SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10-K
__________
/X/ Annual Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1999
or
/_/ Transition Report Pursuant to Section 13 or 15(d) of The
Securities Exchange Act Of 1934
Commission File Number 0-21952
__________
AMERICAN SAFETY RAZOR COMPANY
(Exact name of registrant as specified in its charter)
Delaware 54-1050207
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
240 Cedar Knolls Road, Suite 401
Cedar Knolls, New Jersey 07927
(Address of principal executive offices, including zip code)
__________
Registrant's telephone number, including area code:
(973) 753-3000
__________
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
__________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes /X/ No /_/
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. /X/
There were 12,110,349 shares of the Registrant's Common Stock,
par value $.01 per share, outstanding as of the close of business on
March 16, 2000.
Documents incorporated by reference - None.
<PAGE>
Table of Contents
Part I
Page
Item 1. Business . . . . . . . . . . . . . . . . . . . . . 1
Introduction to Our Business . . . . . . . . . . . 1
Product Lines . . . . . . . . . . . . . . . . . . 4
Sales and Marketing . . . . . . . . . . . . . . . 6
Manufacturing . . . . . . . . . . . . . . . . . . 7
Raw Materials . . . . . . . . . . . . . . . . . . 8
Competition . . . . . . . . . . . . . . . . . . . 9
Other Factors Affecting Our Business . . . . . . 10
Merger . . . . . . . . . . . . . . . . . . . . . 13
Item 2. Properties . . . . . . . . . . . . . . . . . . . 13
Item 3. Legal Proceedings . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . 16
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . 16
Item 6. Selected Financial Data . . . . . . . . . . . . 18
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . 20
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk . . . . . . . . . . . . . . . . . . 32
Item 8. Financial Statements and Supplementary Data . . 32
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . 33
Part III
Item 10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . . . 33
Item 11. Executive Compensation . . . . . . . . . . . . . 36
Item 12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . 39
Item 13. Certain Relationships and Related Transactions . 41
Part IV
Item 14. Exhibits, Financial Statement Schedule and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . 42
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Signatures . . . . . . . . . . . . . . . . . . . 44
_______________________
Market share and product distribution data shown throughout were obtained
through Information Resources Incorporated, a nationally recognized
market research firm based in Chicago, Illinois, which provides the
Company with scanner based product movement data from U.S. grocery stores
with annual all commodity volume of at least $2 million and data from
drug stores and mass merchandisers in major U.S. markets.
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<PAGE>
PART I
ITEM 1 - Business
Introduction to Our Business
Established in 1875, the American Safety Razor Company (together
with its subsidiaries, the "Company") is a leading manufacturer of high-
quality private label and value brand consumer products. We operate our
business in three segments consisting of Razors and Blades (which
includes three product lines: consumer shaving razors and blades, both
store and value brand, blades and bladed hand tools and specialty
industrial and medical blades); Cotton and Foot Care and Custom Bar Soap.
We distribute our products principally through the following retail
channels: national mass merchandisers (Wal-Mart, Target and Kmart), drug
stores (CVS, Walgreens and RiteAid), supermarkets (Safeway, Publix and
Albertson's) and home improvement centers (Home Depot, TruServ and
Sherwin Williams). For the fiscal year ended December 31, 1999, we had
net sales of $314.8 million.
We are the largest manufacturer of private label and value brand
consumer shaving razors and blades in the United States, and are the
fourth largest manufacturer in the total domestic consumer shaving market
(based on market research data for 1999 prepared by an independent market
research firm). These products, which generated $134.3 million of 1999
net sales worldwide, represent 42.7% of total net sales and consisted of
$79.1 million of domestic net sales and $55.2 million of international
net sales. Our products provide consumers with a value-priced alternative
to more heavily advertised premium priced brands, while providing
retailers with attractive margins. Our shaving razor and blade products
are primarily sold both under a retailer's store brand and under our
value brand names such as Personna (Registered Trademark), GEM
(Registered Trademark), Flicker (Registered Trademark), MBC (Trademark),
Burma Shave (Registered Trademark) and Tri-Flexxx (Trademark). We market
both complete razor and blade systems and components which can be used
alone or with most other premium priced brands. Based on independent
consumer tests, our products perform at levels comparable to the premium
priced products. We are the only domestic provider of a complete line of
private label disposable razors, blade shaving systems and replacement
blades. We attribute our leadership in the private label and value brand
markets to our long history of dedication to quality, low-cost
manufacturing and competitive pricing.
We believe that we are the largest single manufacturer of both
premium and value-priced replacement blades for bladed hand tools (based
on publicly available information and Company estimates). Our premium and
value-priced blades and bladed hand tools are sold primarily under our
Personna (Registered Trademark), American Line (Trademark) and Ardell
(Trademark) brand names. These products generated $50.6 million of 1999
net sales representing 16.1% of total net sales. This product category
capitalizes on our precision shaving blade technology and includes such
items as single-edge blades, utility and carpet knives and replacement
blades and paint scrapers. Our blades and bladed hand tools are sold to
consumers and professionals through home-improvement centers/Do-It-
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Yourself retailers, retail paint chains and hardware stores and to
professionals through wholesalers, distributors and specialty supply
jobbers.
We have leveraged our technical and manufacturing expertise by
developing a line of high-quality specialty industrial and medical
blades. These products generated $16.6 million of 1999 net sales,
representing 5.3% of total net sales. These specialty industrial blades
are used in manufacturing processes employed by a variety of industries
including food-processing, fiber cutting and automotive. In addition, we
manufacture and market carbon and stainless steel surgical blades,
disposable scalpels and surgical prep blades for the U.S. health care
markets under the Personna (Registered Trademark) brand name to customers
including Allegiance Health Care, McKesson General Medical and Owens &
Minor.
We believe we are the leading private label and value brand
manufacturer of a full line of personal care cotton and foot care
products in the United States. This segment generated $84.3 million of
1999 net sales, representing 26.8% of total net sales. Our cotton and
foot care segment offers a full product line including cotton swabs,
cotton balls, puffs, cosmetic pads, cotton rolls, pocket tissue, and foot
care products. We have achieved market leadership in this category due to
a series of strategic acquisitions, including Megas Beauty Care, Inc. in
1994, Absorbent Cotton Company in 1995 and the purchase of certain assets
of the American White Cross ("AWC") business in 1997.
We are a leading domestic manufacturer of cosmetic, bath,
pharmaceutical and specialty custom bar soaps. This segment generated
$29.0 million of 1999 net sales, representing 9.2% of total net sales,
and is marketed primarily under customers' brand names. Our major
customers include Estee Lauder, Johnson & Johnson and the NuSkin
Corporation.
Operating Strategy
In order to steadily grow our business, improve operations and
lower our cost structure, our operating strategy is focused on five
primary areas:
- Increase trade penetration through improved sales and
marketing efforts. We believe that private label and value
brand products generally offer higher margins to retailers
and significant savings to consumers over premium priced
products. We intend to improve our trade channel
penetration by leveraging our traditional strengths in key
consumer product categories by improving the effectiveness
of our sales and marketing efforts. Our marketing efforts
will continue to focus on improved packaging and point of
sale promotional activities. In addition, we expect to
improve coordination between our sales and production
functions to increase order-fill rates, reduce our
inventory levels and improve efficiency in our production
lines.
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- Expand international market penetration and enter new
markets. The international market for the shaving razor
and blade category is approximately four times the size of
the U.S. market. We expect to expand into new markets
while continuing to grow within our current markets. We
will continue to develop relationships with distributors
in targeted markets and establish local sales and
marketing organizations to take advantage of specific
regional opportunities. To this end, we acquired Wolco
Holland B.V. in September 1998, which distributes shaving
products into Northern European markets. Our international
sales in all our business segments were $64.3 million in
1999.
- Develop and introduce new products. We are continuously
evolving our primary product lines with product
improvements, new innovations and line extensions. We
launched our new three-blade shaving system, Tri-Flexxx
(Trademark), to the U.S. market in the second quarter of
1999. This new shaving system is designed to fit the
Gillette Sensor (Registered Trademark) and SensorExcel
(Registered Trademark) handles, and will allow us to
address the new three blade standard being set by the
Gillette Mach3 (Trademark).
- Continue to grow blades and bladed hand tools product
line. Our blades and bladed hand tools product line is
highly regarded for quality performance and maintains
strong levels of professional loyalty. Sales of these
products were $50.6 million in 1999. Historically, this
part of our business has grown internally through
increased market penetration in the professional and Do-
it-Yourself retail channels. Our goal is to improve upon
the historical steady growth in this strong product
category by refocusing on new product introductions.
- Reduce operating costs. We have implemented a number of
initiatives to reduce operating costs and increase
productivity and efficiency in our consumer shaving and
cotton and foot care product lines. We have been able to
reduce manufacturing costs in our consumer shaving product
line by opening a highly automated blade manufacturing
facility in Knoxville, Tennessee, and expanding our low-
cost injection molding, assembly and packaging operation
in Obregon, Mexico. The integration in 1997 of our
industrial blade business into our Verona, Virginia
facility permitted us to close manufacturing facilities in
Union and Maplewood, New Jersey. In addition, since our
acquisition of AWC, we have made significant progress in
reorganizing our six cotton and foot care manufacturing
facilities.
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Product Lines
Our business operations are concentrated in three product
segments: Razors and Blades; Cotton and Foot Care; and Custom Bar Soap.
Within the Razors and Blades segment we offer three product lines:
Consumer Shaving Razors and Blades; Blades and Bladed Hand Tools; and
Specialty Industrial and Medical Blades.
The following table sets forth net sales and percentage of total
net sales by segment and for product lines for the years ended December
31, 1997, 1998 and 1999.
<TABLE>
<CAPTION>
1997 1998 1999
---------------------- ---------------------- ----------------------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Razors and Blades
Consumer shaving razors and blades . . . $120.8 40.8% $119.0 40.0% $134.3 42.7%
Blades and bladed hand tools . . . . . . 45.4 15.3 48.9 16.4 50.6 16.1
Specialty industrial and medical blades . 16.4 5.5 16.1 5.4 16.6 5.3
------ ----- ------ ----- ------ -----
Total . . . . . . . . . . . . . . . . . 182.6 61.6 184.0 61.9 201.5 64.0
Cotton and foot care<F1> . . . . . . . . . 80.4 27.1 87.3 29.3 84.3 26.8
Custom bar soap . . . . . . . . . . . . . . 33.6 11.3 26.2 8.8 29.0 9.2
------ ----- ------ ----- ------ -----
Total . . . . . . . . . . . . . . . . . $296.6 100.0% $297.5 100.0% $ 314.8 100.0%
====== ===== ====== ===== ====== =====
____________________
<FN>
<F1> Fiscal 1997 includes net sales of AWC of $21.1 million since its
acquisition on April 22, 1997.
</TABLE>
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Consumer Shaving Razors and Blades. We design, manufacture and
market a full line of shaving razors and blades, including single-edge,
double-edge and injector blades, twin-blade fixed and pivoting head
cartridges, moving-blade cartridges, three-blade cartridges, disposables,
single-edge razors, women's shaving razors and special-purpose shaving
blades. We provide both total shaving systems and components which can be
used alone or with most other nationally recognized premium brands. These
shaving products are marketed under our own brands or under store brands
of our private label shaving razor and blade customers.
Blades and Bladed Hand Tools. We design, manufacture and market
replacement blades and bladed hand tools, such as single-edge blades,
utility blades and knives, carpet blades and knives and paint scrapers
primarily under our Personna (Registered Trademark), American Line
(Trademark) and Ardell (Trademark) brand names. The majority of our
blades and bladed hand tools are sold to retail customers through home
improvement centers, retail paint chains and hardware stores and to
professionals through wholesalers, distributors and specialty supply
jobbers.
Specialty Industrial and Medical Blades. We design, manufacture
and market disposable blades for both the industrial and medical markets.
Although the specialty industrial blade market is large and diverse, our
products are specially designed for niche industrial applications. These
specialty industrial blades perform many of the cutting, slicing or
chopping functions involved in manufacturing processes employed by a
variety of industries including food processing, fiber cutting and
automotive. We manufacture and market carbon and stainless-steel surgical
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blades, disposable scalpels and surgical prep blades for the U.S. health-
care markets under the Personna (Registered Trademark) brand name.
Cotton and Foot Care. We believe we are the largest private
label manufacturers and distributors of cotton swabs, cotton balls and
puffs and cotton cosmetic pads. In addition, we also manufacture cotton
roll, foot care products and pocket tissue. All of the foregoing products
are sold under retailers' private label as well as our own value brands:
Megas (Registered Trademark), ACCO (Registered Trademark), Cottonettes
(Registered Trademark) and Crystal (Registered Trademark). We believe
that we are one of the few personal care cotton products manufacturers
and distributors that can bleach its own cotton--a process integral to
the production of cotton products.
Custom Bar Soap. We manufacture custom-designed and formulated
bar soap for sale to a broad variety of pharmaceutical, skin care and
department store customers, primarily under such customers' own brand
names. Our flexible manufacturing equipment, product design and
development capabilities and reputation for high quality allow us to
compete in all major custom bar soap market segments. Our 1997 expansion
of synthetic soap manufacturing capacity in a new highly efficient
manufacturing facility in Columbus, Indiana, reflects our commitment to
new product development and a competitive cost structure.
Sales and Marketing
Our sales and marketing organization is divided into the
following five sales groups, based on distribution channel and target
customers: (1) consumer products, (2) international, (3) Do-it-Yourself
and Industrial; (4) medical and (5) soap. Our products are sold through
our major distribution channels utilizing internal sales and marketing
resources, as well as third-party distributors and manufacturers'
representatives. Our sales personnel receive a fixed salary plus a bonus
based on sales performance and our earnings.
Consumer Products. Our private label and value brand shaving
razors and blades and cotton and foot care products are sold through mass
merchandisers, drug stores and supermarket chains. Our sales of consumer
and personal care products are managed by a vice president who oversees
field sales and related personnel. Marketing support for the value brand
shaving razors and blades and cotton and foot care products focuses on
temporary price reductions, point of sale promotions and direct mail
advertisements and is managed by a senior vice president. To assist
stores in promoting their private label shaving and cotton and foot care
products, we help customers develop customized marketing programs,
including managing product introductions and promotional planning
support. In addition, such merchandising vehicles as trial-size programs,
floor displays, point of purchase advertising, bonus sizes, coupons,
rebates, store signs and promotional packs are available and incorporated
into individual customers' programs. We also provide customers with
market research to assist in determining the effectiveness of various
marketing programs.
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International Sales. Our international shaving razors and blades
sales effort is headed by a senior vice president who directs daily
activities through group managers responsible for specific geographic
regions. We use a variety of sales strategies and organizations, each
tailored to the specific geographic locations in which we sell our
products, including extensive use of local distributors. We have a
manufacturing and packaging facility in Mexico, a manufacturing,
warehousing and packaging facility in Nazareth Illit, Israel, warehousing
and packaging operations in Puerto Rico and the United Kingdom, and
warehousing facilities in Canada to further our penetration in those
markets.
Do-it-Yourself and Industrial. We sell blades and bladed hand
tools to national and regional chains of home-improvement/ Do-it-Yourself
centers and paint centers as well as hardware co-op, wholesale buying
groups, and industrial distributors. Specialty industrial blades are sold
to direct users, original equipment manufacturers and to a wide variety
of distributors who service professional and niche segments. Overall
management of the industrial division is headed by a vice president with
specific responsibilities assigned to a director of field sales, director
of market development and a general manager in Europe. Marketing needs
for the entire division are overseen by a marketing manager who reports
to the vice president.
Medical. We distribute medical blades to hospitals, nursing
homes and other health care practitioners. Our medical blade sales
efforts are headed by a vice president who oversees a number of regional
managers. We focus our medical blade marketing efforts primarily through
targeted trade-journal advertising, direct mail promotions and medical
trade shows.
Soap. Our soap sales effort is headed by a vice president--
general manager who oversees a number of sales people and national
account representatives who work with customers to custom design soap
products and programs. We also utilize manufacturers' representatives to
sell our products to customers in the hospitality industry, such as
hotels, and to market our line of industrial and corporate promotional
products.
Manufacturing
We are a fully integrated manufacturer of shaving razors and
blades, blades for use with bladed hand tools and specialty industrial
and medical blades. Our manufacturing processes include blade forming,
heat treating and coating, plastic injection molding and assembly and
packaging. Blades are manufactured at our facilities in Verona, Virginia,
Knoxville, Tennessee, and Nazareth Illit, Israel. We operate a low-cost,
highly efficient injection molding, packaging and assembly facility in
Obregon, Mexico. In July 1995, we purchased a new facility in Knoxville,
Tennessee in order to develop a fully integrated shaving razors and
blades manufacturing operation. During 1998, we completed our three-year
manufacturing plan to develop this fully integrated facility which now
performs all operations attendant to the manufacture, molding, assembly
and packaging of shaving razors and blades. In 1997, we restructured our
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industrial blade business, moving substantially all of our operations
into a single facility in Verona, Virginia, and closed our manufacturing
facilities in Union and Maplewood, New Jersey.
Proprietary manufacturing processes allow us to produce a wide
variety of products of different quantities, sizes and packaging while
maintaining a high level of quality. We are continually working to
improve our blade-making productivity by adding new technologies and/or
manufacturing processes. Most of the processes that we use to manufacture
products are proprietary.
The production of our cotton and foot care products starts with
the receipt of cotton fibers in bales. The cotton is bleached, either
internally or through the use of contract bleachers. Once the cotton has
been bleached, the cotton is processed into yarn which is then used
either in the production of cotton balls, cotton swabs, cotton pads or
other cotton products. Our cotton and foot care products are manufactured
at our facilities in Cleveland, Ohio, Valley Park, Missouri, Pomfret,
Connecticut, Canavanas, Puerto Rico, and Nogales, Mexico.
The manufacture of soap is a specialized process which involves
the reaction between tallow (animal fat), vegetable oil or a fatty acid
with a caustic substance (called an alkaline) and water. The resulting
soap mixture is then treated with additives to decrease the harshness of
the substance and to give the soap functional or cosmetic applications.
We have the ability to produce soap through four different manufacturing
processes, producing a variety of soap products with different
characteristics. We manufacture soap in our Dayton, Ohio and Columbus,
Indiana facilities.
Raw Materials
The principal raw materials used by us in the manufacture of
razor and blade products are stainless and carbon steel, plastics and
packaging supplies, all of which are normally readily available in the
marketplace. While all raw materials are purchased from outside sources,
we are not dependent upon any single supplier in our operations for any
materials essential to our business or not otherwise commercially
available to us. We have been able to obtain an adequate supply of raw
materials, and no shortage of raw materials is currently anticipated.
The principal raw materials used by us in the manufacture of our
cotton and foot care products include cotton fiber, plastic and paper
sticks for cotton swabs, foam insoles and packaging supplies. We have
developed several different qualified sources for our key material
requirements. We bleach cotton internally for a portion of our production
requirements while also maintaining relationships with several sources
for outside contract bleaching.
The prices of certain of the raw materials used in our cotton
and foot care operations are subject to commodity price volatility,
particularly with respect to cotton fiber and paper sticks, which may
affect the profitability of our cotton and foot care products. We have
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been able to obtain an adequate supply of high-quality raw materials, and
no shortage of raw materials is currently anticipated.
The principal raw materials used by us in the manufacture of our
custom bar soap products are tallow, various chemicals, coconut oil,
fatty acids, fragrances and packaging supplies. The prices of certain of
the raw materials used by us, such as coconut oil and fatty acids, are
volatile, which may affect the profitability of our soap products. We
have been able to obtain an adequate supply of high-quality raw
materials, and no shortage of raw materials is currently anticipated.
Competition
The shaving razor and blade market is competitive and sensitive
to changing consumer preferences and demands and competition is based on
quality, price and customer service. Our principal competitors in the
shaving razor and blade market are Gillette, the Schick Division of
Warner-Lambert and Societe Bic, S.A. These competitors are substantially
larger and have substantially greater resources than we do.
We are the leading producer of private label and value brand
shaving razors and blades in the United States where our primary
competitors are smaller, privately held companies. Periodically, one of
the premium brand shaving razor and blade manufacturers mentioned above
attempts to compete with us by lowering prices or entering the private
label market. We believe that it is unlikely that a new shaving razor and
blade manufacturer will appear in the near future given the proprietary
nature of the manufacturing processes used by us and each of our
competitors.
In the blades and bladed hand tools and specialty industrial
blades markets, competition is based on quality, price and customer
service. We believe that we compete favorably on these bases and are a
leading producer of blades and bladed hand tools and specialty industrial
blades in the United States. We have a number of smaller competitors in
blades and bladed hand tools such as I.B.U. and U.S. Blades. The medical
blade market is dominated by a division of Becton Dickinson and Company.
In cotton swabs, cotton balls, puffs, cotton cosmetic pads,
pharmaceutical and beauty coils and foot care products, we compete on the
basis of producing a complete line of high-quality private label and
value brand products as well as quality, price and customer service. The
market for these products is highly competitive, often attracting large
national-brand manufacturers seeking to add incremental private label
business. Companies such as Chesebrough-Pond's, Johnson & Johnson and Dr.
Scholl's invest significant resources in their premium brands, partly in
an attempt to reclaim market share lost to private label and value brand
products. Kimberly-Clark, in particular, has become very active in the
private label pocket tissue category.
The custom bar soap market is very fragmented with numerous
participants, some of which have greater resources than we do.
Competition in the custom bar soap market is based primarily on quality,
price and customer service.
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Other Factors Affecting Our Business
Intellectual Property
We own a large number of U.S. and foreign trademarks used in connection
with our blade, cotton and foot care and soap businesses. Such trademarks
include "Personna (Registered Trademark)", "MBC (Trademark)", "GEM
(Registered Trademark)", "Flicker (Registered Trademark)", "PFB
(Registered Trademark)", "Burma Shave (Registered Trademark)", "Acti-
Flexx (Trademark)", "Tri-Flexxx (Trademark)", "Megas (Registered
Trademark)", "ACCO (Registered Trademark)", "Cottonettes (Registered
Trademark)", "Crystal (Registered Trademark)", "Omnibus (Registered
Trademark)", "Centurion (Registered Trademark)", and "Kensington
(Registered Trademark)". Many of our trademarks are registered in the
United States Patent and Trademark Office or the corresponding trademark
agencies in other countries. We consider our trademarks, in the
aggregate, to be material to our business.
In addition, we own or are licensed to use various U.S. and
foreign patents covering the design and manufacture of certain of our
products. We consider our portfolio of owned and licensed patents, in the
aggregate, to be material to our business. In particular, the "MBC
(Trademark)" and "Tri-Flexxx (Trademark)" patents are considered material
to our business.
We consider many of the processes which we use to manufacture
our products to be proprietary. We have not, however, applied for patent
protection for any of these processes. We instead rely on non-disclosure
and non-compete agreements with employees to protect our proprietary
rights in these processes. There can be no guarantee that these
agreements will provide sufficient protection in this regard, or that
such employees will not breach them.
We take actions and devote resources to protect our intellectual
property rights, including trademarks, patents, and proprietary
processes. There can be no assurance that such actions and resources will
be adequate to protect such rights, or that such rights will not be
successfully challenged by third parties or government authorities.
Moreover, no assurance can be given that others will not assert rights
in, or ownership of, our intellectual property or that we will be able to
resolve such conflicts successfully.
In addition, the laws of certain foreign countries may not
protect intellectual property to the same extent as do the laws of the
United States. With respect to U.S. law, patent protection is limited in
duration, and once a patent expires, competitors can make, have made, use
or sell products or processes that are identical or similar to those once
covered by the expired patent.
Employees and Labor Relations
As of December 31, 1999, we employed 2,531 people worldwide,
including 2,023 hourly employees and 508 salaried employees.
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Four collective-bargaining agreements cover certain of our
employees: the first agreement expires on September 25, 2000 and covers
354 employees at the Verona, Virginia plant; the second agreement expires
on March 31, 2002 and covers 192 employees at the Dayton, Ohio plant; the
third agreement expires on October 1, 2002 and covers 114 employees at
our St. Louis plant; and the fourth agreement expires on January 22, 2002
and covers 143 employees at our Nazareth Illit, Israel plant. In addition
to the foregoing employees, we employ an aggregate of 1,220 hourly
employees at our Knoxville, Tennessee; Cleveland, Ohio; Pomfret,
Connecticut; Nogales, Mexico; Canavanas, Puerto Rico; Nottingham,
England; Obregon, Mexico; and San Juan, Puerto Rico facilities, none of
whose employees are covered by a collective-bargaining agreement. We
consider our relations with our employees to be satisfactory.
Environmental Matters
We are subject to various federal, state and local environmental
laws and regulations and the environmental laws and regulations of the
various foreign jurisdictions in which we do business. We anticipate that
such laws and regulations will become increasingly stringent in the
future.
In December 1986, we entered into a Special Order with the
predecessor agency of the VDEQ pursuant to which we agreed to investigate
and clean up groundwater contamination at our Verona, Virginia, razor-
blade manufacturing facility. Pursuant to a plan of remediation approved
by the VDEQ's executive director on February 18, 1988, and fully
implemented in 1989, we built and currently operate a groundwater
treatment facility to treat the contaminated groundwater. We regularly
monitor the level of contamination in the groundwater. We are not
presently aware of any additional contamination that is required to be
remediated at this time at the Verona site.
When we purchased the Maplewood, New Jersey, facility as part of
the Ardell acquisition, we and the previous owners of Ardell entered into
an Administrative Consent Order on March 31, 1989, with the New Jersey
Department of Environmental Protection and Energy ("NJDEPE") obligating
the previous owners of Ardell to perform soil and groundwater remediation
under the New Jersey Environmental Cleanup and Responsibility Act.
Through September 1996, the previous owners had assumed full financial
and oversight responsibility for remediation of the site. At that time,
in settlement of claims by Ardell under its insurance policies with
Federal Insurance Company covering the periods March 6, 1979 to March 6,
1987, Federal Insurance Company assumed primary financial and oversight
responsibility for the remediation. The costs to complete the remediation
are being borne by Federal Insurance Company and the previous owners of
Ardell. The previous owners have posted the requisite financial assurance
bond with NJDEPE securing such remediation obligations. As security, a
letter of credit was obtained by the sellers in favor of NJDEPE in the
amount of $0.6 million which remains intact. We have incurred only
limited costs to date regarding this matter and do not expect to incur
any material future costs.
-11-
<PAGE>
The Valley Park, Missouri, plant facility of our Megas
subsidiary, which was acquired on March 3, 1995, is located on a parcel
of land which is the subject of a CERCLA investigation. This
investigation is being undertaken in response to a release of "hazardous
substances" from upgradient industries. The affected area, which includes
the groundwater beneath a segment of the plant site, has been found to be
contaminated by various chlorinated solvents including trichloroethylene
("TCE") and trichloroethane ("TCA"). The contaminated aquifer had been
the source of municipal water supply wells. The results of a remedial
investigation completed for EPA and the State of Missouri in January 1988
indicate that the source of the TCE contamination was located to the
northwest of the Megas facility. The EPA and the State subsequently
developed a remediation plan to address the TCE contamination and have
executed a Consent Order with a potentially responsible party to
implement the plan. The focus of their investigation has now turned to
the remediation of the TCA contamination which the remedial investigation
concluded was originating west southwest of the Megas facility. Megas
does not use or have records of having used the identified "hazardous
substances" in its facility and has not been found to be a potentially
responsible party. We have reviewed the EPA limited remediation
investigation report and performed limited soil gas analysis on site. The
results of the testing showed no contamination that could have
contributed to the underlying plume. Based on our investigation to date,
results of the soil gas analyses performed on site, and discussions held
with the Missouri Attorney General's office, we believe that it is
unlikely that Megas will be identified as a potentially responsible party
in connection with the EPA Superfund site.
In response to a possible release of water containing TCE
outside its razor blade manufacturing plant in Knoxville, Tennessee, the
Company had an environmental consulting firm take soil and groundwater
samples for the presence of TCE. The sampling found relatively low levels
of TCE in soil adjacent to the building and in the groundwater. Pursuant
to Tennessee environmental law, the Company notified the Tennessee
Department of Environmental Conservation ("TNDEC") and in September 1999
installed three monitoring wells and had the contaminated soil excavated
and the groundwater at the property boundary sampled. Pursuant to
Tennessee environmental law under the Voluntary Cleanup, Oversight and
Assistance Program ("VOAP"), the Company has entered a Consent Order
which approves the investigation and remediation plan and requires
ongoing monitoring of groundwater. Pursuant to the Consent Order, the
TNDEC will likely require sampling and analysis of groundwater at the
property boundary for at least a year and, possibly, the installation of
a deep monitoring well to bedrock. If the analytic results continue to
show the low levels detected to date, the TNDEC likely will accept the
soil removal as sufficient remedial action and allow the closure of the
monitoring wells. If the monitoring reveals higher levels more extensive
investigation and remediation may be required.
We, after consultation with our advisors, do not believe that
any of these matters will have a material effect on our consolidated
financial position or results of operations, regardless of any claims to
indemnification.
-12-
<PAGE>
Merger
Effective April 23, 1999, RSA Acquisition Corporation, an
affiliate of J.W. Childs Equity Partners II, L.P. ("J.W. Childs"),
completed its $14.20 per share cash tender offer for all outstanding
shares of American Safety Razor Company (the "Predecessor") in accordance
with a February 12, 1999 merger agreement, as amended on April 8, 1999,
(the "Acquisition") upon the terms and subject to the conditions set
forth in the offer to purchase (the "Stock Tender Offer"). Following
completion of the Stock Tender Offer, there remained approximately
266,601 American Safety Razor Company shares outstanding. On July 1,
1999, RSA Acquisition Corporation and American Safety Razor Company
completed a merger transaction (the "Merger") pursuant to which RSA
Acquisition Corporation acquired the remaining shares of the Predecessor
for $14.20 per share. The aggregate purchase price, including transaction
costs of $1.0 million, paid for the common stock purchased in the Stock
Tender Offer excluding the cost to redeem stock options, including all of
the common stock tendered, was approximately $173.0 million.
Following the Merger, American Safety Razor Company and its
subsidiaries (the "Company") became the surviving corporation and is a
direct, wholly-owned subsidiary of RSA Holdings Corporation, which is
wholly-owned by J.W. Childs, its affiliates and Company management.
ITEM 2 - Properties
As of March 16, 2000, we owned or leased the following
facilities:
<TABLE>
<CAPTION>
Lease
Approximate Owned or Termination
Products Location Type of Facility Square Feet Leased Date
- - -------- -------- ---------------- ----------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Cedar Knolls, New Corporate 11,600 Leases October 2004
Jersey headquarters
Shaving razors and Verona, Virginia Manufacturing, 307,000 Owned
blades, blades and packaging,
bladed hand tools and distribution and
specialty industrial sales
and medical blades
Knoxville, Manufacturing, 125,000 Owned
Tennessee packaging and
distribution
Obregon, Mexico Manufacturing and 94,000 Leased April 2006
packaging
-13-
<PAGE>
Lease
Approximate Owned or Termination
Products Location Type of Facility Square Feet Leased Date
- - -------- -------- ---------------- ----------- -------- ----------------
Nazareth Illit, Manufacturing, 65,000 Leased July 2002
Israel packaging
distribution and
sales
Nottinghamshire, Packaging, 36,000 Leased July 2012
United Kingdom distribution and
sales
Rio Grande, Puerto Packaging, 26,000 Leased June 2000
Rico distribution and
sales
Cotton and foot care Cleveland, Ohio Manufacturing, 250,000 Leased April 2013
packaging,
distribution and
sales
Valley Park, Manufacturing and 107,000 Owned
Missouri packaging
Nogales, Mexico Manufacturing, 86,000 Leased March 2000
packaging and (excluding our
distribution unilateral
indefinite
renewal rights)
Pomfret, Manufacturing 14,000 Leased Month to Month
Connecticut
Canavanas, Puerto Manufacturing, 22,000 Leased December 2008
Rico packaging and
distribution
Soap Dayton, Ohio Manufacturing, 270,000 Owned
packaging,
distribution and
sales
Columbus, Indiana Manufacturing, Leased September 2005
packaging,
distribution and
sales
</TABLE>
We supplement our distribution capabilities through public
warehouse facilities. In addition, we use contract packagers in selected
domestic and international markets. We believe that the variety of
domestic and international locations gives us operating flexibility.
We consider all of our facilities to be in good operating
condition and adequate for our present purposes. Our production
-14-
<PAGE>
facilities are capable of being utilized at a higher capacity to support
increased demand, if necessary.
ITEM 3 - Legal Proceedings
During 1998, the Company purchased bleached cotton from an
outside supplier for use in its pharmaceutical coil business. The Company
converted this cotton from incoming bales into a coil, which was shipped
to its pharmaceutical customers to be used as filler in bottles of oral
dosage forms of pharmaceutical products to prevent breakage. During the
period from March through November of 1998, the process by which the
Company's supplier bleached this cotton was changed by introducing an
expanded hydrogen peroxide treatment. Subsequent testing indicated
varying levels of residual hydrogen peroxide in the cotton processed
during this time period and the supplier in November 1998 reduced the
levels of residual hydrogen peroxide in its bleaching process. The
Company, to date, has received complaints from a number of customers
alleging defects in the cotton supplied them during the period and
asserting these defects may have led to changes in their products
pharmaceutical appearance, and with respect to a limited number of
products, potency. No lawsuits have been filed by any of these customers.
The Company has received written notice of claims for damages in the
aggregate amount of approximately $117.0 million. To date, no claim has
been substantiated. In addition, $111.0 million of this amount is for
alleged lost profits from two customers, which lost profits have not been
substantiated. It is possible that additional damage claims might be
forthcoming. On March 2, 1999, at the request of the Food and Drug
Administration, the Company notified all (numbering approximately 85) of
its pharmaceutical cotton coil customers that it was withdrawing from the
market those lots of cotton coil which may contain elevated levels of
hydrogen peroxide.
The Company has notified its supplier that, in the Company's
view, the supplier is primarily responsible for damages, if any, that may
arise out of this matter. At this time, the Company's supplier has agreed
to be responsible for the cost of fiber, bleaching and freight of
returned product, but has not agreed to be responsible for any other
damages and has expressed an intention to assert defenses to the
Company's claims. The Company's insurance carriers have been timely
notified of the existence of the claim and have agreed to provide defense
in a reservation of rights letter, but are continuing to evaluate whether
coverage would apply to all aspects of the claims. The Company is advised
by outside counsel that it has strong legal arguments that the aggregate
amount of insurance available for these claims would be sufficient to
cover the magnitude of the claims currently expressed.
The Company also has been advised by its general counsel that it
has a number of valid defenses to potential customer claims as well as a
third party claim against its suppliers for damages, if any, incurred by
the Company. However, management cannot at this time make a meaningful
estimate of the amount or range of loss that could result from an
unfavorable outcome relating to this overall issue, and accordingly,
there can be no assurance that the Company's exposure from this matter
might not potentially exceed the combination of its insurance coverages
-15-
<PAGE>
and recourse to its suppliers. It is therefore possible that the
Company's results of operations or cash flows in a particular quarterly
or annual period or its financial position could be significantly or
adversely affected by an ultimate unfavorable outcome of this matter.
In June 1999, the Company received notice of the filing of a
lawsuit by The Gillette Company ("Gillette") asserting claims for
damages and injunctive relief for alleged patent infringement,
misappropriation of trade dress, false advertising and breach of contract
in connection with the marketing of the Company's two-bladed and three-
bladed shaving cartridge systems (the MBC (Trademark) introduced in 1994 and
the Tri-Flexxx (Trademark) introduced in 1999). In August 1999, the Company
filed an answer and counterclaims in which it denied Gillette's allegations,
sought a declaration that Gillette's patents are not infringed, are
invalid and unenforeable, and asserted counterclaims against Gillette for
damages and injunctive relief for, among other things, alleged antitrust
violations and false advertising. Gillette's time to respond to the
Company's answer and counterclaims has been postponed pending ongoing
settlement discussions. The Company believes that Gillette's claims are
without merit and intends to defend against them vigorously, as well as
to vigorously pursue the Company's counterclaims against Gillette. The
Company does not believe it has any material liability with respect to
Gillette's claims described above. However, management and counsel at
this time are unable to make a meaningful estimate of the amount or range
of loss that could result from an unfavorable outcome relating to this
matter. The Company will reassess this matter as new facts become
available.
We are involved in various other legal proceedings from time to
time incidental to the conduct of our business. We believe that any
ultimate liability arising out of such proceedings will not have a
material adverse effect on our consolidated financial position or results
of operations.
ITEM 4 - Submission of Matters to a Vote of Security Holders
None.
PART II
ITEM 5 - Market for Registrant's Common Equity and Related Stockholder
Matters
Our common stock, Paragraph A value $.01 per share (the "Common
Stock") was traded in the over-the-counter market and was included in the
NASDAQ National Market under the symbol "RAZR" until June 30, 1999, at
which time the Company's Common Stock was delisted as a result of the
Acquisition and Merger of the Company. Information with respect to market
prices of our Common Stock for the first two quarters in 1999 and each of
the quarters in 1998 is presented under Item 8 of this Report.
-16-
<PAGE>
We have not paid and do not anticipate paying any cash dividends
on the Common Stock in the foreseeable future. From time to time, the
Company's Board of Directors intends to review our dividend policy. Any
payment of dividends will be at the discretion of the Board of Directors
and will be dependent on our earnings and financial requirements and
other factors, including the restrictions imposed by the General
Corporation Law of the State of Delaware on the payment of dividends and
covenants in our credit agreement, dated as of April 23, 1999 (the
"Credit Agreement") and the indenture relating to the 9 7/8% Series B
Senior Notes described in Note 6 to our Consolidated Financial Statements
under Item 8 of this Report.
-17-
<PAGE>
ITEM 6 - Selected Financial Data
The following data (in thousands, except per share data) should
be read in conjunction with our Consolidated Financial Statements
included under Item 8 of this Report and management's discussion and
analysis of financial condition and results of operations included under
Item 7 of this Report.
<TABLE>
<CAPTION>
Company
----------- Predecessor
Period -----------
from Period
April 24, from
1999 to January 1, Predecessor
December 1999 to ----------------------------------------------------
31, April 23, Year ended December 31,
1999 1999 1998 1997<F1> 1996<F2> 1995<F3>
State of Income Data: ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . $227,159 $87,591 $297,488 $296,607 $260,636 $230,453
Cost and expenses . . . . . . . . . . . . .
Cost of sales<F4> . . . . . . . . . . . . 155,496 58,520 201,978 196,991 169,949 149,994
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . 52,567 21,429 63,516 60,206 54,867 48,487
Amortization of intangible assets . . . . 3,178 835 2,543 2,501 2,503 2,341
Special charges<F5> . . . . . . . . . . . -- -- 3,003 -- -- 947
Transaction expenses<F6> . . . . . . . . -- 11,440 -- -- -- --
-------- -------- -------- -------- -------- --------
Operating income (loss) . . . . . . . . . . 15,918 (4,633) 26,448 36,909 33,317 28,684
Interest expense . . . . . . . . . . . . . 15,112 3,907 12,270 12,270 11,719 10,582
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes and
extraordinary item . . . . . . . . . . . 806 (8,540) 14,178 24,639 21,598 18,102
Income taxes (benefit) . . . . . . . . . . 1,453 (842) 4,076 9,570 8,425 7,241
-------- -------- -------- -------- -------- --------
(Loss) income before extraordinary item . . (647) (7,698) 10,102 15,069 13,173 10,861
Extraordinary item, net of income tax
benefit<F7> . . . . . . . . . . . . . . . . 611 118 -- -- -- 980
-------- -------- -------- -------- -------- --------
Net (loss) income . . . . . . . . . . . . . $ (1,258) $ (7,816) $ 10,102 $ 15,069 $ 13,173 $ 9,881
======== ======== ======== ======== ======== ========
Basic earnings per share: . . . . . . . . .
(Loss) income before extraordinary item . $(0.05) $(0.64) $0.83 $1.25 $1.09 $0.90
Extraordinary item . . . . . . . . . . . (0.05) (0.01) -- -- -- (0.08)
-------- -------- -------- -------- -------- --------
Net (loss) income . . . . . . . . . . . . . $ (0.10) $ (0.65) $ 0.83 $ 1.25 $ 1.09 $ 0.82
======== ======== ======== ======== ======== ========
Weighted average number of shares
outstanding . . . . . . . . . . . . . . . . 12,110 12,110 12,107 12,094 12,093 12,093
======== ======== ======== ======== ======== ========
-18-
<PAGE>
Diluted earnings per share:
(Loss) income before extraordinary item . $(0.05) $(0.64) $0.83 $1.23 $1.09 $0.90
Extraordinary item . . . . . . . . . . . (0.05) (0.01) -- -- -- (0.08)
-------- -------- -------- -------- --------- --------
Net (loss) income . . . . . . . . . . . . $ (0.10) $ (0.65) $ 0.83 $ 1.23 $ 1.09 $ 0.82
======== ======== ======== ======== ========= ========
Weighted average number of shares
outstanding . . . . . . . . . . . . . . . . 12,110 12,198 12,223 12,255 12,139 12,135
======== ======== ======== ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
Company Predecessor
------------- -----------------------------------------------------------
December 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
Balance Sheet Data: ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Total assets . . . . . . . . . . . . . . . . . . $402,871 $262,897 $254,081 $229,997 $208,263
Long-term obligations, including
current portion . . . . . . . . . . . . . . . . 185,616 127,333 123,612 112,181 109,789
Stockholders' equity . . . . . . . . . . . . . . 129,002 69,554 59,439 44,523 30,898
</TABLE>
[FN]
<F1> Our results of operations include results for the Cotton Division
of American White Cross, Inc. ("AWC") since its April 22, 1997,
acquisition date. Results for the period ended December 31, 1997,
include net sales of AWC of $21.1 million.
<F2> Our results of operations include results for Bond-America Israel
Blades, Ltd., and its wholly-owned subsidiary, A.I. Blades, Inc.
(collectively, "Bond") since its March 29, 1996, acquisition date.
Results for the period ended December 31, 1996, include net sales
of Bond of $11.2 million.
<F3> Our results of operations include results for Absorbent Cotton
Company ("ACCO") since its March 3, 1995, acquisition date.
Results for the period ended December 31, 1995, include net sales
of ACCO of $16.6 million.
<F4> Cost of sales for the period from April 24, 1999 to December 31,
1999 includes additional inventory costs of $9.0 million resulting
from adjusting the carrying value of acquired inventories to
reflect their estimated fair market value at the Acquisition date.
<F5> See Note 14 to our Consolidated Financial Statements relating to
the special charges in 1998. Special charges in 1995 relate to a
litigation settlement and related expenses.
<F6> Transaction expenses of $11.4 million were incurred in connection
with the sale of the Predecessor (see Note 1 to our Consolidated
Financial Statements).
<F7> Extraordinary item relates to the early extinguishment of debt in
1999 (see Note 6 to our Consolidated Financial Statements) and
1995.
-19-
<PAGE>
ITEM 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The following discussion of results of operations and financial
condition is based upon and should be read in conjunction with the
Consolidated Financial Statements of our Company and notes thereto
included under Item 8 of this Report. Additionally, management has
prepared pro forma results of operations for 1999 to enable a meaningful
comparison between 1999 and 1998 results of operations. Accordingly, see
"Pro Forma Year Ended December 31, 1999 Compared to Year Ended
December 31, 1998" discussions below which compare the year ended
December 31, 1999 on a pro forma basis, assuming the Acquisition and the
related financing transactions had occurred on January 1, 1999, with 1998
for a more meaningful comparison of operations.
Forward-Looking Statements.
Management's discussion and analysis of financial condition and
results of operations and other sections of this Report contain "forward-
looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We
intend the forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements in these sections. All
statements regarding our expected financial position, business and
financing plans are forward-looking statements. Such forward-looking
statements are identified by use of forward-looking words such as
"anticipates," "believes," "plans," "estimates," "expects," and "intends"
or words or phrases of similar expression. These forward-looking
statements are subject to various assumptions, risks and uncertainties,
including but not limited to, changes in political and economic
conditions, demand for our products, acceptance of new products,
technology developments affecting our products and to those discussed in
our filings with the Securities and Exchange Commission. Accordingly,
actual results could differ materially from those contemplated by the
forward-looking statements.
Results of Operations
American Safety Razor Company is a leading manufacturer of high-
quality private label and value brand consumer products. We have three
reportable segments, organized primarily on the basis of differences in
products, which consist of Razors and Blades, Cotton and Foot Care and
Custom Bar Soap. The razors and blades segment includes three product
lines, consumer shaving razors and blades, both store and value brand,
blades and bladed hand tools, and specialty industrial and medical
blades. The cotton and foot care segment includes cotton swabs, cotton
balls and puffs, cosmetic pads, tissues, pharmaceutical and beauty coil,
and foot care products. The custom bar soap segment includes
cosmetic/skin care, bath, pharmaceutical and specialty custom bar soaps.
We distribute our products to the retail and professional trades in the
United States and in selected international markets. The following table
sets forth information with respect to our business segments:
-20-
<PAGE>
<TABLE>
<CAPTION>
Predecessor Predecessor Company
------------------------------------------- -------------------- --------------------
Year Ended December 31, Period from January Period from April
------------------------------------------- 1, 1999 to 24, 1999 to
1997 1998 April 23, 1999 December 31, 1999
-------------------- -------------------- -------------------- --------------------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales:
Razors and blades . . . . . . . . $182.6 61.6% $184.0 61.9% $55.2 63.0% $146.3 64.4%
Cotton and foot care<F1> . . . . . 80.4 27.1 87.3 29.3 25.5 29.1 58.8 25.9
Custom bar soap . . . . . . . . . 33.6 11.3 26.2 8.8 6.9 7.9 22.1 9.7
------ ----- ------ ----- ----- ----- ------ -----
Total . . . . . . . . . . . . $296.6 100.0% $297.5 100.0% $87.6 100.0% $227.2 100.0%
====== ===== ====== ===== ===== ===== ====== =====
Operating Income<F2>:
Razors and blades . . . . . . . . $ 26.5 14.5% $ 21.0 11.4% $ 6.7 12.1% $ 11.4 7.8%
Cotton and foot care . . . . . . 6.3 7.8 4.1 4.7 0.3 1.2 1.8 3.1
Custom bar soap . . . . . . . . . 4.1 12.3 1.3 5.0 (0.2) (2.9) 2.7 12.2
------ ----- ------ ----- ----- ----- ------ -----
Total . . . . . . . . . . . . $ 36.9 12.4% $ 26.4 8.9% $ 6.8 7.8% $ 15.9 7.0%
====== ===== ====== ===== ===== ===== ===== =====
<FN>
<F1> Fiscal 1997 includes net sales of AWC of $21.1 million since its
acquisition on April 22, 1997.
<F2> Operating income for the period from January 1, 1999 to April 23,
1999 excludes transaction expenses of $11.4 million incurred in
connection with the sale of the Predecessor.
</TABLE>
Overview
Net sales are gross sales net of returns and cash discounts.
Gross profit is net sales less cost of sales, which includes the
costs necessary to make our products, including the costs of materials,
production, warehousing and procurement, and the costs to ship our
products to our customers, including freight and distribution. The
principal elements of our cost to make our products are raw materials and
packaging supplies, labor and manufacturing overhead. Raw materials,
among other things, consist of steel (both carbon and stainless), cotton
fiber, coconut oil, fatty acids and plastic resins the overall costs of
which have remained relatively stable during the periods discussed below,
despite susceptibility to significant price fluctuations. Labor costs
consist primarily of hourly wages plus employee fringe benefits.
Manufacturing overhead generally includes indirect labor, plant costs,
depreciation and manufacturing supplies.
Selling, general and administrative expenses include the costs
incurred to support the sale and marketing of our products and the
general and administrative costs of managing the business, including
-21-
<PAGE>
salaries and related benefits, commissions, advertising and promotion
expenses, bad debts, travel and insurance.
Pro Forma Condensed Consolidated Statement of Operations for the Year
Ended December 31, 1999
The following unaudited pro forma condensed consolidated
statement of operations has been prepared by management from the
historical financial statements of the Predecessor for the period from
January 1, 1999 to April 23, 1999, and the historical financial
statements of the Company for the period from April 24, 1999 to
December 31, 1999. The Acquisition, and the related financing
transactions, are assumed to have occurred on January 1, 1999 (see Notes
1 and 6 to our Consolidated Financial Statements). The pro forma
condensed consolidated statement of operations for the year ended
December 31, 1999, is not necessarily indicative of the results of
operations that would have occurred for the year ended December 31, 1999,
had the Acquisition and relating financing transactions occurred on
January 1, 1999. In preparation of the pro forma condensed consolidated
statement of operations, management has made certain estimates and
assumptions that affect the amounts reported in the unaudited pro forma
condensed consolidated statement of operations. The unaudited pro forma
condensed consolidated statement of operations for the year ended
December 31, 1999, should be read in conjunction with the historical
financial statements and related notes thereto of the Company which are
included in this Annual Report on Form 10-K for the year ended
December 31, 1999.
-22-
<PAGE>
Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the Year Ended December 31, 1999
(In Thousands)
<TABLE>
<CAPTION>
Company
Predecessor Predecessor Historical
Historical Pro Forma Period
Period from Period From From Company
January 1, January 1, April 24, Pro Forma
1999 to 1999 to 1999 to Year Ended
April 23, Pro Forma April 23, December 31, Pro Forma December
1999 Adjustments 1999 1999 Adjustments 31, 1999
--------- ----------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . $87,591 $ -- $87,591 $227,159 $ -- $314,750
Cost of sales:
Cost of sales . . . . . . . . . 58,520 460<F1> 58,980 146,488 -- 205,468
Purchase accounting
adjustment to inventory . . -- 9,008<F2> 9,008 9,008 (9,008)<F2> 9,008
------- ------ ------- -------- ------- --------
Gross profit . . . . . . . . . 29,071 (9,468) 19,603 71,663 9,008 100,274
Selling, general and
administrative expenses . . . . 21,429 68<F3> 21,497 52,567 -- 74,064
Amortization of intangible assets 835 638<F4> 1,473 3,178 -- 4,651
Transaction expenses . . . . . . 11,440 -- 11,440 -- -- 11,440
------- ------ ------- -------- ------- --------
Operating (loss) income . . . . (4,633) (10,174) (14,807) 15,918 9,008 10,119
Interest expense . . . . . . . . 3,907 2,030<F5> 5,937 15,112 (138)<F7> 20,911
------- ------- ------- -------- ------ --------
(Loss) income before income
taxes and extraordinary item . (8,540) (12,204) (20,744) 806 9,146 (10,792)
Income taxes (benefit) . . . . . (842) (4,666)<F6> (5,508) 1,453 3,631<F6> (424)
------- ------ ------- -------- ----- --------
(Loss) income before
extraordinary item . . . . . . $(7,698) $(7,538) $(15,236) $ (647) $5,515 $(10,368)
======= ======= ======= ======== ======= ========
<FN>
<F1> Adjustment to provide pro forma depreciation expense resulting from
the application of purchase accounting adjustments computed based
on the remaining useful lives of plant and equipment.
<F2> Adjustment to reflect the impact on cost of sales of additional
inventory costs resulting from adjusting the carrying value of
acquired inventories to reflect their estimated fair market value
assuming the Acquisition occurred on January 1, 1999.
<F3> Adjustment to reflect the elimination of amortization of
unrecognized prior service cost and unrecognized gains related to
the Predecessor's pension and postretirement benefit plans.
-23-
<PAGE>
<F4> Adjustment to reflect the elimination of $705 of amortization
related to historical goodwill and record pro forma amortization of
$1,343 related to intangible assets including goodwill, trademarks
and patents recorded in connection with the Acquisition. Goodwill
and trademarks are being amortized over a 40-year useful life and
patents are being amortized over a 15-year useful life. These
periods are believed by management to be reasonable based on the
expected lives of the underlying processes, products, and equipment
assumed to be acquired.
<F5> Adjustment to reflect (i) the elimination of historical interest
expense of $494 related to the Predecessor's credit facilities,
loan commitment fees, and the amortization of deferred financing
costs, (ii) pro forma amortization of $353 for the $8,001 in
deferred financing costs incurred in connection with the financing,
amortized over the respective lives of the Company's credit
facilities, and (iii) pro forma interest expense of $2,171 on the
Company's credit facilities related to the balances assumed to be
outstanding on January 1, 1999. Interest expense has been computed
assuming that the LIBOR-based interest rate (plus the applicable
margin) option is selected by the Company. Balances assumed to be
outstanding on January 1, 1999, includes $5,000 under the revolving
credit facility and $88,000 under the Term Loan Facility. In
addition, the purchase of $30,700 in Senior Notes on June 10, 1999,
was assumed to occur on January 1, 1999.
<F6> Adjustment to reflect the income tax consequences of the pro forma
adjustments computed at the statutory rate of 39.7% excluding the
net adjustment for goodwill of $451 which is not tax deductible.
<F7> Adjustment to reflect pro forma interest expense of $261 on the
Company's credit facilities related to the balances assumed to be
outstanding on April 24, 1999. Interest expense has been computed
assuming that the LIBOR-based interest rate (plus the applicable
margin) option is selected by the Company. Balances assumed to be
outstanding on April 24, 1999, are the same as described in (e)
above. Adjustment to reflect pro forma interest expense reduction
of $399 related to the $30,700,000 in Senior Notes which were
assumed to be purchased on April 24, 1999.
</TABLE>
Pro Forma Year Ended December 31, 1999 Compared to Year Ended
December 31, 1998
Net Sales. Net sales for pro forma 1999 and 1998 were $314.8
million and $297.5 million, respectively, an increase of $17.3 million or
5.8%. We did not experience any significant price increases in 1999
across our three business segments. Our increase in net sales for 1999
related primarily to volume increases.
Razors and Blades. Net sales of our razors and blades segment
for pro forma 1999 and 1998 were $201.5 million and $184.0 million,
respectively, an increase of $17.5 million or 9.5%.
-24-
<PAGE>
Net sales of shaving razors and blades for pro forma 1999 and
1998 were $134.3 million and $119.0 million, respectively, an increase of
$15.3 million or 12.8%. Net sales of domestic value branded shaving
products increased 32.1% compared to 1998, rebounding from weak sales in
1998, reflecting sales gains relating to the launch of the new Tri-Flexxx
(Trademark) shaving product, an increase in promotional programs with
several customers and overall increased distribution of the Company's
shaving products. Net sales of domestic private label shaving products
were substantially unchanged compared to 1998. Net sales of shaving
products in international markets increased 9.2% (net of a 2% negative
impact of unfavorable exchange rates) reflecting stronger sales in
certain markets.
Net sales of blades and bladed hand tools for pro forma 1999 and
1998 were $50.6 million and $48.9 million, respectively, an increase of
$1.7 million or 3.6%. This growth primarily reflects increased sales of
our Personna (Registered Trademark) and American Line (Trademark) brands
of products as a result of distribution gains.
Net sales of specialty industrial and medical blades for pro
forma 1999 and 1998 were $16.6 million and $16.1 million, respectively,
an increase of $0.5 million, or 3.2%. Sales of specialty industrial
products decreased 6.3% due primarily to inventory adjustments by certain
customers and mix shifts to lower priced blade products. Additionally,
certain of our distributors experienced increased competition in their
serviced niche markets. Sales of medical products increased 12.3% due
primarily to increased distribution of certain products.
Cotton and Foot Care. Net sales of cotton and foot care products
for pro forma 1999 and 1998 were $84.3 million and $87.3 million,
respectively, a decrease of $3.0 million, or 3.5%. This decrease results
primarily from issues related to the cotton coil matter (see Note 12 to
our Consolidated Financial Statements and Item 3 - Legal Proceedings) and
the continuing integration and reorganization of the Company's cotton
operations.
Custom Bar Soap. Net sales of our custom bar soap products for
pro forma 1999 and 1998 were $29.0 million and $26.2 million,
respectively, an increase of $2.8 million, or 10.5%. This increase
results primarily from increased sales volume to certain of our
pharmaceutical/skin care customers.
Gross Profit. Gross profit increased $4.8 million to $100.3
million for pro forma 1999 from $95.5 million for 1998. As a percentage
of net sales, gross profit was 31.9% for pro forma 1999 and 32.1% for
1998. Excluding the purchase accounting adjustment to inventory of $9.0
million, gross profit increased $13.8 million to $109.3 million for pro
forma 1999, from $95.5 million for 1998, and as a percentage of net
sales, gross profit was 34.7% for pro forma 1999, and 32.1% for 1998.
Blade margins improved due to favorable product mix, lower material costs
and lower manufacturing costs reflecting the Company's continuing efforts
to reduce manufacturing costs. Soap margins improved due to lower
material costs for certain raw materials. This improvement in blade and
soap margins was somewhat offset by increased depreciation expense
resulting from the Acquisition and by lower margins in the Company's
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<PAGE>
cotton operations due to increased distribution costs and higher
manufacturing overheads resulting primarily from issues related to the
continuing integration and reorganization of the cotton operations.
Operating and Other Expenses. Selling, general and
administrative expenses were 23.5% of net sales for pro forma 1999,
compared to 21.4% for 1998. This increase primarily reflects an increase
in promotional support for our shaving blade products and an increase in
legal fees resulting from the Gillette lawsuit. Amortization of goodwill
and other intangible assets increased $2.2 million to $4.7 million for
pro forma 1999 from $2.5 million for 1998, reflecting increased
amortization of intangible assets related to the Acquisition. Interest
expense increased $8.6 million to $20.9 million for pro forma 1999, from
$12.3 million for 1998, due primarily to the write-off of approximately
$2.1 million in connection with the reduction in the term loan facility
and increased interest expense, commitment fees and amortization of
deferred loan fees associated with debt incurred in connection with the
Acquisition. This increase was somewhat offset by lower interest expense
relating to the Company's $30.7 million purchase of its 9 7/8% Series B
Senior Notes in June 1999.
In connection with the Acquisition the Predecessor incurred
approximately $11.4 million in transaction expenses related primarily to
(i) amounts paid to redeem all of the outstanding options to purchase
common stock of the Predecessor, (ii) costs incurred by or on behalf of
the Predecessor in connection with the Acquisition, including legal and
other advisory fees, and (iii) costs incurred by or on behalf of the
Predecessor related to payments made to certain employees of the
Predecessor in connection with the change of control.
Costs of $0.7 million (net of tax benefit) associated with the
purchase of the Senior Notes and repayment of the Terminated Credit
Facility (see Note 6 to our Consolidated Financial Statements) are
reflected in the consolidated statement of operations in the caption
"Extraordinary item".
As of December 31, 1999, approximately $0.3 million remained as
an accrued expense on our balance sheet related to the Company's special
charges which is expected to be utilized for asset write-offs during
2000.
Our effective income tax rate for pro forma 1999 and 1998 was
(3.9)% and 28.7%, respectively, and varies from the United States
statutory rate due primarily to nondeductible goodwill amortization,
certain non-deductible transaction expenses, state income taxes, net of
the federal tax benefit, and in 1998 due to a tax benefit relating to the
settlement of tax issues. (See Note 9 to our Consolidated Financial
Statements).
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net Sales. Net sales for 1998 and 1997 were essentially
unchanged at $297.5 million and $296.6 million, respectively. We did not
-26-
<PAGE>
experience any significant price increases in 1998 across our three
business segments.
Razors and Blades. Net sales of our razors and blades segment
for 1998 and 1997 were $184.0 million and $182.6 million, respectively,
an increase of $1.4 million or 0.8%.
Net sales of shaving razors and blades for 1998 and 1997 were
$119.0 million and $120.8 million, respectively, a decrease of $1.8
million or 1.5%. Net sales of domestic value branded shaving products in
1998 declined 9.6% compared to 1997 and net sales of domestic private
label shaving products decreased 5.8% over the same period. In 1997, net
sales of domestic value branded shaving products were favorably affected
by the launch of the Revlon Perfect Finish (Trademark) shaving system.
1998 sales of the Revlon Perfect Finish (Trademark) shaving system were
significantly below 1997 levels and at the end of 1998, due to a lack of
demand, we discontinued the sale of this product. Excluding sales of this
product, domestic value branded sales were essentially flat during the
period. Net sales of domestic private label shaving products were down
due primarily to heavy promotional activity by Gillette and reduced
promotional support by certain customers in advance of and during the
introduction of the Gillette Mach3 (Trademark) shaving system. Net sales
of shaving products in international markets increased 8.2% (net of a 3%
negative impact of unfavorable exchange rates) reflecting stronger sales
in certain markets.
Net sales of blades and bladed hand tools for 1998 and 1997 were
$48.9 million and $45.4 million, respectively, an increase of $3.5
million or 7.7%. This growth primarily reflects increased sales of our
Personna (Registered Trademark), Ardell (Trademark) and American Line
(Trademark) brands of products as a result of distribution gains and new
product introductions in the Personna (Registered Trademark) line of
products.
Net sales of specialty industrial and medical blades for 1998
and 1997 were $16.1 million and $16.4 million, respectively, a decrease
of $0.3 million, or 1.8%. Sales of specialty industrial products
decreased 5.0% due primarily to cyclical usage and purchasing patterns by
certain customers and mix shifts to lower priced blade products.
Additionally, certain of our distributors experienced increased
competition in their serviced niche markets. Sales of medical products
increased 1.6% due primarily to increased distribution of products.
Cotton and Foot Care. Net sales of cotton and foot care products
for 1998 and 1997 were $87.3 million and $80.4 million, respectively, an
increase of $6.9 million, or 8.6%. This increase primarily reflects a
full year of sales resulting from the April 1997 acquisition of the
cotton division of American White Cross ("AWC").
Custom Bar Soap. Net sales of our custom bar soap products for
1998 and 1997 were $26.2 million and $33.6 million, respectively, a
decrease of $7.4 million, or 22.0%. This decrease results primarily from
lower sales to certain of our pharmaceutical/skin care customers due to
weakness in certain Asian markets and to a lesser extent, reductions in
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<PAGE>
inventory levels by key customers and delays in product purchases by
customers prior to the introduction of reformulated products.
Gross Profit. Gross profit decreased $4.1 million to $95.5
million for 1998 from $99.6 million for 1997. As a percentage of net
sales, gross profit was 32.1% for 1998 and 33.6% for 1997.
A modest 0.3% of net sales increase in razors and blades gross
margins due to lower manufacturing overhead was more than offset by costs
incurred in the continuing integration of the cotton operations of AWC
with those of the Company, and the related reorganization of our cotton
operations. During fiscal 1998, we opened a new cotton production
facility in Nogales, Mexico, closed our Sparks, Nevada facility and
expanded the operations of our Cleveland, Ohio facility. The process of
integrating the product lines, equipment and facilities acquired in the
AWC transaction and executing our reorganization plan was more difficult
than we anticipated. As a result, we experienced production
inefficiencies that resulted in higher manufacturing, distribution, and
freight costs. These difficulties also resulted in reduced levels of
customer service. In addition to the reorganization of our cotton
operations, gross margins in our soap business were negatively impacted
by higher absorption of manufacturing overhead and depreciation over a
lower sales base.
Operating and Other Expenses. Selling, general and
administrative expenses were 21.4% of net sales for 1998, compared to
20.3% for 1997. This increase primarily reflects an increase in
promotional support for our shaving blade products, increased spending on
new product development activities, primarily with respect to Tri-Flexxx
(Trademark), and absorption of soap operating expenses over a smaller
sales base. Amortization of goodwill and other intangible assets was
unchanged at $2.5 million for 1998 and 1997. Interest expense was
unchanged at $12.3 million for 1998 and 1997.
During 1998, we recorded special charges aggregating $3.0
million, which were comprised of approximately $1.0 million related to
our decision to discontinue the Revlon Perfect Finish (Trademark) shaving
system, approximately $1.8 million for certain severance and employee
benefits related to the termination of certain employees, and
approximately $0.2 million related to the shutdown of our cotton
operations in Sparks, Nevada. Employee terminations have resulted
primarily from the consolidation of our sales forces and the termination
of certain other management employees. As of December 31, 1998
approximately $1.6 million remained as an accrued expense on our balance
sheet, which was substantially paid or utilized for asset impairment
during 1999.
Our effective income tax rate for 1998 and 1997 was 28.7% and
38.8%, respectively, and varies from the United States statutory rate due
primarily to nondeductible goodwill amortization, state income taxes, net
of the federal tax benefit, and in 1998 due to a tax benefit relating to
the settlement of tax issues. (See Note 8 to our consolidated financial
statements).
-28-
<PAGE>
Liquidity and Capital Resources
Our primary sources of liquidity are cash flow from operations
and borrowings under our revolving credit facility. For the period from
April 24, 1999 to December 31, 1999, net cash provided by operating
activities amounted to $19.3 million and for the period from January 1,
1999 to April 23, 1999, net cash used in operating activities amounted to
$5.3 million. For the years ended December 31, 1998 and 1997, net cash
provided by operating activities amounted to $12.5 million and $12.0
million, respectively. Net cash provided by operating activities for the
period from April 24, 1999 to December 31, 1999 primarily reflects a
decrease in inventories of $15.1 million due in part to the write-off of
the purchase accounting adjustment of $9.0 million and a decrease in
income taxes receivable of $3.7 million which was somewhat offset by a
decline in net income, a decrease in accounts payable and an increase in
accounts receivable. Net cash used in operating activities for the period
from January 1, 1999 to April 23, 1999 primarily reflects the payment of
transaction expenses of $11.4 million relating to the Acquisition, an
increase in inventories of $7.7 million and an increase in income taxes
receivable of $2.3 million, which were somewhat offset by a decrease in
accounts receivable. The increase in net cash provided by operating
activities for 1998 compared to 1997 primarily reflects a decrease in
trade receivables of $1.2 million reflecting the timing of customer
payments as compared to an increase of $7.7 million in 1997, offset by a
decline in net income and a decline in accounts payable.
For the period from April 24, 1999 to December 31, 1999 and for
the period from January 1, 1999 to April 23, 1999, net cash used in
investing activities related primarily to capital expenditures of $8.4
million and $3.6 million, respectively. For the years ended December 31,
1998 and 1997, net cash used in investing activities amounted to $12.6
million and $24.0 million, respectively. Net cash used in investing
activities for 1998 related primarily to capital expenditures of $11.4
million and the purchase of Wolco for $0.6 million. Net cash used in
investing activities for 1997 related primarily to capital expenditures
of $13.7 million and the purchase of AWC for $10.3 million.
For the period from April 24, 1999 to December 31, 1999, net
cash used in financing activities resulted from $18.6 million in net
advances to the Company's parent and deferred loan fees of $0.4 million
which were substantially offset by net borrowings of $18.4 million. For
the period from January 1, 1999 to April 23, 1999, net cash provided from
financing activities resulted from net borrowings of $39.5 million which
was reduced by net advances to the Company's parent of $24.2 million and
deferred loan fees of $7.6 million. For the years ended December 31, 1998
and 1997, net cash provided by financing activities was $2.1 million and
$11.4 million, respectively. Net cash provided by financing activities
for 1998 and 1997 resulted from net borrowings of $2.0 million and $11.4
million, respectively.
At December 31, 1999, long-term indebtedness amounted to $185.6
million (including the current portion of $10.5 million), and we had
$25.0 million available for future borrowings and letters of credit under
our revolving credit facility. The weighted-average interest rate
incurred by us with respect to our debt obligations was approximately
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<PAGE>
9.5% for the period from April 24, 1999 to December 31, 1999 and
approximately 9.3% for the period from January 1, 1999 to April 23, 1999.
Our liquidity requirements are primarily the funding of working
capital needs, which consist of inventory and accounts receivable,
capital expenditures and scheduled principal and interest payments on
indebtedness. Capital expenditures in 1999 totaled $12.1 million, as
compared to $11.4 million in 1998 and $13.7 million in 1997. We expect
our capital expenditures to increase to approximately $12.5 million in
2000. It is anticipated that these expenditures will fund purchases of
equipment to support production capacity for new and existing products as
well as routine on-going requirements.
We believe that our cash on hand, anticipated funds from
operations and the amounts available to us under our revolving credit
facility will be sufficient to cover our working capital, capital
expenditures, debt service requirements and tax obligations as well as
our growth-oriented strategy for our existing business for at least the
next 12 months.
Our ability to fund operations, make capital expenditures and
make scheduled principal and interest payments or to refinance our
indebtedness will depend upon our future financial and operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, some of which are beyond our
control.
Market Risk
The Company is exposed to various market risk factors such as
fluctuating interest rates and changes in foreign currency rates. These
risk factors can impact our results of operations, cash flows and
financial position. We manage these risks through regular operating and
financing activities and periodically use derivative financial
instruments such as foreign exchange option and forward contracts and
interest rate cap and swap agreements. These derivative instruments are
placed with major financial institutions and are not for speculative or
trading purposes.
The following analysis presents the effect on the Company's
earnings, cash flows and financial position as if the hypothetical
changes in market risk factors occurred on December 31, 1999. Only the
potential impacts of our hypothetical assumptions are analyzed. The
analysis does not consider other possible effects that could impact our
business.
Interest Rate Risk
At December 31, 1999, the Company carried $185.6 million of
outstanding debt on its books, with $113.3 million of that total held at
variable interest rates. In October 1999, the Company entered into an
interest rate cap agreement and an interest rate swap agreement with a
bank covering $56,250,000 of its variable rate debt outstanding to manage
its interest rate risk (see Note 6 to our Consolidated Financial
Statements). Holding all other variables constant, if interest rates
-30-
<PAGE>
hypothetically increased or decreased by 10%, the impact on earnings,
cash flow and financial position would not be material. In addition, if
interest rates hypothetically increased or decreased by 10%, with all
other variables held constant, the fair market value of our $69.3 million
9 7/8% Series B Senior Notes would increase or decrease by approximately
$3.4 million.
Foreign Currency Risk
The Company sells to customers in foreign markets through our
foreign operations and through export sales from our plants in the U.S.
These transactions are often denominated in currencies other than the
U.S. dollar. Our primary currency exposures are the Euro, British Pound
Sterling, Canadian Dollar and Mexican Peso.
The Company limits its foreign currency risk by operational
means, mostly by locating its manufacturing operations in those locations
where it has significant exposures in major currencies. The Company has
entered into currency option contracts to minimize the risk of foreign
currency fluctuations. The value of these contracts at December 31, 1999
was not material to the Company's earnings, cash flow and financial
position.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133
establishes standards for accounting and disclosure of derivative
instruments. This new standard, as amended by FAS 137, is effective for
fiscal quarters of fiscal years beginning after June 15, 2000. The
implementation of this new standard is not expected to have a material
effect on our consolidated results of operations or financial position.
Year 2000 Computer Issues
The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the applicable year,
as well as hardware designed with similar constraints. If corrective
action was not taken, some of our computer programs and hardware that
have date sensitive functions could have recognized a date using "00" as
the year 1900 rather than the year 2000. This could have resulted in a
system failure or miscalculations causing disruptions in operations
including, among other things, a temporary inability to process
transactions, receive invoices, make payments or engage in normal
business transactions.
We took action to resolve those Year 2000 issues that were under
our control. The overall effort encompassed our razors and blades, cotton
and foot care and custom bar soap business segments and covered
international as well as domestic sites. We centrally monitored and
controlled the effort; however, there were designated representatives at
each affiliate and subsidiary location with responsibility for resolving
site-specific Year 2000 issues.
-31-
<PAGE>
Our systems made a successful transition into the Year 2000
without any problems and we have had no issues with supplier Year 2000
problems, so the Year 2000 issue has had no material impact on the
Company.
Since most of our Year 2000 issues were addressed through normal
planned upgrades, incremental external Year 2000 costs were minimal,
approximating $115,000.
Inflation
Inflation has not been material to our operations within the
periods presented.
ITEM 7A - Quantitative and Qualitative Disclosures about Market Risk
The information called for by this item is provided under the
captions "Market Risk", "Interest Rate Risk" and "Foreign Currency Risk"
under Part I, Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations of this Report.
ITEM 8 - Financial Statements and Supplementary Data
The consolidated financial statements of the registrant are
submitted as a separate section of this Report starting on page 46.
Information related to "Quarterly Data (Unaudited)" is summarized below:
<TABLE>
<CAPTION>
1999
--------------------------------------------------------------
First Second Third Fourth
----- ------ ----- ------
(In thousands, except per share and market price data)
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . $70,287 $77,246 $86,080 $81,137
Gross profit . . . . . . . . . . . . . . . . . . 23,458 18,362<F1> 31,167 27,747
Transaction expenses . . . . . . . . . . . . . . -- 11,440<F2> -- --
Income (loss) before extraordinary item . . . . . 1,974 (13,397) 1,259 1,819
Extraordinary item . . . . . . . . . . . . . . . -- 729 -- --
Net income (loss) . . . . . . . . . . . . . . . . 1,974 (14,126) 1,259 1,819
Earnings per share - income (loss) before
extraordinary item
Basic . . . . . . . . . . . . . . . . . . . . . 0.16 (1.11) 0.10 0.15
Diluted . . . . . . . . . . . . . . . . . . . . 0.16 (1.11) 0.10 0.15
Earnings per share - net income (loss)
Basic . . . . . . . . . . . . . . . . . . . . . 0.16 (1.17) 0.10 0.15
Diluted . . . . . . . . . . . . . . . . . . . . 0.16 (1.17) 0.10 0.15
Market price
High . . . . . . . . . . . . . . . . . . . . . 14.06 14.25 n/a n/a
Low . . . . . . . . . . . . . . . . . . . . . . 9.88 11.81 n/a n/a
</TABLE>
-32-
<PAGE>
<TABLE>
<CAPTION>
1998
-----------------------------------------------------------
First Second Third Fourth
----- ------ ----- ------
(In thousands, except per share and market price data)
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . $66,511 $73,751 $80,171 $77,055
Gross profit . . . . . . . . . . . . . . . . . . . 19,508 23,800 26,902 25,300
Special charges <F3> . . . . . . . . . . . . . . . 1,003 -- -- 2,000
Net income . . . . . . . . . . . . . . . . . . . . 789 2,094 3,702 3,517<F4>
Earnings per share
Basic . . . . . . . . . . . . . . . . . . . . . . .07 .17 .31 .29<F4>
Diluted . . . . . . . . . . . . . . . . . . . . . .06 .17 .30 .29<F4>
Market price
High . . . . . . . . . . . . . . . . . . . . . . 23.25 18.38 14.75 12.63
Low . . . . . . . . . . . . . . . . . . . . . . . 17.50 11.00 8.63 8.13
<FN>
<F1> Includes additional inventory costs of $9.0 million resulting from
adjusting the carrying value of acquired inventories to reflect
their estimated fair market value at the Acquisition date.
<F2> Relates to expenses incurred in connection with the sale of the
Predecessor (see Note 1 to our Consolidated Financial Statements).
<F3> See Note 14 to our Consolidated Financial Statements.
<F4> Includes a tax benefit of $1.5 million or $.13 per share relating
to the settlement of tax issues (see Note 9 to our Consolidated
Financial Statements).
</TABLE>
ITEM 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
ITEM 10 - Directors and Executive Officers of the Registrant
The following table sets forth the name, age and position of
each of the Company's directors, executive officers and other significant
employees. All of the Company's officers are elected annually and serve
at the discretion of the Company's Board of Directors.
-33-
<PAGE>
Name Age Position
- - ---- --- --------
James D. Murphy 53 President and Chief Executive Officer and
Director
Alan R. Koss 66 Senior Vice President - Chief Financial
Officer
James W. Nelson 60 Senior Vice President - Manufacturing and
Logistics
Karen A. August 42 Senior Vice President - Consumer Products
Mario E. Soussou 49 Senior Vice President - International
Gary R. Moorhead 51 Vice President - General Manager, Custom Bar
Soap
Paul W. Tonnesen 35 Vice President- Consumer Products
Gary S. Wade 51 Vice President - Industrial/Specialty
Adam L. Suttin 32 Vice President and Secretary and Director
John W. Childs 58 Director
Timothy J. Healy 50 Director
Raymond B. Rudy 69 Director
Biographical Information
Mr. Murphy joined the Company as President and Chief Executive
Officer on April 23, 1999 in connection with the acquisition of American
Safety Razor Company by RSA Acquisition Corporation, an affiliate of J.W.
Childs Equity Partners II, L.P. (the "Acquisition"). He has nearly 25
years of experience in the packaged goods industry both domestically and
internationally. He has held the senior management position in three
companies over the last ten years as either Country Manager, Division
President or President/CEO. Mr. Murphy is the former President and CEO of
the Personal Care Group which was acquired by J.W. Childs in 1996 and
sold to Playtex Products, Inc. in 1998. Prior to this, Mr. Murphy was
Managing Director for Scott Paper, Ltd. from 1995 through 1996 with
responsibility for the U.K. and Ireland. From 1983 to 1995, he held
increasing levels of responsibility at L&F Products including President
of the Canadian Division and President of the Personal Care Division. He
also held senior management positions at the Airwick Division of Ciba
Geigy and American Home Products.
Mr. Koss joined the Company as Senior Vice President - Chief
Financial Officer on September 1, 1999. Prior to joining the Company he
was Executive Vice President and Chief Financial Officer of the Personal
Care Group, which was acquired by J.W. Childs in 1996 and sold to Playtex
Products, Inc. in 1998. Mr. Koss held the position of Senior Vice
President and Chief Financial Officer at Snapple Beverage Corporation
when it was acquired by Thomas H. Lee Company until it was sold to the
Quaker Oats Company. Prior to this, Mr. Koss was Executive Vice President
of the Gaines Food Company, a subsidiary of Anderson, Clayton, and for
many years before that held a series of executive positions of increasing
responsibility with the General Foods Corp.
Mr. Nelson joined the Company as Senior Vice President -
Manufacturing and Logistics on April 23, 1999 in connection with the
Acquisition. From 1963 to 1998, Mr. Nelson has held senior management
positions in manufacturing and logistics with consumer and health care
-34-
<PAGE>
product companies such as Reckitt and Colman, L&F Products, and Johnson
and Johnson.
Ms. August joined the Company as Senior Vice President -
Consumer Products on April 23, 1999 in connection with the Acquisition.
Ms. August has over 15 years of consumer packaged goods experience that
spans a wide range of categories in personal care and household products.
Prior to joining the Company, Ms. August was Vice President, Marketing
for the Personal Care Group from 1996 to 1998. Prior to working at
Personal Care Group, Ms. August held positions of increasing
responsibility for L&F Products.
Mr. Soussou joined the Company as Senior Vice President -
International on April 23, 1999 in connection with the Acquisition. From
1996 to 1998 he was the Managing Director, International Business for the
Personal Care Group where he oversaw the company's international
business. From 1992 to 1995, Mr. Soussou was Vice President of Snapple
Beverage Corporation. He was Director of International Business
Development and Exports at Best Foods, Inc., where he held various
positions of increasing responsibility between 1981 and 1992.
Mr. Moorhead joined the Company in 1980, in connection with the
acquisition of the Hewitt Soap Company and held various sales and
marketing positions until April 1997, when he became Vice President -
General Manager, Custom Bar Soap.
Mr. Tonnesen joined the Company in October 1998 and has served
as Vice President - Consumer Products since that time. Prior to joining
the Company, Mr. Tonnesen was National Sales Manager for the Personal
Care Group since 1996. From 1994 to 1996, Mr. Tonnesen was Eastern Zone
Sales Manager at H.J. Heinz, Inc./Kraft General Foods. From 1991 to 1994,
Mr. Tonnesen held various positions at Kraft General Foods.
Mr. Wade has been employed in various sales, management and
marketing positions in our industrial blade division since 1978. In 1990,
Mr. Wade was appointed Vice President - Industrial/Specialty. Prior to
joining the Company, Mr. Wade was employed in various sales and sales
management positions with the General Products Division of Philip Morris
U.S.A.
Mr. Suttin became a member of the Company's Board of Directors
on April 23, 1999 in connection with the Acquisition. He has been a
Managing Director of J.W. Childs Associates, L.P. ("JWCA") since January
1998, and has been with JWCA since July 1995. Prior to that time, he was
an executive at Thomas H. Lee Company from August 1989, most recently
holding the position of Associate. He is a director of Quality Stores,
Inc., Empire Kosher Poultry, Inc. and DESA International, Inc.
Mr. Childs became a member of the Company's Board of Directors
on April 23, 1999 in connection with the Acquisition. He has been
President of JWCA since July 1995. Prior to that time, he was an
executive at Thomas H. Lee Company from May 1987, most recently holding
the position of Senior Managing Director. Prior to that, Mr. Childs was
with the Prudential Insurance Company of America where he held various
executive positions in the investment area ultimately serving as Senior
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<PAGE>
Managing Director in charge of the Capital Markets Group. He is a
director of Big V Supermarkets, Inc., Quality Stores, Inc., Chevys
Holdings, Inc., Beltone Electronics Corp., Pan Am International Academy,
Inc., DESA International, Inc., Edison Schools Inc., and Bass Pro Inc.
Mr. Healy became a member of the Company's Board of Directors on
April 23, 1999 in connection with the Acquisition. He has been a Managing
Director of JWCA since July 1998. From 1991 to 1998, Mr. Healy was
President and Chief Executive Officer of Select Beverages. Prior to 1991,
he was Executive Vice President and Chief Operating Partner of National
Beverage Corporation and from 1972 to 1986 he held various executive and
marketing positions of increasing responsibility for Proctor & Gamble
Co.; Frito-Lay, Inc.; Heinz, USA; General Foods Corporation and the
NutriSweet division of G.D. Searle & Co. He is the chairman of IDF
Holdings, Inc.
Mr. Rudy became a member of the Company's Board of Directors on
April 23, 1999 in connection with the Acquisition. He has been a Managing
Director of JWCA since July 1995. Prior to that time, he was Deputy
Chairman and Director of Snapple Beverage Corporation from 1992 until the
company was sold in 1994. From 1987 to 1989, Mr Rudy was President of
Best Foods Subsidiaries of CPC International. From 1984 to 1986, Mr. Rudy
was Chairman, President and CEO of Arnold Foods Company, Inc. He is
Chairman of Beltone Electronics Corp., Vice Chairman of Empire Kosher
Poultry, Inc. and a director of International Diverse Foods, Inc., Widmer
Brothers Brewing Company and DESA International, Inc.
ITEM 11 - Executive Compensation
The following table sets forth a summary of certain information
regarding compensation paid or accrued by the Company for services
rendered to the Company for the fiscal year ended December 31, 1999, and
the two prior fiscal years, paid or awarded to those persons who were, at
December 31, 1999: (i) the Company's chief executive officer, (ii) the
Company's four most highly compensated executive officers other than the
chief executive officer whose total annual salary and bonus exceeded
$100,000 during such period (collectively, the "Named Executive
Officers") and (iii) two additional individuals for whom disclosure would
have been provided but for the fact that the individuals were not serving
as an executive officer of the Company as of December 31, 1999.
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<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------- ------------
Securities
Other Annual Underlying
Name and Principal Position Year Salary<F1> Bonus<F2> Compensation<F3> Options
- - ------------------------------ ---- --------- -------- --------------- ---------
<S> <C> <C> <C> <C> <C>
James D. Murphy 1999 274,364 372,500 0 0
President and Chief 1998 0 0 0 0
Executive Officer 1997 0 0 0 0
James W. Nelson 1999 134,065 132,500 0 0
Senior Vice President - 1998 0 0 0 0
Manufacturing and Logistics 1997 0 0 0 0
Karen A. August 1999 135,400 130,000 0 0
Senior Vice President - 1998 0 0 0 0
Consumer Products 1997 0 0 0 0
Mariou E. Soussou 1999 137,050 130,000 0 0
Senior Vice President - 1998 0 0 0 0
International 1997 0 0 0 0
Gary S. Wade 1999 141,828 84,500 32,000<F4> 0
Vice President - Industrial/ 1998 134,678 64,300 0 0
Specialty 1997 124,785 45,010 0 7,500
Thomas H. Quinn 1999 41,668 0 374,000<F5> 0
Past Chairman and 1998 125,000 0 0 0
Chief Executive Officer 1997 125,000 0 0 0
Thomas G. Kasvin 1999 150,003 105,000 1,191,250<F6> 0
Past Senior Vice President - 1998 190,832 0 0 0
Chief Financial Officer 1997 174,667 117,447 0 15,000
____________________
<FN>
<F1> Includes amounts deferred under the Company's 401(k) plan.
<F2> The Company provides bonus compensation based on an individual's
achievement of certain specified objectives, with additional
rewards if certain operating objectives, including, among others,
EBITDA, are met. The bonus plan is administered by the Company's
Compensation Committee.
<F3> Except as indicated, no executive named in the table received any
other annual compensation in an amount in excess of the lesser of
either $50,000 or 10% of the total of annual salary and loans
reported for him in the two preceding columns for the periods
covered by this table.
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<PAGE>
<F4> Payment related to the April 30, 1999 redemption of the
Predecessor's stock options.
<F5> Payment pursuant to a Letter Agreement dated as of February 5,
1999 between the Company and Mr. Quinn.
<F6> Payment of $660,000 pursuant to an Employment Protection Agreement
dated December 8, 1997 between the Company and Mr. Kasvin, payment
of $300,000 pursuant to a Letter Agreement dated July 15, 1998
between the Company and Mr. Kasvin and payment of $231,250 related
to the April 30, 1999 redemption of the Predecessor's stock
options.
</TABLE>
Employment Agreements
The Company is in the process of negotiating and finalizing an
employment agreement with Mr. Murphy.
On March 3, 1995, Sterile Products Holdings, Inc., a wholly-
owned subsidiary of the Company ("Holdings") and Sterile Products
Corporation, d.b.a. Absorbent Cotton Company, Inc., a wholly-owned
subsidiary of Holdings ("ACCO"), entered into an employment agreement
with Mr. C. C. Van Noy (the "Van Noy Employment Agreement"). Pursuant to
the terms of the Van Noy Employment Agreement, Mr. Van Noy served as the
President of ACCO for two years and agreed not to compete with Holdings
or ACCO or disclose any confidential information during the period in
which the Annual Retirement Payments (as hereinafter defined) are being
paid to him. In exchange for his services and agreements not to compete
or disclose certain information, Mr. Van Noy, who has retired and no
longer performs services for the Company, is entitled to receive an
annual payment of $75,000 (the "Annual Retirement Payments") for a ten
year period. The Van Noy Employment Agreement provides that the Annual
Retirement Payments shall be made to the beneficiary of Mr. Van Noy upon
his death, subject to certain adjustments.
On December 8, 1997, the Company entered into Employment
Protection Agreements (the "Protection Agreements") with each of Messrs.
Weathersby and Kasvin (the "Executive"). The Protection Agreement
provides that, in the event of a Change of Control (as defined therein),
the Company will pay the Executive a lump sum in cash (the "Change of
Control Payment") equal to: (i) one year's base salary (six months in the
case of Mr. Weathersby) and (ii) an amount equal to 100% of Executive's
target bonus (50% in the case of Mr. Weathersby) for the fiscal year in
which the Change of Control occurs. If, after a Change of Control,
Executive's employment is terminated or is otherwise materially and
adversely affected, Executive will be entitled to an additional lump sum
payment equal to the Change of Control Payment. In addition, all stock
options previously granted to the Executive, whether or not vested, shall
become immediately exercisable. Executive shall have one year from such
date to exercise the options. During 1999, Mr. Weathersby and Mr. Kasvin
received payments aggregating $542,000 and $660,000, respectively, under
their Employment Protection Agreements. In addition, Mr. Weathersby and
Mr. Kasvin received payments aggregate $203,375 and $231,250,
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<PAGE>
respectively, related to the April 30, 1999 redemption of the
Predecessor's stock options.
On July 15, 1998, the Company entered into a Letter Agreement
with Mr. Kasvin, in which the Company agreed to pay Mr. Kasvin $300,000
on September 1, 1999 (above and beyond salary and other benefits which he
is receiving) if he remained employed by the Company until that date (or
was terminated by the Company without cause prior to that date). Mr.
Kasvin remained on the payroll until September 30, 1999 and received a
payment of $300,000 under the Letter Agreement.
On November 9, 1998, the Company entered into a Separation and
Release Agreement (the "Release Agreement") with Mr. James V. Heim,
Senior Vice President of Consumer and Personal Products. Pursuant to the
terms of the Release Agreement, Mr. Heim's employment with the Company
ceased on November 30, 1998. In satisfaction of all Mr. Heim's claims for
compensation, Mr. Heim received a lump sum payment from the Company of
$322,500. Mr. Heim may exercise his stock options in the Company's stock
until November 30, 1999. In furtherance of the Employee Patent and
Confidential Information Agreement executed by Mr. Heim on June 3, 1996,
Mr. Heim agreed that he would keep secret all confidential financial and
proprietary matters of the Company and would not take with him any
documents relating to the Company. Mr. Heim received a payment of $64,000
related to the April 30, 1999 redemption of the Predecessor's stock
options.
On February 5, 1999, the Company entered into a Letter Agreement
with Thomas H. Quinn. Pursuant to the Letter Agreement, Mr. Quinn's
employment with the Company will cease upon a change of control of the
Company. In recognition of his service and dedication to the Company, Mr.
Quinn is entitled to receive a lump sum payment, upon consummation of a
change of control, from the Company of $374,000. Mr. Quinn received a
payment of $374,000 under the Letter Agreement.
ITEM 12 - Security Ownership of Certain Beneficial Owners and Management
As of December 31, 1999, there were 12,110,349 shares of the
Company's Common Stock outstanding which were owned 100% by the Company's
parent, RSA Holdings Corporation. The following table sets forth as of
December 31, 1999 certain information with respect to the number of
shares of common stock of RSA Holdings Corporation beneficially owned by
(i) each director of the Company who beneficially owned common stock,
(ii) each executive officer of the Company as of December 31, 1999, named
in the table under "Executive Compensation" under Item 11 of this Report,
who beneficially owned common stock, (iii) all directors and executive
officers of the Company as a group and (iv) each person or entity that
beneficially owned (directly or together with affiliates) more than 5% of
the common stock. The Company believes that each individual or entity
named has sole investment and voting power with respect to shares of
common stock indicated as beneficially owned by them, except as otherwise
noted.
-39-
<PAGE>
<TABLE>
<CAPTION>
Common Stock
Beneficially Percentage
Name Owned<F1> Ownership<F1>
- - --------------------------------------------- ------------ ------------
<S> <C> <C>
Directors and Executive Officers:
John W. Childs <F2> . . . . . . . . . . . . . 45,320 4.4%
Timothy J. Healy . . . . . . . . . . . . . . 1,944 <F*>
Raymond B. Rudy . . . . . . . . . . . . . . . 2,500 <F*>
Adam L. Suttin <F3> . . . . . . . . . . . . . 6,105 <F*>
James D. Murphy . . . . . . . . . . . . . . . 6,667 <F*>
Alan R. Koss <F4> . . . . . . . . . . . . . . 1,111 <F*>
James W. Nelson . . . . . . . . . . . . . . . 2,222 <F*>
Karen A. August . . . . . . . . . . . . . . . 2,222 <F*>
Mario E. Soussou <F5> . . . . . . . . . . . . 5,000 <F*>
Gary R. Moorhead . . . . . . . . . . . . . . 278 <F*>
Paul W. Tonnesen . . . . . . . . . . . . . . 417 <F*>
Gary S. Wade . . . . . . . . . . . . . . . . 3,378 <F*>
All directors and executive officers as a 77,164 7.6%
group (12 persons) . . . . . . . . . . . .
Other Principal Stockholders:
J.W. Childs Equity Partners II, L.P. <F6> . . 904,097 88.6%
____________________
<FN>
<F*> Indicates beneficial ownership of less than 1% of shares of common
stock.
<F1> Calculated pursuant to Rule 13d-3(d) of the Exchange Act. Under
Rule 13d-3(d), shares not outstanding which are subject to
options, warrants, rights or conversion privileges exercisable
within 60 days are deemed outstanding for the purpose of
calculating the number and percentage owned by such person, but
not deemed outstanding for the purpose of calculating the
percentage owned by each other person listed.
<F2> Includes 556 shares of common stock held by Richard Childs and 556
shares of common stock held by James Childs for each of which Mr.
Childs disclaims beneficial ownership.
<F3> Includes 276 shares of common stock held by the Suttin Irrevocable
Family Trust, 599 shares of common stock held by the Suttin Family
Trust II and 2,281 shares of common stock held by the Eugene
Suttin IRA for each of which Mr. Suttin disclaims beneficial
ownership.
<F4> Includes 222 shares of common stock held by the Jadyn Emma Koss
Trust for which Mr. Koss disclaims beneficial ownership.
<F5> Includes 111 shares of common stock held by the Isabelle Soussou
Trust and 111 shares of common stock held by the Moriella Soussou
Trust for each of which Mr. Soussou disclaims beneficial
ownership.
-40-
<PAGE>
<F6> Shares of common stock shown as beneficially owned by J.W. Childs
Equity Partners II, L.P. are owned by RSA Holdings Corporation,
which is wholly owned by J.W. Childs Equity Partners II, L.P. J.W.
Childs Advisors II, L.P. is the sole general partner of J.W.
Childs Equity Partners II, L.P. J.W. Childs Associates, L.P. is
the sole general partner of J.W. Childs Advisors II L.P. J. W.
Childs Associates, Inc. is a corporation, the officers of which
are Messrs. John W. Childs, Steven G. Segal, Adam L. Suttin, Glenn
A. Hopkins, Dana L. Schmaltz, Edward D. Yun and Allan A. Dowds.
Messrs. Childs and Suttin are directors of the Company. Each of
Messrs. Childs, Segal, Suttin and Hopkins may be deemed to share
beneficial ownership of the shares shown as beneficially owned by
J. W. Childs Equity Partners II, L.P. Each of these individuals
disclaims such beneficial ownership. Messrs. Raymond B. Rudy and
Timothy J. Healy are directors of the Company and are also
Managing Directors of J.W. Childs Associates, L.P. Messrs. Rudy
and Healy disclaim that they are the beneficial owners of any
shares beneficially owned by J.W. Childs Equity Partners II, L.P.
Each of the foregoing has a business address c/o J.W. Childs
Equity Partners, One Federal Street, 21st Floor, Boston, MA 02110.
</TABLE>
ITEM 13 - Certain Relationships and Related Transactions
J.W. Childs. J.W. Childs owns approximately 89% of RSA Holdings
Corporation, which beneficially owns 100% of the Company's Common Stock.
The President of J.W. Childs is Mr. John W. Childs, the Senior Managing
Director is Mr. Steven G. Segal and the other Managing Directors are
Messrs. John V. Bock, Jr., Glenn A. Hopkins, Jerry D. Horn, Timothy J.
Healy, Raymond B. Rudy and Adam L. Suttin. Messrs. Childs, Healy, Rudy
and Suttin are directors of the Company. J.W. Childs assisted the Company
in negotiating the Acquisition and arranging the financing therefor, and
was paid a fee of $3.0 million and reimbursed for its expenses in
connection therewith, which aggregated $0.2 million. From time to time in
the future, J.W. Childs may receive customary investment banking fees for
services rendered to the Company in connection with divestitures,
acquisitions and certain other transactions. In addition, pursuant to a
management agreement entered into with the Company, J.W. Childs will
render management, consulting and financial services to the Company for
an annual fee of $240,000. See "Directors and Executive Officers of the
Registrant" and "Security Ownership of Certain Beneficial Owners and
Management."
The Jordan Company. On July 12, 1995, the Company and TJC
Management Corporation, an affiliate of The Jordan Company, entered into
an advisory agreement (the "Advisory Agreement"). The Advisory Agreement
provided for the payment by the Company to TJC Management Corporation of
(a) up to 2% of the aggregate consideration paid by the Company and/or
its subsidiaries in connection with acquisitions or paid to the Company
in connection with a sale of the Company and/or its subsidiaries and (b)
up to 1% of the amount obtained pursuant to any debt, equity or other
refinancing. In accordance with Company policy, the Advisory Agreement
was (i) approved by a majority of the members of the Company's Board and
-41-
<PAGE>
by a majority of the disinterested members of the Company's Board and
(ii) deemed by the Company's Board to be subject to terms and conditions
no less favorable to the Company than could be obtained from unaffiliated
third parties.
Pursuant to the terms of the Advisory Agreement, on May 28,
1997, the Company paid to TJC Management Corporation $196,000 as
compensation for providing investment banking and other consulting
services rendered in connection with the acquisition by a subsidiary of
the Company of certain assets of AWC. Messrs. Jordan, Zalaznick, Boucher
and Lowden were directors of the Predecessor and are partners of The
Jordan Company.
On February 12, 1999, the Company and TJC Management Corporation
amended and restated the Advisory Agreement (the "Amended Advisory
Agreement"). The Company's Board unanimously approved the Amended
Advisory Agreement. Pursuant to the Amended Advisory Agreement, the
Company and TJC Management Corporation agreed upon a flat $2,500,000 fee
for financial advisory services which was paid at closing of the Stock
Tender Offer. The financial advisory fee in the Amended Advisory
Agreement represents a reduction from the base fee of up to 2% which
would otherwise have been paid in connection with the Stock Tender Offer.
In accordance with Company policy, the Amended Advisory Agreement was (i)
approved by a majority of the members of the Company's Board and a
majority of the disinterested members of the Company's Board and (ii)
deemed by the Company's Board to be subject to terms and conditions no
less favorable to the Company than could be obtained from unaffiliated
third parties.
During the fiscal year 1999, the Company paid to The Jordan
Company an aggregate of $15,000 as compensation for Messrs. Jordan,
Zalaznick, Boucher and Lowden serving as members of the Company's Board
prior to the Acquisition.
Indemnification Agreements. The Company is party to
indemnification agreements with each of the past members of the Company's
Board pursuant to which the Company has agreed to indemnify and hold
harmless each director from liabilities incurred as a result of such
director's status as a director of the Company, subject to certain
limitations.
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(a) (1), (2) and (3)--The response to this portion of Item 14 is
submitted as a separate section of this Report starting on page 46.
(b) Reports on Form 8-K filed in the fourth quarter of 1999.
None
(c) Exhibits--The response to this portion of Item 14 is submitted as a
separate section of this Report starting on page 105.
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<PAGE>
(d) Financial Statement Schedule--The response to this portion of Item
14 is submitted as a separate section of this Report on page 103.
-43-
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, as of
the 29th day of March 2000.
AMERICAN SAFETY RAZOR COMPANY
/s/James D. Murphy
-----------------------------------------------
James D. Murphy
Director, President and Chief Executive Officer
Power of Attorney
Each person whose signature appears below hereby constitutes and appoints
James D. Murphy and Adam L. Suttin, and each of them, the true and lawful
attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of
the undersigned and to file the same, with all exhibits thereto, in any
and all capabilities, to sign any and all amendments (including post-
effective exhibits thereto, and other documents in connection therewith)
with the Securities and Exchange Commission, and hereby grants to such
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as the undersigned might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities as of the 29th day of March 2000.
Signature Title
--------- -----
/s/James D. Murphy Director, President and
- - ------------------------- Chief Executive Officer
James D. Murphy
/s/Alan R. Koss Senior Vice President
- - ------------------------- Chief Financial Officer
Alan R. Koss (Principal Financial
Officer and Principal
Accounting Officer)
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<PAGE>
/s/Adam L. Suttin Director, Vice President and
- - ------------------------- Secretary
Adam L. Suttin
/s/John W. Childs Director
- - -------------------------
John W. Childs
/s/Timothy J. Healy Director
- - -------------------------
Timothy J. Healy
/s/Raymond B. Rudy Director
- - -------------------------
Raymond B. Rudy
-45-
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) and (2), (c) and (d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 1999
AMERICAN SAFETY RAZOR COMPANY
STAUNTON, VIRGINIA
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<PAGE>
FORM 10-K--ITEM 14(a)(1) AND (2)
American Safety Razor Company
List of Financial Statements and Financial Statement Schedule
The following consolidated financial statements of American Safety Razor
Company are included in Item 8:
Consolidated Balance Sheets--December 31, 1999 (the Company) and
1998 (Predecessor)
Consolidated Statements of Operations--For the period
from April 24, 1999 to December 31, 1999 (the Company),
for the period from January 1, 1999 to April 23, 1999,
and for the years ended December 31, 1998 and 1997
(Predecessor)
Consolidated Statements of Comprehensive Income--For the
period from April 24, 1999 to December 31, 1999 (the
Company), for the period from January 1, 1999 to
April 23, 1999, and for the years ended December 31,
1998 and 1997 (Predecessor)
Consolidated Statements of Cash Flows--For the period
from April 24, 1999 to December 31, 1999 (the Company),
for the period from January 1, 1999 to April 23, 1999,
and for the years ended December 31, 1998 and 1997
(Predecessor)
Notes to Consolidated Financial Statements--December 31, 1999
Report of Independent Accountants
The following consolidated financial statement schedule of American
Safety Razor Company is included in Item 14(d):
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore
have been omitted.
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<PAGE>
AMERICAN SAFETY RAZOR COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
Company Predecessor
------------------ --------------------
December 31, 1999 December 31, 1998
------------------ --------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . $12,500 $3,453
Accounts receivable, less allowances of $4,213 in 46,252 44,498
1999, and $2,957 in 1998 . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . 54,404 54,029
Income taxes receivable . . . . . . . . . . . . . . -- 989
Deferred income taxes . . . . . . . . . . . . . . . 6,814 5,108
Prepaid expenses . . . . . . . . . . . . . . . . . 1,882 2,340
------- --------
Total current assets . . . . . . . . . . . . . . . . 121,852 110,417
Property and equipment, net . . . . . . . . . . . . . 89,991 74,665
Intangible assets, net:
Goodwill, trademarks and patents . . . . . . . . . 159,675 68,446
Other . . . . . . . . . . . . . . . . . . . . . . . 6,826 3,365
-------- --------
166,501 71,811
Prepaid pension cost and other . . . . . . . . . . . 24,527 6,004
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . $402,871 $262,897
======== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . $13,711 $14,269
Accrued expenses . . . . . . . . . . . . . . . . . 13,607 12,009
Payroll and related liabilities . . . . . . . . . . 6,045 3,727
Accrued interest . . . . . . . . . . . . . . . . . 3,294 4,232
Income taxes payable . . . . . . . . . . . . . . . 185 --
Current maturities of long-term obligations . . . . 10,508 3,852
------- -------
Total current liabilities . . . . . . . . . . . . . . 47,350 38,089
Long-term obligations . . . . . . . . . . . . . . . . 175,108 123,481
Retiree health and insurance benefits . . . . . . . . 26,025 23,802
Pension and other liabilities . . . . . . . . . . . . 1,308 1,361
Deferred income taxes . . . . . . . . . . . . . . . . 24,078 6,610
------- -------
Total liabilities . . . . . . . . . . . . . . . . . . 273,869 193,343
------- -------
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<PAGE>
AMERICAN SAFETY RAZOR COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
Company Predecessor
------------------ --------------------
December 31, 1999 December 31, 1998
------------------ --------------------
<S> <C> <C>
Contingent liabilities and commitments
Stockholders' equity:
Common stock, $.01 Paragraph A value, 25,000,000
shares authorized; 12,110,349 shares issued and
outstanding in 1999, 12,110,049 in 1998 . . . . . 121 121
Additional paid-in capital . . . . . . . . . . . . 172,843 65,905
Advances to RSA Holdings Corporation, net . . . . . (42,714) --
(Accumulated deficit) retained earnings . . . . . . (1,258) 4,457
Accumulated other comprehensive income (loss) . . . 10 (929)
-------- --------
129,002 69,554
-------- --------
Total liabilities and stockholders' equity . . . . . $402,871 $262,897
======== ========
See accompanying notes.
</TABLE>
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<PAGE>
AMERICAN SAFETY RAZOR COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Company Predecessor
------------- -------------------------------------------------
Period from
April 24, 1999 Period from Year Ended Year Ended
to December 31, January 1, 1999 December 31, December 31,
1999 to April 23, 1999 1998 1997
-------------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . $227,159 $87,591 $297,488 $296,607
Cost of sales:
Cost of sales . . . . . . . . . . . . . . . . . 146,488 58,520 201,978 196,991
Purchase accounting adjustment to inventory . . 9,008 -- -- --
-------- ------- -------- --------
Gross profit . . . . . . . . . . . . . . . . . . 71,663 29,071 95,510 99,616
Selling, general and administrative expenses . . 52,567 21,429 63,516 60,206
Amortization of intangible assets . . . . . . . . 3,178 835 2,543 2,501
Special charges . . . . . . . . . . . . . . . . . -- -- 3,003 --
Transaction expenses . . . . . . . . . . . . . . -- 11,440 -- --
-------- ------- -------- --------
Operating income (loss) . . . . . . . . . . . . . 15,918 (4,633) 26,448 36,909
Interest expense . . . . . . . . . . . . . . . . 15,112 3,907 12,270 12,270
-------- ------- -------- --------
Income (loss) before income taxes and 806 (8,540) 14,178 24,639
extraordinary item . . . . . . . . . . . . . . .
Income taxes (benefit) . . . . . . . . . . . . . 1,453 (842) 4,076 9,570
-------- ------- -------- --------
(Loss) income before extraordinary item . . . . . (647) (7,698) 10,102 15,069
Extraordinary item, net of income tax benefit . . 611 118 -- --
-------- ------- -------- --------
Net (loss) income . . . . . . . . . . . . . . . . $ (1,258) $(7,816) $ 10,102 $ 15,069
======== ======= ======== ========
Basic earnings per share:
(Loss) income before extraordinary item . . . . $ (0.05) $ (0.64) $ 0.83 $ 1.25
Extraordinary item . . . . . . . . . . . . . . (0.05) (0.01) -- --
-------- ------- -------- --------
Net (loss) income . . . . . . . . . . . . . . . $ (0.10) $ (0.65) $ 0.83 $ 1.25
======== ======= ======== ========
Weighted average number of shares outstanding 12,110 12,110 12,107 12,094
======== ======= ======== ========
-50-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Company Predecessor
------------- -------------------------------------------------
Period from
April 24, 1999 Period from Year Ended Year Ended
to December 31, January 1, 1999 December 31, December 31,
1999 to April 23, 1999 1998 1997
-------------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
Diluted earnings per share:
(Loss) income before extraordinary item . . . . $ (0.05) $ (0.64) $ 0.83 $ 1.23
Extraordinary item . . . . . . . . . . . . . . (0.05) (0.01) -- --
-------- ------- ------- --------
Net (loss) income . . . . . . . . . . . . . . . $ (0.10) $ (0.65) $ 0.83 $ 1.23
======== ======= ======= ========
Weighted average number of shares outstanding . 12,110 12,198 12,223 12,255
======== ======= ======= ========
See accompanying notes.
</TABLE>
-51-
<PAGE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
<TABLE>
<CAPTION>
Company Predecessor
-------------- -------------------------------------------------
Period from
April 24, 1999 Period from Year Ended Year Ended
to December 31, January 1, 1999 December 31, December 31,
1999 to April 23, 1999 1998 1997
-------------- ---------------- ------------ -------------
<S> <C> <C> <C> <C>
Net (loss) income . . . . . . . . . . . . . . . . . $(1,258) $(7,816) $10,102 $15,069
Other comprehensive income (loss):
Foreign currency translation adjustments . . . . 10 (116) (91) (198)
------- ------- ------- -------
Comprehensive (loss) income . . . . . . . . . . . . $(1,248) $(7,932) $10,011 $14,871
======= ======= ======= =======
See accompanying notes.
</TABLE>
-52-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Company Predecessor
-------------- -------------------------------------------------
Period from
April 24, 1999 Period from Year Ended Year Ended
to December 31, January 1, 1999 December 31, December 31,
1999 to April 23, 1999 1998 1997
-------------- ----------------- ------------ -------------
<S> <C> <C> <C> <C>
Operating activities
Net (loss) income . . . . . . . . . . . . . . . . $(1,258) $(7,816) $10,102 $15,069
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating
activities:
Extraordinary item . . . . . . . . . . . . . . 611 118 -- --
Depreciation . . . . . . . . . . . . . . . . . 8,319 3,270 9,634 8,624
Amortization . . . . . . . . . . . . . . . . . 3,178 835 2,543 2,501
Interest and financing costs . . . . . . . . . 3,264 180 553 540
Deferred income taxes . . . . . . . . . . . . (1,980) 232 (381) 1,834
Retiree health and insurance benefits . . . . 926 224 836 674
Pension and other . . . . . . . . . . . . . . (2,062) (943) (2,126) (2,023)
Changes in operating assets and liabilities
net of effects of acquisitions:
Accounts receivable . . . . . . . . . . . . (9,464) 7,710 1,186 (7,685)
Inventories . . . . . . . . . . . . . . . . 15,111 (7,748) (2,186) (3,619)
Income taxes receivable . . . . . . . . . . 3,667 (2,252) (93) (896)
Prepaid expenses . . . . . . . . . . . . . . 84 205 (927) 423
Accounts payable . . . . . . . . . . . . . . (2,153) 1,723 (1,671) 1,492
Accrued and other expenses . . . . . . . . . 835 (1,072) (1,328) (70)
Income taxes payable . . . . . . . . . . . . 185 -- (3,601) (4,827)
------- ------- ------- -------
Net cash provided by (used in) operating 19,263 (5,334) 12,541 12,037
activities . . . . . . . . . . . . . . . . . . ------- ------- ------- -------
Investing activities
Capital expenditures . . . . . . . . . . . . . . (8,430) (3,638) (11,375) (13,714)
Acquisitions, net of cash acquired . . . . . . . -- -- (571) (10,300)
Other, net . . . . . . . . . . . . . . . . . . . (29) 49 (663) (3)
------- ------- ------- -------
Net cash used in investing activities . . . . . . (8,459) (3,589) (12,609) (24,017)
------- ------- ------- -------
Financing activities
Repayment of long-term obligations . . . . . . . (32,906) (21,909) (1,397) (553)
Proceeds from borrowings . . . . . . . . . . . . 51,294 61,400 3,380 11,943
Deferred loan fees . . . . . . . . . . . . . . . (395) (7,606) -- --
Proceeds from exercise of stock options . . . . . -- 2 104 45
Advances to RSA Holdings Corporation, net . . . . (18,559) (24,155) -- --
------- ------- ------- -------
-53-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Company Predecessor
-------------- -------------------------------------------------
Period from
April 24, 1999 Period from Year Ended Year Ended
to December 31, January 1, 1999 December 31, December 31,
1999 to April 23, 1999 1998 1997
-------------- ----------------- ------------ -------------
<S> <C> <C> <C> <C>
Net cash (used in) provided from financing
activities . . . . . . . . . . . . . . . . . . (566) 7,732 2,087 11,435
------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . . . . 10,238 (1,191) 2,019 (545)
Cash and cash equivalents, beginning of period . 2,262 3,453 1,434 1,979
------- ------- ------- -------
Cash and cash equivalents, end of period . . . . $12,500 $2,262 $3,453 $1,434
======= ======= ======= =======
See accompanying notes.
</TABLE>
-54-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. MERGER
Effective April 23, 1999, RSA Acquisition Corporation, an affiliate of
J.W. Childs Equity Partners II, L.P. ("J.W. Childs"), completed its
$14.20 per share cash tender offer for all outstanding shares of American
Safety Razor Company (the "Predecessor") in accordance with a February
12, 1999 merger agreement, as amended on April 8, 1999, (the
"Acquisition") upon the terms and subject to the conditions set forth in
the offer to purchase (the "Stock Tender Offer"). Following completion of
the Stock Tender Offer, there remained approximately 266,601 American
Safety Razor Company shares outstanding. On July 1, 1999, RSA Acquisition
Corporation and American Safety Razor Company completed a merger
transaction (the "Merger") pursuant to which RSA Acquisition Corporation
acquired the remaining shares of the Predecessor for $14.20 per share.
The aggregate purchase price, including transaction costs of $1.0
million, paid for the common stock purchased in the Stock Tender Offer
excluding the cost to redeem stock options, including all of the common
stock tendered, was approximately $173.0 million.
Following the Merger, American Safety Razor Company and its subsidiaries
(the "Company") became the surviving corporation and is a direct, wholly-
owned subsidiary of RSA Holdings Corporation, which is wholly-owned by
J.W. Childs, its affiliates and Company management.
Subsequent to the Acquisition and pursuant to the terms of its Indenture,
the Company made an offer to purchase all of its $100 million 9 7/8%
Series B Senior Notes due August 1, 2005 (the "Senior Notes"). In
response thereto, $30.7 million of the Senior Notes were validly tendered
and retired by the Company.
The Company has accounted for the Acquisition as a purchase. The
allocation of the purchase price resulted in purchase adjustments being
applied to the assets acquired and liabilities assumed. The total
purchase price of approximately $172,964,000 was allocated to the
acquired assets and assumed liabilities based on their respective fair
values at April 23, 1999 as follows:
<TABLE>
<CAPTION>
<S> <C>
Working capital . . . . . . . . . . . . . . . . . . $ 76,555,000
Property, plant and equipment . . . . . . . . . . . 89,880,000
Intangible assets, including goodwill . . . . . . . 173,496,000
Prepaid pension and other assets . . . . . . . . . 46,827,000
Long-term debt . . . . . . . . . . . . . . . . . . (163,685,000)
Other liabilities . . . . . . . . . . . . . . . . . (50,109,000)
-----------
$172,964,000
============
</TABLE>
As a result of the Acquisition and new basis of accounting, the Company's
financial statements for the period from April 24, 1999 to December 31,
-55-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1999 are not comparable to the Predecessor's financial statements for the
period from January 1, 1999 to April 23, 1999. As a result of the
application of purchase accounting the Company's depreciation expense and
amortization of intangible assets increased and the Company adjusted the
carrying value of acquired inventories to reflect their estimated fair
market value, which adjustment of $9,008,000 was written-off in the April
24, 1999 to December 31, 1999 reporting period. In addition, certain fees
and expenses incurred relating to the above transactions aggregating
$11,440,000 were expensed and are included in the Predecessor's
consolidated statement of operations in the caption "Transaction
expenses".
The primary components of Transaction expenses are (i) amounts paid to
redeem all of the outstanding options to purchase common stock of the
Predecessor, (ii) costs incurred by or on behalf of the Predecessor in
connection with the Acquisition, including legal and other advisory fees,
and (iii) costs incurred by or on behalf of the Predecessor related to
payments made to certain employees of the Predecessor in connection with
the change of control.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
The Company is a leading manufacturer of high-quality private label and
value brand consumer products. The Company's principal products consist
of consumer shaving razors and blades, blades and bladed hand tools,
specialty industrial and medical blades, cotton and foot care products,
and custom bar soaps principally sold to the retail and professional
trades in the United States and in selected international markets.
Basis of Presentation
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles which require management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Accordingly, actual
results could differ from those estimates.
Certain prior year amounts have been reclassified to conform with the
1999 presentation.
Principles of Consolidation
The consolidated financial statements include the accounts of American
Safety Razor Company and its subsidiaries, all of which are wholly owned.
The consolidated financial statements also include the accounts of The
Cotton Division of American White Cross, Inc., ("AWC"), and Wolco Holland
B.V. ("Wolco") since their acquisition dates (See Note 13). All
significant intercompany accounts and transactions have been eliminated
in consolidation.
-56-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Inventories
Inventories are stated at the lower of cost or market. In connection with
the Acquisition, the Company's new owners adopted the first-in, first-out
("FIFO") method of valuation of inventories for financial reporting
purposes. Cost for approximately 59 percent of inventories for 1998 were
determined by the Predecessor using the last-in, first-out ("LIFO")
method. Cost for 1998 of the remaining inventories, operating supplies
and inventories of foreign and certain domestic subsidiaries, were
determined by the FIFO method.
Long-Lived Assets
Property and equipment are stated on the basis of appraised values as
determined by independent appraisers. Expenditures for renewals and
betterments are capitalized, and expenditures for repairs and maintenance
are expensed as incurred. Depreciation is computed by the straight-line
method over the estimated useful lives of the related assets, which are
as follows:
Land improvements . . . . . . . . . 4-20 years
Buildings and improvements . . . . 10-40 years
Machinery and equipment . . . . . . 2-15 years
Intangible assets are stated on the basis of appraised values as
determined by independent appraisers. Goodwill and trademarks are being
amortized on a straight-line basis over a forty-year period. Patents are
being amortized on a straight-line basis over a fifteen-year period. The
Company periodically reviews its long-lived assets to assess
recoverability or impairment based on expectations of undiscounted cash
flows and the assets' carrying amount. Any impairment in carrying value
would be recognized in operating results if a permanent decline in value
were to occur. Noncompete agreements are being amortized using the
straight-line method over the terms of the related agreements. Deferred
loan costs are being amortized using the effective interest method over
the term of the related long-term obligations.
Advertising Expenses
Advertising costs are expensed when incurred and approximated $997,000
for the period from April 24, 1999 to December 31, 1999, $259,000 for the
period from January 1, 1999 to April 23, 1999, $912,000 in 1998, and
$2,318,000 in 1997.
Foreign Currency Translation
The accounts of the Company's foreign subsidiaries are generally measured
using local currency as the functional currency. Accordingly, assets and
liabilities are translated into U.S. dollars at period-end exchange
rates, and income and expense are translated at average monthly exchange
rates. Net exchange gains or losses resulting from such translations are
excluded from net earnings and accumulated as a separate component of
accumulated other comprehensive income or loss. The Company does not
provide income taxes on such gains and losses because the earnings of
foreign subsidiaries are permanently invested. Gains and losses from
-57-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
foreign currency transactions are included in net earnings and are not
significant in amount. The effect of exchange rate changes on cash flows
is not material.
Financial Instruments
The Company's financial instruments include cash and cash equivalents,
accounts receivable, accounts payable, debt obligations, foreign currency
forward contracts, foreign currency options and interest rate cap and
swap agreements. Because of their short maturity, the carrying amount of
cash and cash equivalents, accounts receivable and accounts payable
approximates fair value. Fair value of debt obligations is based on
quoted market prices for the same or similar issues. Fair value of
foreign currency forward contracts and foreign currency options are based
on quoted market prices. Fair value of interest rate cap and swap
agreements are based on dealer quotes, considering current interest
rates.
The Company periodically hedges certain foreign currency exposures
through the use of foreign currency forward contracts and foreign
currency options. Certain of these contracts, although intended and
economically effective as a hedge of certain of the Company's foreign
currency exposures, do not qualify for hedge accounting. Gains and losses
on contracts qualifying for hedge accounting treatment are deferred and
offset against foreign exchange gains or losses on the underlying
transaction. Gains and losses on contracts not qualifying for hedge
accounting treatment are included in current income. Premiums paid are
amortized on a straight-line basis over the term of the related contract.
The Company also periodically hedges exposure to fluctuating interest
rates through the use of interest rate cap and swap agreements. As
interest rates change, the differential paid or received is recognized in
interest expense of the period.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentration of credit risk consist primarily of cash and cash
equivalents and accounts receivable. The Company restricts its cash and
cash equivalents to financial institutions with high credit ratings and
credit risk on accounts receivable is minimized due to the diverse
geographic areas covered by the Company's operations and its diverse
customer base.
Earnings Per Share
Basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share includes
the dilutive effects of options, warrants and convertible securities. The
difference between the weighted average number of shares outstanding for
computing basic earnings per share and diluted earnings per share related
to the Predecessor's employee stock options outstanding which were
assumed to be converted for the diluted earnings per share calculation
when the average market price of the Predecessor's common stock for the
-58-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
period exceeded the exercise price of the employee stock options which
were outstanding.
Statement of Cash Flows
The Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents. The
Company paid income taxes of $582,000 for the period from April 24, 1999
to December 31, 1999 and the Predecessor paid income taxes of $806,000
for the period from January 1, 1999 to April 23, 1999, $9,994,000 in
1998, and $13,516,000 in 1997. The Company paid interest of $11,174,000
for the period from April 24, 1999 to December 31, 1999 and the
Predecessor paid interest of $5,564,000 for the period from January 1,
1999 to April 23, 1999, $11,802,000 in 1998, and $11,706,000 in 1997.
Supplemental non-cash investing and financing activities related to the
Wolco acquisition consist of (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Fair value of assets acquired, net of cash . . . . . . $2,626
Liabilities assumed . . . . . . . . . . . . . . . . . . (877)
Seller financing . . . . . . . . . . . . . . . . . . . (1,178)
------
Cash paid . . . . . . . . . . . . . . . . . . . . . . . $ (571)
======
</TABLE>
Liabilities assumed include acquired debt of $506,000.
Stock Options
The Predecessor followed Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options. Under APB
25, because the exercise price of the Predecessor's employee stock
options equaled the market price of the underlying stock on the date of
grant, no compensation expense was recognized. The Predecessor provides
additional pro forma disclosures of the fair-value based method in
accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (See Note 10).
Retirement Plans and Other Postretirement Benefits
FAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits" was issued in 1998 as an amendment to FAS Nos.
87, 88 and 106. The Company has conformed its pension and other
postretirement disclosures to comply with FAS No. 132.
Income Taxes
Income taxes are determined based on FAS No. 109, "Accounting for Income
Taxes." Deferred tax liabilities and assets are recognized for the
expected future tax consequences of events that have been included in the
-59-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
financial statements or tax returns. Deferred tax liabilities and assets
are determined based on differences between financial statement carrying
amounts and tax bases of assets and liabilities using enacted tax rates
in effect in the years in which the differences are expected to reverse.
Segment Reporting
The Company provides segment disclosures pursuant to FAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information"
(See Note 11).
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes
standards for accounting and disclosure of derivative instruments. This
new standard, as amended by FAS 137, is effective for fiscal quarters of
fiscal years beginning after June 15, 2000. The implementation of this
new standard is not expected to have a material effect on the Company's
results of operations or financial position.
3. INVENTORIES
Inventories consisted of:
<TABLE>
<CAPTION>
Company Predecessor
-------------- -------------
December 31,
1999 1998
-------------- -------------
(In thousands)
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . $27,928 $24,833
Work in process . . . . . . . . . . . . . . . 4,521 6,612
Finished goods . . . . . . . . . . . . . . . 18,098 19,034
Operating supplies . . . . . . . . . . . . . 3,857 3,475
------ ------
54,404 53,954
Current cost under LIFO inventory value . . . -- 75
------- -------
$54,404 $54,029
======= =======
</TABLE>
-60-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of:
<TABLE>
<CAPTION>
Company Predecessor
-------------- -------------
December 31,
1999 1998
-------------- -------------
(In thousands)
<S> <C> <C>
Land and land improvements . . . . . . . . . $3,928 $1,872
Buildings and improvements . . . . . . . . . 7,107 10,235
Machinery and equipment . . . . . . . . . . . 82,728 104,334
Construction in progress . . . . . . . . . . 4,635 8,373
------- -------
98,398 114,814
Less accumulated depreciation . . . . . . . . (8,407) (50,149)
------- -------
$89,991 $74,665
======= =======
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets consisted of:
<TABLE>
<CAPTION>
Company Predecessor
-------------- -------------
December 31,
1999 1998
-------------- -------------
(In thousands)
<S> <C> <C>
Goodwill . . . . . . . . . . . . . $149,414 $86,013
Trademarks . . . . . . . . . . . . 6,624 --
Patents . . . . . . . . . . . . . . 6,570 --
Noncompete agreements . . . . . . . 689 2,522
Deferred loan costs and other . . . 9,568 4,256
------- -------
172,865 92,791
Less accumulated amortization . . . (6,364) (20,980)
-------- -------
$166,501 $71,811
======== =======
</TABLE>
-61-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
Company Predecessor
-------------- -------------
December 31,
1999 1998
-------------- -------------
(In thousands)
<S> <C> <C>
Term loans, due January 2005 . . . . . . . $112,500 $ --
Revolving loans . . . . . . . . . . . . . . -- 20,600
9 7/8% Series B Senior Notes, due August
2005 . . . . . . . . . . . . . . . . . . 69,300 100,000
9% subordinated note, due June 2000 . . . . 1,250 2,500
Other:
3% Virginia Small Business Financing
Authority Note, due March 30, 2002 . . . 1,118 1,448
Other obligations . . . . . . . . . . . . 1,448 2,785
------- -------
185,616 127,333
Less current maturities . . . . . . . . . . 10,508 3,852
------- --------
$175,108 $123,481
======== ========
</TABLE>
On April 23, 1999 and concurrent with the Acquisition described in Note
1, the Company entered into a $190,000,000 credit agreement (the "Credit
Agreement"), which provides for term loan commitments in the aggregate
amount of $165,000,000 (the "Term Loan Facility") and a revolving credit
facility commitment of $25,000,000, and terminated its existing revolving
credit facility (the "Terminated Credit Facility"). Borrowings under the
Term Loan Facility of $88,000,000 and borrowings under the revolving
credit facility of $5,000,000 and internally generated funds of
$1,986,000 were used to purchase $30,700,000 face value of the Company's
Senior Notes which were validly tendered (see Note 1), pay expenses and
accrued interest of $1,402,000 incurred in connection with the purchase
of the Senior Notes, pay the outstanding balances of $18,811,000
including accrued interest on the Terminated Credit Facility and other
short-term debt, pay fees and expenses of $19,918,000 related to the
acquisition and financing and advance funds totaling $24,155,000 to RSA
Acquisition Corporation to fund a portion of the Acquisition described in
Note 1.
In connection with the purchase of the Senior Notes, the Company paid a
premium over Paragraph A and wrote-off deferred financing costs in the
aggregate gross amount of $969,000. These expenses, net of the related
-62-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
tax benefit of $358,000, are reflected in the Company's consolidated
statement of operations in the caption "Extraordinary item" for the
period from April 24, 1999 to December 31, 1999.
In addition, the Predecessor wrote-off deferred financing costs, in the
aggregate gross amount of $186,000 in connection with the
termination of the Terminated Credit Facility. These expenses, net of the
related tax benefit of $68,000, are reflected in the Predecessor's
consolidated statement of operations in the caption "Extraordinary item"
for the period from January 1, 1999 to April 23, 1999.
Effective July 5, 1999, the Company permanently reduced the amount
available for future borrowings under its Term Loan Facility by $52.5
million to $112.5 million which represents the amount of borrowings
outstanding under the Term Loan Facility at December 31, 1999. In
connection with the reduction in the Term Loan Facility, the Company
wrote off deferred financing costs in the aggregate amount of $2,103,000.
These expenses are reflected in the Company's consolidated statement of
operations in the caption, "Interest expense" for the period from April
24, 1999 to December 31, 1999.
The Term Loan Facility expires on January 31, 2005 and principal payments
under this facility began on January 31, 2000 and continue quarterly
until the expiration date. Principal payments are based on a percentage
of principal balance outstanding on the respective payment date as
defined in the Credit Agreement. The revolving credit facility also
expires on January 31, 2005 and borrowings (none at December 31, 1999)
under this facility are required to be repaid by the expiration date.
Interest is based on the bank's prime rate or the London Interbank
Offered Rate plus a margin as defined in the Credit Agreement. The
weighted-average interest rate on the Company's outstanding Term Loans
was approximately 9.5% at December 31, 1999. The weighted-average
interest rate incurred with respect to all debt obligations was
approximately 9.5% for the period from April 24, 1999 to December 31,
1999, 9.3% for the period from January 1, 1999 to April 23, 1999 and 9.3%
for the year ended December 31, 1998.
The Senior Notes require semi-annual interest payments on August 1 and
February 1 of each year and a principal payment of $69,300,000 on August
1, 2005. The 9 7/8% Series B Senior Notes are guaranteed by certain
domestic subsidiaries of the Company.
The 9% subordinated note was issued in connection with an acquisition and
is due on June 10, 2000.
The Virginia Small Business Financing Authority note requires semi-annual
payments of $185,000 through September 2001 with a final payment of
$435,000 due March 2002. Other obligations include debt obligations of
several of the Company's subsidiaries.
Maturities of long-term obligations subsequent to December 31, 1999,
approximate $10,508,000 in 2000, $11,921,000 in 2001, $14,604,000 in
2002, $15,142,000 in 2003, $15,333,000 in 2004 and $118,108,000
thereafter.
-63-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's accounts receivable, inventories and property and equipment
are pledged as collateral for the Virginia Small Business Financing
Authority note and accounts receivable and inventories are pledged as
collateral under the Credit Agreement. The Credit Agreement limits the
ability of the Company, among other limitations, to incur certain
additional indebtedness, places certain restrictions on the payment of
dividends and limits the amount of annual capital expenditures. The
Credit Agreement also contains certain financial covenants which require
the Company, among other requirements, to meet certain financial ratios
relating to leverage, fixed charges and interest coverage. The indenture
related to the 9 7/8% Series B Senior Notes limits the ability of the
Company, among other limitations, to pay dividends, make certain other
restricted payments or incur certain additional indebtedness unless it
meets a cash flow coverage ratio, as defined. In addition, the Company
may be required to offer to purchase Senior Notes equal to 100% of the
principal amount thereof, with the proceeds of certain asset sales, as
defined.
In October 1999, the Company entered into an interest rate cap agreement
and an interest rate swap agreement with a bank. The interest rate cap
agreement covers $28,125,000 of variable rate debt, has an interest rate
cap of 6.5% over a 3 month LIBOR period and expires in October 2001. The
interest rate swap agreement also covers $28,125,000 of variable rate
debt and expires in October 2001. Under the terms of this agreement, the
interest rate is fixed at 5.98% over a 3 month LIBOR period as long as
the 3 month LIBOR remains below 6.5%. If the 3 month LIBOR is greater
than or equal to 6.5%, but less than or equal to 7.00% then no payment is
required by the Company or the bank. If the 3 month LIBOR is greater than
7.00%, the swap becomes a cap at an interest rate of 7.00%. Under these
agreements the Company reduced its interest expense by an immaterial
amount.
7. FINANCIAL INSTRUMENTS
At December 31, 1999 and 1998, the carrying value of the Company's
financial instruments, excluding foreign currency options and interest
rate cap and swap agreements, approximate their fair values except for
the 9 7/8% Series B Senior Notes which had a fair value of approximately
$67,221,000 and $102,000,000 at December 31, 1999 and 1998, respectively.
At December 31, 1999 and 1998, there were no foreign exchange forward
contracts outstanding. At December 31, 1998, the Company held put options
with a notional amount of 36,000,000 French Francs, which expired in
equal quarterly amounts during 1999. At December 31, 1998, the carrying
value of these contracts approximated their fair value.
At December 31, 1999, the Company had $56,250,000 of variable rate debt
covered by interest rate cap and swap agreements. At December 31, 1999,
the carrying value of these agreements approximated their fair value.
-64-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS
The Company and certain subsidiaries have defined benefit pension plans
covering substantially all employees. Benefits are generally based on
employee years of service and compensation. The Company's funding policy
is to contribute such amounts as are necessary to provide assets
sufficient to meet the benefits to be paid to plan members.
The Company also sponsors several defined benefit postretirement medical
and life insurance plans providing benefits to certain employees who have
worked a minimum of five years and attained age 55 while in service with
the Company. The Company requires salaried employees retiring after
April 1, 1993, to have 20 years of service after age 40 to receive full
benefits and has implemented maximum payment limits for certain of its
hourly employees. Salaried employees hired after May 1, 1991, are not
eligible to participate in these postretirement benefit plans. The plans
are contributory, with retiree contributions adjusted annually, and
contain other cost-sharing features such as deductibles and coinsurance.
The Company's policy is to fund the costs of these medical and life
insurance benefit plans as they become due.
-65-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables reconcile the changes in benefit obligations and
plan assets in 1999 and 1998, and reconcile the funded status to prepaid
or accrued cost at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Pension Benefits Other Post-Retirement Benefits
------------------------------- --------------------------------
Company Predecessor Company Predecessor
-------------- -------------- -------------- --------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
(In thousands)
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation, beginning of year . . . . . . . . $102,679 $96,685 $24,294 $24,815
Service cost . . . . . . . . . . . . . . . . . . . . 2,550 2,585 560 548
Interest cost . . . . . . . . . . . . . . . . . . . . 6,995 6,794 1,732 1,714
Employee contributions . . . . . . . . . . . . . . . -- -- 73 71
Effect of discount rate change . . . . . . . . . . . (11,412) 3,231 (1,387) 590
Plan amendments related to increases in benefits . . 1,035 -- 149 --
Effect of rate of compensation change . . . . . . . . -- (3,015) -- (76)
Effect of health care cost trend rate change . . . . -- -- 143 (313)
Actuarial (gain) loss . . . . . . . . . . . . . . . . (275) 1,934 (682) (1,977)
Benefits paid . . . . . . . . . . . . . . . . . . . . (5,996) (5,535) (1,168) (1,078)
------- -------- ------- -------
Benefit obligation, end of year . . . . . . . . . . . $95,576 $102,679 $23,714 $24,294
======= ======== ======= =======
Change in plan assets:
Plan assets at fair value, beginning of year . . . . $122,222 $117,777 $ -- $ --
Actual return on plan assets . . . . . . . . . . . . 7,575 9,944 -- --
Employer contributions . . . . . . . . . . . . . . . 122 36 1,095 1,007
Employee contributions . . . . . . . . . . . . . . . -- -- 73 71
Benefits paid . . . . . . . . . . . . . . . . . . . . (5,996) (5,535) (1,168) (1,078)
------- ------- ------- -------
Plan assets at fair value, end of year . . . . . . . $123,923 $122,222 $ -- $ --
======== ======== ======= ========
Reconciliation of prepaid (accrued) cost:
Funded status of the plans . . . . . . . . . . . . . $28,347 $19,543 $(23,714) $(24,294)
Unrecognized net transition (asset) obligation . . . -- (2) -- --
Unrecognized prior service cost . . . . . . . . . . . 967 580 141 (882)
Unrecognized net (gain) loss . . . . . . . . . . . . (5,527) (15,023) (2,452) 1,374
------- ------- -------- --------
Prepaid (accrued) cost, end of year . . . . . . . . . $23,787 $5,098 $(26,025) $(23,802)
======= ======== ======== ========
</TABLE>
The benefit obligation, plan assets at fair value and accrued cost for
the pension plan with the benefit obligation in excess of plan assets
were $1,049,000, $893,000 and $221,000, respectively, as of December 31,
1999 and $900,000, $735,000 and $82,000, respectively, as of December 31,
1998.
-66-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assumptions used for financial reporting purposes to compute benefit
obligations and net benefit income or cost, and the components of net
periodic benefit income or cost, are as follows (in thousands, except
percentages):
<TABLE>
<CAPTION>
Pension Benefits Other Post-Retirement Benefits
-------------------------------------- --------------------------------------
Company Predecessor Company Predecessor
---------- ------------------------ ---------- ------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Weighted-average assumptions for benefit
obligations:
Discount rate . . . . . . . . . . . . . . 8.00% 7.00% 7.25% 8.00% 7.00% 7.25%
Rate of compensation increases . . . . . 4.00% 4.00% 5.00% 4.00% 4.00% 5.00%
Expected return on plan assets . . . . . 11.00% 11.00% 11.00% n/a n/a n/a
Weighted-average assumptions for net
benefit income or cost:
Discount rate . . . . . . . . . . . . . . 7.00% 7.25% 7.50% 7.00% 7.25% 7.50%
Rate of compensation increases . . . . . 4.00% 5.00% 5.00% 4.00% 5.00% 5.00%
Expected return on plan assets . . . . . 11.00% 11.00% 11.00% n/a n/a n/a
Rate of increase in per capita cost of
covered health care benefits . . . . . . n/a n/a n/a 7.00% 7.50% 8.00%
</TABLE>
<TABLE>
<CAPTION>
Pension Benefits
------------------------------------------------------------------
Company Predecessor
-------------- -------------------------------------------------
Period from Period from
April 24, 1999 January 1, 1999 Year Ended Year Ended
to December 31, to April 23, December 31, December 31,
1999 1999 1998 1997
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Components of net periodic benefit income (cost):
Service cost . . . . . . . . . . . . . . . . . . $(1,744) $(806) $(2,585) $(2,238)
Interest cost . . . . . . . . . . . . . . . . . . (4,624) (2,371) (6,794) (6,662)
Expected return on plan assets . . . . . . . . . 8,380 4,032 11,383 10,421
Net amortization and deferral . . . . . . . . . . (68) (8) (94) (114)
------- ------ ------- -------
Net periodic benefit income . . . . . . . . . . . . $1,944 $ 847 $1,910 $1,407
======= ====== ======= =======
</TABLE>
-67-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Other Post-Retirement Benefits
------------------------------------------------------------------
Company Predecessor
-------------- -------------------------------------------------
Period from Period from
April 24, 1999 January 1, 1999 Year Ended Year Ended
to December 31, to April 23, December 31, December 31,
1999 1999 1998 1997
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Components of net periodic benefit income (cost):
Service cost . . . . . . . . . . . . . . . . . . . . $(374) $(186) $(548) $(548)
Interest cost . . . . . . . . . . . . . . . . . . . . (1,157) (575) (1,714) (1,739)
Net amortization and deferral . . . . . . . . . . . . (141) 188 419 486
------- ----- ------- -------
Net periodic benefit cost . . . . . . . . . . . . . . . $(1,672) $(573) $(1,843) $(1,801)
======= ===== ======= =======
</TABLE>
Net benefit income or cost is determined using assumptions at the
beginning of each year. Funded status is determined using assumptions at
the end of each year.
The rates for the per capita cost of covered health care benefits were
assumed to decrease gradually to 5.50% in year 2003, and remain at that
level thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported. An increase in the assumed
health care cost trend rates by one percentage point in each year would
increase the accumulated postretirement benefit obligation as of December
31, 1999, by $1,097,000 and the aggregate of the service and interest
cost components of net periodic postretirement benefit cost for 1999 by
$132,000.
The net pension asset is comprised of a prepaid pension asset of
$24,007,000 in 1999 and $5,483,000 in 1998 and an accrued pension
liability of $220,000 in 1999 and $385,000 in 1998. As a result of the
application of purchase accounting, the Company increased its prepaid
pension asset by $15,904,000 and increased its pension liability by
$220,000 to reflect their fair market value at the Acquisition date. In
addition, the liability for other postretirement benefits was increased
by $1,073,000 to reflect fair market value at the Acquisition date.
Amortization of unrecognized prior service cost is based on the expected
future service of active employees expected to receive benefits. The plan
assets were primarily invested in listed common stocks, cash equivalents,
and U.S. government debt securities.
The Company and certain subsidiaries sponsor defined contribution benefit
plans for substantially all U.S. employees. The plans permit employees to
contribute up to 15% of their salary to the plan. The Company also makes
contributions to certain of the plans which approximated $109,000 for the
period from April 24, 1999 to December 31, 1999, $51,000 for the period
-68-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
from January 1, 1999 to April 23, 1999, $136,000 in 1998 and $173,000 in
1997.
9. TAXES ON INCOME
The provision for taxes on income is comprised of the following:
<TABLE>
<CAPTION>
Company Predecessor
-------------- -------------------------------------------------
Period from Period from
April 24, 1999 January 1, 1999 Year Ended Year Ended
to December 31, to April 23, December 31, December 31,
1999 1999 1998 1997
-------------- ---------------- ------------ -------------
(In Thousands)
<S> <C> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . $1,065 $(850) $4,541 $6,869
State and local . . . . . . . . . . . . . 611 (262) 319 493
Foreign . . . . . . . . . . . . . . . . . 1,757 38 (403) 374
------ ------ ------ -----
Total current . . . . . . . . . . . . . . . 3,433 (1,074) 4,457 7,736
------ ------ ----- -----
Deferred:
Federal . . . . . . . . . . . . . . . . . (1,718) 207 (557) 1,708
State and local . . . . . . . . . . . . . (195) 31 (34) 233
Foreign . . . . . . . . . . . . . . . . . (67) (6) 210 (107)
------ ----- ------ ------
Total deferred . . . . . . . . . . . . . . (1,980) 232 (381) 1,834
------ ----- ------ ------
Total provision for income taxes . . . . . $1,453 $(842) $4,076 $9,570
====== ===== ====== ======
</TABLE>
The Company has not provided taxes of approximately $1,495,000 on the
undistributed pre-tax earnings of $15,477,000 of foreign subsidiaries as
it is the intent of the Company to support these subsidiaries with such
earnings. Income before income taxes attributable to foreign operations
for the period from April 24, 1999 to December 31, 1999, for the period
from January 1, 1999 to April 23, 1999, for 1998 and 1997 was
approximately $5,474,000, $516,000, $265,000, and $1,134,000,
respectively. The Company's tax provision for the period from April 24,
1999 to December 31, 1999 reflects the state tax benefit of the
unconsolidated parent company. This benefit is approximately $230,000.
-69-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's effective income tax rate varies from the United States
statutory rate as follows:
<TABLE>
<CAPTION>
Company Predecessor
-------------- -------------------------------------------------
Period from
April 24, 1999 Period from Year Ended Year Ended
to December 31, January 1, 1999 December 31, December 31,
1999 to April 23, 1999 1998 1997
-------------- ----------------- ------------ -------------
<S> <C> <C> <C> <C>
United States rate . . . . . . . . . . . . 35% (35)% 35% 35%
Foreign taxes in excess of (less than) U.S.
rate . . . . . . . . . . . . . . . . . . . 12 (2) (2) --
State income taxes, net of federal tax
benefit . . . . . . . . . . . . . . . . . . 26 (2) 2 2
Goodwill amortization . . . . . . . . . . . 109 3 5 3
Nondeductible transaction expenses . . . . -- 26 -- --
Tax liability adjustments . . . . . . . . . -- -- (11) --
Other--net . . . . . . . . . . . . . . . . (2) -- -- (1)
--- --- --- ---
Effective income tax rate . . . . . . . . . 180% (10)% 29% 39%
=== === === ===
</TABLE>
At December 31, 1999 and 1998, the Company had deferred tax liabilities
and assets which have been netted by tax jurisdiction for presentation
purposes. Included in the deferred tax liabilities-other are the
Company's estimated tax liabilities relating to tax issues. The
significant components of these amounts at December 31, 1999 and 1998 are
as follows:
-70-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Company Predecessor
-------------- ----------------
December 31,
1999 1998
--------------- ----------------
(In thousands)
<S> <C> <C>
Deferred tax liabilities:
Property and equipment . . . . . . . . $15,837 $9,436
Employee benefits . . . . . . . . . . . 9,437 2,420
Trademarks and patents . . . . . . . . 4,888 --
Other . . . . . . . . . . . . . . . . . 4,084 4,544
------ ------
Total deferred tax liabilities . . . . 34,246 16,400
Deferred tax assets:
Employee benefits . . . . . . . . . . . 11,441 10,286
Selling and promotion costs . . . . . . 1,537 825
Inventories . . . . . . . . . . . . . . 1,947 1,303
Restructuring costs . . . . . . . . . . 100 684
Net operating loss carryforward . . . . -- 53
Interest . . . . . . . . . . . . . . . 1,442 1,442
Other . . . . . . . . . . . . . . . . . 515 305
------- ------
Total deferred tax assets . . . . . . . 16,982 14,898
------- ------
Net deferred tax liabilities . . . . . $17,264 $1,502
======= =======
</TABLE>
As a result of the application of purchase accounting, the Company
decreased its deferred tax assets by $1,043,000 and increased its
deferred tax liabilities by $16,467,000 to reflect the differences
between financial statement amounts and tax bases of assets and
liabilities.
-71-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The deferred tax liabilities and assets are disclosed in the consolidated
balance sheets at December 31, 1999 and 1998 as follows:
<TABLE>
<CAPTION>
Company Predecessor
------- ----------
December 31,
1999 1998
---- ----
(In thousands)
<S> <C> <C>
Noncurrent deferred income tax liabilities . . . . . . . . . . . . . . . . . $24,078 $6,610
Current deferred income tax assets . . . . . . . . . . . . . . . . . . . . . 6,814 5,108
------- ------
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . $17,264 $1,502
======= ======
</TABLE>
The Predecessor's federal income tax returns for 1989 through 1994 have
been examined by the IRS and the federal income tax returns for 1996 and
1997 are currently under examination by the IRS. The Predecessor acquired
certain intangible assets at the time of acquisition of the Predecessor
and of Ardell for $29 million, and the Predecessor has claimed federal
income tax deductions of $29 million for the amortization of those
assets. In June 1997, the IRS issued a statutory notice of deficiency
disallowing substantially all of the Predecessor's amortization
deductions relating to the intangible assets. The Predecessor disagreed
with the IRS's disallowances and in September 1997, petitioned the U.S.
Tax Court to review and redetermine such disallowances. In January 1999,
the Predecessor reached agreement with the IRS and signed a stipulation
which was filed with the U.S. Tax Court as final resolution of all
outstanding issues. During 1998, the Predecessor recognized a $1,546,000
reduction in its provision for income taxes as a result of settling these
issues. The settlement of these issues did not have a materially adverse
impact on the 1998 consolidated financial position or results of
operations of the Predecessor.
10. STOCKHOLDERS' EQUITY
The Predecessor had an incentive stock option plan whereby incentive
stock options were granted to directors, officers and other key employees
to purchase a specified number of shares of common stock at a price not
less than the fair market value on the date of grant and for a term not
to exceed 10 years. The plan provided for the granting of options to
purchase up to 750,000 shares of common stock. Grants of options for
10,000 shares of common stock for each of two new directors issued in
June 1993 became exercisable in five equal installments commencing one
year from the date of grant. Grants of options issued to key management
employees became 40% exercisable two years following the date of grant
-72-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and the remainder were exercisable over the following three years in
equal annual installments. The plan also provided for the granting of
stock appreciation rights ("SARs") to officers and key employees with
terms of ten years. The terms of the SARs are determined at the time of
grant. Upon exercise, holders of SARs are paid, at the option of the
Predecessor, cash or common stock in an amount equal to the appreciation
in market value of such stock between the grant date and the exercise
date.
In connection with the Acquisition, the Predecessor redeemed all of its
outstanding options to purchase common stock at an aggregate purchase
price of $1,162,000. The Company does not have an incentive stock option
plan.
Pro forma information regarding net income and earnings per share is
required by FAS Statement No. 123, "Accounting for Stock-Based
Compensation," and has been determined as if the Predecessor had
accounted for its employee stock options under the fair value method of
that Statement. The fair value for these options was estimated at the
date of grant using the Black-Scholes option-pricing model. Significant
weighted-average assumptions used in the model for valuing stock options
granted during 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Risk-free interest rate . . . . . . . . . . . . . . . 6.9% 6.6%
Expected life of the option . . . . . . . . . . . . . 7.9 years 8.0 years
Expected volatility of stock . . . . . . . . . . . . .268 .261
Expected dividend yield . . . . . . . . . . . . . . . 0% 0%
</TABLE>
-73-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options vesting period. The
Predecessor's pro forma information follows (in thousands, except for
earnings per share data):
<TABLE>
<CAPTION>
Period from Year Ended December 31,
January 1, 1999 -----------------------
to April 23, 1999 1998 1997
----------------- ---- ----
<S> <C> <C> <C>
Net (loss) income
As reported . . . . . . . . . . . . . . . . . . . . . . . . . . $(7,816) $10,102 $15,069
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,974) 9,600 14,608
Earnings per share
As reported
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.65) $ 0.83 $ 1.25
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.65) 0.83 1.23
Pro forma
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.66) 0.79 1.21
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.66) 0.79 1.19
</TABLE>
Stock options granted during 1997 (net of forfeitures) aggregated 120,500
shares and the weighted-average estimated fair value at the date of grant
was $7.47 per share. There were no stock options granted by the
Predecessor during 1999 or 1998.
Stock option plan activity of the Predecessor is summarized below:
-74-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Exercise Price Per Share
-------------------------
Number of Shares Range Weighted Average
---------------- ------ -----------------
<S> <C> <C> <C>
Outstanding at 12-31-96 . . . . . . . . . . . . . . . . . . . . . 367,500 $8.63-$11.00 $ 9.56
Granted in 1997 . . . . . . . . . . . . . . . . . . . . . . . . . 121,500 15.38 15.38
Exercised in 1997 . . . . . . . . . . . . . . . . . . . . . . . . (5,200) 8.63 8.63
Cancelled in 1997 . . . . . . . . . . . . . . . . . . . . . . . . (1,600) 8.63-11.00 10.11
-------- ------------ ------
Outstanding at 12-31-97 . . . . . . . . . . . . . . . . . . . . . 482,200 8.63-15.38 11.03
Granted in 1998 . . . . . . . . . . . . . . . . . . . . . . . . . --
Exercised in 1998 . . . . . . . . . . . . . . . . . . . . . . . . (12,000) 8.63 8.63
Cancelled in 1998 . . . . . . . . . . . . . . . . . . . . . . . . (5,500) 8.63-15.38 10.93
-------- ------------ ------
Outstanding at 12-31-98 . . . . . . . . . . . . . . . . . . . . . 464,700 8.63-15.38 11.09
Exercised - March 19, 1999 . . . . . . . . . . . . . . . . . . . (300) 8.63 8.63
Redeemed - April 23, 1999 . . . . . . . . . . . . . . . . . . . . (457,600) 8.63-11.00 11.04
Cancelled - April 23, 1999 . . . . . . . . . . . . . . . . . . . (6,800) 8.63-15.38 15.08
-------- ------------ ------
Outstanding at April 23, 1999 . . . . . . . . . . . . . . . . . . -- $ -- $ --
======== ============ ======
</TABLE>
Stock options outstanding at December 31, 1998, aggregated 464,700 shares
and had a weighted-average remaining contractual life of 6.9 years and a
weighted-average exercise price of $11.09 per share. Stock options
exercisable at December 31, 1998 and 1997 totaled 232,600 and 142,460
shares, respectively. Stock options exercisable at December 31, 1998, had
a weighted-average exercise price of $9.20 per share. Stock options
reserved for future grant at December 31, 1998 and 1997 totaled 268,100
and 262,600 shares, respectively.
-75-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Changes in the components of stockholders' equity are as follows:
<TABLE>
<CAPTION>
Predecessor
-----------------------------------------------------------------------------
Common Stock Advances Retained Accumulated
---------------------------------- to RSA Earnings Other
Par Additional Holdings (Accumulated Comprehensive
Shares Value Capital Corporation Deficit) Income (Loss) Total
------- ------ --------- ---------- ---------- ------------ ------
(In thousands, except share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 12,092,849 $121 $ 65,756 $ -- $(20,714) $ (640) $ 44,523
Exercise of stock options . 5,200 -- 45 -- -- -- 45
Foreign currency translation -- -- -- -- -- (198) (198)
Net income . . . . . . . . -- 15,069 15,069
---------- ---- -------- -------- -------- ------ --------
Balance at December 31, 1997 12,098,049 121 65,801 -- (5,645) (838) 59,439
Exercise of stock options . 12,000 -- 104 -- -- -- 104
Foreign currency translation -- -- -- -- -- (91) (91)
Net income . . . . . . . . -- -- -- -- 10,102 -- 10,102
---------- ---- -------- -------- -------- ------ --------
Balance at December 31, 1998 12,110,049 121 65,905 -- 4,457 (929) 69,554
Exercise of stock options . 300 -- 2 -- -- -- 2
Foreign currency translation -- -- -- -- -- (116) (116)
Purchase accounting
transactions . . . . . . . . -- -- 106,936 (24,155) 3,359 1,045 87,185
Net loss . . . . . . . . . -- -- -- -- (7,816) -- (7,816)
---------- ---- -------- -------- -------- ------ --------
Balance at April 23, 1999 . . 12,110,349 $121 $172,843 $(24,155) $ -- $ -- $148,809
========== ==== ======== ======== ======== ====== ========
</TABLE>
-76-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Company
---------------------------------------------------------------------------------
Common Stock Advances Retained Accumulated
-------------------------------- to RSA Earnings Other
Par Additional Holdings (Accumulated Comprehensive
Shares Value Capital Corporation Deficit) Income (Loss) Total
------ ----- --------- ---------- ---------- ------------ -----
(In thousands, except share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 23, 1999 . . 12,110,349 $121 $172,843 $(24,155) $ -- $-- $148,809
Foreign currency
translation . . . . . . . . -- -- -- -- -- 10 10
Advances to RSA Holdings
Corporation, net . . . . . -- -- -- ( 18,559) -- -- (18,559)
Net loss . . . . . . . . . -- -- -- -- (1,258) -- (1,258)
---------- ---- -------- -------- ------- --- --------
Balance at December 31, 1999 12,110,349 $121 $172,843 $(42,714) $(1,258) $10 $129,002
========== ==== ======== ======== ======= === ========
</TABLE>
Accumulated other comprehensive income (loss) consists entirely of
foreign currency translation adjustments at April 23, 1999, December 31,
1999 and December 31, 1998. These amounts have not been tax effected.
Advances to RSA Holdings Corporation for the period from April 24, 1999
to December 31, 1999 of $18,559,000 relate primarily to the $15,000,000
reduction in RSA Holdings Corporation outstanding note payable and the
repurchase of the outstanding shares of the Predecessor's Common Stock,
which remained outstanding following the Stock Tender Offer, for
$3,362,000.
-77-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. SEGMENT INFORMATION
The Company has three reportable segments, organized primarily on the
basis of differences in products, which consist of Razors and Blades,
Cotton and Foot Care and Custom Bar Soap. The razors and blades segment
includes three product lines, consumer shaving razors and blades, both
store and value brand, blades and bladed hand tools, and specialty
industrial and medical blades. The cotton and foot care segment includes
cotton swabs, cotton balls and puffs, cosmetic pads, tissues,
pharmaceutical and beauty coil, and foot care products. The custom bar
soap segment includes cosmetic/skin care, bath, pharmaceutical and
specialty custom bar soaps.
The Company evaluates performance and allocates resources to its segments
based on operating income. The accounting policies of the segments are
the same as those described in the summary of significant accounting
policies (See Note 2).
<TABLE>
<CAPTION>
Net Sales Operating Income (Loss)
----------------------------------------------- -----------------------------------------
Company Predecessor Company Predecessor
--------- ---------------------------------- -------- -------------------------------
Period Period Period Period
from from from from
April 24, January 1, Year Year April 24, January 1, Year Year
1999 to 1999 to Ended Ended 1999 to 1999 to Ended Ended
December April 23, December December December April 23, December December
31, 1999 1999 31, 1998 31, 1997 31, 1999 1999 31, 1998 31, 1997
--------- --------- --------- ---------- -------- --------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Razors and Blades . . . . . . $146,318 $55,189 $183,979 $182,615 $11,368 $6,761 $20,969 $26,506
Cotton and Foot Care . . . . 58,767 25,551 87,339 80,350 1,847 264 4,111 6,278
Custom Bar Soap . . . . . . . 22,074 6,851 26,170 33,642 2,703 (218) 1,368 4,125
-------- ------- -------- -------- ------- ------- ------- -------
$227,159 $87,591 $297,488 $296,607 15,918 6,807 26,448 36,909
======== ======= ======== ========
Transaction expenses . . . . -- 11,440 -- --
------- ------- ------- -------
Operating income (loss) . . . 15,918 (4,633) 26,448 36,909
Interest expense . . . . . . 15,112 3,907 12,270 12,270
------- ------- ------- -------
Income (loss) before income
taxes and extraordinary
item . . . . . . . . . . . $ 806 $(8,540) $14,178 $24,639
======= ======= ======= =======
</TABLE>
-78-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Additions to Long-Lived Assets
-------------------------------------------------
Company Predecessor
--------- -------------------------------------
Year End Assets Period
------------------------------------- from Period from
Company Predecessor April 24, January 1, Year Year
---------- ----------------------- 1999 to 1999 to Ended Ended
December December December, December April 23, December December
31, 1999 31, 1998 31, 1997 31, 1999 1999 31, 1998 31, 1997
---------- ---------- ---------- --------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Razors and Blades . . . . . . . . $315,932 $186,328 $178,331 $5,624 $ 113,885 $ 8,362 $11,467
Cotton and Foot Care . . . . . . 56,569 50,940 49,366 1,065 6,970 3,700 9,311
Custom Bar Soap . . . . . . . . . 30,370 25,629 26,384 994 427 964 957
-------- -------- -------- ------ -------- ------- -------
$402,871 $262,897 $254,081 $7,683 $ 121,282 $13,026 $21,735
======== ======== ======== ====== ======== ======= =======
</TABLE>
-79-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Depreciation and Amortization
------------------------------------------------------------------
Company Predecessor
-------------- -------------------------------------------------
Period Period
from from
April 24, January 1, Year Year
1999 to 1999 to Ended Ended
December April 23, December December
31, 1999 1999 31, 1998 31, 1997
-------------- -------------- -------------- --------------
(In thousands)
<S> <C> <C> <C> <C>
Razors and Blades . . . . . . . . . . . . . . . . . . . $ 8,973 $2,769 $ 8,162 $ 7,415
Cotton and Foot Care . . . . . . . . . . . . . . . . . 1,867 917 2,876 2,625
Custom Bar Soap . . . . . . . . . . . . . . . . . . . . 657 419 1,139 1,085
------- ------ ------- -------
$11,497 $4,105 $12,177 $11,125
======= ====== ======= =======
</TABLE>
Operating income for 1998 for Razors and Blades and Cotton and Foot Care
includes special charges of $2,819,000 and $184,000, respectively.
Operating income for the period from April 24, 1999 to December 31, 1999
for Razors and Blades, Cotton and Foot Care and Custom Bar Soap includes
a purchase accounting adjustment to inventory of $8,793,000, $169,000 and
$46,000, respectively.
The table below reports net sales and long-lived assets (including
intangible assets) by geographic area. Transfers between geographic areas
are made at arms-length pricing. With the exception of the United States,
no country exceeded 10% of net sales or long-lived assets in any year.
Revenues were allocated to geographic areas based on the location to
which the product was shipped.
-80-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Geographic Areas
(In thousands)
------------------------------------------------------------------
Company Predecessor
-------------- -------------------------------------------------
Period Period
from from
April 24, January 1, Year Year
1999 to 1999 to Ended Ended
December April 23, December December
31, 1999 1999 31, 1998 31, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales:
United States . . . . . . . . . . . . . . . . . . . . $184,863 $71,618 $243,660 $249,438
Foreign . . . . . . . . . . . . . . . . . . . . . . . 42,296 15,973 53,828 47,169
-------- ------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . $227,159 $87,591 $297,488 $296,607
======== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Long-lived assets:
United States . . . . . . . . . . . . . . . . $243,590 $134,996 $135,382
Foreign . . . . . . . . . . . . . . . . . . . 12,902 11,480 10,797
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . $256,492 $146,476 $146,179
======== ======== ========
</TABLE>
The Company's foreign operations are located principally in Canada,
Mexico, the United Kingdom, Europe, Israel, and the Caribbean.
Export sales from the Company's United States operations aggregated
$4,628,000 for the period from April 24, 1999 to December 31, 1999,
$1,398,000 for the period from January 1, 1999 to April 23, 1999,
$5,793,000 in 1998, and $6,798,000 in 1997. Sales to one of the Company's
customers in the Razors and Blades and Cotton and Foot Care segments for
the period from April 24, 1999 to December 31, 1999, for the period from
January 1, 1999 to April 23, 1999, for 1998, and 1997 amounted to
-81-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
approximately 12%, 13%, 11% and 10% of consolidated net sales,
respectively.
12. COMMITMENTS, CONTINGENCIES AND OTHER
Cotton Matter:
- - -------------
During 1998, the Company purchased bleached cotton from an outside
supplier for use in its pharmaceutical coil business. The Company
converted this cotton from incoming bales into a coil, which was shipped
to its pharmaceutical customers to be used as filler in bottles of oral
dosage forms of pharmaceutical products to prevent breakage. During the
period from March through November of 1998, the process by which the
Company's supplier bleached this cotton was changed by introducing an
expanded hydrogen peroxide treatment. Subsequent testing indicated
varying levels of residual hydrogen peroxide in the cotton processed
during this time period and the supplier in November 1998 reduced the
levels of residual hydrogen peroxide in its bleaching process. The
Company, to date, has received complaints from a number of customers
alleging defects in the cotton supplied them during the period and
asserting these defects may have led to changes in their products
pharmaceutical appearance, and with respect to a limited number of
products, potency. No lawsuits have been filed by any of these customers.
The Company has received written notice of claims for damages in the
aggregate amount of approximately $117.0 million. To date, no claim has
been substantiated. In addition, $111.0 million of this amount is for
alleged lost profits from two customers, which lost profits have not been
substantiated. It is possible that additional damage claims might be
forthcoming. On March 2, 1999, at the request of the Food and Drug
Administration, the Company notified all (numbering approximately 85) of
its pharmaceutical cotton coil customers that it was withdrawing from the
market those lots of cotton coil which may contain elevated levels of
hydrogen peroxide.
The Company has notified its supplier that, in the Company's view, the
supplier is primarily responsible for damages, if any, that may arise out
of this matter. At this time, the Company's supplier has agreed to be
responsible for the cost of fiber, bleaching and freight of returned
product, but has not agreed to be responsible for any other damages and
has expressed an intention to assert defenses to the Company's claims.
The Company's insurance carriers have been timely notified of the
existence of the claim and have agreed to provide defense in a
reservation of rights letter, but are continuing to evaluate whether
coverage would apply to all aspects of the claims. The Company is advised
by outside counsel that it has strong legal arguments that the aggregate
amount of insurance available for these claims would be sufficient to
cover the magnitude of the claims currently expressed.
The Company also has been advised by its general counsel that it has a
number of valid defenses to potential customer claims as well as a third
party claim against its suppliers for damages, if any, incurred by the
Company. However, management cannot at this time make a meaningful
estimate of the amount or range of loss that could result from an
unfavorable outcome relating to this overall issue, and accordingly,
-82-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
there can be no assurance that the Company's exposure from this matter
might not potentially exceed the combination of its insurance coverages
and recourse to its suppliers. It is therefore possible that the
Company's results of operations or cash flows in a particular quarterly
or annual period or its financial position could be significantly or
adversely affected by an ultimate unfavorable outcome of this matter.
Other Matters:
- - -------------
In June 1999, the Company received notice of the filing of a lawsuit by
The Gillette Company ("Gillette") [asserting claims for damages and
injunctive relief for alleged patent infringement, misappropriation of
trade dress, false advertising and breach of contract in connection with
the marketing of the Company's two-bladed and three-bladed shaving
cartridge systems (the MBC introduced in 1994 and the Tri-Flexxx
(Trademark) introduced in 1999). In August 1999, the Company filed an
answer and counterclaims in which it denied Gillette's allegations,
sought a declaration that Gillette's patents are not infringed, are
invalid and unenforeable, and asserted counterclaims against Gillette for
damages and injunctive relief for, among other things, alleged antitrust
violations and false advertising. Gillette's time to respond to the
Company's answer and counterclaims has been postponed pending ongoing
settlement discussions. The Company believes that Gillette's claims are
without merit and intends to defend against them vigorously, as well as
to vigorously pursue the Company's counterclaims against Gillette. The
Company does not believe it has any material liability with respect to
Gillette's claims described above.] However, management and counsel at
this time are unable to make a meaningful estimate of the amount or range
of loss that could result from an unfavorable outcome relating to this
matter. The Company will reassess this matter as new facts become
available.
The Company is subject to other litigation incidental to the conduct of
its business and is also subject to government agency regulations
relating to its products, environmental matters, taxes and other aspects
of its business. While the ultimate outcome of proceedings against the
Company cannot be predicted with certainty, management does not expect
that these matters will have a materially adverse effect on the
consolidated financial position or results of operations of the Company.
In connection with the change in control of the Company and termination
of employment, certain executives of the Predecessor received payments
aggregating $1.9 million. In addition, The Jordan Company, as advisor to
the transaction, received a fee of $2.5 million.
The Company leases buildings, office space and equipment under operating
lease agreements which expire on various dates through 2013. Certain
leases contain renewal or purchase options which may be exercised by the
Company. Rent for leases amounted to approximately $2,709,000 for the
period from April 24, 1999 to December 31, 1999, $1,376,000 for the
period from January 1, 1999 to April 23, 1999, $3,918,000 in 1998, and
$3,336,000 in 1997. Future minimum rental commitments under all
noncancellable operating leases at December 31, 1999 approximate
$3,236,000 in 2000, $2,941,000 in 2001, $2,600,000 in 2002, $2,174,000 in
2003 and $2,124,000 in 2004.
-83-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1999 and 1998, outstanding checks less amounts on deposit
amounted to $684,000 and $2,388,000, respectively, which is included in
accounts payable in the accompanying consolidated balance sheets. In
addition, at December 31, 1999 and 1998, incurred but not reported health
insurance claims amounted to $764,000 and $600,000, respectively.
13. ACQUISITIONS
On September 18, 1998, the Predecessor purchased all of the capital stock
of Wolco Holland B.V. ("Wolco") for an aggregate purchase price of
approximately $2,626,000 net of cash acquired, including assumed
liabilities of $877,000 and acquisition related expenses. Wolco is a
packager and distributor of razor products to private label accounts in
certain European markets. The acquisition was financed by borrowings
under the Predecessor's revolving credit facility, internally generated
funds and seller financing of $1,178,000 and has been accounted for under
the purchase method of accounting.
On April 22, 1997, the Predecessor purchased certain assets of The Cotton
Division of American White Cross, Inc. ("AWC") for net consideration of
approximately $10,300,000, including acquisition related expenses. AWC is
a manufacturer and distributor of store-brand and value-brand cotton
swabs, cotton rounds and squares, cotton balls and puffs, pharmaceutical
coil and cotton rolls. The acquisition was financed by borrowings of
$9,800,000 under the Predecessor's revolving credit facility and has been
accounted for under the purchase method of accounting.
Wolco's and AWC's results of operations have been included in the
consolidated statement of operations since their respective dates of
acquisition.
Pro forma results of operations for the years ended December 31, 1998 and
1997, as if the Wolco and AWC acquisitions occurred as of the beginning
of the respective periods, are not presented as the effects are not
material.
14. SPECIAL CHARGES
During 1998, the Predecessor recorded an aggregate charge of
approximately $3,003,000, which was comprised of approximately $1,000,000
related to the Predecessor's decision to discontinue one of its product
lines, approximately $1,803,000 for certain severance and employee
benefits related to the termination of certain employees, and
approximately $200,000 related to the shutdown of the Predecessor's
cotton operations in Sparks, Nevada. Employee terminations have resulted
primarily from the consolidation of the Predecessor's sales forces and
the termination of certain other management employees. The following
table provides information as to the components of the charge:
-84-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Company
------------------------------------------------------------------
Remaining Remaining
Balance at Accruals Balance at
April 23, 1999 (Reversals) Charges December 31, 1999
-------------- ------------- ---------- -------------------
<S> <C> <C> <C> <C>
Discontinuation of product line:
Contract termination . . . . . . . . . . . . . . . . $(17,000) $ 17,000 $ -- $ --
Excess inventory and deferred charges . . . . . . . 500,000 200,000 448,000 252,000
Severance and employee benefits . . . . . . . . . . . . 446,000 (200,000) 246,000 --
-------- -------- ---------- --------
$929,000 $ 17,000 $694,000 $252,000
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Predecessor
------------------------------------------------------------------
Remaining Remaining
Balance at Accruals Balance at
January 1, 1999 (Reversals) Charges April 23, 1999
-------------- ------------- ---------- -------------------
<S> <C> <C> <C> <C>
Discontinuation of product line:
Contract termination . . . . . . . . . . . . . . . . $ 500,000 $ -- $517,000 $(17,000)
Excess inventory and deferred charges . . . . . . . 500,000 -- -- 500,000
Severance and employee benefits . . . . . . . . . . . . 603,000 -- 157,000 446,000
---------- -------- --------
$1,603,000 $ -- $674,000 $929,000
========== ======== ======== ========
</TABLE>
Amounts remaining at December 31, 1999 are included in accrued expenses
in the accompanying consolidated balance sheets and are expected to be
utilized for asset write-offs during 2000.
15. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
The Company's $69,300,000 of 9 7/8% Series B Senior Notes due 2005 have
been guaranteed, on a joint and several basis by certain domestic
-85-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
subsidiaries of the Company, which guarantees are senior unsecured
obligations of each guarantor and will rank pari passu in right of
payment with all other indebtedness of each guarantor. However, the
guarantee of one of the guarantor subsidiaries ranks junior to its
outstanding subordinated note.
The following condensed consolidating financial information presents
condensed consolidating financial statements as of December 31, 1999 (the
Company) and December 31, 1998 (Predecessor), for the period from April
24, 1999 to December 31, 1999 (the Company), for the period from January
1, 1999 to April 23, 1999 and for the years ended December 31, 1998 and
1997 (Predecessor), of American Safety Razor Company - the parent
company, the guarantor subsidiaries (on a combined basis), the non-
guarantor subsidiaries (on a combined basis), and elimination entries
necessary to combine such entities on a consolidated basis. Separate
financial statements and other disclosures concerning the guarantor
subsidiaries are not presented because management has determined that
such information would not be material to the holders of the Series B
Senior Notes.
During 1997, Ardell Industries, Inc., a non-guarantor subsidiary, was
merged into American Safety Razor Company - the parent company.
-86-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Balance Sheets
December 31, 1999
<TABLE>
<CAPTION>
Company
----------------------------------------------------------
Guarantor Non-guarantor
ASR Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . $ 6,221 $ 1,180 $ 5,081 $ 18 $ 12,500
Accounts receivable, net . . . . . . . . . . . 19,927 12,906 13,751 (332) 46,252
Advances receivable--subsidiaries . . . . . . . 59,790 -- -- (59,790) --
Inventories . . . . . . . . . . . . . . . . . . 29,825 13,322 11,947 (690) 54,404
Income taxes and prepaid expenses . . . . . . . 6,511 1,912 273 -- 8,696
-------- -------- -------- --------- --------
Total current assets . . . . . . . . . . . . . 122,274 29,320 31,052 (60,794) 121,852
Property and equipment, net . . . . . . . . . . . 58,005 24,731 7,255 -- 89,991
Intangible assets, net . . . . . . . . . . . . . 138,404 22,994 5,103 -- 166,501
Prepaid pension cost and other . . . . . . . . . 16,133 8,373 21 -- 24,527
Investment in subsidiaries . . . . . . . . . . . 32,506 -- 8,587 (41,093) --
-------- -------- -------- --------- --------
Total assets . . . . . . . . . . . . . . . . . $367,322 $ 85,418 $ 52,018 $(101,887) $402,871
======== ======== ======== ========= ========
Liabilities and Stockholders' Equity
Accounts payable, accrued expenses and other . $ 19,299 $ 10,830 $ 6,714 $ (1) $ 36,842
Advances payable--subsidiaries . . . . . . . . -- 44,289 16,504 (60,793) --
Current maturities of long-term obligations . . 7,964 1,417 1,127 -- 10,508
-------- -------- -------- --------- --------
Total current liabilities . . . . . . . . . 27,263 56,536 24,345 (60,794) 47,350
Long-term obligations . . . . . . . . . . . . . . 174,954 154 -- -- 175,108
Retiree benefits and other . . . . . . . . . . . 16,750 10,583 -- -- 27,333
Deferred income taxes . . . . . . . . . . . . . . 19,353 4,392 333 -- 24,078
-------- -------- -------- --------- --------
-87-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Total liabilities . . . . . . . . . . . . . 238,320 71,665 24,678 (60,794) 273,869
-------- -------- -------- --------- --------
Stockholders' equity
Common stock . . . . . . . . . . . . . . . . . 121 485 87 (572) 121
Additional paid-in capital . . . . . . . . . . 172,843 12,463 23,391 (35,854) 172,843
Advances to RSA Holdings Corporation, net . . . (42,714) -- -- -- (42,714)
(Accumulated deficit) retained earnings . . . . (1,258) 805 3,852 (4,657) (1,258)
Accumulated other comprehensive income . . . . 10 -- 10 (10) 10
-------- -------- -------- --------- --------
129,002 13,753 27,340 (41,093) 129,002
-------- -------- -------- --------- --------
Total liabilities and stockholders' equity . $367,322 $ 85,418 $ 52,018 $(101,887) $402,871
======== ======== ======== ========= ========
</TABLE>
-88-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Balance Sheets
December 31, 1998
<TABLE>
<CAPTION>
Predecessor
----------------------------------------------------------
Guarantor Non-guarantor
ASR Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . $ (17) $ 106 $ 3,364 $ -- $ 3,453
Accounts receivable, net . . . . . . . . . . . . 18,717 12,315 13,704 (238) 44,498
Advances receivable--subsidiaries . . . . . . . . 48,543 -- -- (48,543) --
Inventories . . . . . . . . . . . . . . . . . . . 30,108 13,349 11,604 (1,032) 54,029
Income taxes and prepaid expenses . . . . . . . 6,216 1,578 643 -- 8,437
-------- -------- -------- -------- --------
Total current assets . . . . . . . . . . . . . 103,567 27,348 29,315 (49,813) 110,417
Property and equipment, net . . . . . . . . . . . 41,656 24,068 8,941 -- 74,665
Intangible assets, net . . . . . . . . . . . . . 49,027 20,601 2,183 -- 71,811
Prepaid pension cost and other . . . . . . . . . 1,133 4,850 21 -- 6,004
Investment in subsidiaries . . . . . . . . . . . 39,458 -- 4,218 (43,676) --
-------- -------- -------- -------- --------
Total assets . . . . . . . . . . . . . . . . . $234,841 $ 76,867 $ 44,678 $(93,489) $262,897
======== ======== ======== ======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, accrued expenses and other . $ 20,058 $ 9,611 $ 4,568 $ -- $ 34,237
Advances payable--subsidiaries . . . . . . . . . -- 43,283 2,686 (45,969) --
Current maturities of long-term obligations . . . 1,030 1,380 1,442 -- 3,852
-------- -------- -------- -------- --------
Total current liabilities . . . . . . . . . . . 21,088 54,274 8,696 (45,969) 38,089
Long-term obligations . . . . . . . . . . . . . . 121,718 1,377 386 -- 123,481
Retiree benefits and other . . . . . . . . . . . 15,169 9,994 -- -- 25,163
Deferred income taxes . . . . . . . . . . . . . . 3,468 3,040 102 -- 6,610
-------- -------- -------- -------- --------
Total liabilities . . . . . . . . . . . . . . 161,443 68,685 9,184 (45,969) 193,343
-------- -------- -------- -------- --------
-89-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stockholders' equity
Common stock . . . . . . . . . . . . . . . . . . 121 485 87 (572) 121
Additional paid-in capital . . . . . . . . . . . 65,905 15,662 27,173 (42,835) 65,905
Retained earnings (accumulated deficit) . . . . . 4,457 (7,965) 12,075 (4,110) 4,457
Dividends . . . . . . . . . . . . . . . . . . . . 2,877 -- (2,877) -- --
Accumulated other comprehensive income (loss) . . 38 -- (964) (3) (929)
-------- -------- -------- -------- --------
73,398 8,182 35,494 (47,520) 69,554
-------- -------- -------- -------- --------
Total liabilities and stockholders' equity . . $234,841 $ 76,867 $ 44,678 $(93,489) $262,897
======== ======== ======== ======== ========
</TABLE>
-90-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statements of Operations
For the Period from April 24, 1999 to December 31, 1999
<TABLE>
<CAPTION>
Company
----------------------------------------------------------
Guarantor Non-guarantor
ASR Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . $116,497 $ 81,359 $ 44,001 $(14,698) $227,159
Cost of sales:
Cost of sales . . . . . . . . . . . . . . . . . 64,162 66,064 30,825 (14,563) 146,488
Purchase accounting adjustment to inventory . 7,910 215 883 -- 9,008
-------- -------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . . . . 44,425 15,080 12,293 (135) 71,663
Selling, general and administrative expenses . . 35,643 9,904 7,020 -- 52,567
Amortization of intangible assets . . . . . . . . 2,466 626 86 -- 3,178
-------- -------- -------- -------- --------
Operating income . . . . . . . . . . . . . . . . 6,316 4,550 5,187 (135) 15,918
Operating income (expense):
Equity in earnings (losses) of affiliates . . . 5,205 -- (22) (5,183) --
Interest expense . . . . . . . . . . . . . . . (13,514) (2,996) 1,398 -- (15,112)
-------- -------- -------- -------- --------
(Loss) income before income taxes and
extraordinary item . . . . . . . . . . . . . . (1,993) 1,554 6,563 (5,318) 806
Income taxes (benefit) . . . . . . . . . . . . . (1,346) 743 2,056 -- 1,453
-------- -------- -------- -------- --------
(Loss) income before extraordinary item . . . . . (647) 811 4,507 (5,318) (647)
Extraordinary item . . . . . . . . . . . . . . . 611 -- -- -- 611
-------- -------- -------- -------- --------
Net (loss) income . . . . . . . . . . . . . . . . $ (1,258) $ 811 $ 4,507 $ (5,318) $ (1,258)
======== ======== ======== ======== ========
</TABLE>
-91-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statements of Operations
For the Period from January 1, 1999 to April 23, 1999
<TABLE>
<CAPTION>
Predecessor
----------------------------------------------------------
Guarantor Non-guarantor
ASR Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . $ 46,889 $ 32,731 $ 17,136 $ (9,165) $ 87,591
Cost of sales . . . . . . . . . . . . . . . . . . 26,237 28,514 12,934 (9,165) 58,520
-------- -------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . . . . 20,652 4,217 4,202 -- 29,071
Selling, general and administrative expenses . . 13,665 3,860 3,904 -- 21,429
Amortization of intangible assets . . . . . . . . 470 318 47 -- 835
Transaction expenses . . . . . . . . . . . . . . 11,440 -- -- -- 11,440
-------- -------- -------- -------- --------
Operating (loss) income . . . . . . . . . . . . . (4,923) 39 251 -- (4,633)
Operating income (expense):
Equity in earnings (losses) of affiliates . . . (135) -- (394) 529 --
Interest expense . . . . . . . . . . . . . . . (3,193) (1,300) 586 -- (3,907)
-------- -------- -------- -------- --------
(Loss) income before income taxes and
extraordinary item . . . . . . . . . . . . . . (8,251) (1,261) 443 529 (8,540)
Income taxes (benefit) . . . . . . . . . . . . . (553) (570) 281 -- (842)
-------- -------- -------- -------- --------
(Loss) income before extraordinary item . . . . . (7,698) (691) 162 529 (7,698)
Extraordinary item . . . . . . . . . . . . . . . 118 -- -- -- 118
-------- -------- -------- -------- --------
Net (loss) income . . . . . . . . . . . . . . . . $ (7,816) $ (691) $ 162 $ 529 $ (7,816)
======== ======== ======== ======== ========
</TABLE>
-92-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statements of Income
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Predecessor
----------------------------------------------------------
Guarantor Non-guarantor
ASR Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . $150,691 $114,126 $ 55,141 $(22,470) $297,488
Cost of sales . . . . . . . . . . . . . . . . . . 85,333 96,508 42,607 (22,470) 201,978
-------- -------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . . . . 65,358 17,618 12,534 -- 95,510
Selling, general and administrative expenses . . 40,840 11,822 10,854 -- 63,516
Amortization of intangible assets . . . . . . . . 1,477 984 82 -- 2,543
Special charges . . . . . . . . . . . . . . . . . 2,725 184 94 -- 3,003
-------- -------- -------- -------- --------
Operating income . . . . . . . . . . . . . . . . 20,316 4,628 1,504 -- 26,448
Other income (expense):
Equity in earnings of affiliates . . . . . . . 1,645 -- 180 (1,825) --
Interest expense . . . . . . . . . . . . . . . (8,270) (4,193) 193 -- (12,270)
-------- -------- -------- -------- --------
Income before income taxes . . . . . . . . . . . 13,691 435 1,877 (1,825) 14,178
Income taxes . . . . . . . . . . . . . . . . . . 3,589 8 479 -- 4,076
-------- -------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . $ 10,102 $ 427 $ 1,398 $ (1,825) $ 10,102
======== ======== ======== ======== ========
</TABLE>
-93-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statements of Income
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Predecessor
----------------------------------------------------------
Guarantor Non-guarantor
ASR Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . $152,784 $114,365 $ 48,467 $(19,009) $296,607
Cost of sales . . . . . . . . . . . . . . . . . . 87,509 91,503 36,988 (19,009) 196,991
-------- -------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . . . . 65,275 22,862 11,479 -- 99,616
Selling, general and administrative expenses . . 37,853 12,269 10,084 -- 60,206
Amortization of intangible assets . . . . . . . . 1,456 990 55 -- 2,501
-------- -------- -------- -------- --------
Operating income . . . . . . . . . . . . . . . . 25,966 9,603 1,340 -- 36,909
Other income (expense):
Equity in earnings of affiliates . . . . . . . 4,880 -- 1,680 (6,560) --
Interest expense . . . . . . . . . . . . . . . (9,387) (3,923) 1,040 -- (12,270)
-------- -------- -------- -------- --------
Income before income taxes . . . . . . . . . . . 21,459 5,680 4,060 (6,560) 24,639
Income taxes . . . . . . . . . . . . . . . . . . 6,390 2,158 1,022 -- 9,570
-------- -------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . $ 15,069 $ 3,522 $ 3,038 $ (6,560) $ 15,069
======== ======== ======== ======== ========
</TABLE>
-94-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statements of Comprehensive Income
For the Period from April 24, 1999 to December 31, 1999
<TABLE>
<CAPTION>
Company
----------------------------------------------------------
Guarantor Non-guarantor
ASR Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net (loss) income . . . . . . . . . . . . . . . . $ (1,258) $ 811 $ 4,507 $ (5,318) $ (1,258)
Other comprehensive income:
Foreign currency translation adjustments . . . 10 -- 10 (10) 10
-------- -------- -------- -------- --------
Comprehensive income (loss) . . . . . . . . . . . $ (1,248) $ 811 $ 4,517 $ (5,328) $ (1,248)
======== ======== ======== ======== ========
</TABLE>
Condensed Consolidating Statements of Comprehensive Income
For the Period from January 1, 1999 to April 23, 1999
<TABLE>
<CAPTION>
Predecessor
----------------------------------------------------------
Guarantor Non-guarantor
ASR Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net (loss) income . . . . . . . . . . . . . . . . $ (7,816) $ (691) $ 162 $ 529 $ (7,816)
Other comprehensive loss:
Foreign currency translation adjustments . . . -- -- (116) -- (116)
-------- -------- -------- -------- --------
Comprehensive income (loss) . . . . . . . . . . . $ (7,816) $ (691) $ 46 $ 529 $ (7,932)
======== ======== ======== ======== ========
</TABLE>
-95-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statements of Comprehensive Income
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Predecessor
----------------------------------------------------------
Guarantor Non-guarantor
ASR Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . $ 10,102 $ 427 $ 1,398 $ (1,825) $ 10,102
Other comprehensive income:
Foreign currency translation adjustments . . . -- -- (91) -- (91)
-------- -------- -------- -------- --------
Comprehensive income . . . . . . . . . . . . . . $ 10,102 $ 427 $ 1,307 $ (1,825) $ 10,011
======== ======== ======== ======== ========
</TABLE>
Condensed Consolidating Statements of Comprehensive Income
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Predecessor
----------------------------------------------------------
Guarantor Non-guarantor
ASR Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . $ 15,069 $ 3,522 $ 3,038 $ (6,560) $ 15,069
Other comprehensive income:
Foreign currency translation adjustments . . . -- -- (198) -- (198)
-------- -------- -------- -------- --------
Comprehensive income . . . . . . . . . . . . . . $ 15,069 $ 3,522 $ 2,840 $ (6,560) $ 14,871
======== ======== ======== ======== ========
</TABLE>
-96-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statements of Cash Flows
For the Period from April 24, 1999 to December 31, 1999
<TABLE>
<CAPTION>
Company
----------------------------------------------------------
Guarantor Non-guarantor
ASR Subsidiaries Subsidiaries Eliminations Consolidated
---------- ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Operating activities
Net cash provided by operating activities . . . . . $ 9,110 $ 2,871 $ 8,419 $ (1,137) $ 19,263
Investing activities
Capital expenditures . . . . . . . . . . . . . . . (5,427) (2,075) (928) -- (8,430)
Other . . . . . . . . . . . . . . . . . . . . . . . (29) -- -- -- (29)
Advances from (to) subsidiaries . . . . . . . . . . 1,767 -- -- (1,767) --
-------- -------- -------- -------- --------
Net cash used in investing activities . . . . . . . (3,689) (2,075) (928) (1,767) (8,459)
Financing activities
Repayment of long-term obligations . . . . . . . . (31,173) (1,415) (318) -- (32,906)
Proceeds from borrowings . . . . . . . . . . . . . 51,100 194 -- -- 51,294
Deferred loan fees . . . . . . . . . . . . . . . . (395) -- -- -- (395)
Advances to RSA Holdings Corporation, net . . . . . (18,559) -- -- -- (18,559)
Advances from (to) subsidiaries . . . . . . . . . . -- 1,308 (4,230) 2,922 --
-------- -------- -------- -------- --------
Net cash provided from (used in) financing
activities . . . . . . . . . . . . . . . . . . 973 87 (4,548) 2,922 (566)
Net increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . 6,394 883 2,943 18 10,238
Cash and cash equivalents, beginning of period . . (173) 297 2,138 -- 2,262
-------- -------- -------- -------- --------
Cash and cash equivalents, end of period . . . $ 6,221 $ 1,180 $ 5,081 $ 18 $ 12,500
======== ======== ======== ======== ========
</TABLE>
-97-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statements of Cash Flows
For the Period from January 1, 1999 to April 23, 1999
<TABLE>
<CAPTION>
Predecessor
----------------------------------------------------------
Guarantor Non-guarantor
ASR Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Operating activities
Net cash (used in) provided by operating
activities . . . . . . . . . . . . . . . . . . . $ (7,841) $1,545 $ 518 $ 444 $(5,334)
Investing activities
Capital expenditures . . . . . . . . . . . . . . (2,538) (824) (276) -- (3,638)
Other . . . . . . . . . . . . . . . . . . . . . . 49 -- -- -- 49
Advances from (to) subsidiaries . . . . . . . . . 1,997 -- -- (1,997) --
-------- ------ ------ ------ -------
Net cash used in investing activities . . . . . (492) (824) (276) (1,997) (3,589)
Financing activities
Repayment of long-term obligations . . . . . . . (21,464) (62) (383) -- (21,909)
Proceeds from borrowings . . . . . . . . . . . . 61,400 -- -- -- 61,400
Deferred loan fees . . . . . . . . . . . . . . . (7,606) -- -- -- (7,606)
Proceeds from exercise of stock options . . . . . 2 -- -- -- 2
Advances to RSA Holdings Corporation, net . . . . (24,155) -- -- -- (24,155)
Advances from (to) subsidiaries . . . . . . . . . -- (468) (1,085) 1,553 --
-------- ------ ------ ------ -------
Net cash provided from (used in) financing
activities . . . . . . . . . . . . . . . . . . 8,177 (530) (1,468) 1,553 7,732
Net (decrease) increase in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . (156) 191 (1,226) -- (1,191)
Cash and cash equivalents, beginning of period . (17) 106 3,364 -- 3,453
-------- ------ ------ ------ -------
Cash and cash equivalents, end of period . . . $ (173) $ 297 $2,138 $ -- $ 2,262
======== ====== ====== ====== =======
</TABLE>
-98-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Predecessor
----------------------------------------------------------
Guarantor Non-guarantor
ASR Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Operating activities
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . . $ 13,429 $(1,593) $ 383 $ 322 $12,541
------- ------- ------ ------ -------
Investing activities
Capital expenditures . . . . . . . . . . . . . . (7,205) (3,976) (194) -- (11,375)
Purchase of Wolco, net of cash acquired . . . . . -- -- (571) -- (571)
Other . . . . . . . . . . . . . . . . . . . . . . (719) -- 56 -- (663)
Investment in subsidiaries . . . . . . . . . . . (3,481) -- 3,481 -- --
Advances from (to) subsidiaries . . . . . . . . . (5,481) -- -- 5,481 --
------- ------- ------ ------ -------
Net cash (used in) provided from investing
activities . . . . . . . . . . . . . . . . . . (16,886) (3,976) 2,772 5,481 (12,609)
------- ------- ------ ------ -------
Financing activities
Repayment of long-term obligations . . . . . . . (320) (192) (885) -- (1,397)
Proceeds from borrowings . . . . . . . . . . . . 3,300 -- 80 -- 3,380
Proceeds for exercise of stock options . . . . . 104 -- -- -- 104
Advances from (to) subsidiaries . . . . . . . . . -- 5,434 377 (5,811) --
------- ------- ------ ------ -------
Net cash provided from (used in) financing
activities . . . . . . . . . . . . . . . . . . 3,084 5,242 (428) (5,811) 2,087
------- ------- ------ ------ -------
Net (decrease) increase in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . (373) (327) 2,727 (8) 2,019
Cash and cash equivalents, beginning of period . 356 433 637 8 1,434
------- ------- ------ ------ -------
Cash and cash equivalents, end of period . . . $ (17) $ 106 $3,364 $ -- $ 3,453
======= ======= ====== ====== =======
</TABLE>
-99-
<PAGE>
AMERICAN SAFETY RAZOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Predecessor
----------------------------------------------------------
Guarantor Non-guarantor
ASR Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Operating activities
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . . $ (671) $ 9,941 $2,308 $ 459 $12,037
------- ------- ------ ------ -------
Investing activities
Capital expenditures . . . . . . . . . . . . . . (8,115) (2,724) (2,875) -- (13,714)
Purchase of AWC, net of cash acquired . . . . . . -- (10,300) -- -- (10,300)
Other . . . . . . . . . . . . . . . . . . . . . . -- (3) -- -- (3)
Investment in subsidiaries . . . . . . . . . . . (9,445) -- 9,445 -- --
Advances from (to) subsidiaries . . . . . . . . . 7,451 -- -- (7,451) --
------- ------- ------ ------ -------
Net cash (used in) provided from investing
activities . . . . . . . . . . . . . . . . . . (10,109) (13,027) 6,570 (7,451) (24,017)
------- ------- ------ ------ -------
Financing activities
Repayment of long-term obligations . . . . . . . (310) (243) -- -- (553)
Proceeds from borrowings . . . . . . . . . . . . 11,200 -- 743 -- 11,943
Proceeds for exercise of stock options . . . . . 45 -- -- -- 45
Advances from (to) subsidiaries . . . . . . . . . -- 3,750 (10,750) 7,000 --
------- ------- ------ ------ -------
Net cash provided from (used in) financing
activities . . . . . . . . . . . . . . . . . . 10,935 3,507 (10,007) 7,000 11,435
------- ------- ------ ------ -------
Net increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . 155 421 (1,129) 8 (545)
Cash and cash equivalents, beginning of period . 201 12 1,766 -- 1,979
------- ------- ------ ------ -------
Cash and cash equivalents, end of period . . . $ 356 $ 433 $ 637 $ 8 $ 1,434
======= ======= ====== ====== =======
</TABLE>
-100-
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholder
of American Safety Razor Company
In our opinion, the consolidated financial statements listed in the
accompanying index appearing under Item 14(a)(1) on page 47 present
fairly, in all material respects, the financial position of American
Safety Razor Company and its subsidiaries (the "Company") at December 31,
1999 and the results of their operations and their cash flows for the
period from April 24, 1999 to December 31, 1999 in conformity with
accounting principles generally accepted in the United States. In
addition, in our opinion, the financial statement schedule listed in the
accompanying index appearing under Item 14(a)(2) on page 47 presents
fairly, in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audit. We conducted our audit of these statements
in accordance with auditing standards generally accepted in the United
States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Richmond, Virginia
February 11, 2000
-101-
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholder
of American Safety Razor Company
In our opinion, the consolidated financial statements listed in the
accompanying index appearing under Item 14(a)(1) on page 47 present
fairly, in all material respects, the financial position of American
Safety Razor Company and its subsidiaries (the "Predecessor") at December
31, 1998 and the results of their operations and their cash flows for the
period from January 1, 1999 to April 23, 1999, and for the years ended
December 31, 1998 and 1997 in conformity with accounting principles
generally accepted in the United States. In addition, in our opinion, the
financial statement schedule listed in the accompanying index appearing
under Item 14(a)(2) on page 47 presents fairly, in all material respects,
the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedule are the responsibility of the Predecessor's
management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our
audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Richmond, Virginia
February 11, 2000
-102-
<PAGE>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
AMERICAN SAFETY RAZOR COMPANY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Company
-------------------------------------------------------------------------
Additions
---------------------------
Balance Charged to Charged to
Beginning of Costs and Other Balance End
Description Period Expenses Accounts Deductions of Period
- - ------------------------------------------------ ------------ ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Period from April 24, 1999 to December 31, 1999
Reserves and allowances deducted from asset
accounts:
Allowance for doubtful accounts . . . . . . . $1,113 $ 593 $ -- $ 452<F1> $1,254
Allowance for discounts and other deductions . 2,329 3,128 -- 2,498<F2> 2,959
------ ------ ------ ------ ------
$3,442 $3,721 $ -- $2,950 $4,213
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Predecessor
-------------------------------------------------------------------------
Additions
---------------------------
Balance Charged to Charged to
Beginning of Costs and Other Balance End
Description Period Expenses Accounts Deductions of Period
- - ------------------------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Period from January 1, 1999 to April 23, 1999
Reserves and allowances deducted from asset
accounts:
Allowance for doubtful accounts . . . . . . . $ 966 $ 464 $ -- $ 317<F1> $1,113
Allowance for discounts and other deductions . 1,991 1,923 -- 1,585<F2> 2,329
------ ------ ------ ------ ------
$2,957 $2,387 $ -- $1,902 $3,442
====== ====== ====== ====== ======
-103-
<PAGE>
Year ended 12-31-98
Reserves and allowances deducted from asset
accounts:
Allowance for doubtful accounts . . . . . . . $1,363 $ 212 $ -- $ 609<F1> $ 966
Allowance for discounts and other deductions . 2,098 5,209 -- 5,316<F2> 1,991
------ ------ ------ ------ ------
$3,461 $5,421 $ -- $5,925 $2,957
====== ====== ====== ====== ======
Year ended 12-31-97
Reserves and allowances deducted from asset
accounts:
Allowance for doubtful accounts . . . . . . . $1,252 $ 595 $ -- $ 484<F1> $1,363
Allowance for discounts and other deductions . 1,306 4,820 -- 4,028<F2> 2,098
------ ------ ------ ------ ------
$2,558 $5,415 $ -- $4,512 $3,461
====== ====== ====== ====== ======
$2,012 $3,816 $ 35 $3,305 $2,558
====== ====== ====== ====== ======
<FN>
<F1> Accounts written off, net of recoveries
<F2> Discounts taken by customers
</TABLE>
-104-
<PAGE>
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description Page
- - ------- ------------ ----------
2.1 Stock Sale and Purchase Agreement for the Registrant,
dated April 12, 1989, by, between, and among J. Gray
Ferguson, Arthur J. Gajarsa, Joseph F. Hackett and
William L. Robbins, III, the Registrant and ASR
Acquisition Corp. (A) . . . . . . . . . . . . . . . (2)
2.2 Agreement for Purchase and Sale of Stock, dated April
17, 1989, by and among Howard E. Strauss, Bert
Ghavami, and Ardell Acquisition Corp.(A) . . . . . (2)
2.3 Amendment No. 1 to Agreement for Purchase and Sale of
Stock, dated April 28, 1989, by and among Howard E.
Strauss, Bert Ghavami, and Ardell Acquisition Corp. (2)
2.4 Agreement for Purchase and Sale of Stock of Megas
Beauty Care, Inc. dated May 16, 1994 between Megas
Holdings, Inc. and Robert Bender (A) . . . . . . . (3)
2.5 Stock Purchase Agreement dated February 7, 1995, by and
among Sterile Products Holdings, Inc. and C. C.
(Jack) Van Noy, George P. Goemans, Tamalpais
Capital, and Newtek Venture (A) . . . . . . . . . . (4)
2.6 Asset Purchase Agreement, dated as of March 6, 1996, by
and among MLO Razor Company (1996) Ltd.
("Purchaser"), and Bond-America Israel Blades Ltd.
("Seller"), Nostrum Establishment and Kaftor
VePerach Ltd., the stockholders of Seller
(individually each an "Owner" and collectively, the
"Owners") and Robert Mandel, Daniel Mandel, Alfred
Mernone, Shulamit Weiman, Noam Weiman, Efrat
Gershoni and Ayin Mor Ltd. (individually each a
"Beneficial Owner" and collectively the "Beneficial
Owners" and together with the Owners, the
"Stockholders"). (A) . . . . . . . . . . . . . . . (7)
-105-
<PAGE>
2.7 Amendment No. 1 to Asset Purchase Agreement (the
"Amendment"), dated as of March 25, 1996, by and
among Bond Blades International Ltd. (formerly known
as MLO Razor Company (1996) Ltd.), ("Purchaser"),
and Bond-America Israel Blades Ltd., ("Seller"),
Nostrum Establishment and Kaftor VePerach Ltd., the
stockholders of Seller (individually each an "Owner"
and collectively, the "Owners") and Robert Mandel,
Daniel Mandel, Alfred Mernone, Shulamit Weiman, Noam
Weiman, Efrat Gershoni and Ayin Mor Ltd.
(individually each a "Beneficial Owner" and
collectively the "Beneficial Owners" and together
with the Owners, the "Stockholders"). . . . . . . . (7)
2.8 Asset Purchase Agreement, dated as of March 6, 1996, by
and among American Safety Razor Company
("Purchaser"), and A.I. Blades, Inc. ("Seller") and
Bond-America Israel Blades, Ltd., the sole
stockholder of Seller ("Bond"), Nostrum
Establishment and Kaftor VePerach Ltd., Robert
Mandel, Daniel Mandel, Alfred Mernone, Shulmait
Weiman, Noam Weiman, Efrat Gershoni and Ayin Mor
Ltd. (individually each a "Beneficial Owner" and
collectively the "Beneficial Owners" and together
with Bond, the "Stockholders"). (A) . . . . . . . (7)
2.9 Amendment No. 1 to Asset Purchase Agreement (the
"Amendment"), dated as of March 25, 1996, by and
among American Safety Razor Company ("Purchaser"),
and A.I. Blades, Inc. ("Seller") and Bond-America
Israel Blades Ltd., the sole stockholder of Seller
("Bond"), Nostrum Establishment and Kaftor VePerach
Ltd., Robert Mandel, Daniel Mandel, Alfred Mernone,
Shulamit Weiman, Noam Weiman, Efrat Gershoni and
Ayin Mor Ltd. (individually each a "Beneficial
Owner" and collectively the "Beneficial Owners" and
together with Bond, the "Stockholders"). . . . . . (7)
2.10 Agreement and Plan of Merger, dated as of February 12,
1999 by and among RSA Holdings Corp. of Delaware,
RSA Acquisition Corp. and American Safety Razor
Company. (A) . . . . . . . . . . . . . . . . . . . (9)
2.11 Amendment Agreement, dated as of April 8, 1999, to the
Agreement and Plan of Merger, dated as of February
12, 1999, by and among RSA Holdings Corp. of
Delaware, RSA Acquisition Corp. and American Safety
Razor Company. . . . . . . . . . . . . . . . . . . (10)
2.12 Second Amendment Agreement, dated as of April 23, 1999,
to the Agreement and Plan of Merger, dated as of
February 12, 1999, by and among RSA Holdings Corp.
of Delaware, RSA Acquisition Corp. and American
Safety Razor Company. . . . . . . . . . . . . . . . (11)
-106-
<PAGE>
2.13 Offer to Purchase for Cash all Outstanding Shares of
Common Stock of American Safety Razor Company, dated
February 22, 1999. . . . . . . . . . . . . . . . . (9)
2.14 Supplement to the Offer to Purchase for Cash all
Outstanding Shares of Common Stock of American
Safety Razor Company, dated April 13, 1999. . . . . (10)
3.1 Amended and Restated Certificate of Incorporation of
the Registrant . . . . . . . . . . . . . . . . . . . . (1)
3.2 Amended and Restated By-laws of the Registrant . . . . (1)
4.1 Specimen of Stock Certificate . . . . . . . . . . . . . (2)
4.2 Recapitalization Agreement, dated May 24, 1993, among
the Registrant and its Stockholders . . . . . . . . (1)
4.3 Subscription Agreement, dated April 28, 1989, by and
among the Registrant, JZCC and Allsop . . . . . . (2)
4.4 Registration Rights Agreement, dated as of August 3,
1995, among the Registrant, the Guarantors and the
Initial Purchasers, relating to the Senior Notes . (6)
4.5 Indenture governing the Senior Notes, dated as of
August 3, 1995, by and among the Registrant, the
Guarantors and the Trustees . . . . . . . . . . . . (5)
4.6 Preferred Stock Exchange Agreement, dated June 14,
1993, among the Registrant and the holders of
Preferred Stock . . . . . . . . . . . . . . . . . . (1)
4.7 Common Stock Conversion Agreement, dated May 24, 1993,
among the Registrant and the holders of Common Stock (1)
4.8(a) Stockholders Agreement, dated April 14, 1989, between
the Registrant and its Stockholders . . . . . . . . (2)
4.8(b) Shareholder's Agreement, dated February 12, 1999, among
RSA Holdings Corp. of Delaware, RSA Acquisition
Corp., and Principal Holders . . . . . . . . . . . (10)
4.9 First Amendment to the Stockholders Agreement, dated
April 28, 1989, between the Registrant and its
Stockholders . . . . . . . . . . . . . . . . . . . (2)
4.10 Second Amendment to the Stockholders Agreement, dated
December 29, 1992, between the Registrant and its
Stockholders . . . . . . . . . . . . . . . . . . . (2)
4.11 Third Amendment to the Stockholders Agreement, dated
June 15, 1993, among the Registrant and certain of
its Stockholders . . . . . . . . . . . . . . . . . (1)
4.12 $2,500,000 Subordinated Secured Note, due June 10,
2000, executed by Megas Holdings, Inc. in favor of
Robert Bender . . . . . . . . . . . . . . . . . . . (3)
-107-
<PAGE>
4.13 Junior Security Agreement, dated June 10, 1994, by
Megas Beauty Care, Inc. (formerly Megas Holdings,
Inc.) in favor of Robert Bender . . . . . . . . . . (4)
4.14 Multicurrency Credit Agreement, dated as of August 3,
1995, among the Registrant, the Guarantors and First
National Bank of Chicago, as agent, including
exhibits . . . . . . . . . . . . . . . . . . . . . (5)
4.15 Guarantees of the Guarantors pursuant to the
Multicurrency Credit Agreement . . . . . . . . . . . . (6)
4.16 Security Agreement, dated August 3, 1995, between the
Registrant and First National Bank of Chicago, as
agent, including schedules . . . . . . . . . . . . (6)
4.17 Guarantor Security Agreements, dated August 3, 1995, by
and among the Guarantors and First National Bank of
Chicago, as agent, including schedules . . . . . . (6)
4.18 $190,000,000 Credit Agreement, dated as of April 23,
1999, among RSA Acquisition Corp., ("Purchaser"),
the Registrant ("Borrower"), RSA Holdings Corp. of
Delaware ("Holdings"), and the Initial Lenders, The
Swing Line Bank and Initial Issuing Bank and
NationsBank, N.A. ("Administrative Agent"). . . . .
10.1(a) Non-Disclosure/Non-Compete Agreement, dated June 15,
1993, between the Registrant and William C.
Weathersby (B) . . . . . . . . . . . . . . . . . . (1)
10.1(b) Non-Disclosure/Non-Compete Agreement, dated June 15,
1993, between the Registrant and William L. Robbins
(B) . . . . . . . . . . . . . . . . . . . . . . . . (1)
10.1(c) Non-Disclosure/Non-Compete Agreement, dated June 15,
1993, between the Registrant and George L. Pineo (B) (1)
10.1(d) Non-Disclosure/Non-Compete Agreement, dated June 15,
1993, between the Registrant and Gary S. Wade (B) . (1)
10.1(e) Non-Disclosure/Non-Compete Agreement, dated June 15,
1993, between the Registrant and Joseph F. Hackett
(B) . . . . . . . . . . . . . . . . . . . . . . . . (1)
10.1(f) Non-Disclosure/Non-Compete Agreement, dated June 15,
1993, between the Registrant and Thomas G. Kasvin
(B) . . . . . . . . . . . . . . . . . . . . . . . . (1)
10.1(g) Non-Disclosure/Non-Compete Agreement, dated June 15,
1993, between the Registrant and Thomas B. Boyd (B) (1)
10.1(h) Non-Disclosure/Non-Compete Agreement, dated June 15,
1993, between the Registrant and Bruce L. Stichter
(B) . . . . . . . . . . . . . . . . . . . . . . . (1)
10.2(a) Indemnification Agreement, dated June 15, 1993, between
the Registrant and Thomas H. Quinn (B) . . . . . . (1)
-108-
<PAGE>
10.2(b) Indemnification Agreement, dated June 15, 1993, between
the Registrant and William C. Weathersby (B) . . . (1)
10.2(c) Indemnification Agreement, dated June 15, 1993, between
the Registrant and Jonathan F. Boucher (B) . . . . (1)
10.2(d) Indemnification Agreement, dated June 15, 1993, between
the Registrant and John W. Jordan, II (B) . . . . . (1)
10.2(e) Indemnification Agreement, dated June 15, 1993, between
the Registrant and David W. Zalaznick (B) . . . . . (1)
10.2(f) Indemnification Agreement, dated June 15, 1993, between
the Registrant and John R. Lowden (B) . . . . . . . (1)
10.2(g) Indemnification Agreement, dated June 15, 1993, between
the Registrant and Paul D. Rhines (B) . . . . . . . (1)
10.2(h) Indemnification Agreement, dated June 15, 1993, between
the Registrant and D. Patrick Curran (B) . . . . . (1)
10.2(i) Indemnification Agreement, dated June 15, 1993, between
the Registrant and William C. Ballard, Jr. (B) (1)
10.3(a) Financial Advisory Agreement, dated July 12, 1995,
between the Registrant and TJC Management Corp. . . (6)
10.3(b) Amended and Restated Financial Advisory Agreement,
dated February 12, 1999, between the Registrant and
TJC Management Corp. . . . . . . . . . . . . . . . (12)
10.4 Settlement Agreement, dated June 5, 1992, by and
between Warner-Lambert Company and the Registrant . (2)
10.5 Administrative Consent Order, dated March 13, 1989,
between the Registrant and the New Jersey Department
of Environmental Protection and Energy . . . . . . (2)
10.6(a) Employment Agreement, dated March 3, 1995, by and
between Sterile Products Holdings, and Sterile
Products Corporation and C. C. Van Noy (B) . . . . (4)
10.6(b) Employment Protection Agreement, dated December 8,
1997, by and between the Registrant and William C.
Weathersby (B) . . . . . . . . . . . . . . . . . . (8)
10.6(c) Employment Protection Agreement, dated December 8,
1997, by and between the Registrant and James V.
Heim (B) . . . . . . . . . . . . . . . . . . . . . (8)
10.6(d) Employment Protection Agreement, dated December 8,
1997, by and between the Registrant and Thomas G.
Kasvin (B) . . . . . . . . . . . . . . . . . . . . (8)
10.7 The American Safety Razor Company Stock Option Plan . . (1)
10.8 Confidentiality Agreement dated as of December 4, 1997
between PaineWebber Incorporated and J. W. Childs
Associates, L.P. . . . . . . . . . . . . . . . . . (10)
-109-
<PAGE>
10.9 Confidentiality Agreement dated as of January 12, 1999
between PaineWebber Incorporated and J. W. Childs
Associates, L.P. . . . . . . . . . . . . . . . . . (10)
16 Letter re Change in Certifying Accountant . . . . . . . (4)
21 List of Subsidiaries of the Registrant . . . . . . . .
23 Consent of PricewaterhouseCoopers LLP . . . . . . . . .
27 Financial Data Schedule . . . . . . . . . . . . . . . .
____________________
(1) Incorporated by reference to the exhibits filed with the
Registrant's Form 10-K for the fiscal year ended December 31,
1993.
(2) Incorporated by reference to the exhibits filed with the
Registrant's Form S-1 Registration Statement (No. 33-60298).
(3) Incorporated by reference to the exhibits filed with the
Registrant's Form 8-K/A, dated June 10, 1994 relating to the
acquisition of Megas Beauty Care, Inc.
(4) Incorporated by reference to the exhibits filed with the
Registrant's Form 10-K for the fiscal year ended December 31,
1994.
(5) Incorporated by reference to the exhibits filed with the
Registrant's Form 8-K, dated August 15, 1995.
(6) Incorporated by reference to the exhibits filed with the
Registrant's Form S-4 Registration Statement (No. 33-96046).
(7) Incorporated by reference to the exhibits filed with the
Registrant's Form 10-Q for the quarter ended March 31, 1996.
(8) Incorporated by reference to the exhibits filed with the
Registrant's Form 10-K/A for the fiscal year ended December 31,
1997.
(9) Incorporated by reference to the exhibits filed with the
Registrant's Schedule 14D-9, dated February 22, 1999.
(10) Incorporated by reference to the exhibits filed with the
Registrant's Schedule 14D-9, dated April 13, 1999.
(11) Incorporated by reference to the exhibits filed with the
Registrant's Schedule 14D-1, dated April 23, 1999.
(12) Incorporated by reference to the exhibits filed with the
Registrant's Form 10-K for the fiscal year ended December 31,
1998.
(A) Disclosure schedules relating to the representations and
warranties have not been filed; such schedules will be filed
supplementally upon the request of the Securities and Exchange
Commission.
(B) This exhibit is a management contract or compensatory plan or
arrangement required to be identified in this Form 10-K pursuant
to Item 14(c) of this Report.
-110-
<PAGE>
Exhibit 21
LIST OF SUBSIDIARIES OF THE REGISTRANT<F1>:
Subsidiary
- - ----------
American Safety Razor Corporation
American Safety Razor of Canada Limited
ASR Holdings, Inc.
The Hewitt Soap Company, Inc.
Industrias Manufactureras ASR de Puerto Rico, Inc.
Megas Beauty Care, Inc.
Megas de Puerto Rico, Inc.
Personna International de Mexico, S.A. de C.V.
Personna International Limited
Personna International UK Limited
Personna International de Puerto Rico, Inc.
Personna International Israel, Ltd.
Valley Park Realty, Inc.
Wolco Holland B.V.
[FN]
<F1> Each subsidiary is 100% owned by the Company or certain of its
subsidiaries.
-111-
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (File No. 333-38779) of American Safety Razor
Company and subsidiaries of our reports dated February 11, 2000 relating
to the financial statements and financial statement schedule, which
appear in the Form 10-K.
PricewaterhouseCoopers LLP
Richmond, Virginia
March 27, 2000
-112-
<PAGE>
5 This schedule contains summary financial information extracted from the
financial statements included in the Form 10-K of American Safety Razor
Company for the year ended December 31, 1999, and is qualified in its entirety
by reference to such financial statements. 0000750339 AMERICAN SAFETY RAZOR
COMPANY 1000 U.S. DOLLARS
-113-
<PAGE>
EXECUTION COPY
$190,000,000
CREDIT AGREEMENT
Dated as of April 23, 1999
Among
RSA ACQUISITION CORP.
as Purchaser
and
AMERICAN SAFETY RAZOR COMPANY
as Borrower
and
RSA HOLDINGS CORP. OF DELAWARE
as Holdings
and
THE INITIAL LENDERS, THE SWING LINE BANK AND INITIAL ISSUING BANK
NAMED HEREIN
as Initial Lenders, the Swing Line Bank and Initial Issuing Bank
and
NATIONSBANK, N.A.
as Administrative Agent
and
NATIONSBANC MONTGOMERY SECURITIES LLC
and
DLJ CAPITAL FUNDING, INC.
as Co-Arrangers
and
DLJ CAPITAL FUNDING, INC.
as Syndication Agent
<PAGE>
T A B L E O F C O N T E N T S
Section Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . 2
1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . 2
1.02. Computation of Time Periods; Other Definitional Provisions . . . . . 30
1.03. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT. . . . . . . . . . . . . . . . 30
2.01. The Advances and the Letters of Credit . . . . . . . . . . . . . . . 30
2.02. Making the Advances . . . . . . . . . . . . . . . . . . . . . . . . 32
2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit . 34
2.04. Repayment of Advances . . . . . . . . . . . . . . . . . . . . . . . 36
2.05. Termination or Reduction of the Commitments . . . . . . . . . . . . 41
2.06. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.07. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.08. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.09. Conversion of Advances . . . . . . . . . . . . . . . . . . . . . . . 46
2.10. Increased Costs, Etc. . . . . . . . . . . . . . . . . . . . . . . . 47
2.11. Payments and Computations . . . . . . . . . . . . . . . . . . . . . 49
2.12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
2.13. Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . 53
2.14. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 54
2.15. Defaulting Lenders . . . . . . . . . . . . . . . . . . . . . . . . . 54
2.16. Removal of Lender . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE III
CONDITIONS OF LENDING . . . . . . . . . . . . . . . . 57
3.01. Conditions Precedent to Initial Extension of Credit . . . . . . . . 57
3.02. Conditions Precedent to Borrowings to Purchase Company Stock after
Stock Tender Offer . . . . . . . . . . . . . . . . . . . . . . . 61
3.03. Conditions Precedent to Each Borrowing and Issuance . . . . . . . . 61
3.04. Determinations Under Section 3.01 . . . . . . . . . . . . . . . . . 62
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 62
4.01. Representations and Warranties . . . . . . . . . . . . . . . . . . . 62
-i-
<PAGE>
ARTICLE V
COVENANTS . . . . . . . . . . . . . . . . . . . . 70
5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . 70
5.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 74
5.03. Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . 81
5.04. Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE VI
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . 86
6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 86
6.02. Actions in Respect of the Letters of Credit upon Default . . . . . . 89
ARTICLE VII
THE AGENTS . . . . . . . . . . . . . . . . . . . 90
7.01. Authorization and Action . . . . . . . . . . . . . . . . . . . . . . 90
7.02. Administrative Agent's Reliance, Etc. . . . . . . . . . . . . . . . 90
7.03. NationsBank, NMS and Affiliates . . . . . . . . . . . . . . . . . . 91
7.04. Lender Party Credit Decision . . . . . . . . . . . . . . . . . . . . 91
7.05. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 91
7.06. Successor Administrative Agent . . . . . . . . . . . . . . . . . . . 93
ARTICLE VIII
PARENT GUARANTY . . . . . . . . . . . . . . . . . . 94
8.01. Parent Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . 94
8.02. Guaranty Absolute . . . . . . . . . . . . . . . . . . . . . . . . . 94
8.03. Waivers and Acknowledgments . . . . . . . . . . . . . . . . . . . . 95
8.04. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
8.05. Continuing Guarantee; Assignments . . . . . . . . . . . . . . . . . 97
ARTICLE IX
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . 97
9.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 97
9.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
9.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . 99
9.04. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 99
9.05. Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . . . 100
9.06. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 100
9.07. Assignments and Participations . . . . . . . . . . . . . . . . . . 101
9.08. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . 103
9.09. No Liability of the Issuing Bank . . . . . . . . . . . . . . . . . 104
9.10. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . 104
9.11. Jurisdiction, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 104
9.12. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 105
9.13. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . 105
-ii-
<PAGE>
SCHEDULES
Schedule I - Commitments and Applicable Lending Offices
Schedule 3.01(g) Disclosed Litigation
Schedule 4.01(a) Equity Interests in Holdings
Schedule 4.01(b) Subsidiaries of each Loan Party
Schedule 4.01(r) Environmental Laws and Permits - Disclosure of Non-
compliance
Schedule 4.01(s) Properties listed or proposed to be listed on the NPL or
CERCLIS or equivalent
Schedule 4.01(t) Other properties listed or proposed to be listed on the
NPL or CERCLIS or equivalent
Schedule 4.01(v) Open Year of each Loan Party
Schedule 4.01(aa) Part A - Existing Debt.
Part B- Surviving Debt
Schedule 4.01(bb) Part A - Real Property owned by each Loan Party and its
Subsidiaries
Part B- Leased Property of each Loan Party and its
Subsidiaries
Schedule 4.01(cc) Investments held by each Loan Party and its Subsidiaries
Schedule 4.01(dd) Intellectual property held by each Loan Party and its
Subsidiaries
Schedule 5.01(q) Condition subsequent - Mortgages of Real Property
Schedule 5.02(a) Existing Liens
-iii-
<PAGE>
EXHIBITS
Exhibit A-1 - Form of Term A Note
Exhibit A-2 - Form of Term B Note
Exhibit A-3 - Form of Working Capital Note
Exhibit B-1 - Form of Notice of Borrowing
Exhibit B-2 - Form of Notice of Conversion
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Security Agreement
Exhibit E - [Intentionally Omitted]
Exhibit F - Form of Subsidiary Guaranty
Exhibit G - [Intentionally Omitted]
Exhibit H - Form of Opinion of Borrower's Counsel
Exhibit I - Form of Solvency Opinion
Exhibit J - Form of Solvency Certificate
Exhibit K - Terms of Subordinated Notes
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CREDIT AGREEMENT
CREDIT AGREEMENT dated as of April 23, 1999 among RSA Acquisition
Corp., a Delaware corporation (the "Purchaser"), American Safety Razor
Company, a Delaware corporation (the "Borrower"), RSA Holdings Corp. of
Delaware, a Delaware corporation ("Holdings"), the banks, financial
institutions and other institutional lenders listed on the signature pages
hereof under the caption "Initial Lenders" (the "Initial Lenders"),
NationsBank, N.A. ("NationsBank"), as the initial issuer of Letters of Credit
(as hereinafter defined) hereunder (the "Initial Issuing Bank"), NationsBank,
as the initial swing line bank (the "Swing Line Bank"), DLJ Capital Funding,
Inc. ("DLJ") as the syndication agent (in such capacity, the "Syndication
Agent") for the Facilities (as hereinafter defined) hereunder, DLJ and
NationsBanc Montgomery Securities LLC ("NMS"), as co-arrangers (the "Co-
Arrangers"), and NationsBank, as the administrative and collateral agent
(together with any successor thereto appointed pursuant to Article VII, the
"Administrative Agent") for the Lender Parties (as hereinafter defined).
PRELIMINARY STATEMENTS:
(1) J.W. Childs Equity Partners II, L.P. or one of its affiliates
("JWC") organized Holdings as a single-purpose, wholly owned Subsidiary (as
hereinafter defined). Holdings in turn organized the Purchaser as a
single-purpose, wholly owned Subsidiary.
(2) Pursuant to an Agreement and Plan of Merger Agreement dated as
of February 12, 1999, as amended by the Amendment Agreement dated as of April
8, 1999 (as so amended, the "Merger Agreement"), among Holdings, the
Purchaser and the Borrower, the Purchaser offered to acquire through a tender
offer (the "Stock Tender Offer") for $14.20 in cash per share all of the
shares of the Borrower's outstanding common stock (the "Company Stock"),
subject to the minimum conditions provided for in the Stock Tender Offer.
After the closing of the Stock Tender Offer, the Purchaser will consummate a
merger (the "Merger") with the Borrower in which the Borrower will be the
surviving corporation (the "Surviving Corporation") and a wholly owned
Subsidiary of Holdings.
(3) The Purchaser has requested that immediately upon the
consummation of each of the Stock Tender Offer and the Merger, the Lender
Parties lend to the Purchaser up to $28,600,000 to pay to the holders of the
Company Stock a portion of the cash consideration for their shares in the
Stock Tender Offer or in the Merger, as the case may be.
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(4) The Borrower has requested that immediately upon the
consummation of the Stock Tender Offer, the Lender Parties lend to the
Borrower up to $19,000,000 to refinance certain Existing Debt (as hereinafter
defined).
(5) The Borrower has requested that (a) immediately upon the
consummation of the Stock Tender Offer, the Lender Parties lend to the
Borrower to pay transaction fees and expenses in an amount of up to
$20,000,000, and, from time to time thereafter, to pay the holders of the
Senior Notes the Repurchase Payments (as hereinafter defined) and (b) from
time to time, the Lender Parties lend to the Borrower and issue Letters of
Credit for the account of the Borrower to provide working capital for the
Borrower and its Subsidiaries and for general corporate purposes of the
Borrower and its Subsidiaries. The Lender Parties have indicated their
willingness to agree to lend such amounts on the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and the plural forms of the terms
defined):
"Administrative Agent" has the meaning specified in the recital of
parties to this Agreement.
"Administrative Agent's Account" means the account of the
Administrative Agent maintained by the Administrative Agent with
NationsBank at its office at 101 North Tryon Street, Charlotte, North
Carolina 28255, or such other account maintained by the Administrative
Agent and designated by the Administrative Agent as such in a written
notice to the Borrower and each of the Lender Parties.
"Advance" means a Term A Advance, a Term B Advance, a Working
Capital Advance, a Swing Line Advance or a Letter of Credit Advance, as
the context may require.
"Affiliate" means, with respect to any Person, any other Person
that, directly or indirectly, controls, is controlled by or is under
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common control with such Person or is a director or officer of such
Person. For purposes of this definition, the term "control" (including
the terms "controlling," "controlled by" and "under common control
with") of a Person means the possession, direct or indirect, of the
power to vote 5% or more of the Voting Interests of such Person or to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of Voting Interests, by contract
or otherwise.
"Agents" means, collectively, the Administrative Agent and the
Syndication Agent.
"Agreement Value" means, for each Hedge Agreement, on any date of
determination, an amount determined by the Administrative Agent equal
to: (a) in the case of a Hedge Agreement documented pursuant to the
Master Agreement (Multicurrency-Cross Border) published by the
International Swap and Derivatives Association, Inc. (the "Master
Agreement"), the amount, if any, that would be payable by any Loan Party
or any of its Subsidiaries to its counterparty to such Hedge Agreement,
as if (i) such Hedge Agreement was being terminated early on such date
of determination, (ii) such Loan Party or Subsidiary was the sole
"Affected Party", and (iii) the Administrative Agent was the sole party
determining such payment amount (with the Administrative Agent making
such determination pursuant to the provisions of the form of Master
Agreement); or (b) in the case of a Hedge Agreement traded on an
exchange, the mark-to-market value of such Hedge Agreement, which will
be the unrealized loss on such Hedge Agreement to the Loan Party or
Subsidiary of a Loan Party party to such Hedge Agreement determined by
the Administrative Agent based on the settlement price of such Hedge
Agreement on such date of determination, or (c) in all cases, the
mark-to-market value of such Hedge Agreement, which will be the
unrealized loss on such Hedge Agreement to the Loan Party or Subsidiary
of a Loan Party party to such Hedge Agreement determined by the
Administrative Agent as the amount, if any, by which (i) the present
value of the future cash flows to be paid by such Loan Party or
Subsidiary exceeds (ii) the present value of the future cash flows to be
received by such Loan Party or Subsidiary pursuant to such Hedge
Agreement; capitalized terms used and not otherwise defined in this
definition shall have the respective meanings set forth in the above
described Master Agreement.
"Applicable Lending Office" means (a) with respect to the Issuing
Bank, the Issuing Bank's Base Rate Lending Office for all purposes of
this Agreement and (b) with respect to each other Lender Party, such
Lender Party's Base Rate Lending Office in the case of a Base Rate
Advance and such Lender Party's Eurodollar Lending Office in the case of
a Eurodollar Rate Advance.
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"Applicable Margin" means (a) at any time with respect to the Term
B Facility, (i) if the Borrower makes Repurchase Payments in excess of
$20 million or if the Leverage Ratio is greater than 4.00:1 (provided
that this clause (i) shall not be applicable during any subsequent
periods during which the Leverage Ratio is not greater than 4.00:1),
2.75% per annum for Base Rate Advances and 3.75% per annum for
Eurodollar Rate Advances, (ii) if the Subordinated Notes are issued,
2.25% per annum for Base Rate Advances and 3.25% per annum for
Eurodollar Rate Advances, (iii) at any time during the period from the
date of this Agreement through October 23, 1999, if the Borrower has
made (during such period) the Investment permitted by Section
5.02(e)(xi), 2.75% per annum for Base Rate Advances and 3.75% per annum
for Eurodollar Rate Advances and (iv) otherwise 2.50% per annum for Base
Rate Advances and 3.50% per annum for Eurodollar Rate Advances and (b)
with respect to the Term A Facility and the Working Capital Facility,
(i) at any time during the period from the date of this Agreement
through October 23, 1999, (x) (1) if the Borrower makes Repurchase
Payments in excess of $20 million or (2) the Leverage Ratio is greater
than 4.00:1 or (3) the Borrower makes the Investment permitted by
Section 5.02(e)(xi) (provided that clauses (x)(1) and (x)(2) shall not
be applicable during any subsequent periods during which the Leverage
Ratio is not greater than 4.00:1), 2.25% per annum for Base Rate
Advances and 3.25% per annum for Eurodollar Rate Advances, (y) if the
Subordinated Notes are issued, 1.75% per annum for Base Rate Advances
and 2.75% per annum for Eurodollar Rate Advances and (z) at any time
that neither clause (x) nor clause (y) of clause (i) is applicable,
2.00% per annum for Base Rate Advances and 3.00% per annum for
Eurodollar Rate Advances, (ii) at any time and from time to time
thereafter (so long as the Subordinated Notes have not been issued), a
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percentage per annum determined by reference to the Leverage Ratio set
forth below:
Eurodollar Rate
Leverage Ratio Base Rate Advances Advances
Level I
less than 2.50:1.0 1.25% 2.25%
Level II
2.50:1.0 or greater,
but less than 3.00:1.0 1.50% 2.50%
Level III
3.00:1.0 or greater,
but less than 3.50:1.0 1.75% 2.75%
Level IV
3.50:1.0 or greater,
but less than 4.00:1.0 2.00% 3.00%
Level V
4.00:1.0 or greater 2.25% 3.25%
, provided that in the event that the aggregate outstanding principal
amount of Term B Advances is not greater than $20 million, the
percentages set forth above shall be reduced by 0.25%, and (iii) at any
time and from time to time thereafter (so long as the Subordinated Notes
have been issued), a percentage per annum determined by reference to the
Leverage Ratio set forth below:
Eurodollar Rate
Leverage Ratio Base Rate Advances Advances
Level I
less than 3.50:1.0 1.00% 2.00%
Level II
3.50:1.0 or greater,
but less than 4.00:1.0 1.25% 2.25%
Level III
4.00:1.0 or greater,
but less than 4.50:1.0 1.50% 2.50%
Level IV
4.50:1.0 or greater,
but less than 5.50:1.0 1.75% 2.75%
Level V
5.50:1.0 or greater 2.00% 3.00%
For purposes of clause (b)(ii) or (b)(iii) of the immediately
preceding sentence, the Applicable Margin shall be determined by
reference to the Leverage Ratio in effect from time to time;
provided, however, that (A) no change in the Applicable Margin shall
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be effective until three Business Days after the date on which the
Administrative Agent receives Consolidated financial statements of
the Borrower and its Subsidiaries pursuant to (and satisfying all of
the requirements of) Section 5.03(b), 5.03(c) or 5.03(d) reflecting
such change, and the related certificate or schedule demonstrating
the Leverage Ratio required to be delivered pursuant to such Section
and (B) the Applicable Margin shall be at Level V for so long as the
Borrower has not submitted to the Administrative Agent the
information described in clause (A) of this proviso as and when
required under Section 5.03(b), (c) or (d), as the case may be.
"Appropriate Lender" means, at any time, (a) with respect to
the Term A Facility, the Term B Facility or the Working Capital
Facility, a Lender that has a Commitment with respect to such
Facility at such time, (b) with respect to the Letter of Credit
Facility, (i) the Issuing Bank and (ii) if the Working Capital
Lenders have made Letter of Credit Advances pursuant to
Section 2.03(c) that are outstanding at such time, each such Working
Capital Lender and (c) with respect to the Swing Line Facility, (i)
the Swing Line Bank and (ii) if the other Working Capital Lenders
have made Swing Line Advances pursuant to Section 2.02(c) that are
outstanding at such time, each such other Working Capital Lender.
"Approved Fund" means, with respect to any Lender that is a
fund that invests in bank loans, any other fund that invests in bank
loans and is advised or managed by the same investment advisor as
such Lender or by an Affiliate of such investment advisor.
"Assignment and Acceptance" means an assignment and
acceptance entered into by a Lender Party and an Eligible Assignee,
and accepted by the Administrative Agent, in accordance with
Section 9.07 and in substantially the form of Exhibit C hereto.
"Available Amount" of any Letter of Credit means, at any
time, the maximum amount available to be drawn under such Letter of
Credit at such time (assuming compliance at such time with all
conditions to drawing).
"Bank Hedge Agreement" means any interest rate Hedge
Agreement required or permitted under Article V that is entered into
by and between the Borrower and any Hedge Bank.
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be
equal to the higher of:
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(a) the rate of interest established by
NationsBank from time to time as its prime rate (which rate
of interest may not be the lowest rate of interest charged
by NationsBank to its customers); and
(b) the Federal Funds Rate plus 0.50%.
"Base Rate Advance" means an Advance that bears interest as
provided in Section 2.07(a)(i).
"Base Rate Lending Office" means, with respect to each of
the Lender Parties, the office of such Lender Party specified as its
"Base Rate Lending Office" opposite its name on Schedule I hereto or
in the Assignment and Acceptance pursuant to which it became a Lender
Party, as the case may be, or such other office of such Lender Party
as such Lender Party may from time to time specify to the Borrower
and the Administrative Agent for such purpose.
"Borrower" has the meaning specified in the recital of
parties to this Agreement.
"Borrower's Account" means the account of the Borrower
maintained by the Borrower with NationsBank, or such other account of
such Borrower as is agreed from time to time in writing between the
Borrower and the Administrative Agent.
"Borrowing" means a Term A Borrowing, a Term B Borrowing, a
Working Capital Borrowing or a Swing Line Borrowing, as the context
may require.
"Business Day" means a day of the year on which banks are
not required or authorized by law to close in New York, New York or
Charlotte, North Carolina and, if the applicable Business Day relates
to any Eurodollar Rate Advances, on which dealings are carried on in
the London interbank market.
"Capital Assets" means, with respect to any Person, all
equipment, fixed assets and real property or improvements of such
Person, or replacements or substitutions therefor or additions
thereto, that, in accordance with GAAP, have been or should be
reflected as additions to property, plant or equipment on the balance
sheet of such Person or that have a useful life of more than one
year.
"Capital Expenditures" means, for any Person for any
period, the sum (without duplication) of (a) all expenditures made,
directly or indirectly, by such Person or any of its Subsidiaries
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during such period for Capital Assets (whether paid in cash or other
consideration or accrued as a liability and including, without
limitation, all expenditures for maintenance and repairs which have
been or should be, in accordance with GAAP, reflected as additions to
property, plant or equipment on a Consolidated balance sheet of such
Person) and (b) the aggregate principal amount of all Debt
(including, without limitation, Obligations in respect of Capitalized
Leases) assumed or incurred during such period in connection with any
such expenditures. For purposes of this definition, the purchase
price of equipment that is purchased simultaneously with the trade-in
of existing equipment or with insurance proceeds or Net Cash Proceeds
shall be included in Capital Expenditures only to the extent of the
gross amount of such purchase price less the credit granted by the
seller of such equipment for the equipment being traded in at such
time or the amount of such insurance proceeds or Net Cash Proceeds,
as the case may be.
"Capitalized Lease" means any lease with respect to which
the lessee is required to recognize concurrently the acquisition of
property or an asset and the incurrence of a liability in accordance
with GAAP.
"Cash Equivalents" means any of the following types of
Investments, to the extent owned by Holdings or any of its
Subsidiaries free and clear of all Liens (other than Liens created
under the Collateral Documents) and having a maturity of not greater
than 12 months from the date of issuance thereof:
(a) readily marketable direct obligations of
the United States of America or any agency or
instrumentality thereof or obligations unconditionally
guaranteed by the full faith and credit of the United
States;
(b) insured certificates of deposits of or time
deposits with any commercial bank that is a Lender Party or
is a member of the Federal Reserve System that issues (or
the parent of which issues) commercial paper rated as
described in clause (c) of this definition, is organized
under the laws of the United States or any state thereof and
has combined capital and surplus of at least $1 billion;
(c) commercial paper in an aggregate amount of
no more than $2,500,000 per issuer outstanding at any time
issued by any Person organized under the laws of any state
of the United States of America and rated at least "Prime-1"
(or the then equivalent grade) by Moody's Investors Service,
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Inc. or at least "A-1" (or the then equivalent grade) by
Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.; and
(d) Investments in money market investment
programs, the portfolios of which are limited solely to
Investments of the character and quality described in
clauses (a), (b) and (c) of this definition; and
(e) in the case of Foreign Subsidiaries,
Investments made locally of a type comparable to those
described in clauses (a), (b), (c) and (d) of this
definition.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System maintained by the U.S.
Environmental Protection Agency.
"Change of Control" means, at any time:
(a) the Permitted Investors shall cease to own
and control legally and beneficially, either directly or
indirectly, Voting Interests in Holdings representing more
than 50% (or, on and after an initial public offering of
common stock of Holdings, 35%) of the combined voting power
of all of the Voting Interests in Holdings (on a fully
diluted basis);
(b) at any time that the Permitted Investors
own and control legally and beneficially, either directly or
indirectly, Voting Interests representing less than 50% of
the combined voting power of all of the Voting Interests in
Holdings (on a fully diluted basis), any "person" or "group"
(each as used in Sections 13(d)(3) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended) (other than the
Permitted Investors) becomes the "beneficial owner" (as
defined in Rule 13d-3 of the Securities Exchange Act of
1934, as amended), directly or indirectly, of Voting
Interests in Holdings (including through securities
convertible into or exchangeable for such Voting Interests)
representing 30% of the combined voting power of all of the
Voting Interests in Holdings (on a fully diluted basis); or
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(c) during any period of 24 consecutive months,
commencing on or after the date of this Agreement,
individuals who at the beginning of such 24-month period
were members of the board of directors of Holdings (together
with any new directors whose election by such board of
directors was approved by the Permitted Investors or by a
majority of the directors then still in office who are
entitled to vote to elect such new director and were either
directors at the beginning of such period or Persons whose
election as directors was previously so approved) shall
cease for any reason to constitute a majority of the board
of directors of Holdings; or
(d) Holdings shall, on and after the date of
consummation of the Merger, cease, directly or indirectly,
to own and control legally and beneficially all of the
Equity Interests in the Borrower.
"Co-Arrangers" has the meaning set forth in the recital of
parties to this Agreement.
"Collateral" means all of the "Collateral" referred to in
the Collateral Documents and all of the other property and assets
that are or are intended under the terms of the Collateral Documents
to be subject to Liens in favor of the Administrative Agent for the
benefit of the Secured Parties.
"Collateral Documents" means, collectively, the Security
Agreement, the Mortgages and each of the other agreements that
creates or purports to create a Lien in favor of the Administrative
Agent for the benefit of the Secured Parties.
"Commitment" means a Term A Commitment, a Term B Commitment,
a Working Capital Commitment or a Letter of Credit Commitment, as the
context may require.
"Commitment Fee Percentage" means (i) at any time during the
period from the date of this Agreement through October 23, 1999, 1/2
of 1% per annum, and (ii) at any time and from time to time
thereafter, a percentage per annum determined by reference to the
Leverage Ratio set forth below:
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If If
Leverage Ratio Subordinated Notes Issued Subordinated Notes Not
Issued
Level I
less than 2.50:1.0 0.375% 0.375%
Level II
2.50:1.0 or greater,
but less than 3.00:1.0 0.375% 0.400%
Level III
3.00:1.0 or greater,
but less than 3.50:1.0 0.375% 0.450%
Level IV
3.50:1.0 or greater,
but less than 4.00:1.0 0.400% 0.500%
Level V
4.00:1.0 or greater,
but less than 4.50:1.0 0.450% 0.500%
Level VI
4.50:1.0 or greater,
but less than 5.50:1.0 0.500% 0.500%
Level VII
5.50:1.0 or greater 0.500% 0.500%
For purposes of clause (ii) of the immediately preceding sentence,
the Applicable Percentage shall be determined by reference to the
Leverage Ratio in effect from time to time; provided, however, that
(A) no change in the Commitment Fee Percentage shall be effective
until three Business Days after the date on which the Administrative
Agent receives Consolidated financial statements of the Borrower and
its Subsidiaries pursuant to (and satisfying all of the requirements
of) Section 5.03(b), 5.03(c) or 5.03(d) reflecting such change, and
the related certificate or schedule demonstrating the Leverage Ratio
required to be delivered pursuant to such Section and (B) the
Commitment Fee Percentage shall be at Level V for so long as the
Borrower has not submitted to the Administrative Agent the
information described in clause (A) of this proviso as and when
required under Section 5.03(b), (c) or (d), as the case may be.
"Commitment Fees" means the Working Capital Commitment Fee
and the Term B Commitment Fee.
"Company Stock" has the meaning specified in the Preliminary
Statements.
"Confidential Information" means information that is
furnished to the Administrative Agent or any Lender Party by or on
behalf of Holdings, the Purchaser or the Borrower on a confidential
basis, but does not include any such information that (a) is or
becomes generally available to the public other than as a result of a
breach by the Administrative Agent or any Lender Party of its
obligations hereunder or (b) is or becomes available to the
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Administrative Agent or any such Lender Party from a source other
than Holdings, the Purchaser or the Borrower or their respective
Affiliates or advisors.
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Consolidated Cash Interest Expense" means, with respect to
any Person for any period, all interest expense (net of interest
income) paid or payable on all Funded Debt of such Person and its
Subsidiaries (other than any Commitment Fees payable hereunder, any
pay-in-kind interest expense and amortization of all costs and
expenses incurred in connection with the Transaction and all costs of
the issuances of Debt) for such period, determined on a Consolidated
basis and in accordance with GAAP for such period.
"Consolidated EBITDA" means, with respect to any Person for
any period, (a) the net income (or net loss) of such Person and its
Subsidiaries for such period plus (b) the sum of each of the
following expenses (without duplication) that have been deducted from
the determination of the net income (or net loss) of such Person and
its Subsidiaries for such period: (i) all interest expense of such
Person and its Subsidiaries for such period, (ii) all income tax
expense (whether federal, state, local, foreign or otherwise) of such
Person and its Subsidiaries for such period, (iii) all depreciation
expense of such Person and its Subsidiaries for such period, (iv) all
amortization expense of such Person and its Subsidiaries for such
period , (v) all extraordinary losses deducted in determining the net
income (or net loss) of such Person and its Subsidiaries for such
period less all extraordinary gains added in determining the net
income (or net loss) of such Person and its Subsidiaries for such
period, (vi) any non-cash expenses or losses attributable to the
revaluation of the assets of such Person and its Subsidiaries
incurred in connection with the Transaction, (vii) all employee
severance payments and payments under employment contracts (other
than any such payments made on the consummation of the Stock Tender
Offer) in an aggregate amount not to exceed $1,500,000 made by such
Person and its Subsidiaries during the period from the date hereof
through the first anniversary of the date hereof, (viii) any charges
deducted in determining the net income (or net loss) of such Person
and its Subsidiaries for such period as a result of the funding of
early retirement payments made by such Person to its employees from
over-funded pension plans of such Person, (ix) in the case of the
Borrower, all expenses relating to the Transaction, (x) in the case
of Holdings and its Subsidiaries, all fees paid to JWC or its
Affiliates to the extent otherwise permitted under Section 5.01(l),
(xi) for any period during the first year following the Closing Date,
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a fraction (the numerator of which is the excess of 12 over the
number of months elapsed since April 30, 1999 and the denominator of
which is 12) of $400,000 (whether or not deducted from the
determination of the net income (or net loss) of such Person and its
Subsidiaries for such period), (xii) the cash loss associated with
the Revlon contract through December 31, 1999 (other than any
allocated cost that would be otherwise absorbed by the Borrower and
its Subsidiaries), (xiii) reorganization, restructuring and other
special charges taken on or prior to December 31, 1998 and (xiv) in
the case of the Borrower and its Subsidiaries, consent fees paid
during such period in respect of any tender offer of the Senior Notes
and any premiums paid in connection with the Repurchase Payments, in
each of the foregoing cases determined on a Consolidated basis and in
accordance with GAAP for such period.
"Consolidated Net Income" means, for any period, the net
income (or net loss) of any Person and its Subsidiaries for such
period, determined on a Consolidated basis and in accordance with
GAAP, but excluding for each such period (without duplication):
(a) the income (or loss) of any other Person
accrued prior to the date on which it became a Subsidiary of
such Person or is merged into or consolidated with such
Person or any of its Subsidiaries or all or substantially
all of the property and assets of such other Person are
acquired by such Person or any of its Subsidiaries;
(b) the income (or loss) of any other Person
(other than a Subsidiary of such Person) in which a Person
other than such Person or any of its Subsidiaries owns or
otherwise holds an Equity Interest, except to the extent
such income (or loss) shall have been received in the form
of cash dividends or other distributions actually paid to
such Person or any of its Subsidiaries by such other Person
during such period;
(c) the income of any Subsidiary of such Person
to the extent that the declaration or payment of dividends
or other distributions by such Subsidiary of such income is
not permitted to be made or paid on the last day of such
period;
(d) any gains or losses (on an after-tax
basis) attributable to the sale, lease, transfer or other
disposition of any property or assets of such Person or any
of its Subsidiaries;
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(e) any earnings or charges resulting from the
write-up or write-down of any property or assets of such
Person or any of its Subsidiaries other than in the ordinary
course of business;
(f) any gains attributable to the collection of
proceeds of insurance policies; and
(g) to the extent not included in clauses (a)
through (e) of this definition, the noncash portion of all
extraordinary losses deducted in calculating net income and
the noncash portion of all extraordinary gains added in
calculating net income.
"Constitutive Documents" means, with respect to any Person,
the certificate of incorporation or registration (including, if
applicable, certificate of change of name), articles of incorporation
or association, memorandum of association, charter, bylaws,
partnership agreement, trust agreement, joint venture agreement,
limited liability company operating or members agreement, joint
venture agreement or one or more similar agreements, instruments or
documents constituting the organization or formation of such Person.
"Contingent Obligation" means, with respect to any Person,
any Obligation or arrangement of such Person to guarantee or intended
to guarantee any Debt, leases, dividends or other obligations
("primary obligations") of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, including, without
limitation, (a) the direct or indirect guarantee, endorsement (other
than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by such
Person of the Obligation of a primary obligor, (b) the Obligation to
make take-or-pay or similar payments, if required, regardless of
nonperformance by any other party or parties to an agreement or (c)
any Obligation of such Person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting
direct or indirect security therefor, (ii) to advance or supply funds
(A) for the purchase or payment of any such primary obligation or
(B) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, assets, securities or
services primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to assure or
hold harmless the holder of such primary obligation against loss in
respect thereof. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of
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the primary obligation in respect of which such Contingent Obligation
is made (or, if less, the maximum amount of such primary obligation
for which such Person may be liable pursuant to the terms of the
instrument evidencing such Contingent Obligation) or, if not stated
or determinable, the maximum reasonably anticipated liability in
respect thereof (assuming such Person is required to perform
thereunder), as determined by such Person in good faith.
"Conversion", "Convert" and "Converted" each refer to a
conversion of Advances of one Type into Advances of the other Type
pursuant to Section 2.09 or 2.10.
"Cotton Liability" has the meaning specified in Section
4.01(ee).
"Current Assets" means, with respect to any Person, all
assets of such Person that, in accordance with GAAP, would be
classified as current assets on the balance sheet of a company
conducting a business the same as or similar to that of such Person,
after deducting appropriate and adequate reserves therefrom in each
case in which a reserve is proper in accordance with GAAP.
"Current Liabilities" means, with respect to any Person, all
items (including, without limitation, taxes accrued as estimated but
excluding Debt) that, in accordance with GAAP, would be classified on
the balance sheet of such Person as current liabilities of such
Person.
"Debt" means, with respect to any Person (without
duplication) (a) all indebtedness of such Person for borrowed money,
(b) all Obligations of such Person for the deferred purchase price of
property or services (other than trade payables incurred in the
ordinary course of such Person's business), (c) all Obligations of
such Person evidenced by notes, bonds, debentures or other similar
instruments, (d) all Obligations of such Person created or arising
under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights
and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such
property), (e) all Obligations of such Person as lessee under
Capitalized Leases, (f) all Obligations, contingent or otherwise, of
such Person under acceptance, letter of credit or similar facilities,
(g) for the purposes of determining whether a Default has occurred
under Section 6.01(e) only, all Obligations of such Person to
purchase, redeem, retire, defease or otherwise make any payment in
respect of any Equity Interests in such Person or any other Person,
valued, in the case of Redeemable Preferred Interests, at the greater
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of its voluntary or involuntary liquidation preference plus accrued
and unpaid dividends, (h) all Obligations of such Person in respect
of Hedge Agreements, (i) all Obligations of such Person under any
synthetic lease, tax retention operating lease, off-balance sheet
loan or similar off-balance sheet financing if the transaction giving
rise to such Obligation is considered indebtedness for borrowed money
for tax purposes but is classified as an operating lease in
accordance with GAAP, (j) all Contingent Obligations in respect of
Debt and (k) all Debt referred to in clauses (a) through (j) above of
another Person secured by (or for which the holder of such Debt has
an existing right, contingent or otherwise, to be secured by) any
Lien on property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Debt; provided
that, until such time as any such Person has declared a dividend on
any class of its Equity Interests or a dividend on any such class
shall otherwise have become payable, the accrued and unpaid dividends
on such class shall not constitute Debt for purposes of this
Agreement.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Default Termination Notice" has the meaning specified in
Section 2.01(d)(ii).
"Defaulted Advance" means, with respect to any Lender Party
at any time, the portion of any Advance required to be made by such
Lender Party to the Borrower pursuant to Section 2.01 or 2.02 at or
prior to such time that has not been made by such Lender Party or by
the Administrative Agent for the account of such Lender Party
pursuant to Section 2.02(e) as of such time. In the event that a
portion of a Defaulted Advance shall be deemed made pursuant to
Section 2.15(a), the remaining portion of such Defaulted Advance
shall be considered a Defaulted Advance originally required to be
made pursuant to Section 2.01 on the same date as the Defaulted
Advance so deemed made in part.
"Defaulted Amount" means, with respect to any Lender Party
at any time, any amount required to be paid by such Lender Party to
the Administrative Agent or any other Lender Party hereunder or under
any other Loan Document at or prior to such time that has not been so
paid as of such time, including, without limitation, any amount
required to be paid by such Lender Party to (a) any Swing Line Bank
pursuant to Section 2.02(b) to purchase a portion of a Swing Line
Advance made by such Swing Line Bank, (b) the Issuing Bank pursuant
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to Section 2.03(c) to purchase a portion of a Letter of Credit
Advance made by the Issuing Bank, (c) the Administrative Agent
pursuant to Section 2.02(e) to reimburse the Administrative Agent for
the amount of any Advance made by the Administrative Agent for the
account of such Lender Party, (d) any other Lender Party pursuant to
Section 2.13 to purchase any participation in Advances owing to such
other Lender Party and (e) the Administrative Agent or the Issuing
Bank pursuant to Section 7.05 to reimburse the Administrative Agent
or the Issuing Bank for such Lender Party's ratable share of any
amount required to be paid by the Lender Parties to the
Administrative Agent or the Issuing Bank as provided therein. In the
event that a portion of a Defaulted Amount shall be deemed paid
pursuant to Section 2.15(b), the remaining portion of such Defaulted
Amount shall be considered a Defaulted Amount originally required to
be paid hereunder or under any other Loan Document on the same date
as the Defaulted Amount so deemed paid in part.
"Defaulting Lender" means, at any time, any Lender Party
that, at such time, (a) owes a Defaulted Advance or a Defaulted
Amount or (b) shall take any action or be the subject of any action
or proceeding of a type described in Section 6.01(f).
"Disclosed Litigation" has the meaning specified in
Section 3.01(g).
"DLJ" has the meaning set forth in the recital of parties to
this Agreement.
"Eligible Assignee" means (a) with respect to any Facility
other than the Letter of Credit Facility) (i) a Lender; (ii) an
Affiliate or Approved Fund of a Lender; or (iii) any other Person
approved by the Administrative Agent and, so long as no Event of
Default under Section 6.01(a) or (f) has occurred and is continuing
at the time the related assignment is effected pursuant to Section
9.07, the Borrower and, in the case of an Eligible Assignee that
shall be a Working Capital Lender, the Issuing Bank (in each case
such approval not to be unreasonably withheld or delayed and, in the
case of the Borrower, such approval to be deemed to have been given
if no objection thereto is received by the Administrative Agent and
the assigning Lender within five Business Days after the date on
which written notice of the proposed assignment is provided to the
Borrower; and (b) with respect to the Letter of Credit Facility, a
Person that is an Eligible Assignee under clause (a) of this
definition and is a commercial bank organized under the laws of the
United States of America; provided, however, that neither any Loan
Party nor any Affiliate of a Loan Party shall qualify as an Eligible
Assignee under this definition.
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"Environmental Action" means any action, suit, demand,
demand letter, claim, notice of noncompliance or violation, notice of
liability or potential liability, investigation, proceeding, consent
order or consent agreement relating in any way to any Environmental
Law, any Environmental Permit or Hazardous Material or arising from
alleged injury or threat to the environment or human health or safety
as related to the environment, including, without limitation, (a) by
any Governmental Authority for enforcement, cleanup, removal,
response, remedial or other actions or damages and (b) by any
Governmental Authority or any other Person for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"Environmental Law" means any federal, state, local or
foreign statute, law, ordinance, rule, regulation, code, order, writ,
judgment, injunction, decree or legally binding and enforceable
judicial or agency interpretation, policy or guidance relating to
pollution or protection of the environment, natural resources or
human health or safety, including, without limitation, those relating
to the use, handling, transportation, treatment, storage, disposal,
release or discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization required under
any Environmental Law.
"Equity Interests" means, with respect to any Person, all of
the shares of capital stock of (or other ownership or profit
interests in) such Person, all of the warrants, options or other
rights for the purchase or acquisition from such Person of shares of
capital stock of (or other ownership or profit interests in) such
Person, all of the securities convertible into or exchangeable for
shares of capital stock of (or other ownership or profit interests
in) such Person or warrants, rights or options for the purchase or
acquisition from such Person of such shares (or such other
interests), and all of the other ownership or profit interests in
such Person (including, without limitation, partnership, member or
trust interests therein), whether voting or nonvoting, and whether or
not such shares, warrants, options, rights or other interests are
outstanding on any date of determination.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated
and the rulings issued thereunder.
"ERISA Affiliate" means any Person that for purposes of
Title IV of ERISA is a member of the controlled group of any Loan
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Party, or under common control with any Loan Party, within the
meaning of Section 414 of the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable
event, within the meaning of Section 4043 of ERISA, with respect to
any Plan unless the 30-day notice requirement with respect to such
event has been waived by the PBGC or (ii) the requirements of
paragraph (1) of Section 4043(b) of ERISA are met with respect to a
contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of
a Plan, and an event described in paragraph (9), (10), (11), (12) or
(13) of Section 4043(c) of ERISA could reasonably be expected to
occur with respect to such Plan within the following 30 days; (b) the
application for a minimum funding waiver with respect to a Plan;
(c) the provision by the administrator of any Plan of a notice of
intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA
(including any such notice with respect to a plan amendment referred
to in Section 4041(e) of ERISA); (d) the cessation of operations at a
facility of any Loan Party or any ERISA Affiliate in the
circumstances described in Section 4062(e) of ERISA; (e) the partial
or complete withdrawal by any Loan Party or any ERISA Affiliate from
a Multiple Employer Plan during a plan year for which it was a
substantial employer, as defined in Section 4001(a)(2) of ERISA;
(f) the conditions for imposition of a lien under Section 302(f) of
ERISA shall have been met with respect to any Plan; (g) the adoption
of an amendment to a Plan requiring the provision of security to such
Plan pursuant to Section 307 of ERISA; or (h) the institution by the
PBGC of proceedings to terminate a Plan pursuant to Section 4042 of
ERISA, or the occurrence of any event or condition described in
Section 4042 of ERISA, that constitutes grounds for the termination
of, or the appointment of a trustee to administer, such Plan,
provided, however, that the occurrence of the event or condition
described in Section 4042(a)(4) of ERISA shall be an ERISA Event only
if the PBGC has notified any Loan Party or any ERISA Affiliate in
writing that it intends to institute proceedings to terminate a Plan
pursuant to such section or has threatened in writing to do so.
"Eurocurrency Liabilities" has the meaning specified in
Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
"Eurodollar Lending Office" means, with respect to each of
the Lenders, the office of such Lender specified as its "Eurodollar
Lending Office" opposite its name on Schedule I hereto or in the
Assignment and Acceptance pursuant to which it became a Lender, as
the case may be (or, if no such office is specified, its Base Rate
Lending Office), or such other office of such Lender as such Lender
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may from time to time specify to the Borrower and the Administrative
Agent for such purpose.
"Eurodollar Rate" means, for any Interest Period for all
Eurodollar Rate Advances comprising part of the same Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a) the rate per annum at which deposits in U.S. dollars
appear on page 3750 (or any successor page thereto) of the Dow Jones
Telerate Screen two Business Days before the first day of such
Interest Period and for a term comparable to such Interest Period or,
if such rate does not so appear on the Dow Jones Telerate Screen on
any date of determination, on the Reuters Screen LIBO Page two
Business Days before the first day of such Interest Period and for a
term comparable to such Interest Period by (b) a percentage equal to
100% minus the Eurodollar Rate Reserve Percentage for such Interest
Period; provided, however, that if the Reuters Screen LIBO Page is
being used to determine the Eurodollar rate at any date of
determination and more than one rate is specified thereon from
deposits in U.S. dollars, the applicable rate shall be the average of
all such rates (rounded upward, if necessary, to the nearest whole
multiple of 1/100 of 1% per annum).
"Eurodollar Rate Advance" means an Advance that bears
interest as provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period
for all Eurodollar Rate Advances comprising part of the same
Borrowing means the reserve percentage applicable two Business Days
before the first day of such Interest Period under regulations issued
from time to time by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member bank
of the Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities (or with respect to any other category of liabilities
that includes deposits by reference to which the interest rate on
Eurodollar Rate Advances is determined) having a term equal to such
Interest Period.
"Events of Default" has the meaning specified in
Section 6.01.
"Excess Cash Flow" means, for any period, the sum (without
duplication) of (a) Consolidated pre-tax net income (or loss) of
Holdings and its Subsidiaries for such period, plus (b) an amount
equal to the aggregate amount of all noncash charges deducted in
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arriving at such Consolidated net income (or loss), plus (c) if there
was a net increase in Consolidated Current Liabilities of Holdings
and its Subsidiaries during such period, the amount of such net
increase, plus (d) if there was a net decrease in Consolidated
Current Assets (excluding cash and Cash Equivalents) of Holdings and
its Subsidiaries during such period, the amount of such net decrease,
less (e) the aggregate amount of all noncash credits included in
arriving at such Consolidated net income (or loss), less (f) if there
was a net decrease in Consolidated Current Liabilities of Holdings
and its Subsidiaries during such period, the amount of such net
decrease, less (g) if there was a net increase in Consolidated
Current Assets (excluding cash and Cash Equivalents) of Holdings and
its Subsidiaries during such period, the amount of such net increase,
less (h) an amount equal to the amount of all Capital Expenditures
made in cash during such period or committed during such period to be
made in cash (so long as such commitment is required to be funded on
or prior to June 30 of the Fiscal Year immediately following such
period) and Investments made in cash during such period by Holdings
and its Subsidiaries, in each case to the extent otherwise permitted
by this Agreement, less (i) an amount equal to the aggregate amount
of all Required Principal Payments in respect of Debt and all other
permanent reductions in the outstanding principal amount of Debt made
during such period to the extent otherwise permitted by this
Agreement, together with any optional prepayment of Term Advances
made during such period in accordance with Section 2.06(a), less
(j) to the extent not otherwise excluded from the calculation of
Excess Cash Flow for such period, an amount equal to the net gain, if
any, attributable to the sale, lease, transfer or other disposition
of property and assets of Holdings and its Subsidiaries and included
in determining the Consolidated net income of Holdings and its
Subsidiaries for such period, less (k) an amount equal to the
aggregate amount of all taxes paid in cash by Holdings and its
subsidiaries during such period less (l) an amount equal to the
aggregate amount of all dividends and other distributions on Equity
Interests in the Borrower paid in cash during such period; provided,
however, that the amount of Capital Expenditures deducted pursuant to
clause (h) shall not include any amounts deducted in the calculation
of Excess Cash Flow in the prior period.
"Existing Debt" means Debt of the Company and its
Subsidiaries outstanding immediately before giving effect to the
Stock Tender Offer.
"Extraordinary Receipt" means any cash received by or paid
to or for the account of any Person, that constitute proceeds of any
casualty or property insurance, condemnation awards (and payments in
lieu thereof) and indemnity payments in respect of loss or damage to
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equipment, fixed assets or real property; provided, however, that an
Extraordinary Receipt shall not include (a) amounts applied to
replace or repair the equipment, fixed assets or real property in
respect of which such proceeds were received, so long as such
application is made within twelve months after receipt of such
amounts or (b) amounts received by any Person in respect of any third
party claim against such Person and applied to pay (or to reimburse
such Person for its prior payment of) such claim and the costs and
expenses of such Person with respect thereto.
"Facility" means the Term A Facility, the Term B Facility,
the Working Capital Facility, the Swing Line Facility or the Letter
of Credit Facility, as the context may require.
"Facility Required Lenders" means, for any Facility at any
time, those Lenders which would constitute the Required Lenders
under, and as defined in, this Agreement if all outstanding
Obligations under the other Facilities were repaid in full and all
Commitments with respect thereto were terminated.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates (rounded upward, if necessary, to the
nearest whole multiple of 1/100 of 1% per annum) on overnight Federal
funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for such day (or, if
such day is not a Business Day, for the immediately preceding
Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the
average of the quotations for such day for such transactions received
by the Administrative Agent from three federal funds brokers of
recognized standing selected by it.
"Fiscal Year" means, with respect to Holdings or any of its
Subsidiaries, the period commencing on January 1 in any calendar year
and ending on the next succeeding December 31 or, if any such
Subsidiary was not in existence on January 1 in any calendar year,
the period commencing on the date on which such Subsidiary is
incorporated, organized, formed or otherwise created and ending on
the next succeeding December 31.
"Foreign Subsidiary" means a Subsidiary organized under the
laws of a jurisdiction other than the United States or any State
thereof.
"Funded Debt" of any Person means Debt in respect of the
Advances, in the case of the Purchaser and the Borrower, and all
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other Debt of such Person that by its terms matures more than one
year after the date of determination or matures within one year from
such date but is renewable or extendible, at the option of such
Person, to a date more than one year after such date or arises under
a revolving credit or similar agreement that obligates the lender or
lenders to extend credit during a period of more than one year after
such date, including, without limitation, all amounts of Funded Debt
of such Person required to be paid or prepaid within one year after
the date of determination.
"GAAP" has the meaning specified in Section 1.03.
"Governmental Authority" means any nation or government, any
state, province, city, municipal entity or other political
subdivision thereof, and any governmental, executive, legislative,
judicial, administrative or regulatory agency, department, authority,
instrumentality, commission, board or similar body, whether federal,
state, provincial, territorial, local or foreign.
"Governmental Authorization" means any consent, approval or
authorization of a Governmental Authority.
"Guarantee Supplement" has the meaning specified in
Section 8(b) of the Subsidiary Guaranty.
"Hazardous Materials" means (a) petroleum or petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon
gas and (b) any other chemicals, materials or substances designated,
classified or regulated as hazardous or toxic or as a pollutant or
contaminant under any Environmental Law.
"Hedge Agreements" means, collectively, interest rate swap,
cap or collar agreements, interest rate future or option contracts,
currency swap agreements, currency future or option contracts and
other similar agreements.
"Hedge Bank" means any Person that is a Lender Party or an
Affiliate of a Lender Party, in its capacity as a party to a Bank
Hedge Agreement.
"Hewitt" means The Hewitt Soap Company, Inc., an Ohio
corporation.
"Holdings" has the meaning specified in the recital of
parties to this Agreement.
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"Holdings Debt" means the unsecured pay-in-kind Debt issued
by Holdings initially to JWC or an Affiliate of JWC in an original
principal amount equal to $55 million.
"Holdings Debt Documents" means the 12 1/2% Junior
Subordinated Note dated April 26, 1999 issued by Holdings in favor of
J.W. Childs Equity Funding II, Inc., which shall have a stated
maturity no earlier than six months after the Term B Termination
Date.
"Indemnified Party" has the meaning specified in
Section 9.04(b).
"Information Memorandum" means the information memorandum
dated April, 1999 used by the Co-Arrangers in connection with the
syndication of the Commitments.
"Initial Extension of Credit" means the earlier to occur of
(a) the initial Borrowing and (b) the initial issuance of a Letter of
Credit.
"Initial Issuing Bank" has the meaning specified in the
recital of parties to this Agreement.
"Initial Lenders" has the meaning specified in the recital
of parties to this Agreement.
"Insufficiency" means, with respect to any Plan, the amount,
if any, of its unfunded benefit liabilities, as defined in
Section 4001(a)(18) of ERISA.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, the period commencing on the
date of such Eurodollar Rate Advance or the date of the Conversion of
any Base Rate Advance into such Eurodollar Rate Advance, and ending
on the last day of the period selected by the Borrower or the
Purchaser, as the case may be, pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of
the period selected by the Borrower or the Purchaser, as the case may
be, pursuant to the provisions below. The duration of each such
Interest Period shall be one, two, three or six months (or nine or
twelve months, if available to each of the Lenders making such
Eurodollar Rate Advance), as the Borrower or the Purchaser, as the
case may be, may, upon notice received by the Administrative Agent
not later than 12:00 Noon (Charlotte, North Carolina time) on the
third Business Day prior to the first day of such Interest Period,
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select; provided, however, for purposes of Section 2.02(c) solely,
the duration of an Interest Period may be one week and the notice may
be received by the Administrative Agent not later than 11:00 A.M.
(Charlotte, North Carolina time) on the first day of such Interest
Period; provided further that:
(a) neither the Borrower nor the Purchaser may
select any Interest Period with respect to any Eurodollar
Rate Advance under a Facility that ends after any principal
repayment installment date for such Facility unless, after
giving effect to such selection, the aggregate principal
amount of Base Rate Advances and of Eurodollar Rate Advances
having Interest Periods that end on or prior to such
principal repayment installment date for such Facility shall
be at least equal to the aggregate principal amount of
Advances under such Facility due and payable on or prior to
such date;
(b) Interest Periods commencing on the same
date for Eurodollar Rate Advances comprising part of the
same Borrowing shall be of the same duration;
(c) whenever the last day of any Interest
Period would otherwise occur on a day other than a Business
Day, the last day of such Interest Period shall be extended
to occur on the next succeeding Business Day, provided,
however, that, if such extension would cause the last day of
such Interest Period to occur in the next following calendar
month, the last day of such Interest Period shall occur on
the next preceding Business Day; and
(d) whenever the first day of any Interest
Period occurs on a day of an initial calendar month for
which there is no numerically corresponding day in the
calendar month that succeeds such initial calendar month by
the number of months equal to the number of months in such
Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated
and the rulings issued thereunder.
"Investment" means, with respect to any Person, any loan or
advance to such Person, any purchase or other acquisition of Equity
Interests in or Debt of, or the property and assets comprising a
division or business unit or all or a substantial part of the
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business of, such Person, any capital contribution to such Person or
any other investment in such Person, including, without limitation,
any acquisition by way of a merger or consolidation (or similar
transaction) and any arrangement pursuant to which the investor
incurs Indebtedness of the types referred to in clause (j) or (k) of
the definition of "Debt" set forth in this Section 1.01 in respect of
such Person.
"Issuing Bank" means the Initial Issuing Bank and each other
Person to which the Letter of Credit Commitment hereunder has been
assigned pursuant to Section 9.07.
"JWC" has the meaning specified in the Preliminary
Statements to this Agreement.
"JWC Commitment Letter" means the commitment letter dated
February 12, 1999 from JWC to Holdings.
"L/C Cash Collateral Account" has the meaning specified in
Preliminary Statement (4) to the Security Agreement.
"L/C Related Documents" has the meaning specified in
Section 2.04(e)(ii).
"Lender Indemnified Costs" has the meaning specified in
Section 7.05.
"Lender Party" means any Lender, the Swing Line Bank or the
Issuing Bank.
"Lenders" means, collectively, the Initial Lenders and each
Person that becomes a Lender pursuant to Section 9.07 for so long as
such Initial Lender or Person, as the case may be, shall be a party
to this Agreement.
"Letter of Credit" has the meaning specified in
Section 2.01(d).
"Letter of Credit Advance" means an advance made by the
Issuing Bank or any Working Capital Lender pursuant to
Section 2.03(c).
"Letter of Credit Agreement" has the meaning specified in
Section 2.03(a).
"Letter of Credit Commitment" means, with respect to the
Issuing Bank at any time, the amount set forth opposite the Issuing
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Bank's name on Schedule I hereto under the caption "Letter of Credit
Commitment" or, if the Issuing Bank has entered into one or more
Assignments and Acceptances, the amount set forth for the Issuing
Bank in the Register maintained by the Administrative Agent pursuant
to Section 9.07(d) as the Issuing Bank's "Letter of Credit
Commitment", as such amount may be reduced at or prior to such time
pursuant to Section 2.05.
"Letter of Credit Facility" means, at any time, an amount
equal to the amount of the Issuing Bank's Letter of Credit Commitment
at such time, as such amount may be reduced at or prior to such time
pursuant to Section 2.05.
"Leverage Ratio" means, as of the end of any period, a ratio
of (i) Debt of the Borrower and its Subsidiaries as at the end of
such period less cash on the balance sheet of the Borrower and its
Subsidiaries as at the end of such period (provided that for the
purposes of the calculation of the Leverage Ratio, the amount of such
cash so deducted shall not exceed $3,000,000) to (ii) the sum of
Consolidated EBITDA of the Borrower and its Subsidiaries for the
twelve month period ended at the end of such period. For the
purposes of the Leverage Ratio, Debt shall not include the Agreement
Value of Hedge Agreements.
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential
arrangement, including, without limitation, the lien or retained
security title of a conditional vendor and any easement, right of way
or other encumbrance on title to real property.
"Loan Documents" means, collectively, (a) for purposes of
this Agreement and the Notes and any amendment, supplement or other
modification hereof or thereof and for all other purposes other than
for purposes of the Subsidiary Guaranty, the Parent Guaranty and the
Collateral Documents, (i) this Agreement, (ii) the Notes, (iii) the
Subsidiary Guaranty, (iv) the Collateral Documents and (v) each
Letter of Credit Agreement and (b) for purposes of the Subsidiary
Guaranty, the Parent Guaranty and the Collateral Documents, (i) this
Agreement, (ii) the Notes, (iii) the Collateral Documents, (iv) each
Letter of Credit Agreement and (v) each Bank Hedge Agreement, in each
case as amended, supplemented or otherwise modified hereafter from
time to time in accordance with the terms thereof and Section 9.01.
"Loan Parties" means, collectively, the Borrower, the
Purchaser, Holdings and each of the Subsidiaries of Holdings party to
the Subsidiary Guaranty or any of the Collateral Documents.
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"Margin Stock" has the meaning specified in Regulation U.
"Material Adverse Change" means any material adverse change
in the business, condition (financial or otherwise), operations,
properties or prospects of the Borrower and its Subsidiaries, taken
as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the business, condition (financial or otherwise), operations,
properties or prospects of the Borrower and its Subsidiaries, taken
as a whole, (b) the rights and remedies of the Administrative Agent
or any Lender Party under any Loan Document or (c) the ability of the
Loan Parties (taken as a whole) to perform their Obligations under
the Loan Documents.
"Megas" means Megas Beauty Care, Inc., a Delaware
corporation.
"Merger" has the meaning specified in the Preliminary
Statements to this Agreement.
"Merger Agreement" has the meaning specified in the
Preliminary Statements to this Agreement.
"Minimum Prepayment Amount" means (x) at any time on and
after the Borrower makes the Investment permitted by Section 5.02
(e)(xi), $40 million plus the aggregate amount of such Investment and
(y) at any other time, $40 million.
"Mortgage" has the meaning specified in Section 5.01(q).
"Mortgage Policy" has the meaning specified in
Section 5.01(q).
"Multiemployer Plan" means a multiemployer plan (as defined
in Section 4001(a)(3) of ERISA) to which any Loan Party or any ERISA
Affiliate is making or accruing an obligation to make contributions,
or has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"Multiple Employer Plan" means a single employer plan (as
defined in Section 4001(a)(15) of ERISA) that (a) is maintained for
employees of any Loan Party or any ERISA Affiliate and at least one
Person other than the Loan Parties and the ERISA Affiliates or
(b) was so maintained and in respect of which any Loan Party or any
ERISA Affiliate could reasonably be expected to have liability under
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Section 4064 or 4069 of ERISA in the event such plan has been or were
to be terminated.
"NationsBank" has the meaning specified in the recital of
parties to this Agreement.
"NMS" has the meaning specified in the recital of parties to
this Agreement.
"Net Cash Proceeds" means, with respect to any sale,
transfer or other disposition of any property or asset, or the
incurrence or issuance of any Debt, or the sale or issuance of any
Equity Interests in any Person, or any Extraordinary Receipt received
by or paid to or for the account of any Person, as the case may be,
the aggregate amount of cash received from time to time (whether as
initial consideration or through payment or disposition of deferred
consideration) by or on behalf of such Person for its own account in
connection with any such transaction, after deducting therefrom only
(without duplication):
(a) reasonable and customary brokerage
commissions, underwriting fees and discounts, legal fees,
finder's fees and other fees, commissions and expenses
associated therewith;
(b) the amount of taxes payable in connection
with or as a result of such transaction; and
(c) in the case of any sale, lease, transfer or
other disposition of any property or asset, the outstanding
principal amount of, the premium or penalty, if any, on, and
any accrued and unpaid interest on, any Debt (other than the
Debt outstanding under the Loan Documents) that is secured
by a Lien on the property and assets subject to such sale,
lease, transfer or other disposition and is required to be
repaid under the terms thereof as a result of such sale,
lease, transfer or other disposition;
in each case to the extent, but only to the extent, that the amounts
so deducted are properly attributable to such transaction or to the
property or asset that is the subject thereof and, in the case of
clause (b) of this definition, on the earlier of the dates on which
the tax return covering such taxes is filed or required to be filed,
are actually paid to a Person that is not an Affiliate of such Person
or any Loan Party or of any Affiliate of any Loan Party; provided,
however, that, if the amount deducted pursuant to clause (b) of this
definition is greater than the amount actually so paid, the amount of
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such excess shall constitute "Net Cash Proceeds"; provided, however,
"Net Cash Proceeds" shall not include any proceeds that are
reinvested in the business of the Borrower and its Subsidiaries so
long as such reinvestment is made (or the Borrower has executed a
written agreement providing for such reinvestment) within twelve
months after the receipt of such proceeds.
"Note" means a Term A Note, a Term B Note or a Working
Capital Note, as the context may require.
"Notice of Borrowing" has the meaning specified in
Section 2.02(a).
"Notice of Conversion" has the meaning specified in
Section 2.09(a).
"Notice of Issuance" has the meaning specified in
Section 2.03(a).
"Notice of Renewal" has the meaning specified in
Section 2.01(e).
"Notice of Swing Line Borrowing" has the meaning specified
in Section 2.02(b).
"Notice of Termination" has the meaning specified in
Section 2.01(d).
"NPL" means the National Priorities List under CERCLA.
"Obligation" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind,
including, without limitation, any liability of such Person on any
claim, whether or not the right of any creditor to payment in respect
of such claim is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, disputed, undisputed, legal, equitable,
secured or unsecured, and whether or not such claim is discharged,
stayed or otherwise affected by any proceeding referred to in
Section 6.01(f). Without limiting the generality of the foregoing,
the Obligations of the Loan Parties under the Loan Documents include
(a) the obligation to pay principal, interest, Letter of Credit
commissions, charges, expenses, fees, reasonable attorneys' fees and
disbursements, indemnities and other amounts payable by any Loan
Party under any Loan Document and (b) the obligation of any Loan
Party to reimburse any amount in respect of any of the foregoing that
any Lender Party, in its sole discretion, may elect to pay or advance
on behalf of such Loan Party.
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"OECD" means the Organization for Economic Cooperation and
Development.
"Open Year" means, with respect to any Person, any year for
which United States federal income tax returns have been filed by or
on behalf of such Person and for which the expiration of the
applicable statute of limitations for assessment, reassessment or
collection has not occurred (whether by reason of extension or
otherwise).
"Other Taxes" has the meaning specified in Section 2.12(b).
"Parent Guaranty" has the meaning specified in Section 8.01.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Permitted Encumbrances" has the meaning specified in the
Mortgages.
"Permitted Investors" means the collective reference to (a)
J.W. Childs Associates, L.P. and its Affiliates and (b) the
officers, employees and consultants of any Person referred to in
clause (a) above and their respective immediate family members,
estates, heirs, executors, personal representatives and
administrators, together with any trusts for the benefit of any of
the foregoing.
"Permitted Liens" means such of the following Liens as to
which no execution, foreclosure or similar proceeding shall have been
commenced which, if determined adversely to the Borrower or any of
its Subsidiaries, would, either individually or together with all
such other Liens, reasonably be expected to have a Material Adverse
Effect: (a) Liens for taxes, assessments and governmental charges or
levies to the extent not otherwise required to be paid under
Section 5.01(b); (b) Liens imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's Liens and other
similar Liens arising in the ordinary course of business securing
obligations (other than Debt for borrowed money) (i) that are not
overdue for a period of more than 60 days or (ii) the amount,
applicability or validity of which are being contested in good faith
and by appropriate proceedings diligently conducted and with respect
to which Holdings or any of its Subsidiaries, as the case may be, has
established reserves in accordance with GAAP; (c) pledges or deposits
to secure obligations under workers' compensation laws or similar
legislation or to secure public or statutory obligations; (d) Liens
securing the performance of, or payment in respect of, bids, tenders,
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government contracts (other than for the repayment of borrowed
money), surety and appeal bonds and other obligations of a similar
nature incurred in the ordinary course of business; (e) any interest
or title of a lessor or sublessor and any restriction or encumbrance
to which the interest or title of such lessor or sublessor may be
subject that is incurred in the ordinary course of business and,
either individually or when aggregated with all other Permitted Liens
in effect on any date of determination, could not be reasonably
expected to have a Material Adverse Effect; (f) Liens in favor of
customs and revenue authorities arising as a matter of law or
pursuant to a bond to secure payment of customs duties in connection
with the importation of goods; (g) Liens arising out of judgments or
awards that do not constitute an Event of Default under Section
6.01(g) or 6.01(h); and (h) Permitted Encumbrances and other
easements, rights-of-way and other encumbrances on title to real
property that do not render title to the property encumbered thereby
unmarketable or materially adversely affect the use of such property
for its present purposes or materially interfere with the ordinary
course of business of the Purchaser or any of its Subsidiaries.
"Person" means an individual, partnership, corporation
(including a business trust), limited liability company, unlimited
liability company, joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any
political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer
Plan.
"Preferred Interests" means, with respect to any Person,
Equity Interests issued by such Person that are entitled to a
preference or priority over any other Equity Interests issued by such
Person upon any distribution of such Person's property and assets,
whether by dividend or upon liquidation.
"Prepayment Amount" has the meaning specified in Section
2.06(c).
"Prepayment Date" has the meaning specified in Section
2.06(c).
"primary obligation" has the meaning specified in the
definition of "Contingent Obligation" set forth in this Section 1.01.
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"primary obligor" has the meaning specified in the
definition of "Contingent Obligations" set forth in this Section
1.01.
"Pro Rata Share" of any amount means, with respect to any
Lender at any time, the product of (a) a fraction the numerator of
which is the amount of such Lender's Commitment under the applicable
Facility or Facilities at such time and the denominator of which is
the aggregate amount of such Facility or Facilities at such time
multiplied by (b) such amount.
"Purchaser" has the meaning specified in the recital of
parties to this Agreement.
"Redeemable" means, with respect to any Equity Interest,
Debt or other right or Obligation, any such Equity Interest, Debt or
other right or Obligation that (a) the issuer has undertaken to
redeem at a fixed or determinable date or dates, whether by operation
of a sinking fund or otherwise, or upon the occurrence of a condition
not solely within the control of the issuer or (b) is redeemable at
the option of the holder.
"Reduction Amount" has the meaning specified in
Section 2.06(b)(vi).
"Register" has the meaning specified in Section 9.07(d).
"Regulation U" means Regulation U of the Board of Governors
of the Federal Reserve System as in effect from time to time.
"Related Documents" means the Merger Agreement and the
Holdings Debt Documents.
"Repurchase Payments" means all payments made by the
Borrower to purchase or redeem the Senior Notes (whether through a
tender offer, open market purchases or pursuant to the terms of the
Senior Note Indenture).
"Required Lenders" means, at any time, Lenders owed or
holding at least a majority in interest of the sum of (a) the
aggregate principal amount of the Advances outstanding at such time,
(b) the aggregate Available Amount of all Letters of Credit
outstanding at such time, (c) the aggregate Unused Term A Commitments
at such time, (d) the aggregate Unused Term B Commitments at such
time and (e) the aggregate Unused Working Capital Commitments at such
time; provided, however, that if any Lender shall be a Defaulting
Lender at such time, there shall be excluded from the determination
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of Required Lenders at such time (A) the aggregate principal amount
of the Advances owing to such Lender (in its capacity as a Lender)
and outstanding at such time, (B) such Lender's Pro Rata Share of the
aggregate Available Amount of all Letters of Credit issued by such
Lender and outstanding at such time, (C) the aggregate Unused Term A
Commitments of such Lender at such time, (D) the aggregate Unused
Term B Commitments at such time and (E) the Unused Working Capital
Commitment of such Lender at such time. For purposes of this
definition, the aggregate principal amount of Swing Line Advances
owing to any Swing Line Bank, the aggregate principal amount of
Letter of Credit Advances owing to the Issuing Bank and the Available
Amount of each Letter of Credit shall be considered to be owed to the
Working Capital Lenders ratably in accordance with their respective
Working Capital Commitments.
"Required Principal Payments" means, with respect to any
Person for any period, the sum of all regularly scheduled principal
payments or redemptions and all required prepayments, repurchases,
redemptions or similar acquisitions for value of outstanding Funded
Debt made during such period.
"Requirements of Law" means, with respect to any Person, all
laws, constitutions, statutes, treaties, ordinances, rules and
regulations, all orders, writs, decrees, injunctions, judgments,
determinations or awards of an arbitrator, a court or any other
Governmental Authority, and all Governmental Authorizations, binding
upon or applicable to such Person or to any of its properties, assets
or businesses.
"Responsible Officer" means, with respect to Holdings or any
of its Subsidiaries, the chief executive officer, the president, the
chief financial officer, the principal accounting officer or the
treasurer (or the equivalent of any of the foregoing) or any other
officer, partner or member (or person performing similar functions)
of Holdings or any such Subsidiary responsible for overseeing the
administration of, or reviewing compliance with, all or any portion
of this Agreement or any of the other Loan Documents.
"Secured Obligations" has the meaning specified in the
Security Agreement.
"Secured Parties" means, collectively, the Agents, the
Lender Parties and the Hedge Banks.
"Security Agreement" has the meaning specified in
Section 3.01(j)(viii).
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"Security Agreement Supplement" has the meaning specified in
Section 20(b) of the Security Agreement.
"Senior Note Indenture" means the Indenture dated as of
August 3, 1995 among the Borrower, Megas Beauty Care, Inc., Absorbent
Cotton Company, The Hewitt Soap Company, Inc. and Shawmut Bank
Connecticut, National Association, as trustee, in respect of the
Senior Notes.
"Senior Notes" means the 9 7/8% Senior Notes due 2005 issued
by the Borrower.
"Single Employer Plan" means a single employer plan (as
defined in Section 4001(a)(15) of ERISA) that (a) is maintained for
employees of any Loan Party or any ERISA Affiliate and no Person
other than the Loan Parties and the ERISA Affiliates or (b) was so
maintained and in respect of which any Loan Party or any ERISA
Affiliate could have liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated.
"Solvent" and "Solvency" mean, with respect to any Person on
a particular date, that on such date (a) the fair value of the
property of such Person is greater than the total amount of
liabilities, including, without limitation, contingent liabilities,
of such Person, (b) the present fair salable value of the assets of
such Person is not less than the amount that will be required to pay
the probable liability of such Person on its debts as they become
absolute and matured, (c) such Person does not intend to, and does
not believe that it will, incur debts or liabilities beyond such
Person's ability to pay such debts and liabilities as they mature and
(d) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such
Person's property would constitute an unreasonably small capital.
The amount of contingent liabilities at any time shall be computed as
the amount that, in the light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be
expected to become an actual or matured liability.
"Specified Employment Agreement" means the employment
agreement in respect of Jim Murphy.
"Standby Letter of Credit" means any Letter of Credit issued
under the Letter of Credit Facility, other than a Trade Letter of
Credit.
"Stock Tender Offer" has the meaning specified in the
Preliminary Statements to this Agreement.
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"Subordinated Debt" means the Subordinated Notes and any
other Debt of the Borrower that is subordinated to the Obligations of
the Loan Parties under the Loan Documents on, and that otherwise
contains, terms and conditions satisfactory to the Required Lenders.
"Subordinated Debt Documents" means the Subordinated Notes
and all other agreements, instruments and other documents pursuant to
which the Subordinated Notes and any other Subordinated Debt will be
issued or otherwise setting forth the terms of the Subordinated Notes
or such other Subordinated Debt, as the case may be, in each case as
such agreement, instrument or other document may be amended,
supplemented or otherwise modified from time to time in accordance
with the terms thereof, but to the extent permitted under the terms
of the Loan Documents.
"Subordinated Notes" means the subordinated notes to be
issued by the Borrower in an aggregate principal amount of at least
$100,000,000 with a maturity of not less than one year after the
final stated maturity of the Advances and having terms and conditions
not materially less favorable to the interests of the Lenders than
those set forth in Exhibit K.
"Subsidiary" of any Person means any corporation,
partnership, joint venture, limited liability company, unlimited
liability company, trust or estate of which (or in which) more than
50% of (a) the issued and outstanding shares of capital stock having
ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether at the time capital
stock of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency),
(b) the interest in the capital or profits of such partnership, joint
venture, limited liability company or unlimited liability company or
(c) the beneficial interest in such trust or estate, is at the time
directly or indirectly owned or controlled by such Person, by such
Person and one or more of its other Subsidiaries or by one or more of
such Person's other Subsidiaries.
"Subsidiary Guaranty" has the meaning specified in
Section 3.01(j)(ix).
"Surviving Corporation" has the meaning specified in the
Preliminary Statements to this Agreement.
"Surviving Debt" has the meaning specified in
Section 3.01(e).
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"Swing Line Advance" means an advance made by (a) the Swing
Line Bank pursuant to Section 2.01(e) or (b) any Working Capital
Lender pursuant to Section 2.02(b).
"Swing Line Bank" means NationsBank.
"Swing Line Borrowing" means a borrowing consisting of a
Swing Line Advance made by the Swing Line Bank pursuant to Section
2.01(e) or the Working Capital Lenders pursuant to Section 2.02(b).
"Swing Line Facility" has the meaning specified in Section
2.01(e).
"Syndication Agent" has the meaning specified in the recital
of parties to this Agreement.
"Taxes" has the meaning specified in Section 2.12(a).
"Term A Advance" has the meaning specified in
Section 2.01(a).
"Term A Borrowing" means a borrowing consisting of
simultaneous Term A Advances of the same Type made by the Term A
Lenders.
"Term A Commitment" means, with respect to any Term A Lender
at any time, the amount set forth opposite such Lender's name on
Schedule I hereto under the caption "Term A Commitment" or, if such
Lender has entered into one or more Assignments and Acceptances, the
amount set forth for such Lender in the Register maintained by the
Administrative Agent pursuant to Section 9.07(d) as such Term A
Lender's "Term A Commitment", as such amount may be reduced at or
prior to such time pursuant to Section 2.05.
"Term A Facility" means, at any time, the aggregate Term A
Commitments of all Term A Lenders at such time.
"Term A Lender" means, at any time, any Lender that has a
Term A Commitment at such time.
"Term A Note" means a promissory note of the Purchaser or
the Borrower, as applicable, payable to the order of any Term A
Lender, in substantially the form of Exhibit A-1 hereto, evidencing
the indebtedness of the Purchaser or the Borrower, as the case may
be, to such Term A Lender resulting from the Term A Advance made by
such Term A Lender.
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"Term B Advance" has the meaning specified in Section
2.01(b).
"Term B Borrowing" means a borrowing consisting of
simultaneous Term B Advances of the same Type made by the Term B
Lenders.
"Term B Commitment" means, with respect to any Term B Lender
at any time, the amount set forth opposite such Lender's name on
Schedule I hereto under the caption "Term B Commitment" or, if such
Lender has entered into one or more Assignments and Acceptances, the
amount set forth for such Lender in the Register maintained by the
Administrative Agent pursuant to Section 9.07(d) as such Term B
Lender's "Term B Commitment", as such amount may be reduced at or
prior to such time pursuant to Section 2.05.
"Term B Commitment Fee" has the meaning specified in Section
2.08(a)(ii).
"Term B Facility" means, at any time, the aggregate Term B
Commitments of all Term B Lenders at such time.
"Term B Lender" means, at any time, any Lender that has a
Term B Commitment at such time.
"Term B Note" means a promissory note of the Purchaser or
the Borrower, as applicable, payable to the order of any Term B
Lender, in substantially the form of Exhibit A-2 hereto, evidencing
the indebtedness of the Purchaser or the Borrower, as the case maybe,
to such Term B Lender resulting from the Term B Advance made by such
Term B Lender.
"Term B Termination Date" means the earlier of (a) April 30,
2007 (or, if an aggregate principal amount of Senior Notes greater
than $20 million (or such greater amount as may be agreed by the
Required Lenders and the Facility Required Lenders for the Term B
Facility) remains outstanding on the first anniversary of the
consummation of the Stock Tender Offer, January 31, 2005) and (b) the
date of termination in whole of the Term B Commitments pursuant to
Section 2.05 or 6.01.
"Termination Date" means the earlier of (a) April 30, 2005
(or, if an aggregate principal amount of Senior Notes greater than
$20 million (or such greater amount as may be agreed by the Required
Lenders and the Facility Required Lenders for the Term A Facility)
remains outstanding on the first anniversary of the consummation of
the Stock Tender Offer, January 31, 2005) and (b) the date of
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termination in whole of the Term A Commitments, the Letter of Credit
Commitments and the Working Capital Commitments pursuant to
Section 2.05 or 6.01.
"Trade Letter of Credit" means any Letter of Credit that is
issued under the Letter of Credit Facility for the benefit of a
supplier of inventory to the Borrower or any of its Subsidiaries to
effect payment for such inventory.
"Transaction" means, collectively, (a) the organization of
Holdings and the issuance of all of the Equity Interests therein to
JWC and certain members of management of the Borrower, (b) the
consummation of the Stock Tender Offer and the Merger, (c) the
issuance and sale of the Subordinated Notes, (d) the entering into by
the Loan Parties and their applicable Subsidiaries of the Loan
Documents, the Related Documents and the Subordinated Debt Documents
to which they are or are intended to be a party, (e) the refinancing
of certain outstanding Debt of the Company and its Subsidiaries and
the termination of all commitments thereunder and (f) the payment of
the fees and expenses incurred in connection with the consummation of
the foregoing.
"Type" refers to the distinction between Advances bearing
interest at the Base Rate and Advances bearing interest at the
Eurodollar Rate.
"Unused Term A Commitment" means with respect to any Term A
Lender at any time, (a) such Term A Lender's Term A Commitment at
such time minus (b) the aggregate principal amount of all Term A
Advances made by such Term A Lender and outstanding at such time.
"Unused Term B Commitment" means, with respect to any Term B
Lender at any time, (a) such Term B Lender's Term B Commitment at
such time minus (b) the aggregate principal amount of all Term B
Advances made by such Term B Lender and outstanding at such time.
"Unused Working Capital Commitment" means, with respect to
any Working Capital Lender at any time, (a) such Working Capital
Lender's Working Capital Commitment at such time minus (b) the sum of
(i) the aggregate principal amount of all Working Capital Advances,
Swing Line Advances and Letter of Credit Advances made by such
Working Capital Lender (in its capacity as a Lender) and outstanding
at such time and (ii) such Lender's Pro Rata Share of (A) the
aggregate Available Amount of all Letters of Credit outstanding at
such time, (B) the aggregate principal amount of all Letter of Credit
Advances made by the Issuing Bank pursuant to Section 2.03(c) and
outstanding at such time and (C) the aggregate principal amount of
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all Swing Line Advances made by the Swing Line Bank pursuant to
Section 2.01(e).
"Voting Interests" means shares of capital stock issued by a
corporation, or equivalent Equity Interests in any other Person, the
holders of which are ordinarily, in the absence of contingencies,
entitled to vote for the election of directors (or persons performing
similar functions) of such Person, even if the right so to vote has
been suspended by the happening of such a contingency.
"Welfare Plan" means a welfare plan (as defined in
Section 3(1) of ERISA) that is maintained for employees of any Loan
Party or in respect of which any Loan Party could reasonably be
expected to have liability.
"Withdrawal Liability" has the meaning specified in Part I
of Subtitle E of Title IV of ERISA.
"Working Capital Advance" has the meaning specified in
Section 2.01(c).
"Working Capital Borrowing" means a borrowing consisting of
simultaneous Working Capital Advances of the same Type made by the
Working Capital Lenders.
"Working Capital Commitment" means, with respect to any
Working Capital Lender at any time, the amount set forth opposite
such Working Capital Lender's name on Schedule I hereto under the
caption "Working Capital Commitment" or, if such Working Capital
Lender has entered into one or more Assignments and Acceptances, the
amount set forth for such Working Capital Lender in the Register
maintained by the Administrative Agent pursuant to Section 9.07(d) as
such Working Capital Lender's "Working Capital Commitment", as such
amount may be reduced at or prior to such time pursuant to
Section 2.05.
"Working Capital/Term A Commitment Fee" has the meaning
specified in Section 2.08(a)(i).
"Working Capital Facility" means, at any time, the aggregate
amount of the Working Capital Lenders' Working Capital Commitments at
such time.
"Working Capital Lender" means, at any time, any Lender that
has a Working Capital Commitment at such time.
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"Working Capital Note" means a promissory note of the
Borrower payable to the order of any Working Capital Lender, in
substantially the form of Exhibit A-3 hereto, evidencing the
aggregate indebtedness of the Borrower to such Working Capital Lender
resulting from the Working Capital Advances made by such Working
Capital Lender.
"Year 2000 Problem" has the meaning specified in
Section 4.01(z).
SECTION 1.2. Computation of Time Periods; Other
Definitional Provisions. In this Agreement in the computation of periods of
time from a specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each mean "to but
excluding". References in the Loan Documents to any agreement or contract
"as amended" shall mean and be a reference to such agreement or contract as
amended, amended and restated, supplemented or otherwise modified from time
to time in accordance with its terms.
SECTION 1.3. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the
preparation of the Consolidated financial statements of the Borrower and its
Subsidiaries referred to in Section 4.01(f) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
SECTION 2.1. The Advances and the Letters of Credit. (a)
The Term A Advances. Each Term A Lender severally agrees, on the terms and
conditions hereinafter set forth, to make three advances to the Purchaser on
any Business Days during the period from the date hereof until the date of
the consummation of the Merger and a single advance to the Borrower on the
date of the consummation of the Stock Tender Offer (each such advance, a
"Term A Advance"), in each case in U.S. dollars and in an amount not to
exceed the Unused Term A Commitment of such Term A Lender at such time. Each
Term A Borrowing shall be in an aggregate amount of $2,500,000 (or, if less,
the remaining Unused Term A Commitments) or an integral multiple of $100,000
in excess thereof or, if less, the amount of the aggregate Unused Term A
Commitments at such time. Each Term A Borrowing shall consist of Term A
Advances made simultaneously by the Term A Lenders in accordance with their
respective Pro Rata Shares of the Term A Facility. Amounts borrowed under
this Section 2.01(a) and repaid or prepaid may not be reborrowed.
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(b) The Term B Advances. Each Term B Lender severally
agrees, on the terms and conditions hereinafter set forth, to make up to four
advances to the Borrower on any Business Day during the period from the date
hereof until October 23, 1999 (each such advance, a "Term B Advance"), in
each case in U.S. dollars and in an amount not to exceed the Unused Term B
Commitment of such Term B Lender at such time. Each Term B Borrowing shall
be in an aggregate amount of $2,500,000 (or, if less, the aggregate amount of
the Senior Notes put by the holders thereof pursuant to the provisions of
Section 3.08 of the Senior Note Indenture) or an integral multiple of
$100,000 in excess thereof (or, if less, either the amount of the aggregate
Unused Term B Commitments at such time or the aggregate amount of Working
Capital Advances outstanding on October 23, 1999 the proceeds of which were
used to fund Repurchase Payments). Each Term B Borrowing shall consist of
Term B Advances made simultaneously by the Term B Lenders in accordance with
their respective Pro Rata Shares of the Term B Facility. Amounts borrowed
under this Section 2.01(b) and repaid or prepaid may not be reborrowed. At
any time that the aggregate outstanding amount of Working Capital Advances
the proceeds of which were used to fund Repurchase Payments equals $5
million, the Borrower shall borrow under the Term B Facility to prepay in
full such Working Capital Advances. The Borrower shall also borrow under the
Term B Facility on October 23, 1999 to prepay in full the Working Capital
Advances outstanding on such date the proceeds of which were used to fund
Repurchase Payments.
(c) The Working Capital Advances. Each Working Capital
Lender severally agrees, on the terms and conditions hereinafter set forth,
to make advances (each a "Working Capital Advance") in U.S. dollars to the
Borrower from time to time on any Business Day during the period from the
date hereof until the Termination Date, in each case in an amount not to
exceed the Unused Working Capital Commitment of such Working Capital Lender
at such time; provided, however, that (i) prior to October 23, 1999, the
aggregate amount of Working Capital Advances the proceeds of which were used
to fund Repurchase Payments shall not exceed $5 million at any time
outstanding and (ii) thereafter, the proceeds of the Working Capital
Borrowing shall not be used to fund Repurchase Payments. Each Working
Capital Borrowing shall be in an aggregate amount of $1,000,000 or an
integral multiple of $100,000 in excess thereof (other than a Borrowing the
proceeds of which shall be used solely to repay or prepay in full outstanding
Swing Line Advances or outstanding Letter of Credit Advances) or, if less,
the amount of the aggregate Unused Working Capital Commitments at such time.
Each Working Capital Borrowing shall consist of Working Capital Advances made
simultaneously by the Working Capital Lenders in accordance with their
respective Pro Rata Shares of the Working Capital Facility. Within the
limits of each Working Capital Lender's Unused Working Capital Commitment in
effect from time to time, the Borrower may borrow under this Section 2.01(c),
prepay pursuant to Section 2.06(a) and reborrow under this Section 2.01(c).
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(d) Letters of Credit. (i) The Issuing Bank agrees, on
the terms and conditions hereinafter set forth, to issue letters of credit
(the "Letters of Credit") in U.S. dollars for the account of the Borrower
from time to time on any Business Day during the period from the date hereof
until 30 days before the scheduled Termination Date (i) in an Available
Amount for each such Letter of Credit not to exceed at any time the Issuing
Bank's unused Letter of Credit Commitment at such time and (ii) in an
aggregate Available Amount for all Letters of Credit not to exceed the lesser
of (A) the Letter of Credit Facility at such time and (B) the aggregate
Unused Working Capital Commitments of the Working Capital Lenders at such
time. No Trade Letter of Credit shall have an expiration date later than the
earlier of (1) 365 days after the issuance thereof and (5) five days prior to
the Termination Date. No Standby Letter of Credit shall have an expiration
date (including all rights of the Borrower or the beneficiary of such Standby
Letter of Credit to require renewal) later than one year after the date of
issuance thereof, but any such Standby Letter of Credit may by its terms be
renewable annually on the terms set forth in clause (ii) of this Section
2.01(d). Within the limits of the Letter of Credit Facility, and subject to
the limits referred to above, the Borrower may request the issuance of
Letters of Credit under this Section 2.01(d)(i), repay any Letter of Credit
Advances resulting from drawings thereunder pursuant to Section 2.03(c) and
request the issuance of additional Letters of Credit under this
Section 2.01(d)(i).
(ii) Each Standby Letter of Credit may by its terms be
renewable annually upon notice (a "Notice of Renewal") given to the Issuing
Bank and the Administrative Agent on or prior to any date for notice of
renewal set forth in such Letter of Credit but in any event at least three
Business Days prior to the date of the proposed renewal of such Standby
Letter of Credit and upon fulfillment of the applicable conditions set forth
in Article III unless a Default has occurred and is continuing and the
Issuing Bank has notified the Borrower (with a copy to the Administrative
Agent) on or prior to the date for notice of termination set forth in such
Letter of Credit but in any event at least 30 Business Days prior to the date
of automatic renewal of its election not to renew such Standby Letter of
Credit (a "Notice of Termination"); provided that the terms of each Standby
Letter of Credit that is automatically renewable annually (A) shall require
the Issuing Bank to give the beneficiary of such Standby Letter of Credit
notice of any Notice of Termination, (B) shall permit such beneficiary, upon
receipt of such notice, to draw under such Standby Letter of Credit prior to
the date such Standby Letter of Credit otherwise would have been
automatically renewed and (C) shall not permit the expiration date (after
giving effect to any renewal) of such Standby Letter of Credit in any event
to be extended to a date later than five days prior to the scheduled
Termination Date. If either a Notice of Renewal is not given by the Borrower
or a Notice of Termination is given by the Issuing Bank pursuant to the
immediately preceding sentence, such Standby Letter of Credit shall expire on
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the date on which it otherwise would have been automatically renewed;
provided, however, that in the absence of receipt of a Notice of Renewal the
Issuing Bank may in its discretion, unless instructed to the contrary by the
Administrative Agent or the Borrower deem that a Notice of Renewal had been
timely delivered and, in such case, a Notice of Renewal shall be deemed to
have been so delivered for all purposes under this Agreement. In addition,
unless otherwise agreed by the Issuing Bank, each Standby Letter of Credit
shall contain a provision authorizing the Issuing Bank to deliver to the
beneficiary of such Letter of Credit, upon the occurrence and during the
continuance of an Event of Default, a notice (a "Default Termination Notice")
terminating such Letter of Credit and giving such beneficiary 15 days to draw
such Letter of Credit.
(e) The Swing Line Advances. The Borrower may request
the Swing Line Bank to make, and the Swing Line Bank shall make, on the terms
and conditions hereinafter set forth, Swing Line Advances to the Borrower
from time to time on any Business Day during the period from the date hereof
until the Termination Date (i) in an aggregate amount not to exceed at any
time outstanding $5 million (the "Swing Line Facility") and (ii) in an amount
for each such Swing Line Borrowing not to exceed the aggregate of the Unused
Working Capital Commitments of the Working Capital Lenders at such time. No
Swing Line Advance shall be used for the purpose of funding the payment of
principal of any other Swing Line Advance. Each Swing Line Borrowing shall
be in an amount of $100,000 or an integral multiple of $50,000 in excess
thereof and shall be made as a Base Rate Advance. Within the limits of the
Swing Line Facility and within the limits referred to in clause (ii) above,
so long as any Swing Line Bank, in its sole discretion, elects to make Swing
Line Advances, the Borrower may borrow under this Section 2.01(e), repay
pursuant to Section 2.04(e) or prepay pursuant to Section 2.06(a) and
reborrow under this Section 2.01(e).
SECTION 2.2. Making the Advances. (a) Except as otherwise
provided in Section 2.02(b) or 2.03 or in respect of any Borrowing requested
to be made on the date of the Initial Extension of Credit, in which case
notice will be given on the date of the Initial Extension of Credit, each
Borrowing shall be made on notice, given not later than 12:00 noon
(Charlotte, North Carolina time) on the third Business Day prior to the date
of the proposed Borrowing in the case of a Borrowing consisting of Eurodollar
Rate Advances, or on the first Business Day prior to the date of the proposed
Borrowing in the case of a Borrowing comprised of Base Rate Advances, by the
Borrower or the Purchaser, as the case may be, to the Administrative Agent,
which shall give prompt notice thereof to each Appropriate Lender by telex or
telecopier. Each notice of a Borrowing (a "Notice of Borrowing") shall be by
telephone, confirmed immediately in writing, or by telex or telecopier, in
substantially the form of Exhibit B-1 hereto, shall be duly executed by a
Responsible Officer of the Borrower or the Purchaser, as the case may be, and
shall specify therein: (i) the requested date of such Borrowing (which shall
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be a Business Day); (ii) the Facility under which such Borrowing is requested
to be made; (iii) the Type of Advances requested to comprise such Borrowing;
(iv) the requested aggregate amount of such Borrowing; and (v) in the case of
a Borrowing comprised of Eurodollar Rate Advances, the requested duration of
the initial Interest Period for each such Advance. Each Appropriate Lender
shall, before 12:00 Noon (Charlotte, North Carolina time) on the date of such
Borrowing, make available for the account of its Applicable Lending Office to
the Administrative Agent at the Administrative Agent's Account, in same day
funds, such Lender's Pro Rata Share of such Borrowing. After the
Administrative Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article III, the Administrative Agent will
make such funds available to (i) in the case of the Borrower, the Borrower by
crediting the Borrower's Account and (ii) in the case of the Purchaser, the
Purchaser pursuant to the directions of the Purchaser; provided, however,
that, in the case of any Working Capital Borrowing, the Administrative Agent
shall first make a portion of such funds equal to the aggregate principal
amount of any Swing Line Advances and Letter of Credit Advances made by any
Swing Line Bank or the Issuing Bank, as the case may be, and by any Working
Capital Lender and outstanding on the date of such Working Capital Borrowing,
plus accrued and unpaid interest thereon to and as of such date, available to
such Swing Line Bank or the Issuing Bank, as the case may be, and such other
Working Capital Lenders for repayment of such Swing Line Advances and Letter
of Credit Advances.
(b) Each Swing Line Borrowing shall be made on notice,
given not later than 2:00 P.M. (Charlotte, North Carolina time) on the date
of the proposed Swing Line Borrowing, by the Borrower to the Swing Line Bank
and the Administrative Agent. Each such notice of a Swing Line Borrowing (a
"Notice of Swing Line Borrowing") shall be by telephone, confirmed
immediately in writing, or telex or telecopier, specifying therein the
requested (i) date of such Borrowing, (ii) amount of such Borrowing and
(iii) maturity of such Borrowing (which maturity shall be no later than the
seventh day after the requested date of such Borrowing). The Swing Line Bank
will make the amount of the requested Swing Line Advance available to the
Administrative Agent at the Administrative Agent's Account, in same day
funds. After the Administrative Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article III, the
Administrative Agent will make such funds available to the Borrower by
crediting the Borrower's Account. Upon written demand by the Swing Line
Bank, with a copy of such demand to the Administrative Agent, each other
Working Capital Lender shall purchase from the Swing Line Bank, and the Swing
Line Bank shall sell and assign to each such other Working Capital Lender,
such other Lender's Pro Rata Share of such outstanding Swing Line Advance as
of the date of such demand, by making available for the account of its
Applicable Lending Office to the Administrative Agent for the account of the
Swing Line Bank, by deposit to the Administrative Agent's Account, in same
day funds, an amount equal to the portion of the outstanding principal amount
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of such Swing Line Advance to be purchased by such Lender. The Borrower
hereby agrees to each such sale and assignment. Each Working Capital Lender
agrees to purchase its Pro Rata Share of an outstanding Swing Line Advance on
(i) the Business Day on which demand therefor is made by the Swing Line Bank,
provided that notice of such demand is given not later than 11:00 A.M.
(Charlotte, North Carolina time) on such Business Day or (ii) the first
Business Day next succeeding such demand if notice of such demand is given
after such time. Upon any such assignment by the Swing Line Bank to any
other Working Capital Lender of a portion of a Swing Line Advance, the Swing
Line Bank represents and warrants to such other Lender that the Swing Line
Bank is the legal and beneficial owner of such interest being assigned by it,
but makes no other representation or warranty and assumes no responsibility
with respect to such Swing Line Advance, the Loan Documents or any Loan
Party. If and to the extent that any Working Capital Lender shall not have
so made the amount of the Swing Line Advance available to the Administrative
Agent, such Working Capital Lender agrees to pay to the Administrative Agent
forthwith on demand such amount together with interest thereon, for each day
from the date of demand by the Swing Line Bank until the date such amount is
paid to the Administrative Agent, at the Federal Funds Rate. If such Lender
shall pay to the Administrative Agent such amount for the account of the
Swing Line Bank on any Business Day, such amount so paid in respect of
principal shall constitute a Swing Line Advance made by such Lender on such
Business Day for purposes of this Agreement, and the outstanding principal
amount of the Swing Line Advance shall be reduced by such amount on such
Business Day.
(c) Anything in subsection (a) of this Section 2.02 to
the contrary notwithstanding, neither the Borrower nor the Purchaser may
select Eurodollar Rate Advances (A) for the initial Borrowing hereunder, (B)
during the period from the date of this Agreement to such date as shall be
specified in its sole discretion by the Administrative Agent (in consultation
with the Co-Arrangers) in a written notice to the Borrower and the Lenders or
(C) for any Borrowing if the aggregate amount of such Borrowing is less than
$1,000,000 or if the obligation of the Appropriate Lenders to make Eurodollar
Rate Advances shall then be suspended pursuant to Section 2.09 or 2.10;
provided, however, that in respect of the initial Borrowing hereunder and the
period described in clause (B), the Borrower may select Eurodollar Rate
Advances so long as the Interest Period in respect of such Advances is 1 week
and the Borrower gives notice of such selection by 11:00 A.M. (Charlotte,
North Carolina time) on the date notice of such Borrowing is required to be
given. In addition, the Advances may not be outstanding as part of more than
ten separate Borrowings.
(d) Each Notice of Borrowing and Notice of Swing Line
Borrowing shall be irrevocable and binding on the Borrower or the Purchaser,
as the case may be. In the case of any Borrowing that the related Notice of
Borrowing specifies is to be comprised of Eurodollar Rate Advances, the
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Borrower or the Purchaser, as the case may be, shall indemnify each
Appropriate Lender against any loss, cost or expense incurred by such Lender
as a result of any failure to fulfill on or before the date specified in such
Notice of Borrowing for such Borrowing the applicable conditions set forth in
Article III, and if the Advance to be made by any Appropriate Lender as part
of such Borrowing, as a result of such failure, is not made on such date, the
Borrower or the Purchaser, as the case may be, will pay to the Administrative
Agent for such Appropriate Lender an amount equal to the present value
(calculated in accordance with this Section 2.02(d)) of interest for the
Interest Period specified in such Notice of Borrowing on the amount of such
Advance, at a rate per annum equal to the excess of (i) the Eurodollar Rate
that would have been in effect for such Interest Period over (ii) the
Eurodollar Rate applicable on the date of determination to a deemed Interest
Period ending on the last day of such Interest Period. The present value of
such additional interest shall be calculated by discounting the amount of
such interest for each day in the Interest Period specified in such Notice of
Borrowing from such day to the date of such repayment or termination at an
interest rate per annum determined pursuant to the immediately preceding
sentence, and by adding all such amounts for all such days during such
period. The determination by the Administrative Agent of such amount of
interest shall be conclusive and binding, absent manifest error.
(e) Unless the Administrative Agent shall have received
notice from an Appropriate Lender prior to the date of any Borrowing under a
Facility under which such Lender has a Commitment that such Lender will not
make available to the Administrative Agent such Lender's Pro Rata Share of
such Borrowing, the Administrative Agent may assume that such Lender has made
the amount of such Pro Rata Share available to the Administrative Agent on
the date of such Borrowing in accordance with subsection (a) of this
Section 2.02, and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding
amount. If and to the extent that such Lender shall not have so made the
amount of such Pro Rata Share available to the Administrative Agent, such
Lender and the Borrower severally agree to repay or to pay to the
Administrative Agent forthwith on demand such corresponding amount, together
with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid or paid to the
Administrative Agent, at (i) in the case of the Borrower, the interest rate
applicable at such time under Section 2.07 to Advances comprising such
Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If
such Lender shall pay to the Administrative Agent such corresponding amount,
such amount so paid shall constitute such Lender's Advance as part of such
Borrowing for all purposes under this Agreement.
(f) The failure of any Lender to make the Advance to be
made by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Advance on the date of such
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Borrowing, but no Lender shall be responsible for the failure of any other
Lender to make the Advance to be made by such other Lender on the date of any
Borrowing.
SECTION 2.3. Issuance of and Drawings and Reimbursement
Under Letters of Credit. (a) Request for Issuance. Each Letter of Credit
shall be issued upon notice, given not later than 12:00 Noon (Charlotte,
North Carolina time) on the third Business Day prior to the date of the
proposed issuance of such Letter of Credit (or such later day and time as the
Issuing Bank in its sole discretion shall agree), by the Borrower to the
Issuing Bank, which shall give to the Administrative Agent and each Working
Capital Lender prompt notice thereof by telex or telecopier. Each notice of
issuance of a Letter of Credit (a "Notice of Issuance") shall be by
telephone, confirmed immediately in writing, or by telex or telecopier, shall
be duly executed by a Responsible Officer of the Borrower, and shall specify
therein: (i) the requested date of such issuance (which shall be a Business
Day); (ii) the requested Available Amount of such Letter of Credit; (iii) the
requested expiration date of such Letter of Credit (which shall comply with
the requirements of Section 2.01(d)); (iv) the name and address of the
proposed beneficiary of such Letter of Credit; and (v) the proposed form of
such Letter of Credit, and shall be accompanied by such application and
agreement for letters of credit as the Issuing Bank may specify to the
Borrower for use in connection with such requested Letter of Credit (a
"Letter of Credit Agreement"). If the requested form of such Letter of
Credit is acceptable to the Issuing Bank in its sole discretion, the Issuing
Bank will, upon fulfillment of the applicable conditions set forth in
Article III, make such Letter of Credit available to the Borrower at its
office referred to in Section 9.02 or as otherwise agreed with the Borrower
in connection with the issuance of such Letter of Credit. If and to the
extent that the provisions of any Letter of Credit Agreement shall conflict
with this Agreement, the provisions of this Agreement shall govern.
(b) Letter of Credit Reports. The Issuing Bank shall
furnish (i) to the Administrative Agent and each Working Capital Lender on
the first Business Day of each calendar quarter a written report summarizing
issuance and expiration dates of Letters of Credit issued during the
immediately preceding calendar quarter and drawings during such calendar
quarter under each such Letter of Credit and (ii) the Administrative Agent
and each Working Capital Lender on the first Business Day of each calendar
quarter a written report setting forth the average daily aggregate Available
Amount during the immediately preceding calendar quarter of all Letters of
Credit.
(c) Drawing and Reimbursement. (i) The payment by the
Issuing Bank of a draft drawn under any Letter of Credit shall constitute for
all purposes of this Agreement the making by the Issuing Bank of a Letter of
Credit Advance, which shall be a Base Rate Advance, in the amount of such
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draft. Upon demand by the Issuing Bank, with a copy of such demand to the
Administrative Agent, each Working Capital Lender shall purchase from the
Issuing Bank, and the Issuing Bank shall sell and assign to each such Working
Capital Lender, such Lender's Pro Rata Share of such outstanding Letter of
Credit Advance as of the date of such purchase, by making available for the
account of its Applicable Lending Office to the Administrative Agent for the
account of the Issuing Bank, at the Administrative Agent's Account, in same
day funds, an amount equal to the portion of the outstanding principal amount
of such Letter of Credit Advance to be purchased by such Lender. Promptly
after receipt thereof, the Administrative Agent shall transfer such funds to
the Issuing Bank. The Borrower hereby agrees to each such sale and
assignment. Each Working Capital Lender agrees to purchase its Pro Rata
Share of an outstanding Letter of Credit Advance on (A) the Business Day on
which demand therefor is made by the Issuing Bank so long as notice of such
demand is given not later than 11:00 A.M. (Charlotte, North Carolina time) on
such Business Day or (B) the first Business Day next succeeding such demand
if notice of such demand is given after such time. Upon any such assignment
by the Issuing Bank to any other Working Capital Lender of a portion of a
Letter of Credit Advance, the Issuing Bank represents and warrants to such
other Lender that the Issuing Bank is the legal and beneficial owner of such
interest being assigned by it, free and clear of any Liens, but makes no
other representation or warranty and assumes no responsibility with respect
to such Letter of Credit Advance, the Loan Documents or any Loan Party. If
and to the extent that any Working Capital Lender shall not have so made the
amount of such Letter of Credit Advance available to the Administrative
Agent, such Working Capital Lender agrees to pay to the Administrative Agent
forthwith on demand such amount, together with interest thereon, for each day
from the date of demand by the Issuing Bank until the date such amount is
paid to the Administrative Agent, at the Federal Funds Rate, for its account
or the account of the Issuing Bank, as applicable. If such Working Capital
Lender shall pay to the Administrative Agent such amount for the account of
the Issuing Bank on any Business Day, such amount so paid in respect of
principal shall constitute a Letter of Credit Advance made by such Working
Capital Lender on such Business Day for all purposes of this Agreement, and
the outstanding principal amount of the Letter of Credit Advance made by the
Issuing Bank shall be reduced by such amount on such Business Day.
(ii) The Obligation of each Working Capital Lender to
purchase its Pro Rata Share of each outstanding Letter of Credit Advance upon
demand by the Issuing Bank therefor pursuant to clause (i) of this Section
2.03(c) shall be absolute, unconditional and irrevocable, and shall be made
strictly in accordance with the terms of clause (i) of this Section 2.03(c)
under all circumstances, including, without limitation, the following
circumstances:
(A) any lack of validity or enforceability of any Loan
Document, any Letter of Credit Agreement, any Letter of Credit or any
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other agreement or instrument relating thereto (collectively, the
"L/C Related Documents");
(B) the existence of any claim, set-off, defense or
other right that such Working Capital Lender may have at any time
against any beneficiary or any transferee of a Letter of Credit (or
any Person for whom any such beneficiary or any such transferee may
be acting), the Issuing Bank, the Borrower or any other Person,
whether in connection with the transactions contemplated by the L/C
Related Documents or any unrelated transaction;
(C) the occurrence and continuance of any Default or
Event of Default; or
(D) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing.
(d) Failure to Make Letter of Credit Advances. The
failure of any Working Capital Lender to make the Letter of Credit Advance to
be made by it on the date specified in Section 2.03(c) shall not relieve any
other Working Capital Lender of its obligation hereunder to make its Letter
of Credit Advance on such date, but no Working Capital Lender shall be
responsible for the failure of any other Working Capital Lender to make the
Letter of Credit Advance to be made by such other Working Capital Lender on
such date.
SECTION 2.4. Repayment of Advances. (a) Term A Advances.
In the event that an aggregate principal amount of Senior Notes equal to or
less than $20 million remains outstanding on the first anniversary of the
consummation of the Stock Tender Offer, the Borrower shall repay to the
Administrative Agent for the ratable account of the Term A Lenders the
aggregate principal amount of all Term A Advances outstanding on the
following dates in an amount for each such date equal to the respective
percentage set forth opposite such date of the aggregate Term A Commitments
on the date hereof (which amounts shall be reduced as a result of the
application of prepayments in accordance with the order of priority set forth
in Section 2.05):
Date Percentage
January 31, 2000 2.000%
April 30, 2000 2.000%
July 31, 2000 2.000%
October 31, 2000 2.000%
January 31, 2001 2.000%
April 30, 2001 2.000%
July 31, 2001 5.500%
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October 31, 2001 5.500%
January 31, 2002 5.500%
April 30, 2002 5.500%
July 31, 2002 5.500%
October 31, 2002 5.500%
January 31, 2003 5.500%
April 30, 2003 5.500%
July 31, 2003 5.500%
October 31, 2003 5.500%
January 31, 2004 5.500%
April 30, 2004 5.500%
July 31, 2004 5.500%
October 31, 2004 5.500%
January 31, 2005 5.500%
April 30, 2005 5.500%
provided, however, that if the Subordinated Notes are issued on or prior to
January 31, 2000, the principal payment required to be paid on January 31,
2000 shall instead be paid on April 30, 2005; provided further that the final
principal repayment installment of the Term A Advances shall be repaid on the
Termination Date and in any event shall be in an amount equal to the
aggregate principal amount of all Term A Advances outstanding on such date.
In the event that an aggregate principal amount of Senior
Notes greater than $20 million remains outstanding on the first anniversary
of the consummation of the Stock Tender Offer, the Borrower shall repay to
the Administrative Agent for the ratable account of the Term A Lenders the
aggregate principal amount of all Term A Advances outstanding on the
following dates in an amount for each such date equal to the respective
amounts set forth opposite such dates of the aggregate Term A Commitments on
the date hereof (which amounts shall be reduced as a result of the
application of prepayments in accordance with the order of priority set forth
in Section 2.05):
Date Percentage
January 31, 2000 2.0000%
April 30, 2000 2.0000%
July 31, 2000 3.5000%
October 31, 2000 3.5000%
January 31, 2001 3.5000%
April 30, 2001 3.5000%
July 31, 2001 5.0000%
October 31, 2001 5.0000%
January 31, 2002 5.0000%
April 30, 2002 5.0000%
July 31, 2002 5.5000%
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October 31, 2002 5.5000%
January 31, 2003 5.5000%
April 30, 2003 5.5000%
July 31, 2003 5.7500%
October 31, 2003 5.7500%
January 31, 2004 5.7500%
April 30, 2004 5.7500%
July 31, 2004 5.6667%
October 31, 2004 5.6667%
January 31, 2005 5.6667%
provided, however, that the final principal repayment installment of the Term
A Advances shall be repaid on the Termination Date and in any event shall be
in an amount equal to the aggregate amount of all Term A Advances outstanding
on such date.
(b) Term B Advances. In the event that an aggregate
principal amount of Senior Notes equal to or less than $20 million remains
outstanding on the first anniversary of the consummation of the Stock Tender
Offer, the Borrower shall repay to the Administrative Agent for the ratable
account of the Term B Lenders the aggregate principal amount of all Term B
Advances outstanding on the following dates in an amount for each such date
equal to the respective percentage set forth opposite such date of the
aggregate Term B Commitments on the date hereof (which amounts shall be
reduced as a result of the application of prepayments in accordance with the
order of priority set forth in Section 2.05):
Date Percentage
January 31, 2000 0.2500%
April 30, 2000 0.2500%
July 31, 2000 0.2500%
October 31, 2000 0.2500%
January 31, 2001 0.2500%
April 30, 2001 0.2500%
July 31, 2001 0.2500%
October 31, 2001 0.2500%
January 31, 2002 0.2500%
April 30, 2002 0.2500%
July 31, 2002 0.2500%
October 31, 2002 0.2500%
January 31, 2003 0.2500%
April 30, 2003 0.2500%
July 31, 2003 0.2500%
October 31, 2003 0.2500%
January 31, 2004 0.2500%
April 30, 2004 0.2500%
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July 31, 2004 0.2500%
October 31, 2004 0.2500%
January 31, 2005 0.2500%
April 30, 2005 0.2500%
July 31, 2005 0.2500%
October 31, 2005 0.2500%
January 31, 2006 0.2500%
April 30, 2006 46.5000%
April 30, 2007 47.2500%
provided, however, that if the Subordinated Notes are issued on or prior to
January 31, 2000, the principal payment required to be paid on January 31,
2000 shall instead be paid on April 30, 2007; provided further that the final
principal repayment installment of the Term B Advances shall be repaid on the
Term B Termination Date and in any event shall be in an amount equal to the
aggregate principal amount of all Term B Advances outstanding on such date.
In the event that an aggregate principal amount of Senior
Notes greater than $20 million remains outstanding on the first anniversary
of the consummation of the Stock Tender Offer, the Borrower shall repay to
the Administrative Agent for the ratable account of the Term B Lenders the
aggregate principal amount of all Term B Advances outstanding on the
following dates in the respective percentage set forth opposite such date of
the aggregate Term B Commitments on the date hereof (which amounts shall be
reduced as a result of the application of prepayments in accordance with the
order of priority set forth in Section 2.05):
Date Percentage
January 31, 2000 0.2500%
April 30, 2000 0.2500%
July 31, 2000 0.2500%
October 31, 2000 0.2500%
January 31, 2001 0.2500%
April 30, 2001 0.2500%
July 31, 2001 0.2500%
October 31, 2001 0.2500%
January 31, 2002 0.2500%
April 30, 2002 0.2500%
July 31, 2002 0.2500%
October 31, 2002 0.2500%
January 31, 2003 0.2500%
April 30, 2003 0.2500%
July 31, 2003 0.2500%
October 31, 2003 0.2500%
January 31, 2004 0.2500%
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April 30, 2004 0.2500%
July 31, 2004 0.2500%
October 31, 2004 0.2500%
January 31, 2005 95.000%
provided, however, that the final principal repayment installment of the Term
B Advances shall be repaid on the Term B Termination Date and in any event
shall be in an amount equal to the aggregate principal amount of all Term B
Advances outstanding on such date.
(c) Working Capital Advances. The Borrower shall repay
to the Administrative Agent for the ratable account of the Working Capital
Lenders on the Termination Date the aggregate principal amount of all Working
Capital Advances outstanding on such date.
(d) Letter of Credit Advances. (i) The Borrower shall
repay to the Administrative Agent for the account of the Issuing Bank and
each Working Capital Lender that has made a Letter of Credit Advance the
principal amount of each Letter of Credit Advance made by it and outstanding
on the earlier of (A) three Business Days' following the date of demand
therefor and (B) the Termination Date.
(ii) The Obligations of the Borrower under this
Agreement, any Letter of Credit Agreement and any other agreement or
instrument relating to any Letter of Credit shall be absolute, unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of
this Agreement, such Letter of Credit Agreement or such other agreement or
instrument under all circumstances, including, without limitation, the
following circumstances (it being understood that any such payment by the
Borrower is without prejudice to, and does not constitute a waiver of, any
rights the Borrower might have or might acquire as a result of the payment by
the Issuing Bank of any draft drawn or the reimbursement by the Borrower
thereof):
(A) any lack of validity or enforceability of any L/C
Related Document;
(B) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations of the
Borrower in respect of any L/C Related Document or any other
amendment or waiver of or any consent to departure from all or any of
the L/C Related Documents;
(C) the existence of any claim, set-off, defense or
other right that the Borrower may have at any time against any
beneficiary or any transferee of a Letter of Credit (or any Person
for whom any such beneficiary or any such transferee may be acting),
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the Issuing Bank or any other Person, whether in connection with the
transactions contemplated by the L/C Related Documents or any
unrelated transaction;
(D) any statement or any other document presented under
a Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(E) payment by the Issuing Bank under a Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of such Letter of Credit;
(F) any exchange, release or nonperfection of any
Collateral or other collateral, or any release or amendment or waiver
of or consent to departure from the Subsidiary Guaranty or any other
guarantee, for all or any of the Obligations of the Borrower in
respect of the L/C Related Documents; or
(G) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including, without
limitation, any other circumstance that might otherwise constitute a
defense available to, or a discharge of, the Borrower or a guarantor;
except, in each case, to the extent resulting from the gross negligence or
willful misconduct of the Issuing Bank.
(e) Swing Line Advances. The Borrower shall repay to
the Administrative Agent for the account of the Swing Line Bank and each
other Working Capital Lender that has made a Swing Line Advance the
outstanding principal amount of each Swing Line Advance made by each of them
on the earlier of the maturity date specified in the applicable Notice of
Swing Line Borrowing (which maturity shall be no later than the seventh day
after the requested date of such Borrowing) and the Termination Date.
SECTION 2.5. Termination or Reduction of the Commitments.
(a) Optional. The Borrower may, upon at least three Business Days' notice
to the Administrative Agent, terminate in whole or reduce in part the unused
portions of the Term A Commitments, the Unused Term B Commitments, the Letter
of Credit Facility or the Unused Working Capital Commitments; provided,
however, that each partial reduction of a Facility shall be in an aggregate
amount of $1,000,000 or an integral multiple of $500,000 in excess thereof
or, if less, the aggregate amount of such Facility. Each reduction of the
unused portion of the Commitments under either Term Facility pursuant to this
subsection (a) shall be applied to the principal repayment installments of
such Term Facility on a pro rata basis.
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(b) Mandatory. (i) The Term A Facility shall be
automatically and permanently reduced on the date of each Borrowing under the
Term A Facility (after giving effect to such Borrowing), and from time to
time thereafter upon each repayment or prepayment of the outstanding Advances
outstanding under such Term A Facility, by an amount equal to the amount by
which (A) the Term A Facility immediately prior to such reduction exceeds (B)
the aggregate principal amount of all Advances under the Term A Facility
outstanding at such time.
(ii) The Term B Facility shall be automatically and
permanently reduced on the date of each Borrowing under the Term B Facility
(after giving effect to such Borrowing), and from time to time thereafter
upon each repayment or prepayment of the outstanding Advances outstanding
under such Term B Facility, by an amount equal to the amount by which (A) the
Term B Facility immediately prior to such reduction exceeds (B) the aggregate
principal amount of all Advances under the Term B Facility outstanding at
such time.
(iii) The Working Capital Facility shall be automatically
and permanently reduced on each date on which the prepayment of Working
Capital Advances outstanding thereunder is required to be made pursuant to
Section 2.06(b)(i) or 2.06(b)(ii) by an amount equal to the applicable
Reduction Amount.
(iv) The Letter of Credit Facility shall be automatically
and permanently reduced on the date of each reduction in the Working Capital
Facility by an amount equal to the amount, if any, by which (A) the Letter of
Credit Facility on such date exceeds (B) the Working Capital Facility on such
date, after giving effect to such reduction of the Working Capital Facility.
(v) The Swing Line Facility shall be permanently reduced
from time to time on the date of each reduction in the Working Capital
Facility by the amount, if any, by which the amount of the Swing Line
Facility exceeds the Working Capital Facility after giving effect to such
reduction of the Working Capital Facility.
(vi) The Unused Term A Commitments shall be automatically
and permanently reduced to $0 on the date of the consummation of the Merger.
(vii) The Unused Term B Commitments shall be automatically
and permanently reduced to $0 on the earlier of (i) the six-month anniversary
of the date of the Initial Extension of Credit and (ii) the date on which JWC
or any of its Affiliates sells or otherwise transfers all or any portion of
the Holdings Debt to a Person other than JWC or any of its Affiliates.
(viii) Upon the issuance of the Subordinated Notes and
after giving effect to any Term B Borrowing on the date of such issuance, the
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Unused Term B Commitments shall be automatically and permanently reduced to
$0.
(c) Application of Commitment Reductions. Upon each
reduction of a Facility pursuant to this Section 2.05, the Commitment of each
Appropriate Lender under such Facility shall be reduced by such Lender's Pro
Rata Share of the amount by which such Facility is reduced.
SECTION 2.6. Prepayments. (a) Optional. The Borrower
may, upon notice received not later than 12:00 Noon (Charlotte, North
Carolina time) on (x) the date of such prepayment in the case of Base Rate
Advances and (y) on the third Business Day prior to the date of such
prepayment in the case of Eurodollar Rate Advances, in each case to the
Administrative Agent received not later than 12:00 noon (Charlotte, North
Carolina time) stating the proposed date and aggregate principal amount of
the prepayment, and if such notice is given the Borrower shall, prepay the
aggregate principal amount of the Advances comprising part of the same
Borrowing and outstanding on such date, in whole or ratably in part, together
with accrued interest to the date of such prepayment on the aggregate
principal amount prepaid; provided, however, that (i) each partial prepayment
shall be in an aggregate principal amount of $500,000 or an integral multiple
of $500,000 in excess thereof and (ii) if any such prepayment of a Eurodollar
Rate Advance is made on a date other than the last day of an Interest Period
therefor, the Borrower shall also pay any amounts owing in respect of such
Eurodollar Rate Advance pursuant to Section 9.04(c). Each prepayment of the
outstanding Advances under the Term Facilities pursuant to this subsection
(a) shall be applied ratably to each of the Term Facilities and to the
principal installments thereof, first, in order of maturity to the principal
installments that are due within the 12 months following the date of such
prepayment, and second, ratably to the remaining installments thereof.
(b) Mandatory. (i) The Borrower shall, on the earlier
of (A) the third Business Day following each date on which the Borrower
delivers to the Lender Parties the audited Consolidated financial statements
of the Borrower and its Subsidiaries pursuant to Section 5.03(d) and (B) 96
days after the end of each Fiscal Year, commencing with the Fiscal Year
ending December 31, 2000, prepay an aggregate principal amount of the
Advances comprising part of the same Borrowings equal to (x) at any time that
the Leverage Ratio is 3.25:1 or less, 50% and (y) at any other time, 75% of
the amount of Excess Cash Flow in excess of $1,000,000 for such Fiscal Year.
The Borrower shall also, on June 30th of each Fiscal Year prepay an aggregate
principal amount of the Advances comprising part of the same Borrowings equal
to (x) at any time that the Leverage Ratio is 3.25:1 or less, 50% and (y) at
any other time, 75% of the amount of any Capital Expenditures deducted in the
calculation of Excess Cash Flow for the preceding Fiscal Year and not
actually made on or prior to June 30 of such Fiscal Year. Each prepayment of
Advances pursuant to this clause (i) shall be applied, ratably to each Term
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Facility and to the principal repayment installments thereof, first, in order
of maturity to the principal installments that are due within the 12 months
following the date of such prepayment, and second, ratably to the remaining
installments thereof. Upon payment in full of the Term Facilities, each
prepayment of Advances pursuant to this clause (i) shall be applied to the
Working Capital Facility in the manner set forth in clause (v) of this
Section 2.06(b).
(ii) The Borrower shall, on the date of receipt of the
Net Cash Proceeds by Holdings or any of its Subsidiaries from (A) the sale,
transfer or other disposition of any property or assets of Holdings or any of
its Subsidiaries (other than any property or assets expressly permitted to be
sold, leased, transferred or otherwise disposed of pursuant to clause (i),
(ii), (iii), (v) or (vii) of Section 5.02(d)), (B) the incurrence or issuance
by Holdings or any of its Subsidiaries of any Debt (other than (x) the
Excluded Portion of the Net Cash Proceeds from the issuance of the
Subordinated Notes and (y) any other Debt expressly permitted to be incurred
or issued pursuant to Section 5.02(b) (other than the Subordinated Notes)),
(C) the issuance or sale by Holdings or any of its Subsidiaries of any Equity
Interests therein (other than to the Permitted Investors or to the management
of Holdings or any of its Subsidiaries and (D) any Extraordinary Receipt
received by or paid to or for the account of Holdings or any of its
Subsidiaries and not otherwise included in clause (A), (B) or (C) above,
prepay an aggregate principal amount of the Advances comprising part of the
same Borrowings equal to 100% of the amount of such Net Cash Proceeds. Each
prepayment of Advances pursuant to this clause (ii) shall be applied, first,
pro rata to each of the Term Facilities and to the principal repayment
installments thereof on a pro rata basis and, thereafter, to the Working
Capital Facility in the manner set forth in clause (vi) of this Section
2.06(b). For purposes of the pro rata application of the Net Cash Proceeds
from the issuance of the Subordinated Notes to the prepayment of the Term
Facilities, each of the Term A Facility and Term B Facility shall be deemed
to be fully drawn. The Borrower agrees that, to the extent necessary to make
such pro rata application, the Borrower shall make a Term B Borrowing and use
the proceeds of such Term B Borrowing to repay the Term A Advances.
"Excluded Portion" of the Net Cash Proceeds from the issuance of the
Subordinated Notes means (x) during the period from the date hereof through
the first anniversary of the date hereof any such Net Cash Proceeds in excess
of the Minimum Prepayment Amount but less than or equal to $100 million and
(y) thereafter, none of such Net Cash Proceeds.
(iii) The Borrower shall, on each Business Day, prepay an
aggregate principal amount of the Working Capital Advances comprising part of
the same Borrowings, the Swing Line Advances and the Letter of Credit
Advances equal to the amount by which (A) the sum of (1) the aggregate
principal amount of all Working Capital Advances, Swing Line Advances and
Letter of Credit Advances outstanding on such Business Day and (2) the
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aggregate Available Amount of all Letters of Credit outstanding on such
Business Day exceeds (B) the Working Capital Facility on such Business Day
(after giving effect to any permanent reduction thereof pursuant to Section
2.05 on such Business Day) on such Business Day.
(iv) The Borrower shall, on each Business Day, pay to the
Administrative Agent for deposit into the L/C Cash Collateral Account an
amount sufficient to cause the aggregate amount on deposit in the L/C Cash
Collateral Account on such Business Day to equal the amount by which (A) the
aggregate Available Amount of all Letters of Credit outstanding on such
Business Day exceeds (B) the Letter of Credit Facility on such Business Day
(after giving effect to any permanent reduction thereof pursuant to Section
2.05 on such Business Day).
(v) Prepayments of the Working Capital Facility made
pursuant to clause (i), (ii) or (iii) of this Section 2.06(b), first, shall
be applied to prepay Letter of Credit Advances outstanding at such time until
all such Letter of Credit Advances are paid in full, second, shall be applied
to prepay Swing Line Advances outstanding at such time until all such Swing
Line Advances are paid in full, third, shall be applied to prepay Working
Capital Advances comprising part of the same Borrowings and outstanding at
such time until all such Working Capital Advances are paid in full and,
fourth, shall be deposited into the L/C Cash Collateral Account to cash
collateralize 100% of the Available Amount of all Letters of Credit
outstanding at such time; and, in the case of prepayments of the Working
Capital Facility required pursuant to clause (i) or (ii) of Section 2.06(b),
the amount remaining, if any, after the prepayment in full of all such
Advances outstanding at such time and the 100% cash collateralization of the
aggregate Available Amount of all Letters of Credit outstanding at such time
(the sum of such prepayment amounts, cash collateralization amounts and
remaining amount being, collectively, the "Reduction Amount") may be retained
by the Borrower and the Working Capital Facility shall be automatically and
permanently reduced as set forth in Section 2.05(b)(iii). Upon the drawing
of any Letter of Credit for which funds are on deposit in the L/C Cash
Collateral Account, such funds shall be applied to reimburse the Issuing Bank
or the Working Capital Lenders, as applicable.
(c) Prepayments to Include Accrued Interest, Etc. All
prepayments under this Section 2.06 shall be made together with (i) accrued
and unpaid interest to the date of such prepayment on the principal amount so
prepaid and (ii) in the case of any such prepayment of a Eurodollar Rate
Advance on a date other than the last day of an Interest Period therefor, any
amounts owing in respect of such Eurodollar Rate Advance pursuant to Section
9.04(c).
(d) Term B Opt-Out. The Company, at its option, may, at
any time that there are Term A Advances outstanding, allow any Term B Lender,
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at its option, to elect not to accept any prepayment of the Term B Facility.
Upon receipt by the Administrative Agent of any such prepayment, the amount
of the prepayment that is available to prepay the Term B Advances shall be
deposited in the Cash Collateral Account (the "Prepayment Amount"), pending
application of such amount on the Prepayment Date as set forth below and
promptly after such receipt (the date of such receipt being the "Receipt
Date"), the Administrative Agent shall give written notice to the Term B
Lenders of the amount available to prepay the Term B Advances and the date on
which such prepayment shall be made (the "Prepayment Date"), which date shall
be 10 days after the Receipt Date. Any Lender declining such prepayment (a
"Declining Lender") shall given written notice to the Administrative Agent by
11:00 A.M. (Charlotte, North Carolina time) on the Business Day immediately
preceding the Prepayment Date. On the Prepayment Date, an amount equal to
that portion of the Prepayment Amount accepted by the Term B Lenders other
than the Declining Lenders (such Lenders being the "Accepting Lenders") to
prepay Term B Advances owing to such Accepting Lenders shall be withdrawn
from the Cash Collateral Account and applied to prepay Term Advances owing to
such Accepting Lenders on a pro rata basis. Any amounts that would otherwise
have been applied to prepay Advances under the Term B Facility owing to
Declining Lenders shall instead be applied (i) where the prepayment is made
under Section 2.06(a), (A) to the Borrower in such amount as the Borrower
elects by notice to the Administrative Agent and (B) to the extent of any
balance after payment to the Borrower pursuant to clause (A), ratably to
prepay the remaining Term A Advances as provided in Section 2.06(a) and (ii)
where the prepayment is made under Section 2.06(b), (A) to the Borrower in an
amount equal to 50% of the principal amount of such prepayment and (B)
ratably to prepay the remaining Term A Advances as provided in Section
2.06(b) in an amount equal to 50% of the principal amount of such prepayment;
provided further that on prepayment in full of the Term A Advances, the
remainder of any Prepayment Amount to be applied pursuant to clause (i)(B) or
(ii)(B) shall be applied ratably to prepay Term B Advances owing to Declining
Lenders.
SECTION 2.7. Interest. (a) Scheduled Interest. The
Purchaser and the Borrower, as applicable, shall pay interest on the unpaid
principal amount of each Advance owing to each Lender Party from the date of
such Advance until such principal amount shall be paid in full, at the
following rates per annum:
(i) Base Rate Advances. During such periods as such
Advance is a Base Rate Advance, a rate per annum equal at all times
to the sum of (A) the Base Rate in effect from time to time and
(B) the Applicable Margin for such Advance in effect from time to
time, payable in arrears quarterly on the last Business Day of each
March, June, September and December during such periods, commencing
June 30, 1999, and on the date such Base Rate Advance shall be
Converted or paid in full.
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(ii) Eurodollar Rate Advances. During such periods as
such Advance is a Eurodollar Rate Advance, a rate per annum equal at
all times during each Interest Period for such Advance to the sum of
(A) the Eurodollar Rate for such Advance for such Interest Period and
(B) the Applicable Margin for such Advance in effect on the first day
of such Interest Period, payable in arrears on the last day of such
Interest Period and, if such Interest Period has a duration of more
than three months, on each day that occurs during such Interest
Period every three months from the first day of such Interest Period
and on the date such Eurodollar Rate Advance shall be Converted or
paid in full.
(b) Default Interest. Upon the occurrence and during
the continuance of a Default under Section 6.01(a) or 6.01(f), the Purchaser
and the Borrower shall pay interest on (i) the unpaid principal amount of
each Advance owing to each Lender Party, payable in arrears on the dates
referred to in clause (i) or (ii) of Section 2.07(a), as applicable, and on
demand, at a rate per annum equal at all times to 2% per annum above the rate
per annum required to be paid on such Advance pursuant to clause (i) or (ii)
of Section 2.07(a), as applicable, and (ii) to the fullest extent permitted
by applicable law, the amount of any interest, fee or other amount payable
under this Agreement or any other Loan Document to any Agent or any Lender
Party that is not paid when due, from the date such amount shall be due until
such amount shall be paid in full, payable in arrears on the date such amount
shall be paid in full and on demand, at a rate per annum equal at all times
to 2% per annum above the rate per annum required to be paid, in the case of
interest, on the Type of Advance on which such interest has accrued pursuant
to clause (i) or (ii) of Section 2.07(a), as applicable, and, in all other
cases, on Base Rate Advances pursuant to clause (i) of Section 2.07(a).
(c) Notice of Interest Rate. Promptly after receipt of
a Notice of Borrowing pursuant to Section 2.02(a), the Administrative Agent
shall give notice to the Purchaser and the Borrower and each Appropriate
Lender of the applicable interest rate determined by the Administrative Agent
for purposes of clause (i) or (ii) of Section 2.07(a), as applicable.
SECTION 2.8. Fees. (a) Commitment Fees. (i) The
Borrower shall pay to the Administrative Agent for the account of the Lenders
a commitment fee (the "Working Capital/Term A Commitment Fee"), from the date
hereof in the case of each Initial Lender and from the effective date
specified in the Assignment and Acceptance pursuant to which it became a
Lender in the case of each other Lender until, in each case, the Termination
Date, payable in arrears quarterly on the last Business Day of each March,
June, September and December, commencing June 30, 1999, and on the
Termination Date, at the Commitment Fee Percentage on the sum of the average
daily Unused Working Capital Commitment of each Working Capital Lender plus
the Pro Rata Share of each Working Capital Lender of the average daily
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outstanding Swing Line Advances during such quarter plus the average daily
Unused Term A Commitments of each Term A Lender; provided, however, that
notwithstanding the foregoing, the Swing Line Bank shall receive the Working
Capital/Term A Commitment Fee on an amount equal to the excess of (x) the
amount determined pursuant to the foregoing calculation over (y) the average
daily outstanding Swing Line Advances during such quarter; provided, further
that no Working Capital/Term A Commitment Fee shall accrue on any of the
Working Capital Commitments of a Defaulting Lender so long as such Lender
shall be a Defaulting Lender.
(ii) The Borrower shall pay to the Administrative Agent
for the account of the Lenders a commitment fee (the "Term B Commitment Fee")
from the date hereof in the case of each Initial Lender and from the
effective date specified in the Assignment and Acceptance pursuant to which
it became a Lender in the case of each other Lender until, in each case, the
termination of the Unused Term B Commitments, payable in arrears on the last
Business Day of each March, June, September and December, commencing June 30,
1999, and on the date of termination of the Unused Term B Commitments, at the
rate of 2.75% per annum of the average daily Unused Term B Commitments of
each Term B Lender; provided, however, that no Term B Commitment Fee shall
accrue on any of the Term B Commitments of a Defaulting Lender so long as
such lender shall be a Defaulting Lender.
(b) Letter of Credit Fees, Etc. (i) The Borrower shall
pay to the Administrative Agent for the account of each Working Capital
Lender a commission, payable in arrears quarterly on the last Business Day of
each March, June, September and December, commencing June 30, 1999, on such
Working Capital Lender's Pro Rata Share of the average daily aggregate
Available Amount during such quarter of (A) all Standby Letters of Credit
outstanding from time to time at a rate equal to the Applicable Margin at
such time for Eurodollar Rate Advances under the Working Capital Facility and
(B) all Trade Letters of Credit outstanding at such time at a rate equal to
0.50 % per annum.
(ii) The Borrower shall pay to the Issuing Bank, for its
own account, (A) a fronting fee, payable in arrears quarterly on the last
Business Day of each March, June, September and December and on the
Termination Date, commencing June 30, 1999 on the average daily aggregate
Available Amount during such quarter, from the date hereof until the
Termination Date, at the rate of 0.25% per annum, and (B) such other
commissions, fronting fees, transfer fees and other fees and charges in
connection with the issuance or administration of each Letter of Credit as
the Borrower and the Issuing Bank shall agree.
(c) Agents' Fees. The Borrower shall pay to the
Administrative Agent for the account of the Agents such fees as may from time
to time be agreed between the Borrower and each such Agent.
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SECTION 2.9. Conversion of Advances. (a) Optional. The
Borrower or the Purchaser, as applicable, may on any Business Day, upon
notice given to the Administrative Agent not later than 12:00 Noon
(Charlotte, North Carolina time) on the third Business Day prior to the date
of the proposed Conversion in the case of a Conversion of Base Rate Advances
into Eurodollar Rate Advances or of Eurodollar Rate Advances of one Interest
Period into Eurodollar Rate Advances of another Interest Period, or 12:00
Noon (Charlotte, North Carolina time) on the Business Day immediately
preceding the date of the proposed Conversion in the case of a Conversion of
Eurodollar Rate Advances into Base Rate Advances, and subject to the
provisions of Sections 2.07 and 2.10, Convert all or any portion of the
Advances of one Type comprising the same Borrowing into Advances of the other
Type; provided, however, that:
(i) any Conversion of Eurodollar Rate Advances into Base
Rate Advances shall be made only on the last day of an Interest
Period for such Eurodollar Rate Advances;
(ii) any Conversion of Base Rate Advances into
Eurodollar Rate Advances shall not, if so requested by the Required
Lenders, be made if an Event of Default shall have occurred and be
continuing and shall be in an amount not less than the minimum amount
specified in Section 2.02(c);
(iii) no Conversion of any Advances shall result in more
separate Borrowings than permitted under Section 2.02(c); and
(iv) each Conversion of Advances comprising part of the
same Borrowing under any Facility shall be made among the Appropriate
Lenders in accordance with their respective Pro Rata Shares of such
Borrowing.
Each notice of a Conversion (a "Notice of Conversion") shall be delivered by
telephone, confirmed immediately in writing, or by telex or telecopier, in
substantially the form of Exhibit B-2 hereto, shall be duly executed by a
Responsible Officer of the Purchaser or the Borrower, as applicable, and
shall, within the restrictions set forth in the immediately preceding
sentence, specify therein:
(A) the requested date of such Conversion (which shall
be a Business Day);
(B) the Advances requested to be Converted; and
(C) if such Conversion is into Eurodollar Rate Advances,
the requested duration of the Interest Period for such Eurodollar
Rate Advances.
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The Administrative Agent shall give each of the Appropriate Lenders prompt
notice of each Notice of Conversion received by it, by telex or telecopier.
Each Notice of Conversion shall be irrevocable and binding on the Borrower or
the Purchaser, as applicable.
(b) Mandatory. (i) If the Purchaser or the Borrower,
as the case may be, shall fail to select the duration of any Interest Period
for any Eurodollar Rate Advances in accordance with the provisions contained
in the definition of "Interest Period" set forth in Section 1.01, the
Administrative Agent will forthwith so notify, the Purchaser or the Borrower,
as the case may be, and the Appropriate Lenders, whereupon each such
Eurodollar Rate Advance will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Base Rate Advance.
(ii) Upon the occurrence and during the continuance of
any Event of Default, if so requested by the Required Lenders, (A) each
Eurodollar Rate Advance will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Base Rate Advance and
(B) the obligation of the Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended.
SECTION 2.10. Increased Costs, Etc. (a) If, due to either
(i) the introduction after the date hereof of or any change after the date
hereof in or in the interpretation of any Requirement of Law or (ii) the
compliance with any guideline or request imposed or made after the date
hereof from any central bank or other Governmental Authority (whether or not
having the force of law), there shall be any increase in the cost to any of
the Lender Parties of agreeing to make or making, funding or maintaining any
Advances of any Type, or of agreeing to issue or of issuing or maintaining
Letters of Credit or of agreeing to make or of making or maintaining Letter
of Credit Advances (excluding, for purposes of this Section 2.10, any such
increased costs resulting from (A) Taxes or Other Taxes (as to which
Section 2.12 shall govern), and (B) changes in the rate or basis of taxation
of overall net income (and franchise taxes imposed in lieu thereof) or
overall gross income by the United States of America or the foreign
jurisdiction or state under the laws of which such Lender Party is organized
or has its Applicable Lending Offices or any political subdivision thereof),
then the Borrower hereby agrees to pay, from time to time upon demand by such
Lender Party (with a copy of such demand to the Administrative Agent), to the
Administrative Agent for the account of such Lender Party additional amounts
sufficient to compensate or to reimburse such Lender Party for all such
increased costs; provided, however, that the Borrower shall not be
responsible for costs under this Section 2.10(a) arising more than 90 days
prior to receipt by the Borrower of the certificate from the affected Lender
pursuant to this Section 2.10(a) with respect to such costs; provided further
that a Lender Party claiming additional amounts under this Section 2.10(a)
agrees to use reasonable efforts consistent with its internal policy and
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legal and regulatory restrictions) to designate a different Applicable
Lending Office if the making of such a designation would avoid the need for,
or reduce the amount of, such increased cost that may thereafter accrue and
would not, in the reasonable judgment of such Lender Party, be otherwise
disadvantageous to such Lender Party. A certificate of the Lender Party as
to the amount of such increased cost (together with a schedule setting forth
in reasonable detail the calculation thereof), submitted to the Borrower by
such Lender Party, shall be conclusive and binding for all purposes, absent
manifest error. In determining such amount, such Lender Party may use
reasonable averaging and attribution methods.
(b) If, due to either (i) the introduction after the
date hereof of or any change after the date hereof in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request imposed or made after the date hereof from any central
bank or other Governmental Authority (whether or not having the force of
law), there shall be any increase in the amount of capital required or
expected to be maintained by any Lender Party or corporation controlling such
Lender Party as a result of or based upon the existence of such Lender
Party's commitment to lend or to issue Letters of Credit hereunder and other
commitments of such type or the issuance or maintenance of the Letters of
Credit (or similar contingent obligations), then, upon demand by such Lender
Party (with a copy of such demand to the Administrative Agent), the Borrower
shall pay to the Administrative Agent for the account of such Lender Party,
from time to time as specified by such Lender Party, additional amounts
sufficient to compensate such Lender Party in light of such circumstances, to
the extent that such Lender Party reasonably determines such increase in
capital to be allocable to the existence of such Lender Party's commitment to
lend or to issue Letters of Credit hereunder or to the issuance or
maintenance of any Letters of Credit; provided, however, that the Borrower
shall not be responsible for costs under this Section 2.10(b) arising more
than 90 days prior to receipt by the Borrower of the certificate from the
affected Lender pursuant to this Section 2.10(b) with respect to such costs.
A certificate as to such amounts (together with a schedule setting forth in
reasonable detail the calculation thereof) submitted to the Borrower by such
Lender Party shall be conclusive and binding for all purposes, absent
manifest error. In determining such amount, such Lender party may use any
reasonable averaging and attribution methods.
(c) If, with respect to any Eurodollar Rate Advances the
Required Lenders at any time notify the Administrative Agent that the
Eurodollar Rate for any Interest Period for such Advances will not adequately
reflect the cost to such Lenders of making, participating in or renewing, or
funding or maintaining, their Eurodollar Rate Advances for such Interest
Period, the Administrative Agent shall forthwith so notify the Borrower and
the Lenders, whereupon (i) each such Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
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Convert into a Base Rate Advance and (ii) the obligation of the Lenders to
make, or to Convert Advances into, Eurodollar Rate Advances shall be
suspended until the Administrative Agent shall notify the Borrower (promptly
following notice from the Lenders) that such Lenders have determined that the
circumstances causing such suspension no longer exist.
(d) Notwithstanding any other provision of this
Agreement, if the introduction after the date hereof of or any change after
the date hereof in or in the interpretation of any law or regulation shall
make it unlawful, or any central bank or other Governmental Authority shall
assert that it is unlawful, for any Lender or its Eurodollar Lending Office
to perform its obligations hereunder to make Eurodollar Rate Advances or to
continue to fund or maintain Eurodollar Rate Advances hereunder, then, upon
notice thereof and demand therefor by such Lender to the Borrower through the
Administrative Agent, (i) each Eurodollar Rate Advance of such Lender will
automatically, on the last day of the then existing Interest Period therefor,
if permitted by applicable law, or otherwise upon demand Convert into a Base
Rate Advance and (ii) the obligation of the Lenders to make, or to Convert
Advances into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower that such Lender has
determined that the circumstances causing such suspension no longer exist;
provided, however, that before making any such demand, such Lender agrees to
use reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different Eurodollar Lending Office
if the making of such a designation would allow such Lender or its Eurodollar
Lending Office to continue to perform its obligations to make Eurodollar Rate
Advances or to continue to fund or maintain Eurodollar Rate Advances and
would not, in the judgment of such Lender, be otherwise disadvantageous to
such Lender.
SECTION 2.11. Payments and Computations. (a) Each of the
Purchaser and the Borrower shall make each payment hereunder and under the
Notes, irrespective of any right of counterclaim or set-off (except as
otherwise provided in Section 2.15), not later than 12:00 Noon (Charlotte,
North Carolina time) on the day when due (or, in the case of payments made by
Holdings pursuant to Section 8.01, on the date of demand therefor) in U.S.
dollars to the Administrative Agent at the Administrative Agent's Account in
same day funds, with payments received by the Administrative Agent after such
time being deemed to have been received on the next succeeding Business Day.
The Administrative Agent will promptly thereafter cause like funds to be
distributed (i) if such payment by the Purchaser or the Borrower, as the case
may be, is in respect of principal, interest, commitment fees or any other
Obligation then payable hereunder and under the Notes to more than one Lender
Party, to such Lender Parties for the accounts of their respective Applicable
Lending Offices in accordance with their respective Pro Rata Shares of the
amounts of such respective Obligations payable to such Lender Parties at such
time and (ii) if such payment by the Purchaser or the Borrower, as the case
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may be, is in respect of any Obligation then payable hereunder solely to one
Lender Party, to such Lender Party for the account of its Applicable Lending
Office, in each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of an Assignment and Acceptance and recording
of the information contained therein in the Register pursuant to
Section 9.07(d), from and after the effective date of such Assignment and
Acceptance, the Administrative Agent shall make all payments hereunder and
under the Notes in respect of the interest assigned thereby to the Lender
Party assignee thereunder, and the parties to such Assignment and Acceptance
shall make all appropriate adjustments in such payments for periods prior to
such effective date directly between themselves.
(b) Each of the Purchaser and the Borrower hereby
authorizes each Lender Party, if and to the extent payment owed to such
Lender Party is not made when due hereunder or, in the case of a Lender,
under the Note held by such Lender, to charge from time to time against any
or all of the Purchaser's or the Borrower's, as the case may be, accounts
with such Lender Party any amount so due. Each of the Lender Parties hereby
agrees to notify the Borrower promptly after any such set-off and application
shall be made by such Lender Party; provided, however, that the failure to
give such notice shall not affect the validity of such charge.
(c) All computations of interest based on clause (a) of
the definition of "Base Rate" set forth in Section 1.01 shall be made by the
Administrative Agent on the basis of a year of 365 or 366 days, as the case
may be, and all computations of interest based on the Federal Funds Rate or
the Eurodollar Rate and all computations of commitment fees and Letter of
Credit commissions shall be made by the Administrative Agent on the basis of
a year of 360 days, in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest, fees or commissions are payable. Each determination by the
Administrative Agent of an interest rate, fee or commission hereunder shall
be conclusive and binding for all purposes, absent manifest error.
(d) Whenever any payment hereunder or under the Notes
shall be stated to be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension of time
shall in such case be included in the computation of payment of interest or
commitment fees, as the case may be; provided, however, that, if such
extension would cause payment of interest on or principal of Eurodollar Rate
Advances to be made in the next succeeding calendar month, such payment shall
be made on the immediately preceding Business Day.
(e) Unless the Administrative Agent shall have received
notice from the Purchaser or the Borrower, as the case may be, prior to the
date on which any payment is due to any Lender Party hereunder that the
Purchaser or the Borrower, as the case may be, will not make such payment in
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full, the Administrative Agent may assume that the Purchaser or the Borrower,
as the case may be, has made such payment in full to the Administrative Agent
on such date and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each such Lender Party on such due
date an amount equal to the amount due such Lender Party on such date. If
and to the extent the Purchaser or the Borrower, as the case may be, shall
not have so made such payment in full to the Administrative Agent, each such
Lender Party shall repay to the Administrative Agent forthwith on demand such
amount distributed to such Lender Party, together with interest thereon, for
each day from the date such amount is distributed to such Lender Party until
the date such Lender Party repays such amount to the Administrative Agent, at
the Federal Funds Rate.
(f) Whenever any payment received by the Administrative
Agent under this Agreement or any of the other Loan Documents is insufficient
to pay in full all amounts due and payable to the Agents and the Lender
Parties under or in respect of this Agreement and the other Loan Documents on
any date, such payment shall be distributed by the Administrative Agent and
applied by the Agents and the Lender Parties in the following order of
priority:
(i) first, to the payment of all of the fees,
indemnification payments, costs and expenses that are due and payable
to the Agents (solely in their respective capacities as Agents) under
or in respect of this Agreement or any of the other Loan Documents on
such date, ratably based upon the respective aggregate amounts of all
such fees, indemnification payments, costs and expenses owing to the
Agents on such date;
(ii) second, to the payment of all of the fees,
indemnification payments, costs and expenses that are due and payable
to the Issuing Bank (solely in its capacity as such) under or in
respect of this Agreement or any of the other Loan Documents on such
date, ratably based upon the respective aggregate amounts of all such
fees, indemnification payments, costs and expenses owing to the
Issuing Bank on such date;
(iii) third, to the payment of all of the indemnification
payments, costs and expenses that are due and payable to the Lenders
under Section 9.04 hereof, Section 12 of the Subsidiary Guaranty,
Section 23 of the Security Agreement or similar section of any of the
other Loan Documents on such date, ratably based upon the respective
aggregate amounts of all such indemnification payments, costs and
expenses owing to the Lenders on such date;
(iv) fourth, to the payment of all of the amounts that
are due and payable to the Administrative Agent and the Lender
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Parties under Sections 2.10 and 2.12 hereof or Section 5 of the
Subsidiary Guaranty on such date, ratably based upon the respective
aggregate amounts thereof owing to the Administrative Agent and the
Lender Parties on such date;
(v) fifth, to the payment of all of the fees that are
due and payable to the Lenders under Section 2.08(a) on such date,
ratably based upon the respective aggregate Commitments of the
Lenders under the Facilities on such date;
(vi) sixth, to the payment of all of the accrued and
unpaid interest on the Obligations of the Purchaser and the Borrower
under or in respect of the Loan Documents that is due and payable to
the Administrative Agent and the Lender Parties under Section 2.07(b)
on such date, ratably based upon the respective aggregate amounts of
all such interest owing to the Administrative Agent and the Lender
Parties on such date;
(vii) seventh, to the payment of all of the accrued and
unpaid interest on the Advances that is due and payable to the
Administrative Agent and the Lender Parties under Section 2.07(a) on
such date, ratably based upon the respective aggregate amounts of all
such interest owing to the Administrative Agent and the Lender
Parties on such date;
(viii) eighth, to the payment of the principal amount of
all of the outstanding Advances that is due and payable to the
Administrative Agent and the Lender Parties on such date, ratably
based upon the respective aggregate amounts of all such principal
owing to the Administrative Agent and the Lender Parties on such
date; and
(ix) ninth, to the payment of all other Obligations of
the Loan Parties owing under or in respect of the Loan Documents that
are due and payable to the Administrative Agent and the other Secured
Parties on such date, ratably based upon the respective aggregate
amounts of all such Obligations owing to the Administrative Agent and
the other Secured Parties on such date.
If the Administrative Agent receives funds for application to the Obligations
of the Loan Parties under or in respect of the Loan Documents under
circumstances for which the Loan Documents do not specify the Advances or the
Facility to which, or the manner in which, such funds are to be applied, the
Administrative Agent may, but shall not be obligated to, elect to distribute
such funds to each of the Lender Parties in accordance with such Lender
Party's Pro Rata Share of the sum of (A) the aggregate principal amount of
all Advances outstanding at such time and (b) the aggregate Available Amount
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of all Letters of Credit outstanding at such time, in repayment or prepayment
of such of the outstanding Advances or other Obligations then owing to such
Lender Party, and, in the case of the Term Facility, for application to such
principal repayment installments thereof, as the Administrative Agent shall
direct.
SECTION 2.12. Taxes. (a) Any and all payments by any Loan
Party hereunder or under the Notes shall be made, in accordance with
Section 2.11, free and clear of and without deduction for any and all present
or future taxes, levies, imposts, deductions, charges or withholdings, and
all liabilities with respect thereto, excluding, in the case of each Lender
Party and each Agent, taxes that are imposed on its overall net income by the
United States and taxes that are imposed on its overall net income (and
franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction
under the laws of which such Lender Party or such Agent, as the case may be,
is organized or is a resident, or has a fixed place of business or a
permanent establishment, or any political subdivision of any of the
foregoing, and, in the case of each Lender Party, taxes that are imposed on
its overall net income (and franchise taxes imposed in lieu thereof) by the
state or foreign jurisdiction of either of its Applicable Lending Offices or
any political subdivision thereof (all such nonexcluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities in respect of
payments hereunder or under the Notes being, collectively, "Taxes"). If any
Loan Party shall be required under applicable Requirements of Law to deduct
any Taxes from or in respect of any sum payable hereunder or under any Note
to any Lender Party or any Agent, (i) the sum payable by such Loan Party
shall be increased as may be necessary so that after such Loan Party and the
Administrative Agent have been made all required deductions (including
deductions applicable to additional sums payable under this Section 2.12)
such Lender Party or such Agent, as the case may be, receives an amount equal
to the sum it would have received had no such deductions been made, (ii) such
Loan Party shall make such deductions and (iii) such Loan Party shall pay the
full amount deducted to the relevant taxation authority or other Governmental
Authority in accordance with applicable Requirements of Law.
(b) In addition, each Loan Party shall pay any present
or future stamp, recording, documentary, excise, property or similar taxes,
charges or levies that arise from any payment made hereunder or under the
Notes or from the execution, delivery or registration of, any performance
under, or otherwise with respect to, this Agreement or the Notes
(collectively, "Other Taxes").
(c) Each Loan Party shall indemnify each Lender Party
and each Agent for the full amount of Taxes and Other Taxes, and for the full
amount of taxes of any kind imposed by any jurisdiction on amounts payable
under this Section 2.12, imposed on or paid by such Lender Party or such
Agent, as the case may be, and any liability (including penalties, additions
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to tax, interest and expenses) arising therefrom or with respect thereto.
The indemnity by each Loan Party provided for in this subsection (c) shall
apply and be made whether or not the Taxes or Other Taxes for which
indemnification hereunder is sought have been correctly or legally asserted;
provided, however, that such Lender or such Agent seeking such
indemnification shall take all reasonable actions (consistent with its
internal policy and legal and regulatory restrictions) requested by such Loan
Party to assist such Loan Party in recovering the amounts paid thereby
pursuant to this subsection (c) from the relevant taxation authority or other
Governmental Authority. Amounts payable by such Loan Party under the
indemnity set forth in this subsection (c) shall be paid within 30 days from
the date on which the applicable Lender or Agent, as the case may be, makes
written demand therefor.
(d) Within 30 days after the date of any payment of
Taxes, each Loan Party shall furnish to the Administrative Agent, at its
address referred to in Section 8.02, the original or a certified copy of a
receipt evidencing payment thereof, to the extent such a receipt is issued
therefor, or other written proof of payment thereof that is reasonably
satisfactory to the Administrative Agent. In the case of any payment
hereunder or under the Notes by or on behalf of a Loan Party through an
account or branch outside the United States, or on behalf of such Loan Party
by a payor that is not a United States person, if such Loan Party determines
that no Taxes are payable in respect thereof, such Loan Party shall furnish,
or shall cause such payor to furnish, to the Administrative Agent, at its
address referred to in Section 9.02, an opinion of counsel reasonably
acceptable to the Administrative Agent stating that such payment is exempt
from Taxes. For purposes of this subsection (d) and subsection (e) of this
Section 2.12, the terms "United States" and "United States person" shall have
the meanings specified in Section 7701 of the Internal Revenue Code.
(e) Each Lender Party organized under the laws of a
jurisdiction outside the United States shall, on or prior to the date of its
execution and delivery of this Agreement in the case of each Initial Lender
or Initial Issuing Bank, as the case may be, and on the date of the
Assignment and Acceptance pursuant to which it becomes a Lender Party in the
case of each other Lender Party, and from time to time thereafter as
reasonably requested in writing by the Borrower (but only so long thereafter
as such Lender Party remains lawfully able to do so), provide each of the
Administrative Agent and the Borrower with two original Internal Revenue
Service forms 1001 or 4224 or, in the case of a Lender Party that has
certified in writing to the Administrative Agent that it is not a "bank" (as
defined in Section 881(c)(3)(A) of the Internal Revenue Code), form W-8 (and,
if such Lender Party delivers a form W-8, a certificate representing that
such Lender Party is not (i) a "bank" for purposes of Section 881(c) of the
Internal Revenue Code, (ii) a ten-percent shareholder (within the meaning of
Section 871(h)(3)(B) of the Internal Revenue Code) of the Borrower or (iii) a
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controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Internal Revenue Code), as appropriate), or any
successor or other form prescribed by the Internal Revenue Service,
certifying that such Lender Party is exempt from or entitled to a reduced
rate of United States withholding tax on payments pursuant to this Agreement
or the Notes or, in the case of a Lender Party providing a form W-8,
certifying that such Lender Party is a foreign corporation, partnership,
estate or trust. If the forms provided by a Lender Party at the time such
Lender Party first becomes a party to this Agreement indicate a United States
interest withholding tax rate in excess of zero, withholding tax at such rate
shall be considered excluded from Taxes unless and until such Lender Party
provides the appropriate forms certifying that a lesser rate applies,
whereupon withholding tax at such lesser rate only shall be considered
excluded from Taxes for periods governed by such forms; provided, however,
that, if at the date of the Assignment and Acceptance pursuant to which a
Lender Party becomes a party to this Agreement, the Lender Party assignor was
entitled to payments under subsection (a) of this Section 2.12 in respect of
United States withholding tax with respect to interest paid at such date,
then, to such extent, the term Taxes shall include (in addition to
withholding taxes that may be imposed in the future or other amounts
otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Lender Party assignee on such date.
(f) For any period with respect to which a Lender Party
has failed to provide the Borrower with the appropriate form, certificate or
other document described in subsection (e) of this Section 2.12 (other than
if such failure is due to a change in the applicable Requirements of Law, or
in the interpretation or application thereof, occurring after the date on
which a form, certificate or other document originally was required to be
provided or if such form, certificate or other document otherwise is not
required under subsection (e) of this Section 2.12), such Lender Party shall
not be entitled to indemnification under subsection (a) or (c) of this
Section 2.12 with respect to Taxes imposed by the United States by reason of
such failure; provided, however, that should a Lender Party become subject to
Taxes because of its failure to deliver a form, certificate or other document
required hereunder, each Loan Party shall take such steps as such Lender
Party shall reasonably request to assist such Lender Party in recovering such
Taxes.
(g) Any Lender Party claiming any additional amounts
payable pursuant to this Section 2.12 agrees to use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions)
to change the jurisdiction of its Eurodollar Lending Office if the making of
such a change would avoid the need for, or reduce the amount of, any such
additional amounts that may thereafter accrue and would not, in the
reasonable judgment of such Lender Party, be otherwise disadvantageous to
such Lender Party.
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SECTION 2.13. Sharing of Payments, Etc. If any Lender
Party shall obtain at any time any payment (whether voluntary, involuntary,
through the exercise of any right of setoff, or otherwise) (a) on account of
Obligations due and payable to such Lender Party under or in respect of this
Agreement or any of the other Loan Documents at such time in excess of its
ratable share (according to the proportion of (i) the amount of such
Obligations due and payable to such Lender Party at such time (other than
pursuant to Section 2.10, 2.12, 8.04 or 9.07) to (ii) the aggregate amount of
the Obligations due and payable to all Lender Parties at such time) of
payments on account of the Obligations due and payable to all Lender Parties
under or in respect of this Agreement and the other Loan Documents at such
time obtained by all the Lender Parties at such time or (b) on account of
Obligations owing (but not due and payable) to such Lender Party under or in
respect of this Agreement or any of the other Loan Documents at such time in
excess of its ratable share (according to the proportion of (i) the amount of
such Obligations owing to such Lender Party at such time (other than pursuant
to Section 2.10, 2.12, 8.04 or 9.07) to (ii) the aggregate amount of the
Obligations owing (but not due and payable) to all Lender Parties under or in
respect of this Agreement and the other Loan Documents at such time) of
payments on account of the Obligations owing (but not due and payable) to all
Lender Parties under or in respect of this Agreement and the other Loan
Documents at such time obtained by all of the Lender Parties at such time,
such Lender Party shall forthwith purchase from the other Lender Parties such
interests or participating interests in the Obligations due and payable or
owing to them, as the case may be, as shall be necessary to cause such
purchasing Lender Party to share the excess payment ratably with each of
them; provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender Party, such purchase from
each other Lender Party shall be rescinded and such other Lender Party shall
repay to the purchasing Lender Party the purchase price to the extent of such
Lender Party's ratable share (according to the proportion of (A) the purchase
price paid to such Lender Party to (B) the aggregate purchase price paid to
all Lender Parties) of such recovery, together with an amount equal to such
Lender Party's ratable share (according to the proportion of (1) the amount
of such other Lender Party's required repayment to (2) the total amount so
recovered from the purchasing Lender Party) of any interest or other amount
paid or payable by the purchasing Lender Party in respect of the total amount
so recovered; provided further that, so long as the Obligations under the
Loan Documents shall not have been accelerated, any excess payment received
by any Appropriate Lender shall be shared on a pro rata basis only with other
Appropriate Lenders. Each of the Purchaser and the Borrower hereby agrees
that any Lender Party so purchasing an interest or participating interest
from another Lender Party pursuant to this Section 2.13 may, to the fullest
extent permitted under applicable law, exercise all its rights of payment
(including the right of setoff) with respect to such an interest or
participating interest, as the case may be, as fully as if such Lender Party
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were the direct creditor of the Purchaser or the Borrower, as the case may
be, in the amount of such an interest or participating interest.
SECTION 2.14. Use of Proceeds. The proceeds of the Term A
Advances borrowed by the Purchaser shall be available (and the Purchaser
agrees that it shall use such proceeds) solely to pay to the holders of the
Company Stock (other than the Purchaser) the cash consideration for their
shares in the Stock Tender Offer and the Merger. The proceeds of the Term A
Advances borrowed by the Borrower shall be available (and the Borrower agrees
that it shall use such proceeds) solely to refinance Existing Debt of the
Borrower (other than the Senior Notes) and to pay fees and expenses incurred
in connection with the consummation of the Transaction. The proceeds of the
Term B Advances shall be available (and the Borrower agrees that it shall use
such proceeds) solely to make Repurchase Payments, on the date on which the
Subordinated Notes are issued, to refinance the Holdings Debt, to make the
Investment permitted to be made by the Borrower pursuant to Section
5.02(e)(xi), and, in accordance with Section 2.06(b)(ii), to refinance the
Term A Advances. The proceeds of the Working Capital Advances borrowed by
the Borrower and issuances of Letters of Credit shall be available (and the
Borrower agrees that it shall use such proceeds and Letters of Credit) to
make Repurchase Payments (subject to the provisions of Section 2.01), to make
payments in respect of stock options held by certain members of management of
the Borrower and its Subsidiaries outstanding on the date of the Initial
Extension of Credit, to pay fees and expenses incurred in connection with the
consummation of the Transaction and to provide working capital from time to
time to the Borrower and its Subsidiaries and for general corporate purposes
of the Borrower and its Subsidiaries.
SECTION 2.15. Defaulting Lenders. (a) In the event that,
at any one time, (i) any Lender Party shall be a Defaulting Lender, (ii) such
Defaulting Lender shall owe a Defaulted Advance to the Borrower and (iii) the
Borrower shall be required to make any payment hereunder or under any other
Loan Document to or for the account of such Defaulting Lender, then the
Purchaser and the Borrower may, so long as no Default shall occur or be
continuing at such time and to the fullest extent permitted by applicable
law, set off and otherwise apply the Obligation of the Purchaser or the
Borrower, as the case maybe, to make such payment to or for the account of
such Defaulting Lender against the obligation of such Defaulting Lender to
make such Defaulted Advance. In the event that, on any date, either the
Purchaser or the Borrower, as the case may be, shall so set off and otherwise
apply its obligation to make any such payment against the obligation of such
Defaulting Lender to make any such Defaulted Advance on or prior to such
date, the amount so set off and otherwise applied by the Purchaser or the
Borrower, as the case may be, shall constitute for all purposes of this
Agreement and the other Loan Documents an Advance by such Defaulting Lender
made on the date of such setoff under the Facility pursuant to which such
Defaulted Advance was originally required to have been made pursuant to
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Section 2.01. Such Advance shall be a Base Rate Advance and shall be
considered, for all purposes of this Agreement, to comprise part of the
Borrowing in connection with which such Defaulted Advance was originally
required to have been made pursuant to Section 2.01, even if the other
Advances comprising such Borrowing shall be Eurodollar Rate Advances on the
date such Advance is deemed to be made pursuant to this subsection (a). Each
of the Purchaser and the Borrower shall notify the Administrative Agent at
any time the Purchaser or the Borrower, as the case may be, exercises its
right of set-off pursuant to this subsection (a) and shall set forth in such
notice (A) the name of the Defaulting Lender and the Defaulted Advance
required to be made by such Defaulting Lender and (B) the amount set off and
otherwise applied in respect of such Defaulted Advance pursuant to this
subsection (a). Any portion of such payment otherwise required to be made by
the Purchaser or the Borrower, as the case may be, to or for the account of
such Defaulting Lender which is paid by the Purchaser or the Borrower, as the
case may be, after giving effect to the amount set off and otherwise applied
by the Purchaser or the Borrower, as the case may be, pursuant to this
subsection (a), shall be applied by the Administrative Agent as specified in
subsection (b) or (c) of this Section 2.15.
(b) In the event that, at any one time, (i) any Lender
Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a
Defaulted Amount to the Administrative Agent or any of the other Lender
Parties and (iii) either the Purchaser or the Borrower, as the case may be,
shall make any payment hereunder or under any other Loan Document to the
Administrative Agent for the account of such Defaulting Lender, then the
Administrative Agent may, on its behalf or on behalf of such other Lender
Parties and to the fullest extent permitted by applicable law, apply at such
time the amount so paid by the Purchaser or the Borrower, as the case may be,
for the account of such Defaulting Lender to the payment of each such
Defaulted Amount to the extent required to pay such Defaulted Amount. In the
event that the Administrative Agent shall so apply any such amount to the
payment of any such Defaulted Amount on any date, the amount so applied by
the Administrative Agent shall constitute for all purposes of this Agreement
and the other Loan Documents payment, to such extent, of such Defaulted
Amount on such date. Any such amount so applied by the Administrative Agent
shall be retained by the Administrative Agent or distributed by the
Administrative Agent to such other Lender Parties, ratably in accordance with
the respective portions of such Defaulted Amounts payable at such time to the
Administrative Agent and such other Lender Parties and, if the amount of such
payment made by the Purchaser or the Borrower, as the case may be, shall at
such time be insufficient to pay all Defaulted Amounts owing at such time to
the Administrative Agent and the other Lender Parties, in the following order
of priority:
(i) first, to the Administrative Agent for any Defaulted
Amount then owing to the Administrative Agent;
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(ii) second, to the Issuing Bank and the Swing Line Bank
for any Defaulted Amount then owing to them, in their capacities as
such, ratably in accordance with such respective Defaulted Amounts
then owing to the Issuing Bank and the Swing Line Bank; and
(iii) third, to any other Lender Parties for any Defaulted
Amounts then owing to such other Lender Parties, ratably in
accordance with such respective Defaulted Amounts then owing to such
other Lender Parties.
Any portion of such amount paid by the Purchaser or the Borrower, as the case
may be, for the account of such Defaulting Lender remaining, after giving
effect to the amount applied by the Administrative Agent pursuant to this
subsection (b), shall be applied by the Administrative Agent as specified in
subsection (c) of this Section 2.15.
(c) In the event that, at any one time, (i) any Lender
Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall not owe
a Defaulted Advance or a Defaulted Amount and (iii) the Purchaser, the
Borrower, the Administrative Agent or any other Lender Party shall be
required to pay or distribute any amount hereunder or under any other Loan
Document to or for the account of such Defaulting Lender, then the Purchaser,
the Borrower or such other Lender Party shall pay such amount to the
Administrative Agent to be held by the Administrative Agent, to the fullest
extent permitted by applicable law, in escrow or the Administrative Agent
shall, to the fullest extent permitted by applicable law, hold in escrow such
amount otherwise held by it. Any funds held by the Administrative Agent in
escrow under this subsection (c) shall be deposited by the Administrative
Agent in an account with NationsBank, in the name and under the control of
the Administrative Agent, but subject to the provisions of this
subsection (c). The terms applicable to such account, including the rate of
interest payable with respect to the credit balance of such account from time
to time, shall be NationsBank's standard terms applicable to escrow accounts
maintained with it. Any interest credited to such account from time to time
shall be held by the Administrative Agent in escrow under, and applied by the
Administrative Agent from time to time in accordance with the provisions of,
this subsection (c). The Administrative Agent shall, to the fullest extent
permitted by applicable law, apply all funds so held in escrow from time to
time to the extent necessary to make any Advances required to be made by such
Defaulting Lender and to pay any amount payable by such Defaulting Lender
hereunder and under the other Loan Documents to the Administrative Agent or
any other Lender Party, as and when such Advances or amounts are required to
be made or paid and, if the amount so held in escrow shall at any time be
insufficient to make and pay all such Advances and amounts required to be
made or paid at such time, in the following order of priority:
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(i) first, to the Administrative Agent for any amount
then due and payable by such Defaulting Lender to the Administrative
Agent hereunder;
(ii) second, to the Issuing Bank and the Swing Line Bank
for any amounts then due and payable to them hereunder, in their
capacities as such, by such Defaulting Lender, ratably in accordance
with such respective amounts then due and payable to the Issuing Bank
and the Swing Line Bank;
(iii) third, to any other Lender Parties for any amount
then due and payable by such Defaulting Lender to such other Lender
Parties hereunder, ratably in accordance with such respective amounts
then due and payable to such other Lender Parties; and
(iv) fourth, to the Purchaser and the Borrower for any
Advance then required to be made by such Defaulting Lender pursuant
to a Commitment of such Defaulting Lender, ratably in accordance with
such respective amounts then due and payable to the Purchaser and the
Borrower.
In the event that any Lender Party that is a Defaulting Lender shall, at any
time, cease to be a Defaulting Lender, any funds held by the Administrative
Agent in escrow at such time with respect to such Lender Party shall be
distributed by the Administrative Agent to such Lender Party and applied by
such Lender Party to the Obligations owing to such Lender Party at such time
under this Agreement and the other Loan Documents ratably in accordance with
the respective amounts of such Obligations outstanding at such time.
(d) The rights and remedies against a Defaulting Lender
under this Section 2.15 are in addition to other rights and remedies that the
Purchaser and the Borrower may have against such Defaulting Lender with
respect to any Defaulted Advance and that the Administrative Agent or any
Lender Party may have against such Defaulting Lender with respect to any
Defaulted Amount.
SECTION 2.16. Removal of Lender. In the event that any
Lender Party demands payment of costs or additional amounts pursuant to
Section 2.10 or Section 2.12 or asserts, pursuant to Section 2.10(d) that it
is unlawful for such Lender Party to make Eurodollar Rate Advances, then
(subject to such Lender Party's right to rescind such demand or assertion
within 10 days after the notice from the Borrower referred to below) the
Borrower may, upon 20 days' prior written notice to such Lender Party and the
Administrative Agent, elect to cause such Lender Party to assign its Advances
and Commitments in full to one or more Persons selected by the Borrower so
long as (a) each such Person satisfies criteria of an Eligible Assignee and
is reasonably satisfactory to the Administrative Agent, (b) such Lender Party
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receives payment in full in cash of the outstanding principal amount of all
Advances made by it and all accrued and unpaid interest thereon and all other
amounts due and payable to such Lender Party as of the date of such
assignment (including, without limitation, amounts owing pursuant to Sections
2.10, 2.12, 2.15 and 9.04), and (c) each such Lender Party assignee agrees to
accept such assignment and to assume all obligations of such Lender Party
hereunder, in accordance with Section 9.07.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.1. Conditions Precedent to Initial Extension of
Credit. The obligation of each Lender to make an Advance or of the Issuing
Bank to issue a Letter of Credit on the occasion of the Initial Extension of
Credit hereunder is subject to the satisfaction of the following conditions
precedent prior to or concurrently with the Initial Extension of Credit:
(a) The Stock Tender Offer shall have been consummated
in accordance with the terms of the Merger Agreement and in
compliance with all applicable laws.
(b) The Merger Agreement shall be in full force and
effect and shall not have been amended, modified or otherwise
supplemented in any manner that would be reasonably likely to have a
Material Adverse Effect.
(c) Holdings shall have received not less than $90
million in Net Cash Proceeds as an equity contribution from the
Permitted Investors and certain members of management of the Company
and Holdings shall have contributed such proceeds to the capital of
the Purchaser. The terms of the equity contribution by the Permitted
Investors to the capital of Holdings shall be consistent with those
set forth in the JWC Commitment Letter and otherwise reasonably
acceptable to the Lenders.
(d) Holdings shall have received not less than $55
million in Net Cash Proceeds from the issuance to an Affiliate of JWC
of the Holdings Debt (or such Net Cash Proceeds shall be placed in
escrow on terms and conditions reasonably acceptable to the Lenders).
The terms of the Holdings Debt shall be consistent with those set
forth in the JWC Commitment Letter and otherwise reasonably
acceptable to the Lenders.
(e) The Lender Parties shall be satisfied that all
Existing Debt, other than the Debt identified on Part B of
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Schedule 4.01(aa) (the "Surviving Debt"), has been prepaid, redeemed
or defeased in full or otherwise satisfied and extinguished and that
all such Surviving Debt shall be on terms and conditions satisfactory
to the Lender Parties.
(f) Before giving effect to the Tender Offers and the
other transactions contemplated by this Agreement, there shall have
occurred no material adverse change in the business, assets,
properties, liabilities (actual and contingent), condition (financial
or otherwise), operations or prospects of the Borrower and its
Subsidiaries, taken as a whole, since December 31, 1998.
(g) There shall exist no action, suit, investigation,
litigation or proceeding affecting any Loan Party or any of its
Subsidiaries pending or, to the knowledge of Holdings, the Purchaser
or the Borrower, threatened before any court, governmental agency or
arbitrator that (i) could reasonably be likely to have a Material
Adverse Effect other than the matters described on Schedule 3.01(g)
(the "Disclosed Litigation") or (ii) purports to materially adversely
affect the consummation of the Tender Offers, the Merger or the other
transactions contemplated hereby, and there shall have been no
adverse change in the status, or financial effect on any Loan Party
or any of its Subsidiaries, of the Disclosed Litigation from that
described on Schedule 3.01(g) which could reasonably be expected to
have a Material Adverse Effect.
(h) The Borrower shall have paid all accrued fees and
expenses of the Administrative Agent, the other Agents and the Lender
Parties (including the accrued fees and expenses of counsel to the
Co-Arrangers).
(i) The Co-Arrangers shall be satisfied that there shall
be no less than $15,000,000 of availability under the Working Capital
Facility, after giving effect to the Initial Extension of Credit.
(j) The Administrative Agent shall have received on or
before the day of the Initial Extension of Credit the following, each
dated such day (unless otherwise specified), in form and substance
satisfactory to the Lender Parties (unless otherwise specified) and
(except for the Notes) in sufficient copies for each Lender Party:
(i) The Notes payable to the order of the
Lenders.
(ii) Certified copies of the resolutions of the
Board of Directors of the Borrower, the Purchaser, Holdings
and each other Loan Party approving the Tender Offers, the
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Merger, this Agreement, the Notes, each other Loan Document
and each Related Document to which it is or is to be a
party, and of all documents evidencing other necessary
corporate action and governmental and other third party
approvals and consents, if any, with respect to the Tender
Offers, the Merger, this Agreement, the Notes, each other
Loan Document and each Related Document.
(iii) A copy of the charter of the Borrower, the
Purchaser, Holdings and each other Loan Party and each
amendment thereto, certified (as of a date reasonably near
the date of the Initial Extension of Credit) by the
Secretary of State of the jurisdiction of its incorporation
as being a true and correct copy thereof.
(iv) A copy of a certificate of the Secretary of
State of the jurisdiction of its incorporation, dated
reasonably near the date of the Initial Extension of Credit,
listing the charter of the Borrower, the Purchaser, Holdings
and each other Loan Party and each amendment thereto on file
in his office and certifying that (A) such amendments are
the only amendments to the Borrower's, the Purchaser's or
such other Loan Party's charter on file in his office,
(B) the Borrower, the Purchaser and each other Loan Party
have paid all franchise taxes to the date of such
certificate and (C) the Borrower, the Purchaser and each
other Loan Party are duly incorporated and in good standing
under the laws of the State of the jurisdiction of its
incorporation.
(v) (A) A copy of a certificate of the
Secretary of State of the jurisdiction of each of the State
of Virginia and the State of Tennessee, dated reasonably
near the date of the Initial Extension of Credit stating
that the Borrower is duly qualified and in good standing as
a foreign corporation in each such State and has filed all
annual reports required to be filed to the date of such
certificate.
(B) A copy of a certificate of the Secretary of
State of the jurisdiction of each of the State of Ohio and
the State of Indiana, dated reasonably near the date of the
Initial Extension of Credit stating that Hewitt is duly
qualified and in good standing as a foreign corporation in
each such State and has filed all annual reports required to
be filed to the date of such certificate.
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(C) A copy of a certificate of the Secretary of
State of the jurisdiction of each of the State of Ohio, the
State of Connecticut and the State of Missouri, dated
reasonably near the date of the Initial Extension of Credit
stating that Megas is duly qualified and in good standing as
a foreign corporation in each such State and has filed all
annual reports required to be filed to the date of such
certificate.
(vi) A certificate of the Borrower, the
Purchaser, Holdings and each other Loan Party, signed on
behalf of the Borrower, the Purchaser, Holdings and such
other Loan Party by its President or a Vice President and
its Secretary or any Assistant Secretary, dated the date of
the Initial Extension of Credit (the statements made in
which certificate shall be true on and as of the date of the
Initial Extension of Credit), certifying as to (A) the
absence of any amendments to the charter of the Borrower,
the Purchaser, Holdings or such other Loan Party since the
date of the Secretary of State's certificate referred to in
Section 3.01(j)(iii), (B) a true and correct copy of the
bylaws of the Borrower, the Purchaser, Holdings and such
other Loan Party as in effect on the date of the Initial
Extension of Credit, (C) the due incorporation and good
standing of the Borrower, the Purchaser, Holdings and such
other Loan Party as a corporation organized under the laws
of the jurisdiction of its incorporation or formation, and
the absence of any proceeding for the dissolution or
liquidation of the Borrower, the Purchaser, Holdings or such
other Loan Party, (D) in the case of the Borrower, the
Purchaser and Holdings, the truth of the representations and
warranties contained in the Loan Documents as though made on
and as of the date of the Initial Extension of Credit and
(E) in the case of the Borrower, the Purchaser and
Holdings, the absence of any event occurring and continuing,
or resulting from the Initial Extension of Credit, that
constitutes a Default.
(vii) A certificate of the Secretary or an
Assistant Secretary of the Borrower, the Purchaser and each
other Loan Party certifying the names and true signatures of
the officers of the Borrower, the Purchaser and such other
Loan Party authorized to sign this Agreement, the Notes,
each other Loan Document and each Related Document to which
they are or are to be parties and the other documents to be
delivered hereunder and thereunder.
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(viii) A security agreement in substantially the
form of Exhibit D (together with each other security
agreement delivered pursuant to Section 5.01(o), in each
case as amended, supplemented or otherwise modified from
time to time in accordance with its terms, the "Security
Agreement"), duly executed by the Borrower and each other
Loan Party, together with:
(A) certificates representing the
Pledged Shares referred to therein accompanied by
undated stock powers executed in blank and
instruments evidencing the Pledged Debt referred to
therein indorsed in blank,
(B) executed copies of proper financing
statements to be filed under the Uniform Commercial
Code of all jurisdictions that the Administrative
Agent may deem necessary or desirable in order to
perfect and protect the first priority liens and
security interests created under the Security
Agreement, covering the Collateral described in the
Security Agreement,
(C) completed requests for information,
dated on or before the date of the Initial Extension
of Credit, listing the financing statements referred
to in clause (B) above and all other effective
financing statements filed in the jurisdictions
referred to in clause (B) above that name the
Borrower or any other Loan Party as debtor, together
with copies of such other financing statements,
(D) evidence of the insurance required
by the terms of the Security Agreement, and
(E) evidence that all other action that
the Administrative Agent may deem necessary or
desirable in order to perfect and protect the first
priority liens and security interests created under
the Security Agreement has been taken.
(ix) A guaranty in substantially the form of
Exhibit F (together with each other guaranty delivered
pursuant to Section 5.01(o), in each case as amended,
supplemented or otherwise modified from time to time in
accordance with its terms, the "Subsidiary Guaranty"), duly
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executed by each of the Subsidiaries of the Borrower that is
not a Foreign Subsidiary.
(x) (A) Certified copies of each of the Related
Documents and the Specified Employment Agreement, duly
executed by the parties thereto and in form and substance
satisfactory to the Lender Parties, together with all
agreements, instruments and other documents delivered in
connection therewith, and (B) certified copies of the
Supplemental Insurance (as defined in the Merger Agreement)
in form and substance satisfactory to the Lender Parties.
(xi) The pro forma Consolidated balance sheet of
the Borrower and its Subsidiaries as at March 31, 1999, in
form and substance reasonably satisfactory to the Lender
Parties.
(xii) Letters and certificates, in substantially
the form of Exhibit H and I, respectively, attesting to the
Solvency of each Loan Party after giving effect to the Stock
Tender Offer, the Merger and the other transactions
contemplated hereby, from its chief financial officer and a
nationally recognized appraisal firm, valuation consultant
or investment banking firm reasonably satisfactory to the
Co-Arrangers.
(xiii) Evidence of insurance naming the
Administrative Agent as insured and loss payee with such
responsible and reputable insurance companies or
associations, and in such amounts and covering such risks,
as is satisfactory to the Lender Parties.
(xiv) A favorable opinion of Simpson Thacher &
Bartlett, counsel for Holdings, in substantially the form of
Exhibit J hereto and as to such other matters as any Lender
Party through the Administrative Agent may reasonably
request.
(xv) A favorable opinion of Shearman & Sterling,
counsel for the Administrative Agent, in form and substance
satisfactory to the Administrative Agent.
SECTION 3.2. Conditions Precedent to Borrowings to Purchase
Company Stock after Stock Tender Offer. The obligation of each Lender to
make an Advance or of the Issuing Bank to issue a Letter of Credit on the
occasion of any Borrowing to purchase Company Stock after the date of the
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Stock Tender Offer is subject to the satisfaction of the following conditions
precedent prior to or concurrently with the date of such Borrowing:
(a) The Merger Agreement shall be in full force and
effect and shall not have been amended, modified or otherwise
supplemented in any manner that would be reasonably likely to have a
Material Adverse Effect.
(b) The Administrative Agent shall have received on or
before the day of such Borrowing or issuance a favorable opinion of
Simpson, Thacher & Bartlett, counsel for Holdings, in form and
substance reasonably satisfactory to the Co-Arrangers.
SECTION 3.3. Conditions Precedent to Each Borrowing and
Issuance. The obligation of each Appropriate Lender to make an Advance
(other than a Letter of Credit Advance made by the Issuing Bank or a Working
Capital Lender pursuant to Section 2.03(c) or a Swing Line Advance made by a
Working Capital Lender pursuant to Section 2.02(b)) on the occasion of each
Borrowing (including the Initial Extension of Credit), and the obligation of
the Issuing Bank to issue a Letter of Credit (including the initial issuance)
or renew a Letter of Credit and the right of the Borrower to request a Swing
Line Borrowing, shall be subject to the further conditions precedent that on
the date of such Borrowing or issuance or renewal (a) the following
statements shall be true (and each of the giving of the applicable Notice of
Borrowing, Notice of Swing Line Borrowing, Notice of Issuance or Notice of
Renewal and the acceptance by the Purchaser or the Borrower, as the case may
be of the proceeds of such Borrowing or of such Letter of Credit or the
renewal of such Letter of Credit shall constitute a representation and
warranty by the Borrower that both on the date of such notice and on the date
of such Borrowing or issuance or renewal such statements are true):
(i) the representations and warranties contained in each
Loan Document are correct in all material respects on and as of such
date, before and after giving effect to such Borrowing or issuance or
renewal and to the application of the proceeds therefrom, as though
made on and as of such date other than any such representations or
warranties that, by their terms, refer to a specific date, other than
the date of such Borrowing or issuance or renewal, in which case as
of such specific date; and
(ii) no event has occurred and is continuing, or would
result from such Borrowing or issuance or renewal or from the
application of the proceeds therefrom, that constitutes a Default;
and (b) the Administrative Agent shall have received such other approvals,
opinions or documents as the Administrative Agent may reasonably request.
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SECTION 3.4. Determinations Under Section 3.01. For
purposes of determining compliance with the conditions specified in
Section 3.01, each Lender Party shall be deemed to have consented to,
approved or accepted or to be satisfied with each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to the Lender Parties unless an officer of the Administrative
Agent responsible for the transactions contemplated by the Loan Documents
shall have received notice from such Lender Party prior to the Initial
Extension of Credit specifying its objection thereto and if the Initial
Extension of Credit consists of a Borrowing, such Lender Party shall not have
made available to the Administrative Agent such Lender Party's Pro Rata Share
of such Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties. Each of
Holdings, the Purchaser and the Borrower represents and warrants as follows:
(a) Each Loan Party (i) is a corporation, limited
partnership or limited liability company duly organized and validly
existing under the laws of the jurisdiction of its organization and
is in good standing under the laws of such jurisdiction (except where
the failure to be in good standing would not reasonably be expected
to have a Material Adverse Effect) and (ii) is duly qualified as a
foreign corporation, limited partnership or limited liability company
and is in good standing in each other jurisdiction in which the
ownership, lease or operation of its property and assets or the
conduct of its business require it to so qualify or be licensed,
except, solely in the case of this clause (ii), where the failure to
so qualify or be licensed or to be in good standing, either
individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect. Each Loan Party has all of the
requisite power and authority (including all Governmental
Authorizations), and the legal right, to own or lease and to operate
all of the property and assets it purports to own, lease or operate
and to conduct all of its business as now conducted and as proposed
to be conducted. Each Loan Party has all of the requisite power and
authority, and the legal right, to execute and deliver each of the
Loan Documents and the Related Documents to which it is or is to be a
party, to perform all of its Obligations hereunder and thereunder and
to consummate the Transaction and all of the other transactions
contemplated hereby and thereby. As of the date of this Agreement,
all of the outstanding Equity Interests in Holdings have been validly
issued, are fully paid and nonassessable and are owned directly or
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indirectly by the Permitted Investors and certain members of
management of the Borrower in the type and amounts disclosed on
Schedule 4.01(a) hereto free and clear of all Liens (including,
without limitation, preemptive or other similar rights of the holders
thereof).
(b) Set forth on Schedule 4.01(b) hereto is a complete
and accurate list of all Subsidiaries of each Loan Party as of the
date of this Agreement, showing, as of the date of this Agreement, as
to each such Subsidiary, the correct legal name thereof, the legal
structure thereof, the jurisdiction of its organization, the number
and type of each class of its Equity Interests authorized and the
number outstanding, and the percentage of each such class of its
Equity Interests outstanding on such date that are owned by any of
the Loan Parties. All of the outstanding Equity Interests in each
Subsidiary of the Loan Parties have been validly issued, are fully
paid and nonassessable and all of such Equity Interests owned
directly or indirectly by one or more of the Loan Parties are free
and clear of all Liens (including, without limitation, preemptive or
other similar rights of the holders thereof), except those created
under the Collateral Documents. Each Subsidiary of the Loan Parties
(i) is a corporation, limited partnership or limited liability
company duly organized and validly existing under the laws of the
jurisdiction of its organization and is in good standing under the
laws of such jurisdiction (except where the failure to be in good
standing would not reasonably be expected to have a Material Adverse
Effect) and (ii) is duly qualified as a foreign corporation, limited
partnership or limited liability company and is in good standing in
each other jurisdiction in which the ownership, lease or operation of
its property and assets or the conduct of its business require it to
so qualify or be licensed, except, solely in the case of this clause
(ii), where the failure to so qualify or be licensed or to be in good
standing, either individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. Each Loan
Party has all of the requisite power and authority (including all
Governmental Authorizations), and the legal right, to own or lease
and to operate all of the property and assets it purports to own,
lease or operate and to conduct all of its business as now conducted
and as proposed to be conducted. Each Loan Party has all of the
requisite power and authority, and the legal right, to execute and
deliver each of the Loan Documents and the Related Documents to which
it is or is to be a party, to perform all of its Obligations and
thereunder and to consummate the Transaction and all of the other
transactions contemplated hereby and thereby.
(c) The execution, delivery and performance by each Loan
Party of each Loan Document and each Related Document to which it is
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or is to be a party, and the consummation of the Transaction and the
other transactions contemplated hereby, have been duly authorized by
all necessary action (including, without limitation, all necessary
shareholder or other similar action) and do not:
(i) contravene the Constitutive Documents of
such Loan Party;
(ii) violate any Requirement of Law;
(iii) conflict with or result in the breach of,
or constitute a default under, any material loan agreement,
indenture, mortgage, deed of trust, lease, instrument,
contract or other agreement binding on or affecting such
Loan Party, any of its Subsidiaries or any of their
respective property or assets; or
(iv) except for the Liens created under the
Collateral Documents, result in or require the creation or
imposition of any Lien upon or with respect to any of the
property or assets of such Loan Party or any of its
Subsidiaries.
Neither any of the Loan Parties nor any of their respective
Subsidiaries is in violation of any Requirement of Law or in breach
of any loan agreement, indenture, mortgage, deed of trust, lease,
instrument, contract or other agreement referred to in the
immediately preceding sentence, the violation or breach of which,
either individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
(d) No Governmental Authorization, and no other
consent, approval or authorization of, or notice to or filing with,
or other action by, any other Person is required for:
(i) the due execution, delivery, recordation,
filing or performance by any Loan Party of any of the Loan
Documents or the Related Documents to which it is or is to
be a party, or for the consummation of any aspect of the
Transaction or the other transactions contemplated hereby or
thereby;
(ii) the grant by any Loan Party of the Liens
granted by it pursuant to the Collateral Documents;
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(iii) the perfection or maintenance of the Liens
created under the Collateral Documents (including the first
priority nature thereof); or
(iv) the exercise by the Administrative Agent or
any of the Lenders of its rights under the Loan Documents or
the remedies in respect of the Collateral pursuant to the
Collateral Documents;
except as have been obtained or made (or will be obtained or made in
accordance with the relevant Loan Document or Related Document) and
except for such consents, approvals, authorizations, notices or
filings which if not obtained or made could not, either individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect. All applicable waiting periods in connection with
each aspect of the Transaction and the other transactions
contemplated hereby and thereby have expired without any action
having been taken by any competent authority restraining, preventing
or imposing materially adverse conditions upon any aspect of the
Transaction or the rights of any Loan Party or any of its
Subsidiaries freely to transfer or otherwise dispose of, or to create
any Lien on, any property or assets now owned or hereafter acquired
by any of them. Neither any Loan Party nor any of its Subsidiaries
has received any notice relating to or threatening the revocation,
termination, cancellation, denial, impairment or modification of any
such Governmental Authorization, or is in violation or contravention
of, or in default under, any such Governmental Authorization except
for any violations, contraventions or defaults which could, either
individually or in the aggregate, not reasonably be expected to have
a Material Adverse Effect.
(e) This Agreement has been, and each of the other Loan
Documents and each of the Related Documents when delivered hereunder
will have been, duly executed and delivered by each of the Loan
Parties intended to be a party thereto. This Agreement is, and each
of the other Loan Documents and each of the Related Documents when
delivered hereunder will be, the legal, valid and binding obligations
of each of the Loan Parties intended to be a party thereto,
enforceable against such Loan Party in accordance with their
respective terms, except to the extent such enforceability may be
limited by the effect of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally.
(f) The Consolidated balance sheet of the Company and
its Subsidiaries as at December 31, 1998, and the related
Consolidated statements of income and cash flow of the Borrower and
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its Subsidiaries for the fiscal year then ended, accompanied by an
unqualified opinion of PricewaterhouseCoopers LLP, independent
public accountants of the Borrower copies of all of which have been
furnished to each Lender Party, fairly present the Consolidated
financial condition of the Borrower and its Subsidiaries as at such
date and the Consolidated results of the operations of the Borrower
and its Subsidiaries for the period ended on such date, all in
accordance with generally accepted accounting principles applied on a
consistent basis. Neither Holdings nor any of its Subsidiaries has
any material fixed or contingent liabilities, liabilities for taxes,
unusual forward or long-term commitments or anticipated losses from
any unfavorable commitments, except as referred to, or reflected or
provided for in, the financial statements referred to above in this
Section 4.01(f) or as described in reasonable detail in the
Information Memorandum. Since December 31, 1998, there has been no
Material Adverse Change.
(g) The Consolidated pro forma balance sheet of the
Borrower and its Subsidiaries as at March 31, 1999, duly certified by
the chief financial officer of the Borrower, copies of which have
been furnished to each Lender Party, fairly present the Consolidated
pro forma financial condition of the Borrower and its Subsidiaries as
at such date, in each case after giving effect to the Transaction and
the other transactions contemplated hereby, all in accordance with
GAAP.
(h) The Consolidated forecasted balance sheets, income
statements and cash flow statements of the Borrower and its
Subsidiaries delivered to the Lender Parties pursuant to
Section 3.01(j)(xi) or 5.03 were prepared in good faith on the basis
of the assumptions stated therein, which assumptions were fair in the
light of conditions existing at the time of delivery of such
forecasts, and represented, at the time of delivery, the Borrower's
reasonable estimate of its future financial performance (although the
actual results during the periods covered by such forecasts may
differ materially from the forecasted results).
(i) Neither the Information Memorandum nor any other
information, exhibit or report (other than financial projections and
pro forma financial information) furnished by or on behalf any Loan
Party to any Agent or any Lender Party in connection with the Loan
Documents or the Related Documents or pursuant to the terms of the
Loan Documents contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements made
therein, in light of the circumstances in which any such statements
were made, not misleading.
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(j) There is no action, suit, investigation, litigation,
arbitration or proceeding pending or, to the best knowledge of the
Borrower, threatened against or affecting any Loan Party or any of
its Subsidiaries or any of the property or assets thereof in any
court or before any arbitrator or by or before any Governmental
Authority of any kind that (i) either individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect (other than the Disclosed Litigation) or (ii) purports to
affect the legality, validity, binding effect or enforceability of
any of the Loan Documents or the Related Documents or any aspect of
the Transaction or any of the other transactions contemplated hereby
or thereby; and there has been no adverse change in the status, or
financial effect on any Loan Party or any of its Subsidiaries, of the
Disclosed Litigation from that described on Schedule 3.01(g) which
could reasonably be expected to have a Material Adverse Effect.
(k) Each Loan Party is the legal and beneficial owner of
the Collateral purported to be owned thereby under the Collateral
Documents, free and clear of all Liens, except for the liens and
security interests created under the Collateral Documents or
permitted by Section 5.02(a). The Collateral Documents create valid
and perfected first priority liens on and security interests (subject
to Liens permitted by Section 5.02(a)) in the Collateral in favor of
the Administrative Agent, for the benefit of the Secured Parties,
securing the payment of the Secured Obligations. All of the
certificated Equity Interests in the Purchaser and its Subsidiaries
that are purported to comprise part of the Collateral have been
delivered to the Administrative Agent as required under the terms of
the Collateral Documents, together with undated stock powers or other
appropriate powers duly executed in blank; and upon completion of the
provisions set forth in the Security Agreement, all filings and other
actions necessary to perfect and protect the liens and security
interests of the Administrative Agent in the Collateral shall have
been duly made or taken and are in full force and effect or will be
duly made or taken in accordance with the terms of the Loan
Documents; upon completion of the provisions set forth in the
Security Agreement, all filing fees and recording taxes shall have
been paid in full.
(l) The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying Margin
Stock.
(m) Neither any Loan Party nor any of its Subsidiaries
is an "investment company," or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company"
(as such terms are defined in the Investment Company Act of 1940, as
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amended). None of the making of any Advances, the issuance of any
Letters of Credit or the application of the proceeds or repayment
thereof by the Borrower, or the consummation of the Transaction or
any of the other transactions contemplated hereby, will violate any
provision of such Act or any rule, regulation or order of the
Securities and Exchange Commission thereunder.
(n) Each Loan Party is, individually and together with
its Subsidiaries, Solvent.
(o) Neither the business nor the property and assets of
any Loan Party or any of its Subsidiaries are or have been affected
by any fire, explosion, accident, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or other casualty (whether
or not covered by insurance) that, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect.
(p) There is (i) no unfair labor practice complaint
pending or, to the best knowledge of the Borrower, threatened against
any Loan Party or any of its Subsidiaries by or before any
Governmental Authority and no grievance or arbitration proceeding
pending or, to the best knowledge of the Borrower, threatened against
any Loan Party or any of its Subsidiaries which arises out of or
under any collective bargaining agreement that, either individually
or in the aggregate, could reasonably be expected to have a Material
Adverse Effect, (ii) no strike, labor dispute, slowdown, stoppage or
similar action or grievance pending or, to the best knowledge of the
Borrower, threatened against any Loan Party or any of its
Subsidiaries which could reasonably be expected to have a Material
Adverse Effect and (iii) no union representation question existing
with respect to the employees of any Loan Party or any of its
Subsidiaries and no union organizing activity taking place with
respect to any of the employees of any of them which could reasonably
be expected to have a Material Adverse Effect.
(q) Except as has not had and could not reasonably be
expected to have a Material Adverse Effect, either individually or in
the aggregate: (i) No ERISA Event has occurred or is reasonably
expected to occur with respect to any Plan.
(ii) Neither any Loan Party nor any ERISA Affiliate has
incurred or is reasonably expected to incur any Withdrawal Liability
to any Multiemployer Plan.
(iii) Neither any Loan Party nor any ERISA Affiliate has
been notified by the sponsor of a Multiemployer Plan that such
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Multiemployer Plan is in reorganization or has been terminated,
within the meaning of Title IV of ERISA, and no such Multiemployer
Plan is reasonably expected to be in reorganization or to be
terminated, within the meaning of Title IV of ERISA.
(r) Except as set forth on Schedule 4.01(r), the
operations and properties of each Loan Party and each of its
Subsidiaries comply with all applicable Environmental Laws and
Environmental Permits except for non-compliance that would not be
reasonably likely to have a Material Adverse Effect, all past
noncompliance with such Environmental Laws and Environmental Permits
has been resolved without material ongoing obligations or costs, and,
to the knowledge of the Loan Parties after reasonable inquiry, no
circumstances exist that could (i) form the basis of an Environmental
Action against any Loan Party or any of its Subsidiaries or any of
their properties that could reasonably be expected to have a Material
Adverse Effect or (ii) cause any such property to be subject to any
restrictions on ownership, occupancy, use or transferability under
any Environmental Law that could reasonably be expected to have a
Material Adverse Effect.
(s) Except as set forth on Schedule 4.01(s) or as could
not reasonably be expected to have a Material Adverse Effect: (i)
none of the properties currently or formerly owned or operated by any
Loan Party or any of its Subsidiaries is listed or, to the knowledge
of the Loan Parties after reasonable inquiry, proposed for listing on
the NPL or on the CERCLIS or any analogous foreign, state or local
list or, to the knowledge of the Loan Parties after reasonable
inquiry, is adjacent to any such property, (ii) there are no and
never have been any underground or aboveground storage tanks or any
surface impoundments, septic tanks, pits, sumps or lagoons in which
Hazardous Materials are being or have been treated, stored or
disposed on any property currently owned or operated by any Loan
Party or any of its Subsidiaries or, to the knowledge of the Loan
Parties after reasonable inquiry, on any property formerly owned or
operated by any Loan Party or any of its Subsidiaries during the time
such property was owned or operated by such Loan Party or Subsidiary,
(iii) there is no asbestos or asbestos-containing material on any
property currently owned or operated by any Loan Party or any of its
Subsidiaries and (iv) Hazardous Materials have not been released,
discharged or disposed of on any property currently owned or operated
by any Loan Party or any of its Subsidiaries or, with respect to any
property formerly owned or operated by any Loan Party or any of its
Subsidiaries, during the time such property was owned or operated by
such Loan Party or Subsidiary.
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(t) Except as set forth on Schedule 4.01(t) or as could
not, either individually or in the aggregate, reasonably be likely to
have a Material Adverse Effect, neither any Loan Party nor any of its
Subsidiaries is undertaking, and has not completed, either
individually or together with other potentially responsible parties,
any investigation or assessment or remedial or response action
relating to any actual or threatened release, discharge or disposal
of Hazardous Materials at any site, location or operation, either
voluntarily or pursuant to the order of any Governmental Authority or
the requirements of any Environmental Law; and all Hazardous
Materials generated, used, treated, handled or stored at, or
transported to or from, any property currently or formerly owned or
operated by any Loan Party or any of its Subsidiaries have been
disposed of in a manner not reasonably expected to result in material
liability to any Loan Party or any of its Subsidiaries.
(u) Each Loan Party and each of its Subsidiaries and
Affiliates have filed, have caused to be filed or have been included
in all federal tax returns and all material tax returns (state,
local, foreign or otherwise) required to be filed and have paid all
material taxes, assessments, levies, fees and other charges shown
thereon (or on any assessments received by any such Person or of
which any such Person has been notified) to be due and payable,
together with applicable interest and penalties, except for any such
taxes, assessments, levies, fees and other charges the amount,
applicability or validity of which is being contested in good faith
and by appropriate proceedings diligently conducted and with respect
to which such Loan Party or such Subsidiary or Affiliate, as the case
may be, has established appropriate and adequate reserves in
accordance with GAAP.
(v) Set forth on Schedule 4.01(v) hereto is a complete
and accurate list, as of the date of this Agreement, of each Open
Year of each Loan Party and each of its Subsidiaries and Affiliates
for which federal income tax returns have been filed and for which
the expiration of the applicable statute of limitations for
assessment or collection has not occurred by reason of extension or
otherwise (each, an "Open Year").
(w) As of the date hereof, no issues have been raised by
the Internal Revenue Service in any manner whatsoever, whether by
proposed adjustment or otherwise, with respect to the federal income
tax liability of the Loan Parties or any of their respective
Subsidiaries and Affiliates for any Open Years that, in the
aggregate, would be reasonably likely to have a Material Adverse
Effect.
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(x) As of the date hereof, no issues have been raised by
any state, local or foreign taxing authority in any manner
whatsoever, whether by proposed adjustment or otherwise, with respect
to the state, local and foreign tax liability of the Loan Parties or
any of their respective Subsidiaries and Affiliates that, in the
aggregate, would be reasonably likely to have a Material Adverse
Effect.
(y) No "ownership change" as defined in Section 382(g)
of the Internal Revenue Code, and no event that would result in the
application of the "separate return limitation year" or "consolidated
return change of ownership" limitations under the federal income tax
consolidated return regulations, has occurred with respect to the
Borrower or the Company.
(z) The Borrower, on behalf of itself and its
Subsidiaries, (i) has initiated a review and assessment of all areas
within its and each of its Subsidiaries' business and operations
(including those affected by suppliers, vendors and customers) that
could reasonably expected to be adversely affected by the risk that
computer applications used by the Borrower or any of its Subsidiaries
(or by their respective suppliers, vendors and customers) may be
unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999
(collectively, the "Year 2000 Problem"), (ii) has developed a plan
and time line for addressing the Year 2000 Problem on a timely basis
and (iii) has implemented such plan to date in accordance in all
material respects with such timetable. Based on the foregoing, the
Borrower believes that all computer applications (including those of
its and each of its Subsidiary's suppliers, vendors and customers)
that are material to its or any of its Subsidiaries' business and
operations are reasonably expected on a timely basis to be able to
perform properly date-sensitive functions for all dates before and
after January 1, 2000, except to the extent that a failure to do so,
either individually or in the aggregate, could not reasonably be
expected to have Material Adverse Effect.
(aa) Set forth on Part A of Schedule 4.01(aa) hereto is a
complete and accurate list, as of the date of this Agreement, of all
of the Existing Debt of the Company or any of its Subsidiaries (other
than the Surviving Debt), showing, as of such date, the Loan Party
party thereto, the principal amount outstanding thereunder, the
interest rate thereon, the scheduled maturity date thereof and the
amortization schedule, if any, therefor. Set forth on Part B of
Schedule 4.01(aa) hereto is a complete and accurate list, as of the
date of this Agreement, of all of the Surviving Debt on such date,
showing, as of such date, each of the Loan Parties party thereto, the
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principal amount outstanding thereunder, the interest rate thereon,
the scheduled maturity date thereof and the amortization schedule, if
any, therefor.
(bb) Set forth on Part A of Schedule 4.01(bb) hereto is a
complete and accurate list of all real property owned by any Loan
Party or any of its Subsidiaries as of the date hereof, showing as of
the date hereof the street address, county or other relevant
jurisdiction, state, record owner and book value thereof. Each Loan
Party or such Subsidiary has good, marketable and insurable fee
simple title to such real property, free and clear of all Liens,
other than Liens created or permitted by the Loan Documents. Set
forth on Part B of Schedule 4.01(bb) hereto is a complete and
accurate list of all leases of real property under which any Loan
Party or any of its Subsidiaries is the lessee as of the date hereof,
showing as of the date hereof the street address, county or other
relevant jurisdiction, state, lessor, lessee, expiration date and
annual rental cost thereof. As of the date hereof, each such lease
is the legal, valid and binding obligation of the lessor thereof,
enforceable in accordance with its terms.
(cc) Set forth on Schedule 4.01(cc) hereto is a complete
and accurate list, as of the date of this Agreement, of all of the
Investments (other than cash and Cash Equivalents) held by any Loan
Party or any of its Subsidiaries, showing, as of such date, the
amount, the obligor or issuer thereof and the maturity, if any,
thereof.
(dd) Set forth on Schedule 4.01(dd) hereto is a complete
and accurate list, as of the date hereof, of all patents, trademarks,
trade names, service marks and copyrights, and all applications
therefor and licenses thereof, of each Loan Party or any of its
Subsidiaries, showing as of the date hereof the jurisdiction in which
registered, the registration number, the date of registration and the
expiration date.
(ee) In respect of the potential liability (the "Cotton
Liability") arising from the higher residual levels of hydrogen
peroxide in the cotton that the Borrower's pharmaceutical coil
business received from its supplier during the period from March 1998
through November 1998, the Borrower, based upon a review and
investigation of the Cotton Liability and upon advice of counsel and
taking into account the levels of insurance, including and assuming
for this purpose the purchase of the Supplemental Insurance (as
defined in the Merger Agreement) and potential defenses, claims and
counterclaims available to the Borrower in respect of the Cotton
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Liability, the Borrower believes at the date hereof that the Cotton
Liability will not have a Material Adverse Effect.
(ff) Neither the making of any Advance nor the use of the
proceeds thereof in accordance with this Agreement will violate the
provisions of Regulation T, U or X of the Board of Governors of the
Federal Reserve System.
ARTICLE V
COVENANTS
SECTION 5.1. Affirmative Covenants. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding or any Lender
Party shall have any Commitment hereunder, each of Holdings, the Purchaser
and the Borrower will:
(a) Compliance with Laws, Etc. Comply, and cause each
of its Subsidiaries to comply, in all material respects, with all
applicable laws, rules, regulations and orders, such compliance to
include, without limitation, compliance with ERISA and the Racketeer
Influenced and Corrupt Organizations Chapter of the Organized Crime
Control Act of 1970.
(b) Payment of Taxes, Etc. Pay and discharge, and cause
each of its Subsidiaries to pay and discharge, before the same shall
become delinquent, (i) all material taxes, assessments and
governmental charges or levies imposed upon it or upon its property
and (ii) all material lawful claims that, if unpaid, might by law
become a Lien upon its property; provided, however, that neither the
Borrower nor any of its Subsidiaries shall be required to pay or
discharge any such tax, assessment, charge or claim that is being
contested in good faith and by proper proceedings and as to which
appropriate reserves in the aggregate are being maintained, unless
and until any Lien resulting therefrom attaches to its property and
collection, execution, levy or foreclosure proceedings shall have
been commenced with respect thereto enforceable against its other
creditors.
(c) Compliance with Environmental Laws. Comply, and
cause each of its Subsidiaries to comply, and take all reasonable
efforts to cause all lessees and other Persons operating or occupying
its properties to comply, in all material respects, with all
applicable Environmental Laws and Environmental Permits; obtain and
renew and cause each of its Subsidiaries to obtain and renew all
Environmental Permits material to its operations and properties; and
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conduct, and cause each of its Subsidiaries to conduct, any
investigation, study, sampling and testing, and undertake any
cleanup, removal, remedial or other action necessary to remove and
clean up all Hazardous Materials from any of its properties, in
accordance with (but only to the extent required by) the requirements
of all Environmental Laws; provided, however, that neither Holdings,
the Purchaser, the Borrower nor any of its Subsidiaries shall be
required to undertake any such cleanup, removal, remedial or other
action to the extent that its obligation to do so is being contested
in good faith and by proper proceedings and appropriate reserves are
being maintained in accordance with GAAP with respect to such
circumstances or to the extent that its failure to do so could not
reasonably be expected to have a Material Adverse Effect.
(d) Maintenance of Insurance. Maintain, and cause each
of its Subsidiaries to maintain, insurance with responsible and
reputable insurance companies or associations in such amounts and
covering such risks as is usually carried by companies engaged in
similar businesses and owning similar properties in the same general
areas in which the Borrower or such Subsidiary operates.
(e) Preservation of Corporate Existence, Etc. Preserve
and maintain, and cause each of its Subsidiaries to preserve and
maintain, its existence, legal structure, legal name, rights (charter
and statutory), permits, licenses, approvals, privileges and
franchises; provided, however, that the Purchaser and the Borrower
may consummate the Merger and any other merger or consolidation
permitted under Section 5.02(d); provided further that neither
Holdings nor the Purchaser nor the Borrower nor any of its
Subsidiaries shall be required to preserve any right, permit,
license, approval, privilege or franchise if the Board of Directors
of Holdings, the Purchaser, the Borrower or such Subsidiary shall
determine in good faith that the preservation thereof is no longer
desirable in the conduct of the business of Holdings, the Purchaser,
the Borrower or such Subsidiary, as the case may be, and that the
loss thereof could not reasonably be expected to have a Material
Adverse Effect.
(f) Visitation Rights. At any reasonable time and upon
reasonable notice and from time to time, permit the Administrative
Agent or any of the Lender Parties or any agents or representatives
thereof, to examine and make copies of and abstracts from the records
and books of account of, and visit the properties of, the Borrower
and any of its Subsidiaries, and to discuss the affairs, finances and
accounts of the Borrower and any of its Subsidiaries with any of
their officers or directors and with their independent certified
public accountants, provided that, so long as no Default or Event of
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Default under Section 6.01(a) or 6.01(f) has occurred and is
continuing, the Administrative Agent or such Lender Party shall give
the Borrower prior notice of its discussions with such public
accountants and the opportunity, at its option, to participate in
such discussions.
(g) Preparation of Environmental Reports. Upon the
occurrence of an Event of Default and at the request of the
Administrative Agent from time to time (but no more often than once
every two years), provide to the Lender Parties within 60 days after
such request, at the expense of the Borrower, an environmental site
assessment report for any of the properties subject to a Mortgage,
prepared by an environmental consulting firm acceptable to the
Administrative Agent, indicating the presence or absence of Hazardous
Materials and the estimated cost of any compliance, removal or
remedial action in connection with any Hazardous Materials on such
properties.
(h) Keeping of Books. Keep, and cause each of its
Subsidiaries to keep, proper books of record and account, in which
full and correct entries shall be made of all financial transactions
and the assets and business of the Borrower and each such Subsidiary
in accordance with generally accepted accounting principles in effect
from time to time.
(i) Maintenance of Properties, Etc. Maintain and
preserve, and cause each of its Subsidiaries to maintain and
preserve, all of its properties that are used or useful in the
conduct of its business in good working order and condition, ordinary
wear and tear excepted.
(j) Compliance with Terms of Leaseholds. Make all
payments and otherwise perform all obligations in respect of all
leases of real property to which the Borrower or any of its
Subsidiaries is a party, keep such leases in full force and effect
and not allow such leases to lapse or be terminated or any rights to
renew such leases to be forfeited or canceled, notify the
Administrative Agent of any default by any party with respect to such
leases and cooperate with the Administrative Agent in all respects to
cure any such default, and cause each of its Subsidiaries to do so,
except, in any case, where the failure to do so, either individually
or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect.
(k) Performance of Merger Agreement. Perform and
observe all of the terms and provisions of the Merger Agreement to be
performed or observed by it, maintain the Merger Agreement in full
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force and effect, enforce the Merger Agreement in accordance with its
terms, take all such action to such end as may be from time to time
requested by the Administrative Agent and, upon request of the
Administrative Agent, make to each other party to the Merger
Agreement such demands and requests for information and reports or
for action as the Borrower is entitled to make under the Merger
Agreement, in each case except to the extent that the failure to do
so could not reasonably be expected to have a Material Adverse
Effect.
(l) Transactions with Affiliates. Conduct, and cause
each of its Subsidiaries to conduct, all transactions otherwise
permitted under the Loan Documents with any of their Affiliates on
terms that are fair and reasonable and no less favorable to the
Borrower or such Subsidiary than it would obtain in a comparable
arm's-length transaction with a Person not an Affiliate, other than
(x) so long as no Default under Section 5.04, 6.01(a) or 6.01(f) has
occurred and is continuing, aggregate fees of up to $240,000 in any
calendar year to JWC or its Affiliates and (y) transactions conducted
in the ordinary course of business on a basis consistent with past
practices with Holdings and its Subsidiaries or with the joint
ventures to which the Borrower or any of its Subsidiaries is a party.
(m) Covenant to Give Security. Upon the request of the
Administrative Agent following the occurrence and during the
continuance of a Default, and at the expense of the Borrower,
(i) within 10 days after such request, furnish to the Administrative
Agent a description of the real and personal properties of the
Borrower and its Subsidiaries in detail satisfactory to the
Administrative Agent, (ii) within 15 days after receiving drafts
thereof, duly execute and deliver to the Administrative Agent
mortgages, pledges, assignments and other security agreements, as
specified by and in form and substance satisfactory to the
Administrative Agent, securing payment of all the Obligations of the
Borrower under the Loan Documents and constituting Liens on all such
properties, (iii) within 30 days after such request, take whatever
action (including, without limitation, the recording of mortgages,
the filing of Uniform Commercial Code financing statements, the
giving of notices and the endorsement of notices on title documents)
may be necessary or advisable in the opinion of the Administrative
Agent to vest in the Administrative Agent (or in any representative
of the Administrative Agent designated by it) valid and subsisting
Liens on the properties purported to be subject to the security
agreements delivered pursuant to this Section 5.01(m), enforceable
against all third parties in accordance with their terms, (iv) within
60 days after such request, deliver to the Administrative Agent a
signed copy of a favorable opinion, addressed to the Administrative
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Agent, of counsel for the Borrower acceptable to the Administrative
Agent as to the matters contained in clauses (i), (ii) and (iii)
above, as to such security agreements being legal, valid and binding
obligations of the Borrower and its Subsidiaries enforceable in
accordance with their terms and as to such other matters as the
Administrative Agent may reasonably request, (v) as promptly as
practicable after such request, deliver to the Administrative Agent
surveys meeting the criteria specified in Section 5.01(q) and
Mortgage Policies as to each parcel of real property subject to such
request and (vi) at any time and from time to time, promptly execute
and deliver any and all further instruments and documents and take
all such other action as the Administrative Agent may deem desirable
in obtaining the full benefits of, or in preserving the Liens of,
such security agreements.
(n) Interest Rate Hedging. Enter into prior to October
30, 1999, and maintain at all times thereafter, interest rate Hedge
Agreements with Persons acceptable to the Administrative Agent,
covering a notional amount of not less than 50% of the sum of the
aggregate amount of the Term A Advances and the Term B Advances and
providing for such Persons to make payments thereunder for a period
of no less than two years on terms acceptable to the Administrative
Agent.
(o) Additional Loan Parties. Cause each newly organized
or acquired Subsidiary of Holdings (whether direct or indirect) that
is not a controlled foreign corporation under Section 957 of the
Internal Revenue Code, prior to or concurrently with any Investment
by any of the Loan Parties or any of their Subsidiaries therein:
(i) to execute and deliver to the
Administrative Agent, on behalf of the Secured Parties, if
such Subsidiary is a wholly owned Subsidiary of one or more
of the Loan Parties and their Subsidiaries, (1) a Security
Agreement Supplement and/or, if necessary or in the
reasonable opinion of the Administrative Agent desirable
(and requested thereby) to properly create and perfect a
lien and security interest in the capital stock (or other
ownership or profit interests) in, or the property and
assets of, such Subsidiary, one or more other mortgages in
respect of any real property owned by such Subsidiary with a
fair market value as at the date of such Investment in
excess of $2,500,000, security agreements or pledge
agreements (or other similar documents), in form and
substance reasonably satisfactory to the Administrative
Agent, (2) a Guaranty Supplement and (3) in each case, such
other agreements, instruments, certificates or documents as
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the Administrative Agent may reasonably request, in each
case in form and substance reasonably satisfactory to the
Administrative Agent;
(ii) if such Subsidiary is a wholly owned
Subsidiary of one or more of the Loan Parties and their
Subsidiaries, such Subsidiary and the owners of all of the
capital stock (or other ownership or profit interests)
therein shall have taken or shall take all of the other
actions that may be necessary or that the Administrative
Agent may reasonably deem desirable in order (A) to perfect
and protect any Liens granted under the Collateral
Documents, the Security Agreement Supplement and, if
applicable, the other mortgages, security agreements and
pledge agreements referred to in clause (i) of this Section
5.0(o) and (B) to enable the Administrative Agent and the
Lender Parties to exercise and enforce their rights and
remedies under the Loan Documents; and
(iii) upon the reasonable request of the
Administrative Agent, signed copies of one or more favorable
opinions of appropriate local counsel for each jurisdiction
in which a Mortgage is being provided, covering such matters
as the Administrative Agent may reasonably request.
(p) Change of Control Put. Within 15 days following the
consummation of the Stock Tender Offer, mail the notice required by
Section 3.08(a) of the Senior Note Indenture of the Senior Notes and
specify in such notice that the "Purchase Date" (as defined in the
Senior Note Indenture) shall be no later than 30 days from the date
such notice is mailed.
(q) Conditions Subsequent to the Date of the Initial
Extension of Credit. Within 60 days following the date of the
Initial Extension of Credit, furnish to the Administrative Agent
deeds of trust, trust deeds, mortgages in form and substance
reasonably satisfactory to the Administrative Agent and covering the
properties listed on Schedule 5.01(q) (together with each other
mortgage delivered pursuant to Section 5.01(o), in each case as
amended, supplemented or otherwise modified from time to time in
accordance with their terms, the "Mortgages"), duly executed by the
appropriate Loan Party, together with:
(A) evidence that counterparts of the Mortgages
have been duly recorded on or before such date in all filing
or recording of files that the Administrative Agent may deem
necessary or desirable in order to create a valid first and
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subsisting Lien on the property described therein (subject
to Liens permitted by Section 5.02(a)) in favor of the
Secured Parties and that all filings and recording taxes and
fees have been paid,
(B) fully paid American Land Title Association
Lender's Extended Coverage title insurance policies (the
"Mortgage Policies") in form and substance, with
endorsements and in amount acceptable to the Administrative
Agent, issued, coinsured and reinsured by title insurers
acceptable to the Administrative Agent, insuring the
Mortgages to be valid first and subsisting Liens on the
property described therein, free and clear of all defects
(including, but not limited to, mechanics' and materialmen's
Liens) and encumbrances, excepting only Permitted
Encumbrances, and providing for such other affirmative
insurance (including endorsements for future advances under
the Loan Documents and for mechanics' and materialmen's
Liens) and such coinsurance and direct access reinsurance as
the Administrative Agent may deem necessary or desirable,
(C) American Land Title Association form
surveys, dated as of a date reasonably satisfactory to the
Administrative Agent, certified to the Administrative Agent
and the issuer of the Mortgage Policies in a manner
satisfactory to the Administrative Agent by a land surveyor
duly registered and licensed in the States in which the
property described in such surveys is located and acceptable
to the Administrative Agent, showing all buildings and other
improvements, any off-site improvements, the location of any
easements, parking spaces, rights of way, building set-back
lines and other dimensional regulations and the absence of
encroachments, either by such improvements or on to such
property, and other defects, other than encroachments and
other defects acceptable to the Administrative Agent,
(D) evidence of the insurance required by the
terms of the Mortgages,
(E) evidence that all other action that the
Administrative Agent may deem necessary or desirable in
order to create valid first and subsisting Liens on the
property described in the Mortgages has been taken, and
(F) favorable opinions of local counsel
reasonably satisfactory to the Administrative Agent for each
jurisdiction in which a Mortgage is being provided, covering
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such matters as the Administrative Agent may reasonably
request.
(r) Pledged Shares. On or prior to May 3, 1999, deliver
to the Administrative Agent certificates representing the Pledged
Shares issued by the Company and the Foreign Subsidiaries other than
Personna Israel Ltd., Personna International (Deutschland) GmbH and
Personna International de Mexico, S.A. de C.V., (ii) on or prior to
May 17, 1999, deliver to the Administrative Agent certificates
representing the Pledged Shares issued by Personna Israel Ltd. and
(iii) on or prior to August 3, 1999, deliver to the Administrative
Agent certificates representing the Pledged Shares issued by Personna
International de Mexico, S.A. de C.V.
(s) Termination of Financing Statements. Upon the
request of the Administrative Agent, and at the expense of the
Borrower, within 10 days after such request, furnish to the
Administrative Agent proper termination statements on Form UCC-3
covering such financing statements as the Administrative Agent may
reasonably request that were listed in the completed requests for
information referred to in Section 3.01(j)(viii)(C).
SECTION 5.2. Negative Covenants. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding or any Lender
Party shall have any Commitment hereunder, neither Holdings nor the Borrower
will, at any time:
(a) Liens, Etc. Create, incur, assume or suffer to
exist, or permit any of its Subsidiaries to create, incur, assume or
suffer to exist, any Lien on or with respect to any of its properties
of any character (including, without limitation, accounts) whether
now owned or hereafter acquired, or sign or file or suffer to exist,
or permit any of its Subsidiaries to sign or file or suffer to exist,
under the Uniform Commercial Code of any jurisdiction, a financing
statement that names Holdings or any of its Subsidiaries as debtor,
or sign or suffer to exist, or permit any of its Subsidiaries to sign
or suffer to exist, any security agreement authorizing any secured
party thereunder to file such financing statement, or assign, or
permit any of its Subsidiaries to assign, any accounts or other right
to receive income, excluding, however, from the operation of the
foregoing restrictions the following:
(i) Liens created under the Loan Documents;
(ii) Permitted Liens;
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(iii) in the case of the Borrower and its
Subsidiaries, Liens existing on the date hereof and
described on Schedule 5.02(a) hereto;
(iv) in the case of the Borrower and its
Subsidiaries, purchase money Liens upon or in real property
or equipment acquired or held by the Borrower or any of its
Subsidiaries in the ordinary course of business to secure
the purchase price of such property or equipment or to
secure Debt incurred solely for the purpose of financing the
acquisition, construction or improvement of any such
property or equipment to be subject to such Liens, or Liens
existing on any such property or equipment at the time of
acquisition (other than any such Liens created in
contemplation of such acquisition that do not secure the
purchase price of such real property or equipment), or
extensions, renewals or replacements of any of the foregoing
for the same or a lesser amount; provided, however, that no
such Lien shall extend to or cover any real property or
equipment other than the property or equipment being
acquired, constructed or improved, and no such extension,
renewal or replacement shall extend to or cover any property
not theretofore subject to the Lien being extended, renewed
or replaced; and provided further that the aggregate
principal amount of the Debt secured by Liens permitted by
this clause (iv) shall not exceed the amount permitted under
Section 5.02(b)(iii)(B) at any time outstanding;
(v) in the case of the Borrower and its
Subsidiaries, Liens arising in connection with Capitalized
Leases permitted under Section 5.02(b)(iii)(C); provided
that no such Lien shall extend to or cover any property or
assets other than the property and assets subject to such
Capitalized Leases;
(vi) in the case of the Borrower and its
Subsidiaries, other Liens affecting property with an
aggregate fair value not to exceed $5,000,000; and
(vii) in the case of the Borrower and its
Subsidiaries, the replacement, extension or renewal of any
Lien permitted by clause (iii) above upon or in the same
property theretofore subject thereto or the replacement,
extension or renewal (without increase in the amount or
change in any direct or contingent obligor) of the Debt
secured thereby.
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(b) Debt. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any Debt other than:
(i) in the case of the Borrower,
(A) Subordinated Debt evidenced by the
Subordinated Notes,
(B) Debt in respect of Hedge Agreements
designed to hedge against currency fluctuations and
fluctuations in interest rates on floating rate Debt
otherwise permitted hereby; and
(C) Contingent Obligations of the
Borrower guaranteeing all or any portion of the
outstanding Debt of any of the Borrower's
Subsidiaries, provided that each such Debt of any
such Subsidiary is otherwise permitted under the
terms of the Loan Documents;
(ii) in the case of any of the Subsidiaries of
the Borrower, Debt owed to the Borrower or to a Loan Party;
and
(iii) in the case of Holdings and any of its
Subsidiaries,
(A) Debt under the Loan Documents,
(B) in the case of the Borrower and its
Subsidiaries, Debt secured by Liens permitted by
Section 5.02(a)(iv) not to exceed in the aggregate
(together with the aggregate amount of Debt
outstanding at such time pursuant to the provisions
of clause (iii)(C) below) $15,000,000 at any time
outstanding,
(C) in the case of the Borrower and its
Subsidiaries, Capitalized Leases not to exceed in
the aggregate (together with the aggregate amount of
Debt outstanding at such time pursuant to the
provisions of clause (iii)(B) above) $15,000,000 at
any time outstanding,
(D) the Surviving Debt, and any Debt
extending the maturity of, or refunding or
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refinancing, in whole or in part, any Surviving
Debt, provided that the terms of any such extending,
refunding or refinancing Debt, and of any agreement
entered into and of any instrument issued in
connection therewith, are otherwise permitted by the
Loan Documents, provided further that the principal
amount of such Surviving Debt shall not be increased
above the principal amount thereof outstanding
immediately prior to such extension, refunding or
refinancing, and the direct and contingent obligor
therefor shall not be changed, as a result of or in
connection with such extension, refunding or
refinancing, and
(E) Debt of any Person that becomes a
Subsidiary of the Borrower after the date hereof in
accordance with the terms of Section 5.02(e) that is
existing at the time such Person becomes a
Subsidiary of the Borrower (other than Debt incurred
solely in contemplation of such Person becoming a
Subsidiary of the Borrower),
(F) in the case of Holdings, the
Holdings Debt,
(G) in the case of the Borrower and its
Subsidiaries, indorsement of negotiable instruments
for deposit or collection or similar transactions in
the ordinary course of business, and
(H) in the case of the Borrower and its
Subsidiaries, Debt aggregating (together with the
aggregate amount of Debt outstanding at such time
pursuant to the provisions of clauses (iii)(B) and
(iii)(C) above) not more than $25,000,000 at any one
time outstanding.
(c) Mergers, Etc. Merge into or consolidate with any
Person or permit any Person to merge into it, or permit any of its
Subsidiaries to do so, except that (i) the Purchaser and the Borrower
may consummate the Merger, (ii) any Subsidiary of the Borrower may
merge into or consolidate with any other Subsidiary of the Borrower
provided that, in the case of any such merger or consolidation, the
Person formed by such merger or consolidation shall be a wholly owned
Subsidiary of the Borrower, and (iii) any of the Borrower's
Subsidiaries may merge into the Borrower; provided, however, that in
each case, immediately after giving effect thereto, no event shall
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occur and be continuing that constitutes a Default and, in the case
of any such merger to which the Borrower is a party, the Borrower is
the surviving corporation.
(d) Sales, Etc., of Assets. Sell, lease, transfer or
otherwise dispose of, or permit any of its Subsidiaries to sell,
lease, transfer or otherwise dispose of, any assets, or grant any
option or other right to purchase, lease or otherwise acquire any
asset other than inventory to be sold in the ordinary course of its
business, except:
(i) sales of inventory in the ordinary course of its
business,
(ii) in a transaction authorized by subsection (c) of
this Section,
(iii) sales of assets for cash and for fair value in an
aggregate amount not to exceed $5,000,000 in any Fiscal Year,
(iv) the sale of any asset by the Borrower or
any Subsidiary (other than a bulk sale of inventory and a
sale of receivables other than delinquent accounts for
collection purposes only) so long as (A) the purchase price
paid to the Borrower or such Subsidiary for such asset shall
be no less than the fair market value of such asset at the
time of such sale, (B) the purchase price for such asset
shall be paid to the Borrower or such Subsidiary at least
80% in cash and (C) the aggregate purchase price paid to the
Borrower and all of its Subsidiaries for such asset and all
other assets sold by the Borrower and its Subsidiaries
during the same Fiscal Year pursuant to this clause (iv)
shall not exceed $5,000,000,
(v) so long as no Default shall occur and be
continuing, the grant of any option or other right to
purchase any asset in a transaction which would be permitted
under the provisions of clause (iv) above,
(vi) the sale by the Borrower of Hewitt so long
as (A) the purchase price paid to the Borrower shall be no
less than the fair market value of Hewitt at the time of
such sale and (B) the purchase price for such asset shall be
paid to the Borrower at least 80% in cash, and
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(vii) sales, transfers or other dispositions of
obsolete or surplus equipment or other assets in the
ordinary course of business,
provided that in the case of sales of assets pursuant to clauses (iv)
and (vi) above, the Borrower shall, on the date of receipt by the
Borrower or any of its Subsidiaries of the Net Cash Proceeds from
such sale, prepay the Advances pursuant to, and in the amount and
order of priority set forth in, Section 2.06(b)(ii), as specified
therein.
(e) Investments in Other Persons. Make or hold, or
permit any of its Subsidiaries to make or hold, any Investment in any
Person other than:
(i) Investments by the Borrower and its
Subsidiaries in their Subsidiaries that are Loan Parties
outstanding on the date hereof and additional investments in
Subsidiaries that are Loan Parties;
(ii) loans and advances by the Borrower and its
Subsidiaries to employees in an aggregate principal amount
not to exceed $1,500,000 at any time outstanding;
(iii) Investments by the Borrower and its
Subsidiaries in Cash Equivalents;
(iv) Investments by the Borrower in Hedge
Agreements permitted under Section 5.02(b)(i)(B);
(v) Investments consisting of intercompany Debt
permitted under Section 5.02(b)(ii);
(vi) Investments existing on the date hereof and
described on Schedule 4.01(cc) hereto;
(vii) Investments by the Borrower or any of its
Subsidiaries in Subsidiaries that are controlled foreign
corporations under Section 957 of the Internal Revenue Code
in an aggregate amount invested not to exceed $5,000,000;
(viii) Investments by the Borrower consisting of
Contingent Obligations permitted under Section
5.02(b)(i)(C);
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(ix) Investments consisting of promissory notes
as partial consideration for the sale of any asset permitted
under Section 5.02(d);
(x) Investments by Holdings in the Purchaser
and the Borrower (after consummation of the Stock Tender
Offer);
(xi) Investments by the Company in (A) the
Holdings Debt or (B) a loan to Holdings on terms and
conditions reasonably satisfactory to the Administrative
Agent, provided that (1) the aggregate amount so invested
shall not exceed $15,000,000, (2) at the time of such
Investment, at least an aggregate principal amount of Senior
Notes equal to $55,000,000 shall be outstanding and (3) such
Investment shall not be made until after the "Purchase Date"
(as defined in the Senior Note Indenture) under Section
3.08(a) of the Senior Note Indenture shall have occurred;
(xii) other Investments in an aggregate amount
invested (including the amount of Debt assumed in connection
with such Investments) not to exceed $20,000,000; provided
that (A) up to an aggregate amount of $5,000,000 of such
Investments may be in Persons other than wholly-owned
Subsidiaries and (B) with respect to any Investments made
under this clause (xi), immediately before and after giving
effect thereto, no Default shall have occurred and be
continuing or would result therefrom.
(f) Dividends, Etc. Declare or pay any dividends,
purchase, redeem, retire, defease or otherwise acquire for value any
of its capital stock or any warrants, rights or options to acquire
such capital stock, now or hereafter outstanding, return any capital
to its stockholders as such, make any distribution of assets, capital
stock, warrants, rights, options, obligations or securities to its
stockholders as such, or permit any of its Subsidiaries to do any of
the foregoing or permit any of its Subsidiaries to purchase, redeem,
retire, defease or otherwise acquire for value any capital stock of
Holdings or the Borrower or any warrants, rights or options to
acquire such capital stock or to issue or sell any capital stock or
any warrants, rights or options to acquire such capital stock, except
that, so long as no Default shall have occurred and be continuing at
the time of any action described in clauses (i) and (ii) below or
would result therefrom, (i) the Borrower may (A) declare and pay
dividends and distributions payable only in common stock of the
Borrower, (B) except to the extent the Net Cash Proceeds thereof are
required to be applied to the prepayment of the Advances pursuant to
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Section 2.06(b), purchase, redeem, retire, defease or otherwise
acquire shares of its capital stock with the proceeds received from
the issue of new shares of its capital stock with equal or inferior
voting powers, designations, preferences and rights, (C) declare and
pay cash dividends to Holdings for operating expenses in an aggregate
amount not to exceed $100,000 in any Fiscal Year, (D) on or after the
date of the issuance of the Subordinated Notes, declare and pay cash
dividends to Holdings to enable Holdings to prepay in whole or in
part the Holdings Debt, so long as the Borrower has complied with the
provisions of Section 2.06(b), (E) declare and pay cash dividends
after the fifth anniversary of the date hereof to Holdings to enable
Holdings to pay the current portion of interest on the Holdings Debt
to the extent such interest is required, by the terms of the Holdings
Debt Documents, to be paid in cash and (F) pay cash dividends to
Holdings to enable Holdings to repurchase shares of its common stock
from officers or employees of Holdings and its Subsidiaries, in an
aggregate amount in any calendar year not in excess of the sum of
$1,500,000 plus any amount permitted to be so used in the prior
calendar year pursuant to this clause (E) and not so used; and (ii)
any Subsidiary of the Borrower may (A) declare and pay cash dividends
to the Borrower and (B) declare and pay cash dividends to any other
Subsidiary of the Borrower of which it is a Subsidiary.
(g) Change in Nature of Business. (i) In the case of
Holdings, engage in any business or activity other than (A) holding
the capital stock of the Borrower and (B) entering into, and
performing its obligations under, the Loan Documents, the Related
Documents and certain related documents and (ii) in the case of the
Borrower and its Subsidiaries cease to continue to be engaged
primarily in the business carried on by the Borrower and its
Subsidiaries as at the date hereof or in the consumer personal care
or beauty products business.
(h) Charter Amendments. Amend, or permit any of its
Subsidiaries to amend, its certificate of incorporation or bylaws in
any manner materially adverse to the interests of the Lender Parties.
(i) Accounting Changes. Make or permit, or permit any
of its Subsidiaries to make or permit, any change in (i) accounting
policies or reporting practices, except as permitted by generally
accepted accounting principles or (ii) Fiscal Year.
(j) Prepayments, Etc., of Debt. Prepay, redeem,
purchase, defease or otherwise satisfy prior to the scheduled
maturity thereof in any manner, or make any payment in violation of
any subordination terms of, the Holdings Debt or any Subordinated
Debt, other than (i) regularly scheduled or required repayments or
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redemptions of such Debt and (ii) the prepayment of the Holdings Debt
with the Net Cash Proceeds of the Subordinated Notes, or amend,
modify or change in any manner materially adverse to the interests of
the Lender Parties any term or condition of any Surviving Debt or
Subordinated Debt, or permit any of its Subsidiaries to do any of the
foregoing.
(k) Amendment, Etc., of Related Documents. Cancel or
terminate any Related Document or consent to or accept any
cancellation or termination thereof (except, in the case of the
Holdings Debt Documents, in connection with any permitted repayment
thereof), amend, modify or change in any manner any term or condition
of any Related Document or give any consent, waiver or approval
thereunder, waive any default under or any breach of any term or
condition of any Related Document, agree in any manner to any other
amendment, modification or change of any term or condition of any
Related Document, in each case with respect to the foregoing in a
manner that would materially adversely affect the rights or interests
of the Administrative Agent or any Lender Party or take any other
action in connection with any Related Document that would impair the
value of the interest or rights of the Borrower thereunder or that
would materially adversely affect the rights or interests of the
Administrative Agent or any Lender Party, or permit any of its
Subsidiaries to do any of the foregoing.
(l) Negative Pledge. Enter into or suffer to exist, or
permit any of its Subsidiaries to enter into or suffer to exist, any
agreement prohibiting or conditioning the creation or assumption of
any Lien upon any of its property or assets other than (i) in favor
of the Secured Parties or (ii) in connection with (A) any Surviving
Debt, (B) any Debt permitted by Section 5.02(b)(i)(A) hereof or (C)
any Debt permitted by Section 5.02(a) to be secured so long as such
restriction only applies to the assets covered by the relevant Lien.
(m) Partnerships, Etc. Become a general partner in any
general or limited partnership, or permit any of its Subsidiaries to
do so, other than any Subsidiary the sole assets of which consist of
its interest in such partnership.
(n) Speculative Transactions. Engage, or permit any of
its Subsidiaries to engage, in any transaction involving commodity
options or futures contracts or any similar speculative transactions,
except for Hedge Agreements permitted under Section 5.02(b).
(o) Capital Expenditures. Make, or permit any of its
Subsidiaries to make, any Capital Expenditures that would cause the
aggregate of all such Capital Expenditures made by the Borrower and
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its Subsidiaries in any Fiscal Year to exceed $15,000,000; provided
that if, at the end of any Fiscal Year, the amount of Capital
Expenditures made by the Borrower and its Subsidiaries during such
Fiscal Year is less than $15,000,000, the Borrower and its
Subsidiaries may make additional Capital Expenditures in the
succeeding Fiscal Year in an amount equal to the excess of
$15,000,000 over the aggregate amount of Capital Expenditures made
during such prior Fiscal Year.
(p) Repurchase Payments. Make any Repurchase Payments
in an amount greater than 104.389% of the aggregate principal amount
of the Senior Notes being purchased or redeemed; provided, however,
that on and after the date on which the Borrower makes the Investment
permitted by Section 5.02(e)(xi), if a Repurchase Payment would
result in less than $55 million principal amount of Senior Notes
outstanding, such Repurchase Payment may only be made as a tender
offer for the Senior Notes in respect of which the Borrower has
sufficient liquidity (as a result of capital contributions, or
commitments to make capital contributions, from Holdings or JWC or
its Affiliates) to be able to repurchase 100% of the outstanding
Senior Notes.
SECTION 5.3. Reporting Requirements. So long as any
Advance shall remain unpaid, any Letter of Credit shall be outstanding or any
Lender Party shall have any Commitment hereunder, the Borrower will furnish
to the Lender Parties:
(a) Default Notice. As soon as possible and in any
event within two Business Days after the occurrence of each Default
or any event, development or occurrence reasonably likely to have a
Material Adverse Effect continuing on the date of such statement, a
statement of the chief financial officer of the Borrower setting
forth details of such Default and the action that the Borrower has
taken and proposes to take with respect thereto.
(b) Monthly Financials. As soon as available and in any
event within 30 days after the end of each month, a Consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of
such month and Consolidated statements of income and a Consolidated
statement of cash flows of the Borrower and its Subsidiaries for the
period commencing at the end of the previous month and ending with
the end of such month, in substantially the form as has been
previously provided to the Lenders together with, commencing with
monthly financials delivered for June 1999, a certificate of the
chief financial officer of the Borrower setting forth the
computations for determining the Leverage Ratio at such time.
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(c) Quarterly Financials. As soon as available and in
any event within 45 days after the end of each of the first three
quarters of each Fiscal Year, Consolidated balance sheets of the
Borrower and its Subsidiaries as of the end of such quarter and
Consolidated statements of income and a Consolidated statement of
cash flows of the Borrower and its Subsidiaries for the period
commencing at the end of the previous fiscal quarter and ending with
the end of such fiscal quarter and Consolidated statements of income
and a Consolidated statement of cash flows of the Borrower and its
Subsidiaries for the period commencing at the end of the previous
Fiscal Year and ending with the end of such quarter, setting forth in
each case in comparative form (x) the corresponding figures for the
corresponding period of the preceding Fiscal Year and (y) the
budgeted figures for such period, all in reasonable detail and duly
certified in an officer's certificate (subject to year-end audit
adjustments) by the chief financial officer of the Borrower as having
been prepared in accordance with GAAP, together with (i) a
certificate of said officer stating that no Default has occurred and
is continuing or, if a Default has occurred and is continuing, a
statement as to the nature thereof and the action that the Borrower
has taken and proposes to take with respect thereto, and (ii) a
schedule in form satisfactory to the Administrative Agent of the
computations used by the Borrower in determining compliance with the
covenants contained in Sections 5.04(a) through (c), provided that in
the event of any change in GAAP used in the preparation of such
financial statements, the Borrower shall also provide, if necessary
for the determination of compliance with Section 5.04, a statement of
reconciliation conforming such financial statements to GAAP.
(d) Annual Financials. As soon as available and in any
event within 90 days after the end of each Fiscal Year, a copy of the
annual audit report for such year for the Borrower and its
Subsidiaries, including therein Consolidated balance sheets of the
Borrower and its Subsidiaries as of the end of such Fiscal Year and
Consolidated statements of income and a Consolidated statement of
cash flows of the Borrower and its Subsidiaries for such Fiscal Year,
in each case accompanied by an opinion acceptable to the Required
Lenders of PricewaterhouseCoopers LLP or other independent public
accountants of nationally recognized standing, together with a
certificate of such accounting firm stating that in the course of the
regular audit of the business of the Borrower and its Subsidiaries,
which audit was conducted by such accounting firm in accordance with
generally accepted auditing standards, such accounting firm has
obtained no knowledge that a Default has occurred and is continuing,
or if, in the opinion of such accounting firm, a Default has occurred
and is continuing, a statement as to the nature thereof, provided
that in the event of any change in GAAP used in the preparation of
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such financial statements, the Borrower shall also provide, if
necessary for the determination of compliance with Section 5.04, a
statement of reconciliation conforming such financial statements to
GAAP and a certificate of the chief financial officer of the Borrower
(together with a schedule in form satisfactory to the Administrative
Agent of the computations used by the Borrower in determining, as of
the end of such Fiscal Year, compliance with the covenants contained
in Section 5.04) stating that no Default has occurred and is
continuing or, if a default has occurred and is continuing, a
statement as to the nature thereof and the action that the Borrower
has taken and proposes to take with respect thereto.
(e) Annual Forecasts. As soon as available and in any
event no later than 60 days after the end of each Fiscal Year,
forecasts prepared by management of the Borrower, in form
satisfactory to the Administrative Agent, of balance sheets, income
statements and cash flow statements on a monthly basis for the Fiscal
Year following such Fiscal Year then ended.
(f) ERISA Events and ERISA Reports. (i) Promptly and
in any event within 10 days after any Loan Party or any ERISA
Affiliate knows or has reason to know that any ERISA Event that has
resulted or is reasonably expected to result in a Material Adverse
Effect has occurred, a statement of the chief financial officer of
the Borrower describing such ERISA Event and the action, if any, that
such Loan Party or such ERISA Affiliate has taken and proposes to
take with respect thereto and (ii) on the date any records, documents
or other information must be furnished to the PBGC with respect to
any Plan pursuant to Section 4010 of ERISA, a copy of such records,
documents and information.
(g) Plan Terminations. Promptly and in any event within
two Business Days after receipt thereof by any Loan Party or any
ERISA Affiliate, copies of each notice from the PBGC stating its
intention to terminate any Plan or to have a trustee appointed to
administer any Plan.
(h) Actuarial Reports. Promptly upon request therefor
by any Lender Party (through the Administrative Agent), a copy of the
annual actuarial valuation report for any Plan.
(i) Multiemployer Plan Notices. Promptly and in any
event within five Business Days after receipt thereof by any Loan
Party or any ERISA Affiliate from the sponsor of a Multiemployer
Plan, copies of each notice concerning (i) the imposition of
Withdrawal Liability by any such Multiemployer Plan, (ii) the
reorganization or termination, within the meaning of Title IV of
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ERISA, of any such Multiemployer Plan or (iii) the amount of
liability incurred, or that may be incurred, by such Loan Party or
any ERISA Affiliate in connection with any event described in
clause (i) or (ii), provided, however, that such copies must be
provided only if such imposition of Withdrawal Liability,
reorganization or termination has resulted or is reasonably expected
to result in a Material Adverse Effect, or otherwise, upon the
request of any Lender Party (through the Administrative Agent).
(j) Litigation. Promptly after the commencement
thereof, notice of all actions, suits, investigations, litigation and
proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign,
affecting any Loan Party or any of its Subsidiaries of the type (and
meeting any applicable materiality thresholds) described in
Section 4.01(j), and promptly after the occurrence thereof, notice of
any adverse change in the status or the financial effect on any Loan
Party or any of its Subsidiaries of the Disclosed Litigation from
that described on Schedule 3.01(g) which could reasonably be expected
to have a Material Adverse Effect.
(k) Securities Reports. Promptly after the sending or
filing thereof, copies of all registration statements that any Loan
Party or any of its Subsidiaries files with the Securities and
Exchange Commission or any Governmental Authority that may be
substituted therefor, or with any national securities exchange.
(l) Environmental Conditions. Promptly after the
assertion or occurrence thereof, notice of any Environmental Action
against or of any noncompliance by any Loan Party or any of its
Subsidiaries with any Environmental Law or Environmental Permit that
(i) could reasonably be expected to have a Material Adverse Effect or
(ii) cause any property described in the Mortgages to be subject to
any material restrictions on ownership, occupancy, use or
transferability under any Environmental Law.
(m) Real Property. As soon as available and in any
event within 90 days after the end of each Fiscal Year, a report
supplementing Schedules 4.01(jj) and 4.01(kk) hereto, including an
identification of all real and leased property (with a fair market
value of at least $2.5 million) disposed of by the Borrower or any of
its Subsidiaries during such Fiscal Year, a list and description
(including the street address, county or other relevant jurisdiction,
state, record owner, book value thereof, and in the case of leases of
property, lessor, lessee, expiration date and annual rental cost
thereof) of all real property (with a fair market value of at least
$2.5 million) acquired or leased during such Fiscal Year and a
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description of such other changes in the information included in such
Schedules as may be necessary for such Schedules to be accurate and
complete.
(n) Insurance. As soon as available and in any event
within 60 days after the end of each Fiscal Year, a report
summarizing the insurance coverage (specifying type, amount and
carrier) in effect for the Borrower and its Subsidiaries and
containing such additional information as the Administrative Agent
may reasonably specify.
(o) Year 2000 Compliance. Promptly upon the discovery
or determination thereof by any Loan Party, notice of any computer
application (including any such computer application of its or any of
its Subsidiary's suppliers, vendors and customers) that is material
to its or any of its Subsidiaries' business, financial condition or
operations and will not be able on a timely basis to perform properly
date-sensitive functions for all dates before and after January 1,
2000, except to the extent that such failure, either individually or
in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
(p) Repurchase Payments. Promptly upon making any
Repurchase Payment, notice of such Repurchase Payment (together with
the aggregate principal amount of the Senior Notes that remain
outstanding after giving effect to such Repurchase Payment) and
whether such Repurchase Payment was funded with proceeds of Working
Capital Advances.
(q) Other Information. Such other information
respecting the business, condition (financial or otherwise),
operations, performance, properties or prospects of any Loan Party or
any of its Subsidiaries as the Administrative Agent may from time to
time reasonably request.
SECTION 5.4. Financial Covenants. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding or any Lender
Party shall have any Commitment hereunder, the Borrower will:
(a) Leverage Ratio. Maintain at the end of each fiscal
month of the Borrower a Leverage Ratio of not more than the amount
set forth below for each month set forth below:
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(Subordinated (Subordinated
Each Month During Notes Issued) Notes Not Issued)
Quarter Ending In Ratio Ratio
June 30, 1999 6.25 4.70
September 30, 1999 6.25 4.70
December 31, 1999 6.25 4.70
March 31, 2000 6.25 4.70
June 30, 2000 6.25 4.50
September 30, 2000 6.25 4.25
December 31, 2000 5.50 4.25
March 31, 2001 5.50 3.75
June 30, 2001 5.50 3.75
September 30, 2001 5.00 3.75
December 31, 2001 5.00 3.75
March 31, 2002 5.00 3.25
June 30, 2002 5.00 3.25
September 30, 2002 4.50 3.25
December 31, 2002 4.50 2.75
March 31, 2003 4.50 2.75
June 30, 2003 4.50 2.75
September 30, 2003 3.75 2.75
December 31, 2003 3.75 2.25
and thereafter
; provided, that the ratios set forth above for the circumstances
under which the Subordinated Notes are issued shall only be
applicable if the Holdings Debt shall have been paid or otherwise
satisfied in full.
(b) Fixed Charge Coverage Ratio. Maintain at the end of
each fiscal quarter of the Borrower a ratio of (i) Consolidated
EBITDA less cash Capital Expenditures made, less cash income taxes
paid to (ii) the sum of (x) Consolidated Cash Interest Expense plus
(y) Required Principal Payments payable (other than, if the
Subordinated Notes have been issued, (1) Required Principal Payments
in respect of the Surviving Debt payable during 1999 and 2000 and (2)
Required Principal Payments in respect of the Term B Advances payable
on April 30, 2006 and April 30, 2007) plus (z) cash dividends paid by
Holdings (including, only in the event that the Subordinated Notes
have not been issued, cash dividends paid to Holdings in order to pay
cash interest on the Holdings Debt), in each case (other than clause
(z)), by the Borrower and its Subsidiaries during the four fiscal
quarter period ended at the end of such fiscal quarter of not less
than the amount set forth below for such fiscal quarter set forth
below:
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(Subordinated (Subordinated
Notes Issued) Notes Not Issued)
Quarter Ending In Ratio Ratio
June 30, 1999 1.00 1.00
September 30, 1999 1.00 1.00
December 31, 1999 1.00 1.00
March 31, 2000 1.00 1.00
June 30, 2000 1.00 1.00
September 30, 2000 1.00 1.00
December 31, 2000 1.00 1.10
through June 30, 2005
September 30, 2005 1.0 1.0
and thereafter
; provided, however, that the ratios set forth above for the
circumstances under which the Subordinated Notes are issued shall
only be applicable if the Holdings Debt shall have been paid or
otherwise satisfied in full; provided further, that if such four
fiscal quarter period includes any or all of the quarters ending June
30, 1999, September 30, 1999, December 31, 1999 or March 30, 2000,
the amount referred to in clause (ii) shall be the actual amount for
the period since the Closing Date multiplied by a fraction of the
numerator of which is four and the denominator of which is the number
of fiscal quarters that have elapsed since the Closing Date.
(c) Interest Coverage Ratio. Maintain at the end of
each fiscal quarter of the Borrower a ratio of Consolidated EBITDA of
the Borrower and its Subsidiaries for the four fiscal quarter period
ended at the end of such fiscal quarter to Consolidated Cash Interest
Expense of the Borrower and its Subsidiaries during such four fiscal
quarter period of not less than the amount set forth below for such
fiscal quarter set forth below:
(Subordinated (Subordinated
Notes Issued) Notes Not Issued)
Quarter Ending In Ratio Ratio
June 30, 1999 1.50 2.25
September 30, 1999 1.50 2.25
December 31, 1999 1.50 2.25
March 31, 2000 1.50 2.25
June 30, 2000 1.50 2.25
September 30, 2000 1.50 2.25
December 31, 2000 1.75 2.50
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March 31, 2001 1.75 2.50
June 30, 2001 1.75 2.75
September 30, 2001 2.00 2.75
December 31, 2001 2.00 2.75
March 31, 2002 2.00 2.75
June 30, 2002 2.00 3.25
September 30, 2002 2.25 3.25
December 31, 2002 2.50 3.50
March 31, 2003 2.50 3.50
June 30, 2003 2.50 3.50
September 30, 2003 2.75 3.50
December 31, 2003 2.75 3.50
March 31, 2004 2.75 3.50
June 30, 2004 2.75 3.50
September 30, 2004 2.75 3.50
December 31, 2004 and 3.00 3.50
thereafter
; provided, however, that the ratios set forth above for the
circumstances under which the Subordinated Notes are issued shall
only be applicable if the Holdings Debt shall have been paid or
otherwise satisfied in full; provided further, that if such four
fiscal quarter period includes any or all of the quarters ending June
30, 1999, September 30, 1999, December 31, 1999 or March 30, 2000,
Consolidated Cash Interest Expense shall be the actual amount for the
period since the Closing Date multiplied by a fraction, the numerator
of which is four and the denominator of which is the number of fiscal
quarters that have elapsed since the Closing Date.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) (i) the Borrower shall fail to pay any principal of
any Advance when the same shall become due and payable, whether by
scheduled maturity or at a date fixed for prepayment or by
acceleration, demand or otherwise, or (ii) the Borrower shall fail to
pay any interest on any Advance or any fee owing under or in respect
of this Agreement, or any Loan Party shall fail to make any other
payment under or in respect of any Loan Document, whether by
scheduled maturity or at a date fixed for payment or prepayment or by
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acceleration, demand or otherwise, in each case under this clause
(ii) within three Business Days after the same becomes due and
payable; or
(b) any representation or warranty made by any Loan
Party (or any of its officers) under or in connection with any Loan
Document shall prove to have been incorrect in any material respect
when made or deemed made; or
(c) the Borrower shall fail to perform or observe any
term, covenant or agreement contained in Section 2.14, 5.01(e) (with
respect to Holdings and the Borrower only), 5.01(m),
5.01 (p), 5.01(q), 5.02 or 5.04; or
(d) any Loan Party shall fail to perform or observe any
term, covenant or agreement contained in any of the Loan Documents on
its part to be performed or observed that is not otherwise referred
to in this Section 6.01 and if such failure is capable of remedy such
failure remains unremedied for at least thirty days after the earlier
of the date on which (i) a Responsible Officer of any of the Loan
Parties first becomes aware of such failure and (ii) written notice
thereof shall have been given to the Borrower by the Administrative
Agent or the Required Lenders; or
(e) (i) any Loan Party or any of its Subsidiaries shall
fail to pay any principal of, premium or interest on, or any other
amount payable in respect of, one or more items of Debt of the Loan
Parties and their Subsidiaries (excluding Debt outstanding hereunder)
that is outstanding in an aggregate principal amount (or, in the case
of any Hedge Agreement, that has an Agreement Value) of at least
$5,000,000 when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise) after giving effect to any grace period applicable
thereto; or (ii) any other event shall occur or condition shall exist
under the agreements or instruments relating to one or more items of
Debt of the Loan Parties and their Subsidiaries (excluding Debt
outstanding hereunder) that is outstanding (or under which one or
more Persons have a commitment to extend credit) in an aggregate
principal amount (or, in the case of any Hedge Agreement, that has an
Agreement Value) of at least $5,000,000, if the effect of such event
or condition is to accelerate, or to permit the acceleration of, the
maturity of such Debt or otherwise to cause, or to permit the holder
thereof to cause, such Debt to mature; or (iii) one or more items of
Debt of the Loan Parties and their Subsidiaries (excluding Debt
outstanding hereunder) that is outstanding (or under which one or
more Persons have a commitment to extend credit) in an aggregate
principal amount (or, in the case of any Hedge Agreement, that has an
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Agreement Value) of at least $5,000,000 shall be declared to be due
and payable or required to be prepaid or redeemed (other than by a
regularly scheduled or required prepayment or redemption), purchased
or defeased, or an offer to prepay, redeem, purchase or defease such
Debt shall be required to be made, in each case prior to the stated
maturity thereof; or
(f) any Loan Party or any of its Subsidiaries shall
generally not pay its debts as such debts become due, or shall admit
in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding
shall be instituted by or against any Loan Party or any of its
Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar official for it
or for any substantial part of its property and, in the case of any
such proceeding instituted against it (but not instituted by it) that
is being diligently contested by it in good faith, either such
proceeding shall remain undismissed or unstayed for a period of at
least 30 days or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or any substantial part of its
property) shall occur; or any event or action analogous to or having
a substantially similar effect to any of the events or actions set
forth above in this Section 6.01(f) (other than a solvent
reorganization) shall occur under the Requirements of Law of any
jurisdiction applicable to any Loan Party or any of its Subsidiaries;
or any Loan Party or any of its Subsidiaries shall take any
corporate, partnership, limited liability company or other similar
action to authorize any of the actions set forth above in this
Section 6.01(f); or
(g) one or more judgments or orders for the payment of
money in excess of $5,000,000 in the aggregate shall be rendered
against one or more of the Loan Parties and their Subsidiaries and
shall remain unsatisfied and either (i) enforcement proceedings shall
have been commenced by any creditor upon any such judgment or order
or (ii) there shall be any period of at least thirty consecutive days
during which a stay of enforcement of any such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect;
provided, however, that any such judgment, order or payment shall be
disregarded for the purposes of this Section 6.01(g) to the extent
that (A) the amount of such judgment, order or payment is covered by
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a valid and binding policy of insurance between the defendant and the
insurer covering full payment thereof and (B) such insurer has been
notified, and, in the case of such judgment, order or payment, has
not disputed the claim made for payment, of the amount of such
judgment or order or payment; or
(h) any provision of any Loan Document after delivery
thereof pursuant to Section 3.01, 5.01(m) or 5.01(q) shall for any
reason (other than pursuant to the terms thereof) cease to be valid
and binding on or enforceable against any Loan Party intended to be a
party thereto, or any such Loan Party shall so state in writing; or
(i) any Collateral Document after delivery thereof
pursuant to Section 3.01, 5.01(m) or 5.01(q) shall for any reason
(other than pursuant to the terms thereof) cease to create a valid
and perfected first priority lien on and security interest in
(subject to Liens permitted by Section 5.02(a)) the Collateral
purported to be covered thereby; or
(j) any ERISA Event shall have occurred with respect to
a Plan, the sum (determined as of the date of occurrence of such
ERISA Event) of the Insufficiency of such Plan and the Insufficiency
of any and all other Plans with respect to which an ERISA Event shall
have occurred and then exist (or the liability of the Loan Parties
and the ERISA Affiliates related to such ERISA Event) exceeds
$5,000,000 and any Loan Party or any ERISA Affiliate has incurred or
is reasonably expected to incur liability in connection with such
ERISA Event in such amount; or
(k) any Loan Party or any ERISA Affiliate shall have
been notified by the sponsor of a Multiemployer Plan that it has
incurred Withdrawal Liability to such Multiemployer Plan in an amount
that, when aggregated with all other amounts required to be paid to
Multiemployer Plans by the Loan Parties and the ERISA Affiliates as
Withdrawal Liability (determined as of the date of such
notification), exceeds $5,000,000; or
(l) any Loan Party or any ERISA Affiliate shall have
been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated,
within the meaning of Title IV of ERISA, and the aggregate additional
contributions of the Loan Parties and the ERISA Affiliates resulting
from all such reorganizations or terminations over the amounts
contributed to such Multiemployer Plans for the plan years of such
Multiemployer Plans immediately preceding the plan year in which such
reorganization or termination occurs is reasonably expected to exceed
$5,000,000; or
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(m) a Change of Control shall occur; or
(n) the Merger shall not occur on or prior to July 15,
1999;
then, and in any such event, the Administrative Agent (i) shall at the
request, or may with the consent, of the Required Lenders, by notice to the
Borrower, declare the Commitments of each Lender Party and the obligation of
each Lender Party to make Advances (other than Letter of Credit Advances by
the Issuing Bank or a Working Capital Lender pursuant to Section 2.03(c) and
Swing Line Advances by a Working Capital Lender pursuant to Section 2.02(b))
and of the Issuing Bank to issue Letters of Credit to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the request,
or may with the consent, of the Required Lenders, (A) by notice to the
Borrower, declare the Notes, all interest thereon and all other amounts
payable under this Agreement and the other Loan Documents to be forthwith due
and payable, whereupon the Notes, all such interest and all such amounts
shall become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower, (B) by notice to each party required under the terms
of any agreement in support of which a Standby Letter of Credit is issued,
request that all Obligations under such agreement be declared to be due and
payable and (C) by notice to the Issuing Bank, direct the Issuing Bank to
deliver a Default Termination Notice to the beneficiary of each outstanding
Standby Letter of Credit issued thereby and, promptly upon receipt of such
notice, the Issuing Bank shall so deliver such Default Termination Notices;
provided, however, that in the event of an actual or deemed entry of an order
for relief with respect to the Borrower under the Federal Bankruptcy Code,
(1) the Commitments of each Lender Party and the obligation of each Lender
Party to make Advances (other than Letter of Credit Advances by the Issuing
Bank or a Working Capital Lender pursuant to Section 2.03(c) and Swing Line
Advances by a Working Capital Lender pursuant to Section 2.02(b) and of the
Issuing Bank to issue Letters of Credit shall automatically be terminated and
(2) the Notes, all such interest and all such amounts shall automatically
become and be due and payable, without presentment, demand, protest or any
notice of any kind, all of which are hereby expressly waived by the Borrower.
SECTION 6.2. Actions in Respect of the Letters of Credit
upon Default. If any Event of Default shall have occurred and be continuing,
the Administrative Agent may, or shall at the request of the Required
Lenders, irrespective of whether it is taking any of the actions described in
Section 6.01 or otherwise, make demand upon the Borrower to, and forthwith
upon such demand the Borrower will, pay to the Administrative Agent on behalf
of the Lender Parties in same day funds at the Administrative Agent's office
designated in such demand, for deposit in the L/C Cash Collateral Account, an
amount equal to the aggregate Available Amount of all Letters of Credit then
outstanding. If at any time the Administrative Agent determines that any
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funds held in the L/C Cash Collateral Account are subject to any right or
claim of any Person other than the Administrative Agent and the Secured
Parties or that the total amount of such funds is less than the aggregate
Available Amount of all Letters of Credit, the Borrower will, forthwith upon
demand by the Administrative Agent, pay to the Administrative Agent, as
additional funds to be deposited and held in the L/C Cash Collateral Account,
an amount equal to the excess of (a) such aggregate Available Amount over
(b) the total amount of funds, if any, then held in the L/C Cash Collateral
Account that the Administrative Agent determines to be free and clear of any
such right and claim. Upon the drawing of any Letter of Credit for which
funds are on deposit in the L/C Cash Collateral Account, such funds shall be
applied, to the extent permitted under applicable law, to reimburse the
Issuing Bank or the Working Capital Lenders, as applicable.
ARTICLE VII
THE AGENTS
SECTION 7.1. Authorization and Action. (a) Each Lender
Party (in its capacities as a Lender, the Swing Line Bank (if applicable),
the Issuing Bank (if applicable) and a potential Hedge Bank) hereby appoints
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers and discretion under this Agreement and
the other Loan Documents as are delegated to the Administrative Agent by the
terms hereof and thereof, together with such powers and discretion as are
reasonably incidental thereto. As to any matters not expressly provided for
by the Loan Documents (including, without limitation, enforcement or
collection of the Notes), the Administrative Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or
to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and
such instructions shall be binding upon all Lender Parties and all holders of
Notes; provided, however, that the Administrative Agent shall not be required
to take any action (i) that exposes the Administrative Agent to personal
liability or that is contrary to this Agreement or applicable Requirements of
Law or (ii) as to which the Administrative Agent has not received adequate
security or indemnity (whether pursuant to Section 7.05 or otherwise). If
the security or indemnity furnished to the Administrative Agent for any
purpose under or in respect of the Loan Documents shall, in the good faith
opinion of the Administrative Agent, be insufficient or become impaired, then
the Administrative Agent may require additional security or indemnity and
cease, or not commence, to follow the directions or take the actions
indemnified against until such additional security or indemnity is furnished.
The Administrative Agent hereby agrees to give to each Lender Party prompt
notice of each notice given to it by the Borrower pursuant to the terms of
this Agreement.
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(b) The Administrative Agent shall also act as the
"collateral agent" under the Loan Documents, and each of the Lender Parties
(in its capacities as a Lender, the Issuing Bank (if applicable) and a
potential Hedge Bank) hereby appoints and authorizes the Administrative Agent
to act as the agent of such Lender for purposes of acquiring, holding and
enforcing any and all Liens on Collateral granted by any of the Loan Parties
to secure any of the Secured Obligations, together with such powers and
discretion as are reasonably incidental thereto. The Administrative Agent
may from time to time in its discretion appoint any of the other Lender
Parties or any of the Affiliates of a Lender Party to act as its co-agent or
sub-agent for purposes of holding or enforcing any Lien on the Collateral (or
any portion thereof) granted under the Collateral Documents or of exercising
any rights and remedies thereunder at the direction of the Administrative
Agent. In this connection, the Administrative Agent, as "collateral agent",
and such co-agents and sub-agents shall be entitled to the benefits of all
provisions of this Article VII (including, without limitation, Section 7.05,
as though such co-agents or sub-agents were the "collateral agent" under the
Loan Documents) as if set forth in full herein with respect thereto.
(c) Neither the Syndication Agent nor either of the
Co-Arrangers shall have any powers or discretion under this Agreement or any
of the other Loan Documents other than those bestowed upon it as a co-agent
or sub-agent from time to time by the Administrative Agent pursuant to
subsection (b) of this Section 7.01, and each of the Lender Parties hereby
acknowledges that neither the Syndication Agent nor either of the
Co-Arrangers shall have any liability under this Agreement or any of the
other Loan Documents.
SECTION 7.2. Administrative Agent's Reliance, Etc. Neither
the Administrative Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it
or them under or in connection with the Loan Documents, except for its or
their own gross negligence or willful misconduct as determined in a final,
nonappealable judgment by a court of competent jurisdiction. Without
limitation of the generality of the immediately preceding sentence, the
Administrative Agent: (a) may treat the payee of any Note as the holder
thereof until the Administrative Agent receives and accepts an Assignment and
Acceptance entered into by the Lender that is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07;
(b) may consult with legal counsel (including counsel for any Loan Party),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) makes
no warranty or representation to any Lender Party and shall not be
responsible to any Lender Party for any statements, warranties or
representations (whether written or oral) made in or in connection with the
Loan Documents; (d) shall not have any duty to ascertain or to inquire as to
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the performance or observance of any of the terms, covenants or conditions of
any Loan Document on the part of any Loan Party or to inspect the property or
assets (including the books and records) of any Loan Party; (e) shall not be
responsible to any Lender Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, any Loan Document or any other instrument or
document furnished pursuant thereto, and shall not be a trustee or fiduciary
for any Lender Party; and (f) shall incur no liability under or in respect of
any Loan Document by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram, telecopy or telex) believed
by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.3. NationsBank, NMS and Affiliates. With respect
to its Commitments, the Advances made by it and the Note or Notes issued to
it, NationsBank shall have the same rights and powers under the Loan
Documents as any other Lender Party and may exercise the same as though it
were not the Administrative Agent; and the term "Lender Party" or "Lender
Parties" shall, unless otherwise expressly indicated, include NationsBank in
its individual capacity. NationsBank, NMS and their respective affiliates
may accept deposits from, lend money to, act as trustee under indentures of,
accept investment banking engagements from and generally engage in any kind
of business with, any Loan Party, any of its Subsidiaries and any Person that
may do business with or own securities of any Loan Party or any such
Subsidiary, all as if NationsBank and NMS were not the Agents and without any
duty to account therefor to the Lender Parties.
SECTION 7.4. Lender Party Credit Decision. Each Lender
Party acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender Party and based on the financial
statements referred to in Section 4.01 and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender Party also acknowledges
that it will, independently and without reliance upon the Administrative
Agent or any other Lender Party and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement.
SECTION 7.5. Indemnification. (a) Each Lender Party
severally agrees to indemnify the Administrative Agent (to the extent not
promptly reimbursed by the Borrower) from and against such Lender Party's
ratable share (determined as provided below) of any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Administrative Agent in any
way relating to or arising out of the Loan Documents or any action taken or
omitted by the Administrative Agent under the Loan Documents; provided,
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however, that no Lender Party shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Administrative
Agent's gross negligence or willful misconduct as determined in a final,
nonappealable judgment by a court of competent jurisdiction. In the case of
any claim, investigation, litigation or proceeding for which indemnity under
this Section 7.05(a) applies, such indemnity shall apply whether or not such
claim, investigation, litigation or proceeding is brought by the
Administrative Agent, any of the other Agents, any of the Lender Parties or a
third party. Without limitation of the foregoing, each Lender Party
severally agrees to reimburse the Administrative Agent promptly upon demand
for its ratable share of any costs and expenses (including, without
limitation, fees and expenses of counsel) payable by the Borrower under
Section 9.04, to the extent that the Administrative Agent is not promptly
reimbursed for such costs and expenses by the Borrower. For purposes of this
Section 7.05(a), the Lender Parties' respective ratable shares of any amount
shall be determined, at any time, according to the sum of (i) the aggregate
principal amount of the Advances outstanding at such time and owing to the
respective Lender Parties, (ii) in the case of the Working Capital Lenders,
their respective Pro Rata Shares of the aggregate Available Amount of all
Letters of Credit outstanding at such time, (iii) the aggregate unused
portions of their respective Term A Commitments at such time, (iv) the
aggregate unused portions of their respective Term B Commitments at such time
and (v) their respective Unused Working Capital Commitments at such time;
provided that the aggregate principal amount of Swing Line Advances owing to
the Swing Line Bank and of Letter of Credit Advances owing to the Issuing
Bank shall be considered to be owed to the Working Capital Lenders ratably in
accordance with their respective Working Capital Commitments. The failure of
any Lender Party to reimburse the Administrative Agent promptly upon demand
for its ratable share of any amount required to be paid by the Lender Party
to the Administrative Agent as provided herein shall not relieve any other
Lender Party of its obligation hereunder to reimburse the Administrative
Agent for its ratable share of such amount, but no Lender Party shall be
responsible for the failure of any other Lender Party to reimburse the
Administrative Agent for such other Lender Party's ratable share of such
amount. Without prejudice to the survival of any other agreement of any
Lender Party hereunder, the agreement and obligations of each Lender Party
contained in this Section 7.05(a) shall survive the payment in full of
principal, interest and all other amounts payable hereunder and under the
other Loan Documents.
(b) Each Working Capital Lender severally agrees to
indemnify the Issuing Bank (to the extent not promptly reimbursed by the
Borrower) from and against such Working Capital Lender's Pro Rata Share of
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by, or asserted against the
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Issuing Bank in any way relating to or arising out of the Loan Documents or
any action taken or omitted by the Issuing Bank under the Loan Documents;
provided, however, that no Working Capital Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
the Issuing Bank's gross negligence or willful misconduct as determined in a
final, nonappealable judgment by a court of competent jurisdiction. In the
case of any claim, investigation, litigation or proceeding for which
indemnity under this Section 7.05(b) applies, such indemnity shall apply
whether or not such claim, investigation, litigation or proceeding is brought
by the Issuing Bank, any of the other Lender Parties or a third party.
Without limitation of the foregoing, each Working Capital Lender severally
agrees to reimburse the Issuing Bank promptly upon demand for its Pro Rata
Share of any costs and expenses (including, without limitation, fees and
expenses of counsel) payable by the Borrower under Section 9.04, to the
extent that the Issuing Bank is not promptly reimbursed for such costs and
expenses by the Borrower. The failure of any Working Capital Lender to
reimburse the Issuing Bank promptly upon demand for its Pro Rata Share of any
amount required to be paid by the Working Capital Lenders to the Issuing Bank
as provided herein shall not relieve any other Working Capital Lender of its
obligation hereunder to reimburse the Issuing Bank for its Pro Rata Share of
such amount, but no Working Capital Lender shall be responsible for the
failure of any other Working Capital Lender to reimburse the Issuing Bank for
such other Working Capital Lender's Pro Rata Share of such amount. Without
prejudice to the survival of any other agreement of any Working Capital
Lender hereunder, the agreement and obligations of each Working Capital
Lender contained in this Section 7.05(b) shall survive the payment in full of
principal, interest and all other amounts payable hereunder and under the
other Loan Documents.
SECTION 7.6. Successor Administrative Agent. The
Administrative Agent may resign as to any or all of the Facilities at any
time by giving written notice thereof to the Lender Parties and the Borrower
and may be removed as to all of the Facilities at any time with or without
cause by the Required Lenders. Upon any such resignation or removal, the
Required Lenders shall have the right to appoint a successor Agent (with the
consent of the Borrower, such consent not to be unreasonably withheld or
delayed) as to such of the Facilities as to which the Administrative Agent
has resigned or been removed. If no successor Administrative Agent shall
have been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the retiring Administrative Agent's giving
of notice of resignation or the Required Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf
of the Lender Parties, appoint a successor Administrative Agent (with the
consent of the Borrower, such consent not to be unreasonably withheld or
delayed), which shall be a commercial bank organized under the laws of the
United States or of any state thereof and having a combined capital and
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surplus of at least $100,000,000. If within 45 days after written notice is
given of the retiring Administrative Agent's resignation or removal as to any
or all of the Facilities under this Section 7.06 no successor Administrative
Agent shall have been appointed and shall have accepted such appointment,
then on such 45th day (a) the retiring Administrative Agent's resignation or
removal shall become effective as to such of the Facilities as to which the
Administrative Agent has resigned or been removed, (b) the retiring
Administrative Agent shall thereupon be discharged from its duties and
obligations as to such Facilities under the Loan Documents and (c) the
Required Lenders shall thereafter perform all duties and obligations of the
retiring Administrative Agent as to such Facilities under the Loan Documents
until such time, if any, as the Required Lenders appoint a successor
Administrative Agent as provided above in this Section 7.06. Upon the
acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent as to all of the Facilities and upon the
execution and filing or recording of such financing statements, or amendments
thereto, and such amendments or supplements to the Mortgages, and such other
instruments or notices, as may be necessary or desirable, or as the Required
Lenders may request, in order to continue the perfection of the Liens granted
or purported to be granted by the Collateral Documents, such successor
Administrative Agent shall succeed to and become vested with all the rights,
powers, discretion, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its
duties and obligations under the Loan Documents. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent as to less than all of the Facilities and upon the execution and filing
or recording of such financing statements, or amendments thereto, and such
amendments or supplements to the Mortgages, and such other instruments or
notices, as may be necessary or desirable, or as the Required Lenders may
request, in order to continue the perfection of the Liens granted or
purported to be granted by the Collateral Documents, such successor
Administrative Agent shall succeed to and become vested with all the rights,
powers, discretion, privileges and duties of the retiring Administrative
Agent as to such Facilities, other than with respect to funds transfers and
other similar aspects of the administration of Borrowings under such
Facilities, issuances of Letters of Credit (notwithstanding any resignation
as Administrative Agent with respect to the Letter of Credit Facility) and
payments by the Borrower in respect of such Facilities, and the retiring
Administrative Agent shall be discharged from its duties and obligations
under this Agreement as to such Facilities, other than as aforesaid. After
any retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent as to any of the Facilities shall become effective, the
provisions of this Article VII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent as to
such Facilities under this Agreement.
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ARTICLE VIII
PARENT GUARANTY
SECTION 8.1. Parent Guaranty. Each of Holdings, the
Purchaser and the Borrower unconditionally and irrevocably guarantees (the
undertaking by each of Holdings, the Purchaser and the Borrower under this
Article VIII being the "Parent Guaranty") the punctual payment when due,
whether at scheduled maturity or at a date fixed for prepayment or by
acceleration, demand or otherwise, of all of the Obligations of each of the
other Loan Parties now or hereafter existing under or in respect of the Loan
Documents (including, without limitation, any extensions, modifications,
substitutions, amendments or renewals of any or all of the foregoing
Obligations), whether direct or indirect, absolute or contingent, and whether
for principal, interest, premium, fees, indemnification payments, contract
causes of action, costs, expenses or otherwise (such Obligations being the
"Guaranteed Obligations"), and agrees to pay any and all expenses (including,
without limitation, reasonable fees and expenses of counsel) incurred by the
Administrative Agent or any of the other Secured Parties in enforcing any
rights under this Parent Guaranty. Without limiting the generality of the
foregoing, each of Holdings', the Purchaser's and the Borrower's liability
shall extend to all amounts that constitute part of the Guaranteed
Obligations and would be owed by any of the other Loan Parties to the
Administrative Agent or any of the other Secured Parties under or in respect
of the Loan Documents but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving such other Loan Party.
SECTION 8.2. Guaranty Absolute. Each of Holdings, the
Purchaser and the Borrower guarantees that the Guaranteed Obligations will be
paid strictly in accordance with the terms of the Loan Documents, regardless
of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the Administrative
Agent or any other Secured Party with respect thereto. The Obligations of
each of Holdings, the Purchaser and the Borrower under this Guaranty are
independent of the Guaranteed Obligations or any other Obligations of any
Loan Party under the Loan Documents, and a separate action or actions may be
brought and prosecuted against Holdings, the Purchaser and the Borrower to
enforce this Parent Guaranty, irrespective of whether any action is brought
against any other Loan Party or whether any other Loan Party is joined in any
such action or actions. The liability of each of Holdings, the Purchaser and
the Borrower under this Parent Guaranty shall be absolute, unconditional and
irrevocable irrespective of, and each of Holdings, the Purchaser and the
Borrower hereby irrevocably waives any defenses it may now or hereafter have
in any way relating to, any and all of the following:
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(a) any lack of validity or enforceability of any Loan
Document or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Guaranteed Obligations
or any other Obligations of any Loan Party under the Loan Documents,
or any other amendment or waiver of or any consent to departure from
any Loan Document, including, without limitation, any increase in the
Guaranteed Obligations resulting from the extension of additional
credit to any Loan Party or any of its Subsidiaries or otherwise;
(c) any taking, exchange, release or nonperfection of
any Collateral, or any taking, release or amendment or waiver of or
consent to departure from any Subsidiary Guaranty or any other
guaranty, for all or any of the Guaranteed Obligations;
(d) any manner of application of Collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner
of sale or other disposition of any Collateral for all or any of the
Guaranteed Obligations or any other Obligations of any Loan Party
under the Loan Documents, or any other property and assets of any
other Loan Party or any of its Subsidiaries;
(e) any change, restructuring or termination of the
corporate structure or existence of any other Loan Party or any of
its Subsidiaries;
(f) any failure of the Administrative Agent or any other
Secured Party to disclose to any Loan Party any information relating
to the financial condition, operations, properties or prospects of
any other Loan Party known to the Administrative Agent or such other
Secured Party, as the case may be (each of Holdings and the Purchaser
waiving any duty on the part of the Secured Parties to disclose such
information);
(g) the failure of any other Subsidiary of Holdings, the
Purchaser or the Borrower or any other Person to execute a Subsidiary
Guaranty or any other guarantee or agreement of the release or
reduction of the liability of any of the other Loan Parties or any
other guarantor or surety with respect to the Guaranteed Obligations;
or
(h) any other circumstance (including, without
limitation, any statute of limitations or any existence of or
reliance on any representation by the Administrative Agent or any
other Secured Party) that might otherwise constitute a defense
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available to, or a discharge of, Holdings, the Purchaser, the
Borrower, any other Loan Party or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by the Administrative Agent or any
other Secured Party or by any other Person upon the insolvency, bankruptcy or
reorganization of any other Loan Party or otherwise, all as though such
payment had not been made.
SECTION 8.3. Waivers and Acknowledgments. (a) Each of
Holdings, the Purchaser and the Borrower hereby unconditionally and
irrevocably waives promptness, diligence, notice of acceptance and any other
notice with respect to any of the Guaranteed Obligations and Parent Guaranty,
and any requirement that the Administrative Agent or any other Secured Party
protect, secure, perfect or insure any Lien or any property or assets subject
thereto or exhaust any right or take any action against any other Loan Party
or any other Person or any Collateral.
(b) Each of Holdings, the Purchaser and the Borrower
hereby unconditionally waives any right to revoke this Parent Guaranty, and
acknowledges that this Parent Guaranty is continuing in nature and applies to
all Guaranteed Obligations, whether existing now or in the future.
(c) Each of Holdings, the Purchaser and the Borrower
hereby unconditionally and irrevocably waives (i) any defense arising by
reason of any claim or defense based upon an election of remedies by the
Secured Parties which in any manner impairs, reduces, releases or otherwise
adversely affects the subrogation, reimbursement, exoneration, contribution
or indemnification rights of each of Holdings, the Purchaser and the Borrower
or other rights to proceed against any of the other Loan Parties, any other
guarantor or any other Person or any Collateral, and (ii) any defense based
on any right of setoff or counterclaim against or in respect of the
obligations of Holdings, the Purchaser or the Borrower, as the case may be,
hereunder.
(d) Each of Holdings, the Purchaser and the Borrower
acknowledges that the Administrative Agent may, without notice to or demand
upon Holdings, the Purchaser or the Borrower, as the case may be, and without
affecting the liability of Holdings, the Purchaser or the Borrower, as the
case may be, under this Parent Guaranty, foreclose under any Mortgage by
nonjudicial sale, and each of Holdings, the Purchaser and the Borrower
hereby waives any defense to the recovery by the Administrative Agent and the
other Secured Parties against Holdings, the Purchaser or the Borrower, as the
case may be, of any deficiency after such nonjudicial sale and any defense or
benefits that may be afforded by applicable law.
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(e) Each of Holdings, the Purchaser and the Borrower
acknowledges that it will receive substantial direct and indirect benefits
from the financing arrangements contemplated by the Loan Documents and that
the waivers set forth in Section 8.02 and this Section 8.03 are knowingly
made in contemplation of such benefits.
SECTION 8.4. Subrogation. Each of Holdings, the Purchaser
and the Borrower hereby unconditionally and irrevocably agrees not to
exercise any rights that it may now have or may hereafter acquire against any
other Loan Party or any other insider guarantor that arise from the
existence, payment, performance or enforcement of its Obligations under this
Parent Guaranty or under any other Loan Document, including, without
limitation, any right of subrogation, reimbursement, exoneration,
contribution or indemnification and any right to participate in any claim or
remedy of the Administrative Agent or any other Secured Party against such
other Loan Party or any other insider guarantor or any Collateral, whether or
not such claim, remedy or right arises in equity or under contract, statute
or common law, including, without limitation, the right to take or receive
from such other Loan Party or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right, until such
time as all of the Guaranteed Obligations and all other amounts payable under
this Parent Guaranty shall have been paid in full in cash, all of the Letters
of Credit shall have expired, terminated or been cancelled and the
Commitments and all of the Bank Hedge Agreements shall have expired or
terminated. If any amount shall be paid to Holdings, the Purchaser or the
Borrower in violation of the immediately preceding sentence at any time prior
to the latest of (a) the payment in full in cash of all of the Guaranteed
Obligations and all other amounts payable under this Parent Guaranty, (b) the
full drawing, termination, expiration or cancellation of all Letters of
Credit, (c) the expiration or termination of all of the Bank Hedge Agreements
and (d) the date on which the Commitments have terminated or expired, such
amount shall be held in trust for the benefit of the Administrative Agent and
the other Secured Parties and shall forthwith be paid to the Administrative
Agent to be credited and applied to the Guaranteed Obligations and all other
amounts payable under this Parent Guaranty, whether matured or unmatured, in
accordance with the terms of the Loan Documents, or to be held as Collateral
for any Guaranteed Obligations or other amounts payable under this Parent
Guaranty thereafter arising. If (i) Holdings, the Purchaser or the Borrower
shall pay to the Administrative Agent all or any part of the Guaranteed
Obligations, (ii) all of the Guaranteed Obligations and all other amounts
payable under this Parent Guaranty shall have been paid in full in cash,
(iii) all of the Letters of Credit shall have expired, terminated or been
cancelled, (iv) all of the Bank Hedge Agreements shall have expired or been
terminated and (v) the date on which the Commitments have terminated or
expired, the Administrative Agent and the other Secured Parties will, at the
request and expense of Holdings, the Purchaser or the Borrower, as the case
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may be, execute and deliver to Holdings, the Purchaser or the Borrower, as
the case may be, appropriate documents, without recourse and without
representation or warranty, necessary to evidence the transfer of subrogation
to Holdings, the Purchaser or the Borrower, as the case may be, of an
interest in the Guaranteed Obligations resulting from the payment made by
Holdings, the Purchaser or the Borrower, as the case may be.
SECTION 8.5. Continuing Guarantee; Assignments. This
Parent Guaranty is a continuing guaranty and shall (a) remain in full force
and effect until the latest of (i) the payment in full in cash of all of the
Guaranteed Obligations and all other amounts payable under this Guaranty,
(ii) the full drawing, termination, expiration or cancellation of all Letters
of Credit, (iii) the expiration or termination of all Bank Hedge Agreements
and (iv) the date on which the Commitments have terminated or expired, (b) be
binding upon each of Holdings, the Purchaser and the Borrower and their
respective successors and assigns and (c) inure to the benefit of, and be
enforceable by, the Administrative Agent and the other Secured Parties and
their respective successors, transferees and assigns. Without limiting
generality of clause (c) of the immediately preceding sentence, any Lender
Party may assign or otherwise transfer all or any portion of its rights and
obligations under this Agreement (including, without limitation, all or any
portion of its Commitment or Commitments, the Advances owing to it and the
Notes held by it) to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to such Lender
Party under this Article VIII or otherwise, in each case as provided in
Section 9.07.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Amendments, Etc. No amendment or waiver of
any provision of this Agreement or the Notes or any other Loan Document, nor
consent to any departure by any Loan Party therefrom, shall in any event be
effective unless the same shall be in writing and signed (or, in the case of
the Collateral Documents, consented to) by the Required Lenders and each Loan
Party party to the relevant Loan Document and acknowledged by the
Administrative Agent, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given;
provided, however, that (a) no amendment, waiver or consent shall, unless in
writing and signed by all of the Lenders (other than any Lender Party that
is, at such time, a Defaulting Lender), do any of the following at any time:
(i) change the number of Lenders or the percentage of (A) the Commitments,
(B) the aggregate outstanding principal amount of the Advances or (C) the
aggregate Available Amount of outstanding Letters of Credit that, in each
case, shall be required for the Lender Parties or any of them to take any
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action hereunder, (ii) reduce or limit the Obligations of Holdings or the
Purchaser under Section 8.01 or any Subsidiary of Holdings party to the
Subsidiary Guaranty under Section 1 thereof or release or otherwise limit the
liability of Holdings, the Purchaser or any such Subsidiary (other than as a
result of the sale of a Subsidiary consummated in accordance with the Loan
Documents) with respect to the Obligations owing to the Administrative Agent
and the Lender Parties, (iii) release all or substantially all of the
Collateral in any transaction or series of related transactions, (iv) amend
this Section 9.01 and (b) no amendment, waiver or consent shall, unless in
writing and signed by the Required Lenders and each Lender (other than any
Lender that is, at such time, a Defaulting Lender) that has a Commitment
under the Term A Facility, the Term B Facility or the Working Capital
Facility if such Lender is directly affected by such amendment, waiver or
consent, (i) increase the Commitments of such Lender or subject such Lender
to any additional obligations, (ii) reduce the principal of, or interest on,
the Notes held by such Lender or any fees or other amounts payable hereunder
to such Lender or (iii) postpone any date fixed for any payment of principal
of, or interest on, the Notes held by such Lender or any fees or other
amounts payable hereunder to such Lender and (c) no amendment, waiver or
consent shall, unless in writing and signed by the relevant Facility Required
Lenders, have the effect of changing any voluntary and mandatory prepayments
or Commitment reductions applicable to such Facility in a manner that
disproportionately disadvantages such Facility relative to the other
Facilities (it being understood and agreed that any amendment, modification,
termination or waiver of voluntary or mandatory prepayment, or Commitment
reduction from those set forth in Section 2.05 or 2.06 with respect to one
Facility but not the other Facility shall be deemed to disadvantage such
Facility for purposes of this clause (c)); provided further that no
amendment, waiver or consent shall, unless in writing and signed by the Swing
Line Bank or the Issuing Bank, as the case may be, in addition to the Lenders
required above to take such action, affect the rights or obligations of the
Swing Line Bank or of the Issuing Bank, as the case may be, under this
Agreement; and provided further that no amendment, waiver or consent shall,
unless in writing and signed by the Administrative Agent in addition to the
Lenders required above to take such action, affect the rights or duties of
the Administrative Agent under this Agreement and the other Loan Documents.
Notwithstanding any of the foregoing provisions of this Section 9.01, none of
the defined terms set forth in Section 1.01 shall be amended, supplemented or
otherwise modified in any manner that would change the meaning, purpose or
effect of this Section 9.01 or any section referred to herein unless such
amendment, supplement or modification is agreed to in writing by the number
and percentage of Lenders (and the Issuing Bank and the Administrative Agent,
if applicable) otherwise required to amend such section under the terms of
this Section 9.01.
SECTION 9.2. Notices, Etc. (a) All notices and other
communications provided for hereunder shall be in writing (including
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telegraphic, telecopy or telex communication) and mailed, telegraphed,
telecopied, telexed or delivered, (i) if to the Borrower, at its address at
One Razor Blade Lane, Verona, VA 24482, Attention: Thomas Kasvin; (ii) if to
Holdings, at its address at c/o J.W. Childs Associates, L.P., One Federal
Street, Boston, MA 02110, Attention: Adam L. Suttin; (iii) if to the
Purchaser, at its address at c/o J.W. Childs Associates, L.P., One Federal
Street, Boston, MA 02110, Attention: Adam L. Suttin, (iv) if to any Initial
Lender, at its Base Rate Lending Office specified opposite its name on
Schedule I hereto; (v) if to the Initial Issuing Bank, at its Applicable
Lending Office specified opposite its name on Schedule I hereto; (vi) if to
any other Lender Party, at its Base Rate Lending Office specified in the
Assignment and Acceptance pursuant to which it became a Lender Party; and
(vii) if to the Administrative Agent, (A) for notices regarding Borrowings,
payments, Conversions, fees, interest and other administrative matters:
NATIONSBANK N.A., 101 North Tryon Street, Charlotte, NC 28255, Location
Code: NC1-001-15-12, Attention: Kathy Mumpower, Telephone: (704) 386-6837,
Facsimile: (704) 409-0021, and (B) for all other notices to the
Administrative Agent or the collateral agent (including with respect to
Defaults, amendments, waivers and modifications of the Loan Documents,
assignments and reports and notices under Section 5.04): NATIONSBANK N.A. c/o
Bank of America National Trust and Savings Association, Agency Management
#10831, 1455 Market Street, 12th Floor, San Francisco, California 94103,
Attention: Dietmar Schiel, Vice President, Facsimile (415) 436-3425,
Telephone (415) 436-2769 ; or, as to the Borrower or the Administrative
Agent, at such other address as shall be designated by such party in a
written notice to the other parties and, as to each other party, at such
other address as shall be designated by such party in a written notice to the
Borrower and the Administrative Agent. All such notices and communications
shall, when mailed, telegraphed, telecopied or telexed, be effective when
deposited in the mails, delivered to the telegraph company, transmitted by
telecopier or confirmed by telex answerback, respectively, except that
notices and communications to the Administrative Agent pursuant to
Article II, III or VII shall not be effective until received by the
Administrative Agent. Delivery by telecopier of an executed counterpart of
any amendment or waiver of any provision of this Agreement or the Notes or of
any Exhibit hereto to be executed and delivered hereunder shall be effective
as delivery of a manually executed counterpart thereof.
(b) If any notice required under this Agreement or any
of the other Loan Documents is permitted to be made, and is made, by
telephone, actions taken or omitted to be taken in reliance thereon by the
Administrative Agent or any of the Lender Parties shall be binding upon the
Borrower notwithstanding any inconsistency between the notice provided by
telephone and any subsequent writing in confirmation thereof provided to the
Administrative Agent or such Lender Party; provided that any such action
taken or omitted to be taken by the Administrative Agent or such Lender Party
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shall have been in good faith and in accordance with the terms of this
Agreement.
SECTION 9.3. No Waiver; Remedies. No failure on the part
of any Lender Party or the Administrative Agent to exercise, and no delay in
exercising, any right hereunder or under any Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude
any other or further exercise thereof or the exercise of any other right.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
SECTION 9.4. Costs and Expenses. (a) The Borrower hereby
agrees to pay on demand (i) all costs and expenses of the Administrative
Agent in connection with the preparation, execution, delivery,
administration, modification and amendment of the Loan Documents (including,
without limitation, (A) all due diligence, collateral review, syndication,
transportation, computer, duplication, appraisal, audit, insurance,
consultant, search, filing and recording fees and expenses and (B) the
reasonable fees and expenses of counsel for the Administrative Agent with
respect thereto, with respect to advising the Administrative Agent as to its
rights and responsibilities, or the perfection, protection or preservation of
rights or interests, under the Loan Documents, with respect to negotiations
with any Loan Party or with other creditors of any Loan Party or any of its
Subsidiaries arising out of any Default or any events or circumstances that
may give rise to a Default and with respect to presenting claims in or
otherwise participating in or monitoring any bankruptcy, insolvency or other
similar proceeding involving creditors' rights generally and any proceeding
ancillary thereto) and (ii) all costs and expenses of the Administrative
Agent and each Lender Party in connection with the enforcement of the Loan
Documents, whether in any action, suit or litigation, any bankruptcy,
insolvency or other similar proceeding affecting creditors' rights generally
(including, without limitation, the reasonable fees and expenses of counsel
for the Administrative Agent and each Lender Party with respect thereto).
(b) The Borrower hereby agrees to indemnify and hold
harmless each Agent, each Co-Arranger, each Lender Party and each of their
Affiliates and their officers, directors, employees, trustees, agents and
advisors (each, an "Indemnified Party") from and against any and all claims,
damages, losses, liabilities and expenses (including, without limitation,
reasonable fees and expenses of counsel) that may be incurred by or asserted
or awarded against any Indemnified Party, in each case arising out of or in
connection with or by reason of (including, without limitation, in connection
with any investigation, litigation or proceeding or preparation of a defense
in connection therewith) (i) the Facilities, the actual or proposed use of
the proceeds of the Advances or the Letters of Credit, the Loan Documents or
any of the transactions contemplated thereby, including, without
limitation, any acquisition or proposed acquisition (including, without
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limitation, the Merger and any of the other transactions contemplated hereby)
by JWC or any of its Subsidiaries or Affiliates of all or any portion of the
Equity Interests in, or all or substantially all the property and assets of,
the Company or any of its Subsidiaries or (ii) the actual or alleged presence
of Hazardous Materials on any property of any Loan Party or any of its
Subsidiaries or any Environmental Action relating in any way to any Loan
Party or any of its Subsidiaries, except to the extent such claim, damage,
loss, liability or expense is found in a final, non-appealable judgment by a
court of competent jurisdiction to have resulted from such Indemnified
Party's gross negligence or willful misconduct. In the case of an
investigation, litigation or other proceeding to which the indemnity in this
Section 9.04(b) applies, such indemnity shall be effective whether or not
such investigation, litigation or proceeding is brought by any Loan Party,
its directors, shareholders or creditors or an Indemnified Party or any
Indemnified Party is otherwise a party thereto and whether or not the
Transaction or any of the other transactions contemplated hereby are
consummated. The Borrower also agrees not to assert any claim against any
Agent, any Lender Party or any of their Affiliates, or any of their
respective officers, directors, employees, attorneys and agents, on any
theory of liability, for special, indirect, consequential or punitive damages
arising out of or otherwise relating to the Facilities, the actual or
proposed use of the proceeds of the Advances or the Letters of Credit, the
Loan Documents or any of the transactions contemplated thereby.
(c) If any payment of principal of, or Conversion of,
any Eurodollar Rate Advance is made by the Borrower to or for the account of
a Lender Party other than on the last day of the Interest Period for such
Advance, as a result of a payment or Conversion pursuant to
Section 2.09(b)(i) or 2.10(d), acceleration of the maturity of the Notes
pursuant to Section 6.01 or for any other reason, or if the Borrower fails to
make any payment or prepayment of an Advance for which a notice of prepayment
has been given or that is otherwise required to be made, whether pursuant to
Section 2.04, 2.06 or 6.01, the Borrower shall pay to the Administrative
Agent for such Lender Party an amount equal to the present value (calculated
in accordance with this Section 9.04(c)) of interest for the remaining
portion of the relevant Interest Period on the amount of such Advance, at a
rate per annum equal to the excess of (a) the Eurodollar Rate that would have
been in effect for such Interest Period over (b) the Eurodollar Rate
applicable on the date of determination to a deemed Interest Period ending on
the last day of such Interest Period. The present value of such additional
interest shall be calculated by discounting the amount of such interest for
each day in the relevant Interest Period from such day to the date of such
repayment or termination at an interest rate per annum equal to the interest
rate determined pursuant to the immediately preceding sentence, and by adding
all such amounts for all such days during such period. The determination by
the Administrative Agent of such amount of interest shall be conclusive and
binding (absent manifest error).
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(d) If any Loan Party fails to pay when due any costs,
expenses or other amounts payable by it under any Loan Document, including,
without limitation, fees and expenses of counsel and indemnities, such amount
may be paid on behalf of such Loan Party by the Administrative Agent or any
Lender Party, in its sole discretion.
(e) Without prejudice to the survival of any other
agreement of any Loan Party hereunder or under any other Loan Document, the
agreements and obligations of the Borrower contained in Sections 2.10 and
2.12 and this Section 9.04 shall survive the payment in full of principal,
interest and all other amounts payable hereunder and under any of the other
Loan Documents.
SECTION 9.5. Right of Set-off. Upon (a) the occurrence and
during the continuance of any Event of Default and (b) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
the Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Lender Party and each of its respective
Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Lender Party or
such Affiliate to or for the credit or the account of the Borrower against
any and all of the Obligations of the Borrower now or hereafter existing
under the Loan Documents, held by such Lender Party, irrespective of whether
such Lender Party shall have made any demand under this Agreement or such
Note or Notes and although such obligations may be unmatured. Each Lender
Party agrees promptly to notify the Borrower after any such set-off and
application; provided, however, that the failure to give such notice shall
not affect the validity of such set-off and application. The rights of each
Lender Party and its respective Affiliates under this Section are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Lender Party and its respective Affiliates may have.
SECTION 9.6. Binding Effect. This Agreement shall become
effective when it shall have been executed by the Borrower and the
Administrative Agent and when the Administrative Agent shall have been
notified by each Initial Lender and the Initial Issuing Bank that such
Initial Lender and the Initial Issuing Bank has executed it and thereafter
shall be binding upon and inure to the benefit of the Borrower, the
Administrative Agent and each Lender Party and their respective successors
and assigns, except that the Borrower shall not have the right to assign its
rights hereunder or any interest herein without the prior written consent of
the Lender Parties.
SECTION 9.7. Assignments and Participations. (a) Each
Lender may, and so long as no Default shall have occurred and be continuing,
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if demanded by the Borrower (under the circumstances described in Section
2.16) upon at least 20 days' notice to such Lender and the Administrative
Agent, will, assign to one or more Persons all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment or Commitments, the Advances owing to it and the
Note or Notes held by it); provided, however, that (i) each such assignment
shall be of a uniform, and not a varying, percentage of all rights and
obligations under and in respect of one or more Facilities, (ii) except in
the case of an assignment to a Person that, immediately prior to such
assignment, was a Lender, an Affiliate of a Lender or an Approved Fund of any
Lender or an assignment of all of a Lender's rights and obligations under
this Agreement, the aggregate amount of the Commitments of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall
(if such assignment occurs after the date on which the Co-Arrangers notify
the Borrower and the Lenders that primary syndication has been completed) in
no event be less than $5,000,000, (iii) each such assignment shall be to an
Eligible Assignee, (iv) each such assignment made as a result of a demand by
the Borrower pursuant to this Section 9.07(a) shall be arranged by the
Borrower after consultation with the Administrative Agent and shall be either
an assignment of all of the rights and obligations of the assigning Lender
under this Agreement or an assignment of a portion of such rights and
obligations made concurrently with one or more other such assignments that
together cover all of the rights and obligations of the assigning Lender
under this Agreement and the Notes, (v) no Lender shall be obligated to make
any such assignment as a result of a demand by the Borrower pursuant to this
Section 9.07(a) unless and until such Lender shall have received one or more
payments from one or more Eligible Assignees in an aggregate amount at least
equal to the aggregate outstanding principal amount of all Advances owing to
such Lender, together with accrued and unpaid interest thereon to the date of
payment of such principal amount, and from the Borrower and/or one or more
Eligible Assignees in an aggregate amount equal to all other amounts payable
to such Lender under this Agreement and the Notes (including, without
limitation, any amounts owing to such Lenders under Sections 2.10, 2.12 and
9.04), (vi) no such assignments shall be permitted until the Co-Arrangers
shall have notified the Lender Parties that syndication of the Commitments
hereunder has been completed, and (vii) the parties to each such assignment
shall execute and deliver to the Administrative Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with any
Note or Notes subject to such assignment and (if such assignment occurs after
the date on which the Co-Arrangers notify the Borrower and the Lenders that
primary syndication has been completed) a processing and recordation fee of
$3,500.
(b) Upon such execution, delivery, acceptance and
recording in the Register, from and after the effective date specified in
such Assignment and Acceptance, (i) the assignee thereunder shall be a party
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hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights
and obligations of a Lender or Issuing Bank, as the case may be, hereunder
and (ii) the Lender or Issuing Bank assignor thereunder shall, to the extent
that rights and obligations hereunder have been assigned by it pursuant to
such Assignment and Acceptance, relinquish its rights (other than its rights
under Sections 2.10, 2.12 and 9.04 (and other similar provisions of the other
Loan Documents that are specified under the terms of such other Loan
Documents to survive the payment in full of the Obligations of the Loan
Parties under or in respect of the Loan Documents) to the extent any claim
thereunder relates to an event arising prior to such assignment) and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's or Issuing Bank's rights and obligations under this
Agreement, such Lender or Issuing Bank shall cease to be a party hereto).
(c) By executing and delivering an Assignment and
Acceptance, the Lender Party assignor thereunder and the assignee thereunder
confirm to and agree with each other and the other parties hereto as follows:
(i) other than as provided in such Assignment and Acceptance, such assigning
Lender Party makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or any other Loan Document or
the execution, legality, validity, enforceability, genuineness, sufficiency
or value of, or the perfection or priority of any lien or security interest
created or purported to be created under or in connection with, this
Agreement or any other Loan Document or any other instrument or document
furnished pursuant hereto or thereto; (ii) such assigning Lender Party makes
no representation or warranty and assumes no responsibility with respect to
the financial condition of the Borrower or any other Loan Party or the
performance or observance by any Loan Party of any of its obligations under
any Loan Document or any other instrument or document furnished pursuant
thereto; (iii) such assignee confirms that it has received a copy of this
Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon any Agent, such assigning Lender Party or any other Lender
Party and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking
or not taking action under this Agreement; (v) such assignee confirms that it
is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to
exercise such powers and discretion under the Loan Documents as are delegated
to the Administrative Agent by the terms hereof, together with such powers
and discretion as are reasonably incidental thereto; (vii) such assignee
agrees that it will perform in accordance with their terms all of the
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obligations which by the terms of this Agreement are required to be performed
by it as a Lender or Issuing Bank, as the case may be; and (viii) such
assignee attaches any Internal Revenue Service form (and, if applicable, the
certificate) required to be provided by it under Section 2.12 and, if
applicable, Section __ of the Subsidiary Guaranty and agrees to provide from
time to time any successor or other form prescribed by the Internal Revenue
Service as required to be provided by it under Section 2.12 and/or Section __
of the Subsidiary Guaranty.
(d) The Administrative Agent, acting for this purpose
(but solely for this purpose) as the agent of the Borrower, shall maintain at
its address referred to in Section 9.02 a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the recordation
of the names and addresses of the Lender Parties and the Commitment under
each Facility of, and principal amount of the Advances owing under each
Facility to, each Lender Party from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrower, the Administrative Agent and the
Lender Parties shall treat each Person whose name is recorded in the Register
as a Lender Party hereunder for all purposes of this Agreement. The Register
shall be available for inspection by the Borrower or any Lender Party at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender Party and an assignee, together with any Note
or Notes subject to such assignment and payment of the processing and
recordation fee, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit C
hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Borrower. In the case of any assignment by a Lender, within
five Business Days after its receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Administrative Agent in exchange
for the surrendered Note or Notes a new Note to the order of such Eligible
Assignee in an amount equal to the Commitment assumed by it under a Facility
pursuant to such Assignment and Acceptance and, if the assigning Lender has
retained a Commitment hereunder under such Facility, a new Note to the order
of the assigning Lender in an amount equal to the Commitment retained by it
hereunder. Such new Note or Notes shall be in an aggregate principal amount
equal to the aggregate principal amount of such surrendered Note or Notes,
shall be dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of Exhibit A-1, A-2 or A-3 hereto, as
the case may be. Such surrendered Note or Notes shall be returned to the
Borrower by the Administrative Agent and marked "cancelled".
(f) The Issuing Bank may assign to another Person all of
its rights and obligations under the undrawn portion of its Letter of Credit
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Commitment at any time; provided, however, that (i) each such assignment
shall be to an Eligible Assignee and (ii) the parties to each such assignment
shall execute and deliver to the Administrative Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with a
processing and recordation fee of $3,500.
(g) Each Lender Party may sell participations to one or
more Persons (other than any Loan Party or any of its Affiliates) in or to
all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitments, the
Advances owing to it and the Note or Notes, if any, held by it); provided,
however, that (i) such Lender Party's obligations under this Agreement
(including, without limitation, its Commitments) shall remain unchanged,
(ii) such Lender Party shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such Lender Party shall
remain the holder of any such Note for all purposes of this Agreement,
(iv) the Borrower, the Administrative Agent and the other Lender Parties
shall continue to deal solely and directly with such Lender Party in
connection with such Lender Party's rights and obligations under this
Agreement and (v) no participant under any such participation shall have any
right to approve any amendment or waiver of any provision of any Loan
Document, or any consent to any departure by any Loan Party therefrom, except
to the extent that such amendment, waiver or consent would reduce the
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, in each case to the extent subject to such participation, postpone
any date fixed for any payment of principal of, or interest on, the Notes or
any fees or other amounts payable hereunder, in each case to the extent
subject to such participation, or release all or substantially all of the
Collateral.
(h) Any Lender Party may, in connection with any
assignment or participation or proposed assignment or participation pursuant
to this Section 9.07, disclose to the assignee or participant or proposed
assignee or participant, any information relating to any Loan Party or any of
its Subsidiaries furnished to such Lender Party by or on behalf of the
Borrower or any other Loan Party; provided, however, that, prior to any such
disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any Confidential Information
received by it from such Lender Party.
(i) Notwithstanding any other provision set forth in
this Agreement, any Lender Party may at any time create a security interest
in all or any portion of its rights under this Agreement (including, without
limitation, the Advances owing to it and the Note or Notes held by it) in
favor of any Federal Reserve Bank in accordance with Regulation A of the
Board of Governors of the Federal Reserve System. No such creation shall
release the applicable Lender Party from its obligations hereunder.
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SECTION 9.8. Execution in Counterparts. This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 9.9. No Liability of the Issuing Bank. The
Borrower assumes all risks of the acts or omissions of any beneficiary or
transferee of any Letter of Credit with respect to its use of such Letter of
Credit. Neither the Issuing Bank nor any of its officers or directors shall
be liable or responsible for: (a) the use that may be made of any Letter of
Credit or any acts or omissions of any beneficiary or transferee in
connection therewith; (b) the validity, sufficiency or genuineness of
documents, or of any endorsement thereon, even if such documents should prove
to be in any or all respects invalid, insufficient, fraudulent or forged;
(c) payment by the Issuing Bank against presentation of documents that do not
comply with the terms of a Letter of Credit, including failure of any
documents to bear any reference or adequate reference to the Letter of
Credit; or (d) any other circumstances whatsoever in making or failing to
make payment under any Letter of Credit, except that the Borrower shall have
a claim against the Issuing Bank, and the Issuing Bank shall be liable to the
Borrower, to the extent of any direct, but not consequential, damages
suffered by the Borrower that the Borrower proves were caused by (i) the such
Issuing Bank's willful misconduct or gross negligence (as determined in a
final nonappealable judgment by a court of competent jurisdiction) in
determining whether documents presented under any Letter of Credit comply
with the terms of the Letter of Credit or (ii) the Issuing Bank's willful
failure to make lawful payment under a Letter of Credit after the
presentation to it of a draft and certificates strictly complying with the
terms and conditions of the Letter of Credit. In furtherance and not in
limitation of the foregoing, the Issuing Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary.
SECTION 9.10. Confidentiality. Neither the Administrative
Agent nor any Lender Party shall disclose any Confidential Information to any
Person without the consent of the Borrower, other than (a) to the
Administrative Agent's or such Lender Party's affiliates and their officers,
directors, employees, agents and advisors and to actual or prospective
Eligible Assignees and participants, and then only on a confidential basis,
(b) as required by any law, rule or regulation or judicial process, (c) as
requested or required by any state, federal or foreign authority or examiner
regulating such Lender Party (including, without limitation, the National
Association of Insurance Commissioners) and (d) to any rating agency when
required by it, provided that, prior to any such disclosure, such rating
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agency shall undertake to preserve the confidentiality of any Confidential
Information relating to the Loan Parties received by it from such Lender
Party, (e) to any other person if such disclosure is reasonably incidental to
the administration of the Facilities, (f) in connection with any claim,
litigation or proceeding to which the Administrative Agent or such Lender
Party or any of their affiliates may be a party or (g) to the extent
necessary in connection with the exercise of any remedy under this Agreement
or any other Loan Document.
SECTION 9.11. Jurisdiction, Etc. (a) Each of the parties
hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York state court or
federal court of the United States of America sitting in New York, New York,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or any of the other Loan Documents to
which it is a party, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York state court or, to the extent permitted by
applicable law, in such federal court. Each of the parties hereto hereby
irrevocably consents to the service of copies of any summons and complaint
and any other process which may be served in any such action or proceeding by
certified mail, return receipt requested, or by delivering a copy of such
process to such party, at its address specified in Section 9.02, or by any
other method permitted by applicable law. Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by applicable law. Nothing in this Agreement shall
affect any right that any party may otherwise have to bring any action or
proceeding relating to this Agreement or any of the other Loan Documents in
the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively
do so, any objection that it may now or hereafter have to the laying of venue
of any action or proceeding arising out of or relating to this Agreement or
any of the other Loan Documents to which it is a party in any New York state
or federal court. Each of the parties hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any
such court.
SECTION 9.12. Governing Law. This Agreement and the Notes
shall be governed by, and construed in accordance with, the laws of the State
of New York.
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SECTION 9.13. Waiver of Jury Trial. Each of the Borrower,
the Agents and the Lender Parties irrevocably waive all right to trial by
jury in any action, proceeding or counterclaim (whether based on contract,
tort or otherwise) arising out of or relating to this Agreement, any of the
other Loan Documents, any of the instruments, agreements or other documents
delivered pursuant to the terms of the Loan Documents, the Advances, the
transactions contemplated hereby or thereby or the actions of any Agent or
any Lender Party in the negotiation, administration, performance or
enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
RSA ACQUISITION CORP.
By__________________________________
Name:
Title:
AMERICAN SAFETY RAZOR COMPANY
By__________________________________
Name:
Title:
RSA HOLDINGS CORP. OF DELAWARE
By__________________________________
Name:
Title:
NATIONSBANK, N.A., as Administrative
Agent
By__________________________________
Name:
Title:
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NATIONSBANC MONTGOMERY SECURITIES
LLC, as Co-Arranger
By___________________________________
Name:
Title:
DLJ CAPITAL FUNDING, INC., as
Co-Arranger and Syndication agent
By___________________________________
Name:
Title:
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<PAGE>
Initial Lenders
NATIONSBANK, N.A.
By__________________________________
Title:
DLJ CAPITAL FUNDING, INC.
By__________________________________
Name:
Title:
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<PAGE>
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included in the Form 10-K of American Safety Razor Company
for the year ended December 31, 1999, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 12500
<SECURITIES> 0
<RECEIVABLES> 50465
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0
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