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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 31, 1995 Commission File Number 0-16482
ROADMASTER INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 84-105239
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(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
250 Spring Street NW
Atlanta, Georgia 30303
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(Address of Principal Executive Offices, including Zip Code)
Registrant's telephone number, including area code: (404) 586-9000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class Name of each exchange on which registered
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Common stock, $.01 par value New York Stock Exchange
8% Convertible Subordinated
Debentures Due 2003 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock of the Registrant held
by nonaffiliates as of March 21, 1996 was $87,233,000 based on the closing
sales price of $2.00 on the New York Stock Exchange. For purposes of this
response only, all executive officers, directors and Equitex Inc. are
"affiliates" of the Registrant.
The number of shares outstanding of the Registrant's $.01 par value
common stock at March 21, 1996 was 49,801,929.
DOCUMENTS INCORPORATED BY REFERENCES
Portions of the proxy statement (to be filed pursuant to Regulation
14A) for its annual meeting of stockholders scheduled for June 12, 1996 are
incorporated by reference into Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
Roadmaster Industries, Inc. (the "Company" or "Roadmaster" or "RMI"),
through its operating subsidiaries, is one of the largest manufacturers of
bicycles and a leading manufacturer of fitness equipment and toy products in the
United States. The Company's major product lines consist of bicycles for the
adult, teen and juvenile markets, fitness equipment, including stationary
aerobic equipment, multi-station weight systems and benches, toy products such
as tricycles, wagons, toy horses, bulk plastic toys, sleds and swing sets and
hosiery and team sports equipment. The Company markets its products, primarily
through mass merchandisers, under well established trade names with widespread
consumer recognition and long operating histories, including Roadmaster(R)
(1935), Vitamaster(R) (1950), Flexible Flyer(R) (1889), American Playworld(R)
(1983), MacGregor(R) (1870), DP(R) (1953), Hutch(R) (1906), Reach(R) (1960) and
Forster(R) (1988). In 1995, the Company had sales greater than $10 million each
to 11 leading mass merchandisers, including Toys "R" Us, Inc. ("Toys "R" Us");
Wal-Mart Stores, Inc. ("Wal-Mart") and Target Stores, Inc. ("Target"). The
Company has received several Vendor of the Year awards in the last couple of
years from mass merchandisers, including Toys "R" Us, Wal-Mart, Target, Sears
Canada, Shopko and Pamida.
The Company has developed successful relationships with mass
merchandisers by providing a low cost product that management believes is
differentiated from the competition based on superior features, and by
supplying just-in-time inventory with proven reliability. Low costs are
achieved through modern and efficient manufacturing facilities, low selling,
general and administrative costs, and an experienced workforce. Savings from
manufacturing are reinvested into higher quality componentry for Company
products, thus providing a higher value product at a competitive cost. The
Company emphasizes quality through strict design criteria to ensure high
standards for all its products and believes that its return rates generally are
among the lowest in the industry. In addition, the Company has developed
flexible and efficient manufacturing operations that enable it to shift
production runs to match demand.
The Company has achieved significant sales growth during the last
several years. Since 1990, total sales have increased approximately 377%, from
$153.1 million in 1990 to $730.9 million in 1995. The increase is due to a
combination of increased sales in the Company's existing product lines,
particularly in its core bicycle business, and the sales contributed by recent
acquisitions, most notably the sporting goods subsidiaries acquired from The
Actava Group Inc. ("Actava") in December 1994. Total sales for the year ended
December 31, 1995 increased approximately 60% from the year ended December 31,
1994.
The Company, formed on June 1, 1987, acquired Roadmaster Corporation
("RMC"), a manufacturer of bicycles, fitness equipment and junior products, on
August 10, 1987. On August 31, 1988, the Company acquired Ajay Enterprises
Corporation, a manufacturer of fitness equipment and sports accessories which
it subsequently merged with RMC. In June 1989, RMC sold its sports product line
to Ajay Sports, Inc. ("Ajay Sports") and its wholly-owned subsidiary Ajay
Leisure, Inc., the sale of which was not recorded for financial statement
purposes until May 1992. In September 1993, the Company acquired certain assets
of the Flexible Flyer Company ("Flexible Flyer"), a manufacturer of a variety
of toy products. In September 1993, the Company, in a separate transaction,
also acquired all of the capital stock of Flexible Flyer Europe, Ltd. (now
"Roadmaster Limited"), a United Kingdom company and distributor of Flexible
Flyer products which now distributes the Company's products in Europe. In
October 1993, RMC entered into a distribution agreement with MacGregor Sports
Products, Inc., a wholly-owned subsidiary of MacGregor Sports and Fitness,
Inc., a publicly-held company engaged in the business of marketing and
distributing a broad range of sports, recreational and fitness products under
the MacGregor trademark. Pursuant to such distribution agreement, RMC became
the exclusive worldwide distributor of MacGregor(TM) brand baseball, softball,
basketball, football, soccer, hockey, volleyball, racquet sports and other
products, for a term of five years, with a five-year renewal option. In early
1994, the Company consolidated several of its operating subsidiaries, including
Flexible Flyer, Inc. with its RMC subsidiary.
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In February 1994, the Company acquired substantially all the assets of American
Playworld, Inc., a leading manufacturer of trampolines distributed mainly to
mass merchants. American Playworld's operations are now conducted by RMC. On
December 6, 1994, the Company acquired Diversified Products Corporation ("DP"),
Nelson/Weather-Rite, Inc. ("Nelson/Weather-Rite"), Willow Hosiery Company,
Inc. ("Willow") and Hutch Sports USA, Inc. ("Hutch") (collectively referred to
as the "Sports Subsidiaries") from Actava. On March 23, 1995, Hutch acquired
the sporting goods division of Forster Manufacturing Company ("Forster"). The
Forster product categories acquired include various backyard and lawn games,
including croquet, bocce ball, and volleyball. On April 28, 1995,
Nelson/Weather-Rite finalized the acquisition of certain assets and the
business of MZH, Inc. ("MZH"), a manufacturer and marketer of sleeping bags.
The Company's financial statements include the operations of its camping
subsidiary, Nelson/Weather-Rite from December 6, 1994 through December 31,
1995. Substantially all of Nelson/Weather-Rite's assets were sold on March 8,
1996 to Brunswick Corporation ("Brunswick") for $120 million in cash and the
assumption of certain liabilities. The net proceeds of such sale were applied
to reduce outstanding indebtedness. As a result of such divestiture, the
manufacturing and distribution of camping products is no longer a material
portion of the Company's business.
The Company's principal executive offices are located at 250 Spring
Street NW, Suite 3 South, Atlanta, Georgia 30303 and its telephone number is
(404) 586-9000. The Company is incorporated under Delaware law.
PRODUCTS
Bicycle Products. In recent years, sales of bicycles have increased
primarily as a result of favorable social and demographic factors. Bicycling
continues to rank as one of the most popular leisure time activities in the
United States. Social factors behind this trend include increased consciousness
of health, fitness and appearance. Demographic trends in the United States also
favor strong bicycle sales. In particular, the post-war "baby boom" generation
is a prime bicycle user group. According to the Bicycle Manufacturers'
Association ("BMA"), an industry trade group comprised of the Company, Huffy
Corporation ("Huffy") and Murray-Ohio Manufacturing Company ("Murray"), total
bicycle industry sales have increased 6% from 1991 to 1995. During such period,
the Company's sales growth for bicycles has been 192%.
Roadmaster's line of bicycles includes virtually all types and sizes of
bicycles for the juvenile, teen and adult markets and consists of numerous
models which differ by frame style, size, gearing, braking systems, components,
graphics and color. Models include both motocross-style bicycles and
"high-rise" types, aimed primarily at juveniles, and a broad selection of
all-terrain bicycles ("ATBs"). Roadmaster currently focuses its efforts on
ATBs, which the BMA estimates accounted for approximately 54% of the bicycles
sold in the United States in 1995. The most recent introductions to its bicycle
product line are "dual-suspension" and oversized frame bicycles in the 26 inch
ATB category and the expansion of the Motocyke(TM) line of 12, 16 and 20 inch
bicycles ("sidewalk bicycles"). Management believes Roadmaster's line of
sidewalk bicycles are among the most significant sellers in such bicycle
products category.
Fitness Products. Sales of fitness equipment (including free weights
and benches, multi-station weight systems, skiers, stair steppers, stationary
exercise bikes and treadmills) in the United States have grown significantly as
a consequence of increased consciousness of health, fitness and appearance and
often benefit from the same demographic and social factors that positively
affect bicycle sales. According to the National Sporting Goods Association
("NSGA"), a trade association, wholesale sales of exercise equipment in the
United States market grew by an estimated 6% in 1995 to a total estimated
market size of $1.935 billion. Sales of the Company's fitness products
increased 57% in 1995 compared to 1994 due to increased sales of infomercial
and Body By Jake(R) products and sales attributable to the acquisition of DP.
Today, Roadmaster is a leading domestic manufacturer of a variety of
fitness equipment such as stationary exercise bicycles, treadmills, weight
benches, stack weight and other resistance systems,
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specialty fitness items, ski machines and stair steppers. The Company's
exercise and fitness equipment is sold primarily under the Vitamaster(R) and
DP(R) names.
In 1995, Roadmaster broadened its fitness distribution channels by
placing increased emphasis on television infomercials and television home
shopping programs including the Home Shopping Network. Management believes the
rollout of new products in this format increases consumer awareness of the
Company's products and provides benefits of additional distribution along with
"as seen on TV" advertising campaigns for the mass merchandisers. The Body By
Jake(R), AB and Back Plus(TM) product and infomercial were selected as the Best
Infomercial Product of the Year (1995) and the Best Infomercial of the Year,
respectively, by the National Infomercial Marketing Association ("NIMA").
Toys. The Company's toy products are composed of many different kinds
of products, including metal and plastic tricycles, preschool "foot-to-floor"
ride-ons, wagons, 10 inch "junior" sidewalk bikes, snow sleds, plastic snow
toys, swingsets, trampolines, toy horses and bulk plastic toys. The Company also
manufactures and sells a variety of table and decorative lamps focusing on the
children's market, such as decorative lamps employing licensed rights to various
themes and characters of Disney Enterprises, Inc. ("Disney"). See "LICENSING"
below for additional discussion.
Toy product categories in which the Company competes, which comprise
only a portion of the total toy products market, accounted for approximately
$315 million in wholesale sales in 1995 according to management's estimates. In
addition, the Company estimates there were $127 million in wholesale sales of
residential metal swing sets and gym sets and over $525 million in bulk plastic
toys in 1995. Demographic trends in the United States continue to support
strong sales of toy products as the number of children who are prime users of
toy products remain at relatively high levels on a historical basis.
The Company is a leading domestic manufacturer and distributor of
tricycles, wagons, 10 inch sidewalk bikes, swing sets, toy horses, trampolines,
traditional wood and steel sleds and other toy products. The overall growth in
the toy line has been the result of increases in its market share for
traditional products including metal tricycles, metal swingsets, wagons and
ride-ons, as well as the introduction of new products.
In 1995, the Company introduced a number of new and innovative toy
products including: the Prodigy Swing System(TM); Bounce-A-Round See-Saw(TM);
Sand Dune Rally(TM) sandbox; Having a Ball(TM) ball cage; 8' Junior All Pro
Trampoline; Wave, Wiggle and Roll(TM) tricycles; Ready-Set-Grow(TM) ride-on;
Shark Snow Board(TM) and Sno-Kat(TM) sled. New product introductions represented
9.1% of total toy sales in 1995 and accounted for 53.5% of the $15.6 million
increase in total sales for toys from 1994 to 1995. Products introduced both
capitalize on the Company's strong brand names, including Roadmaster(R),
Flexible Flyer(R), American Playworld(R) and PlaySafe(TM) and provided further
line extensions to the wide range of toy categories in which the Company
competes.
Camping. Subsequent to its acquisition of the Sports Subsidiaries, the
Company, through its Nelson/Weather-Rite subsidiary, was a leading supplier of
outdoor and camping equipment to mass merchandisers and specialty stores.
In 1995, Nelson/Weather-Rite expanded its product line by acquiring
MZH, a manufacturer and marketer of sleeping bags. See Item 7. "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION" for a
further description of the MZH acquisition.
Nelson/Weather-Rite continued to perform well during 1995 growing
revenues 50.8% and more than doubling operating profits. Excluding the
acquisition of MZH, Nelson/Weather-Rite's operating profit increase was
approximately 50.9% on a 7.1% increase in revenues. Nelson/Weather-Rite
contributed $96.4 million in sales for 1995 and $3.2 million in net income for
the year then ended.
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In order to reduce the Company's substantial indebtedness, the Company
decided to divest its camping operations based on anticipated realizable values
for such operations. Subsequent to year end, on January 22, 1996, the Company
entered into an agreement to sell Nelson/Weather-Rite to Brunswick for cash
consideration of $120 million and the assumption of certain liabilities. Such
transaction was consummated on March 8, 1996. See Item 7. "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION" for a
further discussion of the sale.
Other Products. The Company also markets and distributes a line of
team sports and hosiery products through its Hutch and Willow subsidiaries,
respectively.
Hutch is a national marketer and distributor of products for team
sports and is an official licensee for The National Football League ("NFL"),
The National Basketball Association ("NBA"), The National Hockey League
("NHL"), Major League Baseball ("MLB") and various colleges. Its major product
lines include basketballs, footballs, baseballs, baseball gloves and football
outfits. Hutch markets its products under both the Hutch(R) and MacGregor(R)
brands. The MacGregor(R) products are marketed under Roadmaster's Distribution
Agreement with MacGregor Sports Products, Inc. signed in October 1993. Hutch
employs similar distribution channels to Roadmaster.
In March 1995, Hutch acquired the sporting goods division of Forster
Manufacturing Company. The product categories acquired include various
backyard and lawn games, including croquet, bocce ball, and volleyball. The
Forster products contributed $6.8 million in sales in 1995.
Willow has a nationally distributed line of hosiery and is a licensee
for the NFL, Keds(R) and Pro Keds(R), as well as various colleges and
universities. Willow's products are manufactured to specification by hosiery
manufacturers located in the southeastern United States. Like Hutch, Willow
employs distribution channels similar to the Company's other operating
subsidiaries. During the second quarter of 1995, the operations of Willow were
consolidated with those of Hutch at one location in Erlanger, Kentucky.
LICENSING
In tandem with its product and design innovation efforts, the Company
and its subsidiaries are licensees of numerous heavily promoted trademarked
themes which are used to support sales of toys, children's lighting products,
fitness products, team sports products, and certain hosiery lines. Characters
from popular television programs and feature films, and professional team and
college logos, frequently are added to increase consumer appeal. Usually, a
royalty is paid to the licensor based on a negotiated fixed percentage of
sales.
The Company or its subsidiaries have various license agreements with
Disney(TM) to utilize various character names and depictions such as Mickey and
Minnie , Pocohontas(TM), and Gargoyles(TM) on Company products such as
tricycles, sidewalk bikes, action riders, wagons and children's lamps. Such
licenses, which expire at various dates through June 1997, provide for
royalties based on a negotiated percentage of sales and provide for guaranteed
minimum royalties with royalty payments payable quarterly. Although such
licenses are generally non-exclusive, the Disney trademarks typically have not
been licensed to competitors of the Company. The Company has always been able
to obtain renewals of its license rights with Disney. The Company also has
licenses to utilize the Barbie(R) and Precious Moments(R) characters for use
with its children's lamps. These licenses expire at separate times through
December 1996. While no assurances can be given, the Company expects to
maintain, and is seeking to expand, its license rights to certain other popular
children's themes and characters.
The Company utilizes certain endorsement and license agreements for
use with its fitness marketing programs. These agreements include both print
and television promotions as well as personal appearances of certain "sports
celebrities" to promote the Company's products. Current agreements
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include agreements with Body By Jake Licensing Corporation, Pro Group, Inc. and
Thighmaster Corporation. These agreements expire at various times through
December 1998.
Hutch is an official licensee for the NFL, NBA, NHL, MLB and various
colleges. Hutch also has agreements with Glenn Robinson and Chris Mullin of the
NBA to use their names in endorsing their products. Willow is a licensee for
the NFL, Keds(R), Pro Keds(R) and various colleges. Current licenses for Hutch
and Willow expire at various times through October 1997.
MANUFACTURING
The Company's manufacturing operations primarily employ a focused
factory approach utilizing individual "manufacturing cells". Like a factory
within a factory, each manufacturing cell supports an entire product line from
welding to packaging. This approach allows a flexible response to both increases
in demand and changing seasonal product mix and has allowed the Company to
acquire a reputation as a proven, reliable supplier of just-in-time inventory.
The ability to rapidly respond to changing demands and to produce products
just-in-time minimizes the Company's risk of over production and inventory
obsolescence. Roadmaster manufactures children's bicycles, sidewalk bikes, toy
products, stationary exercise bikes and free weights at its manufacturing
facilities in Olney, Illinois; adult bicycles at its facilities in Delavan,
Wisconsin and Effingham, Illinois. Lighting products are manufactured at the
Company's facilities in Kansas City and North Kansas City, Missouri. Trampolines
and related products are manufactured at the Company's facility in Ogden, Utah.
The Company's facility located in Opelika, Alabama, manufactures DP and
Vitamaster fitness products, as well as mountain bikes.
The Company's facility located in West Point, Mississippi, manufactures
traditional Flexible Flyer products as well as a number of new toy products.
Flexible Flyer's plastic molding capacity has allowed the Company to expand its
toy products lines into a variety of molded plastic toys. During 1995, the
Company added additional plastic molding capacity thereby decreasing its
dependency on outside parties for certain plastic parts.
The Company previously manufactured treadmills, swing sets and certain
fitness equipment at a facility in Tyler, Texas. During the year, the Company
realigned certain fitness operations by moving production of weight systems,
weight benches, stair steppers, ski machines and specialty fitness products from
the Tyler facility to Opelika. In December 1995, the Company announced plans to
close its Tyler facility and consolidate its remaining Tyler operations into the
Opelika facility. The Company also is relocating its stationary exercise bikes
production from the Olney facility to Opelika with a corresponding transfer of
Opelika's mountain bike production to Olney. These actions are designed to
reduce certain fixed costs as well as streamline and focus operational
activities along product categories. This restructuring of operations is
expected to be finished by mid-year 1996. See Item 7. "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION" for a further
discussion of the restructuring.
Basic materials used by Roadmaster are purchased primarily from
domestic sources. Certain component parts (such as bicycle tires and
derailleurs) are currently obtainable on an economically feasible basis only
from foreign suppliers and, therefore, are subject to changes in price as a
result of changes in foreign currencies against the U.S. dollar. Final
production of the Company's bicycle products occurs at facilities located in
the United States. Alternative domestic and/or foreign sources are available
for raw materials and components, and the Company anticipates no significant
difficulty in obtaining raw materials or components.
CAPITAL IMPROVEMENTS AND EXPANSION
The Company's capital expansion plans contemplate the investment of up
to approximately $25 million for plant and capital improvements of its
businesses over the next two years. The Company
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believes that less than half of that amount is necessary to maintain production
facilities. The majority of these planned expenditures include projects to
integrate and streamline the Opelika facility; tooling for new products,
machinery and equipment for cost reductions; and equipment upgrades. The
Company analyzes each of its investment projects to seek to ensure that the
investment yields acceptable returns and is in accordance with the Company's
current and future growth plans. See "PROPERTIES," and "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND
CAPITAL RESOURCES."
DISTRIBUTION AND MARKETING
There are two principal channels of bicycle distribution in the United
States: mass merchandisers and specialty bicycle shops. Management estimates
that specialty shops account for approximately 20% of bicycles sold in the
United States and mass merchandisers, which primarily sell popular-priced
models, account for approximately 80% of the bicycles sold. In general,
specialty bicycle shops and mass merchandisers are not in direct competition.
Roadmaster's bicycles are sold primarily to mass merchandisers. Fitness
products are marketed primarily to mass merchants and through direct marketing
channels, including television infomercials. Toys are marketed to mass market
retailers, discount department stores and large chain toy stores. Team sports
and hosiery products employ similar distribution channels as bicycles and toys,
including distribution to mass merchandisers and discount department stores.
Roadmaster maintains showrooms in New York, New York; Delavan,
Wisconsin; Olney, Illinois; Opelika, Alabama; and Atlanta, Georgia, and
sponsors promotional events such as the annual Little 500 bike race at Indiana
University in Bloomington, Indiana. The Company participates in trade shows,
advertises in trade publications and supplies large numbers of catalogs to
retail trade groups and consumers.
Roadmaster advertises its products with "point of purchase" materials
and has both print and TV media advertising campaigns to emphasize its products
including the Motocyke line of childrens bikes and PlaySafe line of swing
sets. The Company also advertises certain fitness products through the
"infomercial" format. See "PRODUCTS, FITNESS" for a discussion of the Company's
infomercial programs.
Due to the relatively short period of time between placement of orders
for products and shipments, the Company normally does not consider its open
orders to be significant to its business. Because of rapid delivery
requirements of its customers, the Company does maintain certain quantities of
finished goods inventories to respond to short notice demand and to provide
high service levels to its customers. However, since some of Roadmaster's
customers also share point of sale information through Electronic Data
Interchange ("EDI") with the Company, management believes the Company is able
to adequately project its customers' requirements, limit its inventory levels
and reduce its exposure to inventory obsolescence. The Company either ships
products directly from its plants or, in the case of imported products,
arranges for direct container shipments to certain U.S. ports designated by
customers for pickup.
The Company presently distributes and markets a broad range of
recreation and fitness products in Canada. The majority of the products
distributed in Canada are manufactured by Roadmaster, with the remainder
sourced from other suppliers. In addition, the Company currently distributes a
variety of products in Europe and Asia. Products distributed in Europe and Asia
are manufactured by the Company or by third parties in the United Kingdom.
International sales in 1995 accounted for 4.3% of the consolidated net sales of
the Company versus 4.0% of net sales for the prior fiscal year. The Company
intends to continue increasing its international sales by expanding its
distribution channels in Canada, Europe and Asia.
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CUSTOMERS
In 1995, the Company had sales greater than $10 million each to 11
leading mass merchandisers. Wal-Mart, Toys "R" Us, K-Mart and Sears
collectively accounted for 42.9% and 49.7%, of the Company's total sales in
1995 and 1994, respectively. One of these customers, Wal-Mart, accounted for
26.2% and 28.2% of total sales in 1995 and 1994, respectively. Other than
Wal-Mart, no other customer accounted for more than 10% of the Company's sales
in 1995 and 1994. The loss of, or a material reduction in, business from any of
these customers could adversely affect the Company's business.
COMPETITION
All of the Company's businesses are extremely competitive. Roadmaster
competes primarily on the basis of just-in-time delivery, production innovation,
consistent quality control and price. Roadmaster competes in the bicycle market
with domestic manufacturers Huffy and Murray. Roadmaster also competes with
various distributors of imported bikes produced primarily in China, Taiwan and
Korea. The market share of imported bikes sold in the United States was
approximately 59% of total units sold in 1987 compared to approximately 45% of
total units in 1995.
The BMA on behalf of its members, Roadmaster, Huffy and Murray, filed a
petition on April 5, 1995, with the United States International Trade
Commission ("ITC") regarding the import of bicycles from China that are
allegedly sold in the United States at less than fair value. The Company has
completed various questionnaires from the ITC and is waiting for a
determination on the case. No assurances can be given regarding the ultimate
timing and extent of a positive or negative determination from the ITC
regarding this case. See Item 3. "LEGAL PROCEEDINGS".
Roadmaster competes in the fitness equipment market with domestic
companies such as ICON Health and Fitness, Inc. and importers of foreign
sourced products.
In the toy products category, the Company competes with a number of
competitors, including the Rubbermaid Corporation and Mattel, Inc. Some of the
Company's competitors may have substantially greater financial resources than
the Company.
Imports of low cost bicycles, toy products and fitness equipment have
subjected domestic producers to price competition, especially over the past
five years, and have created price sensitivity. Imports constitute a
significant source of competition for Roadmaster because the vast majority of
the imports continue to be distributed to major national and regional mass
merchandisers including Roadmaster's major existing customers.
PATENTS AND TRADEMARKS
The Roadmaster(R) trademark, registered in the United States and other
countries, is important to the Company's business and has been in continuous
use since 1935 in the United States. Roadmaster's toys and bicycle products are
sold primarily under the Roadmaster(R) and Flexible Flyer(R) brand names.
Flexible Flyer(R), one of the Company's most recognizable brand names, dates
back to 1889. Most of Roadmaster's fitness products are sold under the
Vitamaster(R) and DP(R) brand names, which have been in use since the early
1950s and 1960s, respectively. Tradenames used to market the Company's team
sports products include Hutch(R), MacGregor(R), Reach(R) and Forster(R).
The Company owns numerous patents and trademarks. The Company believes
that the loss of any of its patents and trademarks (other than the
Roadmaster(R), DP(R), Vitamaster(R), and Flexible Flyer(R) trademarks) would not
have a material adverse effect on its business. Both international patent and
trademark protection will be expanded as the Company's international sales
activities are expanded.
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EMPLOYEES
The Company and its subsidiaries have approximately 5,700 employees of
which approximately 2,000 are represented by various trade unions.
Substantially all of the Company's corporate services are provided by its
subsidiaries, primarily by Roadmaster. Management believes the Company's
relations with its employees are good and does not anticipate material labor
problems; however, in the event of a strike or work stoppage at one or more of
its facilities, the strike or work stoppage, depending on its duration and
magnitude, could result in a disruption of the Company's operations and have a
material adverse effect on its financial condition or results of operations.
TERMINATION OF SHAREHOLDER'S AGREEMENT
The Company, Mr. Fong and Mr. Shake were parties to a shareholders'
agreement (such agreement hereinafter the "Shareholders' Agreement") with
Metromedia International Group, Inc. ("Metromedia"), as successor by merger to
Actava, entered into on December 6, 1994 in connection with the acquisition by
the Company from Actava all of the issued and outstanding capital stock of the
Sports Subsidiaries. The Shareholders' Agreement obligated each party thereto
to use their best efforts to cause the nomination and election of persons
designated by the Company and Actava, respectively, to the Company's Board of
Directors. Pursuant to the Shareholders' Agreement, Messrs. Fong, Shake, Conti,
Rand and Bradley initially were designated by the Company and Messrs. Phillips,
Long, Marshall and Sanders were designated by Actava. Such Shareholders'
Agreement terminated on or about March 31, 1996.
ITEM 2. PROPERTIES
The Company's major manufacturing and distribution sites are described
below. In addition, the Company owns or leases other facilities consisting
primarily of warehouse space. The Company's largest facility was acquired with
DP in 1994 and is located on a 121 acre site in Opelika, Alabama. It consists
of approximately 1,000,000 square feet of modern manufacturing and warehouse
space. Treadmills, fitness systems, fitness cycles and bicycles are
manufactured at this facility.
The Company's first factory was built in 1962 on a 122 acre site in
Olney, Illinois. After many additions and modernizations, it is currently a
720,000 square foot facility that houses administration, manufacturing,
warehouse and showroom space. This facility is served by rail and is readily
accessible from several interstate highways. The Company manufactures
children's bicycles, sidewalk bikes, tricycles, children's ride-ons, wagons,
toy products and stationary exercise bikes at this facility.
The Company's weight filling operation is located in a 40,000 square
foot leased facility in Olney, Illinois.
In 1989, Roadmaster purchased a 16,000 square foot facility in Olney,
located adjacent to its primary manufacturing facility. This facility houses
the Company's 6,000 square foot Design and Development Center. A 17,000 square
foot warehouse was added to this facility in 1989.
The Company leases 72,000 square feet of space in Effingham, Illinois
as a satellite manufacturing facility which the Company utilizes to manufacture
bicycles. The plant became operational in September 1993.
Roadmaster owns a manufacturing facility located on a 12 acre site in
Delavan, Wisconsin. This facility, which primarily manufactures adult bicycles,
consists of over 140,500 square feet of manufacturing space.
10
<PAGE> 10
Roadmaster leases a 280,000 square foot manufacturing and warehouse
facility in Tyler, Texas. Treadmills and swing sets were manufactured at this
facility through February 1996. The Company also leases a 101,500 square foot
facility in Tyler used for warehousing and distributing treadmills and
swingsets. The annual rent obligations for the leased facilities are $275,000
for the manufacturing facility and $228,000 for the distribution facility. The
leases for these facilities terminate in October 1998 and January 2005 for the
manufacturing and distribution facilities, respectively. The Company is actively
seeking to sublease these facilities. See Item 7. "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION" for a discussion
regarding the closing of the Tyler facilities.
The Company leases a 315,000 square foot facility located in West
Point, Mississippi. Molded plastic toys, metal and molded plastic swing sets
and traditional wood and steel sleds are manufactured at this facility.
The Company leases two facilities located in Ogden, Utah totaling
74,000 square feet. Trampolines and related products are manufactured at these
facilities.
Hutch leases a 70,000 square foot facility in Erlanger, Kentucky. This
location includes both warehouse and office space. Footballs, baseballs,
basketballs, licensed gift sets and backboards are stored in this warehouse. A
smaller warehouse, 19,000 square feet, is also leased in Erlanger. This smaller
warehouse is used to store clothing, licensed gift sets and various baseball
items. During the second quarter of 1995, the operations of Willow were
consolidated with those of Hutch with Willow relocating its headquarters to
Hutch's offices in Erlanger.
The Company's executive offices are located in approximately 25,000
square feet of leased office and showroom space in Atlanta, Georgia.
The leased properties of the Company and its subsidiaries are held
under leases expiring over a period from 1996 to 2005. The Company believes
that property comparable to its leased properties can be obtained at a
comparable cost.
ENVIRONMENTAL MATTERS
The Company is subject to regulation under federal, state, local and
provincial laws and regulations governing pollution and protection of human
health and the environment, including air emissions, water discharges,
management and cleanup of solid and hazardous substances and wastes. The
Company believes that its facilities and operations are in material compliance
with all existing applicable laws and regulations. The Company cannot at this
time estimate the impact of any future laws or regulations on its future
operations or future capital expenditure requirements. The Company is not aware
of any pending federal or state legislation that would have a material impact
on the Company's financial position, results of operations or capital
expenditure requirements.
The Company has been identified as a potentially responsible party
("PRP") for hazardous wastes in connection with the Four County Landfill
Superfund proceeding in Rochester, Indiana, pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
("CERCLA" or "Superfund"). CERCLA requires cleanup of sites from which there
has been a release or threatened release of hazardous substances and authorizes
the United States Environmental Protection Agency (the "EPA") to take any
necessary response action at Superfund sites, including ordering PRPs liable
for the release to take or pay for these actions. The Company disposed of
hazardous substances at the Four County Landfill, composed of paint sludge,
plating sludge and plating pre-treatment sludge. Although the Company has been
invited to settle this matter as a de minimis party, it has not yet done so.
The Indiana Department of Environmental Management, which has responsibility
for the site, estimates the Company's liability to be less than 1% of the total
cleanup costs (approximately 0.28%). In management's opinion, based on the
proceedings and investigations to date and the amount of wastes sent by the
11
<PAGE> 11
Company to the Four County Landfill, the costs associated with the cleanup at
this site will not have a material effect on the Company's financial condition
or results of operations.
The Company is currently conducting remedial activities at its Olney,
Illinois manufacturing facility, where approximately 3,000 barrels of paint
waste and solvents were buried between 1974 and 1978. This site also includes
three small inactive disposal pits for paints, sludges, solvents, and oils, and
four inactive surface settling basins for plating wastewater (such paint waste,
sludges, solvents and oils collectively referred to herein as the
"contaminants"). The pits and basins were utilized by one or more prior owners
of the facility, and the burial of the barrels was carried out by a prior owner
of the facility, AMF Corporation. In 1980, the then current owner of the
facility installed six monitoring wells strategically located near each area to
monitor any migration of contaminants. Based on the most recent results from
the monitoring wells and additional sampling and testing by an environmental
engineering firm, Environmental Science & Engineering, Inc. ("ESE"), some minor
migration of contaminants has been detected from the buried barrels toward the
southern portion of the site. Since the soil at the site is a glacial till
composed of dense clay, the Company believes, based on further investigation
during the drilling of additional monitoring wells by ESE, that the probability
of significant movements of contaminants from the buried barrels is small. ESE
is currently pursuing a testing and remedial plan for the site, which will be
subject to approval by the Illinois Environmental Protection Agency ("IEPA").
The cleanup has been accepted as part of the State of Illinois' Voluntary
Cleanup Program, which allows the Company to clean up the site, subject to IEPA
supervision and review, without any enforcement action by the IEPA or the EPA.
While no assurances can be given, the Company believes that by participating in
the Voluntary Cleanup Program, it may be able to reduce its total cleanup
costs. The remedial program could include placement of additional monitoring
wells or other monitoring instruments, "capping" the site, installation of
slurry or containment walls or interception trenches, hydraulic containment
using sump pumps to recover contaminants and other liquids and discharge them
through a new and existing wastewater treatment facility or removal of the
barrels and surrounding soils. No assurances can be given that the costs
associated with the remedial program will not be material or that unanticipated
environmental matters resulting in additional material cost for the Company
will not arise. However, in management's opinion the costs associated with the
remedial program will be expended over a number of years and will not have a
material adverse effect on its financial condition or results of operations.
Prior to the purchase of DP by Roadmaster, the Alabama Department of
Environmental Management ("ADEM") issued an administrative order on May 14,
1991, obligating DP to undertake various investigative activities with respect
to an inactive chrome plating tank at its Opelika facility. This area is
located on the property acquired by Roadmaster. The required investigation
called for, among other things: (a) preparation of a "Groundwater Quality
Assessment Work Plan," (b) closure of the chrome tank area, and (c) submission
of a complete post-closure permit application for the chrome tank area. Closure
of the chrome tank area was completed in April 1992 and the Company has
subsequently worked with Alabama authorities to comply with the terms of the
order. In addition, a final Groundwater Quality Assessment Report was submitted
to ADEM in May 1994. The Company submitted its application for a post-closure
permit for the chrome tank area on July 31, 1995. In addition, the Company has
submitted a Risk-Based Closure Report seeking a Clean Closure Equivalency
Determination with respect to the chrome tank area, which would, if granted,
avoid further corrective action near the chrome tank area and additional
long-term groundwater monitoring. It is anticipated that the Company may be
required to conduct additional investigative and corrective action at the
Opelika facility. In the Resource Conservation and Recovery Act ("RCRA")
facility assessment, the EPA identified 45 solid-waste management units and one
area for further study at that portion of the Opelika facility acquired by
Roadmaster. A contiguous land parcel, "the Materials Storage Area", which was
retained by a subsidiary of Actava, the former owner of the Sports
Subsidiaries, was identified as an additional solid-waste management unit. It
is anticipated that the EPA will require confirmatory sampling and testing for
some or all of the 45 identified solid-waste management units. Depending on the
results of this additional investigation, the Company and/or other persons will
be required to develop and implement a corrective action plan for those
solid-waste management units that pose potential threats to human health and
the environment, if any. In connection with any investigation and corrective
action which is required at the Materials Storage Area, federal and
12
<PAGE> 12
state environmental authorities have acknowledged that Actava has retained
ownership of this area, and are requiring Actava, rather than Roadmaster, to
undertake and finance any necessary investigation and corrective action with
respect thereto. The ADEM and EPA permitting processes are expected to require
several years of investigation, design, construction and negotiation. Unless
the Clean Closure Equivalency Determination is granted, subsequent post-closure
care of the chrome tank area may last as long as 30 years. The extent of the
remediation of soil and groundwater contamination that may have to be
undertaken at the Opelika facility will be determined by the results of
additional on-site investigation. Any environmental remediation costs
associated with the Opelika facility will not have any effect on the Company's
income statements unless remediation costs exceed the reserve which is
established or the Company incurs liability for the Materials Storage Area
which is not covered by an environmental indemnity agreement between Roadmaster
and Actava pursuant to which Actava has agreed to indemnify Roadmaster for
costs and liabilities resulting from the presence on or migration of regulated
materials from the Materials Storage Area. Notwithstanding the foregoing, no
assurances can be given that costs ultimately associated with the actual
remediation program will not be material or that unanticipated environmental
matters resulting in material costs for the Company will not arise in the
future.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant, along with two other major U.S.
manufacturers of bicycles, Huffy and Murray, in a case brought in the U.S.
District Court for the District of Massachusetts in November 1995 (case number
95-12532), by two major importers of bicycles manufactured in the People's
Republic of China, Dynacraft Industries, Inc. and China Bicycle Company
(Holdings) Ltd. (the "Chinese Importers"). The Chinese Importers are seeking to
prevent these three U.S. manufacturers of bicycles from marketing their
bicycles as "Made in the USA". The Chinese Importers have brought this action
under the Lanham Act and the Massachusetts unfair trade practices statute,
alleging that the three U.S. manufacturers are deceiving retailers and the
consumers by advertising the bicycles as "Made in the USA" while making
bicycles which include foreign components and therefore are not 100% made in
the U.S. The Chinese Importers claim that they have lost over $100 million in
sales as a result, and assert that amount as alleged damages. The U.S.
manufacturers, including the Company, have answered and demanded a jury trial,
asserting that 100% content is not only not legally required, but also
impossible because some components are only available from foreign sources, and
therefore these bicycles are made in the U.S. to the fullest economically
practical extent, as well as other defenses. The Company, together with the two
other U.S. manufacturers of bicycles, intends to vigorously defend this action.
On March 6, 1990, the Company entered into an agreement to acquire all
of the issued and outstanding common stock of Columbia Manufacturing Company
("Columbia"), but on or before July 19, 1990, the Company rescinded the
agreement to acquire Columbia based upon, among other things, material
misrepresentations and omissions of material facts regarding its environmental
and financial condition. In association with a declaratory judgment action
filed by the Company in 1990, the Columbia shareholders filed counterclaims
against the Company and others. After the U.S. District Court for the District
of Massachusetts entered partial summary judgment in favor of the Company, all
matters in dispute were settled, with final documents being circulated for
signature. The Company incurred no liability or expense under the settlement.
The adversary proceeding by the Unsecured Creditors Committee of
MacGregor Sporting Goods, Inc. previously pending in the United States
Bankruptcy Court for the District of New Jersey against the Company was settled
in 1995 without material impact on the results of operations of the Company,
with the Company obtaining a full release.
The Company, through its operating subsidiaries, is involved in
various legal proceedings which are normal to its business, including product
liability, patent infringement, contested OSHA matters and workers'
compensation claims. In management's opinion, the ultimate resolution of those
proceedings or any of the litigation discussed above is not likely to have a
material adverse effect on its financial condition or its results of
operations.
13
<PAGE> 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the stockholders of the Company
during the fourth quarter of the year ended on December 31, 1995.
14
<PAGE> 14
PART II
ITEM 5. PRICE RANGE FOR COMMON STOCK
The Company's Common Stock has traded on the New York Stock Exchange
under the symbol "RDM" since December 12, 1994. From May 26, 1993 to December
12, 1994, the Common Stock traded on the American Stock Exchange under the
symbol "RDM". The following table indicates the high and low closing sale prices
of the Common Stock on the New York Stock Exchange and the American Stock
Exchange.
<TABLE>
<CAPTION>
1995
- ----
New York Stock Exchange: Closing Sale Price
------------------
High Low
---- ---
<S> <C> <C>
Fourth Quarter $3.75 $2.13
Third Quarter 3.25 2.63
Second Quarter 3.38 2.25
First Quarter 4.00 2.75
1994
- ----
New York Stock Exchange: Closing Sale Price
------------------
High Low
---- ---
Fourth Quarter from December 12, 1994 $4.00 $3.50
American Stock Exchange: Closing Sale Price
------------------
High Low
---- ---
Fourth Quarter from December 12, 1994 $4.13 $3.00
Third Quarter 4.00 3.63
Second Quarter 4.44 3.38
First Quarter 4.56 4.06
</TABLE>
On March 21, 1996 there were 1,582 registered holders of the Company's
Common Stock.
DIVIDEND POLICY
Holders of Common Stock are entitled to such dividends as may be
declared by the Board of Directors and paid out of funds legally available for
payment of dividends. The Company has never paid any dividends on its Common
Stock. The Company intends to retain earnings to finance the development and
expansion of its business and does not anticipate paying cash dividends in the
foreseeable future. Future determination as to the payment of dividends is
subject to the discretion of the Board of Directors and will depend upon a
number of factors, including future earnings, capital requirements, financial
condition and the existence or absence of any contractual limitations on the
payment of dividends. For more information as to the current contractual
limitations on the payment of dividends, see Item 7. "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND
CAPITAL RESOURCES" and Note 3 of Notes to Consolidated Financial Statements.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data
for each of the years in the five-year period ended December 31, 1995. The
income statement data for the fiscal years ended December 31, 1995, 1994 and
1993 and the balance sheet data as of December 31, 1995 and 1994 have been
derived from the Company's consolidated financial statements included elsewhere
in this report. This data should be read in conjunction with Item 7.
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," the consolidated financial statements and the notes thereto.
15
<PAGE> 15
(in thousands except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS (1)(2)(3)(5):
Net sales $730,875 $455,661 $312,160 $226,201 $192,738
Cost of sales 644,268 388,871 264,031 190,951 162,519
-------- -------- -------- -------- --------
Gross profit 86,607 66,790 48,129 35,250 30,219
Selling, general and
administrative expenses 92,814 37,976 27,055 21,589 20,289
Impairment loss 23,500 -- -- -- --
Restructuring expense 7,521 -- -- -- --
Equity in earnings (losses) of
affiliated company -- -- -- -- 182
Gain on sale of affiliated
company -- -- -- 709 --
Interest expense, net 35,470 21,312 9,515 6,355 6,847
Other expense, net 7,785 (394) (103) 592 817
-------- -------- -------- -------- --------
(Loss) earnings before income
tax (benefit) expense (80,483) 7,896 11,662 7,423 2,448
======== ======== ======== ======== ========
Net (loss) earnings ($51,004) $5,000 $7,633 $3,697 $3,394
======== ======== ======== ======== ========
(Loss) earnings per common share:
Primary ($1.04) $0.16 $0.26 $0.13 $0.12
======== ======== ======== ======== ========
Fully diluted ($1.04) $0.16 $0.25 $0.13 $0.12
======== ======== ======== ======== ========
AT DECEMBER 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
BALANCE SHEET DATA:
Total assets $577,107 $515,036 $281,775 $142,864 $128,648
Working capital 174,084 180,710 122,818 48,136 41,311
Total short-term debt 86,921 63,659 22,899 27,082 27,136
Long-term debt and other
long-term liabilities
(Excluding convertible
Debentures) 237,339 180,030 110,312 59,879 53,182
Convertible Debentures (4) 51,742 51,742 51,742 -- --
-------- -------- -------- -------- --------
Total long-term debt and other
long-term liabilities $289,081 $231,772 $162,054 $59,879 $53,182
Stockholders' equity $55,524 $103,097 $16,376 $14,077 $11,794
</TABLE>
(1) Includes operations of Ajay Enterprises Corporation through April 14,
1992.
(2) Includes operations of Flexible Flyer Company beginning September 14,
1993.
(3) Includes operations of the Sports Subsidiaries beginning December 7,
1994.
(4) The Convertible Debentures are convertible into Common Stock at $4.00
per share of Common Stock and are redeemable by the Company on or after
September 15, 1996 if the Common Stock price exceeds certain price
levels.
(5) Includes operations of MZH beginning March 1, 1995.
16
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
OVERVIEW AND RECENT DEVELOPMENTS
Bicycle and fitness products together accounted for 60% of the
Company's net sales in 1995. The Company has experienced sales growth in these
categories of 66% from 1993 to 1995. Total sales for the year ended December
31, 1995 increased approximately 60% to $730.9 million from 1994, primarily due
to revenue attributable to recent acquisitions and increased sales in the
Company's existing product lines.
The Company's business tends to have varying degrees of seasonally.
Accordingly, quarterly results may not be indicative of yearly results. The
historical seasonally of the recently acquired Sports Subsidiaries and Flexible
Flyer businesses has been countercyclical to that of the rest of the Company.
While no assurances can be given, these recently completed acquisitions may
result in a moderation in the seasonally of the Company's consolidated
business. See "LIQUIDITY AND CAPITAL RESOURCES".
Sale of Nelson/Weather-Rite
The Company decided to divest its camping operations based on the
anticipated realizable values for such operations. Subsequent to year end, on
January 22, 1996, the Company entered into an agreement to sell the assets of
Nelson/Weather-Rite, which includes MZH, to Brunswick for cash consideration of
$120 million. The sale includes the purchase of all the assets, and the
assumption of accounts payable and accrued liabilities which totaled $8.5
million at December 31, 1995. Such transaction was consummated on March 8,
1996. The final purchase price is subject to ordinary post closing adjustments
based on closing working capital levels. The Company used the net proceeds to
reduce its outstanding revolving credit facility by approximately $110 million.
Pending final purchase price adjustments, the Company expects a pretax gain of
more than $25 million to be recognized in the first quarter of 1996. In 1995,
Nelson/Weather-Rite contributed $96.4 million in sales and $3.2 million in net
income for the year then ended.
ACQUISITIONS
MZH
In April 1995, Nelson/Weather-Rite finalized the acquisition of
certain assets and the business of MZH, a manufacturer and marketer of sleeping
bags with revenues of approximately $28 million in 1994. The purchase price
included $21.5 million in cash, 400,000 shares of the Company's Common Stock
valued at $1.5 million, and the assumption of certain liabilities. MZH's
results of operations were included in the Company's consolidated operations
beginning March 1, 1995, contributing approximately $27.9 million or 3.8% of
net sales for the year ended.
Forster
In March 1995, Hutch acquired the sporting goods division of Forster
Manufacturing Company for $7.4 million in cash. The product categories acquired
include various backyard and lawn games, including croquet, bocce ball and
volleyball. Sales of the Forster products were included in the Company's
consolidated operations beginning March 23, 1995, contributing $6.8 million or
0.9% of net sales for the year ended.
17
<PAGE> 17
RESULTS OF OPERATIONS
The following table reflects the percentage relationship between net
sales and specified line items from the Consolidated Statements of Operations
and the percentage change in the dollar amount of each of such line items for
the periods indicated:
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE (DECREASE)
OF DOLLAR AMOUNTS
------------------------ YEAR ENDED DECEMBER 31,
YEAR 1995 YEAR 1994 -----------------------------------
VS. 1994 VS. 1993 1995 1994 1993
-------- -------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Net sales 60.4% 46.0% 100.0% 100.0% 100.0%
Gross Profit 29.7 38.8 11.8 14.7 15.4
Selling, general and administrative
expense 144.4 40.4 12.7 8.3 8.7
Interest expense 66.4 124.0 4.9 4.7 3.0
Earnings before income tax
expense (1,119.3) (32.3) (11.0) 1.7 3.7
Net earnings (1,120.1) (34.5) (7.0) 1.1 2.4
</TABLE>
Fiscal year 1995 compared to fiscal year 1994. The 1995 year was a
difficult one for the Company as a variety of internal and external factors
adversely affected both revenue growth and profitability. These factors
included market pricing pressures in bicycle and fitness products, high
material costs related to cardboard, plastics and steel, elevated interest
expense and higher product warranty costs associated with DP products.
Nevertheless, overall sales increased $275.2 million (60%) in 1995 compared to
1994. The increase was primarily attributable to a full year of sales
contributed by the Sports Subsidiaries as well as an increase in sales of the
Company's core fitness and toy products.
Sales of fitness products increased 57% in 1995 compared to 1994 due to
increased sales of infomercial and Body By Jake(R) products and sales
attributable to the acquisition of DP. Sales of bicycles were flat for the year,
however, the Company continued to increase its market share in bicycles. Sales
of toy products increased 20% compared to 1994 due to the introduction of
several new products, including snow toys, and increasing sales of trampolines
and swingsets.
Gross profit increased $19.8 million in 1995 compared to 1994 due to
higher sales volume. Gross profit as a percentage of net sales was 11.8% verses
14.7% in 1994. This decrease was attributable to large increases in raw
material prices in steel, cardboard, and plastics in the fourth quarter of
1994, which remained in effect through much of 1995. Additionally, competitive
pricing pressures in the bicycle and fitness markets contributed to the decline
in gross profit. The Company moved to offset these factors in the second half
of the year by successfully introducing new products with higher profit
margins, by implementing price increases designed to mitigate increases in raw
material costs and by undertaking cost reduction projects. However, the total
potential impact of these improvements was dampened by softness in retail
orders in the fourth quarter.
Selling, General and Administrative ("SG&A") expenses were $92.8
million or 12.7% of net sales compared to $38.0 million or 8.3% of net sales in
1994. The increase in expenses from 1994 was due to volume related expenses
such as commissions and a full year impact of the Sports Subsidiaries
acquisitions which occurred in December 1994. SG&A expenses for the Sports
Subsidiaries historically have been at higher levels than the Company's
historical levels due to a higher composition of product warranty and
administration expenses. Additionally, the Company experienced higher than
normal warranty expenses due to product warranty claims caused by faulty
treadmill motors. Product warranty expenses increased to
18
<PAGE> 18
3.8% of sales in 1995 versus 2.1% in 1994. Although no assurances can be given,
the Company anticipates warranty expenses, as a percentage of sales, will be
lower in 1996 due to sourcing treadmill motors from new suppliers and the
implementation of stringent quality assurance measures. In 1995, the Company
began and successfully implemented cost reductions relating to administrative
expenses, including the consolidation of certain operations and a reduction in
personnel. With respect to its fitness operations, the Company has announced
plans to streamline such operations by consolidating all fitness products
manufacturing at its Opelika facility. With respect to Willow and Hutch, the
Company reduced certain administrative costs by eliminating certain positions
and consolidating operations beginning in the second quarter of 1995. While no
assurances can be given, management believes the combination of the above
actions will assist in reducing its product warranty costs and administrative
costs and will ultimately bring such costs in line with the Company's historical
percentages. The full impact of these actions on SG&A expenses is not expected
to be realized until 1997.
The Company wrote off $23.5 million of goodwill related to the DP
fitness business since the Company determined it would not be able to recover
the associated goodwill based on an undiscounted cash flow analysis. On the
balance sheet, the $23.5 million writeoff of goodwill is offset against goodwill
generated on the acquisition of MZH and Forster, as well as final purchase
accounting adjustments related to the acquisition of the Sports Subsidiaries.
See Note 2 of Notes to the Consolidated Financial Statements for additional
discussion.
The Company recorded a one time Restructuring Charge of $7.5 million
in connection with closing its Tyler, Texas facility and the change in the
method of the Company's overseas distribution operations. Although no
assurances can be given, the Company does not anticipate the change in its
overseas distribution methodology will adversely affect overseas sales. See
Note 16 of Notes to the Consolidated Financial Statements for additional
discussion.
Other expense in 1995 was $7.8 million, representing mainly
amortization of other long-term assets and the write off of certain acquisition
related costs for transactions the Company is now no longer pursuing.
Additionally, the Company recognized a writedown of investments that were
received in exchange for receivables from a bankrupt customer.
Interest expense for 1995 was $35.4 million verses $21.3 million in
1994. This increase in interest expense was attributable to higher interest
rates in 1995 and increased borrowings necessary to support higher inventories
and receivables resulting from the 60% increase in sales.
Fiscal year 1994 compared to fiscal year 1993. Net sales increased
$143.5 million (46.0%) in 1994 compared to 1993, resulting from increased sales
of bicycles, fitness products, toys and sales attributable to recent
acquisitions. Sales of bicycles increased 22.1% in 1994 compared to 1993 due
to increasing sales of ATBs and Motocykes(TM). Sales of fitness products
increased 51.1% in 1994 compared to 1993 primarily due to increased sales of
treadmills and sales to a lesser degree attributable to DP during the three
weeks of the Company's ownership in 1994. The overall increase in fitness
products was partially offset by a decline in stairstepper sales. Sales of toy
products increased 112.5% in 1994 compared to 1993, primarily due to a full
year's sales of swingsets, hobby horses and snow goods from Flexible Flyer in
1994, and the first period of sales of trampolines from American Playworld.
Gross profit increased $18.7 million (38.8%) in 1994 compared to 1993,
primarily due to higher sales volume. Gross profit, expressed as a percent of
net sales, was 14.7% for 1994 versus 15.4% in 1993. The decrease in gross
profit percentage was attributable to price increases in steel, cardboard and
plastic raw materials. This decrease was partially offset by overhead
efficiencies as fixed costs were absorbed by higher production in support of
the greater sales volume.
Selling, general and administrative expenses in 1994 were $38.0
million or 8.3% of net sales compared to $27.1 million or 8.7% of net sales
during 1993. The $10.9 million higher expense in 1994 was primarily due to
volume-related expenses such as commissions and product warranty costs. Other
selling expenses, primarily advertising, marketing and administrative expenses
also increased in connection with the promotion of new products and higher
sales volume. The decrease in such costs expressed as a percent of net sales
reflects the relatively fixed nature of certain administrative costs.
19
<PAGE> 19
Interest expense for 1994 was $21.3 million or 4.7% of net sales
compared with $9.5 million or 3.0% in 1993. Higher interest expense is the
result of additional bank borrowings and debt offerings to fund acquisitions,
higher inventory levels due to increased sales and the resulting higher
accounts receivable balances, and increased interest rates throughout 1994.
The Company recorded a 1994 tax expense of $2.9 million, representing
an effective tax rate of 36.7%, compared to a $4.0 million expense and 34.5%
effective tax rate in 1993. See Note 7 of Notes to the Consolidated Financial
Statements for additional discussion.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's working capital has been obtained
primarily from internally generated funds and revolving lines of credit from
banks. On a consolidated basis, during 1995, the Company's operations used cash
of approximately $37 million. The seasonal nature of the Company's sales
imposes fluctuating demands on its cash flow, due to the temporary buildup of
inventories in anticipation of, and receivables subsequent to, the peak
seasonal period, which historically has occurred around November of each year.
The Company entered into a revolving credit facility in January 1994
providing $100 million, $50 million of which was subject to restrictions on
borrowings pursuant to the Company's $100 million 11.75% Senior Subordinated
Notes due 2002 (the "Notes"). This facility had a four-year term and provided
for interest at the prime rate, as defined, plus 1.25%. Such rate was later
reduced to prime plus 0.75%.
Effective November 15, 1994, and prior to completing the acquisition
of the Sports Subsidiaries, the Company obtained consents from a majority of
the holders of its Notes to increase the amount of indebtedness it could incur
without meeting an interest coverage test from $50 million to $150 million. The
Notes indenture does not limit the amount of indebtedness the Company can incur
under circumstances where the Company's earnings before interest, taxes,
depreciation and amortization is equal to at least two times its cash interest
expense.
In December 1994, the Company restructured its revolving credit line
(the "Revolver") to include the Sports Subsidiaries as borrowers. The Revolver
provides for borrowings of up to $200 million at the prime rate plus 0.75%, as
defined, and includes a LIBOR rate option which equals LIBOR plus 2.75%.
Borrowings are supported by eligible inventory, certain raw materials and
finished goods and accounts receivable.
In September 1995, the Company amended and restated the Revolver. The
Amended and Restated Revolver provides a term loan facility and a revolving
credit facility of up to $300 million, subject to restrictions on borrowings
pursuant to certain covenants in the indenture, as amended, for the Company's
Notes. The revolving credit facility provides for borrowings of up to $275
million based on eligible trade receivables and inventory. At December 31,
1995, the Amended and Restated Revolver's interest rate was 9.25%. The term of
the Amended and Restated Revolver is through September 29, 1998, and is
automatically renewed for successive one year terms unless terminated by either
the lender or the Company.
The Amended and Restated Revolver requires the maintenance of various
financial covenants including minimum net worth, fixed maturity coverages and
minimum working levels. In the first quarter of 1996, the Company was not in
compliance with several of its loan covenants calculated as of December 31,
1995. These events of non-compliance were waived as of December 31, 1995 by the
lenders under the Amended and Restated Revolver pursuant to the further
amendment and restatement of the Revolver in the first quarter of 1996. At no
time was the Company in default with respect to the payment of indebtedness
under the Amended and Restated Revolver. The Company expects to remain in
compliance with the amended covenants in 1996.
20
<PAGE> 20
The Company has two long-term debt issues, the $51,745,000 Convertible
Subordinated Debentures due 2003 (the "Debentures") and the Notes. The
Debentures are convertible at the option of the Company on September 15, 1996
and thereafter at a price of $4.00 per share of common stock. Before the
Company's Debentures can be called for redemption, the Company's Common Stock
must meet or exceed a minimum closing price of $5.0625 per share for the thirty
day period prior to such notice of redemption.
Subject to the foregoing limitation, the Notes are redeemable at the
option of the Company beginning September 15, 1996, at a price of 105.875%. The
redemption price declines to par on or after December 15, 2000.
The Notes and Debentures are obligations of the Company and are, to a
large extent, dependent on the Company's operating subsidiaries for the payment
of interest. Such interest payments are permitted under the Revolver with
certain restrictions. The Company does not anticipated any restrictions on its
ability to make such interest payments pursuant to the Revolver.
At December 31, 1995 and December 31, 1994, the Company, on a
consolidated basis, had stockholders' equity of $55.5 million and $103.1
million, respectively.
In connection with the March 8, 1996 sale of Nelson/Weather-Rite for
cash consideration of $120 million, the Company utilized substantially all of
the proceeds to reduce its revolving line of credit. Management believes this
transaction significantly improves the Company's working capital position.
The Company's capital expenditures plan contemplates the investment of
up to approximately $25 million for plant improvements, expansion of production
capability and other capital improvements of its businesses over the next two
years. Such capital expenditures program could be curtailed or deferred
depending on the availability of financing and the Company believes that less
than half of that amount is necessary to maintain production facilities. The
majority of the Company's capital expenditures are planned for tooling of new
products and cost reductions. Management believes that the Company's sources of
financing and anticipated cash flow are adequate to provide the funds necessary
to support operations and to meet its obligations over the next several years.
INFLATION AND FOREIGN CURRENCY FLUCTUATIONS
Increases in the materials price of plastics, cardboard and steel had
a significant negative impact on the results of operations. The manner in which
sales programs are set causes a delay in price adjustments which limits the
Company's ability to pass some or all of these increased costs on to the
Company's customers as such costs are incurred. Furthermore, depending on the
competitive environment, the Company may or may not be able to timely pass
along material price increases to its customers.
Although the Company's foreign operations were negatively impacted by
the reduction in the value of the Canadian dollar versus the U.S. dollar, such
transaction exposure did not have a material adverse effect on the Company's
results of operations for the year ended 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
All financial statements required to be filed herein are attached
hereto following Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
21
<PAGE> 21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by reference from
the information in Registrant's proxy statement (filed or to be filed pursuant
to Regulation 14A) for its Annual Meeting of Stockholders scheduled for June
12, 1996.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from
the information in Registrant's proxy statement (filed or to be filed pursuant
to Regulation 14A) for its Annual Meeting of Stockholders scheduled for June
12, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 12 is incorporated by reference from
the information in Registrant's proxy statement (filed or to be filed pursuant
to Regulation 14A) for its Annual Meeting of Stockholders scheduled for June
12, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference from
the information in Registrant's proxy statement (filed or to be filed pursuant
to Regulation 14A) for its Annual Meeting of Stockholders scheduled for June
12, 1996.
22
<PAGE> 22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
3.1 --Certificate of Incorporation (6)
3.2 --Amended and Restated By-Laws (6)
4.1 --Indenture dated as of July 15, 1993 between Roadmaster Industries, Inc. as Issuer and LaSalle
National Bank as Trustee (6)
4.2 --Indenture dated as of December 15, 1993 among Roadmaster Industries, Inc. as Issuer and
LaSalle National Bank as Trustee (6)
10.1 --Loan and Security Agreement Dated as of December 6, 1994 among Roadmaster Corporation,
Roadmaster Leisure Inc., Hutch Sports USA,Inc., Nelson/Weather-Rite, Inc., Willow Hosiery
Company, Inc. and BankAmerica Business Credit, Inc. (6)
10.2 --Agreement and Plan of Reorganization dated July 20, 1994 by and among The Actava Group
Inc., Diversified Products Corporation, Hutch Sports USA,Inc., Nelson/Weather-Rite, Inc.,
Willow Hosiery Company, Inc. and Roadmaster Industries, Inc. (7)
10.3 --Employment Agreement for Henry Fong dated December 6, 1994 (6)
10.4 --Employment Agreement for Edward E. Shake dated December 6, 1994 (6)
10.5 --Promissory Note in the principal amount of $1,625,000 payable by Roadmaster Corporation to
Roadmaster Industries, Inc. dated August 10, 1987 (1)
10.12 --Consulting Agreement by and between Registrant and Equitex, Inc. (1)
10.14 --Letter dated December 8, 1987 from the City of Olney, Illinois to Roadmaster Corporation
regarding UDAG loan (1)
10.17 --Second amended and Restated Loan and Security Agreement between Roadmaster Corporation and
Bank of America, National Trust, N.A. dated April 14, 1992 (2)
10.18 --Addendum to Consulting Agreement by and between Registrant and Equitex, Inc. dated
December 15, 1990 (3)
10.25 --License Agreement by and between Roadmaster Corporation and International Sports and
Fitness, Inc. dated December 18, 1991, as amended (3)
10.26 --Marketing Agreement by and between Roadmaster Corporation and International Sports and
Fitness, Inc. dated December 18, 1991, as amended (3)
10.27 --Lease by and between Agracel, Inc. and Roadmaster Corporation dated May 6, 1993
[Effingham, IL] (3)
10.28 --Industrial Building Lease by and between J.G. Realty Co. and Hamilton Lamp Corporation dated as of
February 12, 1990 (3)
10.29 --Lease by and between John Belger and Associates and Hamilton Lamp Corporation dated as of
March 15, 1990 [North Kansas City, MO] (3)
10.30 --Industrial Real Estate Lease by and between the Southland Corporation and Roadmaster Corporation
dated February 11, 1993 [Tyler, TX] (3)
10.31 --Sublease Agreement by and between Carrier Corporation and Roadmaster Corporation dated
September 10, 1992 [Tyler, TX] (3)
10.32 --Lease Agreement by and between Helgesen Properties and Roadmaster Corporation dated
December 29, 1992 [Delavan, WI] (3)
10.33 --Guaranty executed by Roadmaster Industries, Inc. in favor of MacGregor Sporting Goods, Inc.,
dated August 3, 1989 (3)
</TABLE>
23
<PAGE> 23
<TABLE>
<S> <C>
10.35 --Amendment to Warrant dated December 18, 1992 (3)
10.36 --Amendment to Warrant dated December 21, 1992 (3)
10.38 --Form of Stock Purchase Agreement and Shareholder Agreement dated November 11, 1991 (3)
10.39 --Form of Warrant dated July 6, 1992 for directors (3)
10.40 --Form of Warrant dated July 6, 1992 for employees (3)
10.41 --Form of Warrant dated September 9, 1992 (3)
10.42 --Form of Warrant dated November 2, 1992 for directors (3)
10.43 --Form of Warrant dated November 2, 1992 for employees (3)
10.48 --Settlement Agreement by and between Roadmaster Industries, Inc., Thomas W. Itin and TWI
International, Inc. dated as of May 21, 1993 (3)
10.49 --Mutual Release between Roadmaster Industries, Inc. and Thomas W. Itin dated as of May 21, 1993 (3)
10.52 --Asset Purchase Agreement (the "Asset Purchase Agreement") by and between Roadmaster Industries, Inc.
and Par Industries, Inc. dated June 25, 1993 (4)
10.53 --Amendment to Asset Purchase Agreement, dated July 23, 1993 (4)
10.54 --Amendment to Asset Purchase Agreement, dated September 14, 1993 (4)
10.55 --Loan and Security Agreement, dated as of September 15, 1993 between Flexible Flyer Acquisition Corp. and
BankAmerica Business Credit, Inc. (the "Flexible Flyer Loan Agreement") (5)
10.56 --Exchange Agreement dated October 13, 1993 between TICO, a Michigan partnership, Thomas W. Itin, Ajay Sports,
Inc., Ajay Leisure Products, Inc., Roadmaster Industries, Inc., Roadmaster Corporation and Equitex, Inc. (5)
10.57 --Warrant dated as of August 12, 1993 issued to RAS Securities Corp. (5)
10.58 --Representative's Warrant Agreement dated as of August 12, 1993 between Roadmaster Industries, Inc. and RAS
Securities Corp. (5)
10.59 --Form of Warrants dated August 12, 1993 issued in connection with the placement of stand-by financing in
connection with the acquisition of the Flexible Flyer division of Par Industries, Inc. with individual grants
identified. (6)
10.60 --Lease Agreement, as amended, dated September 30, 1992 by and between the Industrial Development Board of the
City of Sulligent, Alabama and Eagle Manufacturing Company, a division of Par Industries, Inc. [Sulligent,
Alabama] (5)
10.61 --Lease dated September 14, 1993 by and between Par Industries, Inc. and Flexible Flyer Acquisition Corp.
[West Point, Mississippi] (5)
10.62 --Warrant Agreement dated December 16, 1993 between Jefferies & Company, Inc. and the Company with Form of
Warrant dated December 27, 1993 issuable to Jefferies & Company, Inc. (5)
10.63 --Loan and Security Agreement Dated as of January 31, 1994 among Roadmaster Corporation, Roadmaster Leisure Inc.
and BankAmerica Business Credit, Inc. (6)
10.64 --Asset Purchase Agreement between Roadmaster Industries, Inc. and American Playworld Inc. dated February 28, 1994 (6)
10.65 --Key Employee Stock Incentive Plan, dated October 25, 1994. (8)
10.66 --Directors Restricted Stock Plan, dated October 25, 1994. (8)
10.67 --Loan and Security Agreement Dated as of December 6, 1994 Amended and Restated as of September 29, 1995 among
Roadmaster Corporation, Roadmaster Leisure Inc., Willow Hosiery Company, Inc., Hutch Sports USA, Inc., and
Roadmaster Receivables Corporation and BankAmerica Business Credit,
Inc. as the Agent for the Lenders (the "Amended and Restated Revolver")
10.68 --First Amendment to the Amended and Restated Revolver dated as of October 31, 1995
10.69 --Second Amendment to the Amended and Restated Revolver dated as of January 15, 1996
10.70 --Third Amendemnt to the Amended and Restated Revolver dated as of February 14, 1996
10.71 --Asset Purchase Agreement between Brunswick Corporation and Roadmaster Industries, Inc. for the Acquisition of
the Nelson/Weather-Rite Division, dated February 26, 1996, without exhibits
10.72 --Fourth Amendment to the Amended and Restated Revolver dated as of March 8, 1996
11.1 --Statement of Computation of Per Share Earnings
21.1 --List of Registrant's subsidiaries
23.1 --Consent of Arthur Andersen LLP
27.1 --Financial Data Schedule (for SEC use only)
</TABLE>
24
<PAGE> 24
__________
(1) Previously filed with the SEC and incorporated by reference from the
Registrant's Registration Statement, File Number 33-18366, filed
November 9, 1987, or as subsequently amended December 9, 1987 and
December 9, 1994.
(2) Previously filed with the SEC and incorporated by reference from the
Registrant's From 8-K filed April 16, 1992.
(3) Previously filed with the SEC and incorporated by reference from the
Registrant's Registration Statement, File Number 33-64230, filed on
June 10, 1993 or as subsequently amended on July 9, 1993, July 29,
1993 and December 9, 1994.
(4) Previously filed with the SEC and incorporated by reference from the
Registrant's Form 8-K filed on September 29, 1993.
(5) Previously filed with the SEC and incorporated by reference from the
Registrant's Number 33-71586 filed November 12, 1993 or as
subsequently amended on November 26, 1993, December 14, 1993 or
December 16, 1993.
(6) Previously filed with the SEC and incorporated by reference from the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, filed on March 31, 1994.
(7) Previously filed with the SEC and incorporated by reference from the
Registrant's Definitive Proxy Statement for a Special Meeting of
Stockholders held on October 31, 1994, filed on September 28, 1994.
(8) Previously filed with the SEC and incorporated by reference from the
Registrant's Definitive Proxy Statement for its Annual Meeting of
Stockholders held on June 14, 1995, filed on May 13, 1995.
(b) The consolidated financial statements and schedules filed as a part of
this Annual Report on Form 10-K are as follows:
1.) Consolidated Financial Statements of Roadmaster Industries, Inc.
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Report of Independent Public Accountants 29
Consolidated Balance Sheets 30
Consolidated Statements of Operations 32
Consolidated Statements of Cash Flows 33
Consolidated Statements of Stockholders' Equity 35
Notes to Consolidated Financial Statements 36
</TABLE>
2.) Financial Statement Schedules
<TABLE>
<S> <C> <C>
Schedule II Valuation and Qualifying Accounts 51
</TABLE>
(c) Reports on Form 8-K:
No reports on Form 8-K were filed in the 4th quarter of 1995.
On January 19, 1996, the Company filed a current report on Form 8-K
announcing the acquisition of its Nelson/Weather-Rite, Inc. subsidiary
by Brunswick Corporation
25
<PAGE> 25
(d) Executive Compensation Plans and Arrangements.
(I) Form of Warrant dated July 6, 1992 for employees (10.40)
(ii) Form of Warrant dated September 9, 1992 (10.41)
(iii) Form of Warrant dated November 2, 1992 for directors (10.42)
(iv) Form of Warrant dated November 2, 1992 for employees (10.43)
(v) Form of Warrant dated July 6, 1992 for directors (10.39)
(vi) Form of Stock Purchase Agreement and Shareholder Agreement
dated November 11, 1991 (10.38)
(vii) Employment Agreement for Henry Fong dated December 6, 1994
(10.3)
(viii) Employment Agreement for Edward E. Shake dated December 6,
1994 (10.4)
(ix) Key Employee Stock Incentive Plan dated October 25, 1995
(10.65)
(x) Directors Restricted Stock Plan dated October 25, 1995 (10.66)
26
<PAGE> 26
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.
ROADMASTER INDUSTRIES, INC.
---------------------------
Registrant
By: /s/ HENRY FONG Date: March 27, 1996
------------------------
Henry Fong
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
By: /s/ CHARLES E. SANDERS Date: March 27, 1996
------------------------
Charles E. Sanders
Secretary, Principal Financial Officer
(Principal Financial and Accounting Officer)
27
<PAGE> 27
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
By: /s/ STEPHEN P. BRADLEY Date: March 27, 1996
------------------------------------
Stephen P. Bradley
Director
By: /s/ LOUIS J. CONTI Date: March 27, 1996
------------------------------------
Louis J. Conti
Director
By: /s/ HENRY FONG Date: March 27, 1996
------------------------------------
Henry Fong
Chief Executive Officer and Director
By: /s/ CLAY C. LONG Date: March 27, 1996
------------------------------------
Clay C. Long
Director
By: /s/ MICHAEL P. MARSHALL Date: March 27, 1996
------------------------------------
Michael P. Marshall
Director
By: /s/ JOHN D. PHILLIPS Date: March 27, 1996
------------------------------------
John D. Phillips
Director
By: /s/ JAMES H. RAND Date: March 27, 1996
------------------------------------
James H. Rand
Director
By: /s/ CARL E. SANDERS Date: March 27, 1996
------------------------------------
Carl E. Sanders
Director
By: /s/ EDWARD E. SHAKE Date: March 27, 1996
------------------------------------
Edward E. Shake
Director
</TABLE>
28
<PAGE> 28
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and
Board of Directors of
Roadmaster Industries, Inc.:
We have audited the accompanying consolidated balance sheets of ROADMASTER
INDUSTRIES, INC. (a Delaware corporation) AND SUBSIDIARIES as of December 31,
1995 and 1994, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Roadmaster Industries, Inc.
and Subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Chicago, Illinois
March 29, 1996
- ----------- ----
29
<PAGE> 29
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
<TABLE>
<CAPTION>
December 31,
------------
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $8,417 $6,378
Accounts and notes receivable, less allowance of
$1,389 in 1995 and $1,744 in 1994 188,573 185,550
Inventories 166,743 155,175
Prepaid expenses and other 6,441 8,786
Deferred income taxes 6,232 2,669
Refundable income taxes 30,180 2,319
-------- --------
Total current assets 406,586 360,877
-------- --------
Property, plant and equipment 101,773 87,158
Less - Accumulated depreciation and
amortization 25,300 15,951
-------- --------
Net property, plant and equipment 76,473 71,207
-------- --------
Deferred income taxes -- 1,355
Investments in equity securities, at market 1,809 1,431
Deferred financing and acquisition charges 23,847 22,467
Goodwill and other intangible assets, net of accumulated
amortization of $3,011 in 1995 and $543 in 1994 63,933 52,597
Long-term trade receivables 1,639 1,200
Other long-term assets 2,820 3,902
-------- --------
Total assets $577,107 $515,036
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
30
<PAGE> 30
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
(in thousands except share data)
<TABLE>
<CAPTION>
December 31,
------------
1995 1994
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Revolving lines of credit $85,402 $61,230
Current portion of long-term debt 1,519 2,429
Accounts payable 97,369 77,890
Accrued expenses 48,212 38,618
-------- --------
Total current liabilities 232,502 180,167
-------- --------
Long-term liabilities:
Deferred income taxes 3,145 --
Revolving lines of credit 132,200 82,000
Long-term debt 147,388 145,279
Other long-term liabilities 6,348 4,493
-------- --------
Total long-term liabilities 289,081 231,772
-------- --------
Commitments and contingencies (Note 9):
Stockholders' Equity:
Preferred stock of $.01 par value per share, 10,000,000
shares authorized, no shares issued and outstanding -- --
Common stock of $.01 par value per share, 100,000,000
shares authorized, 54,041,527 shares issued and
outstanding at December 31, 1995 and 53,619,117 at
December 31, 1994 540 536
Additional paid-in capital 103,574 102,121
Retained (loss) earnings (35,412) 15,416
Deferred compensation (2,896) (3,479)
Net unrealized gain (loss) on equity securities 281 (643)
-------- --------
66,087 113,951
Treasury stock, at cost, 4,239,598 shares at December 31,
1995 and 4,329,598 shares at December 31, 1994 (10,563) (10,854)
-------- --------
Total stockholders' equity 55,524 103,097
-------- --------
Total liabilities and stockholders' equity $577,107 $515,036
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
31
<PAGE> 31
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Net sales $730,875 $455,661 $312,160
Cost of sales 644,268 388,871 264,031
--------- -------- --------
Gross profit 86,607 66,790 48,129
Selling, general and administrative expenses 92,814 37,976 27,055
Impairment Loss (Note 2) 23,500 -- --
Restructuring expense (Note 16) 7,521 -- --
Other (income) expense, net:
Interest 35,470 21,312 9,515
Other 7,785 (394) (103)
--------- -------- --------
43,255 20,918 9,412
--------- -------- --------
(Loss) earnings before income tax
expense (80,483) 7,896 11,662
Income tax (benefit) expense (29,479) 2,896 4,029
--------- -------- --------
Net (loss) earnings ($51,004) $5,000 $7,633
========= ======== ========
(Loss) earnings per common share:
Primary ($1.04) $0.16 $0.26
========= ======== ========
Fully diluted ($1.04) $0.16 $0.25
========= ======== ========
Weighted average number of shares outstanding:
Primary 49,004 31,878 29,693
Fully diluted 49,004 31,878 42,851
</TABLE>
See Notes to Consolidated Financial Statements
32
<PAGE> 32
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net (loss) earnings ($51,004) $5,000 $7,633
Adjustments to reconcile net (loss) income to net cash
used in operating activities:
Depreciation and amortization 17,434 7,501 3,720
Amortization of deferred compensation 644 189 212
(Loss) Gain on sale of property, plant and equipment 522 (99) (120)
Gain on sale of affiliated company -- -- --
Gain on sale of marketable securities 844 (1,034) --
Impairment loss 23,500 -- --
Changes in assets and liabilities:
Accounts receivable (867) (20,468) (19,631)
Inventories 4,503 (23,276) (32,085)
Prepaid expenses and other assets 2,431 (2,499) (4,027)
Cash in escrow -- 4,247 988
Deferred income taxes 340 3,377 1,702
Other assets and long term receivables (28,681) (8,139) (6,513)
Accounts payable 8,813 (12,904) 34,512
Accrued expenses 12,645 (2,550) (2,317)
Income taxes (27,966) (1,619) (1,142)
Other (157) 5 (11)
-------- -------- --------
Net cash used in operating activities ($36,999) ($52,269) ($17,079)
-------- -------- --------
Cash Flows From Investing Activities:
Additions to property, plant and equipment ($13,534) ($14,233) ($9,635)
Proceeds from sale of property, plant and equipment -- -- 21
Purchase of warrants -- (1,068) --
Investments in equity securities -- (622) --
Acquisitions (23,282) (7,366) (8,700)
-------- -------- --------
Net cash used in investing activities ($36,816) ($23,289) ($18,314)
-------- -------- --------
Cash Flows From Financing Activities:
Proceeds from issuance of long term debt $ -- $ -- $141,793
Net change in bank loan 76,352 117,716 (53,145)
Principal payments under debt agreements (1,989) (70,097) (17,577)
Additions to borrowings 2,203 -- 1,401
</TABLE>
See Notes to Consolidated Financial Statements
33
<PAGE> 33
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(in thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Purchases of treasury stock -- (4,263) (698)
Cumulative translation adjustments 120 (251) (119)
Proceeds from exercise of stock warrants 120 3,536 279
Debt refinancing costs incurred (952) (2,140) (125)
-------- -------- --------
Net cash provided by financing activities $75,854 $44,501 $71,809
-------- -------- --------
Net Increase (Decrease) in Cash and Cash Equivalents $2,039 ($31,057) $36,416
Cash and Cash Equivalents, beginning of period 6,378 37,435 1,019
-------- -------- --------
Cash and Cash Equivalents, end of period $8,417 $6,378 $37,435
======== ======== ========
Supplemental Disclosures of Cash Flow Information:
Cash (received) paid during the year for:
-Interest $29,501 $15,323 $7,323
-Income taxes (1,434) 2,690 3,524
======== ======== ========
Supplemental Schedule of Non-cash Activities:
Issuance of treasury stock to Employee Stock Ownership Plan 295 775 --
Exchange of common stock for acquisitions 1,500 82,958 --
Note receivable received on sale of equity securities -- 5,887 --
Capital lease incurred to purchase equipment 1,474 1,510 188
Note receivable in exchange for warrants exercised -- 1,321 591
Purchase of treasury stock in exchange for forgiveness of note
receivable -- 1,976 --
Purchase of treasury stock in exchange for note payable -- -- 4,070
Exchange of preferred stock and note receivable for warrants -- -- 2,854
Equity securities received in exchange for notes receivable -- -- 245
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
34
<PAGE> 34
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED UNREALIZED TOTAL
------------ PAID-IN (LOSS) TREASURY DEFERRED GAIN/LOSS ON STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK COMPENSATION EQUITY SECURITIES EQUITY
------ ------ ------- -------- ----- ------------ ----------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 30,878 $309 $ 15,474 $ 3,445 ($4,537) ($614) $ -- $14,077
Amortization of deferred
compensation -- -- -- -- -- 212 -- 212
Purchase of treasury stock -- -- -- -- (4,152) -- -- (4,152)
Exercise of stock warrants 637 6 868 -- -- -- -- 874
Conversion of debentures
to common stock 1 -- 3 3
Shares retired (427) (4) (615) -- -- -- -- (619)
Cumulative translation adjustments -- -- -- (119) -- -- -- (119)
Deferred compensation from
sale of stock to company ESOP -- -- -- -- -- (1,533) -- (1,533)
Net earnings -- -- -- 7,633 -- -- -- 7,633
------ ---- ------- -------- -------- ------- ----- --------
Balance, December 31, 1993 31,089 $311 $15,730 $ 10,959 ($8,689) ($1,935) $ -- $16,376
Amortization of deferred
compensation -- -- -- -- -- 189 -- 189
Purchase of treasury stock -- -- -- -- (6,091) -- -- (6,091)
Exercise of common stock warrants 2,496 25 4,208 -- -- -- -- 4,233
Purchase of common stock warrants -- -- (1,068) -- -- -- -- (1,068)
Shares retired (2,201) (22) (3,942) -- 3,964 -- -- --
Issuance of common stock 20,962 209 82,827 -- -- -- -- 83,036
Note receivable from stock issuance -- -- -- (292) -- -- -- (292)
Unrealized loss on
available-for-sale securities -- -- -- -- -- -- (643) (643)
Cumulative translation adjustments -- -- -- (251) -- -- -- (251)
Deferred compensation 656 7 2,372 -- (38) (1,437) -- 904
Accrued interest on ESOP obligation -- -- -- -- -- (296) -- (296)
Expiration of put provision on
redeemable common stock 617 6 1,994 -- -- -- -- 2,000
Net earnings -- -- -- 5,000 -- -- -- 5,000
------ ---- -------- -------- -------- ------- ----- --------
Balance, December 31, 1994 53,619 $536 $102,121 $ 15,416 ($10,854) ($3,479) ($643) $103,097
Amortization of deferred
compensation -- -- (78) -- -- 647 -- 569
Note receivable from stock issuance -- -- -- 56 -- -- 56
Exercise of common stock warrants 90 1 197 -- -- -- -- 198
Shares retired (90) (1) (225) -- 226 -- -- --
Acquisitions and other 422 4 1,559 -- 65 (64) -- 1,564
Unrealized gain on
available-for-sale securities -- -- -- -- -- -- 924 924
Cumulative translation adjustments -- -- -- 120 -- -- -- 120
Net (loss) -- -- -- (51,004) -- -- (51,004)
------ ---- -------- -------- -------- ------- ----- --------
Balance, December 31, 1995 54,042 $540 $103,574 ($35,412) ($10,563) $(2,896) $281 $55,524
====== ==== ======== ======== ======== ======= ===== ========
</TABLE>
See Notes to Consolidated Financial Statements.
35
<PAGE> 35
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING NOTES APPLICABLE TO THE UNAUDITED PERIODS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Roadmaster Industries, Inc. (the "Company"), formed on June 1, 1987,
acquired Roadmaster Corporation ("Roadmaster" or "RMC") on August 10, 1987.
Roadmaster is a manufacturer of bicycles, toys and fitness equipment. In
September 1993, the Company acquired certain assets of the Flexible Flyer
Company ("Flexible Flyer"), and the stock of Flexible Flyer Europe Limited
("Roadmaster Limited"), manufacturers of toy products. In February 1994, the
Company acquired substantially all the assets of American Playworld, Inc.
("American Playworld"), a leading manufacturer of trampolines. In December 1994,
the Company acquired Diversified Products Corporation ("DP"),
Nelson/Weather-Rite, Inc. ("Nelson/Weather-Rite"), Willow Hosiery Company, Inc.
("Willow") and Hutch Sports USA, Inc. ("Hutch") (collectively referred to as the
"Sports Subsidiaries") from The Actava Group Inc. ("Actava"). The Sports
Subsidiaries manufacture, market and distribute a variety of products including
camping equipment, fitness equipment, team sports products and hosiery. In March
1995, the Company acquired the sporting goods division of Forster Manufacturing
Company. In April 1995, the Company finalized the acquisition of the business of
MZH, Inc. ("MZH"), a manufacturer and marketer of sleeping bags.
Nature of Operations
The Company is a United States manufacturer and distributor whose
principal lines of business are bikes, toys, fitness, team sports and hosiery
products. The principal markets for the Company's products are mass
merchandisers located primarily in the United States and Canada.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Certain prior year amounts have been
reclassified to conform to the current year's presentation.
Foreign Currency Translation
The financial statements of the Company's foreign subsidiaries are
translated into U.S. dollars using current exchange rates in effect at the
balance sheet date for assets and liabilities and weighted average exchange
rates for revenues and expenses. The resulting translation adjustments are
accumulated as a separate component of stockholders' equity and are included
within retained earnings on the consolidated balance sheet.
Investments
The Company invests in various equity securities. In May, 1993, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," which requires certain debt securities to be reported at amortized
cost, certain debt and equity securities to be reported at market with current
recognition of unrealized gains and losses, and certain debt and equity
securities to be reported at market with unrealized gains and losses as a
separate component of stockholders' equity. The Company adopted the provisions
of the new standard for investments held as of or acquired after January 1,
1994. In accordance with the Statement, prior period financial statements have
not been restated to reflect the change in accounting principle. The cumulative
effect of adopting Statement 115 as of January 1, 1994 was not material.
36
<PAGE> 36
Management determines the appropriate classification of investments as
held-to-maturity or available-for-sale at the time of purchase and reevaluates
such designation as of each balance sheet date. The Company has classified all
investments as available-for-sale. Available-for-sale securities are carried at
fair value, with the unrealized gains and losses reported in stockholders'
equity. Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in
investment income. The cost of securities sold is based on the specific
identification method.
Inventories
Inventories are valued at the lower of cost or market and include the
combined costs of purchased materials, labor and manufacturing overhead. Cost
is determined on approximately 81% and 65% of the inventory at December 31,
1995 and 1994, respectively, using the last-in, first-out (LIFO) method, and
the first-in, first-out (FIFO) method on the remaining inventory.
Depreciation and Amortization
Depreciation and amortization of plant and equipment are computed
using the straight-line method over the estimated useful lives of the related
assets: 15-20 years for buildings and 5-15 years for machinery and equipment.
Goodwill and other intangible assets, representing costs in excess of net
assets acquired, are amortized over 40 years using the straight-line method.
The Company continually evaluates whether later events and
circumstances have occurred that indicate the remaining estimated useful life
of goodwill and other intangible assets may warrant revision or that the
remaining balance of goodwill and other intangible assets may not be
recoverable. The Company's policy is to recognize any impairment through the
reduction of current earnings in the period in which such determination is made
(See Note 2 "Impairment of Long-Lived Assets").
Goodwill and other intangible assets are presented in the consolidated
balance sheets net of accumulated amortization of $3,011,000 at December 31,
1995 and $543,000 at December 31, 1994. Other assets and deferred charges are
presented in the consolidated balance sheets net of accumulated amortization of
$6,586,000 at December 31, 1995 and $1,451,000 at December 31, 1994.
Income Taxes
Deferred income taxes are provided for differences between the
financial statement and income tax basis of assets and liabilities using
enacted tax law. Deferred income tax expense is based on the change in the net
deferred income tax asset or liability from period to period. The Company does
not provide income taxes on the undistributed earnings of its foreign
subsidiaries that are deemed to be permanently reinvested.
Research and Development
Expenditures for research and development are charged to operations in
the year incurred. Such costs aggregated $3,721,000 in 1995, $1,862,000 in 1994
and $1,081,000 in 1993.
Product Warranty Costs
Estimated product warranty costs are provided at the time the Company
sells the product, based on experience.
Cash and Cash Equivalents
The Company considers cash equivalents to be temporary investments
that are readily convertible to cash and have original maturities of three
months or less.
37
<PAGE> 37
Major Customers
One of the Company's customers accounted for 26.2%, 28.2% and 28.0% of
net sales during 1995, 1994 and 1993 respectively. No other customer accounted
for more than 10% of sales in 1995.
The Company sells to mass merchandisers, including national retailers,
regional retailers, and smaller customers. At December 31, 1995 and 1994, the
Company had approximately 83% and 85%, respectively, of trade accounts
receivable due from national retailers. The Company's credit granting process
includes comprehensive analyses of each potential customer's financial
condition. In some situations, cash deposits and/or other collateral are
required before the Company authorizes a sale. The Company grants credit up to
specific amounts after sufficient favorable experience is achieved or if its
analysis of the customer's financial condition and operating cash flows provide
sufficient comfort.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The following assumptions are used to estimate the fair value of each
class of financial instruments:
Cash and Short-term Investments: The carrying amount approximates fair value
because of the short maturity of those instruments.
Long-term Investments: The fair values of the Company's investments are
estimated based on quoted market prices for those investments at December 31,
1995.
Long-term Debt: The fair value of the Company's long-term debt is estimated
based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same remaining maturities.
(2) IMPAIRMENT OF LONG-LIVED ASSETS
In the fourth quarter of 1995, the Company adopted Statement of
Financial Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". The application
of the statement requires the Company to evaluate facts and circumstances that
indicate the costs of certain property, plant and equipment and intangible
assets may be impaired. The evaluation is based upon the estimated future net
cash flows (undiscounted and without interest charges) associated with the
property, plant and equipment and intangible assets compared to the carrying
value of the asset to determine whether a write-down to fair value is required.
As a result of this adoption, the Company has included in its
consolidated statement of operations an impairment loss of $23,500,000. This
amount relates to the goodwill associated with the 1994 acquisition of the
Sport Subsidiaries acquired from Actava related to the DP fitness business.
Based upon the Company's undiscounted cash flow projections of this business,
the Company determined it would not be able to recover the associated goodwill.
The amount of the impairment loss is based upon the Company's determination of
fair value based on discounted cash flow methodology over a fifteen year
period.
38
<PAGE> 38
(3) REVOLVING LINES OF CREDIT
At December 31, 1995, the Company had a $275 million revolving credit
facility (the "Amended and Restated Revolver"). At December 31, 1994, the
Company had a $200 million revolving credit facility.
Amounts outstanding under the revolving lines of credit facilities at
the dates indicated were:
<TABLE>
<CAPTION>
(in thousands) December 31,
----------------------------
1995 1994
-------- -------
<S> <C> <C>
Current:
Revolver $ 85,402 $61,230
======== =======
Long-Term:
Revolver $132,200 $82,000
======== =======
</TABLE>
The amounts classified as long-term at December 31, 1995 and 1994,
represent the minimum borrowings that were expected to be outstanding during the
next twelve months.
The Company entered into a revolving credit facility in January 1994
providing $100 million, $50 million of which was subject to restrictions on
borrowings pursuant to the Company's $100 million 11.75% Senior Subordinated
Notes due 2002 (the "Notes"). This facility had a four year term and provided
for interest at the prime rate, as defined, plus 1.25%. Such rate was later
reduced to prime plus 0.75%.
In December 1994, the Company restructured its revolving credit line
to include the Sports Subsidiaries, as borrowers. The Revolver provided for
borrowings of up to $200 million based on eligible trade receivables and
inventory. The Revolver's interest was calculated at the prime rate plus 0.75%
(9.25% at December 31, 1994) and included a LIBOR rate option which equals
LIBOR plus 2.75%. The unused line fee is 0.25% on the available unused portion
of the line. The term of the Revolver was through January 31, 1997.
In September 1995, the Company amended and restated the Revolver. The
Amended and Restated Revolver provides for a term loan facility and a revolving
credit facility of up to $300 million, subject to restrictions on borrowings
pursuant to certain covenants in the indenture, as amended, for the Company's
Notes. The revolving credit facility provides for borrowings of up to $275
million based on eligible trade receivables and inventory. At December 31,
1995, the Amended and Restated Revolver's interest rate was 9.25%. The term of
the Amended and Restated Revolver is through September 29, 1998, and is
automatically renewed for successive one year terms unless terminated by either
the lenders or the Company.
The Amended and Restated Revolver requires the maintenance of various
financial covenants including minimum net worth, fixed maturity coverages and
minimum working levels. In the first quarter of 1996, the Company was not in
compliance with several of its loan covenants calculated as of December 31,
1995. These events of non-compliance were waived as of December 31, 1995 by the
lenders under the Amended and Restated Revolver pursuant to the further
amendment and restatement of the Revolver in the first quarter of 1996. At no
time was the Company in default with respect to the payment of indebtedness
under the Amended and Restated Revolver. The Company expects to remain in
compliance with amended covenants in 1996. Unutilized credit available under
this facility was approximately $45.9 million at December 31, 1995. At December
31, 1995, the Company had outstanding commercial letters of credit totaling
approximately $7.0 million.
39
<PAGE> 39
(4) INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
(in thousands) December 31,
---------------------------
1995 1994
-------- --------
<S> <C> <C>
Raw materials $ 58,960 $ 57,902
Work in process 9,570 8,604
Finished goods 98,213 88,669
-------- --------
$166,743 $155,175
======== ========
</TABLE>
If the FIFO inventory valuation method had been used for all
inventories, they would have been $2,072,000 higher than reported at December
31, 1995. The estimated current cost of inventories is approximately the same
as the LIFO or FIFO inventory values at December 31, 1994.
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
(in thousands) December 31,
---------------------------
1995 1994
-------- --------
<S> <C> <C>
Land $ 1,420 $ 1,420
Buildings 18,357 17,789
Machinery and Equipment 81,996 67,949
-------- --------
$101,173 $ 87,158
======== ========
</TABLE>
Additions and improvements to property, plant and equipment are
capitalized while maintenance and repairs are charged to expense as incurred.
Upon disposal or retirement of property, plant and equipment, the cost and
accumulated depreciation are eliminated from the accounts and the gain or loss
on the transaction is included in earnings.
Approximately $31 million of property, plant and equipment was
acquired in the acquisition of the Sports Subsidiaries (See Note 14
"Acquisitions").
Included in machinery and equipment at December 31, 1995 and 1994 is
approximately $4,639,000 and $3,165,000, respectively, of equipment under
capital leases.
Depreciation of plant and equipment was $9,660,000 in 1995, $4,662,000
in 1994 and $2,864,000 in 1993.
(6) LONG-TERM DEBT
Long-Term Debt is summarized as follows at:
<TABLE>
<CAPTION>
(dollars in thousands) December 31,
---------------------------
1995 1994
-------- --------
<S> <C> <C>
Note payable to a bank, interest at 7%, payable in 60
monthly installments through June 1998 $ 380 $ 515
</TABLE>
40
<PAGE> 40
<TABLE>
<CAPTION>
(dollars in thousands) December 31,
---------------------------
1995 1994
-------- --------
<S> <C> <C>
Secured loan agreement with the State of Missouri dated
September 13, 1990, as amended, interest at 1%, due
June 30, 1995 -- 160
Secured note payable for purchase of Flexible Flyer -- 871
Unsecured Senior Subordinated Notes, interest at 11.75%,
payable January 15 and July 15, due July 2002 100,000 100,000
Convertible Subordinated Debentures, interest at 8%,
payable February 15 and August 15, due August 2003 51,742 51,742
Urban Development Action Grant ("UDAG") Agreement
dated August 30, 1983, interest at 6% in first 10 years
and 4.5% less than prime with a maximum of 8% in
second 10 years, maturing 1987 to 2003, secured by
guarantee of Equitex, Inc. 889 1,003
Industrial Development Revenue Bonds, interest at 62%
of bank prime rate as defined, due 2001 1,739 1,707
Industrial Development Revenue Bonds, variable interest
rates ranging from 5.69% to 7.14%, due in quarterly principal
payments of $53 from 1989 to 1999 1,003 1,395
Secured loan agreement with City of Effingham, Illinois,
interest at 3%, payable in 60 monthly installments
through July 1998 156 215
Obligations under capital leases 2,816 2,222
Other 80 128
-------- --------
Total $158,805 $159,958
Less: Debt held in treasury 9,898 12,250
Current maturities 1,519 2,429
-------- --------
Total long-term debt $147,388 $145,279
======== ========
</TABLE>
Aggregate maturities are as follows: 1996, $1,519,000; 1997,
$1,237,000; 1998, $1,081,000; 1999, $480,000; 2000, $398,000; and thereafter,
$144,192,000.
In August 1993, the Company issued $51,745,000 of its 8% Convertible
Subordinated Debentures ("the Debentures") due 2003. The Debentures are
convertible into the Company's $0.01 par value common stock at $4.00 per share.
The Company can call the Debentures on or after September 15, 1996 subject to
the attainment of certain minimum stock price levels. The Debentures were
issued to repay certain term loans under the Roadmaster Loan Agreement, provide
funds for the acquisition of Flexible Flyer, and for general corporate
purposes.
In December 1993, the Company issued $100 million of its 11.75% Senior
Subordinated Notes (the "Notes") due 2002. The Notes were issued to diminish
the Company's reliance on traditional asset-based revolving lines of credit and
establish a more permanent capital structure in connection with the Company's
long-term growth objectives. The funds were used to partially repay amounts due
under the Roadmaster Loan Agreement, meet seasonal working capital requirements
and provide for the Company's three year, $35 million capital expenditures
budget. Much of the additional expenditures were targeted for cost reduction
projects and tooling of new products. The Company repurchased $7.3 million of
its Notes in January 1994 and $5.0 million in November 1994. In August 1995, in
a private transaction, the Company sold $2.4 million of its Notes held in
treasury. The entire $100 million is issued and outstanding, and the $9.9
million repurchased are held in treasury.
41
<PAGE> 41
Deferred offering costs of $12.5 million at December 31, 1995, are
amortized on the effective interest rate method over the life of the related
obligations.
At December 31, 1993, the Company placed $60 million in an irrevocable
trust for the purpose of reducing the previous bank credit facility.
Accordingly, the Company treated this transaction as an in-substance defeasance
and accounted for the proceeds in the trust account as a reduction in the loan
balance. In January 1994, the previous bank credit facility was retired and
replaced with the Revolver.
Under terms of the UDAG agreement between Roadmaster, the City of
Olney, Illinois, and the United States Department of Housing and Urban
Development ("HUD"), Roadmaster agreed to invest matching funds to renovate,
expand, and upgrade its plant and equipment. Roadmaster failed to comply with
the schedule of investing funds and, in 1986, HUD terminated the UDAG grant but
indicated it would not accelerate the then outstanding loan balance. The City
of Olney, Illinois, which administers the UDAG loan, waived the matching
requirement under the UDAG agreement and indicated it would not accelerate the
loan so long as Roadmaster repaid the loan according to the scheduled
maturities. Roadmaster is current in making its scheduled payments under the
loan.
(7) INCOME TAXES
Income tax (benefit) expense for the years ended December 31, 1995,
1994 and 1993 consists of:
<TABLE>
<CAPTION>
Year Ended December 31, 1993
(in thousands) -------------------------------------------------
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Federal ($31,659) $6,411 ($25,248)
State (5,955) 1,202 (4,753)
-------- ------ --------
($37,614) 7,613 ($30,001)
Foreign 522 -- 522
-------- ------ --------
($37,092) $7,613 ($29,479)
======== ====== ========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1993
(in thousands) -------------------------------------------------
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Federal $ 260 $1,437 $1,697
State (188) 507 319
-------- ------ --------
$ 72 $1,944 $2,016
Foreign 880 -- 880
-------- ------ --------
$ 952 $1,944 $2,896
======== ====== ========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1993
(in thousands) -------------------------------------------------
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Federal $2,557 $ 573 $3,130
State 556 86 642
-------- ------ --------
$3,113 $ 659 $3,772
Foreign 257 -- 257
-------- ------ --------
$3,370 $ 659 $4,029
======== ====== ========
</TABLE>
42
<PAGE> 42
The Company's effective tax rate varies from the statutory Federal
income tax rate as a result of the following items for the years ended December
31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31,
-----------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Tax expense at U.S.
statutory rate ($27,364) $2,685 $3,982
Increases resulting from--
Foreign taxes in excess of U.S.
statutory tax rate 622 496 171
State income taxes, net of
Federal income tax benefit (3,187) 313 423
Jobs tax credit (500) (21) (234)
Capital losses utilization -- (559) --
Other, net 950 (18) (313)
-------- ------ ------
Tax expense at effective rate ($29,479) $2,896 $4,029
======== ====== ======
</TABLE>
At December 31, 1995, the Company had a foreign tax credit
carryforward of $1,002,000 which expires in 1997.
The components of the net deferred tax asset/(liability) as of
December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
(in thousands) December 31,
------------------------
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Inventory and related reserves $2,064 $1,104
Warranty and other reserves 12,448 7,896
Alternative minimum tax and jobs credit
carryforwards 1,550 1,550
Deferred compensation 1,904 2,017
Unrealized loss on equity securities -- 394
All other, net 423 1,750
Valuation allowance (3,579) (4,152)
-------- -------
Total deferred tax assets $14,810 $10,559
======== =======
Deferred tax liabilities:
LIFO ($4,398) ($2,415)
Property, plant and equipment (4,048) (2,059)
Long-term debt -- (349)
Unrealized gain on equity securities (200) --
Restricted stock grants -- (306)
Loss on sale of assets -- (49)
All other, net (3,075) (1,357)
-------- -------
Total deferred tax liabilities ($11,721) ($6,535)
======== =======
Net deferred tax asset/(liability) $3,089 $4,024
======== =======
</TABLE>
Related to the acquisition of the Sports Subsidiaries, as of December
6, 1994, a preliminary allocation had been provided for a valuation allowance
related to the acquired net deferred tax assets. During 1995, the Company
completed its purchase accounting to record the final acquired net deferred tax
assets and made adjustment to the initial valuation allowance. Subsequent tax
benefits related to the valuation allowance
43
<PAGE> 43
established will be allocated directly to goodwill. As of December 31, 1995, the
remaining valuation allowance is $3,579,000. The valuation allowance was
established due to the poor earnings history of the acquired Sports
Subsidiaries, excluding Nelson/Weather-Rite.
In management's opinion, based on the Company's earnings history,
expectations of future taxable income, and other relevant considerations, it is
more likely than not that future taxable income will be sufficient to fully
utilize the deferred tax assets, net of the valuation allowance, which existed
at December 31, 1995.
(8) LEASES
The Company leases certain equipment and machinery under
noncancellable operating leases. Rent expense was $9,942,000 in 1995,
$3,783,000 in 1994 and $2,065,000 in 1993.
The Company leases certain equipment under capital leases. Future
aggregate minimum lease payments under capital and operating leases that have
initial or remaining noncancellable lease terms in excess of one year as of
December 31, 1995, are as follows:
<TABLE>
<CAPTION>
(in thousands)
Capital Operating
Year ended December 31 Leases Leases
- ---------------------- ------ ------
<S> <C> <C>
1996 $1,216 $ 8,965
1997 864 6,469
1998 393 5,602
1999 372 4,042
2000 314 2,756
Thereafter -- 5,431
------ -------
$3,159 $33,265
=======
Less: Interest expense 437
------
Present value of future minimum lease payments $2,722
======
</TABLE>
(9) COMMITMENTS AND CONTINGENCIES
Roadmaster Leisure, Inc., a wholly-owned indirect subsidiary of the
Company, files a separate Canadian income tax return. Revenue Canada has
proposed a reassessment of amounts due under income tax returns previously
filed. The Company intends to vigorously oppose any reassessment and believes
that, in the event of an unfavorable outcome, amounts payable (net of potential
recoveries) will not have a material adverse impact on the Company's annual
consolidated results of operations or financial condition.
The Company and its subsidiaries are involved in certain other legal
actions and claims arising in the ordinary course of business. In addition,
from time to time the Company becomes aware of certain environmental
remediation related matters which may result in the incurrence of
non-reimbursable costs. Management believes that the resolution of such
contingencies will not have a materially adverse impact on the Company's annual
consolidated results of operations or financial position.
In connection with the acquisition of the assets of American
Playworld, the Company granted a price guarantee for the 606,061 shares issued.
The seller is guaranteed a price of $4.125 per share by the Company. In the
event the seller sells the shares at a price below $4.125, the Company may be
required to pay the seller the difference between the price received and $4.125
per share. Any such payment would result in an increase to goodwill.
44
<PAGE> 44
In connection with the acquisition of MZH, the Company granted a price
guarantee for the 400,000 shares issued. The seller is guaranteed a price of
$3.75 per share by the Company. In the event the seller sells the shares at a
price below $3.75, the Company may be required to pay the seller the difference
between the price received and $3.75 per share. Any such payment would result
in an increase to goodwill.
(10) BENEFIT PLANS
The Company maintains three Employee Stock Ownership Plans (the
"Plans" or "ESOP") and each incorporates salary deferral and employer matching
contribution features ("401(k)"). The Company makes basic contributions to the
Plan in amounts necessary to pay any maturing obligations under any outstanding
ESOP loans. The ESOP has no maturity obligations at December 31, 1995.
Additionally, the Company periodically makes discretionary contributions of
shares of its common stock or cash for the benefit of eligible employees.
The Company sponsors a 401(k) savings plan under which eligible U.S.
employees may choose to save up to 15% of their salary income on a pre-tax
basis, subject to certain IRS limits. The Company matches 4% of employee
contributions with Company common stock up to a minimum of 1% of net income.
The shares for this purpose are provided principally by the Company's ESOP,
supplemented as needed by newly issued shares. The Company makes annual
contributions to the ESOP. The ESOP shares were initially pledged as
collateral for the Company's debt. As the debt is repaid over a 10 year period,
shares are released from collateral and allocated to employees who made 401(k)
contributions that year. The Company accounts for its ESOP in accordance with
Statement of Position 93-6. Accordingly, the shares pledged as collateral are
reported as unearned ESOP shares in the statement of financial position. As
shares are released from collateral, the Company reports compensation expense
equal to the current market price of the shares, and the shares become
outstanding for earnings per share computations.
Compensation expense for the 401(k) match and the ESOP was $696,000 in
1995. The ESOP shares as of December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
(in thousands, except share amounts) Year Ended December 31,
------------------------
1995 1994
---- ----
<S> <C> <C>
Allocated shares 2,081,651 1,459,518
Shares released for allocation 69,412 --
Unreleased shares 624,706 806,387
------- -------
Total ESOP shares 2,775,769 2,265,905
Total value of ESOP shares $ 6,606 $ 8,203
======= =======
</TABLE>
The Company has received favorable tax qualification determination
letters from the Internal Revenue Service ("IRS") on all three of its Plans.
The Company also maintains three qualified defined benefit plans on a
curtailed basis. Net periodic pension income for the years ended December 31,
1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>
(in thousands) Year Ended December 31,
------------------------
1995 1994
---- ----
<S> <C> <C>
Interest cost on projected obligations $ 477 $ 466
Actual return on plan assets (545) (543)
Net amortization and deferral 55 33
------- -------
Net periodic pension income $ (13) $ (44)
======= =======
</TABLE>
45
<PAGE> 45
The following table sets forth the funded status at December 31, 1995
and 1994 of the pension plans and amounts recognized in the Company's
consolidated financial statements as of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
(in thousands) As of December 31,
------------------
1995 1994
---- ----
<S> <C> <C>
Actuarial present value of:
Accumulated benefit obligation, including vested
benefits of $7,389 and $6,209, respectively $7,389 $6,209
====== ======
Projected benefit obligation $7,389 $6,209
Plan assets at fair value 7,175 6,527
------ ------
Plan assets (less than)/in excess of projected benefit obligation $ (214) $ 318
Unrecognized net experience loss 909 282
------ ------
Prepaid pension cost $ 695 $ 600
====== ======
</TABLE>
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation was 6.5% both in 1995 and
1994. The expected long-term rate of return on assets was 8.5% in both 1995 and
1994. No rate of increase in future compensation levels is considered since the
plans are frozen.
Plan assets are invested in a collective guaranteed investment
contract fund, a collective equity investment fund and temporary investments.
Roadmaster acquired the Actava Group Inc. Sports Group Profit Sharing
Plan ("Actava Plan") and the Diversified Products Corporation Profit
Sharing/401(k) Plan ("DP Plan") with the 1994 acquisition of the Sports
Subsidiaries. The Actava Plan is a defined contribution plan for the employees
of Nelson/Weather-Rite and Willow whose assets are invested in money market
funds, bond funds and U.S. Treasury Bills. The DP Plan is a defined contribution
plan with 401(k) features for the employees of DP whose plan assets are
primarily invested in a guaranteed interest contract. Both plans were inactive
during 1995.
(11) RELATED-PARTY TRANSACTIONS
On October 7, 1993, Roadmaster entered into a distribution agreement
with MacGregor Sports Products, Inc. ("MSP"), a wholly-owned subsidiary of
MacGregor Sports and Fitness, Inc. ("MacGregor"), a publicly-held company
engaged in the business of marketing and distributing a broad range of sports,
recreational and fitness products under the MacGregor trademark. Roadmaster
became the exclusive worldwide distributor of MacGregor brand baseball,
softball, basketball, football, soccer, hockey, volleyball, racquet sports, and
other products, for a term of five years, with a five-year renewal option.
Pursuant to the distribution agreement, Roadmaster is obligated to pay MSP a 3%
royalty based on a percentage of Roadmaster's net revenues from products bearing
the MacGregor trademarks and brand names, with certain minimum royalties. In
addition, Roadmaster acquired certain accounts receivable, inventory, general
intangibles and equipment, for a purchase price of $1.6 million. The Company's
Chief Executive Officer ("CEO") and Chief Operating Officer are
serving or have served as directors of MacGregor. The Company is a significant
shareholder of MacGregor.
Equitex is a major stockholder of the Company and the CEO of Equitex
is also the CEO and a director of the Company. Equitex earned management fees
of $144,000 for each of the years from 1993 through 1995.
(12) COMMON STOCK
In connection with the acquisition of Flexible Flyer in September
1993, the Company issued 617,165 shares of redeemable common stock valued at
$2.0 million. These shares contained a contractual
46
<PAGE> 46
right to put the shares back to the Company at $3.24 per share. This right
expired on October 15, 1994. Accordingly, since this right has expired, these
shares were included as a component of stockholders' equity at December 31, 1994
in the accompanying balance sheet.
During 1994, the Company issued warrants to purchase up to a total of
888,145 shares of the Company's common stock at prices ranging from $3.63 to
$4.06 per share. In addition, warrants to purchase 409,175 shares were issued
with an exercise price of the fair market value of the Company's common stock
at the date of exercise.
During 1995, the Company issued warrants to purchase up to a total of
1,575,250 shares of the Company's common stock at prices ranging from $2.56 to
$4.00 per share. In addition, warrants to purchase 442,700 shares were issued
with an exercise price of the fair market value of the Company's common stock
at the date of exercise.
Stock option and warrant transactions are summarized below for the
three year period ended December 31, 1995:
<TABLE>
<CAPTION>
Number Exercise
of Shares Price Range
--------- -----------
<S> <C> <C>
Options and warrants:
Options and warrants outstanding
at January 1, 1993 6,085,800 $1.33 - $1.50
Granted 2,639,205 $1.33 - $6.60
Exercised (637,387) $1.33 - $1.48
Canceled (876,705) $1.33 - $1.48
Options and warrants outstanding ---------- -------------
at December 31, 1993 7,210,913 $1.33 - $6.60
Granted 1,297,320 $3.63 - $4.06
Exercised (2,496,371) $1.33 - $1.50
Canceled (533,434) $1.33 - $1.50
Options and warrants outstanding ---------- -------------
at December 31, 1994 5,478,428 $1.33 - $6.60
Granted 2,017,950 $2.56 - $4.00
Exercised (90,000) $1.33
Canceled (28,000) $1.33 - $1.48
Options and warrants outstanding ---------- -------------
at December 31, 1995 7,378,378 $1.33 - $6.60
========== =============
</TABLE>
As of December 31, 1995, the Company had a total of 7,378,378 shares
of common stock reserved for issuance upon exercise of warrants ($1.33-$6.60
exercise price per share).
(13) EARNINGS PER COMMON SHARE
In 1995, primary and fully diluted earnings per common share were
based on the weighted average number of common shares outstanding during the
year.
In 1993 and 1994, primary earnings per common share were based on the
weighted average number of common shares outstanding during the year and common
stock equivalent shares assumed to be exercised with the proceeds used to
repurchase common shares at the average market price for the year.
47
<PAGE> 47
In 1993 and 1994, fully diluted earnings per common share further
assumed that the proceeds of common equivalent shares were used to repurchase
common shares as of the beginning of the year, at the higher of the market
price at the close of the period or the average market price for the year, to
reflect maximum potential dilution. In 1993, the computation of fully diluted
earnings per share also includes interest savings assuming conversion of the
Debentures and the 12,936,000 shares issuable under that assumption as the
effect of their inclusion is dilutive for 1993.
(14) ACQUISITIONS
ACQUISITION OF MZH
In April 1995, the Company finalized the acquisition of certain assets
and the business of MZH, a manufacturer and marketer of sleeping bags. MZH had
revenues of approximately $28 million in 1994. The purchase price included
$21.5 million in cash, 400,000 shares of the Company's common stock valued at
$1.5 million and the assumption of certain liabilities.
ACQUISITION OF FORSTER
In March 1995, Hutch acquired the sporting goods division of Forster
Manufacturing Company for $7.4 million in cash. The product categories acquired
include various backyard and lawn games, including croquet, bocce ball and
volleyball.
The pro forma effect of the 1995 acquisitions on the 1995 financial
statements is not material.
ACQUISITION OF THE SPORTS SUBSIDIARIES
On December 6, 1994, the Company exchanged with Actava all of the issued and
outstanding capital shares of DP, Hutch, Nelson/Weather-Rite, and Willow,
wholly-owned subsidiaries of Actava, for an aggregate 19,169,000 shares of the
Company's common stock, par value $0.01 per share valued at $76.7 million.
The acquisition has been accounted for as a purchase, and the net
assets and results of operations are included in the Company's Consolidated
Financial Statements beginning December 7, 1994. The purchase price has been
allocated to the assets and liabilities of the Sports Subsidiaries based on
their estimated fair values. The purchase price and expenses associated with
the acquisition exceeded the fair value of net assets by $71.0 million. These
amounts have been included in goodwill and other intangible assets.
ACQUISITION OF AMERICAN PLAYWORLD
In February 1994, the Company acquired the assets and business of
American Playworld. American Playworld is a manufacturer of trampolines
distributing mainly to mass merchants and had revenues of approximately $17
million in 1993. The purchase price included $7.0 million in cash, 606,061
shares of the Company's common stock valued at $2.5 million, and the assumption
of certain trade payables.
ACQUISITION OF FLEXIBLE FLYER COMPANY
On September 14, 1993, the Company purchased from Par Industries, Inc.
("Par") certain assets and the business of, and assumed certain recorded
liabilities incurred in the ordinary course of business by, Flexible Flyer
Company, a division of Par. The price paid by the Company for the Flexible
Flyer assets and business was approximately $23.0 million. The purchase
financing included the issuance of 617,165 shares of redeemable common stock
valued at $2.0 million and the assumption of $4.2 million of accounts payable.
In addition, the principal stockholders of Par agreed to a five-year
non-compete arrangement for which the Company will pay an additional $1.5
million over the five-year period following the closing date of the Flexible
Flyer acquisition.
48
<PAGE> 48
The acquisition was accounted for as a purchase, and the net assets
and results of operations are included in the Company's Consolidated Financial
Statements beginning September 14, 1993. The purchase price was allocated to
the assets and liabilities of Flexible Flyer based on their estimated fair
values. The purchase price and expenses associated with the acquisition
exceeded the fair value of Flexible Flyer's net assets by approximately $6.6
million. These amounts have been included in goodwill and other intangible
assets.
The following unaudited pro forma information combines the
consolidated results of operations of the Company, Flexible Flyer, American
Playworld and the Sports Subsidiaries as if the acquisitions had occurred on
January 1 of the respective years, after giving effect to amortization of
goodwill and noncompetition agreements and increased interest expense at
approximately 8% on average borrowings to finance the acquisition. The pro
forma results of operations exclude salary expense for the terminated salary
employees not rehired by the Company, as provided for in the Flexible Flyer
Acquisition Agreement, and direct costs associated with assets not purchased or
liabilities not assumed as provided by the Flexible Flyer Acquisition
Agreement. The pro forma information is not necessarily indicative of the
results of operations which would have actually been obtained during such
periods.
<TABLE>
<CAPTION>
Unaudited
(in thousands except per share data) As of December 31,
------------------------
1994 1993
---- ----
<S> <C> <C>
Net sales $759,373 $651,300
Income (loss) before taxes 4,437 (1,249)
Net income (loss) 2,795 (775)
======== ========
Earnings (loss) per share
Primary $0.06 ($0.02)
======== ========
</TABLE>
(15) NEW ACCOUNTING PRONOUNCEMENTS
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation", which is required to be adopted for fiscal years beginning
December 15, 1995. The Company anticipates including the appropriate disclosure
requirements in its 1996 financial statements. The Company anticipates that
there will be no financial statement impact.
(16) RESTRUCTURING CHARGE
In December 1995, the Company recorded a restructuring charge of $7.5
million, primarily related to the closure of its Tyler, Texas manufacturing
facility and the downsizing of its European distribution operations. The
operations of the Tyler facility will be integrated with the Company's Opelika,
Alabama manufacturing operations enabling the Company to reduce fixed costs and
increase utilization and efficiency of existing manufacturing facilities. The
components of the restructuring charge include $1.4 million for employee
severance, $3.9 million to cover lease obligations for facilities which will no
longer be needed and $2.2 million for the maintenance, security and other
facility related carrying costs. Total cash expenditures of $7.5 million are
included in this charge. All employees were notified of this restructuring by
December 31, 1995. The Company plans to substantially complete all related
restructuring activities by December 31, 1996.
(17) SUBSEQUENT EVENT
On March 8, 1996, the Company completed the sale of the assets of its
Nelson/Weather-Rite camping division, including MZH, to Brunswick Corporation
for cash consideration of $120 million. The sale includes the
49
<PAGE> 49
purchase of all the assets and the assumption of accounts payable and accrued
liabilities, which totaled $87.7 million at December 31, 1995. Such
transaction was consummated on March 8, 1996. The final purchase price is
subject to ordinary post closing adjustments based on closing working capital
levels. The Company used the net proceeds to reduce its outstanding revolving
credit facility by approximately $120 million. Pending final purchase price
adjustments, the Company expects a pretax gain of more than $25 million to be
recognized in the first quarter of 1996.
(18) QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(in thousands, except per share data) 1995 Quarter Ended
------------------------------------------------------------
December 31 September 30 July 1 April 1
----------- ------------ ------ -------
<S> <C> <C> <C> <C>
Net Sales $207,395 $175,221 $172,713 $175,546
Gross Profit 18,496 24,376 19,778 23,957
Net (Loss) Earnings (41,745)(1) (2,203) (5,579) (1,477)
Per Common Share -
Net (Loss) Earnings $ (.85) $ (.04) $ (.11) $ (.03)
</TABLE>
<TABLE>
<CAPTION>
(in thousands, except per share data) 1994 Quarter Ended
------------------------------------------------------------
December 31 October 1 July 2 April 2
----------- ---------- ------ -------
<S> <C> <C> <C> <C>
Net Sales $151,705 $103,102 $102,566 $98,288
Gross Profit 20,623 17,880 15,353 12,934
Net Earnings 170 2,995 1,053 782
Per Common Share -
Net Earnings $ .00 $ .09 $ .03 $ .03
</TABLE>
(1) This loss includes costs associated with the impairment loss and
restructuring costs.
50
<PAGE> 50
SCHEDULE II
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(in thousands)
<TABLE>
<CAPTION>
Additions
------------------------
Balance at Charged to Charged Balance
Beginning Costs and to Other at End
of Period Expenses Accounts Deductions of Period
--------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful receivables-
Year ended-
December 31, 1995 $1,744 $689 $2,339 ($3,363) $1,389
December 31, 1994 411 82 1,300 (3) (49) (1) 1,744
December 31, 1993 828 (51) 84 (2) (450) (1) 411
Valuation allowance for deferred tax assets-
Year ended-
December 31, 1995 $4,152 $-- $-- ($573) $3,579
December 31, 1994 -- -- 4,296 (3) (144) 4,152
December 31, 1993 -- -- -- -- --
</TABLE>
Notes: (1) Represents amounts charged off as uncollectible.
(2) Represents amounts assumed through the acquisition of Flexible
Flyer Company.
(3) Represents amounts assumed through the acquisition of the Sports
Subsidiaries.
51
<PAGE> 1
LOAN AND SECURITY AGREEMENT
Dated as of December 6, 1994
AMENDED AND RESTATED
as of September 29, 1995
among
ROADMASTER CORPORATION,
ROADMASTER LEISURE INC.,
WILLOW HOSIERY COMPANY, INC.,
HUTCH SPORTS USA INC.,
NELSON/WEATHER-RITE, INC.
and
ROADMASTER RECEIVABLES CORPORATION
as the Borrowers
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders
and
BANKAMERICA BUSINESS CREDIT, INC.
as the Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C> <C>
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
1.3 Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
1.4 Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 2
LOANS, LETTERS OF CREDIT AND ACCEPTANCES
2.1 Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.2 Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.3 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.4 Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 3
INTEREST AND FEES
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
3.2 Conversion or Continuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
3.3 Special Provisions Governing LIBOR Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
3.4 Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
3.5 Closing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
3.6 Letter of Credit Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
3.7 Unused Line Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
3.8 Audit Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
3.9 Collateral Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
3.10 Early Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
3.11 Currency Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 4
PAYMENTS AND PREPAYMENTS
4.1 Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
4.2 Termination of the Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
4.3 Place and Form of Payments; Extension of Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
4.4 Payments as Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
4.5 Apportionment, Application and Reversal of Payments . . . . . . . . . . . . . . . . . . . . . . . . . 59
4.6 Indemnity for Returned Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
4.7 Increased Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
4.8 Register; Agent's and Lenders' Books and Records; Monthly Statements . . . . . . . . . . . . . . . . . 61
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
ARTICLE 5
COLLATERAL
5.1 Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.2 Perfection and Protection of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
5.3 Location of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.4 Title to, Liens on, and Sale and Use of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.5 Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
5.6 Access and Examination; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
5.7 Collateral Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
5.8 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
5.9 Collection of Accounts; Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5.10 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
5.11 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
5.12 Assigned Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
5.13 Documents, Instruments, and Chattel Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
5.14 Right to Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
5.15 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
5.16 The Agent's and Lenders' Rights, Duties and Liabilities . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE 6
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
6.1 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
6.2 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
6.3 Notices to the Agent and the Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
ARTICLE 7
GENERAL WARRANTIES AND REPRESENTATIONS
7.1 Authorization, Validity, and Enforceability of this Agreement and the Loan Documents . . . . . . . . 82
7.2 Validity and Priority of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.3 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.4 Corporate Name; Prior Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.5 Subsidiaries and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.6 Financial Statements and Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.7 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.8 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.9 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.10 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.11 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.12 Real Estate; Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.13 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.14 Trade Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.16 Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.17 Labor Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
</TABLE>
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7.18 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.19 No Violation of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7.20 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7.21 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7.22 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
7.23 Investment Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
7.24 Margin Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
7.25 Consummation of Exchanges and DP Asset Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
7.26 Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
7.27 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
7.28 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
7.29 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
7.30 Eligibility of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
7.31 Public Utility Holding Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
ARTICLE 8
AFFIRMATIVE AND NEGATIVE COVENANTS
8.1 Taxes and Other Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
8.2 Corporate Existence and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
8.3 Compliance with Law and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
8.4 Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
8.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
8.6 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
8.7 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
8.8 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
8.9 Mergers, Consolidations or Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
8.10 Distributions; Capital Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
8.11 Transactions Affecting Collateral or Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 97
8.12 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
8.13 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
8.14 Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
8.15 Payment of Debt to Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
8.16 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
8.17 Investment Banking and Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
8.18 Business Conducted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
8.19 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
8.20 Sale and Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
8.21 New Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
8.22 Restricted Investments; Permitted Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
8.23 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
8.24 Operating Lease Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
8.25 Fixed Maturity Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
8.26 RMC Debt Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
8.27 Adjusted Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
8.28 Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
8.29 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
8.30 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
</TABLE>
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ARTICLE 9
CONDITIONS OF LENDING
9.1 Conditions Precedent to Making of Loans on the Closing Date . . . . . . . . . . . . . . . . . . . . . . 108
9.2 Conditions Precedent to Each Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
ARTICLE 10
DEFAULT; REMEDIES
10.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
10.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
ARTICLE 11
TERM AND TERMINATION
11.1 Term and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
ARTICLE 12
AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
12.1 No Implied Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
12.2 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
12.3 Assignments; Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
12.4 Binding Effect; Assignment; Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
ARTICLE 13
THE AGENT
13.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
13.2 Nature of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
13.3 Rights, Exculpation, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
13.4 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
13.5 Indemnification of the Agent by the Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
13.6 Agent in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
13.7 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
13.8 Collateral Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
13.9 Restrictions on Actions by Lenders; Sharing of Payments . . . . . . . . . . . . . . . . . . . . . . . 126
13.10 Agency for Perfection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
13.11 Payments by Agent to Lenders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
13.12 Concerning the Collateral and the Related Loan Documents . . . . . . . . . . . . . . . . . . . . . . . 128
13.13 Field Audit Reports; Disclaimers by Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
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ARTICLE 14
MISCELLANEOUS
14.1 Cumulative Remedies; No Prior Recourse to Collateral . . . . . . . . . . . . . . . . . . . . . . . . . 129
14.2 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
14.3 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver . . . . . . . . . . . . . . . . 129
14.4 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
14.5 Other Security and Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
14.6 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
14.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
14.8 Indemnity of the Agent and the Lenders by the Borrowers . . . . . . . . . . . . . . . . . . . . . . . 134
14.9 Waiver of Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
14.10 Final Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
14.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
14.12 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
14.13 Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
14.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
14.15 Joint and Several Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
</TABLE>
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EXHIBITS AND SCHEDULES
EXHIBIT A - Borrowing Base Certificate
EXHIBIT B-1 - Financial Statements
EXHIBIT B-2 - Latest Projections
EXHIBIT B-3 - Form of Management Analysis
EXHIBIT C - Form of Free Quota Letter of Credit
EXHIBIT D-1 - Revolving Loan Notice of Borrowing
EXHIBIT D-2 - Capital Expenditure Loan Notice of Borrowing
EXHIBIT E - Notice of Conversion/Continuation
EXHIBIT F - Form of Capital Expenditure Loan Note
EXHIBIT G - List of Closing Documents
EXHIBIT H - Form of Assignment and Acceptance
SCHEDULE 2.3 - Projected Cash Flow
SCHEDULE 2.5 - Outstanding Letters of Credit
SCHEDULE 5.3 - Locations of Collateral
SCHEDULE 5.12 - Assigned Contracts
SCHEDULE 7.2 - Permitted Liens
SCHEDULE 7.3 - Good Standing Jurisdictions
SCHEDULE 7.4 - Corporate Names; Trade Names
SCHEDULE 7.5 - Affiliates
SCHEDULE 7.9 - Indebtedness
SCHEDULE 7.12 - Real Property and Leases; Permitted Sales
SCHEDULE 7.13 - Proprietary Rights
SCHEDULE 7.15 - Litigation
SCHEDULE 7.17 - Labor Contracts and Disputes
SCHEDULE 7.18 - Environmental Matters
SCHEDULE 7.21 - Employee Benefit Plans
SCHEDULE 7.26 - Investment Banking and Broker's Fees
SCHEDULE 7.29 - Bank Accounts
SCHEDULE 8.12 - Guaranty Obligations
SCHEDULE 12.3 - Eligible Assignees
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This LOAN AND SECURITY AGREEMENT is dated as of December 6,
1994 and amended and restated as of September 29, 1995 (this "Agreement"),
among ROADMASTER CORPORATION, a Delaware corporation ("RMC"), with an office at
Radio Tower Road and East Street, Olney, Illinois 62450, ROADMASTER LEISURE
INC., a corporation incorporated under the laws of the province of Ontario,
Canada ("RML"), with an office at 6040 Progress Street, Niagara Falls, Ontario,
WILLOW HOSIERY COMPANY, INC., a New York corporation ("Willow"), with an office
at 1835 Airport Exchange Boulevard, Erlanger, Kentucky 41018, HUTCH SPORTS USA
INC., a Delaware corporation ("Hutch"), with an office at 1835 Airport Exchange
Boulevard, Erlanger, Kentucky 41018, NELSON/WEATHER-RITE, INC., a Delaware
corporation ("NWR"), with an office at 14760 Santa Fe Trail Drive, Lenexa,
Kansas 66215-0488, and ROADMASTER RECEIVABLES CORPORATION, an Illinois
corporation ("RRC"), with an office at Radio Tower Road and East Street, Olney,
Illinois 62450 (RMC, RML, Willow, Hutch, NWR and RRC being sometimes
hereinafter referred to collectively as the "Borrowers" and individually as a
"Borrower"), the financial institutions named on the signature pages of this
Agreement as "Lenders" (such financial institutions and their respective
successors and assigns being sometimes hereinafter referred to collectively as
the "Lenders" and each of such financial institutions and its successors and
assigns being sometimes hereinafter referred to individually as a "Lender"),
and BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, as agent for the
Lenders (in such capacity as agent, the "Agent"). In consideration of the
mutual conditions and agreements set forth in this Agreement, and for good and
valuable consideration, the receipt of which is hereby acknowledged, the
Borrowers, the Lenders and the Agent hereby agree as follows:
RECITALS
A. The Borrowers, the Lenders and the Agent are parties
to a certain Loan and Security Agreement dated as of December 6, 1994, as
amended pursuant to a certain Amendment No. 1 dated as of February 3, 1995,
Amendment No. 2 dated as of April 28, 1995, Amendment No. 3 dated as of May 31,
1995, Amendment No. 4 dated as of June 23, 1995, Amendment No. 5 dated as of
July 14, 1995, and Amendment No. 6 dated as of August 2, 1995 (such Loan and
Security Agreement, as so amended, being hereinafter referred to as the
"Original Agreement"), providing for certain loans and other financial
accommodations by the Lenders and the Agent to the Borrowers.
B. The Borrowers, the Lenders and the Agent have agreed
to amend the Original Agreement in certain respects, and have agreed to execute
and deliver this Agreement as a restatement of the Original Agreement, in order
to incorporate the new amendments and all prior amendments into a single
document.
C. It is the intent of the parties hereto that the
execution and delivery of this Agreement, made for the purpose
<PAGE> 9
described in the immediately preceding Recital, not effectuate a novation of
the indebtedness outstanding under the Original Agreement, but rather a
substitution of certain of the terms governing the payment and performance of
such indebtedness.
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
1.1 Restatement and Amendment. The Borrowers, the Lenders
and the Agent hereby agree that, effective upon the execution and delivery of
this Agreement by each such party: (a) the terms and provisions of the Original
Agreement shall be and hereby are amended, superseded and restated in their
entirety by the terms and provisions of this Agreement, and (b) the
indebtedness evidenced by the Original Agreement shall be payable solely in
accordance with the terms of this Agreement and any Loan Documents delivered
pursuant hereto. The Borrowers agree that the Lenders and the Agent shall have
no obligations under the Original Agreement, except to the extent that any
obligations thereunder may be restated in this Agreement or the other Loan
Documents. The Borrowers, the Lenders and the Agent agree that the execution
and delivery of this Agreement shall not effectuate a novation of the
indebtedness outstanding under the Original Agreement, but rather a
substitution of certain of the terms governing the payment and performance of
such indebtedness.
1.2 Definitions. As used herein:
"Acceptance" has the meaning specified in Section 2.5.
"Acceptance Fee" has the meaning specified in Section 3.6.
"Accounts" means all of each Borrower's now owned or hereafter
acquired or arising accounts, contract rights, and any other rights to payment
for the sale or lease of goods or rendition of services, whether or not they
have been earned by performance.
"Account Debtor" means each Person obligated in any way on or
in connection with an Account.
"Actava" means The Actava Group Inc., a Delaware corporation.
"Actava World Trade" means Actava World Trade Corporation, a
Delaware corporation.
"Actava World Trade Guaranty" means that certain Guaranty
dated as of December 6, 1994 executed by Actava World Trade in favor of the
Agent guarantying the payment and
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<PAGE> 10
performance of the Obligations, other than the Obligations owing by RRC.
"Adjusted Net Earnings from Operations" means, with respect to
any fiscal period of a Borrower, such Borrower's combined net income after
provision for income taxes for such fiscal period, as determined in accordance
with GAAP and reported on the Financial Statements for such period, less any
and all of the following included in such net income: (a) gain or loss arising
from the sale of any capital asset; (b) gain arising from any write-up in the
book value of any asset; (c) earnings of any corporation, substantially all the
assets of which have been acquired by such Borrower in any manner, to the
extent realized by such other corporation prior to the date of acquisition; (d)
earnings of any business entity in which such Borrower has an ownership
interest unless (and only to the extent) such earnings shall actually have been
received by such Borrower in the form of cash distributions; (e) earnings of
any Person to which assets of such Borrower shall have been sold, transferred
or disposed of, or into which such Borrower shall have been merged, or which
has been a party with such Borrower to any consolidation or other form of
reorganization, prior to the date of such transaction; (f) gain arising from
the acquisition of any debt or equity securities of such Borrower or from
cancellation or forgiveness of any Debt; and (g) gain arising from any
extraordinary items, other than net operating loss offsets, as determined in
accordance with GAAP, or from any other non-recurring transaction.
"Adjusted Tangible Assets" means all of a Borrower's assets,
including all purchase accounting entries (provided, that noncash purchase
accounting entries shall be excluded from the calculation of assets to the
extent that such entries do not exceed (a) $5,000,000 in the case of RMC,
$2,000,000 in the case of NWR, $1,000,000 in the case of Willow, or $1,000,000
in the case of Hutch, or (b) $6,000,000 in the aggregate for all of the
Borrowers) but excluding (1) Intercompany Accounts, (2) investments in the
Parent, (3) Restricted Investments, (4) fixed assets to the extent of any
write-up in the book value thereof resulting from a revaluation effective after
the Restatement Closing Date, and (5) general intangibles, advances and
receivables due from officers, directors, employees and stockholders, licenses,
goodwill, prepaid expenses, covenants not to compete, franchise fees,
organizational costs, research and development costs, financing and acquisition
costs, deferred income tax receivables, long term trade receivables (whether or
not converted to notes), and such similar items as may from time to time be
determined in the reasonable discretion of the Lenders (including leasehold
improvements net of depreciation and deposits to the extent such items are
material and separately identified in the Financial Statements).
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<PAGE> 11
"Adjusted Tangible Net Worth" means, with respect to a
Borrower, at any date: (a) the book value (after deducting related
depreciation, obsolescence, amortization, valuation, and other proper reserves
as determined in accordance with GAAP) at which the Adjusted Tangible Assets of
such Borrower would be shown on a balance sheet of such Borrower at such date
prepared in accordance with GAAP less (b) the amount of Debt of such Borrower
(excluding (1) in the case of RMC, the then outstanding principal amounts of
the Subordinated Debt and the outstanding principal amount of Debt incurred
under the Subordinated Revolver, and (2) Debt incurred and subordinated to the
Obligations on a basis satisfactory in form and substance to the Agent and the
Lenders); provided that Adjusted Tangible Net Worth shall be calculated, (A)
with respect to RMC and Hutch, without giving effect to the Distributions, if
any, by Hutch, and simultaneous capital contributions by the Parent to RMC,
permitted pursuant to clause (2)(B) of the second sentence of Section 8.10, and
(B) with respect to each Borrower, without giving effect to the payment of
closing fees, legal expenses and associated costs incurred by such Borrower in
connection with the initial closing of the transactions described in this
Agreement or payments made to employees pursuant to severance packages in
effect on the date of this Agreement.
"Affiliate" means: (a) any Person which, directly or
indirectly, controls, is controlled by or is under common control with, any
Borrower; (b) any Person which beneficially owns or holds, directly or
indirectly, five percent (5.0%) or more of any class of Voting Stock of any
Borrower; or (c) any Person, five percent (5.0%) or more of any class of the
Voting Stock (or if such Person is not a corporation, five percent (5.0%) or
more of the equity interest) of which is beneficially owned or held, directly
or indirectly, by any Borrower. Control (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as used herein,
means the possession, directly or indirectly, of the power in any form to
direct or cause the direction of the management and policies of the Person in
question.
"Agent" means BankAmerica Business Credit, Inc., in its
capacity as agent for the Lenders, and shall include any successor Agent
appointed pursuant to Section 13.7.
"Agent Advances" has the meaning specified in Section 2.4(h).
"Agent's Liens" means the Liens granted to the Agent, for the
ratable benefit of the Secured Creditors, pursuant to this Agreement and the
other Loan Documents.
"Aggregate Revolver Outstandings" means, at any time: (a) with
respect to any Borrower other than NWR, the sum of
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(1) the unpaid balance of Revolving Loans to such Borrower, (2) the aggregate
amount of Pending Revolving Loans to such Borrower, (3) one hundred percent
(100%) of the aggregate undrawn face amount of all outstanding Letters of
Credit issued for the account of such Borrower, (4) the aggregate amount of any
unpaid reimbursement obligations in respect of the Letters of Credit issued for
the account of such Borrower, and (5) the aggregate face amount of all
outstanding Acceptances created for the account of such Borrower; (b) with
respect to NWR, the sum of (1) the unpaid balance of Revolving Loans to NWR,
(2) the aggregate amount of Pending Revolving Loans to NWR, (3) one hundred
percent (100%) of the aggregate undrawn face amount of (A) all outstanding
Letters of Credit (other than Free Quota Letters of Credit) issued for the
account of NWR, and (B) all then outstanding Free Quota Letters of Credit that
have been outstanding for a period greater than ninety (90) days, (4) the
aggregate amount of any unpaid reimbursement obligations in respect of the
Letters of Credit issued for the account of NWR, and (5) the aggregate face
amount of all outstanding Acceptances created for the account of NWR; and (c)
with respect to all of the Borrowers, the sum of Aggregate Revolver
Outstandings to or for the account of each Borrower at such time.
"Agreement and Plan of Reorganization" means that certain
Agreement and Plan of Reorganization dated as of July 20, 1994 among Actava,
DP, Hutch, NWR, Willow and the Parent, as amended, modified or supplemented
from time to time.
"American Playworld Purchase Agreement" means that certain
Asset Purchase Agreement dated February 28, 1994 between the Parent and
American Playworld, Inc., as amended, modified or supplemented from time to
time.
"Anniversary Date" means each anniversary of the Restatement
Closing Date.
"Assigned Contracts" means, collectively, all of each
Borrower's rights and remedies under, and all moneys and claims for money due
or to become due to such Borrower under, the Flexible Flyer Purchase Agreement,
the American Playworld Purchase Agreement, the Agreement and Plan of
Reorganization, the MZH Purchase Agreement, the Receivables Purchase Agreement
and the other agreements listed on Schedule 5.12, and any and all amendments,
supplements, extensions, and renewals thereof including, without limitation,
all rights and claims of such Borrower now or hereafter existing: (a) under any
insurance, indemnities, warranties, and guarantees provided for or arising out
of or in connection with the foregoing agreements; (b) for any damages arising
out of or for breach or default under or in connection with the foregoing
agreements; (c) to all other amounts from time to time paid or payable under or
in connection
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with the foregoing agreements; or (d) to exercise or enforce any and all
covenants, remedies, powers and privileges thereunder.
"Assignment Agreements" means, collectively, those certain
three (3) Assignments of Representations, Warranties and Covenants dated as of
December 6, 1994 executed by the Parent or RMC, as the case may be, in favor of
the Agent, in connection with the Agreement and Plan of Reorganization,
Flexible Flyer Purchase Agreement and MZH Purchase Agreement, respectively.
"Assignment and Acceptance" has the meaning specified in
Section 12.3(a).
"Availability" means, at any time, (a) the Maximum Revolver
Amount at such time minus (b) the Aggregate Revolver Outstandings to or for the
accounts of all of the Borrowers at such time. In determining pursuant to
Sections 2.2, 2.4(g) or 2.4(h) whether Revolving Loans to be made on any date
would exceed Availability on such date, such proposed Revolving Loans shall be
counted as either Revolving Loans or Pending Revolving Loans for purposes of
calculating Availability on such date, but shall not be counted as both
Revolving Loans and Pending Revolving Loans.
"BABC" means BankAmerica Business Credit, Inc., a Delaware
corporation.
"BABC Loan" and "BABC Loans" have the meanings specified in Section 2.4(g).
"Bank of America" means Bank of America National Trust and
Savings Association, a national banking association, or any successor entity
thereto.
"Bankruptcy Code" means Title 11 of the United States Code (11
U.S.C. Section 101 et seq.).
"Base LIBO Rate" means, for any Interest Period, an interest
rate per annum equal to the average (rounded upward to the nearest whole
multiple of one-sixteenth of one percent (0.0625%) per annum, if such average
is not such a multiple) of the rate per annum at which deposits in Dollars are
offered by the principal office of Bank of America in London, England to prime
banks in the London interbank market at 11:00 a.m. (London time) two (2)
Business Days before the first day of such Interest Period in an amount
substantially equal to the LIBOR Loans requested for such Interest Period and
for a period equal to such Interest Period.
"Benefit Plan" means a defined benefit plan as defined in
Section 3(35) of ERISA (other than a Multiemployer Plan) in respect of which
any Borrower or an ERISA Affiliate is, or within
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the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"Borrowing" means a borrowing consisting of either Revolving
Loans or Capital Expenditure Loans made on the same day by the Lenders (or by
BABC in the case of a Borrowing funded by BABC Loans) or by the Agent in the
case of a Borrowing consisting of an Agent Advance.
"Borrowing Base" means, at any time, the sum of (a)
eighty-five percent (85%) of the Net Amount of Eligible Accounts at such time
plus (b) an amount equal to the least of (1) $150,000,000, (2) (A) sixty
percent (60%) of the value of Eligible Inventory at such time plus (B) the sum
of each Seasonal Inventory Advance Amount in effect at such time, and (3)
fifty-five percent (55%) of the amount of the Revolver Facility at such time.
"Borrowing Base Certificate" means a certificate of the chief
financial officers or treasurers of the Borrowers substantially in the form of
Exhibit A (or another form mutually acceptable to the Agent and the Borrowers)
setting forth calculations of the Borrowing Base and the Individual Borrowing
Bases, including a calculation of each component thereof, all in such detail as
shall be satisfactory to the Agent.
"Business Day" means (a) any day that is not a Saturday,
Sunday, or a day on which banks in the State of Illinois are required or
permitted to close, and (b) with respect to all notices, determinations,
fundings and payments in connection with the LIBO Rate or LIBOR Loans, any day
that is a Business Day pursuant to clause (a) above and that is also a day on
which trading is carried on by and between banks in the London interbank
market.
"Canadian Taxes" has the meaning specified in Section
3.1(c)(1).
"Capital Expenditure Availability" means, at any time,
$15,000,000 minus the sum of the aggregate original principal amounts of all
Capital Expenditure Loans made on or after the Restatement Closing Date.
"Capital Expenditure Facility" means the Lender's agreement to
provide Capital Expenditure Loans in an aggregate amount up to $15,000,000, as
set forth in Section 2.3.
"Capital Expenditure Loan Equipment" means any Equipment which
shall serve as the basis on which any Capital Expenditure Loans shall be made.
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"Capital Expenditure Loan Note" has the meaning specified in
Section 4.2.
"Capital Expenditure Loans" has the meaning specified in
Section 2.3.
"Capital Expenditure Loan Notice of Borrowing" has the meaning
specified in Section 2.4(a)(2).
"Capital Expenditure Subline" means (a) with respect to RMC,
the lesser of (1) $12,500,000 and (2) seventy five percent (75%) of the
Eligible Capital Expenditures made by RMC; (b) with respect to NWR, the lesser
of (1) $1,500,000 and (2) seventy five percent of the Eligible Capital
Expenditures made by NWR; (c) with respect to each of Willow and Hutch, the
lesser of (1) $1,000,000 and (2) seventy five percent (75%) of the Eligible
Capital Expenditures made by such Borrower; and (d) with respect to RML, the
lesser of (1) $500,000 and (2) seventy five percent (75%) of the Eligible
Capital Expenditures made by RML.
"Capital Expenditures" means all payments due (whether or not
paid) during a fiscal period in respect of the cost of any fixed asset or
improvement, or replacement, substitution, or addition thereto, which have a
useful life of more than one year, including, without limitation, those arising
in connection with the direct or indirect acquisition of such assets by way of
increased product or service charges or offset items or in connection with
Capital Leases.
"Capital Lease" means any lease of property by any Borrower
that, in accordance with GAAP, should be reflected as a liability on the
balance sheet of such Borrower.
"Closing Fee" has the meaning specified in Section 3.7.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, any successor statute, and the rules and regulations
promulgated thereunder.
"Collateral" has the meaning specified in Section 5.1.
"Commitment" means, at any time with respect to a Lender, the
principal amount set forth beside such Lender's name under the heading
"Commitment" on the signature pages of this Agreement or on the signature page
of the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 12.3, as such Commitment
may be adjusted from time to time in accordance with the provisions of Section
12.3, and "Commitments" means, collectively, the aggregate amount of the
commitments of all of the Lenders.
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"Contaminant" means any pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated
biphenyls ("PCBs"), or any hazardous or toxic constituent of any such substance
or waste.
"Currency Hedging Contracts" means currency hedging
agreements, currency hedging swap agreements, currency hedging collar
agreements, options on any of the foregoing, or any other agreements or
arrangements designed to provide protection against fluctuations in exchange
rates with respect to currency, entered into between RMC or RML and Bank of
America.
"Currency Hedging Contract Exposure" means, with respect to
each Currency Hedging Contract, an amount equal to the product of the maximum
obligation of RMC or RML under such Currency Hedging Contract multiplied by a
percentage determined by Bank of America which percentage shall be comparable
to the percentages determined by Bank of America to apply to contracts of like
kind and term entered into by Bank of America.
"Currency Hedging Contract Reserve" has the meaning specified
in Section 2.6(b).
"Debt" means all liabilities, obligations and indebtedness of
each Borrower to any Person, of any kind or nature, now or hereafter owing,
arising, due or payable, howsoever evidenced, created, incurred, acquired or
owing, whether primary, secondary, direct, contingent, fixed or otherwise.
Without in any way limiting the generality of the foregoing, Debt shall
specifically include the following: (a) each Borrower's liabilities and
obligations to trade creditors; (b) all Obligations; (c) the Subordinated Debt,
indebtedness incurred under the Subordinated Revolver, and indebtedness in the
principal amount of $6,000,000 evidenced by a certain Fourth Subordinated Term
Note dated November 30, 1993 executed by RMC in favor of the Parent; (d)
indebtedness evidenced by the DP Note; (e) the UDAG Debt, the Wisconsin
Department of Development Debt, the Opelika Debt and the Olney Trust Bank Debt;
(f) all of each Borrower's obligations for borrowed money; (g) all obligations
and liabilities of any Person secured by any Lien on any Borrower's property,
even though such Borrower shall not have assumed or become liable for the
payment thereof; provided, however, that all such obligations and liabilities
which are limited in recourse to such property shall be included in Debt only
to the extent of the value of such property as would be shown on a balance
sheet of such Borrower prepared in accordance with GAAP; (h) all obligations or
liabilities created or arising under any Capital Lease or conditional sale or
other title retention agreement other than a true lease, with respect to
property used or acquired by any Borrower, even if the rights and remedies of
the lessor, seller or lender thereunder are limited
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to repossession of such property; provided, however, that all such obligations
and liabilities which are limited in recourse to such property shall be
included in Debt only to the extent of the value of such property as shown on a
balance sheet of such Borrower prepared in accordance with GAAP; (i) all
accrued pension fund and other employee benefit plan obligations and
liabilities of such Borrower; (j) all obligations and liabilities of such
Borrower under Guaranties; and (k) deferred taxes of such Borrower.
"Default" means any event or condition which would constitute
an Event of Default if any requirement in connection therewith for the giving
of notice or the lapse of time, or both, had been satisfied.
"Default Rate" means a fluctuating per annum interest rate at
all times equal to the sum of (a) the otherwise applicable Interest Rate plus
(b) two percent (2.00%). Each Default Rate shall be adjusted simultaneously
with any change in the applicable Interest Rate.
"Distribution" means, in respect of any corporation: (a) the
payment or making of any dividend or other distribution of property in respect
of capital stock (or any options or warrants for such stock) of such
corporation, other than distributions in capital stock (or any options or
warrants for such stock) of the same class; (b) the redemption or other
acquisition of any capital stock (or any options or warrants for such stock) of
such corporation; or (c) the payment of any amount or other distribution of
property to or for the benefit of any of its shareholders.
"Diversified Trucking" means Diversified Trucking Corp., an
Alabama corporation.
"Diversified Trucking Guaranty" means that certain Guaranty
and Security Agreement dated as of December 6, 1994 executed by Diversified
Trucking in favor of the Agent guarantying the payment and performance of the
Obligations, other than the Obligations owing by RRC, and granting to the Agent
a security interest in certain of its personal property as security therefor.
"DOL" means the United States Department of Labor or any
successor department or agency.
"Dollar" and "$" means dollars in the lawful currency of the
United States.
"DP" means Diversified Products Corporation, an Alabama
corporation.
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"DP Asset Transfer" means the transfer by DP to RMC on
December 6, 1994 of substantially all of DP's personal property, other than
certain general intangibles, in exchange for the DP Note.
"DP Guaranty" means that certain Guaranty and Security
Agreement dated as of December 6, 1994 executed by DP in favor of the Agent
guarantying the payment and performance of the Obligations, other than the
Obligations owing by RRC, and granting to the Agent a security interest in
certain of its personal property as security therefor.
"DP Note" means that certain non-interest bearing promissory
note dated as of December 6, 1994 in the principal amount of $58,100,000
executed by RMC and payable to DP.
"DP Pledge" means that certain Pledge Agreement dated as of
December 6, 1994 executed by DP in favor of the Agent pledging the DP Note as
security for DP's obligations under the DP Guaranty and the payment and
performance of the Obligations, other than the Obligations owing by RRC.
"DP Subordination Agreement" means that certain Subordination
Agreement dated as of December 6, 1994 between DP and the Agent with respect to
that certain Debt evidenced by the DP Note, as amended from time to time.
"Eligible Accounts" means those Accounts which are not
ineligible as the basis for Revolving Loans, based on the following criteria
(such criteria not to be amended or waived without the consent of the Majority
Lenders) and on such other criteria as the Agent may from time to time
establish in its sole credit judgment. Without intending to limit the Agent's
discretion (which discretion shall be exercised following the Agent's
reasonable attempts to consult with the Lenders thereon) to establish other
criteria of eligibility, Eligible Accounts shall not include any Account:
(a) which has a due date sixty (60) days or less from the
date of the original invoice therefor and which is outstanding more
than ninety (90) days after the original invoice date;
(b) which has a due date more than sixty (60) days from the
date of the original invoice therefor (a "Dated Account") and which is
(1) outstanding more than one hundred fifty (150) days after the
original invoice date or (2) more than thirty (30) days past due;
(c) owing by any Account Debtor, if fifty percent (50%) or
more of all Accounts owing by such Account
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Debtor are ineligible by reason of any of the criteria set forth in
clauses (a) or (b) above;
(d) with respect to which any of the representations,
warranties, covenants, and agreements contained in this Agreement are
not or have ceased to be complete and correct or have been breached;
(e) with respect to which, in whole or in part, a check or
other instrument for the payment of money has been received, presented
for payment and returned uncollected for any reason;
(f) which represents a progress billing or as to which the
applicable Borrower has extended the time for payment without the
consent of the Agent; for the purposes hereof, "progress billing"
means any invoice for goods sold or leased or services rendered under
a contract or agreement pursuant to which the Account Debtor's
obligation to pay such invoice is conditioned upon the applicable
Borrower's completion of any further performance under the contract or
agreement;
(g) as to which any one or more of the following events has
occurred with respect to the Account Debtor on such Account: death or
judicial declaration of incompetency of an Account Debtor who is an
individual; the filing by or against the Account Debtor of a request
or petition for liquidation, reorganization, arrangement, adjustment
of debts, adjudication as a bankrupt, winding-up, or other relief
under the bankruptcy, insolvency, or similar laws of the United
States, any state or territory thereof, or any foreign jurisdiction,
now or hereafter in effect; the making of any general assignment by
the Account Debtor for the benefit of creditors; the appointment of a
receiver or trustee for the Account Debtor or for any of the assets of
the Account Debtor; the institution by or against the Account Debtor
of any other type of insolvency proceeding (under the bankruptcy laws
of the United States, any foreign jurisdiction or otherwise) or of any
formal or informal proceeding for the dissolution or liquidation of,
settlement of claims against, or winding up of affairs of, the Account
Debtor; the sale, assignment, or transfer of all or substantially all
of the assets of the Account Debtor; the nonpayment generally by the
Account Debtor of its debts as they become due; or the cessation of
the business of the Account Debtor as a going concern;
(h) if the aggregate Dollar amount of all Accounts owed by
the Account Debtor thereon exceeds a
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credit limit determined by the Agent in its sole reasonable credit
judgment, but only to the extent such Account exceeds such limit;
(i) owed by an Account Debtor which: (1) does not maintain
its chief executive office in the United States or Canada; or (2) is
the government of any foreign country or sovereign state, province, or
of any state, municipality, or other political subdivision thereof, or
of any department, agency, public corporation, or other
instrumentality thereof; except to the extent that such Account is
secured or payable by letter of credit or acceptance terms acceptable
to the Agent, any such instrument having been assigned, upon the
Agent's request, to the Agent pursuant to documentation satisfactory
to the Agent;
(j) owed by an Account Debtor which is an Affiliate or
employee of the applicable Borrower;
(k) except as provided in (n) below, as to which the
perfection of the Lien in such Account is governed by any federal,
state, local or foreign statutory requirements other than those of the
UCC or the PPSA;
(l) as to which the Lien in such Account is not valid or
enforceable or as to which the Agent does not have the right or
ability to obtain direct payment to the Agent of the proceeds of such
Account;
(m) which is owed by an Account Debtor to which the
applicable Borrower is indebted in any way, or which is subject to any
right of setoff by the Account Debtor, unless the Account Debtor has
entered into an agreement acceptable to the Agent to waive setoff
rights; or if the Account Debtor thereon has disputed liability or
made any claim with respect to any other Account due from such Account
Debtor; but in each such case only to the extent of such indebtedness,
setoff, dispute, or claim;
(n) which are owed by the government of the United States of
America, or any department, agency, public corporation, or other
instrumentality thereof, unless the applicable Borrower has assigned
its right to payment of such Account to the Agent in accordance with
the Federal Assignment of Claims Act of 1940, as amended, and any
other steps necessary to perfect the Lien of the Agent have been taken
to the Agent's satisfaction with respect to such Account;
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(o) which is owed by any state, municipality or other
political subdivision of the United States of America, or any
department, agency, public corporation, or other instrumentality
thereof and as to which the Agent determines that its Lien therein is
not or cannot be perfected or the applicable Borrower's right to
payment thereunder has not been assigned to the Agent in compliance
with any applicable law or regulation of such state, municipality or
other political subdivision;
(p) which arises out of a sale to an Account Debtor on a
bill-and-hold, guaranteed sale, sale and return, sale on approval,
consignment, or other repurchase or return basis;
(q) which is evidenced by a promissory note or other
instrument or by chattel paper or which has been reduced to judgment;
(r) the goods giving rise to such Account have not been
shipped and delivered to and accepted by the Account Debtor or the
services giving rise to such Accounts have not been performed by the
applicable Borrower and accepted by the Account Debtor;
(s) the goods giving rise to such Account have been returned
by the Account Debtor, to the extent of such returned goods;
(t) if the Agent believes in its reasonable credit judgment
that the prospect of collection of such Account is impaired or that
the Account may not be paid by reason of the Account Debtor's
financial inability to pay;
(u) which is owed by an Account Debtor which the Agent, in
its reasonable credit judgment, otherwise deems to be uncreditworthy;
(v) which is evidenced by a debit memo, to the extent of such
debit memo; provided, that prior to the Triggering Date, only debit
memos equal to or exceeding $5000.00 shall be covered by this clause
(v); or
(w) with respect to which the Account Debtor is located in
any State requiring filing of a Notice of Business Activities Report
or similar report in order to permit the applicable Borrower to seek
judicial enforcement in such State of payment of such Account, unless
the applicable Borrower has qualified to do business in such State or
has filed a Notice of
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Business Activities Report or similar report with the appropriate
State agency for the then current year.
Whenever in this definition of "Eligible Accounts" a reference is made to "the
applicable Borrower", such reference, in the case of Accounts of RRC, shall be
a reference to RMC, Hutch, NWR, Willow, as applicable, and/or RRC.
"Eligible Capital Expenditures" means, with respect to RMC,
NWR, Hutch, Willow and RML, the actual, out-of-pocket invoice cost (not to
include installation charges or other charges not comprising the
pre-installation purchase price of such Equipment) of Equipment (other than
tools, dies, furniture, furnishings, Equipment leased by such Borrower, data
processing software and Equipment to be attached to existing Equipment)
purchased by such Borrower on or after the Restatement Closing Date which the
Agent shall determine, in its reasonable discretion, to be eligible as the
basis on which Capital Expenditure Loans may be made hereunder; provided, that
any such purchase shall be permitted by the terms of Section 8.23.
"Eligible Inventory" means Inventory that constitutes raw
materials or first quality finished goods, and: (a) that is not, in the
Agent's reasonable judgment, obsolete, slow-moving or unmerchantable; (b) upon
which the Agent has a first priority perfected security interest; and (c) that
the Agent otherwise deems eligible as the basis for Revolving Loans based on
such other credit and collateral considerations as the Agent may from time to
time establish in its sole credit judgment. Without intending to limit the
Agent's discretion to establish other criteria of eligibility (the following
criteria not to be amended or waived without the consent of the Majority
Lenders), no work-in-process, spare parts, packaging and shipping material,
supplies, bill and hold inventory, returned Inventory (unless and until the
related Account shall have been reduced with respect to such returned
Inventory), defective Inventory, Inventory used for display or located in a
showroom, Inventory located outside of the United States or Canada, or on
premises at locations not permitted pursuant to this Agreement, or Inventory
delivered to a Borrower on consignment shall constitute Eligible Inventory;
provided, that Inventory which is in-transit (1) to a Borrower, the purchase of
which Inventory was financed by a Letter of Credit, or (2) shipped to RMC from
Asia on an "open account" basis, shall constitute Eligible Inventory so long as
(A) all of the other above-stated criteria with respect to eligibility are
satisfied, (B) at the Agent's election prior to the occurrence of an Event of
Default, and at all times upon and after the occurrence of an Event of Default,
all documents of title with respect to such Inventory (other than such
documents of title with respect to Shimano, prior to the Triggering Date, for
Inventory that has been paid for in full in advance) shall have been delivered
to the custody of the Agent or its designee and
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shall have been duly negotiated to the Agent in a manner satisfactory to the
Agent, or the Agent shall have been named as consignee with respect thereto,
and (C) such Inventory is insured in a manner satisfactory to the Agent and
naming the Agent as loss payee.
"Environmental Compliance Reserve" means any reserves which the
Agent from time to time establishes for amounts that are required to be
expended in order for the Borrowers and their respective operations and
property to comply with Environmental Laws or in order to correct any violation
by any Borrower or its operations or property of Environmental Laws.
"Environmental Laws" means all federal, state and local laws,
rules, regulations, ordinances, programs, permits, guidance, orders and consent
decrees or other binding determination of any Public Authority relating to
health, safety, hazardous substances, and environmental matters applicable to
any Borrower's business and facilities (whether or not owned by such Borrower).
Such laws and regulations include, but are not limited to, the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., as amended; the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., as amended; the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., as amended; the Clean Water Act, 42 U.S.C. Section 466
et seq., as amended; the Clean Air Act, 46 U.S.C. Section
7401 et seq., as amended; state and federal lien and environmental cleanup
programs; the Occupational Safety and Health Act, 29 U.S.C. Section 651 et
seq.; and U.S. Department of Transportation regulations, each as from time to
time hereafter in effect.
"Environmental Lien" means a Lien in favor of any Public
Authority for (a) any liability under any Environmental Laws, or (b) damages
arising from, or costs incurred by such Public Authority in response to, a
Release or threatened Release of a Contaminant into the environment.
"Environmental Property Transfer Act" means any applicable
requirement of law that conditions, restricts, prohibits or requires any
notification or disclosure triggered by the closure of any property or the
transfer, sale or lease of any property or deed or title for any property for
environmental reasons, including, but not limited to, any so-called
"Environmental Cleanup Responsibility Acts" or "Responsible Property Transfer
Acts."
"Equipment" means all of each Borrower's now owned and
hereafter acquired machinery, equipment, furniture, furnishings, fixtures, and
other tangible personal property (except Inventory), including, without
limitation, data processing hardware and software, motor vehicles, aircraft,
dies, tools, jigs, and office equipment, as well as all of such types of
property leased
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by such Borrower and all of such Borrower's rights and interests with respect
thereto under such leases (including, without limitation, options to purchase);
together with all present and future additions and accessions thereto,
replacements therefor, component and auxiliary parts and supplies used or to be
used in connection therewith, and all substitutes for any of the foregoing, and
all manuals, drawings, instructions, warranties and rights with respect
thereto; wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
"ERISA Affiliate" means (a) any corporation which is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as any Borrower; (b) a partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Code) with any Borrower; or (c) a member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
any Borrower, any corporation described in clause (a) above or any partnership,
trade or business described in clause (b) above.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Federal Reserve Board, as in effect from time to
time.
"Event of Default" has the meaning specified in Section 10.1.
"Exchanges" means the transfer by Actava of one hundred
percent (100.0%) of the capital stock of each of DP, Hutch, NWR and Willow to
the Parent, in exchange for 19,169,000 shares of the common stock of the
Parent, effectuated by and between Actava and the Parent as of December 6, 1994
pursuant to the Agreement and Plan of Reorganization.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Funds Rate" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic mean as
determined by the Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by
each of three
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leading brokers of Federal funds transactions in New York City selected in good
faith by the Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any successor thereto.
"Financial Statements" means, according to the context in
which it is used, the financial statements attached hereto as Exhibit B-1 or
any financial statements required to be given to the Lenders pursuant to
Sections 6.2(a) and (b), or any combination thereof.
"Fiscal Year" means the Borrowers' fiscal years for financial
accounting purposes, each of which is a year of twelve (12) fiscal months
commencing on January 1 and ending on December 31 of each year. Each week
commencing with January 1 will be a partial week unless January 1 occurs on a
Sunday, and each week ending on December 31 will be a partial week unless
December 31 occurs on a Saturday. A fiscal quarter consists of two fiscal
months of four weeks each and one fiscal month of five weeks.
"Flexible Flyer" means Flexible Flyer Industries, Inc., a
Delaware corporation, formerly known as Flexible Flyer Acquisition Corp., which
merged with and into RMC pursuant to the Flexible Flyer Merger.
"Flexible Flyer Merger" means the merger of Flexible Flyer
with and into RMC on January 31, 1994, with RMC being the surviving corporation
of such merger.
"Flexible Flyer Purchase Agreement" means that certain Asset
Purchase Agreement dated June 25, 1993 between the Parent and Par, as amended,
modified or supplemented from time to time.
"Free Quota Letter of Credit" means a Letter of Credit
substantially in the form of Exhibit C, issued for the account of NWR, and
providing as a condition to any drawing thereon, among other such conditions,
that a Senior Vice President of BABC approve in writing the underlying purchase
order, such approval not to be unreasonably withheld if (a) the amount of such
drawing would not exceed Availability, or Individual Availability with respect
to NWR, at the time of such drawing, and (b) such Availability or Individual
Availability shall be sufficient to enable NWR to maintain its business going
forward; provided, however, that in the event that any such approval shall be
granted, such Letter of Credit shall cease to be a Free Quota Letter of Credit.
"Funding Date" means the date any Loans (including BABC Loans
and Agent Advances) are to be made hereunder.
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"GAAP" means at any particular time generally accepted
accounting principles as in effect at such time, consistently applied;
provided, that with respect to the computation of the financial covenants set
forth in Sections 8.23 through 8.27, "GAAP" means at any particular time
generally accepted accounting principles as in effect on the Restatement
Closing Date, consistently applied.
"General Intangibles" means all of each Borrower's now owned
or hereafter acquired general intangibles, choses in action and causes of
action and all other intangible personal property of such Borrower of every
kind and nature (other than Accounts), including, without limitation, all
Proprietary Rights, corporate or other business records, inventions, designs,
blueprints, plans, specifications, patents, patent applications, trademarks,
service marks, trade names, trade secrets, goodwill, copyrights, computer
software, customer lists, registrations, licenses, franchises, tax refund
claims, any funds which may become due to such Borrower in connection with the
termination of any Plan or other employee benefit plan or any rights thereto
and any other amounts payable to such Borrower from any Plan or other employee
benefit plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof,
property, casualty or any similar type of insurance and any proceeds thereof,
proceeds of insurance covering the lives of key employees on which such
Borrower is beneficiary, and any letter of credit, guarantee, claim, security
interest or other security held by or granted to such Borrower to secure
payment by an account debtor of any of the Accounts.
"Guaranty" means, with respect to any Person, all obligations
of such Person which in any manner directly or indirectly guarantee or assure,
or in effect guarantee or assure, the payment or performance of any
indebtedness, dividend or other similar obligation of any other Person (the
"guaranteed obligations"), or assure or in effect assure the holder of the
guaranteed obligations against loss in respect thereof, including, without
limitation, any such obligations incurred through an agreement, contingent or
otherwise: (a) to purchase the guaranteed obligations or any property
constituting security therefor; (b) to advance or supply funds for the purchase
or payment of the guaranteed obligations or to maintain a working capital or
other balance sheet condition; or (c) to lease property or to purchase any debt
or equity Securities or other property or services.
"Hamilton Lamp" means Hamilton Lamp Corporation, a Delaware
corporation which merged with and into RMC pursuant to the Hamilton Lamp
Merger.
"Hamilton Lamp Merger" means the merger of Hamilton Lamp with
and into RMC on February 28, 1994, with RMC being the surviving corporation of
such merger.
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"Hutch" means Hutch Sports USA Inc., a Delaware corporation,
and one of the Borrowers hereunder.
"Hutch Pledge" means that certain Pledge Agreement dated as of
December 6, 1994 executed by Hutch in favor of the Agent pledging all of its
capital stock of T.Q., Inc., a Kentucky corporation, now owned or hereafter
acquired by Hutch as security for the payment and performance of the
Obligations, other than the Obligations owing by RRC.
"Individual Availability" means, at any time with respect to
any Borrower, (a) the Individual Maximum Revolver Amount with respect to such
Borrower at such time minus (b) the Aggregate Revolver Outstandings to or for
the account of such Borrower at such time.
"Individual Borrowing Base" means
(a) at any time with respect to RMC, the sum of (1)
eighty-five percent (85%) of the Net Amount of Eligible Accounts of
RMC at such time plus (2) an amount equal to the lesser of (A)
$100,000,000, and (B) (i) sixty percent (60%) of the value of Eligible
Inventory of RMC at such time plus (ii) for two (2) two-
consecutive-month periods during each twelve-month period (including,
in any twelve-month period that includes August 1995 and September
1995, such two-consecutive-month period selected by RMC pursuant to
the Original Agreement), each selected by RMC by giving twenty (20)
days' prior written notice of such selection to the Agent, the
Seasonal Inventory Advance Amount for RMC at such time;
(b) at any time with respect to RML, the sum of (1)
eighty-five percent (85%) of the Net Amount of Eligible Accounts of
RML at such time plus (2) an amount equal to the lesser of (A)
$7,500,000, and (B) (i) sixty percent (60%) of the value of Eligible
Inventory of RML at such time plus (ii) for two (2) two-
consecutive-month periods during each twelve-month period (including,
in any twelve-month period that includes August 1995 and September
1995, such two-consecutive-month period selected by RML pursuant to
the Original Agreement), each selected by RML by giving twenty (20)
days' prior written notice of such selection to the Agent, the
Seasonal Inventory Advance Amount for RML at such time;
(c) at any time with respect to Willow, the sum of (1)
eighty-five percent (85%) of the Net Amount of Eligible Accounts of
Willow at such time plus (2) an amount equal to the lesser of (A)
$10,000,000, and (B) (i) sixty percent (60%) of the value of Eligible
Inventory of Willow at such time plus (ii) for two (2) two-
consecutive-month periods
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during each twelve-month period (including, in any twelve-month period
that includes August 1995 and September 1995, such
two-consecutive-month period selected by Willow pursuant to the
Original Agreement), each selected by Willow by giving twenty (20)
days' prior written notice of such selection to the Agent, the
Seasonal Inventory Advance Amount for Willow at such time;
(d) at any time with respect to Hutch, the sum of (1)
eighty-five percent (85%) of the Net Amount of Eligible Accounts of
Hutch at such time, and (2) an amount equal to the lesser of (A)
$10,000,000, and (B) (i) sixty percent (60%) of the value of Eligible
Inventory of Hutch at such time plus (ii) for two (2) two-
consecutive-month periods during each twelve-month period (including,
in any twelve-month period that includes August 1995 and September
1995, such two-consecutive-month period selected by Hutch pursuant to
the Original Agreement), each selected by Hutch by giving twenty (20)
days' prior written notice of such selection to the Agent, the
Seasonal Inventory Advance Amount for Hutch at such time;
(e) at any time with respect to NWR, the sum of (1)
eighty-five percent (85%) of the Net Amount of Eligible Accounts of
NWR at such time, and (2) an amount equal to the lesser of (A)
$30,000,000, and (B) (i) sixty percent (60%) of the value of Eligible
Inventory of NWR at such time plus (ii) for two (2) two-
consecutive-month periods during each twelve-month period (including,
in any twelve-month period that includes August 1995 and September
1995, such two-consecutive-month period selected by NWR pursuant to
the Original Agreement), each selected by NWR by giving twenty (20)
days' prior written notice of such selection to the Agent, the
Seasonal Inventory Advance Amount for NWR at such time; and
(f) with respect to RRC, eighty-five percent (85%) of the Net
Amount of Eligible Accounts of RRC.
"Individual Capital Expenditure Availability" means, at any
time, with respect to any Borrower, the Capital Expenditure Subline for such
Borrower minus the sum of the aggregate original principal amounts of all
Capital Expenditure Loans made to such Borrower on or after the Restatement
Closing Date.
"Individual Maximum Revolver Amount" means
(a) at any time with respect to RMC (1) the lesser of (A)
$150,000,000; or (B) the Individual Borrowing Base at such time with
respect to RMC; minus (2) the sum of (i) the Seasonal Reserve then in
effect; (ii) the Interest Rate Contract Reserve then in effect; (iii)
the Currency Hedging
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Contract Reserve then in effect with respect to RMC; (iv) reserves for
accrued interest on the Obligations owing by RMC; and (v) all other
reserves which the Agent deems necessary or desirable to maintain with
respect to RMC's account, including, without limitation, any
Environmental Compliance Reserve with respect to RMC and reserves for
any amounts which the Agent or any Lender may be obligated to pay in
the future for the account of RMC;
(b) at any time with respect to RML (1) the lesser of (A)
$15,000,000; or (B) the Individual Borrowing Base at such time with
respect to RML; minus (2) the sum of (i) the Currency Hedging Contract
Reserve then in effect with respect to RML; (ii) reserves for accrued
interest on the Obligations owing by RML; and (iii) all other reserves
which the Agent deems necessary or desirable to maintain with respect
to RML's account, including, without limitation, any Environmental
Compliance Reserve with respect to RML and reserves for any amounts
which the Agent or any Lender may be obligated to pay in the future
for the account of RML;
(c) at any time with respect to Willow (1) the lesser of (A)
$15,000,000; or (B) the Individual Borrowing Base at such time with
respect to Willow; minus (2) the sum of (i) reserves for accrued
interest on the Obligations owing by Willow; and (ii) all other
reserves which the Agent deems necessary or desirable to maintain with
respect to Willow's account, including, without limitation, any
Environmental Compliance Reserve with respect to Willow and reserves
for any amounts which the Agent or any Lender may be obligated to pay
in the future for the account of Willow;
(d) at any time with respect to Hutch (1) the lesser of (A)
$20,000,000; or (B) the Individual Borrowing Base at such time with
respect to Hutch; minus (2) the sum of (i) reserves for accrued
interest on the Obligations owing by Hutch; and (ii) all other
reserves which the Agent deems necessary or desirable to maintain with
respect to Hutch's account, including, without limitation, any
Environmental Compliance Reserve with respect to Hutch and reserves
for any amounts which the Agent or any Lender may be obligated to pay
in the future for the account of Hutch;
(e) at any time with respect to NWR (1) the lesser of (A)
$50,000,000; or (B) the Individual Borrowing Base at such time with
respect to NWR; minus (2) the sum of (i) reserves for accrued interest
on the Obligations owing by NWR; and (ii) all other reserves which the
Agent deems necessary or desirable to maintain with respect to NWR's
account, including, without limitation, any Environmental Compliance
Reserve with respect to NWR and reserves for any
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amounts which the Agent or any Lender may be obligated to pay in the
future for the account of NWR; and
(f) at any time with respect to RRC (1) the lesser of (A)
$85,000,000; or (B) the Individual Borrowing Base at such time with
respect to RRC; minus (2) the sum of (i) reserves for accrued interest
on the Obligations owing by RRC; and (ii) all other reserves which the
Agent deems necessary or desirable to maintain with respect to RRC's
account, including, without limitation, any Environmental Compliance
Reserve with respect to RRC and reserves for any amounts which the
Agent or any Lender may be obligated to pay in the future for the
account of RRC.
"Intercompany Accounts" means, as the context indicates, all
assets, however arising, consisting of amounts which are due to any Borrower
from any Affiliate, or liabilities, however arising, which are due from any
Borrower to any Affiliate.
"Interest Period" means, with respect to each LIBOR Loan, the
interest period applicable to such LIBOR Loan as determined pursuant to Section
3.3(b).
"Interest Rate" means each or any of the interest rates,
including the Default Rate, set forth in Section 3.1.
"Interest Rate Contracts" means interest rate cap agreements,
interest rate swap agreements, interest rate collar agreements, options on any
of the foregoing, or any other agreements or arrangements designed to provide
protection against fluctuations in interest rates, entered into between RMC and
Bank of America.
"Interest Rate Contract Exposure" means, with respect to each
Interest Rate Contract, an amount equal to the product of the maximum
obligation of RMC under such Interest Rate Contract multiplied by a percentage
determined by Bank of America which percentage shall be comparable to the
percentages determined by Bank of America to apply to contracts of like kind
and term entered into by Bank of America.
"Interest Rate Contract Reserve" has the meaning specified in Section 2.6.
"International" means International Sports and Fitness, Inc.,
a Delaware corporation, and owner of one hundred percent (100.0%) of the issued
and outstanding capital stock of RML.
"International Guaranty" means that certain Guaranty dated as
of December 6, 1994 executed by International in favor
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of the Agent guarantying the payment and performance of the Obligations, other
than the Obligations owing by RRC.
"International Pledge" means that certain Pledge Agreement
dated as of December 6, 1994 executed by International in favor of the Agent
pledging one hundred percent (100.0%) of the issued and outstanding capital
stock of RML now owned or hereafter acquired by International as security for
International's obligations under the International Guaranty and the payment
and performance of the Obligations, other than the Obligations owing by RRC.
"Inventory" means all of each Borrower's now owned and
hereafter acquired inventory, goods, merchandise, and other personal property,
wherever located, to be furnished under any contract of service or held for
sale or lease, including, without limitation, all returned goods, raw
materials, work-in-process inventory, finished goods and other materials and
supplies of any kind, nature or description which are or might be consumed in
such Borrower's business or used in connection with the packing, shipping,
advertising, selling or finishing of such goods, merchandise and such other
personal property, and all documents of title or other documents representing
them.
"IRS" means the Internal Revenue Service or any successor
agency.
"ITA" means the Income Tax Act (Canada) and Regulations, as
amended, and any successor statute.
"Latest Projections" means: (a) on the Restatement Closing
Date and thereafter until the Lenders receive new projections pursuant to
Section 6.2(e), the projections of the Borrowers' individual and combined
monthly balance sheets, income statements and cash flows through December 31,
1997, and Availability and Individual Availability for each Borrower through
December 31, 1997, attached hereto as Exhibit B-2; and (b) thereafter, the
projections most recently received by the Lenders pursuant to Section 6.2(e).
"Lender" and "Lenders" have the meanings specified in the
introductory paragraph hereof.
"Letter of Credit" has the meaning specified in Section 2.5,
and shall include any Free Quota Letter of Credit.
"Letter of Credit Fee" has the meaning specified in Section
3.5.
"LIBO Rate" means, for any Interest Period, a per annum
interest rate equal to the sum of (a) the Base LIBO Rate for such Interest
Period, plus (b) the remainder obtained by subtracting
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(i) the Base LIBO Rate for such Interest Period from (ii) the rate obtained by
dividing such Base LIBO Rate by the percentage equal to one hundred percent
(100%) minus the LIBOR Reserve Percentage for such Interest Period.
"LIBOR Interest Payment Date" means, with respect to a LIBOR
Loan, the last day of each Interest Period applicable to such Loan, and, if
such Interest Period has a duration of more than three months, on each day
which occurs during such Interest Period every three months from the first day
of such Interest Period.
"LIBOR Interest Rate Determination Date" means each date of
calculating the LIBO Rate for purposes of determining the interest rate with
respect to an Interest Period. The LIBOR Interest Rate Determination Date for
any LIBOR Loan shall be the second Business Day prior to the first day of the
related Interest Period for such LIBOR Loan.
"LIBOR Loan" means a Loan during any period in which it bears
interest at a rate based upon the LIBO Rate.
"LIBOR Reserve Percentage" means, for any Interest Period, the
reserve percentage applicable during such Interest Period (or if more than one
such percentage shall be so applicable, the daily average of such percentages
for those days in such Interest Period during which any such percentage shall
be so applicable) under regulations issued from time to time by the Federal
Reserve Board for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement) for Bank of America with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities having a term equal to such
Interest Period.
"Lien" means: (a) any interest in property securing an
obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute, or
contract, and including without limitation, a security interest, charge, claim,
or lien arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, agreement, security agreement,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes; and (b) to the extent not included under clause (a), any
reservation, exception, encroachment, easement, right-of-way, covenant,
condition, restriction, lease or other title exception or encumbrance affecting
property.
"Loan Documents" means this Agreement, the Capital Expenditure
Loan Notes, the Patent Agreements, the Trademark Agreements, the RMC Pledge,
the NWR Pledge, the Hutch Pledge, the Assignment Agreements, the Mortgages, the
Parent Subordination
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Agreement, the Parent Guaranty, the Parent Pledge, the DP Subordination
Agreement, the DP Guaranty, the DP Pledge, the International Guaranty, the
International Pledge, the Actava World Trade Guaranty, the Diversified Trucking
Guaranty and all other agreements, instruments, and documents heretofore, now
or hereafter evidencing, securing, guaranteeing or otherwise relating to the
Obligations, the Collateral, or any other aspect of the transactions
contemplated by this Agreement, together with all amendments, restatements,
supplements, replacements, or other modifications thereof; provided, that the
Mortgages, other than those Mortgages delivered in connection with the making
of a Capital Expenditure Loan, shall not constitute Loan Documents until such
time as the Triggering Date shall have occurred.
"Loans" means, collectively, all loans and advances provided
for in Article 2.
"Majority Lenders" means, at any time, either (a) "A Lenders"
(as defined in the next succeeding sentence) whose Commitments aggregate at
least fifty percent (50.0%) of the sum of the Commitments of all A Lenders plus
"B Lenders" (as so defined) whose Commitments aggregate at least fifty percent
(50.0%) of the sum of the Commitments of all B Lenders plus Lenders whose Pro
Rata Shares aggregate greater than fifty-one percent (51.0%) as such percentage
is determined under the definition of Pro Rata Share set forth herein; or (b)
Lenders whose Pro Rata Shares aggregate at least eighty percent (80.0%) as such
percentage is determined under the definition of Pro Rata Share set forth
herein. "A Lender" means any Lender having a Commitment equal to or greater
than $50,000,000, and "B Lender" means any Lender whose Commitment is less than
$50,000,000.
"Maximum Rate" has the meaning specified in Section 3.4.
"Maximum Revolver Amount" means, at any time, (a) the lesser
of (1) the Revolver Facility; or (2) the Borrowing Base at such time; minus (b)
the sum of (A) the Seasonal Reserve then in effect; (B) the Interest Rate
Contract Reserve then in effect; (C) the aggregate Currency Hedging Contract
Reserve then in effect; (D) reserves for accrued interest on the Obligations;
and (E) all other reserves which the Agent deems necessary or desirable to
maintain with respect to any Borrower's account, including, without limitation,
any Environmental Compliance Reserve, and reserves for any amounts which the
Agent or any Lender may be obligated to pay in the future for the account of
such Borrower.
"Mergers" means, collectively, the Flexible Flyer Merger and
the Hamilton Lamp Merger.
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"Mortgages" means all real property mortgages, leasehold
mortgages, assignments of leases, mortgage deeds, deeds of trust, deeds to
secure debt, security agreements, and other similar instruments, which provide
the Agent a Lien, for the benefit of the Secured Creditors, on, or other
interest in any portion of the Premises or the Real Estate or which relate to
any such Lien or interest.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding six (6) years contributed to by any Borrower
or any ERISA Affiliate.
"MZH" means, collectively, MZH, Inc., a New Jersey
corporation, and MZH Contracting Corp., a Utah corporation.
"MZH Purchase Agreement" means, collectively, that certain
Option Agreement dated as of March 1, 1995, and that certain Asset Purchase
Agreement dated as of March 1, 1995, in each case among the Parent and MZH.
"Net Amount of Eligible Accounts" means, at any time, the
gross amount of Eligible Accounts less sales, excise or similar taxes, and less
returns, discounts, claims, credits and allowances of any nature (other than
sales allowances maintained by the Borrowers and reflected on the Borrowers'
Financial Statements) at any time issued, owing, granted, outstanding,
available or claimed, and less fifty percent (50%) of the reserve for sales
allowances maintained by the Borrowers and reflected on the Borrowers'
Financial Statements or general ledgers, as the case may be.
"Notice of Borrowing" means, as the context may require, a
Revolving Loan Notice of Borrowing or Capital Expenditure Loan Notice of
Borrowing.
"Notice of Conversion/Continuation" has the meaning specified
in Section 3.2(b).
"NWR" means Nelson/Weather-Rite, Inc., a Delaware corporation,
one of the Borrowers hereunder and owner of one hundred percent of the issued
and outstanding capital stock of Actava World Trade.
"NWR Pledge" means that certain Pledge Agreement dated as of
December 6, 1994 executed by NWR in favor of the Agent pledging one hundred
percent (100.0%) of the issued and outstanding capital stock of Actava World
Trade now owned or hereafter acquired by NWR as security for the payment and
performance of the Obligations, other than the Obligations owing by RRC.
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"Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties, and debts owing by each Borrower
to the Agent and/or any Lender, arising under or pursuant to this Agreement or
any other Loan Document, whether or not evidenced by any note, or other
instrument or document, whether arising from an extension of credit, opening of
a letter of credit, currency hedging contract, interest rate contract,
acceptance, loan, guaranty, indemnification (including any indemnity made by
the Agent or the Lenders to Bank of America in connection with Currency Hedging
Contracts and Interest Rate Contracts) or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment from others, and
any participation by the Agent and/or any Lender in such Borrower's debts owing
to others), absolute or contingent, due or to become due, primary or secondary,
as principal or guarantor, and including, without limitation, all principal,
interest, charges, expenses, fees, attorneys' fees, filing fees and any other
sums chargeable to such Borrower hereunder or under any other Loan Document.
"Obligations" includes, without limitation, all debts, liabilities, and
obligations now or hereafter owing from each Borrower to the Agent and/or any
Lender under or in connection with the Letters of Credit, Currency Hedging
Contracts and Interest Rate Contracts, and all of RMC's obligations to RRC
arising under the Receivables Purchase Agreement, including certain
representations, warranties, covenants and indemnities by RMC, Hutch, NWR and
Willow in favor of RRC, all of which have been assigned to the Agent pursuant
to a certain Assignment of Representations, Warranties and Covenants dated as
of the Restatement Closing Date executed by RRC in favor of the Agent and
consented to by RMC, Hutch, NWR and Willow.
"OCC" means the Office of the Comptroller of the Currency.
"Olney Trust Bank Debt" means Debt that may be incurred by RMC
in a principal amount not to exceed $500,000, in connection with a term loan
made by Olney Trust Bank and secured solely by Real Estate constituting RMC's
Big Yank warehouse located in West Point, Mississippi pursuant to documentation
in form and substance satisfactory to the Lenders.
"Opelika Debt" means Debt that may be incurred by RMC in a
principal amount not to exceed $150,000, in connection with industrial revenue
development bonds issued by the City of Opelika, Alabama or a related
authority, pursuant to documentation in form and substance satisfactory to the
Lenders.
"Original Agreement" has the meaning specified in the Recitals
hereof.
"Par" means Par Industries, Inc., a Delaware corporation.
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<PAGE> 36
"Parent" means Roadmaster Industries, Inc., a Delaware
corporation, and owner of one hundred percent of the issued and outstanding
capital stock of RMC, DP, International, RLTD, Willow, Hutch and NWR.
"Parent Guaranty" means that certain Guaranty dated as of
December 6, 1994 executed by the Parent in favor of the Agent guarantying the
payment and performance of the Obligations, other than the Obligations owing by
RRC.
"Parent Pledge" means that certain Pledge Agreement dated as
of December 6, 1994 executed by the Parent in favor of the Agent pledging one
hundred percent (100.0%) of the issued and outstanding capital stock of RMC,
DP, International, Willow, Hutch and NWR now owned or hereafter acquired by the
Parent as security for the Parent's obligations under the Parent Guaranty and
the payment and performance of the Obligations, other than the Obligations
owing by RRC.
"Parent Subordination Agreement" means that certain
Subordination Agreement dated as of December 6, 1994 between the Parent and the
Agent with respect to (a) the Subordinated Debt, (b) Debt incurred under the
Subordinated Revolver, and (c) that certain Debt in the principal amount of
$6,000,000 evidenced by a certain Fourth Subordinated Term Note dated November
30, 1993 executed by RMC in favor of the Parent, as amended from time to time.
"Participating Lender" means any Person who shall have been
granted the right by any Lender to participate in the financing provided by
such Lender under this Agreement pursuant to Section 12.3(e), and who shall
have entered into a participation agreement in form and substance satisfactory
to such Lender.
"Patent Agreements" means the Patent Security Agreements dated
as of December 6, 1994, executed and delivered by (a) each Borrower to the
Agent pursuant to Section 5.2 and (b) by DP to the Agent, to evidence and
perfect the Agent's security interest in such Borrower's or DP's present and
future patents and related licenses and rights, for the benefit of the Secured
Creditors.
"Payment Account" means each blocked bank account established
pursuant to Section 5.9, to which the funds of any Borrower (including, without
limitation, proceeds of Accounts and other Collateral) are deposited or
credited, and which is maintained in the name of the Agent or such Borrower, as
the Agent may determine, on terms acceptable to the Agent.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Person succeeding to the functions thereof.
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"Pending Revolving Loans" means, at any time, the aggregate
principal amount of all Revolving Loans requested in any Notice(s) of Borrowing
received by the Agent but which Revolving Loans have not yet been advanced at
such time.
"Permitted Liens" means:
(a) Liens for taxes not yet payable or statutory Liens for
taxes in an amount not to exceed $100,000 provided that the payment of such
taxes which are due and payable is being contested in good faith and by proper
proceedings diligently pursued, and that reserves or other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor
and that a stay of enforcement of any such Lien is in effect;
(b) the Agent's Liens;
(c) Liens upon Equipment granted in connection with the
acquisition of such Equipment by the applicable Borrower after the date hereof
(including, without limitation, pursuant to Capital Leases), provided that (1)
the cost of each such acquisition constitutes a Capital Expenditure permitted
by Section 8.23, (2) the Debt incurred to finance each such acquisition is
permitted by Section 8.13, (3) each such Lien attaches only to the Equipment
acquired with the Debt secured thereby (including insurance and other proceeds
from the disposition of such Equipment), and (4) the principal amount of the
indebtedness secured by any item of Equipment shall not exceed 100% of the
actual cost thereof (excluding transportation, installation or other incidental
costs);
(d) deposits under workmen's compensation, unemployment
insurance, social security and other similar laws, or to secure the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure indemnity, performance or other similar bonds for the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory obligations (other than liens arising under ERISA or
Environmental Liens) or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business;
(e) Liens which arise by operation of law under Article 2 of
the Uniform Commercial Code in favor of unpaid sellers of goods or prepaying
buyers of goods, or liens in items of any accompanying documents or proceeds of
either arising by operation of law under Article 4 of the Uniform Commercial
Code in favor of a collecting bank, and in respect of RML, Liens which arise
under Canadian provincial laws of similar application;
(f) Liens securing the claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like
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Persons, provided that the payment thereof is not at the time required by
Section 8.1;
(g) reservations, exceptions, encroachments, easements,
rights of way, covenants running with the land, and other similar title
exceptions or encumbrances affecting any Real Estate; provided that they do not
in the aggregate materially detract from the value of the Real Estate or
materially interfere with its use in the ordinary conduct of business of the
applicable Borrower; and
(h) Liens in existence on the Restatement Closing Date and
reflected on Schedule 7.2.
"Permitted Rentals" means the Rentals permitted to be paid by
any Borrower pursuant to Section 8.24.
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, Public Authority, or any other entity.
"Plan" means any employee benefit plan as defined in Section
3(3) of ERISA in respect of which any Borrower or any of its ERISA Affiliates
is, or within the immediately preceding six (6) years was, an "employer" as
defined in Section 3(5) of ERISA.
"PPSA" means the Personal Property Security Act (Ontario), as
amended from time to time, and any other Canadian provincial legislation of
similar application, or legislation in the Northwest Territories and Northern
Territories of Canada of similar application.
"Premises" means the land identified by addresses on Schedule
7.12, together with all buildings, improvements, and fixtures thereon and all
tenements, hereditaments, and appurtenances belonging or in any way
appertaining thereto, and which constitutes all of the real property in which
any Borrower has any interests on the Restatement Closing Date.
"Pro Rata Share" means, with respect to a Lender, a fraction
(expressed as a percentage), the numerator of which is the amount of such
Lender's Commitment and the denominator of which is the sum of the amounts of
all of the Lenders' Commitments.
"Proprietary Rights" means all of each Borrower's now owned
and hereafter arising or acquired: licenses, franchises, permits, patents,
patent rights, copyrights, works which are the subject matter of copyrights,
trademarks, service marks, trade names, trade styles, patent, trademark and
service mark applications, and all licenses and rights related to any of the
foregoing, including, without limitation, those patents, trademarks,
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service marks and copyrights set forth on Schedule 7.13 hereto, and all other
rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations, and continuations-in-part of any of the foregoing,
and all rights to sue for past, present and future infringement of any of the
foregoing.
"Public Authority" means the government of any country or
sovereign state, or of any state, province, municipality, or other political
subdivision thereof, or any department, agency, public corporation or other
instrumentality of any of the foregoing.
"Real Estate" means all of the present and future interests of
any Borrower, as owner, lessee, or otherwise, in the Premises, including,
without limitation, any interest arising from an option to purchase or lease
the Premises or any portion thereof.
"Receivables Purchase Agreement" means that certain
Receivables Purchase Agreement dated as of the Restatement Closing Date among
RMC, Hutch, NWR, Willow and RRC.
"Reference Rate" means the rate announced from time to time by
Bank of America at its principal office in San Francisco, California as its
reference rate. The "Reference Rate" is one of several base rates that serve
as a basis upon which effective rates of interest are calculated for loans
making reference thereto and may not be the lowest of the rates charged by Bank
of America. Each Interest Rate based on the Reference Rate shall be adjusted
simultaneously with any change in the Reference Rate.
"Reference Rate Loan" means a Loan during any period in which
it bears interest at a rate based upon the Reference Rate.
"Register" has the meaning specified in Section 12.3(c).
"Release" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any Real
Estate or other property, including the movement of Contaminants through or in
the air, soil, surface water, groundwater or Real Estate or other property.
"Rentals" means all payments due from the lessee or sublessee
under a lease, including, without limitation, basic rent, percentage rent,
property taxes, utility or maintenance costs, and insurance premiums.
"Reportable Event" means any of the events described in
Section 4043 of ERISA.
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"Restatement Closing Date" means September 29, 1995.
"Restricted Investment" means any acquisition of property by
any Borrower in exchange for cash or other property, whether in the form of an
acquisition of stock, debt Security, or other indebtedness or obligation, or
the purchase or acquisition of any other property, or a loan, advance, capital
contribution, or subscription, except acquisitions of the following: (a) fixed
assets to be used in the business of such Borrower, so long as the acquisition
costs thereof constitute Capital Expenditures permitted hereunder, and other
property purchased by such Borrower in the ordinary course of business to be
used in the business of such Borrower; (b) goods held for sale or lease or to
be used in the provision of services by such Borrower in the ordinary course of
business; (c) current assets arising from the sale or lease of goods or the
rendition of services in the ordinary course of business of such Borrower; (d)
direct obligations of the United States of America, or any agency thereof, or
obligations guaranteed by the United States of America, provided that such
obligations mature within one year from the date of acquisition thereof; (e)
certificates of deposit maturing within one year from the date of acquisition,
bankers' acceptances, eurodollar bank deposits, overnight bank deposits, or
demand or time deposits maturing within one (1) year, in each case issued by,
created by, or with a bank or trust company organized under the laws of the
United States or any state thereof (or, in the case of RML, Canada or the
Province of Ontario) having capital and surplus aggregating at least
$100,000,000; (f) commercial paper given the highest rating by a national
credit rating agency and maturing not more than 270 days from the date of
creation thereof; and (g) Accounts transferred to RRC pursuant to the
Receivables Purchase Agreement.
"Revolver Facility" means, as the context may require, either
(a) $275,000,000, or (b) the Lenders' agreement to provide Revolving Loans,
Letters of Credit and Acceptances up to such amount subject to the terms of
this Agreement.
"Revolving Loans" has the meaning specified in Section 2.2.
"Revolving Loan Notice of Borrowing" has the meaning specified
in Section 2.4(a)(1).
"RLTD" means Roadmaster, Ltd., an English company.
"RMC" means Roadmaster Corporation, a Delaware corporation,
one of the Borrowers hereunder and owner of one hundred percent of the issued
and outstanding capital stock of RRC and Diversified Trucking.
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"RMC Pledge" means that certain Pledge Agreement dated as of
December 6, 1994 executed by RMC in favor of the Agent pledging (a) one hundred
percent (100.0%) of the issued and outstanding capital stock of Diversified
Trucking and RRC, (b) all of its capital stock of MacGregor Sports and Fitness,
Inc., a Minnesota corporation, and (c) certain promissory notes referred to in
such Pledge Agreement, now owned or hereafter acquired by RMC as security for
the payment and performance of the Obligations, other than the Obligations
owing by RRC.
"RML" means Roadmaster Leisure Inc., a corporation
incorporated under the laws of the province of Ontario, Canada, and one of the
Borrowers hereunder.
"RRC" means Roadmaster Receivables Corporation, an Illinois
corporation, and one of the Borrowers hereunder.
"Seasonal Inventory Advance Amount" means, with respect to any
Borrower at any time applicable, five percent (5%) of the value of Eligible
Inventory of such Borrower at such time.
"Seasonal Reserve" means (a) $1,000,000 during each October
and March, commencing with October 1996, (b) $2,000,000 during each November
and February, commencing with November 1996, (c) $3,000,000 during each
December and January, commencing with December 1996, and (d) zero during each
other calendar month; provided, that the Seasonal Reserve shall be zero from
and after the date on which the rate of returns, discounts, claims, credits and
allowances of any nature with respect to Inventory manufactured by RMC at its
Opelika, Alabama location shall have averaged no more than four percent (4.0%)
for the six (6) months preceding such date, such calculation to be delivered to
the Agent in writing and performed using a method satisfactory to the Agent.
"Seasonal Revolving Loans" means, with respect to any Borrower
at any time, a portion of the Revolving Loans to such Borrower equal to the
excess, if any, of (a) the Aggregate Outstandings to or for the account of such
Borrower at such time over (b) the Individual Borrowing Base of such Borrower
at such time, computed without giving effect to any Seasonal Inventory Advance
Amount.
"Secured Creditors" means the Agent and the Lenders.
"Security" has the meaning specified in Section 2(1) of the
Securities Act of 1933, as amended.
"Senior Subordinated Notes" means the 11-3/4% Senior
Subordinated Notes Due 2002 issued pursuant to that certain Indenture dated as
of December 15, 1993 between the Parent and LaSalle National Bank, as Trustee
(the "Senior Subordinated Note
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Indenture"), as amended, modified or supplemented from time to time.
"Solvent" means, when used with respect to any Person, that
(a) the fair value of all its assets is in excess of the total amount of its
debts (including contingent liabilities); (b) it is able to pay its debts as
they mature; (c) it does not have unreasonably small capital for the business
in which it is engaged or for any business or transaction in which it is about
to engage; and (d) it is not "insolvent" as such term is defined in Section
101(32) of the Bankruptcy Code.
"Stated Termination Date" means September 29, 1998.
"Subordinated Debentures" means the 8% Convertible
Subordinated Debentures Due 2003 issued pursuant to that certain Indenture
dated as of July 15, 1993 between the Parent and LaSalle National Bank, as
Trustee, as amended, modified or supplemented from time to time.
"Subordinated Debt" means that certain Debt of RMC to the
Parent in the original principal amount of (a) $1,000,000 evidenced by that
certain promissory note dated August 31, 1988 executed by RMC in favor of the
Parent, (b) $1,150,000 evidenced by that certain promissory note dated August
10, 1987 executed by RMC in favor of the Parent, and (c) $33,000,000 evidenced
by that certain Third Subordinated Term Note dated September 30, 1993 executed
by RMC in favor of the Parent.
"Subordinated Revolver" means that certain Debt of RMC to the
Parent in a principal amount of up to $94,000,000 incurred pursuant to that
certain Subordinated Revolving Credit Note dated as of December 29, 1993
between RMC and the Parent.
"Subsidiary" means, with respect to any Person, any
corporation of which more than fifty percent (50.0%) of the outstanding
Securities of any class or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to elect a majority of the corporate
directors (or Persons performing similar functions), is at the time, directly
or indirectly through one or more intermediaries, owned by such Person and/or
one or more of its Subsidiaries.
"Supporting Letter of Credit" has the meaning specified in
Section 2.5.
"Telemarketing Sales" has the meaning specified in Section 5.9.
"Termination Date" means the earliest to occur of (a) the
Stated Termination Date, (b) the date the Revolver Facility is terminated
either by the Borrowers pursuant to Section 4.3 or
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by the Majority Lenders pursuant to Section 10.2, and (c) the date this
Agreement is otherwise terminated for any reason whatsoever.
"Termination Event" means: (a) a Reportable Event with
respect to any Benefit Plan; (b) the withdrawal of any Borrower or any ERISA
Affiliate from a Benefit Plan during a plan year in which such Borrower or
ERISA Affiliate was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; (c) the imposition of an obligation on any Borrower or any ERISA
Affiliate under Section 4041 of ERISA to provide affected parties written
notice of intent to terminate a Benefit Plan in a distress termination
described in Section 4041(c) of ERISA; (d) the institution by the PBGC of
proceedings to terminate a Benefit Plan; (e) any event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan; (f) the partial or
complete withdrawal of any Borrower or any ERISA Affiliate from a Multiemployer
Plan; or (g) the cessation of operations which results in the termination of
employment of twenty percent (20.0%) of Benefit Plan participants who are
employees of the applicable Borrower and its ERISA Affiliates.
"Trademark Agreements" means the Trademark Security Agreements
dated as of December 6, 1994, executed and delivered by (a) each Borrower to
the Agent pursuant to Section 5.2 and (b) by DP to the Agent, to evidence and
perfect the Agent's security interest in such Borrower's or DP's present and
future trademarks and related licenses and rights, for the benefit of the
Secured Creditors.
"Triggering Date" means a date designated by the Agent
following the occurrence of either (a) Availability being less than $5,000,000,
or (b) any Default or Event of Default, and in either such case the Agent's
election in its discretion to designate a Triggering Date; provided, that the
Triggering Date may not occur prior to two (2) Business Days following the
Agent's notice thereof to RMC.
"UCC" means the Uniform Commercial Code (or any successor
statute) of the State of Illinois or of any other state the laws of which are
required by Section 9-103 thereof to be applied in connection with the issue of
perfection of security interests.
"UDAG Debt" means Debt pursuant to that certain Urban
Development Action Grant Agreement dated August 30, 1983 in a principal amount
not to exceed $1,200,000, accruing interest at a rate of 6% for the first ten
years and 4.5% less than the prime rate, with a maximum rate of 8%, for the
second 10 years, maturing 1987 to 2003.
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"Unused Acceptance Subfacility" means, with respect to
(a) RMC, an amount equal to the lesser of (1) $10,000,000
minus the aggregate face amount of all outstanding Acceptances, or (2)
$5,000,000 minus the aggregate face amount of all outstanding
Acceptances created for the account of RMC;
(b) RML, an amount equal to the lesser of (1) $10,000,000
minus the aggregate face amount of all outstanding Acceptances, or (2)
$1,000,000 minus the aggregate face amount of all outstanding
Acceptances created for the account of RML;
(c) Willow, an amount equal to the lesser of (1) $10,000,000
minus the aggregate face amount of all outstanding Acceptances, or (2)
$1,000,000 minus the aggregate face amount of all outstanding
Acceptances created for the account of Willow;
(d) Hutch, an amount equal to the lesser of (1) $10,000,000
minus the aggregate face amount of all outstanding Acceptances, or (2)
$1,000,000 minus the aggregate face amount of all outstanding
Acceptances created for the account of Hutch; and
(e) NWR, an amount equal to the lesser of (1) $10,000,000
minus the aggregate face amount of all outstanding Acceptances, or (2)
$3,000,000 minus the aggregate face amount of all outstanding
Acceptances created for the account of NWR.
"Unused Letter of Credit Subfacility" means, with respect to
(a) RMC, an amount equal to the lesser of (1) $50,000,000
minus the aggregate maximum undrawn face amount of all outstanding
Letters of Credit and unpaid reimbursement obligations with respect to
all Letters of Credit, or (2) $40,000,000 minus the aggregate maximum
undrawn face amount of all outstanding Letters of Credit issued for
the account of RMC and unpaid reimbursement obligations with respect
to all Letters of Credit issued for the account of RMC;
(b) RML, an amount equal to the lesser of (1) $50,000,000
minus the aggregate maximum undrawn face amount of all outstanding
Letters of Credit and unpaid reimbursement obligations with respect to
all Letters of Credit, or (2) $3,000,000 minus the aggregate maximum
undrawn face amount of all outstanding Letters of Credit issued for
the account of RML and unpaid reimbursement
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obligations with respect to all Letters of Credit issued for the
account of RML;
(c) Willow, an amount equal to the lesser of (1) $50,000,000
minus the aggregate maximum undrawn face amount of all outstanding
Letters of Credit and unpaid reimbursement obligations with respect to
all Letters of Credit, or (2) $3,000,000 minus the aggregate maximum
undrawn face amount of all outstanding Letters of Credit issued for
the account of Willow and unpaid reimbursement obligations with
respect to all Letters of Credit issued for the account of Willow;
(d) Hutch, an amount equal to the lesser of (1) $50,000,000
minus the aggregate maximum undrawn face amount of all outstanding
Letters of Credit and unpaid reimbursement obligations with respect to
all Letters of Credit, or (2) $3,000,000 minus the aggregate maximum
undrawn face amount of all outstanding Letters of Credit issued for
the account of Hutch and unpaid reimbursement obligations with respect
to all Letters of Credit issued for the account of Hutch; and
(e) NWR, an amount equal to the lesser of (1) $50,000,000
minus the aggregate maximum undrawn face amount of all outstanding
Letters of Credit and unpaid reimbursement obligations with respect to
all Letters of Credit, or (2) the sum of (A) $20,000,000 minus the
aggregate maximum undrawn face amount of all outstanding Letters of
Credit (other than Free Quota Letters of Credit) issued for the
account of NWR and unpaid reimbursement obligations with respect to
all Letters of Credit (other than Free Quota Letters of Credit) issued
for the account of NWR, and (B) $8,000,000 minus the aggregate maximum
undrawn face amount of all outstanding Free Quota Letters of Credit
and unpaid reimbursement obligations with respect to all Free Quota
Letters of Credit.
"Voting Stock" means Securities of any class or classes of a
corporation, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
"Willow" means Willow Hosiery Co., Inc., a New York
corporation, and one of the Borrowers hereunder.
"Wisconsin Department of Development Debt" means Debt pursuant
to the Major Economic Development and Fund Agreement between the Wisconsin
Department of Development and RMC and Promissory Note issued in connection with
such agreement in the original principal amount of $200,000.
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1.3 Accounting Terms. Any accounting term used in this
Agreement shall have, unless otherwise specifically provided herein, the
meaning customarily given in accordance with GAAP, and all financial
computations hereunder shall be computed, unless otherwise specifically
provided herein, in accordance with GAAP as consistently applied.
1.4 Other Terms. All other undefined terms contained in
this Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein.
Any references herein to exhibits, schedules, sections or articles are
references to exhibits, schedules, sections or articles of this Agreement,
unless otherwise specified. Wherever appropriate in the context, terms used
herein in the singular also include the plural, and vice versa, and each
masculine, feminine, or neuter pronoun shall also include the other genders.
1.5 Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" shall mean "from and including" and the words "to" and "until"
shall each mean "to but excluding." Periods of days referred to in this
Agreement shall be counted in calendar days unless Business Days are expressly
prescribed and references in this Agreement to months and years shall be to
calendar months and calendar years unless otherwise specified.
ARTICLE 2
LOANS, LETTERS OF CREDIT AND ACCEPTANCES
2.1 Total Credit Facility. Subject to all of the terms and
conditions of this Agreement, the Lenders severally agree to make available a
total credit facility of up to $290,000,000 for the Borrowers' use from time to
time during the term of this Agreement. Such credit facility shall be
comprised of the Revolver Facility consisting of revolving loans, letters of
credit and bankers' acceptances up to the Maximum Revolver Amount, as described
in Sections 2.2 and 2.5, and the Capital Expenditure Facility described in
Section 2.3.
2.2 Revolving Loans. Subject to the satisfaction of the
applicable conditions precedent set forth in Article 9, each Lender severally
agrees, upon the Borrowers' request from time to time, to make revolving loans
(together with the Revolving Loans outstanding under the Original Agreement,
the "Revolving Loans") to the Borrowers, in an amount not to exceed (except for
BABC with respect to BABC Loans) either such Lender's Pro Rata Share of
Individual Availability for each Borrower or Availability in the aggregate at
such time. The Lenders, in their discretion,
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may unanimously elect to make Revolving Loans or participate (as provided for
in Section 2.5(f)) in the credit support or enhancement provided through the
Agent to the issuers of Letters of Credit or accepting banks with respect to
Acceptances, in excess of Availability or Individual Availability on one or
more occasions, but if they do so, neither the Agent nor the Lenders shall be
deemed thereby to have changed the limits of the Maximum Revolver Amount or of
the Individual Maximum Revolver Amounts, or to be obligated to exceed such
limits on any other occasion. If at any time (a) the Aggregate Revolver
Outstandings to or for the accounts of all Borrowers exceed the Maximum
Revolver Amount, the Lenders may refuse to make or otherwise restrict the
making of Revolving Loans, or (b) the Aggregate Revolver Outstandings to or for
the account of a Borrower exceed the Individual Maximum Revolver Amount with
respect to such Borrower, the Lenders may refuse to make or otherwise restrict
the making of Revolving Loans to such Borrower, in either case on such terms as
the Lenders determine until any such excess has been eliminated; provided, that
the remedies by the Lenders described in the foregoing sentence in such event
shall not be deemed to limit any other remedies available to the Agent and the
Lenders under Section 10.2 of this Agreement or otherwise.
2.3 Capital Expenditure Loans. Subject to the
satisfaction of the applicable conditions precedent set forth in Article 9,
each Lender severally agrees, upon the request of RMC, NWR, Hutch, Willow or
RML from time to time, to make loans (the "Capital Expenditure Loans") to each
such Borrower, in an amount not to exceed (except with respect to BABC Loans)
either such Lender's Pro Rata Share of Individual Capital Expenditure
Availability for such Borrower or Capital Expenditure Availability in the
aggregate at such time. Each Capital Expenditure Loan must be in an amount not
less (a) $250,000 in the case of RMC, and (b) $100,000 in the case of Hutch,
NWR, Willow and RML. The aggregate amount of Capital Expenditure Loans made
during (1) October 1995 shall not exceed $1,000,000, (2) November 1995 shall
not exceed $1,000,000, (3) December 1995 shall not exceed $1,000,000, and (4)
each calendar month thereafter shall not exceed $2,000,000; provided, that
until such time as the audited Financial Statements delivered to the Lenders
pursuant to Section 6.2(a) shall demonstrate each Borrower's compliance with
the financial covenants contained in Sections 8.23 through 8.27 of this
Agreement, and the Parent's compliance with the financial covenants contained
in Section 16 of the Parent Guaranty, in each case for the period covered by
such Financial Statements, no Capital Expenditure Loans shall be made to any
Borrower at any time that current "Cash Flow" (as defined in the next
succeeding sentence) for all of the Borrowers as reflected in any of the
Financial Statements delivered to the Lenders pursuant to Sections 6.2(a) and
(b) shall be less than the applicable amount set forth on Schedule 2.3 (with
the Borrowers being required to demonstrate that such test shall have
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been met for September 1995 prior to any borrowing of Capital Expenditure
Loans); provided, that in any event, no Capital Expenditure Loans shall be made
to any Borrower at any time that any of such Financial Statements shall have
been required to be delivered pursuant to Sections 6.2(a) or (b), as
applicable, but shall not have been so delivered. "Cash Flow" shall mean net
income plus, to the extent deducted in computing such net income, depreciation
and amortization, minus capital expenditures not financed by Capital
Expenditure Loans or other Debt for borrowed money, principal payments paid and
Distributions made, plus decreases in working capital and minus increases in
working capital (working capital being calculated in each such case exclusive
of the effect thereon of the Revolving Loans).
2.4 Borrowing Provisions for Loans. (a) Notice of
Borrowing. (1) Whenever RMC, Hutch, NWR, Willow or RML desires to borrow
Revolving Loans under Section 2.2 such Borrower shall deliver to the Agent a
written request substantially in the form of Exhibit D-1 hereto (a "Revolving
Loan Notice of Borrowing") signed by an authorized officer or employee of such
Borrower, no later than (A) 10:00 a.m. (Chicago, Illinois time) on the
requested Funding Date, in the case of requests for Reference Rate Loans, or
(B) 10:00 a.m. (Chicago, Illinois time) three (3) Business Days in advance of
the requested Funding Date, in the case of requests for LIBOR Loans. The
Revolving Loan Notice of Borrowing shall contain a certification by an
authorized officer or employee that the requested Revolving Loans would be
permitted to be made pursuant to Section 4.11 of the Senior Subordinated Note
Indenture, and shall specify (i) the requested Funding Date (which shall be a
Business Day), (ii) the aggregate amount of the requested Revolving Loans,
(iii) whether the Revolving Loans requested are to be Reference Rate Loans or
LIBOR Loans, (iv) if the requested Revolving Loans are to be LIBOR Loans, the
requested Interest Period, and (v) the account to which the proceeds of such
Revolving Loans are to be transferred, which account shall be one of the
accounts specified by the Borrowers pursuant to the first sentence of Section
2.4(b). With respect to any request for Revolving Loans which shall be
Reference Rate Loans, in lieu of delivering the above-described Revolving Loan
Notice of Borrowing the applicable Borrower may give the Agent telephonic
notice of such request by the required time; provided, however, that such
telephonic notice shall be confirmed in writing by delivery to the Agent (a)
immediately of a telecopy of a Revolving Loan Notice of Borrowing which has
been signed by an authorized officer or employee of the applicable Borrower,
and (b) promptly of a Revolving Loan Notice of Borrowing containing the
original signature of an authorized officer or employee of the applicable
Borrower mailed by such Borrower to the Agent via United States mail on the
date such notice is given.
(2) Whenever RMC, NWR, Hutch, Willow or RML desires to borrow
Capital Expenditure Loans under Section 2.3 such Borrower
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shall deliver to the Agent a written request substantially in the form of
Exhibit D-2 hereto (a "Capital Expenditure Loan Notice of Borrowing") signed by
an authorized officer or employee of such Borrower, no later than 10:00 a.m.
(Chicago, Illinois time), five (5) Business Days in advance of the requested
Funding Date. The Capital Expenditure Loan Notice of Borrowing shall contain a
certification by an authorized officer or employee that the requested Capital
Expenditure Loans would be permitted to be made pursuant to Section 4.11 of the
Senior Subordinated Note Indenture, and shall specify (A) the requested Funding
Date (which shall be a Business Day), (B) the aggregate amount of the requested
Capital Expenditure Loans, (C) the account to which the proceeds of such
Capital Expenditure Loans are to be transferred, which account shall be one of
the accounts specified by the Borrowers pursuant to the first sentence of
Section 2.4(b), (D) a detailed description of the proposed Capital Expenditure
Loan Equipment, including the serial number(s) thereof, and (E) a detailed
calculation demonstrating that the requested Capital Expenditure Loans would
not exceed Capital Expenditure Availability in the aggregate or Individual
Capital Expenditure Availability for the applicable Borrower. In addition, the
applicable Borrower shall deliver with the Capital Expenditure Loan Notice of
Borrowing such invoices and other materials as the Agent may request to support
such Borrower's statements described in clauses (D) and (E) of the immediately
preceding sentence.
(b) Reliance upon Authority. On or prior to the Restatement
Closing Date and thereafter prior to any change with respect to any of the
information contained in the following clauses (1) and (2), each Borrower shall
deliver to the Agent a writing setting forth (1) the accounts to which the
Agent is authorized to transfer the proceeds of the Loans requested by such
Borrower pursuant to this Section 2.4, and (2) the names of the officers and
employees authorized to request Loans on behalf of such Borrower, and shall
provide the Agent with a specimen signature of each such officer and employee.
The Agent shall be entitled to rely conclusively on such officer's or
employee's authority to request Loans on behalf of the applicable Borrower, the
proceeds of which are to be transferred to any of the accounts specified by
such Borrower pursuant to the immediately preceding sentence, until the Agent
receives written notice to the contrary. With respect to any oral request for
a Loan, the Agent shall have no duty to verify the identity of any individual
representing himself as one of the officers or employees authorized by the
applicable Borrower to make such requests on its behalf.
(c) No Liability. The Agent shall not incur any liability to
any Borrower as a result of acting upon any notice referred to in Sections
2.4(a) and (b), which notice the Agent believes to have been given by an
officer or employee duly authorized by the applicable Borrower to request Loans
on its
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behalf or for otherwise acting under this Section 2.4, and the crediting of
Loans to any of the accounts specified by the applicable Borrower pursuant to
the first sentence of Section 2.4(b) shall conclusively establish the
obligation of such Borrower to repay such Loans as provided herein.
(d) Notice Irrevocable. Any Notice of Borrowing (or
telephonic notice in lieu thereof) made pursuant to Section 2.4(a) shall be
irrevocable and the applicable Borrower shall be bound to borrow the funds
requested therein in accordance therewith; provided, that any Notice of
Borrowing (or telephonic notice in lieu thereof) in respect of Reference Rate
Loans shall be revocable at any time up to one (1) Business Day prior to the
requested Funding Date specified therein.
(e) Agent's Election. Promptly after receipt of a Notice of
Borrowing pursuant to Section 2.4(a), the Agent shall elect, in its discretion,
(1) to have the terms of Section 2.4(f) apply to such requested Borrowing, or
(2) to request BABC to make a BABC Loan pursuant to the terms of Section 2.4(g)
in the amount of the requested Borrowing; provided, however, that if BABC
declines in its sole discretion to make a BABC Loan pursuant to Section 2.4(g),
the Agent shall elect to have the terms of Section 2.4(f) apply to such
requested Borrowing.
(f) Making of Loans. (1) In the event that the Agent shall
elect to have the terms of this Section 2.4(f) apply to a requested Borrowing
as described in Section 2.4(e), the Agent shall notify the Lenders by telecopy,
telephone or other similar form of transmission, of the requested Borrowing, no
later than 10:30 a.m. (Chicago, Illinois time) on the date of the Agent's
receipt of the applicable Notice of Borrowing pursuant to Section 2.4(a). Each
Lender shall make the amount of such Lender's Pro Rata Share of the requested
Borrowing available to the Agent in same day funds, to such account of the
Agent as the Agent may designate, on the Funding Date applicable thereto.
After the Agent's receipt of the proceeds of such Loans, upon satisfaction of
the applicable conditions precedent set forth in Article 9, the Agent shall
make the proceeds of such Loans available to the applicable Borrower on the
applicable Funding Date by transferring same day funds equal to the proceeds of
such Loans received by the Agent to the account of such Borrower, designated in
writing by such Borrower.
(2) On any Funding Date in respect of a Borrowing, the Agent
shall be entitled to assume that each Lender has made the amount of such
Lender's Loan available to the Agent on such Funding Date, unless such Lender
shall have notified the Agent to the contrary. The Agent, in its sole
discretion, based upon such assumption, may make available to the applicable
Borrower a corresponding amount on such Funding Date. If such corresponding
amount had not in fact been made available to the Agent by any
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Lender, such Lender and the Borrowers severally agree to repay to the Agent
forthwith, on demand, such corresponding amount, together with interest thereon
for each day during the period commencing on the date such amount is made
available to the applicable Borrower and ending on the date such amount is
repaid to the Agent, at (A) in the case of a Borrower, the interest rate
applicable from time to time to such Borrowing, and (B) in the case of a
Lender, the Federal Funds Rate. If such Lender repays to the Agent such
corresponding amount, such amount so repaid shall constitute a Loan to the
applicable Borrower, and if both such Lender and the applicable Borrower shall
have repaid such corresponding amount, the Agent shall promptly return to such
Borrower such corresponding amount in same day funds. Nothing in this Section
2.4(f)(2) shall be deemed to relieve any Lender of its obligation, if any,
hereunder to make a Loan on any Funding Date.
(g) Making of BABC Loans. In the event the Agent shall
elect, with the consent of BABC, to have the terms of this Section 2.4(g) apply
to a requested Borrowing as described in Section 2.4(e), BABC shall make a Loan
in the amount of such Borrowing (any such Loan made solely by BABC pursuant to
this Section 2.4(g) being referred to as a "BABC Loan" and such Loans being
referred to collectively as "BABC Loans") available to the applicable Borrower
on the Funding Date applicable thereto by transferring same day funds to an
account of such Borrower, designated in writing by such Borrower. Each BABC
Loan is a Loan hereunder (and shall be a Revolving Loan if used to fund a
Borrowing which is to consist of Revolving Loans or a Capital Expenditure Loan
if used to fund a Borrowing which is to consist of Capital Expenditure Loans)
and shall be subject to all the terms and conditions applicable to other Loans
except that all payments thereon shall be payable to BABC solely for its own
account (and for the account of the holder of any participation interest with
respect to such Loan created pursuant to Section 2.4(i)(2)). The Agent shall
not request BABC to make any BABC Loan if the Agent shall have received written
notice from any Lender or shall otherwise have actual knowledge that one or
more of the applicable conditions precedent set forth in Article 9 will not be
satisfied on the requested Funding Date for the applicable Borrowing, or if the
requested Borrowing would exceed either (a) in the case of a Borrowing to
consist of Revolving Loans, the amount of Availability or Individual
Availability with respect to the applicable Borrower on the Funding Date, or
(b) in the case of a Borrowing to consist of Capital Expenditure Loans, the
amount of Capital Expenditure Availability or Individual
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Capital Expenditure Availability with respect to the applicable Borrower on the
Funding Date. BABC shall not otherwise be required to determine whether the
applicable conditions precedent set forth in Article 9 have been satisfied or
the requested Borrowing would exceed the amount of Availability, Individual
Availability, Capital Expenditure Availability or Individual Capital
Expenditure Availability, as applicable, on the Funding Date applicable thereto
prior to making, in its sole discretion, any BABC Loan.
(h) Agent Advances. (1) Subject to the limitations set forth
in the provisos contained in this Section 2.4(h)(1), the Agent is hereby
authorized by the Borrowers and the Lenders, from time to time in the Agent's
discretion (which discretion shall be exercised following the Agent's
reasonable attempts to consult with the Lenders thereon), (A) after the
occurrence of a Default or an Event of Default, or (B) at any time that any of
the other applicable conditions precedent set forth in Article 9 have not been
satisfied, to make Revolving Loans to any Borrower on behalf of the Lenders
which the Agent, in its reasonable business judgment, deems necessary or
desirable (i) to preserve or protect the Collateral, or any portion thereof,
(ii) to enhance the likelihood of, or maximize the amount of, repayment of the
Loans and other Obligations, or (iii) to pay any other amount chargeable to any
Borrower pursuant to the terms of this Agreement, including, without
limitation, costs, fees and expenses as described in Section 14.6 (any of the
advances described in this Section 2.4(h)(1) being hereinafter referred to as
"Agent Advances"); provided, that the Agent shall not make any Agent Advance to
a Borrower if (x) the amount of such Agent Advance would exceed the amount of
Availability or Individual Availability with respect to such Borrower on the
Funding Date applicable thereto, or (y) the making of such Agent Advance would
cause the aggregate amount of all Agent Advances outstanding on the Funding
Date applicable thereto to exceed $5,000,000; and provided, further, that the
Majority Lenders may at any time revoke the Agent's authorization contained in
this Section 2.4(h)(1) to make Agent Advances, any such revocation to be in
writing and to become effective upon the Agent's receipt thereof.
(2) The Agent Advances shall be repayable on demand and
secured by the Collateral, shall constitute Revolving Loans and Obligations
hereunder, and shall bear interest at the rate applicable to the Revolving
Loans from time to time. The Agent shall notify each Lender and the applicable
Borrower in writing of each such Agent Advance, which notice shall include a
description of the purpose of such Agent Advance.
(i) Settlement. The Agent and the Lenders hereby agree that,
except in the case of Loans consisting of BABC Loans or Agent Advances, each
Lender's funded portion of the Loans is intended to be equal at all times to
such Lender's Pro Rata Share of the outstanding Loans. The Agent and the
Lenders agree (which agreement shall not be for the benefit of or enforceable
by any Borrower) that in order to facilitate the administration of this
Agreement and the other Loan Documents, settlement among them as to the BABC
Loans, Agent Advances and other Loans shall take
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place on a periodic basis in accordance with the following provisions:
(1) The Agent shall request settlement ("Settlement") with
the Lenders on a weekly basis, or on a more frequent basis if so determined by
the Agent, with respect to (A) each outstanding BABC Loan, (B) each outstanding
Agent Advance, and (C) payments received, by notifying the other Lenders by
telecopy, telephone or other similar form of transmission, of such requested
Settlement, no later than 10:30 a.m. (Chicago, Illinois time) on the date of
such requested Settlement (the "Settlement Date"). In the event that the Agent
shall have elected to have the terms of Section 2.4(f) apply to requested
Borrowings, Settlement Dates shall occur on a corresponding daily basis. Each
Lender (other than BABC, in the case of BABC Loans) shall make the amount of
such Lender's Pro Rata Share of the outstanding principal amount of the BABC
Loans and Agent Advances with respect to which Settlement is requested
available to the Agent, for itself or for the account of BABC, in same day
funds, to such account of the Agent as the Agent may designate, on the
Settlement Date applicable thereto, regardless of whether the applicable
conditions precedent set forth in Article 9 have then been satisfied. Such
amounts made available to the Agent shall be applied against the amounts of the
applicable BABC Loan or Agent Advance and, together with the portion of such
BABC Loan or Agent Advance representing BABC's Pro Rata Share thereof, shall
constitute Loans of such Lenders. If any such amount is not made available to
the Agent by any Lender on the Settlement Date applicable thereto, the Agent
shall be entitled to recover such amount on demand from such Lender together
with interest thereon at the Federal Funds Rate for the first three (3) days
from and after the Settlement Date and thereafter at the Interest Rate then
applicable to the Loans with respect to which Settlement is to be made.
(2) Notwithstanding the foregoing, not more than one (1)
Business Day after demand is made by the Agent (whether before or after the
occurrence of a Default or an Event of Default and regardless of whether the
Agent has requested a Settlement with respect to a BABC Loan or Agent Advance),
each other Lender shall irrevocably and unconditionally purchase and receive
from BABC or the Agent, as applicable, without recourse or warranty, an
undivided interest and participation in such BABC Loan or Agent Advance to the
extent of such Lender's Pro Rata Share thereof by paying to the Agent, in same
day funds, an amount equal to such Lender's Pro Rata Share of such BABC Loan or
Agent Advance. If such amount is not in fact made available to the Agent by
any Lender, the Agent shall be entitled to recover such amount on demand from
such Lender together with interest thereon at the Federal Funds Rate for the
first three (3) days from and after such demand and thereafter at the Interest
Rate
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then applicable to the Loans in which the participation is to be purchased.
(3) From and after the date, if any, on which any Lender
purchases an undivided interest and participation in any BABC Loan or Agent
Advance pursuant to subsection (2) above, the Agent shall promptly distribute
to such Lender at such address as such Lender may request in writing, such
Lender's Pro Rata Share of all payments of principal and interest and all
proceeds of Collateral received by the Agent in respect of such BABC Loan or
Agent Advance.
(4) If any payments are received by the Agent which, in
accordance with the terms of this Agreement would be applied to the reduction
of (A) the Revolving Loans, and no BABC Loans or Agent Advances consisting of
Revolving Loans are then outstanding, or (B) the Capital Expenditure Loans, and
no BABC Loans consisting of Capital Expenditure Loans are then outstanding, the
Agent may pay over such amounts to BABC for application to BABC's Pro Rata
Share of such Revolving Loans or Capital Expenditure Loans, as applicable. If,
as of any Settlement Date, payments received since the then immediately
preceding Settlement Date have been applied to BABC's Pro Rata Share of the
Loans other than BABC Loans and Agent Advances, as provided for in the
immediately preceding sentence, then BABC shall pay to the Agent, for the
accounts of the Lenders, to be applied to the outstanding Revolving Loans or
Capital Expenditure Loans, as applicable, of such Lenders, an amount such that
each Lender shall have outstanding, as of such Settlement Date, after giving
effect to such payments, its Pro Rata Share of such Revolving Loans or Capital
Expenditure Loans; provided, that the Agent may net payments due from BABC
pursuant to this sentence against payments due to BABC pursuant to Section
2.4(i)(1) on the applicable Settlement Date, and require either BABC or the
other Lenders, as applicable, to make only the amount of the payment due after
such netting. As of each Settlement Date, each of (x) BABC with respect to
BABC Loans, (y) the Agent with respect to Agent Advances, and (z) each Lender
with respect to the Loans other than BABC Loans and Agent Advances, shall be
entitled to interest at the applicable rate or rates payable under this
Agreement on the actual average daily amount of funds employed by BABC, the
Agent or such Lender since the immediately preceding Settlement Date.
(j) Notation. The Agent shall record in the Register the
principal amount of the Revolving Loans and Capital Expenditure Loans owing to
each Lender, including the BABC Loans owing to BABC, and the Agent Advances
owing to the Agent, from time to time. In addition, each Lender is authorized,
at such Lender's option, to note the date and amount of each payment or
prepayment of principal of such Lender's Revolving Loans and Capital
Expenditure Loans in its books and records, including
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computer records, such books and records constituting rebuttably presumptive
evidence, absent manifest error, of the accuracy of the information contained
therein.
(k) Lenders' Failure to Perform. All Loans (other than BABC
Loans and Agent Advances) shall be made by the Lenders simultaneously and in
accordance with their Pro Rata Shares. It is understood that (1) no Lender
shall be responsible for any failure by any other Lender to perform its
obligation to make any Loans hereunder, nor shall any Commitment of any Lender
be increased or decreased as a result of any failure by any other Lender to
perform its obligation to make any Loans hereunder, and (2) no failure by any
Lender to perform its obligation to make any Loans hereunder shall excuse any
other Lender from its obligation to make any Loans hereunder.
2.5 Letters of Credit and Acceptances.
(a) Agreement to Cause Issuance or Acceptance. Subject to
the terms and conditions of this Agreement, and in reliance upon the
representations and warranties of the Borrowers herein set forth, the Agent
agrees to use its best efforts to (1) cause to be issued for the respective
accounts of the Borrowers other than RRC, and to provide credit support or
other enhancement in connection with, one or more documentary letters of credit
(each such letter of credit, together with the letters of credit outstanding on
the Restatement Closing Date and described on Schedule 2.5, a "Letter of
Credit" and such letters of credit, collectively, the "Letters of Credit") in
accordance with this Section 2.5 from time to time during the term of this
Agreement and (2) cause drafts to be accepted and banker's acceptances created
for the respective accounts of the Borrowers, and to provide credit support or
other enhancement in connection with such banker's acceptances (each such
banker's acceptance, an "Acceptance," and such banker's acceptances,
collectively, the "Acceptances") in accordance with this Section 2.5 from time
to time during the term of this Agreement.
(b) Amounts; Outside Expiration Date. The Agent shall not
have any obligation to use its best efforts to cause to be issued any Letter of
Credit at any time: (1) if the maximum undrawn face amount of the requested
Letter of Credit is greater than the Unused Letter of Credit Subfacility for
the applicable Borrower at such time; (2) in the case of a Letter of Credit
other than a Free Quota Letter of Credit, if the maximum undrawn face amount of
the requested Letter of Credit and all commissions, fees and charges due from
the applicable Borrower in connection with the opening thereof, are greater
than Availability or Individual Availability applicable to such Borrower at
such time; (3) in the case of a Free Quota Letter of Credit, if all
commissions, fees, and charges due from NWR in connection with the opening
thereof, are greater than
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Availability, or Individual Availability applicable to NWR at such time; (4)
which Letter of Credit has an expiration date later than thirty (30) days prior
to the Stated Termination Date, or more than one (1) year from the date of
issuance; (5) which Letter of Credit would provide security with respect to the
obligations of any Borrower in connection with workers compensation laws and
regulations, to the extent that the sum of the undrawn face amounts of all such
Letters of Credit issued for the account of any Borrower would exceed
$8,000,000; (6) in the case of a Free Quota Letter of Credit, if the issuance
thereof would cause the sum of the undrawn face amounts of all then outstanding
Free Quota Letters of Credit to exceed $8,000,000; or (7) in the case of a
Letter of Credit (other than a Free Quota Letter of Credit) issued for the
account of NWR, if the issuance thereof would cause the sum of the undrawn face
amounts of all then outstanding Letters of Credit (other than Free Quota
Letters of Credit) issued for the account of NWR to exceed $20,000,000. The
Agent shall not have any obligation to use its best efforts to cause to be
created or to provide credit support in connection with any Acceptance at any
time: (1) if the face amount of the requested Acceptance and all commissions,
fees and charges due from the applicable Borrower in connection with the
creation thereof, are greater than Availability or Individual Availability
applicable to such Borrower at such time; or (2) which Acceptance has a
maturity date more than 180 days after the date of the draft to be accepted or
later than thirty (30) days prior to the Stated Termination Date.
(c) Other Conditions. In addition to being subject to the
satisfaction of the applicable conditions precedent contained in Article 9, the
obligation of the Agent to use its best efforts to cause any Letter of Credit
to be issued or any Acceptance to be created is subject to the following
conditions precedent having been satisfied in a manner satisfactory to the
Agent:
(1) in the case of a Letter of Credit, the applicable
Borrower shall have delivered to the proposed issuer of such Letter of
Credit, at such times and in such manner as such proposed issuer may
prescribe, an application in form and substance satisfactory to such
proposed issuer for the issuance of the Letter of Credit and such
other documents as may be required pursuant to the terms thereof, and
the form and terms of the proposed Letter of Credit shall be
satisfactory to the Agent and such proposed issuer;
(2) in the case of an Acceptance, the applicable Borrower
shall have entered into an acceptance agreement with the bank creating
such Acceptance and such other documents as may be required pursuant
to the terms thereof, and the terms of such acceptance agreement and
proposed Acceptance shall be satisfactory to the Agent and such bank;
and
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(3) as of the date of issuance or creation, no order of any
court, arbitrator or Public Authority shall purport by its terms to
enjoin or restrain money center banks generally from issuing letters
of credit or creating banker's acceptances of the type and in the
amount of the proposed Letter of Credit or Acceptance, and no law,
rule or regulation applicable to money center banks generally and no
request or directive (whether or not having the force of law) from any
Public Authority with jurisdiction over money center banks generally
shall prohibit, or request that the bank proposed to issue such Letter
of Credit or create such Acceptance refrain from, the issuance of
letters of credit or creation of banker's acceptances generally or the
issuance of such Letter of Credit or creation of such Acceptance.
(d) Issuance of Letters of Credit and Creation of Acceptances.
(1) Request for Issuance. The applicable Borrower shall give
the Agent three (3) Business Days' prior written notice, containing
the original signature of an authorized officer of such Borrower, of
such Borrower's request for the issuance of a Letter of Credit or
creation of an Acceptance. Such notice shall be irrevocable and shall
specify the original face amount of the Letter of Credit or Acceptance
requested, the effective date (which date shall be a Business Day) of
issuance of such requested Letter of Credit or creation of such
requested Acceptance, whether such Letter of Credit may be drawn in a
single or in partial draws, the date on which such requested Letter of
Credit is to expire or such Acceptance is to mature (which date shall
be a Business Day), the purpose for which such Letter of Credit is to
be issued or such Acceptance is to be created, and the beneficiary of
the requested Letter of Credit. In the case of a Letter of Credit,
the applicable Borrower shall attach to such notice the form of the
Letter of Credit that it requests that the Agent cause to be issued.
(2) Responsibilities of the Agent; Issuance. The Agent shall
determine, as of the Business Day immediately preceding the requested
effective date of issuance of the Letter of Credit or creation of the
Acceptance set forth in the notice from the applicable Borrower
pursuant to Section 2.5(d)(1), (A) the amount of the applicable Unused
Letter of Credit Subfacility or Unused Acceptance Subfacility and (B)
the amount of Availability and Individual Availability as of such date
(for purposes of computing Availability and Individual Availability at
such time, giving effect to the issuance of such requested Letter of
Credit or creation of such requested Acceptance). If (i) (x) the
undrawn face amount of the requested Letter of Credit is not greater
than
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the applicable Unused Letter of Credit Subfacility or the face amount
of the requested Acceptance is not greater than the applicable Unused
Acceptance Subfacility, and (y) the issuance of such requested Letter
of Credit or creation of such requested Acceptance, and all
commissions, fees, and charges due from the applicable Borrower in
connection with the opening or creation thereof, would not cause
Availability or Individual Availability to be exceeded and (ii) the
Agent has received a certificate from the applicable Borrower stating
that the applicable conditions set forth in Article 9 have been
satisfied, the Agent shall use its best efforts to cause such issuer
to issue the requested Letter of Credit or the accepting bank to
create such Acceptance on such requested effective date of issuance or
acceptance.
(3) Notice of Issuance or Acceptance. Within seven (7) days
following the issuance of any Letter of Credit or creation of any
Acceptance, the Agent shall give each Lender written notice, or
telephonic notice confirmed promptly thereafter in writing, of the
issuance of such Letter of Credit or creation of such Acceptance.
(4) No Extensions or Amendment. The Agent shall not cause
any Letter of Credit to be extended or amended unless the requirements
of this Section 2.5(d) are met as though a new Letter of Credit were
being requested and issued.
(e) Payments Pursuant to Letters of Credit or Acceptances.
(1) Payment of Letter of Credit and Acceptance Obligations.
The Borrowers agree (A) to reimburse the issuer for any draw under any
Letter of Credit immediately upon demand, and to pay to such issuer
the amount of all other obligations and other amounts payable to such
issuer under or in connection with any Letter of Credit and (B) to pay
the accepting bank on the maturity date of each Acceptance the face
amount of such Acceptance, and to pay to such accepting bank the
amount of all other obligations and other amounts payable to such
accepting bank in connection with any Acceptance, in each case
immediately when due, irrespective of any claim, set-off, defense or
other right which any Borrower may have at any time against such
issuer, accepting bank or any other Person.
(2) Revolving Loans to Satisfy Reimbursement Obligations and
Acceptance Obligations. In the event that the issuer of any Letter of
Credit honors a draw under such Letter of Credit or an accepting bank
makes payment under any Acceptance, and the Borrowers shall not have
repaid such amount to such issuer or accepting bank pursuant to
Section
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2.5(e)(1), the Agent shall, upon receiving notice of such failure,
notify each Lender of such failure, and each Lender unconditionally
agrees to pay to the Agent, for the account of such issuer or
accepting bank, as and when provided hereinbelow, an amount equal to
such Lender's Pro Rata Share of the amount of such payment in Dollars
and in same day funds. If the Agent so notifies the Lenders prior to
10:00 a.m. (Chicago, Illinois time) on any Business Day, each Lender
shall make available to the Agent the amount of such payment, as
provided in the immediately preceding sentence, on such Business Day.
Such amounts paid by the Lenders to the Agent shall constitute
Revolving Loans which shall be deemed to have been requested by the
applicable Borrower pursuant to Section 2.4 as set forth in Section
4.5.
(f) Participations.
(1) Purchase of Participations. Immediately upon issuance of
any Letter of Credit or creation of any Acceptance in accordance with
Section 2.5(d), each Lender shall be deemed to have irrevocably and
unconditionally purchased and received, without recourse or warranty,
an undivided interest and participation in the credit support or
enhancement provided through the Agent to such issuer or accepting
bank in connection with the issuance of such Letter of Credit or
creation of such Acceptance, equal to such Lender's Pro Rata Share of
the face amount of such Letter of Credit or Acceptance (including,
without limitation, all obligations of the Borrowers with respect
thereto, and any security therefor or guaranty pertaining thereto).
(2) Sharing of Reimbursement Obligation Payments. Whenever
the Agent receives a payment from a Borrower on account of
reimbursement obligations in respect of a Letter of Credit or
Acceptance as to which the Agent has previously received payment from
a Lender for the account of the issuer or accepting bank, the Agent
shall promptly pay to such Lender such Lender's Pro Rata Share of such
payment from such Borrower in Dollars. Each such payment shall be
made by the Agent on the Business Day on which the Agent receives
immediately available funds paid to such Person pursuant to the
immediately preceding sentence, if received prior to 10:00 a.m.
(Chicago, Illinois time) on such Business Day and otherwise on the
next succeeding Business Day.
(3) Documentation. Upon the request of any Lender, the Agent
shall furnish to such Lender copies of any Letter of Credit,
reimbursement agreement executed in connection therewith, application
for any Letter of Credit, acceptance agreement and credit support or
enhancement provided through the Agent in connection with the issuance
of any Letter of
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Credit or creation of any Acceptance, and such other documentation as
may reasonably be requested by such Lender.
(4) Obligations Irrevocable. The obligations of each Lender
to make payments to the Agent with respect to any Letter of Credit or
Acceptance or with respect to any credit support or enhancement
provided through the Agent with respect to a Letter of Credit or
Acceptance, and the obligations of the Borrowers to make payments to
the Agent, for the account of the Lenders, shall be irrevocable, not
subject to any qualification or exception whatsoever and shall be made
in accordance with the terms and conditions of this Agreement
(assuming, in the case of the obligations of the Lenders to make such
payments, that the Agent has caused such Letter of Credit to be issued
or Acceptance to be created in accordance with the terms of Section
2.5(d)), including, without limitation, any of the following
circumstances:
(A) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(B) the existence of any claim, set-off, defense or
other right which any Borrower may have at any time against a
beneficiary named in a Letter of Credit or any transferee of
any Letter of Credit (or any Person for whom any such
transferee may be acting), any Lender, the Agent, the issuer
of such Letter of Credit, or any other Person, whether in
connection with this Agreement, any Letter of Credit or
Acceptance, the transactions contemplated herein or any
unrelated transactions (including any underlying transactions
between any Borrower or any other Person and the beneficiary
named in any Letter of Credit);
(C) any draft, certificate or any other document
presented under a Letter of Credit or in connection with an
Acceptance proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(D) the surrender or impairment of any security for
the performance or observance of any of the terms of any of
the Loan Documents; or
(E) the occurrence of any Default or Event of
Default.
(g) Recovery or Avoidance of Payments. In the event any
payment by or on behalf of any Borrower received by the Agent with respect to
credit support or enhancement provided for any Letter of Credit or Acceptance
(or any guaranty by any Borrower
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or reimbursement obligation of any Borrower relating thereto) and distributed
by the Agent to the Lenders on account of their respective participations
therein, is thereafter set aside, avoided or recovered from the Agent in
connection with any receivership, liquidation or bankruptcy proceeding, the
Lenders shall, upon demand by the Agent, pay to the Agent their respective Pro
Rata Shares of such amount set aside, avoided or recovered, together with
interest at the rate required to be paid by the Agent upon the amount required
to be repaid by it.
(h) Compensation for Letters of Credit and Acceptances.
(1) Letter of Credit Fee and Acceptance Fee. The Borrowers
agree to pay to the Agent for the credit support or enhancement
provided with respect to each Letter of Credit, for the account of the
Lenders, the Letter of Credit Fee specified in, and in accordance with
the terms of, Section 3.5. The Borrowers agree to pay to the Agent
for the credit support or enhancement provided with respect to each
Acceptance, for the account of the Lenders, the Acceptance Fee
specified in, and in accordance with the terms of, Section 3.6.
(2) Issuer and Accepting Bank Fees and Charges. The
Borrowers shall pay to the issuer of any Letter of Credit, or to the
Agent, for the account of any such issuer, solely for the account of
such issuer, such fees and other charges as are charged by such issuer
for letters of credit issued by it, including, without limitation, its
standard fees for issuing, administering, amending, renewing, paying
and cancelling letters of credit and all other fees associated with
issuing or servicing letters of credit, as and when assessed. The
Borrowers shall pay to the accepting bank on any Acceptance, or to the
Agent, for the account of any such accepting bank, solely for the
account of such accepting bank, such fees and other charges as are
charged by such accepting bank for acceptances created by it,
including, without limitation, its standard fees for creating banker's
acceptances, as and when assessed.
(i) Indemnification; Exoneration.
(1) Indemnification. In addition to amounts payable as
elsewhere provided in this Section 2.5, each Borrower hereby agrees to
protect, indemnify, pay and save the Lenders and the Agent harmless
from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable attorneys'
fees) which any Lender or the Agent may incur or be subject to as a
consequence, direct or indirect, of the issuance of any Letter of
Credit or the creation of any Acceptance or the
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provision of any credit support or enhancement in connection therewith.
(2) Assumption of Risk by the Borrowers. As among the
Borrowers, the Lenders and the Agent, each Borrower assumes all risks
of the acts and omissions of, or misuse of any of the Letters of
Credit by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, subject to the
provisions of the applications for the issuance of Letters of Credit,
the Lenders and the Agent shall not be responsible for: (A) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any Person in connection with the application
for and issuance of and presentation of drafts with respect to any of
the Letters of Credit, even if it should prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (B)
the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of Credit or
the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (C)
the failure of the beneficiary of any Letter of Credit to comply duly
with conditions required in order to draw upon such Letter of Credit;
(D) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (E) errors in
interpretation of technical terms; (F) any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any Letter of Credit or of the proceeds thereof; (G) the
misapplication by the beneficiary of any Letter of Credit of the
proceeds of any drawing under such Letter of Credit; or (H) any
consequences arising from causes beyond the control of the Lenders or
the Agent, including, without limitation, any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto
Public Authority. None of the foregoing shall affect, impair or
prevent the vesting of any rights or powers of the Agent or any Lender
under this Section 2.5(i).
(3) Exoneration. In furtherance and extension, and not in
limitation, of the specific provisions set forth above, any action
taken or omitted by the Agent or any Lender under or in connection
with any of the Letters of Credit or Acceptances or any related
certificates, if taken or omitted in good faith, shall not put the
Agent or any Lender under any resulting liability to any Borrower or
relieve any Borrower of any of its obligations hereunder to any such
Person.
(j) Supporting Letter of Credit; Cash Collateral.
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(1) If, notwithstanding the provisions of Section 2.5(b) any
Letter of Credit or Acceptance is outstanding upon the termination of this
Agreement, then upon such termination the Borrowers shall deposit with the
Agent, for the ratable benefit of the Secured Creditors, with respect to each
Letter of Credit and Acceptance then outstanding, as the Agent shall specify,
either (A) a standby letter of credit (a "Supporting Letter of Credit") in form
and substance satisfactory to the Agent, issued by an issuer satisfactory to
the Agent in an amount equal to the greatest amount for which such Letter of
Credit may be drawn, and the face amount of each such Acceptance, under which
Supporting Letter of Credit the Agent is entitled to draw amounts necessary to
reimburse the Agent and the Lenders for payments made by the Agent and the
Lenders under such Letter of Credit, in connection with such Acceptance, or
under any credit support or enhancement provided through the Agent with respect
to any such Letter of Credit or Acceptance, or (B) cash in amounts necessary to
reimburse the Agent and the Lenders for payments made by the Agent or the
Lenders under such Letter of Credit, in connection with such Acceptance, or
under any credit support or enhancement provided through the Agent with respect
to any such Letter of Credit or Acceptance. Such Supporting Letter of Credit
or deposit of cash shall be held by the Agent, for the ratable benefit of the
Secured Creditors, as security for, and to provide for the payment of, the
aggregate undrawn face amount of such Letters of Credit and the face amount of
such Acceptance remaining outstanding.
(2) The Borrowers shall, upon the request of the Agent, which
may be made at any time that (i) an Event of Default has occurred and is
continuing, deliver to the Agent cash collateral for any Letter of Credit or
Acceptance outstanding, or (ii) Availability or Individual Availability is less
than zero, deliver to the Agent cash collateral for any Letter of Credit or
Acceptance in the amount by which Availability or Individual Availability is
less than zero.
2.6 Interest Rate and Currency Hedging Contract Reserves.
(a) The Agent and the Lenders acknowledge that RMC may be entering into
Interest Rate Contracts from time to time during the term of this Agreement,
and RMC acknowledges that neither the Agent nor any Lender has any obligation
to obtain or to cause to be entered into any such Interest Rate Contracts. In
the event that such Interest Rate Contracts shall be entered into, a reserve
(the "Interest Rate Contract Reserve") shall be established against the Maximum
Revolver Amount and Individual Maximum Revolver Amount with respect to RMC in
the aggregate amount of Interest Rate Contract Exposure from time to time with
respect to all Interest Rate Contracts. At no time shall RMC permit the
aggregate amount of Interest Rate Contract Exposure to exceed $10,000,000.
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(b) The Agent and the Lenders acknowledge that RMC and RML
may be entering into Currency Hedging Contracts from time to time during the
term of this Agreement, and RMC and RML acknowledge that neither the Agent nor
any Lender has any obligation to obtain or to cause to be entered into any such
Currency Hedging Contracts. In the event that such Currency Hedging Contracts
shall be entered into, a reserve (the "Currency Hedging Contract Reserve")
shall be established against the Maximum Revolver Amount and Individual Maximum
Revolver Amount with respect to RMC or RML, as applicable, in the aggregate
amount of Currency Hedging Contract Exposure from time to time with respect to
all Currency Hedging Contracts of RMC or RML, as applicable. At no time shall
the aggregate amount of Currency Hedging Contract Exposure with respect to (A)
RML exceed $2,000,000, or (B) RMC and RML, on a combined basis, exceed
$10,000,000.
2.7 Disbursements. The parties hereto agree that the
Agent may deliver the proceeds of Loans to be made to RML either directly to
RML, or indirectly to RML by first funding proceeds to RMC, as RML's borrowing
agent, and having RMC provide such funds to RML.
ARTICLE 3
INTEREST AND FEES
3.1 Interest.
(a) Interest Rates. All outstanding Obligations shall bear
interest on the unpaid amount thereof (including, to the extent permitted by
law, on interest on such Loans not paid when due) from the date made until paid
in full in cash. All Obligations shall bear interest at a rate determined by
reference to the Reference Rate or the LIBO Rate and Sections 3.1(a)(1), (2),
or (3), as applicable, but not to exceed the Maximum Rate. Subject to the
provisions of Section 3.2 and the other terms and provisions of this Agreement,
any of the Loans may be converted into, or continued as, Reference Rate Loans
or LIBOR Loans in the manner provided in Section 3.2. If at any time Loans are
outstanding with respect to which notice has not been delivered to the Agent in
accordance with the terms of this Agreement specifying the basis for
determining the interest rate applicable thereto, then those Loans shall be
Reference Rate Loans and shall bear interest at a rate determined by reference
to the Reference Rate until notice to the contrary has been given to the Agent
and such notice has become effective. Except as otherwise provided herein, the
outstanding Obligations shall bear interest as follows:
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(1) For all Revolving Loans (other than Seasonal Revolving
Loans) during any period for which they are Reference Rate Loans, at a
per annum rate equal to three-quarters of one percent (0.75%) plus the
Reference Rate, and during any period for which they are LIBOR Loans,
at a per annum rate equal to two and three quarters percent (2.75%)
plus the LIBO Rate determined for the applicable Interest Period;
(2) For all Seasonal Revolving Loans, at a per annum rate
equal to one and one-quarter percent (1.25%) plus the Reference Rate;
and
(3) For all Capital Expenditure Loans, at a per annum
rate equal to one percent (1.00%) plus the Reference Rate.
Except as otherwise provided herein, all outstanding Obligations other than
Loans shall bear interest at the rate applicable from time to time to Revolving
Loans which are Reference Rate Loans. Each change in the Reference Rate shall
be reflected in each interest rate based upon the Reference Rate as of the
effective date of such change. All interest charges shall be computed on the
basis of a year of 360 days and actual days elapsed. Except as otherwise
provided herein, (A) interest accrued on each LIBOR Loan shall be payable in
arrears on each LIBOR Interest Payment Date applicable to such LIBOR Loan and
upon payment thereof in full, and (B) interest accrued on the Reference Rate
Loans will be payable in arrears on the first day of each month hereafter.
(b) Default Rate. If any Default or Event of Default occurs
and the Majority Lenders in their discretion so elect, then, while any such
Default or Event of Default is outstanding, all of the Obligations shall bear
interest at the Default Rate applicable thereto.
(c) Canadian Matters.
(1) Each payment of interest or other fees or charges payable
hereunder to the Agent or any Lender shall be made without deduction
or withholding on account of any tax imposed, levied, collected,
withheld or assessed by Canada, any province or any municipality
thereof, or any department, agency, subdivision or instrumentality of
any of them, pursuant to the ITA or the Canada-U.S. Income Tax
Convention (1980) ("Canadian Taxes").
(2) In the event that RML shall be obligated under applicable
law to make any deduction for or withholding on account of Canadian
Taxes from any payment of interest or other fees or charges payable
hereunder to the Agent or any Lender, RML shall deduct or withhold
from such payment such amounts, not exceeding the minimum amounts, as
may be
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required by applicable law and RML shall promptly pay such amounts to
the appropriate taxation authorities and obtain official receipts or
other satisfactory evidence of the payment of such amounts to the
appropriate taxation authorities and shall promptly provide the same
to the Agent and such Lender.
(3) In the event that RML makes any deduction or withholding
as provided in Section 3.l(c)(2), concurrently with the payment to the
Agent or any Lender of each amount to which such deduction or
withholding is applicable, RML shall pay to the Agent or such Lender
such additional amounts ("Gross-Up Payments") as may be necessary to
insure that after withholding all applicable amounts on account of
Canadian Taxes from any payments made hereunder, including any
Gross-Up Payments, the Agent or such Lender receives an amount in
Dollars equal to the full amount which it would have received if no
withholding had been required in respect of Canadian Taxes.
(4) The provisions of this Section 3.1(c) and the
obligations of the Borrowers hereunder shall survive the termination
of this Agreement and the repayment of the Obligations hereunder.
(5) For purposes of the Interest Act (Canada), the yearly
rate of interest or the yearly rate of any fee, or the rate of such
interest or fee per annum, equal to the rate of such interest or fee
payable hereunder for any period, is the rate of such interest or fee
payable hereunder multiplied by a fraction, the numerator of which is
the actual number of days in the year in which such period commenced
(i.e. 365 or 366, as the case may be) and the denominator of which is
360.
3.2 Conversion or Continuation. (a) Subject to the
provisions of Section 3.3, any Borrower shall have the option (1) to convert
all or any part of its outstanding Revolving Loans (other than Seasonal
Revolving Loans), in a minimum amount of $5,000,000 and integral multiples of
$1,000,000 in excess of that amount, from Reference Rate Loans to LIBOR Loans;
(2) to convert all or any part of its outstanding Revolving Loans from LIBOR
Loans to Reference Rate Loans on the expiration of the Interest Period
applicable thereto; and (3) upon the expiration of any Interest Period
applicable to any outstanding LIBOR Loan, to continue all or any portion of
such LIBOR Loan in a minimum amount of $5,000,000 and integral multiples of
$1,000,000 in excess of that amount, as a LIBOR Loan; provided, however, that
no outstanding Loans may be converted into, or continued under the foregoing
clause (3) as LIBOR Loans when any Default or Event of Default has occurred and
is continuing. Any conversion or continuation made with respect to less than
the entire
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outstanding balance of the Revolving Loans must be applied pro rata to the
Revolving Loans according to the outstanding principal balance of each
Revolving Loan.
(b) Whenever any Borrower elects to convert or continue Loans
under this Section 3.2, such Borrower shall deliver to the Agent a written
notice substantially in the form of that attached hereto as Exhibit E (a
"Notice of Conversion/Continuation"), with a copy thereof to be delivered
contemporaneously by such Borrower to each Lender, signed by an authorized
officer of such Borrower (1) no later than 10:00 a.m. (Chicago, Illinois time)
two (2) Business Days in advance of the requested conversion date, in the case
of a conversion into Reference Rate Loans, and (2) no later than 11:00 a.m
(Chicago, Illinois time) three (3) Business Days in advance of the requested
conversion or continuation date, in the case of a conversion into, or
continuation of, LIBOR Loans. The Notice of Conversion/Continuation shall
specify (A) the conversion or continuation date (which shall be a Business
Day), (B) the amount and type of the Loans to be converted or continued, (C)
the nature of the requested conversion or continuation, and (D) in the case of
a conversion into, or continuation of, LIBOR Loans, the requested Interest
Period. In the event that the applicable Borrower should fail to provide a
Notice of Conversion/Continuation with respect to any LIBOR Loans as provided
above, such Loans shall, on the last day of the Interest Period with respect to
such Loans, convert to Reference Rate Loans.
(c) Any officer of any Borrower authorized to request
Revolving Loans on behalf of such Borrower shall also be authorized to request
a conversion or continuation on behalf of such Borrower. The Agent shall be
entitled to rely on such officers' authority until the Agent is notified to the
contrary in writing pursuant to Section 2.4(b). The Agent shall incur no
liability to any Borrower in acting upon any notice referred to in this Section
3.2, which notice the Agent believes to have been given by an officer
authorized to make such requests on behalf of such Borrower, or for otherwise
acting under this Section 3.2 and, upon such conversion or continuation by the
Agent and the Lenders in accordance with this Agreement, the applicable
Borrower shall have effected the conversion or continuation of the applicable
Loans hereunder.
(d) Any Notice of Conversion/Continuation for conversion to,
or continuation of, Loans made pursuant to this Section 3.2 shall be
irrevocable and the applicable Borrower shall be bound to convert or continue
in accordance therewith.
3.3 Special Provisions Governing LIBOR Loans.
Notwithstanding any other provisions to the contrary contained in
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this Agreement, the following provisions shall govern with respect to LIBOR
Loans as to the matters covered:
(a) Amount of LIBOR Loans. Each election of, continuation of
or conversion to a LIBOR Loan, shall be in a minimum amount of $5,000,000 and
in integral multiples of $1,000,000 in excess of that amount.
(b) Determination of Interest Period. By giving notice as
set forth in Section 3.2(b), the applicable Borrower shall have the option,
subject to the other provisions of this Section 3.3, to specify whether the
Interest Period for such LIBOR Loan shall be a one, two, three or six month
period. The determination of Interest Periods shall be subject to the
following provisions:
(1) In the case of immediately successive Interest Periods,
each successive Interest Period shall commence on the day on which the
next preceding Interest Period expires.
(2) If any Interest Period would otherwise expire on a day
which is not a Business Day, the Interest Period shall be extended to
expire on the next succeeding Business Day; provided, however, that if
the next succeeding Business Day occurs in the following calendar
month, then such Interest Period shall expire on the immediately
preceding Business Day.
(3) No Borrower may select an Interest Period for any LIBOR
Loan, which Interest Period expires later than the Stated Termination
Date.
(4) There shall be no more than six (6) Interest Periods in
effect at any one time.
(c) Determination of Interest Rate. As soon as practicable
after 10:00 a.m. (Chicago, Illinois time) on the LIBOR Interest Rate
Determination Date, the Agent shall determine (which determination shall,
absent manifest error, be presumptively correct) the Interest Rate for the
LIBOR Loans for which an Interest Rate is then being determined and shall
promptly give notice thereof (in writing or by telephone confirmed in writing)
to the applicable Borrower and to the Lenders. In the event that on any LIBOR
Interest Rate Determination Date the Agent shall have determined (which
determination shall be presumptively correct and binding upon all parties)
that:
(1) adequate and fair means do not exist for ascertaining the
applicable interest rates by reference to which the LIBO Rate then
being determined is to be fixed; or
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(2) the LIBO Rate for any Interest Period for such Loans will
not adequately reflect the cost to any Lender of making, funding or
maintaining its LIBOR Loan for such Interest Period, the Agent shall
forthwith so notify the applicable Borrower and the Lenders,
whereupon:
(A) each LIBOR Loan will automatically, on the last day
of the then existing Interest Period therefor,
convert into a Reference Rate Loan; and
(B) the obligation of the Lenders to make, or to convert
Loans into, LIBOR Loans shall be suspended until the
Agent shall notify the Borrowers and the Lenders that
the circumstances causing such suspension no longer
exist.
(d) Illegality. Notwithstanding any other provision of this
Agreement, if any Lender shall notify the Agent that the introduction of or any
change in or in the interpretation of any law or regulation makes it unlawful,
or any central bank or other Public Authority asserts that it is unlawful, for
any Lender to perform its obligations hereunder to make LIBOR Loans or to fund
or maintain LIBOR Loans hereunder, (1) the obligation of the Lenders to make,
or to convert Loans into or to continue Loans as, LIBOR Loans shall be
suspended until the Agent shall notify the applicable Borrower and the Lenders
that the circumstances causing such suspension no longer exist and (2) such
Borrower shall on the termination of the Interest Period then applicable
thereto, or on such earlier date required by law, prepay in full all LIBOR
Loans then outstanding together with accrued interest thereon, or convert all
such LIBOR Loans into Reference Rate Loans in accordance with Section 3.2.
(e) Increased Costs. If, due to either (1) the introduction
of or any change (other than any change by way of imposition or increase of
reserve requirements included in the LIBOR Reserve Percentage) in or in the
interpretation of any law or regulation or (2) the compliance with any
guideline or request from any central bank or other Public Authority (whether
or not having the force of law), there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining LIBOR Loans, then
the Borrowers agree that they shall, from time to time, upon demand by such
Lender, pay to such Lender additional amounts sufficient to compensate such
Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to the Borrowers by such Lender, shall be rebuttably
presumptive evidence of the correctness of such amount.
(f) Compensation. In addition to such amounts as are
required to be paid by the Borrowers pursuant to the other
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Sections of this Article 3, each Borrower agrees to compensate any Lender for
all losses, expenses and liabilities, including, without limitation, any loss
or expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Lender to fund or maintain such Lender's LIBOR
Loans to the Borrowers, which such Lender may sustain (1) if for any reason a
funding of any LIBOR Loans does not occur on a date specified therefor in a
Notice of Borrowing or Notice of Conversion/Continuation, or a successive
Interest Period does not commence after notice therefor is given pursuant to
Section 3.2, (2) if any voluntary or mandatory prepayment of any LIBOR Loans
occurs for any reason on a date which is not the last scheduled day of an
Interest Period, (3) as a consequence of any required conversion of LIBOR Loans
to Reference Rate Loans as a result of any of the events indicated in Section
3.3(d), or (4) as a consequence of any other failure by any Borrower to repay
LIBOR Loans when required by the terms of this Agreement.
(g) Booking of LIBOR Loans. Each Lender may make, carry or
transfer LIBOR Loans at, to, or for the account of, any of its branch offices
or the office of any of its affiliates.
(h) LIBOR Loans After Event of Default. After the occurrence
of and during the continuance of any Event of Default, no Borrower may borrow
Loans as LIBOR Loans or elect to have any Loans continued as, or converted to,
LIBOR Loans after the expiration of any Interest Period then in effect for such
Loans.
3.4 Maximum Interest Rate. In no event shall any interest
rate hereunder exceed the maximum rate permissible for corporate borrowers
under applicable law (the "Maximum Rate"). If, in any month, any interest
rate, absent such limitation, would have exceeded the Maximum Rate, then the
interest rate for that month shall be the Maximum Rate, and, if in future
months, that interest rate would otherwise be less than the Maximum Rate, then
that interest rate shall remain at the Maximum Rate until such time as the
amount of interest paid hereunder equals the amount of interest which would
have been paid if the same had not been limited by the Maximum Rate. In the
event that, upon payment in full of the Obligations under this Agreement, the
total amount of interest paid or accrued under the terms of this Agreement is
less than the total amount of interest which would, but for this Section 3.4,
have been paid or accrued if the interest rates otherwise set forth in this
Agreement had at all times been in effect, then the Borrowers shall, to the
extent permitted by applicable law, pay the Agent, for the account of the
Lenders, an amount equal to the difference between (a) the lesser of (1) the
amount of interest which would have been charged if the Maximum Rate had, at
all times, been in effect or (2) the amount of interest which would have
accrued had the interest rates otherwise set forth in this Agreement, at all
times, been in effect and (b) the amount of interest actually paid or accrued
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under this Agreement. In the event that a court determines that the Agent
and/or any Lender has received interest and other charges hereunder in excess
of the Maximum Rate, such excess shall be deemed received on account of, and
shall automatically be applied to reduce, the Obligations other than interest,
in the inverse order of maturity, and if there are no Obligations outstanding,
the Agent and/or such Lender shall refund to the Borrowers such excess.
3.5 Letter of Credit Fee. The Borrowers shall pay the Agent,
for the account of the Lenders, for each Letter of Credit, a fee ("Letter of
Credit Fee") equal to one and one-quarter percent (1.25%) per annum of the
undrawn face amount of each such Letter of Credit issued for a Borrower's
account at such Borrower's request. The Letter of Credit Fee shall be payable
in advance (a) upon the issuance of each Letter of Credit for the number of
days remaining in the month during which such Letter of Credit was issued, and
(b) thereafter, monthly, on the first day of each month during which each such
Letter of Credit remains outstanding. The Letter of Credit Fee shall be
computed on the basis of a 360-day year for the actual number of days elapsed.
The Borrowers shall also pay the costs, fees, or expenses of the Person issuing
the Letter(s) of Credit, all in accordance with Section 2.5 and any Letter of
Credit reimbursement agreement.
3.6 Acceptance Fee. The Borrowers shall pay the Agent, for
the account of the Lenders, for each Acceptance, a fee ("Acceptance Fee") equal
to one and one-quarter percent (1.25%) per annum of the face amount of each
such Acceptance created for a Borrower's account at such Borrower's request.
The Acceptance Fee shall be payable in advance (a) upon the creation of each
Acceptance for the number of days remaining in the month during which such
Acceptance was created, and (b) thereafter, monthly, on the first day of each
month during which each such Acceptance remains outstanding. The Acceptance
Fee shall be computed on the basis of a 360-day year for the actual number of
days elapsed. The Borrowers shall also pay the costs, fees, or expenses of the
bank creating each Acceptance, all in accordance with Section 2.5 and any
acceptance agreement.
3.7 Closing Fee. The Borrowers will pay the Agent, for the
account of the Lenders, on the Restatement Closing Date, a closing fee (the
"Closing Fee") in the amount of $725,000. The Borrowers, the Lenders and the
Agent agree that the Closing Fee shall be financed by the Lenders as Revolving
Loans and shall be fully earned by the Lenders on the Restatement Closing Date.
3.8 Unused Line Fee. The Borrowers shall pay to the Agent,
for the account of the Lenders, in arrears on the first day of each month and
on the date of the termination of the Revolver Facility, an unused line fee on
the amount (the "Unused Amount") by which the Revolver Facility exceeded the
sum of (a)
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the average daily outstanding amount of Revolving Loans (with such amount
calculated for this purpose by giving immediate application to all amounts
received by the Agent or any Lender), (b) the average daily undrawn face amount
of all outstanding Letters of Credit, and (c) the average daily face amount of
all outstanding Acceptances, in each case during the immediately preceding
month, in an amount equal to one-quarter of one percent (0.25%) per annum of
the Unused Amount. The unused line fee shall be computed on the basis of a
360-day year for the actual number of days elapsed.
3.9 Audit Fee. The Borrowers shall pay to the Agent, solely
for its own account, all costs and expenses reasonably incurred by the Agent's
internal auditors in connection with audits of the Borrowers performed by the
Agent during the term of this Agreement. The Agent's internal auditors shall
be billed at the rate of $300 per day per auditor plus reasonably incurred
out-of-pocket costs.
3.10 Collateral Management Fee. The Borrowers will pay the
Agent, solely for its own account, a collateral management fee equal to
$125,000 per annum, payable quarterly in arrears on the first day of each
calendar quarter, commencing January 1, 1996.
3.11 Early Termination Fee. If the Revolver Facility is
terminated by the Borrowers pursuant to Section 4.3 (a) on or before the second
Anniversary Date, the Borrowers shall pay to the Agent, for the ratable benefit
of the Lenders, an early termination fee equal to $6,000,000, or (b) after the
second Anniversary Date but before the third Anniversary Date, the Borrowers
shall pay to the Agent, for the ratable benefit of the Lenders, an early
termination fee equal to $3,000,000. Notwithstanding the immediately preceding
sentence, in the event that the Revolver Facility is terminated by the
Borrowers pursuant to a refinancing of the Obligations pursuant to an asset
securitization transaction with respect to the all or substantially all of the
Accounts, pursuant to which (a) each Lender or its affiliate shall have been
offered the opportunity to be a lender in an amount (1) at least equal to such
Lenders's Commitment, or (2) which would result in such Lender's percentage
share of such financing being at least equal to such Lender's Pro Rata Share,
and (b) the Agent or Bank of America or another affiliate of Bank of America
shall act as sole agent for the lenders, such early termination fee shall not
be required to be paid.
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3.12 Currency Conversion. All obligations payable under this
Agreement or secured hereby, including principal, interest, costs, expenses,
charges, premiums, fees, rates and other amounts, shall be due and payable in
Dollars. In any proceeding in which the amount of any obligation payable
hereunder must be converted into Canadian currency, the amount of such
obligation shall be converted into an amount in Canadian currency sufficient to
purchase the amount of the obligation in Dollars at a chartered bank in
Ontario, Canada at the close of business on the first day on which such bank
quotes a Canadian dollar rate for purchase of such amount of Dollars before the
day on which payment of the obligation is received by the Agent, for the
account of the Lenders, but the Lenders shall have a separate cause of action
against the Borrowers for the amount, if any, by which the amount paid to the
Agent, for the account of the Lenders, in respect of the obligation in any
currency other than Dollars, when promptly converted to Dollars under normal
banking procedures and in an appropriate market of the Agent's choice, fails to
yield (net after any cost of conversion) the full amount of the obligation in
Dollars.
ARTICLE 4
PAYMENTS AND PREPAYMENTS
4.1 Revolving Loans. The Borrowers shall repay the
outstanding principal balance of the Revolving Loans, plus all accrued but
unpaid interest thereon, upon the termination of this Agreement for any reason.
The Borrowers may prepay Revolving Loans at any time, and reborrow subject to
the terms of this Agreement; provided, however, that with respect to any LIBOR
Loans prepaid by any Borrower prior to the expiration date of the Interest
Period applicable thereto, such Borrower agrees to pay to the Lenders the
amounts described in Section 3.3(f). In addition, and without limiting the
generality of the foregoing, the Borrowers shall pay to the Agent, for the
account of the Lenders, on demand, (a) the amount by which the Aggregate
Revolver Outstandings to or for the accounts of all Borrowers exceed the
Maximum Revolver Amount, and (b) the amount by which the Aggregate Revolver
Outstandings to or for the account of a Borrower exceed the Individual Maximum
Revolver Amount with respect to such Borrower.
4.2 Capital Expenditure Loans. The Borrowers shall repay
the principal amount of each Capital Expenditure Loan in consecutive monthly
installments commencing on the first day of the calendar month immediately
succeeding the calendar month in which such Capital Expenditure Loan was made,
and continuing on the first day of each calendar month thereafter, until the
earlier of payment in full of such Capital Expenditure Loan or the Termination
Date, with all outstanding principal and accrued
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interest on such Capital Expenditure Loan due on the Termination Date. Each
monthly installment for each Capital Expenditure Loan (other than a final
installment in the amount of the then outstanding principal balance thereof,
together with accrued interest thereon, due on the Termination Date), shall be
in a principal amount equal to (a) the original principal amount of such
Capital Expenditure Loan divided by (b) the lesser of (1) thirty-six (36) or
(2) the number of calendar months remaining prior to the Stated Termination
Date at the time such Capital Expenditure Loan is made. The Borrowers may
prepay Capital Expenditure Loans at any time. In the event that any of the
Capital Expenditure Loan Equipment that served as the basis, in whole or in
part, on which any Capital Expenditure Loan was made, shall be sold or
otherwise disposed of by the applicable Borrower (which sale or other
disposition shall be made in accordance with the terms of Section 5.11), such
Borrower shall prepay such Capital Expenditure Loan in an amount equal to the
portion of the outstanding principal amount of such Capital Expenditure Loan
allocable to the Capital Expenditure Loan Equipment to be sold or otherwise
disposed of. In the event that any such sale or other disposition shall be
made of Capital Expenditure Loan Equipment with respect to a Capital
Expenditure Loan (A) that had been paid in full prior to such sale or other
disposition, or (B) with respect to which the outstanding principal balance is
less than the proceeds of such sale or other disposition, the prepayment
described in the immediately preceding sentence (or the excess amount following
prepayment in full of a Capital Expenditure Loan with respect to which the
outstanding principal balance is less than the proceeds of the applicable sale
or other disposition) shall be applied to the Capital Expenditure Loan made
most recently prior to the date of such sale or other disposition. Any
prepayment of any Capital Expenditure Loan shall be applied to the principal
installments due under such Capital Expenditure Loan in the inverse order of
their maturity, and shall be accompanied by the payment of all accrued but
unpaid interest thereon. The Capital Expenditure Loans owing by RMC, NWR,
Hutch, Willow and RML to each Lender will be evidenced by a promissory note and
attached grid (each, a "Capital Expenditure Loan Note") in the form attached
hereto as Exhibit F, with appropriate insertions.
4.3 Termination of the Revolver Facility. The Borrowers may
terminate the Revolver Facility in whole, but not in part, upon (a) at least
five (5) Business Days' notice to the Agent and the Lenders, (b) the payment in
full of all outstanding Revolving Loans and Capital Expenditure Loans, together
with accrued interest thereon, and the cancellation of all outstanding Letters
of Credit, Interest Rate Contracts and Currency Hedging Contracts, (c) the
provision of a Supporting Letter of Credit or cash collateral in the amount of
any outstanding Acceptance, in the manner set forth in Section 2.5(j)(1), (d)
the payment of the early termination fee set forth in Section 3.11, if
applicable,
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(e) with respect to any LIBOR Loans prepaid in connection with such termination
prior to the expiration date of the Interest Period applicable thereto, the
payment of the amounts described in Section 3.3(f), and (f) the payment in full
in cash of all other Obligations, together with accrued interest thereon;
provided, that the Borrowers shall not be required to cancel all Interest Rate
Contracts and Currency Hedging Contracts pursuant to the foregoing clause (b)
in the event that (1) the Revolver Facility shall be terminated pursuant to a
refinancing of the Obligations by the Lenders or by Bank of America, or (2) all
obligations of any Borrower under such Interest Rate Contracts and Currency
Hedging Contracts shall be secured in a manner and pursuant to documentation in
form and substance satisfactory to the Agent and Bank of America.
4.4 Place and Form of Payments; Extension of Time. All
payments of principal, interest, premium, and other sums due to the Agent or
the Lenders shall be made at the Agent's address set forth in or specified
pursuant to Section 14.7. Except for proceeds received directly by the Agent,
all such payments shall be made in immediately available funds. Except as may
otherwise be provided pursuant to the terms of Section 3.3(b)(2), if any
payment of principal, interest, premium, or other sum to be made hereunder
becomes due and payable on a day other than a Business Day, the due date of
such payment shall be extended to the next succeeding Business Day and interest
thereon shall be payable at the applicable Interest Rate during such extension.
4.5 Payments as Revolving Loans. All payments of principal,
interest, reimbursement obligations in connection with Letters of Credit,
Acceptances, fees, premiums and other sums payable hereunder, including all
reimbursement for expenses pursuant to Section 14.6, may, at the option of the
Agent, in its sole discretion, subject only to the terms of this Section 4.5,
be paid from the proceeds of Revolving Loans made hereunder, whether made
following a request by a Borrower pursuant to Section 2.4 or a deemed request
as provided in this Section 4.5. Each Borrower hereby irrevocably authorizes
the Lenders to make Revolving Loans (including BABC Loans by BABC or Agent
Advances by the Agent), upon notice from the Agent as described in the next
succeeding sentence, for the purpose of paying principal, interest,
reimbursement obligations in connection with Letters of Credit or Acceptances,
fees, premiums and other sums payable hereunder, including reimbursing expenses
pursuant to Section 14.6, and agrees that all such Revolving Loans so made
shall be deemed to have been requested by it pursuant to Section 2.4, as of the
date of the aforementioned notice. The Agent may request Revolving Loans on
behalf of a Borrower as described in the immediately preceding sentence, but
notwithstanding anything to the contrary contained herein, any notice required
to be given to any Lender by the Agent in connection with any BABC Loans made
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pursuant to this Section 4.5 may be made contemporaneously with the Settlement
relating thereto.
4.6 Apportionment, Application and Reversal of Payments.
Aggregate principal and interest payments shall be apportioned ratably among
the Lenders (according to the unpaid principal balance of the Loans to which
such payments relate held by each Lender) and payments of the fees shall, as
applicable, be apportioned ratably among the Lenders. All payments received
with respect to a Borrower shall be remitted to the Agent and all such payments
not relating to principal or interest of specific Loans, or not constituting
payment of specific fees, and all proceeds of Accounts or other Collateral
received by the Agent, shall be applied, ratably, subject to the provisions of
this Agreement, first, to pay any fees, expense reimbursements or indemnities
then due to the Agent and the Lenders from such Borrower under or in connection
with this Agreement or any other Loan Document; second, to pay interest due in
respect of the BABC Loans and Agent Advances to such Borrower; third, to pay or
prepay principal of the BABC Loans and Agent Advances to such Borrower; fourth,
to pay interest due in respect of all Loans (other than the BABC Loans and
Agent Advances) to such Borrower and unpaid reimbursement obligations in
respect of Letters of Credit issued or Acceptances created for the account of
such Borrower; fifth, to pay or prepay principal of the Revolving Loans (other
than the BABC Loans and Agent Advances) to such Borrower and to pay any unpaid
reimbursement obligations in respect of Letters of Credit or Acceptances, as
applicable; sixth, to pay or prepay principal of the Capital Expenditure Loans
(other than BABC Loans) to such Borrower; seventh, to provide cash collateral
for any outstanding Letters of Credit or Acceptances; and eighth, to the
payment of any other Obligation due to any Secured Creditor by such Borrower.
Notwithstanding anything to the contrary contained in this Agreement, unless so
directed by the applicable Borrower, neither the Agent nor any Lender shall
apply any payments which it receives to any LIBOR Loan, except (a) on the
expiration date of the Interest Period applicable to any such LIBOR Loan, or
(b) in the event, and only to the extent, that there are no outstanding
Reference Rate Loans. The Agent shall distribute to each Lender promptly, and
in any event no later than the then next succeeding Settlement Date, pursuant
to the applicable wire transfer instructions set forth in Section 13.11, or
pursuant to such other instructions as such Lender may deliver to the Agent in
writing, such funds as it may be entitled to receive. If any such amount is
not so made available to any Lender, such Lender shall be entitled to recover
such amount on demand from the Agent together with interest thereon at the
Federal Funds Rate for the first three (3) days from and after the date payable
and thereafter at the Interest Rate then applicable to the Revolving Loans.
The Agent and the Lenders shall have the continuing and exclusive right to
apply
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and reverse and reapply any and all such proceeds and payments to any portion
of the Obligations.
4.7 Indemnity for Returned Payments. If after receipt of any
payment of, or proceeds applied to the payment of, all or any part of the
Obligations, the Agent or any Lender is for any reason compelled to surrender
such payment or proceeds to any Person, because such payment or application of
proceeds is invalidated, declared fraudulent, set aside, determined to be void
or voidable as a preference, impermissible set-off, or a diversion of trust
funds, or for any other reason, then the Obligations or part thereof intended
to be satisfied shall be revived and continue and this Agreement shall continue
in full force as if such payment or proceeds had not been received by the Agent
or such Lender, and the Borrowers shall be liable to pay to the Agent, and
hereby do indemnify the Agent and the Lenders and hold the Agent and the
Lenders harmless for, the amount of such payment or proceeds surrendered. The
provisions of this Section 4.7 shall be and remain effective notwithstanding
any contrary action which may have been taken by the Agent or any Lender in
reliance upon such payment or application of proceeds, and any such contrary
action so taken shall be without prejudice to the Agent's and the Lenders'
rights under this Agreement and shall be deemed to have been conditioned upon
such payment or application of proceeds having become final and irrevocable.
The provisions of this Section 4.7 shall survive the termination of this
Agreement.
4.8 Increased Capital. (a) If any Lender determines that
compliance by such Lender with any guideline or request from any central bank
or other Public Authority (whether or not having the force of law) affects or
would affect the amount of capital required or expected to be maintained by
such Lender, or any corporation controlling such Lender, and such Lender
reasonably determines that the amount of such capital is increased by or based
upon its Commitment or its making or maintaining Loans hereunder, or its
commitment to participate (as provided for in Section 2.5(f)) in any credit
support or enhancement provided through the Agent in connection with the
issuance of any Letter of Credit or creation of any Acceptance, or to otherwise
extend credit to the Borrowers hereunder, and other commitments of this type,
then, upon demand by such Lender, the Borrowers agree to immediately pay to
such Lender, from time to time as specified by such Lender, additional amounts
sufficient to compensate such Lender in the light of such circumstances, to the
extent that such Lender reasonably determines such increase in capital to be
allocable to such Lender's Commitment or its commitment to participate (as
provided for in Section 2.5(f)) in any credit support or enhancement provided
through the Agent in connection with Letters of Credit or Acceptances. A
certificate as to the amount of such increased cost, submitted to the Borrowers
and the
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Agent by the applicable Lender shall, absent manifest error, be conclusive and
binding on the Borrowers for all purposes.
(b) In the event that the sum of the amounts paid by the
Borrowers to any Lender pursuant to Section 4.8(a) shall exceed $1,000,000,
such Lender shall, at the request of the Borrowers, assign its Commitment, the
Loans owing to it and its rights and obligations with respect to Letters of
Credit and Acceptances, in accordance with the terms of Section 12.3, to a
commercial bank or other financial institution identified by the Borrowers and
acceptable to the Agent. No Lender shall be required to make any assignment
pursuant to the immediately preceding sentence unless (1) such assignment shall
become effective within one hundred twenty (120) days following the date on
which the sum of the amounts paid by the Borrowers to such Lender pursuant to
Section 4.8(a) shall have exceeded $1,000,000, and (2) the Borrowers shall have
given the Agent and the Lenders written notification of such proposed
assignment at least ninety (90) days prior thereto.
4.9 Register; Agent's and Lenders' Books and Records; Monthly
Statements. Each Borrower agrees that the Register and each Lender's books and
records showing the Obligations and the transactions pursuant to this Agreement
and the other Loan Documents shall be admissible in any action or proceeding
arising therefrom, and shall constitute prima facie proof thereof, irrespective
of whether any Obligation is also evidenced by a promissory note or other
instrument. The Agent will provide to the Borrowers a monthly statement of
Loans, payments, and other transactions pursuant to this Agreement. Such
statement shall be deemed correct, accurate, and binding on the Borrowers and
an account stated (except for reversals and reapplications of payments made as
provided in Sections 4.6 and 4.7 and corrections of errors discovered by the
Agent), unless the Borrowers notify the Agent in writing to the contrary within
thirty (30) days after such statement is rendered. In the event a timely
written notice of objections is given by the Borrowers, only the items to which
exception is expressly made will be considered to be disputed by the Borrowers.
ARTICLE 5
COLLATERAL
5.1 Grant of Security Interest. (a) Collateral. As security
for all Obligations, each Borrower hereby reaffirms its grant to the Agent,
pursuant to the Original Agreement, for the ratable benefit of the Secured
Creditors, of a continuing security interest in, lien on, assignment of, and
right of set-off against all of the following property of such Borrower,
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whether now owned or existing or hereafter acquired or arising and regardless
of where located:
(1) all Accounts, contract rights, letters of credit,
Assigned Contracts, chattel paper, instruments, notes, documents, and
documents of title;
(2) General Intangibles;
(3) Inventory;
(4) Equipment;
(5) all moneys, Securities, and other property of any kind of
such Borrower in the possession or under the control of the Agent or
any Lender, any assignee of or participant in the Obligations, or a
bailee of any such party or such party's affiliates;
(6) all of such Borrower's deposit accounts, credits, and
balances with and other claims against the Agent or any Lender or any
of its affiliates or any other financial institution with which such
Borrower maintains deposits;
(7) all books, records and other property relating to or
referring to any of the foregoing, including, without limitation, all
books, records, ledger cards, data processing records, computer
software (subject to any restrictions contained in any licensing
agreement with respect thereto) and other property and General
Intangibles at any time evidencing or relating to any of the
foregoing; and
(8) all accessions to, substitutions for and replacements,
products and proceeds of any of the foregoing, including, but not
limited to, proceeds of any insurance policies, claims against third
parties, and condemnation or requisition payments with respect to all
or any of the foregoing.
All of the foregoing, together with any other property of any Borrower,
including the Real Estate, in which the Agent shall at any time be granted a
Lien, is hereinafter collectively referred to as the "Collateral."
Notwithstanding anything contained in this Agreement to the contrary, the
Agent's Liens on Equipment (and related property described in the foregoing
clauses (7) and (8)), shall secure Obligations only to the extent that such
Liens would constitute "Permitted Liens" under the Senior Subordinated Note
Indenture.
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(b) Real Estate. Each Borrower has executed and delivered,
or shall, on the Restatement Closing Date execute and deliver, to the Agent
such Mortgages and such other agreements which purport to grant to the Agent,
for the ratable benefit of the Secured Creditors, continuing and perfected
mortgage liens on such Borrower's Real Estate. Prior to the Triggering Date,
such Mortgages and other agreements shall be held by the Agent, shall not be
recorded and shall not be effective to grant a Lien on any Real Estate
described therein or otherwise be of any force or effect. From and after the
Triggering Date, such Mortgages and other agreements shall be effective and may
be recorded by the Agent. In addition, promptly after the Triggering Date, the
Borrowers shall provide to the Agent title insurance with respect to the Real
Estate covered by such Mortgages in form, substance and amount satisfactory to
the Agent.
(c) General Provisions Regarding Collateral. All of the
Obligations shall be secured by all of the Collateral. The Agent may, subject
to the provisions of Article 12 and 13, in its sole discretion, as limited by
the terms of this Agreement, (1) exchange, waive, or release any of the
Collateral, (2) following the occurrence of any Event of Default, apply
Collateral and direct the order or manner of sale thereof as the Agent may
determine, and (3) settle, compromise, collect, or otherwise liquidate any
Collateral in any manner, all without affecting the Obligations or the Agent's
or any Lender's right to take any other action with respect to any other
Collateral.
5.2 Perfection and Protection of Security Interest. Each
Borrower shall, at its expense, subject to the terms of Section 5.1, perform
all steps requested by the Agent at any time to perfect, maintain, protect, and
enforce the Agent's Liens, including, without limitation: (a) executing and
recording of the Mortgages, the Patent Agreements, and the Trademark Agreements
and executing and filing financing or continuation statements, and amendments
thereof, in form and substance satisfactory to the Agent; (b) delivering to the
Agent the original certificates of title for motor vehicles with the Agent's
security interest properly endorsed thereon; (c) delivering to the Agent the
originals of all instruments, documents, and chattel paper, and all other
Collateral of which the Agent determines it should have physical possession in
order to perfect and protect the Agent's security interest therein, duly
endorsed or assigned to the Agent without restriction; (d) delivering to the
Agent warehouse receipts covering any portion of the Collateral located in
warehouses and for which warehouse receipts are issued; (e) following the
occurrence of any Event of Default, transferring Inventory to warehouses
designated by the Agent; (f) placing notations on such Borrower's books of
account to disclose the Agent's security interest; (g) delivering to the Agent
all letters of credit on which such Borrower is named beneficiary; and (h)
taking such other steps as
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are deemed necessary or desirable by the Agent to maintain and protect the
Agent's Liens. To the extent permitted by applicable law, the Agent may file,
without the applicable Borrower's signature, one or more financing statements
disclosing the Agent's Liens. Each Borrower agrees that a carbon,
photographic, photostatic, or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement.
If any Collateral is at any time in the possession or control
of any warehouseman, bailee or any of a Borrower's agents or processors, then
such Borrower shall notify the Agent thereof and shall notify such Person of
the Agent's security interest in such Collateral and, upon the Agent's request,
instruct such Person to hold all such Collateral for the Agent's account
subject to the Agent's instructions. If at any time any Collateral (other than
(a) Collateral in transit at such time, or (b) additional Collateral not in
excess of $100,000 in aggregate value at such time) is located on any premises
that are not owned by a Borrower, then the Borrowers shall obtain written
waivers, in form and substance satisfactory to the Agent, of all present and
future Liens to which the owner or lessor or any mortgagee of such premises may
be entitled to assert against the Collateral.
From time to time, each Borrower shall, upon the Agent's
request, execute and deliver confirmatory written instruments pledging to the
Agent, for the ratable benefit of the Secured Creditors, the Collateral, but
any Borrower's failure to do so shall not affect or limit the Agent's security
interest or the Agent's other rights in and to the Collateral. So long as this
Agreement is in effect and until all Obligations have been fully satisfied, the
Agent's Liens shall continue in full force and effect in all Collateral
(whether or not deemed eligible for the purpose of calculating the Maximum
Revolver Amount or any Individual Maximum Revolver Amount, or as the basis for
any advance, loan, extension of credit, or other financial accommodation).
5.3 Location of Collateral. Each Borrower represents and
warrants to the Agent and the Lenders that: (a) Schedule 5.3 contains a correct
and complete list of each such Borrower's chief executive office, the location
of its books and records, the locations of the Collateral, and the locations of
all of its other places of business; and (b) Schedule 5.3 correctly identifies
any of such facilities and locations that are not owned by such Borrower and
sets forth the names of the owners and lessors or sublessors of, and, to the
best of such Borrower's knowledge, the holders of any mortgages on, such
facilities and locations. Each Borrower covenants and agrees that it will not
(1) maintain any Collateral at any location other than those listed on Schedule
5.3 with respect to such Borrower, (2) otherwise change or add to any of such
locations, or (3) change the location of its chief executive office from the
location identified in
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Schedule 5.3, unless it gives the Agent at least thirty (30) days' prior
written notice thereof and executes any and all financing statements and other
documents that the Agent requests in connection therewith.
5.4 Title to, Liens on, and Sale and Use of Collateral. Each
Borrower represents and warrants to the Agent and the Lenders and agrees with
the Agent and the Lenders that: (a) all of such Borrower's Collateral and Real
Estate is and will continue to be owned by such Borrower free and clear of all
Liens whatsoever, except for Permitted Liens; (b) the Agent's Liens in the
Collateral will not be subject to any prior Lien except for those Permitted
Liens, if any, specifically identified on Schedule 7.2; (c) such Borrower will
use, store, and maintain the Collateral with all reasonable care and will use
the Collateral for lawful purposes only; and (d) such Borrower will not,
without the Agent's prior written approval, sell, or dispose of or permit the
sale or disposition of any Collateral, except for (1) Accounts of RMC, Hutch,
NWR and Willow transferred to RRC pursuant to the terms of the Receivables
Purchase Agreement, (2) sales of Inventory in the ordinary course of business,
and (3) dispositions of Equipment permitted by Section 5.11. The inclusion of
proceeds in the Collateral shall not be deemed to constitute the Agent's or any
Lender's consent to any sale or other disposition of the Collateral except as
expressly permitted herein.
5.5 Appraisals. The Borrowers shall provide the Agent, no
later than December 31, 1995, with appraisals of all of the Equipment from an
appraiser, and prepared on a basis, satisfactory to the Agent. Whenever a
Default or Event of Default exists, and at such other times not more frequently
than once a year as the Agent requests, the Borrowers shall, at their expense
and upon the Agent's request, provide the Agent with additional appraisals or
updates thereof of any or all of the Collateral from an appraiser, and prepared
on a basis, satisfactory to the Agent.
5.6 Access and Examination; Confidentiality. (a) The Agent,
accompanied by any Lender which so elects, may at all reasonable times (and at
any time when a Default or Event of Default exists) have access to, examine,
audit, make extracts from or copies of and inspect any or all of each
Borrower's records, files, and books of account and the Collateral, and discuss
each Borrower's affairs with such Borrower's officers and management. Prior to
the Triggering Date such audits shall be limited to four during each
twelve-month period. Each Borrower will deliver to the Agent any instrument
necessary for the Agent to obtain records from any service bureau maintaining
records for such Borrower. The Agent may, and at the direction of the Majority
Lenders shall, at any time when a Default or Event of Default exists, and at
the Borrowers' expense, make copies of all
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of each Borrower's books and records, or require the Borrowers to deliver such
copies to the Agent. The Agent may, without expense to the Agent, use such of
the Borrowers' respective personnel, supplies, and premises as may be
reasonably necessary for maintaining or enforcing the Agent's Liens.
(b) The Agent and each Lender agree to take normal and
reasonable precautions and exercise due care to maintain the confidentiality of
all information identified as "confidential" or "secret" by any Borrower and
provided to the Agent or such Lender by or on behalf of such Borrower, under
this Agreement or any other Loan Document, and neither the Agent, nor such
Lender nor any of their respective affiliates shall use any such information
other than in connection with or in enforcement of this Agreement and the other
Loan Documents, except to the extent that such information (1) was or becomes
generally available to the public other than as a result of disclosure by the
Agent or such Lender, or (2) was or becomes available on a nonconfidential
basis from a source other than such Borrower, provided that such source is not
bound by a confidentiality agreement with such Borrower known to the Agent or
such Lender; provided, however, that the Agent and any Lender may disclose such
information (A) at the request or pursuant to any requirement of any Public
Authority to which the Agent or such Lender is subject or in connection with an
examination of the Agent or such Lender by any such Public Authority; (B)
pursuant to subpoena or other court process; (C) when required to do so in
accordance with the provisions of any applicable requirement of law; (D) to the
extent reasonably required in connection with any litigation or proceeding to
which the Agent, any Lender or their respective affiliates may be party; (E) to
the extent reasonably required in connection with the exercise of any remedy
hereunder or under any other Loan Document; (F) to the Agent's or such Lender's
independent auditors, accountants, attorneys and other professional advisors;
(G) to any affiliate of the Agent or such Lender, or to any Participating
Lender or assignee under any Assignment and Acceptance, actual or potential,
provided that such affiliate, Participating Lender or assignee agrees to keep
such information confidential to the same extent required of the Agent and the
Lenders hereunder; and (H) as expressly permitted under the terms of any other
document or agreement regarding confidentiality to which such Borrower is party
or is deemed party with the Agent or such Lender; provided, further, that in
the case of disclosures pursuant to the foregoing clauses (A) through (D), the
Agent or such Lender shall notify the applicable Borrower of the disclosure as
promptly as is reasonably practicable and cooperate with such Borrower in
protecting the confidential nature of the information which must be so
disclosed.
5.7 Collateral Reporting. In the event that the Triggering
Date has not yet occurred, the Borrowers will provide
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the Agent, on a weekly basis, with a schedule of Accounts created since the
last such schedule, together with, if requested, copies of invoices therefor,
in form and substance satisfactory to the Agent; provided, that in the event
that the Triggering Date shall have occurred, such schedule and, if requested
by the Agent, copies, shall be provided to the Agent on a daily basis. In
addition, the Borrowers will provide the Agent with the following documents at
the following times in form satisfactory to the Agent: (a) upon request,
copies of customer statements and credit memos, remittance advices and reports,
and copies of deposit slips; (b) upon request, copies of shipping and delivery
documents; (c) monthly Inventory reports by location and category; (d) monthly
perpetual Inventory reports; (e) monthly agings of accounts receivable and
accounts payable; (f) upon request, copies of purchase orders, invoices and
delivery documents for Inventory and Equipment acquired by any Borrower; (g)
such other reports as to the Collateral as the Agent or any Lender shall
request from time to time; and (h) with the delivery of each of the foregoing,
a certificate of an officer of each Borrower certifying as to the accuracy and
completeness of the foregoing. If any of any Borrower's records or reports of
the Collateral are prepared by an accounting service or other agent, each
Borrower hereby authorizes such service or agent to deliver such records,
reports, and related documents to the Agent and the Lenders. Any amounts
contained in reports provided by or with respect to RML pursuant to this
Section 5.7 may be expressed in Canadian dollars (provided they are so
identified in such reports); provided, that all amounts contained in any
Borrowing Base Certificate shall be expressed in Dollars.
5.8 Accounts. (a) Each Borrower hereby represents and
warrants to the Agent and the Lenders that: (1) each existing Account
represents, and each future Account will represent, a bona fide sale or lease
and delivery of goods by such Borrower (or, in the case of Accounts of RRC,
RMC, Hutch, NWR or Willow, as applicable), or rendition of services by such
Borrower (or, in the case of Accounts of RRC, RMC, Hutch, NWR or Willow, as
applicable), in the ordinary course of such Borrower's business; (2) each
existing Account is, and each future Account will be, for a liquidated amount
payable by the Account Debtor thereon on the terms set forth in the invoice
therefor or in the schedule thereof delivered to the Agent, without any offset,
deduction, defense, or counterclaim known to such Borrower and not disclosed to
the Agent and the Lenders pursuant to this Agreement; (3) no payment will be
received with respect to any Account, and no credit, discount, or extension, or
agreement therefor will be granted on any Account, except as reported to the
Agent and the Lenders in accordance with this Agreement; (4) each copy of an
invoice delivered to the Agent by a Borrower will be a genuine copy of the
original invoice sent to the Account Debtor named therein; and (5) all goods
described in each invoice will have been delivered to the Account Debtor and
all services
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of the applicable Borrower described in each invoice will have been performed.
(b) No Borrower shall re-date any invoice or sale or make
sales on extended dating beyond that customary in such Borrower's business or
extend or modify any Account. If any Borrower becomes aware of any matter
which may materially affect the collectability of any Account, including
information regarding the Account Debtor's creditworthiness, such Borrower will
promptly so advise the Agent.
(c) No Borrower shall accept any note or other instrument
(except a check or other instrument for the immediate payment of money) with
respect to any Account without the Agent's written consent. If the Agent
consents to the acceptance of any such instrument, it shall be considered as
evidence of the Account and not payment thereof and the applicable Borrower
will promptly deliver such instrument to the Agent appropriately endorsed,
regardless of the form of presentment, demand, notice of dishonor, protest, and
notice of protest with respect thereto.
(d) Each Borrower shall notify the Agent promptly of all
disputes and claims with Account Debtors and settle or adjust them at no
expense to the Agent or any Lender, but no discount, credit or allowance shall
be granted to any Account Debtor without the Agent's consent, except for
discounts, credits and allowances made or given with respect to Accounts in the
ordinary course of the applicable Borrower's business when no Event of Default
exists hereunder. Each Borrower shall send the Agent a copy of each credit
memorandum in excess of (1) $100,000 in the case of RMC, and $50,000 in the
case of each other Borrower, as soon as issued. The Agent may, and at the
direction of the Majority Lenders shall, at all times when an Event of Default
exists hereunder, settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which the Agent or the Majority Lenders, as
applicable, shall consider advisable and, in all cases, the Agent will credit
the applicable Borrower's loan account with only the net amounts received by
the Agent in payment of any Accounts.
(e) If an Account Debtor returns any Inventory to any
Borrower when no Event of Default exists, then such Borrower shall promptly
determine the reason for such return and shall issue a credit memorandum to the
Account Debtor in the appropriate amount. Each Borrower shall immediately
report to the Agent any return involving an amount in excess of (1) $100,000 in
the case of RMC, and (2) $50,000 in the case of each other Borrower. Each such
report shall indicate the reasons for the returns and the locations and
condition of the returned Inventory. In the event any Account Debtor returns
Inventory to any Borrower when an Event of Default exists, such Borrower shall:
(1) hold the returned Inventory in trust for the Agent;
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(2) segregate all returned Inventory from all of its other property; (3)
dispose of the returned Inventory solely according to the Agent's written
instructions; and (4) not issue any credits or allowances with respect thereto
without the Agent's prior written consent. All returned Inventory shall be
subject to the Agent's Liens thereon. Whenever any Inventory is returned, the
related Account shall be deemed ineligible to the extent of the return and the
Maximum Revolver Amount and the applicable Individual Maximum Revolver Amount
shall be adjusted accordingly.
5.9 Collection of Accounts; Payments. (a) Except with
respect to sales generated pursuant to the Borrowers' telemarketing program and
repaid by consumer credit cards ("Telemarketing Sales"), the proceeds of which
shall be collected, processed and remitted to the Agent on a basis satisfactory
to the Agent, each Borrower shall establish a lock-box service for collections
of its Accounts at a bank or banks mutually acceptable to the Agent and such
Borrower and pursuant to documentation satisfactory to the Agent. Each
Borrower shall instruct all of its Account Debtors to make all payments
directly to the address or addresses established for such service, other than
those relating to Telemarketing Sales. If, notwithstanding such instructions,
any Borrower receives any proceeds of Accounts, it shall receive such payments
as the Agent's and the Lenders' trustee, and shall immediately deliver such
payments to the Agent in their original form (other than in the case of
payments received in the form of foreign currency, which shall be exchanged by
the applicable Borrower and immediately remitted to the Agent in Dollars) duly
endorsed in blank or deposit them into a Payment Account, as the Agent may
direct. Notwithstanding the foregoing, so long as no Default or Event of
Default shall have occurred and be continuing, RML shall be entitled to retain
all proceeds of its Accounts received in its lock-box or received directly by
it, to fund its immediate working capital needs, and shall remit to the Agent
all proceeds of its Accounts in excess of such immediate working capital needs
no less frequently than once every two weeks. All collections received in any
such lock-box or Payment Account or directly by a Borrower, the Agent or any
Lender, and all funds in any Payment Account or other account to which such
collections are deposited, shall be the sole property of the Agent and the
Lenders and subject to the Agent's and the Lenders' sole control. The Agent or
the Agent's designee may (1) at any time upon the occurrence and during the
continuance of an Event of Default, notify obligors that the Accounts have been
assigned to the Agent and of the Agent's security interest therein, and (2)
collect Accounts directly and charge the collection costs and expenses to the
applicable Borrower's loan account as a Revolving Loan as described in Section
4.5. At the Agent's request, each Borrower shall execute and deliver to the
Agent such documents as the Agent shall require to grant the Agent access to
any post office
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box in which collections of Accounts are received. No Borrower shall open,
establish or maintain any depository account without first having delivered to
the Agent a duly executed and delivered restricted account agreement
satisfactory to the Agent.
(b) If sales of Inventory are made for cash, the applicable
Borrower shall within two (2) Business Days, deliver to the Agent or deposit
into a Payment Account the identical checks, cash, or other forms of payment
which such Borrower receives, other than minor cash proceeds from sales of
Inventory which are deposited in RMC's petty cash account in accordance with
past practices.
(c) All payments received by the Agent on account of Accounts
or as proceeds of other Collateral will be the Agent's sole property and will
be credited to the applicable Borrower's loan account (conditional upon final
collection) after allowing one (1) Business Day for collection; provided, that
for purposes of determining Availability or Individual Availability and for
purposes of calculating the unused line fee pursuant to Section 3.8, all such
payments shall be credited to the applicable Borrower's loan account
immediately upon receipt.
5.10 Inventory. Each Borrower represents and warrants to the
Agent and the Lenders and agrees with the Agent and the Lenders that all of the
Inventory, other than supplies and scrap, is and will be, following the
completion of necessary finishing and processing functions with respect to raw
materials and work in process, held for sale or lease, or to be furnished in
connection with the rendition of services, in the ordinary course of such
Borrower's business, and is and will be fit for such purposes. Each Borrower
will keep such Inventory in good and marketable condition, at its own expense.
No Borrower will, without prior written notice to the Agent, acquire or accept
any Inventory on consignment or approval; provided, that the Borrowers may
acquire or accept Inventory on consignment having an aggregate value not in
excess of $4,000,000 at any time with respect to all of the Borrowers; and
provided, further, that all Inventory accepted by a Borrower on consignment
shall be clearly identified as such and segregated from Inventory which is not
on consignment. Each Borrower agrees that all Inventory will be produced in
accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all rules, regulations, and orders thereunder. Each Borrower will maintain a
perpetual inventory reporting system at all times, and will conduct cycle
counts in accordance with the requirements of its independent certified public
accountants. After the occurrence and during the continuance of any Event of
Default, and in any event from and after the Triggering Date, each Borrower
will conduct a physical count of its Inventory at such times as the Agent
requests, and shall promptly supply the Lenders with a copy of such count
accompanied by a report of the value of such inventory
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(determined on a first-in-first-out basis and valued at the lower of cost or
market value). No Borrower will, without the Agent's written consent, sell any
Inventory on a bill-and-hold, guaranteed sale, sale and return, sale on
approval, consignment, or other repurchase or return basis, except for
Telemarketing Sales made by RMC on a repurchase or return basis, provided, that
the sum of the outstanding face amounts of the Accounts generated pursuant to
such Telemarketing Sales shall not exceed $1,000,000 at any time.
5.11 Equipment. Each Borrower represents and warrants to the
Agent and the Lenders and agrees with the Agent and the Lenders that all of the
Equipment is and will be used or held for use in such Borrower's business, and
is and will be fit for such purposes. Each Borrower shall keep and maintain
its Equipment in good operating condition and repair (ordinary wear and tear
excepted) and shall make all necessary replacements thereof. Each Borrower
shall promptly inform the Agent of any material additions to or deletions from
its Equipment. No Borrower shall permit any Equipment to become a fixture to
real property or an accession to other personal property, unless the Agent has
a valid, perfected, and first priority Lien in such real or personal property.
No Borrower will, without the Agent's prior written consent, alter or remove
any identifying symbol or number on its Equipment. No Borrower shall, without
the Agent's prior written consent, sell, lease as a lessor, or otherwise
dispose of any of the Equipment; provided, however, that the Borrowers may
dispose of obsolete or unusable Equipment having an orderly liquidation value
no greater $150,000 in the aggregate in any Fiscal Year, without the Agent's
consent, subject to the conditions set forth below. In the event that any
Capital Expenditure Loan Equipment is sold, transferred or otherwise disposed
of, the applicable Borrower shall deliver all of the cash proceeds of any such
sale, transfer or disposition to the Agent, in prepayment of the relevant
Capital Expenditure Loan in accordance with Section 4.2; provided, that the
amount of such prepayment so required to be made shall not be limited to the
amount of such proceeds. In the event any of the other Equipment is sold,
transferred or otherwise disposed of, (1) if such sale, transfer or disposition
is effected without replacement of such Equipment, or such Equipment is
replaced by Equipment leased by the applicable Borrower or by Equipment
purchased by such Borrower subject to a Lien, then the applicable Borrower
shall deliver all of the cash proceeds of any such sale, transfer or
disposition to the Agent, which proceeds shall be applied to the repayment of
the Obligations and without premium or penalty or (2) if such sale, transfer or
disposition is made in connection with the purchase by the applicable Borrower
of replacement Equipment (other than Equipment subject to a Lien), then such
Borrower shall use the proceeds of such sale, transfer or disposition to
finance the purchase by such Borrower of such replacement Equipment and shall
deliver to the Agent written
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evidence of the use of the proceeds for such purchase. All replacement
Equipment purchased by a Borrower shall be free and clear of all Liens, except
for Permitted Liens (other than such Liens upon Equipment granted in connection
with the acquisition of such Equipment by the applicable Borrower).
5.12 Assigned Contracts. Each Borrower shall fully perform
all of its obligations under each of its Assigned Contracts, and shall enforce
all of its rights and remedies thereunder as it deems appropriate in its
business judgment; provided, however, that no Borrower shall take any action or
fail to take any action with respect to the Assigned Contracts which would
result in a waiver or other loss of any material right or remedy of such
Borrower thereunder. Without limiting the generality of the foregoing, each
Borrower shall take all action necessary or appropriate to permit, and shall
not take any action which would have any adverse effect upon, the full
enforcement of all indemnification rights under its Assigned Contracts. No
Borrower shall, without the prior written consent of the Majority Lenders,
modify, amend, supplement, compromise, satisfy, release, or discharge any of
the Assigned Contracts, any collateral securing the same, any Person liable
directly or indirectly with respect thereto, or any agreement relating to any
of the Assigned Contracts or the collateral therefor. Each Borrower shall
notify the Agent in writing, promptly after such Borrower becomes aware
thereof, of any event or fact which could give rise to any claim by it in
excess of $150,000 for indemnification under any of its Assigned Contracts, and
shall diligently pursue such right and report to the Agent on all further
developments with respect thereto. Each Borrower shall remit directly to the
Agent for application to the Obligations in such order as the Majority Lenders
shall determine and without premium or penalty, all amounts received by such
Borrower as indemnification or otherwise pursuant to the Assigned Contracts.
If any Borrower shall fail after the Agent's demand to pursue diligently any
right under the Assigned Contracts, or if an Event of Default exists, then the
Agent may, and at the direction of the Majority Lenders shall, directly enforce
such right in its own or such Borrower's name and may enter into such
settlements or other agreements with respect thereto as the Agent or the
Majority Lenders, as applicable, shall determine and without premium or
penalty. In any suit, proceeding or action brought by the Agent under any
Assigned Contract for any sum owing thereunder or to enforce any provision
thereof, the Borrowers shall indemnify and hold the Agent harmless from and
against all expense, loss or damage suffered by reason of any defense, set-off,
counterclaims, recoupment, or reduction of liability whatsoever of the obligor
thereunder arising out of a breach by the applicable Borrower of any obligation
thereunder or arising out of any other agreement, indebtedness or liability at
any time owing from such Borrower to or in favor of such obligor or its
successors. All such obligations of the applicable Borrower shall be and
remain
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enforceable only against such Borrower and shall not be enforceable against the
Agent. Notwithstanding any provision hereof to the contrary, each Borrower
shall at all times remain liable to observe and perform all of its duties and
obligations under its Assigned Contracts, and the Agent's or any Lender's
exercise of any of their respective rights with respect to the Collateral shall
not release such Borrower from any of such duties and obligations. Neither the
Agent nor any Lender shall be obligated to perform or fulfill any of any
Borrower's duties or obligations under the Assigned Contracts or to make any
payment thereunder, or to make any inquiry as to the nature or sufficiency of
any payment or property received by it thereunder or the sufficiency of
performance by any party thereunder, or to present or file any claim, or to
take any action to collect or enforce any performance, any payment of any
amounts, or any delivery of any property.
5.13 Documents, Instruments, and Chattel Paper. Each
Borrower represents and warrants to the Agent and the Lenders and agrees with
the Agent and the Lenders that (a) all documents, instruments, and chattel
paper describing, evidencing, or constituting Collateral, and all signatures
and endorsements thereon, are and will be complete, valid, and genuine, and (b)
all goods evidenced by such documents, instruments, and chattel paper are and
will be owned by such Borrower free and clear of all Liens other than Permitted
Liens; provided, however, that such representation and warranty contained in
the foregoing clause (a) with respect to any document or instrument received in
connection with an Account is made to the best of such Borrower's knowledge.
5.14 Right to Cure. The Agent may, in its discretion and at
any time, and shall, at the direction of the Majority Lenders, for the
Borrowers' account and at the Borrowers' expense, pay any amount or do any act
required of any Borrower hereunder or requested by the Agent to preserve,
protect, maintain or enforce the Obligations, the Collateral or the Agent's
Liens therein, and which such Borrower fails to pay or do, including, without
limitation, payment of any judgment against any Borrower, any insurance
premium, any warehouse charge, any finishing or processing charge, any
landlord's claim, and any other Lien upon or with respect to the Collateral.
All payments that the Agent makes under this Section 5.14 and all out-of-pocket
costs and expenses that the Agent pays or incurs in connection with any action
taken by it hereunder shall be charged to the applicable Borrower's loan
account as a Revolving Loan as described in Section 4.5. Any payment made or
other action taken by the Agent under this Section 5.14 shall be without
prejudice to any right to assert an Event of Default hereunder and to proceed
thereafter as herein provided.
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5.15 Power of Attorney. Each Borrower hereby appoints the
Agent and the Agent's designees as such Borrower's attorney, with power: (a)
to endorse such Borrower's name on any checks, notes, acceptances, money
orders, or other forms of payment or security that come into the Agent's or any
Lender's possession; (b) to sign such Borrower's name on any invoice, bill of
lading, warehouse receipt or other document of title relating to any
Collateral, on drafts against customers, on assignments of Accounts, on notices
of assignment, financing statements and other public records, on verifications
of Accounts and on notices to Account Debtors; (c) to notify the post office
authorities, when an Event of Default exists, to change the address for
delivery of such Borrower's mail to an address designated by the Agent and to
receive, open and dispose of all mail addressed to such Borrower; (d) to send
requests for verification of accounts to customers or account debtors; (e) to
clear Inventory, the purchase of which was financed with Letters of Credit or
Acceptances, through customs in such Borrower's name, the Agent's name or the
name of the Agent's designee, and to sign and deliver to customs officials
powers of attorney in such Borrower's name for such purpose; and (f) to do all
things necessary to carry out this Agreement. Each Borrower ratifies and
approves all acts of the Agent and the Agent's designee as such attorney. None
of the Lenders or the Agent nor the attorneys will be liable for any acts or
omissions or for any error of judgment or mistake of fact or law. This power,
being coupled with an interest, is irrevocable until this Agreement has been
terminated and the Obligations have been fully satisfied.
5.16 The Agent's and Lenders' Rights, Duties and
Liabilities. Each Borrower assumes all responsibility and liability arising
from or relating to the use, sale or other disposition of the Collateral.
Neither the Agent, nor any Lender, nor any of their respective officers,
directors, employees or agents shall be liable or responsible in any way for
the safekeeping of any of the Collateral, or for any act or failure to act with
respect to the Collateral, or for any loss or damage thereto, or for any
diminution in the value thereof, or for any act of default of any warehouseman,
carrier, forwarding agency or other Person whomsoever, all of which shall be at
the Borrowers' sole risk; provided, however, that the Agent shall be
responsible for the safekeeping of Collateral consisting of certificates
representing shares of capital stock pledged and delivered to the Agent by any
Borrower. The Obligations shall not be affected by any failure of the Agent or
any Lender to take any steps to perfect the Agent's Liens or to collect or
realize upon the Collateral, nor shall loss of or damage to the Collateral
release any Borrower from any of the Obligations. The Agent may, and at the
direction of the Majority Lenders shall, without notice to or consent from any
Borrower, sue upon or otherwise collect, extend the time for payment of, modify
or amend the terms of, compromise or settle for cash, credit, or
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otherwise upon any terms, grant other indulgences, extensions, renewals,
compositions, or releases, and take or omit to take any other action with
respect to the Collateral, any security therefor, any agreement relating
thereto, any insurance applicable thereto, or any Person liable directly or
indirectly in connection with any of the foregoing, without discharging or
otherwise affecting the liability of any Borrower for the Obligations or under
this Agreement or any other agreement now or hereafter existing between the
Agent and/or any Lender and any Borrower.
ARTICLE 6
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
6.1 Books and Records. Each Borrower shall maintain, at all
times, correct and complete books, records and accounts in which complete,
correct and timely entries are made of its transactions in accordance with GAAP
applied consistently with the audited Financial Statements required to be
delivered pursuant to Section 6.2(a). Each Borrower shall, by means of
appropriate entries, reflect in such accounts and in all Financial Statements
proper liabilities and reserves for all taxes and proper provision for
depreciation and amortization of property and bad debts, all in accordance with
GAAP. Each Borrower shall maintain at all times books and records pertaining
to the Collateral in such detail, form and scope as the Agent or any Lender
shall reasonably require, including, but not limited to, records of (a) all
payments received and all credits and extensions granted with respect to the
Accounts; (b) the return, rejections, repossession, stoppage in transit, loss,
damage, or destruction of any Inventory; and (c) all other dealings affecting
the Collateral.
6.2 Financial Information. The Borrowers shall promptly
furnish or cause to be furnished, to the Agent and the Lenders, all such
financial information as the Agent or any Lender shall reasonably request, and
notify its auditors and accountants that the Agent, on behalf of the Lenders,
is authorized to obtain such information directly from them. Without limiting
the foregoing, the Borrowers will furnish or cause to be furnished to the Agent
and the Lenders, in such detail as the Agent or the Lenders shall request, the
following:
(a) Consolidated audited balance sheets, statements of income
and expense, cash flows and stockholders equity, as soon as available,
but in any event not later than (1) 120 days after the close of each
Fiscal Year, for such Fiscal Year, for the Parent and its consolidated
Subsidiaries, and for RMC and its consolidated Subsidiaries (together,
in each case, with
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consolidating schedules supporting the computations contained therein
in a form reasonably satisfactory to the Agent), and (2) June 30 of
each Fiscal Year, for the then immediately preceding Fiscal Year, for
Hutch, NWR, Willow and RRC and their respective consolidated
Subsidiaries; in any such case together with the accompanying notes
thereto, setting forth in such case in comparative form figures for
the previous Fiscal Year, all in reasonable detail, fairly presenting
the financial position and the results of operations of the Parent and
its Subsidiaries or Borrowers and their consolidated Subsidiaries, as
applicable, as at the date thereof and for the Fiscal Year then ended,
and prepared in accordance with GAAP. All such statements described
in this Section 6.2(a) shall be examined in accordance with generally
accepted auditing standards by and accompanied by a report thereon
unqualified as to scope of independent certified public accountants
selected by the Parent and the Borrowers and reasonably satisfactory
to the Agent. The Parent and the Borrowers, simultaneously with
retaining such independent public accountants to conduct such annual
audit, shall send a letter to such accountants, with a copy to the
Agent and the Lenders, notifying such accountants that one of the
primary purposes for retaining such accountants' services and having
audited financial statements prepared by them is for use by the Agent
and the Lenders.
(b) As soon as available, but in any event not later than the
end of the next succeeding calendar month, consolidated unaudited
balance sheets and statements of income and expense, as at the end of
each fiscal month, for the Parent and its consolidated Subsidiaries
(together, in each case, with consolidating schedules supporting the
computations contained therein in a form reasonably satisfactory to
the Agent), and individual statements of cash flow for the Borrowers
for such fiscal month (with statements of cash flow for the Borrowers
to be delivered on a combined basis for each fiscal quarter), and, in
each case, for the period from the beginning of the Fiscal Year to the
end of such fiscal month, setting forth in each case in comparative
form figures for the corresponding periods in the previous Fiscal Year
and figures from the current management budget, together with an
analysis of sales of each Borrower by product line and customer for
such fiscal month and for the period from the beginning of the Fiscal
Year to the end of such fiscal month, all in reasonable detail,
reflecting all "push-down" accounting entries, consistent with the
Borrowers' past practices, fairly presenting the financial position
and results of operation of the Parent and its consolidated
Subsidiaries or the
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Borrowers, as applicable, as at the date thereof and for such periods,
and prepared in accordance with GAAP applied consistently with the
audited Financial Statements required pursuant to Section 6.2(a).
Such statements provided under this Section 6.2(b) shall be certified
to be correct by the chief financial officers or treasurers of the
Parent and the Borrowers, subject to normal year-end adjustments. In
addition to the Financial Statements required to be delivered pursuant
to the foregoing provisions of this Section 6.2(b), in the event that
GAAP in effect for the period with respect to which such Financial
Statements shall have been prepared shall be different from GAAP in
effect on the Restatement Closing Date, the Borrowers shall furnish to
the Agent additional such Financial Statements prepared on the basis
of GAAP in effect on the Restatement Closing Date.
(c) With each of the audited Financial Statements delivered
pursuant to Section 6.2(a), a certificate of the independent certified
public accountants that examined such statements to the effect that
they have reviewed and are familiar with the Loan Documents and that,
in examining such Financial Statements, they did not become aware of
any fact or condition which then constituted a Default or Event of
Default as a result of a breach of any of the covenants set forth in
Sections 8.9, 8.10(a), 8.13, 8.15, 8.16, 8.20 and 8.22 through 8.27
and in Section 16 of the Parent Guaranty, except for those, if any,
described in reasonable detail in such certificate; provided, that
such accountants will not opine with respect to the covenants
contained in Section 8.15(a) and (b), and the second sentence of
Section 8.16, to the extent such covenants refer to the occurrence of
certain events, or the taking of certain actions, while a Default or
Event of Default is outstanding.
(d) With each of the audited and unaudited Financial
Statements delivered pursuant to Sections 6.2(a) and (b), a
certificate of the treasurer of RMC, chief financial officer of each
other Borrower and chief financial officer of the Parent, (1) setting
forth in reasonable detail the calculations required to establish that
the Borrowers were in compliance with the covenants set forth in
Sections 8.23 through 8.27 during the period covered in such Financial
Statements, the Parent was in compliance with the covenants set forth
in Section 16 of the Parent Guaranty, and the Borrowers were in
compliance with the financial test described in Section 2.3 as a
condition to the borrowing of Capital Expenditure Loans, as
applicable; (2) stating that, except as explained in reasonable detail
in such certificate, (A) all of the representations, warranties and
covenants of the Borrowers contained in this Agreement and the other
Loan Documents, or Parent contained in the Parent Guaranty, as
applicable, are correct as at the date of such
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certificate and (B) no Event of Default then exists or existed during
the period covered by such Financial Statements; and (3) describing
and analyzing in reasonable detail all material trends, changes and
developments in each and all Financial Statements, and such other
matters as are described on Exhibit B-3 attached hereto, such
description and analysis to be in form and substance satisfactory to
the Agent and the Lenders. If such certificate discloses that a
representation or warranty is not correct, or that a covenant has not
been complied with, or that an Event of Default existed or exists,
such certificate shall set forth what action the applicable Borrower
or the Parent, as applicable, has taken or proposes to take with
respect thereto.
(e) No sooner than 90 days and no fewer than 30 days prior to
the beginning of each Fiscal Year, consolidated and consolidating
projected balance sheets, statements of income and expense, and
statements of cash flow for the Parent and its Subsidiaries as at the
end of and for each fiscal month of such Fiscal Year; provided, that
in the event that at any time during such Fiscal Year the actual
amounts of (1) sales, (2) operating income, or (3) net income, in each
case for the Parent and its Subsidiaries, shall be in excess of
twenty-five percent (25.0%) below the applicable projected amounts
contained in such balance sheets, statements of income and expense, or
statements of cash flow, the Borrowers shall furnish to the Agent and
the Lenders revised projected financial statements reflecting such
performance.
(f) Promptly upon their becoming available, copies of each
proxy statement, financial statement, and reports which any Borrower
sends to its stockholders.
(g) Upon the Agent's request, promptly after filing with the
PBGC and the IRS a copy of each annual report or other filing filed
with respect to each Plan of any Borrower or any Affiliate.
(h) Promptly upon their becoming available (and in the case
of reports on (1) Form 10-K, no later than 90 days following the end
of each Fiscal Year, and (2) Form 10-Q, no later than 45 days
following the end of each fiscal quarter or, in either such case if
later, the end of any relevant extension period granted by the
Securities and Exchange Commission, a copy of the waiver with respect
to which shall have been furnished to the Agent), copies of all proxy
statements, annual reports, reports on Forms 10-K, 10-Q and 8-K,
financial statements and other reports which the Parent sends to its
stockholders or the Securities and Exchange Commission.
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(i) A Borrowing Base Certificate (1) prior to the Triggering
Date, on each Wednesday, setting forth information as of the end of
the then immediately preceding Friday, and (2) from and after the
Triggering Date, on each Business Day.
(j) Such additional information as the Agent or any Lender
may from time to time reasonably request regarding the financial and
business affairs of the Borrowers.
Any amounts contained in Financial Statements or other reports provided
pursuant to this Section 6.2 by or with respect to RML or RLTD shall be
expressed in Dollars.
6.3 Notices to the Lenders. The Borrowers shall notify the
Lenders, in writing, of the following matters at the following times:
(a) Promptly and in any event within two (2) Business Days
after becoming aware thereof, any Default or Event of Default.
(b) Within two (2) Business Days after becoming aware
thereof, the assertion by the holder of any preferred capital stock of
any Borrower or of any Debt in an outstanding principal amount equal
to or exceeding $50,000, that a default exists with respect thereto or
that any Borrower is not in compliance with the terms thereof, or the
threat or commencement by such holder of any enforcement action
because of such asserted default or noncompliance.
(c) Within two (2) Business Days after becoming aware
thereof, any material adverse change in any Borrower's property,
business, operations, financial condition or prospects.
(d) Within two (2) Business Days after becoming aware
thereof, any pending or threatened action, suit, proceeding, or
counterclaim by any Person, or any pending or threatened investigation
by a Public Authority, which may materially and adversely affect the
Collateral, the repayment of the Obligations, the Agent's or any
Lender's rights under the Loan Documents, or any Borrower's property,
business, operations, financial condition or prospects.
(e) Within two (2) Business Days after becoming aware
thereof, any pending or threatened strike, work stoppage, material
unfair labor practice claim, or other material labor dispute affecting
any Borrower.
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(f) Within two (2) Business Days after becoming aware
thereof, any violation of any law, statute, regulation, or ordinance
of any Public Authority applicable to any Borrower or its properties,
which may materially and adversely affect the Collateral, the
repayment of the Obligations, the Agent's or any Lender's rights under
the Loan Documents, or such Borrower's property, business, operations,
financial condition or prospects.
(g) Within two (2) Business Days after becoming aware
thereof, any violation by any Borrower of any Environmental Law or any
notice that any Borrower receives asserting that such Borrower is not
in compliance with any Environmental Law or that its compliance is
being investigated by a Public Authority.
(h) Within two (2) Business Days upon receipt thereof, any
notice that any Borrower is or may be liable to any Person as a result
of the Release or threatened Release of any Contaminant or that such
Borrower is subject to investigation by any Public Authority
evaluating whether any remedial action is needed to respond to the
Release or threatened Release of any Contaminant.
(i) Within two (2) Business Days after becoming aware
thereof, the imposition of any Environmental Lien against any property
of any Borrower.
(j) Any change in any Borrower's name, jurisdiction of
incorporation, or form of organization, trade names or trade styles
under which such Borrower will sell Inventory or create Accounts, or
to which instruments in payment of Accounts may be made payable, at
least thirty (30) days prior thereto.
(k) Within two (2) Business Days after any Borrower or any
ERISA Affiliate of any Borrower knows or has reason to know, that a
Termination Event or a prohibited transaction (as defined in Sections
406 of ERISA and 4975 of the Code) has occurred, and, when known, any
action taken or threatened by the IRS, the DOL or the PBGC with
respect thereto.
(l) Within five (5) Business Days after the filing thereof
with the IRS, the DOL or the PBGC, as applicable, copies of the
following: (1) each annual report (form 5500 series), including
Schedule B thereto, filed with respect to each Benefit Plan and (2) a
copy of each funding waiver request filed with respect to any Benefit
Plan and all communications
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received by any Borrower or its ERISA Affiliate from the IRS, the DOL
or the PBGC with respect to such request.
(m) Within five (5) Business Days after receipt thereof by
any Borrower or its ERISA Affiliate, copies of the following: (1)
each actuarial report for any Benefit Plan or Multiemployer Plan and
annual report for any Multiemployer Plan; (2) any notices of the
PBGC's intention to terminate a Benefit Plan or to have a trustee
appointed to administer such Benefit Plan; (3) any favorable or
unfavorable determination letter from the IRS regarding the
qualification of a Plan under Section 401(a) of the Code; or (4) any
notice from a Multiemployer Plan regarding the imposition of
withdrawal liability.
(n) Within three (3) Business Days upon the occurrence
thereof: (1) any increases in the benefits of any existing Benefit
Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which any Borrower or its ERISA Affiliate
was not previously contributing; or (2) any failure by any Borrower or
its ERISA Affiliate to make a required installment or any other
required payment under Section 412 of the Code on or before the due
date for such installment or payment.
(o) Within three (3) Business Days after any Borrower or its
ERISA Affiliate knows or has reason to know that any of the following
events has or will occur: (1) a Multiemployer Plan has been or will
be terminated; (2) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan; or (3)
the PBGC has instituted or will institute proceedings under Section
4042 of ERISA to terminate a Multiemployer Plan.
For purposes of subsections (k) through (o) above, each Borrower and any ERISA
Affiliate of each Borrower shall be deemed to know all facts known by the
Administrator of any Plan of which such Borrower or ERISA Affiliate is the plan
sponsor.
Each notice given under this Section shall describe the subject matter thereof
in reasonable detail, and shall set forth the action that the applicable
Borrower or ERISA Affiliate has taken or proposes to take with respect thereto.
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ARTICLE 7
GENERAL WARRANTIES AND REPRESENTATIONS
Each Borrower warrants and represents to the Agent and the
Lenders, that:
7.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents. Each Borrower has the corporate power and
authority to execute, deliver and perform this Agreement and other Loan
Documents and Mortgages to which it is a party, to incur the Obligations, and
to grant to the Agent Liens upon and security interests in the Collateral.
Each Borrower has taken all necessary corporate action (including, without
limitation, obtaining approval of its stockholders) to authorize its execution,
delivery, and performance of this Agreement and the other Loan Documents and
Mortgages to which it is a party. No consent, approval, or authorization of,
or declaration or filing with, any Public Authority, and no consent of any
other Person, is required in connection with any Borrower's execution,
delivery, and performance of this Agreement and the other Loan Documents and
Mortgages to which it is a party, except for those already duly obtained or
made. Each of this Agreement and the other Loan Documents and Mortgages to
which it is a party has been duly executed and delivered by each Borrower, and
constitute the legal, valid and binding obligation of such Borrower,
enforceable against it in accordance with its terms (except as such enforcement
may be limited by general principles of equity, and bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting creditors' rights generally)
and without defense, setoff, or counterclaim of which such Borrower has
knowledge. Each Borrower's execution, delivery, and performance of this
Agreement and the other Loan Documents and Mortgages to which it is a party do
not and will not conflict with, or constitute a violation or breach of, or
constitute a default under, or result in the creation or imposition of any Lien
upon the property of such Borrower by reason of the terms of (a) any contract,
mortgage, Lien, lease, agreement, indenture, or instrument to which such
Borrower is a party or which is binding upon it, (b) any judgment, law,
statute, rule or governmental regulation applicable to such Borrower, or (c)
the Certificate or Articles of Incorporation or By-laws of such Borrower.
7.2 Validity and Priority of Security Interest. The
provisions of this Agreement and the other Loan Documents create legal and
valid Liens on all the Collateral in favor of the Agent, for the ratable
benefit of the Secured Creditors. Such Liens (1) in Collateral in existence on
the Restatement Closing Date constitute, and (2) in Collateral arising after
the Restatement Closing Date shall constitute (assuming the filing of all
appropriate continuation statements), and in the Real Estate
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shall constitute (assuming the filing of the Mortgages), perfected and
continuing Liens, having priority over all other Liens on the Collateral except
those Permitted Liens specifically identified on Schedule 7.2, securing all the
Obligations, and enforceable against each Borrower and all third parties.
7.3 Organization and Qualification. Each Borrower (a) is
duly incorporated and organized and validly existing in good standing under the
laws of the jurisdiction of its incorporation; (b) is qualified to do business
as a foreign corporation and is in good standing in the jurisdictions set forth
on Schedule 7.3, which are the only jurisdictions in which qualification is
necessary in order for it to own or lease its property and conduct its
business; and (c) has all requisite power and authority to conduct its business
and to own its property.
7.4 Corporate Name; Prior Transactions. No Borrower has,
during the past five (5) years, been known by or used any other corporate or
fictitious name, or been a party to any merger or consolidation, or acquired
all or substantially all of the assets of any Person, or acquired any of its
property outside of the ordinary course of business, except for the Mergers,
the transactions contemplated pursuant to the American Playworld Purchase
Agreement and the MZH Option Agreement and MZH Asset Purchase Agreement, the
Exchanges, the DP Asset Transfer, the Receivables Purchase Agreement and as set
forth on Schedule 7.4.
7.5 Subsidiaries and Affiliates. Schedule 7.5 is a correct
and complete list of the name and relationship to each Borrower of each and all
of such Borrower's Affiliates. The Parent has no direct Subsidiaries other
than RMC, DP, Willow, Hutch, NWR, International, RLTD, and Roadmaster Service
Corporation. RMC has no Subsidiaries other than Diversified Trucking, RRC, and
Roadmaster Funding Corporation, a Delaware corporation which shall not engage
in any business or own any assets, other than the ownership of AA Funding
Corp., a Delaware corporation which shall not engage in any business or own any
assets. Each of Diversified Trucking, RRC, DP, Willow, Hutch, Actava World
Trade, RML, RLTD and Roadmaster Service Corporation has no Subsidiaries. NWR
has no Subsidiaries other than Actava World Trade. International has no
Subsidiaries other than RML.
7.6 Financial Statements and Projections. (a) The Borrowers
have delivered to the Lenders the audited balance sheet and related statements
of income, retained earnings, statement of cash flows, and changes in
stockholders equity for the Fiscal Year ended December 31, 1994, accompanied by
the report thereon of Arthur Andersen & Co. The Borrowers have also delivered
to the Lenders the unaudited balance sheet and related statements of income and
expense and cash flows for the first eight (8) fiscal months of the 1995 Fiscal
Year and the first and second fiscal
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quarters of Fiscal Year 1995. Such financial statements are attached hereto as
Exhibit B-1. All such financial statements have been prepared in accordance
with GAAP and present accurately and fairly the financial position of the
Borrowers as at the dates thereof and its results of operations for the periods
then ended.
(b) The Latest Projections, attached hereto as Exhibit B-2,
represent each Borrower's best estimate of such Borrower's future financial
performance for the periods set forth therein. The Latest Projections have
been prepared on the basis of the assumptions set forth therein, which each
Borrower believes are fair and reasonable in light of current and reasonably
foreseeable business conditions.
7.7 Capitalization. (a) RMC's authorized capital stock
consists of 1000 shares of common stock, par value $.01 per share, of which
1000 shares are validly issued and outstanding, fully paid and non-assessable,
and are owned beneficially and of record by the Parent.
(b) RML's authorized capital stock consists of 40,000 shares
of common stock, of which 12,100 shares are validly issued and outstanding,
fully paid and non-assessable, and are owned beneficially and of record by
International.
(c) International's authorized capital stock consists of (1)
10,000,000 shares of common stock, of which 1000 shares are validly issued and
outstanding, fully paid and non-assessable, and are owned beneficially and of
record by the Parent, and (2) 5,000,000 shares of preferred stock, of which no
shares are issued and outstanding.
(d) Willow's authorized capital stock consists of 100,000
shares of common stock, par value $1.00 per share, of which 46,000 shares are
validly issued and outstanding, fully paid and non-assessable, and are owned
beneficially and of record by the Parent.
(e) Hutch's authorized capital stock consists of 1000 shares
of common stock, par value $1.00 per share, of which 1000 shares are validly
issued and outstanding, fully paid and non-assessable, and are owned
beneficially and of record by the Parent.
(f) NWR's authorized capital stock consists of 1000 shares of
common stock, par value $1.00 per share, of which 1000 shares are validly
issued and outstanding, fully paid and non-assessable, and are owned
beneficially and of record by the Parent.
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(g) RRC's authorized capital stock consists of 1000 shares of
common stock, no par value per share, of which 100 shares are validly issued
and outstanding, fully paid and non-assessable, and are owned beneficially and
of record by RMC.
7.8 Solvency. Each Borrower is Solvent prior to and after
giving effect to the making of the Loans to be made on the Restatement Closing
Date.
7.9 Debt. After giving effect to the making of the Loans to
be made on the Restatement Closing Date, no Borrower has any Debt, except (a)
the Obligations, (b) Debt set forth on Schedule 7.9, and (c) trade payables and
other contractual obligations arising in the ordinary course of business since
December 31, 1994.
7.10 Distributions. On and after the Restatement Closing
Date, no Distribution has been declared, paid, or made upon or in respect of
any capital stock or other Securities of any Borrower except as expressly
permitted hereby.
7.11 Title to Property. Each Borrower has good,
indefeasible, and merchantable title to all of its property other than property
leased by it (including, without limitation, the assets reflected on the
December 31, 1994 Financial Statements delivered to the Agent and the Lenders,
except as disposed of in the ordinary course of business since the date thereof
or as otherwise expressly permitted hereby), free of all Liens except Permitted
Liens.
7.12 Real Estate; Leases. Schedule 7.12 sets forth a correct
and complete list of all Real Estate owned by any Borrower, all leases and
subleases of real or personal property by any Borrower as lessee or sublessee,
and all leases and subleases of real or personal property by any Borrower as
lessor, lessee, sublessor or sublessee. Except as set forth on Schedule 7.12,
each of such leases and subleases is valid and enforceable in accordance with
its terms and is in full force and effect and, to the best of each Borrower's
knowledge, no default by any party to any such lease or sublease exists.
7.13 Proprietary Rights. Schedule 7.13 sets forth a correct
and complete list of all of the Proprietary Rights which are filed with the
United States Patent and Trademark Office, and any other material Proprietary
Rights. None of the Proprietary Rights is subject to any licensing agreement
or similar arrangement except as set forth on Schedule 7.13. To the best of
each Borrower's knowledge, none of the Proprietary Rights, other than
Proprietary Rights subject to a licensing agreement or similar arrangement set
forth on Schedule 7.13, infringes on or conflicts with any other Person's
property, and no other Person's property infringes on or conflicts with the
Proprietary Rights.
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The Proprietary Rights described on Schedule 7.13 constitute all of the
property of such type necessary to the current and anticipated future conduct
of each Borrower's business.
7.14 Trade Names. All trade names or styles under which any
Borrower will sell Inventory or create Accounts, or to which instruments in
payment of Accounts may be made payable, are listed on Schedule 7.4.
7.15 Litigation. Except as set forth on Schedule 7.15, and
except for suits, proceedings or counterclaims against a Borrower seeking
relief of $50,000 or less, there is no pending or (to the best of each
Borrower's knowledge) threatened, action, suit, proceeding, or counterclaim by
any Person, or investigation by any Public Authority, or any basis for any of
the foregoing, which may materially and adversely affect the Collateral, the
repayment of the Obligations, the Agent's or any Lender's rights under the Loan
Documents, or any Borrower's property, business, operations, financial
condition or prospects.
7.16 Restrictive Agreements. No Borrower is a party to any
contract or agreement, or subject to any charter or other corporate
restriction, which affects its ability to execute, deliver, and perform the
Loan Documents or Mortgages or repay the Obligations, or which materially and
adversely affects or, insofar as such Borrower can reasonably foresee, could
materially and adversely affect, such Borrower's property, business,
operations, financial condition or prospects, or would in any respect
materially and adversely affect the Collateral, the repayment of the
Obligations, the Agent's or any Lender's rights under the Loan Documents or
Mortgages, or such Borrower's property, business, operations, financial
condition or prospects.
7.17 Labor Disputes. Except as set forth on Schedule 7.17,
(a) there is no collective bargaining agreement or other labor contract
covering employees of any Borrower, (b) no such collective bargaining agreement
or other labor contract is scheduled to expire during the term of this
Agreement, and (c) no union or other labor organization is known by any
Borrower to be seeking to organize, or to be recognized as, a collective
bargaining unit of employees of any Borrower or for any similar purpose, and
(d) there is no pending or (to the best of any Borrower's knowledge)
threatened, strike, work stoppage, material unfair labor practice claim, or
other material labor dispute against or affecting any Borrower or its
employees.
7.18 Environmental Matters. Except as otherwise disclosed on
Schedule 7.18:
(a) Each Borrower and its Subsidiaries, and, to the best of
its knowledge, each of their respective predecessors in interest, has
complied in all material respects with all
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Environmental Laws and health and safety laws applicable to its
property and business, and no Borrower or Subsidiary of such Borrower,
nor any of their respective present property or operations, nor any
predecessor's past property or operations, is subject to any order
from or agreement with any Public Authority or private Person
respecting (1) compliance with any Environmental Law or health or
safety requirements of law, or (2) any potential liabilities and costs
or remedial action arising from the Release or threatened Release of a
Contaminant.
(b) Each Borrower, and each of its Subsidiaries, has obtained
all environmental, health and safety permits necessary for its
operation, and all such permits are in good standing, and such
Borrower and Subsidiaries are in compliance with all terms and
conditions of such permits.
(c) Except as necessary in the ordinary course of business,
and in all cases in compliance with Environmental Laws, no Borrower,
and no Subsidiaries of any Borrower, nor, to the best of each
Borrower's knowledge, any predecessor of any Borrower, has generated,
handled, used, stored or disposed of any hazardous or toxic waste or
substance, as defined pursuant to 40 CFR Part 261 or any equivalent
Environmental Law, on or off its property (whether or not owned by
it), nor has any Borrower filed any notice with any Public Authority
indicating such generation, handling, use, storage or disposal.
(d) No Borrower has any material contingent liability with
respect to noncompliance with any Environmental Laws or any Release or
threatened Release of a Contaminant or the generation, handling, use,
storage, or disposal of hazardous or toxic wastes or substances.
(e) No Borrower, and no Subsidiary of any Borrower, nor to
the best of each Borrower's knowledge, any of any Borrower's
predecessors in interest, has received any summons, complaint, order
or similar notice that it is not in compliance with, or that any
Public Authority is investigating its compliance with, any
Environmental Laws or health and safety laws or that it is or may be
liable to any other Person as a result of a Release or threatened
Release of a Contaminant.
(f) None of the operations of any Borrower or its
Subsidiaries is the subject of any investigation by any Public
Authority evaluating whether any remedial action is needed to respond
to a Release or threatened Release of a Contaminant.
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(g) Except as necessary in the ordinary course of business,
and in all cases in compliance with Environmental Laws, there is not
now, nor has there ever been on or in the Premises:
(1) any generation, treatment, recycling, storage or disposal
of any hazardous waste, as that term is defined under 40 CFR
Part 261 or any equivalent Environmental Law,
(2) any underground storage tanks or surface impoundments,
(3) any asbestos containing material, or
(4) any polychlorinated biphenyls (PCBs) used in hydraulic
oils, electrical transformers or other equipment.
(h) No Borrower, and no Subsidiary of any Borrower, has filed
any notice under any applicable Environmental Law reporting a Release
of a Contaminant into the environment.
(i) None of the products manufactured, distributed or sold by
any Borrower or any of its Subsidiaries contains asbestos containing
material.
(j) No Environmental Lien has attached to any property of any
Borrower or any of its Subsidiaries.
(k) No Environmental Property Transfer Acts are applicable to
the transactions contemplated by this Agreement, and each Borrower has
provided all notices and obtained all necessary environmental permit
transfers and consents, if any, required in order to consummate the
transactions contemplated by this Agreement, to perfect the Agent's
Liens and to operate such Borrower's business as presently or proposed
to be operated.
7.19 No Violation of Law. No Borrower is in violation of any
law, statute, regulation, ordinance, judgment, order, or decree applicable to
it which violation would in any respect materially and adversely affect the
Collateral, the repayment of the Obligations, the Agent's or any Lender's
rights under the Loan Documents or Mortgages, or such Borrower's property,
business, operations, financial condition or prospects.
7.20 No Default. No Borrower is in default with respect to
any note, indenture, loan agreement, mortgage, lease, deed, or other agreement
to which such Borrower is a party or by which it is bound, which default would
materially and adversely affect the Collateral, the repayment of the
Obligations, the
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Agent's or any Lender's rights under the Loan Documents or Mortgages, or such
Borrower's property, business, operations, financial condition or prospects.
7.21 ERISA. (a) No Borrower, and no ERISA Affiliate,
maintains or contributes to any Plan other than those listed on Schedule 7.21.
(b) No Plan has been terminated or partially terminated or is
insolvent or in reorganization, nor have any proceedings been instituted to
terminate or reorganize any Plan.
(c) No Borrower, and no ERISA Affiliate, has any withdrawal
liability, including contingent withdrawal liability, to any Benefit Plan
pursuant to Title IV of ERISA.
(d) No Borrower, and no ERISA Affiliate, has incurred any
liability to the PBGC which remains outstanding other than the payment of
premiums, and there are no premium payments which have become due which are
unpaid.
(e) No Benefit Plan has incurred any accumulated funding
deficiency (as defined in Sections 302(a)(2) of ERISA and 412(a) of the Code),
whether or not waived.
(f) No Borrower, and no ERISA Affiliate, has breached any of
the responsibilities, obligations or duties imposed on it by ERISA or
regulations promulgated thereunder with respect to any Plan. Each Plan is in
substantial compliance with ERISA, and no Borrower, and no ERISA Affiliate, has
received any notice asserting that a Plan is not in compliance with ERISA.
(g) Each Plan which is intended to be a qualified Plan has
been determined by the IRS to be qualified under Section 401(a) of the Code as
currently in effect and each trust related to such Plan has been determined to
be exempt from federal income tax under Section 501(a) of the Code.
(h) Except as provided on Schedule 7.21, no Borrower, and no
ERISA Affiliate, maintains or contributes to any employer welfare benefit plan
within the meaning of Section 3(1) of ERISA which provides benefits to
employees after termination of employment other than as required by Section 601
of ERISA.
(i) Schedule B to the most recent annual report filed with
the IRS with respect to each Benefit Plan and furnished to the Lenders is
complete and accurate. Since the date of each such Schedule B, there has been
no adverse change in funding status or financial condition of the Benefit Plan
relating to such Schedule B.
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(j) No Borrower, and no ERISA Affiliate, has failed to make a
required installment under subsection (m) of Section 412 of the Code or any
other payment required under Section 412 of the Code on or before the due date
for such installment or other payment.
(k) No Borrower, and no ERISA Affiliate, is required to
provide security to a Plan under Section 401(a)(29) of the Code due to a Plan
amendment that results in an increase in current liability for the plan year.
(l) No Borrower, and no ERISA Affiliate or fiduciary of any
Plan which is not a Multiemployer Plan (1) has engaged in a nonexempt
prohibited transaction described in Sections 406 of ERISA or 4975 of the Code
or (2) has taken or failed to take any action which would constitute or result
in a Termination Event.
(m) No Borrower, and no ERISA Affiliate, has failed to make a
required contribution or payment to a Multiemployer Plan nor has any Borrower
or any ERISA Affiliate made a complete or partial withdrawal under Sections
4203 or 4205 of ERISA from a Multiemployer Plan.
(n) Each Borrower has given to the Agent and the Lenders
copies of all of the following: each Benefit Plan and related trust agreement
(including all amendments to such Plan and trust) in existence or committed to
as of the date hereof and the most recent summary plan description, actuarial
report, determination letter issued by the IRS and Form 5500 filed in respect
of each such Benefit Plan in existence; a listing of all of the Multiemployer
Plans with the aggregate amount of the most recent annual contributions
required to be made by such Borrower and all of its ERISA Affiliates to each
such Multiemployer Plan, any information which has been provided to such
Borrower or its ERISA Affiliate regarding withdrawal liability under any
Multiemployer Plan and the collective bargaining agreement pursuant to which
such contribution is required to be made; each employee welfare benefit plan
within the meaning of Section 3(1) of ERISA which provides benefits to
employees after termination of employment other than as required by Section 601
of ERISA, the most recent summary plan description for such plan and the
aggregate amount of the most recent annual payments made to terminated
employees under each such Plan.
(o) No Borrower, and no ERISA Affiliate of any Borrower has,
or would reasonably be expected to have, any liability under Sections 4063,
4064, 4069, 4204 or 4212(c) of ERISA.
7.22 Taxes. Each Borrower has filed all tax returns and
other reports which it was required by law to file on or prior to the date
hereof and has paid all taxes, assessments,
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fees, and other governmental charges, and penalties and interest, if any,
against it or its property, income, or franchise, that are due and payable.
7.23 Investment Act. No Borrower is an "investment company"
nor an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act
of 1940, as amended (15 U.S.C. Section 80(a)(1), et seq.), nor is any Borrower
subject to any other state or federal regulation limiting its ability to incur
Debt. The making of the Loans and other financial accommodations hereunder by
the Agent and the Lenders, the application of the proceeds and repayment
thereof by the Borrowers and the consummation of the other transactions
contemplated by this Agreement and the other Loan Documents do not violate any
provisions of such laws or any rule, regulation or order issued by the
Securities and Exchange Commission or other Public Authority thereunder.
7.24 Margin Securities. No Borrower owns any "margin
security," as that term is defined in Regulations G and U of the Federal
Reserve Board, and the proceeds of the Loans and the other financial
accommodations made pursuant to this Agreement will be used only for the
purposes contemplated hereunder. None of the transactions contemplated by this
Agreement will violate Regulations G, T, U or X of the Federal Reserve Board.
None of the Loans or other financial accommodations hereunder will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any Debt or other Person's
indebtedness which was originally incurred to purchase or carry any margin
security, or for any other purpose which might cause any such loan or other
financial accommodation to be considered a "purpose credit" within the meaning
of Regulation G, U or X of the Federal Reserve Board. No Borrower will either
take or permit any agent acting on its behalf to take any action which might
cause any transaction, obligation or right created by this Agreement, or any
document or instrument delivered pursuant hereto, to violate any regulation of
the Federal Reserve Board.
7.25 Consummation of Exchanges and DP Asset Transfer. (a)
The Borrowers have delivered to the Agent and the Lenders correct and complete
executed copies of the Agreement and Plan of Reorganization, all amendments,
schedules and exhibits thereto, and all other agreements, documents, and
certificates which have been executed and delivered in connection with the
transactions contemplated thereby. The Agreement and Plan of Reorganization
has been duly authorized and executed and is the valid and binding obligation
of each of Actava, DP, Hutch, NWR, Willow and the Parent, enforceable in
accordance with its terms. Each of the parties thereto has performed all
obligations, covenants and conditions required of it prior to or as a condition
to the
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consummation of the transactions contemplated by the Agreement and Plan of
Reorganization, and no such obligation, covenant or condition has been waived
by any party. Neither the Parent, nor DP, Hutch, NWR or Willow is in default
in any material respect, and to the best of each Borrower's knowledge, Actava
is not in default in any material respect, of any of its obligations under the
Agreement and Plan of Reorganization, and all representations and warranties in
the Agreement and Plan of Reorganization of any Borrower and the other parties
thereto were complete and correct in all material respects as of December 6,
1994 as if made at and as of such time. On or prior to December 6, 1994, (1)
any consent, approval, or authorization of, or declaration or filing with, any
Public Authority, and any consent of any other Person, required in connection
with the Exchanges, was obtained or made, and (2) the Exchanges were
consummated in accordance with all applicable state and federal laws.
(b) RMC has delivered to the Agent and the Lenders correct
and complete executed copies of the agreements, documents, and certificates
executed and delivered in connection with the DP Asset Transfer. Such
agreements, documents and certificates have been duly authorized and executed
and are the valid and binding obligation of RMC and DP, enforceable in
accordance with their terms. Each of the parties thereto has performed all
obligations, covenants and conditions required of it prior to or as a condition
to the consummation of the DP Asset Transfer, and no such obligation, covenant
or condition has been waived by any party. Neither DP nor RMC is in default in
any material respect of any of its obligations under such agreements, documents
and certificates, and all representations and warranties therein of any party
thereto are complete and correct in all material respects as of December 6,
1994 as if made at and as of such time. On or prior to December 6, 1994, (1)
any consent, approval, or authorization of, or declaration or filing with, any
Public Authority, and any consent of any other Person, required in connection
with the DP Asset Transfer, was obtained or made, and (2) the DP Asset Transfer
was consummated in accordance with all applicable state and federal laws.
7.26 Broker's Fees. No broker or finder is entitled to
receive compensation for services rendered with respect to the transactions
described in this Agreement, other than as set forth on Schedule 7.26.
7.27 No Material Adverse Change. No material adverse change
has occurred in the property, business, operations, financial condition or
prospects of any Borrower since December 31, 1994.
7.28 Disclosure. Neither this Agreement nor any document or
statement furnished to the Agent or any Lender by or on behalf of any Borrower
hereunder contains any untrue statement
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of a material fact or omits to state any material fact necessary in order to
make the statements contained herein or therein not misleading.
7.29 Bank Accounts. Schedule 7.29 contains a complete and
accurate list of all bank accounts maintained by any Borrower with any bank or
other financial institution.
7.30 Eligibility of Collateral. Each Account or item of
Inventory which any Borrower shall, expressly or by implication, request the
Agent to classify as an Eligible Account or as Eligible Inventory,
respectively, will, to the best of such Borrower's knowledge, as of the time
when such request is made, conform in all respects to the requirements of such
classification set forth in the respective definitions of "Eligible Accounts"
and "Eligible Inventory" set forth herein.
7.31 Public Utility Holding Company. No Borrower is a
"holding company" or a "subsidiary company" of a "holding company" or an
Affiliate of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
ARTICLE 8
AFFIRMATIVE AND NEGATIVE COVENANTS
Each Borrower covenants to the Agent and each Lender that, so
long as any of the Obligations remain outstanding or this Agreement is in
effect:
8.1 Taxes and Other Obligations. Each Borrower shall (a)
file when due all tax returns and other reports which it is required to file,
(b) pay, or provide for the payment, when due, of all taxes, fees, assessments
and other governmental charges against it or upon its property, income and
franchises, make all required withholding and other tax deposits, and establish
adequate reserves for the payment of all such items, and provide to the Agent
and the Lenders, upon request, satisfactory evidence of its timely compliance
with the foregoing and (c) pay when due all claims of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons, and all other
indebtedness owed by it and perform and discharge in a timely manner all other
obligations undertaken by it; provided, however, that the Borrowers need not
pay any tax, fee, assessment, governmental charge, or Debt, or discharge any
other obligation, that any of them is contesting in good faith by appropriate
proceedings diligently pursued, and for which adequate reserves are maintained,
so long as no Lien, other than a Permitted Lien, results from such non-payment.
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8.2 Corporate Existence and Good Standing. Each Borrower
shall maintain its corporate existence and its qualification and good standing
in all jurisdictions necessary to conduct its business and own its property,
and shall obtain and maintain all licenses, permits, franchises and
governmental authorizations necessary to conduct its business and own its
property.
8.3 Compliance with Law and Agreements. Each Borrower shall
comply with the material terms and provisions of each judgment, law, statute,
rule, and governmental regulation applicable to it and each material contract,
mortgage, lien, lease, indenture, order, instrument, agreement, or document to
which it is a party or by which it is bound.
8.4 Maintenance of Property. Each Borrower shall maintain
all of its property necessary and useful in its business in good operating
condition and repair, ordinary wear and tear excepted.
8.5 Insurance. Each Borrower shall maintain, with
financially sound and reputable insurers, insurance against loss or damage by
fire with extended coverage; theft, burglary, pilferage and loss in transit;
public liability and third party property damage; larceny, embezzlement or
other criminal liability; business interruption; and such other hazards or of
such other types as is customary for Persons of established reputation engaged
in the same or similar business, as the Agent in its discretion shall specify,
in amounts, and under policies acceptable to the Agent; provided, however, that
with respect to such insurance for business interruption and public liability,
such policies shall be acceptable to the Majority Lenders, and provided,
further, that such policies shall be deemed acceptable to the Majority Lenders
in the event that the Lenders shall have received written summaries or copies
thereof and shall not have promptly objected thereto. Without limiting the
foregoing, each Borrower shall also maintain flood insurance, in the event of a
designation of the area in which any Real Estate is located as "flood prone" or
a "flood risk area," as defined by the Flood Disaster Protection Act of 1973,
in an amount to be reasonably determined by the Agent, and shall comply with
the additional requirements of the National Flood Insurance Program as set
forth in said Act.
Each Borrower shall cause the Agent, for the ratable benefit
of the Secured Creditors, to be named in each such policy as secured party or
mortgagee and loss payee or additional insured, in a manner acceptable to the
Agent. Each policy of insurance shall contain a standard lender's loss payable
clause or endorsement, which shall include a requirement that the insurer give
not less than thirty (30) days' prior written notice to the Agent in the event
of cancellation of the policy for any
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reason whatsoever and a statement that the interest of the Agent shall not be
impaired or invalidated by any act or neglect of the applicable Borrower or the
owner of any premises for purposes more hazardous than are permitted by such
policy. All premiums for such insurance shall be paid by the applicable
Borrower when due, and certificates of insurance and, if requested by the Agent
or any Lender, photocopies of the policies shall be delivered to the Agent, in
each case for distribution by the Agent to each of the Lenders. If any
Borrower fails to procure such insurance or to pay the premiums therefor when
due, the Agent may do so from the proceeds of Revolving Loans as described in
Section 4.5.
Each Borrower shall promptly notify the Agent and the Lenders
of any material loss, damage, or destruction to the Collateral or arising from
its use, whether or not covered by insurance. The Agent is hereby authorized
to collect all insurance proceeds directly. After deducting from such proceeds
the expenses, if any, incurred by the Agent in the collection or handling
thereof, the Agent may apply such proceeds to the reduction of the Obligations,
without premium or penalty, in such order as the Majority Lenders shall
determine, or at the option of the Majority Lenders, may permit or require the
applicable Borrower to use such money, or any part thereof, to replace, repair,
restore or rebuild the Collateral in a diligent and expeditious manner with
materials and workmanship of substantially the same quality as existed before
the loss, damage or destruction. Without limiting the foregoing, in case of
any loss, damage or destruction with respect to any of the Equipment or Real
Estate, including any improvements, the Agent is authorized to collect all
insurance proceeds payable in connection therewith and apply them at the option
of the Majority Lenders, to the reduction of the Revolving Loans without
premium or penalty or to any of the other Obligations then due hereunder. The
Agent may permit or require the applicable Borrower to use any such insurance
proceeds, or any part thereof, to replace, or to repair, restore or rebuild,
the lost, damaged or destroyed property; provided, that (a) if the amount of
any loss, damage or destruction is less than $250,000, or (b) if the loss,
damage or destruction is to Real Estate prior to the Triggering Date, the Agent
shall permit the applicable Borrower so to replace, restore, repair or rebuild
the property so long as no Default or Event of Default shall have occurred and
be continuing at the time of any requested release of funds. If the lost,
damaged or destroyed property is to be replaced, repaired, restored or rebuilt,
such replacement, repair, restoration or rebuilding shall be done with
materials and workmanship of substantially as good a quality as existed before
such loss, damage or destruction. The applicable Borrower shall commence the
work of replacement, repair, restoration or rebuilding as soon as practicable
and proceed diligently with it until completion. Plans and specifications for
any such repair or restoration shall be reasonably satisfactory to the Agent
and shall be submitted to
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the Agent and the Lenders, prior to commencement of the work and shall be
subject to the reasonable approval of the Agent.
8.6 Condemnation. Each Borrower shall, immediately upon
learning of the institution of any proceeding for the condemnation or other
taking of any of its property, notify the Agent and the Lenders of the pendency
of such proceeding, and agrees that the Agent may participate in any such
proceeding, and such Borrower from time to time will deliver to the Agent all
instruments reasonably requested by the Agent to permit such participation.
The Agent is authorized to collect the proceeds of any condemnation claim or
award and apply them, at the direction of the Majority Lenders, to the
reduction of the Loans without premium or penalty or to any of the other
Obligations then due; provided, that (a) if the amount of any condemnation is
less than $250,000, or (b) if the condemnation is of Real Estate prior to the
Triggering Date, the Agent shall permit the applicable Borrower so to replace,
restore, repair or rebuild the property so long as no Default or Event of
Default shall have occurred and be continuing at the time of any requested
release of funds. If the condemned property is to be replaced, repaired,
restored or rebuilt, such replacement, repair, restoration or rebuilding shall
be done with materials and workmanship of substantially as good a quality as
existed before such loss, damage or destruction. The applicable Borrower shall
commence the work of replacement, repair, restoration or rebuilding as soon as
practicable and proceed diligently with it until completion. Plans and
specifications for any such repair or restoration shall be reasonably
satisfactory to the Agent and shall be submitted to the Agent and the Lenders,
prior to commencement of the work and shall be subject to the reasonable
approval of the Agent.
8.7 Environmental Laws. Each Borrower shall conduct its
business in full compliance with all Environmental Laws applicable to it,
including, without limitation, those relating to the generation, handling, use,
storage, and disposal of hazardous and toxic wastes and substances. Each
Borrower shall take prompt and appropriate action to respond to any
noncompliance with Environmental Laws and shall regularly report to the Agent
and the Lenders on such response. Without limiting the generality of the
foregoing, whenever a Borrower gives notice to the Agent pursuant to Section
6.3(g), such Borrower shall, at the request of the Agent and the Borrowers'
expense (a) cause an independent environmental engineer acceptable to the Agent
to conduct such tests of the site where the noncompliance or alleged
noncompliance with Environmental Laws has occurred and prepare and deliver to
the Agent and the Lenders a report setting forth the results of such tests, a
proposed plan for responding to any environmental problems described therein,
and an estimate of the costs thereof and (b) provide to the Agent and the
Lenders a supplemental report of such engineer whenever the scope of the
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environmental problems, or the response thereto or the estimated costs thereof,
shall change.
8.8 ERISA. (a) Each Borrower shall, and shall cause each of
its ERISA Affiliates to, establish, maintain and operate all Plans to comply in
all material respects with the provisions of ERISA, the Code, all regulations
and interpretations promulgated thereunder, and all other applicable laws and
regulations.
(b) No Borrower shall, and no Borrower shall permit any ERISA
Affiliate, to:
(1) Engage in any prohibited transaction described in
Sections 406 of ERISA or 4975 of the Code for which a statutory or
class exemption is not available or a private exemption has not
previously been obtained from the DOL;
(2) Permit to exist any accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code) whether
or not waived;
(3) Fail to pay timely required contributions or annual
installments due with respect to any waived funding deficiency to any
Benefit Plan;
(4) Terminate any Benefit Plan which would result in any
liability of such Borrower or an ERISA Affiliate under Title IV of
ERISA;
(5) Fail to make any contribution or payment to any
Multiemployer Plan which such Borrower or any ERISA Affiliate may be
required to make under any agreement relating to such Multiemployer
Plan, or any law pertaining thereto;
(6) Fail to pay any required installment under section (m) of
Section 412 of the Code or any other payment required under Section
412 of the Code on or before the due date for such installment or
other payment; or
(7) Amend a Plan resulting in an increase in current
liability for the plan year such that such Borrower or any ERISA
Affiliate is required to provide security to such Plan under Section
401(a)(29) of the Code.
8.9 Mergers, Consolidations or Sales. No Borrower shall
enter into any transaction of merger, reorganization, or consolidation, or
transfer, sell, assign, lease, or otherwise
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dispose of all or any material part of its property, or wind up, liquidate or
dissolve, or agree to do any of the foregoing, except (a) for sales of
Inventory in the ordinary course of its business, or (b) as otherwise expressly
permitted hereby.
8.10 Distributions; Capital Change. No Borrower shall (a)
directly or indirectly declare or make, or incur any liability to make, any
Distribution, except Distributions to such Borrower by a Subsidiary wholly
owned by such Borrower or by one or more other Subsidiaries that are wholly
owned by such Borrower, or (b) make any change in its capital structure which
could adversely affect the repayment of the Obligations. Notwithstanding the
foregoing, Distributions may be made to the Parent by RMC, Hutch, Willow and
NWR (provided that at the time of any such Distribution and after giving effect
thereto no Default or Event of Default shall exist and be continuing and that
such Distributions shall be made in accordance with all applicable laws) in
accordance with the following:
(1) RMC may make such Distributions to enable the Parent
to pay its normal cash operating expenses, in an aggregate amount not
to exceed (A) $1,187,500 during any fiscal quarter of Fiscal Year
1995, (B) $1,312,500 during any fiscal quarter of Fiscal Year 1996, or
(C) $1,380,000 during any fiscal quarter of Fiscal Years 1997 and
1998.
(2) Hutch may make such Distributions (A) to enable the
Parent to pay its normal cash operating expenses, in an aggregate
amount not to exceed (i) $125,000 during any fiscal quarter of Fiscal
Years 1995 and 1996, or (ii) $135,000 during any fiscal quarter of
Fiscal Years 1997 and 1998, and (B) to enable the Parent to make
simultaneous capital contributions to RMC in the amount of such
Distributions, commencing with the third fiscal quarter of Fiscal Year
1995, in an aggregate amount not to exceed (i) $100,000 during each of
the third and fourth fiscal quarters of Fiscal Year 1995, and the
first, second and third fiscal quarters of Fiscal Year 1996, (ii)
$125,000 during the fourth fiscal quarter of Fiscal Year 1996, or
(iii) $135,000 during any fiscal quarter of Fiscal Years 1997 and
1998.
(3) Willow may make such Distributions to enable the Parent
to pay its normal cash operating expenses, in an aggregate amount not
to exceed (A) $125,000 during any fiscal quarter of Fiscal Years 1995
and 1996, or (B) $135,000 during any fiscal quarter of Fiscal Years
1997 and 1998.
(4) NWR may make such Distributions to enable the Parent to
pay its normal cash operating expenses, in an aggregate amount not to
exceed (A) $187,500 during any fiscal quarter of Fiscal Year 1995, (B)
$212,500 during any
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fiscal quarter of Fiscal Year 1996, or (C) $225,000 during any fiscal
quarter of Fiscal Years 1997 and 1998.
8.11 Transactions Affecting Collateral or Obligations. No
Borrower shall enter into any transaction which materially and adversely
affects the Collateral or such Borrower's ability to repay the Obligations.
8.12 Guaranties. No Borrower shall make, issue, or become
liable on any Guaranty, except (a) Guaranties in favor of the Agent, and (b)
unsecured Guaranties entered into by such Borrower pursuant to Section 6.7 of
the Agreement and Plan of Reorganization, to the extent required in order to
release Actava from certain of its guaranty obligations, which guaranty
obligations are set forth on Schedule 8.12.
8.13 Debt. No Borrower shall incur or maintain any Debt,
other than: (a) the Obligations; (b) trade payables and contractual obligations
to suppliers of goods or services and customers incurred in the ordinary course
of business; (c) obligations to fund any of such Borrower's pension or employee
benefit plans in the ordinary course of business; (d) liability for employees'
salaries incurred in the ordinary course of business; (e) tax liability
incurred in the ordinary course of business; (f) Debt incurred to finance the
purchase of fixed assets constituting Capital Expenditures permitted by Section
8.23, so long as the principal amount of Debt incurred for any such purchase of
Equipment does not exceed 100% of the purchase price of such Equipment (net of
transportation, installation and other incidental costs); (g) other Debt
existing on the Restatement Closing Date and reflected on Schedule 7.9, or
refinancings thereof upon terms fully disclosed to the Agent and the Lenders
and which are no less favorable to the applicable Borrower than those with
respect to the Debt being refinanced; (h) Permitted Rentals; (i) the Opelika
Debt; and (j) the Olney Trust Bank Debt.
8.14 Prepayment. No Borrower shall voluntarily prepay any
Debt, except (a) the Obligations in accordance with their terms; (b) trade
payables in the ordinary course of business; (c) the Wisconsin Department of
Development Debt; and (d) the UDAG Debt provided that no such prepayment of any
UDAG Debt may be made unless there shall have been contributed to the capital
of RMC, following the Restatement Closing Date, an amount at least equal to the
amount of such prepayment (whether by the conversion of Debt to equity or
otherwise).
8.15 Payment of Debt to Affiliates. Except (a) as otherwise
permitted pursuant to Section 8.16, (b) for the payment of a Borrower's
obligations to fund any of such Borrower's pension or employee benefit plans in
the ordinary course of its business, and (c) for payments with respect to a
Borrower's Debt
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owed to any Affiliate in an amount not to exceed $25,000 for any such payment
or $150,000 in the aggregate for all such payments made by all of the Borrowers
during any Fiscal Year, no Borrower shall make any payment with respect to Debt
owed to any Affiliate, except that RMC may, subject to the terms of the Parent
Subordination Agreement or DP Subordination Agreement, as applicable:
(1) (A) pay interest on the Subordinated Debt in the original
principal amount of $1,000,000 evidenced by that certain promissory
note dated August 31, 1988 executed by RMC in favor of the Parent at a
rate not in excess of twelve percent (12%) per annum; and (B) pay
interest on the Subordinated Debt in the original principal amount of
$1,150,000 evidenced by that certain promissory note dated August 10,
1987 executed by RMC in favor of the Parent at a rate not in excess of
ten percent (10%) per annum; provided, that (i) any such interest is
paid only on a fiscal quarterly basis, (ii) the Borrowers shall have
delivered, prior to the date any such interest is paid, the Financial
Statements required pursuant to Sections 6.2(b) for the fiscal months
contained in the applicable fiscal quarter and for such fiscal
quarter, and (iii) at the time of any such payment and after giving
effect thereto, no Default or Event of Default shall exist and be
continuing;
(2) (A) pay interest on the Subordinated Debt in the
original principal amount of $33,000,000 evidenced by that certain
Third Subordinated Term Note dated September 30, 1993 executed by RMC
in favor of the Parent in amounts not to exceed $1,035,000 per
calendar quarter to enable the Parent to pay interest which is then
due and payable on the Subordinated Debentures; (B) pay interest at a
rate not in excess of eight percent (8%) per annum, on that certain
Debt in the original principal amount of $6,000,000 evidenced by that
certain Fourth Subordinated Term Note dated November 30, 1993 executed
by RMC in favor of the Parent, to enable the Parent to pay interest
which is then due and payable on the Subordinated Debentures; and (C)
pay interest on the Debt outstanding under the Subordinated Revolver
in amounts not to exceed $5,875,000 semiannually to enable the Parent
to pay interest which is then due and payable on the Senior
Subordinated Notes; provided, however, that the payments described in
this clause (2) may not be made in the event with respect to RMC that
after giving effect thereto (i) Individual Availability with respect
to RMC would be less than (x) $1,000,000 during the period commencing
on the Restatement Closing Date and ending on March 31, 1996, (y)
$2,000,000 during the period commencing on April 1, 1996 and ending on
September 30, 1996, or (z) $3,000,000 on or after October 1, 1996,
(ii) Availability would be less than $6,000,000, or (iii) there would
have occurred any Default
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or Event of Default; and provided, further, that the amount of
interest on the Debt outstanding under the Subordinated Revolver
permitted to be paid pursuant to the foregoing clause (C) shall be
reduced by the product of (a) the excess, if any, of $50,000,000 over
the principal of the Debt outstanding from time to time under the
Subordinated Revolver times (b) the interest rate of 11 3/4% per annum
applicable thereto (provided, that nothing herein shall be deemed to
permit any payment of principal of the Debt outstanding under the
Subordinated Revolver); and
(3) pay principal on the DP Note to the extent required to
enable DP to pay its obligations and liabilities, as and when DP shall
be required to do so; provided, however, that the payments described
in this clause (3) may not be made in the event that after giving
effect thereto, (i) Availability would be less than $5,000,000, (ii)
there would have occurred any Default or Event of Default, or (iii)
the sum of such payments made upon or after the Restatement Closing
Date would exceed $5,000,000.
8.16 Transactions with Affiliates. Except as set forth below
or otherwise permitted by this Agreement, no Borrower shall sell, transfer,
distribute, or pay any money or property, including, but not limited to, any
fees or expenses of any nature (including, but not limited to, any fees or
expenses for management services), except actual expenses incurred and approved
in advance in writing by the Majority Lenders, to any Affiliate or employee
thereof, or lend or advance money or property to any Affiliate or employee
thereof, or invest in (by capital contribution or otherwise) or purchase or
repurchase any stock or indebtedness, or any property, of any Affiliate or
employee thereof, or become liable on any Guaranty of the indebtedness,
dividends, or other obligations of any Affiliate or employee thereof.
Notwithstanding the foregoing, any Borrower may (a) pay compensation to
employees of such Borrower who are Affiliates, (b) if no Event of Default has
occurred and is continuing, engage in transactions with Affiliates in the
normal course of business, in amounts and upon terms fully disclosed to the
Agent and the Lenders and which are no less favorable to the applicable
Borrower than would be obtained in a comparable arm's length transaction with a
Person not an Affiliate, and (c) sell Inventory to RLTD.
8.17 Investment Banking and Finder's Fees. No Borrower shall
pay or agree to pay, or reimburse any other party with respect to, any
investment banking or similar or related fee, underwriter's fee, finder's fee,
or broker's fee to any Person in connection with this Agreement, other than as
set forth on Schedule 7.26. Each Borrower shall defend and indemnify the Agent
and the Lenders against and hold them harmless from all
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claims of any Person for any such fees, and all costs and expenses (including
without limitation, attorneys' fees) incurred by the Agent and/or any Lender in
connection therewith.
8.18 Business Conducted. No Borrower shall engage, directly
or indirectly, in any line of business other than the businesses in which such
Borrower is engaged on the Restatement Closing Date. RRC shall not engage in
any business other than the ownership and collection of Accounts transferred by
RMC, Hutch, NWR and Willow to RRC pursuant to the Receivables Purchase
Agreement.
8.19 Liens. No Borrower shall create, incur, assume, or
permit to exist any Lien on any property now owned or hereafter acquired by any
of them, except Permitted Liens.
8.20 Sale and Leaseback Transactions. No Borrower shall,
directly or indirectly, enter into any arrangement with any Person providing
for such Borrower to lease or rent property that such Borrower has sold or
otherwise transferred, or will sell or otherwise transfer to such Person;
provided, that prior to the Triggering Date the Borrowers other than RRC may
enter in such arrangements with respect to property owned by a Borrower on the
Restatement Closing Date, provided that the aggregate sale proceeds with
respect to all such transactions shall not exceed $250,000.
8.21 New Subsidiaries. No Borrower shall, directly or
indirectly, organize or acquire any Subsidiary.
8.22 Restricted Investments. No Borrower shall make any
Restricted Investment.
8.23 Capital Expenditures. (a) (i) RMC shall not make or
incur any Capital Expenditure if, after giving effect thereto, the aggregate
amount of all Capital Expenditures by RMC would exceed (1) $10,000,000 during
the period consisting of the third and fourth fiscal quarters of Fiscal Year
1995, (2) $20,000,000 during Fiscal Year 1996, (3) $20,000,000 during Fiscal
Year 1997, or (4) $5,000,000 during each fiscal quarter thereafter.
(ii) In addition, RMC shall not make or incur any Capital
Expenditure not financed by Capital Expenditure Loans or other Debt for
borrowed money ("Unfinanced Capital Expenditures") if, after giving effect
thereto, the aggregate amount of all such Unfinanced Capital Expenditures would
exceed the following amounts during the fiscal quarters indicated: (1)
$4,750,000 during the third fiscal quarter of Fiscal Year 1995, (2) $2,850,000
during the fourth fiscal quarter of Fiscal Year 1995, (3) $2,850,000 during the
first fiscal quarter of Fiscal Year 1996, (4) $3,250,000 during the second
fiscal quarter of Fiscal
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<PAGE> 120
Year 1996, (5) $3,500,000 during the third fiscal quarter of Fiscal Year 1996,
(6) $3,647,000 during the fourth fiscal quarter of Fiscal Year 1996, (7)
$3,250,000 during the first fiscal quarter of Fiscal Year 1997, (8) $3,500,000
during the second fiscal quarter of Fiscal Year 1997, (9) $3,750,000 during the
third fiscal quarter of Fiscal Year 1997, or (10) $4,000,000 during each fiscal
quarter thereafter.
(b) RML shall not make or incur any Capital Expenditure if,
after giving effect thereto, the aggregate amount of all Capital Expenditures
by RML would exceed (1) $35,000 during the period consisting of the third and
fourth fiscal quarters of Fiscal Year 1995, (2) $75,000 during Fiscal Year
1996, (3) $85,000 during Fiscal Year 1997, or (3) $25,000 during each fiscal
quarter thereafter.
(c) Willow shall not make or incur any Capital Expenditure
if, after giving effect thereto, the aggregate amount of all Capital
Expenditures by Willow would exceed (1) $30,000 during the period consisting of
the third and fourth fiscal quarters of Fiscal Year 1995, (2) $60,000 during
Fiscal Year 1996, (3) $60,000 during Fiscal Year 1997, or (4) $20,000 during
each fiscal quarter thereafter.
(d) Hutch shall not make or incur any Capital Expenditure if,
after giving effect thereto, the aggregate amount of all Capital Expenditures
by Hutch would exceed (1) $70,000 during the period consisting of the third and
fourth fiscal quarters of Fiscal Year 1995, (2) $385,000 during Fiscal Year
1996, (3) $385,000 during Fiscal Year 1997, or (4) $100,000 during each fiscal
quarter thereafter. For purposes of this Section 8.23(d), Capital Expenditures
shall be deemed to exclude expenditures made by Hutch in connection with
setting up the production facility for Forster products at Hutch's plant
located in Monticello, Kentucky; provided that such expenditures shall not
exceed $800,000, of which $270,000 shall be financed by Kentucky Regional
Economic Development Authority (KREDA) on terms reasonably satisfactory to the
Agent.
(e) NWR shall not make or incur any Capital Expenditure if,
after giving effect thereto, the aggregate amount of all Capital Expenditures
by NWR would exceed (1) $200,000 during the period consisting of the third and
fourth fiscal quarters of Fiscal Year 1995, (2) $880,000 during Fiscal Year
1996, (3) $880,000 during Fiscal Year 1997, or (4) $220,000 during each fiscal
quarter thereafter.
(f) RRC shall not make or incur any Capital Expenditures.
(g) No Borrower shall make or incur any Capital Expenditure
if, after giving effect thereto, the aggregate amount
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of all Capital Expenditures by all Borrowers would exceed (1) $10,650,000
during the period consisting of the third and fourth quarters of Fiscal Year
1995, (2) $21,300,000 during Fiscal Year 1996, (3) $21,300,000 during Fiscal
Year 1997, or (4) $5,325,000 during each fiscal quarter thereafter.
Each amount set forth in clauses (a) through (e) of this Section 8.23 for any
fiscal period shall hereinafter be referred to as a "Base Amount." In the
event that a Borrower shall, during any applicable fiscal period, make or incur
Capital Expenditures (or Unfinanced Capital Expenditure in the case of clause
(a)(ii)) in an aggregate amount less than the Base Amount for such fiscal
period, an amount (a "Carry-Over Amount") equal to the lesser of (1) one-half
of such Base Amount, and (2) such Base Amount minus the aggregate amount of
such Capital Expenditures actually made or incurred, shall be added to the Base
Amount for the then next succeeding fiscal period. No Carry-Over Amount shall
be added to any Base Amount other than the Base Amount for the then next
succeeding fiscal period. For purposes of making the calculations contemplated
by this paragraph, any Capital Expenditures made or incurred during any fiscal
period shall be deemed to reduce, first, the Base Amount for such fiscal
period, and second, the Carry-Over Amount, if any, added to the Base Amount for
such fiscal period.
8.24 Operating Lease Obligations. (a) RMC shall not enter
into any lease of real or personal property as lessee or sublessee (other than
Capital Leases), if, after giving effect thereto and excluding any permitted
intercompany lease payments, the aggregate amount of Rentals payable by RMC in
any Fiscal Year in respect of such lease and all such other leases would exceed
$9,500,000.
(b) RML shall not enter into any lease of real or personal
property as lessee or sublessee (other than Capital Leases), if, after giving
effect thereto and excluding any permitted intercompany lease payments, the
aggregate amount of Rentals payable by RML in any Fiscal Year in respect of
such lease and all such other leases would exceed $300,000.
(c) Willow shall not enter into any lease of real or personal
property as lessee or sublessee (other than Capital Leases), if, after giving
effect thereto and excluding any permitted intercompany lease payments, the
aggregate amount of Rentals payable by Willow in any Fiscal Year in respect of
such lease and all such other leases would exceed $300,000.
(d) Hutch shall not enter into any lease of real or personal
property as lessee or sublessee (other than Capital Leases), if, after giving
effect thereto and excluding any permitted intercompany lease payments, the
aggregate amount of
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Rentals payable by Hutch in any Fiscal Year in respect of such lease and all
such other leases would exceed $2,000,000.
(e) NWR shall not enter into any lease of real or personal
property as lessee or sublessee (other than Capital Leases), if, after giving
effect thereto and excluding any permitted intercompany lease payments, the
aggregate amount of Rentals payable by NWR in any Fiscal Year in respect of
such lease and all such other leases would exceed $2,000,000.
(f) RRC shall not enter into any lease of real or personal
property as lessee or sublessee.
8.25 Interest Coverage. (a) RMC will not permit the ratio
of RMC's and its consolidated Subsidiaries' (other than Diversified Trucking's)
(1) Adjusted Net Earnings from Operations plus, to the extent deducted in
computing such Adjusted Net Earnings from Operations, (A) cash interest
expense, (B) any provision for income taxes, (C) depreciation, and (D)
amortization, to (2) cash interest expense, to be less than the applicable
ratio set forth below as of the last day of the fiscal quarter of the Fiscal
Year indicated, calculated (i) for the third and fourth fiscal quarters of
Fiscal Year 1995 and the first fiscal quarter of Fiscal Year 1996, for the
period commencing on the first day of the third fiscal quarter of Fiscal Year
1995 and ending on such date, and (ii) for the second fiscal quarter of Fiscal
Year 1996 and for each fiscal quarter thereafter, for the four (4) consecutive
fiscal quarters ending on such date:
<TABLE>
<CAPTION>
Ratio Fiscal Quarter Fiscal Year
----- -------------- -----------
<S> <C> <C>
0.7 to 1.0 Third 1995
1.4 to 1.0 Fourth 1995
1.4 to 1.0 First 1996
1.4 to 1.0 Second 1996
1.4 to 1.0 Third 1996
and
1.4 to 1.0 Each fiscal quarter
thereafter
</TABLE>
For purposes of this Section 8.25(a), Adjusted Net Earnings of RMC and its
consolidated Subsidiaries, other than Diversified Trucking, for any fiscal
quarter shall be deemed to include the principal amount of any Debt of RMC
incurred during such fiscal quarter and subordinated to the Obligations on a
basis satisfactory in form and substance to the Majority Lenders; provided, no
such amounts in excess of $5,000,000 in the aggregate during the term of this
Agreement shall be so included
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<PAGE> 123
in Adjusted Net Earnings of RMC and its consolidated Subsidiaries other than
Diversified Trucking.
(b) RML will not permit the ratio of RML's (1) Adjusted Net
Earnings from Operations plus, to the extent deducted in computing such
Adjusted Net Earnings from Operations, (A) cash interest expense, (B) any
provision for income taxes, (C) depreciation, and (D) amortization, to (2) cash
interest expense, to be less than (i) 1.5 to 1.0 as of the last day of the
third and fourth fiscal quarters of Fiscal Year 1995 and the first fiscal
quarter of Fiscal Year 1996, for the period commencing on the first day of the
third fiscal quarter of Fiscal Year 1995 and ending on such date, and (ii) 1.5
to 1.0 as of the last day of each fiscal quarter thereafter, commencing with
the second fiscal quarter of Fiscal Year 1996, calculated for the four (4)
consecutive fiscal quarters ending on such date.
(c) Willow will not permit the ratio of Willow's (1) Adjusted
Net Earnings from Operations plus, to the extent deducted in computing such
Adjusted Net Earnings from Operations, (A) cash interest expense, (B) any
provision for income taxes, (C) depreciation, and (D) amortization, to (2) cash
interest expense, to be less than (i) 4.5 to 1.0 as of the last day of the
third and fourth fiscal quarters of Fiscal Year 1995 and the first fiscal
quarter of Fiscal Year 1996, for the period commencing on the first day of the
third fiscal quarter of Fiscal Year 1995 and ending on such date, and (ii) 4.5
to 1.0 as of the last day of each fiscal quarter thereafter, commencing with
the second fiscal quarter of Fiscal Year 1996, calculated for the four (4)
consecutive fiscal quarters ending on such date.
(d) Hutch will not permit the ratio of Hutch's (1) Adjusted
Net Earnings from Operations plus, to the extent deducted in computing such
Adjusted Net Earnings from Operations, (A) cash interest expense, (B) any
provision for income taxes, (C) depreciation, and (D) amortization, to (2) cash
interest expense, to be less than the applicable ratio set forth below as of
the last day of the fiscal quarter of the Fiscal Year indicated, calculated (i)
for the third and fourth fiscal quarters of Fiscal Year 1995 and the first
fiscal quarter of Fiscal Year 1996, for the period commencing on the first day
of the third fiscal quarter of Fiscal Year 1995 and ending on such date, and
(ii) for the second fiscal quarter of Fiscal Year 1996 and for each fiscal
quarter thereafter, for the four (4) consecutive fiscal quarters ending on such
date:
<TABLE>
<CAPTION>
Ratio Fiscal Quarter Fiscal Year
----- -------------- -----------
<S> <C> <C>
2.7 to 1.0 Third 1995
2.7 to 1.0 Fourth 1995
2.7 to 1.0 First 1996
3.1 to 1.0 Second 1996
</TABLE>
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<PAGE> 124
<TABLE>
<S> <C> <C>
3.1 to 1.0 Third 1996
3.6 to 1.0 Fourth 1996
3.6 to 1.0 First 1997
3.7 to 1.0 Second 1997
and
4.0 to 1.0 Each fiscal quarter
thereafter
</TABLE>
(e) NWR will not permit the ratio of NWR's (1) Adjusted Net
Earnings from Operations plus, to the extent deducted in computing such
Adjusted Net Earnings from Operations, (A) cash interest expense, (B) any
provision for income taxes, (C) depreciation, and (D) amortization, to (2) cash
interest expense, to be less than the applicable ratio set forth below as of
the last day of the fiscal quarter of the Fiscal Year indicated, calculated (i)
for the third and fourth fiscal quarters of Fiscal Year 1995 and the first
fiscal quarter of Fiscal Year 1996, for the period commencing on the first day
of the third fiscal quarter of Fiscal Year 1995 and ending on such date, and
(ii) for the second fiscal quarter of Fiscal Year 1996 and for each fiscal
quarter thereafter, for the four (4) consecutive fiscal quarters ending on such
date:
<TABLE>
<CAPTION>
Ratio Fiscal Quarter Fiscal Year
----- -------------- -----------
<S> <C> <C>
1.4 to 1.0 Third 1995
1.4 to 1.0 Fourth 1995
1.7 to 1.0 First 1996
2.2 to 1.0 Second 1996
2.4 to 1.0 Third 1996
2.5 to 1.0 Fourth 1996
2.6 to 1.0 First 1997
2.8 to 1.0 Second 1997
and
2.9 to 1.0 Each fiscal quarter
thereafter
</TABLE>
8.26 Adjusted Tangible Net Worth. (a) RMC and its
consolidated Subsidiaries other than Diversified Trucking will have Adjusted
Tangible Net Worth of not less than the applicable amount set forth below as of
the last day of the fiscal quarter of the Fiscal Year indicated:
<TABLE>
<CAPTION>
Amount Fiscal Quarter Fiscal Year
------ -------------- -----------
<S> <C> <C>
$ 73,414,000 Third 1995
$ 79,725,000 Fourth 1995
$ 80,183,000 First 1996
</TABLE>
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<PAGE> 125
<TABLE>
<S> <C> <C>
$ 81,027,000 Second 1996
$ 81,568,000 Third 1996
$ 83,918,000 Fourth 1996
$ 84,048,000 First 1997
$ 84,813,000 Second 1997
$ 85,276,000 Third 1997
$ 88,978,000 Fourth 1997
and
$ 88,500,000 Each fiscal quarter
thereafter
</TABLE>
(b) RML will have Adjusted Tangible Net Worth of not less
than the applicable amount set forth below as of the last day of the fiscal
quarter of the Fiscal Year indicated:
<TABLE>
<CAPTION>
Amount Fiscal Quarter Fiscal Year
------ -------------- -----------
<S> <C> <C>
$ 4,102,000 Fourth 1995
$ 4,102,000 First 1996
$ 4,102,000 Second 1996
$ 4,102,000 Third 1996
$ 4,985,000 Fourth 1996
$ 4,985,000 First 1997
$ 4,985,000 Second 1997
$ 4,985,000 Third 1997
$ 5,691,000 Fourth 1997
and
$ 5,700,000 Each fiscal quarter
thereafter
</TABLE>
(c) Willow will have Adjusted Tangible Net Worth of not less
than the applicable amount set forth below as of the last day of the fiscal
quarter of the Fiscal Year indicated:
<TABLE>
<CAPTION>
Amount Fiscal Quarter Fiscal Year
------ -------------- -----------
<S> <C> <C>
$ 2,283,000 Third 1995
$ 2,392,000 Fourth 1995
$ 2,390,000 First 1996
$ 2,718,000 Second 1996
$ 2,986,000 Third 1996
$ 3,129,000 Fourth 1996
$ 2,949,000 First 1997
$ 3,380,000 Second 1997
$ 3,713,000 Third 1997
$ 3,882,000 Fourth 1997
and
</TABLE>
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<PAGE> 126
<TABLE>
<S> <C>
$ 3,850,000 Each fiscal quarter
thereafter
</TABLE>
(d) Hutch will have Adjusted Tangible Net Worth of not less
than the applicable amount set forth below as of the last day of the fiscal
quarter of the Fiscal Year indicated:
<TABLE>
<CAPTION>
Amount Fiscal Quarter Fiscal Year
------ -------------- -----------
<S> <C> <C>
$ 5,298,000 Third 1995
$ 5,482,000 Fourth 1995
$ 6,073,000 First 1996
$ 6,012,000 Second 1996
$ 7,050,000 Third 1996
$ 7,698,000 Fourth 1996
$ 7,636,000 First 1997
$ 7,509,000 Second 1997
$ 8,775,000 Third 1997
$ 9,296,000 Fourth 1997
and
$ 9,000,000 Each fiscal quarter
thereafter
</TABLE>
(e) NWR will have Adjusted Tangible Net Worth of not less
than the applicable amount set forth below as of the last day of the fiscal
quarter of the Fiscal Year indicated:
<TABLE>
<CAPTION>
Amount Fiscal Quarter Fiscal Year
------ -------------- -----------
<S> <C> <C>
$ 8,202,000 Third 1995
$ 8,249,000 Fourth 1995
$ 9,160,000 First 1996
$ 11,369,000 Second 1996
$ 12,742,000 Third 1996
$ 12,799,000 Fourth 1996
$ 13,619,000 First 1997
$ 16,270,000 Second 1997
$ 17,904,000 Third 1997
$ 18,171,000 Fourth 1997
and
$ 21,000,000 Each fiscal quarter
thereafter
</TABLE>
8.27 RMC Availability. RMC shall have Individual
Availability of not less than the applicable amount set forth below as of the
last day of the fiscal quarter of the Fiscal Year indicated:
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<PAGE> 127
<TABLE>
<CAPTION>
Amount Fiscal Quarter Fiscal Year
------ -------------- -----------
<S> <C> <C>
$ 500,000 Third 1995
$ 1,000,000 Fourth 1995
$ 200,000 First 1996
$ 1,700,000 Second 1996
$ 1,800,000 Third 1996
$ 1,200,000 Fourth 1996
$ 500,000 First 1997
$ 2,000,000 Second 1997
$ 2,000,000 Third 1997
and
$ 1,500,000 Each fiscal quarter
thereafter
</TABLE>
8.28 Fiscal Year. No Borrower will change its Fiscal Year
from a calendar year.
8.29 Further Assurances. Each Borrower shall execute and
deliver, or cause to be executed and delivered, to the Agent and/or the Lenders
such documents and agreements, and shall take or cause to be taken such
actions, as the Agent may, from time to time, request to carry out the terms
and conditions of this Agreement and the other Loan Documents.
ARTICLE 9
CONDITIONS OF LENDING
9.1 Conditions Precedent to Making of Loans on the
Restatement Closing Date. The obligation of the Lenders to make the initial
Loans on the Restatement Closing Date, and the obligation of the Agent to take
reasonable steps to cause to be issued any Letter of Credit or created any
Acceptance on the Restatement Closing Date and the obligation of the Lenders to
participate in any credit support or enhancement provided through the Agent in
connection with any such Letter of Credit or Acceptance, are subject to the
following conditions precedent having been satisfied in a manner satisfactory
to the Agent and the Lenders:
(a) Each Borrower shall have performed and complied with all
covenants, agreements and conditions contained herein which are
required to be performed or complied with by such Borrower before or
on the Restatement Closing Date.
(b) The Agent and the Lenders shall have received
certificates dated the Restatement Closing Date and
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signed by the vice president administration - treasurer of RMC, Hutch,
NWR, Willow and RRC, and treasurer and secretary of RML, certifying
that the condition specified in Section 9.1(a) has been fulfilled, and
setting forth in detail each component of such Borrower's Individual
Borrowing Base, Individual Maximum Revolver Amount and Aggregate
Revolver Outstandings in order to demonstrate that after making the
Revolving Loans on the Restatement Closing Date, Availability would be
at least $5,000,000, and Individual Availability for each Borrower
shall be at least zero.
(c) The Agent and the Lenders shall have received all items
on the List of Closing Documents attached hereto as Exhibit G which
are not elsewhere identified in this Article 9, such items to be in
form and substance satisfactory to the Agent and the Lenders, and to
be executed by all parties thereto when the nature of such items so
requires.
(d) The Borrowers shall have paid to the Agent, for its
benefit and/or for the benefit of the Lenders, as applicable, the
Closing Fee and all fees, costs, and expenses (including, without
limitation, attorneys and paralegals fees and disbursements) incurred
by the Agent and the Lenders in connection with the negotiation,
preparation, and consummation of this Agreement, the other Loan
Agreements and the transactions contemplated thereby.
(e) All proceedings taken in connection with the execution of
this Agreement, all other Loan Documents and all documents and papers
relating thereto shall be satisfactory to the Agent and the Lenders.
The Agent shall have received copies of such documents and papers as
the Agent and the Lenders may reasonably request in connection
therewith, all in form and substance satisfactory to the Agent and the
Lenders.
(f) (A) RMC will have Adjusted Tangible Net Worth of not less
than $72,000,000 on the Restatement Closing Date, and (B) the Parent
will have "Adjusted Tangible Net Worth" (as such term is defined in
the Parent Guaranty) of not less than $106,500,000 on the Restatement
Closing Date.
The acceptance by a Borrower of any Loans made on the Restatement Closing Date
shall be deemed to be a representation and warranty made by such Borrower to
the effect that all of the conditions to the making of such Loans set forth in
this Section 9.1 have been satisfied, with the same effect as delivery to the
Agent and the Lenders of a certificate signed by the president and chief
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financial officer or treasurer of such Borrower, dated the Restatement Closing
Date, to such effect.
9.2 Conditions Precedent to Each Loan. The obligation of the
Lenders to make each Loan, including the initial Loans on the Restatement
Closing Date, and the obligation of the Agent to take reasonable steps to cause
to be issued any Letter of Credit or created any Acceptance, including any
Letter of Credit issued or Acceptance created on the Restatement Closing Date,
and the obligation of the Lenders to participate in any credit support or
enhancement provided through the Agent in connection with any such Letter of
Credit or Acceptance, shall be subject to the further conditions precedent that
on the date of any such extension of credit;
(a) the following statements shall be true, and the
acceptance by a Borrower of any extension of credit shall be deemed to
be a statement to the effect set forth in clauses (1) and (2), with
the same effect as the delivery to the Agent and the Lenders of a
certificate signed by the president and chief financial officer or
treasurer of such Borrower, dated the date of such extension of
credit, stating that:
(1) The representations and warranties contained in
this Agreement and the other Loan Documents are correct in all
material respects on and as of the date of such extension of
credit as though made on and as of such date, except to the
extent the Agent and the Lenders have been notified by a
Borrower that any representation or warranty is not correct
and the Majority Lenders have explicitly waived in writing
compliance with such representation or warranty;
(2) No event has occurred and is continuing, or
would result from such extension of credit, which constitutes
a Default or an Event of Default; and
(3) Such extension of credit is permitted to be made
pursuant to Section 4.11 of the Senior Subordinated Note
Indenture;
(b) the Agent and the Lenders shall have received such other
approvals, opinions or documents as they may reasonably request;
(c) no order, judgment or decree of any Public Authority and
no law, rule or regulation applicable to the
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Agent or any Lender shall purport by its terms to enjoin, restrain or
otherwise prohibit the making of such Loan;
(d) since December 31, 1994, no material adverse change shall
have occurred with respect to the business, operations, assets,
financial condition or prospects of any Borrower; and
(e) in the case of a Capital Expenditure Loan, the Agent
shall obtain a first priority perfected Lien, for the benefit of the
Secured Creditors, on the Equipment that served as the basis for such
Capital Expenditure Loan, contemporaneously with the making of such
Capital Expenditure Loan;
provided, however, that the foregoing conditions precedent are not conditions
to each Lender participating in or reimbursing BABC or the Agent for such
Lender's Pro Rata Share of any BABC Loan or Agent Advance as provided in
Sections 2.4(g), (h) and (i).
ARTICLE 10
DEFAULT; REMEDIES
10.1 Events of Default. It shall constitute an event of
default ("Event of Default") if any one or more of the following shall occur
for any reason:
(a) any failure to pay the principal of or interest or
premium on any of the Obligations when due, whether upon demand or
otherwise;
(b) any representation or warranty made by any Borrower in
this Agreement, any of the other Loan Documents, any Financial
Statement, or any certificate furnished by any Borrower at any time to
the Agent or any Lender shall prove to be untrue or misleading in any
material respect as of the date on which made;
(c) any failure by any Borrower to comply with any of the
covenants set forth in Article 8;
(d) any failure by any Borrower to comply with any of the
other covenants and agreements contained in this Agreement, the
Mortgages, the other Loan Documents, or any other agreement entered
into at any time to which any Borrower and the Agent and/or any Lender
are party, for more than (1) twenty (20) days after notice of such
failure by the Agent to the applicable Borrower, (2) thirty (30) days
after the
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<PAGE> 131
date that the applicable Borrower discovers, or reasonably should have
discovered, such failure, or (3) if such failure shall have existed
for more than forty-five (45) days, five (5) days after the earlier of
(A) written notice thereof from the Agent to the applicable Borrower
or (B) the applicable Borrower's discovery of such failure; provided,
however, that no such grace period shall apply, and an Event of
Default shall exist promptly upon such failure to comply, if such
failure to comply may not, in the reasonable determination of the
Majority Lenders, be cured by the applicable Borrower during such
grace period; or if any such agreement, instrument or document shall
terminate (other than in accordance with its terms or the terms hereof
or with the written consent of the Majority Lenders) or become void or
unenforceable without the written consent of the Majority Lenders;
(e) default shall occur with respect to the Subordinated
Debentures or the Senior Subordinated Notes, or default shall occur
with respect to any Debt for borrowed money (other than the
Obligations, the UDAG Debt and the Wisconsin Department of Development
Debt) in an outstanding principal amount in excess of $200,000 or
under any agreement or instrument under or pursuant to which any such
Debt or indebtedness may have been issued, created, assumed, or
guaranteed by any Borrower, and any such default shall continue for
more than the period of grace, if any, therein specified, if the
effect thereof (with or without the giving of notice or further lapse
of time or both) is to accelerate, or to permit the holders of any
such Debt or indebtedness to accelerate, the maturity of any such Debt
or indebtedness; or any Debt (including the UDAG Debt and the
Wisconsin Department of Development Debt) or indebtedness shall be
declared due and payable or be required to be prepaid (other than by a
regularly scheduled required prepayment) prior to the stated maturity
thereof;
(f) the Parent, DP, International, any Borrower, or any
Subsidiary of any Borrower, shall (1) file a voluntary petition in
bankruptcy or file a voluntary petition or an answer or otherwise
commence any action or proceeding seeking reorganization, arrangement
or readjustment of its debts or for any other relief under the federal
Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency act or law, state or federal, now or hereafter existing, or
consent to, approve of, or acquiesce in, any such petition, action or
proceeding; (2) apply for or acquiesce in the appointment of a
receiver, assignee, liquidator,
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sequestrator, custodian, trustee or similar officer for it or for all
or any part of its property; (3) make an assignment for the benefit of
creditors; or (4) be unable generally to pay its debts as they become
due;
(g) an involuntary petition shall be filed or an action or
proceeding otherwise commenced against any Borrower, or any Subsidiary
of any Borrower, seeking reorganization, arrangement or readjustment
of the debts of such Borrower or Subsidiary or for any other relief
under the federal Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency act or law, state or federal, now or
hereafter existing, and either (1) such petition, action or proceeding
shall remain undismissed or unvacated for a period of sixty (60) days,
or (2) an order for relief shall be entered with respect thereto;
(h) a receiver, assignee, liquidator, sequestrator,
custodian, trustee or similar officer for any Borrower, or any
Subsidiary of any Borrower, or for all or any material part of their
property shall be appointed; or a warrant of attachment, execution or
similar process shall be issued against any material part of the
property of any Borrower;
(i) any Borrower, or any Subsidiary of any Borrower, shall
file a certificate of dissolution under applicable state or provincial
law or shall be liquidated, dissolved or wound-up or shall commence or
have commenced against it any action or proceeding for dissolution,
winding-up or liquidation, or shall take any corporate action in
furtherance thereof;
(j) all or any material part of the property of any Borrower,
or any Subsidiary of any Borrower, shall be nationalized, expropriated
or condemned, seized or otherwise appropriated, or custody or control
of such property or of any Borrower or any Subsidiary of any Borrower
shall be assumed by any Public Authority or any court of competent
jurisdiction at the instance of any Public Authority, except where
contested in good faith by proper proceedings diligently pursued where
a stay of enforcement is in effect;
(k) for any reason other than the failure of the Agent to
take any action available to it to maintain perfection of the Liens
created in favor of the Agent pursuant to the Loan Documents, any Loan
Document ceases to be in full force and effect or any Lien with
respect to any material portion of the Collateral intended to be
secured thereby ceases to be, or is not,
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valid, perfected and prior to all other Liens (other than Permitted
Liens) or is terminated, revoked or declared void;
(l) one or more final judgments for the payment of money
aggregating in excess of $50,000 (whether or not covered by insurance)
shall be rendered against any Borrower, or any Subsidiary of any
Borrower, which is not discharged in full or stayed within thirty (30)
days from the date of entry thereof;
(m) any loss, theft, damage or destruction of any item or
items of Collateral occurs which (1) materially and adversely affects
the operation of any Borrower's business; or (2) is material in amount
and is not adequately covered by insurance;
(n) there occurs any material adverse change in any
Borrower's property, business, operations, financial condition or
prospects;
(o) Any Termination Event occurs which the Majority Lenders
reasonably believe could subject any Borrower or any ERISA Affiliate
of any Borrower to a liability in excess of $25,000;
(p) The plan administrator of any Plan applies under Section
412(d) of the Code for a waiver of the minimum funding standards of
Section 412(a) of the Code and the Majority Lenders reasonably believe
that the substantial business hardship upon which the application for
such waiver is based could subject any Borrower or any ERISA Affiliate
of any Borrower to a liability in excess of $25,000;
(q) there is filed against any Borrower, or any Subsidiary of
any Borrower, any civil or criminal action, suit or proceeding under
any federal or state racketeering statute (including, without
limitation, the Racketeer Influenced and Corrupt Organization Act of
1970), which action, suit or proceeding (1) is not dismissed within
one hundred eighty (180) days, and (2) could result in the
confiscation or forfeiture of any material portion of the Collateral
or the other assets of any Borrower or the assets of any Subsidiary of
any Borrower;
(r) the Parent shall cease to own one hundred percent (100%)
of the capital stock of RMC, DP, RLTD, Willow, Hutch, NWR and
International, or International shall cease to own one hundred percent
(100%) of the
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capital stock of RML, or RMC shall cease to own one hundred percent
(100%) of the capital stock of RRC; or
(s) any default shall occur under the Parent Guaranty, the DP
Guaranty, the International Guaranty, the Actava World Trade Guaranty
or the Diversified Trucking Guaranty or the Parent Guaranty, the DP
Guaranty, the International Guaranty, the Actava World Trade Guaranty
or the Diversified Trucking Guaranty shall be terminated, revoked or
declared void or invalid.
10.2 Remedies. (a) If a Default or an Event of Default
exists, the Agent may, in its discretion, or, at the direction of the Majority
Lenders, shall, without notice to or demand on any Borrower, do one or more of
the following at any time or times and in any order: (1) reduce the Maximum
Revolver Amount, the Individual Maximum Revolver Amount with respect to any or
all Borrowers, or the amount of the Revolver Facility or Capital Expenditure
Facility, or the advance rates against Eligible Accounts and/or Eligible
Inventory used in computing the Maximum Revolver Amount and Individual Maximum
Revolver Amount with respect to any or all Borrowers, or reduce or increase one
or more of the other elements used in computing the Maximum Revolver Amount and
Individual Maximum Revolver Amount with respect to any or all Borrowers; and
(2) restrict the amount of or refuse to make Revolving Loans or Capital
Expenditure Loans and restrict or refuse to arrange for Letters of Credit or
Acceptances. If an Event of Default exists, the Agent may, in its discretion,
or shall, at the direction of the Majority Lenders, without notice to or demand
on any Borrower, except as otherwise provided herein, do one or more of the
following, in addition to the actions described in the preceding sentence, at
any time or times and in any order: (A) terminate the Commitments and this
Agreement and (B) upon notice to the Borrowers, declare any or all Obligations
to be immediately due and payable (provided however that upon the occurrence of
any Event of Default described in Sections 10.1(f), 10.1(h), or 10.1(i), the
Commitments shall automatically and immediately expire and all Obligations
shall automatically become immediately due and payable without notice or demand
of any kind); and pursue its other rights and remedies under the Loan Documents
and applicable law. Notwithstanding anything contained in this Agreement, no
Lender shall have any obligation to make Loans hereunder during the existence
of any Event of Default; provided, that the foregoing sentence shall not limit
the provisions contained in this Agreement with respect to each Lender
participating in or reimbursing BABC or the Agent for such Lender's Pro Rata
Share of any BABC Loan or Agent Advance as provided in Sections 2.4(g), (h) and
(i).
(b) If an Event of Default exists: (1) the Agent shall have,
in addition to all other rights, the rights and
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remedies of a secured party under the UCC and the PPSA; (2) the Agent may, at
any time, take possession of the Collateral and keep it on the applicable
Borrower's premises, at no cost to the Agent or any Lender, or remove any part
of it to such other place or places as the Agent may desire, or the Borrowers
shall, upon the Agent's demand, at the Borrowers' cost, assemble the Collateral
and make it available to the Agent at a place reasonably convenient to the
Agent; and (3) the Agent may sell and deliver any Collateral at public or
private sales, for cash, upon credit or otherwise, at such prices and upon such
terms as the Agent deems advisable, in its sole discretion, and may, if the
Agent deems it reasonable, postpone or adjourn any sale of the Collateral by an
announcement at the time and place of sale or of such postponed or adjourned
sale without giving a new notice of sale. Without in any way requiring notice
to be given in the following manner, the Borrowers agree that any notice by the
Agent of sale, disposition or other intended action hereunder or in connection
herewith, whether required by the UCC, the PPSA or otherwise, shall constitute
reasonable notice to the Borrowers if such notice is mailed by registered or
certified mail, return receipt requested, postage prepaid, or is delivered
personally against receipt, at least five (5) days prior to such action (or at
least fifteen (15) days prior to such action in the case of any action with
respect to Collateral of RML located in the Province of Ontario, Canada) to the
Borrowers' address specified in or pursuant to Section 14.7. If any Collateral
is sold on terms other than payment in full at the time of sale, no credit
shall be given against the Obligations until the Agent or the Lenders receive
payment, and if the buyer defaults in payment, the Agent may resell the
Collateral without further notice to any Borrower. In the event the Agent
seeks to take possession of all or any portion of the Collateral by judicial
process, each Borrower irrevocably waives: (A) the posting of any bond, surety
or security with respect thereto which might otherwise be required; (B) any
demand for possession prior to the commencement of any suit or action to
recover the Collateral; and (C) any requirement that the Agent retain
possession and not dispose of any Collateral until after trial or final
judgment. Each Borrower agrees that the Agent has no obligation to preserve
rights to the Collateral or marshall any Collateral for the benefit of any
Person. The Agent is hereby granted a license or other right to use, without
charge, each Borrower's labels, patents, copyrights, name, trade secrets, trade
names, trademarks, and advertising matter, or any similar property, in
completing production of, advertising or selling any Collateral, and each
Borrower's rights under all licenses and all franchise agreements shall inure
to the Agent's benefit. The proceeds of sale shall be applied first to all
expenses of sale, including attorneys' fees, and second, in whatever order the
Majority Lenders shall elect, to all Obligations (in accordance with each
Lender's Pro Rata Share therein, as applicable). The Agent will return any
excess to the applicable Borrower or such other Person
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as shall be legally entitled thereto and the Borrowers shall remain liable for
any deficiency.
(c) If an Event of Default occurs, except as otherwise
specifically provided herein, each Borrower hereby waives all rights to notice
and hearing prior to the exercise by the Agent of the Agent's rights to
repossess the Collateral without judicial process or to replevy, attach or levy
upon the Collateral without notice or hearing.
(d) If the Agent, in its discretion or at the direction of
the Majority Lenders, shall terminate this Agreement upon an Event of Default,
the Borrowers shall pay the Agent, for the account of the Lenders, immediately
upon termination, an early termination penalty equal to the early termination
fee that would have been payable under Section 3.11 if this Agreement had been
terminated on that date pursuant to the Borrowers' election.
ARTICLE 11
TERM AND TERMINATION
11.1 Term and Termination. The term of this Agreement shall
end on the Stated Termination Date. The Majority Lenders may terminate this
Agreement without notice upon the occurrence of an Event of Default. Upon the
effective date of termination of this Agreement for any reason whatsoever, all
Obligations shall become immediately due and payable. Notwithstanding the
termination of this Agreement, until all Obligations are paid and performed in
full, the Agent and the Lenders shall retain all their rights and remedies
hereunder (including, without limitation, the security interest of the Agent,
for the ratable benefit of the Secured Creditors, in and all rights and
remedies with respect to all then existing and after-arising Collateral).
ARTICLE 12
AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
12.1 No Implied Waivers. No act, failure or delay by the
Agent or the Lenders shall constitute a waiver of any of their rights and
remedies. No single or partial waiver by the Agent or the Lenders of any
provision of this Agreement or any other Loan Document, or of breach or default
hereunder or thereunder, or of any right or remedy which the Agent or the
Lenders may have, shall operate as a waiver of any other provision, breach,
default, right or remedy or of the same provisions, breach, default, right or
remedy on a future occasion. No waiver by the Agent or the Lenders shall
affect their rights to require strict performance of this Agreement.
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12.2 Amendments and Waivers. No amendment or modification of
any provision of this Agreement shall be effective without the written
agreement of the Majority Lenders and the Borrowers, and no termination or
waiver of any provision of this Agreement, or consent to any departure by a
Borrower therefrom, shall in any event be effective without the written
concurrence of the Majority Lenders, which concurrence the Majority Lenders
shall have the right to grant or withhold at their sole discretion.
Notwithstanding the immediately preceding sentence, any amendment, modification
or waiver (a) of any provision of Articles 2, 3 or 4, which amendment,
modification or waiver relates to any increase in the Commitments or in the
principal amount of any Capital Expenditure Loan or face amount of any Letter
of Credit, extension of the Stated Maturity Date or of the average life or
maturity of any installment of any Capital Expenditure Loan or of the
expiration date of any Letter of Credit or Acceptance, or reduction of the
interest rates applicable to any Loans or the amount of fees payable hereunder,
shall be effective if, and only if, evidenced by a writing agreed to and signed
by all Lenders, (b) effectuating the discharge of any guarantor or release of
any Guaranty of any of the Obligations, the discharge of any Borrower, or the
subordination of the Agent's Liens pursuant to this Agreement, or (b) of the
definitions of "Majority Lenders," "Pro Rata Share," "Maximum Revolver Amount"
or "Individual Maximum Revolver Amount" (or any term affecting the calculation
of the Maximum Revolver Amount or Individual Maximum Revolver Amount in any
material respect), or the provisions contained in this Section 12.2, or in
Section 13.8(a) with respect to the release of the Agent's Liens, shall be
effective if, and only if, evidenced by a writing agreed to and signed by all
Lenders. No amendment, modification, termination, or waiver of any provision
of Article 13 or any other provision referring to the Agent shall be effective
without the written concurrence of the Agent. The Agent may, but shall have no
obligation to, with the written concurrence of any Lender, execute amendments,
modifications, waivers or consents on behalf of such Lender. Any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on a Borrower in any
case shall entitle any Borrower to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, waiver or consent
effected in accordance with this Section 12.2 shall be binding on each Secured
Creditor, each future Secured Creditor, and, if signed by the Borrowers, on the
Borrowers.
12.3 Assignments; Participations.
(a) Each Lender shall have the right, with the Agent's
consent and after consultation with the Borrowers regarding the prospective
assignee, at any time to assign to one or more commercial banks or other
financial institutions all or a portion
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of its Commitment, the Loans owing to it and Capital Expenditure Loan Notes
held by it and its rights and obligations with respect to Letters of Credit and
Acceptances; provided, however, that the Agent shall not withhold its consent
to any such assignment made in compliance with this Section 12.3 to any of the
financial institutions set forth on Schedule 12.3; and provided, further, that
(1) each such assignment shall be of a constant, and not a varying percentage
of all of the assigning Lender's corresponding rights and obligations under
this Agreement and the assignment shall apply the same percentage to such
Lender's Commitment and Loans, (2) the aggregate amount of the outstanding
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance entered
into with respect to such assignment by the assigning Lender and the assignee,
and accepted by the Agent, in substantially the form of Exhibit H ("Assignment
and Acceptance")) shall in no event be less than $15,000,000 and integral
multiples of $5,000,000 in excess of that amount, except that such limitation
shall not apply to an assignment by any Lender of all of its rights and
obligations under this Agreement or to an assignment by an original signatory
to this Agreement to another such signatory, (3) except in the case of an
assignment in whole of a Lender's rights and obligations under this Agreement
or an assignment by an original signatory to this Agreement to another such
signatory, immediately after giving effect to any assignment the aggregate
amount of the outstanding Commitment still held by the assigning Lender in its
own name shall in no event be less than $5,000,000, and (4) the parties to each
such assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together the Capital
Expenditure Loan Notes subject to such assignment with a processing and
recordation fee of $5,000. Notwithstanding the immediately preceding sentence,
no Lender other than BABC shall be permitted to make any assignment of any of
its Commitment, Loans or rights and obligations with respect to Letters of
Credit and Acceptances to any commercial bank or other financial institution
other than BABC, unless BABC shall have declined to purchase such Commitment,
Loans and rights and obligations pursuant to an assignment transaction having
substantially identical terms. Upon execution, delivery, acceptance and
recording of any Assignment and Acceptance, from and after the effective date
specified therein, which effective date shall be at least two (2) Business Days
after the execution thereof, (A) the assignee thereunder shall be a party
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 (including, but not limited to, the obligation to participate in
credit support or other enhancement for Letters of Credit and Acceptances
pursuant to Section 2.5(f)) of a Lender hereunder and (B) the assigning Lender
thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance,
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relinquish its rights 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 rights and obligations under this Agreement,
such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (1) other than
as provided in such Assignment and Acceptance, such assigning Lender 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 the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto; (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Borrower or the performance or observance by any Borrower of any of its
obligations under this Agreement or any other Loan Document furnished pursuant
hereto; (3) such assignee confirms that it has received a copy of this
Agreement, together with 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; (4) such assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender, 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; (5) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (6) such assignee agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of this Agreement are required to be performed by it as a Lender.
(c) The Agent shall maintain at its address set forth in
Section 14.7 a copy of each Assignment and Acceptance delivered to and accepted
by it and books and records, including computer records, in which it shall
record the names and addresses of the Lenders and the Commitment of, and
principal amount of the Loans owing to, each Lender from time to time (the
"Register"). The entries in the Register shall constitute rebuttably
presumptive evidence, absent manifest error, of the accuracy of the information
contained therein, and the Borrowers, the Agent and the Lenders may treat each
Person the name of which is recorded in the Register as a Lender hereunder for
all purposes of this Agreement. The Register shall be available for inspection
by the Borrowers or any Lender at any reasonable time and from time to time
upon reasonable prior notice.
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(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee, together with the Capital Expenditure
Loan Notes subject to such assignment, the Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit H,
(1) accept such Assignment and Acceptance, (2) record the information contained
therein in the Register, and (3) give prompt notice thereof to the Borrowers.
Within five (5) Business Days after the Borrowers' receipt of such notice, the
Borrowers, at their own expense, will execute and deliver to the Agent in
exchange for the surrendered Capital Expenditure Loan Notes, new Capital
Expenditure Loan Notes to the order of (A) such assigning Lender, in amounts
corresponding to the interest in the rights and obligations under this
Agreement retained by such Lender, and (B) such assignee, in amounts
corresponding to the interest in the assigning Lender's rights and obligations
under this Agreement acquired by such assignee pursuant to such Assignment and
Acceptance. Such new Capital Expenditure Loan Notes shall be in aggregate
principal amounts equal to the aggregate principal amounts of such surrendered
Capital Expenditure Loan Notes, shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in substantially the form of
Exhibit F. Upon delivery of such new Capital Expenditure Loan Notes, the
surrendered Capital Expenditure Loan Notes shall be cancelled by the Agent and
returned to the applicable Borrower.
(e) Each Lender may sell participations in all or any part of
its rights and obligations under this Agreement (including, without limitation,
all or any part of its Commitment, the Loans or its rights in connection with
Letters of Credit and Acceptances, as applicable), in minimum amounts of
$10,000,000 and integral multiples of $5,000,000 in excess of that amount, to
one or more other Persons; provided, however, that (1) such Lender's
obligations under this Agreement shall remain unchanged, (2) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, and (3) the Agent, the Borrowers and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement. No Participating Lender
may be given any rights to require the Lender granting such Participating
Lender's participation to vote against any matters, other than (A) the release
of all or substantially all of the Collateral, or (B) any amendment,
modification or waiver of any provision of Articles 2, 3 or 4 relating to the
principal amount of the Loans, Letters of Credit or Acceptances, the maturity
dates of the Loans, the interest rates borne by the Loans and the amounts of
any fees payable to such Lender under Sections 3.5 through 3.8 and 3.11. No
Participating Lender shall be a "Lender" for any purpose under this Agreement;
provided, however, that any Participating Lender may be given the rights and
obligations of a Lender (including any right to receive payment) under Sections
3.3(e) and (f), 3.5
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through 3.8, 3.11, 4.3, 4.8 and 14.8, provided, further, that all requests for
any such payments shall be made by any Participating Lender through the Lender
granting such participation. The right of each Participating Lender to receive
payment pursuant to the immediately preceding sentence shall be limited to the
lesser of (i) the amounts actually incurred by such Participating Lender for
which payment is provided under such Sections and (ii) the amounts that would
have been payable under such Sections to the Lender granting the participation
had such participation not been granted. It is expressly agreed that, in
connection with prospective offers for the sale and transfer of any
participation pursuant to this Section 12.3(e), any Lender may provide to any
prospective Participating Lender such information pertaining to the Borrowers
as such Lender may deem appropriate.
(f) If a Participating Lender shall at any time with the
Borrowers' knowledge participate with any Lender in the Loans, each Borrower
hereby grants to such Participating Lender, and such Participating Lender shall
have and is hereby given, for the its benefit and that of the Agent and the
Lenders, a continuing Lien on and security interest in any money, Securities
and other property of such Borrower in the custody or possession of such
Participating Lender, including the right of set-off, to the extent of the
total amount of the Obligations, and such Participating Lender shall be deemed
to have the same right of set-off to the extent of the Participating Lender's
participation in the Obligations under this Agreement as it would have if it
were a direct lender.
(g) Notwithstanding any other provision in this Agreement,
any Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement, in favor of any
Federal Reserve Bank, in accordance with Regulation A of the Federal Reserve
Board or U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal
Reserve Bank may enforce such pledge or security interest in any manner
permitted under applicable law.
12.4 Binding Effect; Assignment; Disclosure. The provisions
of this Agreement shall be binding upon and inure to the benefit of the
respective representatives, successors and assigns of the parties hereto;
provided, however, that no interest herein may be assigned by any Borrower
without the prior written consent of the Agent and the Lenders. With respect
to a Borrower, successors and assigns shall include, without limitation, any
receiver, trustee or debtor-in-possession of or for such Borrower. The rights
and benefits of any Lender hereunder shall, if such Lender so agrees, inure to
any party acquiring any interest in the Obligations or any part thereof,
subject to the provisions of Section 12.3. Each Borrower agrees that the Agent
and any Lender may use such Borrower's name in
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advertising and promotional materials and in conjunction therewith disclose the
general terms of this Agreement.
ARTICLE 13
THE AGENT
13.1 Appointment. Each Lender hereby designates and appoints
BankAmerica Business Credit, Inc. as its Agent under this Agreement and the
other Loan Documents, and each Lender hereby irrevocably authorizes the Agent
to take such action on its behalf under the provisions of this Agreement and
the other Loan Documents and to exercise such powers as are set forth herein or
therein, together with such other powers as are reasonably incidental thereto.
The Agent agrees to act as such on the express conditions contained in this
Article 13. The provisions of this Article 13 are solely for the benefit of
the Agent and the Lenders, and no Borrower shall have any rights as a third
party beneficiary of any of the provisions hereof (other than as expressly set
forth in Section 13.7). In performing its functions and duties under this
Agreement, the Agent shall act solely as agent of the Lenders and does not
assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any Borrower. The Agent may
perform any of its duties under this Agreement, or under the other Loan
Documents, by or through its agents or employees.
13.2 Nature of Duties. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement or in the
other Loan Documents. Except as expressly otherwise provided in this
Agreement, the Agent shall have and may use its sole discretion with respect to
exercising or refraining from exercising any discretionary rights or taking or
refraining from taking any actions which the Agent is expressly entitled to
take or assert under this Agreement and the other Loan Documents, including,
without limitation, (a) subject to the limitations upon the Agent's discretion
described in the definitions of Eligible Accounts and Eligible Inventory, the
determination of the applicability of ineligibility criteria with respect to
the calculation of the Maximum Revolver Amount and Individual Maximum Revolver
Amounts, (b) the making of Agent Advances pursuant to Section 2.4(h), and (c)
the exercise of remedies pursuant to Section 10.2, and any action so taken or
not taken shall be deemed consented to by the Lenders. The Agent shall not
have by reason of this Agreement a fiduciary relationship in respect of any
Lender. Nothing in this Agreement or any of the other Loan Documents, express
or implied, is intended to or shall be construed to impose upon the Agent any
obligations in respect of this Agreement or any of the other Loan Documents
except as expressly set forth herein or therein. Each Lender shall make its
own independent investigation of the financial
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condition and affairs of the Borrowers in connection with the making and the
continuance of the Loans hereunder, and shall make its own appraisal of the
creditworthiness of the Borrowers, and the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any
Lender with any credit or other information with respect thereto, whether
coming into its possession before the date of this Agreement or at any time or
times thereafter, other than written reports provided by the Borrowers to the
Agent pursuant to this Agreement. If the Agent seeks the consent or approval
of the Majority Lenders to the taking or refraining from taking any action
hereunder, the Agent shall send notice thereof to each Lender. The Agent shall
promptly notify each Lender (1) any time that the Agent becomes aware that an
Event of Default has occurred and is continuing and (2) any time that the
Majority Lenders have instructed the Agent to act or refrain from acting
pursuant hereto. The Agent may employ agents, co-agents and attorneys-in-fact
and shall not be responsible to the Lenders or the Borrowers, except as to
money or securities received by it or its authorized agents, for the negligence
or misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care.
13.3 Rights, Exculpation, Etc. Neither the Agent nor any of
its officers, directors, employees or agents shall be liable to any Lender for
any action taken or omitted by it or any of them under this Agreement or under
any of the other Loan Documents, or in connection herewith or therewith, except
that (a) the Agent shall be obligated on the terms set forth herein for
performance of its express obligations under this Agreement; (b) the Agent
shall not be entitled to exercise any of the powers granted to it under this
Agreement or the other Loan Documents in any way inconsistent with its express
obligations to the Lenders under this Agreement; and (c) no Person shall be
relieved of any liability imposed by law for gross negligence or for willful
misconduct or any other intentional tort. The Agent shall not be liable for
any apportionment or distribution of payments made by it in good faith pursuant
to Section 4.6, and if any such apportionment or distribution is subsequently
determined to have been made in error, the sole recourse of any Secured
Creditor to whom payment was due but not made shall be to recover from other
Secured Creditors any payment in excess of the amount to which it is determined
to have been entitled. The Agent shall not be responsible to any Lender for
any recitals, statements, representations or warranties contained in this
Agreement or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility, or sufficiency of this Agreement or any of the
other Loan Documents or any of the transactions contemplated thereby, or for
the financial condition of any Borrower. The Agent shall not be required to
make any inquiry concerning either the performance or observance of any of the
terms, provisions or conditions of this Agreement or any of the other Loan
Documents or the financial condition of any Borrower, or the existence or
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possible existence of any Default or Event of Default. The Agent may at any
time request instructions from the Lenders or Majority Lenders with respect to
any actions or approvals which by the terms of this Agreement or of any of the
other Loan Documents the Agent is permitted or required to take or to grant,
and if such instructions are promptly requested, the Agent shall be absolutely
entitled to refrain from taking any action or to withhold any approval and
shall not be under any liability whatsoever to any Person for refraining from
any action or withholding any approval under any of the Loan Documents until it
shall have received such instructions from the Lenders or Majority Lenders, as
applicable. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against the Agent as a result of the Agent acting or
refraining from acting under this Agreement or any of the other Loan Documents
in accordance with the instructions of the Lenders or Majority Lenders, as
applicable.
13.4 Reliance. The Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message believed by it in good faith to be genuine and correct and to
have been signed, sent or made by the proper Person, and with respect to all
matters pertaining to this Agreement or any of the other Loan Documents and its
duties hereunder or thereunder, upon advice of counsel selected by it.
13.5 Indemnification of the Agent by the Lenders. To the
extent that the Agent is not reimbursed and indemnified by the Borrowers, the
Lenders will reimburse and indemnify the Agent for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses, advances or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent
in any way relating to or arising out of this Agreement or any of the other
Loan Documents or any action taken or omitted by the Agent under this Agreement
or any of the other Loan Documents, in proportion to each Lender's Pro Rata
Share, including, without limitation, Agent Advances; provided, however, that
no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses,
advances or disbursements resulting from the Agent's recklessness, willful
misconduct or gross negligence. The obligations of the Lenders under this
Section 13.5 shall survive the resignation of an Agent pursuant to Section
13.7, the payment in full of the Loans and reimbursement obligations with
respect to Letters of Credit, the termination of all outstanding Letters of
Credit and Acceptances and the termination of this Agreement.
13.6 Agent in Individual Capacity. BABC and its affiliates
may make loans to, issue letters of credit for the account of, create
Acceptances for the account of, accept
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deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with the
Borrowers and any of their respective Subsidiaries and Affiliates as though
BABC were not the Agent hereunder, and without notice to or the consent of the
other Lenders. The Lenders acknowledge that, pursuant to such activities, BABC
or its affiliates may receive information regarding the Borrowers or their
respective Subsidiaries or Affiliates (including information that may be
subject to confidentiality obligations in favor of the applicable Borrower or
any such Subsidiary or Affiliate) and acknowledge that the Agent shall be under
no obligation to provide such information to them; provided, that in the event
that BABC receives any such information which is not subject to such
confidentiality obligations, and while BABC is the Agent hereunder, and the
Lenders are not otherwise provided with such information, then the Agent shall
provide such information to the Lenders. With respect to its Commitment and
the Loans made by it and the credit support or other enhancement for Letters of
Credit and Acceptances in which it has purchased a participation interest, BABC
shall have the same rights and powers under this Agreement as any other Lender
and may exercise the same as though it were not the Agent.
13.7 Successor Agent.
(a) The Agent may resign from the performance of all of its
functions and duties under this Agreement at any time by giving at least sixty
(60) Business Days' prior written notice to the Borrowers and the Lenders.
Such resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to clause (b) or (c) below.
(b) Upon any such notice of resignation, the Majority Lenders
shall appoint a successor Agent who shall be reasonably satisfactory to the
Borrowers; provided, that any such Agent which shall be a Lender hereunder
shall be deemed to be reasonably satisfactory to the Borrowers.
(c) If the Majority Lenders agree on a successor Agent within
such sixty (60) Business Day period, but the Borrowers unreasonably object to
such successor Agent, then such successor shall be appointed as Agent hereunder
notwithstanding such objection. If a successor Agent shall not have been so
appointed within such sixty (60) Business Day period because the Majority
Lenders have not agreed on such successor, or because the Borrowers shall
reasonably object to such successor Agent, the retiring Agent shall then
appoint a successor Agent who shall serve as Agent until such time, if any, as
a successor Agent shall be appointed as provided above.
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13.8 Collateral Matters.
(a) The Lenders hereby irrevocably authorize the Agent, at
its option and in its discretion, to release any Agent's Lien upon any
Collateral (1) upon the termination of the Commitments, payment and
satisfaction of all Loans and reimbursement obligations in respect of Letters
of Credit and Acceptances, and the termination of all outstanding Letters of
Credit and Acceptances (whether or not any of such obligations are due) and all
other Obligations which have matured and which the Agent has been notified in
writing are then due and payable; (2) constituting property being sold or
disposed of if the applicable Borrower certifies to the Agent that the sale or
disposition is made in compliance with Section 5.11 or 8.9 (and the Agent may
rely conclusively on any such certificate, without further inquiry); (3)
constituting property in which the applicable Borrower owned no interest at the
time the Lien was granted or at any time thereafter; (4) constituting property
leased to the applicable Borrower under a lease which has expired or been
terminated in a transaction permitted under this Agreement or which will expire
imminently and which has not been, and is not intended by such Borrower to be,
renewed or extended; or (5) valued at less than $5,000,000 during the term of
this Agreement (provided, that from and after the occurrence of any Event of
Default, such amount shall be deemed to be reduced to $1,000,000). Except as
provided above, the Agent will not release any of the Agent's Liens on any
portion of the Collateral without the prior written authorization of all of the
Lenders. Upon request by the Agent or the Borrowers at any time, the Lenders
will confirm in writing the Agent's authority to release any Agent's Liens upon
particular types or items of Collateral pursuant to this Section 13.8.
(b) So long as no Event of Default has occurred and is then
continuing, upon receipt by the Agent of confirmation from the Majority Lenders
of its authority to release any Agent's Liens upon particular types or items of
Collateral, and upon at least five (5) Business Days' prior written request by
the applicable Borrower, the Agent shall (and is hereby irrevocably authorized
by the Lenders to) execute such documents as may be necessary to evidence the
release of the Agent's Liens upon such Collateral; provided, however, that (1)
the Agent shall not be required to execute any such document on terms which, in
the Agent's opinion, would expose the Agent to liability or create any
obligation or entail any consequence other than the release of such Liens
without recourse or warranty, and (2) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of any Borrower in respect of)
all interests retained by any Borrower, including (without limitation) the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral.
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(c) The Agent shall have no obligation whatsoever to any of
the Lenders to assure that the Collateral exists or is owned by the applicable
Borrower or is cared for, protected or insured or has been encumbered, or,
other than a duty to act without willful misconduct or gross negligence, that
the Agent's Liens have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to the Agent pursuant to this
Section 13.8 or pursuant to any of the Loan Documents, it being understood and
agreed that in respect of the Collateral, or any act, omission or event related
thereto, the Agent may act in any manner it may deem appropriate, in its sole
discretion, given the Agent's own interest in the Collateral in its capacity as
one of the Lenders and that the Agent shall have no duty or liability
whatsoever to any Secured Creditor as to any of the foregoing.
13.9 Restrictions on Actions by Lenders; Sharing of Payments.
(a) Each of the Lenders agrees that it shall not, without the express consent
of the Agent, and that it shall, to the extent it is lawfully entitled to do
so, upon the request of the Agent, set-off against the Obligations, any amounts
owing by such Lender to any Borrower or any accounts of any Borrower now or
hereafter maintained with such Lender. Each of the Lenders further agrees that
it shall not, unless specifically requested to do so by the Agent, take or
cause to be taken any action, including, without limitation, the commencement
of any legal or equitable proceedings, to foreclose any Lien on, or otherwise
enforce any security interest in, any of the Collateral, the purpose of which
is, or could be, to give such Lender any preference or priority against the
other Lenders with respect to the Collateral.
(b) Subject to Section 4.6, if, at any time or times any
Lender shall receive (1) by payment, foreclosure, set-off or otherwise, any
proceeds of Collateral or any payments with respect to the Obligations of any
Borrower to such Lender arising under, or relating to, this Agreement or the
other Loan Documents, except for any such proceeds or payments received by such
Lender from the Agent pursuant to the terms of this Agreement, or (2) payments
from the Agent in excess of such Lender's ratable portion of all such
distributions by the Agent, such Lender shall promptly (A) turn the same over
to the Agent, in kind, and with such endorsements as may be required to
negotiate the same to the Agent, or in same day funds, as applicable, for the
account of all of the Secured Creditors and for application to the Obligations
in accordance with the applicable provisions of this Agreement, or (B)
purchase, without recourse or warranty, an undivided interest and participation
in the Obligations owed to the other Lenders so that such excess payment
received shall
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be applied ratably as among the Lenders in accordance with their Pro Rata
Shares; provided, however, that if all or part of such excess payment received
by the purchasing party is thereafter recovered from it, those purchases of
participations shall be rescinded in whole or in part, as applicable, and the
applicable portion of the purchase price paid therefor shall be returned to
such purchasing party, but without interest except to the extent that such
purchasing party is required to pay interest in connection with the recovery of
the excess payment.
13.10 Agency for Perfection. Each Lender hereby appoints
each other Lender as agent for the purpose of perfecting the Lenders' security
interest in assets which, in accordance with Article 9 of the UCC, can be
perfected only by possession. Should any Lender (other than BABC at such time
as it shall also act as the Agent) obtain possession of any such Collateral,
such Lender shall notify the Agent thereof, and, promptly upon the Agent's
request therefor shall deliver such Collateral to the Agent or in accordance
with the Agent's instructions.
13.11 Payments by Agent to Lenders. All payments to be made
by the Agent to the Lenders under this Agreement shall be made by bank wire
transfer or internal transfer of immediately available funds to:
if to BABC: Bank of America, Illinois
BABC-Central Account
Account No. 71-09539
ABA #071000039
if to Deutsche Financial
Services Corporation: Chase Manhattan Bank
New York, New York
One Chase Manhattan Plaza
ABA #021000021
Deutsche Financial Services
Account No. 9102734903
Memo with wire: Roadmaster
if to Mellon Bank, N.A.: Mellon Bank, N.A.
Philadelphia, Pennsylvania
ABA #031000037
Account No. ________
Memo with wire: Roadmaster
Corporation
if to National Bank of National Bank of Canada
Canada: New York, New York
Account No. 000885-001
ABA #026005487
Memo with wire: Roadmaster
if to NationsBank of NationsBank of Georgia, N.A.
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Georgia, N.A. Account No. 03552171
ABA #061000052
Memo with wire: Roadmaster
Participation
if to Green Tree Financial First Bank
Servicing Corporation: First Bank Place
601 2nd Avenue South
Minneapolis, Minnesota 55402
Beneficiary: Green Tree Financial
Corporation
ABA #091000022
Account No. 160232402265
Memo with wire: Roadmaster CL
or pursuant to such other wire transfer instructions as each party may
designate for itself by written notice to the Agent. Concurrently with each
such payment, the Agent shall identify whether such payment (or any portion
thereof) represents principal, premium or interest on the Loans or otherwise.
13.12 Concerning the Collateral and the Related Loan
Documents. Each Lender authorizes and directs the Agent to enter into this
Agreement and the other Loan Documents relating to the Collateral, for the
ratable benefit of the Secured Creditors. Each Lender agrees that any action
taken by the Agent or Majority Lenders in accordance with the terms of this
Agreement or the other Loan Documents relating to the Collateral, and the
exercise by the Agent or the Majority Lenders of their respective powers set
forth therein or herein, together with such other powers that are reasonably
incidental thereto, shall be authorized by and binding upon all of the Lenders.
13.13 Field Audit Reports; Disclaimers by Lenders. The Agent
hereby agrees, solely for the benefit of the Lenders, to schedule and perform a
minimum of three (3) audits pursuant to Section 5.6 during any twelve-month
period. If the Agent shall not perform a minimum of four (4) audits pursuant
to Section 5.6 during any twelve-month period, then the Majority Lenders may
perform any such audits not performed by the Agent. By its execution and
delivery of this Agreement, each Lender
(a) is deemed to have requested that the Agent furnish such
Lender, promptly after it becomes available, a copy of each field
audit report (each, a "Report" and collectively, "Reports") prepared
by the Agent pursuant to Section 5.6;
(b) expressly agrees and acknowledges that neither BABC nor
the Agent (1) makes any representation or warranty as to the accuracy
of any Report, or (2) shall be liable for any information contained in
any Report;
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(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits, that the Agent or other party performing any
audit will inspect only specific information regarding the Borrowers
and will rely significantly upon the Borrowers' books and records, as
well as on representations of the Borrowers' personnel;
(d) agrees to keep all Reports confidential and strictly for
its internal use, and agrees not to distribute or use any Report in
any other manner; and
(e) without limiting the generality of any other
indemnification provisions contained in this Agreement, agrees (1) to
hold BABC and the Agent harmless from any action such Lender may take
based upon, or the consequences of any conclusion such Lender may
reach as a result of, the information contained in any Report, in
connection with any Loan or other credit accommodations that such
Lender has made or shall make to any Borrower, or in which such Lender
may purchase a participation interest, and (2) to pay, protect,
indemnify, defend and hold BABC and the Agent harmless from and
against, any claims, actions, proceedings, damages, costs, expenses
and other amounts (including, without limitation, reasonable
attorneys' fees) incurred by BABC and/or the Agent as the direct or
indirect result of the actions of any third parties which might obtain
all or part of any Report through such Lender.
ARTICLE 14
MISCELLANEOUS
14.1 Cumulative Remedies; No Prior Recourse to Collateral.
The enumeration herein of the Agent's and each Lender's rights and remedies is
not intended to be exclusive, and such rights and remedies are in addition to
and not by way of limitation of any other rights or remedies that the Agent and
the Lenders may have under the UCC, the PPSA or other applicable law. The
Agent and the Lenders shall have the right, in their sole discretion, to
determine which rights and remedies are to be exercised and in which order.
The exercise of one right or remedy shall not preclude the exercise of any
others, all of which shall be cumulative. The Agent and the Lenders may,
without limitation, proceed directly against any or all Borrowers to collect
the Obligations without any prior recourse to the Collateral.
14.2 Severability. If any provision of this Agreement shall
be prohibited or invalid, under applicable law, it shall be ineffective only to
such extent, without invalidating the remainder of this Agreement.
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14.3 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY
TRIAL WAIVER. (A) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL
LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS, PROVIDED THAT PERFECTION
ISSUES WITH RESPECT TO ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE MAY GIVE EFFECT
TO APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF THE
UNIFORM COMMERCIAL CODE) OF THE STATE OF ILLINOIS.
(b) SUBJECT ONLY TO THE EXCEPTION IN THE NEXT SENTENCE, THE
BORROWERS, THE AGENT AND THE LENDERS HEREBY AGREE TO THE EXCLUSIVE JURISDICTION
OF THE FEDERAL COURT OF THE NORTHERN DISTRICT OF ILLINOIS AND THE STATE COURTS
OF ILLINOIS LOCATED IN COOK COUNTY, ILLINOIS AND WAIVE ANY OBJECTION BASED ON
VENUE OR FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN,
AND AGREE THAT ANY DISPUTE CONCERNING THE RELATIONSHIP AMONG THE BORROWERS, THE
LENDERS AND THE AGENT OR THE CONDUCT OF ANY PARTY IN CONNECTION WITH THIS
AGREEMENT OR OTHERWISE SHALL BE HEARD ONLY IN THE COURTS DESCRIBED ABOVE.
NOTWITHSTANDING THE FOREGOING: (1) THE AGENT AND THE LENDERS SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY BORROWER OR ITS PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTION THE AGENT OR THE LENDERS DEEM NECESSARY OR
APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE
OBLIGATIONS AND (2) EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS
FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.
(c) EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE
BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO SUCH BORROWER AT ITS
ADDRESS SET FORTH IN SECTION 14.7 AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S.
MAILS, OR, AT THE AGENT'S AND/OR THE LENDERS' OPTION, BY SERVICE UPON DAVID E.
SCHAPER, ROADMASTER CORPORATION, 10275 WEST HIGGINS ROAD, SUITE 540 - LEGAL
GROUP, ROSEMONT, ILLINOIS 60018, WHICH EACH BORROWER IRREVOCABLY APPOINTS AS
SUCH BORROWER'S AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS WITHIN
THE STATE OF ILLINOIS, OR SUCH SUBSTITUTE AGENT FOR SUCH PURPOSE OF WHICH THE
BORROWERS SHALL NOTIFY THE AGENT IN WRITING. IN ADDITION, THE AGENT AND THE
LENDERS AGREE TO PROMPTLY FORWARD BY REGISTERED MAIL ANY PROCESS SO SERVED UPON
SAID AGENT TO THE APPLICABLE BORROWER AT ITS ADDRESS SET FORTH IN SECTION 14.7.
EACH BORROWER HEREBY CONSENTS TO SERVICE OF PROCESS AS AFORESAID.
(d) THE BORROWERS, THE AGENT AND THE LENDERS EACH HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN
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CONNECTION HEREWITH OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO OR EITHER OF THEM IN RESPECT TO THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED,
IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE. EACH OF THE BORROWERS, THE AGENT AND THE LENDERS HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY SUCH PARTY MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(e) NOTHING IN THIS SECTION 14.3 SHALL AFFECT THE RIGHT OF
THE AGENT OR THE LENDERS TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR AFFECT THE RIGHT OF THE AGENT OR THE LENDERS TO BRING ANY ACTION OR
PROCEEDING AGAINST ANY BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
(f) EACH BORROWER AGREES THAT IT WILL NOT ASSERT AGAINST
THE AGENT OR ANY LENDER ANY CLAIM FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL OR
PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
14.4 Survival of Representations and Warranties. All of the
Borrowers' respective representations and warranties contained in this
Agreement shall survive the execution, delivery, and acceptance thereof by the
parties, notwithstanding any investigation by the Agent or the Lenders or their
respective agents.
14.5 Other Security and Guaranties. The Agent may, without
notice or demand and without affecting the Borrowers' respective obligations
hereunder, from time to time: (a) take from any Person and hold collateral
(other than the Collateral) for the payment of all or any part of the
Obligations and exchange, enforce or release such collateral or any part
thereof; and (b) accept and hold any endorsement or guaranty of payment of all
or any part of the Obligations and release or substitute any such endorser or
guarantor, or any Person who has given any Lien in any other collateral as
security for the payment of all or any part of the Obligations, or any other
Person in any way obligated to pay all or any part of the Obligations.
14.6 Fees and Expenses. The Borrowers shall pay to the
Agent, for its benefit, on demand, all costs and expenses that the Agent pays
or incurs in connection with the negotiation, preparation, consummation,
administration, enforcement, and termination of this Agreement and the other
Loan Documents, including, without limitation: (a) attorneys' and paralegals'
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fees (including allocated in-house counsel fees) and disbursements of counsel
to the Agent; (b) costs and expenses (including attorneys' and paralegals' fees
and disbursements) for any amendment, supplement, waiver, consent, or
subsequent closing in connection with the Loan Documents or Mortgages and the
transactions contemplated thereby; (c) costs and expenses of lien and title
searches and title insurance; (d) taxes, fees and other charges for recording
the Mortgages, filing financing statements and continuations, and other actions
to perfect, protect, and continue the Agent's Liens; (e) sums paid or incurred
to pay any amount or take any action required of any Borrower under the Loan
Documents that such Borrower fails to pay or take; (f) costs of appraisals,
inspections, and verifications of the Collateral, including, without
limitation, travel, lodging, and meals for inspections of the Collateral and
the Borrowers' respective operations by the Agent's agents, subject to the
terms of Sections 3.8 and 5.6; (g) costs and expenses of forwarding loan
proceeds, collecting checks and other items of payment, and establishing and
maintaining Payment Accounts; (h) costs and expenses of preserving and
protecting the Collateral; (i) costs and expenses (including attorneys' and
paralegals' fees and disbursements) paid or incurred to obtain payment of the
Obligations, enforce the Agent's Liens, sell or otherwise realize upon the
Collateral, and otherwise enforce the provisions of the Loan Documents, or to
defend any claims made or threatened against the Agent or any Lender arising
out of the transactions contemplated hereby (including without limitation,
preparations for and consultations concerning any such matters); and (j) all
fees payable to the Agent as set forth in Article 3. In addition, The
Borrowers shall pay to the Agent, for the benefit of any Lender, on demand, all
attorneys' and paralegals' fees and disbursements of counsel to such Lender
incurred in connection with the enforcement of this Agreement and the other
Loan Documents at any time after the Agent or such Lender has commenced the
exercise of any of its remedies pursuant to Section 10.2. None of the
foregoing shall be construed to limit any other provisions of the Loan
Documents regarding costs and expenses to be paid by any Borrower. All of the
foregoing costs and expenses shall be charged to the applicable Borrower's loan
account as Revolving Loans as described in Section 4.5. All references in this
Agreement or the other Loan Documents to "attorney's fees" or words of similar
import shall be deemed, in connection with fees payable to any Canadian
counsel, to refer to solicitor's fees on a "solicitor and his own client"
basis.
14.7 Notices. Except as otherwise provided herein, all
notices, demands and requests that any party is required or elects to give to
any other shall be in writing, or by a telecommunications device capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, but not limited to, delivery by overnight
mail and courier service, or (b) four (4) days after it
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shall have been mailed by United States mail, first class, certified or
registered, with postage prepaid, or (c) in the case of notice by such a
telecommunications device, when properly transmitted, in each case addressed to
the party to be notified as follows:
If to the Agent or to BABC:
BankAmerica Business Credit, Inc.
55 West Monroe Street
Suite 3600
Chicago, Illinois 60603
Attention: Vice President
Telecopy No. (312) 553-7381
with copies to:
Bank of America National Trust
and Savings Association
231 South LaSalle Street, Suite 14-L
Chicago, Illinois 60697
Attention: Senior Counsel
Telecopy No. (312) 828-2800
and
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: James R. Looman, Esq.
Telecopy No. (312) 853-7036
If to Deutsche Financial Services
Corporation:
Deutsche Financial Services Corporation
2859 Paces Ferry Road, Suite 1140
Atlanta, Georgia 30339
Attention: Regional Vice President
Telecopy No. (404) 435-3964
with a copy to:
Deutsche Financial Services Corporation
655 Maryville Centre Drive
St. Louis, Missouri 63141
Attention: General Counsel
Telecopy No. (314) 523-3228
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If to Mellon Bank, N.A.:
Mellon Bank, N.A.
1735 Market Street, 6th Floor
Philadelphia, Pennsylvania 19103
Attention: Senior Credit Officer
Telecopy No. (215) 553-3519
If to National Bank of Canada:
National Bank of Canada
225 West Washington, Suite 1100
Chicago, Illinois 60606
Attention: Bruce Walderson or Deborah Doll
Telecopy No. (312) 558-8888
If to NationsBank of Georgia, N.A.:
NationsBank Business Credit
c/o NationsBank of Georgia, N.A.
600 Peachtree Street, 13th Floor
Atlanta, Georgia 30308
Attention: Angela Peterson Leake
Telecopy No. (404) 607-6439
If to Green Tree Financial Servicing Corporation:
Green Tree Financial Servicing Corporation
6270 North Point Parkway, Section 300
Alpharetta, Georgia 30202
Attention: Russell Baqir, Division Credit Manager
Telecopy No. (800) 873-1863
with a copy to:
Green Tree Financial Corporation
800 Landmark Tower
345 St. Peters Street
St. Paul, Minnesota 55102
attention: General Counsel
Telecopy No. (612) 293-5818
If to a Borrower:
Roadmaster Corporation,
Roadmaster Leisure Inc.,
Willow Hosiery Company, Inc.,
Hutch Sports USA Inc.,
Nelson/Weather-Rite, Inc. or
Roadmaster Receivables Corporation
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Radio Tower Road & East Street
Olney, Illinois 62450
Attention: Charles E. Sanders
Telecopy No. (618) 393-3433
with copies to:
Ross & Hardies
150 North Michigan Avenue, Suite 2500
Chicago, Illinois 60601-7567
Attention: C. Frederick LeBaron, Jr.
Telecopy No. (312) 750-8600
and
David E. Schaper
Vice President and General Counsel
Roadmaster Corporation
10275 West Higgins Road
Suite 540 - Legal Group
Rosemont, Illinois 60018
Telecopy No. (708) 635-0487
or to such other address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall not adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
14.8 Indemnity of the Agent and the Lenders by the Borrowers.
Each Borrower agrees to (a) reimburse the Agent and the Lenders for any costs
and expenses (including, without limitation, attorneys' and paralegals' fees
and expenses, including allocated in-house counsel fees) incurred by the Agent
or any Lender in defending any suit brought against it by any Borrower or any
other Person in connection with the transactions contemplated by this
Agreement, and (b) indemnify and hold the Agent and the Lenders and their
respective officers, directors, employees, attorneys and agents (collectively,
the "Indemnitees") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever incurred by the
Indemnitees, whether direct, indirect or consequential, as a result of or
arising from or relating to any proceeding by any Person, whether threatened or
initiated, asserting any claim for legal or equitable remedy against any Person
under any statute or regulation (including, without limitation, any federal or
state securities or commercial laws or under any common law or equitable cause
or otherwise, including any liability and costs under Environmental Laws or
common law
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<PAGE> 157
principles arising from or in connection with the past, present or future
operations of any Borrower or its predecessors in interest, or the past,
present or future environmental condition of such Borrower's property, the
presence of asbestos-containing materials at or on such property, or the
Release or threatened Release of any Contaminant from such property), in any
way arising from or in connection with the negotiation, preparation, execution,
delivery, enforcement, performance and administration of this Agreement or any
other document executed in connection herewith, provided that no Borrower shall
have any obligation hereunder with respect to indemnified liabilities arising
from the gross negligence or willful misconduct of any Indemnitee seeking such
indemnification. To the extent that the indemnity set forth in this Section
may be unenforceable because it is violative of any law or public policy, each
Borrower shall pay the maximum portion which it is permitted to pay under
applicable law. Any Indemnitee will promptly notify the Borrowers of the
commencement of any legal proceeding which may give rise to any indemnified
liability under the foregoing indemnity and shall permit the Borrowers to
participate in the defense of such Indemnitee in any such proceeding. The
foregoing indemnity shall survive the resignation of an Agent pursuant to
Section 13.7, the payment of the Obligations and the termination of this
Agreement. All of the foregoing fees, costs and expenses shall be part of the
Obligations, payable upon demand, and secured by the Collateral.
14.9 Waiver of Notices. Unless otherwise expressly provided
herein, each Borrower waives presentment, protest and notice of demand or
dishonor and protest as to any instrument, as well as any and all other notices
to which it might otherwise be entitled. No notice to or demand on a Borrower
which the Agent or any Lender may elect to give shall entitle such Borrower to
any or further notice or demand in the same, similar or other circumstances.
14.10 Final Agreement. This Agreement is intended by the
Borrowers, the Agent and the Lenders to be the final, complete, and exclusive
expression of the agreement among them. This Agreement supersedes any and all
prior oral or written agreements relating to the subject matter hereof.
14.11 Counterparts. This Agreement may be executed in any
number of counterparts, and by the Agent, each Lender and each Borrower in
separate counterparts, each of which shall be an original, but all of which
shall together constitute one and the same agreement.
14.12 Captions. The captions contained in this Agreement are
for convenience of reference only, are without substantive meaning and should
not be construed to modify, enlarge, or restrict any provision.
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14.13 Right of Set-Off. Whenever an Event of Default exists,
the Agent and each Lender are hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and 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 the Agent or such Lender or
any affiliate of the Agent or such Lender to or for the credit or the account
of any Borrower against any and all of the Obligations, whether or not then due
and payable, any such amounts to be applied in accordance with the terms of
Section 4.6. The Agent and each Lender agree promptly to notify the applicable
Borrower after any such set-off and application made by the Agent or such
Lender, as applicable, provided that the failure to give such notice shall not
affect the validity of such set-off and application.
14.14 Taxes.
(a) Any and all payments by a Borrower hereunder shall be
made 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 and the
Agent, taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Lender or the Agent (as the case may
be) is organized or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If a Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to any Lender
or the Agent, (1) the sum payable shall be increased as may be necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section 14.14) such Lender or the Agent (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (2) such Borrower shall make such deductions and
(3) such Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, each Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies which arise from any payment made hereunder or from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents (hereinafter referred to as "Other
Taxes").
(c) Each Borrower will indemnify each Lender and the Agent
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 14.14) paid by
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such Lender or the Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
This indemnification shall be made within 30 days from the date such Lender or
the Agent (as the case may be) makes written demand therefor. Each Lender
shall, at the time of any written demand for indemnification under this
subsection (c), provide to the applicable Borrower a receipt for, or other
evidence of the payment of, the Taxes or Other Taxes for which indemnification
is sought.
(d) Within 30 days after the date of any payment of Taxes,
the applicable Borrower will furnish to the Agent, at its address referred to
in Section 14.7, the original or a certified copy of a receipt evidencing
payment thereof. If no Taxes are payable in respect of any payment hereunder
with respect to which a claim for indemnity has been made hereunder, the
applicable Borrower will furnish to the Agent, at such address, a certificate
from each appropriate taxing authority, or an opinion of counsel acceptable to
the Agent, in either case stating that such payment is exempt from or not
subject to Taxes.
(e) Without prejudice to the survival of any other agreement
of any Borrower hereunder, the agreements and obligations of the Borrowers
contained in this Section 14.14 shall survive the payment in full of principal
and interest hereunder.
14.15 Joint and Several Liability. (a) Except as otherwise
provided in subsection (b) below, the liability of the Borrowers for all
amounts due to the Agent or any Lender under this Agreement shall be joint and
several regardless of which Borrower actually receives Loans or other
extensions of credit hereunder or the amount of such Loans received or the
manner in which the Agent or such Lender accounts for such Loans or other
extensions of credit on its books and records. Each Borrower's Obligations
with respect to Loans made to it, and each Borrower's Obligations arising as a
result of the joint and several liability of the Borrowers hereunder, with
respect to Loans made to any other Borrower hereunder, shall be separate and
distinct obligations, but all such Obligations shall be primary obligations of
each Borrower.
(b) Notwithstanding anything to the contrary contained in
this Agreement or in any of the Loan Documents, RMC, RML, Hutch, NWR and Willow
shall have no liability for amounts due from RRC to the Agent or any Lender
under this Agreement or any of the other Loan Documents.
(c) Each Borrower's Obligations arising as a result of the
joint and several liability of the Borrowers hereunder with respect to Loans or
other extensions of credit made to any other
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<PAGE> 160
Borrower hereunder shall, to the fullest extent permitted by law, be
unconditional irrespective of (1) the validity or enforceability, avoidance or
subordination of the Obligations of such other Borrower or of any promissory
note or other document evidencing all or any part of the Obligations of such
other Borrower, (2) the absence of any attempt to collect the Obligations from
such other Borrower, any other guarantor, or any other security therefor, or
the absence of any other action to enforce the same, (3) the waiver, consent,
extension, forbearance or granting of any indulgence by the Agent or any Lender
with respect to any provision of any instrument evidencing the Obligations of
such other Borrower, or any part thereof, or any other agreement now or
hereafter executed by such other Borrower and delivered to the Agent or any
Lender, (4) the failure by the Agent or any Lender to take any steps to perfect
and maintain its security interest in, or to preserve its rights to, any
security or collateral for the Obligations of such other Borrower, (5) the
Agent's or any Lender's election, in any proceeding instituted under the
Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy
Code, (6) any borrowing or grant of a security interest by such other Borrower,
as debtor-in-possession under Section 364 of the Bankruptcy Code, (7) the
disallowance of all or any portion of the Agent's or any Lender's claim(s) for
the repayment of the Obligations of such other Borrower under Section 502 of
the Bankruptcy Code, or (8) any other circumstances which might constitute a
legal or equitable discharge or defense of a guarantor or of such other
Borrower. With respect to each Borrower's Obligations arising as a result of
the joint and several liability of the Borrowers hereunder with respect to
Loans or other extensions of credit made to any of the other Borrowers
hereunder, such Borrower waives, until the Obligations shall have been paid in
full and the Loan Agreement shall have been terminated, any right to enforce
any right of subrogation or any remedy which the Agent or any Lender now or may
hereafter have against any Borrower, any endorser or any guarantor of all or
any part of the Obligations, and any benefit of, and any right to participate
in, any security or collateral given to the Agent or any Lender to secure
payment of the Obligations or any other liability of the Borrowers to the Agent
or any Lender.
(d) Upon any Event of Default, the Agent may proceed directly
and at once, without notice, against any Borrower to collect and recover the
full amount, or any portion of the Obligations, without first proceeding
against any other Borrower or any other Person, or against any security or
collateral for the Obligations. Each Borrower consents and agrees that the
Agent shall be under no obligation to marshall any assets in favor of such
Borrower or against or in payment of any or all of the Obligations.
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<PAGE> 161
IN WITNESS WHEREOF, the parties have entered into this
Agreement on the date first above written.
ROADMASTER CORPORATION
By:
-------------------------------------------
Title:
ROADMASTER LEISURE INC.
By:
-------------------------------------------
Title:
WILLOW HOSIERY COMPANY, INC.
By:
-------------------------------------------
Title:
HUTCH SPORTS USA INC.
By:
-------------------------------------------
Title:
NELSON/WEATHER-RITE, INC.
By:
-------------------------------------------
Title:
ROADMASTER RECEIVABLES CORPORATION.
By:
-------------------------------------------
Title:
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<PAGE> 162
BANKAMERICA BUSINESS CREDIT, INC.,
as the Agent
By:
-------------------------------------------
Vice President
Commitment: $100,000,000 BANKAMERICA BUSINESS CREDIT, INC., as a Lender
By:
-------------------------------------------
Vice President
Commitment: $100,000,000 DEUTSCHE FINANCIAL SERVICES CORPORATION,
as a Lender
By:
-------------------------------------------
Vice President
Commitment: $ 25,000,000 MELLON BANK, N.A., as a Lender
By:
-------------------------------------------
Vice President
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<PAGE> 163
Commitment: $ 25,000,000 NATIONSBANK OF GEORGIA, N.A., as a Lender
By:
-------------------------------------------
Vice President
Commitment: $ 25,000,000 GREEN TREE FINANCIAL SERVICING CORPORATION,
as a Lender
By:
-------------------------------------------
Vice President
Commitment: $ 15,000,000 NATIONAL BANK OF CANADA, a Canadian chartered
bank, as a Lender
By:
-------------------------------------------
Vice President
By:
-------------------------------------------
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<PAGE> 164
The undersigned hereby designates the "Obligations" (as such term is defined in
the foregoing Amended and Restated Loan and Security Agreement dated as of
September 29, 1995 among Roadmaster Corporation, Roadmaster Leisure Inc.,
Willow Hosiery Company, Inc., Hutch Sports USA Inc., Nelson/Weather-Rite, Inc.,
Roadmaster Receivables Corporation, the "Lenders" (as such term is defined
therein) and BankAmerica Business Credit, Inc., as "Agent" for the Lenders) as
"Designated Senior Indebtedness" (as such term is defined in that certain
Indenture dated as of December 15, 1993 between the undersigned and LaSalle
National Bank, as Trustee).
September 29, 1995 ROADMASTER INDUSTRIES, INC.
By:
-------------------------------------------
Title:
----------------------------------------
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<PAGE> 1
AMENDMENT NO. 1
TO
LOAN AND SECURITY AGREEMENT
Dated as of December 6, 1994
AMENDED AND RESTATED
as of September 29, 1995
THIS AMENDMENT NO. 1 dated as of October 31, 1995 (this
"Amendment") is entered into among ROADMASTER CORPORATION, a Delaware
corporation ("RMC"), ROADMASTER LEISURE INC., a corporation incorporated under
the laws of the province of Ontario, Canada ("RML"), WILLOW HOSIERY COMPANY,
INC., a New York corporation ("Willow"), HUTCH SPORTS USA INC., a Delaware
corporation ("Hutch"), NELSON/WEATHER-RITE, INC., a Delaware corporation
("NWR"), and ROADMASTER RECEIVABLES CORPORATION, an Illinois corporation
("RRC") (RMC, RML, Willow, Hutch, NWR and RRC being sometimes hereinafter
referred to collectively as the "Borrowers" and individually as a "Borrower"),
the financial institutions named on the signature pages of this Amendment as
"Lenders," and BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, as
agent for the Lenders (in such capacity as agent, the "Agent"). Capitalized
terms used herein but not defined herein shall have the meanings provided in
the Loan Agreement.
W I T N E S S E T H:
WHEREAS, the Borrowers, the Lenders and the Agent are parties
to a certain Loan and Security Agreement dated as of December 6, 1994, as
amended and restated as of September 29, 1995 (the "Loan Agreement"); and
WHEREAS, the Borrowers, the Lenders and the Agent have agreed
to amend the Loan Agreement on the terms and conditions hereinafter set forth
in order, among other things, to (a) increase the amount of the Capital
Expenditure Facility, and (b) add First Bank National Association as a
"Lender" under the Loan Agreement.
NOW, THEREFORE, in consideration of the premises set forth
above, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and
the Agent hereby agree as follows:
Section 1. Amendment of the Loan Agreement. Subject to the
fulfillment of the conditions precedent set forth in Section 2 below, the Loan
Agreement is hereby amended as follows:
(a) The definitions of "Capital Expenditure Availability,"
"Capital Expenditure Facility" and "Capital Expenditure Subline"
contained in Section 1.1 are hereby deleted in their entirety and the
following respective definitions substituted therefor:
-1-
<PAGE> 2
"Capital Expenditure Availability" means, at any
time, $25,000,000 minus the sum of the aggregate original
principal amounts of all Capital Expenditure Loans made on or
after the Restatement Closing Date.
"Capital Expenditure Facility" means the Lender's
agreement to provide Capital Expenditure Loans in an aggregate
amount up to $25,000,000, as set forth in Section 2.3.
"Capital Expenditure Subline" means a) with respect
to RMC, the lesser of (1) $20,000,000 and (2) seventy five
percent (75%) of the Eligible Capital Expenditures made by
RMC; b) with respect to NWR, the lesser of (1) $2,500,000 and
(2) seventy five percent of the Eligible Capital Expenditures
made by NWR; c) with respect to each of Willow and Hutch, the
lesser of (1) $1,500,000 and (2) seventy five percent (75%) of
the Eligible Capital Expenditures made by such Borrower; and
d) with respect to RML, the lesser of (1) $1,000,000 and (2)
seventy five percent (75%) of the Eligible Capital
Expenditures made by RML.
(b) Section 2.1 is amended to delete the amount
"$290,000,000" appearing therein and to substitute the amount
"$300,000,000" therefor.
(c) Sections 13.11 and 14.7 are amended and restated as set
forth on Exhibits A and B hereto, respectively.
(d) Section 12.2 is amended to correct a typographical error
therein by deleting the second clause designation "(b)" and
substituting therefor a clause designation "(c)".
Section 2. Conditions to Amendment. This Amendment shall
become effective upon satisfaction of the following conditions:
a) the receipt by the Agent of eight counterparts of this
Amendment, executed by each Borrower and each Lender, and the
execution of this Amendment by the Agent;
b) the receipt by the Agent of eight counterparts of an
Acknowledgment and Reaffirmation Agreement, executed by each Borrower
and each other party thereto;
c) the receipt by the Agent of a substitute Capital
Expenditure Loan Note executed by each Borrower other than Roadmaster
Receivables Corporation and payable to each Lender, in order to
evidence the Capital Expenditure Loans owing by each Borrower to such
Lender, in amounts revised to reflect the increase contemplated by
this Amendment in the Capital Expenditure Facility; and
d) the receipt by First Bank National Association of a closing
fee in the amount of $25,000.
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<PAGE> 3
Section 3. Amount of Commitment of First Bank National
Association. Upon the effectiveness of this Amendment, First Bank National
Association shall be added as a "Lender" under the Loan Agreement, as amended
hereby, with the amount of First Bank National Association's Commitment being
$10,000,000. The amounts of the Commitments of the Lenders other than First
Bank National Association shall remain those set forth on the applicable
signature pages of the Loan Agreement.
Section 4. Representations and Warranties. Each Borrower
hereby represents and warrants that (i) this Amendment constitutes a legal,
valid and binding obligation of such Borrower, enforceable against such
Borrower in accordance with its terms, (ii) the representations and warranties
contained in the Loan Agreement are correct in all material respects as though
made on and as of the date of this Amendment, and (iii) no Event of Default has
occurred and is continuing.
Section 5. Reference to and Effect on the Loan Agreement.
a) Upon the effectiveness of this Amendment, each
reference in the Loan Agreement to "this Agreement", "hereunder", "hereof",
"herein", or words of like import shall mean and be a reference to the Loan
Agreement, as amended hereby, and each reference to the Loan Agreement in any
other document, instrument or agreement executed and/or delivered in connection
with the Loan Agreement shall mean and be a reference to the Loan Agreement, as
amended hereby.
b) Except as specifically amended above, the Loan
Agreement and all other documents, instruments and agreements executed and/or
delivered in connection therewith shall remain in full force and effect and are
hereby ratified and confirmed.
c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of the
Agent or the Lenders under the Loan Agreement, nor constitute a waiver of any
provision of the Loan Agreement, except as specifically set forth herein.
Section 6. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
Section 7. Governing Law. This Amendment shall be governed
by and construed in accordance with the internal laws (as opposed to the
conflicts of laws provisions) of the State of Illinois.
-3-
<PAGE> 4
Section 8. Section Titles. The section titles contained in
this Amendment are and shall be without substance, meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of October 31, 1995.
ROADMASTER CORPORATION
By:
-----------------------------------------
Title:
ROADMASTER LEISURE INC.
By:
-----------------------------------------
Title:
WILLOW HOSIERY COMPANY, INC.
By:
-----------------------------------------
Title:
HUTCH SPORTS USA INC.
By:
-----------------------------------------
Title:
-4-
<PAGE> 5
NELSON/WEATHER-RITE, INC.
By:
-----------------------------------------
Title:
ROADMASTER RECEIVABLES CORPORATION
By:
-----------------------------------------
Title:
BANKAMERICA BUSINESS CREDIT, INC.,
as the Agent
By:
-----------------------------------------
Vice President
BANKAMERICA BUSINESS CREDIT, INC.,
as a Lender
By:
-----------------------------------------
Vice President
DEUTSCHE FINANCIAL SERVICES CORPORATION,
as a Lender
By:
-----------------------------------------
Vice President
-5-
<PAGE> 6
MELLON BANK, N.A., as a Lender
By:
-----------------------------------------
Vice President
NATIONSBANK OF GEORGIA, N.A., as a Lender
By:
-----------------------------------------
Vice President
GREEN TREE FINANCIAL SERVICING CORPORATION,
as a Lender
By:
-----------------------------------------
Vice President
NATIONAL BANK OF CANADA, a Canadian
chartered bank, as a Lender
By:
-----------------------------------------
Vice President
By:
-----------------------------------------
FIRST BANK NATIONAL ASSOCIATION, as a Lender
By:
-----------------------------------------
Vice President
-6-
<PAGE> 7
EXHIBIT A
to
AMENDMENT NO. 1
13.11 Payments by Agent to Lenders. All payments to be made
by the Agent to the Lenders under this Agreement shall be made by bank wire
transfer or internal transfer of immediately available funds to:
if to BABC: Bank of America, Illinois
BABC-Central Account
Account No. 71-09539
ABA #071000039
if to Deutsche Financial
Services Corporation: Chase Manhattan Bank
New York, New York
One Chase Manhattan Plaza
ABA #021000021
Deutsche Financial Services
Account No. 9102734903
Memo with wire: Roadmaster
if to Mellon Bank, N.A.: Mellon Bank, N.A.
Philadelphia, Pennsylvania
ABA #031000037
Account No. ________
Memo with wire: Roadmaster
Corporation
if to National Bank of Canada: National Bank of Canada
New York, New York
Account No. 000885-001
ABA #026005487
Memo with wire: Roadmaster
if to NationsBank of Georgia, N.A. NationsBank of Georgia, N.A.
Account No. 03552171
ABA #061000052
Memo with wire: Roadmaster
Participation
if to Green Tree Financial First Bank
Servicing Corporation: First Bank Place
601 2nd Avenue South
Minneapolis, Minnesota 55402
Beneficiary: Green Tree
Financial Corporation
ABA #091000022
Account No. 160232402265
Memo with wire: Roadmaster CL
-7-
<PAGE> 8
if to First Bank National Association: First Bank National
Association
First Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402
Beneficiary: First Bank
National Association
Account No. 16023034900-5
ABA #091000022
Memo: Roadmaster CL
or pursuant to such other wire transfer instructions as each party may
designate for itself by written notice to the Agent. Concurrently with each
such payment, the Agent shall identify whether such payment (or any portion
thereof) represents principal, premium or interest on the Loans or otherwise.
-8-
<PAGE> 9
EXHIBIT B
to
AMENDMENT NO. 1
14.7 Notices. Except as otherwise provided herein, all
notices, demands and requests that any party is required or elects to give to
any other shall be in writing, or by a telecommunications device capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, but not limited to, delivery by overnight
mail and courier service, or (b) four (4) days after it shall have been mailed
by United States mail, first class, certified or registered, with postage
prepaid, or (c) in the case of notice by such a telecommunications device, when
properly transmitted, in each case addressed to the party to be notified as
follows:
If to the Agent or to BABC:
BankAmerica Business Credit, Inc.
55 West Monroe Street
Suite 3600
Chicago, Illinois 60603
Attention: Vice President
Telecopy No. (312) 553-7381
with copies to:
Bank of America National Trust and Savings Association
231 South LaSalle Street, Suite 14-L
Chicago, Illinois 60697
Attention: Senior Counsel
Telecopy No. (312) 828-2800
and
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: James R. Looman, Esq.
Telecopy No. (312) 853-7036
If to Deutsche Financial Services Corporation:
Deutsche Financial Services Corporation
2859 Paces Ferry Road, Suite 1140
Atlanta, Georgia 30339
Attention: Regional Vice President
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<PAGE> 10
Telecopy No. (404) 435-3964
with a copy to:
Deutsche Financial Services Corporation
655 Maryville Centre Drive
St. Louis, Missouri 63141
Attention: General Counsel
Telecopy No. (314) 523-3228
If to Mellon Bank, N.A.:
Mellon Bank, N.A.
1735 Market Street, 6th Floor
Philadelphia, Pennsylvania 19103
Attention: Senior Credit Officer
Telecopy No. (215) 553-3519
If to National Bank of Canada:
National Bank of Canada
225 West Washington, Suite 1100
Chicago, Illinois 60606
Attention: Bruce Walderson or Deborah Doll
Telecopy No. (312) 558-8888
If to NationsBank of Georgia, N.A.:
NationsBank Business Credit
c/o NationsBank of Georgia, N.A.
600 Peachtree Street, 13th Floor
Atlanta, Georgia 30308
Attention: Angela Peterson Leake
Telecopy No. (404) 607-6439
If to Green Tree Financial
Servicing Corporation:
Green Tree Financial Servicing Corporation
6270 North Point Parkway, Section 300
Alpharetta, Georgia 30202
Attention: Russell Baqir, Division Credit Manager
Telecopy No. (800) 873-1863
with a copy to:
Green Tree Financial Corporation
800 Landmark Tower
345 St. Peters Street
St. Paul, Minnesota 55102
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<PAGE> 11
Attention: General Counsel
Telecopy No. (612) 293-5818
If to First Bank National Association:
First Bank National Association
701 Lee Street, Suite 645
Des Plaines, Illinois 60016
Attention: Tim Bellcourt
Telecopy No. (708) 298-7362
with a copy to:
First Bank National Association
2338 Central Avenue, N.E., Suite 200
Minneapolis, Minnesota 55418
Attention: James Lambertson
Telecopy No. (612) 782-1801
If to a Borrower:
Roadmaster Corporation,
Roadmaster Leisure Inc.,
Willow Hosiery Company, Inc.,
Hutch Sports USA Inc.,
Nelson/Weather-Rite, Inc. or
Roadmaster Receivables Corporation
Radio Tower Road & East Street
Olney, Illinois 62450
Attention: Charles E. Sanders
Telecopy No. (618) 393-3433
with copies to:
Ross & Hardies
150 North Michigan Avenue, Suite 2500
Chicago, Illinois 60601-7567
Attention: C. Frederick LeBaron, Jr.
Telecopy No. (312) 750-8600
and
David E. Schaper
Vice President and General Counsel
Roadmaster Corporation
10275 West Higgins Road
Suite 540 - Legal Group
Rosemont, Illinois 60018
Telecopy No. (708) 635-0487
or to such other address as each party may designate for itself
-11-
<PAGE> 12
by like notice. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the persons
designated above to receive copies shall not adversely affect the effectiveness
of such notice, demand, request, consent, approval, declaration or other
communication.
-12-
<PAGE> 1
AMENDMENT NO. 2
TO
LOAN AND SECURITY AGREEMENT
Dated as of December 6, 1994
AMENDED AND RESTATED
as of September 29, 1995
THIS AMENDMENT NO. 2 dated as of January 15, 1996 (this
"Amendment") is entered into among ROADMASTER CORPORATION, a Delaware
corporation ("RMC"), ROADMASTER LEISURE INC., a corporation incorporated under
the laws of the province of Ontario, Canada ("RML"), WILLOW HOSIERY COMPANY,
INC., a New York corporation ("Willow"), HUTCH SPORTS USA INC., a Delaware
corporation ("Hutch"), NELSON/WEATHER-RITE, INC., a Delaware corporation
("NWR"), and ROADMASTER RECEIVABLES CORPORATION, an Illinois corporation
("RRC") (RMC, RML, Willow, Hutch, NWR and RRC being sometimes hereinafter
referred to collectively as the "Borrowers" and individually as a "Borrower"),
the financial institutions named on the signature pages of this Amendment as
"Lenders," and BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, as
agent for the Lenders (in such capacity as agent, the "Agent"). Capitalized
terms used herein but not defined herein shall have the meanings provided in
the Loan Agreement.
W I T N E S S E T H:
WHEREAS, the Borrowers, the Lenders and the Agent are parties
to a certain Loan and Security Agreement dated as of December 6, 1994, as
amended and restated as of September 29, 1995, and as further amended as of
October 31, 1995 pursuant to Amendment No. 1 thereto (the "Loan Agreement"); and
WHEREAS, the Borrowers, the Lenders and the Agent have agreed
to amend the Loan Agreement on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises set forth
above, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and
the Agent hereby agree as follows:
Section 1. Amendment of the Loan Agreement. Subject to the
fulfillment of the conditions precedent set forth in Section 3 below, the Loan
Agreement is hereby amended as follows:
(a) The definition of "Eligible Inventory" contained in
Section 1.1 is amended to delete "shipped to RMC from Asia" from
clause 2 of the proviso contained therein and to substitute "shipped
to a Borrower from Asia" therefor.
-1-
<PAGE> 2
(b) The definition of "Individual Borrowing Base" contained in
Section 1.1 is amended and restated as follows:
"Individual Borrowing Base" means:
(a) at any time with respect to RMC, the sum of (1)
eighty-five percent (85%) of the Net Amount of Eligible
Accounts of RMC at such time plus (2) an amount equal to the
lesser of (A) $100,000,000, and (B) (i) sixty percent (60%) of
the value of Eligible Inventory of RMC at such time plus (ii)
any Seasonal Inventory Advance Amount in effect for RMC at
such time. During Fiscal Year 1996, the Seasonal Inventory
Advance Amount shall be in effect for RMC (x) from January 15,
1996 through and including February 15, 1996, and (y) during
up to four (4) additional one-month periods during the period
commencing on July 1, 1996 and ending on December 31, 1996,
which periods shall be selected by RMC by giving twenty (20)
days' prior written notice of such selection to the Agent.
Thereafter, the Seasonal Inventory Advance Amount may be in
effect for two (2) two-consecutive-month periods during each
twelve-month period (including, in any twelve-month period
that includes any period during Fiscal Year 1996 for which the
Seasonal Inventory Advance Amount shall be in effect for RMC,
such period), each selected by RMC by giving twenty (20) days'
prior written notice of such selection to the Agent.
(b) at any time with respect to RML, the sum of (1)
eighty-five percent (85%) of the Net Amount of Eligible
Accounts of RML at such time plus (2) an amount equal to the
lesser of (A) $7,500,000, and (B) (i) sixty percent (60%) of
the value of Eligible Inventory of RML at such time plus (ii)
any Seasonal Inventory Advance Amount in effect for RML at
such time. During Fiscal Year 1996, the Seasonal Inventory
Advance Amount shall be in effect for RML during the months of
January, April, June and December. Thereafter, the Seasonal
Inventory Advance Amount may be in effect for two (2) two-
consecutive-month periods during each twelve-month period
(including, in any twelve-month period that includes any
period during Fiscal Year 1996 for which the Seasonal
Inventory Advance Amount shall be in effect for RML, such
period), each selected by RML by giving twenty (20) days'
prior written notice of such selection to the Agent.
(c) at any time with respect to Willow, the sum of
(1) eighty-five percent (85%) of the Net Amount of Eligible
Accounts of Willow at such time plus (2) an amount equal to
the lesser of (A) $10,000,000, and (B) (i) sixty percent (60%)
of the value of Eligible Inventory of Willow at such time plus
(ii) any Seasonal Inventory Advance Amount in effect for
Willow at such time. During Fiscal Year 1996, the Seasonal
Inventory Advance Amount shall be in effect for Willow during
the months of February, March, April and May. Thereafter, the
Seasonal Inventory Advance Amount may be in effect for two (2)
two-consecutive-month periods during each twelve-month period
(including, in any twelve-month period
-2-
<PAGE> 3
that includes any period during Fiscal Year 1996 for which the
Seasonal Inventory Advance Amount shall be in effect for
Willow, such period), each selected by Willow by giving twenty
(20) days' prior written notice of such selection to the Agent.
(d) at any time with respect to Hutch, the sum of (1)
eighty-five percent (85%) of the Net Amount of Eligible
Accounts of Hutch at such time, and (2) an amount equal to the
lesser of (A) $10,000,000, and (B) (i) sixty percent (60%) of
the value of Eligible Inventory of Hutch at such time plus
(ii) any Seasonal Inventory Advance Amount in effect for Hutch
at such time. During Fiscal Year 1996, the Seasonal Inventory
Advance Amount shall be in effect for Hutch during the months
of March, April, May and June. Thereafter, the Seasonal
Inventory Advance Amount may be in effect for two (2)
two-consecutive-month periods during each twelve-month period
(including, in any twelve-month period that includes any
period during Fiscal Year 1996 for which the Seasonal
Inventory Advance Amount shall be in effect for Hutch, such
period), each selected by Hutch by giving twenty (20) days'
prior written notice of such selection to the Agent.
(e) at any time with respect to NWR, the sum of (1)
eighty-five percent (85%) of the Net Amount of Eligible
Accounts of NWR at such time, and (2) an amount equal to the
lesser of (A) $30,000,000, and (B) (i) sixty percent (60%) of
the value of Eligible Inventory of NWR at such time plus (ii)
any Seasonal Inventory Advance Amount in effect for NWR at
such time. During Fiscal Year 1996, the Seasonal Inventory
Advance Amount shall be in effect for NWR during the months of
January, February, March and April. Thereafter, the Seasonal
Inventory Advance Amount may be in effect for two (2) two-
consecutive-month periods during each twelve-month period
(including, in any twelve-month period that includes any
period during Fiscal Year 1996 for which the Seasonal
Inventory Advance Amount shall be in effect for NWR, such
period), each selected by NWR by giving twenty (20) days'
prior written notice of such selection to the Agent.
(f) with respect to RRC, eighty-five percent (85%) of
the Net Amount of Eligible Accounts of RRC.
(c) Section 5.7 is amended to add the following immediately
following the first sentence thereof:
In addition, the Borrowers will provide the Agent, on a weekly
basis, with a current forecast of Availability, and Individual
Availability for each Borrower, for the thirteen (13) weeks
commencing on the date of such forecast.
(d) The first sentence of Section 8.10 is amended and restated
as follows:
No Borrower shall (a) directly or indirectly declare or make,
or incur any liability
-3-
<PAGE> 4
to make, any Distribution, or (b) make any change in its
capital structure which could adversely affect the repayment
of the Obligations.
(e) Section 8.27 is amended and restated as follows:
8.27 Availability.
(a) RMC shall maintain Individual Availability of
not less than the applicable amount set forth below at all
times during the calendar month of the Fiscal Year indicated:
<TABLE>
<CAPTION>
Amount Calendar Month Fiscal Year
------ -------------- -----------
<S> <C> <C>
$ 1,000,000 January 1996
$ 4,750,000 February 1996
$ 5,000,000 March 1996
$ 5,000,000 April 1996
$ 1,000,000 May 1996
$ 2,000,000 June 1996
$ 5,000,000 July 1996
$ 5,000,000 August 1996
$ 3,000,000 September 1996
$ 1,000,000 October 1996
$ 1,500,000 November 1996
$ 1,500,000 December 1996
and
$ 2,000,000 Each calendar month
thereafter
</TABLE>
(b) The Borrowers shall maintain Availability of not
less than the applicable amount set forth below at all times
during the calendar month of the Fiscal Year indicated:
<TABLE>
<CAPTION>
Amount Calendar Month Fiscal Year
------ -------------- -----------
<S> <C> <C>
$ 5,500,000 January 1996
$ 7,000,000 February 1996
$ 7,000,000 March 1996
$ 7,000,000 April 1996
$ 7,500,000 May 1996
$ 8,500,000 June 1996
$14,000,000 July 1996
</TABLE>
-4-
<PAGE> 5
<TABLE>
<S> <C> <C>
$14,000,000 August 1996
$14,000,000 September 1996
$15,000,000 October 1996
$15,000,000 November 1996
$15,000,000 December 1996
and
$15,000,000 Each calendar month
thereafter
</TABLE>
Section 2. Senior Subordinated Notes. Reference is hereby
made to clause (2) of Section 8.15 of the Loan Agreement, which, among other
things, sets forth the conditions under which RMC may pay interest on the Debt
outstanding under the Subordinated Revolver, in amounts not to exceed
$5,875,000 semiannually, to enable the Parent to pay interest which is then due
and payable on the Senior Subordinated Notes. With respect to such payment
proposed to be made on January 16, 1996, such conditions would include, without
limitation, a requirement that after giving effect to such payment, Individual
Availability with respect to RMC would be at least $1,000,000, and Availability
would be at least $6,000,000. The Lenders hereby agree, solely for purposes of
such payment proposed to be made on January 16, 1996, subject to the provisos
contained in this sentence, to waive such minimum Individual Availability and
Availability requirements; provided, that the amount of such payment permitted
to be made by RMC on interest on Debt outstanding under the Subordinated
Revolver shall not exceed $4,375,000; and provided, further, that after giving
effect to such payment (i) Individual Availability with respect to RMC would be
at least $750,000, (ii) Availability would be at least $4,500,000, and (iii)
there would not have occurred any Default or Event of Default.
Section 3. Conditions to Amendment. This Amendment shall
become effective upon satisfaction of the following conditions:
(a) the receipt by the Agent, by facsimile transmission, of
signed counterparts of this Amendment, executed by each Lender, each
Borrower and each other party thereto, and the execution of this
Amendment by the Agent; provided that each Lender, each Borrower and
each other party thereto shall promptly thereafter execute and deliver
to the Agent eight original counterparts of this Amendment.
(b) the receipt by the Agent, by facsimile transmission, of
signed counterparts of an Acknowledgment and Reaffirmation Agreement,
executed by each Borrower and each other party thereto; provided that
each Borrower and each other party thereto shall promptly thereafter
execute and deliver to the Agent eight original counterparts of such
Acknowledgment and Reaffirmation.
(c) the receipt by the Agent, by facsimile transmission, of
signed counterparts of a letter agreement concerning the payment by
the Borrowers of certain fees and other
-5-
<PAGE> 6
matters, executed by each Lender and each Borrower, and the execution
of such letter agreement by the Agent; provided that each Lender and
each Borrower shall promptly thereafter execute and deliver to the
Agent eight original counterparts of such letter agreement.
(d) the receipt by the Agent, by facsimile transmission, of
signed counterparts of a letter agreement concerning the payment by
the Parent of certain fees and other matters, executed by the Parent
and each Borrower; provided that the Parent and each Borrower shall
promptly thereafter execute and deliver to the Agent eight original
counterparts of such letter agreement.
Section 4. Representations and Warranties. Each Borrower
hereby represents and warrants that (i) this Amendment constitutes a legal,
valid and binding obligation of such Borrower, enforceable against such
Borrower in accordance with its terms, (ii) the representations and warranties
contained in the Loan Agreement are correct in all material respects as though
made on and as of the date of this Amendment, and (iii) no Event of Default has
occurred and is continuing.
Section 5. Reference to and Effect on the Loan Agreement.
(a) Upon the effectiveness of this Amendment, each
reference in the Loan Agreement to "this Agreement", "hereunder", "hereof",
"herein", or words of like import shall mean and be a reference to the Loan
Agreement, as amended hereby, and each reference to the Loan Agreement in any
other document, instrument or agreement executed and/or delivered in connection
with the Loan Agreement shall mean and be a reference to the Loan Agreement, as
amended hereby.
(b) Except as specifically amended above, the Loan
Agreement and all other documents, instruments and agreements executed and/or
delivered in connection therewith shall remain in full force and effect and are
hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of the
Agent or the Lenders under the Loan Agreement, nor constitute a waiver of any
provision of the Loan Agreement or of any Default or Event of Default in
existence on the date of this Amendment.
Section 6. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
Section 7. Governing Law. This Amendment shall be governed
by and construed in accordance with the internal laws (as opposed to the
conflicts of laws provisions) of the State of Illinois.
-6-
<PAGE> 7
Section 8. Section Titles. The section titles contained in
this Amendment are and shall be without substance, meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of January 15, 1996.
ROADMASTER CORPORATION
By:
----------------------------------
Title:
ROADMASTER LEISURE INC.
By:
----------------------------------
Title:
WILLOW HOSIERY COMPANY, INC.
By:
----------------------------------
Title:
HUTCH SPORTS USA INC.
By:
----------------------------------
Title:
-7-
<PAGE> 8
NELSON/WEATHER-RITE, INC.
By:
----------------------------------
Title:
ROADMASTER RECEIVABLES CORPORATION
By:
----------------------------------
Title:
BANKAMERICA BUSINESS CREDIT, INC.,
as the Agent
By:
----------------------------------
Vice President
BANKAMERICA BUSINESS CREDIT, INC.,
as a Lender
By:
----------------------------------
Vice President
DEUTSCHE FINANCIAL SERVICES
CORPORATION, as a Lender
By:
----------------------------------
Vice President
-8-
<PAGE> 9
MELLON BANK, N.A., as a Lender
By:
----------------------------------
Vice President
NATIONSBANK OF GEORGIA, N.A.,
as a Lender
By:
----------------------------------
Vice President
GREEN TREE FINANCIAL SERVICING
CORPORATION, as a Lender
By:
----------------------------------
Vice President
NATIONAL BANK OF CANADA, a Canadian
chartered bank, as a Lender
By:
----------------------------------
Vice President
By:
----------------------------------
FIRST BANK NATIONAL ASSOCIATION,
as a Lender
By:
----------------------------------
Vice President
-9-
<PAGE> 10
Acknowledged and Agreed as of
this ___ day of January, 1996
INTERNATIONAL SPORTS AND
FITNESS, INC.
By:
---------------------------------------
Title:
-----------------------------------
-10-
<PAGE> 1
AMENDMENT NO. 3
TO
LOAN AND SECURITY AGREEMENT
Dated as of December 6, 1994
AMENDED AND RESTATED
as of September 29, 1995
THIS AMENDMENT NO. 3 dated as of February 14, 1996 (this
"Amendment") is entered into among ROADMASTER CORPORATION, a Delaware
corporation ("RMC"), ROADMASTER LEISURE INC., a corporation incorporated under
the laws of the province of Ontario, Canada ("RML"), WILLOW HOSIERY COMPANY,
INC., a New York corporation ("Willow"), HUTCH SPORTS USA INC., a Delaware
corporation ("Hutch"), NELSON/WEATHER-RITE, INC., a Delaware corporation
("NWR"), and ROADMASTER RECEIVABLES CORPORATION, an Illinois corporation
("RRC") (RMC, RML, Willow, Hutch, NWR and RRC being sometimes hereinafter
referred to collectively as the "Borrowers" and individually as a "Borrower"),
the financial institutions named on the signature pages of this Amendment as
"Lenders," and BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, as
agent for the Lenders (in such capacity as agent, the "Agent"). Capitalized
terms used herein but not defined herein shall have the meanings provided in
the Loan Agreement.
W I T N E S S E T H:
WHEREAS, the Borrowers, the Lenders and the Agent are parties
to a certain Loan and Security Agreement dated as of December 6, 1994, as
amended and restated as of September 29, 1995, and as further amended as of
October 31, 1995 pursuant to Amendment No. 1 thereto and as of January 15, 1996
pursuant to Amendment No. 2 thereto (the "Loan Agreement"); and
WHEREAS, the Borrowers, the Lenders and the Agent have agreed
to amend the Loan Agreement on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises set forth
above, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and
the Agent hereby agree as follows:
Section 1. Amendment of the Loan Agreement. Subject to the
fulfillment of the conditions precedent set forth in Section 3 below, the Loan
Agreement is hereby amended as follows:
(a) Paragraph (a) of the definition of "Individual Borrowing
Base" contained in Section 1.1 is amended and restated as follows:
-1-
<PAGE> 2
(a) at any time with respect to RMC, the sum of (1)
eighty-five percent (85%) of the Net Amount of Eligible
Accounts of RMC at such time plus (2) an amount equal to the
lesser of (A) $100,000,000, and (B) (i) sixty percent (60%) of
the value of Eligible Inventory of RMC at such time plus (ii)
any Seasonal Inventory Advance Amount in effect for RMC at
such time. During Fiscal Year 1996, the Seasonal Inventory
Advance Amount shall be in effect for RMC from January 15,
1996 through and including April 30, 1996. After December
31, 1996, the Seasonal Inventory Advance Amount may be in
effect for two (2) two-consecutive-month periods during each
twelve-month period (including, in any twelve-month period
that includes any period during Fiscal Year 1996 for which the
Seasonal Inventory Advance Amount shall be in effect for RMC,
such period), each selected by RMC by giving twenty (20) days'
prior written notice of such selection to the Agent.
(b) Section 8.27 is amended and restated as follows:
8.27 Availability.
(a) RMC shall maintain Individual Availability of
not less than the applicable amount set forth below at all
times during the calendar month of the Fiscal Year indicated:
<TABLE>
<CAPTION>
Amount Calendar Month Fiscal Year
------ -------------- -----------
<S> <C> <C>
$ 1,000,000 February 1996
$ 1,000,000 March 1996
$ 1,000,000 April 1996
$ 1,000,000 May 1996
$ 1,500,000 June 1996
$ 4,000,000 July 1996
$ 4,000,000 August 1996
$ 2,000,000 September 1996
$ 1,000,000 October 1996
$ 1,000,000 November 1996
$ 1,000,000 December 1996
and
$ 1,500,000 Each calendar month
thereafter
</TABLE>
(b) The Borrowers shall maintain Availability of not
less than the applicable amount set forth below at all times
during the calendar month of the Fiscal Year indicated:
-2-
<PAGE> 3
<TABLE>
<CAPTION>
Amount Calendar Month Fiscal Year
------ --------------- -----------
<S> <C> <C>
$ 5,000,000 February 1996
$ 5,000,000 March 1996
$ 5,000,000 April 1996
$ 5,000,000 May 1996
$ 7,500,000 June 1996
$11,500,000 July 1996
$11,500,000 August 1996
$12,500,000 September 1996
$12,500,000 October 1996
$12,500,000 November 1996
$12,500,000 December 1996
and
$12,500,000 Each calendar month
thereafter
</TABLE>
Section 2. RRC Distribution. Reference is hereby made to
Section 8.10 of the Loan Agreement, which, among other things, prohibits the
making of Distributions by the Borrowers, other than certain Distributions
described therein. Notwithstanding such prohibition, the Lenders hereby
consent to the making of a Distribution by RRC to RMC in the amount of
$1,500,000; provided that such Distribution shall be made no later than
February 16, 1996, and provided, further, that such Distribution shall be made
in accordance with all applicable laws.
Section 3. Conditions to Amendment. This Amendment shall
become effective upon satisfaction of the following conditions:
(a) the receipt by the Agent, by facsimile transmission, of
signed counterparts of this Amendment, executed by each Lender, each
Borrower and each other party thereto, and the execution of this
Amendment by the Agent; provided that each Lender, each Borrower and
each other party thereto shall promptly thereafter execute and deliver
to the Agent eight original counterparts of this Amendment.
(b) the receipt by the Agent, by facsimile transmission, of
signed counterparts of a letter agreement concerning the payment by
the Borrowers of certain fees and other matters, executed by each
Lender and each Borrower, and the execution of such letter agreement
by the Agent; provided that each Lender and each Borrower shall
promptly thereafter execute and deliver to the Agent eight original
counterparts of such letter agreement.
(c) the receipt by the Agent, by facsimile transmission, of
signed counterparts of an Acknowledgment and Reaffirmation Agreement,
executed by each Borrower and each
-3-
<PAGE> 4
other party thereto; provided that each Borrower and each other party
thereto shall promptly thereafter execute and deliver to the Agent
eight original counterparts of such Acknowledgment and Reaffirmation.
Section 4. Representations and Warranties. Each Borrower
hereby represents and warrants that (i) this Amendment constitutes a legal,
valid and binding obligation of such Borrower, enforceable against such
Borrower in accordance with its terms, (ii) the representations and warranties
contained in the Loan Agreement are correct in all material respects as though
made on and as of the date of this Amendment, and (iii) no Event of Default has
occurred and is continuing.
Section 5. Reference to and Effect on the Loan Agreement.
(a) Upon the effectiveness of this Amendment, each
reference in the Loan Agreement to "this Agreement", "hereunder", "hereof",
"herein", or words of like import shall mean and be a reference to the Loan
Agreement, as amended hereby, and each reference to the Loan Agreement in any
other document, instrument or agreement executed and/or delivered in connection
with the Loan Agreement shall mean and be a reference to the Loan Agreement, as
amended hereby.
(b) Except as specifically amended above, the Loan
Agreement and all other documents, instruments and agreements executed and/or
delivered in connection therewith shall remain in full force and effect and are
hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of the
Agent or the Lenders under the Loan Agreement, nor constitute a waiver of any
provision of the Loan Agreement or of any Default or Event of Default in
existence on the date of this Amendment.
Section 6. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
Section 7. Governing Law. This Amendment shall be governed
by and construed in accordance with the internal laws (as opposed to the
conflicts of laws provisions) of the State of Illinois.
-4-
<PAGE> 5
Section 8. Section Titles. The section titles contained in
this Amendment are and shall be without substance, meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of February 14, 1996.
ROADMASTER CORPORATION
By:
----------------------------------
Title:
ROADMASTER LEISURE INC.
By:
----------------------------------
Title:
WILLOW HOSIERY COMPANY, INC.
By:
----------------------------------
Title:
HUTCH SPORTS USA INC.
By:
----------------------------------
Title:
-5-
<PAGE> 6
NELSON/WEATHER-RITE, INC.
By:
----------------------------------
Title:
ROADMASTER RECEIVABLES CORPORATION
By:
----------------------------------
Title:
BANKAMERICA BUSINESS CREDIT, INC.,
as the Agent
By:
----------------------------------
Vice President
BANKAMERICA BUSINESS CREDIT, INC.,
as a Lender
By:
----------------------------------
Vice President
DEUTSCHE FINANCIAL SERVICES
CORPORATION, as a Lender
By:
----------------------------------
Vice President
-6-
<PAGE> 7
MELLON BANK, N.A., as a Lender
By:
----------------------------------
Vice President
NATIONSBANK OF GEORGIA, N.A.,
as a Lender
By:
----------------------------------
Vice President
GREEN TREE FINANCIAL SERVICING
CORPORATION, as a Lender
By:
----------------------------------
Vice President
NATIONAL BANK OF CANADA, a Canadian
chartered bank, as a Lender
By:
----------------------------------
Vice President
By:
----------------------------------
-7-
<PAGE> 8
FIRST BANK NATIONAL ASSOCIATION,
as a Lender
By:
----------------------------------
Vice President
-8-
<PAGE> 1
CONFORMED COPY
================================================================================
ASSET PURCHASE AGREEMENT
dated as of February 26, 1996,
among
ROADMASTER INDUSTRIES, INC.,
Seller,
NELSON/WEATHER-RITE, INC.,
ACTAVA WORLD TRADE CORPORATION,
Seller Subs,
and
BRUNSWICK CORPORATION,
Purchaser.
Purchase and Sale of Roadmaster's
Nelson/Weather-Rite Division
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I
Purchase and Sale of Acquired Assets
Page
----
<S> <C> <C>
SECTION 1.1. Purchase and Sale . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2. Acquired Assets and
Excluded Assets . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3. Assumption of Certain
Liabilities . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 1.4. Purchase Price . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 1.5. Purchase Price Adjustment . . . . . . . . . . . . . . . . . 12
SECTION 1.6. Prorations . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE II
The Closing
SECTION 2.1. Closing Date . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.2. Transactions To Be Effected
at the Closing . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.3. Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III
Representations and Warranties
SECTION 3.1. Representations and Warranties of
Seller and Seller Subs . . . . . . . . . . . . . . . . . 17
(a) Organization, Standing and Power . . . . . . . . .
17
(b) Authority . . . . . . . . . . . . . . . . . . . . 18
(c) Financial Statements . . . . . . . . . . . . . . . 20
</TABLE>
<PAGE> 3
2
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(d) Compliance with Applicable Laws; Permits . . . . .
21
(e) Litigation; Decrees . . . . . . . . . . . . . . . 22
(f) Undisclosed Liabilities . . . . . . . . . . . . . 22
(g) Title to Acquired Assets . . . . . . . . . . . . . 23
(h) Real Property . . . . . . . . . . . . . . . . . . 24
(i) Inventories . . . . . . . . . . . . . . . . . . . 25
(j) Personal Property . . . . . . . . . . . . . . . . 25
(k) Receivables . . . . . . . . . . . . . . . . . . . 26
(l) Intellectual Property and Technology . . . . . . .
26
(m) Insurance . . . . . . . . . . . . . . . . . . . . 28
(n) Contracts . . . . . . . . . . . . . . . . . . . . 30
(o) Investments; Exclusively Conducted . . . . . . . .
35
(p) Suppliers; Customers . . . . . . . . . . . . . . . 36
(q) Sufficiency of Acquired
Assets . . . . . . . . . . . . . . . . . . . . . . 36
(r) Absence of Certain Changes
or Events . . . . . . . . . . . . . . . . . . . . 36
(s) Employees; Officers . . . . . . . . . . . . . . . 38
(t) Employee Benefits;
Labor Matters . . . . . . . . . . . . . . . . . . 38
(u) Environmental Matters . . . . . . . . . . . . . . 43
(v) No Other Agreements To
Sell the Assets . . . . . . . . . . . . . . . . . 50
(w) Material Misstatements
or Omissions . . . . . . . . . . . . . . . . . . . 50
(x) Product Liability . . . . . . . . . . . . . . . . 51
(y) Transactions with
Affiliates . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
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<TABLE>
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<S> <C> <C> <C>
(z) Division Acquisition
Agreements; Valuation
Reports . . . . . . . . . . . . . . . . . . . . . 51
(aa) Tax Matters . . . . . . . . . . . . . . . . . . . 52
SECTION 3.2. Representations and Warranties
of Purchaser . . . . . . . . . . . . . . . . . . . . . . 54
(a) Organization, Standing
and Power . . . . . . . . . . . . . . . . . . . . 54
(b) Authority . . . . . . . . . . . . . . . . . . . . 54
ARTICLE IV
Covenants
SECTION 4.1. Covenants of Seller and
Seller Subs Relating to
Conduct of Business . . . . . . . . . . . . . . . . . . . 55
SECTION 4.2. Consultation . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 4.3. Frustration . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.4. Access to Information . . . . . . . . . . . . . . . . . . . 59
SECTION 4.5. Legal Conditions to Closing . . . . . . . . . . . . . . . . 60
SECTION 4.6 Third-Party Consents; Trade Letters of Credit . . . . . .
60
SECTION 4.7 Offer of Employment; Employee
Benefit Plans; Welfare
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 4.8. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 4.9. Brokers or Finders . . . . . . . . . . . . . . . . . . . . 67
SECTION 4.10. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 4.11. Agreement Not to Compete;
Confidentiality;
Nonsolicitation . . . . . . . . . . . . . . . . . . . . . 69
SECTION 4.12. Bulk Transfer Laws . . . . . . . . . . . . . . . . . . . . 71
SECTION 4.13. Additional Agreements . . . . . . . . . . . . . . . . . . . 71
</TABLE>
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<S> <C> <C>
SECTION 4.14. Purchase Price Allocation . . . . . . . . . . . . . . . . . 72
SECTION 4.15. Supplies; Names Following
Closing; Product Identification . . . . . . . . . . . . . 73
SECTION 4.16. Enforcement of Confidentiality
Rights . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 4.17. Post-Closing Financial and
Other Information . . . . . . . . . . . . . . . . . . . 74
SECTION 4.18. License and Sourcing Agreements . . . . . . . . . . . . . . 75
ARTICLE V
Conditions Precedent
SECTION 5.1. Conditions to Each Party's
Obligation . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 5.2. Conditions to Obligation of
Purchaser . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 5.3. Conditions to Obligation of
Seller and Seller Subs . . . . . . . . . . . . . . . . . 82
ARTICLE VI
Termination, Amendment and Waiver
SECTION 6.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 6.2. Amendments and Waivers . . . . . . . . . . . . . . . . . . 88
ARTICLE VII
Indemnification
SECTION 7.1. Indemnification by Seller 89
and Seller Subs . . . . . . . . . . . . . . . . . . . . .
SECTION 7.2. Indemnification by Purchaser . . . . . . . . . . . . . . . 91
SECTION 7.3. Losses Net of Insurance, Etc. . . . . . . . . . . . . . . . 92
</TABLE>
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SECTION 7.4. Termination of
Indemnification . . . . . . . . . . . . . . . . . . . . . 93
SECTION 7.5. Procedure . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 7.6. Other Claims. . . . . . . . . . . . . . . . . . . . . . . . 96
ARTICLE VIII
Tax Matters
SECTION 8.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 8.2. Taxable Periods . . . . . . . . . . . . . . . . . . . . . . 99
SECTION 8.3. FIRPTA . . . . . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 8.4. Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 8.5. Preparation of W-2 Forms,
Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 100
ARTICLE IX
General Provisions
SECTION 9.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 101
SECTION 9.2. Interpretation . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 9.3. Survival of Representations . . . . . . . . . . . . . . . . 104
SECTION 9.4. Severability . . . . . . . . . . . . . . . . . . . . . . . 105
SECTION 9.5. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 9.6. Entire Agreement; No Third-Party
Beneficiaries . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 9.8. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 9.9. Assignment . . . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 9.10. Cumulative Remedies . . . . . . . . . . . . . . . . . . . . 108
</TABLE>
<PAGE> 7
6
<TABLE>
<S> <C>
Exhibit A Procedures and Terms for Purchase Price
Adjustment
Exhibit B Form of Smith, Gambrell & Russell Legal Opinion
Exhibit C Form of Purchaser's General Counsel Legal Opinion
Schedule 1.3(a) Promotional Obligations
Schedule 3.1(c) Financial Statements
Schedule 3.1(d) Permits
Schedule 3.1(e) Litigation; Decrees
Schedule 3.1(g) Title to Acquired Assets
Schedule 3.1(h)-l Owned Property
Schedule 3.1(h)-2 Leased Property
Schedule 3.1(j) Owned Personal Property
Schedule 3.1(l) Intellectual Property and Technology
Schedule 3.1(m) Insurance
Schedule 3.1(n) Contracts
Schedule 3.1(o) Investments
Schedule 3.1(p) Suppliers; Customers
Schedule 3.1(r)(iii) Changes
Schedule 3.1(s) Employees; Officers
Schedule 3.1(t) Benefit Plans
Schedule 3.1(u) Environmental
Schedule 3.1(v) Agreements To Sell Assets
Schedule 3.1(x) Product Liability
Schedule 3.1(y) Affiliate Transactions
Schedule 3.1(aa) Tax Matters
Schedule 4.1(a) Ordinary Course Exceptions
Schedule 5.2(h) Material Required Consents
</TABLE>
<PAGE> 8
CONFORMED COPY
ASSET PURCHASE AGREEMENT dated as of February 26, 1996,
among ROADMASTER INDUSTRIES, INC., a Delaware corporation ("Seller"),
NELSON/WEATHER-RITE, INC., a Delaware corporation and a wholly owned
subsidiary of Seller ("Nelson"), ACTAVA WORLD TRADE CORPORATION, a Delaware
corporation and a wholly owned subsidiary of Nelson ("Actava" and, together
with Nelson, "Seller Subs"), and BRUNSWICK CORPORATION, a Delaware corporation
("Purchaser").
Seller and Seller Subs wish to sell to Purchaser, and
Purchaser wishes to purchase from Seller and Seller Subs, substantially all the
assets used, intended to be used, held for use or useful in the operation and
business of Seller's and Seller Subs' Nelson/Weather-Rite Division (the
"Division"), upon the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties agree as follows:
<PAGE> 9
ARTICLE I
Purchase and Sale of Acquired Assets
SECTION 1.1. Purchase and Sale. Upon the terms and subject
to the conditions of this Agreement, at the Closing (as defined in Section 2.1)
Seller and Seller Subs agree to sell, assign, transfer, convey and deliver to
Purchaser, and Purchaser agrees to purchase, all Seller's and Seller Subs'
right, title and interest in, to and under the Acquired Assets (as defined in
Section 1.2(a)).
SECTION 1.2. Acquired Assets and Excluded Assets. (a) The
term "Acquired Assets" means all the business, properties, assets, goodwill and
rights of Seller and Seller Subs of whatever kind and nature, real or personal,
tangible or intangible, other than the Excluded Assets (as defined in Section
1.2(b)), owned, leased or licensed by Seller or Seller Subs on the Closing Date
(as defined in Section 2.1) and used, intended to be used, held for use or
useful in the operation and business of the Division, including:
(i) all real property, leaseholds and other interests in real
property of Seller or any Seller Sub, including the items listed in
Schedule 3.1(h), in each case together with Seller's and Seller Subs'
right, title and interest in all buildings, improvements, fixtures and
all other appurtenances thereto (the "Premises");
<PAGE> 10
3
(ii) all raw materials, work-in-process, finished goods,
supplies, parts and other inventories ("Inventory") of Seller or any
Seller Sub, including Inventory located on the Premises, in transit,
on consignment or in the possession of any vendor where title to such
Inventory is held by Seller or any Seller Sub;
(iii) all personal property and interests therein of Seller or
any Seller Sub, including machinery, equipment, furniture, office
equipment, communications equipment, vehicles, spare and replacement
parts and other tangible property, together with any additions thereto
or replacements therefor made in the ordinary course of business
("Personal Property");
(iv) all accounts, notes and other receivables ("Receivables")
of Seller or any Seller Sub arising out of operations of the Division;
(v) all patents (including all reissues, divisions,
continuations and extensions thereof), patent applications,
trademarks, trademark registrations, servicemarks, trade names,
copyrights, computer software programs and data, licenses with respect
to the foregoing and any other similar property ("Intellectual
Property");
(vi) all trade secrets, inventions, know-how, formulae,
processes, procedures, research records, records
<PAGE> 11
4
of inventions, test information, market surveys and marketing know-how
("Technology");
(vii) all permits, licenses, consents, certificates, orders,
franchises, approvals, registrations and authorizations by
Governmental Entities and other Persons (each such term as defined in
Section 3.1(b)) ("Permits");
(viii) all Seller's and Seller Subs' rights and privileges
under all contracts, leases, licenses, indentures, joint venture,
environmental indemnity and other agreements, commitments, sales and
purchase orders and all other legally binding arrangements, whether
oral or written ("Contracts"), to which Seller or any Seller Sub is a
party or by which Seller or any Seller Sub is bound that are listed in
Schedule 3.1(h)-l, 3.1(h)-2 or 3.1(n) (unless otherwise designated so
on any such Schedule) and all other Contracts that relate to the
operations of the Division that are not required to be listed in any
such Schedule (all such Contracts, unless otherwise designated so on
such Schedules, collectively referred to as "Assumed Contracts");
(ix) all partnership interests or any other equity interests
in any partnership, joint venture, trust or other business association
("Investments") listed in
<PAGE> 12
5
Schedule 3.1(o) and all other Investments that relate to the
operations of the Division acquired by Seller or any Seller Sub after
the date of this Agreement in the ordinary course of business;
(x) all rights, claims, credits and causes of action to the
extent relating to any of the Assumed Liabilities or the Acquired
Assets, including rights, claims and causes of action under insurance
policies relating thereto;
(xi) all prepaid expenses and all security deposits; and
(xii) all books, ledgers, records, files and papers, whether
in hard copy or computer format, including books of account, general,
financial, accounting and personnel records, invoices, lists of
present and former customers and suppliers, sales and promotional
literature, manuals, sales data, purchase correspondence and
documentation and know-how developed or used for accounting,
marketing, warehousing or any other purpose, other than the financial
and tax records expressly specified in Section 1.2(b)(iv).
(b) The term "Excluded Assets" means:
(i) all cash on hand or in banks and cash equivalents owned by
Seller or any Seller Sub relating to the operations of the Division;
<PAGE> 13
6
(ii) all rights of Seller or any Seller Sub under this
Agreement and the agreements, instruments and certificates delivered
in connection with this Agreement;
(iii) all rights, claims and causes of action to the extent
relating to any of the Excluded Liabilities (as defined in Section
1.3(b)) or the Excluded Assets, including rights, claims and causes of
action under insurance policies relating thereto;
(iv) all financial and tax records relating to the Division
that are part of Seller's general ledger, and supporting documents
therefor; and
(v) all shares of capital stock of Seller held by Actava and
all shares of capital stock of Actava held by Nelson.
SECTION 1.3. Assumption of Certain Liabilities. (a) Upon the
terms and subject to the conditions of this Agreement, at the Closing Purchaser
agrees to assume, to pay, perform and discharge when due, and to indemnify
Seller and Seller Subs and hold Seller and Seller Subs harmless from and after
the Closing from (the obligations and liabilities identified in this Section
1.3 shall be referred to as the "Assumed Liabilities"):
(i) all current liabilities, including current accrued
expenses, of Seller or any Seller Sub included
<PAGE> 14
7
in Closing Net Working Capital (as defined in Exhibit A hereto);
(ii) all Taxes (as defined in Section 8.1) relating to or
arising out of the Acquired Assets accruing under the principles of
Section 8.2 during the Post-Closing Tax Period (as defined in Section
8.1);
(iii) all obligations and liabilities of Seller or any Seller
Sub under its (A) product warranties (but only to the extent that such
obligations or liabilities are limited to repair, replacement or
refund of the purchase price) for products of the Division sold to the
end-users, or, in the case of Covered Products (as defined below),
manufactured, by or on behalf of Seller or any Seller Sub on or prior
to the Closing Date and (B) promotional obligations, including
advertising allowances, guaranteed sales, freight allowances and
volume discounts (but only to the extent that such promotional
obligations are of the type listed on Schedule 1.3(a)) and, in the
case of obligations or liabilities under either clause (A) or (B),
only to the extent of the applicable aggregate reserves (in the case
of clause (A)) or liabilities (in the case of clause (B)) therefor
included in Closing Net Working Capital; and
<PAGE> 15
8
(iv) all obligations and liabilities of Seller or any Seller
Sub under the Assumed Contracts but only to the extent such
obligations or liabilities (A) relate to the period from and after the
Closing Date and arise from actions taken after the Closing Date or
(B) are otherwise included in Section 1.3(a)(i).
The term "Covered Products" shall mean all (A) propane-related products to the
extent Seller or any Seller Sub shall have placed a purchase order with respect
thereto, (B) sleeping bags and (C) waders.
(b) The term "Excluded Liabilities" means any obligation or
liability (other than as expressly assumed by Purchaser in Section 1.3(a)
above) of Seller or any Seller Sub or relating to or arising out of the
Acquired Assets, or the business, assets or operations of the Division, of any
nature whatsoever whether express or implied, fixed or contingent, known or
unknown, and based on, arising out of, or resulting from, acts, facts,
circumstances, events or conditions occurring or existing on or prior to the
Closing Date, including:
(i) all obligations and liabilities (including environmental
liabilities) relating to or arising out of any of the Excluded Assets;
(ii) all Taxes imposed upon Seller or any Seller Sub or any
present or former affiliate of Seller or any
<PAGE> 16
9
Seller Sub for any taxable period (including Taxes relating to or
arising out of the transactions contemplated by this Agreement), all
Taxes relating to or arising out of the Excluded Assets for any
taxable period, all Taxes relating to or arising out of any Tax
sharing agreement, Tax indemnity obligation or similar agreement,
arrangement or practice in effect with respect to Seller, any Seller
Sub or any present or former affiliate of Seller or any Seller Sub and
all Taxes relating to or arising out of the Acquired Assets accruing
under the principles of Section 8.2 during the Pre-Closing Tax Period
(as defined in Section 8.1) ("Excluded Taxes");
(iii) all Transfer Taxes (as defined in Section 8.1);
(iv) all obligations and liabilities relating to or arising
out of any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option,
phantom stock, retirement, vacation, severance pay, disability
benefits, death benefits, hospitalization, insurance or other similar
plan or arrangement or understanding (whether or not legally binding)
providing benefits to any present or former employee (or dependent or
<PAGE> 17
10
beneficiary thereof) of Seller or any Seller Sub, including Employees
(as defined in Section 3.1(s));
(v) all obligations and liabilities relating to or arising out
of any claims made by Employees or former employees (or their
dependents or beneficiaries) or labor organizations, unions or
associations representing Employees or former employees for severance
or other separation benefits with respect to the employment or the
failure to offer employment to, the failure to promote, or the
termination of employment of (including any claims under the Worker
Adjustment and Retaining Notification Act, as amended ("WARN Act"),
the Age Discrimination in Employment Act ("ADEA"), the Equal
Employment Opportunity Act ("EEOA") or any other applicable law), any
such Employee or former employee or which are based on, arising out
of, or resulting from, acts, facts, circumstances, events or
conditions occurring or existing on or prior to the Closing Date,
including any such claims based upon the transactions contemplated
hereby;
(vi) all obligations and liabilities (including any
environmental liabilities) relating to or arising out of any Acquired
Assets, or the business, assets or operations of the Division, with
respect to any claim, cause of action, proceeding or other litigation
pending
<PAGE> 18
11
or threatened on the Closing Date or which is initiated at any time
thereafter and based on, arising out of, or resulting from, acts,
facts, circumstances, events or conditions occurring or existing on or
prior to the Closing Date;
(vii) all obligations and liabilities based on, arising out
of, or resulting from, products sold to the end-users, or, in the case
of Covered Products, manufactured, by or on behalf of Seller or any
Seller Sub on or prior to the Closing Date (including claims of
negligence, personal injury, product damage, product liability,
product warranties, promotional obligations, strict liability, product
recall or any other claims (including workers' compensation,
employer's liability or otherwise)), whether such obligations or
liabilities are based on, arising out of, or resulting from,
accidents, injuries or losses occurring on or prior to or after the
Closing Date; and
(viii) all intercompany obligations and liabilities of Seller,
any Seller Sub or the Division.
(c) Purchaser shall acquire the Acquired Assets free and
clear of all Liens, other than Permitted Liens (each such term as defined in
Section 3.1(g)), obligations and liabilities, except as expressly provided in
Section 1.3(a). Each of Seller and Seller Subs jointly and
<PAGE> 19
12
severally agrees to pay, perform and discharge, and indemnify Purchaser against
and hold Purchaser harmless from, all obligations and liabilities of Seller and
Seller Subs based on, arising out of, or resulting from, the Acquired Assets
except those which Purchaser has expressly agreed to assume pursuant to Section
1.3(a).
SECTION 1.4. Purchase Price. The purchase price for the
Acquired Assets shall be $120,000,000 (the "Purchase Price"), subject to
adjustment as set forth in Section 1.5 and payable as set forth in Section
2.2(b).
SECTION 1.5. Purchase Price Adjustment. (a) The Purchase
Price shall be increased by the amount that Closing Net Working Capital exceeds
$45,688,000 (the "Base Amount"), and the Purchase Price shall be decreased by
the amount that Closing Net Working Capital is less than the Base Amount (the
Purchase Price as so increased or decreased being herein referred to as the
"Adjusted Purchase Price"). If the Closing Date Amount (as defined in Section
2.2(b)) is less than the Adjusted Purchase Price, Purchaser shall, and if the
Closing Date Amount is more than the Adjusted Purchase Price, Seller shall,
within 10 business days after the Closing Statement (as defined in Exhibit A
hereto) becomes final and binding on the parties, make payment by wire transfer
in immediately available funds of the amount of such difference, together with
simple interest thereon at
<PAGE> 20
13
the prime or base rate of Chemical Bank, N.A., announced from time to time,
calculated on the basis of the actual number of days elapsed divided by 365,
from the Closing Date to the date of actual payment (the "Applicable Rate").
(b) Closing Net Working Capital shall be determined according
to the procedures and terms set forth in Exhibit A hereto.
SECTION 1.6. Prorations. The items listed below, to the
extent not reflected in Closing Net Working Capital or covered by Section 8.2
("Proration Items"), shall be apportioned between Seller and Seller Subs and
Purchaser, with Seller and Seller Subs being fully responsible for all
expenses, and entitled to all income, attributable to periods on or prior to
the Closing Date, and Purchaser being responsible for all expenses, and
entitled to all income, attributable to periods after the Closing Date:
(i) prepaid rent, tenant utility payments and all other
percentage or additional rent, common area maintenance and sundry
charges (including any HVAC charges) and commissions paid by tenants;
(ii) utility company charges, including electricity, gas,
fuel, water and sewer charges;
(iii) prepaid insurance premiums; and
<PAGE> 21
14
(iv) other items typically apportioned in sale of assets
transactions of the type contemplated by this Agreement.
No less than 10 days prior to the Closing Date, the parties shall provide each
other with a list of all Proration Items reasonably ascertainable at such time
and all information necessary to determine the apportionment of such Proration
Items between Seller and Seller Subs and Purchaser ("Proration Information").
To the extent practicable, any payments between the parties necessary with
respect to such Proration Items shall be made as of the Closing Date. As soon
as practicable after the Closing Date, the parties shall provide each other
with a list of any other Proration Items and all related Proration Information.
Payment for any Proration Items not made as of the Closing Date shall be made
no later than 30 days after the Closing Date, together with interest thereon
from the Closing Date to the date of actual payment at the Applicable Rate.
ARTICLE II
The Closing
SECTION 2.1. Closing Date. The closing of the sale and
transfer of the Acquired Assets (hereinafter called the "Closing") shall take
place at the offices of Cravath, Swaine & Moore, 825 8th Avenue, New York, New
York, at
<PAGE> 22
15
10:00 a.m. on the second business day following the satisfaction of the
conditions set forth in Article V, or at such other time, date and place as
shall be fixed by agreement among the parties hereto (such date of the Closing
being hereinafter referred to as the "Closing Date").
SECTION 2.2. Transactions To Be Effected at the Closing. At
the Closing:
(a) Seller and Seller Subs shall deliver to Purchaser (i) such
appropriately executed deeds, bills of sale, assignments and other
instruments of transfer relating to the Acquired Assets in form and
substance reasonably satisfactory to Purchaser and its counsel; and
(ii) such other documents as Purchaser or its counsel may reasonably
request to demonstrate satisfaction of the conditions and compliance
with the agreements set forth in this Agreement; and
(b) Purchaser shall deliver to Seller and Seller Subs (i) by
wire transfer to an account designated in writing by Seller, by notice
to Purchaser, no later than two business days prior to the Closing
Date, immediately available funds in an amount equal to the Purchase
Price, less an estimate prepared by Seller in good faith and delivered
to Purchaser at least two business days prior to the Closing Date of
any decrease to the Purchase Price pursuant to the adjustment set
<PAGE> 23
16
forth in Section 1.5 (the Purchase Price, less any such estimate,
being herein referred to as the "Closing Date Amount"); (ii) such
appropriately executed assumption agreements and other instruments of
assumption providing for the assumption of the Assumed Liabilities in
form and substance reasonably satisfactory to Seller and its counsel;
and (iii) such other documents as Seller or its counsel may reasonably
request to demonstrate satisfaction of the conditions and compliance
with the agreements set forth in this Agreement.
SECTION 2.3. Risk of Loss. Until the Closing, any loss of or
damage to the Acquired Assets from fire, casualty or any other occurrence shall
be the sole responsibility of Seller or one of Seller Subs, as applicable.
ARTICLE III
Representations and Warranties
SECTION 3.1. Representations and Warranties of Seller and
Seller Subs. Each of Seller and Seller Subs hereby jointly and severally
represents and warrants to Purchaser as follows:
(a) Organization, Standing and Power. It is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the
<PAGE> 24
17
requisite power and authority and all material governmental licenses,
authorizations, permits, consents and approvals required to own the Acquired
Assets owned by it and to carry on the business of the Division. Seller has
heretofore delivered to Purchaser true and complete copies of the respective
certificates of incorporation and By-laws of Seller and Seller Subs, in each
case as amended through the date of this Agreement. It is duly qualified to do
business as a foreign corporation in each jurisdiction where the character of
the Acquired Assets or the nature of the Division make such qualification
necessary to carry on the business of the Division, except where the failure to
so qualify does not have, or is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect (as defined in Section 5.2(g)).
Neither Seller nor any of Seller Subs has any subsidiaries that are or have
been engaged in the business or operations of the Division, other than (i) in
the case of Seller, Nelson, which is a subsidiary of Seller, and (ii) in the
case of Nelson, Actava, which is a subsidiary of Nelson.
(b) Authority. It has all corporate power and authority to
execute this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized
<PAGE> 25
18
by all necessary corporate action on its part and do not require the approval
of the stockholders of Seller. This Agreement has been duly executed and
delivered by it and constitutes its legal, valid and binding obligation
enforceable against it in accordance with its terms. The execution and
delivery of this Agreement by it do not, and the consummation by it of the
transactions contemplated hereby and the compliance with the terms hereof will
not, (i) violate any law, judgment, order, decree, statute, ordinance, rule or
regulation applicable to it, any of its affiliates or any of its property, (ii)
conflict with any provision of its certificate of incorporation or By-laws,
(iii) conflict with, or result in the breach of, or give rise to any right of
termination, cancelation or acceleration of any right or obligation or to a
loss of any benefit under, or constitute a default under or violation of
(whether with notice or lapse of time or both), or result in the creation of
any Lien upon any of Purchaser's assets pursuant to, any Contract to which it
is a party or by which it or any of its property is bound, except as set forth
on Section 3.1(n) or (iv) require any consent, approval, order or authorization
of, or the registration, declaration or filing with, any court, administrative
agency or commission or other governmental or regulatory authority, body or
instrumentality, domestic or foreign (a "Governmental
<PAGE> 26
19
Entity") or any individual, corporation, partnership, joint venture, trust,
business association or other entity (a "Person", which term shall include a
Governmental Entity), except for (A) the filing of a premerger notification
report by Seller under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act"), (B) compliance with and filings under Section 13(a) of the
Securities Exchange Act of 1934 (the "Exchange Act") and (C) as set forth on
Schedule 3.1(n).
(c) Financial Statements. Schedule 3.1(c) sets forth (i) the
unaudited balance sheet and statement of income of the Division as of and for
the year-to-date period ended November 24, 1995 (the "Unaudited Financial
Statements"), and (ii) the audited balance sheet and statements of income and
cash flows of the Division as of and for the year ended December 31, 1995 (the
"Audited Financial Statements", and, together with the Unaudited Financial
Statements, the "Financial Statements"). Each of the Unaudited Financial
Statements and the Audited Financial Statements (i) have been prepared from the
books and records of Seller and Seller Subs relating to the Division in
accordance with generally accepted accounting principles consistently applied
(except in each case as may be described in the notes included therein)
throughout the periods covered thereby, (ii) fairly present the financial
<PAGE> 27
20
condition, results of operations and, in the case of the Audited Financial
Statements, cash flows of the Division as of and for the dates and periods
indicated, (iii) do not contain any material items of special or nonrecurring
income or any other income not earned in the ordinary course of business except
as otherwise expressly stated therein and (iv) set forth therein all material
assumptions upon which such Financial Statements are based.
(d) Compliance with Applicable Laws; Permits. (i) Each of
Seller and Seller Subs has complied in all material respects with all material
laws, regulations, rules and orders of all Governmental Entities applicable to
it which relate to the Acquired Assets. Neither Seller nor any Seller Sub has
received any written notice of any asserted violation in any material respect
of any such laws, regulations, rules or orders which relate to the Acquired
Assets. Neither Seller nor any Seller Sub has received any written notice that
any investigation or review by any Governmental Entity with respect to any of
the Acquired Assets or the Division is pending or that any such investigation
or review is contemplated. Neither this paragraph (d)(i) nor paragraph (d)(ii)
relates to Environmental Laws (as defined in Section 3.1(u)), as to which
Section 3.1(u) is applicable.
<PAGE> 28
21
(ii) Seller or one of Seller Subs possesses or has applied for
all material Permits to own or hold under lease and operate the Acquired Assets
and to conduct the business of the Division. Neither Seller nor any Seller Sub
has received notice of any proceedings relating to the revocation or
modification of any Permit which, individually or in the aggregate, would have,
or would be reasonably likely to have, a Material Adverse Effect. The Permits
are identified in Schedule 3.1(d). Each of Seller and Seller Subs is operating
in all material respects in compliance with the provisions, terms and
conditions of the Permits.
(e) Litigation; Decrees. Except as set forth in Schedule
3.1(e), there is no suit, claim, action, investigation, inquiry or proceeding
pending against or affecting Seller or any Seller Sub relating to the Acquired
Assets. To the best knowledge of Seller and Seller Subs, there is no suit,
claim, action, investigation, inquiry or proceeding threatened against Seller
or any Seller Sub relating to the Acquired Assets which if adversely determined
would have a material adverse effect on the business or financial condition of
the Division. Neither Seller nor any Seller Sub is in default under any
judgment, order, injunction, rule or decree of any Governmental Entity or
arbitrator relating to the Acquired Assets.
<PAGE> 29
22
(f) Undisclosed Liabilities. There are no material
liabilities or obligations of any nature or kind (absolute, accrued, contingent
or otherwise) except (i) as set forth or reflected in the Financial Statements
(or described in the notes thereto), (ii) as disclosed in the Schedules hereto,
(iii) for liabilities incurred in the ordinary course of business since the
date of the Audited Financial Statements and (iv) for Excluded Liabilities.
(g) Title to Acquired Assets. Either Seller or one of Seller
Subs has good, valid and marketable title to all the Acquired Assets free and
clear of all mortgages, claims, charges, liens, security interests, easements,
rights of way, pledges, rights of first refusal, restrictions or encumbrances
of any nature whatsoever ("Liens"), except for (i) mechanics', carriers',
workmen's, repairmen's and other like Liens arising or incurred in the ordinary
course of business, (ii) Liens for taxes, assessments and other governmental
charges that are not yet due and payable or that may thereafter be paid without
penalty, (iii) imperfections of title and other encumbrances that, individually
or in the aggregate, are insignificant in character or amount and do not,
except in immaterial respects, detract from, or interfere with the use, value
or operation of, the Acquired Assets and (iv) Liens arising under the Credit
Agreement (the "Credit Agreement")
<PAGE> 30
23
identified in Schedule 3.1(g) (the Liens described in clauses (i), (ii) and
(iii) being herein referred to as "Permitted Liens"). This paragraph (g) does
not relate to real property, interests in real property or leasehold interests
(except that the defined term "Permitted Liens" shall be applicable to
paragraph (h) of this Section 3.1 to the extent provided therein). The
Acquired Assets are in good operating condition and repair, ordinary wear and
tear excepted, are usable in the ordinary course of business and conform in all
material respects to all applicable statutes, ordinances and regulations
relating to their use and operation.
(h) Real Property. Schedule 3.1(h)-l sets forth a complete
list of all real property and interests in real property owned in fee by Seller
or any Seller Sub and related to the operations of the Division (individually,
an "Owned Property"). Schedule 3.1(h)-2 sets forth a complete list of all real
property and interests in real property leased by Seller or any Seller Sub and
related to the operations of the Division, whether capitalized or operating
(individually, a "Leased Property"). Either Seller or one of Seller Subs has
good fee title, insurable without material qualification, to all Owned Property
free and clear of all Liens other than (A) Permitted Liens, (B) recorded
easements, covenants, rights-of-way and other similar
<PAGE> 31
24
restrictions, (C) zoning, building and other similar restrictions of record and
(D) Liens arising under the Credit Agreement, none of which such items set
forth in clauses (A) through (C) above, individually or in the aggregate, could
reasonably be expected to impair, except in immaterial respects, the continued
use and operation of the Owned Property in the business of Seller or any Seller
Sub, as presently conducted. Either Seller or one of Seller Subs is the lessee
of all the Leased Property and is in possession of the premises purported to be
leased thereunder, and each such lease is valid without any material default
thereunder by Seller or any Seller Sub, as applicable, or, to Seller's and
Seller Subs' knowledge, by the lessor.
(i) Inventories. All Inventory included in the Acquired
Assets are (A) free of any material defect or deficiency, (B) in good, usable
and currently marketable condition in the ordinary course of business of the
Division consistent with past practice (subject, in the case of raw materials
and work-in-process, to the completion of the production process) and (C)
properly stated on the Financial Statements at the lesser of cost and fair
market value, with adequate obsolescence reserves, all as determined in
accordance with generally accepted accounting principles.
<PAGE> 32
25
(j) Personal Property. Schedule 3.1(j) sets forth a brief
description of each item of owned Personal Property having a cost in excess of
$10,000, indicating, in each case, the purchase price thereof, the year of
purchase and the accumulated book depreciation. Each such item of Personal
Property is in good working order, is free from any material defects and has
been well maintained, and no repairs, replacements or regularly scheduled
maintenance relating to such items have been deferred.
(k) Receivables. All Receivables included in the Acquired
Assets (i) represent actual indebtedness incurred by the applicable account
debtors, (ii) are good and collectible in the ordinary course of business of
Seller or one of Seller Subs, less any reserves for doubtful accounts reflected
on (A) the Financial Statements or (B) in the case of currently existing
Receivables arising since the date of the Audited Financial Statements, on
Seller's or such Seller Sub's current books and records, (iii) have arisen in
the ordinary course of the Division's business and (iv) will not be subject on
the Closing Date to any prior Lien of any nature whatsoever.
(l) Intellectual Property and Technology. Schedule 3.1(l)
sets forth a true and complete list of all Intellectual Property and Technology
of the Division and, to the extent indicated on such Schedule, such
Intellectual
<PAGE> 33
26
Property has been duly registered in, applications have been filed in or
patents or certificates of registration have been issued by the United States
Copyright Office or the United States Patent and Trademark Office, the
appropriate offices in the various states of the United States and the
appropriate offices of such other jurisdictions (foreign or domestic). Except
as set forth on Schedule 3.1(l), either Seller or one of Seller Subs is the
sole and exclusive owner of all the Intellectual Property and has received no
written notice from any other Person pertaining to or challenging the right of
Seller or such Seller Sub, as applicable, to use any of the Intellectual
Property or any rights thereunder. Except as set forth on item 5 of Schedule
3.1(l), the current use of the Intellectual Property in the operations of the
Division does not, to the knowledge of Seller and Seller Subs, conflict with,
infringe upon or violate any intellectual property rights, including any
patent, copyright, trademark or trade name, of any other Person. Except as set
forth on Schedule 3.1(l), neither Seller nor any Seller Sub has granted any
licenses or other rights, and neither Seller nor any Seller Sub has any
obligation to grant licenses or other rights to any of the Intellectual
Property or Technology, to any other Person. Seller and Seller Subs have taken
all reasonable and prudent steps to protect the Intellectual Property and
Technology
<PAGE> 34
27
from infringement by any other Person. Except as set forth on item 5 of
Schedule 3.1(l), neither Seller nor any Seller Sub has made any claim of a
violation or infringement by others of its rights to or in connection with the
Intellectual Property or Technology. Except as set forth on item 5 of Schedule
3.1(l), there have not been and are not pending, or to Seller's and Seller
Subs' knowledge, threatened, any suits, claims, actions or proceedings
involving Seller or any Seller Sub concerning the infringement or
misappropriation of any intellectual property rights of any other Person or
otherwise concerning Seller's or any Seller Sub's ownership interest in any of
the Intellectual Property. There are no interferences or other contested
proceedings, either pending or, to the knowledge of Seller and Seller Subs,
threatened, in the United States Copyright Office, the United States Patent and
Trademark Office or any Federal, state or local court or before any other
Governmental Entity, relating to any pending application with respect to any of
the Intellectual Property. The consummation of the transactions contemplated
by this Agreement will not alter, impair or modify Seller's or any Seller Sub's
rights or obligations with respect to the Intellectual Property or the
Technology.
(m) Insurance. All the material properties and businesses
constituting any part of the Acquired Assets are
<PAGE> 35
28
insured for Seller's or one of Seller Sub's benefit, as applicable, and will be
so insured through the Closing, in amounts and against risks consistent with
past practice. Schedule 3.1(m) contains a list of all insurance policies
(specifying (i) the insurer, (ii) the amount of the coverage, (iii) the type of
insurance, (iv) the policy number and (v) any currently pending claims
thereunder or any claims asserted thereunder or under similar policies since
the date that is two years prior to the date of this Agreement) currently
maintained by or on behalf of Seller or one of Seller Subs on the Acquired
Assets. All such policies are (and pending the Closing will continue to be) in
full force and effect, and Seller or one of Seller Subs, as applicable, is not
in default in any material respect with respect to any provision contained in
any such insurance policy, nor has Seller or such Seller Sub, to the best of
their knowledge, failed to give any notice or present any claim thereunder with
respect to the Acquired Assets in due and timely fashion. Except as set forth
on Schedule 3.1(m), neither Seller nor any Seller Sub self-insures or has
self-insured any risks with respect to the Acquired Assets.
In the two years preceding the date of this Agreement neither
Seller nor any Seller Sub has been denied any insurance or indemnity bond
coverage which it has
<PAGE> 36
29
requested with respect to the Acquired Assets or received written notice from
or on behalf of any insurance carrier presently providing insurance relating to
the Acquired Assets that (i) insurance rates have been or may or will be
substantially increased, (ii) there has been or will be no renewal of such
policies or (iii) material alterations to any of the properties or business
operations of Seller or one of Seller Subs are or will be necessary or required
by such carrier.
(n) Contracts. (i) Except for Contracts listed on Schedule
3.1(h)-l, 3.1(h)-2 or 3.1(n), and except for contracts relating exclusively to
the Excluded Assets, neither Seller nor any Seller Sub is a party to or bound
by any Contract affecting the Acquired Assets or the Assumed Liabilities which
is a:
(1) Contract for the employment of any Person or any
consulting agreement with any Person;
(2) Contract with any labor organization, union or
association;
(3) Contract with any shareholder, director, officer,
subsidiary or affiliate of Seller or any Seller Sub;
(4) indenture, note, loan or credit agreement, letter of
credit or other Contract relating to the borrowing of money by Seller
or any Seller Sub or to
<PAGE> 37
30
the direct or indirect guarantee or assumption by Seller or any Seller
Sub of the obligation of any other Person, including any arrangement
which has the economic effect although not the legal form of a
guarantee;
(5) power of attorney (other than powers of attorney given in
the ordinary course of the Division's business with respect to routine
tax and securities matters) or other agency agreement;
(6) Contract not made in the ordinary course of business;
(7) covenant not to compete or confidentiality agreement;
(8) lease or similar agreement under which (A) Seller or any
Seller Sub is a lessee of, or holds or operates, any real property
owned by any other Person or (B) Seller or any Seller Sub is a lessor
of, or makes available for use by any other Person, any real property
owned or held as lessee by Seller or such Seller Sub;
(9) lease or similar agreement under which (A) Seller or any
Seller Sub is lessee of, or holds or uses, any machinery, equipment,
vehicle or other tangible personal property owned by any other Person
having a fair market value in excess of $10,000 or
<PAGE> 38
31
(B) Seller or any Seller Sub is a lessor of, or makes available for
use by any other Person, any Personal Property owned (including
ownership for tax purposes) by Seller or such Seller Sub having a fair
market value in excess of $10,000;
(10) Contract (including vendor supply contracts and customer
"blanket" purchase orders) involving payment by Seller or any Seller
Sub of more than $50,000 or extending for a term more than 30 days
from the date of this Agreement (unless terminable without payment or
penalty upon no more than 30 days' notice);
(11) Contract (including vendor supply contracts and "blanket"
sales orders) involving the obligation of Seller or any Seller Sub to
deliver products or services for payment of more than $50,000 or
extending for a term more than 30 days from the date of this Agreement
(unless terminable without payment or penalty upon no more than 30
days' notice);
(12) Contract for the sale of any of the Acquired Assets
(other than Inventory sales in the ordinary course of business) or the
grant of any rights to purchase any of the Acquired Assets (including
any right of first negotiation or first refusal) or requiring the
consent of any party to the transfer thereof;
<PAGE> 39
32
(13) mortgage, pledge, security agreement, deed of trust,
financing statement or other document granting a Lien (including Liens
upon properties acquired under conditional sales, capital leases or
other title retention or security devices);
(14) Contract with, or license or Permit by or from, any
Governmental Entity;
(15) foreign currency exchange or similar Contract;
(16) Contract for any joint venture, partnership or similar
arrangement;
(17) Contract providing for the services of any dealer,
distributor, sales representative, franchisee or similar
representative involving the payment or receipt of in excess of $5,000
by Seller or any Seller Sub;
(18) Contract providing for the provision of advertising
services and involving the payment or receipt of in excess of $15,000
by Seller or any Seller Sub;
(19) Contract relating to the ownership, use or licensing of
any Intellectual Property or Technology;
(20) Contract (other than purchase orders) with one or more of
the 10 largest customers of products and services of the Division; or
<PAGE> 40
33
(21) Contract other than as set forth above to which Seller or
any Seller Sub is a party or by which it or any of its assets or
businesses is bound or subject to that is material to the Division or
the use or operation of the Acquired Assets.
Subject to the last sentence of this paragraph (n) and except as disclosed in
Schedule 3.1(h)-l, 3.1(h)-2 or 3.1(n), each Contract listed in such Schedules
is a valid and binding obligation of each of Seller and Seller Subs, to the
extent named as parties thereto or bound thereby, and, to the best of Seller's
and Seller Subs' knowledge, each of the other parties thereto, enforceable in
accordance with its terms and in full force and effect. Except as disclosed in
such Schedules, none of Seller, Seller Subs or, to the best of Seller's and
Seller Subs' knowledge, any other party to any such Contract is (with or
without the lapse of time or the giving of notice, or both) in breach or
default in any material respect under any Contract listed in such Schedules.
Neither Seller nor any Seller Sub has, except as disclosed in such Schedules,
received any notice of the intention of any party to terminate any such
Contract. Complete and correct copies of all Contracts referred to in such
Schedules, together with all modifications and amendments thereto, have been
delivered or made available to Purchaser.
<PAGE> 41
34
(ii) Schedule 3.1(n) lists each Contract with respect to
which the consent of the other party or parties thereto must be obtained by
virtue of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby to avoid the invalidity of the transfer of
such Contract, the termination thereof, a breach, violation or default
thereunder or any other change or modification to the terms thereof (each, a
"Required Consent").
(o) Investments; Exclusively Conducted.
(i) Schedule 3.1(o) is a list of all Investments (other than
Investments that are Excluded Assets) owned by Seller or any Seller Sub on the
date of this Agreement relating to the Division.
(ii) The business and operation of the Division is conducted
exclusively and solely by Seller or one of Seller Subs and not by any of
Seller's other affiliates, and no assets or properties relating to the Acquired
Assets or the Division are owned or leased by any such affiliates.
(p) Suppliers; Customers. Schedule 3.1(p) contains a true
and complete list of the names and addresses of the 15 largest suppliers
(indicating dollar volume and percentage of product purchases for each) of
products and services to the Division and the 25 largest customers (indicating
dollar volume and percentage of sales for each)
<PAGE> 42
35
of products and services of the Division, in each case for the 12 months ended
December 31, 1995, indicating the existing contractual arrangements for
continued supply from or to each such Person. Except as set forth in Schedule
3.1(p), neither Seller nor any Seller Sub has received any notice of, and knows
of no reasonable basis for, any development which threatens to affect adversely
its arrangements with such customers and suppliers.
(q) Sufficiency of Acquired Assets. The Acquired Assets
comprise all the assets used, held for use, intended to be used or useful in
connection with the Division's business that are necessary for the conduct of
the business of the Division in the same manner as currently conducted (except
for the Excluded Assets specified in Sections 1.2(b)(i) and (iv)).
(r) Absence of Certain Changes or Events. Except as set
forth in the Schedules hereto (including, in the case of clause (iii) below,
Schedule 3.1(r)(iii)), since the date of the Audited Financial Statements:
(i) there has been no change which, individually or in the
aggregate, has had, or is reasonably likely to have, a Material
Adverse Effect;
(ii) there has not been any material damage or destruction to,
or any sale or other disposition of,
<PAGE> 43
36
any of the Acquired Assets, except for sale of Inventory in the
ordinary course of business;
(iii) there has not been any increase in, or commitment to
increase, the compensation paid or payable to employees of the
Division;
(iv) there has not been any amendment or termination, or
proposed or threatened amendment or termination, of any Contract or
Permit;
(v) Seller and Seller Subs have operated the Division in the
ordinary course of business so as to preserve the Division intact, to
keep available to the Division the services of its officers and
employees and to preserve the Division's relationship and goodwill
with its suppliers, customers, distributors, creditors, lenders and
others having business or financial dealings with it; and
(vi) none of Seller, any Seller Sub or their respective
affiliates has directly or indirectly taken or agreed to take any
action that it would not be permitted to take pursuant to Section 4.1.
(s) Employees; Officers. Schedule 3.1(s) lists the name and
address of each active and inactive employee, each officer and each consultant
of the Division (each, an "Employee") as of December 31, 1995, together with
each such person's current annual salary (including bonus), a
<PAGE> 44
37
description of applicable bonus or benefit plans applicable to each such person
and, in the case of any such person that was paid by the Division in excess of
$25,000 for the period from January 1, 1995, through December 31, 1995, such
person's current job title or relationship to the Division.
(t) Employee Benefits; Labor Matters. (i) Schedule 3.1(t)
contains a list of each "employee pension benefit plan" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (a "Pension Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) (a "Welfare Plan") and each other material plan,
arrangement or policy relating to stock options, stock purchases, compensation,
deferred compensation, severance or termination, fringe benefits or other
employee benefits, in each case currently maintained or contributed to by
Seller, any Seller Sub or their respective affiliates (whether or not legally
binding) on behalf of active employees of the Division who are employed in the
United States and each employee benefit plan maintained or contributed to by
Seller, any Seller Sub or their respective affiliates outside the United States
on behalf of active foreign employees of the Division who are employed outside
the United States (all the foregoing being herein called "Benefit Plans").
Seller has furnished to Purchaser copies of (1) each Benefit Plan, (2) the most
<PAGE> 45
38
recent annual report on Form 5500 filed with the Internal Revenue Service with
respect to each Benefit Plan, (3) the most recent summary plan description (or
similar document) for each Benefit Plan and (4) all insurance policies and
other funding or financing agreements and material service agreements relating
to the Benefit Plans.
(ii) There are no investigations by any Governmental Entity,
termination proceedings or other claims (except claims for benefits
payable in the normal operation of the Benefit Plans), suits or
proceedings against or involving any Benefit Plan or asserting any
rights or claims to benefits under any Benefit Plan that could give
rise to any material liability to Purchaser.
(iii) All contributions to Benefit Plans that are Pension
Plans (hereinafter "Business Pension Plans") that were required to be
made in accordance with Section 302 of ERISA or Section 412 of the
Internal Revenue Code of 1986, as amended (the "Code"), have been
timely made, no Business Pension Plan has applied for or received a
waiver of the minimum funding standards imposed by Section 412 of the
Code, and no Business Pension Plan has an "accumulated funding
deficiency" within the meaning of Section 412(a) of the Code as of its
most recent plan year. Except as set
<PAGE> 46
39
forth in Schedule 3.1(t), none of the Business Pension Plans are
"multiemployer plans" within the meaning of 3(31) of ERISA.
(iv) As of the most recent valuation date for each Business
Pension Plan covering Transferred Employees (as defined in Section
4.7(a)) that is a "defined benefit plan" (as defined in Section 3(35)
of ERISA (hereinafter a "Defined Benefit Plan")), there was not any
amount of "unfunded benefit liabilities" (as defined in Section
4001(a)(18) of ERISA) under such Defined Benefit Plan and neither
Seller nor any Seller Sub is aware of any facts or circumstances that
would materially change the funded status of any such Defined Benefit
Plan. Seller has furnished to Purchaser the most recent actuarial
report or valuation with respect to each Defined Benefit Plan. The
information supplied to the plan actuary by Seller or any subsidiary
of Seller for use in preparing those reports or valuations was true,
complete and accurate in all material respects and neither Seller nor
any Seller Sub has any reason to believe that the conclusions
expressed in those reports or valuations are incorrect.
(v) All the Benefit Plans, as adopted or as they may have
been amended, comply in all material respects with currently
applicable provisions of the Code and
<PAGE> 47
40
ERISA and other applicable laws and have been administered in
accordance with its terms. Seller has furnished to Purchaser a copy
of the most recent determination letter received with respect to each
Business Pension Plan for which such a letter has been issued.
(vi) With respect to any Business Pension Plan subject to
Title IV of ERISA, no event has occurred, or is reasonably expected to
occur as a result of the transactions contemplated by this Agreement,
which will result in any material liability to any such plan or to the
Pension Benefit Guaranty Corporation, other than for the payment of
contributions or premiums, all of which have been paid when due.
Seller has furnished to Purchaser the most recent actuarial report or
valuation with respect to each Business Pension Plan that is a
"defined benefit plan" (as defined in Section 3(35) of ERISA).
(vii) Each of Seller and Seller Subs complies in all material
respects with the applicable requirements of Section 4980B(f) of the
Code with respect to each Benefit Plan that is a "group health plan"
(as such term is defined in Section 5000(b)(1) of the Code).
(viii) No Benefit Plan disclosed in Schedule 3.1(t) which is
a Welfare Plan provides for post-retirement
<PAGE> 48
41
medical or dental benefits to Employees or their dependents who are
participants or beneficiaries thereunder.
(ix) No Employee will be entitled to any additional benefits
or any acceleration of the time of payment or vesting of any benefits
under any Benefit Plan as a result of the transactions contemplated by
this Agreement.
(x) Except as set forth in Schedule 3.1(t), neither Seller
nor any Seller Sub is a party to or is otherwise bound by any
contract, agreement or collective bargaining agreement with any labor
organization, union or association or other commitment respecting
employment or compensation of any of the Employees, and no Employees
are represented by any labor organization, union or association.
There is no existing or, to Seller's or any Seller Sub's knowledge,
threatened labor disturbance by Employees.
(u) Environmental Matters. (i) Except as disclosed in
Schedule 3.1(u) and except for activities and operations by Persons unrelated
to Seller or any Seller Sub, the existence of which Seller and Seller Subs, to
the best of their knowledge, are unaware of, all facilities owned, leased, used
or operated by Seller, any Seller Sub or any predecessor in interest in the
business of the Division
<PAGE> 49
42
("Division Facilities") have been, and continue to be, owned, leased, used or
operated in compliance in all respects with all applicable Federal, state,
local and foreign laws, statutes, regulations, rules, binding guidelines,
ordinances, decrees or orders relating to environmental contamination or
pollution, the protection of natural resources or employee health or safety, as
enacted, amended or reauthorized or promulgated, including common law
("Environmental Laws"), except in such a manner that does not have, or is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect.
(ii) Except as disclosed in Schedule 3.1(u), (a) Seller or
one of Seller Subs holds and is in substantial compliance with all
environmental permits, licenses, consents, certificates, orders,
franchises, approvals, registrations and authorizations
("Environmental Permits") required in the conduct of the business of
the Division under all Environmental Laws, and all such Environmental
Permits are currently in effect, and (b) each of Seller and Seller
Subs has complied in all respects with all Environmental Laws,
including those relating to any Hazardous Substance (as defined below)
or toxic substances or waste, including petroleum, its by-products or
fractions, and radioactive materials ("Hazardous Materials"), other
<PAGE> 50
43
than in such a manner that does not have, or is not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect.
"Hazardous Substance" shall have the meaning assigned to it in Section
101(14) of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA").
(iii) Each of Seller and Seller Subs has made timely
applications for renewals for all Environmental Permits that are
scheduled to expire by December 31, 1996, except for such
Environmental Permits for which, by their terms or by operation of
law, application for renewal need not be made more than 90 days before
their expiration. A complete list of Seller's and Seller Subs'
Environmental Permits and applications for renewal is set forth in
Schedule 3.1(u).
(iv) Except as disclosed in Schedule 3.1(u), no notice,
citation, summons, order or consent decree has been issued, no
complaint has been filed, no penalty has been assessed, and, to the
best of Seller's and Seller Subs' knowledge, no investigation or
review is pending or has been threatened by any Governmental Entity or
other Person (a) with respect to any alleged violation by Seller or
any Seller Sub in the conduct of the business of the Division of any
Environmental Law,
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44
(b) with respect to any alleged failure by Seller or any Seller Sub in
the conduct of the business of the Division to have or to comply with
any required Environmental Permit or (c) with respect to alleged
violations of any Environmental Law concerning the generation, use,
possession, treatment, storage, recycling, transportation or disposal
("Management") of any Hazardous Material by Seller or any Seller Sub
in the conduct of the business of the Division.
(v) Except as disclosed in Schedule 3.1(u), neither Seller
nor any Seller Sub has received any request for information, notice of
claim, demand or notification that it is or may be potentially
responsible under any Environmental Law with respect to any
investigation or cleanup of any threatened or actual release of any
Hazardous Material.
(vi) With respect to the Division or the Division Facilities,
Schedule 3.1(u) identifies (a) all environmental audits, assessments
or occupational health studies known to Seller or any Seller Sub
undertaken by, or at the direction of, any Governmental Entity, Seller
or any Seller Sub or any predecessor in interest; (b) the results of
the most recent analyses of water (including groundwater analyses),
soil, air or asbestos samples where noncompliance or contamination
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45
is indicated; (c) the most recent inspection of each operating
facility by the Environmental Protection Agency or other Governmental
Entity provided to Seller or any Seller Sub by such Agency or
authority; (d) written communications with all Governmental Entities
relating to issues of noncompliance or contamination; and (e) any
claim or complaint concerning environmental matters.
(vii) Except as disclosed in Schedule 3.1(u), each of Seller
and Seller Subs has reported, or has reason to believe that a
responsible party has reported, promptly to appropriate authorities
each unauthorized Release (as defined below) of any Hazardous
Substance at any facility leased, owned, used or operated by Seller,
any Seller Sub or any predecessor in interest in the business of the
Division where the report was required by law. Each such reported
unauthorized Release of any Hazardous Substance is also disclosed in
Schedule 3.1(u). For purposes hereof, Release shall have the meaning
assigned to it in Section 101(22) of CERCLA.
(viii) Except as disclosed in Schedule 3.1(u), neither
Seller, any Seller Sub nor, to the best of Seller's or any Seller
Sub's knowledge, any predecessor in interest, has disposed, treated,
or arranged for the storage, disposal or treatment of, any Hazardous
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46
Material at a site or location, or has leased, used, owned a site or
location, including any site which, pursuant to CERCLA or other
similar state law: (a) has been placed on the National Priorities
List or its state equivalent; (b) the Environmental Protection Agency
or relevant state authority has proposed, or is proposing, to place on
the National Priorities List or state equivalent; (c) is on notice of,
or subject to a claim, administrative order or other demand, either to
take "removal", "remedial" or "corrective" action as those terms are
defined by CERCLA, the Resource Conservation and Recovery Act ("RCRA")
or other Environmental Law or to reimburse any person who has taken
"removal", "remedial" or "corrective" action in connection with that
site; (d) has filed (or had filed with respect to it) notification of
hazardous waste activities; or (e) is on the Comprehensive
Environmental Response Compensation Liability Information System List
or any state equivalent.
(ix) There are no environmental liens on any properties owned
or leased by Seller or any Seller Sub and used in the business of the
Division, and, to the best of Seller's and Seller Subs' knowledge, no
governmental actions have been taken or are in process
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47
or pending which would subject any of such properties to such liens.
(x) Schedule 3.1(u) sets forth the age, contents or former
contents of any storage tanks that are, to the best knowledge of
Seller and Seller Subs, located on premises owned or operated by
Seller or any Seller Sub and related to the business of the Division.
Except as set forth in Schedule 3.1(u) and except for any tanks
abandoned by Persons unrelated to Seller or any Seller Sub, the
existence of which Seller and Seller Subs, to the best of their
knowledge, are unaware of, neither Seller nor any Seller Sub has owned
or operated, or presently owns or operates, any underground storage
tanks as defined in RCRA. Except as set forth in Schedule 3.1(u), all
Seller's or any Seller Sub's tanks and pipes pertinent thereto are
currently and have been in the past in good condition and do not leak.
(xi) To the best knowledge of Seller and Seller Subs, there
has been no treatment, storage, disposal, handling or Release of any
Hazardous Material on any property currently or formerly owned,
operated or leased by Seller or any Seller Sub that could reasonably
be expected to lead to any liability that would have a Material
Adverse Effect.
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48
(xii) Except as set forth in Schedule 3.1(u), to the best
knowledge of Seller and Seller Subs, there are no polychlorinated
biphenyls, asbestos or urea formaldehyde insulation in or on premises
owned or operated by Seller or any Seller Sub.
(v) No Other Agreements To Sell the Assets. Except as set
forth in Schedule 3.1(v), neither Seller nor any Seller Sub nor any of their
respective officers, directors, shareholders or affiliates has any commitment
or legal obligation, absolute or contingent, to any Person other than Purchaser
to sell, assign, transfer or effect a sale of any of the Acquired Assets, other
than Inventory in the ordinary course, to sell or effect a sale of the capital
stock of any Seller Sub, to effect any merger, consolidation, liquidation,
dissolution or other reorganization of any Seller Sub or to enter into any
agreement or cause the entering into of an agreement with respect to any of the
foregoing.
(w) Material Misstatements or Omissions. To the best of
Seller's and Seller Subs' knowledge, no statements, representations or
warranties by Seller or any Seller Sub contained herein (including the
Schedules hereto), or in any document, exhibit, statement, certificate or
Schedule heretofore or hereafter furnished to Purchaser pursuant hereto, or in
connection with the transactions contemplated
<PAGE> 56
49
hereunder, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact necessary to make the statements
or facts contained herein and therein not misleading. Seller and Seller Subs
have endeavored to disclose all events, conditions and facts materially
affecting the Acquired Assets and the Division.
(x) Product Liability. Except as disclosed in Schedule
3.1(x), there are no actions, suits, inquiries, proceedings or investigations
by or before any Governmental Entity or, to the knowledge of Seller or Seller
Sub, threatened, against or involving Seller or any Seller Sub relating to any
product alleged to have been manufactured or sold by Seller or any Seller Sub
in the Division and alleged to have been defective or improperly designed or
manufactured.
(y) Transactions with Affiliates. Except as set forth in
Schedule 3.1(y), there are no contracts or arrangements (formal or informal,
written or oral), directly or indirectly, between Seller or any Seller Sub, on
the one hand, and any other Persons controlling, under common control with or
controlled by Seller or any Seller Sub, on the other hand, relating to the
Acquired Assets.
(z) Division Acquisition Agreements; Valuation Reports.
Seller has delivered to Purchaser true and complete copies of (i) the Agreement
and Plan of
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50
Reorganization dated as of July 20, 1994 (the "Actava Agreement"), by and among
The Actava Group Inc., Diversified Products Corporation, Hutch Sports USA,
Inc., Nelson/Weather-Rite, Inc., Willow Hosiery Company, Inc. and Roadmaster
Industries, Inc., (ii) the Asset Purchase Agreement dated as of March 1, 1995
(the "MZH Agreement"), among MZH, Inc., MZH Contracting Corp. and Roadmaster
Industries, Inc. and (iii) all documents, exhibits, statements, certificates,
schedules and other agreements relating to either thereof. Seller has
delivered to Purchaser a true and complete copy of any opinion, report, study,
presentation, appraisal or similar document received by Seller or any Seller
Sub with respect to a valuation of the Division or any of the Acquired Assets.
(aa) Tax Matters. Except as otherwise provided in Schedule 3.1(aa),
(i) each of Seller and Seller Subs, and each consolidated, combined or
affiliated group of which Seller or any Seller Sub is or has been a member, has
timely filed or caused to be filed, within the time and in the manner
prescribed by applicable law and regulations, with the relevant Taxing
Authorities (as defined below), all material returns required to be filed by or
on behalf of it ("Returns"), and each such Return was true, complete and
accurate in all material respects at the time of filing; (ii) all Taxes of
Seller or any Seller Sub, or for which
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51
Seller or any Seller Sub could otherwise be held liable, or which relate to the
Acquired Assets or the Division, or for which a Lien could otherwise be imposed
after the Closing Date upon any Acquired Asset (except for Permitted Liens
described in clause (ii) of the definition thereof) (all such Taxes, "Covered
Taxes") have been duly and timely paid; (iii) no Returns with respect to
Covered Taxes are under audit or examination by any Taxing Authority, and no
written or unwritten notice of such an audit or examination has been received
by Seller or any Seller Sub or any of their respective affiliates; (iv) each
material deficiency resulting from any audit or examination relating to Covered
Taxes by any Taxing Authority has been paid; and (v) no material issues were
raised in writing by the relevant Taxing Authority during any audit or
examination relating to Covered Taxes, and no issues which could reasonably be
expected to have a material adverse effect during a Post-Closing Tax Period on
the business or financial condition of the Division were raised in writing by
the relevant Taxing Authority during any audit or examination for Covered
Taxes. The term "Taxing Authority" shall mean any governmental or regulatory
authority, body or instrumentality, domestic or foreign, exercising any Taxing
authority or Tax regulatory authority.
<PAGE> 59
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SECTION 3.2. Representations and Warranties of Purchaser.
Purchaser hereby represents and warrants to Seller and Seller Subs as follows:
(a) Organization, Standing and Power. It is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted.
(b) Authority. It has the corporate power and authority to
execute this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser and do not and will not require the
approval of the stockholders of Purchaser. This Agreement has been duly
executed and delivered by Purchaser and constitutes a legal, valid and binding
obligation of Purchaser enforceable in accordance with its terms. The
execution and delivery of this Agreement by Purchaser does not, and the
consummation by Purchaser of the transactions contemplated hereby will not, (i)
violate any law, judgment, order, decree, statute, ordinance, rule or
regulation applicable to it, any of its affiliates or any of its property, (ii)
conflict with any provision of the certificate of incorporation or By-laws of
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53
Purchaser or (iii) require the consent, approval, order or authorization of, or
the registration, declaration or filing with, any Governmental Entity or other
Person, except for (A) the filing of a premerger notification report by
Purchaser under the HSR Act and (B) compliance with and filings under Section
13(a) of the Exchange Act.
ARTICLE IV
Covenants
SECTION 4.1. Covenants of Seller and Seller Subs Relating to Conduct
of Business. During the period from the date of this Agreement and continuing
until the Closing, each of Seller and Seller Subs jointly and severally agrees
(except as expressly provided in this Agreement or the Schedules or to the
extent that Purchaser shall otherwise consent in writing) that:
(a) Ordinary Course. Seller and Seller Subs shall carry on the
business of the Division and operate the Acquired Assets in the ordinary course
in substantially the same manner as presently conducted, maintain the business
records of the Division in substantially the same manner as presently
maintained and use all reasonable efforts to preserve intact the Division's
present business organization, keep available the services of the Division's
present officers and employees and preserve the Division's goodwill
<PAGE> 61
54
and relationships with customers, suppliers, distributors, creditors, lenders
and others having business or financial dealings with the Division. Without in
any way limiting the foregoing, Seller and Seller Subs shall not, and shall not
agree to, and will not permit their respective affiliates to, or to agree to,
without the prior written consent of Purchaser:
(i) purchase or otherwise acquire assets that would constitute
Acquired Assets from any Person in excess of an aggregate of $25,000
for all such purchases and other acquisitions, other than Inventory in
the ordinary course of business;
(ii) sell, assign, lease, license, transfer or otherwise
dispose of, or mortgage, pledge or encumber, any assets that would
constitute Acquired Assets other than the sale of Inventory in the
ordinary course of business;
(iii) amend or modify in any material respect or terminate or
fail to renew any Contract set forth in Schedule 3.1(h)-1, 3.1(h)-2 or
3.1(n) or enter into any other Contract which, if in existence on the
date hereof, would be required to be set forth in any such Schedule;
(iv) commit to make capital expenditures in excess of an
aggregate of $25,000 for all such capital
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55
expenditures relating to the Division or the Acquired Assets, other
than capital expenditures set forth on Schedule 4.1(a);
(v) (A) except as required by law, enter into, adopt or amend
in any material respect or terminate any Benefit Plan or any other
agreement, arrangement, plan or policy affecting employees; or (B)
increase the compensation of any Transferred Employee or pay any
benefit or amount not required by a plan or arrangement as in effect
on the date of this Agreement; or
(vi) agree, whether in writing or otherwise, to do any of the
foregoing.
(b) Affirmative Covenants. Each of Seller and Seller Subs
shall, and shall cause their respective affiliates to:
(i) (A) maintain the Acquired Assets in the ordinary course of
business in good operating order and condition, reasonable wear and
tear excepted; (B) upon any damage, destruction or loss to any of the
Acquired Assets, apply any and all insurance proceeds received with
respect thereto to the prompt repair, replacement and restoration
thereof to the condition of the Acquired Assets before such event or,
if required, to such other (better) condition as may be required by
applicable law; and (C) maintain its level and quality
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56
of Inventory and supplies, raw materials and spare parts in the
ordinary course in a manner consistent with its practices in place as
of the date of the Audited Financial Statements; and
(ii) use its best efforts to obtain, prior to the Closing
Date, all Required Consents.
SECTION 4.2. Consultation. In connection with the continuing
operation of the Division between the date of this Agreement and the Closing,
Seller and Seller Subs shall use reasonable efforts to consult in good faith on
a regular and frequent basis with the representatives for Purchaser to report
material operational developments and the general status of ongoing operations
pursuant to procedures reasonably requested by Purchaser or such
representatives. Seller and Seller Subs each acknowledge that any such
consultation shall not constitute a waiver by Purchaser of any rights it may
have under this Agreement, and that Purchaser shall have no liability or
responsibility for any actions of Seller, any Seller Sub or any of their
respective officers or directors with respect to matters which are the subject
of such consultations unless Purchaser expressly consents to such action in
writing.
SECTION 4.3. Frustration. Neither Seller nor any Seller Sub
shall take any action that would or could reasonably be expected to result in
any of the
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57
representations and warranties of Seller and Seller Subs set forth in this
Agreement becoming untrue (including the accuracy of the Schedules) or in any
of the conditions of the Closing set forth in Article V not being satisfied.
SECTION 4.4. Access to Information. Each of Seller and
Seller Subs shall afford to Purchaser and its officers, directors, principals,
attorneys, accountants, employees and other representatives reasonable access
during normal business hours during the period prior to the Closing to all the
properties, books, work papers of its accountants, Contracts, commitments, tax
returns and records of the Division, and, during such period, shall furnish
promptly to Purchaser or any such other Person any information or data
concerning the Division as Purchaser or any such other Person may reasonably
request. Purchaser acknowledges that any information being provided to it or
its representatives by Seller or any Seller Sub pursuant to this Agreement is
subject to the terms of a confidentiality agreement between Purchaser and
Seller dated May 3, 1995 (the "Confidentiality Agreement"), which terms are
incorporated herein by reference.
SECTION 4.5. Legal Conditions to Closing. Each of Purchaser,
Seller and Seller Subs will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on it or any of its
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58
subsidiaries with respect to the Closing (including the prompt filing of the
premerger notification report under the HSR Act and the furnishing of all
information required under the HSR Act) and will promptly cooperate with and
furnish information to each other and to other parties in connection with any
such legal requirements. The filing fees under the HSR Act shall be borne by
Purchaser.
SECTION 4.6. Third-Party Consents; Trade Letters of Credit.
(a) Anything in this Agreement to the contrary notwithstanding, this Agreement
shall not constitute an agreement to assign any Acquired Asset or any claim or
right or any benefit arising thereunder or resulting therefrom if an attempted
assignment thereof, without the consent of a third party thereof, would
constitute a breach or other contravention thereof, would be ineffective with
respect to any party thereto or would in any way adversely affect the rights of
Seller or any Seller Sub or, upon transfer, Purchaser thereunder.
(b) Pursuant to Section 4.1(b)(ii), each of Seller and Seller
Subs has agreed that between the date hereof and the Closing Date it will use
its best efforts to obtain the Required Consents, including the Required
Consent of the lenders under the Credit Agreement. If (i)(A) any Required
Consent identified as a "Material Required Consent" on Schedule 5.2(h) is not
obtained prior to the Closing Date
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and (B) notwithstanding the provisions of Section 5.2(h) Purchaser elects to
consummate the Closing or (ii) any other Required Consent is not obtained,
Purchaser may, at its option, endeavor to obtain any such Material Required
Consents or other Required Consents and Seller and Seller Subs shall be jointly
and severally liable to Purchaser for all costs incurred by Purchaser in
respect of any such Material Required Consents or other Required Consents it
attempts to obtain. Seller, Seller Subs and Purchaser will cooperate in an
arrangement reasonably satisfactory to Purchaser, Seller and Seller Subs under
which Purchaser shall obtain the claims, rights and benefits and assume the
corresponding obligations under any Contracts with respect to which the
Required Consents have not been obtained in accordance with this Agreement,
including subcontracting, sublicensing or subleasing to Purchaser and
enforcement of any and all rights of Seller and Seller Subs against the other
party thereto arising out of a breach or cancellation thereof by the other
party. Seller or one of Seller Subs, as applicable, will promptly pay to
Purchaser when received all money received under any Contract or any other
Acquired Asset, or any claim, right or benefit arising thereunder, that has
been assigned to Purchaser or which Seller or one of Seller Subs has made an
arrangement to the satisfaction of Purchaser to provide pursuant to this
Section 4.6.
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(c) With respect to the Required Consent of the lenders under
the Credit Agreement, Purchaser (i) acknowledges that, prior to such lenders
providing such Required Consent, (A) the reimbursement obligations for the
undrawn balances of any trade letters of credit outstanding pursuant to the
Credit Agreement must be assumed or otherwise guaranteed by Purchaser or (B)
such other arrangements must be made that are satisfactory to such lenders
given such lenders' liability under such letters of credit; and (ii) agrees to
so assume or otherwise guarantee, or effect such other arrangements with
respect to, the reimbursement obligations for the undrawn balances of any trade
letters of credit of the Division, whether outstanding pursuant to the Credit
Agreement or otherwise; provided, that Seller and Seller Subs agree to
cooperate with and facilitate any such assumption, guarantee or other
arrangements.
SECTION 4.7. Offer of Employment; Employee Benefit Plans;
Welfare Benefit Plans. (a) Continuation of Employment. Purchaser shall offer
employment to such Employees actively at work on the Closing Date ("Active
Employees") as Purchaser, in its sole discretion, shall elect. Purchaser may
also offer employment to any Employee who is not actively at work on the
Closing Date due to leave of absence, disability leave, military leave or
layoff with
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recall rights ("Inactive Employees"). The period of such employment shall, in
the case of Active Employees offered employment by Purchaser, begin on the
Closing Date, and, in the case of Inactive Employees offered employment by
Purchaser, on the date that they first become eligible for reemployment. For
purposes of this Agreement, Active Employees who immediately following the
Closing continue their employment with the Division and Inactive Employees (but
only to the extent that they become reemployed by Purchaser following the
Closing) shall be referred to herein collectively as "Transferred Employees".
Nothing herein shall be construed as requiring Purchaser to continue any
Transferred Employee in employment following the Closing.
(b) Accrued Vacation. Purchaser shall credit each
Transferred Employee with the unused vacation days, holidays and any personal
and sickness days accrued by such Transferred Employee as of the Closing Date
under the applicable policy of Seller or one of Seller Subs.
(c) Benefit Plans.
(i) Participation in Benefit Plans. Transferred Employees
shall be given credit for all service with Seller and its subsidiaries credited
as of the Closing Date under the applicable plans of Seller or its subsidiaries
with respect to all employee benefit plans and arrangements of Purchaser or any
of its subsidiaries in which such
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Transferred Employees become participants for purposes of eligibility and
vesting (other than for purposes of any early retirement subsidy under
Purchaser's pension plans), to the same extent as if such service had been
rendered to Purchaser or any of its subsidiaries.
(ii) Tax-Qualified Defined Contribution Plans. Effective as
of the Closing, Transferred Employees shall be fully vested by Seller
and Seller Subs in their account balances under each applicable
defined contribution plan of Seller and Seller Subs intended to
qualify under Section 401(a) of the Code, including each 401(k) and
employee stock ownership plan.
(iii) Medical and Disability Benefits; Life Insurance.
Seller and Seller Subs shall be responsible in accordance with their
applicable welfare plans in effect prior to the Closing for all
medical and dental claims for expenses incurred on or prior to the
Closing Date by Transferred Employees and other Employees, former
employees and their dependents, including claims which are filed after
the Closing Date. Reimbursement of employees and their dependents for
medical and dental expenses associated with such claims (including
claims submitted on behalf of disabled employees and their dependents)
shall be determined in accordance with the terms of Seller's and
Seller Subs' medical and
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dental programs as in effect immediately prior to the Closing Date.
Purchaser shall be responsible for all medical and dental claims for
expenses incurred after the Closing Date with respect to Transferred
Employees. Purchaser shall cause to be waived any pre-existing
condition limitation under its welfare plans that might otherwise
apply to a Transferred Employee. Purchaser agrees to recognize (or
cause to be recognized) the dollar amount of all expenses incurred by
Transferred Employees during the 1996 calendar year for purposes of
satisfying the 1996 calendar year deductibles and co-payments
limitations under the relevant benefit plans of Purchaser and its
subsidiaries. Each of Seller and Seller Subs agrees that it shall be
responsible for providing appropriate severance and termination
benefits under Seller's and Seller Subs' applicable plans and
arrangements consistent with past practice, including providing COBRA
coverage under its medical and dental plans for all its Employees (and
their eligible dependents) who are not Transferred Employees.
(d) WARN Act. Seller and Seller Subs agree to provide any
required notice under the WARN Act and any other applicable law and to
otherwise comply with any such statute with respect to any "plant closing" or
"mass layoff" (as defined in the WARN Act) or similar event affecting
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Employees and occurring on or prior to the Closing Date. Seller and Seller
Subs shall indemnify and hold harmless Purchaser and its subsidiaries with
respect to any liability under the WARN Act or other applicable law arising
from the actions of Seller, Seller Subs or their respective affiliates on or
prior to the Closing Date. Purchaser shall indemnify and hold harmless Seller
and Seller Subs with respect to any liability under the WARN Act arising from
Purchaser's failure to offer employment on the Closing Date to any Employee and
for its failure to comply with the WARN Act with respect to events occurring
after the Closing Date.
SECTION 4.8. Expenses. Whether or not the Closing takes
place, except as provided in Section 4.5 all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expense.
SECTION 4.9. Brokers or Finders. Each of Purchaser and
Seller represents, as to itself and its affiliates, that no agent, broker,
investment banker or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement, except, as to
Seller and its affiliates, SBC Capital Markets, Inc., whose fees and expenses
(whether for the transactions contemplated by this Agreement or any other
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transactions) will be paid by Seller, and each of Purchaser and Seller
respectively agrees to indemnify and hold the other harmless from and against
any and all claims, liabilities or obligations with respect to any other fees,
commissions or expenses asserted by any Person on the basis of any act or
statement alleged to have been made by such party or its affiliate.
SECTION 4.10. Insurance. Each of Seller and Seller Subs
shall keep the Division's current product liability insurance (both general and
umbrella coverages) policies in effect through the Closing. No later than the
Closing Date Seller and Seller Subs shall obtain a fully prepaid "tail
coverage" insurance policy (the "Policy") for a term of five years beginning on
the Closing Date for products of the Division sold to the end-users, or, in the
case of Covered Products, manufactured, by or on behalf of Seller or any Seller
Sub on or prior to the Closing Date. The Policy shall be (i) for an amount not
less than $5,000,000 per occurrence, with excess coverage for an amount not
less than $10,000,000 per occurrence, aggregate coverage of $15,000,000 for the
term of the Policy and a $200,000 deductible, (ii) on other terms substantially
similar to the terms of the Division's current product liability insurance and
(iii) with an insurance company reasonably acceptable to Purchaser (the
"Insurer").
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Purchaser shall be included as an "additional insured" on the Policy for the
term of the Policy. On the Closing Date Seller shall furnish Purchaser a
binder containing a marked specimen of the Policy and a letter and certificate
of insurance from the Insurer with respect to the Policy, such letter and
certificate to be in form and substance reasonably satisfactory to Purchaser.
SECTION 4.11. Agreement Not To Compete; Confidentiality;
Nonsolicitation. For a period ending five years after the Closing Date,
neither Seller nor any Seller Sub nor any of their respective controlled
affiliates (which term shall not include any officers, directors or
stockholders of Seller) shall, without the prior written consent of Purchaser,
engage in a business which competes with the Division, directly or indirectly,
as an owner, consultant, manager, associate, partner, agent or otherwise, or by
means of any corporate or other device within North America or any other
location in the world (this geographic area is hereafter referred to as the
"Territory"); nor shall Seller, any Seller Sub or their respective controlled
affiliates (which term shall not include any officers, directors or
stockholders of Seller), for such period and in the Territory (A) solicit
orders, directly or indirectly, from any customer of Seller or any Seller Sub,
for any product substantially similar to those currently or at any
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time since the date that is five years prior to the date of this Agreement
sold, manufactured or distributed by the Division or (B) engage in any product
design relating to any such product, in each case as an owner, consultant,
manager, associate, partner, agent or otherwise, or by means of any corporate
or other device; nor shall Seller, any Seller Sub or their respective
controlled affiliates (which term shall not include any officers, directors or
stockholders of Seller), for a period of three years after the Closing Date
solicit for employment any employee of Seller or any Seller Sub who continued
employment with Purchaser after the Closing Date.
Each of Seller and Seller Subs covenants and agrees that it
shall not use for its own behalf or divulge to any other Person any
confidential information or trade secrets of or relating to the Division. As
used herein, confidential information shall consist of all information,
knowledge or data relating to the Division (including all information relating
to inventions, production methods, customer and prospective customer lists,
prices and trade practices) which is not in the public domain or otherwise
published or publicly available.
This Section 4.11 shall not be construed to prohibit the
ownership by Seller, any Seller Sub or any of their respective affiliates of
not more than 5% of the
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capital stock of any corporation having a class of securities registered
pursuant to the Securities Act of 1933 or the common stock of Purchaser.
Each of Seller and Seller Subs acknowledges that the
restrictions contained in this Section 4.11 are reasonable and necessary to
protect the legitimate interests of Purchaser, do not cause Seller or any
Seller Sub undue hardship, and that any violations of any provision of this
Section 4.11 will result in irreparable injury to Purchaser and that,
therefore, Purchaser shall be entitled to preliminary and permanent injunctive
relief in any court of competent jurisdiction and to an equitable accounting of
all earnings, profits and other benefits arising from such violation, which
rights shall be cumulative and in addition to any other rights or remedies to
which Purchaser may be entitled.
SECTION 4.12. Bulk Transfer Laws. Purchaser hereby waives
compliance by Seller and Seller Subs with the provisions of any so-called "bulk
transfer law" of any jurisdiction in connection with the sale of the Acquired
Assets to Purchaser. Each of Seller and Seller Subs shall indemnify and hold
harmless Purchaser against any and all liabilities that may be asserted by
other Persons against Purchaser as a result of noncompliance with any such bulk
transfer law.
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SECTION 4.13. Additional Agreements. Each of Seller and
Seller Subs will use its best efforts to facilitate and effect the
implementation of the transfer of the Acquired Assets to Purchaser and, for
such purpose but without limitation, each of Seller and Seller Subs promptly
will at and after the Closing execute and deliver to Purchaser such
assignments, deeds, bills of sale, consents and other instruments as Purchaser
or its counsel may reasonably request as necessary or desirable for such
purpose.
SECTION 4.14. Purchase Price Allocation. Seller, Seller Subs
and Purchaser agree that they will report, to the extent required under Section
1060 of the Code, the temporary regulations thereunder and any other applicable
laws and regulations, the allocation of consideration among the Acquired Assets
consistent with an allocation statement (the "Allocation Statement")
established by an appraiser selected by Purchaser and reasonably acceptable to
Seller and provided by Purchaser to Seller and Seller Subs no later than
December 31, 1996. Purchaser, Seller and Seller Subs shall refrain, and cause
their affiliates to refrain, from taking any position inconsistent with such
Allocation Statement before any relevant Taxing Authority, unless such Taxing
Authority will not accept a return filed on that
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basis or unless otherwise required under applicable law after a final
determination thereof.
SECTION 4.15. Supplies; Names Following Closing; Product
Identification. (a) Purchaser shall not use stationery, purchase order forms
or other similar paper goods or supplies ("Supplies") that state or otherwise
indicate thereon that the Division is a division or unit of Seller or any
Seller Sub without first crossing out or marking over such statement or
indication or otherwise clearly indicating on such Supplies that the Division
is no longer a division or unit of Seller or such Seller Sub, as applicable.
Purchaser shall not reorder any Supplies which state or otherwise indicate
thereon that the Division is a division or unit of Seller or any Seller Sub.
(b) Immediately following the Closing, each of Seller and
Seller Subs shall amend or terminate any certificate of assumed name or d/b/a
filings so as to eliminate its right to use the name "Nelson/Weather-Rite",
"Actava World Trade Corporation" or "MZH", or any name which, in the judgment
of Purchaser acting reasonably, is confusingly similar to any such names, and
neither Seller nor any Seller Sub shall thereafter use those name or other
names acquired by Purchaser hereunder or names confusingly similar thereto.
Seller Subs shall also amend their respective certificate of incorporation to
change their
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names to names not similar to any of "Nelson/Weather-Rite", "Actava World Trade
Corporation" or "MZH".
(c) For a period of five years beginning on the Closing Date,
Purchaser shall use its best efforts to comply with any reasonable requirements
of the Insurer under the Policy the Purchaser is notified of by Seller for
creating and maintaining, or causing to be created and maintained, a method for
identifying whether Covered Products of the Division were manufactured on or
prior to or after the Closing Date.
SECTION 4.16. Enforcement of Confidentiality Rights. Each of
Seller and Seller Subs shall take all necessary or appropriate action to
enforce its rights and benefits under any confidentiality covenant or other
agreement relating to the Acquired Assets or the Division, including the
confidentiality agreements set forth in the Actava Agreement and the MZH
Agreement.
SECTION 4.17. Post-Closing Financial and Other Information.
After the Closing, upon reasonable written notice, Purchaser, Seller and Seller
Subs shall furnish or cause to be furnished to each other and their respective
accountants, counsel and other representatives access, during normal business
hours, to such information (including records pertinent to the Acquired Assets)
and assistance relating to the Acquired Assets as is reasonably necessary
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for financial reporting and accounting matters, the preparation and filing of
any returns, reports or forms, the defense of any tax claim or assessment or
the preparation by Seller, or the review by Purchaser, of the Closing Statement
(as defined in Exhibit A); provided, that such access by one party shall not
unreasonably interfere with the conduct of the business of the other party.
SECTION 4.18. License and Sourcing Agreements. Each of
Seller and Purchaser agree to enter into, on the Closing Date, (i) a Trademark
License Agreement (the "License Agreement") pursuant to which Purchaser shall
grant Seller a non-exclusive, royalty-free one-year license of the Division's
"AMERICAN CAMPER" trademark for use on Seller's hosiery products and (ii) a
Sourcing Agreement (the "Sourcing Agreement") pursuant to which Purchaser shall
agree (A) to provide, for one-year terms that are automatically renewable
unless a six-month termination notice is provided by either party, certain
product sourcing services to Roadmaster Leisure, Inc. and Hutch Sports USA,
Inc., each a wholly-owned subsidiary of Seller, in the same manner in which
Actava currently provides such services to such entities and for a 4%
commission (with a minimum annual payment to Purchaser of $400,000), and (B) to
consider in good faith any request by Roadmaster Corporation, a wholly owned
subsidiary of Seller, that Purchaser provide such
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product sourcing services for bicycles to be distributed by such entity;
provided, however, that each such Agreement shall be in form and substance
reasonably acceptable to Seller and Purchaser.
ARTICLE V
Conditions Precedent
SECTION 5.1. Conditions to Each Party's Obligation. The
obligation of Purchaser to purchase the Acquired Assets, and the obligation of
Seller and Seller Subs to sell, assign, transfer, convey and deliver the
Acquired Assets to Purchaser, shall be subject to the satisfaction prior to the
Closing of the following conditions:
(a) Approvals. All authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Entity necessary for the consummation of
the transactions contemplated by this Agreement shall have been obtained or
filed or shall have occurred.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other legal restraint or
prohibition preventing the consummation of the transactions contemplated by
this Agreement shall be in effect.
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(c) License and Sourcing Agreements. Seller and Purchaser
shall have entered into the License Agreement and the Sourcing Agreement, and
each such Agreement shall be in full force and effect.
SECTION 5.2. Conditions to Obligation of Purchaser. The
obligation of Purchaser to purchase the Acquired Assets is subject to the
satisfaction at and as of the Closing of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Seller and Seller Subs set forth in this Agreement qualified as
to materiality shall be true and correct and those not so qualified shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties shall be true and correct on and as of such earlier date), and
Purchaser shall have received a certificate to such effect signed by the chief
executive officer and the chief financial officer of Seller.
(b) Performance of Obligations of Seller and Seller Sub.
Each of Seller and Seller Subs shall have performed or complied in all material
respects with all obligations, conditions and covenants required to be
performed or complied with by it under this Agreement at or
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prior to the Closing, and Purchaser shall have received a certificate signed by
the chief executive officer and the chief financial officer of Seller to such
effect.
(c) Opinion of Seller's Counsel. Purchaser shall have
received an opinion dated the Closing Date of Smith, Gambrell & Russell,
counsel to Seller (which counsel Purchaser understands is licensed to practice
law only in the State of Georgia), in the form attached hereto as Exhibit B,
and in reliance on the provisions of the General Corporation Law of the State
of Delaware solely by reference to Volume 3, Delaware Corporation Statutes
(Prentice Hall 1990), as updated January 2, 1996, to the effect that:
(i) Each of Seller and Seller Subs is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware.
(ii) Each of Seller and Seller Subs has the requisite
corporate power and authority to execute this Agreement, to perform
its obligations hereunder, to consummate the transactions contemplated
hereby and to carry on the business of the Division as now being
conducted; the execution and delivery of this Agreement, the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby by Seller and Seller Subs have been
duly authorized by requisite corporate action on the part of
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Seller and each of Seller Subs, as applicable, and do not require the
approval of the stockholders of Seller; and this Agreement has been
duly executed and delivered by each of Seller and Seller Subs and
constitutes, without regard for the provisions of Section 4.11, a
legal, valid and binding obligation of each of Seller and Seller Subs
enforceable in accordance with its terms (subject to applicable
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws affecting creditors' rights
generally from time to time in effect, and subject, as to
enforceability, to general principles of equity, regardless of whether
such enforceability is considered in a proceeding in equity or at
law); provided, that in giving such opinion, counsel to Seller shall
be entitled to assume that the Uniform Commercial Code ("UCC") and
other applicable commercial laws of the State of Delaware are
identical to the UCC and such other commercial laws of the State of
Georgia.
(iii) The execution and delivery of this Agreement by Seller
and Seller Subs does not, and consummation by Seller and Seller Subs
of the transactions contemplated hereby will not, (A) violate any
Federal law or the General Corporation Law of the State of Delaware or
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(B) conflict with any provision of the certificate of incorporation or
By-laws of Seller or any Seller Sub.
(iv) Any consent, approval, order or authorization of, any
registration, declaration or filing with, and any waiting period
imposed by, any Governmental Entity under Federal law or the General
Corporation Law of the State of Delaware, which is required by or with
respect to Seller or one of Seller Subs in connection with the
execution and delivery of this Agreement by Seller and Seller Subs or
the consummation by Seller and Seller Subs of the transactions
contemplated hereby, has been obtained or made or, in the case of any
such waiting period, has expired, as specified in such opinion.
(d) Bills of Sale; Warranty Deeds. Each of Seller and Seller
Subs, as applicable, shall have delivered to Purchaser bills of sale conveying
the personal property and warranty deeds for the real property included in the
Acquired Assets, in each case in form and substance reasonably satisfactory to
Purchaser and its counsel.
(e) Lien Searches. Each of Seller and Seller Subs shall have
furnished to Purchaser (i) such UCC and other Lien searches and (ii) such duly
executed UCC-3 Termination or Partial Release Statements and other releases, in
each case as Purchaser or its counsel shall reasonably request for the Acquired
Assets.
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(f) Other Documents. Each of Seller and Seller Subs shall
have furnished to Purchaser such other documents relating to Seller's or such
Seller Sub's corporate existence and authority (including copies of resolutions
of the respective board of directors of Seller and Seller Subs), absence of
Liens and such other matters as Purchaser or its counsel may reasonably
request.
(g) No Material Change. No change (nor any condition, event
or development involving a prospective change) on or after date of the Audited
Financial Statements shall have occurred which, individually or in the
aggregate, would have, or would be reasonably likely to have, a Material
Adverse Effect. The term "Material Adverse Effect" shall mean a materially
adverse change in, or materially adverse effect on, the operations, affairs,
business, financial condition, results of operations, assets or liabilities of
the Division.
(h) Material Required Consents. All Material Required
Consents shall have been obtained in written instruments reasonably
satisfactory to Purchaser and its counsel.
(i) Insurance Policy. Seller and Seller Sub shall have
complied with all its obligations set forth in Section 4.10 with respect to the
Policy.
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(j) No Litigation. There shall be no suit, action or other
proceeding pending before any Governmental Entity in which it is sought to
restrain, prohibit, invalidate or set aside in whole or in part the
consummation of the transactions contemplated by this Agreement or to obtain
substantial damages in connection therewith.
(k) Acceptance by Purchaser's Counsel. The form and
substance of all legal matters contemplated hereby and all documents delivered
hereunder shall be reasonably acceptable to counsel to Purchaser.
SECTION 5.3. Conditions to Obligation of Seller and Seller
Subs. The obligation of Seller and Seller Subs to sell, assign, transfer,
convey, and deliver the Acquired Assets is subject to the satisfaction at and
as of the Closing of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Purchaser set forth in this Agreement qualified as to materiality
shall be true and correct and those not so qualified shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing
Date except to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties shall be
true and correct on and as of such
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earlier date), and Seller shall have received a certificate to such effect
signed by an officer of Purchaser.
(b) Performance of Obligations of Purchaser. Purchaser shall
have performed or complied in all material respects with all obligations,
conditions and covenants required to be performed or complied with by it under
this Agreement at or prior to the Closing and Seller shall have received a
certificate signed by an officer of Purchaser to such effect.
(c) Opinion of Purchaser's Counsel. Seller shall have
received an opinion dated the Closing Date of the General Counsel of Purchaser,
in the form attached hereto as Exhibit C, to the effect that:
(i) Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(ii) Purchaser has the requisite corporate power and
corporate authority to execute this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby; the execution and delivery of this Agreement, the performance
of the obligations hereunder and the consummation of the transactions
contemplated hereby by Purchaser have been duly authorized by all
necessary corporate action on the part of Purchaser; and this
Agreement has been duly
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executed and delivered by Purchaser and constitutes a valid and
binding obligation of Purchaser enforceable in accordance with its
terms (subject to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other similar laws affecting
creditors' rights generally from time to time in effect, and subject,
as to enforceability, to general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or
at law).
(iii) The execution and delivery of this Agreement by
Purchaser does not, and the consummation by Purchaser of the
transactions contemplated hereby will not, (A) violate any Federal law
or any law of the State of Delaware or (B) conflict with any provision
of the certificate of incorporation or By-laws of Purchaser.
(iv) Any consent, approval, order or authorization of, any
registration, declaration or filing with, and any waiting period
imposed by, any Governmental Entity under Federal law or the law of
the State of Delaware, which is required by or with respect to
Purchaser in connection with the execution and delivery of this
Agreement by Purchaser or the consummation of the transactions
contemplated hereby, has been obtained or
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made, or, in the case of any such waiting period, has expired, as
specified in such opinion.
(d) Acceptance by Seller's Counsel. The form and substance
of all legal matters contemplated herein and of all papers delivered hereunder
shall be reasonably acceptable to counsel to Seller.
ARTICLE VI
Termination, Amendment and Waiver
SECTION 6.1. Termination. (a) Notwithstanding anything to
the contrary in this Agreement, this Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing:
(i) by mutual written consent of Seller, Seller Subs and
Purchaser;
(ii) by Seller or any Seller Sub if any of the conditions set
forth in Section 5.1 or 5.3 shall have become incapable of
fulfillment, and shall not have been waived by Seller;
(iii) by Purchaser if any of the conditions set forth in
Section 5.1 or 5.2 shall have become incapable of fulfillment, and
shall not have been waived by Purchaser; or
(iv) by Seller or Purchaser, if the Closing does not occur on
or prior to March 31, 1996; provided,
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however, that the party seeking termination pursuant to clause
(ii), (iii), or (iv) is not in material breach of any of its
representations, warranties, covenants or agreements contained in this
Agreement; provided, further , that, if the Closing shall not have
occurred because the waiting period under the HSR Act shall not have
expired or been terminated or because Material Required Consents shall
not have been obtained, either party may extend such date to up to
June 30, 1996.
(b) In the event of termination by Seller or any Seller Sub,
on the one hand, or Purchaser, on the other hand, pursuant to this Section 6.1,
written notice thereof shall forthwith be given to the other party and the
transactions contemplated by this Agreement shall be terminated, without
further action by any party. If the transactions contemplated by this
Agreement are terminated as provided herein:
(i) Purchaser shall return all documents and other material
received from Seller or any Seller Sub relating to the transactions
contemplated hereby, whether so obtained before or after the execution
hereof, to Seller; and
(ii) all confidential information received by Purchaser with
respect to the businesses of Seller or any Seller Sub shall be treated
in accordance with the
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Confidentiality Agreement which shall remain in full force and effect
notwithstanding the termination of this Agreement.
(c) If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 6.1, this
Agreement and the letter agreement dated as of the date hereof between the
parties hereto (the "Letter Agreement") shall become null and void and of no
further force and effect, except for the provisions of (i) Section 4.4 relating
to the obligation of Purchaser to keep confidential certain information and
data obtained by it from Seller or any Seller Sub, (ii) Section 4.8 relating to
certain expenses, (iii) Section 4.9 relating to finder's fees and broker's
fees, (iv) this Section 6.1 and (v) Section 9.8 relating to publicity. Nothing
in this Section 6.1 shall be deemed to release any party from any liability for
any breach by such party of the terms and provisions of this Agreement or to
impair the right of either party to compel specific performance by the other
party of its obligations under this Agreement.
SECTION 6.2. Amendments and Waivers. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto. By an instrument in writing signed by Purchaser, on the one
hand, or Seller and Seller Subs, on the other hand, a party
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may waive compliance by the other party with any term or provision of this
Agreement that such other party was or is obligated to comply with or perform.
ARTICLE VII
Indemnification
SECTION 7.1. Indemnification by Seller and Seller Sub.
Seller and Seller Subs hereby jointly and severally agree to indemnify
Purchaser and its affiliates and their respective officers, directors,
employees, agents and representatives against, and agree to hold them harmless
from, any loss, liability, claim, damage or expense (including reasonable legal
fees and expenses), as incurred (payable promptly upon written request, with
interest from the date which is 30 days from the date of such request to the
date of actual payment, at the Applicable Rate) ("Losses"), based on, arising
out of, or resulting from: (i) any breach on the part of Seller or any Seller
Sub of any representation or warranty contained in this Agreement or any
document, exhibit, statement, certificate or Schedule delivered in connection
herewith; (ii) any breach of any covenant or agreement of Seller or any Seller
Sub contained in this Agreement or any document, exhibit, statement,
certificate or Schedule delivered in connection herewith; (iii) any Excluded
Liability; (iv) the failure to
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comply with statutory provisions relating to bulk sales and transfers, if
applicable; (v) any claims made by any Employee, former employee or labor
organization representing Employees or former employees (A) for severance or
other separation benefits, (B) based on, arising out of, or resulting from,
breach of contract or (C) based on, arising out of, or resulting from, the
employment or the failure to offer employment to, the failure to promote, or
the termination of employment of (including any claims under the WARN Act,
ADEA, EEOA or any other applicable law), any such Employee or former employee
or based on, arising out of, or resulting from, events occurring or existing on
or prior to the Closing Date, including any severance claims based upon the
consummation of the transactions contemplated hereby; or (vi) any fees,
expenses or other payments incurred or owed by Seller or any Seller Sub to any
brokers, financial advisors or comparable other Persons retained or employed by
it in connection with the transactions contemplated by this Agreement;
provided, however, that Seller and Seller Subs shall not have any liability
under clause (i) of this Section 7.1 unless the aggregate of all Losses
relating thereto for which Seller would, but for this proviso, be liable
exceeds on a cumulative basis an amount equal to $750,000 (it being understood
that in such event, Seller's and Seller Subs' liability under such clause (i)
shall
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include liability for such $750,000 of Losses); provided, further, however,
that in connection with (A) any breach of the representations and warranties
set forth in Section 3.1(f), 3.1(o)(ii), 3.1(q) or 3.1(v); (B) any Losses
which, in addition to arising under clause (i) are also covered by any one or
more of clauses (ii), (iii), (iv), (v), and (vi) above; or (C) any Losses
arising from fraud or willful misconduct of Seller, any Seller Sub or any of
their respective affiliates, the liability of Seller under this Section 7.1
shall be without regard or subject to the dollar threshold specified in the
foregoing proviso. In determining whether any representation or warranty has
been breached for purposes of clause (i) above, any reference to or
qualification by materiality in any such representation or warranty shall be
deemed to be deleted.
SECTION 7.2. Indemnification by Purchaser. Purchaser hereby
agrees to indemnify Seller, Seller Subs, their respective affiliates and their
respective officers, directors, employees, agents and representatives against,
and agrees to hold them harmless from, any Loss, as incurred (payable promptly
upon written request, with interest from the date which is 30 days from the
date of such request to the date of actual payment, at the Applicable Rate),
based on, arising out of, or resulting from: (i) any breach of any
representation or warranty of Purchaser contained in
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this Agreement or any document, exhibit, statement, certificate or Schedule
delivered in connection herewith; (ii) any breach of any covenant or agreement
of Purchaser contained in this Agreement or any document, exhibit, statement,
certificate or Schedule delivered in connection herewith; or (iii) the Assumed
Liabilities.
SECTION 7.3. Losses Net of Insurance, Etc. The amount of any
Loss for which indemnification is provided under this Article VII shall be net
of any amounts actually recovered by the indemnified party under insurance
policies with respect to such Loss and shall be (i) increased to take account
of any net tax cost incurred by the indemnified party arising from the receipt
of indemnity payments hereunder (grossed up for such increase) and (ii) reduced
to take account of any net tax benefit realized by the indemnified party
arising from the incurrence or payment of any such loss, liability, claim,
damage or expense. An indemnified party shall be deemed to have realized a net
tax cost or a net tax benefit to the extent that, and at such time as, the
amount of taxes payable by such indemnified party is increased above or reduced
below, as the case may be, the amount of taxes that such indemnified party
would have been required to pay but for receipt or accrual of the indemnity
payment or the incurrence or payment of such loss.
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SECTION 7.4. Termination of Indemnification. The obligations
to indemnify and hold harmless any party (x) pursuant to Sections 7.1(i) and
7.2(i) shall terminate when the applicable representation or warranty
terminates pursuant to Section 9.3; provided, however, that such obligations to
indemnify and hold harmless shall not terminate with respect to any item as to
which the Person to be indemnified shall have, before the expiration of the
applicable period, previously made a claim by delivering a notice pursuant to
Section 7.5 or 7.6 hereof to the party to be providing the indemnification; and
(y) pursuant to the other clauses of Sections 7.1 and 7.2, shall not terminate;
provided, further, however, that, if any item for which indemnification is
available under Section 7.1(i) is also covered by any one or more of clauses
(ii), (iii), (iv), (v) or (vi) of Section 7.1, then the fact that the
indemnification obligations for such item under Section 7.1(i) shall have
terminated shall not limit or affect the indemnification under any one or more
of such other clauses.
SECTION 7.5. Procedure. (a) In order for a Person (the
"indemnified party") to be entitled to any indemnification provided for under
this Agreement in respect of, arising out of or involving a claim made by any
Person against the indemnified party (a "Third Party Claim"), such
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indemnified party must notify the indemnifying party in writing of the Third
Party Claim within 10 business days after receipt by such indemnified party of
written notice of the Third Party Claim; provided, however, that failure to
give such notification shall not affect the indemnification provided hereunder
except to the extent the indemnifying party shall have been actually prejudiced
as a result of such failure. Thereafter, the indemnified party shall deliver
to the indemnifying party, within five business days' time after the
indemnified party's receipt thereof, copies of all notices and documents
(including court papers) received by the indemnified party relating to the
Third Party Claim.
(b) If a Third Party Claim is made against an indemnified
party, the indemnifying party will be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the indemnifying party and reasonably satisfactory to the
indemnified party. Should the indemnifying party so elect to assume the
defense of a Third Party Claim, the indemnifying party will not be liable to
the indemnified party for any legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof. If the indemnifying
party assumes such defense, the indemnified party shall have the right to
participate in the defense
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thereof and to employ counsel, at its own expense, separate from the counsel
employed by the indemnifying party, it being understood that the indemnifying
party shall control such defense. The indemnifying party shall be liable for
the fees and expenses of counsel employed by the indemnified party for any
period during which the indemnifying party has not assumed the defense thereof
(other than during any period in which the indemnified party shall have failed
to give notice of the Third Party Claim as provided above). If the
indemnifying party chooses to defend or prosecute a Third Party Claim, all the
parties hereto shall cooperate in the defense or prosecution thereof. Such
cooperation shall include the retention and (upon the indemnifying party's
request) the provision to the indemnifying party of records and information
which are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. If the indemnifying party
chooses to defend or prosecute any Third Party Claim, the indemnified party
will agree to any settlement, compromise or discharge of such Third Party Claim
which the indemnifying party may recommend and which by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third Party Claim. Whether or not the indemnifying party shall have
<PAGE> 99
92
assumed the defense of a Third Party Claim, the indemnified party shall not
admit any liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the indemnifying party's prior written consent, which
shall not be unreasonably withheld.
Notwithstanding the foregoing, the indemnifying party shall
not be entitled to assume the defense of any Third Party Claim (and shall be
liable for the reasonable fees and expenses of counsel incurred by the
indemnified party in defending such Third Party Claim) if the Third Party Claim
seeks an order, injunction or other equitable relief or relief for other than
money damages against the indemnified party.
SECTION 7.6. Other Claims. In the event any indemnified
party should have a claim against any indemnifying party under Section 7.1 or
7.2 that does not involve a Third Party Claim being asserted against or sought
to be collected from such indemnified party, the indemnified party shall
deliver notice of such claim with reasonable promptness to the indemnifying
party. The failure by any indemnified party so to notify the indemnifying
party shall not affect the indemnification provided hereunder, except to the
extent that the indemnifying party shall have been actually prejudiced as a
result of such failure. If the indemnifying party does not notify the
indemnified party
<PAGE> 100
93
within 10 Business Days following its receipt of such notice that the
indemnifying party disputes its liability to the indemnified party under
Section 7.1 or 7.2, then such claim specified by the indemnified party in such
notice shall be conclusively deemed a liability of the indemnifying party under
Section 7.1 or 7.2 and the indemnifying party shall pay the amount of such
liability to the indemnified party on demand or, in the case of any notice in
which the amount of the claim (or any portion thereof) is estimated, on such
later date when the amount of such claim (or such portion thereof) becomes
finally determined. If the indemnifying party has timely disputed its
liability with respect to such claim, as provided above, the indemnifying party
and the indemnified party shall proceed in good faith to negotiate a resolution
of such dispute and, if not resolved through negotiations, such dispute shall
be resolved by litigation.
ARTICLE VIII
Tax Matters
SECTION 8.1. Definitions. The term "Tax" or "Taxes" shall
mean all Federal, state, local, foreign and other governmental taxes,
assessments, duties, fees, levies or similar charges of any kind, including all
sales, payroll, employment and other withholding taxes, and including all
obligations under any tax sharing agreement,
<PAGE> 101
94
tax indemnity obligation or similar written or unwritten agreement, arrangement
or practice, and including all interest, penalties and additions imposed with
respect to such amounts.
The term "Transfer Taxes" shall mean all transfer,
documentary, sales, use, registration, value-added and other similar Taxes
(including all applicable real estate transfer Taxes and real property transfer
gains Taxes) and related amounts (including any penalties, interest and
additions to Tax) incurred in connection with this Agreement and the
transactions contemplated hereby and thereby.
The term "Post-Closing Tax Period" shall mean all taxable
periods beginning after the Closing Date and the portion beginning on the day
after the Closing Date of any taxable period that includes (but does not begin
on) such day.
The term "Pre-Closing Tax Period" shall mean all taxable
periods ending on or before the Closing Date and the portion ending on the
Closing Date of any taxable period that includes (but does not end on) such
day.
<PAGE> 102
95
SECTION 8.2. Taxable Periods. In the case of any taxable
period that includes but does not end on the Closing Date (a "Straddle
Period"):
(i) real, personal and intangible property Taxes relating or
with respect to or arising out of the Acquired Assets ("Property
Taxes") for the Pre-Closing Tax Period shall be equal to the amount of
such Property Taxes for such entire Straddle Period multiplied by a
fraction, the numerator of which is the number of days during the
Straddle Period that are in the Pre-Closing Tax Period and the
denominator of which is the number of days in the Straddle Period; and
(ii) all Taxes (other than Property Taxes) relating or with
respect to or arising out of the Acquired Assets for the Pre-Closing
Tax Period shall be computed based on an actual closing of the books
as if such taxable period ended as of the close of business on the
Closing Date.
SECTION 8.3. FIRPTA. Seller shall deliver to the Purchaser
at the Closing a duly executed certificate in the form specified in Treas. Reg.
Section 1.1445-2(b)(2)(iii).
SECTION 8.4. Transfer Taxes. All liability for Transfer
Taxes shall be the responsibility of Seller and Seller Subs. Seller, Seller
Subs and Purchaser shall cooperate in timely making and filing all filings, tax
<PAGE> 103
96
returns, resale certifications, reports and forms as may be required to comply
with the provisions of any Transfer Tax laws.
SECTION 8.5. Preparation of W-2 Forms, Etc. Each of Seller,
Seller Subs and Purchaser agrees that it will not apply the alternative
procedure contained in Section 5 of Revenue Procedure 84-77, 1984-2 C.B. 753.
Accordingly, Seller and Seller Subs acknowledge that they will be responsible
for the furnishing of a Form W-2 to each employee of the Division who has been
employed by them, such Form W-2 to disclose all wages and other compensation
paid for the period ending on the Closing Date, and taxes withheld thereon.
Purchaser acknowledges that it will be responsible for the furnishing of a Form
W-2 to each Transferred Employee, such Form W-2 to disclose all wages and other
compensation paid for the period beginning on the day following the Closing
Date and ending on December 31, 1996, and taxes withheld thereon.
ARTICLE IX
General Provisions
SECTION 9.1. Notices. All notices and other communications
hereunder shall be in writing (including
<PAGE> 104
97
telecopy or similar writing) and shall be sent, delivered or mailed, addressed
or telecopied:
(a) if to Purchaser, to
Brunswick Corporation
1 North Field Court
Lake Forest, Illinois 60045-4811
Attention of General Counsel
Facsimile: (847) 735-4050; and
(b) if to Seller or any Seller Sub, to
Roadmaster Industries, Inc.
250 Spring Street, N.W.
Atlanta, Georgia 30303
Attention of Jeff L. Hinton
Facsimile: (404) 586-3319;
with copies to
David E. Schaper, Esq.
Roadmaster Corporation
Vice President and General Counsel
10275 West Higgins Road
Suite 540
Rosemont, Illinois 60018
Facsimile: (708) 635-0487; and
David J. Harris, Esq.
Smith, Gambrell & Russell
1230 Peachtree Street, N.E.
Suite 3100
Atlanta, Georgia 30309
Facsimile: (404) 815-3509.
Each such notice, request or other communication shall be given (i) by hand
delivery, (ii) by nationally recognized courier service or (iii) by telecopy,
receipt confirmed. Each such notice, request or communication shall be effec-
<PAGE> 105
98
tive (A) if delivered by hand or by nationally recognized courier service, when
delivered at the address specified in this Section 9.1 (or in accordance with
the latest unrevoked direction from such party) and (B) if given by telecopy,
when such telecopy is transmitted to the telecopy number specified in this
Section 9.1 (or in accordance with the latest unrevoked direction from such
party), and the confirmation is received from the party receiving such notice.
SECTION 9.2. Interpretation. When a reference is made in
this Agreement to a Section, Schedule or Exhibit, such reference shall be to a
Section of, or a Schedule or Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "included", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". All accounting terms not defined in this
Agreement shall have the meanings determined by generally accepted accounting
principles. The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. The definitions contained
in this Agreement
<PAGE> 106
99
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term, and
references to a Person are also to its permitted successors and assigns. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
Statements in this Agreement made to the "Knowledge" of a party shall mean the
knowledge that the executive officers of such party have, or should have after
having made a good faith effort to ascertain the fact in question pursuant to
an inquiry directed to such officers, directors, supervisors and advisors of
Seller as would be reasonably likely to have information relating to the fact
in question.
SECTION 9.3. Survival of Representations. The
representations and warranties in this Agreement (other than (A) the
representations and warranties contained in Sections 3.1(f), 3.1(g),
3.1(o)(ii), 3.1(q), 3.1(u) and 3.1(v) and (B) the representations and
warranties relating to tax matters and employee benefits matters, including the
<PAGE> 107
100
representations and warranties set forth in Section 3.1(t)) and in any other
document, exhibit, statement, certificate or Schedule delivered in connection
herewith (on the date hereof or at the Closing) shall survive the Closing and
shall terminate at the close of business on the second anniversary of the
Closing Date. The representations and warranties relating to tax matters and
employee benefits matters (including the representations and warranties set
forth in Section 3.1(t)) shall terminate 60 days after the expiration of the
applicable statute of limitations, to be tolled for any period during which
Seller or any Seller Sub shall have consented to the tolling of the applicable
statute of limitations. The representations and warranties contained in
Sections 3.1(f), 3.1(g), 3.1(o)(ii), 3.1(q) and 3.1(v) shall survive the
Closing indefinitely. The representations and warranties contained in Section
3.1(u) shall survive the Closing and shall terminate at the close of business
on the fifth anniversary of the Closing. All statements made by or on behalf of
or any party herein or in the Schedules hereto, or in any other document,
exhibit, statement or certificate delivered hereunder, shall be representations
and warranties of the party on whose behalf it was made which was relied upon
by the party to whom it was made regardless of any investigation made by or on
behalf of the party to whom it was made, and shall not be
<PAGE> 108
101
affected in any respect by such investigation or by any knowledge or claimed
knowledge of the party to whom it was made.
SECTION 9.4. Severability. If any provision of this Agreement
(or any portion hereof), or the application thereof to any Person, place or
circumstance, shall be held invalid, unenforceable or void by a court of
competent jurisdiction, then such invalidity, illegality or unenforceability
shall not affect any other provision hereof (or the remaining portion thereof)
or the application of such provision to any other Persons, places or
circumstances.
SECTION 9.5. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered (including by telecopy) to the
other parties, it being understood that all parties need not sign the same
counterpart.
SECTION 9.6. Entire Agreement; No Third-Party Beneficiaries.
This Agreement, the Confidentiality Agreement and the Letter Agreement (i)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, including the letter
<PAGE> 109
102
agreements relating to the sale contemplated hereby dated January 19, 1996,
February 16, 1996, and February 23, 1996, between Seller and Purchaser, and
(ii) except as provided in Article VII, are not intended to confer upon any
Person other than the parties hereto and their successors and permitted assigns
any rights or remedies hereunder.
SECTION 9.7. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware
applicable to contracts made and to be performed entirely in the State of
Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflicts of law.
SECTION 9.8. Publicity. From the date of this Agreement
through the Closing, neither Seller nor any Seller Sub, on the one hand, nor
Purchaser, on the other hand, shall issue or cause the publication of any press
release or other public announcement with respect to the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld, except that any party may make any
disclosure required to be made by it under applicable law (including Federal
securities laws) if it determines in good faith that it is appropriate to do so
and gives prior notice to the other party hereto, which notice shall include
the contents of such press release or other public announcement.
<PAGE> 110
103
SECTION 9.9. Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any party
hereto without the prior written consent of the other parties, except that
Purchaser may assign any part of or all its rights and obligations to one or
more corporations or other entities all or substantially all the capital stock
or equity interests in which are owned by Purchaser or any affiliate of
Purchaser, in which event all the rights and powers of Purchaser hereunder
shall extend to and be enforceable by each such corporation or other entity;
provided, however, that any such assignment shall not release Purchaser from
its obligations hereunder. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
SECTION 9.10. Cumulative Remedies. All rights and remedies
of any party hereto are cumulative of each other and of every other right or
remedy such party may otherwise have at law or in equity, and the exercise of
one or more rights or remedies shall not prejudice or impair the
<PAGE> 111
104
concurrent or subsequent exercise of other rights or remedies.
IN WITNESS WHEREOF, Purchaser, Seller and Seller Subs have
caused this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
ROADMASTER INDUSTRIES, INC.,
by
/s/ HENRY FONG
------------------------------
Name: Henry Fong
Title: Chief Executive
Officer and President
NELSON/WEATHER-RITE, INC.,
by
/s/ CHARLES E. SANDERS
------------------------------
Name: Charles E. Sanders
Title: Vice President
ACTAVA WORLD TRADE CORPORATION,
by
/s/ CHARLES E. SANDERS
------------------------------
Name: Charles E. Sanders
Title: Vice President
BRUNSWICK CORPORATION,
by
/s/ PETER B. HAMILTON
------------------------------
Name: Peter B. Hamilton
Title: Senior Vice President
and Chief Financial
Officer
<PAGE> 1
AMENDMENT NO. 4
TO
LOAN AND SECURITY AGREEMENT
Dated as of December 6, 1994
AMENDED AND RESTATED
as of September 29, 1995
THIS AMENDMENT NO. 4 dated as of March 8, 1996 (this
"Amendment") is entered into among ROADMASTER CORPORATION, a Delaware
corporation ("RMC"), ROADMASTER LEISURE INC., a corporation incorporated under
the laws of the province of Ontario, Canada ("RML"), WILLOW HOSIERY COMPANY,
INC., a New York corporation ("Willow"), HUTCH SPORTS USA INC., a Delaware
corporation ("Hutch"), NELSON/WEATHER-RITE, INC., a Delaware corporation
("NWR"), and ROADMASTER RECEIVABLES CORPORATION, an Illinois corporation
("RRC") (RMC, RML, Willow, Hutch, NWR and RRC being sometimes hereinafter
referred to collectively as the "Borrowers" and individually as a "Borrower"),
the financial institutions named on the signature pages of this Amendment as
"Lenders," and BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, as
agent for the Lenders (in such capacity as agent, the "Agent"). Capitalized
terms used herein but not defined herein shall have the meanings provided in
the Loan Agreement.
W I T N E S S E T H:
WHEREAS, the Borrowers, the Lenders and the Agent are parties
to a certain Loan and Security Agreement dated as of December 6, 1994, as
amended and restated as of September 29, 1995, as further amended as of October
31, 1995 pursuant to Amendment No. 1 thereto, as of January 15, 1996 pursuant
to Amendment No. 2 thereto and as of February 14, 1996 pursuant to Amendment 3
thereto (the "Loan Agreement"); and
WHEREAS, the Borrowers, the Lenders and the Agent have agreed
to amend the Loan Agreement on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises set forth
above, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and
the Agent hereby agree as follows:
Section 1. Amendment of the Loan Agreement. Subject to the
fulfillment of the conditions precedent set forth in Section 3 below, the Loan
Agreement is hereby amended as follows:
(a) The reference to the amount "$150,000,000" contained in
the definition of "Borrowing Base" contained in Section 1.1 is amended
to be a reference to the amount "$115,000,000."
-1-
<PAGE> 2
(b) The reference to the amount "$85,000,000" contained in
clause (f) of the definition of "Individual Maximum Revolver Amount"
contained in Section 1.1 is amended to be a reference to the amount
"$75,000,000."
(c) The reference to the amount "$275,000,000" contained in
the definition of "Revolver Facility" contained in Section 1.1 is
amended to be a reference to the amount "$230,000,000."
(d) Each reference to the amount "$10,000,000" contained in
the definition of "Unused Acceptance Subfacility" is amended to be a
reference to the amount "$8,000,000."
(e) Each reference to the amount "$50,000,000" contained in
the definition of "Unused Letter of Credit Subfacility" is amended to
be a reference to the amount "$40,000,000."
Section 2. Sale of NWR Assets. (a) Reference is hereby made
to Section 8.9 of the Loan Agreement, which, among other things, prohibits each
Borrower from selling or otherwise disposing of all or any material part of its
property, other than certain dispositions described therein. Notwithstanding
such prohibition, subject to the fulfillment of the conditions precedent set
forth in Section 3 below, the Lenders hereby consent to the sale of all of the
assets of NWR and Actava World Trade to Brunswick Corporation pursuant to that
certain Asset Purchase Agreement dated as of February 26, 1996 (the "Asset
Purchase Agreement") among the Parent, NWR, Actava World Trade and Brunswick
Corporation.
(b) The Agent, the Lenders and the Borrowers agree that from
and after the date of this Amendment, subject to the fulfillment of the
conditions precedent set forth in Section 3 below, NWR shall cease to be a
"Borrower" under the Loan Agreement, and shall be released from all of its
liabilities and obligations thereunder. The Borrowers further acknowledge that
from and after the date of this Amendment, no Free Quota Letters of Credit will
be issued under or connection with the Loan Agreement.
Section 3. Conditions to Amendment. This Amendment shall
become effective upon satisfaction of the following conditions:
(a) the receipt by the Agent, by facsimile transmission, of
signed counterparts of this Amendment, executed by each Lender, each
Borrower and each other party thereto, and the execution of this
Amendment by the Agent; provided that each Lender, each Borrower and
each other party thereto shall promptly thereafter execute and deliver
to the Agent eight original counterparts of this Amendment;
(b) the receipt by the Agent, by facsimile transmission, of
signed counterparts of an
-2-
<PAGE> 3
Acknowledgment and Reaffirmation Agreement, executed by each Borrower
and each other party thereto; provided that each Borrower and each
other party thereto shall promptly thereafter execute and deliver to
the Agent eight original counterparts of such Acknowledgment and
Reaffirmation; and
(c) the receipt by the Agent, for the benefit of the Lenders,
of an amount equal to the sum of (1) a fee in the amount of
$1,000,000, which fee was payable pursuant to and to facilitate the
execution and delivery of Amendment No. 2 to the Loan Agreement, plus
(2) the sum of the proceeds of the transactions contemplated by the
Asset Purchase Agreement, net of such fee and any investment banking
fees, applicable taxes, legal, accounting and other actual and
necessary expenses of accomplishing and closing such transactions
(following which payment all security interests and liens granted to
the Agent in the "Acquired Assets" (as described and defined in the
Asset Purchase Agreement) shall be released and terminated by the
Agent), such proceeds to be applied first to pay in full all of the
outstanding Obligations of NWR under the Loan Agreement, second, in an
amount equal to $500,000, to reduce the outstanding Obligations of
Hutch under the Loan Agreement by such amount, and third, to reduce
the outstanding Obligations of RMC under the Loan Agreement.
Section 4. Representations and Warranties. Each Borrower
hereby represents and warrants that (i) this Amendment constitutes a legal,
valid and binding obligation of such Borrower, enforceable against such
Borrower in accordance with its terms, (ii) the representations and warranties
contained in the Loan Agreement are correct in all material respects as though
made on and as of the date of this Amendment, and (iii) no Event of Default has
occurred and is continuing.
Section 5. Reference to and Effect on the Loan Agreement.
(a) Upon the effectiveness of this Amendment, each
reference in the Loan Agreement to "this Agreement", "hereunder", "hereof",
"herein", or words of like import shall mean and be a reference to the Loan
Agreement, as amended hereby, and each reference to the Loan Agreement in any
other document, instrument or agreement executed and/or delivered in connection
with the Loan Agreement shall mean and be a reference to the Loan Agreement, as
amended hereby.
(b) Except as specifically amended above, the Loan
Agreement and all other documents, instruments and agreements executed and/or
delivered in connection therewith shall remain in full force and effect and are
hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of the
Agent or the Lenders under the Loan Agreement, nor constitute a waiver of any
provision of the Loan Agreement or of any Default or Event of Default in
existence on the date of this Amendment.
-3-
<PAGE> 4
Section 6. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
Section 7. Governing Law. This Amendment shall be governed
by and construed in accordance with the internal laws (as opposed to the
conflicts of laws provisions) of the State of Illinois.
-4-
<PAGE> 5
Section 8. Section Titles. The section titles contained in
this Amendment are and shall be without substance, meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of March 8, 1996.
ROADMASTER CORPORATION
By:
----------------------------------
Title:
ROADMASTER LEISURE INC.
By:
----------------------------------
Title:
WILLOW HOSIERY COMPANY, INC.
By:
----------------------------------
Title:
HUTCH SPORTS USA INC.
By:
----------------------------------
Title:
-5-
<PAGE> 6
NELSON/WEATHER-RITE, INC.
By:
----------------------------------
Title:
ROADMASTER RECEIVABLES CORPORATION
By:
----------------------------------
Title:
BANKAMERICA BUSINESS CREDIT, INC.,
as the Agent
By:
----------------------------------
Vice President
BANKAMERICA BUSINESS CREDIT, INC.,
as a Lender
By:
----------------------------------
Vice President
DEUTSCHE FINANCIAL SERVICES
CORPORATION, as a Lender
By:
----------------------------------
Vice President
-6-
<PAGE> 7
MELLON BANK, N.A., as a Lender
By:
----------------------------------
Vice President
NATIONSBANK OF GEORGIA, N.A.,
as a Lender
By:
----------------------------------
Vice President
GREEN TREE FINANCIAL SERVICING
CORPORATION, as a Lender
By:
----------------------------------
Vice President
NATIONAL BANK OF CANADA, a Canadian
chartered bank, as a Lender
By:
----------------------------------
Vice President
By:
----------------------------------
-7-
<PAGE> 8
FIRST BANK NATIONAL ASSOCIATION,
as a Lender
By:
----------------------------------
Vice President
-8-
<PAGE> 1
EXHIBIT 11.1
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(in thousands except per share data)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Primary:
Weighted average common shares outstanding during year 49,004 29,571 26,927
Common shares issuable if all warrants had been converted
at the date of issuance (1) -- 2,307 2,766
-------- ------ ------
Average common shares outstanding for primary calculation 49,004 31,878 29,693
======== ====== ======
Fully Diluted:
Weighted average common shares outstanding during year 49,004 29,571 26,927
Net common shares issuable on exercise of warrants (2) -- 2,307 2,988
Assumed conversion of 8% subordinated debentures to
common stock as of date of issuance, August 5, 1993 -- -- 12,936
-------- ------ ------
Average common shares outstanding for fully diluted calculation 49,004 31,878 42,851
======== ====== ======
Earnings:
Net (loss) earnings ($51,004) $5,000 $7,633
======== ====== ======
Assumed conversion of 8% subordinated debentures as of
date of issuance, August 5, 1993: interest savings, net of tax -- -- 2,887
======== ====== ======
Primary (loss) earnings per share ($1.04) $0.16 $0.26
======== ====== ======
Fully diluted (loss) earnings per share (3) ($1.04) $0.16 $0.25
======== ====== ======
</TABLE>
Notes:
(1) Includes warrants, the exercise of which would result in dilution of
earnings per share. Such warrants have been considered as exercised and the
proceeds therefrom used to purchase common stock at the average market price
during the period.
(2) Additional shares resulting from the application of the same principles
described in Note (1) above except that the proceeds from assumed exercises
were used to purchase Common Stock at the ending market price if that price
was higher than the average market price during the period.
(3) Computed by dividing the sum of net earnings and interest savings, net of
tax, by the fully diluted average shares outstanding.
53
<PAGE> 1
EXHIBIT 21.1
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION
NAME OF INCORPORATION
- ---- ----------------
<S> <C>
Roadmaster Corporation Delaware
International Sports and Fitness, Inc. Delaware
Roadmaster Leisure, Inc. Ontario, Canada
Roadmaster Limited United Kingdom
Roadmaster Service Corp. Delaware
Roadmaster Receivables Corporation Illinois
Hutch Sports USA, Inc. Delaware
NWR, Inc., formerly known as Nelson/Weather-Rite, Inc. Delaware
Willow Hosiery Co., Inc. New York
AWTC, Inc. formerly known as Actava World Trade Corporation Delaware
Diversified Products Corporation Alabama
Diversified Trucking Corp. Alabama
</TABLE>
54
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included or incorporated by reference in this Form 10-K, into the
Company's previously filed Registration Statements File Nos. 33-45692,
33-61016, 33-87520, 33-87524, and 33-87526.
Chicago, Illinois
March 29, 1996
55
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ROADMASTER FOR THE PERIOD ENDED DECEMBER 1, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-01-1995
<CASH> 8,417
<SECURITIES> 0
<RECEIVABLES> 189,962
<ALLOWANCES> (1,389)
<INVENTORY> 166,743
<CURRENT-ASSETS> 406,586
<PP&E> 101,773
<DEPRECIATION> (25,300)
<TOTAL-ASSETS> 577,107
<CURRENT-LIABILITIES> 232,502
<BONDS> 0
0
0
<COMMON> 540
<OTHER-SE> 54,984
<TOTAL-LIABILITY-AND-EQUITY> 577,107
<SALES> 730,875
<TOTAL-REVENUES> 730,875
<CGS> 644,268
<TOTAL-COSTS> 92,814
<OTHER-EXPENSES> 38,806<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,470
<INCOME-PRETAX> (80,483)
<INCOME-TAX> (29,479)
<INCOME-CONTINUING> (51,004)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (51,004)
<EPS-PRIMARY> (1.04)
<EPS-DILUTED> (1.04)
<FN>
<F1>INCLUDED IN OTHER EXPENSES IS AN IMPAIRMENT LOSS OF $23,500,000 AND A
RESTRUCTURING EXPENSE CHARGE OF $7,521,000.
</FN>
</TABLE>
