EXHIBIT 4.1
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AMERICAN BILTRITE INC.
NOTE PURCHASE AND PRIVATE SHELF AGREEMENT
AND FACILITY GUARANTEE
$20,000,000
7.91% Series A Senior Notes Due August 28, 2010
$15,000,000
Private Shelf Facility
Dated as of August 28, 2001
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TABLE OF CONTENTS
(not part of agreement)
Page
1. AUTHORIZATION OF ISSUE OF NOTES................................................................................1
1A. Authorization of Issue of Series A Notes.............................................................1
1B. Authorization of Issue of Shelf Notes................................................................1
1C. Facility Guarantee...................................................................................2
2. PURCHASE AND SALE OF NOTES.....................................................................................2
2A. Purchase and Sale of Series A Notes..................................................................2
2B. Purchase and Sale of Shelf Notes...................................................................2
2B(1). Facility..........................................................................................2
2B(2). Issuance Period...................................................................................3
2B(3). Periodic Spread Information.......................................................................3
2B(4). Request for Purchase..............................................................................4
2B(5). Rate Quotes.......................................................................................4
2B(6). Acceptance........................................................................................4
2B(7). Market Disruption.................................................................................5
2B(8). Facility Closings.................................................................................5
2B(9). Fees..............................................................................................6
2B(9)(i). Facility Fee.................................................................................6
2B(9)(ii). Insurance Fee................................................................................6
2B(9)(iii). Delayed Delivery Fee.........................................................................6
2B(9)(iv). Cancellation Fee..............................................................................7
2B(9)(v). Leverage Fee..................................................................................7
3. CONDITIONS OF CLOSING..........................................................................................7
3A. Certain Documents....................................................................................7
3B. Representations and Warranties; No Default ..........................................................9
3C. Purchase Permitted by Applicable Laws ...............................................................9
3D. Approvals and Consents...............................................................................9
3E. Payment of Fees .....................................................................................9
3F. Guarantor Joinder Agreement..........................................................................9
3G. Commitment Letter....................................................................................9
3H. Proceedings and Documents...........................................................................10
4. PREPAYMENTS...................................................................................................10
4A. Required Prepayments of Series A Notes..............................................................10
4B. Required Prepayment of Shelf Notes.................................................................10
4C. Optional Prepayment ................................................................................10
4D. Notice of Optional Prepayments......................................................................10
4E. Application of Prepayment...........................................................................11
4F. No Acquisition of Notes ............................................................................11
4G. Cancellation of Notes...............................................................................11
5. AFFIRMATIVE COVENANTS.........................................................................................11
5A. Financial Statements................................................................................11
5B. Information Required by Rule 144A...................................................................13
5C. Inspection of Property; Books and Records...........................................................13
5D. Covenant to Secure Notes Equally....................................................................13
5E. Maintenance of Properties...........................................................................14
5F. Maintenance of Insurance............................................................................14
5G. Compliance with Environmental Laws..................................................................14
5H. ERISA Notices.......................................................................................14
5I. Payment of Taxes and Claims.........................................................................15
5J. Corporate Existence, Etc............................................................................15
5K. Compliance With Etc. ...............................................................................16
5L. New Borrowers Under Bank Agreement..................................................................16
6. NEGATIVE COVENANTS......................................................................................16
6A. Financial Ratios....................................................................................16
6B. Net Worth...........................................................................................17
6C. Restricted Payment..................................................................................17
6D. Limitations on Liens................................................................................17
6E. Merger and Consolidation............................................................................18
6F. Restricted Investments..............................................................................19
6G. Restrictions and Restricted Subsidiaries............................................................20
6H. Non-economic Contracts..............................................................................21
6I. Sale of Discount Receivables........................................................................21
6J. Transactions with Affiliates........................................................................21
6K. Assumption of Debt of Congoleum.....................................................................21
6L. Hedging Agreements..................................................................................21
7. DEFAULTS; REMEDIES............................................................................................21
7A. Events of Default...................................................................................21
7B. Rescission of Acceleration..........................................................................24
7C. Notice of Acceleration or Rescission................................................................25
7D. Other Remedies......................................................................................25
8. REPRESENTATIONS, COVENANTS AND WARRANTIES.....................................................................25
8A. Organization; Authority; Enforceability.............................................................25
8B. Business; Financial Statements......................................................................26
8C. Actions Pending.....................................................................................26
8D. Outstanding Debt....................................................................................26
8E. Title to Properties.................................................................................27
8F. Taxes...............................................................................................27
8G. Conflicting Agreements and Other Matters............................................................27
8H. Offering of Notes and Facility Xxxxxxxxx............................................................00
0X. Use of Proceeds.....................................................................................28
8J. ERISA...............................................................................................28
8K. Governmental Consent................................................................................29
8L. Environmental Compliance............................................................................29
8M. Disclosure..........................................................................................29
8N. Hostile Tender Offers...............................................................................29
8O. Patents and Trademarks..............................................................................29
8P. Regulatory Status...................................................................................29
9. REPRESENTATIONS OF THE PURCHASER..............................................................................30
9A. Nature of Purchase..................................................................................30
9B. Source of Funds.....................................................................................30
10. DEFINITIONS AND ACCOUNTING MATTERS...........................................................................30
10A. Yield-Maintenance Terms............................................................................30
10B. Other Defined Terms................................................................................31
10C. Accounting Terms and Determinations................................................................40
11. FACILITY GUARANTEE...........................................................................................40
11A. Guaranteed Obligations.............................................................................40
11B. Payments and Performance...........................................................................41
11C. Releases...........................................................................................41
11D. Waivers............................................................................................42
11E. Marshaling.........................................................................................43
11F. Immediate Liability................................................................................44
11G. Primary Obligations................................................................................44
11H. No Reduction or Defense............................................................................44
11I. Subordination......................................................................................46
11J. No Election........................................................................................46
11K. Severability.......................................................................................46
11L. Appropriations.....................................................................................46
11M. Other Enforcement Rights...........................................................................47
11N. Invalid Payments...................................................................................47
11O. No Waivers or Election of Remedies; Expenses; etc..................................................47
11P. Restoration of Rights and Remedies.................................................................47
11Q. No Setoff or Counterclaim..........................................................................47
11R. Further Assurances.................................................................................48
11S. Survival...........................................................................................48
11T. Acknowledgment of Common Interests; etc............................................................48
12. MISCELLANEOUS................................................................................................48
12A. Note Payments......................................................................................48
12B. Expenses...........................................................................................48
12C. Consent to Amendments..............................................................................49
12D. Form, Registration, Transfer and Exchange of Notes; Lost Notes.....................................50
12E. Persons Deemed Owners; Participations..............................................................50
12F. Survival of Representations and Warranties; Entire Agreement.......................................50
12G. Successors and Assigns.............................................................................50
12H. Independence of Covenants..........................................................................51
12I. Notices............................................................................................51
12J. Payments Due on Non-Business Days..................................................................51
12K. Severability.......................................................................................51
12L. Descriptive Headings...............................................................................52
12M. Satisfaction Requirement...........................................................................52
12N. Governing Law......................................................................................52
12O. Severalty of Obligations...........................................................................52
12P. Counterparts.......................................................................................52
12Q. Binding Agreement..................................................................................52
Exhibits and Schedules
Purchaser Schedule
Information Schedule
Disclosure Schedules:
Schedule 6D -- Liens
Schedule 6F -- Investments
Schedule 8A -- List of Subsidiaries
Schedule 8D -- Outstanding Debt
Schedule 8G -- Agreements Restricting Debt
Schedule 8O -- Patents and Trademarks
Exhibit A-1 -- Form of Series A Note
Exhibit A-2 -- Form of Shelf Note
Exhibit B -- Form of Request for Purchase
Exhibit C -- Form of Confirmation of Acceptance
Exhibit D-1 -- Form of Opinion of Company Counsel, Series A Note Closing
Exhibit D-2 -- Form of Opinion of Company Counsel, Shelf Note Closing
Exhibit E - Form of Guarantor Joinder Agreement
AMERICAN BILTRITE INC.
00 Xxxxx Xxxxxx
Xxxxxxxxx Xxxxx, XX 00000
As of August 28, 2001
The Prudential Insurance Company
of America (herein called "Prudential") Each Prudential Affiliate (as
hereinafter defined) which becomes bound by certain provisions of this Agreement
as hereinafter provided (together with Prudential, the "Purchasers")
c/o Prudential Capital Group
1114 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
The undersigned, American Biltrite Inc., a Delaware
corporation (herein called the "Company"), hereby agrees with you as follows:
1. AUTHORIZATION OF ISSUE OF NOTES.
1A. Authorization of Issue of Series A Notes. The Company will
authorize the issue of its senior promissory notes (the "Series A Notes") in the
aggregate principal amount of $20,000,000, to be dated the date of issue
thereof, to mature August 28, 2010, to bear interest on the unpaid balance
thereof from the date thereof until the principal thereof shall have become due
and payable at the rate of 7.91% per annum and on overdue principal,
Yield-Maintenance Amount and interest at the rate specified therein, and to be
substantially in the form of Exhibit A-1 attached hereto. The terms "Series A
Note" and "Series A Notes" as used herein shall include each Series A Note
delivered pursuant to any provision of this Agreement and each Series A Note
delivered in substitution or exchange for any such Series A Note pursuant to any
such provision.
1B. Authorization of Issue of Shelf Notes. The Company will
authorize the issue of its senior promissory notes (the "Shelf Notes") in the
aggregate principal amount of $15,000,000, to be dated the date of issue
thereof, to mature, in the case of each Shelf Note so issued, no more than 10
years after the date of original issuance thereof, to have an average life, in
the case of each Shelf Note so issued, of no more than 7 years after the date of
original issuance thereof, to bear interest on the unpaid balance thereof from
the date thereof at the rate per annum, and to have such other particular terms,
as shall be set forth, in the case of each Shelf Note so
issued, in the Confirmation of Acceptance with respect to such Shelf Note
delivered pursuant to paragraph 2B(6), and to be substantially in the form of
Exhibit A-2 attached hereto. The terms "Shelf Note" and "Shelf Notes", as used
herein shall include each Shelf Note delivered pursuant to any provision of
this Agreement and each Shelf Note delivered in substitution or exchange for
any such Shelf Note pursuant to any such provision. The terms "Note" and
"Notes" as used herein shall include each Series A Note and each Shelf Note
delivered pursuant to any provision of this Agreement and each Note delivered
in substitution or exchange for any such Note pursuant to any such provision.
Notes which have (i) the same final maturity, (ii) the same principal
prepayment dates, (iii) the same principal prepayment amounts (as a percentage
of the original principal amount of each Note), (iv) the same interest rate,
(v) the same interest payment periods and (vi) the same date of issuance
(which, in the case of a Note issued in exchange for another Note, shall be
deemed for these purposes the date on which such Note's ultimate predecessor
Note was issued), are herein called a "Series" of Notes.
1C. Facility Guarantee. To induce Prudential to enter into
this Agreement, and to induce the Purchasers to purchase the Notes from the
Company in accordance with the terms hereof, the obligations of the Company
hereunder and under the Notes are fully and unconditionally guaranteed by the
Guarantors, as provided in paragraph 11 hereof, together with any Guarantor
Joinder Agreement(s) delivered pursuant to paragraph 5L below. As of the date
hereof and the Series A Closing Day, the Company owns the percentage of
outstanding shares of the Guarantors as set forth on Schedule 8A (as updated and
in effect on each such date), and, as a result, the Guarantors will receive a
direct financial and economic benefit from the indebtedness to be incurred by
the Company.
2. PURCHASE AND SALE OF NOTES.
2A. Purchase and Sale of Series A Notes. The Company hereby
agrees to sell to Prudential and, subject to the terms and conditions herein set
forth, Prudential agrees to purchase from the Company the aggregate principal
amount of Series A Notes set forth opposite its name on the Purchaser Schedule
attached hereto at 100% of such aggregate principal amount. On August 28, 2001
or any other date upon which the Company and Prudential may agree (herein called
the "Series A Closing Day"), the Company will deliver to Prudential at the
offices of Prudential Capital Group, 1114 Avenue of the Americas, 00xx Xxxxx,
Xxx Xxxx, Xxx Xxxx, one or more Series A Notes registered in its name,
evidencing the aggregate principal amount of Series A Notes to be purchased by
Prudential and in the denomination or denominations specified in the Purchaser
Schedule attached hereto, against payment of the purchase price thereof by
transfer of immediately available funds for credit to the Company's account #00
535-31885 at Fleet Bank, ABA Routing Number 000-000-000.
2B. Purchase and Sale of Shelf Notes.
2B(1). Facility. Prudential is willing to consider, in its
sole discretion and within limits which may be authorized for purchase by
Prudential and Prudential Affiliates from time to time, the purchase of Shelf
Notes pursuant to this Agreement. The willingness of Prudential to consider such
purchase of Shelf Notes is herein called the "Facility". At any time, the
aggregate principal amount of Shelf Notes stated in paragraph 1B, minus the
aggregate principal amount of
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Shelf Notes purchased and sold pursuant to this Agreement prior to such time,
minus the aggregate principal amount of Accepted Notes (as hereinafter defined)
which have not yet been purchased and sold hereunder prior to such time, is
herein called the "Available Facility Amount" at such time. NOTWITHSTANDING THE
WILLINGNESS OF PRUDENTIAL TO CONSIDER PURCHASES OF SHELF NOTES, THIS AGREEMENT
IS ENTERED INTO ON THE EXPRESS UNDERSTANDING THAT NEITHER PRUDENTIAL NOR ANY
PRUDENTIAL AFFILIATE SHALL BE OBLIGATED TO MAKE OR ACCEPT OFFERS TO PURCHASE
SHELF NOTES, OR TO QUOTE RATES, SPREADS OR OTHER TERMS WITH RESPECT TO SPECIFIC
PURCHASES OF SHELF NOTES, AND THE FACILITY SHALL IN NO WAY BE CONSTRUED AS A
COMMITMENT BY PRUDENTIAL OR ANY PRUDENTIAL AFFILIATE. NOTWITHSTANDING THE
WILLINGNESS OF THE COMPANY TO CONSIDER SALES OF SHELF NOTES, THIS AGREEMENT IS
ENTERED INTO ON THE EXPRESS UNDERSTANDING THAT THE COMPANY SHALL NOT BE
OBLIGATED TO MAKE OFFERS TO SELL SHELF NOTES, OR TO REQUEST RATES, SPREADS OR
OTHER TERMS WITH RESPECT TO SPECIFIC SALES OF SHELF NOTES, AND THE FACILITY
SHALL IN NO WAY BE CONSTRUED AS A COMMITMENT BY THE COMPANY.
2B(2). Issuance Period. Shelf Notes may be issued and sold
pursuant to this Agreement until the earlier of (i) the third anniversary of the
date of this Agreement (or if such anniversary is not a Business Day, the
Business Day next preceding such anniversary) and (ii) the thirtieth day after
Prudential shall have given to the Company, or the Company shall have given to
Prudential, a written notice stating that it elects to terminate the issuance
and sale of Shelf Notes pursuant to this Agreement (or if such thirtieth day is
not a Business Day, the Business Day next preceding such thirtieth day). The
period during which Shelf Notes may be issued and sold pursuant to this
Agreement is herein called the "Issuance Period".
2B(3). Periodic Spread Information. Not later than 9:30 A.M.
(New York City local time) on a Business Day during the Issuance Period if there
is an Available Facility Amount on such Business Day, the Company may request by
telecopier or telephone, and Prudential will, to the extent reasonably
practicable, provide to the Company on such Business Day (or, if such request is
received after 9:30 A.M. (New York City local time) on such Business Day, on the
following Business Day), information (by telecopier or telephone followed by
telecopier notice, if requested by the Company) with respect to various spreads
at which Prudential or Prudential Affiliates might be interested in purchasing
Shelf Notes of different average lives; provided, however, that the Company may
not make such requests more frequently than once in every five Business Days or
such other period as shall be mutually agreed to by the Company and Prudential.
The amount and content of information so provided shall be in the sole
discretion of Prudential but it is the intent of Prudential to provide
information which will be of use to the Company in determining whether to
initiate procedures for use of the Facility. Information so provided shall not
constitute an offer to purchase Shelf Notes, and neither Prudential nor any
Prudential Affiliate shall be obligated to purchase Shelf Notes at the spreads
specified. Information so provided shall be representative of potential interest
only for the period commencing on the day such information is provided and
ending on the earlier of the fifth Business Day after such day and the first day
after such day on which further spread information is provided. Prudential may
suspend or terminate providing information pursuant to this paragraph 2B(3) for
any reason, including its determination that the
3
credit quality of the Company has declined since the date of this Agreement and
shall be required to provide written notice to the Company as soon as
practicable of its decision to suspend or terminate providing information to the
Company.
2B(4). Request for Purchase. The Company may from time to time
during the Issuance Period make requests for purchases of Shelf Notes (each such
request being herein called a "Request for Purchase"). Each Request for Purchase
shall be made to Prudential by telecopier or overnight delivery service, and
shall (i) specify the aggregate principal amount of Shelf Notes covered thereby,
which shall not be less than $5,000,000 and not be greater than the Available
Facility Amount at the time such Request for Purchase is made, (ii) specify the
principal amounts, final maturities, principal prepayment dates and amounts and
interest payment periods (quarterly or semi-annual in arrears) of the Shelf
Notes covered thereby, (iii) specify the use of proceeds of such Shelf Notes,
(iv) specify the proposed day for the closing of the purchase and sale of such
Shelf Notes, which shall be a Business Day during the Issuance Period not less
than 10 days and not more than 25 days after the making of such Request for
Purchase, (v) specify the number of the account and the name and address of the
depository institution to which the purchase prices of such Shelf Notes are to
be transferred on the Closing Day for such purchase and sale, (vi) certify that
the representations and warranties contained in paragraph 8 are true on and as
of the date of such Request for Purchase and that there exists on the date of
such Request for Purchase no Event of Default or Default and (vii) be
substantially in the form of Exhibit B attached hereto. Each Request for
Purchase shall be in writing and shall be deemed made when received by
Prudential.
2B(5). Rate Quotes. Not later than five Business Days after
the Company shall have given Prudential a Request for Purchase pursuant to
paragraph 2B(4), Prudential may, but shall be under no obligation to, provide to
the Company by telephone or telecopier with oral confirmation of receipt by the
Company, in each case between 9:30 A.M. and 1:30 P.M. New York City local time
(or such later time as Prudential may elect) interest rate quotes for the
several principal amounts, maturities, principal prepayment schedules, and
interest payment periods of Shelf Notes specified in such Request for Purchase.
Each quote shall represent the interest rate per annum payable on the
outstanding principal balance of such Shelf Notes at which Prudential or a
Prudential Affiliate would be willing to purchase such Shelf Notes at 100% of
the principal amount thereof.
2B(6). Acceptance. Within 30 minutes after Prudential shall
have provided any interest rate quotes pursuant to paragraph 2B(5) or such
shorter period as Prudential may specify to the Company (such period herein
called the "Acceptance Window"), the Company may, subject to paragraph 2B(7),
elect to accept such interest rate quotes as to not less than $5,000,000
aggregate principal amount of the Shelf Notes specified in the related Request
for Purchase. Such election shall be made by an Authorized Officer of the
Company notifying Prudential by telecopier or telephone followed by telecopier
notice, if requested by the Company within the Acceptance Window that the
Company elects to accept such interest rate quotes, specifying the Shelf Notes
(each such Shelf Note being herein called an "Accepted Note") as to which such
acceptance (herein called an "Acceptance") relates. The day the Company notifies
an Acceptance with respect to any Accepted Notes is herein called the
"Acceptance Day" for such Accepted Notes. Any interest rate quotes as to which
Prudential does not receive an Acceptance within the Acceptance Window shall
expire, and no purchase or sale of Shelf Notes hereunder shall be made based on
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such expired interest rate quotes. Subject to paragraph 2B(7) and the other
terms and conditions hereof, the Company agrees to sell to Prudential or a
Prudential Affiliate, and Prudential agrees to purchase, or to cause the
purchase by a Prudential Affiliate of, the Accepted Notes at 100% of the
principal amount of such Notes. As soon as practicable following the Acceptance
Day, the Company, Prudential and each Prudential Affiliate which is to purchase
any such Accepted Notes will execute a confirmation of such Acceptance
substantially in the form of Exhibit C attached hereto (herein called a
"Confirmation of Acceptance"). If the Company should fail to execute and return
to Prudential within three Business Days following receipt thereof a
Confirmation of Acceptance with respect to any Accepted Notes, Prudential may at
its election at any time prior to its receipt thereof cancel the closing with
respect to such Accepted Notes by so notifying the Company in writing.
2B(7). Market Disruption. Notwithstanding the provisions of
paragraph 2B(6), if Prudential shall have provided interest rate quotes pursuant
to paragraph 2B(5) and thereafter prior to the time an Acceptance with respect
to such quotes shall have been notified to Prudential in accordance with
paragraph 2B(6) the domestic market for U.S. Treasury securities or derivatives
shall have closed or there shall have occurred a general suspension, material
limitation, or significant disruption of trading in securities generally on the
New York Stock Exchange or in the domestic market for U.S. Treasury securities
or derivatives, then such interest rate quotes shall expire, and no purchase or
sale of Shelf Notes hereunder shall be made based on such expired interest rate
quotes. If the Company thereafter notifies Prudential of the Acceptance of any
such interest rate quotes, such Acceptance shall be ineffective for all purposes
of this Agreement, and Prudential shall promptly notify the Company in writing
that the provisions of this paragraph 2B(7) are applicable with respect to such
Acceptance.
2B(8). Facility Closings. Not later than 11:30 A.M. (New York
City local time) on the Closing Day for any Accepted Notes, the Company will
deliver to each Purchaser listed in the Confirmation of Acceptance relating
thereto at the offices of Prudential Capital Group, 1114 Avenue of the Xxxxxxxx,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, the Accepted Notes to be purchased by such
Purchaser in the form of one or more Notes in authorized denominations as such
Purchaser may request for each Series of Accepted Notes to be purchased on the
Closing Day, dated the Closing Day and registered in such Purchaser's name (or
in the name of its nominee), against payment of the purchase price thereof by
transfer of immediately available funds for credit to the Company's account
specified in the Request for Purchase of such Notes. If the Company fails to
tender to any Purchaser the Accepted Notes to be purchased by such Purchaser on
the scheduled Closing Day for such Accepted Notes as provided above in this
paragraph 2B(8), or any of the conditions specified in paragraph 3 shall not
have been fulfilled by the time required on such scheduled Closing Day, the
Company shall, prior to 1:00 P.M., New York City local time, on such scheduled
Closing Day notify Prudential (which notification shall be deemed received by
each Purchaser) in writing whether (i) such closing is to be rescheduled (such
rescheduled date to be a Business Day during the Issuance Period not less than
one Business Day and not more than 10 Business Days after such scheduled Closing
Day (the "Rescheduled Closing Day") and certify to Prudential (which
certification shall be for the benefit of each Purchaser) that the Company
reasonably believes that it will be able to comply with the conditions set forth
in paragraph 3 on such Rescheduled Closing Day and that the Company will pay the
Delayed Delivery Fee in accordance with paragraph 2B(9)(iii) or (ii) such
closing is to be canceled. In the event that the
5
Company shall fail to give such notice referred to in the preceding sentence,
Prudential (on behalf of each Purchaser) may at its election, at any time after
1:00 P.M., New York City local time, on such scheduled Closing Day, notify the
Company in writing that such closing is to be canceled. Notwithstanding anything
to the contrary appearing in this Agreement, the Company may elect to reschedule
a closing with respect to any given Accepted Notes on not more than one
occasion, unless Prudential shall have otherwise consented in writing.
2B(9). Fees.
2B(9)(i). Facility Fee. At the time of the execution and
delivery of this Agreement by the Company and Prudential, the Company will pay
to Prudential in immediately available funds a fee (herein called the "Facility
Fee") in the amount of $40,000.
2B(9)(ii). Issuance Fee. The Company will pay to Prudential in
immediately available funds a fee (herein called the "Issuance Fee") on each
Closing Day (other than the Series A Closing Day) in an amount equal to 0.15% of
the aggregate principal amount of Notes sold on such Closing Day.
2B(9)(iii). Delayed Delivery Fee. If the closing of the
purchase and sale of any Accepted Note is delayed for any reason beyond the
original Closing Day for such Accepted Note, the Company will pay to Prudential
(a) on the Cancellation Date or actual closing date of such purchase and sale
and (b) if earlier, the next Business Day following 90 days after the Acceptance
Day for such Accepted Note and on each Business Day following 90 days after the
prior payment hereunder, a fee (herein called the "Delayed Delivery Fee")
calculated as follows:
(BEY - MMY) X DTS/360 X PA
where "BEY" means Bond Equivalent Yield, i.e., the bond equivalent yield per
annum of such Accepted Note, "MMY" means Money Market Yield, i.e., the yield per
annum on a commercial paper investment of the highest quality selected by
Prudential on the date Prudential receives notice of the delay in the closing
for such Accepted Note having a maturity date or dates the same as, or closest
to, the Rescheduled Closing Day or Rescheduled Closing Days (a new alternative
investment being selected by Prudential each time such closing is delayed);
"DTS" means Days to Settlement, i.e., the number of actual days elapsed from and
including the original Closing Day with respect to such Accepted Note (in the
case of the first such payment with respect to such Accepted Note) or from and
including the date of the next preceding payment (in the case of any subsequent
delayed delivery fee payment with respect to such Accepted Note) to but
excluding the date of such payment; and "PA" means Principal Amount, i.e., the
principal amount of the Accepted Note for which such calculation is being made.
In no case shall the Delayed Delivery Fee be less than zero. Nothing contained
herein shall obligate any Purchaser to purchase any Accepted Note on any day
other than the Closing Day for such Accepted Note, as the same may be
rescheduled from time to time in compliance with paragraph 2B(8).
2B(9)(iv). Cancellation Fee. If the Company at any time
notifies Prudential in writing that the Company is canceling the closing of the
purchase and sale of any Accepted Note, or if Prudential notifies the Company in
writing under the circumstances set forth in the last sentence
6
of paragraph 2B(6) or the penultimate sentence of paragraph 2B(8) that the
closing of the purchase and sale of such Accepted Note is to be canceled, or if
the closing of the purchase and sale of such Accepted Note is not consummated on
or prior to the last day of the Issuance Period (the date of any such
notification, or the last day of the Issuance Period, as the case may be, being
herein called the "Cancellation Date"), the Company will pay the Purchasers in
immediately available funds an amount (the "Cancellation Fee") calculated as
follows:
PI X PA
where "PI" means Price Increase, i.e., the quotient (expressed in decimals)
obtained by dividing (a) the excess of the ask price (as determined by
Prudential) of the Hedge Treasury Note(s) on the Cancellation Date over the bid
price (as determined by Prudential) of the Hedge Treasury Notes(s) on the
Acceptance Day for such Accepted Note by (b) such bid price; and "PA" has the
meaning ascribed to it in paragraph 2B(9)(iii). The foregoing bid and ask prices
shall be as reported by Bridge Telerate (or, if such data for any reason ceases
to be available through Bridge Telerate, any publicly available source of
similar market data). Each price shall be based on a U.S. Treasury security
having a par value of $100.00 and shall be rounded to the second decimal place.
In no case shall the Cancellation Fee be less than zero.
2B(9)(v). Leverage Fee. In addition to interest accruing on
the Series A Notes in accordance with their terms, the Company agrees to pay
each holder of Series A Notes in immediately available funds a fee (the
"Leverage Fee") payable in arrears on each interest payment date for the Series
A Notes in an amount equal to 0.25% per annum of the outstanding principal
amount of Series A Notes held by such holder; provided that the Leverage Fee
shall cease to accrue if at any time after the Series A Closing Day the Leverage
Fee is less than 2.5 to 1.0 for each of two consecutive fiscal quarters. The
Leverage Fee shall be calculated on the same basis as interest on the Series A
Notes is calculated. For purposes of the foregoing, (a) the Leverage Ratio shall
be determined as of the end of each fiscal quarter of the Company based on the
consolidated financial statements delivered pursuant to paragraph 5A(i) or (ii),
(b) any discontinuation of the Leverage Fee resulting from a change in the
Leverage Ratio shall be effective as of the date the Company delivers the
Officer's Certificate referred to in paragraph 5A, which certificate shall
specify the basis for discontinuing the Leverage Fee, and (c) if the Company
fails to deliver the consolidated financial statements required to be delivered
by it pursuant to paragraph 5A(i) or (ii), the Leverage Fee shall continue to
accrue until such consolidated financial statements are delivered. The
acceptance of the Leverage Fee by any holder of a Series A Note shall not
constitute a waiver of any Default or Event of Default.
3. CONDITIONS OF CLOSING. The obligation of any Purchaser to
purchase and pay for any Notes on any Closing Day are subject (in each case) to
the satisfaction, on or before such Closing Day, as the case may be, of the
following conditions applicable thereto:
3A. Certain Documents. The Purchaser shall have received the
following, each dated the applicable Closing Day:
(i) The Note(s) to be purchased by such Purchaser.
7
(ii) Certified copies of (a) the resolutions of the Board of
Directors of the Company, authorizing the execution and delivery of
this Agreement and the issuance of the Notes, (b) the resolutions of
the General Partner of the Guarantor, authorizing the execution and
delivery of this Agreement and the issuance of the Facility Guarantee,
and (c) all documents evidencing other necessary corporate or
partnership action and governmental approvals, if any, with respect to
this Agreement, the Notes and the Facility Guarantee.
(iii) A certificate of (a) the Secretary or an Assistant
Secretary and one other officer of the Company, certifying the names
and true signatures of the officers of the Company authorized to sign
this Agreement and the Notes and the other documents to be delivered
hereunder and (b) the Secretary or an Assistant Secretary and one other
officer of the General Partner of the Guarantor, certifying the names
and true signatures of the officers of the General Partner of the
Guarantor authorized to sign this Agreement and the other documents to
be delivered hereunder.
(iv) Certified copies of (a) the Certificate of Incorporation
and By-laws of the Company and (b) the Partnership Agreement of each
Guarantor.
(v) A favorable opinion of Xxxxx X. Xxxxxxxxx, Esq., Corporate
Counsel of the Company and the Guarantors (or such other counsel
designated by the Company and acceptable to the Purchaser(s))
satisfactory to such Purchaser and substantially in the form of Exhibit
D-1 (in the case of the Series A Notes) or D-2 (in the case of any
Shelf Notes) attached hereto and as to such other matters as such
Purchaser may reasonably request. The Company and the Guarantors hereby
direct each such counsel to deliver such opinion, agree that the
issuance and sale of any Notes and any Facility Guarantee will
constitute a reconfirmation of such direction, and understand and agree
that each Purchaser receiving such an opinion will and is hereby
authorized to rely on such opinion.
(vi) A good standing certificate for the Company from the
Secretary of State of Delaware and for each Guarantor from the
Secretary of State (or equivalent official) of its jurisdiction of
organization, in each case dated as of a recent date and such other
evidence of the status of the Company and each Guarantor as such
Purchaser may reasonably request.
(vii) Certified copies of Requests for Information or Copies
(Form UCC-11) or equivalent reports listing all effective financing
statements which name the Company or any Restricted Subsidiary (under
its present name and previous names) as debtor and which are filed in
the offices of the Secretaries of State of Delaware, Massachusetts, New
Jersey and Rhode Island, together with copies of such financing
statements.
(viii) Certified copies of searches of Personal Property
Security Act (Ontario) and similar registrations and filings which name
the Company or any Restricted Subsidiary (under its present name and
previous names) as debtor.
8
(ix) Additional documents or certificates with respect to
legal matters or corporate or other proceedings related to the
transactions contemplated hereby as may be reasonably requested by such
Purchaser.
3B. Representations and Warranties; No Default. The
representations and warranties contained in this Agreement and those
otherwise made in writing by or on behalf of the Company or any
Guarantor in connection with the transactions contemplated by this
Agreement shall be true on and as of such Closing Day; there shall
exist on such Closing Day no Event of Default or Default; the Company
and each Guarantor shall have performed or complied with all matters
required to be performed or complied with by each of them hereunder;
there shall have been no material adverse change in the business,
financial condition or operations of the Company and its Subsidiaries,
taken as a whole, since December 31, 2000; and the Company shall have
delivered to such Purchaser an Officer's Certificate, dated the Closing
Day to each such effect.
3C. Purchase Permitted by Applicable Laws. The purchase of and
payment for the Notes and the Facility Guarantee on the terms and
conditions herein provided (including the use of the proceeds of such
Notes by the Company) shall not violate any applicable law or
governmental regulation (including, without limitation, Section 5 of
the Securities Act or Regulation T, U or X of the Board of Governors of
the Federal Reserve System) and shall not subject such Purchaser to any
tax (other than income taxes payable on the receipt of income),
penalty, liability or, in the reasonable judgment of such Purchaser,
other onerous condition under or pursuant to any applicable law or
governmental regulation. Purchaser shall have received such
certificates or other evidence as it may reasonably request to
establish compliance with this condition.
3D. Approvals and Consents. The Company and each Guarantor
shall have duly received all material authorizations, consents,
approvals, licenses, franchises, permits and certificates by or of all
United States federal, state and local governmental authorities and any
third parties necessary in connection with the transactions
contemplated hereby, and all thereof shall be in full force and effect
on such Closing Day. Any consent from the shareholders of the Company
required to be obtained in connection with the transactions
contemplated herein shall have been obtained. The Company shall have
delivered an Officer's Certificate to such Purchaser, dated such
Closing Day to such effect.
3E. Payment of Fees. The Company shall have paid to Prudential
any fees due it pursuant to or in connection with this Agreement,
including any Facility Fee due pursuant to paragraph 2B(9)(i), any
Issuance Fee due pursuant to paragraph 2B(9)(ii) and any Delayed
Delivery Fee due pursuant to paragraph 2B(9)(iii).
3F. Guarantor Joinder Agreements. Each Guarantor shall have
executed and delivered to the Purchasers a counterpart to this
Agreement, or, if applicable, a Guarantor Joinder Agreement.
3G. Commitment Letter. Evidence that a commitment letter
providing for the extension of credit to the Company and K&M in an
aggregate principal amount of
9
$30,000,000 and otherwise in form and substance reasonably satisfactory to
Prudential shall have been executed and delivered by each of the parties thereto
and shall be in effect.
3H. Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
reasonably satisfactory to you, and you shall have received all such counterpart
originals or certified or other copies of such documents as you may reasonably
request.
4. PREPAYMENTS. The Series A Notes and any Shelf Notes shall
be subject to the required prepayments specified in paragraphs 4A and 4B,
respectively. The Series A Notes and any Shelf Notes shall also be subject to
prepayment under the circumstances set forth in paragraph 4C. Any prepayment
made by the Company pursuant to any other provision of this paragraph 4 shall
not reduce or otherwise affect its obligation to make any required prepayment as
specified in paragraph 4A or 4B.
4A. Required Prepayments of Series A Notes. Until the Series A
Notes shall be paid in full, the Company shall apply to the prepayment of the
Series A Notes, without Yield-Maintenance Amount, the sum of $4,000,000 on
August 28 in each of the years 2006 to 2009, inclusive, and such principal
amounts of the Series A Notes, together with interest thereon to the payment
dates, shall become due on such payment dates. The remaining unpaid principal
amount of the Series A Notes, together with interest accrued thereon, shall
become due on the maturity date of the Series A Notes.
4B. Required Prepayments of Shelf Notes. Each Series of Shelf
Notes shall be subject to required prepayment, if any, set forth in the Notes of
such Series.
4C. Optional Prepayment. The Notes of each Series shall be
subject to prepayment, in whole or from time to time in part (in an amount of at
least $1,000,000 and any larger integral multiples of $100,000), at the option
of the Company, at 100% of the principal amount so prepaid plus interest accrued
thereon to the prepayment date and the Yield-Maintenance Amount, if any, with
respect to each such Note. Any partial prepayment of the Notes pursuant to this
paragraph 4C shall be applied in satisfaction of required payments of principal
in inverse order of their scheduled due dates.
4D. Notice of Optional Prepayment. The Company shall give the
holder of each Note to be prepaid pursuant to paragraph 4C irrevocable written
notice of such prepayment not less than 10 Business Days prior to the prepayment
date, specifying such prepayment date, the aggregate principal amount of the
Notes, and of the Notes held by such holder, to be prepaid on such date and
stating that such prepayment is to be made pursuant to paragraph 4C. Notice of
prepayment having been given as aforesaid, the principal amount of the Notes
specified in such notice, together with interest thereon to the prepayment date
and together with the Yield-Maintenance Amount, if any, herein provided, shall
become due and payable on such prepayment date. The Company shall, on or before
the day on which it gives written notice of any prepayment pursuant to paragraph
4C, give telephonic notice or notice by facsimile machine of the principal
amount of the Notes to be prepaid and the prepayment date to each holder of
Notes
10
which shall have designated a recipient of such notices in the Purchaser
Schedule attached hereto or the applicable Confirmation of Acceptance or by
notice in writing to the Company.
4E. Application of Prepayments. Upon any partial prepayment of
Notes of any Series pursuant to paragraph 4A, 4B or 4C, the principal amount to
be prepaid shall be applied pro rata to all outstanding Notes of such Series
according to the respective unpaid principal amounts thereof.
4F. No Acquisition of Notes. The Company shall not, and shall
not permit any of its Subsidiaries or Affiliates to, prepay or otherwise retire
in whole or in part prior to their stated final maturity (other than by
prepayment pursuant to paragraph 4A, 4B or 4C or upon acceleration of such final
maturity pursuant to paragraph 7A), or purchase or otherwise acquire, directly
or indirectly, Notes of any Series held by any holder unless the Company, or
such Subsidiary or Affiliate, shall have offered to prepay or otherwise retire
or purchase or otherwise acquire, as the case may be, the same proportion of the
aggregate principal amount of Notes of such Series held by each other holder of
Notes of such Series at the time outstanding. Any Notes so prepaid or otherwise
retired or purchased or otherwise acquired by the Company or any of its
Subsidiaries or Affiliates shall not be deemed outstanding for any purpose under
this Agreement.
4G. Cancellation of Notes. Any Notes acquired pursuant to
paragraph 4A, 4B or 4C, or otherwise acquired by or on behalf of the Company or
a Subsidiary, shall be canceled and shall not be reissued and shall not be
deemed to be outstanding for any purpose of this Agreement. Any Note held by any
Affiliate of the Company shall not be deemed outstanding for the purpose of
determining the aggregate principal amount of Notes outstanding for purposes of
determining whether or not any specified percentage of holders of outstanding
Notes have given any consent or taken any other action hereunder.
5. AFFIRMATIVE COVENANTS. During the Issuance Period and so
long thereafter as any Note is outstanding and unpaid, the Company covenants as
follows:
5A. Financial Statements. The Company covenants that it will
deliver to each holder of any Note in triplicate:
(i) as soon as practicable and in any event within 45
days after the end of each quarterly period (other than the
last quarterly period) in each fiscal year, consolidating and
consolidated statements of income and cash flows and a
consolidated statement of shareholders' equity of the Company
and its Restricted Subsidiaries for the period from the
beginning of the current fiscal year to the end of such
quarterly period, and a consolidating and consolidated balance
sheet of the Company and its Restricted Subsidiaries as at the
end of such quarterly period, setting forth in each case in
comparative form figures for the corresponding period in the
preceding fiscal year, all in reasonable detail and
satisfactory in form to the Required Holder(s) and certified
by an authorized financial officer of the Company, subject to
changes resulting from year-end adjustments;
11
(ii) as soon as practicable and in any event within
90 days after the end of each fiscal year, consolidating and
consolidated statements of income and cash flows and a
consolidated statement of shareholders' equity of the Company
and its Restricted Subsidiaries for such year, and a
consolidating and consolidated balance sheet of the Company
and its Restricted Subsidiaries as at the end of such year,
setting forth in each case in comparative form corresponding
consolidated figures from the preceding annual audit, all in
reasonable detail and satisfactory in form to the Required
Holder(s) and, as to the consolidated statements, reported on
by independent public accountants of recognized national
standing selected by the Company whose report shall be without
limitation as to the scope of the audit and satisfactory in
substance to the Required Holder(s) and, as to the
consolidating statements, certified by an authorized financial
officer of the Company;
(iii) promptly upon transmission thereof, (a) copies
of all such financial statements, proxy statements, notices
and reports as it shall send to its public shareholders, (b)
copies of all registration statements (without exhibits) and
all reports which it publicly files with the Securities and
Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange
Commission) (including, without limitation, reports on Form
10-K and Form 10-Q not later than the date on which the same
are required to be filed) and (c) copies of all press
releases;
(iv) promptly upon receipt thereof, a copy of each
other report submitted to the Company or any Subsidiary by
independent accountants in connection with any annual, interim
or special audit made by them of the books of the Company or
any Subsidiary which constitutes a "significant subsidiary"
within the meaning of Regulation S-X of the Securities and
Exchange Commission (including management letters submitted to
the board of directors of the Company or any such Subsidiary);
and
(v) with reasonable promptness, such other
information with respect to the business, finances and affairs
of the Company and its Subsidiaries as such holder may
reasonably request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each holder of any Notes an Officer's
Certificate demonstrating (with computations in reasonable detail) compliance by
the Company and its Subsidiaries with the provisions of paragraphs 6A, 6B, 6C,
6D or 6F and stating that there exists no Event of Default or Default, or, if
any Event of Default or Default exists, specifying the nature and period of
existence thereof and what action the Company has taken or proposes to take with
respect thereto. Together with each delivery of financial statements required by
clause (ii) above, the Company will deliver to each record holder of any Note a
certificate of the accountants referred to in said clause (ii) above stating
that, in making the audit necessary for their report on such financial
statements, they have obtained no knowledge of any Event of Default or Default,
or, if they have obtained knowledge of any Event of Default or Default,
specifying the nature and period of existence thereof. Such accountants,
however, shall not be liable to anyone by reason
12
of their failure to obtain knowledge of any Event of Default or Default, which
Event of Default or Default would not normally be disclosed or discovered in the
course of an audit conducted in accordance with generally accepted auditing
standards.
The Company also covenants that promptly after any Responsible
Officer obtains actual knowledge that any existing state of facts or
circumstances constitutes an Event of Default or Default (and in any event
within 5 Business Days of obtaining such knowledge), it will deliver to each
holder of any Note an Officer's Certificate specifying the nature and period of
existence thereof and what action the Company has taken or proposes to take with
respect thereto.
5B. Information Required by Rule 144A. The Company covenants
that it will, upon the request of the holder of any Note, provide such holder,
and any qualified institutional buyer permitted to purchase any Note under the
terms of this Agreement designated by such holder, such financial and other
information as such holder may reasonably determine to be necessary in order to
permit compliance with the information requirements of Rule 144A under the
Securities Act in connection with the resale of Notes, except at such times as
the Company is subject to the reporting requirements of section 13 or 15(d) of
the Exchange Act. For the purpose of this paragraph 5B, the term "qualified
institutional buyer" shall have the meaning specified in Rule 144A under the
Securities Act.
5C. Inspection of Property; Books and Records. The Company
covenants that it will permit any Person designated in writing by any
Significant Holder, at the Company's expense while an Event of Default is
continuing and otherwise at such Significant Holder's expense, to visit and
inspect any of the properties of the Company and its Subsidiaries, to examine
the corporate books and financial records of the Company and its Subsidiaries
and make copies thereof or extracts therefrom and to discuss the affairs,
finances and accounts of any of such corporations with the principal officers
thereof or with its independent public accountants (and by this provision the
Company hereby agrees that it will make such officers available for any such
discussion and authorizes such accountants to discuss such matters with such
Person), all at such reasonable times, upon reasonable notice, and as often as
such Significant Holder may reasonably request. The Company will maintain or
cause to be maintained the books of record and account of the Company and its
Subsidiaries in good order in accordance with sound business and financial
practice and its financial statements (including those required to be delivered
pursuant to paragraph 5A) prepared in accordance with generally accepted
accounting principles.
5D. Covenant to Secure Notes Equally. The Company covenants
that if it or any Restricted Subsidiary shall create or assume any Lien upon any
of its property or assets, whether now owned or hereafter acquired, other than
Liens permitted by the provisions of paragraph 6D (unless prior written consent
to the creation or assumption thereof shall have been obtained pursuant to
paragraph 12C), it will make or cause to be made effective provision
satisfactory in form and substance to the Required Holder(s) (including, without
limitation, opinions of counsel relating thereto) whereby the Notes will be
secured by such Lien equally and ratably with any and all other Debt thereby
secured so long as any such other Debt shall be so secured. Securing the Notes
as provided in this paragraph 5D shall not permit the existence of any Lien not
permitted by paragraph 6D.
13
5E. Maintenance of Properties. The Company will maintain or
cause to be maintained in good repair, working order and condition all
properties used in or necessary for the operation of the business of
the Company and its Restricted Subsidiaries (ordinary wear and tear
excepted) and from time to time will make or cause to be made all
reasonable repairs, renewals and replacements thereof, all to the
extent material to the business and operations of the Company and its
Restricted Subsidiaries taken as a whole. The Company will procure and
maintain in full force and effect all franchises, certificates,
licenses, permits and other authorizations from governmental political
subdivisions or regulatory authorities and all patents, trademarks,
service marks, trade names, copyrights, licenses and other rights, in
each case that are necessary in any material respect for the ownership,
maintenance and operation of the business and operations of the Company
and its Restricted Subsidiaries taken as a whole.
5F. Maintenance of Insurance. The Company covenants that it
and each of its Restricted Subsidiaries will maintain with financially
sound and reputable insurers insurance against fire, explosion, hazards
insured against by extended coverage and liability for other hazards
and risks, and insurance against liability to Persons and for property
damage, all to the extent and in the manner as is customarily
maintained by other companies of established reputation operating
comparable or similar businesses.
5G. Compliance with Environmental Laws. The Company will, and
will cause each of its Subsidiaries and each of its Affiliates that are
controlled by the Company or its Subsidiaries to, comply with, or
operate pursuant to valid waivers of, applicable Environmental Laws and
Environmental Permits, including, without limitation, to the extent
required by applicable Environmental Laws or Environmental Permits,
conducting, on a timely basis, periodic tests and monitoring for
contamination of ground water, surface water, air and land and for
biological toxicity and completing proper, thorough and effective
clean-up, removal, remediation and/or restoration, except to the extent
that failure so to comply with any Environmental Law or Environmental
Permit does not have a material adverse effect on the business,
financial condition or operations of the Company and its Restricted
Subsidiaries, taken as a whole, and, except that, with respect to any
testing, monitoring, clean-up, removal, remediation or other such
action required pursuant to such law or permits, neither the Company
nor any of its Subsidiaries or Affiliates shall be required to perform
any such action if the applicability or validity thereof is being
contested in good faith by appropriate proceedings and adequate
reserves have been established in accordance with generally accepted
accounting principles.
5H. ERISA Notices. The Company covenants that it shall deliver
to each Significant Holder, promptly upon the Company or its
Subsidiaries or any of their respective ERISA Affiliates:
(i) giving or being required to give notice to the PBGC of any
"reportable event" (as defined in section 4043 of ERISA) with respect
to any Plan which might constitute grounds for a termination of such
Plan under Title IV of ERISA by the PBGC, or becoming aware that any
plan administrator of any Plan has given or is required to give notice
of any such "reportable event", a copy of the notice of such reportable
event given or which should have been given to the PBGC;
14
(ii) receiving notice of the Company's or an ERISA Affiliate's
complete or partial withdrawal from a Multiemployer Plan under Title IV
of ERISA, or notice that any Multiemployer Plan is in reorganization,
is insolvent or has been terminated, a copy of such notice;
(iii) receiving notice from the PBGC under Title IV of ERISA
of its intent to terminate, impose liability (other than for premiums
under section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice;
(iv) applying for a waiver of the minimum funding
standard under section 412 of the Code, a copy of such
application;
(v) giving notice to the PBGC of intent to terminate any Plan
under section 4041(c) of ERISA, a copy of such notice and other
information filed with the PBGC;
(vi) giving notice to the PBGC of withdrawal from any
Plan pursuant to section 4063 of ERISA, a copy of such
notice; or
(vii) failing to make any required payment or required
contribution to any Plan or Multiemployer Plan or making any amendment
to any Plan which has resulted in the posting of a bond or other
security, a certificate of the chief financial officer or the chief
accounting officer of the Company setting forth details as to such
occurrence and the action, if any, which the Company is required to
take.
5I. Payment of Taxes and Claims. The Company will pay or
discharge, or cause to be paid or discharged, before the same shall
become delinquent (a) all taxes, assessments and governmental charges
(including claims of the IRS and the PBGC and claims made at the
insistence of the PBGC) levied or imposed upon it or any ERISA
Affiliate or any Code Affiliate or upon its or their income, profits or
property, (b) all lawful claims for labor, materials and supplies,
which, if unpaid, might by law become a Lien upon its or its
Subsidiaries, properties, and (c) all required installments under
section 412(m) of the Code and all other required payments under
section 412 of the Code with respect to any Plan maintained by the
Company or any ERISA Affiliate; provided, however, that, in the case of
clause (a) and (b) above, the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment,
charge or claim, the applicability or validity of which is being
contested in good faith by appropriate proceedings and for which
adequate reserves have been established in accordance with generally
accepted accounting principles.
5J. Corporate Existence, Etc. Subject to the provisions of
paragraph 6E, the Company will at all times preserve and keep in full
force and effect its and its Restricted Subsidiaries', corporate
existence, and will qualify, and cause each of its Restricted
Subsidiaries to qualify, to do business in any jurisdiction where the
failure to do so would have a material adverse effect on the business,
financial condition or operations of the Company and its Restricted
Subsidiaries taken as a whole.
15
5K. Compliance With Laws, Etc. The Company will comply and
cause its Restricted Subsidiaries to comply with the requirements of
all applicable laws, rules, regulations and judicial or administrative
orders and judgments of any court or governmental authority (including
those relating to environmental protection, employee benefits and
welfare and employee safety), the noncompliance with which would
materially adversely affect the business, financial condition or
operations of the Company and its Restricted Subsidiaries taken as a
whole.
5L. New Borrowers Under Bank Agreement. The Company covenants
that, if any Subsidiary becomes a borrower or obligor under the Bank
Agreement, (a) the Company shall cause such Subsidiary to become
simultaneously a Guarantor by executing and delivering to the
Purchasers a Guarantor Joinder Agreement, together with such other
agreements, opinions, organizational documents and other documents as
the Required Holder(s) may reasonably request and (b) notwithstanding
any provision hereof to the contrary, such Subsidiary shall constitute
a Restricted Subsidiary for all purposes hereunder.
6. NEGATIVE COVENANTS.
6A. Financial Ratios. The Company covenants that it
will not permit, as determined at the end of each fiscal quarter,
(i) Current Ratio. The ratio of Current Assets to
Current Liabilities to be less than 1.5 to 1.0.
(ii) Fixed Charge Coverage Ratio. The ratio of Consolidated
Adjusted EBITDA for the period of four consecutive fiscal quarters to
Consolidated Fixed Charges for such period to be less than the
following ratios during the following respective periods:
Period Ratio
Closing Date through December 31, 2001 2.00 to 1.00
January 1, 2002 through March 31, 2002 1.50 to 1.00
April 1, 2002 through September 30, 2002 1.75 to 1.00
Thereafter 2.00 to 1.00
(iii) Debt Levels. Debt of the Company and its Restricted
Subsidiaries (a) from the Closing Date through December 31, 2001 to
exceed 50% of Consolidated Tangible Gross Worth and (b) from January 1,
2002 and at all times thereafter to exceed 45% of Consolidated Tangible
Gross Worth.
(iv) Priority Debt. Priority Debt to exceed 15% of
Consolidated Tangible Gross Worth.
(v) Leverage Ratio. The Leverage Ratio for the period of four
consecutive fiscal quarters most recently ended to exceed the following
ratios during the following respective periods:
16
Period Ratio
Closing Date through September 30, 2001 3.25
October 1, 2001 through December 31, 2001 2.75
January 1, 2002 through June 30, 2002 3.25
July 1, 2002 through September 30, 2002 2.75
October 1, 2002 through December 31, 2002 2.50
Thereafter 2.50
6B. Net Worth. The Company will not permit, as at the end of
each fiscal quarter, Consolidated Tangible Net Worth to be less than the sum of
(i) $56,000,000, plus (ii) 50% of Consolidated Net Income Available for Tangible
Net Worth for the period from December 31, 2000 to and including the most recent
quarter ended prior to the measurement date.
6C. Restricted Payments. The Company will not, directly or
indirectly, declare, order, pay, make or set apart any sum or property for any
Restricted Payment in excess of an amount equal to the sum of (i) $5,000,000,
plus (ii) 50% of Consolidated Net Income for the period from December 31, 2000
to and including the most recent quarter ended prior to the measurement date,
minus (iii) the aggregate amount of all Restricted Payments declared, ordered,
paid, made or set apart after December 31, 2000, provided that the Company shall
not make any Restricted Payments if (a) there shall exist any Default or Event
of Default or (b) immediately after such Restricted Payment a Default or Event
of Default would occur.
6D. Limitations on Liens. The Company covenants that neither
it nor any of its Restricted Subsidiaries will create, assume or suffer to exist
any Lien upon any of its Property or assets (including, without limitation, any
capital stock of a Restricted Subsidiary owned by the Company or any
Subsidiary), whether now owned or hereafter acquired and whether or not
provision is made for equally and ratably securing the Notes as provided in
paragraph 5D; provided, however, that the foregoing restriction and limitation
shall not apply to the following Liens:
(i) Liens existing on the Closing Date and listed on
Schedule 6D;
(ii) Liens for taxes, assessments or governmental
charges or levies not yet delinquent or which are being
contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with,
and as permitted by, paragraph 5I;
(iii) Liens imposed by law, such as carriers',
landlords', warehousemen's and mechanics' liens and other
similar liens arising in the ordinary course of business which
secure payment of obligations not more than 30 days past due
or which are being contested in good faith by appropriate
proceedings as permitted by paragraph 5I;
17
(iv) Liens consisting of encumbrances in the nature
of zoning restrictions, easements, rights and restrictions on
the use of real property on the date of the acquisition
thereof, which in any case do not materially detract from the
value of such property or impair the Company's or any
Restricted Subsidiary's use thereof;
(v) Liens (other than ERISA Liens) incurred or
deposits made in the ordinary course of business
(a) in connection with workers'
compensation, unemployment insurance and other types
of social security, or
(b) to secure (or to obtain letters of
credit that secure) performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases,
performance bonds, sales contracts and other similar
obligations, in each case, not incurred in connection
with the obtaining of credit or the payment of a
deferred purchase price, and which do not, in the
aggregate, materially detract from the value of the
Company's or any Restricted Subsidiary's property or
assets or impair the use thereof or operation of its
business;
(vi) Liens consisting of Capitalized Leases or Liens
on property existing at the time of acquisition or placed on
property being acquired or constructed to secure the purchase
price or cost thereof or Debt incurred to finance such
purchase or construction; provided that (a) the property is
not encumbered in excess of the lesser of the cost or fair
market value thereof, (b) the Lien is confined to the property
so acquired or constructed, and (c) no Default or Event of
Default has occurred and is continuing;
(vii) any Lien renewing or extending any Lien
permitted by clause (i) or (vi), provided that (a) the Debt is
not increased or the weighted average life to maturity thereof
reduced, (b) the Lien is not extended to other property, (c)
the Debt secured thereby is permitted under paragraph 6A, and
(d) no Default or Event of Default is in existence; and
(viii) other Liens not otherwise permitted, provided
that the Debt secured by such Liens shall not (a) when
aggregated with all other Priority Debt, exceed 15% of
Consolidated Tangible Gross Worth, (b) violate the provisions
of paragraph 6A, and (c) at the time any such Lien is
incurred, exceed the book value, or, if less, the fair market
value of the property subject to such Lien.
6E. Merger and Consolidation. The Company covenants that it
will not, and will not permit Congoleum or any Restricted Subsidiary to, be a
party to any merger, amalgamation, consolidation, reorganization, reconstruction
or arrangement with any other Person or sell, lease or transfer or otherwise
dispose of all or substantially all of its assets to any Person, except that:
(i)
18
a Restricted Subsidiary may merge or consolidate
with, or sell, lease, transfer or otherwise dispose of all or
substantially all of its assets to, the Company if the Company
is the surviving or continuing corporation;
(ii) a Restricted Subsidiary may merge or consolidate
with, or sell, lease, transfer or otherwise dispose of all or
substantially all of its assets to, any other Restricted
Subsidiary; and
(iii) any corporation, except Congoleum, may merge or
consolidate with, or sell, lease, transfer or otherwise
dispose of all or substantially all of its assets to, the
Company or any Restricted Subsidiary if the Company or such
Restricted Subsidiary is the surviving or continuing
corporation;
provided, that at the time of such merger, consolidation, sale, transfer or
disposition and after giving effect thereto there shall exist no Default or
Event of Default.
6F. Restricted Investments. The Company will not make or
permit a Restricted Subsidiary to make any Investment, except:
(i) loans or advances to any Restricted Subsidiary or
to the Company;
(ii) stock, obligations or securities of a Restricted
Subsidiary or a corporation which immediately after such
purchase or acquisition will be a Restricted Subsidiary;
(iii) stock, obligations or securities received in
settlement of debts (created in the ordinary course of
business) owing to the Company or any Restricted Subsidiary;
(iv) the following Investments, provided that they
are payable in the United States in United States dollars and
are due within one year from the date of issuance;
(a) commercial paper of a United States
issuer rated A1 or better by Standard & Poor's
Corporation or P-1 or better by Xxxxx'x Investors
Service, Inc.;
(b) certificates of deposits of commercial
banks organized under the laws of the United States,
whose deposits are at all times insured by the
Federal Deposit Insurance Corporation, having
combined capital and surplus in excess of
$500,000,000 and a long-term deposit rating of A or
better from either Standard & Poor's Corporation or
Xxxxx'x Investors Service, Inc.;
(c) marketable direct obligations of, or
obligations unconditionally guaranteed by, the United
States Government or any instrumentality or agency
thereof; or
19
(d) shares of money market mutual or similar
funds which invest exclusively in assets satisfying
the requirements of clauses (a) through (c) above;
(v) equity investments in Congoleum (a) existing at
December 31, 2000 and (b) additional Investments in Congoleum
not to exceed $7,500,000;
(vi) equity investments in K&M (a) existing on the
date of this Agreement and (b) additional Investments in K&M
not to exceed $2,000,000;
(vii) loans or advances to employees, officers or
directors of the Company or any Restricted Subsidiary in their
capacity as such in an aggregate principal amount not to
exceed $1,000,000 at any one time outstanding;
(viii) Investments by the Company or a Restricted
Subsidiary in connection with the Company's deferred
compensation plan (as existing and in effect on the Closing
Date);
(ix) Company-owned life insurance policies which name
the Company as the sole loss payee;
(x) Investments existing on the Closing Date and
listed on Schedule 6F;
(xi) Hedging Agreements permitted under paragraph 6L;
and
(xii) other Investments not otherwise permitted,
provided that in no event shall the aggregate amount of
Investments made pursuant to clause (v)(b) above and this
clause (xii) exceed at any time 20% of Tangible Net Worth.
6G. Restrictions on Restricted Subsidiaries. The Company will
not permit
(i) itself or any Restricted Subsidiary to sell,
assign, pledge or otherwise dispose of any Debt of, or any
shares of stock or other equity interest in (or warrants,
rights or options to acquire stock of or equity interests in),
any Restricted Subsidiary except to the Company or any other
Restricted Subsidiary, provided that all of the stock and Debt
of a Restricted Subsidiary may be sold as an entirety if prior
to and immediately after such sale, no Default or Event of
Default would exist; or
(ii) any Restricted Subsidiary to
(a) enter into any contract or agreement (including
any provision in its charter) that imposes restrictions on its
ability to pay dividends or
20
(b) except as permitted by paragraph 6A(iii) and
(iv), issue, sell, create, incur, assume or suffer to exist
Debt owing to or held by any Person other than the Company or
any Restricted Subsidiary.
6H. Non-economic Contracts. The Company will not permit itself
or any Restricted Subsidiary to enter into or become a party to any non-economic
contract (other than Hedging Agreements permitted under paragraph 6L), including
any contract for the purchase of materials, supplies, or other property, if such
contract requires that payment for such materials, supplies or other property
shall be made whether or not delivery is ever made, or Guarantees other than
endorsements or negotiable instruments for collection in the ordinary course of
business and Guarantees permitted under paragraph 6A(iii) or 6A(iv).
6I. Sale or Discount of Receivables. The Company will not
permit itself or any Restricted Subsidiary to discount, pledge, sell with
recourse, or otherwise sell, any of its Receivables.
6J. Transactions with Affiliates. The Company will not permit
itself or any Restricted Subsidiary to effect any transaction with any Affiliate
by which any asset or services of the Company or a Restricted Subsidiary is
transferred to such Affiliate, or from such Affiliate, or enter into any other
transaction with an Affiliate on terms no less favorable to the Company or any
Restricted Subsidiary than those that could be obtained in an arm's length
transaction.
6K. Assumption of Debt of Congoleum. The Company will not
permit itself or any Restricted Subsidiary to, directly or indirectly,
Guarantee, assume or otherwise become obligated with respect to Debt or any
other obligation or liability of Congoleum.
6L. Hedging Agreements. The Company will not permit itself or
any Restricted Subsidiary to enter into any Hedging Agreement other than Hedging
Agreements entered into in the ordinary course of business to hedge or mitigate
risks to which the Company or any Restricted Subsidiary is exposed in the
conduct of its business or the management of its liabilities. For the avoidance
of doubt, the Company acknowledges that a Hedging Agreement entered into for
speculative purposes or of a speculative nature is not a Hedging Agreement
entered into in the ordinary course of business to hedge or mitigate risks.
7. DEFAULTS; REMEDIES.
7A. Events of Default. If any of the following events shall
occur and be continuing for any reason whatsoever (and whether such occurrence
shall be voluntary or involuntary or come about or be effected by operation of
law or otherwise):
(i) the Company defaults in the payment of any
principal of or Yield-Maintenance Amount in respect of any
Note when the same shall become due, either by the terms
thereof or otherwise as herein provided; or
(ii) the Company defaults in the payment of any
interest on any Note for a period of 10 days after the same
shall become due; or
21
(iii) the Company or any Restricted Subsidiary
defaults (whether as primary obligor or as guarantor or as
surety) in any payment of principal of or interest on any
other obligation for money borrowed, any Capitalized Lease
Obligation, any obligation under a conditional sale or other
title retention agreement, any obligation issued or assumed as
full or partial payment for property whether or not secured by
a purchase money mortgage, or any obligation under notes
payable or drafts accepted representing extensions of credit
(any of the foregoing being herein called a "Payment Default")
beyond any period of grace provided with respect thereto; or
the Company or any Restricted Subsidiary fails to perform or
observe any other agreement, term or condition contained in
any agreement under which any such obligation is created (or
if any other event thereunder or under any such agreement
shall occur and be continuing) and the effect of such failure
or other event is to cause, or to permit the holder or holders
of such obligation (or a trustee or agent on behalf of such
holder or holders) at such time to cause, such obligation to
become due (or to be purchased by the Company or any
Restricted Subsidiary) prior to any stated maturity; provided,
that the aggregate amount of all obligations as to which such
a Payment Default shall occur and be continuing or such a
failure or other event causing or permitting acceleration (or
repurchase by the Company or any Restricted Subsidiary) shall
occur and be continuing exceeds $1,000,000 (or the equivalent
amount in any foreign currency); or
(iv) any representation or warranty made by the
Company or any Guarantor herein or by the Company, any
Guarantor or any of its respective officers in any writing
furnished in connection with or pursuant to this Agreement
shall be false in any material respect on the date as of which
made; or
(v) the Company fails to perform or observe any
agreement contained in the last sentence of paragraph 5A, in
paragraph 5J with respect to the Company's corporate existence
or in paragraph 6 or any Guarantor fails to perform or observe
any agreement contained in the Facility Guarantee or any
Guarantor Joinder Agreement; or
(vi) the Company fails to perform or observe any
other agreement, term or condition contained herein, and any
such failure described in this clause (vi) shall continue
unremedied for a period of 30 days after the earlier of (a)
notice thereof from the holder of any Note or (b) the date any
Responsible Officer obtains actual knowledge thereof; or
(vii) the Company or any Restricted Subsidiary makes
a general assignment for the benefit of creditors or admits in
writing its inability to pay its debts as such debts become
due or ceases or threatens to cease carrying on its business
permanently; or
(viii) any decree or order for relief in respect of
the Company, any Guarantor or any Restricted Subsidiary is
entered under any bankruptcy,
22
reorganization, compromise, arrangement, insolvency,
readjustment of debt, composition, dissolution, winding up or
liquidation or other similar law, whether now or hereafter in
effect (herein called the "Bankruptcy Law"), of any
jurisdiction; or
(ix) the Company or any Restricted Subsidiary
petitions or applies to any tribunal for, or consents to, the
appointment of, or taking possession by, a trustee, receiver,
custodian, liquidator or similar official of the Company or
any Restricted Subsidiary, or of any substantial part of the
assets of the Company or any Restricted Subsidiary, or
commences a voluntary case under the Bankruptcy Law of the
United States or any proceedings (other than proceedings for
the voluntary liquidation and dissolution of a Restricted
Subsidiary) relating to the Company or any Restricted
Subsidiary under the Bankruptcy Law of any other jurisdiction
or takes any corporate action to authorize any of the actions
described in this clause (ix); or
(x) any such petition or application is filed, or any
such proceedings are commenced, against the Company or any
Restricted Subsidiary and the Company or any Restricted
Subsidiary by any act indicates its or their approval thereof,
consent thereto or acquiescence therein, or an order, judgment
or decree is entered appointing any such trustee, receiver,
custodian, liquidator or similar official, or approving the
petition in any such proceedings, and such order, judgment or
decree remains unstayed and in effect for more than 60 days;
or
(xi) any order, judgment or decree is entered in any
proceedings against the Company decreeing the dissolution of
the Company and such order, judgment or decree remains
unstayed and in effect for more than 60 days; or an
encumbrancer takes possession of, or a receiver or receiver
manager is appointed over, all or substantially all of the
assets and the revenues of the Company; or
(xii) any order, judgment or decree is entered in any
proceedings against the Company or any Restricted Subsidiary
decreeing a split-up of the Company or such Restricted
Subsidiary which requires the divestiture of assets
representing a substantial part, or the divestiture of the
stock of a Restricted Subsidiary whose assets represent a
substantial part, of the consolidated assets of the Company
and its Restricted Subsidiaries (determined in accordance with
generally accepted accounting principles) or which requires
the divestiture of assets, or stock of a Restricted
Subsidiary, which shall have contributed a substantial part of
the consolidated net income of the Company and its Restricted
Subsidiaries (determined in accordance with generally accepted
accounting principles) for any of the three fiscal years then
most recently ended, and such order, judgment or decree
remains unstayed and in effect for more than 60 days; or
(xiii) a final judgment is rendered against one or
more of the Company and its Restricted Subsidiaries and which
judgment is not, within 60
23
days after entry thereof, bonded, discharged or
stayed pending appeal, or are not discharged within 60 days
after the expiration of any such stay; or
(xiv) the Company or any ERISA Affiliate, in its
capacity as an employer under a Multiemployer Plan, makes a
complete or partial withdrawal from such Multiemployer Plan
resulting in the incurrence with such withdrawing employer of
a withdrawal liability; or
(xv) all or any portion of the Facility Guarantee or
any Guarantor Joinder Agreement shall cease to be in full
force and effect with respect to any Guarantor or any
Guarantor shall so assert in writing to any holder of any
Note;
then (a) if such event is an Event of Default specified in clauses (i) or (ii)
this paragraph 7A, any holder of any Note may at its option during the
continuance of such Event of Default, by notice in writing to the Company,
declare all of the Notes held by such holder to be, and all of the Notes held by
such holder shall thereupon be and become, immediately due and payable at par
together with interest accrued thereon, and together with the Yield-Maintenance
Amount, if any, with respect to each Note, without presentment, demand, protest
or notice of any kind, all of which are hereby waived by the Company, (b) if
such event is an Event of Default specified in clauses (viii), (ix) or (x) of
this paragraph 7A with respect to the Company, all of the Notes at the time
outstanding shall automatically become immediately due and payable at the
principal amount thereof together with interest accrued thereon and together
with the Yield-Maintenance Amount, if any, with respect to each Note, without
presentment, demand, protest or notice of any kind, all of which are hereby
waived by the Company and (c) if such event is any other Event of Default, the
Required Holder(s) of the Notes of any Series may, at its or their option and in
addition to any right, power or remedy permitted by law or equity, by notice in
writing to the Company, declare all of the Notes of such Series to be, and all
of the Notes of such Series shall thereupon be and become, immediately due and
payable at the principal amount thereof, together with interest accrued thereon
and together with the Yield-Maintenance Amount, if any, with respect to each
Note of such Series, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Company.
7B. Rescission of Acceleration. At any time after any or all
of the Notes of any Series shall have been declared immediately due and payable
pursuant to paragraph 7A, the Required Holder(s) of the Notes of such Series
may, by notice in writing to the Company, rescind and annul such declaration and
its consequences if (i) the Company shall have paid all overdue interest on the
Notes of such Series, the principal of and Yield-Maintenance Amount, if any,
payable with respect to any Notes of such Series which have become due otherwise
than by reason of such declaration, and interest on such overdue interest and
overdue principal and Yield-Maintenance Amount at the rate specified in the
Notes of such Series, (ii) the Company shall not have paid any amounts which
have become due solely by reason of such declaration, (iii) all Events of
Default and Defaults, other than non-payment of amounts which have become due
solely by reason of such declaration, shall have been cured or waived pursuant
to paragraph 12C, and (iv) no judgment or decree shall have been entered for the
payment of any amounts due pursuant to the Notes or such Series or this
Agreement. No such rescission or annulment shall
24
extend to or affect any subsequent Event of Default or Default
or impair any right arising therefrom.
7C. Notice of Acceleration or Rescission. Whenever any Note of
any Series shall be declared immediately due and payable pursuant to paragraph
7A or any such declaration shall be rescinded and annulled pursuant to paragraph
7B, the Company shall forthwith give written notice thereof to the holder of
each Note of each Series at the time outstanding.
7D. Other Remedies. If any Event of Default or Default shall
occur and be continuing, the holder of any Note may proceed to protect and
enforce its rights under this Agreement and such Note by exercising such
remedies as are available to such holder in respect thereof under applicable
law, either by suit in equity or by action at law, or both, whether for specific
performance of any covenant or other agreement contained in this Agreement or in
aid of the exercise of any power granted in this Agreement. No remedy conferred
in this Agreement upon the holder of any Note is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at
law or in equity or by statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company and
the Guarantors represent, covenant and warrant as follows (all references to
"Subsidiary" and "Subsidiaries" in this paragraph 8 shall be deemed omitted if
the Company has no Subsidiaries at the time the representations herein are made
or repeated):
8A. Organization; Authority; Enforceability. The Company is a
corporation duly organized and existing in good standing under the laws of the
State of Delaware. Each Restricted Subsidiary is a corporation or partnership
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization. The Company has and each Restricted Subsidiary has
all corporate or partnership power and authority to own and operate its
properties and to carry on its business and, in the case of the Company and the
Guarantor, to enter into and perform all of its respective obligations under
this Agreement, the Notes and the Facility Guarantee and to issue and sell the
Notes and the Facility Guarantee. Each of the Company and its Restricted
Subsidiaries is duly licensed or qualified to do business as a foreign
corporation or partnership in each state where the failure to be so licensed or
qualified would have a material adverse effect on the business, financial
condition or operations of the Company and its Restricted Subsidiaries taken as
a whole and has all corporate or partnership power, licenses, franchises and
other governmental authorizations and approvals necessary to carry on its
present business, with respect to which the failure to possess would have a
material adverse effect on the business, financial condition or operations of
the Company and its Restricted Subsidiaries taken as a whole. Schedule 8A
includes a correct list as to each Guarantor and each of the Restricted
Subsidiaries on the date hereof (i) its name, (ii) the jurisdiction of its
organization and (iii) its capital stock issued and outstanding and the holders
by percentage of that stock. This Agreement is and the Notes and the Facility
Guarantee when issued and delivered hereunder will be, legal, valid, binding and
enforceable obligations of the Company and the Guarantor except to the extent
that such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
25
enforcement of creditors, rights generally and by general
equitable principles (regardless of whether enforcement is sought in equity or
at law).
8B. Business; Financial Statements. The Company has furnished
each Purchaser of any Notes with the following financial statements, identified
by a principal financial officer of the Company: (i) consolidating and
consolidated balance sheets of the Company and its Subsidiaries as at December
31 in each of the three fiscal years of the Company most recently completed
prior to the date as of which this representation is made or repeated to such
Purchaser (other than fiscal years completed within 90 days prior to such date
for which audited financial statements have not been released) and consolidating
and consolidated statements of income and consolidated statements of cash flows
and of shareholders' equity of the Company and its Subsidiaries for each such
year, all reported on by Ernst & Young, LLP or other independent public
accountants of recognized national standing and (ii) consolidating and
consolidated balance sheets of the Company and its Subsidiaries as at the end of
the quarterly period (if any) most recently completed prior to such date and
after the end of such fiscal year (other than quarterly periods completed within
60 days prior to such date for which financial statements have not been
released) and the comparable quarterly period in the preceding fiscal year and
consolidated statements of income, cash flows and shareholders' equity for the
periods from the beginning of the fiscal years in which such quarterly periods
are included to the end of such quarterly periods, prepared by the Company. Such
financial statements (including any related schedules and/or notes) are true and
correct in all material respects (subject, as to interim statements, to changes
resulting from audits and year-end adjustments), have been prepared in
accordance with generally accepted accounting principles consistently followed
throughout the periods involved and show all liabilities, direct and contingent,
of the Company and its Subsidiaries required to be shown in accordance with such
principles. The balance sheets fairly present the condition of the Company and
its Subsidiaries as at the dates thereof, and the statements of income,
shareholders' equity and cash flows fairly present the results of the operations
of the Company and its Subsidiaries and their cash flows for the periods
indicated. There has not been a material adverse change in the business,
property or assets, condition (financial or otherwise), operations or prospects
of the Company and its Subsidiaries taken as a whole since the end of the most
recent fiscal year for which such audited financial statements have been
furnished.
8C. Actions Pending. There is no action, suit, investigation
or proceeding pending or (to the knowledge of the Company or any Guarantor or
Restricted Subsidiary) threatened against the Company, any Guarantor or any
Restricted Subsidiary, or any properties or rights of the Company, any Guarantor
or any Restricted Subsidiary, by or before any court, arbitrator or
administrative or governmental body which might result in any material adverse
change in the business, property or assets, condition (financial or otherwise)
or operations of the Company and its Restricted Subsidiaries taken as a whole.
8D. Outstanding Debt. Neither the Company nor any of its
Restricted Subsidiaries has outstanding any Debt except as permitted by
paragraph 6A. Schedule 8D correctly describes all secured and unsecured Debt of
the Company and its Restricted Subsidiaries outstanding, or for which the
Company or any of its Restricted Subsidiaries have commitments, on the date of
this Agreement, and identifies the collateral, if any, securing such
26
Debt. There exists no default or temporary waiver of default
under the provisions of any instrument evidencing such Debt or of any agreement
relating thereto.
8E. Title to Properties. The Company has and each of its
Restricted Subsidiaries has good and indefeasible title to its respective real
properties (other than properties which it leases) and good title to all of its
other respective properties and assets, including the properties and assets
reflected in the most recent audited balance sheet referred to in paragraph 8B
(other than properties and assets disposed of in the ordinary course of
business), subject to no Lien of any kind except Liens permitted by paragraph
6D. All leases necessary in any material respect for the conduct of the
respective businesses of the Company and its Restricted Subsidiaries are valid
and subsisting and are in full force and effect.
8F. Taxes. The Company has and each of its Restricted
Subsidiaries has filed all federal, state and other income tax returns which, to
the best knowledge of the officers of the Company and its Restricted
Subsidiaries, are required to be filed, and each has paid all taxes as shown on
such returns and on all assessments received by it to the extent that such taxes
have become due, except such taxes as are being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with generally accepted accounting principles, and the Company has no
knowledge of any basis for any further material assessment to the Company and
its Restricted Subsidiaries taken as a whole that has not been adequately so
provided for on the books of the Company.
8G. Conflicting Agreements and Other Matters. Neither the
Company nor any of its Restricted Subsidiaries is a party to any contract or
agreement or subject to any charter or other corporate restriction which
materially and adversely affects the business, property or assets, conditions
(financial or otherwise) or operations of the Company and its Subsidiaries taken
as a whole. Neither the execution nor delivery of this Agreement or the Notes,
nor the offering, issuance and sale of the Notes hereunder, nor fulfillment of
nor compliance with the terms and provisions hereof and thereof will conflict
with, or result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of the Company or any
of its Restricted Subsidiaries pursuant to, the charter or by-laws of the
Company or any of its Restricted Subsidiaries, as the case may be, any agreement
(including any agreement with shareholders), instrument, order, judgment, decree
or arbitrator's award, or any statute, law, rule or regulation, to which the
Company or any of its Restricted Subsidiaries or their respective properties is
subject. The Company is not a party to, or otherwise subject to, any contract or
agreement (including its charter) which limits the amounts of, or otherwise
imposes restrictions on the incurring of, indebtedness of the type to be
evidenced by the Notes except as set forth in the agreements listed in Schedule
8G, and the Company has received all consents necessary with respect to such
agreements in connection with the consummation of the transactions contemplated
hereby.
8H. Offering of Notes and Facility Guarantee. Neither the
Company, the Guarantors nor any agent acting on its behalf has, directly or
indirectly, offered the Notes, the Facility Guarantee or any similar security of
the Company or the Guarantors for sale to, or solicited any offers to buy the
Notes, the Facility Guarantee or any similar security of the
27
Company or the Guarantors from, or otherwise approached or
negotiated with respect thereto with, any Person other than Prudential and not
more than 10 other "qualified institutional buyers" as such term is defined in
Rule 144A under the Securities Act, and neither the Company, the Guarantors nor
any agent acting on their behalf has taken or will take any action which would
subject the issuance or sale of the Notes or the Facility Guarantee hereunder to
the provisions of section 5 of the Securities Act or to the registration
provisions of any securities or Blue Sky law of any applicable jurisdiction.
8I. Use of Proceeds. The proceeds of the Series A Notes and the
Facility Guarantee will be used to refinance Debt and for general corporate
purposes. Neither the Company nor any Subsidiary owns or has any present
intention of acquiring any "margin stock" as defined in Regulation U (12 CFR
Part 221) of the Board of Governors of the Federal Reserve System (herein called
"margin stock"), exceeding in value 5% of Consolidated Net Worth. None of the
proceeds of the issuance of any Notes will be used, directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any margin stock, or for the purpose of maintaining, reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
stock that is currently a margin stock and in any such case which will
constitute this transaction a violation of such Regulation U. Neither the
Company nor any agent acting on its behalf has taken or will take any action
which might cause this Agreement or the Notes to violate Regulation T,
Regulation U, Regulation X or any other regulation of the Board of Governors of
the Federal Reserve System or to violate Section 7 of the Exchange Act, in each
case as in effect now or as the same may hereafter be in effect.
8J. ERISA. No accumulated funding deficiency (as defined in
section 302 of ERISA and section 412 of the Code), whether or not waived, exists
with respect to any Plan (other than a Multiemployer Plan). No liability to the
PBGC has been or is expected by the Company or any ERISA Affiliate to be
incurred with respect to any Plan (other than a Multiemployer Plan) by the
Company, any Subsidiary or any ERISA Affiliate which is or would be materially
adverse to the business, financial condition or operations of the Company and
its Restricted Subsidiaries, taken as a whole. Neither the Company, nor any
Subsidiary nor any ERISA Affiliate has incurred or presently expects to incur
any withdrawal liability under Title IV of ERISA with respect to any
Multiemployer Plan which is or would be materially adverse to the business,
financial condition or operations of the Company and its Restricted
Subsidiaries, taken as a whole. Neither the Company, any Subsidiary nor any
ERISA Affiliate has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan which
is or would be materially adverse to the business, property or assets, condition
(financial or otherwise) or operations of the Company and its Restricted
Subsidiaries taken as a whole. The execution and delivery of this Agreement and
the issuance and sale of the Notes will be exempt from or will not involve any
transaction which is subject to the prohibitions of section 406 of ERISA and
will not involve any transaction in connection with which a penalty could be
imposed under section 502(i) of ERISA or a tax could be imposed pursuant to
section 4975 of the Code. The representation by the Company in the next
preceding sentence is made in reliance upon and subject to the accuracy of the
representation of each Purchaser in paragraph 9B as to the source of funds to be
used by it to purchase any Notes.
28
8K. Governmental Consent. Neither the nature of the Company
nor of any Guarantor or Restricted Subsidiary, nor any of their respective
businesses or properties, nor any relationship between the Company, any
Guarantor or any Restricted Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Notes or the Facility Guarantee is such as to require any authorization,
consent, approval, exemption or any action by or notice to or filing with any
court or administrative or governmental body (other than routine filings after
the Closing Day for any Notes or Facility Guarantee with the Securities and
Exchange Commission and/or state Blue Sky authorities) in connection with the
execution and delivery of this Agreement, the offering, issuance, sale or
delivery of the Notes and the Facility Guarantee or fulfillment of or compliance
with the terms and provisions hereof or of the Notes or the Facility Guarantee.
8L. Environmental Compliance. The Company and its Restricted
Subsidiaries and all of their respective properties and facilities have complied
at all times and in all respects with all applicable Environmental Laws and all
administrative orders, judgments, rulings and regulations relating to protection
of the Environment, except, in any such case, where failure to comply would not
result in a material adverse effect on the business, financial condition or
operations of the Company and its Restricted Subsidiaries, taken as a whole.
8M. Disclosure. Neither this Agreement nor any other document,
certificate or written statement furnished to any Purchaser by or on behalf of
the Company in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which they
were made, not misleading. There is no fact peculiar to the Company or any of
its Restricted Subsidiaries which materially adversely affects or in the future
may (so far as the Company can now reasonably foresee) materially adversely
affect the business, financial condition or operations of the Company and its
Restricted Subsidiaries taken as a whole, and which has not been set forth in
this Agreement.
8N. Hostile Tender Offers. None of the proceeds of the sale of
any Notes or any Facility Guarantee will be used to finance a Hostile Tender
Offer.
8O. Patents and Trademarks. Except as set forth in Schedule
8O, the Company and each Restricted Subsidiary owns or possesses all the
patents, trademarks, trade names, service marks, copyrights, licenses and rights
with respect to the foregoing necessary for the present and planned future
conduct of its business, without any known conflict with the rights of others.
8P. Regulatory Status. None of the Company, any Guarantor or
any Subsidiary is (i) an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, (ii) a "holding company" or a "subsidiary company" or an "affiliate"
of a "holding company" or a "subsidiary company" of a "holding company," within
the meaning of the Public Utility Act of 1935, as amended, or (iii) a "public
utility" within the meaning of the Federal Power Act, as amended.
29
9. REPRESENTATIONS OF THE PURCHASER. Each Purchaser represents
as follows:
9A. Nature of Purchase. Such Purchaser is not acquiring the
Notes or the Facility Guarantee to be purchased by it hereunder with a view to
or for sale in connection with any distribution thereof within the meaning of
the Securities Act, provided that the disposition of the Purchaser's property
shall at all times be and remain within its control.
9B. Source of Funds. The source of funds being used by such
Purchaser to pay the purchase price of the Notes and the Facility Guarantee to
be purchased by such Purchaser hereunder constitutes assets: (i) allocated to
the "insurance company general account" of such Purchaser (as such term is
defined under Section V of the United States Department of Labor's Prohibited
Transaction Class Exemption ("PTCE") 95-60), and as of the date of the purchase
of the Notes such Purchaser satisfies all of the applicable requirements for
relief under Sections I and IV of PTCE 95-60, (ii) allocated to a separate
account maintained by such Purchaser in which no employee benefit plan, other
than employee benefit plans identified on a list which has been furnished by
such Purchaser to the Company, participates to the extent of 10% or more or
(iii) of an investment fund, the assets of which do not include assets of any
employee benefit plan within the meaning of ERISA. For the purpose of this
Paragraph 9B, the terms "separate account" and "employee benefit plan" shall
have the respective meanings specified in section 3 of ERISA.
10. DEFINITIONS AND ACCOUNTING MATTERS. For the purpose of
this Agreement, as used herein, the terms defined in paragraphs 10A and 10B (or
within the text of any other paragraph) shall have the respective meanings
specified therein and all accounting matters shall be subject to determination
as provided in paragraph 10C.
10A. Yield-Maintenance Terms.
"Called Principal" shall mean, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to paragraph 4C or is
declared to be immediately due and payable pursuant to paragraph 7A, as the
context requires.
"Discounted Value" shall mean, with respect to the Called
Principal of any Note, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a discount
factor (as converted to reflect the periodic basis on which interest on such
Note is payable, if interest is payable on other than a semi-annual basis) equal
to the Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" shall mean, with respect to the Called
Principal of any Note, the yield to maturity implied by (i) the yields reported,
as of 10:00 A.M. (New York City time) on the Business Day preceding the
Settlement Date with respect to such Called Principal, on the display designated
as "Page 678" on Bridge Telerate (or such other display as may replace Page 678
on Bridge Telerate) for actively traded U.S. Treasury securities having a
maturity equal
30
to the Remaining Average Life of such Called Principal as of
such Settlement Date, or (ii) if such yields shall not be reported as of such
time or the yields reported as of such time shall not be ascertainable, the
Treasury Constant Maturity Series yields reported, for the latest day for which
such yields shall have been so reported as of the Business Day preceding the
Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date. Such
implied yield shall be determined, if necessary, by (a) converting U.S. Treasury
xxxx quotations to bond-equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between yields reported for various
maturities. The Reinvestment Yield will be rounded to that number of decimal
places as appears in the Notes.
"Remaining Average Life" shall mean, with respect to the
Called Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the
sum of the products obtained by multiplying (a) each Remaining Scheduled Payment
of such Called Principal (but not of interest thereon) by (b) the number of
years (calculated to the nearest one-twelfth year) which will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" shall mean, with respect to the
Called Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"Settlement Date" shall mean, with respect to the Called
Principal of any Note, the date on which such Called Principal is to be prepaid
pursuant to paragraph 4C or is declared to be immediately due and payable
pursuant to paragraph 7A, as the context requires.
"Yield-Maintenance Amount" shall mean, with respect to any
Note, a premium equal to the excess, if any, of the Discounted Value of the
Called Principal of such Note over the sum of (i) such Called Principal plus
(ii) interest accrued thereon as of (including interest due on) the Settlement
Date with respect to such Called Principal. The Yield-Maintenance Amount shall
in no event be less than zero.
10B. Other Defined Terms.
"Acceptance" shall have the meaning specified in paragraph
2B(6).
"Acceptance Day" shall have the meaning specified in paragraph
2B(6).
"Acceptance Window" shall have the meaning specified in
paragraph 2B(6).
"Accepted Note" shall have the meaning specified in paragraph
2B(6).
"Affiliate" shall mean any Person (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, the Company,
31
(ii) which beneficially owns or holds five percent (5%) or
more of any class of the Voting Stock of the Company or (iii) five percent (5%)
or more of the Voting Stock (or in the case of a person which is not a
corporation, five percent (5%) or more of the voting equity interest) or five
percent (5%) of the ownership interests (other than limited partnership
interests) of which is beneficially owned or held by the Company and/or one or
more Subsidiaries. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Authorized Officer" shall mean (i) in the case of the
Company, its president, its chief executive officer, its chief financial
officer, any vice president of the Company designated as an "Authorized Officer"
of the Company in the Information Schedule attached hereto or any vice president
of the Company designated as an "Authorized Officer" of the Company for the
purpose of this Agreement in an Officer's Certificate executed by the Company's
chief executive officer or chief financial officer and delivered to Prudential,
and (ii) in the case of Prudential, any officer of Prudential designated as its
"Authorized Officer" in the Information Schedule or any officer of Prudential
designated as its "Authorized Officer" for the purpose of this Agreement in a
certificate executed by one of its Authorized Officers. Any action taken under
this Agreement on behalf of the Company by any individual who on or after the
date of this Agreement shall have been an Authorized Officer of the Company and
whom Prudential in good faith believes to be an Authorized Officer of the
Company at the time of such action shall be binding on the Company even though
such individual shall have ceased to be an Authorized Officer of the Company,
and any action taken under this Agreement on behalf of Prudential by any
individual who on or after the date of this Agreement shall have been an
Authorized Officer of Prudential and whom the Company in good faith believes to
be an Authorized Officer of Prudential at the time of such action shall be
binding on Prudential even though such individual shall have ceased to be an
Authorized Officer of Prudential.
"Available Facility Amount" shall have the meaning specified
in paragraph 2B(1).
"Bank Agreement" shall mean that certain Credit Agreement,
dated on or around August 31, 2001, among the Company and K&M, on the one hand,
and Fleet National Bank and Citizens Bank of Massachusetts, as lenders, on the
other hand.
"Bankruptcy Law" shall have the meaning specified in clause
(viii) of paragraph 7A.
"Business Day" shall mean any day other than (i) a Saturday or
a Sunday, (ii) a day on which commercial banks in New York City are required or
authorized to be closed, and (iii) for purposes of paragraph 2B(3) only, a day
on which Prudential is not open for business.
"Cancellation Date" shall have the meaning specified in
paragraph 2B(9)(iv).
"Cancellation Fee" shall have the meaning specified in
paragraph 2B(9)(iv).
"Capitalized Lease" shall mean any lease under which the
obligation to make
32
rental payments thereunder constitutes a Capitalized Lease Obligation.
"Capitalized Lease Obligation" shall mean any rental
obligation which, under generally accepted accounting principles, would be
required to be capitalized on the books of the Company or any Restricted
Subsidiary, in each case taken at the amount thereof accounted for as
indebtedness (net of interest expense) in accordance with such principles.
"Closing Day" shall mean, with respect to the Series A Notes,
the Series A Closing Day and, with respect to any Accepted Note, the Business
Day specified for the closing of the purchase and sale of such Accepted Note in
the Request for Purchase of such Accepted Note, provided, that (i) if the
Company and the Purchaser which is obligated to purchase such Accepted Note
agree on an earlier Business Day for such closing, the "Closing Day" for such
Accepted Note shall be such earlier Business Day, and (ii) if the closing of the
purchase and sale of such Accepted Note is rescheduled pursuant to paragraph
2B(8), the Closing Day for such Accepted Note, for all purposes of this
Agreement except references to "original Closing Day" in paragraph 2B(9)(iii),
shall mean the Rescheduled Closing Day with respect to such Accepted Note.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the regulations and rulings promulgated thereunder.
"Code Affiliate" shall mean each Person which together with
the Company or any of its Subsidiaries is treated as a "single employer" under
subsection (b), (c), (m) or (o) of section 414 of the Code.
"Confirmation of Acceptance" shall have the meaning specified
in paragraph 2B(6).
"Congoleum" shall mean Congoleum Corporation, a subsidiary of
the Company, or and any of its direct or indirect Subsidiaries.
"Consolidated Adjusted EBITDA" shall mean, with reference to
any period, Consolidated EBITDA for such period, minus (a) unfunded capital
expenditures of $4,500,000 for each year, minus (b) cash income taxes paid by
the Company and its Restricted Subsidiaries during such period, minus (c)
dividends paid and the aggregate purchase price of shares purchased by the
Company during such period (to the extent paid or purchased after the Closing
Date).
"Consolidated EBITDA" shall mean, with reference to any
period, Consolidated Net Income, plus (a) Consolidated Interest Expense for such
period, plus (b) taxes imposed on or measured by income or excess profits for
such period, plus (c) the depreciation expense of the Company and its Restricted
Subsidiaries for such period determined in accordance with generally accepted
accounting principles, on a consolidated basis, plus (d) the amortization
expense of the Company and its Restricted Subsidiaries for such period
determined in accordance with generally accepted principles, on a consolidated
basis.
"Consolidated Fixed Charges" shall mean, with reference to any
period,
33
Consolidated Interest Expense plus scheduled principal repayments of the
Company and its Restricted Subsidiaries on a consolidated basis on Debt
obligations existing after the Closing Date.
"Consolidated Interest Expense" shall mean, with reference to
any period, the aggregate amount of interest expense of the Company and its
Restricted Subsidiaries on a consolidated basis.
"Consolidated Net Income" shall mean, for any period, net
income (or deficit) of the Company and its Restricted Subsidiaries for such
period determined in accordance with generally accepted principles, on a
consolidated basis, excluding
(a) extraordinary gains (net of any extraordinary losses up to
the amount of any extraordinary gains),
(b) net income of any Person (other than a Restricted
Subsidiary) in which the Company or a Restricted Subsidiary has an
ownership interest unless those net earnings have actually been
received in the form of cash for distributions,
(c) any portion of the net income of any Restricted Subsidiary
which for any reason is unavailable to pay dividends to the Company or
any other Restricted Subsidiary,
(d) any aggregate net gain (in excess of any net losses)
arising from the sale, exchange or other disposition of capital assets
(such term to include all fixed assets, whether tangible or intangible,
all inventory sold in conjunction with the disposition of fixed assets,
and all securities),
(e) any write-up of any asset,
(f) any gain arising from the acquisition of any securities of
the Company or its Restricted Subsidiaries,
(g) net income or gain (but not any loss) resulting from a
change in accounting, discontinuing or disposing of operations, an
extraordinary event or prior period adjustments, and
(h) the income (or loss) of any Person accrued prior to the
date it becomes a Restricted Subsidiary.
For the avoidance of doubt, "Consolidated Net Income" shall not include any
operating loss of Congoleum.
"Consolidated Net Income Available for Tangible Net Worth"
shall mean, with reference to any period, Consolidated Net Income for all
quarterly fiscal periods of the Company and its Restricted Subsidiaries
occurring during such period (taken as a cumulative whole), determined in
accordance with generally accepted accounting principles, without
34
deducting or offsetting therefrom any deficit or net loss occurring during any
quarterly fiscal period of the Company and its Restricted Subsidiaries that is
within such period.
"Consolidated Net Worth" as of any date shall mean
shareholders' equity of the Company and its Restricted Subsidiaries as computed
as of that date in accordance with generally accepted accounting principles.
"Consolidated Tangible Gross Worth" shall mean the sum of
Consolidated Tangible Net Worth plus Debt of the Company and its Restricted
Subsidiaries.
"Consolidated Tangible Net Worth" shall mean the aggregate
amount of (a) capital stock (less any treasury stock, capital stock subscribed
and unissued and other contra-equity accounts), (b) surplus, (c) foreign
currency translation adjustments, and (d) retained earnings of the Company and
its Restricted Subsidiaries, determined on a consolidated basis in accordance
with generally accepted accounting principles, excluding (i) any inter-company
transactions, (ii) intangibles, (iii) any increase in the value of the Company's
Investments in Congoleum as reflected on the Company's balance sheet as of
December 31, 2000 and (iv) the cumulative amount of any net write-up of asset
values after the audit immediately preceding the Closing Date.
"Current Assets" shall mean the aggregate amount carried as
current assets on the books of the Company and its Restricted Subsidiaries, on a
consolidated basis and after eliminating all inter-company items, in accordance
with generally accepted accounting principles.
"Current Liabilities" shall mean the aggregate amount carried
as current liabilities on the books of the Company and its Restricted
Subsidiaries, on a consolidated basis and after eliminating all inter-company
items, in accordance with generally accepted accounting principles, minus (to
the extent included in determining the amount of such "Current Liabilities") the
amount of any Debt outstanding under the Bank Agreement.
"Debt" shall mean, with respect to any Person, (i) all
Indebtedness for borrowed money, (ii) Capitalized Leases, (iii) letters of
credit, and (iv) all Guarantees of the foregoing.
"Delayed Delivery Fee" shall have the meaning specified in
paragraph 2B(9)(iii).
"Environment" shall mean soil, surface waters, ground waters,
land stream sediments, surface or subsurface strata, and ambient air.
"Environmental Law" shall mean any law, regulation, rule or
ordinance at the federal, state or local level related to pollution, protection
of the environment or worker health and safety, whether or not previously
enforced, and, for purposes of complying in the future with such laws,
regulations, rules or ordinances, those that are subsequently enacted.
"Environmental Permits" shall mean all permits, licenses and
other authorizations required under any applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as
35
amended.
"ERISA Affiliate" shall mean any corporation which is a member
of the same controlled group of corporations as the Company within the meaning
of section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
"ERISA Lien" shall mean a Lien created or otherwise imposed
under the provisions of ERISA.
"Event of Default" shall mean any of the events specified in
paragraph 7A, provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "Default" shall mean
any of such events, whether or not any such requirement has been satisfied.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Facility" shall have the meaning specified in paragraph
2B(1).
"Facility Fee" shall have the meaning specified in paragraph
2B(9)(i).
"Facility Guarantee" shall have the meaning specified in
paragraph11A.
"Guarantee" shall mean, with respect to any Person, any direct
or indirect liability, contingent or otherwise, of such Person with respect to
any indebtedness, lease, dividend or other obligation of another, including,
without limitation, any such obligation directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business) or discounted or sold with recourse by such Person, or in respect of
which such Person is otherwise directly or indirectly liable, including without
limitation, any such obligation in effect guaranteed by such Person through any
agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire
such obligation or any security therefore, or to provide funds for the payment
or discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the solvency or
any balance sheet or other financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies or for
any transportation or service, regardless of the non-delivery or non-furnishing
thereof, in any such case if the purpose or intent of such agreement is to
provide assurance that such obligation will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligations will be protected against loss in respect thereof. The amount of any
Guarantee shall be equal to the outstanding principal amount of the obligation
guaranteed or such lesser amount to which the maximum exposure of the guarantor
shall have been specifically limited.
"Guaranteed Facility Obligations" shall have the meaning
specified in paragraph 11A.
36
"Guarantor" shall mean K&M and each other Subsidiary that
becomes a Guarantor pursuant to paragraph 5L. "Guarantors" means all the
foregoing Persons, collectively.
"Guarantor Joinder Agreement" shall mean a Guarantor Joinder
Agreement, in the form of Exhibit E hereto, to be executed by newly added
Guarantors pursuant to paragraph 5L.
"Hedge Treasury Note(s)" shall mean, with respect to any
Accepted Note, the United States Treasury Note or Notes whose duration (as
determined by Prudential) most closely matches the duration of such Accepted
Note.
"Hedging Agreement" means any derivative or similar agreement
or arrangement, including any interest rate protection agreement, foreign
currency exchange agreement, commodity price protection agreement or other
interest or currency exchange rate or commodity pricing hedging agreement.
"Hostile Tender Offer" shall mean, with respect to the use of
proceeds of any Note, any offer to purchase, or any purchase of, shares of
capital stock of any corporation or equity interests in any other entity, or
securities convertible into or representing the beneficial ownership of, or
rights to acquire, any such shares or equity interests, if such shares, equity
interests, securities or rights are of a class which is publicly traded on any
securities exchange or in any over-the-counter market, other than purchases of
such shares, equity interests, securities or rights representing less than 5% of
the equity interests or beneficial ownership of such corporation or other entity
for portfolio investment purposes, and such offer or purchase has not been duly
approved by the board of directors of such corporation or the equivalent
governing body of such other entity prior to the date on which the Company makes
the Request for Purchase of such Note.
"including" shall mean, unless the context clearly requires
otherwise, "including without limitation".
"Indebtedness" shall mean, with respect to any Person, with
duplication, (i) all items (excluding items of contingency reserves or of
reserves for deferred income taxes) which in accordance with generally accepted
accounting principles would be included in determining total liabilities as
shown on the liability side of a balance sheet of such Person as of the date on
which Indebtedness is to be determined, (ii) all indebtedness secured by any
Lien on any property or asset owned or held by such Person subject thereto,
whether or not the indebtedness secured thereby shall have been assumed, and
(iii) all indebtedness of others with respect to which such Person has become
liable by way of Guarantee.
"Investments" shall mean any loans or advances to, or
purchases or acquisitions of the securities or obligations of, any Person or the
assumption of any liability of another Person which, in each case, did not arise
from sales to such Person in the ordinary course of business.
"IRS" shall mean the Internal Revenue Service and any
successor governmental agency.
37
"Issuance Fee" shall have the meaning specified in paragraph
2B(9)(ii).
"Issuance Period" shall have the meaning specified in
paragraph 2B(2).
"K&M" shall mean K&M Associates, L.P., a Rhode Island limited
partnership.
"Leverage Fee" shall have the meaning specified in paragraph
2B(9)(v).
"Leverage Ratio" shall mean the ratio of Debt of the Company
and its Restricted Subsidiaries to Consolidated EBITDA.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or otherwise) or charge of any (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction) or any other type of preferential arrangement for the purpose,
or having the effect, of protecting a creditor against loss or securing the
payment or performance of an obligation.
"Multiemployer Plan" shall mean any Plan which is a
"multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA).
"Notes" shall have the meaning specified in paragraph 1B.
"Officer's Certificate" shall mean a certificate signed in
the name of the Company by an Authorized Officer of the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any successor corporation or governmental agency.
"Person" shall mean and include an individual, a partnership,
a joint venture, a corporation, limited liability company, a trust, an
unincorporated organization and a government or any department or agency
thereof.
"Plan" shall mean any "employee pension benefit plan" (as such
term is defined in section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any ERISA Affiliate.
"Priority Debt" shall mean (i) Debt of any Restricted
Subsidiary that is not a Guarantor hereunder (other than Debt owed to the
Company or a wholly-owned Restricted Subsidiary), plus (ii) (without
duplication) all Debt secured by Liens permitted under paragraph 6D, and, in
each case, otherwise permitted by paragraph 6A.
"Property" shall mean and include all interests in property
and assets, whether tangible or intangible and whether real, personal or mixed.
"Prudential" shall mean The Prudential Insurance Company of
America.
38
"Prudential Affiliate" shall mean (i) any Person which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, Prudential, or (ii) any
investment fund, account or other vehicle for which Prudential (or any
Prudential Affiliate) acts as investment advisor or portfolio manager. As used
in the preceding clause (i), the term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Purchasers" shall mean, with respect to the Series A Notes,
Prudential and, with respect to any Accepted Notes, Prudential and/or the
Prudential Affiliate(s) which are purchasing such Accepted Notes.
"Receivables" shall mean any accounts, contract rights and
other forms of obligations for the payment of money arising from the sale of
goods or the rendering of services by the Company or any of its Restricted
Subsidiaries, including those outstanding under any off balance sheet factoring
agreement or asset securitization program of the Company or any of its
Restricted Subsidiaries.
"Request for Purchase" shall have the meaning specified in
paragraph 2B(4).
"Required Holder(s)" shall mean at any particular time the
holder or holders of at least 51% of the aggregate principal amount of the Notes
or of a Series of Notes, as the context may require, from time to time
outstanding.
"Rescheduled Closing Day" shall have the meaning specified in
paragraph 2B(8).
"Responsible Officer" shall mean the president, chief
executive officer, chief operating officer, chief financial officer or chief
accounting officer of the Company, corporate counsel of the Company or any other
officer of the Company involved principally in its financial administration or
its controllership function.
"Restricted Payments" shall mean (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of the Company now or hereafter outstanding, except a dividend payable solely in
shares of stock of the Company, and (ii) any redemption, retirement, purchase or
other acquisition, direct or indirect, of any shares of any class of stock of
the Company now or hereafter outstanding, or of any warrants, rights or options
to acquire any such shares, except to the extent that the consideration therefor
consists solely of shares of stock of the Company.
"Restricted Subsidiary" shall mean (a) K&M and (b) any U.S. or
Canadian Person in which all the capital stock (or other equity interest) is
owned, directly or indirectly, by the Company, provided that, at no time shall
Congoleum be considered a Restricted Subsidiary.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Series" shall have the meaning specified in paragraph 1B.
39
"Series A Closing Day" shall have the meaning specified in
paragraph 2A.
"Series A Note(s)" shall have the meaning specified in
paragraph 1A.
"Shelf Notes" shall have the meaning specified in paragraph
1B.
"Significant Holder" shall mean (x) Prudential, so long as
Prudential or any Prudential Affiliate shall hold (or be committed under this
Agreement to purchase) any Note and (y) any other holder of Notes holding by
itself or together with one or more of its affiliates Notes having an aggregate
principal amount of not less than 5% of the aggregate principal amount of the
Notes of any Series at the time outstanding.
"Subsidiary" shall mean any corporation at least 51% of the
total combined voting power of all classes of Voting Stock of which shall, at
the time as of which any determination is being made, be owned by the Company
either directly or through Subsidiaries.
"Transferee" shall mean any direct or indirect transferee of
all or any part of any Note purchased by the Purchaser under this Agreement.
"Voting Stock" shall mean, with respect to any Person, any
shares of stock of or other ownership interest in such Person whose holders are
entitled under ordinary circumstances to vote for the election of directors or
similar body of such Person (irrespective of whether at the time stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).
10C. Accounting Terms And Determinations. All references in
this agreement to "generally accepted accounting principles" shall mean
generally accepted accounting principles in effect in the United States at the
time of application thereof. Unless otherwise specified herein, all accounting
terms used herein shall be interpreted, all determinations with respect to
accounting matters hereunder shall be made, and all financial statements and
certificates and reports as to financial matters required to be furnished
hereunder shall be prepared, in accordance with generally accepted accounting
principles, applied on a basis consistent with the most recent audited
consolidated financial statements of the Company and its Subsidiaries (except as
otherwise stated therein or in the notes thereto) delivered pursuant to
paragraph 5A(ii), or, if no such statements have been so delivered, the most
recent audited financial statements referred to in paragraph 8B.
11. FACILITY GUARANTEE
11A. Guaranteed Obligations. The Guarantors party to this
Agreement, in consideration of the execution and delivery of this Agreement and
the purchase of the Notes by the Purchasers, hereby irrevocably,
unconditionally, absolutely, jointly and severally guarantee, on a continuing
basis, to each holder of Notes as and for such Guarantor's own debt, until final
and indefeasible payment in cash has been made, the due and punctual payment by
the Company of the principal of, and interest, and the Yield-Maintenance Amount
(if any) on, the Notes at any time outstanding and the due and punctual payment
of all other amounts payable, and all other
40
Debt owing, by the Company to the holders of the Notes under this Agreement and
the Notes, in each case when and as the same shall become due and payable,
whether at maturity, pursuant to mandatory or optional prepayment, by
acceleration or otherwise, all in accordance with the terms and provisions
hereof and thereof; it being the intent of the Guarantors that the obligations
guaranteed by the guaranty set forth in this paragraph 11A are referred to in
this paragraph 11 as the "Guaranteed Facility Obligations" and the guaranty
thereof set forth in this paragraph 11A is referred to in this Agreement,
together with any Guarantor Joinder Agreement, as the "Facility Xxxxxxxxx".
00X. Payments and Performance. In the event that the Company
fails to make, on or before the due date thereof, any payment to be made of any
principal amount of, or interest or Yield-Maintenance Amount on, or in respect
of, the Notes or of any other amounts due to any holder of Notes under the Notes
or this Agreement, after giving effect to any applicable grace periods or cure
provisions or waivers or amendments, each Guarantor shall cause forthwith to be
paid the moneys in respect of which such failure has occurred in accordance with
the terms and provisions of this Agreement and the Notes. In furtherance of the
foregoing, if any or all the Notes have been accelerated as provided in
Paragraph 7A (and such acceleration has not been rescinded by action of the
Required Holders), the Guaranteed Facility Obligations in respect of such Notes
shall forthwith become due and payable without notice, regardless of whether the
acceleration of such Notes shall be stayed, enjoined, delayed or deemed
ineffective. Nothing shall discharge or satisfy the obligations of the
Guarantors under the Facility Guarantee except the full, final and indefeasible
payment in cash of the Guaranteed Facility Obligations.
11C. Releases. Each of the Guarantors consent and agree that,
without any notice whatsoever to or by the Guarantors, except with respect to
any action (but not any failure to act) referred to in clauses (i), (ii) and
(iv) below (it being understood that the Guarantors shall be deemed to have
notice of any matter as to which the Company has knowledge), and without
impairing, releasing, abating, deferring, suspending, reducing, terminating or
otherwise affecting the obligations of the Guarantors hereunder, each holder of
Notes, by action or inaction, may:
(i) compromise or settle, renew or extend the period
of duration or the time for the payment, or discharge the
performance of, or may refuse to, or otherwise not, enforce,
or may, be action or inaction, release all or any one or more
parties to, any one or more of the Notes, this Agreement, or
any other guaranty or agreement or instrument related thereto
or hereto;
(ii) assign, sell or transfer, or otherwise dispose
of, any one or more of the Notes;
(iii) grant waivers, extensions, consents and other
indulgences of any kind whatsoever to the Company or any
Guarantor or any other Person liable in any manner in respect
of all or any part of the Guaranteed Facility Obligations;
41
(iv) amend, modify or supplement in any manner
whatsoever and at any time (or from time to time) any one or
more of the Notes, this Agreement, or any other guaranty or
any agreement or instrument related thereto or hereto;
(v) release or substitute any one or more of the
endorsers or guarantors of the Guaranteed Facility Obligations
whether parties hereto or not; and
(vi) sell, exchange, release, accept, surrender or
enforce rights in, or fail to obtain or perfect or to
maintain, or caused to be obtained, perfected or maintained,
the perfection of any security interest or other Lien on, by
action or inaction, any Property at any time pledged or
granted as security in respect of the Guaranteed Facility
Obligations, whether so pledged or granted by the Company,
Guarantor or any other Person.
The Guarantors hereby ratify and confirm any such action specified in this
paragraph 11C and agree that the same shall be binding upon each Guarantor. The
Guarantors hereby waive any and all defenses, counterclaims or offsets which the
Guarantors might or could have by reason thereof.
11D. Waivers. To the fullest extent permitted by law, each of
the Guarantors hereby waives:
(i) notice of acceptance of this Agreement;
(ii) notice of any purchase or acceptance of the
Notes under this Agreement, or the creation, existence or
acquisition of any of the Guaranteed Facility Obligations,
subject to any such Guarantor's right to make inquiry of each
holder of Notes to ascertain the amount of the Guaranteed
Facility Obligations at any reasonable time;
(iii) notice of the amount of the Guaranteed Facility
Obligations, subject to any Guarantor's right to make inquiry
of each holder of Notes to ascertain the amount of the
Guaranteed Facility Obligations at any reasonable time;
(iv) notice of adverse change in the financial
condition of the Company or any Guarantor or any other fact
that might increase such Company's or Guarantor's risk
hereunder;
(v) notice of presentment for payment, diligence,
demand, protest, and notice thereof as to the Notes or any
other instrument;
(vi) all other notices and demands to which the
Company or any Guarantor might otherwise be entitled (except
if such notice or demand is specifically otherwise required to
be given to the Company or any Guarantor under this
Agreement);
42
(vii) the right by statute or otherwise to require
any or each holder of Notes to institute suit against the
Company or any Guarantor or to exhaust the rights and remedies
of any or each holder of Notes against the Company or any
Guarantor, such Guarantor being bound to the payment of each
and all Guaranteed Facility Obligations, whether now existing
or hereafter accruing, as fully as if such Guaranteed Facility
Obligations were directly owing to each holder of Notes by
such Guarantor;
(viii) any defense arising by reason of any
disability or other defense (other than the defense that the
Guaranteed Facility Obligations shall have been fully, finally
and indefeasibly paid) of the Company or any Guarantor or by
reason of the cessation from any cause whatsoever of the
liability of the Company or any Guarantor in respect thereof;
(ix) any stay (except in connection with a pending
appeal), valuation, appraisal, redemption or extension law now
or at any time hereafter in force that, but for this waiver,
might be applicable to any sale of Property of the Company or
any Guarantor made under any judgment, order or decree based
on this Agreement, and the Company any each Guarantor
covenants that it will not at any time insist upon or plead,
or in any manner claim or take the benefit or advantage of any
such law;
(x) at all times prior to full, final and
indefeasible payment of the Guaranteed Facility Obligations,
any claim of any nature arising out of any right of indemnity,
contribution, reimbursement, indemnification or any similar
right or any claim of subrogation (whether such right or claim
arises under contract, common law or statutory or civil law
(including, without limitation, Xxxxxxx 000 xx xxx Xxxxxx
Xxxxxx Bankruptcy Code) arising in respect of any payment made
under this Agreement or in connection with this Agreement,
against the Company or any Guarantor (including Liens on the
Property of the Company or any Guarantor), in each case
whether or not the Company or Guarantor at any time shall be
the subject of any proceeding brought under any Bankruptcy
Law, and the Company and each Guarantor further agrees that it
will not file any claims against the Company or the estate of
the Company in the course of any such proceeding or otherwise,
and further agrees that each holder of Notes may specifically
enforce the provisions of this clause (x);
(xi) the benefit of any statute of limitations; and
(xii) the benefit of any laws that exonerate or limit
the liability of guarantors or sureties, and any defenses
provided by these laws.
11E. Marshaling. Each Guarantor hereby consents and agrees:
(i) that each holder of Notes, and each Person acting
for the benefit of one or more of the holders of Notes, shall
be under no obligation to marshal any
43
assets in favor of the Guarantors or against or in payment of
any or all of the Guaranteed Facility Obligations; and
(ii) that, to the extent that any Guarantor makes a
payment or payments to any holder of the Notes, which payment
or payments or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or
required, for any of the foregoing reasons or for any other
reason, to be repaid or paid over to a custodian, trustee,
receiver or any other party under any Bankruptcy Law, other
common or civil law, or equitable cause, then, to the extent
of such payment or repayment, the obligation or part thereof
intended to be satisfied thereby shall be revived and
continued in full force and effect as if such payment or
payments had not been made and the Guarantor shall be
primarily liable for such obligation.
11F. Immediate Liability. Each Guarantor agrees that the
liability of the Guarantors in respect of this Facility Guarantee shall be
immediate and shall not be contingent upon the exercise or enforcement by any
holder of Notes or any other Person of whatever remedies such holder of Notes or
other Person may have against the Company or any other Guarantor or the
enforcement of any Lien or realization upon any security such holder of Notes or
other Person may at any time possess.
11G. Primary Obligations. This Facility Guarantee is a primary
and original obligation of the Guarantors and is an absolute, unconditional,
continuing and irrevocable guaranty of payment and shall remain in full force
and effect without respect to any action by any holder of Notes specified in
paragraph 11C hereof or any future changes in conditions, including, without
limitation, change of law or any invalidity or irregularity with respect to the
issuance or assumption of any obligations (including, without limitation, the
Notes) of or by the Company or any other Guarantor, or with respect to the
execution and delivery of any agreement (including, without limitation, the
Notes and this Agreement) by the Company or any other Person.
11H. No Reduction or Defense. The obligations of the
Guarantors under this Agreement, and the rights of any holder of Notes to
enforce such obligations by any proceedings, whether by action at law, suit in
equity or otherwise, shall not be subject to any reduction, limitation,
impairment or termination, whether by reason of any claim of any character
whatsoever or otherwise (other than payment in full of all amounts owing
hereunder or under the Notes), including, with limitation, claims of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense (other than any defense based upon the irrevocable payment in full of
the obligations of the Company and the Guarantors under this Agreement and the
Notes), set-off, counterclaim, recoupment or termination whatsoever.
Without limiting the generality of the foregoing, the
obligations of the Guarantors shall not be discharged or impaired by:
(i) any default (including, without limitation, any
Default or Event of Default), failure or delay, willful or
otherwise, in the performance of any
44
obligations by the Company or any Guarantor, or any of their
respective Subsidiaries or Affiliates;
(ii) any proceeding of, or involving, the Company or
Guarantor, or any of their respective Subsidiaries or
Affiliates under any Bankruptcy Law, or any merger,
consolidation, reorganization, dissolution, liquidation, sale
of assets or winding up or change in corporate constitution or
corporate identity or loss of corporate identity of the
Company or Guarantor, or any other Subsidiaries or Affiliates;
(iii) any incapacity or lack of power, authority or
legal personality of, or dissolution or change in the
directors, stockholders or status of, the Company or any
Guarantor, or any of their Subsidiaries or Affiliates or any
other Person;
(iv) impossibility or illegality of performance on
the part of the Company or any Guarantor under this Agreement
or the Notes;
(v) the invalidity, irregularity or unenforceability
of the Notes, this Agreement or any documents referred to
therein or herein;
(vi) in respect of the Company or any Guarantor, or
any of their Subsidiaries or Affiliates, any change of
circumstances, whether or not foreseen or foreseeable, whether
or not imputable to the Company or any Guarantor, or any such
Subsidiary or Affiliate, or impossibility of performance
through fire, explosion, accident, labor disturbance, floods,
droughts, embargoes, wars (whether or not declared), terrorist
activities, civil commotions, acts of God or the public enemy,
delays or failure of suppliers or carriers, inability to
obtain materials or any other causes affecting performance, or
any other force majeure, whether or not beyond the control of
the Company or any Guarantor, or any of their Subsidiaries or
Affiliates and whether or not of the kind herein before
specified;
(vii) any attachment, claim, demand, charge, Lien,
order, process, encumbrance or any other happening or event or
reason, similar or dissimilar to the foregoing, or any
withholding or diminution at the source, by reason of any
taxes, assessments, expenses, indebtedness, obligations or
liabilities of any character, foreseen or unforeseen, and
whether or not valid, incurred by or against any Person,
corporation or entity, or any claims, demands, charges, Liens
or encumbrances of any nature, foreseen or unforeseen,
incurred by any Person, or against any sums payable under this
Agreement or the Notes, so that such sums would be rendered
inadequate or would be unavailable to make the payments herein
provided; or
(viii) any order, judgment, decree, ruling or
regulation (whether or not valid) of any court of any
government authority or agency thereof, or any other action,
happening, event or reason whatsoever which shall delay,
interfere with,
45
hinder or prevent, or in any way adversely affect, the
performance by the Company or any Guarantor of any of their
respective obligations under this Agreement or the Notes, as
the case may be.
11I. Subordination. In the event that, for any reason
whatsoever, the Company now or hereafter becomes indebted or obligated to any of
the other Guarantors in any manner, the Guarantors agree that the amount of such
obligation, interest thereon if any, and all other amounts due with respect
thereto, shall, at all times during the existence of a Default or an Event of
Default, be subordinate as to time of payment and in all other respects to all
the Guaranteed Facility Obligations, and the Guarantors shall not be entitled to
enforce or receive payment thereof until all sums then due and owing to the
holders of the Notes in respect of the Guaranteed Facility Obligations shall
have been fully, finally and indefeasibly paid in full in cash, except that the
Guarantors may enforce (and shall enforce, at the request of the Required
Holders, and at the Guarantors' expense) any obligations in respect of any such
obligation owing to the Guarantors from the Company so long as all proceeds in
respect of any recovery of from the such enforcement shall be held by the
Guarantors in trust for the benefit of the holders of the Notes, to be paid
thereto as promptly as reasonably possible. If any other payment, other than
pursuant to the immediately preceding sentence, shall have been made to the
Guarantors by the Company in respect of any such obligation during any time that
a Default or and Event of Default exists and there are Guaranteed Facility
Obligations outstanding, the Guarantors shall hold in trust all such payments
for the benefit of the holders of Notes, to be paid thereto as promptly as
reasonably possible.
11J. No Election. Each holder of Notes shall, individually or
collectively, have the right to seek recourse against any or all of the
Guarantors to the fullest extent provided for herein for its obligations under
this Agreement. No election to proceed in one form of action or proceeding, or
against any party, or on any obligation, shall constitute a waiver of such
holder's right to proceed in any other form of action or proceeding or against
other parties unless such holder of Notes has expressly waived such right in
writing. Specifically, but without limiting the generality of the foregoing, no
action or proceeding by or on behalf of any holder of Notes against the Company
or any other Person under any document or instrument evidencing obligations of
the Company or any such other Person to or for the benefit of such holder of
Notes shall serve to diminish the liability of the Guarantors under this
Agreement except to the extent that such holder of Notes unconditionally shall
have realized payment by such action or proceeding.
11K. Severability. Each of the rights and remedies granted
under this paragraph 11 to each holder of Notes in respect of the Notes may be
exercised by such holder without notice, or the consent of or any other action
by any other holder of the Notes.
11L. Appropriations. Until all amounts which may be or become
payable by the Company under or in connection with this Agreement or the Notes
or by the Guarantors, any holder of Notes (on its own behalf or under any
trustee or agent on its behalf) may refrain from applying or enforcing any
moneys, security or rights held or received by such holder of Notes (or any
trustee or agent on its behalf) in respect of those amounts, or apply and
enforce the same in such manner and order as it sees fit (whether against those
amounts or otherwise) and the
46
Guarantors shall not be entitled to the benefit of the same; provided, however,
that any payments received from the Company, or the Guarantors on behalf of the
Company, will be applied to amounts owing by the Company hereunder or in respect
of the Notes issued by it.
11M. Other Enforcement Rights. Each holder of Notes may
proceed to protect and enforce this Agreement by suit or suits or proceedings in
equity, at law or in bankruptcy or insolvency, and whether for the specific
performance of any covenant or agreement contained herein or in execution or aid
of any power herein granted, or for the recovery of judgment for the obligations
hereby guarantied or for the enforcement of any other proper, legal or equitable
remedy available under applicable law.
11N. Invalid Payments. To the extent that any payment is made
to any holder of Notes in respect of the Guaranteed Facility Obligations by any
Person, which payment or any part thereof is subsequently invalidated, declared
to be fraudulent or preferential, set aside or required, for any of the
foregoing reasons or for any other reason, to be repaid or paid over to a
custodian, trustee, receiver, administrative receiver, administrator or any
other party or officer under any Bankruptcy Law, or any other common or civil
law or equitable cause, then to the extent of such payment or repayment, the
obligation or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if said payment had not been made and the
Guarantors shall be primarily liable for such obligation.
11O. No Waivers or Election of Remedies; Expenses; etc. No
course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement upon any holder of Notes shall be exclusive
of any other right, power or remedy referred to herein or therein or now or
hereafter available at law, in equity, by statute or otherwise. Without limiting
the obligations of the Company under this Agreement, the Guarantors will pay to
the holder of each Note on demand all amounts specified in this Agreement and
such further amount as shall be sufficient to cover all reasonable costs and
expenses of such holder of Notes incurred in any enforcement or collection under
this Agreement, including, without limitation, reasonable attorney's fees,
expenses and disbursements.
11P. Restoration of Rights and Remedies. If any holder of
Notes shall have instituted any proceeding to enforce any right or remedy under
this Agreement or any Note held by such holder and such proceeding shall have
been discontinued or abandoned for any reason, or shall have been determined
adversely to such holder, then and in every such case each such holder of Notes,
the Company and each of the Guarantors shall, except as may be limited or
affected by any determination in such proceeding, be restored severally and
respectively to its respective former position hereunder and thereunder, and
thereafter the rights and remedies of such holder of Notes shall continue as
though no such proceeding had been instituted.
11Q. No Setoff or Counterclaim. Except as otherwise required
by law, each payment by the Guarantors shall be made without setoff or
counterclaim.
47
11R. Further Assurances. The Guarantors will cooperate with
the holders of the Notes and execute such further instruments and documents as
the Required Holders shall reasonably request to carry out, to the reasonable
satisfaction of the Required Holders, the transactions contemplated by this
Agreement, the Notes and the documents and instruments related hereto and
thereto.
11S. Survival. So long as the Guaranteed Facility Obligations
shall not have been fully and finally performed and indefeasibly paid in full in
cash, the obligations of the Guarantors under this Facility Guarantee shall
survive the transfer and payment of any Note and the payment in full of all the
Notes.
11T. Acknowledgment of Common Interests; etc. Each Guarantor
acknowledges and confirms that: it is a member of an affiliated group of
companies that includes the Company and the other Guarantors; the proceeds of
the issue and sale of Notes will be used in part to benefit the Guarantor in the
operation of its businesses; and the Company and the Guarantors are engaged in
related businesses, and the Company and each Guarantor will derive substantial
direct and indirect benefits from the issue and sale of Notes.
12. MISCELLANEOUS.
12A. Note Payments. The Company agrees that, so long as any
Purchaser shall hold any Note, it will make payments of principal of, interest
on and any Yield-Maintenance Amount payable with respect to such Note, which
comply with the terms of this Agreement, by wire transfer of immediately
available funds for credit (not later than 12:00 noon, New York City time, on
the date due) to (i) the account or accounts of such Purchaser specified in the
Purchaser Schedules attached hereto in the case of any Series A Notes, (ii) the
account or accounts of such Purchaser specified in the Confirmation of
Acceptance with respect to such Note in the case of any Shelf Notes or (iii)
such other account or accounts in the United States as such Purchaser may
designate in writing, notwithstanding any contrary provision herein or in any
Note with respect to the place of payment. Each Purchaser agrees that, before
disposing of any Note, it will make a notation thereon (or on a schedule
attached thereto) of all principal payments previously made thereon and of the
date to which interest thereon has been paid. The Company agrees to afford the
benefits of this paragraph 12A to any Transferee which shall have made the same
agreement as the Purchaser has made in this paragraph 12A.
12B. Expenses. The Company agrees, whether or not the
transactions contemplated hereby shall be consummated, to pay, and save
Prudential, each Purchaser and any Transferee harmless against liability for the
payment of, all out-of-pocket expenses arising in connection with such
transactions (other than a transaction in which a Person becomes a Transferee),
including (i) all document production and duplication charges and the fees and
expenses of any special counsel engaged by the Purchaser or such Transferee in
connection with this Agreement, the transactions contemplated hereby and any
subsequent proposed modification of, or proposed consent under, this Agreement,
whether or not such proposed modification shall be effected or proposed consent
granted (which shall be a single counsel representing all the holders of the
Notes and any local counsel retained by them, unless there shall be a conflict
in any such representation of all the holders), and (ii) the costs and expenses,
including attorneys'
48
fees, incurred by any Purchaser or such Transferee in enforcing (or
determining whether or how to enforce) any rights under this Agreement, any
Guarantor Joinder Agreement, the Notes or the Facility Guarantee or in
responding to any subpoena or other legal process or informal investigative
demand issued in connection with this Agreement or the transactions
contemplated hereby or by reason of any Purchaser's or such Transferee's
having acquired any Note, including without limitation costs and expenses
incurred in any bankruptcy case. The obligations of the Company under this
paragraph 12B shall survive the transfer of any Note or portion thereof or
interest therein by any Purchaser or any Transferee and the payment of any
Note.
12C. Consent to Amendments. This Agreement may be amended, and
the Company and the Guarantors may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, if the Company shall
obtain the written consent to such amendment, action or omission to act, of the
Required Holder(s) of the Notes of each Series except that, (i) with the written
consent of the holders of all Notes of a particular Series, and if an Event of
Default shall have occurred and be continuing, of the holders of all Notes of
all Series, at the time outstanding (and not without such written consents), the
Notes of such Series may be amended or the provisions thereof waived to change
the maturity thereof, to change or affect the principal thereof, or to change or
affect the rate or time of payment of interest on or any Yield-Maintenance
Amount payable with respect to the Notes of such Series, (ii) without the
written consent of the holder or holders of all Notes at the time outstanding,
no amendment to or waiver of the provisions of this Agreement shall change or
affect the provisions of paragraph 7A or this paragraph 12C insofar as such
provisions relate to proportions of the principal amount of the Notes of any
Series, or the rights of any individual holder of Notes, required with respect
to any declaration of Notes to be due and payable or with respect to any
consent, amendment, waiver or declaration, (iii) with the written consent of
Prudential (and not without the written consent of Prudential) the provisions of
paragraph 2B may be amended or waived (except insofar as any such amendment or
waiver would affect any rights or obligations with respect to the purchase and
sale of Notes which shall have become Accepted Notes prior to such amendment or
waiver), and (iv) with the written consent of all of the Purchasers which shall
have become obligated to purchase Accepted Notes of any Series (and not without
the written consent of all such Purchasers), any of the provisions of paragraphs
2B and 3 may be amended or waived insofar as such amendment or waiver would
affect only rights or obligations with respect to the purchase and sale of the
Accepted Notes of such Series or the terms and provisions of such Accepted
Notes. Each holder of any Note at the time or thereafter outstanding shall be
bound by any consent authorized by this paragraph 12C, whether or not such Note
shall have been marked to indicate such consent, but any Notes issued thereafter
may bear a notation referring to any such consent. No course of dealing between
the Company and the holder of any Note nor any delay in exercising any rights
hereunder or under any Note shall operate as a waiver of any rights of any
holder of such Note. As used herein and in the Notes, the term "this Agreement"
and references thereto shall mean this Agreement as it may from time to time be
amended or supplemented. No course of dealing between the Company and the holder
of any Note nor any delay in exercising any rights hereunder or under any Note
shall operate as a waiver of any rights of any holder of such Note. As used
herein and in the Notes, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.
49
12D. Form, Registration, Transfer and Exchange of Notes; Lost
Notes. The Notes are issuable as registered notes without coupons in
denominations of at least $1,000,000 and otherwise in integral multiples of
$1,000,000. The Company shall keep at its principal office a register in which
the Company shall provide for the registration of Notes and of transfers of
Notes. Upon surrender for registration of transfer of any Note at the principal
office of the Company, the Company shall, at its expense, execute and deliver
one or more new Notes of like tenor and of a like aggregate principal amount,
registered in the name of such Transferee or Transferees. At the option of the
holder of any Note, such Note may be exchanged for other Notes of like tenor and
of any authorized denominations, of a like aggregate principal amount, upon
surrender of the Note to be exchanged at the principal office of the Company.
Whenever any Notes are so surrendered for exchange, the Company shall, at its
expense, execute and deliver the Notes which the holder making the exchange is
entitled to receive. Every Note surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer duly executed, by the holder of such Note or such holder's attorney
duly authorized in writing. Any Note or Notes issued in exchange for any Note or
upon transfer thereof shall carry the rights to unpaid interest and interest to
accrue which were carried by the Note so exchanged or transferred, so that
neither gain nor loss of interest shall result from any such transfer or
exchange. Upon receipt of written notice from the holder of any Note of the
loss, theft, destruction or mutilation of such Note and, in the case of any such
loss, theft or destruction, upon receipt of such holder's unsecured indemnity
agreement, or in the case of any such mutilation upon surrender and cancellation
of such Note, the Company will make and deliver a new Note, of like tenor, in
lieu of the lost, stolen, destroyed or mutilated Note.
12E. Persons Deemed Owners; Participations. Prior to due
presentment for registration of transfer, the Company may treat the Person in
whose name any Note is registered as the owner and holder of such Note for the
purpose of receiving payment of principal of, interest on and any
Yield-Maintenance Amount payable with respect to such Note and for all other
purposes whatsoever, whether or not such Note shall be overdue, and the Company
shall not be affected by notice to the contrary. Subject to the preceding
sentence, the holder of any Note may from time to time grant participations in
such Note to any Person on such terms and conditions as may be determined by
such holder in its sole and absolute discretion, provided that any such
participation shall be in an amount of at least $1,000,000.
12F. Survival of Representations and Warranties; Entire
Agreement. All representations and warranties contained herein or made in
writing by or on behalf of the Company or any Guarantor in connection herewith
shall survive the execution and delivery of this Agreement and the Notes, the
transfer by any Purchaser of any Note or portion thereof or interest therein and
the payment of any Note, and may be relied upon by any Transferee, regardless of
any investigation made at any time by or on behalf of any Purchaser or any
Transferee. Subject to the preceding sentence, this Agreement, any Guarantor
Joinder Agreement and the Notes embody the entire agreement and understanding
between the Purchasers and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
12G. Successors and Assigns. All covenants and other
agreements in this Agreement contained by or on behalf of any of the parties
hereto shall bind and inure to the
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benefit of the respective successors and assigns of the parties hereto
(including, without limitation, any Transferee) whether so expressed or not.
12H. Independence of Covenants. All covenants hereunder shall
be given independent effect so that if a particular action or condition is
prohibited by any one of such covenants, the fact that it would be permitted by
an exception to, or otherwise be in compliance within the limitations of,
another covenant shall not avoid the occurrence of a Default or Event of Default
if such action is taken or such condition exists.
12I. Notices. All written communications provided for
hereunder (other than communications provided for under paragraph 2) shall be
sent by first class mail or nationwide overnight delivery service (with charges
prepaid) and (i) if to any Purchaser, addressed as specified for such
communications in the Purchaser Schedule attached hereto (in the case of the
Series A Notes) or the Purchaser Schedule attached to the applicable
Confirmation of Acceptance (in the case of any Shelf Notes) or at such other
address as any such Purchaser shall have specified to the Company in writing,
(ii) if to any other holder of any Note, addressed to it at such address as it
shall have specified in writing to the Company or, if any such holder shall not
have so specified an address, then addressed to such holder in care of the last
holder of such Note which shall have so specified an address to the Company and
(iii) if to the Company or any Guarantor, addressed to it c/o American Biltrite
Inc., 00 Xxxxx Xxxxxx, Xxxxxxxxx Xxxxx, XX 00000, Attention: Vice
President--Finance or Treasurer, provided, however, that any such communication
to the Company may also, at the option of the Person sending such communication,
be delivered by any other means either to the Company at its address specified
above or to any Authorized Officer of the Company. Any communication pursuant to
paragraph 2 shall be made by the method specified for such communication in
paragraph 2, and shall be effective to create any rights or obligations under
this Agreement only if, in the case of a telephone communication, an Authorized
Officer of the party conveying the information and of the party receiving the
information are parties to the telephone call, and in the case of a telecopier
communication, the communication is signed by an Authorized Officer of the party
conveying the information, addressed to the attention of an Authorized Officer
of the party receiving the information, and in fact received at the telecopier
terminal the number of which is listed for the party receiving the communication
in the Information Schedule or at such other telecopier terminal as the party
receiving the information shall have specified in writing to the party sending
such information.
12J. Payments Due on Non-Business Days. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of principal
of or interest on any Note that is due on a date other than a Business Day shall
be made on the next succeeding Business Day. If the date for any payment is
extended to the next succeeding Business Day by reason of the preceding
sentence, the period of such extension shall not be included in the computation
of the interest payable on such Business Day.
12K. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
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12L. Descriptive Headings. The descriptive headings of the
several paragraphs of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.
12M. Satisfaction Requirement. If any agreement, certificate
or other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to any Purchaser or to the Required
Holder(s), the determination of such satisfaction shall be made by such
Purchaser or the Required Holder(s), as the case may be, in the sole and
exclusive judgment (exercised in good faith) of the Person or Persons making
such determination.
12N. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
12O. Severalty of Obligations. The sales of Notes to the
Purchasers are to be several sales, and the obligations of Prudential and the
Purchasers under this Agreement are several obligations. No failure by
Prudential or any Purchaser to perform its obligations under this Agreement
shall relieve any other Purchaser or the Company of any of its obligations
hereunder, and neither Prudential nor any Purchaser shall be responsible for the
obligations of, or any action taken or omitted by, any other such Person
hereunder.
12P. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument.
12Q. Binding Agreement. When this Agreement is executed and
delivered by the Company, the Guarantors and Prudential, it shall become a
binding agreement among the Company, the Guarantors and Prudential. This
Agreement shall also inure to the benefit of each Purchaser which shall have
executed and delivered a Confirmation of Acceptance, and each such Purchaser
shall be bound by this Agreement to the extent provided in such Confirmation of
Acceptance.
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If you are in agreement with the foregoing, please sign the
form of acceptance on the enclosed counterparts of this letter and return the
same to the Company, whereupon this letter shall become a binding agreement
among the Company, the Guarantor and the Purchaser.
Very truly yours,
AMERICAN BILTRITE INC.
By /s/ Xxxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President - Finance
K&M ASSOCIATES, L.P., as Guarantor
By: AIMPAR, INC., its General Partner
By /s/ Xxxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President - Finance
The foregoing Agreement is hereby
accepted as of the date first above written.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By /s/ Xxxxx X. Xxxxxx
-------------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
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