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XXXXX TICONDEROGA COMPANY
$16,500,000
12.00% Senior Subordinated Notes due 2003
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NOTE AND WARRANT
PURCHASE AGREEMENT
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Dated as of September 26, 1996
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TABLE OF CONTENTS
1. Authorization of Notes and Warrants. . . . . . . . . . . . .1
2. Sale and Purchase of Notes and Warrants. . . . . . . . . . .1
3. Closing; Fees. . . . . . . . . . . . . . . . . . . . . . . .1
3.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . .1
3.2. Transaction Fees. . . . . . . . . . . . . . . . . . . . .2
3.3. Legal Fees. . . . . . . . . . . . . . . . . . . . . . . .2
4. Conditions to Closing. . . . . . . . . . . . . . . . . . . .2
4.1. Representations and Warranties. . . . . . . . . . . . . .2
4.2. Performance; No Default . . . . . . . . . . . . . . . . .2
4.3. Compliance Certificate. . . . . . . . . . . . . . . . . .2
4.4. Opinions of Counsel . . . . . . . . . . . . . . . . . . .3
4.5. Guaranties. . . . . . . . . . . . . . . . . . . . . . . .3
4.6. Credit Agreement. . . . . . . . . . . . . . . . . . . . .3
4.7. Satisfaction of Company Obligations . . . . . . . . . . .3
4.8. Consents, Agreements. . . . . . . . . . . . . . . . . . .3
4.9. Compliance with Securities Laws . . . . . . . . . . . . .3
4.10. No Adverse U.S. Legislation, Action or
Decision, etc.. . . . . . . . . . . . . . . . . . . . . .4
4.11. No Actions Pending. . . . . . . . . . . . . . . . . . . .4
4.12. Purchase Permitted By Applicable Law, etc . . . . . . . .4
4.13. Proceedings and Documents . . . . . . . . . . . . . . . .4
4.14. Sale of Other Notes . . . . . . . . . . . . . . . . . . .4
4.15. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . .4
5. Representations and Warranties, etc. . . . . . . . . . . . .4
5.1. Organization, Standing, etc . . . . . . . . . . . . . . .4
5.2. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . .5
5.3. Qualification . . . . . . . . . . . . . . . . . . . . . .5
5.4. Business; Financial Statements. . . . . . . . . . . . . .5
5.5. Changes, etc. . . . . . . . . . . . . . . . . . . . . . .6
5.6. Tax Returns and Payments. . . . . . . . . . . . . . . . .6
5.7. Debt. . . . . . . . . . . . . . . . . . . . . . . . . . .6
5.8. Capital Stock and Related Matters . . . . . . . . . . . .6
5.9. Title to Properties; Liens. . . . . . . . . . . . . . . .7
5.10. Litigation, etc . . . . . . . . . . . . . . . . . . . . .7
5.11. Compliance with Other Instruments, etc. . . . . . . . . .7
5.12. Governmental Consent. . . . . . . . . . . . . . . . . . .8
5.13. Patents, Trademarks, Authorizations, etc. . . . . . . . .8
5.14. Offer of Notes. . . . . . . . . . . . . . . . . . . . . .8
5.15. Use of Proceeds . . . . . . . . . . . . . . . . . . . . .8
5.16. Federal Reserve Regulations . . . . . . . . . . . . . . .8
5.17. Environmental Matters . . . . . . . . . . . . . . . . . .8
5.18. Status Under Certain Federal Statutes . . . . . . . . . .9
5.19. Foreign Assets Control Regulations, etc . . . . . . . . 10
5.20. Compliance with ERISA . . . . . . . . . . . . . . . . . 10
5.21. Certain Fees. . . . . . . . . . . . . . . . . . . . . . 11
5.22. Disclosure. . . . . . . . . . . . . . . . . . . . . . . 11
6. Purchase Intent; Source of Funds . . . . . . . . . . . . . 11
6.1. Purchase Intent . . . . . . . . . . . . . . . . . . . . 11
6.2. Source of Funds . . . . . . . . . . . . . . . . . . . . 12
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7. Accounting; Financial Statements and Other
Information. . . . . . . . . . . . . . . . . . . . . . . . 12
8. Inspection; Confidentiality. . . . . . . . . . . . . . . . 15
8.1. Inspection. . . . . . . . . . . . . . . . . . . . . . . 15
8.2. Confidentiality . . . . . . . . . . . . . . . . . . . . 15
9. Prepayment of Notes. . . . . . . . . . . . . . . . . . . . 15
9.1. Required Prepayments. . . . . . . . . . . . . . . . . . 15
9.2. Optional Prepayments with Premium . . . . . . . . . . . 15
9.3. Optional Prepayment upon Public Offering. . . . . . . . 16
9.4. Contingent Prepayments Upon Change of Control . . . . . 16
9.5. Contingent Prepayment Upon Sale of Certain
Assets. . . . . . . . . . . . . . . . . . . . . . . . . 16
9.6. Notice of Optional Prepayments; Officers'
Certificate . . . . . . . . . . . . . . . . . . . . . . 17
9.7. Allocation of Partial Prepayments . . . . . . . . . . . 17
9.8. Maturity; Surrender, etc. . . . . . . . . . . . . . . . 17
9.9. Acquisition of Notes. . . . . . . . . . . . . . . . . . 17
10. Business and Financial Covenants . . . . . . . . . . . . . 17
10.1. Debt. . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.2. Liens, etc. . . . . . . . . . . . . . . . . . . . . . . 20
10.3. Investments, Guaranties, etc. . . . . . . . . . . . . . 21
10.4. Restricted Payments and Restricted Investments. . . . . 23
10.5. Minimum Net Worth . . . . . . . . . . . . . . . . . . . 24
10.6. Interest and Dividend Coverage. . . . . . . . . . . . . 24
10.7. Transactions with Affiliates. . . . . . . . . . . . . . 25
10.8. Consolidation, Merger, Sale of Assets, etc. . . . . . . 25
10.9. Subsidiary Stock and Indebtedness . . . . . . . . . . . 27
10.10. Corporate Existence, etc.; Business . . . . . . . . . . 28
10.11. Payment of Taxes and Claims . . . . . . . . . . . . . . 28
10.12. Compliance with ERISA . . . . . . . . . . . . . . . . . 28
10.13. Maintenance of Properties; Insurance. . . . . . . . . . 29
10.14. Additional Guaranties . . . . . . . . . . . . . . . . . 30
10.15. Restrictions Affecting Subsidiaries . . . . . . . . . . 30
10.16. Amendment of Credit Agreement . . . . . . . . . . . . . 31
11. Events of Default; Acceleration. . . . . . . . . . . . . . 31
12. Remedies on Default, etc.. . . . . . . . . . . . . . . . . 33
13. Subordination of Subordinated Notes. . . . . . . . . . . . 33
13.1. General. . . . . . . . . . . . . . . . . . . . . . . . . 33
13.2. Superior Debt. . . . . . . . . . . . . . . . . . . . . . 33
13.3. Default in Respect of Superior Debt. . . . . . . . . . . 34
13.4. Insolvency, etc. . . . . . . . . . . . . . . . . . . . . 34
13.5. Payments and Distributions Received. . . . . . . . . . . 35
13.6. No Prejudice or Impairment . . . . . . . . . . . . . . . 35
13.7. Payment of Superior Debt, Subrogation, etc . . . . . . . 36
14. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 36
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15. Registration, Transfer and Substitution of Notes;
Action by Noteholders. . . . . . . . . . . . . . . . . . . 45
15.1. Note Register; Ownership of Notes. . . . . . . . . . . . 45
15.2. Transfer and Exchange of Notes . . . . . . . . . . . . . 45
15.3. Replacement of Notes . . . . . . . . . . . . . . . . . . 45
15.4. Notes held by Company, etc., Deemed Not
Outstanding. . . . . . . . . . . . . . . . . . . . . . . 45
16. Payments on Notes. . . . . . . . . . . . . . . . . . . . . 45
16.1. Place of Payment . . . . . . . . . . . . . . . . . . . . 45
16.2. Home Office Payment. . . . . . . . . . . . . . . . . . . 46
17. Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . 46
18. Survival of Representations and Warranties . . . . . . . . 47
19. Amendments and Waivers . . . . . . . . . . . . . . . . . . 47
20. Notices, etc . . . . . . . . . . . . . . . . . . . . . . . 47
21. Submission to Jurisdiction . . . . . . . . . . . . . . . . 48
22. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 48
SCHEDULE A. . . . . . . . . . . . . . Delivered to Purchasers Only
SCHEDULE B. . . . . . . . . . . . . . Delivered to Purhcasers Only
SCHEDULE C. . . . . . . . . . . . . . Delivered to Purchasers Only
EXHIBIT A . . . . . . . . . . . . . . Delivered to Purchasers Only
EXHIBIT B . . . . . . . . . . . . . . . . . . . . .Form of Warrant
EXHIBIT C-1 . . . . . . . . . . . . . Delviered to Purhcasers Only
EXHIBIT C-2 . . . . . . . . . . . . . Delivered to Purchasers Only
EXHIBIT C-3 . . . . . . . . . . . . . Delivered to Purchasers Only
EXHIBIT D . . . . . . . . . . . . . . Delivered to Purchasers Only
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Xxxxx Ticonderoga Company
000 Xxxxxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxxx 00000
12.00% Senior Subordinated Notes due September 26, 2003
Warrants to Purchase Common Stock
Dated as of September 26, 1996
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A
Ladies and Gentlemen:
Xxxxx Ticonderoga Company, a Delaware corporation (the
"Company"), agrees with you as follows:
1. AUTHORIZATION OF NOTES AND WARRANTS. The Company will
authorize the issue and sale of (a) $16,500,000 aggregate principal
amount of its 12.00% Senior Subordinated Notes due September 26, 2003
(the "Notes", such term to include any such notes issued in substitution
therefor pursuant to section 15), to be substantially in the form of the
Note set out in Exhibit A, with such changes therefrom, if any, as may be
approved by you and the Company, and (b) warrants (the "Warrants", such
term to include any warrants issued in substitution therefor pursuant to
section 15) to purchase 300,000 shares of the Common Stock, par value
$1.00 per share (the "Common Stock"), of the Company at an initial
exercise price of $7.24 per share, to be substantially in the form of the
Warrant set out in Exhibit B, with such changes therefrom, if any, as may
be approved by you and the Company. Certain capitalized terms used in
this Agreement are defined in section 14; references to a "Schedule" or
an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit
attached to this Agreement.
2. SALE AND PURCHASE OF NOTES AND WARRANTS. The Company
will issue and sell to you and, subject to the terms and conditions of
this Agreement, you will purchase from the Company, at the Closing
provided for in section 3, (a) Notes in the principal amount specified
opposite your name in Schedule A and (b) Warrants for the number of
shares of Common Stock specified opposite your name in Schedule A; at the
purchase price of 100% of the principal amount of such Notes.
Contemporaneously with entering into this Agreement, the Company is
entering into separate Note Agreements (the "Other Agreements") identical
with this Agreement with the other purchasers named in Schedule A (the
"Other Purchasers"), providing for the sale to each of the Other
Purchasers, at such Closing, of Notes in the principal amount specified
opposite its name in Schedule A.
3. CLOSING; FEES. 3.1. CLOSING. The sales of the Notes
and the Warrants to be purchased by you shall take place at the offices
of Becker, Glynn, Xxxxxxx & Xxxxxx LLP, at 10:00 a.m., New York City
time, at a closing (the "Closing") on September 26, 1996 or on such other
Business Day thereafter as may be agreed upon by the Company and you. At
the Closing the Company will deliver to you (a) the Notes to be purchased
by you in the form of a single Note (or such greater number of Notes in
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denominations of at least $500,000 as shall be set forth in Schedule A
or as you may request) dated the date of the Closing and registered
in your name (or in the name of your nominee), and (b) the Warrants
to be purchased by you in the form of a single warrant certificate
(or such greater number of warrant certificates as shall be set
forth in Schedule A or as you may request) dated the date of the
Closing and registered in your name (or in the name of your nominee);
against delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor. If at the
Closing the Company shall fail to tender such Notes or such Warrants to
you as provided above in this section 3, or any of the conditions
specified in section 4 shall not have been fulfilled to your
satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any other
rights you may have by reason of such failure or such nonfulfillment.
3.2. TRANSACTION FEES. On the date of the Closing, the
Company will pay to you (or to the Person designated by you for payment
in Schedule A), in immediately available funds, a transaction fee equal
to 1.0% of the aggregate purchase price for the Notes and Warrants
purchased by you on the Closing Date, by crediting the account specified
below your name in Schedule A for the payment of transaction fees.
3.3. LEGAL FEES. On the date of the Closing, the Company
will pay the reasonable fees and disbursements of your special counsel
incurred in connection with the transactions contemplated by this
Agreement and set forth in a statement delivered to the Company on or
prior to the date of the Closing, and thereafter the Company will pay,
promptly upon receipt of a supplemental statement therefor, additional
reasonable fees and disbursements of your special counsel, if any,
incurred in connection with such transactions.
4. CONDITIONS TO CLOSING. Your obligation to purchase and
pay for the Notes and Warrants to be sold to you at the Closing is
subject to the fulfillment to your satisfaction, prior to or at the
Closing, of the following conditions:
4.1. REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company contained in this Agreement and those
otherwise made in writing by or on behalf of the Company in connection
with the transactions contemplated by this Agreement shall be correct
when made and at the time of the Closing, except as affected by the
consummation of such transactions.
4.2. PERFORMANCE; NO DEFAULT. The Company shall have
performed and complied with all agreements and conditions contained in
this Agreement required to be performed or complied with by it prior to
or at the Closing and at the time of the Closing no Event of Default or
Potential Event of Default shall have occurred and be continuing.
4.3. COMPLIANCE CERTIFICATE. The Company shall have
delivered to you an Officers' Certificate, dated the date of the Closing,
certifying that the conditions specified in sections 4.1 and 4.2 have
been fulfilled and demonstrating that, after giving effect to the
issuance of all of the Notes and Warrants, the Company will be in
compliance in all material respects with the most stringent limitations
on the incurrence or maintenance of Debt contained in any instrument or
agreement applicable to or binding on the Company or certifying that a
3
complete and correct copy of a waiver or waivers of compliance with
such limitations is attached to such Officers' Certificate.
4.4. OPINIONS OF COUNSEL. You shall have received (a) from
Johnson, Blakely, Pope, Bokor, Xxxxxx & Xxxxx, P.A., counsel for the
Company, (b) from Becker, Glynn, Xxxxxxx & Xxxxxx LLP, your special
counsel in connection with the transactions contemplated by this
Agreement, and (c) from Xxxxxxx X. Xxxxx, Esq., Executive Vice President
and Chief Legal Executive of the Company, favorable opinions sub-
stantially in the forms set forth in Exhibits C-1, C-2 and C-3,
respectively, and covering such other matters incident to such
transactions as you may reasonably request, each addressed to you, dated
the date of the Closing and otherwise satisfactory in substance and form
to you; and such opinions of counsel to the Company's Subsidiaries as you
may reasonably request, covering matters relating to the Guaranty
Agreement.
4.5. GUARANTIES. Each of the Company's Subsidiaries shall
have executed and delivered to you the Guaranty Agreement, substantially
in the form of Exhibit D, unconditionally and irrevocably guaranteeing to
you the full and prompt payment and performance of the Company's
obligations under the Notes.
4.6. CREDIT AGREEMENT. The Credit Agreement shall have been
executed and delivered by the Company, First Union Commercial
Corporation, as Agent, and the lenders named therein, and shall be
satisfactory in form and substance to you. You shall have received a
copy of the Credit Agreement, certified as a true and complete copy
thereof by an officer of the Company.
4.7. SATISFACTION OF COMPANY OBLIGATIONS. All of the
obligations of the Company shown on Schedule B as obligations that are
required or intended to be satisfied on or prior to the Closing Date
shall have been satisfied in full and all Liens securing any of such
obligations shall have been released. The Company shall have received a
payoff letter, reasonably satisfactory in form and substance to you, from
the holder of the Company's 10.59% Senior Subordinated Notes, stating
that upon the payment of the amount set forth in such letter, all of the
Company's obligations with respect to such Notes will be fully and
irrevocably discharged.
4.8. CONSENTS, AGREEMENTS. The Company shall have obtained
all consents and waivers, under any term of any agreement or instrument
to which it is a party or by which it or any of its properties is bound,
or any term of any applicable law, ordinance, rule or regulation of any
governmental authority, or any term of any applicable order, judgment or
decree of any court, arbitrator or governmental authority, necessary or
appropriate in connection with the transactions contemplated by this
Agreement, and such consents and waivers shall be in full force and
effect on the Closing Date. A complete and correct copy of each of such
consents and waivers shall have been delivered to you.
4.9. COMPLIANCE WITH SECURITIES LAWS. The offering and sale
of the Notes and Warrants to you and the Other Purchaser shall have
complied with all applicable requirements of federal and state securities
laws and you shall have received evidence thereof in form and substance
reasonably satisfactory to you.
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4.10. NO ADVERSE U.S. LEGISLATION, ACTION OR DECISION, ETC.
No legislation shall have been enacted by either house of Congress or
favorably reported by any committee thereof, no other action shall have
been taken by any governmental authority, whether by order, regulation,
rule, ruling or otherwise, and no decision shall have been rendered by
any court of competent jurisdiction, which would materially and adversely
affect the Notes or the Warrants being purchased by you hereunder.
4.11. NO ACTIONS PENDING. There shall be no suit, action,
investigation, inquiry or other proceeding by any governmental body or
any other Person or any other legal or administrative proceeding pending
or, to the Company's knowledge, threatened which questions the validity
or legality of the transactions contemplated by this Agreement or the
other Operative Agreements or which seeks damages or injunctive or other
equitable relief in connection therewith.
4.12. PURCHASE PERMITTED BY APPLICABLE LAW, ETC. On the
date of the Closing your purchase of Notes and Warrants (a) shall be
permitted by the laws and regulations of each jurisdiction to which you
are subject and (b) shall not subject you to any tax, penalty or, in your
reasonable judgment, other onerous condition by reason of any change
after the date of this Agreement in any applicable law or governmental
regulation. If requested by you, you shall have received, at least five
Business Days prior to the Closing, an Officers' Certificate certifying
as to such matters of fact as you may reasonably specify to enable you to
determine whether such purchase is so permitted.
4.13. 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 satisfactory to you and your special counsel, and you and your
special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request.
4.14. SALE OF OTHER NOTES. Contemporaneously with the
Closing the Company shall sell to the Other Purchasers the Notes and
Warrants to be purchased by them at the Closing as specified in
Schedule A.
4.15. FEES. The fees required to be paid by sections 3.2
and 3.3 shall have been paid as therein provided.
5. REPRESENTATIONS AND WARRANTIES, ETC. The Company
represents and warrants that:
5.1. ORGANIZATION, STANDING, ETC. The Company is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power
and authority to own and operate its properties, to carry on its business
as now conducted and as proposed to be conducted, to enter into this
Agreement, to issue and sell the Notes and the Warrants and to carry out
the terms of this Agreement, the Notes and the Warrants.
5
5.2. SUBSIDIARIES. Schedule C correctly lists as to each
Subsidiary on the date of this Agreement (a) its name, (b) the
jurisdiction of its incorporation and (c) the percentage of its issued
and outstanding shares owned by the Company or another Subsidiary
(specifying such other Subsidiary). Each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation and has all requisite corporate
power and authority to own and operate its properties, to carry on its
business as now conducted and as proposed to be conducted, to enter into
the Guaranty Agreement and to carry out the terms of the Guaranty
Agreement. All the outstanding shares of capital stock of each
Subsidiary are validly issued, fully paid and non-assessable, and all
such shares indicated in Schedule C as owned by the Company or by any
other Subsidiary are so owned beneficially and of record by the Company
or by such other Subsidiary free and clear of any Lien, other than Liens
permitted by subdivision (f) of section 10.2.
5.3. QUALIFICATION. Each of the Company and its
Subsidiaries is duly qualified and in good standing as a foreign
corporation authorized to do business in each jurisdiction (other than
the jurisdiction of its incorporation) in which the nature of its
activities or the character of the properties it owns or leases makes
such qualification necessary and in which the failure so to qualify would
have a materially adverse effect on the Company.
5.4. BUSINESS; FINANCIAL STATEMENTS. The Company has
delivered to you complete and correct copies of (a) its annual reports on
Form 10-K for the fiscal years ended September 30, 1993 through 1995, as
filed with the Securities and Exchange Commission (the "Forms 10-K") and
(b) the Private Placement Memorandum. The Forms 10-K and the Private
Placement Memorandum correctly describe, in all material respects, as of
their respective dates, the business then conducted and proposed to be
conducted by the Company. There are included in the Forms 10-K financial
statements of the Company for each of the fiscal years ended September
30, 1993 through 1995, accompanied in each case by the opinion thereon of
Coopers & Xxxxxxx L.L.P., independent public accountants. The Company
has also delivered to you complete and correct copies of its quarterly
reports to stockholders sent or made available to stockholders, and its
quarterly reports on Form 10-Q filed with the Securities and Exchange
Commission, in each case for fiscal periods subsequent to September 30,
1995, and current reports on Form 8-K, proxy statements, registration
statements and prospectuses, if any, filed by the Company with the
Securities and Exchange Commission since such date. All financial
statements included in the foregoing materials delivered to you (except
as otherwise specified therein) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods specified and present fairly the financial posi-
tion of the Company and its Subsidiaries as of the respective dates
specified and the results of their operations and cash flows for the
respective periods specified.
6
5.5. CHANGES, ETC. Since September 30, 1995, (a) other than
the ECRA Decision, there has been no change in the assets, liabilities or
financial condition of the Company or any of its Subsidiaries, other than
changes in the ordinary course of business which have not been, either in
any case or in the aggregate, materially adverse to the Company or any of
its Subsidiaries, (b) neither the business, operations or affairs nor any
of the properties or assets of the Company or its Subsidiaries have been
affected by any occurrence or development (whether or not insured
against) which has been, either in any case or in the aggregate,
materially adverse to the Company or any of its Subsidiaries and (c) the
Company has not as of the date of this Agreement directly or indirectly
declared, ordered, paid, made or set apart any sum or property for any
Restricted Payment or agreed to do so.
5.6. TAX RETURNS AND PAYMENTS. The Company and its
Subsidiaries have filed all tax returns required by law to be filed by
them and have paid all taxes, assessments and other governmental charges
levied upon the Company and its Subsidiaries, and any of their respective
properties, assets, income or franchises which are due and payable, other
than those presently payable without penalty or interest and those
presently being contested in good faith by appropriate proceedings
diligently conducted for which such reserves or other appropriate
provision, if any, as shall be required by generally accepted accounting
principles shall have been made. The Federal income tax liabilities of
the Company and its Subsidiaries have been finally determined by the
Internal Revenue Service and satisfied, or the time for audit has
expired, for all fiscal periods through September 30, 1992. The charges,
accruals and reserves on the books of the Company and its Subsidiaries in
respect of Federal, state and foreign income taxes for all fiscal periods
are adequate in the opinion of the Company, and the Company knows of no
unpaid assessment for additional Federal, state or foreign income taxes
for any period or any basis for any such assessment.
5.7. DEBT. Schedule B-1 correctly describes all secured and
unsecured Debt of the Company and its Subsidiaries outstanding, or for
which the Company or any of its Subsidiaries has commitments, on the date
of this Agreement, and identifies the collateral securing any secured
Debt. Schedule B-2 correctly describes all such Debt that, on the
Closing Date and after giving effect to the transactions contemplated by
this Agreement, will remain outstanding. Neither the Company nor any of
its Subsidiaries is in default with respect to any Debt or any instrument
or agreement relating thereto.
5.8. CAPITAL STOCK AND RELATED MATTERS. As of the Closing
Date, the authorized capital stock of the Company will consist of
8,000,000 shares of Common Stock and 100,000 shares of Preferred Stock,
par value $1.00 per share. On the Closing Date after giving effect to
the transactions contemplated by this Agreement and the Operative
Agreements, 3,293,778 shares of the Common Stock and no shares of such
Preferred Stock will be issued and outstanding. The shares of Common
Stock issuable upon exercise of the Warrants have been duly authorized
and validly reserved for issuance upon such exercise and, when so issued,
will be validly issued, fully paid and non-assessable. As of the Closing
Date, the Company will not have outstanding securities convertible into
or exchangeable for any shares of its capital stock, nor will it have
outstanding any rights to subscribe for or to purchase, or any options
for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
7
character relating to, any shares of its capital stock or any
securities convertible into or exchangeable for any shares of its capital
stock, other than (a) the Warrants and (b) options issued and to be
issued to certain employees of the Company and its Subsidiaries from time
to time in the manner contemplated by the Option Plan.
5.9. TITLE TO PROPERTIES; LIENS. Each of the Company and
its Subsidiaries has good and sufficient title to its properties and
assets, including the properties and assets reflected in the financial
statements referred to in section 5.4 (except properties and assets
disposed of since such date in the ordinary course of business and
properties and assets held under Capital Leases referred to in Schedule
B), and none of such properties or assets is subject to any Liens except
such as are of the character permitted by section 10.2. The Company and
its Subsidiaries enjoy peaceful and undisturbed possession under all
leases necessary in any material respect for the operation of their
respective properties and assets, and all such leases are valid and
subsisting and are in full force and effect. Except to perfect and
protect security interests of the character permitted by section 10.2, no
presently effective financing statement under the Uniform Commercial Code
which names the Company or any Subsidiary as debtor is on file in any
jurisdiction and neither the Company nor any Subsidiary has signed any
presently effective financing statement or any presently effective
security agreement authorizing any secured party thereunder to file any
such financing statement.
5.10. LITIGATION, ETC. Other than the ECRA Decision, there
is no action, proceeding or investigation pending or threatened (or any
basis therefor known to the Company) which questions the validity of this
Agreement, the Notes or the Warrants or any action taken or to be taken
pursuant to this Agreement, the Notes or the Warrants, or which might
result, either in any case or in the aggregate, in any adverse change in
the business, operations, affairs, condition (financial or otherwise),
properties or assets of the Company or any of its Subsidiaries, or in any
liability on the part of the Company or any of its Subsidiaries, which
would be material to the Company or any of its Subsidiaries.
5.11. COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Neither the
Company nor any of its Subsidiaries is in violation of any term of its
certificate or articles of incorporation or by-laws, and neither the
Company nor any of its Subsidiaries is in violation of any term of any
agreement or instrument to which it is a party or by which it is bound or
any term of any applicable law, ordinance, rule or regulation of any
governmental authority or any term of any applicable order, judgment or
decree of any court, arbitrator or governmental authority, the
consequences of which violation might have a materially adverse effect on
the business, operations, affairs, condition (financial or otherwise),
properties or assets of the Company or any of its Subsidiaries; the
execution, delivery and performance of this Agreement, the Notes and the
Warrants will not result in any violation of or be in conflict with or
constitute a default under any such term or result in the creation of (or
impose any obligation on the Company or any of its Subsidiaries to
create) any Lien upon any of the properties or assets of the Company or
any of its Subsidiaries pursuant to any such term; and there is no such
term which materially adversely affects or in the future may (so far as
the Company can now foresee) materially adversely affect the business,
operations, affairs, condition (financial or otherwise), properties or
assets of the Company or any of its Subsidiaries.
8
5.12. GOVERNMENTAL CONSENT. No consent, approval or
authorization of, or declaration or filing with, any governmental
authority on the part of the Company or any of its Subsidiaries is
required for the valid execution and delivery of this Agreement or the
valid offer, issue, sale and delivery of the Notes or the Warrants pur-
suant to this Agreement.
5.13. PATENTS, TRADEMARKS, AUTHORIZATIONS, ETC. The Company
and its Subsidiaries own or possess all patents, trademarks, service
marks, trade names, copyrights, licenses and authorizations, and all
rights with respect to the foregoing, necessary for the conduct of their
respective businesses as now conducted, without any known material
conflict with the rights of others.
5.14. OFFER OF NOTES. Neither the Company nor Alex. Xxxxx &
Sons Incorporated (the only Person authorized or employed by the Company
as financial adviser or otherwise as agent in connection with the
offering or sale of the Notes or Warrants or any similar securities of
the Company) has directly or indirectly offered the Notes or the Warrants
or any part thereof or any similar securities for sale to, or solicited
any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, anyone other than you and not more
than 30 other institutional investors. Neither the Company nor anyone
acting on its behalf has taken or will take any action which would
subject the issuance and sale of the Notes or the Warrants to the
registration and prospectus delivery provisions of the Securities Act.
5.15. USE OF PROCEEDS. The Company will apply the proceeds
of the sale of the Notes and Warrants, simultaneously with the Closing,
to (a) the repayment in full of the Company's 10.59% Senior Subordinated
Notes due 1999, in the principal amount of $7,025,000, plus a premium
thereon equal to $355,807.43, plus accrued interest, (b) the repayment of
$8,228,641.92 principal amount of the revolving credit portion of the
Debt of the Company outstanding under the Credit Agreement and (c) the
payment of fees and expenses incurred in connection with the offering and
sale of the Notes and Warrants.
5.16. FEDERAL RESERVE REGULATIONS. The Company will not,
directly or indirectly, use any of the proceeds of the sale of the Notes
and Warrants for the purpose, whether immediate, incidental or ultimate,
of buying a "margin stock" or of maintaining, reducing or retiring any
indebtedness originally incurred to purchase a stock that is currently a
"margin stock", or for any other purpose which might constitute this
transaction a "purpose credit", in each case within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System (12
C.F.R. 207, as amended) or Regulation U of such Board (12 C.F.R. 221, as
amended), or otherwise take or permit to be taken any action which would
involve a violation of such Regulation G or Regulation U or of Regulation
T (12 C.F.R. 220, as amended) or Regulation X (12 C.F.R. 224, as amended)
or any other regulation of such Board. No Debt being reduced or retired
out of the proceeds of the sale of the Notes and Warrants was incurred
for the purpose of purchasing or carrying any such "margin stock", and
neither the Company nor any of its Subsidiaries either owns or has any
present intention of acquiring any such "margin stock".
5.17. ENVIRONMENTAL MATTERS. Except as set forth in the
ECRA Decision:
9
(a) Each of the Company and its Subsidiaries has complied and
is in compliance with all Environmental Laws in all material respects.
(b) Each of the Company and its Subsidiaries has obtained
and complied with, and is in compliance with, all permits, licenses and
other authorizations that are required pursuant to Environmental Laws for
the occupation of its facilities and the operation of its business,
without transfer, reissuance, or other governmental approval or action.
(c) Neither the Company nor any of its Subsidiaries has
received any written claim, complaint, citation, report or other written
or oral notice regarding any liabilities or potential liabilities,
including any investigatory, remedial or corrective obligations, arising
under Environmental Laws.
(d) No underground storage tanks or surface impoundments or
asbestos-containing material in any form or condition exists at any
property owned or occupied by the Company or any of its Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any substance, including without
limitation any hazardous substance, or owned or operated any facility or
property, in a manner that would reasonably be expected to give rise to
liabilities of the Company or any of its Subsidiaries for response costs,
natural resource damages or attorneys' fees pursuant to CERCLA or other
Environmental Laws.
(f) No facts, events or conditions relating to the past or
present facilities, properties or operations of the Company or its
Subsidiaries will prevent, hinder or limit continued compliance with
Environmental Laws, give rise to any investigatory, remedial or
corrective obligations pursuant to Environmental Laws, or give rise to
any other liabilities pursuant to Environmental Laws, including without
limitation any relating to onsite or offsite Releases (as defined in
CERCLA) or threatened Releases of hazardous or otherwise regulated
materials, substances or wastes, personal injury, property damage or
natural resources damage.
(g) Neither the Company nor any of its Subsidiaries has,
either expressly or by operation of law, assumed or undertaken any
liability or corrective or remedial obligation of any other Person
relating to Environmental Laws.
5.18. STATUS UNDER CERTAIN FEDERAL STATUTES. The Company is
not (a) an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of
1940, as amended; (b) a "holding company" or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", as such terms are defined in
the Public Utility Holding Company Act of 1935, as amended; (c) a "public
utility" as such term is defined in the Federal Power Act, as amended; or
(d) a "rail carrier or a person controlled by or affiliated with a rail
carrier", within the meaning of Title 49, U.S.C., or a "carrier" to which
49 U.S.C. Section 11301(b)(1) is applicable.
10
5.19. FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the
issue and sale of the Notes and Warrants by the Company nor its use of
the proceeds thereof as contemplated by this Agreement will violate the
Foreign Assets Control Regulations, the Transaction Control Regulations,
the Cuban Assets Control Regulations, the Foreign Funds Control
Regulations, the Iranian Assets Control Regulations, the Iranian
Transactions Regulations, the Iraqi Sanctions Regulations, the Libyan
Sanctions Regulations, or any similar foreign assets control or export
control regulations of the United States Treasury Department (31 C.F.R.,
Subtitle B, Chapter V as amended) or the restrictions set forth in Execu-
tive Orders No. 8389, 9193, 12543 (Libya), 12544 (Libya), 12801 (Libya),
12722 (Iraq) or 12724 (Iraq), as amended, of the President of the United
States of America or of any rules or regulations issued thereunder.
5.20. COMPLIANCE WITH ERISA. (a) Neither the Company nor
any of its Subsidiaries has breached the fiduciary rules of ERISA or
engaged in any prohibited transaction in connection with which the
Company or any of its Subsidiaries could be subjected to (in the case of
any such breach) a suit for damages or (in the case of any such
prohibited transaction) either a civil penalty assessed under section
502(i) of ERISA or a tax imposed by section 4975 of the Code, which suit,
penalty or tax, in any case, would be materially adverse to the Company
or any of its Subsidiaries.
(b) No Plan (other than a Multiemployer Plan) or any trust
created under any such Plan has been terminated since September 2, 1974.
Neither the Company nor any Related Person has within the past six years
contributed to a single employer plan which has at least two contributing
sponsors not under common control or ceased operations at a facility in a
manner which could result in liability under section 4062(f) of ERISA.
No liability to the PBGC has been or is expected by the Company to be
incurred with respect to any Plan (other than a Multiemployer Plan) by
the Company or any Subsidiary which is or would be materially adverse to
the Company or such Subsidiary. There has been no reportable event
(within the meaning of section 4043(b) of ERISA) or any other event or
condition with respect to any Plan (other than a Multiemployer Plan)
which presents a risk of termination of any such Plan by the PBGC under
circumstances which in any case could result in liability which would be
materially adverse to the Company or any of its Subsidiaries.
(c) Full payment has been made of all amounts which the
Company or any Related Person is required under the terms of each Plan to
have paid as contributions to such Plan as of the last day of the most
recent fiscal year of such Plan ended prior to the date hereof, and no
accumulated funding deficiency (as defined in section 302 of ERISA and
section 412 of the Code), whether or not waived, exists with respect to
any Plan (other than a Multiemployer Plan).
(d) The present value of all vested accrued benefits under
all Plans (other than Multiemployer Plans), determined as of the end of
the Company's most recently ended fiscal year on the basis of reasonable
actuarial assumptions, did not exceed the current value of the assets of
such Plans allocable to such vested accrued benefits by more than
$1,500,000. The terms "present value", "current value", and "accrued
benefit" have the meanings specified in section 3 of ERISA.
11
(e) The Company is not and has never been obligated to
contribute to any "multiemployer plan" (as such term is defined in
section 4001(a)(3) of ERISA).
(f) The execution and delivery of this Agreement and the
issue and sale of the Notes hereunder will not involve any transaction
which is subject to the prohibitions of section 406 of ERISA or in
connection with which a tax could be imposed pursuant to section 4975 of
the Code. The representation by the Company in the preceding sentence is
made in reliance upon and subject to the accuracy of your representation
in section 6.2 of this Agreement as to the source of the funds used to
pay the purchase price of the Notes purchased by you. The Company has
delivered to you, if requested by you, a complete and correct list of all
employee benefit plans with respect to which the Company is a party in
interest and with respect to which its securities are employer
securities. As used in this section 5.20(f), the terms "employee
benefit plans" and "party in interest" have the respective meanings
specified in section 3 of ERISA and the term "employer securities" has
the meaning specified in section 407(d)(1) of ERISA.
5.21. CERTAIN FEES. Except for the fees referred to in sec-
tion 3 and except for a placement fee payable to Alex. Xxxxx & Sons
Incorporated in the amount of $577,500, no broker's or finder's fee or
commission has been paid or will be payable by the Company with respect
to the offer, issue and sale of the Notes or the Warrants, and the
Company hereby indemnifies you against, and will hold you harmless from,
any claim, demand or liability asserted against you for broker's or
finder's fees alleged to have been incurred by the Company or any other
Person (other than you or your affiliates) in connection with any such
offer, issue and sale or any of the other transactions contemplated by
this Agreement or any of the other Operative Agreements.
5.22. DISCLOSURE. Neither this Agreement, the Memorandum,
the Forms 10-K nor any other document, certificate or instrument
delivered to you by or on behalf of the Company in connection with the
transactions contemplated by this Agreement contains (in each case, as of
its date) any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in this
Agreement and in such other documents, certificates or instruments not
misleading. There is no fact (other than matters of a general economic
or political nature which do not affect the Company uniquely) known to
the Company which materially adversely affects or in the future may (so
far as the Company can now foresee) materially adversely affect the
business, operations, affairs, condition (financial or otherwise),
properties or assets of the Company which has not been set forth in this
Agreement or in the other documents, certificates and instruments
delivered to you by or on behalf of the Company specifically for use in
connection with the transactions contemplated by this Agreement.
6. PURCHASE INTENT; SOURCE OF FUNDS. 6.1. PURCHASE INTENT.
You represent that you are purchasing the Notes and Warrants hereunder
for your own account, not with a view to the distribution thereof or with
any present intention of distributing or selling any of such Notes or
Warrants except in compliance with the Securities Act and any applicable
state securities laws, provided that the disposition of your property
shall at all times be within your control.
12
6.2. SOURCE OF FUNDS. You represent that all or a portion
of the funds to be used by you to pay the purchase price of the Notes and
Warrants consists of funds which do not constitute assets of any employee
benefit plan (other than a governmental plan exempt from the coverage of
ERISA) and the remaining portion, if any, of such funds consists of funds
which may be deemed to constitute assets of one or more specific employee
benefit plans, complete and accurate information as to the identity of
each of which you have delivered to the Company. As used in this sec-
tion 6.2, the terms "employee benefit plan" and "government plan" shall
have the respective meanings assigned to such terms in section 3 of
ERISA.
7. ACCOUNTING; FINANCIAL STATEMENTS AND OTHER INFORMATION.
The Company will maintain, and will cause each of its Subsidiaries to
maintain, a system of accounting established and administered in
accordance with generally accepted accounting principles, and will
accrue, and will cause each of its Subsidiaries to accrue, all such
liabilities as shall be required by generally accepted accounting
principles. The Company will deliver (in duplicate) to you, so long as
you shall be entitled to purchase Notes under this Agreement or you or
your nominee shall be the holder of any Notes, and to each other holder
of any Notes:
(a) not later than the earlier to occur of (i) the fiftieth
day after the end of each of the first three quarterly fiscal
periods in each fiscal year of the Company and (ii) the date of the
filing thereof with the Securities and Exchange Commission, (x)
consolidated balance sheets of the Company and its Subsidiaries as
at the end of such period and the related consolidated statements
of income, stockholders' equity and cash flows of the Company and
its Subsidiaries for such period and (in the case of the second and
third quarterly periods) for the period from the beginning of the
current fiscal year to the end of such quarterly period, setting
forth in each case in comparative form the consolidated figures for
the corresponding periods of the previous fiscal year, all in
reasonable detail and certified by a principal financial officer of
the Company as presenting fairly, in accordance with generally
accepted accounting principles (except for the absence of notes
thereto) applied (except as specifically set forth therein) on a
basis consistent with such prior fiscal periods, the information
contained therein, subject to changes resulting from normal
year-end audit adjustments, and (y) such supplemental profit and
loss and balance sheet information by division and department in
such detail as the holders of the Notes may request; provided that
so long as the Company is subject to the reporting provisions of
the Exchange Act, delivery of copies of the Company's quarterly
report on Form 10-Q for such period will satisfy the requirements
of this paragraph (a);
(b) not later than the earlier to occur of (i) the 105th
day after the end of each fiscal year of the Company and (ii) the
date of the filing thereof with the Securities and Exchange
Commission, (x) consolidated balance sheets of the Company and its
Subsidiaries as at the end of such year and the related
consolidated statements of income, stockholders' equity and cash
flows of the Company and its Subsidiaries for such fiscal year,
setting forth in each case in comparative form the consolidated
figures for the previous fiscal year, all in reasonable detail, and
accompanied by a report thereon of Coopers & Xxxxxxx L.L.P or other
13
"Big Six" independent public accountants, which report shall state that
such consolidated financial statements present fairly the financial
position of the Company and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows
for the periods indicated in conformity with generally accepted
accounting principles applied on a basis consistent with prior
years (except as otherwise specified in such report) and that the
audit by such accountants in connection with such consolidated
financial statements has been made in accordance with generally
accepted auditing standards, and (y) such supplemental profit and
loss and balance sheet information by division and department in
such detail as the holders of the Notes may request; provided that
so long as the Company is subject to the reporting provisions of
the Exchange Act, delivery of copies of the Company's annual report
on Form 10-K for such period will satisfy the requirements of this
paragraph (b);
(c) together with each delivery of financial statements
pursuant to subdivisions (a) and (b) of this section 7, an
Officers' Certificate (i) stating that the signers have reviewed
the terms of this Agreement and of the Notes and have made, or
caused to be made under their supervision, a review in reasonable
detail of the transactions and condition of the Company and its
Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence
during or at the end of such accounting period, and that the
signers do not have knowledge of the existence as at the date of
the Officers' Certificate, of any condition or event which
constitutes an Event of Default or Potential Event of Default, or,
if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action the Company
has taken or is taking or proposes to take with respect thereto,
(ii) specifying the amount available at the end of such accounting
period for Restricted Payments in compliance with section 10.4 and
showing in reasonable detail all calculations required in arriving
at such amount, and (iii) demonstrating in reasonable detail
compliance during and at the end of such accounting period with the
restrictions contained in sections 10.1, 10.3, 10.4, 10.5, 10.6 and
10.9;
(d) together with each delivery of financial statements
pursuant to subdivision (b) of this section 7, a written statement
by the independent public accountants giving the report thereon (i)
stating that their audit examination has included a review of the
terms of this Agreement and of the Notes as they relate to
accounting matters and that such review is sufficient to enable
them to make the statement referred to in clause (iii) of this sub-
division (d) (it being understood that no special audit procedures,
other than those required by generally accepted auditing standards,
shall be required), (ii) stating whether, in the course of their
audit examination, they obtained knowledge (and whether, as of the
date of such written statement, they have knowledge) of the
existence of any condition or event which constitutes an Event of
Default or Potential Event of Default, and, if so, specifying the
nature and period of existence thereof, and (iii) stating that they
have examined the Officers' Certificate delivered in connection
14
therewith pursuant to subdivision (c) of this section 7 and
that the matters set forth in such Officers' Certificate pursuant
to clauses (ii) and (iii) of such subdivision (c) have been
properly stated in accordance with the terms of this Agreement;
(e) concurrently with the delivery thereof to other lenders
or security holders of Xxxxx Mexico, quarterly and annual balance
sheets of Xxxxx Mexico and the related statements of income,
stockholders' equity and (annually) cash flows of Xxxxx Mexico for
such period, all meeting substantially the same criteria as set
forth in subdivisions (a) and (b) above.
(f) promptly upon receipt thereof, copies of all final
reports submitted to the Company by independent public accountants
in connection with each annual, interim or special audit of the
books of the Company or any Subsidiary made by such accountants,
including, without limitation, the comment letter submitted by such
accountants to management in connection with their annual audit;
(g) promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent or
made available generally by the Company to its public security
holders, of all regular and periodic reports and all registration
statements and prospectuses filed by the Company or any Subsidiary
with any securities exchange or with the Securities and Exchange
Commission or any governmental authority succeeding to any of its
functions, and of all press releases and other statements made
available generally by the Company or any Subsidiary to the public
concerning material developments in the business of the Company or
its Subsidiaries;
(h) immediately upon the Company obtaining knowledge of any
condition or event which constitutes an Event of Default or
Potential Event of Default, or that the holder of any Note has
given any notice or taken any other action with respect to a
claimed Event of Default or Potential Event of Default under this
Agreement or that any Person has given any notice to the Company or
any Subsidiary or taken any other action with respect to a claimed
default or event or condition of the type referred to in section
11(f), an Officers' Certificate describing the same and the period
of existence thereof and what action the Company has taken, is
taking and proposes to take with respect thereto;
(i) immediately upon the Company obtaining knowledge of the
occurrence of any (i) "reportable event", as such term is defined
in section 4043 of ERISA, or (ii) "prohibited transaction", as such
term is defined in section 4975 of the Code, in connection with any
Plan or any trust created thereunder, a written notice specifying
the nature thereof, what action the Company has taken, is taking
and proposes to take with respect thereto, and, when known, any
action taken or threatened by the Internal Revenue Service or the
PBGC with respect thereto, provided that, with respect to the
occurrence of any "reportable event" as to which the PBGC has
waived the 30-day reporting requirement, such written notice need
be given only at the time notice is given to the PBGC; and
15
(j) with reasonable promptness, such other financial reports
and information and data with respect to the Company or any of its
Subsidiaries as from time to time may be reasonably requested.
8. INSPECTION; CONFIDENTIALITY. 8.1. INSPECTION. The
Company will permit any authorized representatives designated by you, so
long as you shall be entitled to purchase Notes under this Agreement or
you or your nominee shall be the holder of any Notes, or by any other
holder of any Notes, without expense to the Company, to visit and inspect
any of the properties of the Company or any of its Subsidiaries,
including its and their books of account, and to make copies and take
extracts therefrom, and to discuss its and their affairs, finances and
accounts with its and their officers and independent public accountants,
all at such reasonable times and as often as may be reasonably requested.
8.2. CONFIDENTIALITY. You agree that you will use your best
efforts not to disclose without the prior consent of the Company (other
than to your employees, officers, directors, advisors, auditors or
counsel or to another holder of the Notes) any information with respect
to the Company or any Subsidiary which is furnished pursuant to section 7
or this section 8 and which is designated by the Company to you in
writing as confidential, provided that you may disclose any such infor-
mation (a) as has become generally available to the public, (b) as may be
required or appropriate in any report, statement or testimony submitted
to any municipal, state or Federal regulatory body having or claiming to
have jurisdiction over you or to the National Association of Insurance
Commissioners or similar organizations or their successors, (c) as may be
required or appropriate in response to any summons or subpoena or in
connection with any litigation, (d) to the extent that you believe it
appropriate in order to protect your investment in the Notes or in order
to comply with any law, order, regulation or ruling applicable to you or
(e) to the prospective transferee in connection with any contemplated
transfer of any of the Notes by you.
9. PREPAYMENT OF NOTES. 9.1. REQUIRED PREPAYMENTS. On
each of September 26, 2001 and September 26, 2002, the Company will
prepay $5,500,000 principal amount of the Notes (or such lesser principal
amount as shall then be outstanding), at the principal amount of the
Notes so prepaid, without premium, provided that, upon any prepayment
pursuant to section 9.4 or 9.5 of the Notes held by some but not all
holders, the principal amount of each required prepayment of the Notes
becoming due under this section 9.1 on and after the date of such
prepayment under section 9.4 or 9.5, as the case may be, shall be reduced
in the same proportion as the aggregate unpaid principal amount of the
Notes is reduced as a result of such prepayment under section 9.4 or 9.5.
9.2. OPTIONAL PREPAYMENTS WITH PREMIUM. The Company may, at
its option, upon notice as provided in section 9.6, prepay at any time
all, or from time to time any part (in an amount of at least $500,000 in
the aggregate or an integral multiple of $1,000 in excess thereof) of,
the Notes at the principal amount so prepaid, plus the Make-Whole
Premium.
16
9.3. OPTIONAL PREPAYMENT UPON PUBLIC OFFERING. The Company
may, at its option, upon notice as provided in section 9.6, prepay at any
time on or prior to September 26, 1999, concurrently with or within five
days after the occurrence of any Public Offering, up to $4,950,000
principal amount (in an amount of at least $100,000 in the aggregate or
an integral multiple of $1,000 in excess thereof) of the Notes, at the
principal amount so prepaid, plus a premium equal to the lesser of (a)
the Make-Whole Premium and (b) 9.0% of the principal amount of the Notes
so prepaid, provided that no prepayment shall be made pursuant to this
section 9.2 unless, immediately after giving effect to such prepayment,
the aggregate principal amount of the Notes remaining outstanding shall
be not less than $11,550,000.
9.4. CONTINGENT PREPAYMENTS UPON CHANGE OF CONTROL. In the
event of the occurrence of a Change of Control, then the Company shall
give prompt written notice thereof to each holder of the Notes, by
registered mail (and shall confirm such notice by prompt telephonic
advice to an investment officer of each such holder), which notice shall
contain a written, irrevocable offer by the Company to prepay, on a date
specified in such notice (which date shall be not less than 30 days and
not more than 60 days after the date of such notice), the Notes held by
such holder in full (and not in part). Upon the acceptance of such offer
by such holder mailed to the Company at least 10 days prior to the date
of prepayment specified in the Company's offer, such prepayment shall be
made at the principal amount of the Notes so prepaid, plus a premium
equal to 1.0% of the principal amount of the Notes so prepaid. Any offer
by the Company to prepay the Notes pursuant to this section 9.4 shall be
accompanied by an Officers' Certificate certifying that the conditions of
this section 9.4 have been fulfilled and specifying the particulars of
such fulfillment. If the holder of any Notes shall accept such offer,
the principal amount of such Notes shall become due and payable on the
date specified in such offer. In the event that there shall have been a
partial prepayment of the Notes under this section 9.4, the Company shall
promptly give notice to the holders of the Notes, accompanied by an
Officers' Certificate setting forth the principal amount of each of the
Notes that was prepaid and specifying how each such amount was
determined, and setting forth the reduced amount of each required
prepayment thereafter becoming due with respect to the Notes under
section 9.1 and certifying that such reduction has been computed in
accordance with section 9.1.
9.5. CONTINGENT PREPAYMENT UPON SALE OF CERTAIN ASSETS. In
the event that at any time there shall be Excess Sale Proceeds of
$1,000,000 or more, then the Company shall give prompt written notice
thereof to each holder of the Notes, by registered mail (and shall
confirm such notice by prompt telephonic advice to an investment officer
of each such holder), which notice shall contain a written, irrevocable
offer by the Company to prepay, on a date specified in such notice (which
date shall be not less than 30 days and not more than 60 days after the
date of such notice), the Notes in an aggregate principal amount equal to
the amount of Excess Sale Proceeds. Upon the acceptance of such offer by
such holder mailed to the Company at least 10 days prior to the date of
prepayment specified in the Company's offer, such prepayment shall be
made at the principal amount of the Notes so prepaid, plus a premium
equal to (a) 6.0% of the principal amount of the Notes so prepaid, if the
date of prepayment shall be on or prior to September 26, 1998, and (b)
5.0% of the principal amount of the Notes so prepaid, if the date of
prepayment shall be after September 26, 1998 Any offer by the Company to
17
prepay the Notes pursuant to this section 9.5 shall be accompanied by
an Officers' Certificate certifying that the conditions of this section
9.5 have been fulfilled and specifying the particulars of such
fulfillment. If the holder of any Notes shall accept such offer,
the principal amount of such Notes to be prepaid shall become due and
payable on the date specified in such offer. In the event that there
shall have been a partial prepayment of the Notes under this section 9.5,
the Company shall promptly give notice to the holders of the Notes,
accompanied by an Officers' Certificate setting forth the principal
amount of each of the Notes that was prepaid and specifying how each such
amount was determined, and if some but not all of the Notes were prepaid,
setting forth the reduced amount of each required prepayment thereafter
becoming due with respect to the Notes under section 9.1 and certifying
that such reduction has been computed in accordance with section 9.1.
9.6. NOTICE OF OPTIONAL PREPAYMENTS; OFFICERS' CERTIFICATE.
The Company will give each holder of any Notes written notice of each
optional prepayment under section 9.2 or 9.3 not less than 30 days and
not more than 60 days prior to the date fixed for such prepayment, in
each case specifying such date, the aggregate principal amount of the
Notes to be prepaid, the principal amount of each Note held by such
holder to be prepaid, and the premium, if any, applicable to such
prepayment. Such notice shall be accompanied by an Officers' Certificate
certifying that the conditions of such section have been fulfilled and
specifying the particulars of such fulfillment.
9.7. ALLOCATION OF PARTIAL PREPAYMENTS. In the case of each
partial prepayment paid or to be prepaid (except a prepayment pursuant to
section 9.4 or 9.5 of the Notes held by some but not all holders), the
principal amount of the Notes to be prepaid shall be allocated (in
integral multiples of $1,000) among all of the Notes at the time
outstanding in proportion, as nearly as practicable, to the respective
unpaid principal amounts thereof not theretofore called for prepayment,
with adjustments, to the extent practicable, to compensate for any prior
prepayments not made exactly in such proportion.
9.8. MATURITY; SURRENDER, ETC. In the case of each
prepayment, the principal amount of each Note to be prepaid shall mature
and become due and payable on the date fixed for such prepayment,
together with interest on such principal amount accrued to such date and
the applicable premium, if any. From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
together with the interest and premium, if any, as aforesaid, interest on
such principal amount shall cease to accrue. Any Note paid or prepaid in
full shall be surrendered to the Company and canceled and shall not be
reissued, and no Note shall be issued in lieu of any prepaid principal
amount of any Note.
9.9. ACQUISITION OF NOTES. The Company will not, and will
not permit any Subsidiary or Affiliate to, purchase, redeem or otherwise
acquire any Note except upon the payment or prepayment thereof in
accordance with the terms of this Agreement and such Note.
10. BUSINESS AND FINANCIAL COVENANTS. The Company covenants
that from the date of this Agreement through the Closing and thereafter
so long as any of the Notes are outstanding:
18
10.1. DEBT. The Company will not, and will not permit any
Subsidiary to, directly or indirectly, create, incur, assume, guarantee,
or otherwise become or remain directly or indirectly liable with respect
to, any Debt, or create, issue, sell, or otherwise become or remain
directly or indirectly liable with respect to, any Disqualified Stock,
except that:
(a) the Company may become and remain liable with respect to
the Debt evidenced by the Notes;
(b) the Company and its subsidiaries may become and remain
liable with respect to Debt outstanding pursuant to the Credit
Agreement in an aggregate outstanding principal amount not to
exceed at any time of determination $48,000,000;
(c) the Company may become and remain liable with respect to
Debt incurred to refund the Debt outstanding under the Credit
Agreement (which shall not include any extension or modification of
the Credit Agreement or any restructuring of the Credit Agreement
involving the same or substantially the same parties as the parties
to the Credit Agreement on the date hereof) or any previous
refunding thereof (any such Debt being referred to as "Refunding
Debt") if (i) the principal amount of such Refunding Debt does not
exceed the principal amount of the Debt being refunded, (ii) the
Weighted Average Life to Maturity of such Refunding Debt is not
shorter than that of the Debt being refunded, and (iii) the rate or
rates of interest applicable to such Refunding Debt does not exceed
by more than 2% the interest rate or rates (including the rate of
interest payable upon the occurrence of any default or event of
default thereunder) permitted to be charged under the Credit
Agreement as in effect on the date hereof;
(d) the Company and its Subsidiaries may remain liable with
respect to Debt and Disqualified Stock outstanding on the date of
this Agreement and referred to in Schedule B;
(e) any Wholly-Owned Subsidiary may become and remain liable
with respect to Debt owing to or Disqualified Stock held by the
Company;
(f) any Person that becomes a Wholly-Owned Subsidiary may
remain liable with respect to its Debt and Disqualified Stock
outstanding on the date it becomes a Wholly-Owned Subsidiary (other
than Debt and Disqualified Stock incurred or issued in
contemplation of its becoming a Wholly-Owned Subsidiary), provided
that, on the date such Person becomes a Wholly-Owned Subsidiary and
immediately after giving effect thereto, the Company could incur
$1.00 of Debt pursuant to subdivision (k) of this section 10.1;
(g) any Wholly-Owned Subsidiary may become and remain liable
with respect to Debt or Disqualified Stock incurred or issued to
refinance any Debt or Disqualified Stock outstanding pursuant to
subdivision (d) or (f) of this section 10.1, provided that with
respect to any such Debt or Disqualified Stock incurred or issued
pursuant to this subdivision (g) (a "Refinancing Instrument")(i)
the principal amount or liquidation value of the Refinancing
Instrument shall not exceed that of the Debt or Disqualified Stock
19
being refinanced plus reasonable fees and expenses incurred
in connection with such refinancing; (ii) the Refinancing
Instrument shall have a final maturity later than that of the Debt
or Disqualified Stock being refinanced and a Weighted Average Life
to Maturity equal to or greater than that of the Debt or
Disqualified Stock being refinanced; (iii) Debt issued to refinance
Debt subordinate in right of payment to the Notes shall be
subordinate in right of payment to the Notes at least to the extent
of the Debt being refinanced; and (iv) Debt shall not be issued to
refinance Disqualified Stock;
(h) Xxxxx Mexico may become and remain liable with respect
to Debt in an aggregate principal amount outstanding not to exceed
at any time of determination $3,000,000;
(i) the Company may become and remain liable with respect to
Debt (which may be pursuant to the Credit Agreement) in addition to
that otherwise permitted by the foregoing provisions of this
section 10.1 in an aggregate principal amount outstanding not to
exceed at any time of determination $3,000,000;
(j) the Company's Subsidiaries may become and remain liable
with respect to Debt and Disqualified Stock in addition to that
otherwise permitted by the foregoing provisions of this section
10.1 in an aggregate principal amount outstanding not to exceed at
any time of determination $100,000;
(k) the Company may become and remain liable with respect to
Debt (which may be pursuant to the Credit Agreement) in addition to
that otherwise permitted by the foregoing provisions of this
section 10.1, provided that, on the date the Company becomes liable
with respect to such Debt and immediately after giving effect
thereto and to the concurrent retirement of any other Debt:
(i) the Consolidated Interest and Dividend Coverage
Ratio shall not be less than 1.85 to 1.0 (if such date occurs
on or prior to September 30, 1996), 2.0 to 1.0 (if such date
occurs after September 30, 1996 and on or prior to September
30, 1997), 2.25 to 1.0 (if such date occurs after September
30, 1997 and on or prior to September 30, 1998), and 2.50 to
1.0 (if such date occurs after September 30, 1998);
(ii) the ratio of Debt plus Disqualified Stock to
Adjusted EBIT shall not exceed 5.5 to 1.0 (if such date
occurs on or prior to September 30, 1997), 5.0 to 1.0 (if
such date occurs after September 30, 1997 and on or prior to
September 30, 1998), and 4.5 to 1.0 (if such date occurs
after September 30, 1998); and
(iii) no condition or event shall exist which
constitutes an Event of Default or Potential Event of
Default.
No Debt incurred by the Company or any Subsidiary pursuant to this
section 10.1 shall be subordinate in right of payment to any other Debt
of the Company or any Subsidiary unless such Debt is Permitted
Subordinated Debt.
20
10.2. LIENS, ETC. The Company will not, and will not permit
any Subsidiary to, directly or indirectly create, incur, assume or permit
to exist any Lien on or with respect to any property or asset (including
any document or instrument in respect of goods or accounts receivable) of
the Company or any Subsidiary, whether now owned or held or hereafter
acquired, or any income or profits therefrom, except:
(a) Liens for taxes, assessments or other governmental
charges the payment of which is not at the time required by section
10.11;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary
course of business for sums not yet due or the payment of which is
not at the time required by section 10.11;
(c) Liens (other than any Lien imposed by ERISA or the Code
in connection with a Plan) incurred or deposits made in the
ordinary course of business (i) in connection with workers'
compensation, unemployment insurance and other types of social
security, or (ii) to secure (or to obtain letters of credit that
secure) the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, performance bonds, purchase,
construction or sales contracts and other similar obligations, in
each case not incurred or made in connection with the borrowing of
money, the obtaining of advances or credit or the payment of the
deferred purchase price of property;
(d) any attachment or judgment Lien, unless the judgment it
secures shall not, within 60 days after the entry thereof, have
been discharged or execution thereof stayed pending appeal, or
shall not have been discharged within 60 days after the expiration
of any such stay;
(e) leases or subleases granted to others, easements,
rights-of-way, restrictions and other similar charges or
encumbrances, in each case incidental to, and not interfering with,
the ordinary conduct of the business of the Company or any Sub-
sidiary; and
(f) Liens incurred to secure the Debt (other than
subordinated Debt) of the Company outstanding in compliance with
section 10.1(b) or (c) or (if the Debt referred to in section
10.1(i) is incurred pursuant to the Credit Agreement) (i);
(g) Liens existing on the date of this Agreement and
securing the Debt of the Company and its Subsidiaries referred to
in Schedule B-2;
(h) any Lien created to secure all or any part of the
purchase price, or to secure Debt incurred or assumed to pay all or
any part of the purchase price, of property acquired by the Company
or a Subsidiary after the Closing Date, provided that (i) any such
Lien shall be confined solely to the item or items of property so
acquired and, if required by the terms of the instrument originally
creating such Lien, other property which is an improvement to or is
acquired for specific use in connection with such acquired property
21
or which is real property being improved by such acquired property,
(ii) the principal amount of the Debt secured by any such Lien
shall at no time exceed an amount equal to 100% of the lesser
of (A) the cost to the Company or such Subsidiary of the property
so acquired and (B) the fair market value of such property (as
determined in good faith by the Board) at the time of such
acquisition, and (iii) any such Lien shall be created within three
months after, in the case of property, its acquisition, or, in the
case of improvements, their completion;
(i) any Lien existing on property of a Person immediately
prior to its being consolidated with or merged into the Company or
a Subsidiary or its becoming a Subsidiary, or any Lien existing on
any property acquired by the Company or any Subsidiary at the time
such property is so acquired (whether or not the Debt secured
thereby shall have been assumed), provided that no such Lien shall
have been created or assumed in contemplation of such consolidation
or merger or such Person's becoming a Subsidiary or such
acquisition of property, and provided further that each such Lien
shall at all times be confined solely to the item or items of
property so acquired and, if required by the terms of the instru-
ment originally creating such Lien, other property which is an
improvement to or is acquired for specific use in connection with
such acquired property; and
(j) any Lien renewing, extending or refunding any Lien
permitted by subdivision (f), (g), (h) or (i) of this section 10.2,
provided that the principal amount of Debt secured by such Lien
immediately prior thereto is not increased or the maturity thereof
reduced and such Lien is not extended to other property, and
provided further that each such Lien shall at all times be confined
solely to the item or items of property subject to the Lien being
renewed, extended or refunded.
For the purposes of this section 10.2, any Person becoming a Subsidiary
after the date of this Agreement shall be deemed to have incurred all of
its then outstanding Liens at the time it becomes a Subsidiary, and any
Person extending, renewing or refunding any Debt secured by any Lien
shall be deemed to have incurred such Lien at the time of such extension,
renewal or refunding.
10.3. INVESTMENTS, GUARANTIES, ETC. The Company will not,
and will not permit any Subsidiary to, directly or indirectly make or own
any Investment in any Person, or create or become or be liable with
respect to any Guaranty, except:
(a) the Company and its Subsidiaries may make and own
Investments in
(i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or
issued by any agency thereof and backed by the full faith and
credit of the United States of America, in each case maturing
within one year from the date of acquisition thereof,
22
(ii) marketable direct obligations issued by any state
of the United States of America or any political subdivision
of any such state or any public instrumentality thereof
maturing within one year from the date of acquisition thereof
and having as at any date of determination the highest rating
obtainable from either Standard & Poor's Corporation or
Xxxxx'x Investors Service, Inc.,
(iii) commercial paper maturing no more than 270 days
from the date of creation thereof and having as at any date
of determination the highest rating obtainable from either
Standard & Poor's Corporation or Xxxxx'x Investors Service,
Inc.,
(iv) certificates of deposit maturing within one year
from the date of acquisition thereof issued by commercial
banks incorporated under the laws of the United States of
America or any state thereof or the District of Columbia,
each having as at any date of determination combined capital
and surplus of not less than $300,000,000 ("Permitted Banks")
or a foreign branch thereof,
(v) bankers' acceptances eligible for rediscount under
requirements of The Board of Governors of the Federal Reserve
System and accepted by Permitted Banks,
(vi) obligations of the type described in clauses (i)
through (iv) above purchased from a securities dealer
designated as a "primary dealer" by the Federal Reserve Bank
of New York or a Permitted Bank as counterparty pursuant to a
repurchase agreement obligating such counterparty to
repurchase such obligations not later than 14 days after the
purchase thereof and which provides that the obligations
which are the subject thereof are held for the benefit of the
Company and its Subsidiaries by a custodian which is a
Permitted Bank and which is not the counterparty to the
repurchase agreement in question, and
(vii) the securities of any investment company
registered under the Investment Company Act of 1940 which is
a "money market fund" within the meaning of regulations of
the Securities and Exchange Commission, or an interest in a
pooled fund maintained by a Permitted Bank having comparable
investment restrictions;
(b) the Company and its Wholly-Owned Subsidiaries may make
and own Investments in any Wholly-Owned Subsidiary or any Person
which simultaneously therewith becomes a Wholly-Owned Subsidiary,
if such Wholly-Owned Subsidiary or such Person is a corporation
organized under the laws of the United States or any state thereof
or the District of Columbia or Canada and substantially all of
whose assets are located and substantially all of whose business is
conducted within the United States and Canada;
(c) the Company may make and own Investments in Xxxxx Mexico
(subject to the limitation set forth in section 10.4(b));
23
(d) any Wholly-Owned Subsidiary may make and permit to be
outstanding loans and advances to the Company;
(e) the Company may become and remain liable with respect to
Guaranties of the obligations of Subsidiaries incurred in the
ordinary course of the business of such Subsidiaries;
(f) the Company's Subsidiaries may become and remain liable
with respect to Guaranties of the Notes set forth in the Guaranty
Agreement; and
(g) the Company and its Wholly-Owned Subsidiaries may, in
addition to the Investments and Guaranties permitted by the
foregoing subdivisions of this section 10.3, make and continue to
own Investments in, and become and remain liable with respect to
Guaranties of the obligations of, any Person (other than a Wholly-
Owned Subsidiary or any Person which would simultaneously therewith
become a Wholly-Owned Subsidiary) if the Company would be permitted
to make such Investment or Guaranty pursuant to, and within the
limitations specified in, section 10.4 (any such Investment or
Guaranty made pursuant to this subdivision (g) being referred to as
a "Restricted Investment").
Notwithstanding the foregoing, no Guaranty shall be permitted by this
section 10.3 unless either the maximum dollar amount of the obligation
being guaranteed is readily ascertainable by the terms of such obligation
or the agreement or instrument evidencing such Guaranty specifically
limits the dollar amount of the maximum exposure of the guarantor
thereunder.
10.4. RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS. (a)
The Company will not directly or indirectly declare, order, pay, make or
set apart any sum or property for any Restricted Payment, and the Company
will not and will not permit any Subsidiary to make or become obligated
to make any Restricted Investment, unless, immediately after giving
effect to any such proposed action:
(i) no condition or event shall exist which constitutes an
Event of Default or Potential Event of Default; and
(ii) the sum of (x) the aggregate amount of all sums and
property included in all Restricted Payments directly or indirectly
declared, ordered, paid, made or set apart by the Company during
the period from the Closing Date to and including the date of such
proposed action plus (y) the aggregate amount of all Restricted
Investments directly or indirectly made by the Company and its
Subsidiaries, or which they have become obligated to make, during
such period in any Person (but disregarding any Investment or
Guaranty which was a Restricted Investment when made but which on
the date of determination could have been made pursuant to one of
the subdivisions of section 10.3 other than subdivision (h)) shall
not exceed the sum of:
(x) 25% (but, in the case of a deficit, 100%) of
Consolidated Net Income for such period; plus
24
(y) the aggregate amount of the net cash proceeds
received during such period from the sale of its capital
stock (other than Disqualified Stock), and as consideration
for the issuance during such period of Debt of the Company
convertible into its capital stock (other than Disqualified
Stock), but only to the extent that any such Debt has been
converted into shares of such stock during such period,
provided that the aggregate amount of such net cash proceeds
to be taken into account for such period shall not exceed the
aggregate of the amounts expended by the Company during such
period for the redemption, retirement, purchase or other
acquisition, direct or indirect, of any shares of capital
stock of the Company or for the retirement, purchase or other
acquisition, direct or indirect, of any Permitted
Subordinated Debt;
provided that any dividend which could be paid in compliance with this
section 10.4 at the date of its declaration may continue to be paid
notwithstanding any subsequent change.
(b) The provisions of section 10.4(a) shall not, so long as
no condition or event shall exist which constitutes an Event of Default
of Potential Event of Default, prevent the acquisition by the Company for
consideration (other than in shares of its capital stock) of shares of
the capital stock of Xxxxx Mexico from Persons other than Affiliates in
an aggregate amount of not more than $3,000,000.
(c) For the purposes of this section 10.4, the amount
involved in any Restricted Payment directly or indirectly declared,
ordered, paid, made or set apart in property shall be the greater of the
fair market value of such property (as determined in good faith by the
Board) and the net book value thereof on the books of the Company
(determined in accordance with generally accepted accounting principles)
on the date such Restricted Payment is declared, ordered, paid, made or
set apart. The Company will not declare any dividend (other than a
dividend payable solely in shares of its own stock) on any shares of any
class of its stock which is payable more than 60 days after the date of
declaration thereof. The Company will not permit any Subsidiary,
directly or indirectly, to declare, order, pay or make any Restricted
Payment or to set apart any sum or property for any such purpose.
10.5. MINIMUM NET WORTH. The Company will not, as of the
end of any fiscal quarter of the Company, permit Adjusted Net Worth to be
less than the sum of $14,500,000 and 75% (but, in the case of a deficit,
100%) of Consolidated Net Income for the period from the Closing Date to
and including the date of determination.
10.6. INTEREST AND DIVIDEND COVERAGE. The Company will not
at any time permit the Consolidated Interest and Dividend Coverage Ratio
to be less than 1.70 to 1.0 (if the date of determination occurs on or
prior to September 30, 1996); 1.85 to 1.0 (if the date of determination
occurs after September 30, 1996 and on or prior to September 30, 1997);
2.25 to 1.0 (if the date of determination occurs after September 30, 1997
and on or prior to September 30, 1998); and 2.50 to 1.0 (if the date of
determination occurs after September 30, 1998).
25
10.7. TRANSACTIONS WITH AFFILIATES. The Company will not,
and will not permit any Subsidiary to, directly or indirectly, engage in
any transaction (or series of related transactions) material to the
Company or any of its Subsidiaries (including, without limitation, the
purchase, sale or exchange of assets or the rendering of any service)
with any Affiliate of the Company, except in the ordinary course of and
pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms that are no less
favorable to the Company or such Subsidiary, as the case may be, than
those which might be obtained, in the good faith judgment of the Company,
in an arm's length transaction at the time from Persons which are not
such an Affiliate. In the case of any such transaction with an Affiliate
involving aggregate consideration in excess of $500,000, the Company
shall deliver to each holder of Notes an Officer's Certificate certifying
that such transaction complies with this section 10.7; and in the case of
any such transaction with an Affiliate involving aggregate consideration
in excess of $2,000,000, (a) the Company shall deliver to each holder of
Notes a favorable opinion as to the fairness to the Company or such
Subsidiary of such transaction from a financial point of view, issued by
an investment banking or accounting firm of national standing and (b)
such transaction shall have been approved by a committee of disinterested
members of the Board.
10.8. CONSOLIDATION, MERGER, SALE OF ASSETS, ETC. The
Company will not, and will not permit any Subsidiary to, directly or
indirectly,
(a) consolidate with or merge into any other Person or
permit any other Person to consolidate with or merge into it,
except that:
(i) any Subsidiary may consolidate with or merge into
the Company or a Wholly-Owned Subsidiary if the Company or
such Wholly-Owned Subsidiary, as the case may be, shall be
the surviving corporation and if, immediately after giving
effect to such transaction, no condition or event shall exist
which constitutes an Event of Default or Potential Event of
Default;
(ii) any corporation (other than a Subsidiary) may
consolidate with or merge into the Company if the Company
shall be the surviving corporation and if, immediately after
giving effect to such transaction, (x) no condition or event
shall exist which constitutes an Event of Default or
Potential Event of Default, (y) substantially all of the
assets of the Company shall be located and substantially all
of its business shall be conducted within the United States
and Canada, and (z) the Company could incur at least $1.00 of
additional Debt in compliance with section 10.1(k); and
(iii) the Company may consolidate with or merge into
any other corporation if (x) the surviving corporation is a
corporation organized and existing under the laws of the
United States of America or a state thereof or Canada, with
substantially all of its assets located and substantially all
of its business conducted within the United States and
Canada, (y) such corporation expressly assumes, by an
26
agreement satisfactory in substance and form to the holders
of more than 50% of the Notes outstanding (subject to
section 15.4) (which agreement may require the delivery in
connection with such assumption of such opinions of counsel
as such holders may reasonably require), the obligations of
the Company under this Agreement and under the Notes, (z)
immediately after giving effect to such transaction (and such
assumption) (A) such corporation shall not be liable with
respect to any Debt or allow its property to be subject to
any Lien which it could not become liable with respect to or
allow its property to become subject to under this Agreement
on the date of such transaction, (B) such corporation would
have Consolidated Tangible Net Worth equal to or greater than
the Consolidated Tangible Net Worth of the Company
immediately prior to the transaction, (C) such corporation
could incur at least $1.00 of additional Debt in compliance
with section 10.1(k) and (D) no condition or event shall
exist which constitutes an Event of Default or a Potential
Event of Default; or
(b) sell, lease, abandon or otherwise dispose of all or
substantially all its assets, except that:
(i) any Subsidiary may sell, lease or otherwise dispose
of all or substantially all its assets to the Company or a
Wholly-Owned Subsidiary;
(ii) the Company may sell, lease or otherwise dispose
of all or substantially all its assets to any corporation
into which the Company could be consolidated or merged in
compliance with subdivision (a)(iii) of this section 10.8,
provided that (x) each of the conditions set forth in such
subdivision (a)(iii) shall have been fulfilled, and (y) no
such disposition shall relieve the Company from its
obligations under this Agreement or the Notes; or
(c) sell, lease, abandon or otherwise dispose of any of its
assets (except in a transaction permitted by subdivision (b) of
this section 10.8), except that
(i) the Company and its Subsidiaries may sell their
goods in the ordinary course of business;
(ii) the Company and its Subsidiaries may dispose of
obsolete inventory and equipment in the ordinary course of
business;
(iii) the Company and its Subsidiaries may sell
additional assets if such assets, together with all assets
sold during any Reference Period, shall not constitute assets
that exceed 10% of the lesser of (A) the total assets of the
Company and its Subsidiaries shown on the balance sheet of
the Company as of the most recent quarter-end prior to the
commencement of such Reference Period and (B) the total
assets of the Company and its Subsidiaries shown on the
balance sheet of the Company as of the last day of such
Reference Period; and
27
(iv) the Company and its Subsidiaries may sell
additional assets, in each case for a consideration at least
85% of which is in the form of cash or cash equivalents of
the type described in section 10.3(a), if such consideration
is at least equal to the Fair Market Value of the assets to
be sold and if the proceeds thereof shall, on or prior to the
180th day following such sale, be applied either
(x) to the acquisition of assets consisting of
writing instruments, art supplies, graphite refining or
lubricants or refractories manufacturing businesses, or
similar or related businesses, or plant and equipment
to be used in such businesses; or
(y) to the prepayment of Debt of the Company,
first to Superior Debt of the Company and second to the
Notes in the manner contemplated by section 9.5;
it being agreed that if the Company shall not prior to such
180th day have performed or given notice to the holders of
the Notes of its election to perform under one of the
foregoing clauses (x) or (y), it shall be deemed to have
elected to perform the obligation set forth in the foregoing
clause (y), and the provisions of section 9.5 shall be
applicable;
provided that in no event shall the Company sell assets comprising all or
substantially all of the assets of the Consumer Products Group.
10.9. SUBSIDIARY STOCK AND INDEBTEDNESS. The Company will
not, and will not permit any Subsidiary to:
(a) directly or indirectly sell, assign, pledge or otherwise
dispose of any Debt of or any shares of stock of (or warrants,
rights or options to acquire stock of) any Subsidiary except to a
Wholly-Owned Subsidiary, or as directors' qualifying shares if
required by applicable law or as permitted by subdivision (f) of
section 10.2;
(b) permit any Subsidiary directly or indirectly to sell,
assign, pledge or otherwise dispose of any Debt of the Company or
any other Subsidiary, or any shares of stock of (or warrants,
rights or options to acquire stock of) any other Subsidiary, except
to the Company or a Wholly-Owned Subsidiary or as directors'
qualifying shares if required by applicable law;
(c) permit any Subsidiary to have outstanding any shares of
Preferred Stock other than shares of Preferred Stock which are
owned by the Company or a Wholly-Owned Subsidiary; or
(d) permit any Subsidiary directly or indirectly to issue or
sell (including, without limitation, in connection with a merger or
consolidation of a Subsidiary otherwise permitted by section
10.8(a)) any shares of its stock (or warrants, rights or options to
acquire its stock) except to the Company or a Wholly-Owned
Subsidiary or as directors' qualifying shares if required by
applicable law;
28
provided that, subject to compliance with section 10.8(c), all Debt and
shares of stock of any Subsidiary of the Company may be simultaneously
sold as an entirety for a cash consideration at least equal to the Fair
Market Value thereof at the time of such sale if such Subsidiary does not
at the time own (i) any Debt of the Company or any of its Subsidiaries or
(ii) any Debt or stock of any other Subsidiary which is not also being
simultaneously sold as an entirety in compliance with this proviso and if
immediately after giving effect to such transaction (and after deducting
from Adjusted EBIT the Consolidated Net Income attributed to the assets
so disposed of) the Company could incur at least $1.00 of additional Debt
in compliance with section 10.1(k), and provided further that shares of
stock of Subsidiaries owned by the Company may be disposed of in
connection with a sale or other disposition by the Company of all or
substantially all of its assets in compliance with section 10.8(b)(ii).
10.10. CORPORATE EXISTENCE, ETC.; BUSINESS. The Company
will at all times preserve and keep in full force and effect its
corporate existence, and rights and franchises deemed material to its
business, and those of each of its Subsidiaries, except as otherwise
specifically permitted by section 10.8 and except that the corporate
existence of any Subsidiary may be terminated if, in the good faith
judgment of the Board, such termination is in the best interest of the
Company and is not disadvantageous to the holders of the Notes. The
Company will not, and will not permit any Subsidiary to, engage in any
business other than the business of manufacturing writing instruments or
art supplies, graphite refining or lubricants or refractories
manufacturing and other activities incidental or related to such
business.
10.11. PAYMENT OF TAXES AND CLAIMS. The Company will, and
will cause each Subsidiary to, pay all taxes, assessments and other
governmental charges imposed upon it or any of its properties or assets
or in respect of any of its franchises, business, income or profits
before any penalty or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law
have or might become a Lien upon any of its properties or assets, -
provided that no such charge or claim need be paid if being contested in
good faith by appropriate proceedings promptly initiated and diligently
conducted and if such reserves or other appropriate provision, if any, as
shall be required by generally accepted accounting principles shall have
been made therefor.
10.12. COMPLIANCE WITH ERISA. The Company will not, and
will not permit any Subsidiary to,
(a) engage in any transaction in connection with which the
Company or any Subsidiary could be subject to either a civil
penalty assessed pursuant to section 502(i) of ERISA or a tax
imposed by section 4975 of the Code, terminate or withdraw from any
Plan (other than a Multiemployer Plan) in a manner, or take any
other action with respect to any such Plan (including, without
limitation, a substantial cessation of operations within the
meaning of section 4062(f) of ERISA), which could result in any
liability of the Company or any Subsidiary to the PBGC, to a trust
established pursuant to section 4041(c)(3)(B)(ii) or (iii) or
4042(i) of ERISA, or to a trustee appointed under section 4042(b)
29
or (c) of ERISA, incur any liability to the PBGC on account
of a termination of a Plan under section 4064 of ERISA, fail to
make full payment when due of all amounts which, under the
provisions of any Plan, the Company or any Subsidiary is required
to pay as contributions thereto, or permit to exist any accumulated
funding deficiency, whether or not waived, with respect to any Plan
(other than a Multiemployer Plan), if, in any such case, such
penalty or tax or such liability, or the failure to make such
payment, or the existence of such deficiency, as the case may be,
could have a material adverse effect on the Company or any of its
Subsidiaries;
(b) permit the present value of all vested accrued benefits
under all Plans maintained at such time by the Company and any
Subsidiary (other than Multiemployer Plans) guaranteed under Title
IV of ERISA to exceed the current value of the assets of such Plans
allocable to such vested accrued benefits by more than $2,000,000;
(c) permit the aggregate complete or partial withdrawal
liability under Title IV of ERISA with respect to Multiemployer
Plans incurred by the Company and its Subsidiaries to exceed
$1,000,000; or
(d) permit the sum of (i) the amount by which the current
value of all vested accrued benefits referred to in subdivision (b)
of this section 10.12 exceeds the current value of the assets
referred to in such subdivision (b) and (ii) the amount of the
aggregate incurred withdrawal liability referred to in subdivision
(c) of this section 10.12 to exceed $2,000,000.
For the purposes of subdivisions (c) and (d) of this section 10.12, the
amount of the withdrawal liability of the Company and its Subsidiaries at
any date shall be the aggregate present value of the amount claimed to
have been incurred less any portion thereof as to which the Company
reasonably believes, after appropriate consideration of possible
adjustments arising under sections 4219 and 4221 of ERISA, it and its
Subsidiaries will have no liability, provided that the Company shall
obtain prompt written advice from independent actuarial consultants
supporting such determination. The Company agrees (i) once in each
calendar year to request and obtain a current statement of withdrawal
liability from each Multiemployer Plan and (ii) to transmit a copy of
such statement to each holder of any Notes, within 15 days after the
Company receives the same. As used in this section 10.12, the term
"accumulated funding deficiency" has the meaning specified in section 302
of ERISA and section 412 of the Code, and the terms "present value",
"current value" and "accrued benefit" have the meanings specified in
section 3 of ERISA.
10.13. MAINTENANCE OF PROPERTIES; INSURANCE. The Company
will maintain or cause to be maintained in good repair, working order and
condition all properties used or useful in the business of the Company
and its Subsidiaries and from time to time will make or cause to be made
all appropriate repairs, renewals and replacements thereof. The Company
will maintain or cause to be maintained, with financially sound and
reputable insurers, insurance with respect to its properties and business
and the properties and business of its Subsidiaries against loss or
damage of the kinds customarily insured against by corporations of
30
established reputation engaged in the same or similar business and
similarly situated, of such types and in such amounts as are customarily
carried under similar circumstances by such other corporations. Such
insurance may be subject to co-insurance, deductibility or similar
clauses which, in effect, result in self-insurance of certain losses,
provided that such self-insurance is in accord with the approved
practices of corporations similarly situated and adequate insurance
reserves are maintained in connection with such self-insurance.
10.14. ADDITIONAL GUARANTIES. The Company shall cause any
Person that hereafter becomes a Subsidiary of the Company to execute and
deliver to the holders of the Notes a Guaranty Agreement with respect to
the obligations of the Company hereunder and under the Notes,
substantially in the form of Exhibit D, with such changes to such form as
may be appropriate to reflect the identity and circumstances of the
guarantor.
10.15. RESTRICTIONS AFFECTING SUBSIDIARIES. The Company
will not, and will not permit any Subsidiary to, create or otherwise
permit to exist any restriction on the ability of any Subsidiary (a) to
pay dividends or make any other distributions on its capital stock or any
other interest in its profits owned by the Company or any other
Subsidiary, or pay any Debt owed to the Company or any other Subsidiary;
(b) make any loan or advance to the Company or any other Subsidiary; or
(c) transfer any of its properties or assets to the Company or any other
Subsidiary; other than
(i) any such restriction in effect pursuant to Debt
outstanding on the date of this Agreement and described in Schedule
B-2;
(ii) any such restriction in effect pursuant to Debt of a
Person outstanding at the time such Person becomes a Wholly-Owned
Subsidiary (other than Debt incurred in contemplation of its
becoming a Wholly-Owned Subsidiary), provided that such restriction
shall at all times be confined solely to the Person or the assets
and properties of the Person so acquired;
(iii) any such restriction in effect pursuant to Debt
incurred to renew, extend or refund any Debt referred to in
paragraph (i) or (ii) of this section 10.15, provided that the
restrictions in effect under such Debt shall be no less favorable
to the holders of the Notes than those in effect prior thereto;
(iv) any such restriction contained in security agreements
permitted by section 10.2, provided that such restriction shall at
all times be confined solely to the item or items of property
covered by such security agreement; and
(v) restrictions consisting of customary non-assignment
provisions in leases governing leasehold interests to the extent
such provisions restrict the transfer of such leasehold interests.
31
10.16. AMENDMENT OF CREDIT AGREEMENT. The Company will not
enter into any amendment or modification of Section 8.8 of the Credit
Agreement or any amendment or modification of the Credit Agreement which
would materially shorten the maturity date of any required payment of any
of the Loans thereunder.
11. EVENTS OF DEFAULT; ACCELERATION. If any of the
following conditions or events ("Events of Default") shall occur and be
continuing:
(a) if the Company shall default in the payment of any
principal of or premium, if any, on any Note when the same becomes
due and payable, whether at maturity or at a date fixed for
prepayment or by declaration or otherwise; or
(b) if the Company shall default in the payment of any
interest on any Note for more than 10 days after the same becomes
due and payable; or
(c) if the Company shall default in the performance of or
compliance with any term contained in section 7(h) or section 10.1
through 10.9, inclusive, or section 10.14; or
(d) if the Company shall default in the performance of or
compliance with any term contained in this Agreement other than
those referred to above in this section 11 and such default shall
not have been remedied within 30 days after such failure shall
first have become known to any officer of the Company or written
notice thereof shall have been received by the Company from any
holder of any Note; or
(e) if any representation or warranty made in writing by or
on behalf of the Company in this Agreement or in any instrument
furnished in compliance with or in reference to this Agreement or
otherwise in connection with the transactions contemplated by this
Agreement shall prove to have been false or incorrect in any
material respect on the date as of which made; or
(f) if the Company or any Subsidiary shall default (as
principal or guarantor or other surety) in the payment of any
principal of or premium or interest on any Debt which is
outstanding in a principal amount of at least $1,000,000 (other
than the Notes), or if any event shall occur or condition shall
exist in respect of any such Debt which is outstanding in a
principal amount of at least $1,000,000 or under any evidence of
any such Debt or of any mortgage, indenture or other agreement
relating thereto, the effect of which default, event or condition
is to cause the acceleration of the payment of such Debt before its
stated maturity or before its regularly scheduled dates of payment;
or
(g) if a final judgment or judgments (other than any
judgment associated with the ECRA Decision) shall be rendered
against the Company or any Subsidiary for the payment of money in
excess of $1,000,000 (in excess of insurance coverage) in the
aggregate and any one of such judgments shall not be discharged or
execution thereon stayed pending appeal, within 60 days after entry
32
thereof, or, in the event of such a stay, such judgment shall
not be discharged within 60 days after such stay expires; or
(h) if the Company or any Subsidiary shall (i) be generally
not paying its debts as they become due, (ii) file, or consent by
answer or otherwise to the filing against it of, a petition for
relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy
or insolvency law of any jurisdiction, (iii) make an assignment for
the benefit of its creditors, (iv) consent to the appointment of a
custodian, receiver, trustee or other officer with similar powers
with respect to it or with respect to any substantial part of its
property, (v) be adjudicated insolvent or (vi) take corporate
action for the purpose of any of the foregoing; or
(i) if a court or governmental authority of competent
jurisdiction shall enter an order appointing, without consent by
the Company or any Subsidiary, a custodian, receiver, trustee or
other officer with similar powers with respect to it or with
respect to any substantial part of its property, or if an order for
relief shall be entered in any case or proceeding for liquidation
or reorganization or otherwise to take advantage of any bankruptcy
or insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Company or any Subsidiary, or if
any petition for any such relief shall be filed against the Company
or a Subsidiary and such petition shall not be dismissed within 30
days;
then, (x) upon the occurrence of any Event of Default described in
subdivision (h) or (i) of this section 11 with respect to the Company
(other than such an Event of Default described in clause (i) of
subdivision (h) or described in clause (vi) of subdivision (h) by virtue
of the reference in such clause (vi) to such clause (i)), the unpaid
principal amount of and accrued interest on the Notes shall automatically
become due and payable or (y) upon the occurrence of any other Event of
Default, any holder or holders of 25% or more (in the case of any Event
of Default described in subdivision (a) or (b) of this section 11) or any
holder or holders of more than 35% (in the case of any Event of Default
described in any other subdivision of this section 11), in principal
amount of the Notes at the time outstanding (subject to section 15.4) may
at any time (unless all defaults shall theretofore have been remedied) at
its or their option, by written notice or notices to the Company, declare
all the Notes to be due and payable, whereupon (A) if at the time there
shall be no Superior Debt outstanding, the Notes shall forthwith mature
and become due and payable, and (B) if at the time there shall be
Superior Debt outstanding, the Notes shall mature and become due and
payable upon the earlier to occur of (1) the acceleration of the maturity
of any Superior Debt by the holder or holders thereof and (2) the forty-
fifth day following notice of such declaration by such holder or holders
of 25% or more in principal amount of the Notes to the Company (and the
Company shall forward such notice to the holders of the Superior Debt),
in each case together with interest accrued thereon; and, in the case of
any Event of Default described in this section 11, there shall also be
due and payable, to the extent permitted by applicable law, a premium
equal to the Make-Whole Premium, all without presentment, demand, protest
or (other than as specifically provided for in this Agreement) notice,
which are hereby waived.
33
At any time after the principal of, and interest accrued on,
any or all of the Notes are declared due and payable, the holders of not
less than 75% in aggregate principal amount of the Notes then outstanding
(subject to section 15.4), by written notice to the Company may rescind
and annul any such declaration and its consequences if (x) the Company
has paid all overdue interest on the Notes, the principal of and premium,
if any, on any Notes which have become due otherwise than by reason of
such declaration, and interest on such overdue principal and premium and
(to the extent permitted by applicable law) any overdue interest in
respect of the Notes at the rate of 14% per annum, (y) all Events of
Default, other than non-payment of amounts which have become due solely
by reason of such declaration, and all conditions and events which
constitute Events of Default or Potential Events of Default have been
cured or waived pursuant to section 19, and (z) no judgment or decree has
been entered for the payment of any monies due pursuant to the Notes or
this Agreement; but no such rescission and annulment shall extend to or
affect any subsequent Event of Default or Potential Event of Default or
impair any right consequent thereon.
12. REMEDIES ON DEFAULT, ETC. In case any one or more
Events of Default or Potential Events of Default shall occur and be
continuing, the holder of any Note at the time outstanding may proceed to
protect and enforce the rights of such holder by an action at law, suit
in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained herein or in such Note, or for an
injunction against a violation of any of the terms hereof or thereof, or
in aid of the exercise of any power granted hereby or thereby or by law
or otherwise. In case of a default in the payment of any principal of or
premium, if any, or interest on any Note, the Company will pay to the
holder thereof such further amount as shall be sufficient to cover the
cost and expenses of collection, including, without limitation,
reasonable attorneys' fees, expenses and disbursements. 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 or by any Note upon any holder thereof
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.
13. SUBORDINATION OF SUBORDINATED NOTES. 13.1. GENERAL.
The Notes (the "Subordinated Debt") shall be subordinate and junior in
right of payment to all Superior Debt (as defined in section 13.2) to the
extent and in the manner provided in this section 13. The provisions of
this section 13 are intended to be for the benefit of the holders from
time to time of the Superior Debt.
13.2. SUPERIOR DEBT. As used in this section 13, the term
"Superior Debt" shall mean (a) all principal of and premium, if any, and
interest on Debt of the Company outstanding from time to time under the
Credit Agreement and all fees and expenses payable under the Credit
Agreement and (b) other Debt of the Company outstanding in compliance
with section 10.1 other than (i) Debt which by its terms is subordinated
to any other Debt of the Company and (ii) Debt outstanding between the
Company and any Affiliate of the Company or between any Subsidiary and
another Subsidiary or Affiliate of the Company). The Superior Debt shall
continue to be Superior Debt and entitled to the benefits of these
34
subordination provisions irrespective of any restatement, amendment,
modification or waiver of any term of the Credit Agreement or the Superior
Debt or extension or renewal of the Credit Agreement or the Superior Debt.
13.3. DEFAULT IN RESPECT OF SUPERIOR DEBT. (a) In the
event the Company shall default in the payment of any principal of, or
premium, if any, or interest on any Superior Debt when the same becomes
due and payable, whether at maturity or at a date fixed for payment or
prepayment thereof or by declaration or otherwise, then, unless and until
such default shall have been remedied or waived in writing or shall have
ceased to exist, no direct or indirect payment (in cash, property or
securities or by set-off or otherwise, except securities which are subor-
dinate and junior in right of payment to the payment of Superior Debt at
least to the extent provided in this section 13) shall be made on account
of the principal of, or premium, if any, or interest on any Subordinated
Debt, or as a sinking fund for Subordinated Debt, or in respect of any
redemption, retirement, purchase or other acquisition of any Subordinated
Debt.
(b) Upon the happening of an event of default with respect
to any Superior Debt, as defined therein or in the instrument under which
the same is outstanding, permitting the holders thereof to accelerate the
maturity thereof (other than under circumstances when the terms of sec-
tion 13.3(a) are applicable), then, unless and until such event of
default shall have been remedied or waived in writing or shall have
ceased to exist, no direct or indirect payment (in cash, property or
securities or by set-off or otherwise, except securities which are subor-
dinate and junior in right of payment to the payment of Superior Debt at
least to the extent provided in this section 13) shall be made on account
of the principal of or premium, if any, or interest on any Subordinated
Debt or as a sinking fund for the Subordinated Debt, or in respect of any
redemption, retirement, purchase or other acquisition of any Subordinated
Debt, during any period:
(i) during any period of up to 179 days after written
notice of such default shall have been given to the Company
and each holder of Subordinated Debt by any holder of
Superior Debt, provided that only one such notice may be
given by the holders of the Superior Debt in any 360-day
period; or
(ii) in which any judicial proceeding shall be pending
in respect of such default or an effective notice of
acceleration of the maturity of the Superior Debt shall have
been transmitted to the Company in respect of such default.
13.4. INSOLVENCY, ETC. In the event of:
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar
proceeding relating to the Company, its creditors as such or its
property,
(b) any proceeding for the liquidation, dissolution or other
winding-up of the Company, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings,
35
(c) any assignment by the Company for the benefit of
creditors, or
(d) any other marshaling of the assets of the Company,
all Superior Debt shall first be paid in full in cash or cash equivalents
(or with other assets acceptable to the holders of the Superior Debt)
before payment or distribution, whether in cash, securities or other
property, shall be made to any holder of any Subordinated Debt on account
of any Subordinated Debt. Any payment or distribution, whether in cash,
securities or other property (other than securities of the Company or any
other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in this section 13 with respect to the Subordinated Debt, to the
payment of all Superior Debt at the time outstanding and to any securi-
ties issued in respect thereof under any such plan of reorganization or
readjustment), which would otherwise (but for these subordination
provisions) be payable or deliverable in respect of Subordinated Debt
shall be paid or delivered directly to the holders of Superior Debt in
accordance with the priorities then existing among such holders until all
Superior Debt shall have been paid in full in cash or cash equivalents
(or with other assets acceptable to the holders of the Superior Debt).
13.5. PAYMENTS AND DISTRIBUTIONS RECEIVED. If any payment
or distribution of any character or any security, whether in cash,
securities or other property (other than securities of the Company or any
other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in this section 13 with respect to Subordinated Debt, to the
payment of all Superior Debt at the time outstanding and to any
securities issued in respect thereof under any such plan of
reorganization or readjustment), shall be received by any holder of any
Subordinated Debt in contravention of any of the terms hereof and before
all the Superior Debt shall have been paid in full in cash or cash
equivalents (or with other assets acceptable to the holders of the
Superior Debt), such payment or distribution or security shall be
received in trust for the benefit of, and shall be paid over or delivered
and transferred to, the holders of the Superior Debt at the time
outstanding in accordance with the priorities then existing among such
holders for application to the payment of all Superior Debt remaining
unpaid, to the extent necessary to pay all such Superior Debt in full in
cash (or with other assets acceptable to the holders of the Superior
Debt).
13.6. NO PREJUDICE OR IMPAIRMENT. No present or future
holder of any Superior Debt shall be prejudiced in the right to enforce
subordination of the Subordinated Debt by any act or failure to act on
the part of the Company or the holders of the Subordinated Debt. Nothing
contained herein shall impair, as between the Company and the holder of
any Subordinated Debt, the obligation of the Company to pay to the holder
thereof the principal thereof and interest thereon as and when the same
shall become due and payable in accordance with the terms thereof and of
this Agreement, or prevent the holder of any Subordinated Debt from
exercising all rights, powers and remedies otherwise permitted by ap-
plicable law or hereunder upon a Potential Event of Default or Event of
Default hereunder, all subject to the terms of this section 13 and the
rights of the holders of the Superior Debt to receive cash, securities or
36
other property otherwise payable or deliverable to the holders of
Subordinated Debt.
13.7. PAYMENT OF SUPERIOR DEBT, SUBROGATION, ETC. Upon the
payment in full of all Superior Debt in cash (or with other assets
acceptable to the holders of the Superior Debt), the holders of
Subordinated Debt shall be subrogated to all rights of any holders of
Superior Debt to receive any further payments or distributions applicable
to the Superior Debt until the Subordinated Debt shall have been paid in
full, and, for the purposes of such subrogation, no payment or
distribution received by the holders of Superior Debt of cash,
securities, or other property to which the holders of Subordinated Debt
would have been entitled except for this section 13 shall, as between the
Company and its creditors other than the holders of Superior Debt, on the
one hand, and the holders of Subordinated Debt, on the other, be deemed
to be a payment or distribution by the Company on account of Superior
Debt.
14. DEFINITIONS. As used herein the following terms have
the following respective meanings:
Adjusted EBIT: for any Reference Period, Consolidated Net
Income before dividends, (a) adjusted by adding thereto (i) Consolidated
Interest Expense, (ii) "minority interests" related to Xxxxx Mexico, and
(iii) income taxes, all to the extent deducted in arriving at the
calculation of Consolidated Net Income for such Reference Period; (b)
further adjusted by excluding therefrom all extraordinary gains and
losses and all other extraordinary or non-recurring items (in each case
as determined in accordance with generally accepted accounting
principles), and (c) further adjusted by deducting therefrom Minority
EBIT for such Reference Period.
Adjusted Net Worth: at any date of determination, the
stockholders' equity (including amounts attributable to Preferred Stock)
shown on the balance sheet of the Company and its consolidated
Subsidiaries delivered pursuant to section 7 most recently prior to such
date, adjusted to exclude (to the extent included in calculating such
equity), (a) amounts attributable to Disqualified Stock or treasury stock
of the Company and its consolidated Subsidiaries, (b) all upward
revaluations and other write-ups in the book value of any asset of the
Company or a Subsidiary subsequent to the Closing Date, and (c) the
amount of the "Cumulative Translation Adjustment" (as shown on such
consolidated balance sheet), provided, however, that the amount of the
"Cumulative Translation Adjustment" excluded from the calculation of
Adjusted Net Worth shall not be less than $3,250,000.
Affiliate: any Person directly or indirectly controlling or
controlled by or under common control with the Company or any Subsidiary,
including (without limitation) any Person beneficially owning or holding
5% or more of any class of voting securities of the Company or any
Subsidiary or any other corporation of which the Company or any
Subsidiary owns or holds 5% or more of any class of voting securities,
provided that, for purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
37
the ownership of voting securities or by contract or otherwise, and
provided further that neither you nor any other Person which is an
institution shall be deemed to be an Affiliate of the Company or any of
its Subsidiaries solely by reason of ownership of the Notes or other
securities issued in exchange for the Notes or by reason of having
the benefits of any agreements or covenants of the Company contained in
this Agreement.
Board: the Board of Directors of the Company or a committee
of three or more directors lawfully exercising the relevant powers of the
Board.
Business Day: any day except a Saturday, a Sunday or other
day on which commercial banks in New York City are required or authorized
by law to be closed.
Capital Lease: as applied to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee which
would, in accordance with generally accepted accounting principles, be
required to be classified and accounted for as a capital lease on a
balance sheet of such Person, other than, in the case of the Company or a
Subsidiary, any such lease under which the Company or a Wholly-Owned
Subsidiary is the lessor.
Capital Lease Obligation: with respect to any Capital Lease,
the amount of the obligation of the lessee thereunder which would, in
accordance with generally accepted accounting principles, appear on a
balance sheet of such lessee in respect of such Capital Lease.
CERCLA: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time.
Change of Control: (a) the sale, lease or transfer of all or
substantially all of the Company's assets to any Person or "group"
(within the meaning of Section 13(d) of the Exchange Act, hereinafter a
"Group") together with any Affiliates thereof, (b) the liquidation of the
Company, (c) the acquisition after the date hereof by any Person or
Group, together with any Affiliates thereof, of in excess of 30% of the
Voting Stock of the Company, or (d) the success by any Person or Group,
together with any Affiliates thereof, in causing its or their nominees to
be elected to the Board such that such nominees, when added to any
director remaining on the Board who is an Affiliate or Related Person of
such Person or Group, shall constitute 50% or more of the Board.
Code: the Internal Revenue Code of 1986, as amended from
time to time.
Common Stock: the meaning specified in section 1.
Consolidated Interest and Dividend Coverage Ratio: for any
Reference Period, the ratio of (a) Adjusted EBIT for such Reference
Period to (b) the sum of (i) Consolidated Interest Expense for such
Reference Period, plus (ii) Capitalized Interest for such Reference
Period, plus (iii) all cash dividends accrued or paid on capital stock,
including Disqualified Stock, of the Company during such Reference
Period.
38
Consolidated Interest Expense: for any Reference Period,
Interest Expense of the Company and its consolidated Subsidiaries for
such Reference Period.
Consolidated Net Income: for any Reference Period, (a) the
net income (or deficit) of the Company and its Subsidiaries for such
period (taken as a cumulative whole), after deducting all operating
expenses, provisions for all taxes and reserves and all other proper
deductions, all determined in accordance with generally accepted
accounting principles on a consolidated basis, less (b) the net income
(or deficit) of any Subsidiary that is less than Wholly-Owned (other than
Xxxxx Mexico).
Consolidated Tangible Net Worth: Adjusted Net Worth,
adjusted by (a) adding thereto the amount of the "Cumulative Translation
Adjustment" excluded in the computation of Adjusted Net Worth and (b)
deducting therefrom the net book amount of all assets, after deducting
any reserves applicable thereto, which would be treated as intangible
under generally accepted accounting principles.
Consumer Products Group: the Consumer Products Group of the
Company, consisting of its business of manufacturing and marketing
writing supplies and art supplies.
Credit Agreement: collectively, (a) the Amended and Restated
Revolving Credit Loan and Security Agreement, dated July 10, 1996, (b)
the Amended and Restated Term Loan Agreement, dated July 10, 1996, in
each case among the Company, First Union Commercial Corporation, as
Agent, and the lenders named therein, as amended or restated on the
Closing Date and as amended or restated from time to time thereafter and
(c) the "Letter of Credit Agreements" as such term is defined in the
agreement referred to in the foregoing clause (a).
Debt: as applied to any Person (without duplication):
(a) any indebtedness for borrowed money which such Person
has directly or indirectly created, incurred or assumed; and
(b) any indebtedness secured by any Lien in respect of
property owned by such Person, whether or not such Person has
assumed or become liable for the payment of such indebtedness; and
(c) any indebtedness with respect to which such Person has
become directly or indirectly liable and which represents or has
been incurred to finance the purchase price (or a portion thereof)
of any property or services or business acquired by such Person,
whether by purchase, consolidation, merger or otherwise; and
(d) any indebtedness of any other Person of the character
referred to in subdivision (a), (b) or (c) of this definition with
respect to which the Person whose Debt is being determined has
become liable by way of a Guaranty.
39
Disqualified Stock: (a) any capital stock of the Company or
any Subsidiary that, by its terms, matures, or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is redeemable at
the option of the holder or holders thereof, in whole or in part on or
prior to the date of final maturity of the Notes, (b) any Preferred Stock
of any Subsidiary, and (c) any capital stock of the Company or any
Subsidiary which is convertible into or exchangeable for any stock
described in clauses (a) and (b) above.
Xxxxx Mexico: Xxxxx Ticonderoga Company de Mexico, S.A. de
C.V., a corporation organized under the laws of Mexico.
ECRA Decision: the decision, dated April 24, 1996, of the
Superior Court of New Jersey in Xxxxxx County finding the Company
responsible for certain environmental clean-up costs and related
obligations aggregating approximately $3,300,000.
Environmental Laws: Federal, state, provincial, local and
foreign laws, rules and regulations relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes into the environment
(including, without limitation, air, surface water, ground water or
land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous
substances or wastes.
ERISA: the Employee Retirement Income Security Act of 1974,
as amended from time to time.
Exchange Act: the Securities Exchange Act of 1934, as
amended from time to time.
Excess Sale Proceeds: as of any date of determination, the
excess of (a) the proceeds of sales of assets of the Company and its
Subsidiaries which are required to be applied to the prepayment of Debt
of the Company pursuant to section 10.8(c)(iv)(y), over (b) the amount of
Superior Debt of the Company outstanding as of such date and required to
be prepaid pursuant to a provision of the agreement or instrument
evidencing such Superior Debt similar in effect to section 10.8 hereof.
Event of Default: the meaning specified in section 11.
Fair Market Value: with respect to any sale of assets of the
Company or any of its Subsidiaries pursuant to section 10.8(c), the fair
market value of the assets to be sold (a) in the case of any asset sale
involving consideration of $5,000,000 or less, as determined in good
faith by the Board and evidenced by a resolution filed with the minutes
of the meeting of the Board and (b) in the case of any asset sale
involving consideration of more than $5,000,000, as determined by an
investment banking or accounting firm of national standing selected by
the Company.
40
Guaranty: as applied 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 xxxxxx-
xxxx, 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 therefor, 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 services regardless of the non-delivery or
nonfurnishing 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 obligation will be protected against
loss in respect thereof. The amount of any Guaranty shall be equal to
the outstanding principal amount of the obligation guaranteed. For the
purposes of section 10.4, the amount involved in any Guaranty which con-
stitutes a Restricted Investment made during any period shall be the
aggregate amount of the obligation guaranteed, less any amount by which
the guarantor may have been discharged with respect thereto (including
any discharge by way of a reduction in the amount of the obligation
guaranteed), provided that the guarantor shall not be deemed to have been
discharged with respect to any Guaranty to the extent the guarantor shall
have been required to perform such Guaranty (except to the extent that
any loss on such Guaranty has been recognized in reducing Consolidated
Net Income).
Guaranty Agreement: the Guaranty Agreement, dated as of
September 26, 1996, executed and delivered by the Subsidiaries of the
Company, substantially in the form of Exhibit D.
Interest Expense: as applied to any Person with reference to
any period, interest expense of such Person for such period, including
amortization of debt discount and expense and imputed interest on Capital
Lease Obligations properly chargeable to income during such period in
accordance with generally accepted accounting principles.
Investment: as applied to any Person, any direct or indirect
purchase or other acquisition by such Person of stock or other securities
of any other Person, or any direct or indirect loan, advance (other than
advances to employees for moving and travel expenses, drawing accounts
and similar expenditures in the ordinary course of business) or capital
contribution by such Person to any other Person, including all Debt and
accounts receivable from such other Person which are not current assets
or did not arise from sales to such other Person in the ordinary course
of business. In computing the amount involved in any Investment at the
time outstanding, (a) undistributed earnings of, and interest accrued in
respect of Debt owing by, such other Person accrued after the date of
such Investment shall not be included, (b) there shall not be deducted
from the amounts invested in such other Person any amounts received as
earnings (in the form of dividends, interest or otherwise) on such
41
Investment or as loans from such other Person, and (c) unrealized
increases or decreases in value, or write-ups, write-downs or write-offs,
of Investments in such other Person shall be disregarded.
Lien: as to any Person, any mortgage, lien, pledge, adverse
claim, charge, security interest or other encumbrance in or on, or any
interest or title of any vendor, lessor, lender or other secured party to
or of such Person under any conditional sale or other title retention
agreement or Capital Lease with respect to, any property or asset owned
or held by such Person, or the signing or filing of a financing statement
which names such Person as debtor, or the signing of any security
agreement authorizing any other party as the secured party thereunder to
file any financing statement.
Make-Whole Premium: 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 (a) such Called Principal plus (b)
interest accrued thereon as of (including interest due on) the Settlement
Date with respect to such Called Principal. The Make-Whole Premium shall
in no event be less than zero. As used in this definition, the following
terms have the following meanings:
Called Principal: with respect to any Note, the principal of
such Note that is to be prepaid, subject to a Make-Whole Premium,
pursuant to section 9.2 or 9.3 or is declared to be immediately due
and payable pursuant to section 11, as the context requires.
Discounted Value: 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 (applied on a semiannual basis)
equal to the Reinvestment Yield with respect to such Called
Principal.
Reinvestment Yield: with respect to the Called Principal of
any Note, the sum of (a) 1.0% plus (b) the yield to maturity
determined by reference to the Treasury Constant Maturity Series
yields reported, for the latest day for which such yields shall
have been reported as of the Business Day next preceding the
Settlement Date with respect to such Called Principal, in Federal
Reserve Statistical Release H.15 (519) (or, if such Statistical
Release is not published, any publicly available source of similar
market data acceptable to the holders of more than 50% in principal
amount of the Notes being prepaid or accelerated) 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, (x) by converting U.S. Treasury xxxx quotations to bond-
equivalent yields in accordance with accepted financial practice
and (y) by linear interpolation between reported yields.
42
Remaining Average Life: with respect to the Called Principal
of any Note, the number of years (calculated to the nearest one-
twelfth year) obtained by dividing (a) such Called Principal into
(b) the sum of the products obtained by multiplying (i) each
Remaining Scheduled Payment of such Called Principal (but not of
interest thereon) by (ii) 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: 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: with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid
pursuant to section 9.2 or 9.3 or is declared to be immediately due
and payable pursuant to section 11, as the context requires.
Minority EBIT: for any Reference Period, the product of (a)
the ownership percentage of all Persons, other than the Company and any
Subsidiary, of the outstanding shares of Xxxxx Mexico times (b) the net
income (or deficit) of Xxxxx Mexico for such Reference Period (taken as a
cumulative whole), after deducting all operating expenses, provisions for
all taxes and reserves and all other proper deductions, all determined in
accordance with generally accepted accounting principles on a
consolidated basis, (i) adjusted by adding thereto Interest Expense and
income taxes deducted in the calculation of the net income of Xxxxx
Mexico for such Reference Period, and (ii) further adjusted by excluding
therefrom all extraordinary gains and losses and all other extraordinary
or non-recurring items (in each case as determined in accordance with
generally accepted accounting principles), provided, that all items under
clause (b) above shall be determined in accordance with United States
generally accepted accounting principles and shall be denominated in U.S.
dollars.
Multiemployer Plan: any Plan which is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).
Officers' Certificate: a certificate executed on behalf of
the Company by the Chairman of the Board of Directors (if an officer) or
its President or one of its Vice Presidents.
Operative Agreements: the Warrants and the Guaranty
Agreement.
Option Plan: the employee stock option plan adopted by the
Company providing for the grant to employees of the Company and its
Subsidiaries from time to time of options to purchase shares of Common
Stock not in excess of 20% of the number of shares of Common Stock issued
and outstanding on the Closing Date.
PBGC: the Pension Benefit Guaranty Corporation or any
governmental authority succeeding to any of its functions.
43
Permitted Subordinated Debt: unsecured Debt of the Company
or a Subsidiary which (a) does not permit any holder of such Debt to
declare all or any part of such Debt to be due and payable, or to require
(upon the occurrence of any contingency or otherwise) all or any part of
such Debt to be paid, before its expressed maturity for any reason other
than the occurrence of a default in respect thereof; and (b) is created
under or evidenced by an instrument containing provisions for the
subordination of such Debt either (i) on a parity with the Notes or (ii)
on a basis that is junior and subordinate to the Notes at least to the
extent the Notes are junior and subordinate in right of payment to
Superior Debt.
Person: a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
government or political subdivision thereof or a governmental agency.
Plan: an "employee pension benefit plan" (as 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 of its
Related Persons, or an employee pension benefit plan as to which the
Company or any of its Related Persons would be treated as a contributory
sponsor under section 4069 of ERISA if it were to be terminated.
Potential Event of Default: any condition or event which,
with notice or lapse of time or both, would become an Event of Default.
Preferred Stock: as applied to any corporation, shares of
such corporation which shall be entitled to preference or priority over
any other shares of such corporation in respect of either the payment of
dividends or the distribution of assets upon liquidation or both.
Private Placement Memorandum: the Private Placement
Memorandum prepared by Alex. Xxxxx & Sons Incorporated for use in
connection with the Company's private placement of the Notes and Warrants
Public Offering: an underwritten primary public offering of
Common Stock of the Company pursuant to an effective registration
statement under the Securities Act such that, after giving effect to such
offering, the Company shall have received gross proceeds from such public
offering or offerings of at least $12,000,000.
Reference Period: as of any date of determination, the four
consecutive full fiscal quarters ended most recently prior to such date.
Related Person: any trade or business, whether or not
incorporated, which, together with the Company, is under common control,
as described in section 414(b) or (c) of the Code.
Restricted Investment: the meaning specified in section
10.3(h).
Restricted Payment: (a) any declaration or payment of any
dividend or other distribution, direct or indirect, on account of any
shares of any class of stock of the Company or any of its subsidiaries,
now or hereafter outstanding, except a dividend payable solely in shares
of stock of the Company; (b) any redemption, retirement, purchase or
other acquisition, direct or indirect, of any shares of any class of
44
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 of shares of stock of the Company;
(c) any payment, direct or indirect, of or on account of any principal
of or premium on any Permitted Subordinated Debt now or hereafter
outstanding or any redemption, retirement, purchase or other
acquisition, direct or indirect, of any Permitted Subordinated Debt
(except for any sinking fund, other required prepayment or mandatory
installment or final payment at maturity pursuant to the provisions
thereof and except for any payment consisting solely of shares of stock
of the Company or of other Permitted Subordinated Debt).
Securities Act: the Securities Act of 1933, as amended from
time to time.
Subordinated Debt: the meaning specified therefor in section
13.1.
Subsidiary: any corporation or other business entity at
least 50% (by number of votes) of the Voting Stock of which is at the
time owned by the Company or by one or more Subsidiaries or by the
Company and one or more Subsidiaries.
Superior Debt: the meaning specified therefor in section
13.2.
Voting Stock: with reference to any corporation, stock of
any class or classes (or equivalent interests), if the holders of the
stock of such class or classes (or equivalent interests) are ordinarily,
in the absence of contingencies, entitled to vote for the election of the
directors (or Persons performing similar functions) of such corporation,
even though the right so to vote has been suspended by the happening of
such a contingency.
Warrants: the meaning specified in section 1.
Weighted Average Life to Maturity: as applied to any Debt at
any date, the number of years obtained by dividing (a) the then
outstanding principal amount of such Debt into (b) the total of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other regularly scheduled
required payment, including payment at final maturity, in respect
thereof, by (ii) the number of years (calculated to the nearest
one-twelfth) which will elapse between such date and the date on which
such payment is to be made; as applied to any Preferred Stock at any
date, the number of years obtained by dividing (x) the then liquidation
value of such Preferred Stock into (y) the total of the products obtained
by multiplying (A) the amount of each then remaining installment, sinking
fund or other required redemption, including redemption at final
maturity, in respect thereof, by (B) the number of years (calculated to
the nearest one-twelfth) which will elapse between such date and the
making of such redemption.
Wholly-Owned: as applied to any Subsidiary, a Subsidiary all
the outstanding shares (other than directors' qualifying shares, if
required by law) of every class of stock of which are at the time owned
by the Company or by one or more Wholly-Owned Subsidiaries or by the
Company and one or more Wholly-Owned Subsidiaries.
45
15. REGISTRATION, TRANSFER AND SUBSTITUTION OF NOTES; ACTION
BY NOTEHOLDERS.
15.1. NOTE REGISTER; OWNERSHIP OF NOTES. The Company will
keep at its principal office a register in which the Company will provide
for the registration of Notes and the registration of transfers of Notes.
The Company may treat the Person in whose name any Note is registered on
such register as the owner thereof for the purpose of receiving payment
of the principal of and the premium, if any, and interest on such Note
and for all other purposes, whether or not such Note shall be overdue,
and the Company shall not be affected by any notice to the contrary. All
references in this Agreement to a "holder" of any Note shall mean the
Person in whose name such Note is at the time registered on such
register.
15.2. TRANSFER AND EXCHANGE OF NOTES. Upon surrender of any
Note for registration of transfer or for exchange to the Company at its
principal office, the Company at its expense will execute and deliver in
exchange therefor a new Note or Notes in denominations of at least
$500,000 (except one Note may be issued in a lesser principal amount if
the unpaid principal amount of the surrendered Note is not evenly
divisible by, or is less than $500,000), as requested by the holder or
transferee, which aggregate the unpaid principal amount of such sur-
rendered Note, registered as such holder or transferee may request, dated
so that there will be no loss of interest on such surrendered Note and
otherwise of like tenor.
15.3. REPLACEMENT OF NOTES. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Note and, in the case of any such loss, theft or
destruction of any Note, upon delivery of an indemnity bond in such
reasonable amount as the Company may determine (or, in the case of any
Note held by you or another institutional holder or your or its nominee,
of an indemnity agreement from you or such other holder) or, in the case
of any such mutilation, upon the surrender of such Note for cancellation
to the Company at its principal office, the Company at its expense will
execute and deliver, in lieu thereof, a new Note in the unpaid principal
amount of such lost, stolen, destroyed or mutilated Note, dated so that
there will be no loss of interest on such Note and otherwise of like
tenor. Any Note in lieu of which any such new Note has been so executed
and delivered by the Company shall not be deemed to be an outstanding
Note for any purpose of this Agreement.
15.4. NOTES HELD BY COMPANY, ETC., DEEMED NOT OUTSTANDING.
For the purposes of determining whether the holders of the Notes of the
requisite principal amount at the time outstanding have taken any action
authorized by this Agreement with respect to the giving of consents or
approvals or with respect to acceleration upon an Event of Default, any
Notes directly or indirectly owned by the Company or any of its
Subsidiaries or Affiliates shall be disregarded and deemed not to be
outstanding.
16. PAYMENTS ON NOTES. 16.1. PLACE OF PAYMENT. Payments of
principal, premium, if any, and interest becoming due and payable on the
Notes shall be made at the principal office of The Chase Manhattan Bank,
N.A., in the Borough of Manhattan, the City and State of New York, unless
the Company, by written notice to each holder of any Notes, shall
46
designate the principal office of another bank or trust company in such
Borough as such place of payment, in which case the principal office of
such other bank or trust company shall thereafter be such place of payment.
16.2. HOME OFFICE PAYMENT. So long as you or your nominee
shall be the holder of any Note, and notwithstanding anything contained
in section 16.1 or in such Note to the contrary, the Company will pay all
sums becoming due on such Note for principal, premium, if any, and
interest by the method and at the address specified for such purpose in
Schedule A, or by such other method or at such other address as you shall
have from time to time specified to the Company in writing for such
purpose, without the presentation or surrender of such Note or the making
of any notation thereon, except that any Note paid or prepaid in full
shall be surrendered to the Company at its principal office or at the
place of payment maintained by the Company pursuant to section 16.1 for
cancellation. Prior to any sale or other disposition of any Note held by
you or your nominee you will, at your election, either endorse thereon
the amount of principal paid thereon and the last date to which interest
has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to section 15.2. The Company will
afford the benefits of this section 16.2 to any institutional investor
which is the direct or indirect transferee of any Note purchased by you
under this Agreement and which has made the same agreement relating to
such Note as you have made in this section 16.2.
17. EXPENSES, ETC. Whether or not the transactions
contemplated by this Agreement shall be consummated, the Company will pay
all expenses in connection with such transactions and in connection with
any amendments or waivers (whether or not the same become effective)
under or in respect of this Agreement or the Notes, including, without
limitation: (a) the cost and expenses of preparing and reproducing this
Agreement and the Notes, of furnishing all opinions by counsel for the
Company (including any opinions requested by your special counsel as to
any legal matter arising hereunder) and all certificates on behalf of the
Company, and of the Company's performance of and compliance with all
agreements and conditions contained herein on its part to be performed or
complied with; (b) the cost of delivering to your principal office,
insured to your satisfaction, the Notes sold to you hereunder and any
Notes delivered to you upon any substitution of Notes pursuant to section
15 and of your delivering any Notes, insured to your satisfaction, upon
any such substitution; (c) the reasonable fees, expenses and
disbursements of one special counsel for the holders of the Notes (and,
in addition, any local counsel determined by the holders of the Notes to
be necessary in the circumstances) in connection with such transactions
and any such amendments or waivers; and (d) the reasonable out-of-pocket
expenses incurred by you in connection with such transactions and any
such amendments or waivers. The Company also will pay, and will save you
and each holder of any Notes harmless from, all claims in respect of the
fees, if any, of brokers and finders and any and all liabilities with
respect to any taxes (including interest and penalties) which may be
payable in respect of the execution and delivery of this Agreement, the
issue of the Notes and any amendment or waiver under or in respect of
this Agreement or the Notes. The obligation of the Company under this
section 17 shall survive any disposition or payment of the Notes and the
termination of this Agreement.
47
18. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Agreement or made in
writing by or on behalf of the Company in connection with the
transactions contemplated by this Agreement shall survive the execution
and delivery of this Agreement, any investigation at any time made by you
or on your behalf, the purchase of the Notes by you under this Agreement
and any disposition or payment of the Notes. All statements contained in
any certificate or other instrument delivered by or on behalf of the
Company pursuant to this Agreement or in connection with the transactions
contemplated by this Agreement shall be deemed representations and
warranties of the Company under this Agreement.
19. AMENDMENTS AND WAIVERS. Any term of this Agreement or
of the Notes may be amended and the observance of any term of this
Agreement or of the Notes may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with
the written consent of the Company and the holders of at least 66.7% in
principal amount of the Notes at the time outstanding (subject to section
15.4), provided that, without the prior written consent of the holders of
all the Notes at the time outstanding (subject to section 15.4), no such
amendment or waiver shall (a) change the maturity or the principal amount
of, or reduce the rate or change the time of payment of interest on, or
change the amount or the time of payment of any principal or premium
payable on any prepayment of, any Note, (b) reduce the aforesaid
percentages of the principal amount of the Notes the holders of which are
required to consent to any such amendment or waiver, (c) change the
percentage of the principal amount of the Notes the holders of which may
declare the Notes to be due and payable as provided in section 11,
(d) modify the proviso to the first sentence of section 11, or
(e) decrease the percentage of the principal amount of the Notes the
holders of which may rescind and annul any such declaration as provided
in section 11. Any amendment or waiver effected in accordance with this
section 19 shall be binding upon each holder of any Note at the time
outstanding, each future holder of any Note and the Company.
20. NOTICES, ETC. Except as otherwise provided in this
Agreement, notices and other communications under this Agreement shall be
in writing and shall be delivered by hand or courier service, or mailed
by registered or certified mail, return receipt requested, addressed,
(a) if to you, at the address set forth in Schedule A or at such other
address as you shall have furnished to the Company in writing, except as
otherwise provided in section 16.2 with respect to payments on Notes held
by you or your nominee, or (b) if to any other holder of any Note, at
such address as such other holder shall have furnished to the Company in
writing, or, until any such other holder so furnishes to the Company an
address, then to and at the address of the last holder of such Note who
has furnished an address to the Company, or (c) if to the Company, at its
address set forth at the beginning of this Agreement, to the attention of
Chief Financial Officer, or at such other address, or to the attention of
such other officer, as the Company shall have furnished to you and each
such other holder in writing. Any notice so addressed and delivered by
hand or courier shall be deemed to be given when received, and any notice
so addressed and mailed by registered or certified mail shall be deemed
to be given three business days after being so mailed.
48
21. SUBMISSION TO JURISDICTION. The Company, for itself and
its successors and assigns, hereby irrevocably (a) agrees that any legal
or equitable action, suit or proceeding against the Company arising out
of or relating to this Agreement or any transaction contemplated hereby
or the subject matter of any of the foregoing may be instituted in any
state or federal court in the State of New York, (b) waives any objection
which it may now or hereafter have to the venue of any action, suit or
proceeding, and (c) irrevocably submits itself to the nonexclusive
jurisdiction of any state or federal court of competent jurisdiction in
the State of New York for purposes of any such action, suit or
proceeding. Nothing contained in this section 21 shall be deemed to
affect the rights of the Purchasers or any subsequent holder of a Note to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Company in any jurisdiction.
22. MISCELLANEOUS. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto, whether so expressed or not, and, in
particular, shall inure to the benefit of and be enforceable by any
holder or holders at the time of the Notes or any part thereof. Except
as stated in section 18, this Agreement embodies the entire agreement and
understanding between you and the Company and supersedes all prior
agreements and understandings relating to the subject matter hereof.
This Agreement and the Notes shall be construed and enforced in
accordance with and governed by the law of the State of New York. The
headings in this Agreement are for purposes of reference only and shall
not limit or otherwise affect the meaning hereof. 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.If
you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterparts of this letter and return one
of the same to the Company, whereupon this letter shall become a binding
agreement between you and the Company.
Very truly yours,
XXXXX TICONDEROGA COMPANY
By: /s/ Xxxxxxx X. Xxxx
----------------------------
Xxxxxxx X. Xxxx
Title: EVP & Chief Financial
Officer
49
The foregoing Agreement is
hereby agreed to as of the
date thereof.
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
By: /s/ U. Xxxxx Xxxxxxxx
-------------------------
U. Xxxxx Xxxxxxxx
Title: Investment Officer
XXXX XXXXXXX MUTUAL LIFE INSURANCE COMPANY
By: /s/ Xxxx Xxxxxxx
-------------------------
Xxxx Xxxxxxx
Title: Senior Investment
Officer
SIGNATURE 1A (CAYMAN), LTD.
By: Xxxx Xxxxxxx Mutual Life Insurance Company,
Portfolio Advisor
By: /s/ Xxxx Xxxxxxx
-------------------------
Xxxx Xxxxxxx
Title: Senior Investment
Officer
