Exhibit 4.1
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AMERICAN BILTRITE INC.
AMENDED AND RESTATED NOTE PURCHASE AGREEMENT
AND FACILITY GUARANTEE
$20,000,000
7.91% Senior Notes Due August 28, 2010
Dated as of May 20, 2005
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TABLE OF CONTENTS
(not part of agreement)
1. AUTHORIZATION OF ISSUE OF NOTES.............................................1
1A. Authorization of Issue of Notes......................................1
1B. Facility Guarantee...................................................2
2. PURCHASE AND SALE OF NOTES..................................................2
2A. Purchase and Sale of Notes...........................................2
2B. Leverage Fee.........................................................2
3. CONDITIONS TO EFFECTIVENESS OF AMENDMENT AND RESTATEMENT....................3
3A. Certain Documents....................................................3
3B. Representations and Warranties; No Default...........................4
3C. Approvals and Consents...............................................4
3D. Payment of Fees......................................................4
3E. Proceedings and Documents............................................4
4. PREPAYMENTS.................................................................4
4A. Required Prepayments of Notes........................................5
4B. Reserved.............................................................5
4C. Optional Prepayment..................................................5
4D. Notice of Optional Prepayment........................................5
4E. Application of Prepayments...........................................5
4F. No Acquisition of Notes..............................................5
4G. Cancellation of Notes................................................5
5. AFFIRMATIVE COVENANTS.......................................................6
5A. Financial Statements.................................................6
5B. Information Required by Rule 144A....................................7
5C. Inspection of Property; Books and Records............................7
5D. Covenant to Secure Notes Equally.....................................8
5E. Maintenance of Properties............................................8
5F. Maintenance of Insurance.............................................8
5G. Compliance with Environmental Laws...................................8
5H. ERISA Notices........................................................9
5I. Payment of Taxes and Claims..........................................9
5J. Corporate Existence, Etc............................................10
5K. Compliance With Laws, Etc...........................................10
5L. New Borrowers or Guarantors Under Bank Agreement....................10
5M. Types of Business...................................................10
5N. Compliance with Material Agreements.................................10
5O. Business Interruption Insurance.....................................10
5P. Other Reports.......................................................10
5Q. Notice of Litigation, Defaults, etc.................................11
5R. Additional Collateral...............................................11
5S. Other Covenants.....................................................11
6. NEGATIVE COVENANTS.........................................................11
6A. Financial Ratios....................................................11
6B. Net Worth...........................................................12
6C. Restricted Payments.................................................12
6D. Limitations on Liens................................................12
6E. Merger and Consolidation............................................14
6F. Restricted Investments..............................................15
6G. Restrictions on Restricted Subsidiaries.............................16
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6H. Non-economic ▇▇▇▇▇▇▇▇▇..............................................▇▇
▇▇. Sale or Discount of Receivables.....................................17
6J. Transactions with Affiliates........................................17
6K. Assumption of Debt of Congoleum.....................................17
6L. Hedging Agreements..................................................17
6M. Indebtedness........................................................17
6N. Voluntary Prepayments of Other Indebtedness.........................18
6O. Congoleum...........................................................19
6P. Sale of Assets......................................................19
6Q. American Biltrite (Canada) Ltd......................................19
7. DEFAULTS; REMEDIES.........................................................19
7A. Events of Default...................................................19
7B. Rescission of Acceleration..........................................23
7C. Notice of Acceleration or Rescission................................23
7D. Other Remedies......................................................23
8. REPRESENTATIONS, COVENANTS AND WARRANTIES..................................23
8A. Organization; Authority; Enforceability.............................24
8B. Business; Financial Statements......................................24
8C. Actions Pending.....................................................25
8D. Outstanding Debt....................................................25
8E. Title to Properties.................................................25
8F. Taxes...............................................................25
8G. Conflicting Agreements and Other Matters............................25
8H. Offering of Notes and Facility ▇▇▇▇▇▇▇▇▇............................▇▇
▇▇. Use of Proceeds.....................................................26
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8J. ERISA...............................................................26
8K. Governmental Consent................................................27
8L. Environmental Compliance............................................27
8M. Disclosure..........................................................27
8O. Patents and Trademarks..............................................27
8P. Regulatory Status...................................................28
8Q. Material Agreements.................................................28
9. RESERVED..................................................................28
10. DEFINITIONS AND ACCOUNTING MATTERS........................................28
10A. Yield-Maintenance Terms.............................................28
10B. Other Defined Terms.................................................29
10C. Accounting Terms And Determinations.................................40
11. FACILITY GUARANTEE........................................................41
11A. Guaranteed Obligations..............................................41
11B. Payments and Performance............................................41
11C. Releases............................................................41
11D. Waivers.............................................................42
11E. Marshaling..........................................................43
11F. Immediate Liability.................................................44
11G. Primary Obligations.................................................44
11H. No Reduction or Defense.............................................44
11I. Subordination.......................................................46
11J. No Election.........................................................46
11K. Severability........................................................46
11L. Appropriations......................................................46
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11M. Other Enforcement Rights............................................46
11N. Invalid Payments....................................................47
11O. No Waivers or Election of Remedies; Expenses; etc...................47
11P. Restoration of Rights and Remedies..................................47
11Q. No Setoff or Counterclaim...........................................47
11R. Further Assurances..................................................47
11S. Survival............................................................47
11T. Acknowledgment of Common Interests; etc.............................48
12. MISCELLANEOUS.............................................................48
12A. Note Payments.......................................................48
12B. Expenses............................................................48
12C. Consent to Amendments...............................................48
12D. Form, Registration, Transfer and Exchange of Notes; Lost Notes......49
12E. Persons Deemed Owners; Participations...............................49
12F. Survival of Representations and Warranties; Entire Agreement........50
12G. Successors and Assigns..............................................50
12H. Independence of Covenants...........................................50
12I. Notices.............................................................50
12J. Payments Due on Non-Business Days...................................51
12K. Severability........................................................51
12L. Descriptive Headings................................................51
12M. Satisfaction Requirement............................................51
12N. Governing Law.......................................................51
12O. Severalty of Obligations............................................51
12P. Counterparts........................................................51
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12Q. Binding Agreement...................................................51
12R. Reaffirmation of Guaranty...........................................51
12S. Acknowledgment of Perfection of Security Interest...................52
Exhibits and Schedules
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Annex I
Purchaser Schedule
Information Schedule
Disclosure Schedules:
Schedule 6D -- Liens
Schedule 6F -- Existing Investments
Schedule 6M-1 -- Existing Indebtedness
Schedule 6M-2 -- Interim CIBC Letters of Credit
Schedule 8A -- List of Subsidiaries
Schedule 8D -- Outstanding Debt
Schedule 8G -- Agreements Restricting Debt
Schedule 8O -- Patents and Trademarks
Schedule 8Q -- Material Agreements
Exhibit A -- Form of Note
Exhibit B - Form of Guarantor Joinder Agreement
Exhibit 1(a) -- Form of Congoleum Plan
Exhibit 1(b) -- Form of Congoleum Plan Note
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AMERICAN BILTRITE INC.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
As of May 20, 2005
The Prudential Insurance Company
of America (herein called "Prudential")
Each Prudential Affiliate (as hereinafter
defined) which becomes bound by certain
provisions of this Agreement as hereinafter
provided (together with Prudential, the "Purchasers")
c/o Prudential Capital Group
1114 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
American Biltrite Inc., a Delaware corporation (the "Company") and
you (sometimes referred individually as a "Purchaser" and collectively as the
"Purchasers") are parties to a certain Note Purchase and Private Shelf Agreement
and Facility Guarantee, dated as of August 28, 2001 (as amended and in effect on
the date hereof, the "Original Note Agreement") pursuant to which Purchasers
have purchased the "Notes" (as defined below). The Company and Purchasers have
agreed to amend the Original Note Agreement in the manner set forth herein. As a
convenience to the Company and Purchasers, the Company and Purchasers have
agreed to effect such amendments by amending and restating the Original Note
Agreement in its entirety as hereinafter set forth, upon and subject to the
terms and conditions hereof. This amendment and restatement is not intended to
be, and shall not be deemed or construed as, a repayment or a novation of the
indebtedness outstanding pursuant to the Original Note Agreement. The Company
and Purchasers hereby agree that the Original Note Agreement is hereby amended
and restated in its entirety to read as follows:
1. AUTHORIZATION OF ISSUE OF NOTES.
1A. Authorization of Issue of Notes. The Company authorized the
issue of its senior promissory notes (the "Notes") in the aggregate principal
amount of $20,000,000, dated as of August 28, 2001, maturing on August 28, 2010,
bearing interest on the unpaid balance thereof from the date thereof until the
principal thereof shall have become due and payable at the rate of 7.91% per
annum and on overdue principal, Yield-Maintenance Amount and interest at the
rate specified therein, and substantially in the form of Exhibit A-1 to the
Original Note Agreement as in effect as of August 28, 2001. The terms "Note" and
"Notes" as used herein shall include each Note delivered pursuant to any
provision of this Agreement and each Note delivered in substitution or exchange
for any such Note
pursuant to any such provision. Any such Notes delivered after the date hereof
will be substantially in the form of Exhibit A attached hereto.
1B. Facility Guarantee. To induce Prudential to enter into the
Original Note Agreement, and to induce the Purchasers to purchase the Notes from
the Company in accordance with the terms of the Original Note Agreement, the
obligations of the Company hereunder and under the Notes are fully and
unconditionally guaranteed by the Guarantors, as provided in paragraph 11
hereof, together with any Guarantor Joinder Agreement(s) delivered pursuant to
paragraph 5L below. As of the date hereof, the Company owns the percentage of
outstanding shares or other equity interest of the Guarantors as set forth on
Schedule 8A and, as a result, the Guarantors will receive a direct financial and
economic benefit from the indebtedness to be incurred by the Company. To induce
Prudential to enter into this Agreement, the Guarantors acknowledge and reaffirm
their guarantee under paragraph 11 hereof and under any Guarantor Joinder
Agreement, after giving effect to the amendment and restatement of the Original
Note Agreement by this Agreement.
2. PURCHASE AND SALE OF NOTES.
2A. Purchase and Sale of Notes. The Company sold to Prudential and
Prudential purchased from the Company the aggregate principal amount of Notes
set forth opposite its name on the Purchaser Schedule attached hereto. On August
28, 2001, the Company delivered to Prudential at the offices of Prudential
Capital Group, 1114 Avenue of the Americas, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, one
or more Notes registered in its name, evidencing the aggregate principal amount
of Notes purchased by Prudential, against payment of the purchase price thereof
by transfer of immediately available funds for credit to the Company's account
#00 535-31885 at Fleet Bank, ABA Routing Number ▇▇▇-▇▇▇-▇▇▇.
2B. Leverage Fee. In addition to interest accruing on the Notes in
accordance with their terms, the Company agrees to pay each holder of Notes in
immediately available funds a fee (the "Leverage Fee") payable in arrears on
each interest payment date for the Notes in an amount per annum equal to a
percentage of the outstanding principal amount of Notes held by such holder
determined in accordance with the following table:
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Leverage Ratio Leverage Fee
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3.5:1.0 or greater 2.00%
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3.0:1.0 or greater, but
less than 3.5:1.0 1.00%
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2.75:1.0 or greater, but
less than 3.0:1.0 0.50%
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2.5:1.0 or greater, but
less than 2.75:1.0 0.25%
-------------------------------------------------------
less than 2.5:1.0 0.0%
-------------------------------------------------------
provided that (i) for the fiscal quarters ending September 30, 2003 and December
31, 2003, the Leverage Fee shall be 2.00%, (ii) the interest payment payable on
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November 28, 2003 shall include the Leverage Fee calculated at 2.00% per annum
in respect of the period between August 28, 2003 and November 28, 2003 and (iii)
for the fiscal quarter ending March 31, 2004 and each fiscal quarter ending
thereafter, the Leverage Fee shall be determined by reference to the above
table, except that at any time the Leverage Fee shall decrease only if a
determination of the Leverage Ratio for each of two consecutive fiscal quarters
would warrant such a decrease
3. CONDITIONS TO EFFECTIVENESS OF AMENDMENT AND RESTATEMENT.This
Agreement shall become effective, upon the satisfaction of the following
conditions:
3A. Certain Documents. The Purchaser shall have received the
following, each dated the Effective Date:
(i) This Agreement, duly executed and delivered by the Company
and each Guarantor.
(ii) Certified copies of (a) the resolutions of the Board of
Directors of the Company, authorizing the execution and delivery of this
Agreement, (b) the resolutions of the Board of Directors of Aimpar, Inc.,
in its capacity as the General Partner of K&M, and (c) the resolutions of
the Board of Directors or manager or sole member, as the case may be, of
K&M Legendary Services, Inc., AbItalia, Inc. American Biltrite Far East,
Inc., and Abimex, LLC, authorizing the execution and delivery of this
Agreement and the other documents to be delivered hereunder.
(iii) A certificate of (a) the Secretary or an Assistant
Secretary and one other officer of the Company, certifying the names and
true signatures of the Secretary of the Company and the officer of the
Company signatory to this Agreement and the other documents to be
delivered hereunder on behalf of the Company and (b) the Secretary or an
Assistant Secretary and one other officer of the General Partner of K&M,
certifying the names and true signatures of the Secretary of the General
Partner and the officer signatory to this Agreement and the other
documents to be delivered hereunder on behalf of K&M; and (c) the
Secretary, Assistant Secretary or Manager, as the case may be, and one
other officer or manager of K&M Legendary Services, Inc., AbItalia, Inc.,
American Biltrite Far East, Inc., and Abimex, LLC, certifying the names
and true signatures of the Secretary or Manager of such Guarantor and the
officer of such Guarantor signatory to this Agreement and the other
documents to be delivered hereunder on behalf of such Guarantor.
(iv) Certified copies of the certificate or articles of
incorporation, bylaws or analogous organizational and governing documents
of the Company, K&M, K&M Legendary Services, Inc., AbItalia, Inc.,
American Biltrite Far East, Inc., Abimex, LLC or certification from the
Secretary or Assistant Secretary or another officer of the Company or such
Guarantor, as the case may be, that such corporate documents have not been
amended, modified or supplemented since their previous delivery to the
Noteholders.
(v) A good standing certificate for the Company, K&M, K&M
Legendary Services, Inc., AbItalia, Inc., American Biltrite Far East,
Inc., and Abimex, LLC, from the Secretary of State (or equivalent
official) of its jurisdiction of organization, in each case dated as of a
recent date and
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such other evidence of the status of the Company and each such Guarantor
as such Purchaser may reasonably request.
(vi) A true and correct copy of the Bank Agreement.
(vii) A true and correct copy of the Canadian Security
Agreement executed by American Biltrite (Canada) Ltd.
(viii) True and correct copies of the Joinder Agreements.
(ix) An Intercreditor Agreement, in form and substance
satisfactory to Prudential, duly executed by Fleet National Bank, a Bank
of America company, and Bank of America, National Association, acting
through its Canada branch;
(x) Additional documents or certificates with respect to legal
matters or corporate or other proceedings related to the transactions
contemplated hereby as may be reasonably requested by such Purchaser.
3B. Representations and Warranties; No Default. The representations
and warranties contained in this Agreement and those otherwise made in writing
by or on behalf of the Company or any Guarantor in connection with the
transactions contemplated by this Agreement shall be true on and as of the
Effective Date; there shall exist on the Effective Date no Event of Default or
Default; the Company and each Guarantor shall have performed or complied with
all matters required to be performed or complied with by each of them hereunder;
there shall have been no material adverse change in the business, financial
condition or operations of the Company and its Subsidiaries, taken as a whole,
since December 31, 2004; and the Company shall have delivered to such Purchaser
an Officer's Certificate, dated the Effective Date to each such effect.
3C. Approvals and Consents. The Company and each Guarantor shall
have duly received all material authorizations, consents, approvals, licenses,
franchises, permits and certificates by or of all United States federal, state
and local governmental authorities and any third parties necessary in connection
with the transactions contemplated hereby, and all thereof shall be in full
force and effect on the Effective Date. Any consent from the shareholders of the
Company required to be obtained in connection with the transactions contemplated
herein shall have been obtained. The Company shall have delivered an Officer's
Certificate to such Purchaser, dated the Effective Date, to such effect.
3D. Payment of Fees. The Company shall have paid to Prudential an
amendment fee of $30,000.
3E. Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory to you, and you shall have received all such counterpart originals
or certified or other copies of such documents as you may reasonably request.
4. PREPAYMENTS. The Notes shall be subject to the required
prepayments specified in paragraphs 4A. The Notes shall also be subject to
prepayment under the circumstances set forth in paragraph 4C. Any prepayment
made by the Company pursuant to any other provision of this paragraph 4 shall
not reduce or otherwise affect its obligation to make any required prepayment as
specified in paragraph 4A.
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4A. Required Prepayments of Notes. Until the Notes shall be paid in
full, the Company shall apply to the prepayment of the Notes, without
Yield-Maintenance Amount, the sum of $4,000,000 on August 28 in each of the
years 2006 to 2009, inclusive, and such principal amounts of the Notes, together
with interest thereon to the payment dates, shall become due on such payment
dates. The remaining unpaid principal amount of the Notes, together with
interest accrued thereon, shall become due on the maturity date of the Notes.
4B. Reserved.
4C. Optional Prepayment. The Notes shall be subject to prepayment,
in whole or from time to time in part (in an amount of at least $1,000,000 and
any larger integral multiples of $100,000), at the option of the Company, at
100% of the principal amount so prepaid plus interest accrued thereon to the
prepayment date and the Yield-Maintenance Amount, if any, with respect to each
such Note. Any partial prepayment of the Notes pursuant to this paragraph 4C
shall be applied in satisfaction of required payments of principal in inverse
order of their scheduled due dates.
4D. Notice of Optional Prepayment. The Company shall give the holder
of each Note to be prepaid pursuant to paragraph 4C irrevocable written notice
of such prepayment not less than 10 Business Days prior to the prepayment date,
specifying such prepayment date, the aggregate principal amount of the Notes,
and of the Notes held by such holder, to be prepaid on such date and stating
that such prepayment is to be made pursuant to paragraph 4C. Notice of
prepayment having been given as aforesaid, the principal amount of the Notes
specified in such notice, together with interest thereon to the prepayment date
and together with the Yield-Maintenance Amount, if any, herein provided, shall
become due and payable on such prepayment date. The Company shall, on or before
the day on which it gives written notice of any prepayment pursuant to paragraph
4C, give telephonic notice or notice by facsimile machine of the principal
amount of the Notes to be prepaid and the prepayment date to each holder of
Notes which shall have designated a recipient of such notices in the Purchaser
Schedule attached hereto or by notice in writing to the Company.
4E. Application of Prepayments. Upon any partial prepayment of Notes
pursuant to paragraph 4A or 4C, the principal amount to be prepaid shall be
applied pro rata to all outstanding Notes according to the respective unpaid
principal amounts thereof.
4F. No Acquisition of Notes. The Company shall not, and shall not
permit any of its Subsidiaries or Affiliates to, prepay or otherwise retire in
whole or in part prior to their stated final maturity (other than by prepayment
pursuant to paragraph 4A or 4C or upon acceleration of such final maturity
pursuant to paragraph 7A), or purchase or otherwise acquire, directly or
indirectly, Notes held by any holder unless the Company, or such Subsidiary or
Affiliate, shall have offered to prepay or otherwise retire or purchase or
otherwise acquire, as the case may be, the same proportion of the aggregate
principal amount of Notes held by each other holder of Notes at the time
outstanding. Any Notes so prepaid or otherwise retired or purchased or otherwise
acquired by the Company or any of its Subsidiaries or Affiliates shall not be
deemed outstanding for any purpose under this Agreement.
4G. Cancellation of Notes. Any Notes acquired pursuant to paragraph
4A or 4C, or otherwise acquired by or on behalf of the Company or a Subsidiary,
shall be canceled and shall not be reissued and shall not be deemed to be
outstanding for any purpose of this Agreement. Any Note held by any Affiliate of
the Company shall not be deemed outstanding for the purpose of determining the
aggregate
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principal amount of Notes outstanding for purposes of determining whether or not
any specified percentage of holders of outstanding Notes have given any consent
or taken any other action hereunder.
5. AFFIRMATIVE COVENANTS. So long as any Note is outstanding and
unpaid, the Company covenants as follows:
5A. Financial Statements. The Company covenants that it will deliver
to each holder of any Note in triplicate:
(i) as soon as practicable and in any event within 45 days
after the end of each quarterly period (other than the last quarterly
period) in each fiscal year, consolidating and consolidated statements of
income and cash flows and a consolidated statement of shareholders' equity
of the Company and its Restricted Subsidiaries for the period from the
beginning of the current fiscal year to the end of such quarterly period,
and a consolidating and consolidated balance sheet of the Company and its
Restricted Subsidiaries as at the end of such quarterly period, setting
forth in each case in comparative form figures for the corresponding
period in the preceding fiscal year, all in reasonable detail and
satisfactory in form to the Required Holder(s) and certified by an
authorized financial officer of the Company, subject to changes resulting
from year-end adjustments;
(ii) as soon as practicable and in any event within 90 days
after the end of each fiscal year, consolidating and consolidated
statements of income and cash flows and a consolidated statement of
shareholders' equity of the Company and its Restricted Subsidiaries for
such year, and a consolidating and consolidated balance sheet of the
Company and its Restricted Subsidiaries as at the end of such year,
setting forth in each case in comparative form corresponding consolidated
figures from the preceding fiscal year, all in reasonable detail and
satisfactory in form to the Required Holder(s) and, as to the
consolidating statements, certified by an authorized financial officer of
the Company;
(iii) as soon as practicable and in any event within 90 days
after the end of each fiscal year, a report by independent public
accountants of recognized national standing selected by the Company,
containing no material qualification and stating that they have audited
the consolidated financial statements of the Company and its Subsidiaries
in accordance with the standards of the Public Company Accounting
Oversight Board (United States) (or such relevant successor standards) and
that such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and its
Subsidiaries at the dates thereof and the results of their operations for
the periods covered thereby in conformity with generally accepted
accounting principles, such report to be satisfactory in substance to the
Required Holder(s);
(iv) promptly upon transmission thereof, (a) copies of all
such financial statements, proxy statements, notices and reports as it
shall send to its public shareholders, (b) copies of all registration
statements (without exhibits), proxy statements and reports, including
Forms ▇-▇, ▇-▇, ▇-▇, ▇-▇, 10-K, 10-Q and 8-K and all reports which it or
any of its Subsidiaries publicly files with the Securities and Exchange
Commission (or any governmental body or agency succeeding to the functions
of the
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Securities and Exchange Commission), not later than the date on which the
same are required to be filed and (c) copies of all press releases;
(v) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any Subsidiary by independent accountants in
connection with any annual, interim or special audit made by them of the
books of the Company or any Subsidiary which constitutes a "significant
subsidiary" within the meaning of Regulation S-X of the Securities and
Exchange Commission (including management letters submitted to the board
of directors of the Company or any such Subsidiary); and
(vi) with reasonable promptness, such other information with
respect to the business, finances and affairs of the Company and its
Subsidiaries as such holder may reasonably request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each holder of any Notes an Officer's
Certificate demonstrating (with computations in reasonable detail) compliance by
the Company and its Subsidiaries with the provisions of paragraphs 6A, 6B, 6C,
6D or 6F and stating that there exists no Event of Default or Default, or, if
any Event of Default or Default exists, specifying the nature and period of
existence thereof and what action the Company has taken or proposes to take with
respect thereto.
The Company also covenants that promptly after any Responsible
Officer obtains actual knowledge that any existing state of facts or
circumstances constitutes an Event of Default or Default (and in any event
within 5 Business Days of obtaining such knowledge), it will deliver to each
holder of any Note an Officer's Certificate specifying the nature and period of
existence thereof and what action the Company has taken or proposes to take with
respect thereto.
5B. Information Required by Rule 144A. The Company covenants that it
will, upon the request of the holder of any Note, provide such holder, and any
qualified institutional buyer permitted to purchase any Note under the terms of
this Agreement designated by such holder, such financial and other information
as such holder may reasonably determine to be necessary in order to permit
compliance with the information requirements of Rule 144A under the Securities
Act in connection with the resale of Notes, except at such times as the Company
is subject to the reporting requirements of section 13 or 15(d) of the Exchange
Act. For the purpose of this paragraph 5B, the term "qualified institutional
buyer" shall have the meaning specified in Rule 144A under the Securities Act.
5C. Inspection of Property; Books and Records. The Company covenants
that it will permit any Person designated in writing by any Significant Holder,
at the Company's expense while an Event of Default is continuing and otherwise
at such Significant Holder's expense, to visit and inspect any of the properties
of the Company and its Subsidiaries, to examine the corporate books and
financial records of the Company and its Subsidiaries and make copies thereof or
extracts therefrom and to discuss the affairs, finances and accounts of any of
such corporations with the principal officers thereof or with its independent
public accountants (and by this provision the Company hereby agrees that it will
make such officers available for any such discussion and authorizes such
accountants to discuss such matters with such Person), all at such reasonable
times, upon reasonable notice, and as often as such Significant Holder may
reasonably request. The Company will maintain or cause to be maintained the
books of record
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and account of the Company and its Subsidiaries in good order in accordance with
sound business and financial practice and its financial statements (including
those required to be delivered pursuant to paragraph 5A) prepared in accordance
with generally accepted accounting principles.
5D. Covenant to Secure Notes Equally. The Company covenants that if
it or any Restricted Subsidiary shall create or assume any Lien upon any of its
property or assets, whether now owned or hereafter acquired, other than Liens
permitted by the provisions of paragraph 6D (unless prior written consent to the
creation or assumption thereof shall have been obtained pursuant to paragraph
12C), it will make or cause to be made effective provision satisfactory in form
and substance to the Required Holder(s) (including, without limitation, opinions
of counsel relating thereto) whereby the Notes will be secured by such Lien
equally and ratably with any and all other Debt thereby secured so long as any
such other Debt shall be so secured. Securing the Notes as provided in this
paragraph 5D shall not permit the existence of any Lien not permitted by
paragraph 6D.
5E. Maintenance of Properties. The Company will maintain or cause to
be maintained in good repair, working order and condition all properties used in
or necessary for the operation of the business of the Company and its Restricted
Subsidiaries (ordinary wear and tear excepted) and from time to time will make
or cause to be made all reasonable repairs, renewals and replacements thereof,
all to the extent material to the business and operations of the Company and its
Restricted Subsidiaries taken as a whole. The Company will procure and maintain
in full force and effect all franchises, certificates, licenses, permits and
other authorizations from governmental political subdivisions or regulatory
authorities and all patents, trademarks, service marks, trade names, copyrights,
licenses and other rights, in each case that are necessary in any material
respect for the ownership, maintenance and operation of the business and
operations of the Company and its Restricted Subsidiaries taken as a whole.
5F. Maintenance of Insurance. The Company covenants that it and each
of its Restricted Subsidiaries will maintain with financially sound and
reputable insurers insurance against fire, explosion, hazards insured against by
extended coverage and liability for other hazards and risks, and insurance
against liability to Persons and for property damage, all to the extent and in
the manner as is customarily maintained by other companies of established
reputation operating comparable or similar businesses.
5G. Compliance with Environmental Laws. The Company will, and will
cause each of its Subsidiaries and each of its Affiliates that are controlled by
the Company or its Subsidiaries to, comply with, or operate pursuant to valid
waivers of, applicable Environmental Laws and Environmental Permits, including,
without limitation, to the extent required by applicable Environmental Laws or
Environmental Permits, conducting, on a timely basis, periodic tests and
monitoring for contamination of ground water, surface water, air and land and
for biological toxicity and completing proper, thorough and effective clean-up,
removal, remediation and/or restoration, except to the extent that failure so to
comply with any Environmental Law or Environmental Permit does not have a
material adverse effect on the business, financial condition or operations of
the Company and its Restricted Subsidiaries, taken as a whole, and, except that,
with respect to any testing, monitoring, clean-up, removal, remediation or other
such action required pursuant to such law or permits, neither the Company nor
any of its Subsidiaries or Affiliates shall be required to perform any such
action if the applicability or validity thereof is being contested in good faith
by appropriate proceedings and adequate reserves have been established in
accordance with generally accepted accounting principles.
8
5H. ERISA Notices. The Company covenants that it shall deliver to
each Significant Holder, promptly upon the Company or its Subsidiaries or any of
their respective ERISA Affiliates:
(i) giving or being required to give notice to the PBGC of any
"reportable event" (as defined in section 4043 of ERISA) with respect to
any Plan which might constitute grounds for a termination of such Plan
under Title IV of ERISA by the PBGC, or becoming aware that any plan
administrator of any Plan has given or is required to give notice of any
such "reportable event", a copy of the notice of such reportable event
given or which should have been given to the PBGC;
(ii) receiving notice of the Company's or an ERISA Affiliate's
complete or partial withdrawal from a Multiemployer Plan under Title IV of
ERISA, or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice;
(iii) receiving notice from the PBGC under Title IV of ERISA
of its intent to terminate, impose liability (other than for premiums
under section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice;
(iv) applying for a waiver of the minimum funding standard
under section 412 of the Code, a copy of such application;
(v) giving notice to the PBGC of intent to terminate any Plan
under section 4041(c) of ERISA, a copy of such notice and other
information filed with the PBGC;
(vi) giving notice to the PBGC of withdrawal from any Plan
pursuant to section 4063 of ERISA, a copy of such notice; or
(vii) failing to make any required payment or required
contribution to any Plan or Multiemployer Plan or making any amendment to
any Plan which has resulted in the posting of a bond or other security, a
certificate of the chief financial officer or the chief accounting officer
of the Company setting forth details as to such occurrence and the action,
if any, which the Company is required to take.
5I. Payment of Taxes and Claims. The Company will pay or discharge,
or cause to be paid or discharged, before the same shall become delinquent (i)
all taxes, assessments and governmental charges (including claims of the IRS and
the PBGC and claims made at the insistence of the PBGC) levied or imposed upon
it or any ERISA Affiliate or any Code Affiliate or upon its or their income,
profits or property, (ii) all lawful claims for labor, materials and supplies,
which, if unpaid, might by law become a Lien upon its or its Subsidiaries,
properties, and (iii) all required installments under section 412(m) of the Code
and all other required payments under section 412 of the Code with respect to
any Plan maintained by the Company or any ERISA Affiliate; provided, however,
that, in the case of clause (i) and (ii) above, the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim, the applicability or validity of which is being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with generally accepted accounting
principles.
9
5J. Corporate Existence, Etc. Subject to the provisions of paragraph
6E, the Company will at all times preserve and keep in full force and effect its
and its Restricted Subsidiaries', corporate existence, and will qualify, and
cause each of its Restricted Subsidiaries to qualify, to do business in any
jurisdiction where the failure to do so would have a material adverse effect on
the business, financial condition or operations of the Company and its
Restricted Subsidiaries taken as a whole.
5K. Compliance With Laws, Etc. The Company will comply and cause its
Restricted Subsidiaries to comply with the requirements of all applicable laws,
rules, regulations and judicial or administrative orders and judgments of any
court or governmental authority (including those relating to environmental
protection, employee benefits and welfare and employee safety), the
noncompliance with which would materially adversely affect the business,
financial condition or operations of the Company and its Restricted Subsidiaries
taken as a whole.
5L. New Borrowers or Guarantors Under Bank Agreement. The Company
covenants that, if any Subsidiary becomes a "Domestic Borrower" or "Guarantor",
as such terms are defined in the Bank Agreement in effect on the Effective Date,
(a) the Company shall cause such Subsidiary to become simultaneously a Guarantor
by executing and delivering to the Purchasers a Guarantor Joinder Agreement,
together with such other agreements, opinions, organizational documents and
other documents as the Required Holder(s) may reasonably request and (b)
notwithstanding any provision hereof to the contrary, such Subsidiary shall
constitute a Restricted Subsidiary for all purposes hereunder.
5M. Types of Business. The Company and its Subsidiaries shall engage
only in the business as they are currently engaged in and other activities
related thereto.
5N. Compliance with Material Agreements. Each of the Company and its
Subsidiaries shall comply in all material respects with the Material Agreements
(to the extent not in violation of the other provisions of this Agreement or any
other Collateral Document). Without the prior written consent of the Required
Holders, no Material Agreement shall be amended, modified, waived or terminated
in any manner that would have in any material respect an adverse effect on the
interests of the holders of the Notes.
5O. Business Interruption Insurance. Each of the Company and its
Subsidiaries shall maintain with financially sound and reputable insurers
insurance related to interruption of business, either for loss of profits or for
extra expense, in the manner customary for businesses of similar size engaged in
similar activities.
5P. Other Reports. The Company shall promptly furnish to the
Lenders:
(i) As soon as prepared and in any event before the beginning
of each fiscal year, an annual budget and operating projections for such
fiscal year of the Company and its Subsidiaries, prepared in a manner
consistent with the manner in which the financial statements described in
paragraph 5A were prepared.
(ii) Any material updates of such budget and projections, if
requested by the holder of any Note.
(iii) Any management letters furnished to the Company or any
of its Subsidiaries by the Company's auditors, if requested by the holder
of any Note.
10
(iv) All budgets, projections, statements of operations and
other reports furnished generally to the shareholders of the Company.
(v) Any 90-day letter or 30-day letter from the federal
Internal Revenue Service (or the equivalent notice received from state or
other taxing authorities) asserting tax deficiencies against the Company
or any of its Subsidiaries.
5Q. Notice of Litigation, Defaults, etc. The Company shall promptly
furnish to the holders of any Notes notice of any litigation or any
administrative or arbitration proceeding (a) which creates a material risk of
resulting, after giving effect to any applicable insurance, in the payment by
the Company and its Subsidiaries of more than $500,000 or (b) which results, or
creates a material risk of resulting, in a Material Adverse Change. Promptly
upon acquiring knowledge thereof, the Company shall notify the Lenders of the
existence of any Default or Material Adverse Change, specifying the nature
thereof and what action the Company or any of its Subsidiaries has taken, is
taking or proposes to take with respect thereto.
5R. Additional Collateral. With respect to any property described in
Section 3 of the Security Agreement as "Credit Security" acquired after the date
of this Agreement, the Company shall at its own expense, execute, acknowledge
and deliver, or cause the execution, acknowledgment and delivery of, and
thereafter register, file or record in an appropriate governmental office, any
document or instrument reasonably deemed by the Required Holders to be necessary
or desirable for the creation and perfection of the Liens created pursuant to
the Collateral Documents.
5S. Other Covenants. If (in the reasonable opinion of the Required
Holders) at any time and from time to time, after the date hereof, any of the
covenants, representations and warranties or events of default, or any other
material term or provision (other than any term or provision relating to payment
terms, interest rates, fees or penalties or terms included in or contemplated by
the Bank Agreement as in effect on the Effective Date), contained in any
document, agreement or instrument from time to time entered into by the Company
in respect of Indebtedness, is more favorable to the lenders thereunder than are
the terms of this Agreement to the holders of the Notes, the Company and each
holder of Notes agree that thereafter this Agreement shall be amended to contain
each such more favorable covenant, representation and warranty, event of
default, term or provision, and the Company hereby agrees further to so amend
this Agreement and to execute and deliver all such documents requested in
writing by the Required Holder(s) to reflect such amendment. Prior to the
execution and delivery of such documents by the Company, this Agreement shall be
deemed to contain each such more favorable covenant, representation and
warranty, event of default, term or provision for purposes of determining the
rights and obligations hereunder.
6. NEGATIVE COVENANTS.
6A. Financial Ratios. The Company covenants that, from and as of the
Effective Date through and including June 30, 2006, it will not permit the items
specified in Annex I hereto, and thereafter, as follows, in each case determined
at the end of each fiscal quarter:
(i) Current Ratio. The ratio of Current Assets to Current
Liabilities to be less than 1.5 to 1.0, as of the fiscal quarter ending
September 30, 2006 and each fiscal quarter ending thereafter.
11
(ii) Fixed Charge Coverage Ratio. The ratio of Consolidated
Adjusted EBITDA for the period of four consecutive fiscal quarters to
Consolidated Fixed Charges for such period to be less than 2.00 to 1.00
for the fiscal quarter ending September 30, 2006 and each fiscal quarter
thereafter.
(iii) Debt Levels. Debt of the Company and its Restricted
Subsidiaries to exceed 45% of Consolidated Tangible Gross Worth as of the
quarter ending September 30, 2006 and each fiscal quarter ending
thereafter.
(iv) Priority Debt. Priority Debt to exceed 15% of
Consolidated Tangible Gross Worth as of the fiscal quarter ending
September 30, 2006 and each fiscal quarter ending thereafter.
(v) Leverage Ratio. The Leverage Ratio to exceed 2.50 to 1.00
as of September 30, 2006 and each fiscal quarter ending thereafter.
6B. Net Worth. The Company will not permit, as at the end of each
fiscal quarter ending on or after September 30, 2006, Consolidated Tangible Net
Worth to be less than the sum of (i) $45,000,000, plus (ii) 50% of Consolidated
Net Income Available for Tangible Net Worth for the period from December 31,
2002 to and including the most recent quarter ended prior to the measurement
date.
6C. Restricted Payments. The Company will not, directly or
indirectly, declare, order, pay, make or set apart any sum or property for any
Restricted Payment in excess of an amount equal to the sum of (i) $6,000,000,
plus (ii) 50% of Consolidated Net Income for the period from December 31, 2000
to and including the most recent quarter ended prior to the measurement date,
minus (iii) the aggregate amount of all Restricted Payments declared, ordered,
paid, made or set apart after December 31, 2000, provided that the Company shall
not make any Restricted Payments if (a) there shall exist any Default or Event
of Default or (b) immediately after such Restricted Payment a Default or Event
of Default would occur.
6D. Limitations on Liens. The Company covenants that neither it nor
any of its Restricted Subsidiaries will create, assume or suffer to exist any
Lien upon any of its Property or assets (including, without limitation, any
capital stock of a Restricted Subsidiary owned by the Company or any
Subsidiary), whether now owned or hereafter acquired and whether or not
provision is made for equally and ratably securing the Notes as provided in
paragraph 5D; provided, however, that the foregoing restriction and limitation
shall not apply to the following Liens:
(i) Liens existing on the date hereof and listed on Schedule
6D;
(ii) Liens for taxes, assessments or governmental charges or
levies not yet delinquent or which are being contested in good faith by
appropriate proceedings for which adequate reserves have been established
in accordance with, and as permitted by, paragraph 5I;
(iii) Liens imposed by law, such as carriers', landlords',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations not more
than 30 days past due or which are being contested in good faith by
appropriate proceedings as permitted by paragraph 5I;
12
(iv) Liens consisting of encumbrances in the nature of zoning
restrictions, easements, rights and restrictions on the use of real
property on the date of the acquisition thereof, which in any case do not
materially detract from the value of such property or impair the Company's
or any Restricted Subsidiary's use thereof;
(v) Liens (other than ERISA Liens) incurred or deposits made
in the ordinary course of business:
(a) in connection with workers' compensation, unemployment
insurance and other types of social security, or
(b) to secure (or to obtain letters of credit that secure)
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, performance bonds, sales contracts and other
similar obligations, in each case, not incurred in connection with
the obtaining of credit or the payment of a deferred purchase price,
and which do not, in the aggregate, materially detract from the
value of the Company's or any Restricted Subsidiary's property or
assets or impair the use thereof or operation of its business;
(vi) Liens consisting of Capitalized Leases, Synthetic Lease
Obligations or Liens on property existing at the time of acquisition or
placed on property being acquired or constructed to secure the purchase
price or cost thereof or Debt incurred to finance such purchase or
construction; provided that (a) the property is not encumbered in excess
of the lesser of the cost or fair market value thereof, (b) the Lien is
confined to the property so acquired or constructed, and (c) no Default or
Event of Default has occurred and is continuing;
(vii) any Lien renewing or extending any Lien permitted by
clause (i) or (vi), provided that (a) the Debt is not increased or the
weighted average life to maturity thereof reduced, (b) the Lien is not
extended to other property, (c) the Debt secured thereby is permitted
under paragraph 6A, and (d) no Default or Event of Default is in
existence;
(viii) other Liens not otherwise permitted, provided that the
Debt secured by such Liens shall not (a) when aggregated with all other
Priority Debt, exceed 15% of Consolidated Tangible Gross Worth, (b)
violate the provisions of paragraph 6A, and (c) at the time any such Lien
is incurred, exceed the book value, or, if less, the fair market value of
the property subject to such Lien; and
(ix) any pledge by the Company of shares of common stock of
Congoleum held by the Company and any other equity rights the Company has
in Congoleum, which pledge shall serve as collateral for any amounts owed
by Congoleum under the Congoleum Plan Note;
(x) Liens existing as of the date hereof on foreign assets,
which Liens the Company covenants and agrees that it shall not materially
alter nor suffer to exist any material alteration of such Lien;
(xi) any pledge by the Company of amounts receivable under the
Congoleum Joint Venture Agreement to the Congoleum Plan Trust as
additional collateral securing Congoleum's obligations under the Congoleum
Plan Note;
13
(xii) Liens in the nature of non-exclusive licenses of the
Company's or any Subsidiaries' intellectual property (a) in the ordinary
course of business consistent with past practices or (b) to their
respective Affiliates, notwithstanding the requirements of Section 6J;
(xiii) Liens in the nature of a security interest granted by
American Biltrite (Canada) Ltd. to the Bank of America, National
Association, acting through its Canada branch, pursuant to the terms of
the Canadian Security Agreement (as defined in the Bank Agreement) and in
connection with the credit facility entered into between American Biltrite
(Canada) Ltd. and the Bank of America, National Association, acting
through its Canada branch, pursuant to the Bank Agreement; and
(xiv) Liens in favor of the Collateral Agent securing both the
Obligations and the obligations under the Bank Agreement;
(xv) Until one week after the Effective Date, Liens on assets
of American Biltrite (Canada) Ltd. in favor of CIBC; and
(xvi) Until August 1, 2005 only, Liens on assets of American
Biltrite (Canada) Ltd. in favor of CIBC as security for letters of credit
issued under the CIBC Credit Agreement (as defined in the Bank Agreement)
as set forth in Schedule 6M-2; and
(xvii) Until August 1, 2005 only, deposits by American
Biltrite (Canada) Ltd. with CIBC (as defined in the Bank Agreement) to
secure amounts drawn on the CIBC checking accounts or purchasing cards of
American Biltrite (Canada) Ltd., not to exceed $1,000,000.00.
6E. Merger and Consolidation. The Company covenants that it will
not, and will not permit Congoleum or any Restricted Subsidiary to, be a party
to any merger, amalgamation, consolidation, reorganization, reconstruction or
arrangement with any other Person or sell, lease or transfer or otherwise
dispose of all or substantially all of its assets to any Person, except that:
(i) a Restricted Subsidiary may merge or consolidate with, or
sell, lease, transfer or otherwise dispose of all or substantially all of
its assets to, the Company if the Company is the surviving or continuing
corporation;
(ii) a wholly owned Restricted Subsidiary may merge or
consolidate with, or sell, lease, transfer or otherwise dispose of all or
substantially all of its assets to, any other wholly owned Restricted
Subsidiary; and
(iii) any corporation, except Congoleum, may merge or
consolidate with, or sell, lease, transfer or otherwise dispose of all or
substantially all of its assets to, the Company or any wholly owned
Restricted Subsidiary if the Company or such wholly owned Restricted
Subsidiary is the surviving or continuing corporation;
provided, that at the time of such merger, consolidation, sale, transfer or
disposition and after giving effect thereto there shall exist no Default or
Event of Default.
6F. Restricted Investments. The Company will not make or permit a
Restricted Subsidiary to make any Investment, except:
14
(i) loans or advances to any Restricted Subsidiary or to the
Company; provided, however, that no such Investment shall involve the
transfer by the Company or any Restricted Subsidiary of any material
assets other than cash or capital stock of the Company; and provided,
further, that the aggregate amount of Investments in American Biltrite
(Canada) Ltd. at any time outstanding from and after April 22, 2004 shall
not exceed $3,500,000, it being understood that amounts to be paid
pursuant to paragraph 6P(v) shall not be included in this restriction;
(ii) stock, obligations or securities of a wholly owned
Restricted Subsidiary or a corporation which immediately after such
purchase or acquisition will be a Restricted Subsidiary;
(iii) stock, obligations or securities received in settlement
of debts (created in the ordinary course of business) owing to the Company
or any Restricted Subsidiary;
(iv) the following Investments, provided that they are payable
in the United States in United States dollars and are due within one year
from the date of issuance;
(a) commercial paper of a United States issuer rated A1
or better by Standard & Poor's Corporation or P-1 or better by
▇▇▇▇▇'▇ Investors Service, Inc.;
(b) certificates of deposits of commercial banks
organized under the laws of the United States, whose deposits
are at all times insured by the Federal Deposit Insurance
Corporation, having combined capital and surplus in excess of
$500,000,000 and a long-term deposit rating of A or better
from either Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors
Service, Inc.;
(c) marketable direct obligations of, or obligations
unconditionally guaranteed by, the United States Government or
any instrumentality or agency thereof; or
(d) shares of money market mutual or similar funds which
invest exclusively in assets satisfying the requirements of
clauses (a) through (c) above;
(v) equity investments in Congoleum existing at December 31,
2000;
(vi) equity investments in K&M (a) existing on the date of
this Agreement and (b) additional Investments in K&M not to exceed
$2,000,000;
(vii) loans or advances to employees, officers or directors of
the Company or any Restricted Subsidiary in their capacity as such in an
aggregate principal amount not to exceed $1,000,000 at any one time
outstanding;
(viii) Investments by the Company or a Restricted Subsidiary
in connection with the Company's deferred compensation plan (as existing
and in effect on August 28, 2001);
15
(ix) Company-owned life insurance policies which name the
Company as the sole loss payee;
(x) Investments existing on August 28, 2001, and still
continuing on the Effective Date, as listed on Schedule 6F;
(xi) Hedging Agreements permitted under paragraph 6L;
(xii) Investments in the Congoleum Plan Trust permitted by the
Consent Letter, dated as of August 1, 2003, by Prudential in favor of the
Company;
(xiii) Investments consisting of (a) intercompany loans and
advances from any Subsidiary to the Company but in each case only to the
extent reasonably necessary for Consolidated tax planning and working
capital management or (b) intercompany loans and advances among the
Company or any Subsidiary in the ordinary course of business for working
capital management;
(xiv) Investments not otherwise provided for in this Paragraph
6F in Subsidiaries other than Janus Flooring Corporation not to exceed
$500,000 in the aggregate; and
(xv) Investments existing on the Effective Date and set forth
on Schedule 6F hereto, or any other non-material Investments not exceeding
$10,000 in the aggregate.
6G. Restrictions on Restricted Subsidiaries. The Company will not
permit
(i) itself or any wholly owned Restricted Subsidiary to sell,
assign, pledge or otherwise dispose of any Debt of, or any shares of stock
or other equity interest in (or warrants, rights or options to acquire
stock of or equity interests in), any wholly owned Restricted Subsidiary
except pursuant to the Collateral Documents and to the Company or any
other wholly owned Restricted Subsidiary, provided that all of the stock
and Debt of a wholly owned Restricted Subsidiary may be sold as an
entirety if prior to and immediately after such sale, no Default or Event
of Default would exist; or
(ii) any Restricted Subsidiary to:
(a) enter into any contract or agreement (including any provision in
its charter) that imposes restrictions on the declaration or payment of
dividends by it other than to the Company or any other Subsidiary, or
(b) except as permitted by paragraph 6A(iii) (or subsection (i) of
Annex I for periods ending on or prior to June 30, 2006) and paragraph 6A(iv),
issue, sell, create, incur, assume or suffer to exist Debt owing to or held by
any Person other than the Company or any wholly owned Restricted Subsidiary.
6H. Non-economic Contracts. The Company will not permit itself or
any Restricted Subsidiary to enter into or become a party to any non-economic
contract (other than Hedging Agreements permitted under paragraph 6L), including
any contract for the purchase of materials, supplies, or other property, if such
contract requires that payment for such materials, supplies or other property
shall be made whether or not delivery is ever made, or Guarantees other than
endorsements or negotiable instruments for collection in the ordinary course of
16
business, Guarantees pursuant to the Bank Agreement as in effect on the date
hereof, and Guarantees permitted under paragraph 6A(iii) (or subsection (i) of
Annex I for periods ending on or prior to June 30, 2006) and paragraph 6A(iv).
6I. Sale or Discount of Receivables. The Company will not permit
itself or any Restricted Subsidiary to discount, pledge, sell with recourse, or
otherwise sell, any of its Receivables.
6J. Transactions with Affiliates. The Company will not permit itself
or any Restricted Subsidiary to effect any transaction with any Affiliate (other
than the Company or any Guarantors) by which any asset or services of the
Company or a Restricted Subsidiary is transferred to such Affiliate, or from
such Affiliate, or enter into any other transaction with an Affiliate on terms
no less favorable to the Company or any Restricted Subsidiary than those that
could be obtained in an arm's length transaction.
6K. Assumption of Debt of Congoleum. The Company will not permit
itself or any Restricted Subsidiary to, directly or indirectly, Guarantee,
assume or otherwise become obligated with respect to Debt or any other
obligation or liability of Congoleum.
6L. Hedging Agreements. The Company will not permit itself or any
Restricted Subsidiary to enter into any Hedging Agreement other than Hedging
Agreements entered into in the ordinary course of business to hedge or mitigate
risks to which the Company or any Restricted Subsidiary is exposed in the
conduct of its business or the management of its liabilities. For the avoidance
of doubt, the Company acknowledges that a Hedging Agreement entered into for
speculative purposes or of a speculative nature is not a Hedging Agreement
entered into in the ordinary course of business to hedge or mitigate risks.
6M. Indebtedness. Neither the Company nor any of its Subsidiaries
shall create, incur, assume or otherwise become or remain liable with respect to
any Indebtedness, including Guarantees of Indebtedness of others and
reimbursement obligations, whether contingent or matured, under letters of
credit or other financial guarantees by third parties, (or become contractually
committed to do so), except the following:
(i) Indebtedness in respect of the Bank Agreement and
Guarantees thereof;
(ii) Indebtedness in respect of Capitalized Lease Obligations,
Synthetic Lease Obligations or secured by purchase money security
interests; provided, however, that the aggregate principal amount of all
Indebtedness permitted by this paragraph 6M(ii) at any one time
outstanding shall not exceed $1,000,000;
(iii) current liabilities, other than Financing Debt, incurred
in the ordinary course of business or in accordance with hedge agreements
permitted by the other provisions of this Agreement;
(iv) to the extent that payment thereof shall not at the time
be required by paragraph 5I, Indebtedness in respect of taxes,
assessments, governmental charges and claims for labor, materials and
supplies;
(v) Indebtedness secured by Liens of carriers, warehouses,
mechanics, landlords and other Persons permitted by paragraphs 6D(iii) and
6D(iv);
17
(vi) Indebtedness in respect of judgments or awards (i) which
have been in force for less than the applicable appeal period or (ii) in
respect of which the Company or any Subsidiary shall at the time in good
faith be prosecuting an appeal or proceedings for review and, in the case
of each of clauses (i) and (ii), the Company or such Subsidiary shall have
taken appropriate reserves therefor in accordance with generally accepted
accounting principles and execution of such judgment or award shall not be
levied;
(vii) Guarantees by the Company of Indebtedness and other
obligations incurred by its Subsidiaries and permitted by the other
provisions of this paragraph 6M;
(viii) Indebtedness in respect of inter-company loans and
advances among the Company and its Subsidiaries which are not prohibited
by paragraph 6F;
(ix) Indebtedness outstanding on the date hereof, or incurred
after the date hereof under any unused portion of a committed facility
that exists on the date hereof and is described in Schedule 6M-1 and all
refinancings and extensions thereof not in excess of the amount thereof
outstanding or committed immediately prior to such refinancing or
extension;
(x) Indebtedness (other than Financing Debt) in addition to
the foregoing; provided, however, that the aggregate amount of all such
Indebtedness at any one time outstanding shall not exceed $1,000,000;
(xi) the obligation of the Company to contribute cash in the
amount of $250,000 to the Congoleum Plan Trust;
(xii) to the extent of such stock sale or disposition, the
obligation of the Company to make a contribution to the Congoleum Plan
Trust if the Company sells or otherwise disposes of all or substantially
all of its shares of Congoleum stock within a certain period of time if
the value of Congoleum implied by such stock sale or disposition exceeds a
certain amount, as further provided under the Congoleum Plan;
(xiii) Indebtedness contemplated by the Congoleum Plan, the
Congoleum Plan Note or the Congoleum Plan Trust;
(xiv) Indebtedness outstanding on the date hereof under the
CIBC Credit Agreement, but only to the extent such Indebtedness is paid in
full on the Effective Date;
(xv) Until August 1, 2005 only, Indebtedness of American
Biltrite (Canada) Ltd. secured by letters of credit issued under the CIBC
Credit Agreement, as set forth on Schedule 6M-2; and
(xvi) Until August 1, 2005 only, Indebtedness to secure
amounts drawn on the CIBC checking accounts or purchasing cards of
American Biltrite (Canada) Ltd., not to exceed $1,000,000.00
6N. Voluntary Prepayments of Other Indebtedness. Neither the Company
nor any of its Subsidiaries shall make any voluntary prepayment of principal of
or interest on any Financing Debt (other than pursuant to the Bank Agreement) or
make any voluntary redemptions or repurchases of Financing Debt (other than
pursuant to the Bank Agreement), in each case except in order to facilitate a
refinancing of Indebtedness permitted by paragraph 6M. Notwithstanding the
foregoing, American Biltrite (Canada) Ltd. may prepay any and all amounts
18
pursuant to the Bank Agreement at any time and from time to time and repay and
retire in full all Indebtedness outstanding under the CIBC Credit Agreement.
▇▇. ▇▇▇▇▇▇▇▇▇. Each of the Company and its Subsidiaries will not
make any amendments or changes to the Congoleum Plan, the Congoleum Plan Note or
the Congoleum Plan Trust without the prior written consent of the Required
Holders if the effect of such amendment or change would be to increase the
obligations of the Company or any of its Restricted Subsidiaries.
6P. Sale of Assets. The Company shall not, and shall not permit its
Subsidiaries to, convey, sell, lease, assign, transfer or otherwise dispose of
any of its property , business or assets (including, without limitation,
receivables and leasehold interests), whether now owned or hereafter acquired,
except for (i) the sale or other disposition of obsolete or worn out property,
whether now owned or hereafter acquired, in the ordinary course of business;
(ii) the sale or other disposition of property in the ordinary course of
business (including Inventory) in the ordinary course of business; (iii) the
sale or other disposition of property to the Company or a wholly-owned
Restricted Subsidiary; (iv) the sale or disposition of the assets of Janus
Flooring Corporation; (v) the sale or disposition of the Janus Flooring
Corporation building structure; provided that in the case of this clause (v) the
Net Asset Sale Proceeds of such sale are payable first CDN$5,500,000 to the
reduction of amounts then outstanding under the Bank Agreement owed by American
Biltrite (Canada) Ltd., and second to reduce equally the obligations of the
Company under the Notes and the obligations under the Bank Agreement; and (vi)
other asset sales not to exceed $2,000,000 in the aggregate.
6Q. American Biltrite (Canada) Ltd. In each fiscal quarter, the
Company will collect all management or other fees incurred during the
immediately preceding fiscal quarter from American Biltrite (Canada) Ltd.
Amounts incurred during a particular fiscal quarter shall be collected by the
Company no later than the last day of the immediately subsequent fiscal quarter.
7. DEFAULTS; REMEDIES.
7A. Events of Default. If any of the following events shall occur
and be continuing for any reason whatsoever (and whether such occurrence shall
be voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of or
Yield-Maintenance Amount in respect of any Note when the same shall become
due, either by the terms thereof or otherwise as herein provided; or
(ii) the Company defaults in the payment of any interest on
any Note for a period of 10 days after the same shall become due; or
(iii) the Company or any Restricted Subsidiary defaults
(whether as primary obligor or as guarantor or as surety) in any payment
of principal of or interest on any other obligation for money borrowed,
any Capitalized Lease Obligation, any obligation under a conditional sale
or other title retention agreement, any obligation issued or assumed as
full or partial payment for property whether or not secured by a purchase
money mortgage, or any obligation under notes payable or drafts accepted
representing extensions of credit (any of the foregoing being herein
called a "Payment Default") beyond any period of grace provided with
respect thereto; or the Company or any Restricted Subsidiary fails to
19
perform or observe any other agreement, term or condition contained in any
agreement under which any such obligation is created (or if any other
event thereunder or under any such agreement shall occur and be
continuing) and the effect of such failure or other event is to cause, or
to permit the holder or holders of such obligation (or a trustee or agent
on behalf of such holder or holders) at such time to cause, such
obligation to become due (or to be purchased by the Company or any
Restricted Subsidiary) prior to any stated maturity; provided, that the
aggregate amount of all obligations as to which such a Payment Default
shall occur and be continuing or such a failure or other event causing or
permitting acceleration (or repurchase by the Company or any Restricted
Subsidiary) shall occur and be continuing exceeds $1,000,000 (or the
equivalent amount in any foreign currency); or
(iv) any representation or warranty made by the Company or any
Guarantor herein, in the Security Agreement or any Collateral Document or
by the Company, any Guarantor or any of its respective officers in any
writing furnished in connection with or pursuant to this Agreement, the
Security Agreement or any Collateral Document shall be false in any
material respect on the date as of which made; or
(v) the Company fails to perform or observe any agreement
contained in the last sentence of paragraph 5A, in paragraph 5J with
respect to the Company's corporate existence, paragraph 5R or in paragraph
6 or any Guarantor fails to perform or observe any agreement contained in
the Facility Guarantee or any Guarantor Joinder Agreement; or
(vi) the Company fails to perform or observe any other
agreement, term or condition contained herein, and any such failure
described in this clause (vi) shall continue unremedied for a period of 30
days after the earlier of (a) notice thereof from the holder of any Note
or (b) the date any Responsible Officer obtains actual knowledge thereof;
or
(vii) the Company or any Restricted Subsidiary makes a general
assignment for the benefit of creditors or admits in writing its inability
to pay its debts as such debts become due or ceases or threatens to cease
carrying on its business permanently; or
(viii) any decree or order for relief in respect of the
Company, any Guarantor or any Restricted Subsidiary is entered under any
bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, composition, dissolution, winding up or liquidation
or other similar law, whether now or hereafter in effect (herein called
the "Bankruptcy Law"), of any jurisdiction; or
(ix) the Company or any Restricted Subsidiary petitions or
applies to any tribunal for, or consents to, the appointment of, or taking
possession by, a trustee, receiver, custodian, liquidator or similar
official of the Company or any Restricted Subsidiary, or of any
substantial part of the assets of the Company or any Restricted
Subsidiary, or commences a voluntary case under the Bankruptcy Law of the
United States or any proceedings (other than proceedings for the voluntary
liquidation and dissolution of a Restricted Subsidiary) relating to the
Company or any Restricted Subsidiary under the Bankruptcy Law of any other
jurisdiction or takes any corporate action to authorize any of the actions
described in this clause (ix); or
20
(x) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Restricted
Subsidiary and the Company or any Restricted Subsidiary by any act
indicates its or their approval thereof, consent thereto or acquiescence
therein, or an order, judgment or decree is entered appointing any such
trustee, receiver, custodian, liquidator or similar official, or approving
the petition in any such proceedings, and such order, judgment or decree
remains unstayed and in effect for more than 60 days; or
(xi) any order, judgment or decree is entered in any
proceedings against the Company decreeing the dissolution of the Company
and such order, judgment or decree remains unstayed and in effect for more
than 60 days; or an encumbrances takes possession of, or a receiver or
receiver manager is appointed over, all or substantially all of the assets
and the revenues of the Company; or
(xii) any order, judgment or decree is entered in any
proceedings against the Company or any Restricted Subsidiary decreeing a
split-up of the Company or such Restricted Subsidiary which requires the
divestiture of assets representing a substantial part, or the divestiture
of the stock of a Restricted Subsidiary whose assets represent a
substantial part, of the consolidated assets of the Company and its
Restricted Subsidiaries (determined in accordance with generally accepted
accounting principles) or which requires the divestiture of assets, or
stock of a Restricted Subsidiary, which shall have contributed a
substantial part of the consolidated net income of the Company and its
Restricted Subsidiaries (determined in accordance with generally accepted
accounting principles) for any of the three fiscal years then most
recently ended, and such order, judgment or decree remains unstayed and in
effect for more than 60 days (it being understand that the Congoleum Plan
and proceedings, settlements and transactions in connection therewith
shall be excluded the purposes hereof); or
(xiii) a final judgment is rendered against one or more of the
Company and its Restricted Subsidiaries obligating the Company or any of
its Restricted Subsidiaries to make any monetary payment in excess of
applicable insurance coverage that has been acknowledged in writing by the
applicable insurance carriers and which judgment is not, within 60 days
after entry thereof, bonded, discharged or stayed pending appeal, or are
not discharged within 60 days after the expiration of any such stay (it
being understood that the Congoleum Plan and proceedings, settlements, and
transactions in connection therewith shall be excluded for the purposes
hereof); or
(xiv) the Company or any ERISA Affiliate, in its capacity as
an employer under a Multiemployer Plan, makes a complete or partial
withdrawal from such Multiemployer Plan resulting in the incurrence with
such withdrawing employer of a withdrawal liability; or
(xv) all or any portion of the Facility Guarantee, any
Collateral Documents or any Guarantor Joinder Agreement shall cease to be
in full force and effect with respect to any Guarantor or any Guarantor
shall so assert in writing to any holder of any Note; or
(xvi) the Liens created by any of the Collateral Documents
shall have ceased and continue not to be perfected and enforceable in
accordance with its terms or of the same effect as to perfection and
priority purported to be created thereby with respect to any significant
21
portion of the Credit Security (as defined in the Security Agreement)
(other than in connection with any release or other termination of such
Lien in respect of any Credit Security as permitted hereby or by any
Collateral Document), and such failure of the Lien to be perfected and
enforceable with such priority shall have continued unremedied for a
period of 10 days; or
(xvii) the Company shall (A) fail to enter into, on or before
June 30, 2006 a definitive commitment relating to the replacement or
refinancing of not less than $20,000,000 of the facilities under the Bank
Agreement to be effective by September 30, 2006 or such other date prior
to the termination of the current Bank Agreement, on terms substantially
similar to the Bank Agreement and with a maturity of not less than one
year, (B) fail to consummate on or before September 30, 2006 such
replacement or refinancing of not less than $20,000,000 of the facilities
under the Bank Agreement or (C) fail to cause the lenders party to such
replacement or refinancing to enter into an intercreditor agreement with
the holders of the Notes on terms substantially similar to the
Intercreditor Agreement;
(xviii) any of the following shall occur:
(A) the Company shall cease to own, directly or indirectly,
the capital stock of its Subsidiaries in the percentage, or a
greater percentage, as currently owned, except to the extent
permitted by paragraphs 6E or 6F; or
(B) a majority of the board of directors of the Company shall
be neither (I) directors of the Company as of the date hereof nor
(II) nominated, appointed or approved by directors of the Company as
of the date hereof nor (III) nominated, appointed or approved by
directors described in clause (II) above; or
(C) any Person, together with "affiliates" and "associates" of
such Person within the meaning of Rule 12b-2 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any
"group" including such Person under sections 13(d) and 14(d) of the
Exchange Act, other than the Senior Management Team and any Person
with whom any such member of the Senior Management Team, may be
deemed to be part of such a "group", shall acquire after the date
hereof (I) beneficial ownership within the meaning of Rule 13d-3 of
the Exchange Act of 33% or more of either the voting stock or total
equity capital of the Company or (II) direct or indirect control of
the Company through a shareholder, voting or similar agreement or
arrangement; or
(D) the Company or any of its Subsidiaries or any Guarantor
shall initiate any action to dissolve, liquidate or otherwise
terminate its existence;
then (a) if such event is an Event of Default specified in clauses (i) or (ii)
this paragraph 7A, any holder of any Note may at its option during the
continuance of such Event of Default, by notice in writing to the Company,
declare all of the Notes held by such holder to be, and all of the Notes held by
such holder shall thereupon be and become, immediately due and payable at par
together with interest accrued thereon, and together with the Yield-Maintenance
Amount, if any, with respect to each Note, without presentment, demand, protest
or notice of any kind, all of which are hereby waived by the Company, (b) if
such event is an Event of Default specified in clauses (viii), (ix) or (x) of
22
this paragraph 7A with respect to the Company, all of the Notes at the time
outstanding shall automatically become immediately due and payable at the
principal amount thereof together with interest accrued thereon and together
with the Yield-Maintenance Amount, if any, with respect to each Note, without
presentment, demand, protest or notice of any kind, all of which are hereby
waived by the Company and (c) if such event is any other Event of Default, the
Required Holder(s) of the Notes may, at its or their option and in addition to
any right, power or remedy permitted by law or equity, by notice in writing to
the Company, declare all of the Notes to be, and all of the Notes shall
thereupon be and become, immediately due and payable at the principal amount
thereof, together with interest accrued thereon and together with the
Yield-Maintenance Amount, if any, with respect to each Note, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company.
7B. Rescission of Acceleration. At any time after any or all of the
Notes shall have been declared immediately due and payable pursuant to paragraph
7A, the Required Holder(s) of the Notes may, by notice in writing to the
Company, rescind and annul such declaration and its consequences if (i) the
Company shall have paid all overdue interest on the Notes, the principal of and
Yield-Maintenance Amount, if any, payable with respect to any Notes which have
become due otherwise than by reason of such declaration, and interest on such
overdue interest and overdue principal and Yield-Maintenance Amount at the rate
specified in the Notes, (ii) the Company shall not have paid any amounts which
have become due solely by reason of such declaration, (iii) all Events of
Default and Defaults, other than non-payment of amounts which have become due
solely by reason of such declaration, shall have been cured or waived pursuant
to paragraph 12C, and (iv) no judgment or decree shall have been entered for the
payment of any amounts due pursuant to the Notes or this Agreement. No such
rescission or annulment shall extend to or affect any subsequent Event of
Default or Default or impair any right arising therefrom.
7C. Notice of Acceleration or Rescission. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 7A or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.
7D. Other Remedies. If any Event of Default or Default shall occur
and be continuing, the holder of any Note may proceed to protect and enforce its
rights under this Agreement and such Note by exercising such remedies as are
available to such holder in respect thereof under applicable law, either by suit
in equity or by action at law, or both, whether for specific performance of any
covenant or other agreement contained in this Agreement or in aid of the
exercise of any power granted in this Agreement. No remedy conferred in this
Agreement upon the holder of any Note is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at
law or in equity or by statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company and the
Guarantors represent, covenant and warrant as follows (all references to
"Subsidiary" and "Subsidiaries" in this paragraph 8 shall be deemed omitted if
the Company has no Subsidiaries at the time the representations herein are made
or repeated):
8A. Organization; Authority; Enforceability. The Company is a
corporation duly organized and existing in good standing under the laws of the
State of Delaware. Each Restricted Subsidiary is a corporation or partnership
23
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization. The Company has and each Restricted Subsidiary has
all corporate or partnership power and authority to own and operate its
properties and to carry on its business and, in the case of the Company and the
Guarantor, to enter into and perform all of its respective obligations under
this Agreement, the Notes and the Facility Guarantee and to issue and sell the
Notes and the Facility Guarantee. Each of the Company and its Restricted
Subsidiaries is duly licensed or qualified to do business as a foreign
corporation or partnership in each state where the failure to be so licensed or
qualified would have a material adverse effect on the business, financial
condition or operations of the Company and its Restricted Subsidiaries taken as
a whole and has all corporate or partnership power, licenses, franchises and
other governmental authorizations and approvals necessary to carry on its
present business, with respect to which the failure to possess would have a
material adverse effect on the business, financial condition or operations of
the Company and its Restricted Subsidiaries taken as a whole. Schedule 8A
includes a correct list as to each Guarantor and each of the Restricted
Subsidiaries on the date hereof (i) its name, (ii) the jurisdiction of its
organization and (iii) its capital stock issued and outstanding and the holders
by percentage of that stock. This Agreement is and the Notes and the Facility
Guarantee when issued and delivered hereunder will be, legal, valid, binding and
enforceable obligations of the Company and the Guarantor except to the extent
that such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors, rights generally and by general equitable principles (regardless of
whether enforcement is sought in equity or at law).
8B. Business; Financial Statements. The Company has furnished each
Purchaser of any Notes with the following financial statements, identified by a
principal financial officer of the Company: (i) consolidating and consolidated
balance sheets of the Company and its Subsidiaries as at December 31 in each of
the three fiscal years of the Company most recently completed prior to the date
as of which this representation is made or repeated to such Purchaser (other
than fiscal years completed within 90 days prior to such date for which audited
financial statements have not been released) and consolidating and consolidated
statements of income and consolidated statements of cash flows and of
shareholders' equity of the Company and its Subsidiaries for each such year, all
reported on by Ernst & Young, LLP or other independent public accountants of
recognized national standing and (ii) consolidating and consolidated balance
sheets of the Company and its Subsidiaries as at the end of the quarterly period
(if any) most recently completed prior to such date and after the end of such
fiscal year (other than quarterly periods completed within 60 days prior to such
date for which financial statements have not been released) and the comparable
quarterly period in the preceding fiscal year and consolidated statements of
income, cash flows and shareholders' equity for the periods from the beginning
of the fiscal years in which such quarterly periods are included to the end of
such quarterly periods, prepared by the Company. Such financial statements
(including any related schedules and/or notes) are true and correct in all
material respects (subject, as to interim statements, to changes resulting from
audits and year-end adjustments), have been prepared in accordance with
generally accepted accounting principles consistently followed throughout the
periods involved and show all liabilities, direct and contingent, of the Company
and its Subsidiaries required to be shown in accordance with such principles.
The balance sheets fairly present the condition of the Company and its
Subsidiaries as at the dates thereof, and the statements of income,
shareholders' equity and cash flows fairly present the results of the operations
of the Company and its Subsidiaries and their cash flows for the periods
indicated. There has not been a material adverse change in the business,
24
property or assets, condition (financial or otherwise), operations or prospects
of the Company and its Subsidiaries taken as a whole since the end of the most
recent fiscal year for which such audited financial statements have been
furnished.
8C. Actions Pending. There is no action, suit, investigation or
proceeding pending or (to the knowledge of the Company or any Guarantor or
Restricted Subsidiary) threatened against the Company, any Guarantor or any
Restricted Subsidiary, or any properties or rights of the Company, any Guarantor
or any Restricted Subsidiary, by or before any court, arbitrator or
administrative or governmental body which could reasonably be expected to result
in any material adverse change in the business, property or assets, condition
(financial or otherwise) or operations of the Company and its Restricted
Subsidiaries taken as a whole.
8D. Outstanding Debt. Neither the Company nor any of its Restricted
Subsidiaries has outstanding any Debt except as permitted by paragraph 6M.
Schedule 8D correctly describes all secured and unsecured Debt of the Company
and its Restricted Subsidiaries outstanding, or for which the Company or any of
its Restricted Subsidiaries have commitments, on the date of this Agreement, and
identifies the collateral, if any, securing such Debt. There exists no default
or temporary waiver of default under the provisions of any instrument evidencing
such Debt or of any agreement relating thereto.
8E. Title to Properties. The Company has and each of its Restricted
Subsidiaries has good and indefeasible title to its respective real properties
(other than properties which it leases) and good title to all of its other
respective properties and assets, including the properties and assets reflected
in the most recent audited balance sheet referred to in paragraph 8B (other than
properties and assets disposed of in the ordinary course of business), subject
to no Lien of any kind except Liens permitted by paragraph 6D. All leases
necessary in any material respect for the conduct of the respective businesses
of the Company and its Restricted Subsidiaries are valid and subsisting and are
in full force and effect.
8F. Taxes. The Company has and each of its Restricted Subsidiaries
has filed all federal, state and other income tax returns which, to the best
knowledge of the officers of the Company and its Restricted Subsidiaries, are
required to be filed, and each has paid all taxes as shown on such returns and
on all assessments received by it to the extent that such taxes have become due,
except such taxes as are being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance with
generally accepted accounting principles, and the Company has no knowledge of
any basis for any further material assessment to the Company and its Restricted
Subsidiaries taken as a whole that has not been adequately so provided for on
the books of the Company.
8G. Conflicting Agreements and Other Matters. Neither the Company
nor any of its Restricted Subsidiaries is a party to any contract or agreement
or subject to any charter or other corporate restriction which materially and
adversely affects the business, property or assets, conditions (financial or
otherwise) or operations of the Company and its Subsidiaries taken as a whole.
Neither the execution nor delivery of this Agreement or the Notes, nor the
offering, issuance and sale of the Notes hereunder, nor fulfillment of nor
compliance with the terms and provisions hereof and thereof will conflict with,
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the creation of any
Lien (other than under the Collateral Documents) upon any of the properties or
25
assets of the Company or any of its Restricted Subsidiaries pursuant to, the
charter or by-laws of the Company or any of its Restricted Subsidiaries, as the
case may be, any agreement (including any agreement with shareholders),
instrument, order, judgment, decree or arbitrator's award, or any statute, law,
rule or regulation, to which the Company or any of its Restricted Subsidiaries
or their respective properties is subject. The Company is not a party to, or
otherwise subject to, any contract or agreement (including its charter) which
limits the amounts of, or otherwise imposes restrictions on the incurring of,
indebtedness of the type to be evidenced by the Notes except as set forth in the
agreements listed in Schedule 8G, and the Company has received all consents
necessary with respect to such agreements in connection with the consummation of
the transactions contemplated hereby.
8H. Offering of Notes and Facility Guarantee. Neither the Company,
the Guarantors nor any agent acting on its behalf has, directly or indirectly,
offered the Notes, the Facility Guarantee or any similar security of the Company
or the Guarantors for sale to, or solicited any offers to buy the Notes, the
Facility Guarantee or any similar security of the Company or the Guarantors
from, or otherwise approached or negotiated with respect thereto with, any
Person other than Prudential and not more than 10 other "qualified institutional
buyers" as such term is defined in Rule 144A under the Securities Act, and
neither the Company, the Guarantors nor any agent acting on their behalf has
taken or will take any action which would subject the issuance or sale of the
Notes or the Facility Guarantee hereunder to the provisions of section 5 of the
Securities Act or to the registration provisions of any securities or Blue Sky
law of any applicable jurisdiction.
8I. Use of Proceeds. The proceeds of the Notes and the Facility
Guarantee were used to refinance Debt and for general corporate purposes.
Neither the Company nor any Subsidiary owns or has any present intention of
acquiring any "margin stock" as defined in Regulation U (12 CFR Part 221) of the
Board of Governors of the Federal Reserve System (herein called "margin stock"),
exceeding in value 5% of Consolidated Net Worth. None of the proceeds of the
issuance of any Notes have been or will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of purchasing or carrying
any margin stock, or for the purpose of maintaining, reducing or retiring any
indebtedness which was originally incurred to purchase or carry any stock that
is currently a margin stock and in any such case which will constitute this
transaction a violation of such Regulation U. Neither the Company nor any agent
acting on its behalf has taken or will take any action which might cause this
Agreement or the Notes to violate Regulation T, Regulation U, Regulation X or
any other regulation of the Board of Governors of the Federal Reserve System or
to violate Section 7 of the Exchange Act, in each case as in effect now or as
the same may hereafter be in effect.
8J. ERISA. No accumulated funding deficiency (as defined in section
302 of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC
has been or is expected by the Company or any ERISA Affiliate to be incurred
with respect to any Plan (other than a Multiemployer Plan) by the Company, any
Subsidiary or any ERISA Affiliate which is or would be materially adverse to the
business, financial condition or operations of the Company and its Restricted
Subsidiaries, taken as a whole. Neither the Company, nor any Subsidiary nor any
ERISA Affiliate has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan which
is or would be materially adverse to the business, financial condition or
operations of the Company and its Restricted Subsidiaries, taken as a whole.
Neither the Company, any Subsidiary nor any ERISA Affiliate has incurred or
presently expects to incur any withdrawal liability under Title IV of ERISA with
respect to any Multiemployer Plan which is or would be materially adverse to the
business, property or assets, condition (financial or otherwise) or operations
of the Company and its Restricted Subsidiaries taken as a whole. The execution
26
and delivery of this Agreement and the issuance and sale of the Notes will be
exempt from or will not involve any transaction which is subject to the
prohibitions of section 406 of ERISA and will not involve any transaction in
connection with which a penalty could be imposed under section 502(i) of ERISA
or a tax could be imposed pursuant to section 4975 of the Code.
8K. Governmental Consent. Neither the nature of the Company nor of
any Guarantor or Restricted Subsidiary, nor any of their respective businesses
or properties, nor any relationship between the Company, any Guarantor or any
Restricted Subsidiary and any other Person, nor any circumstance in connection
with the offering, issuance, sale or delivery of the Notes or the Facility
Guarantee is such as to require any authorization, consent, approval, exemption
or any action by or notice to or filing with any court or administrative or
governmental body (other than routine filings after the Effective Date for this
Agreement, the Notes and the Facility Guarantee with the Securities and Exchange
Commission and/or state Blue Sky authorities) in connection with the execution
and delivery of this Agreement, the offering, issuance, sale or delivery of the
Notes and the Facility Guarantee or fulfillment of or compliance with the terms
and provisions hereof or of the Notes or the Facility Guarantee.
8L. Environmental Compliance. The Company and its Restricted
Subsidiaries and all of their respective properties and facilities have complied
at all times and in all respects with all applicable Environmental Laws and all
administrative orders, judgments, rulings and regulations relating to protection
of the Environment, except, in any such case, where failure to comply would not
result in a material adverse effect on the business, financial condition or
operations of the Company and its Restricted Subsidiaries, taken as a whole.
8M. Disclosure. Neither this Agreement nor any other document,
certificate or written statement furnished to any Purchaser by or on behalf of
the Company in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which they
were made, not misleading. There is no fact peculiar to the Company or any of
its Restricted Subsidiaries which materially adversely affects or in the future
may (so far as the Company can now reasonably foresee) materially adversely
affect the business, financial condition or operations of the Company and its
Restricted Subsidiaries taken as a whole, and which has not been set forth in
this Agreement.
8N. [Reserved].
8O. Patents and Trademarks. Except as set forth in Schedule 8O, the
Company and each Restricted Subsidiary owns or possesses all the patents,
trademarks, trade names, service marks, copyrights, licenses and rights with
respect to the foregoing necessary for the present and planned future conduct of
its business, without any known conflict with the rights of others.
8P. Regulatory Status. None of the Company, any Guarantor or any
Subsidiary is (i) an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, (ii) a "holding company" or a "subsidiary company" or an "affiliate"
27
of a "holding company" or a "subsidiary company" of a "holding company," within
the meaning of the Public Utility Act of 1935, as amended, or (iii) a "public
utility" within the meaning of the Federal Power Act, as amended.
8Q. Material Agreements. The Company has previously furnished to the
Noteholders correct and complete copies, including all exhibits, schedules and
amendments thereto, of the agreements and instruments, each as in effect on the
Effective Date, listed in Schedule 8Q, which constitute all agreements and
instruments material to the Company and its Subsidiaries on a Consolidated basis
(together with the charters and bylaws of the Company and its Subsidiaries, the
"Material Agreements").
9. RESERVED.
10. DEFINITIONS AND ACCOUNTING MATTERS. For the purpose of this
Agreement, as used herein, the terms defined in paragraphs 10A and 10B (or
within the text of any other paragraph) shall have the respective meanings
specified therein and all accounting matters shall be subject to determination
as provided in paragraph 10C.
10A. Yield-Maintenance Terms.
"Called Principal" shall mean, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to paragraph 4C or is
declared to be immediately due and payable pursuant to paragraph 7A, as the
context requires.
"Discounted Value" shall mean, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (as converted to reflect
the periodic basis on which interest on such Note is payable, if interest is
payable on other than a semi-annual basis) equal to the Reinvestment Yield with
respect to such Called Principal.
"Reinvestment Yield" shall mean, with respect to the Called
Principal of any Note, the yield to maturity implied by (i) the yields reported,
as of 10:00 A.M. (New York City time) on the Business Day preceding the
Settlement Date with respect to such Called Principal, on the display designated
as "Page 678" on Bridge Telerate (or such other display as may replace Page 678
on Bridge Telerate) for actively traded U.S. Treasury securities having a
maturity equal to the Remaining Average Life of such Called Principal as of such
Settlement Date, or (ii) if such yields shall not be reported as of such time or
the yields reported as of such time shall not be ascertainable, the Treasury
Constant Maturity Series yields reported, for the latest day for which such
yields shall have been so reported as of the Business Day preceding the
Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date. Such
implied yield shall be determined, if necessary, by (a) converting U.S. Treasury
▇▇▇▇ quotations to bond-equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between yields reported for various
maturities. The Reinvestment Yield will be rounded to that number of decimal
places as appears in the Notes.
28
"Remaining Average Life" shall mean, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the
sum of the products obtained by multiplying (a) each Remaining Scheduled Payment
of such Called Principal (but not of interest thereon) by (b) the number of
years (calculated to the nearest one-twelfth year) which will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" shall mean, with respect to the
Called Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"Settlement Date" shall mean, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid pursuant
to paragraph 4C or is declared to be immediately due and payable pursuant to
paragraph 7A, as the context requires.
"Yield-Maintenance Amount" shall mean, with respect to any Note, a
premium equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement Date
with respect to such Called Principal. The Yield-Maintenance Amount shall in no
event be less than zero.
10B. Other Defined Terms.
"Affiliate" shall mean any Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the Company, (ii) which beneficially owns or holds five
percent (5%) or more of any class of the Voting Stock of the Company or (iii)
five percent (5%) or more of the Voting Stock (or in the case of a person which
is not a corporation, five percent (5%) or more of the voting equity interest)
or five percent (5%) of the ownership interests (other than limited partnership
interests) of which is beneficially owned or held by the Company and/or one or
more Subsidiaries. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Authorized Officer" shall mean (i) in the case of the Company, its
president, its chief executive officer, its chief financial officer, any vice
president of the Company designated as an "Authorized Officer" of the Company in
the Information Schedule attached hereto or any vice president of the Company
designated as an "Authorized Officer" of the Company for the purpose of this
Agreement in an Officer's Certificate executed by the Company's chief executive
officer or chief financial officer and delivered to Prudential, and (ii) in the
case of Prudential, any officer of Prudential designated as its "Authorized
Officer" in the Information Schedule or any officer of Prudential designated as
its "Authorized Officer" for the purpose of this Agreement in a certificate
executed by one of its Authorized Officers. Any action taken under this
Agreement on behalf of the Company by any individual who on or after the date of
this Agreement shall have been an Authorized Officer of the Company and whom
Prudential in good faith believes to be an Authorized Officer of the Company at
the time of such action shall be binding on the Company even though such
29
individual shall have ceased to be an Authorized Officer of the Company, and any
action taken under this Agreement on behalf of Prudential by any individual who
on or after the date of this Agreement shall have been an Authorized Officer of
Prudential and whom the Company in good faith believes to be an Authorized
Officer of Prudential at the time of such action shall be binding on Prudential
even though such individual shall have ceased to be an Authorized Officer of
Prudential.
"Bank Agreement" shall mean that certain Amended and Restated Credit
Agreement, dated on or around the Effective Date, among the Company, K&M and
American Biltrite (Canada) Ltd., on the one hand, and Fleet National Bank, a
Bank of America company, and Bank of America, National Association, acting
through its Canada branch, as lenders, on the other hand or any replacement,
extension, renewal, refinancing, amendment or substitution thereof, provided
that the aggregate amount of Indebtedness thereunder shall not exceed
$20,000,000.
"Bankruptcy Law" shall have the meaning specified in clause (viii)
of paragraph 7A.
"Business Day" shall mean any day other than (i) a Saturday or a
Sunday and (ii) a day on which commercial banks in New York City are required or
authorized to be closed.
"Canadian Security Agreement" shall mean that Deed of Hypothec and
Issue of Mortgage Bonds executed by American Biltrite (Canada) Ltd. in favor of
Bank of America, National Association, acting through its Canada branch as
collateral agent for the benefit of the Canadian Lenders (as defined in the Bank
Agreement), as it may be amended, modified or supplemented from time to time, in
accordance with its terms.
"Capitalized Lease" shall mean any lease under which the obligation
to make rental payments thereunder constitutes a Capitalized Lease Obligation.
"Capitalized Lease Obligation" shall mean any rental obligation
which, under generally accepted accounting principles, would be required to be
capitalized on the books of the Company or any Restricted Subsidiary, in each
case taken at the amount thereof accounted for as indebtedness (net of interest
expense) in accordance with such principles.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations and rulings promulgated thereunder.
"Code Affiliate" shall mean each Person which together with the
Company or any of its Subsidiaries is treated as a "single employer" under
subsection (b), (c), (m) or (o) of section 414 of the Code.
"Collateral Agent" means the Fleet National Bank, a Bank of America
company, as Collateral Agent for the Lenders (as defined in the Bank Agreement
as in effect on the Effective Date) and the Noteholders under the Security
Agreement, or any successor collateral agent thereunder.
"Collateral Documents" shall mean (i) the Security Agreement, (ii)
any other agreement, document or instrument executed and delivered by the
30
Company, a Guarantor, or another direct or indirect Subsidiary of the Company
pursuant to the requirements of Sections 3.2 or 3.3 of the Security Agreement or
paragraph 5R of this Agreement after the date hereof, (iii) any other agreement,
document or instrument executed and delivered by any Obligor (as defined in the
Security Agreement) after the date hereof under which such Obligor has granted a
lien upon or security interest in any property or assets to the Collateral Agent
to secure all or any part of the Obligations and (iv) all financing statements,
certificates, documents and instruments relating thereto or executed or provided
in connection therewith, each as amended, restated, supplemented or otherwise
modified from time to time.
"Congoleum" shall mean Congoleum Corporation, a subsidiary (but not
a Subsidiary) of the company, and/or any of its direct or indirect Subsidiaries.
"Congoleum Joint Venture Agreement" means the Joint Venture
Agreement dated as of December 16, 1992 by and among the Company, Resilient
Holdings, Incorporated, Congoleum, Hillside Industries Incorporated and Hillside
Capital Incorporated, as amended.
"Congoleum Plan" means the Fourth Modified Joint Plan of
Reorganization under Chapter 11 of the Bankruptcy Code of Congoleum Corporation,
et al., substantially in the form attached as Exhibit 1(a), as the same may be
amended in accordance with paragraph 6O.
"Congoleum Plan Note" means the promissory note to be issued by
Congoleum to the Congoleum Plan Trust substantially in the form attached as
Exhibit 1(b), as the same may be amended in accordance with paragraph 6O.
"Congoleum Plan Trust" means the trust to be established upon
consummation of the Congoleum Plan, as the same may be amended in accordance
with paragraph 6O.
"Consolidated" and "Consolidating", when used with reference to any
term, mean that term as applied to the accounts of the Company (or other
specified Person) and all of its Restricted Subsidiaries (or other specified
group of Persons), or such of its Restricted Subsidiaries as may be specified,
consolidated (or combined) or consolidating (or combining), as the case may be,
in accordance with generally accepted accounting principles (except that
Congoleum shall be accounted for on the equity method) and with appropriate
deductions for minority interests in Restricted Subsidiaries.
"Consolidated Adjusted EBITDA" shall mean, for any period, the total
of :
(a) Consolidated EBITDA; minus
(b) $4,500,000 in respect of capital expenditures made during such
period (whether or not actual capital expenditures are greater or less
than $4,500,000); minus
(c) any dividends paid or payable in cash by the Company or any of
its Restricted Subsidiaries to third parties; minus
(d) the aggregate amount paid by the Company and its Restricted
Subsidiaries to repurchase shares of capital stock and options to purchase
shares of capital stock; minus
31
(e) any income taxes paid or payable in cash by the Company or any
of its Restricted Subsidiaries.
"Consolidated EBITDA" shall mean, for any period, the total of:
(i) Consolidated Net Income; plus
(ii) all amounts deducted in computing such Consolidated Net Income
in respect of:
(a) depreciation, amortization and unusual noncash charges
(other than the write-down of current assets),
(b) interest expense, and
(c) income tax expense, minus
(iii) all cash payments made during such period on account of
reserves, restructuring charges and other noncash charges added back to
Consolidated EBITDA in a previous period, minus
(iv) all amounts included in Consolidated Net Income in respect of
deferred income tax benefits and other noncash income items, except such
amounts that have been deducted from Consolidated EBITDA in a previous
period.
"Consolidated Fixed Charges" shall mean, for any period, the total
of:
(i) Consolidated Interest Expense, plus
(ii) the aggregate amount of all mandatory scheduled payments,
mandatory scheduled prepayments, sinking fund payments and mandatory
reductions in revolving loans as a result of mandatory reductions in
revolving credit availability, all with respect to Debt of the Company and
its Restricted Subsidiaries reporting Congoleum on the equity method,
including payments in the nature of principal under Capitalized Leases.
"Consolidated Interest Expense" shall mean, for any period, the
total of:
(i) the aggregate amount of interest, including commitment fees,
payments in the nature of interest under Capitalized Leases and net
payments under hedge agreements, accrued by the Company and its Restricted
Subsidiaries reporting Congoleum on the equity method (whether such
interest is reflected as an item of expense or capitalized), minus
(ii) to the extent otherwise included in clause (a) above, the
amortization of deferred financing fees and costs, original issue discount
relating to Indebtedness and accrued interest on Indebtedness not paid in
cash to the extent permitted by the terms, including subordination terms,
of such Indebtedness (including PIK Interest), plus
32
(iii) actual cash payments with respect to accrued and unpaid
interest (including PIK Interest) that has previously reduced Consolidated
Interest Expense pursuant to clause (ii) above.
"Consolidated Net Income" shall mean, for any period, net income (or
deficit) of the Company and its Restricted Subsidiaries for such period
determined in accordance with generally accepted accounting principles, on a
consolidated basis, excluding
(i) extraordinary gains (net of any extraordinary losses up to the
amount of any extraordinary gains),
(ii) net income of any Person (other than a Restricted Subsidiary)
in which the Company or a Restricted Subsidiary has an ownership interest
unless those net earnings have actually been received in the form of cash
for distributions,
(iii) any portion of the net income of any Restricted Subsidiary
which for any reason is unavailable to pay dividends to the Company or any
other Restricted Subsidiary,
(iv) any aggregate net gain (in excess of any net losses) arising
from the sale, exchange or other disposition of capital assets (such term
to include all fixed assets, whether tangible or intangible, all inventory
sold in conjunction with the disposition of fixed assets, and all
securities),
(v) any write-up of any asset,
(vi) any gain arising from the acquisition of any securities of the
Company or its Restricted Subsidiaries,
(vii) net income or gain (but not any loss) resulting from a change
in accounting, discontinuing or disposing of operations, an extraordinary
event or prior period adjustments, and
(viii) the income (or loss) of any Person accrued prior to the date
it becomes a Restricted Subsidiary.
For the avoidance of doubt, "Consolidated Net Income" shall not include any
operating loss of Congoleum.
"Consolidated Net Income Available for Tangible Net Worth" shall
mean, with reference to any period, Consolidated Net Income for all quarterly
fiscal periods of the Company and its Restricted Subsidiaries occurring during
such period (taken as a cumulative whole), determined in accordance with
generally accepted accounting principles, without deducting or offsetting
therefrom any deficit or net loss occurring during any quarterly fiscal period
of the Company and its Restricted Subsidiaries that is within such period.
"Consolidated Net Worth" as of any date shall mean shareholders'
33
equity of the Company and its Restricted Subsidiaries as computed as of that
date in accordance with generally accepted accounting principles.
"Consolidated Tangible Gross Worth" shall mean the sum of
Consolidated Tangible Net Worth plus Debt of the Company and its Restricted
Subsidiaries.
"Consolidated Tangible Net Worth" shall mean the aggregate amount of
(i) capital stock (less any treasury stock, capital stock subscribed and
unissued and other contra-equity accounts), (ii) surplus, (iii) foreign currency
translation adjustments, and (iv) retained earnings of the Company and its
Restricted Subsidiaries, determined on a consolidated basis in accordance with
generally accepted accounting principles, excluding (a) any inter-company
transactions, (b) intangibles, (c) any increase in the value of the Company's
Investments in Congoleum as reflected on the Company's consolidated balance
sheet as of December 31, 2000 and (d) the cumulative amount of any net write-up
of asset values after the audit immediately preceding August 28, 2001.
"Current Assets" shall mean, at any date, all amounts carried as
current assets on the balance sheet of the Company and its Restricted
Subsidiaries determined in accordance with generally accepted accounting
principles on a consolidated basis, excluding cash and cash equivalents.
"Current Liabilities" means, at any date, all amounts that are or
should be carried as current liabilities on the balance sheet of the Company and
its Restricted Subsidiaries determined in accordance with generally accepted
accounting principles on a consolidated basis, excluding the current portion of
long-term Debt and the Revolving Loan (as defined under the Bank Agreement),
each to the extent they are included in Consolidated Fixed Charges.
"Debt" shall mean each of the items described in clauses (a) through
(f) of the definition of the term "Indebtedness" and, without duplication, any
Guarantees of such items.
"Effective Date" shall mean May __, 2005.
"Environment" shall mean soil, surface waters, ground waters, land
stream sediments, surface or subsurface strata, and ambient air.
"Environmental Law" shall mean any law, regulation, rule or
ordinance at the federal, state or local level related to pollution, protection
of the environment or worker health and safety, whether or not previously
enforced, and, for purposes of complying in the future with such laws,
regulations, rules or ordinances, those that are subsequently enacted.
"Environmental Permits" shall mean all permits, licenses and other
authorizations required under any applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean any corporation which is a member of
the same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
34
control with the Company within the meaning of section 414(c) of the Code.
"ERISA Lien" shall mean a Lien created or otherwise imposed under
the provisions of ERISA.
"Event of Default" shall mean any of the events specified in
paragraph 7A, provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "Default" shall mean
any of such events, whether or not any such requirement has been satisfied.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Facility Guarantee" shall have the meaning specified in paragraph
11A.
"Financing Debt" means all obligations, contingent or otherwise,
which in accordance with generally accepted accounting principles are required
to be classified upon the balance sheet of the Company (or other specified
Person) as liabilities, but in any event including (without duplication) and
excluding for all purposes the transactions under the terms of the Congoleum
Plan, the Congoleum Plan Trust and the Congoleum Plan Note: (i) indebtedness for
borrowed money; (ii) indebtedness evidenced by notes, debentures or similar
instruments; (iii) Capitalized Lease Obligations and Synthetic Lease
Obligations; (iv) mandatory redemption, repurchase or dividend rights on capital
stock (or other equity), including provisions that require the exchange of such
capital stock (or other equity) for Indebtedness from the issuer; (v)
reimbursement obligations, whether contingent or matured, with respect to
letters of credit, bankers acceptances, surety bonds, other financial guarantees
and hedge agreements (without duplication of other Indebtedness supported or
guaranteed thereby); and (vi) without duplication, any Guarantees of such items
(i) through (v).
"Guarantee" shall mean, with respect to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another, including, without
limitation, any such obligation directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of which such
Person is otherwise directly or indirectly liable, including without limitation,
any such obligation in effect guaranteed by such Person through any agreement
(contingent or otherwise) to purchase, repurchase or otherwise acquire such
obligation or any security therefore, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the solvency or
any balance sheet or other financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies or for
any transportation or service, regardless of the non-delivery or non-furnishing
thereof, in any such case if the purpose or intent of such agreement is to
provide assurance that such obligation will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligations will be protected against loss in respect thereof. The amount of any
Guarantee shall be equal to the outstanding principal amount of the obligation
35
guaranteed or such lesser amount to which the maximum exposure of the guarantor
shall have been specifically limited.
"Guaranteed Facility Obligations" shall have the meaning specified
in paragraph 11A.
"Guarantor" shall mean K&M and each other Subsidiary that has
executed this Agreement as a Guarantor or that becomes a Guarantor pursuant to
paragraph 5L. "Guarantors" means all the foregoing Persons, collectively.
"Guarantor Joinder Agreement" shall mean a Guarantor Joinder
Agreement, in the form of Exhibit B hereto, to be executed by newly added
Guarantors pursuant to paragraph 5L.
"Hedging Agreement" means any derivative or similar agreement or
arrangement, including any interest rate protection agreement, foreign currency
exchange agreement, commodity price protection agreement or other interest or
currency exchange rate or commodity pricing hedging agreement.
"including" shall mean, unless the context clearly requires
otherwise, "including without limitation".
"Indebtedness" means all obligations, contingent or otherwise, which
in accordance with generally accepted accounting principles are required to be
classified upon the balance sheet of the Company (or other specified Person) as
liabilities, but in any event including (without duplication):
(a) indebtedness for borrowed money;
(b) indebtedness evidenced by notes, debentures or similar
instruments;
(c) Capitalized Lease Obligations and Synthetic Lease Obligations;
(d) mandatory redemption, repurchase or dividend rights on capital
stock (or other equity), including provisions that require the exchange of
such capital stock (or other equity) for Indebtedness from the issuer;
(e) reimbursement obligations, whether contingent or matured, with
respect to letters of credit, bankers acceptances, surety bonds, other
financial guarantees and hedge agreements (without duplication of other
Indebtedness supported or guaranteed thereby);
(f) obligations that are immediately and directly due and payable
out of the proceeds of or production from property;
(g) liabilities secured by any Lien existing on property owned or
acquired by the Company (or such specified Person), whether or not the
liability secured thereby shall have been assumed; and
36
(h) all Guarantees in respect of Indebtedness of others.
"Intercreditor Agreement" shall mean that certain Intercreditor
Agreement, dated as of the Effective Date, among Prudential, Fleet National
Bank, and the Lenders (as defined in the Bank Agreement as in effect on the
Effective Date) and holders of Notes from time to time party thereto, as the
same may be amended or modified from time to time.
"Investments" shall mean any loans or advances to, or purchases or
acquisitions of the securities or obligations of, any Person or the assumption
of any liability of another Person which, in each case, did not arise from sales
to such Person in the ordinary course of business.
"IRS" shall mean the Internal Revenue Service and any successor
governmental agency.
"Joinder Agreements" shall mean those agreements between the
Collateral Agent and each of K&M Legendary Services, Inc., AbItalia, Inc.,
American Biltrite Far East, Inc. and Abimex, LLC, pursuant to which these
Guarantors shall become Obligors under the Collateral Documents.
"K&M" shall mean K&M Associates, L.P., a Rhode Island limited
partnership.
"Leverage Ratio" shall mean the ratio of Debt of the Company and its
Restricted Subsidiaries to Consolidated EBITDA.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or otherwise) or charge of any (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction) or any other type of preferential arrangement for the purpose,
or having the effect, of protecting a creditor against loss or securing the
payment or performance of an obligation.
"Material Adverse Change" means, since any specified date or from
the circumstances existing immediately prior to the happening of any specified
event, a material adverse change in (i) the business, assets, financial
condition, income or prospects of the Company and its Subsidiaries (on a
Consolidated basis), whether as a result of (a) general economic conditions
affecting the industries in which the Company operates, (b) difficulties in
obtaining supplies and raw materials, (c) fire, flood or other natural
calamities, (d) environmental pollution, (e) regulatory changes, judicial
decisions, war or other governmental action or (vi) any other event or
development, whether or not related to those enumerated above or (ii) the
ability of any Obligor (as defined in the Security Agreement) to perform
material obligations under this Agreement, any Note or any Collateral Document
or (iii) the rights and remedies of the holder of any Note under this Agreement,
any Note or any Collateral Document, it being understood that the transactions
contemplated by the Congoleum Plan, the Congoleum Note or the Congoleum Plan
Trust, and the effects thereof (including, without limitation, changes in
ownership or ownership rights in Congoleum), shall be excluded for the purposes
hereof.
"Material Agreements" shall have the meaning set forth in paragraph
8Q.
37
"Multiemployer Plan" shall mean any Plan which is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"Net Asset Sale Proceeds" means the cash proceeds of the sale or
disposition of assets by the Company or any of its Subsidiaries, net of (i)
income taxes that, as estimated by the Company in good faith, will be required
to be paid by the Company or any of its Subsidiaries in cash as a result of, and
within 16 months after, such sale or disposition (provided that any such amounts
that are not actually paid in taxes within such period shall automatically
become Net Asset Sale Proceeds), (ii) reasonable reserves for liabilities,
indemnification, escrows and purchase price adjustments resulting from the sale
of assets, (iii) transfer, sales, use and other similar taxes payable in
connection with such sale or disposition and (iv) all reasonable expenses of the
Company or any of its Subsidiaries payable in connection with such sale or
disposition.
"Noteholders" means Prudential, together with all other holders of
the Notes, together with their respective successors and assigns.
"Notes" shall have the meaning specified in paragraph 1A.
"Obligations" means the principal amount of the Notes and all of the
other present or future indebtedness, liabilities and obligations of all and
each of the Company or any Guarantor now or hereafter owed to any or all of the
Collateral Agent or the Noteholders, evidenced by or arising under, by virtue of
or pursuant to the Note Agreement, any Collateral Document or any Guaranty
Agreement, whether such indebtedness, liabilities and obligations are direct or
indirect, joint, several or joint and several, or now exist or hereafter arise,
and all renewals and extensions thereof, including, without limitation, all
interest on the Notes and any Yield-Maintenance Amount. The term "Obligations"
shall include all of the foregoing indebtedness, liabilities and obligations
whether or not allowed as a claim in any bankruptcy, insolvency, receivership or
similar proceeding.
"Officer's Certificate" shall mean a certificate signed in the name
of the Company by an Authorized Officer of the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor corporation or governmental agency.
"Person" shall mean and include an individual, a partnership, a
joint venture, a corporation, limited liability company, a trust, an
unincorporated organization and a government or any department or agency
thereof.
"PIK Interest" shall mean any accrued interest payments on Debt that
are postponed or made through the issuance of "payment-in-kind" notes or other
similar securities (including book-entry accrual with respect to such postponed
interest payments), all in accordance with the terms of such Debt; provided,
however, that in no event shall PIK Interest include payments made with cash or
cash equivalents.
"Plan" shall mean any "employee pension benefit plan" (as such term
is defined in section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any ERISA Affiliate.
38
"Priority Debt" shall mean (i) Debt of any Restricted Subsidiary
that is not a Guarantor hereunder (other than Debt owed to the Company or a
wholly-owned Restricted Subsidiary), plus (ii) (without duplication) all Debt
secured by Liens permitted under paragraph 6D, and, in each case, otherwise
permitted by paragraph 6A.
"Property" shall mean and include all interests in property and
assets, whether tangible or intangible and whether real, personal or mixed.
"Prudential" shall mean The Prudential Insurance Company of America.
"Prudential Affiliate" shall mean (i) any Person which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, Prudential, or (ii) any investment fund, account
or other vehicle for which Prudential (or any Prudential Affiliate) acts as
investment advisor or portfolio manager. As used in the preceding clause (i),
the term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Purchasers" shall mean, with respect to the Notes, Prudential.
"Receivables" shall mean any accounts, contract rights and other
forms of obligations for the payment of money arising from the sale of goods or
the rendering of services by the Company or any of its Restricted Subsidiaries,
including those outstanding under any off balance sheet factoring agreement or
asset securitization program of the Company or any of its Restricted
Subsidiaries.
"Required Holder(s)" shall mean at any particular time the holder or
holders of at least 51% of the aggregate principal amount of the Notes from time
to time outstanding.
"Responsible Officer" shall mean the president, chief executive
officer, chief operating officer, chief financial officer or chief accounting
officer of the Company, corporate counsel of the Company or any other officer of
the Company involved principally in its financial administration or its
controllership function.
"Restricted Payments" shall mean (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of the Company now or hereafter outstanding, except a dividend payable solely in
shares of stock of the Company, and (ii) any redemption, retirement, purchase or
other acquisition, direct or indirect, of any shares of any class of stock of
the Company now or hereafter outstanding, or of any warrants, rights or options
to acquire any such shares, except to the extent that the consideration therefor
consists solely of shares of stock of the Company.
"Restricted Subsidiary" shall mean (a) K&M and (b) any Person of
which the Company (or other specified Person) shall at the time, directly or
indirectly, through one or more of its Restricted Subsidiaries, (i) own at least
50% of the outstanding capital stock (or other shares of beneficial interest)
entitled to vote generally, (ii) hold at least 50% of the partnership, joint
venture or similar interests, or (iii) be a general partner or joint venturer;
provided that, at no time shall Congoleum be considered a Restricted Subsidiary.
39
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Security Agreement" means the Security Agreement, dated as of
October 14, 2003, executed by the Company and the Guarantor in favor of the
Collateral Agent on behalf of the Lenders (as defined in the Bank Agreement) and
the Noteholders.
"Senior Management Team" means each of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III.
"Significant Holder" shall mean (x) Prudential, so long as
Prudential or any Prudential Affiliate shall hold (or be committed under this
Agreement to purchase) any Note and (y) any other holder of Notes holding by
itself or together with one or more of its affiliates Notes having an aggregate
principal amount of not less than 5% of the aggregate principal amount of the
Notes at the time outstanding.
"Subsidiary" shall mean any corporation at least 51% of the total
combined voting power of all classes of Voting Stock of which shall, at the time
as of which any determination is being made, be owned by the Company either
directly or through Subsidiaries.
"Synthetic Lease Obligations" shall mean the aggregate discounted
amount of future rental payments under all leases by the Company and its
Restricted Subsidiaries that are treated as operating leases under generally
accepted accounting principles and as loans or other financings for federal
income tax purposes.
"Transferee" shall mean any direct or indirect transferee of all or
any part of any Note purchased by the Purchaser under this Agreement.
"Voting Stock" shall mean, with respect to any Person, any shares of
stock of or other ownership interest in such Person whose holders are entitled
under ordinary circumstances to vote for the election of directors or similar
body of such Person (irrespective of whether at the time stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
"Wholly Owned Subsidiary" means any Subsidiary of which all of the
outstanding capital stock (or other shares of beneficial interest) entitled to
vote generally (other than directors' qualifying shares and, in the case of
Foreign Subsidiaries, shares required by applicable legal requirements to be
held by foreign nationals) is owned by the Company (or other specified Person)
directly, or indirectly through one or more other Wholly Owned Subsidiaries.
10C. Accounting Terms And Determinations. All references in this
Agreement to "generally accepted accounting principles" shall mean generally
accepted accounting principles in effect in the United States at the time of
application thereof. Unless otherwise specified herein, all accounting terms
used herein shall be interpreted, all determinations with respect to accounting
matters hereunder shall be made, and all financial statements and certificates
and reports as to financial matters required to be furnished hereunder shall be
prepared, in accordance with generally accepted accounting principles, applied
on a basis consistent with the most recent audited consolidated financial
statements of the Company and its Subsidiaries (except as otherwise stated
therein or in the notes thereto) delivered pursuant to subparagraph 5A(iii), or,
40
if no such statements have been so delivered, the most recent audited financial
statements referred to in paragraph 8B, it being understood that, for purposes
of the Agreement, with reference to the Company and its Subsidiaries or
Restricted Subsidiaries, accounting for Congoleum on the equity method shall be
deemed to be in accordance with generally accepted accounting principles.
11. FACILITY GUARANTEE
11A. Guaranteed Obligations. The Guarantors party to this Agreement,
in consideration of the execution and delivery of this Agreement and the
purchase of the Notes by the Purchasers, hereby irrevocably, unconditionally,
absolutely, jointly and severally guarantee, on a continuing basis, to each
holder of Notes as and for such Guarantor's own debt, until final and
indefeasible payment in cash has been made, the due and punctual payment by the
Company of the principal of, and interest, and the Yield-Maintenance Amount (if
any) on, the Notes at any time outstanding and the due and punctual payment of
all other amounts payable, and all other Debt owing, by the Company to the
holders of the Notes under this Agreement and the Notes, in each case when and
as the same shall become due and payable, whether at maturity, pursuant to
mandatory or optional prepayment, by acceleration or otherwise, all in
accordance with the terms and provisions hereof and thereof; it being the intent
of the Guarantors that the obligations guaranteed by the guaranty set forth in
this paragraph 11A are referred to in this paragraph 11 as the "Guaranteed
Facility Obligations" and the guaranty thereof set forth in this paragraph 11A
is referred to in this Agreement, together with any Guarantor Joinder Agreement,
as the "Facility ▇▇▇▇▇▇▇▇▇".
▇▇▇. Payments and Performance. In the event that the Company fails
to make, on or before the due date thereof, any payment to be made of any
principal amount of, or interest or Yield-Maintenance Amount on, or in respect
of, the Notes or of any other amounts due to any holder of Notes under the Notes
or this Agreement, after giving effect to any applicable grace periods or cure
provisions or waivers or amendments, each Guarantor shall cause forthwith to be
paid the moneys in respect of which such failure has occurred in accordance with
the terms and provisions of this Agreement and the Notes. In furtherance of the
foregoing, if any or all the Notes have been accelerated as provided in
Paragraph 7A (and such acceleration has not been rescinded by action of the
Required Holders), the Guaranteed Facility Obligations in respect of such Notes
shall forthwith become due and payable without notice, regardless of whether the
acceleration of such Notes shall be stayed, enjoined, delayed or deemed
ineffective. Nothing shall discharge or satisfy the obligations of the
Guarantors under the Facility Guarantee except the full, final and indefeasible
payment in cash of the Guaranteed Facility Obligations.
11C. Releases. Each of the Guarantors consent and agree that,
without any notice whatsoever to or by the Guarantors, except with respect to
any action (but not any failure to act) referred to in clauses (i), (ii) and
(iv) below (it being understood that the Guarantors shall be deemed to have
notice of any matter as to which the Company has knowledge), and without
impairing, releasing, abating, deferring, suspending, reducing, terminating or
otherwise affecting the obligations of the Guarantors hereunder, each holder of
Notes, by action or inaction, may:
(i) compromise or settle, renew or extend the period of
duration or the time for the payment, or discharge the performance of, or
may refuse to, or otherwise not, enforce, or may, be action or inaction,
release all or any one or more parties to, any one or more of the Notes,
41
this Agreement, or any other guaranty or agreement or instrument related
thereto or hereto;
(ii) assign, sell or transfer, or otherwise dispose of, any
one or more of the Notes;
(iii) grant waivers, extensions, consents and other
indulgences of any kind whatsoever to the Company or any Guarantor or any
other Person liable in any manner in respect of all or any part of the
Guaranteed Facility Obligations;
(iv) amend, modify or supplement in any manner whatsoever and
at any time (or from time to time) any one or more of the Notes, this
Agreement, or any other guaranty or any agreement or instrument related
thereto or hereto;
(v) release or substitute any one or more of the endorsers or
guarantors of the Guaranteed Facility Obligations whether parties hereto
or not; and
(vi) sell, exchange, release, accept, surrender or enforce
rights in, or fail to obtain or perfect or to maintain, or caused to be
obtained, perfected or maintained, the perfection of any security interest
or other Lien on, by action or inaction, any Property at any time pledged
or granted as security in respect of the Guaranteed Facility Obligations,
whether so pledged or granted by the Company, Guarantor or any other
Person.
The Guarantors hereby ratify and confirm any such action specified in this
paragraph 11C and agree that the same shall be binding upon each Guarantor. The
Guarantors hereby waive any and all defenses, counterclaims or offsets which the
Guarantors might or could have by reason thereof.
11D. Waivers. To the fullest extent permitted by law, each of the
Guarantors hereby waives:
(i) notice of acceptance of this Agreement;
(ii) notice of any purchase or acceptance of the Notes under
this Agreement, or the creation, existence or acquisition of any of the
Guaranteed Facility Obligations, subject to any such Guarantor's right to
make inquiry of each holder of Notes to ascertain the amount of the
Guaranteed Facility Obligations at any reasonable time;
(iii) notice of the amount of the Guaranteed Facility
Obligations, subject to any Guarantor's right to make inquiry of each
holder of Notes to ascertain the amount of the Guaranteed Facility
Obligations at any reasonable time;
(iv) notice of adverse change in the financial condition of
the Company or any Guarantor or any other fact that might increase such
Company's or Guarantor's risk hereunder;
(v) notice of presentment for payment, diligence, demand,
protest, and notice thereof as to the Notes or any other instrument;
42
(vi) all other notices and demands to which the Company or any
Guarantor might otherwise be entitled (except if such notice or demand is
specifically otherwise required to be given to the Company or any
Guarantor under this Agreement);
(vii) the right by statute or otherwise to require any or each
holder of Notes to institute suit against the Company or any Guarantor or
to exhaust the rights and remedies of any or each holder of Notes against
the Company or any Guarantor, such Guarantor being bound to the payment of
each and all Guaranteed Facility Obligations, whether now existing or
hereafter accruing, as fully as if such Guaranteed Facility Obligations
were directly owing to each holder of Notes by such Guarantor;
(viii) any defense arising by reason of any disability or
other defense (other than the defense that the Guaranteed Facility
Obligations shall have been fully, finally and indefeasibly paid) of the
Company or any Guarantor or by reason of the cessation from any cause
whatsoever of the liability of the Company or any Guarantor in respect
thereof;
(ix) any stay (except in connection with a pending appeal),
valuation, appraisal, redemption or extension law now or at any time
hereafter in force that, but for this waiver, might be applicable to any
sale of Property of the Company or any Guarantor made under any judgment,
order or decree based on this Agreement, and the Company any each
Guarantor covenants that it will not at any time insist upon or plead, or
in any manner claim or take the benefit or advantage of any such law;
(x) at all times prior to full, final and indefeasible payment
of the Guaranteed Facility Obligations, any claim of any nature arising
out of any right of indemnity, contribution, reimbursement,
indemnification or any similar right or any claim of subrogation (whether
such right or claim arises under contract, common law or statutory or
civil law (including, without limitation, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Bankruptcy Code)) arising in respect of any payment made under this
Agreement or in connection with this Agreement, against the Company or any
Guarantor (including Liens on the Property of the Company or any
Guarantor), in each case whether or not the Company or Guarantor at any
time shall be the subject of any proceeding brought under any Bankruptcy
Law, and the Company and each Guarantor further agrees that it will not
file any claims against the Company or the estate of the Company in the
course of any such proceeding or otherwise, and further agrees that each
holder of Notes may specifically enforce the provisions of this clause
(x);
(xi) the benefit of any statute of limitations; and
(xii) the benefit of any laws that exonerate or limit the
liability of guarantors or sureties, and any defenses provided by these
laws.
11E. Marshaling. Each Guarantor hereby consents and agrees:
(i) that each holder of Notes, and each Person acting for the
benefit of one or more of the holders of Notes, shall be under no
obligation to marshal any assets in favor of the Guarantors or against or
in payment of any or all of the Guaranteed Facility Obligations; and
(ii) that, to the extent that any Guarantor makes a payment or
payments to any holder of the Notes, which payment or payments or any part
43
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required, for any of the foregoing reasons or
for any other reason, to be repaid or paid over to a custodian, trustee,
receiver or any other party under any Bankruptcy Law, other common or
civil law, or equitable cause, then, to the extent of such payment or
repayment, the obligation or part thereof intended to be satisfied thereby
shall be revived and continued in full force and effect as if such payment
or payments had not been made and the Guarantor shall be primarily liable
for such obligation.
11F. Immediate Liability. Each Guarantor agrees that the liability
of the Guarantors in respect of this Facility Guarantee shall be immediate and
shall not be contingent upon the exercise or enforcement by any holder of Notes
or any other Person of whatever remedies such holder of Notes or other Person
may have against the Company or any other Guarantor or the enforcement of any
Lien or realization upon any security such holder of Notes or other Person may
at any time possess.
11G. Primary Obligations. This Facility Guarantee is a primary and
original obligation of the Guarantors and is an absolute, unconditional,
continuing and irrevocable guaranty of payment and shall remain in full force
and effect without respect to any action by any holder of Notes specified in
paragraph 11C hereof or any future changes in conditions, including, without
limitation, change of law or any invalidity or irregularity with respect to the
issuance or assumption of any obligations (including, without limitation, the
Notes) of or by the Company or any other Guarantor, or with respect to the
execution and delivery of any agreement (including, without limitation, the
Notes and this Agreement) by the Company or any other Person.
11H. No Reduction or Defense. The obligations of the Guarantors
under this Agreement, and the rights of any holder of Notes to enforce such
obligations by any proceedings, whether by action at law, suit in equity or
otherwise, shall not be subject to any reduction, limitation, impairment or
termination, whether by reason of any claim of any character whatsoever or
otherwise (other than payment in full of all amounts owing hereunder or under
the Notes), including, with limitation, claims of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense (other than
any defense based upon the irrevocable payment in full of the obligations of the
Company and the Guarantors under this Agreement and the Notes), set-off,
counterclaim, recoupment or termination whatsoever.
Without limiting the generality of the foregoing, the obligations of
the Guarantors shall not be discharged or impaired by:
(i) any default (including, without limitation, any Default or Event of
Default), failure or delay, willful or otherwise, in the performance of any
obligations by the Company or any Guarantor, or any of their respective
Subsidiaries or Affiliates;
(ii) any proceeding of, or involving, the Company or
Guarantor, or any of their respective Subsidiaries or Affiliates
under any Bankruptcy Law, or any merger, consolidation,
reorganization, dissolution, liquidation, sale of assets or winding
up or change in corporate constitution or corporate identity or loss
of corporate identity of the Company or Guarantor, or any other
Subsidiaries or Affiliates;
44
(iii) any incapacity or lack of power, authority or legal
personality of, or dissolution or change in the directors,
stockholders or status of, the Company or any Guarantor, or any of
their Subsidiaries or Affiliates or any other Person;
(iv) impossibility or illegality of performance on the part of
the Company or any Guarantor under this Agreement or the Notes;
(v) the invalidity, irregularity or unenforceability of the
Notes, this Agreement or any documents referred to therein or
herein;
(vi) in respect of the Company or any Guarantor, or any of
their Subsidiaries or Affiliates, any change of circumstances,
whether or not foreseen or foreseeable, whether or not imputable to
the Company or any Guarantor, or any such Subsidiary or Affiliate,
or impossibility of performance through fire, explosion, accident,
labor disturbance, floods, droughts, embargoes, wars (whether or not
declared), terrorist activities, civil commotions, acts of God or
the public enemy, delays or failure of suppliers or carriers,
inability to obtain materials or any other causes affecting
performance, or any other force majeure, whether or not beyond the
control of the Company or any Guarantor, or any of their
Subsidiaries or Affiliates and whether or not of the kind herein
before specified;
(vii) any attachment, claim, demand, charge, Lien, order,
process, encumbrance or any other happening or event or reason,
similar or dissimilar to the foregoing, or any withholding or
diminution at the source, by reason of any taxes, assessments,
expenses, indebtedness, obligations or liabilities of any character,
foreseen or unforeseen, and whether or not valid, incurred by or
against any Person, corporation or entity, or any claims, demands,
charges, Liens or encumbrances of any nature, foreseen or
unforeseen, incurred by any Person, or against any sums payable
under this Agreement or the Notes, so that such sums would be
rendered inadequate or would be unavailable to make the payments
herein provided; or
(viii) any order, judgment, decree, ruling or regulation
(whether or not valid) of any court of any government authority or
agency thereof, or any other action, happening, event or reason
whatsoever which shall delay, interfere with, hinder or prevent, or
in any way adversely affect, the performance by the Company or any
Guarantor of any of their respective obligations under this
Agreement or the Notes, as the case may be.
11I. Subordination. In the event that, for any reason whatsoever,
the Company now or hereafter becomes indebted or obligated to any of the other
Guarantors in any manner, the Guarantors agree that the amount of such
obligation, interest thereon if any, and all other amounts due with respect
thereto, shall, at all times during the existence of a Default or an Event of
Default, be subordinate as to time of payment and in all other respects to all
the Guaranteed Facility Obligations, and the Guarantors shall not be entitled to
enforce or receive payment thereof until all sums then due and owing to the
holders of the Notes in respect of the Guaranteed Facility Obligations shall
45
have been fully, finally and indefeasibly paid in full in cash, except that the
Guarantors may enforce (and shall enforce, at the request of the Required
Holders, and at the Guarantors' expense) any obligations in respect of any such
obligation owing to the Guarantors from the Company so long as all proceeds in
respect of any recovery of from the such enforcement shall be held by the
Guarantors in trust for the benefit of the holders of the Notes, to be paid
thereto as promptly as reasonably possible. If any other payment, other than
pursuant to the immediately preceding sentence, shall have been made to the
Guarantors by the Company in respect of any such obligation during any time that
a Default or and Event of Default exists and there are Guaranteed Facility
Obligations outstanding, the Guarantors shall hold in trust all such payments
for the benefit of the holders of Notes, to be paid thereto as promptly as
reasonably possible.
11J. No Election. Each holder of Notes shall, individually or
collectively, have the right to seek recourse against any or all of the
Guarantors to the fullest extent provided for herein for its obligations under
this Agreement. No election to proceed in one form of action or proceeding, or
against any party, or on any obligation, shall constitute a waiver of such
holder's right to proceed in any other form of action or proceeding or against
other parties unless such holder of Notes has expressly waived such right in
writing. Specifically, but without limiting the generality of the foregoing, no
action or proceeding by or on behalf of any holder of Notes against the Company
or any other Person under any document or instrument evidencing obligations of
the Company or any such other Person to or for the benefit of such holder of
Notes shall serve to diminish the liability of the Guarantors under this
Agreement except to the extent that such holder of Notes unconditionally shall
have realized payment by such action or proceeding.
11K. Severability. Each of the rights and remedies granted under
this paragraph 11 to each holder of Notes in respect of the Notes may be
exercised by such holder without notice, or the consent of or any other action
by any other holder of the Notes.
11L. Appropriations. Until all amounts which may be or become
payable by the Company under or in connection with this Agreement or the Notes
or by the Guarantors, any holder of Notes (on its own behalf or under any
trustee or agent on its behalf) may refrain from applying or enforcing any
moneys, security or rights held or received by such holder of Notes (or any
trustee or agent on its behalf) in respect of those amounts, or apply and
enforce the same in such manner and order as it sees fit (whether against those
amounts or otherwise) and the Guarantors shall not be entitled to the benefit of
the same; provided, however, that any payments received from the Company, or the
Guarantors on behalf of the Company, will be applied to amounts owing by the
Company hereunder or in respect of the Notes issued by it.
11M. Other Enforcement Rights. Each holder of Notes may proceed to
protect and enforce this Agreement by suit or suits or proceedings in equity, at
law or in bankruptcy or insolvency, and whether for the specific performance of
any covenant or agreement contained herein or in execution or aid of any power
herein granted, or for the recovery of judgment for the obligations hereby
guarantied or for the enforcement of any other proper, legal or equitable remedy
available under applicable law.
11N. Invalid Payments. To the extent that any payment is made to any
holder of Notes in respect of the Guaranteed Facility Obligations by any Person,
which payment or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required, for any of the foregoing
46
reasons or for any other reason, to be repaid or paid over to a custodian,
trustee, receiver, administrative receiver, administrator or any other party or
officer under any Bankruptcy Law, or any other common or civil law or equitable
cause, then to the extent of such payment or repayment, the obligation or part
thereof intended to be satisfied shall be revived and continued in full force
and effect as if said payment had not been made and the Guarantors shall be
primarily liable for such obligation.
11O. No Waivers or Election of Remedies; Expenses; etc. No course of
dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder's rights, powers or remedies. No right, power or remedy conferred by
this Agreement upon any holder of Notes shall be exclusive of any other right,
power or remedy referred to herein or therein or now or hereafter available at
law, in equity, by statute or otherwise. Without limiting the obligations of the
Company under this Agreement, the Guarantors will pay to the holder of each Note
on demand all amounts specified in this Agreement and such further amount as
shall be sufficient to cover all reasonable costs and expenses of such holder of
Notes incurred in any enforcement or collection under this Agreement, including,
without limitation, reasonable attorney's fees, expenses and disbursements.
11P. Restoration of Rights and Remedies. If any holder of Notes
shall have instituted any proceeding to enforce any right or remedy under this
Agreement or any Note held by such holder and such proceeding shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to such holder, then and in every such case each such holder of Notes,
the Company and each of the Guarantors shall, except as may be limited or
affected by any determination in such proceeding, be restored severally and
respectively to its respective former position hereunder and thereunder, and
thereafter the rights and remedies of such holder of Notes shall continue as
though no such proceeding had been instituted.
11Q. No Setoff or Counterclaim. Except as otherwise required by law,
each payment by the Guarantors shall be made without setoff or counterclaim.
11R. Further Assurances. The Guarantors will cooperate with the
holders of the Notes and execute such further instruments and documents as the
Required Holders shall reasonably request to carry out, to the reasonable
satisfaction of the Required Holders, the transactions contemplated by this
Agreement, the Notes and the documents and instruments related hereto and
thereto.
11S. Survival. So long as the Guaranteed Facility Obligations shall
not have been fully and finally performed and indefeasibly paid in full in cash,
the obligations of the Guarantors under this Facility Guarantee shall survive
the transfer and payment of any Note and the payment in full of all the Notes.
11T. Acknowledgment of Common Interests; etc. Each Guarantor
acknowledges and confirms that: it is a member of an affiliated group of
companies that includes the Company and the other Guarantors; the proceeds of
the issue and sale of Notes have been used in part to benefit the Guarantor in
the operation of its businesses; and the Company and the Guarantors are engaged
in related businesses, and the Company and each Guarantor will derive
substantial direct and indirect benefits from the issue and sale of Notes.
12. MISCELLANEOUS.
47
12A. Note Payments. The Company agrees that, so long as any
Purchaser shall hold any Note, it will make payments of principal of, interest
on and any Yield-Maintenance Amount payable with respect to such Note, which
comply with the terms of this Agreement, by wire transfer of immediately
available funds for credit (not later than 12:00 noon, New York City time, on
the date due) to (i) the account or accounts of such Purchaser specified in the
Purchaser Schedules attached hereto in the case of any Notes, or (ii) such other
account or accounts in the United States as such Purchaser may designate in
writing, notwithstanding any contrary provision herein or in any Note with
respect to the place of payment. Each Purchaser agrees that, before disposing of
any Note, it will make a notation thereon (or on a schedule attached thereto) of
all principal payments previously made thereon and of the date to which interest
thereon has been paid. The Company agrees to afford the benefits of this
paragraph 12A to any Transferee which shall have made the same agreement as the
Purchaser has made in this paragraph 12A.
12B. Expenses. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save Prudential, each
Purchaser and any Transferee harmless against liability for the payment of, all
out-of-pocket expenses arising in connection with such transactions (other than
a transaction in which a Person becomes a Transferee), including (i) all
document production and duplication charges and the fees and expenses of any
special counsel engaged by the Purchaser or such Transferee in connection with
this Agreement, the transactions contemplated hereby and any subsequent proposed
modification of, or proposed consent under, this Agreement, whether or not such
proposed modification shall be effected or proposed consent granted (which shall
be a single counsel representing all the holders of the Notes and any local
counsel retained by them, unless there shall be a conflict in any such
representation of all the holders), and (ii) the costs and expenses, including
attorneys' fees, incurred by any Purchaser or such Transferee in enforcing (or
determining whether or how to enforce) any rights under this Agreement, any
Guarantor Joinder Agreement, the Notes or the Facility Guarantee or in
responding to any subpoena or other legal process or informal investigative
demand issued in connection with this Agreement or the transactions contemplated
hereby or by reason of any Purchaser's or such Transferee's having acquired any
Note, including without limitation costs and expenses incurred in any bankruptcy
case. The obligations of the Company under this paragraph 12B shall survive the
transfer of any Note or portion thereof or interest therein by any Purchaser or
any Transferee and the payment of any Note.
12C. Consent to Amendments. This Agreement may be amended, and the
Company and the Guarantors may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, if the Company shall
obtain the written consent to such amendment, action or omission to act, of the
Required Holder(s) of the Notes except that, (i) with the written consent of the
holders of all Notes at the time outstanding (and not without such written
consents), the Notes may be amended or the provisions thereof waived to change
the maturity thereof, to change or affect the principal thereof, or to change or
affect the rate or time of payment of interest on or any Yield-Maintenance
Amount payable with respect to the Notes, and (ii) without the written consent
of the holder or holders of all Notes at the time outstanding, no amendment to
or waiver of the provisions of this Agreement shall change or affect the
provisions of paragraph 7A or this paragraph 12C insofar as such provisions
relate to proportions of the principal amount of the Notes, or the rights of any
individual holder of Notes, required with respect to any declaration of Notes to
be due and payable or with respect to any consent, amendment, waiver or
declaration. Each holder of any Note at the time or thereafter outstanding shall
48
be bound by any consent authorized by this paragraph 12C, whether or not such
Note shall have been marked to indicate such consent, but any Notes issued
thereafter may bear a notation referring to any such consent. No course of
dealing between the Company and the holder of any Note nor any delay in
exercising any rights hereunder or under any Note shall operate as a waiver of
any rights of any holder of such Note. As used herein and in the Notes, the term
"this Agreement" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented. No course of dealing between the
Company and the holder of any Note nor any delay in exercising any rights
hereunder or under any Note shall operate as a waiver of any rights of any
holder of such Note. As used herein and in the Notes, the term "this Agreement"
and references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.
12D. Form, Registration, Transfer and Exchange of Notes; Lost Notes.
The Notes are issuable as registered notes without coupons in denominations of
at least $1,000,000 and otherwise in integral multiples of $1,000,000. The
Company shall keep at its principal office a register in which the Company shall
provide for the registration of Notes and of transfers of Notes. Upon surrender
for registration of transfer of any Note at the principal office of the Company,
the Company shall, at its expense, execute and deliver one or more new Notes of
like tenor and of a like aggregate principal amount, registered in the name of
such Transferee or Transferees. At the option of the holder of any Note, such
Note may be exchanged for other Notes of like tenor and of any authorized
denominations, of a like aggregate principal amount, upon surrender of the Note
to be exchanged at the principal office of the Company. Whenever any Notes are
so surrendered for exchange, the Company shall, at its expense, execute and
deliver the Notes which the holder making the exchange is entitled to receive.
Every Note surrendered for registration of transfer or exchange shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed,
by the holder of such Note or such holder's attorney duly authorized in writing.
Any Note or Notes issued in exchange for any Note or upon transfer thereof shall
carry the rights to unpaid interest and interest to accrue which were carried by
the Note so exchanged or transferred, so that neither gain nor loss of interest
shall result from any such transfer or exchange. Upon receipt of written notice
from the holder of any Note of the loss, theft, destruction or mutilation of
such Note and, in the case of any such loss, theft or destruction, upon receipt
of such holder's unsecured indemnity agreement, or in the case of any such
mutilation upon surrender and cancellation of such Note, the Company will make
and deliver a new Note, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Note.
12E. Persons Deemed Owners; Participations. Prior to due presentment
for registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of, interest on and any Yield-Maintenance Amount
payable with respect to such Note and for all other purposes whatsoever, whether
or not such Note shall be overdue, and the Company shall not be affected by
notice to the contrary. Subject to the preceding sentence, the holder of any
Note may from time to time grant participations in such Note to any Person on
such terms and conditions as may be determined by such holder in its sole and
absolute discretion, provided that any such participation shall be in an amount
of at least $1,000,000.
12F. Survival of Representations and Warranties; Entire Agreement.
All representations and warranties contained herein or made in writing by or on
behalf of the Company or any Guarantor in connection herewith shall survive the
execution and delivery of this Agreement and the Notes, the transfer by any
49
Purchaser of any Note or portion thereof or interest therein and the payment of
any Note, and may be relied upon by any Transferee, regardless of any
investigation made at any time by or on behalf of any Purchaser or any
Transferee. Subject to the preceding sentence, this Agreement, any Guarantor
Joinder Agreement and the Notes embody the entire agreement and understanding
between the Purchasers and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
12G. Successors and Assigns. All covenants and other agreements in
this Agreement contained by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not.
12H. Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is
prohibited by any one of such covenants, the fact that it would be permitted by
an exception to, or otherwise be in compliance within the limitations of,
another covenant shall not avoid the occurrence of a Default or Event of Default
if such action is taken or such condition exists.
12I. Notices. All written communications provided for hereunder
(other than communications provided for under paragraph 2) shall be sent by
first class mail or nationwide overnight delivery service (with charges prepaid)
and (i) if to any Purchaser, addressed as specified for such communications in
the Purchaser Schedule attached hereto or at such other address as any such
Purchaser shall have specified to the Company in writing, (ii) if to any other
holder of any Note, addressed to it at such address as it shall have specified
in writing to the Company or, if any such holder shall not have so specified an
address, then addressed to such holder in care of the last holder of such Note
which shall have so specified an address to the Company and (iii) if to the
Company or any Guarantor, addressed to it c/o American Biltrite Inc., ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: Vice President--Finance or
Treasurer, provided, however, that any such communication to the Company may
also, at the option of the Person sending such communication, be delivered by
any other means either to the Company at its address specified above or to any
Authorized Officer of the Company. Any communication pursuant to paragraph 2
shall be made by the method specified for such communication in paragraph 2, and
shall be effective to create any rights or obligations under this Agreement only
if, in the case of a telephone communication, an Authorized Officer of the party
conveying the information and of the party receiving the information are parties
to the telephone call, and in the case of a telecopier communication, the
communication is signed by an Authorized Officer of the party conveying the
information, addressed to the attention of an Authorized Officer of the party
receiving the information, and in fact received at the telecopier terminal the
number of which is listed for the party receiving the communication in the
Information Schedule or at such other telecopier terminal as the party receiving
the information shall have specified in writing to the party sending such
information.
12J. Payments Due on Non-Business Days. Anything in this Agreement
or the Notes to the contrary notwithstanding, any payment of principal of or
interest on any Note that is due on a date other than a Business Day shall be
made on the next succeeding Business Day. If the date for any payment is
extended to the next succeeding Business Day by reason of the preceding
sentence, the period of such extension shall not be included in the computation
of the interest payable on such Business Day.
50
12K. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12L. Descriptive Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
12M. Satisfaction Requirement. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to any Purchaser or to the Required
Holder(s), the determination of such satisfaction shall be made by such
Purchaser or the Required Holder(s), as the case may be, in the sole and
exclusive judgment (exercised in good faith) of the Person or Persons making
such determination.
12N. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW
OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
12O. Severalty of Obligations. The sales of Notes to the Purchasers
were several sales, and the obligations of Prudential and the Purchasers under
this Agreement are several obligations. No failure by Prudential or any
Purchaser to perform its obligations under this Agreement shall relieve any
other Purchaser or the Company of any of its obligations hereunder, and neither
Prudential nor any Purchaser shall be responsible for the obligations of, or any
action taken or omitted by, any other such Person hereunder.
12P. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
12Q. Binding Agreement. When this Agreement is executed and
delivered by the Company, the Guarantors and Prudential, it shall become a
binding agreement among the Company, the Guarantors and Prudential.
12R. Reaffirmation of Guaranty. Each Guarantor consents to the
execution and delivery by the Borrower of this Amendment and jointly and
severally ratify and confirm the terms of the Guaranty Agreement with respect to
the indebtedness now or hereafter outstanding under the Credit Agreement as
amended hereby and all promissory notes issued thereunder. Each Guarantor
acknowledges that, notwithstanding anything to the contrary contained herein or
in any other document evidencing any indebtedness of the Borrower to the Lenders
or any other obligation of the Borrower, or any actions now or hereafter taken
by the Lenders with respect to any obligation of the Borrower, the Guaranty
Agreement (i) is and shall continue to be a primary obligation of the
Guarantors, (ii) is and shall continue to be an absolute, unconditional, joint
and several, continuing and irrevocable guaranty of payment, and (iii) is and
shall continue to be in full force and effect in accordance with its terms.
Nothing contained herein to the contrary shall release, discharge, modify,
change or affect the original liability of the Guarantors under the Guaranty
Agreement.
51
12S. Acknowledgment of Perfection of Security Interest. The Company
and each Guarantor hereby acknowledges that, as of the date hereof, the security
interests and liens granted to the Collateral Agent for the benefit of the
Lenders under the Bank Agreement and the holders of the Notes are in full force
and effect, are properly perfected and are enforceable in accordance with the
terms of the Collateral Documents. Further, the Company and each Guarantor
Lenders each acknowledges and agrees that each reference in the Security
Agreement to the "Bank Agreement", shall be deemed to refer to the Bank
Agreement, as in effect on the Effective Date, as amended, restated,
supplemented or otherwise modified from time to time, and each reference in the
Security Agreement to the "Note Agreement" shall be deemed to refer to this
Agreement, as amended, restated, supplemented or otherwise modified from time to
time.
52
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterparts of this letter and return the same to
the Company, whereupon this letter shall become a binding agreement among the
Company, the Guarantors and the Purchaser.
Very truly yours,
AMERICAN BILTRITE INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title: VP- Finance
K&M ASSOCIATES L.P., as Guarantor
By: AIMPAR, INC., its General Partner
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title:VP
ABTRE, INC., as Guarantor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title: VP
AIMPAR, INC., as Guarantor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title: VP
AMERICAN BILTRITE INTELLECTUAL
PROPERTIES, INC., as Guarantor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
-----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title: VP
Signature Page to Amended and Restated Note Agreement
IDEAL TAPE CO., INC., as Guarantor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
-----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title: VP
ABITALIA, INC., as Guarantor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
-----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title: VP
AMERICAN BILTRITE FAR EAST, INC.,
as Guarantor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title: VP
MAJESTIC JEWELRY, INC., as Guarantor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
-----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title: VP
OCEAN STATE JEWELRY, INC., as Guarantor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
-----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title: VP
Signature Page to Amended and Restated Note Agreement
425 DEXTER ASSOCIATES, L.P., as Guarantor
By: AIMPAR, INC., its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
-----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title: VP
K&M LEGENDARY SERVICES, INC.,
as Guarantor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
-----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title: VP
ABIMEX, LLC, as Guarantor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
-----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title: VP
Signature Page to Amended and Restated Note Agreement
The foregoing Agreement is hereby accepted as of the date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: SVP
Signature Page to Amended and Restated Note Agreement
Annex I
The Company covenants that it will not permit, as determined at the end of each
fiscal quarter commencing with the fiscal quarter ending March 31, 2005 and
ending on or prior to June 30, 2006,
(i) Consolidated Total Liabilities to Consolidated Tangible Net
Worth. On the last day of each fiscal quarter of the Company, Consolidated
Total Liabilities shall not exceed the percentage set forth in the table
below of Consolidated Tangible Net Worth on such date:
Quarter Ending Percentage
-------------- ----------
3/31/05 and thereafter 200%
(ii) Consolidated Adjusted EBITDA to Consolidated Interest Expense.
For each period of four consecutive fiscal quarters of the Company,
Consolidated Adjusted EBITDA shall equal or exceed the percentage set
forth in the table below of Consolidated Interest Expense.
Quarter Ending Percentage
-------------- ----------
3/31/05 and 6/30/05 125%
9/30/05 and each fiscal quarter ending
thereafter 150%
(iii) Consolidated Tangible Net Worth. Consolidated Tangible Net
Worth shall on each quarter end exceed the sum of (a) $40,000,000 plus (b)
33?% of Consolidated Net Income (if positive) for each fiscal quarter of
the Company ending June 30, 2003 and thereafter.
(iv) Income or Loss from Continuing Operations. Net income from
continuing operations of the Company and its Subsidiaries reporting
Congoleum on the equity method shall equal or exceed $1.00 in at least one
of any two consecutive fiscal quarters of the Company for any two
consecutive fiscal quarters of the Company ending March 31, 2004 and
thereafter.
(v) Capital Expenditures. The aggregate amount of Capital
Expenditures in any fiscal year of the Company ending after December 31,
2004 shall not exceed $4,000,000.
56
In connection with any calculations performed in determining compliance
with the above calculations, defined terms shall have the meanings as set forth
in the Note Purchase Agreement, except that the following terms shall have the
following meanings:
"Capital Expenditures" means, for any period, amounts added or
required to be added to the property, plant and equipment or other fixed assets
account on the Consolidated balance sheet of the Company and its Subsidiaries,
prepared in accordance with GAAP.
"Capitalized Lease" means any lease which is required to be
capitalized on the balance sheet of the lessee in accordance with GAAP,
including Statement Nos. 13 and 98 of the Financial Accounting Standards Board.
"Capitalized Lease Obligations" means the amount of the liability
reflecting the aggregate discounted amount of future payments under all
Capitalized Leases calculated in accordance with GAAP, including Statement Nos.
13 and 98 of the Financial Accounting Standards Board.
"Cash Equivalents" means:
(a) negotiable certificates of deposit, time deposits (including
sweep accounts), demand deposits and bankers' acceptances having a
maturity of nine months or less and issued by any United States or
Canadian financial institution having capital and surplus and undivided
profits aggregating at least $100,000,000 and rated at least Prime-1 by
▇▇▇▇▇'▇ or A-1 by S&P or issued by any Lender (as defined in the Bank
Agreement as in effect on the Effective Date);
(b) corporate obligations having a maturity of nine months or less
and rated at least Prime-1 by ▇▇▇▇▇'▇ or A-1 by S&P or issued by any
Lender (as defined in the Bank Agreement as in effect on the Effective
Date);
(c) any direct obligation of the United States of America or Canada
or any agency or instrumentality thereof, or of any state or municipality
thereof, (i) which has a remaining maturity at the time of purchase of not
more than one year or which is subject to a fully collateralized
repurchase agreement with any Lender (or any other financial institution
referred to in clause (a) above) exercisable within one year from the time
of purchase and (ii) which, in the case of obligations of any state or
municipality, is rated at least Aaa by ▇▇▇▇▇'▇ or AAA by S&P; and
(d) any mutual fund or other pooled investment vehicle rated at
least Aa by ▇▇▇▇▇'▇ or AA by S&P which invests principally in obligations
described above.
"Consolidated Adjusted EBITDA" shall mean, for any period ending on
or before June 30, 2006, the total of:
(i) Consolidated EBITDA; minus
(ii) Capital Expenditures except (a) to the extent attributable to
Capitalized Lease Obligations or (b) financed with the proceeds of
Financing Debt; minus
2
(iii) any dividends paid or payable in cash by the Company or any of
its Subsidiaries to third parties; minus
(iv) the aggregate amount paid by the Company and its Subsidiaries
to repurchase shares of capital stock and options to purchase shares of
capital stock, in each case excluding any such payments made prior to June
30, 2003; minus
(v) any net income taxes paid or payable in cash by the Company or
any of its Subsidiaries after subtracting any income tax refunds paid or
payable in cash to the Company or any of its Subsidiaries; provided,
however, that the foregoing shall not include any cash taxes paid or
payable in connection with the sale by Tullahoma Properties, L.L.C. of the
warehouse facility located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
on or about January 31, 2005.
"Consolidated EBITDA" shall mean, for any period, the total of:
(i) Consolidated Net Income; plus
(ii) all amounts deducted in computing such Consolidated Net Income
in respect of:
(a) depreciation, amortization and unusual noncash charges
(other than the write-down of current assets),
(b) interest expense, and
(c) income tax expense, minus
(iii) all cash payments made during such period on account of
reserves, restructuring charges and other noncash charges added back to
Consolidated EBITDA in a previous period; provided, however, that the
foregoing shall not include any cash payments made on account of the
reserve for environmental liabilities for the 10.33 acres of land
bordering on ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ owned by
Tullahoma Properties, L.L.C., minus
(iv) all amounts included in Consolidated Net Income in respect of
deferred income tax benefits and other noncash income items, except such
amounts that have been deducted from Consolidated EBITDA in a previous
period
"Consolidated Interest Expense" means, for any period, the total of:
(i) the aggregate amount of interest, including commitment fees,
payments in the nature of interest under Capitalized Leases and net
payments under hedge agreements, accrued by the Company and its
Subsidiaries reporting Congoleum on the equity method (whether such
interest is reflected as an item of expense or capitalized), minus
(ii) to the extent otherwise included in clause (a) above, the
amortization of deferred financing fees and costs, original issue discount
relating to Indebtedness and accrued interest on Indebtedness not paid in
3
cash to the extent permitted by the terms, including subordination terms,
of such Indebtedness (including PIK Interest), plus
(iii) actual cash payments with respect to accrued and unpaid
interest (including PIK Interest) that has previously reduced Consolidated
Interest Expense pursuant to clause (b) above, plus
(iv) scheduled principal payments on Financing Debt paid by the
Company and its Subsidiaries during such period.
"Consolidated Net Income" means, for any period, net income (or
loss) from continuing operations (excluding in all events, net income (or loss)
relating to Janus Flooring Corporation) of the Company and its Subsidiaries
reporting Congoleum on the equity method, excluding:
(i) extraordinary gains (net of any extraordinary losses up to the
amount of any extraordinary gains),
(ii) net income of any Person (other than a Subsidiary) in which the
Company or any of its Subsidiaries has an ownership interest, unless those
net earnings have actually been received in the form of cash for
distributions,
(iii) any portion of the net income of any Subsidiary which for any
reason is unavailable to pay dividends to the Company or any other
Subsidiary,
(iv) any aggregate net gain (in excess of any net losses) arising
from the sale, exchange or other disposition of capital assets (such term
to include all fixed assets, whether tangible or intangible, all inventory
sold in conjunction with the disposition of fixed assets, and all
securities),
(v) any write-up of any asset,
(vi) any gain arising from the acquisition of any securities of the
Company or any of its Subsidiaries,
(vii) net income or gain (but not any loss) resulting from a change
in accounting, an extraordinary event or prior period adjustments,
(viii) the income (or loss) of any Person accrued to the date it
becomes a Subsidiary, and
(ix) the reserve for environmental liabilities for the 10.33 acres
of land bordering on ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ owned
by Tullahoma Properties, L.L.C.
"Consolidated Tangible Net Worth" means the aggregate amount of (i)
capital stock (less any treasury stock, capital stock subscribed and unissued
and other contra-equity accounts, (ii) surplus, (iii) foreign currency
translation adjustments made after June 30, 2003, and (iv) retained earnings of
4
the Company and it Subsidiaries reporting Congoleum on the equity method,
excluding (a) any inter-company balances, (b) intangibles, (c) any change in the
value of the Company's Investments in Congoleum as reflected on the Company's
balance sheet as of December 31, 2002 and (d) the cumulative amount of any net
write-up of asset values after the audit immediately preceding the Closing Date.
"Consolidated Total Liabilities" means, at any date, total
liabilities of the Company and its Subsidiaries on a Consolidated basis, reduced
by any rights, proceeds or funds available due to or in connection with any
insurance, and excluding in all events Indebtedness in connection with or
contemplated by the Congoleum Joint Venture Agreement, the Congoleum Plan, the
Congoleum Plan Note and the Congoleum Plan Trust.
"GAAP" means generally accepted accounting principles as from time
to time in effect, including the statements and interpretations of the United
States Financial Accounting Standards Board; provided, however, that (a) for
purposes of compliance with paragraphs 5A and 6 and the related definitions,
"GAAP" means such principles as in effect on December 31, 2004, as applied by
the Company and its Subsidiaries in the preparation of the most recent annual
statements referred to in paragraph 5A, and consistently followed, without
giving effect to any subsequent changes thereto and (b) in the event of a change
in generally accepted accounting principles after such date, either the Company
or the Required Lenders may request a change in the definition of "GAAP", in
which case the parties hereto shall negotiate in good faith with respect to an
amendment of this Agreement implementing such change, it being understood that,
for purposes of this Annex I, with respect to any reference or requirement that
the financial statements of and other financial measurements with respect to the
Company be (or be based on or derived from) financial measurements determined in
accordance with GAAP, accounting for Congoleum on the equity method of
accounting shall be deemed GAAP-compliant.
"PIK Interest" means any accrued interest payments on Financing Debt
that are postponed or made through the issuance of "payment-in-kind" notes or
other similar securities (including book-entry accrual with respect to such
postponed interest payments), all in accordance with the terms of such Financing
Debt; provided, however, that in no event shall PIK Interest include payments
made with cash or Cash Equivalents.
5
Schedule 6D
Existing Liens
6
Schedule 6F
Existing Investments
7
Schedule 6M-1
Existing Indebtedness
8
Schedule 6M-2
Interim CIBC Letters of Credit
9
10
Schedule 8A
List of Subsidiaries
11
Schedule 8D
Outstanding Debt
12
Schedule 8G
Agreements Restricting Debt
13
Schedule 8O
Patents and Trademarks
14
Schedule 8Q
Material Agreements
15
Exhibit 1(a)
Congoleum Plan
16
Exhibit 1(b)
Congoleum Plan Note
17
Aggregate Principal
Amount of Notes Note
Purchased Denomination(s)
--------- ---------------
THE PRUDENTIAL INSURANCE COMPANY OF $20,000,000 $20,000,000
AMERICA Notes
(1) All payments on account of Notes
held by such purchaser shall be
made by wire transfer of
immediately available funds for
credit to:
Account No.: ▇▇▇-▇▇▇▇-▇▇▇
The Bank of New York
New York, NY
(ABA No.: 021-000-018)
Each such wire transfer shall set
forth the name of the Company, a
reference to "7.91% Senior Notes
due August 28, 2010, Security No.
!INV 7654!, PPN 024591\C2"," for
the Note, and the due date and
application (as among principal,
interest and Yield-Maintenance
Amount) of the payment being made.
(2) Address for all notices relating
to payments:
The Prudential Insurance Company of America
c/o Investment Operations Group
Gateway Center Two, 10th Floor
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Manager, ▇▇▇▇▇▇▇▇ and
Collections
(3) Address for all other
communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Managing Director
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Managing Director
(4) Recipient of telephonic prepayment notices:
Manager, Trade Management Group
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(5) Address for Delivery of Notes:
Send physical security by
nationwide overnight delivery
service to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Prudential Capital Group
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
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INFORMATION SCHEDULE
Authorized Officers for Prudential
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Name Title Telephone Facsimile
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▇▇▇▇ ▇▇▇▇▇▇▇ Managing Director (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Senior Vice President (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Vice President (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
Authorized Officers for Company
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Name Title Telephone Facsimile
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Chairman and Chief (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
Executive Officer
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ President and Chief (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
Operating Officer
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Treasurer
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III V.P. Finance and Chief (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
Financial Officer
EXHIBIT A
[FORM OF NOTE]
AMERICAN BILTRITE INC.
7.91% SENIOR NOTE DUE AUGUST 28, 2010
No. _____ ___________, 20__
$________
FOR VALUE RECEIVED, the undersigned, American Biltrite Inc. (herein called
the "Company"), a corporation organized and existing under the laws of the State
of Delaware, hereby promises to pay to , or registered assigns, the principal
sum of DOLLARS on August 28, 2010, with interest (computed on the basis of a
360-day year--actual days month) (a) on the unpaid balance thereof at the rate
of 7.91% per annum from the date hereof, payable quarterly on the 28th day of
February, May, August and November in each year, commencing with the next such
date succeeding the date hereof, until the principal hereof shall have become
due and payable, and (b) on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of Yield-Maintenance Amount and
any overdue payment of interest, payable quarterly as aforesaid (or, at the
option of the registered holder hereof, on demand), at a rate per annum from
time to time equal to the greater of (i) 9.66% or (ii) 2% over the rate of
interest publicly announced by Bank of New York from time to time in New York
City as its Prime Rate.
Payments of principal, Yield-Maintenance Amount, if any, and interest are
to be made at the main office of Bank of New York in New York City or at such
other place as the holder hereof shall designate to the Company in writing, in
lawful money of the United States of America.
This Note is one of the Senior Notes (herein called the "Notes") issued
pursuant to a Note Purchase Agreement and Facility Guarantee, dated as of August
28, 2001, as amended and restated by that certain Amended and Restated Note
Purchase Agreement and Facility Guarantee, dated as of May __, 2005 (as amended
from time to time, the "Agreement"), among the Company and the Guarantors party
thereto, on the one hand, and The Prudential Insurance Company of America and
each Prudential Affiliate which becomes party thereto, on the other hand, and is
entitled to the benefits thereof.
As provided in the Agreement, this Note is subject to prepayment, in whole
or from time to time in part, in certain cases without Yield-Maintenance Amount
and, in other cases, with the Yield-Maintenance Amount specified in the
Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for the then outstanding principal amount will be issued to, and registered in
the name of, the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
The Company agrees to make prepayments of principal of this Note on the
dates and in the amounts specified in the Agreement.
In case an Event of Default shall occur and be continuing, the principal
of this Note may be declared or otherwise become due and payable in the manner
and with the effect provided in the Agreement.
Capitalized terms used and not otherwise defined herein shall have the
meanings (if any) provided in the Agreement.
This Note is intended to be performed in the State of New York and shall
be construed and enforced in accordance with the internal law of such State.
AMERICAN BILTRITE INC.
By: ____________________
Title: ___________________
EXHIBIT B
[FORM OF GUARANTOR JOINDER AGREEMENT]
GUARANTOR JOINDER AGREEMENT, dated as of ___________________, ______, made
by [Name and Jurisdiction of New Guarantor] (the "New Guarantor"), in favor of
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA and the other Purchasers party to,
and holders and Transferees of Notes issued pursuant to, the Agreement referred
to below (collectively, the "Holders"). All capitalized terms used herein and
not otherwise defined shall have the respective meanings ascribed thereto in the
Agreement referred to below.
WHEREAS, American Biltrite, Inc., a Delaware corporation (the "Company"),
and certain Guarantors described therein on the one hand, and The Prudential
Insurance Company of America (and, if applicable, certain other Holders), on the
other hand, are parties to that certain Amended and Restated Note Purchase
Agreement and Facility Guarantee, dated as of May __, 2005 (herein called the
"Agreement");
WHEREAS, pursuant to paragraph 5L of the Agreement, the Company covenants
that at the time that the New Guarantor becomes a borrower or obligor under the
Bank Agreement, it will cause such Subsidiary to become simultaneously a
Guarantor by, inter alia, executing and delivering to the Holders a Guarantor
Joinder Agreement
WHEREAS, the New Guarantor is a member of an affiliated group of companies
that includes the Company and the Guarantors under the Agreement; the proceeds
of the issue and sale of Notes under the Agreement will be used in part to
benefit the Company and the Guarantors (including the New Guarantor) in the
operation of their respective businesses; and the Company and the Guarantors
(including the New Guarantor) are engaged in related businesses, and each of the
Company and the Guarantors (including the New Guarantor) will derive substantial
direct and indirect benefits from the issue and sale of Notes under the
Agreement; and
WHEREAS, the New Guarantor has agreed to execute this Guarantor Joinder
Agreement to become a party to, and Guarantor under, the Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Note Agreement. By executing and delivering this Guarantor Joinder
Agreement (in addition to satisfying the other conditions precedent set
forth in paragraph 5L of the Agreement), the New Guarantor, as provided in
the Agreement, hereby becomes a party to the Agreement as a Guarantor
thereunder with the same force and effect as if originally named therein
as a Guarantor and, without limiting the generality of the foregoing,
hereby expressly assumes all obligations and liabilities of a Guarantor
thereunder and under the Facility Guarantee. The New Guarantor hereby
represents and warrants that each of the representations and warranties of
the Guarantors contained in paragraph 8 of the Agreement is true and
correct with respect to such New Guarantor on and as of the date hereof
(after giving effect to this Guarantor Joinder Agreement) as if made on
and as of such date.
2. GOVERNING LAW. THIS GUARANTOR JOINDER AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE
GOVERNED BY, THE INTERNAL LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Guarantor Joinder
Agreement to be duly executed and delivered to the Holders as of the date first
above written.
[NAME OF NEW GUARANTOR]
By:_________________________
Name:
Title:
B - 2