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
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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
Contracts..............................................16
6I. 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 Guarantee............................26
8I. 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
----------------------
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.
57 River Street
Wellesley Hills, MA 02481
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 Americas, 30th Floor
New York, New York 10036
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
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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,
30th Floor, New York, New York, 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 011-000-138.
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:
-------------------------------------------------------
Leverage Ratio
Leverage Fee
-------------------------------------------------------
3.5:1.0 or
greater
2.00%
-------------------------------------------------------
3.0:1.0 or greater, but
less than 3.5:1.0
1.00%
-------------------------------------------------------
2.75:1.0 or greater, but
less than 3.0:1.0
0.50%
-------------------------------------------------------
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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<PAGE>
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
5
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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 S-1,
S-2, S-3, S-4, 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
6
<PAGE>
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
7
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
(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
<PAGE>
(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
<PAGE>
(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
<PAGE>
(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
Moody's 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 Moody's
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
<PAGE>
(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
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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);
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(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
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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.
6O. Congoleum. 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
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<PAGE>
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
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<PAGE>
(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
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<PAGE>
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
<PAGE>
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
