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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[|X|] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended June 30, 2001
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from______ to _______
Commission file number: 333-17305
International Knife & Saw, Inc.
(Exact name of registrant as specified in its charter)
Delaware 57-0697252
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1299 Cox Avenue
Erlanger, Kentucky 41018
(Address of principal executive offices)
(859) 371-0333
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No __
As of July 31, 2001, there were 481,971 shares of the registrant's common stock
outstanding, all of which were owned by an affiliate of the registrant.
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International Knife & Saw, Inc. and Subsidiaries
Index
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk 18
Part II. Other Information
Item 1. Legal Proceedings 19
Item 2. Change in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20
(a) Exhibits
(b) Reports on Form 8-K 20
Signatures 21
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
International Knife & Saw, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
2001 2000
-------------------------------------
Assets (in thousands)
Current assets:
Cash and cash equivalents $ 1,142 $ 3,392
Accounts receivable, trade, less
allowances for doubtful accounts
of $1,235 and $2,428 11,254 24,223
Inventories 12,722 29,526
Due (to) from parent (46) 34
Other current assets 1,011 2,898
-------------------------------------
Total current assets 26,083 60,073
Other assets:
Goodwill 7,189 14,773
Debt issuance costs 2,037 2,271
Other noncurrent assets 699 2,478
-------------------------------------
9,925 19,522
Property, plant and equipment-net 20,122 46,796
-------------------------------------
Total assets $ 56,130 $ 126,391
=====================================
See accompanying notes.
3
International Knife & Saw, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
2001 2000
------------------------------------
(in thousands)
Liabilities and shareholder's deficit
Current liabilities:
Notes payable $ 2,375 $ 19,208
Current portion of long-term debt 90,989 4,027
Accounts payable 4,472 10,807
Accrued liabilities 11,366 13,745
------------------------------------
Total current liabilities 109,202 47,787
Long-term debt, less current portion 1,680 108,321
Other liabilities 415 8,865
------------------------------------
Total liabilities 111,297 164,973
Minority interest - 1,072
Shareholder's deficit:
Common stock, no par value - authorized
580,000 shares; issued - 526,904
shares; outstanding - 481,971 shares
5 5
Additional paid-in capital 10,153 10,153
Accumulated deficit (59,641) (41,427)
Accumulated other comprehensive loss (2,252) (4,953)
Treasury stock, at cost (3,432) (3,432)
------------------------------------
Total shareholder's deficit (55,167) (39,654)
------------------------------------
Total liabilities and $ 56,130 $ 126,391
shareholder's deficit ====================================
See accompanying notes.
4
International Knife & Saw, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Quarter ended Six months ended
June 30, June 30,
2001 2000 2001 2000
----------------------------------------------------
(in thousands, except per share amounts)
Net sales $ 31,405 $ 42,055 $ 70,150 $ 86,567
Cost of sales 23,986 31,582 52,895 63,840
----------------------------------------------------
Gross profit 7,419 10,473 17,255 22,727
Selling, general and 19,884 11,473 29,319 21,025
administrative expenses ----------------------------------------------------
Operating income (loss) (12,465) (1,000) (12,064) 1,702
Other expenses (income):
Interest income (24) (45) (193) (66)
Interest expense 3,298 3,260 6,517 6,364
Minority interest 51 68 103 134
----------------------------------------------------
3,325 3,283 6,427 6,432
----------------------------------------------------
Loss before income taxes (15,790) (4,283) (18,491) (4,730)
Provision (benefit) for 270 498 (277) 1,168
income taxes ----------------------------------------------------
Net loss $ (16,060) $ (4,781) $ (18,214) $ (5,898)
====================================================
Net loss per common share $ (33.32) $ (9.92) $ (37.79) $ (12.24)
See accompanying notes.
5
International Knife & Saw, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
June 30,
2001 2000
-------------------------
(in thousands)
Operating activities
Net loss $ (18,214) $ (5,898)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 3,585 3,959
Loss on disposition of businesses 11,233 1,981
Loss on sale of property, plant and equipment 78 44
Minority interest in income of subsidiary 103 134
Changes in operating assets and liabilities,
net of effects from purchases of operations:
Accounts receivable (1,272) (1,696)
Inventories 1,282 1,721
Accounts payable (3,132) (4,101)
Accrued liabilities 5,321 (161)
Other 201 786
-------------------------
Net cash used by operating activities (815) (3,231)
Investing activities
Purchases of operations, net of cash acquired - (956)
Purchases of property, plant and equipment (2,366) (2,802)
Proceeds from sale of property, plant and equipment 82 80
Proceeds from disposition of businesses,
net of cash disposed 9,252 1,290
Decrease (increase) in notes receivable
and other assets 90 (22)
-------------------------
Net cash provided (used) by investing activities 7,058 (2,410)
Financing activities
Decrease in amounts due from parent 80 32
Increase in notes payable and long-term debt 7,924 16,967
Repayment of notes payable and long-term debt (16,318) (9,970)
Cash received from investees 18 28
-------------------------
Net cash (used) provided by financing activities (8,296) 7,237
Effect of exchange rates on cash and cash equivalents (197) (121)
-------------------------
Increase (decrease) in cash and cash equivalents (2,250) 1,475
Cash and cash equivalents at beginning of period 3,392 1,862
-------------------------
Cash and cash equivalents at end of period $ 1,142 $ 3,337
=========================
See accompanying notes.
6
International Knife & Saw, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(in thousands)
1. Basis of Presentation
The unaudited interim consolidated financial statements contain all adjustments,
consisting of normal recurring adjustments, which are, in the opinion of the
management of International Knife & Saw, Inc. and its consolidated subsidiaries
(the "Company"), necessary to present fairly the consolidated financial position
and consolidated results of operations and cash flows of the Company. Results of
operations for the periods presented are not necessarily indicative of the
results for the full fiscal year.
These financial statements should be read in conjunction with the audited
consolidated financial statements and related notes included in the Company's
Form 10-K for the year ended December 31, 2000. The consolidated balance sheet
at December 31, 2000 has been derived from the audited consolidated financial
statements at that date. Certain 2000 amounts have been reclassified to conform
to the current year presentation.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, and its amendments
Statements 137, Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133 and 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities issued in June
1999 and June 2000, respectively (collectively referred to as Statement 133),
which was required to be adopted in fiscal years beginning after June 15, 2000.
The Statement required the Company to recognize any derivatives on the balance
sheet at fair value. The Company adopted this new Statement as of January 1,
2001. The adoption of this Statement did not have a significant effect on the
Company's earnings or financial position.
In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
Business Combinations, and No. 142, Goodwill and Other Intangible Assets,
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives will no
longer be amortized but will be subject to annual impairment tests in accordance
with the Statements. Other intangible assets will continue to be amortized over
their useful lives.
7
International Knife & Saw, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(in thousands)
1. Basis of Presentation (continued)
The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
non-amortization provisions of the Statement is expected to result in an
increase in net income of approximately $400 ($0.83 per share) per year. During
2002, the Company will perform the first of the required impairment tests of
goodwill and indefinite lived intangible assets as of January 1, 2002. The
Company has not yet determined what the effect of these tests will be on the
earnings and financial position of the Company.
2. Going Concern and Restructuring
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. The Company is highly leveraged.
As of June 30, 2001, the Company's total notes payable and long term debt and
stockholder's deficit was approximately $95,044 and $55,167, respectively. The
Company incurred net losses of approximately $18,214 and $15,529 in the first
half of 2001 and the year ended December 31, 2000, respectively. In addition,
the Company incurred negative cash flow from operations of $815 and $4,534
during these same periods.
In February 2001, the Company retained Jefferies & Company, Inc. ("Jefferies")
as its financial advisor to assist the Company in addressing its highly
leveraged capital structure, specifically the restructuring of its $90,000 of 11
3/8% Senior Subordinated Notes due 2006 (the "Subordinated Notes"). Continuing
adverse market conditions and their negative effect on the Company's cash flow,
coupled with limited liquidity, precluded the Company from making the
approximate $5,100 interest payment on the Subordinated Notes on May 15, 2001
and will likely preclude the Company from making the approximate $5,100 interest
payment due on November 15, 2001. As a result, all of such debt is subject to
acceleration and has been classified as current.
As part of the Company's restructuring initiative, on June 6, 2001, the Company
sold all of the issued and outstanding capital stock of IKS Klingelnberg GmbH
("IKSK"), a wholly-owned German subsidiary of the Company for approximately
$11,724 in cash (see Note 7 of the Notes to the Consolidated Financial
Statements). The proceeds from the sale were immediately applied to repay all
indebtedness and other obligations owed by the Company to Deutsche Bank AG, the
Company's former senior lender. On June 21, 2001, the Company entered into an
agreement with Chilmark Fund II, L.P. ("Chilmark") for a six-month senior
secured credit facility for up to $5,000 to replace the Deutsche Bank
facilities. The new facility will be used for professional
8
International Knife & Saw, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(in thousands)
2. Going Concern and Restructuring (continued)
fees and other costs incurred in the ongoing restructuring of the Company's
Subordinated Notes and general working capital needs. While the Company believes
that there are certain restructuring alternatives available to it, there can be
no assurance that the Company will be successful in implementing any such
alternatives or that any such alternatives, if implemented, will enable the
Company to meet its obligations.
The Company does not have any significant capital expenditure commitments in
2001 that cannot be deferred; however, deferral of planned maintenance and
expansion expenditures may negatively impact the Company's operations. In
addition, the Company is pursuing aggressive cost cutting programs. At June 30
and July 31, 2001, the Company had approximately $2,625 and $2,000,
respectively, available under its new credit facility and approximately $1,141
and $1,471, respectively, cash on hand. The Company's operations continue to
generate negative cash flow from operations. These matters and those noted above
raise substantial doubt about the Company's ability to continue as a going
concern.
The operating loss for the second quarter and first half of 2001 include, in
addition to the loss on the sale of IKSK, professional fees of $1,469 and
$1,981, respectively, incurred in the restructuring of the Company's
Subordinated Notes and severance costs of $10 and $100, respectively, resulting
from the Company's cost cutting programs.
3. Comprehensive Income
The Company includes foreign currency translation adjustments in other
comprehensive income. For the quarters ended June 30, 2001 and 2000, total
comprehensive losses amounted to $12,351 and $5,004, respectively, including
$3,709 of other comprehensive gains and $223 of other comprehensive losses
related to foreign currency translation. For the six months ended June 30, 2001
and 2000, total comprehensive losses amounted to $15,513 and $6,782,
respectively, including $2,701 of other comprehensive gains and $884 of other
comprehensive losses related to foreign currency translation.
9
International Knife & Saw, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(Unaudited)
(in thousands)
4. Notes Payable and Long -Term Debt
June 30, December 31,
2001 2000
-------------------------
Notes payable:
Note payable on demand in German Marks to
a German bank, issued under revolving
credit agreements, interest payable
quarterly $ - $5,499
Note payable on demand in U.S. Dollars to a
German bank, issued under revolving
credit agreements, interest payable
quarterly - 8,719
Notes payable on demand in Chinese Yuan
Renminbi to Chinese banks, issued under
revolving credit agreements, interest
payable monthly - 2,125
Note payable on demand in Austrian Schillings
to an Austrian bank - 1,365
Note payable on demand in U.S. Dollars to a
U.S. bank - 1,500
Note payable in U.S. Dollars to a U.S. lender 2,375 -
-------------------------
$ 2,375 $19,208
=========================
June 30, December 31,
2001 2000
-------------------------
Long-term debt:
11-3/8% Senior Subordinated Notes
due 2006 $90,000 $90,000
Notes payable in German Marks to
a German bank - 14,559
Notes payable in Chinese Yuan Renminbi
to Chinese banks - 1,017
Capitalized lease obligations to U.S. lenders 2,639 3,199
Promissory notes payable in Austrian
Schillings to an Austrian bank - 1,746
Promissory note payable in Dutch Guilders
to a former shareholder of the Diacarb
Company - 1,792
Other 30 35
-------------------------
92,669 112,348
Less current portion 90,989 4,027
-------------------------
1,680 $108,321
=========================
10
International Knife & Saw, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(Unaudited)
(in thousands)
4. Notes Payable and Long -Term Debt (continued)
Continuing adverse market conditions and their negative effect on the Company's
cash flow, coupled with limited liquidity, precluded the Company from making the
approximate $5,100 interest payment on the Subordinated Notes on May 15, 2001.
As a result, all of such debt is subject to acceleration and has been classified
as current.
On June 6, 2001, the Company sold all of the issued and outstanding capital
stock of IKSK for approximately $11,724 in cash (see Note 7 of the Notes to the
Consolidated Financial Statements). The purchase price included the assumption
of all related debt of IKSK and its subsidiaries by the buyer. The proceeds from
the sale were immediately applied to repay all U.S. indebtedness and other
obligations owed by the Company to Deutsche Bank AG, the Company's former senior
lender.
On June 21, 2001, the Company entered into an agreement with Chilmark for a
six-month senior secured credit facility for up to $5,000 to replace its former
Deutsche Bank facilities. The new facility will be used for professional fees
and other costs incurred in the ongoing restructuring of the Company's
Subordinated Notes and general working capital needs. At June 30, 2001, the
interest rate on the new facility was at 7.75% and the Company had $2,625
available under this new facility.
5. Income Taxes
IKS Corporation, of which the Company is a wholly-owned subsidiary, files a
consolidated federal income tax return which includes the Company. The Company's
provision/benefit for income taxes includes U.S. federal, state, and local
income taxes as well as non-U.S. income taxes in certain jurisdictions. The
current and deferred tax provision and benefit for the Company are recorded as
if it filed on a stand-alone basis. All participants in the consolidated income
tax return are separately liable for the full amount of the taxes, including
penalties and interest, if any, which may be assessed against the consolidated
group. The current provision/benefit for United States income taxes is recorded
to the intercompany account with IKS Corporation. The Company did not record a
tax benefit related to the pre-tax losses in the United States for the quarter
ended June 30, 2001 in accordance with income tax accounting rules, but did
record the benefit of a $1,108 federal tax refund received in the first quarter
of 2001.
11
International Knife & Saw, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(Unaudited)
(in thousands)
6. Inventories
June 30, December 31,
2001 2000
-----------------------------------------
Finished goods $ 9,613 $ 18,275
Work in process 1,612 4,795
Raw materials and supplies 1,497 6,456
-----------------------------------------
$ 12,722 $ 29,526
=========================================
7. Disposition of Businesses
On June 6, 2001, the Company sold all of the issued and outstanding capital
stock of IKSK to Diether Klingelnberg and TKM GmbH i.G., a company organized
under the laws of Germany ("TKM" and, together with Mr. Klingelnberg, the
"Purchasers"), for approximately $11,724 in cash. The Company recorded a loss on
the sale of IKSK of approximately $11,233. The proceeds from the sale were
immediately applied to repay all indebtedness and other obligations owed by the
Company to Deutsche Bank AG, the Company's former senior lender.
Mr. Klingelnberg and Thomas W.G. Meyer are managing directors and stockholders
of TKM. Mr. Meyer is a minority stockholder of IKS Corporation, a Delaware
corporation and the parent of the Company ("Parent"). In addition, until April
20, 2001 Mr. Klingelnberg served as a director of the Company and Parent, and
until May 31, 2001 Mr. Meyer served as an Executive Vice President of the
Company and Parent. At the time of the sale, Mr. Meyer was the Chief Executive
Officer of IKSK. The amount of consideration paid to the Company for the issued
and outstanding capital stock of IKSK was determined by arms-length negotiation
between the Board of Directors of the Company and the Purchasers.
In connection with the sale, the Purchasers agreed that, for a period of 18
months and subject to certain conditions, IKSK would continue the existing
trading arrangements between the Company and IKSK with respect to current
products manufactured by IKSK and purchased by the Company.
12
International Knife & Saw, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(Unaudited)
(in thousands, except per share amounts)
7. Disposition of Businesses (continued)
Prior to the sale, the holders of a majority in aggregate principal amount of
the Company's Subordinated Notes consented to the sale and waived compliance by
the Company with the provisions of Section 4.14 (Limitation on Transactions with
Affiliates), Section 4.15 (Change of Control), Section 4.16 (Limitation on Asset
Sales) and article five of the indenture governing the Subordinated Notes, as
well as any other relevant provisions of such Indenture, to the extent
applicable to the transaction.
13
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for certain forward looking statements. Certain matters discussed in this filing
could be characterized as forward looking statements, such as statements
relating to plans for future expansion, other capital spending, financing
sources and effects of regulation and competition. Such forward looking
statements involve important risks and uncertainties that could cause actual
results to differ materially from those expressed in such forward looking
statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the audited
consolidated financial statements and related notes included in the Company's
Form 10-K for the year ended December 31, 2000.
General
The Company is in the business of manufacturing, servicing and
marketing of industrial and commercial machine knives and saws. Together with
its predecessors, the Company has been manufacturing knives and saws for nearly
100 years, beginning in Europe and expanding its presence to the United States
in the 1960s. The Company offers a broad range of products, used for various
applications in numerous markets.
As part of the Company's restructuring initiative, on June 6, 2001, the
Company sold all of the issued and outstanding capital stock of IKSK to Diether
Klingelnberg and TKM, the "Purchasers," for approximately $11.7 million in cash.
Mr. Klingelnberg and Thomas W.G. Meyer are managing directors and stockholders
of TKM. Mr. Meyer is a minority stockholder of IKS Corporation, the parent of
the Company ("Parent"). In addition, until April 20, 2001 Mr. Klingelnberg
served as a director of the Company and Parent, and until May 31, 2001 Mr. Meyer
served as an Executive Vice President of the Company and Parent. At the time of
the sale, Mr. Meyer was the Chief Executive Officer of IKSK. The amount of
consideration paid to the Company for the issued and outstanding capital stock
of IKSK was determined by arms-length negotiation between the Board of Directors
of the Company and the Purchasers.
IKSK comprised all of the Companies non-North American operations
except Indonesia and accounted for approximately one half of the Company's 2001
net sales through the sale date and approximately 43% of its net sales during
the first half of 2001. In connection with the sale, the Purchasers agreed that,
for a period of 18 months and subject to certain conditions, IKSK would continue
its existing trading arrangements with the Company with respect to current
products manufactured by IKSK and purchased by the Company.
Presence outside the U.S.
The Company's presence outside the U.S. was significantly diminished by
the sale of IKSK. The Company's remaining operations are in the U.S., Canada,
Mexico and Indonesia. The Company's remaining operations are predominately in
North America which accounted for approximately 56% of its net sales during the
first half of 2001.
14
The Company's operating results are subject to fluctuations in foreign
currency exchange rates as well as the currency translation of its foreign
operations into U.S. dollars. The Company's foreign sales are subject to
exchange rate volatility. In addition, the Company's consolidation of its
foreign operations and changes in exchange rates relative to the U.S. dollar
have impacted financial results. As a result, a decline in the value of the U.S.
dollar relative to these other currencies can have a favorable effect on the
profitability of the Company and an increase in the value of the U.S. dollar
relative to these other currencies can have a negative effect on the
profitability of the Company. Comparing exchange rates for the first six months
of 2001 to the first six months of 2000, there was a positive impact of $1.2
million on net sales with a minimal impact on operating income. In addition, in
the first six months of 2001 there was a decrease of $2.7 million in accumulated
other comprehensive loss from December 31, 2000 due to the realization of $4.2
million of foreign currency translation losses related to IKSK partially offset
by a $1.5 million increase in foreign currency translation adjustment. To
mitigate the short-term effect of changes in currency exchange rates on the
Company's foreign currency based purchases and its functional currency based
sales, the Company occasionally enters into foreign exchange and U.S. dollar
forward contracts to hedge a portion of its budgeted (future) net foreign
exchange and U.S. dollar transactions over periods ranging from one to fifteen
months.
Results of Operations
As used in the following discussion of the Company's results of
operations, (i) the term "gross profit" means the dollar difference between the
Company's net sales and cost of sales and (ii) the term "gross margin" means the
Company's gross profit divided by its net sales.
Second quarter and six months ended June 30, 2001 compared to second
quarter and six months ended June 30, 2000
Net Sales: Net sales decreased 25.3% to $31.4 million for the second
quarter and 19.0% to $70.2 million for the first half of 2001 from $42.1 and
$86.6 million for the same periods in 2000 equally attributable to poor results
in North America (attributable in large part to leadership changes at the
Company in 1999 and 2000 and to market softness worldwide) and the sale of IKSK
in June of 2001 as discussed in Note 7. The Company experienced sales reductions
in its North American operations (22.1% to $19.0 million) for the second quarter
and (21.8% to $39.1 million) for the first half of 2001 and in its other
operations (29.9% to $12.4 million) for the second quarter and (15.3% to $31.0
million) for the first half of 2001 compared to the same periods in 2000.
Gross Profit: Gross profit decreased to $7.4 and $17.3 million for the
second quarter and first half of 2001 from $10.5 and $22.7 million for the same
periods in 2000. Excluding the effect of the non-recurring charges in the second
quarter of 2000, gross profit would have been $11.0 and $23.2 million for the
second quarter and first half of 2000, respectively. Gross margin decreased to
23.6% and 24.6% for the second quarter and first half of 2001 compared to 24.9%
and 26.3% for the same periods in 2000. Excluding the second quarter 2000
non-recurring charges, gross profit for the second quarter and first six months
of 2000 would have been 26.1% and 26.8%, respectively. The Company experienced
gross profit declines
15
in its North American operations (29.4% to $3.6 million) for the second quarter
and (33.9% to $7.6 million) for the first half of 2001 compared to the same
periods in 2000 while gross margin also declined to 18.9% and 19.4% from 20.9%
and 23.0%, respectively. The Company experienced gross profit declines in its
other operations (29.6% to $3.8 million) for the second quarter and (14.3% to
$9.7 million) for the first half of 2001 compared to the same periods in 2000
while gross margin improved slightly to 30.6% and 31.0% from 30.5% and 30.6%,
respectively. The decrease in gross profit and the decrease in gross margin in
North America is attributable to the factors noted above.
Selling, General and Administrative Expenses: Selling, general and
administrative ("SG&A") expenses were $19.9 and $29.3 million for the second
quarter and first half of 2001 compared to $11.5 and $21.0 million for the same
periods in 2000. Excluding the loss on the sale of IKSK and other charges
primarily related to the Company's restructuring in 2001 and non-recurring
charges in the second quarter of 2000, SG&A expenses would have been $7.2 and
$16.0 million for the second quarter and first half of 2001 compared to $9.4 and
$18.9 million for the same periods in 2000. The decrease is primarily
attributable to the sale of IKSK in June 2001 and the cost cutting programs the
Company has put into place. SG&A expenses increased to 63.3% and 41.8% from
27.3% and 24.3% of net sales for the respective periods. Excluding the loss on
the sale of IKSK and all non-recurring charges in 2001 and 2000, SG&A expenses
would have increased slightly to 22.9% and 22.8% of net sales for the second
quarter and first half of 2000 from 22.3% and 21.8% compared to the same periods
in 2000.
Interest Expense, net: Net interest expense remained relatively
constant at $3.3 and $6.3 million for the second quarter and first half of 2001
compared to the same periods in 2000.
Income Taxes: The Company did not record a tax benefit related to its
pre-tax losses in the United States in the second quarter or in the first half
of 2001 in accordance with income tax accounting rules, but did record the
benefit of a $1.1 million federal tax refund received in the first quarter of
2001. This benefit more than offsets the tax provisions recorded on pre-tax
income in the Company's other operations for the first half of 2001. As a
result, the Company has recorded a $0.3 million consolidated provision and a
$0.3 million consolidated benefit for income tax on a consolidated second
quarter and first half of 2001 pre-tax loss of $15.8 million and $18.5 million,
respectively. The only significant change in income taxes from 2000 is due to
the benefit recorded on the federal tax refund in the first quarter of 2001.
Liquidity and Capital Resources
The Company's principal capital requirements are to fund working
capital needs, to meet required debt payments and to complete planned
maintenance and expansion expenditures. The Company is highly leveraged. As of
June 30, 2001, the Company's total notes payable and long term debt and
stockholder's deficit was approximately $95,044 and $55,167, respectively. In
the past, the Company's operating cash flow and available borrowings under the
Company's credit facilities have been sufficient to enable the Company to meet
its working capital requirements, debt service requirements and capital
expenditure requirements. However, deteriorating results in the Company's North
American operations over the past two years, primarily attributable to
leadership changes at the Company in 1999 and 2000 as well as a softening
market, have more than offset improved results in the Company's former European
operations. The Company incurred net losses of approximately $18.2 million and
$15.5 million in the first half of 2001 and the year ended December 31, 2000,
respectively. In addition, the Company incurred negative cash flow from
operations of approximately $0.8 million and $4.5 million during these same
periods.
16
In February 2001, the Company retained Jefferies as its financial
advisor to assist the Company in addressing its highly leveraged capital
structure, specifically the restructuring of its Subordinated Notes. Continuing
adverse market conditions and their negative effect on the Company's cash flow,
coupled with limited liquidity, precluded the Company from making the
approximate $5.1 million interest payment on the Subordinated Notes on May 15,
2001 and will likely preclude the Company from making the approximate $5.1
million interest payment due on November 15, 2001. As a result, all of such debt
is subject to acceleration and has been classified as current.
As part of the Company's restructuring initiative, on June 6, 2001, the
Company sold all of the issued and outstanding capital stock of IKSK for
approximately $11.7 million in cash (see Note 7 of the Notes to the Consolidated
Financial Statements). The proceeds from the sale were immediately applied to
repay all indebtedness and other obligations owed by the Company to Deutsche
Bank AG, the Company's former senior lender. On June 21, 2001, the Company
entered into an agreement with Chilmark for a six-month senior secured credit
facility for up to $5.0 million to replace the Deutsche Bank facilities. The new
facility will be used for professional fees and other costs incurred in the
ongoing restructuring of the Company's Subordinated Notes and general working
capital needs. While the Company believes that there are certain restructuring
alternatives available to it, there can be no assurance that the Company will be
successful in implementing any such alternatives or that any such alternatives,
if implemented, will enable the Company to meet its obligations.
The Company does not have any significant capital expenditure
commitments in 2001 that cannot be deferred; however, deferral of planned
maintenance and expansion expenditures may negatively impact the Company's
operations. In addition, the Company is pursuing aggressive cost cutting
programs. At June 30 and July 31, 2001, the Company had approximately $2.6
million and $2.0 million, respectively, available under its new credit facility
and approximately $1.1 million and $1.4 million, respectively, cash on hand. The
Company's operations continue to generate negative cash flow from operations.
These matters and those noted above raise substantial doubt about the Company's
ability to continue as a going concern.
Net cash flow used by operations aggregated $0.8 million for the first
half of 2001 compared to $3.2 million for the same period in 2000. The decrease
was primarily attributable to a $5.9 million decrease in working capital
primarily due to $4.7 million of interest accrued on the Subordinated Notes that
was due on May 15, 2001 but was not paid, offset by a $3.1 million increase in
net loss net of loss on disposition of businesses for both years, compared to
2000.
Cash provided by investing activities for the first half of 2001 was
$7.1 million compared to cash used of $2.4 million for the same period in 2000.
The increase is primarily due to the proceeds from the sale of IKSK.
Cash used by financing activities for the first half of 2001 was $8.3
million compared to cash provided of $7.2 million for the same period in 2000.
The decrease is primarily due to decreased net borrowings and the $11.7 million
repayment of indebtedness and other obligations to the Company's former senior
lender with proceeds from the sale of IKSK.
17
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, and its
amendments Statements 137, Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133 and 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities
issued in June 1999 and June 2000, respectively (collectively referred to as
Statement 133), which was required to be adopted in fiscal years beginning after
June 15, 2000. The Statement required the Company to recognize any derivatives
on the balance sheet at fair value. The Company adopted this new Statement as of
January 1, 2001. The adoption of this Statement did not have a significant
effect on the Company's earnings or financial position.
In June 2001, the Financial Accounting Standards Board issued SFAS No.
141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets,
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives will no
longer be amortized but will be subject to annual impairment tests in accordance
with the Statements. Other intangible assets will continue to be amortized over
their useful lives.
The Company will apply the new rules on accounting for goodwill and
other intangible assets beginning in the first quarter of 2002. Application of
the non-amortization provisions of the Statement is expected to result in an
increase in net income of approximately $.4 ($.83 per share) per year. During
2002, the Company will perform the first of the required impairment tests of
goodwill and indefinite lived intangible assets as of January 1, 2002 and has
not yet determined what the effect of these tests will be on the earnings and
financial position of the Company.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Information required by Item 3 is included in Item 2 on page 14 of this
Form 10-Q.
18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is from time to time involved in legal proceedings arising
in the normal course of business. The Company believes there is no outstanding
litigation which could have a material impact on its financial position or
results of operations.
Item 2. Change in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
As part of the restructuring initiative described in "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
during the second quarter of 2001, the Company did not make interest payments on
its Subordinated Notes. The following table sets forth the scheduled debt
payment that was not made during the second quarter of 2001:
Debt Series and Aggregate Principal Type and Date of Payment Amount Unpaid in
Amount Outstanding Due in Quarter Quarter
----------------------------------------------------------------------------
11 3/8% Subordinated Notes Interest, May 15, 2001 $5.1 million
due 2006($90 million)
As a result of this default, holders of all the Company's publicly held
debt have the right to demand acceleration of this debt. At the date of this
filing, total arrearages of principal and interest are $5.1 million.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
None.
19
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Description
------------- -----------------------------------------------------------
10.01 Security Agreement dated December 11, 2000 between Deutsche
Bank and the Company. (Incorporated by reference to exhibit
10.20 to the Company's Current Report on Form 8-K dated
February 19, 2001, Registration No. 333-17305.)
10.02 First Amendment to Security Agreement dated January 24,
2001 between Deutsche Bank and the Company. (Incorporated
by reference to exhibit 10.21 to the Company's Current
Report on Form 8-K dated February 19, 2001, Registration
No. 333-17305.)
10.03 Agreement dated as of June 5, 2001 among TKM GmbH, i.G.,
Diether Klingelnberg and the Company. (Incorporated by
reference to exhibit 10.01 to the Company's Current Report
on Form 8-K dated June 6,2001, Registration No. 333-17305.)
10.04 Notarial Deed (Incorporated by reference to exhibit 10.02
to the Company's Current Report on Form 8-K dated June 6,
2001, Registration No. 333-17305.)
10.05 Supply Agreement dated June 5, 2001 among TKM GmbH, i.G.,
Diether Klingelnberg and the Company. (Incorporated by
reference to exhibit 10.03 to the Company's Current Report
on Form 8-K dated June 6, 2001, Registration No.333-17305.)
10.06 Loan and Security Agreement dated June 21, 2001 between and
among Chilmark Fund II, L.P. and IKS Corporation and the
Company.
(b) Reports on Form 8-K
A report on Form 8-K dated June 6, 2001 was filed regarding the
Company's sale of IKSK.
A report on Form 8-K/A dated August 9, 2001 was filed regarding the
Company's sale of IKSK.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INTERNATIONAL KNIFE & SAW, INC.
By: /s/ William M. Schult
----------------------------------------
William M. Schult
Executive Vice President - Chief
Financial Officer, Treasurer
and Secretary (Principal Financial
and Accounting Officer, and
Executive Committee
member)
August 13, 2001
21
EXHIBIT INDEX
Exhibit
No.
Description
------------- ----------------------------------------------------------------
10.01 Security Agreement dated December 11, 2000 between Deutsche Bank
and the Company. (Incorporated by reference to exhibit 10.20 to
the Company's Current Report on Form 8-K dated February 19,
2001, Registration No. 333-17305.)
10.02 First Amendment to Security Agreement dated January 24, 2001
between Deutsche Bank and the Company.(Incorporated by reference
to exhibit 10.21 to the Company's Current Report on Form 8-K
dated February 19, 2001, Registration No. 333-17305.)
10.03 Agreement dated as of June 5, 2001 among TKM GmbH, i.G., Diether
Klingelnberg and the Company. (Incorporated by reference to
exhibit 10.01 to the Company's Current Report on Form 8-K dated
June 6, 2001, Registration No. 333-17305.)
10.04 Notarial Deed (Incorporated by reference to exhibit 10.02 to the
Company's Current Report on Form 8-K dated June 6, 2001,
Registration No. 333-17305.)
10.05 Supply Agreement dated June 5, 2001 among TKM GmbH, i.G.,
Diether Klingelnberg and the Company. (Incorporated by reference
to exhibit 10.03 to the Company's Current Report on Form 8-K
dated June 6, 2001, Registration No. 333-17305.)
10.06 Loan and Security Agreement dated June 21, 2001 between and
among Chilmark Fund II, L.P. and IKS Corporation and the
Company.
22
LOAN AND SECURITY AGREEMENT
by and among
IKS CORPORATION
and
INTERNATIONAL KNIFE & SAW, INC.
as Borrowers,
and
CHILMARK FUND II, L.P.
as Lender
Dated as of June 21, 2001
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as
of June 21, 2001, between and among CHILMARK FUND II, L.P. (together with any
successors and assigns, "Lender") and IKS Corporation, a Delaware corporation
("Parent") and International Knife & Saw, Inc., a Delaware corporation
("International Knife", and together with Parent, are referred to hereinafter
each individually as a "Borrower" and individually and collectively, jointly and
severally, as the "Borrowers").
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall
have the following definitions:
"Account Debtor" means any Person who is or who may become obligated
under, with respect to, or on account of, an Account, chattel paper, or a
General Intangible.
"Accounts" means all of Borrowers' now owned or hereafter acquired
right, title, and interest with respect to "accounts" (as that term is defined
in the Code), and any and all supporting obligations in respect thereof.
"Additional Documents" has the meaning set forth in Section 4.4.
"Administrative Borrower" has the meaning set forth in Section 16.10.
"Advances" has the meaning set forth in Section 2.1.
"Affiliate" means, as applied to any Person, any other Person who,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person; provided, however, that for the purposes of this Agreement,
Dieter Klingelnberg and Thomas Meyer shall each be deemed to be an "Affiliate"
of each Borrower. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by contract, or
otherwise; provided, however, that, in any event: (a) any Person which owns
directly or indirectly 10% or more of the securities having ordinary voting
power for the election of directors or other members of the governing body of a
Person or 10% or more of the partnership or other ownership interests of a
Person (other than as a limited partner of such Person) shall be deemed to
control such Person; (b) each director (or comparable manager) of a Person shall
be deemed to be an Affiliate of such Person; and (c) each partnership or joint
venture in which a Person is a partner or joint venturer shall be deemed to be
an Affiliate of such Person.
"Agreement" has the meaning set forth in the preamble hereto.
"Assignee" has the meaning set forth in Section 14.1(a).
"Authorized Person" means any officer or other employee of
Administrative Borrower.
"Availability" means, as of any date of determination, if such date is
a Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day, the
amount that Borrowers are entitled to borrow as Advances under Section 2.1
(after giving effect to all then outstanding Obligations and all sublimits and
reserves applicable hereunder).
"Bankruptcy Code" means the United States Bankruptcy Code, as in effect
from time to time.
"Base Rate" means, the rate of interest announced within The Chase
Manhattan Bank at its principal office in New York City as its "prime rate",
with the understanding that the "prime rate" is one of The Chase Manhattan
Bank's base rates (not necessarily the lowest of such rates) and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto and is evidenced by the recording thereof after its
announcement in such internal publication or publications as The Chase Manhattan
Bank may designate.
"Base Rate Loan" means each portion of an Advance that bears interest
at a rate determined by reference to the Base Rate.
"Base Rate Margin" means 1.00 percentage points.
"Benefit Plan" means a "defined benefit plan" (as defined in Section
3(35) of ERISA) for which any Borrower or any Subsidiary or ERISA Affiliate of
any Borrower has been an "employer" (as defined in Section 3(5) of ERISA) within
the past six years.
"Board of Directors" means the board of directors (or comparable
managers) of Parent or any committee thereof duly authorized to act on behalf
thereof.
"Books" means all of each Borrower's now owned or hereafter acquired
books and records (including all of its Records indicating, summarizing, or
evidencing its assets (including the Collateral) or liabilities, all of its
Records relating to its business operations or financial condition, and all of
its goods or General Intangibles related to such information).
"Borrower" and "Borrowers" have the respective meanings set forth in
the preamble to this Agreement.
"Borrowing" means a borrowing hereunder of an Advance.
"Borrowing Base" has the meaning set forth in Section 2.1.
"Borrowing Base Certificate" means a certificate in the form of Exhibit
B-1.
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which national banks are authorized or required to close.
2
"Capital Expenditures" means all expenditures for the acquisition or
leasing (pursuant to a Capital Lease) of fixed or capital assets or additions to
equipment (including replacements, capitalized repairs and improvements) which
should be capitalized under GAAP
"Capital Lease" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means any Indebtedness represented by
obligations under a Capital Lease.
"Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within 1 year from the date of acquisition thereof, (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or Moody's,
(c) commercial paper maturing no more than 1 year from the date of acquisition
thereof and, at the time of acquisition, having a rating of A-1 or P-1, or
better, from S&P or Moody's, and (d) certificates of deposit or bankers'
acceptances maturing within 1 year from the date of acquisition thereof either
(i) issued by any bank organized under the laws of the United States or any
state thereof which bank has a rating of A or A2, or better, from S&P or
Moody's, or (ii) certificates of deposit less than or equal to $100,000 in the
aggregate issued by any other bank insured by the Federal Deposit Insurance
Corporation.
"Cash Management Account" has the meaning set forth in Section 2.6(a).
"Cash Management Agreements" means those certain cash management
service agreements and/or lockbox operating procedural agreements, in form and
substance satisfactory to Lender, each of which is among Administrative
Borrower, Lender, and one of the Cash Management Banks.
"Cash Management Bank" has the meaning set forth in Section 2.6(a).
"Change of Control" means (a) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d) of the Exchange Act), other than Permitted
Holders, becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 10%, or more, of the Stock of Parent
having the right to vote for the election of members of the Board of Directors,
or (b) a majority of the members of the Board of Directors do not constitute
Continuing Directors, or (c) any Borrower ceases to directly own and control
100% of the outstanding capital Stock of each of its Subsidiaries extant as of
the Closing Date, or (d) any Permitted Holder shall change the percentage of
shares in Parent that it owns on the Closing Date.
"Closing Date" means the date of the making of the initial Advance (or
other extension of credit) hereunder or the date on which Lender sends Borrower
a written notice that each of the conditions precedent set forth in Section 3.1
either have been satisfied or have been waived.
3
"Closing Date Business Plan" means the set of Projections of Borrowers
for the 1 year period following the Closing Date, on a month by month basis), in
form and substance (including as to scope and underlying assumptions)
satisfactory to Lender.
"Code" means the New York Uniform Commercial Code, as in effect from
time to time.
"Collateral" means all of each Borrower's now owned or hereafter
acquired right, title, and interest in and to each of the following:
(a) Accounts,
(b) Books,
(c) Equipment,
(d) General Intangibles,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
(h) Documents,
(i) Deposit Accounts,
(j) money or other assets of each such Borrower that now or
hereafter come into the possession, custody, or control of Lender,
(k) to the extent not covered, or not specifically excluded, by
clauses (a) through (j) above, all of such Borrower's other personal property,
(l) Real Property Collateral, and
(m) the proceeds and products, whether tangible or intangible, of
any of the foregoing, including proceeds of insurance covering any or all of the
foregoing, and any and all Accounts, Books, Equipment, General Intangibles,
Inventory, Investment Property, Negotiable Collateral, Real Property, money,
deposit accounts, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver, bailee letter,
or acknowledgement agreement of any lessor, warehouseman, processor, consignee,
or other Person in possession of, having a Lien upon, or having rights or
interests in the Equipment or Inventory, in each case, in form and substance
satisfactory to Lender.
4
"Collections" means all cash, checks, notes, instruments, and other
items of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds) of Borrowers, but excludes Advances made pursuant to
this Agreement.
"Compliance Certificate" means a certificate substantially in the form
of Exhibit C-1 delivered by the chief financial officer of Parent to Lender.
"Continuing Director" means (a) any member of the Board of Directors
who was a director (or comparable manager) of Parent on the Closing Date, and
(b) any individual who becomes a member of the Board of Directors after the
Closing Date if such individual was appointed or nominated for election to the
Board of Directors by a majority of the Continuing Directors, but excluding any
such individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual or threatened election
contest relating to the election of the directors (or comparable managers) of
Parent (as such terms are used in Rule 14a-11 under the Exchange Act) and whose
initial assumption of office resulted from such contest or the settlement
thereof.
"Control Agreement" means a control agreement, in form and substance
satisfactory to Lender, executed and delivered by the applicable Borrower,
Lender, and the applicable securities intermediary with respect to a Securities
Account or a bank with respect to a deposit account.
"Daily Balance" means, with respect to each day during the term of this
Agreement, the amount of an Obligation owed at the end of such day.
"DDA" means any checking or other demand deposit account maintained by
any Borrower.
"Default" means an event, condition, or default that, with the giving
of notice, the passage of time, or both, would be an Event of Default.
"Deposit Account" means the Borrowers' now owned or hereafter acquired
right, title and interest with respect to "deposit accounts" (as that term is
defined in the Code).
"Designated Account" means account number 999-77224 of Administrative
Borrower maintained with the Designated Account Bank, or such other deposit
account of Administrative Borrower (located within the United States) that has
been designated as such, in writing, by Administrative Borrower to Lender.
"Designated Account Bank" means Fifth Third, Northern Kentucky, whose
ABA number is 042000314.
"Dilution" means, as of any date of determination, a percentage, based
upon the experience of the immediately prior 90 days, that is the result of
dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising
allowances, credits, or other dilutive items with respect to the Accounts during
such period, by (b) Borrowers' Collections with respect to Accounts during such
period (excluding extraordinary items) plus the Dollar amount of clause (a).
5
"Dilution Reserve" means, as of any date of determination, an amount
sufficient to reduce the advance rate against Eligible Accounts by one
percentage point for each percentage point by which Dilution is in excess of 5%.
"Disbursement Letter" means an instructional letter executed and
delivered by Administrative Borrower to Lender regarding the extensions of
credit to be made on the Closing Date, the form and substance of which is
satisfactory to Lender.
"Documents" means all of Borrowers' now owned or hereafter acquired
right, title and interest with respect to "documents" (as that term is defined
in the Code).
"Dollars" or "$" means United States dollars.
"Eligible Accounts" means those Accounts created by International Knife
in the ordinary course of its business, that arise out of its sale of goods or
rendition of services, that comply with each of the representations and
warranties respecting Eligible Accounts made by Borrowers under the Loan
Documents, and that are not excluded as ineligible by virtue of one or more of
the criteria set forth below; provided, however, that such criteria may be fixed
and revised from time to time by Lender in Lender's Permitted Discretion to
address the results of any audit performed by Lender from time to time after the
Closing Date. In determining the amount to be included, Eligible Accounts shall
be calculated net of customer deposits and unapplied cash remitted to
International Knife. Eligible Accounts shall not include the following:
(a) Accounts that the Account Debtor has failed to pay within
60 days (which may be changed to 90 days in the sole discretion of Lender upon
request of Borrowers) of original invoice date or Accounts with selling terms of
more than 30 days,
(b) Accounts owed by an Account Debtor (or its Affiliates) where
50% or more of all Accounts owed by that Account Debtor (or its Affiliates) are
deemed ineligible under clause (a) above,
(c) Accounts with respect to which the Account Debtor is an
employee, Affiliate, or lender of any Borrower,
(d) Accounts arising in a transaction wherein goods are placed on
consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale
on approval, a bill and hold, or any other terms by reason of which the payment
by the Account Debtor may be conditional,
(e) Accounts that are not payable in Dollars,
(f) Accounts with respect to which the Account Debtor either (i)
does not maintain its chief executive office in the United States, or (ii) is
not organized under the laws of the United States or any state thereof, or (iii)
is the government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof, unless
(y) the Account is supported by an irrevocable letter of credit satisfactory to
Lender (as to form,
6
substance, and issuer or domestic confirming bank) that has been delivered to
Lender and is directly drawable by Lender, or (z) the Account is covered by
credit insurance in form, substance, and amount, and by an insurer, satisfactory
to Lender,
(g) Accounts with respect to which the Account Debtor is either
(i) the United States or any department, agency, or instrumentality of the
United States (exclusive, however, of Accounts with respect to which
International Knife has complied, to the reasonable satisfaction of Lender, with
the Assignment of Claims Act, 31 USC Section 3727), or (ii) any state of the
United States (exclusive, however, of (y) Accounts owed by any state that does
not have a statutory counterpart to the Assignment of Claims Act or (z) Accounts
owed by any state that does have a statutory counterpart to the Assignment of
Claims Act as to which International Knife has complied to Lender's
satisfaction),
(h) Accounts with respect to which the Account Debtor is a
creditor of any Borrower, has or has asserted a right of setoff, has disputed
its liability, or has made any claim with respect to its obligation to pay the
Account, to the extent of such claim, right of setoff, or dispute,
(i) Accounts with respect to an Account Debtor whose total
obligations owing to International Knife exceed 10% of all Eligible Accounts, to
the extent of the obligations owing by such Account Debtor in excess of such
percentage,
(j) Accounts with respect to which the Account Debtor is subject
to an Insolvency Proceeding, is not Solvent, has gone out of business, or as to
which a Borrower has received notice of an imminent Insolvency Proceeding or a
material impairment of the financial condition of such Account Debtor,
(k) Accounts with respect to which the Account Debtor is located
in the states of New Jersey, Minnesota, or West Virginia (or any other state
that requires a creditor to file a business activity report or similar document
in order to bring suit or otherwise enforce its remedies against such Account
Debtor in the courts or through any judicial process of such state), unless
International Knife has qualified to do business in New Jersey, Minnesota, West
Virginia, or such other states, or has filed a business activities report with
the applicable division of taxation, the department of revenue, or with such
other state offices, as appropriate, for the then-current year, or is exempt
from such filing requirement,
(l) Accounts, the collection of which, Lender, in its Permitted
Discretion, believes to be doubtful by reason of the Account Debtor's financial
condition,
(m) Accounts that are not subject to a valid and perfected first
priority Lender's Lien,
(n) Accounts with respect to which (i) the goods giving rise to
such Account have not been shipped and billed to the Account Debtor, or (ii) the
services giving rise to such Account have not been performed and billed to the
Account Debtor, or
7
(o) Accounts that represent the right to receive progress payments
or other advance billings that are due prior to the completion of performance by
International Knife of the subject contract for goods or services.
"Environmental Actions" means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other communication from any Governmental
Authority, or any third party involving violations of Environmental Laws or
releases of Hazardous Materials from (a) any assets, properties, or businesses
of any Borrower or any predecessor in interest, (b) from adjoining properties or
businesses, or (c) from or onto any facilities which received Hazardous
Materials generated by any Borrower or any predecessor in interest.
"Environmental Law" means any applicable federal, state, provincial,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy or rule of common
law now or hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, to the extent binding on Borrowers, relating
to the environment, employee health and safety, or Hazardous Materials,
including CERCLA; RCRA; the Federal Water Pollution Control Act, 33 USC Section
1251 et seq; the Toxic Substances Control Act, 15 USC, Section 2601 et seq; the
Clean Air Act, 42 USC Section 7401 et seq.; the Safe Drinking Water Act, 42 USC.
Section 3803 et seq.; the Oil Pollution Act of 1990, 33 USC. Section 2701 et
seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42
USC. Section 11001 et seq.; the Hazardous Material Transportation Act, 49 USC
Section 1801 et seq.; and the Occupational Safety and Health Act, 29 USC.
Section 651 et seq. (to the extent it regulates occupational exposure to
Hazardous Materials); any state and local or foreign counterparts or
equivalents, in each case as amended from time to time.
"Environmental Liabilities and Costs" means all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts, or consultants and costs of
investigation and feasibility studies), fines, penalties, sanctions, and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any Environmental Action.
"Environmental Lien" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
"Equipment" means all of Borrowers' now owned or hereafter acquired
right, title, and interest with respect to equipment, machinery, machine tools,
motors, furniture, furnishings, vehicles (including motor vehicles), tools,
parts, goods (other than consumer goods, farm products or Inventory), wherever
located and whether or not affixed to any Real Property, including all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto.
8
"ERISA Affiliate" means (a) any Person subject to ERISA whose employees
are treated as employed by the same employer as the employees of a Borrower
under IRC Section 414(b), (b) any trade or business subject to ERISA whose
employees are treated as employed by the same employer as the employees of a
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which a Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any Person subject to ERISA that is a party to an arrangement
with a Borrower and whose employees are aggregated with the employees of a
Borrower under IRC Section 414(o).
"Event of Default" has the meaning set forth in Section 8.
"Excess Availability" means the amount, as of the date any
determination thereof is to be made, equal to Availability minus the aggregate
amount, if any, of all trade payables of Borrowers aged in excess of their
historical levels with respect thereto and all book overdrafts in excess of
their historical practices with respect thereto, in each case as determined by
Lender in its Permitted Discretion.
"Exchange Act" means the Securities Exchange Act of 1934, as in effect
from time to time.
"FEIN" means Federal Employer Identification Number.
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"General Intangibles" means all of Borrowers' now owned or hereafter
acquired right, title, and interest with respect to general intangibles
(including payment intangibles, contract rights, rights to payment, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, software, literature, reports,
catalogs, money, deposit accounts, insurance premium rebates, tax refunds, and
tax refund claims), and any and all supporting obligations in respect thereof,
and any other personal property other than goods, Accounts, Investment Property,
and Negotiable Collateral.
"Governing Documents" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.
"Governmental Authority" means any federal, state, local, or other
governmental or administrative body, instrumentality, department, or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute-resolving panel or body.
9
"Guarantor" means IKS Canadian.
"Guaranty" means that certain general continuing guaranty executed and
delivered by the Guarantor in favor of Lender, in form and substance
satisfactory to Lender.
"Hazardous Materials" means (a) substances that are defined or listed
in, or otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"IKS Canadian" means IKS Canadian Knife & Saw Ltd., a Canadian
corporation.
"Indebtedness" means (a) all obligations of a Borrower for borrowed
money, (b) all obligations of a Borrower evidenced by bonds, debentures, notes,
or other similar instruments and all reimbursement or other obligations of a
Borrower in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations of a Borrower under
Capital Leases, (d) all obligations or liabilities of others secured by a Lien
on any asset of a Borrower, irrespective of whether such obligation or liability
is assumed, (e) all obligations of a Borrower for the deferred purchase price of
assets (other than trade debt incurred in the ordinary course of a Borrower's
business and repayable in accordance with customary trade practices), and (f)
any obligation of a Borrower guaranteeing or intended to guarantee (whether
directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with
recourse to a Borrower) any obligation of any other Person.
"Indemnified Liabilities" has the meaning set forth in Section 11.3.
"Indemnified Person" has the meaning set forth in Section 11.3.
"Insolvency Proceeding" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other state
or federal bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.
"International Knife" has the meaning set forth in the preamble to this
Agreement.
"Inventory" means all Borrowers' now owned or hereafter acquired right,
title, and interest with respect to inventory, including goods held for sale or
lease or to be furnished under a contract of service, goods that are leased by a
Borrower as lessor, goods that are furnished by a Borrower under a contract of
service, and raw materials, work in process, or materials used or consumed in a
Borrower's business.
10
"Investment" means, with respect to any Person, any investment by such
Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, entertainment, relocation and similar advances to officers and employees
of such Person made in the ordinary course of business, and (b) bona fide
Accounts arising from the sale of goods or rendition of services in the ordinary
course of business consistent with past practice), purchases or other
acquisitions for consideration of Indebtedness or Stock, and any other items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP.
"Investment Property" means all of Borrowers' now owned or hereafter
acquired right, title, and interest with respect to "investment property" as
that term is defined in the Code, and any and all supporting obligations in
respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect from time
to time.
"Lender" has the meaning set forth in the preamble to this Agreement.
"Lender's Account" means an account at a bank designated by Lender from
time to time as the account into which Borrowers shall make all payments to
Lender under this Agreement and the other Loan Documents; unless and until
Lender notifies Administrative Borrower, Lender's Account shall be that certain
deposit account bearing account number 8188800566 and maintained by Lender with
Bank of America, ABA #071000039.
"Lender's Liens" means the Liens granted by Borrowers to Lender under
this Agreement or the other Loan Documents.
"Lender Expenses" means all (a) costs or expenses (including taxes, and
insurance premiums) required to be paid by a Borrower under any of the Loan
Documents that are paid or incurred by Lender, (b) fees or charges paid or
incurred by Lender in connection with Lender's transactions with Borrowers,
including, fees or charges for photocopying, notarization, couriers and
messengers, telecommunication, public record searches (including tax lien,
litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic Collateral
appraisals or business valuations to the extent of the fees and charges (and up
to the amount of any limitation) contained in this Agreement, real estate
surveys, real estate title policies and endorsements, and environmental audits,
(c) costs and expenses incurred by Lender in the disbursement of funds to or for
the account of Borrowers (by wire transfer or otherwise), (d) charges paid or
incurred by Lender resulting from the dishonor of checks, (e) reasonable costs
and expenses paid or incurred by Lender to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Collateral, or any portion thereof, irrespective of
whether a sale is consummated, (f) audit fees and expenses of Lender related to
audit examinations of the Books to the extent of the fees and charges (and up to
the amount of any limitation) contained in this Agreement, (g) reasonable costs
and expenses of third party claims or any other suit paid or incurred by Lender
in enforcing or defending the Loan Documents or in connection with the
transactions contemplated by the Loan Documents or Lender's relationship with
any Borrower or any guarantor of the Obligations, (h) Lender's
11
reasonable fees and expenses (including attorneys fees) incurred in advising,
structuring, drafting, reviewing, administering, or amending the Loan Documents,
and (i) Lender's reasonable fees and expenses (including attorneys fees)
incurred in terminating, enforcing (including attorneys fees and expenses
incurred in connection with a "workout," a "restructuring," or an Insolvency
Proceeding concerning any Borrower or in exercising rights or remedies under the
Loan Documents), or defending the Loan Documents, irrespective of whether suit
is brought, or in taking any Remedial Action concerning the Collateral.
"Lender-Related Person" means Lender, Lender's Affiliates, and the
officers, directors, employees, and agents of Lender.
"Lien" means any interest in an asset securing an obligation owed to,
or a claim by, any Person other than the owner of the asset, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.
"Loan Account" has the meaning set forth in Section 2.9.
"Loan Documents" means this Agreement, the Cash Management Agreements,
the Control Agreements, the Disbursement Letter, the Guaranty, the Mortgages,
the Officers' Certificate, the Stock Pledge Agreement, the Trademark Security
Agreement, any note or notes executed by a Borrower in connection with this
Agreement and payable to Lender, and any other agreement entered into, now or in
the future, by any Borrower and Lender in connection with this Agreement.
"Material Adverse Change" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrowers and the Guarantor taken as a
whole, (b) a material impairment of a Borrower's or the Guarantor's ability to
perform its obligations under the Loan Documents to which it is a party or of
Lender's ability to enforce the Obligations or realize upon the Collateral, or
(c) a material impairment of the enforceability or priority of the Lender's
Liens with respect to the Collateral as a result of an action or failure to act
on the part of a Borrower.
"Maturity Date" has the meaning set forth in Section 3.4.
"Maximum Revolver Amount" means $5,000,000.
"Mortgages" means, individually and collectively, one or more
mortgages, deeds of trust, or deeds to secure debt, executed and delivered by a
Borrower in favor of Lender, in form and substance satisfactory to Lender, that
encumber the Real Property Collateral and the related improvements thereto.
12
"Negotiable Collateral" means all of Borrowers' now owned and hereafter
acquired right, title, and interest with respect to letters of credit, letter of
credit rights, instruments, promissory notes, drafts, documents, and "chattel
paper" (as that term is defined in the Code, including electronic chattel paper
and tangible chattel paper), and any and all supporting obligations in respect
thereof.
"Obligations" means all loans, Advances, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), premiums, liabilities (including all amounts charged to
Borrowers' Loan Account pursuant hereto), obligations, fees (including the fees
provided for in this Agreement), charges, costs, Lender Expenses (including any
fees or expenses that, but for the provisions of the Bankruptcy Code, would have
accrued), lease payments, guaranties, covenants, and duties of any kind and
description owing by Borrowers to Lender pursuant to or evidenced by the Loan
Documents and irrespective of whether for the payment of money, whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including all interest not paid when due and all Lender
Expenses that Borrowers are required to pay or reimburse by the Loan Documents,
by law, or otherwise. Any reference in this Agreement or in the Loan Documents
to the Obligations shall include all amendments, changes, extensions,
modifications, renewals, replacements, substitutions, and supplements, thereto
and thereof, as applicable, both prior and subsequent to any Insolvency
Proceeding.
"Officers' Certificate" means the representations and warranties of
officers form submitted by Lender to Administrative Borrower, together with
Borrowers' completed responses to the inquiries set forth therein, the form and
substance of such responses to be satisfactory to Lender.
"Overadvance" has the meaning set forth in Section 2.4.
"Parent" has the meaning set forth in the preamble to this Agreement.
"Participant" has the meaning set forth in Section 14.1(d).
"Pay-Off Letter" means a letter, in form and substance satisfactory to
Lender, from Prior Lender to Lender respecting the release of all of the Liens
existing in favor of Prior Lender in and to the assets of Borrowers.
"Permitted Discretion" means a determination made in good faith and in
the exercise of reasonable (from the perspective of a secured lender) business
judgment.
"Permitted Dispositions" means (a) sales or other dispositions by
Borrowers of Equipment that is substantially worn, damaged, or obsolete in the
ordinary course of the applicable Borrower's business, (b) sales by
International Knife of Inventory to buyers in the ordinary course of business,
(c) the use or transfer of money or Cash Equivalents by Borrowers in a manner
that is not prohibited by the terms of this Agreement or the other Loan
Documents, and (d) the licensing by Borrowers, on a non-exclusive basis, of
patents, trademarks, copyrights, and other intellectual property rights in the
ordinary course of the applicable Borrower's business.
13
"Permitted Holder" means each of Citicorp Venture Capital Ltd. (and
their co-investors), Haulux AG and Dualux AG.
"Permitted Investments" means (a) investments in Cash Equivalents,
(b) investments in negotiable instruments for collection, (c) advances made in
connection with purchases of goods or services in the ordinary course of
business, and (d) investments by any Borrower in any other Borrower.
"Permitted Liens" means (a) Liens held by Lender, (b) Liens for unpaid
taxes, assessments and other governmental charges that either (i) are not yet
delinquent, or (ii) do not constitute an Event of Default hereunder and are the
subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the
interests of lessors under operating leases, (e) purchase money Liens or the
interests of lessors under Capital Leases to the extent that such Liens or
interests secure Permitted Purchase Money Indebtedness and so long as such Lien
attaches only to the asset purchased or acquired and the proceeds thereof,
(f) Liens arising by operation of law in favor of warehousemen, landlords,
carriers, mechanics, repairmen, materialmen, laborers, or suppliers, incurred in
the ordinary course of Borrowers' business and not in connection with the
borrowing of money, and which Liens either (i) are for sums not yet delinquent,
or (ii) are the subject of Permitted Protests, (g) Liens arising from deposits
made in connection with obtaining worker's compensation or other unemployment
insurance, (h) Liens or deposits to secure performance of bids, tenders, or
leases incurred in the ordinary course of Borrowers' business and not in
connection with the borrowing of money, (i) Liens granted as security for surety
or appeal bonds, payment and performance bonds and other similar bonds in
connection with obtaining such bonds in the ordinary course of Borrowers'
business, (j) Liens resulting from any judgment or award that is not an Event of
Default hereunder, (k) Liens with respect to the Real Property Collateral that
are exceptions to the commitments for title insurance issued in connection with
the Mortgages, as accepted by Lender, and (l) with respect to any Real Property
that is not part of the Real Property Collateral, easements, rights of way, and
zoning restrictions that do not materially interfere with or impair the use or
operation thereof by Borrowers.
"Permitted Protest" means the right of the applicable Borrower to
protest any Lien (other than any such Lien that secures the Obligations), taxes
(other than payroll taxes or taxes that are the subject of a United States
federal tax lien), or rental or lease payment, provided that (a) a reserve with
respect to such obligation is established on the Books in such amount as is
required under GAAP, (b) any such protest is instituted promptly and prosecuted
diligently by the applicable Borrower in good faith, and (c) Lender is satisfied
that, while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Lender's Liens.
"Permitted Purchase Money Indebtedness" means, as of any date of
determination, Purchase Money Indebtedness incurred after the Closing Date in an
aggregate amount outstanding at any one time not in excess of $100,000.
"Person" means natural persons, corporations, limited liability
companies, limited partnerships, general partnerships, limited liability
partnerships, joint ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.
14
"Personal Property Collateral" means all Collateral other than Real
Property.
"Prior Lender" means Deutsche Bank.
"Projections" means Parent's forecasted (a) balance sheets, (b) profit
and loss statements, and (c) cash flow statements, all prepared on a consistent
basis with Parent's historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions.
"Purchase Money Indebtedness" means Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations), incurred at the time
of, or within 20 days after, the acquisition of any fixed assets for the purpose
of financing all or any part of the acquisition cost thereof.
"Real Property" means any estates or interests in real property now
owned or hereafter acquired by any Borrower and the improvements thereto.
"Real Property Collateral" means the parcel or parcels of Real Property
identified on Schedule R-1 and any Real Property hereafter acquired by a
Borrower.
"Record" means information that is inscribed on a tangible medium or
which is stored in an electronic or other medium and is retrievable in
perceivable form.
"Remedial Action" means all actions taken to (a) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate, or in any way address
Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC Section 9601.
"Required Availability" means Excess Availability and unrestricted cash
and Cash Equivalents in an amount of not less than $2,000,000.
"Revolver Usage" means, as of any date of determination, the then
extant amount of outstanding Advances.
"SEC" means the United States Securities and Exchange Commission and
any successor thereto.
"Securities Account" means a "securities account" as that term is
defined in the Code.
"Solvent" means, with respect to any Person on a particular date, that
such Person is not insolvent (as such term is defined in the Uniform Fraudulent
Transfer Act).
"Stock" means all shares, options, warrants, interests, participations,
or other equivalents (regardless of how designated) of or in a Person, whether
voting or nonvoting,
15
including common stock, preferred stock, or any other "equity security" (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the SEC under the Exchange Act).
"Stock Pledge Agreement" means a stock pledge agreement, in form and
substance satisfactory to Lender, executed and delivered by each Borrower that
owns Stock of a Subsidiary of Parent.
"Subsidiary" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of Stock having ordinary voting power to elect a
majority of the board of directors (or appoint other comparable managers) of
such corporation, partnership, limited liability company, or other entity.
"Supply Agreement" means the letter agreement, dated on or about as of
June 5, 2001, between TKM GmbH and International Knife.
"Taxes" has the meaning set forth in Section 16.5.
"Trademark Security Agreement" means a trademark security agreement
executed and delivered by International Knife and Lender, the form and substance
of which is satisfactory to Lender.
"Voidable Transfer" has the meaning set forth in Section 16.8.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean International Knife and its
Subsidiaries on a consolidated basis unless the context clearly requires
otherwise.
1.3 Code. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 Construction. Unless the context of this Agreement or any other
Loan Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein). Any reference herein to any Person shall be construed to
16
include such Person's successors and assigns. Any requirement of a writing
contained herein or in the other Loan Documents shall be satisfied by the
transmission of a Record and any Record transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached
to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolver Advances.
(a) Subject to the terms and conditions of this Agreement, and
during the term of this Agreement, Lender agrees to make advances ("Advances")
to Borrowers in an amount at any one time outstanding not to exceed an amount
equal to the lesser of (i) the Maximum Revolver Amount, or (ii) the Borrowing
Base. For purposes of this Agreement, "Borrowing Base," as of any date of
determination, shall mean the result of:
(x) the lesser of
(i) 85% of the amount of Eligible Accounts, less the
amount, if any, of the Dilution Reserve, and
(ii) an amount equal to Borrowers' Collections with
respect to Accounts for the immediately preceding 60 day period,
minus
(y) the aggregate amount of reserves, if any, established by
Lender under Section 2.1(b).
(b) Anything to the contrary in this Section 2.1 notwithstanding,
Lender shall have the right to establish reserves in such amounts, and with
respect to such matters, as Lender in its Permitted Discretion shall deem
necessary or appropriate, against the Borrowing Base, including reserves with
respect to (i) sums that Borrowers are required to pay (such as taxes,
assessments, insurance premiums, or, in the case of leased assets, rents or
other amounts payable under such leases) and has failed to pay under any Section
of this Agreement or any other Loan Document, and (ii) amounts owing by
Borrowers to any Person to the extent secured by a Lien on, or trust over, any
of the Collateral (other than any existing Permitted Lien set forth on Schedule
P-1 which is specifically identified thereon as entitled to have priority over
the Lender's Liens), which Lien or trust, in the Permitted Discretion of Lender
likely would have a priority superior to the Lender's Liens (such as Liens or
trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen,
laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or
other taxes where given priority under applicable law) in and to such item of
the Collateral.
(c) Lender shall have no obligation to make additional Advances
hereunder to the extent such additional Advances would cause the Revolver Usage
to exceed the Maximum Revolver Amount.
17
(d) Amounts borrowed pursuant to this Section may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
2.2 Borrowing Procedures and Settlements.
(a) Procedure for Borrowing. Each Borrowing shall be made by a
written request by an Authorized Person delivered to Lender (which notice must
be received by Lender no later than 10:00 a.m. (Chicago, Illinois time) one
Business Day prior to the requested Funding Date) specifying (i) the amount of
such Borrowing (which shall be in a minimum amount of $200,000) and (ii) the
requested Funding Date, which shall be a Business Day. At Lender's election, in
lieu of delivering the above-described request in writing, any Authorized Person
may give Lender telephonic notice of such request by the required time, with
such telephonic notice to be confirmed in writing within 24 hours of the giving
of such notice.
(b) Making of Advances. If Lender has received a timely request for
a Borrowing in accordance with the provisions hereof, and subject to the
satisfaction of the applicable terms and conditions set forth herein, Lender
shall make the proceeds of such Advance available to Borrowers on the applicable
Funding Date by transferring available funds equal to such proceeds to
Administrative Borrower's Designated Account.
2.3 Payments.
(a) Payments by Borrowers. Except as otherwise expressly provided
herein, all payments by Borrowers shall be made to Lender's Account and shall be
made in immediately available funds, no later than 11:00 a.m. (Chicago, Illinois
time) on the dates specified herein if such date is a Business Day, or the next
Business Day if such date is not a Business Day. Any payment received by Lender
later than 11:00 a.m. (Chicago, Illinois time), shall be deemed to have been
received on the following Business Day and any applicable interest or fee shall
continue to accrue until such following Business Day.
(b) Application, and Reversal of Payments.
(i) All payments shall be remitted to Lender and all such payments
(other than payments received while no Default or Event of Default has
occurred and is continuing and which relate to the payment of principal or
interest of specific Obligations or which relate to the payment of specific
fees), and all proceeds of Accounts or other Collateral received by Lender,
shall be applied as follows:
A. first, to pay any Lender Expenses then due to Lender
under the Loan Documents, until paid in full,
B. second, to pay any fees then due to Lender under the
Loan Documents until paid in full,
C. third, ratably to pay interest due in respect of
Advances until paid in full,
18
D. fourth, to pay the principal of all Advances until
paid in full,
E. fifth, to pay any other Obligations until paid in
full, and
F. sixth, to Borrowers (to be wired to the Designated
Account) or such other Person entitled thereto under applicable
law.
(ii) In each instance, so long as no Default or Event of Default
has occurred and is continuing, Section 2.3(b)(i) shall not be deemed to
apply to any payment by Borrowers specified by Borrowers to be for the
payment of specific Obligations then due and payable (or prepayable) under
any provision of this Agreement.
(iii) For purposes of the foregoing, "paid in full" means payment
of all amounts owing under the Loan Documents according to the terms
thereof, including loan fees, service fees, professional fees, interest (and
specifically including interest accrued after the commencement of any
Insolvency Proceeding), default interest, interest on interest, and expense
reimbursements, whether or not the same would be or is allowed or disallowed
in whole or in part in any Insolvency Proceeding.
(iv) In the event of a direct conflict between the priority
provisions of this Section 2.3 and other provisions contained in any other
Loan Document, it is the intention of the parties hereto that such priority
provisions in such documents shall be read together and construed, to the
fullest extent possible, to be in concert with each other. In the event of
any actual, irreconcilable conflict that cannot be resolved as aforesaid,
the terms and provisions of this Section 2.3 shall control and govern.
2.4 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrowers to Lender pursuant to Section 2.1 is greater than
either the Dollar or percentage limitations set forth in Section 2.1 (an
"Overadvance"), Borrowers immediately shall pay to Lender, in cash, the amount
of such excess, which amount shall be used by Lender to reduce the Obligations
in accordance with the priorities set forth in Section 2.3(b). In addition,
Borrowers hereby promise to pay the Obligations (including principal, interest,
fees, costs, and expenses) in Dollars in full to Lender as and when due and
payable under the terms of this Agreement and the other Loan Documents.
2.5 Interest Rates, Payments, and Calculations.
(a) Interest Rates. Except as provided in clause (b) below, all
Obligations that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof at a per annum rate
equal to the Base Rate plus the Base Rate Margin. The foregoing notwithstanding,
at no time shall any portion of the Obligations bear interest on the Daily
Balance thereof at a per annum rate less than 7.75%. To the extent that interest
accrued hereunder at the rate set forth herein would be less than the foregoing
minimum daily rate, the interest rate chargeable hereunder for such day
automatically shall be deemed increased to such minimum rate.
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(b) Default Rate. Upon the occurrence and during the continuation
of an Event of Default, all Obligations that have been charged to the Loan
Account pursuant to the terms hereof shall bear interest on the Daily Balance
thereof at a per annum rate equal to 2 percentage points above the per annum
rate otherwise applicable hereunder.
(c) Payment. Interest and all other fees payable hereunder shall
be due and payable, in arrears, on the first day of each month at any time that
Obligations or obligation to extend credit hereunder are outstanding. Borrowers
hereby authorize Lender, from time to time, without prior notice to Borrowers,
to charge such interest and fees, all Lender Expenses (as and when incurred),
and all other payments as and when due and payable under any Loan Document to
Borrowers' Loan Account, which amounts thereafter constitute Advances hereunder
and shall accrue interest at the rate then applicable to Advances hereunder. Any
interest not paid when due shall be compounded by being charged to Borrowers'
Loan Account and shall thereafter constitute Advances hereunder and shall accrue
interest at the rate then applicable to Advances.
(d) Computation. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed. In the event the Base Rate is changed from time to time
hereafter, the rates of interest hereunder based upon the Base Rate
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Base Rate.
(e) Intent to Limit Charges to Maximum Lawful Rate. In no event
shall the interest rate or rates payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable. Borrowers and Lender, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto, as
of the date of this Agreement, Borrowers are and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrowers
in excess of such legal maximum, whenever received, shall be applied to reduce
the principal balance of the Obligations to the extent of such excess.
2.6 Cash Management.
(a) Upon the request of Lender, Borrowers shall (i) establish and
maintain cash management services of a type and on terms satisfactory to Lender
at one or more of the banks set forth on Schedule 2.6(a) (each a "Cash
Management Bank"), and shall request in writing and otherwise take such
reasonable steps to ensure that all of its Account Debtors forward payment of
the amounts owed by them directly to such Cash Management Bank, and (ii) deposit
or cause to be deposited promptly, and in any event no later than the first
Business Day after the date of receipt thereof, all Collections (including those
sent directly by Account Debtors to a Cash Management Bank) into a bank account
in Lender's name (a "Cash Management Account") at one of the Cash Management
Banks.
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(b) Each Cash Management Bank shall establish and maintain Cash
Management Agreements with Lender and Borrowers, in form and substance
acceptable to Lender. Each such Cash Management Agreement shall provide, among
other things, that (i) all items of payment deposited in such Cash Management
Account and proceeds thereof are held by such Cash Management Bank Lender or
bailee-in-possession for Lender, (ii) the Cash Management Bank has no rights of
setoff or recoupment or any other claim against the applicable Cash Management
Account, other than for payment of its service fees and other charges directly
related to the administration of such Cash Management Account and for returned
checks or other items of payment, and (iii) it immediately will forward by daily
sweep all amounts in the applicable Cash Management Account to the Lender's
Account.
(c) So long as no Default or Event of Default has occurred and is
continuing, Administrative Borrower may amend Schedule 2.6(a) to add or replace
a Cash Management Account Bank or Cash Management Account; provided, however,
that (i) such prospective Cash Management Bank shall be satisfactory to Lender
and Lender shall have consented in writing in advance to the opening of such
Cash Management Account with the prospective Cash Management Bank, and (ii)
prior to the time of the opening of such Cash Management Account, Borrowers and
such prospective Cash Management Bank shall have executed and delivered to
Lender a Cash Management Agreement. Borrowers shall close any of their Cash
Management Accounts (and establish replacement cash management accounts in
accordance with the foregoing sentence) promptly and in any event within 30 days
of notice from Lender that the creditworthiness of any Cash Management Bank is
no longer acceptable in Lender's Permitted Discretion, or as promptly as
practicable and in any event within 60 days of notice from Lender that the
operating performance, funds transfer, or availability procedures or performance
of the Cash Management Bank with respect to Cash Management Accounts or Lender's
liability under any Cash Management Agreement with such Cash Management Bank is
no longer acceptable in Lender's reasonable judgment.
(d) The Cash Management Accounts shall be cash collateral
accounts, with all cash, checks and similar items of payment in such accounts
securing payment of the Obligations, and in which Borrowers are hereby deemed to
have granted a Lien to Lender.
2.7 Crediting Payments; Float Charge. The receipt of any payment
item by Lender (whether from transfers to Lender by the Cash Management Banks
pursuant to the Cash Management Agreements or otherwise) shall not be considered
a payment on account unless such payment item is a wire transfer of immediately
available federal funds made to the Lender's Account or unless and until such
payment item is honored when presented for payment. Should any payment item not
be honored when presented for payment, then Borrowers shall be deemed not to
have made such payment and interest shall be calculated accordingly. Anything to
the contrary contained herein notwithstanding, any payment item shall be deemed
received by Lender only if it is received into the Lender's Account on a
Business Day on or before 11:00 a.m. (Chicago, Illinois time). If any payment
item is received into the Lender's Account on a non-Business Day or after 11:00
a.m. (Chicago, Illinois time) on a Business Day, it shall be deemed to have been
received by Lender as of the opening of business on the immediately following
Business Day. From and after the Closing Date, Lender shall be entitled to
charge Borrowers for 3 Business Days of 'clearance' or 'float' at the rate
applicable to Advances under Section 2.5 on all Collections that are received by
Borrowers (regardless of whether forwarded by the Cash
21
Management Banks to Lender). This across-the-board 3 Business Day clearance or
float charge on all Collections is acknowledged by the parties to constitute an
integral aspect of the pricing of the financing of Borrowers and shall apply
irrespective of whether or not there are any outstanding monetary Obligations;
the effect of such clearance or float charge being the equivalent of charging
3 Business Days of interest on such Collections.
2.8 Designated Account. Lender is authorized to make the Advances under
this Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Person, or without instructions if pursuant to
Section 2.5(c). Administrative Borrower agrees to establish and maintain the
Designated Account with the Designated Account Bank for the purpose of receiving
the proceeds of the Advances requested by Borrowers and made by Lender
hereunder. Unless otherwise agreed by Lender and Administrative Borrower in
writing, any Advance requested by Borrowers and made by Lender hereunder shall
be made to the Designated Account.
2.9 Maintenance of Loan Account; Statements of Obligations. Lender
shall maintain an account on its books in the name of Borrowers (the "Loan
Account") on which Borrowers will be charged all Advances made by Lender to
Borrowers or for Borrowers' account, and with all other payment Obligations
hereunder or under the other Loan Documents, including, accrued interest, fees
and expenses, and Lender Expenses. In accordance with Section 2.7, the Loan
Account will be credited with all payments received by Lender from Borrowers or
for Borrowers' account, including all amounts received in the Lender's Account
from any Cash Management Bank. Lender shall render statements regarding the Loan
Account to Administrative Borrower, including principal, interest, fees, and
including an itemization of all charges and expenses constituting Lender
Expenses owing, and such statements shall be conclusively presumed to be correct
and accurate and constitute an account stated between Borrowers and Lender
unless, within 30 days after receipt thereof by Administrative Borrower,
Administrative Borrower shall deliver to Lender written objection thereto
describing the error or errors contained in any such statements.
2.10 Fees. Borrowers shall pay to Lender the following fees and
charges, which fees and charges shall be non-refundable when paid (irrespective
of whether this Agreement is terminated thereafter):
(a) Closing Fee. On the Closing Date, Borrowers shall pay to
Lender a fee of $150,000. Once paid, such fee shall not be refundable.
(b) Audit, Appraisal, and Valuation Charges. Audit, appraisal, and
valuation fees and charges as follows, (i) a fee of $750 per day, per auditor,
plus out-of-pocket expenses for each financial audit of a Borrower performed by
personnel employed by Lender, (ii) if implemented, a one time charge of $3,000
plus out-of-pocket expenses for the establishment of electronic collateral
reporting systems, (iii) a fee of $1,500 per day per appraiser, plus
out-of-pocket expenses, for each appraisal of the Collateral performed by
personnel employed by Lender, and (iv) the actual charges paid or incurred by
Lender if it elects to employ the services of one or more third Persons to
perform financial audits of Borrowers, to appraise the Collateral, or any
portion thereof, or to assess a Borrower's business valuation.
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2.11 Capital Requirements. If, after the date hereof, Lender determines
in its Permitted Discretion that (i) the adoption of or change in any law, rule,
regulation or guideline regarding capital requirements for banks or bank holding
companies, or any change in the interpretation or application thereof by any
Governmental Authority charged with the administration thereof, or
(ii) compliance by Lender or its parent bank holding company with any guideline,
request or directive of any such entity regarding capital adequacy (whether or
not having the force of law) has the effect of reducing the return on Lender's
or such holding company's capital as a consequence of Lender's obligations
hereunder to a level below that which Lender or such holding company could have
achieved but for such adoption, change, or compliance (taking into consideration
Lender's or such holding company's then existing policies with respect to
capital adequacy and assuming the full utilization of such entity's capital) by
any amount deemed by Lender in its Permitted Discretion to be material, then
Lender may notify Administrative Borrower thereof. Following receipt of such
notice, Borrowers agree to pay Lender on demand the amount of such reduction of
return of capital as and when such reduction is determined, payable within 90
days after presentation by Lender of a statement in the amount and setting forth
in reasonable detail Lender's calculation thereof and the assumptions upon which
such calculation was based (which statement shall be deemed true and correct
absent manifest error). In determining such amount, Lender may use any
reasonable averaging and attribution methods. Lender shall use reasonable
efforts to promptly notify Borrowers if Lender has actual knowledge of the
occurrence of any event that would permit Lender to demand payment of additional
amounts under this Section 2.11.
2.12 Joint and Several Liability of Borrowers.
(a) Each of Borrowers is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the financial
accommodations to be provided by Lender under this Agreement, for the mutual
benefit, directly and indirectly, of each of Borrowers and in consideration of
the undertakings of the other Borrower to accept joint and several liability for
the Obligations.
(b) Each of Borrowers, jointly and severally, hereby irrevocably
and unconditionally accepts, not merely as a surety but also as a co-debtor,
joint and several liability with the other Borrower, with respect to the payment
and performance of all of the Obligations (including, without limitation, any
Obligations arising under this Section 2.12), it being the intention of the
parties hereto that all the Obligations shall be the joint and several
obligations of each Borrower without preferences or distinction among them.
(c) If and to the extent that any of Borrowers shall fail to make
any payment with respect to any of the Obligations as and when due or to perform
any of the Obligations in accordance with the terms thereof, then in each such
event the other Borrower will make such payment with respect to, or perform,
such Obligation.
(d) The Obligations of each Borrower under the provisions of this
Section 2.12 constitute the absolute and unconditional, full recourse
Obligations of each Borrower enforceable against each such Borrower to the full
extent of its properties and assets, irrespective (to the extent permitted by
law) of the validity, regularity or enforceability of this Agreement or any
other circumstances whatsoever.
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(e) Except as otherwise expressly provided in this Agreement, each
Borrower hereby waives notice of acceptance of its joint and several liability,
notice of any Advances, notice of the occurrence of any Default, Event of
Default, or of any demand for any payment under this Agreement, notice of any
action at any time taken or omitted by Lender under or in respect of any of the
Obligations, any requirement of diligence or to mitigate damages and, generally,
to the extent permitted by applicable law, all demands, notices and other
formalities of every kind in connection with this Agreement (except as otherwise
provided in this Agreement). Each Borrower hereby assents to, and waives notice
of, any extension or postponement of the time for the payment of any of the
Obligations, the acceptance of any payment of any of the Obligations, the
acceptance of any partial payment thereon, any waiver, consent or other action
or acquiescence by Lender at any time or times in respect of any default by any
Borrower in the performance or satisfaction of any term, covenant, condition or
provision of this Agreement, any and all other indulgences whatsoever by Lender
in respect of any of the Obligations, and the taking, addition, substitution or
release, in whole or in part, at any time or times, of any security for any of
the Obligations or the addition, substitution or release, in whole or in part,
of any Borrower. Without limiting the generality of the foregoing, each Borrower
assents to any other action or delay in acting or failure to act on the part of
Lender with respect to the failure by any Borrower to comply with any of its
respective Obligations, including, without limitation, any failure strictly or
diligently to assert any right or to pursue any remedy or to comply fully with
applicable laws or regulations thereunder, which might, but for the provisions
of this Section 2.12 afford grounds for terminating, discharging or relieving
any Borrower, in whole or in part, from any of its Obligations under this
Section 2.12, it being the intention of each Borrower that, so long as any of
the Obligations hereunder remain unsatisfied, the Obligations of such Borrower
under this Section 2.12 shall not be discharged except by performance and then
only to the extent of such performance. The Obligations of each Borrower under
this Section 2.12 shall not be diminished or rendered unenforceable by any
winding up, reorganization, arrangement, liquidation, reconstruction or similar
proceeding with respect to any Borrower or Lender. The joint and several
liability of the Borrower hereunder shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, constitution or place of formation of any of the
Borrower or Lender.
(f) Each Borrower represents and warrants to Lender that such
Borrower is currently informed of the financial condition of Borrowers and of
all other circumstances which a diligent inquiry would reveal and which bear
upon the risk of nonpayment of the Obligations. Each Borrower further represents
and warrants to Lender that such Borrower has read and understands the terms and
conditions of the Loan Documents. Each Borrower hereby covenants that such
Borrower will continue to keep informed of Borrowers' financial condition, the
financial condition of other guarantors, if any, and of all other circumstances
which bear upon the risk of nonpayment or nonperformance of the Obligations.
(g) Each of the Borrowers waives all rights and defenses that such
Borrower may have because the Obligations are secured by Real Property. This
means, among other things:
(i) Lender may collect from such Borrower without first
foreclosing on any Real or Personal Property Collateral pledged by
Borrowers.
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(ii) If Lender forecloses on any Real Property Collateral pledged
by Borrowers:
A. The amount of the Obligations may be reduced only by
the price for which that collateral is sold at the foreclosure
sale, even if the collateral is worth more than the sale price.
B. Lender may collect from such Borrower even if Lender,
by foreclosing on the Real Property Collateral, has destroyed any
right such Borrower may have to collect from the other Borrowers.
This is an unconditional and irrevocable waiver of any rights and defenses such
Borrower may have because the Obligations are secured by Real Property.
(h) The provisions of this Section 2.12 are made for the benefit of
Lender and its respective successors and assigns, and may be enforced by it or
them from time to time against any or all of the Borrowers as often as occasion
therefor may arise and without requirement on the part of Lender, successor, or
assign first to marshal any of its or their claims or to exercise any of its or
their rights against any of the other Borrower or to exhaust any remedies
available to it or them against any of the other Borrower or to resort to any
other source or means of obtaining payment of any of the Obligations hereunder
or to elect any other remedy. The provisions of this Section 2.12 shall remain
in effect until all of the Obligations shall have been paid in full or otherwise
fully satisfied. If at any time, any payment, or any part thereof, made in
respect of any of the Obligations, is rescinded or must otherwise be restored or
returned by Lender upon the insolvency, bankruptcy or reorganization of any of
the Borrowers, or otherwise, the provisions of this Section 2.12 will forthwith
be reinstated in effect, as though such payment had not been made.
(i) Each of the Borrowers hereby agrees that it will not enforce any of
its rights of contribution or subrogation against the other Borrower with
respect to any liability incurred by it hereunder or under any of the other Loan
Documents, any payments made by it to Lender with respect to any of the
Obligations or any collateral security therefor until such time as all of the
Obligations have been paid in full in cash. Any claim which any Borrower may
have against the other Borrower with respect to the payments to Lender hereunder
or under any other Loan Documents are hereby expressly made subordinate and
junior in right of payment, without limitation as to any increases in the
Obligations arising hereunder or thereunder, to the prior payment in full in
cash of the Obligations and, in the event of any insolvency, bankruptcy,
receivership, liquidation, reorganization or other similar proceeding under the
laws of any jurisdiction relating to any Borrower, its debts or its assets,
whether voluntary or involuntary, all such Obligations shall be paid in full in
cash before any payment or distribution of any character, whether in cash,
securities or other property, shall be made to any other Borrower therefor.
(j) Each of the Borrowers hereby agrees that, after the occurrence and
during the continuance of any Default or Event of Default, the payment of any
amounts due with respect to the indebtedness owing by the Borrower to the other
Borrower is hereby subordinated to the prior payment in full in cash of the
Obligations. Each Borrower hereby agrees that after the occurrence and during
the continuance of any Default or Event of Default, such Borrower
25
will not demand, sue for or otherwise attempt to collect any indebtedness of the
other Borrower owing to such Borrower until the Obligations shall have been paid
in full in cash. If, notwithstanding the foregoing sentence, such Borrower shall
collect, enforce or receive any amounts in respect of such indebtedness, such
amounts shall be collected, enforced and received by such Borrower as trustee
for the Lender, and such Borrower shall deliver any such amounts to Lender for
application to the Obligations in accordance with Section 2.3(b).
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Extension of Credit. The
obligation of Lender to make the initial Advance is subject to the fulfillment,
to the satisfaction of Lender, of each of the conditions precedent set forth
below:
(a) the Closing Date shall occur on or before June 21, 2001;
(b) Lender shall have received all financing statements required
by Lender, duly executed by the applicable Borrowers, and Lender shall have
received evidence satisfactory to it of the filing of all such financing
statements;
(c) Lender shall have received each of the following documents, in
form and substance satisfactory to Lender, duly executed, and each such document
shall be in full force and effect:
(i) the Disbursement Letter,
(ii) the Guaranty,
(iii) the Officers' Certificate,
(iv) the Stock Pledge Agreement, together with all certificates
representing the shares of Stock pledged thereunder (other than the shares
of Stock of subsidiaries not organized in the United States or Canada), as
well as Stock powers with respect thereto endorsed in blank,
(v) the Trademark Security Agreement, and
(vi) the Pay-Off Letter, together with UCC termination statements
and other documentation evidencing the termination by Prior Lender of its
Liens in and to the properties and assets of Borrowers.
(d) Lender shall have received a certificate from the Secretary of
each Borrower attesting to the resolutions of such Borrower's board of directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which such Borrower is a party and authorizing specific
officers of such Borrower to execute the same;
(e) Lender shall have received copies of each Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of such Borrower;
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(f) Lender shall have received a certificate of status with
respect to each Borrower, dated within 10 days of the Closing Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of such Borrower, which certificate shall indicate that such
Borrower is in good standing in such jurisdiction;
(g) Lender shall have received certificates of status with respect
to each Borrower, each dated within 30 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions (other
than the jurisdiction of organization of such Borrower) in which its failure to
be duly qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that such Borrower is in good standing in such
jurisdictions;
(h) Lender shall have received a certificate from the Secretary of
the Guarantor attesting to the resolutions of the Guarantor's board of directors
authorizing its execution, delivery, and performance of the Loan Documents to
which the Guarantor is a party and authorizing specific officers of the
Guarantor to execute the same;
(i) Lender shall have received copies of the Guarantor's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of the Guarantor;
(j) Lender shall have received certificates of insurance, together
with the endorsements thereto, as are required by Section 6.8, the form and
substance of which shall be satisfactory to Lender;
(k) Lender shall have received opinions of Borrowers' counsel in
form and substance satisfactory to Lender;
(l) Lender shall have received satisfactory evidence (including a
certificate of the chief financial officer of Parent) that all tax returns
required to be filed by Borrowers have been timely filed and all taxes upon
Borrowers or their properties, assets, income, and franchises (including Real
Property taxes and payroll taxes) have been paid prior to delinquency, except
such taxes that are the subject of a Permitted Protest;
(m) Borrowers shall have the Required Availability after giving
effect to the initial extensions of credit hereunder;
(n) Lender shall have received Borrowers' Closing Date Business
Plan;
(o) Borrowers shall pay all Lender Expenses incurred in connection
with the transactions evidenced by this Agreement;
(p) Borrowers shall have received all licenses, approvals or
evidence of other actions required by any Governmental Authority in connection
with the execution and delivery by Borrowers of this Agreement or any other Loan
Document or with the consummation of the transactions contemplated hereby and
thereby; and
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(q) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance satisfactory to Lender.
3.2 Conditions Subsequent to the Initial Extension of Credit. The
obligation of Lender to continue to make Advances is subject to the fulfillment,
on or before the date applicable thereto, of each of the conditions subsequent
set forth below (the failure by Borrowers to so perform or cause to be performed
constituting an Event of Default):
(a) within 30 days of the Closing Date, deliver to Lender
certified copies of the policies of insurance, together with the endorsements
thereto, as are required by Section 6.8, the form and substance of which shall
be satisfactory to Lender and its counsel;
(b) within 10 days of the Closing Date, Lender shall have received
a certificate of status with respect to the Guarantor, such certificate to be
issued by the appropriate officer of the jurisdiction of organization of the
Guarantor, which certificate shall indicate that the Guarantor is in good
standing in such jurisdiction;
(c) within 10 days of the Closing Date, Lender shall have received
certificates of status with respect to the Guarantor, such certificates to be
issued by the appropriate officer of the jurisdictions (other than the
jurisdiction of organization of the Guarantor) in which its failure to be duly
qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that the Guarantor is in good standing in such
jurisdictions;
(d) within 30 days of the Closing Date, Lender shall have received
an appraisal of the orderly liquidation value applicable to Borrowers' Inventory
and an appraisal of the orderly liquidation value of the Borrowers' machinery
and equipment, each from a third party appraiser acceptable to the Lender, the
results of which shall be satisfactory to Lender;
(e) within 30 days of the Closing Date, Lender shall have received
(i) appraisals of the Real Property Collateral from a third party appraiser and
in form satisfactory to Lender, (ii) the Mortgages with respect to such Real
Property Collateral and (iii) mortgagee title insurance policies (or marked
commitments to issue the same) for the Real Property Collateral issued by a
title insurance company satisfactory to Lender (each a "Mortgage Policy" and,
collectively, the "Mortgage Policies") in amounts satisfactory to Lender
assuring Lender that the Mortgages on such Real Property Collateral are valid
and enforceable first priority mortgage Liens on such Real Property Collateral
free and clear of all defects and encumbrances except Permitted Liens, and the
Mortgage Policies otherwise shall be in form and substance satisfactory to
Lender;
(f) Lender shall have completed its business, legal, and
collateral due diligence, including (i) a collateral audit and review of
Borrowers' books and records and verification of Borrowers' representations and
warranties to Lender, the results of which shall be satisfactory to Lender, and
(ii) an inspection of each of the locations where Inventory is located, the
results of which shall be satisfactory to Lender;
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(g) within 10 days of the Closing Date, Lender shall have received
a Collateral Access Agreement with respect to each location not owned by a
Borrower in which Inventory or Equipment is located, duly executed by the
applicable lessor, warehouseman, processor, consignee, or other Person in
possession of, having a Lien upon, or having rights or interests in such
Equipment or Inventory;
(h) within 30 days of the Closing Date, the Cash Management
Agreements;
(i) upon the request of Lender, Lender shall have received all
stock certificates representing the shares of Stock pledged under the Stock
Pledge Agreement and not delivered to the Lender on the Closing Date; and
(j) on or before July 16, 2001, the Borrowers shall have appointed
an acting chief executive officer reasonably acceptable to the Lender with a
scope of responsibilities and authority reasonably acceptable to Lender (for the
purposes hereof, the individuals listed on Schedule 3.2(i) hereto shall be
deemed to be acceptable to the Lender).
3.3 Conditions Precedent to all Extensions of Credit. The obligation of
Lender to make all Advances shall be subject to the following conditions
precedent:
(a) the representations and warranties contained in this Agreement
and the other Loan Documents shall be true and correct in all material respects
on and as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof;
(c) no injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the extending of such credit shall
have been issued and remain in force by any Governmental Authority against any
Borrower, Lender, or any of their Affiliates; and
(d) no Material Adverse Change shall have occurred.
3.4 Term. This Agreement shall become effective upon the execution and
delivery hereof by Borrowers and Lender and shall continue in full force and
effect for a term ending on December 21, 2001 (the "Maturity Date") unless
terminated earlier as provided herein. The foregoing notwithstanding, Lender
shall have the right to terminate its obligations under this Agreement
immediately and without notice upon the occurrence and during the continuation
of an Event of Default.
3.5 Effect of Termination. On the date of termination of this
Agreement, all Obligations immediately shall become due and payable without
notice or demand. No termination of this Agreement, however, shall relieve or
discharge Borrowers of their duties, Obligations, or covenants hereunder and the
Lender's Liens in the Collateral shall remain in
29
effect until all Obligations have been fully and finally discharged and Lender's
obligations to provide additional credit hereunder have been terminated. When
this Agreement has been terminated and all of the Obligations have been fully
and finally discharged and Lender's obligations to provide additional credit
under the Loan Documents have been terminated irrevocably, Lender will, at
Borrowers' sole expense, execute and deliver any UCC termination statements,
lien releases, mortgage releases, re-assignments of trademarks, discharges of
security interests, and other similar discharge or release documents (and, if
applicable, in recordable form) as are reasonably necessary to release, as of
record, the Lender's Liens and all notices of security interests and liens
previously filed by Lender with respect to the Obligations.
3.6 Early Termination by Borrowers. Borrowers have the option, at any
time upon 60 days prior written notice by Administrative Borrower to Lender, to
terminate this Agreement by paying to Lender, in cash, the Obligations in full.
If Administrative Borrower has sent a notice of termination pursuant to the
provisions of this Section, then Lender's obligations to extend credit hereunder
shall terminate and Borrowers shall be obligated to repay the Obligations in
full on the date set forth as the date of termination of this Agreement in such
notice. Borrowers may, at any time and from time to time, repay in whole or in
part the principal amount of the Obligations without premium or penalty.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Each Borrower hereby grants to Lender a
continuing security interest in all of its right, title, and interest in all
currently existing and hereafter acquired or arising Personal Property
Collateral in order to secure prompt repayment of any and all of the Obligations
in accordance with the terms and conditions of the Loan Documents and in order
to secure prompt performance by Borrowers of each of their covenants and duties
under the Loan Documents. The Lender's Liens in and to the Personal Property
Collateral shall attach to all Personal Property Collateral without further act
on the part of Lender or Borrowers. Anything contained in this Agreement or any
other Loan Document to the contrary notwithstanding, except for Permitted
Dispositions, Borrowers have no authority, express or implied, to dispose of any
item or portion of the Collateral.
4.2 Negotiable Collateral. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, and if and to
the extent that perfection of priority of Lender's security interest is
dependent on or enhanced by possession, the applicable Borrower, immediately
upon the request of Lender, shall endorse and deliver physical possession of
such Negotiable Collateral to Lender.
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral. At any time after the occurrence and during the continuation of an
Event of Default, Lender or Lender's designee may (a) notify Account Debtors of
Borrowers that the Accounts, chattel paper, or General Intangibles have been
assigned to Lender or that Lender has a security interest therein, or (b)
collect the Accounts, chattel paper, or General Intangibles directly and charge
the collection costs and expenses to the Loan Account. Each Borrower agrees that
it will hold in trust for Lender, as Lender's trustee, any Collections that it
receives and immediately will deliver said Collections to Lender or a Cash
Management Bank in their original form as received by the applicable Borrower.
30
4.4 Delivery of Additional Documentation Required. At any time upon the
request of Lender, Borrowers shall execute and deliver to Lender, any and all
financing statements, original financing statements in lieu of continuation
statements, fixture filings, security agreements, pledges, assignments,
endorsements of certificates of title, and all other documents (the "Additional
Documents") that Lender may request in its Permitted Discretion, in form and
substance satisfactory to Lender, to perfect and continue perfected or better
perfect the Lender's Liens in the Collateral (whether now owned or hereafter
arising or acquired), to create and perfect Liens in favor of Lender in any Real
Property acquired after the Closing Date, and in order to fully consummate all
of the transactions contemplated hereby and under the other Loan Documents. To
the maximum extent permitted by applicable law, each Borrower authorizes Lender
to execute any such Additional Documents in the applicable Borrower's name and
authorize Lender to file such executed Additional Documents in any appropriate
filing office. In addition, on such periodic basis as Lender shall require,
Borrowers shall (a) provide Lender with a report of all new patentable,
copyrightable, or trademarkable materials acquired or generated by Borrowers
during the prior period, (b) cause all patents, copyrights, and trademarks
acquired or generated by Borrowers that are not already the subject of a
registration with the appropriate filing office (or an application therefor
diligently prosecuted) to be registered with such appropriate filing office in a
manner sufficient to impart constructive notice of Borrowers' ownership thereof,
and (c) cause to be prepared, executed, and delivered to Lender supplemental
schedules to the applicable Loan Documents to identify such patents, copyrights,
and trademarks as being subject to the security interests created thereunder.
4.5 Power of Attorney. Each Borrower hereby irrevocably makes,
constitutes, and appoints Lender (and any of Lender's officers or employees
designated by Lender) as such Borrower's true and lawful attorney, with power to
(a) if such Borrower refuses to, or fails timely to execute and deliver any of
the Additional Documents, sign the name of such Borrower on any of the
Additional Documents, (b) at any time that an Event of Default has occurred and
is continuing, sign such Borrower's name on any invoice or bill of lading
relating to the Collateral, drafts against Account Debtors, or notices to
Account Debtors, (c) send requests for verification of Accounts, (d) endorse
such Borrower's name on any Collection item that may come into Lender's
possession, (e) at any time that an Event of Default has occurred and is
continuing, make, settle, and adjust all claims under such Borrower's policies
of insurance and make all determinations and decisions with respect to such
policies of insurance, and (f) at any time that an Event of Default has occurred
and is continuing, settle and adjust disputes and claims respecting the
Accounts, chattel paper, or General Intangibles directly with Account Debtors,
for amounts and upon terms that Lender determines to be reasonable, and Lender
may cause to be executed and delivered any documents and releases that Lender
determines to be necessary. The appointment of Lender as each Borrower's
attorney, and each and every one of its rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully and
finally repaid and performed and Lender's obligations to extend credit hereunder
are terminated.
4.6 Right to Inspect. Lender (through any of its respective officers,
employees, or agents) shall have the right, from time to time hereafter upon
notice (which may be telephonic), to inspect the Books and to check, test, and
appraise the Collateral in order to verify Borrowers' financial condition or the
amount, quality, value, condition of, or any other
31
matter relating to, the Collateral. In the absence of an Event of Default, any
inspection by the Lender under this Section 4.6 shall be conducted during normal
business hours.
4.7 Control Agreements. Each Borrower agrees that it will not transfer
assets out of any Securities Accounts other than as permitted under Section 7.19
and, if to another securities intermediary, unless each of the applicable
Borrower, Lender, and the substitute securities intermediary have entered into a
Control Agreement. No arrangement contemplated hereby or by any Control
Agreement in respect of any Securities Accounts or other Investment Property
shall be modified by Borrowers without the prior written consent of Lender. Upon
the occurrence and during the continuance of a Default or Event of Default,
Lender may notify any securities intermediary to liquidate the applicable
Securities Account or any related Investment Property maintained or held thereby
and remit the proceeds thereof to the Lender's Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Lender to enter into this Agreement, each Borrower
makes the following representations and warranties to Lender which shall be
true, correct, and complete, in all material respects, as of the date hereof,
and shall be true, correct, and complete, in all material respects, as of the
Closing Date, and at and as of the date of the making of each Advance made
thereafter, as though made on and as of the date of such Advance (except to the
extent that such representations and warranties relate solely to an earlier
date) and such representations and warranties shall survive the execution and
delivery of this Agreement:
5.1 No Encumbrances. Each Borrower has good and indefeasible title to
its Collateral and the Real Property, free and clear of Liens except for
Permitted Liens.
5.2 Eligible Accounts. The Eligible Accounts are bona fide existing
payment obligations of Account Debtors created by the sale and delivery of
Inventory or the rendition of services to such Account Debtors in the ordinary
course of International Knife's business, owed to International Knife without
defenses, disputes, offsets, counterclaims, or rights of return or cancellation.
As to each Eligible Account, such Account is not:
(a) owed by an employee, Affiliate, or lender of a Borrower,
(b) on account of a transaction wherein goods were placed on
consignment or were sold pursuant to a guaranteed sale, a sale or return, a sale
on approval, a bill and hold, or on any other terms by reason of which the
payment by the Account Debtor may be conditional,
(c) payable in a currency other than Dollars,
(d) owed by an Account Debtor that has or has asserted a right of
setoff, has disputed its liability, or has made any claim with respect to its
obligation to pay the Account,
(e) owed by an Account Debtor that is subject to any Insolvency
Proceeding or is not Solvent or as to which a Borrower has received notice of an
imminent
32
Insolvency Proceeding or a material impairment of the financial condition of
such Account Debtor,
(f) on account of a transaction as to which the goods giving rise
to such Account have not been shipped and billed to the Account Debtor or the
services giving rise to such Account have not been performed and accepted by the
Account Debtor,
(g) a right to receive progress payments or other advance billings
that are due prior to the completion of performance by International Knife of
the subject contract for goods or services, and
(h) an Account that has not been billed to the customer.
5.3 Inventory. As to each item of Inventory, such Inventory is
(a) owned by a Borrower free and clear of all Liens other than
Permitted Liens, and
(b) either located at one of the locations set forth on
Schedule E-1 or in transit from one such location to another such location.
5.4 Equipment. All of the Equipment is used or held for use in
Borrowers' business and is fit for such purposes.
5.5 Location of Inventory and Equipment. The Inventory and Equipment
are not stored with a bailee, warehouseman, or similar party and are located
only at the locations identified on Schedule 5.5.
5.6 Inventory Records. Each Borrower keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its Inventory and
the book value thereof.
5.7 Location of Chief Executive Office; FEIN. The chief executive
office of each Borrower is located at the address indicated in Schedule 5.7 and
each Borrower's FEIN is identified in Schedule 5.7.
5.8 Due Organization and Qualification; Subsidiaries.
(a) Each Borrower is duly organized and existing and in good
standing under the laws of the jurisdiction of its organization and qualified to
do business in any state where the failure to be so qualified reasonably could
be expected to have a Material Adverse Change.
(b) Set forth on Schedule 5.8(b), is a complete and accurate
description of the authorized capital Stock of each Borrower, by class, and, as
of the Closing Date, a description of the number of shares of each such class
that are issued and outstanding. Other than as described on Schedule 5.8(b),
there are no subscriptions, options, warrants, or calls relating to any shares
of each Borrower's capital Stock, including any right of conversion or
33
exchange under any outstanding security or other instrument. No Borrower is
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital Stock or any security convertible
into or exchangeable for any of its capital Stock.
(c) Set forth on Schedule 5.8(c), is a complete and accurate list
of each Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their organization; (ii) the number of shares of each class of
common and preferred Stock authorized for each of such Subsidiaries; and (iii)
the number and the percentage of the outstanding shares of each such class owned
directly or indirectly by the applicable Borrower. All of the outstanding
capital Stock of each such Subsidiary has been validly issued and is fully paid
and non-assessable.
(d) Except as set forth on Schedule 5.8(c), there are no
subscriptions, options, warrants, or calls relating to any shares of any
Borrower's Subsidiaries' capital Stock, including any right of conversion or
exchange under any outstanding security or other instrument. No Borrower or any
of its respective Subsidiaries is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of any
Borrower's Subsidiaries' capital Stock or any security convertible into or
exchangeable for any such capital Stock.
5.9 Due Authorization; No Conflict.
(a) As to each Borrower, the execution, delivery, and performance
by such Borrower of this Agreement and the Loan Documents to which it is a party
have been duly authorized by all necessary action on the part of such Borrower.
(b) As to each Borrower, the execution, delivery, and performance
by such Borrower of this Agreement and the Loan Documents to which it is a party
do not and will not (i) violate any provision of federal, state, or local law or
regulation applicable to any Borrower, the Governing Documents of any Borrower,
or any order, judgment, or decree of any court or other Governmental Authority
binding on any Borrower, (ii) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any
material contractual obligation of any Borrower, (iii) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any properties
or assets of Borrower, other than Permitted Liens, or (iv) require any approval
of any Borrower's interestholders or any approval or consent of any Person under
any material contractual obligation of any Borrower.
(c) Other than the filing of financing statements, fixture
filings, and Mortgages, the execution, delivery, and performance by each
Borrower of this Agreement and the Loan Documents to which such Borrower is a
party do not and will not require any registration with, consent, or approval
of, or notice to, or other action with or by, any Governmental Authority or
other Person.
(d) As to each Borrower, this Agreement and the other Loan
Documents to which such Borrower is a party, and all other documents
contemplated hereby and thereby, when executed and delivered by such Borrower
and the other parties thereto will be the legally valid and binding obligations
of such Borrower, enforceable against such Borrower in accordance with their
respective terms, except as enforcement may be limited by equitable
34
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or limiting creditors' rights generally.
(e) The Lender's Liens are validly created, perfected, and first
priority Liens, subject only to Permitted Liens.
(f) The execution, delivery, and performance by Guarantor of the
Loan Documents to which it is a party have been duly authorized by all necessary
action on the part of Guarantor.
(g) The execution, delivery, and performance by Guarantor of the
Loan Documents to which it is a party do not and will not (i) violate any
provision of federal, state, or local law or regulation applicable to Guarantor,
the Governing Documents of Guarantor, or any order, judgment, or decree of any
court or other Governmental Authority binding on Guarantor, (ii) conflict with,
result in a breach of, or constitute (with due notice or lapse of time or both)
a default under any material contractual obligation of Guarantor, (iii) result
in or require the creation or imposition of any Lien of any nature whatsoever
upon any properties or assets of Guarantor, other than Permitted Liens, or (iv)
require any approval of Guarantor's interestholders or any approval or consent
of any Person under any material contractual obligation of Guarantor.
(h) The execution, delivery, and performance by Guarantor of the
Loan Documents to which Guarantor is a party do not and will not require any
registration with, consent, or approval of, or notice to, or other action with
or by, any Governmental Authority or other Person.
(i) The Loan Documents to which Guarantor is a party, and all
other documents contemplated hereby and thereby, when executed and delivered by
Guarantor will be legally valid and binding obligations of Guarantor,
enforceable against Guarantor in accordance with their respective terms, except
as enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or limiting
creditors' rights generally.
5.10 Litigation. Other than those matters disclosed on Schedule 5.10,
there are no actions, suits, or proceedings pending or, to the best knowledge of
Borrowers, threatened against Borrowers, or any of their Subsidiaries, as
applicable, except for (a) matters that are fully covered by insurance (subject
to customary deductibles), and (b) matters arising after the Closing Date that,
if decided adversely to Borrowers, or any of their Subsidiaries, as applicable,
reasonably could not be expected to result in a Material Adverse Change.
5.11 No Material Adverse Change. All financial statements relating to
Borrowers or Guarantor that have been delivered by Borrowers to Lender have been
prepared in accordance with GAAP (except, in the case of unaudited financial
statements, for the lack of footnotes and being subject to year-end audit
adjustments) and present fairly in all material respects, Borrowers' (or
Guarantor's, as applicable) financial condition as of the date thereof and
results of operations for the period then ended. There has not been a Material
Adverse Change with respect to Borrowers (or Guarantor, as applicable) since the
date of the latest financial statements submitted to Lender on or before the
Closing Date.
35
5.12 Fraudulent Transfer. No transfer of property is being made by any
Borrower and no obligation is being incurred by any Borrower in connection with
the transactions contemplated by this Agreement or the other Loan Documents with
the intent to hinder, delay, or defraud either present or future creditors of
Borrowers.
5.13 Employee Benefits. None of Borrowers, any of their Subsidiaries,
or any of their ERISA Affiliates maintains or contributes to any Benefit Plan.
5.14 Environmental Condition. Except as set forth on Schedule 5.14, (a)
to Borrowers' knowledge, none of Borrowers' properties or assets has ever been
used by Borrowers or by previous owners or operators in the disposal of, or to
produce, store, handle, treat, release, or transport, any Hazardous Materials,
where such production, storage, handling, treatment, release or transport was in
violation, in any material respect, of applicable Environmental Law, (b) to
Borrowers' knowledge, none of Borrowers' properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a Hazardous Materials disposal site, (c) none of Borrowers have
received notice that a Lien arising under any Environmental Law has attached to
any revenues or to any Real Property owned or operated by Borrowers, and (d)
none of Borrowers have received a summons, citation, notice, or directive from
the Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by any Borrower resulting in the
releasing or disposing of Hazardous Materials into the environment.
5.15 Brokerage Fees. Borrowers have not utilized the services of any
broker or finder in connection with Borrowers' obtaining financing from Lender
under this Agreement and no brokerage commission or finders fee is payable by
Borrowers in connection herewith.
5.16 Intellectual Property. Each Borrower owns, or holds licenses in,
all trademarks, trade names, copyrights, patents, patent rights, and licenses
that are necessary to the conduct of its business as currently conducted.
Attached hereto as Schedule 5.16 is a true, correct, and complete listing of all
material patents, patent applications, trademarks, trademark applications,
copyrights, and copyright registrations as to which each Borrower is the owner
or is an exclusive licensee.
5.17 Leases. Borrowers enjoy peaceful and undisturbed possession under
all leases material to the business of Borrowers and to which Borrowers are a
party or under which Borrowers are operating. Except for the leases set forth on
Schedule 5.17 for the locations of the Borrowers in which no Collateral is
located all of such leases are valid and subsisting and no material default by
Borrowers exists under any of them.
5.18 DDAs. Set forth on Schedule 5.18 are all of the DDAs of each
Borrower, including, with respect to each depository (i) the name and address of
such depository, and (ii) the account numbers of the accounts maintained with
such depository.
5.19 Complete Disclosure. All factual information (taken as a whole)
furnished by or on behalf of Borrowers in writing to Lender (including all
information contained in the Schedules hereto or in the other Loan Documents)
for purposes of or in connection with this Agreement, the other Loan Documents
or any transaction contemplated herein or therein is,
36
and all other such factual information (taken as a whole) hereafter furnished by
or on behalf of Borrowers in writing to the Lender will be, true and accurate,
in all material respects, on the date as of which such information is dated or
certified and not incomplete by omitting to state any fact necessary to make
such information (taken as a whole) not misleading in any material respect at
such time in light of the circumstances under which such information was
provided. On the Closing Date, the Closing Date Projections represent, and as of
the date on which any other Projections are delivered to Lender, such additional
Projections represent Borrowers' good faith best estimate of its future
performance for the periods covered thereby.
5.20 Indebtedness. Set forth on Schedule 5.20 is a true and complete
list of all Indebtedness of each Borrower outstanding immediately prior to the
Closing Date that is to remain outstanding after the Closing Date and such
Schedule accurately reflects the aggregate principal amount of such Indebtedness
and the principal terms thereof.
6. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrowers shall and shall cause each of their respective
Subsidiaries to do all of the following:
6.1 Accounting System. Maintain a system of accounting that enables
Borrowers to produce financial statements in accordance with GAAP and maintain
records pertaining to the Collateral that contain information as from time to
time reasonably may be requested by Lender. Borrowers also shall keep an
inventory reporting system that shows all additions, sales, claims, returns, and
allowances with respect to the Inventory.
6.2 Collateral Reporting. Provide Lender with the following documents
at the following times in form satisfactory to Lender:
===================== ==========================================================
- --------------------- ----------------------------------------------------------
- --------------------- ----------------------------------------------------------
Weekly (a) a sales journal, collection journal, and credit
register since the last such schedule,
(b) notice of all returns, disputes, or claims in an
amount in excess of $10,000,
(c) a calculation of the Borrowing Base (using the
Borrowing Base Certificate) as of Friday of the
prior week, and
(d) for finished goods and raw materials, Inventory
reports specifying Borrowers' cost, by category,
with additional detail showing additions to and
deletions from the Inventory.
- --------------------- ----------------------------------------------------------
- --------------------- ----------------------------------------------------------
Monthly (not (e) a detailed calculation of the Borrowing Base
later than the (using the Borrowing Base Certificate and
10th day of including detail regarding those Accounts that are
each month) not Eligible Accounts),
(f) a detailed aging, by total, of the Accounts,
together with a reconciliation
37
- --------------------- ----------------------------------------------------------
- --------------------- ----------------------------------------------------------
to the detailed calculation of the Borrowing Base
previously provided to Lender,
(g) for work in process, Inventory reports specifying
Borrowers' cost by category, with additional
detail showing additions to and deletions from
Inventory,
(h) a summary aging, by vendor, of Borrowers' accounts
payable and any book overdraft, and
(i) a calculation of Dilution for the prior month.
- --------------------- ----------------------------------------------------------
- --------------------- ----------------------------------------------------------
Quarterly (j) a detailed list of Borrowers' customers,
(k) a report regarding Borrowers' accrued, but unpaid,
ad valorem taxes,
- --------------------- ----------------------------------------------------------
- --------------------- ----------------------------------------------------------
Upon request (l) copies of invoices in connection with the
by Lender at Accounts, credit memos, remittance advices,
such times as deposit slips, shipping and delivery documents in
reasonably connection with the Accounts and, for Inventory
determined and Equipment acquired by Borrowers, purchase
by Lender orders and invoices, and
(m) such other reports as to the Collateral, or the
financial condition of Borrowers as Lender may
request.
- --------------------- ----------------------------------------------------------
- --------------------- ----------------------------------------------------------
===================== ==========================================================
In addition, each Borrower agrees to cooperate fully with Lender to
facilitate and implement a system of electronic collateral reporting in order to
provide electronic reporting of each of the items set forth above.
6.3 Financial Statements, Reports, Certificates. Deliver to Lender:
(a) as soon as available, but in any event within 30 days (45 days
in the case of a month that is the end of one of the first 3 fiscal quarters in
a fiscal year) after the end of each month during each of International Knife's
fiscal years,
(i) a company prepared consolidated balance sheet, income
statement, and statement of cash flow covering International Knife's and its
Subsidiaries' operations during such period,
(ii) a certificate signed by the chief financial officer of
International Knife to the effect that:
A. the financial statements delivered hereunder have
been prepared in accordance with GAAP (except for the lack of
footnotes and being subject to year-end audit adjustments) and
fairly present in all material respects the financial condition of
International Knife and its Subsidiaries,
B. the representations and warranties of Borrowers
contained in this Agreement and the other Loan Documents are true
and correct in all material respects on and as of the date of such
certificate, as
38
though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date),
and
C. there does not exist any condition or event that
constitutes a Default or Event of Default (or, to the extent of
any non-compliance, describing such non-compliance as to which he
or she may have knowledge and what action Borrowers have taken,
are taking, or propose to take with respect thereto), and
(iii) for each month that is the date on which a covenant in
Section 7.20 is to be tested, a Compliance Certificate demonstrating, in
reasonable detail, compliance at the end of such period with the applicable
covenants contained in Section 7.20, and
(b) if and when filed by any Borrower,
(i) Form 10-Q quarterly reports, Form 10-K annual reports, and
Form 8-K current reports,
(ii) any other filings made by any Borrower with the SEC,
(iii) copies of Borrowers' federal income tax returns, and any
amendments thereto, filed with the Internal Revenue Service, and
(iv) any other information that is provided by Parent to its
shareholders generally,
(c) if and when filed by any Borrower and as requested by Lender,
satisfactory evidence of payment of applicable excise taxes in each jurisdiction
(i) in which any Borrower conducts business or is required to pay any such
excise tax, (ii) where any Borrower's failure to pay any such applicable excise
tax would result in a Lien on the properties or assets of any Borrower, or (iii)
where any Borrower's failure to pay any such applicable excise tax reasonably
could be expected to result in a Material Adverse Change,
(d) as soon as a Borrower has knowledge of any event or condition
that constitutes a Default or an Event of Default, notice thereof and a
statement of the curative action that Borrowers propose to take with respect
thereto,
(e) as soon as a Borrower has knowledge of any event or condition
that constitutes a default under any material agreement (including the Supply
Agreement) to which any Borrower or any of its Subsidiaries is a party, and
(f) upon the request of Lender, any other report reasonably
requested relating to the financial condition of Borrowers.
In addition to the financial statements referred to above, Borrowers
agree to deliver financial statements prepared on both a consolidated and
consolidating basis and that no Borrower, or any Subsidiary of a Borrower, will
have a fiscal year different from that of Parent. Borrowers agree that their
independent certified public accountants are authorized to
39
communicate with Lender and to release to Lender whatever financial information
concerning Borrowers that Lender reasonably may request. Each Borrower waives
the right to assert a confidential relationship, if any, it may have with any
accounting firm or service bureau in connection with any information requested
by Lender pursuant to or in accordance with this Agreement, and agree that
Lender may contact directly any such accounting firm or service bureau in order
to obtain such information.
6.4 Guarantor Reports. Cause the Guarantor to deliver its annual
financial statements at the time when Parent provides its audited financial
statements to Lender and copies of all federal income tax returns as soon as the
same are available and in any event no later than 30 days after the same are
required to be filed by law.
6.5 Return. Cause returns and allowances as between Borrowers and their
Account Debtors, to be on the same basis and in accordance with the usual
customary practices of the applicable Borrower, as they exist at the time of the
execution and delivery of this Agreement. If, at a time when no Event of Default
has occurred and is continuing, any Account Debtor returns any Inventory to any
Borrower, the applicable Borrower promptly shall determine the reason for such
return and, if the applicable Borrower accepts such return, issue a credit
memorandum (with a copy to be sent to Lender, which may be satisfied by the
delivery to the Lender pursuant to Section 6.2 of the summary of credits issued
by the Borrowers) in the appropriate amount to such Account Debtor. If, at a
time when an Event of Default has occurred and is continuing, any Account Debtor
returns any Inventory to any Borrower, the applicable Borrower promptly shall
determine the reason for such return and, if Lender consents (which consent
shall not be unreasonably withheld), issue a credit memorandum (with a copy to
be sent to Lender) in the appropriate amount to such Account Debtor.
6.6 Maintenance of Properties. Maintain and preserve all of its
properties which are necessary in the proper conduct of its business in good
working order and condition, ordinary wear and tear excepted, and comply at all
times with the provisions of all leases to which it is a party as lessee, so as
to prevent any loss or forfeiture thereof or thereunder.
6.7 Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrowers
or any of their assets to be paid in full, before delinquency or before the
expiration of any extension period, except to the extent that the validity of
such assessment or tax shall be the subject of a Permitted Protest. Borrowers
will make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Lender with proof satisfactory to Lender indicating
that the applicable Borrower has made such payments or deposits. Borrowers shall
deliver satisfactory evidence of payment of applicable excise taxes in each
jurisdiction in which any Borrower is required to pay any such excise tax.
6.8 Insurance.
(a) At Borrowers' expense, maintain insurance respecting its
property and assets wherever located, covering loss or damage by fire, theft,
explosion, and all other hazards and risks as ordinarily are insured against by
other Persons engaged in the same or
40
similar businesses. Borrowers also shall maintain business interruption, public
liability, and product liability insurance, as well as insurance against
larceny, embezzlement, and criminal misappropriation. All such policies of
insurance shall be in such amounts and with such insurance companies as are
reasonably satisfactory to Lender. Borrowers shall deliver copies of all such
policies to Lender with a satisfactory lender's loss payable endorsement naming
Lender as sole loss payee or additional insured, as appropriate. Each policy of
insurance or endorsement shall contain a clause requiring the insurer to give
not less than 30 days prior written notice to Lender in the event of
cancellation of the policy for any reason whatsoever.
(b) Administrative Borrower shall give Lender prompt notice of any
loss covered by such insurance. Lender shall have the exclusive right to adjust
any losses payable under any such insurance policies in excess of $50,000,
without any liability to Borrowers whatsoever in respect of such adjustments.
Any monies received as payment for any loss under any insurance policy mentioned
above (other than liability insurance policies) or as payment of any award or
compensation for condemnation or taking by eminent domain, shall be paid over to
Lender to be applied at the option of Lender either to the prepayment of the
Obligations or shall be disbursed to Administrative Borrower under staged
payment terms reasonably satisfactory to Lender for application to the cost of
repairs, replacements, or restorations. Any such repairs, replacements, or
restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items or property destroyed prior to
such damage or destruction.
(c) Borrowers shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under this Section 6.8, unless Lender is included thereon as named insured with
the loss payable to Lender under a lender's loss payable endorsement or its
equivalent. Administrative Borrower immediately shall notify Lender whenever
such separate insurance is taken out, specifying the insurer thereunder and full
particulars as to the policies evidencing the same, and copies of such policies
promptly shall be provided to Lender.
6.9 Location of Inventory and Equipment. Keep the Inventory and
Equipment only at the locations identified on Schedule 5.5; provided, however,
that Administrative Borrower may amend Schedule 5.5 so long as such amendment
occurs by written notice to Lender not less than 15 days prior to the date on
which the Inventory or Equipment is moved to such new location, so long as such
new location is within the continental United States, and so long as at the time
of such written notification, the applicable Borrower provides any financing
statements or fixture filings necessary to perfect and continue perfected the
Lender's Liens on such assets and also provides to Lender a Collateral Access
Agreement.
6.10 Compliance with Laws. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any Governmental Authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not result in and reasonably could not
be expected to result in a Material Adverse Change.
6.11 Leases. Except for the Leases described in Schedule 5.17, pay
when due all rents and other amounts payable under any leases to which any
Borrower is a party or by
41
which any Borrower's properties and assets are bound, unless such payments are
the subject of a Permitted Protest.
6.12 Intentionally Omitted. 6.13 Existence. At all times preserve and
keep in full force and effect each Borrower's valid existence and good standing
and any rights and franchises material to Borrowers' businesses.
6.14 Environmental.
(a) Keep any property either owned or operated by any Borrower
free of any Environmental Liens or post bonds or other financial assurances
sufficient to satisfy the obligations or liability evidenced by such
Environmental Liens, (b) comply, in all material respects, with Environmental
Laws and provide to Lender documentation of such compliance which Lender
reasonably requests, (c) promptly notify Lender of any release of a Hazardous
Material of any reportable quantity from or onto property owned or operated by
any Borrower and take any Remedial Actions required to abate said release or
otherwise to come into compliance with applicable Environmental Law, and (d)
promptly provide Lender with written notice within 10 days of the receipt of any
of the following: (i) notice that an Environmental Lien has been filed against
any of the real or personal property of any Borrower, (ii) commencement of any
Environmental Action or notice that an Environmental Action will be filed
against any Borrower, and (iii) notice of a violation, citation, or other
administrative order which reasonably could be expected to result in a Material
Adverse Change.
6.15 Disclosure Updates. Promptly and in no event later than 5 Business
Days after obtaining knowledge thereof, (a) notify Lender if any written
information, exhibit, or report furnished to Lender contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which made, and (b) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgement,
filing, or recordation thereof.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrowers will not and will not permit any of their respective
Subsidiaries to do any of the following:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the other Loan
Documents;
(b) Indebtedness set forth on Schedule 5.20;
(c) Permitted Purchase Money Indebtedness; and
(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section 7.1 (and continuance or
renewal of any Permitted Liens
42
associated therewith) so long as: (i) the terms and conditions of such
refinancings, renewals, or extensions do not, in Lender's Permitted Discretion,
materially impair the prospects of repayment of the Obligations by Borrowers or
materially impair Borrowers' creditworthiness, (ii) such refinancings, renewals,
or extensions do not result in an increase in the principal amount of, or
interest rate with respect to, the Indebtedness so refinanced, renewed, or
extended, (iii) such refinancings, renewals, or extensions do not result in a
shortening of the average weighted maturity of the Indebtedness so refinanced,
renewed, or extended, nor are they on terms or conditions, that, taken as a
whole, are materially more burdensome or restrictive to the applicable Borrower,
and (iv) if the Indebtedness that is refinanced, renewed, or extended was
subordinated in right of payment to the Obligations, then the terms and
conditions of the refinancing, renewal, or extension Indebtedness must include
subordination terms and conditions that are at least as favorable to Lender as
those that were applicable to the refinanced, renewed, or extended Indebtedness.
7.2 Liens Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended under Section 7.1(d) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).
7.3 Restrictions on Fundamental Changes.
(a) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock.
(b) Liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution).
(c) Convey, sell, lease, license, assign, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its assets.
7.4 Disposal of Assets. Other than Permitted Dispositions, convey,
sell, lease, license, assign, transfer, or otherwise dispose of any of the
assets of any Borrower.
7.5 Change Name. Change any Borrower's name, FEIN, corporate structure
or identity, or add any new fictitious name; provided, however, that a Borrower
may change its name upon at least 30 days prior written notice by Administrative
Borrower to Lender of such change and so long as, at the time of such written
notification, such Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected Lender's Liens. 7.6 Guarantee.
Guarantee or otherwise become in any way liable with respect to the obligations
of any third Person except by endorsement of instruments or items of payment for
deposit to the account of Borrowers or which are transmitted or turned over to
Lender.
7.7 Nature of Business. Make any change in the principal nature of
Borrowers' business.
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7.8 Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by Section
7.1(d), prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness
of any Borrower, other than the Obligations in accordance with this Agreement,
and
(b) Except in connection with a refinancing permitted by Section
7.1(d), directly or indirectly, amend, modify, alter, increase, or change any of
the terms or conditions of any agreement, instrument, document, indenture, or
other writing evidencing or concerning Indebtedness permitted under Sections
7.1(b) or (c).
7.9 Change of Control. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 Consignments. Except with respect to Inventory with an aggregate
value not exceeding $500,000 at any time, consign any Inventory or sell any
Inventory on bill and hold, sale or return, sale on approval, or other
conditional terms of sale.
7.11 Distributions. Other than distributions or declaration and payment
of dividends by a Borrower to another Borrower, make any distribution or declare
or pay any dividends (in cash or other property, other than common Stock) on, or
purchase, acquire, redeem, or retire any of any Borrower's Stock, of any class,
whether now or hereafter outstanding.
7.12 Accounting Methods. Modify or change its method of accounting
(other than as may be required to conform to GAAP) or enter into, modify, or
terminate any agreement currently existing, or at any time hereafter entered
into with any third party accounting firm or service bureau for the preparation
or storage of Borrowers' accounting records without said accounting firm or
service bureau agreeing to provide Lender information regarding the Collateral
or Borrowers' financial condition.
7.13 Investments. Except for Permitted Investments, directly or
indirectly, make or acquire any Investment, or incur any liabilities (including
contingent obligations) for or in connection with any Investment; provided,
however, that Borrowers shall not have Permitted Investments (other than in the
Cash Management Accounts) unless the applicable Borrower and the applicable
securities intermediary or bank have entered into Control Agreements or similar
arrangements governing such Permitted Investments, as Lender shall determine in
its Permitted Discretion, to perfect (and further establish) the Lender's Liens
in such Permitted Investments.
7.14 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any transaction with any Affiliate of any Borrower except for
transactions that are in the ordinary course of Borrowers' business, upon fair
and reasonable terms, that are fully disclosed to Lender, and that are no less
favorable to Borrowers than would be obtained in an arm's length transaction
with a non-Affiliate. Amend or waive any agreement with any Affiliate without
the prior written consent of Lender.
7.15 Suspension. Suspend or go out of a substantial portion of its
business.
44
7.16 Compensation. (a) Increase the annual fee or per-meeting fees paid
to the members of its board of directors during any year by more than 15% over
the prior year; or (b) pay or accrue total cash compensation, during any year,
to its officers and senior management employees in an aggregate amount in excess
of 115% of that paid or accrued in the prior year, provided, that, with regard
to this subclause (b), the compensation of any Chief Executive Officer hired
after the Closing Date shall not be included in such computation.
7.17 Use of Proceeds. Use the proceeds of the Advances for any purpose
other than (a) on the Closing Date, to pay transactional fees, costs, and
expenses incurred in connection with this Agreement, the other Loan Documents,
and the transactions contemplated hereby and thereby (including, without
limitation, Lender Expenses), and (b) thereafter, consistent with the terms and
conditions hereof, for its lawful and permitted purposes.
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees. Relocate its chief executive office to a new location
without Administrative Borrower providing 30 days prior written notification
thereof to Lender and so long as, at the time of such written notification, the
applicable Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected the Lender's Liens and also provides
to Lender a Collateral Access Agreement with respect to such new location. The
Inventory and Equipment shall not at any time now or hereafter be stored with a
bailee, warehouseman, or similar party without Lender's prior written consent.
7.19 Securities Accounts. Establish or maintain any Securities Account
unless Lender shall have received a Control Agreement in respect of such
Securities Account. Borrowers agree to not transfer assets out of any Securities
Account; provided, however, that, so long as no Event of Default has occurred
and is continuing or would result therefrom, Borrowers may use such assets (and
the proceeds thereof) to the extent not prohibited by this Agreement.
7.20 Financial Covenants.
(a) Permit the amount of payment made for any single Capital
Expenditure to exceed $50,000 or the aggregate amount of payments made for all
Capital Expenditures of the Borrowers and subsidiaries on a Consolidated basis,
including Capitalized Lease Obligations to exceed $250,000.
(b) Fail to maintain Availability for each of the periods set
forth below the minimum Availability corresponding to each such period set forth
below:
- --------------------------------------------------------- --------------------
Period Minimum Availability
- --------------------------------------------------------- --------------------
- --------------------------------------------------------- --------------------
From June 20, 2001 through and including June 30, 2001 $2,500,000
- --------------------------------------------------------- --------------------
- --------------------------------------------------------- --------------------
From July 1, 2001 through and including July 16, 2001 $2,000,000
- --------------------------------------------------------- --------------------
- --------------------------------------------------------- --------------------
On and after July 17, 2001 $1,000,000
- --------------------------------------------------------- --------------------
45
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrowers fail to pay when due and payable or when declared due
and payable, all or any portion of the (a) Obligations constituting principal of
the Advances or (b) Obligations constituting interest (including any interest
which, but for the provisions of the Bankruptcy Code, would have accrued on such
amounts), fees and charges due Lender, and, reimbursement of Lender Expenses, or
other amounts (other than principal of the Advances) constituting Obligations
and, in the case of this clause (b), such failure to pay continues unremedied
for 5 Business Days;
8.2 If Borrowers fail to perform, keep, or observe any term, provision,
condition, covenant, or agreement contained in this Agreement or in any of the
other Loan Documents;
8.3 If any material portion of any Borrower's or any of its
Subsidiaries' assets is attached, seized, subjected to a writ or distress
warrant, levied upon, or comes into the possession of any third Person;
8.4 If an Insolvency Proceeding is commenced by any Borrower or any of
its Subsidiaries;
8.5 If an Insolvency Proceeding is commenced against any Borrower, or
any of its Subsidiaries, and any of the following events occur: (a) the
applicable Borrower or the Subsidiary consents to the institution of the
Insolvency Proceeding against it, (b) the petition commencing the Insolvency
Proceeding is not timely controverted, (c) the petition commencing the
Insolvency Proceeding is not dismissed within 60 calendar days of the date of
the filing thereof; provided, however, that, during the pendency of such period,
Lender shall be relieved of its obligation to extend credit hereunder, (d) an
interim trustee is appointed to take possession of all or any substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, any Borrower or any of its Subsidiaries, or (e) an
order for relief shall have been entered therein;
8.6 If any Borrower or any of its Subsidiaries is enjoined, restrained,
or in any way prevented by court order from continuing to conduct all or any
material part of its business affairs;
8.7 If a notice of Lien, levy, or assessment is filed of record with
respect to any Borrower's or any of its Subsidiaries' assets with a value in
excess of $5,000 by the United States, Canada, or any department, agency, or
instrumentality thereof, or by any state, county,
46
municipal, or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a Lien, whether choate or
otherwise, upon any Borrower's or any of its Subsidiaries' assets with a value
in excess of $5,000 and the same is not paid before such payment is delinquent;
8.8 If a judgment or other claim becomes a Lien or encumbrance upon any
material portion of any Borrower's or any of its Subsidiaries' assets;
8.9 If there is a default in any material agreement to which any
Borrower or any of its Subsidiaries is a party (including, without limitation,
any defaults arising after the Closing Date with respect to the Supply
Agreement) and such default (a) occurs at the final maturity of the obligations
thereunder, or (b) results in a right by the other party thereto, irrespective
of whether exercised, to accelerate the maturity of the applicable Borrower's or
its Subsidiaries' obligations thereunder, to terminate such agreement, or to
refuse to renew such agreement pursuant to an automatic renewal right therein;
8.10 If any Borrower or any of its Subsidiaries makes any payment on
account of Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent such payment is
permitted by the terms of the subordination provisions applicable to such
Indebtedness;
8.11 If any misstatement or misrepresentation exists now or hereafter
in any warranty, representation, statement, or Record made to Lender by any
Borrower, its Subsidiaries, or any officer, employee, agent, or director of any
Borrower or any of its Subsidiaries;
8.12 If the obligation of the Guarantor under its Guaranty is limited
or terminated by operation of law or by the Guarantor thereunder;
8.13 If this Agreement or any other Loan Document that purports to
create a Lien, shall, for any reason, fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
first priority Lien on or security interest in the Collateral covered hereby or
thereby;
8.14 Any provision of any Loan Document shall at any time for any
reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by any Borrower or the Guarantor, or a proceeding
shall be commenced by any Borrower or the Guarantor, or by any Governmental
Authority having jurisdiction over any Borrower, seeking to establish the
invalidity or unenforceability thereof, or any Borrower shall deny that any
Borrower has any liability or obligation purported to be created under any Loan
Document;
8.15 If the chief executive officer appointed by the Borrowers is not
reasonably acceptable to the Lender or if there is a change in the scope of
responsibilities or authority of the chief executive officer appointed by the
Borrowers in accordance with the provisions of Section 3.2(i); or
8.16 If there is a material deviation (as determined by Lender in its
sole discretion) from the Closing Date Business Plan.
47
9. THE LENDER'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during the
continuation, of an Event of Default, Lender (at its election but without notice
of its election and without demand) may do any one or more of the following, all
of which are authorized by Borrowers:
(a) Declare all Obligations, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, immediately due and payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrowers under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrowers and Lender;
(c) Terminate this Agreement and any of the other Loan Documents
as to any future liability or obligation of Lender, but without affecting any of
the Lender's Liens in the Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Lender considers advisable, and in such
cases, Lender will credit the Loan Account with only the net amounts received by
Lender in payment of such disputed Accounts after deducting all Lender Expenses
incurred or expended in connection therewith;
(e) Cause Borrowers to hold all returned Inventory in trust for
Lender, segregate all returned Inventory from all other assets of Borrowers or
in Borrowers' possession and conspicuously label said returned Inventory as the
property of Lender;
(f) Without notice to or demand upon any Borrower or Guarantor,
make such payments and do such acts as Lender considers necessary or reasonable
to protect its security interests in the Collateral. Each Borrower agrees to
assemble the Personal Property Collateral if Lender so requires, and to make the
Personal Property Collateral available to Lender at a place that Lender may
designate which is reasonably convenient to both parties. Each Borrower
authorizes Lender to enter the premises where the Personal Property Collateral
is located, to take and maintain possession of the Personal Property Collateral,
or any part of it, and to pay, purchase, contest, or compromise any Lien that in
Lender's determination appears to conflict with the Lender's Liens and to pay
all expenses incurred in connection therewith and to charge Borrowers' Loan
Account therefor. With respect to any of Borrowers' owned or leased premises,
each Borrower hereby grants Lender a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Lender's rights or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to any Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation (within the meaning of the Code), set off and apply to the
Obligations any and all (i) balances and deposits of any Borrower held by Lender
(including any amounts received in the Cash Management Accounts), or (ii)
Indebtedness at any time owing to or for the credit or the account of any
Borrower held by Lender;
48
(h) Hold, as cash collateral, any and all balances and deposits of
any Borrower held by Lender, and any amounts received in the Cash Management
Accounts, to secure the full and final repayment of all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Personal Property Collateral. Each Borrower hereby grants to Lender
a license or other right to use, without charge, such Borrower's labels,
patents, copyrights, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Personal Property Collateral, in completing production of, advertising for sale,
and selling any Personal Property Collateral and such Borrower's rights under
all licenses and all franchise agreements shall inure to Lender's benefit;
(j) Sell the Personal Property Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrowers' premises)
as Lender determines is commercially reasonable. It is not necessary that the
Personal Property Collateral be present at any such sale;
(k) Lender shall give notice of the disposition of the Personal
Property Collateral as follows:
(i) Lender shall give Administrative Borrower (for the benefit of
the applicable Borrower) a notice in writing of the time and place of public
sale, or, if the sale is a private sale or some other disposition other than
a public sale is to be made of the Personal Property Collateral, then the
time on or after which the private sale or other disposition is to be made;
and
(ii) The notice shall be personally delivered or mailed, postage
prepaid, to Administrative Borrower as provided in Section 12, at least 10
days before the earliest time of disposition set forth in the notice; no
notice needs to be given prior to the disposition of any portion of the
Personal Property Collateral that is perishable or threatens to decline
speedily in value or that is of a type customarily sold on a recognized
market;
(l) Lender may credit bid and purchase at any public sale;
(m) Lender may seek the appointment of a receiver or keeper to
take possession of all or any portion of the Collateral or to operate same and,
to the maximum extent permitted by law, may seek the appointment of such a
receiver without the requirement of prior notice or a hearing;
(n) Lender shall have all other rights and remedies available to
it at law or in equity pursuant to any other Loan Documents; and
(o) Any deficiency that exists after disposition of the Personal
Property Collateral as provided above will be paid immediately by Borrowers. Any
excess will
49
be returned, without interest and subject to the rights of third Persons, by
Lender to Administrative Borrower (for the benefit of the applicable Borrower).
9.2 Remedies Cumulative. The rights and remedies of Lender under this
Agreement, the other Loan Documents, and all other agreements shall be
cumulative. Lender shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by Lender
of one right or remedy shall be deemed an election, and no waiver by Lender of
any Event of Default shall be deemed a continuing waiver. No delay by Lender
shall constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Borrower fails to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or assets,
rents or other amounts payable under such leases) due to third Persons, or fails
to make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Lender, in its sole discretion
and without prior notice to any Borrower, may do any or all of the following:
(a) make payment of the same or any part thereof, (b) set up such reserves in
Borrowers' Loan Account as Lender deems necessary to protect Lender from the
exposure created by such failure, or (c) in the case of the failure to comply
with Section 6.8 hereof, obtain and maintain insurance policies of the type
described in Section 6.8 and take any action with respect to such policies as
Lender deems prudent. Any such amounts paid by Lender shall constitute Lender
Expenses and any such payments shall not constitute an agreement by Lender to
make similar payments in the future or a waiver by Lender of any Event of
Default under this Agreement. Lender need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest. Each Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by
Lender on which any such Borrower may in any way be liable.
11.2 Lender's Liability for Collateral. Each Borrower hereby agrees
that: (a) so long as Lender complies with its obligations, if any, under the
Code, Lender shall not in any way or manner be liable or responsible for:
(i) the safekeeping of the Collateral, (ii) any loss or damage thereto occurring
or arising in any manner or fashion from any cause, (iii) any diminution in the
value thereof, or (iv) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person, and (b) all risk of loss, damage, or
destruction of the Collateral shall be borne by Borrowers.
11.3 Indemnification. Each Borrower shall pay, indemnify, defend, and
hold the Lender-Related Persons, each Participant, and each of their respective
officers, directors, employees, agents, and attorneys-in-fact (each, an
"Indemnified Person") harmless (to the fullest
50
extent permitted by law) from and against any and all claims, demands, suits,
actions, investigations, proceedings, and damages, and all reasonable attorneys
fees and disbursements and other costs and expenses actually incurred in
connection therewith (as and when they are incurred and irrespective of whether
suit is brought), at any time asserted against, imposed upon, or incurred by any
of them (a) in connection with or as a result of or related to the execution,
delivery, enforcement, performance, or administration of this Agreement, any of
the other Loan Documents, or the transactions contemplated hereby or thereby,
and (b) with respect to any investigation, litigation, or proceeding related to
this Agreement, any other Loan Document, or the use of the proceeds of the
credit provided hereunder (irrespective of whether any Indemnified Person is a
party thereto), or any act, omission, event, or circumstance in any manner
related thereto (all the foregoing, collectively, the "Indemnified
Liabilities"). The foregoing to the contrary notwithstanding, Borrowers shall
have no obligation to any Indemnified Person under this Section 11.3 with
respect to any Indemnified Liability that a court of competent jurisdiction
finally determines to have resulted from the gross negligence or willful
misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrowers were required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrowers
with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO
EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE
OR IN PART CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH
INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
Borrowers or Lender to the other relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents, which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such
email addresses as the Administrative Borrower or Lender, as applicable, may
designate to each other in accordance herewith), or telefacsimile to Borrowers
in care of Administrative Borrower or to Lender, as the case may be, at its
address set forth below:
If to Administrative Borrower: International Knife & Saw, Inc.
1299 Cox Avenue
Erlanger, KY 41018
Attn: Chief Financial Officer
Fax No. 859-817-2505
with copies to: Dechert
30 Rockefeller Center
New York, NY 10112
Attn: Joel H. Levitin, Esq.
Fax No. 212-698-3599
51
If to Lender: CHILMARK FUND II, L.P.
c/o Chilmark Partners
875 North Michigan Avenue
Suite 3460
Chicago, Illinois 60611
Attn: John C. Haeckel
Fax No. 312-337-0990
with copies to: KAYE SCHOLER LLP
311 South Wacker Drive
62nd Floor
Chicago, Illinois 60606
Attn: Sheldon Solow, Esq.
Fax No. 312-583-2360
Lender and Borrowers may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other
party. All notices or demands sent in accordance with this Section 12, other
than notices by Lender in connection with enforcement rights against the
Collateral under the provisions of the Code, shall be deemed received on the
earlier of the date of actual receipt or 3 Business Days after the deposit
thereof in the mail. Each Borrower acknowledges and agrees that notices sent by
Lender in connection with the exercise of enforcement rights against Collateral
under the provisions of the Code shall be deemed sent when deposited in the mail
or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW
YORK, STATE OF NEW YORK, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER'S OPTION, IN
THE COURTS OF ANY JURISDICTION WHERE LENDER ELECTS TO BRING SUCH ACTION OR WHERE
SUCH
52
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWERS AND LENDER WAIVE, TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).
BORROWERS AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE
LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWERS AND LENDER REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 Assignments and Participations.
(a) Lender may assign and delegate to one or more assignees (each
an "Assignee") all, or any ratable part of all, of the Obligations and the other
rights and obligations of Lender hereunder and under the other Loan Documents;
provided, however, that Borrowers may continue to deal solely and directly with
Lender in connection with the interest so assigned to an Assignee until written
notice of such assignment, together with payment instructions, addresses, and
related information with respect to the Assignee, have been given to
Administrative Borrower by Lender and the Lender and the Assignee execute an
appropriate assignment and acceptance agreement.
(b) From and after the date that Lender provides Administrative
Borrower with such written notice and executed assignment and acceptance
agreement, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such assignment and acceptance agreement, shall have the assigned and
delegated rights and obligations of Lender under the Loan Documents, and (ii)
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned and delegated by it pursuant to such
assignment and acceptance agreement, relinquish its rights (except with respect
to Section 11.3 hereof) and be released from its obligations under this
Agreement (and in the case of an assignment and acceptance agreement covering
all or the remaining portion of Lender's rights and obligations under this
Agreement and the other Loan Documents, Lender shall cease to be a party hereto
and thereto), and such assignment shall affect a novation between Borrowers and
the Assignee.
(c) Immediately upon Borrower's receipt of such fully executed
assignment and acceptance agreement, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the rights and duties of Lender
arising therefrom.
53
(d) Lender may at any time sell to one or more commercial banks,
financial institutions, or other Persons not Affiliates of Lender (a
"Participant") participating interests in Obligations and the other rights and
interests of Lender hereunder and under the other Loan Documents; provided,
however, that (i) Lender shall remain the "Lender" for all purposes of this
Agreement and the other Loan Documents and the Participant receiving the
participating interest in the Obligations and the other rights and interests of
Lender hereunder shall not constitute a "Lender" hereunder or under the other
Loan Documents and Lender's obligations under this Agreement shall remain
unchanged, (ii) Lender shall remain solely responsible for the performance of
such obligations, (iii) Borrowers and Lender shall continue to deal solely and
directly with each other in connection with Borrowers' and Lender's rights and
obligations under this Agreement and the other Loan Documents, (iv) Lender shall
not transfer or grant any participating interest under which the Participant has
the right to approve any amendment to, or any consent or waiver with respect to,
this Agreement or any other Loan Document, except to the extent such amendment
to, or consent or waiver with respect to this Agreement or of any other Loan
Document would (A) extend the final maturity date of the Obligations hereunder
in which such Participant is participating, (B) reduce the interest rate
applicable to the Obligations hereunder in which such Participant is
participating, (C) release all or a material portion of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the Loan
Documents) supporting the Obligations hereunder in which such Participant is
participating, (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through Lender, or (E) change the
amount or due dates of scheduled principal repayments or prepayments or
premiums, and (v) all amounts payable by Borrowers hereunder shall be determined
as if Lender had not sold such participation, except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement. The rights of any Participant only shall be
derivative through Lender and no Participant shall have any rights under this
Agreement or the other Loan Documents or any direct rights as to Borrowers, the
Collections, the Collateral, or otherwise in respect of the Obligations. No
Participant shall have the right to participate directly in the making of
decisions by Lender.
(e) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose all documents and
information which it now or hereafter may have relating to Borrowers or
Borrowers' business provided that such Assignee or Participant, or proposed
Assignee or Participant, has agreed to the terms of Section 16.11 with respect
to such documents and information.
(f) Any other provision in this Agreement notwithstanding, Lender
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement in favor of any Federal Reserve
Bank in accordance with Regulation A of the Federal Reserve Bank or U.S.
Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
14.2 Successors. This Agreement shall bind and inure to the benefit of
the respective successors and assigns of each of the parties; provided, however,
that Borrowers may not assign this Agreement or any rights or duties hereunder
without Lender's prior written consent and any prohibited assignment shall be
absolutely void ab initio. No consent to assignment by Lender shall release any
Borrower from its Obligations. Lender may assign this Agreement and the other
Loan Documents and its rights and duties hereunder and thereunder pursuant to
Section 14.1 hereof and, except as expressly required pursuant to Section 14.1
hereof, no consent or approval by any Borrower is required in connection with
any such assignment.
54
15. AMENDMENTS; WAIVERS.
15.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrowers therefrom, shall be effective unless the same shall be in
writing and signed by Lender and Administrative Borrower (on behalf of all
Borrowers) and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given
15.2 No Waivers; Cumulative Remedies. No failure by Lender to exercise
any right, remedy, or option under this Agreement or, any other Loan Document,
or delay by Lender in exercising the same, will operate as a waiver thereof. No
waiver by Lender will be effective unless it is in writing, and then only to the
extent specifically stated. No waiver by Lender on any occasion shall affect or
diminish Lender's rights thereafter to require strict performance by Borrowers
of any provision of this Agreement. Lender's rights under this Agreement and the
other Loan Documents will be cumulative and not exclusive of any other right or
remedy that Lender may have.
16. GENERAL PROVISIONS.
16.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by Borrowers and Lender.
16.2 Section Headings. Headings and numbers have been set forth herein
for convenience only. Unless the contrary is compelled by the context,
everything contained in each Section applies equally to this entire Agreement.
16.3 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed against Lender or Borrowers, whether under
any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to accomplish fairly the purposes and
intentions of all parties hereto.
16.4 Severability of Provisions. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
55
16.5 Withholding Taxes. All payments made by Borrowers hereunder or
under any note will be made without setoff, counterclaim, or other defense,
except as required by applicable law other than for Taxes (as defined below).
All such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction (other than the United States) or by any political subdivision or
taxing authority thereof or therein (other than of the United States) with
respect to such payments (but excluding, any tax imposed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein (i) measured
by or based on the net income or net profits of Lender, or (ii) to the extent
that such tax results from a change in the circumstances of Lender, including a
change in the residence, place of organization, or principal place of business
of Lender, or a change in the branch or lending office of Lender participating
in the transactions set forth herein) and all interest, penalties or similar
liabilities with respect thereto (all such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as
"Taxes"). If any Taxes are so levied or imposed, each Borrower agrees to pay the
full amount of such Taxes, and such additional amounts as may be necessary so
that every payment of all amounts due under this Agreement or under any note,
including any amount paid pursuant to this Section 16.5 after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein; provided, however, that Borrowers shall not be required to
increase any such amounts payable to Lender if the increase in such amount
payable results from Lender's own willful misconduct or gross negligence.
Borrowers will furnish to Lender as promptly as possible after the date the
payment of any Taxes is due pursuant to applicable law certified copies of tax
receipts evidencing such payment by Borrowers.
16.6 Amendments in Writing. This Agreement only can be amended by a
writing signed by Lender and each Borrower.
16.7 Counterparts; Telefacsimile Execution. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.
16.8 Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by any Borrower or Guarantor or the transfer to
Lender of any property should for any reason subsequently be declared to be void
or voidable under any state or federal law relating to creditors' rights,
including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if Lender is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Lender is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of Lender
56
related thereto, the liability of Borrowers or Guarantor automatically shall be
revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.
16.9 Integration. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
16.10 International Knife as Agent for Borrowers. Each Borrower hereby
irrevocably appoints International Knife as the borrowing agent and
attorney-in-fact for all Borrowers (the "Administrative Borrower"), which
appointment shall remain in full force and effect unless and until Lender shall
have received prior written notice signed by each Borrower that such appointment
has been revoked and that another Borrower has been appointed Administrative
Borrower. Each Borrower hereby irrevocably appoints and authorizes the
Administrative Borrower (i) to provide Lender with all notices with respect to
Advances and all other notices and instructions under this Agreement and (ii) to
take such action as the Administrative Borrower deems appropriate on its behalf
to obtain Advances and to exercise such other powers as are reasonably
incidental thereto to carry out the purposes of this Agreement. It is understood
that the handling of the Loan Account and Collateral of Borrowers in a combined
fashion, as more fully set forth herein, is done solely as an accommodation to
Borrowers in order to utilize the collective borrowing powers of Borrowers in
the most efficient and economical manner and at their request, and that Lender
shall not incur liability to any Borrower as a result hereof. Each Borrower
expects to derive benefit, directly or indirectly, from the handling of the Loan
Account and the Collateral in a combined fashion since the successful operation
of each Borrower is dependent on the continued successful performance of the
integrated group. To induce Lender to do so, and in consideration thereof, each
Borrower hereby jointly and severally agrees to indemnify and hold Lender
harmless against any and all liability, expense, loss or claim of damage or
injury, made against Lender by any Borrower or by any third party whosoever,
arising from or incurred by reason of (a) the handling of the Loan Account and
Collateral of Borrowers as herein provided, (b) Lender's relying on any
instructions of the Administrative Borrower, or (c) any other action taken by
Lender hereunder or under the other Loan Documents, except that Borrowers will
have no liability to any Lender-Related Person under this Section 16.10 with
respect to any liability that has been finally determined by a court of
competent jurisdiction to have resulted solely from the gross negligence or
willful misconduct of such Lender-Related Person.
16.11 Confidentiality. Upon delivery to the Lender, or permitting the
Lender to inspect, any written information pursuant to this Agreement or the
other Loan Documents, the Borrowers are delivering or making available such
information to the Lender with the understanding that the Lender shall treat
such information as confidential to the extent such information is conspicuously
marked confidential. The Lender agrees to hold such information in confidence
from the date of disclosure thereof. Subject to the other provisions of this
Section 16.11, the Lender may disclose confidential information to its officers,
directors, employees, attorneys, accountants or other professionals engaged by
the Lender only after determining that such third party has been instructed to
hold such information in confidence to the same extent as if it were the Lender.
Notwithstanding the foregoing, the provisions of this Section 16.11 shall not
apply to information within any one of the following categories or any
combination thereof:
57
(i) information the substance of which, at the time of disclosure by the Lender,
has been disclosed to or is known to any creditor of the Borrowers (other than
information as to which such creditor is then under an obligation of
nondisclosure), or any Person other than (A) a director, officer, employee or
agent of any of the Borrowers or a professional engaged by the Borrowers or (B)
a Person who is then under an obligation of nondisclosure (otherwise than as a
consequence of a wrongful act of the Lender), (ii) information which the Lender
had in its possession prior to receipt thereof from the disclosing party, or
(iii) information received by the Lender from a third party having no
obligations of nondisclosure with respect thereto. Nothing contained in this
Section 16.11 shall prevent any disclosure: (x) believed in good faith by the
Lender to be required by any law or guideline or interpretation or application
thereof by any Governmental Authority, arbitrator or grand jury charged with the
interpretation or administration thereof or compliance with any request or
directive of any Governmental Authority, arbitrator or grand jury (whether or
not having the force of law), (y) determined by counsel for the Lender to be
necessary or advisable in connection with enforcement or preservation of rights
under or in connection with this Agreement or any other Loan Document or (z) of
any information which has been made public by a Person other than the Lender
who, to the Lender's actual knowledge, was then under an obligation of
nondisclosure. The Lender shall have the right to disclose any confidential
information described in this Section 16.11 to an Assignee or prospective
Assignee or to a Participant or prospective Participant in Advances hereunder,
provided that the Lender shall have obtained from such Assignee or prospective
Assignee or Participant or prospective Participant a written agreement to hold
such information in confidence to the same extent as if it were the Lender.
16.12 Debtor-in-Possession Financing. Subject to approval of the
applicable United States Bankruptcy Court, if a Borrower receives an offer from
a financial institution to provide debtor-in-possession financing, such Borrower
shall provide Lender with a written notice setting forth the material terms and
conditions of such offer. At any time within 10 Business Days after the receipt
by Lender of such notice, Lender may provide Borrowers with notice that it is
agreeable to providing such debtor-in-possession financing on the same terms and
conditions as set forth in such notice. Borrowers agree that upon receipt of
such notice from Lender it shall not pursue the debtor-in-possession financing
offered by such other financial institution and shall not seek any other
commitments for debtor-in-possession financing.
[Signature page to follow.]
58
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
BORROWERS:
IKS CORPORATION,
a Delaware corporation
By:
--------------------------------
Title:
INTERNATIONAL KNIFE & SAW, INC.,
a Delaware corporation
By:
--------------------------------
Title:
LENDER:
CHILMARK FUND II, L.P.
By: Chilmark II, LLC, a general partner
By:
---------------------------,
a member
John C. Haeckel
TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION......................................................................1
1.1 Definitions.......................................................................................1
1.2 Accounting Terms.................................................................................16
1.3 Code.............................................................................................16
1.4 Construction.....................................................................................16
1.5 Schedules and Exhibits...........................................................................17
2. LOAN AND TERMS OF PAYMENT........................................................................17
2.1 Revolver Advances................................................................................17
2.2 Borrowing Procedures and Settlements.............................................................18
2.3 Payments.........................................................................................18
2.4 Overadvances.....................................................................................19
2.5 Interest Rates, Payments, and Calculations.......................................................20
2.6 Cash Management..................................................................................21
2.7 Crediting Payments; Float Charge.................................................................21
2.8 Designated Account...............................................................................22
2.9 Maintenance of Loan Account; Statements of Obligations...........................................22
2.10 Fees.............................................................................................23
2.11 Capital Requirements.............................................................................23
2.12 Joint and Several Liability of Borrowers.........................................................23
3. CONDITIONS; TERM OF AGREEMENT....................................................................26
3.1 Conditions Precedent to the Initial Extension of Credit..........................................26
3.2 Conditions Subsequent to the Initial Extension of Credit.........................................28
3.3 Conditions Precedent to all Extensions of Credit.................................................29
3.4 Term.............................................................................................30
3.5 Effect of Termination............................................................................30
3.6 Early Termination by Borrowers...................................................................30
4. CREATION OF SECURITY INTEREST....................................................................31
4.1 Grant of Security Interest.......................................................................31
4.2 Negotiable Collateral............................................................................31
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral...........................31
4.4 Delivery of Additional Documentation Required....................................................31
4.5 Power of Attorney................................................................................32
4.6 Right to Inspect.................................................................................32
4.7 Control Agreements...............................................................................32
5. REPRESENTATIONS AND WARRANTIES...................................................................33
5.1 No Encumbrances..................................................................................33
5.2 Eligible Accounts................................................................................33
5.3 Inventory........................................................................................34
5.4 Equipment........................................................................................34
5.5 Location of Inventory and Equipment..............................................................34
5.6 Inventory Records................................................................................34
5.7 Location of Chief Executive Office; FEIN.........................................................34
5.8 Due Organization and Qualification; Subsidiaries.................................................34
5.9 Due Authorization; No Conflict...................................................................35
5.10 Litigation.......................................................................................36
5.11 No Material Adverse Change.......................................................................36
5.12 Fraudulent Transfer..............................................................................37
5.13 Employee Benefits................................................................................37
5.14 Environmental Condition..........................................................................37
5.15 Brokerage Fees...................................................................................37
5.16 Intellectual Property............................................................................37
5.17 Leases...........................................................................................37
5.18 DDAs.............................................................................................38
5.19 Complete Disclosure..............................................................................38
5.20 Indebtedness.....................................................................................38
6. AFFIRMATIVE COVENANTS............................................................................38
6.1 Accounting System................................................................................38
6.2 Collateral Reporting.............................................................................39
6.3 Financial Statements, Reports, Certificates......................................................40
6.4 Guarantor Reports................................................................................41
6.5 Return...........................................................................................41
6.6 Maintenance of Properties........................................................................42
6.7 Taxes............................................................................................42
6.8 Insurance........................................................................................42
6.9 Location of Inventory and Equipment..............................................................43
6.10 Compliance with Laws.............................................................................43
6.11 Leases...........................................................................................43
6.12 Intentionally Omitted............................................................................43
6.13 Existence........................................................................................44
6.14 Environmental....................................................................................44
6.15 Disclosure Updates...............................................................................44
7. NEGATIVE COVENANTS...............................................................................44
7.1 Indebtedness.....................................................................................44
7.2 Liens............................................................................................45
7.3 Restrictions on Fundamental Changes..............................................................45
7.4 Disposal of Assets...............................................................................45
7.5 Change Name......................................................................................45
7.6 Guarantee........................................................................................46
7.7 Nature of Business...............................................................................46
7.8 Prepayments and Amendments.......................................................................46
7.9 Change of Control................................................................................46
7.10 Consignments.....................................................................................46
7.11 Distributions....................................................................................46
7.12 Accounting Methods...............................................................................46
7.13 Investments......................................................................................46
7.14 Transactions with Affiliates.....................................................................47
7.15 Suspension.......................................................................................47
7.16 Compensation.....................................................................................47
7.17 Use of Proceeds..................................................................................47
7.18 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees...............47
7.19 Securities Accounts..............................................................................48
7.20 Financial Covenants..............................................................................48
8. EVENTS OF DEFAULT................................................................................48
9. THE LENDER'S RIGHTS AND REMEDIES.................................................................50
9.1 Rights and Remedies..............................................................................50
9.2 Remedies Cumulative..............................................................................52
10. TAXES AND EXPENSES...............................................................................52
11. WAIVERS; INDEMNIFICATION.........................................................................53
11.1 Demand; Protest..................................................................................53
11.2 Lender's Liability for Collateral................................................................53
11.3 Indemnification..................................................................................53
12. NOTICES..........................................................................................54
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.......................................................55
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.......................................................56
14.1 Assignments and Participations...................................................................56
14.2 Successors.......................................................................................57
15. AMENDMENTS; WAIVERS..............................................................................58
15.1 Amendments and Waivers...........................................................................58
15.2 No Waivers; Cumulative Remedies..................................................................58
16. GENERAL PROVISIONS...............................................................................58
16.1 Effectiveness....................................................................................58
16.2 Section Headings.................................................................................58
16.3 Interpretation...................................................................................58
16.4 Severability of Provisions.......................................................................58
16.5 Withholding Taxes................................................................................58
16.6 Amendments in Writing............................................................................59
16.7 Counterparts; Telefacsimile Execution............................................................59
16.8 Revival and Reinstatement of Obligations.........................................................59
16.9 Integration......................................................................................60
16.10 International Knife as Agent for Borrowers.......................................................60
16.11 Confidentiality..................................................................................60
16.12 Debtor-in-Possession Financing...................................................................61
EXHIBITS AND SCHEDULES
Exhibit B-1 Form of Borrowing Base Certificate
Exhibit C-1 Form of Compliance Certificate
Schedule E-1 Inventory Locations
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 2.6(a) Cash Management Banks
Schedule 3.2(i) Acceptable Candidates for Chief Executive Officer
Schedule 5.5 Locations of Inventory and Equipment
Schedule 5.7 Chief Executive Office; FEIN
Schedule 5.8(b) Capitalization of Borrowers
Schedule 5.8(c) Capitalization of Borrowers' Subsidiaries
Schedule 5.10 Litigation
Schedule 5.14 Environmental Matters
Schedule 5.16 Intellectual Property
Schedule 5.17 Leases
Schedule 5.18 Demand Deposit Accounts
Schedule 5.20 Permitted Indebtedness
Exhibit B-1
Form of Borrowing Base Certificate
[intentionally omitted]
Exhibit C-1
Form of Compliance Certificate
REPRESENTATIONS AND WARRANTIES
OF OFFICERS
OF
International Knife & Saw, Inc.
(Name of Company)
To: Foothill Capital Corporation
To assist you in evaluation of the financing that you are considering
on our behalf, to expedite the preparation of any documentation which may be
required, and to induce you to provide such financing, the undersigned submits
and represents the following information about our company, its organizational
structure, and other matters of interest to you:
1. THE COMPANY
a. The full and correct name of our company (as it appears in our
Articles of Incorporation or other organizational document) is:
International Knife & Saw, Inc hereinafter the "Company"
b. During the past 5 years, the Company has had the following corporate
names:
No other names
c. During the past 5 years, the Company has used the following trade
name(s) and/or trade style(s):
Name Date Used
See Attachment A
d. The Company was incorporated on November 14, 1979, under the laws of
Delaware and it is in good standing under those laws. The Company has
qualified to do business in the following states and is in good
standing under the laws of those states:
See Attachment B
e. The federal taxpayer identification number of the Company is:
57-0697252
f. The Company is affiliated with, or has ownership interests in, the
following corporations (including subsidiaries):
Type of Ownership Percentage
Name and Address Operation or Relationship
See Attachment C
g. During the preceding 5 year period, the Company has not been a party
to any merger, consolidation, stock acquisition or purchase of a
substantial portion of the assets of any person or entity, except as
follows (if none, so state):
Type of Transaction Date Concluded
Please see 2000 Form 10-K, pages II-19 through 11-20 for details of
acquisitions
2. LOCATIONS OF COMPANY
a. The chief executive office of the Company is currently located at, and
additional locations at which the Company maintains any books or
records are at the following addresses:
1299 Cox Avenue, Erlanger, KY 41018
b. During the past 5 years, the Company's chief executive office has been
located at the following additional addresses:
- None -
c. The following are all of the locations where the Company maintains any
equipment or inventory:
See Attachment D
d. The following are the names and addresses of all warehousemen,
bailees, or consignees who have possession of any of the Company's
inventory:
- None -
3. SPECIAL TYPES OF COLLATERAL
a The following are all of the patents, trademarks, servicemarks, and
copyrights, or applications therefor, of the Company:
Patents:
- --------
Application/
Description Patent No. Issue Dates
----------- ---------- -----------
- None -
---------------------- ----------------------- ------------------
---------------------- ----------------------- ------------------
---------------------- ----------------------- ------------------
Trademarks and Servicemarks:
- ----------------------------
Description Application/ Issue Dates
Patent No.
See Attachment E
---------------------- ----------------------- ------------------
---------------------- ----------------------- ------------------
---------------------- ----------------------- ------------------
Copyrights:
- -----------
Application/
Description Patent No. Issue Dates
----------- ---------- -----------
- None -
---------------------- ----------------------- ------------------
---------------------- ----------------------- ------------------
---------------------- ----------------------- ------------------
b. The Company owns the following kinds of assets:
Franchises, marketing agreements,
or similar agreements: Yes _____ No __X__
Stocks, bonds, or other securities: Yes _____ No __X__
Promissory notes, or other instruments or
evidence of indebtedness in favor of such person: Yes __X__ No _____
Leases of equipment, security agreements
naming such person as secured party, or
other chattel paper: Yes __X__ No __X__
Aircraft: Yes _____ No __X__
Vessels, boats or ships: Yes _____ No __X__
Railroad rolling stock: Yes _____ No __X__
Motor Vehicles or similar certificated collateral: Yes __X__ No _____
c. The following are all banks or savings institutions at which the
Company maintain deposit accounts:
Name of Branch Description
Institutions Account Number Address of Account
Fifth Third Bank of 999-77224 8100 Burlington Pike Concentration
---------------------------------------------------------------------------
Northern Kentucky, Inc. Florence, KY 41042
---------------------------------------------------------------------------
Same 741-30262 Same Payroll-ZBA
---------------------------------------------------------------------------
Same 741-33025 Same A/P-ZBA
---------------------------------------------------------------------------
4. OWNERSHIP OF THE COMPANY
a. There is no agreement of the owners of the Company nor any provision
in the governing documents of the Company requiring any vote or
consent of the equity holders to authorize the creation of a security
interest in any assets of the Company or any subsidiary, except
(describe, if any): - No -
b. The following collectively own 100% of the equity interests of the
Company:
Name Ownership Percentage
IKS Corporation 100%
5. OFFICERS OF THE COMPANY
a. The officers of the Company are as follows: (Use an "x" to indicate
members of the Board of Directors) Directors
Chairman of the Board: _______________
President: ___________________________
Vice President: Jeff Welday
Vice President: Brad Widmann
Chief Financial Officer: William M. Schult
Secretary: __________________________
b. Additional members of the Board are:
Steven A. Anderson
c. The following persons will have signatory powers as to all your
transactions with the Company:
William M. Schult
Paul A. Severt
6. ADDITIONAL INFORMATION
a. The Company has the following employee benefit plans (pension, profit
sharing, etc.): International Knife & Saw, Inc Profit Sharing and 401
(k) Plan
b. The Company is not a party to any collective bargaining or other
agreement with any organization or representative of any of its
employees, except (if none, so state):
Teamsters Local Union No. 117
c. The following is a list of all known hazardous or toxic waste storage
or dump sites on any premises owned or leased by the Company or any of
its subsidiaries and a description of the nature of the substances
located thereon and the type of facility:
- None -
d. The Company will be represented by the law firm of.
Name of Firm: Dechert
Address: 30 Rockefeller Plaza New York, NY 10112
Phone Number: 212-698-3558
Partner Handling Relationship: Joel H. Levitin
e. The Certified Public Accountants for the Company is the firm of
Name of Firm: Ernst & Young LLP
Address: 1300 Chiquita Center 250 East Fifth St. Cincinnati, OH 45202
Phone Number: 513-361-1666
Partner Handling Relationship: John Rodgers
Were statements uncertified for any fiscal year?: No
f. The Insurance Broker for the Company is:
Name of Agent or Broker: Schiff Kreidler Shell
Address: 1 West Fourth St. Suite 1300 Cincinnati, OH 45202
Phone/FAX Number: Phone 513-977-3164 Fax 513-977-3193
Partner Handling Relationship: Tim Tepe
g. There are no tax liens or judgments against the Company, its
subsidiaries or affiliates or any of its officers, except as follows
(if none, so state):
- None -
There are no lawsuits pending against the Company, its subsidiaries or
affiliates or any of its officers, except as follows (if none, so
state):
Style of Lawsuit Court Nature of Action
---------------- ----- ----------------
- None -
------------------- -------------------- ----------------------
------------------- -------------------- ----------------------
------------------- -------------------- ----------------------
------------------- -------------------- ----------------------
By the execution and delivery hereof, we hereby represent and warrant
to you that all of the foregoing information is true, correct, and complete. In
addition, we also confirm your authority to file (including pre-filing) any and
all financing statements or other records naming the Company and identifying all
of its assets as collateral as you deem necessary or advisable in connection
with the pursuit of the proposed financing.
Very truly yours
---------------------------------------
Signature
---------------------------------------
William M. Schult
(Print Name)
Title: Executive Vice President - CFO
Treasurer and Secretary
ATTACHMENT A
The Corporation uses and owns the following trade name(s) in the
operation of its business (e.g. billing, advertising, etc)
The Company markets its products under certain trademarks, including
"IKS (TM)", "Cascade Southern", "Chromavan," "Chromalit," "Compaflex,"
"Compalloy," "Durakut," "Durapid," "Duritan," "Dynabloc (TM)", "Dynapren,"
"Dynatherm," "Hyperhone(TM)", "Klirit," "KSFmicroplan," "Novacrom(TM)",
"Novador," "QCP," "Quality Cut Knife Maintenance Program and Design," "Rolf
Meyer", "SAVE," "Stop," "Surekut(TM)," "Systi-Matic", "TecalloyTM",
"Tecnolite(TM)", "Tungsten Carbide Quattro," "Diamond Cut," "Dialux," "Ultrid,"
and "Workalit." In addition, the Company uses the following tradenames: American
Custom Metals; Ban-Carb; Canadian Knife & Saw; Durakut; Econokut; Hannaco;
Hyperhone; IKS de Mexico; Kodiak; SPS; Tuff-Tip; and Ultrakut.
ATTACHMENT B
International Knife & Saw, Inc. is a Delaware corporation and is
qualified to do business in the following states:
Alabama
Arkansas
Georgia
Kentucky
Louisiana
Maine
Oregon
South Carolina
Washington
ATTACHMENT C
[Place for Graphic]
ATTACHMENT D
IKS Bangor IKS Systi-Matic *
337 Perry Road 12530 135th Avenue NE
Bangor, ME 04401 Kirkland, WA 98034
Bus: 800-258-8970 Bus: 800-426-0000
Bus 2: 207-947-3304 Bus 2: 425-823-8200
Bus Fax: 207-945-0145 Bus Fax: 425-821-0804
IKS Camden IKS McMinnville
P. O. Box 878 600 1300 NE Alpha Drive
Camden Bypass McMinnville, OR 97128-9711
Camden, AL 36726 Bus: 800-367-6101
Bus: 800-633-2710 Bus 2: 503-434-5633
Bus: 800-633-2710 Bus Fax: 503-434-9881
Bus Fax: 334-682-4125
IKS Cincinnati IKS Statesboro *
P.O. Box 752006 (Mailing) 590 Gentilly Road
Cincinnati, OH 45275-2006 Statesboro, GA 30459
1299 Cox Avenue (Shipping) Bus: 888-323-6841
Erlanger, KY 41018 Bus 2: 912-489-4869
Bus: 800-354-9872 Bus Fax: 912-489-5420
Bus 2: 859-371-0333
Bus Fax: 859-371-6672
IKS Florence IKS West Monroe
P.O. Box 100535 (Mailing) 600 Grantham Avenue
1435 N. Cashua Road (Shipping) West Monroe, LA 71292
Florence, SC 29501-0535 P.O. Drawer 3147
Bus: 800-334-3057 West Monroe, LA 71294-3147
Bus 2: 843-662-6345 Bus: 318-388-2539
Bus Fax: 843-669-1185 Bus Fax: 318-388-5796
IKS Cascade Southern
1075 Fox Pass Cutoff
Hot Springs, AR 71901
Bus: 800-423-8410
Bus 2: 501-624-2437
Bus Fax: 501-624-2806
* Leased
EXHIBIT E
International Knife & Saw, Inc.
Active Trademark Inventory
Application Registration Registration
Owner Trademark Country Status Number Filing Date
American Custom ACM & Design U.S.A. Registered
Metals Co. Inc.
IKS Corporation HYPERPHONE Canada Registered 835,209 31-Jan-97
IKS Corporation HYPERPHONE U.S.A. Registered 75/154,902 23-Aug-96
6/1/2004-2005
IKS Corporation HYPERPHONE Canada Registered 835,208 31-Jan-97
(Stylized)
IKS Corporation IKS & Design Peru Registered 70389 14-Sep-98
IKS Corporation Perpetual Edge U.S.A. Registered 75/607,899 17-Dec-98
1/11/2005-2006
IKS Corporation QCP Canada Registered 835,210 31-Jan-97
International Knife & Saw, ECONOKUT Canada Registered 806,630 11-Mar-96
Inc.
International Knife & Saw, ECONOKUT U.S.A. Registered 75/001,002 03-Oct-95
Inc. 1/14/2002-2003
International Knife & Saw, HYPERPHONE U.S.A. Registered 75/154,903 23-Aug-96
Inc. (Stylized) 12/29/2003-2004
International Knife & Saw, IKS & Design Canada Registered 651,697 23-Feb-90
Inc.
International Knife & Saw, IKS & Design Chile Registered 236,459 02-Apr-93
Inc.
International Knife & Saw, IKS & Design Germany Registered J24856/8WZ 23-Feb-90
Inc.
International Knife & Saw, IKS & Design Mexico Registered 17-Apr-90
Inc.
International Knife & Saw, IKS & Design U.S.A. Registered 73/821,425 25-Aug-89
Inc. renewal application
International Knife & Saw, KODIAK U.S.A. Registered 74/361,302 19-Feb-93
Inc.
International Knife & Saw, QCP U.S.A. Registered 75/154,805 23-Aug-96
Inc. 8/12/2002
International Knife & Saw, QCP QUALITY KNIFE U.S.A. Registered 75/154,904 23-Aug-96
Inc. MAINTENANCE PROGRAM 11/11/2002-2003
International Knife & Saw, SAWYER'S CHOICE Canada Pending
Inc. 5/21/2001
International Knife & Saw, SAWYER'S CHOICE Mexico Registered 336191 15-Jun-98
Inc.
International Knife & Saw, SAWYER'S CHOICE U.S.A. Registered 75/437,821 20-Feb-98
Inc. 6/1/2004-2005
International Knife & Saw, SUREKUT Canada Registered 651,700 23 Feb-90
Inc.
International Knife & Saw, SUREKUT Mexico Registered 81873 26-Feb-90
Inc. proof of use
International Knife & Saw, SUREKUT U.S.A. Registered 73/821,424 25-Aug-89
Inc. renewal
International Knife & Saw, ULTRAKUT U.S.A. Pending 75/938,785 07-Mar-00
Inc.
Number Date Remarks
- --------------------------------------------------------------------------------------------------
876,956 16-Sep-69 Renewal due 9/16/2009
- --------------------------------------------------------------------------------------------------
TMA486,215 02-Nov-97 Renewal due 9/16/2009
- --------------------------------------------------------------------------------------------------
2,249,993 01-Jun-99 Affidavit of Use due
- --------------------------------------------------------------------------------------------------
TMA502,171 13-Oct-98 Renewal due 10/13/2013
- --------------------------------------------------------------------------------------------------
53811 30-Mar-00 Renewal due 3/30/2009
- --------------------------------------------------------------------------------------------------
2,307,554 11-Jan-00 Affidavit of Use due
- --------------------------------------------------------------------------------------------------
TMA498,722 17-Aug-99 Renewal due 8/17/2003
- --------------------------------------------------------------------------------------------------
475586 30-Apr-97 Renewal due 4/30/2012
- --------------------------------------------------------------------------------------------------
2,029,851 14-Jan-97 Affidavit of Use due
--------------------------------------------------------------------------------------
2,215,050 29-Dec-98 Affidavit of Use due
--------------------------------------------------------------------------------------
TMA411,652 30-Apr-93 Renewal due 4/30/2008
--------------------------------------------------------------------------------------
416,888 18-Nov-93 Renewal due 11/18/2003
--------------------------------------------------------------------------------------
1182916 17-Dec-91 Renewal due 2/12/2010
--------------------------------------------------------------------------------------
434659 36-May-93 Renewal due 4/17/2010
--------------------------------------------------------------------------------------
1,612,667 11-Sep-90 Awaiting acceptance of
--------------------------------------------------------------------------------------
1,887,747 04-Apr-95 Renewal due 4/4/2005
--------------------------------------------------------------------------------------
2,087,635 12-Aug-97 Affidavit of Use due
--------------------------------------------------------------------------------------
2,111,977 11-Nov-97 Affidavit of Use due
--------------------------------------------------------------------------------------
878,814 21-May-98 Declaration of Use due
--------------------------------------------------------------------------------------
586597 31-Aug-96 Proof of Use due 8/31/2001
--------------------------------------------------------------------------------------
2,249,314 01-Jun-99 Affidavit of Use due
--------------------------------------------------------------------------------------
TMA392,606 10-Jan-92 Renewal due 1/10/2007
--------------------------------------------------------------------------------------
395481 23-May-91 Awaiting acceptance of
--------------------------------------------------------------------------------------
1,613,553 18-Sep-90 Awaiting certificate of
--------------------------------------------------------------------------------------
Response due 2/22/2001
--------------------------------------------------------------------------------------
Schedule E-I
Inventory Locations
See Schedule 5.5.
Schedule P-1
Permitted Liens
1. With respect to the real property located at 1435 N. Cashua Road, Florence,
South Carolina, International Knife has an arrangement with the previous
owner of a portion of the land that allows such previous owner to remain
living in a house located on such property until the time of her death.
2. Certain machinery and equipment have been secured pursuant to capitalized
leases. Such capitalized lease obligations are in the amount of not more
than $3,500,000.
Schedule R-1
Real Property Collateral
1299 Cox Avenue, Erlanger, KY 41018
1300 NE Alpha Drive, McMinnville, Oregon 97128-9711
1435 N. Cashua Road, Florence, South Carolina 29501-0535
337 Perry Road, Bangor, Maine 04401
600 Camden Bypass, Camden, Alabama 36726
Schedule 2.6(a)
Cash Management Banks
Fifth Third Bank of Northern Kentucky, Inc.
8100 Burlington Pike
Florence, KY 41042
Schedule 3.2(i)
Acceptable Candidates for Chief Executive Officer
Michael Rapoport
Eugene Davis
Robert Boden
Schedule 5.5
Locations of Inventory and Equipment
IKS Bangor IKS Systi-Matic *
337 Perry Road 12530 135th Avenue NE
Bangor, ME 04401 Kirkland, WA 98034
Bus: 800-258-8970 Bus: 800-426-0000
Bus 2: 207-947-3304 Bus 2: 425-823-8200
Bus Fax: 207-945-0145 Bus Fax: 425-821-0804
IKS Camden IKS McMinnville
P. O. Box 878 600 1300 NE Alpha Drive
Camden Bypass McMinnville, OR 97128-9711
Camden, AL 36726 Bus: 800-367-6101
Bus: 800-633-2710 Bus 2: 503-434-5633
Bus: 800-633-2710 Bus Fax: 503-434-9881
Bus Fax: 334-682-4125
IKS Cincinnati IKS Statesboro *
P.O. Box 752006 (Mailing) 590 Gentilly Road
Cincinnati, OH 45275-2006 Statesboro, GA 30459
1299 Cox Avenue (Shipping) Bus: 888-323-6841
Erlanger, KY 41018 Bus 2: 912-489-4869
Bus: 800-354-9872 Bus Fax: 912-489-5420
Bus 2: 859-371-0333
Bus Fax: 859-371-6672
IKS Florence IKS West Monroe
P.O. Box 100535 (Mailing) 600 Grantham Avenue
1435 N. Cashua Road (Shipping) West Monroe, LA 71292
Florence, SC 29501-0535 P.O. Drawer 3147
Bus: 800-334-3057 West Monroe, LA 71294-3147
Bus 2: 843-662-6345 Bus: 318-388-2539
Bus Fax: 843-669-1185 Bus Fax: 318-388-5796
IKS Cascade Southern
1075 Fox Pass Cutoff
Hot Springs, AR 71901
Bus: 800-423-8410
Bus 2: 501-624-2437
Bus Fax: 501-624-2806
* Leased
Schedule 5.7
Chief Executive Office; FEIN
International Knife
- -------------------
Location of chief executive office:
1299 Cox Avenue
Erlanger, KY 41018
Federal Taxpayer Identification Number:
57-0697252
Parent
- ------
Location of chief executive office:
1299 Cox Avenue
Erlanger, KY 41018
Federal Taxpayer Identification Number:
13-2759891
Schedule 5.8(b)
Capitalization of Borrowers
International Knife
Authorized Capital Stock:
580,000 shares of common stock
0 shares of preferred stock
Outstanding Capital Stock:
481,971 shares of common stock
0 shares of preferred stock
Parent
Authorized Capital Stock:
200,000 shares of Class A common stock
200,000 shares of Class B common stock
12,015 shares of Series A preferred stock
2,000 shares of Series B preferred stock
Outstanding Capital Stock:
89,850 shares of Class A common stock
14,685 shares of Class B common stock
11,972.80 shares of Series A preferred stock
876 shares of Series B preferred stock
Schedule 5.8(c)
Capitalization of Borrowers' Subsidiaries
IKS Mexican Holdings SA de CV (Mexico)
Authorized Capital Stock:
____ shares of common stock
____ shares of preferred stock
Outstanding Capital Stock:
____ shares of common stock
____ shares of preferred stock
100% owned by International Knife
IKS de Mexico SA de CV (Mexico)
Authorized Capital Stock:
____ shares of common stock
____ shares of preferred stock
Outstanding Capital Stock:
____ shares of common stock
____ shares of preferred stock
100% owned by IKS Mexican Holdings SA de CV
IKS Canadian Knife & Saw Ltd. (Canada)
Authorized Capital Stock:
unlimited shares of common stock
no shares of preferred stock
Outstanding Capital Stock:
95,444 shares of common stock
0 shares of preferred stock
100% owned by International Knife
PT Bevenmas Jaya (Indonesia)
Authorized Capital Stock:
____ shares of common stock
____ shares of preferred stock
Outstanding Capital Stock:
____ shares of common stock
____ shares of preferred stock
100% owned by International Knife
International Knife & Saw Trading Corp. (Virgin Islands)
Authorized Capital Stock:
____ shares of common stock
____ shares of preferred stock
Outstanding Capital Stock:
____ shares of common stock
____ shares of preferred stock
100% owned by International Knife
Schedule 5.10
Litigation
None.
Schedule 5.14
Environmental Matters
1. International Knife retained an environmental company earlier this calendar
year to determine the exposure, if any, of International Knife due to the
run-off of certain chemicals used in the process of cleaning machinery at
the property located in Erlanger, Kentucky. Such environmental company
determined the exposure of International Knife to be not more than $50,000.
Schedule 5.16
Intellectual Property
The Corporation uses and owns the following trade name(s) in the
operation of its business (e.g. billing, advertising, etc)
The Company markets its products under certain trademarks, including
"IKS (TM)", "Cascade Southern", "Chromavan," "Chromalit," "Compaflex,"
"Compalloy," "Durakut," "Durapid," "Duritan," "Dynabloc (TM)", "Dynapren,"
"Dynatherm," "Hyperhone(TM)", "Klirit," "KSFmicroplan," "Novacrom(TM)",
"Novador," "QCP," "Quality Cut Knife Maintenance Program and Design," "Rolf
Meyer", "SAVE," "Stop," "Surekut(TM)," "Systi-Matic", "TecalloyTM",
"Tecnolite(TM)", "Tungsten Carbide Quattro," "Diamond Cut," "Dialux," "Ultrid,"
and "Workalit." In addition, the Company uses the following tradenames: American
Custom Metals; Ban-Carb; Canadian Knife & Saw; Durakut; Econokut; Hannaco;
Hyperhone; IKS de Mexico; Kodiak; SPS; Tuff-Tip; and Ultrakut.
Owner Trademark Country Status Application Filing Registration Registration Remarks
Number Date Number Date
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
American Custom ACM & Design U.S.A. Registered 876,956 16-Sep-69 Renewal due 09/16/2009
Metals Co. Inc
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
IKS Corporation HYPERHONE Canada Registered 835,209 31-Jan-97 TMA486,215 02-Nov-97 Renewal due 11/2/2012
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
IKS Corporation HYPERHONE U.S.A. Registered 75/154,902 23-Aug-96 2,249,993 01-Jun-99 Affidavit of Use due
6/1/2004-2005
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
IKS Corporation HYPERHONE Canada Registered 835,208 31-Jan-97 TMA502,171 13-Oct-98 Renewal due 10/13/2013
(Stylized)
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
IKS Corporation IKS & Design Peru Registered 70389 14-Sep-98 53611 30-Mar-99 Renewal due 3/30/2009
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
IKS Corporation PERPETUAL EDGE U.S.A. Registered 75/607,899 17-Dec-98 2,307,554 11-Jan-00 Affidavit of Use due
1/11/2005-2006
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
IKS Corporation QCP Canada Registered 835,210 31-Jan-97 TMA498,722 17-Aug-98 Renewal due 8/17/2013
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
International ECONOKUT Canada Registered 806630 11-Mar-96 475586 30-Apr-97 Renewal due 4/30/2012
Knife and Saw, Inc
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
International ECONOKUT U.S.A. Registered 75/001,002 03-Oct-95 2,029,861 14-Jan-97 Affidavit of Use due
Knife and Saw, Inc 1/14/2002-2003
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
International HYPERHONE U.S.A. Registered 75/154,903 23-Aug-96 2,215,050 29-Dec-98 Affidavit of Use due
Knife and Saw, Inc (Stylized) 12/29/2003-2004
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
International IKS & Design Canada Registered 651,697 23-Feb-90 TMA411,652 30-Apr-93 Renewal due 4/30/2008
Knife and Saw, Inc
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
International IKS & Design Chile Registered 22236,458 02-Apr-93 416,868 18-Nov-93 Renewal due 11/18/2003
Knife and Saw, Inc
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ---------------------
International IKS & Design Germany Registered J24856/8Wz 23-Feb-90 1182916 17-Dec-91 Renewal due 2/23/2010
Knife and Saw, Inc
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ---------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ---------------------
International IKS & Design Mexico Registered 17-Apr-90 434659 26-May-93 Renewal due 4/17/2010
Knife and Saw, Inc
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ --------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ---------------------
Owner Trademark Country Status Application Filing Registration Registration Remarks
Number Date Number Date
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ---------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ---------------------
International IKS & Design U.S.A. Registered 73/821,425 25-Aug-89 1,612,667 11-Sep-90 Awaiting application
Knife and Saw, Inc of renewal application
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ----------------------
International KODIAK U.S.A. Registered 74/361,302 19-Feb-93 1,887,747 04-Apr-95 Renewal due 4/4/2005
Knife and Saw, Inc
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ---------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ---------------------
International QCP U.S.A. Registered 75/154,905 23-Aug-96 2,087,635 12-Aug-97 Affidavit of Use due
Knife and Saw, Inc 08/12/2002
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ---------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ---------------------
International QCP QUALITY CUT U.S.A. Registered 75/154,904 23-Aug-96 2,111,977 11-Nov-97 Affidavit of Use due
Knife and Saw, Inc KNIFE MAINTENANCE 5/21/2001
PROGRAM
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ---------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ---------------------
International SUREKUT Canada Registered 651,700 23-Feb-90 TMA392,606 10-Jan-92 Renewal due 1/10/2007
Knife and Saw, Inc
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ---------------------
- ------------------- --------------- -------- ----------- ------------ ----------- -------------- ------------ ---------------------
International SUREKUT Mexico Registered 81873 26-Feb-90 395481 23-May-91 Awaiting acceptance of
Knife and Saw, Inc proof of use
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International SUREKUT U.S.A. Registered 73/821,424 25-Aug-89 1,613,553 18-Sep-90 Awaiting certificate
Knife and Saw, Inc of renewal
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International ULTRAKUT U.S.A. Pending 75/938,785 07-Mar-00 Response Due 2/22/2001
Knife and Saw, Inc
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International IKIS U.S.A. Pending 76/213,076 21-Feb-01 Pending
Knife & Saw, Inc
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International IKIS and Design U.S.A. Pending 76/213,077 21-Feb-01 Pending
Knife & Saw, Inc
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Schedule 5.17
Leases
1. 730 West Glendale Avenue
Appleton, Wisconsin 54914
2. 4287 C. Southeast International Way, Suite C
Milwaukie, Oregon 97222
Schedule 5.18
Demand Deposit Accounts
International Knife
Description
Name of Institution Account Number of Account
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Fifth Third Bank of Northern Kentucky, Inc. 999-77224 Concentration
8100 Burlington Pike
Florence, KY 41042
Fifth Third Bank of Northern Kentucky, Inc. 741-30262 Payroll-ZBA
8100 Burlington Pike
Florence, KY 41042
Fifth Third Bank of Northern Kentucky, Inc. 741-33025 A/P-ZBA
8100 Burlington Pike
Florence, KY 41042
Parent
Description of
Name of Institution Account Number Account
Wilmington Trust Company 262-58855 Miscellaneous
Rodney Square North Fees Account
1100 N. Market Street
Wilmington, DE 19890
Schedule 5.20
Permitted Indebtedness
1. International Knife issued $90 million in aggregate principal amount of
Subordinated Notes on November 6, 1996 under an Indenture, dated as of
November 6, 1996, by and between International Knife and United States
Trust Company of New York, as trustee.
2. Capitalized lease obligations in amount of not more than $3,500,000.
3. Deferred compensation arrangements with former officers of the Company in
the aggregate amount of approximately $350,000, as set forth below in
approximate amounts:
o Horst Brautigam $125,000
Former President
o Edward Brent $125,000
Former Chief Financial Officer
o James Reed $100,000
Former Chief Executive Officer
4. Note payable in connection with acquisition of South Carolina real property
in outstanding amount of not more than $80,000.