<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 10, 1998 (May 27, 1998)
APPLIED GRAPHICS TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-28208 13-3864004
(State or other jurisdiction (Commission File Number) (I.R.S. Employer Identification No.)
of incorporation)
</TABLE>
450 W. 33rd STREET, NEW YORK, NY 10001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-716-6600
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
On May 27, 1998, pursuant to an Agreement and Plan of Merger, dated as of
February 13, 1998, entered into by and among Applied Graphics Technologies, Inc.
(the "Company" or "AGT"), AGT Acquisition Corp., and Devon Group, Inc.
("Devon"), a Delaware corporation, (the "Merger Agreement"), Devon merged into
AGT Acquisition Corp., a wholly-owned subsidiary of the Company (the "Merger").
Devon, a digital prepress and publishing company, operated 19 facilities in the
United States and one facility in each of England and Canada. Under the terms of
the Merger Agreement, the Company paid $30 per share in cash and distributed 0.6
share of the Company's common stock in exchange for each outstanding share of
Devon common stock. The total consideration paid was approximately $450 million,
including transaction costs. The cash portion of the Merger consideration,
approximately $230 million including transaction costs, was funded with
approximately $135 million borrowed under lines of credit and approximately $95
million from investments in marketable securities.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
<PAGE> 3
Independent Auditors' Report
The Board of Directors and Shareholders
Devon Group, Inc.:
We have audited the accompanying consolidated balance sheets of Devon Group,
Inc. and subsidiaries as of March 31, 1998 and 1997, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the years in the three-year period ended March 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Devon Group, Inc.
and subsidiaries as of March 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended March 31, 1998 in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
May 8, 1998
<PAGE> 4
Consolidated Balance Sheets Devon Group, Inc.
<TABLE>
<CAPTION>
March 31, 1998 1997
--------- ---------
<S> <C> <C>
($ in thousands)
Assets
Current assets:
Cash and cash equivalents $ 53,074 $ 28,901
Short-term investments 12,902 --
Receivables, less allowance for doubtful
accounts of $4,586 in 1998 and $3,465 in 1997 42,791 35,971
Inventories, at lower of cost or market:
Raw materials 718 572
Work-in-process 26,525 19,178
Finished goods 5,015 3,453
--------- ---------
Total inventories 32,258 23,203
Deferred income tax benefits 3,157 3,070
Prepaid expenses and other current assets 6,971 6,624
Net assets of discontinued operation -- 27,762
--------- ---------
Total current assets 151,153 125,531
Property, plant, and equipment, net 29,400 24,194
Deferred charges and other assets 5,252 4,918
Deferred income tax benefits 98 1,095
Excess of cost over fair value of net assets acquired 9,219 6,369
--------- ---------
$ 195,122 $ 162,107
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt $ 444 $ 92
Accounts payable 10,060 6,803
Accrued expenses 8,239 7,970
Accrued compensation 9,370 7,913
Income taxes 639 1,327
--------- ---------
Total current liabilities 28,752 24,105
Long-term debt, excluding current installments 2,536 1,916
Deferred and other compensation 3,274 5,005
Stockholders' equity:
Common stock, $0.01 par value. Authorized
30,000,000 shares; issued 8,458,317 shares
in 1998 and 8,383,317 in 1997 85 84
Additional paid-in capital 37,014 35,658
Retained earnings 140,456 112,334
--------- ---------
177,555 148,076
Less: 1,099,500 shares of common stock held
in treasury, at cost, at March 31, 1998
and March 31, 1997 (16,995) (16,995)
--------- ---------
Total stockholders' equity 160,560 131,081
--------- ---------
$ 195,122 $ 162,107
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
CONSOLIDATED STATEMENTS OF INCOME Devon Group, Inc.
<TABLE>
<CAPTION>
Years ended March 31, 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
($ in thousands except per share data)
Sales $246,094 $209,522 $194,442
Operating costs and expenses:
Cost of sales 144,936 121,089 104,047
Selling, general, and administrative 69,167 59,370 54,935
-------- -------- --------
Income from operations 31,991 29,063 35,460
Interest income (expense), net 1,987 1,197 752
Other income, net 656 885 401
-------- -------- --------
Income from continuing operations
before income taxes 34,634 31,145 36,613
Provision for income taxes 13,416 12,243 14,651
-------- -------- --------
Income from continuing operations 21,218 18,902 21,962
Discontinued operations:
Gain on sale 5,858 -- --
Income from operations 1,046 2,426 2,069
-------- -------- --------
Income from discontinued operations 6,904 2,426 2,069
-------- -------- --------
Net income $ 28,122 $ 21,328 $ 24,031
======== ======== ========
Income per common share:
Basic:
Income from continuing operations $ 2.90 $ 2.57 $ 2.99
Discontinued operations
Gain on sale .80 -- --
Income from operations .14 .33 .28
-------- -------- --------
Income from discontinued operations .94 .33 .28
-------- -------- --------
Net income $ 3.84 $ 2.90 $ 3.27
======== ======== ========
Diluted:
Income from continuing operations $ 2.83 $ 2.53 $ 2.92
Discontinued operations:
Gain on sale .78 -- --
Income from operations .14 .32 .28
-------- -------- --------
Income from discontinued operations .92 .32 .28
-------- -------- --------
Net income $ 3.75 $ 2.85 $ 3.20
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
Consolidated Statements of Cash Flows Devon Group, Inc.
<TABLE>
<CAPTION>
Years ended March 31, 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
($ in thousands)
Operating activities:
Net income 28,122 $ 21,328 $ 24,031
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,041 6,164 5,308
Provision for doubtful accounts 631 641 767
Income from discontinued operations (1,046) (2,426) (2,069)
Gain on sale of discontinued operations (5,858) -- --
Changes in assets and liabilities, net of the
effects of purchases and disposition of
subsidiaries:
Receivables (6,870) (6,586) (7,593)
Inventories (8,325) (5,132) (953)
Deferred charges and other assets (987) (2,639) (1,735)
Accounts payable 3,155 29 310
Accrued expenses (817) 56 (1,461)
Accrued compensation 1,457 175 348
Income taxes (5,148) 360 558
Deferred income taxes 910 108 (178)
Deferred and other compensation (1,731) (1,408) 1,218
-------- -------- --------
Net cash provided by continuing operations 10,534 10,670 18,551
Net cash provided by (used in) discontinued operations (2,037) 1,990 2,563
-------- -------- --------
Net cash provided by operating activities 8,497 12,660 21,114
-------- -------- --------
Investing activities:
Proceeds from sale of discontinued operations 42,883 -- --
Net purchase of short-term investments (12,902) -- --
Capital expenditures (11,514) (7,352) (4,538)
Payments for purchases of subsidiaries,
net of cash acquired (3,227) (400) (5,109)
-------- -------- --------
Net cash provided by (used in) investing activities 15,240 (7,752) (9,647)
-------- -------- --------
Financing activities:
Purchase of treasury stock -- (4,326) (1,294)
Payments of long-term debt (113) (105) (289)
Proceeds from the exercise of stock options and other 549 567 806
-------- -------- --------
Net cash provided by (used in) financing activities 436 (3,864) (777)
-------- -------- --------
Net increase in cash and cash equivalents 24,173 1,044 10,690
Cash and cash equivalents, beginning of year 28,901 27,857 17,167
-------- -------- --------
Cash and cash equivalents, end of year $ 53,074 $ 28,901 $ 27,857
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
Consolidated Statements of Stockholders' Equity Devon Group, Inc.
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Treasury
Years ended March 31, 1998, 1997, and 1996 Stock Capital Earnings Stock Total
------ ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
($ in thousands)
Balances at March 31, 1995 $ 82 $32,471 $ 66,975 $(11,375) $ 88,153
Purchase of treasury stock -- -- -- (1,294) (1,294)
Exercise of stock options
and other 1 2,067 -- -- 2,068
Net income -- -- 24,031 -- 24,031
------ ------- -------- -------- ---------
Balances at March 31, 1996 83 34,538 91,006 (12,669) 112,958
Purchase of treasury stock -- -- -- (4,326) (4,326)
Exercise of stock options
and other 1 1,120 -- -- 1,121
Net income -- -- 21,328 -- 21,328
------ ------- -------- -------- ---------
Balances at March 31, 1997 84 35,658 112,334 (16,995) 131,081
Exercise of stock options
and other 1 1,356 -- 1,357
Net income -- -- 28,122 -- 28,122
------ ------- -------- -------- ---------
Balances at March 31, 1998 $ 85 $37,014 $140,456 $(16,995) $ 160,560
====== ======= ======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 8
Notes to Consolidated Financial Statements
Years ended March 31, 1998, 1997, and 1996
1 Summary of Significant
Accounting Policies
(a) Basis of Presentation: The consolidated financial statements
reflect the operations of the Company and its subsidiaries, all of
which are wholly-owned except for Portal Aird Publications Pty. Ltd.
(Portal Aird) which is 50% owned. All significant intercompany
transactions are eliminated in consolidation. Prior years' financial
statements have been reclassified, where applicable, to conform to the
March 31, 1998 presentation.
(b) Use of Estimates: The preparation of financial statements in
accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
(c) Property, Plant, and Equipment: The Company provides for
depreciation and amortization of property, plant, and equipment
principally by use of the straight-line method over estimated useful
lives or lease terms, as applicable. Significant improvements are
capitalized, while repairs and maintenance are expensed as incurred.
Depreciation is computed based on the following useful lives: buildings
(15 to 39 years), building improvements (5 to 30 years), leasehold
improvements (2 to 10 years), and furniture, fixtures, and equipment (3
to 10 years).
(d) Excess of Cost Over Fair Value of Net Assets Acquired: The excess
of cost over fair value of net assets of companies acquired is
amortized on a straight-line basis over periods of 15 or 25 years. The
Company periodically evaluates the recoverability of goodwill by
assessing whether the unamortized amount can be recovered over its
remaining life through undiscounted cash flows.
(e) Income Taxes: The provision for income taxes, as determined using
the liability method, includes deferred taxes resulting from temporary
differences in income for financial and tax purposes. Such temporary
differences primarily result from differences between the tax bases of
assets and liabilities and their carrying amounts for financial
reporting purposes. The cumulative effect on deferred taxes of changes
in corporate income tax rates is recognized as an adjustment to income
tax expense. The Company and its U.S. subsidiaries file a consolidated
Federal income tax return.
(f) Inventories: Inventories are stated at the lower of cost or market,
using the first-in, first-out (FIFO) method.
(g) Cash and Cash Equivalents: For purposes of the consolidated
statements of cash flows, the Company considers all cash funds and
short-term investments with original maturities of three months or less
to be cash equivalents. At March 31, 1998 the Company had $40,817,000
in portfolio investments comprised of commercial paper with various
original maturity dates within 90 days of purchase. At March 31, 1998
and 1997 the Company also had $21,690,000 and $18,498,000,
respectively, invested in U.S. government securities under agreements
to resell within six days of purchase. At March 31, 1997 the Company
also had $9,961,000 in U.S. Treasury bills with a
<PAGE> 9
maturity date of April 3, 1997. The market value of the underlying
securities approximated their carrying value. Due to the short-term
nature of the agreements, the Company did not take possession of the
securities which were instead held by financial institutions.
(h) Stock-based Compensation: In fiscal 1997 the Company adopted the
provisions of SFAS No. 123, "Accounting for Stock-based Compensation,"
regarding disclosure of pro forma information for stock compensation
which is included in Note 12. As is allowed by Statement No. 123, the
Company will continue to measure compensation expense using the methods
described in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees."
(i) Revenue Recognition: The pre-press business recognizes revenue when
a job is substantially complete and the publishing business recognizes
revenue at the time products are shipped.
2 Business
Devon Group, Inc. is a diversified graphic arts company that provides
the following services and products: advertising and editorial
production, conventional and digital photography, interactive
multimedia, computerized typesetting, composition, and color separation
services to corporate, retail, advertising, and publishing customers,
and publishing/distribution of posters, art reproductions, original
art, greeting cards, notecards, calendars, and related products.
During the years ended March 31, 1998, 1997, and 1996, sales to the
Company's two largest customers amounted to $54,384,000, $46,218,000,
and $52,425,000, and $32,574,000, $28,882,000 and $30,610,000,
respectively.
3 Stockholders' Equity
In fiscal 1998 and 1997, 75,000 and 79,000 stock options, respectively,
were exercised at prices between $5.00 and $16.75 per share (see Note
12). In March 1995, the Company's Board of Directors authorized the
purchase of up to 700,000 shares of its outstanding common stock in the
open market from time to time. Under this authorization, 174,500 shares
were acquired by the Company during fiscal 1997.
4 Acquisitions and Dispositions
Effective September 1, 1997 the Company acquired Canadian Art Prints,
Inc. (CAP) for $2,527,000 in cash and a note payable of $1,086,000.
Located in Richmond B.C., Canada, CAP publishes and distributes art
posters, art cards, limited edition prints, and matted as well as
framed art. The excess of the purchase price over the fair value of net
assets acquired was $2,839,000. The results of CAP are immaterial to
the total results of the Company.
In fiscal 1996, the Company acquired two businesses, Proof
Positive/Farrowlyne Associates, Inc. (PP/FA), and Nobart, Inc.
(Nobart). PP/FA was acquired effective July 31, 1995 for $4,000,000 in
cash and earnings-related, contingent consideration, $1,100,000 of
which has been earned and paid through March 31, 1998. Located in
Evanston, Illinois, PP/FA is a provider of editorial and creative
services to the publishing industry, primarily in the educational
sector. The purchase price exceeded the fair value of net assets
acquired by $4,470,000, including the aforementioned additional
contingent consideration. Nobart, acquired effective March 1, 1996, is
a full-service design, art, photography, and production studio located
in Chicago, Illinois. The purchase price of $1,217,000 was equal to the
net book value of assets acquired.
<PAGE> 10
All of the aforementioned acquisitions were accounted for as purchases.
The cumulative excess of cost over the fair value of net assets
acquired (goodwill) was recorded on the consolidated balance sheets.
Goodwill amortization charged to operations for the years ended March
31, 1998, 1997, and 1996 was $613,000, $452,000, and $357,000,
respectively. As of March 31, 1998 and 1997, the balance of accumulated
amortization was $2,865,000 and $2,252,000, respectively.
5 Discontinued Operations
On July 22, 1997, the Company announced that it had reached agreement
for the sale of the capital stock of its printing subsidiary, Graftek
Press, Inc., to BGJ Enterprises, Inc., an affiliate of Brown Printing
Company for approximately $42,883,000 in cash. The transaction was
consummated on September 8, 1997 and resulted in a gain (net of
applicable income taxes) for financial statement purposes of $5,858,000
and generated approximately $34,495,000 in after-tax cash. The results
of the printing subsidiary have been reported separately as a
discontinued operation and the financial statements restated. The net
assets, consisting primarily of property, plant, and equipment,
accounts receivable, and accounts payable, are combined and reflected
on the accompanying balance sheets as "Net assets of discontinued
operations." For the years ended March 31, 1998, 1997, and 1996,
revenues related to the discontinued operation were $24,269,000,
$54,886,000, and $54,531,000, respectively. The income from
discontinued operations for the years ended March 31, 1998, 1997, and
1996, included income tax expense of $6,197,000, $1,608,000, and
$1,370,000, respectively.
6 Income Taxes
The income tax provisions for the years ended March 31, 1998, 1997, and
1996 follow:
<TABLE>
<CAPTION>
($ in thousands) Current Deferred Total
---------------------------------- ------- -------- -------
<S> <C> <C> <C>
1998 Federal $10,126 $ 745 $10,871
State 2,380 165 2,545
------- ------- -------
Total $12,506 $ 910 $13,416
======= ======= =======
1997 Federal $10,034 $ (67) $ 9,967
State 2,101 175 2,276
------- ------- -------
Total $12,135 $ 108 $12,243
======= ======= =======
1996 Federal $12,198 $ (146) $12,052
State 2,631 (32) 2,599
------- ------ -------
Total $14,829 $ (178) $14,651
======= ======= =======
</TABLE>
Income tax provisions vary from the amounts which would have been
computed by applying the applicable U.S. statutory Federal income tax
rate to income before taxes. The primary reasons for the differences
between the expected and effective rates stated as a percent of pretax
income are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Computed "expected" tax expense 35.0% 35.0% 35.0%
Increase (decrease)in taxes resulting from:
State income taxes, net of
Federal income tax benefit 4.4 4.8 4.6
Other (.7) (.5) .4
------ ------ ------
38.7% 39.3% 40.0%
====== ====== ======
</TABLE>
The actual amounts of income taxes paid during the years ended March
31, 1998, 1997, and 1996 were $18,582,000, $14,331,000, and
$17,167,000, respectively.
The tax effects of temporary differences that give rise to significant
deferred tax assets and deferred tax liabilities at March 31, 1998 and
1997 are presented below:
<PAGE> 11
<TABLE>
<CAPTION>
($ in thousands) 1998 1997
---------------------------------------- ------- -------
<S> <C> <C>
Deferred tax assets:
Deferred compensation $ 2,631 $ 3,474
Inventory 2,723 2,272
Accounts receivable 776 742
Other 890 1,084
------- -------
Total deferred tax assets 7,020 7,572
------- -------
Deferred tax liabilities:
Accelerated depreciation (1,805) (1,885)
Prepaid expenses (1,713) (1,205)
Other (247) (317)
------- -------
Total deferred tax liabilities (3,765) (3,407)
------- -------
Net deferred tax asset $ 3,255 $ 4,165
======= =======
</TABLE>
The Company believes that no valuation allowance is necessary for
deferred tax assets based on its estimate that it is more likely than
not that future taxable income will be sufficient to offset the
expenses to which the deferred tax assets relate.
7 Income Per Share
Earnings per share is presented on a Basic and Diluted basis. The
computation of Basic earnings per share is based on income available to
common stockholders and the weighted average number of common shares
outstanding. Diluted earnings per share reflects the potential dilution
that could occur if dilutive stock options were exercised resulting in
the issuance of common stock that then shared in the earnings of the
Company. The following table details the computation of Basic and
Diluted earnings per share.
<TABLE>
<CAPTION>
Income 1998 1997 1996
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
Income from continuing operations $ 21,218 $ 18,902 $ 21,962
Discontinued operations
Gain on sale 5,858 -- --
Income from operations 1,046 2,426 2,069
---------- ---------- ----------
Income from discontinued operations 6,904 2,426 2,069
---------- ---------- ----------
Net income $ 28,122 $ 21,328 $ 24,031
========== ========== ==========
Shares
Basic shares 7,327 7,360 7,340
Effect of dilutive stock options 179 120 181
---------- ---------- ----------
Diluted shares 7,506 7,480 7,521
========== ========== ==========
Basic EPS
Income from continuing operations $ 2.90 $ 2.57 $ 2.99
Discontinued operations:
Gain on sale .80 -- --
Income from operations .14 .33 .28
---------- ---------- ----------
Income from discontinued operations .94 .33 .28
---------- ---------- ----------
Net income $ 3.84 $ 2.90 $ 3.27
========== ========== ==========
</TABLE>
<PAGE> 12
<TABLE>
Diluted EPS
<S> <C> <C> <C>
Income from continuing operations $ 2.83 $ 2.53 $ 2.92
Discontinued operations
Gain on sale .78 -- --
Income from operations .14 .32 .28
---------- ---------- ----------
Income from discontinued operations .92 .32 .28
---------- ---------- ----------
Net income $ 3.75 $ 2.85 $ 3.20
========== ========== ==========
</TABLE>
8 Property, Plant, and Equipment
A summary of property, plant, and equipment at March 31, 1998 and 1997,
at cost, follows:
<TABLE>
<CAPTION>
($ in thousands) 1998 1997
---------------------------------------- -------- --------
<S> <C> <C>
Land $ 2,017 $ 1,120
Buildings and improvements 19,085 15,261
Leasehold improvements 2,886 2,744
Furniture, fixtures, and equipment 44,405 39,816
-------- --------
68,393 58,941
Less accumulated depreciation and amortization 38,993 34,747
-------- --------
Net property, plant, and equipment $ 29,400 $ 24,194
======== ========
</TABLE>
9 Long-term Debt
The following is a summary of long-term debt at March 31, 1998 and
1997:
<TABLE>
<CAPTION>
($ in thousands) 1998 1997
---------------------------------------- -------- --------
<S> <C> <C>
Revolving credit facility (a) $ - $ -
6.5% IDA bond (b) 900 900
Miscellaneous notes payable (c) 2,080 1,108
-------- --------
2,980 2,008
Less current installments 444 92
-------- --------
$ 2,536 $ 1,916
======== ========
</TABLE>
Annual maturities of long-term debt for the next five fiscal years are
$444,000, $444,000, $444,000, $92,000 and $73,000 per year. Interest
paid for the years ended March 31, 1998, 1997, and 1996 was $194,000,
$163,000, and $195,000, respectively.
(a) The Company's $35,000,000 revolving credit facility extends through
April 1, 2000, is unsecured, and provides interest rate options no less
favorable than prime and generally based upon a competitively bid
"auction" rate. Under the facility agreement, the Company pays fees
which range from .100 to .250 on various portions of the revolving
credit facility. At March 31, 1998, the Company had no outstanding
balance under this agreement.
(b) The 6.5% IDA bond is payable in full on August 1, 2004 and is
secured by real estate.
(c) The Company has various acquisition-related notes payable at
interest rates ranging from 7.5% to 10.0%.
<PAGE> 13
10 Lease Commitments
At March 31, 1998, minimum rental payments due under operating leases
in subsequent fiscal years were as follows: 1999, $3,399,000; 2000,
$3,028,000; 2001, $2,094,000; 2002, $1,379,000; 2003, $918,000; and
later years, $5,110,000.
Total rental expense for the years ended March 31, 1998, 1997, and 1996
was $5,042,000, $4,231,000, and $3,443,000, respectively.
Most of the Company's leases are for facilities and provide that the
Company pay taxes, maintenance, insurance, and certain other operating
expenses applicable to the leased properties. Management expects that,
in the normal course of business, leases which expire will be renewed
or replaced by other leases.
11 Profit Sharing, Pension, and Bonus Plans
The Company has various profit sharing plans covering substantially all
employees who meet eligibility requirements and a pension plan for
certain key executives. Amounts contributed to profit sharing plans are
at the discretion of the appropriate subsidiary's Board of Directors.
Benefits for pension plans accrue and are vested based on compensation
levels and years of service. The amounts charged to operations for all
plans combined for the years ended March 31, 1998, 1997, and 1996 were
$2,188,000, $2,095,000, and $1,887,000, respectively.
The Company has various bonus plans covering key corporate and
subsidiary personnel. The amounts charged to operations under all bonus
plans for the years ended March 31, 1998, 1997, and 1996 were
$2,376,000, $2,344,000, and $4,741,000, respectively.
12 Stock Option Plans
The Company has three stock option plans which provide for the grant of
nonqualified stock options to employees and certain directors. As of
March 31, 1998, 842,500 options were outstanding with exercise prices
ranging from $10.63 to $39.63 per share with 297,000 exercisable at a
weighted average exercise price of $23.18. As of March 31, 1998, there
were 10,000 options available for future grants under the Company's
existing stock option plans. Pursuant to the terms of the option
agreements, options are exercisable in increments over five- or
ten-year periods. A total of 842,500 shares are reserved for issuance
under the option plans.
The tables below summarize stock option activity and options
outstanding for the years ended March 31, 1998, 1997, and 1996:
<TABLE>
<CAPTION>
Option Activity 1998 1997 1996
- ---------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Options outstanding, beginning of year 927,500 851,500 532,000
Options granted 20,000 155,000 420,000
Options exercised (75,000) (79,000) (100,500)
Options forfeited (30,000) -- --
-------- -------- --------
Options outstanding, end of year 842,500 927,500 851,500
======== ======== ========
Weighted average fair value of options granted $ 10.87 $ 7.74 $ 9.79
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
Options Expiration Options
Recap of Options Outstanding at March 31, 1998 Outstanding Date Exercisable
---------------------------------------------- ----------- ---------- -----------
<S> <C> <C> <C>
$10.63 Exercise price 8,000 4/00 --
$12.25 Exercise price 20,000 5/98 20,000
$16.75 Exercise price 239,500 12/99 155,500
$26.00 Exercise price 155,000 7/02 15,500
$34.25 Exercise price 400,000 7/01 106,000
$39.63 Exercise price 20,000 11/03 --
------- -------
842,500 297,000
======= =======
</TABLE>
The estimated fair value of stock options at the grant date using the
Black-Scholes option-pricing model is used to compute pro forma net
income and earnings per share in accordance with SFAS No. 123. The
weighted average assumptions used for grants in fiscal 1998 include
risk-free interest rates ranging from 5.37% to 5.79% and a volatility
factor of 27.73%, fiscal 1997 includes risk-free interest rates ranging
from 6.25% to 6.62% and a volatility factor of 27.64%, while fiscal
1996 is based on risk-free interest rates of 5.94% to 6.19% and a
volatility factor of 26.68%. All calculations are based on expected
lives of five years and a dividend yield of 0%. If compensation cost
for the Company's stock-based compensation plans had been recognized in
the income statements based on the fair value method, net income and
earnings per share would have been reduced to pro forma amounts of:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net income $ 27,547 $ 20,631 $ 23,357
Income per share
Basic EPS $ 3.76 $ 2.80 $ 3.18
Diluted EPS $ 3.67 $ 2.76 $ 3.11
</TABLE>
13 Contingent Liabilities
The Company, in the ordinary course of business, is contingently liable
on pending lawsuits and claims. Based upon advice from legal counsel,
management believes such pending items will not have a material effect
on the Company's consolidated financial position or results of
operations.
14 Quarterly Financial Information (unaudited)
The quarterly results for the years ended March 31, 1998 and 1997 are
summarized below:
<TABLE>
<CAPTION>
First Second Third Fourth Fiscal
($ in thousands except per share data) Quarter Quarter Quarter Quarter Year
-------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1998
Sales $ 55,411 $ 65,571 $ 69,038 $ 56,074 $246,094
Gross profit 24,278 28,936 28,383 19,561 101,158
Income from continuing operations 4,841 6,446 6,483 3,448 21,218
Discontinued operations:
Gain on sale - 6,818 - (960) 5,858
Income from operations 662 384 - - 1,046
-------- -------- -------- -------- --------
Income from discontinued operations 662 7,202 - (960) 6,904
-------- -------- -------- -------- --------
Net income $ 5,503 $ 13,648 $ 6,483 $ 2,488 $ 28,122
======== ======== ======== ======== ========
</TABLE>
<PAGE> 15
<TABLE>
<S> <C> <C> <C> <C> <C>
Income per share from continuing operations (1):
Basic $ 0.66 $ 0.88 $ 0.88 $ 0.47 $ 2.90
Diluted 0.65 0.86 0.86 0.45 2.83
Net income per share (1):
Basic $ 0.76 $ 1.87 $ 0.88 $ 0.34 $ 3.84
Diluted 0.74 1.83 0.86 0.33 3.75
1997
Sales $ 47,866 $ 55,031 $ 56,514 $ 50,111 $ 209,522
Gross profit 20,581 24,612 23,332 19,908 88,433
Income from continuing operations 4,176 5,786 5,417 3,523 18,902
Income from discontinued operations 583 525 678 640 2,426
----------- ----------- ----------- ----------- -----------
Net income $ 4,759 $ 6,311 $ 6,095 $ 4,163 $ 21,328
=========== =========== =========== =========== ===========
Income per share from continuing operations (1):
Basic $ .57 $ .78 $ .74 $ .48 $ 2.57
Diluted .56 .77 .73 .48 2.53
Net income per share (1):
Basic $ .64 $ .85 $ .83 $ .57 $ 2.90
Diluted .63 .84 .82 .56 2.85
</TABLE>
(1) Per share amounts for each quarter are computed independently; and, due
to the computation formula, the sum of the four quarters may not equal
the year.
15 Subsequent Events
On February 17, 1998, the Company and Applied Graphics Technologies,
Inc. (AGT) announced that they had signed a definitive agreement and
plan of merger. Under the agreement, holders of Devon common stock will
receive, for each Devon share, $30 in cash and a tax-free distribution
of 0.6 shares of AGT common stock. The transaction received early
termination of the relevant waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and is still subject to the approval
of both companies shareholders. The transaction is expected to be
completed in May, 1998.
<PAGE> 16
(b) Pro forma financial information.
AGT
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
The pro forma condensed consolidated balance sheets, as of December 31,
1997, are presented as if the acquisition of Flying Color Graphics, Inc.
("FCG"), which was consummated on January 16, 1998, and the Merger
(collectively, the "business combinations") had occurred on December 31, 1997.
The pro forma condensed consolidated balance sheets, as of March 31, 1998, are
presented as if the Merger had occurred on March 31, 1998.
The pro forma condensed consolidated statements of income for the year
ended December 31, 1997, are presented as if the business combinations had
occurred on January 1, 1997. The pro forma condensed consolidated statements of
income for the three months ended March 31, 1998, are presented as if the Merger
had occurred on January 1, 1998. The pro forma condensed consolidated statements
of income also include the receipt and related use of proceeds from an offering
of the Company's common stock in September 1997 (the "1997 Offering") to the
extent used to fund the business combinations.
The business combinations have been accounted for using the purchase method
of accounting. Accordingly, assets acquired and liabilities assumed have been
recorded at their estimated fair values that are subject to further refinement,
including appraisals and other analyses, with appropriate recognition given to
the effect of current interest rates and income taxes. Management does not
expect that the final allocation of the purchase price for the business
combinations will differ materially from the preliminary allocations.
The pro forma consolidated financial information does not purport to
present the financial position or results of operations of the Company had the
transactions and events assumed therein occurred on the dates specified, nor are
they necessarily indicative of the results of operations that may be achieved in
the future. The pro forma condensed consolidated statements of income do not
reflect potential cost savings and revenue enhancements that management believes
may be realized following the business combinations. No assurances can be made
as to the amount of cost savings or revenue enhancements, if any, that actually
will be realized.
The pro forma consolidated financial information is based on certain
assumptions and adjustments described in the Notes to Pro Forma Consolidated
Financial Information and should be read in conjunction therewith and with the
financial statements and related notes of the Company included in its 1997
Annual Report on Form 10-K, the Company's quarterly report on Form 10-Q for the
quarterly period ended March 31, 1998, the financial statements and related
notes of Devon included elsewhere herein, and the financial statements and
related notes of FCG previously filed in the Company's Current Report on Form
8-K/A dated April 1, 1998, pursuant to Regulation S-X Rule 3-05, "Financial
Statements of Businesses Acquired or to be Acquired".
<PAGE> 17
AGT
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro forma
Historical Pro forma Pro forma Pro forma consolidated
-------------- adjustments consolidated Historical adjustments (AGT, FCG,
AGT FCG (FCG) (AGT & FCG) Devon (Devon) & Devon)
--- --- ----- ----------- ----- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and marketable securities $102,734 $1,826 $(18,257)(A) $84,477 $54,163 $(86,365)(C) $20,539
(1,826)(A) (5,000)(C)
(26,736)(C)
Trade accounts receivable - net 43,025 2,958 (270)(A) 45,713 58,939 104,652
Inventory 6,234 630 (18)(A) 6,846 28,182 35,028
Other current assets 16,458 47 90 (A) 16,595 8,583 10,962 (C) 36,140
-------- ------ ------- -------- -------- ------- --------
TOTAL CURRENT ASSETS 168,451 5,461 (20,281) 153,631 149,867 (107,139) 196,359
Property, plant, and equipment - net 31,020 5,006 36,026 29,003 65,029
Goodwill - net 22,229 15,214 (A) 37,443 9,226 310,373 (C) 357,042
Other assets 3,093 30 (30)(A) 3,093 6,254 9,347
-------- ------ ------- -------- -------- ------- --------
TOTAL ASSETS $224,793 $10,497 $(5,097) $230,193 $194,350 $203,234 $627,777
======== ======= ======= ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $27,264 $1,224 $(160)(A) $28,328 $24,949 $53,277
Other current liabilities 10,019 965 (20)(A) 10,964 4,286 $9,000 (C) 24,250
-------- ------ ------- -------- -------- ------- --------
TOTAL CURRENT LIABILITIES 37,283 2,189 (180) 39,292 29,235 9,000 77,527
Long-term debt 2,823 1,059 (1,059)(A) 2,823 2,901 135,000 (C) 140,724
Other liabilities 1,190 91 1,281 5,083 (5,000)(C) 1,364
-------- ------ ------- -------- -------- ------- --------
TOTAL LIABILITIES 41,296 3,339 (1,239) 43,396 37,219 139,000 219,615
-------- ------ ------- -------- -------- ------- --------
Stockholders' Equity:
Common stock 178 17 33 (A) 211 85 44 (C) 255
(17)(B) (85)(D)
Additional paid-in capital 159,627 55 3,267 (A) 162,894 36,073 221,321 (C) 384,215
(55)(B) (36,073)(D)
Accumulated other comprehensive income (31) (31) (31)
Treasury stock (16,995) 16,995 (D) --
Retained earnings 23,723 7,086 (7,086)(B) 23,723 137,968 (137,968)(D) 23,723
-------- ------ ------- -------- -------- ------- --------
Total stockholders' equity 183,497 7,158 (3,858) 186,797 157,131 64,234 408,162
-------- ------ ------- -------- -------- ------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $224,793 $10,497 $(5,097) $230,193 $194,350 $203,234 $627,777
======== ======= ======= ======== ======== ======== ========
</TABLE>
See Notes to Pro Forma Consolidated Financial Information
<PAGE> 18
AGT
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro forma
Historical Pro forma Pro forma Pro forma consolidated
--------------- adjustments consolidated Historical adjustments (AGT, FCG,
AGT FCG (FCG) (AGT & FCG) Devon (Devon) & Devon)
--- --- ----- ----------- ----- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $184,993 $17,652 $202,645 $240,131 $442,776
Cost of revenues 120,018 11,157 131,175 138,626 269,801
-------- ------- -------- -------- --------
Gross profit 64,975 6,495 71,470 101,505 172,975
Operating expenses 42,666 3,913 $ 380 (E) 46,959 68,149 $7,759 (I) 122,867
-------- ------- -------- -------- -------- -------- --------
Operating income 22,309 2,582 (380) 24,511 33,356 (7,759) 50,108
Other income (expense) 398 (172) (304)(F) (78) 1,765 (1,295)(J) (8,383)
(8,775)(K)
-------- ------- -------- -------- -------- -------- --------
Income before provision for income
taxes 22,707 2,410 (684) 24,433 35,121 (17,829) 41,725
Provision for income taxes 9,140 56 639 (G) 9,835 13,828 (3,745)(L) 19,918
-------- ------- -------- -------- -------- -------- --------
Net income $13,567 $2,354 $(1,323) $14,598 $21,293 $(14,084) $21,807
======= ====== ======= ======= ======= ======== =======
Earnings per common share:
Basic $0.88 $0.92 $1.01
Diluted $0.83 $0.87 $0.96
Weighted average number of common shares:
Basic 15,475 366 (H) 15,841 5,836 (M) 21,677
Diluted 16,430 366 (H) 16,796 5,836 (M) 22,632
</TABLE>
See Notes to Pro Forma Consolidated Financial Information
<PAGE> 19
AGT
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro forma Pro forma
Historical Historical adjustments consolidated
AGT Devon (Devon) (AGT & Devon)
--- ----- ------- ------------
<S> <C> <C> <C> <C>
Current assets:
Cash and marketable securities $83,829 $65,976 $(86,365)(N) 31,704
(5,000)(N)
(26,736)(N)
Trade accounts receivable - net 48,807 42,791 91,598
Inventory 7,498 32,258 39,756
Other current assets 13,587 10,128 10,962 (N) 34,677
------ ------ ------- ------
Total current assets 153,721 151,153 (107,139) 197,735
Property, plant, and equipment - net 40,094 29,400 69,494
Goodwill - net 37,105 9,219 306,944 (N) 353,268
Other assets 3,348 5,350 8,698
------ ------ ------- ------
TOTAL ASSETS $234,268 $195,122 $199,805 $629,195
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $30,077 $27,669 $9,000 (N) $66,746
Other current liabilities 6,865 1,083 7,948
------ ------ ------- ------
Total current liabilities 36,942 28,752 9,000 74,694
Long-term debt 3,723 2,536 135,000 (N) 141,259
Other liabilities 1,206 3,274 (5,000)(N) (520)
------ ------ ------- ------
Total liabilities 41,871 34,562 139,000 215,433
------ ------ ------- ------
Stockholders' Equity:
Common stock 179 85 44 (N) 223
(85)(O)
Additional paid-in capital 162,926 37,014 221,321 (N) 384,247
(37,014)(O)
Accumulated other comprehensive income (4) (4)
Treasury stock (16,995) 16,995 (O) --
Retained earnings 29,296 140,456 (140,456)(O) 29,296
------ ------ ------- ------
Total stockholders' equity 192,397 160,560 60,805 413,762
------ ------ ------- ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $234,268 $195,122 $199,805 $629,195
======= ======= ======= =======
</TABLE>
See Notes to Pro Forma Consolidated Financial Information
<PAGE> 20
AGT
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro forma Pro forma
Historical Historical adjustments consolidated
AGT Devon (Devon) (AGT & Devon)
--- ----- ------- ------------
<S> <C> <C> <C> <C>
Revenues $59,655 $56,074 $115,729
Cost of revenues 38,559 36,513 75,072
-------- -------- --------
Gross profit 21,096 19,561 40,657
Operating expenses 12,577 15,596 $1,918 (P) 30,091
-------- -------- -------- -------
Operating income 8,519 3,965 (1,918) 10,566
Other income (expense) 927 1,053 (972)(Q) (1,186)
(2,194)(R)
-------- -------- -------- -------
Income before provision for
income taxes 9,446 5,018 (5,084) 9,380
Provision for income taxes 3,873 1,570 (811)(S) 4,632
-------- -------- -------- -------
Net income $5,573 $3,448 $(4,273) $4,748
======== ======== ======== =======
Earnings per common share:
Basic $0.31 $0.21
Diluted $0.30 $0.20
Weighted average number of
common shares:
Basic 17,929 4,427 (T) 22,356
Diluted 18,861 4,427 (T) 23,288
</TABLE>
See Notes to Pro Forma Consolidated Financial Information
<PAGE> 21
AGT
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
December 31, 1997:
A. Acquisition of FCG:
AGT acquired FCG for the following consideration ($000's):
<TABLE>
<S> <C> <C>
Cash consideration paid................................... $ 18,257
Issuance of 68,103 shares of AGT common stock............. 3,300
--------
Total acquisition cost.................................... $21,557
Fair value of net assets acquired:
Historical net assets of FCG.............................. 7,158
Elimination of cash not acquired.......................... (1,826)
Elimination of certain liabilities not assumed
and fair value adjustments............................. 1,011
--------
Fair value of net assets acquired........................... 6,343
-------
Excess of cost over fair value on net assets acquired....... $15,214
=======
</TABLE>
B. The Pro Forma Adjustments (FCG) represent the elimination of stockholders'
equity of FCG.
C. The Merger:
AGT acquired Devon for the following consideration ($000's):
<TABLE>
<S> <C> <C>
Cash...................................................... $ 86,365
Borrowings under AGT's Revolving Credit Facilities........ 135,000
Issuance of 4,427,290 shares of AGT common stock.......... 221,365
Estimated transaction costs directly identified with the
Merger................................................. 9,000
--------
Total pro forma acquisition cost....................... $451,730
Fair value of net assets acquired:
Historical net assets of Devon............................ $157,131
Fair value adjustments to assets acquired and liabilities
assumed:
Cash paid related to stock option buy back............. (26,736)
Deferred tax benefit related to stock buy back......... 10,962
--------
Fair value of net assets acquired........................... 141,357
--------
Excess of cost over fair value of net assets acquired....... $310,373
========
</TABLE>
The Pro Forma Adjustments (Devon) also include the payment of $5 million of
cash, pursuant to the Merger Agreement, for certain recorded liabilities of
Devon to be paid on or prior to the consummation of the Merger.
D. The Pro Forma Adjustments (Devon) represent the elimination of stockholders'
equity of Devon.
E. The Pro Forma Adjustments (FCG) reflect the effects of the increase in
amortization expense due to the increase in goodwill resulting from the
acquisition of FCG. Goodwill related to the FCG acquisition is amortized on
a straight line basis over the period to be benefited, which is estimated to
be 40 years.
F. The Pro Forma Adjustments (FCG) reflect the elimination of interest income
on the portion of the proceeds of the 1997 Offering assumed to have funded
the FCG acquisition.
<PAGE> 22
AGT
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION -- (CONTINUED)
G. The Pro Forma Adjustments (FCG) to the provision for income taxes are
comprised of ($000's):
<TABLE>
<S> <C>
Reversal of historical provision of
AGT....................................................... $(9,140)
FCG....................................................... (56)
-------
(9,196)
Pro Forma Provision(i).................................... 9,835
-------
Pro Forma Adjustment................................... $ 639
=======
</TABLE>
(i) The pro forma provision for income taxes was computed using pro forma
pre-tax amounts and AGT's 1997 effective tax rate of 40.25%.
H. The Pro Forma Adjustments (FCG) to weighted average number of common shares
consist of the following (000's):
<TABLE>
<S> <C>
Shares issued as consideration for FCG...................... 68
Shares issued in the 1997 Offering for which the proceeds
are assumed to have funded the FCG acquisition............ 298
---
Pro Forma Adjustment................................... 366
===
</TABLE>
The unaudited Pro Forma Consolidated Statements of Income are presented as
if the business combinations took place at the beginning of the period
presented; thus, the stock issuance referred to above is considered
outstanding as of the beginning of the period presented for purposes of per
share calculations.
I. The Pro Forma Adjustments (Devon) reflect the effects of the increase in
amortization expense due to the increase in goodwill resulting from the
Merger. Goodwill related to the Merger is amortized on a straight-line basis
over the period to be benefited, which is estimated to be 40 years.
J. The Pro Forma Adjustments (Devon) reflect the elimination of interest income
on the portion of the proceeds of the 1997 Offering assumed to have funded
the Merger.
K. The Pro Forma Adjustments (Devon) reflect interest expense of $8.8 million
on the $135.0 million of borrowings under AGT's Revolving Credit Facilities
at an interest rate of 6.5%, which is the variable rate the Company
estimates to be in effect. Borrowings represent the amount necessary to
finance the remaining purchase price. The effect on pro forma interest
expense assuming a 1/8% variance in the variable interest rate would be
$168,750.
L. The Pro Forma Adjustments (Devon) to the provision for income taxes are
comprised of ($000's);
<TABLE>
<S> <C>
Reversal of provision of:
Pro forma consolidated (AGT & FCG) $ (9,835)
Historical Devon (13,828)
--------
(23,663)
Pro forma provision(i) 19,918
--------
Pro forma adjustment $(3,745)
========
</TABLE>
(i) The pro forma provision for income taxes was computed using pro forma
pretax amounts, adjusted for the non-deductible goodwill of $7.8
million associated with the Merger, and AGT's 1997 effective tax rate
of 40.25%.
<PAGE> 23
AGT
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION -- (CONTINUED)
M. The Pro Forma Adjustments (Devon) to weighted average number of common
shares consist of the following (000's):
<TABLE>
<S> <C>
Shares issued as consideration for Devon.................... 4,427
Shares issued in the 1997 Offering for which the proceeds
are assumed to have funded the Merger..................... 1,409
-----
Pro Forma Adjustment................................... 5,836
=====
</TABLE>
The unaudited Pro Forma Consolidated Statements of Income are presented as
if the business combinations took place at the beginning of the period
presented; thus, the stock issuance referred to above is considered
outstanding as of the beginning of the period presented for purposes of per
share calculations.
March 31, 1998:
N. The Merger:
AGT acquired Devon for the following consideration ($000's):
<TABLE>
<S> <C> <C>
Cash...................................................... $ 86,365
Borrowings under AGT's Revolving Credit Facilities........ 135,000
Issuance of 4,427,290 shares of AGT common stock.......... 221,365
Estimated transaction costs directly identified with the
Merger................................................. 9,000
--------
Total pro forma acquisition cost....................... $451,730
Fair value of net assets acquired:
Historical net assets of Devon............................ $160,560
Fair value adjustments to assets acquired and liabilities
assumed:
Cash paid related to stock option buy back............. (26,736)
Deferred tax benefit related to stock buy back......... 10,962
--------
Fair value of net assets acquired........................... 144,786
--------
Excess of cost over fair value of net assets acquired....... $306,944
========
</TABLE>
The Pro Forma Adjustments (Devon) also include the payment of $5 million of
cash, pursuant to the Merger Agreement, for certain recorded liabilities of
Devon to be paid on or prior to the consummation of the Merger.
O. The Pro Forma Adjustments (Devon) represent the elimination of stockholders'
equity of Devon.
<PAGE> 24
AGT
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION -- (CONTINUED)
P. The Pro Forma Adjustments (Devon) reflect the effects of the increase in
amortization expense due to the increase in goodwill resulting from the
Merger. Goodwill related to the Merger is amortized on a straight-line basis
over the period to be benefited, which is estimated to be 40 years.
Q. The Pro Forma Adjustments (Devon) reflect the elimination of interest income
on the portion of the proceeds of the 1997 Offering assumed to have funded
the Merger.
R. The Pro Forma Adjustments (Devon) reflect interest expense of $2.2 million
on the $135.0 million of borrowings under AGT's Revolving Credit Facilities
at an interest rate of 6.5%, which is the variable rate the Company
estimates to be in effect. Borrowings represent the amount necessary to
finance the remaining purchase price. The effect on pro forma interest
expense assuming a 1/8% variance in the variable interest rate would be
$42,188 for the quarter.
S. The Pro Forma Adjustments (Devon) to the provision for income taxes are
comprised of ($000's):
<TABLE>
<S> <C>
Reversal of historical provision of
AGT....................................................... $(3,873)
Devon..................................................... (1,570)
-------
(5,443)
Pro Forma Provision(i).................................... 4,632
-------
Pro Forma Adjustment................................... $ (811)
=======
</TABLE>
(i) The pro forma provision for income taxes was computed using pro forma
pre-tax amounts, adjusted for the non-deductible goodwill of $1.9
million associated with the Merger, and AGT's 1998 effective tax rate
of 41%.
T. The Pro Forma Adjustment (Devon) to weighted average number of common shares
consists of the 4,427,290 shares of AGT common stock issued as consideration
for the Merger.
<PAGE> 25
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated as of February 13, 1998, by and
among Devon Group, Inc., Applied Graphics Technologies, Inc., and AGT
Acquisition Corp. (Incorporated by reference to Exhibit No. 2.2 forming
part of Registrant's Report on Form 10-K (File No. 0-28208) filed with
the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, for the fiscal year ended December 31, 1997).
4.1 Credit Agreement, dated as of May 27, 1998, among Applied Graphics
Technologies, Inc., Other Institutional Lenders as Initial Lenders,
Fleet Bank, N.A., First Union National Bank, and BankBoston, N.A.
23. Consent of KPMG Peat Marwick LLP.
<PAGE> 26
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.
Dated: June 10, 1998 By: /s/ Louis Salamone, Jr.
-------------------------
Louis Salamone, Jr.
Senior Vice President and
Chief Financial Officer
<PAGE> 1
Exhibit 4.1
$250,000,000
CREDIT AGREEMENT
DATED AS OF MAY 27, 1998
AMONG
APPLIED GRAPHICS TECHNOLOGIES, INC.
AS BORROWER,
THE BANKS, FINANCIAL INSTITUTIONS AND
OTHER INSTITUTIONAL LENDERS NAMED HEREIN,
AS INITIAL LENDERS,
FLEET BANK, N.A.,
AS INITIAL ISSUING BANK, SWING LINE BANK AND ADMINISTRATIVE AGENT,
FIRST UNION NATIONAL BANK,
AS SYNDICATION AGENT,
AND
BANKBOSTON, N.A.,
AS DOCUMENTATION AGENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS......................................... 1
SECTION 1.01. Certain Defined Terms....................................... 1
SECTION 1.02. Computation of Time Periods................................. 23
SECTION 1.03. Accounting Terms............................................ 23
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF
CREDIT.................................................................... 23
SECTION 2.01. The Advances................................................ 23
(a) The Revolving Credit Advances................................. 23
(b) The Acquisition Line Advances................................. 23
(c) The Swing Line Advances....................................... 24
(d) Letters of Credit............................................. 24
SECTION 2.02. Making the Advances......................................... 25
SECTION 2.03. Issuance of and Drawings and Reimbursement
Under Letters of Credit..................................... 27
(a) Request for Issuance.......................................... 27
(b) Letter of Credit Reports...................................... 28
(c) Drawing and Reimbursement..................................... 28
(d) Failure to Make Letter of Credit Advances..................... 29
SECTION 2.04. Repayment of Advances....................................... 29
(a) Revolving Credit Advances..................................... 29
(b) Acquisition Line Advances..................................... 29
(c) Swing Line Advances........................................... 30
(d) Letter of Credit Advances..................................... 30
SECTION 2.05. Termination or Reduction of the Commitments................. 31
(a) Optional...................................................... 31
(b) Mandatory..................................................... 31
SECTION 2.06. Prepayments and Repayments.................................. 31
(a) Optional...................................................... 31
(b) Mandatory..................................................... 32
(c) Application of Prepayments and Repayments..................... 32
SECTION 2.07. Interest.................................................... 33
(a) Scheduled Interest............................................ 33
(b) Default Interest.............................................. 33
(c) Notice of Interest Rate....................................... 34
SECTION 2.08. Fees........................................................ 34
(a) Commitment Fees............................................... 34
(b) Letter of Credit Fees......................................... 34
(c) Administrative Agent's Fees................................... 35
SECTION 2.09. Conversion of Advances...................................... 35
(a) Optional...................................................... 35
(b) Mandatory..................................................... 35
SECTION 2.10. Increased Costs, Etc........................................ 36
SECTION 2.11. Payments and Computations................................... 37
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 2.12. Taxes....................................................... 38
SECTION 2.13. Sharing of Payments, Etc.................................... 40
SECTION 2.14. Use of Proceeds............................................. 41
SECTION 2.15. Defaulting Lenders.......................................... 41
SECTION 2.16. Regulation U and Regulation G............................... 43
ARTICLE III CONDITIONS OF LENDING.................................................. 44
SECTION 3.01. Conditions Precedent to Initial Extension of Credit......... 44
SECTION 3.02. Conditions Precedent to Each Borrowing and Issuance......... 47
SECTION 3.03. Determinations Under Section 3.01........................... 47
ARTICLE IV REPRESENTATIONS AND WARRANTIES.......................................... 48
SECTION 4.01. Representations and Warranties of the Borrower.............. 48
ARTICLE V COVENANTS OF THE BORROWER AND THE SUBSIDIARIES........................... 52
SECTION 5.01. Affirmative Covenants....................................... 52
(a) Compliance with Law........................................... 53
(b) Payment of Taxes, Etc......................................... 53
(c) Compliance with Environmental Laws............................ 53
(d) Maintenance of Insurance...................................... 53
(e) Preservation of Corporate Existence, Etc...................... 53
(f) Visitation Rights............................................. 53
(g) Keeping of Books.............................................. 53
(h) Maintenance of Properties, Etc................................ 54
(i) Performance of Material Contracts............................. 54
(j) Transactions with Affiliates.................................. 54
(k) Agreement to Execute Guaranty................................. 54
(l) Interest Rate Protection...................................... 54
(m) Year 2000 Compatibility....................................... 54
SECTION 5.02. Negative Covenants.......................................... 54
(a) Liens, Etc.................................................... 54
(b) Debt.......................................................... 55
(c) [Intentionally omitted]....................................... 56
(d) Fundamental Changes........................................... 56
(e) Sales, Etc. of Assets......................................... 57
(f) Investments in Other Persons.................................. 57
(g) Dividends, Etc................................................ 58
(h) Change in Nature of Business.................................. 58
(i) Charter Amendments............................................ 58
(j) Accounting Changes............................................ 59
(k) Prepayments, Etc. of Debt..................................... 59
(l) Amendment, Etc. of Material Contracts......................... 59
(m) Negative Pledge............................................... 59
(n) Partnerships, New Subsidiaries................................ 59
(o) Speculative Transactions...................................... 59
(p) Capital Expenditures.......................................... 59
(q) Issuance of Stock............................................. 60
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
SECTION 5.03. Reporting Requirements...................................... 60
(a) Default Notice................................................ 61
(b) Monthly Financials............................................ 61
(c) Quarterly Financials.......................................... 61
(d) Annual Financials............................................. 61
(e) Annual Forecasts.............................................. 62
(f) ERISA Events and ERISA Reports................................ 62
(g) Plan Terminations............................................. 62
(h) [Intentionally Omitted]....................................... 62
(i) Litigation.................................................... 62
(j) Securities Reports............................................ 63
(k) Agreement Notices............................................. 63
(l) Environmental Conditions...................................... 63
(m) Insurance..................................................... 63
(n) Management Letters............................................ 63
(o) Permitted Acquisition Documents............................... 63
(p) Other Information............................................. 63
SECTION 5.04. Financial Covenants......................................... 64
(a) Consolidated Total Funded Debt to EBITDA Ratio................ 64
(b) Interest Coverage Ratio....................................... 64
(c) Minimum Net Worth............................................. 64
ARTICLE VI EVENTS OF DEFAULT....................................................... 65
SECTION 6.01. Events of Default........................................... 65
SECTION 6.02. Actions in Respect of the Letters of Credit upon Default.... 67
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE VII THE ADMINISTRATIVE AGENT............................................... 67
SECTION 7.01. Authorization and Action.................................... 67
SECTION 7.02. Agent's Reliance, Etc....................................... 68
SECTION 7.03. Fleet and Affiliates........................................ 68
SECTION 7.04. Lender Party Credit Decision................................ 69
SECTION 7.05. Indemnification............................................. 69
SECTION 7.06. Successor Administrative Agents............................. 70
ARTICLE VIII MISCELLANEOUS......................................................... 71
SECTION 8.01. Amendments, Etc............................................. 71
SECTION 8.02. Notices Etc................................................. 71
SECTION 8.03. No Waiver; Remedies......................................... 73
SECTION 8.04. Costs and Expenses.......................................... 73
SECTION 8.05. Right of Set-off............................................ 75
SECTION 8.06. Binding Effect.............................................. 75
SECTION 8.07. Assignments and Participations.............................. 75
SECTION 8.08. Execution in Counterparts................................... 78
SECTION 8.09. No Liability of the Issuing Bank............................ 78
SECTION 8.10. Confidentiality............................................. 78
SECTION 8.11. JURISDICTION, ETC........................................... 78
SECTION 8.12. GOVERNING LAW............................................... 79
SECTION 8.13. WAIVER OF JURY TRIAL........................................ 79
</TABLE>
iv
<PAGE> 6
EXHIBITS
Exhibit A - Form of Assignment and Acceptance
Exhibit B - Form of Revolving Credit Note
Exhibit C - Form of Acquisition Line Note
Exhibit D - Form of Notice of Borrowing
Exhibit E - Form of Guaranty
Exhibit F - Form of Swing Line Note
SCHEDULES
Schedule I Commitments and Applicable Lending Offices
Schedule 1.01 Devon Properties
Schedule 3.01(a)(v) States in which Loan Parties are Qualified to do
Business
Schedule 3.01(d) Disclosed Litigation
Schedule 4.01(b) Subsidiaries
Schedule 4.01(d) Required Authorizations and Approvals
Schedule 4.01(k) Welfare Plans
Schedule 4.01(o) Certain Agreements
Schedule 4.01(t) Surviving Debt
Schedule 5.02(a)(iii) Liens
Schedule 5.02(f)(vi) Existing Investments
<PAGE> 7
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of May 27, 1998, by and among
APPLIED GRAPHICS TECHNOLOGIES, INC., a Delaware corporation (the "BORROWER"),
the banks, financial institutions and other institutional lenders listed on the
signature pages hereof as the Initial Lenders (the "INITIAL LENDERS"), any
Lender Party hereto, FLEET BANK, N.A., as Initial Issuing Bank (the "INITIAL
ISSUING BANK"), FLEET BANK, N.A., as Swing Line Bank (as hereinafter defined),
and FLEET BANK, N.A., as administrative agent (together with any successor
appointed pursuant to Article VII, the "ADMINISTRATIVE AGENT") for the Lender
Parties (as hereinafter defined).
PRELIMINARY STATEMENTS:
(1) Pursuant to an Agreement and Plan of Merger, dated as of
February 13, 1998, by and among Borrower, AGT Acquisition Corp., a wholly-owned
subsidiary of the Borrower ("AGT ACQUISITION CORP."), and Devon Group, Inc. (the
"COMPANY"), the Borrower has agreed to acquire the Company by means of a merger
of the Company with and into AGT Acquisition Corp., with the surviving entity of
such merger to be AGT Acquisition Corp., which shall, immediately after such
merger, change its name to Devon Group, Inc.
(2) The Borrower has requested that the Lender Parties (as
hereinafter defined) make loans to the Borrower and issue letters of credit
having an aggregate principal and face amount at any one time outstanding of up
to Two Hundred Fifty Million Dollars ($250,000,000), to be used by the Borrower
(i) to finance in part the Devon Acquisition (as hereinafter defined), (ii) to
pay fees and expenses incurred in connection with the Devon Acquisition, (iii)
to provide working capital for the Borrower, (iv) for general corporate purposes
and (v) to finance certain acquisitions by the Borrower or any of its
Subsidiaries, and the Lender Parties (as hereinafter defined) have agreed to
make such loans and issue such letters of credit all on and subject to the terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ACQUISITION LINE ADVANCE" has the meaning specified in Section
2.01(b).
"ACQUISITION LINE BORROWING" means a borrowing consisting of
simultaneous Acquisition Line Advances of the same Type made by the Acquisition
Line Lenders.
<PAGE> 8
"ACQUISITION LINE COMMITMENT" means, with respect to any Acquisition
Line Lender at any time, the amount set forth opposite such Lender's name on
Schedule I hereto under the caption "Acquisition Line Commitment" or, if such
Lender has entered into one or more Assignments and Acceptances, set forth for
such Lender in the Register maintained by the Administrative Agent pursuant to
Section 8.07(d) as such Lender's "Acquisition Line Commitment," as such amount
may be reduced at or prior to such time pursuant to Section 2.04(b) and Section
2.05. The initial aggregate amount of the Lenders' Acquisition Line Commitment
is $75,000,000.
"ACQUISITION LINE FACILITY" means, at any time, the aggregate amount of
the Acquisition Line Lenders' Acquisition Line Commitments at such time.
"ACQUISITION LINE LENDER" means any Lender that has an Acquisition Line
Commitment.
"ACQUISITION LINE NOTE" means a promissory note of the Borrower payable
to the order of any Acquisition Line Lender, in substantially the form of
Exhibit C hereto, evidencing the aggregate indebtedness of the Borrower to such
Lender resulting from the Acquisition Line Advances made by such Lender.
"ACQUISITION LINE TERMINATION DATE" means the earlier of (x) (i) the
Initial Acquisition Line Termination Date or, (ii) if the Initial Acquisition
Line Termination Date is extended pursuant to Section 2.01(b), the third
anniversary of the Closing Date and (y) the Termination Date.
"ACQUISITION PURCHASE PRICE" has the meaning specified in Section 2.14.
"ADMINISTRATIVE AGENT" has the meaning specified in the recital of
parties to this Agreement.
"ADMINISTRATIVE AGENT'S ACCOUNT" means the account of the
Administrative Agent maintained by the Administrative Agent with Fleet at its
office at Fleet Bank, N.A., 1185 Avenue of the Americas, New York, New York
10036, Account No. 1510352, Attention: Loan Administration.
"ADVANCE" means a Revolving Credit Advance, an Acquisition Line
Advance, a Swing Line Advance or a Letter of Credit Advance.
"AFFILIATE" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person. For purposes of this
definition, the term "control" (including the terms "controlling," "controlled
by" and "under common control with") of a Person means the possession, direct or
indirect, of the power to vote 50% or more of the Voting Stock of such Person or
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or otherwise.
"AGT PROPERTIES" means, collectively, the real property including any
buildings and improvements located thereon, of the Borrower located at (x) 1050
W. Bloomington Road, Champaign, Illinois, (y) 1001 W. North Street, Pontiac,
Illinois, and (z) 3116 W. Avenue 32, Los Angeles, California.
"AGT ACQUISITION CORP." has the meaning specified in the Preliminary
Statements.
2
<PAGE> 9
"APPLICABLE LENDING OFFICE" means, with respect to each Lender Party,
such Lender Party's Domestic Lending Office in the case of a Prime Rate Advance
and such Lender Party's Eurodollar Lending Office in the case of a Eurodollar
Rate Advance.
"APPLICABLE MARGIN" means at any date of determination thereof, the
applicable percentage set forth below opposite the applicable ratio of
Consolidated Total Funded Debt to EBITDA determined as set forth below:
Applicable Margin for Revolving Credit Advances
and Acquisition Line Advances
<TABLE>
<CAPTION>
RATIO OF APPLICABLE APPLICABLE
CONSOLIDATED MARGIN FOR MARGIN FOR
TOTAL FUNDED EURODOLLAR PRIME RATE
DEBT/EBITDA RATE ADVANCES ADVANCES
------------ ------------- ----------
<S> <C> <C>
Equal to or greater than
3.00 to 1.00 1.25% 0%
Equal to or greater than
2.25 to 1.00, but less than
3.00 to 1.00 1.00% 0%
Equal to or greater than
1.75 to 1.00, but less than
2.25 to 1.00 .75% 0%
Equal to or greater than
1.25 to 1.00, but less than
1.75 to 1.00 .625% 0%
Less than 1.25 to 1.00 .50% 0%
</TABLE>
The Applicable Margin for each Eurodollar Rate Advance shall be determined on a
quarterly basis by reference to the ratio of Consolidated Total Funded Debt to
EBITDA for the preceding four (4) full fiscal quarters, as reflected on the
financial statements provided to the Administrative Agent pursuant to Section
5.03(c) or (d), three (3) Business Days after the date on which the
Administrative Agent receives the foregoing financial statements, together with
a certificate of a Responsible Officer of the Borrower demonstrating the ratio
of Consolidated Total Funded Debt to EBITDA. If the Borrower has not submitted
to the Administrative Agent the information described above as and when required
under Section 5.03(c) or (d), as the case may be, the Administrative Agent may
determine, in its reasonable judgment, the ratio referred to above that would
have been in effect as at such date, and, consequently, the Applicable Margin in
effect for the period commencing on such date until such time as the Borrower
submits to the Administrative Agent the information so required, and within
three (3) Business Days after receipt thereof the Applicable Margin shall be
adjusted retroactively for the relevant period.
3
<PAGE> 10
Notwithstanding the above schedule, prior to the delivery to the Administrative
Agent of the Borrower's financial statements for its fiscal quarter ending June
30, 1998, the Applicable Margin for a Revolving Credit Advance and an
Acquisition Line Advance shall be .75% for a Eurodollar Advance.
"ASSET DISPOSITION" has the meaning specified in Section 2.06(b).
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered
into by a Lender Party and an Eligible Assignee, and accepted by the
Administrative Agent, in accordance with Section 8.07 and in substantially the
form of Exhibit A hereto.
"AVAILABLE AMOUNT" of any Letter of Credit means, at any time, the
maximum amount available to be drawn under such Letter of Credit at such time
(assuming compliance at such time with all conditions to drawing).
"BANK HEDGE AGREEMENT" means any Hedge Agreement required or permitted
under this Agreement that is entered into by and between the Borrower and any
Hedge Bank.
"BORROWER" has the meaning specified in the recital of parties to this
Agreement.
"BORROWER'S ACCOUNT" means an account of the Borrower maintained by the
Borrower with Fleet Bank, N.A.
"BORROWING" means a Revolving Credit Borrowing, an Acquisition Line
Borrowing or a Swing Line Borrowing.
"BUSINESS DAY" means a day of the year on which banks are not required
or authorized by law to close in New York, New York and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings in U.S.
dollars are carried on in the London interbank market.
"CAPITAL EXPENDITURES" means, for any Person for any period, the sum of
all expenditures made, directly or indirectly, by such Person or any of its
Subsidiaries during such period for equipment, fixed assets, real property or
improvements, or for replacements or substitutions therefor or additions
thereto, that have been or should be, in accordance with GAAP, reflected as
additions to property, plant or equipment on a Consolidated balance sheet of
such Person.
"CAPITALIZED LEASES" means all leases that have been or should be, in
accordance with GAAP, recorded as capitalized leases.
"CASH EQUIVALENTS" means any of the following, to the extent owned by
the Borrower or any of its Subsidiaries free and clear of all Liens:
(i) readily marketable direct obligations of the government of
the United States or any agency or instrumentality thereof or obligations
unconditionally guaranteed by the full faith and credit of the Government of the
United States or any agency or instrumentality thereof having a maturity of not
greater than twelve (12) months from the date of issuance thereof;
4
<PAGE> 11
(ii) insured certificates of deposit, bankers' acceptances or
time deposits (including, without limitation, Eurodollar denominated and Yankee
issues) having a maturity of not greater than twelve (12) months from the date
of issuance thereof with any commercial bank or financial institution having
combined capital and surplus of at least $1 billion and a rating of at least
"P-1" (or the then equivalent grade) by Moody's Investors Service, Inc. or "A-1"
(or the then equivalent grade) by Standard & Poor's Ratings Group;
(iii) corporate securities and commercial paper having a
maturity of not greater than twelve (12) months from the date of issuance and
rated at least "P-1" (or the then equivalent grade) by Moody's Investors
Service, Inc. or "A-1" (or the then equivalent grade) by Standard & Poor's
Ratings Group;
(iv) short-term tax exempt securities including municipal
notes, commercial paper, auction rate floaters, and floating rate notes rated at
least "P-1" (or the then equivalent grade) by Moody's Investors Service, Inc. or
"A-1" (or the then equivalent grade) by Standard & Poor's Ratings Group, and
bonds rated at least "AA" (or the then equivalent grade) by Standard & Poor's
Ratings Group;
(v) pre-refunded municipal bonds escrowed to maturity and
backed by U.S. Treasury securities;
(vi) repurchase agreements covering U.S. Treasury or U.S.
government agency securities valued at not less favorably than 102% of market
value with a term of not more than seven (7) days with major banks and dealers
that are recognized as "primary dealers" by the Federal Reserve Bank of New
York;
(vii) tax exempt preferred stock or bonds issued with a
rate-reset mechanism and a maximum term of 180 days and rated at least "AAA" (or
the then equivalent grade) by Moody's Investors Service, Inc.; or
(viii) money market mutual funds that offer daily purchase and
redemption, maintain a constant share price, are 'no-load' funds and have a
constant $1.00 net asset value.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended from time
to time.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System maintained by the U.S. Environmental Protection
Agency.
"CLOSING DATE" means the date on which all of the conditions precedent
set forth in Section 3.01 to the Initial Extension of Credit shall have been
satisfied or waived.
"COMMITMENT" means a Revolving Credit Commitment, an Acquisition Line
Commitment or a Letter of Credit Commitment.
"COMPANY" has the meaning specified in the Preliminary Statements.
5
<PAGE> 12
"CONFIDENTIAL INFORMATION" means information that the Borrower
furnishes to the Administrative Agent or any Lender Party in a writing
designated as confidential, but does not include any such information that is or
becomes generally available to the public other than as a result of a breach by
the Administrative Agent or any Lender Party of its obligations hereunder or
that is or becomes available to the Administrative Agent or such Lender Party
from a source other than the Borrower that is not, to the best of the
Administrative Agent's or such Lender Party's knowledge, acting in violation of
a confidentiality agreement with the Borrower.
"CONSOLIDATED" refers to the consolidation of accounts, in accordance
with GAAP, of the Borrower and all of its Subsidiaries.
"CONVERSION" , "CONVERT" and "CONVERTED" each refer to a conversion of
Advances of one Type into Advances of the other Type pursuant to Section 2.09 or
2.10.
"DEBT" of any Person means, without duplication,
(i) all indebtedness of such Person for borrowed money,
(ii) all Obligations of such Person for the deferred
purchase price of property or services,
(iii) all Obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments,
(iv) all Obligations of such Person created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property),
(v) all Obligations of such Person as lessee under
Capitalized Leases,
(vi) all Obligations, contingent or otherwise, of such
Person in respect of letters of credit or similar facilities,
(vii) all Obligations of such Person to purchase, redeem,
retire, defease or otherwise make any payment in respect of any capital stock of
or other ownership or profit interest in such Person or any other Person or any
warrants, rights or options to acquire such capital stock,
(viii) all Debt of others referred to in clauses (i) through
(vii) above or clause (ix) below guaranteed directly or indirectly in any manner
by such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (A) to pay or purchase such Debt or to advance or supply
funds for the payment or purchase of such Debt, (B) to purchase, sell or lease
(as lessee or lessor) property, or to purchase or sell services, primarily for
the purpose of enabling the debtor to make payment of such Debt or to assure the
holder of such Debt against loss, (C) to supply funds to or in any other manner
invest in the debtor (including any agreement to pay for property or services
irrespective of whether such property is received or such services are rendered)
or (D) otherwise to assure a creditor against loss, and
6
<PAGE> 13
(ix) all Debt referred to in clauses (i) through (viii)
above of another Person secured by (or for which the holder of such Debt has an
existing right, contingent or otherwise, to be secured by) any Lien on property
(including, without limitation, accounts, contract rights or inventory) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Debt.
"DEFAULT" means any Event of Default or any event that would constitute
an Event of Default but for the requirement that notice be given or time elapse
or both.
"DEFAULTED ADVANCE" means, with respect to any Lender Party at any
time, the portion of any Advance required to be made by such Lender Party to the
Borrower pursuant to Section 2.01 or 2.02 at or prior to such time which has not
been made by such Lender Party or by the Administrative Agent for the account of
such Lender Party pursuant to Section 2.02(e) as of such time. In the event that
a portion of a Defaulted Advance shall be deemed made pursuant to Section
2.15(a), the remaining portion of such Defaulted Advance shall be considered a
Defaulted Advance originally required to be made pursuant to Section 2.01 on the
same date as the Defaulted Advance so deemed made in part.
"DEFAULTED AMOUNT" means, with respect to any Lender Party at any time,
any amount required to be paid by such Lender Party to the Administrative Agent
or any other Lender Party hereunder or under any other Loan Document at or prior
to such time which has not been so paid as of such time, including, without
limitation, any amount required to be paid by such Lender Party to (i) the Swing
Line Bank pursuant to Section 2.02(b) to repay a portion of a Swing Line Advance
made by the Swing Line Bank, (ii) the Issuing Bank pursuant to Section 2.03(c)
to purchase a portion of a Letter of Credit Advance made by the Issuing Bank,
(iii) the Administrative Agent pursuant to Section 2.02(e) to reimburse the
Administrative Agent for the amount of any Advance made by the Administrative
Agent for the account of such Lender Party, (iv) any other Lender Party pursuant
to Section 2.13 to purchase any participation in Advances owing to such other
Lender Party and (v) the Administrative Agent or the Issuing Bank pursuant to
Section 7.05 to reimburse the Administrative Agent or the Issuing Bank for such
Lender Party's ratable share of any amount required to be paid by the Lender
Parties to the Administrative Agent or the Issuing Bank as provided therein. In
the event that a portion of a Defaulted Amount shall be deemed paid pursuant to
Section 2.15(b), the remaining portion of such Defaulted Amount shall be
considered a Defaulted Amount originally required to be paid hereunder or under
any other Loan Document on the same date as the Defaulted Amount so deemed paid
in part.
"DEFAULTING LENDER" means, at any time, any Lender Party that, at such
time, (i) owes a Defaulted Advance or a Defaulted Amount or (ii) shall take any
action or be the subject of any action or proceeding of a type described in
Section 6.01(f).
"DEVON ACQUISITION" means the acquisition by AGT Acquisition Corp. of
the Company by means of the Merger as contemplated by the Devon Acquisition
Documents.
"DEVON ACQUISITION DOCUMENTS" means the Merger Agreement and all other
documents and agreements executed and delivered in connection with the Devon
Acquisition.
"DEVON PROPERTIES" means, collectively, the real property including any
buildings and improvements located thereon described on Schedule 1.01 hereto.
7
<PAGE> 14
"DEVON SUBSIDIARY GUARANTORS" means Portal Publications, Ltd., The Winn
Art Group, Inc., Black Dot Graphics, Inc., Orent GraphicArts, Inc.,
Typo-Graphics, Inc., Ambrosi & Associates, Inc., West Coast Creative, Inc., ABD
Group, Inc., Meridian Retail, Inc., Taproot Interactive, Inc., Proof
Positive/Farrowlyne Associates, Inc., and One 2 One Inc.
"DEVON SUBSIDIARY GUARANTY" has the meaning specified in Section
3.01(a)(iii).
"DEVON SUBSIDIARIES" means all the Subsidiaries of the Company.
"DISCLOSED LITIGATION" has the meaning specified in Section 3.01(d).
"DISPOSAL" means the discharge, deposit, injection, dumping, spilling,
leaking or placing of any solid waste or hazardous waste, as those terms are
defined by any federal, state, local or foreign law, into or on any land or
water so that such solid waste or hazardous waste or any constituents thereof
may enter the environment or be emitted into the air or discharged into any
waters, including ground waters.
"DOMESTIC LENDING OFFICE" means, with respect to any Lender Party, the
office of such Lender Party specified as its "Domestic Lending Office" opposite
its name on Schedule I hereto or in the Assignment and Acceptance pursuant to
which it became a Lender Party, as the case may be, or such other office of such
Lender Party as such Lender Party may from time to time specify to the Borrower
and the Administrative Agent.
"DOMESTIC SUBSIDIARY" means any Subsidiary organized under the laws of
the United States of America or any State thereof.
"EBITDA" means, for any period, the sum, determined on a Consolidated
basis without duplication, of (A)(i) net income (or net loss), (ii) interest
expense, (iii) income tax expense, (iv) depreciation expense, (v) amortization
expense, (vi) non-cash charges and (vii) the legal and accounting costs and
expenses incurred in connection with any Permitted Acquisition completed after
the date of this Agreement, in each case determined in accordance with GAAP for
such period; provided, however, that net income (or net loss) shall be computed
without giving effect to extraordinary losses or gains, plus (B) the pro forma
effect on EBITDA for such period of any Permitted Acquisition consummated by the
Borrower or any of its Subsidiaries during the most recent twelve month period
preceding the date of determination, but solely for the number of months
immediately preceding the consummation of the applicable Permitted Acquisition,
which number equals twelve (12) less the number of months following the
consummation of the applicable Permitted Acquisition to such date of
determination.
"ELIGIBLE ASSIGNEE" means with respect to any Facility (other than the
Letter of Credit Facility), (A) a Lender; (B) an Affiliate of a Lender; and (C)
subject to the prior approval of the Administrative Agent and, so long as no
Default or Event of Default shall have occurred and be continuing, the Borrower,
such approval not to be unreasonably withheld or delayed, (i) a commercial bank
organized under the laws of the United States, or any State thereof, and having
total assets in excess of $500,000,000; (ii) a savings and loan association or
savings bank organized under the laws of the United States, or any State
thereof, and having total assets in excess of $500,000,000; (iii) a commercial
bank organized under the laws of any other country that is a member of the OECD
or has concluded special lending arrangements with the International Monetary
Fund associated with its general arrangements to borrow or of the Cayman
Islands, or a
8
<PAGE> 15
political subdivision of any such country, and having total assets in excess of
$500,000,000, so long as such bank is acting through a branch or agency located
in the United States; (iv) the central bank of any country that is a member of
the OECD; and (v) a finance company, insurance company or other financial
institution or fund (whether a corporation, partnership, trust or other entity)
that is engaged in making, purchasing or otherwise investing in commercial loans
in the ordinary course of its business and having total assets in excess of
$500,000,000; and, with respect to the Letter of Credit Facility, a Person that
is an Eligible Assignee under subclause (i) or (iii) of clause (C) of this
definition and is approved by the Administrative Agent and the Borrower, such
approval not to be unreasonably withheld or delayed; provided, however, that no
Loan Party or Affiliate of a Loan Party shall qualify as an Eligible Assignee
under this definition.
"ENVIRONMENTAL ACTION" means any action, suit, demand, demand letter,
claim, notice of non-compliance or violation, notice of liability or potential
liability, investigation, proceeding, consent order or consent agreement
relating in any way to any Environmental Law, any Environmental Permit or
Hazardous Material or arising from alleged injury or threat to public health and
safety or the environment, including, without limitation, (i) by any
governmental or regulatory authority or third party for enforcement, cleanup,
Removal, Response, Remedial or other actions or damages and (ii) by any
governmental or regulatory authority or third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"ENVIRONMENTAL LAW" means any international or transnational law,
federal, state, local or foreign statute, law, ordinance, rule, regulation,
code, order, writ, judgment, injunction, decree or judicial or agency
interpretation, policy or guidelines relating to pollution or protection of the
environment or natural resources, including, without limitation, those relating
to the use, handling, transportation, treatment, storage, disposal, threatened
release, release or discharge of Hazardous Materials.
"ENVIRONMENTAL PERMIT" means any permit, approval, identification
number, license or other authorization required under any Environmental Law.
"EQUITY ISSUANCE" means any issuance or sale by the Borrower or any of
its Subsidiaries of any of its capital stock or other equity securities or any
obligations convertible into or exchangeable for, or giving any Person a right,
option or warrant to acquire such securities or such convertible or exchangeable
obligations; provided, however, that for purposes of determination of Net Cash
Proceeds under Section 2.06(b), the term "Equity Issuance" shall not include any
issuance or sale of (a) capital stock of the Borrower to any Person as
consideration paid in connection with any Permitted Acquisition; (b) capital
stock to qualify any director of the Borrower or any of its Subsidiaries if
required by applicable law; (c) capital stock or other equity securities to
directors, management and employees and other eligible participants of the
Borrower or any of its Subsidiaries, pursuant to a stock purchase, stock option
or similar incentive plan of the Borrower or any of its Subsidiaries, or any
exercise of options issued pursuant thereto; (d) capital stock of any Subsidiary
of the Borrower to the Borrower or any other Subsidiary of the Borrower; (e)
capital stock of the Borrower to any Person for cash, if, and only if, in
respect of this clause (e), such Net Cash Proceeds are applied towards the
payment of an Acquisition Purchase Price as follows: (i) if the offering
documents for such issuance or sale identify a specific acquisition transaction,
within ten (10) days after the consummation of such acquisition transaction (or
the announcement of the termination of any negotiation related to such
acquisition transaction) or, (ii) if the offering documents for such issuance or
sale do not identify a specific acquisition transaction, within one hundred
twenty (120) days after the date of receipt by the Borrower of such Net Cash
Proceeds, and (f) warrants or capital
9
<PAGE> 16
stock required to be issued in connection with the acquisition of the business
of Digital Imagination Inc.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA AFFILIATE" means any Person that for purposes of Title IV of
ERISA is a member of the controlled group of any Loan Party, or under common
control with any Loan Party, within the meaning of Section 414 of the Internal
Revenue Code, and, in respect of the Borrower and its Subsidiaries, the
definition "ERISA Affiliate" shall exclude Daily News, L.P.
"ERISA EVENT" means (i) (y) the occurrence of a reportable event,
within the meaning of Section 4043 of ERISA, with respect to any Plan unless the
30-day notice requirement with respect to such event has been waived by the
PBGC, or (z) the requirements of subsection (1) of Section 4043(b) of ERISA
(without regard to subsection (2) of such Section) are met with respect to a
contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and
an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c)
of ERISA is reasonably expected to occur with respect to such Plan within the
following 30 days; (ii) the application for a minimum funding waiver with
respect to a Plan; (iii) the provision by the administrator of any Plan of a
notice of intent to terminate such Plan under ERISA Section 4041(c), pursuant to
Section 4041(a)(2) of ERISA (including any such notice with respect to a plan
amendment referred to in Section 4041(e) of ERISA); (iv) the cessation of
operations at a facility of any Loan Party or any ERISA Affiliate in the
circumstances described in Section 4062(e) of ERISA; (v) the withdrawal by any
Loan Party or any ERISA Affiliate from a Multiple Employer Plan during a plan
year for which it was a substantial employer, as defined in Section 4001(a)(2)
of ERISA; (vi) the conditions for imposition of a lien under Section 302(f) of
ERISA shall have been met with respect to any Plan; (vii) the adoption of an
amendment to a Plan requiring the provision of security to such Plan pursuant to
Section 307 of ERISA; or (viii) the institution by the PBGC of proceedings to
terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any
event or condition described in Section 4042 of ERISA that constitutes grounds
for the termination of, or the appointment of a trustee to administer, such
Plan.
"EUROCURRENCY LIABILITIES" has the meaning specified in Regulation D of
the Board of Governors of the Federal Reserve System, as in effect from time to
time.
"EURODOLLAR LENDING OFFICE" means, with respect to any Lender Party,
the office of such Lender Party specified as its "Eurodollar Lending Office"
opposite its name on Schedule I hereto or in the Assignment and Acceptance
pursuant to which it became a Lender Party (or, if no such office is specified,
its Domestic Lending Office), or such other office of such Lender Party as such
Lender Party may from time to time specify to the Borrower and the
Administrative Agent.
10
<PAGE> 17
"EURODOLLAR RATE" means, for any Interest Period for all Eurodollar
Rate Advances comprising part of the same Borrowing, an interest rate per annum
(rounded upward, if necessary, to the nearest 1/32 of one percent) as determined
on the basis of the offered rates for deposits in U.S. dollars, for a period of
time comparable to such Interest Period which appears on the Telerate Page 3750
as of 11:00 a.m. (New York time) two Business Days before the first day of such
Interest Period; provided, however, that if the rate described above does not
appear on the Telerate System on any applicable interest determination date, the
Eurodollar Rate shall be the rate (rounded upward as described above, if
necessary) for deposits in U.S. dollars for a period substantially equal to the
interest period on the Reuters Page "LIBO" (or such other page as may replace
the LIBO page on that service for the purpose of displaying such rates), as of
11:00 a.m. (New York time) two Business Days before the first day of such
Interest Period.
If both the Telerate and Reuters system are unavailable, then the rate
for that date will be determined on the basis of the offered rates for deposits
in U.S. dollars for a period of time comparable to such Interest Period which
are offered by four major banks in the London interbank market at approximately
11:00 a.m. (New York time) two Business Days before the first day of such
Interest Period as selected by the Administrative Agent. The principal London
office of each of the four major London banks will be requested to provide a
quotation of its U.S. dollar deposit offered rate. If at least two such
quotations are provided, the rate for that date will be the arithmetic mean of
the quotations. If fewer than two quotations are provided as requested, the rate
for that date will be determined on the basis of the rates quoted for loans in
U.S. dollars to leading European banks for a period of time comparable to such
Interest Period offered by major banks in New York City at approximately 11:00
a.m. (New York time) two Business Days before the first day of such Interest
Period. In the event that the Administrative Agent is unable to obtain any such
quotation as provided above, it will be deemed that the Eurodollar Rate for such
Interest Rate cannot be determined.
In the event that the Board of Governors of the Federal Reserve System
shall impose a Eurodollar Rate Reserve Percentage with respect to Eurocurrency
Liabilities, the Eurodollar Rate for an Interest Period shall be equal to the
amount determined above for such Interest Period divided by a percentage equal
to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period.
"EURODOLLAR RATE ADVANCE" means an Advance that bears interest as
provided in Section 2.07(a)(ii).
"EURODOLLAR RATE RESERVE PERCENTAGE" means, for any Interest Period for
all Eurodollar Rate Advances comprising part of the same Borrowing, the reserve
percentage applicable two Business Days before the first day of such Interest
Period under regulations issued from time to time by the Board of Governors of
the Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any emergency, supplemental
or other marginal reserve requirement) for a member bank of the Federal Reserve
System in New York City with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate on
Eurodollar Rate Advances is determined) having a term equal to such Interest
Period.
"EVENTS OF DEFAULT" has the meaning specified in Section 6.01.
"EXTRAORDINARY RECEIPT" means any cash received by or paid to or for
the account of any Person not in the ordinary course of business, including,
without limitation, pension plan reversions,
11
<PAGE> 18
proceeds of casualty insurance and condemnation awards (and payments in lieu
thereof), excluding proceeds of any other insurance; provided, however, that an
Extraordinary Receipt shall not include cash receipts received from proceeds of
casualty insurance, condemnation awards (or payments in lieu thereof) or
indemnity payments to the extent that such proceeds, awards or payments (i) in
respect of loss or damage to equipment, fixed assets, inventory or real
property, are applied (or in respect of which expenditures were previously
incurred) to replace or repair such equipment, fixed assets, inventory or real
property so long as such application is made or committed to be made within one
hundred twenty (120) days (or such longer time as may be commercially reasonable
in the circumstances) after such Person's receipt of such proceeds, awards or
payments; or (ii) are received by any Person in respect of any third party claim
against such Person and applied to pay (or to reimburse such Person for its
prior payment of) such claim and the costs and expenses of such Person with
respect thereto.
"FACILITY" means the Revolving Credit Facility, the Acquisition Line
Facility, the Letter of Credit Facility or the Swing Line Facility.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"FEE LETTER" has the meaning specified in Section 2.08(c).
"FIRST ACQUISITION LINE ADVANCE PERIOD" means the period from the
Closing Date to and including the second anniversary of the Closing Date.
"FISCAL YEAR" means a fiscal year of the Borrower and its Consolidated
Subsidiaries ending on December 31 in any calendar year.
"FLEET" means Fleet Bank, N.A. in its capacity as a Lender or Issuing
Bank or Swing Line Bank hereunder.
"FOREIGN SUBSIDIARY" means any Subsidiary organized under the laws of
any jurisdiction other than the United States of America or any State thereof.
"GAAP" has the meaning specified in Section 1.03.
"GUARANTEED OBLIGATIONS" has the meaning specified in the Guaranty.
"GUARANTORS" means (i) each Domestic Subsidiary of the Borrower, (ii)
each of the Devon Subsidiary Guarantors, and (iii) each Person which shall have
executed and delivered or become a party to a Guaranty hereunder.
"GUARANTY" shall have the meaning specified in Section 5.01(k). For
purposes of this definition, Guaranty shall also mean the Subsidiary Guaranty
and the Devon Subsidiary Guaranty.
12
<PAGE> 19
"HAZARDOUS MATERIALS" means (i) petroleum or petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials, polychlorinated biphenyls and radon gas and (ii) any other chemicals,
materials or substances designated, classified or regulated as hazardous or
toxic or as a pollutant or contaminant under any Environmental Law.
"HEDGE AGREEMENTS" means interest rate swap, cap or collar agreements,
interest rate future or option contracts, currency swap agreements, currency
future or option contracts and other similar agreements.
"HEDGE BANK" means any Lender Party in its capacity as a party to a
Bank Hedge Agreement.
"INDEMNIFIED PARTY" has the meaning specified in Section 8.04(b).
"INFORMATION MEMORANDUM" means the information memorandum, dated May 6,
1998, delivered by the Administrative Agent to the Initial Lenders.
"INITIAL ACQUISITION LINE TERMINATION DATE" means the second
anniversary of the Closing Date.
"INITIAL EXTENSION OF CREDIT" means the earlier to occur of the initial
Borrowing and the initial issuance of a Letter of Credit.
"INITIAL ISSUING BANK" has the meaning specified in the recitals of the
parties to this Agreement.
"INITIAL LENDERS" has the meaning specified in the recital of parties
to this Agreement.
"INITIAL OUTSTANDING ACQUISITION LINE ADVANCES" has the meaning
specified in Section 2.01(b).
"INSUFFICIENCY" means, with respect to any Plan, the amount, if any, of
its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA.
"INTEREST EXPENSE" means, with respect to any Person for any period,
interest expense on all Debt of such Person for such period net of interest
income for such period, whether paid or accrued, determined on a Consolidated
basis for such Person and its Subsidiaries and in accordance with GAAP, and
including, without limitation, (i) in the case of the Borrower, interest expense
in respect of Debt resulting from Advances, (ii) the interest component of all
obligations under Capitalized Leases, (iii) commissions, discounts and other
fees and charges payable in connection with letters of credit (including,
without limitation, Letters of Credit), (iv) the net payment, if any, payable in
connection with Hedge Agreements less the net credit, if any, received in
connection with Hedge Agreements and (v) all fees paid by the Borrower pursuant
to Section 2.08(a) (other than non-cash amortization related thereto).
"INTEREST PERIOD" means, for each Eurodollar Rate Advance comprising
part of the same Borrowing, the period commencing on the date of such Eurodollar
Rate Advance or the date of the Conversion of any Advance into such Eurodollar
Rate Advance, and ending on the last day of the period selected by the Borrower
pursuant to the provisions below and, thereafter, each subsequent
13
<PAGE> 20
period commencing on the last day of the immediately preceding Interest Period
and ending on the last day of the period selected by the Borrower pursuant to
the provisions below. The duration of each such Interest Period shall be one,
two, three or six months, as the Borrower may, upon notice received by the
Administrative Agent not later than 1:00 p.m. (New York time) on the third
Business Day prior to the first day of such Interest Period, select; provided,
however, that:
(a) The Borrower may not select any Interest Period with
respect to any Eurodollar Rate Advance under a Facility that ends after
any principal repayment installment date for such Facility unless,
after giving effect to such selection, the aggregate principal amount
of Prime Rate Advances and of Eurodollar Rate Advances having Interest
Periods that end on or prior to such principal repayment installment
date for such Facility shall be at least equal to the aggregate
principal amount of Advances under such Facility due and payable on or
prior to such date;
(b) Whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day; provided, however, that, if such extension would cause
the last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on the
next preceding Business Day;
(c) Whenever the first day of any Interest Period occurs on a
day of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months in
such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month; and
(d) Until the earlier of (i) one hundred twenty (120) days
after the Closing Date, or (ii) the date on which the Administrative
Agent notifies the Borrower that the syndication of the Facilities has
been completed, only Interest Periods with a duration of seven days
shall be available to the Borrower for Eurodollar Rate Advances.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"INVENTORY" of any Person means all of such Person's now owned and
hereafter acquired inventory, goods, merchandise, and other personal property,
wherever located, to be furnished under any contract of service or held for sale
or lease, all returned goods, raw materials, other materials and supplies of any
kind, nature or description which are or might be consumed in such Person's
business or used in connection with the packing, shipping, advertising, selling
or finishing of such goods, merchandise and such other personal property, and
all documents of title or other documents representing them.
"INVESTMENT" in any Person means any loan or advance to such Person,
any purchase or other acquisition of any capital stock or other ownership or
profit interest, warrants, rights, options, obligations or other securities of
such Person, any capital contribution to such Person or any other investment in
such Person.
"ISSUING BANK" means the Initial Issuing Bank and each Eligible
Assignee to which the Letter of Credit Commitment hereunder has been assigned
pursuant to Section 8.07.
14
<PAGE> 21
"L/C RELATED DOCUMENTS" has the meaning specified in Section
2.04(d)(ii)(A).
"LENDER PARTY" means any Lender, the Issuing Bank or the Swing Line
Bank.
"LENDER(S)" means the Initial Lender(s) and each Person that shall
become a Lender hereunder pursuant to Section 8.07.
"LETTER OF CREDIT" means any Letter of Credit issued hereunder (as
specified in Section 2.03(a)).
"LETTER OF CREDIT ADVANCE" means an advance made by the Issuing Bank or
any Revolving Credit Lender pursuant to Section 2.03(c).
"LETTER OF CREDIT AGREEMENT" has the meaning specified in Section
2.03(a).
"LETTER OF CREDIT COMMITMENT" means, with respect to the Issuing Bank,
the amount set forth opposite the Issuing Bank's name on Schedule I hereto under
the caption "Letter of Credit Commitment" or, if the Issuing Bank has entered
into one or more Assignments and Acceptances, set forth for the Issuing Bank in
the Register maintained by the Administrative Agent pursuant to Section 8.07(d)
as the Issuing Bank's "Letter of Credit Commitment," as such amount may be
reduced pursuant to Section 2.05.
"LETTER OF CREDIT FACILITY" means, at any time, an amount equal to the
amount of the Issuing Bank's Letter of Credit Commitment at such time, as such
amount may be reduced at or prior to such time pursuant to Section 2.05.
"LIEN" means any lien, security interest or other charge or encumbrance
of any kind, or any other type of preferential arrangement, including, without
limitation, the lien or retained security title of a conditional vendor and any
easement, right of way or other encumbrance on title to real property.
"LOAN DOCUMENTS" means (i) this Agreement, (ii) the Notes, (iii) the
Subsidiary Guaranty, (iv) the Devon Subsidiary Guaranty, (v) each Guaranty
delivered pursuant to Section 5.01(k), (vi) each Letter of Credit Agreement,
(vii) each Bank Hedge Agreement, and (viii) all other agreements, instruments
and documents executed in connection with the foregoing, in each case as the
same may at any time be amended, supplemented, restated or otherwise modified
and in effect.
"LOAN PARTY" means each of the Borrower and the Guarantors.
"MARGIN STOCK" has the meaning specified in Regulations G, T, U and X.
"MATERIAL ADVERSE EFFECT" means any fact of circumstance which (a)
materially and adversely affects the business or financial condition of the
Borrower and its Subsidiaries, taken as a whole, or (b) materially and adversely
affects the ability of the Borrower and the Guarantors, taken as a whole, to
perform their collective obligations under the Loan Documents.
"MATERIAL CONTRACT" means, with respect to any Person, each written
contract which would create a monetary obligation of such Person, or a right to
receive funds by such Person, and each other written contract to which such
Person is a party which is material to the business and
15
<PAGE> 22
operations of such Person, the absence of which could reasonably be expected to
result in a Material Adverse Effect.
"MERGER" means the merger of the Company with and into AGT Acquisition
Corp., a wholly-owned subsidiary of Borrower, as contemplated in the Merger
Agreement.
"MERGER AGREEMENT" means the Agreement and Plan of Merger, dated as of
February 13, 1998, by and among Borrower, AGT Acquisition Corp. and the Company
(as amended, supplemented or otherwise modified from time to time).
"MERGER DATE" means the date on which the Merger is consummated and
effective in accordance with the terms and conditions of the Devon Acquisition
Documents and the Delaware General Corporation Law.
"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is making or
accruing an obligation to make contributions, or has within any of the preceding
five plan years made or accrued an obligation to make contributions.
"MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of any Loan
Party or any ERISA Affiliate and at least one Person other than the Loan Parties
and the ERISA Affiliates or (ii) was so maintained and in respect of which any
Loan Party or any ERISA Affiliate could have liability under Section 4064 or
4069 of ERISA in the event such plan has been or were to be terminated.
"NET CASH PROCEEDS" means, with respect to any Asset Disposition or
Equity Issuance by any Person, or any Extraordinary Receipt, the aggregate
amount of cash received from time to time (whether as initial consideration or
through payment or disposition of deferred consideration) in connection with
such transaction after deducting therefrom only (without duplication) (i)
reasonable and customary brokerage commissions, underwriting fees and discounts,
legal fees, finder's fees and other similar fees and commissions, (ii) the
amount of taxes payable in connection with or as a result of such transaction,
(iii) the amount of any Debt secured by a Lien on such asset that is required to
be repaid upon such disposition, in each case to the extent, but only to the
extent, that the amounts so deducted are, at the time of receipt of such cash,
actually paid to a Person that is not an Affiliate of such Person or any Loan
Party or any Affiliate of any Loan Party and are properly attributable to such
transaction or to the asset that is the subject thereof and (iv) the amount to
be used to replace any such asset.
"NOTE" means a Revolving Credit Note or an Acquisition Line Note or a
Swing Line Note, and collectively, the "NOTES".
"NOTICE OF BORROWING" has the meaning specified in Section 2.02(a).
"NOTICE OF ISSUANCE" has the meaning specified in Section 2.03(a).
"NOTICE OF SWING LINE BORROWING" has the meaning specified in Section
2.02(b).
"NOTICE OF TERMINATION" has the meaning specified in Section 2.01(d).
16
<PAGE> 23
"NPL" means the National Priorities List under CERCLA.
"OBLIGATION" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind, including, without
limitation, any liability of such Person on any claim, whether or not the right
of any creditor to payment in respect of such claim is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed,
legal, equitable, secured or unsecured, and whether or not such claim is
discharged, stayed or otherwise affected by any proceeding referred to in
Section 6.01(f). Without limiting the generality of the foregoing, the
Obligations of the Loan Parties under the Loan Documents include (i) the
obligation to pay principal, interest, Letter of Credit commissions, charges,
expenses, fees, attorneys' fees and disbursements, indemnities and other amounts
payable by any Loan Party under any Loan Document, and (ii) the obligation of
any Loan Party to reimburse any amount in respect of any of the foregoing that
any Lender Party, in its sole discretion, may elect to pay or advance on behalf
of such Loan Party.
"OECD" means the Organization for Economic Cooperation and Development.
"OTHER TAXES" has the meaning specified in Section 2.12(b).
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"PERMITTED ACQUISITION" means the acquisition by the Borrower or any of
its Subsidiaries of any Person or of any division or line of business of any
Person or of any Person with (or without) its Subsidiaries (any such acquired
Person, division or line or business, or Person and Subsidiaries being herein
called a "TARGET BUSINESS") either by merger, consolidation, purchase of the
majority of the Voting Stock, or purchase of all or any portion of the assets of
such Target Business, provided that each of the conditions to any such
acquisition set forth below shall have been satisfied as of the consummation of
such acquisition:
(a) such Target Business is principally engaged in
substantially the same or similar line of business as the Borrowers or any of
its Subsidiaries;
(b) the Required Lenders shall have consented to the
acquisition (such consent not to be unreasonably withheld) in the event that the
total consideration paid by the Borrower and its Subsidiaries (whether in cash,
by the assumption or incurrence of Debt (including seller notes and other
liabilities otherwise permitted to be incurred under this Agreement), by the
transfer of any other assets or properties by any Loan Party to the seller in
connection with such acquisition, or by Equity Issuances by the Borrower in
connection with such acquisition), shall equal or exceed (and including in the
computation of consideration the amount of any contingent, earnout and deferred
payments reasonably likely to be paid in the next succeeding 12 months) (i)(x)
Thirty Million Dollars ($30,000,000) in the event the Acquisition Line Facility
is to be used to fund the consideration for such acquisition, or (y) Ten Million
Dollars ($10,000,000) in the event the Revolving Credit Facility is to be used
to fund the consideration for such acquisition, in each case in respect of any
single acquisition (or series of related acquisitions) or (ii) Fifty Million
Dollars ($50,000,000) in respect of all acquisitions in any twelve (12) month
period ending on the last day of the calendar month immediately preceding the
closing of the proposed acquisition;
(c) no Event of Default shall exist or be continuing or would
exist after giving effect to such acquisition; and
17
<PAGE> 24
(d) all assets and properties acquired in connection with such
proposed acquisition shall be free and clear of all Liens, except as otherwise
permitted in this Agreement.
Notwithstanding the foregoing, in no event shall a Permitted Acquisition be
deemed to include an unsolicited tender offer or other takeover (other than a
tender offer) which does not have the approval of the board of directors of the
Target Business prior to the time the Borrower has taken control of the Target
Business.
"PERMITTED ACQUISITION DOCUMENTS" means, in respect of a Permitted
Acquisition, the final executed copy of the asset or stock purchase agreement or
the merger agreement, as the case may be, and all other material agreements,
documents or instruments to be executed and/or delivered by any Loan Party in
connection with such Permitted Acquisition.
"PERMITTED LIENS" means any of the following: (i) Liens for taxes,
assessments and governmental charges or levies (x) not yet due and payable or
(y) due and payable that are being contested in good faith and by appropriate
proceedings diligently conducted, provided that in the case of Liens under this
clause (y), reserves or other appropriate provisions shall have been established
therefor in accordance with GAAP; (ii) Liens imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's Liens and other
similar Liens arising in the ordinary course of business securing obligations
that are not overdue for a period of more than sixty (60) days or which are
being contested in good faith and by appropriate proceedings diligently
conducted, provided that reserves or other appropriate provisions shall have
been established therefor in accordance with GAAP; (iii) pledges or deposits to
secure obligations under workers' compensation laws or similar legislation or to
secure public or statutory obligations; and (iv) Permitted Real Property
Encumbrances.
"PERMITTED REAL PROPERTY ENCUMBRANCES" means, with respect to any
particular real property, easements, zoning restrictions or other restrictions,
rights-of-way, encroachments, covenants or encumbrances on real property imposed
by law or arising in the ordinary course of business that do not materially
detract from the value of the affected property or interfere with the ordinary
conduct of business of the Borrower or any of its Subsidiaries or materially
impair the use thereof to the Borrower or any Subsidiary.
"PERSON" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"PLAN" means a Single Employer Plan or a Multiple Employer Plan.
"PRIME RATE" means a fluctuating interest rate per annum in effect from
time to time, which rate per annum shall at all times be equal to the higher of:
(a) the rate of interest announced publicly by Fleet from time
to time, as Fleet's prime rate, which is not necessarily the lowest rate made
available by Fleet; or
(b) one-half (1/2) of one percent per annum above the Federal
Funds Rate.
"PRIME RATE ADVANCE" means an Advance that bears interest as provided
in Section 2.07(a)(i).
18
<PAGE> 25
"PRO RATA SHARE" of any amount means, with respect to any Revolving
Credit Lender at any time, the product of such amount times a fraction the
numerator of which is the amount of such Lender's Revolving Credit Commitment at
such time and the denominator of which is the Revolving Credit Facility at such
time.
"REGISTER" has the meaning specified in Section 8.07(d).
"REGULATION G" means Regulation G of the Board of Governors of the
Federal Reserve System, as the same may be modified and supplemented and in
effect from time to time.
"REGULATION T" means Regulation T of the Board of Governors of the
Federal Reserve System, as the same may be modified and supplemented and in
effect from time to time.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as the same may be modified and supplemented and in
effect from time to time.
"REGULATION X" means Regulation X of the Board of Governors of the
Federal Reserve System, as the same may be modified and supplemented and in
effect from time to time.
"RELEASE" means any release, spill, emission, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing into the environment (including the abandonment or discarding of
barrels, containers and other closed receptacles containing any Hazardous
Materials) or into or from any property, including, without limitation, the
movement of any Hazardous Materials through the air, soil, surface waters or
ground water.
"REMEDIAL" shall have the meaning as set forth in CERCLA at 42 U.S.C.
Section 9601(24) and/or any other applicable Environmental Laws.
"REMOVAL" shall have the meaning as set forth in CERCLA at 42 U.S.C.
Section 9601(23) and/or any other applicable Environmental Laws.
"REQUIRED LENDERS" means at any time Lenders owed or holding greater
than 50% of the sum of (i) the aggregate principal amount of the Advances
outstanding at such time and (ii) the aggregate Available Amount of all Letters
of Credit outstanding at such time, or, if no such principal amount and no
Letters of Credit are outstanding at such time, Lenders holding greater than 50%
of the aggregate of the Revolving Credit Commitments and Acquisition Line
Commitments (on or before the Acquisition Line Termination Date); provided,
however, that if any Lender shall be a Defaulting Lender at such time, there
shall be excluded from the determination of Required Lenders at such time (i)
the aggregate principal amount of the Advances owing to such Lender (in its
capacity as a Lender) and outstanding at such time, and (ii) the aggregate
Revolving Credit Commitment and Acquisition Line Commitment (or Acquisition Line
Advances, as the case may be) of such Lender at such time. For purposes of this
definition, the aggregate principal amount of Swing Line Advances owing to the
Swing Line Bank, Letter of Credit Advances owing to the Issuing Bank and the
Available Amount of each Letter of Credit shall be considered to be owed to the
Revolving Credit Lenders ratably in accordance with their respective Revolving
Credit Commitments.
"RESPONSE" shall have the meaning as set forth in CERCLA at 42 U.S.C.
Section 9601(25) and/or any other applicable Environmental Laws.
19
<PAGE> 26
"RESPONSIBLE OFFICER" means, in the case of any Loan Party, the chief
executive officer, chief financial officer or the treasurer of such Loan Party.
"REVOLVING CREDIT ADVANCE" has the meaning specified in Section
2.01(a).
"REVOLVING CREDIT BORROWING" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by the Revolving
Credit Lenders.
"REVOLVING CREDIT COMMITMENT" means, with respect to any Revolving
Credit Lender at any time, the amount set forth opposite such Lender's name on
Schedule I hereto under the caption "Revolving Credit Commitment" or, if such
Lender has entered into one or more Assignments and Acceptances, set forth for
such Lender in the Register maintained by the Administrative Agent pursuant to
Section 8.07(d) as such Lender's "Revolving Credit Commitment," as such amount
may be reduced at or prior to such time pursuant to Section 2.05. The initial
aggregate amount of the Lenders' Revolving Credit Commitment is $175,000,000.
"REVOLVING CREDIT FACILITY" means, at any time, the aggregate amount of
the Revolving Credit Lenders' Revolving Credit Commitments at such time.
"REVOLVING CREDIT LENDER" means any Lender that has a Revolving Credit
Commitment.
"REVOLVING CREDIT NOTE" means a promissory note of the Borrower payable
to the order of any Revolving Credit Lender, in substantially the form of
Exhibit B hereto, evidencing the aggregate indebtedness of the Borrower to such
Lender resulting from the Revolving Credit Advances made by such Lender.
"REVOLVING CREDIT TERMINATION DATE" means the earlier of (x) the fifth
anniversary of the Closing Date and (y) the Termination Date.
"SECOND ACQUISITION LINE ADVANCE PERIOD" means the period from the
first day immediately after the second anniversary of the Closing Date to and
including the third anniversary of the Closing Date.
"SINGLE EMPLOYER PLAN" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of any Loan
Party or any ERISA Affiliate and no Person other than the Loan Parties and the
ERISA Affiliates or (ii) was so maintained and in respect of which any Loan
Party or any ERISA Affiliate could have liability under Section 4069 of ERISA in
the event such plan has been or were to be terminated.
"SOLVENT" and "SOLVENCY" mean, with respect to any Person on a
particular date, that on such date (i) the fair value of the assets of such
Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (ii) the present fair
saleable value of the assets of such Person is not less than the amount that
will be required to pay the probable liability of such Person on its debts as
they become absolute and matured, (iii) such Person does not intend to, and does
not believe that it will, incur debts or liabilities beyond such Person's
ability to pay such debts and liabilities as they mature and (iv) such Person is
not engaged in business or a transaction, and is not about to engage in business
or a transaction, for which such Person's assets would constitute an
unreasonably small capital. The amount of contingent liabilities at any time
20
<PAGE> 27
shall be computed as the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
"STANDBY LETTER OF CREDIT" means any Letter of Credit other than a
Trade Letter of Credit.
"STRATEGIC INVESTMENT" has the meaning specified in Section 5.02(f)(x).
"SUBORDINATED DEBT" means any Debt of the Borrower or any of its
Subsidiaries that is subordinated to the Obligations of the Borrower under the
Loan Documents on, and that otherwise contains, terms and conditions reasonably
satisfactory to the Administrative Agent and Required Lenders.
"SUBSIDIARY" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which) more
than 50% of (i) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (ii) the interest in the capital or profits of such partnership,
joint venture or limited liability company or (iii) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or controlled
by such Person, by such Person and one or more of its other Subsidiaries or by
one or more of such Person's other Subsidiaries.
"SUBSIDIARY GUARANTY" has the meaning specified in Section 3.01(a)(ii).
"SURVIVING DEBT" shall mean the Debt which shall remain outstanding
from and after the date hereof.
"SWING LINE ADVANCE" means an advance made by the Swing Line Bank
pursuant to Section 2.01(c).
"SWING LINE ADVANCE OUTSTANDING" means the aggregate amount of all
Swing Line Advances outstanding as at the close of business on the day
immediately preceding each Swing Line Rollover Date.
"SWING LINE BANK" means Fleet.
"SWING LINE BORROWING" means a borrowing consisting of a Swing Line
Advance made by the Swing Line Bank.
"SWING LINE FACILITY" has the meaning specified in Section 2.01(c).
"SWING LINE NOTE" means a promissory note of the Borrower payable to
the order of the Swing Line Bank, in substantially the form of Exhibit F hereto,
evidencing the indebtedness of the Borrower to such Swing Line Bank resulting
from the Swing Line Advances made by such Swing Line Bank.
"SWING LINE RATE" has the meaning specified in Section 2.01(c).
21
<PAGE> 28
"SWING LINE ROLLOVER DATE" means the calendar day Wednesday or, if such
Wednesday is not a Business Day, the next succeeding Business Day.
"TARGET BUSINESS" has the meaning specified in the definition
"Permitted Acquisition".
"TAXES" has the meaning specified in Section 2.12(a).
"TERMINATION DATE" means the date of termination in whole of the
Commitments pursuant to Section 2.05 or 6.01.
"TRADE LETTER OF CREDIT" means any Letter of Credit that is issued for
the benefit of a supplier of Inventory to the Borrower or any of its
Subsidiaries to effect payment for such Inventory, the conditions to drawing
under which include the presentation to the Issuing Bank of negotiable bills of
lading, invoices and related documents sufficient, in the judgment of the
Issuing Bank, to create a valid and perfected lien on or security interest in
such Inventory, bills of lading, invoices and related documents in favor of the
Issuing Bank.
"TOTAL FUNDED DEBT" means, at any date of determination thereof, the
aggregate outstanding balance of all Debt of the Borrower and its Subsidiaries
(other than (x) Debt arising from Hedge Agreements, (y) guaranties of any such
Debt as described in clauses (viii) and (ix) of the definition "Debt" and (z)
Debt described in Section 5.02(b)(iii)(F)).
"TYPE" refers to the distinction between Advances bearing interest at
the Prime Rate and Advances bearing interest at the Eurodollar Rate.
"UNUSED ACQUISITION LINE COMMITMENT" means, with respect to any
Acquisition Line Lender, at any time, (x) such Lender's Acquisition Line
Commitment at such time minus (y) the aggregate principal amount of all
Acquisition Line Advances made prior to such time by such Lender (in its
capacity as a Lender) and outstanding at such time.
"UNUSED REVOLVING CREDIT COMMITMENT" means, with respect to any
Revolving Credit Lender, at any time, (x) such Lender's Revolving Credit
Commitment at such time minus (y) the sum of (1) the aggregate principal amount
of all Revolving Credit Advances and Letter of Credit Advances made by such
Lender (in its capacity as a Lender) and outstanding at such time, plus (2) such
Lender's Pro Rata Share of (A) the aggregate Available Amount of all Letters of
Credit outstanding at such time and (B) the aggregate principal amount of all
Letter of Credit Advances made by the Issuing Bank pursuant to Section 2.03(c)
and outstanding at such time.
"VOTING STOCK" means capital stock issued by a corporation, or
equivalent interests in any other Person, including, without limitation,
partnership interests and membership interests issued by a limited liability
company, the holders of which are ordinarily, in the absence of contingencies,
entitled to vote for the election of directors (or persons performing similar
functions) of such Person, even if the right so to vote has been suspended by
the happening of such a contingency.
"WELFARE PLAN" means a welfare plan, as defined in Section 3(1) of
ERISA, that is maintained for employees of any Loan Party or in respect of which
any Loan Party could have liability.
22
<PAGE> 29
"WITHDRAWAL LIABILITIES" has the meaning specified in Part I of
Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Section 4.01(f) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
SECTION 2.01. The Advances.
(a) The Revolving Credit Advances. Each Revolving Credit Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
advances (each a "REVOLVING CREDIT ADVANCE") to the Borrower from time to time
on any Business Day during the period from the date hereof until the Revolving
Credit Termination Date in an amount for each such Advance not to exceed such
Lender's Unused Revolving Credit Commitment at such time. Each Revolving Credit
Borrowing shall be in an aggregate amount of $1,000,000 or an integral multiple
of $100,000 in excess thereof (other than a Borrowing the proceeds of which
shall be used solely to repay or prepay in full outstanding Swing Line Advances
or outstanding Letter of Credit Advances) and shall consist of Revolving Credit
Advances made simultaneously by the Revolving Credit Lenders ratably according
to their Revolving Credit Commitments. Within the limits of the Unused Revolving
Credit Commitments in effect from time to time, the Borrower may borrow, repay
and reborrow.
(b) The Acquisition Line Advances. Each Acquisition Line Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
advances (each an "ACQUISITION LINE ADVANCE") to the Borrower from time to time
on any Business Day during the period from the date hereof until the Acquisition
Line Termination Date in an amount for each such Advance not to exceed such
Lender's Unused Acquisition Line Commitment at such time. Each Acquisition Line
Borrowing shall be in an aggregate amount of $1,000,000 or an integral multiple
of $100,000 in excess thereof and shall consist of Acquisition Line Advances
made simultaneously by the Acquisition Line Lenders ratably according to their
Acquisition Line Commitments. Within the limits of the Unused Acquisition Line
Commitments in effect from time to time, the Borrower may borrow, repay and
reborrow; provided, however, that the aggregate principal amount of the
Acquisition Line Advances outstanding as at the Initial Acquisition Line
Termination Date (the "INITIAL OUTSTANDING ACQUISITION LINE ADVANCES") may not
be reborrowed at any time thereafter and shall be repaid in accordance with
Section 2.04(b)(i).
Subject to the prior written approval of the Lenders (which
approval may be withheld for any reason as determined by each such Lender in its
sole discretion), the Initial Acquisition Line Termination Date may be extended
for one additional year upon written request of the Borrower;
23
<PAGE> 30
provided such request is delivered to the Administrative Agent no earlier than
ninety (90) days, but no later than thirty (30) days, prior to, the second
anniversary of the Closing Date; provided, further, that no Event of Default has
occurred and is continuing.
(c) The Swing Line Advances. The Borrower may request the Swing Line
Bank to make, and the Swing Line Bank shall, so long as no Default or Event of
Default shall have occurred and be continuing, make, on the terms and conditions
hereinafter set forth, Swing Line Advances to the Borrower from time to time on
any Business Day during the period from the date hereof until the Revolving
Credit Termination Date (i) in an aggregate amount not to exceed at any time
outstanding $5,000,000 (the "SWING LINE FACILITY") and (ii) in an amount for
each such Swing Line Borrowing not to exceed an amount equal to (x) the
aggregate of the Unused Revolving Credit Commitments of the Revolving Credit
Lenders at such time minus (y) the aggregate Swing Line Advances outstanding at
such time. Each Swing Line Advance shall be in integral multiples of $100,000.
No Swing Line Advance shall be used for the purpose of funding the payment of
principal of any other Swing Line Advance. Each Swing Line Borrowing shall bear
interest at the rate established pursuant to the Fee Letter (the "SWING LINE
RATE"). Within the limits of the Swing Line Facility and within the limits
referred to in this Section 2.01(c), the Borrower may borrow and reborrow under
this Section 2.01(c) and may repay or prepay the Swing Line Advances at such
times prior to the Revolving Credit Termination Date, and in such integral
multiples, as the Borrower may elect.
(d) Letters of Credit. The Issuing Bank agrees, on the terms and
conditions hereinafter set forth, to issue Letters of Credit for the account of
the Borrower from time to time on any Business Day during the period from the
Closing Date until sixty (60) days before the Revolving Credit Termination Date
(A) in an aggregate Available Amount for all Letters of Credit not to exceed at
any time the Issuing Bank's Letter of Credit Commitment at such time and (B) in
an Available Amount for each such Letter of Credit not to exceed an amount equal
to (x) the Unused Revolving Credit Commitments of the Revolving Credit Lenders
at such time minus (y) the aggregate Swing Line Advances outstanding at such
time. No Letter of Credit shall have an expiration date (excluding all rights of
the Borrower or the beneficiary to require renewal) later than the earlier of
(A) sixty (60) days before the fifth anniversary of the Closing Date, (B) in the
case of Standby Letters of Credit, 365 days after the date of issuance thereof
and (C) in the case of a Trade Letter of Credit, 180 days after the date of
issuance thereof. The foregoing notwithstanding, any Standby Letter of Credit
may, by its terms, be automatically renewable annually unless such Issuing Bank
shall have notified the Borrower (with a copy to the Administrative Agent) on or
prior to the date for notice of termination set forth in such Letter of Credit
(but in any event at least thirty (30) Business Days prior to the date of
automatic renewal) of its election not to renew such Standby Letter of Credit (a
"NOTICE OF TERMINATION"); provided that the terms of each Standby Letter of
Credit that is automatically renewable annually shall not permit the expiration
date (after giving effect to any renewal) of such Standby Letter of Credit in
any event to be extended to a date later than sixty (60) days before the
Revolving Credit Termination Date. If a Notice of Termination is given by the
Issuing Bank pursuant to the immediately preceding sentence, such Standby Letter
of Credit shall expire on the date on which it otherwise would have been
automatically renewed. Within the limits of the Letter of Credit Facility, and
subject to the limits referred to above, the Borrower may request the issuance
of Letters of Credit under this Section 2.01(d), repay any Letter of Credit
Advances resulting from drawings under Letters of Credit pursuant to Section
2.03(c) and request the issuance of additional Letters of Credit under this
Section 2.01(d).
24
<PAGE> 31
SECTION 2.02. Making the Advances. (a) Except as otherwise provided in
Section 2.03 or, with respect to Swing Line Advances in Section 2.02(b) below,
each Borrowing shall be made on notice, given not later than 1:00 p.m. (New York
time) on the third Business Day prior to the date of the proposed Borrowing in
the case of Eurodollar Rate Advances and on the Business Day of the proposed
Borrowing in the case of Prime Rate Advances by the Borrower to the
Administrative Agent, which shall give to each appropriate Lender same day
notice thereof by telex or telecopier. Each such notice of a Borrowing (a
"NOTICE OF BORROWING") may be by telephone, confirmed immediately in writing, or
telex or telecopier in substantially the form of Exhibit D hereto, specifying
therein the requested (i) date of such Borrowing, (ii) Facility under which such
Borrowing is to be made, (iii) Type of Advances comprising such Borrowing, (iv)
aggregate amount of such Borrowing and (v) in the case of a Borrowing consisting
of Eurodollar Rate Advances, initial Interest Period for each such Advance. Each
appropriate Lender shall, (x) before 1:00 p.m. (New York time) on the date of
such Borrowing in the case of Eurodollar Rate Advances and (y) before 3:00 p.m.
(New York time) on the date of such Borrowing in the case of Prime Rate
Advances, make available for the account of its Applicable Lending Office to the
Administrative Agent at the Administrative Agent's Account, in same day funds,
such Lender's ratable portion of such Borrowing in accordance with the
respective Commitments under the applicable Facility of such Lender and the
other appropriate Lenders. After the Administrative Agent's receipt of such
funds and upon fulfillment of the applicable conditions set forth in Article
III, the Administrative Agent will make such funds available to the Borrower by
crediting the Borrower's Account; provided, however, that in the case of any
Revolving Credit Borrowing, the Administrative Agent shall first make a portion
of such funds equal to the aggregate principal amount of any Swing Line Advances
and Letter of Credit Advances made by the Swing Line Bank, the Issuing Bank and
by any other Revolving Credit Lender and outstanding on the date of such
Revolving Credit Borrowing in accordance with the terms of this Agreement, plus
interest accrued and unpaid thereon to and as of such date, available to the
Swing Line Bank, the Issuing Bank and such other Revolving Credit Lenders for
repayment of such Swing Line Advances and Letter of Credit Advances.
Notwithstanding anything to the contrary herein, Acquisition Line Advances may
only be borrowed concurrently with (or if permitted by the Administrative Agent,
one Business Day prior to) payment of the consideration for the Strategic
Investment or payment of the cash purchase price (or portion thereof then due)
in respect of the consummation of the Permitted Acquisition to which the
proceeds of such Acquisition Line Advances will be applied upon consummation of
such Permitted Acquisition, as the case may be.
(b) Each Swing Line Borrowing shall be made either (x) on notice, given
not later than 1:00 p.m. (New York time) on the Business Day of the proposed
Swing Line Borrowing, by the Borrower to the Swing Line Bank and the
Administrative Agent or (y) pursuant to other arrangements, including, by way of
example and not of limitation, arrangements for daily repayments and borrowings
on each Business Day, which are satisfactory in form and substance to the Swing
Line Bank, the Administrative Agent and the Borrower. Each notice of a Swing
Line Borrowing pursuant to clause (x) in the immediately preceding sentence (a
"NOTICE OF SWING LINE BORROWING") shall be by telephone, confirmed immediately
in writing, or telex or telecopier, specifying therein the requested (i) date of
such Borrowing and (ii) amount of such Borrowing. The Swing Line Bank shall make
the amount of the Swing Line Advance available to the Administrative Agent at
the Administrative Agent's Account, in same day funds. After the Administrative
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Administrative Agent will make such funds
available to the Borrower by crediting the Borrower's Account. If, and to the
extent, any Swing Line Advance shall be outstanding on the date of any Revolving
Credit Borrowing, such Swing Line Advance shall first be repaid from the
proceeds of such Revolving Credit Borrowing prior to disbursement to the
Borrower pursuant to the proviso in
25
<PAGE> 32
Section 2.02(a) above. In addition, (x) the Swing Line Bank may, at any time, in
its sole discretion by written notice to the Borrower and the Administrative
Agent, demand repayment of its Swing Line Advances or, (y) in the event the
Swing Line Advance Outstanding exceeds $1,000,000, on each Swing Line Rollover
Date such Swing Line Advance Outstanding shall be automatically rolled over into
the Revolving Credit Facility, and in either case the Borrower shall be deemed
to have requested a Revolving Credit Advance hereunder comprised entirely of a
Prime Rate Advance in the amount of such Swing Line Advances from all the
Revolving Credit Lenders based on each such Lender's Pro Rata Share and the
Revolving Credit Lenders shall make a Revolving Credit Advance (comprised
entirely of a Prime Rate Advance and based on each such Lender's Pro Rata Share)
in an amount equal to (i) all outstanding Swing Line Advances as of the date of
such demand in the case of clause (x) above or (ii) the Swing Line Advance
Outstanding in the case of clause (y) above, by deposit to the Administrative
Agent's Account, in same day funds, an amount equal to such Lender's Pro Rata
Share thereof, without regard to whether or not the conditions set forth in
Section 3.02 have otherwise been satisfied. The proceeds from such Revolving
Credit Advance shall be applied directly to the Swing Line Bank to repay the
Swing Line Bank for such outstanding Swing Line Advances. The Borrower hereby
agrees to each such automatic rollover into the Revolving Credit Facility and to
each such Revolving Credit Advance. Each Revolving Credit Lender agrees to each
such automatic rollover into the Revolving Credit Facility and to make each such
Revolving Credit Advance based on its Pro Rata Share on (i) the Swing Line
Rollover Date or such other Business Day on which demand therefor is made by the
Swing Line Bank; provided that notice of such demand is given not later than
3:00 P.M. (New York time) on such Business Day, or (ii) the first Business Day
next succeeding such demand if notice of such demand is given after such time.
If and to the extent that any Revolving Credit Lender shall not have so made the
amount of such Lender's Pro Rata Share of such Revolving Credit Advance
available to the Administrative Agent, such Revolving Credit Lender agrees to
pay to the Administrative Agent, for the account of the Swing Line Bank,
forthwith on demand such amount together with interest thereon, for each day
from the date of demand by the Swing Line Bank until the date such amount is
paid to the Administrative Agent, at the Federal Funds Rate. If such Lender
shall pay to the Administrative Agent such amount for the account of the Swing
Line Bank on any Business Day, such amount so paid in respect of principal shall
constitute a Revolving Credit Advance made by such Lender on such Business Day
for purposes of this Agreement, and the outstanding principal amount of the
Swing Line Advance made by the Swing Line Bank shall be reduced by such amount
on such Business Day.
(c) Anything in subsection (a) above to the contrary notwithstanding,
(i) the Borrower may not select Eurodollar Rate Advances if the obligation of
the appropriate Lenders to make Eurodollar Rate Advances shall then be suspended
pursuant to Section 2.09 or Section 2.10, and (ii) Eurodollar Rate Advances may
not be outstanding as part of more than ten (10) separate Borrowings.
(d) Each Notice of Borrowing and Notice of Swing Line Borrowing shall
be irrevocable and binding on the Borrower. In the case of any Borrowing that
the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate
Advances, the Borrower shall indemnify each appropriate Lender against any loss,
cost or expense incurred by such Lender as a result of any failure to fulfill on
or before the date specified in such Notice of Borrowing for such Borrowing the
applicable conditions set forth in Article III, including, without limitation,
any loss (including loss of anticipated profits as reasonably determined by such
Lender), cost or expense incurred by reason of the liquidation or redeployment
of deposits or other funds acquired by such Lender to fund the
26
<PAGE> 33
Advance to be made by such Lender as part of such Borrowing when such Advance,
as a result of such failure, is not made on such date.
(e) Unless the Administrative Agent shall have received notice from an
appropriate Lender prior to the date of any Borrowing under a Facility under
which such Lender has a Commitment that such Lender will not make available to
the Administrative Agent such Lender's ratable portion of such Borrowing, the
Administrative Agent may assume that such Lender has made such portion available
to the Administrative Agent on the date of such Borrowing in accordance with
subsection (a) or (b) of this Section 2.02 and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such ratable portion available to the Administrative Agent, such Lender and
the Borrower severally agree to repay or pay to the Administrative Agent
forthwith on demand such corresponding amount and to pay interest thereon, for
each day from the date such amount is made available to the Borrower until the
date such amount is repaid or paid to the Administrative Agent, at (i) in the
case of the Borrower, the interest rate applicable at such time under Section
2.07 to Advances comprising such Borrowing and (ii) in the case of such Lender,
the Federal Funds Rate. If such Lender shall pay to the Administrative Agent
such corresponding amount, such amount so paid shall constitute such Lender's
Advance as part of such Borrowing for all purposes.
(f) The failure of any Lender to make the Advance to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation, if
any, hereunder to make its Advance on the date of such Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Issuance of and Drawings and Reimbursement Under Letters
of Credit.
(a) Request for Issuance. Each Letter of Credit shall be issued upon
notice, given not later than 1:00 p.m. (New York time) on the fifth Business Day
prior to the date of the proposed issuance of such Letter of Credit, by the
Borrower to the Issuing Bank, which shall give to the Administrative Agent and
each Revolving Credit Lender prompt notice thereof by telex or telecopier. Each
such notice of issuance of a Letter of Credit (a "NOTICE OF ISSUANCE") may be by
telephone, confirmed immediately in writing, or telex or telecopier, specifying
therein the requested (i) date of such issuance (which shall be a Business Day),
(ii) Available Amount of such Letter of Credit, (iii) expiration date of such
Letter of Credit, (iv) name and address of the beneficiary of such Letter of
Credit and (v) form of such Letter of Credit, and shall be accompanied by such
customary application and agreement for letter of credit as the Issuing Bank may
specify to the Borrower for use in connection with such requested Letter of
Credit (a "LETTER OF CREDIT AGREEMENT"). If the requested form of such Letter of
Credit is acceptable to the Issuing Bank, in its reasonable discretion, the
Issuing Bank will, upon fulfillment of the applicable conditions set forth in
Article III, make such Letter of Credit available to the Borrower or as
otherwise directed by the Borrower in connection with such issuance. In the
event and to the extent that the provisions of any such Letter of Credit
Agreement shall conflict with this Agreement, the provisions of this Agreement
shall govern.
(b) Letter of Credit Reports. The Issuing Bank shall furnish (i) to the
Administrative Agent on the first Business Day of each week a written report
summarizing issuance and expiration dates of Letters of Credit issued during the
previous week and drawings during such week under all Letters of Credit, (ii) to
the Administrative Agent, the Borrower and each Revolving Credit Lender on the
first Business Day of each month a written report summarizing issuance and
expiration dates
27
<PAGE> 34
of Letters of Credit issued during the preceding month and drawings during such
month under all Letters of Credit and (iii) to the Administrative Agent, the
Borrower and each Revolving Credit Lender on the first Business Day of each
calendar quarter a written report setting forth the average daily aggregate
Available Amount during the preceding calendar quarter of all Letters of Credit.
(c) Drawing and Reimbursement. The Borrower shall be obligated pursuant
to each Letter of Credit Agreement to reimburse the Issuing Bank within two (2)
Business Days after demand in immediately available funds for drafts drawn under
any Letter of Credit. If any drawing is not so reimbursed, then the payment by
the Issuing Bank of a draft drawn under any Letter of Credit shall constitute
for all purposes of this Agreement the making by the Issuing Bank of a Letter of
Credit Advance which shall be a Prime Rate Advance, in the amount of such draft.
The Borrower, the Administrative Agent and each Revolving Credit Lender hereby
acknowledge and agree that Letter of Credit Advances may be made, or deemed
made, by the Issuing Bank in respect of any Letter of Credit and to participate
in all Letter of Credit Advances made hereunder as provided herein. Upon written
demand by the Issuing Bank, with a copy of such demand to the Administrative
Agent, each Revolving Credit Lender shall purchase from the Issuing Bank, and
the Issuing Bank shall sell and assign to each such Revolving Credit Lender,
such Lender's Pro Rata Share of such outstanding Letter of Credit Advance as of
the date of such purchase, by making available (for the account of its
Applicable Lending Office) to the Administrative Agent (for the account of the
Issuing Bank), by deposit to the Administrative Agent's Account, in same day
funds, an amount equal to the portion of the outstanding principal amount of
such Letter of Credit Advance to be purchased by such Lender. Promptly after
receipt thereof, the Administrative Agent shall transfer such funds to the
Issuing Bank. The Borrower hereby agrees to each such sale and assignment. Each
Revolving Credit Lender agrees to purchase its Pro Rata Share of an outstanding
Letter of Credit Advance on (i) the Business Day on which demand therefor is
made by the Issuing Bank; provided that notice of such demand is given not later
than 1:00 p.m. (New York time) on such Business Day or (ii) the first Business
Day next succeeding such demand if notice of such demand is given after such
time. Upon any such assignment by the Issuing Bank to any other Revolving Credit
Lender of a portion of a Letter of Credit Advance, the Issuing Bank represents
and warrants to such other Lender that the Issuing Bank is the legal and
beneficial owner of such interest being assigned by it, free and clear of any
liens, but makes no other representation or warranty and assumes no
responsibility with respect to such Letter of Credit Advance, the Loan Documents
or any Loan Party. If and to the extent that any Revolving Credit Lender shall
not have so made the amount of such Letter of Credit Advance available to the
Administrative Agent, such Revolving Credit Lender agrees to pay to the
Administrative Agent forthwith on demand such amount together with interest
thereon, for each day from the date of demand by the Issuing Bank until the date
such amount is paid to the Administrative Agent, at the Federal Funds Rate for
its account or the account of the Issuing Bank, as applicable. If such Lender
shall pay to the Administrative Agent such amount for the account of the Issuing
Bank on any Business Day, such amount so paid in respect of principal shall
constitute a Letter of Credit Advance made by such Lender on such Business Day
for purposes of this Agreement, and the outstanding principal amount of the
Letter of Credit Advance made by the Issuing Bank shall be reduced by such
amount on such Business Day.
(d) Failure to Make Letter of Credit Advances. The failure of any
Lender to make any Letter of Credit Advance to be made by it on the date
specified in Section 2.03(c) shall not relieve any other Lender of its
obligation hereunder to make its Letter of Credit Advance on such date, but no
Lender shall be responsible for the failure of any other Lender to make the
Letter of Credit Advance to be made by such other Lender on such date.
28
<PAGE> 35
SECTION 2.04. Repayment of Advances.
(a) Revolving Credit Advances. The Borrower shall repay to the
Administrative Agent for the ratable account of the Revolving Credit Lenders on
the Revolving Credit Termination Date the aggregate outstanding principal amount
of the Revolving Credit Advances then outstanding.
(b) Acquisition Line Advances. The Borrower shall repay to the
Administrative Agent for the ratable account of the Acquisition Line Lenders the
aggregate outstanding principal amount of the Acquisition Line Advances as
follows:
(i) With respect to Acquisition Line Advances made during the
First Acquisition Line Advance Period, the Borrower shall repay the aggregate
principal amount of such Acquisition Line Advances outstanding at the close of
business on the last day of the First Acquisition Line Advance Period on the
following dates in amounts equal to the respective percentages of the aggregate
principal amount of such Acquisition Line Advances outstanding determined as at
the close of business on the last day of the First Acquisition Line Advance
Period (which amounts shall be reduced as a result of the application of
prepayments in accordance with the order of priority set forth in Section 2.06):
<TABLE>
<CAPTION>
Percentage of Principal of
Advance (outstanding on the
last day of the First Acquisition
Line Advance Period) payable
Date on such date
------------------- ----------------------------------
<S> <C>
June 30, 2000 5.0%
September 30, 2000 5.0%
December 31, 2000 5.0%
March 31, 2001 5.0%
June 30, 2001 7.5%
September 30, 2001 7.5%
December 31, 2001 7.5%
March 31, 2002 7.5%
June 30, 2002 12.5%
September 30, 2002 12.5%
December 31, 2002 12.5%
March 31, 2003 12.5%
</TABLE>
; provided, however, that the final principal installment shall be equal to the
aggregate principal amount of the Acquisition Line Advances outstanding on such
date.
(ii) With respect to Acquisition Line Advances made during the
Second Acquisition Line Advance Period, the Borrower shall repay the aggregate
principal amount of such Acquisition Line Advances outstanding at the close of
business on the last day of the Second Acquisition Line Advance Period on the
following dates in amounts equal to the respective percentages of the aggregate
principal amount of such Acquisition Line Advances outstanding determined as at
the close of business on the last day of the Second Acquisition Line Advance
Period (which amounts shall be reduced as a result of the application of
prepayments in accordance with the order of priority set forth in Section 2.06):
29
<PAGE> 36
<TABLE>
<CAPTION>
Percentage of Principal of
Advance (outstanding on the
last day of the Second Acquisition
Line Advance Period) payable
Date on such date
---- ------------
<S> <C>
June 30, 2001 12.5%
September 30, 2001 12.5%
December 31, 2001 12.5%
March 31, 2002 12.5%
June 30, 2002 12.5%
September 30, 2002 12.5%
December 31, 2002 12.5%
March 31, 2003 12.5%
</TABLE>
; provided, however, that the final principal installment shall be equal to the
aggregate principal amount of the Acquisition Line Advances outstanding on such
date.
(c) Swing Line Advances. The Borrower shall repay to the Administrative
Agent for the account of the Swing Line Bank that has made a Swing Line Advance
the outstanding principal amount of each Swing Line Advance made by such Swing
Line Bank in accordance with Section 2.02(b), but in any event no later than the
Revolving Credit Termination Date.
(d) Letter of Credit Advances. (i) The Borrower shall repay to the
Administrative Agent for the account of the Issuing Bank and each other
Revolving Credit Lender that has made a Letter of Credit Advance on the earlier
of demand and the Revolving Credit Termination Date the outstanding principal
amount of each Letter of Credit Advance made by each of them.
(ii) The Obligations of the Borrower under this Agreement, any
Letter of Credit Agreement and any other agreement or instrument relating to any
Letter of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement, such Letter of Credit
Agreement and such other agreement or instrument under all circumstances,
including, without limitation, the following circumstances:
(A) any lack of validity or enforceability of any
Loan Document, any Letter of Credit Agreement, any Letter of Credit or
any other agreement or instrument relating to any of the foregoing (all
of the foregoing being, collectively, the "L/C RELATED DOCUMENTS");
(B) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations of
the Borrower in respect of any L/C Related Document or any other
amendment or waiver of or any consent to departure from all or any of
the L/C Related Documents;
(C) the existence of any claim, set-off, defense or
other right that the Borrower may have at any time against any
beneficiary or any transferee of a Letter of Credit (or any Persons for
whom any such beneficiary or any such transferee may be acting), the
30
<PAGE> 37
Issuing Bank, or any other Person, whether in connection with the
transactions contemplated by the L/C Related Documents or any unrelated
transaction;
(D) any statement or any other document presented
under a Letter of Credit should prove to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; or
(E) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any Guaranty or any other guarantee, for all or any of
the Obligations of the Borrower in respect of the L/C Related
Documents.
SECTION 2.05. Termination or Reduction of the Commitments.
(a) Optional. The Borrower may, upon at least three (3) Business Days'
notice to the Administrative Agent, terminate in whole or reduce in part the
unused portions of the Unused Revolving Credit Commitments, the Swing Line
Facility, the Letter of Credit Facility and/or the Unused Acquisition Line
Commitments; provided, however, that each partial reduction of a Facility (i)
shall be in an aggregate amount of $1,000,000 or an integral multiple of
$100,000 in excess thereof, and (ii) shall be made ratably among the appropriate
Lenders in accordance with their Commitments with respect to such Facility.
(b) Mandatory.
(i) Any portion of the Acquisition Line Commitments not used
on or prior to the Acquisition Line Termination Date shall be automatically
terminated at the close of business (New York time) on the Acquisition Line
Termination Date.
(ii) In the event the Closing Date shall not have occurred by
May 30, 1998, then all of the Commitments shall be automatically terminated and
this Agreement shall be of no further force or effect.
SECTION 2.06. Prepayments and Repayments.
(a) Optional. The Borrower may, upon at least three (3) Business Days'
notice in the case of Eurodollar Advances and same Business Day's notice in the
case of Prime Rate Advances to the Administrative Agent stating the proposed
date and aggregate principal amount of the prepayment or repayment, as the case
may be, and if such notice is given, the Borrower shall, without premium or
penalty, prepay or repay, as the case may be, the outstanding aggregate
principal amount of the Advances, in whole or ratably in part, together with
accrued interest to the date of such prepayment on the aggregate principal
amount prepaid or repaid, as the case may be; provided, however, that (i) each
partial prepayment or repayment, as the case may be, shall be in an aggregate
principal amount of $1,000,000 or an integral multiple of $100,000 in excess
thereof and (ii) if any prepayment or repayment, as the case may be, of a
Eurodollar Rate Advance shall be made on a day other than on the last day of an
Interest Period therefor, the Borrower shall, together with such prepayment or
repayment, as the case may be, pay any Eurodollar Rate breakage costs as
provided in Section 8.04(c). Each prepayment or repayment, as the case may be,
made pursuant to this Section 2.06(a) shall be applied in accordance with the
Borrower's direction.
31
<PAGE> 38
(b) Mandatory. With respect to (i) any sale, lease, transfer or other
disposition of any property or asset of the Borrower or any of its Subsidiaries
(other than any sale, lease, transfer or other disposition of any such property
or asset as set forth in Section 5.02(e)(i)-(v) (each an "ASSET DISPOSITION",
and collectively, "ASSET DISPOSITIONS")), (ii) any Equity Issuance or (iii) any
Extraordinary Receipt, the Borrower shall, (x) within fifteen (15) days after
receipt by the Borrower or any of its Subsidiaries of the Net Cash Proceeds from
such Asset Disposition or Extraordinary Receipt, as the case may be, or, (y)
with respect to an Equity Issuance, within two (2) Business Days after the
requirement set forth in clause (e) of the definition of "Equity Issuance"
pertaining to the application thereof to the applicable Acquisition Purchase
Price has not been met, in either case prepay or repay, as the case may be
(without premium or penalty), the then outstanding Advances in an amount equal
to (x) thirty-three and one-third percent (33-1/3%) of the Net Cash Proceeds
from any Asset Disposition of the Devon Properties and (y) one hundred percent
(100%) of all other such Net Cash Proceeds; provided, however, that in the event
the Net Cash Proceeds from any Asset Disposition are less than $1,000,000, the
provisions of this Section 2.06(b) shall not be applicable thereto. Each
prepayment or repayment, as the case may be, made pursuant to this Section
2.06(b) shall be subject to the provisions of Section 8.04(c) and shall be
applied as set forth in clause (c) below.
(c) Application of Prepayments and Repayments. All prepayments or
repayments, as the case may be, made pursuant to clause (b) of this Section 2.06
shall be applied to the outstanding Advances as follows:
(i) On or prior to the Initial Acquisition Line
Termination Date, all outstanding Advances shall be repaid in accordance with
Borrower's direction;
(ii) In the event the Initial Acquisition Line
Termination Date has been extended pursuant to Section 2.01(b), then, during the
Second Acquisition Line Advance Period, all outstanding Advances shall be repaid
or prepaid as follows:
first, to prepay the Initial Outstanding
Acquisition Line Advances then outstanding and ratably to each unpaid
installment of principal thereof until such Initial Outstanding Acquisition Line
Advances are paid in full; and
second, to repay all other Advances then
outstanding in accordance with the Borrower's direction; and
(iii) From and after the Acquisition Line Termination
Date, all outstanding Advances shall be repaid or prepaid as follows:
first, to prepay the Acquisition Line
Advances then outstanding and ratably to each unpaid installment of principal of
the Acquisition Line Facility until such Acquisition Line Advances are paid in
full; and
second, to repay all other Advances then
outstanding in accordance with the Borrower's direction.
32
<PAGE> 39
SECTION 2.07. Interest.
(a) Scheduled Interest. The Borrower shall pay to the Administrative
Agent, for the benefit of the Lenders, interest on the unpaid principal amount
of each Advance owing to each Lender from the date of such Advance until such
principal amount shall be paid in full, at the following rates per annum:
(i) Prime Rate Advances. During such periods as such Advance
is a Prime Rate Advance, a rate per annum equal at all times to the sum of (x)
the Prime Rate in effect from time to time plus (y) the Applicable Margin for
such Advance in effect from time to time, payable in arrears monthly on the last
day of each month during such periods and on the date such Prime Rate Advance
shall be Converted or paid in full.
(ii) Eurodollar Rate Advances. During such periods as such
Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during
each Interest Period for such Advance to the sum of (x) the Eurodollar Rate for
such Interest Period for such Advance plus (y) the Applicable Margin for such
Advance in effect on the first day of such Interest Period, payable in arrears
on the last day of such Interest Period and, if such Interest Period has a
duration of more than three months, on each day that occurs during such Interest
Period every three months from the first day of such Interest Period and on the
date such Eurodollar Rate Advance shall be Converted or paid in full.
(iii) Swing Line Advances. During such periods as
such Advance is a Swing Line Advance, a rate per annum equal at all times to the
Swing Line Rate in effect from time to time, payable in arrears monthly on the
last day of each month during such periods and on the date such Swing Line
Advance shall be rolled over into the Revolving Credit Facility as provided in
Section 2.02(b) or paid in full.
(b) Default Interest. (i) With respect to any principal amount of any
Advance not paid when due by the Borrower (whether at the stated maturity, by
acceleration or otherwise), the Borrower shall pay interest on such unpaid
principal amount, in arrears on the dates referred to in clause (a)(i) or
(a)(ii) above and on demand, at a rate per annum equal at all times to two
percent (2%) per annum above the rate per annum required to be paid on such
Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) with respect to the
amount of any interest, fee or other amount payable hereunder not paid when due
(whether at the stated maturity, by acceleration or otherwise) the Borrower
shall pay interest on such amount to the fullest extent permitted by law from
the date such amount shall be due until such amount shall be paid in full, in
arrears on the date such amount shall be paid in full and on demand, at a rate
per annum equal at all times to two percent (2%) per annum above the rate per
annum required to be paid, in the case of interest, on the Type of Advance on
which such interest has accrued pursuant to clause (a)(i) or (a)(ii) above, and,
in all other cases, on Prime Rate Advances pursuant to clause (a)(i) above.
(c) Notice of Interest Rate. Promptly after receipt of a Notice of
Borrowing pursuant to Section 2.02(a), the Administrative Agent shall give
notice to the Borrower and each appropriate Lender of the applicable interest
rate determined by the Administrative Agent for purposes of clause (a)(i) or
(ii).
33
<PAGE> 40
SECTION 2.08. Fees.
(a) Commitment Fees. Borrower shall pay to the Administrative Agent,
for the account of the Lenders, commitment fees, from the Closing Date in the
case of each Initial Lender and from the effective date specified in the
Assignment and Acceptance pursuant to which it became a Lender in the case of
each other Lender, until (x) in the case of the Revolving Credit Facility, the
Revolving Credit Termination Date and (y) in the case of the Acquisition Line
Facility, the Acquisition Line Termination Date payable in arrears quarterly on
the last Business Day of each March, June, September, and December, commencing
June 30, 1998, and on the Revolving Credit Termination Date or on the
Acquisition Line Termination Date, as applicable, at the applicable percent per
annum set forth in the Unused Commitment Fee Table set forth below, determined
in the same manner as are the Applicable Margins for the Facilities, by
reference to the ratio of Consolidated Total Funded Debt to EBITDA for the four
full fiscal quarters preceding such determination. For purposes of this clause
(a), Swing Line Advances shall not constitute utilization of the Revolving
Credit Commitments of the Revolving Credit Lenders.
Notwithstanding the foregoing, prior to the delivery to the
Administrative Agent of the Borrower's financial statements for its fiscal
quarter ending June 30, 1998, the rate per annum on the average daily Unused
Revolving Credit Commitment of each Lender shall be equal to 0.20% and the rate
per annum on the average daily Unused Acquisition Line Commitment of each Lender
shall be 0.20%.
Unused Commitment Fee Table
<TABLE>
<S> <C>
- -------------------------------------------------------------------- -----------------------------------------------
Percentage - Revolving Credit Facility and
Consolidated Total Funded Debt to EBITDA Acquisition Line Facility
- -------------------------------------------------------------------- -----------------------------------------------
Equal to or greater than 3.00 to 1.00 .30%
- -------------------------------------------------------------------- -----------------------------------------------
Equal to or greater than 2.25 to 1.00, but less than 3.00 to 1.00 .25%
- -------------------------------------------------------------------- -----------------------------------------------
Equal to or greater than 1.75 to 1.00, but less than 2.25 to 1.00 .20%
- -------------------------------------------------------------------- -----------------------------------------------
Equal to or greater than 1.25 to 1.00, but less than 1.75 to 1.00 .15%
- -------------------------------------------------------------------- -----------------------------------------------
Less than 1.25 to 1.00 .125%
- -------------------------------------------------------------------- -----------------------------------------------
</TABLE>
(b) Letter of Credit Fees. (i) The Borrower shall pay to the
Administrative Agent for the account of each Revolving Credit Lender a
commission, payable in arrears quarterly on the last Business Day of each March,
June, September and December, commencing June 30, 1998, and on the Revolving
Credit Termination Date, on such Lender's Pro Rata Share of the average daily
aggregate Available Amount during such quarter of all Letters of Credit
outstanding from time to time at the rate per annum equal to the Applicable
Margin then in effect for Eurodollar Rate Advances under the Revolving Credit
Facility.
(ii) In addition to the foregoing fees described in Section
2.08(b)(i) above, the Borrower shall pay to the Issuing Bank, for its own
account, (x) on the Available Amount of each Letter of Credit, a fronting fee,
for the period from the date of issuance of such Letter of Credit to and
including the termination thereof, computed at the rate of one quarter of one
percent (1/4%) per annum, payable in arrears quarterly on the last Business Day
of each March, June, September and December of each year and on the date of
termination thereof and (y) transfer fees and other
34
<PAGE> 41
customary fees and charges in connection with the issuance or administration of
each Letter of Credit as the Borrower and the Issuing Bank shall agree.
(c) Administrative Agent's Fees. The Borrower shall pay to the
Administrative Agent for its own account such fees as may from time to time be
agreed between the Borrower and the Administrative Agent, including, without
limitation, the fees specified in that certain letter agreement dated February
13, 1998, between Borrower and Fleet (as such letter agreement may be amended,
supplemented or otherwise modified from time to time, the "FEE LETTER") and due
under and pursuant to such Fee Letter.
SECTION 2.09. Conversion of Advances.
(a) Optional. The Borrower may on any Business Day, upon notice given
to the Administrative Agent not later than 1:00 p.m. (New York time) on the
third Business Day prior to the date of the proposed Conversion to Eurodollar
Rate Advances and by 1:00 p.m. on the Business Day of the proposed Conversion to
Prime Rate Advances and subject to the provisions of Sections 2.07 and 2.10,
Convert all or any portion of the Advances of one Type comprising the same
Borrowing into Advances of the other Type; provided, however, that any
Conversion of Eurodollar Rate Advances into Prime Rate Advances shall be made
only on the last day of an Interest Period for such Eurodollar Rate Advances, no
Conversion of any Advances shall be less than the minimum amount applicable
under Section 2.01(a) or (b) or result in more separate Borrowings than
permitted under Section 2.02(c) and each Conversion of Advances comprising part
of the same Borrowing under any Facility shall be made ratably among the
appropriate Lenders in accordance with their Commitments under such Facility.
Each such notice of Conversion shall, within the restrictions specified above,
specify (i) the date of such Conversion, (ii) the Advances to be Converted and
(iii) if such Conversion is into Eurodollar Rate Advances, the duration of the
initial Interest Period for such Advances. Each notice of Conversion shall be
irrevocable and binding on the Borrower.
(b) Mandatory. (i) On the date on which the aggregate unpaid principal
amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by
payment or prepayment or otherwise, to less than $500,000, such Advances shall
automatically Convert into Prime Rate Advances on the last day of the Interest
Period relating thereto.
(ii) If the Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower and the appropriate
Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Prime
Rate Advance.
(iii) Upon the occurrence and during the continuance of any
Event of Default and the acceleration of the Notes, interest thereon and other
amounts payable by the Borrower under this Agreement and the other Loan
Documents pursuant to Article VI, (x) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Prime Rate Advance and (y) the obligation of the Lenders to make,
or to Convert Advances into, Eurodollar Rate Advances shall be suspended.
35
<PAGE> 42
SECTION 2.10. Increased Costs, Etc.
(a) If, after the date hereof, due to (i) the introduction of, any
change in reserve requirements included in the Eurodollar Rate Reserve
Percentage, any change in the interpretation of, or any change in, any law or
regulation, or (ii) the compliance with any guideline or request from any
central bank or other governmental authority (whether or not having the force of
law made after the date hereof), there shall be any increase in the cost to any
Lender Party of agreeing to make or of making, funding or maintaining Eurodollar
Rate Advances or of agreeing to issue or of issuing or maintaining Letters of
Credit or of agreeing to make or of making or maintaining Letter of Credit
Advances (excluding for purposes of this Section 2.10 any such increased costs
resulting from (x) Taxes or Other Taxes (as to which Section 2.12 shall govern)
and (y) changes in the basis of taxation of overall net income or overall gross
income by the United States or by the foreign jurisdiction or state under the
laws of which such Lender Party is organized or has its Applicable Lending
Office or any political subdivision thereof), then the Borrower shall from time
to time, upon demand by such Lender Party (with a copy of such demand to the
Administrative Agent), pay to the Administrative Agent for the account of such
Lender Party additional amounts sufficient to compensate such Lender Party for
such increased cost; provided, however, that a Lender Party claiming additional
amounts under this Section 2.10(a) agrees to use reasonable efforts (consistent
with legal and regulatory restrictions) to designate a different Applicable
Lending Office if the making of such a designation would avoid the need for, or
reduce the amount of, such increased cost that may thereafter accrue and would
not, in the reasonable judgment of such Lender Party, be otherwise
disadvantageous to such Lender Party. A certificate as to the amount of such
increased cost, submitted to the Borrower by such Lender Party, shall be
conclusive and binding for all purposes, absent manifest error.
(b) If, after the date hereof, due to (i) the introduction of, any
change in the interpretation of, or any change in, any law or regulation, or
(ii) the compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law made after the
date hereof), there shall be any increase in the amount of capital required or
reasonably expected to be maintained by any Lender Party or any corporation
controlling such Lender Party as a result of or based upon the existence of such
Lender Party's commitment to lend or to issue Letters of Credit hereunder or the
issuance or maintenance of the Letters of Credit, then, upon demand by such
Lender Party (with a copy of such demand to the Administrative Agent), the
Borrower shall pay to the Administrative Agent for the account of such Lender
Party, from time to time as specified by such Lender Party, additional amounts
sufficient to compensate such Lender Party or such corporation in the light of
such circumstances, to the extent that such Lender Party reasonably determines
such increase in capital to be allocable to the existence of such Lender Party's
commitment to lend or to issue Letters of Credit hereunder or to the issuance or
maintenance of any Letters of Credit. A certificate as to such amounts submitted
to the Borrower by such Lender Party shall be conclusive and binding for all
purposes, absent manifest error.
(c) If, with respect to any Eurodollar Rate Advances under any
Facility, Lenders owed greater than 50% of the then aggregate unpaid principal
amount thereof notify the Administrative Agent that the Eurodollar Rate for any
Interest Period for such Advances will not adequately reflect the cost to such
Lenders of making, funding or maintaining their Eurodollar Rate Advances for
such Interest Period, the Administrative Agent shall forthwith so notify the
Borrower and the appropriate Lenders, whereupon (i) each such Eurodollar Rate
Advance under any Facility will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Prime Rate Advance and (ii)
the obligation of the appropriate Lenders to make, or to Convert Advances into,
Eurodollar Rate
36
<PAGE> 43
Advances shall be suspended until the Administrative Agent shall notify the
Borrower that such Lenders have determined that the circumstances causing such
suspension no longer exist.
(d) Notwithstanding any other provision of this Agreement, if, after
the date hereof, the introduction of, any change in, or any change in the
interpretation of, any law or regulation shall make it unlawful, or any central
bank or other governmental authority shall assert that it is unlawful, for any
Lender or its Eurodollar Lending Office to perform its obligations hereunder to
make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate
Advances hereunder, then, on notice thereof and demand therefor by such Lender
to the Borrower through the Administrative Agent, (i) that portion of each
Eurodollar Rate Advance made by such Lender under each Facility under which such
Lender has a Commitment will automatically, upon such demand, Convert into a
Prime Rate Advance and (ii) the obligation of such Lender to make, or to Convert
Advances into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower that such Lender has determined
that the circumstances causing such suspension no longer exist; provided,
however, that before making any such demand, such Lender agrees to use
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Eurodollar Lending Office if the making
of such a designation would allow such Lender or its Eurodollar Lending Office
to continue to perform its obligations to make Eurodollar Rate Advances or to
continue to fund or maintain Eurodollar Rate Advances and would not, in the
judgment of such Lender, be otherwise disadvantageous to such Lender.
SECTION 2.11. Payments and Computations.
(a) The Borrower shall make each payment hereunder and under the Notes,
irrespective of any right of counterclaim or set-off (except as otherwise
provided in Section 2.15), not later than 1:00 p.m. (New York time) on the day
when due in U.S. dollars to the Administrative Agent at the Administrative
Agent's Account in same day funds. The Administrative Agent will promptly
thereafter cause like funds to be distributed (i) if such payment by the
Borrower is in respect of principal, interest, commitment fees or any other
Obligation then payable hereunder and under the Notes to more than one Lender
Party, to such Lender Parties for the account of their respective Applicable
Lending Offices ratably in accordance with the amounts of such respective
Obligations then payable to such Lender Parties and (ii) if such payment by the
Borrower is in respect of any Obligation then payable hereunder to one Lender
Party, to such Lender Party for the account of its Applicable Lending Office, in
each case to be applied in accordance with the terms of this Agreement. Upon its
acceptance of an Assignment and Acceptance and recording of the information
contained therein in the Register pursuant to Section 8.07(d), from and after
the effective date of such Assignment and Acceptance, the Administrative Agent
shall make all payments hereunder and under the Notes in respect of the interest
assigned thereby to the Lender Party assignee thereunder, and the parties to
such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) If the Administrative Agent receives funds for application to the
Obligations under the Loan Documents under circumstances for which the Loan
Documents do not specify the Advances or the Facility to which, or the manner in
which, such funds are to be applied, the Administrative Agent may, but shall not
be obligated to, elect to distribute such funds to each Lender Party ratably in
accordance with such Lender Party's proportionate share of the principal amount
of all outstanding Advances and the Available Amount of all Letters of Credit
then outstanding in repayment or prepayment of such of the outstanding Advances
or other Obligations owed to such
37
<PAGE> 44
Lender Party, and for application to such principal installments, as the
Administrative Agent shall direct.
(c) The Borrower hereby authorizes each Lender Party, if and to the
extent payment owed to such Lender Party is not made when due hereunder or, in
the case of a Lender, under the Note held by such Lender, to charge from time to
time against any or all of the Borrower's accounts with such Lender Party any
amount so due.
(d) All computations of interest, fees and Letter of Credit commissions
shall be made by the Administrative Agent on the basis of a year of 360 days, in
each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest, fees or
commissions are payable. Each determination by the Administrative Agent of an
interest rate, fee or commission hereunder shall be conclusive and binding for
all purposes, absent manifest error.
(e) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or commitment fee, as the
case may be; provided, however, that, if such extension would cause payment of
interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(f) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to any Lender Party
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each such Lender Party
on such due date an amount equal to the amount then due such Lender Party. If
and to the extent the Borrower shall not have so made such payment in full to
the Administrative Agent, each such Lender Party shall repay to the
Administrative Agent forthwith on demand such amount distributed to such Lender
Party together with interest thereon, for each day from the date such amount is
distributed to such Lender Party until the date such Lender Party repays such
amount to the Administrative Agent, at the Federal Funds Rate.
38
<PAGE> 45
SECTION 2.12. Taxes.
(a) Any and all payments by the Borrower hereunder or under the Notes
shall be made, in accordance with Section 2.11, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in
the case of each Lender Party and the Administrative Agent, net income taxes
that are imposed by the United States and net income taxes (or franchise taxes
imposed in lieu thereof) that are imposed on such Lender Party or the
Administrative Agent by the local, state or foreign jurisdiction under the laws
of which such Lender Party or the Administrative Agent (as the case may be) is
organized or any political subdivision thereof and, in the case of each Lender
Party, net income taxes (or franchise taxes imposed in lieu thereof) that are
imposed on such Lender Party by the local, state or foreign jurisdiction of such
Lender Party's Applicable Lending Office or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities in respect of payments hereunder or under the Notes being
hereinafter referred to as "TAXES"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to any Eligible Assignee, any Lender Party or the Administrative Agent, (i)
the sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.12) such Lender Party or the Administrative Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, performing under, or otherwise with respect to,
this Agreement or the Notes (hereinafter referred to as "OTHER TAXES").
(c) The Borrower shall indemnify each Lender Party and the
Administrative Agent for the full amount of Taxes and Other Taxes, and for the
full amount of taxes imposed by any jurisdiction on amounts payable under this
Section 2.12, imposed on or paid by such Lender Party or the Administrative
Agent (as the case may be) and any liability (including penalties, additions to
tax, interest and expenses) arising therefrom or with respect thereto, except
with respect to any Lender Party or the Administrative Agent, as the case may
be, for such a liability arising from such Lender Party's or the Administrative
Agent's, as the case may be, willful misconduct or gross negligence. This
indemnification shall be made within thirty (30) days from the date such Lender
Party or the Administrative Agent, as the case may be, makes written demand
specifying in reasonable detail the basis therefor.
(d) Within thirty (30) days after the date of any payment of Taxes, the
Borrower shall furnish to the Administrative Agent, at its address referred to
in Section 8.02, the original receipt of payment thereof or a certified copy of
such receipt. In the case of any payment hereunder or under the Notes by or on
behalf of the Borrower through an account or branch outside the United States or
by or on behalf of the Borrower by a payor that is not a United States person,
if the Borrower determines that no Taxes are payable in respect thereof, the
Borrower shall furnish, or shall cause such payor to furnish, to the
Administrative Agent, at such address, an opinion of counsel acceptable to the
Administrative Agent stating that such payment is exempt from Taxes. For
purposes of this subsection (d) and subsection (e), the terms "United States"
and "United States person" shall have the meanings specified in Section 7701 of
the Internal Revenue Code.
39
<PAGE> 46
(e) Each Lender Party organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date of its execution and
delivery of this Agreement in the case of each Initial Lender or Initial Issuing
Bank, as the case may be, and on the date of the Assignment and Acceptance
pursuant to which it became a Lender Party in the case of each other Lender
Party, and from time to time thereafter as requested in writing by the Borrower
or the Administrative Agent (but only so long thereafter as such Lender Party
remains lawfully able to do so), provide each of the Administrative Agent and
the Borrower with two (2) original Internal Revenue Service Form 1001 or 4224,
as appropriate, or any successor or other form prescribed by the Internal
Revenue Service, certifying that such Lender is exempt from or entitled to a
reduced rate of United States withholding tax on payments pursuant to this
Agreement or the Notes. If the forms provided by a Lender Party at the time such
Lender Party first becomes a party to this Agreement indicates a United States
interest withholding tax rate in excess of zero, withholding tax at such rate
shall be considered excluded from Taxes unless and until such Lender Party
provides the appropriate form certifying that a lesser rate applies, whereupon
withholding tax at such lesser rate only shall be considered excluded from Taxes
for periods governed by such form; provided, however, that, if at the date of
the Assignment and Acceptance pursuant to which a Lender Party becomes a party
to this Agreement, the Lender Party assignor was entitled to payments under
subsection (a) in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Lender Party assignee on such date. If any form
or document referred to in this subsection (e) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service Form 1001 or
4224, that a Lender Party reasonably considers to be confidential, such Lender
Party shall give notice thereof to the Borrower and shall not be obligated to
include in such form or document such confidential information.
(f) For any period with respect to which a Lender Party has failed to
provide the Borrower with the appropriate form described in subsection (e)
(other than if such failure is due to a change in law occurring after the date
on which a form originally was required to be provided or if such form otherwise
is not required under subsection (e)), such Lender Party shall not be entitled
to indemnification under subsection (a) or (c) with respect to Taxes imposed by
the United States by reason of such failure.
(g) Any Lender Party claiming any additional amounts payable pursuant
to this Section 2.12 agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Applicable Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Lender Party, be otherwise disadvantageous to such Lender Party.
SECTION 2.13. Sharing of Payments, Etc. If any Lender Party shall
obtain at any time any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise) (i) on account of Obligations
due and payable to such Lender Party hereunder or under the Notes at such time
in excess of its ratable share (according to the proportion of (x) the amount of
such Obligations due and payable to such Lender Party at such time to (y) the
aggregate amount of the Obligations due and payable to all Lender Parties
hereunder and under the Notes at such time) of payments on account of the
Obligations due and payable to all Lender Parties hereunder or under
40
<PAGE> 47
the Notes at such time obtained by all the Lender Parties at such time or (ii)
on account of Obligations owing (but not due and payable) to such Lender Party
hereunder and under the Notes at such time in excess of its ratable share
(according to the proportion of (x) the amount of such Obligations owing to such
Lender Party at such time to (y) the aggregate amount of the Obligations owing
(but not due and payable) to all Lender Parties hereunder and under the Notes at
such time) of payments on account of the Obligations owing (but not due and
payable) to all Lender Parties hereunder and under the Notes at such time
obtained by all of the Lender Parties at such time, such Lender Party shall
forthwith purchase from the other Lender Parties such participations in the
Obligations due and payable or owing to them, as the case may be, as shall be
necessary to cause such purchasing Lender Party to share the excess payment
ratably with each of them; provided, however, that if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender Party, such
purchase from each other Lender Party shall be rescinded and each such other
Lender Party shall repay to the purchasing Lender Party the purchase price to
the extent of such Lender Party's ratable share (according to the proportion of
(x) the purchase price paid to such Lender Party to (y) the aggregate purchase
price paid to all Lender Parties) of such recovery together with an amount equal
to such Lender Party's ratable share (according to the proportion of (x) the
amount of such other Lender Party's required repayment to (y) the total amount
of such required repayments to the purchasing Lender Party) of any interest or
other amount paid or payable by the purchasing Lender Party in respect of the
total amount so recovered. The Borrower agrees that any Lender Party so
purchasing a participation from another Lender Party pursuant to this Section
2.13 may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off) with respect to such participation as
fully as if such Lender Party were the direct creditor of the Borrower in the
amount of such participation.
SECTION 2.14. Use of Proceeds. The proceeds of the Advances and
issuances of Letters of Credit shall be available, and the Borrower shall use
such proceeds and Letters of Credit solely (i) to finance in part the Devon
Acquisition, (ii) to pay fees and expenses incurred in connection with the Devon
Acquisition, (iii) to provide working capital for the Borrower, (iv) for general
corporate purposes and (v) to finance Permitted Acquisitions; provided, however,
that the Acquisition Line Facility (and no other Facility except as otherwise
provided below in this Section 2.14) shall be available solely for the purpose
of funding the consideration for the Strategic Investment and the cash purchase
price (including related reasonable and customary fees and costs with respect to
such applicable acquisition) in respect of Permitted Acquisitions (other than
the Devon Acquisition) (the "ACQUISITION PURCHASE PRICE"). The Revolving Credit
Facility may be available for the purpose of funding the Acquisition Purchase
Price in respect of Permitted Acquisitions only if the Unused Acquisition Line
Commitment equals zero or the Acquisition Line Termination Date has occurred.
Notwithstanding the immediately preceding sentence, only the Revolving Credit
Facility shall be available to finance the Devon Acquisition.
41
<PAGE> 48
SECTION 2.15. Defaulting Lenders. (a) In the event that, at any one
time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting
Lender shall owe a Defaulted Advance to the Borrower and (iii) the Borrower
shall be required to make any payment hereunder or under any other Loan Document
to or for the account of such Defaulting Lender, then the Borrower may, so long
as no Default shall occur or be continuing at such time and to the fullest
extent permitted by applicable law, set off and otherwise apply the obligation
of the Borrower to make such payment to or for the account of such Defaulting
Lender against the obligation of such Defaulting Lender to make such Defaulted
Advance. In the event that, on any date, the Borrower shall so set off and
otherwise apply its obligation to make any such payment against the obligation
of such Defaulting Lender to make any such Defaulted Advance on or prior to such
date, the amount so set off and otherwise applied by the Borrower shall
constitute for all purposes of this Agreement and the other Loan Documents an
Advance by such Defaulting Lender made on the date under the Facility pursuant
to which such Defaulted Advance was originally required to have been made
pursuant to Section 2.01. Such Advance shall be a Prime Rate Advance and shall
be considered, for all purposes of this Agreement, to comprise part of the
Borrowing in connection with which such Defaulted Advance was originally
required to have been made pursuant to Section 2.01, even if the other Advances
comprising such Borrowing shall be Eurodollar Rate Advances on the date such
Advance is deemed to be made pursuant to this subsection (a). The Borrower shall
notify the Administrative Agent at any time the Borrower exercises its right of
set-off pursuant to this subsection (a) and shall set forth in such notice (i)
the name of the Defaulting Lender and the Defaulted Advance required to be made
by such Defaulting Lender and (ii) the amount set off and otherwise applied in
respect of such Defaulted Advance pursuant to this subsection (a). Any portion
of such payment otherwise required to be made by the Borrower to or for the
account of such Defaulting Lender which is paid by the Borrower, after giving
effect to the amount set off and otherwise applied by the Borrower pursuant to
this subsection (a), shall be applied by the Administrative Agent as specified
in subsection (b) or (c) of this Section 2.15.
(b) In the event that, at any one time, (i) any Lender Party shall be a
Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount to
the Administrative Agent or any of the other Lender Parties and (iii) the
Borrower shall make any payment hereunder or under any other Loan Document to
the Administrative Agent for the account of such Defaulting Lender, then the
Administrative Agent may, on its behalf or on behalf of such other Lender
Parties and to the fullest extent permitted by applicable law, apply at such
time the amount so paid by the Borrower to or for the account of such Defaulting
Lender to the payment of each such Defaulted Amount to the extent required to
pay such Defaulted Amount. In the event that the Administrative Agent shall so
apply any such amount to the payment of any such Defaulted Amount on any date,
the amount so applied by the Administrative Agent shall constitute for all
purposes of this Agreement and the other Loan Documents, payment, to such
extent, of such Defaulted Amount on such date. Any such amount so applied by the
Administrative Agent shall be retained by the Administrative Agent or
distributed by the Administrative Agent to such other Lender Parties, ratably in
accordance with the respective portions of such Defaulted Amounts payable at
such time to the Administrative Agent and such other Lender Parties and, if the
amount of such payment made by the Borrower shall at such time be insufficient
to pay all Defaulted Amounts owing at such time to the Administrative Agent and
the other Lender Parties, in the following order of priority:
first, to the Administrative Agent for any Defaulted Amount then owing
to the Administrative Agent; and
42
<PAGE> 49
second, to the Lender Parties for any Defaulted Amounts then
owing to such Lender Parties, ratably in accordance with such respective
Defaulted Amounts then owing to such Lender Parties.
Any portion of such amount paid by the Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Administrative Agent pursuant to this subsection (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.15.
(c) In the event that, at any one time, (i) any Lender Party shall be a
Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted Advance
or a Defaulted Amount and (iii) the Borrower, the Administrative Agent or any
other Lender Party shall be required to pay or distribute any amount hereunder
or under any other Loan Document to or for the account of such Defaulting
Lender, then the Borrower or such other Lender Party shall pay such amount to
the Administrative Agent to be held by the Administrative Agent, to the fullest
extent permitted by applicable law, in escrow or the Administrative Agent shall,
to the fullest extent permitted by applicable law, hold in escrow such amount
otherwise held by it. Any funds held by the Administrative Agent in escrow under
this subsection (c) shall be deposited by the Administrative Agent in an account
with Fleet, in the name and under the control of the Administrative Agent, but
subject to the provisions of this subsection (c). The terms applicable to such
account, including the rate of interest payable with respect to the credit
balance of such account from time to time, shall be Fleet's standard terms
applicable to escrow accounts maintained with it. Any interest credited to such
account from time to time shall be held by the Administrative Agent in escrow
under, and applied by the Administrative Agent from time to time in accordance
with the provisions of, this subsection (c). The Administrative Agent shall, to
the fullest extent permitted by applicable law, apply all funds so held in
escrow from time to time to the extent necessary to make any Advances required
to be made by such Defaulting Lender and to pay any amount payable by such
Defaulting Lender hereunder and under the other Loan Documents to the
Administrative Agent or any other Lender Party, as and when such Advances or
amounts are required to be made or paid and, if the amount so held in escrow
shall at any time be insufficient to make and pay all such Advances and amounts
required to be made or paid at such time, in the following order of priority:
first, to the Administrative Agent for any amount then due and
payable by such Defaulting Lender to the Administrative Agent hereunder;
second, to the Lender Parties for any amount then due and
payable by such Defaulting Lender to such Lender Parties hereunder, ratably in
accordance with such respective amounts then due and payable to such Lender
Parties; and
third, to the Borrower for any Advance then required to be
made by such Defaulting Lender pursuant to a Commitment of such Defaulting
Lender.
In the event that any Lender Party that is a Defaulting Lender shall, at any
time, cease to be a Defaulting Lender, any funds held by the Administrative
Agent in escrow at such time with respect to such Lender Party shall be
distributed by the Administrative Agent to such Lender Party and applied by such
Lender Party to the Obligations owing to such Lender Party at such time under
this Agreement and the other Loan Documents in such manner as the Administrative
Agent shall reasonably direct.
43
<PAGE> 50
(d) The rights and remedies against a Defaulting Lender under this
Section 2.15 are in addition to other rights and remedies that the Borrower may
have against such Defaulting Lender with respect to any Defaulted Advance and
that the Administrative Agent or any Lender Party may have against such
Defaulting Lender with respect to any Defaulted Amount.
SECTION 2.16 Regulation U and Regulation G. Each Lender Party shall be
responsible for its compliance hereunder with Regulation U and Regulation G, if
and as applicable, and the Administrative Agent shall have no responsibility
with respect to any such compliance by any Lender Party.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Initial Extension of Credit. The
obligation of each Lender to make an Advance or of the Issuing Bank to issue a
Letter of Credit on the occasion of the Initial Extension of Credit hereunder is
subject to the satisfaction of each of the following conditions precedent before
or concurrently with the Initial Extension of Credit:
(a) The Administrative Agent shall have received on or before the day
of the Initial Extension of Credit the following, each dated such day (unless
otherwise specified), in form and substance reasonably satisfactory to the
Administrative Agent and the Lenders, and in sufficient copies (except for the
Notes), for each Lender Party:
(i) The Notes in substantially the form of Exhibit B, and
Exhibit C and Exhibit F payable to the order of the applicable Lender Parties
duly executed by the Borrower.
(ii) A guaranty in substantially the form of Exhibit E hereto
duly executed by AGT Acquisition Corp., AmuseMatte Corporation and Miramar
Equipment, Inc. (as hereafter amended, supplemented or otherwise modified from
time to time in accordance with its terms, the "SUBSIDIARY GUARANTY").
(iii) A guaranty in substantially the form of Exhibit E hereto
duly executed by each of the Devon Subsidiary Guarantors (as hereafter amended,
supplemented or otherwise modified from time to time in accordance with its
terms, the "DEVON SUBSIDIARY GUARANTY" ).
(iv) A copy of a certificate of the Secretary of State of the
jurisdiction of its incorporation or organization, dated as of a date reasonably
near to the date of the Initial Extension of Credit, listing the charter or
other organizational document of each Loan Party and each amendment thereto on
file in its office and certifying that (A) such amendments are the only
amendments to such Loan Party's charter or other organizational document on file
in its office, (B) such Loan Party has paid all franchise taxes to the date of
such certificate and (C) such Loan Party is duly incorporated or organized and
in good standing under the laws of the State of the jurisdiction of its
incorporation or organization.
44
<PAGE> 51
(v) A copy of a certificate of the Secretary of State of each
State listed on Schedule 3.01(a)(v), dated reasonably near the date of the
Initial Extension of Credit, stating that each Loan Party is duly qualified and
in good standing as a foreign corporation in such State and has filed all annual
reports required to be filed to the date of such certificate, except as
otherwise noted on Schedule 3.01(a)(v).
(vi) A certificate of each Loan Party signed on behalf of such
Loan Party's duly authorized officer and Secretary or an Assistant Secretary,
dated the date of the Initial Extension of Credit (the statements made in such
certificate shall be true on and as of the date of the Initial Extension of
Credit), certifying as to (A) the absence of any amendments to the charter or
other organizational document of such Loan Party since the date of the Secretary
of State's certificate referred to in Section 3.01(a)(iv), (B) a true and
correct copy of the by-laws of such Loan Party, as in effect on the date of the
Initial Extension of Credit, (C) the due incorporation or organization and good
standing of such Loan Party as a corporation organized under the laws of the
jurisdiction of its incorporation or organization, and the absence of any
proceeding for the dissolution or liquidation of such Loan Party, (D) true and
correct copies of the resolutions of the Board of Directors of each Loan Party
approving this Agreement, the Notes, and each other Loan Document and the Devon
Acquisition Documents to which it is or is to be a party, and (E) a true and
correct copy of the charter or other organizational document of each Loan Party
and each amendment thereto, certified (as of a date reasonably near the date of
the Initial Extension of Credit) by the Secretary of State of the jurisdiction
of its incorporation or organization as being a true and correct copy thereof.
(vii) A certificate of the Secretary or an Assistant Secretary
of each Loan Party certifying the names and true signatures of the officers of
such Loan Party authorized to sign this Agreement, the Notes, each other Loan
Document to which it is or is to be a party and the other documents to be
delivered hereunder and thereunder.
(viii) Such financial, business and other information
regarding each Loan Party and each such Person's Subsidiaries as any of the
Lender Parties shall have reasonably requested, including, without limitation,
information as to possible contingent liabilities, tax matters, obligations
under Plans, collective bargaining agreements and other arrangements with
employees, audited annual financial statements dated, in the case of the
Borrower and its Subsidiaries, December 31, 1997, and in the case of the Company
and its Subsidiaries, March 31, 1998, interim financial statements dated, in the
case of the Borrower and its Subsidiaries, March 31, 1998, pro forma financial
statements as to the Borrower and its Subsidiaries, taken as a whole, and
forecasts prepared by management of the Borrower, all in form and substance
reasonably satisfactory to the Lender Parties.
(ix) A Notice of Borrowing.
(b) The Lender Parties shall be satisfied with the corporate and legal
structure and capitalization of the Borrower and its Subsidiaries, including,
without limitation, the terms and conditions of the charter or other
organizational document, by-laws and each class of capital stock, of the
Borrower and its Subsidiaries and of each agreement or instrument relating to
such structure or capitalization.
(c) The Lender Parties shall be satisfied (i) that, other than the
Surviving Debt, all existing Debt of the Borrower and its Subsidiaries has been
(or, upon consummation of the Devon Acquisition will be) prepaid, redeemed or
defeased in full or otherwise satisfied and extinguished
45
<PAGE> 52
and (ii) that all Surviving Debt shall be on terms and conditions reasonably
satisfactory to the Lender Parties.
(d) Other than the litigation described in Schedule 3.01(d) (the
"DISCLOSED LITIGATION"), there shall exist no action, suit, investigation,
litigation or proceeding pending or threatened in any court or before any
arbitrator or governmental or regulatory agency or authority that could
reasonably be expected to have a Material Adverse Effect.
(e) All governmental and third party consents and approvals necessary
in connection with each aspect of the Devon Acquisition and the Facilities shall
have been obtained (without the imposition of any conditions that are not
acceptable to the Initial Lenders) and shall remain in effect other than those
consents and approvals, if any, the failure of which to obtain could not be
reasonably expected to have a Material Adverse Effect; all applicable waiting
periods shall have expired without any adverse action being taken by any
competent authority; and no law or regulation shall be applicable in the
reasonable judgment of the Lender Parties that restrains, prevents or imposes
materially adverse conditions upon any aspect of the Devon Acquisition or the
Facilities.
(f) The Borrower shall have delivered a certificate, in form and
substance satisfactory to the Administrative Agent, attesting to the Solvency of
the Borrower and its Subsidiaries, taken as a whole, immediately before and
immediately after giving effect to the Devon Acquisition, from a Responsible
Officer of the Borrower.
(g) The Lenders shall be reasonably satisfied with the amount, types
and terms and conditions of all insurance maintained by or, after giving effect
to the consummation of the Devon Acquisition, to be maintained by the Borrower
and its Subsidiaries.
(h) The Lenders shall have received satisfactory opinions of counsel
for the Borrower, the Company and each of the Guarantors, as to the transactions
contemplated hereby.
(i) There shall exist no Default or Event of Default and all legal
matters incident to the Initial Extension of Credit shall be reasonably
satisfactory to counsel for the Administrative Agent.
(j) All accrued fees and expenses of the Administrative Agent and the
Lenders (including the fees and expenses of counsel for the Administrative
Agent) shall have been paid.
(k) The Administrative Agent shall have received certified copies of
each of the Devon Acquisition Documents, each of which shall be reasonably
satisfactory to the Administrative Agent and the Lenders and in full force and
effect.
(l) The Devon Acquisition shall be consummated (concurrently with the
Initial Extension of Credit) pursuant to the terms and conditions of the Devon
Acquisition Documents (and none of the material terms and conditions of the
Devon Acquisition Documents shall have been waived or modified except with the
prior written consent of the Administrative Agent and Lenders, which consent
shall not be unreasonably withheld) and (ii) shall be consummated in compliance
with all applicable laws and with all necessary consents and approvals.
46
<PAGE> 53
(m) The Administrative Agent shall have received (i) evidence in form
and substance reasonably satisfactory to it, that all transactions in connection
with the Devon Acquisition have been consummated under the terms and conditions
of the Devon Acquisition Documents and in compliance with all relevant laws and
regulations and (ii) a true and correct copy of a certificate of merger filed
with the Secretary of State of the State of Delaware evidencing that the Merger
is effective.
(n) The Administrative Agent shall have received evidence (which may
include wiring instructions hereunder) that a cash payment of at least
$220,000,000 was made by the Borrower in accordance with the Merger Agreement .
(o) The Initial Extension of Credit made under this Agreement shall be
in full compliance with all applicable requirements of law, including, without
limitation, Regulations G, T, U, and X.
(p) The Administrative Agent shall have received such other approvals,
opinions or documents as any Lender through the Administrative Agent may
reasonably request, and all legal matters incident to such Borrowing and the
other Loan Parties shall be satisfactory to counsel for the Administrative
Agent.
SECTION 3.02. Conditions Precedent to Each Borrowing and Issuance. The
obligation of each appropriate Lender to make an Advance and the obligation of
the Issuing Bank to issue a Letter of Credit (including the initial issuance
thereof) or renew a Letter of Credit and the right of the Borrower to request
the issuance or renewal of a Letter of Credit, shall each be subject to the
further conditions precedent that on the date of each such Borrowing or issuance
or renewal:
(a) The following statements shall be true and the Administrative Agent
shall have received (except in the case of the Letter of Credit Advance made by
the Issuing Bank or a Revolving Credit Lender pursuant to Section 2.03(c) and a
Swing Line Advance made by a Swing Line Bank pursuant to Section 2.02(b)) a
certificate signed by a duly authorized officer of the Borrower, dated the date
of such Borrowing or issuance or renewal, stating that (and each of the giving
of the applicable Notice of Borrowing, Notice of Swing Line Borrowing or Notice
of Issuance and the acceptance by the Borrower of the proceeds of a Borrowing or
of a Letter of Credit or the renewal of a Letter of Credit shall constitute a
representation and warranty by the Borrower that both on the date of such notice
and on the date of such Borrowing or issuance or renewal such statements are
true):
(i) the representations and warranties contained in each Loan
Document are correct in all material respects on and as of such date (or, if any
such representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date), before and after giving effect to such
Borrowing or issuance or renewal and to the application of the proceeds
therefrom, as though made on and as of such date; and
(ii) no event has occurred and is continuing, or would result
from such Borrowing or issuance or renewal or from the application of the
proceeds therefrom, that constitutes a Default or an Event of Default.
(b) With respect to any Permitted Acquisition in connection with which
the Required Lenders' consent is required under this Agreement, the
Administrative Agent shall have received a
47
<PAGE> 54
certificate executed by the Borrower's Responsible Officer showing the
Borrower's compliance (including the computations used by the Borrower in
determining such compliance) with the financial covenants set forth in Sections
5.04(a) through (c) on a pro forma basis after giving effect to the proposed
Permitted Acquisition.
(c) The Administrative Agent shall have received such other approvals,
opinions or documents as any appropriate Lender through the Administrative Agent
may reasonably request, and all legal matters incident to such Borrowing or
issuance of such Letter of Credit shall be reasonably satisfactory to counsel
for the Administrative Agent.
SECTION 3.03. Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender Party shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lender Parties, unless an
officer of the Administrative Agent responsible for the transactions
contemplated by the Loan Documents shall have received written notice from such
Lender Party prior to the Initial Extension of Credit specifying its objection
thereto and, if the Initial Extension of Credit consists of a Borrowing, such
Lender Party shall not have made available to the Administrative Agent such
Lender Party's ratable portion of such Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) Each Loan Party (i) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (ii) is duly
qualified and in good standing in each other jurisdiction in which it owns or
leases property or in which the conduct of its business requires it to so
qualify or be licensed except where the failure to so qualify or be licensed
could not reasonably be expected to have a Material Adverse Effect and (iii) has
all requisite power and authority, corporate or otherwise (including, without
limitation, all governmental licenses, permits and other approvals), to own or
lease and operate its properties and to carry on its business as now conducted
and as proposed to be conducted.
(b) Set forth on Schedule 4.01(b) hereto is a complete and accurate
list of all Subsidiaries of the Borrower as of the date hereof after giving
effect to the Devon Acquisition, showing as of the date hereof (as to each such
Subsidiary) the jurisdiction of its organization, the number of shares of each
class of capital stock, authorized, and the number outstanding, on the date
hereof and the percentage of the outstanding shares of each such class owned
(directly or indirectly) by such Loan Party and the number of shares covered by
all outstanding options, warrants, rights of conversion or purchase and similar
rights at the date hereof. All of the outstanding capital stock of all of such
Subsidiaries has been validly issued, is fully paid and non-assessable and is
owned by such Loan Party or one or more of their respective Subsidiaries free
and clear of all Liens.
(c) The execution, delivery and performance by each Loan Party of this
Agreement, the Notes, each other Loan Document and each Devon Acquisition
Document to which it is or is to be
48
<PAGE> 55
a party, and the consummation of the Devon Acquisition and the other
transactions contemplated hereby and thereby, are within such Loan Party's
governing powers, have been duly authorized by all necessary action, corporate
or otherwise, and do not (i) contravene such Loan Party's organization
documents, (ii) violate any law (including, without limitation, the Securities
Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended),
rule, regulation (including, without limitation, Regulation G, T, U or X),
order, writ, judgment, injunction, decree, determination or award, (iii)
conflict with or result in the breach of, or constitute a default under, any
Material Contract, loan agreement, indenture, mortgage, deed of trust, lease or
other material instrument binding on or affecting any Loan Party or any of their
respective properties or (iv) result in or require the creation or imposition of
any Lien upon or with respect to any of the properties of any Loan Party. No
Loan Party or any of its Subsidiaries is in violation of any such law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award or
in breach of any such contract, loan agreement, indenture, mortgage, deed of
trust, lease or other instrument or agreement, the violation or breach of which
could reasonably be expected to have a Material Adverse Effect.
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other third
party is required for (i) the due execution, delivery, recordation, filing or
performance by any Loan Party of this Agreement, the Notes or any other Loan
Document or any Devon Acquisition Documents to which it is or is to be a party,
or for the consummation of the Devon Acquisition or the other transactions
contemplated hereby or thereby or (ii) the exercise by the Administrative Agent
or any Lender Party of its rights under the Loan Documents, except for the
authorizations, approvals, actions, notices and filings listed on Schedule
4.01(d), all of which have been duly obtained, taken, given or made and are in
full force and effect. All applicable waiting periods in connection with the
Devon Acquisition and the other transactions contemplated hereby have expired
without any action having been taken by any competent authority restraining,
preventing or imposing materially adverse conditions upon the Devon Acquisition,
the transactions contemplated hereby or the rights of the Loan Parties freely to
transfer or otherwise dispose of, or to create any Lien on, any properties now
owned or hereafter acquired by any of them.
(e) This Agreement and each Devon Acquisition Document has been, and
each of the Notes and each other Loan Document has been or when delivered
hereunder will have been, duly executed and delivered by each Loan Party party
thereto, as applicable. This Agreement and each Devon Acquisition Document is,
and each of the Notes and each other Loan Document has been or when delivered
hereunder will be, the legal, valid and binding obligation of each Loan Party
party thereto, as applicable, enforceable against such Loan Party in accordance
with its terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (ii) the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(f) (i) The Consolidated balance sheet of the Borrower and its
Subsidiaries as at December 31, 1997, and the related Consolidated statement of
income and Consolidated statement of cash flows of the Borrower and its
Subsidiaries for the fiscal year then ended, accompanied by an opinion of
Deloitte and Touche LLP, independent public accountants, and the Consolidated
balance sheet of the Borrower and its Subsidiaries as at March 31, 1998, and the
related Consolidated statement of income and Consolidated statement of cash
flows of the Borrower and its Subsidiaries for the three months then ended, duly
certified by the chief financial officer of the Borrower, copies of which have
been furnished to the Administrative Agent, fairly present in all
49
<PAGE> 56
material respects, subject, in the case of said balance sheet as at March 31,
1998, and said statement of income and cash flows for the three months then
ended, to normal year-end audit adjustments and the absence of footnotes, the
Consolidated financial condition of the Borrower and its Subsidiaries as at such
dates and the Consolidated results of the operations of the Borrower and its
Subsidiaries for the period ended on such date, all in accordance with GAAP
applied on a consistent basis, and, since March 31, 1998, there has been no
change which could reasonably be expected to result in a Material Adverse
Effect.
(ii) To the best of the Borrower's knowledge, the Consolidated
balance sheet of the Company and its Subsidiaries as at March 31, 1998, and the
related Consolidated statement of income and Consolidated statement of cash
flows of the Company and its Subsidiaries for the fiscal year then ended,
accompanied by an opinion of KPMG Peat Marwick, independent public accountants,
copies of which have been (or when available, will be promptly) furnished to the
Administrative Agent, fairly present in all material respects the Consolidated
financial condition of the Company and its Subsidiaries as at such dates and the
Consolidated results of operations of the Company and its Subsidiaries for the
fiscal year of the Company ended on such date, all in accordance with GAAP
applied on a consistent basis, and since March 31, 1998, there has been no
change which could reasonably be expected to result in a Material Adverse
Effect.
(g) The Consolidated pro forma balance sheet of the Borrower and its
Subsidiaries as at December 31, 1997, and the related Consolidated pro forma
statement of income of the Borrower and its Subsidiaries for the period then
ended, certified by the chief financial officer of the Borrower, copies of which
have been furnished to the Administrative Agent, fairly present in all material
respects the Consolidated pro forma financial condition of the Borrower and its
Subsidiaries as at such date and the Consolidated pro forma results of
operations of the Borrower and its Subsidiaries for the period ended on such
date, in each case after giving effect to the Devon Acquisition and the other
transactions contemplated hereby, all in accordance with GAAP.
(h) None of the Information Memorandum or any information, exhibit or
report furnished by Borrower or any Person on behalf of Borrower to the
Administrative Agent or any Lender Party in connection with the Loan Documents
or pursuant to the terms of the Loan Documents contained any untrue statement of
a material fact or omitted to state a material fact necessary to make the
statements made therein not misleading.
(i) As of the date hereof, other than the Disclosed Litigation, there
is no action, suit, investigation, litigation or proceeding affecting the
Borrower or any of its Subsidiaries including, without limitation, any
Environmental Action, pending or, to their knowledge, threatened before or by
any court, governmental agency or arbitrator that could reasonably be expected
to have a Material Adverse Effect, and there has been no change in the status,
or financial effect on any Loan Party or any of their respective Subsidiaries of
the Disclosed Litigation from that described on Schedule 3.01(d) hereto which
could reasonably be expected to result in a Material Adverse Effect.
(j) Neither the Borrower nor any of its Subsidiaries is engaged in the
business of extending credit for the purpose of purchasing or carrying Margin
Stock. No part of the proceeds received by the Borrower or any of its
Subsidiaries from the Advances and Letter of Credit will be used directly or
indirectly (i) for any purpose other than as set forth in Section 2.14, or (ii)
for the purpose of purchasing or carrying, or for payment in full or in part of
Debt that was incurred for the purpose of carrying, any Margin Stock.
50
<PAGE> 57
(k) As of the date hereof, except as set forth on Schedule 4.01(k)
hereto, neither the Borrower nor any of its Subsidiaries nor any of their
respective ERISA Affiliates maintains or has maintained any Plans or
Multiemployer Plans. Set forth on Schedule 4.01(k) is a complete and accurate
list of all Welfare Plans and all defined contribution plans in respect of which
any Loan Party could have liability.
(l) Except as set forth in the financial statements referred to in this
Section 4.01 and in Section 5.03, neither the Borrower nor any of its
Subsidiaries has any liability with respect to "expected post retirement benefit
obligations" within the meaning of Statement of Financial Accounting Standards
No. 106 which could reasonably be expected to have a Material Adverse Effect.
(m) Neither the business nor the properties of any Loan Party have been
affected by any fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or of the public
enemy or other casualty (whether or not covered by insurance) that could
reasonably be expected to have a Material Adverse Effect.
(n) The operations and properties of each Loan Party and each of its
respective Subsidiaries comply in all respects with all applicable Environmental
Laws and Environmental Permits, except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect, and no circumstances
exist that could reasonably be expected to form the basis of an Environmental
Action against any Loan Party or any of its Subsidiaries or any of their
properties that could reasonably be expected to have a Material Adverse Effect.
(o) Except as set forth on Schedule 4.01(o), neither any Loan Party nor
any of its Subsidiaries is a party to any indenture, loan or credit agreement or
any lease or other agreement or instrument or subject to any charter or
corporate restriction that could reasonably be expected to have a Material
Adverse Effect.
(p) Each Loan Party has filed, has caused to be filed or has been
included in all income and other material tax returns (Federal, state, local and
foreign) required to be filed and has paid all taxes shown thereon to be due,
together with applicable interest and penalties or is contesting such taxes in
good faith and by appropriate proceedings diligently conducted and reserves or
other appropriate provisions therefor have been established in accordance with
GAAP.
(q) Except to the extent effected by the consummation of the Devon
Acquisition, no "ownership change" as defined in Section 382(g) of the Internal
Revenue Code, and no event that would result in the application of the "separate
return limitation year" or "consolidated return change of ownership" limitations
under the Federal income tax consolidated return regulations, has occurred with
respect to any Loan Party.
(r) Neither the Borrower nor any of its Subsidiaries is an "investment
company," or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company,"as such terms are defined in the Investment Company
Act of 1940, as amended. Neither the making of any Advances, nor the issuance of
any Letters of Credit, nor the application of the proceeds or repayment thereof
by the Borrower, nor the consummation of the Devon Acquisition or the other
transactions contemplated hereby, will violate any provision of such Act or any
rule, regulation or order of the Securities and Exchange Commission thereunder
or any takeover, disclosure or other federal, state or foreign securities law or
Regulations G, T, U or X. The Borrower is not subject to
51
<PAGE> 58
regulation under any federal, state or foreign statute or regulation which
limits its ability to incur Debt.
(s) The Borrower is, individually and together with its Subsidiaries,
Solvent.
(t) Set forth on Schedule 4.01(t) is a complete and accurate list of
all Surviving Debt as of the date hereof the principal amount of which is
greater than $1,000,000, showing as of March 31 or April 30, 1998 as indicated
thereon the principal amount outstanding thereunder and the maturity date
thereof.
(u) Except as could not reasonably be expected to have a Material
Adverse Effect, each Material Contract has been duly authorized, executed and
delivered by all parties thereto, has not been amended or otherwise modified, is
in full force and effect, and to the best of Borrower's knowledge, is binding
upon and enforceable against all parties thereto in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability affecting
the enforcement of creditors' rights and (ii) the application of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). There exists no default under any Material
Contract by the Borrower or any of its Subsidiaries and, to the best knowledge
of the Borrower, there exists no default under any Material Contract by any
other party thereto, in each case which could reasonably be expected to have a
Material Adverse Effect.
(v) Each Loan Party and each of its Subsidiaries owns or has rights to
use all patents, trademarks, trade names, service marks, copyrights and other
intellectual property necessary to conduct its business as now or heretofore
conducted by it or proposed to be conducted by it.
(w) Each Devon Acquisition Document to which the Borrower and AGT
Acquisition Corp. is a party has been duly executed and delivered by each of
them and, to the best knowledge of the Borrower, each Devon Acquisition Document
has been duly executed and delivered by the parties thereto (other than the
Borrower and AGT Acquisition Corp.) and is in full force and effect. To the best
of Borrower's knowledge, the representations and warranties of any Loan Party
contained in each Devon Acquisition Document to which such Loan Party is a party
are true and correct in all material respects on the date hereof and will be
true and correct in all material respects on the Closing Date and the Merger
Date, as if made on each of such dates, and the Administrative Agent and each
Lender Party shall be entitled to rely upon such representations and warranties
with the same force and effect as if they were incorporated in this Agreement
and made to the Administrative Agent and each Lender Party directly as of the
date hereof, the Closing Date and the Merger Date.
(x) The Merger will not be taxable to the Company and its Subsidiaries.
52
<PAGE> 59
ARTICLE V
COVENANTS OF THE BORROWER AND THE SUBSIDIARIES
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, the Borrower will:
(a) Compliance with Law. Comply, and cause each of its Subsidiaries to
comply, in all respects, with all applicable laws, rules, regulations and
orders, except to the extent that the failure to comply therewith could not
reasonably be expected to have a Material Adverse Effect.
(b) Payment of Taxes, Etc. Timely pay and discharge, and cause each of
its Subsidiaries to timely pay and discharge, (i) all income and other material
taxes, assessments and governmental charges or levies imposed upon its property
and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its
property; provided, however, that the Borrower and its Subsidiaries shall not be
required to pay or discharge any such tax, assessment, charge or claim that is
being contested in good faith and by appropriate proceedings diligently
conducted and as to which reserves or other appropriate provisions therefor have
been established in accordance with GAAP.
(c) Compliance with Environmental Laws. (i) Comply, and cause each of
its Subsidiaries and all lessees and other Persons operating or occupying its
properties to comply, in all material respects, with all applicable
Environmental Laws and Environmental Permits; (ii) obtain and renew and cause
each of its Subsidiaries to obtain and renew all Environmental Permits
reasonably necessary for its operations and properties; and (iii) conduct, and
cause each of its Subsidiaries to conduct, any investigation, study, sampling
and testing, and undertake any cleanup, removal, remedial or other action
necessary to remove and clean up all Hazardous Materials from any of its
properties, in accordance with the requirements of all Environmental Laws;
except in the case of each of clauses (i), (ii) and (iii) above, to the extent
that the failure to comply therewith could not reasonably be expected to have a
Material Adverse Effect; provided, however, that the Borrower and its
Subsidiaries shall not be required to undertake any such cleanup, Removal,
Remedial or Response action to the extent that its obligation to do so is being
contested in good faith and by proper proceedings and adequate reserves are
being maintained with respect to such circumstances.
(d) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is usually
carried by companies engaged in similar businesses and owning similar properties
in the same general areas in which the Borrower or such Subsidiary operates.
(e) Preservation of Corporate Existence, Etc. Preserve and maintain,
and cause each of its Subsidiaries to preserve and maintain, its existence,
legal structure, legal name, rights (charter and statutory), permits, licenses,
approvals, privileges and franchises, in each case where the failure to do so
could not reasonably be expected to have a Material Adverse Effect.
(f) Visitation Rights. At any reasonable time and from time to time,
upon reasonable notice, permit the Administrative Agent or any agents or
representatives thereof, to examine and make copies of and abstracts from the
records and books of account of and visit the properties of the Borrower and its
Subsidiaries and to discuss the affairs, finances and accounts of the Borrower
and any such Subsidiaries with any of their officers or directors.
53
<PAGE> 60
(g) Keeping of Books. Keep, and cause each of its Subsidiaries to keep,
proper books of record and account, in which full and correct entries shall be
made of all financial transactions and the assets and business of the Borrower
and each such Subsidiary in accordance with GAAP.
(h) Maintenance of Properties, Etc. Maintain and preserve, and cause
each of its Subsidiaries to maintain and preserve, all of its properties that
are reasonably necessary in the conduct of its business in good working order
and condition, ordinary wear and tear excepted.
(i) Performance of Material Contracts. Perform and observe, and cause
each of its Subsidiaries to perform and observe, all of the terms and provisions
of each Material Contract to be performed or observed by it, maintain, and cause
each of its Subsidiaries to maintain, each such Material Contract in full force
and effect, and enforce, and cause each of its Subsidiaries to enforce, each
such Material Contract in accordance with its terms, except in each case where
the failure to do so could not reasonably be expected to have a Material Adverse
Effect.
(j) Transactions with Affiliates. Conduct, and cause each of its
Subsidiaries to conduct, all transactions otherwise permitted under the Loan
Documents with any of its Affiliates on terms that are fair and reasonable and
no less favorable to the Borrower or such Subsidiary than it would obtain in a
comparable arms-length transaction with a Person not an Affiliate.
(k) Agreement to Execute Guaranty. Contemporaneously with the
consummation of a Permitted Acquisition or the formation of any new Subsidiary,
cause each new Domestic Subsidiary to become party to, or to execute and
deliver, a guaranty, in substantially the form of Exhibit E hereto (as hereafter
amended, supplemented or otherwise modified from time to time in accordance with
its terms, the "GUARANTY").
(l) Interest Rate Protection. Within one hundred eighty (180) days
after the Closing Date, obtain and thereafter keep in effect one or more
interest rate Bank Hedge Agreements (the terms and other provisions of all such
Bank Hedge Agreements to be subject to the prior written consent of the
Administrative Agent) covering at least thirty percent (30%) of the Advances
made on the Closing Date for an aggregate period of not less than two (2) years
commencing on the Closing Date.
(m) Year 2000 Compatibility. Take, and cause each of its Subsidiaries
to take, all action necessary to assure that its computer based systems,
hardware and software used in their business and operations are able to operate
and effectively receive, transmit, process, store, retrieve or retransmit data
including dates on and after January 1, 2000, except where the failure to do so
could not reasonably be expected to result in a Material Adverse Effect, and, at
the request of the Administrative Agent or the Lenders, the Loan Parties will
provide evidence to the satisfaction of the Lenders of such year 2000
compatibility.
SECTION 5.02. Negative Covenants. So long as any Advance shall remain
unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have
any Commitment hereunder, the Borrower will not, at any time, without the prior
consent of the Required Lenders:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any
of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or
with respect to any of its assets and properties of any character whether now
owned or hereafter acquired, or sign or suffer to exist, or
54
<PAGE> 61
permit any of its Subsidiaries to sign or suffer to exist, any security
agreement, or assign, or permit any of its Subsidiaries to assign, any accounts
or other right to receive income, excluding, however, from the operation of the
foregoing restrictions the following:
(i) Liens created under the Loan Documents;
(ii) Permitted Liens;
(iii) Liens existing on the date hereof and described on
Schedule 5.02(a)(iii);
(iv) purchase money Liens securing Debt permitted under
Section 5.02(b)(iii)(A) upon real property or equipment acquired or held by the
Borrower or any of its Subsidiaries in the ordinary course of business to secure
the purchase price of such real property or equipment or to secure Debt incurred
solely for the purpose of financing the acquisition, construction or improvement
of any such real property or equipment to be subject to such Liens, or Liens
existing on any such real property or equipment at the time of acquisition
(other than any such Liens created in contemplation of such acquisition that do
not secure the purchase price), or extensions, renewals or replacements of any
of the foregoing for the same or a lesser amount; provided, however, that no
such Lien shall extend to or cover any property other than the real property or
equipment being acquired, constructed or improved;
(v) Liens arising in connection with Capitalized Leases
permitted under Section 5.02(b)(iii)(B); provided that no such Lien shall extend
to or cover any assets or properties other than the assets or properties subject
to such Capitalized Leases;
(vi) Liens arising in connection with Debt permitted under
Section 5.02(b)(iii)(G); and
(vii) the replacement, extension or renewal of any Lien
permitted by clauses (iii) through (vi) above upon or in the same property
theretofore subject thereto in connection with the replacement, extension or
renewal of the Debt secured thereby.
(b) Debt. Create, incur, assume or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist, any Debt other
than:
(i) in the case of the Borrower and the other Loan Parties,
Debt incurred pursuant to the Loan Documents;
(ii) unsecured Debt (x) of the Borrower to any Subsidiary, (y)
of any Domestic Subsidiary to the Borrower or any other Domestic Subsidiary, (y)
of any Foreign Subsidiary to the Borrower or any Domestic Subsidiary to the
extent permitted under Section 5.02(f)(i), and (z) of any Foreign Subsidiary to
any other Foreign Subsidiary;
(iii) in the case of the Borrower and any of its Subsidiaries:
(A) Debt secured by Liens permitted by Section
5.02(a)(iv), in each case incurred only if, immediately after giving effect to
the incurrence thereof, the limit on Capital Expenditures set forth in Section
5.02(p) hereof would not be breached;
55
<PAGE> 62
(B) Debt incurred with respect to Capitalized Leases
, in each case incurred only if, immediately after giving effect to the
incurrence thereof, the limit on Capital Expenditures set forth in Section
5.02(p) hereof would not be breached;
(C) the Surviving Debt, and any Debt extending the
maturity of, or refunding or refinancing, in whole or in part, the Surviving
Debt; provided that the principal amount of such Surviving Debt shall not be
increased above the principal amount thereof outstanding on the date hereof;
(D) endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business;
(E) Subordinated Debt; provided, that no principal
shall be payable or paid by the Borrower or any of its Subsidiary, as the case
may be, on the Subordinated Debt until the Obligations under the Loan Documents
shall have been repaid in full in cash, but interest on such Subordinated Debt
may accrue and, so long as no Default exists, be payable or be paid by the
Borrower or its applicable Subsidiary;
(F) unsecured Debt incurred in the ordinary course of
business in the form of accounts payable arising from the purchase of property
or services, including, without limitation, Inventory acquired for resale;
(G) in the case of Borrower or any of its
Subsidiaries, Debt of Target Businesses, whether secured or unsecured, assumed
by Borrower or such Subsidiary, as the case may be, in respect of Permitted
Acquisitions not to exceed, for any such Permitted Acquisition, the greater of
(x) $5,000,000 and (y) seventy-five percent (75%) of the Acquisition Purchase
Price of such Permitted Acquisition;
(H) in addition to Debt that is otherwise permitted
in clauses (F) and (G) above, unsecured Debt that is incurred in the ordinary
course of business, not to exceed in the aggregate $10,000,000 at any time
outstanding; and
(I) Debt in respect of Bank Hedge Agreements.
(c) [Intentionally omitted].
(d) Fundamental Changes. (i) Merge into or consolidate with any Person
or permit any Person to merge into it, or permit any of its Subsidiaries to do
so, except (A) that the Borrower and AGT Acquisition Corp. may consummate the
Devon Acquisition in accordance with the terms and conditions of the Devon
Acquisition Documents, (B) the Borrower or any of its Subsidiaries may make
Permitted Acquisitions and (C) any Subsidiary of Borrower may merge or
consolidate with and into the Borrower ( provided, the Borrower is the surviving
entity) or another of the Borrower's Subsidiaries (provided, that, if a Loan
Party is a party to such merger or consolidation, a Loan Party is the surviving
entity).
(ii) Liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), convey, sell, assign, lease, transfer or otherwise
dispose of (or agree to do any of the foregoing at any future time) all or
substantially all of its property, business or assets, or permit any of its
Subsidiaries to do any of the foregoing, except to the extent such Subsidiary
liquidates, winds-up
56
<PAGE> 63
or dissolves into or is otherwise sold, leased, transferred or disposed of to
the Borrower or any other wholly-owned Subsidiary of the Borrower, or as
otherwise permitted under Section 5.02(e).
(iii) Acquire or permit any Subsidiary to acquire all or
substantially all of the assets of any other Person (including capital stock),
except (A) that the Borrower and AGT Acquisition Corp. shall have consummated
the Devon Acquisition and (B) that the Borrower or any Subsidiary of Borrower
may consummate Permitted Acquisitions.
(e) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose
of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise
dispose of, any assets or grant any option or other right to purchase, lease or
otherwise acquire any assets, except:
(i) sales of Inventory in the ordinary course of business;
(ii) sales, leases, transfers or other dispositions of
obsolete or redundant equipment in the ordinary course of business;
(iii) sales, leases, transfers or other dispositions of assets
of the Borrower or any of its Subsidiaries structured as sale-leaseback
arrangements in the ordinary course of business;
(iv) sales, leases, licenses, transfers or other dispositions
of intellectual property in the ordinary course of business, provided that such
sales, leases, licenses, transfers or other dispositions could not reasonably be
expected to result in a Material Adverse Effect;
(v) the sale of the AGT Properties;
(vi) the sale of the Devon Properties; and
(vii) in addition to that which is permitted under clauses
(i), (ii), (iii), (iv), (v) and (vi) above, the sale of any asset by the
Borrower or any of its Subsidiaries so long as (A) the purchase price paid to
the Borrower or such Subsidiary for such asset shall be no less than the fair
market value of such asset at the time of such sale and (B) the aggregate
purchase price paid to the Borrower and all of its Subsidiaries for such asset
and all other assets sold by the Borrower and its Subsidiaries since the Closing
Date pursuant to this clause (vii) shall not exceed $10,000,000;
provided that, in the case of sales of assets pursuant to Section 5.02(e)(vi) or
(vii) above, the Borrower shall, on the date of receipt thereof, apply the Net
Cash Proceeds from such sale in accordance with Section 2.06(b).
(f) Investments in Other Persons. Make or hold, or permit any of its
Subsidiaries to make or hold, any Investment in any Person other than:
(i) Investments by the Borrower and its Subsidiaries in their
wholly-owned Subsidiaries; provided, however, that no more than an aggregate
amount equal to $7,500,000 shall be invested from the date hereof in
wholly-owned Foreign Subsidiaries; and, provided, further, that with respect to
Investments in any newly acquired or created wholly-owned Subsidiary, any such
Subsidiary shall become a Guarantor pursuant to the provisions of Section
5.01(k);
57
<PAGE> 64
(ii) Loans and advances to directors, officers and other
employees in the ordinary course of the business of the Borrower and its
Subsidiaries in an aggregate principal amount not to exceed $500,000 at any time
outstanding;
(iii) Investments by the Borrower and its Subsidiaries in Cash
Equivalents;
(iv) Investments by the Borrower and its Subsidiaries in Bank
Hedge Agreements;
(v) Investments consisting of intercompany Debt permitted
under Section 5.02(b)(ii);
(vi) Investments (other than Cash Equivalents) existing on the
date hereof and, in respect of all such Investments which exceed $1,000,000,
described on Schedule 5.02(f)(vi) hereto;
(vii) Investments consisting of accounts receivable arising in
the ordinary course of business;
(viii) Investments in the form of Permitted Acquisitions;
(ix) In addition to Investments that are otherwise permitted
in clause (x) below, Investments in related businesses which shall not exceed
$8,000,000 in the aggregate at any one time outstanding for the Borrower and its
Subsidiaries, on a Consolidated basis;
(x) Investments in a strategically related business previously
disclosed to the Administrative Agent which shall not exceed $18,000,000 in the
aggregate (the "STRATEGIC INVESTMENT"); and
(xi) Investments by AGT Acquisition Corp. in the Company
pursuant to the Devon Acquisition.
(g) Dividends, Etc. Declare or pay any dividends, purchase, redeem,
retire, defease or otherwise acquire for value any of its capital stock or any
warrants, rights or options to acquire such capital stock, now or hereafter
outstanding, return any capital to its stockholders as such or make any
distribution to its stockholders, except:
(i) the Borrower may declare and pay dividends and make
distributions payable solely in common stock or preferred stock of the Borrower;
(ii) a Subsidiary of the Borrower may declare and pay
dividends and make distributions to the Borrower or to another Loan Party; and
(iii) for issuances of stock or other equity interests
expressly permitted by Section 5.02(q).
(h) Change in Nature of Business. Make, or permit any of its
Subsidiaries to make, any material change in the nature of its business as
carried on at the date hereof.
58
<PAGE> 65
(i) Charter Amendments. Amend, or permit any of its Subsidiaries to
amend, its certificate or articles of incorporation or by-laws, in a manner
which would have a Material Adverse Effect.
(j) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change (i) in accounting policies or
reporting practices, except as mandated by GAAP or approved by its independent
auditors for purposes of consistency or improved presentation or (ii) in its
Fiscal Year.
(k) Prepayments, Etc. of Debt. (i) Prepay, redeem, purchase, defease or
otherwise satisfy prior to the scheduled maturity thereof in any manner, or make
any payment in violation of any subordination terms of, any Debt, other than (A)
the prepayment of the Advances in accordance with the terms of this Agreement
and (B) regularly scheduled or required repayments or redemptions of Surviving
Debt which could reasonably be expected to have a Material Adverse Effect, or
(ii) amend, modify or change in any manner any term or condition of any
Surviving Debt, or (iii) permit any of its Subsidiaries to do any of the
foregoing other than to repay any Debt payable to the Borrower or any other
Subsidiary.
(l) Amendment, Etc. of Material Contracts. Except in the ordinary
course of business or to the extent such would not result in a Material Adverse
Effect, either cancel or terminate any Material Contract, consent to or accept
any cancellation or termination thereof, amend or otherwise modify any Material
Contract, give any consent, waiver or approval thereunder, waive any default
under or breach of any Material Contract, or take any other action in connection
with any Material Contract.
(m) Negative Pledge. Enter into or suffer to exist, or permit any of
its Subsidiaries to enter into or suffer to exist, any agreement prohibiting or
conditioning the creation or assumption of any Lien upon any of its properties
or assets other than as permitted in the Loan Documents.
(n) Partnerships, New Subsidiaries. Except as otherwise permitted under
this Agreement, (i) become a general partner in any general or limited
partnership or joint venture with any unaffiliated third Person, or permit any
of its Subsidiaries to do so, or (ii) create any new Subsidiary, unless such
newly created Subsidiary, if a Domestic Subsidiary, shall become a Guarantor (by
executing and delivering to the Administrative Agent a Guaranty).
(o) Speculative Transactions. Engage, or permit any of its Subsidiaries
to engage, in any transaction involving commodity options or futures contracts
or derivatives or any similar speculative transactions, except for Bank Hedge
Agreements.
(p) Capital Expenditures. Make, or permit any of its Subsidiaries to
make, any Capital Expenditures that would cause the aggregate of all such
Capital Expenditures made by the Borrower and its Subsidiaries in any period set
forth below to exceed the amount set forth below for such period:
59
<PAGE> 66
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C> <C>
Closing Date through and
including December 31, 1998 $22,000,000
January 1, 1999 through and
including December 31, 1999 $24,000,000
January 1, 2000 through and
including December 31, 2000 $27,000,000
January 1, 2001 through and
including December 31, 2001 $27,000,000
January 1, 2002 through and
including December 31, 2002 $27,000,000
January 1, 2003 through and
including December 31, 2003 $27,000,000
</TABLE>
; provided, however, that (a) amounts permitted to be expended in a fiscal year
that are not expended in such fiscal year (not including any amount permitted to
be carried forward from a prior year) shall be permitted to be expended in, but
only in, the subsequent fiscal year, and (b) amounts representing Capital
Expenditures paid or incurred with respect to a Target Business in the ordinary
course of its business prior to consummation of a Permitted Acquisition shall
not be deemed included in the calculation of the aggregate amount of Capital
Expenditures for purposes of determining the maximum annual Capital Expenditures
permitted to be made hereunder, so long as such amounts were incurred prior to
the date of consummation of a Permitted Acquisition and were not incurred in
anticipation of such acquisition, and otherwise conform with the terms and
conditions of this clause (p).
(q) Issuance of Stock. Except as otherwise specifically permitted in
this Agreement, the Borrower will not, and will not permit any of its
Subsidiaries to, directly or indirectly, issue, sell, assign, pledge or
otherwise encumber or dispose of any shares of capital stock of the Borrower or
any Subsidiary of the Borrower, except (A) to the Borrower or any of its
Subsidiaries, (B) to qualify any director of the Borrower or any of its
Subsidiaries if required by applicable law, (C) for issuances or sales of
capital stock or other equity interests of the Borrower, (D) in connection with
the Borrower's or any of its Subsidiaries' stock purchase, stock option or
similar incentive plans, or any exercise pursuant thereto, for the benefit of
the Borrower's or any of its Subsidiaries' directors, management, employees and
other eligible participants, (E) for issuances of capital stock of the Borrower
to any Person as consideration paid in connection with any Permitted
Acquisition, or (G) as required to be issued in connection with the acquisition
of the business of Digital Imagination Inc.
SECTION 5.03. Reporting Requirements. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, the Borrower will furnish to the
Administrative Agent for itself or on behalf of the Lender Parties (references
in this Section 5.03 to any reports or statements being Consolidated or
consolidating shall be applicable at any time the Borrower has any
Subsidiaries):
60
<PAGE> 67
(a) Default Notice. As soon as possible and in any event within two (2)
Business Days after obtaining knowledge of the occurrence of any Default or
Event of Default or any event, development or occurrence reasonably likely to
have a Material Adverse Effect, a statement of the Responsible Officer of the
Borrower setting forth details of such Default or Event of Default or event,
development or occurrence and the action that the Borrower has taken and
proposes to take with respect thereto.
(b) Monthly Financials. As soon as available and in any event within
forty-five (45) days after the end of each month which is not a fiscal quarter
end, a Consolidated balance sheet of the Borrower and its Subsidiaries and a
Consolidated statement of income of the Borrower and its Subsidiaries, for the
period commencing at the end of the previous month and ending with the end of
such month and a Consolidated statement of income of the Borrower and its
Subsidiaries, for the period commencing at the end of the previous Fiscal Year
and ending with the end of such month, setting forth in each case in comparative
form the corresponding figures for the corresponding date or period of the prior
Fiscal Year, all in reasonable detail and duly certified by the Responsible
Officer of the Borrower.
(c) Quarterly Financials. As soon as available and in any event within
forty-five (45) days after the end of each fiscal quarter of each Fiscal Year:
(i) a Consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such quarter and a Consolidated statement of
income of the Borrower and its Subsidiaries for the period commencing at the end
of the previous fiscal quarter and ending with the end of such fiscal quarter;
and
(ii) a Consolidated statement of income and a Consolidated
statement of cash flows of the Borrower and its Subsidiaries for the period
commencing at the end of the previous Fiscal Year and ending with the end of
such fiscal quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding Fiscal Year;
all of the foregoing to be in reasonable detail and duly certified by the
Responsible Officer of the Borrower as having been prepared in accordance with
GAAP (subject to normal year-end audit adjustments and the absence of
footnotes), together with (x) a certificate of said officer stating that no
Default or Event of Default has occurred and is continuing or, if a Default or
an Event of Default has occurred and is continuing, a statement as to the nature
thereof and the action that the Borrower has taken and proposes to take with
respect thereto and (y) a schedule in form reasonably satisfactory to the
Administrative Agent of the computations used by the Borrower in determining
compliance with the financial covenants contained in Sections 5.04(a) through
(c), provided, that in the event of any change in GAAP used in the preparation
of such financial statements, the Borrower shall also provide, if necessary for
the determination of compliance with Section 5.04, a statement of reconciliation
conforming such financial statements to GAAP.
(d) Annual Financials. As soon as available and in any event within
ninety (90) days after the end of each Fiscal Year, a copy of the annual audit
report for such year for the Borrower and its Subsidiaries including therein a
Consolidated balance sheet of the Borrower and its Subsidiaries as of the end of
such Fiscal Year and a Consolidated statement of income and a Consolidated
statement of cash flows of the Borrower and its Subsidiaries for such Fiscal
Year, in each case setting forth in comparative form the corresponding figures
as of the end of and for the
61
<PAGE> 68
prior Fiscal Year and in each case accompanied by an opinion (unqualified as to
scope and without a "going concern" or like qualification or exception) of
Deloitte and Touche LLP or other independent certified public accountants of
recognized national standing reasonably acceptable to the Administrative Agent,
together with (i) a letter of such accounting firm to the Administrative Agent
and Lender Parties stating that in the course of the regular audit of the
business of the Borrower and its Subsidiaries, which audit was conducted by such
accounting firm in accordance with generally accepted auditing standards, such
accounting firm has obtained no knowledge that a Default has occurred and is
continuing, or if, in the opinion of such accounting firm, a Default has
occurred and is continuing, a statement as to the nature thereof, (ii) a
schedule in form satisfactory to the Administrative Agent of the computations
used by such accountants in determining, as of the end of such Fiscal Year,
compliance with the covenants contained in Sections 5.04(a) through (c),
provided, that in the event of any change in GAAP used in the preparation of
such financial statements, the Borrower shall also provide, if necessary for the
determination of compliance with Section 5.04, a statement of reconciliation
conforming such financial statements to GAAP and (iii) a certificate of the
Responsible Officer of the Borrower stating that no Default or Event of Default
has occurred and is continuing or, if a Default or an Event of Default has
occurred and is continuing, a statement as to the nature thereof and the action
that the Borrower has taken and proposes to take with respect thereto.
(e) Annual Forecasts. As soon as available and in any event no later
than forty-five (45) days after the end of each Fiscal Year, an annual operating
budget prepared by management of the Borrower, in form prepared by the Borrower
in the ordinary course of its business, including projected consolidated and
consolidating balance sheets, income statements and cash flow statements on a
quarterly basis for the Fiscal Year following such Fiscal Year then ended.
(f) ERISA Events and ERISA Reports. (i) Promptly and in any event
within twenty (20) days after the Borrower or any ERISA Affiliate knows or has
reason to know that any ERISA Event has occurred, which could reasonably be
expected to have a Material Adverse Effect, a statement of the chief financial
officer of the Borrower describing such ERISA Event and the action, if any, that
the Borrower or such ERISA Affiliate has taken and proposes to take with respect
thereto and (ii) on the date any records, documents or other information must be
furnished to the PBGC with respect to any Plan pursuant to Section 4010 of
ERISA, a copy of such records, documents and information.
(g) Plan Terminations. Promptly and in any event within five (5)
Business Days after receipt thereof by the Borrower or any ERISA Affiliate,
copies of each notice from the PBGC stating its intention to terminate any Plan
or to have a trustee appointed to administer any Plan or correspondence from the
PBGC indicating it is considering termination of any Plan.
(h) [Intentionally Omitted].
(i) Litigation. Promptly after the commencement thereof, notice of all
actions, suits, investigations, litigation and proceedings before or by any
court or governmental department, commission, board, bureau, agency or
instrumentality, Federal, state, local or foreign, that reasonably could be
expected to have a Material Adverse Effect and, promptly after the occurrence
thereof, notice of any change in either the status of the Disclosed Litigation
or the financial effect on such Loan Party or any of its Subsidiaries in
connection therewith from that described on Schedule 3.01(d) which could
reasonably be expected to result in a Material Adverse Effect.
62
<PAGE> 69
(j) Securities Reports. Promptly after the sending or filing thereof,
copies of all proxy statements, financial statements and reports that any Loan
Party or any of its Subsidiaries sends to its stockholders, and copies of all
regular, periodic and special reports, and all registration statements, that any
Loan Party or any of its Subsidiaries files with the Securities and Exchange
Commission or any other governmental authority or with any national securities
exchange.
(k) Agreement Notices. Promptly upon receipt thereof, copies of all
notices, requests and other documents received by any Loan Party or any of its
Subsidiaries under or pursuant to any Devon Acquisition Document or Material
Contract or indenture, loan or credit agreement or similar agreement or
instrument regarding or related to any breach or default by any party thereto or
any event that could materially impair the value of the interests or the rights
of any Loan Party or any of its Subsidiaries or otherwise have a Material
Adverse Effect and copies of any amendment, modification or waiver of any
provision of any Devon Acquisition Document or Material Contract or indenture,
loan or credit agreement or similar agreement or indenture and, from time to
time upon request by the Administrative Agent, such information and reports
regarding the foregoing as the Administrative Agent may reasonably request.
(l) Environmental Conditions. Promptly after the assertion or
occurrence thereof, notice of any Environmental Action against or of any
noncompliance by any Loan Party or any of its Subsidiaries with any
Environmental Law or Environmental Permit that could reasonably be expected to
have a Material Adverse Effect.
(m) Insurance. Upon the request, from time to time, of the
Administrative Agent, promptly and in any event within thirty (30) days after
any such request, a report summarizing the insurance coverage (specifying type,
amount and carrier) in effect for each Loan Party and its Subsidiaries and
containing such additional information as the Administrative Agent may
reasonably request.
(n) Management Letters. As soon as available and in any event within
five (5) Business Days after the receipt thereof, copies of any "management
letter" or similar letter received by the Borrower or its Board of Directors (or
any Committee thereof) from its independent public accountants.
(o) Permitted Acquisition Documents. Within thirty (30) days following
the consummation of each Permitted Acquisition for which the Acquisition
Purchase Price is in excess of $5,000,000, a reasonably detailed description of
such Permitted Acquisition and a copy of the Permitted Acquisition Documents, in
each case certified as true and correct by a Responsible Officer of the
Borrower.
(p) Other Information. Such other information respecting the business,
condition (financial or otherwise), operations, performance, properties or
prospects of any Loan Party or any of Subsidiaries as the Administrative Agent
or any Lender Party (through the Administrative Agent) may from time to time
reasonably request.
SECTION 5.04. Financial Covenants. So long as any Advance shall remain
unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have
any Commitment hereunder, the Borrower will:
63
<PAGE> 70
(a) Consolidated Total Funded Debt to EBITDA Ratio. Maintain as of the
last day of each fiscal quarter of the Borrower a ratio of (i) Consolidated
Total Funded Debt to (ii) EBITDA for the most recently completed four fiscal
quarters of the Borrower of not more than the ratio set forth below:
<TABLE>
<CAPTION>
Four Fiscal Quarters ending on: Ratio
------------------------------- -----
<S> <C>
June 30, 1998 3.25
September 30, 1998 3.25
December 31, 1998 3.25
March 31, 1999 3.25
June 30, 1999 3.25
September 30, 1999 3.25
December 31, 1999 3.25
March 31, 2000 3.00
June 30, 2000 3.00
September 30, 2000 3.00
December 31, 2000 3.00
March 31, 2001 2.75
June 30, 2001 2.75
September 30, 2001 2.75
December 31, 2001 2.75
March 31, 2002 2.75
June 30, 2002 2.75
September 30, 2002 2.75
December 31, 2002 2.75
March 31, 2003 2.75
June 30, 2003 2.75
</TABLE>
(b) Interest Coverage Ratio. Maintain as of the last day of each fiscal
quarter of the Borrower a ratio of (i) Consolidated EBITDA for the most recently
completed four fiscal quarters of the Borrower to (ii) Interest Expense of the
Borrower and its Subsidiaries for such period of not less than 3.00:1.00 for
such period.
(c) Minimum Net Worth. Maintain as of the last day of each fiscal
quarter of the Borrower an excess of Consolidated total assets over Consolidated
total liabilities of the Borrower and its Subsidiaries of not less than (i)
eighty-five percent (85%) of the excess of Consolidated total assets over
Consolidated total liabilities of the Borrower and its Subsidiaries at the
Closing Date plus (ii) seventy-five percent (75%) of Consolidated positive net
income (and excluding 100% of Consolidated net losses) of the Borrower and its
Subsidiaries as at December 31, 1998 and each June 30 and December 31 thereafter
computed on a cumulative basis for said entire period.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following ("EVENTS OF
DEFAULT") shall occur and be continuing:
64
<PAGE> 71
(a) (i) the Borrower shall fail to pay any principal of any Advance
when the same shall become due and payable or (ii) the Borrower shall fail to
pay any interest on any Advance, or any Loan Party shall fail to make any other
payment under any Loan Document, in each case under this clause (ii) within five
(5) days after the same becomes due and payable; or
(b) any representation or warranty made by any Loan Party (or any of
its officers) under or in connection with any Loan Document shall prove to have
been incorrect in any material respect when made or confirmed; or
(c) the Borrower shall fail to perform or observe any term, covenant or
agreement contained in Section 2.14, 5.01(k), (l) or (m), 5.02 or 5.04; or
(d) any Loan Party shall fail to perform any other term, covenant or
agreement contained in any Loan Document on its part to be performed or observed
if such failure shall remain unremedied for thirty (30) days after written
notice thereof shall have been given to the Borrower by the Administrative Agent
or any Lender Party; or
(e) any Loan Party or any of its Subsidiaries shall fail to pay any
principal of, premium or interest on or any other amount payable in respect of
any Debt that is outstanding in a principal or notional amount of at least
$10,000,000 either individually or in the aggregate (but excluding Debt
outstanding hereunder) of such Loan Party or such Subsidiary (as the case may
be), when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise); or any other event
shall occur or condition shall exist under any agreement or instrument relating
to any such Debt, in each case if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Debt or
otherwise to cause, or to permit the holder thereof to cause, such Debt to
mature; or any such Debt shall be declared to be due and payable or required to
be prepaid or redeemed (other than by a regularly scheduled required prepayment
or redemption), purchased or defeased, or an offer to prepay, redeem, purchase
or defease such Debt shall be required to be made, in each case prior to the
stated maturity thereof; or
(f) any Loan Party shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against any Loan Party seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee or other similar official for it or
for any substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it) that is being diligently
contested by it in good faith, either such proceeding shall remain undismissed
or unstayed for a period of sixty (60) days or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other similar
official for, it or any substantial part of its property) shall occur, or any
Loan Party shall take any corporate action to authorize any of the actions set
forth above in this subsection (f); or
(g) any judgment or order for the payment of money in excess of
$10,000,000 (other than such a judgment or order which is fully covered by
insurance for which the appropriate insurer has acknowledged responsibility in
writing) shall be rendered against any Loan Party or any of its
65
<PAGE> 72
Subsidiaries and either (i) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order or (ii) there shall be a period of
thirty (30) consecutive days during which a stay of enforcement of such judgment
or order, by reason of a pending appeal or otherwise, shall not be in effect; or
(h) any material provision of any Loan Document after delivery thereof
shall for any reason cease to be valid and binding on or enforceable against any
Loan Party which is party to it, or any such Loan Party shall so state in
writing; or
(i) (1) any Person or two or more Persons acting in concert shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended), directly or indirectly, of Voting Stock of the Borrower (or other
securities convertible into such Voting Stock) representing 50% or more of the
combined voting power of all Voting Stock of the Borrower; or (2) the
individuals who at the date hereof were directors of the Borrower (together with
any other director whose election to the board of directors of the Borrower or
whose nomination by the board of directors for election by the stockholders of
the Borrower) was approved by a vote of at least a majority of the directors
then in office who either were directors at the date hereof or whose election
was previously so approved) shall cease for any reason to constitute a majority
of the board of directors of the Borrower; or
(j) any ERISA Event shall have occurred with respect to a Plan and the
sum (determined as of the date of occurrence of the last such ERISA Event) of
the Insufficiency of such Plan and the Insufficiency of any and all other Plans
with respect to which an ERISA Event shall have occurred and then exist (or the
liability of the Loan Parties and the ERISA Affiliates related to such ERISA
Events) exceeds $10,000,000; or
(k) any Loan Party or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to
such Multiemployer Plan in an amount that, when aggregated with all other
amounts required to be paid to Multiemployer Plans by the Loan Parties and the
ERISA Affiliates as Withdrawal Liability (determined as of the date of such
notification), exceeds $10,000,000, unless contested in good faith and by
appropriate proceedings diligently conducted and reserves or other appropriate
provisions shall have been established therefor in accordance with GAAP, or
requires payments exceeding $2,000,000 per annum; or
(l) any Loan Party or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of ERISA,
and as a result of such reorganization or termination the aggregate annual
contributions of the Loan Parties and the ERISA Affiliates to all Multiemployer
Plans that are then in reorganization or being terminated have been or will be
increased over the amounts contributed to such Multiemployer Plans for the plan
years of such Multiemployer Plans immediately preceding the plan year in which
such reorganization or termination occurs by an amount exceeding $10,000,000; or
(m) there shall occur in the reasonable judgment of the Required
Lenders any Material Adverse Effect;
then, and in any such event, the Administrative Agent (i) shall at the request,
or with the consent, of the Required Lenders, by notice to the Borrower, declare
the Commitments of each appropriate Lender and of the Issuing Bank to issue
Letters of Credit to be terminated, whereupon the same shall
66
<PAGE> 73
forthwith terminate, and (ii) shall at the request, or with the consent, of the
Required Lenders, (A) by notice to the Borrower, declare the Notes, all interest
thereon and all other amounts payable under this Agreement and the other Loan
Documents to be forthwith due and payable, whereupon the Notes, all such
interest and all such other amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrower and (B) by notice to each
party required under the terms of any agreement in support of which a Standby
Letter of Credit is issued, request that all Obligations under such agreement be
declared to be due and payable; provided, however, that in the event of an
actual or deemed entry of an order for relief with respect to any Loan Party or
any of its Subsidiaries under the Federal Bankruptcy Code, (x) the obligation of
each Lender to make Advances and of the Issuing Bank to issue Letters of Credit
shall automatically be terminated and (y) the Notes, all such interest and all
such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
SECTION 6.02. Actions in Respect of the Letters of Credit upon Default.
If any Event of Default shall have occurred and be continuing, the
Administrative Agent may, or shall at the request of the Required Lenders,
irrespective of whether it is taking any of the actions described in Section
6.01 or otherwise, make demand upon the Borrower to, and forthwith upon such
demand the Borrower will, pay to the Administrative Agent on behalf of the
Lender Parties in same day funds at the Administrative Agent's office designated
in such demand, for deposit in the L/C Cash Collateral Account, an amount equal
to the aggregate Available Amount of all Letters of Credit then outstanding. If
at any time the Administrative Agent determines that any funds held in the L/C
Cash Collateral Account are subject to any right or claim of any Person other
than the Administrative Agent and the Lender Parties or that the total amount of
such funds is less than the aggregate Available Amount of all Letters of Credit,
the Borrower will, forthwith upon demand by the Administrative Agent, pay to the
Administrative Agent, as additional funds to be deposited and held in the L/C
Cash Collateral Account, an amount equal to the excess of (a) such aggregate
Available Amount over (b) the total amount of funds, if any, then held in the
L/C Cash Collateral Account that the Administrative Agent determines to be free
and clear of any such right and claim.
ARTICLE VII
THE ADMINISTRATIVE AGENT
67
<PAGE> 74
SECTION 7.01. Authorization and Action. Each Lender Party (in its
capacity as a Lender, the Issuing Bank, the Swing Line Bank and/or any Hedge
Bank) hereby appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
this Agreement and the other Loan Documents as are delegated to the
Administrative Agent by the terms hereof and thereof, together with such powers
and discretion as are reasonably incidental thereto. As to any matters not
expressly provided for by the Loan Documents (including, without limitation,
enforcement or collection of the Notes), the Administrative Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Lender Parties and all holders of Notes;
provided, however, that the Administrative Agent shall not be required to take
any action that exposes the Administrative Agent to personal liability or that
is contrary to this Agreement, any other Loan Document or applicable law. The
Administrative Agent agrees to give to each Lender Party prompt notice of each
notice given to it by the Borrower pursuant to the terms of this Agreement. The
Administrative Agent shall not be a trustee or fiduciary for any Lender.
SECTION 7.02. Agent's Reliance, Etc. Neither the Administrative Agent
nor any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
the Loan Documents, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the
Administrative Agent: (a) may treat the payee of any Note as the holder thereof
until the Administrative Agent receives and accepts an Assignment and Acceptance
entered into by the Lender that is the payee of such Note, as assignor, and an
Eligible Assignee, as assignee, as provided in Section 8.07; (b) may consult
with legal counsel (including counsel for any Loan Party), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (c) makes no warranty or
representation to any Lender Party and shall not be responsible to any Lender
Party for any statements, warranties or representations (whether written or
oral) made in or in connection with the Loan Documents; (d) shall not have any
duty to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of any Loan Document on the part of any Loan
Party or to inspect the property (including the books and records) of any Loan
Party; (e) shall not be responsible to any Lender Party for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of, or the
perfection or priority of any lien or security interest created or purported to
be created under or in connection with any Loan Document or any other instrument
or document furnished pursuant thereto; and (f) shall incur no liability under
or in respect of any Loan Document by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telegram, telecopy
or telex) believed by it to be genuine and signed or sent by the proper party or
parties.
SECTION 7.03. Fleet and Affiliates. With respect to its Commitments,
the Advances made by it and the Notes issued to it, Fleet shall have the same
rights and powers under the Loan Documents as any other Lender Party and may
exercise the same as though it were not the Administrative Agent; and the term
"Lender Party" or "Lender Parties" shall, unless otherwise expressly indicated,
include Fleet in its individual capacity. Fleet and its affiliates may accept
deposits from, lend money to, act as trustee under indentures of, accept
investment banking engagements from, and generally engage in any kind of
business with, any Loan Party, any of its Subsidiaries and any Person who may do
business with or own securities of any Loan Party or any
68
<PAGE> 75
such Subsidiary, all as if Fleet were not the Administrative Agent and without
any duty to account therefor to the Lender Parties.
SECTION 7.04. Lender Party Credit Decision. Each Lender Party
acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender Party and based on the financial
statements referred to in Section 4.01 and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender Party also acknowledges that it will,
independently and without reliance upon the Administrative Agent or any other
Lender Party and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 7.05. Indemnification. (a) Each Lender Party severally agrees
to indemnify the Administrative Agent (to the extent not promptly reimbursed by
the Borrower) from and against such Lender Party's ratable share (determined as
provided below) of any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against the Administrative Agent in any way relating to or arising out of any of
the Loan Documents or any action taken or omitted by the Administrative Agent
under any of the Loan Documents; provided, however, that no Lender Party shall
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Administrative Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender Party agrees to reimburse the
Administrative Agent promptly upon written demand for its ratable share of any
costs and expenses (including, without limitation, fees and expenses of counsel)
payable by the Borrower under Section 8.04, to the extent that the
Administrative Agent is not promptly reimbursed for such costs and expenses by
the Borrower.
(b) Each Lender Party severally agrees to indemnify the Issuing Bank
(to the extent not promptly reimbursed by the Borrower) from and against such
Lender Party's ratable share (determined as provided below) of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Issuing Bank in any way
relating to or arising out of any of the Loan Documents or any action taken or
omitted by the Issuing Bank under any of the Loan Documents; provided, however,
that no Lender Party shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Issuing Bank's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender Party
agrees to reimburse the Issuing Bank promptly upon written demand for its
ratable share of any costs and expenses (including, without limitation, fees and
expenses of counsel) payable by the Borrower under Section 8.04, to the extent
that the Issuing Bank is not promptly reimbursed for such costs and expenses by
the Borrower.
(c) For purposes of Sections 7.05(a) and 7.05(b), the Lender Parties'
respective ratable shares of any amount shall be determined, at any time,
according to the sum of (i) the aggregate principal amount of the Advances
outstanding at such time and owing to the respective Lender Parties, (ii) their
respective Pro Rata Shares of the aggregate Available Amount of all Letters of
Credit outstanding at such time, (iii) their respective Unused Revolving Credit
Commitments at such time and (iv) their respective Unused Acquisition Line
Commitments; provided, that the aggregate principal amount of Swing Line
Advances owing to the Swing Line Bank and Letter of Credit Advances owing to the
Issuing Bank shall be considered to be owed to the Revolving Credit Lenders
69
<PAGE> 76
ratably in accordance with their respective Revolving Credit Commitments. In the
event that any Defaulted Advance shall be owing by any Defaulting Lender at any
time, such Defaulting Lender Party's Commitment with respect to the Facility
under which such Defaulted Advance was required to have been made shall be
considered to be unused for purposes of this Section 7.05 to the extent of the
amount of such Defaulted Advance. The failure of any Lender Party to reimburse
the Administrative Agent or the Issuing Bank, as the case may be, promptly upon
written demand for its ratable share of any amount required to be paid by the
Lender Parties to the Administrative Agent or the Issuing Bank, as the case may
be, as provided herein shall not relieve any other Lender Party of its
obligation hereunder to reimburse the Administrative Agent or the Issuing Bank,
as the case may be, for its ratable share of such amount, but no Lender Party
shall be responsible for the failure of any other Lender Party to reimburse the
Administrative Agent or the Issuing Bank, as the case may be, for such other
Lender Party's ratable share of such amount. Without prejudice to the survival
of any other agreements of any Lender Party hereunder, the agreement and
obligations of each Lender Party contained in this Section 7.05 shall survive
the payment in full of principal, interest and all other amounts payable
hereunder and under the other Loan Documents.
SECTION 7.06. Successor Administrative Agents. The Administrative Agent
may resign at any time by giving written notice thereof to the Lender Parties
and the Borrower and may be removed as to all of the Facilities at any time with
or without cause by the Required Lenders. Upon any such resignation or removal,
the Required Lenders shall have the right to appoint a successor Administrative
Agent as to such of the Facilities as to which the Administrative Agent has
resigned or been removed, which successor shall have been approved by the
Borrower, which approval shall not be unreasonably withheld or delayed. If no
successor Administrative Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within thirty (30) days after
the retiring Administrative Agent's giving of notice of resignation or the
Required Lenders' removal of the retiring Administrative Agent, then the
retiring Administrative Agent may, on behalf of the Lender Parties, appoint a
successor Administrative Agent, which shall be a Lender which is a commercial
bank organized under the laws of the United States or of any State thereof and
having a combined capital and surplus of at least $250,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent as to all of the Facilities, such successor Administrative
Agent shall succeed to and become vested with all the rights, powers,
discretion, privileges and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from all of its duties and
obligations under this Agreement and the other Loan Documents. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent as to less than all of the Facilities, such successor
Administrative Agent shall succeed to and become vested with all the rights,
powers, discretion, privileges and duties of the retiring Administrative Agent
as to such Facilities, other than with respect to funds transfers and other
similar aspects of the administration of Borrowings under such Facilities,
issuances of Letters of Credit (notwithstanding any resignation as
Administrative Agent with respect to the Letter of Credit Facility) and payments
by the Borrower in respect of such Facilities, and the retiring Administrative
Agent shall be discharged from its duties and obligations under this Agreement
as to such Facilities, other than as aforesaid. After any retiring
Administrative Agent's resignation or removal hereunder as Administrative Agent
as to all of the Facilities, the provisions of this Article VII shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent as to any Facilities under this Agreement.
70
<PAGE> 77
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or the Notes or any other Loan Document, nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that (a) no amendment,
waiver or consent shall, unless in writing and signed by all of the Lender
Parties (other than any Lender Party that is, at such time, a Defaulting
Lender), do any of the following at any time: (i) change the percentage of (x)
the Commitments, (y) the aggregate unpaid principal amount of the Advances or
(z) the aggregate Available Amount of outstanding Letters of Credit that, in
each case, shall be required for the Lenders or any of them to take any action
hereunder; (ii) release any of the Guarantors from their Guaranty, except as
permitted under this Agreement; (iii) amend this Section 8.01 or change the
definition of "REQUIRED LENDERS"; or (iv) limit the liability of any Loan Party
under any of the Loan Documents, except as permitted under this Agreement; and
(b) no amendment, waiver or consent shall, unless in writing and signed by the
Required Lenders and each Lender Party that has a Commitment under the Revolving
Credit Facility or Acquisition Line Facility if affected by such amendment,
waiver or consent, (i) change the amounts of the Commitments of such Lender
Party or subject such Lender Party to any additional obligations, (ii) reduce
the principal of, or interest on, the Notes held by such Lender Party or any
fees or other amounts payable hereunder to such Lender Party, (iii) postpone any
date fixed for any scheduled payment of principal of, or interest on, the Notes
held by such Lender Party or any fees or other amounts payable hereunder to such
Lender Party or (iv) change the order of application of any prepayment set forth
in Section 2.06 in any manner that materially and adversely affects such Lender
Party; provided, further, that no amendment, waiver or consent shall, unless in
writing and signed by the Swing Line Bank or the Issuing Bank, as the case may
be, in addition to the Lenders required above to take such action, affect the
rights or obligations of the Swing Line Bank or the Issuing Bank, as the case
may be, under this Agreement or any other Loan Document; and provided, further,
that no amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above to take such
action, affect the rights or duties of the Administrative Agent under this
Agreement or any other Loan Document.
SECTION 8.02. Notices Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed, delivered by
overnight courier service or personally served,
(i) if to the Borrower:
Applied Graphics Technologies, Inc.
450 West 33rd Street
11th Floor
New York, New York 10001
Attention: Louis Salamone, Jr.,
Chief Financial Officer
Telephone No.: (212) 716-6630
Facsimile No.: (212) 716-6786
71
<PAGE> 78
with a copy to:
Applied Graphics Technologies, Inc.
450 West 33rd Street
3rd Floor
New York, New York 10001
Attention: Martin D. Krall,
Chief Legal Officer
Telephone No.: (212) 210-6345
Facsimile No.: (212) 210-2312
(ii) if to the Administrative Agent:
Fleet Bank, N.A.
1185 Avenue of the Americas
New York, New York 10036
Attention: John M. Tuohy,
Vice President
Telephone No.: (212) 819-5735
Facsimile No.: (212) 819-4120
with a copy to:
Winston & Strawn
200 Park Avenue
New York, New York 10166
Attention: Richard S. Talesnick, Esq.
Telephone No.: (212) 294-6729
Facsimile No.: (212) 294-4700
(iii) if to any Initial Lender or the Initial Issuing Bank, at
its Domestic Lending Office specified opposite its name on Schedule I attached
hereto;
(iv) if to any other Lender Party, at its Domestic Lending
Office specified in the Assignment and Acceptance pursuant to which it became a
Lender Party;
or, as to the Borrower or the Administrative Agent, at such other address as
shall be designated by such party in a written notice to the other parties and,
as to each other party, at such other address as shall be designated by such
party in a written notice to the Borrower and the Administrative Agent. All such
notices and communications shall, (w) when mailed by certified mail, return
receipt requested, be effective three (3) days after mailing, (x) when
telegraphed, telecopied or telexed, be effective upon delivery to the telegraph
company, upon transmission by telecopier or upon confirmation by telex
answerback, (y) when delivered in person, effective when delivered and (z) when
delivered by overnight courier, two (2)Business Days after delivery to the
courier properly addressed, except that notices and communications to the
Administrative Agent pursuant to Article II, III or VII shall not be effective
until received by the Administrative Agent. Delivery by telecopier of an
executed counterpart of this Agreement, the Notes or any other Loan Document or
of any Exhibit hereto or thereto or of any amendment or waiver of any provision
hereof or thereof shall be as effective as delivery of a manually executed
counterpart thereof.
72
<PAGE> 79
SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender
Party or the Administrative Agent to exercise, and no delay in exercising, any
right hereunder or under any Note or under any other Loan Document shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law or in equity.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on
demand (i) all reasonable costs and expenses of the Administrative Agent in
connection with the preparation, execution, delivery, administration,
modification and amendment of the Loan Documents (including, without limitation,
(A) all due diligence, collateral review, syndication (including printing,
distribution and bank meetings), transportation, computer, duplication,
appraisal, audit, insurance, consultant, search, filing and recording fees and
expenses, and (B) the reasonable fees and expenses of counsel for the
Administrative Agent with respect thereto, including advising the Administrative
Agent as to its rights and responsibilities, or the perfection, protection or
preservation of rights or interests under the Loan Documents, with respect to
negotiations with any Loan Party or with other creditors of any Loan Party or
any of its Subsidiaries arising out of any Default or any events or
circumstances that may give rise to a Default and with respect to presenting
claims in or otherwise participating in or monitoring any bankruptcy, insolvency
or other similar proceeding involving creditors' rights generally and any
proceeding ancillary thereto) and (ii) all reasonable costs and expenses of the
Administrative Agent and the Lender Parties in connection with the enforcement
of the Loan Documents, whether in any action, suit or litigation or any
bankruptcy, insolvency or other similar proceeding affecting creditors' rights
generally or otherwise (including, without limitation, the fees and expenses of
counsel for the Administrative Agent and each Lender Party with respect
thereto).
(b) The Borrower agrees to indemnify and hold harmless the
Administrative Agent, each Lender Party and each of their respective Affiliates
and their respective officers, directors, employees, agents and advisors (each,
an "INDEMNIFIED PARTY") from and against any and all claims, damages, losses,
liabilities and expenses (including, without limitation, reasonable fees and
expenses of counsel) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of, or in connection with the preparation for a defense of, any
investigation, litigation or proceeding arising out of, related to or in
connection with (i) the Devon Acquisition or any related transaction of the
Borrower or any of its Subsidiaries or other Affiliates and any of the
transactions contemplated by the Loan Documents, (ii) any acquisition or
proposed acquisition or similar business combination or proposed business
combination by the Borrower or any of its Subsidiaries or other Affiliates of
all or any portion of the shares of capital stock or all or substantially all of
the property and assets of any other Person, (iii) the Facilities, the actual or
proposed use of the proceeds of the Advances or the Letters of Credit by the
Borrower or any of its Subsidiaries or other Affiliates and any of the other
transactions contemplated by the Loan Documents, (iv) the actual or alleged
presence of Hazardous Materials on any property of or any Loan Party or any of
its Subsidiaries or any Environmental Action relating in any way to any Loan
Party or any of its Subsidiaries or (v) any broker's or finder's fees or
commissions or any similar fees or commissions which are or will be owed or
payable by any Loan Party, the Company or any of their respective Subsidiaries
in connection with the incurrence and maintenance of the Obligations, any other
transactions contemplated by the Loan Documents or the Devon Acquisition
Documents or any services rendered in connection with such transactions, in the
case of each of clauses (i) through (v) above whether or not such investigation,
litigation or proceeding is brought by any Loan Party, its directors, officers,
managers, employees, stockholders,
73
<PAGE> 80
or creditors or an Indemnified Party or any Indemnified Party is otherwise a
party thereto and whether or not the transactions contemplated hereby are
consummated, except to the extent such claim, damage, loss, liability or expense
is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct. The Borrower also agrees not to assert any claim against the
Administrative Agent, any Lender Party or any of their respective Affiliates, or
any of their respective officers, directors, employees, attorneys and agents, on
any theory of liability, for special, indirect, consequential or punitive
damages arising out of or otherwise relating to the Devon Acquisition, the
Facilities, the actual or proposed use of the proceeds of the Advances or the
Letters of Credit, the Loan Documents or any of the transactions contemplated
thereby, other than claims for direct, as opposed to consequential, damages
which shall have been determined in a final nonappealable judgment by a court of
competent jurisdiction to have resulted from such Person's gross negligence or
willful misconduct.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made by the Borrower to or for the account of a Lender Party
other than on the last day of the Interest Period for such Advance, as a result
of a payment or Conversion pursuant to Section 2.09(b)(i) or 2.10(d) or a
prepayment pursuant to Section 2.06, acceleration of the maturity of the Notes
pursuant to Section 6.01 or for any other reason, the Borrower shall, upon
demand by such Lender Party (with a copy of such demand to the Administrative
Agent), pay to the Administrative Agent for the account of such Lender Party any
amounts required to compensate such Lender Party for any additional losses,
costs or expenses that it may reasonably incur as a result of such payment,
including, without limitation, any loss, cost or expense incurred by reason of
the liquidation or re-employment of deposits or other funds required by any
Lender Party to fund or maintain such Advance.
(d) If any Loan Party fails to pay when due any costs, expenses or
other amounts payable by it under any Loan Document, including, without
limitation, fees and expenses of counsel and indemnities, such amount may be
paid on behalf of such Loan Party by the Administrative Agent, in its sole
discretion.
(e) Without prejudice to the survival of any other agreement of any
Loan Party hereunder or under any other Loan Document, the agreements and
obligations of the Borrower contained in Sections 2.10 and 2.12 and this Section
8.04 shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under any of the other Loan Documents.
SECTION 8.05. Right of Set-off. Upon (a) the occurrence and during the
continuance of any Default and (b) the making of the request or the granting of
the consent specified by Section 6.01 to authorize the Administrative Agent to
declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Lender Party and each of its respective Affiliates is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and otherwise apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender Party or such Affiliate to or for the credit or the
account of the Borrower or any of its Subsidiaries against any and all of the
Obligations of the Borrower now or hereafter existing under this Agreement and
the Note or Notes (if any) held by such Lender Party, irrespective of whether
such Lender Party shall have made any demand under this Agreement or such Note
or Notes and although such obligations may be unmatured. Each Lender Party
agrees promptly to notify the Borrower and the Administrative Agent after any
such set-off and application; provided, however, that the failure to give such
notice shall
74
<PAGE> 81
not affect the validity of such set-off and application. The rights of each
Lender Party and its respective Affiliates under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) that such Lender Party and its respective Affiliates may have at law,
in equity or otherwise.
SECTION 8.06. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and the Administrative Agent
and when the Administrative Agent shall have been notified by each Initial
Lender and the Initial Issuing Bank that each such Initial Lender and the
Initial Issuing Bank has executed it and thereafter shall be binding upon and
inure to the benefit of the Borrower, the Administrative Agent and each Lender
Party and their respective successors and assigns, except that the Borrower
shall not have the right to assign any of its rights hereunder or any interest
herein without the prior written consent of the Lender Parties.
SECTION 8.07. Assignments and Participations. (a) Each Lender Party may
assign to one or more Eligible Assignees all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment or Commitments, the Advances owing to it and the Note
or Notes held by it); provided, however, that (i) each such assignment shall be
of a uniform, and not a varying, percentage of all rights and obligations under
and in respect of the Facilities on a pro rata basis with respect to each
Facility, (ii) except in the case of an assignment to a Person that, immediately
prior to such assignment, was a Lender or an assignment of all of a Lender
Party's rights and obligations under this Agreement, the amount of the
Commitment of the assigning Lender Party being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $5,000,000, (iii) no
such assignments shall be permitted without the prior consent of the
Administrative Agent (which may be withheld for any reason) until the earlier to
occur of (x) the date on which the Administrative Agent shall have notified the
Lender Parties that syndication of the Commitments hereunder has been completed
or (y) the 120th day following the Closing Date, (iv) no such assignment shall
be permitted if, immediately after giving effect thereto, the Borrower would be
required to make payments to or on behalf of the assignee Lender Party pursuant
to Section 2.10(a) or (b) and the assignor Lender Party was not, at the time of
such assignment, entitled to receive any payment pursuant to Section 2.10(a) or
(b), and (v) the parties to each such assignment shall execute and deliver to
the Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with any Note or Notes subject to such
assignment and a processing and recordation fee of $3,000.
(b) Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in such Assignment and Acceptance, (x) 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, have the rights and obligations of a Lender or Issuing Bank, as the
case may be, hereunder and (y) the Lender or Issuing Bank assignor thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's or Issuing Bank's rights and obligations under this Agreement, such
Lender or Issuing Bank shall cease to be a party hereto), except as to Sections
2.10, 2.12 and 8.04 for the period prior to the effective date of such
assignments.
(c) By executing and delivering an Assignment and Acceptance, the
Lender Party assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other
75
<PAGE> 82
parties hereto as follows: (i) other than as provided in such Assignment and
Acceptance, such assigning Lender Party makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any other Loan
Document or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of, or the perfection or priority of any lien or security
interest created or purported to be created under or in connection with this
Agreement or any other Loan Document or any other instrument or document
furnished pursuant hereto or thereto; (ii) such assigning Lender Party makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or any other Loan Party or the performance
or observance by any Loan Party of any of its obligations under any Loan
Document or any other instrument or document furnished pursuant thereto; (iii)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the financial statements referred to in Section 4.01 and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon the Administrative
Agent, such assigning Lender Party or any other Lender Party and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers and discretion under this
Agreement and the other Loan Documents as are delegated to the Administrative
Agent by the terms hereof and thereof, together with such powers and discretion
as are reasonably incidental thereto; and (vii) such assignee agrees that it
will perform in accordance with their terms all of the obligations which by the
terms of this Agreement are required to be performed by it as a Lender or
Issuing Bank, as the case may be.
(d) The Administrative Agent shall maintain at its address referred to
in Section 8.02 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lender Parties and the Commitment under each Facility of, and principal
amount of the Advances owing under each Facility to, each Lender Party from time
to time (the "REGISTER"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the
Administrative Agent and the Lender Parties may treat each Person whose name is
recorded in the Register as a Lender Party hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender Party at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender Party and an assignee, together with any Note or Notes subject
to such assignment and the appropriate processing and recordation fee, the
Administrative Agent shall, if such Assignment and Acceptance has been completed
and is in substantially the form of Exhibit A hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register
and (iii) give prompt notice thereof to the Borrower. In the case of any
assignment by a Lender, within five (5) Business Days after its receipt of such
notice, the Borrower, at its own expense, shall execute and deliver to the
Administrative Agent in exchange for the surrendered Note or Notes a new Note to
the order of such Eligible Assignee in an amount equal to the Commitment assumed
by it under a Facility pursuant to such Assignment and Acceptance and, if the
assigning Lender has retained a Commitment hereunder under such Facility, a new
Note to the order of the assigning Lender in an amount equal to the Commitment
retained by it hereunder. Such new Note or Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Note or Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of Exhibit B or C
hereto, as the case may be .
76
<PAGE> 83
(f) The Issuing Bank may assign to an Eligible Assignee all of its
rights and obligations under the undrawn portion of its Letter of Credit
Commitment at any time; provided, however, that (i) each such assignment shall
be to an Eligible Assignee and (ii) the parties to each such assignment shall
execute and deliver to the Administrative Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with a
processing and recordation fee of $3,000.
(g) Each Lender Party may sell participations to one or more Persons
(other than any Loan Party or any of its Affiliates) in or to all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Advances owing to it and
the Note or Notes, if any, held by it); provided, however, that (i) such Lender
Party's obligations under this Agreement (including, without limitation, its
Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender Party shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the
other Lender Parties shall continue to deal solely and directly with such Lender
Party in connection with such Lender Party's rights and obligations under this
Agreement and (v) no participant under any such participation shall have any
right to approve any amendment, waiver or other modification of any provision of
this Agreement or any other Loan Document, or any consent to any departure by
any Loan Party therefrom, except to the extent that such amendment, waiver,
modification or consent would reduce the principal of, or interest on, the Notes
or any fees or other amounts payable hereunder, in each case to the extent
subject to such participation, or postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, in each case to the extent subject to such participation, or release
all or substantially all of the collateral.
(h) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender
Party by or on behalf of the Borrower; provided, however, that, prior to any
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any Confidential Information
received by it from such Lender Party.
(i) Notwithstanding any other provision set forth in this Agreement,
any Lender Party may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
SECTION 8.08. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be as effective as delivery of a manually executed counterpart
of this Agreement.
SECTION 8.09. No Liability of the Issuing Bank. The Borrower assumes
all risks of the acts or omissions of any beneficiary or transferee of any
Letter of Credit with respect to its use of such Letter of Credit. Neither the
Issuing Bank nor any of its officers, directors, employees or agents nor any
Lender Party shall be liable or responsible for: (a) the use that may be made of
any Letter
77
<PAGE> 84
of Credit or any acts or omissions of any beneficiary or transferee in
connection therewith; (b) the validity, sufficiency or genuineness of documents,
or of any endorsement thereon, even if such documents should prove to be in any
or all respects invalid, insufficient, fraudulent or forged; or (c) any other
circumstances whatsoever in making or failing to make payment under any Letter
of Credit, except that the Borrower shall have a claim against the Issuing Bank,
and the Issuing Bank shall be liable to the Borrower, to the extent of any
direct, but not consequential, damages suffered by the Borrower that the
Borrower proves were caused by (i) the Issuing Bank's willful misconduct or
gross negligence in determining whether documents presented under any Letter of
Credit comply with the terms of the Letter of Credit or (ii) the Issuing Bank's
willful failure to make lawful payment under a Letter of Credit after the
presentation to it of a draft and certificates strictly complying with the terms
and conditions of the Letter of Credit. In furtherance and not in limitation of
the foregoing, the Issuing Bank may accept documents that appear on their face
to be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary.
SECTION 8.10. Confidentiality. Neither the Administrative Agent nor any
Lender Party shall disclose any Confidential Information to any Person without
the consent of the Borrower, other than (a) to the Administrative Agent's or
such Lender Party's Affiliates and their officers, directors, employees, agents
and advisors and to actual or prospective Eligible Assignees and participants,
and then only on a confidential basis, (b) as required by any law, rule or
regulation or judicial process, (c) as required by the National Association of
Insurance Commissioners, and (d) as requested or required by any state, federal
or foreign authority or examiner regulating banks or banking or insurance
companies.
SECTION 8.11. JURISDICTION, ETC. (a) EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT OF THE
UNITED STATES OF AMERICA SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT FROM
ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH NEW YORK STATE
COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE
PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL
AFFECT ANY RIGHT THAT ANY LENDER PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS IN THE
COURTS OF ANY JURISDICTION.
(b) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF, OR RELATING TO, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS TO WHICH IT IS A PARTY IN ANY NEW YORK STATE OR FEDERAL COURT.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
78
<PAGE> 85
PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
SECTION 8.12. GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE OTHER
LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW
PRINCIPLES).
SECTION 8.13. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE OTHER
LOAN PARTIES, THE ADMINISTRATIVE AGENT AND THE LENDER PARTIES IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE IN EQUITY OR AT LAW) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, THE ADVANCES, THE
LETTERS OF CREDIT OR THE ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER PARTY
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
[SIGNATURE PAGES FOLLOW]
79
<PAGE> 86
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
APPLIED GRAPHICS TECHNOLOGIES, INC.
By: /s/ Nat Buonfiglio
______________________________________
Name:
Title:
FLEET BANK, N.A. AS ADMINISTRATIVE AGENT
By: /s/ John M. Tuohy
______________________________________
Name:
Title:
FLEET BANK, N.A. AS INITIAL ISSUING BANK
By: /s/ John M. Tuohy
_______________________________________
Name:
Title:
FLEET BANK, N.A. AS SWING LINE BANK
By: /s/ John M. Tuohy
_______________________________________
Name:
Title:
INITIAL LENDERS
FLEET BANK, N.A., AS A LENDER
By: /s/ John M. Tuohy
___________________________________
Name:
Title:
THE BANK OF NEW YORK, AS A LENDER
By: /s/ Gina Beyer
______________________________________
Name:
Title:
MELLON BANK, N.A., AS A LENDER
By: /s/ Douglas S. Graham
______________________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
AS A LENDER
By: /s/ Thomas C. Himmelright
______________________________________
Name:
Title:
<PAGE> 87
FIRST UNION NATIONAL BANK,
AS A LENDER
By: /s/ James J. McKenna
______________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
AS A LENDER
By: /s/ Christopher DelDignore
______________________________________
Name:
Title:
KEYBANK NATIONAL ASSOCIATION,
AS A LENDER
By: /s/ Marianne T. Meil
______________________________________
Name:
Title:
BANKBOSTON, N.A.,
AS A LENDER
By: /s/ Daniel M. Kortick
______________________________________
Name:
Title:
DEUTCHE BANK AG NEW YORK AND/OR
CAYMAN ISLANDS BRANCH,
AS A LENDER
By: /s/ Sheryl L. Paynter
______________________________________
Name:
Title:
By: /s/ Andreas Neumeier
______________________________________
Name:
Title:
BANK OF AMERICA,
AS A LENDER
By: /s/ Richard J. Kerbis
______________________________________
Name:
Title:
<PAGE> 88
SUNTRUST BANK,
AS A LENDER
By: /s/ W. David Wisdom
______________________________________
Name:
Title:
By: /s/ Karen Copeland
______________________________________
Name:
Title:
COMERICA BANK,
AS A LENDER
By: /s/ David W. Shirey
______________________________________
Name:
Title:
EUROPEAN AMERICAN BANK,
AS A LENDER
By: /s/ Mark Saeger
______________________________________
Name:
Title:
BANK OF TOKYO- MITSUBISHI TRUST COMPANY,
AS A LENDER
By: /s/ Y. Lillian Kim
______________________________________
Name:
Title:
<PAGE> 89
EXHIBIT A TO THE
CREDIT AGREEMENT
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of May 27,
1998 (as amended, supplemented, restated or otherwise modified from time to
time, the "Credit Agreement"; the terms defined therein being used herein as
therein defined) among Applied Graphics Technologies, Inc., a Delaware
corporation (the "Borrower"), the Lender Parties thereto, Fleet Bank, N.A., as
Initial Issuing Bank, Fleet Bank, as Swing Line Bank, and Fleet Bank, N.A., as
Administrative Agent for the Lender Parties (the "Administrative Agent").
The "Assignor" and the "Assignee" referred to on Schedule I
hereto agree as follows:
1. The Assignor hereby sells and assigns to the Assignee
without recourse, and the Assignee hereby purchases and assumes from the
Assignor, an interest in and to the Assignor's rights and obligations under the
Credit Agreement as of the date hereof equal to the percentage interest
specified on Schedule I hereto of all outstanding rights and obligations under
the Credit Agreement Facility or Facilities as specified on Schedule I hereto.
After giving effect to such sale and assignment, the Assignee's (1) Commitments
and the amount of the (2) Advances owing to the Assignee shall be as set forth
on Schedule I hereto.
(1) Specify Revolving Credit Commitments and/or Acquisition Line Commitments
here.
(2) Specify Revolving Credit Advances and/or Acquisition Line Advances here.
<PAGE> 90
2. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the Loan
Documents or any other instrument, agreement or document furnished pursuant
thereto or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Documents or any other instrument, agreement or
document furnished pursuant thereto; (iii) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Loan Party or the performance or observance by any Loan Party of any of its
obligations under any Loan Document or any other instrument, agreement or
document furnished pursuant thereto; and (iv) attaches the _______________(3/)
Note or Notes held by the Assignor and requests that the Administrative Agent
exchange such Note or Notes for a new _______________(3/) Note or Notes payable
to the order of the Assignee in an amount equal to the _______________(1/)
Commitments assumed by the Assignee pursuant hereto and to the order of the
Assignor in an amount equal to the _______________(1/) Commitments retained by
the Assignor under the Credit Agreement, respectively, as specified on Schedule
I hereto.
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to therein, including, without limitation, those referred to in Section 4.01(f)
thereof and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this Assignment and
Acceptance; (ii) agrees that it shall, independently and without reliance upon
the Administrative Agent, the Assignor or any other Lender Party and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers and discretion under the Loan Documents
as are delegated to the Administrative Agent by the terms thereof, together with
such powers and discretion as are reasonably incidental thereto; (v) agrees that
it shall perform in accordance with their terms all of the obligations that by
the terms of the Credit Agreement and the other Loan Documents are required to
be performed by it as a Lender Party; and (vi) attaches any U.S. Internal
Revenue Service forms or other forms required under Section 2.12 of the Credit
Agreement.
4. Following the execution of this Assignment and Acceptance,
it shall be delivered to the Administrative Agent, together with the processing
and recordation fee specified in the Credit Agreement, for acceptance and
recording by the Administrative Agent. The effective date for this Assignment
and Acceptance (the "Effective Date") shall be the date of acceptance hereof by
the Administrative Agent, unless otherwise specified on Schedule I hereto.
5. Upon such acceptance and recording by the Administrative
Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit
Agreement and, to the extent provided in this Assignment and Acceptance, have
the rights and obligations of a Lender Party thereunder and
(3/) Specify Revolving Credit Note or Notes and/or Acquisition Line Note or
Notes here.
-2-
<PAGE> 91
(ii) the Assignor shall, to the extent provided in this Assignment and
Acceptance, relinquish its rights and be released from its obligations under the
Credit Agreement, except as to Sections 2.10, 2.12 and 8.04 for the period prior
to the Effective Date.
6. Upon such acceptance and recording by the Administrative
Agent, from and after the Effective Date, the Administrative Agent shall make
all payments under the Credit Agreement and the _______________(3/) Notes in
respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and commitment fees with respect thereto) to the
Assignee. The Assignor and Assignee shall make all appropriate adjustments in
payments under the Credit Agreement and the _______________(3/) Notes for
periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York (without giving
effect to its conflicts of law principles).
8. This Assignment and Acceptance may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of Schedule I to this Assignment and Acceptance by
telecopier shall be as effective as delivery of a manually executed counterpart
of this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused
Schedule I to this Assignment and Acceptance to be executed by their officers
thereunto duly authorized as of the date specified thereon.
-3-
<PAGE> 92
SCHEDULE I
TO
ASSIGNMENT AND ACCEPTANCE
As to the _______________(1/) Facility in respect of which an interest is being
assigned:
Percentage interest assigned: __________%
Assignee's _______________(2/) Commitment: $__________
Aggregate outstanding principal amount
of _______________(3/) Advances assigned: $__________
Principal amount of _______________(4/)
Note payable to Assignee: $__________
Principal amount of _______________(4/)
Note payable to Assignor: $__________
Effective Date (if other than date of
acceptance by Administrative Agent): __________, _____
[NAME OF ASSIGNOR], as Assignor
By:______________________________
Name:
Title:
Dated:___________________________
(1/) Specify Revolving Credit Facility and/or Acquisition Line Facility here.
(2/) Specify Revolving Credit Commitments and/or Acquisition Line Commitments
here.
(3/) Specify Revolving Credit Advances and/or Acquisition Line Advances here.
(4/) Specify Revolving Credit Note or Notes and/or Acquisition Line Note or
Notes here.
<PAGE> 93
[NAME OF ASSIGNEE], as Assignee
By:______________________________
Name:
Title:
Dated:____________________________
Domestic Lending Office:
__________________________________
__________________________________
__________________________________
Eurodollar Lending Office:
__________________________________
__________________________________
__________________________________
Accepted this day of _____________, ______
FLEET BANK, N.A., as Administrative Agent
By:____________________________________
Name:
Title:
<PAGE> 94
EXHIBIT B
TO CREDIT AGREEMENT
FORM OF REVOLVING CREDIT PROMISSORY NOTE
$_________________ Dated: ______ __, _____
FOR VALUE RECEIVED, the undersigned, Applied Graphics
Technologies, Inc., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO
PAY to the order of ________________________ (the "Lender") for the account of
its Applicable Lending Office (as defined in the Credit Agreement referred to
below) the principal sum of __________ DOLLARS AND ___ CENTS ($___________) or,
if less, the aggregate unpaid principal amount of the Revolving Credit Advances
owing to the Lender by the Borrower pursuant to the Credit Agreement, dated as
of May __, 1998 (as amended, supplemented, restated or otherwise modified, the
"Credit Agreement"; terms defined therein being used herein as therein defined),
among the Borrower, the Lender and certain other Lender Parties thereto, Fleet
Bank, N.A., as Initial Issuing Bank, Fleet Bank, N.A., as Swing Line Bank, and
Fleet Bank, N.A., as Administrative Agent for the Lender and the other Lender
Parties, on the Revolving Credit Termination Date.
The Borrower further promises to pay interest on the unpaid
principal amount of each Revolving Credit Advance from the date of such
Revolving Credit Advance until such principal amount is paid in full, at such
interest rates and at such times as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Fleet Bank, N.A., as Administrative Agent for the
Lender Parties, at ___________________________, ________________________,
Account No.____________, Attention: Loan Administration, in same day funds. Each
Revolving Credit Advance owing to the Lender by the Borrower and the maturity
thereof, and all payments made on account of principal thereof, shall be
recorded by the Lender and, prior to any transfer hereof, endorsed on the grid
attached hereto or any continuation thereof, which is part of this Promissory
Note; provided, however, that the failure of such Lender to so record any such
information or any error in so recording any such information shall not limit or
otherwise affect the obligations of the Borrower hereunder or under any other
Loan Document.
This Promissory Note is one of the Notes referred to in, and
is entitled to the benefits of, the Credit Agreement. The Credit Agreement,
among other things, (i) provides for the making of Revolving Credit Advances by
the Lender to the Borrower from time to time in an aggregate amount not to
exceed at any time outstanding the U.S. dollar amount first above mentioned, the
indebtedness of the Borrower resulting from each such Revolving Credit Advance
being evidenced by this Promissory Note, and (ii) contains provisions for
acceleration of the
<PAGE> 95
maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
terms and conditions therein specified.
This Promissory Note shall be governed by and construed in
accordance with the laws of the State of New York.
APPLIED GRAPHICS TECHNOLOGIES, INC.
By:____________________________________
Name: _________________________________
Title: ________________________________
<PAGE> 96
REVOLVING CREDIT ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
AMOUNT OF REVOLVING AMOUNT OF UNPAID PRINCIPAL NOTATION MADE BY
DATE CREDIT ADVANCE PRINCIPAL PAID OR BALANCE
PREPAID
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 97
EXHIBIT C
TO CREDIT AGREEMENT
FORM OF ACQUISITION LINE PROMISSORY NOTE
$_________________ Dated: ______, __, ____
FOR VALUE RECEIVED, the undersigned, Applied Graphics Technologies,
Inc., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the
order of ________________________ (the "Lender") for the account of its
Applicable Lending Office (as defined in the Credit Agreement referred to below)
the principal sum of ________________ DOLLARS AND _______ CENTS
($__________________) or, if less, aggregate unpaid principal amount of the
Acquisition Line Advances owing to the Lender by the Borrower pursuant to the
Credit Agreement, dated as of May __, 1998 (as amended, supplemented, restated
or otherwise modified, the "Credit Agreement"; terms defined therein being used
herein as therein defined), among the Borrower, the Lender and certain other
Lender Parties thereto, Fleet Bank, N.A., as Initial Issuing Bank, Fleet Bank,
N.A., as Swing Line Bank, and Fleet Bank, N.A., as Administrative Agent for the
Lender and the other Lender Parties, on the dates and in the amounts specified
in the Credit Agreement.
The Borrower further promises to pay interest on the unpaid
principal amount of each Acquisition Line Advance from the date of such
Acquisition Line Advance until such principal amount is paid in full, at such
interest rates and at such times as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Fleet Bank, N.A., as Administrative Agent for the
Lender Parties, at ___________ _________________________________________,
Account No.____________, Attention: Loan Administration, in same day funds. Each
Acquisition Line Advance owing to the Lender by the Borrower and the maturity
thereof, and all payments made on account of principal thereof, shall be
recorded by the Lender and, prior to any transfer hereof, endorsed on the grid
attached hereto or any continuation thereof, which is part of this Promissory
Note; provided, however, that the failure of such Lender to so record any such
information or any error in so recording any such information shall not limit or
otherwise affect the obligations of the Borrower hereunder and under any other
Loan Document.
This Promissory Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement. The Credit Agreement, among
other things, (i) provides for the making of Acquisition Line Advances by the
Lender to the Borrower from time to time in an aggregate amount not to exceed at
any time outstanding the U.S. dollar amount first above mentioned, the
indebtedness of the Borrower resulting from each such Acquisition Line Advance
<PAGE> 98
being evidenced by this Promissory Note, and (ii) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein specified.
This Promissory Note shall be governed by and construed in
accordance with the laws of the State of New York.
APPLIED GRAPHICS TECHNOLOGIES, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
<PAGE> 99
ACQUISITION LINE ADVANCES AND PAYMENTS OF PRINCIPAL
________________________________________________________________________________
AMOUNT OF AMOUNT OF UNPAID PRINCIPAL NOTATION MADE
DATE ACQUISITION LINE PRINCIPAL PAID OR BALANCE BY
ADVANCE PREPAID
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
<PAGE> 100
EXHIBIT D TO THE
CREDIT AGREEMENT
FORM OF NOTICE OF BORROWING
[Date]
Fleet Bank, N.A., as Administrative
Agent under the Credit Agreement
referred to below
1185 Avenue of the Americas
New York, New York 10036
Attention: Loan Administration
Ladies and Gentlemen:
The undersigned, Applied Graphics Technologies, Inc. (the
"Borrower"), refers to the Credit Agreement, dated as of May 27, 1998 (as
amended, supplemented, restated or otherwise modified, the "Credit Agreement";
the terms defined therein being used herein as therein defined) among the
Borrower, certain Lender Parties thereto, Fleet Bank, N.A. as Initial Issuing
Bank, Fleet Bank, N.A., as Swing Line Bank, and Fleet Bank, N.A., as
Administrative Agent for said Lender Parties, and hereby gives the
Administrative Agent notice, irrevocably, pursuant to Section 2.02 of the Credit
Agreement that the undersigned hereby requests a Borrowing under the Credit
Agreement, and in that connection sets forth below the information relating to
such Borrowing (the "Proposed Borrowing") as required by Section 2.02 of the
Credit Agreement:
(1) The Business Day of the Proposed Borrowing is _____________,_____.
(2) The Facility under which the Proposed Borrowing is to be made is the
[Revolving Credit Facility] [Acquisition Line Facility].
(3) The Type of Advances comprising the Proposed Borrowing is [Prime
Rate Advances][Eurodollar Rate Advances].
(4) The aggregate amount of the Proposed Borrowing is $_________.
(5) The Interest Period for each Eurodollar Rate Advance made as part of
the Proposed Borrowing is _______ month[s].
<PAGE> 101
The undersigned hereby certifies that the following statements are
true and correct on the date hereof, and will be true on the borrowing date:
(a) the representations and warranties contained in each Loan Document
are correct in all material respects on and as of the date of the
Proposed Borrowing (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such
specific date), both before and after giving effect to the Proposed
Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date; and
(b) no event has occurred and is continuing, or would result from the
Proposed Borrowing or from the application of the proceeds
therefrom, that constitutes a Default or an Event of Default.
Very truly yours,
APPLIED GRAPHICS TECHNOLOGIES, INC.
By:________________________________
Name:______________________________
Title:_______________________________
-2-
<PAGE> 102
EXHIBIT E TO THE
CREDIT AGREEMENT
GUARANTY
Dated ______ ___, ____
From
[GUARANTOR]
and
[GUARANTOR]
as Guarantors
in favor of
THE GUARANTEED PARTIES
<PAGE> 103
TABLE OF CONTENTS
Section Page
- ------- ----
Section 1. Guaranty; Limitation of Liability..................................1
Section 2. Guaranty Absolute..................................................2
Section 3. Waivers and Acknowledgments........................................3
Section 4. Subrogation........................................................3
Section 5. Payments Free and Clear of Taxes, Etc..............................4
Section 6. Representations and Warranties.....................................6
Section 7. Covenants..........................................................7
Section 8. Amendments, Etc....................................................7
Section 9. Notices, Etc.......................................................7
Section 10. No Waiver; Remedies................................................8
Section 11. Right of Setoff....................................................8
Section 12. Indemnification....................................................8
Section 13. Continuing Guaranty; Assignments Under the Credit Agreement........8
Section 14. Governing Law; Jurisdiction; Waiver of July Trial, Etc.............9
i
<PAGE> 104
GUARANTY
GUARANTY (this "Guaranty"), dated ______ __, ____, made by each of
the Persons listed on the signature pages hereof, and the Additional Guarantors
(as defined in Section 8(b)) (such Persons so listed and the Additional
Guarantors being, each, a "Guarantor", and collectively, the "Guarantors") in
favor of the Guaranteed Parties (as defined below) and Fleet Bank, N.A., as
administrative agent (the "Administrative Agent").
PRELIMINARY STATEMENT. Applied Graphics Technologies, Inc., a
Delaware corporation (the "Borrower") has entered into a Credit Agreement, dated
as of May 27, 1998 (said Credit Agreement, as it may hereafter be amended,
supplemented, restated or otherwise modified from time to time, being the
"Credit Agreement"; capitalized terms used and not otherwise defined herein have
the meanings ascribed to them in the Credit Agreement), with the banks,
financial institutions and other institutions and other institutional lenders
party thereto, as Lenders, Fleet Bank, N.A., as Initial Issuing Bank, as Swing
Line Bank and as Administrative Agent. It is a condition precedent to the making
of Advances by the Lender Parties, the making of Swing Line Advances by the
Swing Line Bank, and the issuance of Letters of Credit by the Issuing Bank under
the Credit Agreement, and to the entry by the Hedge Banks into Bank Hedge
Agreements with the Borrower, from time to time, that each Guarantor shall have
executed and delivered this Guaranty to the Administrative Agent for the benefit
of the Lender Parties, the Issuing Bank, the Swing Line Bank, the Hedge Banks
and the Administrative Agent (collectively, the "Guaranteed Parties").
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lender Parties to make Advances, the Swing Line Bank to make Swing
Line Advances and Issuing Bank to issue Letters of Credit under the Credit
Agreement, and the Hedge Banks to enter into Bank Hedge Agreements with the
Borrower, from time to time, each Guarantor hereby agrees as follows:
Section 1. Guaranty; Limitation of Liability.
(a) Each Guarantor hereby, jointly and severally, absolutely,
unconditionally and irrevocably guarantees the punctual payment when due,
whether at stated maturity, by acceleration or otherwise, of all Obligations of
the Borrower or any other Loan Party now or hereafter existing under the Loan
Documents, whether for principal, interest, fees, expenses or otherwise (such
Obligations being the "Guaranteed Obligations"), and agrees to pay any and all
expenses (including counsel fees and expenses) incurred by the Administrative
Agent or any other Guaranteed Party in enforcing any rights under this Guaranty.
Without limiting the generality of the foregoing, each Guarantor's liability
shall extend to all amounts that constitute part of the Guaranteed Obligations
and would be owed by the Borrower or any other Loan Party to the Administrative
Agent or any other Guaranteed Party under the Loan Documents but for the fact
that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Borrower.
(b) Each Guarantor, and by its acceptance of this Guaranty, the
Administrative Agent and each other Guaranteed Party, hereby confirms that it is
the intention of all such parties
<PAGE> 105
that this Guaranty not constitute a fraudulent transfer or conveyance for
purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal, state or foreign law
which may be applicable to this Guaranty. To effectuate the foregoing intention,
the Administrative Agent, the other Guaranteed Parties and the Guarantors hereby
irrevocably agree that the Obligations of each Guarantor under this Guaranty
shall be limited to the maximum amount as will, after giving effect to such
maximum amount and all other contingent and fixed liabilities of such Guarantor
that are relevant under such laws, and after giving effect to any collections
from, rights to receive contribution from or payments made by or on behalf of
any other Guarantor in respect of the Obligations of such other Guarantor under
this Guaranty, result in the Obligations of such Guarantor under this Guaranty
not constituting a fraudulent transfer or conveyance. For purposes hereof,
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law
for the relief of debtors.
Section 2. Guaranty Absolute. Each Guarantor guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the terms of the
Loan Documents, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Administrative Agent or any other Guaranteed Party with respect thereto. The
Obligations of each Guarantor under this Guaranty are independent of the
Guaranteed Obligations or any other Obligations of any other Loan Party under
the Loan Documents, and a separate action or actions may be brought and
prosecuted against any Guarantor to enforce this Guaranty, irrespective of
whether any action is brought against the Borrower or any other Loan Party or
whether the Borrower or any other Loan Party is joined in any such action or
actions. The liability of each Guarantor under this Guaranty shall be
irrevocable, absolute and unconditional, irrespective of, and each Guarantor
hereby irrevocably waives any defenses it may now or hereafter have in any way
relating to, any or all of the following:
(a) any lack of validity or enforceability of any Loan Document or
any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations or any other Obligations
of any other Loan Party under the Loan Documents, or any amendment or waiver of
or any consent to departure from any Loan Document, including, without
limitation, any increase in the Guaranteed Obligations resulting from the
extension of additional credit to the Borrower or any of its Subsidiaries or
otherwise;
(c) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed Obligations;
(d) any manner of application of collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any collateral for all or any of the Guaranteed Obligations or
any other Obligations of any other Loan Party under the Loan Documents or any
other assets of the Borrower or any of its Subsidiaries;
2
<PAGE> 106
(e) any change, restructuring or termination of the corporate
structure or existence of the Borrower or any of its Subsidiaries;
(f) any failure of any Guaranteed Party to disclose to the Borrower
or any Guarantor any information relating to the financial condition,
operations, properties or prospects of any other Loan Party now or in the future
known to any Guaranteed Party (each Guarantor waiving any duty on the part of
the Guaranteed Parties to disclose such information); or
(g) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any representation by
the Administrative Agent or any other Guaranteed Party that might otherwise
constitute a defense available to, or a discharge of, the Borrower, such
Guarantor or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be refused by any Guaranteed Party or any other Person upon
the insolvency, bankruptcy or reorganization of the Borrower or any other Loan
Party or otherwise, all as though such payment had not been made.
Section 3. Waivers and Acknowledgments.
(a) Each Guarantor hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that the Administrative Agent
or any other Guaranteed Party protect, secure, perfect or insure any Lien or any
property subject thereto or exhaust any right or take any action against the
Borrower, any Guarantor or any other Person or any collateral.
(b) Each Guarantor hereby waives any right to revoke this Guaranty,
and acknowledges that this Guaranty is continuing in nature and applies to all
Guaranteed Obligations, whether existing now or in the future.
(c) Each Guarantor acknowledges that it will receive substantial
direct and indirect benefits from the financing arrangements contemplated by the
Loan Documents and that the waivers set forth in this Section 3 are knowingly
made in contemplation of such benefits.
Section 4. Subrogation. Each Guarantor will not exercise any rights
that it may now or hereafter acquire against the Borrower or any insider or
other guarantor that arise from the existence, payment, performance or
enforcement of such Guarantor's Obligations under this Guaranty or any other
Loan Document, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Administrative Agent or any other
Guaranteed Party against the Borrower or any insider or other guarantor or any
collateral, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including, without limitation, the right to
take or receive from the Borrower or any insider or other guarantor, directly or
indirectly, in cash or other property or by setoff or in any other manner,
payment or security on account of such claim,
3
<PAGE> 107
remedy or right, unless and until all of the Obligations and all other amounts
payable under this Guaranty and the other Loan Documents shall have been paid in
full in cash and all Letters of Credit have expired or have been terminated,
fully collateralized (in amounts and in form reasonably acceptable to the
Issuing Bank) or cancelled and the Commitment shall have expired or terminated.
If any amount shall be paid to a Guarantor in violation of the preceding
sentence at any time prior to the later of (i) the payment in full in cash of
the Guaranteed Obligations and all other amounts payable under this Guaranty and
(ii) the latest of (x) the Termination Date, (y) the expiration, termination or
cancellation of all Letters of Credit or, if the outstanding obligation under
the Letter of Credit Facility is the sole Obligation of the Borrower to the
Lenders outstanding under the Credit Agreement, the full collateralization of
such Obligation in amounts and form reasonably acceptable to the Issuing Bank,
such amount shall be held in trust for the benefit of the Administrative Agent
and the other Guaranteed Parties and shall forthwith be paid to the
Administrative Agent to be credited and applied to the Guaranteed Obligations
and all other amounts payable under this Guaranty, whether matured or unmatured,
in accordance with the terms of the Loan Documents, or to be held as collateral
for any Guaranteed Obligations or other amounts payable under this Guaranty
thereafter arising. If (i) a Guarantor shall make payment to the Administrative
Agent or any other Guaranteed Party of all or any part of the Guaranteed
Obligations, (ii) all of the Guaranteed Obligations and all other amounts
payable under this Guaranty shall be paid in full in cash and (iii) the
Termination Date shall have occurred, all Letters of Credit have expired or have
been fully collateralized (in amounts and in form reasonably acceptable to the
Issuing Banks), terminated or canceled, the Administrative Agent and the other
Guaranteed Parties will promptly, at such Guarantor's request and expense,
execute and deliver to such Guarantor appropriate documents, without recourse
and without representation or warranty, necessary to evidence the transfer by
subrogation to such Guarantor of an interest in the Guaranteed Obligations
resulting from such payment by such Guarantor.
Section 5. Payments Free and Clear of Taxes, Etc.
(a) Any and all payments made by each Guarantor hereunder shall be
made, in accordance with Section 2.12 of the Credit Agreement, free and clear of
and without deduction for any and all present or future Taxes. If any Guarantor
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to the Administrative Agent or any other Guaranteed Party, (i)
the sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section) the Administrative Agent or such other Guaranteed Party (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) such Guarantor shall make such deductions and
(iii) such Guarantor shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, each Guarantor agrees to pay any present or future
Other Taxes.
4
<PAGE> 108
(c) Each Guarantor will indemnify the Administrative Agent and each
other Guaranteed Party for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section) imposed on or paid by the Administrative
Agent or such other Guaranteed Party (as the case may be) and any liability
(including, without limitation, penalties, additions to tax, interest and
expenses) arising therefrom or with respect thereto, except with respect to the
Administrative Agent or any other Guaranteed Party, as the case may be, for such
a liability arising from the Administrative Agent's or such Guaranteed Party's,
as the case may be, willful misconduct or gross negligence. This indemnification
shall be made within thirty (30) days from the date on which the Administrative
Agent or such other Guaranteed Party, as the case may be, makes written demand
specifying in reasonable detail the basis therefor.
(d) Within thirty (30) days after the date of any payment of Taxes
by or on behalf of a Guarantor, such Guarantor will furnish to the
Administrative Agent, at its address referred to in Section 8.02 of the Credit
Agreement, the original receipt of payment thereof or a certified copy of such
receipt. In the case of any payment hereunder by or on behalf of a Guarantor
through an account or branch outside the United States or by or on behalf of
such Guarantor by a payor that is not a United States person, if such Guarantor
determines that no Taxes are payable in respect thereof, such Guarantor shall
furnish, or shall cause such payor to furnish, to the Administrative Agent, at
such address, an opinion of counsel acceptable to the Administrative Agent
stating that such payment is exempt from Taxes. For purposes of this subsection
(d) and subsection (e), the terms "United States" and "United States person"
shall have the meanings specified in Section 7701 of the Internal Revenue Code.
5
<PAGE> 109
(e) Each Guaranteed Party organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date of its execution and
delivery of the Credit Agreement in the case of each Initial Lender or Initial
Issuing Bank, as the case may be, and on the date of the Assignment and
Acceptance or other agreement pursuant to which it became a Guaranteed Party in
the case of each other Guaranteed Party (but only so long thereafter as such
Guaranteed Party remains lawfully able to do so), provide each of the
Administrative Agent and Guarantors with two originals of Internal Revenue
Service Form 1001 or 4224, as appropriate, or any successor or other form
prescribed by the Internal Revenue Service, certifying that such Guaranteed
Party is exempt from or is entitled to a reduced rate of United States
withholding tax on payments under the Credit Agreement or the Notes. If the form
provided by a Guaranteed Party at the time such Guaranteed Party first becomes a
party to the Credit Agreement indicates a United States interest withholding tax
rate in excess of zero, withholding tax at such rate shall be considered
excluded from Taxes unless and until such Guaranteed Party provides the
appropriate form certifying that a lesser rate applies, whereupon withholding
tax at such lesser rate only shall be considered excluded from Taxes for periods
governed by such form; provided, however, that, if at the date of the Assignment
and Acceptance pursuant to which a Guaranteed Party assignee becomes a party to
the Credit Agreement, the Guaranteed Party assignor was entitled to payments
under subsection (a) in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Guaranteed Party assignee on such date. If any
form or document referred to in this subsection (e) and requested by a Guarantor
pursuant to this subsection (e) requires the disclosure of information, other
than information necessary to compute the tax payable and information required
on the date hereof by Internal Revenue Service Form 1001 or 4224, that the
Guaranteed Party reasonably considers to be confidential, the Guaranteed Party
shall give notice thereof to such Guarantor and shall not be obligated to
include in such form or document such confidential information.
(f) For any period with respect to which a Guaranteed Party has
failed to provide any Guarantor with the appropriate form described in
subsection (e) (other than if such failure is due to a change in law occurring
after the date on which a form originally was required to be provided or if such
form otherwise is not required under subsection (e)), such Guaranteed Party
shall not be entitled to indemnification under subsection (a) or (c) with
respect to Taxes imposed by the United States by reason of such failure.
(g) Any Guaranteed Party claiming any additional amounts payable
pursuant to this Section 5 agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Applicable Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the judgment of such Guaranteed
Party, be otherwise disadvantageous to such Guaranteed Party.
(h) Without prejudice to the survival of any other agreement of each
Guarantor hereunder or under any other Loan Document, the agreements and
obligations of each Guarantor contained in this Section 5 shall survive the
payment in full of the Guaranteed Obligations.
6
<PAGE> 110
Section 6. Representations and Warranties. The Guarantors hereby
jointly and severally represent and warrant as follows:
(a) There are no conditions precedent to the effectiveness of this
Guaranty that have not been satisfied or waived.
(b) Each Guarantor has, independently and without reliance upon the
Administrative Agent or any other Guaranteed Party and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Guaranty, and each Guarantor has established
adequate means of obtaining from any other Loan Parties on a continuing basis
information pertaining to (and is now, and on a continuing basis will be,
completely familiar with) the financial condition, operations, properties and
prospects of the Borrower and the other Loan Parties.
Section 7. Covenants. Each Guarantor hereby covenants and agrees
that, so long as any part of the Guaranteed Obligations shall remain unpaid, any
Letter of Credit shall be outstanding (unless such outstanding obligation under
the Letter of Credit Facility is the sole Obligation of the Borrower to the
Lenders outstanding under the Credit Agreement and such Obligation is fully
collateralized in amounts and form reasonably acceptable to the Issuing Bank),
or any Guaranteed Party shall have any Commitment, such Guarantor will, unless
the Administrative Agent and Required Lenders shall otherwise consent in
writing, perform or observe all of the terms, covenants and agreements that this
Guaranty and the other Loan Documents state that such Guarantor shall perform or
observe.
Section 8. Amendments, Etc. (a) No amendment or waiver of any
provision of this Guaranty, and no consent to any departure by any Guarantor
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent and Required Lenders, and then such
waiver or consent shall be effective only in the specific instance, and for the
specific purpose for which given; provided, however, that, no amendment, waiver
or consent shall, unless in writing and signed by all of the Guaranteed Parties
(other than any Guaranteed Party which is, at such time, a Defaulting Lender),
(a) limit the liability of any Guarantor hereunder, except as permitted under
the Credit Agreement or (b) postpone any date fixed for any payment hereunder.
(b) Upon the execution and delivery by any Person of a supplemental
guaranty in substantially the form of Exhibit A hereto (each a "Guaranty
Supplement"), such Person shall be referred to as an "Additional Guarantor" and
shall be and become a Guarantor for all purposes hereunder and each reference in
this Guaranty to a "Guarantor" shall also mean and be a reference to such
Additional Guarantor and each reference in any other Loan Document to a
"Guarantor" or "Subsidiary Guarantor" shall also mean and be a reference to such
Additional Guarantor.
Section 9. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed, delivered by
overnight courier or personally served, if to a
7
<PAGE> 111
Guarantor, addressed to it at the address listed for such Guarantor on the
signature pages hereof (or in the applicable Guaranty Supplement), if to the
Administrative Agent or any Guaranteed Party, at its address specified in the
Credit Agreement, if to any Hedge Bank, at its address specified in the Bank
Hedge Agreement to which it is a party, or, as to any party, at such other
address as shall be designated by such party in a written notice to each other
party. All such notices and communications shall, (w) when mailed by certified
mail, return receipt requested, be effective three (3) days after mailing, (x)
when telegraphed, telecopied or telexed, be effective upon delivery to the
telegraph company, upon transmission by telecopier or upon confirmation by telex
answerback, (y) when delivered in person, effective when delivered and (z) when
delivered by overnight courier, two (2) Business Days after delivery to the
courier properly addressed, except that notices and communications to the
Administrative Agent shall not be effective until received by the Administrative
Agent. Delivery by telecopier of an executed counterpart of this Guaranty or of
any amendment or waiver of any provision thereof shall be as effective as
delivery of a manually executed counterpart thereof.
Section 10. No Waiver; Remedies. No failure on the part of the
Administrative Agent or any other Guaranteed Party to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 11. Right of Setoff. Upon the occurrence and during the
continuance of any Event of Default, each Guaranteed Party and each of its
Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Guaranteed Party or such Affiliate
to or for the credit or the account of any Guarantor against any and all of the
Obligations of such Guarantor now or hereafter existing under this Guaranty,
whether or not such Guaranteed Party shall have made any demand under this
Guaranty and although such Obligations may be unmatured. Each Guaranteed Party
agrees promptly to notify such Guarantor after any such setoff and application;
provided, however, that the failure to give such notice shall not affect the
validity of such setoff and application. The rights of each Guaranteed Party and
its Affiliates under this Section are in addition to the other rights and
remedies (including, without limitation, other rights of setoff) that such
Guaranteed Party and its respective Affiliates have.
Section 12. Indemnification. Without limitation on any other
Obligations of any Guarantor or the remedies of the Guaranteed Parties under
this Guaranty, each Guarantor shall, to the fullest extent permitted by law,
indemnify, defend and save and hold harmless each Guaranteed Party from and
against, and shall pay on demand, any and all losses, liabilities, damages,
costs, expenses and charges (including the reasonable fees and disbursements of
such Guaranteed Party's legal counsel) suffered or incurred by such Guaranteed
Party as a result of any failure of any Guaranteed Obligations to be the legal,
valid and binding obligations of the Borrower or any other Guarantor enforceable
against the Borrower or such other Guarantor (as the case may be) in accordance
with their terms. The agreements and obligations of each Guarantor contained in
Section
8
<PAGE> 112
5 and this Section 12 shall survive the payment in full of all Guaranteed
Obligations payable hereunder and under the Loan Documents.
Section 13. Continuing Guaranty; Assignments Under the Credit
Agreement. This Guaranty is a continuing guaranty and shall (a) remain in full
force and effect until the later of the payment in full in cash of the
Guaranteed Obligations and all other amounts payable under this Guaranty and the
later of (i) the Termination Date, (ii) the expiration, termination, or
cancellation of all Letters of Credit or, if the outstanding obligation under
the Letter of Credit Facility is the sole Obligation of the Borrower to the
Lenders outstanding under the Credit Agreement, the full collateralization of
such Obligation in amounts and form acceptable to Issuing Banks, and (iii) the
expiration or termination of all Bank Hedge Agreements, (b) be binding upon each
Guarantor, its successors and assigns (except that no Guarantor shall have the
right to assign any of its rights hereunder or any interest herein without the
prior written consent of the Guaranteed Parties), and (c) inure to the benefit
of and be enforceable by the Administrative Agent and the other Guaranteed
Parties and their respective successors, transferees and assigns. Without
limiting the generality of the foregoing clause (c), any Guaranteed Party may
assign or otherwise transfer all or any portion of its rights and obligations
under the Credit Agreement (including, without limitation, all or any portion of
its Commitment, the Advances owing to it and the Note or Notes held by it) to
any other Person, and such other Person shall thereupon become vested with all
the benefits in respect thereof granted to such Guaranteed Party by this
Guaranty or otherwise, in each case to the maximum extent provided in the Credit
Agreement.
Section 14. Governing Law; Jurisdiction; Waiver of July Trial, Etc.
(A) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ITS CONFLICTS
OF LAW PRINCIPLES).
(B) EACH GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS,
FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK
STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK
CITY, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS
TO WHICH IT IS OR IS TO BE A PARTY, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND EACH GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT
ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW,
IN SUCH FEDERAL COURT LOCATED WITHIN THE CITY AND STATE OF NEW YORK. EACH
GUARANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS GUARANTY SHALL AFFECT ANY
RIGHT THAT THE ADMINISTRATIVE AGENT OR ANY OTHER GUARANTEED PARTY MAY OTHERWISE
9
<PAGE> 113
HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS GUARANTY OR ANY OF THE
OTHER LOAN DOCUMENTS TO WHICH IT IS OR IS TO BE A PARTY IN THE COURTS OF ANY
JURISDICTION.
(C) EACH GUARANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF, OR RELATING TO, THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS
TO WHICH IT IS OR IS TO BE A PARTY IN ANY NEW YORK STATE OR FEDERAL COURT. EACH
GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT.
(D) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR OTHERWISE, IN EQUITY OR AT LAW) ARISING OUT OF OR RELATING TO ANY OF THE LOAN
DOCUMENTS, THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF THE
ADMINISTRATIVE AGENT OR ANY OTHER GUARANTEED PARTY IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
[Signature Page Follows]
10
<PAGE> 114
IN WITNESS WHEREOF, the Guarantors have caused this Guaranty to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
[GUARANTOR]
By:____________________________________
Title:_________________________________
Address:
[GUARANTOR]
By:____________________________________
Title: ________________________________
Address:
11
<PAGE> 115
EXHIBIT A
FORM OF GUARANTY SUPPLEMENT
______ __, _____
Fleet Bank, N.A.
1185 Avenue of the Americas
New York, New York 10036
Attention: Corporate Banking Group
Credit Agreement, dated as of May 27, 1998, among Applied Graphics
Technologies, Inc., a Delaware corporation (the "Borrower"), the
Lenders party to the Credit Agreement, Fleet Bank, N.A., as Initial
Issuing Bank, Fleet Bank, N.A., as Swing Line Bank, and Fleet Bank,
N.A., as Administrative Agent (the "Credit Agreement")
Ladies and Gentlemen:
Reference is made to the above-defined Credit Agreement and to the
Guaranty referred to therein (such Guaranty, as in effect on the date hereof and
as it may hereafter be amended, modified, restated or supplemented from time to
time, (the "Guaranty"). Capitalized terms used and not otherwise defined herein
have the meanings ascribed to them in the Guaranty.
The undersigned hereby, jointly and severally, absolutely,
unconditionally and irrevocably guarantees the punctual payment when due,
whether at stated maturity, by acceleration or otherwise, of all of the
Guaranteed Obligations and agrees to pay any and all reasonable expenses
(including reasonable counsel fees and expenses) incurred by the Administrative
Agent or any other Guaranteed Party on the terms set forth in the Guaranty as if
it were an original party thereto. On and after the date hereof, each reference
in the Guaranty to "Guarantor" shall also mean and be a reference to the
undersigned.
The undersigned hereby agrees to be bound as a Guarantor by all of
the terms and provisions of the Guaranty to the same extent as each other
Guarantor.
<PAGE> 116
THIS GUARANTY SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO
ITS CONFLICT OF LAWS PRINCIPLES).
THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE, IN EQUITY OR AT LAW) ARISING OUT OF THE LOAN DOCUMENTS, THE
TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF ANY GUARANTEED PARTY IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
Very truly yours,
[NAME OF ADDITIONAL GUARANTOR]
By:_________________________________
Title:______________________________
Address:____________________________
____________________________
____________________________
<PAGE> 117
EXHIBIT F TO THE
CREDIT AGREEMENT
FORM OF SWING LINE PROMISSORY NOTE
$_________________ Dated: ______ __, _____
FOR VALUE RECEIVED, the undersigned, Applied Graphics Technologies,
Inc., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the
order of ________________________ (the "Lender") for the account of its
Applicable Lending Office (as defined in the Credit Agreement referred to below)
the principal sum of __________ DOLLARS AND ___ CENTS ($___________) or, if
less, the aggregate unpaid principal amount of the Swing Line Advances owing to
the Lender by the Borrower pursuant to the Credit Agreement, dated as of May __,
1998 (as amended, supplemented, restated or otherwise modified, the "Credit
Agreement"; terms defined therein being used herein as therein defined), among
the Borrower, the Lender and certain other Lender Parties thereto, Fleet Bank,
N.A., as Initial Issuing Bank, Fleet Bank, N.A., as Swing Line Bank, and Fleet
Bank, N.A., as Administrative Agent for the Lender and the other Lender Parties,
on the dates and in the amounts specified in the Credit Agreement
The Borrower further promises to pay interest on the unpaid
principal amount of each Swing Line Advance from the date of such Swing Line
Advance until such principal amount is paid in full, at such interest rates and
at such times as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Fleet Bank, N.A., as Administrative Agent for the
Lender Parties, at ___________________________, ________________________,
Account No.____________, Attention: Loan Administration, in same day funds. Each
Swing Line Advance owing to the Lender by the Borrower and the maturity thereof,
and all payments made on account of principal thereof, shall be recorded by the
Lender and, prior to any transfer hereof, endorsed on the grid attached hereto
or any continuation thereof, which is part of this Promissory Note; provided,
however, that the failure of such Lender to so record any such information or
any error in so recording any such information shall not limit or otherwise
affect the obligations of the Borrower hereunder or under any other Loan
Document.
This Promissory Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement. The Credit Agreement, among
other things, (i) provides for the making of Swing Line Advances by the Lender
to the Borrower from time to time in an aggregate amount not to exceed at any
time outstanding the U.S. dollar amount first above mentioned, the indebtedness
of the Borrower resulting from each such Swing Line Advance being
<PAGE> 118
evidenced by this Promissory Note, and (ii) contains provisions for acceleration
of the maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
terms and conditions therein specified.
This Promissory Note shall be governed by and construed in
accordance with the laws of the State of New York.
APPLIED GRAPHICS TECHNOLOGIES, INC.
By:_____________________________________
Name: __________________________________
Title:__________________________________
2
<PAGE> 119
SWING LINE ADVANCES AND PAYMENTS OF PRINCIPAL
________________________________________________________________________________
AMOUNT OF AMOUNT OF UNPAID PRINCIPAL NOTATION MADE
DATE SWING LINE PRINCIPAL PAID OR BALANCE BY
ADVANCE PREPAID
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
<PAGE> 1
Exhibit 23
Consent of Independent Auditors
-------------------------------
The Board of Directors and Stockholders
Applied Graphics Technologies, Inc.:
We consent to the use of our report included herein the Form 8-K.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
June 8, 1998
