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) April 20, 1998
DIAMOND HOME SERVICES, INC.
(Exact name of registrant as specified in charter)
Delaware 0-20829 36-3886872
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
222 Church Street, Woodstock, Illinois 60098
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (815) 334-1414
N/A
(Former name or former address, if changed since last report)
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
Registrant, through its wholly-owned subsidiary Diamond Acquisition Corp.,
acquired all of the outstanding capital stock of Reeves Southeastern
Corporation, a Florida corporation with its principal place of business in Tampa
Florida ("Reeves") on April 20, 1998, pursuant to a Stock Purchase Agreement
dated March 5, 1998 (the "Stock Purchase Agreement"). Reeves was owned by seven
stockholders, including the Reeves Southeastern Corporation Employee Stock
Ownership Trust.
The aggregate consideration for the capital stock of Reeves was $41,700,000. Of
such consideration, $30,000,000 was paid in cash and Registrant delivered two
promissory notes: one, delivered to the stockholders, was in the original
aggregate principal amount of $3,700,000 (the "Short Term Note"), bears no
interest and is due and payable in installments through July 31, 2000. The
other promissory note, which was delivered to an escrow account, has an original
aggregate principal amount of $8,000,000 (the "Note") and bears interest at a
rate of 7% per annum. Any principal and interest payments on the Note will be
paid by Registrant to the escrow account and such amounts may be used to
satisfy any amounts owed by the former stockholders of Reeves to Registrant
pursuant to the indemnification provisions of the Stock Purchase Agreement. The
outstanding principal amount of the Note is due and payable April 20, 2005, but
may be extended to cover any pending indemnification claims. The escrow account
will be terminated upon satisfaction of the Note, and any amounts remaining
therein at such time will be distributed to the stockholders.
The consideration paid in connection with the stock purchase was determined by
an arms-length negotiation between Registrant and the stockholders of Reeves.
Registrant financed the acquisition through $45,000,000 of senior secured credit
facilities provided by a syndicate of banks, with Harris Trust and Savings Bank,
as agent.
Reeves is one of the largest manufacturers and distributors fencing and
perimeter security products to the industrial and residential markets in the
U.S. and, through its wholly-owned subsidiary, Foreline Security, sells and
installs integrated security systems and solutions and security monitoring
services. Registrant intends to continue to operate the business conducted by
Reeves.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
Financial statements of Reeves required to be filed with this report on Form
8-K will be filed by way of an amendment to this Form 8-K within sixty (60)
days of the date that this Report was required to be filed.
(b) Pro Forma financial information
Pro forma financial information required to be filed with this report on Form
8-K, if any, will be filed by way of an amendment to this Form 8-K within
sixty (60) days of the date that this Report was required to be filed.
(c) Exhibits
2.1 Stock Purchase Agreement dated March 5, 1998, with description of
omitted attachments and schedules.
10.1 Credit Agreement, dated April 20, 1998, between Registrant and Harris
Trust and Savings Bank, as agent.
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 hereunto duly authorized.
DIAMOND HOME SERVICES, INC.
Date: April 29, 1998 By: /s/ Richard G. Reece
Richard G. Reece
Vice President and
Chief Financial Officer
Exhibit 2.1
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is entered into this 5th day of March, 1998, by and among
Diamond Acquisition Corp., a Delaware corporation ("BUYER") and a wholly owned
subsidiary of Diamond Home Services, Inc., a Delaware corporation ("DIAMOND"),
the Reeves Southeastern Employee Stock Ownership Trust (the "ESOP") by and
through SouthTrust Asset Management Company, its Trustee (the "ESOP TRUSTEE")
and all of the other stockholders of Reeves Southeastern Corporation, a Florida
corporation ("COMPANY"), all of which are listed on the signature page hereto
(the "STOCKHOLDERS");
WHEREAS, the Company, including through subsidiaries, is engaged in the
business of purchasing, producing and distributing fencing and fencing related
products as well as purchasing, producing, distributing, installing and
servicing security systems and banking equipment, as well as various activities
ancillary to each of such activities (collectively, the "BUSINESS");
WHEREAS, the Stockholders and the ESOP are the record and beneficial owners
of all right, title and interest in and to all of the issued and outstanding
capital stock of the Company;
WHEREAS, Buyer desires to purchase and the Stockholders and the ESOP desire
to sell to Buyer all of the issued and outstanding capital stock of the Company
on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and promises herein
contained, the parties agree as set forth below:
ARTICLE I.
SALE AND PURCHASE OF STOCK
A. SALE AND PURCHASE OF STOCK. At Closing (as hereinafter defined), the
Stockholders and the ESOP Trustee shall sell, transfer, assign and deliver to
Buyer, and Buyer shall purchase, accept, assume and receive all right, title and
interest in and to 308,567 shares of common stock, par value $1.00 per share, of
the Company (the "STOCK"), which constitutes all of the issued and outstanding
capital stock of the Company, free and clear of any liens, encumbrances,
pledges, restrictive agreements, claims or imperfections of any nature
whatsoever.
ARTICLE II.
PURCHASE PRICE
A. PURCHASE PRICE. The aggregate purchase price for the Stock shall be a
combination of cash and promissory notes of Buyer, payable as set forth below.
B. PAYMENT OF THE PURCHASE PRICE. At Closing, Buyer shall:
1. pay the Stockholders and the ESOP Trustee an aggregate of
$30,000,000 in immediately available funds allocated as set forth in
Schedule 2.2;
2. deliver to the Stockholders Buyer's promissory note in the
original aggregate principal amount of $3,700,000, in substantially
the form attached hereto as Exhibit A (the "SHORT-TERM NOTE"); and
3. deliver to the Escrow Agent (as hereinafter defined) Buyer's
promissory note in the original aggregate principal amount of
$8,000,000, in substantially the form attached hereto as Exhibit B
(the "NOTE").
Schedule 2.2, Exhibit A and Exhibit B reflect the allocation of the various
components of the Purchase Price among the Stockholders and the ESOP Trustee;
provided, however, that the parties acknowledge that the ESOP shall be allocated
only cash.
C. ESCROW. Buyer shall pay, when due, any principal and interest payments
on the Note to NationsBank of Florida, N.A. or such other escrow agent
reasonably acceptable to the parties (the "ESCROW AGENT"), to be held and
released pursuant to the terms of the escrow agreement, in substantially the
form attached hereto as Exhibit C (the "ESCROW AGREEMENT"). "ESCROW FUND" shall
mean at any given time the amounts paid into escrow pursuant to this Section 2.3
and the Escrow Agreement, but not including any earnings on the amount held in
escrow.
ARTICLE III.
CLOSING
A. CLOSING. The purchase and sale of the Stock contemplated by this
Agreement (the "CLOSING") shall take place at Trenam, Kemker, Scharf, Barkin,
Frye, O'Neill & Mullis, P.A., 101 East Kennedy Boulevard, Suite 2700, Tampa,
Florida 33602, on the third business day following the satisfaction or waiver of
all conditions to the obligations of the parties to the transactions
contemplated hereby, commencing at 9:00 a.m., local time on such date, or at
such other date or time or other place as the parties may mutually agree upon in
writing, such date being hereinafter referred to as the "CLOSING DATE." Upon
consummation, the Closing shall be deemed to take place as of the opening of
business on the Closing Date.
B. DELIVERIES BY THE STOCKHOLDERS. At Closing, the Stockholders shall
deliver to the Buyer the following:
1. share certificates for the Stock owned by each Stockholder
with fully executed assignments and signature guarantees, evidencing
such Stock and any other documentation necessary or appropriate to
effect the transfer of ownership thereof to Buyer free and clear of
any liens, encumbrances, pledges, restrictions, agreements, claims or
imperfections of any nature, in the form mutually agreed to by the
parties;
2. resignations of all of the present directors and officers of
the Company;
3. a copy of all charter documents of the Company and each
subsidiary certified by the Secretary of State of their jurisdiction
of incorporation as of a date not earlier than five (5) days prior to
the Closing Date;
4. certificates of active status for the Company and each
subsidiary, certified by the Secretary of State of their jurisdiction
of incorporation and the jurisdictions where the Company and each
subsidiary are qualified to do business as of a date not earlier than
three (3) days prior to the Closing Date;
5. certificates of the Secretary of the Company and each
subsidiary certifying the articles of incorporation, by-laws, minute
books and stock record books of the Company and each subsidiary as of
the Closing Date;
6. certificates of each Stockholder certifying as to the
continued accuracy of the representations and warranties and status of
compliance with conditions precedent to the Closing;
7. any third party consents required to be delivered pursuant to
the terms of this Agreement and set forth on Schedule 4.2 hereto;
8. a release from each Stockholder (other than the ESOP)
releasing any rights, claims or causes of action which such
Stockholder may have against the Company or any subsidiary, in
substantially the form mutually agreed to by the parties;
9. an opinion of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill &
Mullis, P.A., counsel to the Company and the Stockholders, in
substantially the form attached hereto as Exhibit E;
10. marked-up Commitments or Title Policies and Surveys for the
Real Estate, as hereinafter provided;
11. estoppel certificates from each landlord with respect to
each Real Estate Lease listed on Schedule 3.2;
12. payoff letters and lien release documents from existing
lenders;
13. Consulting Agreement with Miles Lenhart in the form to be
mutually agreed to by Buyer and Mr. Lenhart;
14. any and all consents, certificates and other documents from the
Company, the Stockholders and third parties requested by Buyer's lenders or
other financing sources in connection with Buyer's financing of the
purchase price for the Stock; and
15. such other instruments, agreements or documents as may be
necessary or appropriate to carry the transactions contemplated
hereby.
C. DELIVERIES BY THE ESOP TRUSTEE. At Closing, the ESOP Trustee shall
deliver to the Buyer the following:
1. share certificates for the Stock owned by the ESOP Trustee
with fully executed assignments and signature guarantees, evidencing
such Stock and any other documentation necessary or appropriate to
effect the transfer of ownership thereof to Buyer free and clear of
any liens, encumbrances, pledges, restrictions, agreements, claims or
imperfections of any nature, in the form mutually agreed to by the
parties;
2. certificate of the ESOP Trustee certifying as to the
continued accuracy of the representations and warranties by the ESOP
Trustee hereunder and status of compliance with conditions precedent
to the Closing;
3. payoff letters and lien release documents from existing
lenders;
4. an opinion of an independent appraisal firm, satisfactory to
Buyer, the Company and the ESOP Trustee to the effect that the sale of
Stock described in Section 1.1 is fair to the ESOP and that the ESOP
will receive adequate consideration (as such term is defined in
ERISA).
5. an opinion of counsel to the ESOP Trustee that the sale of
Stock by the ESOP Trustee, and the ESOP Trustee's use of a portion of
the sale proceeds to repay outstanding debt, comply with the terms of
the ESOP and the related trust.
D. DELIVERIES BY BUYER. At Closing, Buyer shall deliver the following:
1. to the Stockholders and the ESOP Trustee, certified or bank
cashier's checks or wire transfers (as the Stockholders and the ESOP
Trustee may direct) to the accounts of the Stockholders and the ESOP
Trustee as set forth in Schedule 2.2, in the aggregate amount of
$30,000,000;
2. to the Stockholders, the Short-Term Note, including the
guaranty of Diamond attached thereto;
3. to the Escrow Agent, the Note, including the guaranty of
Diamond attached thereto; and
4. to the Stockholders and the ESOP Trustee, such other
instruments, agreements or documents as may be necessary or
appropriate to carry out the transactions contemplated hereby.
E. CLOSING AGREEMENTS. At Closing, the parties shall execute, acknowledge
and deliver the following:
1. the Stockholders, the Buyer and the Escrow Agent shall
execute, acknowledge and deliver the Escrow Agreement; and
2. such other instruments, agreements or documents as may be
necessary or appropriate to carry out the transactions contemplated
hereby.
ARTICLE IV.
CERTAIN REPRESENTATIONS AND WARRANTIES BY
THE STOCKHOLDERS AND THE ESOP TRUSTEE
The Stockholders and the ESOP Trustee severally and as to himself, herself
or itself only and not as to any other Stockholder, hereby represent and warrant
to Buyer, as of the date hereof and as of the Closing Date, as set forth below:
A. AUTHORITY. Such Stockholder and the ESOP Trustee, respectively, has
full capacity, right, power and authority, without the consent of any other
person, to execute and deliver this Agreement and to carry out the transactions
contemplated hereby. All acts or proceedings required to be taken by such
Stockholder to authorize the execution, delivery and performance of this
Agreement, the documents to be delivered at Closing and all transactions
contemplated hereby and thereby have been duly and properly taken.
B. VALIDITY. This Agreement has been, and the documents to be delivered
at Closing will be, duly executed and delivered and constitute lawful, valid and
legally binding obligations of such Stockholder and the ESOP Trustee,
respectively, enforceable in accordance with their terms. Except as disclosed
on Schedule 4.2 with respect to certain loans and liens to be discharged as of
the Closing Date, the execution and delivery of this Agreement, the documents to
be delivered at Closing and the consummation of the transactions contemplated
hereby and thereby will not result in the creation of any lien, charge or
encumbrance of any kind or the termination or acceleration of any indebtedness
or other obligation of the Company, any subsidiary or such Stockholder and the
ESOP Trustee, respectively, and are not prohibited by, do not violate or
conflict with any provision of, do not constitute a default under or a breach of
and do not impair any rights under (a) the charter or by-laws of the Company,
any subsidiary or such Stockholder and the ESOP Trustee, respectively, (b) any
note, bond, indenture, contract, agreement, permit, license or other instrument
to which the Company, any subsidiary or such Stockholder or the ESOP Trustee is
a party or by which the Company, any subsidiary or such Stockholder or the ESOP
Trustee or any of their respective assets are bound, (c) any order, writ,
injunction, decree or judgment of any court or governmental agency, or (d) any
federal, state or local law, rule, regulation, judgment, code, ruling, statute,
order, ordinance or other requirement (collectively, "LAWS") applicable to the
Company, any subsidiary or such Stockholder or the ESOP Trustee, respectively.
No approval, authorization, registration, consent, order or other action of or
filing with any person, including any court, administrative agency or other
governmental authority, is required for the execution and delivery by such
Stockholder and the ESOP Trustee, respectively, of this Agreement, the documents
to be delivered at Closing or the consummation by such Stockholder and the ESOP
Trustee, respectively, of the transactions contemplated hereby and thereby,
except as set forth on Schedule 4.2 and for filings required under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the related
rules and regulations thereunder (the "HSR ACT").
C. OWNERSHIP OF STOCK. Such Stockholder and the ESOP Trustee,
respectively, has good, marketable and indefeasible title to all of the Stock
and the absolute right, power and capacity to sell, assign, transfer and deliver
all right, title and interest both legal and equitable, in and to the Stock
registered in its name as set forth in Schedule 4.3, to Buyer, free and clear of
all claims, security interests, liens, pledges, charges, escrows, options,
proxies, rights of first refusal, preemptive rights, mortgages, hypothecations,
prior assignments, title retention agreements, indentures, security agreements
or any other limitation, encumbrance or restriction of any kind, except as
disclosed on Schedule 4.2 with respect to certain liens to be discharged as of
Closing.
ARTICLE V.
GENERAL REPRESENTATIONS AND
WARRANTIES BY THE STOCKHOLDERS
The Stockholders, jointly and severally, hereby represent and warrant to
Buyer, as of the date hereof and as of the Closing Date, as set forth below:
A. DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, and has full power and authority and all requisite rights,
licenses, permits and franchises to own, lease and operate its assets and to
carry on the business in which it is engaged. The Company is duly licensed,
registered and qualified to do business as a foreign corporation and is in good
standing in all jurisdictions in which the ownership, leasing or operation of
its assets or the conduct of its business requires such qualification, except
where the failure(s) to be so licensed, registered or qualified, in the
aggregate, would not have a material adverse effect upon its business or assets.
Schedule 5.1 sets forth each state or other jurisdiction in which the Company is
licensed or qualified to do business. The Company has delivered to Buyer an
accurate, correct and complete copy of its charter and by-laws and each
agreement, trust, proxy or other arrangement among its Stockholders. No
approval, authorization, registration, consent, order or other action of or
filing with any person, including any court, administrative agency or other
governmental authority, is required for the execution and delivery by the
Company of this Agreement, the documents to be delivered at Closing or the
consummation by the Company of the transactions contemplated hereby and thereby,
except as set forth on Schedule 5.1 and for filings required under the HSR Act.
The books of account and other financial records of the Company and each
subsidiary are accurate, correct and complete and have been maintained in
accordance with good business practices. The minute books and stock records of
the Company and each subsidiary contain accurate, correct and complete records
of all meetings, accurately reflect all other material corporate action of the
Stockholders and directors and any committees of the board of directors of the
Company and each subsidiary and accurately reflect the ownership of the Company
and each subsidiary.
B. SUBSIDIARIES. 1. Except as set forth in Schedule 5.2, the Company
does not own stock or have any equity investment or other interest in, does not
have the right to acquire any such interest, and does not control, directly or
indirectly, any corporation, association, partnership, joint venture or other
entity and has not had such an ownership or control relationship with any such
entity. Schedule 5.2 sets forth the state or other jurisdiction of
incorporation or organization of each subsidiary, and each state or other
jurisdiction in which such subsidiary is licensed or qualified to do business.
Each subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization. Each
subsidiary has full power and authority and all requisite rights, licenses,
permits and franchises to own, lease and operate its assets and to carry on the
business in which it is engaged. Each subsidiary is duly licensed, registered
and qualified to do business as a foreign corporation and is in good standing in
all jurisdictions in which the ownership, leasing or operation of its assets or
the conduct of its business requires such qualification, except where the
failure(s) to be so licensed, registered and qualified, in the aggregate, would
not have a material adverse effect upon its business or assets.
2. The capitalization, including debt and equity, of each subsidiary is
accurately set forth in Schedule 5.2. All outstanding shares of capital stock
of each subsidiary (the "SUBSIDIARY SHARES") are duly authorized, validly
issued, fully paid and nonassessable, were not issued in violation of any
preemptive, subscription or other right of any person to acquire securities of
any subsidiary and constitute in the aggregate all the issued and outstanding
capital stock of all classes of the subsidiaries. The Company is the record and
beneficial owner of the Subsidiary Shares. There is no outstanding
subscription, option, convertible or exchangeable security, preemptive right,
warrant, call or agreement relating to the Subsidiary Shares or other obligation
or commitment of any subsidiary to issue any shares of capital stock. There are
no voting trusts or other agreements, arrangements or understandings applicable
to the exercise of voting or any other rights with respect to any Subsidiary
Shares. The Company has good, marketable and indefeasible title to all of the
Subsidiary Shares, free and clear of all claims, security interests, liens,
pledges, charges, escrows, options, proxies, rights of first refusal, preemptive
rights, mortgages, hypothecations, prior assignments, title retention
agreements, indentures, security agreements or any other limitation, encumbrance
or restriction of any kind.
C. CAPITAL STOCK. 1. The Company's entire equity capital consists of
2,500,000 authorized shares of Common Stock, $1.00 par value per share, of which
308,567 shares are issued and outstanding and all of which are owned
beneficially and of record by the Stockholders. The capitalization, including
debt and equity, of the Company is accurately described in the financial
statements set forth in Schedule 5.5. All outstanding shares of Stock are and
all previously issued shares of capital stock of the Company not currently
outstanding were, duly authorized, validly issued, fully paid and nonassessable,
and were not issued in violation of any preemptive, subscription or other right
of any person to acquire securities. The Stock constitutes in the aggregate all
the issued and outstanding capital stock of all classes of the Company. There
are no outstanding subscription, option, convertible or exchangeable security,
preemptive right, warrant, call or agreement (other than this Agreement)
relating to the Stock or any capital stock or other obligation or commitment
(contingent or otherwise) to issue, repurchase or otherwise acquire or retire
any shares of capital stock of the Company. All shares of the Company's capital
stock, whether or not currently outstanding, were issued in compliance (and if
reacquired or cancelled by the Company, reacquired or cancelled in compliance)
with all Laws, including securities Laws. Except as set forth on Schedule 5.3,
there are no voting trusts or other agreements, arrangements or understandings
applicable to the exercise of voting or any other rights with respect to any
Stock. Except as set forth on Schedule 5.3, there are no restrictions
affecting the transferability of the Stock. Except as listed on Schedule 5.3,
the Company has not lent or advanced any money to, or borrowed any money from,
or guaranteed or otherwise become liable for any indebtedness or other
obligations of, or acquired any capital stock, obligations or securities of, any
Stockholder or any other person.
2. Upon the completion of the transactions contemplated hereby, Buyer will
have good and marketable title to and ownership of the Stock free and clear of
all claims, security interests, liens, pledges, charges, escrows, options,
proxies, rights of first refusal, preemptive rights, mortgages, hypothecations,
prior assignments, title retention agreements, indentures, security agreements
or any other limitation, encumbrance or restriction of any kind.
D. TRANSACTIONS WITH AFFILIATES. Since November 1, 1995, there have not
been any dividends or other distribution of assets by the Company or any
subsidiary which have been declared or effected. Except as set forth in
Schedule 5.4, no Affiliate:
1. owns, directly or indirectly, any debt, equity or other
interest or investment in any corporation, association or other entity
which is a competitor, lessor, lessee, customer, supplier or
advertiser of the Business;
2. has any cause of action or other claim whatsoever against or
owes any amount to, or is owed any amount by, the Company or any
subsidiary;
3. has any interest in or owns any property or right used in the
conduct of the Business;
4. is a party to any contract, lease, agreement, arrangement or
commitment used in the Business; or
5. received from or furnished to the Company or any subsidiary
any goods or services.
The term "AFFILIATE" shall mean any Stockholder, any officer or director of the
Company or a subsidiary, any member of the immediate family (including spouse,
brother, sister, descendant, ancestor or in-law) of any Stockholder or any
officer or director of the Company or any subsidiary. The term Affiliate shall
also include any entity which controls, or is controlled by, or is under common
control with any of the individuals or entities described in the preceding
sentence.
E. FINANCIAL STATEMENTS. The financial statements of the Company for the
three years ended October 30, 1997 attached hereto as Schedule 5.5
(collectively, the "FINANCIAL STATEMENTS") are and the Monthly Financial
Statements (as hereinafter defined) will be (a) accurate, correct and complete
in all material respects, (b) in accordance with the books of account and
records of the Company and its subsidiaries, (c) present fairly the financial
condition and results of operations of the Company and its subsidiaries as of
the dates and for the periods indicated and (d) are prepared in accordance with
U.S. generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby ("GAAP"). Taxes (as hereinafter defined)
are reflected in the Financial Statements, including the balance sheet for the
year ended October 30, 1997, in accordance with Financial Accounting Standards
109. The books of account and other records (financial and otherwise) of the
Company, its subsidiaries and the Business are in all material respects complete
and correct and are maintained in accordance with good business practices and
are accurately reflected on the Financial Statements and the Monthly Financial
Statements.
F. INTERIM CHANGE. Except as set forth in Schedule 5.6, since October 30,
1997, the Company and the subsidiaries have operated the Business only in the
ordinary course, consistent with past practices, and there has not been:
1. any adverse change in the financial condition, assets,
liabilities (fixed or contingent), personnel, prospects or business
affairs of the Company, a subsidiary or the Business or in its
relationships with suppliers, vendors, customers, lessors, employees
or others (in each case, as a group or class) nor has there been the
occurrence of any event or condition which would reasonably be
expected to have such an effect;
2. any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Business or assets of the Company
or any subsidiary;
3. any forgiveness, cancellation or waiver of any rights of the
Company or a subsidiary as to the Business;
4. any disposition of assets of the Company or a subsidiary,
other than sales of inventory in the ordinary course of business on
terms consistent with past practice;
5. any event or condition of any character materially adversely
affecting the Business or assets of the Company or any subsidiary;
6. any increase in the compensation or benefits payable or to
become payable by the Company or a subsidiary (other than for general
increases applicable to most employees in an amount consistent with
past practice);
7. any declaration, authorization or payment of dividends or
distributions to any Stockholder;
8. any issuance or repurchase by the Company of any shares of
its capital stock other than repurchases pursuant to the provisions of
the ESOP as a result of the exercise by ESOP participants of certain
put rights; provided that Buyer is given prior written notice at least
10 days before any repurchase;
9. any grant by the Company of any option to purchase shares of
capital stock;
10. any change in credit practices as to customers of the
Business; or
11. any incurrence of any security interest, lien, charge,
encumbrance or claim on, or any material damage or loss to, the
Company, its subsidiaries or the Business.
Since October 30, 1997, neither the Company nor any subsidiary has incurred or
become subject to, or agreed to incur or become subject to, any liability or
obligation, contingent or otherwise, except current liabilities and contractual
obligations in the ordinary course of business and in amounts consistent with
past practices. Except as set forth in Schedule 5.6, since October 30, 1997,
there has not been any agreement, commitment or understanding by the Company,
any subsidiary or the Stockholders to do any of the foregoing.
G. ACCOUNTS RECEIVABLE. The Company has delivered to Buyer an accurate,
correct and complete aging of all outstanding accounts receivable of the Company
and its subsidiaries (the "ACCOUNTS RECEIVABLE") as of October 30, 1997. All
outstanding Accounts Receivable are due and valid claims against account debtors
for goods or services delivered or rendered, expected to be collectible in full
in accordance with their respective terms and subject to no defenses, offsets or
counterclaims, except as reserved against on the Financial Statements. All
Accounts Receivable arose in the ordinary course of business. Except as set
forth on Schedule 5.7, no Accounts Receivable are subject to prior assignment,
claim, lien or security interest. Where receivables arose out of secured
transactions, all financing statements and other instruments required to be
filed or recorded to perfect the title or security interest of the Company or
any subsidiary have been properly filed and recorded except where failure to do
so would not have a material adverse effect on the collectibility and value of
the Accounts Receivable in the aggregate. Schedule 5.7 contains an accurate,
correct and complete list of the names and addresses of all banks and financial
institutions in which the Company or any subsidiary has an account, deposit,
safe-deposit box, line of credit or other loan facility or relationship, lock
box or other arrangement for the collection of Accounts Receivable, with the
names of all persons authorized to draw or borrow thereon or to obtain access
thereto.
H. INVENTORY. All inventories reflected on the Financial Statements
delivered to Buyer are (a) properly valued at the lower of cost or market value
in the manner described in Note 2 to the Financial Statements in accordance with
GAAP; (b) of good and merchantable quality and contain no material amounts that
are not salable and usable for the purposes intended in the ordinary course of
the Business and meet the current standards and specifications of the Business
and are not obsolete; (c) in conformity with warranties customarily given to
purchasers of like products; and (d) at levels adequate and not excessive in
relation to the circumstances of the Business and in accordance with past
inventory stocking practices. All inventories disposed of subsequent to October
30, 1997, have been disposed of only in the ordinary course of business and at
prices and under terms that are normal and consistent with past practice.
I. INSURANCE. Schedule 5.9 sets forth an accurate and complete list and
summary description (including name of the insurer, coverage, premium and
expiration date) of all binders, policies of insurance, self insurance programs
or fidelity bonds ("INSURANCE") maintained by the Company or a subsidiary or in
which the Company or a subsidiary is a named insured. To the Company's
knowledge, all Insurance has been issued by financially sound insurance
companies under valid and enforceable policies or binders for the benefit of the
Company and its subsidiaries, and all such policies or binders are in such types
and in full force and effect and are in amounts and for risks, casualties and
contingencies customarily insured against by enterprises in operations similar
to the Business. Except as set forth on Schedule 5.9, there are no pending or
asserted claims against any Insurance as to which any insurer has denied
liability or reserved rights, and there are no claims under any Insurance that
have been disallowed or improperly filed within the last three fiscal years.
Schedule 5.9 sets forth the claims experience for the last three full fiscal
years and the interim period through the date hereof with respect to the Company
and its subsidiaries (both insured and self-insured). No notice of cancellation
or nonrenewal with respect to, or material increase of premium for, any
insurance has been received by the Company within the last three fiscal years.
Neither the Company nor the Stockholders have any knowledge of any facts or the
occurrence of any event which (i) reasonably might form the basis of any claim
against the Company or a subsidiary relating to the conduct or operations of the
Business which will materially increase the insurance premiums payable under any
insurance, (ii) otherwise could reasonably be expected to increase the insurance
premiums payable under any insurance, or (iii) reasonably could be expected to
lead to a retroactive premium adjustment.
J. TITLE TO ASSETS. The Company or a subsidiary is the sole and exclusive
legal and equitable owner of all right, title and interest in and has good and
marketable title to all of the owned assets (other than the "REAL ESTATE" as
defined in Section 5.11) used in and related to the Business, located on their
premises, shown on the Financial Statements or acquired after the date hereof.
Except as set forth in Schedule 5.10, none of the assets (other than the Real
Estate) which the Company or a subsidiary purports to own are subject to (a) any
title defect or objection; (b) any contract of lease, license or sale; (c) any
security interest, mortgage, pledge, lien, charge or encumbrance of any kind or
character, direct or indirect, whether accrued, absolute, contingent or
otherwise, except those disclosed in the Financial Statements and except minor
liens and encumbrances which do not materially detract from the value or
interfere with the present use thereof; (d) any royalty or commission
arrangement; or (e) any claim, covenant or restriction. The assets are in good
operating condition and repair (reasonable wear and tear excepted), are not
obsolete, are suitable for the purposes for which they are presently being used,
and are adequate to meet all present and reasonably anticipated future
requirements of the Business as presently conducted. The assets (other than the
Real Estate) will furnish Buyer with all of the capacity and rights to
manufacture, produce, develop, use, sell, distribute, install and service the
products and to perform the same services in the same manner as presently being
manufactured or performed by the Company.
K. REAL ESTATE. 1. Schedule 5.11(a)(i) sets forth an accurate, correct
and complete list of each parcel of real property owned by the Company or its
subsidiaries (the "OWNED REAL ESTATE"), including a street address, and/or legal
description and a list of all material unrecorded contracts and agreements, oral
or written, relating to or affecting the Owned Real Estate or any interest
therein (the "OWNED REAL ESTATE AGREEMENTS"). The Company has delivered to
Buyer accurate, correct and complete copies (or abstracts of oral agreements) of
all Owned Real Estate Agreements. The Owned Real Estate and the real property
subject to Real Estate Leases (as hereinafter defined) is collectively referred
to as the "REAL ESTATE." Except as shown or reflected in the Commitments (as
hereinafter defined) and as set forth in Schedule 5.11(a)(ii) and the Surveys,
the Company or a subsidiary is the sole and exclusive legal and equitable owner
of all right, title and interest in and has good, marketable and insurable title
in fee simple absolute to, and is in possession of, all Owned Real Estate,
including the buildings, structures and improvements situated thereon and
appurtenances thereto, in each case free and clear of all tenancies and other
possessory interests, security interests, conditional sale or other title
retention agreements, liens, encumbrances, mortgages, pledges, assessments
(other than assessments not yet due and payable), and further, to the knowledge
of the Company without having conducted title searches and surveys other than
the Commitments and Surveys, free and clear of easements (other than utility
easements), rights of way, covenants, restrictions, reservations, options,
rights of first refusal, defects in title, encroachments and other burdens other
than for taxes and assessments not yet due and payable. All material unrecorded
contracts, agreements and undertakings affecting the Owned Real Estate are set
forth in Schedule 5.11(a)(iii) and are legally valid and binding and in full
force and effect, and, to the knowledge of the Company, there are no defaults,
offsets, counterclaims or defenses thereunder, and the Company has received no
notice of default, offset, counterclaim or defense under any such contracts or
agreements,
2. Except as shown or reflected on the Survey (as hereinafter defined), to
the knowledge of the Company, no Owned Real Estate is located within a flood or
lakeshore erosion hazard area. Neither the whole nor any portion of any Owned
Real Estate nor, to the knowledge of the Company, any of the Real Estate subject
to Real Estate Leases, has been condemned, requisitioned or otherwise taken by
any public authority. No notice of any such condemnation, requisition or taking
has been received by the Company. To the knowledge of the Company, no such
condemnation, requisition or taking is threatened or contemplated. The Company
has no knowledge of any public improvements which may result in special
assessments against or otherwise affect the Real Estate, except as may be shown
or reflected in the Commitments.
3. To the knowledge of the Company, and subject to or excepted as provided
in Section 5.24 below (i) the Real Estate is in compliance with all applicable
zoning, building, health, fire, water, use or similar Laws, and (ii) the zoning
of each parcel of Real Estate permits the existing improvements and the
continuation following consummation of the transaction contemplated hereby of
the Business as presently conducted thereon. The Company or a subsidiary has
all licenses, certificates of occupancy, permits and authorizations required to
operate the Business and utilize the Real Estate. To the knowledge of the
Company, the Company or a subsidiary has all easements and rights necessary to
conduct the Business, including easements for all utilities, services, roadway,
railway and other means of ingress and egress. To the knowledge of the Company,
the Company or a subsidiary has all rights to any off-site facilities necessary
to ensure compliance in all material respects with all zoning, building, health,
fire, water, use or similar Laws. To the knowledge of the Company, no fact or
condition exists which has resulted or would result in the termination or
impairment of access to the Real Estate or discontinuation of sewer, water,
electric, gas, telephone, waste disposal or other utilities or services. To the
knowledge of the Company and except as set forth on Schedule 5.24, the
facilities servicing the Real Estate are in full compliance with all Laws.
4. The Company has delivered or made available to Buyer accurate, correct
and complete copies of all existing title insurance policies, title reports and
surveys, if any, in possession or control of the Company, with respect to each
parcel of Owned Real Estate.
L. REAL ESTATE LEASES. Schedule 5.12 sets forth an accurate, correct and
complete list of all real property leased or subleased by the Company or its
subsidiaries as a tenant or subtenant, including identification of the lease or
sublease, street address and list of all material contracts, agreements, leases,
subleases, options and other occupancy agreements, oral or written, affecting
such leased Real Estate or any interest therein to which the Company or a
subsidiary is a party as a tenant, subtenant or occupant or by which any of
their interests in real property is bound (the "REAL ESTATE LEASES"). The
Company or its subsidiaries have been in peaceable possession of the premises
covered by each Real Estate Lease since the commencement of the original term of
such Real Estate Lease. The Company has delivered to Buyer accurate, correct
and complete copies of each Real Estate Lease. At the Closing, the Company
shall deliver to Buyer any consents or approvals of any parties required in
connection with the transactions contemplated hereby with respect to the Real
Estate Leases listed on Schedule 3.2.
M. INTELLECTUAL PROPERTY. Schedule 5.13 sets forth an accurate, correct
and complete list and summary description of all patents, trademarks, trademark
rights, trade names, trade styles, trade dress, product designations, service
marks, copyrights and applications for any of the foregoing utilized in the
Business or in which the Company or a subsidiary has an interest (the
"INTELLECTUAL PROPERTY"). During the preceding five (5) years, neither the
Company nor any subsidiary has been known by or done business under any name
other than those listed in Schedule 5.13. Schedule 5.13 sets forth an accurate,
correct and complete list and summary description of all licenses and other
agreements relating to any Intellectual Property. None of the Intellectual
Property is subject to any extensions, renewals, taxes or fees due within ninety
(90) days after Closing. Except as set forth in Schedule 5.13, (a) the Company
or a subsidiary is the sole and exclusive owner and has the sole and exclusive
right to use the Intellectual Property; (b) no action, suit, proceeding or
investigation is pending or, to the knowledge of the Company, threatened with
respect to the Intellectual Property; (c) none of the Intellectual Property
interferes with, infringes upon, conflicts with or otherwise violates the rights
of others or, to the knowledge of the Company, is being interfered with or
infringed upon by others, and none is subject to any outstanding order, decree,
judgment, stipulation or charge; (d) there are no royalty, commission or similar
arrangements, and no licenses, sublicenses or agreements, pertaining to any of
the Intellectual Property; (e) neither the Company nor any subsidiary has agreed
to indemnify any person for or against any infringement of or by the
Intellectual Property; (f) neither the Company nor the Stockholders have
knowledge of any patent, invention or application therefor or similar property
which would infringe upon any of the Intellectual Property or render obsolete or
adversely affect the manufacture, processing, distribution or sale of products
or services relating to the Business; (g) all items of Intellectual Property are
properly registered under applicable Law; and (h) the Intellectual Property
constitutes all such assets, properties and rights which are used in or
necessary for the conduct of the Business as it is being conducted as of the
date hereof. The operation of the Business by the Buyer after the Closing in
the manner and geographic areas in which the Business is currently conducted by
the Company and the subsidiaries will not interfere with or infringe upon any
patent or trademark or any asserted rights of others with respect to the current
trade dress or packaging of any products. Neither the Company nor any
subsidiary is subject to any judgment, order, writ, injunction or decree of any
court or any Federal, state, local or other governmental agency or
instrumentality, domestic or foreign, or any arbitrator, or has entered into or
is a party to any contract which restricts or impairs the use of any
Intellectual Property.
N. TRADE SECRETS. Schedule 5.14 sets forth an accurate and correct list
and summary description of all material information in the nature of know-how,
trade secrets or proprietary information which provides the Company or its
subsidiaries with an advantage over competitors who do not know or use it,
including formulae, patterns, molds, tooling, inventions, industrial models,
processes, designs, devices, engineering data, cost data, compilations of
information, copyrightable material and technical information, if any, relating
to the Business (the "TECHNICAL INFORMATION"). Except as set forth on Schedule
5.14, all Technical Information:
1. is owned solely and exclusively by the Company or its
subsidiaries, and the Company or a subsidiary is solely responsible
for the development of such Technical Information;
2. is fully and completely documented and readily usable by
Buyer; and
3. has been continuously maintained in confidence by taking
reasonable precautions to protect the secrecy of all Technical
Information and prevent disclosure to unauthorized parties.
All Technical Information and any copies thereof shall be delivered to Buyer at
Closing. Neither the Company nor the Stockholders have knowledge of any
violation of any trade secret rights or copyrights with respect to such
Technical Information.
O. CUSTOMERS AND SUPPLIERS. All contracts or agreements with customers
and suppliers of the Business were entered into by or on behalf of the Company
or its subsidiaries in the ordinary course of business at usual and normal
quantities, prices and terms. Schedule 5.15 sets forth an accurate, correct and
complete list of the 25 largest customers and 25 largest suppliers of the
Business, determined on the basis of revenues from items sold (with respect to
customers) or costs of items purchased (with respect to suppliers) for each of
the fiscal years ended November 3, 1995 and November 1, 1996 and October 30,
1997. Neither the Company nor the Stockholders have any reason to believe that
any customer or supplier will cease to do business or materially reduce their
business with the Company or any subsidiary after, or as a result of, the
consummation of any transactions contemplated hereby or that any customer or
supplier is threatened with bankruptcy or insolvency. The Company does not know
of any fact, condition or event which would adversely affect its relationship
with any customer or supplier.
P. EMPLOYEES.
1. CONTRACTS. Schedule 5.16 sets forth an accurate, correct and complete
list and summary description of all agreements, arrangements or understandings
with the employees of the Company and its subsidiaries regarding services to be
rendered, terms and conditions of employment, compensation, bonus, commission,
profit sharing, stock options, severance, termination, golden parachute or other
similar agreements (the "EMPLOYMENT CONTRACTS").
2. COMPENSATION. The Company has provided to Buyer an accurate, correct
and complete list of all employees of the Company and its subsidiaries,
including name, title or position, the present annual compensation (including
bonuses, commissions and deferred compensation) and years of service.
Schedule 5.16 sets forth an accurate, correct and complete list of each employee
who may become entitled to receive supplementary retirement benefits or
allowances, whether pursuant to a contractual obligation or otherwise, and the
estimated amounts of such payments. Since November 1, 1997, the Company has not
(i) paid, or made any accrual or arrangement for the payment of, bonuses or
special compensation of any kind, including any severance or termination pay, to
any present or former officer or employee, (ii) made any general wage or salary
increases or (iii) increased or altered any other benefits or insurance provided
to any employee. No employee is eligible for payments that would constitute
"PARACHUTE PAYMENTS" under Section 280G of the Internal Revenue Code of 1986, as
amended (the "CODE").
3. LABOR RELATIONS. There are no controversies pending or, to the
knowledge of the Company, threatened involving any group of employees, except
individual grievances under any collective bargaining agreement which, in the
aggregate, are not material. Neither the Company nor a subsidiary has suffered
or sustained any work stoppage and no such work stoppage is threatened. No
union organizing or election activities involving any nonunion employees of the
Company or any subsidiary are in progress or threatened. Neither the Company
nor the Stockholders is aware of any reason why any employee of the Company or
any subsidiary would not continue employment after consummation of the
transactions contemplated hereby.
4. COMPLIANCE. The Company and each subsidiary has complied with all Laws
relating to the employment of labor, including provisions relating to wages,
hours, equal opportunity, occupational health and safety, severance, collective
bargaining and the payment of social security and other taxes.
Q. EMPLOYEE BENEFIT PLANS.
1. BENEFIT PLANS. Schedule 5.17(a) sets forth an accurate, correct and
complete list and summary description of all "WELFARE BENEFIT PLANS" (as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), "EMPLOYEE PENSION BENEFIT PLANS" (as defined in Section 3(2)
of ERISA), bonus, profit sharing, deferred compensation, incentive or other
compensation plans or arrangements, and other employee fringe benefit plans,
whether funded or unfunded, qualified or unqualified (all the foregoing being
herein called "BENEFIT PLANS") maintained or contributed to by the Company or
any subsidiary or any other organization which is a member of a controlled group
of organizations (within the meaning of Sections 414(b), (c), (m) or (o) of the
Code) for the benefit of any of its officers, employees or other persons. The
Company has delivered to Buyer accurate, correct and complete copies of (i) each
Benefit Plan (or, in the case of any unwritten Benefit Plans, descriptions
thereof), (ii) the most recent annual report on Form 5500 and attached Schedule
B (including any related actuarial valuation report), if any, filed with the
Internal Revenue Service with respect to any Benefit Plan, (if any such report
was required), (iii) each trust agreement and group annuity contract relating to
any Benefit Plan, (iv) certified financial statements and actuarial reports in
the possession of the Company and/or its agents and representatives or which
information is otherwise known by the Company to exist, (v) attorney's response
to an auditor's request for information in the possession of the Company and/or
its agents and representatives or which information is otherwise known by the
Company to exist, (vi) collective bargaining agreements or other such contracts,
(vii) each ruling letter in the possession of the Company and/or its agents and
representatives or which information is otherwise known by the Company to exist
or any outstanding ruling request by the Company on the tax exempt status of any
voluntary employees' beneficiary association ("VEBA") implementing a Benefit
Plan, (viii) each general notification to employees of their rights under
Section 4980B of the Code and any other such correspondence indicating
compliance with said Section 4980B, and (x) all documents evidencing loans to
any Benefit Plan that is an employee stock ownership plan.
2. FUNDING. All contributions to, and payments from, the Benefit Plans
that may have been required to be made in accordance with the Benefit Plans and,
when applicable, Section 302 of ERISA or Section 412 of the Code, have been
timely made. All such contributions to, and payments from, the Benefit Plans
have been or will be paid prior to the Closing Date or, will be accrued on the
Financial Statements in accordance with GAAP. With respect to each Benefit Plan
which is subject to Title I, Subtitle B, Part 3 of ERISA, the funding method
used in connection with such Benefit Plan is acceptable under ERISA and the
actuarial assumptions used in connection with funding such Benefit Plan, in the
aggregate, are reasonable. Schedule 5.17(b) sets forth as of October 30, 1997
(i) the actuarial present value (based upon the same actuarial assumptions as
those heretofore used for funding purposes) of all vested and nonvested (but
without any assumption that nonvested accrued benefits have become
nonforfeitable) accrued benefits (whether on account of retirement, termination,
death or disability) under such Benefit Plan, (ii) if such Benefit Plan uses a
benefit accrual formula having reference to final earnings, the actuarial
present value of the benefits under such Benefit Plan as calculated in (i), but
based upon projected earnings increases of five percent per annum, (iii) the
actuarial present value (based upon the same actuarial assumptions, other than
turnover assumptions, as those heretofore used for funding purposes) of vested
benefits under such Benefit Plan, (iv) the net fair market value of the assets
held to fund such Benefit Plan, (v) the funding method used in connection with
such Benefit Plan, (vi) the amount and plan year of any "ACCUMULATED FUNDING
DEFICIENCY" as defined in Section 302(a)(2) of ERISA which exists with respect
to any plan year of such Benefit Plan, and (vii) the amount of an employee
contributions under such Benefit Plan. With respect to each Benefit Plan,
including an "INDIVIDUAL ACCOUNT PLAN" (as defined in Section 3(34) of ERISA),
Schedule 5.17(b) sets forth (A) the amount of any liability of the Company or
any subsidiary for contributions due with respect to such Benefit Plan as of the
Closing Date and as of the end of any subsequent plan year ending prior to the
Closing, and the date any such amounts were paid, and (B) the amount of any
contribution paid with respect to such Benefit Plan for the plan year in which
the Closing occurs. As of the most recent valuation date for each funded
Benefit Plan that is a defined benefit pension plan, the present value of the
accrued benefits (as computed by the actuaries for such Benefit Plan using the
actuarial assumptions in effect for such purposes as reflected in the most
recent actuarial report or valuation for such Benefit Plan) of all participants
and former participants in such Benefit Plan did not, and as of the Closing Date
such present value will not, exceed the fair market value of its assets.
3. COMPLIANCE WITH THE CODE AND ERISA. The Company and the subsidiaries
and each Benefit Plan (and any related trust agreement or annuity contract or
any other funding instrument) comply currently, and have complied in the past,
both as to form and operation, with the provisions of ERISA and the Code
(including Section 410(b) of the Code relating to coverage and Section 4980B
relating to health coverage continuation), and all other applicable Laws; and
all necessary governmental approvals for the Benefit Plans have been obtained.
Except as set forth in Schedule 5.17(c), the Benefit Plans that are pension
benefit plans have received determination letters from the Internal Revenue
Service to the effect that such Benefit Plans are qualified and exempt from
Federal income taxes under Sections 401(a) and 501(a), respectively, of the
Code, and no such determination letter has been revoked nor, to the knowledge of
the Company, has revocation been threatened, nor has any such Benefit Plan been
amended since the date of its most recent determination letter or application
therefor in any respect which would adversely affect its qualification or
materially increase its cost.
4. ADMINISTRATION. Each Benefit Plan has been administered to date in
compliance with its terms and with the requirements of the Code and ERISA. All
reports, returns and similar documents with respect to the Benefit Plans
required to be filed with any government agency or distributed to any Benefit
Plan participant have been duly and timely filed or distributed. Except as set
forth in Schedule 5.17(d), there are no investigations by any governmental
agency, termination proceedings or other claims (except claims for benefits
payable in the normal operation of the Benefit Plans), suits or proceedings
against or involving any Benefit Plan or asserting any rights or claims to
benefits under any Benefit Plan that could give rise to any material liability,
nor, to the knowledge of the Company, are there any facts that could give rise
to any material liability in the event of any such investigation, claim, suit or
proceeding. Future compliance with the requirements of ERISA as in effect on
the Closing Date or any collective bargaining agreements to which the Company or
any subsidiary is a party will not result in any increase in the rate of benefit
accrual under any Benefit Plan. The Company's Financial Statements reflect all
of the Company's employee benefit liabilities in a manner satisfying the
requirements of FAS 87, 88 and 106. No event has occurred and no condition
exists under any Benefit Plan that would subject the Company, any subsidiary or
Buyer to any tax under Code Sections 4971, 4972, 4977, 4976, 4979A, 4980B,
4980D, 4980E or 4979 or to a fine under ERISA Section 502(c). All forms,
documents and other materials required to be filed have been filed with the
Securities and Exchange Commission or otherwise distributed as required by the
Securities Act of 1933, as amended. There are no leased employees (as defined
in Section 414(l) of the Code) that must be taken into account under any Benefit
Plan. The purchase and sale of the Stock as described in Article I shall not
subject the Stockholders, the Company, any subsidiary or Buyer to any tax under
Sections 4978, 4978B or 4979A of the Code.
5. PROHIBITED TRANSACTIONS. No "PROHIBITED TRANSACTION" (as defined in
Section 4975 of the Code or Section 406 of ERISA) has occurred which involves
the assets of any Benefit Plan and which could subject the Company, a subsidiary
or any of their respective employees, or a trustee, administrator or other
fiduciary of any trusts created under any Benefit Plan to the tax or penalty on
prohibited transactions imposed by Section 4975 of the Code or the sanctions
imposed under Title I of ERISA. Except as set forth on Schedule 5.17(e), no
Benefit Plan has been terminated. Neither the Company nor any subsidiary nor
any trustee, administrator or other fiduciary of any Benefit Plan nor any agent
of any of the foregoing has engaged in any transaction or acted or failed to act
in a manner which could subject the Company, any subsidiary or Buyer to any
liability for breach of fiduciary duty under ERISA or any other applicable law.
6. OTHER PLANS. Schedule 5.17(f) sets forth an accurate, correct and
complete list and summary description of each deferred compensation plan, bonus
plan, stock option plan, employee stock purchase plan and any other employee
benefit plan, agreement, arrangement or commitment not required under a previous
subsection to be set forth in any other Schedule to Section 5.17 (other than
normal policies concerning holidays, vacations and salary continuation during
short absences for illness or other reasons) maintained by the Company or a
subsidiary.
7. LIABILITIES TO PBGC. The Company and each subsidiary have paid all
premiums (and interest charges and penalties for late payment, if applicable)
due the Pension Benefit Guaranty Corporation ("PBGC") with respect to each
Pension Benefit Plan and each plan year thereof for which such premiums are
required. There has been no "REPORTABLE EVENT" (as defined in Section 4043(c)
of ERISA and the regulations of the PBGC under such Section) with respect to any
Pension Benefit Plan subject to Title IV of ERISA. Except as set forth on
Schedule 5.17(g), no liability to the PBGC has been incurred by the Company or
any subsidiary or any corporation or other trade or business under common
control with the Company or any subsidiary (as determined under Section 414(b)
or (c) of the Code) ("COMMON CONTROL ENTITY") on account of any termination of
an employee pension benefit plan subject to Title IV of ERISA. Except as set
forth on Schedule 5.17(g), no filing has been made by the Company or any Common
Control Entity with the PBGC (and no proceeding has been commenced by the PBGC)
to terminate any employee pension benefit plan subject to Title IV of ERISA
maintained, or wholly or partially funded, by the Company or any Common Control
Entity. Neither the Company nor any subsidiary nor any Common Control Entity
has (i) ceased operations at a facility so as to become subject to the
provisions of Section 4062(e) of ERISA, (ii) withdrawn as a substantial employer
so as to become subject to the provisions of Section 4063 of ERISA, (iii) ceased
making contributions on or before the Closing Date to any employee pension
benefit plan subject to Section 4064(a) of ERISA to which the Company or any
Common Control Entity made contributions during the five (5) years prior to the
Closing Date, or (iv) made a complete or partial withdrawal from a
multi-employer plan (as defined in Section 3(37) of ERISA) so as to incur
withdrawal liability as defined in Section 4201 of ERISA (without regard to
subsequent reduction or waiver of such liability under Section 4207 or 4208 of
ERISA). Except as set forth on Schedule 5.17(g), no Benefit Plan subject to
Title IV of ERISA has incurred any material liability to the PBGC other than for
the payment of premiums, all of which have been paid when due. No Benefit Plan
has applied for or received a waiver of the minimum funding standards imposed by
Section 412 of the Code, and no Benefit Plan has an "ACCUMULATED FUNDING
DEFICIENCY" within the meaning of Section 412(a) of the Code as of the most
recent plan year. The Company has furnished to Buyer the most recent actuarial
report or valuation with respect to each Benefit Plan that is a "DEFINED BENEFIT
PENSION PLAN" (as defined in Section 3(35) of ERISA). The information supplied
to the actuary by the Company and the subsidiaries for use in preparing those
reports or valuations was complete and accurate and neither the Company nor the
Stockholders have reason to believe that the conclusions expressed in those
reports or valuations are incorrect.
8. MULTI-EMPLOYER PLANS. At no time has the Company or any subsidiary
been required to contribute to any "MULTI-EMPLOYER PENSION PLAN" (as defined in
Section 3(37) of ERISA) or incurred any withdrawal liability, within the meaning
of Section 4201 of ERISA, or announced an intention to withdraw, but not yet
completed such withdrawal, from any multi-employer pension plan.
9. VALIDITY AND ENFORCEABILITY. All Welfare Benefit Plans, Pension
Benefit Plans, related trust agreements or annuity contracts (or any other
funding instruments) and all plans, agreements, arrangements and commitments
referred to in this Section are legally valid and binding and in full force and
effect.
10. PRIOR EMPLOYEES. No Benefit Plan provides medical or life insurance
benefits to current or future retired or terminated employees, their spouses or
dependents (except as required by Section 4980B of the Code).
R. LICENSES AND PERMITS. Schedule 5.18 contains an accurate, correct and
complete list and summary description of each license, permit, certificate,
approval, exemption, franchise, registration, variance, accreditation or
authorization currently issued to the Company and its subsidiaries or that are
known by the Company to be required in the future in connection with its current
operations and the operations of the Company as contemplated by the Company's
1998 budget, a copy of which has been provided to Buyer (collectively, the
"LICENSES AND PERMITS"). The Licenses and Permits are valid and in full force
and effect and there are not pending, or, to the knowledge of the Company,
threatened, any proceedings which could result in the termination, revocation,
limitation or impairment of any License or Permit. The Company and its
subsidiaries have all licenses, permits, certificates, approvals, franchises,
registrations, accreditations and other authorizations as are necessary or
appropriate in order to enable them to own and conduct the Business as it is
presently conducted and to own, occupy and lease their real property and no
third party has asserted that others are required. All Licenses and Permits
will continue to be in full force and effect after the consummation of the
transactions contemplated hereby. Except as disclosed in Section 5.24, no
violations have been recorded in respect of any Licenses and Permits, and there
is no meritorious basis therefor.
S. MATERIAL CONTRACTS. Schedule 5.19 sets forth an accurate, correct and
complete list of all instruments, commitments, agreements, arrangements and
understandings to which the Company or any subsidiary is a party or bound, or by
which any of their assets are subject or bound, or pursuant to which the Company
or any subsidiary is a beneficiary, meeting any of the descriptions set forth
below (the "MATERIAL CONTRACTS"):
1. Real Estate Leases, Insurance, licenses of Intellectual
Property, Technical Information, Employment Contracts, Benefit Plans
and Licenses and Permits;
2. any contract for capital expenditures or for the purchase of
goods or services in excess of $50,000;
3. any purchase order, agreement or commitment obligating the
Company or any subsidiary to sell or deliver any product or service at
a price which does not cover the cost (including labor, materials and
production overhead) plus the customary profit margin associated with
such product or service;
4. any financing agreement or other agreement for borrowing
money, any instrument evidencing indebtedness, any liability for
borrowed money, any obligation for the deferred purchase price of
property in excess of $50,000 (excluding normal trade payables), or
any instrument guaranteeing any indebtedness, obligation or liability;
5. any joint venture, partnership, cooperative arrangement or
any other agreement involving a sharing of profits;
6. any contract with any government or any agency or
instrumentality thereof;
7. any contract with respect to the discharge, storage or
removal of effluent, waste or pollutants;
8. any distribution, license or royalty agreement;
9. any power of attorney, proxy or similar instrument;
10. any contract for the purchase or sale of any assets of the
Company or any subsidiary (whether or not completed) other than in the
ordinary course of business or granting an option or preferential
rights to purchase or sell any assets;
11. any contract to indemnify any party or to share in or
contribute to the liability of any party;
12. any contract containing covenants not to compete in any line
of business or with any person in any geographical area;
13. any contract relating to the acquisition of a business or
the equity of any other person (whether or not completed);
14. any contract relating to the purchase or sale of a portion
of its requirements or output;
15. any other contract, commitment, agreement, arrangement or
understanding related to the Business (other than those excluded by an
express exception from the descriptions set forth in the subsections
above) which provides for payment or performance by either party
thereto having an aggregate value of $50,000 or more (unless
terminable without payment or penalty on sixty (60) days (or less)
notice); and
16. any proposed arrangement of a type that if entered into
would be a Material Contract.
Accurate, correct and complete copies of each Material Contract have been
delivered to the Buyer. Each Material Contract is in full force and effect and
is valid, binding and enforceable in accordance with its terms. Each party has
complied with all material commitments and obligations on its part to be
performed or observed under each Material Contract. No event has occurred which
is or, after the giving of notice or passage of time, or both, would constitute
a default under or a breach of any Material Contract by the Company or any
subsidiary, or, to the knowledge of the Company, by any other party. The
Company has not received or given notice of an intention to cancel or terminate
a Material Contract or to exercise or not exercise options or rights under a
Material Contract. Neither the Company nor any subsidiary has received any
notice of a default, offset or counterclaim under any Material Contract, or any
other communication calling upon the Company or any subsidiary to comply with
any provision of any Material Contract or ascertaining noncompliance. The
consummation of the transactions contemplated hereby, without notice to or
consent or approval of any party, will not constitute a default under or a
breach of any provision of a Material Contract following the Closing, and the
Company will have and may enjoy and enforce all rights and benefits under each
Material Contract in the same manner as if the transactions contemplated hereby
were not consummated. Except as set forth on Schedule 5.19, there is no
security interest, lien, encumbrance or claim of any kind on the Company's or
any subsidiary's interest under any Material Contract. Except with respect to
environmental matters, the Company does not have any other undischarged
obligations, liabilities or commitments nor is it subject to any pending claim
under the Asset Purchase Agreement Relating to the Assets of Southeastern
Galvanizing by and between Industrial Galvanizers America, Inc. ("PURCHASER")
and Reeves Southeastern Corporation ("SELLER") dated March 1, 1996, the
Environmental Indemnification Agreement by and between Purchaser and Seller
dated March 1, 1996, the $3.0 million Promissory Note from Purchaser to Seller
dated March 1, 1996 (the "DELTA NOTE") and any and all ancillary agreements and
instruments related thereto (collectively, the "GALVANIZING AGREEMENT").
T. TAXES.
1. FILINGS. The Company, each subsidiary and any partnership or trust in
which any such corporation directly or indirectly owns an interest
(collectively, the "TAXPAYERS") have filed, all returns, declarations and
reports and all information returns and statements (collectively, "RETURNS")
required to be filed or sent with respect to all foreign, federal, state,
county, local and other taxes of every kind and however measured, including
income, gross receipts, excise, franchise, property, value added, import duties,
employment, social security, medicare, payroll, sales and use taxes and any
additions to tax and any interest or penalties thereon (collectively, "TAXES")
for any period ending on or before the Closing Date. As of the time of filing,
the Returns correctly reflected the income, business, assets, operations,
activities and status of the relevant Taxpayers and any other information
required to be shown thereon. Each Taxpayer has timely paid or if payment is
not yet due, has made provision for all Taxes shown as due and payable on its
Returns required to be filed or sent prior to the date hereof and will timely
pay all Taxes that will be shown as due and payable on its Returns required to
be filed or sent after the date hereof. All required Tax estimates, deposits,
prepayments and similar reports or payments for current periods have been
properly made. No Taxpayer is delinquent in the filing of any Return or the
payment of any Tax or has requested any extension of time within which to file
any Return. The Company has delivered to Buyer accurate, correct and complete
copies of all federal and state income tax Returns for the last five (5) fiscal
years.
2. COMPLIANCE. The Company and each subsidiary have obtained all
appropriate sales Tax exemption certificates for all sales made without charging
or remitting a sales Tax. Each Taxpayer has withheld amounts from employees and
others working in the Business, as required under applicable Law, and has filed
all Returns with respect to employee income Tax withholding and social security
and unemployment Taxes in compliance with the tax withholding provisions of the
Code and other applicable foreign, Federal, state or local Laws.
3. DISPUTES. There are no Tax liens on any assets of any Taxpayer and no
basis exists for the imposition of any such liens. No adjustment of or
deficiency for any Tax or claim for additional Taxes has been proposed,
threatened, asserted or assessed against any Taxpayer or any member of any
affiliated or combined group of which any Taxpayer is or was a member for which
the Company or any subsidiary could be liable. No Taxpayer has any dispute with
any taxing authority as to Taxes of any nature. There are no audit examinations
being conducted or threatened, and there is no deficiency or refund litigation
or controversy in progress or threatened, with respect to any Taxes previously
paid by any Taxpayer or with respect to any Returns previously filed by or on
behalf of any Taxpayer. No Taxpayer has any extension or waiver of any statute
of limitations relating to the assessment or collection of Taxes. There are in
effect no powers of attorney or other authorizations to any persons to represent
any Taxpayer with respect to any Tax. No consent, agreement or other
undertaking has been filed by any Taxpayer to have the provisions of Section
341(f) of the Code apply. The Company and the subsidiaries have not been
included in any unitized, affiliated, combined or otherwise consolidated Returns
filed by any Taxpayer.
4. ADEQUACY OF RESERVES. The Company's balance sheet for the year ended
October 30, 1997, contains adequate accruals for all Taxes for all periods
ending on or prior to such date.
U. PRODUCT WARRANTY. All products manufactured, processed, distributed,
shipped or sold by the Company and its subsidiaries and any services rendered by
them have been in conformity in all material respects with all applicable
contractual commitments, all expressed or implied warranties and all Laws. To
the Company's knowledge, no liability exists or will arise for repair,
replacement or damage in connection with such sales or deliveries, in excess of
the reserve therefor reflected in the Financial Statements. Schedule 5.21 sets
forth an accurate, correct and complete statement of all written warranties,
warranty policies, service and maintenance agreements of the Business. No
products heretofore manufactured, processed, distributed, sold, delivered or
leased by the Company or any subsidiary are now subject to any guarantee,
warranty, claim for product liability, or patent or other indemnity, other than
those set forth in Schedule 5.21. The product warranty and return experience
for the three years ended October 30, 1997 and the interim period through the
date hereof is set forth in Schedule 5.21. The product warranty reserves on
Financial Statements were prepared in accordance with GAAP and are adequate in
light of the circumstances of which the Company and the Stockholders are now
aware.
V. PRODUCT LIABILITY. Schedule 5.22 sets forth an accurate, correct and
complete list and summary description of all existing claims, duties,
responsibilities, liabilities or obligations arising from or alleged to arise
from any injury to person or property or economic damage as a result of the
ownership, possession or use of any product manufactured or sold by the Company
or a subsidiary prior to the Closing Date. Except as set forth in Schedule
5.22, to the knowledge of the Company, neither the Company nor any subsidiary
will be subject to any claim, expense, liability or obligation arising from any
injury to person or property or economic damage as a result of ownership,
possession or use of any product manufactured, processed, distributed, shipped
or sold by the Company or a subsidiary prior to the Closing Date. All such
claims are adequately covered by product liability insurance in the amount of
$20.0 million or otherwise accrued for in the Financial Statements. To the
knowledge of the Company, no circumstances exist involving the safety aspects of
the Business' products which would cause any obligation to report to any
Federal, state or local agency.
W. LEGAL PROCEEDINGS. Except as set forth in Schedule 5.23, neither the
Company nor any subsidiary is engaged in or a party to or threatened with any
action, suit, proceeding, complaint, charge, hearing, investigation or
arbitration or other method of settling disputes or disagreements; and neither
the Company nor the Stockholders knows, anticipates or has notice of any
reasonable basis for any such action. Neither the Company nor any subsidiary
has received notice of any investigation threatened or contemplated by any
foreign, Federal, state or local governmental or regulatory authority, including
those involving the safety of products, the working conditions of employees, the
employment practices or policies of the Company and its subsidiaries, or
compliance with environmental regulations. Except as set forth in Schedule
5.23, neither the Company, nor any subsidiary nor any of their assets is subject
to any judgment, order, writ, injunction, stipulation or decree of any court or
any governmental agency or any arbitrator.
X. ENVIRONMENTAL MATTERS. 1. For purposes of this Agreement (including
Section 12.3), the following terms shall have the following meanings:
"ENVIRONMENTAL LAWS" (A) means all Laws relating to (i) pollution or the
protection of the environment (including air, surface water, ground water, soil,
land surface or subsurface strata), (ii) public or employee health or safety, or
(iii) disposal, storage, treatment, emissions, discharges, spills, releases or
threatened releases of Materials of Environmental Concern, or otherwise relating
to the manufacture, processing, distribution, use, import, export, treatment,
storage, disposal, transport or handling of Materials of Environmental Concern,
and (B) shall include the Resource Conservation and Recovery Act, as amended
("RCRA"); the Comprehensive Environmental Response Compensation and Liability
Act, as amended ("CERCLA"); the Clean Water Act, as amended; the Clean Air Act,
as amended; the Safe Drinking Water Act, as amended; the Toxic Substances
Control Act, as amended; the Emergency Planning and Community Right-to-Know Act;
the Hazardous Materials Transportation Act, as amended; the Occupational Safety
and Health Act of 1970, as amended; and all implementing Laws and all similar
state and local Laws, with respect to each of the foregoing acts.
"ENVIRONMENTAL LOSSES, LIABILITIES AND OBLIGATIONS" means with respect to,
related to or arising from, directly or indirectly, any action, omission, event,
release, occurrence or condition that took place or was in existence on or prior
to the Closing Date, (a) any and all Losses, Liabilities and Obligations that
actually arise out of, result from or relate to or are alleged by a third party
to arise out of, result from or relate to any of the following: (i) any actual
or alleged violation of one or more Environmental Laws, (ii) any actual or
alleged requirements of one or more Environmental Laws, or (iii) any Materials
of Environmental Concern; (b) Remediation Costs; and (c) Tort Claims.
"LOSSES, LIABILITIES AND OBLIGATIONS" means any and all losses, costs
(including allocable costs of employees), damages, expenses, suits, actions,
claims, liabilities and obligations, including investigatory costs, court costs,
settlement costs, judgments, attorneys' fees and expenses, cleanup costs,
preventative costs, containment costs, monitoring costs, corrective actions,
remedial measures, remedial costs, compliance costs, response costs, natural
resource damages, property damages, personal injuries, permit costs and fees,
penalties, fines and interest, and includes Remediation Costs and Tort Claims.
"MATERIALS OF ENVIRONMENTAL CONCERN" means any and all hazardous chemicals
and materials, and any and all hazardous substances as defined in CERCLA,
hazardous wastes as defined in RCRA, petroleum and petroleum products,
radioactive materials, and any and all chemicals, constituents, pollutants,
contaminants or other substances regulated under any Environmental Laws or which
may pose a present or potential hazard to health or the environment and any
actual, potential or threatened emissions, discharges, releases or other
emanations thereof.
"REMEDIATION ACTIONS" means any and all actions to clean up, contain or
otherwise ameliorate a condition on or emanating from property either (i) being
alleged by or under any Environmental Law, or (ii) being alleged by any court or
governmental agency or entity pursuant to any Environmental Law.
"REMEDIATION COSTS" means Losses, Liabilities and Obligations related to,
caused by or arising from a Remediation Action.
"TORT CLAIMS" means any and all personal injury, property damage and other
claims, including judgments and settlements resulting therefrom, by one or more
third parties that actually are alleged by a third party to arise out of, or
result from or relate to any of the following: (i) any actual or alleged
violation of one or more Environmental Laws, (ii) any actual or alleged
requirements of one or more Environmental Laws, or (iii) any Materials of
Environmental Concern.
2. Except as set forth in Schedule 5.24(b), the ownership, use and
operation by the Company and its subsidiaries of the Business, all prior
businesses and of each facility now or previously used in the Business or prior
businesses or otherwise now or previously owned or leased by the Company or any
subsidiary has been and, with respect to the Business and the facilities used in
the Business at Closing, on the Closing Date will be and, to the knowledge of
the Company, all ownership, use and operation of each such facility by any other
person has been, in compliance with all Environmental Laws. Except as set forth
in Schedule 5.24(b), neither the Company nor its subsidiaries have received any
notice alleging any actual or potential non-compliance with or actual or
potential liability or responsibility pursuant to any Environmental Laws.
Except as set forth on Schedule 5.24(b), no action, suit, proceeding,
investigation, complaint or charge exists for violation of Environmental Laws,
there is no meritorious basis therefor and neither the Company nor the
Stockholders has any reason to believe that any action, suit, proceeding,
investigation, complaint or charge relating to Environmental Laws could be
asserted.
3. Schedule 5.24(c) contains a list of all Permits from all governmental
authorities which the Company and its subsidiaries are currently required to
obtain or which are known by the Company to be required in the future in
connection with environmental matters or the Real Estate indicating, in each
case, the governmental authority responsible therefor. For purposes of this
Section 5.24, the Real Estate includes the surface and subsurface, including all
subsurface waters and any land, air or water to which waste or process
emissions, discharges or deposition may occur. Such Permits constitute all
Permits which the Company or any subsidiary is currently required to obtain by
applicable Law and, except as set forth in Schedule 5.24(c), all such Permits
have been obtained and complied with.
4. Except as set forth on Schedule 5.24(d), neither the Company nor any
subsidiary has any unmet duty, responsibility, liability or obligation under any
Environmental Laws, including any duty, responsibility, liability or obligation
for fines or penalties, or for investigation, expense or Remediation Actions,
and no such claims, actions, suits, proceedings or investigations under such
Laws exist or are threatened. Except as set forth on Schedule 5.24(d), there
has not been, and is not occurring, at any facility owned or operated or
previously owned or operated by the Company or any subsidiary, any emission,
discharge or release or threatened release of any Materials of Environmental
Concern. Except as set forth on Schedule 5.24(d), neither the Company nor any
subsidiary has applied or disposed of any Materials of Environmental Concern, in
any manner which may form the basis for any present or future claim, demand or
action.
5. Except as set forth on Schedule 5.24(e), neither the Company nor any
subsidiary has sent, arranged for disposal or treatment, arranged with a
transporter for transport for disposal or treatment, transported, or accepted
for transport any substances, to a facility, site or location, which, pursuant
to "CERCLA" or any similar state or local Law, (a) has been placed or is
proposed to be placed, on the National Priorities List or its state equivalent,
or (b) is subject to a claim, administrative order or other request with respect
to a Remedial Action. Except as set forth on Schedule 5.24(e), neither the
Company nor any subsidiary stores, generates or produces any Materials of
Environmental Concern; provided, however, that for purposes of this subsection
and subsection 5.24(f) "MATERIALS OF ENVIRONMENTAL CONCERN" shall not include
materials of the types and amounts stored, used or generated, treated and
disposed of in the normal course of the Company's production, operation and
maintenance activities in compliance with all Laws. Except as set forth on
Schedule 5.24(e), there has not been any contamination of groundwaters, surface
waters, soils or sediments, as a result of the manufacture, storage, processing,
loss, leak, escape, spillage, disposal or other handling or disposition by or on
behalf of the Company or any subsidiary of any product or substance on or prior
to the Closing Date.
6. Except as identified in Schedule 5.24(f), there are no Materials of
Environmental Concern, tanks, containers, cylinders, drums or cans buried,
stored or deposited in or on any property currently or formerly owned or
operated by the Company or its subsidiaries. Except as set forth on Schedule
5.24(f), there has not been located on or disposed of on any facility owned or
operated by the Company or its subsidiaries during any period of such ownership
or operations, or, to the knowledge of the Company, at any other time: (a) any
asbestos; any material, equipment or structure constructed of or containing any
asbestos; or any product or item made in whole or in part of asbestos, (b) any
polychlorinated biphenyl; any compound or material containing any
polychlorinated biphenyl; or any equipment, article or item using, containing,
or made up in whole or in part of any polychlorinated biphenyl, or (c) any lead,
pentachlorophenol or other chemical that may pose a hazard or toxic risk to
persons or the environment. Except as set forth in Schedule 5.24(f), all
underground storage tanks at the Company's facilities were removed in accordance
with all Laws.
7. Except with respect to work related to the CERCLA response actions
undertaken by the Company in compliance with Laws, Schedule 5.24(g) sets forth
an accurate, correct and complete list of all environmental audits,
environmental assessments and occupational health studies undertaken by or on
behalf of the Company, its subsidiaries, the Stockholders or governmental
agencies, as well as plans with respect to Remediation Actions and violation
notices, with respect to the Company, its subsidiaries or the Business, assets,
employees, facilities or properties, the results of groundwater and soil
testing, underground storage tank tests, soil samples, and a description of all
written communications with federal, state or local governments on environmental
and OSHA matters relating to the Company, any subsidiary or the Business or
activities or conditions of environmental concern on the Real Estate.
8. Schedule 5.24(h) identifies all estimates possessed or identified by
the Company, its subsidiaries or the Stockholders of the cost of compliance by
the Company and its subsidiaries with existing requirements of, or pursuant to
any Environmental Law.
9. The Company acknowledges that the representations and warranties
contained in this Section 5.24 apply (except that with respect to Section
5.24(c) which only applies to Permits currently required and Section 5.24(h)
which only applies to the most recent cost estimates), (i) not only to the
present activities and locations of the Company and its subsidiaries, but all
prior activities and locations as well and (ii) to all predecessor and other
entities with respect to which the Company and its subsidiaries have
responsibility.
Y. ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent reflected on
the balance sheet for the year ended October 30, 1997 or arising in the ordinary
course after such date, neither the Company nor the subsidiaries has any
indebtedness, duty, responsibility, liability or obligation of any nature,
whether absolute, accrued, contingent or otherwise, or knows of a reasonable
basis therefor.
Z. COMPLIANCE WITH LAW. The Company and each subsidiary conform in all
material respects to all applicable Laws. The Company and each subsidiary have
complied in all material respects with all licensing requirements, decrees,
awards, orders or the like applicable to their business or operations; and there
is not and will not be any liability arising from or related to any violations
thereof existing on or prior to Closing. To the knowledge of the Company, there
is no proposed or pending change in any Law which would adversely affect the
Business. No notice from any governmental body or other person of any violation
of any Law or requiring or calling attention to the necessity of any repairs,
installation or alteration in connection with the Business has been served, and
neither the Company nor the Stockholders knows of any basis therefor. Neither
the Company nor any subsidiary, including any officer, agent or employee of the
Company or any subsidiary, nor, to the knowledge of the Company, any other
person acting on behalf of the Company or any subsidiary, (a) has made any
unlawful domestic or foreign political contributions, (b) has made any payment
or provided services which were not legal to make or provide or which the
Company or such subsidiary or any such officer, employee or other person should
have known were not legal for the payee or the recipient of such services to
receive, (c) has received any payments, services or gratuities which were not
legal to receive or which the Company or such subsidiary or such person should
have known were not legal for the payor or the provider to make or provide, (d)
has had any transactions or payments which are not recorded in its accounting
books and records or disclosed in its financial statements, (e) has had any off-
book bank or cash accounts or "SLUSH FUNDS", (f) has made any payments to
governmental officials in their individual capacities for the purpose of
affecting their action or the action of the government they represent to obtain
special concessions, or (g) has made payments or expenditures to obtain or
retain business or obtain favorable treatment from vendors, other than the
customary business entertainment.
AA. BROKERS. Neither the Company nor any Stockholder has retained any
broker, finder or agent or incurred any liability or obligation for any
brokerage fees, commissions or finders fees with respect to this Agreement or
the transactions contemplated hereby.
AB. DISCLOSURE. Neither this Agreement nor any attachment, schedule,
exhibit, certificate or other statement delivered pursuant to this Agreement or
in connection with the transactions contemplated hereby omits to state a
material fact necessary in order to make the statements and information
contained herein or therein, in light of the circumstances in which they were
made, not misleading. Neither the Company nor any Stockholder is aware of any
information necessary to enable a prospective purchaser of the Stock to make an
informed decision with respect to the purchase of the Stock which has not been
expressly disclosed herein. Buyer has been provided full and complete copies of
all documents referred to on the Schedules to this Agreement.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF
BUYER AND DIAMOND
Each of Buyer and Diamond, jointly and severally, hereby represents and
warrants to the Stockholders as of the date hereof, and as of the Closing Date,
as follows:
A. AUTHORITY. Each of Buyer and Diamond has full right, power and
authority, without the consent of any other person, to execute and deliver this
Agreement and to carry out the transactions contemplated hereby. All corporate
and other acts or proceedings required to be taken by Buyer and Diamond to
authorize the execution, delivery and performance of this Agreement, the
documents to be delivered at Closing and all transactions contemplated hereby
and thereby have been duly and properly taken.
B. VALIDITY. This Agreement has been, and the documents to be delivered
at Closing will be, duly executed and delivered by Buyer and Diamond and
constitute lawful, valid and legally binding obligations of Buyer and Diamond,
enforceable in accordance with its terms. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
result in the creation of any lien, charge or encumbrance or the acceleration of
any indebtedness or other obligation of Buyer and Diamond and are not prohibited
by, do not violate or conflict with any provision of, and do not result in a
default under or a breach of (a) the charter or by-laws of Buyer or Diamond, (b)
any contract, agreement, permit, license or other instrument to which Buyer or
Diamond is a party or by which it is bound (other than those to be waived prior
to Closing), (c) any order, writ, injunction, decree or judgment of any court or
governmental agency, or (d) any Law applicable to Buyer or Diamond. No
approval, authorization, consent or other order or action of or filing with any
court, administrative agency or other governmental authority is required for the
execution and delivery by Buyer and Diamond of this Agreement or the
consummation by Buyer and Diamond of the transactions contemplated hereby,
except for filings required under the HSR Act.
C. DUE ORGANIZATION. Each of Buyer and Diamond is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full power and authority and all requisite licenses, permits and
franchises to own, lease and operate their assets and to carry on the business
in which they are engaged. Buyer is duly licensed and qualified to do business
as a foreign corporation and is in good standing in all jurisdictions where
failure to be so licensed or qualified would have a material adverse effect upon
its business or assets.
D. BROKERS. Neither Buyer nor Diamond has retained any broker or finder
or incurred any liability or obligation for any brokerage fees, commissions or
finders fees with respect to this Agreement or the transactions contemplated
hereby.
E. INVESTMENT EXPERIENCE AND ACQUISITION OF STOCK FOR INVESTMENT. Each of
Buyer and Diamond is an "ACCREDITED INVESTOR" within the meaning of the
applicable federal securities laws, having such knowledge and experience in
matters relating to investments (and in particular to investments in the
business in which the Company is engaged) as not to require the type of investor
protection that registration of the Stock with the Securities and Exchange
Commission or the Department of Banking and Finance of the State of Florida
would provide. Each of Buyer and Diamond understands that the Stock has not
been, and will not be, registered under the Securities Act, or under any state
securities laws, and is being offered and sold in reliance upon federal and
state exemptions for transactions not involving a public offering. Buyer is
acquiring the Stock for investment and not with a view toward any distribution
thereof, and will dispose of such Stock only in compliance with the Securities
Act of 1933, as amended, and any applicable state securities laws.
F. REPORTS AND FINANCIAL STATEMENTS. (a) From January 1, 1997 to the date
hereof, except where failure to have done so did not and would not have a
material adverse effect on Diamond, Diamond has filed all reports, together with
any required amendments thereto, that it was required to file with the
Securities and Exchange Commission (the "SEC"), including, but not limited to,
Forms 10-K, Forms 10-Q and Forms 8-K (collectively, the "DIAMOND REPORTS"). As
of their respective dates (but taking into account any amendments filed prior to
the date of this Agreement), the Diamond Reports complied in all material
respects with all the rules and regulations promulgated by the SEC and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
G. LITIGATION. Neither the Buyer nor Diamond is a party to and to the
best of their knowledge, are not threatened with any material suit, action,
arbitration, administrative or other proceeding which, if decided adversely to
the Buyer or Diamond, as the case may be, would have a material adverse effect
upon their ability to consummate the transactions contemplated by this
Agreement.
ARTICLE VII.
PRE-CLOSING COVENANTS
A. INTERIM CONDUCT OF BUSINESS. From the date hereof until the Closing,
the Stockholders shall cause the Company to preserve, protect and maintain the
Business and the Stockholders shall cause the Company to operate the Business
consistent with prior practice and in the ordinary course of business. Without
limiting the generality of the foregoing, from the date hereof until the
Closing, except for transactions expressly approved in writing by Buyer, the
Stockholders shall cause the Company and each subsidiary to, with respect to the
Business:
1. maintain inventories in the ordinary course of business,
except for sales in the ordinary course of business, and maintain the
properties of the Business in good repair, order and condition,
reasonable wear and tear excepted;
2. maintain and keep in full force and effect all insurance on
assets and property or for the benefit of employees of the Business,
all liability and other casualty insurance, and all bonds on
personnel, presently carried;
3. not declare, set aside or pay any dividend or make any other
distribution with respect to the capital stock of the Company or a
subsidiary;
4. not redeem or otherwise acquire any capital stock of the
Company other than repurchases pursuant to the ESOP as a result of the
exercise by ESOP participants of certain put rights; provided,
however, Buyer is given prior written notice at least 10 days before
any repurchase;
5. not amend or otherwise change its articles of incorporation
or by-laws of the Company or of a subsidiary;
6. not make any loans to third parties;
7. not merge or consolidate with or agree to merge or
consolidate with, nor purchase or agree to purchase all or
substantially all of the assets of, nor otherwise acquire, any
corporation, partnership, or other business organization or division
thereof;
8. not sell, lease or otherwise dispose of or agree to sell,
lease or otherwise dispose of, any of its assets, properties, rights
or claims, except for inventory sold in the ordinary course of
business and as listed on Schedule 7.1;
9. not authorize for issuance, issue, sell or deliver any
additional shares of its capital stock of any class or any securities
or obligations convertible into shares of its capital stock of any
class or issue or grant any option, warrant or other right to purchase
any shares of its capital stock of any class;
10. preserve intact the organization and reputation of the
Business and to keep available the services of the present executives,
employees and agents of the Business and to preserve the good will of
suppliers, customers and others having business relationships with the
Business;
11. maintain its books, accounts and records in the usual,
regular and ordinary manner on a basis consistent with prior years;
12. not enter into, amend or terminate any employment, bonus,
severance or retirement contract or arrangement, nor, without the
prior written consent of Buyer, which consent will not be unreasonably
withheld, increase any salary or other form of compensation payable or
to become payable to any executives or employees of the Business;
13. not enter into, amend or terminate, or agree to enter into,
amend or terminate, any Material Contract;
14. not purchase any real property;
15. not open or close any bank account, safe deposit box, lock box or
change the persons authorized to draw thereon or obtain access thereto;
16. except as set forth on Schedule 7.1, not make capital
expenditures other than in the ordinary course and consistent with the
Company's existing capital budget; or
17. except as set forth on Schedule 7.1, not incur or become
subject to, nor agree to incur or become subject to, any debt,
obligation or liability, contingent or otherwise, except current
liabilities and contractual obligations in the ordinary course of
business.
From the date hereof through the Closing, the Company shall confer on a regular
and frequent basis with one or more designated representatives of Buyer to
report material operational matters and the general status of on-going
operations of the Business. The Company and the Stockholders shall promptly
notify Buyer of (i) any material change in the financial condition, results of
operations, properties, business or prospects of the Business or (ii) any
material deviation in the Company's fiscal 1998 budget previously provided to
Buyer, and shall keep Buyer fully informed of such events and permit Buyer's
representatives to participate in all discussions relating thereto.
B. ACCESS. From the date hereof through the Closing Date, the Company and
the Stockholders shall cause the Company, upon reasonable notice, to give Buyer
and its representatives full and free access to all properties, facilities,
personnel, books, contracts, leases, commitments and records, and during this
period the Stockholders shall cause the Company to furnish Buyer with all
financial and operating data and other information as to the Company and its
assets, properties, rights and claims, as Buyer may from time to time request.
The Company, its subsidiaries and Stockholders shall cooperate fully with Buyer
and its representatives in Buyer's investigation of the Company, its
subsidiaries and the Business, including environmental conditions and
liabilities of the Company, its subsidiaries and the Business.
C. REAL ESTATE MATTERS.
1. Not less than thirty (30) days prior to Closing, the Stockholders shall
obtain and deliver to Buyer, commitments (the "COMMITMENTS") issued by Lawyers
Title Insurance Corporation, Chicago Title Insurance Company or other nationally
recognized title company reasonably acceptable to Buyer and its lenders (the
"TITLE COMPANY") and dated after the date hereof for the issuance of ALTA Owners
Policies of Title Insurance Form B-1970, if available, (collectively, the "TITLE
POLICY") with respect to the parcels of Owned Real Estate listed on Schedule
7.3(a) in the aggregate amount equal to the book value of the Owned Real Estate
on the Financial Statements, together with copies of underlying title documents
referred to in the Commitments. The Commitments shall show fee simple title to
the Owned Real Estate in the Company, subject only to current real estate taxes
and assessments not yet due and payable as of the Closing Date, liens and
encumbrances reflected in Schedule 7.3(a) hereto, and such other covenants,
conditions, easements and exceptions to title that do not render title
unmarketable or impair the use of the insured parcel for the Business as
currently conducted thereon, as reasonably determined by Buyer and its lenders
(collectively, the "PERMITTED EXCEPTIONS"). The Commitments shall contain an
ALTA Zoning 3.1. and non-imputation endorsements and such other endorsements as
Buyer may reasonably request, to the extent permitted by law. The Stockholders
shall cause the Commitments to be later-dated to cover the Closing and to cause
Title Company to deliver either the Pro Forma Title Policy or the Commitment
marked up to delete the "gap" exception and to otherwise meet the requirements
set forth herein at Closing as directed by Buyer. The Stockholders shall be
responsible for the cost of all title insurance charges, premiums and
endorsements, title abstracts and attorneys' opinions, including all search,
continuation, later date fees and survey costs in excess of $35,000.
2. Within fifteen (15) days of receipt of each of the Commitments and the
underlying title documents referred to in the Commitments, Buyer shall notify
the Stockholders in writing of any matters of title as set forth in the
Commitments (other than the "gap exception" and the Standard Exceptions to be
deleted at Closing as provided hereinafter), that Buyer or its lenders
reasonably deem unacceptable. Failure to notify Company within the aforesaid
time period shall be considered a waiver by Buyer of any such title objections
as to such parcel, and such matters shall be deemed "Permitted Exceptions." The
Company shall have a period of up to thirty (30) days after notification of the
defect by Buyer within which to attempt to cure any defect in title to the
satisfaction of Buyer, and the Closing shall accordingly be postponed. If the
Company fails to satisfy the objections within the afore-described thirty (30)
day period, Buyer may, as its sole options, either (i) accept title subject to
the objections raised by Buyer, without an adjustment in the purchase price as
set forth in Article II, in which event the objections shall be deemed to be
"Permitted Exceptions" or (ii) terminate this Agreement. At Closing, funds
shall be disbursed in accordance with Section 627.7841, Florida Statutes, and
the Company shall furnish the Title Company with an affidavit pertaining to
construction liens and parties in possession and sufficient to delete the "gap
exception" and the Standard Exceptions relating to unfiled claims of liens and
parties in possession, and the Company shall further furnish the Title Company
with a Survey of the insured property, as required in Section 7.3(b), to modify
the general "matters of survey" Standard Exception to an exception to the
matters shown on the furnished Survey. Buyer's obligations hereunder are
conditioned upon Buyer's receipt, at Closing, of the Commitments marked-up to
reflect compliance with all requirements set forth in Schedule B, Section 1 and
subject only to the "Permitted Exceptions."
3. Not less than thirty (30) days prior to Closing, the Stockholders shall
obtain and provide to Buyer, Title Company and Buyer's lenders an as-built plat
of survey of each parcel of the Owned Real Estate listed on Schedule 7.3 (the
"SURVEYS") prepared by a registered land surveyor or engineer, licensed in the
respective states in which the Real Estate is located, dated on or after the
date hereof, certified to Buyer and Title Company conforming (i) as to the Owned
Real Estate located in Florida to the current Florida Minimum Technical
Standards for Surveyors in accordance with Chapter 61G17-6, Florida
Administrative Code; and (ii) as to the Owned Real Estate located outside of
Florida, to current ALTA/ACSM Minimum Detail Requirements for Land Title
Surveys, sufficient to cause Title Company to delete the standard printed survey
exception. Subject to the last sentence of Section 7.3(a), the Stockholders
shall pay the entire cost of obtaining the Surveys. Any Survey may be a
recertification of a prior survey, provided that it meets the above-described
criteria and is recertified in favor of Buyer and such other entities as Buyer
may designate in writing to the Stockholders prior to Closing. Each Survey
shall demonstrate that the improvements located on the surveyed land do not
encroach onto adjoining land or onto any easements, building lines or set-back
requirements, and that there are no encroachments by improvements from adjoining
land onto the surveyed land or onto any easements for the benefit of the
surveyed land. Each Survey shall show all visible conditions as then existing,
including the location of all visible pipes, wires and conduits serving the
Owned Real Estate and their connections to public ways, parking areas
denominated as such, loading docks and other improvements and the access to and
from the improvements on the Real Estate. In the event that any of the Surveys
shows any encroachments of any improvements upon, from, or onto the Owned Real
Estate, or shows any evidence of use which indicates that an unrecorded easement
may exist except as may be disclosed by the Permitted Exceptions or otherwise
acceptable to Buyer, in Buyer's sole discretion, Buyer shall deliver written
notice to that effect to the Company upon fifteen (15) days following delivery
of each of the Surveys, the Company shall have the same option to cure and
curative period with respect to objections to the Survey as is described in
Section 7.3(a) above. If Buyer fails to deliver written notice to the Company
of any survey defects within such survey review period, Buyer shall be deemed to
have waived any Survey defects.
4. The Stockholders shall have delivered to Buyer an estoppel certificate,
in form and substance reasonably satisfactory to Buyer and its counsel, executed
by each lessor of a Real Estate Lease listed on Schedule 3.2.
D. COVENANTS NOT TO COMPETE OR SOLICIT.
1. For a period five years from the Closing Date, each Stockholder agrees
not to, directly or indirectly, by or for himself, through entities, or as the
employee or agent of another or through others as his agent:
a. produce, promote, sell, lease, license, distribute, install
or service anywhere in the United States, Canada, South America,
Central America, Puerto Rico and Asia (the "TERRITORY") products or
services in existence or under development, which are similar to or in
competition with those of the Company, any subsidiary, Diamond or any
of their affiliates as such products and services exist or are in the
process of development as of the Closing Date;
b. own, manage, operate, be compensated by, participate in,
render advice to, have any right to or interest in any other business
directly or indirectly engaged in the production, promotion, sale,
lease, license, distribution or servicing of products or services
competitive with those of the Company, any subsidiary, Diamond or any
of their affiliates as such products and services exist or are in the
process of development as of the Closing Date anywhere in the
Territory;
c. purchase, produce, distribute or install fencing and fencing
related products for resale;
d. divulge, communicate, use or disclose any nonpublic
information concerning the Company, any subsidiary, the Buyer or any
of their affiliates, their personnel, business and affairs;
e. interfere with the business relationships or disparage the
good name or reputation of the Company, any subsidiary, the Buyer,
Diamond or any of their affiliates or take any action which brings the
Company, any subsidiary, the Buyer, Diamond or any of their affiliates
or its business into public ridicule or disrepute; or
f. solicit for employment or employ any present or future
employee of the Company, any subsidiary, the Buyer, Diamond or any of
their affiliates, or request, induce or advise any employee to leave
the employ of the Company, any subsidiary, the Buyer, Diamond or any
of their affiliates.
The ownership of less than five percent of a publicly traded corporation shall
not in and of itself be deemed to be a violation of this covenant.
Notwithstanding the foregoing, in the event this Agreement is terminated
pursuant to Article IX hereof, Section 7.4(a)(vi) shall survive for a period of
one year from the termination date of this Agreement.
2. If any Stockholder violates the provisions of this Section, Buyer shall
not, as a result of the time involved in obtaining relief, be deprived of the
benefit of the full period of the restrictive covenant with respect to that
particular Stockholder. Accordingly, the restrictive covenant of this Section
as it applies to a particular Stockholder shall be deemed to have the duration
specified in Subsections 7.4(a) hereof, computed from the date the relief is
granted, but reduced by the time between the period when the restriction began
to run and the date of the first violation of the covenant by such Stockholder.
3. Each Stockholder agrees that, if he shall violate any of the provisions
of this Section, Buyer shall be entitled to an accounting and repayment of all
profits, compensation, commission, remuneration or other benefits that such
Stockholder, directly or indirectly, may realize arising from or related to any
such violation. These remedies shall be in addition to, and not in limitation
of, any injunctive relief or other rights to which the Buyer or the Company may
be entitled.
4. The parties agree and acknowledge that the duration, scope and
geographic areas applicable to the covenant not to compete described in this
Section are fair, reasonable and necessary, that adequate compensation has been
received by each Stockholder for such obligations, and that these obligations do
not prevent any Stockholder from earning a livelihood. If, however, for any
reason any court determines that the restrictions in this Section are not
reasonable, that consideration is inadequate or that a Stockholder has been
prevented from earning a livelihood and therefore the restrictions are
unenforceable, such restrictions shall be interpreted, modified or rewritten to
include as much of the duration, scope and geographic area identified in this
Section as will render such restrictions valid and enforceable.
5. Each Stockholder acknowledges that he has carefully read and considered
the terms of this Agreement. Each Stockholder hereby waives any requirement of
proof that such breach will cause serious or irreparable injury to the Buyer or
the Company, or that there is an adequate remedy at law. In any proceeding,
either at law or in equity, between the parties hereto, each Stockholder hereby
agrees that he shall not raise as a defense (i) that the duration, scope or
geographical area in which the Stockholder is prohibited from competition is
unfair, unnecessary or unreasonable, (ii) that this Agreement is in restraint of
trade, (iii) lack of irreparable injury to Buyer or the Company, or (iv) lack of
any protectable business interest of the Buyer or the Company. Further, the
existence of any claim or cause of action of the Stockholder against the Buyer
and the Company or any of their affiliates, whether or not predicated on the
terms of this Agreement, shall not constitute a defense to the enforcement of
the Stockholder's obligations under this Agreement. The Stockholders shall pay
or reimburse the Buyer for all costs and expenses, including court costs,
amounts paid in settlement, judgments, reasonable attorneys', legal assistants',
and experts' fees incurred or paid by the Buyer and/or the Company in protecting
or enforcing its rights and remedies hereunder.
E. NOTICES AND CONSENTS. The Stockholders will cause the Company to give
any notices to third parties, and the Company will obtain any third party
consents, that Buyer may request in connection with the matters referred to in
Section 4.2 and Schedule 4.2 above. Each of the parties will give any notices
to, make any filings with, and use its best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Section 4.2 and Schedule 4.2
above. Without limiting the generality of the foregoing, as promptly as
possible but in any event not later than fifteen (15) business days after the
execution of this Agreement, each of the parties will file any Notification and
Report Forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the HSR Act. The Stockholders will use their best
efforts to obtain an early termination of the applicable waiting period, if
requested by Buyer, and will make any further filings pursuant thereto that may
be necessary, proper, or advisable in connection therewith.
F. WAIVER OF RECOURSE. The Stockholders undertake (if any claim is made
against him in connection with the sale of the Stock to Buyer) not to make any
claim against the Company or any past or present director or employee of the
Company on whom Stockholders may have relied before agreeing to any of the terms
of this Agreement.
G. NOTICE OF DEVELOPMENTS. Each party will give prompt written notice to
the other party of any breach of any of its own representations and warranties
in Article IV, Article V and Article VI above. No disclosure by any party
pursuant to this Section 7.7, however, shall be deemed to amend or supplement
the Schedules or to prevent or cure any misrepresentation, breach of warranty,
or breach of covenant.
H. EXCLUSIVITY. Until the Closing or the termination of this Agreement
pursuant to the provisions of Article X, the Stockholders and the Company will
not (and will not permit the Company's directors, officers, employees, or agents
to) directly or indirectly, through any representative or otherwise, (a)
solicit, initiate, or in any manner encourage, accept or consider any proposal
or offer from any person relating to the acquisition of the Stock, any capital
stock of the Company, or any of the Company's assets or the Business, in whole
or in part, whether through direct purchase, merger, consolidation, share
exchange or other structure (other than sales of inventory in the ordinary
course of business), or (b) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any person to do or seek
any of the foregoing. The Company and the Stockholders will notify Buyer
immediately if any person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing and shall inform Buyer of the identity of such
person and the terms of any such proposal, offer or inquiry.
I. CONFIDENTIALITY; PUBLICITY. Except as may be required by law, as
expressly contemplated herein or as expressly consented to by Buyer, no party
hereto or their respective Affiliates, employees, agents and representatives
(including the Company) shall disclose to any third party this Agreement, the
subject matter or terms hereof or any confidential information or other
proprietary knowledge concerning the business or affairs of any other party
which it may have acquired from such party in the course of pursuing the
transactions contemplated by this Agreement or use or knowingly permit the use
of such confidential information or other proprietary knowledge for any purpose
other than in connection with the transactions contemplated hereby without the
prior consent of the other parties hereto; provided, that any information that
is otherwise publicly available, without breach of this provision, or has been
obtained from a third party without a breach of such third party's duties, shall
not be deemed confidential information. No press release or other public
announcement related to this Agreement or the transactions contemplated hereby
shall be issued by the Company, the Stockholders, Buyer or Diamond without the
prior written approval of the other parties hereto (which approval shall not be
unreasonably withheld or delayed); provided, however, that this provision shall
not prohibit Buyer or Diamond from making any public disclosure which Diamond's
counsel advises is required under rules and regulations promulgated by the
Securities and Exchange Commission.
J. APPOINTMENT OF STOCKHOLDERS' AGENT. Each Stockholder hereby appoints
Miles Lenhart (the "STOCKHOLDERS' AGENT") the attorney-in-fact of such person,
with full power and authority, including power of substitution, acting in the
name of and for and on behalf of such person to amend or waive any provision of
this Agreement (including all attachments hereto) and to take all other action
under or related to this Agreement (including the Escrow Agreement), which in
their discretion, they may consider necessary or proper to effectuate the
transactions contemplated hereunder or thereunder and to resolve any dispute
with the Buyer over any aspect of this Agreement or any matter contemplated
hereby and on behalf of such person to enter into any agreement to effectuate
any of the foregoing which shall have the effect of binding such person as if
such person had personally entered into such an agreement. This appointment and
power of attorney shall be deemed as coupled with an interest and all authority
conferred hereby shall be irrevocable and shall not (to the extent permitted by
applicable law) be subject to termination by operation of law, whether by the
death, incapacity, liquidation, dissolution or bankruptcy of any Stockholder, or
the occurrence of any other event or events and shall bind all successors. The
Stockholders' Agent may not terminate this power of attorney with respect to any
Stockholder, or such person's successors or assigns without the consent of
Buyer. Each Stockholder agrees to hold the Stockholders' Agent harmless from
any and all loss, damage or liability and expenses (including legal fees) which
such person may sustain as a result of any action taken in good faith by the
Stockholders' Agent. In the event of the death or legal incapacity of Miles
Lenhart, then Billy Sasser, without further action, shall become Stockholders'
Agent with all of the powers conferred hereby.
SECTION K. JURISDICTION; CONSENT TO SERVICE OF PROCESS; REMEDIES. 1. Each
of the Stockholders hereby irrevocably and unconditionally submits, for itself
and its properties, to the exclusive jurisdiction of any Federal court of the
United States of America sitting in the City of Tampa, Florida (or if federal
subject matter jurisdiction does not exist, then a state court in the City of
Tampa, Florida) and any appellate court from any such court, in any suit, action
or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby, 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 suit, action or proceeding may be heard and
determined in such court. Each party agrees that a final judgment in any such
suit, action or proceeding shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment or in any other manner provided by law.
2. Each of the Stockholders hereby irrevocably and unconditionally
waives, to the fullest extent permitted by law, any objection which 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 the transactions contemplated
hereby in any Federal court sitting in the City of Tampa, Florida. Each of the
Stockholders hereby irrevocably waives, to the fullest extent permitted by law,
the defense of an inconvenient forum to the maintenance of such suit, action or
proceeding in any such court and further waives the right to object, with
respect to such suit, action or proceeding, that such court does not have
jurisdiction over such party.
3. No Stockholder may move to (i) transfer any such suit, action or
proceeding from such court to another jurisdiction, (ii) consolidate any such
suit, action or proceeding brought in such court with a suit, action or
proceeding in another jurisdiction, or (iii) dismiss any such suit, action or
proceeding brought in such court or court for the purpose of bringing the same
in another jurisdiction.
4. Each Stockholder irrevocably consents to service of process by
personal delivery or by registered or certified mail, return receipt requested,
in the manner otherwise provided for notices in Section 13.2. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION L. INTERIM FINANCIAL STATEMENTS. Prior to the Closing Date, the
Stockholders shall cause the Company to deliver to Buyer monthly financial
statements within ten (10) days of the end of each month (the "MONTHLY FINANCIAL
STATEMENTS").
SECTION M. COOPERATION. Each of the Stockholders agrees to cooperate and
assist Buyer in connection with the resolution of all claims and disputes
pending at Closing or that arise after Closing but relate to the period prior to
Closing. The Stockholders shall use their best efforts to provide all
reasonable non-monetary assistance necessary to obtain a fairness opinion
satisfactory to Buyer, the Company and the ESOP Trustee as set forth in
Section 9.4.
ARTICLE VIII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
Each and all of the obligations of Buyer to consummate the transactions
contemplated by this Agreement are subject to fulfillment prior to or at the
Closing of the following conditions:
A. ACCURACY OF WARRANTIES AND PERFORMANCE OF COVENANTS. The
representations and warranties of the Stockholders contained herein shall be
accurate as if made on and as of the Closing Date. The Company and the
Stockholders shall have performed all of the obligations and complied with each
and all of the covenants, agreements and conditions required to be performed or
complied with on or prior to the Closing.
B. NO PENDING ACTION. No action, suit, proceeding or investigation before
any court, administrative agency or other governmental authority shall be
pending or threatened wherein an unfavorable judgment, decree or order would
prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated hereby,
cause such transactions to be rescinded, or which might affect the right of
Buyer to own, operate, control or benefit from the Stock or the Business.
C. CONSENTS. All consents by third parties that are required for the
consummation of the transactions contemplated hereby, or that are required in
order to prevent a breach of or a default under or a termination of any Material
Contract, shall have been obtained or provided for.
D. REGULATORY APPROVALS. All regulatory agencies shall have taken such
action as may be required to permit the consummation of the transactions
contemplated hereby and such actions shall remain in full force and effect and
shall be reasonably satisfactory in form and substance to Buyer and its counsel.
E. CONDITION OF BUSINESS AND ASSETS. The Business and the assets of the
Company and its subsidiaries shall not have been materially adversely affected
in any way by any act of God, fire, flood, accident, war, labor disturbance,
legislation (proposed or enacted), or other event or occurrence, whether or not
covered by insurance, and there shall have been no change in the assets or the
Business, its financial condition or prospects, which would have a material
adverse effect thereon.
F. FINANCING. Buyer, after exerting reasonable commercial efforts to
obtain the same, shall have procured adequate financing, upon terms satisfactory
to Buyer, to permit Buyer to purchase the Stock. The Company shall have in
place on or prior to the Closing Date, a working capital line of credit in an
amount which is appropriate given the contemplated growth, including
acquisitions, and the nature and size of the Company and its subsidiaries, on
such terms as are acceptable to Buyer.
G. ENVIRONMENTAL MATTERS. Buyer shall be satisfied, in its sole
discretion, with the results of its investigation of the environmental
conditions and related liabilities of the Company, its subsidiaries and the
Business, including Phase 1, Phase 2 and other investigations as Buyer deems
necessary or appropriate.
H. ESOP CONDITIONS. Prior to the Closing Date, the Company shall take all
necessary action to freeze the ESOP except as may be required to allocate all
proceeds received by the ESOP and the payment by the ESOP of the expenses of the
ESOP hereunder. Upon Closing, the ESOP shall pay from the proceeds hereof all
amounts then owing to NationsBank under that certain Note dated February 21,
1995 and obtain the release of the liens related thereto.
I. FAIRNESS OPINION. The ESOP Trustee shall have received an opinion of
an independent appraisal firm, reasonably satisfactory to Buyer, the Company and
the ESOP Trustee, to the effect that the sale of stock described in Section 1.1
is fair to the ESOP and that the ESOP will receive adequate consideration.
J. SATISFACTION OF COUNSEL. All corporate and other actions and
proceedings in connection with the transactions contemplated hereby, all
resolutions, documents and instruments incidental thereto, and all other related
legal matters, shall be reasonably satisfactory in form and substance to counsel
for Buyer, and Buyer shall have received all such resolutions, documents and
instruments, or copies thereof, certified if requested, as its counsel shall
have requested.
ARTICLE IX.
CONDITIONS PRECEDENT TO
OBLIGATIONS OF THE STOCKHOLDERS AND THE ESOP TRUSTEE
Each and all of the obligations of the Stockholders and the ESOP Trustee to
consummate the transactions contemplated by this Agreement are subject to
fulfillment prior to or at the Closing of the following conditions:
A. ACCURACY OF WARRANTIES AND PERFORMANCE OF COVENANTS. The
representations and warranties of Buyer contained herein shall be accurate as if
made on and as of the Closing Date. Buyer shall have performed all of the
obligations and complied with each and all of the covenants, agreements and
conditions required to be performed or complied with on or prior to the Closing.
B. NO PENDING ACTION. No action, suit, proceeding or investigation before
any court, administrative agency or other governmental authority shall be
pending or threatened wherein an unfavorable judgment, decree or order would
prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated hereby or
cause such transactions to be rescinded.
C. REGULATORY APPROVALS. All regulatory agencies shall have taken such
action as may be required to permit the consummation of the transactions
contemplated hereby and such actions shall remain in full force and effect and
shall be reasonably satisfactory in form and substance to the Stockholders and
its counsel.
D. FAIRNESS OPINION. The ESOP Trustee shall have received an opinion of
an independent appraisal firm, reasonably satisfactory to Buyer, the Company and
the ESOP Trustee, to the effect that the sale of stock described in Section 1.1
is fair to the ESOP and that the ESOP will receive adequate consideration.
E. SATISFACTION OF COUNSEL. All corporate and other actions and
proceedings in connection with the transactions contemplated hereby, all
resolutions, documents and instruments incidental thereto, and all other related
legal matters, shall be reasonably satisfactory in form and substance to counsel
for the Company and the Stockholders and the counsel for the ESOP Trustee, and
the Company and the Stockholders and the ESOP Trustee shall have received all
such resolutions, documents and instruments, or copies thereof, certified if
requested, as its respective counsel shall have requested.
ARTICLE X.
TERMINATION BY THE PARTIES
A. TERMINATION. 1. Without prejudice to other remedies which may be
available to the parties by law or under this Agreement, this Agreement may be
terminated:
a. by mutual consent of the parties hereto;
b. by any party hereto by giving written notice of such
termination on the Closing Date to the other party (the "NOTIFIED
PARTY") if, as of the Closing Date, any condition precedent to the
performance of the obligations of the party giving such notice shall
not have been satisfied and shall not have been waived by such party;
c. by any party by notice to the other party if the Closing
shall not have been consummated on or before the 30th day following
the date all of the conditions of Buyer or the Stockholders and the
ESOP Trustee set forth in Articles VIII and IX, respectively, are
satisfied, unless extended by written agreement of the parties hereto,
so long as the party terminating this Agreement shall not be in
default hereunder; or
d. by any party by notice to the others if the Closing has not
been consummated on or before October 30, 1998.
2. In the event of termination of this Agreement under this Section prior
to Closing, there shall be no further liability hereunder on the part of any
party hereto, provided that termination of this Agreement shall not be deemed to
release any party hereto from any liability or damage to the others arising out
of the breaching party's breach of the representations or warranties contained
herein or its failure in performing any of its covenants or agreements contained
herein. This Section 10.1, as well as Sections 7.4(a)(vi) (but only with
respect to one (1) year from the termination date of this Agreement), 7.9, 11.3
and 13.3 shall survive termination of this Agreement.
B. SPECIFIC PERFORMANCE. Notwithstanding anything in this Agreement to
the contrary, if, on the Closing Date, Buyer (a) has complied with all of the
conditions to Closing contained in Article IX and all conditions contained in
Article IX have been satisfied, (b) has notified the Company, the Stockholders
and the ESOP Trustee of its intention to consummate the transactions
contemplated under this Agreement, and (c) is ready and able to pay the purchase
price for the Stock and furnishes evidence to that effect to the Stockholders
and the ESOP Trustee, and if the Closing does not then occur due to the refusal
of any Stockholder or the ESOP Trustee to so consummate the transactions
contemplated under this Agreement, Buyer will be entitled to specifically
enforce the terms of this Agreement in a court of competent jurisdiction, it
being acknowledged that monetary damages due Buyer in such case cannot be
adequately determined at law.
ARTICLE XI.
ADDITIONAL COVENANTS
A. CONTINUED ASSISTANCE. Following the Closing, the Stockholders shall
refer to Buyer as promptly as practicable any telephone calls, letters, orders,
notices, requests, inquiries and other communications relating to the Business.
B. TAXES. The Stockholders shall promptly pay and fully discharge any
income, excise, or other taxes imposed as a result of the sale, transfer,
conveyance or assignment of the Stock pursuant to the transactions contemplated
hereby, which could result in liability to the Company or Buyer.
C. CONFIDENTIALITY. After the Closing, except as may be required for tax
purposes or other regulatory purposes, the Stockholders and their Affiliates and
respective successors and assigns shall not (a) retain any document, databases
or other media embodying any confidential or proprietary information which
constitutes a part of the assets of the Company or use, publish or disclose to
any third person any such confidential or proprietary information or (b) use,
publish or disclose any information concerning Buyer, its affiliates, the
Company or any subsidiary, the Business, the customers or suppliers of the
Business or the terms of this Agreement or the transactions contemplated hereby.
D. POST-CLOSING ENVIRONMENTAL MATTERS. Neither the Buyer nor any Buyer
Affiliate shall intentionally take any action which causes any Stockholder to
incur, directly or indirectly, any Losses, Liabilities and Obligations (other
than pursuant to this Agreement) that actually arise out of, result from or
relate to or are alleged by a third party to arise out of, result from or relate
to any of the following: (i) any actual or alleged violation of one or more
Environmental Laws; (ii) any actual or alleged requirements of one or more
Environmental Laws; (iii) any Materials of Environmental Concern; (iv)
Remediation Costs; (v) Tort Claims; or (vi) the Consent Decree (as hereinafter
defined) (the "ENVIRONMENTAL MATTERS"). The foregoing shall not apply to any
action, omission, event, release, occurrence or condition that took place or was
in existence prior to the Closing Date.
E. SUBSEQUENT TRANSACTIONS. Subsequent to Closing, Buyer and Diamond
shall require the Company and all Buyer Affiliates to comply with all terms and
conditions of this Agreement that affect, directly or indirectly, the rights and
obligations of the Stockholders hereunder. Subject to the following sentence,
neither Buyer nor Diamond shall convey nor permit the Company or any Buyer
Affiliate to convey to any third party any controlling interest in the stock of
the Company or in the Owned Real Estate listed on Schedule 11.5 without first
requesting that such third party buyer agree in writing, and further agree to
seek to require its successors, assigns, purchasers and transferees to agree in
writing not to pursue the Stockholders individually with respect to
environmental matters. In the event the agreement of a third party buyer is not
requested or not obtained, Buyer shall indemnify and hold harmless the
Stockholders from any Loss (as hereinafter defined) asserted by a third party
buyer and related to, resulting from or arising out of any environmental matter
on the condition that (i) Buyer has the right to control the defense of any such
matter, including the right to appoint counsel, and control the settlement or
other disposition of such matter and (ii) Buyer's obligation to indemnify under
this Section 11.5 shall not apply with respect to any environmental matter to
the extent the Stockholders would be obligated under Article XII to indemnify
Buyer or any Buyer Affiliate and/or reimburse Buyer or any Buyer Affiliate with
respect to Excess Environmental Costs, as to that matter.
F. ESOP FIDUCIARY MATTERS. (a) Following the Closing, the plan
administrator of the ESOP, subject to applicable federal requirements, shall
allocate the remaining proceeds hereof and any other earnings or unallocated
amounts among the accounts of ESOP participants in accordance with the terms of
the ESOP as it may be amended; provided, however, that such amendment shall (i)
provide for such allocation in accordance with current published authority of
the Internal Revenue Service (including Private Letter Rulings and Technical
Advice Memorandum) for the allocation of such proceeds or shall be specifically
approved by the Internal Revenue Service (including through a favorable
determination letter) and (ii) provide that there shall be no reversion to the
employer from the ESOP. In the event such allocation cannot be accomplished
during the Plan Year (as defined in the ESOP) during which the Closing occurs,
the ESOP shall be continued for the sole purpose of allocating such unallocated
amounts.
(b) Neither the Buyer nor Diamond has any present intention to take any
action, and the Buyer and Diamond shall take no action within one year following
the Closing Date, which, independently or when combined with the Closing, would
constitute a corporate merger or consolidation, recapitalization,
reclassification, liquidation, dissolution, sale of substantially all assets of
a trade or business, or similar transaction subject to Internal Revenue Code
Section 409(e)(3) which would result in any obligation of the ESOP Trustee to
pass through voting rights with respect to the approval or disapproval of such
transaction to the participants and beneficiaries in the ESOP.
(c) In the event Buyer or Diamond breaches of covenants provided in this
Section 11.6, the ESOP Trustee's sole recourse shall be as provided in 12.13.
ARTICLE XII.
SURVIVAL AND INDEMNIFICATION
A. SURVIVAL. All covenants and agreements contained in this Agreement or
in any document delivered pursuant hereto shall be deemed to be material and to
have been relied upon by the parties hereto and shall survive the Closing until
fully performed. All representations and warranties contained in this Agreement
or in any document delivered pursuant hereto or thereto shall be deemed to be
material and to have been relied upon by the parties hereto, and shall survive
the Closing and shall continue to be fully effective and enforceable for a
period of two (2) years from the Closing Date; provided, however, that any
representations and warranties set forth in Sections 5.18 and 5.19 as they
relate to a specific License, Permit or Material Contract shall survive for the
lesser of four (4) years from the Closing Date or 30 days after the expiration
or termination of the License, Permit or Material Contract (but in no event less
than two (2) years from the Closing Date), Section 5.20 shall survive for 90
days after the applicable statute of limitations period set forth in the Code or
other applicable Laws, Section 5.22 shall survive for the lesser of four (4)
years from the Closing Date or 30 days after the applicable statute of
limitations period pursuant to applicable Laws (but in no event less than two
(2) years from the Closing Date), Sections 5.1, 5.17 and 5.26 shall survive for
a period of four (4) years from the Closing Date, the representations and
warranties set forth in Sections 4.1, 4.2, 4.3, 5.2 and 5.3 shall survive
indefinitely and the representations and warranties contained in Section 5.24
shall survive until the Environmental Termination Date (as defined in Section
12.3(g) hereof). Notwithstanding the foregoing, any claim for indemnification
that is asserted by written notice within the applicable survival period shall
survive until resolved and discharged by the parties or pursuant to a final non-
appealable judicial determination. The representations and warranties contained
in this Agreement are absolute and unconditional and shall not be affected by
any investigation, verification or examination by any party hereto or by anyone
on behalf of any such party.
B. INDEMNIFICATION FOR LOSS. Subject to Section 12.4, the Stockholders,
jointly and severally, on the one hand, and Buyer, on the other hand, shall
indemnify and hold harmless the other from and against any and all loss, damage,
cost (including allocable costs of employees), expense (including court costs,
amounts paid in settlement, judgments, reasonable attorneys', legal assistants',
and experts' fees and other expenses for investigating and defending), suit,
action, claim, deficiency, liability or obligation (collectively, "LOSS")
related to, caused by or arising from any misrepresentation, breach of warranty
or failure to fulfill any covenant or agreement contained herein or in any other
agreement, instrument or other document delivered pursuant hereto, and any and
all third party claims made based upon facts alleged that, if true, would have
constituted any such misrepresentation, breach or failure, together with
interest at seven (7) percent per annum from the date of payment of the Loss to
the date of payment of the indemnification amount. Except for and with respect
to the rights conferred under Sections 11.5, 12.2 and 12.12, each Stockholder
hereby waives any right to indemnification, contribution or any other similar
right it may have against the Company or any Buyer Affiliate (as hereinafter
defined), including as a result of agreeing to indemnify Buyer as set forth in
this Article XII. All indemnification obligations shall be deemed made in favor
of and shall include Losses incurred by, any party's officers, directors,
agents, representatives, subsidiaries, parents, affiliates, successors and
assigns.
C. EXCESS ENVIRONMENTAL COSTS. Subject to the limitations contained in
Section 12.4, the Stockholders, jointly and severally, shall indemnify and hold
harmless the Buyer from and against all Excess Environmental Costs (as
hereinafter defined).
1. For purposes of this Agreement, "EXCESS ENVIRONMENTAL COSTS" shall mean
the aggregate of any and all of the following incurred and demonstrated to exist
by a Buyer Affiliate to the extent said aggregate amount is in excess of the
Reserve Amount, and that the following items (i) through (vi) listed below,
arise out of, result from or relate to or are alleged by a third party to arise
out of, result from or relate to any action, omission, event, release,
occurrence or condition that took place or was in existence on or prior to
Closing:
a. Losses, Liabilities and Obligations with respect to, directly
or indirectly, environmental matters related to, caused by or arising
from the Galvanizing Agreement;
b. all Environmental Losses, Liabilities and Obligations;
c. all Remediation Costs;
d. all Tort Claims;
e. all Losses, Liabilities and Obligations related to, caused by
or arising from the Consent Decree (as hereinafter defined); and
f. all Losses related to, caused by or arising from the breach
of the representations and warranties contained in Section 5.24 to the
extent not included in 12.3(a)(i) through (v) above;
provided, that such above amounts shall be computed net of:
(x) any net realized tax benefits resulting therefrom
after taking into account any income tax or other adverse
tax effects of any indemnification amounts received by Buyer
hereunder;
(y) any insurance proceeds from a third party insurer
received by Buyer resulting therefrom (after associated
costs of collection), after reduction for (i) any
retroactive premium adjustment and (ii) the aggregate amount
of the reasonably anticipated (based on written advice from
insurance brokers or providers) increased insurance premiums
over the following five policy years attributable to such
event or claim; and
(z) any other proceeds or payments from third parties
(after associated costs of collection) received by the
Company in connection with matters giving rise to the claim
for Excess Environmental Costs.
2. "BUYER AFFILIATE" shall mean the Buyer, Diamond, the Company, a
subsidiary, a parent or any affiliate of any of the forgoing. For purposes of
this Section 12.3, "AFFILIATe" shall mean any entity which controls, or is
controlled by, or is under common control with any of the entities described in
the preceding sentence.
3. "CONSENT DECREE" means the Consent Decree entered by the United States
District Court for the Middle District of Florida (Tampa Division) in United
States v. Reeves Southeastern Corp., No. 94-1752 (civ) on July 17, 1995, and all
subsequent additions and amendments thereto relating to conditions existing at
the Closing Date.
4. "DELTA NOTE" is defined in Section 5.19.
5. "RESERVE AMOUNT" means (i) $650,000 plus (ii) the cash proceeds
received by the Company pursuant to the Delta Note after the date hereof, less
(iii) any expenditures by the Company or a subsidiary after October 30, 1997 and
through the Closing that either (A) in accordance with historical practice of
the Company, would have been charged against the balance sheet reserve, or (B)
are within the definition of Excess Environmental Costs, without giving effect
to the concept of the Reserve Amount.
6. This provision shall apply equally with respect to the Real Estate (as
defined in Section 5.11) as well as facilities previously, but not currently
employed in the Company's or a subsidiary's activities.
7. Subject to the limitations contained in Section 12.4, the
indemnification obligations with respect to Excess Environmental Costs contained
in this Section 12.3 are absolute and unconditional and shall remain in full
force and effect until the Environmental Termination Date. Thereafter,
Stockholders' indemnification obligations shall survive only with respect to
pending claims or any remaining "KNOWN ENVIRONMENTAL CONDITIONS" (as hereinafter
defined) until such are resolved or satisfied. The "ENVIRONMENTAL TERMINATION
DATE" shall be the seventh anniversary of the Closing. Any payments to a Buyer
Affiliate pursuant to this Section shall be accompanied by interest at the rate
of seven (7) percent per annum from the date of payment of such loss to the date
of payment by the Stockholders pursuant to this Article XII.
8. Except for and with respect to the rights conferred under Sections
11.5, 12.2 and 12.12 below, the Stockholders hereby waive any common law,
statutory or other right of indemnification or contribution from the Company or
any other Buyer Affiliate.
D. LIMITATION OF STOCKHOLDERS' INDEMNIFICATION OBLIGATION. 1. Subject to
subsection (c) below, Buyer's exclusive remedy for breach of representation or
warranty and/or reimbursement of Excess Environmental Costs shall be to collect
amounts from the Escrow Fund created pursuant to the Escrow Agreement, it being
the intention hereof that, except as set forth in subsection (c) below, the
Stockholders shall not be obligated to indemnify the Buyer or any other Buyer
Affiliate for, and shall have no liability for breach of representation or
warranty or for reimbursement of Excess Environmental Costs under this
Agreement, except through the forfeiture of their rights with respect to amounts
paid or to be paid into the Escrow Fund.
2. Subject to subsection (c) below, the Stockholders shall not be liable
and Buyer agrees not to enforce any claims for indemnification for breach of
representation or warranty under this Agreement until the aggregate amount of
all such claims (excluding claims for Excess Environmental Costs) exceeds
$250,000 (the "THRESHOLD AMOUNT"), and then Buyer shall be entitled to recover
only the amount of such claims in excess of the Threshold Amount. The Threshold
Amount shall not apply to the recovery by Buyer of Excess Environmental Costs.
3. Notwithstanding anything contained herein to the contrary, the
limitation of remedies contained in subsection (a) above shall not be applicable
to claims of Buyer related to, caused by or arising from a Disqualifying Event
and the Threshold Amount shall not apply to a Disqualifying Event described in
Section 12.4(d)(i) or (ii). In no event, however, shall the Stockholders'
aggregate liability (other than for breaches of covenants or agreements) under
this Agreement exceed the total amount of the Purchase Price paid or to be paid
to the Stockholders hereunder.
4. "DISQUALIFYING EVENT" shall mean any of the following:
a. intentional misrepresentation or reckless disregard
on the part of a Stockholder;
b. breach by a Stockholder of Sections 4.1, 4.2, 4.3,
5.2 or 5.3; and
c. breach by a Stockholder of any representation or
warranty (other than those contained in Section 5.24 hereof
or any other representation or warranty to the extent
pertaining to environmental conditions (whether known or
unknown)), which, when aggregated with claims arising out of
breaches of the same representation or warranty, has
resulted in a Loss in excess of One Million Dollars
($1,000,000).
E. RELEASE OF ESCROW FUND. 1. As provided in the Escrow Agreement,
earnings with respect to the Escrow Fund shall be distributed to the
Stockholders on a quarterly basis.
2. On the Environmental Termination Date, and at certain times thereafter,
portions of the Escrow Fund shall be released to the Stockholders subject to the
terms and conditions hereafter set forth.
3. Schedule 12.5 sets forth certain environmental matters (the "KNOWN
ENVIRONMENTAL CONDITIONS"), the actions presently contemplated to be taken with
respect to each such condition, the approvals and conditions to be received or
satisfied in order to release portions of the Escrow Fund assigned to each such
condition (the "SATISFACTION CONDITION") and the specific amount of any
remaining portion of the Escrow Fund assigned to each such condition.
4. On the Environmental Termination Date, the "Distributable Portion"
shall be distributed to the Stockholders. The DISTRIBUTABLE PORTION shall mean
(i) the Escrow Fund as it exists on such date, less (ii) the amount(s)
designated on Schedule 12.5 with respect to each Known Environmental Condition
as to which the associated Satisfaction Condition has not been completed,
subject to adjustment as hereinafter provided, (the "ENVIRONMENTAL HOLDBACK"),
less (iii) the aggregate of all other claims arising under Article XII which are
pending but not yet resolved (the "OTHER CLAIMS"). The amount of any
Environmental Holdback calculated under this Agreement shall be reduced by the
amount of any Excess Environmental Costs previously paid from the Escrow Fund
with respect to the Known Environmental Condition related to such Environmental
Holdback; provided, however, that in the event the Excess Environmental Costs
for any Known Environmental Condition exceed or are reasonably expected to
exceed the amount of any Environmental Holdback with respect to such Known
Environmental Condition, as adjusted as provided in this sentence (the
"DEFICIENCY"), the non-allocated portion of the Escrow Fund as set forth on
Schedule 12.5, to the extent of the Deficiency, shall be added to the
Environmental Holdback related to the Known Environmental Conditions and
retained and held in the Escrow Fund to fund the Deficiency, if any.
5. On each date after the Environmental Termination Date that a
Satisfaction Condition has been completed or an Other Claim has been resolved,
after payment to Buyer or a Buyer Affiliate of any amounts from the Escrow Fund
in connection therewith, the following amount shall be distributed to the
Stockholders: (i) the Escrow Fund as it exists on such date, less (ii) the
Environmental Holdback as it exists on such date, less (iii) the Other Claims as
they exist on such date.
F. ENVIRONMENTAL CONSULTATION. Buyer and Stockholders' Agent shall use
their reasonable efforts to confer on all matters that may relate in any way to:
(i) all Environmental Losses, Liabilities and Obligations, including, those
related to, caused by or arising from the Galvanizing Agreement or Known
Environmental Conditions; (ii) all Remediation Costs; (iii) all Tort Claims;
(iv) all Losses, Liabilities and Obligations related to, caused by or arising
from the Consent Decree; and (v) all Losses related to, caused by or arising
from any actual or alleged breach of the representations and warranties
contained in Section 5.24 relating to environmental matters. Buyer will
exercise reasonable business judgment to minimize (consistent with terms of the
Consent Decree and all Environmental Laws) any Excess Environmental Costs. If
the Stockholders' Agent disagrees with Buyer's activities in connection
therewith, Buyer agrees to cooperate in a non-binding mediation process
reasonably acceptable to the parties, with the costs of such process being
allocated equitably by the mediator.
G. PROCEDURES FOR INDEMNIFICATION . 1. The procedures specified herein
and Section 12.8 shall apply to any claims of third parties asserted in a
governmental or judicial forum for which a party intends to seek indemnification
hereunder, other than Excess Environmental Costs which shall be dealt with as
provided in Sections 12.3, 12.4, 12.5 and 12.6 (a "THIRD-PARTY CLAIM"). The
claiming party is referred to hereinafter as the "INDEMNIFIED PARTY" and the
other party is referred to hereinafter as the "INDEMNIFYING PARTY."
2. In the event of a Third-Party Claim, the Indemnified Party shall notify
the Indemnifying Party in writing promptly after the Indemnified Party has
actual knowledge of such claims and the acts constituting the basis for such
claim or threatened claim (the "NOTICE OF CLAIM"); provided, however, that the
omission so to notify the Indemnifying Party shall not relieve the Indemnifying
Party from any liability which the Indemnifying Party may have to the
Indemnified Party except to the extent that the Indemnifying Party is materially
prejudiced as a proximate result of the failure to give such notice promptly.
The Notice of Claim shall contain a summary of all material facts known to the
Indemnified Party giving rise to such indemnification claim and the amount or an
estimate of the amount of the liability arising therefrom if reasonably known.
3. The parties to this Agreement shall cooperate reasonably as necessary
or appropriate to facilitate the defense of any third party claim or litigation
subject hereto, including the provision of access to the counsel, accountants
and other representatives of each party during normal business hours and access
to all properties, personnel, and non-privileged books, tax records, contracts,
commitments and other business records of such other party. The parties will
furnish copies of all such documents as may reasonably be requested (certified,
if requested). The party seeking cooperation and access shall reimburse the
other party for all reasonable costs and expenses incurred by such party in
providing cooperation and access, unless the party providing such cooperation
and access is the Indemnifying Party.
4. If the Indemnifying Party fails to fulfill its obligations under this
Article XII, the Indemnified Party, in addition to any and all other remedies
available to it, may assume its own defense without forfeiting any rights or
remedies it has under this Agreement.
H. DEFENSE AGAINST ASSERTED CLAIMS. 1. The Indemnified Party shall not
settle or compromise any Third Party Claim for which the Indemnified Party is
entitled to indemnification hereunder without the prior written consent of the
Indemnifying Party, unless legal action shall have been instituted against the
Indemnified Party and the Indemnifying Party shall not have taken control of
such suit in the manner provided herein within twenty (20) days after
notification thereof as provided herein, or such lesser period as is required
for submission of a pleading or other filing.
2. In connection with any Third-Party Claim, the Indemnifying Party, at
its sole cost and expense, may, upon written notice to the Indemnified Party,
assume the defense of any such claim on the condition that (i) such claim
involves only money damages and does not seek injunctive or other equitable
relief; (ii) an adverse result in connection with such Third-Party Claim could
not reasonably be expected to have a material adverse effect on the Indemnified
Party or the Business, notwithstanding the discharge of the money damages by the
Indemnifying Party; (iii) the Indemnifying Party confirms in writing its
obligation to indemnify and hold harmless Buyer without regard to any limitation
provided for in this Article; and (iv) the Indemnifying Party segregates in a
manner reasonably satisfactory to Buyer funds reasonably anticipated to fund any
such defense, judgment and settlement. For purposes hereof (other than with
respect to Disqualifying Events), the presence of funds in the Escrow Fund shall
constitute a satisfactory segregation of funds. If the Indemnifying Party
assumes the defense of any such claim, the Indemnifying Party shall select
counsel, reasonably satisfactory to the Indemnified Party, to conduct the
defense of such claims and at its sole cost and expense shall take all steps
necessary to conduct a competent and diligent defense or settlement thereof.
3. The Indemnifying Party shall not consent to a settlement of, or the
entry of any judgment arising from, any Third-Party Claim, without the prior
written consent of the Indemnified Party, unless the Indemnifying Party,
concurrently with such settlement, pays into the court the full amount of such
settlement or judgment (which payment, other than with respect to Disqualifying
Events, may be made from proceeds in the Escrow Fund in instances in which the
Stockholders are the Indemnifying Party) and, if such settlement or judgment
would not impose or affect ongoing obligations of the Indemnified Party and
could not reasonably be expected to have a material adverse effect on the
Indemnified Party or the Business. The Indemnified Party shall be entitled to
participate in the defense of any such action with its own counsel and at its
own expense. If the Indemnifying Party assumes the defense of the Third-Party
Claim in accordance with the terms hereof, the Indemnified Party shall have the
right to control the defense of the claim at such time as it notifies the
Indemnifying Party that it is assuming the defense of such claim at its own
expense and that the Indemnifying Party is relieved of its obligations to the
Indemnified Party hereunder with respect to such claim.
4. If the Indemnifying Party does not assume the defense of any such claim
resulting therefrom in accordance with the terms hereof, the Indemnified Party
may defend such claim in such a manner as it may deem appropriate, including
settling such claim after giving notice of the same to the Indemnifying Party on
such terms as the Indemnified Party may deem appropriate. In any claim or
action by the Indemnified Party seeking indemnification from the Indemnifying
Party in accordance with the provisions of this Section, if the Indemnified
Party complied in all material respects with the provision of Section 12.7 and
12.8, the Indemnifying Party shall not be entitled to question the manner in
which the Indemnified Party defended such claim or the amount or nature of any
such settlement.
I. AMOUNT OF LOSS. The amount of Loss to be paid by the Indemnifying
Party to the Indemnified Party shall be net of
(i) any net realized tax benefits resulting therefrom after
taking into account any income tax or other adverse tax effects of any
indemnification amounts received by Buyer hereunder;
(ii) any insurance proceeds from a third party insurer received
by Buyer resulting therefrom (after associated costs of collection),
after reduction for (x) any retroactive premium adjustment, and (y)
the aggregate amount of the reasonably anticipated (based on written
advice from insurance brokers or providers) increased insurance
premiums over the following five policy years; and
(iii) any other proceeds or payments from third parties (after
associated costs of collection) received by the Company in connection
with the matter giving rise to the claim.
In all situations in which the Stockholders are the Indemnifying Party, the
amount of Losses paid shall be deemed for all purposes to be an adjustment to
the Purchase Price. The parties agree to treat the payment of Losses as such
for all purposes, including the determination and reporting of any federal or
state income tax liability of the parties, and to file all tax returns
(including amended returns and claims for refund) and other reporting in a
manner consistent with such treatment.
J. JOINT WRITTEN DIRECTION. At such time as Buyer is entitled to
indemnification hereunder, the Stockholders and the Stockholders' Agent shall
provide a joint Instruction (as defined in the Escrow Agreement) to the Escrow
Agent directing the release of funds to the Buyer in an amount to which the
Buyer is entitled pursuant to the terms hereof.
K. EXCLUSIVE REMEDY. 1. Except with respect to any non-monetary
statutory, equitable or common law remedy Buyer may have relating to Section
1.1, Article III, Sections 7.4, 7.5, 7.6, 7.8, 7.9, 7.10, 7.11, 7.13, Sections
10.1 and 10.2, Article XI and Section 13.3 and any other remedies specifically
provided for in such Sections and Articles, the foregoing indemnification
provisions under this Article XII are the sole and exclusive remedy of each
party with respect to any Loss related to any breach of any representation or
warranty of the other party set forth in this Agreement and/or any other claim,
cause of action or other complaint arising out of or in connection with, or
related in any manner to, the transactions contemplated by this Agreement, in
lieu of any statutory, equitable or common law remedy any party may have
relating hereto. The parties expressly agree that Section 13.3 shall not be
subject to this Article XII.
2. In the event of any claim brought by either party hereto to seek
indemnification under this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys', legal assistants' and experts' fees and other
direct costs and expenses incident to any such claim.
L. LIMITED SURVIVAL OF DIRECTOR AND OFFICER INDEMNIFICATION. Nothing
contained herein to the contrary shall be construed as a release or waiver of
any rights of any Stockholder who is or has been an officer or director of the
Company to indemnification by the Company under the Company's existing charter
and bylaw provisions attached hereto as Schedule 12.12, with respect to claims
of third parties who are not Stockholders or Buyer Affiliates, and which claims
do not give rise to a right of indemnification of Buyer or a Buyer Affiliate
hereunder.
M. INDEMNIFICATION OF ESOP TRUSTEE. The Buyer and Diamond, jointly and
severally, shall defend, indemnify and hold harmless the ESOP Trustee from and
against any and all loss, damage, cost, expense (including court costs, amounts
paid in settlement, judgments, reasonable attorneys', legal assistants', and
experts' fees and other expenses for investigating and defending), suit, action,
claim, deficiency, liability or obligation (collectively, the "ESOP Trustee's
Loss") related to, caused by or arising from any misrepresentations, breach of
warranty or failure to fulfill any covenant or agreement contained in Section
11.6 and any and all third party claims relating thereto, together with interest
at 7% per annum from the date of payment of the ESOP Trustee's Loss to the date
of payment of the indemnification amount.
ARTICLE XIII.
GENERAL PROVISIONS
A. AMENDMENTS AND WAIVER. 1. No amendment, waiver or consent with
respect to any provision of this Agreement shall in any event be effective,
unless the same shall be in writing and signed by the parties hereto (which may
include the Stockholder's Agent on behalf of the Stockholders), and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
2. The failure of any party at any time or times to require
performance of any provisions hereof shall in no manner affect that party's
right at a later time to enforce the same. No waiver by any party of the breach
of any term or covenant contained in this Agreement in any one or more instances
shall be deemed to be, or construed as, a further or continuing waive of any
such breach, or a waiver of the breach of any other term or covenant contained
in this Agreement.
B. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be personally delivered, sent by
overnight carrier (such as Express Mail, Federal Express, etc.) or sent by
facsimile transmission with confirming copy sent by overnight courier and a
delivery receipt obtained and addressed to the intended recipient as follows:
1. If to Stockholders prior to Closing:
Reeves Southeastern Corporation
9800 Reeves Road
Tampa, FL 33619
Attention: Miles Lenhart
Telephone No.: (813) 626-3191
Facsimile No.: (813) 628-0423
With a copy to:
Trenam, Kemker, Scharf, Barkin, Frye
O'Neill & Mullis, P.A.
101 East Kennedy Boulevard
Suite 2700
Tampa, Florida 33602
Attention: Harold W. Mullis, Jr., Esq.
Telephone No.: (813) 227-7453
Facsimile No.: (813) 229-6553
If to Stockholders following Closing:
c/o Miles Lenhart
3610 Joe Sanchez Road
Plant City, Florida 33565
Attention: Miles Lenhart
Telephone No.:
Facsimile No.:
With a copy to:
Trenam, Kemker, Scharf, Barkin, Frye
O'Neill & Mullis, P.A.
101 East Kennedy Boulevard
Suite 2700
Tampa, Florida 33602
Attention: Harold W. Mullis, Jr., Esq.
Telephone No.: (813) 227-7453
Facsimile No.: (813) 229-6553
2. If to ESOP Trustee:
SouthTrust Asset Management Company of Florida, Inc.
150 2nd Avenue North
St. Petersburg, Florida 33731-1439
Attention: R. Duane Johnson
Telephone No.: (813) 822-0308
Facsimile No.: (813) 822-5238
With a copy to:
Kalish & Ward, P.A.
101 East Kennedy Boulevard
Suite 4100
Tampa, Florida 33602
Attention: R. Dennis Tweed, Esq.
Telephone No.: (813) 222-8700
Facsimile No.: (813) 222-8701
3. If to Buyer:
Diamond Home Services, Inc.
222 Church Street
Diamond Plaza
Woodstock, IL 60098
Telephone No.: (815) 334-1414
Facsimile No.: (815) 334-1421
Attention: Richard G. Reece
Joseph U. Schorer, Esq.
With a copy to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606-5096
Attention: Grant A. Bagan, P.C.
Telephone No.: (312) 984-7567
Telecopy No.: (312) 984-3669
Any party may change its address or add or change parties for receiving notice
by giving the other party notice in the manner set forth above.
C. EXPENSES. Except as otherwise expressly provided herein, each party to
this Agreement shall pay its own costs and expenses in connection with the
negotiations, documentation and closing of, and closing documents to be
delivered with respect to, the transactions contemplated hereby. Except as set
forth in Section 7.3, the Company shall not bear any of such expense. The
provisions of this Section shall survive any termination of this Agreement.
D. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
E. CAPTIONS. The captions contained in this Agreement are for convenience
of reference only, shall not be given meaning and do not form a part of this
Agreement.
F. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties named herein and their respective successors and
permitted assigns. Buyer shall be entitled to assign its rights and duties
under this Agreement to any affiliate of Buyer without the consent of
Stockholders; provided, however, that Buyer and Diamond shall in all events
remain liable hereunder. Except as provided in the foregoing sentence, this
Agreement shall not be assigned by either party hereto without the express prior
written consent of the other party and any attempted assignment, without such
consents, shall be null and void. This Agreement does not create any rights,
claims or benefits inuring to any person that is not a party hereto nor create
or establish any third-party beneficiary hereto.
G. ENTIRE TRANSACTION. This Agreement and the documents referred to
herein contain the entire agreement and understanding among the parties with
respect to the transactions contemplated hereby and supersede all other
agreements, understandings and undertakings among the parties on the subject
matter hereof. All exhibits and schedules hereto are hereby incorporated by
reference and made a part of this Agreement.
H. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the internal substantive laws of the State of Florida.
I. OTHER RULES OF CONSTRUCTION. References in this Agreement to sections,
schedules and exhibits are to sections of, and schedules and exhibits to, this
Agreement unless otherwise indicated. Words in the singular include the plural
and in the plural include the singular. The word "OR" is not exclusive. The
word "INCLUDING" shall mean including, without limitation. The term "ORDINARY
COURSE OF BUSINESS" means the ordinary course of the Business consistent with
the past practice of the Business. References to the terms "CONTRACTS" or
"AGREEMENTS" shall each be deemed to include the other and shall include
understandings and arrangements of all types, whether written or oral, and all
amendments thereto. The term "KNOWLEDGE OF THE COMPANY" or words of similar
meaning shall mean actual knowledge of the Board of Directors, the Stockholders,
Billy Sasser, Miles Lenhart, Mike Augello, W. Cecil Everidge, Scott Meckly,
Barry Kenny, Don Hicks, Bob Dumont, John Carter, Jerry Gambrel and Scott Pollack
after reasonable and due inquiry. References to the "Company" shall include its
subsidiaries, unless the context otherwise requires. The section and other
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
J. PARTIAL INVALIDITY. In the event that any provision of this Agreement
shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision
hereof.
K. GUARANTEE. Diamond hereby guarantees the payment obligations of Buyer
hereunder and under the Short-Term Note and the Note.
* * *
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by a duly authorized officer all as of the date first
written above.
STOCKHOLDERS DIAMOND ACQUISITION CORP.
By:
Miles L. Lenhart, as Co-Trustee Its:
of the Voting Trust dated March 23,
1987, as amended
Billy G. Sasser, as Co-Trustee of the DIAMOND HOME SERVICES, INC.
Voting Trust dated March 23, 1987,
as amended By:
Its:
Michael A. Augello
SOUTHTRUST ASSET MANAGEMENT
Miles L. Lenhart COMPANY OF FLORIDA, N.A., as
Trustee of the Reeves Southeastern
The Billy G. Sasser Revocable Trust Corporation Employee Stock
Ownership
Trust dated February 21, 1995
By:
Billy G. Sasser, Trustee By:
R. Duane Johnson, Vice President
The W. Cecil Everidge Revocable Trust
By:
W. Cecil Everidge, Trustee
The Mary Helen Everidge Revocable Trust
By:
Mary Helen Everidge, Trustee
The W. K. Neuman Revocable Trust
By:
W. K. Neuman, Trustee
EXHIBITS
A Form of Short-Term Note
B Form of Note
C Form of Escrow Agreement
D Form of Release
E Form of Legal Opinion
SCHEDULES
2.2 Payment Allocation and Wire Transfer Instructions
3.2 Estoppel Certificates
4.2 Required Consents
4.3 List of Stockholders
5.1 States in which the Company is Qualified to do Business and Required
Consents
5.2 Subsidiaries
5.3 Capitalization
5.4 Transactions with Affiliates
5.5 Financial Statements
5.6 Interim Charge
5.7 Accounts Receivable
5.9 Insurance
5.10 Liens and Encumbrances
5.11 Real Estate
5.12 Real Estate Leases
5.13 Intellectual Property
5.14 Trade Secrets
5.15 Customers and Suppliers
5.16 Employees
5.17 Employee Benefit Plans
5.18 Licenses and Permits
5.19 Material Contracts
5.21 Product Warranty
5.22 Product Liability
5.23 Legal Proceedings
5.24 Environmental Matters
7.1 Sales of Nonoperating Assets, Capital Expenditures and Debt
7.3 Real Estate
12.5 Environmental Matters
12.12 Charter and By-Laws
CREDIT AGREEMENT
DATED AS OF APRIL 20, 1998,
AMONG
DIAMOND HOME SERVICES, INC.
THE BANKS PARTY HERETO,
AND
HARRIS TRUST AND SAVINGS BANK,
as Agent
TABLE OF CONTENTS
SECTION DESCRIPTION PAGE
SECTION 1. THE CREDIT FACILITIES 1
Section 1.1. Revolving Credit Commitments 1
Section 1.2. Letters of Credit 1
Section 1.3. Term Loan Commitments 4
Section 1.4. Applicable Interest Rates 4
Section 1.5. Minimum Borrowing Amounts 6
Section 1.6. Manner of Borrowing Loans and Designating Applicable
Interest Rates 6
Section 1.7. Interest Periods 8
Section 1.8. Maturity of Loans 9
Section 1.9. Prepayments 9
Section 1.10. Default Rate 11
Section 1.11. The Notes 12
Section 1.12. Funding Indemnity 12
Section 1.13. Commitment Terminations 13
Section 1.14. Swing Loans 14
SECTION 2. FEES 16
Section 2.1. Fees 16
SECTION 3. PLACE AND APPLICATION OF PAYMENTS 17
SECTION 4. COLLATERAL AND GUARANTIES 18
Section 4.1. Collateral 18
Section 4.2. Guaranties 19
Section 4.3. Further Assurances 19
SECTION 5. DEFINITIONS; INTERPRETATION 20
Section 5.1. Definitions 20
Section 5.2. Interpretation 33
Section 5.3. Change in Accounting Principles 33
SECTION 6. REPRESENTATIONS AND WARRANTIES 33
Section 6.1. Organization and Qualification 33
Section 6.2. Subsidiaries 34
Section 6.3. Authority and Validity of Obligations 34
Section 6.4. Use of Proceeds; Margin Stock 35
Section 6.5. Financial Reports 35
Section 6.6. No Material Adverse Change 36
Section 6.7. Full Disclosure 36
Section 6.8. Trademarks, Franchises, and Licenses 36
Section 6.9. Governmental Authority and Licensing 36
Section 6.10. Good Title 36
Section 6.11. Litigation and Other Controversies 37
Section 6.12. Taxes 37
Section 6.13. Approvals 37
Section 6.14. Affiliate Transactions 37
Section 6.15. Investment Company; Public Utility Holding Company 37
Section 6.16. ERISA 37
Section 6.17. Compliance with Laws 38
Section 6.18. Other Agreements 38
Section 6.19. Solvency 38
Section 6.20. Reeves Acquisition 38
Section 6.21. Year 2000 Compliance 39
Section 6.22. No Default 39
SECTION 7. CONDITIONS PRECEDENT 39
Section 7.1. Initial Credit Event 39
Section 7.2. All Credit Events 42
SECTION 8. COVENANTS 42
Section 8.1. Maintenance of Business 42
Section 8.2. Maintenance of Properties 43
Section 8.3. Taxes and Assessments 43
Section 8.4. Insurance 43
Section 8.5. Financial Reports 43
Section 8.6. Inspection 45
Section 8.7. Indebtedness for Borrowed Money 45
Section 8.8. Liens 46
Section 8.9. Investments, Acquisitions, Loans, Advances and
Guaranties 47
Section 8.10. Mergers, Consolidations and Sales 49
Section 8.11. Maintenance of Subsidiaries 50
Section 8.12. Dividends and Certain Other Restricted Payments 50
Section 8.13. ERISA 51
Section 8.14. Compliance with Laws 51
Section 8.15. Burdensome Contracts With Affiliates 51
Section 8.16. No Changes in Fiscal Year 51
Section 8.17. Formation of Subsidiaries 51
Section 8.18. Change in the Nature of Business 51
Section 8.19. Use of Loan Proceeds 52
Section 8.20. No Restrictions on Subsidiary Distributions 52
Section 8.21. Subordinated Debt 52
Section 8.22. Cash Flow Leverage Ratio 52
Section 8.23. Net Worth 53
Section 8.24. Fixed Charge Coverage Ratio 53
Section 8.25. Interest Coverage Ratio 53
Section 8.26. Minimum EBITDA 53
Section 8.27. Operating Leases 53
Section 8.28. Interest Rate Protection 53
Section 8.29. Seller Debt Payments 54
SECTION 9. EVENTS OF DEFAULT AND REMEDIES 54
Section 9.1. Events of Default 54
Section 9.2. Non-Bankruptcy Defaults 56
Section 9.3. Bankruptcy Defaults 57
Section 9.4. Collateral for Undrawn Letters of Credit 57
Section 9.5. Notice of Default 58
Section 9.6. Expenses 58
SECTION 10. CHANGE IN CIRCUMSTANCES 58
Section 10.1. Change of Law 58
Section 10.2. Unavailability of Deposits or Inability to Ascertain,
or Inadequacy of, LIBOR 58
Section 10.3. Increased Cost and Reduced Return 59
Section 10.4. Lending Offices 60
Section 10.5. Discretion of Bank as to Manner of Funding 60
SECTION 11. THE AGENT AND ISSUING BANK 60
Section 11.1. Appointment and Authorization of Agent 60
Section 11.2. Agent and its Affiliates 61
Section 11.3. Action by Agent 61
Section 11.4. Consultation with Experts 61
Section 11.5. Liability of Agent; Credit Decision 61
Section 11.6. Indemnity 62
Section 11.7. Resignation of Agent and Successor Agent 62
Section 11.8. Interest Rate Hedging Arrangements 63
Section 11.9. Issuing Bank 63
SECTION 12. MISCELLANEOUS 63
Section 12.1. Withholding Taxes 63
Section 12.2. No Waiver, Cumulative Remedies 64
Section 12.3. Non-Business Days 64
Section 12.4. Documentary Taxes 65
Section 12.5. Survival of Representations 65
Section 12.6. Survival of Indemnities 65
Section 12.7. Sharing of Set-Off 65
Section 12.8. Notices 65
Section 12.9. Counterparts 66
Section 12.10.Successors and Assigns 66
Section 12.11. Participants 66
Section 12.12.Assignment of Commitments by Banks 67
Section 12.13.Amendments 67
Section 12.14.Headings 68
Section 12.15.Costs and Expenses 68
Section 12.16.Set-off 68
Section 12.17.Entire Agreement 69
Section 12.18.Governing Law 69
Section 12.19.Severability of Provisions 69
Section 12.20.Excess Interest 69
Section 12.21.Confidentiality 70
Section 12.22.Single Bank 70
Section 12.23.Submission to Jurisdiction; Waiver of Jury Trial 70
Signature Page 71
EXHIBIT A - Notice of Payment Request
EXHIBIT B - Notice of Borrowing
EXHIBIT C - Notice of Continuation/Conversion
EXHIBIT D - Revolving Note
EXHIBIT E - Term Note
EXHIBIT F - Swing Line Note
EXHIBIT G - Compliance Certificate
EXHIBIT H - Assignment and Acceptance
SCHEDULE 6.2 - Subsidiaries
CREDIT AGREEMENT
To each of the Banks signatory hereto
Ladies and Gentlemen:
The undersigned, Diamond Home Services, Inc., a Delaware corporation
(the "Borrower"), applies to you for your several commitments, subject to
the terms and conditions hereof and on the basis of the representations
and warranties hereinafter set forth, to extend credit to the Borrower,
all as more fully hereinafter set forth. Each of you is hereinafter
referred to as a "Bank," all of you are hereinafter referred to
collectively as the "Banks," and Harris Trust and Savings Bank in its
capacity as agent for the Banks hereunder is hereinafter referred to as
the "Agent."
SECTION 1. THE CREDIT FACILITIES.
Section 1.1. Revolving Credit Commitments. Subject to the terms and
conditions hereof, each Bank, by its acceptance hereof, severally agrees
to make a loan or loans (individually a "Revolving Loan" and collectively
the "Revolving Loans") to the Borrower in U.S. Dollars from time to time
on a revolving basis up to the amount of such Bank's revolving credit
commitment set forth on the applicable signature page hereof or pursuant
to Section 12.12 hereof (its "Revolving Credit Commitment" and,
cumulatively for all the Banks, the "Revolving Credit Commitments"),
subject to any reductions thereof pursuant to the terms hereof, before
the Revolving Credit Termination Date. The sum of the aggregate
principal amount of Revolving Loans, Swing Loans and L/C Obligations at
any time outstanding shall not exceed the Revolving Credit Commitments in
effect at such time. Each Borrowing of Revolving Loans shall be made
ratably from the Banks in proportion to their respective Revolver
Percentages. As provided in Section 1.6(a) hereof, the Borrower may
elect that each Borrowing of Revolving Loans be either Base Rate Loans or
Eurodollar Loans. Revolving Loans may be repaid and the principal amount
thereof reborrowed before the Revolving Credit Termination Date, subject
to the terms and conditions hereof.
Section 1.2. Letters of Credit. (a) General Terms. Subject to the
terms and conditions hereof, as part of the Revolving Credit, the Issuing
Bank shall issue standby and commercial letters of credit (each a "Letter
of Credit") for the Borrower's account in U.S. Dollars in an aggregate
undrawn face amount up to the amount of the L/C Commitment, provided that
the aggregate L/C Obligations at any time outstanding shall not exceed
(i) the L/C Commitment and (ii) the difference between the Revolving
Credit Commitments in effect at such time and the aggregate principal
amount of Revolving Loans and Swing Loans then outstanding. Each Letter
of Credit shall be issued by the Issuing Bank, but each Bank shall be
obligated to reimburse the Issuing Bank for such Bank's Revolver
Percentage of the amount of each drawing thereunder and, accordingly,
each Letter of Credit shall constitute usage of the Revolving Credit
Commitment of each Bank pro rata in an amount equal to its Revolver
Percentage of the L/C Obligations then outstanding.
(b) Applications. At any time before the Revolving Credit
Termination Date, the Issuing Bank shall, at the request of the Borrower,
issue one or more Letters of Credit, in a form satisfactory to the
Issuing Bank, with expiration dates no later than the earlier of 12
months from the date of issuance (or be cancelable not later than 12
months from the date of issuance and each renewal) or five Business Days
prior to the Revolving Credit Termination Date, in an aggregate face
amount not to exceed that set forth above, upon the receipt of an
application duly executed by the Borrower for the relevant Letter of
Credit in the form then customarily prescribed by the Issuing Bank for
the Letter of Credit requested (each an "Application"). Notwithstanding
anything contained in any Application to the contrary: (i) the Borrower
shall pay fees in connection with each Letter of Credit as set forth in
Section 2.1 hereof, (ii) except as otherwise provided in Section 1.9
hereof, unless an Event of Default has occurred and is continuing, the
Issuing Bank will not call for the funding by the Borrower of any amount
under a Letter of Credit before being presented with a drawing
thereunder, and (iii) if the Issuing Bank is not timely reimbursed for
the amount of any drawing under a Letter of Credit on the date such
drawing is paid, the Borrower's obligation to reimburse the Issuing Bank
for the amount of such drawing shall bear interest (which the Borrower
hereby promises to pay) from and after the date such drawing is paid at a
rate per annum equal to the sum of 2% plus the Applicable Margin for
Reimbursement Obligations plus the Base Rate from time to time in effect.
If the Issuing Bank issues any Letter of Credit with an expiration date
that is automatically extended unless the Issuing Bank gives notice that
the expiration date will not so extend beyond its then scheduled
expiration date, the Issuing Bank will give such notice of non-renewal
before the time necessary to prevent such automatic extension if before
such required notice date: (i) the expiration date of such Letter of
Credit if so extended would be after the Revolving Credit Termination
Date, (ii) the Revolving Credit Commitments have been terminated, or
(iii) a Default or an Event of Default exists and the Agent, at the
direction of the Required Banks, has given the Issuing Bank instructions
not to so permit the extension of the expiration date of such Letter of
Credit. The Issuing Bank agrees to issue amendments to the Letter(s) of
Credit increasing the amount, or extending the expiration date, thereof
at the request of the Borrower subject to the conditions of Section 7.2
hereof and the other terms of this Section 1.2.
(c) The Reimbursement Obligations. Subject to Section 1.2(b)
hereof, the obligation of the Borrower to reimburse the Issuing Bank for
all drawings under a Letter of Credit (a "Reimbursement Obligation")
shall be governed by the Application related to such Letter of Credit,
except that reimbursement shall be made by no later than 12:00 Noon
(Chicago time) on the date when each drawing is paid in immediately
available funds at the Issuing Bank's principal office in Chicago,
Illinois or such other office as the Issuing Bank may designate in
writing to the Borrower. If the Borrower does not make any such
reimbursement payment on the date due and the Participating Banks fund
their participations therein in the manner set forth in Section 1.2(d)
below, then all payments thereafter received by the Issuing Bank in
discharge of any of the relevant Reimbursement Obligations shall be
distributed in accordance with Section 1.2(d) below.
(d) The Participating Interests. Each Bank, by its acceptance
hereof, severally agrees to purchase from the Issuing Bank, and the
Issuing Bank hereby agrees to sell to each such Bank (a "Participating
Bank"), an undivided percentage participating interest (a "Participating
Interest"), to the extent of its Revolver Percentage, in each Letter of
Credit issued by, and each Reimbursement Obligation owed to, the Issuing
Bank. Upon any failure by the Borrower to pay any Reimbursement
Obligation at the time required on the date the related drawing is paid,
as set forth in Section 1.2(c) above, or if the Issuing Bank is required
at any time to return to the Borrower or to a trustee, receiver,
liquidator, custodian, or other Person any portion of any payment of any
Reimbursement Obligation, each Participating Bank shall, not later than
the Business Day it receives a certificate in the form of Exhibit A
hereto from the Issuing Bank to such effect, if such certificate is
received before 1:00 p.m. (Chicago time), or not later than 1:00 p.m.
(Chicago time) the following Business Day, if such certificate is
received after such time, pay to the Issuing Bank an amount equal to such
Participating Bank's Revolver Percentage of such unpaid or recaptured
Reimbursement Obligation together with interest on such amount accrued
from the date the related payment was made by the Issuing Bank to the
date of such payment by such Participating Bank at a rate per annum equal
to: (i) from the date the related payment was made by the Issuing Bank to
the date 2 Business Days after payment by such Participating Bank is due
hereunder, the Federal Funds Rate for each such day and (ii) from the
date 2 Business Days after the date such payment is due from such
Participating Bank to the date such payment is made by such Participating
Bank, the Base Rate in effect for each such day. Each such Participating
Bank shall thereafter be entitled to receive its Revolver Percentage of
each payment received in respect of the relevant Reimbursement Obligation
and of interest paid thereon, with the Issuing Bank retaining its
Revolver Percentage as a Bank hereunder.
The several obligations of the Participating Banks to the Issuing
Bank under this Section 1.2 shall be absolute, irrevocable, and
unconditional under any and all circumstances whatsoever and shall not be
subject to any set-off, counterclaim or defense to payment which any
Participating Bank may have or have had against the Borrower, the Agent,
the Issuing Bank, any other Bank, or any other Person whatsoever.
Without limiting the generality of the foregoing, such obligations shall
not be affected by any Default or Event of Default or by any reduction or
termination of any Commitment of any Bank occurring after any issuance,
extension or amendment of the related Letter of Credit (other than any
such reduction or termination of a Commitment by virtue of an assignment
thereof permitted hereby), and each payment by a Participating Bank under
this Section 1.2 shall be made without any offset, abatement, withholding
or reduction whatsoever. The Issuing Bank shall be entitled to offset
amounts received for the account of a Bank under this Agreement against
unpaid amounts due from such Bank to the Issuing Bank hereunder (whether
as fundings of participations, indemnities, or otherwise), but shall not
be entitled to offset against amounts owed to the Issuing Bank by any
Bank arising outside of this Agreement.
(e) Indemnification. The Participating Banks shall, to the extent
of their respective Revolver Percentages, indemnify the Issuing Bank (to
the extent not reimbursed by the Borrower) against any cost, expense
(including reasonable counsel fees and disbursements), claim, demand,
action, loss, or liability (except such as result from the Issuing Bank's
gross negligence or willful misconduct) that the Issuing Bank may suffer
or incur in connection with any Letter of Credit. The obligations of the
Participating Banks under this Section 1.2(e) and all other parts of this
Section 1.2 shall survive termination of this Agreement and of all
Applications, Letters of Credit, and all drafts and other documents
presented in connection with drawings thereunder.
Section 1.3. Term Loan Commitments. Subject to the terms and
conditions hereof, each Bank, by its acceptance hereof, severally agrees
to make a loan (individually a "Term Loan" and collectively the "Term
Loans") to the Borrower in the amount of such Bank's term loan commitment
set forth on the applicable signature page hereof or pursuant to
Section 12.12 hereof (its "Term Loan Commitment" and, cumulatively for
all the Banks, the "Term Loan Commitments"). The Term Loans shall be
made, if at all, on or before April 30, 1998, at which time the Term Loan
Commitments shall expire. The Term Loans shall be advanced in a single
Borrowing and shall be made ratably by the Banks in proportion to their
respective Term Loan Percentages. As provided in Section 1.6(a) hereof,
the Borrower may elect that the Term Loans be outstanding as Base Rate
Loans or Eurodollar Loans. No amount repaid or prepaid on any Term Loan
may be borrowed again.
Section 1.4. Applicable Interest Rates. (a) Base Rate Loans. Each
Base Rate Loan made or maintained by a Bank shall bear interest during
each Interest Period it is outstanding (computed on the basis of a year
of 365 or 366 days, as the case may be, and the actual days elapsed,
except that determinations made under clause (ii) of the definition of
Base Rate set forth below shall be computed on the basis of a year of
360 days and actual days elapsed) on the unpaid principal amount thereof
from the date such Loan is advanced, continued or created by conversion
from a Eurodollar Loan until maturity (whether by acceleration or
otherwise) at a rate per annum equal to the sum of the Applicable Margin
plus the Base Rate from time to time in effect, payable on the last day
of its Interest Period and at maturity (whether by acceleration or
otherwise).
"Base Rate" means for any day, the greater of (i) the rate of
interest announced by the Agent from time to time as its prime commercial
rate, as in effect on such day (it being acknowledged and agreed that
rate may not be the Agent's best or lowest rate); and (ii) the sum of (x)
the rate determined by the Agent to be the average (rounded upwards, if
necessary, to the next higher 1/100 of 1%) of the rates per annum quoted
to the Agent at approximately 10:00 a.m. (Chicago time) (or as soon
thereafter as is practicable) on such day (or, if such day is not a
Business Day, on the immediately preceding Business Day) by two or more
Federal funds brokers selected by the Agent for the sale to the Agent at
face value of Federal funds in an amount equal or comparable to the
principal amount owed to the Agent for which such rate is being
determined, plus (y) 1/2 of 1% (0.5%).
(b) Eurodollar Loans. Each Eurodollar Loan made or maintained by a
Bank shall bear interest during each Interest Period it is outstanding
(computed on the basis of a year of 360 days and actual days elapsed) on
the unpaid principal amount thereof from the date such Loan is advanced,
continued, or created by conversion from a Base Rate Loan until maturity
(whether by acceleration or otherwise) at a rate per annum equal to the
sum of the Applicable Margin plus the Adjusted LIBOR applicable for such
Interest Period, payable on the last day of the Interest Period and at
maturity (whether by acceleration or otherwise), and, if the applicable
Interest Period is longer than three months, on each day occurring every
three months after the commencement of such Interest Period.
"Adjusted LIBOR" means, for any Borrowing of Eurodollar Loans, a
rate per annum determined in accordance with the following formula:
Adjusted LIBOR = LIBOR
1 - Eurodollar Reserve Percentage
"LIBOR" means, for an Interest Period for a Borrowing of Eurodollar
Loans, (a) the LIBOR Index Rate for such Interest Period, if such rate is
available, and (b) if the LIBOR Index Rate cannot be determined, the
arithmetic average of the rates of interest per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) at which deposits in U.S.
Dollars in immediately available funds are offered to the Agent at
11:00 a.m. (London, England time) 2 Business Days before the beginning of
such Interest Period by major banks in the interbank eurodollar market
selected by the Agent for delivery on the first day of and for a period
equal to such Interest Period and in an amount equal or comparable to the
principal amount of the Eurodollar Loan scheduled to be made by the Agent
as part of such Borrowing.
"LIBOR Index Rate" means, for any Interest Period, the rate per
annum (rounded upwards, if necessary, to the next higher one hundred-
thousandth of a percentage point) for deposits in U.S. Dollars for a
period equal to such Interest Period, which appears on the Telerate Page
3750 as of 11:00 a.m. (London, England time) on the day 2 Business Days
before the commencement of such Interest Period.
"Telerate Page 3750" means the display designated as "Page 3750" on
the Dow Jones Telerate Service (or such other page as may replace Page
3750 on that service or such other service as may be nominated by the
British Bankers' Association as the information vendor for the purpose of
displaying British Bankers' Association Interest Settlement Rates for
U.S. Dollar deposits).
"Eurodollar Reserve Percentage" means, for any Borrowing of
Eurodollar Loans, the daily average for the applicable Interest Period of
the maximum rate, expressed as a decimal, at which reserves (including,
without limitation, any supplemental, marginal, and emergency reserves)
are imposed during such Interest Period by the Board of Governors of the
Federal Reserve System (or any successor) on "eurocurrency liabilities",
as defined in such Board's Regulation D (or in respect of any other
category of liabilities that includes deposits by reference to which the
interest rate on Eurodollar Loans is determined or any category of
extensions of credit or other assets that include loans by non-United
States offices of any Bank to United States residents), subject to any
amendments of such reserve requirement by such Board or its successor,
taking into account any transitional adjustments thereto. For purposes
of this definition, the Eurodollar Loans shall be deemed to be
"eurocurrency liabilities" as defined in Regulation D without benefit or
credit for any prorations, exemptions or offsets under Regulation D.
(d) Rate Determinations. The Agent shall determine each interest
rate applicable to the Loans and the Reimbursement Obligations hereunder,
and its determination thereof shall be conclusive and binding except in
the case of manifest error.
Section 1.5. Minimum Borrowing Amounts. Each Borrowing of Base Rate
Loans advanced under a Credit shall be in an amount not less than
$500,000 or such greater amount which is an integral multiple of
$100,000. Each Borrowing of Eurodollar Loans advanced, continued, or
converted under a Credit shall be in an amount equal to $2,000,000 or
such greater amount which is an integral multiple of $500,000.
Section 1.6. Manner of Borrowing Loans and Designating Applicable
Interest Rates. (a) Notice to the Agent. The Borrower shall give notice
to the Agent by no later than 10:00 a.m. (Chicago time): (i) at least 3
Business Days before the date on which the Borrower requests the Banks to
advance a Borrowing of Eurodollar Loans and (ii) on the date the Borrower
requests the Banks to advance a Borrowing of Base Rate Loans. The Loans
included in each Borrowing shall bear interest initially at the type of
rate specified in such notice of a new Borrowing. Thereafter, the
Borrower may from time to time elect to change or continue the type of
interest rate borne by each Borrowing or, subject to the minimum amount
requirements for each outstanding Borrowing established by Section 1.5
hereof, a portion thereof, as follows: (i) if such Borrowing is of
Eurodollar Loans, on the last day of the Interest Period applicable
thereto, the Borrower may continue part or all of such Borrowing as
Eurodollar Loans or convert part or all of such Borrowing into Base Rate
Loans or (ii) if such Borrowing is of Base Rate Loans, on any Business
Day, the Borrower may convert all or part of such Borrowing into
Eurodollar Loans for an Interest Period or Interest Periods specified by
the Borrower. The Borrower shall give all such notices requesting the
advance, continuation, or conversion of a Borrowing to the Agent by
telephone or telecopy (which notice shall be irrevocable once given and,
if by telephone, shall be promptly confirmed in writing) substantially in
the form attached hereto as Exhibit B (Notice of Borrowing) or Exhibit C
(Notice of Continuation/Conversion), as applicable, or in such other form
acceptable to the Agent. Notices of the continuation of a Borrowing of
Eurodollar Loans for an additional Interest Period or of the conversion
of part or all of a Borrowing of Base Rate Loans into Eurodollar Loans
must be given by no later than 10:00 a.m. (Chicago time) at least 3
Business Days before the date of the requested continuation or
conversion. All such notices concerning the advance, continuation, or
conversion of a Borrowing shall specify the date of the requested
advance, continuation, or conversion of a Borrowing (which shall be a
Business Day), the amount of the requested Borrowing to be advanced,
continued, or converted, the type of Loans to comprise such new,
continued, or converted Borrowing and, if such Borrowing is to be
comprised of Eurodollar Loans, the Interest Period applicable thereto.
The Borrower agrees that the Agent may rely on any such telephonic or
telecopy notice given by any person the Agent in good faith believes is
an Authorized Representative without the necessity of independent
investigation, and in the event any such notice by telephone conflicts
with any written confirmation, such telephonic notice shall govern if the
Agent has acted in good faith in reliance thereon.
(b) Notice to the Banks. The Agent shall give prompt telephonic or
telecopy notice to each Bank of any notice from the Borrower received
pursuant to Section 1.6(a) above and, if such notice requests the Banks
to make Eurodollar Loans, the Agent shall give notice to the Borrower and
each Bank by like means of the interest rate applicable thereto promptly
after the Agent has made such determination.
(c) Borrower's Failure to Notify; Automatic Continuations and
Conversions. Any outstanding Borrowing of Base Rate Loans shall
automatically be continued for an additional Interest Period on the last
day of its then current Interest Period unless the Borrower has notified
the Agent within the period required by Section 1.6(a) that the Borrower
intends to convert such Borrowing, subject to Section 7.2 hereof, into a
Borrowing of Eurodollar Loans or such Borrowing is prepaid in accordance
with Section 1.9(a). If the Borrower fails to give notice pursuant to
Section 1.6(a) above of the continuation or conversion of any outstanding
principal amount of a Borrowing of Eurodollar Loans before the last day
of its then current Interest Period within the period required by
Section 1.6(a) or, whether or not such notice has been given, one or more
of the conditions set forth in Section 7.2 for the continuation or
conversion of a Borrowing of Eurodollar Loans would not be satisfied and
such Borrowing is not prepaid in accordance with Section 1.9(a), such
Borrowing shall automatically be converted into a Borrowing of Base Rate
Loans. In the event the Borrower fails to give notice pursuant to
Section 1.6(a) above of a Borrowing equal to the amount of a
Reimbursement Obligation and has not notified the Agent by 1:00 p.m.
(Chicago time) on the day such Reimbursement Obligation becomes due that
it intends to repay such Reimbursement Obligation through funds not
borrowed under this Agreement, the Borrower shall be deemed to have
requested a Borrowing of Base Rate Loans on such day in the amount of the
Reimbursement Obligation then due, subject to Section 7 hereof, which
Borrowing shall be applied to pay the Reimbursement Obligation then due.
(d) Disbursement of Loans. Not later than 1:00 p.m. (Chicago time)
on the date of any requested advance of a new Borrowing, subject to
Section 7 hereof, each Bank shall make available its Loan comprising part
of such Borrowing in funds immediately available at the principal office
of the Agent in Chicago, Illinois. The Agent shall make the proceeds of
each new Borrowing available to the Borrower at the Agent's principal
office in Chicago, Illinois (or by wire transfer of funds pursuant to the
Borrower's written instructions to the Agent).
(e) Agent Reliance on Bank Funding. Unless the Agent shall have
been notified by a Bank prior to (or, in the case of a Borrowing of Base
Rate Loans, by 1:00 p.m. (Chicago time) on) the date on which such Bank
is scheduled to make payment to the Agent of the proceeds of a Loan
(which notice shall be effective upon receipt) that such Bank does not
intend to make such payment, the Agent may assume that such Bank has made
such payment when due and the Agent may in reliance upon such assumption
(but shall not be required to) make available to the Borrower the
proceeds of the Loan to be made by such Bank and, if any Bank has not in
fact made such payment to the Agent, such Bank shall, on demand, pay to
the Agent the amount made available to the Borrower attributable to such
Bank together with interest thereon in respect of each day during the
period commencing on the date such amount was made available to the
Borrower and ending on (but excluding) the date such Bank pays such
amount to the Agent at a rate per annum equal to (i) from the date the
related advance was made by the Agent to the date 2 Business Days after
payment by such Bank is due hereunder, the Federal Funds Rate for each
such day and (ii) from the date 2 Business Days after the date such
payment is due from such Bank to the date such payment is made by such
Bank, the Base Rate in effect for each such day. If such amount is not
received from such Bank by the Agent immediately upon demand, the
Borrower will, on demand, repay to the Agent the proceeds of the Loan
attributable to such Bank with interest thereon at a rate per annum equal
to the interest rate applicable to the relevant Loan, but without such
payment being considered a payment or prepayment of a Loan under
Section 1.12 hereof, so that the Borrower will have no liability under
such Section with respect to such payment.
Section 1.7. Interest Periods. As provided in Section 1.6(a) hereof,
at the time of each request to advance, continue, or create by conversion
a Borrowing of Eurodollar Loans, the Borrower shall select an Interest
Period applicable to such Loans from among the available options. The
term "Interest Period" means the period commencing on the date a
Borrowing of Loans is advanced, continued, or created by conversion and
ending: (a) in the case of Base Rate Loans, on the last day of the
calendar quarter in which such Borrowing is advanced, continued, or
created by conversion (or on the last day of the following calendar
quarter if such Loan is advanced, continued or created by conversion on
the last day of a calendar quarter), (b) in the case of a Eurodollar
Loan, 1, 2, 3, or 6 months thereafter, and (c) in the case of Swing
Loans, on the date one (1) to seven (7) days thereafter as mutually
agreed by the Agent and the Borrower; provided, however, that:
(a) any Interest Period for a Borrowing of Revolving Loans
consisting of Base Rate Loans that otherwise would end after the
Revolving Credit Termination Date shall end on the Revolving
Credit Termination Date, and any Interest Period for a Borrowing
of Term Loans consisting of Base Rate Loans that otherwise would
end after the final maturity date of the Term Loans shall end on
the final maturity date of the Term Loans;
(b) no Interest Period with respect to any portion of the
Term Loans shall extend beyond the final maturity date of the
Term Loans, and no Interest Period with respect to any portion of
the Revolving Loans shall extend beyond the Revolving Credit
Termination Date;
(c) no Interest Period with respect to any portion of the
Term Loans consisting of Eurodollar Loans shall extend beyond a
date on which the Borrower is required to make a scheduled
payment of principal on the Term Loans, unless the sum of (a) the
aggregate principal amount of Term Loans that are Base Rate Loans
plus (b) the aggregate principal amount of Term Loans that are
Eurodollar Loans with Interest Periods expiring on or before such
date equals or exceeds the principal amount to be paid on the
Term Loans on such payment date;
(d) whenever the last day of any Interest Period would
otherwise be a day that is not a Business Day, the last day of
such Interest Period shall be extended to the next succeeding
Business Day, provided that, if such extension would cause the
last day of an Interest Period for a Borrowing of Eurodollar
Loans to occur in the following calendar month, the last day of
such Interest Period shall be the immediately preceding Business
Day; and
(e) for purposes of determining an Interest Period for a
Borrowing of Eurodollar Loans, a month means a period starting on
one day in a calendar month and ending on the numerically
corresponding day in the next calendar month; provided, however,
that if there is no numerically corresponding day in the month in
which such an Interest Period is to end or if such an Interest
Period begins on the last Business Day of a calendar month, then
such Interest Period shall end on the last Business Day of the
calendar month in which such Interest Period is to end.
Section 1.8. Maturity of Loans. (a) Revolving Loans and Swing Loans.
Each Revolving Loan shall mature and become due and payable by the
Borrower on the Revolving Credit Termination Date. Each Swing Loan shall
mature and become due and payable by the Borrower on the last day of the
Interest Period applicable thereto.
(b) Scheduled Payments of Term Loans. The Borrower shall make
principal payments on the Term Loans in installments on the last day of
each March, June, September and December in each year, commencing with
the calendar quarter ending December 31, 1998 and ending on March 31,
2003, with the amount of each such installment to aggregate $1,071,429,
and the last installment on all Term Loans to aggregate all principal of
the Term Loans not sooner paid on March 31, 2003 and with the amount of
each installment due on the Term Loans held by each Bank to be equal to
its Term Loan Percentage of each such aggregate amount.
Section 1.9. Prepayments. (a) Optional. The Borrower shall have the
privilege of prepaying in whole or in part (but, if in part, then: (i)
if such Borrowing is of Base Rate Loans, in an amount not less than
$100,000, (ii) if such Borrowing is of Eurodollar Loans, in an amount not
less than $500,000, and (iii) in each case, in an amount such that the
minimum amount required for a Borrowing pursuant to Section 1.5 hereof
remains outstanding) any Borrowing of Eurodollar Loans at any time upon 3
Business Days prior notice to the Agent or, in the case of a Borrowing of
Base Rate Loans, notice delivered to the Agent by the Borrower no later
than 10:00 a.m. (Chicago time) on the date of prepayment, such prepayment
to be made by the payment of the principal amount to be prepaid and
accrued interest thereon to the date fixed for prepayment plus any
amounts due the Banks under Section 1.12 hereof. Swing Loans bearing
interest at Agent's Quoted Rate may only be paid on the last day of the
Interest Period then applicable to such Loans. The Agent will promptly
advise each Bank of any such prepayment notice it receives from the
Borrower. Any amount of Revolving Loans paid or prepaid before the
Revolving Credit Termination Date may, subject to the terms and
conditions of this Agreement, be borrowed, repaid and borrowed again. No
amount of the Term Loans paid or prepaid may be reborrowed.
(b) Mandatory. (i) The Borrower shall, on each date the Revolving
Credit Commitments are reduced pursuant to Section 1.13 hereof, prepay
the Revolving Loans, Swing Loans and, if necessary, prefund the L/C
Obligations by the amount, if any, necessary to reduce the sum of the
aggregate principal amount of Revolving Loans, Swing Loans and L/C
Obligations then outstanding to the amount to which the Revolving Credit
Commitments have been so reduced.
(ii) On the deadline expressed in Section 8.5 below for the Banks'
receipt of the audited financial statements for the fiscal year of the
Borrower ending on or about December 31, 1998 and each fiscal year
thereafter, or, if earlier the Borrower's receipt of such financial
statements, the Borrower shall prepay the Term Loans by an amount equal
to 50% of Excess Cash Flow of Borrower and its Subsidiaries for the then
most recently completed fiscal year of the Borrower (for such year,
"Excess Cash Flow Net Proceeds"); provided, however, the Borrower shall
not be required to make any prepayment under this clause (i) if the Cash
Flow Leverage Ratio as of the last day of any two consecutive fiscal
quarters of the Borrower ending after the date hereof is or has been in
each case less than or equal to 2.5 to 1.0 (it being understood and
agreed upon that if such prepayments are not required because of the
foregoing proviso, the Borrower shall never again be required to make any
prepayments under this clause (i)). Each such prepayment shall be
applied to the remaining installments of the Term Notes in the inverse
order of maturity.
(iii) If the Borrower or any Subsidiary shall at any time or from
time to time make or agree to make a Disposition or shall suffer an Event
of Loss resulting in Net Cash Proceeds in excess of $500,000 on a
cumulative basis during any calendar year, then (x) the Borrower shall
promptly notify the Agent of such proposed Disposition or Event of Loss
(including the amount of the estimated Net Cash Proceeds to be received
by the Borrower or such Subsidiary in respect thereof) and (y) promptly
upon, and in no event later than the Business Day after, receipt by the
Borrower or the Subsidiary of the Net Cash Proceeds of such Disposition
or Event of Loss, the Borrower shall, or shall cause such Subsidiary to,
deposit with the Agent an aggregate amount equal to 100% of the amount of
such Net Cash Proceeds and the Agent will hold with it the amount of such
proceeds so deposited in the Account; provided, however, that no such
deposit shall be required, and accordingly the following described
prepayment shall not be required with respect to Net Cash Proceeds of any
Disposition made or Event of Loss suffered by Reeves or any of its
subsidiaries during the calendar year ended December 31, 1998 with
respect to Property owned by Reeves or any of its subsidiaries
immediately after giving effect to the Reeves Acquisition to the extent
such Net Cash Proceeds, when taken together with the Net Cash Proceeds of
all other Dispositions made and Events of Loss suffered by the Borrower
and its Subsidiaries during the same calendar year, aggregate less than
$2,500,000. From time to time upon the Borrower's request, the Agent
will release the proceeds so deposited in the Account to the Borrower or
such Subsidiary, as necessary, to pay for the replacement or rebuilding
of the Property disposed of, lost or condemned, as the case may be, if at
the time of such release, no Default or Event of Default shall have
occurred and be continuing. If such Property has not been replaced or
rebuilt within twelve (12) calendar months following the date of such
Disposition or Event of Loss, or if the Borrower fails to notify the
Agent in writing on or before sixty (60) days after such Disposition or
Event of Loss that the Borrower or such Subsidiary will commence the
replacement or rebuilding of such Property, or if the Borrower or such
Subsidiary shall not be committed by contract to so replace or rebuild
such Property within sixty (60) days after such Disposition or Event of
Loss, then, in any such case, the Agent may at any time thereafter apply
(without further notice to or demand on the Borrower) the proceeds so
deposited in the Account pursuant to this Section with respect to such
Disposition or Event of Loss and not yet released pursuant to this
Section so as to prepay the Term Loans. Each such prepayment shall be
applied to the remaining installments of the Term Notes in the inverse
order of maturity.
(iv) If after the date of this Agreement the Borrower or any
Subsidiary shall issue new equity securities (whether common or preferred
stock or otherwise), other than common stock issued in connection with
the exercise of employee stock options, or dispose of any treasury stock,
the Borrower shall promptly notify the Agent of the estimated Net Cash
Proceeds of such issuance or disposition, as the case may be, to be
received by or for the account of the Borrower or such Subsidiary in
respect thereof. Promptly upon, and in no event later than the Business
Day after, receipt by the Borrower or such Subsidiary of Net Cash
Proceeds of such issuance or disposition, the Borrower shall prepay the
Term Loans in an aggregate amount equal to 100% of the amount of such Net
Cash Proceeds. Each such prepayment shall be applied to the remaining
installments of the Term Notes in the inverse order of maturity.
(v) Unless the Borrower otherwise directs, prepayments of Loans
under this Section 1.9(b) shall be applied first to Borrowings of Base
Rate Loans until payment in full thereof with any balance applied to
Borrowings of Eurodollar Loans in the order in which their Interest
Periods expire. Each prepayment of Loans under this Section 1.9(b) shall
be made by the payment of the principal amount to be prepaid and accrued
interest thereon to the date of prepayment together with any amounts due
the Banks under Section 1.12 hereof. Each prefunding of L/C Obligations
shall be made in accordance with Section 9.4 hereof.
Section 1.10. Default Rate. Notwithstanding anything to the contrary
contained in Section 1.4 hereof, while any Event of Default exists or
(unless and until rescinded by the requisite Banks) after acceleration,
the Borrower shall pay interest (after as well as before entry of
judgment thereon to the extent permitted by law) on the principal amount
of all Revolving Loans and Term Loans (computed on the basis of a year of
360 days and actual days elapsed) at a rate per annum equal to:
(a) for any Base Rate Loan, the sum of 2% plus the
Applicable Margin plus the Base Rate from time to time in effect;
and
(b) for any Eurodollar Loan, the sum of 2% plus the rate of
interest in effect thereon at the time of such default until the
end of the Interest Period applicable thereto and, thereafter, at
a rate per annum equal to the sum of 2% plus the Applicable
Margin for Base Rate Loans plus the Base Rate from time to time
in effect;
provided, however, that in the absence of acceleration, any adjustments
pursuant to this Section 1.10 shall be made at the election of the
Required Banks with written notice to the Borrower. While any Event of
Default exists or after acceleration, interest shall be paid on demand of
the Agent at the request or with the consent of the Required Banks.
Section 1.11. The Notes. (a) The Revolving Loans made to the Borrower
by a Bank shall be evidenced by a single promissory note of the Borrower
issued to such Bank in the form of Exhibit D hereto. Each such
promissory note is hereinafter referred to as a "Revolving Note" and
collectively such promissory notes are referred to as the "Revolving
Notes."
(b) The Term Loans made to the Borrower by a Bank shall be
evidenced by a single promissory note of the Borrower issued to such Bank
in the form of Exhibit E hereto. Each such promissory note is
hereinafter referred to as a "Term Note" and collectively such promissory
notes are referred to as the "Term Notes."
(c) The Swing Loans made to the Borrower by the Agent shall be
evidenced by a single promissory note of the Borrower issued to the Agent
in the form of Exhibit F hereto. This promissory note is hereinafter
referred to as the "Swing Line Note."
(d) Each Bank shall record on its books and records or on a
schedule to its appropriate Note the amount of each Loan advanced,
continued or converted by it, all payments of principal and interest and
the principal balance from time to time outstanding thereon, the type of
such Loan, and, for any Eurodollar Loan, the Interest Period and the
interest rate applicable thereto. The record thereof, whether shown on
such books and records of a Bank or on a schedule to the relevant Note,
shall be prima facie evidence as to all such matters; provided, however,
that the failure of any Bank to record any of the foregoing or any error
in any such record shall not limit or otherwise affect the obligation of
the Borrower to repay all Loans made to it hereunder together with
accrued interest thereon. At the request of any Bank and upon such Bank
tendering to the Borrower the appropriate Note to be replaced, the
Borrower shall furnish a new Note to such Bank to replace any outstanding
Note, and at such time the first notation appearing on a schedule on the
reverse side of, or attached to, such Note shall set forth the aggregate
unpaid principal amount of all Loans, if any, then outstanding thereon.
Section 1.12. Funding Indemnity. If any Bank (including for such
purposes, the Agent in the case of a Swing Loan which is a Fixed Rate
Loan) shall incur any loss, cost or expense (including, without
limitation, any loss of profit, and any loss, cost or expense incurred by
reason of the liquidation or re-employment of deposits or other funds
acquired by such Bank to fund or maintain any Fixed Rate Loan or the
relending or reinvesting of such deposits or amounts paid or prepaid to
such Bank) as a result of:
(a) any payment, prepayment or conversion of a Fixed Rate
Loan on a date other than the last day of its Interest Period
(unless and to the extent resulting solely from the operation of
Section 10.1 hereof),
(b) any failure (because of a failure to meet the
conditions of Section 7 or otherwise) by the Borrower to borrow a
Fixed Rate Loan on the date specified in a notice given pursuant
to Section 1.6(a) or 1.14(c), as the case may be,
(c) any failure (because of a failure to meet the
conditions of Section 7 or otherwise) by the Borrower to continue
a Eurodollar Loan, or to convert a Base Rate Loan into a
Eurodollar Loan, on the date specified in a notice given pursuant
to Section 1.6(a),
(d) any failure by the Borrower to make any payment of
principal on any Fixed Rate Loan when due (whether by
acceleration or otherwise), or
(e) any acceleration of the maturity of a Fixed Rate Loan
as a result of the occurrence of any Event of Default hereunder,
then, upon the demand of such Bank, the Borrower shall pay to such Bank
such amount as will reimburse such Bank for such loss, cost or expense.
If any Bank makes such a claim for compensation, it shall provide to the
Borrower, with a copy to the Agent, a certificate setting forth the
amount of such loss, cost or expense in reasonable detail (including an
explanation of the basis for and the computation of such loss, cost or
expense) and the amounts shown on such certificate shall be deemed prima
facie correct.
Section 1.13. Commitment Terminations. (a) Optional Revolving Credit
Terminations. The Borrower shall have the right at any time and from
time to time, upon 5 Business Days prior written notice to the Agent, to
terminate the Revolving Credit Commitments without premium or penalty and
in whole or in part, any partial termination to be (i) in an amount which
is not less than $5,000,000 and which is an integral multiple of
$1,000,000 and (ii) allocated ratably among the Banks in proportion to
their respective Revolver Percentages, provided that (x) the Revolving
Credit Commitments may not be reduced to an amount less than the sum of
the aggregate principal amount of Loans (whether Revolving Loans or Swing
Loans) and of L/C Obligations then outstanding and (y) any reduction of
the Revolving Credit Commitments to an amount less than the Swing Line
Commitment or L/C Commitment shall automatically reduce the Swing Line
Commitment or L/C Commitment, as the case may be, to such amount as well.
The Agent shall give prompt notice to each Bank of any such termination
of the Revolving Credit Commitments.
(b) Mandatory Termination Upon a Change of Control. After the
occurrence of a Change of Control, the Required Banks may, by written
notice to the Borrower at any time on or before the date occurring
90 days after the date the Borrower notifies the Banks of such Change of
Control, terminate the remaining Commitments and all other obligations of
the Banks hereunder on the date stated in such notice (which shall in no
event be sooner than (i) three (3) days after such notice is given or
(ii) the day on which the Borrower repays any other Indebtedness for
Borrowed Money). On the date the Commitments are so terminated, all
outstanding Obligations (including, without limitation, all principal of
and accrued interest on the Notes) shall forthwith be due and payable
without further demand, presentment, protest, or notice of any kind and
the Borrower shall immediately pay to the Banks the full amount then
available for drawing under each Letter of Credit, such amount to be held
in the Account referred to in Section 9.4 hereof (the Borrower agreeing
to immediately make such payment on the date the Commitments are so
terminated and acknowledging and agreeing that the Banks would not have
an adequate remedy at law for the failure by the Borrower to honor any
such demand and that the Banks, and the Agent on their behalf, shall have
the right to require the Borrower to specifically perform such
undertaking whether or not any drawings or other demands for payment have
been made under any of the Letters of Credit).
(c) Any termination of the Commitments pursuant to this
Section 1.13 may not be reinstated unless consented to in writing by all
the Banks in their discretion.
Section 1.14. Swing Loans.
(a) Generally. Subject to all of the terms and conditions hereof,
the Agent agrees to make loans in U.S. Dollars to the Borrower under the
Swing Line ("Swing Loans") which shall not in the aggregate at any time
outstanding exceed the lesser of (i) $5,000,000 (as the same may be
reduced pursuant hereto, the "Swing Line Commitment") or (ii) the
difference between the Revolving Credit Commitments in effect at such
time and the aggregate amount of all Revolving Loans and L/C Obligations
outstanding at the time of computation. The Swing Line Commitment shall
be available to the Borrower and may be availed of by the Borrower from
time to time and borrowings thereunder may be repaid and used again
during the period ending on the Revolving Credit Termination Date;
provided that each Swing Loan must be repaid on the last day of the
Interest Period applicable thereto. The Agent shall not make any Swing
Loan during the continuation of any Event of Default if the Required
Banks direct it not to do so. Without regard to the face principal
amount of the Swing Line Note, the actual principal amount at any time
outstanding and owing by the Borrower on account of the Swing Line Note
during the period ending on the Revolving Credit Termination Date shall
be the sum of all Swing Loans then or theretofore made thereon less all
payments actually received thereon during such period. The Agent shall
record on its books and records or on a schedule to the Swing Line Note
the amount of each Swing Loan made by it, all payments of principal and
interest and the principal balance from time to time outstanding thereon,
and, for any Swing Loan bearing interest at Agents' Quoted Rate, the
Interest Period and the interest rate applicable thereto. The record
thereof, whether shown on such books and records of the Agent or on a
schedule to the Swing Line Note, shall be prima facie evidence as to all
such matters; provided, however, that the Agent's failure to record any
of the foregoing or any error in any such record shall not limit or
otherwise affect the obligation of the Borrower to repay all Swing Loans
made to it hereunder together with accrued interest thereon.
(b) Interest on Swing Loans. Each Swing Loan shall bear interest
until maturity (whether by acceleration or otherwise) at a rate per annum
equal to (i) the sum of the Base Rate as in effect from time to time plus
the Applicable Margin for Base Rate Loans as from time to time in effect
or (ii) the Agent's Quoted Rate. Interest on each Swing Loan shall be
due and payable prior to such maturity on the last day of each Interest
Period applicable thereto. Notwithstanding anything to the contrary
contained in this Section 1.14(b) hereof, while any Event of Default
exists or after acceleration, the Borrower shall pay interest (after as
well as before entry of judgment thereon to the extent permitted by law)
on the principal amount of all Swing Loans (computed on the basis of a
year of 360 days and actual days elapsed) at a rate per annum equal to
(a) for any Swing Loan bearing interest with reference to the Base Rate,
the sum of 2% plus the Applicable Margin plus the Base Rate from time to
time in effect; and (b) for any Swing Loan bearing interest with
reference to the Agent's Quoted Rate, the sum of 2% plus the rate of
interest in effect thereon at the time of such default until the end of
the Interest Period applicable thereto and, thereafter, at a rate per
annum equal to the sum of 2% plus the Applicable Margin for Base Rate
Loans plus the Base Rate from time to time in effect; provided, however,
that in the absence of acceleration, any adjustments pursuant to this
Section 1.14(b) shall be made at the election of the Required Banks with
written notice to the Borrower. While any Event of Default exists or
(unless and until rescinded by the requisite Banks) after acceleration,
interest shall be paid on demand of the Agent at the request or with the
consent of the Required Banks.
(c) Requests for Swing Loans. The Borrower shall give the Agent
prior notice (which may be written or oral) no later than 12:00 Noon
(Chicago time) on the date upon which the Borrower requests that any
Swing Loan be made, of the amount and date of such Swing Loan and the
Interest Period selected therefor. Within thirty (30) minutes after
receiving such notice, Agent shall in its discretion quote an interest
rate to the Borrower at which the Agent would be willing to make such
Swing Loan available to the Borrower for a given Interest Period (the
rate so quoted for a given Interest Period being herein referred to as
"Agent's Quoted Rate"). The Borrower acknowledges and agrees that the
interest rate quote is given for immediate and irrevocable acceptance,
and if the Borrower does not so immediately accept Agent's Quoted Rate
for the full amount requested by the Borrower for such Swing Loan, the
Agent's Quoted Rate shall be deemed immediately withdrawn and such Swing
Loan shall bear interest at a rate per annum equal to the sum of the Base
Rate as in effect from time to plus the Applicable Margin for Base Rate
Loans as from time to time in effect. Subject to all of the terms and
conditions hereof, the proceeds of such Swing Loan shall be made
available to the Borrower on the date so requested at the offices of the
Agent in Chicago, Illinois. Anything contained in the foregoing to the
contrary notwithstanding (i) the obligation of Agent to make Swing Loans
shall be subject to all of the terms and conditions of this Agreement and
(ii) the Agent shall not be obligated to make more than one Swing Loan
during any one day.
(d) Refunding Loans. In its sole and absolute discretion, the
Agent may at any time, on behalf of the Borrower (which hereby
irrevocably authorizes the Agent to act on its behalf for such purpose)
and with notice to the Borrower, request each Bank to make a Revolving
Loan in the form of a Base Rate Loan in an amount equal to such Bank's
Revolver Percentage of the amount of the Swing Loans outstanding on the
date such notice is given. Unless any of the conditions of Section 7.2
are not fulfilled on such date, each Bank shall make the proceeds of its
requested Revolving Loan available to Agent, in immediately available
funds, at Agent's principal office in Chicago, Illinois, before 12:00
Noon (Chicago time) on the Business Day following the day such notice is
given. The proceeds of such Revolving Loans shall be immediately applied
to repay the outstanding Swing Loans.
(e) Participations. If any Bank refuses or otherwise fails to make
a Revolving Loan when requested by the Agent pursuant to Section 1.14(d)
above (because the conditions in Section 7.2 are not satisfied or
otherwise), such Bank will, by the time and in the manner such Revolving
Loan was to have been funded to the Agent, purchase from the Agent an
undivided participating interest in the outstanding Swing Loans in an
amount equal to its Revolver Percentage of the aggregate principal amount
of Swing Loans that were to have been repaid with such Revolving Loans,
provided no purchase of a participation in a Swing Loan bearing interest
at Agent's Quoted Rate need be made until after expiration of the
Interest Period applicable thereto. Each Bank that so purchases a
participation in a Swing Loan shall thereafter be entitled to receive its
Revolver Percentage of each payment of principal received on the Swing
Loan and of interest received thereon accruing from the date such Bank
funded to Agent its participation in such Loan. The several obligations
of the Banks under this Section 1.14(e) shall be absolute, irrevocable
and unconditional under any and all circumstances whatsoever and shall
not be subject to any set-off, counterclaim or defense to payment which
any Bank may have or have had against the Borrower, any other Bank or any
other Person whatever. Without limiting the generality of the foregoing,
such obligations shall not be affected by any Default or Event of Default
or by any reduction or termination of the Commitments of any Bank, and
each payment made by an Bank under this Section 1.14(e) shall be made
without any offset, abatement, withholding or reduction whatsoever.
SECTION 2. FEES.
Section 2.1. Fees. (a) Revolving Credit Commitment Fee. The
Borrower shall pay to the Agent for the ratable account of the Banks in
accordance with their Revolver Percentages a commitment fee at the rate
per annum equal to the Applicable Margin (computed on the basis of a year
of 360 days and the actual number of days elapsed) on the average daily
Unused Revolving Credit Commitments. Such commitment fee shall be
payable quarterly in arrears on the last day of each March, June,
September and December in each year (commencing June 30, 1998) and on the
Revolving Credit Termination Date, unless the Revolving Credit
Commitments are terminated in whole on an earlier date, in which event
the commitment fee for the period to the date of such termination in
whole shall be paid on the date of such termination.
(b) Letter of Credit Fees. Quarterly in advance, on the first day
of each calendar quarter, the Borrower shall pay to the Issuing Bank for
its own account a facing fee equal to .125% per annum (computed on the
basis of a year of 360 days and the actual number of days elapsed)
applied to the daily average face amount of standby Letters of Credit
which are scheduled to be outstanding during the immediately succeeding
quarter. Quarterly in arrears, on the last day of each calendar quarter
(commencing June 30, 1998), the Borrower shall pay to the Agent, for the
ratable benefit of the Banks in accordance with their Revolver
Percentages, a letter of credit fee on the daily average face amount of
standby Letters of Credit outstanding during such immediately preceding
quarter at a rate per annum equal to the Applicable Margin (computed on
the basis of a year of 360 days and the actual number of days elapsed)
then in effect. In addition, the Borrower shall pay to the Issuing Bank
for its own account the Issuing Bank's standard drawing, negotiation,
amendment, and other administrative fees for each Letter of Credit
(whether a commercial Letter of Credit or a standby Letter of Credit).
Such standard fees referred to in the preceding sentence may be
established by the Agent from time to time.
(c) Agent Fees. The Borrower shall pay to the Agent, for its own
use and benefit, the fees set forth in that certain mandate letter dated
March 19, 1998 by and between the Borrower and the Agent, or as otherwise
agreed to by the Agent and the Borrower.
(d) Audit Fees. The Borrower shall pay to the Agent for its own
use and benefit charges for audits of the Collateral performed by the
Agent or its agents or representatives in such amounts as the Agent may
from time to time request (the Agent acknowledging and agreeing that such
charges shall be computed in the same manner as it at the time
customarily uses for the assessment of charges for similar collateral
audits); provided, however, that in the absence of any Default and Event
of Default, the Borrower shall not be required to pay the Agent for more
than one such audit during any calendar year.
SECTION 3. PLACE AND APPLICATION OF PAYMENTS.
All payments of principal of and interest on the Loans and the
Reimbursement Obligations, and of all other Obligations payable by the
Borrower under this Agreement and the other Loan Documents, shall be made
by the Borrower to the Agent by no later than 12:00 Noon (Chicago time)
on the due date thereof at the office of the Agent in Chicago, Illinois
(or such other location in the State of Illinois as the Agent may
designate to the Borrower) for the benefit of the Bank or Banks entitled
thereto. Any payments received after such time shall be deemed to have
been received by the Agent on the next Business Day. All such payments
shall be made in U.S. Dollars, in immediately available funds at the
place of payment, in each case without set-off or counterclaim. The
Agent will promptly thereafter cause to be distributed like funds
relating to the payment of principal or interest on Loans and on
Reimbursement Obligations in which the Banks have purchased Participating
Interests ratably to the Banks and like funds relating to the payment of
any other amount payable to any Bank to such Bank, in each case to be
applied in accordance with the terms of this Agreement.
Anything contained herein to the contrary notwithstanding, all
payments and collections received in respect of the Obligations and all
proceeds of the Collateral received, in each instance, by the Agent or
any of the Banks after the occurrence and during the continuation of an
Event of Default shall be remitted to the Agent and distributed as
follows:
(a) first, to the payment of any outstanding costs and
expenses reasonably incurred by the Agent, and any security trustee
therefor, in monitoring, verifying, protecting, preserving or
enforcing the Liens on the Collateral or by the Agent, and any
security trustee therefor, in protecting, preserving or enforcing
rights under the Loan Documents, and in any event all costs and
expenses of a character which the Borrower has agreed to pay the
Agent under Section 12.15 hereof (such funds to be retained by the
Agent for its own account unless it has previously been reimbursed
for such costs and expenses by the Banks, in which event such
amounts shall be remitted ratably to the Banks to reimburse them for
payments theretofore made to the Agent);
(b) second, to the payment of any outstanding interest or
other fees or amounts due under the Notes and the other Loan
Documents, in each case other than for principal on the Loans or in
reimbursement or collateralization of L/C Obligations, pro rata as
among the Agent and the Banks in accordance with the amount of such
interest and other fees or amounts owing each;
(c) third, to the payment of the principal of the Notes and
any unpaid Reimbursement Obligations and to the Agent to be held as
collateral security for any other L/C Obligations (until the Agent
is holding an amount of cash equal to the then outstanding amount of
all such L/C Obligations), the aggregate amount paid to or held as
collateral security for the Banks to be allocated pro rata as among
the Banks in accordance with the aggregate unpaid principal balances
of their Loans and interests in the Letters of Credit;
(d) fourth, to the Agent and the Banks ratably in accordance
with the amounts of any other indebtedness, obligations or
liabilities of the Borrower and its Subsidiaries owing to each of
them and secured by the Collateral Documents (other than for Hedging
Liability described in subsection (e) below), unless and until all
such indebtedness, obligations and liabilities have been fully paid
and satisfied;
(e) fifth, to the payment of the Hedging Liability (if any)
pro rata as among the Banks and their Affiliates to whom such
Hedging Liability is owed in accordance with the then respective
unpaid amounts of such liability; and
(f) sixth, to the Borrower or whoever else may be lawfully
entitled thereto.
SECTION 4.COLLATERAL AND GUARANTIES.
Section 4.1. Collateral. The Obligations shall be secured by
(a) valid, perfected, and enforceable Liens on all right, title, and
interest of the Borrower and each Subsidiary in all capital stock or
other equity interests held by such Person in each of its Subsidiaries
(including Marquise), whether now owned or hereafter formed or acquired,
and all proceeds thereof, and (b) valid, perfected (subject to the
proviso appearing at the end of this sentence) and enforceable Liens on
all right, title, and interest of the Borrower and each Material
Subsidiary in all accounts and account receivables, notes and note
receivables, contract rights, instruments, documents, chattel paper,
general intangibles (including, without limitation, patents, trademarks,
tradenames, copyrights, and other intellectual property rights, but in
any event excluding applications for trademarks based on "intent to
use"), investment property, deposit accounts, inventory, machinery and
equipment (but in any event excluding real estate), whether now owned or
hereafter acquired or arising, and all proceeds thereof; provided,
however, that: (i) neither Marquise nor any subsidiary of Marquise need
grant or perfect any Lien on any of its Property (it being understood
that capital stock held by the Borrower or any Subsidiary in Marquise
does not constitute Property of Marquise) if and so long as the terms of
a Permitted Marquise Financing would prohibit such a Lien and more than
$500,000 is outstanding, or committed to be extended, on such Permitted
Marquise Financing, (ii) the Lien of the Agent on Property subject to a
Capital Lease or conditional sale agreement or subject to a purchase
money lien in each instance permitted hereby shall be subject to the
rights of the lessor or lender thereunder, and the Lien of the Agent on
any such Property need not be perfected if and so long as the grant of a
security interest therein is prohibited by the terms of the relevant
Capital Lease, conditional sale agreement or purchase money financing
agreement, as the case may be, (iii) the Lien of the Agent on
intellectual property licensed to the Borrower or any Subsidiary shall be
subject to the rights of the licensor under such license, (iv) until an
Event of Default has occurred and is continuing and thereafter until
otherwise required by the Agent or the Required Banks, Liens on deposit
accounts maintained by the Borrower or any Material Subsidiary in
proximity to its operations for the purpose of paying amounts owing (as
opposed to receiving collections of the Collateral), Liens on note
receivables, Liens on office equipment and Liens on vehicles which are
subject to a certificate of title law need not be perfected provided that
the total value of such Property at any one time not so perfected does
not exceed $500,000 in the aggregate and (v) until an Event of Default
has occurred and is continuing and thereafter until otherwise required by
the Agent or the Required Banks, Liens on inventory of the Borrower or
any Subsidiary located at a job site and to be installed or otherwise
used in the ordinary course of business at that job need not be
perfected. The Borrower acknowledges and agrees that the Liens on the
Collateral shall be granted to the Agent for the benefit of itself and
the Banks and the Issuing Bank and shall be valid and perfected first
priority Liens subject, however, to the proviso appearing at the end of
the immediately preceding sentence, in each case pursuant to one or more
Collateral Documents from such Persons, each in form and substance
reasonably satisfactory to the Agent.
Section 4.2. Guaranties. The payment and performance of the
Obligations shall at all times be guaranteed by each existing or
hereafter acquired Material Subsidiary of the Borrower pursuant to one or
more guaranty agreements in form and substance reasonably acceptable to
the Agent, as the same may be amended, modified or supplemented from time
to time (individually a "Guaranty" and collectively the "Guaranties").
Section 4.3. Further Assurances. The Borrower agrees that it shall,
and shall cause each Material Subsidiary to, from time to time at the
request of the Agent or the Required Banks, execute and deliver such
documents and do such acts and things as the Agent or the Required Banks
may reasonably request in order to provide for or perfect or protect such
Liens on the Collateral. In the event the Borrower or any Subsidiary
forms or acquires any other Material Subsidiary after the date hereof,
the Borrower shall within 10 Business Days of such formation or
acquisition cause such newly formed or acquired Material Subsidiary to
execute a Guaranty and such Collateral Documents as the Agent may then
require, and the Borrower shall also deliver to the Agent, or cause such
Material Subsidiary to deliver to the Agent, at the Borrower's cost and
expense, such other instruments, documents, certificates, and opinions
reasonably required by the Agent in connection therewith.
SECTION 5.DEFINITIONS; INTERPRETATION.
Section 5.1. Definitions. The following terms when used herein shall
have the following meanings:
"Account" is defined in Section 9.4 hereof.
"Acquired Business" means the entity or assets acquired by the
Borrower or a Subsidiary in an Acquisition, whether before or after the
date hereof.
"Acquisition " means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly, in
(a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the acquisition
of in excess of 50% of the capital stock, partnership interests,
membership interests or equity of any Person, or otherwise causing any
Person to become a Subsidiary, or (c) a merger or consolidation or any
other combination with another Person (other than a Person that is a
Subsidiary) provided that the Borrower or the Subsidiary is the surviving
entity.
"Acquisition Corp." means the Borrower's Wholly-owned Subsidiary,
Diamond Acquisition Corp., a Delaware corporation.
"Adjusted EBITDA" means, with reference to any period, EBITDA for
such period calculated on a pro forma basis, in accordance with the
balance sheets, income statements and other related financial statements
furnished to the Agent and the Banks pursuant to Section 8.9(j) hereof,
as if each Acquisition permitted by Section 8.9(j) hereof occurring
during such period had taken place on the first day of such period.
"Adjusted LIBOR" is defined in Section 1.4(b) hereof.
"Affiliate" means any Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another
Person. A Person shall be deemed to control another Person for the
purposes of this definition if such Person possesses, directly or
indirectly, the power to direct, or cause the direction of, the
management and policies of the other Person, whether through the
ownership of voting securities, common directors, trustees or officers,
by contract or otherwise; provided that, in any event for purposes of
this definition, any Person that owns, directly or indirectly, 5% or more
of the securities having the ordinary voting power for the election of
directors or governing body of a corporation or 5% or more of the
partnership or other ownership interest of any other Person (other than
as a limited partner of such other Person) will be deemed to control such
corporation or other Person.
"Agent" means Harris Trust and Savings Bank, and any successor
pursuant to Section 11.7 hereof.
"Agent's Quoted Rate" is defined in Section 1.14(c) hereof.
"Applicable Margin" means, with respect to Loans, Reimbursement
Obligations, and the Revolving Credit Commitment fees and letter of
credit fees payable under Section 2.1 hereof, from the date of this
Agreement through the first Pricing Date the rate per annum specified
below:
Applicable Margin for Base Rate Revolving Loans
and Reimbursement Obligations: 0.50%
Applicable Margin for Base Rate Term Loans:
0.75%
Applicable Margin for Eurodollar Revolving Loans:
2.00%
Applicable Margin for Eurodollar Term Loans 2.50%
Applicable Margin for Revolving Credit Commitment 0.375%
fee:
Applicable Margin for letter of credit fee: 2.00%
; provided that the Applicable Margin shall be subject to quarterly
adjustments on the first Pricing Date, and thereafter from one Pricing
Date to the next, so that the Applicable Margin means a rate per annum
determined in accordance with the following schedule:
APPLICABLE APPLICABLE APPLICABLE
CASH FLOW MARGIN FOR BASE MARGIN FOR MARGIN FOR
LEVERAGE RATIO RATE LOANS AND EURODOLLAR LOANS REVOLVING CREDIT
FOR SUCH PRICING REIMBURSEMENT AND, LETTER OF COMMITMENT FEE
DATE OBLIGATIONS CREDIT FEE SHALL SHALL BE:
SHALL BE: BE:
Greater than or 0.75% 2.50% 0.50%
equal to 3.5 to
1.0
Less than 3.5 to 0.50% 2.00% 0.375%
1.0, but greater
than or equal to
2.5 to 1.0
Less than 2.5 to 0.00% 1.50% 0.25%
1.0, but greater
than or equal to
1.5 to 1.0
Less than 1.5 to 0.00% 1.00% 0.25%
1.0
For purposes hereof, the term "Pricing Date" means, for any fiscal
quarter of the Borrower ending on or after December 31, 1998, the date on
which the Agent is in receipt of the Borrower's most recent financial
statements for the fiscal quarter then ended, pursuant to Section 8.5(a)
or (b) hereof. The Applicable Margin shall be established based on the
Cash Flow Leverage Ratio for the most recently completed fiscal quarter
and the Applicable Margin established on a Pricing Date shall remain in
effect until the next Pricing Date. If the Borrower has not delivered
its financial statements by the date such financial statements (and, in
the case of the year-end financial statements, audit report) are required
to be delivered under Section 8.5(a) or (b) hereof, until such financial
statements and audit report are delivered, the Applicable Margin shall be
the highest Applicable Margin (i.e., the Cash Flow Leverage Ratio shall
be deemed to be greater than 3.5 to 1.0). If the Borrower subsequently
delivers such financial statements before the next Pricing Date, the
Applicable Margin established by such late delivered financial statements
shall take effect from the date of delivery until the next Pricing Date.
In all other circumstances, the Applicable Margin established by such
financial statements shall be in effect from the Pricing Date that occurs
immediately after the end of the Borrower's fiscal quarter covered by
such financial statements until the next Pricing Date. Each
determination of the Applicable Margin made by the Agent in accordance
with the foregoing shall be conclusive and binding on the Borrower and
the Banks if reasonably determined.
"Application" is defined in Section 1.2(b) hereof.
"Authorized Representative" means those persons shown on the list of
officers provided by the Borrower pursuant to Section 7.1(h) hereof or on
any update of any such list provided by the Borrower to the Agent, or any
further or different officer of the Borrower so named by any Authorized
Representative of the Borrower in a written notice to the Agent.
"Bank" is defined in the introductory paragraph of this Agreement
and includes each assignee bank pursuant to Section 12.12 hereof.
"Base Rate" is defined in Section 1.4(a) hereof.
"Base Rate Loan" means a Loan bearing interest at a rate specified
in Section 1.4(a) hereof.
"Borrower" is defined in the introductory paragraph of this
Agreement.
"Borrowing" means the total of Loans of a single type advanced,
continued for an additional Interest Period, or converted from a
different type into such type by the Banks under a Credit on a single
date and, in the case of Eurodollar Loans, for a single Interest Period.
Borrowings of Loans are made and maintained ratably from each of the
Banks under a Credit according to their Percentages of such Credit. A
Borrowing is "advanced" on the day Banks advance funds comprising such
Borrowing to the Borrower, is "continued" on the date a new Interest
Period for the same type of Loans commences for such Borrowing, and is
"converted" when such Borrowing is changed from one type of Loans to the
other, all as requested by the Borrower pursuant to Section 1.6(a).
Borrowings of Swing Loans are made from the Agent in accordance with the
procedures of Section 1.14 hereof.
"Business Day" means any day (other than a Saturday or Sunday) on
which banks are not authorized or required to close in Chicago, Illinois
and, if the applicable Business Day relates to the advance or
continuation of, or conversion into, or payment of a Eurodollar Loan, on
which banks are dealing in U.S. Dollar deposits in the interbank
eurodollar market in London, England.
"Capital Expenditures" means, with respect to any Person for any
period, the aggregate amount of all expenditures (whether paid in cash or
accrued as a liability) by such Person during that period which, in
accordance with GAAP, are or should be included as "additions to
property, plant or equipment" or similar items reflected in the statement
of cash flows of such Person.
"Capital Lease" means any lease of Property which in accordance with
GAAP is required to be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligation" means, for any Person, the amount of
the liability shown on the balance sheet of such Person in respect of a
Capital Lease determined in accordance with GAAP.
"Cash Flow Leverage Ratio" means, as of the last day of any fiscal
quarter of the Borrower, the ratio of (a) Total Funded Debt as of the
last day of such fiscal quarter, to (b) Adjusted EBITDA for the four
fiscal quarters then ended.
"Change of Control" means any of (a) the acquisition after the date
hereof by any "person" or "group" (as such terms are used in
sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) at any time of beneficial ownership of 30% or more of the
outstanding capital stock of the Borrower on a fully-diluted basis
(excluding, for such purposes, such an acquisition by any such "person"
or "group" which on and at all times after the date hereof held
beneficial ownership of 30% or more of the outstanding capital stock of
the Borrower on a fully-diluted basis), (b) the failure of individuals
who are members of the board of directors of the Borrower on the date of
this Agreement (together with any new or replacement directors whose
initial nomination for election was approved by a majority of the
directors who were either directors on the date of this Agreement or
previously so approved) to constitute a majority of the board of
directors of the Borrower, or (c) any "Change of Control" (or words of
like import), as defined in any agreement or indenture relating to any
issue of Subordinated Debt, shall occur, the effect of which is to cause
the acceleration of any issue of Subordinated Debt or to enable any
holder of Subordinated Debt to cause the Borrower or any Subsidiary to
repurchase, redeem or retire if any Subordinated Debt held by it.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.
"Collateral" means all properties, rights, interests and privileges
from time to time subject to the Liens granted to the Agent, or any
security trustee therefor, by the Collateral Documents.
"Collateral Documents" means the Security Agreement, the Pledge
Agreement, and all other security agreements, pledge agreements,
assignments, financing statements and other documents as shall from time
to time secure or relate to the Obligations or any part thereof.
"Commitments" means the Revolving Credit Commitments, the L/C
Commitment, the Swing Line Commitment, and the Term Loan Commitments.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated)
under common control which, together with the Borrower or any Subsidiary,
are treated as a single employer under Section 414 of the Code.
"Credit" means any of the Revolving Credit or the Term Credit.
"Credit Event" means the advancing of any Loan, the continuation of
or conversion into a Eurodollar Loan, or the issuance of, or extension of
the expiration date or increase in the amount of, any Letter of Credit.
"Default" means any event or condition the occurrence of which
would, with the passage of time or the giving of notice, or both,
constitute an Event of Default.
"Disposition" means the sale, lease, conveyance, or other
disposition of Property, other than sales or other dispositions expressly
permitted under Section 8.10(a), 8.10(b), 8.10(d) or 8.10(h) hereof. The
parties hereto acknowledge and agree that any release to the Borrower or
any Subsidiary of any escrowed portion of the purchase price for the
Reeves Acquisition, or any setoff in reduction of the Seller Debt, in
each case for environmental claims brought by the Borrower, shall not
constitute a Disposition.
"EBIT" means, with reference to any period, Net Income for such
period plus all amounts deducted in arriving at such Net Income amount in
respect of (i) Interest Expense for such period, plus (ii) federal, state
and local income taxes for such period.
"EBITDA" means, with reference to any period, Net Income for such
period plus the sum (without duplication) of all amounts deducted in
arriving at such Net Income amount in respect of (w) Interest Expense for
such period, (x) federal, state and local income taxes for such period,
and (y) depreciation of fixed assets and amortization of intangible
assets (including, without limitation, goodwill, deferred expenses and
organization costs) for such period.
"Eligible Line of Business" means the principal line of business in
which the Borrower is engaged as of the date hereof and each line of
business related thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, or any successor statute thereto.
"Eurodollar Loan" means a Loan bearing interest at the rate
specified in Section 1.4(b) hereof.
"Eurodollar Reserve Percentage" is defined in Section 1.4(b) hereof.
"Event of Default" means any event or condition identified as such
in Section 9.1 hereof.
"Event of Loss" means, with respect to any Property, any of the
following: (a) any loss, destruction or damage of such Property or
(b) any condemnation, seizure, or taking, by exercise of the power of
eminent domain or otherwise, of such Property, or confiscation of such
Property or the requisition of the use of such Property. The parties
hereto acknowledge and agree that any release to the Borrower or any
Subsidiary of any escrowed portion of the purchase price for the Reeves
Acquisition, or any setoff in reduction of the Seller Debt, in each case
for environmental claims brought by the Borrower, shall not constitute an
Event of Loss.
"Excess Cash Flow" means, with respect to any period, the amount (if
any) by which (a) EBITDA during such period exceeds (b) the sum of
(i) Interest Expense during such period plus (ii) federal, state and
local taxes payable in cash during such period plus (iii) the aggregate
amount of payments required to be made in cash by the Borrower and its
Subsidiaries during such period in respect of all principal on the Seller
Debt and all other Indebtedness for Borrowed Money (whether at maturity,
as a result of mandatory sinking fund redemption, mandatory prepayment,
acceleration or otherwise) plus (iv) the aggregate amount of Capital
Expenditures incurred by the Borrower and its Subsidiaries during such
period.
"Excess Cash Flow Net Proceeds" is defined in Section 1.9(b)(i)
hereof.
"Existing Credit Agreement" means, collectively, (i) that certain
Loan and Security Agreement dated as of February 6, 1996 as amended by
the First, Second and Third Amendments thereto, among American National
Bank and Trust Company of Chicago and the Borrower, (ii) that certain
Credit Agreement dated February 21, 1995 between Reeves and NationsBank
of Florida, N.A. and (iii) that certain Second Amended and Restated
Revolving Credit and Term Loan, dated February 21, 1995 as amended by the
First Amendment thereto between Reeves and NationsBank of Florida, N.A.
"Existing Marquise Financing" means the loans available to Marquise
on a revolving basis in an aggregate principal amount of not to exceed
$10,000,000 at any one time outstanding under that certain Credit
Agreement dated December 5, 1997 by and between the Agent, Marquise and
each lender party thereto as the same may from time to time be modified
or amended.
"Federal Funds Rate" means the fluctuating interest rate per annum
described in part (x) of clause (ii) of the definition of Base Rate
appearing in Section 1.4(a) hereof.
"Fixed Charges" shall mean, with respect to any period, the sum
(without duplication) of (i) the aggregate amount of payments required to
be made in cash during such period in respect of the principal of the
Seller Debt (whether at maturity as a result of mandatory sinking fund
redemption, mandatory prepayment, acceleration or otherwise) plus
(ii) all payments of principal due under the terms of any Total Funded
Debt (other than the Seller Debt) within twelve calendar months after the
close of such period plus (iii) Interest Expense during such period, all
of the foregoing as determined for the Borrower and its Subsidiaries on a
consolidated basis in accordance with GAAP plus (iv) the aggregate amount
expended by the Borrower during such period for its repurchase as
treasury stock of its common capital stock.
"Fixed Rate Loan" means any Eurodollar Loan and (to the extent
bearing interest with reference to the Agent's Quoted Rate) any Swing
Loan.
"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable statute
and authority within the U.S. accounting profession), which are
applicable to the circumstances as of the date of determination.
"Guaranty" is defined in Section 4.2 hereof.
"Hedging Liability" means the liability of the Borrower to any of
the Banks in respect of any interest rate swaps, interest rate caps,
interest rate collars, or other interest rate hedging arrangements as the
Borrower may from time to time enter into with any one or more of the
Banks party to this Agreement or their Affiliates. Unless and until the
amount of the Hedging Liability is fixed and determined, the Hedging
Liability shall be deemed to be the market value of the notional amount
of the hedge from the date of computation to the date the hedge expires.
"Hostile Acquisition" means the acquisition of the capital stock or
other equity interests of a Person through a tender offer or similar
solicitation of the owners of such capital stock or other equity
interests which has not been approved (prior to such acquisition) by
resolutions of the Board of Directors of such Person or by similar action
if such Person is not a corporation, or as to which such approval has
been withdrawn.
"Indebtedness for Borrowed Money" means for any Person (without
duplication) (i) all indebtedness created, assumed or incurred in any
manner by such Person representing money borrowed (including by the
issuance of debt securities), (ii) all indebtedness for the deferred
purchase price of property or services (other than trade accounts payable
arising in the ordinary course of business), (iii) all indebtedness
secured by any Lien upon Property of such Person, whether or not such
Person has assumed or become liable for the payment of such indebtedness,
(iv) all Capitalized Lease Obligations of such Person and (v) all
obligations of such Person on or with respect to letters of credit,
bankers' acceptances and other extensions of credit whether or not
representing obligations for borrowed money.
"Interest Expense" means, with reference to any period, the sum of
all interest charges (including imputed interest charges with respect to
Capitalized Lease Obligations and all amortization of debt discount and
expense) of the Borrower and its Subsidiaries for such period determined
on a consolidated basis in accordance with GAAP.
"Interest Period" is defined in Section 1.7 hereof.
"Issuing Bank" means Harris Trust and Savings Bank.
"L/C Commitment" means $1,500,000, as reduced pursuant to the terms
hereof.
"L/C Obligations" means the aggregate undrawn face amounts of all
outstanding Letters of Credit and all unpaid Reimbursement Obligations.
"Lending Office" is defined in Section 10.4 hereof.
"Letter of Credit" is defined in Section 1.2(a) hereof.
"LIBOR" is defined in Section 1.4(b) hereof.
"Lien" means any mortgage, lien, security interest, pledge, charge
or encumbrance of any kind in respect of any Property, including the
interests of a vendor or lessor under any conditional sale, Capital Lease
or other title retention arrangement.
"Loan" means and includes Revolving Loans, Term Loans, and Swing
Loans, and each of them singly, and the term "type" of Loan refers to its
status as a Revolving Loan, Term Loan or Swing Loan, or, if a Revolving
Loan or Term Loan, to its status as a Base Rate Loan or Eurocurrency
Loan.
"Loan Documents" means this Agreement, the Notes, the Applications,
the Collateral Documents, the Guaranties, and each other instrument or
document to be delivered hereunder or thereunder or otherwise in
connection therewith.
"Marquise" means Marquise Financial Services, Inc., a Delaware
corporation.
"Marquise Support Letter" means that certain Capital Maintenance
Agreement dated December 5, 1997 by and between the Borrower and Harris
Trust and Savings Bank as currently in force and effect without giving
effect to any subsequent modification or amendment thereof.
"Material Adverse Effect" means (a) a material adverse change in, or
a material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or business prospects of the Borrower,
or the Borrower and its Subsidiaries taken as a whole; (b) a material
impairment of the ability of the Borrower or any Subsidiary to perform
its obligations under any Loan Document; or (c) a material adverse effect
upon the legality, validity, binding effect or enforceability against the
Borrower or any Subsidiary of any Loan Document.
"Material Subsidiary" shall mean each Subsidiary (i) which has
(together with its subsidiaries) consolidated total assets with an
aggregate book value as determined in accordance with GAAP of more than
$1,000,000 as of the close of any quarterly accounting period of the
Borrower ending on or after December 31, 1997, or (ii) which has
(together with its subsidiaries) annual consolidated total gross revenues
as determined in accordance with GAAP of more than $2,500,000 as of the
close of annual accounting period of the Borrower ending on or after
December 31, 1997, or (iii) which is obligated, or which has a subsidiary
which is obligated, as of any time after the date hereof on any Debt
aggregating in excess of $250,000; provided, however, that each
Subsidiary which would (but for the application of this proviso to such
Subsidiary) constitute a Non-Material Subsidiary with the greatest total
assets shall constitute a Material Subsidiary if (i) the consolidated
total gross revenues of such Subsidiary (together with its subsidiaries),
when taken together with the consolidated total gross revenues of all
other Non-Material Subsidiaries (together with their respective
subsidiaries), in each case for the most recently completed annual
accounting period of the Borrower for which audited financial statements
are available, equal or exceed $5,000,000 or (ii) the consolidated total
assets of such Subsidiary (together with its subsidiaries), when taken
together with the consolidated total assets of all other Non-Material
Subsidiaries (together with their respective subsidiaries), in each case
as of the close of any quarterly accounting period of the Borrower, equal
or exceed $2,000,000. Once a Subsidiary is a Material Subsidiary, it
shall remain a Material Subsidiary unless and until the Required Banks
agree otherwise.
"Moody's" means Moody's Investors Service, Inc.
"Net Cash Proceeds" means, as applicable, (a) with respect to any
Disposition by a Person, cash and cash equivalent proceeds received by or
for such Person's account, net of (i) reasonable direct costs relating to
such Disposition, (ii) sale, use, or other transactional taxes paid or
payable by such Person as a direct result of such Disposition, and
(iii) amounts required to be applied to repay principal of, premium, if
any, and interest on any Indebtedness for Borrowed Money secured by a
Lien on the Property (or portion thereof) sold or otherwise disposed of
(other than the Obligations hereunder) which is required to be and is
repaid in connection with such Disposition; (b) with respect to any Event
of Loss of a Person, cash and cash equivalent proceeds received by or for
such Person's account (whether as a result of payments made under any
applicable insurance policy therefor or in connection with condemnation
proceedings or otherwise), net of (i) reasonable direct costs incurred in
connection with the collection of such proceeds, awards or other
payments, (ii) sale or other transactional taxes paid or payable by such
Person as a direct result of such Event of Loss, and (iii) amounts
required to be applied to repay principal of, premium, if any, and
interest on any Indebtedness for Borrowed Money secured by a Lien on the
Property (or portion thereof) so damaged or taken (other than the
Obligations hereunder) which is required to be and is repaid in
connection with such Event of Loss; and (c) with respect to any offering
of equity securities of a Person or the issuance of any Indebtedness for
Borrowed Money by a Person, cash and cash equivalent proceeds received
by or for such Person's account, net of reasonable legal, underwriting,
and other fees and expenses incurred as a direct result thereof.
"Net Income" means, with reference to any period, the net income (or
net loss) of the Borrower and its Subsidiaries for such period computed
on a consolidated basis in accordance with GAAP.
"Net Worth" means, at any time the same is to be determined, total
shareholders' equity (including capital stock, preferred stock,
additional paid-in capital and retained earnings after deducting treasury
stock) which would appear on the balance sheet of the Borrower and its
Subsidiaries prepared on a consolidated basis in accordance with GAAP.
"Non-Material Subsidiary" means each Subsidiary that is not a
Material Subsidiary.
"Notes" means and includes the Revolving Notes, Term Notes and Swing
Line Note.
"Obligations" means all fees payable hereunder, all obligations of
the Borrower to pay principal and interest on Loans and Reimbursement
Obligations, and all other payment obligations of the Borrower or any
Subsidiary arising under or in relation to any Loan Document, in each
case whether now existing or hereafter arising.
"Participating Bank" is defined in Section 1.2(d) hereof.
"Participating Interest" is defined in Section 1.2(d) hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to any or all of its functions under ERISA.
"Percentage" means for any Bank its Revolver Percentage or Term Loan
Percentage, as applicable.
"Permitted Marquise Financing" means the Existing Marquise Financing
and any refinancing (but not any increase) of the Existing Marquise
Financing on terms and conditions no more burdensome on the Borrower and
its Subsidiaries on the whole than those governing the Existing Marquise
Financing.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization or any
other entity or organization, including a government or agency or
political subdivision thereof.
"Plan" means any employee pension benefit plan covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of
the Code that either (i) is maintained by a member of the Controlled
Group for employees of a member of the Controlled Group or (ii) is
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to
which a member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan
years made contributions.
"Pledge Agreement" means that certain Pledge Agreement dated of even
date herewith among the Borrower, certain of its Subsidiaries, and the
Agent, as the same may be amended, modified or restated from time to
time.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Reimbursement Obligation" is defined in Section 1.2(c) hereof.
"Required Banks" means, at any time, Banks whose outstanding Loans
and interests in Letters of Credit and Unused Revolving Credit
Commitments constitute more than 66-2/3% of the sum of the total
outstanding Loans, interests in Letters of Credit and Unused Revolving
Credit Commitments of the Banks.
"Reeves" means Reeves Southeastern Corporation, a Florida
corporation.
"Reeves Acquisition" means the acquisition of Reeves Southeastern
Corporation by Borrower pursuant to the Reeves Stock Purchase Agreement.
"Reeves Stock Purchase Agreement" means that certain Agreement dated
as of March 5, 1998, by and among Reeves, the Borrower, Acquisition
Corp., Reeves Southeastern Employee Stock Ownership Trust, and the
stockholders of Reeves Southeastern Corporation, all exhibits, schedules,
and attachments thereto, and all instruments and documents to be executed
and delivered in connection therewith.
"Revolving Credit" means the credit facility for making Revolving
Loans and issuing Letters of Credit described in Sections 1.1 and 1.2
hereof.
"Revolver Percentage" means, for each Bank, the percentage of the
Revolving Credit Commitments represented by such Bank's Revolving Credit
Commitment or, if the Revolving Credit Commitments have been terminated,
the percentage held by such Bank (including through participation
interests in Reimbursement Obligations) of the aggregate principal amount
of all Revolving Loans and L/C Obligations then outstanding.
"Revolving Credit Commitment" is defined in Section 1.1 hereof.
"Revolving Credit Termination Date" means April 20, 2003, or such
earlier date on which the Revolving Credit Commitments are terminated in
whole pursuant to Section 1.13, 9.2 or 9.3 hereof.
"Revolving Loan" is defined in Section 1.1 hereof and, as so
defined, includes a Base Rate Loan or a Eurodollar Loan, each of which is
a "type" of Revolving Loan hereunder.
"Revolving Note" is defined in Section 1.11(a) hereof.
"S&P" means Standard & Poor's Ratings Services Group, a division of
The McGraw-Hill Companies, Inc.
"Security Agreement" means that certain Security Agreement dated of
even date herewith among the Borrower, certain of its Subsidiaries, and
the Agent, as the same may be amended, modified or restated from time to
time.
"Seller Debt" means the $11,700,000 in aggregate amount of unsecured
Indebtedness of Acquisition Corp. to the ESOP and Stockholders identified
and defined in the Reeves Stock Purchase Agreement evidenced by those
certain promissory notes of Acquisition Corp. payable to the order of
ESOP and Stockholders in the aggregate amount of $11,700,000,
representing the deferred portion of the consideration due from
Acquisition Corp. for the Reeves Acquisition.
"Subordinated Debt" means Indebtedness for Borrowed Money of the
Borrower or any Subsidiary owing to any Person on terms and conditions,
and in such amounts, acceptable to the Agent and the Required Banks in
their sole discretion and which is subordinated in right of payment to
the prior payment in full of the Obligations pursuant to written
subordination provisions approved in writing by the Agent and the
Required Banks.
"subsidiary" means, as to any particular parent corporation or
organization, any other corporation or organization more than 50% of the
outstanding Voting Stock of which is at the time directly or indirectly
owned by such parent corporation or organization or by any one or more
other entities which are themselves subsidiaries of such parent
corporation or organization. The term "Subsidiary" means a subsidiary of
the Borrower or of any of its direct or indirect Subsidiaries.
"Swing Line" means the credit facility for making a Swing Loan
described in Section 1.14 hereof.
"Swing Loans" is defined in Section 1.14 hereof.
"Swing Line Note" is defined in Section 1.14 hereof.
"Swing Line Commitment" is defined in Section 1.14(a) hereof.
"Term Credit" means the credit facility for Term Loans described in
Section 1.3 hereof.
"Term Loan Commitment" is defined in Section 1.3 hereof.
"Term Loan" is defined in Section 1.3 hereof and, as so defined,
includes a Base Rate Loan or a Eurodollar Loan, each of which is a "type"
of Term Loan hereunder.
"Term Note" is defined in Section 1.11(b) hereof.
"Term Loan Percentage" means, for each Bank, the percentage of the
Term Loan Commitments represented by such Bank's Term Loan Commitment or,
if the Term Loan Commitments have been terminated or have expired, the
percentage held by such Bank of the aggregate principal amount of all
Term Loans then outstanding.
"Total Consideration" means the total amount (but without
duplication) of (a) cash paid in connection with any Acquisition, plus
(b) indebtedness payable to the seller in connection with such
Acquisition, plus (c) the fair market value of any equity securities,
including any warrants or options therefor, delivered in connection with
any Acquisition, plus (d) the present value of covenants not to compete
entered into in connection with such Acquisition or other future payments
which are required to be made over a period of time and are not
contingent upon the Borrower or its Subsidiary meeting financial
performance objectives (discounted at the Base Rate), but only to the
extent not included in clause (a), (b), or (c) above, plus (e) the amount
of indebtedness assumed in connection with such Acquisition.
"Total Funded Debt" means, at any time the same is to be determined,
the aggregate of all Indebtedness for Borrowed Money of the Borrower and
its Subsidiaries at such time, including all Indebtedness for Borrowed
Money of any other Person which is directly or indirectly guaranteed by
the Borrower or any of its Subsidiaries or which the Borrower or any of
its Subsidiaries has agreed (contingently or otherwise) to purchase or
otherwise acquire or in respect of which the Borrower or any of its
Subsidiaries has otherwise assured a creditor against loss.
"Unfunded Vested Liabilities" means, for any Plan at any time, the
amount (if any) by which the present value of all vested nonforfeitable
accrued benefits under such Plan exceeds the fair market value of all
Plan assets allocable to such benefits, all determined as of the then
most recent valuation date for such Plan, but only to the extent that
such excess represents a potential liability of a member of the
Controlled Group to the PBGC or the Plan under Title IV of ERISA.
"U.S. Dollars" and "$" each means the lawful currency of the United
States of America.
"Unused Revolving Credit Commitments" means, at any time, the
difference between the Revolving Credit Commitments then in effect and
the aggregate outstanding principal amount of Revolving Loans and L/C
Obligations.
"Voting Stock" of any Person means capital stock or other equity
interests of any class or classes (however designated) having ordinary
power for the election of directors or other similar governing body of
such Person, other than stock or other equity interests having such power
only by reason of the happening of a contingency.
"Welfare Plan" means a "welfare plan" as defined in Section 3(1) of
ERISA.
"Wholly-owned Subsidiary" means a Subsidiary of which all of the
issued and outstanding shares of capital stock (other than directors'
qualifying shares as required by law) or other equity interests are owned
by the Borrower and/or one or more Wholly-owned Subsidiaries within the
meaning of this definition.
Section 5.2. Interpretation. The foregoing definitions are equally
applicable to both the singular and plural forms of the terms defined.
The words "hereof", "herein", and "hereunder" and words of like import
when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All references to
time of day herein are references to Chicago, Illinois time unless
otherwise specifically provided. Where the character or amount of any
asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is
required to be made for the purposes of this Agreement, it shall be done
in accordance with GAAP except where such principles are inconsistent
with the specific provisions of this Agreement.
Section 5.3. Change in Accounting Principles. If, after the date of
this Agreement, there shall occur any change in GAAP from those used in
the preparation of the financial statements referred to in Section 6.5
hereof and such change shall result in a change in the method of
calculation of any financial covenant, standard or term found in this
Agreement, either the Borrower or the Required Banks may by notice to the
Banks and the Borrower, respectively, require that the Banks and the
Borrower negotiate in good faith to amend such covenants, standards, and
term so as equitably to reflect such change in accounting principles,
with the desired result being that the criteria for evaluating the
financial condition of the Borrower and its Subsidiaries shall be the
same as if such change had not been made. No delay by the Borrower or
the Required Banks in requiring such negotiation shall limit their right
to so require such a negotiation at any time after such a change in
accounting principles. Until any such covenant, standard, or term is
amended in accordance with this Section 5.3, financial covenants shall be
computed and determined in accordance with GAAP in effect prior to such
change in accounting principles. Without limiting the generality of the
foregoing, the Borrower shall neither be deemed to be in compliance with
any financial covenant hereunder nor out of compliance with any financial
covenant hereunder if such state of compliance or noncompliance, as the
case may be, would not exist but for the occurrence of a change in
accounting principles after the date hereof.
SECTION 6.REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Agent and the Banks as
follows:
Section 6.1. Organization and Qualification. The Borrower is duly
organized, validly existing and in good standing as a corporation under
the laws of the state of its incorporation, has full and adequate
corporate power to own its Property and conduct its business as now
conducted, and is duly licensed or qualified and in good standing in each
jurisdiction in which the nature of the business conducted by it or the
nature of the Property owned or leased by it requires such licensing or
qualifying, except where the failure to do so would not have a Material
Adverse Effect.
Section 6.2. Subsidiaries. Each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which
it is incorporated or organized, as the case may be, has full and
adequate power to own its Property and conduct its business as now
conducted, and is duly licensed or qualified and in good standing in each
jurisdiction in which the nature of the business conducted by it or the
nature of the Property owned or leased by it requires such licensing or
qualifying, except where the failure to do so would not have a Material
Adverse Effect. Schedule 6.2 hereto (as the same may be deemed amended
pursuant to Section 8.10(c) or 8.17 hereof) identifies each Subsidiary,
the jurisdiction of its incorporation or organization, as the case may
be, the percentage of issued and outstanding shares of each class of its
capital stock or other equity interests owned by the Borrower and the
other Subsidiaries and, if such percentage is not 100% (excluding
directors' qualifying shares as required by law), a description of each
class of its authorized capital stock and other equity interests and the
number of shares of each class issued and outstanding and whether such
Subsidiary is a Material or Non-Material Subsidiary. All of the
outstanding shares of capital stock and other equity interests of each
Subsidiary are validly issued and outstanding and fully paid and
nonassessable and all such shares and other equity interests indicated on
Schedule 6.2 (as the same may be deemed amended pursuant to
Section 8.10(c) or 8.17 hereof) as owned by the Borrower or a Subsidiary
are owned, beneficially and of record, by the Borrower or such Subsidiary
free and clear of all Liens other than the Liens granted in favor of the
Agent pursuant to the Collateral Documents. There are no outstanding
commitments or other obligations of any Subsidiary to issue, and no
options, warrants or other rights of any Person to acquire, any shares of
any class of capital stock or other equity interests of any Subsidiary.
Section 6.3. Authority and Validity of Obligations. The Borrower has
full right and authority to enter into this Agreement and the other Loan
Documents executed by it, to make the borrowings herein provided for, to
issue its Notes in evidence thereof, to grant to the Agent the Liens
described in the Collateral Documents executed by the Borrower, and to
perform all of its obligations hereunder and under the other Loan
Documents executed by it. Each Subsidiary has full right and authority
to enter into the Loan Documents executed by it, to guarantee the
Obligations to the extent required hereunder, to grant to the Agent the
Liens described in the Collateral Documents executed by such Person, and
to perform all of its obligations under the Loan Documents executed by
it. The Loan Documents delivered by the Borrower and by each Subsidiary
have been duly authorized, executed and delivered by such Person and
constitute valid and binding obligations of such Person enforceable in
accordance with their terms except as enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
creditors' rights generally and general principles of equity (regardless
of whether the application of such principles is considered in a
proceeding in equity or at law); and this Agreement and the other Loan
Documents do not, nor does the performance or observance by the Borrower
or any Subsidiary of any of the matters and things herein or therein
provided for, (a) contravene or constitute a default under any provision
of law or any judgment, injunction, order or decree binding upon the
Borrower or any Subsidiary or any provision of the charter, articles of
incorporation, by-laws or comparable constituent documents of the
Borrower or any Subsidiary, (b) contravene or constitute a default under
any covenant, indenture or agreement of or affecting the Borrower or any
Subsidiary or any of its Property, in each case where such contravention
or default is reasonably likely to have a Material Adverse Effect, or
(c) result in the creation or imposition of any Lien on any Property of
the Borrower or any Subsidiary other than the Liens granted in favor of
the Agent pursuant to the Collateral Documents.
Section 6.4. Use of Proceeds; Margin Stock. The Borrower shall use
certain proceeds of the Revolving Loans for the purpose of refinancing
existing indebtedness and shall use all other Credit under the Revolving
Credit for its general corporate purposes. The Borrower shall use the
proceeds of the Term Loans to finance the Reeves Acquisition. Neither
the Borrower nor any Subsidiary is engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Loan or any other extension
of credit made hereunder will be used to purchase or carry any such
margin stock or to extend credit to others for the purpose of purchasing
or carrying any such margin stock. Margin stock (as hereinabove defined)
constitutes less than 25% of those assets of the Borrower and its
Subsidiaries which are subject to any limitation on sale, pledge, or
other restriction hereunder.
Section 6.5. Financial Reports.
(a) Diamond. The consolidated balance sheet of the Borrower and
its Subsidiaries as at December 31, 1997, and the related consolidated
statements of income, retained earnings and cash flows of the Borrower
and its Subsidiaries for the fiscal year then ended, and accompanying
notes thereto, which financial statements are accompanied by the audit
report of Ernst & Young, independent public accountants, and the
unaudited interim consolidated balance sheet of the Borrower and its
Subsidiaries as at February 28, 1998, and the related consolidated
statements of income and retained earnings of the Borrower and its
Subsidiaries for the two months then ended, heretofore furnished to the
Banks, fairly present in all material respects the consolidated financial
condition of the Borrower and its Subsidiaries as at said dates and the
consolidated results of their operations and cash flows for the periods
then ended in conformity with GAAP applied on a consistent basis (other
than, in respect of interim statements, for the absence of notes and
normal year-end audit adjustments). Neither the Borrower nor any
Subsidiary has contingent liabilities which are material to it other than
as indicated on such financial statements or, with respect to future
periods, on the financial statements furnished pursuant to Section 8.5
hereof.
(b) Reeves. The consolidated balance sheet of the Reeves and its
subsidiaries as at November 1, 1997, and the related consolidated
statements of income, retained earnings and cash flows of the Reeves and
its subsidiaries for the fiscal year then ended, and accompanying notes
thereto, which financial statements are accompanied by the audit report
of Coopers & Lybrand, independent public accountants, and the unaudited
interim consolidated balance sheet of the Reeves and its subsidiaries as
at February 28, 1998, and the related consolidated statements of income
and retained earnings of the Reeves and its subsidiaries for the four
months then ended, heretofore furnished to the Banks, fairly present in
all material respects the consolidated financial condition of the Reeves
and its subsidiaries as at said dates and the consolidated results of
their operations and cash flows for the periods then ended in conformity
with GAAP applied on a consistent basis (other than, in respect of
interim statements, for the absence of notes and normal year-end audit
adjustments). Neither Reeves nor any subsidiary has contingent
liabilities which are material to it other than as indicated on such
financial statements or, with respect to future periods, on the financial
statements furnished pursuant to Section 8.5 hereof.
Section 6.6. No Material Adverse Change. Since December 31, 1997,
there has been no change in the condition (financial or otherwise) or
business prospects of the Borrower or any Subsidiary, except those
occurring in the ordinary course of business, none of which individually
or in the aggregate have been materially adverse.
Section 6.7. Full Disclosure. The statements and information
furnished by or on behalf of the Borrower to the Banks in connection with
the negotiation of this Agreement and the other Loan Documents and the
commitments by the Banks to provide all or part of the financing
contemplated hereby do not (x) contain any untrue statements of a fact or
(y) omit a fact necessary to make the material statements contained
herein or therein, in the light of the circumstances under which they
were made, not misleading, in either case where the correct or complete
facts would, if they constituted a change from the facts as originally
disclosed or stated, have been reasonably likely to have a Material
Adverse Effect; the Banks acknowledging that, as to any projections and
other forward-looking statements regarding future expectations and
beliefs (the "Statements") furnished by the Borrower to the Banks, the
Borrower only represents that, at the time the Statements were made by
the Borrower to the Banks the Statements were based upon information and
estimates the Borrower in good faith believed to be reasonable.
Section 6.8. Trademarks, Franchises, and Licenses. The Borrower and
each of the Subsidiaries own, possess, or have the right to use all
necessary patents, licenses, franchises, trademarks, trade names, trade
styles, copyrights, trade secrets, know how and confidential commercial
and proprietary information to conduct their businesses as now conducted,
without known conflict with any patent, license, franchise, trademark,
trade name, trade style, copyright or other proprietary right of any
other Person which conflict would reasonably be expected (x) to be
resolved adversely and (y) if so determined, to have a Material Adverse
Effect.
Section 6.9. Governmental Authority and Licensing. The Borrower and
each of the Subsidiaries have received all licenses, permits, and
approvals of all Federal, state, local, and foreign governmental
authorities, if any, necessary to conduct their business, in each case
where the failure to obtain or maintain the same is reasonably likely to
have a Material Adverse Effect. There is neither pending nor to the
Borrower's knowledge, threatened, any investigation or proceeding which,
if adversely determined, is reasonably likely to result in revocation or
denial of any material license, permit or approval, the revocation or
denial of which would reasonably be expected to have a Material Adverse
Effect.
Section 6.10. Good Title. The Borrower and each of the Subsidiaries
have good and defensible title (or valid leasehold interests) to their
assets as reflected on the most recent consolidated balance sheet of the
Borrower and its Subsidiaries furnished to the Banks (except for sales of
assets in the ordinary course of business), subject to no Liens other
than such thereof as are permitted by Section 8.8 hereof.
Section 6.11. Litigation and Other Controversies. After giving effect
to the indemnities in the Reeves Purchase Agreement for certain existing
environmental issues, there is no litigation or governmental proceeding
or labor controversy pending, nor to the knowledge of the Borrower
threatened, against the Borrower or any Subsidiary which if adversely
determined is reasonably likely to have a Material Adverse Effect.
Section 6.12. Taxes. All tax returns required to be filed by the
Borrower or any Subsidiary in any jurisdiction have, in fact, been filed,
and all taxes, assessments, fees and other governmental charges upon the
Borrower or any Subsidiary or upon any of its respective Property, income
or franchises, which are shown to be due and payable in such returns,
have been paid, except such taxes, assessments, fees and governmental
charges, if any, as are being contested in good faith and by appropriate
proceedings which prevent enforcement of the matter under contest and as
to which adequate reserves established in accordance with GAAP have been
provided. The Borrower does not know of any proposed additional tax
assessment against the Borrower or any Subsidiary for which adequate
provisions in accordance with GAAP have not been made on their accounts.
Adequate provisions in accordance with GAAP for taxes on the books of the
Borrower and each Subsidiary have been made for all open years, and for
its current fiscal period.
Section 6.13. Approvals. No authorization, consent, license, or
exemption from, or filing or registration with, any court or governmental
department, agency or instrumentality, nor any approval or consent of the
stockholders of the Borrower or any Subsidiary, or of any other Person,
is or will be necessary to the valid execution, delivery or performance
by the Borrower or any Subsidiary of this Agreement or any other Loan
Document, except for such approvals which have been obtained prior to the
date of this Agreement and remain in full force and effect.
Section 6.14. Affiliate Transactions. Neither the Borrower nor any
Subsidiary is a party to any contracts or agreements with any of its
Affiliates on terms and conditions which are less favorable to the
Borrower or such Subsidiary than would be usual and customary in similar
contracts or agreements between Persons not affiliated with each other.
Section 6.15. Investment Company; Public Utility Holding Company.
Neither the Borrower nor any Subsidiary is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "public utility holding
company" within the meaning of the Public Utility Holding Company Act of
1935, as amended.
Section 6.16. ERISA. The Borrower and each of its Subsidiaries, and
each member of its Controlled Group, have fulfilled their obligations
under the minimum funding standards of, and are in compliance in all
material respects with, ERISA and the Code to the extent applicable to
any Plan maintained by any one or more of them or for the benefit of
their employees and have not incurred any liability to the PBGC or a Plan
under Title IV of ERISA other than a liability to the PBGC for premiums
under Section 4007 of ERISA. Neither the Borrower nor any Subsidiary has
any material contingent liabilities with respect to any post-retirement
benefits under a Welfare Plan, other than liability for continuation
coverage described in article 6 of Title I of ERISA.
Section 6.17. Compliance with Laws. The Borrower and each of its
Subsidiaries are in compliance with the requirements of all federal,
state and local laws, rules and regulations applicable to or pertaining
to their Properties or business operations (including, without
limitation, the Occupational Safety and Health Act of 1970, the Americans
with Disabilities Act of 1990, laws and regulations relating to the
providing of health care services and products, and laws and regulations
establishing quality criteria and standards for air, water, land and
toxic or hazardous wastes and substances), where any such non-compliance,
individually or in the aggregate, after giving effect to the indemnities
in the Reeves Purchase Agreement for certain existing environmental
issues, is reasonably likely to have a Material Adverse Effect. Neither
the Borrower nor any Subsidiary has received notice to the effect that
its operations are not in compliance with any of the requirements of
applicable federal, state or local environmental, health and safety
statutes and regulations or are the subject of any governmental
investigation evaluating whether any remedial action is needed to respond
to a release of any toxic or hazardous waste or substance into the
environment, where any such non-compliance or remedial action,
individually or in the aggregate, after giving effect to the indemnities
in the Reeves Purchase Agreement for certain existing environmental
issues, is reasonably likely to have a Material Adverse Effect.
Section 6.18. Other Agreements. Neither the Borrower nor any
Subsidiary is in default under the terms of any covenant, indenture or
agreement of or affecting such Persons or any of their Properties, which
default if uncured is reasonably likely to have a Material Adverse
Effect.
Section 6.19. Solvency. The Borrower and its Subsidiaries are able to
pay their debts as they become due and have sufficient capital to carry
on their businesses and all businesses in which they are about to engage
in; and the amount that will be required to pay the Borrower's and each
Subsidiary's probable liabilities as they become absolute and mature is
less than the sum of the present fair sale value of its assets as a going
concern.
Section 6.20. Reeves Acquisition. The Borrower has heretofore
delivered to the Agent a true and correct copy of the Reeves Stock
Purchase Agreement and, except to the extent consented to in writing by
the Agent, the Reeves Stock Purchase Agreement has not been amended or
modified in any respect and no condition to the effectiveness thereof or
the obligations of the Borrower or Acquisition Corp. thereunder has been
waived. The Borrower and, to the best of the Borrower's knowledge,
Reeves, have all necessary right, power, and authority to consummate the
transactions contemplated by the Reeves Stock Purchase Agreement and to
perform all of their obligations thereunder. The Reeves Stock Purchase
Agreement has been duly authorized, executed, and delivered by the
Borrower and Acquisition Corp. and, to the best of the Borrower's
knowledge, Reeves, and the Reeves Stock Purchase Agreement constitutes
the valid and binding obligation of the Borrower and Acquisition Corp.
and to the best of the Borrower's knowledge, Reeves, enforceable against
each of them in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, fraudulent conveyance or similar
laws affecting creditors' rights generally and general principles of
equity (regardless of whether the application of such principles is
considered in a proceeding in equity or at law); and the Reeves Stock
Purchase Agreement does not, nor does the observance or performance by
the Borrower or Acquisition Corp. or, to the best of the Borrower's
knowledge, Reeves, of any of the matters and things therein provided for,
contravene or constitute a default under any provision of law or any
judgment, injunction, order, or decree binding upon such Person or any
provision of the charter, articles of incorporation, or by-laws of such
Person or any covenant, indenture, or agreement of or affecting such
Person or any of its Property, or result in the creation or imposition of
any Lien on any such Person's Property. No authorization, consent,
license, or exemption from, or filing or registration with, any court or
governmental department, agency, or instrumentality, nor any approval or
consent of any other Person, is or will be necessary to the valid
execution, delivery, or performance by the Borrower or Acquisition Corp.
or, to the best of the Borrower's knowledge, Reeves, of the Reeves Stock
Purchase Agreement or of any other instrument or document executed and
delivered in connection therewith, except for such thereof that have
heretofore been obtained and remain in full force and effect. Neither
the Borrower nor Acquisition Corp. nor, to the best of the Borrower's
knowledge, Reeves, are in default in any of their respective obligations
under the Reeves Stock Purchase Agreement.
Section 6.21. Year 2000 Compliance. The Borrower and its Subsidiaries
are conducting or have conducted a comprehensive review and assessment of
its computer applications, and have made inquiry of their material
suppliers, vendors and customers, with respect to any defect in computer
software, data bases, hardware, controls and peripherals related to the
occurrence of the year 2000 or the use of any date after December 31,
1999, in connection therewith. Based on the foregoing review, assessment
and inquiry, the Borrower believes that no such defect could reasonably
be expected to have a Material Adverse Effect.
Section 6.22. No Default. No Default or Event of Default has occurred
and is continuing.
SECTION 7. CONDITIONS PRECEDENT.
The obligation of each Bank to advance, continue or convert any Loan
(whether a Revolving Loan or Swing Loan, but in any event other than the
continuation of, or conversion into, a Base Rate Loan) or of the Issuing
Bank to issue, extend the expiration date (including by not giving notice
of non-renewal) of or increase the amount of any Letter of Credit under
this Agreement, shall be subject to the following conditions precedent:
Section 7.1. Initial Credit Event. Before or concurrently with the
initial Credit Event:
(a) the Agent shall have received for each Bank this Agreement
duly executed by the Borrower and the Banks;
(b) the Agent shall have received for each Bank such Bank's
duly executed Notes of the Borrower dated the date hereof and
otherwise in compliance with the provisions of Section 1.11 hereof;
(c) the Agent shall have received the Security Agreement and
the Pledge Agreement duly executed by the Borrower and each Material
Subsidiary (other than Marquise), and the Guaranty duly executed by
each Material Subsidiary, together with (i) original stock
certificates or other similar instruments or securities representing
all of the issued and outstanding shares of capital stock or other
equity interest in each Subsidiary as of the date of this Agreement,
(ii) stock powers for the Collateral consisting of the stock or
other equity interest in each Subsidiary each to be executed in
blank and undated, and (iii) UCC financing statements to be filed
against the Borrower and each Material Subsidiary (other than
Marquise), as debtor, in favor of the Agent, as secured party;
(d) the Agent shall have received evidence of insurance
required to be maintained under the Loan Documents, naming the Agent
as loss payee;
(e) the Agent shall have received for each Bank copies of the
Borrower's and each Subsidiary's articles of incorporation and
bylaws (or comparable constituent documents) and any amendments
thereto, certified in each instance by its Secretary or Assistant
Secretary;
(f) the Agent shall have received for each Bank copies of
resolutions of the Borrower's and of each Subsidiary's Board of
Directors authorizing the execution, delivery and performance of
this Agreement and the other Loan Documents to which it is a party
and the consummation of the transactions contemplated hereby and
thereby, together with specimen signatures of the persons authorized
to execute such documents on the Borrower's and such Subsidiary's
behalf, all certified in each instance by its Secretary or Assistant
Secretary;
(g) the Agent shall have received for each Bank copies of the
certificates of good standing for the Borrower and for each
Subsidiary (dated no earlier than 30 days prior to the date hereof)
from the office of the secretary of the state of its incorporation
and of each state in which it is qualified to do business as a
foreign corporation;
(h) the Agent shall have received for each Bank a list of the
Borrower's Authorized Representatives;
(i) the Agent shall have received for itself and for the Banks
the fees forth in Section 2.1(c) hereof;
(j) the Banks shall have received and approved as satisfactory
to them, a proforma consolidated balance sheet for the Borrower
immediately after giving effect to the Reeves Acquisition;
(k) the Agent shall have received a field audit of the
Property of the Borrower and its Subsidiaries conducted by an
inhouse auditor and approved the results of such audit as
satisfactory to it;
(l) the Banks shall have completed its due diligence review of
the environmental liabilities of the Borrower and its Subsidiaries
and approved the results of such review as satisfactory to them;
(m) each Bank shall have received such evaluations and
certifications as it may reasonably require (including an officer's
certificate as to the solvency of the Borrower and its Subsidiaries
after giving effect to the transactions contemplated hereby and a
compliance certificate in the form attached hereto as Exhibit G
containing compliance calculations of the financial covenants as of
the date of this Agreement after giving effect to the Reeves
Acquisition) in order to satisfy itself as to the value of the
Collateral, the financial condition of the Borrower and its
Subsidiaries, and the lack of material environmental and other
contingent liabilities of the Borrower and its Subsidiaries;
(n) the Agent shall have received a pay-off and lien release
letter from NationsBank, N.A. ("Nations") and American National Bank
and Trust Company ("American") setting forth, among other things,
the total amount of indebtedness outstanding under the Existing
Credit Agreement (or outstanding letters of credit issued for the
account of the Borrower or any of its Subsidiaries) and containing
an undertaking to cause to be delivered to the Agent each UCC
termination statement and any other lien release instrument
necessary to release Nations' and American's Lien on all assets of
the Borrower and its Subsidiaries, which pay-off and lien release
letters shall be in form and substance reasonably acceptable to the
Agent;
(o) the Agent shall have received evidence satisfactory to it
that (i) all conditions precedent to the Reeves Acquisition (except
for the Banks' funding of not more than $31,000,000 of the purchase
price therefor) have been satisfied in accordance with the terms of
the Reeves Stock Purchase Agreement (without giving effect to any
amendment, modification or waiver thereto not consented to in
writing by the Agent) and (ii) the Reeves Stock Purchase Agreement
is effective;
(p) all legal, tax and regulatory matters incident to the
Credits and the Reeves Acquisition shall be satisfactory to the
Agent;
(q) the Agent shall have received for each Bank the favorable
written opinions of counsel to the Borrower and its Subsidiaries, in
form and substance reasonably satisfactory to the Agent;
(r) the Agent shall have received and approved as to form and
substance the Reeves Stock Purchase Agreement and all other
instruments and documents applicable to the Seller Debt; and
(s) the Agent shall have received and approved (both as to
form and substance) such UCC financing statements and other
instruments and documents as it shall deem necessary to perfect the
Liens required hereunder and satisfactory lien searches confirming
the priority of such Liens.
References in this Section to Subsidiaries shall be deemed to
include Reeves and its subsidiaries prior to, as well as after,
consummation of the Reeves Acquisition.
Section 7.2. All Credit Events. As of the time of each Credit Event
hereunder:
(a) in the case of a Borrowing the Agent shall have received
the notice required by Section 1.6 hereof, in the case of a Swing
Loan, Agent shall have received the notice required in Section 1.14
hereof, in the case of the issuance of any Letter of Credit the
Agent shall have received a duly completed Application for such
Letter of Credit together with any fees called for by Section 2.1
hereof and, in the case of an extension or increase in the amount of
a Letter of Credit, a written request therefor in a form acceptable
to the Agent together with fees called for by Section 2.1 hereof;
(b) each of the representations and warranties set forth in
Section 6 hereof shall be and remain true and correct as of such
time, except to the extent that any such representation or warranty
relates solely to an earlier time or that any change therein is not
reasonably likely to have a Material Adverse Effect;
(c) the Borrower shall be in compliance with all of the terms
and conditions hereof, and no Default or Event of Default shall have
occurred and be continuing hereunder or would occur as a result of
such Credit Event; and
(d) such Credit Event shall not violate any order, judgment or
decree of any court or other authority or any provision of law or
regulation applicable to any Bank (including, without limitation,
Regulation U of the Board of Governors of the Federal Reserve
System).
Each request for a Borrowing hereunder and each request for the
issuance of, increase in the amount of, or extension of the expiration
date of, a Letter of Credit, shall be deemed to be a representation and
warranty by the Borrower on the date on such Credit Event as to the facts
specified in subsections (a) through (c), both inclusive, this
Section 7.2.
SECTION 8. COVENANTS.
The Borrower agrees that, so long as any Note or any L/C Obligation
is outstanding or any Commitment is available to or in use by the
Borrower hereunder, except to the extent compliance in any case or cases
is waived in writing by the Required Banks:
Section 8.1. Maintenance of Business. The Borrower shall, and shall
cause each Subsidiary to, preserve and maintain its existence, except
(i) as otherwise provided in Section 8.10(c) hereof and (ii) the
discontinuance of any Subsidiary (other than any Material Subsidiary or
any other Subsidiary which has furnished any Collateral or Guaranty) to
the extent such discontinuance would not reasonably be likely to have any
Material Adverse Effect. The Borrower shall, and shall cause each
Subsidiary to, preserve and keep in force and effect all licenses,
permits, franchises, approvals, patents, trademarks, trade names, trade
styles, copyrights, and other proprietary rights necessary to the proper
conduct of its business where the failure to do so is reasonably likely
to have a Material Adverse Effect.
Section 8.2. Maintenance of Properties. The Borrower shall, and shall
cause each Subsidiary to, maintain, preserve and keep its property, plant
and equipment in good repair, working order and condition (ordinary wear
and tear excepted) and shall from time to time make all needful and
proper repairs, renewals, replacements, additions and betterments thereto
so that at all times the efficiency thereof shall be fully preserved and
maintained, except to the extent that, in the reasonable business
judgment of such Person, any such Property is no longer necessary for the
proper conduct of the business of such Person.
Section 8.3. Taxes and Assessments. The Borrower shall duly pay and
discharge, and shall cause each Subsidiary to duly pay and discharge, all
taxes, rates, assessments, fees and governmental charges upon or against
it or its Properties, in each case before the same become delinquent and
before penalties accrue thereon, unless and to the extent that the same
are being contested in good faith and by appropriate proceedings which
prevent enforcement of the matter under contest and adequate reserves are
provided therefor.
Section 8.4. Insurance. The Borrower shall insure and keep insured,
and shall cause each Subsidiary to insure and keep insured, with
insurance companies with a general policyholder service rating of not
less than A as rated in the most current available Best's Insurance
Report, all insurable Property owned by it which is of a character
usually insured by Persons similarly situated and operating like
Properties against loss or damage from such hazards and risks, and in
such amounts, as are insured by Persons similarly situated and operating
like Properties; and the Borrower shall insure, and shall cause each
Subsidiary to insure, such other hazards and risks (including employers'
and public liability risks) with insurance companies with a general
policyholder service rating of not less than A as rated in the most
current available Best's Insurance Report as and to the extent usually
insured by Persons similarly situated and conducting similar businesses.
The Borrower shall in any event maintain, and cause each Subsidiary to
maintain, insurance on the Collateral to the extent required by the
Collateral Documents. The Borrower shall, upon the request of the Agent,
furnish to the Agent and each Bank a certificate setting forth in summary
form the nature and extent of the insurance maintained pursuant to this
Section.
Section 8.5. Financial Reports. The Borrower shall, and shall cause
each Subsidiary to, maintain a standard system of accounting in
accordance with GAAP and shall furnish to the Agent, each Bank and each
of their duly authorized representatives such information respecting the
business and financial condition of the Borrower and each Subsidiary as
the Agent or such Bank may reasonably request; and without any request,
shall furnish to the Agent and the Banks:
(a) as soon as available, and in any event within 45 days
after the close of each of the first three fiscal quarters of each
fiscal year of the Borrower, a copy of the consolidated and
consolidating balance sheet of the Borrower and its Subsidiaries as
of the last day of such period and the consolidated and
consolidating statements of income, retained earnings and cash flows
of the Borrower and its Subsidiaries for the fiscal quarter and for
the fiscal year-to-date period then ended, each in reasonable detail
showing in comparative form the figures for the corresponding date
and period in the previous fiscal year, prepared by the Borrower in
accordance with GAAP (except with respect to the absence of notes
and for normal year-end adjustments) and certified to by the
Borrower's chief financial officer, or another officer of the
Borrower reasonably acceptable to the Agent;
(b) as soon as available, and in any event within 90 days
after the close of each fiscal year of the Borrower, a copy of the
consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as of the last day of the period then ended and the
consolidated and consolidating statements of income, retained
earnings and cash flows of the Borrower and its Subsidiaries for the
period then ended, and accompanying notes thereto, each in
reasonable detail showing in comparative form the figures for the
previous fiscal year, accompanied in the case of the Borrower's
consolidated financial statements by an unqualified opinion of Ernst
& Young or another firm of independent public accountants of
recognized national standing, selected by the Borrower and
reasonably satisfactory to the Required Banks, to the effect that
the consolidated financial statements have been prepared in
accordance with GAAP and present fairly, in all material respects,
in accordance with GAAP the consolidated financial condition of the
Borrower and its Subsidiaries as of the close of such fiscal year
and the results of their operations and cash flows for the fiscal
year then ended and that an examination of such accounts in
connection with such financial statements has been made in
accordance with generally accepted auditing standards and,
accordingly, such examination included such tests of the accounting
records and such other auditing procedures as were considered
necessary in the circumstances;
(c) promptly after the sending or filing thereof, copies of
each financial statement, report, notice or proxy statement sent by
the Borrower or any Subsidiary to its stockholders, and copies of
each regular, periodic or special report, registration statement or
prospectus (including all Form 10-K, Form 10-Q, and Form 8-K reports
and proxy statements) filed by the Borrower or any Subsidiary with
any securities exchange or the Securities and Exchange Commission or
any successor agency;
(d) promptly after receipt thereof, a copy of each audit made
by any regulatory agency of the books and records of the Borrower or
any Subsidiary or of any notice of material noncompliance with any
applicable law, regulation, or guideline relating to the Borrower or
any Subsidiary or any of their respective businesses;
(e) as soon as available, and in any event within 30 days
prior to the end of each fiscal year of the Borrower, a copy of the
Borrower's consolidated and consolidating business plan for the
following fiscal year, such business plan to show the Borrower's
projected consolidated and consolidating revenues, expenses, and
balance sheet on month-by-month basis, such business plan to be in
reasonable detail prepared by the Borrower and in form reasonably
satisfactory to the Agent which shall include a summary of all
assumptions made in preparing such business plan;
(f) notice of any Change of Control; and
(g) promptly after knowledge thereof shall have come to the
attention of any responsible officer of the Borrower, written notice
of any threatened or pending litigation or governmental proceeding
or labor controversy against the Borrower or any Subsidiary which,
if adversely determined, is reasonably likely to have a Material
Adverse Effect or of the occurrence of any Default or Event of
Default hereunder.
Each of the financial statements furnished to the Banks pursuant to
subsections (a) and (b) of this Section 8.5 shall be accompanied by a
written certificate in the form attached hereto as Exhibit G signed by
the chief financial officer of the Borrower, or another officer of the
Borrower reasonably acceptable to the Agent, to the effect that to the
best of such officer's knowledge and belief no Default or Event of
Default has occurred during the period covered by such statements or, if
any such Default or Event of Default has occurred during such period,
setting forth a description of such Default or Event of Default and
specifying the action, if any, taken by the Borrower or any Subsidiary to
remedy the same. Such certificate shall also set forth the calculations
supporting such statements in respect of Sections 8.22, 8.23, 8.24, 8.25
and 8.26 of this Agreement.
Section 8.6. Inspection. The Borrower shall, and shall cause each
Subsidiary to, permit the Agent, each Bank and each of their duly
authorized representatives and agents to visit and inspect any of its
Properties, corporate books and financial records, to examine and make
copies of its books of accounts and other financial records, and to
discuss its affairs, finances and accounts with, and to be advised as to
the same by, its officers, employees and independent public accountants
(and by this provision the Borrower hereby authorizes such accountants to
discuss with the Agent and such Banks the finances and affairs of the
Borrower and each Subsidiary) at such reasonable times and intervals as
the Agent or any such Bank may designate.
Section 8.7. Indebtedness for Borrowed Money. The Borrower shall not,
nor shall it permit any Subsidiary to, issue, incur, assume, create or
have outstanding any Indebtedness for Borrowed Money; provided, however,
that the foregoing shall not restrict nor operate to prevent:
(a) the Obligations of the Borrower owing to the Agent and the
Banks hereunder;
(b) purchase money indebtedness and Capitalized Lease
Obligations of the Borrower and of its Subsidiaries in an aggregate
amount not to exceed $3,000,000 at any one time outstanding;
(c) obligations of the Borrower arising out of interest rate
hedging agreements entered into with financial institutions in the
ordinary course of business;
(d) the Seller Debt;
(e) indebtedness from time to time owing by the Borrower to
any Subsidiary or by any Subsidiary to the Borrower or any other
Subsidiary to the extent resulting from intercompany loans and
advances permitted by Section 8.9 hereof;
(f) indebtedness outstanding under the Existing Credit
Agreement which is paid and satisfied in full out of proceeds of the
initial Credit Event hereunder;
(g) Permitted Marquise Financing;
(h) other indebtedness existing on the date of this Agreement
and described on Schedule 8.7 attached hereto and made a part
hereof, as reduced from time to time by repayments thereof, and
refinancings thereof (but not increases) thereof on terms and
conditions on the whole no more burdensome in any material respect
on the relevant obligors;
(i) guaranties expressly permitted by Section 8.9 hereof; and
(j) other unsecured indebtedness of the Borrower and its
Subsidiaries not otherwise permitted by this Section in an aggregate
amount not to exceed $1,000,000 at any one time outstanding.
Section 8.8. Liens. The Borrower shall not, nor shall it permit any
other Subsidiary to, create, incur or permit to exist any Lien of any
kind on any Property owned by any such Person; provided, however, that
the foregoing shall not apply to nor operate to prevent:
(a) Liens arising by statute in connection with worker's
compensation, unemployment insurance, old age benefits, social
security obligations, taxes, assessments, statutory obligations or
other similar charges, good faith cash deposits in connection with
tenders, contracts or leases to which the Borrower or any Subsidiary
is a party or other cash deposits required to be made in the
ordinary course of business, provided in each case that the
obligation is not for borrowed money and that the obligation secured
is not overdue or, if overdue, is being contested in good faith by
appropriate proceedings which prevent enforcement of the matter
under contest and adequate reserves have been established therefor;
(b) mechanics', workmen's, materialmen's, landlords',
carriers', or other similar Liens arising in the ordinary course of
business with respect to obligations which are not due or which are
being contested in good faith by appropriate proceedings which
prevent enforcement of the matter under contest;
(c) the pledge of assets for the purpose of securing an
appeal, stay or discharge in the course of any legal proceeding,
provided that the aggregate amount of liabilities of the Borrower
and its Subsidiaries secured by a pledge of assets permitted under
this subsection, including interest and penalties thereon, if any,
shall not be in excess of $500,000 at any one time outstanding;
(d) the Liens granted in favor of the Agent for the benefit of
the Agent and the Banks pursuant to the Collateral Documents;
(e) Liens on property of the Borrower or any Subsidiary
created solely for the purpose of securing indebtedness permitted by
Section 8.7(b) hereof, representing or incurred to finance,
refinance or refund the purchase price of Property, provided that no
such Lien shall extend to or cover other Property of the Borrower or
such Subsidiary other than the respective Property so acquired, and
the principal amount of indebtedness secured by any such Lien shall
at no time exceed the original purchase price of such Property;
(f) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in
the aggregate, are not substantial in amount and which do not
materially detract from the value of the Property subject thereto or
materially interfere with the ordinary conduct of the business of
the Borrower or any Subsidiary;
(g) Liens described on Schedule 8.8 hereof securing the
indebtedness described therein; and
(h) any interest or title of a lessor under any operating
lease.
Section 8.9. Investments, Acquisitions, Loans, Advances and
Guaranties. The Borrower shall not, nor shall it permit any Subsidiary
to, directly or indirectly, make, retain or have outstanding any
investments (whether through purchase of stock or obligations or
otherwise) in, or loans or advances (other than for travel advances and
other similar cash advances made to employees in the ordinary course of
business) to, any other Person, or acquire all or any substantial part of
the assets or business of any other Person or division thereof, or be or
become liable as endorser, guarantor, surety or otherwise for any debt,
obligation or undertaking of any other Person, or otherwise agree to
provide funds for payment of the obligations of another, or supply funds
thereto or invest therein or otherwise assure a creditor of another
against loss, or apply for or become liable to the issuer of a letter of
credit which supports an obligation of another, or subordinate any claim
or demand it may have to the claim or demand of any other Person;
provided, however, that the foregoing shall not apply to nor operate to
prevent:
(a) investments in direct obligations of the United States of
America or of any agency or instrumentality thereof whose
obligations constitute full faith and credit obligations of the
United States of America, provided that any such obligations shall
mature within one year of the date of issuance thereof;
(b) investments in commercial paper rated at least P-1 by
Moody's and at least A-1 by S&P maturing within one year of the date
of issuance thereof;
(c) investments in certificates of deposit issued by any Bank
or by any United States commercial bank having capital and surplus
of not less than $100,000,000 which have a maturity of one year or
less;
(d) endorsement of items for deposit or collection of
commercial paper received in the ordinary course of business;
(e) present equity investments in Subsidiaries;
(f) equity investments made after the date hereof in
Subsidiaries obligated on Guaranties provided the aggregate amount
of such investments in Marquise and its subsidiaries (if any) is
limited to those permitted by subsection (j) below;
(g) trade receivables from time to time owing to the Borrower
or any Subsidiary created or acquired in the ordinary course of its
business;
(h) guaranties by the Borrower or any Subsidiary guaranteeing
or otherwise supporting the repayment of indebtedness of the
Borrower or another Subsidiary permitted by Section 8.7(h) hereof;
(i) obligations of the Borrower under the Marquise Support
Letter provided (1) the aggregate amount paid by the Borrower in
satisfaction of its obligations thereunder on a cumulative basis on
and after the date hereof, when taken together with the aggregate
amount of intercompany advances by the Borrower or any Subsidiary to
Marquise also on a cumulative basis on and after the date hereof,
does not exceed $500,000 and (2) no payment is made on such
obligations during the continuance of any Default or Event of
Default;
(j) guaranties by the Borrower or any Subsidiary of the
obligations of any other Material Subsidiary, as lessee, under any
real estate leases entered into in the ordinary course of its
business;
(k) intercompany advances made from time to time between the
Borrower and one or more Material Subsidiaries or between
Subsidiaries obligated on Guaranties provided (1) the aggregate
amount of advances made to Marquise and its subsidiaries (if any) on
a cumulative basis on and after the date hereof, when taken together
with the aggregate amount paid by the Borrower under the Marquise
Support Letter also on a cumulative basis on and after the date
hereof, does not exceed $500,000 (2) no such advance is made during
the continuance of any Default or Event of Default;
(l) the Reeves Acquisition and other Acquisitions with respect
to which all of the following conditions have been satisfied:
(i) the Acquired Business is in an Eligible Line of Business and has
its primary operations in the United States, (ii) the Acquisition is
not a Hostile Acquisition, (iii) at the time of such Acquisition and
immediately after giving effect thereto the Total Consideration for
all Acquisitions (other than the Reeves Acquisition) during any
single fiscal year of the Borrower would not exceed $2,000,000 in
the aggregate, (iv) prior to consummating an Acquisition, the
Borrower shall have notified the Agent and the Banks in writing of
the proposed Acquisition in reasonable detail (including sources and
uses of funds therefor) and furnished the Agent and the Banks
historic and pro forma financial information and compliance
calculations reasonably satisfactory to the Agent, and (v) after
giving effect to the Acquisition, no Default or Event of Default
shall exist, including with respect to the covenants contained in
Sections 8.22, 8.23, 8.24, 8.25 and 8.26 hereof on a pro forma
basis;
(m) investments by the Borrower to establish and maintain a
captive insurance company to provide workers' compensation and
general liability insurance coverage to qualified independent
installers, primarily for their work for the Borrower and its
Subsidiaries, provided the aggregate amount of such investments does
not exceed $2,000,000 at any one time outstanding; and
(n) other investments, loans and advances in addition to those
otherwise permitted by this Section in an aggregate amount not to
exceed $1,000,000 at any one time outstanding.
In determining the amount of investments, acquisitions, loans, advances
and guaranties permitted under this Section, investments and acquisitions
shall always be taken at the original cost thereof (regardless of any
subsequent appreciation or depreciation therein), loans and advances
shall be taken at the principal amount thereof then remaining unpaid, and
guaranties shall be taken at the amount of the obligations guaranteed
thereby.
Section 8.10. Mergers, Consolidations and Sales. The Borrower shall
not, nor shall it permit any Subsidiary to, be a party to any merger or
consolidation, or sell, transfer, lease or otherwise dispose of its
Property, including any disposition of Property as part of a sale and
leaseback transaction, or in any event sell or discount (with or without
recourse) any of its notes or accounts receivable; provided, however,
that this Section shall not apply to nor operate to prevent:
(a) the sale or lease of inventory in the ordinary course of
business;
(b) the sale, transfer, lease, or other disposition of
Property of the Borrower or any Subsidiary to one another in the
ordinary course of its business;
(c) a merger of any Subsidiary with and into the Borrower or
any other Subsidiary; provided that, in the case of any merger
involving the Borrower, the Borrower is the corporation surviving
the merger and in the case of any other merger, a Wholly-owned
Subsidiary is the corporation surviving such merger;
(d) the sale of delinquent notes or accounts receivable in the
ordinary course of business for purposes of collection only (and not
for the purpose of any bulk sale or securitization transaction);
(e) the sale by Marquise of finance receivables in the
ordinary course of its business;
(f) the sale, transfer, or other disposition of any tangible
personal property that, in the reasonable business judgment of the
Borrower or its Subsidiary, has become uneconomical, obsolete, or
worn out, and which is disposed of in the ordinary course of
business;
(g) the sale by the Borrower of treasury stock acquired by it
as part of its stock repurchase program aggregating not more than
$2,000,000 during any 12-month period provided the proceeds of each
such sale are remitted as required by Section 1.9(b)(iv) hereof; and
(h) the sale, transfer, lease, or other disposition of other
Property of the Borrower or any Subsidiary aggregating for the
Borrower and its Subsidiaries not more than $500,000 during any 12-
month period.
In the event of any merger permitted by Section 8.10(c) above, the
Borrower shall give the Agent and the Banks prior written notice of any
such event and, immediately after giving effect to any such merger,
Schedule 6.2 of this Agreement shall be deemed amended excluding
reference to any such Subsidiary merged out of existence. So long as no
Default or Event of Default has occurred and is continuing or would arise
as a result thereof, upon the written request of the Borrower, the Agent
shall release its Lien on any Property sold pursuant to the provisions of
subsections (a), (d), (f) or (h) above.
Section 8.11. Maintenance of Subsidiaries. The Borrower shall not
assign, sell or transfer, nor shall it permit any Subsidiary to issue,
assign, sell or transfer, any shares of capital stock of a Subsidiary;
provided, however, that the foregoing shall not operate to prevent
(i) the Lien on the capital stock of each Subsidiary granted to the Agent
pursuant to the Collateral Documents, (ii) the issuance, sale and
transfer to any person of any shares of capital stock of a Subsidiary
solely for the purpose of qualifying, and to the extent legally necessary
to qualify, such person as a director of such Subsidiary, and (iii) any
transaction permitted by Section 8.10(c) above.
Section 8.12. Dividends and Certain Other Restricted Payments. The
Borrower shall not, nor shall it permit any Subsidiary to, (i) declare or
pay any dividends on or make any other distributions in respect of any
class or series of its capital stock (other than dividends payable solely
in its capital stock) or (ii) directly or indirectly purchase, redeem or
otherwise acquire or retire any of its capital stock; provided, however,
that the foregoing shall not operate to prevent:
(a) the making of dividends or distributions by any Wholly-
owned Subsidiary to its parent corporation or by any Subsidiary
solely to the Borrower or any Wholly-owned Subsidiary; and
(b) the repurchase by the Company of its common capital stock
pursuant to its stock repurchase program if at the time of each such
purchase and immediately after giving effect thereto, no Default or
Event of Default (including with respect to the covenant contained
in Section 8.24 hereof on a pro forma basis) shall occur or be
continuing.
Section 8.13. ERISA. The Borrower shall, and shall cause each
Subsidiary to, promptly pay and discharge all obligations and liabilities
arising under ERISA pertaining to a Plan of a character which if unpaid
or unperformed is reasonably likely to result in the imposition of a Lien
against any of its Properties. The Borrower shall, and shall cause each
Subsidiary to, promptly notify the Agent of (i) the occurrence of any
reportable event (as defined in ERISA) with respect to a Plan,
(ii) receipt of any notice from the PBGC of its intention to seek
termination of any Plan or appointment of a trustee therefor, (iii) its
intention to terminate or withdraw from any Plan, and (iv) the occurrence
of any event with respect to any Plan which would result in the
incurrence by the Borrower or any Subsidiary of any material liability,
fine or penalty, or any material increase in the contingent liability of
the Borrower or any Subsidiary with respect to any post-retirement
Welfare Plan benefit.
Section 8.14. Compliance with Laws. The Borrower shall, and shall
cause each Subsidiary to, comply in all respects with the requirements of
all federal, state and local laws, rules, regulations, ordinances and
orders applicable to or pertaining to its Properties or business
operations, where any such non-compliance, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect or is
reasonably likely to result in a Lien upon any material portion of their
Property.
Section 8.15. Burdensome Contracts With Affiliates. The Borrower shall
not, nor shall it permit any Subsidiary to, enter into any contract,
agreement or business arrangement with any of its Affiliates on terms and
conditions which are less favorable to the Borrower or such Subsidiary
than would be usual and customary in similar contracts, agreements or
business arrangements between Persons not affiliated with each other.
Section 8.16. No Changes in Fiscal Year. The Borrower shall not change
its fiscal year from its present basis without the prior written consent
of the Required Banks.
Section 8.17. Formation of Subsidiaries. Promptly upon the formation
or acquisition of any Subsidiary, the Borrower shall provide the Agent
and the Banks written notice thereof and shall do such acts and things as
are required of it to comply with Section 4 hereof, and then and
thereafter Schedule 6.2 of this Agreement shall be deemed amended from
and after such date to include reference to any such Subsidiary.
Section 8.18. Change in the Nature of Business. The Borrower shall not,
nor shall it permit any Subsidiary to, engage in any business or activity
if as a result the general nature of the business of the Borrower or any
Subsidiary would be changed in any material respect from the general
nature of the business engaged in by it as of the date of this Agreement
or as of the date such Person becomes a Subsidiary hereunder.
Section 8.19. Use of Loan Proceeds. The Borrower shall use the credit
extended under this Agreement solely for the purposes set forth in, or
otherwise permitted by, Section 6.4 hereof.
Section 8.20. No Restrictions on Subsidiary Distributions. Except as
provided herein, the Borrower shall not, nor shall it permit any
Subsidiary to, directly or indirectly create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of the Borrower or any Subsidiary to:
(a) guarantee the Obligations; (b) grant Liens on its assets to the Agent
for the benefit of the Banks as required by Section 4 hereof; (c) in the
case of any Subsidiary, pay dividends or make any other distribution on
any of such Subsidiary's capital stock or other equity interests owned by
the Borrower or any Subsidiary; (d) pay any indebtedness owed to the
Borrower or any Subsidiary; (e) make loans or advances to the Borrower or
any Subsidiary; or (f) transfer any of its property or assets to the
Borrower or any Subsidiary; provided, however, (i) clause (b) of the
foregoing shall not apply to restrictions or conditions imposed by any
agreement relating to secured Indebtedness for Borrowed Money permitted
by this Agreement if such restrictions or conditions apply only to the
property or assets securing such Indebtedness and (ii) clause (b) of the
foregoing shall not apply to customary provisions in leases and other
contracts restricting the assignment thereof.
Section 8.21. Subordinated Debt. The Borrower shall not, nor shall it
permit any Subsidiary to, amend or modify any of the terms and conditions
relating to any Subordinated Debt or make any voluntary prepayment
thereof or affect any voluntary redemption thereof or make any payment on
account of Subordinated Debt which is prohibited under the terms of any
instrument or agreement subordinating the same to the Obligations. The
provisions of this Section shall not be in derogation of any other
covenant or obligation of the Borrower and its Subsidiaries under the
Loan Documents and shall not be construed as a waiver of, or a consent to
departure from, any such covenant or obligation.
Section 8.22. Cash Flow Leverage Ratio. As of the last day of each
fiscal quarter of the Borrower occurring during one of the periods
specified below, the Borrower shall not permit the Cash Flow Leverage
Ratio as of the last day of the relevant fiscal quarter to be greater
than or equal to the amount set forth below:
RATIO SHALL NOT BE
FROM AND INCLUDING TO AND INCLUDING GREATER THAN OR EQUAL TO
12/31/98 03/31/99 3.75 to 1.0
04/01/99 09/30/99 3.25 to 1.0
10/01/99 at all times 3.00 to 1.0
thereafter
Section 8.23. Net Worth. The Borrower shall, as of the last day of
each fiscal quarter, maintain Net Worth of not less than the Minimum
Required Amount. For purposes hereof, the term "Minimum Required Amount"
shall mean $31,000,000 and shall increase (but never decrease) as of the
last day of the fiscal second and fourth quarters of the Borrower ending
on or about June 30, 1998 and December 31, 1998 and as of the last day of
each fiscal second and fourth quarters of the Borrower thereafter by an
amount (if positive) equal to 50% of Net Income for the two fiscal
quarters then ended.
Section 8.24. Fixed Charge Coverage Ratio. As of the last day of each
fiscal quarter of the Borrower occurring during one of the periods
specified below, the Borrower shall maintain a ratio of (a) EBITDA for
the four fiscal quarters of the Borrower then ended less Capital
Expenditures incurred during such period to (b) Fixed Charges for the
same four fiscal quarter period then ended, of not less than the amount
set forth below:
RATIO SHALL NOT BE
FROM AND INCLUDING TO AND INCLUDING GREATER THAN OR EQUAL TO
12/31/98 09/30/99 1.25 to 1.0
10/01/99 at all times 1.50 to 1.0
thereafter
Section 8.25. Interest Coverage Ratio. The Borrower shall not, as of
the last day of each fiscal quarter of the Borrower (commencing with the
fiscal quarter ending on or about December 31, 1998), permit the ratio of
(a) EBIT for the four fiscal quarters of the Borrower then ended to (b)
Interest Expense for the same four fiscal quarters then ended to be less
than 3.0 to 1.0.
Section 8.26. Minimum EBITDA. (a) The Borrower shall as of the last
day of the fiscal quarter of the Borrower ending on or about June 30,
1998 maintain EBITDA at not less than $4,000,000, and (b) the Borrower
shall as of the last day of the fiscal quarter of the Borrower ending on
or about September 30, 1998 maintain EBITDA at not less than $4,500,000.
Section 8.27. Operating Leases. The Borrower shall not, nor shall it
permit any Subsidiary to, acquire the use or possession of any Property
under a lease or similar arrangement, whether or not the Borrower or any
Subsidiary has the express or implied right to acquire title to or
purchase such Property, at any time if, after giving effect thereto, the
aggregate amount of fixed rentals and other consideration payable by the
Borrower and its Subsidiaries under all such leases and similar
arrangements would exceed $6,500,000 during any fiscal year of the
Borrower. Capital Leases shall not be included in computing compliance
with this Section to the extent the Borrower's and its Subsidiaries'
liability in respect of the same is permitted by this Section.
Section 8.28. Interest Rate Protection. On or before May 31, 1998, the
Borrowers will hedge their interest rate risk on at least $10,000,000 in
principal amount of the Term Loans, or if less, the principal amount
outstanding on the Term Loans, through the use of one or more interest
rate swaps, interest rate caps, interest rate collars or other recognized
interest rate hedging arrangements (collectively, "Hedging
Arrangements"), with all of the foregoing to effectively limit the amount
of interest that the Borrowers must pay on notional amounts of not less
than such portion of the Term Loan to not more than a rate acceptable to
the Agent in its discretion for a period ending no earlier than April 20,
2001 and to be with the Banks, their respective Affiliates or with other
parties reasonably acceptable to the Required Banks. If the Borrower
enters into any Hedging Arrangements with any Bank, the Borrower's
obligations to such Bank in connection with such Hedging Arrangements do
not constitute usage of the Commitments of such Bank.
Section 8.29. Seller Debt Payments. The Borrower will not, and will
not permit any Subsidiary to, directly or indirectly make any payment or
other distribution on or in respect of any principal, interest or
premium, if any, of any of the Seller Debt or otherwise acquire, prepay
or retire any Seller Debt (such payments, distributions, acquisitions,
prepayments or retirements being hereinafter referred to collectively as
"Seller Debt Payments") if such Seller Debt Payment would be made prior
to the scheduled maturity thereof or prior to any other times required
for payment thereof as are in force and effect as of the date hereof.
SECTION 9.EVENTS OF DEFAULT AND REMEDIES.
Section 9.1. Events of Default. Any one or more of the following
shall constitute an "Event of Default" hereunder:
(a) default for one Business Day in the payment when due of
all or any part of the principal of or interest on any Note (whether
at the stated maturity thereof or at any other time provided for in
this Agreement), or default for one Business Day in the payment when
due of any Reimbursement Obligation or of any fee or other
Obligation payable hereunder or under any other Loan Document;
(b) default in the observance or performance of any covenant
set forth in Sections 8.1, 8.4, 8.7, 8.8, 8.9, 8.10, 8.11, 8.12,
8.19, 8.21, 8.22, 8.23, 8.24, 8.25, 8.26 or 8.29 hereof or of any
provision in any Loan Document dealing with the use, disposition or
remittance of the proceeds of Collateral or requiring the
maintenance of insurance thereon;
(c) default in the observance or performance of any covenant
set forth in Section 8.5 hereof which is not remedied within 5 days
after the earlier of (i) the date on which such failure shall first
become known to any responsible officer of the Borrower or
(ii) written notice thereof is given to the Borrower by the Agent;
(d) default in the observance or performance of any other
provision hereof or of any other Loan Document which is not remedied
within 30 days after the earlier of (i) the date on which such
failure shall first become known to any responsible officer of the
Borrower or (ii) written notice thereof is given to the Borrower by
the Agent;
(e) any representation or warranty made herein or in any other
Loan Document or in any certificate furnished to the Agent or the
Banks pursuant hereto or thereto or in connection with any
transaction contemplated hereby or thereby proves untrue in any
material respect as of the date of the issuance or making or deemed
making thereof;
(f) any event occurs or condition exists (other than those
described in subsections (a) through (e) above) which is specified
as an event of default under any of the other Loan Documents, or any
of the Loan Documents shall for any reason not be or shall cease to
be in full force and effect or is declared to be null and void, or
any of the Collateral Documents shall for any reason fail to create
a valid and perfected first priority Lien in favor of the Agent in
any Collateral purported to be covered thereby aggregating in excess
of $100,000 except as expressly permitted by the terms thereof, or
any Subsidiary takes any action for the purpose of terminating,
repudiating or rescinding any Loan Document executed by it or any of
its obligations thereunder;
(g) default shall occur under any Indebtedness for Borrowed
Money aggregating in excess of $1,000,000 issued, assumed or
guaranteed by the Borrower or any Subsidiary, or under any
indenture, agreement or other instrument under which the same may be
issued, and such default shall continue for a period of time
sufficient to permit the acceleration of the maturity of any such
Indebtedness for Borrowed Money (whether or not such maturity is in
fact accelerated), or any such Indebtedness for Borrowed Money shall
not be paid when due (whether by demand, lapse of time, acceleration
or otherwise);
(h) the Borrower shall not have in place a contract with
Sears, Roebuck & Co. granting the Borrower a license on terms and
conditions reasonably acceptable to the Agent and Required Banks, to
sell, furnish and install roofing, gutters, doors and fencing under
the "Sears" name as a Sears authorized contractor to residential
customers;
(i) any judgment or judgments, writ or writs or warrant or
warrants of attachment, or any similar process or processes in an
aggregate amount in excess of $1,000,000 in excess of any applicable
insurance coverage shall be entered or filed against the Borrower or
any Subsidiary, or against any of its Property, and which remains
undischarged, unvacated, unbonded or unstayed for a period of 30
days;
(j) the Borrower or any Subsidiary, or any member of its
Controlled Group, shall fail to pay when due an amount or amounts
aggregating in excess of $1,000,000 which it shall have become
liable to pay to the PBGC or to a Plan under Title IV of ERISA; or
notice of intent to terminate a Plan or Plans having aggregate
Unfunded Vested Liabilities in excess of $1,000,000 (collectively, a
"Material Plan") shall be filed under Title IV of ERISA by the
Borrower or any Subsidiary, or any other member of its Controlled
Group, any plan administrator or any combination of the foregoing;
or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any
Material Plan or a proceeding shall be instituted by a fiduciary of
any Material Plan against the Borrower or any Subsidiary, or any
member of its Controlled Group, to enforce Section 515 or 4219(c)(5)
of ERISA and such proceeding shall not have been dismissed within 30
days thereafter; or a condition shall exist by reason of which the
PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated;
(k) the Borrower or any Subsidiary shall (i) have entered
involuntarily against it an order for relief under the United States
Bankruptcy Code, as amended, (ii) not pay, or admit in writing its
inability to pay, its debts generally as they become due, (iii) make
an assignment for the benefit of creditors, (iv) apply for, seek,
consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it
or any substantial part of its Property, (v) institute any
proceeding seeking to have entered against it an order for relief
under the United States Bankruptcy Code, as amended, to adjudicate
it insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or
other pleading denying the material allegations of any such
proceeding filed against it, (vi) take any corporate action in
furtherance of any matter described in parts (i) through (v) above,
or (vii) fail to contest in good faith any appointment or proceeding
described in Section 9.1(l) hereof; or
(l) a custodian, receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Borrower or any
Subsidiary or any substantial part of any of its Property, or a
proceeding described in Section 9.1(j)(v) shall be instituted
against the Borrower or any Subsidiary, and such appointment
continues undischarged or such proceeding continues undismissed or
unstayed for a period of 30 days.
Section 9.2. Non-Bankruptcy Defaults. When any Event of Default other
than those described in subsection (k) or (l) of Section 9.1 hereof has
occurred and is continuing, the Agent shall, by written notice to the
Borrower: (a) if so directed by the Required Banks, terminate the
remaining Commitments and all other obligations of the Banks hereunder on
the date stated in such notice (which may be the date thereof); (b) if so
directed by the Required Banks, declare the principal of and the accrued
interest on all outstanding Notes to be forthwith due and payable and
thereupon all outstanding Notes, including both principal and interest
thereon, shall be and become immediately due and payable together with
all other amounts payable under the Loan Documents without further
demand, presentment, protest or notice of any kind; and (c) if so
directed by the Required Banks, demand that the Borrower immediately pay
to the Agent the full amount then available for drawing under each or any
Letter of Credit, and the Borrower agrees to immediately make such
payment and acknowledges and agrees that the Banks would not have an
adequate remedy at law for failure by the Borrower to honor any such
demand and that the Agent, for the benefit of the Banks, shall have the
right to require the Borrower to specifically perform such undertaking
whether or not any drawings or other demands for payment have been made
under any Letter of Credit. The Agent, after giving notice to the
Borrower pursuant to Section 9.1(c) or this Section 9.2, shall also
promptly send a copy of such notice to the other Banks, but the failure
to do so shall not impair or annul the effect of such notice.
Section 9.3. Bankruptcy Defaults. When any Event of Default described
in subsections (k) or (l) of Section 9.1 hereof has occurred and is
continuing, then all outstanding Notes shall immediately become due and
payable together with all other amounts payable under the Loan Documents
without presentment, demand, protest or notice of any kind, the
obligation of the Banks to extend further credit pursuant to any of the
terms hereof shall immediately terminate and the Borrower shall
immediately pay to the Agent the full amount then available for drawing
under all outstanding Letters of Credit, the Borrower acknowledging and
agreeing that the Banks would not have an adequate remedy at law for
failure by the Borrower to honor any such demand and that the Banks, and
the Agent on their behalf, shall have the right to require the Borrower
to specifically perform such undertaking whether or not any draws or
other demands for payment have been made under any of the Letters of
Credit.
Section 9.4. Collateral for Undrawn Letters of Credit. (a) If the
prepayment of the amount available for drawing under any or all
outstanding Letters of Credit is required under Section 1.9(b) or under
Section 9.2 or 9.3 above, the Borrower shall forthwith pay the amount
required to be so prepaid, to be held by the Agent as provided in
subsection (b) below.
(b) All amounts prepaid pursuant to subsection (a) above, together
with amounts deposited with the Agent pursuant to Section 1.9(b)(iii)
hereof, shall be held by the Agent in a separate collateral account (such
account, and the credit balances, properties and any investments from
time to time held therein, and any substitutions for such account, any
certificate of deposit or other instrument evidencing any of the
foregoing and all proceeds of and earnings on any of the foregoing being
collectively called the "Account") as security for, and for application
by the Agent (to the extent available) to, the reimbursement of any
payment under any Letter of Credit then or thereafter made by the Agent,
and to the payment of the unpaid balance of any Loans and all other
Obligations. The Account shall be held in the name of and subject to the
exclusive dominion and control of the Agent for the benefit of the Agent
and the Banks. If and when requested by the Borrower, the Agent shall
invest funds held in the Account from time to time in direct obligations
of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America with a
remaining maturity of one year or less, provided that the Agent is
irrevocably authorized to sell investments held in the Account when and
as required to make payments out of the Account for application to
amounts due and owing from the Borrower to the Agent or Banks; provided,
however, that if (i) the Borrower shall have made payment of all such
obligations referred to in subsection (a) above, (ii) all relevant
preference or other disgorgement periods relating to the receipt of such
payments have passed, and (iii) no Letters of Credit, Commitments, Loans
or other Obligations remain outstanding hereunder, then the Agent shall
release to the Borrower any remaining amounts held in the Account.
Section 9.5. Notice of Default. The Agent shall give notice to the
Borrower under Section 9.1(c) hereof promptly upon being requested to do
so by any Bank and shall thereupon notify all the Banks thereof.
Section 9.6. Expenses. The Borrower agrees to pay to the Agent and
each Bank, and any other holder of any Note outstanding hereunder, all
expenses reasonably incurred or paid by the Agent and such Bank or any
such holder, including reasonable attorneys' fees and court costs, in
connection with any Default or Event of Default by the Borrower hereunder
or in connection with the enforcement of any of the Loan Documents.
SECTION 10.CHANGE IN CIRCUMSTANCES.
Section 10.1. Change of Law. Notwithstanding any other provisions of
this Agreement or any Note, if at any time any change in applicable law
or regulation or in the interpretation thereof makes it unlawful for any
Bank to make or continue to maintain any Eurodollar Loans or to perform
its obligations as contemplated hereby, such Bank shall promptly give
notice thereof to the Borrower and such Bank's obligations to make or
maintain Eurodollar Loans under this Agreement shall be suspended until
it is no longer unlawful for such Bank to make or maintain Eurodollar
Loans. The Borrower shall prepay on demand the outstanding principal
amount of any such affected Eurodollar Loans, together with all interest
accrued thereon and all other amounts then due and payable to such Bank
under this Agreement; provided, however, subject to all of the terms and
conditions of this Agreement, the Borrower may then elect to borrow the
principal amount of the affected Eurodollar Loans from such Bank by means
of Base Rate Loans from such Bank, which Base Rate Loans shall not be
made ratably by the Banks but only from such affected Bank.
Section 10.2. Unavailability of Deposits or Inability to Ascertain, or
Inadequacy of, LIBOR. If on or prior to the first day of any Interest
Period for any Borrowing of Eurodollar Loans:
(a) the Agent determines that deposits in U.S. Dollars (in the
applicable amounts) are not being offered to it in the interbank
eurodollar market for such Interest Period, or that by reason of
circumstances affecting the interbank eurodollar market adequate and
reasonable means do not exist for ascertaining the applicable LIBOR,
or
(b) the Required Banks advise the Agent that (i) LIBOR as
determined by the Agent will not adequately and fairly reflect the
cost to such Banks of funding their Eurodollar Loans for such
Interest Period or (ii) that the making or funding of Eurodollar
Loans become impracticable,
then the Agent shall forthwith give notice thereof to the Borrower and
the Banks, whereupon until the Agent notifies the Borrower that the
circumstances giving rise to such suspension no longer exist, the
obligations of the Banks to make Eurodollar Loans shall be suspended.
Section 10.3. Increased Cost and Reduced Return. (a) If, on or after
the date hereof, the adoption of any applicable law, rule or regulation,
or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency:
(i) shall subject any Bank (or its Lending Office) to any tax,
duty or other charge with respect to its Eurodollar Loans, its
Notes, its Letter(s) of Credit, or its participation in any thereof,
any Reimbursement Obligations owed to it or its obligation to make
Eurodollar Loans, issue a Letter of Credit, or to participate
therein, or shall change the basis of taxation of payments to any
Bank (or its Lending Office) of the principal of or interest on its
Eurodollar Loans, Letter(s) of Credit, or participations therein or
any other amounts due under this Agreement or any other Loan
Document in respect of its Eurodollar Loans, Letter(s) of Credit,
any participation therein, any Reimbursement Obligations owed to it,
or its obligation to make Eurodollar Loans, or issue a Letter of
Credit, or acquire participations therein (except for changes in the
rate of tax on the overall net income of such Bank or its Lending
Office imposed by the jurisdiction in which such Bank's principal
executive office or Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without
limitation, any such requirement imposed by the Board of Governors
of the Federal Reserve System, but excluding with respect to any
Eurodollar Loans any such requirement included in an applicable
Eurodollar Reserve Percentage) against assets of, deposits with or
for the account of, or credit extended by, any Bank (or its Lending
Office) or shall impose on any Bank (or its Lending Office) or on
the interbank market any other condition affecting its Eurodollar
Loans, its Notes, its Letter(s) of Credit, or its participation in
any thereof, any Reimbursement Obligation owed to it, or its
obligation to make Eurodollar Loans, or to issue a Letter of Credit,
or to participate therein;
and the result of any of the foregoing is to increase the cost to such
Bank (or its Lending Office) of making or maintaining any Eurodollar
Loan, issuing or maintaining a Letter of Credit, or participating
therein, or to reduce the amount of any sum received or receivable by
such Bank (or its Lending Office) under this Agreement or under any other
Loan Document with respect thereto, by an amount deemed by such Bank to
be material, then, within 15 days after demand by such Bank (with a copy
to the Agent), the Borrower shall be obligated to pay to such Bank such
additional amount or amounts as will compensate such Bank for such
increased cost or reduction.
(b) If, after the date hereof, any Bank or the Agent shall have
determined that the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Lending Office)
with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or
comparable agency, has had the effect of reducing the rate of return on
such Bank's capital as a consequence of its obligations hereunder to a
level below that which such Bank could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's
policies with respect to capital adequacy) by an amount deemed by such
Bank to be material, then from time to time, within 15 days after demand
by such Bank (with a copy to the Agent), the Borrower shall pay to such
Bank such additional amount or amounts as will compensate such Bank for
such reduction.
(c) A certificate of a Bank claiming compensation under this
Section 10.3 and setting forth the additional amount or amounts to be
paid to it hereunder shall be prima facie correct. In determining such
amount, such Bank may use any reasonable averaging and attribution
methods.
(d) Notwithstanding the foregoing, no Bank shall be entitled to
make a claim for compensation under this Section 10.3 if such Bank has
not generally been making claims for compensation under similar
circumstances from other borrowers similarly situated under loan
agreements with provisions comparable to this Section entitling the Bank
to make such a claim.
Section 10.4. Lending Offices. Each Bank may, at its option, elect to
make its Loans hereunder at the branch, office or affiliate specified on
the appropriate signature page hereof (each a "Lending Office") for each
type of Loan available hereunder or at such other of its branches,
offices or affiliates as it may from time to time elect and designate in
a written notice to the Borrower and the Agent.
Section 10.5. Discretion of Bank as to Manner of Funding.
Notwithstanding any other provision of this Agreement, each Bank shall be
entitled to fund and maintain its funding of all or any part of its Loans
in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder with respect to
Eurodollar Loans shall be made as if each Bank had actually funded and
maintained each Eurodollar Loan through the purchase of deposits in the
interbank eurodollar market having a maturity corresponding to such
Loan's Interest Period and bearing an interest rate equal to LIBOR for
such Interest Period.
SECTION 11.THE AGENT AND ISSUING BANK.
Section 11.1. Appointment and Authorization of Agent. Each Bank hereby
appoints Harris Trust and Savings Bank as the Agent under the Loan
Documents and hereby authorizes the Agent to take such action as Agent on
its behalf and to exercise such powers under the Loan Documents as are
delegated to the Agent by the terms thereof, together with such powers as
are reasonably incidental thereto. The Banks expressly agree that the
Agent is not acting as a fiduciary of the Banks in respect of the Loan
Documents, the Borrower or otherwise, and nothing herein or in any of the
other Loan Documents shall result in any duties or obligations on the
Agent or any of the Banks except as expressly set forth herein.
Section 11.2. Agent and its Affiliates. The Agent shall have the same
rights and powers under this Agreement and the other Loan Documents as
any other Bank and may exercise or refrain from exercising such rights
and power as though it were not the Agent, and the Agent and its
affiliates may accept deposits from, lend money to, and generally engage
in any kind of business with the Borrower or any Affiliate of the
Borrower as if it were not the Agent under the Loan Documents. The term
"Bank" as used herein and in all other Loan Documents, unless the context
otherwise clearly requires, includes the Agent in its individual capacity
as a Bank. References in Section 1 hereof to the Agent's Loans, or to
the amount owing to the Agent for which an interest rate is being
determined, refer to the Agent in its individual capacity as a Bank.
Section 11.3. Action by Agent. If the Agent receives from the Borrower
a written notice of an Event of Default pursuant to Section 9.5 hereof,
the Agent shall promptly give each of the Banks written notice thereof.
The obligations of the Agent under the Loan Documents are only those
expressly set forth therein. Without limiting the generality of the
foregoing, the Agent shall not be required to take any action hereunder
with respect to any Default or Event of Default, except as expressly
provided in Sections 9.2 and 9.5. Upon the occurrence of an Event of
Default, the Agent shall take such action to enforce its Lien on the
Collateral and to preserve and protect the Collateral as may be directed
by the Required Banks. Unless and until the Required Banks give such
direction, the Agent may (but shall not be obligated to) take or refrain
from taking such actions as it deems appropriate and in the best interest
of all the Banks. In no event, however, shall the Agent be required to
take any action in violation of applicable law or of any provision of any
Loan Document, and the Agent shall in all cases be fully justified in
failing or refusing to act hereunder or under any other Loan Document
unless it first receives any further assurances of its indemnification
from the Banks that it may require, including prepayment of any related
expenses and any other protection it requires against any and all costs,
expense, and liability which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall be entitled to
assume that no Default or Event of Default exists unless notified in
writing to the contrary by a Bank or the Borrower. In all cases in which
the Loan Documents do not require the Agent to take specific action, the
Agent shall be fully justified in using its discretion in failing to take
or in taking any action thereunder. Any instructions of the Required
Banks, or of any other group of Banks called for under the specific
provisions of the Loan Documents, shall be binding upon all the Banks and
the holders of the Obligations.
Section 11.4. Consultation with Experts. The Agent may consult with
legal counsel, independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken
by it in good faith in accordance with the advice of such counsel,
accountants or experts.
Section 11.5. Liability of Agent; Credit Decision. Neither the Agent
nor any of its directors, officers, agents, or employees shall be liable
for any action taken or not taken by it in connection with the Loan
Documents: (i) with the consent or at the request of the Required Banks
or (ii) in the absence of its own gross negligence or willful misconduct.
Neither the Agent nor any of its directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into or
verify: (i) any statement, warranty or representation made in connection
with this Agreement, any other Loan Document or any Credit Event;
(ii) the performance or observance of any of the covenants or agreements
of the Borrower or any Subsidiary contained herein or in any other Loan
Document; (iii) the satisfaction of any condition specified in Section 7
hereof, except receipt of items required to be delivered to the Agent; or
(iv) the validity, effectiveness, genuineness, enforceability,
perfection, value, worth or collectibility hereof or of any other Loan
Document or of any other documents or writing furnished in connection
with any Loan Document or of any Collateral; and the Agent makes no
representation of any kind or character with respect to any such matter
mentioned in this sentence. The Agent may execute any of its duties
under any of the Loan Documents by or through employees, agents, and
attorneys-in-fact and shall not be answerable to the Banks, the Borrower,
or any other Person for the default or misconduct of any such agents or
attorneys-in-fact selected with reasonable care. The Agent shall not
incur any liability by acting in reliance upon any notice, consent,
certificate, other document or statement (whether written or oral)
believed by it to be genuine or to be sent by the proper party or
parties. In particular and without limiting any of the foregoing, the
Agent shall have no responsibility for confirming the accuracy of any
compliance certificate or other document or instrument received by it
under the Loan Documents. The Agent may treat the payee of any Note as
the holder thereof until written notice of transfer shall have been filed
with the Agent signed by such payee in form satisfactory to the Agent.
Each Bank acknowledges that it has independently and without reliance on
the Agent or any other Bank, and based upon such information,
investigations and inquiries as it deems appropriate, made its own credit
analysis and decision to extend credit to the Borrower in the manner set
forth in the Loan Documents. It shall be the responsibility of each Bank
to keep itself informed as to the creditworthiness of the Borrower and
its Subsidiaries, and the Agent shall have no liability to any Bank with
respect thereto.
Section 11.6. Indemnity. The Banks shall ratably, in accordance with
their respective Percentages, indemnify and hold the Agent, and its
directors, officers, employees, agents and representatives harmless from
and against any liabilities, losses, costs or expenses suffered or
incurred by it under any Loan Document or in connection with the
transactions contemplated thereby, regardless of when asserted or
arising, except to the extent they are promptly reimbursed for the same
by the Borrower and except to the extent that any event giving rise to a
claim was caused by the gross negligence or willful misconduct of the
party seeking to be indemnified. The obligations of the Banks under this
Section shall survive termination of this Agreement.
Section 11.7. Resignation of Agent and Successor Agent. The Agent may
resign at any time by giving written notice thereof to the Banks and the
Borrower. Upon any such resignation of the Agent, the Required Banks
shall have the right to appoint a successor Agent with (unless during the
continuance of any Default or Event of Default) the consent of the
Borrower (which shall not be unreasonably withheld or delayed). If no
successor Agent shall have been so appointed by the Required Banks, and
shall have accepted such appointment, within 30 days after the retiring
Agent's giving of notice of resignation then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be any Bank
hereunder or any commercial bank organized under the laws of the United
States of America or of any State thereof and having a combined capital
and surplus of at least $200,000,000. Upon the acceptance of its
appointment as the Agent hereunder, such successor Agent shall thereupon
succeed to and become vested with all the rights and duties of the
retiring Agent under the Loan Documents, and the retiring Agent shall be
discharged from its duties and obligations thereunder. After any
retiring Agent's resignation hereunder as Agent, the provisions of this
Section 11 and all protective provisions of the other Loan Documents
shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent.
Section 11.8. Interest Rate Hedging Arrangements. By virtue of a
Bank's execution of this Agreement or an Assignment Agreement, as the
case may be, any Affiliate of such Bank with whom the Borrower has
entered into an agreement creating Hedging Liability shall be deemed a
Bank party hereto for purpose of any reference in a Loan Document to the
parties for whom the Agent is acting, it being understood and agreed that
the rights and benefits of such Affiliate under the Loan Documents
consist exclusively of such Affiliate's right to share in payments and
collections out of the Collateral and the Guaranties as more fully set
forth in other provisions hereof.
Section 11.9. Issuing Bank. The Issuing Bank shall act on behalf of
the Banks with respect to any Letters of Credit issued by it and the
documents associated therewith. The Issuing Bank shall have all of the
benefits and immunities (i) provided to the Agent in this Section 11 with
respect to any acts taken or omissions suffered by the Issuing Bank in
connection with Letters of Credit issued by it or proposed to be issued
by it and the Applications pertaining to such Letters of Credit as fully
as if the term "Agent", as used in this Section 11, included Issuing Bank
with respect to such acts or omissions and (ii) as additionally provided
in this Agreement with respect to such Issuing Bank.
SECTION 12. MISCELLANEOUS.
Section 12.1. Withholding Taxes. (a) Payments Free of Withholding.
Except as otherwise required by law and subject to Section 12.1(b)
hereof, each payment by the Borrower under this Agreement or the other
Loan Documents shall be made without withholding for or on account of any
present or future taxes (other than overall net income taxes on the
recipient) imposed by or within the jurisdiction in which the Borrower is
domiciled, any jurisdiction from which the Borrower makes any payment, or
(in each case) any political subdivision or taxing authority thereof or
therein. If any such withholding is so required, the Borrower shall make
the withholding, pay the amount withheld to the appropriate governmental
authority before penalties attach thereto or interest accrues thereon and
forthwith pay such additional amount as may be necessary to ensure that
the net amount actually received by each Bank and the Agent free and
clear of such taxes (including such taxes on such additional amount) is
equal to the amount which that Bank or the Agent (as the case may be)
would have received had such withholding not been made. If the Agent or
any Bank pays any amount in respect of any such taxes, penalties or
interest, the Borrower shall reimburse the Agent or such Bank for that
payment on demand in the currency in which such payment was made. If the
Borrower pays any such taxes, penalties or interest, it shall deliver
official tax receipts evidencing that payment or certified copies thereof
to the Bank or Agent on whose account such withholding was made (with a
copy to the Agent if not the recipient of the original) on or before the
thirtieth day after payment.
(b) U.S. Withholding Tax Exemptions. Each Bank that is not a
United States person (as such term is defined in Section 7701(a)(30) of
the Code) shall submit to the Borrower and the Agent on or before the
earlier of the date the initial Credit Event is made hereunder and
30 days after the date hereof, two duly completed and signed copies of
either Form 1001 (relating to such Bank and entitling it to a complete
exemption from withholding under the Code on all amounts to be received
by such Bank, including fees, pursuant to the Loan Documents and the
Loans) or Form 4224 (relating to all amounts to be received by such Bank,
including fees, pursuant to the Loan Documents and the Loans) of the
United States Internal Revenue Service. Thereafter and from time to
time, each Bank shall submit to the Borrower and the Agent such
additional duly completed and signed copies of one or the other of such
Forms (or such successor forms as shall be adopted from time to time by
the relevant United States taxing authorities) as may be (i) requested by
the Borrower in a written notice, directly or through the Agent, to such
Bank and (ii) required under then-current United States law or
regulations to avoid or reduce United States withholding taxes on
payments in respect of all amounts to be received by such Bank, including
fees, pursuant to the Loan Documents or the Loans.
(c) Inability of Bank to Submit Forms. If any Bank determines, as
a result of any change in applicable law, regulation or treaty, or in any
official application or interpretation thereof, that it is unable to
submit to the Borrower or the Agent any form or certificate that such
Bank is obligated to submit pursuant to subsection (b) of this
Section 12.1 or that such Bank is required to withdraw or cancel any such
form or certificate previously submitted or any such form or certificate
otherwise becomes ineffective or inaccurate, such Bank shall promptly
notify the Borrower and Agent of such fact and the Bank shall to that
extent not be obligated to provide any such form or certificate and will
be entitled to withdraw or cancel any affected form or certificate, as
applicable.
Section 12.2. No Waiver, Cumulative Remedies. No delay or failure on
the part of the Agent or any Bank or on the part of the holder or holders
of any of the Obligations in the exercise of any power or right under any
Loan Document shall operate as a waiver thereof or as an acquiescence in
any default, nor shall any single or partial exercise of any power or
right preclude any other or further exercise thereof or the exercise of
any other power or right. The rights and remedies hereunder of the
Agent, the Banks and of the holder or holders of any of the Obligations
are cumulative to, and not exclusive of, any rights or remedies which any
of them would otherwise have.
Section 12.3. Non-Business Days. Subject to Section 1.7(d) hereof, if
any payment hereunder becomes due and payable on a day which is not a
Business Day, the due date of such payment shall be extended to the next
succeeding Business Day on which date such payment shall be due and
payable. In the case of any payment of principal falling due on a day
which is not a Business Day, interest on such principal amount shall
continue to accrue during such extension at the rate per annum then in
effect, which accrued amount shall be due and payable on the next
scheduled date for the payment of interest.
Section 12.4. Documentary Taxes. The Borrower agrees to pay on demand
any documentary, stamp or similar taxes payable in respect of this
Agreement or any other Loan Document, including interest and penalties,
in the event any such taxes are assessed, irrespective of when such
assessment is made and whether or not any credit is then in use or
available hereunder.
Section 12.5. Survival of Representations. All representations and
warranties made herein or in any other Loan Document or in certificates
given pursuant hereto or thereto shall survive the execution and delivery
of this Agreement and the other Loan Documents, and shall continue in
full force and effect with respect to the date as of which they were made
as long as any credit is in use or available hereunder.
Section 12.6. Survival of Indemnities. All indemnities and other
provisions relative to reimbursement to the Banks of amounts sufficient
to protect the yield of the Banks with respect to the Loans and Letters
of Credit, including, but not limited to, Sections 1.12, 10.3 and 12.15
hereof, shall survive the termination of this Agreement and the other
Loan Documents and the payment of the Obligations.
Section 12.7. Sharing of Set-Off. Each Bank agrees with each other
Bank a party hereto that if such Bank shall receive and retain any
payment, whether by set-off or application of deposit balances or
otherwise, on any of the Loans or Reimbursement Obligations in excess of
its ratable share of payments on all such Obligations then outstanding to
the Banks, then such Bank shall purchase for cash at face value, but
without recourse, ratably from each of the other Banks such amount of the
Loans or Reimbursement Obligations, or participations therein, held by
each such other Banks (or interest therein) as shall be necessary to
cause such Bank to share such excess payment ratably with all the other
Banks; provided, however, that if any such purchase is made by any Bank,
and if such excess payment or part thereof is thereafter recovered from
such purchasing Bank, the related purchases from the other Banks shall be
rescinded ratably and the purchase price restored as to the portion of
such excess payment so recovered, but without interest. For purposes of
this Section, amounts owed to or recovered by the Issuing Bank in
connection with Reimbursement Obligations in which Banks have been
required to fund their participation shall be treated as amounts owed to
or recovered by the Issuing Bank as a Bank hereunder.
Section 12.8. Notices. Except as otherwise specified herein, all
notices hereunder and under the other Loan Documents shall be in writing
(including, without limitation, notice by telecopy) and shall be given to
the relevant party at its address or telecopier number set forth below,
or such other address or telecopier number as such party may hereafter
specify by notice to the Agent and the Borrower given by courier, by
United States certified or registered mail, by telecopy or by other
telecommunication device capable of creating a written record of such
notice and its receipt. Notices under the Loan Documents to the Banks
and the Agent shall be addressed to their respective addresses or
telecopier numbers set forth on the signature pages hereof, and to the
Borrower to:
Diamond Home Services, Inc.
222 Church Street
Woodstock, IL 60098
Attention: Richard G. Reece & Joseph Schorer
Telephone: (815) 334-1414
Telecopy: (815) 334-1421
with a copy (in case of notices of default) to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, IL 60606-5096
Attention: Grant A. Bagan, P.C.
Telephone: (312) 984-7567
Telecopy: (312) 984-3669
Each such notice, request or other communication shall be effective
(i) if given by telecopier, when such telecopy is transmitted to the
telecopier number specified in this Section or on the signature pages
hereof and a confirmation of such telecopy has been received by the
sender, (ii) if given by mail, 5 days after such communication is
deposited in the mail, certified or registered with return receipt
requested, addressed as aforesaid or (iii) if given by any other means,
when delivered at the addresses specified in this Section or on the
signature pages hereof; provided that any notice given pursuant to
Section 1 hereof shall be effective only upon receipt.
Section 12.9. Counterparts. This Agreement may be executed in any
number of counterparts, and by the different parties hereto on separate
counterpart signature pages, and all such counterparts taken together
shall be deemed to constitute one and the same instrument.
Section 12.10. Successors and Assigns. This Agreement shall be binding
upon the Borrower and its successors and assigns, and shall inure to the
benefit of the Agent and each of the Banks and the benefit of their
respective successors and assigns, including any subsequent holder of any
of the Obligations. The Borrower may not assign any of its rights or
obligations under any Loan Document without the written consent of all of
the Banks.
Section 12.11. Participants. Each Bank shall have the right at its own
cost to grant participations (to be evidenced by one or more agreements
or certificates of participation) in the Loans made and Reimbursement
Obligations and/or Commitments and/or participations in Swing Loans held
by such Bank at any time and from time to time to one or more other
Persons; provided that no such participation shall relieve any Bank of
any of its obligations under this Agreement, and, provided, further that
no such participant shall have any rights under this Agreement except as
provided in this Section, and the Agent shall have no obligation or
responsibility to such participant. Any agreement pursuant to which such
participation is granted shall provide that the granting Bank shall
retain the sole right and responsibility to enforce the obligations of
the Borrower under this Agreement and the other Loan Documents including,
without limitation, the right to approve any amendment, modification or
waiver of any provision of the Loan Documents, except that such agreement
may provide that such Bank will not agree to any modification, amendment
or waiver of the Loan Documents that would reduce the amount of or
postpone any fixed date for payment of any Obligation in which such
participant has an interest. Any party to which such a participation has
been granted shall have the benefits of Section 1.12 and Section 10.3
hereof. The Borrower authorizes each Bank to disclose to any participant
or prospective participant under this Section any financial or other
information pertaining to the Borrower.
Section 12.12. Assignment of Commitments by Banks. Each Bank shall have
the right at any time, with the prior consent of the Agent and, so long
as no Event of Default then exists, the Borrower (which consent of the
Borrower shall not be unreasonably withheld) to sell, assign, transfer or
negotiate all or any part of its Commitments (including the same
percentage of its Notes, outstanding Loans and Reimbursement Obligations
owed to it) to one or more commercial banks or other financial
institutions or investors, provided that such assignment shall be of a
fixed percentage (and not by its terms of varying percentage) of the
assigning Bank's Commitments; provided, however, that in order to make
any such assignment (i) unless the assignee Bank is assigning all of its
Commitments, the assigning Bank shall retain at least $5,000,000 in
outstanding Loans, interests in Letters of Credit and unused Commitments,
(ii) the assignee bank shall have outstanding Loans, interests in Letters
of Credit and unused Commitments of at least $5,000,000, (iii) each such
assignment shall be evidenced by a written agreement (substantially in
the form attached hereto as Exhibit H or in such other form acceptable to
the Agent) executed by such assigning Bank, such assignee bank or banks,
the Agent and, if required as provided above, the Borrower, which
agreement shall specify in each instance the portion of the Obligations
which are to be assigned to the assignee bank and the portion of the
Commitments of the assigning Bank to be assumed by the assignee bank or
banks, and (iv) the assigning Bank shall pay to the Agent a processing
fee of $3,500 and any out-of-pocket attorneys' fees and expenses incurred
by the Agent in connection with any such assignment agreement. Any such
assignee shall become a Bank for all purposes hereunder to the extent of
the Commitments it assumes and the assigning Bank shall be released from
its obligations, and will have released its rights, under the Loan
Documents to the extent of such assignment. The Borrower authorizes each
Bank to disclose to any purchaser or prospective purchaser of an interest
in the Loans and Reimbursement Obligations owed to it or its Commitments
under this Section any financial or other information pertaining to the
Borrower.
Section 12.13. Amendments. Any provision of this Agreement or the other
Loan Documents may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by (a) the Borrower, (b) the
Required Banks, and (c) if the rights or duties of the Agent are affected
thereby, the Agent; provided that:
(i) no amendment or waiver pursuant to this Section 12.13
shall (A) increase any Commitment of any Bank without the consent of
such Bank or (B) reduce the amount of or postpone the scheduled due
date for payment of any principal of or interest on any Loan or of
any Reimbursement Obligation or of any fee payable hereunder without
the consent of the Bank to which such payment is owing or which has
committed to make such Loan or Letter of Credit (or participate
therein) hereunder; and
(ii) no amendment or waiver pursuant to this Section 12.13
shall, unless signed by each Bank, change the definitions of
Revolving Credit Termination Date, or Required Banks, change the
provisions of this Section 12.13, Section 7, Section 9, release any
guarantor or all or any substantial part of the Collateral (except
as otherwise provided for in the Loan Documents), or affect the
number of Banks required to take any action hereunder or under any
other Loan Document.
Section 12.14. Headings. Section headings used in this Agreement are
for reference only and shall not affect the construction of this
Agreement.
Section 12.15. Costs and Expenses. The Borrower agrees to pay all costs
and expenses of the Agent in connection with the preparation,
negotiation, and administration of the Loan Documents, including, without
limitation, the reasonable fees and disbursements of counsel to the
Agent, in connection with the preparation and execution of the Loan
Documents, and any amendment, waiver or consent related thereto, whether
or not the transactions contemplated herein are consummated, together
with any fees and charges suffered or incurred by the Agent in connection
with periodic environmental audits, fixed asset appraisals, title
insurance policies, collateral filing fees and lien searches. The
Borrower further agrees to indemnify the Agent, each Bank, and their
respective directors, officers and employees, against all losses, claims,
damages, penalties, judgments, liabilities and expenses (including,
without limitation, all reasonable expenses of litigation or preparation
therefor, whether or not the indemnified Person is a party thereto, or
any settlement arrangement arising from or relating to any such
litigation) which any of them may pay or incur arising out of or relating
to any Loan Document or any of the transactions contemplated thereby or
the direct or indirect application or proposed application of the
proceeds of any Loan or Letter of Credit, other than those which arise
from the gross negligence or willful misconduct of, or material breach of
the Loan Documents by, the party claiming indemnification and, except
with respect to the Agent, to the extent relating to the expenses of
preparing, executing and delivering this Agreement and the other Loan
Documents required as a condition precedent to the closing of the credit
facilities contemplated hereby. The Borrower, upon demand by the Agent
or a Bank at any time, shall reimburse the Agent or such Bank for any
legal or other expenses incurred in connection with investigating or
defending against any of the foregoing (including any settlement costs
relating to the foregoing) except if the same is directly due to the
gross negligence or willful misconduct of the party to be indemnified.
The obligations of the Borrower under this Section shall survive the
termination of this Agreement.
Section 12.16. Set-off. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such
rights, upon the occurrence of any Event of Default, each Bank and each
subsequent holder of any Obligation is hereby authorized by the Borrower
at any time or from time to time, without notice to the Borrower or to
any other Person, any such notice being hereby expressly waived, to set-
off and to appropriate and to apply any and all deposits (general or
special, including, but not limited to, indebtedness evidenced by
certificates of deposit, whether matured or unmatured, but not including
trust accounts, and in whatever currency denominated) and any other
indebtedness at any time held or owing by that Bank or that subsequent
holder to or for the credit or the account of the Borrower, whether or
not matured, against and on account of the Obligations of the Borrower to
that Bank or that subsequent holder under the Loan Documents, including,
but not limited to, all claims of any nature or description arising out
of or connected with the Loan Documents, irrespective of whether or not
(a) that Bank or that subsequent holder shall have made any demand
hereunder or (b) the principal of or the interest on the Loans or Notes
and other amounts due hereunder shall have become due and payable
pursuant to Section 9 and although said obligations and liabilities, or
any of them, may be contingent or unmatured.
Section 12.17. Entire Agreement. The Loan Documents constitute the
entire understanding of the parties thereto with respect to the subject
matter thereof and any prior agreements, whether written or oral, with
respect thereto are superseded hereby.
Section 12.18. Governing Law. This Agreement and the other Loan
Documents, and the rights and duties of the parties hereto, shall be
construed and determined in accordance with the internal laws of the
State of Illinois.
Section 12.19. Severability of Provisions. Any provision of any Loan
Document which is unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such unenforceability
without invalidating the remaining provisions hereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 12.20. Excess Interest. Notwithstanding any provision to the
contrary contained herein or in any other Loan Document, no such
provision shall require the payment or permit the collection of any
amount in excess of the maximum amount of interest permitted by
applicable law to be charged for the use or detention, or the forbearance
in the collection, of all or any portion of the Loans or other
obligations outstanding under this Agreement or any other Loan Document
("Excess Interest"). If any Excess Interest is provided for, or is
adjudicated to be provided for, herein or in any other Loan Document,
then in such event (a) the provisions of this Section 12.20 shall govern
and control; (b) neither the Borrower nor any guarantor or endorser shall
be obligated to pay any Excess Interest; (c) any Excess Interest that the
Agent or any Bank may have received hereunder shall, at the option of the
Agent, be (i) applied as a credit against the then outstanding principal
amount of Loans hereunder, accrued and unpaid interest thereon (not to
exceed the maximum amount permitted by applicable law) and any other
obligations, or all of the foregoing; (ii) refunded to the Borrower, or
(iii) any combination of the foregoing; (d) the interest rate payable
hereunder or under any other Loan Document shall be automatically subject
to reduction to the maximum lawful contract rate allowed under applicable
usury laws, and this Agreement and the other Loan Documents shall be
deemed to have been, and shall be, reformed and modified to reflect such
reduction in the relevant interest rate; and (e) neither the Borrower nor
any guarantor or endorser shall have any action against the Agent or any
Bank for any damages whatsoever arising out of the payment or collection
of any Excess Interest.
Section 12.21. Confidentiality. Any information disclosed by the
Borrower or any of its Subsidiaries to the Agent or any Bank which was
designated proprietary or confidential at the time of its receipt by the
Agent or such Bank, and which it is not otherwise in the public domain,
shall not be disclosed by the Agent or such Bank to any other Person
except (i) to its independent accountants and legal counsel (it being
understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such information and instructed to
keep such information confidential), (ii) pursuant to statutory and
regulatory requirements, (iii) pursuant to any mandatory court order,
subpoena or other legal process, (iv) to the Agent or any other Bank,
(v) pursuant to any agreement heretofore or hereafter made between such
Bank and the Borrower which permits such disclosure, (vi) in connection
with the exercise of any remedy under the Loan Documents, or
(vii) subject to an agreement containing provisions substantially the
same as those of this Section, to any participant in or assignee of, or
prospective participant in or assignee of, any Obligation or Commitments.
Section 12.22. Single Bank. If and so long as Harris Trust and Savings
Bank is the only Bank hereunder, Harris Trust and Savings Bank shall have
all rights, powers and privileges afforded to the Agent, the Banks, and
the Required Banks hereunder and under the other Loan Documents.
Section 12.23. Submission to Jurisdiction; Waiver of Jury Trial. The
Borrower hereby submits to the nonexclusive jurisdiction of the United
States District Court for the Northern District of Illinois and of any
Illinois state court sitting in the Cook County, Illinois for purposes of
all legal proceedings arising out of or relating to this Agreement, the
other Loan Documents or the transactions contemplated hereby or thereby.
The Borrower irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an
inconvenient forum. THE BORROWER, THE AGENT AND EACH BANK HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED THEREBY.
[SIGNATURE PAGES TO FOLLOW]
Upon your acceptance hereof in the manner hereinafter set forth,
this Agreement shall constitute a contract between us for the uses and
purposes hereinabove set forth.
Dated as of this ____________ 1998.
DIAMOND HOME SERVICES, INC.
By
Name:
Title:
Accepted and agreed to as of the day and year last above written.
HARRIS TRUST AND SAVINGS BANK, in
its individual capacity as a Bank
and as Agent
Address and Amount of Commitments: By . . . . . . . . . . . . . . . . .
Name: . . . . . . . . . . . . . .
Address: Title: Vice President
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
Attention: Adam Balbach
Telecopy: (312) 461-2591
Telephone: (312) 461-3134
with notices of Borrowing requests to:
Attention: Kevin J. Houlahan
Telecopy: (312) 461-7385
Telephone: (312) 461-2841
Revolving Credit Commitment:
$5,000,000
Term Loan Commitment:
$10,000,000
Lending Offices:
111 West Monroe Street
Chicago, Illinois 60603
LASALLE NATIONAL BANK
Address and Amount of Commitments: By . . . . . . . . . . . . . . . . .
Name: . . . . . . . . . . . . . .
Address: Title: Vice President
LaSalle National Bank
Suite 242
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Richard P. Bott
Telecopy: (312) 904-1706
Telephone: (312) 904-7367
with notices of Borrowing requests to:
Attention: Joy Lippo
Telecopy: (312) 904-1706
Telephone: (312) 904-1046
Revolving Credit Commitment:
$5,000,000
Term Loan Commitment:
$10,000,000
Lending Offices:
135 South LaSalle Street
Chicago, Illinois 60603
BANK OF AMERICA ILLINOIS
Address and Amount of Commitments: By . . . . . . . . . . . . . . . . .
Name: . . . . . . . . . . . . . .
Address: Title: Vice President
Bank of America Illinois
Suite 600
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Sally A. Munn
Telecopy: (312) 974-8935
Telephone: (312) 828-6853
with notices of Borrowing requests to:
Attention: Christine Wynimko
Telecopy: (312) 974-1623
Telephone: (312) 828-4212
Revolving Credit Commitment:
$5,000,000
Term Loan Commitment:
$10,000,000
Lending Offices:
Suite 600
231 South LaSalle Street
Chicago, Illinois 60697
EXHIBIT A
NOTICE OF PAYMENT REQUEST
[Date]
[Name of Bank]
[Address]
Attention:
Reference is made to the Credit Agreement, dated as of
______________, 1998, among Diamond Home Services, Inc., the Banks party
thereto, and Harris Trust and Savings Bank, as Agent (the "Credit
Agreement"). Capitalized terms used herein and not defined herein have
the meanings assigned to them in the Credit Agreement. [The Borrower has
failed to pay its Reimbursement Obligation in the amount of $_________.
Your Bank's Percentage of the unpaid Reimbursement Obligation is
$_________] or [The undersigned has been required to return a payment by
the Borrower of a Reimbursement Obligation in the amount of $________.
Your Bank's Percentage of the returned Reimbursement Obligation is
$_________.]
Very truly yours,
HARRIS TRUST AND SAVINGS BANK, as
Issuing Bank
By
Its
XHIBIT B
NOTICE OF BORROWING
Date: ______________, ____
To: Harris Trust and Savings Bank, as Agent for the Banks parties to the
Credit Agreement dated as of ______________, 1998 (as extended,
renewed, amended or restated from time to time, the "Credit
Agreement") among Diamond Home Services, Inc., certain Banks which
are signatories thereto and Harris Trust and Savings Bank, as Agent
Ladies and Gentlemen:
The undersigned, Diamond Home Services, Inc. (the "Borrower"),
refers to the Credit Agreement, the terms defined therein being used
herein as therein defined, and hereby gives you notice irrevocably,
pursuant to Section 1.6 of the Credit Agreement, of the Borrowing
specified below:
1. The Business Day of the proposed Borrowing is ___________,
____.
2. The aggregate amount of the proposed Borrowing is
$______________.
3. The Borrowing is being advanced under the [REVOLVING]
[TERM] Credit.
4. The Borrowing is to be comprised of $___________ of [BASE
RATE] [EURODOLLAR] Loans.
[5. THE DURATION OF THE INTEREST PERIOD FOR THE EURODOLLAR
LOANS INCLUDED IN THE BORROWING SHALL BE ____________ MONTHS.]
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the proposed
Borrowing, before and after giving effect thereto and to the application
of the proceeds therefrom:
(a) the representations and warranties of the Borrower
contained in Section 6 of the Credit Agreement are true and correct
as though made on and as of such date (except to the extent such
representations and warranties relate to an earlier date, in which
case they are true and correct as of such date); and
(b) no Default or Event of Default has occurred and is
continuing or would result from such proposed Borrowing.
DIAMOND HOME SERVICES, INC.
By
Name
Title
EXHIBIT C
NOTICE OF CONVERSION/CONTINUATION
Date: ____________, ____
To: Harris Trust and Savings Bank, as Agent for the Banks parties to the
Credit Agreement dated as of ___________, 1998 (as extended,
renewed, amended or restated from time to time, the "Credit
Agreement") among Diamond Home Services, Inc., certain Banks which
are signatories thereto and Harris Trust and Savings Bank, as Agent
Ladies and Gentlemen:
The undersigned, Diamond Home Services, Inc. (the "Borrower"),
refers to the Credit Agreement, the terms defined therein being used
herein as therein defined, and hereby gives you notice irrevocably,
pursuant to Section 1.6 of the Credit Agreement, of the [CONVERSION]
[CONTINUATION] of the Loans specified herein, that:
1. The conversion/continuation Date is __________, ____.
2. The aggregate amount of the [REVOLVING] [TERM] Loans to be
[CONVERTED] [CONTINUED] is $______________.
3. The Loans are to be [CONVERTED INTO] [CONTINUED AS]
[EURODOLLAR] [BASE RATE] Loans.
4. [IF APPLICABLE:] The duration of the Interest Period for
the [REVOLVING] [TERM] Loans included in the [CONVERSION]
[CONTINUATION] shall be _________ months.
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the proposed
conversion/continuation date, before and after giving effect thereto and
to the application of the proceeds therefrom:
(a) the representations and warranties of the Borrower
contained in Section 6 of the Credit Agreement are true and correct
as though made on and as of such date (except to the extent such
representations and warranties relate to an earlier date, in which
case they are true and correct as of such date); provided, however,
that this condition shall not apply to the conversion of an
outstanding Eurodollar Loan to a Base Rate Loan; and
(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed [CONVERSION]
[CONTINUATION].
DIAMOND HOME SERVICES, INC.
By:
Name
Title
EXHIBIT D
REVOLVING NOTE
U.S. $_______________ ________________, 19___
FOR VALUE RECEIVED, the undersigned, DIAMOND HOME SERVICES, INC., a
Delaware corporation (the "Borrower"), hereby promises to pay to the
order of ______________________ (the "Bank") on the Revolving Credit
Termination Date of the hereinafter defined Credit Agreement, at the
principal office of Harris Trust and Savings Bank, as Agent, in Chicago,
Illinois, in immediately available funds, the principal sum of
___________________ Dollars ($__________) or, if less, the aggregate
unpaid principal amount of all Revolving Loans made by the Bank to the
Borrower pursuant to the Credit Agreement, together with interest on the
principal amount of each Revolving Loan from time to time outstanding
hereunder at the rates, and payable in the manner and on the dates,
specified in the Credit Agreement.
The Bank shall record on its books or records or on a schedule
attached to this Note, which is a part hereof, each Revolving Loan made
by it pursuant to the Credit Agreement, together with all payments of
principal and interest and the principal balances from time to time
outstanding hereon, whether the Revolving Loan is a Base Rate Loan or a
Eurodollar Loan, the interest rate and Interest Period applicable
thereto, provided that prior to the transfer of this Note all such
amounts shall be recorded on a schedule attached to this Note. The
record thereof, whether shown on such books or records or on a schedule
to this Note, shall be prima facie evidence of the same, provided,
however, that the failure of the Bank to record any of the foregoing or
any error in any such record shall not limit or otherwise affect the
obligation of the Borrower to repay all Revolving Loans made to it
pursuant to the Credit Agreement together with accrued interest thereon.
This Note is one of the Revolving Notes referred to in the Credit
Agreement dated as of ___________, 1998, among the Borrower, Harris Trust
and Savings Bank, as Agent, and the Banks party thereto (the "Credit
Agreement"), and this Note and the holder hereof are entitled to all the
benefits and security provided for thereby or referred to therein, to
which Credit Agreement reference is hereby made for a statement thereof.
All defined terms used in this Note, except terms otherwise defined
herein, shall have the same meaning as in the Credit Agreement. This
Note shall be governed by and construed in accordance with the internal
laws of the State of Illinois.
Voluntary prepayments may be made hereon, certain prepayments are
required to be made hereon, and this Note may be declared due prior to
the expressed maturity hereof, all in the events, on the terms and in the
manner as provided for in the Credit Agreement.
The Borrower hereby waives demand, presentment, protest or notice of
any kind hereunder.
DIAMOND HOME SERVICES, INC.
By
Name
Title
EXHIBIT E
TERM NOTE
U.S. $_______________ ________________, 19___
FOR VALUE RECEIVED, the undersigned, DIAMOND HOME SERVICES, INC., a
Delaware corporation (the "Borrower"), hereby promises to pay to the
order of ______________________ (the "Bank") at the principal office of
Harris Trust and Savings Bank, as Agent, in Chicago, Illinois, in
immediately available funds, the principal sum of ___________________
Dollars ($__________) or, if less, the aggregate unpaid principal amount
of the Term Loan made or maintained by the Bank to the Borrower pursuant
to the Credit Agreement, in consecutive quarter-annual principal
installments in the amounts called for by Section 1.8(b) of the Credit
Agreement, commencing on December 31, 1998, and continuing on the last
day of each June, September, December and March occurring thereafter,
together with interest on the principal amount of such Term Loan from
time to time outstanding hereunder at the rates, and payable in the
manner and on the dates, specified in the Credit Agreement, except that
all principal and interest not sooner paid on the Term Loan evidenced
hereby shall be due and payable on March 31, 2003, the final maturity
date hereof.
The Bank shall record on its books or records or on a schedule
attached to this Note, which is a part hereof, the Term Loan made or
maintained by it pursuant to the Credit Agreement, together with all
payments of principal and interest and the principal balances from time
to time outstanding hereon, whether the Term Loan is a Base Rate Loan or
a Eurodollar Loan, the interest rate and Interest Period applicable
thereto, provided that prior to the transfer of this Note all such
amounts shall be recorded on a schedule attached to this Note. The
record thereof, whether shown on such books or records or on a schedule
to this Note, shall be prima facie evidence of the same, provided,
however, that the failure of the Bank to record any of the foregoing or
any error in any such record shall not limit or otherwise affect the
obligation of the Borrower to repay the Term Loan made to it pursuant to
the Credit Agreement together with accrued interest thereon.
This Note is one of the Term Notes referred to in the Credit
Agreement dated as of ______________, 1998, among the Borrower, Harris
Trust and Savings Bank, as Agent, and the Banks party thereto (the
"Credit Agreement"), and this Note and the holder hereof are entitled to
all the benefits and security provided for thereby or referred to
therein, to which Credit Agreement reference is hereby made for a
statement thereof. All defined terms used in this Note, except terms
otherwise defined herein, shall have the same meaning as in the Credit
Agreement. This Note shall be governed by and construed in accordance
with the internal laws of the State of Illinois.
Voluntary prepayments may be made hereon, certain prepayments are
required to be made hereon, and this Note may be declared due prior to
the expressed maturity hereof, all in the events, on the terms and in the
manner as provided for in the Credit Agreement.
The Borrower hereby waives demand, presentment, protest or notice of
any kind hereunder.
DIAMOND HOME SERVICES, INC.
By
Name
Title
XHIBIT F
SWING LINE NOTE
U.S. $______________ __________, 1998
On the Revolving Credit Termination Date, for value received, the
undersigned, DIAMOND HOME SERVICES, INC., a _________ corporation (the
"Borrower"), promises to pay to the order of Harris Trust and Savings
Bank (the "Bank"), at the principal office of Harris Trust and Savings
Bank in Chicago, Illinois, the principal sum of (i) _________________
Dollars ($______________), or (ii) such lesser amount as may at the time
of the maturity hereof, whether by acceleration or otherwise, be the
aggregate unpaid principal amount of all Swing Loans owing from the
Borrower to the Bank under the Swing Line Commitment provided for in the
Credit Agreement hereinafter mentioned.
This Note evidences Swing Loans made and to be made to the Borrower
by the Bank under the Swing Line Commitment provided for under that
certain Credit Agreement dated as of __________, 1998 by and between the
Borrower, Harris Trust and Savings Bank individually and as Agent and
certain banks which are or may from time to time become parties thereto
(the "Credit Agreement"), and the Borrower hereby promises to pay
interest at the office specified above on each Swing Loan evidenced
hereby at the rates and times specified therefor in the Credit Agreement.
Each Swing Loan made under the Swing Line Commitment provided for in
the Credit Agreement by the Bank to the Borrower against this Note, any
repayment of principal hereon and the interest rates applicable thereto
shall be endorsed by the holder hereof on the reverse side of this Note
or recorded on the books and records of the holder hereof (provided that
such entries shall be endorsed on the reverse side hereof prior to any
negotiation hereof) and the Borrower agrees that in any action or
proceeding instituted to collect or enforce collection of this Note, the
entries so endorsed on the reverse side hereof or recorded on the books
and records of the Bank shall be prima facie evidence of the unpaid
balance of this Note and the interest rates applicable thereto.
This Note is issued by the Borrower under the terms and provisions
of the Credit Agreement, and this Note and the holder hereof are entitled
to all of the benefits and security provided for thereby or referred to
therein, to which reference is hereby made for a statement thereof. This
Note may be declared to be, or be and become, due prior to its expressed
maturity as specified in the Credit Agreement, and certain prepayments
are required to be made hereon, all in the events, on the terms and with
the effects provided in the Credit Agreement. All capitalized terms used
herein without definition shall have the same meaning herein as such
terms have in the Credit Agreement.
This Note shall be construed in accordance with, and governed by,
the internal laws of the State of Illinois without regard to principles
of conflict of law.
The Borrower hereby waives demand, presentment, protest or notice of
any kind hereunder.
DIAMOND HOME SERVICES, INC.
By
Its
EXHIBIT G
COMPLIANCE CERTIFICATE
FOR
DIAMOND HOME SERVICES, INC.
This Compliance Certificate is furnished to Harris Trust and Savings
Bank, as Agent (the "Agent") pursuant to that certain Credit Agreement
dated as of ___________, 1998, among Diamond Home Services, Inc. (the
"Borrower"), Harris Trust and Savings Bank, as Agent, and the Banks party
thereto (the "Credit Agreement"). Unless otherwise defined herein, the
terms used in this Compliance Certificate have the meanings ascribed
thereto in the Credit Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I a m t h e d u l y e l e c t e d
_____________________________________ of the Borrower;
2. I have reviewed the terms of the Credit Agreement and I
have made, or have caused to be made under my supervision, a
detailed review of the transactions and conditions of the Borrower
and its Subsidiaries during the accounting period covered by the
attached financial statements;
3. The examinations described in paragraph 2 did not
disclose, and I have no knowledge of, the existence of any condition
or the occurrence of any event which constitutes a Default or Event
of Default during or at the end of the accounting period covered by
the attached financial statements or as of the date of this
Certificate, except as set forth below; and
4. The Attachment hereto sets forth financial data and
computations evidencing the Borrower's compliance with certain
covenants of the Credit Agreement, all of which data and
computations are, to the best of my knowledge, correct and have been
made in accordance with the relevant Sections of the Credit
Agreement.
Described below are the exceptions, if any, to paragraph 3 by
listing, in detail, the nature of the condition or event, the period
during which it has existed and the action which the Borrower has taken,
is taking, or proposes to take with respect to each such condition or
event:
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
The foregoing certifications, together with the computations set
forth in the Attachment hereto and the financial statements delivered
with this Certificate in support hereof, are made and delivered this
_________ day of __________________ 19___.
DIAMOND HOME SERVICES, INC.
By
. . . . . . . ,
(Name)(Title)
ATTACHMENT TO COMPLIANCE CERTIFICATE
FOR
DIAMOND HOME SERVICES, INC.
Compliance Calculations for Credit Agreement
Dated as of ____________, 1998
Calculations as of _____________, 19___
_________________________________________________________________________
__
A. CASH FLOW LEVERAGE RATIO (SECTION 8.22)
1. Total Funded Debt, as defined
2. Net Income, as defined
3. Amounts deducted in arriving at Net Income in respect of
(a) Interest Expense as defined . . .
(b) Federal, state, local
income taxes . . . .
(c) Depreciation and amortization . .
4. Sum of Lines 2, 3(a), 3(b) and 3(c) ("EBITDA")
5. Net income attributable to acquired company
during same period not otherwise included above
6. Amounts deducted in arriving at Net Income (Line 5 above)
in respect of
(a) Interest expense
attributable to acquired
company . . . .
(b) Federal, state, local
income taxes
attributable to acquired
company . . . .
(c) Depreciation and amortization
attributable to acquired
company . . . .
7. Sum of Lines 5, 6(a), 6(b) and 6(c) ("Adjusted EBITDA")
8. Ratio of Total Funded Debt (Line 1)
to Adjusted EBITDA (Line 7) ("Cash Flow
Leverage Ratio")
:1
9. As listed in Section 8.22, for the date of
this Certificate, the Cash Flow Leverage Ratio shall
not be greater than
:1
10. Company is in compliance?
(Circle yes or no) Yes/No
B. NET WORTH (SECTION 8.23)
1. Net Worth, as defined
2. As listed in Section 8.23, for the
date of this Certificate, Net
Worth (Line 1) must not be less than the Minimum
Required Amount $
3. Company is in compliance?
(Circle yes or no) Yes/No
C. FIXED CHARGE COVERAGE RATIO (SECTION 8.24)
1. EBITDA
(from Line A4 above)
2. Capital Expenditures, as defined
3. Aggregate amount of principal
payments required to be made on
Seller Debt and Total Funded Debt . . .
4. Interest Expense, as defined . . . .
5. Aggregate amount expended to
repurchase common capital stock
of Borrower . . . .
6. Sum of Lines 3, 4 and 5 ("Fixed Charges")
7. Ratio of the (i) difference between (a)
EBITDA (Line 1) and (b) Capital Expenditures
(Line 2) to (ii) Fixed
Charges (Line 5) ("Fixed Charge
Coverage Ratio")
:1
8. As listed in Section 8.24, for
the date of this Certificate, the
Fixed Charge Coverage Ratio
must not be less than
:1
9. Company is in compliance?
(Circle yes or no) Yes/No
D. INTEREST COVERAGE RATIO (SECTION 8.25)
1. Net Income, as defined
2. Amounts deducted in arriving at Net Income in
respect of:
(a) Interest Expense . . . .
(b) Federal, state, and local
income taxes . . . .
3. Sum of Lines 1, 2(a) and 2(b) ("EBIT")
4. Interest Expense, as defined
5. Ratio of EBIT (Line 3) to
Interest Expense (Line 4)
("Interest Coverage Ratio")
:1
6. As listed in Section 8.25, for
the date of this Certificate,
the Interest Coverage Ratio must
not be less than
:1
7. Company is in compliance?
(Circle yes or no) Yes/No
E. MINIMUM EBITDA (SECTION 8.26)
1. EBITDA (From Line A4 above)
2. As listed in Section 8.26, for the date of this Certificate,
EBITDA (Line 1) must not be less than $
3. Company is in compliance?
(Circle yes or no) Yes/No
EXHIBIT H
ASSIGNMENT AND ACCEPTANCE
Dated _____________, _______
Reference is made to the Credit Agreement dated as of __________,
1998 (the "Credit Agreement") among Diamond Home Services, Inc., a
Delaware corporation, the Banks (as defined in the Credit Agreement) and
Harris Trust and Savings Bank, as Agent for the Banks (the "Agent").
Terms defined in the Credit Agreement are used herein with the same
meaning.
_____________________________________________________ (the
"Assignor") and _________________________ (the "Assignee") agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, a
_______% interest in and to all of the Assignor's rights and
obligations under the Credit Agreement as of the Effective Date (as
defined below), including, without limitation, such percentage
interest in the Assignor's Commitments as in effect on the Effective
Date and the Loans, if any, owing to the Assignor on the Effective
Date and the Assignor's Percentage of any outstanding L/C
Obligations and Swing Loans, if any.
2. The Assignor (i) represents and warrants that as of the
date hereof (A) its Revolving Credit Commitment is $_____________
and its Term Loan Commitment is $______________, (B) the aggregate
outstanding principal amount of Loans made by it under the Credit
Agreement that have not been repaid is $____________ ($_____________
of Revolving Loans and $_____________ of Term Loans ) and a
description of the interest rates and interest periods of such Loans
is attached as Schedule 1 hereto, (C) the aggregate principal amount
of Assignor's Percentage of outstanding L/C Obligations is
$____________, and (D) the aggregate amount of Assignor's
participations (whether or not funded) in outstanding Swing Loans is
$____________; (ii) 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, lien, or
encumbrance of any kind; (iii) makes no representation or warranty
and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant
thereto; and (iv) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the
Borrower or any Subsidiary or performance or observance by the
Borrower or any Subsidiary of any of its obligations under the
Credit Agreement or any other instrument or document furnished
pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial
statements referred to in Section 8.5 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 will, independently and without
reliance upon the Agent, the Assignor or any other Bank 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) appoints and
authorizes the Agent to take such action as Agent on its behalf and
to exercise such powers under the Credit Agreement and the other
Loan Documents as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto;
(iv) agrees that it will perform in accordance with their terms all
of the obligations which by the terms of the Credit Agreement are
required to be performed by it as a Bank; and (v) specifies as its
lending office (and address for notices) the offices set forth
beneath its name on the signature pages hereof.
4. As consideration for the assignment and sale contemplated
in Section 1 hereof, the Assignee shall pay to the Assignor on the
Effective Date in Federal funds an amount equal to
$________________1. It is understood that commitment and/or
facility fees accrued to the Effective Date with respect to the
interest assigned hereby are for the account of the Assignor and
such fees accruing from and including the date hereof are for the
account of the Assignee. Each of the Assignor and the Assignee
hereby agrees that if it receives any amount under the Credit
Agreement which is for the account of the other party hereto, it
shall receive the same for the account of such other party to the
extent of such other party's interest therein and shall promptly pay
the same to such other party.
5. The effective date for this Assignment and Acceptance
shall be _____________, 19___ (the "Effective Date"). Following the
execution of this Assignment and Acceptance, it will be delivered to
the Agent for acceptance and recording by the Agent and, if
required, the Borrower.
6. Upon such acceptance and recording, 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 Bank thereunder and (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.
7. Upon such acceptance and recording, from and after the
Effective Date, the Agent shall make all payments under the Credit
Agreement 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 for periods prior to the Effective Date
directly between themselves.
8. In accordance with Section 12.12 of the Credit Agreement,
the Assignor and the Assignee request and direct that the Agent
prepare and cause the Borrower to execute and deliver to the
1 Amount should combine principal together with accrued interest
and breakage compensation, if any, to be paid by the
Assignee, net of any portion of any upfront fee to be paid by the
Assignor to the Assignee. It may be preferable in an
appropriate case to specify these amounts generically or by formula rather
than as a fixed sum.
Assignee the relevant Notes payable to the Assignee in the amount of
its Commitments and new Notes to the Assignor in the amount of its
Commitments after giving effect to this assignment.
9. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of Illinois.
[ASSIGNOR BANK]
By
Name
Title
[ASSIGNEE BANK]
By
Name
Title
Lending office (and address for
notices):
Accepted and consented this
____ day of ___________, 19__
DIAMOND HOME SERVICES, INC.
By . . . . . . . . . . . . . . .
Name . . . . . . . . . . . . .
Title . . . . . . . . . . . .
Accepted and consented to by the Agent this
_______ day of ___________, 19__
HARRIS TRUST AND SAVINGS BANK, as Agent
By . . . . . . . . . . . . . . .
Name . . . . . . . . . . . . .
Title . . . . . . . . . . . .
SCHEDULE I
PRINCIPAL AMOUNT TYPE OF LOAN INTEREST RATE MATURITY DATE
ATTACHMENT ONE
SCHEDULE 6.2
NAME JURISDICTION OF PERCENTAGE
INCORPORATION OWNERSHIP
Diamond Acquisition Corp. DELAWARE 100%
Reeves Southeastern FLORIDA 100%
Corporation
Foreline Security Corporation FLORIDA 100%
Marquise Financial Services, DELAWARE 100%
Inc.
Reeves Southeastern Realty, FLORIDA 100%
Inc.
Diamond Exteriors, Inc. DELAWARE 100%
All of the above-listed Subsidiaries are Material Subsidiaries.
SCHEDULE 8.7
OTHER INDEBTEDNESS
AT DECEMBER 31, 1997:
DESCRIPTION OUTSTANDING NOTES
12/31/97
$15,000,000 unsecured $0 To be terminated at
line of credit closing
Non-interest bearing $1,098,000
notes to stockholder
Notes to Reeves former $1,100,000 To be paid shortly
ESOP employees after closing
Guarantees by the $0
Borrower and Diamond
Acquisition Corp. of
$8,000,000 of the
Seller Debt
SCHEDULE 8.8
OTHER LIENS
Notes to Reeves former ESOP employees-secured by
receivables/inventory/fixed assets (See Schedule 8.7)
Permitted Marquise Financing-secured by loan receivables/other assets
$350,000 in Cash Collateral to secure $350,000 letter of credit issued by
American National Bank and Trust Company of Chicago for the account of
the Borrower and its subsidiaries
$700,000 in Cash Collateral to secure $700,000 letter of credit issued by
NationsBank for the account of Reeves
