SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
__X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 OR
______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO
_____________ .
COMMISSION FILE NUMBER: 1-14310
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IMATION CORP.
(Exact name of registrant as specified in its charter)
A DELAWARE 41-1838504
CORPORATION (I.R.S. Employer
(State or other jurisdiction of Identification No.)
incorporation or organization)
1 IMATION PLACE
OAKDALE, MINNESOTA 55128
(Address of principal executive offices)
(612) 704-4000
(Registrant's telephone number, including area code)
--------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__. No _____.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 40,570,571 shares of Common
Stock, par value $0.01 per share, were outstanding at October 31, 1997.
<PAGE>
IMATION CORP.
INDEX
PAGE(S)
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Operations
for the three and nine months ended
September 30, 1997 and 1996 3
Condensed Consolidated Balance Sheets as
of September 30, 1997 and December 31, 1996 4
Condensed Consolidated Statements of
Cash Flows for the nine months ended
September 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6-10
Report of Independent Accountants 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 12-21
PART II. OTHER INFORMATION 22
SIGNATURE 24
EXHIBITS 25-27
<PAGE>
PART I. FINANCIAL INFORMATION
IMATION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Millions, Except Per Share Amounts)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
------ ------ -------- --------
Net revenues $529.5 $559.3 $1,632.0 $1,696.6
Cost of goods sold 338.3 362.7 1,048.8 1,105.0
------ ------ -------- --------
Gross profit 191.2 196.6 583.2 591.6
Operating expenses:
Selling, general and
administrative 144.8 133.5 420.4 423.4
Research and development 78.4 38.6 156.6 132.1
Restructuring charges - - - 53.9
------ ------ -------- --------
Total 223.2 172.1 577.0 609.4
Operating income (loss) (32.0) 24.5 6.2 (17.8)
Other income and expense:
Interest expense 3.9 4.0 10.1 11.4
Other, net 1.6 (1.5) 3.8 (3.5)
------- ------- -------- ---------
Total 5.5 2.5 13.9 7.9
Income (loss) before tax and
minority interest (37.5) 22.0 (7.7) (25.7)
Income tax provision (benefit) 1.2 10.2 14.6 (5.4)
Minority interest - - - (0.4)
------- ------- --------- ---------
Net income (loss) $(38.7) $ 11.8 $ (22.3) $ (19.9)
======= ======= ========= =========
Earnings (loss) per share $(0.97) $ 0.29 $ (0.56) $ (0.48)
======= ======= ========= =========
Weighted average shares
outstanding 38.7 40.8 39.7 41.5
======= ======= ========= ========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
<PAGE>
IMATION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Millions, Except Share Amounts)
September 30,
1997 December 31,
(Unaudited) 1996
-------- --------
ASSETS
Current Assets
Cash and equivalents $ 43.1 $ 61.7
Accounts receivable - net 483.4 479.6
Inventories 417.5 392.8
Other current assets 137.1 94.5
-------- --------
Total current assets 1,081.1 1,028.6
Property, Plant and Equipment - net 449.2 480.1
Other Assets 134.4 64.6
-------- --------
Total Assets $1,664.7 $1,573.3
======== ========
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 183.2 $ 194.1
Accrued payroll 47.7 41.9
Income taxes payable 10.5 7.6
Short-term debt 29.2 26.5
Other current liabilities 173.9 151.2
-------- --------
Total current liabilities 444.5 421.3
Other Liabilities 113.9 98.6
Long-Term Debt 262.1 123.1
Commitments and Contingencies
Shareholders' Equity
Common stock, $0.01 par value 0.4 0.4
September 30, 1997: 42,927,627 shares issued
December 31, 1996: 42,879,880 shares issued
Additional paid-in capital 1,026.3 1,011.5
Retained earnings (accumulated deficit) (12.5) 11.2
Unearned ESOP shares (39.9) (46.6)
Cumulative translation adjustment (71.7) (46.2)
Treasury stock, at cost
September 30, 1997: 2,382,088 shares (58.4) -
-------- --------
Total shareholders' equity 844.2 930.3
-------- --------
Total Liabilities and Shareholders' Equity $1,664.7 $1,573.3
======== ========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
<PAGE>
IMATION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
(Unaudited)
Nine months ended
September 30,
-------------
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (22.3) $ (19.9)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 111.4 137.7
Restructuring and other one-time charges 41.7 76.4
Working capital changes (62.3) 88.1
Other 12.7 (17.4)
-------- --------
Net cash provided by operating activities 81.2 264.9
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (92.8) (115.9)
Capitalized software (64.8) -
Acquisition, net of cash acquired (29.0) -
Other 1.5 6.2
-------- --------
Net cash used in investing activities (185.1) (109.7)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term debt 2.0 16.2
Borrowings of long-term debt 1,275.8 249.3
Repayments of long-term debt (1,141.5) (82.0)
Purchases of treasury stock (60.9) -
Reissuances of treasury stock 1.3 -
Decrease in unearned ESOP shares 6.7 -
Employee stock plans 0.2 -
Loan to ESOP - (50.0)
Net cash paid to 3M - (155.9)
-------- --------
Net cash provided by (used in) financing activities 83.6 (22.4)
Effect of exchange rate changes on cash 1.7 (6.0)
-------- --------
Net change in cash and equivalents (18.6) 126.8
Cash and equivalents - beginning of period 61.7 -
-------- --------
Cash and equivalents - end of period $ 43.1 $ 126.8
======== ========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
<PAGE>
IMATION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. FINANCIAL STATEMENTS
Imation Corp. (the "Company") became an independent, publicly held company as of
July 1, 1996 (the "Distribution Date"), when Minnesota Mining and Manufacturing
("3M") spun off its data storage and imaging businesses (the "Distribution").
One share of the Company's common stock was issued for every ten shares of 3M
stock outstanding to stockholders of record on June 28, 1996. 3M and the Company
have entered into a number of agreements to facilitate the transition of the
Company to an independent business enterprise. Descriptions of the various
agreements are set forth under the caption "Relationship Between 3M and the
Company" contained in the Company's 1996 Annual Report on Form 10-K filed with
the Securities and Exchange Commission.
The consolidated financial statements for periods prior to July 1, 1996 reflect
the assets, liabilities, revenues, and expenses that were directly related to
the Company as it was operated within 3M. The Company's consolidated statements
of operations for periods prior to July 1, 1996 include all of the related costs
of doing business including an allocation of certain general corporate expenses
of 3M which were not directly related to these businesses, including costs for
corporate logistics, corporate research and development, information
technologies, finance, legal and corporate executives. Management believes these
allocations were made on a reasonable basis. All material inter-company
transactions and balances between the Company's businesses have been eliminated.
The financial information included herein for periods prior to July 1, 1996 may
not necessarily be indicative of the results of operations or cash flows of the
Company if it had been a separate, independent company during the periods prior
to July 1, 1996.
The interim consolidated financial statements are unaudited but, in the opinion
of management, reflect all adjustments necessary for a fair presentation of
financial position, results of operations and cash flows for the periods
presented. These adjustments, except for the restructuring and one-time charges
recorded in 1997 and 1996, consist of normal, recurring items. The results of
operations for any interim period are not necessarily indicative of results for
the full year. The consolidated financial statements and notes are presented
<PAGE>
as permitted by the requirements for Form 10-Q and do not contain certain
information included in the Company's annual consolidated financial statements
and notes. This Form 10-Q should be read in conjunction with the Company's
consolidated financial statements and notes included in its 1996 Annual Report
on Form 10-K.
2. SUPPLEMENTAL BALANCE SHEET INFORMATION
September 30,
1997 December 31,
(Unaudited) 1996
---------- ---------
(In millions)
Inventories
Finished goods $ 276.9 $ 248.1
Work in process 64.1 57.3
Raw materials and supplies 76.5 87.4
---------- ---------
Total inventories $ 417.5 $ 392.8
========== =========
Property, Plant and Equipment
Property, plant and equipment $ 1,729.4 $ 1,709.9
Less accumulated depreciation (1,280.2) (1,229.8)
---------- ----------
Property, plant and equipment - net $ 449.2 $ 480.1
========== =========
3. COMMITMENTS AND CONTINGENCIES
Discussion of legal matters is cross-referenced to this Form 10-Q, Part II, Item
1, Legal Proceedings, and should be considered an integral part of the
Consolidated Financial Statements and Notes.
4. MASTER LEASE AND SECURITY AGREEMENT
In March 1997, the Company entered into a Master Lease and Security Agreement in
connection with the construction of a new research and development facility at
the Company's headquarters site. Construction is expected to be completed in
June 1998, at which time the lease payments will commence. The Company has the
option to purchase the facility at the end of the lease term, March 2002. In the
event the Company chooses not to exercise this purchase option, the Company is
obligated to arrange for the sale of the facility and has guaranteed the lessor
a sale price of $58.5 million.
<PAGE>
5. INTEREST RATE SWAP AGREEMENT
Effective March 25, 1997, the Company entered into an interest rate swap
agreement with a financial institution. The notional amount of the interest rate
swap agreement is $100 million with the Company paying fixed rate and receiving
variable rate. The agreement expires March 31, 2000. Net payments or receipts
under the agreement are recorded as adjustments to interest expense. As of
September 30, 1997, the effective interest rate on the $255.0 million in debt
outstanding under the Company's revolving credit facility was 6.4% including the
effect of the interest rate swap agreement.
6. EARNINGS PER SHARE
The number of weighted average shares outstanding used in the computation of
earnings per share (EPS) for periods prior to July 1, 1996 is equal to one-tenth
the weighted average number of 3M shares outstanding based on the distribution
ratio of one share of Imation Corp. for every ten shares of 3M pursuant to the
spin-off on July 1, 1996.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share". This statement establishes standards for computing
and presenting basic and diluted earnings per share for financial statements
issued for periods ending after December 15, 1997. The adoption of this
statement is not expected to have a material effect on the Company's reported
EPS.
7. DERIVATIVE ACCOUNTING POLICY
The Company uses, or may use, interest rate swaps and foreign currency and
commodity forward and option contracts to manage risks generally associated with
interest rate, exchange rate and commodity market volatility. All hedging
instruments are designated as, and effective as, hedges and are highly
correlated as required by generally accepted accounting principles. Instruments
that do not qualify for hedge accounting are marked to market with changes
recognized in current earnings. The Company does not hold or issue derivative
financial instruments for trading purposes and is not a party to leveraged
derivatives.
Realized and unrealized gains and losses on foreign currency and commodity
forward and option contracts for qualifying hedge instruments are deferred until
offsetting gains and losses on the underlying transactions are recognized in
earnings. These gains and losses generally are recognized as an adjustment to
cost of goods sold
<PAGE>
for inventory related hedge transactions, or in stockholders' equity for hedges
of net investments in international companies. Cash flows attributable to these
financial instruments are included with cash flows of the associated hedged
items. For interest rate swaps, the differential paid or received on the swaps
is recognized on an accrual basis as an adjustment to interest expense. Gains
and losses on terminated interest rate swaps are amortized and reflected in
interest expense over the remaining term of the underlying debt.
8. ACQUISITION
On August 15, 1997, the Company acquired all of the outstanding common shares of
Cemax-Icon, Inc. (Cemax) through a merger of a wholly-owned subsidiary of the
Company with and into Cemax. Cemax designs, manufactures and markets medical
imaging and information systems which electronically acquire, archive,
distribute and display medical images throughout hospitals, outpatient
facilities and integrated delivery networks.
The initial purchase price was approximately $51.8 million, comprised of $29.0
million in cash (net of cash acquired) and non-cash amounts consisting of $9.2
million of the Company's previous investment in Cemax preferred shares and $13.6
million related to the fair value of approximately 971,000 stock options and
warrants issued to replace stock options and warrants granted by Cemax. In
addition, the Company issued certain contingent payment rights which allow Cemax
stockholders to receive additional payments of up to a total of $44.8 million if
Cemax attains certain revenue targets in the twelve month periods ended June 30,
1998 and 1999. At the election of the Cemax stockholders, the contingent
payments are payable in cash or the Company's common stock.
The acquisition was accounted for using the purchase method of accounting.
Accordingly, a portion of the purchase price was allocated to the assets
acquired and liabilities assumed based on their estimated fair values. The
Company allocated $41.7 million of the purchase price to in-process research and
development projects that had not yet reached technological feasibility and had
no alternative future uses, which resulted in a non-recurring, non-tax
deductible charge recorded in the third quarter. The excess of the initial
purchase price over net assets acquired and in-process research and development
of approximately $17.7 million was allocated to goodwill and is being amortized
over seven years. Any additional payments pursuant to the contingent payment
rights will be recorded as additional goodwill when the contingencies are met.
<PAGE>
The Cemax operating results are included in the Company's consolidated results
of operations from August 15, 1997. The following table reflects unaudited pro
forma results of operations of the Company and Cemax assuming that the
acquisition had taken place at the beginning of each of the fiscal years for
each period presented. The pro forma information excludes the non-recurring
charge of $41.7 million related to the purchased in-process research and
development.
Nine Months Ended
September 30,
-------------
(In millions, except per share data) 1997 1996
-------- --------
Net revenues $1,648.9 $1,711.5
Net income (loss) 13.4 (23.0)
Earnings (loss) per share 0.34 (0.55)
These unaudited pro forma results of operations have been prepared for
informational purposes only and do not purport to be indicative of the results
of operations that actually would have resulted had the acquisition been made at
the beginning of 1997 or 1996, or of the results of operations that may occur in
the future.
9. SUBSEQUENT EVENT
On October 30, 1997, the Company announced it plans to restructure its worldwide
operations. Based on preliminary plans, the Company expects that restructuring
activities will include workforce reductions of approximately 1,000 to 1,500
people and selected asset write-offs. The Company expects the pre-tax charge
related to the restructuring to be approximately $200 million with most of these
charges being recognized in the fourth quarter of 1997 in accordance with
generally accepted accounting principles.
10. RECLASSIFICATIONS
Certain reclassifications have been made to the prior year's financial
statements to conform with the current year presentation.
*****
Coopers & Lybrand L.L.P., the Company's independent accountants, have performed
a review of the unaudited interim consolidated financial statements included
herein and their report thereon accompanies this filing.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Imation Corp.:
We have reviewed the accompanying condensed consolidated balance sheet of
Imation Corp. (the Company) as of September 30, 1997, and the related
consolidated statements of operations for the three and nine months ended
September 30, 1997 and 1996, and condensed consolidated statements of cash flows
for the nine months ended September 30, 1997 and 1996. These consolidated
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1996, and the
related consolidated statements of operations and cash flows for the year then
ended (not presented herein); and in our report dated February 14, 1997, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1996, is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
October 30, 1997
<PAGE>
IMATION CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL OVERVIEW
On June 18, 1996, the Board of Directors of Minnesota Mining and Manufacturing
Company ("3M") approved the spin-off of Imation Corp., a Delaware corporation
(the "Company"), which is comprised of substantially all of the businesses
previously operated within 3M's data storage and imaging systems groups. To
effectuate the transaction, the Board of Directors of 3M declared a dividend
payable to the holders of record of 3M common stock as of June 28, 1996, based
upon a ratio of one share of the Company's common stock, par value $0.01 per
share (the "Common Stock") for every ten shares of 3M common stock owned on the
record date. Effective July 1, 1996, all of the outstanding shares of Common
Stock were distributed to 3M stockholders (the "Distribution"). Following the
Distribution, the Company began operations as an independent, publicly held
company. Prior to July 1, 1996, the financial statements reflect the results of
operations and cash flows of the businesses transferred to the Company from 3M
as they operated within 3M. As a result, the financial statements of the Company
prior to July 1, 1996 have been carved out from the financial statements of 3M
using the historical results of operations and historical basis of the assets
and liabilities of such businesses. The Company's statements of operations prior
to July 1, 1996 include all of the related costs of doing business, including
charges for the use of facilities and for employee benefits, and include an
allocation of certain general corporate expenses of 3M which were not directly
related to these businesses including costs for corporate logistics, corporate
research and development, information technologies, finance, legal and corporate
executives. Management believes these allocations were made on a reasonable
basis. The financial information included herein for periods prior to July 1,
1996 may not necessarily be indicative of the results of operations or cash
flows of the Company had the Company been a separate, independent company during
the periods prior to July 1, 1996.
At the time of the Distribution, the Company established an overall financial
goal of improving the Company's economic profit (measured as after-tax operating
income in excess of a charge for the use of capital) by $150 million during the
three year period ending December 31, 1998. This goal was based on anticipated
cost reductions and the
<PAGE>
Company's objectives for improved revenue growth and improved asset utilization.
Since the beginning of 1996, the Company's economic profit has improved by
approximately $70.6 million, with $38.1 million of the improvement coming from
cost reductions and $40.2 million from improved asset management, partially
offset by $7.7 million due to revenue declines. The Company's progress toward
these goals has been negatively impacted in 1997 as a result of a number of
factors discussed below in "Results of Operations". While the Company believes
the stated goal of improving economic profit by $150 million is an appropriate
goal for the Company's businesses, it is not expected that this goal will be
achieved by the end of 1998.
On October 30, 1997 the Company announced it plans to restructure its worldwide
operations to reduce its structure and costs to a more appropriate level given
current business conditions. Restructuring activities will include workforce
reductions of approximately 1,000 to 1,500 people and selected asset write-offs.
The Company expects to record a pre-tax charge associated with the restructuring
of approximately $200 million with most of these charges being recognized in the
fourth quarter of 1997 in accordance with generally accepted accounting
principles.
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
The following table displays the components of the Company's consolidated
statements of operations as a percentage of net revenues. The adjusted 1997
percentages exclude the impact of the non-recurring write-off of $41.7 million
of in-process research and development related to the acquisition of Cemax-Icon,
Inc. ("Cemax") in August 1997.
Three Months Ended
September 30,
----------------------
Adjusted
1997 1996
------ ------
Net revenues 100.0% 100.0%
Cost of goods sold 63.9% 64.8%
------ ------
Gross profit 36.1% 35.2%
Operating expenses:
Selling, general
and administrative 27.3% 23.9%
Research and development 7.0% 6.9%
------ ------
Total 34.3% 30.8%
Operating income 1.8% 4.4%
Other income and expense:
Interest expense 0.7% 0.7%
Other, net 0.3% (0.2%)
------ -------
Total 1.0% 0.5%
Income before tax and
minority interest 0.8% 3.9%
Income tax provision 0.2% 1.8%
------ ------
Net income 0.6% 2.1%
====== ======
Net revenues for the third quarter of 1997 were $529.5 million, a decrease of
$29.8 million or 5.3 percent from the same period in 1996. Volume increases of
4.7 percent were more than offset by price declines of 6.1 percent and the
negative effect of changes in currency exchange rates of 3.9 percent. Volume
growth was positively impacted by increased sales of the Company's digital
products including DryView(TM) laser imagers and high-end data storage products,
while volume growth was negatively impacted by lower demand for certain products
in the Company's analog imaging business, including graphic arts film and
plates, conventional x-ray and photographic film, as well as certain
lower-capacity data storage products. The Company's growth portfolio (including
Travan(TM) data cartridges,
<PAGE>
DryView(TM) laser imagers, Rainbow(TM) color proofers, 120 megabyte
SuperDisk(TM), Luminous pre-press software and Cemax-Icon image management
systems) represented approximately 19 percent of revenues in the quarter, up
from 15 percent in the second quarter of 1997 and up from 13 percent in the
third quarter of 1996. Pricing declines of 6.1 percent were higher than the
pricing declines of 5.1 percent in the third quarter of 1996, driven by higher
pricing declines in the United States.
Net revenues in the United States decreased 2.1 percent with volume increases of
3.7 percent more than offset by pricing declines of 5.8 percent. Pricing
declines were greatest with respect to graphic arts film and plate products,
conventional x-ray film and photographic film products, but also resulted from
pricing adjustments by the Company for low end data storage products to more
competitive levels. Internationally, net revenues decreased 8.9 percent.
International volume growth was 5.6 percent which was more than offset by price
declines of 6.4 percent. Changes in currency exchange rates negatively impacted
international revenues by 8.1 percent. International revenues accounted for 45.6
percent of the Company's third quarter 1997 revenues, as compared to 47.4
percent for third quarter 1996.
Based on currency exchange rates as of September 30, 1997, changes in currency
exchange rates will continue to negatively impact revenues and earnings in the
fourth quarter of 1997 as compared to the same period in 1996.
Gross profit in the third quarter of 1997 was $191.2 million or 36.1 percent of
revenues. Gross profit in the third quarter of 1996 was $196.6 million or 35.2
percent of revenues. The increase in gross profit margin of 0.9 percent is
primarily due to productivity improvements in the Company's manufacturing
operations and lower raw material prices, partially offset by sales price
declines and a $2.7 million write-down of CD-Recordable inventory due to
industry price declines.
Selling, general and administrative (SG&A) expenses were $144.8 million or 27.3
percent of revenues. SG&A expenses in the third quarter of 1996 were $133.5
million or 23.9 percent of revenues. The increase is primarily attributable to
costs associated with the Company's launch of its SuperDisk program and costs
attributable to information technology infrastructure development in order to
support the Company's new worldwide information systems.
<PAGE>
Research and development costs totaled $78.4 million or 14.8 percent of revenues
in the third quarter of 1997. Included in third quarter 1997 research and
development is the write-off of $41.7 million of in-process research and
development related to the acquisition of Cemax. Excluding this write-off,
research and development costs would have been $36.7 million or 7.0% of
revenues, down $1.9 million but up 0.1 percentage points from the same period in
1996 and in line with the Company's expectations.
The operating loss for the third quarter of 1997 was $(32.0) million. Excluding
the write-off of in-process research and development related to the acquisition
of Cemax, operating income would have been $9.7 million or 1.8 percent of
revenues. This represents a $14.8 million decrease over operating income of
$24.5 million in the third quarter of 1996.
Third quarter 1997 interest expense was $3.9 million, down $0.1 million from the
same quarter last year. Average debt outstanding was higher in the third quarter
of 1997 as compared to the same period of 1996 while the effective interest rate
was slightly lower. Capitalized interest in the third quarter of 1997 was
approximately $1.2 million. No interest was capitalized in the same period of
1996.
The net other income and expense in the third quarter of 1997 totaled $1.6
million of expense. In the same period of 1996, net other income and expense was
$1.5 million of income.
Excluding the impact of the non-recurring, non-tax deductible write-off of $41.7
million of in-process research and development related to the acquisition of
Cemax, the Company's effective tax rate in the third quarter of 1997 was 28.6
percent, compared to 46.4 percent in the third quarter of 1996. The third
quarter 1997 rate reflects the impact of lowering the expected annual effective
tax rate to 43 percent from the 45 percent used for the six months ended June
30, 1997.
Net loss in the third quarter of 1997 was $(38.7) million, or $(0.97) per share.
Excluding the impact of the $41.7 million write-off of in-process research and
development related to the acquisition of Cemax, net income would have been $3.0
million, or $0.08 per share. Net income in the comparable period of 1996 was
$11.8 million, or $0.29 per share.
<PAGE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
The following table displays the components of the Company's consolidated
statements of operations as a percentage of total revenues. The 1997 percentages
exclude the impact of the non-recurring write-off of $41.7 million of in-process
research and development related to the acquisition of Cemax. The 1996
percentages exclude the impact of $76.4 million of pretax one-time charges
recorded in the nine months ended September 30, 1996, with $7.9 million recorded
as cost of goods sold, $14.6 million recorded as selling, general and
administrative expenses and $53.9 million recorded as restructuring charges.
After taxes, these charges totaled $48.6 million.
Nine Months Ended
September 30,
-------------
Adjusted Adjusted
1997 1996
-------- --------
Net revenues 100.0% 100.0%
Cost of goods sold 64.3% 64.7%
------ ------
Gross profit 35.7% 35.3%
Operating expenses:
Selling, general
and administrative 25.8% 24.1%
Research and development 7.0% 7.7%
------ ------
Total 32.8% 31.8%
Operating income 2.9% 3.5%
Other income and expense:
Interest expense 0.6% 0.7%
Other, net 0.2% (0.2%)
------ -------
Total 0.8% 0.5%
Income before tax and
minority interest 2.1% 3.0%
Income tax provision 0.9% 1.3%
Minority interest - -
------ ------
Net income 1.2% 1.7%
====== ======
On a year to date basis, net revenues were $1,632.0 million, a decrease of $64.6
million or 3.8 percent from the same period in 1996. Volume increases of 5.3
percent were more than offset by price declines of 5.2 percent and the negative
effect of changes in currency exchange rates of 3.9 percent. Volume growth
benefited from strong sales growth of the Company's digital products including
DryView laser imagers and high-end data storage products while it was negatively
impacted by the Company's decision in the first quarter of
<PAGE>
1997 to reduce sales in certain low margin product lines and by lower demand for
certain lower-capacity data storage products and conventional medical imaging
and graphic arts film products. Overall price declines remained at approximately
5.2 percent in the nine months ended September 30, 1997 as compared to the same
period of 1996 and is consistent with the Company's expectations.
Net revenues in the United States decreased 1.7 percent with volume increases of
2.2 percent more than offset by pricing declines of 3.9 percent.
Internationally, net revenues decreased 6.0 percent. International volume growth
of 8.6 percent was partially offset by price declines of 6.6 percent, resulting
in local currency growth of 2.0 percent. Changes in currency exchange rates
negatively impacted international revenues by 8.0 percent. International
revenues accounted for 48.2 percent of total revenues compared with 49.3 percent
in the same period of 1996.
Gross profit for the first nine months of 1997 was $583.2 million or 35.7
percent of revenues. Excluding the one-time charges of $7.9 million recorded in
the first nine months of 1996, gross profit in that period would have been
$599.5 million or 35.3 percent of revenues. The gross profit margin in the first
nine months of 1997 was positively impacted by productivity improvements in the
Company's manufacturing operations, lower raw material prices and reduced sales
in certain low margin product lines. These positive impacts were partially
offset by lower than expected demand in the desktop tape back-up segment
resulting in under-utilization of a tape production facility in the second
quarter of 1997 and due to increased sales of DryView laser imagers, which have
a lower than average gross margin.
Selling, general and administrative expenses were $420.4 million or 25.8 percent
of revenues. Excluding the $14.6 million of one-time costs recorded in the first
nine months of 1996, SG&A expenses in that period would have been $408.8 million
or 24.1 percent of revenues. The increase is primarily attributable to costs
associated with the Company's launch of its SuperDisk program and costs
attributable to information technology infrastructure development in order to
support the Company's new worldwide information systems.
Research and development costs totaled $156.6 million or 9.6 percent of revenues
in the first nine months of 1997. Excluding the write-off of $41.7 million of
in-process research and development related to the acquisition of Cemax,
research and development costs would have been $114.9 million or 7.0 percent of
revenues, down $17.2 million or 0.7 percentage points from the same period in
1996 and in line with the Company's expectations.
<PAGE>
The Company recorded restructuring charges of $53.9 million in the first nine
months of 1996 reflecting costs for certain voluntary employee separation
programs. No such charges were recorded in the first nine months of 1997. As
discussed in the "General Overview" section above, however, on October 30, 1997
the Company announced it plans to restructure its worldwide operations. Based on
preliminary plans, the Company expects to record pre-tax restructuring charges
of approximately $200 million, with most of these charges being recognized in
the fourth quarter of 1997.
Operating income for the first nine months of 1997 was $6.2 million compared to
an operating loss of $(17.8) million in the same period of 1996. Excluding the
special one-time charges of $41.7 million and $76.4 million that were recorded
in the first nine months of 1997 and 1996, respectively, operating income would
have been $47.9 million for the first nine months of 1997 compared to $58.6
million in the same period of 1996.
Interest expense for the first nine months of 1997 was $10.1 million, down $1.3
million from the same period of 1996. This decrease is due to capitalized
interest of approximately $1.5 million in the first nine months of 1997, while
no interest was capitalized in the same period of 1996. Interest expense prior
to July 1, 1996 was based on an assumed $250 million in outstanding debt and
3M's effective interest rate during the period. The allocation of interest
expense for periods prior to July 1, 1996 is more fully discussed in Note 7 of
the Notes to Consolidated Financial Statements included in the Company's 1996
Annual Report on Form 10-K.
The net other income and expense in the first nine months of 1997 totaled $3.8
million of expense, compared to $3.5 million of income in the comparable period
of 1996. The 1997 expense is primarily due to transaction losses due to foreign
currency exposures offset by interest income.
Excluding the impact of the special one-time charges recorded in 1997 and 1996,
the Company's effective tax rate for the first nine months of 1997 was 43.0
percent, compared to 44.2 percent in the same period in 1996.
Year to date net loss in 1997 was $(22.3) million, or $(0.56) per share. Net
loss in the comparable period of 1996 was $(19.9) million, or $(0.48) per share.
Excluding the after-tax impact of the one-time charges of $41.7 million and
$48.6 million recorded year to date in 1997 and 1996, respectively, net income
in the first nine
<PAGE>
months of 1997 would have been $19.4 million, or $0.49 per share, compared to
$28.7 million or $0.69 per share in the comparable period in 1996.
FINANCIAL POSITION
The Company had 3.6 months of inventory on hand at September 30, 1997, up from
3.2 months at December 31, 1996. This increase is primarily due to temporarily
higher inventory levels of products in the Company's growth portfolio. The
accounts receivable days sales outstanding was 80 days at September 30, 1997, up
from 77 days at December 31, 1996. Other current assets increased approximately
$42.6 million from December 31, 1996 primarily due to an increase in income
taxes refundable and deferred taxes.
The book value of property, plant and equipment at September 30, 1997 was
$449.2, a decrease of $30.9 million from the December 31, 1996 balance of $480.1
million. This decrease is primarily due to capital spending being lower than
depreciation and to the effect of changes in currency exchange rates. Other
assets increased $69.8 million from December 31, 1996 primarily due to
capitalization of costs related to the design, implementation and testing of the
Company's worldwide information technology systems and from goodwill recorded in
connection with the acquisition of Cemax.
LIQUIDITY
Prior to July 1, 1996, cash and equivalents and debt were not allocated to the
Company from 3M since 3M uses a centralized approach to cash management and the
financing of its operations. The Company's financing requirements prior to July
1, 1996 are represented by cash transactions with 3M and are reflected in "Net
cash paid to 3M" in the condensed consolidated statements of cash flows. This
financial support was discontinued following the Distribution.
Cash provided by operating activities was $81.2 million during the nine months
ended September 30, 1997, compared to $264.9 million during the same period in
1996. This change was primarily due to working capital increasing $62.3 million
in the first nine months of 1997, while working capital decreased $88.1 million
in the comparable period of 1996. Depreciation and amortization was $111.4
million in the first nine months of 1997, as compared to $137.7 million in the
comparable period of 1996.
<PAGE>
Cash used in investing activities was $185.1 million for the first nine months
of 1997 compared to $109.7 million in the comparable period of 1996. Investing
activities included capital expenditures of $92.8 million for the first nine
months of 1997 compared to $115.9 million during the same period of 1996.
Capitalized software was $64.8 million in the first nine months of 1997,
primarily related to the design, implementation and testing of the Company's new
information technology systems. It is expected that these capitalized costs will
continue to be incurred through the remainder of 1997 and into 1998.
Amortization of these costs will not begin until the systems are implemented.
Net cash paid in connection with the acquisition of Cemax was $29.0 million.
Financing activities during the first nine months of 1997 provided cash of $83.6
million. Financing activities primarily related to the net borrowing of $136.3
million and the payment of $60.9 million to repurchase approximately 2,481,000
of the Company's common shares.
At September 30, 1997, the Company's ratio of total debt to total capital was
25.7%. The Company expects to maintain an adequate level of liquidity through
cash flows from operations, availability of borrowings under its bank credit
agreement and potential debt and equity financings.
FORWARD-LOOKING STATEMENTS
Certain information contained in this report which does not relate to historical
financial information may be deemed to constitute forward looking statements.
The words or phrases "will likely result", "are expected to", "will continue",
"is anticipated", "estimate", "project", "believe" or similar expressions
identify "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to certain
risks and uncertainties which could cause actual results to differ materially
from historical results and those presently anticipated or projected. The
Company wishes to caution readers not to place undue reliance on any such
forward looking statements, which speak only as of the date made. Among the
factors that could cause the Company's actual results in the future to differ
materially from any opinions or statements expressed with respect to future
periods are market acceptance of newly introduced products, competitive industry
conditions including historical price erosion in certain product categories,
technological developments in the markets served by the Company, foreign
currency fluctuations, the Company's ability to establish its operations as an
independent company, and the various factors set forth in the Company's 1996
Annual Report on Form 10-K.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company, in the ordinary course of its business, is the subject of various
pending or threatened legal actions. Although such matters are subject to many
uncertainties and outcomes that are not predictable with assurance, the Company
does not believe that any such routine legal proceedings to which it is a party
will have a material adverse effect on the Company's financial position or
results of operations.
In addition, the Company has been notified that it is the subject of a
threatened claim by Eastman Kodak Company ("Kodak") involving allegations of
misappropriation of trade secrets. Kodak has alleged that during the period 1993
to May 1996 a retired Kodak employee improperly conveyed trade secrets to the
Italian subsidiary of 3M. This subsidiary was subsequently spun-off as a
subsidiary of the Company in July 1996. The Kodak retiree has entered a guilty
plea in U.S. District Court to criminal charges of misappropriating confidential
Kodak documents and has been sentenced. While Kodak has notified the Company of
the threatened claim, no litigation has yet been filed. It is not possible at
this time to reach any conclusions as to the outcome of this threatened claim.
The Company disputes any liability based on these allegations and intends to
vigorously defend any action that may be filed by Kodak.
Items 2-5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) The following documents are filed as exhibits to this Report.
4.1 Credit Agreement dated as of July 1, 1996 among the
Company, the Lenders named therein and Citicorp USA,
Inc., as Agent.
4.2 Amendment No. 1 to the Credit Agreement dated as of
July 1, 1996 among the Company, the Lenders named
therein and Citicorp USA, Inc., as Agent.
11 A statement regarding the computation of common
shares and common share equivalents.
15 An awareness letter from the Company's independent
accountants regarding unaudited interim financial
statements.
27 Financial data schedule.
<PAGE>
(b) Reports on Form 8-K:
(1) During the quarter ended September 30, 1997,
the Company filed a Report on Form 8-K dated
August 15, 1997 reporting under Item 2 the
Company's acquisition of all of the
outstanding stock of Cemax-Icon, Inc. through
a merger of a wholly-owned subsidiary of the
Company with and into Cemax-Icon, Inc.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Imation Corp.
(REGISTRANT)
Date: November 14, 1997 By: /s/ Jill D. Burchill
-------------------------
Jill D. Burchill
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
4.1 Credit Agreement dated as of July 1, 1996 among the Company, the
Lenders named therein and Citicorp USA, Inc., as Agent.
4.2 Amendment No. 1 to the Credit Agreement dated as of July 1, 1996 among
the Company, the Lenders named therein and Citicorp USA, Inc., as
Agent.
11 A statement regarding the computation of common shares and common share
equivalents.
15 An awareness letter from the Company's independent accountants
regarding unaudited interim financial statements.
27 Financial data schedule.
EXHIBIT 4.1
[CONFORMED COPY]
---------------------------------------
CREDIT AGREEMENT
dated as of July 1, 1996
among
IMATION CORP.,
as Borrower
CERTAIN LENDERS
CERTAIN ISSUING BANKS
and
CITICORP USA, INC.
as Administrative Agent
---------------------------------------
[Exhibits C-1, C-2 and D are photocopies of the opinions as delivered.]
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Certain Defined Terms........................................ 1
Section 1.02. Computation of Time Periods.................................. 28
Section 1.03. Accounting Terms............................................. 29
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
Section 2.01. The Revolving Credit Advances................................ 29
Section 2.02. The Swing Line Advances...................................... 30
Section 2.03. Making the Revolving Credit Advances......................... 30
Section 2.04. Making the Swing Line Advances, Etc.......................... 32
Section 2.05. Repayment.................................................... 34
Section 2.06. Termination or Reduction of the
Commitments..................................... 34
Section 2.07. Prepayments, Etc............................................. 35
Section 2.08. Interest..................................................... 37
Section 2.09. Fees......................................................... 39
Section 2.10. Conversion and Continuation of Advances...................... 40
Section 2.11. Increased Costs, Illegality, Etc............................. 41
Section 2.12. Payments and Computations.................................... 43
Section 2.13. Taxes........................................................ 45
Section 2.14. Sharing of Payments, Etc..................................... 48
Section 2.15. Letters of Credit............................................ 49
Section 2.16. Replacement of Lender........................................ 53
Section 2.17. Use of Proceeds.............................................. 54
ARTICLE III
CONDITIONS OF LENDING
Section 3.01. Conditions Precedent to Initial
Borrowing....................................... 54
Section 3.02. Conditions Precedent to Each Borrowing
and Issuance.................................... 57
Section 3.03. Determinations Under Section 3.01............................ 57
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the
Borrower........................................ 58
<PAGE>
ARTICLE V
COVENANTS
Section 5.01. Affirmative Covenants........................................ 64
Section 5.02. Negative Covenants........................................... 66
Section 5.03. Reporting Requirements....................................... 71
Section 5.04. Financial Covenants.......................................... 74
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01. Events of Default............................................ 75
Section 6.02. Actions in Respect of the Letters of
Credit Upon Default............................. 78
ARTICLE VII
THE ADMINISTRATIVE AGENT
Section 7.01. Authorization and Action..................................... 81
Section 7.02. Administrative Agent's Reliance, Etc......................... 81
Section 7.03. CUSA and Affiliates.......................................... 82
Section 7.04. Lender Credit Decision....................................... 82
Section 7.05. Indemnification.............................................. 82
Section 7.06. Successor Administrative Agent............................... 83
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Amendments, Consents, Etc.................................... 84
Section 8.02. Notices, Etc................................................. 84
Section 8.03. No Waiver; Remedies.......................................... 85
Section 8.04. Costs, Expenses and Indemnification.......................... 86
Section 8.05. Right of Setoff.............................................. 88
Section 8.06. Governing Law; Submission to
Jurisdiction.................................... 88
Section 8.07. Assignments and Participations............................... 88
Section 8.08. Execution in Counterparts.................................... 92
Section 8.09. No Liability of the Issuing Banks............................ 92
Section 8.10. Confidentiality.............................................. 93
Section 8.11. WAIVER OF JURY TRIAL......................................... 94
Section 8.12. Survival..................................................... 94
Section 8.13. Captions..................................................... 95
Section 8.14. Successors and Assigns....................................... 95
<PAGE>
SCHEDULES
SCHEDULE 2.01 List of Commitments and Lending
Offices
SCHEDULE 2.07(b)(i) Permitted Sale-Leaseback Transaction
Properties
SCHEDULE 4.01(b) Material Subsidiaries
SCHEDULE 4.01(j) Certain Plans
SCHEDULE 4.01(q) Environmental Permits, Etc.
SCHEDULE 4.01(r) Superfund Sites, Etc.
SCHEDULE 4.01(s) Certain Environmental Matters
SCHEDULE 4.01(w) Existing Debt, Liens
EXHIBITS
EXHIBIT A Form of Note
EXHIBIT B-1 Form of Notice of Revolving Credit Borrowing
EXHIBIT B-2 Form of Notice of Swing Line Borrowing
EXHIBIT C-1 Form of Opinion of Special Counsel
for the Borrower
EXHIBIT C-2 Form of Opinion of General Counsel
of the Borrower
EXHIBIT D Form of Opinion of Special Counsel
for the Administrative Agent
EXHIBIT E Form of Assignment and Acceptance
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of July 1, 1996 among IMATION CORP., a
Delaware corporation (the "Borrower"); each of the lenders (the "Initial
Lenders") listed on the signature pages hereof; and CITICORP USA, INC., as agent
(together with its successors in such capacity appointed pursuant to Article
VII, the "Administrative Agent") for the Lenders, Swing Line Lenders and the
Issuing Banks hereunder.
Prior to the date hereof, Minnesota Mining and Manufacturing Company
("3M") formed the Borrower, as a wholly owned Subsidiary of 3M, to hold 3M's
global data storage and imaging systems businesses. 3M has proposed to
distribute 100% of the outstanding common stock of the Borrower to 3M's
shareholders in a tax-free transaction (the "Spin-Off"). The Borrower has
requested that the Lenders extend credit to the Borrower in an aggregate
principal or face amount not exceeding $350,000,000 to refinance certain
existing debt, to fund certain purchases of non-U.S. inventory and other
short-term assets, to fund certain accrued employee benefits and to fund loans
by the Borrower to the Borrower's employee stock ownership plans, in each case
in connection with the Spin-Off, and for the working capital needs and other
general corporate purposes of the Borrower and its Subsidiaries.
Accordingly, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Adjusted Interest Coverage Ratio" means, for any period, the
ratio of (a) EBITDA for such period minus Capital Expenditures for such
period to (b) Interest Expense for such period.
"Administrative Agent" has the meaning specified in the
recital of parties to this Agreement.
"Administrative Agent's Account" means the account of the
Administrative Agent maintained by the Administrative Agent at its
office at 1 Court Square, Long Island City, New York 11120, Account No.
36852248, Attention: Lei Tang (or her successors), or such other
account maintained by the
<PAGE>
Administrative Agent as may be designated by the Administrative Agent
in a written notice to the Lenders, each Issuing Bank, each Swing Line
Lender and the Borrower.
"Advances" means, collectively, the Revolving Credit Advances
and the Swing Line Advances.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person.
For purposes of this definition, the term "control" (including the
terms "controlling", "controlled by" and "under common control with")
of a Person means the possession, direct or indirect, of the power to
vote 10% or more of the Voting Stock of such Person or to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or
otherwise.
"Applicable Debt Rating" means, on any Rating Availability
Date, the Borrower Debt Ratings then in effect; provided that:
(a) if the Borrower Debt Ratings shall fall within
different Rating Levels, the Applicable Debt Rating shall be
the Borrower Debt Rating that falls in the lower Rating Level
(provided that if the Borrower Debt Ratings shall be two or
more Rating Levels apart, the Applicable Debt Rating shall be
in the Rating Level that is one Rating Level higher than the
Rating Level in which the lower Borrower Debt Rating falls);
and
(b) if only one Rating Agency shall have in effect a
Borrower Debt Rating, the Applicable Debt Rating shall be the
available Borrower Debt Rating.
"Applicable Fee Percentage" shall be determined as follows:
(a) On any date (other than any Rating Availability
Date), the Applicable Fee Percentage shall be the percentage
set forth below opposite the Ratio Level with respect to which
the Applicable Margin is determined on such date:
<PAGE>
---------------- -------------------------
RATIO LEVEL APPLICABLE FEE PERCENTAGE
---------------- -------------------------
Ratio Level 1 0.125%
Ratio Level 2 0.15%
Ratio Level 3 0.20%
Ratio Level 4 0.25%
---------------- -------------------------
(b) On any Rating Availability Date, the Applicable
Fee Percentage shall be the percentage set forth below
opposite the Rating Level with respect to which the Applicable
Margin is determined on such date:
---------------- -------------------------
RATIO LEVEL APPLICABLE FEE PERCENTAGE
---------------- -------------------------
Rating Level 1 0.09%
Rating Level 2 0.10%
Rating Level 3 0.125%
Rating Level 4 0.18%
Rating Level 5 0.25%
---------------- -------------------------
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of a Base
Rate Advance and such Lender's Eurodollar Lending Office in the case of
a Eurodollar Rate Advance.
"Applicable Letter of Credit Fee Rate" means, at any time, a
rate per annum equal to the Applicable Margin for Eurodollar Rate
Advances in effect at such time.
"Applicable Margin" shall be determined as follows:
(a) On any date (other than any Rating Availability
Date), the Applicable Margin shall be the applicable
percentage set forth below under the Base Rate Column A or the
Eurodollar Rate Column A, as applicable, based upon the
Demonstrated Interest Coverage Ratio in effect on such date
(as determined below); provided that for each Excess
Utilization Date that is not a Rating Availability Date, the
Applicable Margin with respect to Base Rate Advances and
Eurodollar Rate Advances shall be the percentage set forth
below under the Base Rate Column B or the Eurodollar Rate
Column B, as applicable:
<PAGE>
- ------------------------------- ---------------------- ------------------------
DEMONSTRATED INTEREST Base Rate Eurodollar Rate
COVERAGE RATIO COLUMN A COLUMN B COLUMN A COLUMN B
- ------------------------------- ---------------------- ------------------------
Ratio Level 1
Greater than 7.00 0.00% 0.05% 0.25% 0.30%
to 1.00
- ------------------------------- ---------- ----------- ----------- ------------
Ratio Level 2
Less than or equal 0.00% 0.05% 0.30% 0.35%
to 7.00 to 1.00
and greater than
3.50 to 1.00
- ------------------------------- ---------- ----------- ----------- ------------
Ratio Level 3
Less than or equal to 0.00% 0.05% 0.35% 0.40%
3.50 to 1.00 and
greater than 2.50
to 1.00
- ------------------------------- ---------- ----------- ----------- ------------
Ratio Level 4
Less than or equal 0.50% 0.55% 0.50% 0.55%
to 2.50 to 1.00
- ------------------------------- ---------- ----------- ----------- ------------
The "Demonstrated Interest Coverage Ratio" shall be deemed for
purposes of this paragraph (a) to be within Ratio Level 3
during the period from the Closing Date to September 30, 1996
and, for each fiscal quarter of the Borrower thereafter, to be
within the Ratio Level in effect as of the last day of the
immediately preceding fiscal quarter; provided that:
(x) subject to the delivery to the
Administrative Agent of a certificate of a senior
financial officer of the Borrower (a "Demonstration
Certificate") on or prior to the date 30 days
following the end of each fiscal quarter of the
Borrower (each, a "Test Quarter") ending after the
date hereof demonstrating the Interest Coverage Ratio
for the Rolling Period ending on the last day of such
Test Quarter, the Demonstrated Interest Coverage
Ratio shall be changed to the Interest Coverage Ratio
demonstrated in such Demonstration Certificate; and
(y) if no Demonstration Certificate shall be
so delivered to the Administrative Agent during such
30
<PAGE>
day period, the Demonstrated Interest Coverage Ratio
shall be changed to be within Ratio Level 4.
Each change in the Demonstrated Interest Coverage Ratio
pursuant to the foregoing proviso shall be effective
retroactive to the first day of the fiscal quarter immediately
succeeding the Test Quarter. If the Demonstrated Interest
Coverage Ratio shall be so changed to a Ratio Level that is
lower than the Ratio Level theretofore in effect (a
"Retroactive Rate Increase"), the Borrower shall be obligated
to make additional payments of interest, and if the
Demonstrated Interest Coverage Ratio shall be changed to a
Ratio Level that is higher than the Ratio Level theretofore in
effect (a "Retroactive Rate Decrease"), the Borrower shall be
entitled to a credit for excess interest paid, in each case in
the manner and to the extent provided in Section 2.08(c).
Determinations of the Demonstrated Interest Coverage Ratio for
any date (including any date after the initial Rating
Availability Date on which neither Rating Agency has in effect
a Borrower Debt Rating) shall be made on the basis of the
Demonstration Certificates delivered by the Borrower from time
to time, all in accordance with this paragraph (a).
(b) On any Rating Availability Date, the Applicable
Margin shall be the applicable percentage set forth below
under the Base Rate Column A or the Eurodollar Rate Column A,
as applicable, based upon the Applicable Debt Rating in effect
on such date; provided that for each Excess Utilization Date
that is a Rating Availability Date, the Applicable Margin with
respect to Base Rate Advances and Eurodollar Rate Advances
shall be the percentage set forth below under the Base Rate
Column B or the Eurodollar Rate Column B, as applicable:
- ---------------------------- --------------------- ----------------------
APPLICABLE DEBT RATING Base Rate Eurodollar Rate
S&P/MOODY'S
COLUMN A COLUMN B COLUMN A COLUMN B
- ---------------------------- ---------- ---------- ---------- -----------
Rating Level 1
0.00% 0.05% 0.16% 0.21%
A-/A3 or higher
- ---------------------------- ---------- ---------- ---------- -----------
Rating Level 2
0.00% 0.05% 0.20% 0.25%
BBB+/Baa1
- ---------------------------- ---------- ---------- ---------- -----------
<PAGE>
- ---------------------------- --------------------- ----------------------
APPLICABLE DEBT RATING Base Rate Eurodollar Rate
S&P/MOODY'S
COLUMN A COLUMN B COLUMN A COLUMN B
- ---------------------------- ---------- ---------- ---------- -----------
Rating Level 3
0.00% 0.05% 0.25% 0.30%
BBB/Baa2
- ---------------------------- ---------- ---------- ---------- -----------
Rating Level 4
0.00% 0.05% 0.30% 0.35%
BBB-/Baa3
- ---------------------------- ---------- ---------- ---------- -----------
Rating Level 5
Less than Rating Level 4 0.50% 0.55% 0.50% 0.55%
- ---------------------------- ---------- ---------- ---------- -----------
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Administrative Agent, in accordance with Section 8.07 and in
substantially the form of Exhibit E.
"Available Amount" of any Letter of Credit at any time means
the maximum amount available to be drawn under such Letter of Credit at
such time (assuming compliance with all conditions to drawing specified
therein and, if such Letter of Credit provides for increases in or
reinstatements of the amount available to be drawn thereunder, taking
into account such increases and reinstatements).
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be
equal to the highest of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time, as
Citibank's "base rate";
(b) 1/2 of 1% per annum above the Federal Funds Rate;
and
(c) the sum (adjusted to the nearest 1/16 of 1% or,
if there is no nearest 1/16 of 1%, to the next higher 1/16 of
1%) of (i) 1/2 of 1% per annum plus (ii) the rate obtained by
dividing (x) the latest three-week moving average of secondary
market morning offering rates in the United States for
three-month certificates of deposit of major United States
money center banks, such three-week moving average (adjusted
to the basis of a year of 360 days) being determined
<PAGE>
weekly on each Monday (or, if such date is not a Business Day,
on the next succeeding Business Day) for the three-week period
ending on the previous Friday by Citibank on the basis of such
rates reported by certificate of deposit dealers to and
published by the Federal Reserve Bank of New York or, if such
publication shall be suspended or terminated, on the basis of
quotations for such rates received by Citibank from three New
York certificate of deposit dealers of recognized standing
selected by Citibank by (y) a percentage equal to 100% minus
the average of the daily percentages specified during such
three-week period by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement)
for Citibank with respect to liabilities consisting of or
including (among other liabilities) three-month U.S. Dollar
non-personal time deposits in the United States plus (iii) the
average during such three-week period of the annual assessment
rates estimated by Citibank for determining the then current
annual assessment rate payable by Citibank to the Federal
Deposit Insurance Corporation (or any successor) for insuring
U.S. Dollar deposits of Citibank in the United States.
Each change in any interest rate provided for herein based upon the
Base Rate resulting from a change in the Base Rate shall take effect at
the time of such change in the Base Rate.
"Base Rate Advance" means an Advance that bears interest as
provided in Section 2.08(a)(i).
"Borrower" has the meaning specified in the recital of parties
to this Agreement.
"Borrower Debt Rating" for a Rating Agency at any time means
the rating (including, without limitation, a rating issued on an
implied or indicative basis), if any, issued by such Rating Agency and
then in effect with respect to public long-term senior unsecured debt
securities of the Borrower ("Rated Debt"); provided that, if a Rating
Agency shall issue a rating on Rated Debt without having been requested
by the Borrower to do so, then such Rating Agency shall be deemed for
purposes hereof not to have in effect a Borrower Debt Rating until the
date 30 days after the date on which such Rating Agency shall have
issued such rating. Each change by a Rating Agency of its rating on
Rated Debt shall be effective for purposes hereof as of the date on
which
<PAGE>
such change is first announced publicly by such Rating Agency.
"Borrower's Account" means the account of the Borrower
maintained with Citibank at its office at 1 Court Square, Long Island
City, New York 11120, Account No. 40698722, or such other account
maintained by the Borrower with Citibank and designated by the Borrower
in a written notice to the Administrative Agent.
"Borrowing" means a Revolving Credit Borrowing or a Swing Line
Borrowing.
"Business Day" means a day on which banks are not required or
authorized to close in New York City and, if such Business Day relates
to a Eurodollar Rate Advance, on which dealings are carried on in the
London interbank market.
"Capital Expenditures" means, for any period, expenditures
(including, without limitation, the aggregate amount of Capital Lease
Obligations incurred during such period) made by the Borrower or any of
its Subsidiaries to acquire or construct fixed assets, plant and
equipment (including renewals, improvements and replacements, but
excluding repairs) during such period computed in accordance with GAAP.
"Capital Lease Obligations" means, for any Person, all
obligations of such Person to pay rent or other amounts under a lease
of (or other agreement conveying the right to use) property to the
extent such obligations are required to be classified and accounted for
as a capital lease on a balance sheet of such Person under GAAP, and,
for purposes of this Agreement, the amount of such obligations shall be
the capitalized amount thereof, determined in accordance with GAAP.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"Citibank" means Citibank, N.A., a national banking
association.
"Closing Date" means the date on which the conditions
precedent set forth in Section 3.01 are satisfied.
"Commitment" means, as to any Initial Lender, the amount set
forth opposite its name on Schedule 2.01 or, as to any Lender that has
entered into one or more Assignments
<PAGE>
and Acceptances, the amount set forth for such Lender in the Register,
in each case as the same may be reduced pursuant to Section 2.06 or
increased or reduced pursuant to assignments effected in accordance
with Section 8.07. The original aggregate amount of the Commitments is
$350,000,000.
"Commitment Termination Date" means the earlier of June 30,
2001 (or, if such day is not a Business Day, the immediately preceding
Business Day) and the termination or cancellation of the Commitments
pursuant to the terms of this Agreement.
"Confidential Information" means information identified as
such that the Borrower or any of its Subsidiaries furnishes to the
Administrative Agent, any Issuing Bank, any Swing Line Lender or any
Lender, but does not include any such information once such information
has become generally available to the public or once such information
has become available to the Administrative Agent, any Issuing Bank, any
Swing Line Lender or any Lender from a source other than the Borrower
and its Subsidiaries (unless, in either case, such information becomes
so available as a result of the breach by the Administrative Agent, an
Issuing Bank, a Swing Line Lender or a Lender of its duty of
confidentiality set forth in Section 8.10 or if the Administrative
Agent, an Issuing Bank, a Swing Line Lender or a Lender had reason to
believe that such source obtained such Confidential Information
illegally or disclosed such Confidential Information in breach of a
confidentiality agreement with the Borrower).
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Consolidated Tangible Net Worth" means, as at any date of
determination, the sum for the Borrower and its Subsidiaries
(determined on a Consolidated basis without duplication) of the
following (as reported on the Consolidated balance sheet of the
Borrower as at the last day of the fiscal quarter of the Borrower
ending on or most recently ended prior to the date of determination):
(a) the amount of capital stock; plus
(b) the amount of surplus and retained earnings (or,
in the case of a surplus or retained earnings deficit, minus
the amount of such deficit); minus
(c) the sum of the following: cost of treasury shares
and the book value of all assets that should be classified as
intangibles (without duplication of
<PAGE>
deductions in respect of items already deducted in arriving at
surplus and retained earnings) but in any event including
goodwill, minority interests, research and development costs,
trademarks, trade names, copyrights, patents and franchises,
unamortized debt discount and expense, all reserves and any
write-up in the book value of assets resulting from a
revaluation thereof subsequent to December 31, 1995.
"Continuation", "Continue" and "Continued" each refers to a
continuation of Eurodollar Rate Advances from one Interest Period to
the next Interest Period pursuant to Section 2.10.
"Conversion", "Convert" and "Converted" each refers to a
conversion of Revolving Credit Advances of one Type into Revolving
Credit Advances of the other Type pursuant to Section 2.10 or 2.11.
"CUSA" means Citicorp USA, Inc., a Delaware corporation.
"Debt" of any Person means (without duplication):
(a) all indebtedness of such Person for borrowed
money;
(b) all obligations of such Person for the deferred
purchase price of Property or services (other than trade
payables incurred in the ordinary course of such Person's
business but only if and for so long as the same remain
payable on customary trade terms);
(c) all obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments;
(d) all Capital Lease Obligations of such Person;
(e) all Obligations, contingent or otherwise, of such
Person in respect of acceptances, letters of credit or similar
extensions of credit (excluding trade payables to the extent
excluded from clause (b) above);
(f) all Obligations of such Person to purchase,
redeem, retire, defease or otherwise make any payment in
respect of any Redeemable capital stock, which Obligations
shall be valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends;
<PAGE>
(g) all Debt of others referred to in clauses (a)
through (f) above guaranteed directly or indirectly in any
manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (i) to pay or
purchase such Debt or to advance or supply funds for the
payment or purchase of such Debt, (ii) to purchase, sell or
lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to
make payment of such Debt or to assure the holder of such Debt
against loss, (iii) to supply funds to or in any other manner
invest in the debtor (including any agreement to pay for
property or services irrespective of whether such property is
received or such services are rendered) or (iv) otherwise to
assure a creditor against loss; and
(h) all Debt referred to in clauses (a) through (g)
above secured by (or for which the holder of such Debt has an
existing right, contingent or otherwise, to be secured by) any
Lien on property (including, without limitation, Receivables
and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of
such Debt.
"Debt Issuance" means any issuance, sale or incurrence by the
Borrower after the Closing Date of any debt securities or other
evidence of Debt (other than Debt incurred hereunder).
"Default" means any Event of Default and any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Delayed Spin-Off Properties" means Spin-Off Properties that
are not transferred to or purchased by the Borrower and its
Subsidiaries on or prior to the Closing Date.
"Disposition" means any sale, assignment, transfer or other
disposition of any property (whether now owned or hereafter acquired)
by the Borrower or any of its Subsidiaries, but excluding any sale,
assignment, transfer or other disposition of any property (i) sold or
disposed of in the ordinary course of business and on ordinary business
terms, (ii) by the Borrower to a Subsidiary of the Borrower, (iii) that
consists of outmoded or obsolete items (as determined by the Borrower
reasonably and in good faith) or (iv) to the extent the fair market
value of such property is less than $1,000,000 (as determined by the
Borrower in good faith).
<PAGE>
"Distribution Agreement" means the Transfer and Distribution
Agreement dated as of June 18, 1996 between 3M and the Borrower, as
amended from time to time (without prejudice to Section 5.02(g)).
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office"
opposite its name on Schedule 2.01 or in the Assignment and Acceptance
pursuant to which it became a Lender, or such other office of such
Lender as such Lender may from time to time specify to the
Administrative Agent.
"EBIT" means the following, determined in accordance with GAAP
for the Borrower and its Subsidiaries on a Consolidated basis, for any
period: net income (or net loss) plus the sum of Interest Expense and
income tax expense.
"EBITDA" means the following, determined in accordance with
GAAP for the Borrower and its Subsidiaries on a Consolidated basis, for
any period: net income (or net loss) plus the sum of (a) Interest
Expense, (b) income tax expense and (c) depreciation expense,
amortization expense and other non-cash charges (including, without
limitation, non-cash restructuring charges incurred on or prior to July
1, 1996 in connection with the Spin-Off) deducted in arriving at such
net income (or loss).
"Eligible Assignee" means:
(a) a Lender and any affiliate of such Lender;
(b) a commercial bank organized under the laws of the
United States, or any State thereof, and having total assets
in excess of $1,000,000,000;
(c) a savings bank organized under the laws of the
United States, or any state thereof, and having a net worth in
excess of $100,000,000;
(d) a commercial bank organized under the laws of any
other country that is a member of the OECD or that has
concluded special lending arrangements with the International
Monetary Fund associated with its General Arrangements to
Borrow, or a political subdivision of any such country, and
having total assets in excess of $1,000,000,000;
(e) the central bank of any country that is a member
of the OECD;
<PAGE>
(f) a finance company, insurance company or other
financial institution or fund (whether a corporation,
partnership, trust or other entity) that is engaged in making,
purchasing or otherwise investing in commercial loans in the
ordinary course of its business, and having total assets in
excess of $100,000,000; and
(g) any other Person (other than the Borrower or an
Affiliate of the Borrower) approved by the Administrative
Agent and the Borrower, such approval of the Borrower not to
be unreasonably withheld or delayed.
"Environmental Action" means any administrative, regulatory or
judicial suit, demand, demand letter, claim, notice of non-compliance
or violation, consent order or consent agreement relating in any way to
any violation of or liability under any Environmental Law or any
Environmental Permit, including without limitation (a) any claim by any
governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any
Environmental Law, (b) any claim by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from
alleged injury or threat of injury to the environment and (c) any
notice by any governmental or regulatory authority alleging that the
Borrower or any of its Subsidiaries is or may be responsible for, or is
a potentially responsible party with respect to, any cleanup, removal,
response, remedial or other actions or damages pursuant to any
Environmental Law.
"Environmental Law" means any Federal, state, local or foreign
governmental law, rule, regulation, order, writ, judgment, injunction
or decree relating to pollution or protection of the environment or the
treatment, storage, disposal, release, threatened release or handling
of Hazardous Materials, including, without limitation, CERCLA, the
Resource Conservation and Recovery Act, the Hazardous Materials
Transportation Act, the Clean Water Act, the Toxic Substances Control
Act, the Clean Air Act, the Safe Drinking Water Act, the Atomic Energy
Act, the Federal Insecticide, Fungicide and Rodenticide Act and the
Occupational Safety and Health Act, in each case as amended from time
to time.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization required under
any Environmental Law.
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" of any Person means any other Person that
for purposes of Title IV of ERISA is a member of such Person's
controlled group, or under common control with such Person, within the
meaning of Sections 414(b), (c), (m) and (o) of the Internal Revenue
Code.
"ERISA Event" with respect to any Person means (a) the
occurrence of a reportable event, within the meaning of Section 4043 of
ERISA, with respect to any Plan of such Person or any of its ERISA
Affiliates unless the 30-day notice requirement with respect to such
event has been waived pursuant to regulations under Section 4043 of
ERISA; (b) the provision by the administrator of any Plan of such
Person or any of its ERISA Affiliates of a notice of intent to
terminate such Plan, pursuant to Section 4041(c) of ERISA as a distress
termination; (c) the cessation of operations at a facility of such
Person or any of its ERISA Affiliates in the circumstances described in
Section 4062(e) of ERISA; (d) the withdrawal by such Person or any of
its ERISA Affiliates from a Multiple Employer Plan during a plan year
for which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (e) the satisfaction of the conditions set forth
in Sections 302(f)(1)(A) and (B) of ERISA to the creation of a lien
upon property or rights to property of such Person or any ERISA
Affiliate for failure to make a required payment to a Plan; (f) the
adoption of an amendment to a Plan of such Person or any of its ERISA
Affiliates requiring the provision of security to such Plan, pursuant
to Section 307 of ERISA; or (g) the institution by the PBGC of
proceedings to terminate a Plan of such Person or any of its ERISA
Affiliates, pursuant to Section 4042 of ERISA.
"ESOP" means, collectively, the employee stock ownership plans
of the Borrower.
"Eurocurrency Liabilities" has the meaning specified in
Regulation D.
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule 2.01 or in the Assignment and Acceptance
pursuant to which it became a Lender (or, if no such office is
specified, its Domestic Lending Office), or such other office of such
Lender as such Lender may from time to time specify to the
Administrative Agent.
<PAGE>
"Eurodollar Rate" means, for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a) the average (rounded upward to the nearest whole multiple
of 1/16 of 1% per annum, if such average is not such a multiple) of the
rates per annum at which deposits in U.S. Dollars are offered by the
principal office of each of the Reference Banks in London, England to
prime banks in the London interbank market at approximately 11:00 A.M.
(London time) two Business Days before the first day of such Interest
Period in an amount substantially equal to such Reference Bank's
Eurodollar Rate Advance (or, in the case of Citibank, an amount
substantially equal to CUSA's Eurodollar Rate Advance) comprising part
of such Borrowing (determined without giving effect to any assignments
by such Reference Bank or CUSA, as the case may be) and for a period
equal to such Interest Period by (b) a percentage equal to 100% minus
the Eurodollar Rate Reserve Percentage for such Interest Period. The
Eurodollar Rate for each Interest Period for each Eurodollar Rate
Advance comprising part of the same Borrowing shall be determined by
the Administrative Agent on the basis of applicable rates furnished to
and received by the Administrative Agent from the Reference Banks two
Business Days before the first day of such Interest Period, subject,
however, to the provisions of Section 2.12.
"Eurodollar Rate Advance" means an Advance that bears interest
as provided in Section 2.08(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period
for each Eurodollar Rate Advance comprising part of the same Borrowing
means the reserve percentage (if any) applicable two Business Days
before the first day of such Interest Period under regulations issued
from time to time by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental
or other marginal reserve requirement) for a member bank of the Federal
Reserve System in New York City with deposits exceeding $1,000,000,000
with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest
rate on Eurodollar Rate Advances is determined) having a term equal to
such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
<PAGE>
"Excess Utilization Date" means any date on which the
aggregate outstanding principal amount of all Revolving Credit Advances
and Swing Line Advances and the aggregate Available Amount of all
Letters of Credit exceeds an amount equal to 50% of the aggregate
Commitments.
"Excluded Period" means, with respect to any additional amount
payable under Section 2.11 or 2.15, the period ending 90 days prior to
the applicable Lender's delivery of a certificate referenced in Section
2.11(a), 2.11(b) or 2.15(d), as applicable, with respect to such
additional amount.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day for such
transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"Form 10" means the Form 10 of the Borrower filed with the
Securities and Exchange Commission on June 20, 1996 relating to the
Spin-Off.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the date of, and used in,
the preparation of the audited financial statements referred to in
Section 4.01(f).
"Hazardous Materials" means (a) petroleum or petroleum
products, natural or synthetic gas, asbestos in any form that is or
could become friable, and radon gas, (b) any substances defined as or
included in the definition of "hazardous substances", "hazardous
wastes", "hazardous materials", "extremely hazardous wastes",
"restricted hazardous wastes", "toxic substances", "toxic pollutants",
"contaminants" or "pollutants", or words of similar meaning and
regulatory effect, under any Environmental Law and (c) any other
substance exposure to which is regulated under any Environmental Law.
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts, commodity future or
option agreements and other
<PAGE>
similar agreements designed to hedge against fluctuations in interest
rates, foreign exchange rates or commodity prices.
"Indemnified Party" has the meaning specified in Section
8.04(b).
"Initial Lenders" has the meaning specified in the recital of
the parties to this Agreement.
"Insufficiency" means, with respect to any Plan at any date,
the amount, if any, by which the "accumulated benefit obligation" (as
defined in Statement of Financial Accounting Standards 87) exceeds the
fair market value of the assets of such Plan as of the date of the most
recent actuarial valuation for such Plan, calculated using the
actuarial methods, factors and assumptions used in such valuation.
"Interest Coverage Ratio" means, for any period, the ratio of
(a) EBIT of the Borrower and its Subsidiaries for such period to (b)
Interest Expense for such period.
"Interest Expense" means, with respect to the Borrower and its
Subsidiaries on a Consolidated basis, for any period (without
duplication), interest expense, whether paid or accrued (including the
interest component of Capital Lease Obligations), on all Debt of the
Borrower and its Subsidiaries on a Consolidated basis for such period,
including, without limitation, (a) interest expense in respect of the
Advances, (b) commissions, discounts and other fees and charges payable
in connection with letters of credit (including, without limitation,
any Letter of Credit) and (c) plus the net payment or minus the net
receivable, if any, payable or receivable, as the case may be, in
connection with any Hedge Agreement; all as determined in accordance
with GAAP for such period.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, the period commencing on the
date of such Eurodollar Rate Advance or the date of the Conversion of
any Base Rate Advance into such Eurodollar Rate Advance, and ending on
the last day of the period selected by the Borrower pursuant to the
provisions below and, thereafter, each subsequent period commencing on
the last day of the immediately preceding Interest Period and ending on
the last day of the period selected by the Borrower pursuant to the
provisions below. The duration of each such Interest Period shall be
one, two, three or six months, as the Borrower may, upon notice
received by the Administrative Agent not later than 11:00 A.M. (New
York City time) on the third Business Day prior to
<PAGE>
the first day of such Interest Period, select; provided that:
(a) no Interest Period for any Advance may end after
the Commitment Termination Date;
(b) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, provided that, if such
extension would cause the last day of such Interest Period to
occur in the next following calendar month, the last day of
such Interest Period shall occur on the next preceding
Business Day; and
(c) whenever the first day of any Interest Period
occurs on the last day of a calendar month (or on any day for
which there is no numerically corresponding day in the
appropriate subsequent calendar month), such Interest Period
shall end on the last Business Day of the appropriate
subsequent calendar month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Issuing Bank" means each Lender specified on the signature
pages hereof as an "Issuing Bank", together with its successors in such
capacity.
"L/C Cash Collateral Account", and "L/C Cash Collateral
Account Collateral" have the respective meanings specified in Section
6.02.
"L/C Related Documents" has the meaning specified in Section
2.15(e).
"Lenders" means the Initial Lenders and each Eligible Assignee
that shall become a party hereto pursuant to Section 8.07.
"Letter of Credit Commitment" means, with respect to any
Issuing Bank at any time, the amount set forth opposite such Issuing
Bank's name on Schedule 2.01 under the caption "Letter of Credit
Commitment".
"Letter of Credit Liability" means, as of any date of
determination, all of the liabilities of the Borrower to the Issuing
Banks in respect of Letters of Credit, whether such liability is
contingent or fixed, and shall consist of the
<PAGE>
sum of (a) the aggregate Available Amount of all Letters of Credit then
outstanding plus (b) the aggregate amount that has then been paid by,
and has not been reimbursed by the Borrower to, any Issuing Bank under
Letters of Credit.
"Letter of Credit Reduction" has the meaning specified in
Section 2.01.
"Letter of Credit Sublimit" means $10,000,000.
"Letters of Credit" has the meaning specified in Section
2.15(a).
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance
on title to real property.
"Loan Documents" means, collectively, this Agreement and the
Notes.
"Margin Stock" has the meaning specified in Regulations G, U
and X.
"Material Adverse Change" means any material adverse change in
the financial condition or results of operations of the Borrower (or of
the Borrower and its Subsidiaries, taken as a whole).
"Material Adverse Effect" means a material adverse effect on
(a) the financial condition or results of operations of the Borrower
(or of the Borrower and its Subsidiaries, taken as a whole), (b) the
rights and remedies of the Administrative Agent or any Lender under the
Loan Documents or (c) the ability of the Borrower to perform its
obligations under the Loan Documents.
"Material Contract" means:
(a) each agreement, instrument or other document
relating to any Debt of the Borrower and its Material
Subsidiaries in an aggregate principal amount exceeding
$10,000,000;
(b) each agreement, instrument or other document
relating to Obligations of the Borrower and its Material
Subsidiaries (other than Debt Obligations, but including,
without limitation, indemnity agreements, guarantees, other
contingent obligations and liabilities assumed from 3M and
<PAGE>
its Subsidiaries pursuant to the Spin-Off Documents), under
which the aggregate liability of the Borrower or such Material
Subsidiaries (determined by the Borrower reasonably and in
good faith) is likely to exceed $10,000,000 during any single
calendar year; and
(c) each supply and purchase contract of the Borrower
and its Material Subsidiaries, the termination of which could
reasonably be expected to have a Material Adverse Effect.
"Material Subsidiary" means, at any time, a Subsidiary of the
Borrower having (i) at least 5% of the total Consolidated assets of the
Borrower and its Subsidiaries (determined as of the last day of the
most recent fiscal quarter of the Borrower) or (ii) at least 5% of the
Consolidated revenues of the Borrower and its Subsidiaries for the
fiscal year of the Borrower then most recently ended (all as
determined, in the case of any determination on or prior to the
delivery of the Borrower's financial statements for fiscal year 1996
pursuant to Section 5.03(c), by the Borrower in good faith on a pro
forma basis).
"Moody's" means Moody's Investors Service, Inc., or any rating
agency successor thereto.
"Multiemployer Plan" of any Person means a multiemployer plan,
as defined in Section 4001(a)(3) of ERISA, to which such Person or any
of its ERISA Affiliates is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made
or accrued an obligation to make contributions.
"Multiple Employer Plan" of any Person means a single employer
plan, as defined in Section 4001(a)(15) of ERISA, that is subject to
Title IV of ERISA and (a) is maintained for employees of such Person or
any of its ERISA Affiliates and at least one Person other than such
Person and its ERISA Affiliates or (b) was so maintained and in respect
of which such Person or any of its ERISA Affiliates has or would have
liability under Section 4064 or 4069 of ERISA in the event such plan
has been or were to be terminated.
"Net Available Proceeds" means:
(a) in the case of any Disposition, the aggregate
amount of all cash payments, and the fair market value of any
non-cash consideration, received by the Borrower and its
Subsidiaries directly or indirectly in connection with such
Disposition; provided that (i) such Net Available Proceeds
shall be net of (x) the
<PAGE>
amount of any legal, title and recording tax expenses,
commissions and other reasonable fees and expenses (including
reasonable expenses of preparing the relevant property for
sale) paid by the Borrower and its Subsidiaries in connection
with such Disposition and (y) any Federal, state, local and
foreign income or other taxes estimated in good faith to be
payable by the Borrower and its Subsidiaries as a result of
such Disposition and (ii) such Net Available Proceeds shall be
net of any repayments by the Borrower or any of its
Subsidiaries of Debt to the extent that (x) such Debt is
secured by a Lien on the property that is the subject of such
Disposition and (y) the transferee of (or holder of a Lien on)
such property requires that such Debt be repaid as a condition
to the purchase of such property;
(b) in the case of any Debt Issuance, the aggregate
amount of all cash received by the Borrower and its
Subsidiaries in respect thereof, net of reasonable expenses
incurred by the Borrower and its Subsidiaries in connection
therewith; and
(c) in the case of any sale, transfer, assignment or
other disposition of Receivables, the aggregate amount of all
cash received by the Borrower and its Subsidiaries in respect
thereof, net of reasonable expenses incurred by the Borrower
and its Subsidiaries in connection therewith.
"Note" means a promissory note of the Borrower payable to the
order of a Lender, in substantially the form of Exhibit A hereto,
evidencing the aggregate indebtedness of the Borrower to such Lender
resulting from the Revolving Credit Advances made by such Lender.
"Notice of Borrowing" means a Notice of Revolving Credit
Borrowing or a Notice of Swing Line Borrowing.
"Notice of Issuance" has the meaning specified in Section
2.15(b)(i).
"Notice of Revolving Credit Borrowing" has the meaning
specified in Section 2.03(a).
"Notice of Swing Line Borrowing" has the meaning specified in
Section 2.04(a).
"Obligation" means, with respect to any Person, any obligation
of such Person of any kind, including, without limitation, any
liability of such Person on any claim,
<PAGE>
whether or not the right of any creditor to payment in respect of such
claim is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, disputed, undisputed, legal, equitable, secured or
unsecured, and whether or not such claim is discharged, stayed or
otherwise affected by any proceeding referred to in Section 6.01(f).
Without limiting the generality of the foregoing, the Obligations of
the Borrower under the Loan Documents include the obligation to pay
principal, interest, Letter of Credit commissions, charges, expenses,
fees, attorneys' fees and disbursements, indemnities and other amounts
payable under any Loan Document.
"OECD" means the Organization for Economic Cooperation and
Development.
"Other Taxes" has the meaning specified in Section 2.13(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor.
"Permitted Investments" means: (a) direct obligations of the
United States of America, or of any agency thereof, or obligations
guaranteed as to principal and interest by the United States of
America, or of any agency thereof, in either case maturing not more
than 90 days from the date of acquisition thereof; (b) certificates of
deposit issued by any bank or trust company organized under the laws of
the United States of America or any state thereof and having capital,
surplus and undivided profits of at least $500,000,000, maturing not
more than 90 days from the date of acquisition thereof; and (c)
commercial paper rated A-1 or better or P-1 by S&P or Moody's,
respectively, maturing not more than 90 days from the date of
acquisition thereof.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced (or, if such a proceeding has been commenced,
such proceeding is being contested in good faith by appropriate
proceedings and enforcement of any Lien has been and is stayed):
(a) Liens for taxes, assessments and governmental
charges or levies to the extent not required to be paid under
Section 5.01(b),
(b) Liens imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's Liens,
statutory landlord's Liens and other similar Liens arising in
the ordinary course of business securing
<PAGE>
obligations that are not overdue for a period of more than 30
days or which are being contested in good faith and by
appropriate proceedings,
(c) pledges or deposits to secure obligations under
workers' compensation laws or similar legislation or to secure
public or statutory obligations,
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases (other than
capital leases), surety and appeal bonds, and performance
bonds and other obligations of a like nature incurred, in each
case arising in the ordinary course of business,
(e) as to any particular property at any time, such
easements, encroachments, covenants, rights of way, minor
defects, irregularities or encumbrances on title which do not
materially impair the use of such property for the purpose for
which it is held by the owner thereof,
(f) municipal and zoning ordinances that are not
violated in any material respect by the existing improvements
and the present use made by the owner thereof,
(g) real estate taxes and assessments not yet
delinquent,
(h) Liens arising from Uniform Commercial Code
financing statements regarding operating leases permitted by
this Agreement,
(i) any interest or title of a lessor or sublessor or
licensor under any lease or license permitted or not
prohibited by this Agreement, and
(j) Liens arising under Environmental Laws.
"Permitted Receivables Facility" means a facility entered into
by the Borrower or any of its Subsidiaries providing for the sale by
the Borrower and its Subsidiaries of Receivables (provided that the
purchase price of Receivables so sold shall be not less than the
aggregate face amount thereof, net of discount thereon calculated at a
market rate and net of customary and reasonable reserves and allowance
for contingencies).
<PAGE>
"Permitted Sale-Leaseback Transaction" means one or more
transactions with respect to a sale-leaseback of any of the properties
listed on Schedule 2.07(b)(i).
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer
Plan.
"Post-Default Rate" means, in respect of any principal of any
Advance or any other amount under this Agreement or any Note that is
not paid when due (whether at stated maturity, by acceleration, by
optional or mandatory prepayment or otherwise), a rate per annum during
the period from and including the due date to but excluding the date on
which such amount is paid in full equal to 2% plus the Base Rate as in
effect from time to time plus the Applicable Margin for Base Rate
Advances (provided that, if the amount so in default is principal of a
Eurodollar Rate Advance and the due date thereof is a day other than
the last day of the Interest Period therefor, the "Post-Default Rate"
for such principal shall be, for the period for and including such due
date to but excluding the last day of the Interest Period, 2% plus the
interest rate for such Advance as provided in Section 2.08(a)(ii) and,
thereafter, the rate provided for above in this definition).
"Pro Rata Share" means, with respect to any Lender at any
time, a fraction, the numerator of which is the amount of such Lender's
Commitment (or, after the Commitment Termination Date, the amount of
such Lender's outstanding Advances) and the denominator of which is the
aggregate Commitments or Advances (as the case may be) of all of the
Lenders at such time.
"Quarterly Dates" means March 31, June 30, September 30 and
December 31 in each year, the first of which shall be the first such
day after the Closing Date, provided that, if any such day is not a
Business Day, the relevant Quarterly Date shall be the immediately
preceding Business Day.
"Rating Agency" means each of Moody's and S&P.
"Rating Availability Date" means each date on which either or
both of the Rating Agencies shall have in effect a Borrower Debt
Rating.
<PAGE>
"Rating Level" means Rating Level 1, Rating Level 2, Rating
Level 3, Rating Level 4 and Rating Level 5 (with Rating Level 1 being
the highest Rating Level and Rating Level 5 being the lowest).
"Rating Level 1", "Rating Level 2", "Rating Level 3", "Rating
Level 4" and "Rating Level 5" have the meanings specified in clause (b)
of the definition of "Applicable Margin" in this Section 1.01.
"Ratio Level" means Ratio Level 1, Ratio Level 2, Ratio Level
3 and Ratio Level 4 (with Ratio Level 1 being the highest Ratio Level
and Ratio Level 4 being the lowest).
"Ratio Level 1", "Ratio Level 2", "Ratio Level 3" and "Ratio
Level 4" have the meanings specified in clause (a) of the definition of
"Applicable Margin" in this Section 1.01.
"Receivables" means trade accounts receivable of the Borrower
or any of its Subsidiaries.
"Redeemable" means any capital stock that (a) the issuer
thereof has undertaken to redeem at a fixed or determinable date or
dates prior to the Commitment Termination Date, whether by operation of
a sinking fund or otherwise, or upon the occurrence of a condition not
solely within the control of the issuer or (b) is redeemable on any
date prior to the Commitment Termination Date at the option of the
holder thereof.
"Reference Banks" means Citibank, Bank of America Illinois and
Bank of Montreal (or their respective Applicable Lending Offices, as
the case may be).
"Register" has the meaning specified in Section 8.07(c).
"Regulation A", "Regulation D", "Regulation G", "Regulation U"
and "Regulation X" mean Regulations A, D, G, U and X of the Board of
Governors of the Federal Reserve System, respectively, as in effect
from time to time.
"Required Lenders" means at any time Lenders holding in the
aggregate at least 51% of the Commitments (or, after the Commitment
Termination Date, at least 51% of the sum of the then aggregate unpaid
principal amount of the Advances and the aggregate Available Amount of
all Letters of Credit). For purposes of this definition, the Available
Amount of each Letter of Credit shall be considered to be owed to the
Lenders according to their respective Pro Rata Shares.
<PAGE>
"Restricted Investment" in any Person means the acquisition of
all or substantially all of the assets of such Person or of any
division of such Person.
"Revolving Credit Advances" has the meaning specified in
Section 2.01(a).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by each of
the Lenders pursuant to Section 2.01.
"Rolling Period" means a period of four consecutive fiscal
quarters of the Borrower (or, at any time prior to the first
anniversary of the Closing Date, the fiscal quarters of the Borrower
that have ended after the Closing Date).
"Single Employer Plan" of any Person means a single employer
plan, as defined in Section 4001(a)(15) of ERISA, that is subject to
Title IV of ERISA and that (a) is maintained for employees or former
employees of such Person or any of its ERISA Affiliates and no Person
other than such Person and its ERISA Affiliates or (b) was so
maintained and in respect of which such Person or any of its ERISA
Affiliates has or would have liability under Section 4069 of ERISA in
the event such plan has been or were to be terminated.
"Solvent" and "Solvency" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property
of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person,
(b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that
it will, incur debts or liabilities beyond such Person's ability to pay
as such debts and liabilities mature and (d) such Person is not engaged
in business or a transaction, and is not about to engage in business or
a transaction, for which such Person's property would constitute an
unreasonably small capital.
"Spin-Off" has the meaning specified in the Preliminary
Statements to this Agreement.
"Spin-Off Documents" means, collectively, the Form 10, the
Distribution Agreement, the Tax Sharing and Indemnification Agreement,
the Master Corporate Services
<PAGE>
Transition Agreement, the Environmental Matters Agreement, the
Intellectual Property Rights Agreement, the Supply, Service and Sales
Agency Agreements (other than those Supply, Service and Sales Agency
Agreements the termination of which could not reasonably be expected to
have a Material Adverse Effect) and each domestic Shared Facilities
Lease Agreement, in each case as amended from time to time (without
prejudice to Section 5.02(g)).
"Spin-Off Properties" means the properties and businesses
contemplated to be transferred to or purchased by the Borrower and its
subsidiaries under the Spin-Off Documents.
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., or any rating agency successor
thereto.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, trust or estate of which (or in which) more than 50% of
(a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class
or classes of such corporation shall or might have voting power upon
the occurrence of any contingency), (b) the interest in the capital or
profits of such partnership or joint venture or (c) the beneficial
interest in such trust or estate is at the time directly or indirectly
owned or controlled by such Person, by such Person and one or more of
its other Subsidiaries or by one or more of such Person's other
Subsidiaries.
"Swing Line Advance" means an Advance made by (a) a Swing Line
Lender pursuant to Section 2.04 or (b) any Lender pursuant to Section
2.04(d).
"Swing Line Borrowing" means a borrowing consisting of a Swing
Line Advance made by a Swing Line Lender.
"Swing Line Facility" means, as to any Swing Line Lender
individually, and as to all Swing Line Lenders collectively, an
aggregate amount not to exceed $10,000,000 at any time outstanding.
"Swing Line Lender" means (a) each Lender specified on the
signature pages hereof as a "Swing Line Lender" and (b) each other
Lender that, upon the request of the Borrower and the consent of the
Administrative Agent, agrees to become a "Swing Line Lender" hereunder;
or, as to any Swing Line Lender, such other Lender as shall, with the
consent of
<PAGE>
such Swing Line Lender, the Administrative Agent and the Borrower, have
assumed the obligations of such Swing Line Lender with respect to any
or all of such Swing Line Lender's Swing Line Advances (and its ability
to make Swing Line Advances) hereunder.
"Swing Line Reduction" has the meaning specified in Section
2.01.
"3M" has the meaning specified in the Preliminary Statements
to this Agreement.
"Total Capital" means, as at any date, the sum, for the
Borrower and its Subsidiaries (determined on a Consolidated basis
without duplication in accordance with GAAP), of the following:
(a) Total Debt plus (b) total shareholder's equity.
"Total Debt" means, as at any date, the aggregate amount of
all Debt of the Borrower and its Subsidiaries (determined on a
Consolidated basis without duplication in accordance with GAAP).
"Type" refers to the distinction between Revolving Credit
Advances bearing interest at the Base Rate and Revolving Credit
Advances bearing interest at the Eurodollar Rate.
"Unused Commitments" means, at any time, the aggregate amount
of the Commitments then unused and outstanding after giving effect to
the Swing Line Reduction and the Letter of Credit Reduction.
"U.S. Dollars" and "$" means lawful money of the United States
of America.
"Voting Stock" means capital stock issued by a corporation or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even though the right to so vote has been suspended by the
happening of such contingency.
"Withdrawal Liability" has the meaning specified in Part 1 of
Subtitle E of Title IV of ERISA.
Section 1.02. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and
<PAGE>
including" and the words "to" and "until" mean "to but excluding".
Section 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
Section 2.01. The Revolving Credit Advances.
(a) Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make advances ("Revolving Credit Advances")
to the Borrower from time to time on any Business Day during the period
from the date hereof until the Commitment Termination Date in an
aggregate amount at any one time outstanding not to exceed at any time
the amount of such Lender's Commitment; provided that the aggregate
amount of the Commitments of the Lenders shall be deemed used from time
to time to the extent of (i) the aggregate amount of Swing Line
Advances then outstanding and (ii) the aggregate Letter of Credit
Liability then outstanding, and such deemed uses of the aggregate
amount of the Commitments shall be applied to the Lenders ratably
according to their respective Commitments (such deemed uses of the
aggregate amount of the Commitments with respect to (i) Swing Line
Advances being a "Swing Line Reduction" and (ii) the aggregate Letter
of Credit Liability being a "Letter of Credit Reduction").
(b) Each Revolving Credit Borrowing shall be in an aggregate
amount not less than $10,000,000 or an integral multiple of $1,000,000
in excess thereof and shall consist of Revolving Credit Advances of the
same Type made on the same day by the Lenders.
(c) The Revolving Credit Advances shall be made by the Lenders
ratably according to their respective Commitments.
(d) Within the limits of each Lender's Commitment in effect
from time to time, the Borrower may borrow under this Section 2.01,
borrow under Section 2.02 and/or obtain the issuance of Letters of
Credit under Section 2.15, prepay pursuant to Section 2.07(a) and
reborrow; provided that the aggregate outstanding principal amount of
Revolving Credit Advances and Swing Line Advances when added to the
aggregate Letter of Credit Liability may not at any time exceed the
aggregate amount of the Commitments at such time.
<PAGE>
Section 2.02. The Swing Line Advances.
(a) The Borrower may request each Swing Line Lender to make,
and each Swing Line Lender may from time to time, in its sole
discretion, make, on the terms and conditions herein set forth, Swing
Line Advances to the Borrower on any Business Day during the period
from the date of the initial Borrowing until 30 days before the
Commitment Termination Date in an aggregate amount not to exceed at any
time outstanding the lesser of (i) the Swing Line Facility and (ii) the
Unused Commitments on such Business Day.
(b) Each Swing Line Borrowing shall be in a principal amount
not less than $1,000,000.
(c) Within the limits of the Swing Line Facility and the
Unused Commitments, the Borrower may borrow under this Section 2.02,
borrow under Section 2.01 and/or obtain the issuance of Letters of
Credit under Section 2.15, prepay pursuant to Section 2.07(a) and
reborrow; provided that the aggregate outstanding principal amount of
Revolving Credit Advances and Swing Line Advances when added to the
aggregate Letter of Credit Liability may not at any time exceed the
aggregate amount of the Commitments at such time.
Section 2.03. Making the Revolving Credit Advances.
(a) (i) Except as otherwise provided in Section 2.13, each
Revolving Credit Borrowing shall be made on notice, given not later
than 11:00 A.M. (New York City time) on the Business Day of (or, with
respect to a Revolving Credit Borrowing of Eurodollar Rate Advances,
11:00 A.M. (New York City time) on the third Business Day prior to the
date of) the proposed Borrowing, by the Borrower to the Administrative
Agent, which shall give to each Lender prompt notice thereof by
telecopier. Each such notice of a Revolving Credit Borrowing (a "Notice
of Revolving Credit Borrowing") shall be by telecopier, confirmed
immediately in writing, in substantially the form of Exhibit B-1,
specifying therein (1) the requested date of such Borrowing, (2) the
requested Type of Advances comprising such Borrowing, (3) the requested
aggregate amount of such Borrowing and (4) in the case of a Borrowing
consisting of Eurodollar Rate Advances, the requested initial Interest
Period for each such Advance.
(ii) In the case of a proposed Revolving Credit
Borrowing comprised of Eurodollar Rate Advances, the
Administrative Agent shall promptly notify each Lender of the
applicable interest rate under Section 2.08(a)(ii).
<PAGE>
(iii) Each Lender shall, before 1:00 P.M. (New York
City time) on the date of each Revolving Credit Borrowing,
make available for the account of its Applicable Lending
Office to the Administrative Agent at the Administrative
Agent's Account, in same day funds, such Lender's ratable
portion of such Borrowing. After the Administrative Agent's
receipt of such funds and upon fulfillment of the applicable
conditions set forth in Article III, the Administrative Agent
will transfer same day funds to the Borrower's Account;
provided that in the case of any Revolving Credit Borrowing,
the Administrative Agent shall first (1) make a portion of
such funds equal to any unreimbursed drawing under any Letter
of Credit available to each Issuing Bank having issued any
such Letter of Credit for reimbursement of such drawing and
(2) make a portion of such funds equal to the aggregate
outstanding principal amount of Swing Line Advances available
to the Swing Line Lenders having made such Swing Line
Advances.
(b) Anything in subsection (a) above to the contrary
notwithstanding, (i) the Borrower may not select Eurodollar Rate
Advances for any Revolving Credit Borrowing if the aggregate amount of
such Borrowing is less than $10,000,000 or if the obligation of the
Lenders to make Eurodollar Rate Advances shall then be suspended
pursuant to Section 2.10 or 2.11, and (ii) Eurodollar Rate Advances may
not be outstanding under more than 15 separate Interest Periods at any
one time.
(c) Each Notice of Revolving Credit Borrowing shall be
irrevocable and binding on the Borrower. In the case of any Revolving
Credit Borrowing that the related Notice of Revolving Credit Borrowing
specifies is to be comprised of Eurodollar Rate Advances, the Borrower
shall indemnify each Lender against any loss, cost or expense incurred
by such Lender as a result of any failure to fulfill on or before the
date specified in such Notice of Revolving Credit Borrowing for such
Borrowing the applicable conditions set forth in Article III,
including, without limitation, any loss (excluding loss of anticipated
profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund
the Advance to be made by such Lender as part of such Borrowing when
such Advance, as a result of such failure, is not made on such date.
(d) Unless the Administrative Agent shall have received notice
from a Lender prior to 12:00 Noon (New York City time) on the date of
any Revolving Credit Borrowing that such Lender will not make available
to the Administrative Agent such Lender's ratable portion of such
<PAGE>
Borrowing, the Administrative Agent may assume that such Lender has
made such portion available to the Administrative Agent on the date of
such Borrowing in accordance with Section 2.03(a) and the
Administrative Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If and
to the extent that such Lender shall not have so made such ratable
portion available to the Administrative Agent and the Administrative
Agent shall have made available such corresponding amount to the
Borrower, such Lender and the Borrower severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount
is made available to the Borrower until the date such amount is repaid
to the Administrative Agent, at (i) in the case of the Borrower, the
interest rate applicable at such time under Section 2.08 to Advances
comprising such Borrowing and (ii) in the case of such Lender, the
Federal Funds Rate. If such Lender shall repay to the Administrative
Agent such corresponding amount, such amount so repaid shall constitute
such Lender's Advance as part of such Borrowing for purposes of this
Agreement.
(e) The failure of any Lender to make the Revolving Credit
Advance to be made by it as part of any Revolving Credit Borrowing
shall not relieve any other Lender of its obligation, if any, hereunder
to make its Revolving Credit Advance on the date of such Borrowing, but
no Lender shall be responsible for the failure of any other Lender to
make the Revolving Credit Advance to be made by such other Lender on
the date of any Borrowing.
Section 2.04. Making the Swing Line Advances, Etc.
(a) The Borrower may request a Swing Line Borrowing from a
Swing Line Lender under this Section 2.04 by delivering to the
Administrative Agent and such Swing Line Lender, no later than 12:00
Noon (New York City time) on the date of the proposed Swing Line
Borrowing, a notice of a Swing Line Borrowing (a "Notice of Swing Line
Borrowing"), which shall be made by telecopier, confirmed immediately
in writing, in substantially the form of Exhibit B-2, specifying
therein the requested (i) Swing Line Lender, (ii) date of such
Borrowing (which shall be a Business Day), (iii) amount of such
Borrowing, (iv) maturity of such Borrowing (which maturity shall be no
later than the seventh day after the requested date of such Borrowing)
and (v) account of the Borrower to which the proceeds of such Borrowing
are to be made available.
(b) The relevant Swing Line Lender shall, no later than 2:00
P.M. (New York City time) notify the Administrative
<PAGE>
Agent and the Borrower of its decision whether or not to make the
requested Swing Line Advance; provided that any failure by such Swing
Line Lender to give such notice shall not cause such Swing Line Lender
to be obligated to make such Swing Line Advance.
(c) If the relevant Swing Line Lender, in its sole discretion,
elects to make such Swing Line Advance, it will (subject to the
applicable conditions set forth in Article III) make the amount of such
Swing Line Advance available to the Borrower at the account specified
in the relevant Notice of Swing Line Borrowing.
(d) Upon demand by a Swing Line Lender through the
Administrative Agent, each other Lender shall purchase from such Swing
Line Lender, and such Swing Line Lender shall sell and assign to each
other Lender, such other Lender's Pro Rata Share of each outstanding
Swing Line Advance (and related claims for accrued and unpaid interest
thereon) made by such Swing Line Lender, by making available for the
account of its Applicable Lending Office to the Administrative Agent
for the account of such Swing Line Lender by deposit to the
Administrative Agent's Account, in same day funds, an amount equal to
the sum of (x) the portion of the outstanding principal amount of such
Swing Line Advances to be purchased by such Lender plus (y) interest
accrued and unpaid to and as of such date on such portion of the
outstanding principal amount of such Swing Line Advances. Each Lender's
obligations to make such payments to the Administrative Agent for
account of the Swing Line Lenders under this paragraph (d), and each
Swing Line Lender's right to receive the same, shall be absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, the failure of any other Lender to make
its payment under this paragraph (d), the financial condition of the
Borrower, the existence of any Default, the failure of any of the
conditions set forth in Article III to be satisfied, or the termination
of the Commitments. Each such payment to a Swing Line Lender shall be
made without any offset, abatement, withholding or reduction
whatsoever. Each Lender agrees to purchase its Pro Rata Share of such
outstanding Swing Line Advances on (i) the Business Day on which demand
therefor is made by such Swing Line Lender, provided that notice of
such demand is given not later than 11:00 A.M. (New York City time) on
such Business Day or (ii) the first Business Day next succeeding such
demand if notice of such demand is given after such time. Upon any such
assignment by a Swing Line Lender to any other Lender of a portion of
such Swing Line Lender's Swing Line Advances, such Swing Line Lender
represents and warrants to such other Lender that such Swing Line
Lender is the legal and beneficial owner of such interest being
assigned by it, but makes no other representation or warranty and
assumes no responsibility with respect to such Swing Line Advance. If
and to the extent that
<PAGE>
any Lender shall not have so made the amount of such Swing Line Advance
available to the Administrative Agent, such Lender agrees to pay to the
Administrative Agent for the account of such Swing Line Lender
forthwith on demand such amount together with interest thereon, for
each day from the date of demand by such Swing Line Lender until the
date such amount is paid to the Administrative Agent, at the Federal
Funds Rate. If such Lender shall pay to the Administrative Agent such
amount for the account of such Swing Line Lender, such amount so paid
in respect of principal shall constitute a Swing Line Advance by such
Lender for purposes of this Agreement, and the outstanding principal
amount of the Swing Line Advances made by such Swing Line Lender shall
be reduced by such amount.
Section 2.05. Repayment.
(a) Revolving Credit Advances. The Borrower hereby promises to
pay to the Administrative Agent for the account of each Lender on the
Commitment Termination Date the full outstanding principal amount of
the Revolving Credit Advances of such Lender.
(b) Swing Line Advances. The Borrower hereby promises to pay
to each Swing Line Lender (with notice to the Administrative Agent),
and to the Administrative Agent for the account of each other Lender
that has made a Swing Line Advance, the outstanding principal amount of
each Swing Line Advance made by each of them on the earlier of the
maturity date specified in the applicable Notice of Swing Line
Borrowing (which maturity shall be no later than the seventh day after
the requested date of such Borrowing) and the Commitment Termination
Date.
(c) All Advances. All repayments of principal under this
Section 2.05 shall be made together with interest accrued to the date
of such repayment on the principal amount repaid.
Section 2.06. Termination or Reduction of the Commitments.
(a) Optional. The Borrower may at any time or from time to
time, upon not less than three Business Days' notice to the
Administrative Agent, terminate in whole or reduce in part the
Commitments, provided that (i) each partial reduction of the
Commitments shall be in an aggregate amount of $10,000,000 or an
integral multiple of $1,000,000 in excess thereof and (ii) the
aggregate amount of the Commitments shall not be reduced below the sum
of (1) the Letter of Credit Commitment then in effect and (2) the
aggregate principal amount of Advances outstanding at such time.
<PAGE>
(b) Mandatory. The Commitments shall be automatically and
permanently reduced to zero on the Commitment Termination Date. In
addition, the Commitments shall be automatically and permanently
reduced as provided in Section 2.07(c).
(c) Reductions Pro Rata. Each reduction of the Commitments
shall be applied to the respective Commitments of the Lenders according
to their respective Pro Rata Shares.
(d) General. Commitments once terminated or reduced may not be
reinstated.
Section 2.07. Prepayments, Etc.
(a) Optional Prepayments. (i) The Borrower may, upon at least
three Business Days' notice (in the case of prepayment of Eurodollar
Rate Advances) or upon notice given on the date of prepayment (in the
case of prepayments of Base Rate Advances) to the Administrative Agent
(which notice shall state the proposed date and aggregate principal
amount of the prepayment), and if such notice is given the Borrower
shall, prepay the outstanding principal amount of the Revolving Credit
Advances in the aggregate amount and on the date specified in such
notice, together with accrued interest to the date of such prepayment
on the principal amount prepaid; provided that (x) each partial
prepayment shall be in an aggregate principal amount of $10,000,000 or
an integral multiple of $1,000,000 in excess thereof, (y) any such
prepayment of a Eurodollar Rate Advance other than on the last day of
the Interest Period therefor shall be accompanied by, and subject to,
the payment of any amount payable under Section 8.04(c) in respect of
such prepayment and (z) each such notice shall be made on the relevant
day not later than 11:00 A.M. (New York City time). Each prepayment of
Advances under this Section 2.07(a) shall be made for account of the
Lenders according to their respective Pro Rata Shares of the principal
amount of the Revolving Credit Advances then outstanding.
(ii) The Borrower may, upon notice to the
Administrative Agent and the relevant Swing Line Lender (which
notice shall state the proposed date and aggregate principal
amount of the prepayment), and if such notice is given the
Borrower shall, prepay the outstanding principal amount of the
Swing Line Advances in the aggregate amount and on the date
specified in such notice, together with accrued interest to
the date of such prepayment on the principal amount prepaid;
provided that (x) each partial prepayment shall be in an
aggregate principal amount of not less than $1,000,000, (y)
after giving effect to a partial prepayment, the outstanding
principal amount of a Swing Line
<PAGE>
Advance shall not be less than $1,000,000 and (z) each such
notice shall be made not later than 11:00 A.M. (New York City
time) on the date of the proposed prepayment.
(b) Mandatory Prepayments; Commitment Reductions.
(i) Sale of Assets. Without limiting the obligation
of the Borrower to obtain the consent of the Required Lenders
pursuant to Section 5.02(d) to any Disposition not otherwise
permitted hereunder, on the first anniversary of each
Disposition the Commitments shall be reduced, and, to the
extent required by Section 2.07(c), the Borrower shall prepay
the Advances (and/or provide cover for Letter of Credit
Liabilities as specified in Section 2.07(d)), in an aggregate
amount equal to (A) 100% of the Net Available Proceeds of such
Disposition minus (B) the amount of such Net Available
Proceeds theretofore invested or committed to be invested in
the business of the Borrower and its Subsidiaries; provided
that (x) for purposes of this clause (i) the aggregate Net
Available Proceeds of all such Dispositions in a fiscal year
shall be deemed to be reduced by $10,000,000 (but shall not be
deemed to be less than zero); and (y) neither a Permitted
Sale-Leaseback Transaction nor sales of Receivables shall be
deemed to be a "Disposition" for purposes of this clause (i).
(ii) Debt Issuance. Without limiting the obligation
of the Borrower to obtain the consent of the Required Lenders
pursuant to Section 5.02(b) to any Debt Issuance not otherwise
permitted hereunder, upon any Debt Issuance (other than any
Debt Issuance secured by Liens expressly permitted by Section
5.02(a)(ii)(5), (6), (7) or (10)), the Commitments shall be
reduced, and, to the extent required by Section 2.07(c), the
Borrower shall prepay the Advances (and/or provide cover for
Letter of Credit Liabilities as specified in Section 2.07(d)),
in an aggregate amount equal to 100% of the Net Available
Proceeds thereof; provided that sales of Receivables shall be
deemed not to be a "Debt Issuance" for purposes of this clause
(ii).
(iii) Receivables. Upon each sale, transfer,
assignment or other disposition of Receivables (including,
without limitation, each such sale, transfer, assignment or
other disposition under a Permitted Receivables Facility, but
excluding Receivables sold or otherwise transferred for the
purposes of collection in the ordinary course of business),
the Commitments shall be reduced, and, to the extent required
by Section 2.07(c), the Borrower shall prepay the Advances
(and/or provide cover for Letter of Credit Liabilities as
specified in Section 2.07(d)), in an
<PAGE>
aggregate amount equal to 100% of the Net Available Proceeds
of such sale, transfer, assignment or other disposition.
(c) Application. On the dates specified in clauses (i), (ii)
and (iii) of Section 2.07(b), the Commitments shall be reduced
automatically in an aggregate amount equal to the amount specified in
such paragraphs (and to the extent that, after giving effect to such
reduction, the aggregate principal amount of Revolving Credit Advances,
Swing Line Advances and Letter of Credit Liabilities would exceed the
Commitments, the Borrower shall, first, prepay the Swing Line Advances,
second, prepay Revolving Credit Advances and, third, provide cover for
Letter of Credit Liabilities as specified in paragraph (d) below, in an
aggregate amount equal to such excess).
(d) Cover for Letter of Credit Liabilities. In the event that
the Borrower shall be required pursuant to Section 2.07(c) to provide
cover for Letter of Credit Liabilities, the Borrower shall effect the
same by paying to the Administrative Agent same day funds in an amount
equal to the required amount, which funds shall be deposited in the L/C
Cash Collateral Account until such time as the Letters of Credit shall
have been terminated and all of the Letter of Credit Liabilities paid
in full.
(e) Payments with Interest. All prepayments under this Section
2.07 shall be made together with accrued interest to the date of such
prepayment on the principal amount prepaid.
Section 2.08. Interest.
(a) Ordinary Interest. The Borrower shall pay interest on the
unpaid principal amount of each Advance owing to each Lender from the
date of such Advance until such principal amount shall be paid in full
at the following rates per annum:
(i) Base Rate Advances. If such Advance is a Base
Rate Advance, a rate per annum equal at all times to the sum
of (1) the Base Rate in effect from time to time plus (2) the
Applicable Margin for Base Rate Advances in effect from time
to time, payable in arrears quarterly on each Quarterly Date
and on the date such Base Rate Advance shall be Converted (but
only on the amount Converted) or paid in full.
(ii) Eurodollar Rate Advances. If such Advance is a
Eurodollar Rate Advance, a rate per annum equal at all times
during each Interest Period for such Advance to the sum of (1)
the Eurodollar Rate for such Interest Period for such Advance
plus (2) the Applicable Margin for Eurodollar Rate Advances in
effect from time to time, payable in arrears on
<PAGE>
the last day of such Interest Period and, if such Interest
Period has a duration of more than three months, on each
three-month anniversary of the first day of such Interest
Period occurring during such Interest Period.
(iii) Swing Line Advances. If such Advance is a Swing
Line Advance, a rate per annum equal at all times to the sum
of (1) the Base Rate in effect from time to time plus (2) the
Applicable Margin for Base Rate Advances in effect from time
to time, payable in arrears quarterly on each Quarterly Date,
on the scheduled maturity date of such Swing Line Advance and
on the date such Swing Line Advance shall be paid in full.
(b) Post-Default Interest. Notwithstanding Section 2.08(a),
the Borrower shall pay interest on (x) the unpaid principal amount of
each Advance owing to each Lender that is not paid when due, at a rate
per annum equal at all times to 2% per annum above the rate per annum
required to be paid on such Advance pursuant to Section 2.08(a)(i),
(a)(ii) or (a)(iii) and (y) the amount of any interest, fee or other
amount payable hereunder that is not paid when due, from the date such
amount shall be due until such amount shall be paid in full, payable in
arrears on the date such amount shall be paid in full and on demand, at
a rate per annum equal at all times to 2% per annum above the rate per
annum required to be paid on Base Rate Advances pursuant to Section
2.08(a)(i).
(c) Retroactive Rate Changes. If a Retroactive Rate Decrease
or a Retroactive Rate Increase (each, a "Retroactive Rate Change")
shall occur and the Borrower shall theretofore have paid interest with
respect to amounts outstanding hereunder and under the Notes during the
related Retroactive Period (as hereinafter defined), then the Borrower
shall, on the next date on which the Borrower is required to pay
interest pursuant to this Section 2.08:
(i) in the event of a Retroactive Rate Increase, pay
such additional amounts as shall be necessary to give effect
to such Retroactive Rate Increase for such Retroactive Period;
and
(ii) in the event of Retroactive Rate Decrease, be
entitled to such reduction in the amount of interest so
payable as shall be necessary to give effect to such
Retroactive Rate Decrease for such Retroactive Period.
For purposes of this Section 2.08(c):
"Demonstration Certificate", "Retroactive Rate Decrease" and
"Retroactive Rate Increase" have the
<PAGE>
respective meanings specified in the definition of "Applicable Margin"
in Section 1.01.
"Retroactive Period" means, with respect to any Retroactive
Rate Change, the period commencing on the first day of the fiscal
quarter in which such Retroactive Rate Change occurs and ending on the
earlier of (a) the date on which the Administrative Agent receives the
related Demonstration Certificate and (b) the date 30 days following
the end of the prior fiscal quarter of the Borrower.
Section 2.09. Fees.
(a) Facility Fees. The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a facility fee on
the average daily amount (whether used or unused) of such Lender's
Commitment (computed without regard to any Swing Line Reduction or any
Letter of Credit Reduction) from the Closing Date (in the case of each
Initial Lender), and from the effective date specified in the
Assignment and Acceptance pursuant to which it became a Lender (in the
case of each other Lender), until the Commitment Termination Date,
payable in arrears on each Quarterly Date and on the Commitment
Termination Date, at a rate per annum equal to the Applicable Fee
Percentage in effect from time to time. Notwithstanding the foregoing,
no such facility fee shall be payable to a Lender for any period during
which such Lender has failed to make any Advance it is required to make
pursuant to the terms and conditions hereof.
(b) Letter of Credit Fees. The Borrower hereby promises to pay
to the Administrative Agent (i) for the account of each Issuing Bank a
non-refundable fronting fee of 1/16 of 1% (or such other amount as may
be agreed between the Borrower and such Issuing Bank) per annum of the
face amount of each Letter of Credit issued by it for the period from
the date of issuance thereof until such Letter of Credit has been drawn
in full, expires or is terminated and (ii) for the account of each
Lender a non-refundable commission on such Lender's Pro Rata Share of
the average daily aggregate Available Amount of all Letters of Credit
then outstanding at the Applicable Letter of Credit Fee Rate, such fees
to be payable in arrears on each Quarterly Date and on the Commitment
Termination Date and calculated, for any day, after giving effect to
any payments made under such Letter of Credit on such day.
(c) Letter of Credit Expenses. The Borrower shall pay to each
Issuing Bank, for its own account, such commission, issuance fees,
transfer fees and other fees and charges in connection with the
issuance or administration of the Letters of Credit issued by it as the
Borrower and such Issuing Bank shall agree; provided that all fees and
other charges payable pursuant
<PAGE>
to this Section 2.09(c) shall be the customary amounts charged by such
Issuing Bank in connection with the issuance or administration of
similar letters of credit and the amounts so determined shall be
adjusted as necessary to avoid a duplicative payment hereunder.
Section 2.10. Conversion and Continuation of Advances.
(a) Optional Conversion. The Borrower may on any Business Day,
upon notice given to the Administrative Agent not later than 11:00 A.M.
(New York City time) on the third Business Day prior to the date of the
proposed Conversion and subject to the provisions of Sections 2.10 and
2.11, Convert all or any portion of the Revolving Credit Advances of
one Type outstanding (and, in the case of Eurodollar Rate Advances,
having the same Interest Period); provided that any such Conversion of
a Eurodollar Rate Advance other than on the last day of the Interest
Period therefor shall be accompanied by, and subject to, the payment of
any amount payable under Section 8.04(c) in respect of such Conversion,
any Conversion of Base Rate Advances into Eurodollar Rate Advances
shall be in an amount not less than the minimum amount specified in
Section 2.03(b)(i) and no Conversion of any Revolving Credit Advances
shall result in a greater number of separate Interest Periods in
respect of Eurodollar Rate Advances than permitted under Section
2.03(b)(ii). Each such notice of Conversion shall, within the
restrictions specified above, specify (i) the date of such Conversion,
(ii) the aggregate amount and Type of the Revolving Credit Advances
(and, in the case of Eurodollar Rate Advances, the Interest Period
therefor) to be Converted and (iii) if such Conversion is into
Eurodollar Rate Advances, the duration of the initial Interest Period
for such Advances. Each notice of Conversion shall be irrevocable and
binding on the Borrower.
(b) Certain Mandatory Conversions.
(i) On the date on which the aggregate unpaid
principal amount of Eurodollar Rate Advances comprising any
Borrowing shall be reduced, by payment or prepayment or
otherwise, to less than $10,000,000 such Advances shall
automatically Convert into Base Rate Advances.
(ii) If the Borrower shall fail to select the
duration of any Interest Period for any outstanding Eurodollar
Rate Advances in accordance with the provisions contained in
the definition of "Interest Period" in Section 1.01 and in
clause (a) or (c) of this Section 2.10, the Administrative
Agent will forthwith so notify the Borrower and the Lenders,
whereupon each such Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest
Period therefor, Convert into a Base Rate Advance.
<PAGE>
(iii) Upon the occurrence and during the continuance
of any Event of Default, unless the Required Lenders otherwise
agree, (x) each Eurodollar Rate Advance will automatically, on
the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance and (y) the obligation of the
Lenders to make, or to Convert Advances into, or to Continue,
Eurodollar Rate Advances shall be suspended.
(c) Continuations. The Borrower may, on any Business Day, upon
notice given to the Administrative Agent not later than 11:00 A.M. (New
York City time) on the third Business Day prior to the date of the
proposed Continuation and subject to the provisions of Sections 2.09,
Continue all or any portion of the outstanding Eurodollar Rate Advances
having the same Interest Period as such Eurodollar Rate Advances;
provided that any such Continuation shall be made only on the last day
of an Interest Period for such Eurodollar Rate Advances, any
Continuation of Eurodollar Rate Advances shall be in an amount not less
than the minimum Borrowing amount specified in Section 2.03(b)(i) and
no Continuation of any Eurodollar Rate Advances shall result in a
greater number of separate Interest Periods in respect of Eurodollar
Rate Advances than permitted under Section 2.03(b)(ii). Each such
notice of Continuation shall, within the restrictions specified above,
specify (i) the date of such Continuation, (ii) the aggregate amount
of, and the Interest Period for, the Revolving Credit Advances being
Continued and (iii) the duration of the initial Interest Period for the
Eurodollar Rate Advances subject to such Continuation. Each notice of
Continuation shall be irrevocable and binding on the Borrower.
Section 2.11. Increased Costs, Illegality, Etc.
(a) If, due to either (i) the introduction of or any change in
or in the interpretation of any law or regulation (to the extent any
such introduction or change occurs after the date hereof) or (ii) the
compliance with any guideline or request from any central bank or other
governmental authority adopted or made after the date hereof (whether
or not having the force of law), there shall be any increase in the
cost to any Lender of agreeing to make or making, funding or
maintaining Eurodollar Rate Advances, then the Borrower shall from time
to time, upon demand by such Lender (with a copy of such demand to the
Administrative Agent), pay to the Administrative Agent for the account
of such Lender additional amounts sufficient to compensate such Lender
for such increased cost; provided that, before making any such demand,
each Lender agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to designate a
different Applicable Lending Office if the making of such a designation
would avoid the need for, or reduce the
<PAGE>
amount of, such increased cost and would not, in the sole judgment of
such Lender, be otherwise disadvantageous to such Lender. A certificate
as to the amount of such increased cost, submitted to the Borrower by
such Lender in good faith and setting forth in reasonable detail the
basis for such increased cost, shall be conclusive and binding for all
purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or
regulation enacted or introduced after the date hereof or any guideline
or request from any central bank or other governmental authority
adopted or made after the date hereof (whether or not having the force
of law) affects or would affect the amount of capital required or
expected to be maintained by such Lender or any corporation or other
entity controlling such Lender and that the amount of such capital is
increased by or based upon the existence of such Lender's commitment to
lend hereunder and other commitments of this type or the issuance of
the Letters of Credit (or similar contingent obligations), then, upon
demand by such Lender (with a copy of such demand to the Administrative
Agent), the Borrower shall pay to the Administrative Agent for the
account of such Lender, from time to time as specified by such Lender,
additional amounts sufficient to compensate such Lender (or such
corporation or other entity) in the light of such circumstances, to the
extent that such Lender reasonably determines such increase in capital
to be allocable to the existence of such Lender's commitment to lend
hereunder or to the issuance or maintenance of any Letters of Credit. A
certificate as to such amounts submitted to the Borrower by such Lender
in good faith and setting forth in reasonable detail the basis for such
increased cost shall be conclusive and binding for all purposes, absent
manifest error.
(c) If, with respect to any Eurodollar Rate Advances, (i) the
Required Lenders reasonably determine and notify the Administrative
Agent that the Eurodollar Rate for any Interest Period for such
Advances will not adequately reflect the cost to such Required Lenders
of making, funding or maintaining their respective Eurodollar Rate
Advances for such Interest Period, or (ii) if fewer than two Reference
Banks furnish timely information to the Administrative Agent for
determining the Eurodollar Rate for any Eurodollar Rate Advances, the
Administrative Agent shall forthwith so notify the Borrower and the
Lenders, whereupon (x) each Eurodollar Rate Advance will automatically,
on the last day of any then existing Interest Period therefor, Convert
to a Base Rate Advance, and (y) the obligation of the Lenders to make,
or to Convert Advances into, or to Continue, Eurodollar Rate Advances
shall be suspended until the Administrative Agent shall notify the
Borrower and such Lenders that the circumstances causing such
suspension no longer exist.
<PAGE>
(d) Notwithstanding any other provision of this Agreement, if
the introduction of or any change in or in the interpretation of any
law or regulation (to the extent any such introduction or change occurs
after the date hereof) shall make it unlawful, or any central bank or
other governmental authority having appropriate jurisdiction shall
assert in writing that it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to make Eurodollar
Rate Advances or to continue to fund or maintain Eurodollar Rate
Advances hereunder, then, on notice thereof and demand therefor by such
Lender to the Borrower through the Administrative Agent, (i) each
Eurodollar Rate Advance of such Lender will automatically, on the last
day of the then-current Interest Period or on such earlier date as may
be required by law, Convert to a Base Rate Advance and (ii) the
obligation of such Lender to make, or to Convert Advances into, or to
Continue, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower that such Lender has
determined that the circumstances causing such suspension no longer
exist; provided that, before making any such demand, such Lender agrees
to use reasonable efforts (consistent with its internal policy and
legal and regulatory restrictions) to designate a different Eurodollar
Lending Office if the making of such a designation would allow such
Lender or its Eurodollar Lending Office to continue to perform its
obligations to make Eurodollar Rate Advances or to continue to fund or
maintain Eurodollar Rate Advances and would not, in the sole judgment
of such Lender, be otherwise disadvantageous to such Lender.
(e) The Borrower shall not be obligated to pay any additional
amounts arising pursuant to clauses (a) and (b) of this Section 2.11
that are attributable to the Excluded Period with respect to such
additional amount; provided that if an applicable law, rule,
regulation, guideline or request shall be adopted or made on any date
and shall be applicable to the period (a "Retroactive Period") prior to
the date on which such law, rule, regulation, guideline or request is
adopted or made, the limitation on the Borrower's obligations to pay
such additional amounts hereunder shall not apply to the additional
amounts payable in respect of such Retroactive Period.
Section 2.12. Payments and Computations.
(a) The Borrower shall make each payment hereunder and under
the Notes not later than 12:00 Noon (New York City time) on the day
when due in U.S. Dollars to the Administrative Agent at the
Administrative Agent's Account in same day funds and, except as
expressly set forth herein, without deduction, set-off or counterclaim.
The Administrative Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal, interest,
facility fees or letter of credit fees
<PAGE>
ratably (other than amounts payable pursuant to Section 2.11(a),
2.11(b), 2.13, 2.15(d) or 8.04(c) or amounts payable to an Issuing Bank
in respect of Letters of Credit) to the Lenders for the account of
their Applicable Lending Offices, and like funds relating to the
payment of any other amount payable to any Lender to such Lender for
the account of its Applicable Lending Office, in each case to be
applied in accordance with the terms of this Agreement. Upon its
acceptance of an Assignment and Acceptance and recording of the
information contained therein in the Register pursuant to Section
8.07(d), from and after the effective date of such Assignment and
Acceptance, the Administrative Agent shall make all payments hereunder
and under the Notes in respect of the interest assigned thereby to the
Lender assignee thereunder, and the parties to such Assignment and
Acceptance shall make all appropriate adjustments in such payments for
periods prior to such effective date directly between themselves.
(b) If the Administrative Agent receives funds for application
to the Obligations under the Loan Documents under circumstances for
which the Loan Documents do not specify the Advances to which, or the
manner in which, such funds are to be applied, and the Borrower has not
otherwise directed how such funds are to be applied (which direction is
consistent with the terms of the Loan Documents), the Administrative
Agent may, but shall not be obligated to, elect to distribute such
funds to each Lender ratably in accordance with such Lender's
proportionate share of the principal amount of all outstanding Advances
and the Available Amount of all Letters of Credit then outstanding, in
repayment or prepayment of such of the outstanding Advances or other
Obligations owed to such Lender as the Administrative Agent shall
direct.
(c) Each Reference Bank agrees to furnish to the
Administrative Agent timely information for the purpose of determining
each Eurodollar Rate. If any one or more of the Reference Banks shall
not furnish such timely information to the Administrative Agent for the
purpose of determining any such interest rate, the Administrative Agent
shall determine such interest rate on the basis of timely information
furnished by the remaining Reference Banks.
(d) All computations of interest (other than interest
determined under paragraph (a) of the definition of "Base Rate" in
Section 1.01), facility fees, letter of credit fees and Letter of
Credit commissions shall be made by the Administrative Agent on the
basis of a year of 360 days, and all computations of interest under
paragraph (a) of the definition of "Base Rate" in Section 1.01 shall be
made by the Administrative Agent on the basis of a year of 365 days, in
each case for the actual number of days (including the first day but
excluding the last day)
<PAGE>
occurring in the period for which such interest, fees or commissions
are payable. Each determination by the Administrative Agent of an
interest rate, fee or commission hereunder made in accordance with the
provisions of this Agreement shall be conclusive and binding for all
purposes, absent manifest error.
(e) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension of time
shall in such case be included in the computation of payment of
interest or commitment fee, as the case may be; provided that, if such
extension would cause payment of interest on or principal of Eurodollar
Rate Advances to be made in the next following calendar month, such
payment shall be made on the immediately preceding Business Day.
(f) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to any
Lender hereunder that the Borrower will not make such payment in full,
the Administrative Agent may assume that the Borrower has made such
payment in full to the Administrative Agent on such date and the
Administrative Agent may, in reliance upon such assumption, cause to be
distributed to each such Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent the Borrower shall
not have so made such payment in full to the Administrative Agent, each
such Lender shall repay to the Administrative Agent forthwith on demand
such amount distributed to such Lender together with interest thereon,
for each day from the date such amount is distributed to such Lender
until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate.
Section 2.13. Taxes.
(a) Any and all payments by the Borrower hereunder or under
the Notes shall be made, in accordance with Section 2.12, free and
clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each
Lender, each Swing Line Lender, each Issuing Bank and the
Administrative Agent (each, a "Tax Indemnitee"), net income taxes that
are imposed by the United States and franchise taxes and net income
taxes that are imposed on such Tax Indemnitee by the state or foreign
jurisdiction under the laws of which such Tax Indemnitee is organized
or any political subdivision thereof and, in the case of such Tax
Indemnitee, franchise taxes and net income taxes that are imposed on it
by the state or foreign jurisdiction of such Person's Applicable
Lending Office or any political subdivision thereof
<PAGE>
(all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes").
If the Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder or under any Note to any Tax
Indemnitee, (i) subject to Section 2.13(f), the sum payable shall be
increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable
under this Section 2.13) such Tax Indemnitee receives an amount equal
to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower
shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies that arise from any payment made by it
hereunder or under the Notes or from the execution, delivery or
registration of this Agreement or the Notes (hereinafter referred to as
"Other Taxes").
(c) The Borrower will indemnify each Tax Indemnitee for the
full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable
under this Section 2.13) paid by such Tax Indemnitee and any liability
(including penalties, additions to tax, interest and expenses) arising
therefrom or with respect thereto. This indemnification shall be made
within 30 days from such date such Tax Indemnitee makes written demand
therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower will furnish to the Administrative Agent, at its address
referred to in Section 8.02, appropriate evidence of payment thereof.
If the Borrower shall make a payment hereunder or under the Notes
through an account or branch outside the United States, or a payment is
made on behalf of the Borrower by a payor that is not a United States
Person, the Borrower will, if no taxes are payable in respect of such
payment, furnish, or will cause such payor to furnish, to the
Administrative Agent, at such address, a certificate from the
appropriate taxing authority or authorities, or an opinion of counsel
acceptable to the Administrative Agent, in either case stating that
such payment is exempt from or not subject to Taxes. For purposes of
this subsection (d) and subsection (e), the terms "United States" and
"United States Person" shall have the meanings specified in Section
7701 of the Internal Revenue Code.
(e) Each Tax Indemnitee organized under the laws of a
jurisdiction outside the United States shall, on or prior to the date
of its execution and delivery of this Agreement (in the case of each
Initial Lender and each initial Swing Line Lender) and on
<PAGE>
the date of the Assignment and Acceptance pursuant to which it became a
Lender (in the case of each other Lender), and from time to time
thereafter if requested in writing by the Borrower or the
Administrative Agent (but only so long as such Tax Indemnitee remains
lawfully able to do so after the date such Person becomes a party
hereto), provide the Administrative Agent and the Borrower with either
(i) Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying
that such Tax Indemnitee is entitled to benefits under an income tax
treaty to which the United States is a party that reduces the rate of
withholding tax on payments under this Agreement and the Notes or
certifying that the income receivable pursuant to this Agreement and
the Notes is effectively connected with the conduct of a trade or
business in the United States or (ii) Internal Revenue Service form
W-8, upon which the Borrower is entitled to rely, from a Tax Indemnitee
that has not at the time it becomes a party hereto been named in any
notice issued by the Secretary of the Treasury (or such Secretary's
authorized delegate) pursuant to Sections 881(c)(2)(B) or 871(h)(5) of
the Internal Revenue Code, or any successor form or statement
prescribed by the Internal Revenue Service in order to establish that
such Tax Indemnitee is entitled to treat the interest payments under
this Agreement and the Notes as portfolio interest that is exempt from
withholding tax under the Internal Revenue Code, together with a
certificate stating that such Tax Indemnitee is not described in
Section 881(c)(3) of the Internal Revenue Code. If the form provided by
a Tax Indemnitee at the time it first becomes a party to this Agreement
indicates a United States interest withholding tax rate in excess of
zero (or if such Tax Indemnitee cannot provide at such time such form
because it is not entitled to reduced withholding under a treaty, the
payments are not effectively connected income and the payments do not
qualify as portfolio interest), withholding tax at the rate indicated
in such form (or at the then existing U.S. statutory rate if the Tax
Indemnitee cannot provide such a form) shall be excluded from Taxes
unless and until such Lender provides the appropriate form certifying
that a zero rate applies; provided that, if at the date of the
Assignment and Acceptance pursuant to which a Lender assignee becomes a
party to this Agreement, the Lender assignor was entitled to payments
under subsection (a) in respect of United States withholding tax with
respect to interest paid at such date, then, to the extent such tax
results in liability for such payments, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or
other amounts otherwise includable in Taxes) United States interest
withholding tax, if any, applicable with respect to the Lender assignee
on such date.
(f) For any period with respect to which a Tax Indemnitee has
failed to provide the Borrower and the
<PAGE>
Administrative Agent with the appropriate form described in Section
2.13(e) (other than if such failure is due to a change in law occurring
after the date on which a form originally was required to be provided
or if such form otherwise is not required under subsection (e)), such
Lender shall not be entitled to indemnification under subsection (a) or
(c) with respect to Taxes imposed by the United States or any state or
other political subdivision thereof.
(g) Any Lender claiming any additional amounts payable
pursuant to this Section 2.13 shall use reasonable efforts (consistent
with its internal policy and legal and regulatory restrictions) to
change the jurisdiction of its Applicable Lending Office(s) if the
making of such a change would avoid the need for, or reduce the amount
of, any such additional amounts that may thereafter accrue and would
not, in the sole judgment of such Lender, be otherwise disadvantageous
to such Lender.
(h) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 2.13 shall survive the payment in
full of principal and interest hereunder and under the Notes.
Section 2.14. Sharing of Payments, Etc. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Advances owing to it (other than
pursuant to Section 2.11(a), 2.11(b), 2.13, 2.15(d) or 8.04(c), or payments to
an Issuing Bank in respect of Letters of Credit) in excess of its ratable share
of payments on account of the Advances obtained by all the Lenders, such Lender
shall forthwith purchase from the other Lenders such participations in the
Advances owing to them as shall be necessary to cause such purchasing Lender to
share the excess payment ratably with each of them; provided that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender's ratable share (according to the
proportion of (i) the amount of such Lender's required repayment to (ii) the
total amount so recovered from the purchasing Lender) of any interest or other
amount paid or payable by the purchasing Lender in respect of the total amount
so recovered. The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 2.14 may exercise all its rights of
payment (including the right of set-off) with respect to such participation as
fully as if such Lender were the direct creditor of the Borrower in the amount
of such participation.
<PAGE>
Section 2.15. Letters of Credit.
(a) Issuance of Letters of Credit, Etc. The Borrower may
request one or more Issuing Banks to issue, on the terms and conditions
hereinafter set forth, stand-by and performance letters of credit
(letters of credit so issued being herein called "Letters of Credit")
from time to time on any Business Day during the period from the date
hereof until the date 90 days prior to the Commitment Termination Date;
provided that:
(i) the Letter of Credit Commitments shall be
utilized under this Section 2.15 solely for the issuance of
Letters of Credit for the account of the Borrower and, to the
extent specified by the Borrower, for the account of (or to
support obligations of) one or more of its Subsidiaries;
(ii) the aggregate Available Amount of all Letters of
Credit issued by all Issuing Banks shall not exceed at any
time the Letter of Credit Sublimit, and the aggregate
outstanding principal amount of all Revolving Credit Advances
and Swing Line Advances at any time, when added to the
aggregate amount of Letter of Credit Liabilities at such time,
shall not exceed the aggregate Commitments of the Lenders at
such time;
(iii) the aggregate amount of all Letter of Credit
Liabilities under Letters of Credit issued by any Issuing Bank
shall not exceed at any time the Letter of Credit Commitment
of such Issuing Bank; and
(iv) no Letter of Credit shall have an expiration
date later than, or shall permit the account party or the
beneficiary to require the renewal thereof to a date beyond,
the date 30 days prior to the Commitment Termination Date.
(b) Request for Issuance.
(i) Each Letter of Credit shall be issued upon
notice, given not later than 1:00 P.M. (New York City time)
two Business Days prior to the date of the proposed issuance
of such Letter of Credit, by the Borrower to the relevant
Issuing Bank, which shall give to the Administrative Agent and
each Lender prompt notice thereof by telex or telecopier. Each
such notice of issuance of a Letter of Credit (a "Notice of
Issuance") shall be by telecopier, confirmed promptly in
writing, specifying therein (1) the requested date of such
issuance (which shall be a Business Day), (2) the Available
Amount requested for such Letter of Credit, (3) the expiration
date of such Letter of Credit, (4) the account party or
parties for such Letter of Credit, (5) the name and address of
the issuer and the beneficiary
<PAGE>
of such Letter of Credit and (6) the form of such Letter of
Credit, together with a description of the nature of the
transactions or obligations proposed to be supported thereby.
If the requested form of such Letter of Credit is acceptable
to such Issuing Bank in its discretion, such Issuing Bank
will, upon fulfillment of the applicable conditions set forth
in Article III, make such Letter of Credit available to the
Borrower at its office referred to in Section 8.02 or as
otherwise agreed with the Borrower in connection with such
issuance.
(ii) Each Issuing Bank shall furnish (1) to the
Administrative Agent, each Lender and the Borrower on the
first Business Day of each month, a written report summarizing
the issuance and expiration dates of the Letters of Credit
issued by such Issuing Bank during the preceding month and
drawings during such month under all Letters of Credit issued
by the Issuing Bank and (2) to the Administrative Agent and
each Lender on the first Business Day of each calendar
quarter, a written report setting forth the average daily
aggregate Available Amount during the preceding calendar
quarter of all Letters of Credit issued by such Issuing Bank.
(c) Drawing and Reimbursement.
(i) The payment by an Issuing Bank of a draft drawn
under any Letter of Credit shall constitute for all purposes
of this Agreement the making by such Issuing Bank of an
advance to the Borrower in the amount of such payment, which
the Borrower agrees to repay on demand and, if not paid on
demand, shall bear interest, from the date demanded to the
date paid in full (and which interest shall be payable on
demand), (x) from and including the date of demand to but not
including the second Business Day thereafter at the Base Rate
in effect for each such day plus the Applicable Margin for
Base Rate Advances in effect for each such day, and (y) from
and including said second Business Day thereafter at the
Post-Default Rate. Without limiting the obligations of the
Borrower hereunder, upon demand by such Issuing Bank through
the Administrative Agent, each Lender shall make Revolving
Credit Advances in an aggregate amount equal to the amount of
such Lender's Pro Rata Share of such advance by making
available for the account of its Applicable Lending Office to
the Administrative Agent for the account of such Issuing Bank,
by deposit to the Administrative Agent's Account, in same day
funds, an amount equal to the sum of (A) its Pro Rata Share of
the outstanding principal amount of such advance plus (B)
interest accrued and unpaid to and as of such date on the
outstanding principal amount of such advance.
<PAGE>
(ii) Each Lender agrees to make such Revolving Credit
Advances on the Business Day on which demand therefor is made
by the relevant Issuing Bank through the Administrative Agent
(provided that notice of such demand is given not later than
12:00 Noon (New York City time) on such Business Day) or (if
notice of such demand is given after such time) the first
Business Day next succeeding such demand.
(iii) If and to the extent that any Lender shall not
have so made the amount of such Advance available to the
Administrative Agent for account of such Issuing Bank, such
Lender agrees to pay to the Administrative Agent forthwith on
demand such amount together with interest thereon, for each
day from the date of demand by the relevant Issuing Bank until
the date such amount is paid to the Administrative Agent, at
the Federal Funds Rate.
(iv) The Revolving Credit Advances provided for in
this Section 2.15 shall be made by the Lenders irrespective of
whether there has occurred and is continuing any Default, or
of whether any other condition precedent specified in Article
III has not been satisfied or of whether the Commitment shall
have been terminated or cancelled, and the obligation of each
Lender to make such Advances is absolute and unconditional.
(d) Increased Costs.
(i) If any change in any law or regulation or in the
interpretation thereof (to the extent any such change occurs
after the date hereof) by any court or administrative or
governmental authority charged with the administration thereof
shall either (x) impose, modify or deem applicable any
reserve, special deposit or similar requirement against
letters of credit or guarantees issued by, or assets held by,
or deposits in or for the account of, any Issuing Bank or any
Lender or (y) impose on any Issuing Bank or any Lender any
other condition regarding this Agreement or such Issuing Bank
or such Lender or any Letter of Credit, and the result of any
event referred to in the preceding clause (x) or (y) shall be
to increase the cost to such Issuing Bank or Lender of issuing
or maintaining any Letter of Credit or any commitment
hereunder in respect of Letters of Credit, then, upon demand
by such Issuing Bank or such Lender, the Borrower shall
immediately pay to such Issuing Bank or such Lender, from time
to time as specified by such Issuing Bank or such Lender,
additional amounts that shall be sufficient to compensate such
Issuing Bank or such Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted
to the Borrower by such Issuing Bank or such Lender in good
faith and setting forth in
<PAGE>
reasonable detail the basis for such increased cost, shall
be conclusive and binding for all purposes, absent manifest
error.
(ii) The Borrower shall not be obligated to pay any
additional amounts arising pursuant to this Section 2.15(d)
that are attributable to the Excluded Period with respect to
such additional amounts; provided that if an applicable law,
rule, regulation, guideline or request shall be adopted or
made on any date and shall be applicable to the period (a
"Retroactive Period") prior to the date on which such law,
rule, regulation, guideline or request is adopted or made, the
limitation on the Borrower's obligation to pay such additional
amounts hereunder shall not apply to the additional amounts
payable in respect of such Retroactive Period.
(e) Obligations Absolute. The Obligations of the Borrower
under this Agreement and any other agreement or instrument relating to
any Letter of Credit (as hereafter amended, supplemented or otherwise
modified from time to time, collectively, the "L/C Related Documents")
shall, to the extent permitted by law, be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of
such L/C Related Document under all circumstances, including, without
limitation, the following circumstances:
(i) any lack of validity or enforceability of any one
or more of such other documents and agreements, including, but
not limited to, the L/C Related Documents;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
Obligations of the Borrower in respect of any L/C Related
Document or any other amendment or waiver of or any consent to
departure from all or any of the L/C Related Documents;
(iii) the existence of any claim, set-off, defense or
other right that the Borrower may have at any time against any
beneficiary or any transferee of a Letter of Credit (or any
Persons for whom any such beneficiary or any such transferee
may be acting), any Issuing Bank or any other Person, whether
in connection with the transactions contemplated by the L/C
Related Documents or any unrelated transaction;
(iv) any statement or any other document presented
under a Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
<PAGE>
(v) payment by an Issuing Bank under a Letter of
Credit against presentation of a draft or certificate that
does not comply with the terms of such Letter of Credit,
except to the extent that such payment resulted from such
Issuing Bank's willful misconduct or gross negligence in
determining whether such draft or certificate complies on its
face with the terms of such Letter of Credit;
(vi) any exchange, release or nonperfection of any
collateral, or any release or amendment or waiver of or
consent to departure from any guarantee, for all or any of the
Obligations of the Borrower in respect of the L/C Related
Documents; or
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including,
without limitation, any other circumstance that might
otherwise constitute a defense available to, or a discharge
of, the Borrower or a guarantor.
Section 2.16. Replacement of Lender.
(a) Subject to clause (b) below, in the event that any Lender
requests compensation pursuant to Section 2.11(a), 2.11(b), 2.13 or
2.15(d), or the obligation of any Lender to make, or to Convert Base
Rate Advances into, or to Continue, Eurodollar Rate Advances shall be
suspended pursuant to Section 2.11(c) or 2.11(d) (such Lender being
herein called an "Affected Lender"), then, so long as such condition
exists, the Borrower may, after the date 30 days after the date of such
request or suspension, (i) designate an Eligible Assignee acceptable to
the Administrative Agent, each Issuing Bank and each Swing Line Lender
(which acceptance will not be unreasonably withheld) that is not an
Affiliate of the Borrower (such Eligible Assignee being herein called a
"Replacement Lender") to assume the Affected Lender's Commitments and
other obligations hereunder and to purchase the Affected Lender's
Advances and other rights under the Loan Documents (all without
recourse to or representation or warranty by, or expense to, the
Affected Lender) for a purchase price equal to the aggregate principal
amount of the outstanding Advances held by the Affected Lender plus all
accrued but unpaid interest on such Advances and accrued but unpaid
fees owing to the Affected Lender (and upon such assumption, purchase
and substitution, and subject to the execution and delivery to the
Administrative Agent by the Replacement Lender of documentation
satisfactory to the Administrative Agent and compliance with the
requirements of Section 8.07(c), the Replacement Lender shall succeed
to the rights and obligations of the Affected Lender hereunder and the
other Loan Documents), and (ii) pay to the Affected Lender all amounts
payable to such Affected Lender under Section 8.04(c), calculated as if
the purchase by the Replacement
<PAGE>
Lender constituted a mandatory prepayment of Advances by the Borrower,
and (iii) pay to the Administrative Agent the processing and
recordation fee specified in Section 8.07(a)(v) with respect to such
assignment. In the event that the Borrower exercises its rights under
this paragraph (a), the Affected Lender shall no longer be a party
hereto or have any rights or obligations hereunder or under the other
Loan Documents; provided that the obligations of the Borrower to the
Affected Lender under Sections 2.11, 2.13, 2.15(d) and 8.04 with
respect to events occurring or obligations arising before or as a
result of such replacement shall survive such exercise.
(b) The Borrower may not exercise its rights under this
Section 2.16 with respect to any Affected Lender unless the Borrower
simultaneously exercises such rights with respect to all Affected
Lenders or if a Default has occurred and is then continuing.
Section 2.17. Use of Proceeds. The proceeds of the Advances and the
Letters of Credit shall be available (and the Borrower agrees that it shall use
such proceeds and the Letters of Credit) solely (a) to refinance certain
existing Debt of the Borrower and its Subsidiaries, (b) to fund certain
purchases of non-U.S. inventory and other short-term assets by the Borrower and
its Subsidiaries, (c) to fund certain accrued employee benefits of the Borrower,
(d) to finance loans from the Borrower to the ESOP (provided that proceeds of
Advances used for such purpose shall not exceed $50,000,000 in the aggregate)
and (e) for the working capital needs and other general corporate purposes of
the Borrower and its Subsidiaries, in each case in compliance with all
applicable legal and regulatory requirements. Neither the Administrative Agent
nor any Lender, Swing Line Lender or Issuing Bank shall have any responsibility
as to the application or use of any of the proceeds of any Advance or Letter of
Credit.
ARTICLE III
CONDITIONS OF LENDING
Section 3.01. Conditions Precedent to Initial Borrowing. The obligation
of each Lender to make a Revolving Credit Advance on the occasion of the initial
Borrowing is subject to the following conditions precedent being satisfied on or
before July 15, 1996:
(a) Documents. The Administrative Agent shall have received
the following documents (with, in the case of clauses (2), (3), (4),
(5) and (6) below, sufficient copies
<PAGE>
for each Lender), each of which shall be satisfactory to the
Administrative Agent in form and substance:
(1) Notes. The Notes payable to the order of the
Lenders, respectively.
(2) Corporate Documents. Certified copies of the
charter and by-laws (or equivalent documents) of the Borrower
and of all corporate authority for the Borrower (including,
without limitation, board of director resolutions and evidence
of the incumbency, including specimen signatures, of officers)
with respect to the execution, delivery and performance of the
Loan Documents and each other document to be delivered by the
Borrower from time to time in connection herewith and the
extensions of credit hereunder (and the Administrative Agent
and each Lender may conclusively rely on such certificate
until it receives notice in writing from the Borrower to the
contrary).
(3) Opinion of Borrower's Counsel. (i) A favorable
opinion of Skadden, Arps, Slate, Meagher & Flom, special
counsel for the Borrower, and (ii) a favorable opinion of
Carolyn A. Bates, Esq., general counsel of the Borrower, in
substantially the forms of Exhibits C-1 and C-2, respectively,
and as to such other matters as the Administrative Agent, any
Lender through the Administrative Agent may reasonably
request.
(4) Opinion of Administrative Agent's Counsel. A
favorable opinion of Milbank, Tweed, Hadley & McCloy, special
New York counsel for the Administrative Agent, in
substantially the form of Exhibit D.
(5) Closing Certificate. A certificate of a senior
financial officer of the Borrower to the effect that:
(x) the representations and warranties
contained in each Loan Document are correct on and as
of the Closing Date, before and after giving effect
to the Spin-Off and the other transactions
contemplated to occur on or prior to the Closing
Date, as though made on and as of such date (or, if
any such representation or warranty is expressly
stated to have been made as of a specific date, as of
such specific date); and
<PAGE>
(y) no event has occurred and is continuing
that constitutes a Default.
(6) Solvency. A certificate of a senior financial
officer of the Borrower to the effect that the Borrower (both
individually and collectively with its Subsidiaries) is
Solvent.
(7) Insurance. Certificates of insurance evidencing
the existence of all insurance maintained by the Borrower. In
addition, the Administrative Agent shall have received a
certificate of a senior financial officer of the Borrower
stating that such insurance is in full force and effect.
(b) Spin-Off. The Administrative Agent shall have received the
following, each of which shall be satisfactory to the Administrative
Agent in form and substance::
(1) Spin-Off Resolutions, Etc. Certified copies of
the resolutions of the Board of Directors of 3M, the Borrower
and Imation Enterprises Corp. authorizing and approving the
Spin-Off and the transactions contemplated thereby.
(2) Spin-Off Documents, Etc. Certified copies of each
Spin-Off Document and each Material Contract, each as amended
and in effect on the Closing Date.
(3) Spin-Off Effectiveness, Etc. Evidence that (i)
all conditions to the Spin-Off shall have been met or waived
to the satisfaction of the Lenders; (ii) not less than 90% of
the Spin-Off Properties shall have been, or shall
simultaneously with the initial Borrowing hereunder be,
transferred or purchased by the Borrower and its Subsidiaries
pursuant to the Spin-Off Documents; and (iii) the Spin-Off
shall otherwise have been, or shall simultaneously with the
initial Borrowing hereunder be, consummated in all material
respects in accordance with the terms of the Distribution
Agreement and the other Spin-Off Documents (without any waiver
or amendment not consented to by the Lenders of any material
term, provision or condition therein), and in compliance with
all applicable law.
(c) Governmental Approvals. The Administrative Agent shall
have received evidence satisfactory to it of receipt of all
governmental and third party consents and approvals necessary in
connection with this Agreement (without the imposition of any
conditions except those that are
<PAGE>
acceptable to the Lenders) and that the same remain in effect.
(d) Fees. The Borrower shall have paid all accrued fees and
expenses of the Administrative Agent (including the reasonable fees and
expenses of counsel to the Administrative Agent in connection with this
Agreement).
(e) Other Items. The Administrative Agent shall have received
such other approvals, opinions and documents relating to this Agreement
and the transactions contemplated hereby as any Lender may, through the
Administrative Agent, reasonably request.
Section 3.02. Conditions Precedent to Each Borrowing and Issuance. The
obligation of each Lender to make an Advance on the occasion of each Borrowing
(excluding, however, the making of any Advance pursuant to Section 2.15), and
the right of the Borrower to request a Swing Line Borrowing or the issuance of a
Letter of Credit, shall be subject to the further conditions precedent that on
the date of such Borrowing or issuance the following statements shall be true
(and each of the giving of the applicable Notice of Borrowing or Notice of
Issuance and the acceptance by the Borrower of the proceeds of such Borrowing or
of such Letter of Credit shall constitute a representation and warranty by the
Borrower that on the date of such Borrowing or issuance such statements are
true):
(i) the representations and warranties contained in each Loan
Document are correct on and as of the date of such Borrowing or
issuance, before and after giving effect to such Borrowing or issuance
and to the application of the proceeds therefrom, as though made on and
as of such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such
specific date); and
(ii) no event has occurred and is continuing, or would result
from such Borrowing or issuance or from the application of the proceeds
therefrom, that constitutes a Default or an Event of Default.
Section 3.03. Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Administrative Agent responsible for the transactions contemplated by the
Loan Documents shall have received notice from such Lender prior to the initial
Borrowing specifying its
<PAGE>
objection thereto and such Lender shall not have made available to the
Administrative Agent such Lender's ratable portion of such Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) The Borrower (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases
property or in which the conduct of its business requires it to so
qualify or be licensed and where, in each case, failure so to qualify
and be in good standing could reasonably be expected to have a Material
Adverse Effect and (iii) has all requisite power (corporate or other)
and authority to own or lease and operate its properties and to carry
on its business as now conducted and as proposed to be conducted.
(b) Set forth on Schedule 4.01(b) is a complete and accurate
list of all Material Subsidiaries of the Borrower as of the Closing
Date, showing as of such date (as to each such Subsidiary) the
jurisdiction of its organization and the percentage of the outstanding
shares or interests of each class of capital stock or partnership
interests owned (directly or indirectly) by the Borrower. All of the
outstanding capital stock or partnership interests of all of such
Subsidiaries has been validly issued, is fully paid and non-assessable
and, except as otherwise specified on Schedule 4.01(b), is owned by the
Borrower or one or more of its Subsidiaries free and clear of all
Liens. Except as otherwise specified on Schedule 4.01(b), as of the
Closing Date there are no options, warrants, rights of conversion or
purchase or similar rights outstanding covering shares of capital stock
or partnership interests of any Material Subsidiaries of the Borrower.
Each Material Subsidiary (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (ii) is duly qualified and in good standing as a foreign
corporation or limited partnership, as the case may be, in each other
jurisdiction in which it owns or leases property or in which the
conduct of its business requires it to so qualify or be licensed and
where, in each case, failure to so qualify and be in good standing
could reasonably be expected to have a Material Adverse Effect and
<PAGE>
(iii) has all requisite power (corporate or other) and authority to own
or lease and operate its properties and to carry on its business as now
conducted and as proposed to be conducted.
(c) The execution, delivery and performance by the Borrower of
this Agreement and the Notes, and the consummation of the Spin-Off and
the other transactions contemplated hereby are within the Borrower's
powers (corporate or other), have been duly authorized by all necessary
corporate action, and do not (i) contravene the Borrower's charter or
by-laws, (ii) violate any applicable law (including, without
limitation, the Securities Exchange Act of 1934 and the Racketeer
Influenced and Corrupt Organizations Chapter of the Organized Crime
Control Act of 1970), rule, regulation (including, without limitation,
Regulation U and Regulation X), order, writ, judgment, injunction,
decree, determination or award (except for any such violation, by
action or inaction of the Borrower, that could not reasonably be
expected to have a Material Adverse Effect and that could not result in
any liability of any Lender), (iii) conflict with or result in the
breach of, or constitute a default under, any contract, loan agreement,
indenture, mortgage, deed of trust, lease or other instrument binding
on or affecting the Borrower, any of its Material Subsidiaries or any
of their properties (except for any such conflict, breach or default,
caused by action or inaction of the Borrower, that could not reasonably
be expected to have a Material Adverse Effect and that could not result
in any liability of any Lender) or (iv) result in or require the
creation or imposition of any Lien upon or with respect to any of the
properties of the Borrower or any of its Material Subsidiaries. Neither
the Borrower nor any of its Material Subsidiaries is in violation of
any such law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award or in breach of any such contract, loan
agreement, indenture, mortgage, deed of trust, lease or other
instrument, the violation or breach of which could be reasonably
expected to have a Material Adverse Effect.
(d) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for (i) the due execution,
delivery, recordation, filing or performance by the Borrower of this
Agreement or the Notes, for the consummation of the transactions
contemplated hereby (other than the Spin-Off) or (ii) the exercise by
the Administrative Agent or any Lender, Swing Line Lender or Issuing
Bank of its rights under the Loan Documents, except for the
authorizations, approvals, actions, notices and
<PAGE>
filings which have been duly obtained, taken, given or made and are in
full force and effect. No authorization or approval or other action by,
and no notice to or filing with, any governmental authority or
regulatory body or any other third party is required for the
consummation of the Spin-Off or the transactions contemplated thereby,
except for the authorizations, approvals, actions, notices and filings
(x) the failure to obtain could not reasonably be expected to have a
Material Adverse Effect or (y) which have been duly obtained, taken,
given or made and are in full force and effect. On the date of initial
Borrowing, all applicable waiting periods in connection with the
Spin-Off and the other transactions contemplated hereby and thereby
have expired without any action having been taken by any competent
authority restraining, preventing or imposing materially adverse
conditions upon the Spin-Off or the rights of the Borrower or its
Subsidiaries.
(e) This Agreement has been, and each of the Notes when
delivered will have been, duly executed and delivered by the Borrower.
This Agreement is, and each of the Notes when delivered will be, the
legal, valid and binding obligation of the Borrower, enforceable
against the Borrower in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency and other
similar laws affecting creditors generally and by general principles of
equity (regardless of whether enforcement is sought in equity or at
law).
(f) (i) The pro forma balance sheet of the Borrower as at
March 31, 1996 as presented in the Form 10 (copies of which have been
furnished to each Lender) presents accurately (subject to year-end
audit adjustments) the pro forma financial condition of the Borrower as
at such date (determined as if the Spin-Off had occurred on such date),
all in accordance with generally accepted accounting principles applied
on a consistent basis.
(ii) The historical balance sheet of the Borrower as
at December 31, 1995 and the related historical statements of
income and cash flows of the Borrower for the twelve months
then ended, accompanied by an opinion of Coopers & Lybrand
L.L.P. independent public accountants, and the historical
balance sheet of the Borrower as at March 31, 1996 and the
related historical statements of income and cash flows of the
Borrower for the three months then ended, as presented in the
Form 10 (copies of which have been furnished to each Lender)
present fairly, in all material respects (subject, in the case
of said balance sheet as at March 31, 1996, and said
statements of income and cash flows for the three months then
ended, to year-end audit
<PAGE>
adjustments) the historical financial condition of the
Borrower as at such dates and the historical results of the
operations of the Borrower for the periods ended on such
dates, all in accordance with generally accepted accounting
principles applied on a consistent basis.
(iii) Except as disclosed in the Form 10, since
December 31, 1995, there has been no Material Adverse Change.
(g) (A) No written information, exhibit or report (as at the
Closing Date) furnished by any officer of the Borrower to the
Administrative Agent, any Issuing Bank, any Swing Line Lender or any
Lender in connection with the negotiation of the Loan Documents (when
taken together) contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements made
therein not misleading and (B) none of the information, exhibits or
reports furnished by the Borrower to the Administrative Agent or any
Lender pursuant to Section 5.03 contained (on the date of delivery
thereof) any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements made therein not
misleading.
(h) There is no action, suit, litigation or proceeding against
the Borrower or any of its Material Subsidiaries or any of their
respective property, including any Environmental Action, pending before
any court, governmental agency or arbitrator, or (to the knowledge of
the Borrower) threatened, nor (to the knowledge of the Borrower) is
there any investigation pending in respect of the Borrower, that (i)
could reasonably be expected to have a Material Adverse Effect, or (ii)
on the Closing Date could reasonably be expected to affect the
legality, validity or enforceability of this Agreement, any Note or the
consummation of the Spin-Off or the other transactions contemplated
hereby.
(i) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying Margin Stock; except
as expressly permitted in Section 2.17, no proceeds of any Advance will
be used to purchase or carry any Margin Stock or to extend credit to
others for the purpose of purchasing or carrying any Margin Stock; and
no proceeds of any Advance will be used for any purpose which violates
the provisions of the regulations of the Board of Governors of the
Federal Reserve System. Each employee stock ownership plan of the
Borrower comprising part of the ESOP has been adopted by the Borrower,
approved by the Borrower's shareholders and provides for the purchase
of capital stock of the Borrower constituting Margin Stock.
<PAGE>
After applying the proceeds of each Advance, not more than 25% of the
value of the assets of the Borrower and the Borrower's Subsidiaries (as
determined in good faith by the Borrower) that are subject to Section
5.02(a) or Section 5.02(d) will consist of or be represented by Margin
Stock. If requested by any Lender or the Administrative Agent, the
Borrower will furnish to the Administrative Agent and each Lender a
statement in conformity with the requirements of Federal Reserve Form
U-1 referred to in Regulation U, the statements made in which shall be
such, in the opinion of each Lender, as to permit the transactions
contemplated hereby in accordance with Regulation U.
(j) Set forth on Schedule 4.01(j) is a complete and accurate
list, as of the Closing Date, of each Plan that is subject to Title IV
of ERISA and each Multiemployer Plan with respect to any employees or
former employees of the Borrower or any of its ERISA Affiliates.
(k) No ERISA Event has occurred or, to the Borrower's
knowledge, is reasonably expected to occur with respect to any Plan of
the Borrower or any of its ERISA Affiliates that could reasonably be
expected to have a Material Adverse Effect.
(l) Since the date of the Schedule B (Actuarial Information)
to the most recent annual report (Form 5500 Series) for each Plan of
the Borrower or any of its ERISA Affiliates, there has been no change
in the funding status of any such Plan except to the extent that such
change (or the aggregate of all such changes) could not reasonably be
expected to have a Material Adverse Effect.
(m) Neither the Borrower nor, to the Borrower's knowledge, any
of its ERISA Affiliates has incurred or is reasonably expected to incur
any withdrawal liability to any Multiemployer Plan except to the extent
such withdrawal liability (or the aggregate of all such withdrawal
liability) is not reasonably expected to have a Material Adverse
Effect.
(n) Neither the Borrower nor, to the Borrower's knowledge, any
of its ERISA Affiliates has been notified by the sponsor of a
Multiemployer Plan of the Borrower or any of its ERISA Affiliates that
such Multiemployer Plan is in reorganization or has been terminated,
within the meaning of Title IV of ERISA.
(o) As of the Closing Date, the aggregate annualized cost on a
pay-as-you-go basis (including, without limitation, the cost of
insurance premiums) with respect to
<PAGE>
post-retirement benefits under welfare plans (other than
post-retirement benefits required to be provided by Section 4980B of
the Internal Revenue Code or applicable state law) for which the
Borrower and its Subsidiaries is liable does not exceed $10,000,000.
(p) Neither the business nor the properties of the Borrower or
any of its Material Subsidiaries are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance) that could reasonably be
expected to have a Material Adverse Effect.
(q) Except as provided in Schedule 4.01(q) or to the extent
any of the following could not reasonably be expected to have a
Material Adverse Effect, (i) the operations and properties of the
Borrower and each of its Subsidiaries comply in all material respects
with all Environmental Laws, all necessary Environmental Permits have
been obtained and are in effect for the operations and properties of
the Borrower and its Subsidiaries, the Borrower and its Subsidiaries
are in compliance in all material respects with all such Environmental
Permits, and (ii) to the best of the Borrower's knowledge, no
circumstances exist that could (x) form the basis of an Environmental
Action against the Borrower or any of its Subsidiaries or (y) cause any
such property to be subject to any material restrictions on ownership,
occupancy, use or transferability under any Environmental Law.
(r) Except as provided in Schedule 4.01(r) or to the extent
any of the following could not reasonably be expected to have a
Material Adverse Effect, as of the Closing Date (i) none of the
properties of the Borrower or any of its Subsidiaries is listed or
proposed for listing on the National Priorities List under CERCLA or on
the Comprehensive Environmental Response, Compensation and Liability
Information System maintained by the Environmental Protection Agency or
any analogous state list of sites requiring investigation or cleanup,
and (ii) no underground storage tanks, as such term is defined in 42
U.S.C. 6901, are located on any property of the Borrower or any of its
Subsidiaries.
(s) Except as provided in Schedule 4.01(s) or to the extent
any of the following could not reasonably be expected to have a
Material Adverse Effect, as of the Closing Date neither the Borrower
nor any of its Subsidiaries has been notified in writing by any
federal, state or local governmental agency or any other Person that
the Borrower or
<PAGE>
any of its Subsidiaries is potentially liable for the remedial or other
costs with respect to treatment, storage, disposal, release,
arrangement for disposal or transportation of any Hazardous Material
generated by the Borrower or any of its Subsidiaries, except for costs
incurred in the ordinary course of business with respect to treatment,
storage, disposal or transportation of such Hazardous Materials.
(t) The Borrower and each of its Material Subsidiaries has
filed, has caused to be filed or has been included in, all federal and
state income tax returns and all other material tax returns (federal,
state, local and foreign) required to be filed and has paid (or is
contesting in good faith by appropriate proceedings) all taxes shown
thereon to be owing, together with applicable interest and penalties.
(u) Neither the Borrower nor any of its Material Subsidiaries
is an "investment company," or an "affiliated person" of, or "promoter"
or "principal underwriter" for, an "investment company," as such terms
are defined in the Investment Company Act of 1940, as amended. Neither
the Borrower nor any of its Material Subsidiaries is a "holding
company", or an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(v) The Borrower (both individually and collectively with its
Subsidiaries) is Solvent.
(w) Set forth on Schedule 4.01(w) is a complete and accurate
list, as of a date not more than five days prior to the Closing Date,
of all existing Debt of the Borrower and its Material Subsidiaries in
an aggregate principal amount in excess of $10,000,000, showing as of
such date the principal amount outstanding thereunder and whether such
Debt is secured by any Lien.
ARTICLE V
COVENANTS
Section 5.01. Affirmative Covenants. So long as any principal of or
interest on any Advance or any other amount payable under this Agreement shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender shall
have any Commitment hereunder, the Borrower will, and will cause each of its
Material Subsidiaries to:
<PAGE>
(a) Compliance with Laws, Etc. Comply with all applicable
laws, rules, regulations and orders, such compliance to include,
without limitation, compliance with ERISA, the Racketeer Influenced and
Corrupt Organizations Chapter of the Organized Crime Control Act of
1970 and all Environmental Laws and Environmental Permits (except to
the extent that non-compliance with any thereof could not reasonably be
expected to have a Material Adverse Effect).
(b) Payment of Taxes, Etc. Pay and discharge before the same
shall become delinquent, (i) all taxes, assessments and governmental
charges or levies imposed upon it or upon its property and (ii) all
lawful claims that, if unpaid, might by law become a Lien upon its
property; provided that neither the Borrower nor any of its Material
Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge or claim that is being contested in good faith and
by proper proceedings and as to which appropriate reserves are being
maintained to the extent required by GAAP, unless and until any Lien
resulting therefrom attaches to its property and becomes enforceable
against its other creditors.
(c) Maintenance of Insurance. Maintain with responsible and
reputable insurance companies or associations, insurance, including
business interruption insurance with respect to each manufacturing
plant, in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses.
(d) Preservation of Corporate Existence, Etc. Subject to
Section 5.02(c) and (d), preserve and maintain its corporate existence,
rights (charter and statutory) and franchises; provided that neither
the Borrower nor any of its Material Subsidiaries shall be required to
preserve any right or franchise if the Borrower or such Subsidiary
shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Borrower or such Subsidiary, as the
case may be, and that the loss thereof could not reasonably be expected
to have a Material Adverse Effect.
(e) Visitation Rights. At any reasonable time and as may be
reasonably requested from time to time (and, so long as no Default
shall have occurred and is continuing, upon reasonable advance notice),
permit the Administrative Agent or any of the Lenders or any agents or
representatives thereof to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of,
the Borrower and any of its Material Subsidiaries (in the presence of
an appropriate officer or representative of
<PAGE>
the Borrower), and to discuss the affairs, finances and accounts of the
Borrower and any of its Subsidiaries with any of their officers or
directors and with their independent certified public accountants.
(f) Keeping of Books. Keep proper books of record and account,
in which full and correct entries shall be made of all financial
transactions and the assets and business of the Borrower and each
Material Subsidiary in accordance with GAAP.
(g) Maintenance of Properties, Etc. Maintain and preserve,
except to the extent the failure to do so could not reasonably be
expected to have a Material Adverse Effect, all of its properties that
are used or useful in the conduct of its business in good working order
and condition, ordinary wear and tear excepted.
(h) Performance of Spin-Off Documents. Perform and observe all
of the terms and provisions of each Spin-Off Document to be performed
or observed by it, maintain each such Spin-Off Document in full force
and effect and enforce such Spin-Off Document in accordance with its
terms, except to the extent the failure to do any of the foregoing
could not reasonably be expected to have a Material Adverse Effect.
(i) Transactions with Affiliates. Conduct all transactions
(including, without limitation, transactions otherwise permitted under
the Loan Documents) with any of its Affiliates on terms that are fair
and reasonable and no less favorable to the Borrower or its Material
Subsidiary than would obtain in a comparable arm's-length transaction
with a Person that is not an Affiliate; provided that this Section
5.01(i) shall not be applicable to (i) transactions between the
Borrower and wholly owned Subsidiaries of the Borrower or between
wholly owned Subsidiaries of the Borrower unless otherwise prohibited
by this Agreement and (ii) compensation paid for services rendered by
any director or officer of the Borrower or any director or officer of a
Subsidiary of the Borrower serving at the direction or request of the
Borrower to the extent such compensation is determined in the good
faith exercise of business judgment by the Board of Directors of the
Borrower to be reasonable and appropriate to the functions of such
office.
Section 5.02. Negative Covenants. So long as any principal of or
interest on any Advance or any other amount payable under this Agreement shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender shall
have any
<PAGE>
Commitment hereunder, the Borrower will not, and will not permit any of its
Material Subsidiaries to:
(a) Liens, Etc.
(i) Create, assume or suffer to exist any Lien on or
in respect of (or sign or file under the Uniform Commercial
Code of any jurisdiction a financing statement that names the
Borrower or any of its Subsidiaries as debtor or sign any
security agreement authorizing any secured party thereunder to
file such financing statement in respect of) any capital stock
of any of the Borrower's Subsidiaries or on any Debt owed by
any of the Borrower's Subsidiaries to the Borrower or any of
the Borrower's other Subsidiaries, in each case whether now
owned or hereafter acquired.
(ii) Create, incur, assume or suffer to exist any
Lien on or with respect to any of its other properties of any
character (including, without limitation, Receivables) whether
now owned or hereafter acquired, or sign or file under the
Uniform Commercial Code of any jurisdiction a financing
statement that names the Borrower or any of its Material
Subsidiaries as debtor, or sign any security agreement
authorizing any secured party thereunder to file such
financing statement, or assign any Receivables or other right
to receive income, excluding from the operation of the
foregoing restrictions in this clause (ii) the following:
(1) Liens in favor of the Administrative
Agent for the benefit of the Lenders, Swing Line
Lenders and Issuing Banks hereunder;
(2) Permitted Liens;
(3) Liens existing on the Closing Date and
identified on Schedule 4.01(w);
(4) Liens on Receivables of the Borrower and
its Subsidiaries under a Permitted Receivables
Facility;
(5) Purchase money Liens upon or in property
acquired or held by the Borrower or such Subsidiary
in the ordinary course of business to secure the
purchase price of such property or to secure Debt
(including, without limitation, commercial letters of
credit) incurred solely for the purpose of financing
the acquisition, construction or improvement of any
such property to be subject to such Liens, or Liens
existing on any such property at the time of
acquisition (and not created in anticipation
thereof), or extensions, renewals or replacements of
any of the foregoing for
<PAGE>
the same or a lesser amount; provided that the Debt
secured by any such Lien shall at no time exceed 100%
of the fair market value (as determined in good faith
by a senior financial officer of the Borrower) of
such property at the time it was acquired;
(6) Any Lien arising after the Closing Date
in favor of any state of the United States of America
or any agency, political subdivision or
instrumentality thereof, upon any pollution abatement
or control facilities being financed in compliance
with Section 103(c)(4)(F) of the Internal Revenue
Code of 1986, as in effect on the date of this
Agreement (or any successor statute which is similar
in all substantive respects), the interest payable in
respect of which financing is excluded from gross
income under said Section 103, provided, however,
that (x) the Debt secured by such Lien is not
prohibited by clause (b) of this Section 5.02, and
(y) such Lien does not cover any other property at
any time owned by the Borrower or any Material
Subsidiary;
(7) Liens on property that is the subject of
a capital lease to secure the performance of the
Capital Lease Obligations relating thereto;
(8) Liens upon property of a Person that
becomes a Subsidiary of the Borrower after the
Closing Date, each of which Liens existed on such
property before the time such Person became a
Subsidiary of the Borrower and was not created in
anticipation thereof; provided that no such Lien
shall extend to or cover any property of the Borrower
or any of its Subsidiaries other than the property
subject to such Liens at the time such Person became
a Subsidiary of the Borrower and improvements
thereon;
(9) other Liens in existence from time to
time; provided that the aggregate amount of
liabilities secured by such Liens shall not exceed
$25,000,000 outstanding at any time; and
(10) the replacement, extension or renewal
of any Lien permitted by clauses (3) and (8) above
upon or in the same property theretofore subject
thereto or the replacement, extension or renewal
(without increase in the principal amount or change
in any direct or contingent obligor) of the Debt
secured thereby.
<PAGE>
(b) Debt. Permit any Material Subsidiary of the Borrower to
create, incur, assume or suffer to exist any Debt other than:
(i) Obligations under a Permitted Receivables
Facility;
(ii) endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business;
(iii) Debt owed to the Borrower or to a Subsidiary of
the Borrower;
(iv) Debt secured by Liens permitted under clauses
(5), (6) and (7) of Section 5.02(a)(ii) and purchase money
Debt secured by Liens permitted under Section 5.02(a)(ii)(8);
(v) Debt in an aggregate outstanding principal amount
collectively for all Material Subsidiaries not at any time
exceeding $25,000,000;
(vi) Debt assumed pursuant to the Spin-Off and
retired substantially contemporaneously therewith; and
(vii) renewals, refinancings and replacements of the
Debt permitted under clauses (iv) and (v) above (without
increase in the principal amount or change in any direct or
contingent obligor and not including any Debt to be paid or
prepaid with the proceeds of Advances).
(c) Mergers, Restricted Investments, Etc.
(i) Merge with or into or consolidate with or into
any Person except that if no Default shall have occurred and
be continuing or would result therefrom, (x) any Subsidiary of
the Borrower may be merged or consolidated with or into the
Borrower (provided that the Borrower shall be the continuing
or surviving corporation) or any other wholly owned Subsidiary
of the Borrower; and (y) the Borrower or any of its
Subsidiaries may merge or consolidate with any other Person
(provided that (1) in the case of a merger or consolidation of
the Borrower, the Borrower is the continuing or surviving
corporation and (2) in any other case, the continuing or
surviving corporation is a wholly owned Subsidiary of the
Borrower).
<PAGE>
(ii) If any Default shall have occurred and be
continuing or would result therefrom, make any Restricted
Investment in any Person.
(d) Sales, Etc., of Assets. Effect any Disposition, whether in
one transaction or in a series of transactions, (i) of all or
substantially all of the property of the Borrower (or of the Borrower
and its Subsidiaries, taken as a whole), or (ii) if any Default shall
have occurred and be continuing or would result therefrom, of any
property material to the business of the Borrower (or of the Borrower
and its Subsidiaries, taken as a whole). Nothing in this Section
5.02(d) shall prohibit the Borrower or any of its Subsidiaries from
selling Receivables under a Permitted Receivables Facility. The
foregoing provisions of this Section 5.02(d) are without prejudice to
the obligations of the Borrower under Section 2.07(b).
(e) Change in Nature of Business. Make any material change in
the nature of the business of the Borrower and its Subsidiaries taken
as a whole as carried on at the Closing Date.
(f) Charter Amendments. Amend its articles of incorporation or
bylaws, or amend any partnership agreement to which it or any of its
Material Subsidiaries is a party (except for amendments to authorize
the issuance of preferred or common stock), in each case to the extent
any such amendment could reasonably be expected to have a Material
Adverse Effect.
(g) Amendment of Spin-Off Documents. Cancel or terminate any
Spin-Off Document or consent to or accept any cancellation or
termination thereof, amend, modify or change in any manner any term or
condition of any Spin-Off Document or give any consent, waiver or
approval thereunder, waive any default under or any breach of any term
or condition of any Spin-Off Document or agree in any manner to any
other amendment, modification or change of any term or condition of any
Spin-Off Document to the extent any of the foregoing could reasonably
be expected to have a Material Adverse Effect.
(h) Certain Obligations Respecting Subsidiaries. Enter into or
permit to be in effect, or permit any of its Subsidiaries to enter into
or permit to be in effect, any indenture, agreement, instrument or
other arrangement that, directly or indirectly, prohibits or restrains,
or has the effect of prohibiting or restraining, or imposes materially
adverse conditions upon, the declaration or payment of dividends or the
making of loans or advances to or other
<PAGE>
investments in or the sale, assignment, transfer or other disposition
of property to the Borrower or any of its Material Subsidiaries, in
each case other than any such restrictions in joint venture or
partnership agreements between a Subsidiary of the Borrower and a third
party to the extent the Borrower, reasonably and in good faith,
determines such restrictions to be customary and necessary in light of
the circumstances in which the related joint venture or partnership is
formed.
(i) Margin Stock. Permit more than 25%, after applying the
proceeds of each Advance, of the value of the assets of the Borrower
and the Borrower's Subsidiaries (as determined in good faith by the
Borrower) that are subject to Section 5.02(a) or Section 5.02(d) to
consist of or be represented by Margin Stock.
Section 5.03. Reporting Requirements. So long as any principal of or
interest on any Advance or any other amount payable under this Agreement shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender shall
have any Commitment hereunder:
(a) Default Notice. The Borrower will furnish to the
Administrative Agent, as soon as possible and in any event within five
Business Days after the Borrower knows or has reason to believe that a
Default has occurred, a statement of a senior financial officer of the
Borrower setting forth details of such Default and the action that the
Borrower has taken and proposes to take with respect thereto.
(b) Quarterly Financials. As soon as available and in any
event within 45 days after the end of each of the first three quarters
of each fiscal year of the Borrower, the Borrower will furnish to the
Administrative Agent, with sufficient copies for each Lender, a
Consolidated balance sheet of the Borrower and its Subsidiaries as of
the end of such quarter and Consolidated statements of income and cash
flows of the Borrower and its Subsidiaries for the period commencing at
the end of the previous fiscal year and ending with the end of such
quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding
fiscal year in reasonable detail and duly certified (subject to
year-end audit adjustments) by a senior financial officer of the
Borrower as having been prepared in accordance with GAAP, together with
(i) a certificate of said officer (A) stating that no Default has
occurred and is continuing or, if a Default has occurred and is
continuing, a statement as to the nature thereof and the action that
the Borrower has taken and proposes to take with respect thereto and
(B)
<PAGE>
stating that, except as disclosed in the Form 10, since December 31,
1995, there has been no Material Adverse Change and (ii) a schedule in
form satisfactory to the Administrative Agent of the computations used
by the Borrower in determining compliance with the covenants contained
in Section 5.04.
(c) Annual Financials. As soon as available and in any event
within 90 days after the end of each fiscal year of the Borrower, the
Borrower will furnish to the Administrative Agent, with sufficient
copies for each Lender, the Consolidated balance sheet of the Borrower
and its Subsidiaries as of the end of such fiscal year and Consolidated
statements of income and cash flows of the Borrower and its
Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal
year and accompanied by an unqualified opinion of Coopers & Lybrand
L.L.P. or other independent public accountants of nationally recognized
standing stating that, except as expressly disclosed therein, said
Consolidated financial statements present fairly, in all material
respects, the Consolidated financial position and results of operations
of the Borrower and its Subsidiaries as of the last day of, and for,
such fiscal year, together with (i) a certificate of such accounting
firm to the Lenders stating that in the course of the regular audit of
the business of the Borrower and its Subsidiaries, which audit was
conducted by such accounting firm in accordance with generally accepted
auditing standards, nothing came to their attention that caused them to
believe that the Borrower was not in compliance with Section 5.02(a),
5.02(b) or 5.04 as at the end of such fiscal year, insofar as such
Sections relate to accounting matters (or if, in the opinion of such
accounting firm, such a Default has occurred and is continuing, a
statement as to the nature thereof), (ii) a schedule in form
satisfactory to the Administrative Agent of the computations used by
such accountants in determining, as of the end of such fiscal year,
compliance with the covenants contained in Section 5.04 and (iii) a
certificate of a senior financial officer of the Borrower (A) stating
that no Default has occurred and is continuing or, if a Default has
occurred and is continuing, a statement as to the nature thereof and
the action that the Borrower has taken and proposes to take with
respect thereto and (B) stating that, except as disclosed in the Form
10, since December 31, 1995, there has been no Material Adverse Change.
(d) ERISA Events. Promptly and in any event within 10 Business
Days after the Borrower knows or has reason to know that any ERISA
Event with respect to the Borrower or any of
<PAGE>
its ERISA Affiliates has occurred, the Borrower will furnish to the
Administrative Agent a statement of a senior financial officer of the
Borrower describing such ERISA Event and the action, if any, that the
Borrower or such ERISA Affiliate has taken and proposes to take with
respect thereto.
(e) Plan Terminations. Promptly and in any event within 15
Business Days after receipt thereof by the Borrower or any of its ERISA
Affiliates, the Borrower will furnish to the Administrative Agent
copies of each notice from the PBGC stating its intention to terminate
any Plan of the Borrower or any of its ERISA Affiliates or to have a
trustee appointed to administer any such Plan.
(f) Multiemployer Plan Notices. Promptly and in any event
within 10 Business Days after receipt thereof by the Borrower or any of
its ERISA Affiliates from the sponsor of a Multiemployer Plan of the
Borrower or any of its ERISA Affiliates, the Borrower will furnish to
the Administrative Agent copies of each notice concerning (i) the
imposition of material withdrawal liability by any such Multiemployer
Plan, (ii) the reorganization or termination, within the meaning of
Title IV of ERISA, of any such Multiemployer Plan or (iii) the amount
of any material liability incurred, or that is reasonably expected to
be incurred, by the Borrower or any of its ERISA Affiliates in
connection with any event described in clause (i) or (ii).
(g) Litigation. Promptly after the commencement thereof, the
Borrower will furnish to the Administrative Agent notice of all
actions, suits, investigations, litigation and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting the Borrower or any of
its Subsidiaries of the type described in Section 4.01(h).
(h) Public Filings. The Borrower shall, promptly upon their
becoming available, deliver to the Administrative Agent and each Lender
copies of all registration statements and regular periodic reports that
the Borrower shall have filed with the Securities and Exchange
Commission (or any governmental agency substituted therefor) or any
national securities exchange.
(i) Shareholder Reports, Etc. The Borrower shall deliver to
the Administrative Agent and each Lender promptly upon the mailing
thereof to the shareholders of the Borrower generally, copies of all
financial statements and proxy statements so mailed.
<PAGE>
(j) Other Information. The Borrower shall furnish to the
Lenders through the Administrative Agent such other information
respecting the business, condition (financial or otherwise),
operations, performance, properties or prospects of the Borrower or any
of its Subsidiaries as the Administrative Agent or any Lender may from
time to time reasonably request.
Section 5.04. Financial Covenants. So long as any principal of or
interest on any Advance or any other amount payable under this Agreement shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender shall
have any Commitment hereunder, the Borrower will:
(a) Total Debt to Total Capital. Maintain at all times a ratio
of Total Debt to Total Capital of not more than 0.30 to 1.00.
(b) Adjusted Interest Coverage Ratio. Maintain the Adjusted
Interest Coverage Ratio at not less than the ratio set forth below for
each Rolling Period ending in the respective fiscal years of the
Borrower set forth below:
Each
Rolling Period
Ending In
Calendar Year Ratio
------------- -----
1996 1.50 to 1.00
1997 and thereafter 4.50 to 1.00
(c) Consolidated Tangible Net Worth. Maintain Consolidated
Tangible Net Worth on each day during each calendar year set forth
below of not less than the amount set forth opposite such calendar
year:
Minimum Consolidated
Calendar Year Tangible Net Worth
------------- ------------------
1996 $825,000,000
1997 $875,000,000
1998 $925,000,000
1999 $975,000,000
2000 and thereafter $1,125,000,000.
<PAGE>
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) the Borrower (i) shall fail to pay when due any principal
of any Advance made to it or (ii) shall fail for three Business Days to
pay when due any interest on any Advance made to it or any other amount
payable by it under any Loan Document; or
(b) any representation or warranty made by the Borrower (or
any of its officers) under or in connection with any Loan Document
shall prove to have been incorrect in any material respect when made;
or
(c) the Borrower shall fail to perform or observe any term,
covenant or agreement contained in clause (a), (b), (c), (d), (e), (f),
(g) or (h) of Section 5.02, or clause (a) or (e) of Section 5.03, or
Section 5.04; or
(d) the Borrower shall fail to perform any other term,
covenant or agreement contained in any Loan Document on its part to be
performed or observed if such failure shall remain unremedied for a
period of 30 days after notice thereof from the Administrative Agent or
any Lender (through the Administrative Agent); or
(e) the Borrower or any of its Material Subsidiaries shall
fail to pay any principal of, premium or interest on or any other
amount payable in respect of any Debt that is outstanding in a
principal or notional amount of at least $10,000,000 in the aggregate
(but excluding Debt outstanding hereunder) of the Borrower or such
Subsidiary (as the case may be), when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise); or any other event shall occur or condition shall
exist under any agreement or instrument relating to any such Debt and
shall continue after the applicable grace period, if any, specified in
such agreement or instrument, if the effect of such event or condition
is to accelerate, or to permit the acceleration of, the maturity of
such Debt or otherwise to cause, or to permit the holder or holders (or
an agent or trustee on its or their behalf) thereof to cause, such Debt
to mature; or any such Debt shall be declared to be due and payable or
required to be prepaid or redeemed (other than by a regularly scheduled
required prepayment or redemption),
<PAGE>
purchased or defeased, or an offer to prepay, redeem, purchase or
defease such Debt shall be required to be made, in each case prior to
the stated maturity thereof; or
(f) the Borrower or any of its Material Subsidiaries shall
generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding
shall be instituted by or against the Borrower or any of its Material
Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief
of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it) that is
being diligently contested by it in good faith, either such proceeding
shall remain undismissed or unstayed for a period of 60 days or any of
the actions sought in such proceeding (including, without limitation,
the entry of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, it or any
substantial part of its property) shall occur; or the Borrower or any
of its Material Subsidiaries shall take any corporate action to
authorize any of the actions set forth above in this subsection (f); or
(g) any judgment or order for the payment of money in excess
of $10,000,000 shall be rendered against the Borrower or any of its
Material Subsidiaries and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order or (ii)
there shall be any period of 30 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect, unless such judgment or order shall
have been vacated, satisfied or dismissed or bonded pending appeal; or
(h) during any period of 25 consecutive calendar months, a
majority of the Board of Directors of the Borrower shall no longer be
composed of individuals (i) who were members of said Board on the first
day of such period, (ii) whose election or nomination to said Board was
approved by individuals referred to in clause (i) above constituting at
the time of such election or nomination at least a majority of said
Board or (iii) whose election or nomination to said Board was approved
by individuals referred to in
<PAGE>
clauses (i) and (ii) above constituting at the time of such election or
nomination at least a majority of said Board; or
(i) any ERISA Event shall have occurred with respect to a Plan
of the Borrower or any of its ERISA Affiliates and the amount
(determined as of the date of occurrence of such ERISA Event) of the
Insufficiency of such Plan and the Insufficiency of any and all other
Plans of the Borrower and its ERISA Affiliates with respect to which an
ERISA Event shall have occurred and then exist (or the liability of the
Borrower and its ERISA Affiliates related to such ERISA Event) could
reasonably be expected to have a Material Adverse Effect; provided that
with respect to any Multiple Employer Plan, such Insufficiency shall
include only the portion thereof attributable to the Borrower or its
ERISA Affiliates; or
(j) the Borrower or any of its ERISA Affiliates shall have
been notified by the sponsor of a Multiemployer Plan of the Borrower or
any of its ERISA Affiliates that it has incurred withdrawal liability
to such Multiemployer Plan in an amount that, when aggregated with all
other amounts required to be paid to Multiemployer Plans by the
Borrower and its ERISA Affiliates as withdrawal liability (determined
as of the date of such notification), could reasonably be expected to
have a Material Adverse Effect; or
(k) the Borrower or any of its ERISA Affiliates shall have
been notified by the sponsor of a Multiemployer Plan of the Borrower or
any of its ERISA Affiliates that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV
of ERISA, and as a result of such reorganization or termination the
aggregate annual contributions of the Borrower and its ERISA Affiliates
to all Multiemployer Plans that are then in reorganization or being
terminated have been or will be increased over the amounts contributed
to such Multiemployer Plans for the plan years of such Multiemployer
Plans immediately preceding the plan year in which such reorganization
or termination occurs by an amount that could reasonably be expected to
have a Material Adverse Effect; or
(l) substantially all of the Delayed Spin-Off Properties shall
not be transferred to or purchased by the Borrower and its Subsidiaries
pursuant to the Spin-Off Documents on or prior to September 30, 1996 if
the effect thereof is such that less than 95% of the total Spin-Off
Properties (including those initially transferred or purchased) shall
not have been so transferred or purchased on or prior to such date; or
<PAGE>
(m) 3M or any of its Subsidiaries shall default in the
performance of any of their respective obligations under the Spin-Off
Documents and such default (either individually or in the aggregate
with all such defaults at the time outstanding) could reasonably be
expected to have a Material Adverse Effect;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the obligation of each Lender to make Revolving Credit Advances and of
each Issuing Bank to issue Letters of Credit to be terminated, whereupon the
same shall forthwith terminate and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the
Advances and the Notes, all interest thereon and all other amounts payable under
this Agreement and the other Loan Documents to be forthwith due and payable,
whereupon the Advances and the Notes, all such interest and all such amounts
shall become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Borrower; provided that in the event of an actual or deemed entry of an
order for relief with respect to the Borrower under the Federal Bankruptcy Code,
(x) the obligation of each Lender to make Revolving Credit Advances and of any
Issuing Bank to issue Letters of Credit shall automatically be terminated and
(y) the Advances and the Notes, all such interest and all such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower.
Section 6.02. Actions in Respect of the Letters of Credit Upon Default.
(a) If any Event of Default shall have occurred and be
continuing, the Administrative Agent may, irrespective of whether it is
taking any of the actions described in Section 6.01 or otherwise, make
demand upon the Borrower to, and forthwith upon such demand the
Borrower will, pay to the Administrative Agent on behalf of the Lenders
in same day funds at the Administrative Agent's office designated in
such demand, for deposit in the L/C Cash Collateral Account, an amount
equal to the aggregate Available Amount of all Letters of Credit then
outstanding, which funds shall be retained by the Administrative Agent
in the L/C Collateral Account (as collateral security for the Letter of
Credit Liabilities) until such time as the Letters of Credit shall have
been terminated and all of such Letter of Credit Liabilities paid in
full.
If at any time the Administrative Agent determines that any
funds held in the L/C Cash Collateral Account are subject to
<PAGE>
any right or claim of any Person other than the Administrative Agent
and the Lenders or that the total amount of such funds is less than the
aggregate Available Amount of all Letters of Credit, the Borrower will,
forthwith upon demand by the Administrative Agent, pay to the
Administrative Agent, as additional funds to be deposited and held in
the L/C Cash Collateral Account, an amount equal to the excess of (1)
such aggregate Available Amount over (2) the total amount of funds, if
any, then held in such L/C Cash Collateral Account that the
Administrative Agent determines to be free and clear of any such right
and claim.
(b) The Borrower hereby authorizes the Administrative Agent to
open at any time upon the occurrence and during the continuance of an
Event of Default a non-interest bearing account with the Administrative
Agent at its address designated in Section 8.02 in the name of the
Borrower but under the sole control and dominion of the Administrative
Agent (the "L/C Cash Collateral Account"), and hereby pledges and
assigns and grants to the Administrative Agent on behalf of the Lenders
a security interest in the following collateral (the "L/C Cash
Collateral Account Collateral"):
(i) the L/C Cash Collateral Account, all funds held
therein and all certificates and instruments, if any, from
time to time representing or evidencing the investment of
funds held therein,
(ii) all notes, certificates of deposit, deposit
accounts, checks and other instruments from time to time
delivered to or otherwise possessed by the Administrative
Agent for or on behalf of the Borrower in substitution for or
in addition to any or all of the L/C Cash Collateral Account
Collateral,
(iii) all interest, dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or
all of the L/C Cash Collateral Account Collateral, and
(iv) all proceeds of any and all of the foregoing.
(c) Amounts on deposit in the L/C Cash Collateral Account may
be invested and reinvested in such Permitted Investments as the
Administrative Agent may select.
(d) Upon such time as (i) the aggregate Available Amount of
all Letters of Credit is reduced to zero and such Letters of Credit are
expired or terminated by their terms and all amounts payable in respect
thereof, including but not limited to principal, interest, commissions,
fees and expenses, have been
<PAGE>
paid in full in cash, and (ii) no Event of Default has occurred and is
continuing under this Agreement, the Administrative Agent will pay and
release to the Borrower or at its order the balance remaining in the
L/C Cash Collateral Account after the application, if any, by the
Administrative Agent of funds in the L/C Cash Collateral Account to the
payment of amounts described in clause (i) of this subsection (d).
(e) The Administrative Agent may, without notice to the
Borrower except as required by law and at any time or from time to
time, charge, set-off and otherwise apply all or any part of the L/C
Cash Collateral Account against the Letter of Credit Liabilities or any
part thereof. The Administrative Agent agrees to notify the Borrower
promptly after any such set-off and application, provided that the
failure of the Administrative Agent to give such notice shall not
affect the validity of such set-off and application. Any cash held by
the Administrative Agent as L/C Cash Collateral Account Collateral and
all cash proceeds received by the Administrative Agent in respect of
any sale of, collection from, or other realization upon all or any part
of the L/C Cash Collateral Account Collateral may, in the discretion of
the Administrative Agent, be held by the Administrative Agent as
collateral for, and/or then or at any time thereafter be applied in
whole or in part by the Administrative Agent against, all or any part
of the Letter of Credit Liabilities in such order as the Administrative
Agent shall elect. The Administrative Agent may also exercise in
respect of the L/C Cash Collateral Account Collateral, in addition to
other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the
Uniform Commercial Code in effect in the State of New York at that time
(whether or not said Code applies to the affected L/C Cash Collateral
Account Collateral).
(f) Any surplus of such cash or cash proceeds held by the
Administrative Agent and remaining after payment in full of all the
Letter of Credit Liabilities shall be paid over to the Borrower or to
whomsoever may be lawfully entitled to receive such surplus. Upon the
permanent reduction from time to time of the aggregate Available Amount
of all Letters of Credit in accordance with the terms thereof, the
Administrative Agent shall release to the Borrower amounts from the L/C
Cash Collateral Account in an amount equal to each such permanent
reduction; provided that the Administrative Agent shall not be
obligated to reduce the funds or other L/C Cash Collateral Account
Collateral then held in the L/C Cash Collateral Account below that
level that the Administrative Agent reasonably determines is required
to be maintained after taking into consideration any rights or claims
of any Persons other than the Administrative Agent.
<PAGE>
ARTICLE VII
THE ADMINISTRATIVE AGENT
Section 7.01. Authorization and Action. Each Lender, each Swing Line
Lender and each Issuing Bank hereby appoints and authorizes the Administrative
Agent to take such action as agent on its behalf and to exercise such powers and
discretion under this Agreement and the other Loan Documents as are delegated to
the Administrative Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto. As to any matters not expressly
provided for by the Loan Documents, including, without limitation, enforcement
or collection of the Notes, the Administrative Agent shall not be required to
exercise any discretion or take any action, and shall not be required to act or
to refrain from acting (and shall be fully protected in so acting or refraining
from acting) except upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Lenders, all Swing Line Lenders and all
Issuing Banks and all holders of the Notes; provided that the Administrative
Agent shall not be required to take any action that exposes it to personal
liability or that is contrary to this Agreement or applicable law. The
Administrative Agent agrees to give to each Lender prompt notice of each notice
given to it by the Borrower pursuant to the terms of this Agreement.
Section 7.02. Administrative Agent's Reliance, Etc. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with the Loan Documents, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Administrative Agent (i) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives and accepts an Assignment
and Acceptance entered into by the Lender that is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07;
(ii) may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by them in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to any Issuing Bank, any Swing Line Lender or any
Lender and shall not be responsible to any of them for any statements,
warranties or representations made in or in connection with the Loan Documents;
(iv) shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of any Loan Document on
the part of the Borrower or to inspect the property (including the books and
records) of the Borrower; (v) shall not be responsible to any
<PAGE>
Issuing Bank, any Swing Line Lender or any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of any
Loan Document or any other instrument or document furnished pursuant hereto; and
(vi) shall incur no liability under or in respect of any Loan Document by acting
upon any notice, consent, certificate or other instrument or writing (which may
be by telegram, telecopy, cable or telex) believed by it to be genuine and
signed or sent by the proper party or parties.
Section 7.03. CUSA and Affiliates. With respect to its Commitments, the
Advances made by it and the Notes issued to it, CUSA shall have the same rights
and powers under the Loan Documents as any other Lender and may exercise the
same as though it were not the Administrative Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include CUSA in its
individual capacity. CUSA and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures for, accept investment banking
engagements from and generally engage in any kind of business with, the
Borrower, any of its Subsidiaries, any of its Affiliates and any Person who may
do business with or own securities of the Borrower or any such Subsidiary or
Affiliate, all as if CUSA were not the Administrative Agent and without any duty
to account therefor to the Lenders, any Swing Line Lender or any Issuing Bank.
Section 7.04. Lender Credit Decision. Each Lender, each Swing Line
Lender and each Issuing Bank acknowledges that it has, independently and without
reliance upon the Administrative Agent, any Issuing Bank, any Swing Line Lender
or any other Lender and based on the financial statements referred to in Section
4.01 and such other documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each Lender,
each Swing Line Lender and each Issuing Bank also acknowledges that it will,
independently and without reliance upon the Administrative Agent, any Issuing
Bank, any Swing Line Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.
Section 7.05. Indemnification. The Lenders agree to indemnify the
Administrative Agent (to the extent not promptly reimbursed by the Borrower),
ratably according to the principal amounts of the Notes then held by each of
them (or if no Advances are at the time outstanding, ratably according to the
amounts of their Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against any of them in any way relating to or
arising out of the
<PAGE>
Loan Documents or any action taken or omitted by any of them under the Loan
Documents; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the gross negligence or willful
misconduct of the Administrative Agent. Without limitation of the foregoing,
each Lender agrees to reimburse the Administrative Agent promptly upon demand
for its ratable share of any costs and expenses payable by the Borrower under
Section 8.04 of this Agreement to the extent that the Administrative Agent is
not promptly reimbursed for such costs and expenses by the Borrower.
Section 7.06. Successor Administrative Agent. The Administrative Agent
may resign at any time by giving written notice thereof to the Lenders and the
Borrower and may be removed at any time with or without cause by the Required
Lenders. Upon any such resignation or removal, the Required Lenders shall have
the right to appoint (subject, so long as no Default has occurred and is
continuing, to the consent of the Borrower, which consent shall not be
unreasonably withheld) a successor Administrative Agent. If no successor
Administrative Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the Required Lenders'
removal of the Administrative Agent, as the case may be, then the retiring
Administrative Agent may, on behalf of the Issuing Banks, the Swing Line Lenders
and the Lenders, appoint (subject, so long as no Default has occurred and is
continuing, to the consent of the Borrower, which consent shall not be
unreasonably withheld) a successor Administrative Agent, which shall be an
Initial Lender or a commercial bank organized under the laws of the United
States or of any State thereof and having a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent such successor
Administrative Agent shall succeed to and become vested with all the rights,
powers, discretion, privileges and duties of the retiring Administrative Agent,
as the case may be, and such retiring Administrative Agent shall be discharged
from its duties and obligations under the Loan Documents. After any retiring
Administrative Agent's resignation or removal hereunder as Administrative Agent,
the provisions of this Article VII shall inure to the benefit of the
Administrative Agent as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement.
<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Amendments, Consents, Etc. No amendment or waiver of any
provision of this Agreement or the other Loan Documents, nor any consent to any
departure by the Borrower from any provision of this Agreement or the other Loan
Documents, shall in any event be effective unless the same shall be in writing
and signed by the Required Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided that (i) no amendment, waiver or consent shall, unless in
writing and signed by all the Lenders, do any of the following: (1) waive any of
the conditions specified in Section 3.01, (2) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Advances, or the
number or percentage of Lenders, that shall be required for the Lenders or any
of them to take any action hereunder, (3) amend this Section 8.01, (4) reduce
the principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, (5) postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder or amend
Section 2.05 or 2.07, and (ii) no amendment, waiver or consent shall, unless in
writing and signed by the Required Lenders and each Lender that would be
adversely affected by such amendment, waiver or consent, increase the Commitment
of such Lender or subject such Lender to any additional obligations; and
provided, further, that no amendment, waiver or consent shall, unless in writing
and (x) signed by the Administrative Agent in addition to the Lenders required
above to take such action, affect the rights or duties of the Administrative
Agent under this Agreement, any Note or any other Loan Document, (y) signed by
each Issuing Bank in addition to the Lenders required to take such action, amend
Section 2.09, 2.15 or 3.02, increase the Letter of Credit Sublimit or otherwise
affect the rights or obligations of any Issuing Bank under this Agreement and
(z) signed by each Swing Line Lender in addition to the Lenders required to take
such action, amend Section 2.02, 2.04 or 3.02, increase the Swing Line Facility
or otherwise affect the rights or obligations of any Swing Line Lender under
this Agreement.
Section 8.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopy communication)
and mailed, telecopied or delivered:
(a) if to the Borrower, at Imation Corp., 1 Imation Place,
Oakdale, Minnesota 55128, Attention: Deborah Weiss, telephone number
(612) 733-8556, telecopier number (612)
<PAGE>
733-3273, with a copy to Legal Department, telephone number (612)
733-1250, telecopier number (612) 737-2553;
(b) if to any Initial Lender, at its Domestic Lending Office
specified opposite its name on Schedule 2.01;
(c) if to any other Lender, at its Domestic Lending Office
specified in the Assignment and Acceptance pursuant to which it became
a Lender;
(d) if to any Issuing Bank, at its address beneath its
signature hereto;
(e) if to any Swing Line Lender, at its address beneath its
signature hereto; and
(f) if to the Administrative Agent, at its address at 1 Court
Square, Long Island City, New York 11120, Attention: Lei Tang (or her
successors), telephone number (718) 248-4490, telecopier number (718)
248-4844;
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and communications
shall, when mailed or telecopied, be effective when deposited in the mails or
transmitted by telecopier, respectively, except that notices and communications
to the Administrative Agent pursuant to Article II or III shall not be effective
until received by the Administrative Agent.
Section 8.03. No Waiver; Remedies. No failure on the part of any
Lender, any Swing Line Lender Issuing Bank or the Administrative Agent to
exercise, and no delay in exercising, any right hereunder or under any Note
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
The Borrower irrevocably waives, to the fullest extent permitted by
applicable law, any claim that any action or proceeding commenced by the
Administrative Agent, any Issuing Bank, any Swing Line Lender or any Lender
relating in any way to this Agreement should be dismissed or stayed by reason,
or pending the resolution, of any action or proceeding commenced by the Borrower
relating in any way to this Agreement whether or not commenced earlier. To the
fullest extent permitted by applicable law, the Borrower shall take all measures
necessary for any such action or proceeding commenced by the Administrative
Agent, any Issuing Bank, any Swing Line Lender or any Lender to proceed to
<PAGE>
judgment prior to the entry of judgment in any such action or proceeding
commenced by the Borrower.
Section 8.04. Costs, Expenses and Indemnification.
(a) The Borrower agrees to pay on demand (i) all costs and
expenses of the Administrative Agent in connection with the
preparation, execution, delivery, administration, modification and
amendment of the Loan Documents including, without limitation, (A) all
due diligence, syndication (including printing, distribution and bank
meetings), transportation, computer, duplication, appraisal, insurance,
consultant, search, filing and recording fees and expenses, ongoing
audit expenses and all other reasonable out-of-pocket expenses incurred
by the Administrative Agent (including the reasonable fees and expenses
of Milbank, Tweed, Hadley & McCloy, special counsel to the
Administrative Agent) whether or not any of the transactions
contemplated by this Agreement are consummated, (B) the reasonable fees
and expenses of counsel for the Administrative Agent with respect
thereto, with respect to advising the Administrative Agent as to its
rights and responsibilities, or the perfection, protection or
preservation of rights or interests, under the Loan Documents, and (C)
with respect to negotiations with the Borrower or with other creditors
of the Borrower or any of its Subsidiaries arising out of any Default
or any events or circumstances that may reasonably be expected to give
rise to a Default and with respect to presenting claims in or otherwise
participating in or monitoring any bankruptcy, insolvency or other
similar proceeding involving creditors' rights generally and any
proceeding ancillary thereto) and (ii) all costs and expenses of the
Administrative Agent, the Issuing Banks, Swing Line Lenders and the
Lenders in connection with the enforcement of the Loan Documents,
whether in any action, suit or litigation, any bankruptcy, insolvency
or other similar proceeding affecting creditors' rights generally or
otherwise (including, without limitation, the reasonable fees and
expenses of counsel for the Administrative Agent, each Issuing Bank,
each Swing Line Lender and each Lender with respect thereto).
(b) The Borrower agrees to indemnify and hold harmless the
Administrative Agent, each Issuing Bank, each Swing Line Lender and
each Lender and each of their Affiliates and their officers, directors,
employees, agents, advisors and representatives (each, an "Indemnified
Party") from and against any and all claims, damages, losses,
liabilities and expenses (including, without limitation, reasonable
fees and expenses of counsel) that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of or
in connection with or by reason of, or in connection with the
preparation for a defense of, any investigation, litigation or
proceeding arising out of, related to or in connection with the Loan
Documents, the Spin-Off or any part thereof or any of the other
transactions contemplated hereby or thereby, in each case whether or
not such investigation, litigation or
<PAGE>
proceeding is brought by the Borrower, its directors, shareholders or
creditors or an Indemnified Party or any Indemnified Party is otherwise
a party thereto and whether or not the Spin-Off or the other
transactions contemplated hereby or thereby are consummated, except to
the extent such claim, damage, loss, liability or expense is found in a
final, non-appealable judgment by a court of competent jurisdiction to
have resulted from such Indemnified Party's gross negligence or willful
misconduct. The Borrower also agrees not to assert any claim against
the Administrative Agent, any Issuing Bank, any Swing Line Lender, any
Lender, any of their Affiliates or any of their respective directors,
officers, employees, attorneys, agents or representatives on any theory
of liability, for special, indirect, consequential or punitive damages
arising out of or otherwise relating to the Spin-Off or any part
thereof or the other transactions contemplated herein or in any other
Loan Document or the actual or proposed use of the proceeds of the
Advances or Letters of Credit. For purposes of this Section 8.04(b),
the term "non-appealable" includes any judgment as to which all appeals
have been taken or as to which the time for taking an appeal shall have
expired.
(c) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance is made by the Borrower to or for the account
of a Lender other than on the last day of the Interest Period for such
Advance, as a result of a payment or Conversion pursuant to Section
2.03, 2.05, 2.07, 2.10(a), 2.10(b)(i) or 2.11(d) or as the result of
acceleration of the maturity of the Notes pursuant to Section 6.01 or
for any other reason, the Borrower shall, upon demand by such Lender
(with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender any amounts
required to compensate such Lender for any additional losses, costs or
expenses that it may incur as a result of such payment, including,
without limitation, any loss (excluding loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by any Lender to fund or maintain
such Advance.
(d) If the Borrower fails to pay when due any costs, expenses
or other amounts payable by it under any Loan Document, including,
without limitation, reasonable fees and expenses of counsel and
indemnities, such amount may be paid on behalf of the Borrower by the
Administrative Agent or any Lender, in its sole discretion.
<PAGE>
Section 8.05. Right of Setoff. Upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and
otherwise apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender to or for the credit or the account of the Borrower against any
and all of the Obligations of the Borrower now or hereafter existing under this
Agreement and the Note held by such Lender, irrespective of whether such Lender
shall have made any demand under this Agreement or such Note and although such
obligations may be unmatured. Each Lender agrees promptly to notify the Borrower
after any such setoff and application; provided that the failure to give such
notice shall not affect the validity of such setoff and application. The rights
of each Lender under this Section are in addition to other rights and remedies
(including, without limitation, other rights of setoff) that such Lender may
have.
Section 8.06. Governing Law; Submission to Jurisdiction. This Agreement
and the Notes shall be governed by, and construed in accordance with, the law of
the State of New York. The Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York state court sitting in New York County for the
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. The Borrower irrevocably waives, to the
fullest extent permitted by applicable law, any objection that 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.
Section 8.07. Assignments and Participations.
(a) Each Lender may assign to one or more banks or other
entities all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its
Commitments, the Advances owing to it and the Note or Notes held by
it); provided that:
(i) except in the case of an assignment to a Person
that, immediately prior to such assignment, was a Lender or an
affiliate of a Lender or an assignment of all of a Lender's
rights and obligations under this Agreement, the amount of the
Commitments of the assigning Lender being
<PAGE>
assigned pursuant to each such assignment (determined as of
the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than the lesser of (x)
such Lender's Commitments hereunder and (y) $10,000,000 or an
integral multiple of $1,000,000 in excess thereof (except as
otherwise agreed by the Borrower and the Administrative
Agent),
(ii) except in the case of an assignment to a Person
that, immediately prior to such assignment, was a Lender or an
affiliate of a Lender, each such assignment shall be made only
upon the prior written approval of the Borrower, the
Administrative Agent, each Issuing Bank and each Swing Line
Lender, such approval not to be unreasonably withheld or
delayed,
(iii) each such assignment shall be to an Eligible
Assignee,
(iv) each such assignment by a Lender of its
Advances, Commitment or Note shall be made in such manner so
that the same portion of its Revolving Credit Advances,
Commitment and Note is assigned to the respective assignee,
and
(v) the parties to each such assignment shall execute
and deliver to the Administrative Agent, for its acceptance
and recording in the Register, an Assignment and Acceptance,
together with any Note or Notes subject to such assignment and
a processing and recordation fee of $3,000.
Upon such execution, delivery, acceptance and recording, from and after
the effective date specified in such Assignment and Acceptance, (x) the
assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to
such Assignment and Acceptance, have the rights and obligations of a
Lender hereunder and (y) the Lender assignor thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and
be released from its obligations under this Agreement (and, in the case
of an Assignment and Acceptance covering all or the remaining portion
of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to
and agree with each other and the other parties hereto as follows: (i)
other than as provided in such Assignment and Acceptance, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in
<PAGE>
or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition
of the Borrower or the performance or observance by the Borrower of any
of its obligations under this Agreement or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms that
it has received a copy of this Agreement, together with copies of the
financial statements referred to in Section 4.01 and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance
upon the Administrative Agent, such assigning Lender, any Issuing Bank,
any Swing Line Lender or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) such assignee confirms that it is an Eligible Assignee;
(vi) such assignee appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers and
discretion under this Agreement as are delegated to the Administrative
Agent by the terms hereof, together with such powers and discretion as
are reasonably incidental thereto; (vii) such assignee agrees to comply
with its obligations under Section 2.13(e) and (viii) such assignee
agrees that it will perform in accordance with their terms all of the
obligations that by the terms of this Agreement are required to be
performed by it as a Lender.
(c) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at its address referred to in
Section 8.02 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Commitments of, and principal amount
of the Advances owing to, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the
Administrative Agent and the Lenders shall treat each Person whose name
is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. No assignment shall be effective until it is recorded
in the Register pursuant to this Section 8.07(c). The Register shall be
available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee, together with any Note or Notes
subject to such assignment, the Administrative
<PAGE>
Agent shall, if such Assignment and Acceptance has been completed and
is in substantially the form of Exhibit E hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the
Borrower. Within five Business Days after its receipt of such notice,
the Borrower, at its own expense, shall execute and deliver to the
Administrative Agent in exchange for the surrendered Note or Notes a
new Note or Notes to the order of such assignee in an amount equal to
the Commitment assumed by it pursuant to such Assignment and Acceptance
and, if the assigning Lender has retained a Commitment, a new Note or
Notes to the order of the assigning Lender in an amount equal to the
portion so retained by it hereunder. Such new Note or Notes shall be in
an aggregate principal amount equal to the aggregate principal amount
of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially
the form of Exhibit A.
(e) Each Lender may sell participations in or to all or a
portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitments, the Advances
owing to it and the Note or Notes held by it); provided that (i) such
Lender's obligations under this Agreement (including, without
limitation, its Commitments) shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) such Lender shall remain the
holder of any such Note for all purposes of this Agreement, (iv) the
Borrower, the Administrative Agent, the Issuing Banks, the Swing Line
Lenders and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and (v) no participant under any such
participation shall have any right to approve any amendment or waiver
of any provision of any Loan Document, or any consent to any departure
by the Borrower therefrom, except to the extent that such amendment,
waiver or consent would reduce the principal of, or interest on, the
Notes or any fees or other amounts payable hereunder, in each case to
the extent subject to such participation, postpone any date fixed for
any payment of principal of, or interest on, the Notes or any fees or
other amounts payable hereunder, in each case to the extent subject to
such participation.
(f) Any Issuing Bank may (subject to the prior written consent
of the Borrower, such consent not to be unreasonably withheld) assign
all or any portion of its rights and obligations under this Agreement
to one or more successor Issuing Banks that is a commercial bank
organized under the laws of the United States, or any state thereof,
and having total assets in excess of $1,000,000,000 and, upon the
acceptance of such assignment, the respective successor Issuing Banks
shall succeed to such
<PAGE>
portion of such rights and obligations and such assigning Issuing Bank
shall be discharged from its duties and obligations under this
Agreement to such extent, including, without limitation, such portion
of its Letter of Credit Commitment.
(g) Any Issuing Bank and any Lender may, in connection with
any assignment or participation or proposed assignment or participation
pursuant to this Section 8.07, disclose to the assignee or participant
or proposed assignee or participant, any information relating to the
Borrower furnished to such Lender by or on behalf of the Borrower;
provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree in writing
to preserve the confidentiality of any Confidential Information
received by it from such Issuing Bank or Lender in accordance with the
provisions of Section 8.10.
(h) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all
or any portion of its rights under this Agreement (including, without
limitation, the Advances owing to it and the Note or Notes held by it)
in favor of any Federal Reserve Bank in accordance with Regulation A.
(i) Anything in this Section 8.07 to the contrary
notwithstanding, neither the Borrower nor any of its Subsidiaries or
Affiliates may acquire (whether by assignment, participation or
otherwise), and no Lender, Swing Line Lender or Issuing Bank shall
assign or participate to the Borrower or any of its Subsidiaries or
Affiliates, any interest in any Commitment, Advance or other amount
owing hereunder without the prior consent of each Lender.
Section 8.08. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.
Section 8.09. No Liability of the Issuing Banks. The Borrower assumes
all risks of the acts or omissions of any beneficiary or transferee of any
Letter of Credit with respect to its use of such Letter of Credit. Neither the
relevant Issuing Bank nor any of its officers or directors shall be liable or
responsible for: (a) the use that may be made of any Letter of Credit or any
acts or omissions of any beneficiary or transferee in connection therewith; (b)
the validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if
<PAGE>
such documents should prove to be in any or all respects invalid, insufficient,
fraudulent or forged; (c) payment by such Issuing Bank against presentation of
documents that do not comply with the terms of a Letter of Credit, including
failure of any documents to bear any reference or adequate reference to the
Letter of Credit; or (d) any other circumstances whatsoever in making or failing
to make payment under any Letter of Credit, except that the Borrower shall have
a claim against such Issuing Bank, and such Issuing Bank shall be liable to the
Borrower, to the extent of any direct, but not consequential, damages suffered
by the Borrower that the Borrower proves were caused by (i) such Issuing Bank's
willful misconduct or gross negligence in determining whether documents
presented under any Letter of Credit comply with the terms of the Letter of
Credit or (ii) such Issuing Bank's willful failure to make lawful payment under
a Letter of Credit after the presentation to it of a draft and certificates
strictly complying with the terms and conditions of the Letter of Credit. In
furtherance and not in limitation of the foregoing, such Issuing Bank may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary.
Section 8.10. Confidentiality.
(a) The Borrower acknowledges that from time to time financial
advisory, investment banking and other services may be offered or
provided to the Borrower or one or more of its Subsidiaries (in
connection with this Agreement or otherwise) by any Lender or by one or
more subsidiaries or affiliates of such Lender and the Borrower hereby
authorizes each Lender to share any information delivered to such
Lender by the Borrower and its Subsidiaries pursuant to this Agreement,
or in connection with the decision of such Lender to enter into this
Agreement, to any such subsidiary or affiliate, it being understood
that any such subsidiary or affiliate receiving such information shall
be bound by the provisions of paragraph (b) below as if it were a
Lender hereunder. Such authorization shall survive the repayment of the
Advances and Letter of Credit Liabilities and the termination of the
Commitments.
(b) Each Lender, each Issuing Bank, each Swing Line Lender and
the Administrative Agent (each, a "Recipient") agrees (on behalf of
itself and each of its officers, directors, employees, accountants,
attorneys and other advisors (each, a "Representative") to maintain the
confidentiality of the Confidential Information in accordance with such
Recipient's customary procedures for handling confidential information
and in accordance with safe and sound banking practices, and in any
event using the same degree of care as such Recipient uses to maintain
the confidentiality of its own information of equivalent
<PAGE>
importance. This Section 8.10(b) shall not apply to Confidential
Information which (i) becomes generally available to the public other
than as a result of a disclosure by a Recipient or its Representatives
or (ii) is provided to Recipient or a Representative by a third party
(unless the Recipient has reason to believe that such information was
obtained by such third party illegally or in violation of a
confidentiality agreement with the Borrower), and nothing herein shall
limit the disclosure of any Confidential Information (1) to the extent
required by statute, rule, regulation or judicial process, or in
accordance with any order, ruling or regulatory practice of any bank
regulatory agency (including, without limitation, the Board of
Governors of the Federal Reserve System) having or claiming
jurisdiction of such Recipient or to bank examiners, (2) to Recipients
counsel or to counsel for any Representative, (3) to Recipient's
auditors or accountants, (4) to any other Lender or to any potential
assignee or participant (and their respective counsel), or (5) in
connection with any litigation to which such Recipient or any one or
more of said Lenders or potential assignees or participants is a party;
provided that in the case of clauses (2), (3) and (4) above the Person
or Persons to whom such Recipient discloses the Confidential
Information agrees to maintain the confidentiality of the Confidential
Information substantially on the terms set forth herein. Each
Recipient's obligations hereunder shall terminate on the date three
years after the Commitment Termination Date.
The obligations of each Lender under this Section 8.10 shall
supersede and replace the obligations of such Lender under the
confidentiality letter in respect of this financing signed and
delivered by such Lender to the Borrower prior to the date hereof.
SECTION 8.11. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
ADMINISTRATIVE AGENT, THE LENDERS, THE SWING LINE LENDERS AND THE ISSUING BANKS
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES, THE LETTERS OF CREDIT OR
THE ACTIONS OF THE ADMINISTRATIVE AGENT, ANY LENDER, ANY SWING LINE LENDER OR
ANY ISSUING BANK IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.
Section 8.12. Survival. The obligations of the Borrower under Sections
2.11, 2.13, 2.15(d) and 8.04, and the obligations of the Lenders under Section
7.05, shall survive the repayment of the Advances and the termination of the
Commitments. In addition, each representation and warranty made, or deemed to be
made by a notice of any extension of credit (whether by means of an Advance or a
Letter of Credit), herein or pursuant hereto shall survive the making of such
representation and warranty, and
<PAGE>
no Lender, Swing Line Lender or Issuing Bank shall be deemed to have waived, by
reason of making any extension of credit hereunder (whether by means of an
Advance or a Letter of Credit), any Default that may arise by reason of such
representation or warranty proving to have been false or misleading,
notwithstanding that such Lender, such Issuing Bank, such Swing Line Lender or
the Administrative Agent may have had notice or knowledge or reason to believe
that such representation or warranty was false or misleading at the time such
extension of credit was made.
Section 8.13. Captions. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
Section 8.14. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, provided that the Borrower may not assign any
of its rights or obligations hereunder or under the other Loan Documents without
the prior consent of all of the Lenders, the Issuing Banks, the Swing Line
Lenders and the Administrative Agent.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE BORROWER
IMATION CORP.
By /s/ Jill D. Burchill
Name: Jill D. Burchill
Title: Chief Financial Officer
THE ADMINISTRATIVE AGENT
CITICORP USA, INC.
By /s/ Alan J. Berenbaum
Name: Alan J. Berenbaum
Title: Attorney-in-Fact
THE ISSUING BANKS
FIRST BANK NATIONAL ASSOCIATION
By /s/ Mark R. Olmon
Name: Mark R. Olmom
Title: Vice President
Address for Notices:
First Bank National Association
First Bank Place
601 2nd Avenue South
Minneapolis, MN 55402-4302
Attention: Mark Olmon
Fax: (612) 973-0825
<PAGE>
THE SWING LINE LENDERS
CITICORP USA, INC.
By /s/ Alan J. Berenbaum
Name: Alan J. Berenbaum
Title: Attorney-in-Fact
Address for Notices:
Citicorp USA, Inc.
399 Park Avenue
New York, NY 10043
Attention: Heidi McKibben
Fax: (212) 832-9213
with a copy to:
Citibank, N.A.
200 South Wacker Drive
Chicago, IL 60606
Attention: Shafique Janmohamed
Fax: (312) 993-1050
FIRST BANK NATIONAL ASSOCIATION
By /s/ Mark R. Olmon
Name: Mark R. Olmon
Title: Vice President
Address for Notices:
First Bank National Association
First Bank Place
601 2nd Avenue South
Minneapolis, MN 55402-4302
Attention: Mark Olmon
Fax: (612) 973-0825
<PAGE>
THE LENDERS
CITICORP USA, INC.
By /s/ Alan J. Berenbaum
Name: Alan J. Berenbaum
Title: Attorney-in-Fact
BANCA COMMERCIALE ITALIANA-CHICAGO
BRANCH
By /s/ Julian M. Teodori
Name: Julian M. Teodori
Title: Senior Vice President &
Branch Manager
By /s/ Diane Zeller Scherer
Name: Diane Zeller Scherer
Title: Assistant Vice President
FIRST BANK NATIONAL ASSOCIATION
By /s/ Mark R. Olmon
Name: Mark R. Olmon
Title: Vice President
THE SUMITOMO BANK, LIMITED, CHICAGO
BRANCH
By /s/ Hiroyuki Iwami
Name: Hiroyuki Iwami
Title: Joint General Manager
<PAGE>
BANK OF MONTREAL
By /s/ Michael D. Pincus
Name: Michael D. Pincus
Title: Managing Director
THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH
By /s/ Jeffrey R. Arnold
Name: Jeffrey R. Arnold
Title: Vice President
DEUTSCHE BANK, AG-CHICAGO BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By /s/ Krys Szremski
Name: Krys Szremski
Title: Vice President
By /s/ Hans Roderich
Name: Hans Roderich
Title: Associate
MELLON BANK, N.A.
By /s/ Jeffrey M. Anderson
Name: Jeffery M. Anderson
Title: Vice President
THE SAKURA BANK, LIMITED-CHICAGO
BRANCH
By /s/ Shunji Sakurai
Name: Shunji Sakurai
Title: Joint General Manager
<PAGE>
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By /s/ J. M. Malley
Name: J. M. Malley
Title: Vice President
By /s/ C. D. Rockey
Name: C. D. Rockey
Title: Associate
THE YASUDA TRUST & BANKING COMPANY,
LIMITED, CHICAGO BRANCH
By /s/ Koichiro Inoue
Name: Koichiro Inoue
Title: Joint General Manager
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION
By /s/ Raju N. Patel
Name: Raju N. Patel
Title: Vice President
THE FUJI BANK, LIMITED
By /s/ Hidekazu Seo
Name: Hidekazu Seo
Title: Joint General Manager
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD. CHICAGO BRANCH
By /s/ Richard E. Stahl
Name: Richard E. Stahl
Title: Senior Vice President &
Joint General Manager
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
By /s/ Molly S. Van Metre
Name: Molly S. Van Metre
Title: Vice President
SOCIETE GENERALE
By /s/ Steven R. Fercho
Name: Steven R. Fercho
Title: Vice President
THE BOATMEN'S NATIONAL BANK OF
ST. LOUIS
By /s/ John D. Lubus
Name: John D. Lubus
Title: Vice President
EXHIBIT 4.2
[CONFORMED COPY]
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of September 10, 1997 among: IMATION CORP., a
Delaware corporation (the "Borrower"); each of the lenders party to the Credit
Agreement referred to below (the "Lenders"); and CITICORP USA, INC., as
administrative agent (in such capacity, the "Administrative Agent").
The Borrower, the Lenders, certain Issuing Banks and Swing Line Lenders
and the Administrative Agent are parties to the Credit Agreement dated as of
July 1, 1996 (as from time to time amended, the "Credit Agreement"). The
Borrower has requested the Lenders to amend the Credit Agreement in certain
respects, and the Lenders are willing to so amend the Credit Agreement, all on
the terms and conditions set forth herein. Accordingly, the parties hereto
hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this Amendment
No. 1, terms defined in the Credit Agreement are used herein as defined therein.
Section 2. Amendments. Subject to the Administrative Agent's receipt of
this Amendment No. 1, duly executed by the Borrower, the Required Lenders and
the Administrative Agent, but effective as of the date hereof, the Credit
Agreement shall be amended as follows:
A. Definitions. Section 1.01 of the Credit Agreement is amended by
inserting the following definitions (or, in the case of any definition for a
term that is defined in the Credit Agreement before giving effect to this
Amendment No. 1, by amending and restating such definition to read as set forth
below):
"Capitalized Information Technology Costs" means costs
incurred by the Borrower and its Subsidiaries in connection with their
design, testing and implementation of information technology systems,
which costs are capitalized by the Borrower on its Consolidated balance
sheet in accordance with GAAP.
"Consolidated Net Income" means, for any period, the net
income of the Borrower and its Subsidiaries (determined on a
Consolidated basis without duplication) for such period.
"Consolidated Tangible Net Worth" means, as at any date of
determination, the sum for the Borrower and its Subsidiaries
(determined on a Consolidated basis without duplication) of the
following (as reported on the
<PAGE>
Consolidated balance sheet of the Borrower as at the last day of the
fiscal quarter of the Borrower ending on or most recently ended prior
to the date of determination):
(a) the amount of capital stock; plus
(b) the amount of surplus and retained earnings (or,
in the case of a surplus or retained earnings deficit, minus
the amount of such deficit); minus
(c) the sum of the following: cost of treasury shares
and the book value of all assets that should be classified as
intangibles (without duplication of deductions in respect of
items already deducted in arriving at surplus and retained
earnings) but in any event including goodwill, minority
interests, research and development costs, trademarks, trade
names, copyrights, patents and franchises, unamortized debt
discount and expense, all reserves and any write-up in the
book value of assets resulting from a revaluation thereof
subsequent to December 31, 1995, but excluding Capitalized
Information Technology Costs made subsequent to June 30, 1996;
plus
(d) the amount of non-recurring charges to
Consolidated Net Income (not exceeding $100,000,000 in the
aggregate) resulting from discontinuance of operations, and
divestitures and acquisitions (whether effected through one
transaction or series of related transactions and whether
through purchase or sale of assets, merger or otherwise) of
businesses, divisions or Subsidiaries of the Borrower, made
subsequent to September 30, 1996.
B. Net Worth. Section 5.04 of the Credit Agreement shall be amended by
amending paragraph (c) thereof to read in its entirety as follows:
"(c) Consolidated Tangible Net Worth. Maintain Consolidated
Tangible Net Worth on each day during each calendar year (commencing
with the calendar year beginning January 1, 1997) of not less than the
sum of (i) $875,000,000 plus (ii) an amount equal to 50% of
Consolidated Net Income for each fiscal quarter of the Borrower
beginning after December 31, 1997 for which Consolidated Net Income is
positive."
C. General. References in the Credit Agreement to "this Agreement"
(including indirect references such as "hereunder", "hereby", "herein" and
"hereof") shall be deemed to be references to the Credit Agreement as amended
hereby.
<PAGE>
Section 3. Representations and Warranties. The Borrower hereby
represents and warrants to the Administrative Agent and the Lenders that:
(a) the representations and warranties contained in each Loan
Document are correct on and as of the date hereof, as though made on
and as of such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such
specific date); and
(b) no event has occurred and is continuing that constitutes a
Default or an Event of Default.
Section 4. Miscellaneous. Except as herein provided, the Credit
Agreement and each of the other Loan Documents shall remain unchanged and in
full force and effect. This Amendment No. 1 may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment No. 1 by
signing any such counterpart. This Amendment No. 1 shall be governed by, and
construed in accordance with, the law of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
THE BORROWER
IMATION CORP.
By /s/ Deborah D. Weiss
Name: Deborah D. Weiss
Title: Treasurer
THE ADMINISTRATIVE AGENT
CITICORP USA, INC.
By /s/ Eileen G. Ogimachi
Name: Eileen G. Ogimachi
Title: Attorney-in-Fact
THE LENDERS
CITICORP USA, INC.
By /s/ Eileen G. Ogimachi
Name: Eileen G. Ogimachi
Title: Attorney-in-Fact
<PAGE>
BANCA COMMERCIALE ITALIANA-CHICAGO
BRANCH
By /s/ Diana R. Lamb
Name: Diana R. Lamb
Title: Vice President
By /s/ Mark D. Mooney
Name: Mark D. Mooney
Title: Vice President
FIRST BANK NATIONAL ASSOCIATION
By /s/ Mark R. Olmon
Name: Mark R. Olmon
Title: Vice President
THE SUMITOMO BANK, LIMITED, CHICAGO
BRANCH
By /s/ Hiroyuki Iwami
Name: Hiroyuki Iwami
Title: Joint General Manager
BANK OF MONTREAL
By____________________________
Name:
Title:
<PAGE>
THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH
By /s/ Jeffrey R. Arnold
Name: Jeffrey R. Arnold
Title: Vice President
DEUTSCHE BANK, AG-CHICAGO BRANCH
By /s/ Hans-Josef Thiele
Name: Hans-Josef Thiele
Title: Director
By /s/ Robert Wood
Name: Robert Wood
Title: Director
MELLON BANK, N.A.
By /s/ Christine Plumb
Name: Christine Plumb
Title: Vice President
THE SAKURA BANK, LIMITED-CHICAGO
BRANCH
By /s/ Takao Okada
Name: Takao Okada
Title: Senior Manager
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By /s/ S. Battinell
Name: S. Battinell
Title: Vice President
By /s/ Lisa Walker
Name: Lisa Walker
Title: Associate
THE YASUDA TRUST & BANKING COMPANY,
LIMITED
By /s/ Koichiro Inoue
Name: Koichiro Inoue
Title: Joint General Manager
BANK OF AMERICA ILLINOIS
By /s/ Kevin McMahon
Name: Kevin McMahon
Title: Managing Director
THE FUJI BANK, LIMITED
By /s/ Peter L. Chinnici
Name: Peter L. Chinnici
Title: Joint General Manager
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD. CHICAGO BRANCH
By /s/ Armund J. Schoen, Jr.
Name: Armund J. Schoen, Jr.
Title: Senior Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
By ____________________________
Name:
Title:
SOCIETE GENERALE
By /s/ Steven R. Fercho
Name: Steven R. Fercho
Title: Vice President
NATIONSBANK, N.A.
By /s/ Valerie C. Mills
Name: Valerie C. Mills
Title: Sr. Vice President
EXHIBIT 11
IMATION CORP.
COMPUTATION OF COMMON SHARES AND COMMON SHARE EQUIVALENTS
(IN MILLIONS)
(UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
----- ----- ----- -----
Weighted average number of shares
outstanding during the period (a) 40.5 41.9 41.6 41.9
Weighted average number of shares
held by the ESOP not committed
to be released (1.8) (1.1) (1.9) (0.4)
Common share equivalents resulting
from the assumed exercise of
stock options (b) 0.9 -- 0.9 --
----- ----- ----- -----
Total common shares and common
share equivalents 39.6 (c) 40.8 40.6 (c) 41.5
(a) The number of shares used to compute earnings per share for the period
prior to July 1, 1996 is based on one-tenth of the average 3M shares
outstanding based on the distribution ratio of one share of the
Company's common stock for every ten shares of 3M common stock held on
the record date.
(b) Common share equivalents are computed by the "treasury stock" method.
This method first determines the number of shares issuable under stock
options that have an option price below the average market price for the
period, and then deducts the number of shares that could be repurchased
with the proceeds of options were they exercised. Common share
equivalents for primary and fully diluted earnings per share were
essentially equivalent.
(c) Common share equivalents for all periods are not material. As a result,
earnings per share have been computed using the weighted average number
of shares outstanding less the weighted average number of shares held by
the ESOP not committed to be released, or 39.7 million weighted average
shares outstanding for the nine months ended September 30, 1997 and 38.7
million weighted average shares outstanding for the three months ended
September 30, 1997.
EXHIBIT 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Imation Corp.
Registrations on Form S-8 and Form S-4
We are aware that our report dated October 30, 1997 on our reviews of the
interim consolidated financial information of Imation Corp. (the Company) for
the three and nine months ended September 30, 1997 and 1996, and included in the
Company's Form 10-Q for the quarter ended September 30, 1997, is incorporated by
reference in the Company's Registration Statements on Form S-8 (Registration
Nos. 333-15273, 333-15275, 333-15277 and 333-35591) and on Form S-4
(Registration No. 333-28837). Pursuant to Rule 436(c), under the Securities Act
of 1933, this report should not be considered part of the Registration
Statements prepared or certified by us within the meaning of Sections 7 and 11
of that Act.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
November 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH CONSOLIDATED FINANCIAL STATEMENTS AND NOTES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 43,100
<SECURITIES> 0
<RECEIVABLES> 502,300
<ALLOWANCES> (18,900)
<INVENTORY> 417,500
<CURRENT-ASSETS> 1,081,100
<PP&E> 1,729,400
<DEPRECIATION> (1,280,200)
<TOTAL-ASSETS> 1,664,700
<CURRENT-LIABILITIES> 444,500
<BONDS> 262,100
<COMMON> 400
0
0
<OTHER-SE> 843,800
<TOTAL-LIABILITY-AND-EQUITY> 1,664,700
<SALES> 1,632,000
<TOTAL-REVENUES> 1,632,000
<CGS> 1,048,800
<TOTAL-COSTS> 1,048,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,100
<INCOME-PRETAX> (7,700)
<INCOME-TAX> 14,600
<INCOME-CONTINUING> (22,300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,300)
<EPS-PRIMARY> (0.56)
<EPS-DILUTED> (0.56)
</TABLE>
