<PAGE> 1
UNITED STATES
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 October 29, 1995.
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: 0-6643
UNITOG COMPANY
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 44-0529828
- ------------------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 W. 11th Street, Kansas City, MO 64105
- ------------------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
(816) 474-7000
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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.
As of October 29, 1995, the registrant had 9,278,148 shares of
common stock, par value $.01 per share, outstanding.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
<S> <C> <C>
ITEM 1. Financial Statements
(1) Condensed Consolidated Financial Statements (unaudited):
Condensed Consolidated Balance Sheets as of October 29, 1995
and January 29, 1995. 3
Condensed Consolidated Statements of Earnings for the Three
Months ended October 29, 1995 and October 30, 1994. 4
Condensed Consolidated Statements of Earnings for the Nine
Months ended October 29, 1995 and October 30, 1994. 5
Condensed Consolidated Statements of Cash Flows for the Nine
Months ended October 29, 1995 and October 30, 1994. 6
(2) Notes to Condensed Consolidated Financial Statements. 7
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 10
ITEM 6. Exhibits and Reports on Form 8-K 10
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
UNITOG COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
OCTOBER 29, 1995 AND JANUARY 29, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS October 29, 1995 January 29, 1995
---------------- ----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 358,931 $ 7,717,999
Accounts receivable, less allowance for doubtful
receivables of $517,700 and $425,000, respectively 19,833,599 18,079,047
Inventories (note 2) 15,251,096 13,630,072
Rental garments in service, net 28,252,426 24,478,470
Prepaid expenses 1,244,386 991,674
------------ -------------
Total current assets 64,940,438 64,897,262
------------ -------------
Property, plant and equipment, at cost 123,878,127 107,490,586
Less accumulated depreciation 52,561,667 47,974,078
------------ -------------
Net property, plant and equipment 71,316,460 59,516,508
------------ -------------
Other assets, net 20,490,795 16,529,871
Excess cost over net assets of businesses
acquired, net 4,376,698 2,504,370
------------ -------------
$161,124,391 $ 143,448,011
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 268,168 $ 827,214
Accounts payable 9,257,029 6,691,845
Accrued expenses 10,552,728 9,485,204
Income taxes payable 377,865 419,969
Deferred income taxes 8,412,000 7,142,000
------------ -------------
Total current liabilities 28,867,790 24,566,232
------------ -------------
Long-term debt, less current installments 39,202,770 34,837,880
Other liabilities, noncurrent 1,653,685 986,217
Deferred income taxes, noncurrent 7,800,011 7,625,011
Stockholders' equity:
Common stock of $.01 par value. Authorized
30,000,000 shares; issued and outstanding
9,278,148 shares (note 3) 92,781 92,721
Additional paid-in capital 39,179,878 39,070,262
Retained earnings 44,327,476 36,269,688
------------ -------------
Total stockholders' equity 83,600,135 75,432,671
------------ -------------
$161,124,391 $143,448,011
============ =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
UNITOG COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED OCTOBER 29, 1995 AND OCTOBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
October 29, 1995 October 30, 1994
---------------- ----------------
<S> <C> <C>
Revenues:
Rental operations $ 38,769,022 $ 34,031,367
Direct sales 13,682,987 14,284,680
------------ ------------
Total revenues 52,452,009 48,316,047
------------ ------------
Operating costs and expenses:
Cost of rental operations 30,881,281 27,254,571
Cost of direct sales 11,112,103 11,308,372
Depreciation and amortization 2,702,189 2,433,031
General and administrative 1,848,355 2,072,863
------------ ------------
Total costs and expenses 46,543,928 43,068,837
------------ ------------
Operating income 5,908,081 5,247,210
Interest expense 710,726 645,057
Other expense, net (8,280) (5,550)
------------ ------------
Earnings before income taxes 5,205,635 4,607,703
Income taxes 1,888,000 1,797,000
------------ ------------
Net earnings $ 3,317,635 $ 2,810,703
============ ============
Net earnings per common share $ .35 $ .30
============ ============
Weighted average common and common equivalent
shares outstanding 9,381,681 9,339,408
============ ============
Dividends per common share (note 3) $ .05 $ .04
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
UNITOG COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
NINE MONTHS ENDED OCTOBER 29, 1995 AND OCTOBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
October 29, 1995 October 30, 1994
------------------ ------------------
<S> <C> <C>
Revenues:
Rental operations $ 112,561,972 $ 98,951,606
Direct sales 41,304,242 40,954,879
---------------- ----------------
Total revenues 153,866,214 139,906,485
---------------- ----------------
Operating costs and expenses:
Cost of rental operations 90,440,529 79,702,555
Cost of direct sales 33,835,857 33,059,223
Depreciation and amortization 7,885,306 7,165,111
General and administrative 5,934,829 6,260,452
---------------- ----------------
Total costs and expenses 138,096,521 126,187,341
---------------- ----------------
Operating income 15,769,693 13,719,144
Interest expense 2,032,895 1,984,013
Other expense, net 405 72,303
---------------- ----------------
Earnings before income taxes 13,736,393 11,662,828
Income taxes 5,215,000 4,549,000
---------------- ----------------
Net earnings $ 8,521,393 $ 7,113,828
================ ================
Net earnings per common share $ .91 $ .76
================ ================
Weighted average common and common equivalent
shares outstanding 9,361,147 9,310,462
================ ================
Dividends per common share (note 3) $ .05 $ .04
================ ================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
UNITOG COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED OCTOBER 29, 1995 AND OCTOBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
October 29, 1995 October 30, 1994
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 8,521,393 $ 7,113,828
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 7,885,306 7,165,111
Provision for deferred income taxes 1,445,000 128,000
Disposal of equipment, net of gains and losses 56,253 335,300
Changes in assets and liabilities:
Accounts receivable (1,670,145) (818,238)
Inventories (1,621,024) (179,931)
Rental garments in service (1,703,956) (1,449,312)
Prepaid expenses (252,712) (214,810)
Other noncurrent assets (26,345) (41,209)
Accounts payable 2,565,184 1,507,367
Accrued expenses 1,067,524 2,019,696
Income taxes payable (42,104) 127,069
Other noncurrent liabilities 667,468 8,165
------------ ------------
Net cash provided by operating activities 16,891,842 15,701,036
------------ ------------
Cash flows from investing activities:
Acquisition of rental operations (11,331,244) (4,365,526)
Purchase of property, plant and equipment (16,371,581) (7,204,345)
------------ ------------
Net cash used by investing activities (27,702,825) (11,569,871)
------------ ------------
Cash flows from financing activities:
Proceeds from exercise of stock options, net 109,676 --
Dividends paid (463,605) (370,884)
Increase (decrease) in long-term debt 3,805,844 (479,266)
------------ ------------
Net cash provided (used) by financing activities 3,451,915 (850,150)
------------ ------------
Net increase (decrease) in cash and cash equivalents (7,359,068) 3,281,015
Cash and cash equivalents at beginning of period 7,717,999 3,416,988
------------ ------------
Cash and cash equivalents at end of period $ 358,931 $ 6,698,003
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 2,182,757 $ 2,193,404
============ ============
Income taxes $ 3,793,155 $ 4,293,931
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
UNITOG COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED OCTOBER 29, 1995 AND OCTOBER 30, 1994
Note 1
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial position of the
Company as of October 29, 1995, and the results of its operations and its cash
flows for the nine months ended October 29, 1995 and October 30, 1994 and the
results of its operations for the three months ended October 29, 1995 and
October 30, 1994. The results of operations for the nine months ended October
29, 1995 are not necessarily indicative of the results to be expected for the
full year.
Note 2 Inventories
The following is a summary of inventories at October 29, 1995 and January 29,
1995:
<TABLE>
<CAPTION>
October 29, 1995 January 29, 1995
---------------- ----------------
<S> <C> <C>
Raw materials $ 4,163,314 $ 3,570,498
Work in progress 2,529,794 2,351,766
Finished goods 12,326,690 11,255,800
----------- -----------
19,019,798 17,178,064
Less LIFO allowance (3,768,702) (3,547,992)
----------- -----------
$15,251,096 $13,630,072
=========== ===========
</TABLE>
Note 3 Cash Dividend
At its November 20, 1995 Board of Directors meeting the Board declared a $.05
per share cash dividend payable on December 20, 1995 to stockholders of record
on December 5, 1995. The $.05 per share dividend was a 25% increase over the
prior year.
Note 4 Acquisitions
During fiscal 1996 the Company acquired rental routes and equipment for
approximately $11.3 million in cash and notes payable. The operating results
of these rental acquisitions have been included in the consolidated results of
the Company since their purchase with an insignificant effect on revenues and
net earnings.
7
<PAGE> 8
Note 5 Subsequent Events
On November 10, 1995, Unitog Company completed the acquisition of Ace-Tex
Corporation. Ace-Tex, headquartered in Detroit Michigan, is a leading supplier
of uniform rental services in Michigan, Indiana and Ohio. Last year its
uniform rental business generated $27 million in revenue. In conjunction with
the acquisition, Unitog sold Ace-Tex's wiping cloth business thereby retaining
only the uniform rental services business. The final purchase price of Ace-Tex
and the final sale price of the wiping cloth business is subject to a closing
audit and currently unavailable. Proforma balance sheet data including the
effect of the Ace-Tex transaction as of October 29, 1995 is currently
unavailable. Pro forma income statement data including the effect of the
Ace-Tex transaction as of the first day of Unitog's fiscal 1995 and fiscal 1996
is currently unavailable.
On October 31, 1995, Unitog Company issued $40 million in long-term notes to an
insurance company. The notes bear interest at 6.83% and mature in 2005. The
proceeds from the notes were used to prepay, without penalty, $15 million in
long-term 10.06% debt and to provide funds for the Ace-Tex acquisition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $359,000 at October 29, 1995 compared to $7.7
million at January 29, 1995. The funding of rental acquisitions created the
decrease. At October 29, 1995, the Company had borrowed $3.1 million under its
bank credit facility. The amount of borrowings available under the Company's
bank credit facility was $31.5 million at October 29, 1995. On November 9,
1995 the Company amended its bank credit facility extending its term to
September 8, 1998 and increasing the facility to $50 million. The Company's
capitalization ratio was 32% at October 29, 1995 and January 29, 1995.
On October 31, 1995, Unitog Company issued $40 million in long-term notes to an
insurance company. The notes bear interest at 6.83% and mature in 2005. The
proceeds from the notes were used to prepay, without penalty, $15 million in
long-term 10.06% debt and to provide funds for the Ace-Tex acquisition.
Cash provided by operating activities was $16.9 million for the nine months
ended October 29, 1995, 8% better than last year. Working capital was $36.1
million at October 29, 1995 compared to $40.3 million at January 29, 1995. The
funding of rental acquisitions reduced cash and cash equivalents. Capital
expenditures were $16.4 million through October 29, 1995, 127% greater than
last year. The Company opened a combined manufacturing and distribution
facility in Northeastern Alabama. A rental production plant is under
construction in Las Vegas, Nevada. Capital expenditures for fiscal 1996 are
expected to approximate $18 million.
In November 1995 the Board of Directors declared a $.05 per share cash dividend
payable on December 20, 1995 to stockholders of record on December 5, 1995.
The $.05 per share dividend was 25% greater than the semi-annual dividend paid
last year and follows a $.05 per share cash dividend paid in June 1995.
8
<PAGE> 9
On November 10, 1995 the Company completed the acquisition of Ace-Tex
Corporation. Ace-Tex, headquartered in Detroit, Michigan, is a leading
supplier of uniform rental services in Michigan, Indiana and Ohio. Last year
its uniform rental business generated $27 million in revenue. In conjunction
with the acquisition, the Company sold Ace-Tex's wiping cloth business thereby
retaining only the uniform rental services business.
During fiscal 1996 the Company has also purchased a cleanroom operation in Iowa
and industrial and linen rental routes in Iowa, Ohio, Dallas and Los Angeles.
These acquisitions are expected to add over $10.0 million in annual rental
revenues. These purchased industrial and linen rental routes will be serviced
by existing facilities.
Management believes that cash generated from operations, its bank credit
facility and available long-term financing will be sufficient to meet its cash
requirements for acquisitions and capital expenditures in the foreseeable
future.
RESULTS OF OPERATIONS
Third quarter fiscal 1996 compared to third quarter fiscal 1995
Revenues for the third quarter of fiscal 1996 were $52.5 million, an increase
of $4.1 million or 9% over the comparable period last year. Rental revenues
for the quarter were $38.8 million, an increase of $4.7 million or 14% over
last year. Revenues from acquisitions this year in Columbus, Ohio, Los
Angeles, Dallas and Northern Iowa generated the majority of this increase.
Direct sales for the third quarter of fiscal 1996 were $13.7 million, a
decrease of $602,000 or 4% over the comparable period last year. The decrease
in Direct sales was principally due to mild fall weather which postponed
seasonal demand for winter garments.
Operating income for the third quarter of fiscal 1996 was $5.9 million an
increase of $661,000 or 13% over the comparable period last year. Higher
operating contribution from Rental operations created the improvement over last
year despite acquisition related assimilation costs. Costs incurred to
start-up our new Northeastern Alabama plant lowered operating income.
Net earnings for the third quarter of fiscal 1996 were $3.3 million, an
increase of $507,000 or 18% over the comparable period last year. Improved
operating contribution from Rental operations created the increase over last
year. Net earnings per common share for the third quarter of fiscal 1996 were
$.35 per share, an increase of $.05 per share or 17% over the comparable period
last year.
Nine months fiscal 1996 compared to nine months fiscal 1995
Revenues for the nine months ended October 29, 1995 were $153.9 million, an
increase of $14.0 million or 10% over the comparable period last year. Rental
revenues for the nine months ended October 29, 1995 were $112.6 million.
Acquired revenues and internal growth created the $13.6 million or 14% increase
in Rental revenues over last year. Direct sales for the first nine months of
fiscal 1996 were $41.3 million, the same as last year.
9
<PAGE> 10
Operating income for the nine months ended October 29, 1995 was $15.8 million,
an increase of $2.1 million or 15% over last year. Improved operating
profitability from the Rental business segment created the increase in
operating income. Depreciation and amortization for the nine months ended
October 29, 1995 was $7.9 million, an increase of $720,000 or 10% over last
year. Higher amortization and depreciation related to acquisitions and capital
expenditures created this increase.
Net earnings for the nine months ended October 29, 1995 were $8.5 million, an
increase of $1.4 million or 20% higher than the comparable period last year.
Increased profitability from Rental operations created the earnings
improvement. Net earnings per share were $.91 for the nine months ended
October 29, 1995, an increase of $.15 per share or 20% over the comparable
period last year.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See the discussion of certain environmental matters in Part I, Item 1 of the
Company's Annual Report on Form 10-K for the fiscal year ended January 29,
1995 and in Part II, Item 1 of the Company's Quarterly Report on Form 10-Q for
the quarter ended July 30, 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
4(a) Note Agreement, dated as of December 1, 1993, among Unitog
Company, Unitog Rental Services, Inc. and Metropolitan Life
Insurance Company and First Amendment thereto, dated as of
October 15, 1995.
4(b) Note Agreement dated as of October 15, 1995 among Unitog
Company, Unitog Rental Services, Inc. and Metropolitan Life
Insurance Company.
4(c) Loan and Letter of Credit Reimbursement Agreement, dated
September 10, 1993, among Unitog Company, Unitog
Rental Services, Inc., "UMB Bank, N.A., Harris Trust and Savings
Bank and NBD Bank, N.A. and Amendment No.1 thereto, dated
December 29, 1994 and Amendment No.2 thereto, dated
November 9, 1995.
27 Financial Data Schedule for the nine months ended October 29,
1995.
(b) Reports on Form 8-K.
Unitog Company has not filed any reports on Form 8-K during the
quarter ended October 29, 1995.
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Unitog Company
Dated : December 11, 1995 By: /S/ J. Craig Peterson
--------------------------
J. Craig Peterson
Senior Vice-President of
Finance and Administration,
Chief Financial Officer
(Duly Authorized Officer)
11
<PAGE> 12
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4(a) Note Agreement, dated as of December 1, 1993, among Unitog Company,
Unitog Services, Inc. and Metropolitan Life Insurance Company and First
Amendment thereto, dated as of October 15, 1995.
4(b) Note Agreement dated as of October 15, 1995 among Unitog Company,
Unitog Rental Services, Inc. and Metropolitan Life Insurance Company.
4(c) Loan and Letter of Credit Reimbursement Agreement, dated September 10,
1993, among Unitog Company, Unitog Rental Services, Inc., "UMB Bank,
N.A., Harris Trust and Savings Bank and NBD Bank, N.A. and Amendment
No.1 thereto, dated December 29, 1994 and Amendment No.2 thereto, dated
November 9, 1995.
27 Financial Data Schedule for Unitog Company for the nine months ended
October 30, 1995.
<PAGE> 1
Unitog Company
and
Unitog Rental Services, Inc.
Note Agreement
Dated as of December 1, 1993
Re: $20,000,000 5.79% Senior Notes
Due December 15, 2003
<PAGE> 2
Table of Contents
(Not a part of the Agreement)
Section Heading Page
Section 1. Description of Notes and Commitment 1
Section 1.1. Description of Notes 1
Section 1.2. Commitment, Closing Date 2
Section 2. Prepayment of Notes 2
Section 2.1. Required Prepayments 2
Section 2.2. Optional Prepayment With Premium 3
Section 2.3. Notice of Optional Prepayments 3
Section 2.4. Application of Prepayments 4
Section 2.5. Direct Payment 4
Section 3. Representations 4
Section 3.1. Representations of the Constituent Companies 4
Section 3.2. Representations of the Purchaser 4
Section 4. Closing Conditions 5
Section 4.1. Conditions 5
Section 4.2. Waiver of Conditions 6
Section 5. Constituent Company Covenants 7
Section 5.1. Corporate Existence, Etc 7
Section 5.2. Insurance 7
Section 5.3. Taxes, Claims for Labor and Materials; Compliance
with Laws 7
Section 5.4. Maintenance, Etc 8
Section 5.5. Nature of Business 8
Section 5.6. Current Ratio 8
Section 5.7. Consolidated Stockholders' Equity 8
Section 5.8. Fixed Charges Coverage Ratio 8
Section 5.9. Limitations on Indebtedness 8
Section 5.10. Limitation on Liens 10
Section 5.11. Restricted Payments 12
Section 5.12. Investments 13
Section 5.13. Mergers, Consolidations and Sales of Assets 14
Section 5.14. Repurchase of Notes 18
Section 5.15. Transactions with Affiliates 18
Section 5.16. Multiemployer Plan Liability and Termination of
Pension Plans 18
Section 5.17. Reports and Rights of Inspection 19
Section 5.18. Additional Constituent Companies 22
- -2-
<PAGE> 3
Section 5.19. Contribution and Conveyance 22
Section 5.20. Prohibition of Extension of the Lincoln National Liens 23
Section 5.21. Prohibition of Change in Fiscal Year 23
Section 6. Events of Default and Remedies Therefor 23
Section 6.1. Events of Default 23
Section 6.2. Notice to Holders 24
Section 6.3. Acceleration of Maturities 25
Section 6.4. Rescission of Acceleration 25
Section 7. Amendments, Waivers and Consents 26
Section 7.1. Consent Required 26
Section 7.2. Solicitation of Holders 26
Section 7.3. Effect of Amendment or Waiver 26
Section 8. Interpretation of Agreement; Definitions 26
Section 8.1. Definitions 26
Section 8.2. Accounting Principles 36
Section 8.3. Directly or Indirectly 36
Section 9. Miscellaneous 37
Section 9.1. Registered Notes 37
Section 9.2. Exchange of Notes 37
Section 9.3. Loss, Theft, Etc. of Notes 37
Section 9.4. Expenses, Stamp Tax Indemnity 38
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative 38
Section 9.6. Notices 38
Section 9.7. Successors and Assigns 39
Section 9.8. Survival of Covenants and Representations 39
Section 9.9. Severability 39
Section 9.10. Governing Law 39
Section 9.11. Submission to Jurisdiction 39
Section 9.12. Captions 39
Signature 40
- -3-
<PAGE> 4
Attachments to Note Agreement:
Schedule I - Name and Address of Purchaser and Amount of Commitment
Schedule II - Specified Indebtedness; Liens; Capitalized Leases; Subsidiaries
Exhibit A - Form of 5.79% Senior Note
Exhibit B - Representations and Warranties of the Constituent Companies
Exhibit C - Description of Special Counsel's Closing Opinion
Exhibit D - Description of Closing Opinion of Outside Counsel to the
Constituent Companies
Exhibit E - Description of Closing Opinion of the General Counsel for the
Constituent Companies
Exhibit F - Form of Joinder Agreement
Exhibit G - Form of Additional Constituent Company Counsel Opinion
- -4-
<PAGE> 5
Unitog Company
101 West 11th Street
Kansas City, Missouri 64105
Unitog Rental Services, Inc.
101 West 11th Street
Kansas City, Missouri 64105
Note Agreement
Re: $20,000,000 5.79% Senior Notes
Due December 15, 2003
Dated as of
December 1, 1993
To the Purchaser named in Schedule I
hereto which is a signatory of this
Agreement
Ladies and Gentlemen:
The undersigned, Unitog Company, a Delaware corporation (the "Parent"),
and Unitog Rental Services, Inc., a California corporation ("Rental", together
with the Parent and Subsidiaries fulfilling the requirements of e5.19 after
the date hereof, being hereinafter collectively referred to as the
"Constituent Companies" and individually as a "Constituent Company"), jointly
and severally agree with you as follows:
Section 1. Description of Notes and Commitment;.
Section 1.1. Description of Notes;. The Constituent Companies will
authorize the issue and sale of $20,000,000 aggregate principal amount of
their 5.79% Senior Notes (the "Notes") to be dated the date of issue, to bear
interest from such date at the rate of 5.79% per annum, payable quarterly on
the fifteenth day of each March, June, September and December in each year
(commencing March 15, 1994) and at maturity and to bear interest on overdue
principal (including any overdue required or optional prepayment of principal)
and premium, if any, and (to the extent legally enforceable) on any overdue
installment of interest at the Overdue Rate after the date due, whether by
acceleration or otherwise, until paid, to be expressed to mature on December
15, 2003, and to be substantially in the form attached hereto as Exhibit A.
Interest on the Notes shall be computed on the basis of a 360-day year of
twelve 30-day months. If any amount of principal, premium or interest on or
in respect of the Notes becomes due and payable on any date which is not a
Business Day, such amount shall be payable on the immediately succeeding
Business Day. The Notes are not subject to prepayment or redemption at the
option of the Constituent Companies prior to their expressed maturity dates
except on the terms and conditions and in the amounts and with the premium, if
any, set forth in e2 of this Agreement. The term "Notes" as used herein shall
- -5-
<PAGE> 6
include each Note delivered pursuant to this Agreement. You are hereinafter
sometimes referred to as the "Purchaser". The terms which are capitalized
herein shall have the meanings set forth in e8.1 unless the context shall
otherwise require.
Section 1.2. Commitment, Closing Date;. Subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth, the Constituent Companies agree to issue and sell to
you, and you agree to purchase from the Constituent Companies, Notes in the
principal amount set forth opposite your name on Schedule I hereto at a price
of 100% of the principal amount thereof on the Closing Date hereafter
mentioned.
Delivery of the Notes will be made at the offices of Chapman and Cutler, 111
West Monroe Street, Chicago, Illinois 60603, against payment therefor in
Federal Reserve or other funds current and immediately available at United
Missouri Bank, Kansas City, Missouri, ABA #101000695, Acct. #9870515318 in the
amount of the purchase price at 10:30 A.M., New York, New York time, on
December 15, 1993 or such later date (not later than December 20, 1993) as
shall mutually be agreed upon by the Constituent Companies and the Purchaser
(the "Closing Date"). The Notes delivered to you on the Closing Date will be
delivered to you in the form of a single registered Note in the form attached
hereto as Exhibit A for the full amount of your purchase (unless different
denominations are specified by you), registered in your name or in the name of
such nominee, as may be specified in Schedule I attached hereto and in
substantially the form attached hereto as Exhibit A.
Section 2. Prepayment of Notes;.
Section 2.1. Required Prepayments;. In addition to paying the entire
outstanding principal amount and the interest due on the Notes on the maturity
date thereof, the Constituent Companies agree that on the fifteenth day of
June and December in each year, commencing December 15, 1997 and ending June
15, 2003, both inclusive, it will prepay and apply and there shall become due
and payable on the principal indebtedness evidenced by the Notes an amount
equal to the following:
<TABLE>
<CAPTION>
DATE OF REQUIRED PRINCIPAL AMOUNT OF
PAYMENT REQUIRED PREPAYMENT
<S> <C>
December 15, 1997 $1,538,460
June 15, 1998 $1,538,460
December 15, 1998 $1,538,460
June 15, 1999 $1,538,460
December 15, 1999 $1,538,460
June 15, 2000 $1,538,460
December 15, 2000 $1,538,460
June 15, 2001 $1,538,460
December 15, 2001 $1,538,460
June 15, 2002 $1,538,460
December 15, 2002 $1,538,460
June 15, 2003 $1,538,470
</TABLE>
- -6-
<PAGE> 7
The entire remaining principal amount of the Notes shall become due and
payable on December 15, 2003. No premium shall be payable in connection with
any required prepayment made pursuant to this e2.1.
In the event that the Constituent Companies shall prepay less than all of
the Notes pursuant to e2.2 hereof, the amounts of the prepayments required by
this e2.1 shall be reduced by an amount which is the same percentage of such
required prepayment as the percentage that the principal amount of Notes
prepaid pursuant to e2.2 is of the aggregate principal amount of outstanding
Notes immediately prior to such prepayment.
Section 2.2. Optional Prepayment With Premium;. In addition to the
payments required by e2.1, upon compliance with e2.3, the Constituent
Companies shall have the privilege at any time and from time to time of
prepaying the outstanding Notes, either in whole or in part (but if in part
then in a minimum principal amount of $1,000,000 and in multiples of $100,000)
by payment of the principal amount of the Notes, or portion thereof to be
prepaid, and accrued interest thereon to the date of such prepayment, together
with a premium equal to the Make-Whole Amount, determined as of two Business
Days prior to the date of such prepayment pursuant to this e2.2.
Section 2.3. Notice of Optional Prepayments;. The Constituent
Companies will give written notice of any prepayment of the Notes pursuant to
e2.2 to each holder thereof not less than 30 days nor more than 60 days before
the date fixed for such optional prepayment specifying (a) such date, (b) the
principal amount of the holder's Notes to be prepaid on such date, (c) that a
premium may be payable, (d) the date when such premium will be calculated and
the name of the Computing Holder to make such calculation, and (e) the accrued
interest applicable to the prepayment. Such notice of prepayment shall also
certify all facts, if any, which are conditions precedent to any such
prepayment. The notice to the Computing Holder shall set forth in addition to
the foregoing information the names and addresses of, and the respective
principal amounts of the Notes held by, the other holders of the Notes. Notice
of prepayment having been so given, the aggregate principal amount of the Notes
specified in such notice, together with accrued interest thereon and the
premium, if any, payable with respect thereto shall become due and payable on
the prepayment date specified in said notice. The Computing Holder shall give
written notice by facsimile communication to the Parent and each other holder
of the Notes, on the second Business Day preceding the date for such
prepayment, of the amount of the Make-Whole Amount in respect of the Notes held
by it and such other holders, which notice shall set forth in reasonable detail
the computation thereof. The Make-Whole Amount set forth in such notice shall
be binding on the Constituent Companies and each other holder of the Notes
absent manifest error.
Section 2.4. Application of Prepayments;. All partial prepayments
shall be applied on all outstanding Notes ratably in accordance with the unpaid
principal amounts thereof.
Section 2.5. Direct Payment;. Notwithstanding anything to the
contrary contained in this Agreement or the Notes, in the case of any Note
owned by you or your nominee or owned by any subsequent Institutional Holder
which has given written notice to the Constituent Companies requesting that the
provisions of this e2.5 shall apply, the Constituent Companies will punctually
pay when due the principal thereof, interest thereon and premium, if any, due
- -7-
<PAGE> 8
with respect to said principal, without any presentment thereof, directly to
you, to your nominee or to such subsequent Institutional Holder at your address
or your nominee's address set forth in Schedule I hereto or such other address
as you, your nominee or such subsequent Institutional Holder may from time to
time designate in writing to the Constituent Companies or, if a bank account
with a United States bank is designated for you or your nominee on Schedule I
hereto or in any written notice to the Constituent Companies from you, from
your nominee or from any such subsequent Institutional Holder, the Constituent
Companies will make such payments in immediately available funds to such bank
account, no later than 12:00 p.m. New York, New York, time on the date due,
marked for attention as indicated, or in such other manner or to such other
account in any United States bank as you, your nominee or any such subsequent
Institutional Holder may from time to time direct in writing. If for any
reason whatsoever the Constituent Companies do not make any such payment by
such 12:00 p.m. transmittal time, such payment shall be deemed to have been
made on the next following Business Day and such payment shall bear interest at
the Overdue Rate as provided herein.
Section 3. Representations;.
Section 3.1. Representations of the Constituent Companies;. Each
of the Constituent Companies represents and warrants that all representations
and warranties set forth in Exhibit B are true and correct as of the date
hereof and are incorporated herein by reference with the same force and effect
as though herein set forth in full.
Section 3.2. Representations of the Purchaser;. (a) You represent, and in
entering into this Agreement the Constituent Companies understand, that you
are acquiring the Notes for the purpose of investment and not with a view to
the distribution thereof, and that you have no present intention of selling,
negotiating or otherwise disposing of the Notes; it being understood, however,
that the disposition of your property shall at all times be and remain within
your control.
(b) You further represent that no part of the funds to be used by you
to purchase the Notes constitutes assets allocated to any separate account
maintained by you. As used in this e3.2(b), the term "separate account" shall
have the meaning assigned to it in ERISA.
Section 4. Closing Conditions;.
Section 4.1. Conditions;. Your obligation to purchase the Notes on
the Closing Date shall be subject to the performance by the Constituent
Companies of their agreements hereunder which by the terms hereof are to be
performed at or prior to the time of delivery of the Notes and to the following
further conditions precedent:
(a) Closing Certificate. You shall have received a certificate dated the
Closing Date, signed by the President or a Vice President of each of the
Constituent Companies, the truth and accuracy of which shall be a condition to
your obligation to purchase the Notes proposed to be sold to you and to the
effect that (1) the representations and warranties of the Constituent
Companies set forth in Exhibit B hereto are true and correct on and with
respect to the Closing Date, (2) the Constituent Companies have performed all
of their obligations hereunder which are to be performed on or prior to the
- -8-
<PAGE> 9
Closing Date, and (3) no Default or Event of Default has occurred and is
continuing.
(b) Legal Opinions; Expenses. You shall have received from Chapman and
Cutler, who are acting as your special counsel in this transaction, from
Bryan Cave, outside counsel for the Constituent Companies, and from Robert M.
Barnes, Esq., General Counsel for the Constituent Companies, their respective
opinions dated the Closing Date, in form and substance satisfactory to you,
and covering the matters set forth in Exhibits C, D and E, respectively,
hereto. The reasonable fees and expenses of Chapman and Cutler shall be paid
on the Closing Date by the Constituent Companies.
(c) Constituent Companies' Existence and Authority. On or prior to the
Closing Date, you shall have received, in form and substance reasonably
satisfactory to you and your special counsel, such documents and evidence with
respect to the Constituent Companies as you may reasonably request in order to
establish the existence and good standing of each of the Constituent Companies
and the authorization of the transactions contemplated by this Agreement.
(d) Related Transactions. The Constituent Companies shall have
consummated the sale of the entire principal amount of the Notes scheduled to
be sold on the Closing Date pursuant to this Agreement.
(e) Private Placement Number. On or prior to the Closing Date, special
counsel to the Purchaser shall have duly made the appropriate filings with
Standard & Poor's CUSIP Service Bureau, as agent for the National Association
of Insurance Commissioners, in order to obtain a private placement number for
the Notes.
(f) Funding Instructions. You shall have received written instructions
executed by a Responsible Officer of the Parent directing the manner of the
payment of funds and setting forth (1) the name of the transferee bank, (2)
such transferee bank's ABA number, (3) the account name and number into which
the purchase price for the Notes is to be deposited, and (4) the name and
telephone number of the account representative responsible for verifying
receipt of such funds.
(g) Legality of Investment. The Notes to be purchased by you shall be a
legal investment for you under the laws of each jurisdiction to which you may
be subject (without resort to any so-called "basket provisions" to such laws).
(h) Purchase Permitted by Applicable Laws. The purchase of and
payment for the Notes to be purchased by you on the Closing Date on the terms
and conditions herein provided (including the use of the proceeds of the Notes
by the Constituent Companies and their Subsidiaries) shall not violate any
applicable law or governmental regulation (including, without limitation,
Regulations G, T and X of the Board of Governors of the Federal Reserve
System) and shall not subject you to any tax, penalty, liability or other
onerous condition under or pursuant to any applicable law or governmental
regulation relating to the extension of credit, and you shall have received
such certificates or other evidence as you may request to establish compliance
with this condition.
(i) Environmental Information. You shall have received such available
information regarding environmental matters reasonably requested by you or
your special counsel.
- -9-
<PAGE> 10
(j) Satisfactory Proceedings. All proceedings taken in connection with
the transactions contemplated by this Agreement, and all documents necessary
to the consummation thereof, shall be satisfactory in form and substance to
you and your special counsel, and you shall have received a copy (executed or
certified as may be appropriate) of all legal documents or proceedings taken
in connection with the consummation of said transactions.
Section 4.2. Waiver of Conditions;. If on the Closing Date the
Constituent Companies fail to tender to you the Notes to be issued to you on
such date or if the conditions specified in e4.1 have not been fulfilled, you
may thereupon elect to be relieved of all further obligations under this
Agreement. Without limiting the foregoing, if the conditions specified in e4.1
have not been fulfilled, you may waive compliance by the Constituent Companies
with any such condition to such extent as you may in your sole discretion
determine. Nothing in this e4.2 shall operate to relieve the Constituent
Companies of any of their obligations hereunder or to waive any of your rights
against the Constituent Companies.
Section 5. Constituent Company Covenants;.
From and after the Closing Date and continuing so long as any amount remains
unpaid on any Note:
Section 5.1. Corporate Existence, Etc;. (a) Each of the Constituent
Companies will preserve and keep in full force and effect its corporate
existence, provided that the foregoing shall not prevent any transaction
permitted by e5.13. Each of the Constituent Companies will preserve and keep
in full force and effect all licenses and permits necessary to the proper
conduct of its business, the failure of which to preserve and keep would be
reasonably likely to materially and adversely affect the properties, business,
prospects or financial condition of the Parent and its Subsidiaries taken as a
whole.
(b) Each of the Constituent Companies will cause each of its Subsidiaries
to preserve and keep in full force and effect such Subsidiary's corporate
existence and all licenses and permits necessary to the proper conduct of its
business the failure of which to preserve and keep such corporate existence or
licenses and permits would be reasonably likely to materially and adversely
affect the properties, business, prospects or financial condition of the
Parent and its Subsidiaries taken as a whole, provided that the foregoing
shall not prevent any transaction permitted by e5.13.
Section 5.2. Insurance;. Each of the Constituent Companies will maintain,
and will cause each of its Subsidiaries to maintain, insurance coverage by
financially sound and reputable insurers and in such forms and amounts and
against such risks as are customary for corporations of established reputation
engaged in the same or a similar business and owning and operating similar
properties.
Section 5.3. Taxes, Claims for Labor and Materials; Compliance with Laws';.
(a) Each of the Constituent Companies will promptly pay and discharge,
and will cause each of its Subsidiaries promptly to pay and discharge, all
lawful taxes, assessments and governmental charges or levies imposed upon such
Constituent Company or such Subsidiaries, respectively, or upon or in respect
of all or any part of the property or business of such Constituent Company or
- -10-
<PAGE> 11
such Subsidiaries, all trade accounts payable in accordance with usual and
customary business terms, and all claims for work, labor or materials, which
if unpaid might become a Lien upon any property of such Constituent Company or
such Subsidiaries; provided that no Constituent Company nor any Subsidiary
shall be required to pay any such tax, assessment, charge, levy, account
payable or claim if (1) the validity, applicability or amount thereof is being
contested in good faith by appropriate actions or proceedings which will
prevent the forfeiture or sale of any property of such Constituent Company or
such Subsidiary or any material interference with the use thereof by such
Constituent Company or such Subsidiary, and (2) such Constituent Company or
such Subsidiary shall set aside on its books, reserves deemed by it to be
adequate with respect thereto.
(b) Each of the Constituent Companies will promptly comply and will cause
each of its Subsidiaries to comply with all laws, ordinances or governmental
rules and regulations to which it is subject, including, without limitation,
the Occupational Safety and Health Act of 1970, as amended, ERISA and all
Environmental Laws, the violation of which would be reasonably likely to
materially and adversely affect the properties, business, prospects, or
financial condition of the Parent and its Subsidiaries taken as a whole.
Section 5.4. Maintenance, Etc;. Each of the Constituent Companies
will maintain, preserve and keep, and will cause each of its Subsidiaries to
maintain, preserve and keep, its properties which are used or useful in the
conduct of its business (whether owned in fee or a leasehold interest) in good
repair and working order and from time to time will make all necessary repairs,
replacements, renewals and additions so that such properties are suitable for
the operation of its business.
Section 5.5. Nature of Business;. None of the Constituent Companies
nor any Subsidiary will engage in any business if, as a result, the general
nature of the business, taken on a consolidated basis, which would then be
engaged in by the Constituent Companies and their Subsidiaries would be
substantially changed from the general nature of the business engaged in by the
Constituent Companies and their Subsidiaries on the date of this Agreement.
Section 5.6. Current Ratio;. The Parent will at all times keep and
maintain the ratio of Consolidated Current Assets to Consolidated Current
Liabilities at not less than 1.25 to 1.00.
Section 5.7. Consolidated Stockholders' Equity;. The Parent will
at all times keep and maintain Consolidated Stockholders' Equity at an amount
not less than the sum of (a) $48,000,000 plus (b) 50% of Consolidated Net
Earnings for each fiscal quarter ending after August 1, 1993 and prior to the
date of determination thereof computed on a cumulative basis, provided that for
purposes of the foregoing calculation, Consolidated Net Earnings shall be
deemed to be zero for any fiscal quarter period for which Consolidated Net
Earnings is less than or equal to zero.
Section 5.8. Fixed Charges Coverage Ratio;. The Parent will keep
and maintain as of the end of each fiscal quarter of the Parent the ratio of
Net Earnings Available for Fixed Charges to Fixed Charges for the period of
four consecutive fiscal quarters then ending at not less than 2.00 to 1.00.
- -11-
<PAGE> 12
Section 5.9. Limitations on Indebtedness;. (a) The Parent will at
all times keep and maintain the ratio of Consolidated Funded Debt to
Consolidated Total Capitalization at not more than 0.6 to 1.0.
(b) The Parent will at all times keep and maintain the ratio of
Consolidated Specified Indebtedness to Consolidated Stockholders' Equity at
not more than 2.5 to 1.0.
(c) The Parent and its Subsidiaries will not create, assume, guarantee or
otherwise incur or in any manner be or become liable in respect of any
Indebtedness secured by Liens permitted by e5.10(l), unless at the time of
creation, issuance, assumption, guarantee or incurrence thereof and after
giving effect thereto and to the application of the proceeds thereof the sum
of (1) all Indebtedness of the Parent and its Subsidiaries secured by Liens
permitted by e5.10(l) plus (2) all Specified Indebtedness incurred by
Non-Obligor Subsidiaries pursuant to e5.9(d)(6) (other than Specified
Indebtedness of such Non-Obligor Subsidiary which is included in clause (1)
immediately above) shall not exceed:
(i) 15% of Consolidated Stockholders' Equity, at any time prior to the
release of the Lincoln National Liens; and
(ii) 25% of Consolidated Stockholders' Equity, at all times after the
release of the Lincoln National Liens.
(d) The Constituent Companies will not permit any Non-Obligor Subsidiary
to, create, assume, guarantee or otherwise incur or in any manner be or become
liable in respect of any Specified Indebtedness, except:
(1) Capitalized Leases entered into the normal and ordinary course of
the business of such Non-Obligor Subsidiary;
(2) Specified Indebtedness owed to a Constituent Company or to a
Wholly-owned Subsidiary;
(3) Industrial Development Bonds;
(4) Specified Indebtedness assumed at the time of acquisition or
purchase of any business entity, so long as such Specified Indebtedness was
not incurred, extended or renewed in contemplation of such acquisition or
purchase;
(5) Specified Indebtedness secured by Liens permitted by e5.10 (a)
through (k); and
(6) other Specified Indebtedness; provided that at the time of
creation, issuance, assumption, guarantee or incurrence thereof and after
giving effect thereto and to the application of the proceeds thereof the sum
of (i) all Specified Indebtedness incurred pursuant to this e5.9(d)(6) plus
(ii) all Indebtedness of the Parent and its Subsidiaries secured by Liens
permitted by e5.10(l) (other than Specified Indebtedness of a Non-Obligor
Subsidiary which is included in clause (i) immediately above) shall not
exceed:
- -12-
<PAGE> 13
(A) 15% of Consolidated Stockholders' Equity, at any time prior to the
release of the Lincoln National Liens; and
(B) 25% of Consolidated Stockholders' Equity, at all times after the
release of the Lincoln National Liens.
(e) The renewal, extension or refunding of any Indebtedness secured by
Liens, Funded Debt or Specified Indebtedness, issued, incurred or outstanding
pursuant to this e5.9 shall constitute the issuance of additional Indebtedness
secured by Liens, Funded Debt or Specified Indebtedness which is, in turn,
subject to the limitations of the applicable provisions of this e5.9.
(f) Any corporation which becomes a Subsidiary after the date hereof
shall for all purposes of this e5.9 be deemed to have created, assumed or
incurred at the time it becomes a Subsidiary all Indebtedness secured by
Liens, Funded Debt or Specified Indebtedness of such corporation existing
immediately after it becomes a Subsidiary.
Section 5.10. Limitation on Liens;. Each of the Constituent
Companies will not, and will not permit any of its Subsidiaries to, create or
incur, or suffer to be incurred or to exist, any Lien on its or their property
or assets, whether now owned or hereafter acquired, or upon any income or
profits therefrom, or transfer any property for the purpose of subjecting the
same to the payment of obligations in priority to the payment of its or their
general creditors, or acquire or agree to acquire, or permit any of its
Subsidiaries to acquire, any property or assets upon conditional sales
agreements or other title retention devices, except:
(a) Liens for property taxes and assessments or governmental charges or
levies, provided that payment thereof is not at the time required by e5.3;
(b) Liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall not have expired, or in
respect of which a Constituent Company or Subsidiary shall at any time in good
faith be prosecuting an appeal or proceeding for a review and in respect of
which a stay of execution pending such appeal or proceeding for review shall
have been secured; provided in each case, such Constituent Company or
Subsidiary shall set aside on its books adequate reserves with respect
thereto;
(c) Liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall have expired; provided that
the aggregate amount of such judgments or awards shall not exceed $10,000,000
in the aggregate at any one time outstanding and each such judgment and award
shall be discharged within 60 days of the creation thereof;
(d) Liens incidental to the conduct of business or the ownership of
properties and assets (including Liens in connection with worker's
compensation, unemployment insurance and other like laws, warehousemen's,
carrier's and attorneys' liens and statutory landlords' liens), Liens securing
claims or demands of mechanics, workmen, repairmen and materialmen, and Liens
to secure the performance of bids, tenders or trade contracts, or to secure
statutory obligations, surety or appeal bonds or other Liens of like general
nature, in any such case incurred in the ordinary course of business and not
in connection with the borrowing of money and which do not in the aggregate
- -13-
<PAGE> 14
materially impair the use of any property which is material to the business
and operations of the Parent and its Subsidiaries, taken as a whole, or the
value of such property, provided in each case, the obligation secured is not
overdue or, if overdue, is being contested in good faith by appropriate
actions or proceedings and such Constituent Company or Subsidiary, as the case
may be, shall have set aside on its books adequate reserves with respect
thereto;
(e) survey exceptions or encumbrances, easements or reservations,
covenants, conditions, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use of real
properties, which do not individually or in the aggregate materially impair
the use of properties which are material to the operation of the business of
the Parent and its Subsidiaries taken as a whole;
(f) Liens securing Indebtedness of a Subsidiary to any Constituent
Company or to another Wholly-owned Subsidiary;
(g) the Lincoln National Liens;
(h) Liens securing Industrial Development Bonds;
(i) Liens existing as of the Closing Date and described on Schedule
II hereto;
(j) Liens created or incurred after the Closing Date given to secure the
payment of the purchase price incurred in connection with the acquisition or
construction of fixed assets useful and intended to be used in carrying on the
business of a Constituent Company or a Subsidiary, including Liens existing on
such fixed assets at the time of acquisition or construction thereof or at the
time of acquisition by such Constituent Company or Subsidiary of any business
entity then owning such fixed assets, whether or not such existing Liens were
given to secure the consideration for the fixed assets to which they attach so
long as they were not incurred, extended or renewed in contemplation of such
acquisition, provided that (1) the Lien shall attach solely to the fixed
assets acquired or constructed, (2) such Lien shall have been created or
incurred within 180 days of the date of acquisition or construction, (3) at
the time of acquisition or construction of such fixed assets, the aggregate
amount remaining unpaid on all Indebtedness secured by Liens on such fixed
assets, whether or not assumed by such Constituent Company or Subsidiary,
shall not exceed an amount equal to 100% of the fair market value at the time
of acquisition or construction of such fixed assets (as determined in good
faith by the Board of Directors of such Constituent Company or Subsidiary),
(4) in the case of the creation or incurrence of any Capitalized Lease, the
fixed asset which is the subject thereof if previously owned by a Constituent
Company or Subsidiary shall have been sold or otherwise disposed of within the
limitations provided in e5.13(b)(2), and (5) all such Indebtedness shall have
been incurred within the applicable limitations provided in e5.9;
(k) leases or subleases of property owned by any Constituent Company
or Subsidiary wherein such Constituent Company or Subsidiary is the lessor
thereunder; provided that any such lease is entered into within the applicable
limitations of e5.13(b); and
- -14-
<PAGE> 15
(l) Liens created or incurred after the Closing Date given to secure
Indebtedness of the Parent or any of its Subsidiaries in addition to the Liens
permitted by the preceding clauses (a) through (k) hereof, provided that all
Indebtedness secured by such Liens shall have been incurred within the
applicable limitations provided in e5.9.
Section 5.11. Restricted Payments;. (a) None of the Constituent
Companies will except as hereinafter provided:
(1) Declare or pay any dividends, either in cash or property, on any
shares of its capital stock excluding, without limitation, Specified Preferred
Stock) of any class (except dividends or other distributions which are payable
only to another Constituent Company or are payable solely in shares of capital
stock (other than in shares of Specified Preferred Stock));
(2) Directly or indirectly, or through any Subsidiary or through any
Affiliate of such Constituent Company, purchase, redeem or retire any shares
of its capital stock of any class or any warrants, rights or options to
purchase or acquire any shares of its capital stock; provided that Rental may
purchase, redeem or retire any shares of its capital stock of any class or any
warrants, rights or options to purchase or acquire any shares of capital stock
owned by the Parent; or
(3) Make any other payment or distribution, either directly or
indirectly or through any Subsidiary, in respect of its capital stock (other
than in respect of Specified Preferred Stock), except to another Constituent
Company;
(such declarations or payments of dividends, purchases, redemptions or
retirements of capital stock and warrants, rights or options and all such
other payments or distributions being herein collectively called "Restricted
Payments"), if after giving effect thereto the aggregate amount of Restricted
Payments made during the period after August 1, 1993 to and including the date
of the making of the Restricted Payment in question by all of the Constituent
Companies would exceed the sum of (i) $14,000,000 plus (ii) 50% of
Consolidated Net Earnings for such period, computed on a cumulative basis for
said entire period (or if such Consolidated Net Earnings is a negative figure,
then minus 100% of such negative figure), plus (iii) the aggregate amount of
net cash proceeds received by the Constituent Companies from the issue or sale
of shares of capital stock (including the re-issuance of treasury stock but
excluding the issuance of Specified Preferred Stock) of Constituent Companies
during such period to Persons other than a Constituent Company or a
Subsidiary.
(b) The Constituent Companies will not declare any dividend which
constitutes a Restricted Payment payable more than 60 days after the date of
declaration thereof.
(c) For the purposes of this e5.11, the amount of any Restricted payment
declared, paid or distributed in property shall be deemed to be the greater of
the book value or fair market value (as determined in good faith by the Board
of Directors of the relevant Constituent Company) of such property at the time
of the making of the Restricted Payment in question.
- -15-
<PAGE> 16
(d) The Constituent Companies will not authorize or make a Restricted
Payment if after giving effect to the proposed Restricted Payment a Default or
Event of Default would exist.
Section 5.12. Investments;. Each of the Constituent Companies will
not, and will not permit any of its Subsidiaries to, make any Investments,
other than:
(a) Investments in and to Subsidiaries, including any Investment in a
corporation which, after giving effect to such Investment, will become a
Subsidiary;
(b) Investments in commercial paper maturing in 270 days or less from
the date of issuance which, at the time of acquisition by the Constituent
Companies or any Subsidiary, is accorded a rating of "A-1+" by Standard &
Poor's Corporation or "P-1" by Moody's Investors Service, Inc.;
(c) Investments in direct obligations of the United States of America
or any agency or instrumentality of the United States of America, the payment
or guarantee of which constitutes a full faith and credit obligation of the
United States of America, in either case, maturing in twelve months or less
from the date of acquisition thereof;
(d) Investments in certificates of deposit maturing within one year
from the date of issuance thereof, issued by a bank or trust company organized
under the laws of the United States or any state thereof, having capital,
surplus and undivided profits aggregating at least $100,000,000 and rated "B+"
or better by Sheshunoff Information Services, Inc.;
(e) Investments in money market mutual funds investing in Securities
described in clauses (b), (c) or (d) of this e5.12 which in any such case
would be classified as a current asset in accordance with GAAP and which are
managed by a fund manager having at least $2,500,000,000 under management;
(f) Investments in (i) Federally tax-exempt municipal Securities
maturing in twelve months or less from the date of acquisition by the
Constituent Companies or any Subsidiary thereof and which, at the time of
acquisition, are rated "A" or better by Standard & Poor's Corporation or "A2"
or better by Moody's Investors Service, Inc.; or (ii) mutual funds or
investment trusts investing in Federally tax-exempt municipal Securities
which, at the time of acquisition by the Constituent Companies or any
Subsidiary thereto, are rated "A" or better by Standard & Poor's Corporation
or "A2" or better by Moody's Investors Service, Inc.; provided that (1) such
Investment is a marketable and highly liquid Investment as evidenced by the
general trading of such Investment on an established financial market; (2) the
ability of the Constituent Companies to purchase and sell such Investment
shall not be contractually restricted in any manner; (3) the original amount
of such Investment shall not be subject to any risk whatsoever as represented
by such mutual fund or investment trust other than the bankruptcy of such
mutual fund or investment trust; (4) the fund or trust is managed by a manager
having at least $2,500,000,000 under management; and (5) such Investment shall
not exceed a term of 60 days;
(g) Investments in money market preferred stock rated "A" or better by
Standard & Poor's Corporation or "A2" or better by Moody Investors Service,
- -16-
<PAGE> 17
Inc.; and
(h) other Investments (in addition to those permitted by the foregoing
provisions of this e5.12), provided that (1) all such other Investments shall
not at any time exceed 20% of Total Assets and (2) after giving effect to such
other Investments, no Default or Event of Default shall have occurred and be
continuing.
In valuing any Investments for the purpose of applying the limitations set
forth in this e5.12, such Investments shall be taken at the book value
thereof.
For purposes of this e5.12, at any time when a corporation becomes a
Subsidiary, all Investments of such corporation at such time shall be deemed
to have been made by such corporation, as a Subsidiary, at such time. Any
continuing Investment by any Constituent Company or Subsidiary in any entity
which ceases to be a Subsidiary pursuant to a merger or consolidation under
e5.13(a)(4) or a sale or other disposition of Subsidiary Stock under e5.13(c)
shall be deemed to be incurred by the relevant Constituent Company or
Subsidiary on the date such entity ceases to be a Subsidiary and shall be
subject to the limitations of this e5.12.
Section 5.13. Mergers, Consolidations and Sales of Assets;. (a) Each
of the Constituent Companies will not, and will not permit any of its
Subsidiaries to, consolidate with or be a party to a merger with any other
corporation, or sell, lease or otherwise dispose of all or substantially all of
its assets; provided that:
(1) any Subsidiary may merge or consolidate with or into any of the
Constituent Companies or any Wholly-owned Subsidiary and any Constituent
Company may merge or consolidate with or into any other Constituent Company,
so long as in any merger or consolidation involving a Constituent Company, a
Constituent Company shall be the surviving or continuing corporation;
(2) the Parent may consolidate or merge with any other corporation if
(i) the corporation which results from such merger or consolidation (the
"surviving corporation") is the Parent or (ii) (A) greater than 50% of the
Voting Stock of the surviving corporation is owned and continues for one year
thereafter to be owned by a Specified Group, (B) the surviving corporation is
organized under the laws of any State of the United States or the District of
Columbia, (C) the due and punctual payment of the principal of and premium, if
any, and interest on all of the Notes, according to their tenor, and the due
and punctual performance and observation of all of the covenants in the Notes
and this Agreement to be performed or observed by the Parent are expressly
assumed in writing by the surviving corporation and the surviving corporation
shall furnish the holders of the Notes an opinion of counsel satisfactory to
such holders to the effect that the instrument of assumption has been duly
authorized, executed and delivered and constitutes the legal, valid and
binding contract and agreement of the surviving corporation enforceable in
accordance with its terms, except as enforcement of such terms may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles, and (D) at the time of such consolidation or merger and
immediately after giving effect thereto, no Default or Event of Default would
exist;
- -17-
<PAGE> 18
(3) the Parent may sell or otherwise dispose of all or substantially
all of its assets to any Person for consideration which represents the fair
market value at the time of such sale or other disposition if (i) greater than
50% of the Voting Stock of the acquiring Person is owned and continues for one
year thereafter to be owned by a Specified Group, (ii) the surviving
corporation is a corporation organized under the laws of any State of the
United States or District of Columbia, (iii) the due and punctual payment of
the principal of and premium, if any, and interest on all the Notes, according
to their tenor, and the due and punctual performance and observance of all of
the covenants in the Notes and in this Agreement to be performed or observed
by the Parent are expressly assumed in writing by the acquiring corporation
and the acquiring corporation shall furnish the holders of the Notes an
opinion of counsel satisfactory to such holders to the effect that the
instrument of assumption has been duly authorized, executed and delivered and
constitutes the legal, valid and binding contract and agreement of such
acquiring corporation enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles, and (iv) at
the time of such sale or disposition and immediately after giving effect
thereto, no Default or Event of Default would exist;
(4) any Non-Obligor Subsidiary may merge or consolidate with or into
any other corporation, provided in the case of any such merger or
consolidation which transaction shall include a sale, transfer or other
disposition by the Parent and/or its Subsidiaries of any shares of stock of
such Non-Obligor Subsidiary, such disposition of shares of stock shall be
subject to the limitations of, and the Assigned Value of such stock shall be
included in the computations set forth in, e5.13(b)(2);
(5) any Non-Obligor Subsidiary may sell, lease or otherwise dispose of
all or substantially all of its assets to any of the Constituent Companies or
any Wholly-owned Subsidiary;
(6) (x) any Non-Obligor Subsidiary may sell, lease or otherwise
dispose of all or substantially all of its assets to a Person or Persons
(other than a Constituent Company or a Wholly-owned Subsidiary and other than
to a Special Subsidiary pursuant to and in accordance with the terms of clause
(y) below), provided that such sale, lease or other disposition shall be
subject to the limitations of, and the net book value of such assets shall be
included in the computations set forth in, e5.13(b)(2) and (y) any Non-Obligor
Subsidiary may sell, lease or otherwise dispose of all or substantially all of
its assets to a Special Subsidiary, provided that such sale, lease or other
disposition shall be subject to the limitations of, and the Stipulated Value
of such assets shall be included in the computations set forth in, e5.13(b)2);
and
(7) any other corporation may consolidate into or merge into Rental if
(i) the surviving or continuing corporation is Rental, (ii) at the time of
such consolidation or merger and immediately after giving effect thereto, no
Default or Event of Default would exist, (iii) immediately after giving effect
to such consolidation or merger the Parent shall continue to own 100% of the
stock of Rental, and (iv) all Indebtedness, Liens and Investments of such
corporation shall be deemed to be created, assumed or incurred by Rental at
the time of such consolidation or merger.
- -18-
<PAGE> 19
Computations deemed made pursuant to e5.13(a)(4) and (a)(6) shall include
dispositions made pursuant to e5.13(b)(2) and e5.13(c)(3) and computations
pursuant to e5.13(b)(2) and e5.13(c)(3) shall include dispositions deemed made
pursuant to e5.13(a)(4) and (a)(6).
(b) Each of the Constituent Companies will not, and will not permit any
of its Subsidiaries to, sell, lease, transfer, abandon or otherwise dispose
of, assets (except assets sold, leased, transferred, abandoned or otherwise
disposed of in the ordinary course of business for fair market value (provided
that such fair market value requirement shall not be applicable to assets
sold, leased, transferred or otherwise disposed of to the Parent or a
Subsidiary in the ordinary course of business) and except as provided in
e5.13(a)(3); provided that the foregoing restrictions do not apply to:
(1) the sale, lease, transfer or other disposition of assets of a
Constituent Company to another Constituent Company or of a Non-Obligor
Subsidiary to any of the Constituent Companies or a Wholly-Owned Subsidiary;
or
(2) the sale, lease, transfer or other disposition of such assets for
cash or other property to a Person or Persons if all of the following
conditions are met:
(i) such assets (valued at net book value) do not, together
with all other assets of the Constituent Companies and their Subsidiaries
previously disposed of during the immediately preceding 12 month period (other
than in the ordinary course of business or pursuant to e5.13(a)(3) or
e5.13(a)(5) or e5.13(b)(1)), including assets deemed disposed of pursuant to
e5.13(a)(4) and (a)(6), exceed 20% of Total Assets;
(ii) the sale is for fair value and is in the best interests of
such Constituent Company or Subsidiary, such determination of fair value to be
made in good faith by (x) a Responsible Officer of such Constituent Company or
Subsidiary if such assets have a presumptive fair value of less than
$5,000,000 or if such assets, when considered together with assets sold or to
be sold in any related sale or sales or have a presumptive fair value of less
than $5,000,000 in the aggregate or (y) under any other circumstance, by the
Board of Directors of the Constituent Company or Subsidiary; and
(iii) immediately after the consummation of the transaction and
after giving effect thereto, no Default or Event of Default would exist.
Computations pursuant to this e5.13(b)(2) shall include dispositions made
pursuant to e5.13(c)(3) and deemed made pursuant to e5.13(a)(4) and (a)(6) and
computations pursuant to e5.13(c)(3) shall include dispositions made pursuant
to this e5.13(b)(2) and deemed made pursuant to e5.13(a)(4) and (a)(6).
(c) Each of the Constituent Companies will not, and will not permit
any of its Subsidiaries to, sell, pledge or otherwise dispose of any shares of
the stock (including as "stock" for the purposes of this Section any options or
warrants to purchase stock or other Securities exchangeable for or convertible
into stock) of a Subsidiary (said stock, options, warrants and other Securities
herein called "Subsidiary Stock"), nor will any Subsidiary issue, sell, pledge
or otherwise dispose of any shares of its own Subsidiary Stock, provided that
the foregoing restrictions do not apply to:
- -19-
<PAGE> 20
(1) the issue of directors qualifying shares; or
(2) the issue of Subsidiary Stock to any of the Constituent Companies
or a Wholly-Owned Subsidiary; and
(3) the sale or other disposition of Subsidiary Stock in any
Non-Obligor Subsidiary if all of the following conditions are met:
(i) the Assigned Value of such Subsidiary Stock of such
Non-Obligor Subsidiary does not, together with all other Subsidiary Stock in
Non-Obligor Subsidiaries of the Constituent Companies and their Subsidiaries
previously disposed of during the immediately preceding 12-month period (other
than in the ordinary course of business or pursuant to e5.13(c)(1) or (c)(2)),
exceed 20% of Total Assets;
(ii) the sale is for fair value and is in the best interests of
such Constituent Company or Subsidiary, such determination of fair value to be
made in good faith by (x) a Responsible Officer of such Constituent Company or
Subsidiary if such Subsidiary Stock has a presumptive fair value of less than
$5,000,000 or if such Subsidiary Stock, when considered together with assets
sold or to be sold in any related sale or sales or has a presumptive fair
value of less than $5,000,000 in the aggregate or (y) under any other
circumstance, by the Board of Directors of such Constituent Company or
Subsidiary;
(iii) immediately after the consummation of the transaction and
after giving effect thereto, such Subsidiary shall have no Indebtedness of any
of the Constituent Companies or of any Subsidiary; and
(iv) immediately after the consummation of the transaction and
after giving effect thereto, no Default or Event of Default would exist.
Computations pursuant to this e5.13(c)(3) shall include dispositions
made pursuant to e5.13(b)(2) and deemed made pursuant to e5.13(a)(4) and
(a)(6), and computations pursuant to e5.13(b)(2) shall include dispositions
made pursuant to this e5.13(c)(3).
(d) Any Indebtedness of any Constituent Company or Subsidiary owed to
any entity which ceases to be a Subsidiary pursuant to merger or consolidation
under e5.13(a)(4) or a sale or other disposal of Subsidiary Stock under
e5.13(c) shall be deemed to be incurred by the relevant Constituent Company or
Subsidiary on the date such entity ceases to be a Subsidiary and shall be
subject to the limitations set forth in e5.9.
Section 5.14. Repurchase of Notes;. None of the Constituent Companies
nor any Subsidiary, directly or indirectly, may repurchase or make any offer
to repurchase any Notes unless an offer has been made to repurchase Notes, pro
rata, from all holders of the Notes at the same time and upon the same terms.
In case any Constituent Companies or any Subsidiary repurchases or otherwise
acquires any Notes, such Notes shall immediately thereafter be canceled and
no Notes shall be issued in substitution therefor. Without limiting the
foregoing, upon the purchase or other acquisition of any Notes by any
Constituent Companies or Subsidiary, such Notes shall no longer be outstanding
for purposes of any section of this Agreement relating to the taking by the
holders of the Notes of any actions with respect hereto, including, without
- -20-
<PAGE> 21
limitation, e6.3, e6.4 and e7.1.
Section 5.15. Transactions with Affiliates;. The Constituent Companies
will not, and will not permit any Subsidiary to, enter into or be a party to
any transaction or arrangement with any Affiliate (including, without
limitation, the purchase from, sale to or exchange of property with, or the
rendering of any service by or for, any Affiliate), unless such transaction or
arrangement is entered into pursuant to the reasonable requirements of such
Constituent Company's or such Restricted Subsidiary's business and upon fair
and reasonable terms no less favorable to such Constituent Company or such
Subsidiary than would obtain in a comparable arm's-length transaction with a
Person other than an Affiliate.
Section 5.16. Multiemployer Plan Liability and Termination of Pension
Plans;. The Constituent Companies will not and will not permit any ERISA
Affiliate to withdraw from any Multiemployer Plan if such withdrawal could
result in withdrawal liability (as described in Part 1 of Subtitle E of Title
IV of ERISA) which would be reasonably likely to materially and adversely
affect the properties, business, prospects or financial condition of the
Parent and its Subsidiaries taken as a whole. Each Constituent Company and
any ERISA Affiliate will not permit any employee benefit plan maintained by it
to be terminated if such termination would result in the imposition of a Lien
on any property of the Constituent Company or any ERISA Affiliate pursuant to
Section 4068 of ERISA.
Section 5.17. Reports and Rights of Inspection;. Each of the
Constituent Companies will keep, and will cause each of its Subsidiaries to
keep, proper books of record and account in which full and correct entries
will be made of all dealings or transactions of, or in relation to, the
business and affairs of such Constituent Company or Subsidiary, in accordance
with GAAP consistently applied (except for changes disclosed in the financial
statements furnished to you pursuant to this e5.17 and concurred in by the
independent public accountants referred to in e5.17(b) hereof), and the Parent
will furnish to you so long as you are the holder of any Note and to each
other Institutional Holder of the then outstanding Notes (in duplicate if so
specified below or otherwise requested):
(a) Quarterly Statements. As soon as available and in any event
within 45 days after the end of each quarterly fiscal period (except the last)
of the Parent of each fiscal year, copies of:
(1) the consolidated balance sheets of the Parent and its
Subsidiaries as of the close of such quarterly fiscal period, setting forth in
comparative form the consolidated figures for the fiscal year then most
recently ended;
(2) the consolidated statements of earnings of the Parent and its
Subsidiaries for such quarterly fiscal period and for the portion of the fiscal
year ending with such quarterly fiscal period, in each case setting forth in
comparative form the consolidated figures for the corresponding periods of the
preceding fiscal year;
all in reasonable detail and certified by an authorized financial officer of
the Parent as being prepared in accordance with GAAP consistently applied and
as presenting fairly in all material respects the financial position of the
Parent and its Subsidiaries on a consolidated basis, provided that the Parent
- -21-
<PAGE> 22
may satisfy its requirements under this e5.17(a) by the delivery within the
time period described hereinabove of its quarterly reports on form 10-Q as
filed with the Securities and Exchange Commission;
(b) Annual Statements. As soon as available and in any event within
120 days after the close of each fiscal year of the Parent, copies of:
(1) the consolidated balance sheet of the Parent and its Subsidiaries
as of the close of such fiscal year, and
(2) the consolidated statement of earnings and retained earnings and
cash flows of the Parent and its Subsidiaries for such fiscal year,
in each case setting forth in comparative form the consolidated figures for
the preceding fiscal year, all in reasonable detail and accompanied by a
report thereon of a firm of independent public accountants of recognized
national standing selected by the Parent to the effect that the consolidated
financial statements present fairly, in all material respects, the
consolidated financial position of the Parent and its Subsidiaries as of the
end of the fiscal year being reported on and the consolidated results of the
operations and cash flows for said year in conformity with GAAP and that the
examination of such accountants in connection with such financial statements
has been conducted in accordance with generally accepted auditing standards,
provided that the Parent may satisfy its requirements under this e5.17(b) by
the delivery within the time period described hereinabove of its annual
reports on form 10-K as filed with the Securities and Exchange Commission;
(c) Additional Statements and Reconciliation. Within the periods
provided in paragraphs (a) and (b) above, (1) such financial statements as are
required to be delivered pursuant to paragraphs (a) and (b) above prepared in
conformity with Frozen GAAP and (2) a statement in reasonable detail and
certified as complete and correct by an authorized financial officer of the
Parent reconciling the statements provided pursuant to paragraphs (a) and (b)
above and the statements delivered pursuant to this paragraph (c) and providing
a detailed explanation of the differences between the same;
(d) Annual Consolidating Schedules. As soon as available and in any
event within 120 days after the close of each fiscal year of the Parent copies
of the consolidating balance sheet and statement of earnings of the Parent and
its Subsidiaries for such fiscal year all in reasonable detail and certified by
an authorized financial officer of the Parent as being prepared in accordance
with GAAP consistently applied and as presenting fairly in all material
respects the financial position of the Parent and its Subsidiaries on a
consolidated basis;
(e) SEC and Other Reports. Promptly upon their becoming available, one
copy of each financial statement, report, notice or proxy statement sent by
the Parent to stockholders generally and of each regular or periodic report,
and any registration statement or prospectus filed by any Constituent Company
or any Subsidiary with any securities exchange or the Securities and Exchange
Commission or any successor agency, and copies of any orders in any
proceedings to which any Constituent Company or any Subsidiary is a party,
issued by any governmental agency, Federal or state, having jurisdiction over
such Constituent Company or Subsidiary, if such order could have a material
adverse effect on the properties, business, prospects or financial condition
of the Parent and its Subsidiaries taken as a whole;
- -22-
<PAGE> 23
(f) Officer's Certificates. Within the periods provided in paragraphs
(a) and (b) above, a certificate of the chief financial officer of the Parent
stating that such officer has reviewed the provisions of this Agreement and
setting forth: (1) the information and computations (in sufficient detail)
required in order to establish whether the Constituent Companies and their
Subsidiaries were in compliance with the requirements of e5.6 through e5.13 at
the end of the period covered by the financial statements then being furnished,
and (2) whether there existed as of the date of such financial statements and
whether, to the best of such officer's knowledge, there exists on the date of
the certificate or existed at any time during the period covered by such
financial statements any Default or Event of Default and, if any such condition
or event exists on the date of the certificate, specifying the nature and
period of existence thereof and the action the Constituent Companies are taking
and propose to take with respect thereto;
(g) Accountant's Certificates. Within the period provided in
paragraph (b) above, (i) a certificate of the accountants who render an opinion
with respect to such financial statements, stating that they have reviewed this
Agreement and stating further whether, in making their audit, such accountants
have become aware of any Default or Event of Default under any of the terms or
provisions of this Agreement insofar as any such terms or provisions pertain to
or involve accounting matters or determinations, and if any such condition or
event then exists, specifying the nature and period of existence thereof and
(ii) a certificate of such accountants indicating that they have audited the
annual reconciliation of consolidated financial statements prepared in
accordance with Frozen GAAP to the consolidated financial statements prepared
in accordance with GAAP and in their opinion the adjustments made are presented
fairly in all material respects in accordance with this Agreement; and
(h) Requested Information. With reasonable promptness, such other
data and information as you or any such Institutional Holder may reasonably
request.
Without limiting the foregoing, the Constituent Companies will permit you, so
long as you are the holder of any Note, and each Institutional Holder of 5% or
more of the aggregate principal amount of the Notes then outstanding (or such
Persons as either you or such Institutional Holder may reasonably designate),
to visit and inspect, under the Constituent Companies' guidance, any of the
properties of any Constituent Company or any Subsidiary, to examine all of
their books of account, records, reports and other papers, to make copies and
extracts therefrom and to discuss their respective affairs, finances and
accounts with their respective officers, employees, and, upon notification to
the Chief Financial Officer of the Parent, independent public accountants (and
by this provision each Constituent Company authorizes said accountants to
discuss with you the finances and affairs of such Constituent Company and its
Subsidiaries) all at such reasonable times and as often as may be reasonably
requested. Any visitation shall be at the sole expense of you or such
Institutional Holder, unless a Default or Event of Default shall have occurred
and be continuing or the holder of any Note or of any other evidence of
Indebtedness of the Constituent Companies or any Subsidiary gives any written
notice or takes any other action with respect to a claimed default, in which
case, any such visitation or inspection shall be at the sole expense of the
Constituent Companies.
- -23-
<PAGE> 24
Section 5.18. Additional Constituent Companies;. Any Non-Obligor
Subsidiary may become a Constituent Company upon the delivery to all of the
holders of the Notes each of the following items:
(a) an executed Joinder Agreement in the form attached hereto as
Exhibit F;
(b) a certificate of the Secretary (or equivalent) of such Non-Obligor
Subsidiary certifying (1) the names and true signatures of the incumbent
officers of such Non-Obligor Subsidiary authorized to sign the Joinder
Agreement, (2) the By-Laws of such Non-Obligor Subsidiary as in effect on the
date of such certification, (3) the resolutions of such Non-Obligor
Subsidiary's Board of Directors approving and authorizing the execution,
delivery and performance of the Joinder Agreement, (4) that there has been no
change in the Articles of Incorporation (or equivalent) or By-Laws of such
Non-Obligor Subsidiary since the date of the review thereof by counsel
providing the opinion described in clause (e) below, and (5) that such
Non-Obligor Subsidiary is in good standing in its state of incorporation and
in each other state in which it is qualified to do business;
(c) a good standing certificate or like certificate from the
appropriate governmental official of the jurisdiction of incorporation of such
Non-Obligor Subsidiary;
(d) the Articles of Incorporation (or equivalent) of such Non-Obligor
Subsidiary recently certified by the Secretary of State (or equivalent) of the
jurisdiction of incorporation of such Non-Obligor Subsidiary; and
(e) an opinion of counsel satisfactory to you in the form attached hereto
as Exhibit G.
Upon receipt by the holders of the Notes of all of the foregoing items
properly completed and duly executed, such Non-Obligor Subsidiary shall be
deemed to be a Constituent Company for the purposes hereof, subject to all of
the terms, conditions and provisions hereof and of each of the Notes as if it
were an original party hereto and thereto.
Section 5.19. Contribution and Conveyance;. Each of the Constituent
Companies acknowledges that each of the other Constituent Companies is part of
a consolidated group of companies and that its financial strength is
interdependent upon the financial strength of the consolidated group as a
whole. Each of the Constituent Companies further acknowledges that its joint
and several obligations under the Agreements is a necessary condition to the
Constituent Companies receiving any funds from the issue of the Notes.
Therefore, each of the Constituent Companies acknowledges and agrees that the
Notes are supported by adequate consideration and that each has received a
substantial benefit from the Notes, regardless of the amount of funds actually
received by such Constituent Company under the Agreements. In the event a
Constituent Company makes any payment under the Agreements which exceeds the
amount of funds actually received, directly or indirectly, by such Constituent
Company thereunder, such Constituent Company shall be entitled to contribution
and reimbursement from each of the other Constituent Companies, pro rata, on
the basis of funds actually received and shall be entitled to recover such
amounts by available legal means. After (but only after) full payment of the
Notes and until such recovery is made, such Constituent Company shall be
- -24-
<PAGE> 25
deemed subrogated to the rights and interests of the Purchasers under the
Agreements. Such rights of contribution, reimbursement and subrogation shall
be and remain at all times junior, subordinate, inferior and subject to the
right and interests of the Purchasers under the Agreements and shall not
affect or impair in any way the joint, several, personal and unconditional
obligation of each Constituent Company to fully pay each of the Notes and to
perform all its other obligations under the Agreements.
Section 5.20. Prohibition of Extension of the Lincoln National Liens;.
The Constituent Companies will not agree to any extension, renewal or
refunding of any lien securing the Lincoln National Indebtedness, whether or
not in connection with the extension, renewal or refunding of the Lincoln
National Indebtedness; provided that the Constituent Companies may substitute
collateral for the collateral securing the Lincoln National Indebtedness in
accordance with and pursuant to the terms of the Trust Indenture evidencing
the Lincoln National Indebtedness so long as the fair market value of such
substitute collateral is similar to the fair market value of the collateral
being released with respect to the Lincoln National Indebtedness determined on
the date of such substitution (hereinafter referred to as the "Lincoln
National Liens").
Section 5.21. Prohibition of Change in Fiscal Year;. The Constituent
Companies will not, and will not permit any of their Subsidiaries to, change
their fiscal year-ends for accounting purposes unless each Constituent Company
and Subsidiary concurrently changes its fiscal year end to the same date and
the Parent provides 60 days prior written notice of such change to each of the
holders of the Notes.
Section 6. Events of Default and Remedies Therefor;.
Section 6.1. Events of Default;. Any one or more of the following
shall constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note when
the same shall have become due and such default shall continue for more than
five Business Days; or
(b) Default shall occur in the making of any required prepayment on any
of the Notes as provided in e2.1; or
(c) Default shall occur in the making of any other payment of the
principal of any Note or premium, if any, thereon at the expressed or any
accelerated maturity date or at any date fixed for prepayment; or
(d) Default shall occur in the observance or performance of any other
provision of this Agreement which is not remedied within 30 days after the
earlier of (1) the day on which any of the Constituent Companies first knows
of such default, or (2) the day on which written notice thereof is given to
the Constituent Companies by the holder of any Note; or
(e) Default or the happening of any event shall occur under any
indenture, agreement or other instrument under which any Indebtedness for
borrowed money of any Constituent Company or any Subsidiary (other than the
Notes) is outstanding in excess of the lesser of (1) 10% of Consolidated
Stockholders' Equity or (2) $10,000,000 and such default or event shall have
- -25-
<PAGE> 26
resulted in the acceleration of the maturity of such Indebtedness; or
(f) Any representation or warranty made by a Constituent Company herein,
or made by a Constituent Company in any written statement or certificate
furnished by such Constituent Company in connection with the consummation of
the issuance and delivery of the Notes or furnished by a Constituent Company
pursuant hereto, is untrue in any material respect as of the date of the
issuance or making thereof; or
(g) Final uninsured judgment or judgments for the payment of money
aggregating in excess of $10,000,000 is or are outstanding against the
Constituent Companies or their Subsidiaries or against any property or assets
of either and any one of such judgments has remained unpaid, unvacated,
unbonded or unstayed by appeal or otherwise for a period of 60 days from the
date of its entry; or
(h) A custodian, liquidator, trustee or receiver is appointed for any
Constituent Company or Subsidiary or for the major part of the property of
such Constituent Company or Subsidiary and is not discharged within 60 days
after such appointment; or
(i) Any Constituent Company or Subsidiary becomes insolvent or
bankrupt, is generally not paying its debts as they become due or makes an
assignment for the benefit of creditors, or any Constituent Company or
Subsidiary applies for or consents to the appointment of a custodian,
liquidator, trustee or receiver for such Constituent Company or Subsidiary or
for the major part of the property of such Constituent Company or Subsidiary;
or
(j) Bankruptcy, reorganization, arrangement or insolvency proceedings, or
other proceedings for relief under any bankruptcy or similar law or laws for
the relief of debtors, are instituted by or against any of the Constituent
Companies or any Subsidiary and, if instituted against any of the Constituent
Companies or any Subsidiary, are consented to or are not dismissed within 60
days after such institution.
Section 6.2. Notice to Holders;. When any Event of Default
described in the foregoing e6.1 has occurred, or if the holder of any Note or
of any other evidence of Indebtedness for borrowed money of the Constituent
Companies gives any notice or takes any other action with respect to a claimed
default, the Constituent Companies agree to give notice within three Business
Days of such event to all holders of the Notes then outstanding.
Section 6.3. Acceleration of Maturities;. When any Event of Default
described in paragraph (a), (b) or (c) of e6.1 has happened and is continuing,
any holder of any Note may, by notice in writing sent in the manner provided
in e9.6 hereof to the Constituent Companies, declare the entire principal and
all interest accrued on such Note to be, and such Note shall thereupon become
forthwith due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived. When any Event
of Default described in paragraphs (a) through (g), inclusive, of said e6.1
has happened and is continuing, the holder or holders of greater than 50% of
the principal amount of Notes at the time outstanding may, by notice in
writing in the manner provided in e9.6 to the Constituent Companies, declare
the entire principal and all interest accrued on all Notes to be, and all
- -26-
<PAGE> 27
Notes shall thereupon become, forthwith due and payable, without any
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived. When any Event of Default described in paragraph
(h), (i) or (j) of e6.1 has occurred, then all outstanding Notes shall
immediately become due and payable without presentment, demand or notice of
any kind. Upon the Notes becoming due and payable as a result of any Event of
Default as aforesaid, the Constituent Companies will forthwith pay to the
holders of the Notes the entire principal and interest accrued on the Notes
and, to the extent not prohibited by applicable law, an amount as liquidated
damages for the loss of the bargain evidenced hereby (and not as a penalty)
equal to the Make-Whole Amount, determined as of the date on which the Notes
shall so become due and payable. No course of dealing on the part of the
holder or holders of any Notes nor any delay or failure on the part of any
holder of Notes to exercise any right shall operate as a waiver of such right
or otherwise prejudice such holder's rights, powers and remedies. The
Constituent Companies further agree, to the extent permitted by law, to pay to
the holder or holders of the Notes all costs and expenses incurred by them in
the collection of any Notes upon any default hereunder or thereon, including
reasonable compensation to such holder's or holders' attorneys for all
services rendered in connection therewith.
Section 6.4. Rescission of Acceleration;. The provisions of e6.3 are
subject to the condition that if the principal of and accrued interest on all
or any outstanding Notes have been declared immediately due and payable by
reason of the occurrence of any Event of Default described in paragraphs (a)
through (g), inclusive, of e6.1, the holders of 66-2/3% in aggregate principal
amount of the Notes then outstanding may, by written instrument filed with the
Constituent Companies, rescind and annul such declaration and the consequences
thereof, provided that at the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other sums payable
under the Notes and under this Agreement (except any principal, interest or
premium on the Notes which has become due and payable solely by reason of such
declaration under e6.3) shall have been duly paid; and
(c) each and every other Default and Event of Default shall have been
made good, cured or waived pursuant to e7.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right
consequent thereto.
Section 7. Amendments, Waivers and Consents;.
Section 7.1. Consent Required;. Any term, covenant, agreement or
condition of this Agreement may, with the consent of the Constituent Companies,
be amended or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), if the
Constituent Companies shall have obtained the consent in writing of the holders
of at least 66-2/3% in aggregate principal amount of outstanding Notes;
provided that without the written consent of the holders of all of the
- -27-
<PAGE> 28
Notes then outstanding, no such amendment or waiver shall be effective
(a) which will change the time of payment (including any prepayment required by
e2.1) of the principal of or the interest on any Note or change the principal
amount thereof or change the rate of interest thereon, or (b) which will change
any of the provisions with respect to optional prepayments, or (c) which will
change the percentage of holders of the Notes required to consent to any such
amendment or waiver of any of the provisions of this e7 or e6.
Section 7.2. Solicitation of Holders;. So long as there are any Notes
outstanding, the Constituent Companies will not solicit, request or negotiate
for or with respect to any proposed waiver or amendment of any of the
provisions of this Agreement or the Notes unless each holder of Notes
(irrespective of the amount of Notes then owned by it) shall be informed
thereof by the Constituent Companies and shall be afforded the opportunity of
considering the same and shall be supplied by the Constituent Companies with
sufficient information to enable it to make an informed decision with respect
thereto. The Constituent Companies will not, directly or indirectly, pay or
cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, to any holder of Notes as consideration
for or as an inducement to entering into by any holder of Notes of any waiver
or amendment of any of the terms and provisions of this Agreement or the Notes
unless such remuneration is concurrently offered, on the same terms, ratably
to the holders of all Notes then outstanding. Promptly and in any event
within 30 days of the date of execution and delivery of any such waiver or
amendment, the Constituent Companies shall provide a true, correct and
complete copy thereof to each of the holders of the Notes.
Section 7.3. Effect of Amendment or Waiver;. Any such amendment or
waiver shall apply equally to all of the holders of the Notes and shall be
binding upon them, upon each future holder of any Note and upon each of the
Constituent Companies, whether or not such Note shall have been marked to
indicate such amendment or waiver. No such amendment or waiver shall extend to
or affect any obligation not expressly amended or waived or impair any right
consequent thereon.
Section 8. 'Interpretation of Agreement; Definitions';.
Section 8.1. Definitions;. Unless the context otherwise requires,
the terms hereinafter set forth when used herein shall have the following
meanings and the following definitions shall be equally applicable to both the
singular and plural forms of any of the terms herein defined:
"Affiliate" shall mean any Person (other than a Subsidiary (a) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, any of the Constituent
Companies, (b) which beneficially owns or holds 10% or more of any class of
the Voting Stock of any of the Constituent Companies, (c) 10% or more of the
Voting Stock (or in the case of a Person which is not a corporation, 10% or
more of the equity interest) of which is beneficially owned or held by any of
the Constituent Companies or any Subsidiary or (d) each executive officer and
director of such Person whether or not included within the meaning of clauses
(a), (b) or (c) above. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of Voting Stock, by
contract or otherwise.
- -28-
<PAGE> 29
"Assigned Value" shall mean the amount of stock which is the subject of
the transaction expressed as a percentage of the total stock of such entity
times the net book value of all assets of such entity as the net book value of
such assets is determined in accordance with GAAP.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks in Kansas City, Missouri or New York, New York are required
by law to close or are customarily closed.
"Capitalized Lease" shall mean any lease the obligation for Rentals with
respect to which is required to be capitalized on a consolidated balance sheet
of the lessee and its subsidiaries in accordance with Frozen GAAP.
"Capitalized Rentals" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person in accordance with Frozen GAAP.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. ee9601 et seq., and any future
amendments.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations from time to time promulgated thereunder.
"Computing Holder" shall mean, as of the date of the related notice of
optional prepayment delivered pursuant to e2.3, the holder of Notes with the
highest aggregate principal amount outstanding then being prepaid which holder
is willing to act in such capacity. In case two or more holders of Notes
would, by reason of holding Notes in the same aggregate principal amount
outstanding, qualify as the Computing Holder as aforesaid as of any date of
determination, the Computing Holder shall be the qualifying holder or holders
as mutually determined by all such qualifying holders. For purposes of this
definition Notes held by a holder and one or more of its affiliates shall be
deemed to be held by a single holder.
"Consolidated Current Assets" and "Consolidated Current Liabilities"
shall mean as of the date of any determination thereof such assets and
liabilities of the Parent and its Subsidiaries on a consolidated basis as
shall be determined in accordance with Frozen GAAP to constitute current
assets and current liabilities, respectively, including without limitation,
the current portion of any long-term Indebtedness and the current portion of
any amounts due with respect to Specified Preferred Stock.
"Consolidated Funded Debt" shall mean, as of the date of determination
thereof, all Funded Debt of the Parent and its Subsidiaries, determined on a
consolidated basis eliminating intercompany items.
"Consolidated Net Earnings" for any period shall mean the consolidated
net earnings of the Parent and its Subsidiaries for such period, determined on
a consolidated basis eliminating intercompany items in accordance with Frozen
GAAP, but excluding in any event:
- -29-
<PAGE> 30
(a) net earnings and losses of any Subsidiary accrued prior to the
date it became a Subsidiary except such net earnings or losses which were
actually included within "Consolidated Net Earnings" prior to the time such
entity became a Subsidiary; and
(b) any extraordinary gains or losses included in consolidated net
earnings in accordance with Frozen GAAP.
"Consolidated Specified Indebtedness" shall mean, as of the date of any
determination thereof, the Specified Indebtedness of the Parent and its
Subsidiaries on a consolidated basis eliminating intercompany items.
"Consolidated Stockholders' Equity" shall mean, as of the date of any
determination thereof, the Stockholders' Equity of the Parent and its
Subsidiaries on a consolidated basis eliminating intercompany items.
"Consolidated Total Capitalization" shall mean, as of the date of any
determination thereof, the sum of Consolidated Stockholders' Equity plus
Consolidated Funded Debt.
"Constituent Companies" shall mean, collectively, (a) the Parent, (b)
Unitog Rental Services, Inc., a California corporation, (c) any other
Subsidiary which has satisfied the requirements of e5.19 and (d) any Person
who succeeds to all, or substantially all, of the assets and business of any
such party.
"Credit Agreement" shall mean that certain Bank Credit Agreement dated
as of September 10, 1993 among the Parent, Unitog Rental Services, Inc., the
financial institutions which are from time to time parties thereto, United
Missouri Bank of Kansas City, as agent, as the same may be amended or modified
from time to time, and any credit facility or agreement in replacement of,
renewal of or expansion of that certain Bank Credit Agreement described above.
"Current Management Team" shall mean those officers of the Parent which
qualify as an "Executive Officer" as defined in Rule 501(f) of the Securities
Act of 1933, as amended, as of the date of the relevant consolidation or
merger pursuant to e5.13(a).
"Default" shall mean any event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default.
"Environmental Law" shall mean any international, federal, state or
local statute, law, regulation, order, consent decree, judgment, permit,
license, code, common law, treaty, convention, ordinance or other requirement
relating to the environment, including, without limitation, those relating to
releases, discharges or emissions to air, water, land or groundwater, to the
withdrawal or use of groundwater, to the use and handling of polychlorinated
biphenyls or asbestos, to the disposal, treatment, storage or management of
hazardous or solid waste, or Hazardous Substances or crude oil, or any
fraction thereof, or to exposure to toxic or hazardous materials, to the
handling, transportation, discharge or release of gaseous or liquid Hazardous
Substances and any regulation, order, or notice issued pursuant to such law,
statute or ordinance, in each case applicable to the property of the
Constituent Companies and its Subsidiaries or the operation, construction or
- -30-
<PAGE> 31
modification of any thereof, including without limitation the following: the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986, the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, the
Hazardous Materials Transportation Act, as amended, the Federal Water
Pollution Control Act, as amended by the Clean Water Act of 1976, the Safe
Drinking Water Control Act, the Clean Air Act of 1966, as amended, the Toxic
Substances Control Act of 1976, the Occupational Safety and Health Act of
1977, as amended, the Emergency Planning and Community Right-to-Know Act of
1986, the National Environmental Policy Act of 1975, the Oil Pollution Act of
1990 and any similar or implementing state law, and any state statute and any
further amendments to these laws providing for financial responsibility for
cleanup or other actions with respect to the release or threatened release of
Hazardous Substances or crude oil, or any fraction thereof and all rules and
regulations promulgated thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to also refer to any
successor sections.
"ERISA Affiliate" shall mean any corporation, trade or business that is,
along with any of the Constituent Companies, a member of a controlled group of
corporations or a controlled group of trades or businesses, as described in
section 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA.
"Event of Default" shall have the meaning set forth in e6.1.
"Fixed Charges" for any period shall mean on a consolidated basis the
sum of (a) all Rentals (other than Rentals on Capitalized Leases) expensed
during such period by the Parent and its Subsidiaries, and (b) all Interest
Expense on all Indebtedness (including the interest component of Rentals on
Capitalized Leases) of the Parent and its Subsidiaries.
"Frozen GAAP" shall mean generally accepted accounting principles in
existence as of August 1, 1993.
"Funded Debt" of any Person shall mean (a) all Indebtedness of such
Person (1) for borrowed money, (2) which has been incurred in connection with
the acquisition of assets and is classified as long-term debt in accordance
with Frozen GAAP, including, without limitation, Purchase Money Indebtedness
or (3) Specified Preferred Stock, in each case having a final maturity of one
or more than one year from the date of origin thereof (or which is renewable
or extendible at the option of the obligor for a period or periods more than
one year from the date of origin), excluding all payments in respect thereof
that are required to be made within one year from the date of any
determination of Funded Debt and that shall constitute a current liability of
the obligor under Frozen GAAP, (b) all Capitalized Rentals (excluding current
maturities) of such Person, and (c) all Guaranties (excluding current
maturities) by such Person of Funded Debt of others.
"GAAP" shall mean generally accepted accounting principles in existence
from time to time.
- -31-
<PAGE> 32
"Governmental Approval" shall mean any written permit, license, variance,
certification, consent, no-action letter, clearance, exemption or other
approval granted by a Governmental Authority.
"Governmental Authority" shall mean any international, foreign, federal,
state, regional, county, local or other governmental or quasi-governmental
authority.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an agreement, contingent
or otherwise, by such Person: (a) to purchase such Indebtedness or obligation
or any property or assets constituting security therefor, (b) to advance or
supply funds (1) for the purchase or payment of such Indebtedness or
obligation, (2) to maintain working capital or any balance sheet or income
statement condition or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation, (c) to lease property
or to purchase Securities or other property or services primarily for the
purpose of assuring the owner of such Indebtedness or obligation of the
ability of the primary obligor to make payment of the Indebtedness or
obligation, or (d) otherwise to assure the owner of the Indebtedness or
obligation of the primary obligor against loss in respect thereof. For the
purposes of all computations made under this Agreement, a Guaranty in respect
of any Indebtedness for borrowed money shall be deemed to be Indebtedness
equal to the principal amount of such Indebtedness for borrowed money which
has been guaranteed, and a Guaranty in respect of any other obligation or
liability or any dividend shall be deemed to be Indebtedness equal to the
maximum aggregate amount of such obligation, liability or dividend.
"Hazardous Substance" shall mean any hazardous or toxic material,
substance or waste, pollutant or contaminant which is regulated under any
statute, law, ordinance, rule or regulation of any local, state, regional or
federal authority having jurisdiction over the property of any of the
Constituent Companies and their Subsidiaries or its use, including but not
limited to any material, substance or waste which is: (a) defined as a
hazardous substance under Section 311 of the Federal Water Pollution Control
Act (33 U.S.C. e1317) as amended; (b) regulated as a hazardous waste under
Section 1004 or Section 3001 of the Federal Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act (42 U.S.C. e6901 et
seq.), as amended; (c) defined as a hazardous substance under Section 101 of
the Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. e9601 et seq.), as amended, or (d) defined or regulated as a hazardous
substance or hazardous waste under any rules or regulations promulgated under
any of the foregoing statutes.
"Honduras Subsidiary" shall mean Unitog De Honduras, S.A., a Honduran
corporation.
"Indebtedness" of any Person shall mean and include all obligations of
such Person which in accordance with Frozen GAAP shall be classified upon a
balance sheet of such Person as liabilities of such Person, and in any event
shall include all (a) obligations of such Person for borrowed money or which
- -32-
<PAGE> 33
has been incurred in connection with the acquisition of property or assets,
(b) obligations secured by any Lien upon property or assets owned by such
Person, even though such Person has not assumed or become liable for the
payment of such obligations, (c) obligations created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the event of default
are limited to repossession or sale of property, (d) Capitalized Rentals, (e)
Specified Preferred Stock, and (f) Guaranties of obligations of others of the
character referred to in this definition.
"Industrial Development Bonds" shall mean all "qualified small issue
bonds" as defined in Section 144(a) of the Code or any successor provision
thereto.
"Institutional Holder" shall mean any of the following Persons: (a) any
bank, savings and loan association, savings institution, trust company or
national banking association, acting for its own account or in a fiduciary
capacity, (b) any charitable foundation, (c) any insurance company, (d) any
fraternal benefit society, (e) any pension, retirement or profit sharing trust
or fund within the meaning of Title I of ERISA or for which any bank, trust
company, national banking association or investment adviser registered under
the Investment Advisers Act of 1940, as amended, is acting as trustee or
agent, (f) any investment company or business development company, as defined
in the Investment Company Act of 1940, as amended, (g) any small business
investment company licensed under the Small Business Investment Act of 1958,
as amended, (h) any broker or dealer registered under the Securities Exchange
Act of 1934, as amended, or any investment adviser registered under the
Investment Adviser Act of 1940, as amended, (i) any government, any public
employees' pension or retirement system, or any other government agency
supervising the investment of public funds, (j) any other entity all of the
equity owners of which are Institutional Holders or (k) any other Person which
may be within the definition of "qualified institutional buyer" as such term
is used in Rule 144A, as from time to time in effect, promulgated under the
Securities Act of 1933, as amended.
"Interest Expense" for any period shall mean all interest and all
amortization of debt discount and expense on any particular Indebtedness
(including, without limitation, payment-in-kind, zero coupon and other like
Securities) for which such calculations are being made and dividends on
Specified Preferred Stock.
"Investments" shall mean all investments, in cash or by delivery of
property made, directly or indirectly in any Person, whether by acquisition of
shares of capital stock, Indebtedness or Securities or by loan, advance
(excluding employee related advances), capital contribution or otherwise;
provided that "Investments" shall not mean or include investments in property
to be used or consumed in the ordinary course of business. In no event shall
the purchase or acquisition of any Property (other than shares of stock of any
class or any other Security) of a business engaged in the same general nature
of business engaged in by the Parent and its Subsidiaries taken as a whole
constitute an Investment.
"Lien" shall mean any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
- -33-
<PAGE> 34
interest is based on the common law, statute or contract, and including but
not limited to the security interest lien arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encumbrances, easements, rights-of-way, covenants,
conditions, and restrictions on real property. For the purposes of this
Agreement, a Constituent Company or a Subsidiary shall be deemed to be the
owner of any property which it has acquired or holds subject to a conditional
sale agreement, Capitalized Lease or other arrangement pursuant to which title
to the property has been retained by or vested in some other Person for
security purposes and such retention or vesting shall constitute a Lien.
"Lincoln National Indebtedness" shall mean that certain Indebtedness
issued pursuant to that certain Trust Indenture dated as of December 1, 1988
between the Parent, Unitog Rental Services, Inc. and People's Bank & Trust
Company, as trustee, for the benefit of Lincoln National Life Insurance
Company and outstanding on the Closing Date.
"Lincoln National Liens" shall have the meaning set forth in e5.20.
"Make-Whole Amount" shall mean in connection with any prepayment or
acceleration of the Notes the excess, if any, of (a) the aggregate present
value as of the date of such prepayment or acceleration of each dollar of
principal being prepaid (taking into account the application of such
prepayment required by e2.1) or accelerated and the amount of interest
(exclusive of interest accrued to the date of prepayment) that would have been
payable in respect of such dollar if such prepayment or acceleration had not
occurred, determined by discounting such amounts at the Reinvestment Rate from
the respective dates on which they would have been payable, over (b) 100% of
the principal amount of the outstanding Notes being prepaid or accelerated.
If the Reinvestment Rate is equal to or higher than 5.79%, the Make-Whole
Amount shall be zero. For purposes of any determination of the Make-Whole
Amount:
"Reinvestment Rate" shall mean the sum of .50%, plus the yield reported
on the Telerate Information System, page 7677, Bid Side, (or, if not
available, any other nationally recognized trading screen reporting on-line
intraday trading in the United States government Securities as selected by the
holder or holders of greater than 50% of the principal amount of Notes at the
time outstanding) at 11:00 A.M. (New York, New York time) for the United
States government Securities having a maturity (rounded to the nearest month)
corresponding to the remaining Weighted Average Life to Maturity of the
principal being prepaid (taking into account the application of such
prepayment required by e2.1) or accelerated. If no maturity exactly
corresponds to such Weighted Average Life to Maturity, yields for the two
published maturities most closely corresponding to such Weighted Average Life
to Maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated from such yields on a
straight-line basis.
"Weighted Average Life to Maturity" of the principal amount of the Notes
being prepaid or accelerated shall mean, as of the time of any determination
thereof, the number of years obtained by dividing the then Remaining
Dollar-Years of such principal by the aggregate amount of such principal. The
term "Remaining Dollar-Years" of such principal shall mean the amount obtained
by (1) multiplying (i) the remainder of (A) the amount of principal that would
- -34-
<PAGE> 35
have become due on each scheduled payment date if such prepayment or
acceleration had not occurred, less (B) the amount of principal on the Notes
scheduled to become due on such date after giving effect to such prepayment
(and the application thereof in accordance with the provisions of e2.1) or
acceleration, by (ii) the number of years which will elapse between the date
of determination and such scheduled payment date, and (2) totalling the
products obtained in (1).
"Multiemployer Plan" shall have the same meaning as in ERISA.
"National Priority List" shall mean that certain list promulgated by the
United States Environmental Protection Agency of uncontrolled or abandoned
hazardous waste sites identified for possible long-term remedial action under
CERCLA.
"Net Earnings Available for Fixed Charges" for any period shall mean (a)
Consolidated Net Earnings during such period plus (b) (to the extent deducted
in determining Consolidated Net Earnings) the sum of (1) all provisions for
any Federal, state or other income taxes made by the Parent and its
Subsidiaries during such period, (2) amortization expense of the Parent and
its Subsidiaries during such period, and (3) Fixed Charges during such period.
"Non-Obligor Subsidiary" shall mean any Subsidiary which is not a
Constituent Company.
"Overdue Rate" shall mean the greater of (a) 7.79% per annum and (b) 2%
plus the rate which Chase Manhattan Bank, N.A., New York, New York announces
from time to time as its prime lending rate.
"Parent" shall mean Unitog Company, a Delaware corporation, and any
Person who succeeds to all, or substantially all, of the assets and business
of such Person.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political
subdivision thereof.
"Plan" shall mean a "pension plan," as such term is defined in ERISA,
established or maintained by any of the Constituent Companies or any ERISA
Affiliate or as to which the Constituent Company or any ERISA Affiliate
contributed or is a member or otherwise may have any liability, other than a
Multiemployer Plan.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
"Purchase Money Indebtedness" shall mean with respect to any Person
Indebtedness secured by Liens given to secure the payment of the purchase
price of assets acquired by such Person.
"Purchaser" shall have the meaning set forth in e1.1.
- -35-
<PAGE> 36
"RCRA" shall mean the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste
Amendments of 1984, 42 U.S.C. ee6901 et seq., and any future amendments.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing
into the environment, including, without limitation, the abandonment or
discarding of barrels, drums, containers, tanks and other receptacles
containing any Hazardous Substance.
"Rentals" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of
the property) payable by a Constituent Company or a Subsidiary, as lessee or
sublessee under a lease of real or personal property, but shall be exclusive
of any amounts required to be paid by such Constituent Company or Subsidiary
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges. Fixed rents under
any so-called "percentage leases" shall be computed solely on the basis of the
minimum rents, if any, required to be paid by the lessee regardless of sales
volume or gross revenues.
"Reportable Event" shall have, with respect to any Plan, the same
meaning as in Section 4043 of ERISA, except shall not include reportable
events with respect to which the 30-day notice requirement has been waived by
the PBGC (provided that the loss of qualification of a Plan and the failure to
meet the minimum funding standards of Section 412 of the Code or Section 302
of ERISA shall be a Reportable Event regardless of the issuance of any waiver
of the notice requirement by the PBGC).
"Responsible Officer" shall mean the Chairman, President and any Senior
Vice President, of the relevant Constituent Company.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Special Subsidiary" shall mean any corporation of which more than 80%
(by number of votes) of the Voting Stock shall be beneficially owned by the
Constituent Companies and/or Wholly-Owned Subsidiaries, which is organized
under the laws of the United States or any State thereof and which conducts
substantially all of its business and has substantially all of its assets
within the United States.
"Specified Group" shall mean any group of Persons which includes 2/3 of
the Current Management Team.
"Specified Indebtedness" shall mean with respect to any Person, as of
the date of determination thereof, the sum of (a) Funded Debt of such Person
plus (b) all Indebtedness for borrowed money that shall constitute a current
liability of the obligor under Frozen GAAP, including without limitation, all
payments in respect of Funded Debt that are required to be made within one
year from the date of any determination thereof and all payments in respect of
Specified Preferred Stock that are required to be made within one year from
the date of any determination thereof.
- -36-
<PAGE> 37
"Specified Preferred Stock" shall mean preferred stock of any entity
which includes mandatory redemption provisions without regard to the date of
any such final redemption whether or not such preferred stock shall be
classified as indebtedness in accordance with Frozen GAAP.
"Stipulated Value" shall mean the remainder of (a) the percentage of the
total stock of the relevant Non-Obligor Subsidiary owned by the Constituent
Companies or Wholly-Owned Subsidiaries immediately prior to the relevant sale,
lease or other disposition of assets (the "Asset Transaction") multiplied by
the net book value of the total assets of such Non-Obligor Subsidiary
determined immediately prior such Asset Transaction less (b) the percentage of
the total stock of the relevant Special Subsidiary owned by the Constituent
Companies or Wholly-Owned Subsidiaries immediately after giving effect to such
Asset Transaction multiplied by the net book value of the total assets of such
Non-Obligor Subsidiary determined immediately prior to such Asset Transaction.
"Stockholders' Equity" shall mean with respect to any Person, as of the
date of any determination thereof, the stockholders' equity as would be shown
on the balance sheet of such Person in accordance with Frozen GAAP, excluding
in any event Specified Preferred Stock.
The term "subsidiary" shall mean as to any particular parent corporation any
corporation of which more than 50% (by number of votes) of the Voting Stock
shall be beneficially owned, directly or indirectly, by such parent
corporation. The term "Subsidiary" shall mean a subsidiary of the Constituent
Companies.
"Total Assets" shall mean all those items which are shown as assets on
the consolidated balance sheet of the Parent and its Subsidiaries on a
consolidated basis determined in accordance with Frozen GAAP.
"Voting Stock" shall mean Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
"Wholly-owned" shall mean (a) when used in connection with any
Subsidiary shall mean a Subsidiary of which all of the issued and outstanding
shares of stock (except shares required as directors' qualifying shares) shall
be owned by the Constituent Companies and/or one or more of their Wholly-owned
Subsidiaries and (b) the Honduras Subsidiary so long as the Parent continues
to own 98% of the stock of the Honduras Subsidiary at all times.
Section 8.2. Accounting Principles;. Where the character or amount
of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, the same shall be done in
accordance with Frozen GAAP, to the extent applicable, except where such
principles are inconsistent with the requirements of this Agreement.
Section 8.3. Directly or Indirectly;. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action
in question is taken directly or indirectly by such Person.
- -37-
<PAGE> 38
Section 9. Miscellaneous;.
Section 9.1. Registered Notes;. The Parent shall cause to be kept at
its principal office a register for the registration and transfer of the Notes,
and the Parent will register or transfer or cause to be registered or
transferred, as hereinafter provided any Note issued pursuant to this
Agreement.
At any time and from time to time the holder of any Note which has been
duly registered as hereinabove provided may transfer such Note upon surrender
thereof at the principal office of the Parent duly endorsed or accompanied by a
written instrument of transfer duly executed by the holder of such Note or its
attorney duly authorized in writing.
The Person in whose name any Note shall be registered shall be deemed
and treated as the owner and holder thereof for all purposes of this Agreement.
Payment of or on account of the principal, premium, if any, and interest on any
Note shall be made to or upon the written order of such holder.
Section 9.2. Exchange of Notes;. At any time and from time to time,
upon not less than ten days' notice to that effect given by the holder of any
Note initially delivered or of any Note substituted therefor pursuant to e9.1,
this e9.2 or e9.3, and, upon surrender of such Note at the Parent's office, the
Constituent Companies will deliver in exchange therefor, without expense to
such holder, except as set forth below, a Note for the same aggregate principal
amount as the then unpaid principal amount of the Note so surrendered, or Notes
in the denomination of $100,000 (or such lesser amount as shall constitute 100%
of the Notes of such holder) or any amount in excess thereof as such holder
shall specify, dated as of the date to which interest has been paid on the Note
so surrendered or, if such surrender is prior to the payment of any interest
thereon, then dated as of the date of issue, registered in the name of such
Person or Persons as may be designated by such holder, and otherwise of the
same form and tenor as the Notes so surrendered for exchange. The Constituent
Companies may require the payment of a sum sufficient to cover any stamp tax or
governmental charge imposed upon such exchange or transfer.
Section 9.3. Loss, Theft, Etc. of Notes;. Upon receipt of evidence
satisfactory to the Constituent Companies of the loss, theft, mutilation or
destruction of any Note, and in the case of any such loss, theft or destruction
upon delivery of a bond of indemnity in such form and amount as shall be
reasonably satisfactory to the Constituent Companies, or in the event of such
mutilation upon surrender and cancellation of the Note, the Constituent
Companies will make and deliver without expense to the holder thereof, a new
Note, of like tenor, in lieu of such lost, stolen, destroyed or mutilated Note.
If the Purchaser or any subsequent Institutional Holder is the owner of any
such lost, stolen or destroyed Note, then the affidavit of an authorized
officer of such owner, setting forth the fact of loss, theft or destruction and
of its ownership of such Note at the time of such loss, theft or destruction
shall be accepted as satisfactory evidence thereof and no further indemnity
shall be required as a condition to the execution and delivery of a new Note
other than the written agreement of such owner to indemnify the Constituent
Companies.
- -38-
<PAGE> 39
Section 9.4. Expenses, Stamp Tax Indemnity;. Whether or not the
transactions herein contemplated shall be consummated, the Constituent
Companies agree to pay directly all of your reasonable out-of-pocket expenses
in connection with the preparation, execution and delivery of this Agreement
and the transactions contemplated hereby, including but not limited to the
reasonable charges and disbursements of Chapman and Cutler, your special
counsel, duplicating costs and charges for shipping the Notes, adequately
insured to you at your home office or at such other place as you may
designate, and all such expenses relating to any amendment, waivers or
consents pursuant to the provisions hereof (whether or not the same are
actually executed and delivered), including, without limitation, any
amendments, waivers, or consents resulting from any work-out, renegotiation or
restructuring relating to the performance by the Constituent Companies of
their obligations under this Agreement and the Notes. The Constituent
Companies further agree that they will pay and save you harmless against any
and all liability with respect to stamp and other taxes, if any, which may be
payable or which may be determined to be payable in connection with the
execution and delivery of this Agreement or the Notes, whether or not any
Notes are then outstanding. The Constituent Companies agree to protect and
indemnify you against any liability for any and all brokerage fees and
commissions payable or claimed to be payable to any Person in connection with
the transactions contemplated by this Agreement. Without limiting the
foregoing, the Constituent Companies agree to pay the cost of obtaining the
private placement number for the Notes and authorizes the submission of such
information as may be required by Standard & Poor's CUSIP Service Bureau for
the purpose of obtaining such number.
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative';. No
delay or failure on the part of the holder of any Note in the exercise of any
power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of the same preclude any other or further exercise thereof, or
the exercise of any other power or right, and the rights and remedies of the
holder of any Note are cumulative to, and are not exclusive of, any rights or
remedies any such holder would otherwise have.
Section 9.6. Notices;. All communications provided for hereunder
shall be in writing and, if to you, delivered or mailed prepaid by registered
or certified mail or overnight air courier, or by facsimile communication, in
each case addressed to you at your address appearing on Schedule I to this
Agreement or such other address as you or the subsequent holder of any Note
initially issued to you may designate to the Constituent Companies in writing,
and if to the Constituent Companies, delivered or mailed by registered or
certified mail or overnight air courier, or by facsimile communication, to the
Parent at 101 West 11th Street, Kansas City, Missouri 64105, Attention:
President, or to such other address as the Parent may in writing designate to
you or to a subsequent holder of the Note initially issued to you; provided,
however, that a notice to you by overnight air courier shall only be effective
if delivered to you at a street address designated for such purpose in
Schedule I, and a notice to you by facsimile communication shall only be
effective if made by confirmed transmission to you at a telephone number
designated for such purpose in Schedule I, or, in either case, as you or a
subsequent holder of any Note initially issued to you may designate to the
Parent in writing.
- -39-
<PAGE> 40
Section 9.7. Successors and Assigns;. This Agreement shall be
binding upon the Constituent Companies and their successors and assigns and
shall inure to your benefit and to the benefit of your successors and assigns,
including each successive holder or holders of any Notes.
Section 9.8. Survival of Covenants and Representations;. All
covenants, representations and warranties made by the Constituent Companies
herein and in any certificates delivered pursuant hereto, whether or not in
connection with the Closing Date, shall survive the closing and the delivery of
this Agreement and the Notes.
Section 9.9. Severability;. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect
the validity or enforceability of any remaining portion, which remaining
portion shall remain in force and effect as if this Agreement had been
executed with the invalid or unenforceable portion thereof eliminated and it
is hereby declared the intention of the parties hereto that they would have
executed the remaining portion of this Agreement without including therein any
such part, parts or portion which may, for any reason, be hereafter declared
invalid or unenforceable.
Section 9.10. Governing Law;. This Agreement and the Notes issued and
sold hereunder shall be governed by and construed in accordance with Illinois
law.
Section 9.11. Submission to Jurisdiction.; Any legal action or
proceeding with respect to this Agreement or the Notes or any document related
thereto may be brought in the courts of the State of Illinois or of the United
States of America for the Northern District of Illinois, and, by execution and
delivery of this Agreement, each of the Constituent Companies hereby accepts
for itself and in respect of its property generally and unconditionally, the
jurisdiction of the aforesaid courts. Each of the Constituent Companies hereby
irrevocably and unconditionally waives any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens which it may now or hereafter have to the bringing of any
action or proceeding in such respective jurisdiction.
Section 9.12. Captions;. The descriptive headings of the various
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
The execution hereof by you shall constitute a contract between us for
the uses and purposes hereinabove set forth, and this Agreement may be executed
in any number of counterparts, each executed counterpart constituting an
original but all together only one agreement.
Unitog Company
By: /s/ J. Craig Peterson
Its: Senior Vice President
- -40-
<PAGE> 41
Unitog Rental Services, Inc.
By: /s/ J. Craig Peterson
Its: Senior Vice President
Accepted as of December 15, 1993.
Metropolitan Life Insurance Company
By: /s/ Michael J. Kroeger
Its: Vice President
By: /s/ Ruth Gluck
Its: Associate General Counsel
- -41-
<PAGE> 42
Unitog Company
and
Unitog Rental Services, Inc.
5.79% Senior Note
Due December 15, 2003
No. ____________, ____
$ PPN # 91326@ AB 0
Each of the undersigned (being referred to hereinafter individually and
collectively as a "Constituent Company" or the "Constituent Companies"), for
value received, hereby promises, jointly and severally, to pay to
or registered assigns
on the fifteenth day of December, 2003
the principal amount of
Dollars ($ )
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at
the rate of 5.79% per annum from the date hereof until maturity, payable
quarterly on the fifteenth of each March, June, September and December in each
year (commencing on March 15, 1994) and at maturity. The Constituent
Companies jointly and severally agree to pay interest on overdue principal
(including any overdue required or optional prepayment of principal) and
premium, if any, and (to the extent legally enforceable) on any overdue
installment of interest, at the Overdue Rate after the due date, whether by
acceleration or otherwise, until paid. "Overdue Rate" shall mean the greater
of (a) 7.79% per annum and (b) 2% plus the rate which Chase Manhattan Bank,
N.A., New York, New York announces from time to time as its prime lending
rate.
Both the principal hereof and interest hereon are payable at the principal
office Unitog Company, a Delaware corporation (the "Parent"), in Kansas City,
Missouri in coin or currency of the United States of America which at the time
of payment shall be legal tender for the payment of public and private debts.
If any amount of principal, premium, if any, or interest on or in respect of
this Note becomes due and payable on any date which is not a Business Day,
such amount shall be payable on the immediately succeeding Business Day.
"Business Day" means any day other than a Saturday, Sunday or other day on
which banks in Kansas City, Missouri or New York, New York are required by law
to close or are customarily closed.
This Note is one of the 5.79% Senior Notes due December 15, 2003 (the
"Notes") of the Constituent Companies in the aggregate principal amount of
$20,000,000 issued or to be issued under and pursuant to the terms and
provisions of that certain Note Agreement, dated as of December 1, 1993 (the
"Agreement"), entered into by the Constituent Companies with the original
Purchaser therein referred to and this Note and the holder hereof are entitled
to all the benefits provided for thereby or referred to therein. Reference is
hereby made to the Agreement for a statement of such rights and benefits.
This Note and the other Notes outstanding under the Agreement may be
A-49
<PAGE> 43
declared due prior to their expressed maturity dates and certain prepayments
are required to be made thereon, all in the events, on the terms and in the
manner and amounts as provided in the Agreement.
The Notes are not subject to prepayment or redemption at the option of
the Constituent Companies prior to their expressed maturity dates except on
the terms and conditions and in the amounts and with the premium, if any, set
forth in the Agreement.
This Note is registered on the books of the Parent and is transferable
only by surrender thereof at the principal office of the Constituent Companies
duly endorsed or accompanied by a written instrument of transfer duly executed
by the registered holder of this Note or its attorney duly authorized in
writing. Payment of or on account of principal, premium, if any, and interest
on this Note shall be made only to or upon the order in writing of the
registered holder.
This Note and said Agreement are governed by and construed in accordance
with the laws of Illinois.
Unitog Company
By
Its
Unitog Rental Services, Inc.
By
Its
A-50
<PAGE> 44
[Signature page for additional Constituent Company]
______________________________________
By
Its
A-51
<PAGE> 45
Representations and Warranties
Each of the Constituent Companies represents and warrants to you as
follows:
1. Subsidiaries. Schedule II attached to the Agreement states the name
of each of the Constituent Companies' Subsidiaries, its jurisdiction of
incorporation and the percentage of its Voting Stock owned by the Constituent
Companies and/or their Subsidiaries. The Constituent Companies and each
Subsidiary has good and marketable title to all of the shares it purports to
own of the stock of each Subsidiary, free and clear in each case of any Lien.
All such shares have been duly issued and are fully paid and non-assessable.
2. Corporate Organization and Authority. Each of the Constituent
Companies, and each Subsidiary,
(a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority to own and operate its
properties and to carry on its business as now conducted and as presently
proposed to be conducted;
(c) has all necessary licenses and permits to own and operate its
properties and to carry on its business as now conducted and as presently
proposed to be conducted, except where the failure to have such licenses or
permits will not materially affect adversely the properties, business,
prospects, or financial condition of the Parent and its Subsidiaries, taken as
a whole; and
(d) is duly licensed or qualified and is in good standing as a
foreign corporation in each jurisdiction wherein the nature of the business
transacted by it or the nature of the property owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified will not materially affect adversely the properties,
business, prospects, or financial condition of the Parent and its
Subsidiaries, taken as a whole.
As of January 31, 1993, the total assets of the Honduras Subsidiary
represented less than 1% of Total Assets and the amount of Consolidated Net
Earnings contributed by the Honduras Subsidiary was less than 1.3%.
3. Business and Property. You have heretofore been furnished with a
copy of the Confidential Private Placement Offering Memorandum dated October,
1993 (the "Memorandum") prepared by George K. Baum & Company which generally
sets forth the business conducted and proposed to be conducted by the
Constituent Companies and their Subsidiaries and the principal properties of
the Constituent Companies and their Subsidiaries, taken as a whole.
4. Financial Statements. (a) The consolidated balance sheets of the
Parent and its consolidated Subsidiaries as of its fiscal year end in each of
the years 1991 to 1993, both inclusive, and the statements of earnings and
retained earnings and cash flows for the fiscal years then ended, each
accompanied by a report thereon containing an opinion unqualified as to scope
limitations imposed by the Parent and otherwise without qualification except
B-52
<PAGE> 46
as therein noted, by KPMG Peat Marwick, have been prepared in accordance with
generally accepted accounting principles at the time consistently applied
except as therein noted, and present fairly in all material respects the
financial position of the Parent and its consolidated Subsidiaries as of such
dates and the results of its operations and cash flows for such periods. The
unaudited consolidated balance sheets of the Parent and its consolidated
Subsidiaries as of October 31, 1993, and the unaudited statements of earnings
and retained earnings and cash flows for the nine-month period ended on said
date prepared by the Parent, have been prepared in accordance with generally
accepted accounting principles at the time consistently applied, and present
fairly in all material respects the financial position of the Parent and its
consolidated Subsidiaries as of said date and the results of its operations
and cash flows for such period.
(b) Since January 31, 1993, there has been no change in the condition,
financial or otherwise, of the Parent and its consolidated Subsidiaries as
shown on its consolidated balance sheets as of such date except for a public
offering in April 1993 of 1,150,000 shares of common stock by the Parent and
except for changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse.
5. Indebtedness. Schedule II attached to the Agreement correctly
describes all Specified Indebtedness, Capitalized Leases and Liens of the
Constituent Companies and their Subsidiaries securing Indebtedness outstanding
on October 31, 1993.
6. Full Disclosure. Neither the financial statements referred to in
paragraph 4 hereof nor the Agreement, the Memorandum or any other written
statement furnished by the Constituent Companies to you in connection with the
negotiation of the sale of the Notes, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. To the knowledge of the
Consolidated Companies, there is no fact peculiar to the Constituent Companies
or their Subsidiaries which the Constituent Companies have not disclosed to
you in writing which materially affects adversely nor, so far as the
Constituent Companies can now foresee, will materially affect adversely the
properties, business, prospects, or financial condition of the Parent and its
Subsidiaries, taken as a whole.
7. Pending Litigation. There are no proceedings pending or, to the
knowledge of the Constituent Companies, threatened against or affecting any of
the Constituent Companies or any Subsidiary in any court or before any
governmental authority or arbitration board or tribunal which are reasonably
likely to materially and adversely affect the properties, business, prospects
or financial condition of the Parent and its Subsidiaries, taken as a whole.
8. Title to Properties. Each of the Constituent Companies and each
Subsidiary has good and indefeasible title in fee simple (or its equivalent
under applicable law) to all material parcels of real property and has good
title to all the other material items of property it purports to own,
including that reflected in the most recent balance sheet referred to in
paragraph 4 hereof, except as sold or otherwise disposed of in the ordinary
course of business and except for Liens permitted by the Agreement.
9. Patents and Trademarks. Each of the Constituent Companies and each
Subsidiary owns or possesses (without any known conflict with the rights of
B-53
<PAGE> 47
others) all the patents, trademarks, trade names, service marks, copyrights,
licenses and rights with respect to the foregoing necessary for the present
and planned future conduct of its business, where the failure to possess would
be reasonably likely to have a material adverse effect on the properties,
business, prospects or financial condition of the Parent and its Subsidiaries,
taken as a whole.
10. Sale is Legal and Authorized. The sale of the Notes and compliance
by each of the Constituent Companies with all of the provisions of the
Agreement and the Notes:
(a) are within the corporate powers of each of the Constituent
Companies;
(b) will not violate any provisions of any law or any order of any
court or governmental authority or agency and will not conflict with or result
in any breach of any of the terms, conditions or provisions of, or constitute
a default under the Articles of Incorporation or By-laws of any Constituent
Company or any indenture or other agreement or instrument to which any
Constituent Company is a party or by which it may be bound or result in the
imposition of any Liens or encumbrances on any property of any Constituent
Company; and
(c) have been duly authorized by proper corporate action on the part
of each Constituent Company (no action by the stockholders of any Constituent
Company being required by law, by the Articles of Incorporation or By-laws of
such Constituent Company or otherwise), executed and delivered by each
Constituent Company and the Agreement and the Notes constitute the legal,
valid and binding obligations, contracts and agreements of each of the
Constituent Companies enforceable in accordance with their respective terms.
11. No Defaults. No Default or Event of Default has occurred and is
continuing. None of the Constituent Companies is in default in the payment of
principal or interest on any Indebtedness for borrowed money and is in default
under any instrument or instruments or agreements under and subject to which
any Indebtedness for borrowed money has been issued and no event has occurred
and is continuing under the provisions of any such instrument or agreement
which with the lapse of time or the giving of notice, or both, would
constitute an event of default thereunder.
12. Governmental Consent. No approval, consent or withholding of
objection on the part of any regulatory body, state, Federal or local, is
necessary in connection with the execution and delivery by the Constituent
Companies of the Agreement or the issuance, sale or delivery of the Notes or
compliance by the Constituent Companies with any of the provisions of the
Agreement or the Notes.
13. Taxes. All Federal income tax returns and, to the knowledge of the
Constituent Companies, all other tax returns required to be filed by the
Constituent Companies or any Subsidiary in any jurisdiction have, in fact,
been filed, and all taxes, assessments, fees and other governmental charges
upon any Constituent Company or any Subsidiary or upon any of their respective
properties, income or franchises, which are shown to be due and payable in
such returns have been paid. For all taxable years ending on or before
January 26, 1992, the Federal income tax liability of the Parent and its
B-54
<PAGE> 48
Subsidiaries has been satisfied and all taxable years through January 26, 1992
have been closed to future Federal income tax assessment by either the
District Director of the Internal Revenue Service's acceptance of a Revenue
Agent Report, or by the expiration of the period of limitations on assessment
of additional Federal tax. None of the Constituent Companies knows of any
proposed material additional tax assessment against it for which adequate
provision has not been made on its accounts, and no material controversy in
respect of additional Federal or state income taxes due since said date is
pending or to the knowledge of such Constituent Company threatened. In the
opinion of the Parent, the provisions for taxes on the consolidated books of
the Parent and its Subsidiaries are adequate in all material respects for all
open years, and for its current fiscal period.
14. Use of Proceeds. The net proceeds from the sale of the Notes will
be used to repay indebtedness under the Credit Agreement, for working capital
and for other corporate purposes all as set forth in greater detail on Annex I
hereto. None of the transactions contemplated in the Agreement (including,
without limitation thereof, the use of proceeds from the issuance of the
Notes) will violate or result in a violation of Section 7 of the Securities
Exchange Act of 1934, as amended, or any regulation issued pursuant thereto,
including, without limitation, Regulations G, T and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Chapter II. None of the
Constituent Companies nor any Subsidiary owns or intends to carry or purchase
any "margin stock" within the meaning of said Regulation G. None of the
proceeds from the sale of the Notes will be used to purchase, or refinance any
borrowing the proceeds of which were used to purchase, any "security" within
the meaning of the Securities Exchange Act of 1934, as amended, except as set
forth on Annex I hereto.
15. Private Offering. None of the Constituent Companies, directly or
indirectly, nor any agent on its behalf has offered or will offer the Notes or
any similar Security or has solicited or will solicit an offer to acquire the
Notes or any similar Security from or has otherwise approached or negotiated
or will approach or negotiate in respect of the Notes or any similar Security
with any Person other than the Purchaser and not more than 19 other
institutional investors, each of whom was offered a portion of the Notes at
private sale for investment. None of the Constituent Companies, directly or
indirectly, nor any agent on its behalf has offered or will offer the Notes or
any similar Security or has solicited or will solicit an offer to acquire the
Notes or any similar Security from any Person so as to bring the issuance and
sale of the Notes within the provisions of Section 5 of the Securities Act of
1933, as amended.
16. ERISA. The consummation of the transactions provided for in the
Agreement and compliance by the Constituent Companies with the provisions
thereof and the Notes issued thereunder will not involve any prohibited
transaction within the meaning of ERISA or Section 4975 of the Internal
Revenue Code of 1986, as amended. Each Plan complies in all material respects
with all applicable statutes and governmental rules and regulations, and (a)
no Reportable Event has occurred and is continuing with respect to any Plan,
(b) none of the Constituent Companies nor any ERISA Affiliate has any current
withdrawal liability (as described in Part I of Subtitle E of Title IV of
ERISA) with respect to any Multiemployer Plan or has instituted any steps to
withdraw from any Multiemployer Plan which could result in a withdrawal
liability, and (c) no steps have been instituted to terminate any Plan in a
B-55
<PAGE> 49
distress termination under Section 4041(c) of ERISA or a termination
instituted by the PBGC under Section 4042 of ERISA. To the knowledge of the
Constituent Companies, no condition exists or event or transaction has
occurred in connection with any Plan which could result in the incurrence by
any Constituent Company or any ERISA Affiliate of any material liability, fine
or penalty. No Plan maintained by any Constituent Company or any ERISA
Affiliate, nor any trust created thereunder, has incurred any "accumulated
funding deficiency" as defined in Section 302 of ERISA in excess of $100,000
nor does the present value of all benefits vested under all Plans exceed, as
of the last annual valuation date, the value of the assets of the Plans
allocable to such vested benefits by an amount greater than $100,000 in the
aggregate. None of the Constituent Companies nor any ERISA Affiliate has any
contingent liability with respect to any post-retirement "welfare benefit
plan" (as such term is defined in ERISA) except as has been disclosed to the
Purchaser.
17. Compliance with Law. None of the Constituent Companies nor any
Subsidiary (1) is in violation of any law, ordinance, franchise, governmental
rule or regulation to which it is subject; or (2) has failed to obtain any
license, permit, franchise or other governmental authorization necessary to
the ownership of its property or to the conduct of its business, which
violation or failure to obtain is reasonably likely to materially adversely
affect the business, prospects, properties or financial condition of the
Parent and its Subsidiaries, taken as a whole, or impair the ability of any of
the Constituent Companies to perform their respective obligations contained in
the Agreement or the Notes; provided, however, the Constituent Companies make
no representation or warranty in this paragraph 17 as to environmental
matters. None of the Constituent Companies nor any Subsidiary is in default
with respect to any order of any court or governmental authority or
arbitration board or tribunal.
18. Investment Company Act. None of the Constituent Companies is, nor
is directly or indirectly controlled by or acting on behalf of any Person
which is, required to register as an "investment company" under the Investment
Company Act of 1940, as amended.
19. Foreign Assets Control Regulations, etc. None of the Constituent
Companies nor any Affiliate of the Constituent Companies is, by reason of
being a "national" of "designated foreign country" or a "specially designated
national" within the meaning of the Regulations of the Office of Foreign
Assets Control, United States Treasury Department (31 C.F.R., Subtitle B,
Chapter V), or for any other reason, subject to any restriction or prohibition
under, or is in violation of, any Federal statute or Presidential Executive
Order, or any rules or regulations of any department, agency or administrative
body promulgated under any such statute or order, concerning trade or other
relations with any foreign country or any citizen or national thereof or the
ownership or operation of any property.
20. Environmental Matters. Except as disclosed in writing to the
Purchaser by letter dated the date hereof:
(i) the Constituent Companies and each of their Subsidiaries have
complied with all Environmental Laws;
(ii) to the Company's knowledge, there is not and has not ever been
B-56
<PAGE> 50
a Release or threatened Release of any Hazardous Substances at the Properties
of the Parent and its Subsidiaries that requires remediation under CERCLA;
(iii) the Constituent Companies and their Subsidiaries have obtained
all Governmental Approvals required under Environmental laws for the
operations on their Properties; and
(iv) the Constituent Companies and their Subsidiaries have not
received in writing any claims or orders for environmental response or
corrective action costs or orders;
where the failure to comply, or to obtain, or where the expense with respect
to which, is reasonably likely to materially adversely affect the business,
properties, prospects or financial condition of the Parent and its
Subsidiaries taken as a whole or would impair the ability of any of the
Constituent Companies to perform their respective obligations contained in the
Agreement or the Note. None of the matters disclosed in the above referenced
letter are reasonably likely to materially adversely affect the business,
properties, prospects or financial condition of the Parent and its
Subsidiaries taken as a whole or would impair the ability of any of the
Constituent Companies to perform their respective obligations contained in the
Agreement or the Note.
B-57
<PAGE> 51
Unitog Company
and
Unitog Rental Services, Inc.
First Amendment
Dated as of October 15, 1995
to
Note Agreement
Dated as of December 1, 1993
Re: $20,000,000 5.79% Senior Notes
Due December 15, 2003
<PAGE> 52
First Amendment to Note Agreement
This First Amendment dated as of October 15, 1995 (the or this "First
Amendment") to the Note Agreement dated as of December 1, 1993 (the "Note
Agreement") is among Unitog Company, a Delaware corporation (the "Parent"),
Unitog Rental Services, Inc., a California corporation ("Rental," together
with the Parent and the Subsidiaries (as defined in the Note Agreement)
fulfilling the requirements of Section 5.18 of the Note Agreement after the
date thereof, being collectively referred to as the "Constituent Companies"
and individually as a "Constituent Company") and the institution which is a
signatory to this First Amendment (the "Purchaser").
Recitals:
A. The Parent, Rental and the Purchaser have heretofore entered into a
Note Agreement dated as of December 1, 1993.
B. The Parent, Rental and the Purchaser now desire to amend the Note
Agreement in the respects, but only in the respects, hereinafter set forth.
C. Capitalized terms used herein shall have the respective meanings
ascribed thereto in the Note Agreement unless herein defined or the context
shall otherwise require.
D. All requirements of law have been fully complied with and all other
acts and things necessary to make this First Amendment a valid, legal and
binding instrument according to its terms for the purposes herein expressed
have been done or performed.
Now, therefore, the Parent, Rental and the Purchaser, in consideration of
$10.00 and other good and valuable consideration the receipt whereof is hereby
acknowledged, do hereby agree as follows:
Section 1. Amendments.
Section 1.1. Section 5.9(d)(3) of the Note Agreement shall be and is hereby
amended in its entirety to read as follows:
"(3) Indebtedness in connection with or related to Industrial
Development Bonds or a reimbursement obligation with respect to a letter of
credit, insurance or other credit enhancement securing such Industrial
Development Bonds;"
Section 1.2. Section 5.10(d) of the Note Agreement shall be and is hereby
amended by deleting the words "or the value of such property," appearing after
the words "taken as a whole" of said Section.
Section 1.3. Section 5.10(h) of the Note Agreement shall be and is hereby
amended in its entirety to read as follows:
"(h) Liens securing Industrial Development Bonds or a
reimbursement obligation with respect to a letter of credit, insurance or
other credit enhancement securing such Industrial Development Bonds;"
Section 1.4. Section 5.10(j) of the Note Agreement shall be and is hereby
amended as follows:
-2-
<PAGE> 53
(a) by adding the words "in connection with Capitalized Leases and
Liens" after the words "of a Constituent Company or a Subsidiary, including
Liens" in said Section;
(b) by deleting the word "such" appearing after the words "existing on"
and before the words "fixed assets at the time of acquisition" in said
Section;
(c) by deleting the comma appearing after the word "constructed" in
clause (1) of said Section and replacing it with the words "and, if required
by the terms of the instrument originally creating such Lien, other property
which after the Closing Date is an improvement to or is acquired for specific
use in connection with such fixed assets which is the subject of such Lien;";
and
(d) by deleting the number "180" and replacing it with "360" in clause
(2) of said Section.
Section 1.5. Section 5.13 of the Note Agreement shall be and is hereby
amended as follows:
(a) Clause (a)(6) thereof is amended by deleting the word "and"
following the semi-colon therein;
(b) Clause (a)(7) thereof shall be and is hereby amended by adding the
word "and" following the semi-colon therein; and
(c) Clause (a) thereof shall be and is hereby amended by adding a new
clause (8) thereto which reads in its entirety as follows:
(8) the Constituent Companies may sell or otherwise dispose of or cause
its Subsidiaries to sell or otherwise dispose of the wiping cloth business
acquired pursuant to the Ace-Tex Acquisition; provided, that such sale or
disposition is completed within thirty (30) days of the Ace-Tex Acquisition
(the "Permitted Ace-Tex Disposition").
Section 1.6. Section 5.13(b)(1) of the Note Agreement shall be and is hereby
amended by adding "(i)" before the words "the sale" and by adding "and (ii)
the Permitted Ace-Tex Disposition;" after the words "Wholly-Owned Subsidiary"
appearing therein.
Section 1.7. Section 5.13(b)(2) of the Note Agreement shall be and is hereby
amended by adding "(including the assumption of debt)" after the words "other
property" and before the words "to a Person or Persons" in said Section.
Section 1.8. Section 8 of the Note Agreement shall be and is hereby amended
by adding the following definition immediately before the definition of
"Affiliate" in said section:
"Ace-Tex Acquisition" shall mean the acquisition by either
Constituent Company or any of their Wholly-Owned Subsidiaries of all of the
issued and outstanding capital stock of Ace-Tex Corporation, a Michigan
corporation.
-3-
<PAGE> 54
Section 1.9. The definition of "Credit Agreement" in Section 8 of the Note
Agreement shall be and is hereby amended in its entirety to read as follows:
""Credit Agreement" shall mean that certain Bank Credit
Agreement dated as of September 10, 1993, as amended by the Amendment No. 1 to
Loan and Letter of Credit Reimbursement Agreement dated as of December 29,
1994 among the Parent, Unitog Rental Services, Inc., the financial
institutions which are from time to time parties thereto, United Missouri Bank
of Kansas City, as agent, as the same may be amended or modified from time to
time, and any credit facility or agreement in replacement of, renewal of or
expansion of that certain Bank Credit Agreement described above."
Section 1.10. The definition of "Industrial Development Bonds" in Section 8
of the Note Agreement shall be and is hereby amended in its entirety to read
as follows:
""Industrial Development Bonds" shall mean any bond issued by
or on behalf of a political subdivision the interest on which is excludable
from gross income for federal income tax purposes on the date such obligations
were issued."
Section 1.11. Section 8 of the Note Agreement shall be and is hereby amended
by adding the following definition immediately before the definition of
"Person" and immediately after the definition of "PBGC":
"Permitted Ace-Tex Disposition" shall have the meaning set forth
in e5.13(a)(8).
Section 2. Miscellaneous.
Section 2.1. This First Amendment shall be construed in connection with and
as part of the Note Agreement, and all terms, conditions and covenants
contained in the Note Agreement shall be and remain in full force and effect.
Section 2.2. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
First Amendment may refer to the Note Agreement without making specific
reference to this First Amendment but nevertheless all such references shall
include this First Amendment unless the context otherwise requires.
Section 2.3. Except as modified and expressly amended by this First
Amendment, the Note Agreement is in all respects ratified, confirmed and
approved and all of the terms, provisions and conditions thereof shall be and
remain in full force and effect.
Section 2.4. The descriptive headings of the various Sections or parts of
this First Amendment are for convenience only and shall not affect the meaning
or construction of any of the provisions hereof.
Section 2.5. This First Amendment shall be governed by and construed in
accordance with Illinois law.
Section 2.6. The execution hereof by you shall constitute a contract between
us for the uses and purposes hereinabove set forth, and this First Amendment
may be executed in any number of counterparts, each executed counterpart
-4-
<PAGE> 55
constituting an original, but all together only one agreement.
Unitog Company
By/s/ J. Craig Peterson
Its Senior Vice President -
Finance and Chief Financial Officer
Unitog Rental Services, Inc.
By/s/ J. Craig Peterson
Its Senior Vice President -
Finance and Chief Financial Officer
Accepted and Agreed to:
Metropolitan Life Insurance Company
By/s/ Robert B. Bodett
Its Assistant Vice-President
By
Its
-5-
<PAGE> 1
Unitog Company
and
Unitog Rental Services, Inc.
Note Agreement
Dated as of October 15, 1995
Re: $40,000,000 6.83% Senior Notes
Due October 31, 2005
<PAGE> 2
Table of Contents
(Not a part of the Agreement)
Section Heading Page
Section 1. Description of Notes and Commitment 1
Section 1.1. Description of Notes 1
Section 1.2. Commitment, Closing Date 2
Section 1.3. Interest Rate Adjustment 2
Section 2. Prepayment of Notes 2
Section 2.1. Required Prepayments 2
Section 2.2. Optional Prepayment With Premium 3
Section 2.3. Notice of Optional Prepayments 3
Section 2.4. Application of Prepayments 4
Section 2.5. Direct Payment 4
Section 3. Representations 4
Section 3.1. Representations of the Constituent Companies 4
Section 3.2. Representations of the Purchaser 4
Section 4. Closing Conditions 5
Section 4.1. Conditions 5
Section 4.2. Waiver of Conditions 6
Section 5. Constituent Company Covenants 7
Section 5.1. Corporate Existence, Etc 7
Section 5.2. Insurance 7
Section 5.3. Taxes, Claims for Labor and Materials;
Compliance with Laws 7
Section 5.4. Maintenance, Etc 8
Section 5.5. Nature of Business 8
Section 5.6. Current Ratio 8
Section 5.7. Consolidated Stockholders' Equity 8
Section 5.8. Fixed Charges Coverage Ratio 8
Section 5.9. Limitations on Indebtedness 8
Section 5.10. Limitation on Liens 10
Section 5.11. Restricted Payments 12
Section 5.12. Investments 13
Section 5.13. Mergers, Consolidations and Sales of Assets 14
Section 5.14. Repurchase of Notes 18
Section 5.15. Transactions with Affiliates 19
Section 5.16. Multiemployer Plan Liability and Termination
of Pension Plans 19
Section 5.17. Reports and Rights of Inspection 19
Section 5.18. Additional Constituent Companies 22
- -2-
<PAGE> 3
Section 5.19. Contribution and Conveyance 23
Section 5.20. Prohibition of Extension of the Lincoln National Liens 23
Section 5.21. Prohibition of Change in Fiscal Year 23
Section 6. Events of Default and Remedies Therefor 23
Section 6.1. Events of Default 23
Section 6.2. Notice to Holders 25
Section 6.3. Acceleration of Maturities 25
Section 6.4. Rescission of Acceleration 25
Section 7. Amendments, Waivers and Consents 26
Section 7.1. Consent Required 26
Section 7.2. Solicitation of Holders 26
Section 7.3. Effect of Amendment or Waiver 27
Section 8. Interpretation of Agreement; Definitions 27
Section 8.1. Definitions 27
Section 8.2. Accounting Principles 37
Section 8.3. Directly or Indirectly 37
Section 9. Miscellaneous 37
Section 9.1. Registered Notes 37
Section 9.2. Exchange of Notes 38
Section 9.3. Loss, Theft, Etc. of Notes 38
Section 9.4. Expenses, Stamp Tax Indemnity 38
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative 39
Section 9.6. Notices 39
Section 9.7. Successors and Assigns 39
Section 9.8. Survival of Covenants and Representations 39
Section 9.9. Severability 39
Section 9.10. Governing Law 40
Section 9.11. Submission to Jurisdiction. 40
Section 9.12. Captions 40
Signature 41
- -3-
<PAGE> 4
Attachments to Note Agreement:
Schedule I - Name and Address of Purchaser and Amount of Commitment
Schedule II - Specified Indebtedness; Liens; Capitalized Leases; Subsidiaries
Exhibit A - Form of 6.83% Senior Note
Exhibit B - Representations and Warranties of the Constituent Companies
Exhibit C - Description of Special Counsel's Closing Opinion
Exhibit D - Description of Closing Opinion of Outside Counsel to the
Constituent Companies
Exhibit E - Description of Closing Opinion of the General Counsel for the
Constituent Companies
Exhibit F - Form of Joinder Agreement
Exhibit G - Form of Additional Constituent Company Counsel Opinion
- -4-
<PAGE> 5
Unitog Company
101 West 11th Street
Kansas City, Missouri 64105
Unitog Rental Services, Inc.
101 West 11th Street
Kansas City, Missouri 64105
Note Agreement
Re: $40,000,000 6.83% Senior Notes
Due October 31, 2005
Dated as of
October 15, 1995
To the Purchaser named in Schedule I
hereto which is a signatory of this
Agreement
Ladies and Gentlemen:
The undersigned, Unitog Company, a Delaware corporation (the "Parent"),
and Unitog Rental Services, Inc., a California corporation ("Rental", together
with the Parent and Subsidiaries fulfilling the requirements of e5.18 after
the date hereof, being hereinafter collectively referred to as the
"Constituent Companies" and individually as a "Constituent Company"), jointly
and severally agree with you as follows:
Section 1. Description of Notes and Commitment;.
Section 1.1. Description of Notes;. The Constituent Companies will
authorize the issue and sale of $40,000,000 aggregate principal amount of
their 6.83% Senior Notes (the "Notes") to be dated the date of issue, to bear
interest from such date at the rate of 6.83% per annum, payable quarterly on
each January thirty-first, April thirtieth, July thirty-first and October
thirty-first in each year (commencing January 31, 1996) and at maturity and to
bear interest on overdue principal (including any overdue required or optional
prepayment of principal) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest at the Overdue Rate after
the date due, whether by acceleration or otherwise, until paid, to be
expressed to mature on October 31, 2005, and to be substantially in the form
attached hereto as Exhibit A. Interest on the Notes shall be computed on the
basis of a 360-day year of twelve 30-day months. If any amount of principal,
premium or interest on or in respect of the Notes becomes due and payable on
any date which is not a Business Day, such amount shall be payable on the
immediately succeeding Business Day. The Notes are not subject to prepayment
or redemption at the option of the Constituent Companies prior to their
expressed maturity dates except on the terms and conditions and in the amounts
and with the premium, if any, set forth in e2 of this Agreement. The term
"Notes" as used herein shall include each Note delivered pursuant to this
Agreement. You are hereinafter sometimes referred to as the "Purchaser". The
terms which are capitalized herein shall have the meanings set forth in e8.1
unless the context shall otherwise require.
- -5-
<PAGE> 6
Section 1.2. Commitment, Closing Date;. Subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth, the Constituent Companies agree to issue and sell to
you, and you agree to purchase from the Constituent Companies, Notes in the
principal amount set forth opposite your name on Schedule I hereto at a price
of 100% of the principal amount thereof on the Closing Date hereafter
mentioned.
Delivery of the Notes will be made at the offices of Chapman and Cutler,
111 West Monroe Street, Chicago, Illinois 60603, against payment therefor in
Federal Reserve or other funds current and immediately available at United
Missouri Bank, Kansas City, Missouri, ABA #101000695, Acct. #9870515318 in the
amount of the purchase price at 10:30 A.M., New York, New York time, on
October 31, 1995 or such later date (not later than November 1, 1995) as shall
mutually be agreed upon by the Constituent Companies and the Purchaser (the
"Closing Date"). The Notes delivered to you on the Closing Date will be
delivered to you in the form of a single registered Note in the form attached
hereto as Exhibit A for the full amount of your purchase (unless different
denominations are specified by you), registered in your name or in the name of
such nominee, as may be specified in Schedule I attached hereto and in
substantially the form attached hereto as Exhibit A.
Section 1.3. Interest Rate Adjustment;. (a) If for any reason whatsoever
on January 26, 1997, the ratio of Consolidated Specified Indebtedness to the
sum of (i) Consolidated Specified Indebtedness plus (ii) Consolidated
Stockholders' Equity exceeds 0.45 to 1.0, the Notes shall bear interest at the
rate of 6.88% per annum from and after January 26, 1997.
(b) Within one hundred twenty (120) days following January 26, 1997 the
Constituent Companies shall notify the holders of the Notes in writing, sent
in the manner provided in e9.6, of their failure to meet such requirement as
provided in e1.3(a) or of their ability to meet said requirement, which
written notice shall be accompanied by a certificate of a Responsible Officer
of each Constituent Company reasonably satisfactory to the holders of the
Notes, setting forth in sufficient detail the computation of the calculation
described in e1.3(a), and certifying the interest rate to be payable in
respect of the Notes in consequence thereof from and after January 26, 1997.
In the event that the interest rate borne by the Notes is adjusted pursuant
to this e1.3 on and as of January 26, 1997, the Constituent Companies shall on
the first Interest Payment Date following the delivery of the notice required
by this e1.3(b) pay to the holders of the Notes the accrued but unpaid
interest from January 26, 1997 to the Interest Payment Date immediately
preceding the date of delivery of such notice.
Section 2. Prepayment of Notes;.
Section 2.1. Required Prepayments;. In addition to paying the entire
outstanding principal amount and the interest due on the Notes on the maturity
date thereof, the Constituent Companies agree that on the thirtieth day of
April and the thirty-first day of October in each year, commencing October 31,
1999 and ending April 30, 2005, both inclusive, it will prepay and apply and
there shall become due and payable on the principal indebtedness evidenced by
the Notes an amount equal to the following:
- -6-
<PAGE> 7
<TABLE>
<CAPTION>
Date of Required Payment Principal Amount of
Required Prepayment
<S> <C>
October 31, 1999 $3,076,920
April 30, 2000 $3,076,920
October 31, 2000 $3,076,920
April 30, 2001 $3,076,920
October 31, 2001 $3,076,920
April 30, 2002 $3,076,920
October 31, 2002 $3,076,920
April 30, 2003 $3,076,920
October 31, 2003 $3,076,920
April 30, 2004 $3,076,920
October 31, 2004 $3,076,920
April 30, 2005 $3,076,920
</TABLE>
The entire remaining principal amount of the Notes shall become due and
payable on October 31, 2005. No premium shall be payable in connection with
any required prepayment made pursuant to this e2.1.
In the event that the Constituent Companies shall prepay less than all of
the Notes pursuant to e2.2 hereof, the amounts of the prepayments required by
this e2.1 shall be reduced by an amount which is the same percentage of such
required prepayment as the percentage that the principal amount of Notes
prepaid pursuant to e2.2 is of the aggregate principal amount of outstanding
Notes immediately prior to such prepayment.
c2.Section 2.2. Optional Prepayment With Premium;. In addition to the
payments required by e2.1, upon compliance with e2.3, the Constituent
Companies shall have the privilege at any time and from time to time of
prepaying the outstanding Notes, either in whole or in part (but if in part
then in a minimum principal amount of $1,000,000 and in multiples of $100,000)
by payment of the principal amount of the Notes, or portion thereof to be
prepaid, and accrued interest thereon to the date of such prepayment, together
with a premium equal to the Make-Whole Amount, determined as of two Business
Days prior to the date of such prepayment pursuant to this e2.2.
c2.Section 2.3. Notice of Optional Prepayments;. The Constituent Companies
will give written notice of any prepayment of the Notes pursuant to e2.2 to
each holder thereof not less than 30 days nor more than 60 days before the
date fixed for such optional prepayment specifying (a) such date, (b) the
principal amount of the holder's Notes to be prepaid on such date, (c) that a
premium may be payable, (d) the date when such premium will be calculated and
the name of the Computing Holder to make such calculation, and (e) the accrued
interest applicable to the prepayment. Such notice of prepayment shall also
certify all facts, if any, which are conditions precedent to any such
prepayment. The notice to the Computing Holder shall set forth in addition to
the foregoing information the names and addresses of, and the respective
principal amounts of the Notes held by, the other holders of the Notes.
Notice of prepayment having been so given, the aggregate principal amount of
the Notes specified in such notice, together with accrued interest thereon and
the premium, if any, payable with respect thereto shall become due and
payable on the prepayment date specified in said notice. The Computing Holder
shall give written notice by facsimile communication to the Parent and each
- -7-
<PAGE> 8
other holder of the Notes, on the second Business Day preceding the date for
such prepayment, of the amount of the Make-Whole Amount in respect of the
Notes held by it and such other holders, which notice shall set forth in
reasonable detail the computation thereof. The Make-Whole Amount set forth in
such notice shall be binding on the Constituent Companies and each other
holder of the Notes absent manifest error.
c2.Section 2.4. Application of Prepayments;. All partial prepayments shall
be applied on all outstanding Notes ratably in accordance with the unpaid
principal amounts thereof.
c2.Section 2.5. Direct Payment;. Notwithstanding anything to the contrary
contained in this Agreement or the Notes, in the case of any Note owned by you
or your nominee or owned by any subsequent Institutional Holder which has
given written notice to the Constituent Companies requesting that the
provisions of this e2.5 shall apply, the Constituent Companies will punctually
pay when due the principal thereof, interest thereon and premium, if any, due
with respect to said principal, without any presentment thereof, directly to
you, to your nominee or to such subsequent Institutional Holder at your
address or your nominee's address set forth in Schedule I hereto or such other
address as you, your nominee or such subsequent Institutional Holder may from
time to time designate in writing to the Constituent Companies or, if a bank
account with a United States bank is designated for you or your nominee on
Schedule I hereto or in any written notice to the Constituent Companies from
you, from your nominee or from any such subsequent Institutional Holder, the
Constituent Companies will make such payments in immediately available funds
to such bank account, no later than 12:00 p.m. New York, New York, time on the
date due, marked for attention as indicated, or in such other manner or to
such other account in any United States bank as you, your nominee or any such
subsequent Institutional Holder may from time to time direct in writing. If
for any reason whatsoever the Constituent Companies do not make any such
payment by such 12:00 p.m. transmittal time, such payment shall be deemed to
have been made on the next following Business Day and such payment shall bear
interest at the Overdue Rate as provided herein.
Section 3. Representations;.
c2.Section 3.1. Representations of the Constituent Companies;. Each of the
Constituent Companies represents and warrants that all representations and
warranties set forth in Exhibit B are true and correct as of the date hereof
and are incorporated herein by reference with the same force and effect as
though herein set forth in full.
c2.Section 3.2. Representations of the Purchaser;. (a) You represent, and
in entering into this Agreement the Constituent Companies understand, that you
are acquiring the Notes for the purpose of investment and not with a view to
the distribution thereof, and that you have no present intention of selling,
negotiating or otherwise disposing of the Notes; it being understood, however,
that the disposition of your property shall at all times be and remain within
your control.
(b) You further represent that the source of funds to be used by you to
purchase the Notes is an "insurance company general account" within the
meaning of Department of Labor Prohibited Transaction Exemption ("PTE") 95-60
(issued July 12, 1995) and the purchase of the Notes by you is eligible for
- -8-
<PAGE> 9
and satisfies the requirements of PTE 95-60.
Section 4. Closing Conditions;.
c2.Section 4.1. Conditions;. Your obligation to purchase the Notes on the
Closing Date shall be subject to the performance by the Constituent Companies
of their agreements hereunder which by the terms hereof are to be performed at
or prior to the time of delivery of the Notes and to the following further
conditions precedent:
(a) Closing Certificate. You shall have received a certificate dated
the Closing Date, signed by the President or a Vice President of each of the
Constituent Companies, the truth and accuracy of which shall be a condition to
your obligation to purchase the Notes proposed to be sold to you and to the
effect that (1) the representations and warranties of the Constituent
Companies set forth in Exhibit B hereto are true and correct on and with
respect to the Closing Date, (2) the Constituent Companies have performed all
of their obligations hereunder which are to be performed on or prior to the
Closing Date, and (3) no Default or Event of Default has occurred and is
continuing.
(b) Legal Opinions; Expenses. You shall have received from Chapman and
Cutler, who are acting as your special counsel in this transaction, from Bryan
Cave, outside counsel for the Constituent Companies, and from Robert M.
Barnes, Esq., Vice President and General Counsel for the Constituent
Companies, their respective opinions dated the Closing Date, in form and
substance satisfactory to you, and covering the matters set forth in Exhibits
C, D and E, respectively, hereto. The reasonable fees and expenses of Chapman
and Cutler shall be paid on the Closing Date by the Constituent Companies.
(c) Constituent Companies' Existence and Authority. On or prior to the
Closing Date, you shall have received, in form and substance reasonably
satisfactory to you and your special counsel, such documents and evidence with
respect to the Constituent Companies as you may reasonably request in order to
establish the existence and good standing of each of the Constituent Companies
and the authorization of the transactions contemplated by this Agreement.
(d) Related Transactions. The Constituent Companies shall have
consummated the sale of the entire principal amount of the Notes scheduled to
be sold on the Closing Date pursuant to this Agreement.
(e) Private Placement Number. On or prior to the Closing Date, special
counsel to the Purchaser shall have duly made the appropriate filings with
Standard & Poor's CUSIP Service Bureau, as agent for the National Association
of Insurance Commissioners, in order to obtain a private placement number for
the Notes.
(f) Funding Instructions. You shall have received written
instructions executed by a Responsible Officer of the Parent directing the
manner of the payment of funds and setting forth (1) the name of the
transferee bank, (2) such transferee bank's ABA number, (3) the account name
and number into which the purchase price for the Notes is to be deposited, and
(4) the name and telephone number of the account representative responsible
for verifying receipt of such funds.
(g) Legality of Investment. The Notes to be purchased by you shall be a
- -9-
<PAGE> 10
legal investment for you under the laws of each jurisdiction to which you may
be subject (without resort to any so-called "basket provisions" to such laws).
(h) Purchase Permitted by Applicable Laws. The purchase of and payment
for the Notes to be purchased by you on the Closing Date on the terms and
conditions herein provided (including the use of the proceeds of the Notes by
the Constituent Companies and their Subsidiaries) shall not violate any
applicable law or governmental regulation (including, without limitation,
Regulations G, T and X of the Board of Governors of the Federal Reserve
System) and shall not subject you to any tax, penalty, liability or other
onerous condition under or pursuant to any applicable law or governmental
regulation relating to the extension of credit, and you shall have received
such certificates or other evidence as you may request to establish compliance
with this condition.
(i) Environmental Information. You shall have received such available
information regarding environmental matters reasonably requested by you or
your special counsel.
(j) Satisfactory Proceedings. All proceedings taken in connection with
the transactions contemplated by this Agreement, and all documents necessary
to the consummation thereof, shall be satisfactory in form and substance to
you and your special counsel, and you shall have received a copy (executed or
certified as may be appropriate) of all legal documents or proceedings taken
in connection with the consummation of said transactions.
c2.Section 4.2. Waiver of Conditions;. If on the Closing Date the
Constituent Companies fail to tender to you the Notes to be issued to you on
such date or if the conditions specified in e4.1 have not been fulfilled, you
may thereupon elect to be relieved of all further obligations under this
Agreement. Without limiting the foregoing, if the conditions specified in
e4.1 have not been fulfilled, you may waive compliance by the Constituent
Companies with any such condition to such extent as you may in your sole
discretion determine. Nothing in this e4.2 shall operate to relieve the
Constituent Companies of any of their obligations hereunder or to waive any of
your rights against the Constituent Companies.
Section 5. Constituent Company Covenants;.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
c2.Section 5.1. Corporate Existence, Etc;. (a) Each of the Constituent\
Companies will preserve and keep in full force and effect its corporate
existence, provided that the foregoing shall not prevent any transaction
permitted by e5.13. Each of the Constituent Companies will preserve and keep
in full force and effect all licenses and permits necessary to the proper
conduct of its business, the failure of which to preserve and keep would be
reasonably likely to materially and adversely affect the properties, business,
prospects or financial condition of the Parent and its Subsidiaries taken as a
whole.
(b) Each of the Constituent Companies will cause each of its
Subsidiaries to preserve and keep in full force and effect such Subsidiary's
corporate existence and all licenses and permits necessary to the proper
- -10-
<PAGE> 11
conduct of its business the failure of which to preserve and keep such
corporate existence or licenses and permits would be reasonably likely to
materially and adversely affect the properties, business, prospects or
financial condition of the Parent and its Subsidiaries taken as a whole,
provided that the foregoing shall not prevent any transaction permitted by
e5.13.
c2.Section 5.2. Insurance;. Each of the Constituent Companies will
maintain, and will cause each of its Subsidiaries to maintain, insurance
coverage by financially sound and reputable insurers and in such forms and
amounts and against such risks as are customary for corporations of
established reputation engaged in the same or a similar business and owning
and operating similar properties.
c2.'Section 5.3. Taxes, Claims for Labor and Materials; Compliance with
Laws';. (a) Each of the Constituent Companies will promptly pay and
discharge, and will cause each of its Subsidiaries promptly to pay and
discharge, all lawful taxes, assessments and governmental charges or levies
imposed upon such Constituent Company or such Subsidiaries, respectively, or
upon or in respect of all or any part of the property or business of
such Constituent Company or such Subsidiaries, all trade accounts payable in
accordance with usual and customary business terms, and all claims for work,
labor or materials, which if unpaid might become a Lien upon any property of
such Constituent Company or such Subsidiaries; provided that no Constituent
Company nor any Subsidiary shall be required to pay any such tax, assessment,
charge, levy, account payable or claim if (1) the validity, applicability or
amount thereof is being contested in good faith by appropriate actions or
proceedings which will prevent the forfeiture or sale of any property of such
Constituent Company or such Subsidiary or any material interference with the
use thereof by such Constituent Company or such Subsidiary, and (2) such
Constituent Company or such Subsidiary shall set aside on its books, reserves
deemed by it to be adequate with respect thereto.
(b) Each of the Constituent Companies will promptly comply and will
cause each of its Subsidiaries to comply with all laws, ordinances or
overnmental rules and regulations to which it is subject, including, without
limitation, the Occupational Safety and Health Act of 1970, as amended, ERISA
and all Environmental Laws, the violation of which would be reasonably likely
to materially and adversely affect the properties, business, prospects, or
financial condition of the Parent and its Subsidiaries taken as a whole.
c2.Section 5.4. Maintenance, Etc;. Each of the Constituent Companies will
maintain, preserve and keep, and will cause each of its Subsidiaries to
maintain, preserve and keep, its properties which are used or useful in the
conduct of its business (whether owned in fee or a leasehold interest) in good
repair and working order and from time to time will make all necessary
repairs, replacements, renewals and additions so that such properties are
suitable for the operation of its business.
c2.Section 5.5. Nature of Business;. None of the Constituent Companies nor
any Subsidiary will engage in any business if, as a result, the general nature
of the business, taken on a consolidated basis, which would then be engaged in
by the Constituent Companies and their Subsidiaries would be substantially
changed from the general nature of the business engaged in by the Constituent
Companies and their Subsidiaries on the date of this Agreement.
- -11-
<PAGE> 12
c2.Section 5.6. Current Ratio;. The Parent will at all times keep and
maintain the ratio of Consolidated Current Assets to Consolidated Current
Liabilities at not less than 1.25 to 1.00.
c2.Section 5.7. Consolidated Stockholders' Equity;. The Parent will at all
times keep and maintain Consolidated Stockholders' Equity at an amount not
less than the sum of (a) $48,000,000 plus (b) 50% of Consolidated Net Earnings
for each fiscal quarter ending after August 1, 1993 and prior to the date of
determination thereof computed on a cumulative basis, provided that for
purposes of the foregoing calculation, Consolidated Net Earnings shall be
deemed to be zero for any fiscal quarter period for which Consolidated Net
Earnings is less than or equal to zero.
c2.Section 5.8. Fixed Charges Coverage Ratio;. The Parent will keep and
maintain as of the end of each fiscal quarter of the Parent the ratio of Net
Earnings Available for Fixed Charges to Fixed Charges for the period of four
consecutive fiscal quarters then ending at not less than 2.00 to 1.00.
c2.Section 5.9. Limitations on Indebtedness;. (a) The Parent will at all
times keep and maintain the ratio of Consolidated Funded Debt to Consolidated
Total Capitalization at not more than 0.6 to 1.0.
(b) The Parent will at all times keep and maintain the ratio of
Consolidated Specified Indebtedness to Consolidated Stockholders' Equity at
not more than 2.5 to 1.0.
(c) The Parent and its Subsidiaries will not create, assume, guarantee
or otherwise incur or in any manner be or become liable in respect of any
Indebtedness secured by Liens permitted by e5.10(l), unless at the time of
creation, issuance, assumption, guarantee or incurrence thereof and after
giving effect thereto and to the application of the proceeds thereof the sum
of (1) all Indebtedness of the Parent and its Subsidiaries secured by Liens
permitted by e5.10(l) plus (2) all Specified Indebtedness incurred by
Non-Obligor Subsidiaries pursuant to e5.9(d)(6) (other than Specified
Indebtedness of such Non-Obligor Subsidiary which is included in clause (1)
immediately above) shall not exceed:
(i) 15% of Consolidated Stockholders' Equity, at any time prior to the
release of the Lincoln National Liens; and
(ii) 25% of Consolidated Stockholders' Equity, at all times after the
release of the Lincoln National Liens.
(d) The Constituent Companies will not permit any Non-Obligor Subsidiary
to, create, assume, guarantee or otherwise incur or in any manner be or become
liable in respect of any Specified Indebtedness, except:
(1) Capitalized Leases entered into the normal and ordinary course of
the business of such Non-Obligor Subsidiary;
(2) Specified Indebtedness owed to a Constituent Company or to a
Wholly-owned Subsidiary;
(3) Indebtedness in connection with or related to Industrial Development
- -12-
<PAGE> 13
Bonds or a reimbursement obligation with respect to a letter of credit,
insurance or other credit enhancement securing such Industrial Development
Bonds;
(4) Specified Indebtedness assumed at the time of acquisition or purchase
of any business entity, so long as such Specified Indebtedness was not
incurred, extended or renewed in contemplation of such acquisition or
purchase;
(5) Specified Indebtedness secured by Liens permitted by e5.10 (a)
through (k); and
(6) Other Specified Indebtedness; provided that at the time of creation,
issuance, assumption, guarantee or incurrence thereof and after giving effect
thereto and to the application of the proceeds thereof the sum of (i) all
Specified Indebtedness incurred pursuant to this e5.9(d)(6) plus (ii) all
Indebtedness of the Parent and its Subsidiaries secured by Liens permitted by
e5.10(l) (other than Specified Indebtedness of a Non-Obligor Subsidiary which
is included in clause (i) immediately above) shall not exceed:
(A) 15% of Consolidated Stockholders' Equity, at any time prior to the
release of the Lincoln National Liens; and
(B) 25% of Consolidated Stockholders' Equity, at all times after the
release of the Lincoln National Liens.
(e) The renewal, extension or refunding of any Indebtedness secured by
Liens, Funded Debt or Specified Indebtedness, issued, incurred or outstanding
pursuant to this e5.9 shall constitute the issuance of additional Indebtedness
secured by Liens, Funded Debt or Specified Indebtedness which is, in turn,
subject to the limitations of the applicable provisions of this e5.9.
(f) Any corporation which becomes a Subsidiary after the date hereof
shall for all purposes of this e5.9 be deemed to have created, assumed or
incurred at the time it becomes a Subsidiary all Indebtedness secured by
Liens, Funded Debt or Specified Indebtedness of such corporation existing
immediately after it becomes a Subsidiary.
c2.Section 5.10. Limitation on Liens;. Each of the Constituent Companies
will not, and will not permit any of its Subsidiaries to, create or incur, or
suffer to be incurred or to exist, any Lien on its or their property or
assets, whether now owned or hereafter acquired, or upon any income or profits
therefrom, or transfer any property for the purpose of subjecting the same to
the payment of obligations in priority to the payment of its or their general
creditors, or acquire or agree to acquire, or permit any of its Subsidiaries
to acquire, any property or assets upon conditional sales agreements or other
title retention devices, except:
(a) Liens for property taxes and assessments or governmental charges or
levies, provided that payment thereof is not at the time required by e5.3;
(b) Liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall not have expired, or in
respect of which a Constituent Company or Subsidiary shall at any time in good
faith be prosecuting an appeal or proceeding for a review and in respect of
- -13-
<PAGE> 14
which a stay of execution pending such appeal or proceeding for review shall
have been secured; provided in each case, such Constituent Company or
Subsidiary shall set aside on its books adequate reserves with respect
thereto;
(c) Liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall have expired; provided that
the aggregate amount of such judgments or awards shall not exceed $10,000,000
in the aggregate at any one time outstanding and each such judgment and award
shall be discharged within 60 days of the creation thereof;
(d) Liens incidental to the conduct of business or the ownership of
properties and assets (including Liens in connection with worker's
compensation, unemployment insurance and other like laws, warehousemen's,
carrier's and attorneys' liens and statutory landlords' liens), Liens securing
claims or demands of mechanics, workmen, repairmen and materialmen, and Liens
to secure the performance of bids, tenders or trade contracts, or to secure
statutory obligations, surety or appeal bonds or other Liens of like general
nature, in any such case incurred in the ordinary course of business and not
in connection with the borrowing of money and which do not in the aggregate
materially impair the use of any property which is material to the business
and operations of the Parent and its Subsidiaries, taken as a whole, provided
in each case, the obligation secured is not overdue or, if overdue, is being
contested in good faith by appropriate actions or proceedings and such
Constituent Company or Subsidiary, as the case may be, shall have set aside on
its books adequate reserves with respect thereto;
(e) Survey exceptions or encumbrances, easements or reservations,
covenants, conditions, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use of real
properties, which do not individually or in the aggregate materially impair
the use of properties which are material to the operation of the business of
the Parent and its Subsidiaries taken as a whole;
(f) Liens securing Indebtedness of a Subsidiary to any Constituent
Company or to another Wholly-owned Subsidiary;
(g) the Lincoln National Liens;
(h) Liens securing Industrial Development Bonds or a reimbursement
obligation with respect to a letter of credit, insurance or other credit
enhancement securing such Industrial Development Bonds;
(i) Liens existing as of the Closing Date and described on Schedule II
hereto;
(j) Liens created or incurred after the Closing Date given to secure the
payment of the purchase price incurred in connection with the acquisition or
construction of fixed assets useful and intended to be used in carrying on the
business of a Constituent Company or a Subsidiary, including Liens in
connection with Capitalized Leases and Liens existing on fixed assets at the
time of acquisition or construction thereof or at the time of acquisition by
such Constituent Company or Subsidiary of any business entity then owning such
fixed assets, whether or not such existing Liens were given to secure the
consideration for the fixed assets to which they attach so long as they were
- -14-
<PAGE> 15
not incurred, extended or renewed in contemplation of such acquisition,
provided that (1) the Lien shall attach solely to the fixed assets acquired or
constructed and, if required by the terms of the instrument originally
creating such Lien, other property which after the Closing Date is an
improvement to or is acquired for specific use in connection with such fixed
asset which is the subject of such Lien; (2) such Lien shall have been created
or incurred within 360 days of the date of acquisition or construction, (3) at
the time of acquisition or construction of such fixed assets, the aggregate
amount remaining unpaid on all Indebtedness secured by Liens on such fixed
assets, whether or not assumed by such Constituent Company or Subsidiary,
shall not exceed an amount equal to 100% of the fair market value at the time
of acquisition or construction of such fixed assets (as determined in good
faith by the Board of Directors of such Constituent Company or Subsidiary),
(4) in the case of the creation or incurrence of any Capitalized Lease, the
fixed asset which is the subject thereof if previously owned by a Constituent
Company or Subsidiary shall have been sold or otherwise disposed of within the
limitations provided in e5.13(b)(2), and (5) all such Indebtedness shall have
been incurred within the applicable limitations provided in e5.9;
(k) leases or subleases of property owned by any Constituent Company or
Subsidiary wherein such Constituent Company or Subsidiary is the lessor
thereunder; provided that any such lease is entered into within the applicable
limitations of e5.13(b); and
(l) Liens created or incurred after the Closing Date given to secure
Indebtedness of the Parent or any of its Subsidiaries in addition to the Liens
permitted by the preceding clauses (a) through (k) hereof, provided that all
Indebtedness secured by such Liens shall have been incurred within the
applicable limitations provided in e5.9.
c2.Section 5.11. Restricted Payments;. (a) None of the Constituent
Companies will except as hereinafter provided:
(1) Declare or pay any dividends, either in cash or property, on any
shares of its capital stock (excluding, without limitation, Specified
Preferred Stock) of any class (except dividends or other distributions which
are payable only to another Constituent Company or are payable solely in
shares of capital stock (other than in shares of Specified Preferred Stock));
(2) Directly or indirectly, or through any Subsidiary or through any
Affiliate of such Constituent Company, purchase, redeem or retire any shares
of its capital stock of any class or any warrants, rights or options to
purchase or acquire any shares of its capital stock; provided that Rental may
purchase, redeem or retire any shares of its capital stock of any class or any
warrants, rights or options to purchase or acquire any shares of capital stock
owned by the Parent; or
(3) Make any other payment or distribution, either directly or
indirectly or through any Subsidiary, in respect of its capital stock (other
than in respect of Specified Preferred Stock), except to another Constituent
Company;
(such declarations or payments of dividends, purchases, redemptions or
retirements of capital stock and warrants, rights or options and all such
other payments or distributions being herein collectively called "Restricted
- -15-
<PAGE> 16
Payments"), if after giving effect thereto the aggregate amount of Restricted
Payments made during the period after August 1, 1993 to and including the date
of the making of the Restricted Payment in question by all of the Constituent
Companies would exceed the sum of (i) $14,000,000 plus (ii) 50% of
Consolidated Net Earnings for such period, computed on a cumulative basis for
said entire period (or if such Consolidated Net Earnings is a negative figure,
then minus 100% of such negative figure), plus (iii) the aggregate amount of
net cash proceeds received by the Constituent Companies from the issue or sale
of shares of capital stock (including the re-issuance of treasury stock but
excluding the issuance of Specified Preferred Stock) of Constituent Companies
during such period to Persons other than a Constituent Company or a
Subsidiary.
(b) The Constituent Companies will not declare any dividend which
constitutes a Restricted Payment payable more than 60 days after the date of
declaration thereof.
(c) For the purposes of this e5.11, the amount of any Restricted Payment
declared, paid or distributed in property shall be deemed to be the greater of
the book value or fair market value (as determined in good faith by the Board
of Directors of the relevant Constituent Company) of such property at the time
of the making of the Restricted Payment in question.
(d) The Constituent Companies will not authorize or make a Restricted
Payment if after giving effect to the proposed Restricted Payment a Default or
Event of Default would exist.
c2.Section 5.12. Investments;. Each of the Constituent Companies will
not, and will not permit any of its Subsidiaries to, make any Investments,
other than:
(a) Investments in and to Subsidiaries, including any Investment in a
corporation which, after giving effect to such Investment, will become a
Subsidiary;
(b) Investments in commercial paper maturing in 270 days or less from
the date of issuance which, at the time of acquisition by the Constituent
Companies or any Subsidiary, is accorded a rating of "A-1+" by Standard &
Poor's Corporation or "P-1" by Moody's Investors Service, Inc.;
(c) Investments in direct obligations of the United States of America or
any agency or instrumentality of the United States of America, the payment or
guarantee of which constitutes a full faith and credit obligation of the
United States of America, in either case, maturing in twelve months or less
from the date of acquisition thereof;
(d) Investments in certificates of deposit maturing within one year
from the date of issuance thereof, issued by a bank or trust company organized
under the laws of the United States or any state thereof, having capital,
surplus and undivided profits aggregating at least $100,000,000 and rated "B+"
or better by Sheshunoff Information Services, Inc.;
(e) Investments in money market mutual funds investing in Securities
- -16-
<PAGE> 17
described in clauses (b), (c) or (d) of this e5.12 which in any such case
would be classified as a current asset in accordance with GAAP and which are
managed by a fund manager having at least $2,500,000,000 under management;
(f) Investments in (i) Federally tax-exempt municipal Securities
maturing in twelve months or less from the date of acquisition by the
Constituent Companies or any Subsidiary thereof and which, at the time of
acquisition, are rated "A" or better by Standard & Poor's Corporation or "A2"
or better by Moody's Investors Service, Inc.; or (ii) mutual funds or
investment trusts investing in Federally tax-exempt municipal Securities
which, at the time of acquisition by the Constituent Companies or any
Subsidiary thereto, are rated "A" or better by Standard & Poor's Corporation
or "A2" or better by Moody's Investors Service, Inc.; provided that (1) such
Investment is a marketable and highly liquid Investment as evidenced by the
general trading of such Investment on an established financial market; (2) the
ability of the Constituent Companies to purchase and sell such Investment
shall not be contractually restricted in any manner; (3) the original amount
of such Investment shall not be subject to any risk whatsoever as represented
by such mutual fund or investment trust other than the bankruptcy of such
mutual fund or investment trust; (4) the fund or trust is managed by a manager
having at least $2,500,000,000 under management; and (5) such Investment shall
not exceed a term of 60 days;
(g) Investments in money market preferred stock rated "A" or better by
Standard & Poor's Corporation or "A2" or better by Moody Investors Service,
Inc.; and
(h) Other Investments (in addition to those permitted by the foregoing
provisions of this e5.12), provided that (1) all such other Investments shall
not at any time exceed 20% of Total Assets and (2) after giving effect to such
other Investments, no Default or Event of Default shall have occurred and be
continuing.
In valuing any Investments for the purpose of applying the limitations
set forth in this e5.12, such Investments shall be taken at the book value
thereof.
For purposes of this e5.12, at any time when a corporation becomes a
Subsidiary, all Investments of such corporation at such time shall be deemed
to have been made by such corporation, as a Subsidiary, at such time. Any
continuing Investment by any Constituent Company or Subsidiary in any entity
which ceases to be a Subsidiary pursuant to a merger or consolidation under
e5.13(a)(4) or a sale or other disposition of Subsidiary Stock under e5.13(c)
shall be deemed to be incurred by the relevant Constituent Company or
Subsidiary on the date such entity ceases to be a Subsidiary and shall be
subject to the limitations of this e5.12.
c2.Section 5.13. Mergers, Consolidations and Sales of Assets;. (a) Each
of the Constituent Companies will not, and will not permit any of its
Subsidiaries to, consolidate with or be a party to a merger with any other
corporation, or sell, lease or otherwise dispose of all or substantially all of
its assets; provided that:
(1) any Subsidiary may merge or consolidate with or into any of the
Constituent Companies or any Wholly-owned Subsidiary and any Constituent
- -17-
<PAGE> 18
Company may merge or consolidate with or into any other Constituent Company,
so long as in any merger or consolidation involving a Constituent Company, a
Constituent Company shall be the surviving or continuing corporation;
(2) the Parent may consolidate or merge with any other corporation if
(i) the corporation which results from such merger or consolidation (the
"surviving corporation") is the Parent or (ii) (A) greater than 50% of the
Voting Stock of the surviving corporation is owned and continues for one year
thereafter to be owned by a Specified Group, (B) the surviving corporation is
organized under the laws of any State of the United States or the District of
Columbia, (C) the due and punctual payment of the principal of and premium, if
any, and interest on all of the Notes, according to their tenor, and the due
and punctual performance and observation of all of the covenants in the Notes
and this Agreement to be performed or observed by the Parent are expressly
assumed in writing by the surviving corporation and the surviving corporation
shall furnish the holders of the Notes an opinion of counsel satisfactory to
such holders to the effect that the instrument of assumption has been duly
authorized, executed and delivered and constitutes the legal, valid and
binding contract and agreement of the surviving corporation enforceable in
accordance with its terms, except as enforcement of such terms may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles, and (D) at the time of such consolidation or merger and
immediately after giving effect thereto, no Default or Event of Default would
exist;
(3) the Parent may sell or otherwise dispose of all or substantially all
of its assets to any Person for consideration which represents the fair market
value at the time of such sale or other disposition if (i) greater than 50% of
the Voting Stock of the acquiring Person is owned and continues for one year
thereafter to be owned by a Specified Group, (ii) the surviving corporation is
a corporation organized under the laws of any State of the United States or
District of Columbia, (iii) the due and punctual payment of the principal of
and premium, if any, and interest on all the Notes, according to their tenor,
and the due and punctual performance and observance of all of the covenants in
the Notes and in this Agreement to be performed or observed by the Parent are
expressly assumed in writing by the acquiring corporation and the acquiring
corporation shall furnish the holders of the Notes an opinion of counsel
satisfactory to such holders to the effect that the instrument of assumption
has been duly authorized, executed and delivered and constitutes the legal,
valid and binding contract and agreement of such acquiring corporation
enforceable in accordance with its terms, except as enforcement of such terms
may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles, and (iv) at the time of such sale or disposition
and immediately after giving effect thereto, no Default or Event of Default
would exist;
(4) any Non-Obligor Subsidiary may merge or consolidate with or into any
other corporation, provided in the case of any such merger or consolidation
which transaction shall include a sale, transfer or other disposition by the
Parent and/or its Subsidiaries of any shares of stock of such Non-Obligor
Subsidiary, such disposition of shares of stock shall be subject to the
limitations of, and the Assigned Value of such stock shall be included in the
computations set forth in, e5.13(b)(2);
- -18-
<PAGE> 19
(5) any Non-Obligor Subsidiary may sell, lease or otherwise dispose of
all or substantially all of its assets to any of the Constituent Companies or
any Wholly-owned Subsidiary;
(6) (x) any Non-Obligor Subsidiary may sell, lease or otherwise dispose
of all or substantially all of its assets to a Person or Persons (other than a
Constituent Company or a Wholly-owned Subsidiary and other than to a Special
Subsidiary pursuant to and in accordance with the terms of clause (y) below),
provided that such sale, lease or other disposition shall be subject to the
limitations of, and the net book value of such assets shall be included in the
computations set forth in, e5.13(b)(2) and (y) any Non-Obligor Subsidiary may
sell, lease or otherwise dispose of all or substantially all of its assets to
a Special Subsidiary, provided that such sale, lease or other disposition
shall be subject to the limitations of, and the Stipulated Value of such
assets shall be included in the computations set forth in, e5.13(b)(2);
(7) any other corporation may consolidate into or merge into Rental if
(i) the surviving or continuing corporation is Rental, (ii) at the time of
such consolidation or merger and immediately after giving effect thereto, no
Default or Event of Default would exist, (iii) immediately after giving effect
to such consolidation or merger the Parent shall continue to own 100% of the
stock of Rental, and (iv) all Indebtedness, Liens and Investments of such
corporation shall be deemed to be created, assumed or incurred by Rental at
the time of such consolidation or merger; and
(8) the Constituent Companies may sell or otherwise dispose of or cause
its Subsidiaries to sell or otherwise dispose of the wiping cloth business
acquired pursuant to the Ace-Tex Acquisition; provided, that such sale or
disposition is completed within thirty (30) days of the Ace-Tex Acquisition
(the "Permitted Ace-Tex Disposition").
Computations deemed made pursuant to e5.13(a)(4) and (a)(6) shall include
dispositions made pursuant to e5.13(b)(2) and e5.13(c)(3) and computations
pursuant to e5.13(b)(2) and e5.13(c)(3) shall include dispositions deemed made
pursuant to e5.13(a)(4) and (a)(6).
(b) Each of the Constituent Companies will not, and will not permit any
of its Subsidiaries to, sell, lease, transfer, abandon or otherwise dispose
of, assets (except assets sold, leased, transferred, abandoned or otherwise
disposed of in the ordinary course of business for fair market value (provided
that such fair market value requirement shall not be applicable to assets
sold, leased, transferred or otherwise disposed of to the Parent or a
Subsidiary in the ordinary course of business) and except as provided in
e5.13(a)(3)); provided that the foregoing restrictions do not apply to:
(1) (i) the sale, lease, transfer or other disposition of assets of a
Constituent Company to another Constituent Company or of a Non-Obligor
Subsidiary to any of the Constituent Companies or a Wholly-Owned Subsidiary and
(ii) the Permitted Ace-Tex Disposition; or
(2) the sale, lease, transfer or other disposition of such assets for
- -19-
<PAGE> 20
cash or other property (including the assumption of debt) to a Person or
Persons if all of the following conditions are met:
(i) such assets (valued at net book value) do not, together with
all other assets of the Constituent Companies and their Subsidiaries
previously disposed of during the immediately preceding 12 month period (other
than in the ordinary course of business or pursuant to e5.13(a)(3) or
e5.13(a)(5) or e5.13(b)(1)), including assets deemed disposed of pursuant to
e5.13(a)(4) and (a)(6), exceed 20% of Total Assets;
(ii) the sale is for fair value and is in the best interests of
such Constituent Company or Subsidiary, such determination of fair value to be
made in good faith by (x) a Responsible Officer of such Constituent Company or
Subsidiary if such assets have a presumptive fair value of less than
$5,000,000 or if such assets, when considered together with assets sold or to
be sold in any related sale or sales or have a presumptive fair value of less
than $5,000,000 in the aggregate or (y) under any other circumstance, by the
Board of Directors of the Constituent Company or Subsidiary; and
(iii) immediately after the consummation of the transaction and
after giving effect thereto, no Default or Event of Default would exist.
Computations pursuant to this e5.13(b)(2) shall include dispositions made
pursuant to e5.13(c)(3) and deemed made pursuant to e5.13(a)(4) and (a)(6) and
computations pursuant to e5.13(c)(3) shall include dispositions made pursuant
to this e5.13(b)(2) and deemed made pursuant to e5.13(a)(4) and (a)(6).
(c) Each of the Constituent Companies will not, and will not permit any
of its Subsidiaries to, sell, pledge or otherwise dispose of any shares of the
stock (including as "stock" for the purposes of this Section any options or
warrants to purchase stock or other Securities exchangeable for or convertible
into stock) of a Subsidiary (said stock, options, warrants and other
Securities herein called "Subsidiary Stock"), nor will any Subsidiary issue,
sell, pledge or otherwise dispose of any shares of its own Subsidiary Stock,
provided that the foregoing restrictions do not apply to:
(1) the issue of directors qualifying shares; or
(2) the issue of Subsidiary Stock to any of the Constituent Companies or
a Wholly-Owned Subsidiary; and
(3) the sale or other disposition of Subsidiary Stock in any Non-Obligor
Subsidiary if all of the following conditions are met:
(i) the Assigned Value of such Subsidiary Stock of such Non-Obligor
Subsidiary does not, together with all other Subsidiary Stock in Non-Obligor
Subsidiaries of the Constituent Companies and their Subsidiaries previously
disposed of during the immediately preceding 12-month period (other than in
the ordinary course of business or pursuant to e5.13(c)(1) or (c)(2)), exceed
20% of Total Assets;
(ii) the sale is for fair value and is in the best interests of
such Constituent Company or Subsidiary, such determination of fair value to be
made in good faith by (x) a Responsible Officer of such Constituent Company or
Subsidiary if such Subsidiary Stock has a presumptive fair value of less than
- -20-
<PAGE> 21
$5,000,000 or if such Subsidiary Stock, when considered together with assets
sold or to be sold in any related sale or sales or has a presumptive fair
value of less than $5,000,000 in the aggregate or (y) under any other
circumstance, by the Board of Directors of such Constituent Company or
Subsidiary;
(iii) immediately after the consummation of the transaction and
after giving effect thereto, such Subsidiary shall have no Indebtedness of any
of the Constituent Companies or of any Subsidiary; and
(iv) immediately after the consummation of the transaction and
after giving effect thereto, no Default or Event of Default would exist.
Computations pursuant to this e5.13(c)(3) shall include dispositions made
pursuant to e5.13(b)(2) and deemed made pursuant to e5.13(a)(4) and (a)(6),
and computations pursuant to e5.13(b)(2) shall include dispositions made
pursuant to this e5.13(c)(3).
(d) Any Indebtedness of any Constituent Company or Subsidiary owed to
any entity which ceases to be a Subsidiary pursuant to merger or consolidation
under e5.13(a)(4) or a sale or other disposal of Subsidiary Stock under
e5.13(c) shall be deemed to be incurred by the relevant Constituent Company or
Subsidiary on the date such entity ceases to be a Subsidiary and shall be
subject to the limitations set forth in e5.9.
c2.Section 5.14. Repurchase of Notes;. None of the Constituent Companies
nor any Subsidiary, directly or indirectly, may repurchase or make any offer
to repurchase any Notes unless an offer has been made to repurchase Notes, pro
rata, from all holders of the Notes at the same time and upon the same terms.
In case any Constituent Companies or any Subsidiary repurchases or otherwise
acquires any Notes, such Notes shall immediately thereafter be canceled and
no Notes shall be issued in substitution therefor. Without limiting the
foregoing, upon the purchase or other acquisition of any Notes by any
Constituent Companies or Subsidiary, such Notes shall no longer be outstanding
for purposes of any section of this Agreement relating to the taking by the
holders of the Notes of any actions with respect hereto, including, without
limitation, e6.3, e6.4 and e7.1.
c2.Section 5.15. Transactions with Affiliates;. The Constituent Companies
will not, and will not permit any Subsidiary to, enter into or be a party to
any transaction or arrangement with any Affiliate (including, without
limitation, the purchase from, sale to or exchange of property with, or the
rendering of any service by or for, any Affiliate), unless such transaction or
arrangement is entered into pursuant to the reasonable requirements of such
Constituent Company's or such Restricted Subsidiary's business and upon fair
and reasonable terms no less favorable to such Constituent Company or such
Subsidiary than would obtain in a comparable arm's-length transaction with a
Person other than an Affiliate.
c2.Section 5.16. Multiemployer Plan Liability and Termination of Pension
Plans;. The Constituent Companies will not and will not permit any ERISA
Affiliate to withdraw from any Multiemployer Plan if such withdrawal could
result in withdrawal liability (as described in Part 1 of Subtitle E of Title
IV of ERISA) which would be reasonably likely to materially and adversely
affect the properties, business, prospects or financial condition of the
- -21-
<PAGE> 22
Parent and its Subsidiaries taken as a whole. Each Constituent Company and
any ERISA Affiliate will not permit any employee benefit plan maintained by it
to be terminated if such termination would result in the imposition of a Lien
on any property of the Constituent Company or any ERISA Affiliate pursuant to
Section 4068 of ERISA.
c2.Section 5.17. Reports and Rights of Inspection;. Each of the
Constituent Companies will keep, and will cause each of its Subsidiaries to
keep, proper books of record and account in which full and correct entries
will be made of all dealings or transactions of, or in relation to, the
business and affairs of such Constituent Company or Subsidiary, in accordance
with GAAP consistently applied (except for changes disclosed in the financial
statements furnished to you pursuant to this e5.17 and concurred in by the
independent public accountants referred to in e5.17(b) hereof), and the Parent
will furnish to you so long as you are the holder of any Note and to each
other Institutional Holder of the then outstanding Notes (in duplicate if so
specified below or otherwise requested):
(a) Quarterly Statements. As soon as available and in any event within
45 days after the end of each quarterly fiscal period (except the last) of the
Parent of each fiscal year, copies of:
(1) the consolidated balance sheets of the Parent and its
Subsidiaries as of the close of such quarterly fiscal period, setting forth in
comparative form the consolidated figures for the fiscal year then most
recently ended;
(2) the consolidated statements of earnings of the Parent and its
Subsidiaries for such quarterly fiscal period and for the portion of the
fiscal year ending with such quarterly fiscal period, in each case setting
forth in comparative form the consolidated figures for the corresponding
periods of the preceding fiscal year;
all in reasonable detail and certified by an authorized financial officer of
the Parent as being prepared in accordance with GAAP consistently applied and
as presenting fairly in all material respects the financial position of the
Parent and its Subsidiaries on a consolidated basis, provided that the Parent
may satisfy its requirements under this e5.17(a) by the delivery within the
time period described hereinabove of its quarterly reports on form 10-Q as
filed with the Securities and Exchange Commission;
(b) Annual Statements. As soon as available and in any event within 120
daysafter the close of each fiscal year of the Parent, copies of:
(1) the consolidated balance sheet of the Parent and its
Subsidiaries as of the close of such fiscal year, and (2) the
consolidated statement of earnings and retained earnings and cash flows of the
Parent and its Subsidiaries for such fiscal year, in each case setting forth
in comparative form the consolidated figures for the preceding fiscal year, all
in reasonable detail and accompanied by a report thereon of a firm of
independent public accountants of recognized national standing selected by the
Parent to the effect that the consolidated financial statements present fairly,
in all material respects, the
- -22-
<PAGE> 23
consolidated financial position of the Parent and its Subsidiaries as of the
end of the fiscal year being reported on and the consolidated results of the
operations and cash flows for said year in conformity with GAAP and that the
examination of such accountants in connection with such financial statements
has been conducted in accordance with generally accepted auditing standards,
provided that the Parent may satisfy its requirements under this e5.17(b) by
the delivery within the time period described hereinabove of its annual
reports on form 10-K as filed with the Securities and Exchange Commission;
(c) Additional Statements and Reconciliation. Within the periods
provided in paragraphs (a) and (b) above, (1) such financial statements as are
required to be delivered pursuant to paragraphs (a) and (b) above prepared in
conformity with Frozen GAAP and (2) a statement in reasonable detail and
certified as complete and correct by an authorized financial officer of the
Parent reconciling the statements provided pursuant to paragraphs (a) and (b)
above and the statements delivered pursuant to this paragraph (c) and
providing a detailed explanation of the differences between the same;
(d) Annual Consolidating Schedules. As soon as available and in any
event within 120 days after the close of each fiscal year of the Parent copies
of the consolidating balance sheet and statement of earnings of the Parent and
its Subsidiaries for such fiscal year all in reasonable detail and certified
by an authorized financial officer of the Parent as being prepared in
accordance with GAAP consistently applied and as presenting fairly in all
material respects the financial position of the Parent and its Subsidiaries on
a consolidated basis;
(e) SEC and Other Reports. Promptly upon their becoming available, one
copy of each financial statement, report, notice or proxy statement sent by
the Parent to stockholders generally and of each regular or periodic report,
and any registration statement or prospectus filed by any Constituent Company
or any Subsidiary with any securities exchange or the Securities and Exchange
Commission or any successor agency, and copies of any orders in any
proceedings to which any Constituent Company or any Subsidiary is a party,
issued by any governmental agency, Federal or state, having jurisdiction over
such Constituent Company or Subsidiary, if such order could have a material
adverse effect on the properties, business, prospects or financial condition
of the Parent and its Subsidiaries taken as a whole;
(f) Officer's Certificates. Within the periods provided in paragraphs
(a) and (b) above, a certificate of the chief financial officer of the Parent
stating that such officer has reviewed the provisions of this Agreement and
setting forth: (1) the information and computations (in sufficient detail)
required in order to establish whether the Constituent Companies and their
Subsidiaries were in compliance with the requirements of e5.6 through e5.13 at
the end of the period covered by the financial statements then being
furnished, and (2) whether there existed as of the date of such financial
statements and whether, to the best of such officer's knowledge, there exists
on the date of the certificate or existed at any time during the period
covered by such financial statements any Default or Event of Default and, if
any such condition or event exists on the date of the certificate, specifying
the nature and period of existence thereof and the action the Constituent
Companies are taking and propose to take with respect thereto;
(g) Accountant's Certificates. Within the period provided in paragraph
- -23-
<PAGE> 24
(b) above, (i) a certificate of the accountants who render an opinion with
respect to such financial statements, stating that they have reviewed this
Agreement and stating further whether, in making their audit, such accountants
have become aware of any Default or Event of Default under any of the terms or
provisions of this Agreement insofar as any such terms or provisions pertain
to or involve accounting matters or determinations, and if any such condition
or event then exists, specifying the nature and period of existence thereof
and (ii) a certificate of such accountants indicating that they have audited
the annual reconciliation of consolidated financial statements prepared in
accordance with Frozen GAAP to the consolidated financial statements prepared
in accordance with GAAP and in their opinion the adjustments made are
presented fairly in all material respects in accordance with this Agreement;
and
(h) Requested Information. With reasonable promptness, such other data
and information as you or any such Institutional Holder may reasonably
request.
Without limiting the foregoing, the Constituent Companies will permit you, so
long as you are the holder of any Note, and each Institutional Holder of 5% or
more of the aggregate principal amount of the Notes then outstanding (or such
Persons as either you or such Institutional Holder may reasonably designate),
to visit and inspect, under the Constituent Companies' guidance, any of the
properties of any Constituent Company or any Subsidiary, to examine all of
their books of account, records, reports and other papers, to make copies and
extracts therefrom and to discuss their respective affairs, finances and
accounts with their respective officers, employees, and, upon notification to
the Chief Financial Officer of the Parent, independent public accountants (and
by this provision each Constituent Company authorizes said accountants to
discuss with you the finances and affairs of such Constituent Company and
its Subsidiaries) all at such reasonable times and as often as may be
reasonably requested. Any visitation shall be at the sole expense of you or
such Institutional Holder, unless a Default or Event of Default shall have
occurred and be continuing or the holder of any Note or of any other evidence
of Indebtedness of the Constituent Companies or any Subsidiary gives any
written notice or takes any other action with respect to a claimed default, in
which case, any such visitation or inspection shall be at the sole expense of
the Constituent Companies.
c2.Section 5.18. Additional Constituent Companies;. Any Non-Obligor
Subsidiary may become a Constituent Company upon the delivery to all of the
holders of the Notes each of the following items:
(a) an executed Joinder Agreement in the form attached hereto as Exhibit
F;
(b) a certificate of the Secretary (or equivalent) of such Non-Obligor
Subsidiary certifying (1) the names and true signatures of the incumbent
officers of such Non-Obligor Subsidiary authorized to sign the Joinder
Agreement, (2) the By-Laws of such Non-Obligor Subsidiary as in effect on the
date of such certification, (3) the resolutions of such Non-Obligor
Subsidiary's Board of Directors approving and authorizing the execution,
delivery and performance of the Joinder Agreement, (4) that there has been no
change in the Articles of Incorporation (or equivalent) or By-Laws of such
Non-Obligor Subsidiary since the date of the review thereof by counsel
- -24-
<PAGE> 25
providing the opinion described in clause (e) below, and (5) that such
Non-Obligor Subsidiary is in good standing in its state of incorporation and
in each other state in which it is qualified to do business;
(c) a good standing certificate or like certificate from the appropriate
governmental official of the jurisdiction of incorporation of such Non-Obligor
Subsidiary;
(d) the Articles of Incorporation (or equivalent) of such Non-Obligor
Subsidiary recently certified by the Secretary of State (or equivalent) of the
jurisdiction of incorporation of such Non-Obligor Subsidiary; and
(e) an opinion of counsel satisfactory to you in the form attached
hereto as Exhibit G.
Upon receipt by the holders of the Notes of all of the foregoing items
properly completed and duly executed, such Non-Obligor Subsidiary shall be
deemed to be a Constituent Company for the purposes hereof, subject to all of
the terms, conditions and provisions hereof and of each of the Notes as if it
were an original party hereto and thereto.
c2.Section 5.19. Contribution and Conveyance;. Each of the Constituent
Companies acknowledges that each of the other Constituent Companies is part of
a consolidated group of companies and that its financial strength is
interdependent upon the financial strength of the consolidated group as a
whole. Each of the Constituent Companies further acknowledges that its joint
and several obligations under the Agreements is a necessary condition to the
Constituent Companies receiving any funds from the issue of the Notes.
Therefore, each of the Constituent Companies acknowledges and agrees that the
Notes are supported by adequate consideration and that each has received a
substantial benefit from the Notes, regardless of the amount of funds actually
received by such Constituent Company under the Agreements. In the event a
Constituent Company makes any payment under the Agreements which exceeds the
amount of funds actually received, directly or indirectly, by such Constituent
Company thereunder, such Constituent Company shall be entitled to contribution
and reimbursement from each of the other Constituent Companies, pro rata, on
the basis of funds actually received and shall be entitled to recover such
amounts by available legal means. After (but only after) full payment of the
Notes and until such recovery is made, such Constituent Company shall be
deemed subrogated to the rights and interests of the Purchasers under the
Agreements. Such rights of contribution, reimbursement and subrogation shall
be and remain at all times junior, subordinate, inferior and subject to the
right and interests of the Purchasers under the Agreements and shall not
affect or impair in any way the joint, several, personal and unconditional
obligation of each Constituent Company to fully pay each of the Notes and to
perform all its other obligations under the Agreements.
c2.Section 5.20. Prohibition of Extension of the Lincoln National Liens;.
The Constituent Companies will not agree to any extension, renewal or
refunding of any lien securing the Lincoln National Indebtedness, whether or
not in connection with the extension, renewal or refunding of the Lincoln
National Indebtedness; provided that the Constituent Companies may substitute
collateral for the collateral securing the Lincoln National Indebtedness in
accordance with and pursuant to the terms of the Trust Indenture evidencing
the Lincoln National Indebtedness so long as the fair market value of such
- -25-
<PAGE> 26
substitute collateral is similar to the fair market value of the collateral
being released with respect to the Lincoln National Indebtedness determined on
the date of such substitution (hereinafter referred to as the "Lincoln
National Liens").
c2.Section 5.21. Prohibition of Change in Fiscal Year;. The Constituent
Companies will not, and will not permit any of their Subsidiaries to, change
their fiscal year-ends for accounting purposes unless each Constituent Company
and Subsidiary concurrently changes its fiscal year end to the same date and
the Parent provides 60 days prior written notice of such change to each of the
holders of the Notes.
Section 6. Events of Default and Remedies Therefor;.
c2.Section 6.1. Events of Default;. Any one or more of the following
shall constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note when the
same shall have become due and such default shall continue for more than five
Business Days; or
(b) Default shall occur in the making of any required prepayment on any
of the Notes as provided in e2.1; or
(c) Default shall occur in the making of any other payment of the
principal of any Note or premium, if any, thereon at the expressed or any
accelerated maturity date or at any date fixed for prepayment; or
(d) Default shall occur in the observance or performance of any other
provision of this Agreement which is not remedied within 30 days after the
earlier of (1) the day on which any of the Constituent Companies first knows
of such default, or (2) the day on which written notice thereof is given to
the Constituent Companies by the holder of any Note; or
(e) Default or the happening of any event shall occur under any
indenture, agreement or other instrument under which any Indebtedness for
borrowed money of any Constituent Company or any Subsidiary (other than the
Notes) is outstanding in excess of the lesser of (1) 10% of Consolidated
Stockholders' Equity or (2) $10,000,000 and such default or event shall have
resulted in the acceleration of the maturity of such Indebtedness; or
(f) Any representation or warranty made by a Constituent Company
herein, or made by a Constituent Company in any written statement or
certificate furnished by such Constituent Company in connection with the
consummation of the issuance and delivery of the Notes or furnished by a
Constituent Company pursuant hereto, is untrue in any material respect as of
the date of the issuance or making thereof; or
(g) Final uninsured judgment or judgments for the payment of money
aggregating in excess of $10,000,000 is or are outstanding against the
Constituent Companies or their Subsidiaries or against any property or assets
of either and any one of such judgments has remained unpaid, unvacated,
unbonded or unstayed by appeal or otherwise for a period of 60 days from the
date of its entry; or
(h) A custodian, liquidator, trustee or receiver is appointed for any
- -26-
<PAGE> 27
Constituent Company or Subsidiary or for the major part of the property of
such Constituent Company or Subsidiary and is not discharged within 60 days
after such appointment; or
(i) Any Constituent Company or Subsidiary becomes insolvent or bankrupt,
is generally not paying its debts as they become due or makes an assignment
for the benefit of creditors, or any Constituent Company or Subsidiary applies
for or consents to the appointment of a custodian, liquidator, trustee or
receiver for such Constituent Company or Subsidiary or for the major part of
the property of such Constituent Company or Subsidiary; or
(j) Bankruptcy, reorganization, arrangement or insolvency proceedings,
or other proceedings for relief under any bankruptcy or similar law or laws
for the relief of debtors, are instituted by or against any of the Constituent
Companies or any Subsidiary and, if instituted against any of the Constituent
Companies or any Subsidiary, are consented to or are not dismissed within 60
days after such institution.
c2.Section 6.2. Notice to Holders;. When any Event of Default described in
the foregoing e6.1 has occurred, or if the holder of any Note or of any other
evidence of Indebtedness for borrowed money of the Constituent Companies gives
any notice or takes any other action with respect to a claimed default, the
Constituent Companies agree to give notice within three Business Days of such
event to all holders of the Notes then outstanding.
c2.Section 6.3. Acceleration of Maturities;. When any Event of Default
described in paragraph (a), (b) or (c) of e6.1 has happened and is continuing,
any holder of any Note may, by notice in writing sent in the manner provided
in e9.6 hereof to the Constituent Companies, declare the entire principal and
all interest accrued on such Note to be, and such Note shall thereupon become
forthwith due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived. When any Event
of Default described in paragraphs (a) through (g), inclusive, of said e6.1
has happened and is continuing, the holder or holders of greater than 50% of
the principal amount of Notes at the time outstanding may, by notice in
writing in the manner provided in e9.6 to the Constituent Companies, declare
the entire principal and all interest accrued on all Notes to be, and all
Notes shall thereupon become, forthwith due and payable, without any
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived. When any Event of Default described in paragraph
(h), (i) or (j) of e6.1 has occurred, then all outstanding Notes shall
immediately become due and payable without presentment, demand or notice of
any kind. Upon the Notes becoming due and payable as a result of any Event of
Default as aforesaid, the Constituent Companies will forthwith pay to the
holders of the Notes the entire principal and interest accrued on the Notes
and, to the extent not prohibited by applicable law, an amount as liquidated
damages for the loss of the bargain evidenced hereby (and not as a penalty)
equal to the Make-Whole Amount, determined as of the date on which the Notes
shall so become due and payable. No course of dealing on the part of the
holder or holders of any Notes nor any delay or failure on the part of any
holder of Notes to exercise any right shall operate as a waiver of such right
or otherwise prejudice such holder's rights, powers and remedies. The
Constituent Companies further agree, to the extent permitted by law, to pay to
the holder or holders of the Notes all costs and expenses incurred by them in
the collection of any Notes upon any default hereunder or thereon, including
- -27-
<PAGE> 28
reasonable compensation to such holder's or holders' attorneys for all
services rendered in connection therewith.
c2.Section 6.4. Rescission of Acceleration;. The provisions of e6.3 are
subject to the condition that if the principal of and accrued interest on all
or any outstanding Notes have been declared immediately due and payable by
reason of the occurrence of any Event of Default described in paragraphs (a)
through (g), inclusive, of e6.1, the holders of 66-2/3% in aggregate principal
amount of the Notes then outstanding may, by written instrument filed with the
Constituent Companies, rescind and annul such declaration and the consequences
thereof, provided that at the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any principal,
interest or premium on the Notes which has become due and payable solely by
reason of such declaration under e6.3) shall have been duly paid; and
(c) each and every other Default and Event of Default shall have been
made good, cured or waived pursuant to e7.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right
consequent thereto.
Section 7. Amendments, Waivers and Consents;.
c2.Section 7.1. Consent Required;. Any term, covenant, agreement or
condition of this Agreement may, with the consent of the Constituent
Companies, be amended or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), if the
Constituent Companies shall have obtained the consent in writing of the
holders of at least 66-2/3% in aggregate principal amount of outstanding
Notes; provided that without the written consent of the holders of all of the
Notes then outstanding, no such amendment or waiver shall be effective (a)
which will change the time of payment (including any prepayment required by
e2.1) of the principal of or the interest on any Note or change the principal
amount thereof or change the rate of interest thereon, or (b) which will
change any of the provisions with respect to optional prepayments, or (c)
which will change the percentage of holders of the Notes required to consent
to any such amendment or waiver of any of the provisions of this e7 or e6.
c2.Section 7.2. Solicitation of Holders;. So long as there are any Notes
outstanding, the Constituent Companies will not solicit, request or negotiate
for or with respect to any proposed waiver or amendment of any of the
provisions of this Agreement or the Notes unless each holder of Notes
(irrespective of the amount of Notes then owned by it) shall be informed
thereof by the Constituent Companies and shall be afforded the opportunity of
considering the same and shall be supplied by the Constituent Companies with
sufficient information to enable it to make an informed decision with respect
thereto. The Constituent Companies will not, directly or indirectly, pay or
cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, to any holder of Notes as consideration
- -28-
<PAGE> 29
for or as an inducement to entering into by any holder of Notes of any waiver
or amendment of any of the terms and provisions of this Agreement or the Notes
unless such remuneration is concurrently offered, on the same terms, ratably
to the holders of all Notes then outstanding. Promptly and in any event
within 30 days of the date of execution and delivery of any such waiver or
amendment, the Constituent Companies shall provide a true, correct and
complete copy thereof to each of the holders of the Notes.
c2.Section 7.3. Effect of Amendment or Waiver;. Any such amendment or
waiver shall apply equally to all of the holders of the Notes and shall be
binding upon them, upon each future holder of any Note and upon each of the
Constituent Companies, whether or not such Note shall have been marked to
indicate such amendment or waiver. No such amendment or waiver shall extend
to or affect any obligation not expressly amended or waived or impair any
right consequent thereon.
Section 8. Interpretation of Agreement; Definitions';.
c2.Section 8.1. Definitions;. Unless the context otherwise requires, the
terms hereinafter set forth when used herein shall have the following meanings
and the following definitions shall be equally applicable to both the singular
and plural forms of any of the terms herein defined:
"Ace-Tex Acquisition" shall mean the acquisition by either Constituent
Company or any of their Wholly-owned Subsidiaries of all of the issued and
outstanding capital stock of Ace-Tex Corporation, a Michigan corporation.
"Affiliate" shall mean any Person (other than a Subsidiary) (a) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, any of the Constituent
Companies, (b) which beneficially owns or holds 10% or more of any class of
the Voting Stock of any of the Constituent Companies, (c) 10% or more of the
Voting Stock (or in the case of a Person which is not a corporation, 10% or
more of the equity interest) of which is beneficially owned or held by any of
the Constituent Companies or any Subsidiary or (d) each executive officer and
director of such Person whether or not included within the meaning of clauses
(a), (b) or (c) above. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of Voting Stock, by
contract or otherwise.
"Assigned Value" shall mean the amount of stock which is the subject of
the transaction expressed as a percentage of the total stock of such entity
times the net book value of all assets of such entity as the net book value of
such assets is determined in accordance with GAAP.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks in Kansas City, Missouri or New York, New York are required
by law to close or are customarily closed.
"Capitalized Lease" shall mean any lease the obligation for Rentals with
respect to which is required to be capitalized on a consolidated balance sheet
of the lessee and its subsidiaries in accordance with Frozen GAAP.
"Capitalized Rentals" of any Person shall mean as of the date of any
- -29-
<PAGE> 30
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person in accordance with Frozen GAAP.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. ee9601 et seq., and any future
amendments.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations from time to time promulgated thereunder.
"Computing Holder" shall mean, as of the date of the related notice of
optional prepayment delivered pursuant to e2.3, the holder of Notes with the
highest aggregate principal amount outstanding then being prepaid which holder
is willing to act in such capacity. In case two or more holders of Notes
would, by reason of holding Notes in the same aggregate principal amount
outstanding, qualify as the Computing Holder as aforesaid as of any date of
determination, the Computing Holder shall be the qualifying holder or holders
as mutually determined by all such qualifying holders. For purposes of this
definition Notes held by a holder and one or more of its affiliates shall be
deemed to be held by a single holder.
"Consolidated Current Assets" and "Consolidated Current Liabilities"
shall mean as of the date of any determination thereof such assets and
liabilities of the Parent and its Subsidiaries on a consolidated basis as
shall be determined in accordance with Frozen GAAP to constitute current
assets and current liabilities, respectively, including without limitation,
the current portion of any long-term Indebtedness and the current portion of
any amounts due with respect to Specified Preferred Stock.
"Consolidated Funded Debt" shall mean, as of the date of determination
thereof, all Funded Debt of the Parent and its Subsidiaries, determined on a
consolidated basis eliminating intercompany items.
"Consolidated Net Earnings" for any period shall mean the consolidated
net earnings of the Parent and its Subsidiaries for such period, determined on
a consolidated basis eliminating intercompany items in accordance with Frozen
GAAP, but excluding in any event:
(a) net earnings and losses of any Subsidiary accrued prior to the date
it became a Subsidiary except such net earnings or losses which were actually
included within "Consolidated Net Earnings" prior to the time such entity
became a Subsidiary; and
(b) any extraordinary gains or losses included in consolidated net
earnings in accordance with Frozen GAAP.
"Consolidated Specified Indebtedness" shall mean, as of the date of any
determination thereof, the Specified Indebtedness of the Parent and its
Subsidiaries on a consolidated basis eliminating intercompany items.
"Consolidated Stockholders' Equity" shall mean, as of the date of any
- -30-
<PAGE> 31
determination thereof, the Stockholders' Equity of the Parent and its
Subsidiaries on a consolidated basis eliminating intercompany items.
"Consolidated Total Capitalization" shall mean, as of the date of any
determination thereof, the sum of Consolidated Stockholders' Equity plus
Consolidated Funded Debt.
"Constituent Companies" shall mean, collectively, (a) the Parent, (b)
Unitog Rental Services, Inc., a California corporation, (c) any other
Subsidiary which has satisfied the requirements of e5.18 and (d) any Person
who succeeds to all, or substantially all, of the assets and business of any
such party.
"Credit Agreement" shall mean that certain Bank Credit Agreement dated as
of September 10, 1993, as amended by the Amendment No. 1 to Loan and Letter of
Credit Reimbursement Agreement dated as of December 29, 1994 among the Parent,
Unitog Rental Services, Inc., the financial institutions which are from time
to time parties thereto, United Missouri Bank of Kansas City, as agent, as the
same may be amended or modified from time to time, and any credit facility or
agreement in replacement of, renewal of or expansion of that certain Bank
Credit Agreement described above.
"Current Management Team" shall mean those officers of the Parent which
qualify as an "Executive Officer" as defined in Rule 501(f) of the Securities
Act of 1933, as amended, as of the date of the relevant consolidation or
merger pursuant to e5.13(a).
"Default" shall mean any event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default.
"Environmental Law" shall mean any international, federal, state or local
statute, law, regulation, order, consent decree, judgment, permit, license,
code, common law, treaty, convention, ordinance or other requirement relating
to the environment, including, without limitation, those relating to releases,
discharges or emissions to air, water, land or groundwater, to the withdrawal
or use of groundwater, to the use and handling of polychlorinated biphenyls or
asbestos, to the disposal, treatment, storage or management of hazardous or
solid waste, or Hazardous Substances or crude oil or any fraction thereof, or
to exposure to toxic or hazardous materials, to the handling, transportation,
discharge or release of gaseous or liquid Hazardous Substances and any
regulation, order, or notice issued pursuant to such law, statute or
ordinance, in each case applicable to the property of the Constituent
Companies and its Subsidiaries or the operation, construction or modification
of any thereof, including without limitation the following: the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976
and the Hazardous and Solid Waste Amendments of 1984, the Hazardous Materials
Transportation Act, as amended, the Federal Water Pollution Control Act, as
amended by the Clean Water Act of 1976, the Safe Drinking Water Control Act,
the Clean Air Act of 1966, as amended, the Toxic Substances Control Act of
1976, the Occupational Safety and Health Act of 1977, as amended, the
Emergency Planning and Community Right-to-Know Act of 1986, the National
Environmental Policy Act of 1975, the Oil Pollution Act of 1990 and any
- -31-
<PAGE> 32
similar or implementing state law, and any state statute and any further
amendments to these laws providing for financial responsibility for cleanup or
other actions with respect to the release or threatened release of Hazardous
Substances or crude oil or any fraction thereof, and all rules and regulations
promulgated thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to also refer to any
successor sections.
"ERISA Affiliate" shall mean any corporation, trade or business that is,
along with any of the Constituent Companies, a member of a controlled group of
corporations or a controlled group of trades or businesses, as described in
section 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA.
"Event of Default" shall have the meaning set forth in e6.1.
"Fixed Charges" for any period shall mean on a consolidated basis the sum
of (a) all Rentals (other than Rentals on Capitalized Leases) expensed during
such period by the Parent and its Subsidiaries, and (b) all Interest Expense
on all Indebtedness (including the interest component of Rentals on
Capitalized Leases) of the Parent and its Subsidiaries.
"Frozen GAAP" shall mean generally accepted accounting principles in
existence as of August 1, 1993.
"Funded Debt" of any Person shall mean (a) all Indebtedness of such
Person (1) for borrowed money, (2) which has been incurred in connection with
the acquisition of assets and is classified as long-term debt in accordance
with Frozen GAAP, including, without limitation, Purchase Money Indebtedness
or (3) Specified Preferred Stock, in each case having a final maturity of one
or more than one year from the date of origin thereof (or which is renewable
or extendible at the option of the obligor for a period or periods more than
one year from the date of origin), excluding all payments in respect thereof
that are required to be made within one year from the date of any
determination of Funded Debt and that shall constitute a current liability of
the obligor under Frozen GAAP, (b) all Capitalized Rentals (excluding current
maturities) of such Person, and (c) all Guaranties (excluding current
maturities) by such Person of Funded Debt of others.
"GAAP" shall mean generally accepted accounting principles in existence
from time to time.
"Governmental Approval" shall mean any written permit, license, variance,
certification, consent, no-action letter, clearance, exemption or other
approval granted by a Governmental Authority.
"Governmental Authority" shall mean any international, foreign, federal,
state, regional, county, local or other governmental or quasi-governmental
authority.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
- -32-
<PAGE> 33
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an agreement, contingent
or otherwise, by such Person: (a) to purchase such Indebtedness or obligation
or any property or assets constituting security therefor, (b) to advance or
supply funds (1) for the purchase or payment of such Indebtedness or
obligation, (2) to maintain working capital or any balance sheet or income
statement condition or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation, (c) to lease property
or to purchase Securities or other property or services primarily for the
purpose of assuring the owner of such Indebtedness or obligation of the
ability of the primary obligor to make payment of the Indebtedness or
obligation, or (d) otherwise to assure the owner of the Indebtedness or
obligation of the primary obligor against loss in respect thereof. For the
purposes of all computations made under this Agreement, a Guaranty in respect
of any Indebtedness for borrowed money shall be deemed to be Indebtedness
equal to the principal amount of such Indebtedness for borrowed money which
has been guaranteed, and a Guaranty in respect of any other obligation or
liability or any dividend shall be deemed to be Indebtedness equal to the
maximum aggregate amount of such obligation, liability or dividend.
"Hazardous Substance" shall mean any hazardous or toxic material,
substance or waste, pollutant or contaminant which is regulated under any
statute, law, ordinance, rule or regulation of any local, state, regional or
federal authority having jurisdiction over the property of any of the
Constituent Companies and their Subsidiaries or its use, including but not
limited to any material, substance or waste which is: (a) defined as a
hazardous substance under Section 311 of the Federal Water Pollution Control
Act (33 U.S.C. e1317) as amended; (b) regulated as a hazardous waste under
Section 1004 or Section 3001 of the Federal Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act (42 U.S.C. e6901 et
seq.), as amended; (c) defined as a hazardous substance under Section 101 of
the Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. e9601 et seq.), as amended, or (d) defined or regulated as a hazardous
substance or hazardous waste under any rules or regulations promulgated under
any of the foregoing statutes.
"Honduras Subsidiary" shall mean Unitog De Honduras, S.A., a Honduran
corporation.
"Indebtedness" of any Person shall mean and include all obligations of
such Person which in accordance with Frozen GAAP shall be classified upon a
balance sheet of such Person as liabilities of such Person, and in any event
shall include all (a) obligations of such Person for borrowed money or which
have been incurred in connection with the acquisition of property or assets,
(b) obligations secured by any Lien upon property or assets owned by such
Person, even though such Person has not assumed or become liable for the
payment of such obligations, (c) obligations created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the event of default
are limited to repossession or sale of property, (d) Capitalized Rentals, (e)
Specified Preferred Stock, and (f) Guaranties of obligations of others of the
character referred to in this definition.
- -33-
<PAGE> 34
"Industrial Development Bonds" shall mean any bond issued by or on behalf
of a political subdivision the interest on which is excludable from gross
income for federal income tax purposes on the date such obligations were
issued.
"Institutional Holder" shall mean any of the following Persons: (a) any
bank, savings and loan association, savings institution, trust company or
national banking association, acting for its own account or in a fiduciary
capacity, (b) any charitable foundation, (c) any insurance company, (d) any
fraternal benefit society, (e) any pension, retirement or profit sharing trust
or fund within the meaning of Title I of ERISA or for which any bank, trust
company, national banking association or investment adviser registered under
the Investment Advisers Act of 1940, as amended, is acting as trustee or
agent, (f) any investment company or business development company, as defined
in the Investment Company Act of 1940, as amended, (g) any small business
investment company licensed under the Small Business Investment Act of 1958,
as amended, (h) any broker or dealer registered under the Securities Exchange
Act of 1934, as amended, or any investment adviser registered under the
Investment Adviser Act of 1940, as amended, (i) any government, any public
employees' pension or retirement system, or any other government agency
supervising the investment of public funds, (j) any other entity all of the
equity owners of which are Institutional Holders or (k) any other Person which
may be within the definition of "qualified institutional buyer" as such term
is used in Rule 144A, as from time to time in effect, promulgated under the
Securities Act of 1933, as amended.
"Interest Expense" for any period shall mean all interest and all
amortization of debt discount and expense on any particular Indebtedness
(including, without limitation, payment-in-kind, zero coupon and other like
Securities) for which such calculations are being made and dividends on
Specified Preferred Stock.
"Interest Payment Date" shall mean each January thirty-first, April
thirtieth, July thirty-first and October thirty-first occurring in each year
including the maturity date of the Notes.
"Investments" shall mean all investments, in cash or by delivery of
property made, directly or indirectly in any Person, whether by acquisition of
shares of capital stock, Indebtedness or Securities or by loan, advance
(excluding employee related advances), capital contribution or otherwise;
provided that "Investments" shall not mean or include investments in property
to be used or consumed in the ordinary course of business. In no event shall
the purchase or acquisition of any Property (other than shares of stock of any
class or any other Security) of a business engaged in the same general nature
of business engaged in by the Parent and its Subsidiaries taken as a whole
constitute an Investment.
"Lien" shall mean any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but
not limited to the security interest lien arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encumbrances, easements, rights-of-way, covenants,
- -34-
<PAGE> 35
conditions, and restrictions on real property. For the purposes of this
Agreement, a Constituent Company or a Subsidiary shall be deemed to be the
owner of any property which it has acquired or holds subject to a conditional
sale agreement, Capitalized Lease or other arrangement pursuant to which title
to the property has been retained by or vested in some other Person for
security purposes and such retention or vesting shall constitute a Lien.
"Lincoln National Indebtedness" shall mean that certain Indebtedness
issued pursuant to that certain Trust Indenture dated as of December 1, 1988
between the Parent, Unitog Rental Services, Inc. and People's Bank & Trust
Company, as trustee, for the benefit of Lincoln National Life Insurance
Company and outstanding on the Closing Date.
"Lincoln National Liens" shall have the meaning set forth in e5.20.
"Make-Whole Amount" shall mean in connection with any prepayment or
acceleration of the Notes the excess, if any, of (a) the aggregate present
value as of the date of such prepayment or acceleration of each dollar of
principal being prepaid (taking into account the application of such
prepayment required by e2.1) or accelerated and the amount of interest
(exclusive of interest accrued to the date of prepayment) that would have been
payable in respect of such dollar if such prepayment or acceleration had not
occurred, determined by discounting such amounts at the Reinvestment Rate from
the respective dates on which they would have been payable, over (b) 100% of
the principal amount of the outstanding Notes being prepaid or accelerated.
If the Reinvestment Rate is equal to or higher than the interest rate borne
by the Notes on the date of any determination hereof, the Make-Whole Amount
shall be zero. For purposes of any determination of the Make-Whole Amount:
"Reinvestment Rate" shall mean the sum of 0.50%, plus the yield reported
on the Telerate Information System, page 7677, Bid Side, (or, if not
available, any other nationally recognized trading screen reporting on-line
intraday trading in the United States government Securities as selected by the
holder or holders of greater than 50% of the principal amount of Notes at the
time outstanding) at 11:00 A.M. (New York, New York time) for the United
States government Securities having a maturity (rounded to the nearest month)
corresponding to the remaining Weighted Average Life to Maturity of the
principal being prepaid (taking into account the application of such
prepayment required by e2.1) or accelerated. If no maturity exactly
corresponds to such Weighted Average Life to Maturity, yields for the two
published maturities most closely corresponding to such Weighted Average Life
to Maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated from such yields on a
straight-line basis.
"Weighted Average Life to Maturity" of the principal amount of the Notes
being prepaid or accelerated shall mean, as of the time of any determination
thereof, the number of years obtained by dividing the then Remaining
Dollar-Years of such principal by the aggregate amount of such principal. The
term "Remaining Dollar-Years" of such principal shall mean the amount obtained
by (1) multiplying (i) the remainder of (A) the amount of principal that would
have become due on each scheduled payment date if such prepayment or
acceleration had not occurred, less (B) the amount of principal on the Notes
scheduled to become due on such date after giving effect to such prepayment
(and the application thereof in accordance with the provisions of e2.1) or
- -35-
<PAGE> 36
acceleration, by (ii) the number of years which will elapse between the date
of determination and such scheduled payment date, and (2) totalling the
products obtained in (1).
"Multiemployer Plan" shall have the same meaning as in ERISA.
"National Priority List" shall mean that certain list promulgated by the
United States Environmental Protection Agency of uncontrolled or abandoned
hazardous waste sites identified for possible long-term remedial action under
CERCLA.
"Net Earnings Available for Fixed Charges" for any period shall mean (a)
Consolidated Net Earnings during such period plus (b) (to the extent deducted
in determining Consolidated Net Earnings) the sum of (1) all provisions for
any Federal, state or other income taxes made by the Parent and its
Subsidiaries during such period, (2) amortization expense of the Parent and
its Subsidiaries during such period, and (3) Fixed Charges during such period.
"Non-Obligor Subsidiary" shall mean any Subsidiary which is not a
Constituent Company.
"Overdue Rate" shall mean the greater of (a) the interest rate borne by
the Notes on the date of any determination hereof expressed as a percentage
plus 2% per annum and (b) 2% plus the rate which Chase Manhattan Bank, N.A.,
New York, New York announces from time to time as its prime lending rate.
"Parent" shall mean Unitog Company, a Delaware corporation, and any
Person who succeeds to all, or substantially all, of the assets and business
of such Person.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Permitted Ace Tex Disposition" shall have the meaning set forth in
5.13(a)(8).
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political
subdivision thereof.
"Plan" shall mean a "pension plan," as such term is defined in ERISA,
established or maintained by any of the Constituent Companies or any ERISA
Affiliate or as to which the Constituent Company or any ERISA Affiliate
contributed or is a member or otherwise may have any liability, other than a
Multiemployer Plan.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
Purchase Money Indebtedness" shall mean with respect to any Person
Indebtedness secured by Liens given to secure the payment of the purchase
price of assets acquired by such Person.
"Purchaser" shall have the meaning set forth in e1.1.
"RCRA" shall mean the Solid Waste Disposal Act, as amended by the
- -36-
<PAGE> 37
Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste
Amendments of 1984, 42 U.S.C. ee6901 et seq., and any future amendments.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing
into the environment, including, without limitation, the abandonment or
discarding of barrels, drums, containers, tanks and other receptacles
containing any Hazardous Substance.
"Rentals" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of
the property) payable by a Constituent Company or a Subsidiary, as lessee or
sublessee under a lease of real or personal property, but shall be exclusive
of any amounts required to be paid by such Constituent Company or Subsidiary
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges. Fixed rents under
any so-called "percentage leases" shall be computed solely on the basis of the
minimum rents, if any, required to be paid by the lessee regardless of sales
volume or gross revenues.
"Reportable Event" shall have, with respect to any Plan, the same meaning
as in Section 4043 of ERISA, except shall not include reportable events with
respect to which the 30-day notice requirement has been waived by the PBGC
(provided that the loss of qualification of a Plan and the failure to meet the
minimum funding standards of Section 412 of the Code or Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any waiver of the
notice requirement by the PBGC).
"Responsible Officer" shall mean the Chairman, President and any Senior
Vice President, of the relevant Constituent Company.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Special Subsidiary" shall mean any corporation of which more than 80%
(by number of votes) of the Voting Stock shall be beneficially owned by the
Constituent Companies and/or Wholly-Owned Subsidiaries, which is organized
under the laws of the United States or any State thereof and which conducts
substantially all of its business and has substantially all of its assets
within the United States.
"Specified Group" shall mean any group of Persons which includes 2/3 of
the Current Management Team.
"Specified Indebtedness" shall mean with respect to any Person, as of the
date of determination thereof, the sum of (a) Funded Debt of such Person plus
(b) all Indebtedness for borrowed money that shall constitute a current
liability of the obligor under Frozen GAAP, including without limitation, all
payments in respect of Funded Debt that are required to be made within one
year from the date of any determination thereof and all payments in respect of
Specified Preferred Stock that are required to be made within one year from
the date of any determination thereof.
"Specified Preferred Stock" shall mean preferred stock of any entity
- -37-
<PAGE> 38
which includes mandatory redemption provisions without regard to the date of
any such final redemption whether or not such preferred stock shall be
classified as indebtedness in accordance with Frozen GAAP.
"Stipulated Value" shall mean the remainder of (a) the percentage of the
total stock of the relevant Non-Obligor Subsidiary owned by the Constituent
Companies or Wholly-Owned Subsidiaries immediately prior to the relevant sale,
lease or other disposition of assets (the "Asset Transaction") multiplied by
the net book value of the total assets of such Non-Obligor Subsidiary
determined immediately prior such Asset Transaction less (b) the percentage of
the total stock of the relevant Special Subsidiary owned by the Constituent
Companies or Wholly-Owned Subsidiaries immediately after giving effect to such
Asset Transaction multiplied by the net book value of the total assets of such
Non-Obligor Subsidiary determined immediately prior to such Asset Transaction.
"Stockholders' Equity" shall mean with respect to any Person, as of the
date of any determination thereof, the stockholders' equity as would be shown
on the balance sheet of such Person in accordance with Frozen GAAP, excluding
in any event Specified Preferred Stock.
The term "subsidiary" shall mean as to any particular parent corporation
any corporation of which more than 50% (by number of votes) of the Voting
Stock shall be beneficially owned, directly or indirectly, by such parent
corporation. The term "Subsidiary" shall mean a subsidiary of the Constituent
Companies.
"Total Assets" shall mean all those items which are shown as assets on
the consolidated balance sheet of the Parent and its Subsidiaries on a
consolidated basis determined in accordance with Frozen GAAP.
"Voting Stock" shall mean Securities of any class or classes, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
"Wholly-owned" shall mean (a) when used in connection with any Subsidiary
shall mean a Subsidiary of which all of the issued and outstanding shares of
stock (except shares required as directors' qualifying shares) shall be owned
by the Constituent Companies and/or one or more of their Wholly-owned
Subsidiaries and (b) the Honduras Subsidiary so long as the Parent continues
to own 98% of the stock of the Honduras Subsidiary at all times.
c2.Section 8.2. Accounting Principles;. Where the character or amount of
any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, the same shall be done in
accordance with Frozen GAAP, to the extent applicable, except where such
principles are inconsistent with the requirements of this Agreement.
c2.Section 8.3. Directly or Indirectly;. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action
in question is taken directly or indirectly by such Person.
Section 9. Miscellaneous;.
c2.Section 9.1. Registered Notes;. The Parent shall cause to be kept at
- -38-
<PAGE> 39
its principal office a register for the registration and transfer of the
Notes, and the Parent will register or transfer or cause to be registered or
transferred, as hereinafter provided any Note issued pursuant to this
Agreement.
At any time and from time to time the holder of any Note which has been
duly registered as hereinabove provided may transfer such Note upon surrender
thereof at the principal office of the Parent duly endorsed or accompanied by
a written instrument of transfer duly executed by the holder of such Note or
its attorney duly authorized in writing.
The Person in whose name any Note shall be registered shall be deemed and
treated as the owner and holder thereof for all purposes of this Agreement.
Payment of or on account of the principal, premium, if any, and interest on
any Note shall be made to or upon the written order of such holder.
c2.Section 9.2. Exchange of Notes;. At any time and from time to time,
upon not less than ten days' notice to that effect given by the holder of any
Note initially delivered or of any Note substituted therefor pursuant to e9.1,
this e9.2 or e9.3, and, upon surrender of such Note at the Parent's office,
the Constituent Companies will deliver in exchange therefor, without expense
to such holder, except as set forth below, a Note for the same aggregate
principal amount as the then unpaid principal amount of the Note so
surrendered, or Notes in the denomination of $100,000 (or such lesser amount
as shall constitute 100% of the Notes of such holder) or any amount in excess
thereof as such holder shall specify, dated as of the date to which interest
has been paid on the Note so surrendered or, if such surrender is prior to the
payment of any interest thereon, then dated as of the date of issue,
registered in the name of such Person or Persons as may be designated by such
holder, and otherwise of the same form and tenor as the Notes so surrendered
for exchange. The Constituent Companies may require the payment of a sum
sufficient to cover any stamp tax or governmental charge imposed upon such
exchange or transfer.
c2.Section 9.3. Loss, Theft, Etc. of Notes;. Upon receipt of evidence
satisfactory to the Constituent Companies of the loss, theft, mutilation or
destruction of any Note, and in the case of any such loss, theft or
destruction upon delivery of a bond of indemnity in such form and amount as
shall be reasonably satisfactory to the Constituent Companies, or in the event
of such mutilation upon surrender and cancellation of the Note, the
Constituent Companies will make and deliver without expense to the holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If the Purchaser or any subsequent Institutional Holder is
the owner of any such lost, stolen or destroyed Note, then the affidavit of an
authorized officer of such owner, setting forth the fact of loss, theft or
destruction and of its ownership of such Note at the time of such loss, theft
or destruction shall be accepted as satisfactory evidence thereof and no
further indemnity shall be required as a condition to the execution and
delivery of a new Note other than the written agreement of such owner to
indemnify the Constituent Companies.
c2.Section 9.4. Expenses, Stamp Tax Indemnity;. Whether or not the
transactions herein contemplated shall be consummated, the Constituent
Companies agree to pay directly all of your reasonable out-of-pocket expenses
in connection with the preparation, execution and delivery of this Agreement
- -39-
<PAGE> 40
and the transactions contemplated hereby, including but not limited to the
reasonable charges and disbursements of Chapman and Cutler, your special
counsel, duplicating costs and charges for shipping the Notes, adequately
insured to you at your home office or at such other place as you may
designate, and all such expenses relating to any amendment, waivers or
consents pursuant to the provisions hereof (whether or not the same are
actually executed and delivered), including, without limitation, any
amendments, waivers, or consents resulting from any work-out, renegotiation or
restructuring relating to the performance by the Constituent Companies of
their obligations under this Agreement and the Notes. The Constituent
Companies further agree that they will pay and save you harmless against any
and all liability with respect to stamp and other taxes, if any, which may be
payable or which may be determined to be payable in connection with the
execution and delivery of this Agreement or the Notes, whether or not any
Notes are then outstanding. The Constituent Companies agree to protect and
indemnify you against any liability for any and all brokerage fees and
commissions payable or claimed to be payable to any Person in connection with
the transactions contemplated by this Agreement. Without limiting the
foregoing, the Constituent Companies agree to pay the cost of obtaining the
private placement number for the Notes and authorizes the submission of such
information as may be required by Standard & Poor's CUSIP Service Bureau for
the purpose of obtaining such number.
c2.'Section 9.5. Powers and Rights Not Waived; Remedies Cumulative';. No
delay or failure on the part of the holder of any Note in the exercise of any
power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of the same preclude any other or further exercise thereof,
or the exercise of any other power or right, and the rights and remedies of
the holder of any Note are cumulative to, and are not exclusive of, any rights
or remedies any such holder would otherwise have.
c2.Section 9.6. Notices;. All communications provided for hereunder shall
be in writing and, if to you, delivered or mailed prepaid by registered or
certified mail or overnight air courier, or by facsimile communication, in each
case addressed to you at your address appearing on Schedule I to this Agreement
or such other address as you or the subsequent holder of any Note initially
issued to you may designate to the Constituent Companies in writing, and if to
the Constituent Companies, delivered or mailed by registered or certified mail
or overnight air courier, or by facsimile communication, to the Parent at 101
West 11th Street, Kansas City, Missouri 64105, Attention: President, or to
such other address as the Parent may in writing designate to you or to a
subsequent holder of the Note initially issued to you; provided, however, that
a notice to you by overnight air courier shall only be effective if delivered
to you at a street address designated for such purpose in Schedule I, and a
notice to you by facsimile communication shall only be effective if made by
confirmed transmission to you at a telephone number designated for such purpose
in Schedule I, or, in either case, as you or a subsequent holder of any Note
initially issued to you may designate to the Parent in writing.
c2.Section 9.7. Successors and Assigns;. This Agreement shall be binding
upon the Constituent Companies and their successors and assigns and shall
inure to your benefit and to the benefit of your successors and assigns,
including each successive holder or holders of any Notes.
- -40-
<PAGE> 41
c2.Section 9.8. Survival of Covenants and Representations;. All covenants,
representations and warranties made by the Constituent Companies herein and in
any certificates delivered pursuant hereto, whether or not in connection with
the Closing Date, shall survive the closing and the delivery of this Agreement
and the Notes.
c2.Section 9.9. Severability;. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect
the validity or enforceability of any remaining portion, which remaining
portion shall remain in force and effect as if this Agreement had been
executed with the invalid or unenforceable portion thereof eliminated and it
is hereby declared the intention of the parties hereto that they would have
executed the remaining portion of this Agreement without including therein any
such part, parts or portion which may, for any reason, be hereafter declared
invalid or unenforceable.
c2.Section 9.10. Governing Law;. This Agreement and the Notes issued and
sold hereunder shall be governed by and construed in accordance with Illinois
law.
c2.Section 9.11. Submission to Jurisdiction.; Any legal action or
proceeding with respect to this Agreement or the Notes or any document related
thereto may be brought in the courts of the State of Illinois or of the United
States of America for the Northern District of Illinois, and, by execution and
delivery of this Agreement, each of the Constituent Companies hereby accepts
for itself and in respect of its property generally and unconditionally, the
jurisdiction of the aforesaid courts. Each of the Constituent Companies
hereby irrevocably and unconditionally waives any objection, including,
without limitation, any objection to the laying of venue or based on the
grounds of forum non conveniens which it may now or hereafter have to the
bringing of any action or proceeding in such respective jurisdiction.
c2.Section 9.12. Captions;. The descriptive headings of the various
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
- -41-
<PAGE> 42
The execution hereof by you shall constitute a contract between us for the
uses and purposes hereinabove set forth, and this Agreement may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together only one agreement.
Unitog Company
By /s/ J. Craig Peterson
Its Senior Vice President -
Finance and Administration and
Chief Financial Officer
Unitog Rental Services, Inc.
By /s/ J. Craig Peterson
Its Senior Vice President -
Finance and Administration and
Chief Financial Officer
Accepted as of October 31, 1995.
Metropolitan Life Insurance
Company
By /s/ Robert B. Bodett
Its Assistant Vice-President
By /s/ Robert B. Bodett
Its Assistant Vice-President
- -42-
<PAGE> 43
Unitog Company
and
Unitog Rental Services, Inc.
6.83% Senior Note
Due October 31, 2005
No. ____________, ____
$ PPN 91326@ AD 6
Each of the undersigned (being referred to hereinafter individually
and collectively as a "Constituent Company" or the "Constituent Companies"),
for value received, hereby promises, jointly and severally, to pay to
or registered assigns
on the thirty-first day of October, 2005
the principal amount of
Dollars ($ )
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at
the rate of 6.83% per annum from the date hereof until maturity, payable
quarterly on each January thirty-first, April thirtieth, July thirty-first and
October thirty-first in each year (commencing on January 31, 1996) and at
maturity. The Constituent Companies jointly and severally agree to pay
interest on overdue principal (including any overdue required or optional
prepayment of principal) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest, at the Overdue Rate after
the due date, whether by acceleration or otherwise, until paid. "Overdue Rate"
shall mean the greater of (a) the interest rate borne by the Notes on the date
of any determination hereof expressed as a percentage plus 2% per annum and (b)
2% plus the rate which Chase Manhattan Bank, N.A., New York, New York announces
from time to time as its prime lending rate. The interest rate borne by the
Notes is subject to adjustment pursuant to the terms and provisions of e1.3 of
the Note Agreement hereinafter referred to.
Both the principal hereof and interest hereon are payable at the
principal office of Unitog Company, a Delaware corporation (the "Parent"), in
Kansas City, Missouri in coin or currency of the United States of America which
at the time of payment shall be legal tender for the payment of public and
private debts. If any amount of principal, premium, if any, or interest on or
in respect of this Note becomes due and payable on any date which is not a
Business Day, such amount shall be payable on the immediately succeeding
Business Day. "Business Day" means any day other than a Saturday, Sunday or
other day on which banks in Kansas City, Missouri or New York, New York are
required by law to close or are customarily closed.
This Note is one of the 6.83% Senior Notes due October 31, 2005 (the
"Notes") of the Constituent Companies in the aggregate principal amount of
$40,000,000 issued or to be issued under and pursuant to the terms and
provisions of that certain Note Agreement, dated as of October 15, 1995 (the
"Agreement"), entered into by the Constituent Companies with the original
Purchaser therein referred to and this Note and the holder hereof are entitled
to all the benefits provided for thereby or referred to therein. Reference is
hereby made to the Agreement for a statement of such rights and benefits.
A-47
<PAGE> 44
This Note and the other Notes outstanding under the Agreement may be
declared due prior to their expressed maturity dates and certain prepayments
are required to be made thereon, all in the events, on the terms and in the
manner and amounts as provided in the Agreement.
The Notes are not subject to prepayment or redemption at the option of
the Constituent Companies prior to their expressed maturity dates except on the
terms and conditions and in the amounts and with the premium, if any, set forth
in the Agreement.
This Note is registered on the books of the Parent and is transferable
only by surrender thereof at the principal office of the Constituent Companies
duly endorsed or accompanied by a written instrument of transfer duly executed
by the registered holder of this Note or its attorney duly authorized in
writing. Payment of or on account of principal, premium, if any, and interest
on this Note shall be made only to or upon the order in writing of the
registered holder.
This Note and said Agreement are governed by and construed in
accordance with the laws of Illinois.
Unitog Company
By
Its
Unitog Rental Services, Inc.
By
Its
A-48
<PAGE> 45
[Signature page for additional Constituent Company]
______________________________________
By
Its
<PAGE> 46
Representations and Warranties
Each of the Constituent Companies represents and warrants to you as
follows:
1. Subsidiaries. Schedule II attached to the Agreement
states the name of each of the Constituent Companies' Subsidiaries, its
jurisdiction of incorporation and the percentage of its Voting Stock owned by
the Constituent Companies and/or their Subsidiaries. The Constituent Companies
and each Subsidiary has good and marketable title to all of the shares it
purports to own of the stock of each Subsidiary, free and clear in each case of
any Lien. All such shares have been duly issued and are fully paid and
non-assessable.
2. Corporate Organization and Authority. Each of the Constituent
Companies, and each Subsidiary,
(a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority to own and operate its
properties and to carry on its business as now conducted and as presently
proposed to be conducted;
(c) has all necessary licenses and permits to own and operate
its properties and to carry on its business as now conducted and as presently
proposed to be conducted, except where the failure to have such licenses or
permits will not materially affect adversely the properties, business,
prospects, or financial condition of the Parent and its Subsidiaries, taken as
a whole; and
(d) is duly licensed or qualified and is in good standing as a
foreign corporation in each jurisdiction wherein the nature of the business
transacted by it or the nature of the property owned or leased by it makes such
licensing or qualification necessary, except where the failure to be so
licensed or qualified will not materially affect adversely the properties,
business, prospects, or financial condition of the Parent and its Subsidiaries,
taken as a whole.
As of January 29, 1995, the total assets of the Honduras Subsidiary
represented less than 1% of Total Assets and the amount of Consolidated Net
Earnings contributed by the Honduras Subsidiary was less than 1.3%.
3. Rental has entered into a Stock Purchase Agreement, dated
October 19, 1995, to purchase the stock of Ace-Tex Corporation at a base
purchase price of $42.1 million, subject to certain closing adjustments based
on audited financial data. Ace-Tex has entered into an agreement, dated
October 19, 1995, to sell the assets used in Ace-Tex's wiper business to
certain principals of Ace-Tex for $10 million, subject to certain adjustments
based on audited financial data. Closing of the transactions is scheduled to
occur simultaneously and is expected to occur before December 1, 1995. Based
upon information currently available, the Constituent Companies intend to
allocate the purchase price paid in connection with the Ace-Tex Acquisition
generally in accordance with the letter dated October 31, 1995 from the
Constituent Companies to Metropolitan Life Insurance Company.
4. Financial Statements. (a) The consolidated balance
sheets of the Parent and its consolidated Subsidiaries as of its fiscal year
end in each of the years 1994 to 1995, both inclusive, and the statements of
earnings and retained earnings and cash flows for the fiscal years then ended,
each accompanied by a report thereon containing an opinion unqualified as to
scope limitations imposed by the Parent and otherwise without qualification
except as therein noted, by KPMG Peat Marwick LLP, have been prepared in
accordance with generally accepted accounting principles at the time
consistently applied except as therein noted, and present fairly in all
material respects the financial position of the Parent and its consolidated
Subsidiaries as of such
B-50
<PAGE> 47
dates and the results of its operations and cash flows for such periods. The
unaudited consolidated balance sheets of the Parent and its consolidated
Subsidiaries as of July 30, 1995, and the unaudited statements of earnings and
retained earnings and cash flows for the six-month period ended on said date
prepared by the Parent, have been prepared in accordance with generally
accepted accounting principles at the time consistently applied, and present
fairly in all material respects the financial position of the Parent and its
consolidated Subsidiaries as of said date and the results of its operations and
cash flows for such period.
(b) Since January 29, 1995 there has been no material adverse
change in the condition, financial or otherwise, of the Parent and its
consolidated Subsidiaries as shown on its consolidated balance sheets as of
such date.
5. Indebtedness. Schedule II attached to the Agreement correctly
describes all Specified Indebtedness, Capitalized Leases and Liens securing
Funded Debt of the Constituent Companies and their Subsidiaries securing
Indebtedness outstanding on July 30, 1995.
6. Full Disclosure. Neither the financial statements referred to
in paragraph 3 hereof nor the Agreement or any other written statement
furnished by the Constituent Companies to you in connection with the
negotiation of the sale of the Notes, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. To the knowledge of the
Constituent Companies, there is no fact peculiar to the Constituent Companies
or their Subsidiaries which the Constituent Companies have not disclosed to you
in writing which materially affects adversely nor, so far as the Constituent
Companies can now foresee, will materially affect adversely the properties,
business, prospects, or financial condition of the Parent and its Subsidiaries,
taken as a whole.
7. Pending Litigation. There are no proceedings pending or, to
the knowledge of the Constituent Companies, threatened against or affecting any
of the Constituent Companies or any Subsidiary in any court or before any
governmental authority or arbitration board or tribunal which are reasonably
likely to materially and adversely affect the properties, business, prospects
or financial condition of the Parent and its Subsidiaries, taken as a whole.
8. Title to Properties. Each of the Constituent Companies and
each Subsidiary has good and indefeasible title in fee simple (or its
equivalent under applicable law) to all material parcels of real property and
has good title to all the other material items of property it purports to own,
including that reflected in the most recent balance sheet referred to in
paragraph 3 hereof, except as sold or otherwise disposed of in the ordinary
course of business and except for Liens permitted by the Agreement.
9. Patents and Trademarks. Each of the Constituent Companies and
each Subsidiary owns or possesses (without any known conflict with the rights
of others) all the patents, trademarks, trade names, service marks, copyrights,
licenses and rights with respect to the foregoing necessary for the present and
planned future conduct of its business, where the failure to possess would be
reasonably likely to have a material adverse effect on the properties,
business, prospects or financial condition of the Parent and its Subsidiaries,
taken as a whole.
10. Sale is Legal and Authorized. The sale of the Notes and
compliance by each of the Constituent Companies with all of the provisions of
the Agreement and the Notes:
(a) are within the corporate powers of each of the Constituent
Companies;
(b) will not violate any provisions of any law or any order of any
court or governmental authority or agency and will not conflict with or result
B-51
<PAGE> 48
in any breach of any of the terms, conditions or provisions of, or constitute
a default under the Articles of Incorporation or By-laws of any Constituent
Company or any indenture or other agreement or instrument to which any
Constituent Company is a party or by which it may be bound or result in the
imposition of any Liens or encumbrances on any property of any Constituent
Company; and
(c) have been duly authorized by proper corporate action on the
part of each Constituent Company (no action by the stockholders of any
Constituent Company being required by law, by the Articles of Incorporation or
By-laws of such Constituent Company or otherwise), executed and delivered by
each Constituent Company and the Agreement and the Notes constitute the legal,
valid and binding obligations, contracts and agreements of each of the
Constituent Companies enforceable in accordance with their respective terms.
11. No Defaults. No Default or Event of Default has occurred and
is continuing. None of the Constituent Companies is in default in the payment
of principal or interest on any Indebtedness for borrowed money and is in
default under any instrument or instruments or agreements under and subject to
which any Indebtedness for borrowed money has been issued and no event has
occurred and is continuing under the provisions of any such instrument
or agreement which with the lapse of time or the giving of notice, or both,
would constitute an event of default thereunder.
12. Governmental Consent. No approval, consent or withholding
of objection on the part of any regulatory body, state, Federal or
local, is necessary in connection with the execution and delivery by the
Constituent Companies of the Agreement or the issuance, sale or delivery of the
Notes or compliance by the Constituent Companies with any of the provisions of
the Agreement or the Notes.
13. Taxes. All Federal income tax returns and, to the knowledge
of the Constituent Companies, all other tax returns required to be
filed by the Constituent Companies or any Subsidiary in any jurisdiction have,
in fact, been filed, and all taxes, assessments, fees and other governmental
charges upon any Constituent Company or any Subsidiary or upon any of their
respective properties, income or franchises, which are shown to be due and
payable in such returns have been paid. For all taxable years ending on or
before January 26, 1992, the Federal income tax liability of the Parent and its
Subsidiaries has been satisfied and all taxable years through January 26, 1992
have been closed to future Federal income tax assessment by either the District
Director of the Internal Revenue Service's acceptance of a Revenue Agent
Report, or by the expiration of the period of limitations on assessment of
additional Federal tax. None of the Constituent Companies knows of any
proposed material additional tax assessment against it for which adequate
provision has not been made on its accounts, and no material controversy in
respect of additional Federal or state income taxes due since said date is
pending or to the knowledge of such Constituent Company threatened. In the
opinion of the Parent, the provisions for taxes on the consolidated books of
the Parent and its Subsidiaries are adequate in all material respects for all
open years, and for its current fiscal period.
14. Use of Proceeds. The net proceeds from the sale of the Notes
will be used to repay indebtedness under the Credit Agreement, to repay
the Lincoln National Indebtedness and in connection with the funding of the
Ace-Tex Acquisition, all as set forth in greater detail on Annex I hereto.
None of the transactions contemplated in the Agreement (including, without
limitation thereof, the use of proceeds from the issuance of the Notes) will
violate or result in a violation of Section 7 of the Securities Exchange Act of
1934, as amended, or any regulation issued pursuant thereto, including, without
B-52
<PAGE> 49
limitation, Regulations G, T and X of the Board of Governors of the Federal
Reserve System, 12 C.F.R., Chapter II. None of the Constituent Companies nor
any Subsidiary owns or intends to carry or purchase any "margin stock" within
the meaning of said Regulation G. None of the proceeds from the sale of the
Notes will be used to purchase, or refinance any borrowing the proceeds of
which were used to purchase, any "security" within the meaning of the
Securities Exchange Act of 1934, as amended, except as set forth on Annex I
hereto.
15. Private Offering. None of the Constituent Companies, directly
or indirectly, nor any agent on its behalf has offered or will offer the
Notes or any similar Security or has solicited or will solicit an offer to
acquire the Notes or any similar Security from or has otherwise approached or
negotiated or will approach or negotiate in respect of the Notes or any similar
Security with any Person other than the Purchaser and not more than 2 other
institutional investors, each of whom was offered a portion of the Notes at
private sale for investment. None of the Constituent Companies, directly or
indirectly, nor any agent on its behalf has offered or will offer the Notes or
any similar Security or has solicited or will solicit an offer to acquire the
Notes or any similar Security from any Person so as to bring the issuance and
sale of the Notes within the provisions of Section 5 of the Securities Act of
1933, as amended.
16. ERISA. The consummation of the transactions provided for in
the Agreement and compliance by the Constituent Companies with the
provisions thereof and the Notes issued thereunder will not involve any
prohibited transaction within the meaning of ERISA or Section 4975 of the
Internal Revenue Code of 1986, as amended. Each Plan complies in all material
respects with all applicable statutes and governmental rules and regulations,
and (a) no Reportable Event has occurred and is continuing with respect to any
Plan, (b) none of the Constituent Companies nor any ERISA Affiliate has any
current withdrawal liability (as described in Part I of Subtitle E of Title IV
of ERISA) with respect to any Multiemployer Plan or has instituted any steps to
withdraw from any Multiemployer Plan which could result in a withdrawal
liability, and (c) no steps have been instituted to terminate any Plan in a
distress termination under Section 4041(c) of ERISA or a termination instituted
by the PBGC under Section 4042 of ERISA. To the knowledge of the Constituent
Companies, no condition exists or event or transaction has occurred in
connection with any Plan which could result in the incurrence by any
Constituent Company or any ERISA Affiliate of any material liability, fine or
penalty. No Plan maintained by any Constituent Company or any ERISA Affiliate,
nor any trust created thereunder, has incurred any "accumulated funding
deficiency" as defined in Section 302 of ERISA in excess of $100,000 nor does
the present value of all benefits vested under all Plans maintained by the
Company or any ERISA Affiliate exceed, as of the last annual valuation date,
the value of the assets of the Plans allocable to such vested benefits by an
amount greater than $100,000 in the aggregate. None of the Constituent
Companies nor any ERISA Affiliate has any contingent liability with respect to
any post-retirement "welfare benefit plan" (as such term is defined in ERISA)
except as has been disclosed to the Purchaser.
17. Compliance with Law. None of the Constituent Companies nor
any Subsidiary (1) is in violation of any law, ordinance, franchise,
governmental rule or regulation to which it is subject; or (2) has failed to
obtain any license, permit, franchise or other governmental authorization
necessary to the ownership of its property or to the conduct of its business,
which violation or failure to obtain is reasonably likely to materially
adversely affect the business, prospects, properties or financial condition of
the
B-53
<PAGE> 50
Parent and its Subsidiaries, taken as a whole, or impair the ability of any
of the Constituent Companies to perform their respective obligations contained
in the Agreement or the Notes; provided, however, the Constituent Companies
make no representation or warranty in this paragraph 16 as to environmental
matters. None of the Constituent Companies nor any Subsidiary is in default
with respect to any order of any court or governmental authority or arbitration
board or tribunal.
18. Investment Company Act. None of the Constituent Companies is,
nor is directly or indirectly controlled by or acting on behalf of any Person
which is, required to register as an "investment company" under the Investment
Company Act of 1940, as amended.
19. Foreign Assets Control Regulations, etc. None of the
Constituent Companies nor any Affiliate of the Constituent Companies is, by
reason of being a "national" of "designated foreign country" or a "specially
designated national" within the meaning of the Regulations of the Office of
Foreign Assets Control, United States Treasury Department (31 C.F.R., Subtitle
B, Chapter V), or for any other reason, subject to any restriction or
prohibition under, or is in violation of, any Federal statute or Presidential
Executive Order, or any rules or regulations of any department, agency or
administrative body promulgated under any such statute or order, concerning
trade or other relations with any foreign country or any citizen or national
thereof or the ownership or operation of any property.
20. Environmental Matters. As of the date hereof:
(i) the Constituent Companies and each of their Subsidiaries have
complied with all Environmental Laws;
(ii) to the Company's knowledge, there is not and has not ever been
a Release or threatened Release of any Hazardous Substances at the Properties
of the Parent and its Subsidiaries that requires remediation under CERCLA or
any Environmental Law;
(iii) the Constituent Companies and their Subsidiaries have obtained
all Governmental Approvals required under Environmental laws for the operations
on their Properties; and
(iv) the Constituent Companies and their Subsidiaries have not
received in writing any claims or orders for environmental response or
corrective action costs or orders; except in each such case where the failure
to comply, or to obtain, or where the expense with respect to which, is not
reasonably likely to materially adversely affect the business, properties,
prospects or financial condition of the Parent and its Subsidiaries taken as a
whole or would impair the ability of any of the Constituent Companies to
perform their respective obligations contained in the Agreement or the Note.
B-54
<PAGE> 1
LOAN AND LETTER OF CREDIT
REIMBURSEMENT AGREEMENT
among
UNITOG COMPANY,
UNITOG RENTAL SERVICES, INC.,
and
UNITED MISSOURI BANK, N.A.,
HARRIS TRUST AND SAVINGS BANK,
NBD BANK, N.A.
and
UNITED MISSOURI BANK, N.A.
as Agent
Dated September 10, 1993
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
SECTION 1
<S> <C> <C>
Definitions 2
1.1 Accounting Terms 2
1.2 Defined Terms 2
1.3 Singular and Plural 10
SECTION 2
The Loans 10
2.1 Credit 10
2.2 The Revolving Credit Loans 11
2.2.1 The Revolving Credit Commitments 11
2.2.2 Method of Borrowing 11
2.2.3 Interest on the Revolving Credit
Loans 18
2.2.4 Payments; Mandatory Prepayment of
Revolving Credit Loans 19
2.2.5 Use of Proceeds of Revolving Credit
Loans 19
2.2.6 Revolving Credit Commitment Fee 20
2.2.7 Calculation of Interest 21
2.2.8 Manner of Payment - Prepayments 21
2.2.9 Procedures for Electing Optional
Rates 22
2.2.10 Banking Day 27
2.2.11 Extension of Revolving Credit Maturity
Date 27
SECTION 3
The Letter of Credit 28
3.1 The Letter of Credit 28
3.2 Payment and Reimbursement 28
3.2.1 Payment 28
3.2.2 Reimbursement 29
3.3 Commission 32
3.4 Additional Amounts Payable 33
3.5 Risk of Misuse of the Letter of Credit 34
3.6 Replacement of the Letter of Credit; Cancellation 36
3.7 Letter of Credit Participation 36
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
3.8 Alternative Reimbursement of Letter of Credit
Draw 37
SECTION 4
Representations and Warranties 39
4.1 Organization 39
4.2 Authorization; No Conflict 39
4.3 Validity and Binding Nature 40
4.4 Financial Statements 40
4.5 Litigation and Contingent Liabilities 41
4.6 Liens 42
4.7 Employee Benefit Plans 42
4.8 Investment Company Act 43
4.9 Regulation U 43
4.10 Notices 43
SECTION 5
Affirmative Covenants of the Borrowers 43
5.1 Corporate Existence 43
5.2 Reports, Certificates and Other Information 43
5.2.1 Annual Statements and Form 10-K 43
5.2.2 Quarterly Statements and Form 10-Q 44
5.2.3 Certificates 45
5.2.4 Orders 45
5.2.5 Notice of Default or Litigation 45
5.2.6 Other Information 46
5.2.7 Securities Filings 46
5.2.8 Name; Principal Office 46
5.3 Books, Records, Quarterly Meetings and
Inspections 47
5.4 Insurance 47
5.5 Taxes and Liabilities 48
5.6 Compliance with Legal and Regulatory Requirements 48
5.7 Financial Covenants 49
5.7.1 Current Ratio 49
5.7.2 Capitalization Ratio 49
5.7.3 Consolidated Stockholders' Equity 49
5.7.4 Fixed Charge Coverage Ratio 50
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
5.8 Employee Benefit Plans 50
5.9 Compliance with Term Loan Documents 50
5.10 Hazardous Substances 50
5.11 Subsidiaries 52
SECTION 6
Negative Covenants of the Borrowers 52
6.1 Liens 53
6.2 Guarantees, Loans or Advances 55
6.3 Mergers, Consolidations, Sales or Acquisitions 56
6.4 Margin Stock 58
6.5 Other Agreements 59
6.6 Judgments 59
6.7 Amendments to Term Loan Documents 59
6.8 Debt 59
6.9 Performance of Obligations for Credit Enhanced
Notes 60
SECTION 7
Conditions of Lending 60
7.1 No Default 60
7.2 Documents to be Furnished at Closing 60
7.3 Documents to be Furnished at Time of Each Advance
and Upon Election for the Installment Loan 64
SECTION 8
Events of Default 64
8.1 Nonpayment of the Loans, Etc. 64
8.2 Nonpayment of Other Loans from Banks 64
8.3 Nonpayment of Term Loan Obligations 65
8.4 Nonpayment of Other Indebtedness for Borrowed
Money 65
8.5 Bankruptcy, Insolvency, Etc. 65
</TABLE>
<PAGE> 5
<TABLE>
<S><C> <C>
8.6 Violation of Negative and Affirmative Covenants
and Noncompliance With Other Provisions of this
Agreement or Other Loan Documents 66
8.7 Warranties and Representations 67
SECTION 9
Effect of Event of Default 67
9.1 Automatic Acceleration 67
9.2 Other Remedies 68
9.2.1 Acceleration of the Loans 68
9.2.2 Remedies Cumulative 68
SECTION 10
The Agent 69
10.1 Appointment 69
10.2 Powers 69
10.3 General Immunity 69
10.4 No Responsibility for Loans, Recitals, Etc. 70
10.5 Right to Indemnity 70
10.6 Action on Instructions of Banks 70
10.7 Employment of Agents and Counsel 70
10.8 Reliance on Documents 71
10.9 May Treat Payee as Owner 71
10.10 Agent's Reimbursement 71
10.11 Rights as a Lender 71
10.12 Bank Credit Decision 72
10.13 Successor Agent 72
10.14 Distribution of Information 73
10.15 Application of Proceeds 74
10.16 Agent's Fee 75
10.17 Issues Requiring Decisions by Banks 75
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
SECTION 11
Ratable Payments 76
SECTION 12
General Provisions 77
12.1 Waiver; Amendments 77
12.2 Notices 77
12.3 Costs, Expenses and Taxes 78
12.4 Captions 79
12.5 Governing Law 79
12.6 Successors and Assigns 79
12.7 Counterparts 80
12.8 Contribution, Etc. 80
12.9 Several Obligations 81
12.10 Indemnification 81
12.11 Incorporation by Reference 82
12.12 Right of Set-Off 82
12.13 Interest Rate Limitation 83
12.14 Severability 83
12.15 Provisions Regarding Indenture 84
12.16 Statutory Statement 87
</TABLE>
<PAGE> 7
Exhibits
A Application for Advance
B Officer's Certificate
C Revolving Credit Note
D Letter of Credit
E Installment Note
<PAGE> 8
LOAN AND LETTER OF CREDIT
REIMBURSEMENT AGREEMENT
THIS AGREEMENT, dated as of the 10th day of September, 1993, is made by
and between UNITOG COMPANY, a Delaware corporation (the "Company"), UNITOG
RENTAL SERVICES, INC., a California corporation ("Rental") (Company and Rental
being sometimes collectively referred to herein as the "Borrowers" or
individually as a "Borrower"), UNITED MISSOURI BANK, N.A., Kansas City,
Missouri, a national banking association ("UMB"), HARRIS TRUST AND SAVINGS
BANK, Chicago, Illinois, an Illinois banking corporation ("Harris"), NBD BANK,
N.A., Detroit, Michigan, a national banking association ("NBD") (UMB, Harris
and NBD being sometimes collectively referred to herein as the "Banks" or
individually as a "Bank"), and UNITED MISSOURI BANK, N.A., Kansas City,
Missouri, a national banking association, as agent for the Banks herein (in
such capacity, the "Agent").
WHEREAS, the Borrowers have requested a total credit facility of up to
$50,763,458 in revolving loans and letters of credit; and
WHEREAS, the Banks are willing to extend such credit facility to the
Borrowers on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, the parties mutually agree as follows:
SECTION 1
Definitions
1.1 Accounting Terms. All accounting and financial terms used herein
are used with the meanings such terms are given in accordance with GAAP,
except as may be otherwise specifically provided in this Agreement.
1.2 Defined Terms. As used herein:
"Advance" means a disbursement of proceeds of the Revolving Credit
Loans.
"Agent" means United Missouri Bank, N.A., Kansas City, Missouri, in
its capacity as agent for the Banks hereunder, and any successor Agent
appointed pursuant to this Agreement.
"Agreement" means this Loan and Letter of Credit Reimbursement
Agreement, as amended from time to time.
"Applicable Margin" shall be determined by reference to the
following table:
<PAGE> 9
<TABLE>
<CAPTION>
Applicable Applicable
Margin for Margin for
Capitalization Prime Rate LIBOR
Ratio Advances Advances
<S> <C> <C>
Less than or equal
to 50% 0 bp 75 bp
Greater than 50% 0 bp 100 bp
</TABLE>
The adjustment (upwards or downwards, as appropriate), if any, to the
Applicable Margin shall be calculated as of the last day of the immediately
preceding fiscal quarter and shall be effective two (2) business days after
delivery of required financial statements and Officer's Certificate to Agent.
No decrease in rate shall occur if there exists a Default or Event of Default
on the date on which such decrease would otherwise become effective until such
time as the Default or Event of Default has been cured or waived.
"Application for Advance" or "Application" means the written
application of the Borrowers for an Advance, which Application shall be in the
form of Exhibit A attached hereto.
"Authorized Officer" means the Chairman of the Board, the President,
the Chief Executive Officer, the Chief Financial Officer, the Treasurer, the
Assistant to the Treasurer, the Secretary, the Controller, the Treasury
Manager and the Senior Financial Analyst or such other officer or employee of
a Borrower whose authority to perform acts to be performed only by an
Authorized Officer under the terms of this Agreement is evidenced to the Agent
by a certified copy of an appropriate resolution of the Board of Directors of
such Borrower.
"Banking Day" means a day on which the principal offices of the
Agent and the Banks are open for the purpose of conducting substantially all
of their business activities, and, for purposes of Section 2.2.9, shall also
be a day on which dealings in U.S. dollar deposits are carried on in the
London interbank market and banks are open for business in London.
"Banks" shall have the meaning ascribed in the preamble.
"Borrower" or "Borrowers" shall have the meaning ascribed in the
preamble.
"Capitalization Ratio" means Consolidated long-term debt (interest
bearing obligations with maturities in excess of one year) of the Company
divided by total Consolidated Stockholders' Equity plus long-term debt.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means a Bank's Revolving Credit Commitment.
"Company" shall have the meaning ascribed in the preamble.
"Compliance Certificate" means a certificate signed by an Authorized
<PAGE> 10
Officer showing the calculations of the financial covenants specified in
Section 5.7 and containing the certification that the Company is in compliance
with such financial covenants.
"Consolidated Stockholders' Equity" means the Consolidated
Stockholders' Equity of the Company, determined in accordance with GAAP, shown
on the balance sheets furnished to the Banks from time to time pursuant to
Section 5.2.
"Credit Enhanced Notes" means the Borrowers' Seventeen Million
Dollars ($17,000,000) 9.68% Fixed Rate Credit Enhanced Notes Due December 1,
1998, issued pursuant to the Indenture.
"Default" means any event specified in Section 8, which is not
initially an Event of Default, but which would, if uncured, become an Event of
Default with the giving of notice or the passage of time or both.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Event of Default" shall have the meaning ascribed in Section 8.
"Fixed Charge Coverage Ratio" means the sum of earnings before
interest, taxes, amortization expense, and rent expense, divided by the sum of
interest expense and rent expense.
"GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including, without limitation, any agency, body, commission,
court or department thereof, whether federal, state, local or foreign.
"Harris" shall have the meaning ascribed in the preamble.
"Hazardous Substance" means any hazardous or toxic substance
regulated by any federal, state or local statute or regulation applicable to
the Borrowers or their Subsidiaries, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Resource Conservation and Recovery Act and the Toxic Substance Control Act, or
by any Governmental Authority having jurisdiction over the Borrowers or their
Subsidiaries and over the control of any such substance including, but not
limited to, the United States Environmental Protection Agency.
"Indenture" means the Trust Indenture dated as of December 1, 1988,
executed by the Borrowers and the Trustee relative to the Credit Enhanced
Notes, as amended.
"Letter of Credit" shall have the meaning ascribed in Section 3 and
shall be deemed to include any renewal, replacement, substitution, extension
or modification thereof.
<PAGE> 11
"LIBOR" means the arithmetic average of rates at which deposits in
U.S. dollars are offered by leading banks for the applicable LIBOR Interest
Period in the London interbank market two (2) Banking Days prior to the
commencement of any LIBOR Interest Period, as reasonably determined by the
Agent.
"LIBOR Interest Period" means a period commencing on any date a
Permissible Increment of a Loan or Loans is converted or renewed to an
Optional Rate Portion, and ending, as selected by the Borrowers, on the
numerically corresponding day in the first, second, third or sixth calendar
month thereafter; provided, that, if a LIBOR Interest Period would end on a
day that is not a Banking Day, such LIBOR Interest Period shall be extended to
the next Banking Day unless such Banking Day would fall in the next calendar
month, in which event such LIBOR Interest Period shall end on the immediately
preceding Banking Day.
"Loan Documents" means this Agreement, the Notes and any other
documents or instruments now or hereafter executed and delivered by or on
behalf of the Borrowers to the Banks or to the Agent to further evidence or
govern the Obligations.
"Loans" means the Revolving Credit Loans.
"NBD" shall have the meaning ascribed in the preamble.
"Notes" means the Revolving Credit Notes.
"Obligations" means (i) all obligations of the Borrowers to the
Banks of every type and description, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, on
account of the Loans, including, without limitation, any Advances made
pursuant to any discretionary extension of the Commitment by the Banks beyond
the Revolving Credit Maturity Date or pursuant to any other amendment of the
Loan Documents, and whether or not contemplated by the Borrowers or the Banks
as of the date of this Agreement, (ii) the Borrowers' duty to reimburse the
Banks, as the case may be, for all amounts paid by the Banks in honoring
drafts under the Letter of Credit, including the installment loan described in
Section 3.8 hereof, if applicable, or the documentary trade and standby
letters of credit described in Section 2.2.2(b) and the Borrowers' duty to pay
the Banks, as the case may be, the fees and commissions required hereunder for
issuing the Letter of Credit and such other letters of credit, (iii) all other
commitment fees and similar charges provided for in the Loan Documents, and
(iv) all other obligations arising under the Loan Documents including, without
limitation, all costs of collection and enforcement of any and all of the Loan
Documents, including reasonable attorneys' fees and expenses (to the extent
permitted by applicable law).
"Officer's Certificate" means a certificate in the form of Exhibit B
attached hereto and incorporated herein by reference.
"Optional Rate" means the LIBOR plus the Applicable Margin.
"Optional Rate Portion" means any Loan or portion thereof which
bears interest with reference to an Optional Rate on any given day.
<PAGE> 12
"Permissible Increment" shall have the meaning ascribed in Section
2.2.9(iv).
"Permitted Encumbrances" shall have the meaning ascribed in Section
6.1.
"Person" means and includes an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
Governmental Authority.
"Plan" shall have the meaning ascribed in ERISA.
"Prepayment Premium" shall have the meaning ascribed in Section
2.2.9(vii).
"Prime Rate" means the variable interest prime rate as published
from time to time in the Wall Street Journal, such rate to change
contemporaneously with each change in such established and quoted rate. In
the event that the Wall Street Journal is no longer published, then "Prime
Rate" shall mean the variable interest rate equal at all times to the rate of
interest established and quoted by UMB on any day as its prime rate.
"Pro Rata Share" means, for any Bank, when used with reference to
any aggregate or total amount, an amount equal to the product of (i) such
aggregate or total amount, times (ii) a fraction the numerator of which shall
be such Bank's Commitment and the denominator of which shall be the aggregate
of all Commitments.
"Quarterly Commission Due Date" shall have the meaning ascribed in
Section 3.3.
"Rental" shall have the meaning ascribed in the preamble.
"Revolving Credit Commitments" means the revolving credit
commitments of the Banks, more particularly described in Section 2.2.1, in the
respective amounts of (i) Fourteen Million Dollars ($14,000,000), in the case
of UMB, and (ii) Ten Million Five Hundred Thousand Dollars ($10,500,000), in
the case of Harris, and (iii) Ten Million Five Hundred Thousand Dollars
($10,500,000), in the case of NBD.
"Revolving Credit Loans" shall have the meaning ascribed in Section
2.2.1 and shall be deemed to include any extensions or renewals thereof.
"Revolving Credit Maturity Date" means September_9, 1996, or as
otherwise extended, if extended.
"Revolving Credit Notes" shall have the meaning ascribed in Section
2.2.2 and shall be deemed to include any renewals, extensions, replacements
and modifications thereof.
"Secured Obligations" means all obligations of the Borrowers in
connection with the Term Loan.
<PAGE> 13
"Stated Amount" means, as of any date such amount is to be
determined, the maximum amount available to draw under the Letter of Credit,
assuming compliance with all conditions for drawing under the Letter of
Credit.
"Subsidiary" means any corporation, partnership, joint venture or
other business entity over which a Person exercises control, provided that it
shall be conclusively presumed that the Person exercises effective control
over any such entity 51% or more of the equity interest of which is owned by
the Person, directly or indirectly.
"Term Loan" means the indebtedness of the Borrowers evidenced by the
Credit Enhanced Notes.
"Term Loan Documents" means the Credit Enhanced Notes, the
Indenture, and any mortgages and/or deeds of trust and all other documents and
instruments now or hereafter executed by or on behalf of either Borrower to
evidence, govern or secure the Term Loan, including any amendments thereof,
but excluding the Placement Agency Agreement between the Borrowers and Bank
One, Indianapolis, national association.
"Trustee" shall mean the trustee under the Indenture.
"UMB" shall have the meaning ascribed in the preamble.
1.3 Singular and Plural. The foregoing definitions shall be equally
applicable to both the singular and plural forms of the defined terms.
SECTION 2
The Loans
2.1 Credit. Subject to the terms and conditions of this Agreement, the
Banks will make the Loans described in this Section 2 to the Borrowers.
2.2 The Revolving Credit Loans. Subject to the terms and conditions of
this Agreement, the Banks will make revolving credit loans to the Borrowers as
follows:
2.2.1 The Revolving Credit Commitments. Subject to the conditions
of Section 7, from the date hereof to the Revolving Credit Maturity Date
including any extension thereof, the Banks agree to make Advances
(collectively, the "Revolving Credit Loans") or to provide the other financial
accommodations described in this Section 2.2 to the Borrowers from time to
time in an aggregate amount not to exceed at any one time outstanding the
aggregate Revolving Credit Commitments. Each Advance shall be made by the
Banks concurrently and in accordance with its Pro Rata Share.
2.2.2 Method of Borrowing.
(a) Revolving Credit Loans. The Obligation of the Borrowers
to repay Revolving Credit Loans shall be evidenced by promissory notes (the
"Revolving Credit Notes") of the Borrowers in the form of Exhibit C payable to
each of the Banks in accordance with the amount of their respective Revolving
Credit Commitments. So long as no Default or Event of Default shall have
occurred and be continuing, and until the Revolving Credit Maturity Date
<PAGE> 14
including any extension thereof, the Borrowers may borrow, repay and reborrow
under the Revolving Credit Notes on any Banking Day, provided that no
borrowing may cause the outstanding principal balance of the Revolving Credit
Loans and the documentary trade and standby letters of credit issued pursuant
to Section 2.2.2(b) hereof to exceed the aggregate Revolving Credit
Commitments or may result in a Default or an Event of Default. As the
Borrowers desire to obtain Revolving Credit Loans hereunder, the Company, as
agent for the Borrowers and which is hereby designated as agent for the
Borrowers for such purpose, shall give the Agent notice of the Borrowers'
intention to borrow pursuant to the Revolving Credit Commitments by not later
than 10:00 A.M. (Kansas City, Missouri time) on the proposed date of
borrowing. As soon as practicable after receipt of a borrowing notice but in
no event later than 11:00 A.M. (Kansas City, Missouri time), the Agent shall
give the Banks telephonic notice of the same. By 12:00 Noon (Kansas City,
Missouri time) on each such borrowing date, each Bank severally agrees to make
its Pro Rata Share of the Advance of the Revolving Credit Loans then being
made to the Borrowers by making it available to the Agent, either by wire
transfer to Agent's main office in Kansas City, Missouri, or by deposit to any
correspondent account, if any, which Agent may maintain with such Bank. The
Agent will make the funds so received from the Banks immediately available to
the Borrowers in the manner provided below. Each Advance under the Revolving
Credit Loans will be conditioned upon delivery (which delivery may be made by
telex, telecopier or facsimile transmission) to the Agent by the Borrowers of
an Application for Advance provided that the Agent may, in its sole
discretion, make a disbursement upon the verbal request of the Borrowers made
telephonically by an Authorized Officer. The Agent may rely on any such
verbal request which shall have been received by it in good faith from a
Person reasonably believed to be an Authorized Officer. Each such verbal
request shall be promptly confirmed by a duly executed Application for
Advance. Subject to the provisions of Section 2.2.9, all borrowings and
reborrowings shall be in amounts of not less than One Hundred Thousand Dollars
($100,000). Repayments may be in any amount except (i) mandatory prepayment
of the Revolving Credit Loans as required by Section 2.2.4 and (ii) repayment
of the entire principal balance of the Revolving Credit Loans. Upon
compliance with all conditions of lending stated in this Agreement applicable
to the Revolving Credit Loans, the Agent shall disburse the amount of the
requested Advance to the Borrowers by depositing the same in the Company's
account at UMB, and the Borrowers hereby authorize the disbursement of
Advances of the Revolving Credit Loans in such manner. All Advances by the
Banks and payments by the Borrowers shall be recorded by the Banks on their
books and records, and the principal amount outstanding from time to time,
plus interest payable thereon, shall be determined by reference to the books
and records of the Banks. Such books and records shall be rebuttably presumed
to be correct as to such matters.
(b) Documentary Trade and Standby Letters of Credit.
Subject to the terms and conditions hereof, the Revolving Credit Commitments,
at the option of the Borrowers, may also be utilized in the form of
documentary trade and stand-by letters of credit issued by UMB for the account
of a Borrower. Immediately upon issuance of each such letter of credit, the
Agent shall notify the Banks of the amount and type of the same. Each such
documentary trade letter of credit shall have an expiration date not later
than the first to occur of (i) one hundred twenty (120) days from the date of
issuance, or (ii) one (1) day before the Revolving Credit Maturity Date. Each
such standby letter of credit shall have an expiration date not later than the
<PAGE> 15
first to occur of (i) one (1) year from the date of issuance, or (ii) one (1)
day before the Revolving Credit Maturity Date. The aggregate of such
documentary trade and standby letters of credit outstanding at any time shall
not exceed Five Million Dollars ($5,000,000) and, when taken together with the
aggregate principal amount of Revolving Credit Loans then outstanding, shall
at no time exceed the aggregate Revolving Credit Commitments. Each
documentary trade or standby letter of credit issued pursuant to this Section
2.2.2(b) shall count against and reduce the Revolving Credit Commitments by
the amount of such letter of credit outstanding unless and until such letter
of credit expires by its terms or otherwise terminates, in which event the
Revolving Credit Commitments shall be reinstated by the amount of such letter
of credit. The amount of any documentary trade or standby letter of credit
outstanding at any time for all purposes hereof shall be the maximum amount
which could be drawn thereunder under any circumstances from and after the
date of determination. Each such documentary trade and standby letter of
credit shall conform to the general requirements of UMB for the issuance of
such credits, as to form and substance, and shall be a letter of credit which
UMB may lawfully issue. If and to the extent a drawing is at any time made
under any such letter of credit, UMB shall immediately notify the Borrowers of
such draw and the amount of such draw shall automatically become an Advance
under the Revolving Credit Loans, and the Borrowers, Harris and NBD hereby
irrevocably authorize UMB to refinance, without notice to the Borrowers,
Harris or NBD, the reimbursement Obligation of the Borrowers arising out of
any such drawing into Revolving Credit Loans, evidenced by the Revolving
Credit Notes and for all purposes under, on and subject to the terms and
conditions of this Agreement, but without regard to the conditions precedent
to making an Advance under the Revolving Credit Loans or to any requirement of
this Agreement that each Revolving Credit Loan be in a minimum amount or
Permissible Increment. This Agreement and the other Loan Documents shall
supersede any terms of any letter of credit applications or other documents
which are irreconcilably inconsistent with the terms hereof or thereof. For
administrative convenience UMB shall issue the documentary trade and standby
letters of credit for the account of the Banks pursuant to the arrangements
set forth below, and, accordingly, the outstanding portion of each such letter
of credit shall be deemed to utilize a Pro Rata Share of the Revolving Credit
Commitment of each Bank. The Borrowers agree to pay to the Banks upon the
issuance of each documentary trade and standby letter of credit, in addition
to and not as part of the compensation described in Section 2.2.6, letter of
credit fees computed at a rate equal to the Applicable Margin for LIBOR
Advances multiplied by the face amount of each documentary trade letter of
credit or the face amount of each standby letter of credit, as the case may
be, and further multiplied by a fraction the numerator of which shall equal
the number of months for which the letter of credit is issued and the
denominator of which shall be 12 (subject to a minimum fee in each case of One
Hundred Dollars ($100)). Sixty percent (60%) of any documentary trade or
standby letter of credit fee for servicing totaling in amount $500 or less
shall be retained by UMB and the balance of such fee will be allocated between
the remaining Banks in accordance with their respective Pro Rata Shares and
will be remitted by UMB to Harris and NBD promptly upon receipt; provided,
however, that in the event at any time an aggregate face amount of $1,000,000
or more exists for letters of credit each having face amounts of not more than
$67,000, all such fees for all such letters of credit in excess of the
aggregate of $1,000,000 shall be allocated between the Banks in accordance
with their respective Pro Rata Shares. If any documentary trade or standby
letter of credit fee for servicing exceeds $500, UMB shall retain $500; and
<PAGE> 16
the balance of such fee will be allocated between the Banks in accordance with
their respective Pro Rata Shares and will be remitted by UMB to Harris and NBD
promptly upon receipt. The Borrowers hereby authorize UMB to collect such
fees by deducting the amount thereof from the account of either Borrower at
UMB, advising the Borrowers to that effect. The letters of credit described
in this Section 2.2.2 are distinct from, and unrelated to, the Letter of
Credit and shall be differentiated in all respects under this Agreement.
Notwithstanding anything stated to the contrary in this
Agreement in the event payment of the Obligations is accelerated because of
the occurrence of an Event of Default, the Banks shall not renew any
outstanding letters of credit issued pursuant to this Section 2.2.2.
2.2.3 Interest on the Revolving Credit Loans. The principal amount
of the Revolving Credit Loans outstanding from time to time shall bear
interest until maturity of the Revolving Credit Notes at a rate per annum
equal to the Prime Rate plus the Applicable Margin, except that at the option
of the Borrowers, exercised as provided in Section 2.2.9, interest may accrue
prior to maturity on any Permissible Increment of any Advance or on any
Permissible Increment of the outstanding balance of the Revolving Credit Loans
as to which no Optional Rate has previously been elected, at an Optional Rate
for a period of one, two, three, or six months. At the expiration of such
Optional Rate on such Permissible Increment, unless, in each case, the
Borrowers exercise the Optional Rate as provided in Section 2.2.9, interest
shall again accrue at the Prime Rate plus the Applicable Margin. After
maturity, whether by acceleration or otherwise, or during the continuance of
any Event of Default, and until cure or payment in full, the Revolving Credit
Loans shall bear interest at Two Percent (2%) per annum above the rate
otherwise then in effect. Accrued interest to the first day of each January,
April, July and October shall be due and payable on each such day prior to
maturity for all Loans bearing interest at the Prime Rate plus Applicable
Margin. For all Loans bearing interest at LIBOR plus Applicable Margin which
have an initial maturity of three (3) months or longer, all interest accrued
to the first day of each January, April, July and October shall be due and
payable on each such day, with the balance of accrued interest payable upon
the termination of the LIBOR Interest Period. Interest shall be due and
payable at maturity for all Loans bearing interest at LIBOR plus the
Applicable Margin which have a maturity of less than three (3) months. After
maturity, interest shall be payable on all Loans as accrued and without
demand.
2.2.4 Payments; Mandatory Prepayment of Revolving Credit Loans.
The Borrowers shall promptly pay to the Agent, on demand, any amount by which
the aggregate outstanding principal amount of the Revolving Credit Loans
exceeds the Revolving Credit Commitments. All payments of principal and
interest on the Revolving Credit Loans shall be made by the Borrowers to the
Agent at its main office in Kansas City, Missouri, by 10:00 A.M. (Kansas City
time) on the date when due, and shall be applied pro rata between the Banks in
accordance with the outstanding principal amounts of the Revolving Credit
Notes held by them. Each payment delivered to the Agent for the account of
any Bank shall be delivered by the Agent for the account of such Bank no later
than 12:00 Noon (Kansas City, Missouri time) on the same day.
2.2.5 Use of Proceeds of Revolving Credit Loans. Advances of the
Revolving Credit Loans may be used (i) to fund acquisitions, (ii) to provide
<PAGE> 17
credit enhancement for interest and principal obligations in connection with
the Credit Enhanced Notes, (iii) to meet ongoing working capital requirements
of the Borrowers and (iv) for other corporate purposes not prohibited by this
Agreement.
2.2.6 Revolving Credit Commitment Fee. The Borrowers shall pay to
the Agent, for the ratable account of the Banks, commencing December 15, 1993,
and continuing on the fifteenth (15th) day of each March, June, September and
December thereafter, so long as the Revolving Credit Commitments are
outstanding, a commitment fee equal to twenty-five (25) basis points
calculated on the average daily unused portion of the Revolving Credit
Commitments during the immediately preceding three (3) month period ending
December 1, March 1, June 1 or September 1; provided, however, the aggregate
Revolving Credit commitment fee payable under this Agreement shall not exceed
Fifty Thousand Dollars ($50,000) in any trailing four (4) fiscal quarter
period. Effective as of the relevant payment date, the Obligation to pay the
commitment fee shall be an absolute, joint and several Obligation of the
Borrowers, not subject to cancellation or reduction for any reason, including,
without limitation, termination, in whole or in part, of the Revolving Credit
Commitments, and, once paid, the commitment fee shall be non-refundable. The
Agent is hereby authorized by the Borrowers to automatically debit any of the
Borrowers' accounts with the Agent for the payment of any commitment fee due
and payable hereunder. The Revolving Credit commitment fee shall be allocated
between the Banks according to their Pro Rata Shares and will be remitted to
Harris and NBD by the Agent promptly upon receipt.
Borrowers and Harris agree that facility and other fees collected by
Harris under that certain First Amended and Restated Loan and Letter of Credit
Agreement between the Borrowers, Harris and other parties dated October 25,
1990, will be retained by Harris except that the unexpired portion of the
annual revolving credit commitment fee thereunder paid in December 1992 on the
revolving credit thereunder shall be refunded by Harris. The amount of such
refund shall not exceed $6,200 with the actual amount of refund to be
calculated pursuant to the following formula: $30,000,000 x 31.25% x 25 bp x
(unexpired days between the Closing Date and December 1, 1993/360). Such
refund will be made via offsetting reductions in the amount of future
Revolving Credit Commitments fee or quarterly Letter of Credit Commission
payments made to Harris beginning in March, 1994.
2.2.7 Calculation of Interest. Interest on each of the Loans shall
be calculated based upon use of a fraction, the numerator of which being the
actual number of days elapsed and the denominator of which is 365.
2.2.8 Manner of Payment - Prepayments. All payments of principal
and interest on the Loans shall be payable at the principal office of the
Agent in Kansas City, Missouri, in funds available for the Agent's immediate
use at that city, and no payment will be considered to have been made until
received in such funds. Any of the Loans may be prepaid, in whole or in any
amount, without premium or penalty at any time, subject to Section 2.2.9(vii).
2.2.9 Procedures for Electing Optional Rates. Optional Rates may
be elected only in accordance with the following procedures and subject to the
above-described and the following conditions:
(i) No Optional Rate may be elected at any time a Default
<PAGE> 18
or an Event of Default shall have occurred and is continuing.
(ii) The Borrowers shall notify the Agent of its election
or renewal of an Optional Rate prior to 2:00 P.M. (Kansas City, Missouri time)
not less than three (3) Banking Days prior to the commencement of a LIBOR
Interest Period specifying (a) the election or renewal date, (b) the amount of
the Loan (or Loans taken together) elected or renewed which amount shall be in
a Permissible Increment, and (c) the duration of the LIBOR Interest Period
selected to apply thereto. The Agent shall immediately notify the Banks
whenever an Optional Rate is selected by the Borrowers.
(iii) An election of an Optional Rate may be communicated to
the Agent only by an Authorized Officer of the Company. Such election may be
communicated by telephone or by telex, facsimile machine or other form of
written electronic communication, or by a writing delivered to the Agent. The
Borrowers shall confirm in writing any election communicated by telephone and
such written confirmation shall be signed by an Authorized Officer. The Agent
shall be entitled to rely on any verbal communication of the election of an
Optional Rate which is received by a designated employee of the Agent from
anyone reasonably believed in good faith by such employee to be an Authorized
Officer of the Company.
(iv) No Optional Rate for any Loan may be elected except,
in each case, in "Permissible Increments" which shall mean a minimum principal
amount of One Million Dollars ($1,000,000), and minimum increments of One
Hundred Thousand Dollars ($100,000) above One Million Dollars ($1,000,000).
(v) Notwithstanding any other provision of this Agreement,
in the event that by reason of circumstances affecting the interbank
eurodollar market, adequate and reasonable means do not exist for ascertaining
the LIBOR for any LIBOR Interest Period, the Agent shall forthwith give notice
of such determination, confirmed in writing, to the Borrowers and the Banks.
If such notice is given, then all Loans being renewed at the Optional Rate or
being requested at the Optional Rate shall, at the Borrower's election, bear
interest at the Prime Rate plus the Applicable Margin or at a rate equal to
the then current average yield on United States Treasury bills adjusted to a
maturity of a duration equal to the applicable LIBOR Interest Period (except
if the applicable LIBOR Interest Period is of two (2) months duration, then
adjusted to a one (1) month maturity), as published by Bloomberg or a like
publication, plus 45 bp plus the Applicable Margin for LIBOR Advances.
(vi) If any law or any governmental regulation, guideline
or order or interpretation or application thereof by any Governmental
Authority charged with the interpretation or administration thereof or
compliance with any request or directive of any central bank or other
Governmental Authority whether or not having the force of law (i) imposes,
modifies or deems applicable any reserve, special deposit or similar
requirement against assets held by, credit extended by, deposits with or for
the account of, or other acquisition of funds by, any Bank with respect to any
optional Rate Advance under the Agreement, or (ii) imposes upon any Bank any
other condition or expense with respect to any Optional Rate Advance under
this Agreement, or the making, maintenance or funding of any part of the
proceeds of an Optional Rate Advance; and the result of any of the foregoing
is to increase the cost to, reduce the income receivable by, or impose any
expense upon any Bank with respect to the outstanding balance of the Loans
<PAGE> 19
bearing interest at the Optional Rate or the making, maintenance or funding of
any part thereof by an amount which the Bank deems to be material, the Bank
shall from time to time notify the Borrowers (which notification shall be made
reasonably promptly after discovery by the Bank of the causing circumstances)
of the amount determined in good faith (using any commonly accepted methods
employed in good faith) by the Bank (which determination shall be conclusive)
to be necessary to compensate the Bank in connection with the Optional Rate
Advances to the Borrowers for such increase in cost, reduction in income or
additional expense. Such amount shall be due and payable by the Borrowers to
the Bank thirty (30) Banking Days after such notice is given.
(vii) In the event any Bank shall incur any loss, cost or
expense (including, without limitation, any loss (including loss of profit),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired or contracted to be acquired by such Bank to
fund or maintain its part of any Optional Rate Portion or the relending or
reinvesting of such deposits or other funds or amounts paid or prepaid to such
Bank) as a result of:
(a) any payment of an Optional Rate Portion on a date
other than the last day of the then applicable LIBOR Interest Period for any
reason, whether before or after default, and whether or not such payment is
required by any provisions of this Agreement; or
(b) any failure by the Borrowers to create, borrow,
continue or effect by conversion an Optional Rate Portion on the date
specified in a notice given pursuant to this Agreement;
then, upon the demand of such Bank, the Borrowers shall pay to the Bank
such amount as will reimburse such Bank for such loss, cost or expense
("Prepayment Premium"). If a Bank requests such a reimbursement, it shall
provide to the Borrowers a certificate setting forth the computation of the
loss, cost or expense giving rise to the request for reimbursement in
reasonable detail and such certificate shall be rebuttably presumed to be
correct if reasonably determined.
Notwithstanding any provision of this Agreement to the contrary, each
Bank shall be entitled to fund and to maintain its funding of all or any part
of its Notes in any manner it sees fit, it being understood, however, that to
the extent any Bank is matching funds in any manner (whether or not in the
LIBOR Eurodollar market) that for the purposes of this Agreement all
determinations hereunder shall be made as if such Bank had actually funded and
maintained each Optional Rate Portion during each LIBOR Interest Period
applicable thereto through the purchase of deposits in the relevant interbank
market in the amount of its share of such Optional Rate Portion, having a
maturity corresponding to such LIBOR Interest Period, and bearing an interest
rate equal to the Optional Rate for such LIBOR Interest Period.
If at the time of any voluntary or mandatory prepayment of any portion of
the principal of any Loan, interest accrues at both an Optional Rate or Rates
and at a Prime Rate on portions of a Loan or Loans, then any prepayment of
principal will be applied first to the portion of a Loan or Loans on which
interest accrues at the Prime Rate and next to the portion or portions at
which interest accrues at an Optional Rate or Rates, and if interest accrues
on a Loan or Loans at more than one Optional Rate, first to that portion or
<PAGE> 20
those portions on which interest accrues at a rate or rates which results in
no Prepayment Premium or the lowest Prepayment Premium or Premiums. The Agent
will notify the Borrowers and obtain their approval prior to any application
of any prepayment which would result in any Prepayment Premium.
(viii) Also notwithstanding any provision of this Agreement
to the contrary, (a) no Optional Rate may be selected for any Loan if the
interest period applicable thereto would extend beyond the Revolving Credit
Maturity Date including any extensions thereof, in the case of Revolving
Credit Loans and (b) all Optional Rates shall remain fixed throughout the
relevant LIBOR Interest Period.
2.2.10 Banking Day. If any installment of principal or interest on
any Loan becomes due and payable on a day other than a Banking Day, the
maturity of the installment of principal or interest shall be extended to the
next succeeding Banking Day, and interest shall be payable during such
extension of maturity.
2.2.11 Extension of Revolving Credit Maturity Date. The Borrowers
shall have the right to request two (2) 1-year extensions of the Revolving
Credit Maturity Date. Each such request must be in writing and must be
delivered to the Agent at least sixty (60) days prior to the date which is two
(2) years prior to the Revolving Credit Maturity Date in effect upon the date
of receipt of such notice by the Agent. The Banks, in their sole discretion,
may accept or reject any such request for an extension of the Revolving Credit
Maturity Date. In order for any such an extension to be accepted, all of the
Banks must agree to the extension. The Agent shall give written notice to the
Borrowers of the Banks' acceptance or rejection of the request for any such
extension within forty-five (45) days of receipt by the Agent of the
Borrowers' request for any such extension; provided, however, failure of the
Agent to give any such notice to the Borrowers shall impose no liability on
the Agent or the Banks.
SECTION 3
The Letter of Credit
3.1 The Letter of Credit. Subject to the fulfillment of all the terms
and conditions stated in Section 7 applicable to the issuance of the Letter of
Credit, NBD will open and deliver as of the Closing Date its irrevocable
direct pay letter of credit effective on November 30, 1993 (the "Letter of
Credit") for the account of the Borrowers and in favor of the Trustee for the
benefit of the holders of the Credit Enhanced Notes in the Stated Amount of
Fifteen Million Seven Hundred Sixty-Three Thousand Four Hundred Fifty-Eight
Dollars ($15,763,458). The Letter of Credit will be available to draw to pay
the principal portion of and all accrued interest on the Credit Enhanced
Notes, is in the form attached as Exhibit D and will be subject to the terms
stated therein. The Letter of Credit is issued subject to the terms and
conditions of this Agreement and the Term Loan Documents.
<PAGE> 21
3.2 Payment and Reimbursement.
3.2.1 Payment. NBD shall honor draws made by the Trustee, for the
account of the Borrowers, directly to pay principal and/or interest on the
Credit Enhanced Notes as each installment thereof becomes due, all in
accordance with the terms and provisions of the Letter of Credit. In
addition, the Borrowers shall have the right, upon prior written notice to the
Agent, to cause the Trustee to make a conforming draw of the Stated Amount, or
such lesser amount as may be directed by the Borrowers, in order to make
optional redemption payments on the Credit Enhanced Notes pursuant to Section
3.01(a) of the Indenture and to provide for the payment of the Credit Enhanced
Notes pursuant to Section 8.01(a)(ii) of the Indenture; provided, however, in
the event of any payment pursuant to Section 8.01(a)(ii), the Borrowers shall
provide satisfactory evidence to the Banks that concurrently with such
payment, the Borrowers will provide such additional funds necessary in order
that all mortgages and security interests will be promptly released by the
Trustee; provided, further, in no event shall this Obligation be deemed a
condition precedent to any draw on the Letter of Credit. All payments made by
NBD under the Letter of Credit shall be made from funds of NBD or from funds
obtained by NBD from Harris and UMB, as provided in Section 3.7, and in
no event shall such payment be made with funds obtained from either Borrower
or any Subsidiary of a Borrower.
3.2.2 Reimbursement. Unless an election is made by Borrowers
pursuant to the provisions of Section 3.8, NBD shall automatically convert the
Obligations of the Borrowers arising out of any drawing under the Letter of
Credit into Revolving Credit Loans by giving notice thereof to the Agent if
such conversion does not cause the outstanding principal amount of the
Revolving Credit Loans to exceed the aggregate Revolving Credit Commitments,
and the Borrowers hereby irrevocably authorize the Agent, upon receipt of such
notice from NBD, to convert without notice to the Borrowers the Obligations of
the Borrowers arising out of any such drawing into Revolving Credit Loans on
and subject to the terms and conditions of this Agreement, but without regard
to the conditions precedent to making any such Revolving Credit Loans and any
requirement of this Agreement that each Revolving Credit Loans be in a minimum
Permissible Increment. In the event the amount of a drawing in the Stated
Amount under the Letter of Credit would cause the Revolving Credit Loans to
exceed the aggregate Revolving Credit Commitments, the Borrowers shall
automatically be deemed to have made an election pursuant to Section 3.8
hereof and the full amount of such drawing shall automatically be converted
into the installment loan provided for in Section 3.8 hereof, but without
regard to the conditions precedent to making such installment loan pursuant to
Section 3.8 hereof. In the event any drawing under the Letter of Credit in an
amount less than the Stated Amount would cause the Revolving Credit Loans to
exceed the aggregate Revolving Credit Commitments, the Borrowers shall
immediately reimburse the Banks for the amount of such drawing in excess of
the Revolving Credit Commitments. Nothing in this Section 3.2.2 shall be
deemed to constitute a waiver of Default or Event of Default caused by the
failure to satisfy any of the conditions precedent to making Revolving Credit
Loans or an installment loan pursuant to Section 3.8 or otherwise. The
Obligations of the Borrowers under this Section 3.2.2 shall be absolute,
unconditional and irrevocable and shall be paid and performed strictly in
accordance with the terms of this Agreement under all circumstances
whatsoever, including, without limitation, the following circumstances:
<PAGE> 22
(a) Any lack of validity or enforceability of the
Letter of Credit or any other Term Loan Document;
(b) Any amendment or waiver of or consent to
departure from the terms of the Letter of Credit or any of the Term Loan
Documents;
(c) The existence of any claim, setoff, defense or
other right which either Borrower may have at any time against the Trustee,
any transferee of the Letter of Credit, any holder of a Credit Enhanced Note,
NBD or any other person, whether in connection with the Loan Documents, the
Letter of Credit or the Term Loan Documents or any unrelated transaction;
(d) Any statement, draft or other document presented
under the 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 whatsoever;
(e) The surrender or impairment of any security, if
any, for the performance or observance of the terms of the Loan Documents, the
Letter of Credit or the Term Loan Documents; or
(f) The voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or substantially all the assets
of either Borrower, the receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement, composition with
creditors or readjustment or other similar proceedings affecting either
Borrower or any of the assets of either of them, or any allegation or contest
of the validity of this Agreement, any of the Loan Documents or any of the
Term Loan Documents, in any such proceeding; or
(g) Any other circumstances, happening or omission
whatsoever, whether or not similar to any of the foregoing, including, without
limitation, those matters described in Section 3.5.
3.3 Commission. At the end of each three month period, so long as the
Letter of Credit is outstanding (each of such anniversaries being hereafter
referred to as "Quarterly Commission Due Date"), the Borrowers, jointly and
severally, agree to pay to NBD a commission for the Letter of Credit for the
prior three months computed at a rate equal to the Applicable Margin for LIBOR
Advances (the "Commission Rate") multiplied by the Stated Amount as of the
date of calculation multiplied by three (3) months divided by twelve (12)
months with the first such commission being due and payable on March 1, 1994;
provided, however, that the commission paid as of any Quarterly Commission Due
Date shall not be refundable to the Borrowers, for any reason, including,
without limitation, any reduction in the Stated Amount or the cancellation of
the Letter of Credit. If the Letter of Credit is transferred to a new
beneficiary pursuant to the terms thereof (other than a Person into which the
Trustee may be merged or converted), then the Borrowers, jointly and
severally, promise to pay to NBD promptly upon its demand a transfer fee in
the amount of $500.00. Whenever any payment to be made hereunder shall be
stated to be due on a day which is not a Banking Day, such payment may be made
on the next succeeding Banking Day, and such extension of time shall in each
case be included in the computation of such payment.
<PAGE> 23
3.4 Additional Amounts Payable. If any change in or the enactment,
adoption or judicial or administrative interpretation of any law, regulation,
treaty, guideline or directive (including, without limitation, Regulation O of
the Board of Governors of the Federal Reserve System) either (i) subjects any
Bank to any additional tax, duty, charge, deduction or withholding with
respect to the Letter of Credit or any participation therein or any amount
paid by the Banks thereunder or received by the Banks under this Agreement
because of the Letter of Credit (other than a tax measured by the net or gross
income of the Banks), or (ii) imposes or increases any reserve, special
deposit, or similar requirement on account of the Letter of Credit or any
participation therein, or (iii) imposes increased minimum capital requirements
on any Bank on account of its issuing or participating in the Letter of
Credit, and if any of the foregoing (A) results in an increase to any Bank in
the cost of maintaining the Letter of Credit or any participation therein, or
making any payment on account of the Letter of Credit or any participation
therein, (B) reduces the amount of any payment receivable by the Banks under
this Agreement with respect to the Letter of Credit, (C) requires the Banks to
make any payment calculated by reference to the gross amount of any sum
received or paid by the Banks pursuant to the Letter of Credit or any
participation therein (other than a tax measured by the Banks' gross or net
income) or (D) reduces the rate of return on the Banks' capital, the Borrowers
shall pay to NBD for the account of the Banks, as additional compensation for
the Letter of Credit, such amount as will compensate the Banks for such
increased cost, payment or reduction. Within 30 days after (i) the initial
demand therefor and (ii) presentation by NBD of a certificate to the Borrowers
containing a statement of the cause of such increased cost, payment or
reduction and a calculation of the amount thereof (which statement and
calculation shall be rebuttably presumed to be correct), the Borrowers shall
pay the additional amount payable measured from the date such change,
enactment, adoption or interpretation first affects the relevant Bank to the
date of the next Quarterly Commission Due Date with respect to the Letter of
Credit. Thereafter, the additional amount payable shall be reflected by an
increase in the quarterly commissions payable with respect to the Letter of
Credit pursuant to Section 3.3 and shall be payable, in arrears, on the dates
such quarterly commissions are due pursuant to Section 3.3.
3.5 Risk of Misuse of the Letter of Credit. The parties benefitted by
the Letter of Credit shall be deemed to be the agents of the Borrowers, and,
except as expressly set forth herein, the Borrowers assume all risk for their
acts, omissions or misrepresentations. NBD shall not be responsible for the
validity, sufficiency, truthfulness or genuineness of any document required to
draw under the Letter of Credit even if such document should in fact prove to
be in any or all respects invalid, insufficient, fraudulent or forged,
provided only that the document appears on its face to be in accordance with
the terms of the Letter of Credit and provided NBD is not grossly negligent or
engaging in willful misconduct, or for failure of any draft to bear reference
or adequate reference to the Letter of Credit or failure of any Person to note
the amount of any draft on the Letter of Credit or to surrender or take up the
Letter of Credit, each of which provisions may be waived by NBD, or for
errors, omissions, interruptions, or delays in transmission or delivery of any
messages or documents. Without limiting the generality of the foregoing, the
Borrowers agree that any action taken by NBD under or in connection with the
Letter of Credit, if taken in good faith and without gross negligence, shall
be binding upon the Borrowers and shall not put NBD under any resulting
liability to the Borrowers, and the Borrowers likewise agree as to any
<PAGE> 24
omission unless in breach of good faith or grossly negligent. NBD is
expressly authorized to honor any request for payment which is made under and
in compliance with the terms of the Letter of Credit without regard to and
without any duty on its part to inquire into the existence of any disputes or
controversies between the Borrowers and the beneficiary of the Letter of
Credit or any other Person or into the respective rights, duties or
liabilities of any of them or whether any facts or occurrences represented in
any of the documents presented under the Letter of Credit are true and
correct. No Person, other than the parties hereto, shall have any rights of
any nature under this Agreement or by reason hereof, except to the extent that
the Trustee is expressly granted rights and imposed responsibilities
hereunder, and to that end, the Trustee is hereby made a third party
beneficiary of this Agreement.
3.6 Replacement of the Letter of Credit; Cancellation. The Borrowers
may at any time obtain the cancellation of the Letter of Credit and its return
to NBD by furnishing a replacement letter of credit to the Trustee or by full
redemption or defeasance of the Credit Enhanced Notes from Available Moneys
(as defined in the Indenture), from proceeds of the Letter of Credit or any
additional letter of credit required with respect to a defeasance of the
Credit Enhanced Notes in a manner provided for in the Indenture.
Notwithstanding the foregoing, the Letter of Credit may not be canceled
prior to the payment in full or the defeasance of the Credit Enhanced Notes,
unless the Borrowers provide NBD with the prior written consent to such
cancellation and to the replacement letter of credit, as the case may be, by
such holders of Credit Enhanced Notes as may be required under the Indenture,
if any.
3.7 Letter of Credit Participation. Harris hereby agrees to purchase a
thirty percent (30%) participation and UMB hereby agrees to purchase a forty
percent (40%) participation in the Letter of Credit. Such participation shall
be funded by Harris and by UMB by funding their respective Pro Rata Share upon
any drawing under the Letter of Credit not immediately reimbursed by the
Borrowers; and thereupon Harris and UMB shall be entitled to, and NBD shall
remit to Harris and UMB, Harris' and UMB's Pro Rata Shares of any amounts
received by NBD in reimbursement of such drawing. Notwithstanding the
previous sentence, NBD shall retain for itself the full amount of the transfer
fees described in Section 3.3 hereof. NBD shall furnish to Harris and to UMB,
each time the Letter of Credit, or any replacement thereof is issued, expires
or is drawn under (whether in whole or in part) and not immediately reimbursed
by the Borrowers, a participation certificate showing the Stated Amount of the
Letter of Credit and the amount of Harris' and UMB's participation therein.
The Letter of Credit commissions provided for in Section 3.3 and any
additional amount payable pursuant to Section 3.4 shall be allocated between
the Banks in proportion to their respective participations in the Letter of
Credit (whether or not funded) and will be remitted to Harris and UMB promptly
by NBD upon receipt.
The obligations of Harris and UMB to participate in the Letter of Credit
shall be absolute, unconditional and irrevocable under all circumstances
whatsoever, including, without limitation, the circumstances set forth in
Section 3.2.2(a) through (g) hereof.
<PAGE> 25
3.8 Alternative Reimbursement of Letter of Credit Draw. Unless
otherwise automatically elected by the Borrowers pursuant to Section 3.2.2
hereof, as an alternative to automatic conversion, as required by Section
3.2.2, of any draw under the Letter of Credit in the full Stated Amount, but
only in the full Stated Amount of the Letter of Credit, the Borrowers may, at
their election, if they are in full and complete compliance with the terms of
this Agreement, on the date on which they are advised of any such drawing on
the Letter of Credit by NBD, advise the Agent in writing that the Borrowers
elect to convert the entire amount of such drawing into an installment loan
obligation payable over a term of four (4) years in equal quarterly payments
of principal calculated on a seven (7) year amortization of such principal
amount and a final principal payment in the amount of the remaining
outstanding principal loan amount. Such installment loan shall bear interest
payable quarterly in arrears on the same date as each principal payment is due
and at a rate per annum equal to the 3-month LIBOR rate, as reported in the
Wall Street Journal, plus the Applicable Margin for LIBOR Advances plus 25
basis points, adjusted each ninety (90) days. Upon receipt by the Agent of
notice of any such election by the Borrowers and notes executed by the
Borrowers payable to each of the Banks in the form of Exhibit E attached
hereto in each Bank's respective amount of participation in the Stated Amount
of the Letter of Credit on the date of the draw, the Agent shall notify the
Banks of such election and Harris and NBD shall each, upon receipt of such
notification, immediately transfer to the Agent by wire transfer or deposit to
any correspondent account which Agent may maintain with such Bank an amount
equal to thirty percent (30%) of the principal amount of the draw under the
Letter of Credit as provided above in this Section 3.8 and UMB shall
immediately transfer forty percent (40%) of such amount to the Agent. Upon
receipt of all such transfers from Harris, NBD and UMB, the Agent will
immediately transfer the aggregate of such amount to NBD in full reimbursement
of the draw on the Letter of Credit. The Agent shall handle the notes in the
form of Exhibit E attached hereto and all collections thereon in the same
manner as provided in this Agreement for collections on Revolving Credit Loans
as respects the Banks.
SECTION 4
Representations and Warranties
To induce the Banks to make the Loans, to issue the Letter of Credit,
and, if applicable to make the installment loan provided for in Section 3.8
hereof, the Borrowers represent and warrant to the Banks that, effective as of
the Closing Date:
4.1 Organization. Each Borrower and each of its Subsidiaries is a
corporation organized, existing and in good standing under the laws of its
state of incorporation. Each Borrower and each of its Subsidiaries is
qualified to do business in every jurisdiction in which: (i) the nature of the
business conducted or the character or location of the properties owned or
leased or the residence or activities of employees make such qualification
necessary, and (ii) failure so to qualify might impair title to material
properties or the right to enforce material contracts against others or result
in exposure to material liability in such jurisdiction.
4.2 Authorization; No Conflict. The execution and delivery of the Loan
Documents, the borrowings hereunder, the execution and delivery of the Term
Loan Documents to which the Borrowers are a party, and the performance by the
<PAGE> 26
Borrowers of the Obligations and the Secured Obligations are within their
corporate powers, have been duly authorized by all necessary corporate action
and do not contravene or conflict with any provision of law or the articles of
incorporation or by-laws of either Borrower or of any material agreement
binding upon either Borrower or its property.
4.3 Validity and Binding Nature. The Loan Documents and the Term Loan
Documents to which the Borrowers are a party are the legal, valid and binding
obligations of the Borrowers, enforceable against the Borrowers in accordance
with their respective terms, except to the extent that enforcement thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium and other
laws enacted for the relief of debtors generally and other laws affecting the
enforcement of creditors' rights generally and by equitable principles which
affect the availability of specific performance as a remedy.
4.4 Financial Statements. The Company has delivered to the Banks its
Consolidated audited annual financial statements as of January 31, 1993 for
the fiscal year of the Company then ended and its quarterly Consolidated
(unaudited) financial statements as of August_1, 1993. Such statements have
been prepared in accordance with GAAP consistently applied and present fairly
the financial condition of the Company, on a Consolidated basis, as of the
date thereof and the results of its operations, on a Consolidated basis, for
the period covered thereby and since the date of such statements, except as
disclosed in writing to the Banks, there has been no material adverse change
in the Consolidated financial condition of the Company or in the results of
its operations. For purposes of this representation, and only for this
representation, a material adverse change in the Consolidated financial
condition of the Company or in the results of its operations means a decrease
in Consolidated Stockholders' Equity of the Company in excess of ten percent
(10%) of the Company's Consolidated Stockholders' Equity, calculated as of the
last financial report issued by the Company to the Banks in accordance with
Section 5.2 hereof.
4.5 Litigation and Contingent Liabilities. No litigation, arbitration
proceedings, proceedings of any Governmental Authority or other contingent
liabilities, including but not limited to, environmental liabilities, are
pending or, to the knowledge of the Borrowers, threatened against either
Borrower which are reasonably likely to materially and adversely affect the
financial condition or continued operations of the Company and its
Subsidiaries taken as a whole, nor does either Borrower have, to their
respective knowledge, any such liabilities not provided for or disclosed to
the Banks or in the financial statements referred to in Section 4.4.
For purposes of this representation, and only for this representation,
any event described in this Section 4.5 shall not be deemed to have a material
and adverse effect on the financial condition or continued operations of the
Company and its Subsidiaries taken as a whole unless it is reasonably likely
that the Borrowers' expense with respect to such matter would cause a decrease
in Consolidated Stockholders' Equity of the Company in excess of ten percent
(10%) of the Company's Consolidated Stockholders' Equity, calculated as of the
last financial report issued by the Company to the Banks in accordance with
Section 5.2 hereof.
4.6 Liens. None of the assets of either Borrower is or will become
<PAGE> 27
subject to any mortgage, pledge, title retention lien, or other lien,
encumbrance or security interest except Permitted Encumbrances.
4.7 Employee Benefit Plans. Each Plan maintained by either Borrower is
in material compliance with ERISA, the Code, and all applicable rules and
regulations adopted by Governmental Authorities pursuant thereto, and the
Borrowers have filed all reports and returns required to be filed by ERISA,
the Code and such rules and regulations. The Borrowers have no knowledge that
any Plan maintained by either Borrower, or any trust created thereunder, has
incurred any material "accumulated funding deficiency" as defined in Section
302 of ERISA, nor that the present value of all benefits vested under all
Plans exceed by a material amount, as of the last annual valuation date, the
value of the assets of the Plans allocable to such vested benefits. The
Borrowers have no knowledge that any "reportable event" as defined in ERISA
has occurred with respect to any Plan maintained by either Borrower. Banks
acknowledge that this representation does not cover any multi-employer pension
plans to which the Company or any Subsidiaries contribute.
4.8 Investment Company Act. Neither Borrower is an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
4.9 Regulation U. Neither Borrower is engaged principally, or as one of
its important activities, in the business of extending credit for the purpose
of purchasing or carrying margin stock within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System.
4.10 Notices. The Borrowers have given all notices required by this
Agreement to the Agent.
SECTION 5
Affirmative Covenants of the Borrowers
Until all Obligations terminate or are paid and satisfied in full, and so
long as the Letter of Credit or any of the Commitments is outstanding, each
Borrower agrees that it will strictly observe, and will cause each of its
Subsidiaries to strictly observe, the following covenants, unless at any time
the Banks otherwise expressly consent in writing which consent shall not be
unreasonably withheld:
5.1 Corporate Existence. Each Borrower will preserve its corporate
existence.
5.2 Reports, Certificates and Other Information. The Borrowers will
furnish to the Banks copies of the following:
5.2.1 Annual Statements and Form 10-K. As soon as available and in
any event within One Hundred Twenty (120) days after the close of each fiscal
year, financial statements of the Company for such fiscal year prepared and
presented in accordance with GAAP on a Consolidated basis, setting forth in
comparative form corresponding figures for the preceding fiscal year,
accompanied by the audit report as to the Consolidated statements, unqualified
as to scope, of KPMG Peat Marwick, or other independent certified public
accountants reasonably acceptable to the Agent. As soon as it is filed with
the Securities and Exchange Commission, a copy of the Company's report on Form
<PAGE> 28
10-K for its immediately preceding fiscal year.
5.2.2 Quarterly Statements and Form 10-Q. As soon as available and
in any event within forty-five (45) days after the end of each of the first
three (3) quarterly fiscal periods, a copy of the interim financial statements
of the Company, consisting at a minimum of
(i) a Consolidated balance sheet as of the end of each
quarterly accounting period, and
(ii) a Consolidated statement of income for each quarterly
accounting period and for that portion of the fiscal year then elapsed,
setting forth in each case in comparative form the corresponding figures for
the corresponding dates and periods of the preceding fiscal year, all in
reasonable detail and accompanied by the written representation of the chief
financial officer of the Company that such financial statements have been
prepared in accordance with GAAP (except that they need not reflect
adjustments normally made at year end), consistently applied (except for
changes in which the independent accountants of the Company report upon), and
present fairly the Consolidated financial position of the Company and the
results of its operation as of the dates of such statements and for the fiscal
periods then ended. As soon as filed with the Securities and Exchange
Commission, a copy of the Company's report on Form 10-Q for its immediately
preceding fiscal quarter.
5.2.3 Certificates. (i) Beginning on the 15th day of October,
1993, and on the 15th day of each month thereafter, an Officer's Certificate,
and (ii) within forty-five (45) days after the end of each of the first three
quarterly fiscal periods and within one hundred twenty (120) days after the
end of each annual fiscal period, a Compliance Certificate, and (iii) within
one hundred twenty (120) days after the end of each annual fiscal period an
annual auditors certificate based upon their audit and signed by the
Borrowers' independent certified public accountants.
5.2.4 Orders. Within thirty (30) days after entry thereof, notice
of any adverse final order exceeding $1,000,000 entered in any proceedings to
which either Borrower or any other Subsidiary is a party, issued by any
Governmental Authority, and if the Agent or any Bank should so request, copies
of any such order.
5.2.5 Notice of Default or Litigation. Immediately upon learning
of the occurrence of (a) a Default or an Event of Default or (b) any adverse
determination in any litigation, arbitration proceeding or proceeding of any
Governmental Authority or the occurrence of any other event which is
reasonably likely to materially and adversely affect the financial condition
or continued operations of the Company and its Subsidiaries taken as a whole,
written notice thereof describing the same and the steps being taken with
respect thereto.
For purposes of giving the notice required for events described in
subsection (b) of this Section 5.2.5, and only for the purpose of giving such
notice, any event described in such subsection (b) shall not be deemed to have
a material and adverse effect on the financial condition or continued
operations of the Company and its Subsidiaries taken as a whole unless it is
reasonably likely that the Borrowers' expense with respect to such matter
<PAGE> 29
would cause a decrease in Consolidated Stockholders' Equity of the Company in
excess of ten percent (10%) of the Company's Consolidated Stockholders' Equity
calculated as of the last financial report issued by the Company to the Banks
in accordance with Section 5.2 hereof.
5.2.6 Other Information. From time to time such other information
concerning the Borrowers and its Subsidiaries as the Agent or any Bank may
reasonably request.
5.2.7 Securities Filings. Contemporaneously with the filing of the
same, all filings of the Company with the Securities and Exchange Commission
or with any state's securities commission.
5.2.8 Name; Principal Office. Not less than 30 days prior written
notice of any change by the Borrowers or any of their Subsidiaries of (i)
their name or (ii) the location of their principal office. The principal
offices of both Borrowers are located at 101 West 11th Street, Kansas City,
Missouri 64105 as of the date of this Agreement.
5.3 Books, Records, Quarterly Meetings and Inspections. The Borrowers
will maintain, and will cause each Subsidiary to maintain, complete and
accurate books and records, and permit access thereto by the Agent or any Bank
for purposes of inspection, audit, and copying (except work papers of
independent certified public accountants, unless the consent of such
accountants is first obtained); and the Borrowers will permit, and will cause
each Subsidiary to permit, the Agent or any Bank to inspect their properties
and operations at all reasonable times, to ask questions and receive answers
to inquiries about their affairs, finances and accounts and to have the
cooperation of the Borrowers and their Subsidiaries in connection therewith.
The Borrowers will meet with the Agent and the Banks not less often than
every ninety (90) days on a mutually convenient date to discuss the financial
condition and business operations of the Borrowers and such other matters
pertaining to the Borrowers and their Subsidiaries requested by the Agent and
the Banks from time to time.
5.4 Insurance. In addition to the insurance required by any other Loan
Documents, if any, and the Term Loan Documents, the Borrowers and each
Subsidiary will maintain such insurance as may be required by law and such
other insurance, to such extent and against such hazards and liabilities, as
is customarily maintained by companies similarly situated.
5.5 Taxes and Liabilities. Each Borrower will pay, and will cause each
of its Subsidiaries to pay, when due all taxes, license fees, assessments and
all other liabilities which are reasonably likely, if not paid, to materially
and adversely affect the financial condition or continued operations of the
Company and its Subsidiaries taken as a whole, except such of the foregoing as
are being contested in good faith and by appropriate proceedings and for which
appropriate reserves have been established.
For purposes of this covenant, and only for purposes of this covenant,
any liability shall not be deemed to have a material and adverse effect on the
financial condition or continued operations of the Company and its
Subsidiaries taken as a whole unless it is reasonably likely that the
Borrowers' expense with respect thereto would cause a decrease in the
Consolidated Stockholders' Equity of the Company in excess of ten percent
<PAGE> 30
(10%) of the Company's Consolidated Stockholders' Equity, calculated as of the
last financial report issued by the Company to the Banks in accordance with
Section 5.2 hereof.
5.6 Compliance with Legal and Regulatory Requirements. The Borrowers
will maintain, and will cause each Subsidiary to maintain, material compliance
with the applicable provisions of all federal and state statutes and
regulations and any orders of Governmental Authorities issued thereunder where
the failure to so comply is reasonably likely to materially and adversely
affect the financial condition or continued operations of the Company and its
Subsidiaries taken as a whole.
For purposes of this covenant, and only for purposes of this covenant, a
failure to comply with applicable provisions of all federal and state statutes
and regulations and any orders of Governmental Authorities issued thereunder
shall not be deemed to have a material and adverse effect on the financial
condition or continued operations of the Company and its Subsidiaries taken as
a whole unless it is reasonably likely that the Borrowers' expense with
respect thereto would cause a decrease in the Consolidated Stockholders'
Equity of the Company in excess of ten percent (10%) of the Company's
Consolidated Stockholders' Equity, calculated as of the last financial report
issued by the Company to the Banks in accordance with Section 5.2 hereof.
5.7 Financial Covenants. The Company shall observe the following
financial covenants:
5.7.1 Current Ratio. The Company shall maintain the ratio of its
Consolidated current assets to its Consolidated current liabilities at not
less than 1.50 to 1.00.
5.7.2 Capitalization Ratio. The Company shall maintain a
Capitalization Ratio of not more than sixty percent (60%).
5.7.3 Consolidated Stockholders' Equity. The Company shall
maintain a minimum Consolidated Stockholders' Equity of at least $50,000,000
at all times. Such minimum Consolidated Stockholders' Equity requirement
shall be increased on the last day of each fiscal year by an amount equal to
fifty percent (50%) of the Company's consolidated positive net earnings for
such fiscal year with the first increase to occur on January 30, 1994. Such
required increase in Consolidated Stockholders' Equity shall be cumulative.
5.7.4 Fixed Charge Coverage Ratio. The Company shall maintain a
Fixed Charge Coverage Ratio of not less than 2.25 to 1.0.
5.8 Employee Benefit Plans. The Borrowers and each of their
Subsidiaries will maintain each Plan maintained by them in material compliance
with ERISA, the Code, and all rules and regulations of Governmental
Authorities pursuant thereto and file all reports required to be filed
pursuant to ERISA, the Code, and such rules and regulations with respect to
each Plan maintained by them; provided, however, that this Section 5.9 shall
not prevent either Borrower or any Subsidiary from amending, terminating,
deleting or otherwise changing any Plan in accordance with applicable law.
Banks acknowledge that this covenant does not cover any multi-employer
pension plans to which the Company or any Subsidiaries contribute.
<PAGE> 31
5.9 Compliance with Term Loan Documents. Each Borrower will observe and
comply with and perform each and all of its obligations under the Term Loan
Documents.
5.10 Hazardous Substances. The Borrowers will cause any Hazardous
Substances which are now or may hereafter be used or generated in the
operations of either Borrower or any Subsidiary to be accounted for and
disposed of and not released on any premises owned or occupied by or under
lease to either Borrower or any Subsidiary other than in material compliance
with all applicable federal, state and local laws and regulations where the
failure to comply is reasonably likely to materially and adversely affect the
financial condition or continued operations of the Borrowers and the
Subsidiaries taken as a whole.
For purposes of this covenant, and only for this covenant, a failure to
comply with applicable federal, state and local laws and regulations shall not
be deemed to have a material and adverse effect on the financial condition or
continued operations of the Company and its Subsidiaries taken as a whole
unless it is reasonably likely that the Borrowers' expense with respect to
such failure to comply would cause a decrease in Consolidated Stockholders'
Equity of the Company in excess of ten percent (10%) of the Company's
Consolidated Stockholders' Equity, calculated as of the last financial report
issued by the Company to the Banks in accordance with Section 5.2 hereof.
The Borrowers will notify the Agent and the Agent will promptly remit
such notice to Banks immediately upon obtaining knowledge that:
(i) any premises which have at any time been owned or occupied
by or have been under lease to the Borrowers or any Subsidiary are the subject
of an environmental investigation (other than normal monitoring) by any
Governmental Authority, the purpose of which investigation is to quantify the
levels of Hazardous Substances located on such premises, or
(ii) either Borrower or any Subsidiary have been named as a
potentially responsible party for the possible contamination of any real
property or ground water with Hazardous Substances, including, but not limited
to the contamination of past and present waste disposal sites.
If either Borrower or any Subsidiary is notified of any event described
at item (ii) above, the Borrowers shall (unless they reasonably deem it
unnecessary) immediately engage, or cause the appropriate Subsidiary to
engage, a reputable firm or firms of engineers or environmental consultants
appropriately certified or otherwise qualified to determine as quickly as
practical the extent of contamination, and the Agent shall be provided with a
copy of any report prepared by any such firm or by any Governmental Authority
as to such matters as soon as any such report becomes available to the
Borrowers, unless to provide such report would in the Borrowers' reasonable
judgment jeopardize a claim of attorney-client privilege as to such report.
The Agent shall immediately provide a copy of such report to Banks.
5.11 Subsidiaries. Borrowers will notify Agent and Agent will promptly
remit such notice to Banks if (i) Rental, Holden Manufacturing Co. or Unitog
De Honduras, S.A. cease to be Subsidiaries of the Company; (ii) Unitog
Distributing Company, Inc. or Textile Enterprises, Inc. cease to be
Subsidiaries of Rental; or (iii) Borrowers create or acquire any Subsidiaries.
<PAGE> 32
SECTION 6
Negative Covenants of the Borrowers
Until all Obligations of the Borrowers terminate or are paid and
satisfied in full, and so long as the Letter of Credit or any of the
Commitments is outstanding under this Agreement, each Borrower agrees that it
will strictly observe, and cause each of its Subsidiaries to strictly observe,
the following covenants, unless at any time the Banks otherwise expressly
consent in writing:
6.1 Liens. Neither Borrower nor any of its Subsidiaries will create or
suffer to exist, or permit any of its Subsidiaries to create or suffer to
exist, any mortgage, pledge, title retention lien or other lien, encumbrance
or security interest or any assignment or discount of accounts, with or
without recourse (all of which are hereafter referred to in this subsection as
a "lien" or "liens") with respect to any property or assets now owned or
hereafter acquired except:
(i) liens in favor of the Banks or the Agent created pursuant to
the requirements of this Agreement, if any, or otherwise, or liens created
pursuant to any Term Loan Document;
(ii) any lien or deposit with any Governmental Authority required
or permitted to qualify a Borrower or a Subsidiary of a Borrower to conduct
business or exercise any privilege, franchise or license, or to maintain
self-insurance or to obtain the benefits of or secure obligations under any
law pertaining to workmen's compensation, unemployment insurance, old age
pensions, social security or similar matters, or any similar lien or deposit
arising in the ordinary course of business, provided that appropriate reserves
are established with respect to obligations secured by any such liens;
(iii) any mechanic's, workmen's, repairmen's, carrier's,
warehousemen's or other like liens arising in the ordinary course of business,
or deposits to obtain the release of such liens or any such liens as are being
contested in good faith and are appropriately reserved for;
(iv) easements, licenses, minor irregularities in title or minor
encumbrances on or over any real property which do not materially detract from
the value of such property or its usefulness in the business of the Borrower
or such Subsidiary or minor statutory liens in favor of landlords;
(v) liens for taxes and governmental charges not yet due or being
contested in good faith and for which appropriate reserves have been
established;
(vi) liens or deposits to obtain any stay or discharge in any legal
or administrative proceeding or liens created by or resulting from any
litigation or legal proceeding which is being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established; provided that the aggregate amount of liabilities of the Company
and its Subsidiaries secured by the liens or deposits permitted under this
clause (vi), including interest and penalties thereon, if any, shall not be in
excess of $10,000,000 at any one time outstanding;
(vii) capitalized leases encumbering only the property so leased;
<PAGE> 33
and
(viii) leasehold interests in property of the Company or any of its
Subsidiaries that is leased or subleased under a lease or sublease not
prohibited by Section 6.3 hereof; and
(ix) liens created by any Subsidiary as security for indebtedness
owing by such Subsidiary to the Company or any other Subsidiary; and
(x) those liens currently outstanding in favor of Bank One,
Indianapolis, N.A. pursuant to that certain First Amended and Restated Loan
and Letter of Credit Agreement between the Borrowers, Bank One, Indianapolis,
N.A. and other parties dated October 25, 1990, such liens to be released
pursuant to Amendment No. 4 to such agreement;
(collectively, "Permitted Encumbrances").
6.2 Guarantees, Loans or Advances. Neither Borrower will be, nor permit
any of its Subsidiaries to be, a guarantor or surety of, or otherwise be
responsible in any manner (whether by agreement to purchase any obligations,
stock, assets, goods or services, or to supply or advance any funds, assets,
goods or services, or otherwise) with respect to any undertaking of any other
Person, or make or permit to exist any loans or advances to any other Person,
except for (i) earnest money deposits made in connection with the acquisition
of property, (ii) extensions of credit or credit accommodations to customers
or vendors made by the Borrowers and their Subsidiaries in the ordinary course
of its business as now conducted, (iii) reasonable salary advances to
employees and other advances to agents and employees for anticipated expenses
to be incurred on behalf of a Borrower or its Subsidiaries in the course of
discharging its assigned duties, (iv) reasonable advances and loans to
employees for expenses incurred related to transfers and relocations of such
employees, (v) extensions of credit or credit accommodations made in
connection with any sales, transfers, conveyances or leases of assets of the
Company and Subsidiaries that are not prohibited pursuant to Section 6.3
hereof, and (vi) other loans, advances and guarantees outstanding at any time
in an aggregate amount not exceeding $1,000,000. The provisions of this
Section 6.2 shall not prohibit loans between the Borrowers and any of their
Subsidiaries or guarantees by the Borrowers or any of their Subsidiaries of
their respective Obligations.
6.3 Mergers, Consolidations, Sales or Acquisitions. Neither Borrower
will, nor permit any of its Subsidiaries to, be a party to any consolidation
or to any merger, unless the surviving entity is one of the Borrowers or, in
the case of a Subsidiary, the Subsidiary, and such Borrower or Subsidiary, as
the case may be, is controlled by its existing shareholder(s) as of the date
of this Agreement. Neither Borrower will sell, transfer, convey or lease, or
permit any of its Subsidiaries to sell, transfer, convey or lease, except in
the ordinary course of business, more than ten percent (10%) of the total
assets of the Company and Subsidiaries on a consolidated basis in any twelve
month period unless such sales are made at arms length for fair market value
and all of the proceeds thereof are reinvested in the Borrowers' business;
provided, however, if such proceeds are not so reinvested within twelve (12)
months of the date of receipt all such proceeds not reinvested must be paid in
reduction of long-term debt (interest-bearing obligations with maturities in
excess of one year), but nothing herein shall apply to cause the Borrower to
<PAGE> 34
incur a prepayment premium or penalty. Neither Borrower will make, or permit
any of its Subsidiaries to make, any acquisition of the assets of, or
investment in, any Person except Persons operating within the lines of
business currently being conducted by either of the Borrowers or any
Subsidiary. Neither Borrower will, or permit any of its Subsidiaries to,
acquire any real or personal property except real or personal property to be
used in the ordinary course of the acquirer's business. Notwithstanding
anything stated in this Section 6.4, the Company may invest in any of the
following from time to time:
(a) Certificates of deposit and banker's acceptances
with final maturities of one year or less issued by U.S. or Canadian
commercial banks having capital and surplus in excess of $100,000,000;
(b) Commercial paper with a minimum rating of A1 or
P1 by Standard & Poors Corporation or Moody's Investors Services,
respectively;
(c) Direct obligations of the United States or
United States agency obligations with a maturity of one year or less;
(d) Money market preferred stock rated A or above by
Standard & Poors Corporation or Moody's Investors Services;
(e) Tax exempt bonds, rated at least A by Standard &
Poors Corporation or by Moody's Investors Services; and
(f) Equity securities listed on National Exchanges to
the extent the aggregate investment in equity securities does not exceed Five
Million Dollars ($5,000,000) at any time; and
(g) Equity or debt securities received with respect
to services rendered by either Borrower or any Subsidiary in the ordinary
course of business, but only in settlement of obligations owed to either
Borrower or any Subsidiary which the obligor could not pay in the ordinary
course of its business.
Notwithstanding anything to the contrary herein, no transaction otherwise
permitted to be conducted by the Borrowers or their Subsidiaries under this
Section 6.4 shall be permitted unless no Default or Event of Default shall
then exist and, after giving effect to the transaction, no Default or Event of
Default shall be occasioned thereby.
6.4 Margin Stock. Neither Borrower will use or cause the proceeds of
the Loans to be used, either directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any margin stock
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended from time to time.
6.5 Other Agreements. Neither Borrower will enter into any material
agreement containing any provision which would be violated or breached in
material respect by the performance of any Secured Obligation.
6.6 Judgments. Neither Borrower will permit, or allow any of its
Subsidiaries to permit, any uninsured judgment or monetary penalty rendered
<PAGE> 35
against it in any judicial or administrative proceeding in an amount in excess
of $1,000,000 to remain unsatisfied for a period in excess of 45 days unless
such judgment or penalty is being contested in good faith by appropriate
proceedings and execution upon such judgment has been stayed, and unless an
appropriate reserve has been established or for which appropriate bonding has
been obtained with respect thereto.
6.7 Amendments to Term Loan Documents. Neither Borrower will suffer or
permit or will permit any Subsidiary to suffer or permit any amendment, change
or modification of, or any waiver of any provision of, or grant any consent in
respect of, any of the Term Loan Documents except with the prior written
consent of the Banks, which consent shall not be unreasonably withheld except
no such consent shall be required to obtain the release or reduction in amount
of any collateral held with respect to the Term Loan Documents.
6.8 Debt. Neither Borrower will incur nor permit to exist, or allow any
Subsidiary to incur or permit to exist, any indebtedness for borrowed money
with a right to payment senior or prior in right to payment of Borrowers'
Obligations hereunder except for indebtedness in connection with Permitted
Encumbrances.
6.9 Performance of Obligations for Credit Enhanced Notes. The Borrowers
shall perform all matters provided by the Indenture and the other Term Loan
Documents, and neither Borrower will assign or delegate to any other Person
any of the Borrower's obligations under the Indenture, the Credit Enhanced
Notes, the Letter of Credit, the Loan Documents or any of the Term Loan
Documents.
SECTION 7
Conditions of Lending
The obligation of the Banks to make any Advance under the Revolving
Credit Loans and the installment loan provided for in Section 3.8 hereof shall
be subject to fulfillment of each of the following conditions precedent:
7.1 No Default. No Default, or Event of Default, shall have occurred
and be continuing, and the representations and warranties of the Borrowers
contained in Section 4 shall be true and correct in all material respects as
of the date of this Agreement and as of the date of each Advance, and as of
the date the installment loan provided for in Section 3.8 hereof is to be
made if requested by the Borrowers except that after the date of this
Agreement, the representations contained in Section 4.4 will be construed so
as to refer to the latest financial statements furnished to the Agent by the
Borrowers pursuant to the requirements of this Agreement.
7.2 Documents to be Furnished at Closing. The Agent shall have
received prior to or contemporaneously with the execution of this Agreement,
the following, each duly executed, to the extent execution is required, and in
form and substance satisfactory to the Agent:
(i) The Loan Documents;
(ii) Copies of the Term Loan Documents;
(iii) A certified copy of Resolutions of the Boards of Directors
<PAGE> 36
of each of the Borrowers authorizing the execution, delivery and performance,
respectively, of the Loan Documents and any other documents provided for in
this Agreement to which either Borrower is a party;
(iv) A certificate of the Secretary or any Assistant Secretary of
each Borrower certifying the names of the officer, officers, employee or
employees authorized to sign, respectively, the Loan Documents and any other
documents provided for in this Agreement to which either Borrower is a party,
together with a sample of the true signature of each such officer or employee.
(v) Confirmation, to include written documentation thereof,
satisfactory to the Agent in its sole discretion, of (a) the payment of all
outstanding obligations of the Borrowers under that certain First Amended and
Restated Loan and Letter of Credit Reimbursement Agreement (the "Reimbursement
Agreement") dated October 25, 1990, as later amended from time to time, by and
between the Borrowers, Bank One, Indianapolis, National Association and others
(the parties hereto expressly acknowledge that the letter of credit issued by
Bank One under the Reimbursement Agreement pursuant to the Indenture shall
remain outstanding until November 30, 1993 and that certain documentary and
standby letters of credit shall remain in place after the date hereof), (b)
the release or agreement by Bank One to release its liens and security
interests encumbering any asset of the Borrowers or any of their Subsidiaries
under or pursuant to such Reimbursement Agreement or otherwise except as
otherwise expressly permitted hereunder, the parties hereto expressly
acknowledging that all liens and security interests granted under the
Indenture shall remain in place, and (c) execution of Amendment Number 4 to
the Reimbursement Agreement.
(vi) A copy of the Articles of Incorporation of each Borrower and
a copy of the By-Laws of each Borrower, certified as complete and correct by
the Secretary or any Assistant Secretary of such Borrower, as appropriate;
(vii) A favorable written opinion of counsel for each of the
Borrowers addressed to the Agent in form and substance and issued by a law
firm acceptable to the Banks to the effect that each of the Borrowers and each
of their respective Subsidiaries, except Unitog De Honduras, S.A., are
corporations duly existing and in good standing under the laws of their
respective jurisdictions of incorporation; each of the Borrowers and each of
their respective Subsidiaries are qualified to do business as a foreign
corporation and are in good standing in every jurisdiction where the failure
to be so qualified would have a material adverse effect on the Company and the
Subsidiaries as a whole; that the Borrowers have full power to execute,
deliver and perform their obligations under this Agreement and the Notes; that
such actions have been duly authorized by all necessary corporate action of
each of the Borrowers, and are not in conflict with the charter or bylaws of
either of the Borrowers; that this Agreement and the Notes evidencing
indebtedness hereunder when executed and delivered by each of the Borrowers
will be the legal and binding obligations of each of the Borrowers, subject to
bankruptcy, general equitable principles and other similar laws affecting the
enforcement of creditors' rights generally; and that such counsel knows of no
litigation or other proceeding or contingent liabilities pending or threatened
against either of the Borrowers of the kind referred to in Section 4.5 hereof;
(viii) An opinion of the General Counsel of the Company stating
that to the best of such counsel's knowledge and belief the execution,
<PAGE> 37
delivery and performance of this Agreement by the Borrowers are not in
conflict with any material agreement binding upon either of the Borrowers; and
to the best of such counsel's knowledge and belief, without undertaking any
specific due diligence with respect thereto, such counsel is not aware of any
material defects in title to any properties owned by either Borrower or any
Subsidiary or any liens on such properties other than Permitted Encumbrances
hereunder.
(ix) A certificate or other evidence satisfactory to the Agent
that the insurance required hereunder to be maintained by the Borrowers and
their Subsidiaries is in full force and effect;
(x) Such other documents as the Agent may reasonably require.
7.3 Documents to be Furnished at Time of Each Advance and Upon
Election for the Installment Loan. The Agent shall have received prior to
making each Advance of proceeds of the Revolving Credit Loans and upon any
election of the Borrowers for the installment loan provided for in Section 3.8
hereof, each duly executed and currently dated, unless waived at the Agent's
discretion, an Application for Advance or a written election for the
installment loan.
SECTION 8
Events of Default
Each of the following shall constitute an Event of Default under this
Agreement:
8.1 Nonpayment of the Loans, Etc. The failure by the Borrowers to pay
when due whether by acceleration or otherwise (i) any amount payable under the
terms of the Notes or (ii) any reimbursement Obligation relative to the Letter
of Credit or the installment note provided for in Section 3.8 hereof or (iii)
any other Obligation when due.
8.2 Nonpayment of Other Loans from Banks. The failure by either
Borrower or any of its Subsidiaries to pay when due, or within any applicable
grace or cure period, any amount payable to the Banks under the terms of any
other promissory note payable to, or agreement with, any Bank, which failure
results in an acceleration of such obligation or a cancellation of such
agreement.
8.3 Nonpayment of Term Loan Obligations. The failure by the Borrowers
to pay when due or within any applicable grace or cure period any amount
payable under the terms of any Term Loan Document, which failure results in an
acceleration of such obligation or a cancellation of such agreement.
8.4 Nonpayment of Other Indebtedness for Borrowed Money. The failure by
either Borrower or any of its Subsidiaries to pay when due, whether by
acceleration or otherwise, or within any applicable grace or cure period, any
other indebtedness for borrowed money or default in the performance or
observance of any obligation or condition with respect to any such other
indebtedness if such nonpayment or default causes such indebtedness to be
accelerated prior to its maturity, unless the Borrower or such Subsidiary is
contesting the existence of such default in good faith and by appropriate
proceedings which prevent foreclosure or levy upon the assets of such Borrower
<PAGE> 38
or such Subsidiary.
8.5 Bankruptcy, Insolvency, Etc. Either Borrower or any of its
Subsidiaries (i)(A) having an order for relief entered with respect to it
under the Federal Bankruptcy Code, (B) not paying or admitting in writing its
inability to pay, its debts generally as they become due, (C) making an
assignment for the benefit of creditors, (D) applying for, seeking, consenting
to or acquiescing in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any substantial part of its
property, (E) instituting any proceeding seeking an order for relief under the
Federal Bankruptcy Code or seeking to adjudicate it a bankrupt or insolvent,
or seeking dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or failing to
file an answer or other pleading denying the material allegations of any such
proceeding filed against it, or (F) either of the Borrowers suspends
operations as presently conducted or discontinues doing business as an ongoing
concern; or (ii) without the application, approval or consent of either
Borrower or any of its Subsidiaries, (A) a receiver, trustee, examiner,
liquidator or similar official being appointed for such Borrower or such
Subsidiary or any substantial part of its property, or (B) a proceeding
described in item (i) being instituted against either Borrower or any
Subsidiary, and such appointment continuing undischarged or such proceeding
continuing undismissed or unstayed for a period of sixty (60) consecutive
days.
8.6 Violation of Negative and Affirmative Covenants and Noncompliance
With Other Provisions of this Agreement or Other Loan Documents. Failure of
either Borrower to comply with or perform any provision of the Loan Documents
(which failure does not constitute an Event of Default under any of the
preceding provisions of this Section 8) and continuance of such failure for
thirty (30) days after notice thereof from the Agent; provided, however, that
(i) if such failure is susceptible to cure within a reasonable time, without
harm or jeopardy of harm to the interests of the Banks by the passage of time,
but not within thirty (30) days, and (ii) if the Borrowers commence cure
within the initial thirty (30) day period and proceed diligently and in good
faith thereafter, the Borrowers shall have such reasonable additional time,
not exceeding sixty (60) additional days, to effect cure.
8.7 Warranties and Representations. Any warranty or representation made
by either Borrower to the Banks or the Agent in any Loan Document, or any
schedule, certificate, financial statement, report, notice, or other writing
required to be provided to the Banks or the Agent hereunder (after reasonable
opportunity, not exceeding ten (10) days, to the Borrowers to provide
explanation) is false or misleading in any material respect when made.
<PAGE> 39
SECTION 9
Effect of Event of Default
9.1 Automatic Acceleration. If any Event of Default described in
Section 8.5 shall occur, the Commitments of the Banks to make, renew or
convert Advances of the Loans and to make the installment loan provided for in
Section 3.8 hereof shall automatically terminate, repayment of the Loans shall
immediately be accelerated and the Notes and the Loans evidenced thereby and
such installment loan if it has been made, and all other Obligations of the
Borrowers to the Banks shall become immediately due and payable, all without
notice, election or action of any kind on the part of the Banks or the Agent
on November 20, 1995.
9.2 Other Remedies. When any other Event of Default has occurred and is
continuing, the Banks may cause the Agent to take any or all of the following
actions and, if so directed by the Banks, the Agent shall take the action
directed:
9.2.1 Acceleration of the Loans. After ten (10) days written
notice thereof, the Banks may terminate the Commitments and the obligation to
make the installment loan provided for in Section 3.8, may accelerate payment
of the Loans and such installment loan if it has been made, may cause NBD to
cause the Trustee to accelerate payment of the Credit Enhanced Notes and to
draw on the Letter of Credit, and may declare the Notes, the installment note
if issued, and all other Obligations due and payable, whereupon repayment of
the Loans and such installment loan if it has been made shall be accelerated
and the Notes and the Loans evidenced thereby, and the reimbursement
Obligation relative to the Letter of Credit when drawn upon or such
installment loan if it has been made, and all other Obligations of the
Borrowers to the Banks shall become immediately due and payable, all without
presentment, demand, protest, further notice, election or any further action
of any kind on the part of the Banks or the Agent.
9.2.2 Remedies Cumulative. All remedies contained in the Loan
Documents or by law afforded shall be cumulative and all shall be available to
the Agent and the Banks until the Obligations have been fully and finally
paid. All provisions hereof unless otherwise expressly terminated by the
provisions hereof or by action of the Banks pursuant hereto shall survive and
remain in full force and effect until all Obligations of the Borrowers have
been paid in full.
SECTION 10
The Agent
10.1 Appointment. United Missouri Bank, N.A., Kansas City, Missouri is
hereby appointed Agent hereunder and under the other Loan Documents, and each
of the Banks irrevocably authorizes the Agent to act as the Agent for such
Bank. The Agent agrees to act as such upon the express conditions contained
in this Section 10. The duties of the Agent shall be administrative in
nature, and the Agent shall not have a fiduciary relationship in respect of
any Bank by reason of this Agreement.
10.2 Powers. The Agent shall have and may exercise such powers
hereunder and under the other Loan Documents as are specifically delegated to
the Agent by the terms hereof and thereby, together with such powers as are
reasonably incidental thereto. The Agent shall have no implied duties to the
<PAGE> 40
Banks, or any obligation to the Banks to take any action hereunder or
thereunder except any action specifically provided by this Agreement or the
other Loan Documents to be taken by the Agent.
10.3 General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Banks or any Bank for any
action taken or omitted to be taken by it or them hereunder or under the Loan
Documents or in connection herewith or therewith, except for its or their own
gross negligence or willful misconduct.
10.4 No Responsibility for Loans, Recitals, Etc. The Agent shall not be
responsible to the Banks for any recitals, reports, statements, warranties or
representations herein or in the other Loan Documents or any Loans hereunder
or be bound to ascertain or inquire as to the performance or observance of any
of the terms of this Agreement or the other Loan Documents.
10.5 Right to Indemnity. The Agent shall be fully justified in failing
or refusing to take any action hereunder or under the other Loan Documents
unless it shall first be indemnified to its satisfaction by the Banks pro rata
against any and all liability and expense which may be incurred by it or by
reason of taking or continuing to take any such action.
10.6 Action on Instructions of Banks. The Agent shall, in all cases,
act or refrain from acting, and be fully protected in acting or refraining
from acting, hereunder or under the other Loan Documents in accordance with
written instructions signed by the Banks and such instructions and any action
taken or failure to act pursuant thereto shall be binding on all of the Banks
and on all holders of the Notes.
10.7 Employment of Agents and Counsel. The Agent may execute any of its
duties as Agent hereunder by or through employees, agents, and
attorneys-in-fact and shall not be answerable to the Banks, except as to money
or security received by it or its authorized agents, for the default or
misconduct of any such agents or attorney-in-fact selected by it with
reasonable care. The Agent shall be entitled to advice of counsel concerning
all matters pertaining to the agency hereby created and its duties hereunder.
10.8 Reliance on Documents. The Agent shall be entitled to rely upon
any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and
believed to have been signed or sent by the proper Person and, with respect to
legal matters, upon the opinion of counsel selected by the Agent.
10.9 May Treat Payee as Owner. The Agent may deem and treat the payee
of any Note as the owner thereof for all purposes hereof unless and until a
written notice of the assignment or transfer thereof shall have been filed
with the Agent. Any request, authority or consent of any Person, who at the
time of making such request or giving such authority or consent is the holder
of any Note, shall be conclusive and binding on any subsequent holder,
transferee or assignee of such Note or of any Note or Notes issued in exchange
therefor.
10.10 Agent's Reimbursement. Each Bank agrees to reimburse the Agent its
Pro Rata Share of any expense, not reimbursed by the Borrowers, incurred by
the Agent on behalf of the Banks in connection with the administration and
<PAGE> 41
enforcement of the Loan Documents.
10.11 Rights as a Lender. With respect to its obligations to make Loans
hereunder, Loans made by it and the Notes issued to it, the Agent shall have
the same rights and powers hereunder as any Bank and may exercise the same as
though it were not the Agent, and the term "Bank" or "Banks" shall, unless the
context otherwise indicates, include the Agent in its individual capacity.
The Agent may accept deposits from, lend money to, and generally engage in
any kind of banking or trust business with the Borrowers and their
Subsidiaries as if it were not the Agent.
10.12 Bank Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on the financial statements referred to in Section 4.4, and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent
or any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking
or not taking action under this Agreement or the other Loan Documents. The
Agent makes no representation or warranty of any kind with respect to the
validity, enforceability, legality or sufficiency of any Loan Document or any
of the other documents referred to or contemplated herein or therein.
10.13 Successor Agent. The Agent may resign at any time by giving
written notice to the Banks and the Borrowers and may be removed at any time
with or without cause by unanimous vote of the Banks. Upon any such
resignation or removal, the Banks shall have the right to appoint, on behalf
of the Borrowers and the Banks, a successor Agent, subject to the approval of
the Borrowers and UMB. If no successor Agent shall have been so appointed by
the Banks and shall have accepted such appointment within thirty (30) days
after the retiring Agent's giving notice of resignation, then: (i) if an
amount of the Loans is then payable to UMB which is greater than any amount
payable to any other Bank, UMB may appoint, on behalf of the Borrowers and the
Banks, a successor Agent, subject to the approval of the Borrowers; or (ii) if
the amount of the Loans then payable to UMB is not greater than the amount
then payable to any other Bank, the Borrowers may appoint, on behalf of the
Borrowers and the Bank, a successor Agent, subject to the approval of UMB.
UMB shall remain as Agent until such time as a successor Agent is approved by
the necessary parties and accepts such appointment. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Section 10
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Agent hereunder.
10.14 Distribution of Information. The Borrowers authorize the Agent,
and the Agent shall discuss with and furnish to the Banks all financial
statements, audit reports, notices and other information pertaining to the
Borrowers and their Subsidiaries whether such information was provided by the
Borrowers or prepared or obtained by the Agent. Neither the Agent nor any of
its employees, officers, directors or agents makes any representation or
warranty, regarding any audit reports or other analyses of the Borrowers' or
<PAGE> 42
their Subsidiaries' condition which the Agent may distribute, whether such
information was provided by the Borrowers or prepared or obtained by the
Agent, nor shall the Agent nor any of its employees, officers, directors or
agents be liable to any Person receiving a copy of such reports of analyses
for any inaccuracy or omission contained in or relating thereto.
10.15 Application of Proceeds. Notwithstanding any contrary provision of
any other Loan Document, after the occurrence of an Event of Default and
acceleration of the Obligations, collections on the Loans, shall be applied by
the Agent to payment of the Obligations in the following order unless a court
of competent jurisdiction shall otherwise direct:
(a) FIRST, to payment of all costs and expenses of the Agent and
the Banks incurred in connection with the preservation, collection and
enforcement of the Obligations;
(b) SECOND, to the payment of that portion of the Obligations
constituting accrued and unpaid interest and fees, pro rata between the Banks
in accordance with their Pro Rata Shares;
(c) THIRD, to payment of the principal amount of the Obligations,
pro rata between the Banks in accordance with their Pro Rata Share;
(d) FOURTH, to payment of any other Obligations not referred to
above to the Agent or the Banks as may be properly payable; and
(e) FIFTH, the balance, if any, after all of the Obligations have
been satisfied, shall be deposited by the Agent into the Company's general
operating account with UMB.
10.16 Agent's Fee. The Borrowers agree to pay to the Agent, solely for
the benefit of the Agent and not to be shared by the Banks, an annual fee of
Twelve Thousand Five Hundred Dollars ($12,500) to be unconditionally payable
on December 1, 1993 and conditionally thereafter on each December 1 while this
Agreement continues in effect if the average outstanding amount of all Loans
during the twelve (12) months immediately preceding the December 1 on which
payment of the fee is due equals or exceeds Five Million Dollars ($5,000,000).
10.17 Issues Requiring Decisions by Banks. All issues which require a
decision by the Banks hereunder must be approved by all of the Banks;
provided, however, if all of the Banks cannot agree on any issue requiring
their agreement within ten (10) days after the Agent has given written notice
to the Banks of the issue requiring a decision, then, if the Banks then
holding a majority in amount of outstanding principal of the Loans agree on
the issue in question when such Banks include the Agent, the Agent shall have
the right, but shall not be obligated, to decide the issue for all of the
Banks and proceed thereafter accordingly, including without limitation the
right to sign amendments, modifications, waivers and consents, and shall have
no liability in connection therewith to the Banks except in the event of the
Agent's gross negligence or willful misconduct. Notwithstanding the
foregoing, all of the Banks must approve any decision in respect to (i) the
amount or due dates of the Loans or the installment loan provided for in
Section 3.8 hereof, (ii) the interest and fees to be paid by Borrowers
hereunder, (iii) the financial covenants set forth in Section 5.7 hereof, or
(iv) the negative pledge contained in Section 6.1 hereof. The Commitment of
<PAGE> 43
any Bank may not be increased without its consent.
In the event Borrowers desire to issue industrial revenue bonds for the
acquisition or construction of facilities to be used in their business
operations, the Banks hereby authorize Agent, at its sole discretion, to waive
any provisions hereof for any such industrial revenue bonds up to the amount
of Seven Million Dollars ($7,000,000) during any rolling three (3) year period
provided that the sole security for the repayment of such industrial revenue
bond is the Borrowers' interest in the facility acquired or constructed
thereby.
SECTION 11
Ratable Payments
In case at any time any Bank, whether by setoff or otherwise, has payment
made to it upon its Notes in a greater proportion than received by any other
Bank under its Notes, or receives any other payment on the Obligations in
greater proportion than such Bank is entitled to receive, such Bank so
receiving such greater proportionate payment agrees to promptly purchase a
portion of the Obligations held by the other Banks so that after such purchase
each Bank will hold its ratable proportion of the Loans.
SECTION 12
General Provisions
12.1 Waiver; Amendments. No delay on the part of any Bank or the Agent,
or any holder of the Notes in the exercise of any right, power or remedy under
the Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise by any of them of any right, power or remedy preclude any
other or further exercise thereof, or the exercise of any other right, power
or remedy. No amendment, modification or waiver of, or consent or decision
with respect to any of the provisions of any Loan Document or otherwise of the
Obligations shall be effective unless such amendment, modification, waiver or
consent is in writing and signed by the Banks, except as otherwise provided in
Section 10.17 hereof. No amendment of any provision of this Agreement
relating to the Agent shall be effective without the written consent of the
Agent.
12.2 Notices. Any notice hereunder to the Borrowers or the Banks shall
be in writing and, if delivered by hand shall be deemed to have been given
when delivered and, if mailed, shall be deemed to have been given five (5)
days after the date when sent by registered or certified mail, postage
prepaid, and addressed to a Borrower, the Agent, or a Bank (or other holder)
at its address shown below, or at such other address as such party may, by
written notice to the other parties to this Agreement, have designated as its
address for such purpose. The addresses referred to are as follows:
<PAGE> 44
<TABLE>
<S> <C>
As to UMB United Missouri Bank, N.A.
or the Agent: 1010 Grand
P.O. Box 419226
Kansas City, Missouri 64141-6226
Attention: Commercial Loan Department
With a copy to: Norman E. Fretwell, Esquire
Watson, Ess, Marshall & Enggas
1010 Grand, Suite 500
Kansas City, Missouri 64106-2271
As to Harris: Harris Trust and Savings Bank
111 West Monroe Street
P.O. Box 755
Chicago, Illinois 60690
Attention: Mr. Len Meyer and
Ms. Suzanne Halpin
As to NBD: NBD Bank, N.A.
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Manager, Commercial Loan Department
As to Company c/o Unitog Company
or Rental: 101 West 11th Street
Kansas City, Missouri 64105
Attention: President
With a copy to: Robert Barnes, Esquire
c/o Unitog Company
101 West 11th Street
Kansas City, Missouri 64105.
</TABLE>
12.3 Costs, Expenses and Taxes. Each Borrower agrees to pay or
reimburse the Agent or Banks, as the case may be, on demand for all reasonable
out-of-pocket costs and expenses (including, without limitation, reasonable
attorneys' fees and legal expenses) incurred by: (i) the Agent in connection
with the negotiation, preparation and documentation of the Loan Documents and
the documentation and closing of the Loans; and (ii) the Agent and/or Banks in
connection with the enforcement of the Loan Documents, and such other
instruments or documents as may be given as an incident to this Agreement or
the Obligations following a Default or Event of Default. All Obligations
provided for in this Section shall survive any termination of this Agreement.
12.4 Captions. Section captions used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
12.5 Governing Law. The Loan Documents and the Letter of Credit are
made under and will be governed by the laws of the State of Missouri and the
State of Michigan, respectively, (i) except to the extent that conflict of law
rules of Missouri or Michigan, as the case may be, would require the
substantive rules of law of any other jurisdiction to be applied and (ii)
except to the extent that the Letter of Credit is subject to the Uniform
Customs and Practices for Documentary Credits (1983 Revision) International
Chamber of Commerce Publication No. 400.
<PAGE> 45
12.6 Successors and Assigns. This Agreement shall be binding upon the
Borrowers, the Banks and the Agent and their respective successors and
assigns, and shall inure to the benefit of the Borrowers and the Banks, the
Agent and the respective successors and assigns of their entire interests,
except that neither Borrower shall have the right to assign its rights under
this Agreement. Each Bank may assign its rights and obligations to any other
lender subject to the prior approval of the Company provided any such
assignment is in an amount of at least Ten Million Dollars ($10,000,000);
provided, however, UMB, so long as it remains the Agent, may not assign or
otherwise participate any part of its rights and obligations hereunder except
for participations in any amount to affiliates of UMB.
12.7 Counterparts. This Agreement may be executed in any number of
counterparts, all of which when taken together shall constitute but one
Agreement and any of the parties hereto may execute this Agreement by signing
any such counterpart. This Agreement shall be effective when it has been
executed by the Borrowers, the Banks and the Agent and each party has notified
the Agent by telex or telephone that it has taken such action.
12.8 Contribution, Etc. Each of the Borrowers acknowledges that the
other Borrower is part of a Consolidated group of companies and that its
financial strength is interdependent upon the financial strength of the
Consolidated group as a whole. Therefore, each Borrower acknowledges and
agrees that the Obligations are supported by adequate consideration,
regardless of the amount of Advances or other benefits actually received by
such Borrower under the Loan Documents and the Term Loan Documents. In the
event either Borrower makes any payment under the Loan Documents or the Term
Loan Documents which exceeds the amount of funds actually received, directly
or indirectly, by such Borrower thereunder, such Borrower shall be entitled to
contribution and reimbursement from the other Borrower, pro rata, on the basis
of funds actually received and shall be entitled to recover such amounts by
available legal means. After (but only after) full payment of the Obligations
and until such recovery is made, such Borrower shall be deemed subrogated to
the rights and interests of the Banks under the Loan Documents. Such rights
of contribution, reimbursement and subrogation shall be and remain at all
times junior, subordinate, inferior and subject to the right and interests of
the Banks under the Loan Documents and shall not affect or impair in any way
the joint, several, personal and unconditional Obligation of each Borrower to
fully pay or perform each of the Obligations.
12.9 Several Obligations. The respective obligations of the Banks
hereunder are several and not joint, and no Bank shall be the partner or agent
of the other (except to the extent to which the Agent is authorized to act as
such). The failure of any Bank to perform any of its obligations hereunder
shall not relieve any other Bank from any of its obligations hereunder. All
Obligations of the Borrowers are joint and several.
12.10 Indemnification. Except as otherwise provided herein, the
Borrowers jointly and severally agree to indemnify the Agent and each Bank,
and each successor and assign (including any authorized purchaser of a
participation in any of the Obligations), its directors, officers, employees,
attorneys and agents, on demand and to the fullest extent permitted by law
against any and all liabilities, damages, judgments, suits and claims (and the
reasonable costs and legal fees related thereto) of any kind or nature
whatsoever imposed on, incurred by or asserted against the Agent or any of the
<PAGE> 46
Banks arising under or in connection with the Loan Documents; provided,
however, the Borrowers will not be obligated to indemnify the Agent or any
Bank hereunder to the extent any claims or liabilities result from the Agent's
or such Bank's negligence or willful misconduct. The Obligations of the
Borrowers under this Section shall survive the termination of this Agreement.
12.11 Incorporation by Reference. Each of the other Loan Documents is
hereby made subject to all of the terms, covenants, conditions, obligations,
stipulations and agreements contained in this Agreement to the same extent and
effect as if fully set forth therein, and this Agreement is hereby made
subject to all of the terms, covenants, conditions, obligations, stipulations
and agreements contained in the other Loan Documents to the same extent and
effect as if fully set forth herein. All Exhibits hereto are incorporated
herein by reference. All representations and warranties of the Borrowers
contained herein in Section 4 shall survive the delivery of the Letter of
Credit and have been or will be relied upon by the Agent and the Banks
notwithstanding any investigation made by or on behalf of them.
12.12 Right of Set-Off. Upon the occurrence and during the continuance
of any Event of Default hereunder, the Banks are hereby authorized at any time
and from time to time, without notice to the Borrowers (any requirement for
such notice being expressly waived by the Borrowers) to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by the Borrowers to or
for the credit or the account of the Banks against any and all of the
Obligations of the Borrowers now or hereafter existing under this Agreement,
irrespective of whether or not the Banks shall have made any demand hereunder
and although such obligations may be contingent and unmatured.
12.13 Interest Rate Limitation. Notwithstanding any provisions of this
Agreement or any of the Loan Documents, in no event shall the amount of
interest paid or agreed to be paid by the Borrowers exceed an amount computed
at the highest rate of interest permissible under applicable law. If, from
any circumstances whatsoever, fulfillment of any provision of this Agreement
or any Loan Document at the time performance of such provision shall be due,
shall involve exceeding the interest rate limitation validly prescribed by law
which a court of competent jurisdiction may deem applicable hereto, then, ipso
facto, the Obligations to be fulfilled shall be reduced to an amount computed
at the highest rate of interest permissible under applicable law, and if for
any reason whatsoever the Banks shall ever receive as interest an amount which
would be deemed unlawful under such applicable law, such interest shall be
automatically applied to the payment of principal of the amounts outstanding
hereunder (whether or not then due and payable) and not to the payment of
interest, or shall be refunded to the Borrowers if such principal and all
other obligations of the Borrowers to the Banks have been paid in full.
12.14 Severability. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of
such provision in any other jurisdiction.
<PAGE> 47
12.15 Provisions Regarding Indenture.
(a) The parties acknowledge that Section 2.10 of the Indenture
requires, among other things, the consent of the Credit Bank (as defined in
the Indenture) and Harris to the release of certain collateral held to secure
the Credit Enhanced Notes. Each of the Banks hereby absolutely,
unconditionally and irrevocably consents to the release of all collateral held
to secure the Credit Enhanced Notes and each Bank agrees to promptly execute
and deliver upon the request of the Borrowers at any time all such documents
and instruments as may be necessary or appropriate (as determined in the
reasonable discretion of the Borrowers) to evidence to the satisfaction of any
Person, including, without limitation, the Trustee, the consent of the Banks
to such release and to effect such release.
(b) The parties acknowledge that Section 2.10 of the Indenture
provides a mechanism by which the Borrowers can grant Additional Collateral
(as defined in the Indenture) to secure the Borrowers' obligations under this
Agreement and under the Indenture in order to obtain the release of other
collateral. Each of the Banks hereby absolutely, unconditionally and
irrevocably waives all rights with respect to any Additional Collateral
(whether now existing or hereafter arising) to the extent granted under the
terms of the Indenture and agrees to promptly execute and deliver all such
documents and instruments as may be necessary or appropriate (as determined in
the reasonable discretion of the Borrowers) to evidence to the satisfaction of
any Person, including, without limitation, the Trustee, the release by the
Banks of the Additional Collateral.
(c) Each of the Banks hereby absolutely, unconditionally and
irrevocably waives its rights to approve any Mortgages as provided in the
second paragraph of Section 2.10 of the Indenture, and each Bank agrees to
execute and deliver upon the request of the Borrowers at any time all such
documents and instruments as may be necessary or appropriate (as determined in
the reasonable discretion of the Borrowers) to evidence to the satisfaction of
any Person, including, without limitation, the Trustee, such waiver.
(d) In the event that any of the Banks shall at any time obtain or
receive any mortgage, deed of trust, security interest or other interest of
any type in or to any of the properties or assets of any Borrower or
Subsidiary of any Borrower by virtue of any Term Loan Documents then (i) such
mortgage, deed of trust, security interest or other interest shall be, without
any further action on the part of any Bank, the Borrowers or any Subsidiary of
Borrower, automatically and unconditionally canceled, terminated, released and
rendered void; and (ii) each Bank shall promptly execute and deliver to the
Borrowers such documents and instruments as may be necessary or appropriate
(as determined in the Buyer's reasonable discretion) to evidence such
cancellation, termination and release.
(e) Upon any payment in full of the Credit Enhanced Notes, whether
by a draw on the Letter of Credit or from Available Moneys or otherwise, the
Credit Enhanced Notes shall be canceled and marked paid and each Bank agrees
that it will have no right of subrogation or substitution with respect to the
Credit Enhanced Notes or any collateral or assets held in connection
therewith, and the Banks shall not be deemed a purchaser of a participation
interest in the Credit Enhanced Notes.
<PAGE> 48
(f) Anything in this Agreement to the contrary notwithstanding,
the terms of this Section 12.15 shall survive the termination or expiration of
this Agreement for any reason, and all obligations of the Banks under this
Section 12.15 shall be absolute, unconditional and irrevocable obligations and
the Banks may not refuse to perform any such obligation for any reason or in
any circumstance, including, without limitation, the occurrence or
continuation of a Default, Event of Default, acceleration of the Loans or
cancellation of the Obligations.
[THIS SECTION INTENTIONALLY LEFT BLANK]
12.16 Statutory Statement. (Mo. Rev. Stat. e432.045)
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
FROM ENFORCING PAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH
DEBT ARE NOT ENFORCEABLE. TO PROTECT BORROWERS AND BANKS FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING AND THE DOCUMENTS REFERRED TO HEREIN,
WHICH ARE THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US,
EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers duly authorized as of the date first above
written.
UNITOG COMPANY UNITOG RENTAL SERVICES, INC.
By:/s/ J. Craig Peterson By:/s/ J. Craig Peterson
J. Craig Peterson, Chief J. Craig Peterson, Chief
Financial Officer Financial Officer
UNITED MISSOURI BANK, N.A. HARRIS TRUST AND SAVINGS BANK
Individually and as Agent
By:/s/ A. Kemper By:/s/ Len E. Meyer
Vice President
NBD BANK, N.A.
BY:/S/ J. J. CSERNITS
<PAGE> 49
AMENDMENT NO. 1
to LOAN AND LETTER OF CREDIT
REIMBURSEMENT AGREEMENT
This Amendment No. 1 is made as of the 29th day of December, 1994 among
Unitog Company, a Delaware corporation (the "Company"), Unitog Rental
Services, Inc., a California corporation ("Rental") (Company and Rental being
sometimes collectively referred to herein as the "Borrowers" or individually
as a "Borrower"), UMB Bank, n. a., Kansas City, Missouri, a national banking
association ("UMB"), Harris Trust and Savings Bank, Chicago, Illinois, an
Illinois banking corporation ("Harris"), NBD Bank, n.a., Detroit, Michigan, a
national banking association ("NBD") (UMB, Harris and NBD being sometimes
collectively referred to herein as the "Banks" or individually as a "Bank")
and UMB Bank, n.a., Kansas City, Missouri, a national banking association, as
agent for the Banks herein (in such capacity, the "Agent").
RECITALS
WHEREAS, as of September 10, 1993, the Borrowers, the Banks and the Agent
entered into a Loan and Letter of Credit Reimbursement Agreement (the "Loan
Agreement"), pursuant to which the Banks provided to the Borrowers revolving
loans of up to Thirty-Five Million Dollars ($35,000,000) and issued the Letter
of Credit and provided certain other accommodations.
WHEREAS, the Letter of Credit was issued to Peoples Bank & Trust Company
as trustee (the "Trustee") under a Trust Indenture (the "Indenture") dated as
of December 1, 1988, for the purpose of securing certain notes (the "Notes")
issued by the Borrowers pursuant to the Indenture.
WHEREAS, the Trustee and the holders of the Notes have agreed to waive
the requirement that the Notes be secured by the Letter of Credit, as
specifically set forth in Amendment No. 2 to Trust Indenture, dated December
29, 1994.
WHEREAS, the parties desire to amend the Loan Agreement to reflect the
elimination of the Letter of Credit and to reflect certain other changes.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, the parties mutually agree as follows:
1. Consent to the Amendment to Trust Indenture. Each of the Banks
consents to the execution by the Borrowers of Amendment No. 2 to Trust
Indenture, dated as of December 29, 1994, among the Borrowers and the Trustee.
2. Amendment to Section 3 of the Loan Agreement. Section 3 of the Loan
Agreement is deleted in its entirety and replaced with the following:
"Section 3
Cancellation of the Letter of Credit; Installment Loan
3.1 Cancellation of the Letter of Credit. Each of the Banks consents to
the cancellation and return of the Letter of Credit and agrees that all
obligations of the Borrowers with respect to the Letter of Credit are
terminated including, without limitation, the obligation of the Borrowers to
<PAGE> 50
pay any commission in connection with the issuance or maintenance of the
Letter of Credit.
3.2 Installment Loan. If the Borrowers are in full and complete
compliance with the terms of this Agreement, upon the written election of the
Borrowers to the Agent, the Banks agree to loan to the Borrowers an amount
equal to the then outstanding principal balance of the Credit Enhanced Notes,
plus accrued interest thereon to the date of redemption, which loan shall be
used by the Borrowers for the sole purpose of redeeming the Credit Enhanced
Notes in full. Such loan shall be an installment loan obligation payable over
a term of four (4) years in equal quarterly payments of principal calculated
on a seven (7) year amortization of such principal amount and a final
principal payment in the amount of the remaining outstanding principal loan
amount. Such installment loan shall bear interest payable quarterly in
arrears on the same date as each principal payment is due and at a rate per
annum equal to the 3-month LIBOR rate, as reported in the Wall Street Journal,
plus the Applicable Margin for LIBOR Advances plus 25 basis points, adjusted
each ninety (90) days. Upon receipt by the Agent of notice of any such
election by the Borrowers, the Agent shall immediately notify the Banks of
such election. Three (3) Banking Days after receipt of such notification,
Harris and NBD shall each transfer to the Agent by wire transfer or deposit to
any correspondent account which Agent may maintain with such Bank an amount
equal to thirty percent (30%) of the principal amount of the loan as provided
above in this Section 3.2 and UMB shall immediately transfer forty percent
(40%) of such amount to the Agent. Upon receipt by the Agent of notes
executed by the Borrowers in the form of Exhibit E attached hereto payable to
each of the Banks in each Bank's Pro Rata Share of such loan, the Agent shall
disburse the amount of the loan to the Borrowers by depositing the same in the
Company's account at UMB, and the Borrowers hereby authorize the disbursement
of the loan in such manner. The Agent shall handle the notes in the form of
Exhibit E attached hereto and all collections thereon in the same manner as
provided in this Agreement for collections on Revolving Credit Loans as
respects the Banks."
3. References to Installment Loan. Each reference in the Loan Agreement
to the installment loan provided for in Section 3.8 shall be amended to mean
and refer to the installment loan provided for in Section 3.2 of the Loan
Agreement.
4. Amendment to Section 9.2.1. Section 9.2.1 of the Loan Agreement is
amended by deleting therefrom the phrase "may cause NBD to cause the Trustee
to accelerate payment of the Credit Enhanced Notes and to draw on the Letter
of Credit."
5. Amendment to Exhibit E. Exhibit E to the Loan Agreement is deleted
in its entirety and replaced by Exhibit E, attached hereto and incorporated
herein by reference.
6. Representations and Warranties. The Borrowers hereby represent and
warrant that:
(a) The representations and warranties contained in the Loan
Agreement and in each certificate or document furnished by the Borrowers and
delivered therewith are true and correct in all material respects on and as of
the date hereof as though made on and as of the date hereof;
2
<PAGE> 51
(b) No Event of Default, and to the Borrower's knowledge no event
which with the passage of time or the giving of notice or both could become an
Event of Default, exist on the date hereof, and no offsets or defenses exist
against their obligations under the Loan Agreement or the documents delivered
in connection therewith;
(c) This Amendment has been duly authorized, executed and delivered so
as to constitute the legal, valid and binding obligation of the Borrowers,
enforceable in accordance with its terms, except as the same may be limited by
applicable bankruptcy insolvency, reorganization, moratorium or other similar
laws affecting creditor's rights generally and general principles of equity;
(d) The execution, delivery and performance of this Amendment will not
violate any applicable provision of law or judgment, order or regulation of any
court or of any public or governmental agency or authority nor conflict with or
constitute a breach of or a default under any instrument to which the Borrowers
are a party or by which the Borrowers or the Borrower's properties is bound nor
result in the creation of any lien, charge or encumbrance upon any assets of
the Borrowers.
7. Miscellaneous.
(a) The laws of the State of Missouri shall govern this Amendment.
(b) This Amendment shall be binding on the parties hereto and their
respective successors and assigns, and shall inure to the benefit of the
parties hereto.
(c) This Amendment may be executed in any number of counterparts, all
of which when taken together shall constitute but one agreement and any of the
parties hereto may execute this Amendment by signing any such counterpart.
(d) Section captions used in this Amendment are for convenience only
and shall not affect the construction of this Amendment.
(e) Capitalized terms used herein and not specifically herein defined
shall have the meanings ascribed in the Loan Agreement.
3
<PAGE> 52
IN WITNESS WHEREOF, the Borrowers, the Banks and the Agent have caused
this Amendment No. 1 to be executed by their respective officers duly
authorized as of the date first above written.
UNITOG COMPANY
By:/s/ J. Craig Peterson
J. Craig Peterson, Senior Vice President
Finance & Administration & Chief
Financial Officer
UNITOG RENTAL SERVICES, INC.
By:/s/ J. Craig Peterson
J. Craig Peterson, Senior Vice President
Finance & Administration & Chief
Financial Officer
UMB BANK, N.A.
Individually and as Agent
By:/s/ David A. Proffitt
Senior Vice President
NBD BANK, N.A.
By:/s/ Thomas A. Levasseur
Vice President
HARRIS TRUST & SAVINGS BANK
By:/s/ Len E. Meyer
Vice President
4
<PAGE> 53
EXHIBIT E
$_______________ Kansas City, Missouri
and Interest ___________, 199__
FOR VALUE RECEIVED, the undersigned each (the "undersigned" means each
maker and each jointly and severally agrees to all the provisions hereunder)
promise(s) to pay to the order of __________________________ (hereinafter
called "Bank"), at its main office, the principal sum of ____________________
Dollars in quarterly installments of principal payable as follows:
$______________ on the _____________ day of _________________________,
19___ and $_____________ on the ______________ day of each succeeding quarter
thereafter until _________________, on which date all unpaid principal and
accrued interest shall be due and payable in full. Interest on the unpaid
principal balance shall accrue from the date hereof at the rate as provided in
that certain Loan and Letter of Credit Reimbursement Agreement ("Agreement")
between undersigned, the Bank and others dated September 10, 1993, the
provisions of which are incorporated herein by reference. Accrued interest
shall be due and payable on each date a principal payment is due. If any of
said principal installments or accrued interest thereon is not paid when due,
then all remaining installments plus accrued interest thereon shall, subject
to the terms of the Agreement, immediately become due and payable. Unless
provided in the Agreement to the contrary, each payment shall be applied first
to payment of accrued interest, and then to reduction of the principal sum.
This note shall bear interest after maturity at an annual rate two percent
(2%) above the rate otherwise then in affect until paid in full or cured.
This note may be prepaid in whole or in part at any time without premium or
penalty.
Upon the occurrence of any of the events of default defined in Section 8
of the Agreement, then this note and all other obligations of each of the
undersigned to the holder shall, subject to the provisions of Section 9 of the
Agreement, immediately become due and payable in full in accordance with the
terms of said Agreement.
To the extent (if any) permitted by applicable law, the undersigned
agrees to pay all expenses of the holder in collecting this note, including
reasonable attorney's fees. the interpretation of this instrument and the
rights and remedies of the parties hereto shall be governed by the law of
Missouri. The undersigned warrant(s) and represent(s) that all loan proceeds
of the indebtedness evidenced hereby are to be used exclusively for business
purposes of the undersigned.
Demand for payment, notice of nonpayment, protest, notice of dishonor,
diligence and suit are hereby waived by all parties liable hereon.
Any failure by the holder hereof to exercise any right hereunder shall
not be construed as a waiver of the right to exercise the same or any other
right at any other time and from time to time thereafter.
5
<PAGE> 54
UNITOG COMPANY
By:________________________________
Title:_____________________________
UNITOG RENTAL SERVICES, INC.
By:________________________________
Title:_____________________________
6
<PAGE> 55
AMENDMENT NO. 2
TO LOAN AND LETTER OF CREDIT
REIMBURSEMENT AGREEMENT
THIS AMENDMENT NO. 2 ("Amendment") is made as of the 9th day of
November, 1995, among UNITOG COMPANY, a Delaware corporation (the "Company"),
UNITOG RENTAL SERVICES, INC., a California corporation ("Rental") (Company and
Rental being sometimes collectively referred to herein as the "Borrowers" or
individually as a "Borrower"), UMB Bank, n.a., Kansas City, Missouri, a
national banking association HARRIS TRUST AND SAVINGS BANK, Chicago, Illinois,
an Illinois banking corporation ("Harris"), NBD BANK, Detroit, Michigan, a
Michigan banking corporation ("NBD") (UMB, Harris and NBD being sometimes
collectively referred to herein as the "Banks" or individually as a 'Bank") and
UMB Bank, n.a., Kansas City, Missouri, a national banking association, as agent
for the Banks herein (in such capacity, the "Agent").
RECITALS
WHEREAS, the Borrowers, the Banks and the Agent entered into a Loan and
Letter of Credit Reimbursement Agreement (the "Agreement") dated September 10,
1993, the terms of which were modified and amended by Amendment No. 1 to Loan
and Letter of Credit Reimbursement Agreement "Amendment No. 1") dated December
29, 1994 executed by the Borrowers, the Banks and the Agent (the Agreement, as
modified and amended by Amendment No. 1, herein the "Loan Agreement"); and
WHEREAS, pursuant to the Loan Agreement the Banks provided to the
Borrowers revolving loans of up to Thirty-Five Million Dollars ($35,000,000)
and an installment loan; and
WHEREAS, the parties desire to amend the Loan Agreement to allow for
revolving loans of up to Fifty Million Dollars ($50,000,000), to delete the
provision for an installment loan, and to make certain other changes.
NOW, THEREFORE, in consideration of the promises and the mutual
promises contained herein, the parties mutually agree as follows:
1. Amendment to Section 1.2 of the Loan Agreement. Section 1.2
of the Loan Agreement is amended as follows:
(a) The definition of "Applicable Margin" is amended by
inserting the following at the end thereof:
<PAGE> 56
"Except as to the Optional Rate Portion of any loan or Loans then outstanding.
effective December 1, 1995, the Applicable Margin and the Revolving Credit
Commitment Fee shall be determined by reference to the following table:
<TABLE>
<CAPTION>
Applicable Applicable Revolving
Margin for Margin for Credit
Capitalization Prime Rate LIBOR Commitment
Ratio Advances Advances Fee
------------ -------- -------- ---------
<S> <C> <C> <C>
Less than or (75) bp 35 bp 12.5 bp
equal to 35%
Greater than (50) bp 50 bp 18.75 bp
35% and up to and
equal to 50%
Greater than 0 bp 75 bp 25 bp
50% and up to and
equal to 55%
Greater than 0 bp 100 bp 25 bp
55% and up to and
equal to 60%
</TABLE>
As to the Optional Rate Portion of any Loan or Loans outstanding on December 1,
1995, after the expiration of the LIBOR interest Period for such Optional Rate
Portion, the Applicable Margin shall be determined by reference to the
foregoing table.
(b) The amounts of the revolving credit commitments of the Banks set forth
in the definition of "Revolving Credit Commitments" are deleted and replaced
with the following: (i) Twenty Million Dollars ($20,000,000), in the case of
UMB, and (ii) Fifteen Million Dollars ($15,000,000), in the case of Harris, and
(iii) Fifteen Million Dollars ($15,000,000) in, the case of NBD.
(c) The following defined terms are inserted:
"Federal Funds Rate" means, for any day, an interest rate per annum
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or if such rate is not so published for any day which
is a Business Day, the average of the quotations at approximately 10 a.m.
(Kansas City, Missouri time) on such day of such transactions received by the
Agent from three Federal funds brokers of recognized standing selected by the
Agent in its sole discretion.
<PAGE> 57
"Industrial Development Bonds" shall mean any bond issued by or on
behalf of a political subdivision the interest on which is excludable from
gross income for federal income tax purposes on the date such obligations were
issued.
2. Amendment of Section 2.2.2(b). Section 2.2.2(b) of the Loan
Agreement is amended to delete the aggregate limitation on the amount of
documentary trade and standby letters of credit that may be outstanding at any
time and to change the manner in which the letter of credit fees payable by
Borrowers is calculated, as follows:
(a) The Five Million Dollar ($5,OOO,OOO) limitation on
the aggregate amount of documentary trade and standby letters of credit
outstanding at any time is deleted.
(b) Commencing from the date of this Amendment, the
letter of credit fees to be paid by Borrowers upon the issuance of each
documentary trade and standby letter of credit shall be computed at a rate
equal to the greater of either (i) the Applicable Margin for LIBOR Advances
minus 25 bp or (ii) 25 bp, multiplied by the face amount of each documentary
trade letter of credit or the face amount of each standby letter of credit, as
the case may be, and further multiplied by a fraction the numerator of which
shall equal the number of days for which the letter of credit is issued and the
denominator of which shall be 365 (subject to a minimum fee in each case of One
Hundred Dollars ($100)).
(c) Except as hereby modified and amended, all of the
terms, conditions and covenants contained in Section 2.2.2(b) of the Loan
Agreement shall remain in full force end effect.
3. Amendment of Section 2.2.3. Section 2.2.3 of the Loan Agreement is
amended by deleting the first sentence of such section in its entirety and
replacing such sentence with the following:
"The principal amount of the Revolving Credit Loans outstanding from
time to time shall bear interest until maturity of the Revolving
Credit Loans at a rate per annum equal to the Prime Rate plus the
Applicable Margin, provided, however, that if such calculation results
in a yield that is less than the Federal Funds Rate on any given date,
interest shall accrue on such day on the principal amount of the
Revolving Credit Loans outstanding on such day at the Federal Funds
Rate, adjusted daily, plus the Applicable Margin for LIBOR Advances;
notwithstanding the foregoing, at the option of the Borrowers,
exercised as provided in Section 2.2.9, interest may accrue prior to
maturity on any Permissible Increment of any Advance or on any
Permissible Increment of the outstanding balance of the Revolving
Credit Loans as to which no Optional Rate has previously been elected,
at an Optional Rate for a period of one, two, three, or six months."
<PAGE> 58
4. Amendment of Section 2.2.6. Section 2.2.6 of the Loan
Agreement is amended to change the manner in which the commitment fee is
calculated and to delete the cap on such commitment fees, as follows:
(a) Commencing with the commitment fee due March 15,
1996, the Revolving Credit commitment fee to be paid by Borrowers shall equal
the Revolving Credit Commitment Fee calculated on the average daily unused
portion of the Revolving Credit Commitments during the immediately preceding
three (3) month period ending December 1, March 1, June 1 or September 1, based
on the actual number of days elapsed and a 365 day year, and the Fifty Thousand
Dollar ($50,000) maximum aggregate Revolving Credit commitment fee payable
under the Loan Agreement is deleted.
(b) Except as hereby modified and amended, all of the
terms, conditions and covenants contained in Section 2.2.6 of the Loan
Agreement shall remain in full force and effect.
5. Amendment of Section 2.2.7. Section 2.2.7 of the Loan
Agreement is deleted in its entirety and replaced with the following:
"2.2.7 Calculation of Interest. Interest on each of the Revolving
Credit Loans bearing interest at LIBOR plus Applicable Margin on LIBOR Advances
shall be calculated based upon the use of a fraction, the numerator of which
being the actual number of days elapsed and the denominator of which is 360.
Interest on all other Revolving Credit Loans shall be calculated based upon a
fraction, the numerator of which being the actual number of days elapsed and
the denominator of which is 365."
6. Amended and Restated Master Credit Revolving Note. Borrowers
agree to execute and deliver to each of the Banks an Amended and Restated
Master Revolving Credit Note ("Amended Note") in the form of Exhibit C attached
hereto and incorporated herein by reference payable to each of the Banks in
accordance with the amount of their respective Revolving Credit Commitments as
increased hereunder. Following the execution and delivery of the Amended Note
to each Bank, the Amended Note shall evidence all the indebtedness evidenced by
Master Revolving Credit Note executed and delivered to such Bank by Borrower
dated September 10, 1993, which shall then be marked "Modified pursuant to that
certain Amended and Restated Master Revolving Credit Note, dated [the date
hereof]" and returned to Borrowers. Exhibit C to the Loan Agreement shall be
deleted and replaced in its entirety by Exhibit C hereto.
7. Deleting of Section 3. Section 3 of the Loan Agreement is
deletion in its entirety.
8. References to Installment Loan. Each reference in the Loan
Agreement to the installment loan provided for in Section 3 shall be deleted.
9. Amendment to Section 6.1 of the Loan Agreement. Section 6.1
of the Loan Agreement is amended by inserting the following after subparagraph
(x) and immediately prior to the last Line of Section 6.1:
<PAGE> 59
"(xi) liens securing Industrial Development Bonds or a reimbursement
obligation with respect to a letter of credit, insurance or other credit
enhancement securing such Industrial Development Bonds, provided that any such
lien encumbers only the project or property that is the subject of the
Industrial Development Bond and no other assets of Borrowers or their
Subsidiaries.
10. Amendment to Section 6.2 of the Loan Agreement. Section 6.2
of the Loan Agreement is amended by deleting the last sentence of such section
in its entirety and replacing such sentence with the following:
"The provisions of this Section 6.2 shall not prohibit loans between
the Borrowers and any of their Subsidiaries or guarantees by the
Borrowers or any of their Subsidiaries of their respective
obligations."
11. Amendment to Section 8.4 of the Loan Agreement. Section 8.4 of
the Loan Agreement is amended by inserting the following at the end of such
Section 8.4:
"Notwithstanding the foregoing, it is expressly agreed among Banks and
Borrowers that a default resulting in acceleration of the indebtedness
under any instrument(s) or document(s) evidencing or executed in
connection with the following Industrial Development Bonds caused by a
transfer of the property that is the subject of such Industrial
Development Bond to a Borrower, a Subsidiary, or others, or by the
merger of a Subsidiary and a Borrower, shall not constitute an Event
of Default hereunder:
(i) $3,000,000 Michigan Strategic Fund Variable Rate
Demand Limited Obligation Revenue Bonds, Series 1995
(Mechanics Uniform Rental Co. Project);
(ii) $2,595,000 Michigan Strategic Fund Revenue Refunding
Bonds for Small Businesses (loan repayment My
guaranteed by the United States Small Business
Administration), 1992 Series A-1 (Ace-Tex Corporation
Project); and
(iii) Michigan Job Development Authority Revenue Bonds for
Snuff Business (loan repayment fully guaranteed by the
United States Small Business Administration), 1979
Series A- I (Ace Wiping Cloth Project).
12. No Other Modifications. Except as hereby modified and
amended, all of the terms, conditions and covenants contained in the Loan
Agreement shall remain in full force and effect.
<PAGE> 60
13. Representations and Warranties. The Borrowers hereby
represent and warrant that:
(a) The representations and warranties contained in the
Loan Agreement and in each certificate or document furnished by the Borrowers
and delivered therewith are true and correct in all material respects on and as
of the date hereof as though made on and as of the date hereof;
(b) No Event of Default, and to the Borrower's knowledge
no event which with the passage of time or the giving of notice or both could
become an Event of Default, exists on the date hereof, and no offsets or
defenses exist against their obligations under the Loan Agreement or the
documents delivered in connection therewith;
(c) This Amendment has been duly authorized, executed and
delivered so as to constitute the legal, valid and binding obligation of the
Borrowers, enforceable in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditor's rights generally and general principles
of equity;
(d) The execution, delivery and performance of this
Amendment will not violate any applicable provision of law or judgment, order
or regulation of any court or of any public or governmental agency or authority
nor conflict with or constitute a breach of or a default under any instrument
to which the Borrowers are a party or by which the Borrowers or the Borrower's
properties is bound nor result in the creation of any hen, charge or
encumbrance upon any assets of the Borrowers.
14. Miscellaneous.
(a) The laws of the State of Missouri shall govern this
Amendment.
(b) This Amendment shall be binding on the parties hereto and
their respective successors and assigns, and shall inure to the benefits of the
parties hereto.
(c) This Amendment may be executed in any number of
counterparts, all of which when taken together shall constitute but one
agreement and any of the parties hereto may execute this Amendment by signing
any such counterpart.
(d) Section captions used in this Amendment are for
convenience only and shall not affect the construction of this Amendment.
(e) Capitalized terms used herein and not specifically
herein defined shall have the meanings ascribed in the Loan Agreement.
15. Statutory Statement. (Mo. Rev. Stat. e 432.045)
<PAGE> 61
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING PAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW
SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT BORROWERS AND BANKS FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING AND THE DOCUMENTS REFERRED TO HEREIN,
WHICH ARE THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US,
EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
[THIS SPACE LEFT INTENTIONALLY BLANK]
<PAGE> 62
IN WITNESS WHEREOF, the Borrowers, the Banks and the Agent have caused
this Amendment No. 2 to be executed by their respective officers duly
authorized as of the date first above written.
UNITOG COMPANY
By: /s/ J. Craig Peterson
Name: J. Craig Peterson
Title: Chief Financial officer
UNITOG RENTAL SERVICES, INC.
By: /s/ J. Craig Peterson
Name: J. Craig Peterson
Title: Chief Financial Officer
UMB BANK,, N.A.
Individually and as Agent
By: /s/ David A. Proffitt
Name: David A. Proffitt
Title: Senior Vice President
NBD BANK
By: /s/ Larry E. Shuster
Name: Larry E. Shuster
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
By: /s/ Len E. Meyer
Name: Len E. Meyer
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000101909
<NAME> UNITOG COMPANY
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-28-1996
<PERIOD-END> OCT-29-1995
<CASH> 358,931
<SECURITIES> 0
<RECEIVABLES> 19,833,599
<ALLOWANCES> 517,700
<INVENTORY> 15,251,096
<CURRENT-ASSETS> 64,940,438
<PP&E> 123,878,127
<DEPRECIATION> 52,561,667
<TOTAL-ASSETS> 161,124,391
<CURRENT-LIABILITIES> 28,867,790
<BONDS> 39,202,770
<COMMON> 0
0
92,766
<OTHER-SE> 83,507,369
<TOTAL-LIABILITY-AND-EQUITY> 161,124,391
<SALES> 41,304,242
<TOTAL-REVENUES> 112,561,972
<CGS> 33,835,857
<TOTAL-COSTS> 132,161,692
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,032,895
<INCOME-PRETAX> 13,736,393
<INCOME-TAX> 5,215,000
<INCOME-CONTINUING> 8,521,393
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,521,383
<EPS-PRIMARY> 0.91
<EPS-DILUTED> 0.91
</TABLE>
