<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 10-Q
______________
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 27, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-22003
-------------------
WESLEY JESSEN VISIONCARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-4023739
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
333 EAST HOWARD AVENUE, DES PLAINES, IL 60018-5903
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 294-3000
______________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _______
-------
As of November 10, 1997, the number of shares of Common Stock of the
Registrant outstanding was 17,647,028.
================================================================================
<PAGE>
WESLEY JESSEN VISIONCARE, INC
INDEX
<TABLE>
<CAPTION>
Page No.
-------
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at December 31, 1996 and
September 27, 1997......................................................................... 1
Condensed Consolidated Statements of Operations for the three months
and nine months ended September 28, 1996 and September 27, 1997............................ 2
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 28, 1996 and September 27, 1997............................................ 3
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Deficit) for the period June 29, 1995 through December 31, 1995,
for the year ended December 31, 1996 and for the nine months ended
September 27, 1997......................................................................... 4
Notes to the Condensed Consolidated Financial Statements................................... 5 - 11
Item 2 Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................................. 12 - 19
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K...........................................................
</TABLE>
Signatures
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
WESLEY JESSEN VISIONCARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 27,
1996 1997
------------------ ------------------
ASSETS (UNAUDITED)
------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................................... $ 7,073 $ 3,819
Accounts receivable - trade, net.................................................... 38,869 45,888
Other receivables................................................................... 5,155 4,403
Inventories......................................................................... 69,139 44,286
Deferred income taxes............................................................... 20,119 17,490
Prepaid expenses.................................................................... 9,531 6,428
Assets held for sale................................................................ 7,500 1,222
------------------ ------------------
Total current assets.......................................................... 157,386 123,536
------------------ ------------------
Property, plant and equipment, net...................................................... 10,125 18,447
Other assets............................................................................ 1,346 6,981
Deferred income taxes................................................................... 4,227 15,023
Notes receivable........................................................................ - 2,752
Capitalized financing fees, net......................................................... 7,516 2,790
------------------ ------------------
Total assets.................................................................. $180,600 $169,529
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current liabilities:
Trade accounts payable.............................................................. $ 12,434 $ 14,184
Accrued compensation and benefits................................................... 16,121 17,138
Accrued advertising................................................................. 3,751 4,625
Other accrued liabilities........................................................... 20,938 14,545
Transition reserve.................................................................. 18,894 12,816
Income taxes payable................................................................ 6,989 3,949
------------------ ------------------
Total current liabilities..................................................... 79,127 67,257
------------------ ------------------
Negative goodwill, net.................................................................. 10,577 13,955
Long term debt.......................................................................... 102,975 58,000
Other liabilities....................................................................... 1,213 1,832
------------------ ------------------
Total liabilities............................................................. 193,892 141,044
------------------ ------------------
Stockholders' equity (deficit):
Common stock, $.01 par value, 50,000,000 shares authorized, 14,276,028
and 17,652,374 issued and outstanding at December 31, 1996 and
September 27, 1997, respectively................................................ 143 177
Additional paid in capital.......................................................... 7,654 55,184
Accumulated deficit................................................................. (22,457) (26,464)
Cumulative translation adjustment................................................... 1,368 (412)
------------------ ------------------
Total stockholders' equity (deficit).......................................... (13,292) 28,485
------------------ ------------------
Total liabilities and stockholders' equity (deficit).......................... $180,600 $169,529
================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
WESLEY JESSEN VISIONCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------- ------------------
SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 27,
1996 1997 1996 1997
-------------- -------------- -------------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales...................................................... $ 33,651 $ 75,235 $ 96,048 $ 211,389
-------------- ------------- -------------- --------------
Operating costs and expenses:
Cost of goods sold.......................................... 8,037 23,891 26,471 70,707
Cost of goods sold - inventory step-up (Note 4)............. - - 6,626 22,666
Marketing and administrative................................ 18,350 36,486 51,014 104,049
Research and development.................................... 1,481 3,065 3,786 8,828
Amortization of negative goodwill........................... (196) (196) (588) (588)
-------------- ------------- -------------- --------------
Income from operations.......................................... 5,979 11,989 8,739 5,727
Other (income) expense:
Interest income............................................. - (221) (357)
Interest expense............................................ 747 1,462 2,757 4,728
Other income, net - - (3,500) -
-------------- ------------- -------------- --------------
Income before income taxes and extraordinary loss............... 5,232 10,748 9,482 1,356
Income tax expense.............................................. (895) (3,653) (1,621) (461)
-------------- ------------- -------------- --------------
Net income before extraordinary loss............................ 4,337 7,095 7,861 895
Extraordinary loss, net of related tax benefit of $2,526........ - - - (4,902)
-------------- ------------- -------------- --------------
Net income (loss)............................................... $ 4,337 $ 7,095 $ 7,861 $ (4,007)
============== ============= ============== ==============
Primary net income per common share (Note 2):
Net income.................................................. $ 0.36
=============
Weighted average common shares used in computation
of primary net income per common share...................... 19,796,144
==============
Pro forma primary net income (loss) per common share (Note 2):
Net income before extraordinary loss........................ $ 0.30 $ 0.54 $ 0.05
============= ============= =============
Extraordinary loss, net of tax benefit...................... $ - $ - $ (0.29)
============= ============= =============
Net income (loss)........................................... $ 0.30 $ 0.54 $ (0.24)
============= ============= =============
Weighted average common shares used in computation
of pro forma primary net income (loss) per common share..... 14,637,984 14,637,984 16,620,593
============= ============== =============
Pro forma fully diluted net income per common and
common equivalent share (Note 2):
Net income................................................. $ 0.26 $ 0.48
============= ==============
Weighted average common shares used in computation
of pro forma fully diluted net income per common share..... 16,522,016 16,522,016
============= ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
WESLEY JESSEN VISIONCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------------------------
SEPTEMBER 28, SEPTEMBER 27,
1996 1997
--------------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows provided by operating activities:
Net income (loss)....................................................... $ 7,861 $ (4,007)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary loss on early extinguishment of debt.................. - 7,428
Depreciation expense................................................ 159 584
Purchased inventory step-up......................................... 6,626 22,666
Amortization of capitalized financing fees.......................... 436 368
Amortization of negative goodwill................................... (588) (588)
Deferred income taxes............................................... (301) (5,195)
Other............................................................... (44) (1,778)
Changes in balance sheet items:
Accounts receivable - trade, net.................................... 2,463 (7,188)
Other receivables................................................... 420 (27)
Inventories......................................................... 5,008 2,524
Prepaid expenses.................................................... (1,557) 261
Other assets........................................................ - (362)
Notes receivable.................................................... - (1,252)
Trade accounts payable.............................................. (3,788) 1,750
Accrued liabilities................................................. 4,375 (11,346)
Other liabilities................................................... - 632
Income taxes payable................................................ 1,281 (3,040)
------------ -------------
Cash provided by operating activities........................... 22,351 1,430
------------ -------------
Investing activities:
Proceeds from Natural Touch sale........................................ - 6,000
Capital expenditures.................................................... (3,809) (11,801)
------------ -------------
Cash used in investing activities............................... (3,809) (5,801)
------------ -------------
Financing activities:
Issuance of stock....................................................... 272 47,562
Proceeds from long term debt............................................ - 93,000
Payment of financing fees............................................... - (3,070)
Payments of long term debt.............................................. (13,500) (136,375)
------------ -------------
Cash used in financing activities............................... (13,228) 1,117
------------ -------------
Net increase (decrease) in cash and cash equivalents.................... 5,314 (3,254)
Cash and cash equivalents:
Beginning of period..................................................... 2,522 7,073
------------ -------------
End of period........................................................... $ 7,836 $ 3,819
============ =============
Supplemental disclosure of cash flow information
Cash paid during the period for interest................................ $ 2,811 $ 5,220
============ =============
Cash paid during the period for income taxes, net....................... $ 641 $ 5,827
============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
WESLEY JESSEN VISIONCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CLASS L ADDITIONAL
COMMON STOCK COMMON STOCK PAID IN
--------------------- --------------------
SHARES AMOUNT SHARES AMOUNT CAPITAL
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Balance at June 29, 1995............................. - $ - - $ - $ -
Issuance of stock.................................... 429,177 4 3,862,604 39 7,739
Stock subscription receivable........................ - - - (1) (256)
Net loss............................................. - - - - -
--------- --------- ----------- ------- ---------
Balance at December 31, 1995......................... 429,177 4 3,862,604 38 7,483
Issuance of stock.................................... 823 - 7,396 - 15
Stock subscription receivable........................ - - - 1 256
Currency translation adjustment...................... - - - - -
Net loss............................................. - - - - -
Exchange of stock.................................... (108,933) (1) 220,582 2 -
Retroactive effect of February 12, 1997
Class L Common Stock Reclassification............. (321,067) (3) 1,460,517 15 -
Retroactive effect of February 12, 1997
Common Stock split................................ - - 8,724,929 87 (100)
--------- --------- ----------- ------- ---------
Balance at December 31, 1996......................... - - 14,276,028 143 7,654
Issuance of stock (unaudited)........................ - - 3,376,346 34 47,273
Stock compensation (unaudited)....................... - - - - 257
Currency translation adjustment (unaudited).......... - - - - -
Net loss (unaudited)................................. - - - - -
--------- --------- ----------- ------- ---------
Balance at September 27, 1997 (unaudited)............ - - 17,652,374 $177 $55,184
========= ========= =========== ======= =========
<CAPTION>
TOTAL
CUMULATIVE STOCKHOLDERS
ACCUMULATED TRANSLATION EQUITY
DEFICIT ADJUSTMENT (DEFICIT)
----------- ------------ ------------
<S> <C> <C> <C>
Balance at June 29, 1995 $ - $ - $ -
Issuance of stock.................................... - - 7,782
Stock subscription receivable........................ - - (257)
Net loss............................................. (19,715) - (19,715)
------------- ------------- ----------------
Balance at December 31, 1995......................... (19,715) - (12,190)
Issuance of stock.................................... - - 15
Stock subscription receivable........................ - - 257
Currency translation adjustment...................... - 1,368 1,368
Net loss............................................. (2,742) - (2,742)
Exchange of stock.................................... - - 1
Retroactive effect of February 12, 1997
Class L Common Stock Reclassification............. - - 12
Retroactive effect of February 12, 1997
Common Stock split................................ - - (13)
------------- ------------- ----------------
Balance at December 31, 1996......................... (22,457) 1,368 (13,292)
Issuance of stock (unaudited)........................ - - 47,307
Stock compensation (unaudited)....................... - - 257
Currency translation adjustment (unaudited).......... - (1,780) (1,780)
Net loss (unaudited)................................. (4,007) - (4,007)
------------- ------------- ----------------
Balance at September 27, 1997 (unaudited)............ $(26,464) $ (412) $ 28,485
============= ============= ================
</TABLE>
<PAGE>
WESLEY JESSEN VISIONCARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of business
The Company's primary business activity is the research, development,
manufacture, marketing and sale of conventional and disposable soft contact
lenses in the United States and certain other countries. The Company is
headquartered in Des Plaines, Illinois and operates in one business segment.
Basis of presentation
The consolidated financial statements of the Company include the accounts
of Wesley Jessen VisionCare, Inc. (formerly known as Wesley-Jessen Holding,
Inc.) its wholly owned subsidiary, Wesley-Jessen Corporation, and Wesley-Jessen
Corporation's wholly owned subsidiaries (collectively, the "Company"). All
significant intercompany transactions have been eliminated.
The unaudited financial information presented reflects all adjustments
which are, in the opinion of management, necessary for a fair presentation of
the consolidated financial statements for an interim period. All such
adjustments are of a normal, recurring nature. Results of operations for an
interim period are not necessarily indicative of results for the full year.
These interim financial statements should be read in conjunction with the
financial statements and related notes contained in the Special Financial Report
on Form 10-K filed pursuant to Rule 15d-2 for the year ended December 31, 1996.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
The IPO
In February, 1997, the Company completed an initial public offering of
2,821,000 shares of common stock at a price of $15.00 per share (the "IPO").
Additionally, the Company refinanced its remaining bank indebtedness through
borrowings under a new credit agreement (the "Bank Credit Agreement"). The IPO
and the refinancing are collectively referred to herein as the "IPO
Transactions".
Prior to the IPO, the Company had two classes of issued and outstanding
stock, the Class L common stock, (the "Class L Common") and the common stock,
which were identical except that each share of Class L Common was entitled to a
preferential payment (the "Preference Amount") upon any distribution by the
Company to holders of its capital stock (whether by dividend, liquidating
distribution or otherwise) equal to the original cost of such share ($17.41)
plus an amount which accrued on a daily basis at a rate of 12.5% per annum on
such cost and on the amount so accrued in prior quarters. As of February 12,
1997, the Preference Amount was $21.24 per share of Class L Common issued at the
time of the Wesley Jessen Acquisition. Prior to the completion of the IPO, all
of the outstanding shares of Class L Common were reclassified pursuant to the
terms of the Company's amended and restated Certificate of Incorporation into
shares of common stock (the "Reclassification") and a 3.133-for-one stock split
was effected as to all of the then outstanding shares of common stock (the
"Split"). In connection with the Reclassification (prior to the Split), each
outstanding share of Class L Common was reclassified into one share of common
stock plus an additional number of shares having a value, based on the offering
price, equal to the Preference Amount as of February 12, 1997. For balance sheet
presentation purposes the Reclassification and the Split have been given effect
as if they had occurred on December 31, 1996 and all share and per share data
have been restated.
<PAGE>
WESLEY JESSEN VISIONCARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
(UNAUDITED)
The Offering
In August, 1997, the Company completed a public offering of 4,000,000
shares of common stock at a selling price of $23.50 per share (the "Offering").
Of the 4,000,000 shares, 500,000 shares were offered by the Company and the
remaining 3,500,000 shares were offered by certain selling stockholders. On
September 24, 1997, the underwriters exercised their option to purchase an
additional 341,040 shares from certain selling stockholders to cover over-
allotments.
Net proceeds received by the Company, after deducting underwriting
discounts and commissions and offering expenses, were used to repay the
"Pilkington Note" (Note 6) and to reduce the Company's indebtedness under the
Bank Credit Agreement. In connection with the Offering, the Company amended its
Bank Credit Agreement (Note 6).
2. NET INCOME (LOSS) PER SHARE
Pro forma primary and fully diluted net income (loss) per share were
calculated by dividing net income (loss) by the pro forma weighted average
common and common equivalent shares outstanding after giving retroactive effect
to the Wesley Jessen Acquisition, the Reclassification and the Split.
Additionally, in accordance with the Securities and Exchange Commission Staff
Accounting Bulletin No. 83, using the treasury stock method, 361,956 shares have
been included in the calculation of common stock equivalent shares for pro forma
primary net income (loss) per share as if they were outstanding for the three
and nine months ended September 28, 1996. For purposes of pro forma fully
diluted net income per share, all share options with exercise prices below the
initial public offering price have been included, using the treasury stock
method. Fully diluted per share amounts are not applicable for loss periods.
Primary net loss per share for the nine months ended September 27, 1997 has
been calculated by dividing the net loss by the weighted average common shares
outstanding for the period. Common share equivalents have been excluded because
their effect is not dilutive.
The net proceeds from the IPO and the Offering were used by the Company to
retire indebtedness existing under its credit agreement (Note 6). Supplemental
pro forma net loss per share is ($0.19) for the nine months ended September 27,
1997; the number of shares of common stock whose proceeds are deemed to be used
to retire debt is 3,321,000. This calculation assumes the debt retirement had
taken place at the later of the beginning of the respective period or the
issuance of the debt. The amount of interest expense eliminated, net of income
tax effects, is $0.6 million for the nine months ended September 27, 1997.
3. ACQUISITIONS
Effective June 29, 1995, Wesley-Jessen Corporation completed the
acquisition (the "Wesley Jessen Acquisition" ) of the Wesley-Jessen contact lens
business of Schering-Plough Corporation for a total purchase price of $76.6
million, consisting of cash paid of $47.0 million and liabilities assumed of
$29.6 million. The Wesley Jessen Acquisition was financed by $43.0 million of
bank debt and $7.5 million of proceeds from the issuance of the Company's common
stock.
On October 2, 1996, the Company acquired the contact lens business of the
Barnes-Hind division of Pilkington plc ("the Barnes-Hind Acquisition").
Aggregate consideration of $62.4 million for the acquisition was comprised of
$57.4 million in cash and a $5.0 million subordinated promissory note (Note 6).
The cash portion of the purchase was financed by the proceeds from the Barnes-
Hind Acquisition Financing (Note 6). The purchase method of accounting was used
to record the acquisition. The financial statements presented herein reflect the
allocation of the purchase price to the acquired assets and liabilities based on
their estimated fair values. The
<PAGE>
WESLEY JESSEN VISIONCARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
(UNAUDITED)
results of the operations of the acquired company have been included in the
results of operations of the Company since the acquisition date.
In September, 1997, the Company negotiated a purchase price reduction of
$1.6 million with Pilkington plc based upon specific net current asset measures
as of the closing date of the acquisition. As a result, the purchase price of
Barnes-Hind, after taking into consideration additional acquisition related fees
and expenses, decreased by $0.1 million. Additionally, certain pension
valuations associated with the Barnes-Hind employees were completed in the third
quarter of 1997. Management also has revised the operational details and related
cost estimates of its plans to integrate Barnes-Hind operations. These changes
in estimates used in the initial purchase accounting resulted in recognition of
negative goodwill of $4.0 million, which will be amortized to income through
June 2010.
In connection with the Barnes-Hind Acquisition, the Company entered into a
voluntary consent order with the Federal Trade Commission which provides, among
other things, that the Company must divest Barnes-Hind's U.S. Natural Touch
product line. On March 17, 1997, the Company completed the sale of the product
line for which, under the agreement, it received aggregate consideration of $7.5
million, consisting of $3.0 million in cash and a four-year, $4.5 million
promissory note. The promissory note accrues compounded interest at a rate of
12% per annum, 8% of which is paid currently and 4% of which is payable at the
maturity of the note in 2001. As part of the agreement, the Company has entered
into a supply agreement pursuant to which the Company will supply the purchaser
with Natural Touch lenses for sale in the United States. The purchase accounting
for the Barnes-Hind Acquisition included the expected effects of the divestiture
and has been reflected such that no gain or loss resulted from the divestiture.
On July 31, 1997, the purchaser made a voluntary prepayment of $3.0 million
plus accrued interest on the promissory note.
Pro forma results
The unaudited pro forma results of the operations of the Company for the
nine months ended September 28, 1996 are set forth below, giving pro forma
effect to the following: (i) the Barnes-Hind Acquisition; (ii) the Barnes-Hind
Acquisition Financing described in Note 6; (iii) the estimated recurring cost
savings to the Company from facilities and personnel rationalizations; (iv)
elimination of non-recurring increases to cost of goods sold as a result of
applying purchase accounting to inventories following the Wesley Jessen
Acquisition and the Barnes-Hind Acquisition; (v) the divestiture of Barnes-
Hind's U.S. Natural Touch product line; and (vi) adjusting the income tax
(expense) benefit to an assumed effective rate of 34%, each as if the
transactions had occurred as of January 1, 1996 (in thousands, except share and
per share data):
<TABLE>
<CAPTION>
Nine months ended
September 28, 1996
------------------
<S> <C>
Net sales............................................................... $ 189,979
==================
Net income.............................................................. $ 9,691
==================
Pro forma net income per common and common equivalent share $ 0.59
==================
Weighted average shares used in computation of pro forma income per
common and common equivalent share 16,522,016
=================
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred if the Barnes-Hind Acquisition had been in effect for the period
presented and are not intended to be a projection of future results, which are
dependent on the ability of the Company to accomplish its objectives in
connection with the Barnes-Hind Acquisition. The future success of the Barnes-
Hind Acquisition and its effect on the financial
<PAGE>
WESLEY JESSEN VISIONCARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
(UNAUDITED)
operating results of the Company will depend in large part on the ability of
management to integrate the Barnes-Hind manufacturing, sales and marketing and
administrative functions into the Wesley Jessen operations and achieve the cost
savings expected to result from the acquisition-integration measures adopted by
the Company.
4. COMPONENTS OF CERTAIN BALANCE SHEET ACCOUNTS
Accounts receivable-trade, net
Accounts receivable-trade, net consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, September 27,
1996 1997
------------------ ------------------
<S> <C> <C>
Accounts receivable - trade........................................... $ 56,480 $ 65,733
Less allowances:
Doubtful accounts................................................ (6,989) (8,013)
Sales returns and adjustments.................................... (10,622) (11,832)
------------------ ------------------
Accounts receivable - trade, net...................................... $ 38,869 $ 45,888
================== ==================
</TABLE>
Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, September 27,
1996 1997
------------------ -------------------
<S> <C> <C>
Raw materials......................................................... $ 6,073 $ 4,267
Work-in-process....................................................... 8,958 7,795
Finished goods........................................................ 54,108 32,224
------------------ -------------------
Total....................................................... $69,139 $44,286
================== ===================
</TABLE>
In connection with the Wesley Jessen Acquisition and the Barnes-Hind
Acquisition, under the purchase method of accounting, the Company's total
inventories were written up $40.6 million and $36.7 million, respectively, to
fair value at the date of acquisition. Of these amounts $22.7 million and $6.6
million were charged to cost of goods sold during the nine months ended
September 27, 1997 and September 28, 1996, respectively.
Property, plant and equipment, net
Property, plant and equipment, net, consists of the following (in
thousands):
<TABLE>
<CAPTION>
December 31, September 27,
1996 1997
----------------- -------------------
<S> <C> <C>
Building and improvements............................................. $ 1,230 $ 4,382
Machinery, equipment, furniture and fixtures.......................... 6,257 9,504
Construction-in-progress.............................................. 3,034 5,539
----------------- -------------------
10,521 19,425
Less: accumulated depreciation........................................ (396) (978)
----------------- -------------------
Property, plant and equipment, net.................................... $10,125 $18,447
================= ===================
</TABLE>
<PAGE>
WESLEY JESSEN VISIONCARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
(UNAUDITED)
5. TRANSITION AND RESTRUCTURING RESERVES
In connection with the Barnes-Hind Acquisition, management approved a
transition plan to integrate the acquired operations, for which an accrual of
$20.4 million (transition reserve) was established in purchase accounting. Costs
associated with the transition plan are comprised of facility and employee
termination costs related to the closure of the Barnes-Hind corporate offices in
Sunnyvale, California which was completed during the third quarter of 1997. In
addition, management plans to curtail certain manufacturing activities in San
Diego, California which will include reductions in both manufacturing and
administrative functions. These activities will be transferred to other Company
locations. Payments related to the transition for the nine months ended
September 27, 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
Employee Lease Facility
Related Termination Restoration
Costs Costs & Other Total
Costs
-------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
Transition reserve at December 31, 1996........... $15,623 $2,020 $1,251 $18,894
Charges against the reserve....................... 4,967 895 216 6,078
-------------- ---------------- ---------------- --------------
Transition reserve at September 27, 1997.......... $10,656 $1,125 $1,035 $12,816
============== ================ ================ ==============
</TABLE>
In addition to the transition plan, the Company committed to a plan to
restructure the Wesley Jessen operations following the Barnes-Hind Acquisition,
resulting in a charge of $3.4 million in the fourth quarter of 1996
(restructuring reserve). Pursuant to the restructuring plan, the Chicago
distribution facilities were consolidated with those in Des Plaines, Illinois in
October 1997. The restructuring reserve, totaling $3.1 million at September 27,
1997, consists of costs related to the shutdown of the Chicago distribution
facility and employee termination, lease termination and other restructuring
costs associated with consolidation of the Company's European facilities with
those facilities acquired in the Barnes-Hind Acquisition. Usage of the
restructuring reserve for the nine months ended September 27, 1997 is as follows
(in thousands):
<TABLE>
<CAPTION>
Employee Lease
Related Termination
Costs Costs Other Costs Total
------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C>
Restructuring reserve at December 31, 1996......... $813 $897 $1,690 $3,400
Charges against the reserve........................ 295 5 6 306
------------ ---------------- ---------------- -------------
Restructuring reserve at September 27, 1997........ $518 $892 $1,684 $3,094
============ ================ ================ =============
</TABLE>
6. LONG-TERM DEBT
Barnes-Hind Acquisition Financing
On October 2, 1996, in connection with the Barnes-Hind Acquisition, the
Company replaced its long-term borrowing arrangement with the following credit
facilities (the "1996 Credit Agreement"):
$45 million revolving credit facility due February 28, 2002
$45 million Term Loan A due February 28, 2002
$50 million Term Loan B due February 29, 2004
<PAGE>
WESLEY JESSEN VISIONCARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
(UNAUDITED)
In connection with the refinancing, the Company incurred and capitalized
financing fees of approximately $7.8 million, which were being amortized over
the term of the 1996 Credit Agreement.
Additionally, as part of the consideration paid for the Barnes-Hind
Acquisition, the Company entered into a $5.0 million promissory note with
Pilkington plc (the "Pilkington Note") with an interest rate of 8.0% compounded
annually and payable at maturity. The note was to mature on February 1, 2005,
subject to certain acceleration provisions. In September, 1997, the note was
reduced by $1.6 million, based on purchase price negotiations, and the remaining
principal was repaid.
Initial Public Offering Refinancing
On February 19, 1997, in connection with the IPO, the Company replaced its
long term borrowing arrangements with the following credit facilities (the "Bank
Credit Agreement"):
$35 million revolving loan facility due February 19, 2002
$65 million Term Loan A due February 19, 2002
In connection with the refinancing, the Company recognized an extraordinary
loss of $7.4 million ($4.9 million, net of income tax benefits), relating to the
write-off of capitalized financing fees incurred in connection with the Barnes-
Hind Acquisition Financing. Additionally, the Company incurred and capitalized
financing fees of approximately $2.5 million, which were being amortized over
the term of the Bank Credit Agreement.
On September 10, 1997, in connection with the Offering, the Bank Credit
Agreement was amended to consist of a $135.0 million revolving loan facility
(the "Amended Bank Credit Agreement"), the availability of which will be reduced
by $20.0 million on September 11, 2000 and $20.0 million on September 11, 2001.
The facility matures on September 11, 2002.
An additional $0.6 million of financing fees were incurred and capitalized.
Capitalized fees of $2.8 will be amortized over the term of the Amended Bank
Credit Agreement.
Amounts borrowed under the Amended Bank Credit Agreement bear interest at
either Base Rate (higher of (i) 0.5% in excess of the Federal Reserve reported
adjusted certificate of deposit rate and (ii) the lender's prime lending rate
plus a margin up to 0.5% based on leverage ratios calculated as of certain
dates) or the Eurodollar Rate as determined by the lenders plus a margin of
0.375% to 1.500% based on the type of loan and leverage ratios calculated as of
certain dates as defined in the credit agreement. Additionally, the Company is
required to pay a commitment fee on the unutilized revolving loan commitments
ranging from 0.175% to 0.400% based on leverage ratios calculated as of certain
dates. The unutilized portion of the revolving credit facilities at September
27, 1997 was $77.0 million. The credit facilities are guaranteed by each of its
domestic subsidiaries and secured by essentially all assets of the domestic
subsidiaries.
The Bank Credit Agreement contains a number of covenants restricting the
Company and its subsidiaries with respect to the incurrence of indebtedness, the
creation of liens, the consummation of certain transactions such as sales of
substantial assets, mergers or consolidations, the making of certain
investments, capital expenditures, and payment of dividends. In addition, the
Company is required to maintain certain financial covenants and ratios.
Interest Rate Instrument
The company has purchased an interest rate cap on $35.0 million notional
principal amount at 8.5%, which expires on December 31, 1999. The cap purchased
is intended to provide partial protection to the Company
<PAGE>
WESLEY JESSEN VISIONCARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
(UNAUDITED)
from exposure relating to its variable rate debt instruments in the event a
higher floating interest rate scenario is encountered during a period.
7. RELATED PARTY TRANSACTION
On May 7, 1997, Wesley Jessen Corporation, a wholly owned subsidiary of the
Company, loaned the Company's Chief Executive Officer ("CEO") $1.2 million, in
exchange for an unsecured promissory note bearing interest at the rate of 8%,
interest payable quarterly. The note is due at the earlier of (i) May 9, 2002,
(ii) the date the CEO ceases to be employed by the Company, or (iii) the date
the CEO disposes of any of his common stock holdings in the company. For
purposes of the Offering (Note 1), the Company waived the requirement that Mr.
Ryan repay such loan pursuant to clause (iii) above.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis provides information
with respect to the results of operations of the Company for the three months
and the nine months ended September 28, 1996 and September 27, 1997. The Company
completed the Wesley Jessen Acquisition on June 29, 1995, the Barnes-Hind
Acquisition on October 2, 1996, the initial public offering ("IPO") on February
19, 1997, and the secondary offering (the "Offering") on August 25, 1997. The
Acquisitions were accounted for under the purchase method of accounting. Because
of the revaluation of the assets and liabilities of Wesley Jessen and Barnes-
Hind and the related effects on costs of sales and expenses, the historical
financial statements for the periods discussed are not directly comparable. For
comparative purposes, the combined results of operations of the Company and
Barnes-Hind for the three months and the nine months ended September 28, 1996
and September 27, 1997 have been restated on a "pro forma" basis as if the
Barnes-Hind Acquisition and the IPO had occurred on January 1, 1996. See
"Results of Operations".
OVERVIEW
Wesley Jessen is the leading worldwide developer, manufacturer and marketer
of specialty soft contact lenses, based on its share of the specialty lens
market. The Company's products include cosmetic lenses, which change or enhance
the wearer's eye color appearance; toric lenses, which correct vision for people
with astigmatism; and premium lenses, which offer value-added features such as
improved comfort for dry eyes and protection from UV light. Founded in 1946 by
pioneers in the contact lens industry, the Company has a long-standing
reputation for innovation and new product introductions. Wesley Jessen develops
proprietary technologies, manufacturing processes and products through a
combination of its in-house staff of more than 50 engineers and scientists and
Company-sponsored research by third-party experts. The Company markets and sells
its products to consumers through the second largest advertising campaign in the
industry and to eyecare practitioners through its 190-person salesforce and
network of 67 independent distributors, which together sell the Company's
products in more than 75 countries.
WESLEY JESSEN ACQUISITION
Effective June 29, 1995, Wesley Jessen Corporation completed the
acquisition (the "Wesley Jessen Acquisition") of the Wesley-Jessen contact lens
business (the Predecessor) of Schering-Plough Corporation. As a result of the
Wesley Jessen Acquisition, Wesley-Jessen Corporation acquired certain assets
from Schering-Plough, assumed certain liabilities of the Predecessor, and paid
certain acquisition costs directly attributable to the Wesley Jessen
Acquisition. The Wesley Jessen Acquisition was completed for a total purchase
price of $76.6 million, consisting of cash paid of $47.0 million and liabilities
assumed of $29.6 million. The Wesley Jessen Acquisition was financed by $43.0
million of bank debt and $7.5 million of proceeds from the issuance of the
Company's common stock.
BARNES-HIND ACQUISITION
On October 2, 1996, the Company acquired substantially all the assets and
assumed certain liabilities of the Barnes-Hind division of Pilkington plc (the
"Barnes-Hind Acquisition"). The originally estimated purchase price in the
Barnes-Hind Acquisition of $62.4 million (plus related acquisition and financing
fees of $10.7 million) was funded with approximately $68.1 million of borrowings
under the then existing $140.0 million credit agreement and the $5.0 million
note issued to Pilkington (the "Pilkington Note"). In connection with the
Barnes-Hind
Page 12
<PAGE>
Acquisition, the Company borrowed an additional $28.5 million to repay its then
outstanding term loans and to fund ongoing working capital needs.
In September 1997, the Company negotiated a purchase price reduction of
$1.6 million with Pilkington plc based upon specified net current asset measures
as of the closing date of the acquisition. As a result, the purchase price of
Barnes-Hind, after taking into consideration additional acquisition related fees
and expenses, decreased by $0.1 million. Additionally, certain pension
valuations associated with the Barnes-Hind employees were completed in the third
quarter of 1997. Management also has revised the operational details and related
cost estimates of its plans to integrate Barnes-Hind operations. These changes
in estimates used in the initial purchase accounting resulted in recognition of
negative goodwill of $4.0 million, which will be amortized to income through
June 2010.
With the Barnes-Hind Acquisition, the Company identified significant
operating synergies and substantial cost savings opportunities. The Company has
completed the majority of its initial cost reductions.
In connection with the Barnes-Hind Acquisition, the Company entered into a
voluntary consent order with the Federal Trade Commission which provided, among
other things, that the Company must divest Barnes-Hind's U.S. Natural Touch
Product Line. On March 17, 1997, the Company completed the sale of the product
line for which, under the agreement, it received aggregate consideration of $7.5
million, consisting of $3.0 million in cash and a four-year $4.5 million
promissory note which accrues interest at a compound rate of 12% per annum, 8%
of which is payable currently and 4% of which is payable-in-kind. On July 31,
1997, the purchaser made a voluntary prepayment of $3.0 million on the
promissory note. As part of the agreement, the Company entered into a supply
agreement pursuant to which the Company will supply the purchaser with Natural
Touch lenses for sale in the United States.
THE IPO
In February, 1997, the Company consumated an IPO of its Common Stock, which
included the sale by the Company of 2,821,000 shares of Common Stock at an
initial public offering price of $15.00 per share.
In connection with the IPO, the Company incurred a non-recurring charge for
extraordinary debt extinguishment costs of $7.4 million ($4.9 million, net of
income tax benefits) related to the write-off of capitalized financing fees
incurred in connection with the Barnes-Hind Acquisition financing. Additionally,
the Company incurred and capitalized financing fees of $2.5 million, which were
being amortized over 60 months.
Interest expense reductions as if the IPO had occurred on January 1, 1996
are reflected in the Company's pro forma financial data. See "Results of
Operations." While the Company believes that this interest expense will not
recur, there can be no assurance that the Company's interest expense will not
increase in future periods either as a result of increased borrowings or higher
interest rates.
THE OFFERING
In August, 1997, the Company completed a public offering of 4,341,040
shares of common stock, of which 3,841,040 shares were sold by certain selling
stockholders and 500,000 shares were sold by the Company, at an offering price
of $23.50 per share.
Net proceeds of $10.6 million were received by the Company, after deducting
$1.2 million of underwriting discounts and commissions and offering expenses.
payable by the Company. These proceeds were used to repay the Pilkington Note
and to reduce the Company's indebtedness under the current Bank Credit
Agreement.
Page 13
<PAGE>
In connection with the Offering, in September, 1997, the Company entered
into the Amended Bank Agreement which increased the total borrowing availability
thereunder to a maximum of $135.0 million, converted all remaining term loan
borrowings into revolving loans, and reduced the interest rate thereunder. The
Company incurred an additional $0.6 million of fees and expenses associated with
the Amended Bank Agreement, which have been capitalized and will be amortized
through September, 2002.
RESULTS OF OPERATIONS
The Company was established to acquire the Predecessor, which acquisition
was effective for accounting purposes on June 29, 1995. Because of the
revaluation of the assets and liabilities of the Predecessor and the related
impact on cost of sales and expenses, the financial statements for the nine
months ended September 28, 1996 are not comparable to the financial statements
for the nine months ended September 27, 1997. In order to facilitate
management's discussion of financial results, the following table of pro forma
operating data gives effect to the Wesley Jessen Acquisition as if it had
occurred on January 1, 1996.
The Barnes-Hind Acquisition was effective for accounting purposes on
October 2, 1996. Because of the revaluation of the assets and liabilities of
Barnes-Hind and the related impact on cost of sales and expenses, the historical
financial statements for the three months and the nine months ended September
28, 1996 are not comparable to the financial statements for the three months and
the nine months ended September 27, 1997, respectively. Accordingly, the
following table of pro forma operating income data combines the results of
operations for the three months ended September 28, 1996 and September 27, 1997
and the nine months ended September 28, 1996 and September 27, 1997 of the
Company and Barnes-Hind on a pro forma basis as if the Acquisitions and the IPO
had occurred on January 1, 1996.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------------- ------------------------------------------
September 28, September 27, September 28, September 27,
1996 (a) 1997 1996 (a) 1997 (b)
----------------- ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Net sales.............................. $64,514 $75,235 $189,979 $211,389
Operating costs and expenses:
Cost of goods sold.................. 23,878 23,891 70,549 70,707
Marketing and administrative......... 33,255 36,486 91,623 102,964
Research and development............. 3,513 3,065 9,171 8,828
Amortization of negative goodwill.... (196) (196) (588) (588)
----------------- ------------------ ------------------- -------------------
Income from operations............... 4,064 11,989 19,224 29,478
Other expense:
Interest expense, net................ 1,292 1,241 4,182 3,960
Other (income) expense, net.......... - - (3,500) -
----------------- ------------------ ------------------- -------------------
Income before income taxes............. 2,772 10,748 18,542 25,518
Income tax expense..................... (942) (3,653) (6,304) (8,676)
----------------- ------------------ ------------------- -------------------
Net income............................. $ 1,830 $ 7,095 $ 12,238 $ 16,842
================= ================== =================== ===================
Other Data:
Net income per common and common share
equivalent............................ $0.09 $0.36 $0.63 $0.86
================= ================== =================== ===================
</TABLE>
Page 14
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Weighted average shares used in
computation of income per common and
common equivalent share................... 19,353 19,796 19,353 19,537
</TABLE>
(a) Includes pro forma adjustments to give effect to : (i) the Barnes-Hind
Acquisition; (ii) the divestiture of Barnes-Hind U.S. Natural Touch Product
Line; (iii) the elimination of the non-recurring impact of the inventory
step-up in connection with the Wesley Jessen Acquisition of $0 for the
three months and $6,626 for the nine months ended September 28, 1996; (iv)
the IPO Transactions as if they had occurred on January 1, 1996; and (v)
the pro forma income tax expense at an estimated effective income tax rate
of 34%.
(b) Includes pro forma adjustments to: (i) eliminate the non-recurring impact
of the inventory step-up in connection with the Barnes-Hind Acquisition of
$22,666 in the nine months ended September 27, 1997; (ii) exclude non-
recurring transitional administrative expenses incurred at the Barnes-Hind
corporate facility in Sunnyvale, California, of $1,085 in the nine months
ended September 27, 1997; (iii) reflect the IPO Transactions as if they had
occurred on January 1, 1996; and (v) reflect the pro forma income tax
expense at an estimated effective tax rate of 34%.
THREE MONTHS ENDED SEPTEMBER 27, 1997 COMPARED TO PRO FORMA THREE MONTHS ENDED
SEPTEMBER 28, 1996
The discussion that follows compares the Company's actual results of
operations for the three months ended September 27, 1997 to the pro forma
results of operations for the three months ended September 28, 1996. The actual
results of operations for the three months ended September 28, 1996 have been
adjusted to give effect to: (i) the October, 1996 Barnes-Hind Acquisition; (ii)
the March, 1997 divestiture of the Barnes-Hind U.S. Natural Touch product line;
(iii) the refinancing of the Company's June, 1995 bank credit agreement; (iv)
the Company's February, 1997 initial public offering (and the subsequent over-
allotment sale of additional shares) and the application of the net proceeds
therefrom, as if each had occurred on January 1, 1996; and (v) taxes at an
estimated effective income tax rate of 34%.
Net sales for the three months ended September 27, 1997 increased $10.7
million, or 16.6%, to $75.2 million from $64.5 million for the three months
ended September 28, 1996. This increase resulted primarily from growth in sales
of the Company's disposable and planned replacement contact lenses, from $19.6
million to $27.7 million, a 41.7% increase, as well as sales increases in the
conventional lens product lines, from $45.0 million to $47.5 million, a 5.7%
increase. The Company believes sales increases were due to the continued growing
popularity of the Company's disposable lenses along with benefits realized from
its increased promotional support of the conventional product lines. Domestic
sales increased by 14.4% from $36.9 million to $42.2 million, while sales in the
rest of the world increased by 19.6% from $27.6 million to $33.0 million.
Gross profit for the three months ended September 27, 1997 increased $10.7
million, or 26.4%, to $51.3 million from $40.6 million in the comparable 1996
period. Gross profit margin increased to 68.2% for the three months ended
September 27, 1997 from 63.0% in the comparable 1996 period. This improvement is
due to realized operating efficiencies resulting from the initial cost reduction
measures implemented as part of the Barnes-Hind Acquisition. The higher gross
profit margin also is due to higher margins realized on the Company's disposable
and planned replacement lenses because of higher production volumes and
efficiencies as well as increased sales volume of the Company's higher margin
conventional lens product lines.
Marketing and administrative expenses for the three months ended September
27, 1997 increased by $3.2 million, or 9.7%, to $36.5 million from $33.3 million
for the three months ended September 28, 1996. However, as a percentage of net
sales, marketing and administrative expenses decreased to 48.5% in the 1997
period from 51.5% in the 1996 period. This increase in expenses is largely due
to higher, promotional spending for all product lines, in particular the former
Barnes-Hind conventional lens products, along with higher performance related
compensation expenses.
Research and development expenses for the three months ended September 27,
1997 decreased by $0.4 million, or 12.8%, to $3.1 million from $3.5 million for
the three months ended September 28, 1996. This decrease is due to operational
synergies being realized by the Company as a result of the Barnes-Hind
Acquisition, most notably in compensation related expenses. As a percentage of
net sales, research and development expenses decreased to 4.1% in the 1997
period from 5.4% in the 1996 period.
Page 15
<PAGE>
Income from operations for the three months ended September 27, 1997
increased by $7.9 million to income of $12.0 million from $4.1 million for the
three months ended September 28, 1996. This resulted from higher sales volume
and the substantial improvement in gross margin partially offset by the increase
in marketing and administrative expenses.
Net income for the three months ended September 27, 1997 increased by $5.3
million to $7.1 million from $1.8 million for the three months ended September
28, 1996. This resulted from higher sales volume and improvement in the
Company's gross margins, offset by increased spending in marketing and
administrative expenses.
PRO FORMA NINE MONTHS ENDED SEPTEMBER 27, 1997 COMPARED TO PRO FORMA NINE MONTHS
ENDED SEPTEMBER 28, 1996
The discussion that follows compares the Company's pro forma results of
operations for the nine months ended September 27, 1997 to the pro forma results
of operations for the nine months ended September 28, 1996. The actual results
of operations for the nine months ended September 27, 1997 have been adjusted
to: (i) eliminate the $22,666 non-recurring impact of the inventory write-up
resulting from the Company's application of purchase accounting in connection
with the October, 1996 Barnes-Hind Acquisition, (ii) exclude $1,085 in non-
recurring transitional administrative expenses incurred at the Barnes-Hind
corporate facility in Sunnyvale, California; (iii) reflect the $411 pro forma
reduction in interest expense resulting from the February 1997 refinancing of
the Company's bank credit agreement and the use of a portion of the net proceeds
of the Company's February 1997 initial public offering (and the subsequent over-
allotment sale of additional shares) to repay outstanding debt; (iv) eliminate
the $4,902 ($7,428 pre-tax) extraordinary write-off of capitalized financing
fees; and (v) reflect the as adjusted income tax expense at an estimated
effective income tax rate of 34%. The actual results of operations for the nine
months ended September 28, 1996 have been adjusted to give effect to: (i) the
Barnes-Hind Acquisition; (ii) the March, 1997 divestiture of the Barnes-Hind
U.S. Natural Touch product line; (iii) the elimination of the non-recurring
impact of the inventory step-up in connection with the June 1995 Wesley Jessen
Acquisition; (iv) the refinancing of the Company's then outstanding bank credit
agreement; (v) the Company's initial public offering (and the subsequent over-
allotment sale of additional shares) and the application of the net proceeds
therefrom, as if each had occurred on January 1, 1996; and (vi) taxes at an
estimated effective income tax rate of 34%.
Net sales for the nine months ended September 27, 1997 increased $21.4
million, or 11.3%, to $211.4 million from $190.0 million for the nine months
ended September 28, 1996. This increase resulted primarily from growth in sales
of the Company's disposable and planned replacement contact lenses, from $52.8
million to $71.6 million, a 35.7% increase. The Company believes sales increases
were due to the continued growing popularity of the Company's disposable lenses.
Domestic sales increased by 14.4% from $105.7 million to $121.0 million, while
sales in the rest of the world also increased by 7.3% from $84.2 million to
$90.4 million.
Gross profit for the nine months ended September 27, 1997 increased $21.3
million, or 17.8%, to $140.7 million from $119.4 million in the comparable 1996
period. Gross profit margin increased to 66.6% for the nine months ended
September 27, 1997 from 62.9% in the comparable period. This improvement is due
to realized operating efficiencies resulting from the initial cost reduction
measures implemented as part of the Barnes-Hind Acquisition. The higher gross
profit margin also is due to higher margins realized on the Company's disposable
and planned replacement lenses because of higher production volumes and
efficiencies as well as increased margins on the Company's conventional lens
product lines.
Marketing and administrative expenses for the nine months ended September
27, 1997 increased by $11.3 million, or 12.4%, to $103.0 million from $91.6
million for the nine months ended September 28, 1996. As a percentage of net
sales, marketing and administrative expenses increased slightly to 48.7% in the
1997 period from 48.2% in the 1996 period. This increase is largely due to
higher promotional spending for all product lines, in particular the former
Barnes-Hind conventional lens products, along with higher performance related
compensation expenses.
Research and development expenses for the nine months ended September 27,
1997 decreased by $0.3 million, or 3.7%, to $8.8 million from $9.2 million for
the nine months ended September 28, 1996. This decrease is due to operating
synergies being realized by the Company as a result of the Barnes-Hind
Acquisition, most notably in compensation-related expenses, partially offset by
higher spending related to investigating alternate production materials. As a
percentage of net sales, research and development expenses for the nine months
ended September 27, 1997 decreased to 4.2% from 4.8% in the 1996 period.
Income from operations for the nine months ended September 27, 1997
increased by $10.3 million to income of $29.5 million from $19.2 million for the
nine months ended September 28, 1996. This resulted from higher sales volume and
the substantial improvement in gross margin partially offset by the increase in
marketing and administrative expenses.
Page 16
<PAGE>
Other income for the nine months ended September 28, 1996 of $3.5 million
represents non-recurring licensing fee income. There was no such income in the
comparable 1997 period.
Net income for the nine months ended September 27, 1997 increased by $4.6
million to $16.8 million from $12.2 million for the nine months ended September
28, 1996. Excluding the 1996 license fee income, net income for the nine months
ended September 27, 1997 increased $6.9 million. This resulted from higher sales
volume and improvement in the Company's gross margins, offset by increased
spending in marketing and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through funds provided
from operations and through borrowings under a revolving credit facility. For
the nine months ended September 27, 1997, the Company generated approximately
$1.4 million in cash from operating activities, primarily as a result of
improvements in profitability and reductions in inventory, partially offset by
an increase in accounts receivable and payments made relating to the prior
year's performance related compensation, integration costs relating to the
Barnes-Hind Acquisition and income taxes. For the nine months ended September
28, 1996, the Company generated approximately $22.4 million in cash from
operating activities, primarily as a result of improvements in profitability and
decreases in accounts receivable and inventories and a decrease in accounts
payable. Since December 31, 1996, the Company has reduced its long-term debt by
$45.0 million, due entirely to the proceeds from the IPO and the Offering.
For the nine months ended September 27, 1997 and September 28, 1996, the
Company made capital expenditures of approximately $11.8 million and $3.8
million, respectively. The majority of these capital expenditures were for
facility and equipment improvement, information technology enhancements, and
site consolidations. The Company currently has budgeted approximately $8.4
million of capital expenditures for the remainder of 1997 to (i) facilitate the
consolidation of the businesses; (ii) complete the integration of the Company's
management information systems; and (iii) complete the automation of the
Company's Southampton manufacturing facility. The Company expects to fund these
capital expenditures primarily from cash generated from operating activities and
borrowings under its revolving credit facility.
In connection with the Wesley Jessen Acquisition, the Company initiated a
series of restructuring activities as part of its cost rationalization program.
As part of such acquisition, Schering-Plough agreed to incur the significant
one-time expenses associated with the elimination of approximately 430
positions. In addition, the Company expended $5.0 million in cash from June 29,
1995 through September 27, 1997 to close facilities. Following the Barnes-Hind
Acquisition, the Company expects to incur integration costs of approximately
$20.4 million, principally for severance costs and lease expenses on vacated
premises. Management expects that this integration will be substantially
completed by April 1999. These costs were recorded in connection with the
purchase accounting for the Barnes-Hind Acquisition. As of September 27, 1997,
the Company has paid $7.6 million of these integration costs.
As of September 27, 1997, the Company had approximately $77.0 million in
borrowing availability under the Amended Bank Agreement. The Amended Bank
Agreement imposes certain restrictions on the Company, including restrictions on
its ability to incur indebtedness, declare dividends or other distributions,
make investments and capital expenditures, grant liens, sell its assets and
engage in certain other activities. In addition, the indebtedness of the Company
under the Amended Bank Agreement is secured by substantially all of the assets
of the Company, including the Company's real and personal property, inventory,
accounts receivable, intellectual property and other tangible assets.
Management believes that, based on current levels of operations and
anticipated internal growth, cash flow from operations, potential borrowings
available under the Amended Bank Agreement and available cash on hand at
September 27, 1997 of $3.8 million, will be adequate over the next twelve months
to make required interest
Page 17
<PAGE>
payments on the Company's indebtedness, to fund anticipated capital expenditures
and working capital requirements, to support the aforementioned restructuring
and integration costs, and to enable the Company and its subsidiaries to comply
with the terms of their debt agreements. Any cash surplus remaining after these
payments will be used to reduce the outstanding revolving loans. However, actual
capital requirements may change, particularly as a result of any acquisitions
which the Company may pursue. The ability of the Company to meet its debt
service obligations and reduce its total debt will be dependent, however, upon
the future performance of the Company and its subsidiaries which, in turn, will
be subject to general economic conditions and to financial, business and other
factors, including factors beyond the Company's control. A significant portion
of the consolidated debt of the Company bears interest at floating rates;
therefore, the Company's financial condition is and will continue to be affected
by changes in prevailing interest rates. In December of 1996, the Company
purchased an interest rate cap on $35.0 million notional principal amount at a
fixed rate of 8.5%, which expires on December 31, 1999. The cap is intended to
provide partial protection from exposure relating to the Company's variable rate
debt instruments in the event of higher interest rates.
Approximately 43% of the Company's net sales for the nine months ended
September 27, 1997 were to international customers and the Company expects that
sales to international customers will continue to represent a material portion
of its net sales. Historically, fluctuations in foreign currency exchange rates
have had only a minor impact on the Company's results of operations and the
Company does not expect such fluctuations to be material in the foreseeable
future.
INFLATION
Management believes that inflation has not had a material impact on results
of operations for the Company during the nine months ended September 27, 1997
and September 28, 1996.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share," issued in February 1997, changes the method of calculating earnings per
share and will be effective for the Company's financial statements for the year
ending December 31, 1997. Earlier application is not permitted. However, the
Company is permitted to disclose pro forma earnings per share amounts computed
using this Statement in periods prior to adoption. Upon adoption, all prior
period earnings per share data presented shall be restated to conform to this
Statement. The calculation of earnings per share under SFAS No. 128 is simpler
than prior methods and more consistent with International Accounting Standards.
Given the Company's historical losses, common stock equivalents were excluded
from prior pro forma earnings per share calculations because they were anti-
dilutive. Therefore, adoption of this standard is not expected to have a
material impact on amounts previously reported as pro forma net loss per common
share.
As calculated under SFAS 128, pro forma basic and diluted earnings per
share for the Company, on the adjusted basis presented on page 14, would be as
follows:
<TABLE>
<CAPTION>
BASIC EARNINGS DILUTED EARNINGS
PER SHARE PER SHARE
--------------------------------------------
<S> <C> <C>
Three months ended September 27, 1997 $0.41 $0.36
Three months ended September 28, 1996 $0.10 $0.09
Nine months ended September 27, 1997 $0.98 $0.86
Nine months ended September 28, 1996 $0.70 $0.63
</TABLE>
Page 18
<PAGE>
SFAS No. 130, "Reporting Comprehensive Income," issued in June 1997, will
require the Company to disclose, in financial statement format, all non-owner
changes in equity. Such changes include, for example, cumulative foreign
currency translation adjustments, certain minimum pension liabilities and
unrealized gains and losses on available-for-sale securities. This Statement is
effective for fiscal years beginning after December 15, 1997 and requires
presentation of prior period financial statements for comparability purposes.
The Company expects to adopt this Statement beginning with its 1998 financial
statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," issued in June 1997, establishes standards for reporting
information about operating segments in annual financial statements and interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Operating segments
are components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. Generally,
financial information is required to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. The Company is currently evaluating the Statement, which
will be adopted in its financial statements for the year ending December 31,
1998.
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and
Results of Operation ("MD&A") contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"). Such forward-looking statements are based on the beliefs of
the Company's management as well as on assumptions made by and information
currently available to the Company at the time such statements were made. When
used in this MD&A, the words "anticipate," "believe," "estimate," "expect,"
"intends," and simular expressions, as they relate to the Company are intended
to identify forward-looking statements, which include statements relating to,
among other things, (i) the ability of the Company to continue to compete
successfully in the contact lens market; (ii) the anticipated benefits from new
product introductions; (iii) the completion of the integration of Barnes-Hind
with the Company; (iv) the strategic benefits of the Barnes-Hind Acquisition;
(v) the continued effectiveness of the Company's sales and marketing strategy;
and (vi) the ability of the Company to continue to successfully develop and
launch new products. Actual results could differ materially from those projected
in the forward-looking statements as a result of the matters discussed herein
and certain economic and business factors, some of which may be beyond the
control of the Company.
Page 19
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The following exhibits are filed herewith and made a part
hereof:
Exhibit No. Description of Exhibit
- ----------- ----------------------
4.1 Amended and Restated Credit Agreement, dated as of September 10,
1997, between the Company, Wesley Jessen Corporation, the various
lending institutions named therein and Bankers Trust Company, as
Agent.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K. The following report on Form 8-K was filed by the
Company during the quarterly period ended September 27, 1997:
Current Report on Form 8-K, dated July 31, 1997, filing press
release relating to second quarter earnings.
Page 20
<PAGE>
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.
Date: November 10, 1997 WESLEY JESSEN VISIONCARE, INC.
By /s/ Ronald J. Artale
____________________________
Ronald J. Artale
(Duly authorized officer,
Vice President and Controller)
Page 21
<PAGE>
EXHIBIT 4.1
[Conformed Copy with
Exhibits F and G
Conformed as Executed]
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
WESLEY JESSEN VISIONCARE, INC.,
WESLEY-JESSEN CORPORATION,
VARIOUS LENDING INSTITUTIONS,
and
BANKERS TRUST COMPANY,
AS AGENT
___________________________________________________
Dated as of February 19, 1997 and
amended and restated as of September 10, 1997
___________________________________________________
$135,000,000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Amount and Terms of Credit....................................... 1
1.01 Commitments....................................................... 1
1.02 Minimum Borrowing Amounts, etc.................................... 3
1.03 Notice of Borrowing............................................... 3
1.04 Disbursement of Funds............................................. 4
1.05 Notes............................................................. 5
1.06 Conversions....................................................... 6
1.07 Pro Rata Borrowings............................................... 6
1.08 Interest.......................................................... 6
1.09 Interest Periods.................................................. 7
1.10 Increased Costs, Illegality, etc.................................. 8
1.11 Compensation...................................................... 11
1.12 Change of Lending Office.......................................... 11
1.13 Replacement of Banks.............................................. 12
SECTION 2. Letters of Credit................................................ 13
2.01 Letters of Credit................................................. 13
2.02 Letter of Credit Requests; Notices of Issuance.................... 14
2.03 Agreement to Repay Letter of Credit Payments...................... 15
2.04 Letter of Credit Participations................................... 15
2.05 Increased Costs................................................... 18
SECTION 3. Fees; Commitments................................................ 18
3.01 Fees.............................................................. 18
3.02 Voluntary Termination or Reduction of Total Unutilized Revolving
Loan Commitment............................................... 19
3.03 Mandatory Adjustments of Commitments, etc......................... 20
SECTION 4. Payments......................................................... 23
4.01 Voluntary Prepayments............................................. 23
4.02 Mandatory Prepayments............................................. 24
4.03 Method and Place of Payment....................................... 24
4.04 Net Payments...................................................... 25
SECTION 5. Conditions Precedent............................................. 27
5.01 Execution of Agreement; Notes..................................... 27
5.02 No Default; Representations and Warranties........................ 27
5.03 Officer's Certificate............................................. 27
5.04 Opinions of Counsel............................................... 27
5.05 Corporate Proceedings............................................. 27
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
5.06 Adverse Change, etc............................................... 28
5.07 Litigation........................................................ 28
5.08 Approvals......................................................... 28
5.09 Consummation of the Transaction................................... 29
5.10 Original Credit Agreement......................................... 29
5.11 Security Documents Acknowledgments; Pledge Agreement;
Security Agreement; Mortgages................................. 29
5.12 Subsidiary Guaranty Acknowledgement............................... 31
5.13 Plans; Collective Bargaining Agreements; Existing Indebtedness
Agreements; Shareholders' Agreements; Management
Agreements; Employment Agreements; Tax Allocation
Agreements; Material Contracts................................ 31
5.14 Solvency Certificate; Evidence of Insurance....................... 32
5.15 Pro Forma Balance Sheets.......................................... 33
5.16 Projections....................................................... 33
5.17 Existing Indebtedness............................................. 33
5.18 Payment of Fees................................................... 33
5.19 Notice of Borrowing; Letter of Credit Request..................... 33
SECTION 6. Representations, Warranties and Agreements....................... 34
6.01 Corporate Status.................................................. 34
6.02 Corporate Power and Authority..................................... 34
6.03 No Violation...................................................... 34
6.04 Litigation........................................................ 35
6.05 Use of Proceeds; Margin Regulations............................... 35
6.06 Governmental Approvals............................................ 35
6.07 Investment Company Act............................................ 36
6.08 Public Utility Holding Company Act................................ 36
6.09 True and Complete Disclosure...................................... 36
6.10 Financial Condition; Financial Statements......................... 36
6.11 Security Interests................................................ 37
6.12 Existing Indebtedness............................................. 38
6.13 Transaction....................................................... 38
6.14 Special Purpose Corporation....................................... 38
6.15 Compliance with ERISA............................................. 38
6.16 Capitalization.................................................... 39
6.17 Subsidiaries...................................................... 40
6.18 Intellectual Property............................................. 40
6.19 Compliance with Statutes, etc..................................... 40
6.20 Environmental Matters............................................. 41
6.21 Properties........................................................ 41
6.22 Labor Relations................................................... 42
6.23 Tax Returns and Payments.......................................... 42
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
SECTION 7. Affirmative Covenants........................................... 42
7.01 Information Covenants............................................. 43
7.02 Books, Records and Inspections.................................... 46
7.03 Insurance......................................................... 46
7.04 Payment of Taxes.................................................. 46
7.05 Corporate Franchises.............................................. 47
7.06 Compliance with Statutes, etc..................................... 47
7.07 Compliance with Environmental Laws................................ 47
7.08 ERISA............................................................. 48
7.09 Good Repair....................................................... 48
7.10 End of Fiscal Years; Fiscal Quarters.............................. 49
7.11 Additional Security; Further Assurances........................... 49
7.12 Register.......................................................... 50
7.13 Maintenance of Corporate Separateness............................. 50
7.14 Foreign Subsidiaries Security..................................... 51
7.15 Contributions; Payments........................................... 52
7.16 Interest Rate Protection.......................................... 52
SECTION 8. Negative Covenants............................................... 52
8.01 Changes in Business............................................... 52
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc............ 53
8.03 Liens............................................................. 58
8.04 Indebtedness...................................................... 60
8.05 Advances, Investments and Loans................................... 62
8.06 Dividends, etc.................................................... 66
8.07 Transactions with Affiliates...................................... 68
8.08 Capital Expenditures.............................................. 68
8.09 Minimum Consolidated EBITDA....................................... 69
8.10 Interest Coverage Ratio........................................... 70
8.11 Leverage Ratio.................................................... 70
8.12 Limitation on Voluntary Payments and Modifications of
Indebtedness; Modifications of Certificate of Incorporation,
By-Laws and Certain Other Agreements; Issuance of Capital
Stock; etc.................................................... 71
8.13 Limitation on Certain Restrictions on Subsidiaries................ 72
8.14 Limitation on the Creation of Subsidiaries........................ 72
SECTION 9. Events of Default................................................ 73
9.01 Payments.......................................................... 73
9.02 Representations, etc.............................................. 73
9.03 Covenants......................................................... 73
9.04 Default Under Other Agreements.................................... 73
9.05 Bankruptcy, etc................................................... 73
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.06 ERISA............................................................. 74
9.07 Security Documents................................................ 74
9.08 Guaranties........................................................ 75
9.09 Judgments......................................................... 75
9.10 Ownership......................................................... 75
SECTION 10. Definitions..................................................... 76
SECTION 11. The Agent....................................................... 104
11.01 Appointment...................................................... 104
11.02 Delegation of Duties............................................. 104
11.03 Exculpatory Provisions........................................... 104
11.04 Reliance by Agent................................................ 105
11.05 Notice of Default................................................ 105
11.06 Non-Reliance on Agent and Other Banks............................ 105
11.07 Indemnification.................................................. 106
11.08 Agent in its Individual Capacity................................. 107
11.09 Holders.......................................................... 107
11.10 Resignation of the Agent; Successor Agent........................ 107
SECTION 12. Miscellaneous................................................... 108
12.01 Payment of Expenses, etc......................................... 108
12.02 Right of Setoff, Collateral Matters.............................. 108
12.03 Notices.......................................................... 109
12.04 Benefit of Agreement............................................. 109
12.05 No Waiver; Remedies Cumulative................................... 111
12.06 Payments Pro Rata................................................ 111
12.07 Calculations; Computations....................................... 112
12.08 Governing Law; Submission to Jurisdiction; Venue................. 112
12.09 Counterparts..................................................... 113
12.10 Effectiveness.................................................... 113
12.11 Headings Descriptive............................................. 114
12.12 Amendment or Waiver; etc......................................... 114
12.13 Survival......................................................... 116
12.14 Domicile of Loans................................................ 116
12.15 Confidentiality.................................................. 116
12.16 Waiver of Jury Trial............................................. 116
SECTION 13. Holdings Guaranty............................................... 117
13.01 The Guaranty..................................................... 117
13.02 Bankruptcy....................................................... 117
13.03 Nature of Liability.............................................. 117
13.04 Independent Obligation........................................... 118
</TABLE>
(iv)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
13.05 Authorization.................................................... 118
13.06 Reliance......................................................... 119
13.07 Subordination.................................................... 119
13.08 Waiver........................................................... 119
13.09 Nature of Liability.............................................. 121
</TABLE>
ANNEX I List of Banks and Commitments
ANNEX II Bank Addresses
ANNEX III Existing Letters of Credit
ANNEX IV Real Properties
ANNEX V Projections
ANNEX VI Subsidiaries
ANNEX VII Insurance
ANNEX VIII Existing Indebtedness
ANNEX IX Existing Liens
ANNEX X Asset Sales
ANNEX XI Capitalization
ANNEX XII Investments
ANNEX XIII Excluded Intellectual Property
ANNEX XIV Conflicts
EXHIBIT A-1 - Form of Notice of Borrowing
EXHIBIT A-2 - Form of Letter of Credit Request
EXHIBIT B-1 - Form of Revolving Note
EXHIBIT B-2 - Form of Swingline Note
EXHIBIT C - Form of Section 4.04(b)(ii) Certificate
EXHIBIT D - Form of Opinion of Kirkland & Ellis
EXHIBIT E - Form of Officers' Certificate
EXHIBIT F - Form of Security Documents Acknowledgement
EXHIBIT G - Form of Subsidiary Guaranty Acknowledgement
EXHIBIT H - Form of Assignment and Assumption Agreement
EXHIBIT I - Form of Intercompany Note
EXHIBIT J - Form of Solvency Certificate
EXHIBIT K - Form of Shareholder Subordinated Note
EXHIBIT L - Form of Borrower Subordinated Note
(v)
<PAGE>
CREDIT AGREEMENT, dated as of February 19, 1997 and amended and
restated as of September 10, 1997, among WESLEY JESSEN VISIONCARE, INC., a
Delaware corporation ("Holdings"), WESLEY-JESSEN CORPORATION, a Delaware
corporation (the "Borrower"), the lenders from time to time party hereto (each,
a "Bank" and, collectively, the "Banks"), and BANKERS TRUST COMPANY, as Agent
(in such capacity, the "Agent"). Unless otherwise defined herein, all
capitalized terms used herein and defined in Section 10 are used herein as so
defined.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Holdings, the Borrower, the Agent and the Original Banks are
parties to a Credit Agreement, dated as of February 19, 1997 (as the same has
been amended, modified and supplemented to but excluding the Restatement
Effective Date, the "Original Credit Agreement"); and
WHEREAS, subject to and upon the terms and conditions set forth
herein, the parties hereto wish to amend and restate the Original Credit
Agreement in the form of this Agreement;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
--------------------------
1.01 Commitments. (a) Subject to and upon the terms and conditions
-----------
herein set forth, each Bank severally agrees, at any time and from time to time
on and after the Restatement Effective Date and prior to the Maturity Date, to
make a revolving loan or loans (each, a "Revolving Loan" and, collectively, the
"Revolving Loans") to the Borrower, which Revolving Loans (i) shall be
denominated in U.S. Dollars, (ii) except as hereinafter provided, may, at the
option of the Borrower, be incurred and maintained as and/or converted into Base
Rate Loans or Eurodollar Loans, provided, that (x) all Revolving Loans made as
--------
part of the same Borrowing shall, unless otherwise specifically provided herein,
consist of Revolving Loans of the same Type and (y) unless the Agent has
determined that the Syndication Date has occurred (at which time this clause (y)
shall no longer be applicable), no more than three Borrowings of Revolving Loans
to be maintained as Eurodollar Loans may be incurred prior to the 90th day after
the Restatement Effective Date (each of which Borrowings of Eurodollar Loans may
only have an Interest Period of one month, and the first of which Borrowings may
only be made on a single date on or after the Restatement Effective Date and on
or before the sixth Business Day following the Restatement Effective Date, the
second of which Borrowings may only be made on the last day of the Interest
Period of the first such Borrowing and the third of which Borrowing
<PAGE>
may only be made on the last day of the Interest Period of the second such
Borrowing), (iii) may be repaid and reborrowed in accordance with the provisions
hereof and (iv) shall not exceed for any Bank at any time outstanding that
aggregate principal amount which, when combined with (I) the aggregate principal
amount of all other then outstanding Revolving Loans made by such Bank and (II)
such Bank's Percentage, if any, of the Swingline Loans then outstanding and the
Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid
with the proceeds of, and simultaneously with the incurrence of, Revolving Loans
or Swingline Loans) at such time, equals the Revolving Loan Commitment, if any,
of such Bank at such time.
(b) Subject to and upon the terms and conditions herein set forth,
BTCo in its individual capacity agrees to make at any time and from time to time
after the Restatement Effective Date and prior to the Swingline Expiry Date, a
loan or loans to the Borrower (each, a "Swingline Loan" and, collectively, the
"Swingline Loans"), which Swingline Loans (i) shall be made and maintained as
Base Rate Loans, (ii) shall be denominated in U.S. Dollars, (iii) may be repaid
and reborrowed in accordance with the provisions hereof, (iv) shall not exceed
in aggregate principal amount at any time outstanding, when combined with the
aggregate principal amount of all Revolving Loans then outstanding and the
Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid
with the proceeds of, and simultaneously with the incurrence of, Revolving Loans
or Swingline Loans) at such time, an amount equal to the Total Revolving Loan
Commitment then in effect and (v) shall not exceed in aggregate principal amount
at any time outstanding the Maximum Swingline Amount. Notwithstanding the
foregoing, during each period of fourteen consecutive days occurring prior to
the Swingline Expiry Date, there shall be at least one day on which there are no
outstanding Swingline Loans. BTCo shall not be obligated to make any Swingline
Loans at a time when a Bank Default exists unless BTCo has entered into
arrangements satisfactory to it and the Borrower to eliminate BTCo's risk with
respect to the Defaulting Bank's or Banks' participation in such Swingline
Loans, including by cash collateralizing such Defaulting Bank's or Banks'
Percentage of the outstanding Swingline Loans. BTCo will not make a Swingline
Loan after it has received written notice from the Borrower or the Required
Banks stating that a Default or an Event of Default exists until such time as
BTCo shall have received a written notice of (i) rescission of such notice from
the party or parties originally delivering the same or (ii) a waiver of such
Default or Event of Default from the Required Banks.
(c) On any Business Day, BTCo may, in its sole discretion, give
notice to the Banks that its outstanding Swingline Loans shall be funded with a
Borrowing of Revolving Loans (provided that each such notice shall be deemed to
--------
have been automatically given upon the occurrence of a Default or an Event of
Default under Section 9.05 or upon the exercise of any of the remedies provided
in the last paragraph of Section 9), in which case a Borrowing of Revolving
Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business Day by all
Banks pro rata based on each Bank's Percentage, and the proceeds thereof shall
--------
be applied directly to repay BTCo for such outstanding Swingline Loans.
-2-
<PAGE>
Each Bank hereby irrevocably agrees to make Base Rate Loans upon one Business
Day's notice pursuant to each Mandatory Borrowing in the amount and in the
manner specified in the preceding sentence and on the date specified in writing
by BTCo, notwithstanding (i) that the amount of the Mandatory Borrowing may not
comply with the Minimum Borrowing Amount otherwise required hereunder, (ii)
whether any conditions specified in Section 5 are then satisfied, (iii) whether
a Default or an Event of Default has occurred and is continuing, (iv) the date
of such Mandatory Borrowing and (v) any reduction in the Total Revolving Loan
Commitment after any such Swingline Loans were made. In the event that any
Mandatory Borrowing cannot for any reason be made on the date otherwise required
above (including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code in respect of the Borrower), each Bank
(other than BTCo) hereby agrees that it shall forthwith purchase from BTCo
(without recourse or warranty) such assignment of the outstanding Swingline
Loans as shall be necessary to cause the Banks to share in such Swingline Loans
ratably based upon their respective Percentages, provided that all interest
--------
payable on the Swingline Loans shall be for the account of BTCo until the date
the respective assignment is purchased and, to the extent attributable to the
purchased assignment, shall be payable to the Bank purchasing same from and
after such date of purchase.
1.02 Minimum Borrowing Amounts, etc. The aggregate principal amount
-------------------------------
of each Borrowing of Loans shall not be less than the Minimum Borrowing Amount
applicable to such Loans. More than one Borrowing may be incurred on any day;
provided, that at no time shall there be outstanding more than ten Borrowings of
- --------
Eurodollar Loans.
1.03 Notice of Borrowing. (a) Whenever the Borrower desires to
-------------------
incur Revolving Loans (excluding Borrowings of Revolving Loans pursuant to a
Mandatory Borrowing), it shall give the Agent at its Notice Office, prior to
11:00 A.M. (New York time), at least three Business Days' prior written notice
(or telephonic notice promptly confirmed in writing) of each Borrowing of
Eurodollar Loans and at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate
Loans to be made hereunder. Each such notice (each, a "Notice of Borrowing")
shall, except as provided in Section 1.10, be irrevocable, and, in the case of
each written notice and each confirmation of telephonic notice, shall be in the
form of Exhibit A-1, appropriately completed to specify (i) the aggregate
principal amount of Revolving Loans to be made pursuant to such Borrowing, (ii)
the date of such Borrowing (which shall be a Business Day) and (iii) whether the
respective Borrowing shall consist of Base Rate Loans or, to the extent
permitted hereunder, Eurodollar Loans and, if Eurodollar Loans, the Interest
Period to be initially applicable thereto. The Agent shall promptly give each
Bank written notice (or telephonic notice promptly confirmed in writing) of each
proposed Borrowing, of such Bank's proportionate share thereof, if any, and of
the other matters covered by the Notice of Borrowing.
-3-
<PAGE>
(b) (i) Whenever the Borrower desires to make a Borrowing of
Swingline Loans hereunder, it shall give BTCo not later than 12:00 Noon (New
York time) on the day such Swingline Loan is to be made, written notice (or
telephonic notice promptly confirmed in writing) of each Swingline Loan to be
made hereunder. Each such notice shall be irrevocable and shall specify in
each case (x) the date of such Borrowing (which shall be a Business Day) and (y)
the aggregate principal amount of the Swingline Loan to be made pursuant to such
Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(c), with the Borrower irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of Mandatory Borrowings as set forth in such
Section 1.01(c).
(c) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice permitted to be given hereunder, the
Agent or BTCo (in the case of a Borrowing of Swingline Loans) or the respective
Letter of Credit Issuer (in the case of Letters of Credit), as the case may be,
may prior to receipt of written confirmation act without liability upon the
basis of such telephonic notice, believed by the Agent, BTCo, or such Letter of
Credit Issuer, as the case may be, in good faith to be from an Authorized
Officer of the Borrower. In each such case, the Borrower hereby waives the
right to dispute the Agent's, BTCo's or such Letter of Credit Issuer's record of
the terms of such telephonic notice.
1.04 Disbursement of Funds. (a) No later than 1:00 P.M. (New York
---------------------
time) on the date specified in each Notice of Borrowing (or (x) in the case of
Swingline Loans, not later than 2:00 P.M. (New York time) on the date specified
in Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, not later than
12:00 Noon (New York time) on the date specified in Section 1.01(c)), each Bank
will make available its pro rata share of each Borrowing requested to be made on
--- ----
such date (or in the case of Swingline Loans, BTCo shall make available the full
amount thereof) in the manner provided below. All amounts shall be made
available to the Agent in U.S. Dollars and immediately available funds at the
Payment Office and the Agent promptly will make available to the Borrower by
depositing to its account at the Payment Office the aggregate of the amounts so
made available in the type of funds received. Unless the Agent shall have been
notified by any Bank prior to the date of Borrowing that such Bank does not
intend to make available to the Agent its portion of the Borrowing or Borrowings
to be made on such date, the Agent may assume that such Bank has made such
amount available to the Agent on such date of Borrowing, and the Agent, in
reliance upon such assumption, may (in its sole discretion and without any
obligation to do so) make available to the Borrower a corresponding amount. If
such corresponding amount is not in fact made available to the Agent by such
Bank and the Agent has made available same to the Borrower, the Agent shall be
entitled to recover such corresponding amount from such Bank. If such Bank does
not pay such corresponding amount forthwith upon the Agent's demand therefor,
the Agent shall promptly notify the Borrower, and the Borrower shall immediately
pay such corresponding amount to the Agent. The Agent shall also be entitled to
recover from the Bank or the Borrower, as the
-4-
<PAGE>
case may be, interest on such corresponding amount in respect of each day from
the date such corresponding amount was made available by the Agent to the
Borrower to the date such corresponding amount is recovered by the Agent, at a
rate per annum equal to (x) if paid by such Bank, the overnight Federal Funds
rate or (y) if paid by the Borrower, the then applicable rate of interest,
calculated in accordance with Section 1.08, for the respective Loans.
(b) Nothing herein shall be deemed to relieve any Bank from its
obligation to fulfill its commitments hereunder or to prejudice any rights which
the Borrower may have against any Bank as a result of any default by such Bank
hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal of,
-----
and interest on, all the Loans made to it by each Bank shall be evidenced (i) if
Revolving Loans, by a promissory note substantially in the form of Exhibit B-1
with blanks appropriately completed in conformity herewith (each, a "Revolving
Note" and, collectively, the "Revolving Notes") and (ii) if Swingline Loans, by
a promissory note substantially in the form of Exhibit B-2 with blanks
appropriately completed in conformity herewith (the "Swingline Note").
(b) The Revolving Note issued to each Bank shall (i) be executed by
the Borrower, (ii) be payable to the order of such Bank or its registered
assigns and be dated the Restatement Effective Date, (iii) be in a stated
principal amount equal to the Revolving Loan Commitment of such Bank and be
payable in the principal amount of the Revolving Loans evidenced thereby, (iv)
mature on the Maturity Date, (v) bear interest as provided in the appropriate
clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans,
as the case may be, evidenced thereby, (vi) be subject to voluntary prepayment
as provided in Section 4.01, and mandatory repayment as provided in Section
4.02, and (vii) be entitled to the benefits of this Agreement and the other
Credit Documents.
(c) The Swingline Note issued to BTCo shall (i) be executed by the
Borrower, (ii) be payable to the order of BTCo or its registered assigns and be
dated the Restatement Effective Date, (iii) be in a stated principal amount
equal to the Maximum Swingline Amount and be payable in the principal amount of
the Swingline Loans evidenced thereby, (iv) mature on the Swingline Expiry Date,
(v) bear interest as provided in Section 1.08 in respect of the Base Rate Loans
evidenced thereby, (vi) be subject to voluntary prepayment as provided in
Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii) be
entitled to the benefits of this Agreement and the other Credit Documents.
(d) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
shall not affect the Borrower's obligations in respect of such Loans.
-5-
<PAGE>
1.06 Conversions. The Borrower shall have the option to convert on
-----------
any Business Day occurring on or after the Restatement Effective Date, all or a
portion at least equal to the applicable Minimum Borrowing Amount of the
outstanding principal amount of the Revolving Loans owing by the Borrower into a
Borrowing or Borrowings of another Type of Loan; provided, that (i) except as
--------
otherwise provided in Section 1.10(b), no partial conversion of a Borrowing of
Eurodollar Loans shall reduce the outstanding principal amount of the Eurodollar
Loans made pursuant to such Borrowing to less than the Minimum Borrowing Amount
applicable thereto, (ii) Base Rate Loans may only be converted into Eurodollar
Loans if no payment Default, or Event of Default, is in existence on the date of
the conversion, (iii) Borrowings of Eurodollar Loans resulting from this Section
1.06 shall be limited in number as provided in Section 1.02 and (iv) unless the
Agent has determined that the Syndication Date has occurred (at which time this
clause (iv) shall no longer be applicable), prior to the 90th day after the
Restatement Effective Date, conversions of Base Rate Loans into Eurodollar Loans
may only be made if any such conversion is effective on the first day of the
first, second or third Interest Period referred to in clause (y) of the proviso
to each of Section 1.01(a)(ii) and then only so long as such conversion does not
result in a greater number of Borrowings of Eurodollar Loans prior to the 90th
day after the Restatement Effective Date as are permitted under such Sections.
Each such conversion shall be effected by the Borrower by giving the Agent at
its Notice Office, prior to 11:00 A.M. (New York time), at least three Business
Days' (or one Business Day's in the case of a conversion into Base Rate Loans)
prior written notice (or telephonic notice promptly confirmed in writing) (each,
a "Notice of Conversion") specifying the Revolving Loans to be so converted,
the Type of Revolving Loans to be converted into and, if to be converted into a
Borrowing of Eurodollar Loans, the Interest Period to be initially applicable
thereto. The Agent shall give each Bank prompt notice of any such proposed
conversion affecting any of its Revolving Loans.
1.07 Pro Rata Borrowings. All Borrowings of Revolving Loans under
-------------------
this Agreement shall be made by the Banks pro rata on the basis of their
--- ----
Revolving Loan Commitments. It is understood that no Bank shall be responsible
for any default by any other Bank of its obligation to make Revolving Loans
hereunder and that each Bank shall be obligated to make the Revolving Loans to
be made by it hereunder, regardless of the failure of any other Bank to fulfill
its commitments hereunder.
1.08 Interest. (a) The unpaid principal amount of each Base Rate
--------
Loan shall bear interest from the date of the Borrowing thereof until the
earlier of (i) the maturity (whether by acceleration or otherwise) of such Base
Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan
pursuant to Section 1.06, at a rate per annum which shall at all times be the
Applicable Base Rate Margin plus the Base Rate in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall bear
interest from the date of the Borrowing thereof until the earlier of (i) the
maturity (whether by acceleration or otherwise) of such Eurodollar Loan and (ii)
the conversion of such
-6-
<PAGE>
Eurodollar Loan to a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10(b),
as applicable, at a rate per annum which shall at all times be the Applicable
Eurodollar Margin plus the relevant Eurodollar Rate.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan shall bear interest at a rate per annum equal
to the greater of (x) the rate which is 2% in excess of the rate then borne by
such Loans and (y) the rate which is 2% in excess of the rate otherwise
applicable to Base Rate Loans from time to time. Interest which accrues under
this Section 1.08(c) shall be payable on demand.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on each
Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, on (x) the date
of any prepayment or repayment thereof (on the amount prepaid or repaid), (y)
the date of any conversion into a Base Rate Loan pursuant to Section 1.06, 1.09
or 1.10(b), as applicable (on the amount converted) and (z) the last day of each
Interest Period applicable thereto and, in the case of an Interest Period in
excess of three months, on each date occurring at three month intervals after
the first day of such Interest Period and (iii) in respect of each Loan, at
maturity (whether by acceleration or otherwise) and, after such maturity, on
demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 12.07(b).
(f) The Agent, upon determining the interest rate for any Borrowing
of Eurodollar Loans for any Interest Period, shall promptly notify the Borrower
and the Banks thereof.
1.09 Interest Periods. At the time the Borrower gives a Notice of
----------------
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or prior to 12:00 Noon (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable to a
Borrowing of Eurodollar Loans, it shall have the right to elect by giving the
Agent written notice (or telephonic notice promptly confirmed in writing) of
the Interest Period applicable to such Borrowing, which Interest Period shall,
at the option of the Borrower, be a one, two, three or six-month period or, to
the extent approved by all Banks, a twelve-month period. Notwithstanding
anything to the contrary contained above:
(i) all Eurodollar Loans comprising a Borrowing shall have the same
Interest Period;
(ii) the initial Interest Period for any Borrowing of Eurodollar
Loans shall commence on the date of such Borrowing (including the date of
any conversion
-7-
<PAGE>
from a Borrowing of Base Rate Loans) and each Interest Period occurring
thereafter in respect of such Borrowing shall commence on the day on which
the next preceding Interest Period expires;
(iii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day of
such calendar month;
(iv) if any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided, that if any Interest Period would
--------
otherwise expire on a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(v) no Interest Period for a Borrowing may be elected if it would
extend beyond the Maturity Date;
(vi) no Interest Period may be elected at any time when a payment
Default, or an Event of Default, is then in existence; and
(vii) no Interest Period shall extend beyond any date upon which a
mandatory commitment reduction is scheduled to occur under Section 3.03(b)
if, after giving effect to the selection of such Interest Period, the
aggregate principal amount of Revolving Loans maintained as Eurodollar
Loans with Interest Periods ending after such commitment reduction date
would exceed the aggregate principal amount of Revolving Loans permitted to
be outstanding after such commitment reduction.
If upon the expiration of any Interest Period, the Borrower has failed to elect,
or is not permitted to elect by virtue of the application of clause (vi) above,
a new Interest Period to be applicable to the respective Borrowing of Eurodollar
Loans as provided above, the Borrower shall be deemed to have elected to
convert such Borrowing into a Borrowing of Base Rate Loans effective as of the
expiration date of such current Interest Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that (x) in
---------------------------------
the case of clause (i) below, the Agent or (y) in the case of clauses (ii) and
(iii) below, any Bank, shall have determined (which determination shall, absent
manifest error, be final and conclusive and binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any Interest
Period, that, by reason of any changes arising after the date of this
Agreement affecting the interbank Eurodollar market, adequate and fair
means do not exist for
-8-
<PAGE>
ascertaining the applicable interest rate on the basis provided for in the
definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loans (other than any increased cost or reduction in the
amount received or receivable resulting from the imposition of or a change
in the rate of net income taxes or similar charges) because of (x) any
change since the Restatement Effective Date in any applicable law,
governmental rule, regulation, guideline, order or request (whether or not
having the force of law), or in the interpretation or administration
thereof and including the introduction of any new law or governmental rule,
regulation, guideline, order or request (such as, for example, but not
limited to a change in official reserve requirements, but, in all events,
excluding reserves required under Regulation D to the extent included in
the computation of the Eurodollar Rate) and/or (y) other circumstances
affecting such Bank, the interbank Eurodollar market or the position of
such Bank in such market; or
(iii) at any time since the Restatement Effective Date, that the
making or continuance of any Eurodollar Loan has become unlawful by
compliance by such Bank in good faith with any law, governmental rule,
regulation, guideline or order (or would conflict with any such
governmental rule, regulation, guideline or order not having the force of
law but with which such Bank customarily complies even though the failure
to comply therewith would not be unlawful), or has become impracticable as
a result of a contingency occurring after the Restatement Effective Date
which materially and adversely affects the interbank Eurodollar market;
then, and in any such event, such Bank (or the Agent in the case of clause (i)
above) shall (x) on such date and (y) as promptly as practicable (and in any
event within five Business Days) after the date on which such event no longer
exists give notice (by telephone confirmed in writing) to the Borrower and
(except in the case of clause (i)) to the Agent of such determination (which
notice the Agent shall promptly transmit to each of the other Banks).
Thereafter, (x) in the case of clause (i) above, Eurodollar Loans shall no
longer be available until such time as the Agent notifies the Borrower and the
Banks that the circumstances giving rise to such notice by the Agent no longer
exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower
with respect to Eurodollar Loans which have not yet been incurred shall be
deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the
Borrower agrees to pay to such Bank, upon written demand therefor (accompanied
by the written notice referred to below), such additional amounts (in the form
of an increased rate of, or a different method of calculating, interest or
otherwise as such Bank in its sole discretion shall determine) as shall be
required to compensate such Bank for such increased costs or reductions in
amounts received or receivable hereunder (a written notice as to the additional
amounts owed to such Bank, showing the basis for the calculation thereof,
submitted to the Borrower by such Bank shall, absent manifest error, be final
and conclusive and binding upon all parties hereto) and (z) in the
-9-
<PAGE>
case of clause (iii) above, the Borrower shall take one of the actions specified
in Section 1.10(b) as promptly as possible and, in any event, within the time
period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii) the
Borrower shall) either (i) if the affected Eurodollar Loan is then being made
pursuant to a Borrowing, cancel said Borrowing by giving the Agent telephonic
notice (confirmed promptly in writing) thereof on the same date that the
Borrower was notified by a Bank pursuant to Section 1.10(a)(ii) or (iii), or
(ii) if the affected Eurodollar Loan is then outstanding, upon at least three
Business Days' notice to the Agent, require the affected Bank to convert each
such Eurodollar Loan into a Base Rate Loan (which conversion, in the case of the
circumstances described in Section 1.10(a)(iii), shall occur no later than the
last day of the Interest Period then applicable to such Eurodollar Loan (or such
earlier date as shall be required by applicable law)); provided, that if more
--------
than one Bank is affected at any time, then all affected Banks must be treated
the same pursuant to this Section 1.10(b).
(c) If any Bank shall have determined that after the Restatement
Effective Date, the adoption or effectiveness of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by the National Association of
Insurance Commissioners ("NAIC") or any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by such Bank or any corporation controlling such Bank with any
request or directive regarding capital adequacy (whether or not having the force
of law) of the NAIC or any such authority, central bank or comparable agency,
has or would have the effect of reducing the rate of return on such Bank's or
such other corporation's capital or assets as a consequence of such Bank's
Revolving Loan Commitments or obligations hereunder to a level below that which
such Bank or such other corporation could have achieved but for such adoption,
effectiveness, change or compliance (taking into consideration such Bank's or
such other corporation's policies with respect to capital adequacy), then from
time to time, upon written demand by such Bank (with a copy to the Agent),
accompanied by the notice referred to in the last sentence of this clause (c),
the Borrower agrees to pay to such Bank such additional amount or amounts as
will compensate such Bank or such other corporation for such reduction. Each
Bank, upon determining in good faith that any additional amounts will be payable
pursuant to this Section 1.10(c), will give prompt written notice thereof to
the Borrower, which notice shall set forth the basis of the calculation of such
additional amounts, although the failure to give any such notice shall not
release or diminish the Borrower's obligations to pay additional amounts
pursuant to this Section 1.10(c) upon the subsequent receipt of such notice.
1.11 Compensation. The Borrower agrees to compensate each Bank,
------------
promptly upon its written request (which request shall set forth the basis for
requesting such compensation and shall be made through the Agent), for all
reasonable losses, expenses and liabilities (including, without limitation, any
loss, expense or liability incurred by reason
-10-
<PAGE>
of the liquidation or reemployment of deposits or other funds required by such
Bank to fund its Eurodollar Loans but excluding loss of anticipated profit with
respect to any Loans) which such Bank may sustain: (i) if for any reason (other
than a default by such Bank or the Agent) a Borrowing of Eurodollar Loans does
not occur on a date specified therefor in a Notice of Borrowing or Notice of
Conversion (whether or not withdrawn by the Borrower or deemed withdrawn
pursuant to Section 1.10(a)); (ii) if any repayment (including any repayment
made pursuant to Section 4.02 or as a result of an acceleration of the Loans
pursuant to Section 9) or conversion of any Eurodollar Loans occurs on a date
which is not the last day of an Interest Period applicable thereto; (iii) if any
prepayment of any Eurodollar Loans is not made on any date specified in a notice
of prepayment given by the Borrower; or (iv) as a consequence of (x) any other
default by the Borrower to repay its Eurodollar Loans when required by the terms
of this Agreement or (y) an election made pursuant to Section 1.10(b).
Calculation of all amounts payable to a Bank under this Section 1.11 shall be
made as though that Bank had actually funded its relevant Eurodollar Loan
through the purchase of a Eurodollar deposit bearing interest at the Eurodollar
Rate in an amount equal to the amount of that Loan, having a maturity comparable
to the relevant Interest Period and through the transfer of such Eurodollar
deposit from an offshore office of that Bank to a domestic office of that Bank
in the United States of America; provided, however, that each Bank may fund each
-------- -------
of its Eurodollar Loans in any manner it sees fit and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this Section
1.11. It is further understood and agreed that if any repayment of Eurodollar
Loans pursuant to Section 4.01 or any conversion of Eurodollar Loans pursuant to
Section 1.06 in either case occurs on a date which is not the last day of an
Interest Period applicable thereto, such repayment or conversion shall be
accompanied by any amounts owing to any Bank pursuant to this Section 1.11.
1.12 Change of Lending Office. Each Bank agrees that, upon the
------------------------
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), 1.10(c), 2.05 or 4.04 with respect to such Bank, it will, if requested by
the Borrower, use reasonable efforts (subject to overall policy considerations
of such Bank) to designate another lending office for any Revolving Loans or
Letters of Credit affected by such event; provided, that such designation is
--------
made on such terms that, in the sole judgment of such Bank, such Bank and its
lending office suffer no economic, legal or regulatory disadvantage, with the
object of avoiding the consequences of the event giving rise to the operation of
any such Section. Nothing in this Section 1.12 shall affect or postpone any of
the obligations of the Borrower or the right of any Bank provided in Section
1.10, 2.05 or 4.04.
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<PAGE>
1.13 Replacement of Banks. (x) If any Bank becomes a Defaulting
--------------------
Bank, (y) upon the occurrence of any event giving rise to the operation of
Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with
respect to any Bank which results in such Bank charging to the Borrower
increased costs in excess of those being generally charged by the other Banks or
(z) in the case of a refusal by a Bank to consent to a proposed change, waiver,
discharge or termination with respect to this Agreement which has been approved
by the Required Banks as provided in Section 12.12(b), the Borrower shall have
the right, if no payment Default, or Event of Default, then exists, to replace
such Bank (the "Replaced Bank") with one or more other Eligible Transferee or
Transferees, none of whom shall constitute a Defaulting Bank at the time of such
replacement (collectively, the "Replacement Bank") reasonably acceptable to the
Agent, provided that (i) at the time of any replacement pursuant to this Section
--------
1.13, the Replacement Bank shall enter into one or more Assignment and
Assumption Agreements pursuant to Section 12.04(b) (and with all fees payable
pursuant to said Section 12.04(b) to be paid by the Replacement Bank) pursuant
to which the Replacement Bank shall acquire the Revolving Loan Commitment and
outstanding Revolving Loans of, and participations in Letters of Credit by, the
Replaced Bank and, in connection therewith, shall pay to (x) the Replaced Bank
in respect thereof an amount equal to the sum of (A) an amount equal to the
principal of, and all accrued interest on, all outstanding Revolving Loans of
the Replaced Bank, (B) an amount equal to all Unpaid Drawings that have been
funded by (and not reimbursed to) such Replaced Bank, together with all then
unpaid interest with respect thereto at such time and (C) an amount equal to all
accrued, but theretofore unpaid, Fees owing to the Replaced Bank pursuant to
Section 3.01, (y) the respective Letter of Credit Issuer an amount equal to such
Replaced Bank's Percentage of any Unpaid Drawing (which at such time remains an
Unpaid Drawing) with respect to a Letter of Credit issued by it to the extent
such amount was not theretofore funded by such Replaced Bank and (z) BTCo an
amount equal to such Replaced Bank's Percentage of any Mandatory Borrowing to
the extent such amount was not theretofore funded by such Replaced Bank, and
(ii) all obligations (including, without limitation, all such amounts, if any,
due and owing under Section 1.11) of the Borrower due and owing to the Replaced
Bank (other than those specifically described in clause (i) above in respect of
which the assignment purchase price has been, or is concurrently being, paid)
shall be paid in full to such Replaced Bank concurrently with such replacement.
Upon the execution of the respective Assignment and Assumption Agreements, the
payment of amounts referred to in clauses (i) and (ii) above, recordation of the
assignment on the Register by the Agent pursuant to Section 7.12 and, if so
requested by the Replacement Bank, delivery to the Replacement Bank of the
appropriate Note or Notes executed by the Borrower, (x) the Replacement Bank
shall become a Bank hereunder and the Replaced Bank shall cease to constitute a
Bank hereunder, except with respect to indemnification provisions under this
Agreement, which shall survive as to such Replaced Bank and (y) Annex I hereto
shall be deemed modified to reflect the changed Revolving Loan Commitments
resulting from the assignment from the Replaced Bank to the Replacement Bank.
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<PAGE>
SECTION 2. Letters of Credit.
-----------------
2.01 Letters of Credit. (a) Subject to and upon the terms and
-----------------
conditions herein set forth, the Borrower may request a Letter of Credit Issuer
at any time and from time to time on or after the Restatement Effective Date and
prior to the Maturity Date to issue, for the account of the Borrower and in
support of, (x) trade obligations of the Borrower or any of its Subsidiaries
that arise in the ordinary course of business and are in respect of general
corporate purposes of the Borrower or its Subsidiaries, as the case may be,
and/or (y) on a standby basis, L/C Supportable Indebtedness, and subject to and
upon the terms and conditions herein set forth each Letter of Credit Issuer
agrees to issue from time to time, irrevocable letters of credit in such form as
may be approved by such Letter of Credit Issuer (each such letter of credit, a
"Letter of Credit" and, collectively, the "Letters of Credit"). Annex III
contains a description of all letters of credit issued by BTCo pursuant to the
Original Credit Agreement and which remain outstanding on the Restatement
Effective Date. Each such letter of credit, including any extension thereof
(each an "Existing Letter of Credit") shall constitute a "Letter of Credit" for
all purposes of this Agreement and shall be deemed issued for purposes of
Sections 2.04(a), 3.01(b) and 3.01(c) on the Restatement Effective Date.
Notwithstanding the foregoing, no Letter of Credit Issuer shall be under any
obligation to issue any Letter of Credit if at the time of such issuance:
(i) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain such Letter of
Credit Issuer from issuing such Letter of Credit or any requirement of law
applicable to such Letter of Credit Issuer or any request or directive
(whether or not having the force of law) from any governmental authority
with jurisdiction over such Letter of Credit Issuer shall prohibit, or
request that such Letter of Credit Issuer refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular or shall
impose upon such Letter of Credit Issuer with respect to such Letter of
Credit any restriction or reserve or capital requirement (for which such
Letter of Credit Issuer is not otherwise compensated) not in effect on the
date hereof, or any unreimbursed loss, cost or expense which was not
applicable, in effect or known to such Letter of Credit Issuer as of the
date hereof and which such Letter of Credit Issuer in good faith deems
material to it; or
(ii) such Letter of Credit Issuer shall have received notice from the
Required Banks prior to the issuance of such Letter of Credit of the type
described in clause (vi) of Section 2.01(b).
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) at such time, would
exceed either (x) $23,000,000 or (y) when added to the aggregate principal
amount of all Revolving Loans and Swingline Loans then
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<PAGE>
outstanding, the Total Revolving Loan Commitment at such time; (ii) (x) each
standby Letter of Credit shall have an expiry date occurring not later than one
year (or, in the case of standby Letters of Credit issued in support of Foreign
Subsidiary Working Capital Indebtedness, three years, provided, that the
--------
aggregate Stated Amount of all such Letters of Credit shall not exceed
$10,000,000) after such standby Letter of Credit's date of issuance, provided,
--------
that any standby Letter of Credit may be automatically extendable for periods of
up to one year so long as such standby Letter of Credit provides that the
respective Letter of Credit Issuer retains an option, satisfactory to such
Letter of Credit Issuer, to terminate such standby Letter of Credit within a
specified period of time prior to each scheduled extension date and (y) each
trade Letter of Credit shall have an expiry date occurring not later than 180
days after such trade Letter of Credit's date of issuance; (iii) (x) no standby
Letter of Credit shall have an expiry date occurring later than the Business Day
next preceding the Maturity Date and (y) no trade Letter of Credit shall have an
expiry date occurring later than 30 days prior to the Maturity Date; (iv) each
Letter of Credit shall be denominated in U.S. Dollars and payable on a sight
basis; (v) the Stated Amount of each Letter of Credit shall not be less than
$100,000 or such lesser amount as is acceptable to the Letter of Credit Issuer;
and (vi) no Letter of Credit Issuer will issue any Letter of Credit after it has
received written notice from the Borrower or the Required Banks stating that a
Default or an Event of Default exists until such time as such Letter of Credit
Issuer shall have received a written notice of (i) rescission of such notice
from the party or parties originally delivering the same or (ii) a waiver of
such Default or Event of Default by the Required Banks.
(c) Notwithstanding the foregoing, in the event a Bank Default
exists, no Letter of Credit Issuer shall be required to issue any Letter of
Credit unless the respective Letter of Credit Issuer has entered into
arrangements satisfactory to it and the Borrower to eliminate such Letter of
Credit Issuer's risk with respect to the participation in Letters of Credit of
the Defaulting Bank or Banks, including by cash collateralizing such Defaulting
Bank's or Banks' Percentage of the Letter of Credit Outstandings.
2.02 Letter of Credit Requests; Notices of Issuance. (a) Whenever
----------------------------------------------
it desires that a Letter of Credit be issued, the Borrower shall give the Agent
and the respective Letter of Credit Issuer written notice (or telephonic notice
confirmed in writing) thereof prior to 12:00 Noon (New York time) at least five
Business Days (or such shorter period as may be acceptable to such Letter of
Credit Issuer) prior to the proposed date of issuance (which shall be a Business
Day) which written notice shall be in the form of Exhibit A-2 (each such notice,
a "Letter of Credit Request"). Each Letter of Credit Request shall include any
other documents as the respective Letter of Credit Issuer customarily requires
in connection therewith.
(b) Each Letter of Credit Issuer shall, promptly after the date of
each issuance of or amendment or modification to a Letter of Credit by it, give
the Agent, each Bank and the Borrower written notice of the issuance of or
amendment or modification to
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<PAGE>
such Letter of Credit, accompanied by a copy to the Agent of such Letter of
Credit or Letters of Credit or such amendment or modification.
2.03 Agreement to Repay Letter of Credit Payments. (a) The Borrower
--------------------------------------------
hereby agrees to reimburse the respective Letter of Credit Issuer, by making
payment to the Agent in immediately available funds at the Payment Office, for
any payment or disbursement made by such Letter of Credit Issuer under any
Letter of Credit issued by it (each such amount so paid or disbursed until
reimbursed, an "Unpaid Drawing") no later than one Business Day following the
date of such payment or disbursement, with interest on the amount so paid or
disbursed by such Letter of Credit Issuer, to the extent not reimbursed prior
to 1:00 P.M. (New York time) on the date of such payment or disbursement, from
and including the date paid or disbursed to but not including the date such
Letter of Credit Issuer is reimbursed therefor at a rate per annum which shall
be the Applicable Base Rate Margin plus the Base Rate as in effect from time to
time (plus an additional 2% per annum if not reimbursed by the third Business
Day after the date of such payment or disbursement), such interest also to be
payable on demand. Each Letter of Credit Issuer shall provide the Borrower
prompt notice of any payment or disbursement made by it under any Letter of
Credit issued by it, although the failure of, or delay in, giving any such
notice shall not release or diminish the obligations of the Borrower under this
Section 2.03(a) or under any other Section of this Agreement.
(b) The Borrower's obligation under this Section 2.03 to reimburse
the respective Letter of Credit Issuer with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower may have or have had against such Letter
of Credit Issuer, the Agent or any Bank, including, without limitation, any
defense based upon the failure of any drawing under a Letter of Credit issued by
it to substantially conform to the terms of the Letter of Credit or any
nonapplication or misapplication by the beneficiary of the proceeds of such
drawing; provided, however, that the Borrower shall not be obligated to
-------- -------
reimburse such Letter of Credit Issuer for any wrongful payment made by such
Letter of Credit Issuer under a Letter of Credit issued by it as a result of
acts or omissions constituting willful misconduct or gross negligence on the
part of such Letter of Credit Issuer.
2.04 Letter of Credit Participations. (a) Immediately upon the
-------------------------------
issuance by a Letter of Credit Issuer of any Letter of Credit, such Letter of
Credit Issuer shall be deemed to have sold and transferred to each other Bank,
and each such Bank (each, a "Participant") shall be deemed irrevocably and
unconditionally to have purchased and received from such Letter of Credit
Issuer, without recourse or warranty, an undivided interest and participation,
to the extent of such Participant's Percentage, in such Letter of Credit, each
substitute Letter of Credit, each drawing made thereunder and the obligations of
the Borrower under this Agreement with respect thereto (although Letter of
Credit Fees shall be payable directly to the Agent for the account of the Banks
as provided in Section 3.01(b) and the Participants shall have no right to
receive any portion of any Facing Fees)
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<PAGE>
and any security therefor or guaranty pertaining thereto. Upon any change in the
Revolving Loan Commitments of the Banks pursuant to Section 1.13 or 12.04(b) or
otherwise, it is hereby agreed that, with respect to all outstanding Letters of
Credit and Unpaid Drawings, there shall be an automatic adjustment to the
participations pursuant to this Section 2.04 to reflect the new Percentages of
the assigning and assignee Banks.
(b) In determining whether to pay under any Letter of Credit, no
Letter of Credit Issuer shall have any obligation relative to the Participants
other than to determine that any documents required to be delivered under such
Letter of Credit have been delivered and that they appear to comply on their
face with the requirements of such Letter of Credit. Any action taken or
omitted to be taken by any Letter of Credit Issuer under or in connection with
any Letter of Credit issued by it if taken or omitted in the absence of gross
negligence or willful misconduct, shall not create for such Letter of Credit
Issuer any resulting liability.
(c) In the event that any Letter of Credit Issuer makes any payment
under any Letter of Credit issued by it and the Borrower shall not have
reimbursed such amount in full to such Letter of Credit Issuer pursuant to
Section 2.03(a), such Letter of Credit Issuer shall promptly notify the Agent,
and the Agent shall promptly notify each Participant of such failure, and each
Participant shall promptly and unconditionally pay to the Agent for the account
of such Letter of Credit Issuer, the amount of such Participant's Percentage of
such payment in U.S. Dollars and in same day funds; provided, however, that no
-------- -------
Participant shall be obligated to pay to the Agent its Percentage of such
unreimbursed amount for any wrongful payment made by such Letter of Credit
Issuer under a Letter of Credit issued by it as a result of acts or omissions
constituting willful misconduct or gross negligence on the part of such Letter
of Credit Issuer. If the Agent so notifies any Participant required to fund a
payment under a Letter of Credit prior to 11:00 A.M. (New York time) on any
Business Day, such Participant shall make available to the Agent for the account
of the respective Letter of Credit Issuer such Participant's Percentage of the
amount of such payment on such Business Day in same day funds. If and to the
extent such Participant shall not have so made its Percentage of the amount of
such payment available to the Agent for the account of the respective Letter of
Credit Issuer, such Participant agrees to pay to the Agent for the account of
such Letter of Credit Issuer, forthwith on demand such amount, together with
interest thereon, for each day from such date until the date such amount is paid
to the Agent for the account of such Letter of Credit Issuer at the overnight
Federal Funds rate. The failure of any Participant to make available to the
Agent for the account of the respective Letter of Credit Issuer its Percentage
of any payment under any Letter of Credit issued by it shall not relieve any
other Participant of its obligation hereunder to make available to the Agent
for the account of such Letter of Credit Issuer its Percentage of any payment
under any such Letter of Crediton the date required, as specified above, but
no Participant shall be responsible for the failure of any other Participant to
make available to the Agent for the account of such Letter of Credit Issuer such
other Participant's Percentage of any such payment.
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<PAGE>
(d) Whenever any Letter of Credit Issuer receives a payment of a
reimbursement obligation as to which the Agent has received for the account of
such Letter of Credit Issuer any payments from the Participants pursuant to
clause (c) above, such Letter of Credit Issuer shall promptly pay to the Agent
and the Agent shall promptly pay to each Participant which has paid its
Percentage thereof, in U.S. Dollars and in same day funds, an amount equal to
such Participant's Percentage of the principal amount thereof and interest
thereon accruing after the purchase of the respective participations.
(e) The obligations of the Participants to make payments to the Agent
for the account of the respective Letter of Credit Issuer with respect to
Letters of Credit issued by it shall be irrevocable and not subject to
counterclaim, set-off or other defense or any other qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances, including, without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other right
which the Borrower may have at any time against a beneficiary named in a
Letter of Credit, any transferee of any Letter of Credit (or any Person for
whom any such transferee may be acting), the Agent, any Letter of Credit
Issuer, any Bank, or other Person, whether in connection with this
Agreement, any Letter of Credit, the transactions contemplated herein or
any unrelated transactions (including any underlying transaction between
the Borrower or any of its Subsidiaries and the beneficiary named in any
such Letter of Credit);
(iii) any draft, certificate 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;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
2.05 Increased Costs. If after the Restatement Effective Date, the
---------------
adoption or effectiveness of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Letter of Credit
Issuer or any Participant with any request or directive (whether or not having
the force of law) by any such authority, central bank or comparable agency shall
either (i) impose, modify or make applicable any reserve, deposit, capital
adequacy or similar requirement against Letters of Credit issued by such Letter
of Credit Issuer
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<PAGE>
or such Participant's participation therein, or (ii) impose on any Letter of
Credit Issuer or any Participant any other conditions affecting this Agreement,
any Letter of Credit or such Participant's participation therein; and the result
of any of the foregoing is to increase the cost to such Letter of Credit Issuer
or such Participant of issuing, maintaining or participating in any Letter of
Credit, or to reduce the amount of any sum received or receivable by such Letter
of Credit Issuer or such Participant hereunder, then, upon written demand to the
Borrower by such Letter of Credit Issuer or such Participant (a copy of which
notice shall be sent by such Letter of Credit Issuer or such Participant to the
Agent), accompanied by the certificate described in the last sentence of this
Section 2.05, the Borrower shall pay to such Letter of Credit Issuer or such
Participant such additional amount or amounts as will compensate such Letter of
Credit Issuer or such Participant for such increased cost or reduction. A
certificate submitted to the Borrower by such Letter of Credit Issuer or such
Participant, as the case may be (a copy of which certificate shall be sent by
such Letter of Credit Issuer or such Participant to the Agent), setting forth
the basis for the determination of such additional amount or amounts necessary
to compensate such Letter of Credit Issuer or such Participant as aforesaid
shall be final and conclusive and binding on the Borrower absent manifest error,
although the failure to deliver any such certificate shall not release or
diminish the Borrower's obligations to pay additional amounts pursuant to this
Section 2.05 upon subsequent receipt of such certificate.
SECTION 3. Fees; Commitments.
-----------------
3.01 Fees. (a) The Borrower shall pay to the Agent for distribution
----
to each Non-Defaulting Bank a commitment fee (the "Commitment Fee") for the
period from the Restatement Effective Date to but not including the date the
Total Revolving Loan Commitment has been terminated, computed at a rate for each
day equal to the Applicable Commitment Fee Percentage on the daily Unutilized
Revolving Loan Commitment of such Non-Defaulting Bank. Accrued Commitment Fees
shall be due and payable in arrears on each Quarterly Payment Date and the date
upon which the Total Revolving Loan Commitment is terminated.
(b) The Borrower shall pay to the Agent for the account of the Banks
pro rata on the basis of their Percentages, a fee in respect of each Letter of
- --- ----
Credit (the "Letter of Credit Fee") computed at a rate per annum equal to the
Applicable Eurodollar Margin then in effect on the daily Stated Amount of such
Letter of Credit. Accrued Letter of Credit Fees shall be due and payable
quarterly in arrears on each Quarterly Payment Date and upon the first day after
the termination of the Total Revolving Loan Commitment upon which no Letters of
Credit remain outstanding.
(c) The Borrower shall pay to the Agent for the account of the
respective Letter of Credit Issuer a fee in respect of each Letter of Credit
issued by such Letter of Credit Issuer (the "Facing Fee") computed at the rate
of 1/4 of 1% per annum on the daily Stated Amount of such Letter of Credit;
provided, that in no event shall the annual Facing Fee with respect to each
- --------
Letter of Credit be less than $500; it being agreed that, on the date
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<PAGE>
of issuance of any Letter of Credit and on each anniversary thereof prior to the
termination of such Letter of Credit, if $500 will exceed the amount of Facing
Fees that will accrue with respect to such Letter of Credit for the immediately
succeeding 12-month period, the full $500 shall be payable on the date of
issuance of such Letter of Credit and on each such anniversary thereof prior to
the termination of such Letter of Credit. Except as provided in the immediately
preceding sentence, accrued Facing Fees shall be due and payable quarterly in
arrears on each Quarterly Payment Date and upon the first day after the
termination of the Total Revolving Loan Commitment upon which no Letters of
Credit remain outstanding.
(d) The Borrower hereby agrees to pay directly to the respective
Letter of Credit Issuer upon each issuance of, payment under, and/or amendment
of, a Letter of Credit issued by it such amount as shall at the time of such
issuance, payment or amendment be the administrative charge which such Letter
of Credit Issuer is customarily charg ing for issuances of, payments under or
amendments of, letters of credit issued by it.
(e) The Borrower shall pay to the Agent, for its own account, such
fees as may be agreed to from time to time between the Borrower and the Agent,
when and as due.
(f) All computations of Fees shall be made in accordance with Section
12.07(b).
3.02 Voluntary Termination or Reduction of Total Unutilized Revolving
----------------------------------------------------------------
Loan Commitment. (a) Upon at least two Business Days' prior written notice (or
- ---------------
telephonic notice promptly confirmed in writing) to the Agent at its Notice
Office (which notice the Agent shall promptly transmit to each of the Banks),
the Borrower shall have the right, without premium or penalty, to terminate or
partially reduce the Total Unutilized Revolving Loan Commitment; provided that
--------
(x) any such termination or partial reduction shall apply to proportionately and
permanently reduce the Revolving Loan Commitment of each Bank and (y) any
partial reduction pursuant to this Section 3.02(a) shall be in the amount of at
least $1,000,000.
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
12.12(b), the Borrower shall have the right, upon five Business Days' prior
written notice to the Agent at its Notice Office (which notice the Agent shall
promptly transmit to each of the Banks), to terminate the entire Revolving Loan
Commitment of such Bank, so long as all Revolving Loans, together with accrued
and unpaid interest, Fees and all other amounts, due and owing to such Bank are
repaid concurrently with the effectiveness of such termination pursuant to
Section 4.01(b) and the Borrower shall pay to the Agent at such time an amount
in cash and/or Cash Equivalents equal to such Bank's Percentage of the
outstanding Letters of Credit (which cash and/or Cash Equivalents shall be held
by the Agent as security for the obligations of the Borrower hereunder in
respect of the outstanding Letters of Credit
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<PAGE>
pursuant to a cash collateral agreement to be entered into in form and substance
reasonably satisfactory to the Agent, which shall permit certain investments in
Cash Equivalents reasonably satisfactory to the Agent until the proceeds are
applied to the secured obligations) (at which time Annex I shall be deemed
modified to reflect such changed amounts), and at such time, such Bank shall no
longer constitute a "Bank" for purposes of this Agreement, except with respect
to indemnifications under this Agreement (including, without limitation,
Sections 1.10, 1.11, 2.05, 4.04, 12.01 and 12.06), which shall survive as to
such repaid Bank.
3.03 Mandatory Adjustments of Commitments, etc. (a) The Total
------------------------------------------
Revolving Loan Commitment (and the Revolving Loan Commitment of each Bank) shall
terminate on the earlier of (x) the date on which a Change of Control Event
occurs and (y) the Maturity Date.
(b) The Total Revolving Loan Commitment shall be reduced (i) on the
third anniversary of the Restatement Effective Date, by $20,000,000 and (ii) on
the fourth anniversary of the Restatement Effective Date, by $20,000,000.
(c) In addition to any other mandatory commitment reduction pursuant
to this Section 3.03 but except as otherwise provided in Section 3.03(h) below,
on the third Business Day after the date of receipt thereof by Holdings and/or
any of its Subsidiaries of Proceeds from any Asset Sale (or, in the case of an
Asset Sale in which payments to Holdings or any of its Subsidiaries originate
from outside the United States, within five Business Days after the date of
receipt of such Proceeds), the Total Revolving Loan Commitment shall be
permanently reduced by an amount equal to 100% (or, if on the date of any Asset
Sale (i) no Default or Event of Default then exists and (ii) the Pro Forma
Leverage Ratio is less than 3.00:1.00, 75%) of the Net Proceeds from such Asset
Sale, provided that with respect to no more than (x) $5,000,000 in the aggregate
--------
of the Net Proceeds received in connection with any West Coast Asset Sale and
(y) $5,000,000 in the aggregate of the Net Proceeds received in connection with
all other Asset Sales in any fiscal year of the Borrower, the Net Proceeds
therefrom shall not give rise to a reduction of the Total Revolving Loan
Commitment on such date pursuant to this Section 3.03(c) to the extent that no
payment Default, or Event of Default, then exists and the Borrower delivers
a certificate to the Agent on or prior to such date stating that such Net
Proceeds shall be used to purchase assets used or to be used in the businesses
referred to in Section 8.01(a) (including, without limitation, capital stock of
a corporation engaged in any such business) within one year following the date
of receipt of such Proceeds from such Asset Sale (which certificate shall set
forth the estimates of the proceeds to be so expended), provided, that (1) if
--------
all or any portion of such Net Proceeds are not so used (or contractually
committed to be used) within such one year period, the Total Revolving Loan
Commitment shall be permanently reduced on the last day of such period by an
amount equal to such remaining portion and (2) if all or any portion of such Net
Proceeds are not so used within such one year period referred to in clause (1)
above because such amount is contractually committed to be used and subsequent
to such date such contract is terminated or expires without such
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<PAGE>
portion being so used, then the Total Revolving Loan Commitment shall be
permanently reduced on the date of such termination or expiration by an amount
equal to such remaining portion.
(d) In addition to any other mandatory commitment reduction pursuant
to this Section 3.03 but except as otherwise provided in Section 3.03(h) below,
on the Business Day after the date of the receipt thereof by Holdings and/or any
of its Subsidi aries, the Total Revolving Loan Commitment shall be permanently
reduced by an amount equal to 50% of the cash proceeds (net of underwriting
discounts, fees and commissions and other costs and expenses associated
therewith) of the sale or issuance of preferred or common equity of (or cash
capital contributions to) Holdings or any of its Subsidiaries (other than (w)
issuances of Holdings Common Stock and Permitted Holdings PIK Securities by
Holdings as consideration in connection with any Permitted Acquisition, (x)
issuances of Holdings Common Stock or warrants or options to purchase Holdings
Common Stock (including as a result of the exercise of any options with regard
thereto) to employees, directors and management of Holdings and its
Subsidiaries, (y) equity contributions to any Subsidiary of Holdings made by
Holdings or any other Subsidiary of Holdings and (z) issuances of Holdings
Common Stock pursuant to the Additional Offering); provided that $10,000,000 of
--------
cash equity contributions in the aggregate from Bain Capital or any Related
Party shall not give rise to a reduction of the Total Revolving Loan Commitment
pursuant to this Section 3.03(d) so long as such equity contributions are
substantially contemporaneously contributed to the capital of the Borrower as an
equity contribution or loaned to the Borrower (such loan to be evidenced by the
Borrower Subordinated Note) (the cash contributions made pursuant to this
proviso, "Permitted Equity Proceeds").
(e) In addition to any other mandatory commitment reduction pursuant
to this Section 3.03 but except as otherwise provided in Section 3.03(h) below,
on the date of the receipt thereof by Holdings and/or any of its Subsidiaries,
the Total Revolving Loan Commitment shall be permanently reduced by an amount
equal to 100% of the proceeds (net of underwriting discounts, fees and
commissions and other costs and expenses associated therewith) of the
incurrence of Indebtedness by Holdings and/or any of its Subsidiaries (other
than Indebtedness permitted to be incurred by Section 8.04 as in effect on the
Restatement Effective Date).
(f) In addition to any other mandatory commitment reduction pursuant
to this Section 3.03 but except as otherwise provided in Section 3.03(h) below,
within 10 days following each date on which Holdings or any of its Subsidiaries
receives any proceeds from any Recovery Event, the Total Revolving Loan
Commitment shall be reduced by an amount equal to 100% of the proceeds of such
Recovery Event (net of costs, expenses and taxes incurred in connection with
such Recovery Event); provided that so long as no Default or Event of Default
--------
then exists and such proceeds do not exceed $25,000,000, such proceeds shall not
give rise to a reduction of the Total Revolving Loan Commitment pursuant to this
Section 3.03(f) on such date to the extent that the Borrower has delivered
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a certificate to the Agent on or prior to such date stating that such proceeds
shall be used to replace or restore any properties or assets in respect of which
such proceeds were paid within one year following the date of the receipt of
such proceeds (which certificate shall set forth the estimates of the proceeds
to be so expended), and provided further, that (i) if the amount of such
----------------
Revolving Loan Commitment shall be permanently reduced by the entire amount and
not just the portion in excess of $25,000,000, (ii) if all or any portion of
such proceeds not giving rise to a reduction of the Total Revolving Loan
Commitment pursuant to the preceding proviso are not so used (or contractually
committed to be used) within one year after the date of the receipt of such
proceeds, the Total Revolving Loan Commitment shall be permanently reduced on
the last day of such period by an amount equal to such remaining portion and
(iii) if all or any portion of such proceeds are not so used within the one year
period referred to in clause (ii) above because such amount is contractually
committed to be used and subsequent to such date such contract is terminated or
expires without such portion being so used, then the Total Revolving Loan
Commitment shall be permanently reduced on the date of such termination or
expiration in an amount equal to such remaining portion.
(g) In addition to any other mandatory commitment reduction pursuant
to this Section 3.03 but except as otherwise provided in Section 3.03(h) below,
on the date of the receipt thereof by Holdings and/or any of its Subsidiaries of
a Pension Plan Refund, the Total Revolving Loan Commitment shall be permanently
reduced by an amount equal to 100% of such Pension Plan Refund.
(h) Notwithstanding anything to contrary contained in Sections
3.03(c), (d), (e), (f) and (g) above, in no event shall the Total Revolving Loan
Commitment be reduced to an amount less than $50,000,000 pursuant to or as a
result of any such Section.
(i) Each reduction or adjustment of the Total Revolving Loan
Commitment pursuant to this Section 3.03 shall apply proportionately to the
Revolving Loan Commitment of each Bank.
SECTION 4. Payments.
--------
4.01 Voluntary Prepayments. (a) The Borrower shall have the right
---------------------
to prepay the Loans made to it, in whole or in part, without premium or
penalty, except as otherwise provided in this Agreement, from time to time on
the following terms and conditions: (i) the Borrower shall give the Agent at its
Notice Office written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay such Loans, whether such Loans are Revolving
Loans or Swingline Loans, the amount of such prepayment and (in the case of
Eurodollar Loans) the specific Borrowing(s) pursuant to which made, which notice
shall be given by the Borrower prior to 11:00 A.M. (New York time) (x) at least
one Business Day prior to the date of such prepayment in the case of Revolving
Loans maintained as Base Rate Loans, (y) on the date of such prepayment in the
case of Swingline Loans and (z) at least three Business Days prior to the date
of such prepayment in the case of Eurodollar
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Loans, which notice shall, except in the case of Swingline Loans, promptly be
transmitted by the Agent to each of the Banks; (ii) each prepayment shall be in
an aggregate principal amount of (A) at least $1,000,000 in the case of
Eurodollar Loans and (B) at least $500,000 in the case of Base Rate Loans (or
$100,000 in the case of Swingline Loans); provided, that no partial prepayment
--------
of Eurodollar Loans made pursuant to a Borrowing shall reduce the aggregate
principal amount of the Eurodollar Loans outstanding pursuant to such Borrowing
to an amount less than the Minimum Borrowing Amount applicable thereto; and
(iii) each prepayment in respect of any Loans made pursuant to a Borrowing shall
be applied pro rata among such Loans; provided, that at the Borrower's election
--- ---- --------
in connection with any prepayment of Revolving Loans pursuant to this Section
4.01, such prepayment shall not be applied to any Revolving Loans of a
Defaulting Bank at any time when the aggregate amount of Revolving Loans of any
Non-Defaulting Bank exceeds such Non-Defaulting Bank's Percentage of all
Revolving Loans then outstanding.
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
12.12(b), the Borrower shall have the right, upon five Business Days' prior
written notice to the Agent at its Notice Office (which notice the Agent shall
promptly transmit to each of the Banks) to repay all Revolving Loans of such
Bank, together with accrued and unpaid interest, Fees and all other amounts due
and owing to such Bank in accordance with said Section 12.12(b), so long as (A)
the Revolving Loan Commitment of such Bank is terminated concurrently with such
repayment pursuant to Section 3.02(b) (at which time Annex I shall be deemed
modified to reflect the changed Revolving Loan Commitments) and (B) the consents
required by Section 12.12(b) in connection with the repayment pursuant to this
clause (b) shall have been obtained.
4.02 Mandatory Prepayments. (a) If on any date the sum of (i) the
---------------------
aggregate outstanding principal amount of Revolving Loans and Swingline Loans
(after giving effect to all other repayments thereof on such date) plus (ii) the
Letter of Credit Outstandings on such date exceeds the Total Revolving Loan
Commitment as then in effect, the Borrower shall repay on such date the
principal of Swingline Loans, and if no Swingline Loans are or remain
outstanding, Revolving Loans, in an aggregate amount equal to such excess. If,
after giving effect to the prepayment of all outstanding Swingline Loans and
Revolving Loans, the aggregate amount of Letter of Credit Outstandings exceeds
the Total Revolving Loan Commitment as then in effect, the Borrower agrees to
pay to the Agent an amount in cash and/or Cash Equivalents equal to such excess
(up to the aggregate amount of Letter of Credit Outstandings at such time) and
the Agent shall hold such payment as security for the obligations of the
Borrower hereunder pursuant to a cash collateral agreement to be entered into
in form and substance reasonably satisfactory to the Agent (which shall permit
certain investments in Cash Equivalents reasonably satisfactory to the Agent
until the proceeds are applied to the secured obligations).
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<PAGE>
(b) With respect to each repayment of Loans required by this Section
4.02, the Borrower may designate the Types of Loans which are to be repaid and
the specific Borrowing(s) pursuant to which made; provided, that (i) Eurodollar
--------
Loans may be designated for repayment pursuant to this Section 4.02 only on the
last day of an Interest Period applicable thereto unless all Eurodollar Loans
with Interest Periods ending on such date of required prepayment and all Base
Rate Loans have been paid in full; (ii) if any repayment of Eurodollar Loans
made pursuant to a single Borrowing shall reduce the outstanding Revolving Loans
made pursuant to such Borrowing to an amount less than the Minimum Borrowing
Amount, such Borrowing shall be immediately converted into Base Rate Loans; and
(iii) each repayment of any Revolving Loans made pursuant to a Borrowing shall
be applied pro rata among such Revolving Loans; provided, that no repayment
--- ---- --------
pursuant to Section 4.02(a) shall be applied to any Revolving Loans of a
Defaulting Bank at any time when the aggregate amount of the Revolving Loans of
any Non-Defaulting Bank exceeds such Non-Defaulting Bank's Percentage of
Revolving Loans then outstanding. In the absence of a designation by the
Borrower as described in the preceding sentence, the Agent shall, subject to the
above, make such designation in its sole discretion with a view, but no
obligation, to minimize breakage costs owing under Section 1.11.
(c) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full
on the Swingline Expiry Date and (ii) all outstanding Revolving Loans shall be
repaid in full on the Maturity Date.
4.03 Method and Place of Payment. Except as otherwise specifically
---------------------------
provided herein, all payments under this Agreement shall be made to the Agent
for the ratable account of the Banks entitled thereto, not later than 12:00 Noon
(New York time) on the date when due and shall be made in immediately available
funds and in U.S. Dollars at the Payment Office, it being understood that
written, telex or facsimile transmission notice by the Borrower to the Agent to
make a payment from the funds in the Borrower's account at the Payment Office
shall constitute the making of such payment to the extent of such funds held in
such account. Any payments under this Agreement which are made later than 12:00
Noon (New York time) shall be deemed to have been made on the next succeeding
Business Day. Whenever any payment to be made hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day and, with respect to payments of principal,
interest shall be payable during such extension at the applicable rate in effect
immediately prior to such extension.
4.04 Net Payments. (a) All payments made by the Borrower hereunder
------------
or under any Note will be made without setoff, counterclaim or other defense.
Except as provided in Section 4.04(b), all such payments will be made free and
clear of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever nature
now or hereafter imposed by any jurisdiction or by any political subdivision or
taxing authority thereof or therein with respect to such payments (but
excluding, except as provided in the second succeeding sentence, any
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<PAGE>
tax imposed on or measured by the net income or net profits of a Bank pursuant
to the laws of the jurisdiction in which it is organized or the jurisdiction in
which the principal office or applicable lending office of such Bank is located
or any subdivision thereof or therein) and all interest, penalties or similar
liabilities with respect thereto (all such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as
"Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to pay the
full amount of such Taxes, and such additional amounts as may be necessary so
that every payment of all amounts due under this Agreement or under any Note,
after withholding or deduction for or on account of any Taxes, will not be less
than the amount provided for herein or in such Note. If any amounts are payable
in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to
reimburse each Bank, upon the written request of such Bank, for taxes imposed on
or measured by the net income or net profits of such Bank pursuant to the laws
of the jurisdiction in which the principal office or applicable lending office
of such Bank is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which the principal office or applicable
lending office of such Bank is located and for any withholding of taxes as such
Bank shall determine are payable by, or withheld from, such Bank in respect of
such amounts so paid to or on behalf of such Bank pursuant to the preceding
sentence and in respect of any amounts paid to or on behalf of such Bank
pursuant to this sentence. The Borrower will furnish to the Agent within 45 days
after the date the payment of any Taxes is due pursuant to applicable law
certified copies of tax receipts evidencing such payment by the Borrower. The
Borrower agrees to indemnify and hold harmless each Bank, and reimburse such
Bank upon its written request, for the amount of any Taxes so levied or imposed
and paid by such Bank.
(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower
and the Agent on or prior to the Restatement Effective Date, or in the case of a
Bank that is an assignee or transferee of an interest under this Agreement
pursuant to Section 1.13 or 12.04 (unless the respective Bank was already a Bank
hereunder immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Bank, (i) two accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms)
certifying to such Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note, or (ii) if the Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit C (any such certificate, a "Section
4.04(b)(ii) Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying to
such Bank's entitlement to a complete exemption from United States withholding
tax with respect to payments of interest to be made under this Agreement and
under any Note. In addition, each Bank agrees that from time to time after the
Restatement Effective Date, when a lapse in time or change in circumstances
renders the previous certification obsolete or inaccurate in any material
respect, it will deliver to the Borrower and the Agent two new accurate and
complete original signed copies of Internal Revenue Service Form 4224 or 1001,
or Form
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<PAGE>
W-8 and a Section 4.04(b)(ii) Certificate, as the case may be, and such other
forms as may be required in order to confirm or establish the entitlement of
such Bank to a continued exemption from or reduction in United States
withholding tax with respect to payments under this Agreement and any Note, or
it shall immediately notify the Borrower and the Agent of its inability to
deliver any such Form or Certificate. Notwithstanding anything to the contrary
contained in Section 4.04(a), but subject to Section 12.04(b) and the
immediately succeeding sentence, (x) the Borrower shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or similar
taxes imposed by the United States (or any political subdivision or taxing
authority thereof or therein) from interest, fees or other amounts payable
hereunder for the account of any Bank which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income
tax purposes to the extent that such Bank has not provided to the Borrower U.S.
Internal Revenue Service Forms that establish a complete exemption from such
deduction or withholding and (y) the Borrower shall not be obligated pursuant to
Section 4.04(a) hereof to gross-up payments to be made to a Bank in respect of
income or similar taxes imposed by the United States if (I) such Bank has not
provided to the Borrower the Internal Revenue Service Forms required to be
provided to the Borrower pursuant to this Section 4.04(b) or (II) in the case of
a payment, other than interest, to a Bank described in clause (ii) above, to the
extent that such Forms do not establish a complete exemption from withholding of
such taxes. Notwithstanding anything to the contrary contained in the preceding
sentence or elsewhere in this Section 4.04 and except as set forth in Section
12.04(b), the Borrower agrees to pay additional amounts and to indemnify each
Bank in the manner set forth in Section 4.04(a) (without regard to the identity
of the jurisdiction requiring the deduction or withholding) in respect of any
amounts deducted or withheld by it as described in the immediately preceding
sentence as a result of any changes after the Restatement Effective Date in any
applicable law, treaty, governmental rule, regulation, guideline or order, or in
the interpretation thereof, relating to the deducting or withholding of income
or similar Taxes.
SECTION 5. Conditions Precedent. The occurrence of the Restatement
--------------------
Effective Date pursuant to Section 12.10 and the obligation of each Bank to make
each Loan to the Borrower hereunder, and the obligation of any Letter of Credit
Issuer to issue each Letter of Credit hereunder, is subject, on the Restatement
Effective Date or at the time of each such Credit Event (except as otherwise
hereinafter indicated), as the case may be, to the satisfaction of the following
conditions:
5.01 Execution of Agreement; Notes. On or prior to the Restatement
-----------------------------
Effective Date, (i) this Agreement shall have been executed and delivered as
provided in Section 12.10 and (ii) there shall have been delivered to the Agent
for the account of each Bank the appropriate Revolving Note and to BTCo the
Swingline Note, in each case executed by the Borrower and in the amount,
maturity and as otherwise provided herein.
5.02 No Default; Representations and Warranties. At the time of each
------------------------------------------
Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of
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<PAGE>
Default and (ii) all representations and warranties contained herein or in the
other Credit Documents in effect at such time shall be true and correct in all
material respects with the same effect as though such representations and
warranties had been made on and as of the date of such Credit Event, unless
stated to relate to a specific earlier date, in which case such representations
and warranties shall be true and correct in all material respects as of such
earlier date.
5.03 Officer's Certificate. On the Restatement Effective Date, the
---------------------
Agent shall have received a certificate dated such date signed by an appropriate
officer of the Borrower stating that all of the applicable conditions set forth
in Sections 5.02, 5.07, 5.08 and 5.09 have been satisfied as of such date.
5.04 Opinions of Counsel. On the Restatement Effective Date, the
-------------------
Agent shall have received an opinion, addressed to the Agent and each of the
Banks and dated the Restatement Effective Date, from Kirkland & Ellis, counsel
to the Credit Parties, which opinion shall cover the matters contained in
Exhibit D and such other matters incident to the transactions contemplated
herein as the Agent may reasonably request.
5.05 Corporate Proceedings. (a) On the Restatement Effective Date,
---------------------
the Agent shall have received from each Credit Party a certificate, dated the
Restatement Effective Date, signed by the chairman, a vice chairman, the
president or any vice-president of such Credit Party, and attested to by the
secretary or any assistant secretary of such Credit Party, in the form of
Exhibit E with appropriate insertions, together with copies of the Certificate
of Incorporation and By-Laws of such Credit Party (to the extent required
thereby) and the resolutions of such Credit Party referred to in such
certificate and all of the foregoing (including each such Certificate of
Incorporation and By-Laws) shall be reasonably satisfactory to the Agent.
(b) On the Restatement Effective Date, all corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Documents shall be
reasonably satisfactory in form and substance to the Agent, and the Agent shall
have received all information and copies of all certificates, documents and
papers, including good standing certificates, bring-down certificates and any
other records of corporate proceedings and governmental approvals, if any, which
the Agent reasonably may have requested in connection therewith, such documents
and papers, where appropriate, to be certified by proper corporate or
governmental authorities.
5.06 Adverse Change, etc. On or prior to the Restatement Effective
--------------------
Date, nothing shall have occurred since December 31, 1996 (and neither the Banks
nor the Agent shall have become aware of any facts or conditions not previously
known) which the Required Banks or the Agent shall determine (a) has, or could
reasonably be expected to have, a material adverse effect on the rights or
remedies of the Banks or the Agent, or on the ability of any Credit Party to
perform its obligations to them hereunder or under any
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<PAGE>
other Credit Document or (b) has, or could reasonably be expected to have, a
Material Adverse Effect.
5.07 Litigation. On the Restatement Effective Date, there shall be
----------
no actions, suits or proceedings pending or threatened (a) with respect to this
Agreement or any other Document or the Transaction (b) which the Agent or the
Required Banks shall determine could reasonably be expected to (i) have a
Material Adverse Effect or (ii) have a material adverse effect on the
Transaction, the rights or remedies of the Banks or the Agent hereunder or under
any other Credit Document or on the ability of any Credit Party to perform its
respective obligations to the Banks or the Agent hereunder or under any other
Credit Document.
5.08 Approvals. On or prior to the Restatement Effective Date, all
---------
necessary governmental (domestic and foreign) and third party approvals in
connection with the Transaction, the transactions contemplated by the Documents
and otherwise referred to herein or therein shall have been obtained and remain
in effect, and all applicable waiting periods shall have expired without any
action being taken by any competent authority which restrains, prevents or
imposes materially adverse conditions upon the consummation of the Transaction,
the transactions contemplated by the Documents and otherwise referred to herein
or therein. Additionally, there shall not exist any judgment, order, injunction
or other restraint issued or filed or a hearing seeking injunctive relief or
other restraint pending or notified prohibiting or imposing materially adverse
conditions upon the consummation of the Transaction or the making of Loans.
5.09 Consummation of the Transaction. On or prior to the Restatement
-------------------------------
Effective Date, Holdings shall have received gross cash proceeds of at least
$10,000,000 in connection with a registered public offering (the "Additional
Offering") by Holdings of Holdings Common Stock, (b) Holdings shall have (x)
used the net cash proceeds received from the Additional Offering to repay
amounts outstanding under the Original Credit Agreement to the extent provided
therein, (y) applied (or retained) an amount of such proceeds sufficient to
repay all amounts owing in respect of the Seller Subordinated Note which amounts
shall not exceed $5,000,000 and (z) to the extent of the excess, made a cash
common equity contribution to the Borrower, and (c) the Agent shall have
received (i) true and correct copies of the Additional Offering Documents and
(ii) evidence in form, scope and substance reasonably satisfactory to it that
the matters set forth in this Section 5.09(a) have been satisfied on such date.
5.10 Original Credit Agreement. On the Restatement Effective Date
-------------------------
and concurrently with the initial incurrence of Loans hereunder, (i) the total
commitments in respect of the Indebtedness under the Original Credit Agreement
shall have been terminated, all Original Loans shall have been repaid in full
in cash, together with accrued but unpaid interest thereon, and all letters of
credit issued thereunder shall have been incorporated hereunder as Existing
Letters of Credit pursuant to Section 2.01(a), it being understood and agreed,
however, that any Continuing Bank may net fund any Loans
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<PAGE>
required to be made by it on the Restatement Effective Date by permitting the
principal amount of the Original Loans made by such Continuing Bank to remain
outstanding on the Restatement Effective Date to satisfy such Continuing Bank's
obligation to fund a like principal amount of Loans to be incurred hereunder by
the Borrower on the Restatement Effective Date, and for purposes of this Section
5.10 only such outstanding principal amount shall be deemed outstanding as
Revolving Loans under this Agreement and such corresponding Original Loans shall
be deemed to have been so repaid in full, and (ii) there shall have been paid in
cash in full all accrued but unpaid Fees under, and as defined in, the Original
Credit Agreement (including, without limitation, commitment fees, letter of
credit fees and facing fees) due prior to but excluding the Restatement
Effective Date and all other amounts, costs and expenses (including, without
limitation, breakage costs, if any, with respect to eurodollar rate loans) then
owing to any of the Original Banks and/or the Agent, as agent under the Original
Credit Agreement, in each case to the satisfaction of the Agent or the Original
Banks, as the case may be, regardless of whether or not such amounts would
otherwise be due and payable at such time pursuant to the terms of the Original
Credit Agreement and (iii) all outstanding Notes (as defined in the Original
Credit Agreement) issued by the Borrower to the Original Banks under the
Original Credit Agreement shall be deemed cancelled.
5.11 Security Documents Acknowledgments; Pledge Agreement; Security
--------------------------------------------------------------
Agreement; Mortgages. (a) On the Restatement Effective Date, Holdings, the
- --------------------
Borrower and each Subsidiary Guarantor shall have duly authorized, executed and
delivered an assumption and acknowledgment in the form of Exhibit F and Wesley-
Jessen Puerto Rico shall have duly authorized, executed and delivered such
assumption and acknowledgement as shall be advised by local counsel to the Banks
in respect of (x) the Puerto Rico Security Documents and (y) any pledge of the
stock of Foreign Subsidiaries (such assumptions and acknowledgements,
collectively, the "Security Documents Acknowledgment") with respect to the
Pledge Agreement, the Security Agreement, the Mortgages and the Puerto Rico
Security Documents, each of which assumption and acknowledgement, among other
things, (i) acknowledges and agrees that the "Obligations" (as defined in each
of such documents) or any similar term include all of the Obligations under this
Agreement after giving effect to the Restatement Effective Date, and (ii)
acknowledges and agrees that, after giving effect to the Restatement Effective
Date, each of the Pledge Agreement, the Security Agreement, the Mortgages and
the Puerto Rico Security Documents shall remain in full force and effect in
accordance with the respective terms thereof, and each of Holdings, the Borrower
and each Subsidiary Guarantor shall have taken all actions reasonably requested
by the Agent (including, without limitation, the obtaining of UCC-11's or
equivalent reports and the filing of UCC-1's or UCC-3's) in connection with the
granting of liens pursuant to the Pledge Agreement, the Security Agreement, the
Mortgages and the Puerto Rico Security Documents.
(b) On the Restatement Effective Date, the Collateral Agent, as
pledgee shall have in its possession all of the Pledged Securities referred to
in the Pledge Agreement (and all Mortgage Notes (as defined in the Puerto Rico
Pledge Agreement)), endorsed in
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<PAGE>
blank in the case of promissory notes or accompanied by executed and undated
stock powers in the case of capital stock, and each of the Pledge Agreement and
the Puerto Rico Pledge Agreement shall be in full force and effect.
(c) On the Restatement Effective Date, (i) no filings, recordings,
registrations or other actions shall be necessary to maintain the perfection and
priority of the security interests granted pursuant to the Security Agreement
and the Puerto Rico Security Documents in the Collateral covered thereby, and
(ii) the Banks shall have received evidence that all other actions necessary or,
in the opinion of the Collateral Agent, desirable to perfect and protect the
security interests purported to be created by the Security Agreement and the
Puerto Rico Security Documents have been taken.
(d) On the Restatement Effective Date, (i) no filings, recordings,
registrations or other actions shall be necessary to maintain the first priority
Lien, subject only to Permitted Encumbrances, granted pursuant to the existing
Mortgages, and (ii) the Banks shall have received evidence that all other
actions necessary or, in the opinion of the Collateral Agent, desirable to
perfect and protect the first priority Lien, subject only to Permitted
Encumbrances, on the respective Mortgaged Property in favor of the Collateral
Agent (or such other trustee as may be required or desired under local law) for
the benefit of the Secured Creditors have been taken.
5.12 Subsidiary Guaranty Acknowledgement. On the Restatement
-----------------------------------
Effective Date, each Subsidiary Guarantor shall have duly authorized, executed
and delivered an acknowledgment in the form of Exhibit G (the "Subsidiary
Guaranty Acknowledgment"), which acknowledgment, among other things, (i)
acknowledges this Agreement and the transactions contemplated hereby, and (ii)
acknowledges and agrees that, the "Obligations" (as defined in the Subsidiary
Guaranty) include all of the Obligations under this Agreement after giving
effect to the Restatement Effective Date and any increase in the amounts owing
to the Banks or the Agent under this Agreement, and (iii) acknowledges and
agrees that, after giving effect to the Restatement Effective Date, the
Subsidiary Guaranty shall remain in full force and effect in accordance with the
terms thereof.
5.13 Plans; Collective Bargaining Agreements; Existing Indebtedness
--------------------------------------------------------------
Agreements; Shareholders' Agreements; Management Agreements; Employment
- -----------------------------------------------------------------------
Agreements; Tax Allocation Agreements; Material Contracts. On or prior to the
- ---------------------------------------------------------
Restatement Effective Date, there shall have been delivered to the Banks copies,
certified as true and correct by an appropriate officer of Holdings or its
Subsidiaries, of:
(a) any Plans that are to be assumed by Holdings or any of its
Subsidiaries after giving effect to the consummation of the Transaction and
for each such Plan (i) that is a "single-employer plan" (as defined in
Section 4001(a)(15) of ERISA) the most recently completed actuarial
valuation prepared therefor by such Plan's regular enrolled actuary and the
Schedule B, "Actuarial Information" to the IRS Form 5500 (Annual Report)
most recently filed with the Internal Revenue Service
-30-
<PAGE>
and (ii) that is a "multiemployer plan" (as defined in Section 4001(a)(3)
of ERISA), each of the documents referred to in clause (i) either in the
possession of Holdings, any Subsidiary of Holdings or any ERISA Affiliate
or reasonably available thereto from the sponsor or trustees of such Plan;
(b) any collective bargaining agreements or any other similar
agreement or arrangement covering the employees of Holdings or any of its
Subsidiaries that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Collective Bargaining
Agreements");
(c) all agreements evidencing or relating to the Existing
Indebtedness that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Existing Indebtedness
Agreements");
(d) all agreements entered into by Holdings or any of its
Subsidiaries governing the terms and relative rights of its capital stock,
and any agreements entered into by shareholders relating to any such entity
with respect to their capital stock, in each case that are to remain in
effect after giving effect to the consummation of the Transaction
(collectively, the "Shareholders' Agreements");
(e) any material agreements (or the forms thereof) with members of,
or with respect to, the management of Holdings or any of its Subsidiaries
that are to remain in effect after giving effect to the consummation of the
Transaction (collectively, the "Management Agreements");
(f) any employment agreements entered into by Holdings or any of its
Subsidiaries (collectively, the "Employment Agreements");
(g) any tax sharing or tax allocation agreements entered into by
Holdings or any of its Subsidiaries (collectively, the "Tax Allocation
Agreements"); and
(h) all material contracts and licenses of Holdings or any of its
Subsidiaries that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Material Contracts");
all of which Plans, Collective Bargaining Agreements, Existing Indebtedness
Agreements, Shareholders' Agreements, Management Agreements, Employment
Agreements, Tax Allocation Agreements and Material Contracts shall be in form
and substance reasonably satisfactory to the Agent and shall be in full force
and effect on the Restatement Effective Date; provided, however, that only those
-------- -------
Plans, Collective Bargaining Agreements, Existing Indebtedness Agreements,
Shareholders' Agreements, Management Agreements, Employment Agreements, Tax
Allocation Agreements and Material Contracts which were not in existence on the
Original Effective Date or, if in existence on the Original Effective
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<PAGE>
Date, have been modified since such date, shall be required to be delivered
pursuant to this Section 5.13.
5.14 Solvency Certificate; Evidence of Insurance. On the Restatement
--------------------------------------------
Effective Date, the Agent shall have received:
(a) a Certificate from the Chief Financial Officer of Holdings, in
the form of Exhibit J, addressed to the Agent and each of the Banks and
dated the Restatement Effective Date and supporting the conclusions, that,
after giving effect to the Transaction and the incurrence of all financings
contemplated herein, the Borrower (on a stand-alone basis) and Holdings and
its Subsidiaries (on a consolidated basis) are not insolvent and will not
be rendered insolvent by the indebtedness incurred in connection herewith,
will not be left with unreasonably small capital with which to engage in
their respective businesses and will not have incurred debts beyond their
ability to pay such debts as they mature and become due; and
(b) evidence of insurance complying with the requirements of Section
7.03 for the business and properties of Holdings and its Subsidiaries, in
scope, form and substance reasonably satisfactory to the Agent and the
Required Banks and naming the Collateral Agent as an additional insured
and/or loss payee, and stating that such insurance shall not be cancelled
or revised without 30 days prior written notice by the insurer to the
Collateral Agent.
5.15 Pro Forma Balance Sheets. On or prior the Restatement Effective
------------------------
Date, there shall have been delivered to the Agent, an unaudited pro forma
--- -----
consolidated balance sheet of Holdings and its Subsidiaries after giving effect
to the Transaction and prepared in accordance with GAAP, together with a related
funds flow statement, which pro forma balance sheets and funds flow statement
--- -----
shall be reasonably satisfactory in form and substance to the Agent and the
Required Banks.
5.16 Projections. On or prior to the Restatement Effective Date, the
-----------
Banks shall have received the financial projections (the "Projections") set
forth on Annex V hereto, which include the projected results of Holdings and its
Subsidiaries for the five fiscal years ended after the Restatement Effective
Date.
5.17 Existing Indebtedness. On the Restatement Effective Date and
---------------------
after giving effect to the Transaction and the Loans incurred on the Restatement
Effective Date, neither Holdings nor any of its Subsidiaries shall have any
preferred stock or Indebtedness outstanding except for Indebtedness permitted
under Section 8.04. On and as of the Restatement Effective Date, all of the
Existing Indebtedness shall remain outstanding after giving effect to the
Transaction and the other transactions contemplated hereby without any default
or events of default existing thereunder or arising as a result of the
Transaction and the other transactions contemplated hereby (except to the extent
amended or waived by the
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<PAGE>
parties thereto on terms and conditions reasonably satisfactory to the Agent and
the Required Banks). On and as of the Restatement Effective Date, the Agent and
the Required Banks shall be satisfied with the amount of and the terms and
conditions of all Existing Indebtedness.
5.18 Payment of Fees. On the Restatement Effective Date, all costs,
---------------
fees and expenses, and all other compensation contemplated by this Agreement,
due to the Agent or the Banks (including, without limitation, legal fees and
expenses) shall have been paid to the extent due.
5.19 Notice of Borrowing; Letter of Credit Request. The Agent shall
---------------------------------------------
have received a Notice of Borrowing satisfying the requirements of Section 1.03
with respect to each incurrence of Loans, and the Agent and the respective
Letter of Credit Issuer shall have received a Letter of Credit Request
satisfying the requirements of Section 2.02 with respect to each issuance of a
Letter of Credit.
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by each Credit Party to each of the Banks that all
of the applicable conditions specified above exist as of the date of such Credit
Event. All of the certificates, legal opinions and other documents and papers
referred to in this Section 5, unless other wise specified, shall be delivered
to the Agent at its Notice Office for the account of each of the Banks and,
except for the Notes, in sufficient counterparts for each of the Banks and shall
be satisfactory in form and substance to the Agent and the Required Banks.
SECTION 6. Representations, Warranties and Agreements. In order to
------------------------------------------
induce the Banks to enter into this Agreement and to make the Loans and issue
and/or participate in the Letters of Credit provided for herein, each of
Holdings and the Borrower makes the following representations, warranties and
agreements with the Banks in each case after giving effect to the Transaction,
all of which shall survive the execution and delivery of this Agreement, the
making of the Loans and the issuance of the Letters of Credit (with the
occurrence of each Credit Event being deemed to constitute a representation and
warranty that the matters specified in this Section 6 are true and correct in
all material respects on and as of the date of each such Credit Event, unless
stated to relate to a specific earlier date in which all representations and
warranties shall be true and correct in all material respects as of such earlier
date):
6.01 Corporate Status. Holdings and each of its Subsidiaries (i) is
----------------
a duly organized and validly existing corporation in good standing (to the
extent such concept is relevant in such jurisdiction) under the laws of the
jurisdiction of its organization, (ii) has the corporate power and authority to
own its property and assets and to transact the business in which it is engaged
and presently proposes to engage and (iii) is duly qualified and is authorized
to do business and is in good standing in all jurisdictions where it is required
to be so qualified and where the failure to be so qualified would have a
Material Adverse Effect.
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<PAGE>
6.02 Corporate Power and Authority. Each Credit Party has the
-----------------------------
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Credit Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Credit Documents to which it is a party. Each Credit Party has duly
executed and delivered each Credit Document to which it is a party and each such
Credit Document constitutes the legal, valid and binding obligation of such
Credit Party enforceable in accordance with its terms, except to the extent that
the enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting creditors' rights
and by equitable principles (regardless of whether enforcement is sought in
equity or at law).
6.03 No Violation. Neither the execution, delivery or performance by
------------
any Credit Party of the Credit Documents to which it is a party nor compliance
by any Credit Party with the terms and provisions thereof, nor the consummation
of the transactions contemplated herein or therein, (i) will contravene any
applicable provision of any law, statute, rule or regulation, or any order,
writ, injunction or decree of any court or governmental instrumentality, (ii)
except as set forth on Annex XIV, will conflict or be inconsistent with or
result in any breach of, any of the terms, covenants, conditions or provisions
of, or constitute a default under, or (other than pursuant to the Security
Documents) result in the creation or imposition of (or the obligation to create
or impose) any Lien upon any of the property or assets of Holdings or any of its
Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust,
loan agreement, credit agreement or any other material agreement or instrument
to which Holdings or any of its Subsidiaries is a party or by which it or any of
its property or assets are bound or to which it may be subject or (iii) will
violate any provision of the Certificate of Incorporation or By-Laws of Holdings
or any of its Subsidiaries.
6.04 Litigation. There are no actions, suits or proceedings pending
----------
or, to the knowledge of Holdings or any of its Subsidiaries, threatened, with
respect to Holdings or any of its Subsidiaries (i) that could reasonably be
expected to have a Material Adverse Effect or (ii) that could reasonably be
expected to have a material adverse effect on the rights or remedies of the
Banks or on the ability of any Credit Party to perform its respective
obligations to the Banks hereunder and under the other Credit Documents to which
it is, or will be, a party. Additionally, there does not exist any judgment,
order or injunction prohibiting or imposing material adverse conditions upon the
occurrence of any Credit Event.
6.05 Use of Proceeds; Margin Regulations. (a) The proceeds of
-----------------------------------
Revolving Loans and Swingline Loans shall be utilized (i) to repay, on the
Restatement Effective Date, all amounts outstanding under the Original Credit
Agreement, (ii) to pay fees and expenses incurred in connection with the
Transaction, (iii) to effect Permitted Acquisitions subject to the terms and
conditions set forth herein and (iv) for the general corporate and working
capital purposes of the Borrower and its Subsidiaries; provided that proceeds of
--------
Revolving Loans and Swingline Loans used to finance the Transaction shall not
exceed $65,000,000.
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<PAGE>
(b) Neither the making of any Loan hereunder, nor the use of the
proceeds thereof, will violate the provisions of Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System and no part of the proceeds of
any Loan will be used to purchase or carry any Margin Stock or to extend credit
for the purpose of purchasing or carrying any Margin Stock.
6.06 Governmental Approvals. No order, consent, approval, license,
----------------------
authorization, or validation of, or filing, recording or registration with, or
exemption by, any foreign or domestic governmental or public body or authority,
or any subdivision thereof, is required to authorize or is required in
connection with (i) the execution, delivery and performance of any Credit
Document or (ii) the legality, validity, binding effect or enforceability of any
Credit Document.
6.07 Investment Company Act. Neither Holdings nor any of its
----------------------
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.08 Public Utility Holding Company Act. Neither Holdings nor any of
----------------------------------
its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
6.09 True and Complete Disclosure. All factual information (taken as
----------------------------
a whole) heretofore or contemporaneously furnished by or on behalf of Holdings
or any of its Subsidiaries in writing to the Agent or any Bank (including,
without limitation, all information contained in the Documents) for purposes of
or in connection with this Agreement or any transaction contemplated herein is,
and all other such factual information (taken as a whole) hereafter furnished by
or on behalf of any such Persons in writing to the Agent or any Bank will be,
true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information (taken as a whole) not
misleading at such time in light of the circumstances under which such
information was provided, it being understood that the representation and
warranty made in this Section 6.09 with respect to the information contained in
the Additional Offering Documents is only being made on and as of the
Restatement Effective Date.
6.10 Financial Condition; Financial Statements. (a) On and as of
-----------------------------------------
the Restatement Effective Date, on a pro forma basis after giving effect to the
--- -----
Transaction and to all Indebtedness incurred, and to be incurred (including,
without limitation, the Loans), and Liens created, and to be created, by each
Credit Party in connection therewith, with respect to each of Holdings and its
Subsidiaries (on a consolidated basis) and of the Borrower (on a stand-alone
basis) (x) the sum of the assets, at a fair valuation, of each of Holdings and
its Subsidiaries (on a consolidated basis) and of the Borrower (on a stand-
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alone basis) will exceed its debts, (y) it has not incurred nor intended to, nor
believes that it will, incur debts beyond its ability to pay such debts as such
debts mature and (z) it will have sufficient capital with which to conduct its
business. For purposes of this Section 6.10, "debt" means any liability on a
claim, and "claim" means (i) right to payment whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (ii)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(b) The consolidated balance sheet of Holdings and its Subsidiaries
at December 31, 1996 and at June 30, 1997 and the related statements of
operations and cash flows and changes in shareholders' equity of Holdings and
its Subsidiaries for the fiscal year or three-month period ended as of said
dates, copies of which have heretofore been furnished to each Bank, present
fairly in all material respects the consolidated financial position of Borrower
and its Subsidiaries at the dates of said statements and the results for the
respective periods covered thereby. All such financial statements have been
prepared in accordance with GAAP consistently applied except to the extent
provided in the notes to said financial statements.
(c) Since December 31, 1996, nothing has occurred that has had or
could reasonably be expected to have a Material Adverse Effect.
(d) Except as fully reflected in the financial statements described
in Section 6.10(b) and the Indebtedness incurred under this Agreement, (i) there
were as of the Restatement Effective Date (and after giving effect to any Loans
made on such date), no liabilities or obligations (excluding current obligations
incurred in the ordinary course of business) with respect to Holdings or any of
its Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent
or otherwise and whether or not due), and (ii) neither Holdings nor the Borrower
know of any basis for the assertion against Holdings or any of its Subsidiaries
of any such liability or obligation which, in the case of clause (i) or (ii)
either individually or in the aggregate, is or would be reasonably likely to
have, a Material Adverse Effect.
(e) The Projections are based on good faith estimates and assumptions
made by the management of Holdings, and on the Restatement Effective Date such
management believed that the Projections were reasonable and attainable, it
being recognized by the Banks, however, that projections as to future events are
not to be viewed as facts and that the actual results during the period or
periods covered by the Projections probably will differ from the projected
results and that the differences may be material. There is no fact known to
Holdings or any of its Subsidiaries which would have a Material Adverse Effect,
which has not been disclosed herein or in such other documents, certificates and
statements furnished to the Banks for use in connection with the transactions
contemplated hereby.
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6.11 Security Interests. On and after the Restatement Effective
------------------
Date, each of the Security Documents creates (or after the execution and
delivery thereof will create), as security for the Obligations, a valid and
enforceable perfected security interest in and Lien on all of the Collateral
subject thereto, superior to and prior to the rights of all third Persons and
subject to no other Liens (except that the Security Agreement Collateral, the
Mortgaged Properties and the collateral covered by the Additional Security
Documents may be subject to Permitted Liens relating thereto), in favor of the
Collateral Agent. No filings or recordings are required in order to perfect the
security interests created under any Security Document except for filings or
recordings required in connection with any such Security Document which shall
have been made on or prior to the Restatement Effective Date as contemplated by
Section 5.11 or on or prior to the execution and delivery thereof as
contemplated by Sections 7.11, 7.14 and 8.14.
6.12 Existing Indebtedness. Annex VIII sets forth a true and
---------------------
complete list of all Indebtedness of Holdings and its Subsidiaries as of the
Restatement Effective Date and which is to remain outstanding after giving
effect to the Transaction and the incurrence of Loans on such date (excluding
the Loans and the Letters of Credit, the "Existing Indebtedness"), in each case
showing the aggregate principal amount thereof and the name of the respective
borrower and any other entity which directly or indirectly guaranteed such debt.
6.13 Transaction. At the time of consummation thereof, the
-----------
Transaction shall have been consummated in all material respects in accordance
with the terms of the Documents and all applicable laws. At the time of
consummation thereof, all consents and approvals of, and filings and
registrations with, and all other actions in respect of, all governmental
agencies, authorities or instrumentalities required in order to make or
consummate the Transaction have been obtained, given, filed or taken or waived
and are or will be in full force and effect (or effective judicial relief with
respect thereto has been obtained) except where the failure to obtain, give,
file, or take would not reasonably be expected to have a Material Adverse
Effect. All applicable waiting periods with respect thereto have or, prior to
the time when required, will have, expired without, in all such cases, any
action being taken by any competent authority which restrains, prevents, or
imposes material adverse conditions upon the Transaction. Additionally, there
does not exist any judgment, order or injunction prohibiting or imposing
material adverse conditions upon the Transaction, or the performance by Holdings
and its Subsidiaries of their obligations under the Documents and all applicable
laws.
6.14 Special Purpose Corporation. Holdings has no significant assets
---------------------------
(other than the capital stock of the Borrower, immaterial assets used for the
performance of those activities permitted to be performed by Holdings pursuant
to Section 8.01(b) and Borrower Subordinated Notes) or liabilities (other than
under the Seller Subordinated Note, this Agreement and the other Credit
Documents, those liabilities under the other Documents, those liabilities
permitted to be incurred by Holdings pursuant to Section 8.01(b)) and, as
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and when issued from time to time in accordance with the terms of this
Agreement, Permitted Holdings PIK Securities and Shareholder Subordinated
Notes).
6.15 Compliance with ERISA. (a) Each Plan is in substantial
---------------------
compliance with ERISA and the Code; no Reportable Event has occurred with
respect to a Plan; no Plan is insolvent or in reorganization; no Plan has an
Unfunded Current Liability; no Plan has an accumulated or waived funding
deficiency, has permitted decreases in its funding standard account or has
applied for a waiver of the minimum funding standard or an extension of any
amortization period within the meaning of Section 412 of the Code; all
contributions required to be made with respect to a Plan and a Foreign Pension
Plan have been timely made; neither Holdings nor any Subsidiary of Holdings nor
any ERISA Affiliate has incurred any material liability to or on account of a
Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201,
4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code or
reasonably expects to incur any material liability (including any indirect,
contingent or secondary liability) under any of the foregoing Sections with
respect to any Plan (other than liabilities of any ERISA Affiliate which could
not, by operation of law or otherwise, become a liability of Holdings or any of
its Subsidiaries); no proceedings have been instituted to terminate, or to
appoint a trustee to administer, any Plan; no condition exists which presents a
material risk to Holdings or any Subsidiary of Holdings or any ERISA Affiliate
of incurring a liability to or on account of a Plan pursuant to the foregoing
provisions of ERISA and the Code; using actuarial assumptions and computation
methods consistent with subpart 1 of subtitle E of Title IV of ERISA, the
aggregate liabilities of Holdings and its Subsidiaries and its ERISA Affiliates
to all Plans which are multiemployer plans (as defined in Section 4001(a)(3) of
ERISA) in the event of a complete withdrawal therefrom, as of the close of the
most recent fiscal year of each such Plan ended prior to the date of the most
recent Credit Event, would not result in a Material Adverse Effect; no lien
imposed under the Code or ERISA on the assets of Holdings or any Subsidiary of
Holdings or any ERISA Affiliate exists or is likely to arise on account of any
Plan; and Holdings and its Subsidiaries do not maintain or contribute to any
employee welfare benefit plan (as defined in Section 3(1) of ERISA) which
provides benefits to retired employees or other former employees (other than as
required by Section 601 of ERISA) or any employee pension benefit plan (as
defined in Section 3(2) of ERISA) the obligations with respect to which could
reasonably be expected to have a Material Adverse Effect.
(b) Each Foreign Pension Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. Neither
Holdings nor any of its Subsidiaries has incurred any material obligation in
connection with the termination of or withdrawal from any Foreign Pension Plan.
The present value of the accrued benefit liabilities (whether or not vested)
under each Foreign Pension Plan which is funded, determined as of the end of the
most recently ended fiscal year of the Borrower on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets of such Foreign
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<PAGE>
Pension Plan, and for each Foreign Pension Plan which is not funded, the
obligations of such Foreign Pension Plan are properly accrued.
6.16 Capitalization. (a) On the Restatement Effective Date after
--------------
giving effect to the Transaction, the authorized capital stock of (i) Holdings
shall consist of 50,000,000 shares of common stock, $.01 par value per share
(such authorized shares of common stock, together with any subsequently
authorized shares of common stock of Holdings, the "Holdings Common Stock"), of
which 17,647,028 shares shall be issued and outstanding. All such outstanding
shares have been duly and validly issued, are fully paid and nonassessable.
Except as set forth on Annex XI hereto, Holdings does not have outstanding any
additional securities convertible into or exchangeable for its capital stock or
outstanding any additional rights to subscribe for or to purchase, or any
options for the purchase of, or any additional agreements providing for the
issuance (contingent or otherwise) of, or any calls, commitments or claims of
any character relating to, its capital stock except those set forth on Annex XI
to the Original Credit Agreement.
(b) On the Restatement Effective Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of the Borrower shall consist of 1,000 shares of common stock,
$.01 par value per share, all of which shares shall be issued and outstanding
and owned by Holdings. All such outstanding shares have been duly and validly
issued and are fully paid and nonassessable. The Borrower does not have
outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any rights to subscribe for or to purchase, or any options
for the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its capital stock.
6.17 Subsidiaries. On and as of the Restatement Effective Date and
------------
after giving effect to the consummation of the Transaction, Holdings has no
Subsidiaries other than the Borrower and its Subsidiaries, and the Borrower has
no Subsidiaries other than those Subsidiaries listed on Annex VI. Annex VI
correctly sets forth, as of the Restatement Effective Date and after giving
effect to the Transaction, the percentage ownership (direct and indirect) of
Holdings in each class of capital stock of each of its Subsidiaries and also
identifies the direct owner thereof. All outstanding shares of capital stock of
each Subsidiary of the Borrower have been duly and validly issued, are fully
paid and nonassessable and have been issued free of preemptive rights. No
Subsidiary of the Borrower has outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any right to subscribe for or
to purchase, or any options or warrants for the purchase of, or any agreement
providing for the issuance (contingent or otherwise) of or any calls,
commitments or claims of any character relating to, its capital stock or any
stock appreciation or similar rights.
6.18 Intellectual Property. Except as set forth on Annex XIII,
---------------------
Holdings and each of its Subsidiaries owns or holds a valid license to use all
the material patents, trademarks, permits, service marks, trade names,
technology, know-how and formulas or
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<PAGE>
other rights with respect to the foregoing, free from restrictions that are
materially adverse to the use thereof, that are used in the operation of the
business of Holdings and each of its Subsidiaries as presently conducted.
6.19 Compliance with Statutes, etc. Holdings and each of its
------------------------------
Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the
ownership of its property (including compliance with all applicable
Environmental Laws with respect to any Real Property or governing its business
and the requirements of any permits issued under such Environmental Laws with
respect to any such Real Property or the operations of Holdings or any of its
Subsidiaries), except such non-compliance as is not likely to, individually or
in the aggregate, have a Material Adverse Effect.
6.20 Environmental Matters. (a) Holdings and each of its
---------------------
Subsidiaries have complied with, and on the date of each Credit Event are in
compliance with, all applicable Environmental Laws and the requirements of any
permits issued under such Environmental Laws. There are no pending or, to the
best knowledge of Holdings and the Borrower, past or threatened Environmental
Claims against Holdings or any of its Subsidiaries or any Real Property owned
or operated by Holdings or any of its Subsidiaries that individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect. There
are no facts, circumstances, conditions or occurrences on any Real Property
owned or operated by Holdings or any of its Subsidiaries or, to the best
knowledge of Holdings and the Borrower, on any property adjoining or in the
vicinity of any such Real Property that would reasonably be expected (i) to form
the basis of an Environmental Claim against Holdings or any of its Subsidiaries
or any such Real Property that individually or in the aggregate would reasonably
be expected to have a Material Adverse Effect or (ii) to cause any such Real
Property to be subject to any restrictions on the ownership, occupancy, use or
transferability of such Real Property by Holdings or any of its Subsidiaries
under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any Real Property owned or
operated by Holdings or any of its Subsidiaries where such generation, use,
treatment or storage has violated or would reasonably be expected to violate any
Environmental Law. Hazardous Materials have not at any time been Released on or
from any Real Property owned or operated by Holdings or any of its Subsidiaries.
There are not now any underground storage tanks located on any Real Property
owned or operated by Holdings or any of its Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section 6.20,
the representations made in this Section 6.20 shall only be untrue if the
aggregate effect of all restrictions, failures, noncompliance, Environmental
Claims, Releases and presence of underground storage tanks, in each case of the
types described above, would reasonably be expected to have a Material Adverse
Effect.
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<PAGE>
6.21 Properties. All Real Property owned or leased by Holdings or
----------
any of its Domestic Subsidiaries as of the Restatement Effective Date and after
giving effect to the Transaction, and the nature of the interest therein, is
correctly set forth in Annex IV. Holdings and each of its Subsidiaries has good
and marketable title to, or a validly subsisting leasehold interest in, all
material properties owned or leased by it, including all Real Property reflected
in Annex IV or in the financial statements referred to in Section 6.10(b) or
(c), free and clear of all Liens, other than Permitted Liens.
6.22 Labor Relations. Neither Holdings nor any of its Subsidiaries
---------------
is engaged in any unfair labor practice that could reasonably be expected to
have a Material Adverse Effect. There is (i) no unfair labor practice complaint
pending against Holdings or any of its Subsidiaries or, to the best knowledge of
Holdings and the Borrower, threatened against any of them, before the National
Labor Relations Board, and no grievance or arbitration proceeding arising out of
or under any collective bargaining agreement is so pending against Holdings or
any of its Subsidiaries or, to the best knowledge of Holdings and the Borrower,
threatened against any of them, (ii) no strike, labor dispute, slowdown or
stoppage pending against Holdings or any of its Subsidiaries or, to the best
knowledge of Holdings and the Borrower, threatened against Holdings or any of
its Subsidiaries and (iii) to the best knowledge of Holdings and the Borrower,
no union representation question existing with respect to the employees of
Holdings or any of its Subsidiaries and, to the best knowledge of Holdings and
the Borrower, no union organizing activities are taking place, except (with
respect to any matter specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate) such as is not reasonably likely to have a
Material Adverse Effect.
6.23 Tax Returns and Payments. All Federal, material state and other
------------------------
material returns, statements, forms and reports for taxes (the "Returns")
required to be filed by or with respect to the income, properties or operations
of Holdings and/or any of its Subsidiaries have been timely filed with the
appropriate taxing authority. The Returns accurately reflect all liability for
taxes of Holdings and its Subsidiaries, as the case may be, for the periods
covered thereby. Holdings and each of its Subsidiaries have paid all taxes
payable by them other than taxes which are not yet due and payable, and other
than those contested in good faith by appropriate proceedings and for which
adequate reserves have been established in accordance with GAAP. Except as
disclosed in the financial statements referred to in Section 6.10(b) and (c),
there is no material action, suit, proceeding, investigation, audit, or claim
now pending or, to the knowledge of Holdings and the Borrower, threatened by any
authority regarding any taxes relating to Holdings or any of its Subsidiaries.
As of the Restatement Effective Date, neither Holdings nor any of its
Subsidiaries has entered into an agreement or waiver or been requested to enter
into an agreement or waiver extending any statute of limitations relating to the
payment or collection of taxes of Holdings or any of its Subsidiaries, or is
aware of any circumstances that would cause the taxable years or other taxable
periods of Holdings or any of its Subsidiaries not to be subject to the
normally applicable statute of limitations. Neither Holdings nor any of
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its Subsidiaries have provided, with respect to themselves or property held by
them, any consent under Section 341 of the Code. Neither Holdings nor any of its
Subsidiaries has incurred, or will incur, any material tax liability in
connection with the Transaction and the other transactions contemplated hereby.
SECTION 7. Affirmative Covenants. Holdings and the Borrower hereby
---------------------
covenant and agree that on the Restatement Effective Date and thereafter for so
long as this Agreement is in effect and until the Total Revolving Loan
Commitments has terminated, no Letters of Credit (other than Letters of Credit,
together with all Fees that have accrued and will accrue thereon through the
stated termination date of such Letters of Credit, which have been supported in
a manner satisfactory to the respective Letter of Credit Issuer in its sole
absolute discretion) or Notes are outstanding and the Loans and Unpaid Drawings,
together with interest, Fees and all other Obligations (other than any
indemnities described in Section 12.13 hereof which are not then due and
payable) incurred hereunder, are paid in full:
7.01 Information Covenants. Holdings will furnish to each Bank:
---------------------
(a) Monthly Reports. Within 30 days after the end of each fiscal
---------------
month of Holdings (or 45 days in the case of monthly reports for periods ending
on or prior to the last day of February, 1998), the consolidated balance sheet
of Holdings and its Subsidiaries as at the end of such fiscal month and the
related consolidated statements of income and retained earnings and of cash
flows for such fiscal month and for the elapsed portion of the fiscal year ended
with the last day of such fiscal month, setting forth comparable budgeted
figures for such fiscal month and, commencing with the first fiscal month to end
after the first anniversary of the Original Effective Date, setting forth
comparative figures for the corresponding month in the prior fiscal year, all of
which shall be certified by the chief financial officer or other Authorized
Officer of the Borrower, subject to normal year-end audit adjustments and the
absence of footnote disclosure.
(b) Quarterly Financial Statements. Within 45 days after the close
------------------------------
of each quarterly accounting period in each fiscal year of Holdings, the
consolidated balance sheet of Holdings and its Subsidiaries as at the end of
such quarterly accounting period and the related consolidated statements of
income and retained earnings and of cash flows for such quarterly accounting
period and for the elapsed portion of the fiscal year ended with the last day of
such quarterly accounting period, all of which shall be in reasonable detail and
certified by the chief financial officer or other Authorized Officer of Holdings
that they fairly present the financial condition of Holdings and its
Subsidiaries as of the dates indicated and the results of their operations and
changes in their cash flows for the periods indicated, subject to normal year-
end audit adjustments and the absence of footnote disclosure.
(c) Annual Financial Statements. Within 90 days after the close of
---------------------------
each fiscal year of Holdings, the consolidated balance sheet of Holdings and
its Subsidiaries as at the end of such fiscal year and the related consolidated
statements of income and retained earnings and of cash flows for such fiscal
year, setting forth comparative budgeted figures
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for such fiscal year and, commencing with the fiscal year ending December 31,
1998, setting forth comparative consolidated figures for the preceding fiscal
year, and, in the case of all such financial statements (but excluding such
comparative budgeted figures), certified by Price Waterhouse LLP or such other
independent certified public accountants of recognized national standing as
shall be reasonably acceptable to the Agent, in each case to the effect that
such statements fairly present in all material respects the financial condition
of Holdings and its Subsidiaries as of the dates indicated and the results of
their operations and cash flows, together with a certificate of such accounting
firm stating that in the course of its regular audit of the business of Holdings
and its Subsidiaries, which audit was conducted in accordance with generally
accepted auditing standards, no Default or Event of Default which has occurred
and is continuing has come to their attention insofar as such Default or Event
of Default relates to financial and accounting matters or, if such a Default or
Event of Default has come to their attention a statement as to the nature
thereof.
(d) Budgets, etc. Not more than 60 days after the commencement of
-------------
each fiscal year of the Borrower, budgets of the Borrower and its Subsidiaries
in reasonable detail for each of the four fiscal quarters of such fiscal year as
customarily prepared by management for its internal use setting forth, with
appropriate discussion, the principal assumptions upon which such budgets are
based. Together with each delivery of financial statements pursuant to Section
7.01(b) and (c), a comparison of the current year to date financial results
(other than in respect of the balance sheets included therein) against the
budgets required to be submitted pursuant to this clause (d) shall be presented.
(e) Officer's Certificates. At the time of the delivery of the
----------------------
financial statements provided for in Section 7.01(b) and (c), a certificate of
the chief financial officer or other Authorized Officer of Holdings to the
effect that no Default or Event of Default exists or, if any Default or Event of
Default does exist, specifying the nature and extent thereof, which certificate
shall set forth the calculations required to establish whether Holdings and its
Subsidiaries were in compliance with the provisions of Sections 8.04(d),
8.04(h), 8.05 and 8.08 through and including 8.11, as at the end of such fiscal
quarter or year, as the case may be. In addition, at the time that Holdings
either contributes or loans any Permitted Equity Proceeds, a certificate of the
chief financial officer or other Authorized Officer of Holdings setting forth
the intended use by the Borrower or its Subsidiaries of such Permitted Equity
Proceeds.
(f) Notice of Default or Litigation. Promptly, and in any event
-------------------------------
within five Business Days (or 10 Business Days in the case of clause (y) below)
after any Senior Officer of Holdings or any of its Subsidiaries obtains
knowledge thereof, notice of (x) the occurrence of any event which constitutes a
Default or an Event of Default, which notice shall specify the nature thereof,
the period of existence thereof and what action Holdings or the Borrower
proposes to take with respect thereto and shall state that such notice is a
"notice of default" and (y) the commencement of, or threat of, or any
significant development in, any litigation or governmental proceeding pending
against Holdings or any of its Subsidiaries which is likely to have a Material
Adverse Effect, or a material adverse
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<PAGE>
effect on the ability of any Credit Party to perform its respective obligations
hereunder or under any other Credit Document.
(g) Auditors' Reports. Promptly upon receipt thereof, a copy of each
-----------------
report or "management letter" submitted to Holdings or any of its Subsidiaries
by its independent accountants in connection with any annual, interim or special
audit made by them of the books of Holdings or any of its Subsidiaries.
(h) Environmental Matters. Promptly after obtaining knowledge of any
---------------------
of the following, written notice of:
(i) any pending or threatened material Environmental Claim against
Holdings or any of its Subsidiaries or any Real Property owned or operated
by Holdings or any of its Subsidiaries;
(ii) any condition or occurrence on any Real Property owned or
operated by Holdings or any of its Subsidiaries that (x) results in
material noncompliance by Holdings or any of its Subsidiaries with any
applicable Environmental Law or (y) could reasonably be anticipated to form
the basis of a material Environmental Claim against Holdings or any of its
Subsidiaries or any such Real Property;
(iii) any condition or occurrence on any Real Property owned or
operated by Holdings or any of its Subsidiaries that could reasonably be
anticipated to cause such Real Property to be subject to any material
restrictions on the ownership, occupancy, use or transferability by
Holdings or its Subsidiary, as the case may be, of its interest in such
Real Property under any Environmental Law; and
(iv) the taking of any material removal or remedial action in
response to the actual or alleged presence of any Hazardous Material on any
Real Property owned or operated by Holdings or any of its Subsidiaries
where Holdings or any of its Subsidiaries is or is reasonably expected to
be responsible for the cost of such action or where the taking of such
action could reasonably be expected to materially interfere with the
operations of Holdings or any of its Subsidiaries at such Real Property.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial action and
Holdings' or the Borrower's response thereto. In addition, Holdings agrees to
provide the Banks with copies of all material written communications by Holdings
or any of its Subsidiaries with any Person, government or governmental agency
relating to any of the matters set forth in clauses (i)-(iv) above, and such
detailed reports relating to any of the matters set forth in clauses (i)-(iv)
above, as may reasonably be requested by the Agent or the Required Banks.
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(i) Other Information. Promptly upon transmission thereof, copies of
-----------------
any filings and registrations with, and reports to, the SEC by Holdings or any
of its Subsidiaries and copies of all financial statements, proxy statements,
notices and reports as Holdings or any of its Subsidiaries shall generally send
to analysts or the holders of their capital stock in their capacity as holders
(in each case to the extent not theretofore delivered to the Banks pursuant to
this Agreement) and, with reasonable promptness, such other information or
documents (financial or otherwise) as the Agent on its own behalf or on behalf
of any Bank may reasonably request from time to time.
7.02 Books, Records and Inspections. Holdings will, and will cause
------------------------------
each of its Subsidiaries to, permit, upon notice to the chief financial officer
or other Authorized Officer of Holdings or the Borrower, (x) officers and
designated representatives of the Agent or any Bank to visit and inspect any of
the properties or assets of Holdings and any of its Subsidiaries in whomsoever's
possession, and to examine the books of account of Holdings and any of its
Subsidiaries and discuss the affairs, finances and accounts of Holdings and of
any of its Subsidiaries with, and be advised as to the same by, their officers
and independent accountants, all at such reasonable times and intervals and to
such reasonable extent as the Agent or any Bank may desire and (y) the Agent,
at the request of the Required Banks, to conduct, at Holdings' and the
Borrower's expense, an audit of the accounts receivable and/or inventories of
the Borrower and its Subsidiaries at such times (but no more frequently than
once a year unless an Event of Default has occurred and is continuing) as the
Required Banks shall reasonably require.
7.03 Insurance. Holdings will, and will cause each of its
---------
Subsidiaries to, at all times from and after the Restatement Effective Date
maintain in full force and effect insurance with reputable and solvent insurance
carriers in such amounts, covering such risks and liabilities and with such
deductibles or self-insured retentions as are in accordance with normal industry
practice. At any time that insurance at the levels described in Annex VII is
not being maintained by Holdings and its Subsidiaries, Holdings will notify the
Banks in writing thereof and, if thereafter notified by the Agent to do so,
Holdings will obtain insurance at such levels to the extent then generally
available (but in any event within the deductible or self-insured retention
limitations set forth in the preceding sentence) or otherwise as are acceptable
to the Agent. Holdings will furnish to the Agent on the Restatement Effective
Date and on each date as the Agent or the Required Banks may reasonably request,
a summary of the insurance carried in respect of Holdings and its Subsidiaries
and the assets of Holdings and its Subsidiaries together with certificates of
insurance and other evidence of such insurance, if any, naming the Collateral
Agent as an additional insured and/or loss payee.
7.04 Payment of Taxes. Holdings will pay and discharge, and will
----------------
cause each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which material
penalties attach thereto, and all lawful claims for sums that have become due
and payable which, if unpaid, might become a Lien
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not otherwise permitted under Section 8.03(a) or charge upon any properties of
Holdings or any of its Subsidiaries; provided, that neither Holdings nor any of
--------
its Subsidiaries shall be required to pay any such tax, assessment, charge, levy
or claim which is being contested in good faith and by proper proceedings if it
has maintained adequate reserves with respect thereto in accordance with GAAP.
7.05 Corporate Franchises. Holdings will do, and will cause each of
--------------------
its Subsidiaries to do, or cause to be done, all things necessary to preserve
and keep in full force and effect its existence and its material rights,
franchises and authority to do business; provided, however, that any transaction
-------- -------
permitted by Section 8.02 will not constitute a breach of this Section 7.05.
7.06 Compliance with Statutes, etc. Holdings will, and will cause
------------------------------
each of its Subsidiaries to, comply with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property (including applicable statutes, regulations, orders
and restrictions relating to environmental standards and controls) other than
such non-compliance as would not have a Material Adverse Effect or a material
adverse effect on the ability of any Credit Party to perform its obligations
under any Credit Document to which it is a party.
7.07 Compliance with Environmental Laws. (a) Holdings will pay, and
----------------------------------
will cause each of its Subsidiaries to pay, all costs and expenses incurred by
it in keeping in compliance with all Environmental Laws, and will keep or cause
to be kept all Real Properties owned or operated by Holdings or any of its
Subsidiaries free and clear of any Liens imposed pursuant to such Environmental
Laws; and (b) neither Holdings nor any of its Subsidiaries will generate, use,
treat, store, release or dispose of, or permit the generation, use, treatment,
storage, release or disposal of, Hazardous Materials on any Real Property owned
or operated by Holdings or any of its Subsidiaries, or transport or permit the
transportation of Hazardous Materials to or from any such Real Property, unless
the failure to comply with the requirements specified in clause (a) or (b)
above, either individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect. If Holdings or any of its Subsidiaries, or
any tenant or occupant of any Real Property, cause or permit any intentional or
unintentional act or omission resulting in the presence or Release of any
Hazardous Material (except in compliance with applicable Environmental Laws),
each of Holdings and the Borrower agrees to undertake, and/or to cause any of
its Subsidiaries, tenants or occupants to undertake, at their sole expense, any
clean up, removal, remedial or other action required pursuant to Environmental
Laws to remove and clean up any Hazardous Materials from any Real Property
except where the failure to do so would not be reasonably expected to have a
Material Adverse Effect; provided, that neither Holdings nor any of its
--------
Subsidiaries shall be required to comply with any such order or directive which
is being contested in good faith and by proper proceedings so long as it has
maintained adequate reserves with respect to such compliance to the extent
required in accordance with GAAP.
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7.08 ERISA. As soon as possible and, in any event, within 10 days
-----
after Holdings or any Subsidiary of Holdings or any ERISA Affiliate knows or has
reason to know of the occurrence of any of the following events to the extent
that one or more of such events is reasonably likely to result in a material
liability to Holdings or any Subsidiary of Holdings, Holdings will deliver to
each of the Banks a certificate of the chief financial officer or other
Authorized Officer of Holdings setting forth details as to such occurrence and
the action, if any, which Holdings, such Subsidiary or such ERISA Affiliate is
required or proposes to take, together with any notices required or proposed to
be given to or filed with or by Holdings, such Subsidiary, such ERISA Affiliate,
the PBGC, a Plan participant or the Plan administrator with respect thereto:
that a Reportable Event has occurred, that an accumulated funding deficiency has
been incurred or an application may be or has been made to the Secretary of the
Treasury for a waiver or modification of the minimum funding standard (including
any required installment payments) or an extension of any amortization period
under Section 412 of the Code with respect to a Plan; that a contribution
required to be made to a Plan or Foreign Pension Plan has not been timely made;
that a Plan has been or may be terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability
giving rise to a lien under ERISA or the Code; that proceedings may be or have
been instituted to terminate or appoint a trustee to administer a Plan; that a
proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Plan; that Holdings, any Subsidiary of Holdings or
any ERISA Affiliate will or may incur any liability (including any contingent or
secondary liability) to or on account of the termination of or withdrawal from a
Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with
respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or
Section 409, 502(i) or 502(l) of ERISA; or that Holdings or any Subsidiary of
Holdings has or may incur any liability under any employee welfare benefit plan
(within the meaning of Section 3(1) of ERISA) that provides benefits to retired
employees or other former employees (other than as required by Section 601 of
ERISA) or any employee pension benefit plan (as defined in Section 3(2) of
ERISA). At the request of any Bank, Holdings will deliver to such Bank a
complete copy of the annual report (Form 5500) of each Plan required to be filed
with the Internal Revenue Service. In addition, at the request of any Bank,
copies of annual reports and any notices received by Holdings or any Subsidiary
of Holdings or any ERISA Affiliate with respect to any Plan or Foreign Pension
Plan shall be delivered to such Bank no later than 10 days after the date of any
such request.
7.09 Good Repair. Holdings will, and will cause each of its
-----------
Subsidiaries to, ensure that its material properties and equipment used in its
business are kept in good repair, working order and condition, normal wear and
tear and damage by casualty excepted, and, subject to Section 8.08, that from
time to time there are made in such properties and equipment all needful and
proper repairs, renewals, replacements, extensions, additions, betterments and
improvements thereto, to the extent and in the manner useful or customary for
companies in similar businesses.
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7.10 End of Fiscal Years; Fiscal Quarters. Holdings will, for
------------------------------------
financial reporting purposes, cause (i) each of its, and each of its
Subsidiaries', fiscal years to end on December 31 of each year, provided that
the fiscal year of Wesley-Jessen (Puerto Rico) shall end on November 30 of each
year and (ii) each of its, and each of its Subsidiaries', fiscal quarters to end
on dates which are consistent with a fiscal year ending on December 31, provided
that the fiscal quarters of Wesley-Jessen (Puerto Rico) shall end on dates which
are consistent with a fiscal year ending on November 30.
7.11 Additional Security; Further Assurances. (a) Holdings will,
---------------------------------------
and will cause each of its Domestic Subsidiaries (and to the extent that Section
7.14 is operative, each of its Foreign Subsidiaries) to, grant to the Collateral
Agent security interests and mortgages in such assets and properties of Holdings
and its Subsidiaries as are not covered by the Security Documents, and as may be
requested from time to time by the Agent or the Required Banks (collectively,
the "Additional Security Documents"). All such security interests and mortgages
shall be granted pursuant to documentation reasonably satisfactory in form and
substance to the Agent and shall constitute valid and enforceable perfected
security interests and mortgages superior to and prior to the rights of all
third Persons and subject to no other Liens except for Permitted Liens. The
Additional Security Documents or instruments related thereto shall have been
duly recorded or filed in such manner and in such places as are required by law
to establish, perfect, preserve and protect the Liens in favor of the Collateral
Agent required to be granted pursuant to the Additional Security Documents and
all taxes, fees and other charges payable in connection therewith shall have
been paid in full.
(b) Holdings will, and will cause each of its Subsidiaries to, at the
expense of Holdings and the Borrower, make, execute, endorse, acknowledge, file
and/or deliver to the Collateral Agent from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, real
property surveys, reports and other assurances or instruments and take such
further steps relating to the collateral covered by any of the Security
Documents as the Collateral Agent may reasonably require. Furthermore, Holdings
shall cause to be delivered to the Collateral Agent such opinions of counsel,
title insurance and other related documents as may be reasonably requested by
the Agent to assure themselves that this Section 7.11 has been complied with.
(c) If the Agent or the Required Banks determine that they are
required by law or regulation to have appraisals prepared in respect of the Real
Property of Holdings and its Subsidiaries constituting Collateral, the Borrower
shall provide to the Agent appraisals which satisfy the applicable requirements
of the Real Estate Appraisal Reform Amendments of the Financial Institution
Reform, Recovery and Enforcement Act of 1989 and which shall be in form and
substance satisfactory to the Agent.
(d) Holdings and the Borrower agree that each action required above
by this Section 7.11 shall be completed as soon as possible, but in no event
later than 90 days after
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such action is either requested to be taken by the Agent or the Required Banks
or required to be taken by Holdings and its Subsidiaries pursuant to the terms
of this Section 7.11; provided that in no event shall Holdings or the Borrower
--------
be required to take any action, other than using its reasonable efforts, to
obtain consents from third parties with respect to its compliance with this
Section 7.11.
7.12 Register. The Borrower hereby designates the Agent to serve as
--------
the Borrower's agent, solely for purposes of this Section 7.12, to maintain a
register (the "Register") on which it will record the Revolving Loan Commitments
from time to time of each of the Banks, the Loans made by each of the Banks and
each repayment in respect of the principal amount of the Loans of each Bank.
Failure to make any such recordation, or any error in such recordation shall not
affect the Borrower's obligations in respect of such Loans. With respect to any
Bank, the transfer of the Revolving Loan Commitments of such Bank and the rights
to the principal of, and interest on, any Revolving Loan made pursuant to such
Revolving Loan Commitments shall not be effective until such transfer is
recorded on the Register maintained by the Agent with respect to ownership of
such Revolving Loan Commitments and Revolving Loans and prior to such
recordation all amounts owing to the transferor with respect to such Revolving
Loan Commitments and Revolving Loans shall remain owing to the transferor. The
registration of assignment or transfer of all or part of any Revolving Loan
Commitments and Revolving Loans shall be recorded by the Agent on the Register
only upon the acceptance by the Agent of a properly executed and delivered
Assignment and Assumption Agreement pursuant to Section 12.04(b). Coincident
with the delivery of such an Assignment and Assumption Agreement to the Agent
for acceptance and registration of assignment or transfer of all or part of a
Revolving Loan, or as soon thereafter as practicable, the assigning or
transferor Bank shall surrender the Note evidencing such Loan, and thereupon one
or more new Notes in the same aggregate principal amount shall be issued to the
assigning or transferor Bank and/or the new Bank. The Borrower agrees to
indemnify the Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on, asserted against or
incurred by the Agent in performing its duties under this Section 7.12.
7.13 Maintenance of Corporate Separateness. Holdings will, and will
-------------------------------------
cause each of its Subsidiaries to, satisfy customary corporate formalities,
including the maintenance of corporate records. Neither the Borrower nor any
Subsidiary of the Borrower shall make any payment to a creditor of Holdings
(other than a Guaranteed Creditor pursuant to any Credit Document or an
Interest Rate Protection Agreement or Other Hedging Agreement entered into with
any such Guaranteed Creditor) in respect of any liability of Holdings, and no
bank account of Holdings shall be commingled with any bank account of the
Borrower or any Subsidiary of the Borrower. Any financial statements
distributed to any creditors of Holdings shall, to the extent permitted by GAAP,
clearly establish the corporate separateness of Holdings from the Borrower and
each of the Borrower's Subsidiaries. Finally, neither the Borrower nor any of
its Subsidiaries shall take any action, or conduct its affairs in a manner,
which is likely to result in the corporate existence of Holdings on the one hand
and of the Borrower or any Subsidiary of the Borrower on the
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<PAGE>
other hand being ignored, or in the assets and liabilities of the Borrower or
any Subsidiary of the Borrower being substantively consolidated with those of
Holdings in a bankruptcy, reorganization or other insolvency proceeding.
7.14 Foreign Subsidiaries Security. If following a change in the
-----------------------------
relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, counsel for the
Borrower reasonably acceptable to the Agent and the Required Banks does not
within 30 days after a request from the Agent or the Required Banks deliver
evidence, in form and substance mutually satisfactory to the Agent and the
Borrower, with respect to any Foreign Subsidiary which has not already had all
of its stock pledged pursuant to the Pledge Agreement that (i) a pledge (x) of
66-2/3% or more of the total combined voting power of all classes of capital
stock of such Foreign Subsidiary entitled to vote, and (y) of any promissory
note issued by such Foreign Subsidiary to Holdings or any of its Domestic
Subsidiaries, (ii) the entering into by such Foreign Subsidiary of a security
agreement in substantially the form of the Security Agreement and (iii) the
entering into by such Foreign Subsidiary of a guaranty in substantially the form
of the Subsidiary Guaranty, in any such case could reasonably be expected to
cause (I) the undistributed earnings of such Foreign Subsidiary as determined
for Federal income tax purposes to be treated as a deemed dividend to such
Foreign Subsidiary's United States parent for Federal income tax purposes or
(II) other material adverse federal income tax consequences to the Credit
Parties, then in the case of a failure to deliver the evidence described in
clause (i) above, that portion of such Foreign Subsidiary's outstanding capital
stock or any promissory notes so issued by such Foreign Subsidiary, in each case
not theretofore pledged pursuant to the Pledge Agreement shall be pledged to
the Collateral Agent for the benefit of the Secured Creditors pursuant to the
Pledge Agreement (or another pledge agreement in substantially similar form, if
needed), and in the case of a failure to deliver the evidence described in
clause (ii) above, such Foreign Subsidiary shall execute and deliver the
Security Agreement (or another security agreement in substantially similar form,
if needed), granting the Secured Creditors a security interest in all of such
Foreign Subsidiary's assets and securing the Obligations of the Borrower under
the Credit Documents and under any Interest Rate Protection Agreement or Other
Hedging Agreement and, in the event the Subsidiary Guaranty shall have been
executed by such Foreign Subsidiary, the obligations of such Foreign Subsidiary
thereunder, and in the case of a failure to deliver the evidence described in
clause (iii) above, such Foreign Subsidiary shall execute and deliver the
Subsidiary Guaranty (or another guaranty in substantially similar form, if
needed), guaranteeing the Obligations of the Borrower under the Credit Documents
and under any Interest Rate Protection Agreement or Other Hedging Agreement, in
each case to the extent that the entering into such Security Agreement or
Subsidiary Guaranty is permitted by the laws of the respective foreign
jurisdiction and with all documents delivered pursuant to this Section 7.14 to
be in form and substance reasonably satisfactory to the Agent and the Required
Banks.
7.15 Contributions; Payments. (a) Holdings will contribute as an
-----------------------
equity contribution to the capital of the Borrower upon its receipt thereof, any
cash proceeds (net
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of reasonable costs associated with such sale or issuance) received by Holdings
from any sale or issuance of its preferred or common equity (including, without
limitation, after payment in full of the Seller Subordinated Note, the remaining
proceeds of the Additional Offering) or any cash capital contributions received
by Holdings, provided that to the extent permitted by Section 8.05(s), Holdings
--------
may lend proceeds of Permitted Equity Proceeds to the Borrower.
(b) To the extent required by Section 4.02, the Borrower will use the
proceeds of all equity contributions received by it from Holdings as provided in
clause (a) above toward the repayment of Revolving Loans after giving effect to
the reduction in the Total Revolving Loan Commitment (if any) arising under
Section 3.03(d) as a result of such equity contribution.
7.16 Interest Rate Protection. The Borrower shall, on or prior to
------------------------
the Restatement Effective Date, enter into, and thereafter maintain, Interest
Rate Protection Agreements, satisfactory to the Agent, with a term of at least
24 months, establishing a fixed or maximum interest rate acceptable to the Agent
in respect of at least $35,000,000 of the outstanding Revolving Loans.
SECTION 8. Negative Covenants. Holdings and the Borrower hereby
------------------
covenant and agree that as of the Restatement Effective Date and thereafter for
so long as this Agreement is in effect and until the Total Revolving Loan
Commitment has terminated, no Letters of Credit (other than Letters of Credit,
together with all Fees that have accrued and will accrue thereon through the
stated termination date of such Letters of Credit, which have been supported in
a manner satisfactory to the respective Letter of Credit Issuer in its sole and
absolute discretion) or Notes are outstanding and the Loans and Unpaid Drawings,
together with interest, Fees and all other Obligations (other than any
indemnities described in Section 12.13 hereof which are not then due and
payable) incurred hereunder, are paid in full:
8.01 Changes in Business. (a) Holdings and its Subsidiaries will
-------------------
not engage in any business other than the business engaged in by Holdings and
its Subsidiaries as of the Restatement Effective Date and activities directly
related thereto, and similar or related businesses.
(b) Notwithstanding the foregoing, Holdings will engage in no
business other than (i) its ownership of the capital stock of the Borrower,
those obligations of officers and employees of Holdings and its Subsidiaries to
the extent permitted by Section
8.05(e) and having those liabilities which it is responsible for under the
Seller Subordinated Note, this Agreement and the other Documents to which it is
a party and Borrower Subordinated Notes, (ii) the issuance of Permitted Holdings
PIK Securities, shares of Holdings Common Stock and options and warrants to
purchase Holdings Common Stock, and (iii) activities associated with expenses
paid with dividends made by the Borrower pursuant to Section 8.06(iii).
Notwithstanding the foregoing, Holdings may engage in those
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activities that are incidental to (a) the maintenance of its corporate existence
in compliance with applicable law, (b) legal, tax and accounting matters in
connection with any of the foregoing activities and (c) the entering into, and
performing its obligations under, this Agreement and the other Documents to
which it is a party.
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc.
-------------------------------------------------------
Holdings will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any future time) all or any part of its property or
assets (other than inventory in the ordinary course of business through
distribution arrangements, vendor financial service programs or otherwise), or
enter into any partnerships, joint ventures or sale-leaseback transactions, or
purchase or otherwise acquire (in one or a series of related transactions) any
part of the property or assets (other than purchases or other acquisitions of
inventory, materials and equipment in the ordinary course of business) of any
Person, except that the following shall be permitted:
(a) the Borrower and its Subsidiaries may lease as lessee or lessor
or license as licensee or licensor real or personal property in the
ordinary course of business and otherwise in compliance with this
Agreement, so long as any such lease or license by the Borrower or any of
its Subsidiaries in its capacity as lessor or licensor, as the case may be,
does not prohibit the granting of a Lien by the Borrower or any of its
Subsidiaries pursuant to the Mortgages in the real property covered by such
lease or pursuant to the Security Agreement in the personal property
covered by such lease or license, as the case may be;
(b) Capital Expenditures by the Borrower and its Subsidiaries to the
extent not in violation of Section 8.08;
(c) the advances, investments and loans permitted pursuant to Section
8.05;
(d) the Borrower and its Subsidiaries may sell or discount, in each
case without recourse, accounts receivables arising in the ordinary course
of business, but only in connection with the compromise or collection
thereof;
(e) the Borrower and its Subsidiaries may sell or exchange specific
items of equipment, so long as the purpose of each such sale or exchange is
to acquire (and results within 180 days of such sale or exchange in the
acquisition of) replacement items of equipment which are, in the reasonable
business judgment of the Borrower and its Subsidiaries, the functional
equivalent of the item of equipment so sold or exchanged;
(f) the Borrower and its Subsidiaries may, in the ordinary course of
business, license as licensee or licensor patents, trademarks, copyrights
and know-how to or from third Persons and to one another so long as any
such license by the
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<PAGE>
Borrower or any of its Subsidiaries in its capacity as licensor is
permitted to be assigned pursuant to the Security Agreement (to the extent
that a security interest in such patents, trademarks, copyrights and know-
how is granted thereunder) and does not otherwise prohibit the granting of
a Lien by the Borrower or any of its Subsidiaries pursuant to the Security
Agreement in the intellectual property covered by such license;
(g) any Foreign Subsidiary may be merged with and into, or be
dissolved or liquidated into, or transfer any of its assets to, any Wholly-
Owned Foreign Subsidiary so long as (i) such Wholly-Owned Foreign
Subsidiary is the surviving corporation of any such merger, dissolution or
liquidation and (ii) in each case at least 65% of the total combined voting
power of all classes of capital stock of all first-tier Foreign
Subsidiaries are pledged pursuant to the Pledge Agreement;
(h) the assets of any Foreign Subsidiary may be transferred to the
Borrower or any of its Wholly-Owned Domestic Subsidiaries, and any Foreign
Subsidiary may be merged with and into, or be dissolved or liquidated into,
the Borrower or any of its Wholly-Owned Domestic Subsidiaries so long as
the Borrower or such Wholly-Owned Domestic Subsidiary is the surviving
corporation of any such merger, dissolution or liquidation;
(i) the Borrower or any of its Wholly-Owned Domestic Subsidiaries may
transfer to one or more Wholly-Owned Foreign Subsidiaries those assets
theretofore transferred to the Borrower or such Wholly-Owned Domestic
Subsidiary by a Foreign Subsidiary (whether by merger, liquidation,
dissolution or otherwise) pursuant to clause (h) of this Section 8.02;
(j) the Borrower and its Subsidiaries may sell or otherwise transfer
inventory to their respective Subsidiaries for resale by such Subsidiaries,
and Subsidiaries of the Borrower may sell or otherwise transfer inventory
to the Borrower for resale by the Borrower so long as the security interest
granted to the Collateral Agent for the benefit of the Secured Creditors
pursuant to the Security Agreement in the inventory so transferred (or the
proceeds thereof, in the case of a transfer to a Foreign Subsidiary) shall
remain in full force and effect and perfected (to at least the same extent
as in effect immediately prior to such transfer);
(k) the Borrower may contribute cash to one or more Wholly-Owned
Domestic Subsidiaries formed after the Restatement Effective Date in
accordance with Section 8.14, so long as the aggregate amount of such cash
so contributed to all such Domestic Subsidiaries does not exceed
$3,000,000;
(l) the Borrower and its Domestic Subsidiaries may transfer assets
(other than inventory) to Wholly-Owned Foreign Subsidiaries so long as the
aggregate fair market value of all such assets so transferred (determined
in good faith by the
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<PAGE>
Board of Directors or senior management of the Borrower) to all such
Foreign Subsidiaries does not exceed $10,000,000;
(m) assets of the Borrower and its Domestic Subsidiaries (other than
any Domestic Subsidiary owning assets or having operations in Puerto Rico)
constituting non-U.S. operations may be transferred to Wholly-Owned Foreign
Subsidiaries of the Borrower;
(n) each of the Borrower and its Subsidiaries may sell assets,
provided that (x) the aggregate sale of proceeds from all assets subject to
--------
such sales pursuant to this clause (n) shall not exceed $5,000,000 in any
fiscal year of the Borrower, (y) any such asset sale is for at least 80% in
cash and at fair market value (as determined in good faith by the Board of
Directors or senior management of the Borrower) and (z) the Net Proceeds
therefrom have either resulted in a permanent reduction to the Total
Revolving Loan Commitment as provided in Section 3.03(c) or are reinvested
to the extent permitted by Section 3.03(c).
(o) each of the Borrower and its Subsidiaries may sell other assets,
provided that the aggregate sale proceeds from all assets subject to such
--------
sales pursuant to this clause (o) shall not exceed $500,000 in any fiscal
year of the Borrower;
(p) so long as no Default or Event of Default then exists or would
result therefrom, the Borrower and its Subsidiaries may acquire assets or
the capital stock of any Person (any such acquisition permitted by this
clause (p), a "Permitted Acquisition"), provided, that (i) such Person (or
--------
the assets so acquired) was, immediately prior to such acquisition, engaged
(or used) primarily in the businesses permitted pursuant to Section
8.01(a), (ii) if such acquisition is structured as a stock acquisition,
then either (A) the Person so acquired becomes a Wholly-Owned Subsidiary of
the Borrower or (B) such Person is merged with and into the Borrower or a
Wholly-Owned Subsidiary of the Borrower (with the Borrower or such Wholly-
Owned Subsidiary being the surviving corporation of such merger), and in
any case, all of the provisions of Section 8.14 have been complied with in
respect of such Person, (iii) any Liens or Indebtedness assumed or issued
in connection with such acquisition are otherwise permitted under Section
8.03 or 8.04, as the case may be, (iv) the only consideration paid in
connection with such Permitted Acquisition consists of cash (including cash
constituting the proceeds of Revolving Loans hereunder), Holdings Common
Stock (valued based on the then current trading price for such Holdings
Common Stock) and/or Permitted Holdings PIK Securities (valued at the
aggregate liquidation preference thereof in the case of preferred stock and
the aggregate face amount thereof in the case of indebtedness), and (v) (x)
any such Permitted Acquisition (or series of related Permitted
Acquisitions) involving an expenditure (with the consideration valued as
set forth in clause (iv) above) in excess of $30,000,000 and less than or
equal to
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$50,000,000 (with both of the foregoing amounts to be increased, as of any
date, by the Cumulative Income and Equity Amount as determined as of such
date (after giving effect to any other transactions that have occurred on
such date that would reduce the Cumulative Income and Equity Amount)) shall
not be consummated without the prior written consent of the Required Banks
unless the Pro Forma Leverage Ratio on the date of such acquisition is less
than 2.50:1.00 and (y) any such Permitted Acquisition (or series of related
Permitted Acquisitions) involving an expenditure (with the consideration
valued as set forth in clause (iv) above) in excess of $50,000,000 (plus,
as of any date, the Cumulative Income and Equity Amount as determined as of
such date (after giving effect to any other transactions that have occurred
on such date that would reduce the Cumulative Income and Equity Amount))
shall not be consummated without the prior written consent of the Required
Banks;
(q) any Domestic Subsidiary of the Borrower may transfer assets
(other than accounts receivable and inventory) to the Borrower or to any
other Wholly-Owned Domestic Subsidiary of the Borrower so long as the
security interests granted to the Collateral Agent for the benefit of the
Secured Creditors pursuant to the Security Documents in the assets so
transferred shall remain in full force and effect and perfected (to at
least the same extent as in effect immediately prior to such transfer);
(r) any Wholly-Owned Domestic Subsidiary of the Borrower may merge
with and into, or be dissolved or liquidated into, the Borrower so long as
(i) the Borrower is the surviving corporation of such merger, dissolution
or liquidation and (ii) the security interests granted to the Collateral
Agent for the benefit of the Secured Creditors pursuant to the Security
Documents in the assets of such Wholly-Owned Domestic Subsidiary shall
remain in full force and effect and perfected (to at least the same extent
as in effect immediately prior to such merger);
(s) any Domestic Subsidiary of the Borrower may merge with and into,
or be dissolved or liquidated into, any other Wholly-Owned Domestic
Subsidiary of the Borrower so long as (i) such Wholly-Owned Domestic
Subsidiary of the Borrower is the surviving corporation of such merger,
dissolution or liquidation and (ii) the security interests granted to the
Collateral Agent for the benefit of the Secured Creditors pursuant to the
Security Documents in the assets of such Domestic Subsidiary shall remain
in full force and effect and perfected (to at least the same extent as in
effect immediately prior to such merger, dissolution or liquidation);
(t) the Borrower and its Subsidiaries may effect the Designated Real
Property Sale, provided that the Designated Real Property Sale is for at
--------
least 80% in cash and at fair market value (as determined in good faith by
the Board of Directors or senior management of the Borrower);
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<PAGE>
(u) the Borrower and its Subsidiaries may effect any West Coast Asset
Sale, provided that (x) any such West Coast Asset Sale is for at least 80%
--------
in cash and at fair market value (as determined in good faith by the Board
of Directors or senior management of the Borrower) and (y) the Net Proceeds
therefrom have either resulted in a permanent reduction to the Total
Revolving Loan Commitment as provided in Section 3.03(c) or are reinvested
to the extent permitted by Section 3.03(c);
(v) the Borrower and its Subsidiaries may, in the ordinary course of
business, sell, transfer or otherwise dispose of assets (including, without
limitation, patents, trademarks, copyrights and know-how) which, in the
reasonable judgment of the Borrower or such Subsidiary, are determined to
be uneconomical, negligible or obsolete in the conduct of its business;
(w) (I) the Borrower and/or its Subsidiaries may enter into
factoring arrangements with respect to accounts receivable arising in Japan
in connection with business activities therein, (II) the Borrower and its
Domestic Subsidiaries may sell or otherwise transfer accounts receivable
between or among themselves in the ordinary course of business, and (III)
Foreign Subsidiaries may sell or otherwise transfer accounts receivable
between or among themselves in the ordinary course of business;
(x) the Permitted Sale-Leaseback Transactions shall be permitted so
long as (I) the Net Proceeds therefrom have either resulted in a permanent
reduction to the Total Revolving Loan Commitment as provided in Section
3.03(c) or are reinvested to the extent permitted by Section 3.03(c) and
(II) the lease obligations created thereby are otherwise permitted under
this Agreement;
(y) the Borrower and its subsidiaries may transfer or divest of the
Natural Touch brand name and the assets related thereto, it being
understood that such transferor divestiture shall not be subject to the
provisions set forth in clause (y) of Section 8.02(n); and
(z) the Borrower and its Subsidiaries may sell those assets listed on
Annex X, provided that (x) any such asset sale is for at least 80% in cash
and at fair market value (as determined in good faith by the Board of
Directors or senior management of the Borrower) and (y) the Net Proceeds
therefrom have either resulted in a permanent reduction to the Total
Revolving Loan Commitment as provided in Section 3.03(c) or are reinvested
to the extent permitted by Section 3.03(c).
To the extent the Required Banks waive the provisions of this Section 8.02 with
respect to the sale or other disposition of any Collateral, or any Collateral is
sold or disposed of as permitted by this Section 8.02 (and such Collateral is
permitted to be released from the
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<PAGE>
Liens created by the respective Security Document), such Collateral in each case
shall be sold or otherwise disposed of free and clear of the Liens created by
the Security Documents and the Agent shall take such actions (including, without
limitation, directing the Collateral Agent to take such actions) as are
appropriate in connection therewith.
8.03 Liens. Holdings will not, and will not permit any of its
-----
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of any kind (real or personal, tangible or
intangible) of Holdings or any of its Subsidiaries, whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with recourse to
Holdings or any of its Subsidiaries) or assign any right to receive income,
except for the following (collectively, the "Permitted Liens"):
(a) inchoate Liens for taxes, assessments or governmental charges or
levies not yet due or Liens for taxes, assessments or governmental charges
or levies being contested in good faith by appropriate proceedings and for
which adequate reserves have been established in accordance with GAAP;
(b) Liens in respect of property or assets of the Borrower or any of
its Subsidiaries imposed by law which were incurred in the ordinary course
of business and which have not arisen to secure Indebtedness for borrowed
money, such as carriers', warehousemen's and mechanics' Liens, statutory
landlord's Liens, and other similar Liens arising in the ordinary course of
business, and which either (x) do not in the aggregate materially detract
from the value of such property or assets or materially impair the use
thereof in the operation of the business of the Borrower or any of its
Subsidiaries or (y) are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing the forfeiture
or sale of the property or asset subject to such Lien;
(c) Liens created by or pursuant to this Agreement and the Security
Documents;
(d) Liens in existence on the Restatement Effective Date which are
listed, and the property subject thereto described, in Annex IX, without
giving effect to any extensions or renewals thereof;
(e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 9.09;
(f) Liens incurred or deposits made (x) in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, government
contracts, performance and return-of-
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<PAGE>
money bonds and other similar obligations incurred in the ordinary course
of business (exclusive of obligations in respect of the payment for
borrowed money); and (y) to secure the performance of leases of Real
Property, to the extent incurred or made in the ordinary course of business
consistent with past practices;
(g) licenses, leases or subleases granted to third Persons not
interfering in any material respect with the business of the Borrower or
any of its Subsidiaries;
(h) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
(i) Liens arising from precautionary UCC financing statements
regarding operating leases permitted by this Agreement;
(j) any interest or title of a licensor, lessor or sublessor under
any lease permitted by this Agreement;
(k) Permitted Encumbrances;
(l) Liens arising pursuant to purchase money mortgages, Capital
Leases or security interests securing Indebtedness representing the
purchase price (or financing of the purchase price within 90 days after the
respective purchase) of assets acquired after the Restatement Effective
Date, provided that (i) any such Liens attach only to the assets so
--------
purchased, (ii) the Indebtedness secured by any such Lien does not exceed
100%, nor is less than 70%, of the lesser of the fair market value or the
purchase price of the property being purchased at the time of the
incurrence of such Indebtedness and (iii) the Indebtedness secured thereby
is permitted to be incurred pursuant to Section 8.04(d);
(m) Liens on property or assets acquired pursuant to a Permitted
Acquisition, or on property or assets of a Subsidiary of the Borrower in
existence at the time such Subsidiary is acquired pursuant to a Permitted
Acquisition, provided that (i) any Indebtedness that is secured by such
--------
Liens is permitted to exist under Section 8.04(j), and (ii) such Liens are
not incurred in contemplation of such Permitted Acquisition and do not
attach to any other asset of the Borrower or any of its Subsidiaries;
(n) Liens securing Indebtedness permitted pursuant to, and subject to
the limitations set forth in, clause (x) of Section 8.04(h), so long as any
such Lien attaches only to the assets of the respective Foreign Subsidiary
which is the obligor under such Indebtedness;
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<PAGE>
(o) Liens upon or with respect to inventory arising pursuant to
agreements to repurchase such inventory, provided that any such Liens
--------
attach only to the subject inventory and are created in the ordinary course
of business; and
(p) additional Liens incurred by the Borrower and its Subsidiaries so
long as the value of the property subject to such Liens, and the
Indebtedness and other obligations secured thereby, do not exceed
$1,000,000.
8.04 Indebtedness. Holdings will not, and will not permit any of its
------------
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(b) Existing Indebtedness outstanding on the Restatement Effective
Date and listed on Annex VIII, without giving effect to any subsequent
extension, renewal or refinancing thereof, except as permitted by Section
8.05(t);
(c) Indebtedness under Interest Rate Protection Agreements entered
into to protect the Borrower against fluctuations in interest rates in
respect of the Obligations;
(d) Capitalized Lease Obligations and Indebtedness of the Borrower
and its Subsidiaries incurred pursuant to purchase money Liens, provided,
--------
that (x) all such Capitalized Lease Obligations are permitted under Section
8.08 and (y) the sum of (i) the aggregate Capitalized Lease Obligations
plus (ii) the aggregate principal amount of such purchase money
Indebtedness outstanding at any time (A) during the period (taken as one
accounting period) from the Original Effective Date and ending on December
31, 1997, shall not exceed $7,000,000, and (B) during any fiscal year of
the Borrower thereafter shall not exceed the amount set forth opposite such
fiscal year as set forth below:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
December 31, 1998 $10,000,000
December 31, 1999 $11,000,000
December 31, 2000 $12,000,000
Thereafter $13,000,000
</TABLE>
(e) Indebtedness constituting Intercompany Loans to the extent
permitted by Section 8.05(g);
(f) Indebtedness of Holdings under the Shareholder Subordinated
Notes;
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<PAGE>
(g) Indebtedness under Other Hedging Agreements providing protection
against fluctuations in currency values in connection with the Borrower's
or any of its Subsidiaries' operations so long as management of the
Borrower or such Subsidiary, as the case may be, has determined that the
entering into of such Other Hedging Agreements are bona fide hedging
---- ----
activities;
(h) Indebtedness (x) of Foreign Subsidiaries under lines of credit
extended by third Persons to any such Foreign Subsidiary the proceeds of
which Indebtedness are used for such Foreign Subsidiary's working capital
purposes, provided that the aggregate principal amount of all such
--------
Indebtedness outstanding at any time for all Foreign Subsidiaries shall not
exceed $30,000,000 (the "Foreign Subsidiary Working Capital Indebtedness"),
and (y) consisting of guaranties or similar credit support by the Borrower
or any Foreign Subsidiary of any such Foreign Subsidiary Working Capital
Indebtedness (including, without limitation, Letters of Credit issued for
the account of the Borrower or any such Foreign Subsidiary in favor of
lenders in respect of any such Foreign Subsidiary Working Capital
Indebtedness);
(i) Indebtedness of Foreign Subsidiaries to the Borrower and its
Domestic Subsidiaries as a result of any investment made pursuant to
Section 8.05(o);
(j) Indebtedness of a Subsidiary acquired pursuant to a Permitted
Acquisition (or Indebtedness assumed at the time of a Permitted Acquisition
of an asset securing such Indebtedness), provided that (i) such
--------
Indebtedness was not incurred in connection with or in anticipation of
such Permitted Acquisition, (ii) such Indebtedness does not constitute debt
for borrowed money (other than debt for borrowed money incurred in
connection with industrial revenue or industrial development bond
financings), it being understood and agreed that Capitalized Lease
Obligations and purchase money Indebtedness shall not constitute debt for
borrowed money for purposes of this clause (j), and (iii) at the time of
such Permitted Acquisition such Indebtedness does not exceed 10% of the
total value of the assets of the Subsidiary so acquired, or of the asset so
acquired, as the case may be;
(k) Indebtedness consisting of guaranties (x) by the Borrower of
Indebtedness, leases and other obligations permitted to be incurred by
Domestic Wholly-Owned Subsidiaries, (y) by Domestic Subsidiaries of
Indebtedness, leases and other obligations permitted to be incurred by the
Borrower or other Domestic Wholly-Owned Subsidiaries and (z) by Foreign
Subsidiaries of Indebtedness, leases and other obligations permitted to be
incurred by other Foreign Wholly-Owned Subsidiaries;
(l) Indebtedness of the Borrower constituting Borrower Subordinated
Loans to the extent permitted by Section 8.05(s);
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<PAGE>
(m) Indebtedness of Holdings incurred under Permitted Holdings PIK
Securities, provided that the aggregate outstanding principal amount of
--------
Permitted Holding PIK Securities constituting Indebtedness shall not exceed
$30,000,000 plus the amount of interest on such Permitted Holdings PIK
Securities paid in kind or through accretion;
into by the Borrower and its Subsidiaries in the ordinary course of
business;
(o) Indebtedness of Holdings incurred under the Seller Subordinated
Note in an aggregate amount not to exceed $5,000,000 (as reduced by any
repayments of principal thereof) plus additional indebtedness of Holdings
incurred under the Seller Subordinated Note representing accrued but unpaid
interest thereon; provided, however, that no such indebtedness incurred by
-------- -------
Holdings under the Seller Subordinated Note shall be guaranteed or
supported by the Borrower or any of its Subsidiaries; and
(p) additional Indebtedness of the Borrower and its Domestic
Subsidiaries not otherwise permitted hereunder not exceeding $5,000,000, in
aggregate principal amount at any time outstanding.
8.05 Advances, Investments and Loans. Holdings will not, and will
-------------------------------
not permit any of its Subsidiaries to, lend money or credit or make advances to
any Person, or purchase or acquire any stock, obligations or securities of, or
any other interest in, or make any capital contribution to, any Person, or
purchase or own a futures contract or otherwise become liable for the purchase
or sale of currency or other commodities at a future date in the nature of a
futures contract, or hold any cash, Cash Equivalents or Foreign Cash
Equivalents, except:
(a) the Borrower and its Subsidiaries may invest in cash and Cash
Equivalents;
(b) the Borrower and its Subsidiaries may acquire and hold
receivables owing to it, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade
terms of the Borrower or such Subsidiary;
(c) the Borrower and its Subsidiaries may acquire and own investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of suppliers and customers and in good faith settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
-61-
<PAGE>
(d) Interest Rate Protection Agreements entered into in compliance
with Section 8.04(c) shall be permitted;
(e) Holdings may acquire and hold obligations of one or more officers
or other employees of Holdings or its Subsidiaries in connection with such
officers' or employees' acquisition of shares of Holdings Common Stock so
long as no cash is paid by Holdings or any of its Subsidiaries in
connection with the acquisition of any such obligations;
(f) deposits made in the ordinary course of business consistent with
past practices to secure the performance of leases shall be permitted;
(g) the Borrower may make intercompany loans and advances to any of
its Subsidiaries and any Subsidiary of the Borrower may make intercompany
loans and advances to the Borrower or any other Subsidiary of the Borrower
(collectively, "Intercompany Loans"), provided, that (w) at no time shall
--------
the aggregate outstanding principal amount of Intercompany Loans made
pursuant to this clause (g) by the Borrower and its Domestic Subsidiaries
to Foreign Subsidiaries, when added to the amount of contributions,
capitalizations and forgiveness theretofore made pursuant to clause (l),
exceed $22,000,000 (determined without regard to any write-downs or write-
offs of such loans and advances), (x) each Intercompany Loan made by a
Foreign Subsidiary to the Borrower or a Domestic Subsidiary shall contain
the subordination provisions set forth on Exhibit K, (y) each Intercompany
Loan shall be evidenced by an Intercompany Note and (z) each such
Intercompany Note (other than (1) Intercompany Notes issued by Foreign
Subsidiaries to the Borrower or Domestic Subsidiaries and (2) Intercompany
Notes held by Foreign Subsidiaries) shall be pledged to the Collateral
Agent pursuant to the Pledge Agreement;
(h) loans and advances by the Borrower and its Subsidiaries to
employees of Holdings and its Subsidiaries for moving and travel expenses
and other similar expenses, in each case incurred in the ordinary course of
business, in an aggregate outstanding principal amount not to exceed
$3,000,000 at any time (determined without regard to any write-down or
write-offs of such loans and advances) shall be permitted;
(i) Holdings may make equity contributions to the capital of the
Borrower;
(j) Foreign Subsidiaries may invest in Foreign Cash Equivalents;
(k) Other Hedging Agreements may be entered into in compliance with
Section 8.04(g);
(l) the Borrower and its Domestic Subsidiaries may make cash capital
contributions to Foreign Subsidiaries, and may capitalize or forgive any
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<PAGE>
Indebtedness owed to them by a Foreign Subsidiary and outstanding under
clause (g) of this Section 8.05, provided that the aggregate amount of such
--------
contributions, capitalizations and forgiveness made pursuant to this clause
(l), when added to the aggregate outstanding principal amount of
Intercompany Loans made to Foreign Subsidiaries under clause (g)
(determined without regard to any write-downs or write-offs thereof) shall
not exceed an amount equal to $22,000,000;
(m) Permitted Acquisitions shall be permitted;
(n) the Borrower and its Subsidiaries may make investments in their
respective Subsidiaries in connection with the transfers of those assets
permitted to be transferred pursuant to Sections 8.02(h), (i) and (j), it
being understood that the Borrower and its Subsidiaries may convert any
investment initially made as an equity investment to intercompany
Indebtedness held by the Borrower or such Subsidiary;
(o) the Borrower and its Domestic Subsidiaries may make and hold
investments in their respective Foreign Subsidiaries to the extent that
such investments arise from the sale of inventory in the ordinary course of
business by the Borrower or such Domestic Subsidiary to such Foreign
Subsidiaries for resale by such Foreign Subsidiaries (including any such
investments resulting from the extension of the payment terms with respect
to such sales);
(p) the Borrower and its Subsidiaries may hold additional investments
in their respective Subsidiaries to the extent that such investments
reflect an increase in the value of such Subsidiaries;
(q) the Borrower and its Subsidiaries may capitalize one or more
foreign sales corporations created in accordance with Section 8.14 with
cash contributions in an aggregate amount not to exceed $200,000 for all
such foreign sales corporations;
(r) the Borrower and its Subsidiaries may make transfers of assets to
their respective Subsidiaries in accordance with Section 8.02(h), (i), (j),
(k), (l), (m) and (q);
(s) Holdings may make intercompany loans to the Borrower on a
subordinated basis (collectively, "Borrower Subordinated Loans") so long as
(x) all such Borrower Subordinated Loans are evidenced by a Borrower
Subordinated Note and (y) the proceeds used by Holdings to make such
Borrower Subordinated Loans come from the Permitted Equity Proceeds;
(t) advances, loans and investments in existence on the Restatement
Effective Date and listed on Annex XII shall be permitted, without giving
effect to
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<PAGE>
any additions thereto or replacements thereof (except those additions or
replacements which are existing obligations as of the Restatement Effective
Date), provided that those loans outstanding to Subsidiaries on the
--------
Restatement Effective Date may be repaid and reborrowed so long as the
aggregate outstanding principal amount of all such loans does not exceed
that aggregate principal amount outstanding on the Restatement Effective
Date;
(u) the Borrower and its Subsidiaries may acquire and hold debt
and/or equity securities as partial consideration for a sale of assets
pursuant to Section 8.02(n), (o), (t), (u) or (z) to the extent permitted
by any such Section;
(v) the Borrower and/or its Subsidiaries may enter into a joint
venture in China and in connection therewith may transfer assets (other
than accounts receivable and inventory that is not raw material inventory)
to such joint venture, provided, that (A) the aggregate fair market value
--------
of all assets of the Borrower and its Domestic Subsidiaries so transferred
(determined in good faith by the Board of Directors or senior management of
the Borrower) does not exceed $1,000,000 plus the Cumulative Income and
Equity Amount at the time of any such transfer and (B) the aggregate fair
market value of all assets of Foreign Subsidiaries so transferred
(determined in good faith by the Board of Directors or senior management of
the Borrower) does not exceed $1,000,000 plus the Cumulative Income and
Equity Amount at the time of any such transfer;
(w) Holdings may repurchase shares of the Holdings Common Stock as
and to the extent permitted under Section 8.06; and
(x) in addition to investments permitted by clauses (a) through (w)
above, so long as no Default or Event of Default then exists or would
result therefrom, the Borrower and its Subsidiaries may make additional
loans, advances and investments to or in a Person so long as the amount of
any such loan, advance or investment (at the time of the making thereof)
does not exceed an amount equal to the sum of (A) $7,500,000 less the
aggregate amount of such $7,500,000 previously used to make loans, advances
and investments pursuant to this clause (x) to the extent same are then
still outstanding (determined without regard to any write-downs or write-
offs thereof and net of cash repayments of principal in the case of loans
and cash equity returns (whether as a dividend or redemption) in the case
of equity investments) plus (B) an amount equal to the Cumulative Income
and Equity Amount at such time; provided, that (1) any loan, advance or
--------
investment made with the Cumulative Income and Equity Amount shall be in or
to a Person of which the Borrower owns (directly or indirectly) at least a
majority economic and voting interest (including the interest purchased or
to be purchased with the respective investment) and (2) neither the
Borrower nor any of its Subsidiaries may make or own any investment in
Margin Stock.
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<PAGE>
8.06 Dividends, etc. Holdings will not, and will not permit any of
---------------
its Subsidiaries to, declare or pay any dividends (other than dividends payable
solely in common stock of Holdings or any such Subsidiary, as the case may be)
or return any capital to, its stockholders or authorize or make any other
distribution, payment or delivery of property or cash to its stockholders as
such, or redeem, retire, purchase or otherwise acquire, directly or indirectly,
for a consideration, any shares of any class of its capital stock, now or
hereafter outstanding (or any warrants for or options or stock appreciation
rights in respect of any of such shares), or set aside any funds for any of the
foregoing purposes, and Holdings will not permit any of its Subsidiaries to
purchase or otherwise acquire for consideration any shares of any class of the
capital stock of Holdings or any other Subsidiary, as the case may be, now or
hereafter outstanding (or any options or warrants or stock appreciation rights
issued by such Person with respect to its capital stock) (all of the foregoing
"Dividends"), except that:
(i) the Transaction shall be permitted;
(ii) any Subsidiary of the Borrower may pay Dividends to the
Borrower or any Wholly-Owned Subsidiary of the Borrower;
(iii) (a) Holdings may redeem or purchase shares of Holdings
Common Stock or options to purchase Holdings Common Stock, held by former
employees of Holdings or any of its Subsidiaries following the termination
of their employment, provided that (w) the only consideration paid by
--------
Holdings in respect of such redemptions and/or purchases shall be cash and
Shareholder Subordinated Notes, (x) the sum of (A) the aggregate amount
paid by Holdings in cash in respect of all such redemptions and/or
purchases plus (B) the aggregate amount of all principal and interest
payments made on Shareholder Subordinated Notes, shall not exceed
$2,000,000 in any fiscal year of Holdings, provided that such amount
--------
shall be increased by an amount equal to the proceeds received by Holdings
after the Original Effective Date from the sale or issuance of Holdings
Common Stock to management of Holdings or any of its Subsidiaries and (y)
at the time of any cash payment permitted to be made pursuant to this
Section 8.06(iii), no Default or Event of Default shall then exist or
result therefrom; and (b) so long as no Default or Event of Default then
exists or would result therefrom, the Borrower may pay cash Dividends to
Holdings so long as Holdings promptly uses such proceeds for the purposes
described in clause (iii)(a) of this Section 8.06;
(iv) (a) Holdings may redeem or purchase shares of Holdings
Common Stock or options to purchase Holdings Common Stock held by the two
individuals holding the offices of Chairman and Chief Financial Officer of
the Borrower as of the Restatement Effective Date following the death or
disability of such individuals, provided that (x) the aggregate amount paid
by Holdings in respect of all such redemptions and/or purchases for (I) the
individual holding the office of Chairman shall not exceed $10,000,000 and
(II) the individual holding the office of Chief
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<PAGE>
Financial Officer does not exceed $2,000,000 and (y) at the time of any
payment permitted to be made pursuant to this Section 8.06(iv), no Default
or Event of Default shall then exist or result therefrom and (b) so long as
no Default or Event of Default then exists or would result therefrom, the
Borrower may pay cash Dividends to Holdings so long as the cash proceeds
thereof are promptly used by Holdings for the purposes described in clause
(iv)(a) of this Section 8.06;
(v) the Borrower may pay cash Dividends to Holdings so long as
the pro ceeds thereof are promptly used by Holdings to (x) pay operating
expenses in the ordinary course of business (including, without limitation,
professional fees and expenses) and other similar corporate overhead costs
and expenses, provided that the aggregate amount of cash Dividends paid
--------
pursuant to this clause (x) shall not during any fiscal year of the
Borrower exceed $1,000,000 or (y) pay salaries or other compensation of
employees who perform services for Holdings and the Borrower, provided
--------
that the aggregate amount of cash Dividends paid pursuant to this clause
(y) shall not during any fiscal year of the Borrower exceed $250,000;
(vi) the Borrower may pay cash Dividends to Holdings in the
amounts and at the times of any payment by Holdings in respect of taxes,
provided that (x) the amount of cash Dividends paid pursuant to this
--------
clause (vi) to enable Holdings to pay federal income taxes at any time
shall not exceed the lesser of (A) the amount of such federal income taxes
owing by Holdings at such time for the respective period and (B) the
amount of such federal income taxes that would be owing by the Borrower and
its Subsidiaries on a consolidated basis for such period if determined
without regard to Holdings' ownership of the Borrower and (y) any refunds
shall promptly be returned by Holdings to the Borrower;
(vii) Holdings may pay regularly scheduled Dividends on the
Permitted Holdings PIK Securities (to the extent issued as preferred stock)
pursuant to the terms thereof solely through the issuance of additional
shares of such Permitted Holdings PIK Securities, provided that in lieu of
--------
issuing additional shares of such Permitted Holdings PIK Securities as
Dividends, Holdings may increase the liquidation preference of the shares
of Permitted Holdings PIK Securities in respect of which such Dividends
have accrued; and
(viii) (a) Holdings may pay cash Dividends in addition to those
permitted above in this Section 8.06 in an amount not to exceed $3,000,000
in any fiscal year, plus the Cumulative Income and Equity Amount at the
time of the payment of any such Dividend, so long as no Default or Event of
Default then exists or would result therefrom, and (b) so long as no
Default or Event of Default then exists or would result therefrom, the
Borrower may pay cash Dividends to Holdings so long as the cash proceeds
thereof are promptly used by Holdings for the purpose described in clause
(viii)(a) of this Section 8.06.
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<PAGE>
8.07 Transactions with Affiliates. Holdings will not, and will not
----------------------------
permit any of its Subsidiaries to, enter into any transaction or series of
transactions with any Affiliate other than in the ordinary course of business
and on terms and conditions substantially as favorable to Holdings or such
Subsidiary as would be obtainable by Holdings or such Subsidiary at the time in
a comparable arm's-length transaction with a Person other than an Affiliate;
provided, that the following shall in any event be permitted: (i) the
- --------
Transaction; (ii) Holdings and the Borrower and its Domestic Subsidiaries may
make any payments required under the Holdings Tax Allocation Agreement; (iii)
the payment of reasonable out-of-pocket expenses incurred by Bain Capital and/or
Related Parties in providing services to the Borrower; (iv) the payment, on a
quarterly basis, of management fees to Bain Capital and/or Related Parties in
aggregate amount (for all such Persons taken together) not to exceed $500,000 in
any fiscal quarter of the Borrower; and (iv) the payment by the Borrower, in
connection with any acquisition, divestiture or financing transaction that is
consummated, of a transaction fee to Bain Capital and/or the Bain Affiliates in
an aggregate amount (for all such Persons taken together) not to exceed 1% of
the aggregate value of any such transaction.
8.08 Capital Expenditures. (a) Holdings will not, and will not
--------------------
permit any of its Subsidiaries to, make any Capital Expenditures, except that,
(i) during the period commencing on July 1, 1997 and ending December 31, 1999,
the Borrower and its Subsidiaries may make Capital Expenditures in an aggregate
amount not to exceed $37,900,000 (provided that such Capital Expenditures shall
not exceed $25,000,000 in any fiscal year of the Borrower) and (ii) during any
fiscal year thereafter the Borrower and its Subsidiaries may make Capital
Expenditures so long as the aggregate amount of such Capital Expenditures does
not exceed $10,000,000.
(b) Notwithstanding the foregoing, in the event that the amount of
Capital Expenditures permitted to be made by the Borrower and its Subsidiaries
pursuant to clause (a) above in any period (before giving effect to any increase
in such permitted expenditure amount pursuant to this clause (b)) is greater
than the amount of such Capital Expenditures made by the Borrower and its
Subsidiaries during such period, such excess (the "Rollover Amount") may be
carried forward and utilized to make Capital Expenditures in succeeding fiscal
years, provided that in no event shall the aggregate amount of Capital
Expenditures made by the Borrower and its Subsidiaries during any fiscal year
pursuant to Section 8.08(a) and this Section 8.08(b) exceed 125% of the amount
permitted to be made in such fiscal year pursuant to Section 8.08(a).
(c) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures (which Capital Expenditures will not be included
in any determination under the foregoing clause (a)) with the proceeds of Asset
Sales to the extent such proceeds have not resulted in a reduction to the Total
Revolving Loan Commitment pursuant to Section 3.03(c).
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<PAGE>
(d) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures (which Capital Expenditures will not be included
in any determination under the foregoing clause (a)) with the insurance
proceeds received by the Borrower or any of its Subsidiaries from any Recovery
Event so long as such Capital Expenditures are to replace or restore any
properties or assets in respect of which such proceeds were paid within one
year following the date of the receipt of such insurance proceeds to the extent
such insurance proceeds have not resulted in a reduction to the Total Revolving
Loan Commitment pursuant to Section 3.03(f).
(e) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures at any time in an aggregate amount equal to the
Cumulative Income and Equity Amount at such time (which Capital Expenditures
will not be included in any determination under the foregoing clause (a)).
8.09 Minimum Consolidated EBITDA. The Borrower will not permit
---------------------------
Consolidated EBITDA for any Test Period ending on a date set forth below to be
less than the amount set forth opposite such date:
<TABLE>
<CAPTION>
Minimum Consolidated
Date EBITDA
---- --------------------
<S> <C>
9/30/97 15,200,000
12/31/97 24,300,000
3/31/98 33,600,000
6/30/98 36,500,000
9/30/98 37,500,000
12/31/98 38,200,000
3/31/99 39,400,000
6/30/99 40,600,000
9/30/99 41,800,000
12/31/99 43,100,000
3/31/00 43,600,000
6/30/00 44,200,000
9/30/00 44,700,000
12/31/00 45,300,000
3/31/01 45,900,000
6/30/01 46,500,000
9/30/01 47,100,000
12/31/01 47,700,000
3/31/02 48,300,000
6/30/02 48,300,000
9/30/02 48,300,000
</TABLE>
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<PAGE>
8.10 Interest Coverage Ratio. The Borrower will not permit the
-----------------------
Interest Coverage Ratio for any Test Period ending on a date set forth below to
be less than the ratio set forth opposite such date:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
9/30/97 to and
including 12/31/98 4.00:1.00
3/31/99 to and
including 12/31/99 4.50:1.00
All Test Periods thereafter 5.00:1.00
</TABLE>
8.11 Leverage Ratio. The Borrower will not permit the Leverage Ratio
--------------
at any time during a period set forth below to be more than the ratio set forth
opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
9/30/97 to and
including 12/31/99 4.00:1.00
Thereafter to
and including 12/31/00 3.50:1.00
Thereafter 3.00:1.00
</TABLE>
8.12 Limitation on Voluntary Payments and Modifications of
-----------------------------------------------------
Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain
- --------------------------------------------------------------------------------
Other Agreements; Issuance of Capital Stock; etc. Holdings will not, and will
- -------------------------------------------------
not permit any of its Subsidiaries to:
(i) make (or give any notice in respect of) any payment or
prepayment on or redemption or acquisition for value of any Seller
Subordinated Note or make any interest payment on any Seller Subordinated
Note, provided that, notwithstanding the foregoing, Holdings may repay the
-------- ----
Seller Subordinated Note, together with accrued but unpaid interest
thereon, so long as no Default or Event of Default then exists or would
result therefrom;
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<PAGE>
(ii) amend, modify or change, or permit the amendment or
modification of, any provision of the Seller Subordinated Note in a manner
which would be adverse to the interests of the Banks;
(iii) amend, modify or change in any way adverse to the interests of
the Banks, any Management Agreement, the terms of any Tax Allocation
Agreement, its Certificate of Incorporation (including, without limitation,
by the filing or modification of any certificate of designation) or By-
Laws, or any agreement entered into by it, with respect to its capital
stock (including any Shareholders' Agreement), or enter into any new
agreement with respect to its capital stock which would be adverse to the
interests of the Banks; or
(iv) issue any class of capital stock other than (x) in the case of
the Borrower and its Subsidiaries, non-redeemable common stock and (y) in
the case of Holdings, (1) the issuance of Holdings Common Stock in
connection with the Additional Offering, (2) the issuance of Holdings
Common Stock or Permitted Holdings PIK Securities as consideration for a
Permitted Acquisition pursuant to Section 8.02(p) and (3) issuances of
Holdings Common Stock where, after giving effect to such issuance, no Event
of Default will exist under Section 9.10 and to the extent the proceeds
thereof result in a reduction to the Total Revolving Loan Commitment
pursuant to Section 3.03(d) and are applied in accordance with Section
7.15.
8.13 Limitation on Certain Restrictions on Subsidiaries. Holdings
--------------------------------------------------
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by Holdings or any Subsidiary of
Holdings, or pay any Indebtedness owed to Holdings or a Subsidiary of Holdings,
(b) make loans or advances to Holdings or any of Holdings' Subsidiaries or (c)
transfer any of its properties or assets to Holdings or any of Holdings'
Subsidiaries, except for such encumbrances or restrictions existing under or by
reason of (i) applicable law, (ii) this Agreement and the other Credit
Documents, (iii) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of the Borrower or a Subsidiary of the
Borrower, (iv) customary provisions restricting assignment of any licensing
agreement entered into by the Borrower or a Subsidiary of the Borrower in the
ordinary course of business, (v) customary provisions restricting the transfer
of assets subject to Liens permitted under Sections 8.03(l) and (m) and (vi) any
document or instrument evidencing Foreign Subsidiary Working Capital
Indebtedness so long as such encumbrance or restriction only applies to the
Foreign Subsidiary incurring such Indebtedness.
8.14 Limitation on the Creation of Subsidiaries. Notwithstanding
------------------------------------------
anything to the contrary contained in this Agreement, Holdings will not, and
will not permit any of its Subsidiaries to, establish, create or acquire after
the Restatement Effective Date any
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<PAGE>
Subsidiary; provided that the Borrower and its Wholly-Owned Subsidiaries shall
--------
be permitted to establish or create (x) Subsidiaries as a result of investments
made pursuant to Section 8.05 and (y) Wholly-Owned Subsidiaries so long as (i)
at least 30 days' prior written notice thereof (or such lesser notice as is
acceptable to the Agent) is given to the Agent, (ii) the capital stock of such
new Subsidiary is pledged pursuant to, and to the extent required by, this
Agreement and the Pledge Agreement and the certificates, if any, representing
such stock, together with stock powers duly executed in blank, are delivered to
the Collateral Agent, (iii) such new Subsidiary (other than a Foreign Subsidiary
except to the extent otherwise required pursuant to Section 7.14) executes a
counterpart of the Subsidiary Guaranty, the Pledge Agreement and the Security
Agreement, and (iv) to the extent requested by the Agent or the Required Banks,
takes all actions required pursuant to Section 7.11. In addition, each new
Wholly-Owned Subsidiary that is required to execute any Credit Document shall
execute and deliver, or cause to be executed and delivered, all other relevant
documentation of the type described in Section 5 as such new Subsidiary would
have had to deliver if such new Subsidiary were a Credit Party on the
Restatement Effective Date.
SECTION 9. Events of Default. Upon the occurrence of any of the
-----------------
following specified events (each, an "Event of Default"):
9.01 Payments. The Borrower shall (i) default in the payment when
--------
due of any principal of the Loans or (ii) default, and such default shall
continue for three or more days, in the payment when due of any Unpaid Drawing,
any interest on the Loans or any Fees or any other amounts owing hereunder or
under any other Credit Document; or
9.02 Representations, etc. Any representation, warranty or statement
---------------------
made by Holdings, the Borrower or any other Credit Party herein or in any other
Credit Document or in any statement or certificate delivered pursuant hereto or
thereto shall prove to be untrue in any material respect on the date as of which
made or deemed made; or
9.03 Covenants. Any Credit Party shall (a) default in the due
---------
performance or observance by it of any term, covenant or agreement contained in
Sections 7.11, 7.13, 7.15 or 8, or (b) default in the due performance or
observance by it of any term, covenant or agreement (other than those referred
to in Section 9.01, 9.02 or clause (a) of this Section 9.03) contained in this
Agreement and such default shall continue unremedied for a period of at least 30
days after notice to the defaulting party by the Agent or the Required Banks; or
9.04 Default Under Other Agreements. (a) Holdings or any of its
------------------------------
Subsidiaries shall (i) default in any payment with respect to any Indebtedness
(other than the Obligations) beyond the period of grace, if any, provided in the
instrument or agreement under which Indebtedness was created or (ii) default in
the observance or performance of any agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or
-71-
<PAGE>
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause any such Indebtedness to
become due prior to its stated maturity; or (b) any Indebtedness (other than
the Obligations) of Holdings or any of its Subsidiaries shall be declared to be
due and payable, or shall be required to be prepaid other than by a regularly
scheduled required prepayment or as a mandatory prepayment (unless such required
prepayment or mandatory prepayment results from a default thereunder or an event
of the type that constitutes an Event of Default), prior to the stated maturity
thereof; provided, that it shall not constitute an Event of Default pursuant to
--------
clause (a) or (b) of this Section 9.04 unless the principal amount of any one
issue of such Indebtedness, or the aggregate amount of all such Indebtedness
referred to in clauses (a) and (b) above, exceeds $2,500,000 at any one time; or
9.05 Bankruptcy, etc. Holdings or any of its Subsidiaries shall
---------------
commence a voluntary case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy," as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is commenced against
Holdings or any of its Subsidiaries and the petition is not controverted within
10 days, or is not dismissed within 60 days, after commencement of the case; or
a custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of Holdings or any of its
Subsidiaries; or Holdings or any of its Subsidiaries commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to Holdings or any of
its Subsidiaries; or there is commenced against Holdings or any of its
Subsidiaries any such proceeding which remains undismissed for a period of 60
days; or Holdings or any of its Subsidiaries is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or Holdings or any of its Subsidiaries suffers any
appointment of any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days; or
Holdings or any of its Subsidiaries makes a general assignment for the benefit
of creditors; or any corporate action is taken by Holdings or any of its
Subsidiaries for the purpose of effecting any of the foregoing; or
9.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
-----
standard required for any plan year or part thereof or a waiver of such standard
or extension of any amortization period is sought or granted under Section 412
of the Code, any Plan shall have had or is likely to have a trustee appointed to
administer such Plan, any Plan is, shall have been or is likely to be terminated
or the subject of termination proceedings under ERISA, any Plan shall have an
Unfunded Current Liability, a contribution required to be made to a Plan or a
Foreign Pension Plan has not been timely made, Holdings or any Subsidiary of
Holdings or any ERISA Affiliate has incurred or is likely to incur a liability
to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or
4980 of the Code, or Holdings or any Subsidiary of Holdings has incurred or is
likely
-72-
<PAGE>
to incur liabilities pursuant to one or more employee welfare benefit plans (as
defined in Section 3(1) of ERISA) which provide benefits to retired employees or
other former employees (other than as required by Section 601 of ERISA) or
employee pension benefit plans (as defined in Section 3(2) of ERISA) or Foreign
Pension Plans; (b) there shall result from any such event or events the
imposition of a lien, the granting of a security interest, or a liability or a
material risk of incurring a liability; and (c) which lien, security interest or
liability which arises from such event or events will have a Material Adverse
Effect; or
9.07 Security Documents. (a) Except in each case to the extent
------------------
resulting from the failure of the Collateral Agent to retain possession of the
applicable Pledged Securities, any Security Document shall cease to be in full
force and effect, or shall cease to give the Collateral Agent the Liens, rights,
powers and privileges purported to be created thereby in favor of the Collateral
Agent, or (b) any Credit Party shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed pursuant to any such Security Document and such default shall continue
beyond any cure or grace period specifically applicable thereto pursuant to the
terms of such Security Document; or
9.08 Guaranties. The Guaranties or any provision thereof shall cease
----------
to be in full force and effect, or any Guarantor or any Person acting by or on
behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations
under any Guaranty or any Guarantor shall default in the due performance or
observance of any material term, covenant or agreement on its part to be
performed or observed pursuant to any Guaranty; or
9.09 Judgments. One or more judgments or decrees shall be entered
---------
against Holdings or any of its Subsidiaries involving a liability (not paid or
not fully covered by insurance) in excess of $2,500,000 for all such judgments
and decrees and all such judgments or decrees shall not have been vacated,
discharged or stayed or bonded pending appeal within 60 days from the entry
thereof; or
9.10 Ownership. A Change of Control Event shall have occurred;
---------
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Agent shall, upon the written request of the
Required Banks, by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Agent or any Bank to
enforce its claims against any Guarantor or the Borrower, except as otherwise
specifically provided for in this Agreement (provided, that if an Event of
--------
Default specified in Section 9.05 shall occur with respect to the Borrower, the
result which would occur upon the giving of written notice by the Agent as
specified in clauses (i) and (ii) below shall occur automatically without the
giving of any such notice): (i) declare the Total Revolving Loan Commitment
terminated, whereupon the Revolving Loan Commitment of each Bank shall forthwith
terminate immediately and any Commitment Fees shall forthwith become due and
payable without any other notice of any kind; (ii) declare the principal of and
any accrued interest in respect of all Loans and all
-73-
<PAGE>
Obligations owing hereunder (including Unpaid Drawings) to be, whereupon the
same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower; (iii) enforce, as Collateral Agent (or direct the Collateral Agent to
enforce), any or all of the Liens and security interests created pursuant to the
Security Documents; (iv) terminate any Letter of Credit which may be terminated
in accordance with its terms; and (v) direct the Borrower to pay (and the
Borrower hereby agrees upon receipt of such notice, or upon the occurrence of
any Event of Default specified in Section 9.05, to pay) to the Collateral Agent
at the Payment Office such additional amounts of cash, to be held as security
for the Borrower's reimbursement obligations in respect of Letters of Credit
then outstanding, equal to the aggregate Stated Amount of all Letters of Credit
then outstanding.
SECTION 10. Definitions. As used herein, the following terms shall
-----------
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"Acquired Entity or Business" shall have the meaning set forth in the
definition of "Consolidated Net Income."
"Additional Offering" shall have the meaning provided in Section 5.09.
"Additional Offering Documents" shall mean the Registration Statement
relating to the registration of the Holdings Common Stock, and all other
documents or agreements related to the consummation of the Additional Offering,
including, without limitation, all underwriting or similar agreements and all
documents filed with the SEC.
"Additional Security Documents" shall have the meaning provided in
Section 7.11.
"Adjusted Certificate of Deposit Rate" shall mean, on any day, the sum
(rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x)
the most recent weekly average dealer offering rate for negotiable certificates
of deposit with a three-month maturity in the secondary market as published in
the most recent Federal Reserve System publication entitled "Select Interest
Rates," published weekly on Form H.15 as of the date hereof, or if such
publication or a substitute containing the foregoing rate information shall not
be published by the Federal Reserve System for any week, the weekly average
offering rate determined by the Agent on the basis of quotations for such
certificates received by it from three certificate of deposit dealers in New
York of recognized standing or, if such quotations are unavailable, then on the
basis of other sources reasonably selected by the Agent, by (y) a percentage
equal to 100% minus the stated maximum rate of all reserve requirements as
specified in Regulation D applicable on such day to a three-month certificate of
deposit of a member bank of the Federal Reserve System in excess of $100,000
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves), plus (2) the then daily net annual assessment rate as
estimated by the
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<PAGE>
Agent for determining the current annual assessment payable by BTCo to the
Federal Deposit Insurance Corporation for insuring three month certificates of
deposit.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power (i) to vote 5% or more
of the securities having ordinary voting power for the election of directors of
such corporation or (ii) to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" shall have the meaning provided in the first paragraph of this
Agreement and shall include any successor to the Agent appointed pursuant to
Section 11.10.
"Agreement" shall mean this Credit Agreement, as the same may be from
time to time modified, amended and/or supplemented.
"Applicable Base Rate Margin" shall mean, during any Applicable
Period, the respective percentage per annum set forth in clause (A), (B), (C) or
(D) below if, but only if, as of the Test Date with respect to such Applicable
Period the condition set forth in clause (A), (B), (C) or (D), as the case may
be, below is met:
(A) .500% if, as of the Test Date the Leverage Ratio for the Test
Period ended on such Test Date shall be 3.50:1.00 or greater;
(B) .375% if, but only if, as of the Test Date the Leverage Ratio for
the Test Period ended on such Test Date shall be less than 3.50:1.00 and
neither of the conditions set forth in clauses (C) and (D) below, as the
case may be, are satisfied;
(C) .125% if, but only if, as of the Test Date the Leverage Ratio for
the Test Period ended on such Test Date shall be less than 3.00:1.00 and
the condition set forth in clause (D) below is not satisfied; or
(D) 0% if, but only if, as of the Test Date the Leverage Ratio for
the Test Period ended on such Test Date shall be less than 2.50:1.00.
Notwithstanding anything to the contrary contained above in this definition, (i)
except as provided in clause (ii) below, the Applicable Base Rate Margin shall
be 0% until the first Start Date to occur after September 30, 1997, and (ii) the
Applicable Base Rate Margin shall be .500% at any time when (x) an Event of
Default shall exist or (y) financial statements have not been delivered when
required pursuant to Section 7.01(b) or (c), as the case may be.
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<PAGE>
"Applicable Commitment Fee Percentage" shall mean, during any
Applicable Period, the respective percentage per annum set forth in clause (A),
(B), (C), (D), (E), (F), (G) or (H) below if, but only if, as of the Test Date
with respect to such Applicable Period the condition set forth in clause (A),
(B), (C), (D), (E), (F), (G) or (H) below, as the case may be, is met:
(A) .400% if, as of the Test Date the Leverage Ratio for the Test
Period ended on such Test Date shall be 3.50:1.00 or greater;
(B) .375% if, but only if, as of the Test Date the Leverage Ratio for
the Test Period ended on such Test Date shall be less than 3.50:1.00 and
none of the conditions set forth in clause (C), (D), (E), (F), (G) or (H)
below are satisfied;
(C) .350% if, but only if, as of the Test Date the Leverage Ratio for
the Test Period ended on such Test Date shall be less than 3.00:1.00 and
none of the conditions set forth in clause (D), (E), (F), (G) or (H) below
are satisfied;
(D) .300% if, but only if, as of the Test Date the Leverage Ratio for
the Test Period ended on such Test Date shall be less than 2.50:1.00 and
none of the conditions set forth in clause (E), (F), (G) or (H) below is
satisfied;
(E) .275% if, but only if, as of the Test Date the Leverage Ratio for
the Test Period ended on such Test Date shall be less than 2.25:1.00 and
none of the conditions set forth in clause (F), (G), or (H) below are
satisfied;
(F) .250% if, but only if, as of the Test Date the Leverage Ratio for
the Test Period ended on such Test Date shall be less than 2.00:1.00 and
neither of the conditions set forth in clause (G) or (H) below, as the case
may be, is satisfied;
(G) .200% if, but only if, as of the Test Date the Leverage Ratio for
the Test Period ended on such Test Date shall be less than 1.75:1.00 and
the condition set forth in clause (H) below is not satisfied;
(H) .175% if, but only if, as of the Test Date the Leverage Ratio for
the Test Period ended on such Test Date shall be less than 1.50:1.00.
Notwithstanding anything to the contrary contained above in this definition, (i)
except as provided in clause (iii) below, the Applicable Commitment Fee
Percentage shall be .275% until the first Start Date to occur after September
30, 1997, (ii) the Applicable Commitment Fee Percentage shall not be less than
.275% until the first Start Date to occur after December 31, 1997 and (iii) the
Applicable Commitment Fee Percentage shall be .400% at all times when (x) an
Event of Default shall exist or (y) financial statements have not been delivered
when required pursuant to Section 7.01(b) or (c), as the case may be.
-76-
<PAGE>
"Applicable Eurodollar Margin" shall mean, during any Applicable
Period, the respective percentage per annum set forth in clause (A), (B), (C),
(D), (E), (F), (G) or (H) below if, but only if, as of the Test Date with
respect to such Applicable Period the condition set forth in clause (A), (B),
(C), (D), (E), (F), (G) or (H) as the case may be, below is met:
(A) 1.500% if, as of the Test Date the Leverage Ratio for the Test
Period ended on such Test Date shall be 3.50:1.00 or greater;
(B) 1.375% if, but only if, as of the Test Date the Leverage Ratio
for the Test Period ended on such Test Date shall be less than 3.50:1.00
and none of the conditions set forth in clause (C), (D), (E), (F), (G) or
(H) below, as the case may be, are satisfied;
(C) 1.125% if, but only if, as of the Test Date the Leverage Ratio
for the Test Period ended on such Test Date shall be less than 3.00:1.00
and none of the conditions set forth in clause (D), (E), (F), (G) or (H)
below are satisfied;
(D) .875% if, but only if, as of the Test Date the Leverage Ratio for
the Test Period ended on such Test Date shall be less than 2.50:1.00 and
none of the conditions set forth in clause (E), (F), (G) or (H) below is
satisfied;
(E) .750% if, but only if, as of the Test Date the Leverage Ratio for
the Test Period ended on such Test Date shall be less than 2.25:1.00 and
none of the conditions set forth in clause (F), (G), or (H) below are
satisfied;
(F) .625% if, but only if, as of the Test Date the Leverage Ratio for
the Test Period ended on such Test Date shall be less than 2.00:1.00 and
neither of the conditions set forth in clause (G) or (H) below, as the case
may be, is satisfied;
(G) .500% if, but only if, as of the Test Date the Leverage Ratio for
the Test Period ended on such Test Date shall be less than 1.75:1.00 and
the condition set forth in clause (H) below is not satisfied;
(H) .375% if, but only if, as of the Test Date the Leverage Ratio for
the Test Period ended on such Test Date shall be less than 1.50:1.00.
Notwithstanding anything to the contrary contained above in this definition, (i)
except as provided in clause (iii) below, the Applicable Eurodollar Margin shall
be .750% until the first Start Date to occur after September 30, 1997, (ii) the
Applicable Eurodollar Margin shall not be less than .750% until the first Start
Date to occur after December 31, 1997 and (iii) the Applicable Eurodollar Margin
shall be 1.500% at any time when (x) an Event of Default shall exist or (y)
financial statements have not been delivered when required pursuant to Section
7.01(b) or (c), as the case may be.
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"Applicable Period" shall mean each period which shall commence on a
date on which the financial statements are delivered pursuant to Section 7.01(b)
or (c), as the case may be, and which shall end on the earlier of (i) the date
of actual delivery of the next financial statements pursuant to Section 7.01(b)
or (c), as the case may be, and (ii) the latest date on which the next financial
statements are required to be delivered pursuant to Section 7.01(b) or (c), as
the case may be.
"Asset Sale" shall mean any sale, transfer or other disposition by
Holdings or any of its Subsidiaries to any Person other than the Borrower or any
Wholly-Owned Subsidiary of the Borrower of any asset (including, without
limitation, any capital stock or other securities of another Person, but
excluding the sale by such Person of its own capital stock) of Holdings or such
Subsidiary other than (i) sales, transfers or other dispositions of inventory
made in the ordinary course of business and (ii) sales of assets pursuant to
Section 8.02(d), (e), (f), (o), (t), (v), (w) or (y), provided, that the sale of
--------
the Natural Touch trademark and the one-time sale of inventory related thereto
pursuant to Section 8.02 shall be considered an Asset Sale.
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of Exhibit H (appropriately
completed).
"Authorized Officer" shall mean the Chief Executive Officer,
President, Chief Financial Officer, Treasurer, Controller or Secretary or any
other senior officer of Holdings or the Borrower designated as such in writing
to the Agent by Holdings or the Borrower, in each case to the extent reasonably
acceptable to the Agent.
"Bain Affiliates" shall mean any Affiliate of Bain Capital, provided
that for purposes of the definition of "Change of Control Event", the term Bain
Affiliate shall not include (x) any portfolio company of either Bain Capital or
any Affiliate of Bain Capital or (y) any officer or director of Holdings or any
of its Subsidiaries that is not also a partner or stockholder of Bain Capital on
the Restatement Effective Date.
"Bain Capital" shall mean Bain Capital, Inc. a Delaware corporation.
"Bank" shall have the meaning provided in the first paragraph of this
Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing or to fund
its portion of any unreimbursed payment under Section 2.04(c) or (ii) a Bank
having notified the Agent and/or the Borrower that it does not intend to comply
with the obligations under Section 1.01(a), 1.01(c) or 2.04(c), in the case of
either clause (i) or (ii) above as a result of the appointment of a receiver or
conservator with respect to such Bank at the direction or request of any
regulatory agency or authority.
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"Bankruptcy Code" shall have the meaning provided in Section 9.05.
"Base Rate" at any time shall mean the higher of (x) the rate which is
1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate and (y) the
Prime Lending Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the rates
provided in Section 1.08(a).
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrower Subordinated Loans" shall have the meaning provided in
Section 8.05(s).
"Borrower Subordinated Note" shall mean an unsecured junior
subordinated note issued by the Borrower (and not guaranteed or supported in any
way by any Subsidiary of the Borrower) in the form of Exhibit L, as amended,
modified or supplemented from time to time in accordance with the terms hereof
and thereof.
"Borrowing" shall mean (i) the incurrence of Swingline Loans from BTCo
on a given date and (ii) the incurrence of one Type of Revolving Loan by the
Borrower from all of the Banks on a pro rata basis on a given date (or resulting
--- ----
from conversions on a given date), having in the case of Eurodollar Loans the
same Interest Period; provided, that Base Rate Loans incurred pursuant to
--------
Section 1.10(b) shall be considered part of any related Borrowing of Eurodollar
Loans.
"BTCo" shall mean Bankers Trust Company, in its individual capacity,
and any successor corporation thereto by merger, consolidation or otherwise.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by and
between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Capital Expenditures" shall mean, with respect to any Person, without
duplication, all expenditures by such Person which should be capitalized in
accordance with GAAP, including, without duplication, all such expenditures with
respect to fixed or capital assets (including, without limitation, expenditures
for maintenance and repairs which should be capitalized in accordance with
GAAP), and the amount of all Capitalized Lease Obligations incurred by such
Person.
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"Capital Lease," as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of the Borrower or any of its Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided, that the full faith and credit of the United
--------
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition, (ii) U.S. dollar denominated
time deposits, certificates of deposit and bankers acceptances of (x) any Bank
or (y) any bank whose short-term commercial paper rating from Standard & Poor's
Corporation ("S&P") is at least A-1 or the equivalent thereof or from Moody's
Investors Service, Inc. ("Moody's") is at least P-1 or the equivalent thereof
(any such bank or Bank, an "Approved Bank"), in each case with maturities of not
more than twelve months from the date of acquisition, (iii) commercial paper
issued by any Approved Bank or by the parent company of any Approved Bank and
commercial paper issued by, or guaranteed by, any industrial or financial
company with a short-term commercial paper rating of at least A-1 or the
equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's,
or guaranteed by any industrial company with a long term unsecured debt rating
of at least A or A2, or the equivalent of each thereof, from S&P or Moody's, as
the case may be, and in each case maturing within twelve months after the date
of acquisition, (iv) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within twelve months from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's and (v) investments in
money market funds substantially all the assets of which are comprised of
securities of the types described in clauses (i) through (iv) above.
"Change of Control Event" shall mean (a) Holdings shall cease to own
directly 100% on a fully diluted basis of the economic and voting interest in
the Borrower's capital stock or (b) any Person or "group" (within the meaning of
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in effect on
the Restatement Effective Date), other than Bain Capital and/or the Bain
Affiliates, shall (A) have acquired beneficial ownership of 30% or more on a
fully diluted basis of the voting and/or economic interest in Holdings' capital
stock or (B) obtained the power (whether or not exercised) to elect a majority
of Holdings' directors or (c) the Board of Directors of Holdings shall cease to
consist of a majority of Continuing Directors.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of
this Agreement and any subse-
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quent provisions of the Code amendatory thereof, supplemental thereto or
substituted therefor.
"Collateral" shall mean all of the Collateral as defined in each of
the Security Documents.
"Collateral Agent" shall mean the Agent acting as collateral agent for
the Secured Creditors.
"Collective Bargaining Agreements" shall have the meaning provided in
Section 5.13(b).
"Commitment Fee" shall have the meaning provided in Section 3.01(a).
"Consolidated Current Assets" shall mean, at any time, the current
assets (other than cash, Cash Equivalents and deferred income taxes to the
extent included in current assets) of the Borrower and its Subsidiaries at such
time determined on a consolidated basis.
"Consolidated Current Liabilities" shall mean, at any time, the
current liabilities of the Borrower and its Subsidiaries determined on a
consolidated basis, but excluding (i) deferred income taxes, (ii) the current
portion of and accrued but unpaid interest on any Indebtedness under this
Agreement and any other long-term Indebtedness which would otherwise be included
therein, (iii) short-term borrowings of Foreign Subsidiaries unless the proceeds
thereof are used to finance current assets of such Foreign Subsidiaries and (iv)
to the extent deducted in determining Consolidated Net Income, reserves for
incentive employee bonuses, litigation reserves and delinquent and/or disputed
accounts payable.
"Consolidated Debt" shall mean, at any time, all Indebtedness of the
Borrower and its Subsidiaries determined on a consolidated basis, provided that
--------
for purposes of this definition, (i) the amount of Indebtedness in respect of
Interest Rate Protection Agreements shall be at any time the unrealized net loss
portion, if any, of the Borrower and/or its Subsidiaries thereunder on a marked-
to-market basis determined no more than one month prior to such time and (ii) to
the extent that any Foreign Subsidiary Working Capital Indebtedness is supported
by a Letter of Credit, the amount of such arrangement that shall constitute
Consolidated Debt shall be the greater of the outstanding principal amount of
such Indebtedness and the stated amount of such Letter of Credit.
"Consolidated EBIT" shall mean, for any period, Consolidated Net
Income, before (i) total interest expense (inclusive of amortization of deferred
financing fees, premiums on Interest Rate Protection Agreements and any other
original issue discount) of the Borrower and its Subsidiaries determined on a
consolidated basis, (ii) the write-off of inventory step-up and in-process
research and development costs in accordance with purchase accounting, (iii) any
non-cash charges deducted in determining Consolidated Net
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Income for such period and related to the issuance by Holdings of stock,
warrants or options to management (or any exercise of any such warrants or
options), (iv) provisions for taxes based on income and foreign withholding
taxes, (v) giving effect to any extraordinary gains or losses but with giving
effect to gains or losses from sales of assets sold in the ordinary course of
business, (vi) any non-cash charges related to the write-up of samples in
accordance with purchase accounting, and (vii) Restructuring Expenditures to the
extent deducted in determining Consolidated Net Income for such period, provided
--------
that the aggregate amount of Restructuring Expenditures added back pursuant to
this clause (vii) for all periods shall not exceed $25,250,000.
"Consolidated EBITDA" shall mean, for any period, Consolidated EBIT,
adjusted by adding thereto the amount of all depreciation expense and
amortization expense that were deducted in determining Consolidated EBIT for
such period; provided, that for purposes of the definition of Leverage Ratio and
--------
Pro Forma Leverage Ratio only, (i) for the Test Period ending September 30,
1997, Consolidated EBITDA shall be the actual Consolidated EBITDA for such Test
Period multiplied by 2, and (ii) for the Test Period ending December 31, 1997,
Consolidated EBITDA shall be actual Consolidated EBITDA for such Test Period
multiplied by 4/3.
"Consolidated Interest Expense" shall mean, for any period, total
interest expense (including that attributable to Capital Leases in accordance
with GAAP) of the Borrower and its Subsidiaries determined on a consolidated
basis with respect to all outstanding Indebtedness of the Borrower and its
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs or benefits under Interest Rate Protection
Agreements, but excluding, however, amortization of any payments made to obtain
any Interest Rate Protection Agreements and deferred financing costs and any
interest expense on deferred compensation arrangements to the extent included in
total interest expense.
"Consolidated Net Income" shall mean, for any period, the net income
(or loss), after provision for taxes, of the Borrower and its Subsidiaries on a
consolidated basis for such period taken as a single accounting period but
excluding any unrealized losses and gains for such period resulting from mark-
to-market of Other Hedging Agreements; provided that (x) for purposes of
--------
Section 8.11 and the definitions of Applicable Base Rate Margin, Applicable
Commitment Fee Percentage and Applicable Eurodollar Margin there shall be
included (to the extent not already included) in determining Consolidated Net
Income for any period the net income (or loss) of any Person, business, property
or asset acquired during such period pursuant to Section 8.02(p) and not
subsequently sold or otherwise disposed of by the Borrower or one of its
Subsidiaries during such period (each such Person, business, property or asset
acquired and not subsequently disposed of during such period, an "Acquired
Entity or Business"), in each case based on the actual net income (or loss) of
such Acquired Entity or Business for the entire period (including the portion
thereof occurring prior to such acquisition) and (y) for purposes of calculating
Consolidated Net Income for any period, Consolidated Net Income shall be
adjusted for factually
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supportable and identifiable pro forma cost savings for such period determined
in accordance with GAAP and concurred in by the Borrower's independent
accountants that are directly attributable to the acquisition of an Acquired
Entity or Business pursuant to a Permitted Acquisition.
"Contingent Obligations" shall mean as to any Person any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss in respect thereof; provided, however, that
-------- -------
the term Contingent Obligation shall not include endorsements of instruments for
deposit or collection or standard contractual indemnities (including without
limitation indemnities entered into in connection with the Additional Offering
Documents) entered into, in each case in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Continuing Bank" shall mean each Original Bank with a Revolving Loan
Commitment under this Agreement.
"Continuing Directors" shall mean the directors of Holdings on the
Restatement Effective Date and each other director if such director's nomination
for the election to the Board of Directors of Holdings is recommended by a
majority of the then Continuing Directors.
"Credit Documents" shall mean this Agreement, the Notes, the
Guaranties and each Security Document.
"Credit Event" shall mean the making of a Loan (other than a Revolving
Loan made pursuant to a Mandatory Borrowing) or the issuance of a Letter of
Credit.
"Credit Party" shall mean Holdings, the Borrower and each Subsidiary
Guarantor.
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"Cumulative Consolidated Net Income" shall mean, at any time for the
determination thereof, Consolidated Net Income for the period (taken as one
accounting period) commencing on July 1, 1997 and ending on the last day of the
Borrower's fiscal quarter then last ended.
"Cumulative Income and Equity Amount" shall mean, at any time for the
determination thereof:
(A) the product of (i) 0.25 multiplied by (ii) Cumulative
Consolidated Net Income at such time, plus
(B) the sum of (i) the portion of the net proceeds received by
Holdings after the Restatement Effective Date from any issuance of Holdings
Common Stock (other than Permitted Equity Proceeds and other than proceeds
received from the Additional Offering) which is permitted to be retained by
Holdings pursuant to Section 3.03(d), to the extent contributed to the
Borrower in accordance with Section 7.15, and (ii) 100% of the Permitted
Equity Proceeds received by Holdings from time to time, to the extent
contributed or loaned to the Borrower in accordance with Section 3.03(d),
minus
(C) (I) the aggregate amount theretofore expended for Permitted
Acquisitions in reliance on the parenthetical in clause (v)(x) of Section
8.02(p), (II) the aggregate amount of Capital Expenditures theretofore made
by the Borrower and its Subsidiaries pursuant to Section 8.08(e), (III) the
aggregate amount of investments made pursuant to Section 8.05(x) in excess
of $7,500,000, (IV) the aggregate amount of cash Dividends theretofore paid
pursuant to Section 8.06(viii) in excess of $3,000,000 in any fiscal year
of the Borrower, (V) the aggregate amount of investments made pursuant to
Section 8.05(v)(A) in excess of $1,000,000 and (VI) the aggregate amount of
investments made pursuant to Section 8.05(v)(B) in excess of $1,000,000, it
being understood that the Cumulative Income and Equity Amount shall be
reduced at the time of, and after giving effect to, any of the events
described in preceding clauses (I), (II), (III), (IV), (V) and (VI).
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Designated Real Property Sale" shall mean a sale by the Borrower
and/or any of its Subsidiaries of the Real Property owned by them as of the
Restatement Effective Date and located in San Diego, California.
"Dividends" shall have the meaning provided in Section 8.06.
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"Documents" shall mean the Credit Documents, the Additional Offering
Documents and the Refinancing Documents.
"Domestic Subsidiary" shall mean each Subsidiary of the Borrower which
is not a Foreign Subsidiary.
"Eligible Transferee" shall mean and include a commercial bank,
investment company, financial institution or other "accredited investor" (as
defined in Regulation D of the Securities Act).
"Employment Agreements" shall have the meaning provided in Section
5.13(f).
"End Date" shall mean the last day of any Applicable Period.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations or proceedings relating
in any way to any violation (or alleged violation) by Holdings or any of its
Subsidiaries under any Environmental Law (hereafter "Claims") or any permit
issued to Holdings or any of its Subsidiaries under any such law, including,
without limitation, (a) any and all Claims by governmental or regulatory
authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law, and (b) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of injury to health, safety
or the environment.
"Environmental Law" shall mean any federal, state or local statute,
law, rule, regulation, ordinance, code, policy or rule of common law now or
hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent, decree or judgment (for purposes of this definition
(collectively, "Laws")), relating to the environment or Hazardous Materials or
health and safety to the extent health and safety issues arise under the
Occupational Safety and Health Act of 1970, as amended, or any such similar
Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and the
rulings issued thereunder. Section references to ERISA are to ERISA as in
effect at the date of this Agreement and any subsequent provisions of ERISA
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with Holdings or any Subsidiary of Holdings would be
deemed to be a "single employer" within the meaning of Section 414(b), (c), (m)
or (o) of the Code.
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"Eurodollar Loans" shall mean each Loan bearing interest at the rates
provided in Section 1.08(b).
"Eurodollar Rate" shall mean, with respect to each Interest Period for
a Eurodollar Loan, (i) the arithmetic average (rounded to the nearest 1/100 of
1%) of the offered quotation to first-class banks in the interbank Eurodollar
market by the Agent for U.S. dollar deposits of amounts in same day funds
comparable to the outstanding principal amount of the Eurodollar Loan of the
Agent for which an interest rate is then being determined with maturities
comparable to the Interest Period to be applicable to such Eurodollar Loan,
determined as of 10:00 A.M. (New York time) on the date which is two Business
Days prior to the commencement of such Interest Period divided (and rounded
upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage equal to
100% minus the then stated maximum rate of all reserve requirements (including,
without limitation, any marginal, emergency, supplemental, special or other
reserves) applicable to any member bank of the Federal Reserve System in respect
of Eurocurrency liabilities as defined in Regulation D (or any successor
category of liabilities under Regulation D).
"Event of Default" shall have the meaning provided in Section 9.
"Existing Indebtedness" shall have the meaning provided in Section
6.12.
"Existing Indebtedness Agreements" shall have the meaning provided in
Section 5.13(c).
"Existing Letters of Credit" shall have the meaning provided in
Section 2.01(a).
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Fees" shall mean all amounts payable pursuant to, or referred to in,
Section 3.01.
"Foreign Cash Equivalents" shall mean certificates of deposit or
bankers acceptances of any bank organized under the laws of Canada, Japan or any
country that is a member of the European Economic Community whose short-term
commercial paper rating from S&P is at least A-1 or the equivalent thereof or
from Moody's is at least P-1 or the equivalent thereof, in each case with
maturities of not more than twelve months from the date of acquisition.
"Foreign Pension Plan" shall mean any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by Holdings or any one or more
of its Subsidiaries primarily for the benefit of employees of Holdings or such
Subsidiaries residing outside the United States of America, which plan, fund or
other similar program provides, or results in, retire-
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ment income, a deferral of income in contemplation of retirement or payments to
be made upon termination of employment, and which plan is not subject to ERISA
or the Code.
"Foreign Subsidiary" shall mean each Subsidiary of the Borrower that
is incorporated under the laws of any jurisdiction other than the United States
of America, any State thereof, or any territory thereof.
"Foreign Subsidiary Working Capital Indebtedness" shall have the
meaning provided in Section 8.04(h).
"GAAP" shall mean generally accepted accounting principles in the
United States of America, as promulgated by the American Institute of Certified
Public Accountants and its committees, as in effect from time to time; it being
understood and agreed that determinations in accordance with GAAP for purposes
of Section 8, including defined terms as used therein, are subject (to the
extent provided therein) to Section 12.07(a).
"Guaranteed Creditors" shall mean and include each of the Agent, the
Collateral Agent, the Banks and each party (other than any Credit Party) party
to an Interest Rate Protection Agreement or Other Hedging Agreement to the
extent such party constitutes a Secured Creditor under the Security Documents.
"Guaranteed Obligations" shall mean (i) the full and prompt payment
when due (whether at the stated maturity, by acceleration or otherwise) of the
principal and interest on each Note issued by the Borrower to each Bank, and
Loans made, under this Agreement and all reimbursement obligations and Unpaid
Drawings with respect to Letters of Credit, together with all the other
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities
(including, without limitation, indemnities, fees and interest thereon) of the
Borrower to such Bank now existing or hereafter incurred under, arising out of
or in connection with this Agreement or any other Credit Document and the due
performance and compliance with all the terms, conditions and agreements
contained in the Credit Documents by the Borrower and (ii) the full and prompt
payment when due (whether by acceleration or otherwise) of all obligations
(including obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due) of the Borrower owing under any such
Interest Rate Protection Agreement or Other Hedging Agreement entered into by
the Borrower or any of its Subsidiaries with any Bank or any affiliate thereof
(even if such Bank subsequently ceases to by a Bank under this Agreement for any
reason) so long as such Bank or affiliate participates in such Interest Rate
Protection Agreement or Other Hedging Agreement, and their subsequent assigns,
if any, whether now in existence or hereafter arising, and the due performance
and compliance with all terms, conditions and agreements contained therein.
"Guarantor" shall mean Holdings and each Subsidiary Guarantor.
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"Guaranty" shall mean and include each of the Holdings Guaranty and
the Subsidiary Guaranty.
"Hazardous Materials" shall mean (a) any petrochemical or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls, and
radon gas; and (b) any chemicals, materials or substances defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "restricted hazardous materials," "extremely hazardous wastes,"
"restrictive hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar meaning and regulatory
effect.
"Holdings" shall have the meaning provided in the first paragraph of
this Agreement.
"Holdings Common Stock" shall have the meaning provided in Section
6.16.
"Holdings Guaranty" shall mean the guaranty of Holdings pursuant to
Section 13.
"Holdings Tax Allocation Agreement" shall mean the Tax Sharing
Agreement, dated as of October 2, 1996, among Holdings and the Borrower and its
Domestic Subsidiaries, as in effect on the Restatement Effective Date and as the
same may be modified, supplemented or amended pursuant to the terms hereof and
thereof.
"Indebtedness" of any Person shall mean without duplication (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services payable to the sellers thereof or any of such seller's
assignees which in accordance with GAAP would be shown on the liability side of
the balance sheet of such Person but excluding deferred rent as determined in
accordance with GAAP, (iii) the face amount of all letters of credit issued for
the account of such Person and, without duplication, all drafts drawn
thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any
property owned by such first Person, whether or not such Indebtedness has been
assumed, (v) all Capitalized Lease Obligations of such Person, (vi) all
obligations of such Person to pay a specified purchase price for goods or
services whether or not delivered or accepted, i.e., take-or-pay and similar
----
obligations, (vii) all obligations under Interest Rate Protection Agreements and
Other Hedging Agreements and (viii) all Contingent Obligations of such Person,
provided, that Indebtedness shall not include trade payables and accrued
- --------
expenses, in each case arising in the ordinary course of business.
"Intercompany Loan" shall have the meaning provided in Section
8.05(g).
"Intercompany Notes" shall mean promissory notes, in the form of
Exhibit I, evidencing Intercompany Loans.
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"Interest Coverage Ratio" shall mean, for any period, the ratio of
Consolidated EBITDA to Consolidated Interest Expense for such period.
"Interest Period," with respect to any Eurodollar Loan, shall mean the
interest period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedging agreement or other similar agreement or arrangement.
"L/C Supportable Indebtedness" shall mean (i) Foreign Subsidiary
Working Capital Indebtedness, (ii) obligations of the Borrower or its
Subsidiaries incurred in the ordinary course of business with respect to
insurance obligations and workers' compensation, surety bonds and other similar
statutory obligations and (iii) such other obligations of the Borrower or any of
its Subsidiaries as are reasonably acceptable to the Agent and the respective
Letter of Credit Issuer and otherwise permitted to exist pursuant to the terms
of this Agreement.
"Leasehold" of any Person shall mean all of the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section 2.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Issuer" shall mean BTCo, and any Bank which at the
request of the Borrower and with the consent of the Agent agrees, in such Bank's
sole discretion, to become a Letter of Credit Issuer for the purpose of issuing
Letters of Credit pursuant to Section 2.
"Letter of Credit Outstandings" shall mean, at any time, the sum of,
without duplication, (i) the aggregate Stated Amount of all outstanding Letters
of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all
Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in Section
2.02(a).
"Leverage Ratio" shall mean, at any time, the ratio of Consolidated
Debt at such time to Consolidated EBITDA for the Test Period then last ended.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice
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filed under the UCC or any similar recording or notice statute, and any lease
having substantially the same effect as the foregoing).
"Loan" shall mean each and every Loan made by any Bank hereunder,
including Revolving Loans or Swingline Loans.
"Management Agreements" shall have the meaning provided in Section
5.13(e).
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(c).
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on the
business, properties, assets, liabilities, condition (financial or otherwise)
or prospects of the Borrower, Holdings and its Subsidiaries taken as a whole or
the Borrower and its Subsidiaries taken as a whole.
"Material Contracts" shall have the meaning provided in Section
5.13(h).
"Maturity Date" shall mean September 11, 2002.
"Maximum Swingline Amount" shall mean $10,000,000.
"Minimum Borrowing Amount" shall mean (i) for Base Rate Loans (other
than Swingline Loans), $500,000; (ii) for Eurodollar Loans, $1,000,000; and
(iii) for Swingline Loans, $250,000.
"Mortgage" shall mean those deeds of trusts, mortgages and similar
documents with respect to each of the Mortgaged Properties, as amended, modified
or supplemented from time to time in accordance with the terms hereof and
thereof.
"Mortgaged Properties" shall mean and include (i) all Real Properties
owned and leased by Holdings and its Domestic Subsidiaries to the extent
designated as such on Annex IV and (ii) each Real Property subjected to a
mortgage in favor of the Collateral Agent for the benefit of the Secured
Creditors pursuant to Section 7.11.
"NAIC" shall have the meaning provided in Section 1.10(c).
"Net Proceeds" shall mean, with respect to any Asset Sale, the
Proceeds resulting therefrom net of (a) cash expenses of sale (including
brokerage fees, if any, transfer taxes and payment of principal, premium and
interest of Indebtedness other than the Loans required to be repaid as a result
of such Asset Sale) and (b) incremental income taxes paid or payable as a result
thereof.
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"New Banks" shall mean each of the Persons listed on Annex I hereto
which is not a Continuing Bank.
"Non-Defaulting Bank" shall mean each Bank other than a Defaulting
Bank.
"Note" shall mean each Revolving Note and the Swingline Note.
"Notice of Borrowing" shall have the meaning provided in Section 1.03.
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent
may designate to Holdings, the Borrower and the Banks from time to time.
"Obligations" shall mean all amounts, direct or indirect, contingent
or absolute, of every type or description, and at any time existing, owing to
the Agent, the Collateral Agent or any Bank pursuant to the terms of this
Agreement or any other Credit Document.
"Original Acquisition" shall mean and include (x) the Pilkington
Acquisition and (y) the acquisition by the Borrower and its Subsidiaries of the
Wesley-Jessen conventional and disposable soft contact lenses business from the
Schering Corporation.
"Original Bank" shall mean each Person which was a Bank under, and as
defined in, the Original Credit Agreement.
"Original Credit Agreement" shall have the meaning provided in the
first WHEREAS clause of this Agreement.
"Original Effective Date" shall mean February 19, 1997.
"Original Loans" shall mean the Loans under, and as defined in, the
Original Credit Agreement.
"Other Hedging Agreements" shall mean any foreign exchange contracts,
currency swap agreements or other similar agreements or arrangements designed to
protect against fluctuations in currency values.
"Participant" shall have the meaning provided in Section 2.04(a).
"Payment Office" shall mean the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent
may designate to Holdings, the Borrower and the Banks from time to time.
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"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Pension Plan Refund" shall mean any cash payments (net of reasonable
costs associated therewith, including income, excise and other taxes payable
thereon) received by Holdings and/or of its Subsidiaries from any return of any
surplus assets from any single Plan or Foreign Pension Plan, other than any
return of amounts representing overestimates of any amounts due under any single
Plan or Foreign Pension Plan.
"Percentage" shall mean at any time for each Bank, the percentage
obtained by dividing such Bank's Revolving Loan Commitment at such time by the
Total Revolving Loan Commitment at such time; provided, that if the Total
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Revolving Loan Commitment has been terminated, the Percentage of each Bank shall
be determined by dividing such Bank's Revolving Loan Commitment immediately
prior to such termination by the Total Revolving Loan Commitment immediately
prior to such termination.
"Permitted Acquisition" shall have the meaning provided in Section
8.02(p).
"Permitted Covenant" shall mean (i) any periodic reporting covenant,
(ii) any covenant restricting payments by Holdings with respect to any
securities of Holdings which are junior to the Permitted Holdings PIK
Securities, (iii) any covenant the default of which can only result in an
increase in the amount of any redemption price, repayment amount, dividend rate
or interest rate, (iv) any covenant the default of which gives rise only to
rights or remedies which are subject to subordination terms reasonably
acceptable to the Agent, (v) any covenant providing board observance rights with
respect to Holdings' board of directors and (vi) any other covenant that does
not adversely affect the interests of the Banks (as reasonably determined by the
Agent).
"Permitted Encumbrances" shall mean (i) those liens, encumbrances and
other matters affecting title to any Mortgaged Property listed in the mortgage
title insurance policies in respect thereof and found, on the date of delivery
of such mortgage title insurance policies to the Agent in accordance with the
terms hereof, reasonably acceptable by the Agent, (ii) as to any particular
Mortgaged Property at any time, such easements, encroachments, covenants, rights
of way, minor defects, irregularities or encumbrances on title which do not, in
the reasonable opinion of the Agent, materially impair such Mortgaged Property
for the purpose for which it is held by the mortgagor thereof, or the lien held
by the Collateral Agent, (iii) municipal and zoning ordinances which are not
violated in any material respect by the existing improvements and the present
use made by the mortgagor thereof of the Premises (as defined in the respective
Mortgage), (iv) general real estate taxes and assessments not yet delinquent,
and (v) such other items with respect to Real Property as the Agent may consent
to (such consent not to be unreasonably withheld).
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"Permitted Equity Proceeds" shall have the meaning provided in Section
3.03(d).
"Permitted Holdings PIK Securities" shall mean any preferred stock or
subordinated promissory note of Holdings (or any security of Holdings that is
convertible or exchangeable into any preferred stock or subordinated promissory
note of Holdings), so long as the terms of any such preferred stock,
subordinated promissory note or security of Holdings (i) do not provide any
collateral security, (ii) do not provide any guaranty or other support by the
Borrower or any Subsidiaries of the Borrower, (iii) do not contain any mandatory
put, redemption, repayment, sinking fund or other similar provision occurring
before the sixth anniversary of the Restatement Effective Date, (iv) do not
require the cash payment of dividends or interest before the sixth anniversary
of the Restatement Effective Date, (v) do not contain any covenants other than
any Permitted Covenant, (vi) do not grant the holders thereof any voting rights
except for (x) voting rights required to be granted to such holders under
applicable law and (y) limited customary voting rights on fundamental matters
such as mergers, consolidations, sales of substantial assets, or liquidations
involving Holdings, and (vii) are otherwise reasonably satisfactory to the
Agent.
"Permitted Liens" shall have the meaning provided in Section 8.03.
"Permitted Sale-Leaseback Transactions" shall mean the sale and
leaseback by the Borrower and/or any of its Subsidiaries of vehicles owned by
such Persons.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
or any government or political subdivision or any agency, department or
instrumentality thereof.
"Pilkington Acquisition" shall mean the acquisition by Holdings
and/or its Subsidiaries of certain assets from Pilkington plc pursuant to the
Pilkington Acquisition Agreements.
"Pilkington Acquisition Agreements" shall mean (i) the Agreement for
Purchase and Sale, dated July 5, 1996, by and between the Borrower and
Pilkington plc, as in effect on the Restatement Effective Date, between the
Borrower and Pilkington plc, as amended, modified or supplemented from time to
time in accordance with the terms thereof and hereof and (ii) each of the
agreements listed on Annex XVI to the Original Credit Agreement.
"Plan" shall mean any multiemployer or single-employer plan as defined
in Section 4001 of ERISA, which is maintained or contributed to by (or to which
there is an obligation to contribute of) Holdings, any of its Subsidiaries or
any ERISA Affiliate and each such plan for the five calendar year period
immediately following the latest date on which Holdings, any of its Subsidiaries
or any ERISA Affiliate maintained, contributed to or had an obligation to
contribute to such plan.
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"Pledge Agreement" shall mean the Pledge Agreement, dated as of
February 19, 1997, by the Borrower and the Subsidiary Guarantors, as pledgors,
in favor of BTCo, as pledgee, as the same has been modified, amended or
supplemented through the Restatement Effective Date and as the same may be
further modified, amended or supplemented from time to time in accordance with
the terms thereof and hereof.
"Pledged Securities" shall mean all the Pledged Securities as defined
in the Pledge Agreement.
"Prime Lending Rate" shall mean the rate which BTCo announces from
time to time as its prime lending rate, the Prime Lending Rate to change when
and as such prime lending rate changes. The Prime Lending Rate is a reference
rate and does not necessarily represent the lowest or best rate actually charged
to any customer. BTCo may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate.
"Proceeds" shall mean, with respect to any Asset Sale, the aggregate
cash payments (including any cash received by way of deferred payment pursuant
to a note receivable issued in connection with such Asset Sale, other than the
portion of such deferred payment constituting interest, but only as and when so
received) received by Holdings and/or any of its Subsidiaries from such Asset
Sale.
"Pro Forma Leverage Ratio" shall mean, at any time for the
determination thereof, the ratio of (x) Consolidated Debt at such time to (y)
Consolidated EBITDA for the Test Period then last ended, with such Pro Forma
Leverage Ratio to be determined on a pro forma basis as if the respective
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Permitted Acquisition or Asset Sale (and the incurrence, assumption and/or
repayment of any Indebtedness in connection with such Permitted Acquisition or
Asset Sale), as the case may be, had occurred on the first day of such Test
Period (and such Indebtedness, if any, had remained outstanding (or had not been
outstanding, as the case may be) throughout such Test Period). On the date of a
Permitted Acquisition or Asset Sale pursuant to which the Pro Forma Leverage
Ratio is to be calculated, the Borrower shall deliver to the Agent a certificate
of the Borrower's chief financial officer setting forth in reasonable detail the
pro forma calculations required to establish the Pro Forma Leverage Ratio (with
- --- -----
such pro forma calculations to be made on a basis reasonably satisfactory to the
--- -----
Agent and to assume that the interest expense attributable to any Indebtedness
(whether existing or being incurred) bearing a floating interest rate shall be
computed as if the rate in effect on the date of such Permitted Acquisition or
Asset Sale (taking into account any Interest Rate Protection Agreement
applicable to such Indebtedness if such Interest Rate Protection Agreement has a
remaining term in excess of 12 months) had been the applicable rate for the
entire period). In calculating the Pro Forma Leverage Ratio in connection with
any Permitted Acquisition, it is understood that Consolidated EBITDA shall
include the results of operations of the Person or assets acquired pursuant to
such Permitted Acquisition on a pro forma basis as if such acquisition had
--- -----
occurred on the first day of the respective Test Period.
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"Projections" shall have the meaning provided in Section 5.16.
"Puerto Rico Pledge Agreement" shall mean the pledge agreement entered
into pursuant to Section 5.13(b) of the Original Credit Agreement.
"Puerto Rico Security Documents" shall mean (i) the Puerto Rico Pledge
Agreement, (ii) the Chattel Mortgage, dated as of February 19, 1997, between
Wesley-Jessen (Puerto Rico), as mortgagor, and the Collateral Agent, as
mortgagee, (iii) the Chattel Mortgage Note, dated as of February 19, 1997, by
Wesley-Jessen (Puerto Rico) in favor of the Collateral Agent, (iv) the real
estate mortgage constituted by Wesley-Jessen (Puerto Rico) upon its facilities
in Cidra, Puerto Rico by virtue of deed number 29 executed June 28, 1995 before
notary Juan Agustin Rivero and (v) the mortgage note, dated June 29, 1995, by
Wesley-Jessen (Puerto Rico) in favor of The First National Bank of Chicago, duly
endorsed in favor of the Collateral Agent, in the principal amount of
$4,000,000.
"Quarterly Payment Date" shall mean the last Business Day of each
March, June, September and December.
"Real Property" of any Person shall mean all of the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recovery Event" shall mean the receipt by Holdings or any of its
Subsidiaries of any insurance or condemnation proceeds payable (i) by reason of
any theft, physical destruction or damage or any other similar event with
respect to any properties or assets of Holdings or any of its Subsidiaries, (ii)
by reason any condemnation, taking, seizing or similar event with respect to any
properties or assets of Holdings or any of its Subsidiaries and (iii) under any
policy of insurance required to be maintained under Section 7.03.
"Refinancing" shall mean the refinancing by the Borrower and the
termination by the Borrower in full of all commitments under the Original Credit
Agreement, together with the payment of all loans, accrued interest, premiums,
fees, commissions, expenses and other amounts owing in connection with the
refinancing of the Original Credit Agreement.
"Refinancing Documents" shall mean each of the agreements, documents
and instruments entered into in connection with the Refinancing.
"Register" shall have the meaning provided in Section 7.12.
"Registration Statement" shall mean Holdings' Registration Statement
on Form S-1 in the form delivered to the Banks pursuant to Section 5.09 as
amended from time to time.
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"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
"Regulation G" shall mean Regulation G of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or any portion thereof establishing margin requirements.
"Regulation T" shall mean Regulation T of the Board of Governors of
the Federal Reserve System as from to time in effect and any successor to all or
any portion thereof establishing margin requirements.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
"Regulation X" shall mean Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or any portion thereof establishing margin requirements.
"Related Party" shall mean any Affiliate of Bain Capital on the
Effective Date, provided that for purposes of the definition of "Change of
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Control Event," the term Related Party shall not include (x) any portfolio
company of Bain Capital or any Affiliate of Bain Capital or (y) any officer or
director of Holdings or any of its Subsidiaries if not also a partner or
stockholder of Bain Capital on the Effective Date.
"Release" means disposing, discharging, injecting, spilling, pumping,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing,
pouring and the like, into or upon any land or water or air, or otherwise
entering into the environment.
"Replaced Bank" shall have the meaning provided in Section 1.13.
"Replacement Bank" shall have the meaning provided in Section 1.13.
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan other than those events as to which the 30-day
notice period is waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC
Regulation Section 2615.
"Required Banks" shall mean Non-Defaulting Banks the sum of whose
Revolving Loan Commitments (or, if after the Total Revolving Loan Commitment has
been terminated, outstanding Revolving Loans and Percentages of outstanding
Swingline Loans and Letter of Credit Outstandings) constitute greater than 50%
of the Total Revolving Loan Commitment less the aggregate Revolving Loan
Commitments of Defaulting Banks (or, if
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after the Total Revolving Loan Commitment has been terminated, the total
outstanding Revolving Loans of Non-Defaulting Banks and the aggregate
Percentages of all Non-Defaulting Banks of the total outstanding Swingline Loans
and Letter of Credit Outstandings at such time).
"Restatement Effective Date" shall have the meaning provided in
Section 12.10.
"Restructuring Expenditures" shall mean nonrecurring expenditures and
charges arising out of the restructuring, consolidation, severance or
discontinuance of any portion of the operations of any entities or businesses of
Holdings and its Subsidiaries in connection with the Original Acquisitions.
"Restructuring Reserves" shall mean, at any time, an amount equal to
$25,250,000 less all Restructuring Expenditures theretofore made after the
Original Effective Date.
"Returns" shall have the meaning provided in Section 6.23.
"Revolving Loan" shall have the meaning provided in Section 1.01(a).
"Revolving Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I as the same may be reduced
from time to time pursuant to Section 3.02, 3.03 and/or 9 or otherwise modified
pursuant to Section 1.13 and/or 12.04(b).
"Revolving Note" shall have the meaning provided in Section 1.05(a).
"Rollover Amount" shall have the meaning provided in Section 8.08(b).
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 4.04(b)(ii) Certificate" shall have the meaning provided in
Section 4.04(b)(ii).
"Secured Creditors" shall have the meaning provided in the respective
Security Documents.
"Security Agreement" shall mean the Security Agreement, dated as of
February 19, 1997, among Holdings, the Borrower, the Subsidiary Guarantors, and
BTCo, as Collateral Agent, as the same has been modified, amended or
supplemented through the Restatement Effective Date, and as the same may be
further modified, amended or supplemented from time to time in accordance with
the terms thereof and hereof.
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"Security Agreement Collateral" shall mean all "Collateral" as defined
in the Security Agreement.
"Security Documents" shall mean and include the Security Agreement,
the Pledge Agreement, each Puerto Rico Security Document, each Mortgage, each
Additional Security Document, if any and each other document or instrument
entered into pursuant to Sections 5.11 and 7.14, if any, in each case as and
when executed and delivered in accordance with the terms of this Agreement and
as the same may be amended, modified or supplemented from time to time in
accordance with the terms thereof and hereof.
"Security Documents Acknowledgement" shall have the meaning provided
in Section 5.11(a).
"Seller Subordinated Note" shall mean the unsecured junior
subordinated note issued by Holdings in favor of Pilkington plc in connection
with the Pilkington Acquisition.
"Senior Officer" shall mean Chief Executive Officer, President, Chief
Financial Officer, Treasurer, Controller or Secretary or any other senior
officer of Holdings or any of its Subsidiaries with knowledge of, or
responsibility for, the financial affairs of such Person.
"Shareholder Subordinated Note" shall mean an unsecured junior
subordinated note issued by Holdings (and not guaranteed or supported in any way
by the Borrower or any of its Subsidiaries) in the form of Exhibit K, as the
same may be amended, modified or supplemented from time to time pursuant to the
terms hereof and thereof.
"Shareholders' Agreements" shall have the meaning set forth in Section
5.13(d).
"Start Date" shall mean the first day of any Applicable Period.
"Stated Amount" of each Letter of Credit shall mean at any time the
maximum amount available to be drawn thereunder (regardless of whether any
conditions for drawing could then be met).
"Subsidiary" of any Person shall mean and include (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership,
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association, joint venture or other entity in which such Person directly or
indirectly through Subsidiaries, has more than a 50% equity interest at the
time.
"Subsidiary Guarantor" shall mean each Subsidiary of the Borrower
(other than a Foreign Subsidiary except to the extent otherwise provided in
Section 7.14) that is or becomes a party to the Subsidiary Guaranty.
"Subsidiary Guaranty" shall mean the Guaranty, dated as of February
19, 1997, made by certain Subsidiaries of Holdings (other than the Borrower), as
the same has been modified, amended or supplemented through the Restatement
Effective Date, and as the same may be further modified, amended or supplemented
in accordance with the terms thereof and hereof.
"Subsidiary Guaranty Acknowledgement" shall have the meaning provided
in Section 5.12.
"Swingline Expiry Date" shall mean the date which is five Business
Days prior to the Maturity Date.
"Swingline Loan" shall have the meaning provided in Section 1.01(b).
"Swingline Note" shall have the meaning provided in Section 1.05(a).
"Syndication Date" shall mean that date upon which the Agent
determines (and notifies the Borrower and the Banks) that the primary
syndication (and resulting addition of Persons as Banks pursuant to Section
12.04(b)) has been completed.
"Tax Allocation Agreements" shall have the meaning provided in Section
5.13(g).
"Taxes" shall have the meaning provided in Section 4.04.
"Test Date" shall mean, with respect to any Applicable Period, the
last day of the most recent fiscal quarter or fiscal year, as the case may be,
ended immediately prior to the Start Date with respect to such Applicable
Period.
"Test Period" shall mean (i) for any determination made prior to March
31, 1998, the period from April 1, 1997 to the last day of the fiscal quarter of
the Borrower then last ended and (ii) for any determination made thereafter, the
four consecutive fiscal quarters of the Borrower then last ended; provided, that
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for purposes of the definitions of Applicable Base Rate Margin, Applicable
Commitment Fee Percentage and Applicable Eurodollar Margin, and for the
definition of Leverage Ratio as such definition is used in
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the foregoing definitions, the definition of Test Period shall also include the
fiscal quarter ending March 31, 1997.
"Total Revolving Loan Commitment" shall mean the sum of the Revolving
Loan Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean, at any time,
(i) the Total Revolving Loan Commitment at such time less (ii) the sum of the
aggregate principal amount of all Revolving Loans and Swingline Loans at such
time plus the Letter of Credit Outstandings at such time.
"Transaction" shall mean, collectively, (i) the Additional Offering,
(ii) the Refinancing, (iii) the occurrence of Credit Events hereunder on the
Restatement Effective Date, (iv) such other transactions as contemplated by the
Documents and (v) the payment of fees and expenses in connection with the
foregoing.
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, i.e., a Base Rate Loan or a Eurodollar Loan.
----
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year exceeds the fair market
value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards No. 35, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan.
"Unpaid Drawing" shall have the meaning provided in Section 2.03(a).
"Unutilized Revolving Loan Commitment" with respect to any Bank at any
time shall mean such Bank's Revolving Loan Commitment at such time less the sum
----
of (x) the aggregate outstanding principal amount of all Revolving Loans made by
such Bank and (y) such Bank's Percentage of the Letter of Credit Outstandings at
such time.
"U.S. Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States of America.
"Wesley-Jessen (Puerto Rico)" shall mean Wesley-Jessen (Puerto Rico),
Inc., a Delaware corporation.
"West Coast Asset Sale" shall mean the sale by the Borrower and/or any
of its Subsidiaries of (x) any or all of the assets on or at the Borrower's San
Diego, California
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facility, but excluding the Real Property relating to such facility, and (y) any
or all of the assets on or at the Borrower's Sunnyvale, California facility, in
the case of both clause (x) and (y) above to the extent sold in connection with
the restructuring or transfer to other facilities of the operations at such
facility.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying shares
and/or other nominal amounts of shares required to be held other than by such
Person under applicable law) is at the time owned by such Person and/or one or
more Wholly-Owned Subsidiaries of such Person and (ii) any partnership,
association, joint venture or other entity in which such Person and/or one or
more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such
time.
"Working Capital" shall mean the excess of Consolidated Current Assets
over Consolidated Current Liabilities.
"Written," "written" or "in writing" shall mean any form of written
communication or a communication by means of telex, facsimile device, telegraph
or cable.
SECTION 11. The Agent.
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11.01 Appointment. Each Bank hereby irrevocably designates and
-----------
appoints BTCo as Agent of such Bank (such term to include for purposes of this
Section 11, BTCo acting as Collateral Agent) to act as specified herein and in
the other Credit Documents, and each such Bank hereby irrevocably authorizes
BTCo as the Agent to take such action on its behalf under the provisions of this
Agreement and the other Credit Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Credit Documents, together with such other powers as are
reasonably incidental thereto. The Agent agrees to act as such upon the express
conditions contained in this Section 11. Notwithstanding any provision to the
contrary elsewhere in this Agreement or in any other Credit Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein or in the other Credit Documents, or any fiduciary relationship with any
Bank, and no implied covenants, functions, responsibilities, duties, obligations
or liabilities shall be read into this Agreement or otherwise exist against the
Agent. The provisions of this Section 11 are solely for the benefit of the Agent
and the Banks, and neither Holdings nor any of its Subsidiaries shall have any
rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Banks and the Agent does not assume and shall not be
deemed to have assumed any obligation or relationship of agency or trust with
or for Holdings or any of its Subsidiaries.
11.02 Delegation of Duties. The Agent may execute any of its duties
--------------------
under this Agreement or any other Credit Document by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The
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Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care except to the extent
otherwise required by Section 11.03.
11.03 Exculpatory Provisions. Neither the Agent nor any of its
----------------------
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person in its capacity as Agent under or in connection with this Agreement or
the other Credit Documents (except for its or such Person's own gross negligence
or willful misconduct) or (ii) responsible in any manner to any of the Banks for
any recitals, statements, representations or warranties made by Holdings, any of
its Subsidiaries or any of their respective officers contained in this Agreement
or the other Credit Documents, any other Document or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Document or for
any failure of Holdings or any of its Subsidiaries or any of their respective
officers to perform its obligations hereunder or thereunder. The Agent shall
not be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or the other Documents, or to inspect the properties, books
or records of Holdings or any of its Subsidiaries. The Agent shall not be
responsible to any Bank for the effectiveness, genuineness, validity,
enforceability, collectability or sufficiency of this Agreement or any other
Document or for any representations, warranties, recitals or statements made
herein or therein or made in any written or oral statement or in any financial
or other statements, instruments, reports, certificates or any other documents
in connection herewith or therewith furnished or made by the Agent to the Banks
or by or on behalf of Holdings or any of its Subsidiaries to the Agent or any
Bank or be required to ascertain or inquire as to the performance or observance
of any of the terms, conditions, provisions, covenants or agreements contained
herein or therein or as to the use of the proceeds of the Loans or of the
existence or possible existence of any Default or Event of Default.
11.04 Reliance by Agent. The Agent shall be entitled to rely, and
-----------------
shall be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, facsimile, telex
or teletype message, statement, order or other document or conversation believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to Holdings or any of its Subsidiaries),
independent accountants and other experts selected by the Agent. The Agent shall
be fully justified in failing or refusing to take any action under this
Agreement or any other Credit Document unless it shall first receive such advice
or concurrence of the Required Banks as it deems appropriate or it shall first
be indemnified to its satisfaction by the Banks against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement and the other Credit
Documents in accordance with a request of the Required Banks (or all of the
Banks, to the extent required
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by this Agreement), and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Banks.
11.05 Notice of Default. The Agent shall not be deemed to have
-----------------
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has actually received notice from a Bank, Holdings or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default." In the event that
the Agent receives such a notice, the Agent shall give prompt notice thereof to
the Banks. The Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Banks;
provided, that, unless and until the Agent shall have received such directions,
- --------
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Banks.
11.06 Non-Reliance on Agent and Other Banks. Each Bank expressly
-------------------------------------
acknowledges that neither the Agent nor any of its respective officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of Holdings or any of its
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agent to any Bank. Each Bank represents to the Agent that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations, property,
financial and other condition, prospects and creditworthiness of Holdings and
its Subsidiaries and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Bank also represents 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 analysis, appraisals and decisions in taking or not taking action
under this Agreement, and to make such investigation as it deems necessary to
inform itself as to the business, assets, operations, property, financial and
other condition, prospects and credit worthiness of Holdings and its
Subsidiaries. The Agent shall not have any duty or responsibility to provide
any Bank with any credit or other information concerning the business,
operations, assets, property, financial and other condition, prospects or
creditworthiness of Holdings or any of its Subsidiaries which may come into the
possession of the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
11.07 Indemnification. The Banks agree to indemnify the Agent in its
---------------
capacity as such ratably according to their respective "percentages" as used in
determining the Required Banks at such time or, if the Revolving Loan
Commitments have terminated and all Loans have been repaid in full, as
determined immediately prior to such termination and repayment (with such
"percentages" to be determined as if there are no Defaulting Banks), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, reasonable expenses or disbursements of any
kind whatsoever
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which may at any time (including, without limitation, at any time following the
payment of the Obligations) be imposed on, incurred by or asserted against the
Agent in its capacity as such in any way relating to or arising out of this
Agreement or any other Credit Document, or any documents contemplated by or
referred to herein or the transactions contemplated hereby or any action taken
or omitted to be taken by the Agent under or in connection with any of the
foregoing, but only to the extent that any of the foregoing is not paid by
Holdings or any of its Subsidiaries; provided, that no Bank shall be liable to
--------
the Agent for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting primarily from the gross negligence or willful
misconduct of the Agent. If any indemnity furnished to the Agent for any purpose
shall, in the opinion of the Agent be insufficient or become impaired (other
than as a result of the gross negligence or willful misconduct of the Agent),
the Agent may call for additional indemnity and cease, or not commence, to do
the acts indemnified against until such additional indemnity is furnished. The
agreements in this Section 11.07 shall survive the payment of all Obligations.
11.08 Agent in its Individual Capacity. The Agent and its affiliates
--------------------------------
may make loans to, accept deposits from and generally engage in any kind of
business with Holdings and its Subsidiaries as though the Agent were not the
Agent hereunder. With respect to the Loans made by it and all Obligations owing
to it, the Agent shall have the same rights and powers under this Agreement as
any Bank and may exercise the same as though it were not the Agent and the terms
"Bank" and "Banks" shall include the Agent in its individual capacity. The
Agent and/or its affiliates may own stock of Holdings or any Subsidiary of
Holdings and may accept deposits from, lend money to, and generally engage in
any kind of banking, trust or other business with Holdings or any Affiliate of
Holdings as if it were not performing the duties specified herein, and may
accept fees and other consideration from any Credit Party for services in
connection with this Agreement and otherwise without having to account for the
same to the Banks.
11.09 Holders. 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, transfer or endorsement thereof, as the case may be, shall have
been filed with the Agent. Any request, authority or consent of any Person or
entity 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, assignee or indorsee, as the case may be, of such
Note or of any Note or Notes issued in exchange therefor.
11.10 Resignation of the Agent; Successor Agent. The Agent may
-----------------------------------------
resign as the Agent upon 20 days' notice to the Banks and, unless a Default of
the type referred to in Section 9.05 has occurred and is continuing, to the
Borrower. Upon the resignation of the Agent, the Required Banks shall appoint
from among the Banks a successor Agent which is a bank or a trust company for
the Banks subject, to the extent that no payment Default or Event of Default has
occurred and is then continuing, to prior approval by the Borrower (such
approval not to be unreasonably withheld or delayed), whereupon such suc-
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cessor agent shall succeed to the rights, powers and duties of the Agent, and
the term "Agent" shall include such successor agent effective upon its
appointment, and the resigning Agent's rights, powers and duties as the Agent
shall be terminated, without any other or further act or deed on the part of
such former Agent or any of the parties to this Agreement. If a successor Agent
shall not have been so appointed within such 20 day period after the date such
notice of resignation was given by the Agent, the Agent's resignation shall
become effective and the Banks shall thereafter perform all duties of the Agent
hereunder and/or under any other Credit Documents until such time, if any, as
the Required Banks appoint a successor Agent as provided above. After the
resignation of the Agent hereunder, the provisions of this Section 11 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement.
SECTION 12. Miscellaneous.
-------------
12.01 Payment of Expenses, etc. The Borrower hereby agrees to: (i)
-------------------------
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Agent (including, without
limitation, the reasonable fees and disbursements of White & Case and local
counsel) in connection with the negotiation, preparation, execution and delivery
of the Credit Documents and the documents and instruments referred to therein
and any amendment, waiver or consent relating thereto and in connection with the
Agent's syndication efforts with respect to this Agreement; (ii) pay all
reasonable out-of-pocket costs and expenses of the Agent and each of the Banks
in connection with the enforcement of the Credit Documents and the documents and
instruments referred to therein and, after an Event of Default shall have
occurred and be continuing, the protection of the rights of the Agent and each
of the Banks thereunder (including, without limitation, the reasonable fees and
disbursements of counsel (including in-house counsel) for the Agent and for each
of the Banks); (iii) pay and hold each of the Banks harmless from and against
any and all present and future stamp and other similar taxes with respect to the
foregoing matters and save each of the Banks harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Bank) to pay such taxes; and (iv)
indemnify the Agent, the Collateral Agent and each Bank, its officers,
directors, trustees, employees, representatives and agents from and hold each of
them harmless against any and all losses, liabilities, claims, damages or
expenses incurred by any of them as a result of, or arising out of, or in any
way related to, or by reason of, (a) any investigation, litigation or other
proceeding (whether or not the Agent, the Collateral Agent or any Bank is a
party thereto and whether or not any such investigation, litigation or other
proceeding is between or among the Agent, the Collateral Agent, any Bank, any
Credit Party or any third Person or otherwise) related to the entering into
and/or performance of this Agreement or any other Document or the use of the
proceeds of any Loans hereunder or the Transaction or the consummation of any
other transactions contemplated in any Document (but excluding any such losses,
liabilities, claims, damages or expenses to the extent incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified), or (b)
the actual or alleged presence of Hazardous Materials in the air, surface water
or groundwater or on the
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surface or subsurface of any Real Property or any Environmental Claim, in each
case, including, without limitation, the reasonable fees and disbursements of
counsel and independent consultants incurred in connection with any such
investigation, litigation or other proceeding.
12.02 Right of Setoff, Collateral Matters. (a) In addition to any
-----------------------------------
rights now or hereafter granted under applicable law or otherwise, and not by
way of limitation of any such rights, upon the occurrence and during the
continuance of an Event of Default, each Bank is hereby authorized at any time
or from time to time, without presentment, demand, protest or other notice of
any kind to Holdings or any of its Subsidiaries or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and apply
any and all deposits (general or special) and any other Indebtedness at any time
held or owing by such Bank (including, without limitation, by branches and
agencies of such Bank wherever located) to or for the credit or the account of
Holdings or any of its Subsidiaries against and on account of the Obligations of
Holdings or any of its Subsidiaries to such Bank under this Agreement or under
any of the other Credit Documents, including, without limitation, all interests
in Obligations of Holdings or any of its Subsidiaries purchased by such Bank
pursuant to Section 12.06(b), and all other claims of any nature or description
arising out of or connected with this Agreement or any other Credit Document,
irrespective of whether or not such Bank shall have made any demand hereunder
and although said Obligations shall be contingent or unmatured.
(b) NOTWITHSTANDING THE FOREGOING SUBSECTION (a), AT ANY TIME THAT
THE LOANS OR ANY OTHER OBLIGATION SHALL BE SECURED BY REAL PROPERTY LOCATED IN
CALIFORNIA, NO BANK SHALL EXERCISE A RIGHT OF SETOFF, BANKER'S LIEN OR
COUNTERCLAIM OR TAKE ANY COURT OR ADMINISTRATIVE ACTION OR INSTITUTE ANY
PROCEEDING TO ENFORCE ANY PROVISION OF THIS AGREEMENT OR ANY NOTE THAT IS NOT
TAKEN BY THE REQUIRED BANKS OR APPROVED IN WRITING BY THE REQUIRED BANKS IF SUCH
SETOFF OR ACTION OR PROCEEDING WOULD OR MIGHT (PURSUANT TO SECTIONS 580a, 580b,
580d AND 726 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR SECTION 2924 OF THE
CALIFORNIA CIVIL CODE, IF APPLICABLE, OR OTHERWISE) AFFECT OR IMPAIR THE
VALIDITY, PRIORITY OR ENFORCEABILITY OF THE LIENS GRANTED TO THE COLLATERAL
AGENT PURSUANT TO THE SECURITY DOCUMENTS OR THE ENFORCEABILITY OF THE NOTES AND
OTHER OBLIGATIONS HEREUNDER, AND ANY ATTEMPTED EXERCISE BY ANY BANK OF ANY SUCH
RIGHT WITHOUT OBTAINING SUCH CONSENT OF THE REQUIRED BANKS SHALL BE NULL AND
VOID. THIS SUBSECTION (b) SHALL BE SOLELY FOR THE BENEFIT OF EACH OF THE BANKS
HEREUNDER.
12.03 Notices. Except as otherwise expressly provided herein, all
-------
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile or cable communication) and mailed,
telegraphed, telexed, telecopied,
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cabled or delivered, if to any Credit Party, at the address specified opposite
its signature below or in the other relevant Credit Documents, as the case may
be; if to any Bank, at its address specified for such Bank on Annex II; or, at
such other address as shall be designated by any party in a written notice to
the other parties hereto. All such notices and communications shall be mailed,
telegraphed, telexed, telecopied or cabled or sent by overnight courier, and
shall be effective when received.
12.04 Benefit of Agreement. (a) This Agreement shall be binding
--------------------
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided, however, no Credit Party may assign
-------- -------
or transfer any of its rights, obligations or interest hereunder or under any
other Credit Document without the prior written consent of all of the Banks and,
provided further, that no Bank may assign or transfer all or any portion of its
- ----------------
Revolving Loan Commitment and/or its outstanding Revolving Loans except as
provided in Section 12.04(b) and, provided further, that although any Bank may
----------------
grant participations in its rights hereunder in accordance with this Section,
such Bank shall remain a "Bank" for all purposes hereunder and the participant
shall not constitute a "Bank" hereunder and, provided further, that no Bank
----------------
shall grant any participation under which the participant shall have rights to
approve any amendment to or waiver of this Agreement or any other Credit
Document except to the extent such amendment or waiver would (i) extend the
final scheduled maturity of any Loan, Note or Letter of Credit (unless such
Letter of Credit is not extended beyond the Maturity Date) in which such
participant is participating, or reduce the rate or extend the time of payment
of interest or Fees thereon (except in connection with a waiver of applicability
of any post-default increase in interest rates) or reduce the principal amount
thereof, or increase the amount of the participant's participation over the
amount thereof then in effect (it being understood that a waiver of any Default
or Event of Default or of a mandatory reduction in the Total Revolving Loan
Commitment shall not constitute a change in the terms of such participation, and
that an increase in any Revolving Loan Commitment or Loan shall be permitted
without the consent of any participant if the participant's participation is not
increased as a result thereof), (ii) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement or (iii)
release all or substantially all of the Collateral under all of the Security
Documents (except as expressly provided in the Credit Documents) supporting the
Loans hereunder in which such participant is participating. In the case of any
such participation, the participant shall not have any rights under this
Agreement or any of the other Credit Documents (the participant's rights against
such Bank in respect of such participation to be those set forth in the
agreement executed by such Bank in favor of the participant relating thereto)
and all amounts payable by the Borrower hereunder shall be determined as if such
Bank had not sold such participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank together
with one or more other Banks) may (x) assign all or a portion of its Revolving
Loan Commitment (and related outstanding Obligations hereunder) to its parent
company and/or any affiliate of such Bank which is at least 50% owned by such
Bank or its parent company or to one or more Banks or (y) assign all, or if less
than all, a portion equal to at least
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$5,000,000 in the aggregate for the assigning Bank or assigning Banks, of such
Revolving Loan Commitments hereunder to one or more Eligible Transferees, each
of which assignees shall become a party to this Agreement as a Bank by execution
of an Assignment and Assumption Agreement, provided that (i) at such time Annex
--------
I shall be deemed modified to reflect the Revolving Loan Commitments of such new
Bank and of the existing Banks, (ii) upon surrender of the old Notes, new Notes
will be issued, at the Borrower's expense, to such new Bank and to the assigning
Bank, such new Notes to be in conformity with the requirements of Section 1.05
(with appropriate modifications) to the extent needed to reflect the revised
Revolving Loan Commitments, (iii) the consent of the Agent shall be required in
connection with any such assignment pursuant to clause (y) of this Section
12.04(b) (which consent shall not be unreasonably withheld or delayed) and (iv)
the Agent shall receive at the time of each such assignment, from the assigning
or assignee Bank, the payment of a non-refundable assignment fee of $3,500 and,
provided further, that such transfer or assignment will not be effective until
- ----------------
recorded by the Agent on the Register pursuant to Section 7.13 hereof. To the
extent of any assignment pursuant to this Section 12.04(b), the assigning Bank
shall be relieved of its obligations hereunder with respect to its assigned
commitments. At the time of each assignment pursuant to this Section 12.04(b)
to a Person which is not already a Bank hereunder and which is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) for
Federal income tax purposes, the respective assignee Bank shall provide to the
Borrower and the Agent the appropriate Internal Revenue Service Forms (and, if
applicable a Section 4.04(b)(ii) Certificate) described in Section 4.04(b). To
the extent that an assignment of all or any portion of a Bank's Revolving Loan
Commitment and related outstanding Obligations pursuant to Section 1.13 or this
Section 12.04(b) would, at the time of such assignment, result in increased
costs under Section 1.10, 1.11, 2.05 or 4.04 from those being charged by the
respective assigning Bank prior to such assignment, then the Borrower shall not
be obligated to pay such increased costs (although the Borrower shall be
obligated to pay any other increased costs of the type described above resulting
from changes after the date of the respective assignment).
(c) Nothing in this Agreement shall prevent or prohibit any Bank from
pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank.
12.05 No Waiver; Remedies Cumulative. No failure or delay on the
------------------------------
part of the Agent or any Bank in exercising any right, power or privilege
hereunder or under any other Credit Document and no course of dealing between
any Credit Party and the Agent or any Bank shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or privilege
hereunder or under any other Credit Document preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Agent or any
Bank would otherwise have. No notice to or demand on any Credit Party in any
case shall entitle any Credit Party to any other or further notice or demand in
similar or other circumstances or con-
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stitute a waiver of the rights of the Agent or the Banks to any other or further
action in any circumstances without notice or demand.
12.06 Payments Pro Rata. (a) The Agent agrees that promptly after
-----------------
its receipt of each payment from or on behalf of any Credit Party in respect of
any Obligations of such Credit Party, it shall, except as otherwise provided in
this Agreement, distribute such payment to the Banks (other than any Bank that
has consented in writing to waive its pro rata share of such payment) pro rata
-------- --------
based upon their respective shares, if any, of the Obligations with respect to
which such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the
related sum or sums received by other Banks is in a greater proportion than the
total of such Obligation then owed and due to such Bank bears to the total of
such Obligation then owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall purchase for cash
without recourse or warranty from the other Banks an interest in the Obligations
of the respective Credit Party to such Banks in such amount as shall result in a
proportional participation by all of the Banks in such amount; provided, that if
--------
all or any portion of such excess amount is thereafter recovered from such Bank,
such purchase shall be rescinded and the purchase price restored to the extent
of such recovery, but without interest.
12.07 Calculations; Computations. (a) The financial statements to
--------------------------
be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by Holdings or the Borrower to the Banks); provided, that except as otherwise
--------
specifically provided herein, all computations determining compliance with
Sections 3.03 and 8, including definitions used therein, shall utilize
accounting principles and policies in effect at the time of the preparation of,
and in conformity with those used to prepare, the December 31, 1996 financial
statements delivered to the Banks pursuant to Section 6.10(b), but shall not
give effect to (i) purchase accounting adjustments required or permitted by APB
16 and its interpretations (including non-cash write-ups and non-cash charges
relating to inventory, fixed assets and in-process research and development, in
each case arising in connection with the Original Acquisitions or any Permitted
Acquisitions) and APB 17 and its interpretations (including non-cash charges
relating to intangibles and goodwill arising in connection with the Original
Acquisitions or any Permitted Acquisitions), (ii) those fees paid to Bain
Capital and/or Related Parties pursuant to Sections 8.07(i) and 8.07(iii) and
(iii) those fees paid on or about the Restatement Effective Date to the Agent
and the Banks in connection with this Agreement.
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(b) All computations of interest and Fees hereunder shall be made on
the actual number of days elapsed over a year of 360 days.
12.08 Governing Law; Submission to Jurisdiction; Venue. (a) THIS
------------------------------------------------
AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this Agreement or any other Credit Document may be brought in
the courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, each
Credit Party hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each Credit Party hereby further irrevocably waives any claim that any
such courts lack jurisdiction over such Credit Party, and agrees not to plead or
claim, in any legal action or proceeding with respect to this Agreement or any
other Credit Document brought in any of the aforesaid courts, that any such
court lacks jurisdiction over such Credit Party. Each Credit Party irrevocably
consents to the service of process in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
such Credit Party, at its address for notices pursuant to Section 12.03, such
service to become effective 30 days after such mailing. Each Credit Party hereby
irrevocably waives any objection to such service of process and further
irrevocably waives and agrees not to plead or claim in any action or proceeding
commenced hereunder or under any other Credit Document that service of process
was in any way invalid or ineffective. Nothing herein shall affect the right of
the Agent, any Bank or the holder of any Note to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise proceed
against any Credit Party in any other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement or
any other Credit Document brought in the courts referred to in clause (a) above
and hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
12.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts executed by all the parties hereto shall be lodged with Holdings,
the Borrower and the Agent.
12.10 Effectiveness. (a) This Agreement shall become effective on
-------------
the date (the "Restatement Effective Date") on which (i) Holdings, the Borrower
and each of the Banks shall have signed a counterpart hereof (whether the same
or different counterparts) and shall have delivered the same to the Agent at the
Notice Office or, in the
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case of the Banks, shall have given to the Agent telephonic (confirmed in
writing), written, telex or facsimile notice (actually received) at such office
that the same has been signed and mailed to it and (ii) the conditions contained
in Sections 5 and 12.10(b) are met to the satisfaction of the Agent and the
Required Banks (determined immediately after the occurrence of the Restatement
Effective Date). Unless the Agent has received actual notice from any Bank that
the conditions contained in Section 5 have not been met to its satisfaction,
upon the satisfaction of the condition described in clause (i) of the
immediately preceding sentence and upon the Agent's good faith determination
that the conditions described in clause (ii) of the immediately preceding
sentence have been met, then the Restatement Effective Date shall have been
deemed to have occurred, regardless of any subsequent determination that one or
more of the conditions thereto have not been met (although the occurrence of the
Restatement Effective Date shall not release Holdings or the Borrower from any
liability for failure to satisfy one or more the applicable conditions contained
in Section 5). The Agent will give Holdings, the Borrower and each Bank prompt
written notice of the occurrence of the Restatement Effective Date.
(b) On the Restatement Effective Date, each New Bank and each
Continuing Bank shall have delivered to the Agent for the account of the
Borrower an amount equal to (i) in the case of each New Bank, the Revolving
Loans to be made by such New Bank on the Restatement Effective Date and (ii) in
the case of each Continuing Bank, the amount by which the principal amount of
Revolving Loans to be made by such Continuing Bank on the Restatement Effective
Date exceeds the amount of the Original Loans of such Continuing Bank
outstanding on the Restatement Effective Date. Notwithstanding anything to the
contrary contained in this Section 12.10(b), in satisfying the foregoing
condition, unless the Agent shall have been notified by any Bank prior to the
occurrence of the Restatement Effective Date that such Bank does not intend to
make available to the Agent such Bank's Revolving Loans required to be made by
it on such date, then the Agent may, in reliance on such assumption, make
available to the Borrower the corresponding amounts in accordance with the
provisions of Section 1.04, and the making available by the Agent of such
amounts shall satisfy the condition in this Section 12.10(b).
12.11 Headings Descriptive. The headings of the several sections and
--------------------
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
12.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any
-------------------------
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination
is in writing signed by the respective Credit Parties party thereto and the
Required Banks, provided that no such change, waiver, discharge or termination
--------
shall, without the consent of each Bank (other than a Defaulting Bank) (with
Obligations being directly affected in the case of following clause (i)), (i)
extend the final scheduled maturity of any Loan or Note or extend the stated
maturity of any Letter of Credit beyond the Maturity Date, or reduce the rate or
extend the time of payment of interest or Fees thereon, or reduce the principal
amount
-111-
<PAGE>
thereof (it being understood that any amendment or modification to the financial
definitions in this Agreement shall not constitute a reduction in any rate of
interest or fees for the purposes of this clause (i)), (ii) release all or
substantially all of the Collateral (except as expressly provided in the
Security Documents) under all the Security Documents, (iii) amend, modify or
waive any provision of this Section 12.12, (iv) reduce the percentage specified
in the definition of Required Banks (it being understood that, with the consent
of the Required Banks, additional extensions of credit pursuant to this
Agreement may be included in the determination of the Required Banks on
substantially the same basis as the Revolving Loan Commitments are included on
the Restatement Effective Date) or (v) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement; provided
--------
further, that no such change, waiver, discharge or termination shall (1)
- -------
increase the Revolving Loan Commitment of any Bank over the amount thereof then
in effect without the consent of such Bank (it being understood that waivers or
modifications of conditions precedent, covenants, Defaults or Events of Default
or of a mandatory reduction in the Total Revolving Loan Commitment shall not
constitute an increase of the Revolving Loan Commitment of any Bank, and that an
increase in the available portion of any Revolving Loan Commitment of any Bank
shall not constitute an increase in the Revolving Loan Commitment of such Bank),
(2) without the consent of BTCo and each other Letter of Credit Issuer, amend,
modify or waive any provision of Section 2 or alter its rights or obligations
with respect to Letters of Credit, (3) without the consent of BTCo, alter its
rights or obligations with respect to Swingline Loans, (4) without the consent
of the Agent, amend, modify or waive any provision of Section 11 as same applies
to the Agent or any other provision as same relates to the rights or obligations
of the Agent or (5) without the consent of the Collateral Agent, amend, modify
or waive any provision relating to the rights or obligations of the Collateral
Agent.
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by clause
(a)(i) through (v), inclusive, of the first proviso to Section 12.12(a), the
consent of the Required Banks is obtained but the consent of one or more of such
other Banks whose consent is required is not obtained, then the Borrower shall
have the right, so long as all non-consenting banks whose individual consent is
required are treated as described in either clause (A) or (B) below, to either
(A) replace each such non-consenting Bank or Banks with one or more Replacement
Banks pursuant to Section 1.13 so long as at the time of such replacement, each
such Replacement Bank consents to the proposed change, waiver, discharge or
termination or (B) terminate such non-consenting Bank's Revolving Loan
Commitments and repay in full its outstanding Revolving Loans, in accordance
with Sections 3.02(b) and/or 4.01(b), provided that, unless the Revolving Loan
--------
Commitments terminated and Revolving Loans repaid pursuant to preceding clause
(B) are immediately replaced in full at such time through the addition of new
Banks or the increase of the Revolving Loan Commitments and/or outstanding
Revolving Loans of existing Banks (who in each case must specifically consent
thereto), then in the case of any action pursuant to preceding clause (B) the
Required Banks (determined before giving effect to the proposed action) shall
specifically consent thereto, provided further, that the Borrower shall not
----------------
have the right to replace a
-112-
<PAGE>
Bank solely as a result of the exercise of such Bank's rights (and the
withholding of any required consent by such Bank) pursuant to the second proviso
to Section 12.12(a).
12.13 Survival. All indemnities set forth herein including, without
--------
limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.07 or 12.01, shall survive the
execution and delivery of this Agreement and the making and repayment of the
Loans.
12.14 Domicile of Loans. Each Bank may transfer and carry its Loans
-----------------
at, to or for the account of any branch office, subsidiary or affiliate of such
Bank; provided, that the Borrower shall not be responsible for costs arising
--------
under Section 1.10, 1.11, 2.05 or 4.04 resulting from any such transfer (other
than a transfer pursuant to Section 1.12) to the extent such costs would not
otherwise be applicable to such Bank in the absence of such transfer.
12.15 Confidentiality. (a) Each of the Banks agrees that it will
---------------
use its best efforts not to disclose without the prior consent of the Borrower
(other than to its employees, auditors, counsel or other professional advisors,
to affiliates or to another Bank if the Bank or such Bank's holding or parent
company in its sole discretion determines that any such party should have access
to such information) any information with respect to Holdings, the Borrower or
any of its Subsidiaries which is furnished pursuant to this Agreement; provided,
--------
that any Bank may disclose any such information (a) as has become generally
available to the public or has become available to such Bank on a non-
confidential basis, (b) as may be required or appropriate in any report,
statement or testimony submitted to any municipal, state or Federal regulatory
body having or claiming to have jurisdiction over such Bank or to the Federal
Reserve Board, the Federal Deposit Insurance Corporation, the NAIC or similar
organizations (whether in the United States or elsewhere) or their successors,
(c) as may be required or appropriate in response to any summons or subpoena or
in connection with any litigation, (d) in order to comply with any law, order,
regulation or ruling applicable to such Bank, and (e) to any prospective
transferee in connection with any contemplated transfer of any of the Notes or
any interest therein by such Bank; provided, that such prospective transferee
--------
agrees to be bound by the provisions of this Section 12.15 to the same extent as
such Bank.
(b) Each of Holdings and the Borrower hereby acknowledges and agrees
that each Bank may share with any of its affiliates any information related to
Holdings or any of its Subsidiaries (including, without limitation, any
nonpublic customer information regarding the creditworthiness of Holdings and
its Subsidiaries, provided that such Persons shall be subject to the provisions
of this Section 12.15 to the same extent as such Bank).
12.16 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT
--------------------
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
-113-
<PAGE>
SECTION 13. Holdings Guaranty.
-----------------
13.01 The Guaranty. In order to induce the Banks to enter into this
------------
Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by Holdings from the proceeds of the Loans and the
issuance of the Letters of Credit, Holdings hereby agrees with the Banks as
follows: Holdings hereby unconditionally and irrevocably guarantees as primary
obligor and not merely as surety the full and prompt payment when due, whether
upon maturity, acceleration or otherwise, of any and all of the Guaranteed
Obligations of the Borrower to the Guaranteed Creditors. If any or all of the
Guaranteed Obligations of the Borrower to the Guaranteed Creditors becomes due
and payable hereunder, Holdings unconditionally promises to pay such
indebtedness to the Agent and/or the Banks, or order, on demand, together with
any and all expenses which may be incurred by the Agent or the Banks in
collecting any of the Guaranteed Obligations. If claim is ever made upon any
Guaranteed Creditor for repayment or recovery of any amount or amounts received
in payment or on account of any of the Guaranteed Obligations and any of the
aforesaid payees repays all or part of said amount by reason of (i) any
judgment, decree or order of any court or administrative body having
jurisdiction over such payee or any of its property or (ii) any settlement or
compromise of any such claim effected by such payee with any such claimant
(including the Borrower), then and in such event Holdings agrees that any such
judgment, decree, order, settlement or compromise shall be binding upon
Holdings, notwithstanding any revocation of this Guaranty other instrument
evidencing any liability of the Borrower, and Holdings shall be and remain
liable to the aforesaid payees hereunder for the amount so repaid or recovered
to the same extent as if such amount had never originally been received by any
such payee.
13.02 Bankruptcy. Additionally, Holdings unconditionally and
----------
irrevocably guarantees the payment of any and all of the Guaranteed Obligations
of the Borrower to the Guaranteed Creditors whether or not due or payable by the
Borrower upon the occurrence of any of the events specified in Section 9.05, and
unconditionally promises to pay such indebtedness to the Guaranteed Creditors,
or order, on demand, in lawful money of the United States.
13.03 Nature of Liability. The liability of Holdings hereunder is
-------------------
exclusive and independent of any security for or other guaranty of the
Guaranteed Obligations of the Borrower whether executed by Holdings, any other
guarantor or by any other party, and the liability of Holdings hereunder is not
affected or impaired by (a) any direction as to application of payment by the
Borrower or by any other party, or (b) any other continuing or other guaranty,
undertaking or maximum liability of a guarantor or of any other party as to the
Guaranteed Obligations of the Borrower, or (c) any payment on or in reduction of
any such other guaranty or undertaking, or (d) any dissolution, termination or
increase, decrease or change in personnel by the Borrower, or (e) any payment
made to any Guaranteed Creditor on the Guaranteed Obligations which any such
Guaranteed Creditor repays to the Borrower pursuant to court order in any
bankruptcy, reorganization, arrange-
-114-
<PAGE>
ment, moratorium or other debtor relief proceeding, and Holdings waives any
right to the deferral or modification of its obligations hereunder by reason of
any such proceeding.
13.04 Independent Obligation. The obligations of Holdings hereunder
----------------------
are independent of the obligations of any other guarantor, any other party or
the Borrower, and a separate action or actions may be brought and prosecuted
against Holdings whether or not action is brought against any other guarantor,
any other party or the Borrower and whether or not any other guarantor, any
other party or the Borrower be joined in any such action or actions. Holdings
waives, to the full extent permitted by law, the benefit of any statute of
limitations affecting its liability hereunder or the enforcement thereof. Any
payment by the Borrower or other circumstance which operates to toll any statute
of limitations as to the Borrower shall operate to toll the statute of
limitations as to any Guarantor.
13.05 Authorization. Holdings authorizes the Guaranteed Creditors
-------------
without notice or demand (except as shall be required by applicable statute and
cannot be waived), and without affecting or impairing its liability hereunder,
from time to time to:
(a) change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew, increase, accelerate or alter, any of
the Guaranteed Obligations (including any increase or decrease in the rate
of interest thereon), any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the Guaranty herein made
shall apply to the Guaranteed Obligations as so changed, extended, renewed
or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any of
those hereunder) incurred directly or indirectly in respect thereof or
hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors, the
Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to its creditors other than
the Guaranteed Creditors;
-115-
<PAGE>
(f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower to the Guaranteed Creditors
regardless of what liability or liabilities of Holdings or the Borrower
remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement or any of the instruments or agreements
referred to herein, or otherwise amend, modify or supplement this Agreement
or any of such other instruments or agreements; and/or
(h) take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of
Holdings from its liabilities under this Guaranty.
13.06 Reliance. It is not necessary for any Guaranteed Creditor to
--------
inquire into the capacity or powers of the Borrower or the officers, directors,
partners or agents acting or purporting to act on their behalf, and any
Guaranteed Obligations made or created in reliance upon the professed exercise
of such powers shall be guaranteed hereunder.
13.07 Subordination. Any of the indebtedness of the Borrower
-------------
relating to the Guaranteed Obligations now or hereafter owing to Holdings is
hereby subordinated to the Guaranteed Obligations of the Borrower owing to the
Guaranteed Creditors; and if the Agent so requests at a time when an Event of
Default exists, all such indebtedness relating to the Guaranteed Obligations of
the Borrower to Holdings shall be collected, enforced and received by Holdings
for the benefit of the Guaranteed Creditors and be paid over to the Agent on
behalf of the Guaranteed Creditors on account of the Guaranteed Obligations of
the Borrower to the Guaranteed Creditors, but without affecting or impairing in
any manner the liability of Holdings under the other provisions of this
Guaranty. Prior to the transfer by Holdings of any note or negotiable
instrument evidencing any of the indebtedness relating to the Guaranteed
Obligations of the Borrower to Holdings, Holdings shall mark such note or
negotiable instrument with a legend that the same is subject to this
subordination. Without limiting the generality of the foregoing, Holdings
hereby agrees with the Guaranteed Creditors that it will not exercise any right
of subrogation which it may at any time otherwise have as a result of this
Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or
otherwise) until all Guaranteed Obligations have been irrevocably paid in full
in cash.
13.08 Waiver. (a) Holdings waives any right (except as shall be
------
required by applicable statute and cannot be waived) to require any Guaranteed
Creditor to (i) proceed against the Borrower, any other guarantor or any other
party, (ii) proceed against or exhaust any security held from the Borrower, any
other guarantor or any other party or (iii) pursue any other remedy in any
Guaranteed Creditor's power whatsoever. Holdings waives any defense based on or
arising out of any defense of the Borrower, any other guarantor or any other
party, other than payment in full of the Guaranteed Obligations, based on or
arising out of the disability of the Borrower, any other guarantor or any other
party, or the
-116-
<PAGE>
validity, legality or unenforceability of the Guaranteed Obligations or any part
thereof from any cause, or the cessation from any cause of the liability of the
Borrower other than payment in full of the Guaranteed Obligations. The
Guaranteed Creditors may, at their election, foreclose on any security held by
the Agent, the Collateral Agent or any other Guaranteed Creditor by one or more
judicial or nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable (to the extent such sale is permitted by applicable
law), or exercise any other right or remedy the Guaranteed Creditors may have
against the Borrower or any other party, or any security, without affecting or
impairing in any way the liability of Holdings hereunder except to the extent
the Guaranteed Obligations have been paid. Holdings waives any defense arising
out of any such election by the Guaranteed Creditors, even though such election
operates to impair or extinguish any right of reimbursement or subrogation or
other right or remedy of Holdings against the Borrower or any other party or any
security.
(b) Holdings waives all presentments, demands for performance,
protests and notices, including without limitation notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
Guaranteed Obligations. Holdings assumes all responsibility for being and
keeping itself informed of the Borrower's financial condition and assets, and of
all other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which Holdings assumes
and incurs hereunder, and agrees that the Agent and the Banks shall have no duty
to advise Holdings of information known to them regarding such circumstances or
risks.
(c) Holdings hereby acknowledges and affirms that it understands that
to the extent the Guaranteed Obligations are secured by real property located in
the State of California, Holdings shall be liable for the full amount of its
liability hereunder notwithstanding foreclosure on such real property by
trustee sale or any other reason impairing Holdings' or any secured creditor's
right to proceed against the Borrower or any other guarantor of the Guaranteed
Obligations.
(d) Holdings hereby waives, to the fullest extent permitted by
applicable law, all rights and benefits under Sections 580a, 580b, 580d and 726
of the California Code of Civil Procedure. Holdings hereby further waives, to
the fullest extent permitted by applicable law, without limiting the generality
of the foregoing or any other provision hereof, all rights and benefits which
might otherwise be available to Holdings under Sections 2787 through 2855,
inclusive, 2899 and 3433 of the California Civil Code.
(e) Holdings further understands, is aware and hereby acknowledges
that if the Guaranteed Creditors elect to nonjudicially foreclose on any real
property security located in the State of California any right of subrogation of
Holdings against any Credit Party may be impaired or extinguished and that as a
result of such impairment or extinguishment of subrogation rights, Holdings may
have a defense to a deficiency judgment arising out of the operation of Section
580d of the California Code of Civil Procedure and
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<PAGE>
related principles of estoppel. Holdings waives all rights and defenses arising
out of an election of remedies by the Guaranteed Creditors, even though that
election of remedies, such as a nonjudicial foreclosure with respect to security
for a Guaranteed Obligation, has destroyed the guarantor's rights of subrogation
and reimbursement against the principal by the operation of Section 580d of the
Code of Civil Procedure or otherwise.
13.09 Nature of Liability. It is the desire and intent of Holdings
-------------------
and the Guaranteed Creditors that this Guaranty shall be enforced against
Holdings to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought. If, however, and
to the extent that, the obligations of Holdings under this Guaranty shall be
adjudicated to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers), then the amount of the Guaranteed
Obligations of Holdings shall be deemed to be reduced and Holdings shall pay the
maximum amount of the Guaranteed Obligations which would be permissible under
applicable law.
* * *
-118-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
Address:
- -------
333 East Howard Avenue WESLEY JESSEN VISIONCARE,
Des Plaines, Illinois 60018-5903 INC.
Attention: Chief Financial Officer
Telephone: (847) 294-3868 By /s/ Edward Kelley
-------------------------------------
Telecopier:(847) 294-3058 Title: Vice President and Chief
Financial Officer
333 East Howard Avenue WESLEY-JESSEN CORPORATION
Des Plaines, Illinois 60018-5903
Attention: Chief Financial Officer
Telephone: (847) 294-3868 By /s/ Edward Kelley
-------------------------------------
Telecopier:(847) 294-3058 Title: Vice President and Chief
Financial Officer
BANKERS TRUST COMPANY,
individually and as Agent
By /s/ Mary Kay Coyle
-------------------------------------
Title: Managing Director
THE FIRST NATIONAL BANK OF
CHICAGO
By /s/ Julia A. Bristow
-------------------------------------
Title: Managing Director
<PAGE>
FLEET NATIONAL BANK
By /s/ Andy Sassine
-------------------------------------
Title: Vice President
HARRIS TRUST AND SAVINGS
BANK
By /s/ Peter B. McNitt
-------------------------------------
Title: Senior Vice President
LASALLE NATIONAL BANK
By /s/ Sara K. TenBroek
-------------------------------------
Title: Vice President
NATIONAL BANK OF CANADA
By /s/ Jonathan M. Millard
-------------------------------------
Title: Assistant Vice President
By /s/ William W. Mucker
-------------------------------------
Title: Assistant Vice President
SOCIETE GENERALE
By /s/ John J. Wagner
-------------------------------------
Title: Vice President
<PAGE>
ANNEX I
-------
LIST OF BANKS
-------------
<TABLE>
<CAPTION>
Revolving
Loan
Bank Commitment
---- ------------
<S> <C>
Bankers Trust Company $ 20,000,000
Bank Polska Kasa Opieki, SA $ 5,000,000
The First National Bank $ 22,000,000
of Chicago
Fleet National Bank $ 20,000,000
Harris Trust and Savings Bank $ 20,000,000
Societe Generale $ 20,000,000
LaSalle National Bank $ 16,000,000
National Bank of Canada $ 12,000,000
------------
Total
$135,000,000
</TABLE>
<PAGE>
ANNEX II
--------
BANK ADDRESSES
--------------
Bank Address
- ---- -------
Bankers Trust Company One Bankers Trust Plaza
New York, NY 10006
Attention: Mary Kay Coyle
Telephone No.: (212) 250-9094
Facsimile No.: (212) 250-7218
Bank Polska Kasa Opieki, SA 470 Park Avenue
New York, NY 10016
Attention: William Shea
Telephone No.: (212) 251-1203
Facsimile No.: (212) 679-5910
The First National Bank of Chicago One First National Plaza
Chicago, IL 60670
Attention: Julia Bristow
Telephone: (312) 732-5927
Facsimile: (312) 732-1117
Fleet National Bank 1 Federal Street
Boston, MA 02110
Attention: Andy Sassine
Telephone: (617) 346-5692
Facsimile: (617) 346-4806
Harris Trust and Savings Bank 111 West Monroe Street
2 West
Chicago, IL 60690
Attention: Rich Michalik
Telephone: (312) 461-2272
Facsimile: (312) 461-2591
National Bank of Canada 225 West Washington
Suite 1100
<PAGE>
ANNEX II
Page 2
Chicago, IL 60606
Attention: Bill Mucker
Telephone: (312) 558-1676
Facsimile: (312) 558-6461
<PAGE>
ANNEX II
Page 3
LaSalle National Bank 135 South LaSalle Street
Chicago, IL 60603
Attention: Sara K. TenBroek
Telephone: (312) 904-8448
Facsimile: (312) 904-4660
Societe Generale 1221 Avenue of the Americas
New York, NY 10020
Attention: John J. Wagner
Telephone: (212) 278-6736
Facsimile: (212) 278-6178
<PAGE>
ANNEX III
---------
EXISTING LETTERS OF CREDIT
--------------------------
<PAGE>
ANNEX IV
--------
REAL PROPERTIES
---------------
<PAGE>
ANNEX V
-------
PROJECTIONS
-----------
<PAGE>
ANNEX VI
--------
SUBSIDIARIES
------------
<PAGE>
ANNEX VII
---------
INSURANCE
---------
<PAGE>
ANNEX VIII
----------
EXISTING INDEBTEDNESS
---------------------
<PAGE>
ANNEX IX
--------
EXISTING LIENS
--------------
Filing File Original Description
Location Debtor Secured Party Number File Date of Collateral
- --------- ------ ------------- ------ --------- -------------
<PAGE>
ANNEX X
-------
ASSET SALES
-----------
<PAGE>
ANNEX XI
--------
CAPITALIZATION
--------------
<PAGE>
ANNEX XII
---------
INVESTMENTS
-----------
<PAGE>
ANNEX XIII
----------
EXCLUDED INTELLECTUAL PROPERTY
------------------------------
<PAGE>
EXHIBIT B-1
-----------
FORM OF REVOLVING NOTE
----------------------
$___________ New York, New York
_________ __, 199_
FOR VALUE RECEIVED, WESLEY-JESSEN CORPORATION, a Delaware corporation (the
"Borrower"), hereby promises to pay to __________ or its registered assigns (the
"Bank"), in lawful money of the United States of America in immediately
available funds, at the office of Bankers Trust Company (the "Agent") located at
One Bankers Trust Plaza, New York, New York 10006 on the Maturity Date (as
defined in the Agreement referred to below) the principal sum of _____________
DOLLARS ($__________) or, if less, the unpaid principal amount of all Revolving
Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid principal amount
hereof in like money at said office from the date hereof until paid at the rates
and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Revolving Notes referred to in the Credit
Agreement, dated as of February 19, 1997 and amended and restated as of
September 10, 1997, among Wesley Jessen VisionCare, Inc., the Borrower, the
financial institutions from time to time party thereto (including the Bank) and
the Agent (as so amended and restated and as the same may be further amended,
modified, supplemented or restated from time to time, the "Agreement") and is
entitled to the benefits thereof and of the other Credit Documents (as defined
in the Agreement). This Note is secured by the Security Documents (as defined in
the Agreement) and is entitled to the benefits of the Guaranties (as defined in
the Agreement). This Note is subject to voluntary prepayment and mandatory
repayment prior to the Maturity Date, in whole or in part, as provided in the
Agreement, and Revolving Loans may be converted from one Type (as defined in the
Agreement) into another Type to the extent provided in the Agreement.
In case an Event of Default (as defined in the Agreement) shall occur and
be continuing, the principal of and accrued interest on this Note may become or
be declared to be due and payable in the manner and with the effect provided in
the Agreement.
The Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.
<PAGE>
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.
WESLEY-JESSEN CORPORATION
By________________________________
Title:
<PAGE>
EXHIBIT B-2
-----------
FORM OF SWINGLINE NOTE
----------------------
$10,000,000 New York, New York
_________ __, 199_
FOR VALUE RECEIVED, WESLEY-JESSEN CORPORATION, a Delaware corporation
(the "Borrower"), hereby promises to pay to BANKERS TRUST COMPANY or its
registered assigns (the "Bank"), in lawful money of the United States of America
in immediately available funds, at the office of Bankers Trust Company (the
"Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the
Swingline Expiry Date (as defined in the Agreement referred to below) the
principal sum of TEN MILLION DOLLARS ($10,000,000) or, if less, the unpaid
principal amount of all Swingline Loans (as defined in the Agreement) made by
the Bank pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.08 of the Agreement.
This Note is the Swingline Note referred to in the Credit Agreement,
dated as of February 19, 1997 and amended and restated as of September 10, 1997,
among Wesley Jessen VisionCare, Inc., the Borrower, the financial institutions
from time to time party thereto (including the Bank) and the Agent (as so
amended and restated and as the same may be further amended, modified,
supplemented or restated from time to time, the "Agreement") and is entitled to
the benefits thereof and of the other Credit Documents (as defined in the
Agreement). This Note is secured by the Security Documents (as defined in the
Agreement) and is entitled to the benefits of the Guaranties (as defined in the
Agreement). This Note is subject to voluntary prepayment and mandatory repayment
prior to the Swingline Expiry Date, in whole or in part, as provided in the
Agreement.
In case an Event of Default (as defined in the Agreement) shall occur
and be continuing, the principal of and accrued interest on this Note may become
or be declared to be due and payable in the manner and with the effect provided
in the Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
<PAGE>
EXHIBIT B-2
Page 2
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
WESLEY-JESSEN CORPORATION
By________________________________
Title:
-2-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUN-29-1997
<PERIOD-END> SEP-27-1997
<CASH> 3,819
<SECURITIES> 0
<RECEIVABLES> 65,733
<ALLOWANCES> 19,845<F1>
<INVENTORY> 44,286<F2>
<CURRENT-ASSETS> 123,536
<PP&E> 19,425
<DEPRECIATION> 978
<TOTAL-ASSETS> 169,529
<CURRENT-LIABILITIES> 67,257
<BONDS> 0
0
0
<COMMON> 177
<OTHER-SE> 28,308
<TOTAL-LIABILITY-AND-EQUITY> 169,529
<SALES> 75,235
<TOTAL-REVENUES> 75,235
<CGS> 23,891
<TOTAL-COSTS> 63,442
<OTHER-EXPENSES> (196)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,241
<INCOME-PRETAX> 10,748
<INCOME-TAX> 3,653
<INCOME-CONTINUING> 7,095
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,095
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0
<FN>
<F1>ALLOWED NETTED AGAINTS TRADE RECEIVABLES INCLUDES BOTH BAD DEBT RESERVES AND
SALES RETURN REVERSES.
<F2>INVENTORY INCLUDES ADJUSTMENTS MADE IN ACCORDANCE WITH APB OPINION 16,
ACCOUNTING FOR BUSINESS COMBINATIONS
</FN>
</TABLE>
