<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 16, 1997
REGISTRATION NO. 333-33121
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------
LEINER HEALTH PRODUCTS INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2834 95-3431709
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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901 EAST 233RD STREET
CARSON, CALIFORNIA 90745
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------
WILLIAM B. TOWNE
LEINER HEALTH PRODUCTS INC.
901 EAST 233RD STREET
CARSON, CALIFORNIA 90745
(310) 952-1341
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPY TO:
DAVID A. BRITTENHAM
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE OFFERING MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
9 5/8% Senior Subordinated Notes due
2007.................................... $85,000,000 100% $85,000,000 $25,758.00
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 16, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS
TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
LEINER HEALTH PRODUCTS INC.
OFFER TO EXCHANGE 9 5/8% SENIOR SUBORDINATED NOTES DUE 2007
FOR ANY AND ALL EXISTING NOTES (AS DEFINED BELOW)
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1997, UNLESS EXTENDED.
AS DESCRIBED HEREIN, WITHDRAWAL RIGHTS WITH RESPECT TO THE EXCHANGE OFFER ARE
EXPECTED TO
EXPIRE AT THE EXPIRATION OF THE EXCHANGE OFFER.
--------------------------
Leiner Health Products Inc., a Delaware corporation ("LHP," and collectively
with its subsidiaries, the "Company"), hereby offers (the "Exchange Offer"),
upon the terms and subject to the conditions set forth in this Prospectus (the
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal") to exchange up to $85,000,000 aggregate principal amount of its
9 5/8% Senior Subordinated Notes due 2007 (the "New Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act")
pursuant to a Registration Statement of which this Prospectus is a part, for a
like principal amount of its issued and outstanding 9 5/8% Senior Subordinated
Notes due 2007 (the "Existing Notes"). The New Notes will be issued in
denominations of $1,000 or integral multiples thereof. The New Notes and the
Existing Notes are referred to collectively herein as the "Notes." The Existing
Notes were originally issued and sold by Leiner Health Products Group Inc.,
LHP's indirect corporate parent ("Leiner Group"), in a transaction that was
exempt from registration under the Securities Act (the "Offering") and resold to
certain qualified institutional buyers and institutional accredited investors in
reliance on, and subject to the restrictions imposed pursuant to, Rule 144A
under the Securities Act ("Rule 144A") and other applicable exemptions from the
registration requirements of such Act. Immediately following the consummation of
the Offering, Leiner Group assigned to its wholly-owned indirect subsidiary LHP,
and LHP assumed, all of Leiner Group's obligations in respect of the Existing
Notes (the "Assumption") and LHP became the obligor on the Existing Notes. The
terms of the New Notes are identical in all material respects to the terms of
the Existing Notes for which they may be exchanged pursuant to the Exchange
Offer, except that the New Notes will have been registered under the Securities
Act, and thus will not bear restrictive legends restricting their transfer
pursuant to the Securities Act.
Interest on the Notes is payable semiannually in cash on January 1 and July
1 of each year, commencing January 1, 1998. Interest on each of the New Notes
issued pursuant to the Exchange Offer will accrue from the last interest payment
date to which interest was paid or duly provided for on the Existing Notes
surrendered in exchange therefor or, if no interest has been paid or duly
provided for, from the original date of issuance of the Existing Notes.
The New Notes will be redeemable at the option of LHP, in whole or in part,
at any time on or after July 1, 2002 at the redemption prices set forth herein,
together with accrued and unpaid interest, if any, to the date of redemption. In
addition, on or prior to July 1, 2000, LHP, at its option, may redeem in the
aggregate up to 30% of the original principal amount of the Notes at a
redemption price equal to 109 5/8% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of redemption, with the net cash
proceeds of one or more Public Equity Offerings (as defined herein); PROVIDED,
HOWEVER, that at least $60.0 million aggregate principal amount of Notes remains
outstanding immediately after giving effect to such redemption. See "Description
of the New Notes-- Redemption." Upon a Change of Control (as defined herein),
(i) LHP will have the option prior to July 1, 2002, to redeem the New Notes, in
whole, at a redemption price equal to 100% of the principal amount thereof plus
the Applicable Premium (as defined herein) as of, and accrued and unpaid
interest (if any) to, the date of redemption, and (ii) if LHP does not redeem
the New Notes, subject to certain conditions, each holder of Notes will have the
right to require LHP to purchase such holder's New Notes at a price equal to
101% of the principal amount thereof, together with accrued and unpaid interest
to the date of purchase. See "Description of the New Notes--Change of Control."
The New Notes will be unsecured senior subordinated obligations of LHP and
will be subordinated in right of payment to all existing and future Senior Debt
(as defined herein) of LHP, and will rank PARI PASSU in right of payment with
all other existing and future senior subordinated indebtedness of LHP. As of
June 30, 1997, on a pro forma basis after giving effect to the Recapitalization
(as defined herein) and the financing therefor, the Company had approximately
$164.7 million principal amount of Senior Debt outstanding and approximately
$249.7 million of aggregate indebtedness outstanding (including the Existing
Notes).
The Exchange Offer is not conditioned upon any minimum number of Existing
Notes tendered. The Exchange Offer will expire at 5:00 p.m., New York City time,
on , 1997, unless extended by LHP (such date as it may be so extended,
the "Expiration Date"). As soon as practicable after the Expiration Date, LHP
will accept all Existing Notes properly tendered and not validly withdrawn for
Exchange (the "Exchange Date") and deliver or cause the delivery of New Notes in
exchange therefor. Existing Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to 5:00 p.m. New York City time or the Expiration
Date; otherwise such tenders are irrevocable. New Notes to be issued in exchange
for validly tendered Existing Notes will be delivered through the facilities of
The Depository Trust Company by the Exchange Agent (as defined herein).
--------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING AN INVESTMENT
IN THE NEW NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
--------------------------
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
The Existing Notes were originally issued and sold in a transaction that was
exempt from registration under the Securities Act and resold to certain
qualified institutional buyers and institutional accredited investors in
reliance on, and subject to the restrictions imposed pursuant to, Rule 144A
under the Securities Act ("Rule 144A") and other applicable exemptions from the
registration requirements of such Act. Based on interpretations by the Staff of
the Securities and Exchange Commission (the "Commission") as set forth in no-
action letters issued to third parties (including EXXON CAPITAL HOLDINGS
CORPORATION (available May 13, 1988), MORGAN STANLEY & CO. INCORPORATED
(available June 5, 1991), K-III COMMUNICATIONS CORPORATION (available July 2,
1993) and SHEARMAN & STERLING (available July 2, 1993)), LHP believes that New
Notes issued pursuant to the Exchange Offer in exchange for the Existing Notes
may be offered for resale, resold and otherwise transferred by holders thereof
(other than any such holder which is (i) an "affiliate" of LHP within the
meaning of Rule 405 under the Securities Act, (ii) a broker-dealer who acquired
Existing Notes directly from LHP or (iii) a broker-dealer who acquired Existing
Notes as a result of market-making or other trading activities) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that (a) such New Notes are acquired in the ordinary
course of such holder's business, (b) at the time of the commencement of the
Exchange Offer such holder has no arrangement with any person to participate in
a distribution of the New Notes and (c) such holder is not engaged in, and does
not intend to engage in, a distribution of the New Notes. Holders of the
Existing Notes that, at the time of the commencement of the Exchange Offer, are
engaged in, intend to engage in, or have an arrangement to engage in, a
distribution of the New Notes may not rely on the applicable interpretations of
the Staff of the Commission and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any secondary
resale transaction. In addition, since the Commission has not considered the
Exchange Offer in the context of a no-action letter, there can be no assurance
that the Staff of the Commission would make a similar determination with respect
to the Exchange Offer as in such other circumstances. Each holder of Existing
Notes that desires to participate in the Exchange Offer will be required to make
certain representations described in "The Exchange Offer -- Terms of the
Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer in exchange for Existing Notes, where such Existing Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act and that it has not entered into
any arrangement or understanding with LHP or any affiliate of LHP to distribute
New Notes in connection with any resale of such New Notes. A broker-dealer that
acquired Existing Notes in a transaction other than as part of its market-making
activities or other trading activities will not be able to participate in the
Exchange Offer. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Existing Notes where such Existing Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities. LHP has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any such participating broker-dealer for
use in connection with any such resale. Any holder that cannot rely upon such
interpretations must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. See "The Exchange Offer" and "Plan of Distribution."
The New Notes will be represented by one or more Global Certificate (as
defined herein) registered in the name of a nominee of The Depository Trust
Company, as Depository. Beneficial interest in the Global Certificates will be
shown on, and transfers will be effected only through, records maintained by the
Depository and its participants. See "Description of New Notes -- Book-Entry,
Delivery and Form."
There has not previously been any public market for the New Notes. LHP does
not intend to list the New Notes on any securities exchange or to seek approval
for quotation through any automated quotation system. There can be no assurance
that an active market for the New Notes will develop. Moreover, to the extent
that Existing Notes are tendered and accepted in the Exchange Offer, a holder's
ability to sell untendered, and tendered but unaccepted, Existing Notes could be
adversely affected. See "Risk Factors -- Absence of Public Market."
LHP will not receive any proceeds from the Exchange Offer. LHP has agreed to
pay the expenses it incurs for the Exchange Offer. No dealer manager is being
utilized in connection with the Exchange Offer.
ii
<PAGE>
THE EXCHANGE OFFER IS NOT BEING MADE, NOR WILL LHP ACCEPT SURRENDERS FOR
EXCHANGE FROM HOLDERS OF EXISTING NOTES, IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR "BLUE SKY" LAWS OF SUCH JURISDICTION.
------------------------
AVAILABLE INFORMATION
LHP has filed with the Commission a Registration Statement (together with
any amendments thereto, the "Registration Statement") on Form S-4 under the
Securities Act, with respect to the New Notes offered hereby. As permitted by
the rules and regulations of the Commission, this Prospectus does not contain
all of the information included in the Registration Statement and the exhibits
and schedules thereto. Statements contained in this Prospectus as to the
contents of any contract or other document referred to herein or therein and
filed as an exhibit to the Registration Statement are not necessarily complete
and, in each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. For further information with
respect to LHP and the New Notes, reference is hereby made to the Registration
Statement and the exhibits and schedules thereto.
LHP is not currently subject to the periodic reporting and other
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Pursuant to the Indenture (as defined herein), LHP has
agreed to file with the Commission (so long as it is permitted to do so) and
provide to the holders of the Notes annual reports and the information,
documents and other reports that are specified in Sections 13 and 15(d) of the
Exchange Act. Reports, proxy statements and other information may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and
at the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and Suite 1400, Northwestern Atrium Center, 14th
Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of such material
can also be obtained at prescribed rates by writing to the Commission, Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549 and such
material is contained on the worldwide web site maintained by the Commission at
http://www.sec.gov.
------------------------
YOUR LIFE-REGISTERED TRADEMARK-, PHARMACIST FORMULA-REGISTERED TRADEMARK-,
PROVEN RELEASE-REGISTERED TRADEMARK-, DAILY PAK-REGISTERED TRADEMARK-,
NATURALIZED-REGISTERED TRADEMARK-, MY-A-MULTI-REGISTERED TRADEMARK-,
CENTRAL-VITE-REGISTERED TRADEMARK-, THERA PLUS-REGISTERED TRADEMARK-, MAXIMUM
PAK-REGISTERED TRADEMARK-, SELECT DAILY PAK-REGISTERED TRADEMARK-, MEN'S DAILY
PAK-REGISTERED TRADEMARK-, WOMEN'S DAILY PAK-REGISTERED TRADEMARK-,
PHYTOGRAPH-REGISTERED TRADEMARK- AND BODYCOLOGY-REGISTERED TRADEMARK-, are
registered trademarks of the Company and FE-TABS-TM-, ANTIOXIDANT PAK-TM-,
PHARMACEUTICAL GRADE CALCIUM-TM-, CENTRAL-VITE SELECT-TM-, BODY SYSTEMS-TM-,
STANDARDIZED HERBAL EXTRACTS-TM-, SPACE KIDS-TM-, GER-TAB-TM-, PAPAYAZYME-TM-,
STRESS PAK-TM- and LUBRICARE-TM- are trademarks of the Company. Other brand or
product names used herein are trademarks or registered trademarks of their
respective companies.
iii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE
CONTEXT OTHERWISE REQUIRES, REFERENCES TO THE "COMPANY" OR "LEINER" SHALL MEAN
LHP AND ITS SUBSIDIARIES. REFERENCES HEREIN TO A "FISCAL" YEAR REFER TO THE
COMPANY'S FISCAL YEAR ENDED MARCH 31 IN THE CALENDAR YEAR INDICATED (E.G.,
REFERENCES TO FISCAL 1997 ARE REFERENCES TO THE COMPANY'S FISCAL YEAR ENDED
MARCH 31, 1997). REFERENCES HEREIN TO "PRO FORMA 1997" ARE REFERENCES TO FISCAL
1997, PRESENTED ON A PRO FORMA BASIS GIVING EFFECT TO THE COMPANY'S JANUARY 1997
ACQUISITION OF VITA HEALTH COMPANY (1985) LTD. ("VITA HEALTH"), THE COMPANY'S
CANADIAN SUBSIDIARY, AS WELL AS THE RECAPITALIZATION (AS DEFINED HEREIN) AND
RELATED TRANSACTIONS. REFERENCES HEREIN TO "PRO FORMA FIRST QUARTER FISCAL 1998"
ARE REFERENCES TO THE FIRST QUARTER OF FISCAL 1998, PRESENTED ON A PRO FORMA
BASIS AFTER GIVING EFFECT TO THE RECAPITALIZATION, AND WITH RESPECT TO BALANCE
SHEET DATA, ASSUMING THAT CERTAIN RECAPITALIZATION RELATED TRANSACTIONS THAT
WERE COMPLETED AFTER THE RECAPITALIZATION HAD OCCURRED ON JUNE 30, 1997. SEE
"SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA" AND "UNAUDITED PRO FORMA
FINANCIAL INFORMATION." THE MARKET SHARE AND COMPETITIVE POSITION DATA CONTAINED
IN THIS PROSPECTUS ARE APPROXIMATIONS BASED ON COMPANY ESTIMATES AND THE
INDUSTRY SOURCES SPECIFIED HEREIN, INCLUDING FIND/SVP ("PACKAGED FACTS"),
INFORMATION RESOURCES, INC. ("IRI INFOSCAN"), MULTI-SPONSOR SURVEY, INC.
("GALLUP"), COUNCIL FOR RESPONSIBLE NUTRITION ("CRN DATA") AND MARKETING AND
MANAGEMENT INFORMATION, INC. ("MMI DATA"). THE COMPANY BELIEVES THAT SUCH DATA
ARE INHERENTLY IMPRECISE, BUT ARE GENERALLY INDICATIVE OF ITS RELATIVE MARKET
SHARE AND COMPETITIVE POSITION. MARKET SHARE DATA ARE FOR THE U.S. MASS MARKET
ONLY (WHICH INCLUDES SUPERMARKETS, DRUG STORES, MASS MERCHANDISERS AND WAREHOUSE
CLUBS) AND DO NOT INCLUDE CANADIAN MARKET SHARE INFORMATION FOR VITA HEALTH.
THE COMPANY
Leiner is the nation's largest manufacturer of vitamins, minerals, and
nutritional supplements (collectively "vitamins," "vitamin products" or "VMS")
and distributes its products primarily through mass market retailers. The
Company has a 23% share of all mass market vitamin sales in the United States,
50% larger than its next closest competitor's share. Additionally, Leiner's 50%
share of the mass market private label segment is more than two times the size
of its next closest competitor's share. Leiner has increased its market share
over the last five years, with its U.S. vitamin sales growing at a compound
annual rate of 18.9% per year through fiscal 1997, over one and one half times
the U.S. industry growth rate. Leiner is also one of the nation's largest
private label over-the-counter ("OTC") pharmaceuticals manufacturers, with 20%
of its sales in OTC pharmaceutical and other products. In January 1997, the
Company acquired Vita Health, the second largest private label vitamin and OTC
pharmaceuticals manufacturer in the Canadian market.
The Company's products are sold in more than 50,000 of the nation's leading
retail outlets, including the 20 largest drug store chains, 18 of the 20 largest
supermarket chains, 10 of the largest mass merchandising chains, and the two
largest warehouse club chains, as well as in convenience stores and through
United States military outlets worldwide. Leiner is the vitamin category manager
for many leading retailers.
COMPETITIVE STRENGTHS
During the last five fiscal years, Leiner acquired two companies, built its
Your Life-Registered Trademark- product line into a $100 million broadline
vitamin brand, and invested significantly in plant and equipment. These
initiatives transformed Leiner from a marketing and sales oriented organization
into a fully integrated, low cost manufacturer and marketer of vitamins. The
Company attributes its leadership position to the following competitive
strengths:
- LOW COST MANUFACTURING: During the last five years, in addition to
maintenance capital expenditures, the Company has invested $29.5 million
primarily to increase capacity, as well as to consolidate
1
<PAGE>
plants and modernize equipment. The Company's overall tableting capacity
has been increased by 45% and packaging capacity by 66%. The Company's
overall tableting costs have been reduced by 8%, and packaging and
distribution costs in its western U.S. facilities have been reduced by
approximately 10% and 20%, respectively.
- HIGH QUALITY PRODUCTS: Quality is a critical factor in the customer
purchase decision, particularly for private label products, which are
marketed under the brand names of the Company's mass market retail
customers. The Company was the first major vitamin product supplier to be
certified as being in compliance with the United States Pharmacopoeial
Conventions' ("USP") vitamin manufacturing standards. The Company believes
this certification has enhanced its reputation as a premier quality
manufacturer of vitamins.
- ADVANCED CATEGORY MANAGEMENT: Through its sophisticated information
systems, the Company seeks to optimize the application of emerging
science, new product introductions, merchandising opportunities, shelf
space profitability and inventory management for its customers. The
Company produces over 6,000 stock keeping units ("SKUs"), ships
approximately 1,500 orders per week to over 200 customers and has
established a reputation for consistent on-time delivery.
- HIGH MARGIN NEW PRODUCTS: The Company identifies new products in non-mass
market distribution channels and introduces proven items at the cost,
quality and delivery standards required by mass market retailers. These
new products, typically introduced under Leiner's YOUR
LIFE-Registered Trademark- brand, produce the highest margins of all the
Company's products and represent an increasing percentage of sales. To
evaluate nutritional research and advise the Company on emerging science,
Leiner created a Scientific Advisory Board comprised of nationally
recognized authorities on nutrition and science. In the last two fiscal
years, the Company introduced 52 new products (including 18 herbal
products) which generated $32 million of fiscal 1997 net sales. As a
result, in the mass market, Leiner's share of the high growth herbal
products segment has grown from 9% in 1994 to 16% in 1996.
THE VITAMIN INDUSTRY
Vitamins are one of the nation's fastest growing consumer product
categories. According to industry sources, between 1992 and 1996, sales for the
vitamin industry grew at a compound annual rate of approximately 11.2% to $4.1
billion, as the percentage of American adults regularly using vitamins grew from
34% to 40%. This growth is expected to continue as more of the baby boom
generation reaches age fifty and vitamin usage continues to increase for all age
groups.
Between 1996 and 2005, the 50 to 64 age group is projected to be the fastest
growing segment of the United States population. Gallup polling data shows that
vitamin usage increases significantly with age, with 47% of individuals over age
50 regularly using vitamins, compared with 36% of younger adults.
Increasing vitamin usage among the general population is linked to three
major factors. First, research expenditures devoted to the positive effects of
vitamin products have increased dramatically. Such research has been described
in major medical journals and reported in the popular media. Second, the
national trend towards improved fitness, greater self-care and preventive
medicine has increased the general population's focus on nutritional products
consumption. Finally, the more favorable regulatory environment resulting from
the Dietary Supplement Health and Education Act of 1994 has generated increased
new product introductions and more effective point of sale communication of the
health benefits of vitamins to consumers. See "Industry."
BUSINESS STRATEGY
The Company's business strategy includes the following principal elements:
- INTRODUCING NEW PRODUCTS: Leiner has successfully introduced herb and
nutritional supplements into the mass market that were originally
available only in non-mass market channels. Mass market sales
2
<PAGE>
of high-margin herbal products increased 29% between 1995 and 1996 and
represent a significant growth opportunity for the Company. The Company
believes that the 30 new products it introduced in fiscal 1997 and its
planned new product introductions for fiscal 1998 will further strengthen
its position in the mass market channel.
- EXPANDING DISTRIBUTION IN NON-MASS MARKET DOMESTIC CHANNELS: In addition
to its growth in the mass market channel, Leiner has a proven record of
growing sales in non-mass market channels. For example, Leiner's sales
through United States military outlets worldwide have grown from $9.1
million in fiscal 1994 to $18.9 million in fiscal 1997. The Company has
contractual agreements to (i) sell vitamins directly through television
retailing, (ii) distribute products through direct mail to customers of a
managed care provider, (iii) sell vitamins to companies that market
directly to consumers and (iv) contract manufacture products for major
pharmaceutical companies. The Company is also negotiating arrangements to
market vitamin products through the health food store channel.
- GROWING INTERNATIONAL SALES: Leiner plans to (i) expand its leading
position in Canada established through its recent acquisition of Vita
Health, a major manufacturer of private label and branded vitamins and OTC
pharmaceuticals in Canada, (ii) distribute YOUR LIFE-Registered Trademark-
brand products in Japan through a joint venture established with Takeda
Chemical Industries, Ltd., (iii) supply vitamins to Teva Pharmaceutical
Industries Ltd. for distribution in Israel and (iv) follow its existing
retail customers into international markets including Mexico, Brazil and
Indonesia.
- BUILDING THE YOUR LIFE-REGISTERED TRADEMARK- BRAND: Between fiscal 1993
and fiscal 1997, the Company expanded sales of the YOUR
LIFE-Registered Trademark- brand from $40 million to $104 million. Between
fiscal 1996 and fiscal 1997, YOUR LIFE-Registered Trademark- sales grew
approximately 50%, driven primarily by increasing sales to mass
merchandisers and warehouse clubs. In fiscal 1997, the Company spent
approximately $12 million in advertising and promotional sales support to
further enhance the YOUR LIFE-Registered Trademark- brand.
- SELECTIVELY PURSUING ADD-ON ACQUISITIONS: The Company has successfully
purchased and integrated five companies since 1988, including the
acquisition of Vita Health in January 1997. With this acquisition, Leiner
gained (i) a leading competitive position in the Canadian market, (ii)
distribution through nearly all of the significant mass market retailers
in Canada, (iii) an extensive herb and nutritional supplement product line
and (iv) an established brand in the Canadian health food store segment.
Leiner intends to continue to pursue selective acquisition opportunities
to complement its business strategy.
- INCREASING OPERATING MARGINS AND REDUCING WORKING CAPITAL REQUIREMENTS:
The Company plans to pursue initiatives to (i) consolidate its eastern
U.S. packaging and distribution facilities, (ii) continue to reduce
selling, marketing, distribution, general and administrative ("SG&A")
expense as a percentage of sales, (iii) continue to reduce its raw
material costs, (iv) achieve savings from the integration of Vita Health
and (v) increase the proportion of its overall sales represented by sales
of YOUR LIFE-Registered Trademark- branded products and other higher
margin products, including new products and products sold through new
channels.
3
<PAGE>
SUMMARY OF THE RECAPITALIZATION
On June 30, 1997 (the "Recapitalization Closing Date") Leiner Group, LHP's
indirect corporate parent, completed a leveraged recapitalization (the
"Recapitalization") sponsored by North Castle Partners I, L.L.C. ("North
Castle"). The Recapitalization was effected pursuant to a Stock Purchase
Agreement and Plan of Merger, dated as of May 31, 1997 (the "Recapitalization
Agreement"), among Leiner Group, North Castle and LHP Acquisition Corp., a
wholly-owned subsidiary of North Castle (the "Merger Entity"). North Castle, a
Delaware limited liability company, is an investment fund formed by Charles F.
Baird, Jr. for the purpose of participating in the Recapitalization. Mr. Baird
was formerly a Managing Director of AEA Investors Inc. ("AEA"), which, together
with management, arranged the 1992 acquisition of LHP. Prior to the
Recapitalization, the common stock of Leiner Group (the "Existing Common Stock")
had been held by Mr. Baird, certain current and former managers and employees of
the Company, and AEA and certain of its co-investors (collectively, the
"Existing Shareholders").
Upon consummation of the Recapitalization, (i) certain current managers and
employees of the Company who had been Existing Shareholders had some of their
Existing Common Stock exchanged for cash, but together with Mr. Baird, retained
common stock of the recapitalized Leiner Group ("Group Common Stock") and
received rights under certain circumstances to receive Group Common Stock
("Equity Rights") equal to approximately 16% of the Group Common Stock
outstanding or issuable under Equity Rights (the "Group Equity"), as well as
certain warrants to acquire Group Common Stock ("Warrants"); (ii) AEA and
certain of its co-investors (the "AEA Group") and certain former managers of the
Company, all of whom had been Existing Shareholders, had most of their Existing
Common Stock purchased for cash, but retained Group Common Stock equal to
approximately 10% of the Group Equity, as well as Warrants; and (iii) North
Castle purchased Group Common Stock from Leiner Group representing the balance
or approximately 74% of the Group Equity for a cash investment of $80.4 million.
The Warrants provide the Existing Shareholders with the right to purchase 20% of
the Group Common Stock on a fully-diluted basis giving effect to the exercise of
such Warrants and of the Management Options (as defined herein). The initial
exercise price of the Warrants is 125% of the purchase price per share paid by
North Castle for its investment in the Recapitalization. Commencing on the first
anniversary of the Recapitalization Closing Date, the exercise price will
compound at a rate of 25% per year in years two and three and then at a rate of
10% per year for the subsequent two years.
The cash sources of financing for the Recapitalization consisted of North
Castle's investment in Group Common Stock, the proceeds of the sale of the
Existing Notes, and term and revolving credit borrowings under a senior secured
credit facility (the "New Credit Facility") provided by a syndicate of financial
institutions and The Bank of Nova Scotia as administrative agent, Merrill Lynch
Capital Corporation as documentation agent and Salomon Brothers Holding Company
Inc as syndication agent. See "Description of New Credit Facility." These funds
were applied to acquire Existing Common Stock for cash, to cash out options for
Existing Common Stock, to redeem preferred stock of Leiner Group and Vita
Health, to refinance substantially all existing indebtedness of the Company
other than certain capitalized leases, and to pay transaction-related fees and
expenses.
For further information concerning the Recapitalization, see "The
Recapitalization."
4
<PAGE>
The following table sets forth the sources and uses of funds for the
Recapitalization of Leiner Group, which closed on June 30, 1997.
<TABLE>
<CAPTION>
SOURCES OF FUNDS AMOUNT USES OF FUNDS AMOUNT
- ---------------------------------- ------------------- ---------------------------------- -------------------
<S> <C> <C> <C>
(DOLLARS IN
MILLIONS)
Revolving Credit Facility......... $ 74.8(a) Repurchased and Retained Equity of
Leiner Group.................... $ 211.1(d)
Term Loans........................ 85.0(b) Repayment of Debt and Preferred
Stock........................... 119.8(e)
Existing Notes.................... 85.0 Management Transaction Bonuses.... 5.2(f)
------
Total Debt...................... 244.8 Estimated Fees and Expenses....... 17.7(g)
------ ------
Total Common Equity of Leiner
Group........................... 109.0(c)
------
TOTAL SOURCES OF FUNDS.......... $ 353.8 TOTAL USES OF FUNDS............... $ 353.8
------ ------
------ ------
</TABLE>
- ------------------------
(a) Consists of borrowings under the new $125.0 million U.S. and Canadian
revolving credit facilities (collectively, the "Revolving Credit Facility")
provided under the New Credit Facility. See "Description of New Credit
Facility."
(b) Consists of borrowings under a $45.0 million term B loan facility and a
$40.0 million term C loan facility under the New Credit Facility, which were
fully drawn on the Recapitalization Closing Date. See "Description of New
Credit Facility."
(c) Consists of the Group Equity, comprised of (1) a new equity investment by
North Castle in Group Common Stock for cash of $80.4 million, (2) a retained
equity investment in Group Common Stock and Equity Rights with a value of
$17.6 million (based on the per share value of the North Castle equity
investment), held by certain current managers and employees of the Company
and Mr. Baird (the "Management Retained Equity"), and (3) a retained equity
investment in Group Common Stock with a value of $11.0 million (based on the
per share value of the North Castle equity investment), held by the AEA
Group and certain former managers of the Company (together with the
Management Retained Equity, the "Retained Equity"). See "The
Recapitalization."
(d) Includes transaction-related fees and expenses of $6.1 million, incurred by
Leiner Group, that were an adjustment to the amount received by the Existing
Shareholders. See "The Recapitalization."
(e) Consists of $102.2 million in outstanding borrowings and accrued interest
under the Company's previous senior credit agreement, an aggregate $13.9
million redemption price for outstanding pay-in-kind redeemable preferred
stock of Leiner Group held by AEA and an aggregate $3.7 million redemption
price for a minority preferred stock interest in Vita Health.
(f) Members of the Company's management received $5.1 million in transaction
bonuses ($3.1 million on an after-tax basis), which were paid by the Company
following the Recapitalization Closing Date. In addition, the Company paid
$0.1 million in employer payroll taxes related to the bonus payments.
(g) Does not include any fees and expenses that were an adjustment to the amount
received by the Existing Shareholders, which are included in (d) above.
5
<PAGE>
THE EXCHANGE OFFERING
<TABLE>
<S> <C>
Registration Rights The Existing Notes were issued on June 30, 1997 to Merrill
Agreement................ Lynch, Pierce, Fenner & Smith Incorporated, Salomon Brothers
Inc and Scotia Capital Markets (USA) Inc. (the "Initial
Purchasers"). The Initial Purchasers resold the Existing
Notes to certain qualified institutional buyers and
institutional accredited investors in reliance on, and
subject to the restrictions imposed pursuant to, Rule 144A
of the Securities Act and other applicable exemptions from
the registration requirements of the Act. In connection
therewith, Leiner Group, LHP and the Initial Purchasers
entered into the Registration Rights Agreement, dated as of
June 30, 1997 (the "Registration Rights Agreement"),
providing, among other things, for the Exchange Offer. See
"The Exchange Offer."
The Exchange Offer......... New Notes are being offered in exchange for an equal
principal amount of Existing Notes. As of the date hereof,
$85,000,000 aggregate principal amount of Existing Notes is
outstanding.
Resale of New Notes........ Based on interpretations by the Staff of the Commission as
set forth in no-action letters issued to third parties
(including EXXON CAPITAL HOLDINGS CORPORATION (available May
13, 1988), MORGAN STANLEY & CO. INCORPORATED (available June
5, 1991), K-III COMMUNICATIONS CORPORATION (available July
2, 1993) and SHEARMAN & STERLING (available July 2, 1993)),
LHP believes that the New Notes issued pursuant to the
Exchange Offer may be offered for resale, resold or
otherwise transferred by any holder thereof (other than any
such holder that is a broker-dealer or an "affiliate" of LHP
within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that (i)
such New Notes are acquired in the ordinary course of
business, (ii) at the time of the commencement of the
Exchange Offer such holder has no arrangement or
understanding with any person to participate in a
distribution of the New Notes and (iii) such holder is not
engaged in, and does not intend to engage in, a distribution
of the New Notes. By tendering Existing Notes in exchange
for New Notes, each holder will represent to LHP that: (i)
it is not such an affiliate of LHP, (ii) any New Notes to be
received by it will be acquired in the ordinary course of
business and (iii) at the time of the commencement of the
Exchange Offer it had no arrangement with any person to
participate in a distribution of the New Notes and, if such
holder is not a broker-dealer, it is not engaged in, and
does not intend to engage in, a distribution of New Notes.
If a holder of Existing Notes is unable to make the
foregoing representations, such holder may not rely on the
applicable interpretations of the Staff of the Commission as
set forth in such no-action letters, and must comply with
the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale
transaction.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Each broker-dealer that receives New Notes for its own
account pursuant to the Exchange Offer in exchange for
Existing Notes, where such Existing Notes were acquired by
such broker-dealer as a result of market-making activities
or other activities, must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act
and that it has not entered into any arrangement or
understanding with LHP or an affiliate of LHP to distribute
the New Notes in connection with any resale of such New
Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with
resales of New Notes where such Existing Notes were acquired
by such broker-dealer as a result of market-making
activities or other trading activities. LHP has agreed that,
starting on the Expiration Date, and ending on the close of
business 180 days after the Expiration Date, it will make
this Prospectus available to any such participating
broker-dealer for use in connection with any such resale.
See "Plan of Distribution."
To comply with the securities laws of certain jurisdictions,
it may be necessary to qualify for sale or register the New
Notes prior to offering or selling such New Notes in such
jurisdictions. LHP has agreed, pursuant to the Registration
Rights Agreement and subject to certain specified
limitations therein, to register or qualify the New Notes
for offer or sale under the securities or "blue sky" laws of
such jurisdictions as may be necessary to permit the holders
of New Notes to trade the New Notes without any material
restrictions or limitations under the securities laws of the
several states of the United States.
Consequences of Failure to Upon consummation of the Exchange Offer, subject to certain
Exchange Existing limited exceptions, holders of Existing Notes who do not
Notes.................... exchange their Existing Notes for New Notes in the Exchange
Offer will no longer be entitled to registration rights and
will not be able to offer or sell their Existing Notes,
unless such Existing Notes are subsequently registered under
the Securities Act (which, subject to certain limited
exceptions, the Company will have no obligation to do),
except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state
securities laws. See "The Exchange Offer--Terms of the
Exchange Offer" and "--Consequences of Failure to Exchange."
Expiration Date............ 5:00 p.m., New York City time, on , 1997 (30 days
following the commencement of the Exchange Offer), unless
the Exchange Offer is extended by LHP in its sole
discretion, in which case the term "Expiration Date" means
the latest date and time to which the Exchange Offer is
extended.
Interest on the New The New Notes will accrue interest at a rate of 9 5/8% per
Notes.................... annum from June 30, 1997, the issue date of the Existing
Notes, or from the most recent date to which interest has
been paid or duly provided for on the Existing Notes.
Interest on the New Notes is payable on January 1 and July 1
of each year, commencing on January 1, 1998.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Conditions to the The Exchange Offer is not conditioned upon any minimum
Exchange Offer........... principal amount of Existing Notes being tendered for
exchange. However, the Exchange Offer is subject to certain
customary conditions, which may be waived by LHP. See "The
Exchange Offer--Conditions." Except for the requirements of
applicable federal and state securities laws, there are no
federal or state regulatory requirements to be complied with
by the Company in connection with the Exchange Offer.
Procedures for Tendering Each holder of Existing Notes wishing to accept the Exchange
Existing Notes........... Offer must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in accordance with the
instructions contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or such
facsimile, together with any other required documentation to
the Exchange Agent (as defined herein) at the address set
forth herein and effect a tender of Existing Notes pursuant
to the procedures for book-entry transfer as provided for
herein. See "The Exchange Offer--Procedures for Tendering,"
"--Book Entry Transfer," and
"--Guaranteed Delivery Procedures." Certain other procedures
may apply with respect to certain book-entry transfers. See
"The Exchange Offer--Exchanging Book-Entry Notes."
Guaranteed Delivery Holders of Existing Notes who wish to tender their Existing
Procedures............... Notes and who cannot deliver their Existing Notes and a
properly completed Letter of Transmittal or any other
documents required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date may tender their
Existing Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer--Guaranteed
Delivery Procedures."
Withdrawal Rights.......... Tenders of Existing Notes may be withdrawn to any time prior
to 5:00 p.m., New York City time, on the Expiration Date. To
withdraw a tender of Existing Notes, a written or facsimile
transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein under "The
Exchange Offer--Exchange Agent" prior to 5:00 p.m., New York
City time, on the Expiration Date.
Acceptance of Existing Subject to certain conditions, any and all Existing Notes
Notes and Delivery of that are validly tendered in the Exchange Offer prior to
New Notes................ 5:00 p.m., New York City time, on the Expiration Date will
be accepted for exchange. The New Notes issued pursuant to
the Exchange Offer will be delivered as soon as practicable
following the Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
Certain U.S. Tax The exchange of Existing Notes for New Notes should not
Consequences............. constitute a taxable exchange for U.S. federal income tax
purposes. See "Certain Federal Income Tax Considerations."
Exchange Agent/Trustee..... United States Trust Company of New York, the trustee under
the indenture governing the Notes (the "Trustee") is serving
as exchange agent, (in such capacity the "Exchange Agent"),
in connection with the Exchange Offer.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Fees and Expenses.......... Expenses incident to LHP's consummation of the Exchange
Offer and compliance with the Registration Rights Agreement
will be borne by LHP. See "The Exchange Offer--Fees and
Expenses."
Use of Proceeds............ LHP will not receive any proceeds from the Exchange Offer.
The net proceeds from the sale of the Existing Notes
comprised a portion of the financing for the
Recapitalization and related transactions.
</TABLE>
SUMMARY OF TERMS OF THE NEW NOTES
The Exchange Offer relates to the exchange of up to $85,000,000 aggregate
principal amount of Existing Notes for an equal aggregate principal amount of
New Notes. New Notes will be entitled to the benefits of the same Indenture that
governs the Existing Notes and that will govern the New Notes. The form and
terms of the New Notes are identical in all material respects to the form and
terms of the Existing Notes, except that the New Notes will have been registered
under the Securities Act, and thus will not bear restrictive legends restricting
their transfer pursuant to the Securities Act. See "Description of the New
Notes."
<TABLE>
<S> <C>
Maturity Date.............. July 1, 2007.
Interest Payment Dates..... January 1 and July 1 of each year, commencing January 1,
1998.
Optional Redemption........ The New Notes will be redeemable at the option of LHP, in
whole or in part, at any time on or after July 1, 2002 at
the redemption prices set forth herein, together with
accrued and unpaid interest, if any, to the date of
redemption. In addition, on or prior to July 1, 2000, LHP,
at its option, may redeem in the aggregate up to 30% of the
original principal amount of the Notes at a redemption price
equal to 109 5/8% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of
redemption, with the net cash proceeds of one or more Public
Equity Offerings; PROVIDED, HOWEVER, that at least $60.0
million aggregate principal amount of Notes remains
outstanding immediately after giving effect to such
redemption. See "Description of the New
Notes--Redemption--Optional Redemption."
Ranking.................... The New Notes will be unsecured senior subordinated
obligations of LHP and will be subordinated in right of
payment to all existing and future Senior Debt of LHP,
including borrowings under the New Credit Facility, and will
rank PARI PASSU in right of payment with all other existing
and future senior subordinated indebtedness of LHP.
As of June 30, 1997, after giving effect on a pro forma
basis to the Recapitalization and the financing therefor,
the Company had approximately $164.7 million principal
amount of Senior Debt outstanding and approximately $249.7
million of aggregate indebtedness outstanding (including the
Existing Notes). See "Description of the New
Notes--Subordination."
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Change of Control.......... Upon the occurrence of a Change of Control (as defined
herein), (i) LHP will have the option, prior to July 1,
2002, to redeem all of the Notes, at a redemption price
equal to 100% of the principal amount thereof plus the
Applicable Premium, as of, and accrued and unpaid interest
(if any) to, the date of redemption and (ii) if LHP does not
redeem the Notes, subject to certain conditions, each holder
of Notes will have the right to require LHP to purchase such
holder's Notes at a purchase price equal to 101% of the
principal amount thereof, together with accrued and unpaid
interest, if any, to the date of purchase. See "Description
of the New Notes--Change of Control."
Covenants.................. The Indenture pursuant to which the New Notes will be
issued, contains certain covenants that, among other things,
will limit the ability of LHP and any Restricted Subsidiary
(as defined herein) to (i) incur additional indebtedness,
(ii) issue preferred stock in Restricted Subsidiaries, (iii)
pay dividends or make other distributions, (iv) repurchase
equity interests or subordinated indebtedness, (v) create
certain liens, (vi) enter into certain transactions with
affiliates, (vii) consummate certain asset sales and (viii)
merge or consolidate with any person. See "Description of
the New Notes--Certain Covenants."
Absence of a Public Market The New Notes will be new securities for which there
for currently is no market. Although the Initial Purchasers have
the Notes................ informed LHP that they currently intend to make a market in
the New Notes, they are not obligated to do so, and any such
market making may be discontinued at any time without
notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the New Notes.
The Existing Notes are eligible for trading in the Private
Offerings, Resale and Trading through Automated Linkages
(PORTAL) market. LHP does not intend to apply for listing of
the New Notes on any securities exchange or for quotation
through the National Association of Securities Dealers
Automated Quotation System. See "Plan of Distribution."
</TABLE>
10
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents summary historical financial data derived from
the consolidated financial statements of the Company. The statement of
operations data for the fiscal years ended March 31, 1993, 1994, 1995, 1996, and
1997, except for the unaudited pro forma statement of operations data for the
fiscal year ended March 31, 1997, were derived from the consolidated financial
statements of the Company audited by Ernst & Young LLP, independent auditors,
and included elsewhere herein. The statement of operations data for the three
months ended June 30, 1996 and 1997, and the balance sheet data as of June 30,
1997, except for the unaudited pro forma financial data as of and for the three
months ended June 30, 1997, were derived from the unaudited condensed
consolidated financial statements of the Company included elsewhere herein.
The unaudited pro forma consolidated statement of operations data of the
Company for the year ended March 31, 1997 gives effect to (i) the
Recapitalization with respect to the Company as if it had occurred on April 1,
1996, and (ii) the acquisition of Vita Health on January 30, 1997 as if that
acquisition had occurred on April 1, 1996, based on historical financial
information for Vita Health for the ten months ended January 30, 1997 that was
derived from Vita Health's unaudited financial statements. The unaudited pro
forma consolidated statement of operations data of the Company for the three
months ended June 30, 1997 give effect to the Recapitalization with respect to
the Company as if it had occurred on April 1, 1997. The unaudited pro forma
consolidated balance sheet data of the Company as of June 30, 1997 give effect
to the Recapitalization with respect to the Company assuming that certain
Recapitalization-related transactions that were completed after June 30, 1997
had occurred on June 30, 1997.
The summary unaudited pro forma financial data do not reflect those
Recapitalization-related transactions that only affected Leiner Group. Expenses
of $11.8 million were incurred by Leiner Group in connection with the
Recapitalization, of which $6.1 million represented an adjustment to the amount
received by the Existing Shareholders. See "The Recapitalization." Historically,
the Company has not paid any material recurring expenses on behalf of Leiner
Group, although no assurance can be given that such payments will not be made in
the future. Furthermore, although federal and other consolidated income taxes
are legally payable by Leiner Group, such taxes historically have related to
LHP's operations and accordingly have been paid for by LHP and accounted for in
its consolidated financial statements. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--General-- Recapitalization
Accounting; Financial Statement Presentation; Parent Company."
The summary historical and unaudited pro forma financial data should be read
in conjunction with the historical consolidated financial statements of the
Company and notes thereto, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Unaudited Pro Forma Financial
Information" contained elsewhere in this Prospectus, as well as the information
concerning the Recapitalization (including the sources and uses therefor)
contained in "The Recapitalization." The summary unaudited pro forma financial
data and related notes are provided for informational purposes and do not
necessarily reflect the results of operations or financial position of the
Company that would have actually resulted had the events referred to above or in
the notes to the unaudited pro forma financial information been consummated as
of the date and for the period indicated and are not intended to project the
Company's financial position or results of operations for any future period.
11
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31,
----------------------------------------------------------------------
UNAUDITED
PRO FORMA
1993(1) 1994 1995 1996 1997 1997(2)(7)
----------- --------- --------- --------- --------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales
Vitamins...................................... $ 159.5 $ 217.3 $ 239.6 $ 267.7 $ 321.7 $ 333.7
OTC pharmaceuticals........................... 53.0 67.4 63.1 58.8 61.3 68.6
Other......................................... 18.3 18.9 12.0 11.9 9.8 14.6
----------- --------- --------- --------- --------- -------------
Total net sales................................... 230.8 303.6 314.7 338.4 392.8 416.9
Gross profit...................................... 59.2 77.6 78.1 85.1 104.2 110.5
SG&A.............................................. 48.0 59.5 59.7 62.6 72.7 79.3
Impairment and closure of OTC facility(3)......... -- -- -- 4.7 1.4 1.4
Management reorganization(4)...................... -- -- -- -- 1.0 1.0
Compensation related to stock options(5).......... -- -- -- -- -- --
Management transaction bonuses(5)................. -- -- -- -- -- --
Amortization of goodwill.......................... 1.4 1.6 1.6 1.6 1.5 1.7
Other charges(6).................................. 4.0 2.4 0.5 0.5 0.9 2.0
----------- --------- --------- --------- --------- -------------
Operating income (loss)(7)........................ 5.8 14.1 16.3 15.8 26.7 25.2
Interest expense, net(8).......................... 5.8 7.1 9.0 9.9 8.3 23.4
----------- --------- --------- --------- --------- -------------
Income (loss) before income taxes and
extraordinary item.............................. $ -- $ 7.0 $ 7.3 $ 5.9 $ 18.4 $ 1.8
----------- --------- --------- --------- --------- -------------
----------- --------- --------- --------- --------- -------------
Income (loss) before extraordinary item........... $ (1.0) $ 3.4 $ 3.8 $ 1.2 $ 10.4 $ 0.1
----------- --------- --------- --------- --------- -------------
----------- --------- --------- --------- --------- -------------
<CAPTION>
FOR THE THREE MONTHS
ENDED JUNE 30,
---------------------------------------
(UNAUDITED)
PRO FORMA
1996 1997 1997(7)
--------- --------- -----------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales
Vitamins...................................... $ 56.9 $ 75.6 $ 75.6
OTC pharmaceuticals........................... 11.3 15.1 15.1
Other......................................... 2.4 3.4 3.4
--------- --------- ------
Total net sales................................... 70.6 94.1 94.1
Gross profit...................................... 18.6 22.2 22.2
SG&A.............................................. 15.5 17.5 17.5
Impairment and closure of OTC facility(3)......... -- -- --
Management reorganization(4)...................... 0.2 -- --
Compensation related to stock options(5).......... -- 15.4 --
Management transaction bonuses(5)................. -- 5.1 --
Amortization of goodwill.......................... 0.4 0.4 0.4
Other charges(6).................................. 0.1 0.1 0.4
--------- --------- ------
Operating income (loss)(7)........................ 2.4 (16.4) 3.9
Interest expense, net(8).......................... 2.2 1.8 5.8
--------- --------- ------
Income (loss) before income taxes and
extraordinary item.............................. $ 0.2 $ (18.2) $ (1.9)
--------- --------- ------
--------- --------- ------
Income (loss) before extraordinary item........... $ 0.1 $ (11.1) $ (1.3)
--------- --------- ------
--------- --------- ------
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
------------------------
<S> <C> <C>
UNAUDITED
<CAPTION>
ACTUAL PRO FORMA
----------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.......................................................................... $ 74.5 $ 87.8
Total assets............................................................................. 293.4 293.4
Total debt............................................................................... 239.6 249.7
Minority interest in subsidiary.......................................................... 4.7 1.0
Total common shareholder's deficit....................................................... (45.0) (38.2)
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FISCAL YEARS ENDED MARCH 31, ENDED JUNE 30,
-------------------------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UNAUDITED (UNAUDITED)
PRO FORMA
1993(1) 1994 1995 1996 1997 1997(2)(7) 1996 1997
----------- --------- --------- --------- --------- ----------- --------- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Gross margin.................... 25.6% 25.6% 24.8% 25.2% 26.5% 26.5% 26.3% 23.6%
Adjusted operating income(7).... $ 9.4 $ 16.2 $ 16.5 $ 20.6 $ 29.6 $ 29.3 $ 2.6 $ 4.1
Adjusted operating income
margin(7)..................... 4.1% 5.3% 5.2% 6.1% 7.5% 7.0% 3.7% 4.4%
EBITDA(7)(9).................... $ 14.0 $ 23.4 $ 27.0 $ 32.9 $ 42.0 $ 41.0 $ 5.5 $ 7.2
EBITDA margin(7)(9)............. 6.1% 7.7% 8.6% 9.7% 10.7% 9.8% 7.8% 7.7%
Depreciation and
amortization(10).............. $ 4.6 $ 7.2 $ 10.5 $ 12.3 $ 12.3 $ 12.9 $ 2.9 $ 3.1
Capital expenditures............ 3.3 15.0 16.7 3.5 3.5 3.8 0.6 1.3
Cash flows from operating
activities.................... 1.9 (17.1) 13.1 12.7 23.2 NA 0.5 4.6
Cash flows from investing
activities.................... (21.9) (18.3) (21.9) (8.8) (10.2) NA (0.9) (4.4)
Cash flows from financing
activities.................... 19.6 36.9 7.3 (2.5) (12.1) NA 0.5 0.4
Ratio of total debt to
EBITDA(7)(9)(11).............. 5.4x 4.2x 4.0x 3.2x 2.5x 6.1x -- --
Ratio of EBITDA to interest
expense(7)(9)................. 2.4 3.3 3.1 3.4 5.2 1.9 2.6 4.2
Ratio of Earnings to Fixed
Charges(12)................... 1.0 1.8 1.7 1.5 2.9 1.1 1.1 (7.2)
<CAPTION>
<S> <C>
PRO FORMA
1997(7)
---------------
<S> <C>
OTHER DATA:
Gross margin.................... 23.6%
Adjusted operating income(7).... $ 3.9
Adjusted operating income
margin(7)..................... 4.1%
EBITDA(7)(9).................... $ 7.0
EBITDA margin(7)(9)............. 7.4%
Depreciation and
amortization(10).............. $ 3.1
Capital expenditures............ 1.3
Cash flows from operating
activities.................... NA
Cash flows from investing
activities.................... NA
Cash flows from financing
activities.................... NA
Ratio of total debt to
EBITDA(7)(9)(11).............. --
Ratio of EBITDA to interest
expense(7)(9)................. 1.3
Ratio of Earnings to Fixed
Charges(12)................... 0.7
</TABLE>
12
<PAGE>
- ------------------------
(1) The May 1992 acquisitions by Leiner Group of LHP and XCEL Laboratories, Inc.
("XCEL"), an OTC pharmaceuticals manufacturer, were accounted for under the
purchase method of accounting and new bases of accounting were established
at the time of each such acquisition. See "The Company--History."
Accordingly, the statement of operations data for the fiscal year ended
March 31, 1993 represent the results of operations of the Company, the
results of operations for XCEL from the date of its acquisition, and
purchase accounting for the acquisitions of LHP and XCEL during that fiscal
year.
(2) On January 30, 1997, the Company purchased Vita Health. This column gives
effect to the acquisition of Vita Health, as well as the Recapitalization
and related transactions with respect to the Company. See "Unaudited Pro
Forma Financial Information." The Vita Health acquisition was accounted for
under the purchase method of accounting. Consequently, the results of
operations of Vita Health were included in the consolidated financial
results of the Company for the two months ended March 31, 1997. The pro
forma data shown for fiscal 1997 includes the operating results of Vita
Health for the additional ten months ended January 30, 1997.
(3) During fiscal 1996, the Company decided to significantly reduce the size of
its OTC liquid pharmaceuticals manufacturing business. Accordingly, the
Company determined that certain long-lived assets with a carrying amount of
$8.3 million were impaired and wrote them down by $4.7 million to their
estimated fair value. During fiscal 1997, the Company closed the
manufacturing facility and out-sourced the production to a third party. The
costs incurred of $1.4 million include (i) the write-off of fixed assets of
$0.8 million and (ii) closure costs including salaries in conjunction with
the facility closing of $0.6 million. The expense does not include an
additional charge to cost of sales of $0.5 million for the write-off of
certain liquid OTC inventory which was no longer being manufactured by the
Company.
(4) During fiscal 1997, the Company reorganized the management team. Expenses of
$1.0 million include severance expense for the previous Chief Financial
Officer, Vice President of Product Development and Vice President of
Corporate Development and include the hiring and relocation expenses for the
new Chief Financial Officer and other corporate officers.
(5) Represents the elimination of non-recurring charges relating to the
Recapitalization, consisting of (x) a compensation charge incurred by the
Company for the in-the-money value of existing stock options of $15.4
million which were (i) converted into an equivalent value of Equity Rights
at the date of the Recapitalization, (ii) paid out in cash, or (iii)
exercised for common stock (or a combination thereof), and (y) $5.1 million
in transaction bonuses which were paid to members of the Company's
management subsequent to the Recapitalization. These non-recurring charges
contributed significantly to the Company's operating loss of $16.4 million
for the three months ended June 30, 1997. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Results of
Operation--First Quarter Fiscal 1998 Compared to First Quarter Fiscal 1997."
(6) Other charges for the fiscal years ended March 31, 1993 through March 31,
1997 and the three months ended June 30, 1996 and June 30, 1997 include
management fees paid to AEA that were discontinued upon consummation of the
Recapitalization. Other charges also include costs related to the original
acquisition of Leiner by the AEA Group and compensation expense arising from
the sale of shares of Common Stock to management in connection with the
acquisition of Leiner by the AEA Group in the fiscal year ended March 31,
1993, the write-off of deferred charges associated with the refinancing of
the Company's revolving credit facility in the fiscal year ended March 31,
1994 and expenses incurred in connection with the withdrawn initial public
offering in the fiscal year ended March 31, 1997. Other charges also
include, in the fiscal years ended March 31, 1994 through March 31, 1997,
non-cash compensation expense arising from the granting of stock options.
Other charges in the fiscal year ended March 31, 1995 do not include $0.5
million in other charges incurred by Leiner Group in connection with its
withdrawn initial public offering in that fiscal year, which are reflected
in the consolidated financial statements of Leiner Group. Other charges for
the three months ended June 30, 1997 do not include non-recurring charges
incurred in connection with the Recapitalization for transaction fees and
expenses of $11.9 million which have been deferred and will be amortized
over subsequent periods, not to exceed 10 years, stock option compensation
expense of $15.7 million (including related employers payroll taxes) and
management bonuses of $5.2 million (including related employer payroll
taxes).
(7) Historical adjusted operating income, adjusted operating income margin,
EBITDA and EBITDA margin exclude expenses that are not expected to be
continued, consisting of (i) expenses related to the impairment and closure
of the OTC liquid pharmaceuticals manufacturing facility in fiscal 1996 and
1997 (see Note 3), (ii) the reorganization of the management team in fiscal
1997 (see Note 4) and (iii) (except for the management fees of $0.35 million
per year paid to AEA until the agreement was terminated on June 30, 1997,
which are included), other charges for the fiscal years ended March 31, 1993
through March 31, 1997 and the three months ended June 30, 1996 and June 30,
1997 (see Note 6). Unaudited pro forma statement of operations data for
fiscal 1997 and the three months ended June 30, 1997 include the pro rata
portion of an annual management fee of $1.5 million payable to North Castle
Partners, L.L.C., an affiliate of North Castle, following the
Recapitalization and excludes the annual management fee of AEA. See "Certain
Transactions."
(8) Net interest expense in the fiscal year ended March 31, 1994 does not
reflect $0.1 million in interest income received by Leiner Group in that
year, which is reflected in the consolidated financial statements of Leiner
Group.
(9) For purposes of calculating the ratio of EBITDA to interest expense,
interest expense excludes the amortization of deferred financing fees, which
is included in interest expense in the income statement in the consolidated
financial statements.
13
<PAGE>
"EBITDA," as presented, represents earnings before interest expense, income
taxes, depreciation and amortization and extraordinary item, and also
excludes certain nonrecurring charges relating to the Recapitalization (see
Note 5) and certain historical expenses that are not expected to be
continued (see Note 7) and is calculated as follows (in thousands):
<TABLE>
<CAPTION>
FOR THREE MONTHS
ENDED
FISCAL YEARS ENDED MARCH 31, JUNE 30,
------------------------------------------------------------------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UNAUDITED
<CAPTION>
UNAUDITED
PRO
FORMA
1993 1994 1995 1996 1997 1997 1996 1997
--------- --------- --------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss)....................... $ (1,033) $ 3,417 $ 3,813 $ 1,166 $ 7,638 $ (2,626) $ 119 $ (12,183)
Add back:
Interest expense, net................. 5,791 7,144 9,010 9,924 8,281 23,368 2,152 1,800
Income taxes.......................... 999 3,573 3,524 4,686 8,028 1,669 92 (7,105)
Depreciation and amortization......... 4,586 7,247 10,514 12,288 12,309 12,862 2,867 3,066
Extraordinary item.................... -- -- -- -- 2,756 2,756 -- 1,109
Non-recurring charges:
Impairment and closure of
facility............................ -- -- -- 4,730 1,416 1,416 -- --
Management reorganization........... -- -- -- -- 1,000 1,000 187 --
Compensation related to stock
options........................... -- -- -- -- -- -- -- 15,431
Management transaction bonuses...... -- -- -- -- -- -- -- 5,125
Other charges......................... 3,631 2,017 132 132 528 528 33 --
--------- --------- --------- --------- --------- ----------- --------- ---------
Subtotal................................ 15,007 19,981 23,180 31,760 34,318 43,599 5,331 19,426
--------- --------- --------- --------- --------- ----------- --------- ---------
EBITDA.................................. $ 13,974 $ 23,398 $ 26,993 $ 32,926 $ 41,956 $ 40,973 $ 5,450 $ 7,243
--------- --------- --------- --------- --------- ----------- --------- ---------
--------- --------- --------- --------- --------- ----------- --------- ---------
<CAPTION>
<S> <C>
PRO
FORMA
1997
---------
<S> <C>
Net income (loss)....................... $ (2,431)
Add back:
Interest expense, net................. 5,816
Income taxes.......................... (604)
Depreciation and amortization......... 3,066
Extraordinary item.................... 1,109
Non-recurring charges:
Impairment and closure of
facility............................ --
Management reorganization........... --
Compensation related to stock
options........................... --
Management transaction bonuses...... --
Other charges......................... --
---------
Subtotal................................ 9,387
---------
EBITDA.................................. $ 6,956
---------
---------
</TABLE>
EBITDA for Pro Forma Fiscal 1997 was $43.4 million, excluding certain
discontinued bonuses paid to former owners of Vita Health of $2.4 million.
EBITDA is included because management understands that such information is
considered by certain investors to be an additional basis for evaluating the
Company's ability to pay interest, repay debt and make capital expenditures.
EBITDA should not be considered an alternative to measures of operating
performance as determined in accordance with generally accepted accounting
principles, including net income as a measure of the Company's operating
results and cash flows as a measure of the Company's liquidity. Because
EBITDA is not calculated identically by all companies, the presentation
herein may not be comparable to other similarly titled measures of other
companies.
(10) Depreciation and amortization as presented does not include the
amortization of deferred financing fees. In the cash flow statement in the
consolidated financial statements, the amortization of deferred financing
fees is included in depreciation and amortization.
(11) The ratio of total debt to EBITDA is not presented for interim periods
because it is not meaningful.
(12) In calculating the ratio of earnings to fixed charges, earnings consist of
income before taxes plus fixed charges. Fixed charges consist of interest
expense and amortization of deferred financing fees, whether capitalized or
expensed, plus one-third of rental expense under operating leases (the
portion that has been deemed by the Company to be representative of an
interest factor).
RISK FACTORS
Prospective investors should carefully consider the matters set forth under
"Risk Factors," beginning on page 14, in evaluating an investment in the Notes.
14
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, BEFORE TENDERING
THEIR EXISTING NOTES FOR NEW NOTES, HOLDERS OF EXISTING NOTES SHOULD CONSIDER
CAREFULLY THE FOLLOWING FACTORS, WHICH ARE GENERALLY APPLICABLE TO THE EXISTING
NOTES AND THE NEW NOTES.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
As a result of the Recapitalization, the Company is highly leveraged, with
indebtedness that is very substantial in relation to its shareholder's equity.
After giving pro forma effect to the Recapitalization, as of June 30, 1997, the
Company's aggregate outstanding indebtedness was $249.7 million and the
Company's shareholder's equity reflected a deficit of $38.2 million. The New
Credit Facility and the Indenture will permit the Company to incur or guarantee
certain additional indebtedness, subject to certain limitations. The Company
will be required to repay the $85.0 million in term loans under the New Credit
Facility over the eight and one-half year period following June 30, 1997, with
scheduled principal payments of $850,000 annually for the first six years, $27.4
million in the seventh year, $39.3 million in the eighth year, and $13.2 million
in the final six months. All outstanding revolving credit borrowings under the
New Credit Facility will become due on June 30, 2003. The Company expects that
its working capital needs will require it to obtain replacement revolving credit
facilities at that time. See "Selected Historical and Pro Forma Financial
Information," "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources," "Description of New
Credit Facility" and "Description of the New Notes."
The Company's high degree of leverage could have important consequences to
holders of Notes, including but not limited to the following: (i) the Company's
ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired in the
future; (ii) a substantial portion of the Company's cash flow from operations
must be dedicated to the payment of principal and interest on its indebtedness,
thereby reducing the funds available to the Company for its operations and other
purposes, including investments in research and development and capital
spending; (iii) the Company may be substantially more leveraged than certain of
its competitors, which may place the Company at a competitive disadvantage; (iv)
the Company may be hindered in its ability to adjust rapidly to changing market
conditions; and (v) the Company's substantial degree of leverage could make it
more vulnerable in the event of a downturn in general economic conditions or its
business or changing market conditions and regulations.
The Company's ability to repay or to refinance its obligations with respect
to its indebtedness will depend on its future financial and operating
performance, which, in turn, will be subject to prevailing economic and
competitive conditions and to certain financial, business, legislative,
regulatory and other factors, many of which are beyond the Company's control.
These factors could include operating difficulties, increased operating costs,
product pricing pressures, the response of competitors, regulatory developments,
and delays in implementing strategic projects. The Company's ability to meet its
debt service and other obligations may depend in significant part on the extent
to which the Company can implement successfully its business strategy. There can
be no assurance that the Company will be able to implement its strategy fully or
that the anticipated results of its strategy will be realized. See
"Business--Business Strategy."
If the Company's cash flow and capital resources are insufficient to fund
its debt service obligations, the Company may be forced to reduce or delay
capital expenditures, sell assets, or seek to obtain additional equity capital,
or to refinance or restructure its debt. There can be no assurance that the
Company's cash flow and capital resources will be sufficient for the payment of
principal of, and premium, if any, and interest on, its indebtedness in the
future, or that any such alternative measures would be successful or would
permit the Company to meet its scheduled debt service obligations. In addition,
because the Company's obligations under the New Credit Facility will bear
interest at floating rates, an
15
<PAGE>
increase in interest rates could adversely affect, among other things, the
Company's ability to meet its debt service obligations. The Company entered into
an interest protection arrangement effective July 30, 1997 for a period of three
years with respect to $29.4 million of its indebtedness under the New Credit
Facility that provides a cap of 6.17% on the interest rates payable thereon. See
"Description of New Credit Facility."
SUBORDINATION OF NEW NOTES
The New Notes will be unsecured, senior subordinated obligations of LHP, and
as such, will be subordinated in right of payment to all existing and future
Senior Debt of LHP, including indebtedness of LHP under the New Credit Facility
and LHP's guarantee of indebtedness of Vita Health under the New Credit
Facility. The New Notes will rank PARI PASSU with all senior subordinated
indebtedness of LHP, if any, and will rank senior to all subordinated
indebtedness of LHP, if any. The New Notes will also be effectively subordinated
to all secured indebtedness of LHP to the extent of the value of the assets
securing such indebtedness, and to all existing and future obligations and
liabilities of LHP's subsidiaries. The obligations of LHP under the New Credit
Facility are secured by substantially all of the assets of LHP and any future
U.S. subsidiary of LHP and a pledge of the capital stock of LHP and any such
subsidiary and 65% of the capital stock of any direct foreign subsidiary of LHP.
The obligations of Vita Health under the New Credit Facility are additionally
secured by substantially all of the assets of Vita Health and its Canadian
parents and subsidiaries. As of June 30, 1997, after giving pro forma effect to
the Recapitalization, the aggregate principal amount of Senior Debt that
effectively ranked senior to the Notes was approximately $164.7 million.
In the event of bankruptcy, liquidation, dissolution, reorganization or any
similar proceeding regarding LHP, or any default in payment or acceleration of
any debt thereof, the assets of LHP will be available to pay obligations on the
New Notes (and any Existing Notes that are not exchanged) only after the Senior
Debt of LHP has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on all or any of such Notes. See "Description of
the New Notes-- Subordination."
RESTRICTIVE FINANCING COVENANTS
The New Credit Facility contains a number of covenants that significantly
restrict the operations of the Company. In addition, the Company is required to
comply with specified financial ratios and tests, including minimum net worth
requirements, maximum leverage ratios, minimum fixed charge coverage ratios and
minimum EBITDA to cash interest expense ratios, and certain of these ratios and
tests may be more restrictive in future years. There can be no assurance that
the Company will be able to comply with such covenants or restrictions in the
future. The Company's ability to comply with such covenants and other
restrictions may be affected by events beyond its control, including prevailing
economic, financial and industry conditions. The breach of any such covenants or
restrictions could result in a default under the New Credit Facility that would
permit the lenders thereunder to declare all amounts outstanding thereunder to
be immediately due and payable, together with accrued and unpaid interest, and
terminate their commitments to make further extensions of credit thereunder, and
the Company could be prohibited from making any payments on the New Notes. See
"Description of New Credit Facility." In addition, the Indenture contains a
number of restrictive covenants relating to the Company. These covenants,
however, are subject to a number of exceptions and limitations, and may not
afford holders of the New Notes with protection in the event of a
highly-leveraged transaction, reorganization, restructuring, merger or similar
transaction involving the Company that may adversely affect holders of the
Notes.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined in the Indenture),
the Company will be required to make an offer to purchase all of the outstanding
Notes at a price equal to 101% of the principal amount thereof at the date of
purchase plus accrued and unpaid interest, if any, to the date of
16
<PAGE>
purchase. The occurrence of certain of the events that would constitute a Change
of Control under the Indenture would constitute a default under the New Credit
Facility and might constitute a default under other indebtedness of the Company.
In addition, the New Credit Facility prohibits the purchase of the Notes in the
event of a Change of Control, unless and until such time as the indebtedness
under the New Credit Facility is repaid in full. The Company's failure to
purchase the Notes in such instance would result in a default under each of the
Indenture and the New Credit Facility. The inability to repay the indebtedness
under the New Credit Facility, if accelerated, could have material adverse
consequences to the Company and to the holders of the Notes. Future indebtedness
of the Company may also contain prohibitions of certain events or transactions
that could constitute a Change of Control or require such indebtedness to be
repurchased upon a Change of Control. In the event of a Change of Control, there
can be no assurance that the Company would have sufficient assets to satisfy all
of its obligations under the New Credit Facility and the Notes. See "Description
of New Credit Facility" and "Description of the New Notes--Change of Control."
FRAUDULENT TRANSFER CONSIDERATIONS
The incurrence of indebtedness by the Company, such as the Notes, may be
subject to review under federal bankruptcy law or relevant state fraudulent
conveyance laws if a bankruptcy case or lawsuit is commenced by or on behalf of
unpaid creditors of the Company. Under these laws, if, in a bankruptcy or
reorganization case or a lawsuit by or on behalf of unpaid creditors of the
Company, a court were to find that, at the time the Company incurred
indebtedness, including indebtedness under the Notes, (i) the Company incurred
such indebtedness with the intent of hindering, delaying or defrauding current
or future creditors or (ii) (a) the Company received less than reasonably
equivalent value or fair consideration for incurring such indebtedness and (b)
the Company (1) was insolvent or was rendered insolvent by reason of any of the
transactions, (2) was engaged, or about to engage, in a business or transaction
for which its assets constituted unreasonably small capital, (3) intended to
incur, or believed that it would incur, debts beyond its ability to pay as such
debts matured (as all of the foregoing terms are defined in or interpreted under
the relevant fraudulent transfer or conveyance statutes) or (4) was a defendant
in an action for money damages, or had a judgment for money damages docketed
against it (if, in either case, after final judgment the judgment is
unsatisfied), then such court could avoid or subordinate the amounts owing under
the Notes to presently existing and future indebtedness of the Company and take
other actions detrimental to the holders of the Notes.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law of the jurisdiction that is being applied in any
such proceeding. Generally, however, the Company would be considered insolvent
if, at the time it incurred the indebtedness, either (i) the sum of its debts
(including contingent liabilities) is greater than its assets, at a fair
valuation, or (ii) the present fair saleable value of its assets is less than
the amount required to pay the probable liability on its total existing debts
and liabilities (including contingent liabilities) as they become absolute and
matured. There can be no assurance as to what standards a court would use to
determine whether the Company was solvent at the relevant time, or whether,
whatever standard was used, the Notes would not be avoided or further
subordinated on another of the grounds set forth above. In rendering their
opinions in connection with the initial financing of the Recapitalization,
counsel for the Company and counsel for the lenders did not express any opinion
as to the applicability of federal or state fraudulent transfer and conveyance
laws.
The Company believes that at the time the indebtedness constituting the
Existing Notes was incurred initially by the Company, the Company (i) was (a)
neither insolvent nor rendered insolvent thereby, (b) in possession of
sufficient capital to run its businesses effectively and (c) incurring debts
within its ability to pay as the same matured or became due, and (ii) had
sufficient assets to satisfy any probable money judgment against it in any
pending action. The Company also believes that at the time it initially will
incur indebtedness constituting the New Notes that the Company (i) will be (a)
neither insolvent nor rendered insolvent thereby, (b) in possession of
sufficient capital to run its businesses effectively and (c) incurring
17
<PAGE>
debts within its ability to pay as the same mature or become due and (ii) will
have sufficient assets to satisfy any probable money judgment against it in any
pending action. In reaching the foregoing conclusions, the Company has relied
upon its analyses of internal cash flow projections and estimated values of
assets and liabilities of the Company. There can be no assurance, however, that
a court passing on such questions would reach the same conclusions.
CONTROL OF THE COMPANY
North Castle holds approximately 74% of the issued and outstanding Group
Common Stock on a fully diluted basis. Pursuant to the terms of the Leiner Group
Stockholders Agreement, dated as of June 30, 1997 (the "Stockholders
Agreement"), and entered among Leiner Group, North Castle, AEA Group, and
certain other shareholders represented by AEA Group in connection with the
Recapitalization, the AEA Group has the power to elect one member of Leiner
Group's Board of Directors and North Castle has the power to elect the remaining
directors of Leiner Group, and through Leiner Group, all the directors of LHP.
Accordingly, North Castle controls the Company and has the power to appoint new
management and approve any action requiring the approval of the holders of Group
Common Stock, including adopting amendments to Leiner Group's certificate of
incorporation and approving mergers or sales of substantially all of the
Company's assets. There can be no assurance that the interests of North Castle
will not conflict with the interests of the holders of the Notes. Under North
Castle's operating agreement, Mr. Baird has authority and discretion over the
business, affairs and operations of North Castle. See "Management" and "Certain
Transactions."
EFFECT OF RESEARCH AND PUBLICITY ON VITAMIN PRODUCT BUSINESS
The Company believes the growth experienced in the last several years by the
vitamin product business is based largely on national media attention regarding
recent scientific research suggesting potential health benefits from regular
consumption of certain vitamin products. Various studies published since 1992 by
researchers at major universities have suggested an association between regular
consumption of antioxidant supplements such as vitamins E and C and selenium and
a reduced risk of certain diseases and including heart disease, cancer and
Alzheimer's disease. In addition, certain other studies have reported that
consumption of folic acid (a B vitamin) can aid prevention of heart disease and
neural tube birth defects. Such research has been described in major medical
journals, magazines, newspapers and television programs. However, certain recent
studies relating to certain antioxidants have produced results contrary to the
favorable indications of other prior and subsequent studies. The scientific
research to date with respect to antioxidants and certain other of the Company's
products, including Dehydroepiandrosterone ("DHEA") is not conclusive, and there
can be no assurance of future favorable scientific results and media attention,
or the absence of unfavorable or inconsistent findings. In the event of future
unfavorable scientific results or media attention, the Company's sales of
vitamin products could be materially adversely affected.
POTENTIAL FOR INCREASED GOVERNMENT REGULATION
The manufacturing, processing, formulation, packaging, labeling, advertising
and sale of the Company's products are subject to regulation by one or more
United States and Canadian federal agencies, including the United States Food
and Drug Administration (the "FDA"), the United States Federal Trade Commission
(the "FTC"), the United States Consumer Product Safety Commission (the "CPSC")
and Health Canada. The Company's activities are also regulated by various
agencies of the states, provinces, localities and countries in which the
Company's products are sold. In addition, the Company manufactures and markets
certain of its products in compliance with the guidelines promulgated by
voluntary standard organizations, such as the USP.
The Dietary Supplement Health and Education Act of 1994 ("DSHEA") was
enacted on October 25, 1994. DSHEA amended the Federal Food, Drug, and Cosmetic
Act to (i) define dietary supplements,
18
<PAGE>
(ii) expand with certain limitations the number of products that can be marketed
as dietary supplements, (iii) permit "structure/function" statements for all
vitamin products, including herbal products and other nutritional supplements,
and (iv) permit the use of published literature in the sale of vitamin products.
The FDA has proposed, but not yet promulgated, regulations to implement the
labeling requirements of DSHEA. Since its adoption, certain aspects of DSHEA
have been subject to criticism as a result of the increased distribution of
certain products that have been linked to harmful effects, including death. A
possible effect of such criticism may be that regulations, when promulgated by
the FDA, may significantly limit certain provisions of DSHEA beneficial to the
Company. The Company cannot determine what effect regulations promulgated to
implement DSHEA will have on its business in the future. Such regulations are
likely, among other things, to require expanded or different labeling and could
require expanded documentation of the properties of certain products and
scientific substantiation regarding ingredients, product claims or safety. The
Company believes that it is in material compliance with all applicable laws.
In Canada, the Company's products are subject to government regulation under
the Food and Drug Act and the regulations thereunder (the "Canadian Act") which
require regulatory approvals of such products through a drug identification
number ("DIN") or general proprietary number ("GP") by Health Canada. The loss
of a particular DIN or GP would adversely affect the ability to continue to sell
the particular product to which it was assigned. Material noncompliance with the
provisions of the Canadian Act may result in the loss of a DIN or GP or the
seizure and forfeiture of products which are sold in noncompliance with the
Canadian Act. The Company is currently seeking regulatory approvals for certain
of its products. There can be no assurance that such regulatory approvals will
be received and receipt of such approvals may be subject to significant delays.
Certain of the Company's products are subject to government regulation under
the Canadian Controlled Drugs and Substances Act and the regulations thereunder
(the "CDSA") which includes requirements for licenses of the factory, approved
security, a qualified person in charge of the factory and detailed record
keeping in connection with the manufacturing of controlled substances. The loss
of a license or the failure to meet any of these requirements would adversely
affect the ability to continue to manufacture and to sell products containing
controlled substances.
In response to the Canadian government's concern that a growing number of
unlabeled and incorrectly labeled herbal products are for sale to the Canadian
public which should have, but have not, received regulatory approval, a panel
has been established to review the regulatory framework for herbal products. The
Canadian government may implement new or amended requirements. There is, in
addition, the risk of stricter government enforcement of existing requirements
for herbal products. This may result in additional costs to the Company, delay
the entry of some products into the market or adversely affect sales of herbal
products.
In addition, the Company cannot predict whether new legislation or
regulation governing the Company's activities will be enacted by legislative
bodies or promulgated by agencies regulating the Company's activities, or what
the effect of any such legislation or regulation on the Company's business would
be. There can be no assurance that new legislation or regulation, including
changes to existing laws and regulations, will not materially adversely affect
the Company's results of operations or business.
RELIANCE ON CERTAIN CUSTOMERS AND CERTAIN PRODUCTS
The Company has approximately 200 active U.S. customers. In fiscal 1997,
Wal-Mart Stores, Inc. and Walgreen Co. accounted for approximately 27% and 12%,
respectively, of the Company's sales. Each of the Company's other major
customers accounted for less than 10% of the Company's sales for fiscal 1997.
The Company's top ten customers in the aggregate accounted for approximately 71%
of the Company's sales for fiscal 1997. Sales of vitamins C and E, in the
aggregate, accounted for approximately 34% of the Company's sales in fiscal 1997
(excluding sales by Vita Health). If one or more of the Company's major
19
<PAGE>
customers substantially reduced their volume of purchases from the Company, or
if sales of vitamin C or E were substantially reduced, the Company's results of
operations could be materially adversely affected.
DISRUPTION OF OPERATIONS
Beginning in fiscal 1994, the Company implemented a major facilities
consolidation, capacity expansion and equipment modernization program with
respect to its western U.S. facilities, whereby the Company consolidated its
western U.S. facilities into a smaller number of larger units with modern
equipment and expanded capacity for the purpose of realizing certain cost
savings and manufacturing efficiencies. The Company believes further cost
reduction opportunities exist with respect to its eastern U.S. facilities and
plans to consolidate its three existing eastern U.S. packaging and distribution
facilities into a new facility in York County, South Carolina, an area just
south of Charlotte, North Carolina. While the Company believes that this program
will reduce the Company's manufacturing and distribution costs, there can be no
assurance that the expected cost reductions will be realized or that this
program will result in improved profit margins. A significant, unexpected
disruption during the expansion of this program to the Company's eastern U.S.
facilities could have a material adverse effect on the Company's results of
operations.
POTENTIAL FOR INCREASED COMPETITION
The market for the Company's products is highly competitive. The Company
competes with other vitamin product and OTC pharmaceuticals manufacturers. Among
other factors, competition among these manufacturers is based upon price. If one
or more manufacturers significantly reduce their prices in an effort to gain
market share, the Company's results of operations or market position could be
adversely affected. Certain of the Company's competitors, particularly
manufacturers of nationally advertised brand name products, are larger and have
resources substantially greater than those of the Company, and are less
leveraged than the Company will be following the Recapitalization. In the
future, one or more of these companies could seek to compete more directly with
the Company by manufacturing private label products or by significantly lowering
the prices of their national brand products.
The Company sells substantially all of its vitamin products to mass market
retailers. Although the Company does not currently participate significantly in
other channels such as health food stores, direct mail and direct sales, the
Company's products may face competition from such alternative channels as more
customers utilize these channels of distribution to obtain vitamin products.
RELIANCE ON CERTAIN SUPPLIERS; AVAILABILITY AND COST OF PURCHASED MATERIALS
The Company purchases from third party suppliers certain important
ingredients and products that the Company cannot manufacture. Although the
Company currently has supply arrangements with several suppliers of these
ingredients and products, and the Company's purchased materials are generally
available from numerous sources, an unexpected interruption of supply could
materially adversely affect the Company's results of operations. Two suppliers
provided approximately 31% of the materials purchased during fiscal 1997 by the
Company (excluding purchases by Vita Health), and a loss of either of these
suppliers could materially adversely affect the Company. No other single
supplier accounts for more than 10% of the Company's material purchases.
Increased demand for certain products can occasionally exceed the existing
supply of certain important ingredients and components that the Company does not
manufacture. The Company generally receives adequate notice of any potential
disruption in the supply of such ingredients and components to ensure sufficient
time to procure alternative sources. As a result, the Company has been able to
manage the supply of such ingredients and components. However, an interruption
in supply of such ingredients and components that the Company is unable to
remedy, could result in the Company's inability to deliver its products on a
timely basis, which, in turn, could adversely affect its operations.
20
<PAGE>
The Company has not always in the past been, and may not in the future
always be, able to raise prices quickly enough to fully offset the effects of
increased purchased material costs.
POSSIBILITY OF TRADE DRESS CLAIMS
The Company's packaging of certain of its branded products identifies
nationally branded products to which the Company's products are comparable.
Although the Company designs its packaging to avoid infringing upon any
proprietary rights of national brand marketers and is not currently the subject
of any legal actions regarding infringement, there can be no assurance that the
Company will not be subject to such legal actions in the future.
EXPOSURE TO PRODUCT LIABILITY CLAIMS
The Company, like other retailers, distributors and manufacturers of
products that are ingested, faces an inherent risk of exposure to product
liability claims in the event that, among other things, the use of its products
results in injury. With respect to product liability coverage, the Company
currently has an aggregate of $57.0 million of insurance coverage, including
primary product liability and umbrella liability coverage with deductibles of
(i) in the case of OTC pharmaceuticals, $0.25 million per claim, subject to an
annual aggregate deductible limit of $0.75 million and (ii) in the case of
vitamins and all other products, $0.25 million per claim, subject to an annual,
aggregate deductible limit of $0.75 million. There can be no assurance that
product liability insurance will continue to be available at an economically
reasonable cost or that the Company's insurance will be adequate to cover
liability the Company incurs in respect of product liability claims.
RELIANCE ON KEY MANAGEMENT
The operation of the Company requires managerial and operational expertise.
LHP does not have employment contracts with any of its executive officers. LHP
has entered severance benefit agreements with certain members of LHP's senior
management. See "Management--Severance Arrangements." If, for any reason, key
personnel do not continue to be active in LHP's management, operations could be
adversely affected.
ACQUISITION RELATED RISKS
Part of the Company's business strategy has been and will continue to be to
acquire other businesses that will complement its existing business. Management
is unable to predict whether or when any prospective acquisition candidates will
become available or the likelihood of a material transaction being completed
should any negotiations commence. The Company's ability to finance acquisitions
may be constrained by, among other things, its high degree of leverage. The New
Credit Facility and the Indenture may significantly limit the Company's ability
to make acquisitions and to incur indebtedness in connection with acquisitions.
In addition, acquisitions that the Company may make or in which the Company may
enter will involve risks, including the successful integration and management of
acquired technology, operations and personnel. The integration of acquired
businesses may also lead to the loss of key employees of the acquired companies
and diversion of management attention from ongoing business concerns. There can
be no assurance that any acquisition will be made, that the Company will be able
to obtain additional financing needed to finance such transactions and, if any
acquisitions are so made or formed, that they will be successful.
RISKS ASSOCIATED WITH INTERNATIONAL MARKETS
The Company's continued growth is dependent in part upon its ability to
expand its operations into new markets, including international markets. The
Company may experience difficulty entering new international markets due to
greater regulatory barriers, the necessity of adapting to new regulatory
21
<PAGE>
systems and problems related to entering new markets with different cultural
bases and political systems. Operating in international markets exposes the
Company to certain risks, including, among other things, (i) changes in or
interpretations of foreign import, currency transfer and other restrictions and
regulations that among other things may limit the Company's ability to sell
certain products or repatriate profits to the United States, (ii) exposure to
currency fluctuations, particularly in light of the Company's substantial
interest payment obligations, which must be paid in United States and Canadian
dollars, (iii) the potential imposition of trade or foreign exchange
restrictions or increased tariffs and (iv) economic and political instability.
As the Company continues to expand its international operations, these and other
risks associated with international operations are likely to increase.
ABSENCE OF PUBLIC MARKET
The Existing Notes are eligible for trading through the PORTAL market. The
New Notes are new securities for which there presently is no established market
and none may develop. Although the Initial Purchasers have informed the Company
that they currently intend to make a market in the New Notes, the Initial
Purchasers are not obligated to do so and any such market making may be
discontinued at any time without notice, at the sole discretion of the Initial
Purchasers. In addition, such market making activity may be limited during the
pendency of the Exchange Offer or the effectiveness of a shelf registration
statement in lieu thereof. Accordingly, there can be no assurance as to the
development or liquidity of any market for the New Notes.
Even if a market for the New Notes develops, the price at which the holders
of New Notes will be able to sell cannot be assured and the New Notes could
trade at a price above or below either their purchase price or face value.
To the extent that Existing Notes are tendered and accepted in the Exchange
Offer, the trading market for the remaining untendered or tendered but not
accepted Existing Notes could be adversely affected. Because the Company
anticipates that most holders of the Existing Notes will elect to exchange such
Existing Notes for New Notes due to the absence of restrictions on the resale of
New Notes under the Securities Act, the Company anticipates that the liquidity
of the market for any Existing Notes remaining after the consummation of the
Exchange Offer may be substantially limited.
22
<PAGE>
THE COMPANY
GENERAL
Leiner is the nation's largest manufacturer of vitamins, minerals, and
nutritional supplements and distributes its products primarily through mass
market retailers. The Company has a 23% share of all mass market vitamin sales
in the United States, 50% larger than its next closest competitor's share.
Additionally, Leiner's 50% share of the mass market private label segment is
more than two times the size of its next closest competitor's share. Leiner has
increased its market share over the last five years, with its U.S. vitamin sales
growing at a compound annual rate of 18.9% per year through fiscal 1997, over
one and one half times the U.S. industry growth rate. Leiner is also one of the
nation's largest private label OTC pharmaceuticals manufacturers, with 20% of
its sales in OTC pharmaceutical and other products. In January 1997, the Company
acquired Vita Health, the second largest private label vitamin and OTC
pharmaceuticals manufacturer in the Canadian market.
The Company's products are sold in more than 50,000 of the nation's leading
retail outlets, including the 20 largest drug store chains, 18 of the 20 largest
supermarket chains, 10 of the largest mass merchandising chains, and the two
largest warehouse club chains, as well as in convenience stores and through
United States military outlets worldwide. Leiner is the vitamin category manager
for many leading retailers.
HISTORY
The Company is the ultimate successor to the vitamin product division of P.
Leiner & Sons, America, Inc. The division, founded in 1973, was purchased in
1979 by management and Booker plc ("Booker") through LHP, then named P. Leiner
Nutritional Products Corp. (the "Predecessor Company"). On May 4, 1992, Leiner
Group acquired LHP (the "LHP Acquisition") for a total purchase price of
approximately $90.9 million. LHP subsequently changed its name to Leiner Health
Products Inc. Leiner Group was incorporated under the laws of the State of
Delaware in 1987 by AEA, and did not have any significant assets, liabilities or
activities prior to the LHP Acquisition. Leiner Group is a holding company with
no significant operations or assets other than the stock of LHP, which it holds
through its sole direct subsidiary, PLI Holdings Inc., itself a holding company
("PLI").
On May 22, 1992 Leiner Group acquired privately held XCEL, a major U.S.
private label OTC pharmaceuticals manufacturer (the "XCEL Acquisition"), for a
total purchase price of approximately $24.7 million. On March 8, 1993, XCEL was
merged into LHP. On May 4, 1994, Leiner Group's name was changed from PLI
Investors Inc. to Leiner Health Products Group Inc.
In January 1997, the Company acquired Vita Health (the "Vita Health
Acquisition"), one of the leading manufacturers of private label and branded
vitamins, minerals and OTC pharmaceuticals in Canada, for a total purchase price
of approximately $16.0 million, including $1.1 million of direct acquisition
costs. Vita Health is currently a wholly-owned indirect subsidiary of LHP. Vita
Health is headquartered in Winnipeg, Manitoba, Canada. This location serves as
Vita Health's headquarters, manufacturing, tableting, packaging and distribution
location.
The principal executive offices of LHP are located at 901 East 233rd Street,
Carson, California 90745-6204, and the telephone number is (310) 835-8400.
23
<PAGE>
USE OF PROCEEDS
There will be no cash proceeds payable to LHP from the issuance of the New
Notes pursuant to the Exchange Offer. The proceeds of the Offering of the
Existing Notes were used to fund a portion of the financing for the
Recapitalization and related transactions. Such funding requirements included
payments in respect of Common Stock and options for Common Stock, repayment of
substantially all existing indebtedness of the Company other than certain
capitalized leases, redemption of preferred stock of Leiner Group and Vita
Health, payment of management transaction bonuses, and payment of transaction-
related fees and expenses. For further discussion of the sources and uses of
funds related to the Recapitalization, see "The Recapitalization."
The existing indebtedness of the Company repaid in connection with the
Recapitalization consisted of outstanding term loan and revolving credit
borrowings under the Company's previous senior credit agreement, which had an
expiration of April 1, 2003. Such indebtedness either consisted of short-term
borrowings used for working capital, or was incurred in January 1997 in
connection with financing the acquisition of Vita Health and refinancing of
certain indebtedness of the Company. Such indebtedness amounted to approximately
$102.2 million (including then accrued interest), with interest rates thereon of
6.4% per annum for U.S. borrowings and 4.1% per annum for Canadian borrowings.
The preferred stock redeemed in connection with the Recapitalization consisted
of pay-in-kind redeemable preferred stock of Leiner Group held by AEA, for which
the aggregate redemption price was $13.9 million, and a minority preferred stock
interest in Vita Health, issued in connection with the Vita Health Acquisition,
for which the aggregate redemption price was $3.7 million.
24
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1997 on a historical basis including the effect of the Recapitalization, and
on a pro forma basis after giving effect to certain Recapitalization-related
transactions that were completed after June 30, 1997. This table should be read
in conjunction with "Unaudited Pro Forma Financial Information," "Selected
Historical and Pro Forma Financial Information," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements and the notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-----------------------
<S> <C> <C>
HISTORICAL PRO FORMA
---------- -----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt (including current portion):
Revolving credit facilities (1)...................................................... $ 64,736 $ 74,836
Term loans (2)....................................................................... 85,000 85,000
Capitalized lease obligations........................................................ 4,815 4,815
New Notes............................................................................ 85,000 85,000
---------- -----------
Total long-term debt............................................................... 239,551 249,651
Minority interest in subsidiary (3).................................................... 4,718 1,000
Total common shareholder's deficit..................................................... (45,022) (38,188)
---------- -----------
Total capitalization................................................................... $ 199,247 $ 212,463
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) Borrowings of up to $125.0 million under the Revolving Credit Facility are
available for working capital and general corporate purposes, including
(subject to certain sublimits) letters of credit, the face value of which
totalled $4.7 million as of June 30, 1997. As of September 30, 1997, the
Company's unused availability under the Revolving Credit Facility was
approximately $59.2 million. The Revolving Credit Facility will mature on
June 30, 2003. See "Description of New Credit Facility."
(2) Term loan borrowings under the New Credit Facility consist of $45.0 million
in Term B loans, maturing seven and one-half years following June 30, 1997,
and $40.0 million in Term C loans, maturing eight and one-half years
following June 30, 1997, in each case with required quarterly principal
payments until maturity. See "Description of New Credit Facility."
(3) Consists of preferred stock of Vita Health held by certain of its former
owners, valued at an aggregate redemption price of $4.7 million of which
$3.7 million was redeemed in July 1997 in connection with the
Recapitalization.
25
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial data of the Company
has been prepared to give effect to the Recapitalization and certain
Recapitalization-related transactions that were completed after the
Recapitalization with respect to the Company. For a discussion of the
Recapitalization, see "The Recapitalization".
The pro forma adjustments presented are based upon available information and
certain assumptions that the Company believes are reasonable under the
circumstances. The historical consolidated statement of operations data for the
three months ended June 30, 1997 and the historical consolidated balance sheet
data as of June 30, 1997 were derived from the unaudited condensed consolidated
financial statements of the Company included elsewhere herein. The historical
consolidated statement of operations data for the year ended March 31, 1997 was
derived from the audited consolidated financial statements of the Company
included elsewhere herein.
The unaudited pro forma consolidated statement of operations data of the
Company for the year ended March 31, 1997 give effect to (i) the
Recapitalization with respect to the Company as if it had occurred on April 1,
1996, and (ii) the acquisition of Vita Health on January 30, 1997 as if that
acquisition had occurred on April 1, 1996, based on the historical financial
information for Vita Health for the ten months ended January 30, 1997 that was
derived from Vita Health's unaudited financial statements. The unaudited pro
forma consolidated statement of operations data of the Company for the three
months ended June 30, 1997 give effect to the Recapitalization with respect to
the Company as if it had occurred on April 1, 1997. The unaudited pro forma
consolidated balance sheet data of the Company as of June 30, 1997 give effect
to the Recapitalization with respect to the Company assuming that certain
Recapitalization-related transactions that were completed after June 30, 1997
had occurred on June 30, 1997.
The pro forma financial information does not reflect those
Recapitalization-related transactions that only affected Leiner Group. Expenses
of $11.8 million were incurred by Leiner Group in connection with the
Recapitalization, of which $6.1 million represented an adjustment to the amount
received by the Existing Shareholders. See "The Recapitalization." Historically,
the Company has not paid any material recurring expenses on behalf of Leiner
Group, although no assurances can be given that such payments will not be made
in the future. Furthermore, although federal and other consolidated income taxes
are legally payable by Leiner Group, such taxes historically have related to
LHP's operations and accordingly have been paid for by LHP and accounted for in
its consolidated financial statements. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--General--Recapitalization
Accounting; Financial Statement Presentation; Parent Company."
The unaudited pro forma financial data should be read in conjunction with
the historical consolidated financial statements of the Company and notes
thereto, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and other financial data included elsewhere in this
Prospectus, as well as the information concerning the Recapitalization
(including the sources and uses therefor) contained in "The Recapitalization."
The pro forma financial data and related notes are provided for informational
purposes only and do not necessarily reflect the results of operations or
financial position of the Company that would have actually resulted had the
events referred to above or in the notes to the unaudited proforma financial
information been consummated as of the date and for the period indicated and are
not intended to project the Company's financial position or results of
operations for any future period.
26
<PAGE>
LEINER HEALTH PRODUCTS INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................ $ 3,117 $ 3,117
Accounts receivable, net................................................. 56,012 56,012
Income taxes receivable.................................................. 4,678 4,678
Inventories.............................................................. 96,177 96,177
Deferred income taxes.................................................... 3,838 3,838
Prepaid expenses and other current assets................................ 3,117 3,117
---------- ----------- ---------
Total current assets................................................... 166,939 166,939
Property, plant and equipment, net......................................... 42,034 42,034
Goodwill, net.............................................................. 57,675 57,675
Deferred income taxes...................................................... 3,321 3,321
Deferred financing charges................................................. 11,853 11,853
Other non-current assets................................................... 11,544 11,544
---------- ----------- ---------
Total assets........................................................... $ 293,366 $293,366
---------- ----------- ---------
---------- ----------- ---------
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Bank checks outstanding, less cash on deposit............................ $ 10,222 $ 10,222
Current portion of long-term debt........................................ 2,062 2,062
Accounts payable......................................................... 53,525 53,525
Other accrued expenses................................................... 26,594 $ (7,131)(1)
(5,125)(2)
(960)(3) 13,378
---------- ----------- ---------
Total current liabilities.............................................. 92,403 (13,216) 79,187
Capitalized lease obligations.............................................. 3,603 3,603
Revolving credit facility.................................................. 63,886 5,125(2)
960(3)
3,718(4)
297(5) 73,986
Term loans................................................................. 85,000 85,000
Senior subordinated notes.................................................. 85,000 85,000
Deferred income taxes...................................................... 2,582 2,582
Other non-current liabilities.............................................. 1,196 1,196
Minority interest in subsidiary............................................ 4,718 (3,718)(4) 1,000
Common shareholder's deficit............................................... (45,022) 7,131(1)
297(5) (38,188)
---------- ----------- ---------
Total liabilities and shareholder's equity (deficit)................... $ 293,366 $ -- $293,366
---------- ----------- ---------
---------- ----------- ---------
</TABLE>
See accompanying notes.
27
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
The Pro Forma First Quarter Fiscal 1998 balance sheet data of the Company
give effect to the following pro forma adjustments:
(1) Represents the cash transferred from Leiner Group and paid out by the
Company in July 1997 related to the stock option compensation for options
cancelled in connection with the Recapitalization.
(2) Represents the management transaction bonuses paid in July 1997 related
to the Recapitalization.
(3) Represents certain Recapitalization fees and expenses which had been
accrued as of June 30, 1997, but which were paid subsequent to June 30, 1997.
(4) Consists of preferred stock of Vita Health held by certain of its former
owners, valued at an aggregate redemption price of $4.7 million of which $3.7
million was redeemed in July 1997 in connection with Recapitalization.
(5) Represents employer payroll taxes paid in July 1997 related to the stock
option compensation and the management bonuses.
28
<PAGE>
LEINER HEALTH PRODUCTS INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales....................................................................... $ 94,076 $94,076
Cost of sales................................................................... 71,860 71,860
---------- ---------
Gross profit.................................................................... 22,216 22,216
SG&A............................................................................ 17,549 17,549
Compensation related to stock options........................................... 15,431 $(15,431)(1) --
Management transaction bonuses.................................................. 5,125 (5,125)(1) --
Amortization of goodwill........................................................ 402 402
Other charges................................................................... 88 287(2) 375
---------- ----------- ---------
Operating income (loss)......................................................... (16,379) 20,269 3,890
Interest expense, net........................................................... 1,800 393(3)
3,623(4) 5,816
---------- ----------- ---------
Loss before income taxes and extraordinary item................................. (18,179) 16,253 (1,926)
Benefit for income taxes........................................................ (7,105) 6,501(5) (604)
---------- ----------- ---------
Loss before extraordinary item.................................................. $ (11,074) $ 9,752 $(1,322)
---------- ----------- ---------
---------- ----------- ---------
Depreciation and amortization expenses(6)....................................... $ 3,066 $ -- $ 3,066
---------- ----------- ---------
---------- ----------- ---------
</TABLE>
See accompanying notes.
29
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS)
The Pro Forma First Quarter Fiscal 1998 statement of operations data give effect
to the following pro forma adjustments:
(1) Represents the elimination of non-recurring charges relating to the
Recapitalization consisting of (x) a compensation charge incurred by the
Company for the in-the-money value of existing stock options of $15.4
million which were (i) converted into an equivalent value of Equity Rights
at the date of the Recapitalization, (ii) paid out in cash, or (iii)
exercised for common stock (or a combination thereof), and (y) $5.1 million
in transaction bonuses which were paid to members of the Company's
management subsequent to the Recapitalization. These non-recurring charges
contributed significantly to the Company's operating loss of $16.4 million
for the three months ended June 30, 1997. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Results of
Operations--First Quarter Fiscal 1998 Compared to First Quarter Fiscal
1997."
(2) Represents the elimination of the quarterly management fee of $88
charged by AEA and the application of the quarterly management fee of $375
that will be charged by North Castle after the Recapitalization.
(3) Represents the amortization of debt issuance fees of $393 for the
three months ended June 30, 1997 related to the New Credit Facility.
(4) Reflects the change in interest expense based on the
Recapitalization financing:
<TABLE>
<S> <C>
Elimination of historical interest expense......................... $ (1,800)
Add back historical interest expense related to capitalized leases,
net of historical interest income................................ 71
Interest expense on New Credit Facility (at a weighted average rate
of 8.1%)......................................................... 3,307
Interest expense on the Notes...................................... 2,045
---------
Total incremental interest expense............................. $ 3,623
---------
---------
</TABLE>
For each 0.125% increase or decrease in the assumed weighted average
interest rate in respect of the New Credit Facility, total pro forma
interest expense would increase or decrease, respectively, by approximately
$50 for the three months ended June 30, 1997.
(5) Reflects the income tax effects of pre-tax pro forma adjustments and
related financing structure.
(6) Depreciation and amortization as presented does not include the
amortization of deferred financing fees. In the cash flow statement in the
unaudited condensed consolidated financial statements, the amortization of
deferred financing fees is included in depreciation and amortization.
30
<PAGE>
LEINER HEALTH PRODUCTS INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
10 MONTHS ADJUSTED
HISTORICAL VITA HEALTH ADJUSTMENTS COMPANY ADJUSTMENTS PRO FORMA
---------- ----------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales.................................... $ 392,786 $24,131 $416,917 $416,917
Cost of sales................................ 288,579 17,790 306,369 306,369
---------- ----------- -------- ---------
Gross profit................................. 104,207 6,341 110,548 110,548
SG&A......................................... 72,696 6,561 79,257 79,257
Impairment and closure of OTC facility....... 1,416 1,416 1,416
Management reorganization.................... 1,000 1,000 1,000
Amortization of goodwill..................... 1,514 $ 166(1) 1,680 1,680
Other charges(2)............................. 878 878 $ 1,150(3) 2,028
---------- ----------- ----------- -------- ----------- ---------
Operating income (loss)...................... 26,703 (220) (166) 26,317 (1,150) 25,167
Interest expense, net........................ 8,281 60 8,341 1,573(4)
13,454(5) 23,368
---------- ----------- ----------- -------- ----------- ---------
Income (loss) before income taxes and
extraordinary item......................... 18,422 (280) (166) 17,976 (16,177) 1,799
(Provision) benefit for income taxes......... (8,028) (112) -- (8,140) 6,471(6) (1,669)
---------- ----------- ----------- -------- ----------- ---------
Income (loss) before extraordinary item...... $ 10,394 $ (392) $ (166) $ 9,836 $ (9,706) $ 130
---------- ----------- ----------- -------- ----------- ---------
---------- ----------- ----------- -------- ----------- ---------
Depreciation and amortization expenses(7).... $ 12,345 $ 351 $ 166 $ 12,862 $ -- $ 12,862
---------- ----------- ----------- -------- ----------- ---------
---------- ----------- ----------- -------- ----------- ---------
</TABLE>
See accompanying notes.
31
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1997
(IN THOUSANDS)
The Pro Forma Fiscal 1997 statement of operations data give effect to the
following pro forma adjustments:
(1) Represents the incremental amortization of goodwill related to the
acquisition of Vita Health for the period from April 1, 1996 to January 31,
1997. The amount of goodwill recorded in connection with the acquisition was
$7.1 million, and it is being amortized over its expected benefit period of
35 years.
(2) Other charges do not include (i) non-recurring charges incurred in
connection with the Recapitalization for transaction fees and expenses of
$11.9 million which have been deferred and will be amortized over subsequent
periods, not to exceed 10 years, (ii) stock option compensation expense of
$15.7 million (including related employer payroll taxes) and (iii)
management bonuses of $5.2 million (including related employer payroll
taxes).
(3) Represents the elimination of the management fee of $350 charged by
AEA and the application of the management fee of $1,500 that will be charged
by North Castle after the Recapitalization.
(4) Represents the amortization of debt issuance fees of $1,573 for the
year ended March 31, 1997. The amortization periods for fees related to the
New Credit Facility and the Notes are 6.8 years and 10 years, respectively.
(5) Reflects the change in interest expense based on the
Recapitalization financing:
<TABLE>
<S> <C>
Elimination of historical interest expense......................... $ (8,341)
Add back historical interest expense related to capitalized leases,
net of historical interest income................................ 370
Interest expense on New Credit Facility (at a weighted average rate
of 8.1%)......................................................... 13,244
Interest expense on the Notes...................................... 8,181
---------
Total incremental interest expense............................... $ 13,454
---------
---------
</TABLE>
For each 0.125% increase or decrease in the assumed weighted average
interest rate in respect of the New Credit Facility, total pro forma
interest expense would increase or decrease, respectively, by approximately
$200 for the year ended March 31, 1997.
(6) Reflects the income tax effects of pre-tax pro forma adjustments and
related financing structure.
(7) Depreciation and amortization as presented does not include the
amortization of deferred financing fees. In the cash flow statement in the
consolidated financial statements, the amortization of deferred financing
fees is included in depreciation and amortization.
32
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table presents selected historical financial data derived from
the consolidated financial statements of the Company. The statement of
operations data for the fiscal years ended March 31, 1993, 1994, 1995, 1996, and
1997, except for the unaudited pro forma statement of operations data for the
fiscal year ended March 31, 1997, were derived from the consolidated financial
statements of the Company audited by Ernst & Young LLP, Independent Auditors and
included elsewhere herein. The statement of operations data for the three months
ended June 30, 1996 and 1997, and the balance sheet data as of June 30, 1997,
except for the unaudited pro forma financial information as of and for the three
months ended June 30, 1997, were derived from the unaudited condensed
consolidated financial statements of the Company included elsewhere herein.
The unaudited pro forma consolidated statement of operations data of the
Company for the year ended March 31, 1997 give effect to (i) the
Recapitalization with respect to the Company as if it had occurred on April 1,
1996, and (ii) the acquisition of Vita Health on January 30, 1997 as if that
acquisition had occurred on April 1, 1996. The historical financial information
for Vita Health for the ten months ended January 30, 1997 was derived from Vita
Health's unaudited financial statements. The unaudited pro forma consolidated
statement of operations data of the Company for the three months ended June 30,
1997 give effect to the Recapitalization with respect to the Company as if it
had occurred on April 1, 1997. The unaudited pro forma consolidated balance
sheet data of the Company as of June 30, 1997 give effect to the
Recapitalization with respect to the Company assuming that certain
Recapitalization-related transactions that were completed after June 30, 1997
had occurred on June 30, 1997.
The selected pro forma financial data does not reflect those
Recapitalization-related transactions that only affected Leiner Group. Expenses
of $11.8 million were incurred by Leiner Group in connection with the
Recapitalization, of which $6.1 million represented an adjustment to the amount
received by the Existing Shareholders. See "The Recapitalization." Historically,
the Company has not paid any material recurring expenses on behalf of Leiner
Group. However, no assurance can be given that such payments will not be made in
the future. Furthermore, although federal and other consolidated income taxes
are legally payable by Leiner Group, such taxes historically have related to
LHP's operations and accordingly have been paid for by LHP and accounted for in
its consolidated financial statements. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--General--Recapitalization
Accounting; Financial Statement Presentation; Parent Company."
The selected unaudited pro forma financial data should be read in
conjunction with the historical consolidated financial statements of the Company
and notes thereto, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Unaudited Pro Forma Financial Information"
contained elsewhere in this Prospectus, as well as the information concerning
the Recapitalization (including the sources and uses therefor) contained in "The
Recapitalization." The selected pro forma financial data and related notes are
provided for informational purposes and do not necessarily reflect the results
of operations or financial position of the Company that would have actually
resulted had the events referred to above or in the notes to the unaudited pro
forma financial information been consummated as of the date and for the period
indicated and are not intended to project the Company's financial position or
results of operations for any future period.
33
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE
30,
FISCAL YEARS ENDED MARCH 31, ---------------------------------
--------------------------------------------------------------------
UNAUDITED (UNAUDITED)
PRO FORMA PRO FORMA
1993(1) 1994 1995 1996 1997 1997(2)(7) 1996 1997 1997(7)
----------- --------- --------- --------- --------- ----------- --------- --------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales.................. $ 230.8 $ 303.6 $ 314.7 $ 338.4 $ 392.8 $ 416.9 $ 70.6 $ 94.1 $ 94.1
Cost of sales.............. 171.7 226.0 236.6 253.3 288.6 306.4 52.0 71.9 71.9
----------- --------- --------- --------- --------- ----------- --------- --------- -----------
Gross profit............... 59.2 77.6 78.1 85.1 104.2 110.5 18.6 22.2 22.2
SG&A....................... 48.0 59.5 59.7 62.6 72.7 79.3 15.5 17.5 17.5
Impairment and closure of
OTC facility(3).......... -- -- -- 4.7 1.4 1.4 -- -- --
Management
reorganization(4)........ -- -- -- -- 1.0 1.0 0.2 -- --
Compensation related to
stock options(5)......... -- -- -- -- -- -- -- 15.4 --
Management transaction
bonuses(5)............... -- -- -- -- -- -- -- 5.1 --
Amortization of goodwill... 1.4 1.6 1.6 1.6 1.5 1.7 0.4 0.4 0.4
Other charges(6)........... 4.0 2.4 0.5 0.5 0.9 2.0 0.1 0.1 0.4
----------- --------- --------- --------- --------- ----------- --------- --------- -----------
Operating income
(loss)(7)................ 5.8 14.1 16.3 15.8 26.7 25.2 2.4 (16.4) 3.9
Interest expense, net(8)... 5.8 7.1 9.0 9.9 8.3 23.4 2.2 1.8 5.8
----------- --------- --------- --------- --------- ----------- --------- --------- -----------
Income (loss) before income
taxes and extraordinary
item..................... -- 7.0 7.3 5.9 18.4 1.8 0.2 (18.2) (1.9)
Provision (benefit) for
income taxes............. 1.0 3.6 3.5 4.7 8.0 1.7 0.1 (7.1) 0.6
----------- --------- --------- --------- --------- ----------- --------- --------- -----------
Income (loss) before
extraordinary item....... (1.0) 3.4 3.8 1.2 10.4 0.1 0.1 (11.1) (1.3)
Extraordinary item......... -- -- -- -- 2.8 2.8 -- 1.1 1.1
----------- --------- --------- --------- --------- ----------- --------- --------- -----------
Net income (loss).......... $ (1.0) $ 3.4 $ 3.8 $ 1.2 $ 7.6 $ (2.7) $ 0.1 $ (12.2) $ (2.4)
----------- --------- --------- --------- --------- ----------- --------- --------- -----------
----------- --------- --------- --------- --------- ----------- --------- --------- -----------
BALANCE SHEET DATA:
Working capital............ $ 49.5 $ 63.8 $ 61.7 $ 72.3 $ 79.4 NA $ 74.8 $ 74.5 $ 87.8
Total assets............... 200.3 244.6 257.4 251.3 284.6 NA 242.1 293.4 293.4
Total debt................. 75.0 98.5 106.7 104.2 105.4 NA 104.7 239.6 249.7
Minority interest in
subsidiary............... -- -- -- -- 4.7 NA -- 4.7 1.0
Total common shareholder's
equity (deficit)......... 50.1 67.7 71.5 72.7 80.2 NA 72.8 (45.0) (38.2)
OTHER DATA:
Gross margin............... 25.6% 25.6% 24.8% 25.2% 26.5% 26.5% 26.3% 23.6% 23.6%
Adjusted operating
income(7)................ $ 9.4 $ 16.2 $ 16.5 $ 20.6 $ 29.6 $ 29.3 $ 2.6 $ 4.1 $ 3.9
Adjusted operating income
margin(7)................ 4.1% 5.3% 5.2% 6.1% 7.5% 7.0% 3.7% 4.4% 4.1%
EBITDA(7)(9)............... $ 14.0 $ 23.4 $ 27.0 $ 32.9 $ 42.0 $ 41.0 $ 5.5 $ 7.2 $ 7.0
EBITDA margin(7)(9)........ 6.1% 7.7% 8.6% 9.7% 10.7% 9.8% 7.8% 7.7% 7.4%
Depreciation and
amortization(10)......... $ 4.6 $ 7.2 $ 10.5 $ 12.3 $ 12.3 $ 12.9 $ 2.9 $ 3.1 $ 3.1
Capital expenditures....... 3.3 15.0 16.7 3.5 3.5 3.8 0.6 1.3 1.3
Cash flows from operating
activities............... 1.9 (17.1) 13.1 12.7 23.2 NA 0.5 4.6 NA
Cash flows from investing
activities............... (21.9) (18.3) (21.9) (8.8) (10.2) NA (0.9) (4.4) NA
Cash flows from financing
activities............... 19.6 36.9 7.3 (2.5) (12.1) NA 0.5 0.4 NA
Ratio of total debt to
EBITDA(7)(9)(11)......... 5.4x 4.2x 4.0x 3.2x 2.5x 6.1x -- -- --
Ratio of EBITDA to interest
expense(7)(9)............ 2.4 3.3 3.1 3.4 5.2 1.9 2.6 4.2 1.3
Ratio of earnings to fixed
charges(12).............. 1.0 1.8 1.7 1.5 2.9 1.1 1.1 (7.2) 0.7
</TABLE>
34
<PAGE>
- ------------------------------
(1) The May 1992 acquisitions by Leiner Group of LHP and XCEL were accounted for
under the purchase method of accounting and new bases of accounting were
established at the time of each such acquisition. See "The
Company--History." Accordingly, the statement of operations data for the
fiscal year ended March 31, 1993 represent the results of operations of LHP,
the results of operations for XCEL from the date of its acquisition, and
purchase accounting for the acquisitions of LHP and XCEL during that fiscal
year.
(2) On January 30, 1997, the Company purchased Vita Health. This column gives
effect to the Vita Health acquisition, as well as the Recapitalization and
related transactions with respect to the Company. See "Unaudited Pro Forma
Financial Information." The Vita Health acquisition was accounted for under
the purchase method of accounting. Consequently, the results of operations
of Vita Health were included in the consolidated financial results of the
Company for two months ended March 31, 1997. The pro forma data shown for
fiscal 1997 includes the operating results of Vita Health for the additional
ten months ended January 30, 1997.
(3) During fiscal 1996, the Company decided to significantly reduce the size of
its OTC liquid pharmaceuticals manufacturing business. Accordingly, the
Company determined that certain long-lived assets with a carrying amount of
$8.3 million were impaired and wrote them down by $4.7 million to their
estimated fair value. During fiscal 1997, the Company closed the
manufacturing facility and out- sourced the production to a third party. The
costs incurred of $1.4 million include (i) the write-off of fixed assets of
$0.8 million and (ii) closure costs including salaries in conjunction with
the facility closing of $0.6 million. The expense does not include an
additional charge to cost of sales of $0.5 million for the write-off of
certain liquid OTC inventory which was no longer being manufactured by the
Company.
(4) During fiscal 1997, the Company reorganized the management team. Expenses of
$1.0 million include severance expense for the previous Chief Financial
Officer, Vice President of Product Development and Vice President of
Corporate Development and include the hiring and relocation expenses for the
new Chief Financial Officer and other corporate officers.
(5) Represents the elimination of non-recurring charges relating to the
Recapitalization, consisting of (x) a compensation charge incurred by the
Company for the in-the-money value of existing stock options of $15.4
million which were (i) converted into an equivalent value of Equity Rights
at the date of the Recapitalization, (ii) paid out in cash, or (iii)
exercised for common stock (or a combination thereof), and (y) $5.1 million
in transaction bonuses which were paid to members of the Company's
management subsequent to the Recapitalization. These non-recurring charges
contributed significantly to the Company's net loss of $12.2 million for the
three months ended June 30, 1997. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Results of
Operation--First Quarter Fiscal 1998 Compared to First Quarter Fiscal 1997."
(6) Other charges for the fiscal years ended March 31, 1993 through March 31,
1997 and the three months ended June 30, 1996 and June 30, 1997 include
management fees paid to AEA that were discontinued upon consummation of the
Recapitalization. Other charges also include costs related to the original
acquisition of Leiner by the AEA Group and compensation expense arising from
the sale of shares of Common Stock to management in connection with the
acquisition of Leiner by the AEA Group in the fiscal year ended March 31,
1993, the write-off of deferred charges associated with the refinancing of
the Company's revolving credit facility in the fiscal year ended March 31,
1994 and expenses incurred in connection with the withdrawn initial public
offering in the fiscal year ended March 31, 1997. Other charges also
include, in the fiscal years ended March 31, 1994 through March 31, 1997,
non-cash compensation expense arising from the granting of stock options.
Other charges in the fiscal year ended March 31, 1995 do not include $0.5
million in other charges incurred by Leiner Group in connection with its
withdrawn initial public offering in that fiscal year, which are reflected
in the consolidated financial statements of Leiner Group. Other charges for
the three months ended June 30, 1997 do not include non-recurring charges
incurred in connection with the Recapitalization for transaction fees and
expenses of $11.9 million which have been deferred and will be amortized
over subsequent periods, not to exceed 10 years, stock option compensation
expense of $15.7 million (with related employer's payroll taxes) and
management bonuses $5.2 million (including related employer payroll taxes).
(7) Historical adjusted operating income, adjusted operating income margin,
EBITDA and EBITDA margin exclude expenses that are not expected to be
continued, consisting of (i) expenses related to the impairment and closure
of the OTC liquid pharmaceuticals manufacturing facility in fiscal 1996 and
1997 (see Note 3), (ii) the reorganization of the management team in fiscal
1997 (see Note 4) and, (iii) (except for the management fees of $0.35
million per year paid to AEA until the agreement was terminated on June 30,
1997, which are included,) other charges for the fiscal years ended March
31, 1993 through March 31, 1997 and the three months ended June 30, 1996 and
June 30, 1997 (see Note 6). Unaudited pro forma statement of operations data
for fiscal 1997 and the three months ended June 30, 1997 includes the pro
rata portion of an annual management fee of $1.5 million payable to North
Castle Partners, L.L.C., an affiliate of North Castle, following the
Recapitalization and excludes the annual management fee of AEA. See "Certain
Transactions."
(8) Net interest expense in the fiscal year ended March 31, 1994 does not
reflect $0.1 million in interest income received by Leiner Group in that
year, which is reflected in the consolidated financial statements of Leiner
Group.
(9) For purposes of calculating the ratio of EBITDA to interest expense,
interest expense excludes the amortization of deferred financing fees, which
is included in interest expense in the income statement in the consolidated
financial statements.
35
<PAGE>
"EBITDA," as presented, represents earnings before interest expense, income
taxes, depreciation and amortization and extraordinary item, and also
excludes certain nonrecurring charges relating to the Recapitalization (See
Note 5) and certain historical expenses that are not expected to be
continued (see Notes 7) and is calculated as follows (in thousands):
<TABLE>
<CAPTION>
FOR THREE MONTHS
ENDED JUNE 30,
--------------------
FISCAL YEARS ENDED MARCH 31,
------------------------------------------------------------------
UNAUDITED (UNAUDITED)
PRO
FORMA
1993 1994 1995 1996 1997 1997 1996 1997
--------- --------- --------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Income (loss)....................... $ (1,033) $ 3,417 $ 3,813 $ 1,166 $ 7,638 $ (2,626) $ 119 $ (12,183)
Add Back:
Interest expense, net................. 5,791 7,144 9,010 9,924 8,281 23,368 2,152 1,800
Income taxes.......................... 999 3,573 3,524 4,686 8,028 1,669 92 (7,105)
Depreciation and amortization......... 4,586 7,247 10,514 12,288 12,309 12,862 2,867 3,066
Extraordinary item.................... -- -- -- -- 2,756 2,756 -- 1,109
Non-recurring charges:
Impairment and closure of
facility.......................... -- -- -- 4,730 1,416 1,416 -- --
Management reorganization........... -- -- -- -- 1,000 1,000 187 --
Compensation related to stock
options........................... -- -- -- -- -- -- -- 15,431
Management transaction bonuses...... -- -- -- -- -- -- -- 5,125
Other charges......................... 3,631 2,017 132 132 528 528 33 --
--------- --------- --------- --------- --------- ----------- --------- ---------
Subtotal................................ 15,007 19,981 23,180 31,760 34,318 43,599 5,331 19,426
--------- --------- --------- --------- --------- ----------- --------- ---------
EBITDA.................................. $ 13,974 $ 23,398 $ 26,993 $ 32,926 $ 41,956 $ 40,973 $ 5,450 $ 7,243
--------- --------- --------- --------- --------- ----------- --------- ---------
--------- --------- --------- --------- --------- ----------- --------- ---------
<CAPTION>
PRO
FORMA
1997
---------
<S> <C>
Net Income (loss)....................... $ (2,431)
Add Back:
Interest expense, net................. 5,816
Income taxes.......................... (604)
Depreciation and amortization......... 3,066
Extraordinary item.................... 1,109
Non-recurring charges:
Impairment and closure of
facility.......................... --
Management reorganization........... --
Compensation related to stock
options........................... --
Management transaction bonuses...... --
Other charges......................... --
---------
Subtotal................................ 9,387
---------
EBITDA.................................. $ 6,956
---------
---------
</TABLE>
EBITDA for Pro Forma Fiscal 1997 was $43.4 million, excluding certain
discontinued bonuses paid to former owners of Vita Health of $2.4 million.
EBITDA is included because management understands that such information is
considered by certain investors to be an additional basis for evaluating the
Company's ability to pay interest, repay debt and make capital expenditures.
EBITDA should not be considered an alternative to measures of operating
performance as determined in accordance with generally accepted accounting
principles, including net income as a measure of the Company's operating
results and cash flows as a measure of the Company's liquidity. Because
EBITDA is not calculated identically by all companies, the presentation
herein may not be comparable to other similarly titled measures of other
companies.
(10) Depreciation and amortization as presented does not include the
amortization of deferred financing fees. In the cash flow statement in the
consolidated financial statements, the amortization of deferred financing
fees is included in depreciation and amortization.
(11) The ratio of total debt to EBITDA is not presented for interim periods
because it is not meaningful.
(12) In calculating the ratio of earnings to fixed charges, earnings consist of
income before taxes plus fixed charges. Fixed charges consist of interest
expense and amortization of deferred financing fees, whether capitalized or
expensed, plus one-third of rental expense under operating leases (the
portion that has been deemed by the Company to be representative of an
interest factor).
36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the consolidated financial
statements of the Company contained elsewhere in this Prospectus (the
"Consolidated Financial Statements"). The Company's fiscal year ends on March 31
of each year. References herein to a "fiscal" year refer to the Company's fiscal
year ended March 31 in the calendar year indicated (e.g., references to fiscal
1997 are references to the Company's fiscal year ended March 31, 1997).
GENERAL
CURRENT TRENDS. The Company believes that overall trends in the vitamin
industry are the most significant trends affecting the Company's financial
performance. According to industry sources, between 1992 and 1996, sales for the
vitamin industry grew at a compound annual rate of approximately 11.2% to $4.1
billion, as the percentage of American adults regularly using vitamins grew from
34% to 40%. Between 1996 and 2005, the 50 to 64 age group is projected to be the
fastest growing segment of the United States population. Gallup polling data
shows that vitamin usage increases significantly with age, with 47% of
individuals over age 50 regularly using vitamins, compared with 36% of younger
adults.
Increasing vitamin usage among the general population is linked to three
major factors. First, research expenditures devoted to the positive effects of
vitamin products have increased dramatically. Such research has been described
in major medical journals and reported in the popular media. Second, the
national trend towards improved fitness, greater self-care and preventive
medicine has increased the general population's focus on nutritional products
consumption. Finally, the more favorable regulatory environment resulting from
the DSHEA has generated increased new product introductions and more effective
point of sale communication of the health benefits of vitamins to consumers.
However, as has been the case in the past, adverse scientific research or
publicity concerning the health benefits of vitamin consumption can materially
impact the growth of the vitamin market.
Beginning in fiscal 1996 and continuing in fiscal 1997, the retail drugstore
industry experienced several major consolidations. The Company provides private
label vitamin products to the 20 largest drugstore chains in the United States
and believes it has strong relationships with the leading drugstore chains.
Consequently, management believes the Company is well positioned to benefit from
this consolidation trend due to (i) its strong relationships with the acquiring
companies in the largest consolidations and (ii) the anticipated reduction in
the number of vendors as the consolidated companies streamline their purchasing.
A number of the Company's customers made significant acquisitions or were
acquired during this period, with CVS Corporation acquiring Revco D.S., Inc.,
Rite Aid Corporation acquiring Thrifty-Payless Inc. and JCPenney acquiring
Eckerd Corporation. The recent retail drugstore consolidations have created
certain temporary disruptions in these customers' operations and purchasing
decisions. These disruptions had some minor adverse effects on the Company's
sales in fiscal 1997. Although the Company believes that the consolidation of
major drugstore chains will have a positive effect on its long-term sales, the
increased purchasing scale of the consolidated retailers increases the relative
importance of each of these customers to the Company's financial performance.
HISTORICAL TRENDS. Throughout fiscal 1993 and fiscal 1994, the Company's
growth was fueled by favorable publicity of scientific research evidencing the
health benefits of vitamin product consumption. During fiscal 1994 and fiscal
1995, the Company took its initial step to build capacity and lower its
manufacturing costs by making significant investments in its western U.S.
tableting operation and consolidating two western U.S. packaging plants and one
distribution facility into a single facility. See "Business -- Manufacturing and
Distribution."
37
<PAGE>
In the first quarter of fiscal 1995, however, a study, referred to as the
"Finnish Smokers Study," was released that reached a negative conclusion as to
the health benefits of consumption of certain antioxidants. The release of this
study received significant media attention and negatively impacted short-term
consumer demand for certain vitamin products, and resulted in a downturn in
sales. In response, the Company halted its manufacturing restructuring plan and
focused on the development of a program to downsize, including the closure of a
tableting plant and the elimination of approximately 200 tableting and packaging
positions. The Company's manufacturing efficiency was negatively affected, as
its western U.S. tableting and packaging facilities, designed to operate most
efficiently on higher volumes, were operated at significantly sub-optimal
production levels. Vitamin product sales stabilized during the second half of
fiscal 1995, and by the first quarter of fiscal 1996 had largely recovered to
pre-Finnish Smokers Study levels. Because the market stabilized and recovered
more quickly and strongly than had been expected by the Company and its
customers, the efficiency of the Company's manufacturing operations was again
negatively impacted, this time by costs associated with expedited manufacturing
and packaging scheduling required through December 1995 in order for the Company
to timely meet its customers' increased orders.
During fiscal 1996 and 1997, the retail mass market for vitamins returned to
pre-Finnish Smokers Study levels. Overall market growth was positively affected
by the release of a number of research reports regarding the benefits of such
products as vitamin C, vitamin E and selenium, as well as by new product
introductions, particularly in the herbal and nutritional supplement segments.
During this period, the Company introduced 52 new products, the majority of
which were targeted at these two segments.
RECAPITALIZATION ACCOUNTING; FINANCIAL STATEMENT PRESENTATION; PARENT
COMPANY. The Recapitalization has been accounted for as a recapitalization of
Leiner Group, which will have no impact on the historical basis of assets and
liabilities as reflected in the consolidated financial statements of Leiner
Group or the Company. Other than with respect to redeemable preferred stock of
Leiner Group, which was redeemed in connection with the Recapitalization, the
consolidated financial statements of Leiner Group and LHP for the periods
discussed below are not materially different. See Notes 6 and 8 to "Selected
Historical and Pro Forma Financial Information."
Leiner Group is a holding company with no significant independent operations
or assets other than in respect of its investment in LHP. Leiner Group is not
expected to have any significant sources of funds in the future other than the
proceeds of sales of its equity or other securities (which it may be required to
apply to repay borrowings under the New Credit Facility) and dividends and
distributions for LHP. Historically, the Company has not paid any material
recurring expenses on behalf of Leiner Group. However, no assurance can be given
that such payments will not be made in the future to the extent permitted by the
Company's financing agreements, including the New Credit Facility and the
Indenture. Furthermore, although federal and other consolidated income taxes are
legally payable by Leiner Group, such taxes historically have related to LHP's
operation and accordingly have been paid for by LHP and accounted for in its
consolidated financial statements.
38
<PAGE>
SEASONALITY
Leiner's business is seasonal, as increased vitamin usage corresponds with
the cough, cold and flu season. A significant portion of the Company's sales and
a more significant portion of the Company's operating income, therefore, occurs
in the second half of the fiscal year as reflected in the table below:
<TABLE>
<CAPTION>
ADJUSTED
NET SALES OPERATING INCOME
------------------------ --------------------------
<S> <C> <C> <C> <C>
AMOUNT % OF YEAR AMOUNT % OF YEAR
--------- ------------- ----------- -------------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Fiscal 1998
First quarter................................................... $ 94.1 -- $ 4.1(1) --
Fiscal 1997
First quarter................................................... $ 70.6 18% $ 2.6 9%
Second quarter.................................................. 85.6 22 1.2 4
Third quarter................................................... 104.3 26 10.9 37
Fourth quarter.................................................. 132.3 34 14.9 50
--------- --- ----- ---
$ 392.8 100% $ 29.6(2) 100%
--------- --- ----- ---
--------- --- ----- ---
Fiscal 1996
First quarter................................................... $ 62.7 19% $ 1.5 7%
Second quarter.................................................. 78.7 23 2.6 13
Third quarter................................................... 94.8 28 5.9 29
Fourth quarter.................................................. 102.2 30 10.6 51
--------- --- ----- ---
$ 338.4 100% $ 20.6(3) 100%
--------- --- ----- ---
--------- --- ----- ---
</TABLE>
- ------------------------
(1) Excludes expenses of $15.4 million related to stock option compensation and
$5.1 million of management bonuses, both of which were incurred in
connection with the Recapitalization.
(2) Excludes expenses incurred in connection with the closure of the OTC liquid
pharmaceuticals manufacturing facility, a management reorganization,
non-cash stock compensation expense and the preparation of a registration
statement in connection with a withdrawn initial public offering. See Note 4
of Notes to Consolidated Financial Statements.
(3) Excludes charges for long-lived asset impairment of $4.7 million recorded in
the fourth quarter of fiscal 1996 and non-cash stock compensation expense.
39
<PAGE>
RESULTS OF OPERATIONS
The following table summarizes the Company's historical results of
operations as a percentage of net sales for the fiscal years ended March 31,
1995, 1996 and 1997 and for the three months ended June 30, 1996 and 1997.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
-----------------------------------------------------
FOR THE THREE MONTHS
FOR THE FISCAL YEARS ENDED
MARCH 31, ENDED JUNE 30,
------------------------------- --------------------
1995 1996 1997 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................................... 75.2 74.8 73.5 73.7 76.4
--------- --------- --------- --------- ---------
Gross profit................................................ 24.8 25.2 26.5 26.3 23.6
Marketing, selling and distribution expenses................ 13.5 13.1 13.1 15.5 12.7
General and administrative expenses......................... 5.5 5.4 5.4 6.5 5.9
Impairment and closure of OTC Facility...................... -- 1.4 0.3 -- --
Management reorganization................................... -- -- 0.3 0.3 --
Compensation related to stock options....................... -- -- -- -- 16.4
Management transaction bonuses.............................. -- -- -- -- 5.5
Amortization of goodwill.................................... 0.5 0.5 0.4 0.5 0.4
Other charges............................................... 0.2 0.1 0.2 0.2 0.1
--------- --------- --------- --------- ---------
Operating income (loss)..................................... 5.2 4.7 6.8 3.3 (17.4)
Interest expense, net....................................... 2.9 2.9 2.1 3.0 1.9
--------- --------- --------- --------- ---------
Income (loss) before income taxes and extraordinary item.... 2.3 1.7 4.7 0.3 (19.3)
Provision (benefit) for income taxes before extraordinary
item...................................................... 1.1 1.4 2.0 0.1 (7.5)
--------- --------- --------- --------- ---------
Income (loss) before extraordinary item..................... 1.2 0.3 2.6 0.2 (11.8)
Extraordinary item.......................................... -- -- 0.7 -- 1.2
--------- --------- --------- --------- ---------
Net income (loss)........................................... 1.2% 0.3% 1.9% 0.2% (13.0)%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
FIRST QUARTER FISCAL 1998 COMPARED TO FIRST QUARTER FISCAL 1997
Net sales for the first quarter of fiscal 1998 increased by $23.5 million,
or 33.2%, over the first quarter in fiscal 1997, from $70.6 million to $94.1
million. Sales from Vita Health Company (1985) Ltd. of Canada ("Vita Health"), a
wholly-owned subsidiary acquired January 30, 1997, accounted for $7.1 million of
this increase.
Excluding Vita Health sales, the Company's net sales increased $16.4
million, or 23.2%, over the comparable period in fiscal 1997 due to market
growth. Excluding Vita Health sales, vitamin product sales increased by $15.0
million, or 26.4%, compared to the first quarter of the prior year. Strong
demand for supplements has pushed the vitamin sales volume higher in the current
year. Additionally, an increase in the volume of multi-vitamin sales also
contributed to the vitamin product sales increase. Sales of OTC pharmaceuticals,
excluding Vita Health, increased by $1.7 million, or 15.0%, compared to the same
period in the prior year.
Gross profit increased $3.6 million, or 19.4%, from $18.6 million in the
first quarter of fiscal 1997 to $22.2 million in the first quarter of fiscal
1998. Excluding Vita Health, the increase in gross profit was $1.5 million, or
8.1%. Gross profit margin for the first quarter of fiscal 1998 was 23.6% versus
26.3% in the year ago period. The decrease in margin is primarily attributed to
a change in customer and product sales mix.
40
<PAGE>
Higher margin branded product sales were lower than expected in the first
quarter of fiscal 1998 because of large fourth quarter promotions in fiscal 1997
which slowed first quarter volume, while lower margin private label customers
involved in retail consolidations accelerated their purchases.
Selling, marketing, distribution, general and administrative expense
("SG&A") increased $2.0 million, or 12.9%, in the first quarter of fiscal 1998
when compared to the same period in fiscal 1997. Of this increase, Vita Health
accounted for $1.2 million. SG&A for the first quarter of fiscal 1998 totaled
$17.5 million, representing 18.6% of net sales, showing an improvement over the
same prior year period in which SG&A totaled $15.5 million or 22.0% of net
sales. Overall, this improvement can be attributed primarily to the Company's
focus on holding expenses steady while increasing sales. In addition, for the
first quarter of fiscal 1998, marketing expenses were lower because of the
change in the timing and the reduction of advertising and promotional
expenditures.
In the first quarter of fiscal 1997, the Company reorganized its management
team. Expenses of $0.2 million were incurred relating to severance for the
previous Chief Financial Officer, Vice President of Product Development and Vice
President of Corporate Development, and include hiring and relocation expenses
for the new Chief Financial Officer and other corporate officers.
In the first quarter of fiscal 1998, the Company recorded compensation
expenses related to the in-the-money value of stock options issued to certain
management personnel of $15.4 million and management bonuses of $5.1 million,
both of which related to the Recapitalization.
Primarily due to the impact of such Recapitalization-related expenses, the
Company had an operating loss of $16.4 million for the first quarter of fiscal
1998. Without these Recapitalization-related expenses, the operating income
would have been $4.1 million representing an increase of $1.7 million, or 70.8%,
over the same period in the prior fiscal year.
Net interest expense declined by $0.4 million during the first quarter of
fiscal 1998, compared to the first quarter of fiscal 1997. Net interest expense
during the first quarter of fiscal 1998 was $1.8 million, compared to $2.2
million for the comparable period in fiscal 1997. This improvement was due to
both lower average borrowings and lower interest rates paid by the Company on
its outstanding debt. Interest expense incurred in the first quarter of fiscal
1998 is not representative of the interest expense expected to be incurred
during the balance of fiscal 1998 due to changes in the debt structure and
interest rates effective with the Recapitalization.
The income tax benefit for the first quarter of fiscal 1998 was $7.1
million, which compares to the income tax provision of $0.1 million for the
first quarter of 1997. Based on current estimates, the Company expects its
effective tax rate to be approximately 53% for the remainder of fiscal 1998, and
to be higher than the combined federal and state rate of 40% primarily because
of the nondeductability of goodwill amortization and certain accruals.
The extraordinary loss recorded in the first quarter of fiscal 1998
represented the write off of $1.9 million of deferred financing charges which
had been incurred by the Company when it entered into a credit facility on
January 30, 1997. The income tax effect of that charge was a benefit of $0.8
million.
Primarily as a result of the previously discussed factors, a net loss of
$12.2 million was recorded in the first quarter of fiscal 1998 compared to net
income of $0.1 million recorded in the first quarter of fiscal 1997.
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales increased by $54.4 million, or 16.1%, to $392.8 million for fiscal
1997 from $338.4 million for fiscal 1996. Net sales for fiscal 1997 include $4.6
million of Vita Health sales.
Vitamin product sales, including Vita Health, increased by $54.0 million, or
20.2%, to $321.7 million for fiscal 1997 from $267.7 million for fiscal 1996.
The increase was principally attributable to unit sales
41
<PAGE>
increases and selective price increases in most major types of vitamin products
including vitamin E, the growth of the Company's herbal product line introduced
in fiscal 1996 and fiscal 1997, including products such as echinacea and ginkgo
biloba, and the Company's introduction of new nutritional supplements, including
products such as DHEA and shark cartilage, as well as the added sales from Vita
Health.
OTC pharmaceutical sales increased by $2.5 million, or 4.3%, to $61.3
million for fiscal 1997 from $58.8 million for fiscal 1996. The increase was
principally due to market growth and the acquisition of Vita Health.
Gross profit increased $19.1 million, or 22.4%, to $104.2 million for fiscal
1997 from $85.1 million for fiscal 1996. The gross margin also improved to 26.5%
in fiscal 1997 from 25.2% in fiscal 1996. The increase in the gross profit
margin was principally due to a decrease in the Company's manufacturing costs
from the investment in manufacturing equipment and facility consolidations
during the last four fiscal years and increased sales of higher margin new
products and the Company's YOUR LIFE-REGISTERED TRADEMARK- brand.
SG&A increased $10.1 million, or 16.1%, to $72.7 million for fiscal 1997
from $62.6 million in fiscal 1996. Expressed as a percentage of sales, SG&A
remained essentially flat at 18.5% in fiscal 1996 and fiscal 1997. The dollar
increase in SG&A was partially driven by the Company's investment of
approximately $2.7 million in a national radio advertising campaign (versus $1.1
million in 1996), and an increase in other promotional expenses.
During fiscal 1997, the Company closed its OTC liquid pharmaceuticals
manufacturing facility and out-sourced the production to a third party. As a
result, the Company incurred costs in fiscal 1997 of $1.4 million comprised of
(i) the write-off of fixed assets of $0.8 million and (ii) closure costs
including salaries in conjunction with the closing of $0.6 million. An
additional expense of $0.5 million for the write-off of certain liquid OTC
inventory which was no longer being manufactured by the Company was also
incurred and is included in cost of goods sold. The closure decision was made in
fiscal 1997 based on an evaluation of the OTC liquids pharmaceutical business,
as a result of which it was determined that it was more cost effective to
out-source this production to a third party. As a result of an earlier decision
in fiscal 1996 to reduce production, the Company recognized a long-lived asset
impairment charge of $4.7 million in fiscal 1996. See "--Fiscal 1996 Compared to
Fiscal 1995."
In fiscal 1997, the Company reorganized its management team. Expenses of
$1.0 million were incurred relating to severance for the previous Chief
Financial Officer, Vice President of Product Development and Vice President of
Corporate Development, and include hiring and relocation expenses for the new
Chief Financial Officer and other corporate officers.
Goodwill amortization of $1.5 million in fiscal 1997 and $1.6 million in
fiscal 1996 related to the goodwill arising from the acquisitions of LHP, XCEL
and Vita Health. Other charges of $0.9 million for fiscal 1997 included
management fees paid to AEA, the write-off of expenses incurred in connection
with Leiner Group's withdrawn initial public offering and compensation expense
arising from the grant of stock options to certain members of management in
fiscal 1994. Other charges of $0.5 million for fiscal 1996 included management
fees paid to AEA and stock compensation expense.
Primarily as a result of the factors discussed above, operating income
increased by $10.9 million to $26.7 million for fiscal 1997 from $15.8 million
for fiscal 1996.
Net interest expense decreased by $1.6 million to $8.3 million in fiscal
1997 from $9.9 million in fiscal 1996. The decrease was principally due to a
reduction in the Company's outstanding indebtedness prior to the Vita Health
Acquisition. Additionally, the Company refinanced all of its outstanding
indebtedness in January 1997, which reduced the Company's average interest cost.
The interest rates on the majority of the Company's then existing debt were
based upon variable rates that are a spread above either LIBOR or prime rates.
42
<PAGE>
The Company's effective income tax rate of approximately 44% for fiscal 1997
was higher than the combined state and federal rate of 40% primarily because of
the nondeductibility of goodwill amortization.
Primarily as a result of the factors discussed above, income before
extraordinary item for fiscal 1997 increased by $9.2 million to $10.4 million
for fiscal 1997 from $1.2 million for fiscal 1996.
The extraordinary item for fiscal 1997 of $2.8 million, net of taxes, was a
result of the Company's refinancing on January 30, 1997. See Note 7 to the
Consolidated Financial Statements.
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales increased by $23.7 million, or 7.5%, to $338.4 million for fiscal
1996 from $314.7 million for fiscal 1995.
Vitamin product sales increased by $28.1 million, or 11.7%, to $267.7
million for fiscal 1996 from $239.6 million for fiscal 1995. The increase was
principally attributable to unit sales increases in most major types of vitamin
products, initial sales of the Company's herbal product line and the Company's
introduction of other new nutritional supplements, including products such as
PYCNOGENOL-REGISTERED TRADEMARK-, evening primrose oil and coenzyme Q10. Selling
price increases implemented late in fiscal 1995 and during fiscal 1996
contributed approximately $8.5 million of the vitamin product sales increase.
OTC pharmaceutical sales decreased by $4.3 million, or 6.8%, to $58.8
million for fiscal 1996 from $63.1 million for fiscal 1995. The decrease was
principally due to declines in the net average selling price of certain
analgesics and in the number of units sold as a result of price competition and
the introduction by nationally branded companies of several new analgesic
products. Additionally, the Company's decision to resign as the OTC liquid
pharmaceuticals supplier to a major drug store chain (due to unprofitable
margins) in the first half of fiscal 1996 contributed approximately $4.0 million
to this sales decline. These decreases were partially offset by revenues from
new private label OTC pharmaceuticals business developed by the Company in
fiscal 1996.
Gross profit increased $7.0 million, or 9.0%, to $85.1 million in fiscal
1996 from $78.1 million in fiscal 1995. The gross profit margin also improved to
25.2% in fiscal 1996 from 24.8% in fiscal 1995. The increase in the gross profit
margin was principally due to a decrease in the Company's manufacturing costs
resulting from the investment in manufacturing equipment and facility
consolidations during the last three fiscal years, which allowed the Company,
among other things, to achieve lower per unit manufacturing and packaging costs
through larger batch sizes and longer packaging runs.
SG&A increased $2.9 million to $62.6 million in fiscal 1996 from $59.7
million in fiscal 1995. Expressed as a percentage of sales, SG&A declined 0.5%
from 19.0% in fiscal 1995 to 18.5% in fiscal 1996, as the Company continued to
leverage its SG&A as it increased sales.
In fiscal 1996, following the Company's resignation as the OTC liquid
pharmaceuticals supplier to a major drugstore chain, the Company decided to
scale back its liquid manufacturing capability. As a result of this decision,
the Company recognized a long-lived asset impairment and recorded a write-down
of a portion of the goodwill arising from the XCEL Acquisition. This write-down
has been reflected in the fiscal 1996 results of operations as a long-lived
asset impairment charge of $4.7 million.
Goodwill amortization of $1.6 million in each of the years ended March 31,
1995 and 1996 relates to the goodwill arising from the LHP and XCEL
Acquisitions. The other charges of $0.5 million in each of the years ended March
31, 1995 and 1996 are comprised of management fees paid to AEA and compensation
expense resulting from the grant of stock options to certain members of
management in fiscal 1994.
Primarily as a result of the factors discussed above, operating income of
$15.8 million for fiscal 1996 was $0.5 million less than operating income in
fiscal 1995.
43
<PAGE>
Net interest expense increased by $0.9 million to $9.9 million in fiscal
1996 from $9.0 million in fiscal 1995. The increase was principally due to
higher weighted average interest rates. The interest rates on the majority of
the Company's debt were at rates that were a function of either the LIBOR or
prime rates.
The Company's effective income tax rate of approximately 80% for fiscal 1996
was higher than the combined state and federal rate of 40% primarily because of
the nondeductibility of goodwill amortization, as well as the nondeductibility
of the long-lived asset impairment charge. The effective income tax rate for
fiscal 1996 was higher than the effective income tax rate of 48% for fiscal
1995, principally due to the nondeductibility of the long-lived asset impairment
charge.
Primarily as a result of the above factors, net income for fiscal 1996
declined by 68.4% to $1.2 million from $3.8 million in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash has historically been used to fund capital expenditures,
working capital requirements and debt service. As a result of the
Recapitalization, the Company's liquidity requirements have significantly
increased, primarily due to significantly increased interest expense
obligations. Interest expense, excluding amortization of deferred financing
fees, is estimated to be $21.8 million per year, associated with borrowings of
$159.8 million under the New Credit Facility, $85.0 million under the Notes, and
existing capitalized lease obligations of $4.8 million. See "Unaudited Pro Forma
Financial Information." In addition, the Company will be required to repay the
$85.0 million in term loans under the New Credit Facility over the eight and
one-half year period following June 30, 1997, with scheduled principal payments
of $850,000 annually for the first six years, $27.4 million in the seventh year,
$39.3 million in the eighth year, and $13.2 million in the final six months. The
Company will also be required to apply certain asset sale proceeds, as well as
50% of its excess cash flow (as defined in the New Credit Facility) unless a
leverage ratio test is met, to prepay the borrowings under the New Credit
Facility. All outstanding revolving credit borrowings under the New Credit
Facility will become due on June 30, 2003. The Company incurred a non-cash,
one-time charge of approximately $1.9 million related to the write-off of
existing deferred financing fees during the first quarter of fiscal 1998, as a
result of the Recapitalization. See "-- Results of Operations--First Quarter
Fiscal 1998 Compared to First Quarter Fiscal 1997."
CASH FLOWS, WORKING CAPITAL AND CAPITAL EXPENDITURES. During the first
quarter of fiscal 1998, net cash provided by operating activities totaled $4.6
million. This resulted from the first quarter net loss of $12.2 million, offset
by non-cash charges to income of $9.7 million, including $8.3 million related to
stock option compensation expense incurred in connection with the
Recapitalization, and a net change in operating assets and liabilities of $7.0
million. The changes from March 31, 1997 to June 30, 1997 in the net accounts
receivable and inventory balances resulted primarily of the seasonality of the
Company's business, whereby sales are normally higher in the fourth quarter of
the fiscal year when compared to the first quarter of the fiscal year. See
"--Seasonality." The change in accrued compensation and benefits was primarily
due to the accrual of the management bonuses and the value of the stock options,
both of which were paid in connection with the Recapitalization.
Net cash used in investing activities was $4.4 million in the first quarter
of fiscal 1998. This was primarily due to the net capital expenditures of $1.3
million and a deposit of $1.4 million which was made in connection with the
lease of the South Carolina facility during the quarter. The capital
expenditures included the investment that the Company is making in its
information systems and new manufacturing and distribution facility in South
Carolina.
Net cash provided by financing activities was $0.4 million in the first
quarter of fiscal 1998. This was due primarily to the financing transactions and
related indebtedness incurred in connection with the Recapitalization, offset by
repayments of existing indebtedness and, to a lesser extent, payment of certain
Recapitalization-related expenses on behalf of Leiner Group and an increase in
deferred financing charges
44
<PAGE>
resulting from $11.9 million of deferred financing charges related to the New
Credit Facility and Existing Notes.
Cash provided by operating activities prior to changes in assets and
liabilities was $25.4 million in fiscal 1997. The Company's working capital
increased $7.1 million, or 9.8%, to $79.4 million at March 31, 1997 from $72.3
million at March 31, 1996. This increase in working capital was principally due
to a sales increase of 16.1%. The Company's capital expenditures totaled $3.5
million in each of fiscal 1996 and fiscal 1997. During the latter part of fiscal
1993 and during fiscal years 1994 and 1995, the Company significantly increased
its manufacturing capacity and enhanced its manufacturing technology.
Accordingly, the Company invested in property, plant and equipment during fiscal
1996 and fiscal 1997 at lower levels because of sufficient capacity. The Company
anticipates investing approximately $10 million in capital equipment projects in
fiscal 1998, with approximately 75% for manufacturing capacity and productivity
improvements and 25% for routine maintenance.
Cash provided by operating activities totaled $23.2 million in fiscal year
1997 and $4.6 million in the first quarter of fiscal 1998. The Company's working
capital as of June 30, 1997 totaled $74.5 million. The Company's capital
expenditures totaled $3.5 million in fiscal 1997 and $1.3 million for the three
months ended June 30, 1997. The Company anticipates investing approximately $12
million in capital equipment projects in fiscal 1998, with approximately 75% for
manufacturing capacity and productivity improvements and 25% for routine
maintenance.
FINANCING ARRANGEMENTS. The New Credit Facility provides for term loan
borrowings in an aggregate principal amount of $85.0 million, consisting of
$45.0 million maturing seven and one-half years following June 30, 1997 and
$40.0 million maturing eight and one-half years following June 30, 1997, and
U.S. and Canadian revolving credit facilities with aggregate availability of
$125.0 million, of which $74.8 million was drawn down in connection with the
Recapitalization. As of September 30, 1997 the Company's unused availability
under the New Credit Facility was approximately $59.2 million. The Revolving
Credit Facility will mature six years after the Recapitalization Closing Date
and will include letter of credit and swingline facilities. Borrowings under the
New Credit Facility bear interest at floating rates that are based on LIBOR or
on the applicable alternate base rate (as defined), and accordingly the
Company's financial condition and performance is and will continue to be
affected by changes in interest rates. The Company has entered into an interest
protection arrangement effective July 30, 1997 with respect to $29.4 million of
its indebtedness under the New Credit Facility that provides a cap of 6.17% on
LIBOR rates plus applicable margin on the interest rates payable thereon. The
New Credit Facility imposes certain restrictions on the Company, including
restrictions on its ability to incur additional debt, enter into sale-leaseback
transactions, incur contingent liabilities, pay dividends or make distributions,
incur or grant liens, sell or otherwise dispose of assets, make investments or
capital expenditures, repurchase or prepay the Notes or other subordinated debt,
or engage in certain other activities. The Company must also comply with certain
financial ratios and tests, including a minimum net worth requirement, a maximum
leverage ratio, a minimum interest coverage ratio and a minimum fixed charge
coverage ratio. For a more detailed summary of the terms of the New Credit
Facility, including amortization and interest rates, see "Description of New
Credit Facility."
The Notes may be required to be purchased by the Company upon a Change of
Control (as defined) and in certain circumstances with the proceeds of asset
sales. The Notes are subordinated to the indebtedness under the New Credit
Facility. The Indenture imposes certain restrictions on the Company and its
subsidiaries, including restrictions on its ability to incur additional debt,
make dividends, distributions or investments, sell or otherwise dispose of
assets, or engage in certain other activities. See "Description of the New
Notes."
A portion of the outstanding borrowings under the New Credit Facility,
amounting to approximately U.S. $15.0 million as of June 30, 1997, is
denominated in Canadian dollars. All other outstanding
45
<PAGE>
borrowings under the New Credit Facility, and all of the borrowings under the
Notes, are denominated in U.S. dollars.
The Company currently plans to pursue a receivables financing to be entered
into during fiscal 1998, with initial availability of the equivalent of
approximately $40 million principal amount, which would be fully drawn at the
closing of that financing. Usage under this receivables facility is expected to
result in a dollar-for-dollar reduction in both outstanding borrowings under the
Revolving Credit Facility and the availability under the Revolving Credit
Facility. No assurance can be given that this receivables financing will be
implemented.
The Company intends to establish a new packaging and distribution facility
in York County, South Carolina. As this new facility becomes operational, other
facilities located in the midwestern United States will be closed. The Company
expects to incur expenses estimated at approximately $1.9 million annually
through fiscal year 1999 in connection with the establishment of the new
facility and the closure of the midwestern U.S. facilities. The Company expects
to lease this new facility under an operating lease that will provide the
financing for its construction, at an estimated annual lease expense, net of
lease costs for the facilities currently expected to be closed, of $1.4 million.
See "Business--Manufacturing and Distribution."
The Company currently believes that cash flow from operating activities,
together with revolving credit borrowings available under the New Credit
Facility, will be sufficient to fund the Company's currently anticipated working
capital, capital spending and debt service requirements until the maturity of
the Revolving Credit Facility, but there can be no assurance in this regard. The
Company expects that its working capital needs will require it to obtain new
revolving credit facilities at the time that the Revolving Credit Facility
matures, whether by extending, renewing, replacing or otherwise refinancing the
Revolving Credit Facility. No assurance can be given that any such extension,
renewal, replacement or refinancing can be successfully accomplished.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Prospectus contains forward-looking statements, including statements
regarding, among other items, (i) the Company's growth strategies; (ii) trends
in the Company's business; and (iii) the Company's future liquidity requirements
and capital resources. These forward-looking statements are based largely on the
Company's expectations and are subject to a number of risks and uncertainties,
certain of which are beyond the Company's control. Actual results could differ
materially from those anticipated by these forward-looking statements, including
as a result of the factors described in the section entitled "Risk Factors." In
light of these risks and uncertainties, there can be no assurance that events
anticipated by the forward-looking statements contained in this Prospectus will
in fact transpire.
46
<PAGE>
INDUSTRY
According to industry sources and management estimates, total retail sales
of vitamin products in the United States were approximately $4.1 billion in
calendar year 1996. Several different types of vitamin products are marketed
through four major distribution channels and in three major product categories.
The different types of vitamin products include multivitamins, minerals (such as
calcium), single-entity vitamins (such as vitamins C and E), nutritional
supplements (such as PYCNOGENOL-Registered Trademark-, coenzyme Q10 and evening
primrose oil) and herbal products (such as ginseng, garlic, echinacea and ginkgo
biloba).
<TABLE>
<CAPTION>
PRODUCTS 1996 MASS MARKET VITAMIN SALES
- ---------------------------------------------------------------------------------- -------------------------------
<S> <C>
Multivitamins..................................................................... 28.5%
Minerals.......................................................................... 16.0
Herbal Products................................................................... 11.3
Vitamin E......................................................................... 11.3
Vitamin C......................................................................... 11.0
Nutritional Supplements........................................................... 10.9
B Vitamins........................................................................ 7.5
Other............................................................................. 3.5
-----
Total............................................................................. 100.0%
-----
-----
</TABLE>
- ------------------------
Sources: IRI Infoscan, MMI Data, CRN Industry Data, LHP shipments and management
estimates.
The primary channels of retail distribution in the vitamin product business
are mass market retailers (drug stores, mass merchandising chains, supermarkets
and warehouse club stores, such as Walgreens, Wal-Mart, Safeway and Sam's Club,
respectively), health food stores, direct sales and mail order. Leiner is the
leading participant in the U.S. mass market channel.
<TABLE>
<CAPTION>
1996 TOTAL 1996 MASS
VITAMIN MARKET VITAMIN
RETAIL DISTRIBUTION CHANNELS INDUSTRY SALES MASS MARKET RETAILERS SALES
- ----------------------------------------- --------------- ----------------------------------------- ---------------
<S> <C> <C> <C>
Mass Market Retailers.................... 52.6% Drug Stores.............................. 46.5%
Health Food.............................. 25.7 Mass Merchandisers....................... 24.3
Direct Sales............................. 12.6 Supermarkets............................. 22.9
Mail Order............................... 5.8 Club Stores.............................. 6.3
-----
Other.................................... 3.3 Total.................................... 100.0%
----- -----
-----
Total.................................... 100.0%
-----
-----
</TABLE>
- ------------------------
Sources: IRI Infoscan, MMI Data, CRN Industry Data, LHP shipments and management
estimates.
Within the mass market channel, there are three major product categories:
national brands, broadline brands and private label products.
<TABLE>
<CAPTION>
PRODUCT CATEGORY 1996 MASS MARKET VITAMIN SALES
- ---------------------------------------------------------------------------------- -------------------------------
<S> <C>
National Brands................................................................... 40.3%
Private Label..................................................................... 36.3
Broadline Brands.................................................................. 23.4
-----
Total............................................................................. 100.0%
-----
-----
</TABLE>
- ------------------------
Sources: IRI Infoscan (excludes warehouse club sales).
47
<PAGE>
The national brand category consists primarily of multi-vitamins such as
CENTRUM-REGISTERED TRADEMARK-, ONE-A-DAY-REGISTERED TRADEMARK-,
THERAGRAN-REGISTERED TRADEMARK- and OSCAL-REGISTERED TRADEMARK- mineral
supplements. Broadline brands, such as Leiner's YOUR LIFE-REGISTERED TRADEMARK-
brand, offer a complete range of products under one brand name, including
multi-vitamins, single-entity vitamins, minerals, and nutritional supplements.
Private label products are marketed under the retailer's name and offer a wide
product assortment similar to, but somewhat narrower in scope than, broadline
brands, including national brand equivalent formulas positioned as lower-priced
products.
In the mass market, private label products represented 36.3% of dollar
vitamin sales in 1996. Private label products use the same active ingredients as
national brands. The Company believes that consumers find private label products
attractive because they sell at substantially lower prices than national brands
yet are comparable in quality and efficacy. Private label products appeal to
retailers because such products generally provide for a higher gross profit
margin and higher dollar profit per unit than national brands. Broadline brands
are supported by retailer merchandising programs and less extensive advertising
than national brands. Broadline brands provide advantages to the consumer and
retailer similar to those of private labels, and currently represent 23.4% of
dollar vitamin sales, while national brands represent 40.3%.
VITAMIN INDUSTRY GROWTH. During the last four years, vitamin industry sales
have grown at a compound annual rate of approximately 11.2%, from $2.7 billion
in 1992 to $4.1 billion in 1996. Growth in the vitamin category is being driven
primarily by (i) favorable demographic trends and (ii) increased usage.
According to Gallup polling information, people in the age group 50 and
above exhibit the highest use of vitamin products of all age groups (measured by
percentage of the age group using vitamin products). In the United States, 47%
of persons over age 50 use vitamin products regularly (compared to 40% for
persons age 35 to 49 and 32% for persons age 18 to 34). According to the United
States Bureau of the Census, from 1996 through 2005, the age group of persons
age 50 to 64 is projected to grow 39.2%, compared to 1.3% for the age group of
persons age 18 to 49.
<TABLE>
<CAPTION>
REGULAR VITAMIN USAGE BY AGE GROUP
- -----------------------------------
<S> <C> <C>
AGE CATEGORY 1992 1996
- ------------- --------- ---------
18-34 29.0% 32.0%
35-49 35.5 40.0
50-64 36.9 47.0
65+ 41.7 47.0
</TABLE>
The Company believes that three primary factors have generated significant
increases in vitamin usage: (i) recent scientific research supporting vitamin
supplementation, (ii) the growth of self-care and preventative medicine and
(iii) the increased ability of vitamin manufacturers to communicate the benefits
of individual vitamins with the enactment of the DSHEA. These factors have
created increased usage among all age groups. For example, the percentage of the
United States population between the ages of 81 and 34 who regularly take
vitamins increased from 29% in 1992 to 32% in 1996, and, between the ages of 50
and 64, the percentage increased from 37% to 47%. In addition to a larger
percentage of the population regularly using vitamins, active vitamin users are
consuming more pills. The average number of pills consumed daily by regular
vitamin users increased 12.5%, from 2.4 in 1992 to 2.7 in 1996.
- SCIENTIFIC RESEARCH. Various studies published since 1992 by researchers
at major universities have suggested an association between regular
consumption of vitamin products such as vitamins C and E and other
"antioxidants" and a reduced risk of certain diseases, such as heart
disease, cancer and Alzheimer's disease. Such research has been described
in major medical journals, such as the NEW ENGLAND JOURNAL OF MEDICINE,
magazines, newspapers and television programs. An indicator of the impact
of this research is the reported increase in regular vitamin usage among
the nation's physicians from 43% to 56% between 1994 and 1996.
48
<PAGE>
- GROWTH OF SELF-CARE AND PREVENTIVE MEDICINE. Vitamin product consumption
has been favorably affected by the growing practice of self-care and
preventive medicine by lay people in the United States. This trend is
driven by (i) increased information available to the consumer on the
health benefits of certain foods, including vitamin products, (ii) a
desire to avoid rising health care costs, (iii) convenience and (iv)
affordability.
- DSHEA. The Dietary Supplement Health and Education Act of 1994, enacted in
October 1994, removed or scaled back many restrictions previously imposed
on vitamin product manufacturers. DSHEA expanded the ability of vitamin
product manufacturers to make, on labels and in literature,
"structure/function" statements that explain how a nutrient or dietary
substance affects the structure or function of the body. The
manufacturer's ability to better communicate the health benefits of
vitamins is especially important in light of the growing trend toward
self-care and the increased sales of vitamin products in the mass market
channel, where customers are less able to rely on sales personnel for
explanations of product benefits.
MASS MARKET CHANNEL GROWTH. Over the last five years, the mass market,
where Leiner has the leading position, has consistently grown faster than the
overall vitamin industry. Between 1992 and 1996 the mass market industry sales
have grown at a compound annual rate of approximately 11.9% compared to the
vitamin industry sales which have grown at an annual compound rate of 11.2%. The
Company believes that in addition to attractive economics to retailers, growth
in the mass market channel is being driven by several consumer-driven factors:
- PRICE POINT: The average price of a vitamin in the mass market channel is
approximately 30% less than the same product in the health food channel.
In the mass market, private label products are typically priced 40% below
comparable national brands.
- NUMBER OF OUTLETS: There are more than 50,000 mass market outlets versus
approximately 9,000 in the health food channel.
- CONVENIENCE: Consumers increasingly purchase vitamins at their customary
marketplace. This favors the mass market channel over health food stores,
which are visited less frequently by the general population.
- HERB AND NUTRITIONAL SUPPLEMENT PRODUCTS: Some of the fastest growing
products in the herbal category are just now transitioning from health
food stores to mass market outlets. Typically, newer products are
introduced in the health food channel and, after gaining credibility,
migrate to the mass market. These herbal and nutritional supplement
products currently represent 18.3% of the sales in the mass market channel
versus over 50% of the health food channel's sales.
49
<PAGE>
BUSINESS
GENERAL
Leiner is the nation's largest manufacturer of vitamins, minerals, and
nutritional supplements and distributes its products primarily through mass
market retailers. The Company has a 23% share of all mass market vitamin sales
in the United States, 50% larger than its next closest competitor's share.
Additionally, Leiner's 50% share of the mass market private label segment is
more than two times the size of its next closest competitor's share. Leiner has
increased its market share over the last five years, with its U.S. vitamin sales
growing at a compound annual rate of 18.9% per year through fiscal 1997, over
one and one half times the U.S. industry growth rate. Leiner is also one of the
nation's largest private label OTC pharmaceuticals manufacturers, with 20% of
its sales in OTC pharmaceutical and other products. In January 1997, the Company
acquired Vita Health, the second largest private label vitamin and OTC
pharmaceuticals manufacturer in the Canadian market.
The Company sells a full line of vitamin products, including approximately
370 products in more than 4,400 SKUs. The Company's products are sold in tablet
and capsule forms, and in varying sizes with different potencies, flavors and
coatings. The Company's vitamin products include national brand equivalents
which compare to CENTRUM-Registered Trademark-, ONE-A-DAY-Registered Trademark-
and GINSANA-Registered Trademark-, natural vitamin products such as vitamins C
and E and folic acid, minerals such as calcium and herbal products such as
echinacea and ginkgo biloba. The Company's vitamin products are sold under its
customers' store names ("private label products"), as well as under its own YOUR
LIFE-REGISTERED TRADEMARK- brand. The Company estimates that private label
vitamin products account for approximately 36% of total vitamin product sales by
mass market retailers and accounted for approximately 55% of Leiner's total
fiscal 1997 sales (excluding sales by Vita Health). The Company also markets
over 100 different OTC pharmaceutical products in over 1,575 SKUs, including
products comparable to most major national brands in the analgesic, cough and
cold remedy and digestive aid categories.
The Company's vitamin products are sold in all 50 states through more than
50,000 retail outlets, including drug store, supermarket, mass merchandising,
and warehouse club chains, as well as in convenience stores and through United
States military outlets worldwide. Leiner is the vitamin category manager for
many leading retailers. The Company's vitamin product customers include the
country's 20 largest drug store chains (including Walgreens, American Stores,
Eckerd, CVS, Rite Aid and Revco), 18 of the 20 largest supermarket chains
(including Safeway, Winn-Dixie, Albertson's, A&P and Lucky Stores), 10 of the
largest mass merchandising chains (including Wal-Mart, Target, Kmart and
Venture) and the two largest warehouse club chains (Sam's Club and Costco).
Vita Health is currently the second largest industry participant in Canada
in terms of private label sales and the third largest participant in terms of
total sales. Vita Health has built strong relationships with Canada's largest
mass market retailers, a mass market customer base that matches well with
Leiner's customer base. Vita Health also has a strong position in the health
food channel in Canada, a distribution channel Leiner is in the process of
entering in the United States. Vita Health sells to more than 500 retail
accounts across Canada.
COMPETITIVE STRENGTHS
The Company attributes its strong market position and historical financial
performance to competitive strengths, which it believes include (i) low cost
manufacturing, (ii) high quality products, (iii) advanced category management
and leading customer service, (iv) the consistent introduction of high margin
new products and (v) a complementary OTC pharmaceutical business.
LOW COST MANUFACTURING. During the last five years, the Company has
invested $29.5 million primarily to increase capacity, as well as to consolidate
plants and modernize equipment. Tableting capacity has been increased by 45% and
packaging capacity by 66%. Tableting costs have been reduced by
50
<PAGE>
8%, and packaging and distribution costs in its western U.S. facilities have
been reduced by approximately 10% and 20%, respectively.
The Company is the largest manufacturer in the vitamin industry with two
tableting facilities and four packaging facilities. The tableting facilities
operate to USP standards and are capable of producing over 14 billion tablets
per year. The packaging facilities also operate to USP standards and contain 32
packaging lines.
HIGH QUALITY PRODUCTS. Quality is a critical factor in the customer
purchase decision, particularly of private label products, which are marketed
under the brand names of Leiner's mass market retail customers. The Company was
the first major vitamin product supplier to be certified as being in compliance
with USP's vitamin manufacturing standards. Management believes that the Company
is one of only two companies that have been independently certified as being in
substantial compliance with USP standards for manufacturing vitamin products.
While adhering to USP standards is currently voluntary, customers may require
that products meet these standards. Moreover, if a company applies a USP
designation to its vitamin labels, then the Federal Food, Drug and Cosmetics Act
requires compliance with the USP monographs and USP Manufacturing Practices for
nutritional supplements. All current Leiner vitamins that have USP monographs
qualify under USP standards.
In addition to USP vitamins, Leiner was the first major vitamin product
supplier to introduce quality innovations to the mass market such as a full line
of STANDARDIZED HERBAL EXTRACTS-Registered Trademark- (formulations specially
prepared to ensure consistent potencies of active ingredients), PHARMACEUTICAL
GRADE CALCIUM-TM-(specially processed calcium with the lowest lead levels in the
industry), Preservative-Free Vitamins, and PROVEN RELEASE-Registered Trademark-
(standards for dissolution and disintegration in substantially the form later
adopted by the USP).
The Company's management believes that its reputation for introducing many
new products after review of their safety, utility and commercial acceptance is
a key element of Leiner's strong relationships with mass market retailers and,
in turn, enhances Leiner's ability to introduce new products into the channels
it serves.
ADVANCED CATEGORY MANAGEMENT. Through its information systems, the Company
seeks to optimize the application of emerging science, new product
introductions, merchandising opportunities, shelf space profitability, and
inventory management for its customers. The Company produces over 6,000 SKUs and
ships approximately 1,500 orders per week to over 200 customers. The Company
receives 83% of its sales volume electronically through electronic data
interchange ("EDI") systems and provides vendor-managed inventory ("VMI")
services to many of its customers.
The Company, through its account marketing managers, acts as the category
manager for the vitamin product sections for several of the nation's largest
mass market retailers. Approximately 50% of the Company's sales are from
accounts where the Company is the vitamin category manager. As a category
manager, the Company seeks to utilize industry sales data obtained from consumer
market research firms, together with customer retail sales data (often received
through the Company's on-line EDI system), to identify profit enhancement
opportunities and to develop and present to customers analyses and proposals
regarding merchandising, pricing and marketing strategies. Leiner's account
marketing managers also provide private label customers with creative services
(such as artwork for promotions, advertisement layouts and label and packaging
design). The Company's category management program and creative services
constitute sales and marketing tools that management believes strengthen
Leiner's relationships with its customers.
HIGH MARGIN NEW PRODUCTS. The Company identifies emerging products in
non-mass market distribution channels and introduces proven items at the cost,
quality and delivery standards required by mass market retailers. These new
products, typically introduced under the YOUR LIFE-Registered Trademark- brand,
produce the highest margins of all the Company's products and represent an
increasing percentage of sales. To evaluate nutritional research and advise the
Company on emerging science, Leiner created a Scientific Advisory
51
<PAGE>
Board comprised of nationally recognized authorities on nutrition and science.
In the last two fiscal years, the Company introduced 52 new products which
generated $32 million of fiscal 1997 sales. As a result, in the mass market
Leiner's share of the high growth herbal products segment has grown from 9% in
1994 to 16% in 1996.
NEW PRODUCTS INTRODUCED IN FISCAL 1997
Bilberry
Compare to Garlique-Registered Trademark-
DHA
Ester-C
Grape Seed Extract
Memory Support
Non-Aspirin Gelcaps
Super Multi-Vitamin
Cardio Complex
Compare to
Propalmex-Registered Trademark-
DHEA
Eye Care Complex
Kava Kava
Milk Thistle
Selenium 200 Mcg
Cat's Claw
Compare to Rejuvex-Registered Trademark-
Dong Quai
Ginger
Liquid Energy Tonic
New Phytonutrients
Shark Cartilage
Cayenne
Coenzyme Q10
Echinacea & Goldenseal
Glucosamine Sulfate
Lubricare-TM-
Non-Aspirin Geltabs
St. John's Wort
Leiner's Scientific Advisory Board is comprised of nationally recognized
authorities in nutrition, gerontology, biochemistry, disease prevention,
botanical research, cardiology, epidemiology and regulatory affairs related to
nutrition and related health fields. The Scientific Advisory Board meets three
times annually to review the most recent research published in the area of
nutrition, specified new product development programs and various reports of
interest from board members. The Company believes that its Scientific Advisory
Board is viewed by Leiner's customers as a valuable resource.
COMPLEMENTARY NATURE OF VITAMIN PRODUCT AND OTC PHARMACEUTICAL
BUSINESSES. The Company's OTC pharmaceutical products are sold through the same
distribution channels and, for most products, manufactured by the same processes
as the Company's vitamin products. In addition, vitamin product and OTC
pharmaceuticals purchase decisions are generally made by the same buyer as the
Company's customers. This overlap of channels and processes allows the Company
to enhance its position with mass market retailers and its manufacturing and
distribution expertise by allowing the Company to (i) offer "one-stop"
vitamin/OTC pharmaceuticals shopping, (ii) allocate its fixed costs across a
broader revenue base and (iii) offer a more diversified source of revenue to
fund future growth of the Company.
BUSINESS STRATEGY
The Company has developed an operating plan to take advantage of the
continuing significant growth opportunities available to the Company
specifically and within the industry as a whole. The operating plan includes the
following principal elements: (i) introducing new products, (ii) expanding
distribution in non-mass market domestic channels, (iii) growing international
sales, (iv) building the YOUR LIFE-Registered Trademark- brand, (v) selectively
pursuing add-on acquisitions and (vi) increasing operating margins and reducing
working capital.
INTRODUCING NEW PRODUCTS. Leiner has successfully introduced into the mass
market herb and nutritional supplement products originally available only in
non-mass market channels. Mass market sales of high margin herbal products
increased 29% between 1995 and 1996 and represents a significant growth
opportunity for the Company. The Company believes that the 30 new products it
introduced in fiscal 1997 and its planned new product introductions for fiscal
1998 will further strengthen its position in the mass market channel.
Leiner believes that herb and nutritional supplement products offer an
important avenue of growth because (i) industry sales of herb and nutritional
supplement products have increased in the mass market channel at a compound
annual rate of approximately 31% from 1994 through 1996, and (ii) the Company's
share of herb and nutritional supplement products sales in the mass market
channel is substantially lower than the Company's share for vitamin and mineral
sales and thus presents a growth opportunity. Since 1994, Leiner has introduced
more than 28 herbal products and Leiner's share of herbal product sales in the
52
<PAGE>
mass market channel has grown from 10.7% in 1994 (or estimated retail sales of
$13.3 million) to 16.7% in 1996 (or estimated retail sales of $39.4 million).
The Company believes it is a leader in the vitamin product industry in the
responsible development of new products. The Company intends to continue to
develop new products and programs based on scientific research and consumer
needs. Leiner has substantially bolstered its research/product development teams
with the addition of seven people including a senior executive from the Company
and two scientists with Ph.D's in food science and nutritional science. Leiner's
research team has focused on the broad array of herbal products expected to
migrate from the health food channel to the mass market channel.
EXPANDING DISTRIBUTION IN NON-MASS MARKET DOMESTIC CHANNELS. In addition to
its growth in the mass market channel, Leiner has a proven record of growing
sales in non-mass market channels. For example, Leiner's sales through United
States military outlets worldwide have grown from $9.1 million in fiscal 1994 to
$18.9 million in fiscal 1997. The Company has contractual agreements to (i) sell
products directly through television retailing, (ii) distribute products through
direct mail to customers of a managed care provider, (iii) sell vitamins to
companies that market directly to consumers and (iv) contract manufacture
products for major pharmaceutical companies. The Company is also negotiating
arrangements to market vitamin products through the health food store channel.
GROWING INTERNATIONAL SALES. Leiner plans to (i) expand its leading
position in Canada established through its recent acquisition of Vita Health, a
major manufacturer of private label and branded vitamins and OTC pharmaceuticals
in Canada, which resulted in exclusive relationships for Canadian distribution
with Safeway, London Drug and Wal-Mart, (ii) distribute YOUR
LIFE-Registered Trademark- brand products in Japan through a strategic alliance
established with Takeda Chemical Industries, Ltd., which is the largest vitamin
producer in Japan, distributing vitamins to over 65,000 pharmacies, (iii) supply
a full line of vitamin products to Teva Pharmaceutical Industries Ltd. for
distribution in Israel under the Viva brand and (iv) follow its existing retail
customers into major international markets including Mexico, Brazil and
Indonesia.
BUILDING THE YOUR LIFE-REGISTERED TRADEMARK- BRAND. Between fiscal 1993 and
fiscal 1997, the Company expanded sales of the YOUR LIFE-Registered Trademark-
brand from $40 million to $104 million. Between fiscal 1996 and fiscal 1997,
YOUR LIFE-Registered Trademark- sales grew approximately 50%, driven primarily
by increasing sales to the mass merchandisers and to warehouse clubs. In fiscal
1997, the Company spent approximately $12 million in advertising and promotional
support to further enhance the YOUR LIFE-Registered Trademark- brand.
Nearly all of the Company's product innovations (including PROVEN
RELEASE-Registered Trademark-, DAILY PAKS-Registered Trademark-,
NATURALIZED-Registered Trademark- vitamin products, Family Size packages and
PHYTOGRAPH-TM- herbal testing) are initially introduced under the YOUR
LIFE-Registered Trademark- label. In fiscal 1998, the Company plans to implement
its innovative BODY SYSTEMS-TM- science-based merchandising system, and transfer
the successful YOUR LIFE-Registered Trademark- brand positioning recently
developed in the warehouse club chains to the Company's core drug store
customers.
SELECTIVELY PURSUING ADD-ON ACQUISITIONS. The Company has successfully
purchased and integrated five companies since 1988, including the acquisition of
Vita Health in January 1997. With this acquisition, Leiner gained (i) a leading
competitive position in the Canadian market, (ii) distribution in nearly all of
the significant mass market retailers in Canada, (iii) an extensive herb and
nutritional supplement product line and (iv) an established brand in the
Canadian health food store segment. Leiner intends to continue to pursue
selective acquisition opportunities.
INCREASING OPERATING MARGINS AND REDUCING WORKING CAPITAL REQUIREMENTS. The
Company plans to pursue initiatives to (i) consolidate its eastern U.S.
packaging and distribution facilities; (ii) continue to reduce SG&A expense as a
percentage of sales, (iii) continue to reduce its raw material costs, (iv)
achieve savings from the integration of Vita Health and (v) increase the
proportion of its overall sales represented by sales of Your
Life-Registered Trademark- branded products and other higher margin products,
including new products and products sold through new channels.
53
<PAGE>
- CONSOLIDATING EASTERN U.S. PACKAGING AND DISTRIBUTION: Leiner is committed
to continuous cost reduction and quality improvement. In fiscal 1995, the
Company completed the consolidation of three Los Angeles, California area
packaging and distribution sites into one location in Carson, California.
The centralized facility allowed the Company to more effectively schedule
its packaging lines, reducing set-ups and generating longer, uninterrupted
runs. As a result, productivity in the California packaging location
increased by 53% (measured in bottles produced per line shift). Aggregate
western U.S. packaging costs per bottle were reduced by approximately 10%.
In addition, distribution costs were reduced by approximately 20%, and,
because of the more efficient organization of the western U.S. facilities,
inventory now turns 40% faster in the western U.S. facilities than in the
unconsolidated eastern U.S. facilities.
In April 1997, Leiner announced its plan to consolidate its three eastern
U.S. packaging and distribution sites into one facility in York County,
South Carolina, an area just south of Charlotte, North Carolina. Based on
the demonstrated performance improvement in its western U.S. facilities,
the Company believes the eastern U.S. consolidation will result in future
cost savings.
- REDUCING RAW MATERIAL COSTS: The Company believes that it is the largest
purchaser of vitamin raw material in the United States and, as a result,
can use its purchasing leverage to receive volume discounts and other
benefits that give it a competitive advantage. Although the Company
believes that it has developed a low cost purchasing position in the
industry, it continues to strive to further lower purchasing costs.
- INTEGRATING THE VITA HEALTH ACQUISITION: Management has developed an
integration program with four primary components: (i) consolidate raw
materials purchasing and use low cost vendors; (ii) use Vita Health's
strong relationships with the leading retailers in Canada to expand sales
through the introduction of Leiner's low cost, high quality products in
the Canadian market; (iii) use Vita Health's facilities for combined
distribution in Canada; and (iv) focus manufacturing in low cost
locations.
- INCREASING THE PERCENTAGE OF HIGHER MARGIN PRODUCTS: Leiner intends to
shift its product mix to increase the relative share of higher margin
products by (i) introducing higher margin new products, including herb and
nutritional supplement products, (ii) increasing its sales in alternative
channels, including the health food store channel and direct television
channel, which sell a larger percentage of higher margin branded products
and (iii) continuing to expand the sales of YOUR
LIFE-Registered Trademark- branded products with significant marketing
support, extensive new product introductions and aggressive pricing in
selected channels.
PRODUCTS
The following table sets forth the sales of the Company's vitamin, OTC
pharmaceutical and other product lines from fiscal 1993 through fiscal 1997:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Vitamin products............................. $ 159.5 $ 217.3 $ 239.6 $ 267.7 $ 321.7
OTC pharmaceuticals.......................... 53.0 67.4 63.1 58.8 61.3
Other products............................... 18.3 18.9 12.0 11.9 9.8
--------- --------- --------- --------- ---------
Total.................................. $ 230.8 $ 303.6 $ 314.7 $ 338.4 $ 392.8
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
VITAMIN PRODUCTS. The Company sells a full line of vitamin products,
including approximately 370 products in more than 4,400 SKUs. The Company's
products are sold in tablet and capsule forms, and in varying sizes with
different potencies, flavors and coatings. The Company's vitamin products
include
54
<PAGE>
national brand equivalents which compare to CENTRUM-Registered Trademark-,
ONE-A-DAY-Registered Trademark- and GINSANA-Registered Trademark-, natural
vitamin products such as vitamins C and E and folic acid, minerals such as
calcium and herbal products such as echinacea and ginkgo biloba. In addition,
Leiner's Your Life-Registered Trademark- brand is one of the nation's largest
broadline vitamin product brands. Sales of vitamins C and E, in the aggregate,
accounted for approximately 34% of the Company's sales in fiscal 1997 (excluding
sales by Vita Health).
The following table lists representative national brand equivalent vitamin
products marketed by the Company and the names of comparable nationally
advertised brands (which names are owned by others) with which the Company's
products compete. Virtually all of the Company's products listed below are
marketed under both the Company's Your Life-Registered Trademark- brand and
private label.
<TABLE>
<CAPTION>
NATIONAL BRAND EQUIVALENT VITAMIN PRODUCTS COMPARABLE NATIONALLY ADVERTISED BRANDS
<S> <C>
Animal Chewable Multi........................ Flintstones-Registered Trademark-
Antioxidant Vitamin & Mineral Formula........ Protegra-Registered Trademark-
Calcium 600.................................. Caltrate-Registered Trademark-
Central-Vite Select-TM-...................... Centrum Silver-Registered Trademark-
Central-Vite-Registered Trademark-........... Centrum-Registered Trademark-
Daily Garlic................................. Garlique-Registered Trademark-
Fe-Tabs-TM-.................................. Feosol-Registered Trademark-
Ger-Tab-TM-.................................. Geritol-Registered Trademark-
Ginkgo Biloba Tablets........................ Ginkoba-TM-
Ginseng...................................... Ginsana-Registered Trademark-
Hi-Cal 500................................... Oscal-Registered Trademark-
Mature Women's Formula....................... Rejuvex-Registered Trademark-
My-A-Multi-Registered Trademark-............. Myadec-Registered Trademark-
One Daily.................................... One-A-Day-Registered Trademark-
Prenatal Tablets............................. Stuart Prenatal-Registered Trademark-
Saw Palmetto Complex......................... Propalmex-TM-
Stress Formula............................... Stress Tabs-Registered Trademark-
Thera Plus-Registered Trademark-............. Theragran M-Registered Trademark-
Vision Formula............................... Ocuvite-Registered Trademark-
</TABLE>
DAILY PAKS-REGISTERED TRADEMARK-
Antioxidant Pak-TM-
Maximum Pak-Registered Trademark-
Men's Daily Pak-Registered Trademark-
Daily Pak Select-Registered Trademark-
Stress Pak-TM-
Women's Daily Pak-Registered Trademark-
55
<PAGE>
The following table lists other representative vitamin products marketed by
the Company. Virtually all of the Company's products listed below are marketed
under both the Company's Your Life-Registered Trademark- brand and private
label.
NATURAL VITAMIN PRODUCTS
B-1 with Rice Bran
B-6 with Yeast
B-12 with Liver
Balanced B Complex +C
Balanced B-50, B-100, B-150 Complex
Beta Carotene
Calcium, Magnesium & Zinc
Calcium & Magnesium
Cod Liver Oil Vitamin A&D
Dieter's Multivitamin/Mineral
Hi Potency Iron
Hi Potency Multivitamin Mineral
Iron-Free Multivitamin & Mineral
Natural Source Calcium
Oyster Shell Calcium with D (250 mg, 500 mg)
Pharmaceutical Grade Calcium
Time Release Maximum Choice
Time Release Vit. C w/Rose Hips (500 mg, 1000 mg, 1500 mg)
Time Release Complete Multivitamin
Time Release Balanced B-50, B-100
Time Release B-12 (1000 mcg, 2000 mcg)
Time Release B-6
Vitamin A
Vitamin C with Rose Hips (250 mg, 500 mg, 1000 mg)
Vitamin E Blended (200 I.U., 400 I.U., 1000 I.U.)
Vitamin E
Zinc Lozenges with Vitamins C and B-6
REGULAR VITAMIN PRODUCTS
Advance E with ALA
All Purpose Multivitamin/Multimineral
B-Complex Supplement
Chewable Calcium + D
Chewable Vitamin C (orange)
Chewable Vitamin C with Acerola (100 mg, 300 mg, 500 mg)
Chromium Picolinate
Dieters Multi
Ferrous Sulfate
Folic Acid
New & Improved Antioxidant Tablet
Niacin 100 mg
Physically Active Multivitamin/Multimineral
Selenomax
Space Kids Children's Chewable Vitamin
Super Multi with Herbs
Time Release Vitamin C
Vitamin B-12
Vitamin B-6
Vitamin C (250 mg, 500 mg, Release Vitamin C)
Vitamin E (200 I.U., 400 I.U., 800 I.U., 1000 I.U., 1200 I.U.)
Vitamin E Plus Added Antioxidants
Vitamin E Water Dispersible
Women's Multivitamin/Multimineral
HERBAL PRODUCTS
Bilberry
Cats' Claw
Cayenne
Dong Quai
Echinacea
Echinacea & Goldenseal
Feverfew
Garlic Oil 1500 mg
Garlic & Parsley
Ginkgo Biloba
Ginseng
Ginger
Grape Seed Extract
Green Tea Extract
Hawthorn
Kava Kava
Milk Thistle
Saw Palmetto
St. John's Wort
Valerian
OTHER NUTRITIONAL SUPPLEMENTS
Aloe Vera
Bee Pollen
Brewer's Yeast
Cardio Complex
Citrimax-TM- Weight Loss System*
Coenzyme Q10
Concentrated Garlic
Cranberry Capsules
DHA
DHEA
Evening Primrose Oil
Eye Care Complex
Fast Release Lysine
Fish Oil Concentrate 1000 mg
Gelatin 5 gr
Glucosamine Sulfate
Imperial Ginseng Tablets
L-Formula Lysine (500 mg & 1000 mg)
Memory Support
Papayazyme-TM-
Pycnogenol-Registered Trademark-*
Shark Cartilage
Soya Lecithin
- ------------------------------
* Trademark owned by third party. The Company sells product under license.
56
<PAGE>
Vita Health produces more than 25 different types of vitamins and minerals.
However, the majority of Vita Health's sales in this segment are concentrated in
a few core product categories. The top 5 product categories, which comprise over
one-half of Vita Health's vitamin sales, are vitamin C products, vitamin E
products, multivitamins, herbal products and vitamin B products. Vita Health has
extensive experience and expertise with herbal products which is the fastest
growing segment of the United States vitamin market.
OTC PHARMACEUTICALS. The Company markets over 100 different OTC
pharmaceutical products in over 1,575 SKUs, including products comparable to
most major national brands in the analgesic, cough and cold remedy and digestive
aid categories. The Company sells its OTC pharmaceuticals under its customers'
private labels as well as its own broadline brand, PHARMACIST
FORMULA-Registered Trademark-, first introduced in 1989.
The following table sets forth representative OTC pharmaceutical products
marketed by the Company and the names of comparable nationally advertised brands
(which names are owned by others) with which the Company's products compete.
Virtually all of the Company's products listed below are marketed under the
Company's Pharmacist Formula-Registered Trademark- brand and private label.
<TABLE>
<CAPTION>
COMPARABLE NATIONALLY
COMPANY PRODUCTS ADVERTISED BRANDS
<S> <C>
ANALGESICS
Buffered Aspirin................................................ Bufferin-Registered Trademark-
Children's Non-Aspirin Elixir................................... Children's
Tylenol-Registered Trademark-
Enteric Coated Aspirin.......................................... Ecotrin-Registered Trademark-
Extra Strength Pain Reliever.................................... Excedrin-Registered Trademark-
Fruit Flavored Non-Aspirin Chewables............................ Children's
Tylenol-Registered Trademark-
Ibuprofen Tablets............................................... Advil-Registered Trademark-
Tablets
Infant No-Aspirin Suspension Drops.............................. Tylenol-Registered Trademark-
Infant Drops
Micro-coated Aspirin............................................ Bayer-Registered Trademark-
Non-Aspirin 160 mg Caplets...................................... Tylenol-Registered Trademark-
Junior Strength
Pain Reliever Without Aspirin (Acetaminophen)................... Tylenol-Registered Trademark-
Tablets
COUGH AND COLD
12-hour Nasal Spray............................................. Afrin-Registered Trademark-
Advanced Formula Cold Tablets................................... Dristan-Registered Trademark-
Complete Allergy Medication Tablet.............................. Benadryl-Registered Trademark-
Daytime Liquid Caps............................................. Day
Quil-Registered Trademark-
Liqui-Caps-Registered Trademark-
Flu & Cold Drink................................................ Thera-Flu-Registered Trademark-
Hista-Tabs...................................................... Actifed-Registered Trademark-
Minicol......................................................... Triaminicol-Registered Trademark-
Multisymptom Cold Tablets....................................... Comtrex-Registered Trademark-
Nasal Spray 1/2%................................................ Neo-Synephrine-Registered Trademark-
Nite Time Liquid................................................ Nyquil-Registered Trademark-
Nite Time Liquid Caps........................................... Nyquil-Registered Trademark-
Liqui-Caps
Pseudoephedrine Tablets......................................... Sudafed-Registered Trademark-
Tap DM Elixir................................................... Dimetapp-Registered Trademark-
Tussin Expectorant.............................................. Robitussin-Registered Trademark-
ANTACIDS
Antacid II Liquid with Simethicone.............................. Maximum Strength
Fast-Acting
Mylanta-Registered Trademark-
Antacid Liquid.................................................. Maalox-Registered Trademark-
Antacid Liquid with Simethicone................................. Mylanta-Registered Trademark-
Assorted Antacids Tablets....................................... Tums-Registered Trademark-
Pink Bismuth Liquid............................................. Pepto-Bismol-Registered Trademark-
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
LAXATIVES
Fiber Laxative Caplets.......................................... Fibercon-Registered Trademark-
Natural Fiber Laxative.......................................... Metamucil-Registered Trademark-
Women's Laxative Tablets........................................ Correctol-Registered Trademark-
ANTI-DIARRHEAL
Loperamide Hydrochloride........................................ Imodium
AD-Registered Trademark-
Caplets
</TABLE>
Vita Health's OTC pharmaceutical sales are primarily analgesic products and
cough and cold products. In Canada, there are two primary classes of analgesic
products, those with codeine and those without. Vita Health produces both types
of products.
SERVICES; OTHER PRODUCTS. The Company offers drug repackaging services to
major prescription pharmaceutical wholesalers and a major drug store chain. In
addition, the Company performs contract manufacturing services on a limited
basis for selected consumer products companies. In order to leverage further its
existing distribution system and marketing expertise, the Company markets
certain niche products. For example, the Company developed and markets the
BODYCOLOGY-Registered Trademark- line of hair, skin and bath care products.
CUSTOMER SERVICE: SALES, MARKETING SUPPORT, LABEL AND PACKAGING DESIGN
The Company, through its sales force and account marketing managers,
provides retailers with sales and marketing support, designed to maximize
retailers' sales and profits, including integrated schedules of merchandising
programs, advertising and promotions.
SALES. The Company has a sales force of over 30 professionals who regularly
call on the Company's customers to develop an in-depth understanding of each
customer's competitive environment and opportunities. Leiner's sales force is
intended to enable the Company to establish close relationships with its
customers. The Company's sales department consists of account managers organized
into regional divisions. Each regional sales manager has broad authority in
negotiating with and supporting the retail customers in their territory. The
sales executives utilize financial costing models in order to understand the
profitability of specific sales contracts. The Company has attracted and
retained sales executives who have been trained at many of the leading
pharmaceutical and consumer products companies. The Company believes its sales
force constitutes a competitive advantage over companies that have less
extensive sales forces and therefore rely more heavily on outside brokers.
MARKETING SUPPORT. The Company provides retailers with comprehensive
marketing support designed to maximize their sales and profits. Leiner's
marketing activities are organized into four operating groups: (i) account
marketing, which provides category management and marketing services to
retailers, (ii) brand marketing, which focuses on supporting the Company's
branded products, (iii) new product development, which develops new products and
new product differentiation strategies and (iv) international marketing, which
gains access to foreign markets.
The brand management group focuses on building the sales of the Company's
branded products, primarily YOUR LIFE-Registered Trademark- and DAILY
PAKS-Registered Trademark-. The Company uses marketing programs for its branded
products similar to those used for the Company's private label customers. In
addition to utilizing retailer advertising vehicles, the Company supports its
brands with consumer advertising, in print and radio, and with regular coupon
support provided through free standing inserts in newspapers across the country.
The new product development group seeks to develop new products in response
to scientific research and consumer trends and often consults with the
Scientific Advisory Board in developing and introducing new products. New
products and formulas are developed in the Company's dedicated research
facilities under rigorous testing procedures.
The international marketing group is responsible for developing formulations
and packaging for the Company's foreign markets, as well as obtaining trademark
registrations and authorizations for importation and sale of the Company's
products in countries outside the United States.
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<PAGE>
LABEL AND PACKAGING DESIGN. The Company believes that its resources and
expertise in label design and management are significant competitive advantages
in servicing the complex needs of its private label customers. The Company's
graphics design Staff consists of 35 professionals who produce design concepts,
artwork, graphics and copy for over 5,450 private label products. Leiner's
in-house graphics capability enables the Company to deliver quick turnaround
times for private label design projects and allows its customers to participate
in the development and production of labeling and packaging. Leiner's customers
benefit from the Company's significant investment in computer design equipment,
as well as in-house expertise in marketing strategies and regulatory matters
applicable to labels and packaging. The Company believes that the competitive
advantage derived from its graphics facilities has been enhanced by the
increased use of "structure/function" claims and other nutritional claims on
vitamin product labels as a result of DSHEA. The Company currently operates four
packaging facilities equipped with 32 packaging lines in order to satisfy the
complex demands and rapid response time required by its customers.
The Company has received "Vendor of the Year" awards from several of the
nation's leading retailers, including Albertson's, Revco, Rite-Aid, Safeway and
Target. Vita Health was recently named "Vendor of the Year" by Wal-Mart Canada.
MANUFACTURING AND DISTRIBUTION
MODERN FACILITIES. Leiner's active manufacturing and distribution
facilities consist of approximately 1.0 million square feet of owned or leased
plant and office facilities in six locations and five states. The Company also
recently added Vita Health's site in Canada and announced the construction of a
new plant in South Carolina. Combined, the Company is the largest manufacturer
in the North American vitamin products industry and is capable of packaging over
18 billion doses each year. In April 1995, Leiner was the first major vitamin
product manufacturer to be certified as being in compliance with USP's vitamin
manufacturing standards, which became effective in January 1995. The Company's
U.S. facilities were audited by an independent quality assurance laboratory and
received the laboratory's highest categorical rating. All of the Company's U.S.
manufacturing facilities also have been audited by the FDA and have been found
to be in compliance with the FDA's "Current Good Manufacturing Practices for
Finished Pharmaceuticals" ("cGMP").
Leiner has two U.S. manufacturing facilities, which are located in Garden
Grove, California and Kalamazoo, Michigan. The primary manufacturing facility
for the Company's vitamin products is its 138,500 square foot Garden Grove
plant. The primary manufacturing facility for the Company's OTC pharmaceuticals
is the Company's 51,250 square foot Kalamazoo plant. In the event of a
catastrophic casualty to one of the Company's primary vitamin or OTC tableting
facilities, the Company has the ability to shift production to other facilities.
The Company operates 38 tableting machines in its Garden Grove, California
facility and 23 tableting machines in its Kalamazoo, Michigan facility. The
Company operates four packaging and distribution facilities, which are located
in Carson, California; West Unity, Ohio; Madison, Wisconsin; and Sherburne, New
York, occupying 471,500, 204,200, 95,500 and 10,300 square feet, respectively.
These facilities are equipped with a total of 32 packaging lines, and, as with
tableting, products can be shifted between facilities in the event such a need
arises. See "Properties."
The Company intends to establish a new 535,000 square foot regional
manufacturing and distribution center in Fort Mill, South Carolina. The center
will serve the Company's retail customers throughout the eastern United States
and will employ approximately 700 employees when it becomes fully operational
within the next three years. Construction of the facility is scheduled to begin
this summer. The Company has begun training the staff required for initial
operations at a temporary 121,767 square foot facility adjacent to the permanent
site of the Fort Mill center. Occupancy of the permanent site is expected by the
summer of 1998. Within the first year of operation in South Carolina, the
Company plans to hire up to 450 employees to work at the new center. The
majority of these employees will be recruited from the local labor force with a
smaller percentage relocating from the Company's other facilities. As the new
facility becomes operational, other facilities located in the midwestern United
States will be closed.
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Vita Health currently tablets, bottles and packages its products in a
modern, 100,000 square foot facility in Manitoba. The facility contains 80,000
square feet of manufacturing and distribution space and 20,000 square feet of
office space.
The Company purchases approximately 600 different bulk raw materials which
it mixes into over 480 proprietary formulations and fabricates into a wide
variety of tablets, caplets and liquid products. Upon receipt by the Company,
the raw materials are sampled and tested in the Company's laboratories and
compared against rigid product specifications. After the bulk raw materials are
tested and released, they are available to the manufacturing department where
they are weighed, mixed and (in the case of tableting) compressed. Finished bulk
products are then packaged or filled into a wide variety of bottle counts and
labels producing over 6,000 SKUs. The Company performs comprehensive quality
control procedures from the receipt of raw materials to the release of the
packaged product, including extended stability and dissolution tests on the
finished products. All of the Company's vitamin and OTC pharmaceutical products
are manufactured according to CGMP and all of the Company's vitamin products are
manufactured according to USP standards. In addition, the Company's
manufacturing activities include packaging bulk products purchased from certain
suppliers.
EDI AND VMI. In order to enhance its customers' ability to place orders
efficiently and accurately, Leiner has established an EDI system, which links
Leiner electronically with many of its customers. Leiner receives over 83% of
its sales volume via EDI. The Company also employs EDI, for example, to receive
status reports on customers' warehouse balances, warehouse issues, and consumer
sales, to notify customers in advance of what shipped and how it shipped, to
invoice customers, and to receive payments. The Company has recently added EDI
connections to its freight carriers, so that en route shipments and actual
deliveries can now be monitored automatically. The Company maintains a Staff
dedicated to increasing its connectivity to the customer, and new features are
added each year.
Another advanced aspect of the Company's customer service offering is its
VMI system. As part of the VMI process, the Company electronically receives
sales data generated by scanning equipment at its customers' cashier stations or
warehouses. Using this data, the Company monitors and automatically restocks
customer inventory as needed. In essence, the Company initiates its own purchase
orders for VMI customers, operating on the customers' behalf according to
mutually agreed operating practices. The EDI and VMI systems allow paperless
order placement and increase the accuracy and timeliness of order processing,
while enabling the customer and the Company to decrease inventory levels without
losing sales due to products being out of stock. In addition, by communicating
customer sales data to the Company, VMI allows the Company to better anticipate
customer needs and enhances the Company's ability to manage production
scheduling.
The Company believes that it is a leader among vitamin product manufacturers
and marketers in providing advanced order processing services and expects to
provide these services to an increasing number of customers. The Company also
believes that its new modern manufacturing and distribution facilities provide
the Company with an increased capability to respond quickly to customers' sales
orders while maintaining high levels of quality control.
VITA HEALTH DISTRIBUTION. Vita Health distributes through all leading
retail channels including mass-market stores and health food stores. However,
the bulk of the Vita Health's sales are concentrated in the mass market, which
reflects the overall market distribution in Canada. Mass merchandisers
(Wal-Mart, Kmart, etc.) still represent a relatively small percentage of sales
compared to the United States, but is the fastest growing channel in Canada. The
Company believes that Vita Health should benefit from its strong relationship
with Wal-Mart, as this company continues to gain market share in Canada.
MANUFACTURING PROGRAM/COST REDUCTION. Leiner is committed to being a low
cost producer of vitamin products and OTC pharmaceuticals. In support of this
commitment, during the last five years, Leiner invested approximately $29.5
million in the implementation of its manufacturing program with respect to
expanding and restructuring its tableting and its western U.S. packaging and
distribution facilities. This
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<PAGE>
program reduced costs per unit in tableting, western packaging, and western
distribution by approximately 8%, 10%, and 20%, respectively. In April 1997, the
Company announced its decision to consolidate its eastern U.S. packaging and
distribution operations into a new plant in York County, South Carolina. The
Company believes that it can achieve cost savings from the eastern restructuring
commensurate with those it achieved in the west.
The acquisition of XCEL, as well as other acquisitions made by the Company
prior to 1989, resulted in a number of separate facilities with overlapping
functions, creating opportunities to realize manufacturing cost reductions by
consolidating the acquired facilities into a smaller number of larger, more
efficient units equipped with modern tableting equipment. In response to these
opportunities, in fiscal 1994, Leiner formulated a specific program, which
called for the consolidation and expansion of its western U.S. tablet
manufacturing, packaging and distribution facilities. The Company consolidated
two packaging facilities and one distribution facility into one combined
operation in Carson, California, increasing the aggregate space dedicated to
distribution and packaging from 266,000 to 403,000 square feet. As a result of
moving packaging operations out of the Company's Garden Grove, California
facility and dedicating that facility primarily to tableting, the total
tableting space at Garden Grove was expanded from 66,000 to 120,000 square feet.
Into this space in Garden Grove, the Company consolidated the Warren, Michigan
tableting plant, which was then closed, in fiscal 1996. The planned eastern U.S.
restructuring will consolidate the remaining smaller packaging and distribution
facilities into another facility much like the one in Carson.
The Company has benefited from its significant investments in modern
tableting and packaging equipment. The Company's newly purchased tableting
presses run significantly faster than its older equipment and have reduced raw
material yield loss. In addition, the new presses' advanced design and computer
controls allow quicker setups and longer runs between cleanups. The newly
purchased packaging equipment also runs significantly faster than the Company's
older equipment and allows the Company to reduce changeover time, which
increases packaging throughput and flexibility. The consolidation and consequent
simplification of the Company's manufacturing system have allowed the Company to
benefit from economies of scale (through increased average batch sizes) and to
reduce manufacturing costs (through reduced overhead and handling associated
with multiple subscale facilities). The Company has also reduced packaging
changeover downtime by increased dedication of lines by bottle size.
CUSTOMERS
The Company's vitamin products are sold in all 50 states through more than
50,000 retail outlets, including drug store, supermarket, mass merchandising,
and warehouse club chains, as well as in convenience stores and through the
United States military outlets worldwide. Leiner is the vitamin category manager
for many leading retailers. The Company's vitamin product customers include the
country's 20 largest drug store chains (including Walgreens, American Stores,
Eckerd, CVS, Rite Aid and Revco), 18 of the 20 largest supermarket chains
(including Safeway, Winn-Dixie, Albertson's, A&P and Lucky Stores), 10 of the
largest mass merchandising chains (including Wal-Mart, Target, Kmart and
Venture) and the two largest warehouse club chains (Sam's Club and Costco). The
Company has approximately 200 active U.S. customers. In fiscal 1997, Wal-Mart
Stores, Inc. and Walgreen Co. accounted for approximately 27% and 12%,
respectively, of the Company's sales. Each of the Company's other major
customers accounted for less than 10% of the Company's sales for fiscal 1997.
The Company's top ten customers in the aggregate accounted for approximately 71%
of the Company's sales for fiscal 1997.
BACKLOG ORDERS
The Company had approximately $25.2 million in backlog orders, believed to
be firm, as of September 30, 1997. Substantially all of these orders will be
shipped in the fiscal 1998. The Company had $11.8 million in backlog orders,
believed to be firm, as of September 30, 1996.
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PURCHASED MATERIALS
The Company purchases from third party suppliers certain important
ingredients and products that the Company cannot manufacture. Although the
Company currently has supply arrangements with several suppliers of these
ingredients and products, and the Company's purchased materials are generally
available from numerous sources, an unexpected interruption of supply could
materially adversely affect the Company's results of operations. Two suppliers
provided approximately 31% of the materials purchased during fiscal 1997 by the
Company (excluding purchases by Vita Health). No other single supplier accounts
for more than 10% of the Company's material purchases.
COMPETITION
The markets for the Company's products are highly competitive. The Company
competes on the basis of customer service, product quality, pricing and
marketing support. In the mass market vitamin product business, the Company
believes that its major U.S. competitors are Pharmavite Corp., Rexall Sundown,
Inc. and NBTY, Inc. (manufacturer of Nature's Bounty vitamin products). In the
OTC pharmaceuticals business, the Company believes its major U.S. competitor is
Perrigo Company.
In the United States, the Company sells substantially all of its vitamin
products in the mass market. Although the Company does not currently participate
significantly in other U.S. distribution channels such as health food stores,
direct mail and direct sales, the Company's products may face competition from
such alternative channels as more customers utilize these channels of
distribution to obtain vitamin products. The mass market channel accounted for
approximately 53% of all U.S. vitamin product sales in calendar year 1996.
The Company competes with other major private label and broadline brand
manufacturers, certain of which are larger and have access to greater resources
than the Company. Among other factors, competition among private label
manufacturers is based upon price. If one or more manufacturers significantly
reduce their prices in an effort to gain market share, the Company's results of
operations or market position could be adversely affected. However, the Company
believes that it competes favorably with other companies because of its (i) low
manufacturing costs, (ii) sales and marketing strategies, (iii) customer service
(including complexity and speed of delivery) and (iv) reputation of being a
quality supplier of products.
The Company also competes with manufacturers of nationally advertised brand
name products such as American Home Products Corp., Bayer Group and
Bristol-Myers Squibb Co., which are larger and have resources substantially
greater than those of the Company, and are substantially less leveraged than the
Company. In the future, one or more of these companies could seek to compete
more directly with the Company by manufacturing private label products or by
significantly lowering the prices of their national brand products. The Company
believes, however, that the mass-oriented manufacturing and marketing methods
used by national brand manufacturers are less suited to the customized packaging
and marketing requirements of private label customers, which the Company
satisfies by utilizing its packaging and graphics facilities. See "--Customer
Service: Sales, Marketing Support, Label and Packaging Design."
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PROPERTIES
The following table sets forth the location, type of facility, square
footage and ownership interest in each of the Company's principal facilities. In
addition to the facilities shown below, the Company has signed a letter of
intent to occupy a new 535,000 square foot facility in Fort Mill, South
Carolina. The Company intends to hold the facility under an operating lease. See
"--Manufacturing and Distribution" for a description of the Company's ongoing
consolidation program.
<TABLE>
<CAPTION>
APPROX. LEASED DATE OF
SQUARE OR LEASE
LOCATION TYPE OF FACILITY FEET OWNED EXPIRATION
- ------------------------ ------------------------------------------------ --------- --------- -------------
<S> <C> <C> <C> <C>
Carson, CA.............. Packaging, distribution and corporate offices 471,500 Leased 3/31/04(1)
Garden Grove, CA........ Manufacturing 138,500 Leased 10/31/02
Kalamazoo, MI........... Manufacturing 51,250 Owned --
Kalamazoo, MI........... Auxiliary warehouse 10,000 Leased Mo.-to-mo.
Winnipeg, Canada........ Manufacturing, packaging, distribution 100,000 Owned --
West Unity, OH.......... Packaging and distribution 204,200 Leased 5/31/99(2)
Madison, WI............. Packaging and distribution 95,500 Owned --
Madison, WI............. Auxiliary warehouse 40,000 Leased Mo.-to-mo.
Sherburne, NY........... Packaging and distribution 10,300 Owned --
Sherburne, NY........... Auxiliary warehouse 13,600 Leased Mo.-to-mo.
Chicago, IL............. Not in use; held for sale 379,000 Owned --
Fort Mill, SC........... Manufacturing, packaging and distribution (for 121,767 Leased 5/31/98
short-term use)
</TABLE>
- ------------------------
(1) The Company has the option to extend by 10 years.
(2) The Company has the option to extend by 3 years. The Company also has an
option to cancel with one year's notice.
The Company believes that its facilities and equipment generally are well
maintained and in good operating condition.
EMPLOYEES
As of September 30, 1997, the Company had approximately 1,386 full-time
employees. Approximately 404 employees were engaged in executive or
administrative capacities and approximately 982 employees were engaged in
manufacturing, packaging or distribution. In addition, as of September 30, 1997,
the Company employed approximately 825 temporary employees. The large number of
temporary employees gives the Company significant flexibility to adjust staffing
levels in response to seasonal fluctuations in demand. None of the Company's
employees is represented by a collective bargaining unit. The Company considers
its relations with its employees to be good.
YEAR 2000 COMPLIANCE
The Company is in the process of modifying, upgrading or replacing its
computer software applications and systems to accommodate the "year 2000" dating
changes necessary to permit correct recording of year dates for 2000 and later
years. The Company does not expect that the cost of its year 2000 compliance
program will be material to its financial condition or results of operations.
The Company believes that it will be able to achieve compliance by the end of
1998, and does not currently anticipate any material disruption in its
operations as the result of any failure by the Company to be in compliance. The
Company does not currently have any information concerning the compliance status
of its suppliers and customers.
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In the event that any of the Company's significant suppliers or customers do not
successfully and timely achieve year 2000 compliance, the Company's business or
operations could be adversely affected.
GOVERNMENT REGULATION
The manufacturing, processing, formulation, packaging, labeling, advertising
and sale of the Company's products are subject to regulation by one or more
United States and Canadian federal agencies, including the FDA, the FTC, the
CPSC and Health Canada. The activities are also regulated by various agencies of
the states, provinces and localities in which the Company's products are sold.
In addition, the Company manufactures and markets certain of its products in
compliance with the guidelines promulgated by voluntary standard organizations,
such as the USP.
FDA. The United States Food and Drug Administration exercises authority
over three aspects of the Company's business: (i) the labeling and marketing of
dietary supplements, (ii) the labeling and marketing of OTC pharmaceuticals and
(iii) the operation of its manufacturing and packaging facilities.
DIETARY SUPPLEMENTS. The Dietary Supplement Health and Education Act of
1994 was enacted on October 25, 1994 and amends the Federal Food, Drug and
Cosmetic Act to (i) define dietary supplements, (ii) expand with certain
limitations the number of products that can be marketed as dietary supplements,
(iii) permit "structure/function" statements for all vitamin products, including
herbal products and other nutritional supplements, and (iv) permit the use of
published literature in the sale of vitamin products. Dietary supplements are
regulated as foods under DSHEA, and the FDA is prohibited from regulating the
dietary ingredients in supplements as food additives, or the supplements as
drugs, unless product claims trigger drug status.
DSHEA provides for specific nutritional labeling requirements for dietary
supplements. The FDA has proposed the form of these requirements, which are
proposed to become effective January 1, 1998. DSHEA permits substantiated,
truthful and non-misleading statements of nutritional support to be made in
labeling, including describing the positive effects on general well-being from
consumption of a dietary ingredient or the role of a nutrient or dietary
ingredient in affecting or maintaining structure or function of the body. In
addition, DSHEA also authorizes the FDA to promulgate current good manufacturing
practices specific to the manufacture of dietary supplements, to be modeled
after food current good manufacturing practices. The Company currently
manufactures its dietary supplement products pursuant to the more detailed OTC
pharmaceutical current good manufacturing practices.
The FDA has begun proposing regulations to implement DSHEA. The Company
cannot determine what effect such regulations, when promulgated, will have on
its business in the future. Regulations in the form currently proposed by the
FDA will likely require, among other things, expanded or different labeling. In
addition, regulations promulgated by the FDA in the future could significantly
limit certain provisions of DSHEA that are beneficial to the sales of vitamin
products.
The Nutrition Labeling and Education Act of 1990 (the "NLEA"), in part
modified by DSHEA, requires the FDA to establish regulations (i) governing
nutrition labeling of all foods, including dietary supplements, (ii) regulating
the use of nutrient content descriptors (e.g., "high" or "low") and (iii)
establishing permitted health claims. The FDA issued final regulations under the
NLEA in January 1993. A limited number of the Company's vitamin products are
foods subject to all of the January 1993 NLEA regulations; most of the Company's
vitamin products are dietary supplements subject to the health claim regulations
only.
Based on the changes to the NLEA effected by DSHEA, the FDA has proposed new
dietary supplement regulations (i) adopting standard formats for nutrition
information on dietary supplement labels and (ii) applying existing approved and
proposed new descriptors to dietary supplements. Under the current FDA proposal,
the nutrition information and descriptor regulations for dietary supplements
would apply to packages labeled on or after January 1, 1998. Previously labeled
packages could be sold through
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<PAGE>
the distribution chain. The health claim regulations took effect for packages
labeled, or claims made, after July 1, 1994. While packages labeled before July
1, 1994 are protected from charges under the NLEA for making unapproved health
claims, the FDA is not prevented from using these health claims to allege that
the relevant product is a drug and, therefore, is subject to applicable drug
regulations. The Company has established accounting reserves in connection with
the anticipated cost of complying with the new regulations, which the Company
believes are adequate.
The Company cannot determine what effect the FDA's future regulations, when
and if promulgated, would have on its business in the future. Such regulations
could, however, among other things, require expanded documentation of the
properties of certain products, or scientific substantiation regarding
ingredients, product claims or safety. In addition, the Company cannot predict
whether new legislation regulating the Company's activities will be enacted, or
what effect any such legislation would have on the Company's business.
OTC PHARMACEUTICALS. FDA regulation of OTC pharmaceuticals takes two forms.
Most of the Company's OTC pharmaceutical products are governed by FDA monographs
covering well-known ingredients and specifying, among other things, permitted
claims, required warnings and precautions, allowable combinations of ingredients
and dosage levels. Marketing a product governed by a monograph or pending
monograph requires no prior approval of the FDA, only compliance with the
applicable monograph. Monographs may be changed from time to time, requiring
formulation, packaging or labeling changes for an affected product. While such
changes may cause the Company to incur costs to comply with such changes,
disruption of distribution or material obsolescence of inventory due to any such
changes is not likely.
In the future, the Company may desire to market as over-the-counter products
previously "prescription only" pharmaceuticals ("Rx-to-OTC switch products"),
which require FDA approval before the products can be marketed. The marketing of
such products by the Company will require that the Company obtain FDA approvals
or arrange to obtain such products from manufacturers that have obtained FDA
approval. In addition, the Drug Price Competition & Patent Term Restoration Act
of 1984 (the Hatch-Waxman Amendments to the Federal Food, Drug, and Cosmetic
Act) gives a three-year period of marketing exclusivity to a company that
obtains FDA approval of a switch requiring clinical evidence of effectiveness of
the OTC pharmaceutical dose. Unless Leiner establishes relationships with such
companies having exclusive marketing rights, the Company's ability to market
Rx-to-OTC switch products and offer its customers products comparable to
national brand products would be delayed until the expiration of the exclusivity
granted to the company initiating such a switch. There can be no assurance that,
in the event that the Company applies for FDA approvals, the Company would
obtain such approvals to market Rx-to-OTC switch products or, alternatively,
that the Company would be able to obtain such products from other manufacturers.
MANUFACTURING AND PACKAGING. All facilities where foods (including dietary
supplements) and pharmaceuticals are manufactured, packed, warehoused, or sold
must comply with the FDA manufacturing standards applicable to that type of
product. All of the Company's products are manufactured according to the Current
Good Manufacturing Practices for Finished Pharmaceuticals. The failure of a
facility to be in compliance may lead to a breach of representations made to
private label customers or to regulatory action against the products made in
that facility, including seizure, injunction or recall. The Company believes
that its facilities are in compliance in all material respects with the cGMPs
and other applicable requirements for each facility.
CPSC. The United States Consumer Product Safety Commission ("CPSC") has
authority, under the Poison Prevention Packaging Act, to designate those
products, including vitamin products and OTC pharmaceuticals, that require child
resistant closures to help reduce the incidence of poisonings. The CPSC has
adopted regulations requiring numerous OTC pharmaceuticals and iron-containing
dietary supplements to have such closures, and has adopted rules on the testing
of such closures by both children
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<PAGE>
and adults. The Company, working with its packaging suppliers, believes that it
is in compliance with all CPSC requirements.
FTC. The United States Federal Trade Commission ("FTC") exercises primary
jurisdiction over the advertising and other promotional practices of food and
OTC pharmaceuticals marketers, and has concurrent jurisdiction with the FDA over
the advertising and promotional practices of marketers of dietary supplements.
The FTC has historically applied a different standard to health-related claims
than the FDA; the FTC has applied a "substantiation standard," which is less
restrictive than the standard under the NLEA. The FTC NLEA enforcement policy
uses FDA regulations as a baseline (and safe harbor) and permits (i) nutrient
content descriptions that are reasonable synonyms of FDA-permitted terms, and
(ii) qualified health claims not approved by FDA where adequate substantiation
exists for the qualified or limited claims.
STATE REGULATION. All states regulate foods and drugs under local laws that
parallel federal statutes. Because the NLEA gave the states the authority to
enforce many labeling prohibitions of the Federal Food, Drug, and Cosmetic Act,
after notification to the FDA, the Company and other dietary supplement
manufacturers may be subject to increasing state scrutiny for NLEA compliance,
as well as increasing FDA review.
USP. The United States Pharmacopoeia Convention, Inc. is a
non-governmental, voluntary standard-setting organization. Its drug standards
are incorporated by reference into the Federal Food, Drug, and Cosmetic Act as
the standards that must be met for the listed drugs, unless compliance with
those standards is specifically disclaimed. USP standards exist for most OTC
pharmaceuticals. The FDA requires USP compliance as part of cGMP.
The USP began adopting standards for vitamin and mineral dietary supplements
in 1994. These standards cover composition (nutrient ingredient potency and
combinations), disintegration, dissolution, manufacturing practices and testing
requirements. These standards are codified in the USP Monographs and the USP
Manufacturing Practices. In 1995, USP compliance included the standards for
disintegration and dissolution. While USP standards for vitamins are voluntary,
and not incorporated into federal law, customers of the Company may demand that
products they are supplied meet these standards. Label claims of compliance with
the USP may expose a company to FDA scrutiny for such claims. In addition, the
FDA may in the future require compliance, or such a requirement may be included
in new dietary supplement legislation. All of the Company's vitamin products
(excluding certain nutritional supplements products for which no USP standards
have been adopted) are formulated to comply with existing USP standards.
CANADIAN REGULATION. In Canada, the Company's products are subject to
federal and provincial law, particularly federal drug legislation. All
substances sold for ingestion by humans are regulated either as a food or drug
under the Canadian Act. In addition, certain of the Company's products are
subject to government regulation under the CDSA. The Canadian Act and the CDSA
are enforced by Health Canada--Health Protection Branch (the "HPB").
The Canadian Act governs the processing, formulation, packaging, labelling,
advertising and sale of the Company's products and regulates what may be
represented to the public on labels and in promotional material, in respect of
the properties of the various products. The Canadian Act also provides that any
drugs sold in Canada must have a label affixed thereto which shows certain
information such as its proper scientific or common name, the name and address
of the distributor, its lot number, adequate directions for use, a quantitative
list of its medical ingredients and its expiration date. In addition, no person
may sell a drug unless it has been assigned a DIN or GP. DINs and GPs are
obtained through an application to the HPB. Regulations under the Canadian Act
require all manufacturers to pay annual fees for their DINs and GPs. HPB
approval for the sale of the Company's products may be subject to significant
delays despite the Company's best efforts.
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<PAGE>
The CDSA governs the manufacture and sale of controlled substances as
defined in the CDSA. The CDSA contains requirements for licenses of the factory,
approved security, a qualified person in charge of the factory and detailed
record keeping in connection with the manufacturing of controlled substances.
Regulations under the Canadian Act set out mandatory and rigorous
procedures, practices and standards for manufacturers. Health Canada performs
inspections of companies in the industry to ensure compliance with the Canadian
Act and the CDSA. For each of the Company's products, the development process,
the manufacturing procedures, the use of equipment, and laboratory practices and
premises must comply with Good Manufacturing Practices and Establishment
Licensing regulations under the Canadian Act.
The Company's herbal products which are being marketed with drug claims or
which contain drug substances require regulatory approval in the form of a DIN
or GP issued by Health Canada. In addition, the Canadian government has
established a panel to review the regulatory framework for herbal products. If
the Canadian government implements new or amended requirements for herbal
products it may result in additional costs to the Company for the requisite
regulatory approval, delay the entry of some products onto the market or
adversely affect sales of herbal products.
LEGAL PROCEEDINGS AND PRODUCT LIABILITY
The Company is currently engaged in various legal actions and governmental
proceedings, and, although ultimate liability cannot be determined at the
present time, the Company is currently of the opinion that the amount of any
such liability from these other actions and proceedings, when taking into
consideration the Company's product liability coverage, will not have a material
adverse effect on its financial position.
The Company, like other retailers, distributors and manufacturers of
products that are ingested, faces an inherent risk of exposure to product
liability claims in the event that, among other things, the use of its products
results in injury. With respect to product liability coverage, the Company
currently has an aggregate of $57.0 million of insurance coverage, including
primary products liability and umbrella liability coverage with deductibles of
(i) in the case of OTC pharmaceuticals, $0.25 million per claim subject to an
annual, aggregate deductible limit of $0.75 million and (ii) in the case of
vitamins and all other products, $0.25 million per claim, subject to an annual,
aggregate deductible limit of $0.75 million.
The Company has been named in numerous actions brought in federal or state
courts seeking compensatory and, in some cases, punitive damages for alleged
personal injuries resulting from the ingestion of certain products containing
L-Tryptophan. As of April 24, 1997, the Company and/or certain of its customers,
many of whom have tendered their defense to the Company, had been named in 660
lawsuits of which 647 have been settled. The Company's supplier of bulk
L-Tryptophan has agreed to assume the defense of all claims and pay all
settlements and judgments, other than for certain punitive damages, against the
Company arising out of the ingestion of L-Tryptophan products. To date, such
supplier has funded all settlements and paid all legal fees and expenses
incurred by the Company related to these matters. In light of such agreement and
such supplier's performance to date thereunder, and the Company's product
liability insurance (which is subject to deductibles not to exceed $1.4 million
in the aggregate with respect to these matters), the Company does not expect to
be required to make any material payments in connection with the resolution of
the remaining 13 cases.
The Company learned in the first quarter of fiscal 1998 of an FDA proposal
to ban the use of phenolphthalein in laxatives. The FDA reportedly took this
action in response to certain studies which concluded that the administration of
very high doses of yellow phenolphthalein could cause cancer in laboratory
animals. The reports concerning these studies state that these dosages
administered substantially exceeded the dosages commonly used by human beings.
In response, the Company voluntarily
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<PAGE>
discontinued production of its laxative product containing yellow
phenolphthalein and notified its customers that they may return this product.
The Company has reformulated this product and expects to be shipping the
reformulated version in November 1997.
INTELLECTUAL PROPERTY
The Company owns trademarks registered with the United States Patent and
Trademark Office and/or similar foreign authorities for 127 trademarks. In
addition, the Company has applications pending for 62 trademark registrations.
The Company regards its trademarks and other proprietary rights as valuable
assets and believes they are important in the marketing of the Company's
products. Leiner's most significant trademarks include YOUR
LIFE-Registered Trademark-, PHARMACIST FORMULA-Registered Trademark-, PROVEN
RELEASE-Registered Trademark-, DAILY PAK-Registered Trademark-,
NATURALIZED-Registered Trademark-, CENTRAL-VITE-Registered Trademark-,
PHYTOGRAPH-Registered Trademark- and BODYCOLOGY-Registered Trademark-. The
Company intends to maintain the registrations on its important trademarks so
long as they remain valuable to its business. The Company vigorously protects
its trademarks against infringement.
The Company does not have any patents on its proprietary processes. The
Company believes that it can better protect its trade secrets by maintaining the
confidentiality of the relevant information as opposed to generating the public
exposure inherent in the procedure of applying for patents.
ENVIRONMENTAL MATTERS
The Company is subject to various United States and Canadian federal, state,
provincial and local environmental laws and regulations. The costs of complying
with such laws and regulations have not been, and are not expected to have a
material adverse effect on the business of the Company.
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<PAGE>
MANAGEMENT
DIRECTORS
Management of the business of LHP is vested in its Board of Directors (the
"Board"). The Board is currently comprised of Messrs. Baird, Kaminski, Bensussen
and Towne. The Board of Directors of Leiner Group, LHP's indirect corporate
parent, is currently comprised of Mr. Baird, who was appointed Chairman of such
Board following the Recapitalization, Messrs. Kaminski and Bensussen who already
were members of such Board prior to the Recapitalization, and Messrs. Barry
Twomey, Bruce Gorchow and Alan Colner, who were appointed as members of such
Board in September 1997. Until the formation of North Castle, Mr. Baird was a
Managing Director of AEA. Pursuant to the terms of the Stockholders Agreement,
the AEA Group has the right to elect one member of the Board of Directors of
Leiner Group and North Castle has the right to elect the remaining directors.
EXECUTIVE OFFICERS OF LEINER HEALTH PRODUCTS INC.
The following table sets forth with respect to each of the executive
officers of the Company, their respective years of employment with the Company,
ages and positions.
<TABLE>
<CAPTION>
YEARS
WITH
NAME COMPANY AGE POSITION
- ------------------------------ ------- --- ------------------------------------------------------
<S> <C> <C> <C>
Robert M. Kaminski............ 19 47 Chief Executive Officer and Director
Gale K. Bensussen............. 23 50 President and Director
Kevin J. Lanigan.............. 24 50 Executive Vice President and Chief Operations Officer
William B. Towne.............. 1 53 Executive Vice President, Chief Financial Officer,
Director, Treasurer and Secretary
Stanley J. Kahn............... 17 44 Executive Vice President--Sales
Giffen H. Ott................. 4 37 Senior Vice President--Operations
Scott C. Rexinger............. 10 52 Senior Vice President--Product Marketing & Development
Robert J. LaFerriere.......... 1 48 Senior Vice President--Marketing
</TABLE>
Robert M. Kaminski has been the Chief Executive Officer of LHP since May
1992, and a Director of LHP since June 1992. He has been Chief Executive Officer
of Leiner Group since March 1994 and Vice Chairman of Leiner Group since July
1996. From 1988 to 1992, Mr. Kaminski was Chief Operating Officer of the
Predecessor Company and from 1982 to 1988, he was Vice President--Sales of the
Predecessor Company. Mr. Kaminski joined the Predecessor Company in 1978.
Gale K. Bensussen has been a Director of LHP since June 1992 and President
of LHP since May 1992. He has been a Director of Leiner Group since June 1992
and President of Leiner Group since March 1994. Mr. Bensussen was Senior Vice
President--Marketing and Corporate Development of the Predecessor Company from
May 1991 to May 1992. From July 1988 to May 1991, Mr. Bensussen was Senior Vice
President--Sales and Marketing of the Predecessor Company. Mr. Bensussen joined
the Predecessor Company in 1974.
Kevin J. Lanigan became Executive Vice President and Chief Operations
Officer of LHP in May 1992 and of Leiner Group in March 1994. From 1986 to 1992,
Mr. Lanigan was Senior Vice President-- Operations Planning of the Predecessor
Company and, from 1979 to 1986, was Vice President--Operations. Before joining
the Predecessor Company in 1973, he held various engineering positions in the
aerospace industry.
William B. Towne became Executive Vice President and Chief Financial Officer
of LHP and Leiner Group in June 1996, Treasurer of LHP in June 1996 and
Secretary of LHP and Leiner Group in October 1997. Mr. Towne has been a Director
of LHP since June 1996. From 1995 to 1996, Mr. Towne served as
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<PAGE>
Executive Vice President, Finance and Chief Financial Officer at L. Galoob Toys,
Inc. From 1990 to 1995, Mr. Towne served as Executive Vice President, Chief
Financial Officer for Forstmann & Co., Inc. From 1982 to 1990, Mr. Towne worked
for Tambrands, Inc. where he rose from Manager of Forecast and Planning to Chief
Financial Officer of its International Division.
Stanley J. Kahn became Senior Vice President--Sales of LHP in May 1992 and
of Leiner Group in March 1994. Mr. Kahn became Executive Vice President--Sales
of Leiner Group in April 1997. From September 1989 to 1992, Mr. Kahn was Vice
President--Sales of the Predecessor Company and, from July 1988 to September
1989, was Vice President--Business Development. Mr. Kahn was National Key
Account Manager from 1985 to 1988. Mr. Kahn joined the Predecessor Company in
1980 as Regional Sales Manager.
Giffen H. Ott became Senior Vice President--Operations of LHP in April 1997.
Mr. Ott became Vice President--Operations in September 1995 after joining LHP in
March 1993 as Vice President of Manufacturing Development. Prior to joining LHP
Mr. Ott worked as a Manager with Bain & Company, the international management
consulting firm, where the engagements he led included an evaluation of the
Company's market position and operations on behalf of AEA.
Scott C. Rexinger became Senior Vice President--Product Marketing and
Development of LHP in June 1996. From May 1992 to June 1996, Mr. Rexinger was
Vice President, Product Marketing, and from April 1991 to May 1992, he was
Director, New Category Development. Mr. Rexinger was Group Marketing Manager,
New Products and Brands from August 1988 to April 1991, and Marketing Manager,
Brands from November 1987 to August 1988. Prior to joining the Company, Mr.
Rexinger held various marketing positions in the consumer packaged goods
industry.
Robert J. LaFerriere became Senior Vice President--Marketing of LHP in
February 1997 and was a consultant to LHP from 1996 to 1997. From 1992 to 1996,
Mr. LaFerriere was President and Chief Executive Officer of Slim Fast Foods and
was a Vice President, then Senior Vice President--Purchasing, at Thrifty Drug
and Discount Stores from 1984 until 1990.
EXECUTIVE COMPENSATION
The following table sets forth the compensation of each of the Company's
chief executive officer and the four most highly paid executive officers (other
than the chief executive officer) (collectively, the "named executive officers")
for fiscal 1997.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (1)(2)
-------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
- -------------------------------------------------------------------------- ---------- ---------- -------------
<S> <C> <C> <C>
Robert M. Kaminski........................................................ $ 424,365 $ 360,000 --
Chief Executive Officer
Gale K. Bensussen......................................................... 266,731 225,000 --
President
William B. Towne.......................................................... 199,038 125,000 $ 55,829
Executive Vice President
Kevin J. Lanigan.......................................................... 223,654 190,000 --
Executive Vice President
Stanley J. Kahn........................................................... 266,731 250,000 --
Executive Vice President
</TABLE>
- ------------------------
(1) The compensation described in this table does not include medical and group
life insurance received by the named executive officers which are available
generally to all salaried employees of the Company and certain perquisites
and other personal benefits received by the named executive officers, the
value of which does not exceed the lesser of $50,000 or 10% of any such
officer's total salary and bonus disclosed in this table.
(2) The compensation described in this table does not include the compensation
of $395,000 and an additional payment of $588,000 received by Mr. David F.
Brubaker, former Chairman of LHP, in fiscal 1997. Mr. Brubaker retired
effective September 1996.
The following table sets forth the stock option grants to each of the named
executive officers for fiscal 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
--------------------------------------------------------------- STOCK PRICE
% OF TOTAL APPRECIATION FOR
NUMBER OF OPTIONS GRANTED EXERCISE OPTION TERM*
SECURITIES UNDERLYING TO EMPLOYEES PRICE EXPIRATION --------------------
NAME OPTIONS GRANTED IN FISCAL YEAR ($/SH) DATE 5% 10%
- --------------------------------------- --------------------- --------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert M. Kaminski..................... 4,074 67 $175 12/31/06 $448,384 $1,136,239
Gale K. Bensussen...................... 1,000 16 175 12/31/06 110,060 278,900
William B. Towne....................... -- -- -- -- -- --
Kevin J. Lanigan....................... -- -- -- -- -- --
Stanley J. Kahn........................ -- -- -- -- -- --
</TABLE>
- ------------------------
* Sets forth potential option gains based on assumed annualized rates of stock
price appreciation from the exercise price at the date of grant of 5% and
10% (compounded annually) over the full term of the grant with appreciation
determined as of the expiration date. The 5% and 10% assumed rates of
appreciation are mandated by the rules of the Securities and Exchange
Commission, and do not represent the Company's estimate or projection of
future Common Stock prices.
The following table sets forth the stock option exercises for the fiscal
year ended March 31, 1997 and the stock option values as of March 31, 1997, in
each case, for each of the named executive officers.
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUES AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
YEAR END FISCAL YEAR END*
SHARES ACQUIRED VALUE ---------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- ------------------- ----------- ----------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Robert M. Kaminski................. -- -- 12,305 4,555 $ 1,916,400 $ 484,950
Gale K. Bensussen.................. -- -- 10,536 1,250 1,707,190 137,500
William B. Towne................... -- -- 2,000 2,000 240,640 240,640
Kevin J. Lanigan................... -- -- 7,524 -- 1,243,868 --
Stanley J. Kahn.................... -- -- 9,024 500 1,479,348 70,160
</TABLE>
- ------------------------
* Sets forth values for "in-the-money" options that represent the positive
spread between the respective exercise prices of outstanding stock options
and the value of the Company's Common Stock as of March 31, 1997 based on an
assumed value of approximately $265 per share for the Common Stock in the
Recapitalization. In connection with the Recapitalization, all of these
options were either exchanged for Equity Rights or cashed out. The Equity
Rights represent the right to receive Recapitalized Common Stock upon the
occurrence of certain events, including the termination of the holder's
employment with the Company, a public offering or a change of control. See
"The Recapitalization."
SEVERANCE ARRANGEMENTS
In November 1991, the Predecessor Company entered into certain severance
agreements with certain members of LHP's senior management, pursuant to which
LHP will pay severance benefits if the individual's employment is terminated by
LHP other than for cause or if the individual resigns his or her employment with
LHP for good reason. In May 1997, LHP entered into a substantially similar
agreement with William B. Towne.
The severance benefits that the Company has agreed to provide to each of
Robert M. Kaminski, Gale K. Bensussen, William B. Towne and Stanley J. Kahn
include (a) a lump-sum severance payment equal to the sum of (i) one year's base
salary, plus (ii) any annual individual performance bonus or targeted
commission, both as in effect at the time of the termination or resignation; (b)
outplacement assistance at the Company's expense, up to a maximum cost to the
Company of $20,000; and (c) any rights under applicable Company plans or
programs, including but not limited to stock option and incentive plans, as may
be determined pursuant to the terms of such plans or programs. The severance
benefits provided to Kevin J. Lanigan include a lump-sum severance payment equal
to three times the sum of one year's base salary plus any annual individual
performance bonus or targeted commission, both as in effect at the time of
termination or resignation, as well as the benefits described in clauses (b) and
(c) above; subject to certain limitations to the extent that the Company
determines that the foregoing benefits would not be deductible by the Company
because such payments constitute an "excess parachute payment" (as defined in
section 280G of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code")).
In March 1997, the Company entered into a non-competition and retirement
agreement with Mr. David F. Brubaker, former Chairman of LHP, pursuant to which,
among other things, the Company has agreed to pay Mr. Brubaker an amount equal
to approximately $1 million spread across several installments through February
2000. The agreement provides that under certain circumstances all of the
Company's payment obligations to Mr. Brubaker would accelerate.
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<PAGE>
STOCK OPTION PLAN
Leiner Group has authorized options for issuance to members of management
and employees ("Management Options") representing the right to acquire an
additional 10% of the Group Common Stock on a fully-diluted basis immediately
after the Recapitalization (giving effect to the exercise of such options but
without giving effect to the exercise of the Warrants referred to under "The
Recapitalization" below), exercisable at a price equal to the greater of the
purchase price paid by North Castle or the fair market value of such shares at
the time of grant. A total of 83,843 of these Management Options were issued as
of June 30, 1997. It is expected that the remaining Management Options will be
granted in the ordinary course of business.
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<PAGE>
OWNERSHIP OF CAPITAL STOCK
All of the shares of common stock of LHP are owned by PLI Holdings Inc. and
all of the shares of common stock of PLI Holdings Inc. are owned by Leiner
Group.
The following table sets forth information regarding beneficial ownership of
common stock of Leiner Group as of July 31, 1997, by (i) each person who is
known by the Company to beneficially own more than 5% of voting Group Common
Stock, (ii) each director of Leiner Group, (iii) each named executive officer of
the Company listed on the Summary Compensation Table above and (iv) by all
directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES OF SHARES OF NON-
VOTING GROUP VOTING GROUP
COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY
NAME OWNED OWNED PERCENTAGE OF CLASS
- --------------------------------------------------------- -------------- --------------- ------------------------
<S> <C> <C> <C> <C>
North Castle Partners I, L.L.C.(1)....................... 808,988 -- 85.6%
Baird Investment Group, L.L.C.(2)........................ 808,988 -- 85.6%
Charles F. Baird, Jr..................................... 833,858(3) -- 88.2%
Alan Colner.............................................. -- -- --
Bruce Gorchow............................................ -- -- --
Barry Twomey............................................. -- -- --
Robert M. Kaminski (4)................................... 4,146 -- 0.4%
Gale K. Bensussen (4).................................... 8,490 -- 0.9%
William B. Towne (4)..................................... -- -- --
Kevin J. Lanigan (4)..................................... -- 16,582 25.7%
Stanley J. Kahn (4)...................................... -- 4,245 6.6%
Executive officers and directors as a group (4).......... 846,494 20,827 89.5% Voting
32.3% Non-Voting
</TABLE>
- ------------------------
(1) The address for North Castle Partners I, L.L.C. ("North Castle") is 11
Meadowcroft Lane, Greenwich, CT 06830.
(2) North Castle is an investment fund formed as a limited liability company.
Baird Investment Group, L.L.C. ("Baird Investment") is the sole managing
member of North Castle. Mr. Baird is the sole managing member of Baird
Investment. The address for Baird Investment is 11 Meadowcroft Lane,
Greenwich, CT 06830.
(3) Includes 24,870 shares of voting Group Common Stock owned by Mr. Baird and
the shares of Group Common Stock owned by North Castle which Mr. Baird may
be deemed to have beneficial ownership of by virtue of his status as the
managing member of Baird Investment. Mr. Baird expressly disclaims such
beneficial ownership. Does not include 3,255 shares of voting Group Common
Stock held by a trust in favor of Mr. Baird's children. Mr. Baird expressly
disclaims beneficial ownership of such shares.
(4) Does not reflect Equity Rights owned by Messrs. Kaminski, Bensussen, Towne,
Lanigan and Kahn reflecting the right to receive 24,607 shares, 18,484
shares, 4,812 shares, 4,938 shares and 5,570 shares of Group Common Stock,
respectively, as such Equity Rights are not exercisable within 60 days of
their acquisition.
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<PAGE>
THE RECAPITALIZATION
The following is a summary of the structure of the Recapitalization and the
Merger and certain provisions of the Recapitalization Agreement. This summary
does not purport to be complete and is qualified in its entirety by reference to
the Recapitalization Agreement. The Recapitalization Agreement is filed as an
Exhibit to the Registration Statement of which this Prospectus forms a part.
GENERAL. Leiner Group entered into the Recapitalization Agreement, among
Leiner Group, North Castle and the Merger Entity, to effect the
Recapitalization. The Recapitalization was accomplished through the Merger of
the Merger Entity with and into Leiner Group, with Leiner Group continuing as
the surviving corporation in the Merger. The Recapitalization Agreement does not
provide for the survival of any representations and warranties and none of the
parties has any post-closing indemnification obligations under the
Recapitalization Agreement. The Recapitalization has been accounted for as a
recapitalization of the Leiner Group, which has had no impact on the historical
basis of assets and liabilities as reflected in its consolidated financial
statements.
North Castle, a Delaware limited liability company, is an investment fund
formed by Mr. Baird for the purpose of participating in the Recapitalization.
Mr. Baird was formerly a Managing Director of AEA, which, together with
management, arranged the 1992 acquisition of the Company. Prior to the
Recapitalization, the AEA Group and Mr. Baird were the holders of approximately
92% of the outstanding shares of the Existing Common Stock. Management
Shareholders held the remaining 8%. North Castle, in conjunction with the
Company's management, effected the Recapitalization of the Company in order to
pursue continuing growth opportunities for the Company in the vitamin industry.
Upon consummation of the Recapitalization, (i) current managers and
employees of the Company who had been Existing Shareholders had some of their
Existing Common Stock exchanged for cash, but together with Mr. Baird, retained
Group Equity, consisting of 5.6% of the voting and 58.6% of the non-voting Group
Common Stock and received Equity Rights equal to approximately 7.4% of the Group
Equity, as well as Warrants, (ii) the AEA Group and certain former managers of
the Company, all of whom had been Existing Shareholders, had most of their
Existing Common Stock purchased for cash, but also retained voting and
non-voting Group Common Stock equal to approximately $11.0 million and 10% of
the Group Equity (including 41.4% of the non-voting Group Common Stock and 8.8%
of the voting Group Common Stock), as well as Warrants, and (iii) North Castle
purchased newly issued voting Group Common Stock, equal to approximately 74% of
its issued outstanding Stock on a fully diluted basis for a cash investment of
$80.4 million. In connection with the Recapitalization, existing stock options
held by Management Shareholders were cashed out, exercised for Existing Common
Stock, or converted into Equity Rights.
The Warrants provide the Existing Shareholders the right to purchase 20% of
the Group Common Stock on a fully-diluted basis giving effect to the exercise of
such Warrants and of the Management Options. The initial exercise price of the
Warrants is 125% of the $100 purchase price per share paid by North Castle for
its investment in the Recapitalization, or $125.00 per share. Commencing on the
first anniversary of the Recapitalization Closing Date, the exercise price will
increase at a rate of 25% per year in years two and three and then at a rate of
10% per year for the subsequent two years. After year five, the exercise price
will remain constant. These increases will result in exercise prices of $156.25,
$195.31, $214.84 on the second, third and fourth anniversaries of the
Recapitalization Closing Date and $236.33 on and after the fifth anniversary of
such date. The Warrants will become exercisable upon the earlier of (i) a change
of control (as defined), (ii) an initial public offering (as defined) and (iii)
June 30, 2002, and will expire two years after becoming exercisable. Shares of
Group Common Stock issued upon exercise of the Warrants will be non-voting. The
Warrants include customary anti-dilution provisions.
In connection with the Recapitalization, the Company established a
management transaction bonus pool of $5.1 million which was paid by the Company
following consummation of the Recapitalization.
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<PAGE>
FINANCING FOR THE RECAPITALIZATION. The closing of the Recapitalization
occurred simultaneously with the closing of the offering of the Existing Notes.
Immediately following consummation of the Recapitalization and the Merger, the
obligations of Leiner Group under the New Credit Facility and the Existing Notes
were assigned to and assumed by LHP, and LHP became the obligor on the Notes.
The cash sources of financing for the Recapitalization consisted of North
Castle's investment in Group Common Stock, the proceeds of the Existing Notes
and the term and revolving credit borrowings under the New Credit Facility. See
"Description of New Credit Facility" and "Description of the New Notes." These
funds were applied to acquire Common Stock for cash, to cash out options for
Group Common Stock, to redeem preferred stock of Leiner Group and Vita Health,
to refinance substantially all existing indebtedness of LHP other than certain
capitalized leases, and to pay transaction-related fees and expenses.
The following table sets forth the sources and uses of funds for the
Recapitalization of Leiner Group, which closed on June 30, 1997.
<TABLE>
<CAPTION>
SOURCES OF FUNDS AMOUNT
- ---------------------------------------- -----------
<S> <C>
(DOLLARS IN
MILLIONS)
Revolving Credit Facility............... $ 74.8(a)
Term Loans.............................. 85.0(b)
Existing Notes.......................... 85.0
-----------
Total Debt.............................. 244.8
Total Common Equity of Leiner Group..... 109.0(c)
-----------
TOTAL SOURCES OF FUNDS.................. $ 353.8
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
USES OF FUNDS AMOUNT
- ---------------------------------------- ------
<S> <C>
Repurchased and Retained Equity
of Leiner Group....................... $211.1(d)
Repayment of Debt and
Preferred Stock....................... 119.8(e)
Management Transaction
Bonuses............................... 5.2(f)
Estimated Fees and Expenses............. 17.7(g)
TOTAL USES OF FUNDS..................... $353.8
------
------
</TABLE>
- ------------------------
(a) Consists of borrowings under the Revolving Credit Facility provided under
the New Credit Facility. See "Description of New Credit Facility."
(b) Consists of borrowings under a $45.0 million term B loan facility and a
$40.0 million term C loan facility under the New Credit Facility, which were
fully drawn on the Recapitalization Closing Date. See "Description of New
Credit Facility."
(c) Consists of the Group Equity, comprised of (1) a new equity investment by
North Castle in Group Common Stock for cash of $80.4 million, (2) a retained
equity investment in Group Common Stock and Equity Rights with a value of
$17.6 million (based on the per share value of the North Castle equity
investment), held by certain current managers and employees of the Company
and Mr. Baird, and (3) a retained equity investment in Group Common Stock
with a value of $11.0 million (based on the per share value of the North
Castle equity investment), to be held by the AEA Group and certain former
managers of the Company.
(d) Includes transaction-related fees and expenses of $6.1 million, incurred by
Leiner Group, that were an adjustment to the amount received by the Existing
Shareholders.
(e) Consists of $102.2 million in outstanding borrowings and accrued interest
under the Company's existing senior credit agreement, an aggregate $13.9
million redemption price for outstanding pay-in-kind redeemable preferred
stock of Leiner Group held by AEA, and an aggregate $3.7 million redemption
price for a minority preferred stock interest in Vita Health.
(f) Members of the Company's management received $5.1 million in transaction
bonuses ($3.1 million on an after-tax basis), which were paid by the Company
following the Recapitalization Closing Date. In addition, the Company paid
$0.1 million in employer payroll taxes related to the bonus payments.
(g) Does not include any fees and expenses that were an adjustment to the amount
received by the Existing Shareholders, which are included in (d) above.
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CERTAIN TRANSACTIONS
STOCKHOLDERS AGREEMENT. On the Recapitalization Closing Date, Leiner Group
and the stockholders of Leiner Group entered into the Stockholders Agreement,
which contains, among other terms and conditions, provisions relating to
corporate governance, certain restrictions with respect to transfer of
Recapitalized Common Stock by certain parties thereunder, certain rights and
obligations with respect to transfers of Recapitalized Common Stock and certain
registration rights granted by the Company with respect to shares of
Recapitalized Common Stock. The Stockholders Agreement gives the AEA Group the
power to elect one member of Leiner Group's Board of Directors and, so long as
North Castle owns at least 40% of all outstanding Group Equity, gives North
Castle the power to elect the remaining directors of Leiner Group, and through
Leiner Group, all the directors of LHP. If North Castle's ownership of Group
Equity falls below 40%, it may elect the number of directors that is
proportionate to its shareholdings. Accordingly, North Castle controls the
Company and has the power to appoint new management and approve any action
requiring the approval of the holders of Group Common Stock, including adopting
amendments to Leiner Group's certificate of incorporation and approving mergers
or sales of substantially all of the Company's assets.
The Stockholders Agreement also restricts the ability of existing
shareholders to transfer their Group Equity to third parties prior to June 30,
1998, and gives certain of these shareholders a right of first refusal after
that date. These restrictions either do not apply or change if there is a public
offering, or if North Castle sells more than 5% of all outstanding Group Equity.
If North Castle seeks to sell more than 5% of the outstanding Group Equity,
other existing shareholders have the right to sell their shares at the same
time. The Agreement also gives North Castle rights to require Leiner Group to
register Group Equity under the Securities Act, subject to certain limitations
and conditions.
MANAGEMENT AGREEMENTS. Following the LHP Acquisition on May 4, 1992, AEA
entered into a management agreement with Leiner Group, pursuant to which AEA has
been providing management, consulting and financial services to the Company for
an annual fee of $0.35 million plus expenses. In connection with the Vita Health
Acquisition, the Company paid to AEA an additional transaction fee of $0.3
million for services in arranging, structuring, and negotiating the terms of the
Vita Health Acquisition and related refinancing, and reimbursed it for certain
related expenses. AEA received a transaction fee of $3.5 million for similar
services rendered in connection with the Recapitalization.
Upon consummation of the Recapitalization, Leiner Group's management
agreement with AEA was terminated, and Leiner Group and LHP entered into a
consulting agreement with North Castle Partners, L.L.C. (the "Sponsor"), an
affiliate of North Castle, to provide the Company with certain business,
financial and managerial advisory services. Mr. Baird acts as the managing
member of the Sponsor through Baird Investment Group, L.L.C. In exchange for
such services, Leiner Group and LHP have agreed to pay the Sponsor an annual fee
of $1.5 million, payable semi-annually in advance, plus the Sponsor's reasonable
out-of-pocket expenses. This fee may be reduced upon completion of an initial
public offering of Leiner's shares. The agreement also terminates on June 30,
2007, unless Baird Investment Group ceases to be the managing member of North
Castle or North Castle terminates before that date. Leiner Group and LHP have
also paid the Sponsor a transaction fee of $3.5 million for services relating to
arranging, structuring and financing the Recapitalization, and reimbursed the
Sponsor's related out-of-pocket expenses.
RELATIONSHIP OF MR. BAIRD WITH AEA. Prior to the formation of North Castle
in 1997, Mr. Baird served for seven years as Managing Director of AEA and as
such oversaw the LHP Acquisition and was thereafter closely involved in the
management of the Company. The aggregate valuation of the Company, upon which
the financial terms and conditions of the Recapitalization were based, was
determined on the basis of negotiations between the Existing Shareholders,
including AEA, and Mr. Baird. North Castle and the Company believe that such
valuation was the result of bona fide arm's length negotiations. In addition,
prior to the Recapitalization, Leiner Group obtained a fairness opinion from
Lehman Brothers to the
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effect that the consideration to be received by the Existing Shareholders in
connection with Recapitalization was fair from a financial point of view.
MANAGEMENT. As part of the Recapitalization, the current managers and
employees of the Company were afforded the opportunity to choose the amount of
their existing equity they wished to retain in Leiner Group in the form of Group
Equity. Managers and employees who retained their equity in Leiner Group will,
as a result of the increased leverage on the Company incurred as part of the
Recapitalization, acquired a greater percentage equity ownership. Under the
Stockholders Agreement, current managers have the right, upon their death or
permanent disability, to require Leiner Group to purchase their Group Common
Stock for its then fair market value.
In connection with the Recapitalization, the Company paid senior managers
transaction bonuses of $5.1 million in the aggregate. In addition, Leiner Group
has established a new stock option plan which provides for the Board of Leiner
Group to grant Management Options to acquire 122,222 shares of Group Common
Stock. A total of 83,842 of these Management Options were issued as of June 30,
1997.
The Board of Leiner Group and management of the Company are currently
considering instituting a stock purchase plan pursuant to which certain managers
and employees of the Company would be afforded the opportunity to purchase Group
Common Stock. The Company currently expects that the gross proceeds of such an
offering would not exceed $1 to $2 million.
OTHER. Merrill Lynch & Co. acquired $15 million in limited liability
company interests of North Castle and The Bank of Nova Scotia also acquired $3
million of such interests.
On June 25, 1997, Baird Investment Group, L.L.C. ("Baird Group "), the
managing member of North Castle, entered into separate agreements with three of
the principal investors in North Castle, Electra Fleming Inc. ("Electra"), Moore
Capital Management, Inc. ("Moore") and PPM America, Inc. ("PPM"). As part of
these agreements, Baird Group caused North Castle to exercise its rights under
the Stockholders Agreement to nominate one person designated by Electra, Moore
and PPM to serve on the Board of Directors of Leiner Group. In connection with
these agreements, Leiner Group paid Electra, Moore and PPM a one-time board
representation fee of $100,000, $75,000 and $75,000, respectively.
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<PAGE>
DESCRIPTION OF NEW CREDIT FACILITY
GENERAL. In connection with the Recapitalization, Leiner Group and Vita
Health entered into the New Credit Facility with a syndicate of financial
institutions, The Bank of Nova Scotia ("Scotiabank") as administrative agent
(the "Administrative Agent"), Merrill Lynch Capital Corporation as documentation
agent, and Salomon Brothers Holding Company Inc as syndication agent. On the
Recapitalization Closing Date, immediately following the consummation of the
Recapitalization, Leiner Group assigned to LHP, and LHP assumed, all of Leiner
Group's rights and obligations in respect of the New Credit Facility and the
Existing Notes. Leiner Group was released and discharged from all further
obligations in respect of the New Credit Facility and the Existing Notes. The
following is a summary of the principal terms of the credit agreement governing
the New Credit Facility and the related loan documents (the "Credit
Documentation") and is subject to and qualified in its entirety by reference to
the Credit Documentation. Copies of the Credit Documentation are filed as
Exhibits to the Registration Statement of which this Prospectus forms a part.
The New Credit Facility provides for senior secured credit facilities in an
aggregate amount of $210.0 million, consisting of (i) U.S. and Canadian
revolving credit facilities in an aggregate amount of $125.0 million comprising
the Revolving Credit Facility, and (ii) a $45.0 million term B loan facility
(the "Term B Facility") and a $40.0 million term C loan facility (the "Term C
Facility" and together with the Term B Facility, the "Term Facilities"). The
Revolving Credit Facility initially consists of a $105.0 million revolving
credit facility made available to Leiner Group (the "U.S. Revolving Facility")
and a Canadian dollar-denominated revolving credit facility in an amount
equivalent to $20.0 million (the "Canadian Revolving Facility") made available
to Vita Health. The Company will be entitled to vary from time to time the
allocation of the aggregate Revolving Credit Facility commitment between the
U.S. Revolving Facility and the Canadian Revolving Facility, decreasing the
allocation to one while increasing it to the other (but not over the Canadian
dollar equivalent of $20.0 million, in the case of the Canadian Revolving
Facility). The Revolving Credit Facility also provides for a U.S. swingline
subfacility of $15.0 million, a U.S. letter of credit subfacility of $35.0
million, a Canadian letter of credit subfacility of up to Cdn.$13.0 million and
a Canadian swingline subfacility of up to Cdn.$1.0 million.
USE OF FACILITY. In connection with the Recapitalization, Leiner Group
fully drew down the $85.0 million in term loan borrowings under the Term
Facilities, and Leiner Group and Vita Health borrowed $74.8 million under the
Revolving Credit Facility, as part of the financing for the Recapitalization.
See "The Recapitalization." The remaining unused commitment under the Revolving
Credit Facility is available to the Company for working capital and general
corporate purposes.
GUARANTEE; SECURITY. The obligations of LHP under the U.S. Revolving
Facility and the Term Facilities are guaranteed by its direct parent PLI
Holdings Inc. and by any direct or indirect U.S. subsidiaries of LHP. The
obligations of Vita Health under the Canadian Revolving Facility are guaranteed
by LHP and all of its direct and indirect U.S. subsidiaries, by PLI Holdings
Inc. and by all direct and indirect subsidiaries of Vita Health. The Term
Facilities and the Revolving Credit Facility are secured by substantially all
assets of LHP and any direct or indirect U.S. subsidiaries of LHP, all of the
capital stock of LHP and any such direct or indirect U.S. subsidiaries, and 65%
of the capital stock of any direct non-U.S. subsidiaries of LHP and its U.S.
subsidiaries. The Canadian Revolving Facility is also secured by substantially
all assets of Vita Health, its direct and indirect Canadian parents and any
direct or indirect non- U.S. subsidiaries of LHP, and all of the capital stock
of any such direct or indirect non-U.S. subsidiaries.
AMORTIZATION; INTEREST; FEES. Loans under the Term Facilities amortize in
equal quarterly installments. Annual scheduled repayments under the Term B
Facility amount to $450,000 for the first six years following the
Recapitalization Closing Date, $27.0 million in the seventh year, and $15.3
million in the final six months, with the facility maturing seven and one-half
years after the Recapitalization Closing Date. Annual scheduled repayments under
the Term C Facility amount to $400,000 for the first seven years, $24.0
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<PAGE>
million in the eighth year, and $13.2 million in the final six months, with the
facility maturing eight and one-half years after the Recapitalization Closing
Date. The Revolving Credit Facility will mature six years after the
Recapitalization Closing Date, with all amounts then outstanding thereunder
becoming due.
At LHP's option, the U.S. Revolving Facility and the Term Facilities may
bear interest at variable rates equal to either Scotiabank's alternate base rate
("ABR") or reserve-adjusted LIBO rate ("LIBOR"), plus the applicable margin as
described below (the "Applicable Margin"). At Vita Health's option, the Canadian
Revolving Facility may bear interest at either Scotiabank's Canadian prime rate
or bankers acceptance ("BA") rate, plus the Applicable Margin. The Applicable
Margin is based on the Company's Leverage Ratio, defined generally as the ratio
of total funded indebtedness to the consolidated EBITDA, and will vary as
follows: (a) for revolving credit borrowings, from 0.75% to 2.5% for LIBOR- or
BA-based loans and from zero to 1.5% for ABR- or Canadian prime rate-based
loans, (b) for loans under the Term B Facility, from 2.375% to 2.875% for
LIBOR-based loans and from 1.375% to 1.875% for ABR-based loans, and (c) for
loans under the Term C Facility, from 2.5% to 3.0% for LIBOR-based loans and
from 1.5% to 2.0% for ABR-based loans.
The transaction fees and expenses set forth in the sources and uses of funds
for the Recapitalization (see "The Recapitalization") include transaction fees
paid in connection with the provision of the New Credit Facility. In addition, a
commitment fee is payable quarterly on the daily average unused portion of the
U.S. Revolving Facility by LHP, and of the Canadian Revolving Facility by Vita
Health, in an amount calculated at a rate varying from 0.25% or 0.50% based on
the Company's Leverage Ratio. A letter of credit fee is payable to the New
Credit Facility lenders on the outstanding amount of letters of credit
calculated at the then Applicable Margin. Customary fees are also payable to
Scotiabank as administrative agent and letter of credit issuing bank.
PREPAYMENTS. The New Credit Facility permits the prepayment of loans
thereunder without premium or penalty. In addition, mandatory repayments are
required to be made from (i) 100% of net proceeds from non-ordinary asset sales,
(ii) 50% of annual excess cash flow (as defined in the New Credit Facility) for
each year in which the Company's Leverage Ratio was greater than or equal to 3.5
to 1, and (iii) 50% of the net proceeds from certain sales or issuances of
equity securities. Mandatory prepayments will be applied to term loans ratably
in accordance with remaining amortization payments until all term loans are paid
in full, and then to revolving credit loans, with an accompanying commitment
reduction in the case of prepayments from the proceeds of asset sales.
COVENANTS AND EVENTS OF DEFAULT. The New Credit Facility contains covenants
that impose certain restrictions on the Company, including restrictions on its
ability to incur additional debt, enter into sale-leaseback transactions, incur
contingent liabilities, make dividends or distributions, incur or grant liens,
sell or otherwise dispose of assets, make investments or capital expenditures,
repurchase or prepay the Notes or other subordinated debt, or engage in certain
other activities. The Company must also comply with certain financial ratios and
tests, including a minimum net worth requirement, a maximum Leverage Ratio
(beginning at 6.50:1 and declining to 3.25:1 in fiscal 2004 through 2006), a
minimum fixed charge coverage ratio (beginning at 1.10:1, increasing to 1.20:1
in fiscal 2001 through 2003, and declining thereafter to 1.00:1 in fiscal 2005
and 2006) and a minimum interest coverage ratio (beginning at 1.60:1 and
increasing to 3.25:1 in fiscal 2005 and 2006). In addition, the Company will be
required to apply certain asset sale proceeds, as well as 50% of its excess cash
flow (as defined in the New Credit Facility) unless a leverage ratio test is
met, to prepay the borrowings under the New Credit Facility. The Company has
entered into an interest rate protection arrangement effective July 30, 1997 for
a period of three years with respect to $29.4 million of its indebtedness under
the New Credit Facility that provides an effective cap of 6.17% on LIBOR plus
applicable margin (2.25%) for the interest payable thereon.
The New Credit Facility contains customary events of default, including a
cross default (beyond all applicable grace periods) to other indebtedness of the
Company and default upon any change of control (as defined).
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THE EXCHANGE OFFER
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and reference is made to the
provisions of the Registration Rights Agreement, which has been filed as an
Exhibit to the Registration Statement of which this Prospectus forms a part.
TERMS OF THE EXCHANGE OFFER
GENERAL. In connection with the issuance of the Existing Notes pursuant to
a Purchase Agreement, dated as of June 19, 1997, among Leiner Group, LHP and the
Initial Purchasers, the Initial Purchasers and their respective assignees became
entitled to the benefits of the Registration Rights Agreement.
Under the Registration Rights Agreement, LHP has agreed to use its best
efforts (i) to file with the Commission within 60 days after June 30, 1997, the
Recapitalization Closing Date and date the Existing Notes were issued, the
Registration Statement of which this Prospectus is a part with respect to a
registered offer to exchange the Existing Notes for the New Notes, (ii) to cause
the Registration Statement to be declared effective under the Securities Act
within 120 days after the Recapitalization Closing Date, (iii) to keep the
Registration Statement effective until consummation of the Exchange Offer, and
(iv) to consummate the Exchange Offer not later than 150 days after the
Recapitalization Closing Date. LHP will keep the Exchange Offer open for
acceptance for not less than 30 days after the date notice of the Exchange Offer
is mailed to holders of the Existing Notes. The Exchange Offer being made
hereby, if commenced and consummated within the time periods described in this
paragraph, will satisfy those requirements under the Registration Rights
Agreement.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, all Existing Notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date will be
accepted for exchange. New Notes will be issued in exchange for an equal
principal amount of outstanding Existing Notes accepted in the Exchange Offer.
The terms of the New Notes are identical in all material respects to the terms
of the Existing Notes for which they may be exchanged pursuant to The Exchange
Offer, except that the New Notes will have been registered under the Securities
Act, and thus will not bear restrictive legends restricting their transfer
pursuant to the Securities Act. Existing Notes may be tendered only in integral
multiples of $1,000, and New Notes will be issued in denominations of $1,000 or
integral multiples thereof. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered holders of Existing Notes as of
, 1997. The Exchange Offer is not conditioned upon any minimum
principal amount of Existing Notes being tendered for exchange. However, the
obligation to accept Existing Notes for exchange pursuant to the Exchange Offer
is subject to certain conditions as set forth herein under "--Conditions."
Existing Notes shall be deemed to have been accepted as validly tendered
when, as and if LHP has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders of
Existing Notes for the purposes of receiving the New Notes and delivering New
Notes to such holders.
Based on interpretations by the Staff of the Commission as set forth in
no-action letters issued to third parties (including EXXON CAPITAL HOLDINGS
CORPORATION (available May 13, 1988), MORGAN STANLEY & CO. INCORPORATED
(available June 5, 1991), K-III COMMUNICATIONS CORPORATION (available July 2,
1993) and SHEARMAN & STERLING (available July 2, 1993)), LHP believes that the
New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by any holder thereof (other than any such
holder that is a broker-dealer or an "affiliate" of LHP within the meaning of
Rule 405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that (i) such New
Notes are acquired in the ordinary course of business, (ii) at the time of the
commencement of the Exchange Offer such holder has no arrangement with any
person to participate in a distribution of such New Notes and (iii) such holder
is not engaged in, and does not intend to engage in, a distribution of such New
Notes. LHP has not sought, and does not intend to seek, a no-
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action letter from the Commission with respect to the effects of the Exchange
Offer, and there can be no assurance that the Staff would make a similar
determination with respect to the New Notes as it has in such no-action letters.
By tendering Existing Notes in exchange for New Notes and executing the
Letter of Transmittal, each holder of Existing Notes will represent to LHP that:
(i) it is not an affiliate of LHP, (ii) any New Notes to be received by it will
be acquired in the ordinary course of business and (iii) at the time of the
commencement of the Exchange Offer it had no arrangement with any person to
participate in a distribution of the New Notes and, if such holder is not a
broker-dealer, it is not engaged in, and does not intend to engage in, a
distribution of New Notes. If a holder of Existing Notes is unable to make the
foregoing representations, such holder may not rely on the applicable
interpretations of the Staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction unless such sale is made
pursuant to an exemption from such requirements.
Each broker-dealer that receives New Notes for its own account in exchange
for Existing Notes where such Existing Notes were acquired by such broker-dealer
as a result of market-making or other trading activities, must acknowledge that
it will deliver a prospectus meeting the requirements of the Securities Act and
that it has not entered into any arrangement or understanding with LHP or any
affiliate of LHP to distribute New Notes in connection with any resale of such
New Notes. See "Plan of Distribution."
After the Expiration Date and subject to certain limited exceptions, holders
of Existing Notes who do not exchange their Existing Notes for New Notes in the
Exchange Offer will no longer be entitled to registration rights and will not be
able to offer or sell their Existing Notes, unless such Existing Notes are
subsequently registered under the Securities Act (which, subject to certain
limited exceptions, LHP will have no obligation to do), except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION. The term "Expiration
Date" shall mean , 1997 (30 days following the commencement of the
Exchange Offer), unless LHP, in its sole discretion, extends the Exchange Offer,
in which case the term "Expiration Date" shall mean the latest date to which the
Exchange Offer is extended. Notwithstanding any extension of the Exchange Offer,
if the Exchange Offer is not consummated by , 1997, the interest rate
borne by the Existing Notes shall be increased by one-half of one percent (0.5%)
per annum until the Exchange Offer is consummated (unless already so increased)
. See "Registration Rights."
To extend the Expiration Date, LHP will notify the Exchange Agent of any
extension by oral or written notice and will notify the holders of the Existing
Notes by means of a press release or other public announcement prior to 9:00
A.M., New York City time, on the next business day after the previously
scheduled Expiration Date. Such announcement may state that LHP is extending the
Exchange Offer for a specified period of time.
LHP reserves the right (i) to delay acceptance of any Existing Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and not permit
acceptance of Existing Notes not previously accepted if any of the conditions
set forth herein under "--Conditions" shall have occurred and shall not have
been waived by LHP, by giving oral or written notice of such delay, extension or
termination to the Exchange Agent, or (ii) to amend the terms of the Exchange
Offer in any manner deemed by it to be advantageous to the holders of the
Existing Notes. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the Exchange Agent. If the Exchange Offer is amended in a manner
determined by LHP to constitute a material change, LHP will promptly disclose
such amendment in a manner reasonably calculated to inform the holders of the
Existing Notes of such amendment. Furthermore, any such amendment may require
LHP to make a post-effective amendment to this Registration Statement.
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Without limiting the manner in which LHP may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, LHP shall have no obligations to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.
INTEREST ON THE NEW NOTES
The New Notes will accrue interest at the rate of 9 5/8% per annum from the
Issue Date of the Existing Notes or the most recent date to which interest has
been paid thereon or duly provided for. Interest on the New Notes is payable on
January 1 and July 1 of each year, commencing January 1, 1998.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Existing Notes into
the Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date or
(ii) the holder must comply with the guaranteed delivery procedures described
below. THE METHOD OF DELIVERY OF LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OTHER REQUIRED DOCUMENTS
SHOULD BE SENT TO THE COMPANY. Delivery of all documents must be made to the
Exchange Agent at its address set forth below. Holders may also request their
respective brokers, dealers, commercial banks, trust companies or nominees to
effect such tender for such holders.
The tender by a holder of Existing Notes will constitute an agreement
between such holder and LHP in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal. Any beneficial
owner whose Existing Notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and who wishes to tender should
contact such registered holder promptly and instruct such registered holder to
tender on his behalf.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor" institution within the meaning of Rule
17Ad-15 under the Exchange Act (each an "Eligible Institution") unless the
Existing Notes tendered pursuant thereto are tendered for the account of an
Eligible Institution.
If the Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such person should so indicate
when signing, and unless waived by LHP, evidence satisfactory to LHP of their
authority to so act must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Existing Notes will be determined by LHP
in its sole discretion, which determination will be final and binding. LHP
reserves the absolute right to reject any and all Existing Notes not validly
tendered or any Existing Notes which, if accepted, would, in the opinion of
counsel for LHP, be unlawful. LHP also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Existing
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Notes. LHP's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Existing Notes must be cured within such time as LHP
shall determine. Neither LHP, the Exchange Agent nor any other person shall be
under any duty to give notification of defects or irregularities with respect to
tenders of Existing Notes, nor shall any of them incur any liability for failure
to give such notification. Tenders of Existing Notes will not be deemed to have
been made until such irregularities have been cured or waived. Any Existing
Notes received by the Exchange Agent that are not validly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned without cost to such holder by the Exchange Agent, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
In addition, LHP reserves the right in its sole discretion, subject to the
provisions of the Indenture, (i) to purchase or make offers for any Existing
Notes that remain outstanding subsequent to the Expiration Date or, as set forth
under "--Conditions", (ii) to terminate the Exchange Offer in accordance with
the terms of the Registration Rights Agreement, (iii) to redeem Existing Notes
as a whole or in part at any time and from time to time, as set forth under
"Description of Notes--Optional Redemption" and (iv) to the extent permitted by
applicable law, to purchase Existing Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
could differ from the terms of the Exchange Offer.
ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or, if applicable, waiver of all of the conditions to the
Exchange Offer and as soon as practicable after the Expiration Date, LHP will
accept all Existing Notes properly tendered and not validly withdrawn, deliver
or cause delivery of such Existing Notes to the Trustee for cancellation, and
issue and cause the Trustee to promptly authenticate and deliver New Notes in
exchange therefor. See "-- Conditions." For purposes of the Exchange Offer,
Existing Notes shall be deemed to have been accepted as validly tendered for
exchange when, as and if LHP has given oral or written notice thereof to the
Exchange Agent.
In all cases, issuance of New Notes for Existing Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of a Book-Entry Confirmation of such Existing Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility, a properly
completed and duly executed Letter of Transmittal and all other required
documents. If any tendered Existing Notes are not accepted for any reason set
forth in the terms and conditions of the Exchange Offer, such unaccepted or such
nonexchanged Existing Notes will be credited to an account maintained with such
Book-Entry Transfer Facility as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Existing Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Existing Notes by causing the
Book-Entry Transfer Facility to transfer such Existing Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, the Letter of
Transmittal or facsimile thereof with any required signature guarantees and any
other required documents must, in any case, be transmitted to and received by
the Exchange Agent at one of the addresses set forth below under "--Exchange
Agent" on or prior to the Expiration Date or the guaranteed delivery procedures
described below must be complied with.
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EXCHANGING BOOK-ENTRY NOTES
The Exchange Agent and the Depository Trust Company (the "DTC") have
confirmed that any financial institution that is a participant in DTC may
utilize the Book-Entry Transfer Facility Automated Tender Offer Program ("ATOP")
procedures to tender Existing Notes.
Any DTC participant may make book-entry delivery of Existing Notes by
causing DTC to transfer such Existing Notes into the Exchange Agent's account in
accordance with DTC's ATOP procedures for transfer. However, the exchange for
the Existing Notes so tendered will only be made after a Book-Entry Confirmation
of such book-entry transfer of Existing Notes into the Exchange Agent's account,
and timely receipt by the Exchange Agent of an Agent's Message (as such term is
defined in the next sentence) and any other documents required by the Letter of
Transmittal. The term "Agent's Message" means a message, transmitted by DTC and
received by the Exchange Agent and forming part of a Book-Entry Confirmation,
which states that DTC has received an express acknowledgment from a participant
tendering Existing Notes that are the subject of such Book-Entry Confirmation
that such participant has received and agrees to be bound by the terms of the
Letter of Transmittal, and that LHP may enforce such agreement against such
participant.
GUARANTEED DELIVERY PROCEDURES
If the procedures for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by LHP (by facsimile transmission, mail or
hand delivery), setting forth the name and address of the holder of Existing
Notes and the amount of Existing Notes tendered, stating that the tender is
being made thereby and guaranteeing that within three New York Stock Exchange
("NYSE") trading days after the date of execution of the Notice of Guaranteed
Delivery, a Book-Entry Confirmation and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) a Book-Entry Confirmation and all other documents
required by the Letter of Transmittal are received by the Exchange Agent within
three NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
WITHDRAWAL OF TENDERS
Tenders of Existing Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to 5:00 p.m., New York City time on the
Expiration Date at one of the addresses set forth below under "--Exchange
Agent." Any such notice of withdrawal must specify the name of the holder, the
name and number of the account at the Book-Entry Transfer Facility from which
the Existing Notes was tendered, identify the principal amount of the Existing
Notes to be withdrawn, specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Existing Notes
and otherwise comply with the procedures of such facility and state that such
holder is withdrawing its election to have those Existing Notes exchanged. All
questions as to the validity, form and eligibility (including time of receipt)
of such notice will be determined by the Company, whose determination shall be
final and binding on all parties. Any Existing Notes so withdrawn will be deemed
not to have been validly tendered for exchange for purposes of the Exchange
Offer. Any Existing Notes which have been tendered for exchange but which are
not exchanged for any reason will be credited to an account maintained with such
Book-Entry Transfer Facility for the Existing Notes as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Existing Notes
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may be retendered by following one of the procedures described under
"--Procedures for Tendering" and "--Book-Entry Transfer" above at any time on or
prior to the Expiration Date.
CONDITIONS
LHP has no obligation to consummate the Exchange Offer if the New Notes to
be received by such holder or holders of Existing Notes in the Exchange Offer,
upon receipt, will not be tradable by such holder without restriction under the
Securities Act and the Exchange Act and without material restrictions under the
"blue sky" or securities laws of the several states of the United States. The
Exchange Offer is also subject to the condition that it not violate applicable
law or any applicable interpretation of the Commission or its Staff. All
conditions to the Exchange Offer (with the exception of certain necessary
governmental approvals) must be satisfied or waived prior to the Expiration
Date.
LHP reserves the right in its sole discretion to waive any conditions to the
Exchange Offer. In the event that the Company deems satisfied any such
condition, where it is unreasonable to do so, such action may be the equivalent
of a waiver by the Company of such condition. If such action would be such a
waiver, and such waiver constitutes a material change to the Exchange Offer or
in the information previously disclosed to the holders of the Existing Notes,
the Company will, in accordance with the applicable rules of the Commission,
disseminate promptly disclosure of such change in a manner reasonably calculated
to inform holders of the Existing Notes to such change.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange Agent
for the Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
<TABLE>
<CAPTION>
BY MAIL: BY HAND:
<S> <C> <C>
P.O. Box 843 Telephone: 770 Broadway
Cooper Station (800) 548-6565 13th Floor 10003
New York, NY 10276 New York, NY 10036
Attention: Corporate Trust Facsimile: Attention: Corporate Trust
Services (212) 780-0592 Services
</TABLE>
FEES AND EXPENSES
LHP will pay all fees and expenses incident to its performance of the
Exchange Offer under the Registration Rights Agreement, including fees and
expenses of the Exchange Agent and Trustee and accounting, legal, printing and
related fees and expenses. These fees and expenses include the cost of
registering the New Notes under the Securities Act and applicable Blue Sky laws
and of soliciting tenders under the Exchange Offer. The principal solicitation
for tenders pursuant to the Exchange Offer is being made by mail; however,
additional solicitations may be made by telegraph, telephone, telecopy or in
person by officers and regular employees of LHP.
LHP will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. LHP, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. LHP may also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of the Prospectus and related documents to the beneficial owners of the
Existing Notes and in handling or forwarding tenders for exchange.
LHP will pay all transfer taxes, if any, applicable to the exchange of
Existing Notes pursuant to the Exchange Offer. If, however, New Notes or
Existing Notes for principal amounts not tendered or accepted for exchange are
to be registered or issued in the name of any person other than the registered
holder of
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the Existing Notes tendered, or if tendered Existing Notes are registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Existing
Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Existing Notes who do not exchange their Existing Notes for New
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Existing Notes as set forth in the legend
thereon as a consequence of the issuance of the Existing Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Existing Notes may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. LHP
does not currently anticipate that it will register the Existing Notes under the
Securities Act. To the extent that Existing Notes are tendered and accepted in
the Exchange Offer, the trading market for untendered and tendered but
unaccepted Existing Notes could be adversely affected.
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REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement, in the event that (i)
applicable interpretations of the staff of the Commission do not permit LHP to
effect such an Exchange Offer, (ii) for any other reason the Exchange Offer is
not consummated within 150 days of the Recapitalization Closing Date, (iii) a
holder of Existing Notes is not permitted by applicable law to participate in
the Exchange Offer or does not receive freely tradeable New Notes pursuant to
the Exchange Offer or, (iv) under certain circumstances, LHP or the Initial
Purchasers or the holders of a majority in aggregate principal amount of
Existing Notes so request (any of (i) through (iv) being an "Event" and the date
thereof, the "Event Date"), LHP will, at its cost, use its best efforts to (a)
as promptly as practicable and, in any event, within 30 days after such Event
Date (which shall be no earlier than 90 days after the Recapitalization Closing
Date), file a shelf registration statement (the "Shelf Registration Statement")
covering resales of the Existing Notes, (b) cause the Shelf Registration
Statement to be declared effective under the Securities Act and (c) keep
effective the Shelf Registration Statement for a period of two years after the
Recapitalization Closing Date or such shorter period that will terminate when
all Existing Notes have been sold thereunder. LHP will, in the event a Shelf
Registration Statement is declared effective, provide to each applicable holder
of the Existing Notes copies of the prospectus which is a part of the Shelf
Registration Statement and notify each such holder when the Shelf Registration
Statement has become effective and take certain other actions as are required to
permit unrestricted resales of the Existing Notes.
A holder of Existing Notes that sells such Existing Notes pursuant to the
Shelf Registration Statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement that are applicable to such a
holder (including certain indemnification obligations).
If on or prior to 60 days following the Recapitalization Closing Date, an
Exchange Offer Registration Statement has not been filed with the Commission,
additional interest will accrue on the Existing Notes from and including the
61st day following the Recapitalization Closing Date until, but excluding, the
date such registration statement is filed. In addition, if on or prior to 120
days following the Recapitalization Closing Date, such Exchange Offer
Registration Statement is not declared effective, additional interest will
accrue on the Existing Notes from and including the 121st day following the
Recapitalization Closing Date until, but excluding, the date such registration
statement is declared effective. Further, if on or prior to 150 days following
the Recapitalization Closing Date the Exchange Offer is not consummated,
additional interest will accrue on the Notes from and including the 151st day
following the Closing Date until, but excluding, the date of consummation of the
Exchange Offer. If an Event shall have occurred, and if by 180 days after the
Recapitalization Closing Date a Shelf Registration is not declared effective,
additional interest will accrue on the Existing Notes not exchanged as a result
of such Event from and including the 181st day after the Recapitalization
Closing Date, until, but excluding, the effective date of the Shelf Registration
Statement. In each case, additional interest will be payable semi-annually in
arrears, with the first semiannual payment due on the first interest payment
date in respect of the Existing Notes following the date from which additional
interest begins to accrue, and will accrue, under each circumstance set forth
above, at a rate per annum equal to an additional one-half of one percent (0.5%)
of the principal amount of the Existing Notes upon the occurrence of each such
circumstance, which rate will increase by one half of one percent (0.5%) for
each 90-day period that such additional interest continues to accrue under any
such circumstance, with an aggregate maximum increase in the interest rate per
annum equal to one percent (1.0%).
If applicable, in the event that the Shelf Registration Statement ceases to
be effective prior to the second anniversary of the Recapitalization Closing
Date for a period in excess of 45 days, whether or not consecutive, in any given
year, then, the interest rate borne by the Existing Notes shall increase by an
additional one half of one percent (0.5%) per annum on the 46th day in the
applicable year such Shelf Registration Statement ceases to be effective. Such
interest rate will increase by an additional one half of
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one percent (0.5%) per annum for each additional 90 days that such Shelf
Registration Statement is not effective, subject to the same aggregate maximum
increase in the interest rate per annum of one percent (1.0%) referred to above.
Upon the filing of the Registration Statement, the effectiveness of the
Registration Statement, or the consummation of the Exchange Offer or the
effectiveness of the Shelf Registration Statement, as the case may be, the
interest rate borne by the Existing Notes from the date of such filing,
effectiveness or consummation will be reduced by the full amount of any such
increase, provided that none of the conditions that trigger an interest rate
increase exist.
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DESCRIPTION OF THE NEW NOTES
GENERAL
The Existing Notes were issued, and the New Notes offered hereby will be
issued, under an Indenture (the "Indenture"), dated as of June 30, 1997, by and
between Leiner Group and United States Trust Company of New York as the Trustee.
Immediately following the Recapitalization, pursuant to a supplemental indenture
(the "Supplemental Indenture") between LHP and the Trustee, LHP assumed (the
"Assumption") all of the obligations of Leiner Group under the Indenture and the
Existing Notes, and thereby became the obligor on the Existing Notes. Following
consummation of the Assumption, Leiner Group was released and discharged from
all further obligations in respect of the Indenture and the Existing Notes. Upon
the issuance of the New Notes, the Indenture will be subject to and governed by
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
terms of the New Notes are identical in all material respects to the terms of
the Existing Notes for which they may be exchanged pursuant to the Exchange
Offer, except that the New Notes will have been registered under the Securities
Act, and thus will not bear restrictive legends restricting their transfer
pursuant to the Securities Act. As used in this "Description of the New Notes"
section, the term "Notes" means the Existing Notes and the New Notes,
collectively, and the term "Company" means Leiner Health Products Inc., but not
any of its subsidiaries (unless the context otherwise requires).
The following is a summary of the material provisions of the Indenture and
does not purport to be complete and is subject to the detailed provisions of,
and is qualified in its entirety by reference to, the Trust Indenture Act, the
Notes and the Indenture, including the definitions of certain terms contained
therein and including those terms made part of the Indenture by reference to the
Trust Indenture Act. The Indenture and the Supplemental Indenture are filed as
Exhibits to the Registration Statement of which this Prospectus forms a part.
The definitions of certain terms used in the following summary are set forth
below under "--Certain Definitions." Reference is made to the Indenture for the
full definition of all such terms, as well as any other capitalized terms used
herein for which no definition is provided.
MATURITY AND INTEREST
The New Notes will be unsecured senior subordinated obligations of the
Company limited in aggregate principal amount to $85,000,000. The New Notes will
mature on July 1, 2007. Interest on the New Notes will accrue at the rate of
9 5/8% per annum and will be payable semi-annually in arrears on January 1 and
July 1 in each year, commencing on January 1, 1998, to holders of record on the
immediately preceding December 15 and June 15, respectively. Interest on the New
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from the Issue Date. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months.
Principal of, and premium, if any, and interest on, the New Notes will be
payable at the office or agency of the Company maintained for such purpose in
The City of New York or, at the option of the Company, payment of interest may
be made by check mailed to the holders of the New Notes at their respective
addresses as set forth in the register of holders of Notes. Until otherwise
designated by the Company, the Company's office or agency in The City of New
York will be the office of the Trustee maintained for such purpose. The New
Notes will be issued in fully registered form, without coupons, and in
denominations of $1,000 and integral multiples thereof. No service charge will
be made for any transfer, exchange or redemption of Notes, except in certain
circumstances for any tax or other governmental charge that may be imposed in
connection therewith.
SUBORDINATION
The payment of the principal of, and premium, if any, and interest on, the
New Notes will be subordinated, as set forth in the Indenture, in right of
payment to the prior payment in cash in full of all existing and future Senior
Debt. The New Notes will be senior subordinated indebtedness of the Company
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ranking PARI PASSU with all other existing and future senior subordinated
indebtedness of the Company. The New Notes will also be effectively subordinated
to any secured indebtedness of the Company to the extent of the value of the
assets securing such indebtedness, and to all indebtedness of the Company's
Subsidiaries. As of June 30, 1997, after giving effect to the Recapitalization
and the financing therefor on a pro forma basis, there was outstanding
approximately $164.7 million principal amount of Senior Debt of the Company
(including Indebtedness of Vita Health in an amount equivalent to approximately
$15.0 million, which would be Guaranteed by the Company).
The Indenture provides that in the event of any insolvency or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relating to the Company or
its assets, or any liquidation, dissolution or other winding-up of the Company,
whether voluntary or involuntary, or any assignment for the benefit of creditors
or other marshalling of assets or liabilities of the Company, all Senior Debt
must be paid in full in cash or cash equivalents, or such payment duly provided
for to the satisfaction of holders of Senior Debt, before any payment or
distribution, whether in cash, property or securities (excluding certain
permitted equity or junior debt securities of the Company), is made, directly or
indirectly on account of the Senior Subordinated Note Obligations or for the
acquisition of any of the Notes.
During the continuance of any default in the payment when due (whether at
stated maturity, by acceleration or otherwise) of principal of, or premium, if
any, or interest on, or of unreimbursed amounts under drawn letters of credit or
fees relating to letters of credit constituting or other fees in respect of, any
Senior Debt (in each case, a "Payment Default"), no direct or indirect payment
of any kind or character by or on behalf of the Company or from any source
whatsoever shall be made on account of the Senior Subordinated Note Obligations
of the Company or for the acquisition of any of the Notes unless and until such
default has been cured or waived or has ceased to exist or such Senior Debt has
been discharged or paid in full in cash or cash equivalents.
In addition, during the continuance of any other default with respect to any
Designated Senior Debt of the Company pursuant to which the maturity thereof may
be accelerated (a "Non-payment Default"), after receipt by the Trustee and the
Company from an agent or other representative of holders of such Designated
Senior Debt of a written notice of such Non-payment Default specifying, among
other things, the applicable Designated Senior Debt the Company to which such
Non-payment Default relates, no direct or indirect payment of any kind or
character may be made by the Company on account of the Senior Subordinated Note
Obligations or for the acquisition of any of the Notes for the period specified
below (the "Payment Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice of a
Non-payment Default by the Trustee and the Company from an agent or other
representative of holders of Designated Senior Debt stating that such notice is
a payment blockage notice pursuant to the Indenture and shall end on the
earliest to occur of the following events: (i) 179 days shall have elapsed since
the receipt of such notice; (ii) the date on which such default is cured or
waived or ceases to exist (provided that no other Payment Default or Non-payment
Default has occurred or is then continuing after giving effect to such cure or
waiver); (iii) the date on which such Designated Senior Debt is discharged or
paid in full in cash or cash equivalents; or (iv) the date on which such Payment
Blockage Period shall have been terminated by express written notice to the
Company or the Trustee from the agent or other representative of holders of
Designated Senior Debt initiating such Payment Blockage Period, after which the
Company, subject to the existence of any Payment Default, shall promptly resume
making any and all required payments in respect of the Notes including any
missed payments. Only one Payment Blockage Period with respect to the Notes may
be commenced within any 360 consecutive day period. No Non-payment Default with
respect to Designated Senior Debt that existed or was continuing on the date of
the commencement of any Payment Blockage Period with respect to the Designated
Senior Debt initiating such Payment Blockage Period (other than any such
Non-payment Default which was not and could not reasonably be expected to have
been known by the holders or the agent or other representative of such
Designated Senior Debt) will be, or
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can be, made the basis for the commencement of a second Payment Blockage Period,
whether or not within a period of 360 consecutive days, unless such default has
been cured or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants during the period after the date of commencement of such Payment
Blockage Period, that, in either case, would give rise to a Non-payment Default
pursuant to any provision under which a Non-payment Default previously existed
or was continuing shall constitute a new Non-payment Default for this purpose;
PROVIDED that, in the case of a breach of a particular financial covenant, the
Company shall have been in compliance for at least one full 90 consecutive day
period after the date of commencement of such Payment Blockage Period). In no
event will a Payment Blockage Period extend beyond 179 days from the date of the
receipt by the Trustee of the notice and there must be a 181 consecutive day
period in any 360 day period during which no Payment Blockage Period is in
effect.
If the Company fails to make any payment on the Notes when due or within any
applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of Default
under the Indenture and would enable the holders of the Notes to accelerate the
maturity thereof. See "--Events of Default."
If the Company shall make any payment to the Trustee on account of the
principal of, or premium, if any, or interest on, the Notes, or any other Senior
Subordinated Note Obligations, or the holders of the Notes shall receive from
any source any payment on account of the principal of, or premium, if any, or
interest on, the Notes or any other Senior Subordinated Note Obligations, at a
time when such payment is prohibited by the subordination provisions of the
Indenture, the Trustee or such holders shall hold such payment in trust for the
benefit of, and shall pay over and deliver to, the holders of Senior Debt (pro
rata as to each of such holders on the basis of the respective amounts of such
Senior Debt held by them), or their representative or the trustee under the
indenture or other agreement (if any) pursuant to which such Senior Debt may
have been issued, as their respective interests may appear, for application to
the payment of all outstanding Senior Debt until all such Senior Debt has been
paid in full in cash, after giving effect to all other payments or distributions
to, or provisions made for, the holders of Senior Debt.
By reason of such subordination, in the event of liquidation, receivership,
reorganization or insolvency, creditors of the Company who are holders of Senior
Debt may recover more, ratably, than the holders of the Notes, and funds which
would be otherwise payable to the holders of the Notes will be paid to the
holders of the Senior Debt to the extent necessary to pay the Senior Debt in
full, and the Company may be unable to meet its obligations in full with respect
to the Notes.
REDEMPTION
MANDATORY REDEMPTION. The Notes are not subject to any mandatory sinking
fund redemption prior to maturity.
OPTIONAL REDEMPTION. The Notes are redeemable at the option of the Company,
in whole or in part, at any time on or after July 1, 2002 at the redemption
prices (expressed as percentages of the principal amount of the Notes) set forth
below plus in each case accrued and unpaid interest, if any, to the date of
redemption, if redeemed during the twelve-month period beginning on July 1 of
the years indicated below.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2002.............................................................................. 104.813%
2003.............................................................................. 103.208%
2004.............................................................................. 101.604%
2005 and thereafter............................................................... 100.000%
</TABLE>
In addition, at any time prior to July 1, 2000, the Company may, at its
option, redeem up to 30% of the aggregate principal amount of Notes originally
issued with the net cash proceeds of one or more Public Equity Offerings (as
defined below), at 109 5/8 % of the aggregate principal amount thereof plus
accrued
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and unpaid interest, if any, to the date of redemption; PROVIDED, HOWEVER, that
not less than $60.0 million principal amount of the Notes is outstanding
immediately after giving effect to such redemption (other than any Notes owned
by the Company or any of its Affiliates) and such redemption is effected within
60 days of such issuance. As used in this paragraph, a "Public Equity Offering"
means an underwritten primary public offering of common stock (other than
Disqualified Stock) of the Company, Leiner Group or PLI pursuant to an effective
registration statement filed under the Securities Act, all of the net proceeds
of which, if issued by Leiner Group or PLI, are contributed as common equity to
the Company; PROVIDED that the first public equity offering pursuant to which
the Company redeems Notes pursuant to this paragraph shall have resulted in
gross proceeds to the issuer in such offering of not less than $50 million. Such
a primary offering may be undertaken either independently or in conjunction with
any secondary offering of securities by the issuer thereof.
The Notes will be subject to redemption as a whole, at the option of the
Company, prior to July 1, 2002, at any time within 180 days after a Change of
Control at a redemption price equal to 100% of the principal amount thereof plus
the Applicable Premium as of, and accrued and unpaid interest, if any, to, the
date of redemption (the "Redemption Date"). Each holder of Notes will also have
certain rights to require the Company to purchase such Notes upon the occurrence
of a Change of Control. See "--Change of Control."
SELECTION AND NOTICE. If less than all of the Notes are to be redeemed at
any time, selection of the Notes to be redeemed will be made by the Company in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not listed on a
securities exchange, on a pro rata basis or by lot or any other method as the
Trustee shall deem fair and appropriate; PROVIDED, that Notes redeemed in part
shall only be redeemed in integral multiples of $1,000; PROVIDED, FURTHER, that
any such redemption pursuant to the provisions relating to a Public Equity
Offering shall be made on a pro rata basis or on as nearly a pro rata basis as
practicable (subject to the procedures of The Depository Trust Company, New
York, New York ("DTC") or any other Depository). Notices of any optional or
mandatory redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each holder of Notes to be
redeemed at such holder's registered address. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed, and the Trustee shall
authenticate and mail to the holder of the original Note a new Note in principal
amount equal to the unredeemed portion of the original Note promptly after the
original Note has been cancelled. On and after the redemption date, interest
will cease to accrue on Notes or portions thereof called for redemption.
CHANGE OF CONTROL
The Indenture provides that, in the event that any of certain "Change of
Control" events occurs, each holder of Notes will have the right, subject to the
terms and conditions of the Indenture, to require the Company to offer to
purchase all or any portion of such holder's Notes at a purchase price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase, in accordance with the terms set
forth below (a "Change of Control Offer"). The term "Change of Control" is
defined in the Indenture. See "-- Certain Definitions." Generally, a "Change of
Control" consists of one or more of (i) certain events involving the acquisition
by a person, entity or group of more than 50% of the voting power of the
Company, Leiner Group or PLI, (ii) certain changes in the composition of a
majority of the Board of Directors of the Company, Leiner Group or PLI that are
not approved by certain existing directors, or (iii) certain dispositions of all
or substantially all of the assets of the Company, Leiner Group or PLI.
Unless the Company has exercised its right to redeem all of the Notes as
described under "--Optional Redemption," the Company shall mail on or before the
30th day following the occurrence of any Change of Control (or at the Company's
option, prior to such Change of Control but after the public announcement
thereof), to each holder of Notes at such holder's registered address a notice
stating: (i) that a
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Change of Control has occurred or will occur and that such holder has (or upon
such occurrence will have) the right to require the Company to purchase all or a
portion (equal to $1,000 or an integral multiple thereof) of such holder's Notes
at a purchase price in cash equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase (the
"Change of Control Purchase Date"), which shall be a Business Day, specified in
such notice, that is not earlier than 30 days or later than 60 days from the
date such notice is mailed, (ii) the amount of accrued and unpaid interest, if
any, as of the Change of Control Purchase Date, (iii) that any Note not tendered
will continue to accrue interest, (iv) that, unless the Company defaults in the
payment of the purchase price for the Notes payable pursuant to the Change of
Control Offer, any Notes accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control Purchase Date,
(v) the procedures, consistent with the Indenture, to be followed by a holder of
Notes in order to accept a Change of Control Offer or to withdraw such
acceptance, (vi) such other information as may be required by the Indenture and
applicable laws and regulations and (vii) if such Change of Control Offer is
made prior to the occurrence of such Change of Control, payment is conditioned
on the occurrence of such Change of Control.
On the Change of Control Purchase Date, provided that such Change of Control
has occurred, the Company will (i) accept for payment all Notes or portions
thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent the aggregate purchase price of all Notes or portions thereof
accepted for payment and any accrued interest on such Notes as of the Change of
Control Purchase Date, and (iii) deliver or cause to be delivered to the Trustee
all Notes tendered pursuant to the Change of Control Offer. The Paying Agent
shall promptly mail to each holder of Notes or portions thereof accepted for
payment an amount equal to the purchase price for such Notes plus accrued and
unpaid interest, if any, thereon, and the Trustee shall promptly authenticate
and mail to each holder of Notes accepted for payment in part a new Note equal
in principal amount to any unpurchased portion of the Notes, and any Note not
accepted for payment in whole or in part shall be promptly returned to the
holder of such Note. On and after a Change of Control Purchase Date, interest
will cease to accrue on the Notes or portions thereof accepted for payment,
unless the Company defaults in the payment of the purchase price therefor. The
Company will announce the results of the Change of Control Offer to holders of
the Notes on or as soon as practicable after the Change of Control Purchase
Date.
The Company will comply with the applicable tender offer rules, including
the requirements of Section 14(e) and Rule 14e-1 under the Exchange Act, and all
other applicable securities laws and regulations in connection with any Change
of Control Offer and will be deemed not to be in violation of any of the
covenants under the Indenture to the extent such compliance is in conflict with
such covenants.
The Company will not be required to make a Change of Control Offer, upon a
Change of Control, if a third party makes such an offer in the manner, at the
times and in compliance with the same requirements in the Indenture as apply to
the Company. The third party must purchase all Notes validly tendered and not
withdrawn under the terms of the Change of Control Offer.
The term "all or substantially all of the assets" of the Company is not
defined in the Indenture or the Trust Indenture Act. This may create uncertainty
for holders in the event that some, but not all of the assets of the Company,
PLI or Leiner Group are sold. In such event, if the parties disagree as to how
to characterize a particular sale, the Company nonetheless may or may not
initiate a Change of Control Offer and the parties may need to seek legal
redress for clarification of their rights.
The New Credit Facility prohibits the Company from purchasing any Notes
pursuant to a Change of Control Offer prior to repayment in full of the
indebtedness under the New Credit Facility. Any additional credit agreements or
other agreements relating to unsubordinated indebtedness to which the Company
becomes a party may contain similar restrictions and provisions. Moreover, the
New Credit Facility contains a "change of control" provision that in relevant
part is similar to the provision in the Indenture relating to a Change of
Control, and the occurrence of such a "change of control" would constitute a
default under the New Credit Facility. The Company's obligations under the New
Credit Facility represent
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obligations senior in right of payment to the Notes, and the New Credit Facility
will not permit the purchase of the Notes absent consent of the lenders
thereunder in the event of a Change of Control (although the failure by the
Company to comply with its obligations in the event of a Change of Control would
constitute a Default under the Indenture).
If the Company is unable to obtain the requisite consents and/or repay all
indebtedness which prohibits the repurchase of the Notes upon the occurrence of
a Change of Control, the Company would remain prohibited by such indebtedness
from purchasing any Notes and, as a result, the Company could not commence a
Change of Control Offer to purchase the Notes within 30 days of the occurrence
of the Change of Control, which would constitute an Event of Default under the
Indenture. The Company's failure to commence such a Change of Control Offer
would also constitute an event of default under the New Credit Facility which
would permit the lenders thereunder to accelerate all of the Company's
indebtedness under the New Credit Facility. If a Change of Control were to
occur, there can be no assurance that the Company would have sufficient assets
to first satisfy its obligations under the New Credit Facility or other
agreements relating to any such indebtedness, if accelerated, and then to
purchase all of the Notes that might be delivered by holders seeking to accept a
Change of Control Offer.
CERTAIN COVENANTS
LIMITATION ON INCURRENCE OF INDEBTEDNESS. The Indenture will provide that
the Company will not, and will not permit any Restricted Subsidiary to, create,
incur, assume or directly or indirectly enter into any Guarantee of, or in any
other manner become directly or indirectly liable for ("incur"), any
Indebtedness (including Acquired Debt), except that the Company and any
Subsidiary Guarantor may incur Indebtedness if, at the time of, and immediately
after giving PRO FORMA effect to, such incurrence of Indebtedness, the
Consolidated Cash Flow Coverage Ratio of the Company for the most recently ended
four fiscal quarters for which financial statements are available would be at
least 2.0 to 1.0 until July 1, 1999, and 2.25 to 1.0 thereafter.
The foregoing limitations will not apply to the incurrence of any of the
following (collectively, "Permitted Indebtedness"), each of which shall be given
independent effect:
(i) Indebtedness incurred by the Company or any Subsidiary Guarantor
pursuant to the Credit Facility in a maximum principal amount not to exceed
at any time
(a) an aggregate principal amount of $85.0 million under the Term
Loan Facility, minus the aggregate amount of all scheduled repayments of
principal, and all mandatory prepayments of principal with Net Proceeds
from Asset Sales, whether or not such repayments or prepayments are
actually made (unless the relevant provision requiring any such repayment
or prepayment is waived or amended by the lenders thereunder in
accordance therewith), applied to permanently reduce the Indebtedness
outstanding under the Term Loan Facility, and plus (in the case of any
refinancing thereof) the aggregate amount of fees, underwriting
discounts, premiums and other costs and expenses incurred in connection
with such refinancing, and
(b) an aggregate principal amount outstanding at any time under the
Revolving Credit Facility not to exceed an amount equal to (A) an amount
(the "Total Amount") equal to the greater of (x) an amount equal to
$125.0 million, minus the amount of all mandatory prepayments of
principal with Net Proceeds from Asset Sales applied to permanently
reduce the commitments under the Revolving Credit Facility, and plus (in
the case of any refinancing thereof) the aggregate amount of fees,
underwriting discounts, premiums and other costs and expenses incurred in
connection with such refinancing, and (y) the Borrowing Base, minus (B)
without duplication, the amount then outstanding (I.E., advanced, and
received by, and available for use by, the Company) under any Receivables
Financing (as set forth in the books and records of the Company and
confirmed by the agent, trustee or other representative of the
institution or group providing such Receivables Financing) that has been
entered into by the Company, any
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Restricted Subsidiary or any Receivables Subsidiary since the Issue Date
and that, as of such date of determination, has not expired or otherwise
terminated, minus (C) the aggregate principal amount of Indebtedness
incurred under the Revolving Credit Facility by Restricted Subsidiaries
pursuant to clause (ii) below;
(ii) Indebtedness incurred by any Restricted Subsidiary under the
Revolving Credit Facility in an aggregate principal amount at any one time
outstanding not to exceed the greater of (A) $25.0 million and (B) 20.0% of
the Total Amount, and any Guarantees thereof;
(iii) Indebtedness of Foreign Subsidiaries and any Guarantees in respect
thereof; PROVIDED that the aggregate principal amount of such Indebtedness
outstanding at any time does not exceed, as to all such Foreign
Subsidiaries, the greater of (A) $20.0 million and (B) an amount equal to
9.0% of Consolidated Tangible Assets (calculated on a PRO FORMA basis giving
effect to any Acquisition being financed with any such Indebtedness);
(iv) Indebtedness represented by the Notes or the Exchange Notes, any
Guarantees in respect thereof, and any Indebtedness arising by reason of any
Lien granted to secure any of the foregoing Indebtedness;
(v) Indebtedness owed by any Restricted Subsidiary to the Company or to
another Restricted Subsidiary, or owed by the Company to any Restricted
Subsidiary; PROVIDED, HOWEVER, that any such Indebtedness shall be at all
times held by a Person which is either the Company or a Restricted
Subsidiary of the Company; PROVIDED, FURTHER, HOWEVER, that upon either (a)
the transfer or other disposition of any such Indebtedness to a Person other
than the Company or another Restricted Subsidiary or (b) the sale, lease,
transfer or other disposition of shares of Capital Stock (including by
consolidation or merger) of any such Restricted Subsidiary to a Person other
than the Company or another Restricted Subsidiary, the incurrence of such
Indebtedness shall be deemed to be an incurrence that is not permitted by
this clause (v);
(vi) Indebtedness of the Company or any Restricted Subsidiary in the
form of Purchase Money Obligations, Capital Lease Obligations or
Attributable Debt, in an aggregate amount at any one time outstanding not to
exceed the greater of (A) $5.0 million and (B) an amount equal to 3.0% of
Consolidated Tangible Assets;
(vii) Indebtedness of the Company or any Restricted Subsidiary arising in
the ordinary course of business with respect to Interest Rate Agreement
Obligations or Currency Agreement Obligations incurred for the purpose of
fixing or hedging interest rate risk or currency risk with respect to any
fixed or floating rate Indebtedness that is permitted by the terms of the
Indenture to be outstanding or any foreign currency exposure;
(viii) Indebtedness of the Company or any Restricted Subsidiary arising
from the honoring of a check, draft or similar instrument of such Person
drawn against insufficient funds, provided that such Indebtedness is
extinguished within five Business Days of its incurrence;
(ix) Indebtedness of the Company or any Restricted Subsidiary consisting
of Guarantees, indemnities, or Obligations in respect of purchase price
adjustments, in connection with the acquisition or disposition of assets,
including pursuant to the Recapitalization;
(x) Indebtedness of the Company or any Restricted Subsidiary in respect
of (A) letters of credit, bankers' acceptances or other similar instruments
or obligations, issued in connection with liabilities incurred in the
ordinary course of business (including those issued to governmental entities
in connection with self-insurance under applicable workers' compensation
statutes), or (B) surety, judgment, appeal, performance and other similar
bonds, instruments or obligations provided in the ordinary course of
business or (C) Guarantees of Senior Debt or incurred in compliance with the
"Limitation on Issuances of Guarantees of Indebtedness by Subsidiaries"
covenant, or (D) Indebtedness arising by reason of any Lien securing Senior
Debt or incurred in compliance with the "Limitation on Liens" covenant;
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(xi) Indebtedness (A) of the Company or any Subsidiary Guarantor
consisting of Guarantees of up to an aggregate principal amount of $2.0
million of borrowings by Management Investors in connection with the
purchase of Capital Stock of the Company, Leiner Group or PLI by such
Management Investors or (B) of the Company or any Restricted Subsidiary
consisting of Guarantees in respect of loans or advances made to officers or
employees of Leiner Group, the Company or any Restricted Subsidiary, or
Guarantees otherwise made on their behalf, (1) in respect of travel,
entertainment and moving-related expenses incurred in the ordinary course of
business, or (2) in the ordinary course of business not exceeding $500,000
in the aggregate outstanding at any time;
(xii) Indebtedness of a Receivables Subsidiary secured by a Lien on all
or part of the assets disposed of in, or otherwise incurred in connection
with, a Financing Disposition;
(xiii) Any Indebtedness incurred in connection with or given in exchange
for the renewal, extension, substitution, refunding, defeasance,
refinancing, repayment or replacement (a "refinancing") of any Indebtedness
described in clauses (i), (ii), (iii), (iv), (xiii), (xiv) or (xv) hereof or
of any Indebtedness permitted to be incurred pursuant to the first paragraph
of this "Limitation on Incurrence of Indebtedness" covenant ("Refinancing
Indebtedness"); PROVIDED, HOWEVER, that (a) the principal amount of such
Refinancing Indebtedness shall not exceed the principal amount (or accrued
amount, if less) of the Indebtedness so renewed, extended, substituted,
refunded, defeased, refinanced, repaid or replaced ("refinanced"), plus the
fees, underwriting discounts, premium (not to exceed the stated amount of
any premium required to be paid in connection with such a refinancing
pursuant to the terms of the Indebtedness being refinanced) and other costs
and expenses incurred in connection therewith, (b) with respect to
Refinancing Indebtedness of any Indebtedness other than Senior Debt, the
Refinancing Indebtedness shall have a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being refinanced; (c) with respect to Refinancing Indebtedness
other than Senior Debt, such Refinancing Indebtedness shall rank no more
senior than, and shall be at least as subordinated in right of payment to,
the Notes as the Indebtedness being refinanced; and (d) the obligor on such
Refinancing Indebtedness shall be the obligor on the Indebtedness being
refinanced, the Company or any Subsidiary Guarantor, or (in the case of
Indebtedness of a Foreign Subsidiary that is being refinanced) any Foreign
Subsidiary;
(xiv) Indebtedness of the Company or any Restricted Subsidiary which is
outstanding on the Issue Date;
(xv) Acquired Debt of any Restricted Subsidiary and any Guarantee
thereof, PROVIDED that at the time of such incurrence and after giving
effect thereto on a PRO FORMA basis, (x) no Default or Event of Default will
have occurred and be continuing or would result therefrom and (y) the
Company could incur at least $1.00 of additional Indebtedness pursuant to
the first paragraph of this "Limitation on Incurrence of Indebtedness"
covenant; and
(xvi) Indebtedness of the Company or any Subsidiary Guarantor in addition
to that described in clauses (i) through (xv) above, and any renewals,
extensions, substitutions, refinancings or replacements of such
Indebtedness, so long as the aggregate principal amount at any one time
outstanding of all such Indebtedness incurred pursuant to this clause (xvi)
does not exceed the greater of (a) $15.0 million and (b) an amount equal to
7.0% of Consolidated Tangible Assets.
For purposes of determining compliance with, and the outstanding principal
amount of any particular Indebtedness incurred pursuant to and in compliance
with, this covenant, (i) any other obligation of the obligor on such
Indebtedness (or of any other Person that could have incurred such Indebtedness
as the obligor thereon) arising under any Guarantee, Lien or letter of credit
supporting such Indebtedness shall be disregarded to the extent that such
Guarantee, Lien or letter of credit secures the principal amount of such
Indebtedness; (ii) in the event that Indebtedness meets the criteria of more
than one of the types of Indebtedness described in the preceding paragraphs, the
Company, in its sole discretion, shall classify such item of Indebtedness and
only be required to include the amount and type of such Indebtedness in one of
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such clauses; and (iii) the amount of Indebtedness issued at a price that is
less than the principal amount thereof shall be equal to the amount of the
liability in respect thereof determined in accordance with GAAP.
For purposes of determining compliance with any Dollar-denominated
restriction on the incurrence of Indebtedness denominated in a foreign currency,
the Dollar-equivalent principal amount of such Indebtedness incurred pursuant
thereto shall be calculated based on the relevant currency exchange rate in
effect on the date that such Indebtedness was incurred, in the case of term
debt, or first committed, in the case of revolving credit debt, provided that
(x) the Dollar-equivalent principal amount of any such Indebtedness outstanding
on the Issue Date shall be calculated based on the relevant currency exchange
rate in effect on the Issue Date and (y) if such Indebtedness is incurred to
refinance other Indebtedness denominated in a foreign currency, and such
refinancing would cause the applicable Dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in effect on the
date of such refinancing, such Dollar-denominated restriction shall be deemed
not to have been exceeded so long as the principal amount of such refinancing
Indebtedness does not exceed the principal amount of such Indebtedness being
refinanced and (z) the Dollar-equivalent principal amount of Indebtedness
denominated in a foreign currency and incurred pursuant to the Credit Facility
shall be calculated based on the relevant currency exchange rate in effect on,
at the Company's option, (i) the Issue Date, (ii) any date on which any of the
respective commitments under the Credit Facility shall be reallocated between or
among facilities or subfacilities thereunder, or on which such rate is otherwise
calculated for thereunder, or on which such rate is otherwise calculated for any
purpose thereunder, or (iii) the date of such incurrence. The principal amount
of any Indebtedness incurred to refinance other Indebtedness, if incurred in a
different currency from the Indebtedness being refinanced, shall be calculated
based on the currency exchange rate applicable to the currencies in which such
respective Indebtedness is denominated that is in effect on the date of such
refinancing.
Indebtedness of any Person that is not a Restricted Subsidiary, which
Indebtedness is outstanding at the time such Person becomes a Restricted
Subsidiary or is merged with or into or consolidated with the Company or a
Restricted Subsidiary, shall be deemed to have been incurred at the time such
Person becomes a Restricted Subsidiary or is merged with or into or consolidated
with the Company or a Restricted Subsidiary, and Indebtedness which is assumed
at the time of the acquisition of any asset shall be deemed to have been
incurred at the time of such acquisition.
LIMITATION ON RESTRICTED PAYMENTS. The Indenture will provide that the
Company will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, make any Restricted Payment, unless at the time of and immediately
after giving effect to the proposed Restricted Payment (with the value of any
such Restricted Payment, if other than cash, to be as determined in good faith
by the Board of Directors of the Company, which determination shall be
conclusive), (i) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof, (ii) the Company could incur
at least $1.00 of additional Indebtedness pursuant to the first paragraph under
the "Limitation on Incurrence of Indebtedness" covenant and (iii) the aggregate
amount of all Restricted Payments made after the Issue Date shall not exceed the
sum of (a) an amount equal to 50% of the Company's aggregate cumulative
Consolidated Net Income accrued on a cumulative basis from the Issue Date (or,
if such aggregate cumulative Consolidated Net Income for such period shall be a
deficit, minus 100% of such deficit), PLUS (b) the aggregate amount of all net
cash proceeds (other than proceeds from the issuance of the common stock of
Leiner Group to North Castle Partners on the Issue Date) received since the
Issue Date by the Company (w) as capital contributions in the form of common
equity to the Company after the Issue Date, (x) from the issuance and sale
(other than to a Restricted Subsidiary) of Capital Stock (other than
Disqualified Stock), (y) from the issuance to a Person who is not a Subsidiary
of the Company of any options, warrants or other rights to acquire Capital Stock
of the Company (in each case, exclusive of any Disqualified Stock or any
options, warrants or other rights that are redeemable at the option of the
holder, or are required to be redeemed, prior to the Stated Maturity of the
Notes) and (z) from the issuance and sale by the
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Company or any Restricted Subsidiary after the Issue Date of Disqualified Stock
or debt securities that have been converted into or exchanged for Capital Stock
of the Company (other than Disqualified Stock), PLUS the amount of cash received
by the Company or any Restricted Subsidiary upon such conversion or exchange, in
each case to the extent that such proceeds are not used to redeem, repurchase,
retire or otherwise acquire Capital Stock or any Indebtedness of the Company or
any Restricted Subsidiary, pursuant to clause (ii) of the next paragraph, PLUS
(c) the amount of the net reduction in Investments by the Company in
Unrestricted Subsidiaries resulting from (x) the payment of cash dividends or
the repayment in cash of the principal of loans or the cash return on any
Investment, in each case to the extent received by the Company or any Restricted
Subsidiary from Unrestricted Subsidiaries, (y) the release or extinguishment of
any Guarantee of Indebtedness of any Unrestricted Subsidiary, and (z) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries of the
Company (valued as provided in the definition of "Investment"), such aggregate
amount of the net reduction in Investments not to exceed in the case of any
Unrestricted Subsidiaries the amount of Restricted Investments previously made
by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary,
which amount was included in the calculation of the amount of Restricted
Payments, PLUS (d) to the extent that any Restricted Investment that was made
after the Issue Date is sold for cash or otherwise liquidated or repaid for
cash, the amount of cash proceeds received with respect to such Restricted
Investment, net of taxes and the cost of disposition, not to exceed the amount
of Restricted Investments made after the Issue Date.
The foregoing provisions will not prohibit the following actions
(collectively, "Permitted Payments"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such declaration date such payment would have
been permitted under the Indenture and such payment shall be deemed to have
been paid on such date of declaration for purposes of clause (iii) of the
preceding paragraph;
(ii) the redemption, repurchase, retirement or other acquisition of any
Capital Stock or any Indebtedness of the Company that is subordinated in
right of payment to the Notes in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Restricted Subsidiary) of
Capital Stock of the Company (other than any Disqualified Stock);
(iii) Restricted Investments in an amount such that the sum of the
aggregate amount of Restricted Investments made pursuant to this clause
(iii) after the Issue Date and outstanding (net of any returns in cash
thereof or cash received in liquidation or on disposition thereof) does not
exceed at any time the greater of (A) $15.0 million and (B) 7.0% of
Consolidated Tangible Assets;
(iv) loans, advances, dividends or distributions to Leiner Group or PLI
to the extent necessary to permit Leiner Group to repurchase or otherwise
acquire, or payments by the Company to purchase or otherwise acquire,
Capital Stock of Leiner Group (including options, warrants or other rights
to acquire such Capital Stock) from departing or deceased directors,
officers or employees of Leiner Group, the Company or its Subsidiaries, or
other Management Investors (or payments in lieu of issuing and reacquiring
any such Capital Stock, made to or on behalf of any such Person), whether
pursuant to the terms of an employee benefit plan or employment agreement or
otherwise; PROVIDED that the aggregate amount of all such repurchases shall
not exceed $2.5 million during any fiscal year and $5.0 million during any
period of five consecutive fiscal years (plus the net cash proceeds received
by the Company after the Issue Date as a capital contribution from the sale
to Management Investors of Capital Stock of Leiner Group or options,
warranty or other rights in respect thereof);
(v) payments to Leiner Group or PLI to permit Leiner Group to pay, or
the payment by the Company directly of, the payments provided for by clause
(viii) of the exceptions to the "Limitation on Transactions with Affiliates"
covenant;
(vi) loans, advances, dividends or distributions by the Company or any
Restricted Subsidiary to Leiner Group or PLI not to exceed an amount
necessary to permit Leiner Group or PLI to (A) pay its
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costs (including all professional fees and expenses) incurred to comply with
its reporting obligations under federal or state laws or under the
Indenture, including any reports filed with respect to the Securities Act,
Exchange Act or the respective rules and regulations promulgated thereunder,
(B) make payments in respect of its indemnification obligations owing to
directors, officers, employees or other Persons under its charter or by-laws
or pursuant to written agreements with any such Person, to the extent such
payments relate to the Company and its Subsidiaries, (C) pay all reasonable
fees and expenses payable by it in connection with the Recapitalization and
related transactions (including without limitation the financing thereof),
or (D) pay its other operational expenses (other than taxes) incurred in the
ordinary course of business and not exceeding $500,000 in the aggregate in
any fiscal year;
(vii) payments by the Company or any Restricted Subsidiary to Leiner
Group or PLI (A) pursuant to the Tax Sharing Agreement, (B) to pay or permit
Leiner Group to pay any taxes, charges or assessments, including but not
limited to sales, use, transfer, rental, ad valorem, value-added, stamp,
property, consumption, franchise, license, capital, net worth, gross
receipts, excise, occupancy, intangibles or similar taxes, charges or
assessments ("Taxes") (other than federal, state or local taxes measured by
income and federal, state or local withholding imposed on payments made by
Leiner Group), required to be paid by Leiner Group or PLI by virtue of its
being incorporated or having capital stock outstanding (but not by virtue of
owning stock of any corporation other than PLI or the Company or any of its
Subsidiaries), or being a holding company parent of PLI or the Company or
receiving dividends from or other distributions in respect of the stock of
PLI or the Company, or having guaranteed any obligations of PLI or the
Company or any of its Subsidiaries, or having made any payment in respect of
any of the items for which the Company is permitted to make payments to
Leiner Group or PLI pursuant to this covenant, (C) to pay or permit Leiner
Group or PLI to pay any other federal, state, foreign, provincial or local
taxes measured by income for which Leiner Group or PLI is liable up to an
amount not to exceed with respect to such federal taxes the amount of any
such taxes which the Company would have been required to pay on a separate
company basis or on a consolidated basis if the Company had filed a
consolidated return on behalf of an affiliated group (as defined in Section
1504 of the Internal Revenue Code of 1986, as amended, or an analogous
provision of state, local or foreign law) of which it was the common parent,
or with respect to state and local taxes, on a combined basis if the Company
had filed a combined return on behalf of an affiliated group consisting only
of the Company and its Subsidiaries, (D) to pay or permit Leiner Group or
PLI to pay any Taxes attributable to periods prior to the issuance of the
Notes, or (E) to pay or permit Leiner Group or PLI to pay any Taxes
attributable to the Assumption or any dividend or distribution in respect of
the stock of PLI or the Company;
(viii) the payment by the Company of, or loans, advances, dividends or
distributions by the Company to Leiner Group or PLI to pay, dividends on the
common stock of the Company, Leiner Group or PLI, as applicable, following
an initial public offering of such common stock, in an amount not to exceed
in any fiscal year 6% of the net proceeds received by the Company, in or
from such public offering;
(ix) loans, advances, dividends or distributions by the Company or any
Restricted Subsidiary in an aggregate amount not to exceed $5.0 million;
PROVIDED, HOWEVER, that the Company or any Restricted Subsidiary shall not
be permitted to make Restricted Payments under this clause (ix) unless,
after giving effect thereto (including the incurrence of any Indebtedness to
fund such Restricted Payment), the Consolidated Coverage Ratio of the
Company would be at least equal to 2.25:1.00; and
PROVIDED, FURTHER, that in the case of clauses (viii) and (ix) no Default or
Event of Default shall have occurred or be continuing at the time of such
payment after giving effect thereto.
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For purposes of clause (iii) of the first paragraph of this covenant,
Permitted Payments made pursuant to clauses (i), (iii), (iv), (viii) and (ix) of
the immediately preceding paragraph shall be included (with respect to clause
(i), as of the date of declaration) as Restricted Payments made since the Issue
Date.
LIMITATION ON ASSET SALES. The Indenture will provide that the Company will
not, and will not permit any Restricted Subsidiary to, make any Asset Sale
unless (i) the Company or such Restricted Subsidiary, as the case may be,
receives consideration (including by way of relief from, or by any other Person
assuming responsibility for, any liabilities, contingent or otherwise) at the
time of such Asset Sale at least equal to the Fair Market Value of the assets or
other property sold or disposed of in the Asset Sale, as such Fair Market Value
may be determined (and shall be determined, to the extent such Asset Sale or any
series of related Asset Sales involves aggregate consideration in excess of $1.0
million) in good faith by the Board of Directors, whose determination shall be
conclusive (including as to the value of all noncash consideration), and (ii) at
least 75% of such consideration (excluding, in the case of an Asset Sale of
assets, any consideration by way of relief from, or by any other Person assuming
responsibility for, any liabilities, contingent or otherwise, which are not
Indebtedness) consists of either cash or Cash Equivalents. For purposes of this
covenant, "cash" shall include (1) the amount of any Indebtedness (other than
any Indebtedness that is by its terms expressly subordinated in right of payment
to the Notes) of the Company or such Restricted Subsidiary that is assumed by
the transferee of any such assets or other property in such Asset Sale or
another Person (and excluding any liabilities that are incurred in connection
with or in anticipation of such Asset Sale), but only to the extent that such
assumption is effected on a basis under which there is no further recourse to
the Company or any of the Restricted Subsidiaries with respect to such
liabilities, (2) Indebtedness of a Restricted Subsidiary that is no longer a
Restricted Subsidiary as a result of such Asset Sale, to the extent that the
Company and each other Restricted Subsidiary is unconditionally released from
any Guarantee of such Indebtedness in connection with such Asset Sale, (3)
securities received by the Company or any Restricted Subsidiary from the
transferee that are promptly converted into cash and (4) consideration
consisting of Indebtedness of the Company or any Restricted Subsidiary (other
than Indebtedness that is by its terms expressly subordinated in right of
payment to the Notes), to the extent such Indebtedness is canceled and there is
no further recourse to the Company or any such Restricted Subsidiary, as the
case may be, under such Indebtedness.
Within 365 days after any Asset Sale, the Company may elect to apply an
amount equal to the Net Proceeds from such Asset Sale to (a) permanently reduce
any Senior Debt of the Company or Indebtedness (other than Preferred Stock) of a
Restricted Subsidiary and/or (b) make an investment in, or acquire assets
related to, a Related Business. Pending the final application of such amount,
the Company may temporarily reduce Senior Debt or Indebtedness of a Restricted
Subsidiary or temporarily invest such Net Proceeds in any manner permitted by
the Indenture. Any portion of such amount not applied or invested as provided in
the first sentence of this paragraph within 365 days of such Asset Sale will be
deemed to constitute "Excess Proceeds."
Each date on which the aggregate amount of Excess Proceeds in respect of
which an Asset Sale Offer has not been made exceeds $10.0 million shall be
deemed an "Asset Sale Offer Trigger Date." As soon as practicable, but in no
event later than 20 Business Days after each Asset Sale Offer Trigger Date, the
Company shall commence an offer (an "Asset Sale Offer") to purchase the maximum
principal amount of Notes and other Indebtedness of the Company that ranks PARI
PASSU in right of payment with the Notes (to the extent required by the
instrument governing such other Indebtedness) that may be purchased out of the
Excess Proceeds. Any Notes and other Indebtedness to be purchased pursuant to an
Asset Sale Offer shall, and any other Indebtedness to be purchased pursuant to
an Asset Sale Offer may, be purchased pro rata based on the aggregate principal
amount of Notes and all such other Indebtedness outstanding, and all Notes shall
be purchased at an offer price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase. To the extent that any Excess Proceeds remain after completion of
an Asset Sale Offer, the Company may use the remaining amount for general
corporate purposes otherwise permitted by the Indenture. In the event that the
Company is
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prohibited under the terms of any agreement governing outstanding Senior Debt of
the Company from repurchasing Notes with Excess Proceeds pursuant to an Asset
Sale Offer as set forth in this paragraph, the Company shall promptly use all
Excess Proceeds to permanently reduce such outstanding Senior Debt of the
Company. Upon the consummation of such permanent reduction, or of any Asset Sale
Offer, the amount of Excess Proceeds shall be deemed to be reset to zero.
Notice of an Asset Sale Offer shall be mailed by the Company not later than
the 20th Business Day after the related Asset Sale Offer Trigger Date to each
holder of Notes at such holder's registered address, stating: (i) that an Asset
Sale Offer Trigger Date has occurred and that the Company is offering to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds (to the extent provided in the immediately preceding paragraph),
at an offer price in cash in an amount equal to 100% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of the purchase
(the "Asset Sale Offer Purchase Date"), which shall be a Business Day, specified
in such notice, that is not earlier than 30 days or later than 60 days from the
date such notice is mailed, (ii) the amount of accrued and unpaid interest, if
any, as of the Asset Sale Offer Purchase Date, (iii) that any Note not tendered
will continue to accrue interest, (iv) that, unless the Company defaults in the
payment of the purchase price for the Notes payable pursuant to the Asset Sale
Offer, any Notes accepted for payment pursuant to the Asset Sale Offer shall
cease to accrue interest after the Asset Sale Offer Purchase Date, (v) the
procedures, consistent with the Indenture, to be followed by a holder of Notes
in order to accept an Asset Sale Offer or to withdraw such acceptance, and (vi)
such other information as may be required by the Indenture and applicable laws
and regulations.
On the Asset Sale Offer Purchase Date, the Company will (i) accept for
payment the maximum principal amount of Notes or portions thereof tendered
pursuant to the Asset Sale Offer that can be purchased out of Excess Proceeds
from such Asset Sale that are to be applied to an Asset Sale Offer (to the
extent provided in the second preceding paragraph), (ii) deposit with the Paying
Agent the aggregate purchase price of all Notes or portions thereof accepted for
payment and any accrued and unpaid interest, if any, on such Notes as of the
Asset Sale Offer Purchase Date, and (iii) deliver or cause to be delivered to
the Trustee all Notes tendered pursuant to the Asset Sale Offer. If less than
all Notes tendered pursuant to the Asset Sale Offer are accepted for payment by
the Company for any reason consistent with the Indenture, selection of the Notes
to be purchased by the Company shall be in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis or by lot;
PROVIDED, HOWEVER, that Notes accepted for payment in part shall only be
purchased in integral multiples of $1,000. The Paying Agent shall promptly mail
to each holder of Notes or portions thereof accepted for payment an amount equal
to the purchase price for such Notes plus accrued and unpaid interest, if any,
thereon, and the Trustee shall promptly authenticate and mail to such holder of
Notes accepted for payment in part a new Note equal in principal amount to any
unpurchased portion of the Notes, and any Note not accepted for payment in whole
or in part shall be promptly returned to the holder of such Note. On and after
an Asset Sale Offer Purchase Date, interest will cease to accrue on the Notes or
portions thereof accepted for payment, unless the Company defaults in the
payment of the purchase price therefor. The Company will announce the results of
the Asset Sale Offer to holders of the Notes on or as soon as practicable after
the Asset Sale Offer Purchase Date.
The Company will comply with the applicable tender offer rules, including
the requirements of Section 14(e) and Rule 14e-1 under the Exchange Act, and all
other applicable securities laws and regulations in connection with any Asset
Sale Offer and will be deemed not to be in violation of any of the covenants
under the Indenture to the extent such compliance is in conflict with such
covenants.
LIMITATION ON LIENS. The Indenture will provide that the Company will not,
and will not permit any Restricted Subsidiary to, directly or indirectly,
create, incur, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by such Person, or any income or profits therefrom, or assign
or convey any right to receive income therefrom (any such Lien, including any
such assignment or conveyance, the "Initial Lien"), securing Indebtedness of the
Company or any Subsidiary Guarantor that is PARI PASSU with
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or expressly subordinated in right of payment to the Notes (other than Permitted
Liens), unless the Notes are equally and ratably secured thereby for so long as
such Indebtedness is so secured by the Initial Lien. Any such Lien thereby
created in favor of the Notes will be automatically and unconditionally released
and discharged upon (i) the release and discharge of the Initial Lien to which
it relates, or (ii) any sale, exchange or transfer to any Person not an
Affiliate of the Company of the property or assets secured by such Initial Lien,
or of all of the Capital Stock held by the Company or any Restricted Subsidiary
in, or all or substantially all the assets of, any Restricted Subsidiary
creating such Lien.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Indenture will provide that the Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (i)
pay dividends or make any other distributions to the Company or any other
Restricted Subsidiary on its Capital Stock or with respect to any other interest
or participation in, or measured by, its profits, or pay any Indebtedness owed
to the Company or any other Restricted Subsidiary, (ii) make loans or advances
to the Company or any other Restricted Subsidiary or (iii) transfer any of its
properties or assets to the Company or any other Restricted Subsidiary, except
for such encumbrances or restrictions consisting of or existing under or by
reason of (a) the Credit Facility or any other agreement or instrument as in
effect on the Issue Date, and any amendments, restatements, renewals,
replacements or refinancings thereof; PROVIDED, HOWEVER, that such amendments,
restatements, renewals, replacements or refinancings are no more restrictive
with respect to such dividend and other payment restrictions than those
contained in the Credit Facility or such other agreement or instrument (or, if
more restrictive, than those contained in the Indenture) immediately prior to
any such amendment, restatement, renewal, replacement or refinancing, (b) any
requirement of any regulatory authority having jurisdiction over the Company or
any Restricted Subsidiary or any of their businesses, (c) any agreement or
instrument of a Person, or governing Indebtedness or Capital Stock of a Person,
acquired by or merged or consolidated with or into the Company or any Restricted
Subsidiary, or assumed by the Company or any Restricted Subsidiary in connection
with an acquisition of assets from such Person, as in effect at the time of such
acquisition, merger or consolidation (except to the extent that such
Indebtedness was incurred in connection with or in contemplation of such
acquisition, merger or consolidation), PROVIDED that for purposes of this clause
(c), if another Person is the Surviving Person, any Subsidiary or agreement
thereof shall be deemed acquired or assumed, as the case may be, by the Company
when such Person becomes the Surviving Person, (d) any provision that restricts
in a customary manner the subletting, assignment or transfer of any property or
asset that is subject to a lease, license or similar contract, or the assignment
or transfer of any lease, license or other contract, (e) any transfer of,
agreement to transfer, option or right with respect to, or Lien on, any property
or assets of the Company or any Restricted Subsidiary not otherwise prohibited
by the Indenture, (f) mortgages, pledges or other security agreements securing
Indebtedness of a Restricted Subsidiary to the extent such encumbrance or
restrictions restrict the transfer of the property subject to such mortgages,
pledges or other security agreements, (g) customary provisions restricting
dispositions of real property interests set forth in any reciprocal easement
agreements of the Company or any Restricted Subsidiary, (h) encumbrances or
restrictions arising or agreed to in the ordinary course of business and that do
not, individually or in the aggregate, detract from the value of property or
assets of the Company or any Restricted Subsidiary, (i) any agreement or
instrument relating to any Indebtedness incurred by a Foreign Subsidiary
pursuant to the first paragraph, or clause (ii), (iii), (vii), (x)(A) and (x)(B)
of the second paragraph, of the "Limitation on Incurrence of Indebtedness"
covenant, (j) subordination provisions applicable to any note representing an
obligation of the Company or any Restricted Subsidiary owing to any Restricted
Subsidiary, (k) Purchase Money Obligations for property acquired in the ordinary
course of business that only impose restrictions on the property so acquired,
(l) an agreement relating to Indebtedness of or a Financing Disposition to or by
any Receivables Entity, (m) an agreement for the sale or disposition of the
Capital Stock or assets of any Restricted Subsidiary; PROVIDED, HOWEVER, that
such restriction is only applicable to such Restricted Subsidiary or assets, as
applicable, and such sale or disposition otherwise is permitted under the
"Limitation on Asset Sales" covenant, or (n)
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Refinancing Indebtedness permitted under the Indenture, PROVIDED, HOWEVER, that
the restrictions contained in the agreements governing such Refinancing
Indebtedness are no more restrictive in the aggregate than those contained in
the agreements governing the Indebtedness being refinanced immediately prior to
such refinancing.
Nothing contained in this "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant shall prevent the
Company or any Restricted Subsidiary from (1) creating, incurring, assuming or
suffering to exist any Liens otherwise permitted by the "Limitation on Liens"
covenant or (2) restricting the sale or other disposition of property or assets
of the Company or any of its Restricted Subsidiaries that secure Indebtedness of
the Company or any of its Restricted Subsidiaries.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into or
suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate of the Company (other than the Company or a
Restricted Subsidiary) unless (1) such transaction or series of related
transactions is on terms that taken as a whole are no less favorable to the
Company or such Restricted Subsidiary, as the case may be, than would be
available in a comparable transaction in arm's-length dealings with a Person
that was not such an Affiliate, and (2) the Company delivers to the Trustee (a)
with respect to any transaction or series of related transactions involving
aggregate payments in excess of $1.0 million, an Officers' Certificate
certifying that such transaction or series of related transactions complies with
clause (1) above and (b) with respect to any transaction or series of related
transactions involving aggregate payments in excess of $5.0 million, an
Officers' Certificate certifying that such transaction or series of related
transactions has been approved by a majority of the members of the Board of
Directors of the Company and approved by a majority of the Independent Directors
or, in the event there is only one Independent Director, by such Independent
Director, and evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate, and (c) with respect to any transaction or series of
related transactions involving aggregate payments in excess of $15.0 million, an
opinion issued by an investment banking firm or appraiser or accounting firm of
national standing as to the fairness to the Company or such Restricted
Subsidiary from a financial point of view. Notwithstanding the foregoing, this
covenant will not apply to (i) any transaction entered into by or among the
Company or one of its Restricted Subsidiaries with one or more Restricted
Subsidiaries; (ii) any Restricted Payment or Permitted Payment not prohibited by
the "Limitation on Restricted Payments" covenant; (iii) the payment of
reasonable and customary regular fees to directors of the Company and its
Restricted Subsidiaries who are not employees of the Company or its
Subsidiaries; (iv) any transaction with an employee, officer or member of the
Board of Directors of the Company or any Restricted Subsidiary in the ordinary
course of business involving compensation, indemnity or employee benefit
arrangements; (v) loans or advances made to directors, officers or employees of
Leiner Group, PLI, the Company or any Restricted Subsidiary, or Guarantees in
respect thereof or otherwise made on their behalf (including any payments under
such Guarantees), (A) in respect of travel, entertainment or moving-related
expenses incurred in the ordinary course of business, or (B) in the ordinary
course of business not exceeding $500,000 in the aggregate outstanding at any
time; (vi) payments pursuant to the Tax Sharing Agreement; (vii) any agreement
as in existence on the Issue Date, as the same may be amended from time to time
in any manner not adverse to the holders of Notes; and (viii) the payment of
fees in an aggregate amount not to exceed $1.5 million in any fiscal year and
the reimbursement of reasonable out-of-pocket expenses incurred by North Castle
Partners, L.L.C., in each case in connection with its performance of services
pursuant to the Management Agreement; (ix) the Recapitalization and all related
transactions (including but not limited to the financing thereof), including
without limitation the incurrence and payment of all fees and expenses in
connection therewith; (x) any transaction in the ordinary course of business or
approved by a majority of the Independent Directors, between the Company or any
Restricted Subsidiary and any Affiliate of the Company controlled by the Company
that is a joint venture or similar entity primarily engaged in a Related
Business; and (xii) Guarantees of borrowings by Management Investors in
connection with the purchase of Capital Stock of the Company, Leiner Group or
PLI by such Management
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Investors, which Guarantees are permitted under the "Limitation on Incurrence of
Indebtedness" covenant, and payments thereunder.
LIMITATION ON INCURRENCE OF OTHER SENIOR SUBORDINATED INDEBTEDNESS. The
Company will not, and will not permit any Subsidiary Guarantor to, directly or
indirectly, incur any Indebtedness that is expressly subordinate in right of
payment in any respect to any other Indebtedness, unless such Indebtedness is
expressly subordinate in right of payment to, or ranks PARI PASSU with, the
Notes, in the case of the Company, or the Subsidiary Guarantees, in the case of
a Subsidiary Guarantor; PROVIDED that the foregoing restriction shall not apply
to distinctions between categories of Senior Debt or senior Indebtedness of a
Subsidiary Guarantor ("Guarantor Senior Debt") that exist solely by reason of
Liens or Guarantees arising or created in respect of some but not all such
Senior Debt or Guarantor Senior Debt, as the case may be.
LIMITATION ON THE SALE OR ISSUANCE OF PREFERRED STOCK OF RESTRICTED
SUBSIDIARIES. The Company will not sell, and will not permit any Restricted
Subsidiary to, directly or indirectly, issue or sell, any shares of Preferred
Stock of any Restricted Subsidiary, except (i) to the Company or a Restricted
Subsidiary, or to directors as director's qualifying shares to the extent
required by applicable law, or (in the case of a Foreign Subsidiary) to the
extent required by applicable law, or (ii) for any sale in compliance with the
terms of the "Limitation on Asset Sales" covenant or (iii) for any Preferred
Stock incurred by any Restricted Subsidiary in compliance with the "Limitations
on Incurrence of Indebtedness" covenant.
LIMITATION ON DESIGNATION OF UNRESTRICTED SUBSIDIARIES. The Indenture will
provide that the Company will not designate any Subsidiary of the Company (other
than a newly created Subsidiary in which no Investment has previously been made
in excess of $1,000) as an "Unrestricted Subsidiary" under the Indenture (a
"Designation") unless:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(b) immediately after giving effect to such Designation the Company
would be able to incur $1.00 of Indebtedness (other than Permitted
Indebtedness) under the "Limitation on Incurrence of Indebtedness" covenant;
and
(c) the Company would not be prohibited under the Indenture from making
an Investment at the time of Designation in an amount (the "Designation
Amount") equal to the Fair Market Value of such Restricted Subsidiary on
such date.
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the "Limitation
on Restricted Payments" covenant for all purposes of the Indenture in the
Designation Amount. The Indenture will further provide that neither the Company
nor any Restricted Subsidiary shall at any time (x) provide credit support for,
or a Guarantee of, any Indebtedness of any Unrestricted Subsidiary (including
any undertaking, agreement or instrument evidencing such Indebtedness); PROVIDED
that the Company may pledge Capital Stock or Indebtedness of any Unrestricted
Subsidiary on a nonrecourse basis such that the pledgee has no claim whatsoever
against the Company other than to obtain such pledged property, (y) be directly
or indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z)
be directly or indirectly liable for any Indebtedness which provides that the
holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to its
final scheduled maturity upon the occurrence of a default with respect to any
Indebtedness of any Unrestricted Subsidiary (including any right to take
enforcement action against such Unrestricted Subsidiary), except to the extent
permitted under the "Limitation on Restricted Payments" covenant.
The Indenture will further provide that the Company will not revoke any
Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation"),
unless:
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(a) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation shall be deemed to have
been incurred at such time and shall have been permitted to be incurred for
all purposes of the Indenture.
All Designations and Revocations must be evidenced by a resolution of the
Board of Directors of the Company delivered to the Trustee certifying compliance
with the foregoing provisions.
LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS BY SUBSIDIARIES. The
Indenture will provide that the Company will not permit any U.S. Restricted
Subsidiary, directly or indirectly, to Guarantee any other Indebtedness of the
Company or any Subsidiary Guarantor ("U.S. Specified Indebtedness") unless such
U.S. Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to the Indenture providing for the Guarantee (a "U.S. Subsidiary
Guarantee") of the payment of the Notes by such U.S. Restricted Subsidiary,
which U.S. Subsidiary Guarantee shall be subordinated to such U.S. Restricted
Subsidiary's Guarantee of such U.S. Specified Indebtedness to the same extent as
the Notes or the Subsidiary Guarantees, as applicable, are subordinated to such
U.S. Specified Indebtedness under the Indenture; PROVIDED, HOWEVER, that a U.S.
Restricted Subsidiary will not be required to provide a U.S. Subsidiary
Guarantee under this covenant unless and until such time as such U.S. Restricted
Subsidiary, individually or together with all other U.S. Restricted Subsidiaries
that are otherwise obligated to provide a U.S. Subsidiary Guarantee under this
covenant, accounts for one percent or more of Consolidated Tangible Assets. The
Indenture will further provide that the Company will not permit any Foreign
Subsidiary, directly or indirectly, to Guarantee any other Indebtedness of the
Company or any Subsidiary Guarantor (the "Foreign Specified Indebtedness") that
(i) is PARI PASSU with or expressly subordinated in right of payment to the
Notes or the Subsidiary Guarantees, as applicable, or (ii) represents Public
Debt, in each case, unless such Foreign Subsidiary simultaneously executes and
delivers a supplemental indenture to the Indenture providing for the Guarantee
(a "Foreign Subsidiary Guarantee") of the payment of the Notes by such Foreign
Subsidiary, which Foreign Subsidiary Guarantee shall be subordinated to such
Foreign Subsidiary's Guarantee of such Foreign Specified Indebtedness to the
same extent as the Notes or the Subsidiary Guarantees, as applicable, are
subordinated to such Foreign Specified Indebtedness under the Indenture. A
Subsidiary Guarantor shall be deemed released from all of its obligations under
its U.S. Subsidiary Guarantee or Foreign Subsidiary Guarantee, as applicable, at
any such time that such Subsidiary Guarantor is released from all of its
obligations under all of its Guarantees in respect of U.S. Specified
Indebtedness or Foreign Specified Indebtedness, as the case may be, unless such
release results from payment under such Guarantee of U.S. Specified Indebtedness
or Foreign Specified Indebtedness, as applicable. In addition, the Company will
have the right to cause any Restricted Subsidiary to execute and deliver to the
Trustee a supplemental indenture pursuant to which such Subsidiary will
guarantee payment of the Notes. The obligations of each Subsidiary Guarantor
under its Guarantee will be limited to the maximum amount, as will, after giving
effect to all other contingent and fixed liabilities of such Subsidiary
Guarantor, result in the obligations of such Subsidiary Guarantor under the
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. Notwithstanding the foregoing, any Guarantee by a
Restricted Subsidiary of the Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon the sale or other
disposition, by way of merger or otherwise, to any Person not an Affiliate of
the Company, of all of the Company's stock in, or all or substantially all the
assets of, such Restricted Subsidiary. In addition, any Subsidiary Guarantee
will be automatically and unconditionally released and discharged upon the
merger or consolidation of the applicable Subsidiary Guarantor with and into the
Company or another Subsidiary Guarantor that is the surviving Person in such
merger or consolidation. The form of such supplemental indenture will be
attached as an exhibit to the Indenture.
PROVISION OF FINANCIAL STATEMENTS. The Indenture will provide that, whether
or not the Company is then subject to Section 13(a) or 15(d) of the Exchange
Act, the Company will file (unless such filing is not
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permitted under the Exchange Act) with the Commission, so long as Notes are
outstanding, the annual reports, quarterly reports and other periodic reports
which the Company would have been required to file with the Commission pursuant
to such Section 13(a) or 15(d) if the Company were so subject, and such
documents shall be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Company would have been required so
to file such documents if the Company were so subject. The Company will also in
any event (i) within 15 days of each Required Filing Date, (a) transmit by mail
to all holders of Notes, as their names and addresses appear in the Note
register, without cost to such holders and (b) file with the Trustee copies of
the annual reports, quarterly reports and other periodic reports which the
Company would have been required to file with the Commission pursuant to Section
13(a) or 15(d) of the Exchange Act if the Company were subject to such Sections
and (ii) if filing such documents by the Company with the Commission is
prohibited under the Exchange Act, promptly upon written request and payment of
the reasonable cost of duplication and delivery, supply copies of such documents
to any prospective holder at the Company's cost.
ADDITIONAL COVENANTS. The Indenture also contains covenants with respect to
the following matters: (i) payment of principal, premium and interest; (ii)
maintenance of an office or agency in The City of New York; (iii) maintenance of
corporate existence; (iv) payment of taxes and other claims; (v) maintenance of
properties; and (vi) maintenance of insurance.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Indenture will provide that the Company shall not, in any single
transaction or series of related transactions, consolidate or merge with or into
(whether or not the Company is the Surviving Person (other than a consolidation
or merger with or into a wholly owned Restricted Subsidiary; PROVIDED that, in
connection with any such merger or consolidation, no consideration (other than
Common Stock in the Surviving Person or the Company) shall be issued or
distributed to the shareholders of the Company)), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets in one or more related transactions to, another Person, and the
Company will not permit any Restricted Subsidiary to enter into any such
transaction or series of related transactions if such transaction or series of
related transactions, in the aggregate, would result in a sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the properties and assets of the Company and the Restricted Subsidiaries, taken
as a whole, to another Person, unless (i) the Surviving Person is a corporation
organized or existing under the laws of the United States, any state thereof or
the District of Columbia; (ii) the Surviving Person (if other than the Company)
assumes all the obligations of the Company under the Notes (and the Guarantees
of the Company's subsidiaries shall be confirmed as applying to such Surviving
Person's obligations), and the Indenture pursuant to a supplemental indenture in
a form reasonably satisfactory to the Trustee; (iii) at the time of and
immediately after such Disposition, no Default or Event of Default shall have
occurred and be continuing; and (iv) at the time of such Disposition and after
giving pro forma effect thereto, the Surviving Person would be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the first paragraph
of the covenant described under "--Certain Covenants-- Limitation on Incurrence
of Indebtedness."
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraph in
which the Company is not the Surviving Person, the Surviving Person is to assume
all the obligations of the Company under the Notes, the Indenture and, if then
in effect, the Registration Rights Agreement pursuant to a supplemental
indenture or other written agreement, as the case may be, and such Surviving
Person shall succeed to, and be substituted for, and may exercise every right
and power of, the Company and the Company shall be discharged from its
obligations under the Indenture, the Notes and the Registration Rights
Agreement. In addition, each Subsidiary Guarantor, unless it is the other party
to the transaction or unless its Subsidiary Guarantee will be released and
discharged in accordance with its terms as a result of the transaction, will be
required to confirm, by supplemental indenture, that its Subsidiary Guarantee
will apply to the obligations of the Company or the Surviving Person under the
Indenture.
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EVENTS OF DEFAULT
The Indenture will provide that each of the following constitutes an Event
of Default:
(i) a default for 30 days in the payment when due of interest on any
Note (whether or not prohibited by the subordination provisions of the
Indenture);
(ii) a default in the payment when due of principal on any Note (whether
or not prohibited by the subordination provisions of the Indenture), whether
upon maturity, acceleration, optional or mandatory redemption, required
repurchase or otherwise;
(iii) the failure to perform or comply with any provision described in
"Merger, Consolidation and Sale of Assets" and the failure to offer to
repurchase or to repurchase the Notes in the event of a Change of Control in
accordance with the provisions described in "Change of Control";
(iv) the failure to perform or comply with any covenant or agreement in
the Indenture, the Notes or any Subsidiary Guarantee (other than the
defaults specified in clauses (i), (ii) or (iii) above) which failure
continues for 30 days after written notice thereof has been given to the
Company by the Trustee or to the Company and the Trustee by the holders of
at least 25% in aggregate principal amount of the then outstanding Notes;
(v) the occurrence of one or more defaults under any agreements,
indentures or instruments under which the Company or any Significant
Subsidiary then has outstanding Indebtedness in excess of $7.5 million in
the aggregate and, if not already matured at its final maturity in
accordance with its terms, such Indebtedness shall have been accelerated;
(vi) one or more judgments, orders or decrees for the payment of money
in an amount (net of any insurance or indemnity payments actually received
in respect thereof prior to or within 60 days from the entry thereof, or to
be received in respect thereof in the event any appeal thereof shall be
unsuccessful) in excess of $7.5 million, either individually or in the
aggregate, shall be entered against the Company, any Subsidiary Guarantor or
any Significant Subsidiary or any of their respective properties and which
judgments, orders or decrees are not paid, discharged, bonded or stayed or
stayed pending appeal for a period of 60 days after their entry;
(vii) certain events of bankruptcy, dissolution, insolvency,
reorganization, administration or similar proceedings of the Company, any
Subsidiary Guarantor or any Significant Subsidiary; or
(viii) any Subsidiary Guarantee of a Subsidiary Guarantor ceases to be in
full force and effect or is declared null and void or any Subsidiary
Guarantor denies in writing that it has any further liability under any
Subsidiary Guarantee, or gives written notice to such effect (other than by
reason of the termination of the Indenture or the release of any such
Subsidiary Guarantee in accordance with such Subsidiary Guarantee or the
Indenture).
If any Event of Default (other than as specified in clause (vii) of the
preceding paragraph with respect to the Company) occurs and is continuing, the
Trustee or the holders of at least 25% in aggregate principal amount of the then
outstanding Notes may, and the Trustee at the request of such holders shall,
declare all the Notes to be due and payable, immediately by notice in writing to
the Company, and to the Company and the Trustee if by the holders, specifying
the respective Event of Default and that such notice is a "notice of
acceleration," and the Notes shall become immediately due and payable; PROVIDED
that so long as the Credit Agreement shall be in full force and effect, if an
Event of Default shall have occurred and be continuing (other than as specified
in clause (vii) above with respect to the Company), and such acceleration shall
not be effective until the earlier to occur of (x) five Business Days following
delivery of a written notice of such acceleration of the Notes to the agent
under the Credit Agreement and (y) the acceleration of any Indebtedness under
the Credit Agreement. Notwithstanding the foregoing, in the case of an Event of
Default arising from the events specified in clause (vii) of the preceding
paragraph with respect to the Company, the principal of, and premium, if any,
and any accrued interest on, all outstanding
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Notes shall ipso facto become immediately due and payable without further action
or notice. Holders of the Notes may not enforce the Indenture or the Notes
except as provided in the Indenture.
Notwithstanding the foregoing, in the event of a declaration of acceleration
in respect of the Notes because an Event of Default specified in clause (v)
above shall have occurred and be continuing, such declaration of acceleration of
the Notes and such Event of Default shall be automatically annulled and
rescinded and be of no further effect if the Indebtedness that is the subject of
such Event of Default has been discharged or paid in full or such Event of
Default shall have been cured or waived by the holders of such Indebtedness and
if such Indebtedness has been accelerated, then the holders thereof have
rescinded their declaration of acceleration in respect of such Indebtedness and
written notice of such discharge, cure or waiver and rescission, as the case may
be, shall have been given to the Trustee within 60 days after such declaration
of acceleration in respect of the Notes by the Company or by the requisite
holders of such Indebtedness or a trustee, fiduciary or agent for such holders
or other evidence satisfactory to the Trustee of such events is provided to the
Trustee and no other Event of Default shall have occurred which has not been
cured or waived during such 60-day period.
The holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except (i) a continuing Default or Event of Default in the payment
of the principal of, or premium, if any, or interest on, the Notes (which may
only be waived with the consent of each holder of Notes affected), or (ii) in
respect of a covenant or provision which under the Indenture cannot be modified
or amended without the consent of the holder of each Note outstanding. Subject
to certain limitations, holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal, premium or interest) if it determines that withholding
notice is in their interest.
No holder of any of the Notes has any right to institute any proceeding with
respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee under the Notes and the Indenture, the Trustee has
failed to institute such proceeding within 30 days after receipt of such notice
and the Trustee, within such 30-day period, has not received directions
inconsistent with such written request by holders of a majority in aggregate
principal amount of the outstanding Notes. Such limitations do not apply,
however, to a suit instituted by a holder of a Note for the enforcement of the
payment of the principal of, premium, if any, or interest on, such Note on or
after the respective due dates expressed in such Note.
The Company is required to deliver to the Trustee annually a statement
regarding compliance by the Company with its obligations under the Indenture,
and the Company is required, upon becoming aware of any Default or Event of
Default, to deliver to the Trustee a statement specifying such Default or Event
of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
The Indenture provides that no recourse for the payment of the principal of,
or premium, if any, or interest on, any of the Notes or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture or in any of
the Notes, or of any Subsidiary Guarantor in any Subsidiary Guarantee, or
because of the creation of any Indebtedness represented thereby, shall be had
against any incorporator, shareholder, officer, director, employee or
controlling person of the Company or of any successor Person thereof. Each
holder, by accepting the Notes, waives and releases all such liability.
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DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the
obligations of the Company and any Subsidiary Guarantor discharged with respect
to the outstanding Notes ("defeasance"). Such defeasance means that the Company
shall be deemed to have paid and discharged the entire indebtedness represented
by the outstanding Notes and to have satisfied all other obligations under the
Notes and the Indenture except for (i) the rights of holders of the outstanding
Notes to receive, solely from the trust fund described below, payments in
respect of the principal of, and premium, if any, and interest on, such Notes
when such payments are due, (ii) the Company's obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes, and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights, powers,
trusts, duties and immunities of the Trustee under the Indenture, and (iv) the
defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company and any
Subsidiary Guarantor released with respect to certain covenants that are
described in the Indenture ("covenant defeasance") and any omission to comply
with such obligations shall not constitute a Default or an Event of Default with
respect to the Notes. In the event that a covenant defeasance occurs, certain
events (not including non-payment, bankruptcy and insolvency events) described
under "--Events of Default" will no longer constitute Events of Default with
respect to the Notes.
Either defeasance option may be exercised to any redemption date or to the
maturity date for the Notes. In order to exercise either defeasance or covenant
defeasance, (i) the Company shall irrevocably deposit with the Trustee, as trust
funds in trust, for the benefit of the holders of the Notes, cash in United
States dollars, U.S. Government Obligations (as defined in the Indenture), or a
combination thereof, in such amounts as will be sufficient, in the report of a
nationally recognized firm of independent public accountants or a nationally
recognized investment banking firm, to pay and discharge the principal of, and
premium, if any, and interest on the outstanding Notes to redemption or
maturity, as the case may be; (ii) the Company shall have delivered to the
Trustee an Opinion of Counsel in the United States to the effect that the
holders of the outstanding Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such defeasance or covenant
defeasance, as the case may be, and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such defeasance or covenant defeasance, as the case may be, had not
occurred (in the case of defeasance, such opinion must refer to and be based
upon a ruling of the Internal Revenue Service or a change in applicable Federal
income tax laws); (iii) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit or insofar as clause (vii) under the
first paragraph under "-- Events of Default" is concerned, at any time during
the period ending on the 91st day after the date of deposit; (iv) such
defeasance or covenant defeasance shall not result in a breach or violation of,
or constitute a Default under, the Indenture or any other material agreement or
instrument to which the Company or any Subsidiary Guarantor is a party or by
which it is bound; and (v) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each to the effect that all
conditions precedent under the Indenture to either defeasance or covenant
defeasance, as the case may be, have been complied with and (in the case of such
Officer's Certificate) that no violations under material agreements governing
any other outstanding Indebtedness would result therefrom.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes, as expressly
provided for in the Indenture) as to all outstanding Notes when (i) either (a)
all the Notes theretofore authenticated and delivered (except lost, stolen or
destroyed Notes which have been replaced or paid) have been delivered to the
Trustee for cancellation or (b) all Notes not theretofore delivered to the
Trustee for cancellation (x) have become due and payable, (y) will become due
and payable at their Stated Maturity within one year or (z) are to be called for
redemption within one year under arrangements reasonably satisfactory to the
Trustee for the giving of notice of redemption by the
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Trustee in the name, and at the expense, of the Company and, in each case, the
Company has irrevocably deposited or caused to be deposited with the Trustee an
amount in United States dollars, U.S. Government Obligations, or a combination
thereof, sufficient to pay and discharge the entire indebtedness on the Notes
not theretofore delivered to the Trustee for cancellation, for principal,
premium, if any, and interest to the date of deposit; (iii) the Company has paid
or caused to be paid all other sums payable under the Indenture by the Company;
and (iv) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel each to the effect that all conditions precedent under the
Indenture relating to the satisfaction and discharge of the Indenture have been
complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two paragraphs, the Indenture or the Notes
may be amended or supplemented with the written consent of the holders of at
least a majority in aggregate principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for Notes), and any existing Default or Event of Default or compliance with any
provision of the Indenture or the Notes may be waived with the consent of the
holders of a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for Notes).
Without the consent of each holder affected, an amendment or waiver shall
not: (i) reduce the principal amount of the Notes whose holders must consent to
an amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Note, or reduce the premium payable upon the redemption of
any Note or change the time at which any Note may be redeemed as described under
"Redemption--Optional Redemption" above or, following the occurrence of a Change
of Control or an Asset Sale, amend, change or modify the obligation of the
Company to offer to repurchase and to repurchase the Notes in the event of a
Change of Control or make and consummate the Asset Sale Offer with respect to
any Asset Sale, including by modifying any of the provisions or definitions with
respect thereto, (iii) reduce the rate of or change the time for payment of
interest on any Notes, (iv) waive a Default or Event of Default in the payment
of principal of, or premium, if any, or interest on, the Notes (except that
holders of at least a majority in aggregate principal amount of the then
outstanding Notes may (a) rescind an acceleration of the Notes that resulted
from a non-payment default, and (b) waive the payment default that resulted from
such acceleration), (v) make any Note payable in money other than that stated in
the Notes, (vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of holders of Notes to receive payments
of principal of, or premium, if any, or interest on, the Notes, (vii) waive a
redemption payment with respect to any Note, (viii) make any change to the
subordination provisions of the Indenture (including definitions) that adversely
affects holders, (ix) make any change in the foregoing amendment and waiver
provisions, or (x) release any Subsidiary Guarantor that is a Significant
Subsidiary from any of its obligations under its Subsidiary Guarantee or the
Indenture other than in compliance with the terms of such Subsidiary Guarantee
or the Indenture.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
(i) to cure any ambiguity, omission, defect or inconsistency, (ii) to provide
for uncertificated Notes in addition to or in place of certificated Notes, (iii)
to provide for the assumption of the Company's obligations to holders of the
Notes in the event of any Disposition involving the Company in which the Company
is not the Surviving Person or to add Subsidiary Guarantees or to secure the
Notes, (iv) to make any change that would provide any additional rights or
benefits to the holders of the Notes or that does not adversely affect the
rights of any such holder, or (v) to comply with the requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
No amendment to the subordination provisions of the Indenture or the Notes
described under "Subordination," including by modifying any of the definitions
relating thereto, may be made that
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adversely affects the rights of any Senior Debt then outstanding unless the
holders of such Senior Debt (or any group or representative thereof authorized
to give a consent) consent in writing to such amendment.
TRANSFER AND EXCHANGE
The registered holder of a Note will be treated as the owner of it for all
purposes. A holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a holder among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. Neither the Company nor the Registrar shall be
required to issue, register the transfer of or exchange any Note (i) during a
period beginning at the opening of business on the day that the Trustee receives
notice of any redemption from the Company and ending at the close of business on
the day the notice of redemption is sent to holders, (ii) selected for
redemption, in whole or in part, except the unredeemed portion of any Note being
redeemed in part may be transferred or exchanged, and (iii) during a Change of
Control Offer or an Asset Sale Offer if such Note is tendered pursuant to such
Change of Control Offer or Asset Sale Offer and not withdrawn.
THE TRUSTEE
United States Trust Company of New York is to be the Trustee under the
Indenture and has been appointed by the Company as Registrar and Paying Agent
with regard to the Notes.
The Indenture (including the provisions of the Trust Indenture Act
incorporated by reference therein) will contain limitations on the rights of the
Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; PROVIDED, HOWEVER, if it acquires any
conflicting interest (as defined in the Trust Indenture Act) it must eliminate
such conflict or resign.
GOVERNING LAW
The Indenture, the Notes and the Guarantees will be governed by the laws of
the State of New York, without regard to the principles of conflict of laws.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for the definition of all other terms used in the
Indenture.
"ACQUIRED DEBT" means (x) Indebtedness of any Person (the "Acquired Person")
existing at the time the Acquired Person merges or consolidates with or into, or
becomes a Restricted Subsidiary of, the Company or any Restricted Subsidiary, or
(y) Indebtedness of any Person assumed by the Company or any Restricted
Subsidiary in connection with its acquisition of assets from such Person, in
each case excluding Indebtedness incurred in connection with, or in
contemplation of, the Acquired Person merging or consolidating with or into, or
becoming a Restricted Subsidiary of, the Company or any Restricted Subsidiary,
or such acquisition of assets.
"ACQUISITION" means the purchase or other acquisition of any Person or
substantially all the assets of any Person by any other Person, whether by
purchase, stock purchase, merger, consolidation, or other transfer, and whether
or not for consideration.
"AEA" means AEA Investors Inc., a Delaware corporation, or any legal
successor thereto as a result of a reorganization thereof that does not involve
any change in control thereof.
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"AFFILIATE" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with") of any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"APPLICABLE PREMIUM" means, with respect to a Note at any Redemption Date,
the greater of (i) 1.0% of the then outstanding principal amount of such Note
and (ii) the excess of (A) the present value at such time of (1) the redemption
price of such Note at July 1, 2002 (such redemption price being described under
"--Optional Redemption"), plus (2) all required interest payments (excluding
accrued but unpaid interest) due on such Note through July 1, 2002, computed
using a discount rate equal to the Treasury Rate plus 75 basis points, over (B)
the then outstanding principal amount of such Note.
"ASSET SALE" means (i) any sale, lease, conveyance or other disposition by
the Company or any Restricted Subsidiary of any assets (including by way of a
sale-and-leaseback) other than (A) in the ordinary course of business, (B) the
sale, lease, conveyance or other disposition of the Discontinued Facilities, (C)
any Financing Disposition, (D) the sale, lease, conveyance or other disposition
of all or substantially all of the assets of the Company, which shall not be an
"Asset Sale" but instead shall be governed by the provisions of the Indenture
described under "Merger, Consolidation and Sale of Assets" and (E) any "fee in
lieu" or other disposition of assets to any governmental authority or agency
that continue in use by the Company or any Restricted Subsidiary, so long as the
Company or any Restricted Subsidiary may obtain title to such assets at any time
upon reasonable notice by paying a nominal fee, or (ii) the issuance or sale of
Capital Stock of any Restricted Subsidiary, in the case of each of (i) and (ii),
whether in a single transaction or a series of related transactions, to any
Person (other than to the Company or a Restricted Subsidiary) for Net Proceeds
in excess of $1.0 million.
"ATTRIBUTABLE DEBT" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
assumed in making calculations in accordance with FAS 13) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"BANK DEBT" means any and all amounts, whether outstanding on the Issue Date
or thereafter incurred, payable under or in respect of the Credit Facility,
including without limitation principal, premium (if any), interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company or any Restricted Subsidiary whether or
not a claim for post-filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations, guarantees, other monetary
obligations of any nature and all other amounts payable thereunder or in respect
thereof.
"BORROWING BASE" means, as of any date, an amount equal to the sum of (i)
80% of the consolidated book value of the net accounts receivable that (x) are
owned by the Company or any of its Restricted Subsidiaries as shown on the
balance sheet of the Company and of its Restricted Subsidiaries for the most
recently ended fiscal quarter for which financial statements are available or
(y) are then outstanding as of such balance sheet date and held pursuant to the
terms of any Receivables Financing, and in each case that are not more than 90
days past due, plus (ii) 60% of the consolidated book value of the inventory
owned by the Company or any of its Restricted Subsidiaries as of such balance
sheet date, all as calculated on a consolidated basis and in accordance with
GAAP.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
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"CAPITAL LEASE OBLIGATION" of any Person means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease for property leased by such Person that would at such time be
required to be capitalized on the balance sheet of such Person in accordance
with GAAP.
"CAPITAL STOCK" of any Person means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association, limited liability company
or business entity, any and all Equity Interests, (iii) in the case of a
partnership, partnership interests (whether general or limited) and (iv) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person, including any Preferred Stock.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
instrumentality or agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof; (ii) 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 or agency thereof maturing within one year from the
date of acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from either Standard & Poor's Rating Group (a
division of McGraw Hill Inc.) or any successor rating agency ("S&P") or Moody's
Investors Service, Inc. or any successor rating agency ("Moody's"); (iii)
commercial paper maturing no more than one year from the date of creation
thereof and, at the time of acquisition, having a rating of at least A-1 from
S&P or at least P-1 from Moody's; (iv) certificates of deposit, time deposits or
bankers' acceptances (or, with respect to foreign banks, similar instruments)
maturing within one year from the date of acquisition thereof issued by (x) any
lender under the Credit Agreement or (y) a commercial banking institution that
is a member of the Federal Reserve System or a commercial banking institution
organized and located in a country recognized by the United States of America,
in each case under this clause (y), having combined capital and surplus and
undivided profits in excess of $500,000,000 (or the foreign currency equivalent
thereof); (v) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any bank meeting the qualifications specified in clause (iv) above; (vi)
investments in money market funds which invest substantially all their assets in
securities of the types described in clauses (i) through (v) above; and (vii)
other short-term investments utilized by Foreign Subsidiaries in accordance with
normal investment practices for cash management not exceeding $1.0 million in
aggregate principal amount outstanding at any time.
"CHANGE OF CONTROL" means the occurrence of any of the following events: (i)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act), other than Permitted Holders, is or becomes (including by
merger, consolidation or otherwise) the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to
have beneficial ownership of all shares that such Person has the right to
acquire within one year, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than 50% of the
voting power of the total outstanding Voting Stock of the Company; PROVIDED that
any "person" or "group" will be deemed to "beneficially own" any Voting Stock of
the Company held, directly or indirectly, by Leiner Group or PLI so long as such
person or group "beneficially owns," directly or indirectly, in the aggregate
more than 50% of the voting power of the total outstanding Voting Stock of
Leiner Group or PLI; (ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of any of the Company, Leiner Group or PLI (together with any new
directors whose election to such Board of Directors, or whose nomination for
election by the stockholders of the Company, was approved by the Permitted
Holders or by a vote of 66 2/3% of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of such Board of Directors of the Company, Leiner Group or PLI then in
office, as applicable; or (iii) the sale or other disposition (including by
merger, consolidation or otherwise) of all or substantially all of the assets of
any of the Company, Leiner Group or PLI to any "person" or "group" (as defined
in Rule 13d-5 of the
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Exchange Act) as an entirety or substantially as an entirety in one transaction
or a series of related transactions unless immediately after giving effect to
such transaction, no "person" or "group," other than the Permitted Holders, is
or becomes (as a result of the acquisition, by merger or otherwise) the
beneficial owner, directly or indirectly, of more than 50% of the voting power
of the total outstanding Voting Stock of the surviving or transferee
corporation.
"COMPANY" means Leiner Health Products Inc., a Delaware corporation, which
upon the Assumption became the primary obligor on the Notes, and any successor
that thereafter replaces it in accordance with the Indenture.
"CONSOLIDATED CASH FLOW" means, with respect to any period, the Consolidated
Net Income for such period, plus without duplication (i) Consolidated Interest
Expense for such period, plus (ii) provision for taxes based on income, profits
or capital, to the extent such provision for taxes was included in computing
such Consolidated Net Income, plus (iii) depreciation, amortization (including,
without limitation, amortization of goodwill and other intangibles) and all
other non-cash charges (excluding any non-cash charge which requires an accrual
or reserve for cash charges for any future period), to the extent such
depreciation, amortization and other non-cash charges were deducted in computing
such Consolidated Net Income.
"CONSOLIDATED COVERAGE RATIO" means, with respect to any date of
determination, the ratio of (i) the aggregate amount of Consolidated Cash Flow
for the period of the most recent four consecutive fiscal quarters ended prior
to such date for which consolidated financial statements of the Company are
available, to (ii) Consolidated Interest Expense for such four fiscal quarters,
PROVIDED that:
(1) if since the beginning of such period the Company or any Restricted
Subsidiary has incurred any Indebtedness that remains outstanding on such date
of determination, or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio involves an incurrence of Indebtedness (including
without limitation any Acquired Debt), Consolidated Cash Flow and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Indebtedness and the application of the proceeds thereof
(and, in the case of any Acquired Debt, the related acquisition) as if such
Indebtedness had been incurred (and any such acquisition had occurred) on the
first day of such period;
(2) if since the beginning of such period the Company or any Restricted
Subsidiary has repaid, repurchased, defeased, retired or otherwise discharged (a
"Discharge") any Indebtedness that is no longer outstanding on such date of
determination, or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio involves a Discharge of Indebtedness, Consolidated
Cash Flow and Consolidated Interest Expense for such period shall be calculated
after giving effect to such Discharge of such Indebtedness, including with the
proceeds of any such new Indebtedness, as if such Discharge had occurred on the
first day of such period;
(3) if since the beginning of such period the Company or any Restricted
Subsidiary shall have disposed of any company, any business, any group of assets
constituting an operating unit, or any other assets out of the ordinary course
of business (a "Sale"), (x) Consolidated Cash Flow for such period shall be
reduced by an amount equal to the Consolidated Cash Flow (if positive) directly
attributable to the assets that are the subject of such Sale for such period or
increased by an amount equal to the Consolidated Cash Flow (if negative)
directly attributable thereto for such period and (y) Consolidated Interest
Expense for such period shall be reduced by an amount equal to the Consolidated
Interest Expense directly attributable to any Indebtedness of the Company or any
Restricted Subsidiary Discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Sale for such period (and, if
the Capital Stock of any Restricted Subsidiary is sold, transferred or otherwise
disposed of, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale, transfer or disposition);
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(4) if since the beginning of such period the Company or any Restricted
Subsidiary shall have acquired (by merger or otherwise) any company, any
business, any group of assets constituting an operating unit, or any other
assets out of the ordinary course of business (a "Purchase"), Consolidated Cash
Flow and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the incurrence of any related
Indebtedness) as if such Purchase had occurred on the first day of such period;
and
(5) if since the beginning of such period any Person became a Restricted
Subsidiary or was merged or consolidated with or into the Company or any
Restricted Subsidiary, in each case in a Purchase, and since the beginning of
such period such Person shall have Discharged any Indebtedness or made any Sale
or Purchase that would have required an adjustment pursuant to clause (2), (3)
or (4) above if made by the Company or a Restricted Subsidiary during such
period, Consolidated Cash Flow and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto as if such Discharge,
Sale or Purchase occurred on the first day of such period.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest expense on such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate Agreement
Obligation applicable to such Indebtedness if such Interest Rate Agreement
Obligation has a remaining term as at the date of determination in excess of 12
months). If any Indebtedness bears, at the option of the Company or a Restricted
Subsidiary, a fixed or floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be computed by applying,
at the option of the Company, either a fixed or floating rate. If any
Indebtedness that is being given pro forma effect was incurred under a revolving
credit facility, the interest expense on such Indebtedness shall be computed
based upon the average daily balance of such Indebtedness during the applicable
period. In making any calculation of the Consolidated Coverage Ratio for any
period prior to the date of the closing of the Recapitalization, the
Recapitalization shall be deemed to have taken place on the first day of such
period.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any period, the sum
(without duplication) of (i) the interest expense of the Company and its
Restricted Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP consistently applied, including without limitation (a)
amortization of debt discount, (b) net payments, if any, made or received under
Interest Rate Agreement Obligations (including amortization of discounts), (c)
the interest portion of any deferred payment obligation, (d) accrued interest,
(e) the interest component of Capital Lease Obligations and rent expense
associated with Attributable Debt in respect of the relevant lease giving rise
thereto determined as if such lease were a capitalized lease, accrued by the
Company during such period, and all capitalized interest of the Company and its
Restricted Subsidiaries, and (e) all commissions, discounts and other fees and
charges owed with respect to letters of credit, bankers' acceptance financing or
similar facilities, plus (ii) all cash dividends paid during such period by the
Company and its Restricted Subsidiaries with respect to any Disqualified Stock
(other than to the Company or a Restricted Subsidiary), and minus (iii) to the
extent otherwise included in Consolidated Interest Expense, amortization or
write-off of financing costs, in each case under clauses (i) through (iii) as
determined on a consolidated basis in accordance with GAAP consistently applied.
"CONSOLIDATED NET INCOME" means, with respect to any period, the net income
(or loss) of the Company and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP consistently applied,
adjusted by excluding, to the extent included in calculating such net income (or
loss), without duplication, (i) any extraordinary gain or loss as recorded on
the statement of operations in accordance with GAAP, (ii) the portion of net
income (or loss) of the Company and its Restricted Subsidiaries allocable to the
Company's equity in the net income (or loss) of any unconsolidated Person or
Unrestricted Subsidiary, except (in the case of such net income) to the extent
of the amount of dividends or distributions actually paid or made to the Company
or any of its Restricted Subsidiaries by such other Person during such period,
(iii) net income (or loss) of any Person combined with the Company
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or any of its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (iv) any gain or
loss realized upon any Asset Sale and any gain or loss realized upon the sale or
other disposition of any Capital Stock of any Person, (v) the net income of any
Restricted Subsidiary if the declaration of dividends or similar distributions
by that Restricted Subsidiary of that net income to the Company is at the time
restricted, directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders (other than pursuant to the Notes or the Indenture), except to the
extent that any dividend or distribution was or could have been made by the
Restricted Subsidiary to the Company or another Restricted Subsidiary during
such period in compliance with such restrictions, (vi) all deferred financing
costs written off and premiums paid in connection with any early extinguishment
of Indebtedness, (vii) any unrealized gains or losses in respect of Currency
Agreement Obligations, (viii) any unrealized foreign currency transaction gains
or losses in respect of Indebtedness of any Person denominated in a currency
other than the functional currency of such Person, (ix) any nonrecurring charges
related to the Recapitalization or to any acquisition by the Company or any
Restricted Subsidiary after the Issue Date, including without limitation (a) any
non-recurring compensation expense for the in-the-money value of stock options
that will be cashed out, converted, exchanged or otherwise retired in connection
with the Recapitalization, and (b) any charge or expenses incurred for
management transaction bonuses in connection with the Recapitalization, (x) any
non-cash, non-recurring charges, (xi) any charge relating to the closure of the
Discontinued Facilities, (xii) any non-recurring charges incurred in connection
with the Eastern Consolidation, (xiii) any charge or expense incurred during the
fiscal year ended March 31, 1997 (a) for severance, hiring and relocation
expenses in connection with a management reorganization, (b) in connection with
the preparation and filing of a registration statement with the Securities and
Exchange Commission and (c) for bonuses paid to the former owners of the
Company's Canadian subsidiary and (xiv) any non-cash compensation charge arising
from any grant of stock options.
"CONSOLIDATED TANGIBLE ASSETS" means, as of any date of determination, the
total assets, less goodwill and other intangibles (other than patents,
trademarks, copyrights, licenses and other intellectual property) shown on the
balance sheet of the Company and its Restricted Subsidiaries for the most
recently ended fiscal quarter for which financial statements are available,
determined on a consolidated basis in accordance with GAAP.
"CREDIT AGREEMENT" means the credit agreement dated as of June 30, 1997,
among the Company, Vita Health Company (1985) Ltd., a Canadian corporation, the
banks and other financial institutions party thereto from time to time, The Bank
of Nova Scotia, as administrative agent, Merrill Lynch Capital Corporation, as
documentation agent, and Salomon Brothers Holding Company Inc, as syndication
agent, as such agreement may be assumed by any successor in interest, and as
such agreement may be amended, supplemented, waived or otherwise modified from
time to time, or refunded, refinanced, restructured, replaced, renewed, repaid,
increased or extended from time to time (whether in whole or in part, whether
with the original agent and lenders or other agents and lenders or otherwise,
and whether provided under the original Credit Agreement or otherwise).
"CREDIT FACILITY" means the collective reference to the Credit Agreement,
any Loan Documents (as defined therein), any notes and letters of credit issued
pursuant thereto and any guarantee and collateral agreement, patent and
trademark security agreement, mortgages, letter of credit applications and other
guarantees, security agreements and collateral documents, and other instruments
and documents, executed and delivered pursuant to or in connection with any of
the foregoing, in each case as the same may be amended, supplemented, waived or
otherwise modified from time to time, or refunded, refinanced, restructured,
replaced, renewed, repaid, increased or extended from time to time (whether in
whole or in part, whether with the original agent and lenders or other agents
and lenders or otherwise, and whether provided under the original Credit
Agreement or otherwise). Without limiting the generality of the foregoing, the
term "Credit Facility" shall include any agreement (i) changing the maturity of
any
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Indebtedness incurred thereunder or contemplated thereby, (ii) adding
Subsidiaries of the Company as additional borrowers or guarantors thereunder,
(iii) increasing the amount of Indebtedness incurred thereunder or available to
be borrowed thereunder or (iv) otherwise altering the terms and conditions
thereof.
"CURRENCY AGREEMENT OBLIGATIONS" means the Obligations of any Person under a
foreign exchange contract, currency swap agreement or other similar agreement or
arrangement to protect such Person against fluctuations in currency values.
"DEFAULT" means any event that is, or after the giving of notice or passage
of time or both would be, an Event of Default.
"DESIGNATED SENIOR DEBT" means (i) all Bank Debt, and (ii) if no Senior Debt
is outstanding under the Credit Agreement, or if the lenders under the Credit
Agreement shall have consented thereto, any other Senior Debt of the Company
permitted to be incurred under the Indenture the principal amount of which is
$10.0 million or more at the time of the designation of such Senior Debt as
"Designated Senior Debt" by the Company in a written instrument delivered to the
Trustee.
"DISCONTINUED FACILITIES" means the Company's Chicago, Illinois OTC
pharmaceutical facility and the Company's facilities to be closed in connection
with the Eastern Consolidation, including the West Unity, Ohio and Sherburne,
New York facilities.
"DISPOSITION" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such Person
is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of such Person's assets.
"DISQUALIFIED STOCK" means (i) any Preferred Stock of any Restricted
Subsidiary and (ii) any Capital Stock that, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof (other than upon a change of control of the Company in
circumstances where the holders of the Notes would have similar rights), in
whole or in part on or prior to the final stated maturity of the Notes.
"DOLLARS" and "$" mean lawful money of the United States of America.
"EASTERN CONSOLIDATION" means the consolidation of the Company's eastern
United States packaging and distribution operations into a new facility in South
Carolina, including the closure of Discontinued Facilities, and the incurrence
of moving and relocation expenses for equipment and personnel, severance
expenses in connection with the closure of Discontinued Facilities and training
expenses in connection with the opening of the new facility.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.
"FINANCING DISPOSITION" means any sale, transfer, conveyance or other
disposition of property or assets by the Company or any Subsidiary thereof to
any Receivables Entity, or by any Receivables Subsidiary, in each case in
connection with the incurrence by a Receivables Entity of Indebtedness, or
obligations to make payments to the obligor on Indebtedness, which may be
secured by a Lien in respect of such property or assets.
"FOREIGN SUBSIDIARY" means (a) any Restricted Subsidiary of the Company that
is (i) not organized under the laws of the United States of America or any state
thereof or the District of Columbia and (ii) conducts its principal operations
outside the United States and (b) any Restricted Subsidiary of the Company that
has no material assets other than securities of one or more Foreign
Subsidiaries, and other assets relating to an ownership interest in any such
securities or Subsidiaries.
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"GAAP" means generally accepted accounting principles in the United States
of America (i) as in effect on the Issue Date (for purposes of the definitions
of the terms "Borrowing Base," "Consolidated Cash Flow," "Consolidated Coverage
Ratio," "Consolidated Interest Expense," "Consolidated Net Income,"
"Consolidated Tangible Assets," all defined terms in the Indenture as and to the
extent used in or relating to any of the foregoing definitions, and all ratios
and computations based on any of the foregoing definitions) and (ii) as in
effect from time to time (for all other purposes of the Indenture), including
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statement by such other entity as approved by a significant segment of the
accounting profession.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"INDEBTEDNESS" means, with respect to any Person, without duplication, and
whether or not contingent, (i) all indebtedness of such Person for borrowed
money or which is evidenced by a note, bond, debenture or similar instrument,
(ii) all obligations of such Person to pay the deferred or unpaid purchase price
of property or services, which purchase price is due more than six months after
the date of placing such property in service or taking delivery and title
thereto or the completion of such service, (iii) all Capital Lease Obligations
and Attributable Debt of such Person, (iv) all obligations of such Person in
respect of letters of credit or bankers' acceptances issued or created for the
account of such Person, (v) to the extent not otherwise included in this
definition, all net obligations of such Person under all Interest Rate Agreement
Obligations or Currency Agreement Obligations of such Person, (vi) all
liabilities of others of the kind described in the preceding clause (i), (ii) or
(iii) secured by any Lien on any property owned by such Person even if such
Person has not assumed or otherwise become liable for the payment thereof to the
extent of the value of the property subject to such Lien, (vii) all Disqualified
Stock issued by such Person, and (viii) to the extent not otherwise included,
any Guarantee by such Person of any other Person's indebtedness or other
obligations described in clauses (i) through (vii) above. "Indebtedness" of the
Company and the Restricted Subsidiaries shall not include (i) current trade
payables incurred in the ordinary course of business and payable in accordance
with customary practices and (ii) non-interest bearing installment obligations
and accrued liabilities incurred in the ordinary course of business which are
not more than 90 days past due.
"INDEPENDENT DIRECTOR" means a member of the Board of Directors of the
Company who does not have any material direct or indirect financial interest in
or with respect to any transaction or series of related transactions.
"INTEREST RATE AGREEMENT OBLIGATIONS" means, with respect to any Person, the
Obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"INVESTMENT" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement, but excluding advances, loans and other extension of credit
to customers, directors, officers and employees in the ordinary course of
business) to, capital contribution (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others) to, or any purchase or acquisition of Capital Stock, bonds,
notes, debentures or other similar instruments issued by, such Person and shall
include the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary. For purposes of the definition of "Unrestricted Subsidiary" and the
"Limitation on Restricted Payments" covenant described above, (i) "Investment"
shall include the portion (proportionate to the Company's equity interest in
such Subsidiary) of the Fair Market Value of the assets (net of liabilities) of
any Restricted Subsidiary at the
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time that such Restricted Subsidiary is designated an Unrestricted Subsidiary
and shall exclude the Fair Market Value of the assets (net of liabilities) of
any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary and (ii) any property transferred to or from
an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time
of such transfer, in each case as determined by the Board of Directors in good
faith.
"ISSUE DATE" means the date on which the Notes are first issued under the
Indenture.
"LEINER GROUP" means Leiner Health Products Group Inc., a Delaware
corporation, or any successor thereto.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, or any option or other agreement to sell or give a security interest in
any asset).
"MANAGEMENT AGREEMENT" means the Consulting Agreement dated as of the Issue
Date, among the Company, Leiner Group and North Castle Partners, L.L.C., as in
effect on the Issue Date, and as the same may be amended from time to time in
accordance with the terms of the Indenture.
"MANAGEMENT INVESTORS" means the officers, directors, employees and other
members of the management of Leiner Group, PLI, the Company or any of their
respective Subsidiaries, or family members or relatives thereof, or trusts for
the benefit of any of the foregoing, or any of their heirs, executors,
successors and legal representatives, who at any date beneficially own or have
the right to acquire, directly or indirectly, Capital Stock of the Company,
Leiner Group or PLI.
"NET PROCEEDS" from an Asset Sale means cash payments received (including
any cash payments received by way of deferred payment of principal pursuant to a
note or installment receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring Person of Indebtedness or other obligations relating to the properties
or assets that are the subject of such Asset Sale or received in any other
noncash form) therefrom, in each case net of (i) all legal, title and recording
tax expenses, commissions and other fees and expenses incurred, and all federal,
state, provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such Asset Sale, (ii) all payments
made, and all installment payments required to be made, on any Indebtedness that
is secured by any assets subject to such Asset Sale, in accordance with the
terms of any Lien upon such assets, (iii) all distributions and other payments
required to be made to minority interest holders in Subsidiaries or joint
ventures as a result of such Asset Sale, or to any other Person (other than the
Company or a Restricted Subsidiary) owning a beneficial interest in the assets
disposed of in such Asset Sale and (iv) appropriate amounts to be provided as a
reserve, in accordance with GAAP, against any liabilities associated with the
assets disposed of in such Asset Sale and retained by the Company or any
Restricted Subsidiary after such Asset Sale.
"NORTH CASTLE PARTNERS" means North Castle Partners I, L.L.C., a Delaware
limited liability company, or any legal successor thereto as a result of a
reorganization thereof that does not involve any change in control thereof.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness.
"PERMITTED HOLDERS" means collectively or individually (i) North Castle
Partners and AEA and each of their respective current, former and future
employees, members, stockholders, directors and officers, (ii) trusts for the
benefit of such Persons or the spouses, issue, parents or other relatives of
such Persons, (iii) Persons controlling or controlled by such Persons and (iv)
in the event of the death of any such individual Person, heirs or testamentary
legatees of such Person. For purposes of this definition, "control," as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct
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or cause the direction of the management and policies of such Person, whether
through ownership of voting securities or by contract or otherwise.
"PERMITTED INVESTMENTS" means (i) any Investment in the Company or any
Restricted Subsidiary; (ii) any Investment in Cash Equivalents; (iii) any
Investment in a Person if, as a result of such Investment, (a) such Person
becomes a Restricted Subsidiary, or (b) such Person either (1) is merged,
consolidated or amalgamated with or into the Company or one of its Restricted
Subsidiaries and the Company or such Restricted Subsidiary is the Surviving
Person, or (2) transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or one of its Restricted Subsidiaries; (iv)
Investments in accounts and notes receivable acquired in the ordinary course of
business; (v) any securities or other Investments received in connection with
any sale or other disposition of property or assets, including any Asset Sale
that complies with the "Limitation on Asset Sales" covenant; (vi) Interest Rate
Agreement Obligations or Currency Agreement Obligations permitted pursuant to
the "Limitation on Incurrence of Indebtedness" covenant; (vii) securities or
other Investments received in settlement of debts created in the ordinary course
of business and owing to the Company or any Restricted Subsidiary, or as a
result of foreclosure, perfection or enforcement of any Lien, or in satisfaction
of judgments, including in connection with any bankruptcy proceeding or other
reorganization of another Person; (viii) Investments in existence or made
pursuant to legally binding written commitments in existence on the Issue Date;
(ix) pledges or deposits (a) with respect to leases or utilities, provided to
third parties in the ordinary course of business or (b) otherwise described in
the definition of "Permitted Liens"; (x) bonds secured by assets leased to and
operated by the Company or any Restricted Subsidiary that were issued in
connection with the financing of such assets so long as the Company or any
Restricted Subsidiary may obtain title to such assets at any time by paying a
nominal fee, cancelling such bonds and terminating the transaction; (xi) (1)
Investments in connection with a Financing Disposition by or to any Receivables
Entity, including Investments of funds held in accounts permitted or required by
the arrangements governing such Financing Disposition or any related
Indebtedness, or (2) any promissory note issued by Leiner Group or PLI, provided
that if Leiner Group or PLI, as applicable, receives cash from the relevant
Receivables Entity in exchange for such note, an equal cash amount is
contributed by Leiner Group or PLI to the Company; and (xii) any promissory note
of any Management Investor acquired in connection with the issuance of Capital
Stock of Leiner Group to such Management Investor.
"PERMITTED LIENS" means (i) Liens securing Indebtedness of a Person existing
at the time that such Person is merged into or consolidated with or into, or
becomes a Restricted Subsidiary of, the Company or a Restricted Subsidiary;
PROVIDED, HOWEVER, that such Liens were not incurred in connection with, or in
contemplation of, such merger, consolidation or other transaction, and do not
extend to any property or assets other than those of such Person; (ii) Liens on
property or assets acquired by the Company or a Restricted Subsidiary; PROVIDED,
HOWEVER, that such Liens were not incurred in connection with, or in
contemplation of such acquisition, and do not extend to any other property or
assets; (iii) Liens in respect of Interest Rate Agreement Obligations, Currency
Agreement Obligations, Purchase Money Obligations, Capital Lease Obligations and
Attributable Debt permitted under the Indenture; (iv) Liens to secure
Indebtedness or other obligations of any Receivables Entity; (v) Liens in favor
of the Company or any Restricted Subsidiary; and (vi) Liens incurred, or pledges
and deposits in connection with, (a) workers' compensation, unemployment
insurance and other social security benefits, and other similar legislation or
other insurance related obligations, (b) bids, tenders, trade, government or
other contracts (other than for borrowed money), obligations for utilities,
leases, licenses, statutory obligations, and surety, judgment, performance and
appeal bonds and other obligations of like nature incurred by the Company or any
Restricted Subsidiary in the ordinary course of business, (c) carriers',
warehousemen's, mechanics', landlords', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business, and (d) any extension,
renewal, refinancing, refunding or replacement of any Permitted Lien (or any
arrangement to which such Permitted Lien relates), provided that such new Lien,
pledge or deposit is limited to the property or assets that secured (or under
the arrangement under which the original Permitted Lien arose, could secure) the
obligations to which such Liens relate.
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"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"PLI" means PLI Holdings Inc., a Delaware corporation, or any successor
thereto.
"PREFERRED STOCK" as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over Capital Stock of any other class of such Person.
"PUBLIC DEBT" means any Indebtedness represented by debt securities
(including any Guarantee of such securities) issued by the Company or any
Restricted Subsidiary in connection with a public offering (whether or not
underwritten) or a private placement (provided such private placement is
underwritten for resale pursuant to Rule 144A, Regulation S or otherwise under
the Securities Act or sold on an agency basis by a broker-dealer or one of its
affiliates); it being understood that the term "Public Debt" shall not include
any evidence of Indebtedness under the Credit Facility or any other commercial
bank borrowings or similar borrowings, any Receivables Financing, recourse
transfers of financial assets, capital leases or other types of borrowings
incurred in a manner not customarily viewed as a "securities offering."
"PURCHASE MONEY OBLIGATION" means any Indebtedness secured by a Lien on
assets related to the business of the Company or the Restricted Subsidiaries,
and any additions and accessions thereto, which are purchased or constructed by
the Company or any Restricted Subsidiary at any time after the Issue Date;
PROVIDED that (i) any security agreement or conditional sales or other title
retention contract pursuant to which the Lien on such assets is created
(collectively a "Security Agreement") shall be entered into within 180 days
after the purchase or substantial completion of the construction of such assets
and shall at all times be confined solely to the assets so purchased or
acquired, any additions and accessions thereto and any proceeds therefrom, (ii)
at no time shall the aggregate principal amount of the outstanding Indebtedness
secured thereby be increased, except in connection with the purchase of
additions and accessions thereto and except in respect of fees and other
obligations in respect of such Indebtedness and (iii) (A) the aggregate
outstanding principal amount of Indebtedness secured thereby (determined on a
per asset basis in the case of any additions and accessions) shall not at the
time such Security Agreement is entered into exceed 100% of the purchase price
to the Company or any Restricted Subsidiary of the assets subject thereto or (B)
the Indebtedness secured thereby shall be with recourse solely to the assets so
purchased or acquired, any additions and accessions thereto and any proceeds
therefrom.
"RECAPITALIZATION" means the recapitalization of Leiner Group pursuant to
the Stock Purchase Agreement and Plan of Merger, dated as of May 31, 1997, among
Leiner Group, North Castle and LHP Acquisition Corp., whereby LHP Acquisition
Corp. was merged with and into Leiner Group, with Leiner Group continuing as the
surviving corporation.
"RECEIVABLE" means a right to receive payment arising from a sale or lease
of goods or services by a Person pursuant to an arrangement with another Person
pursuant to which such other Person is obligated to pay for goods or services
under terms that permit the purchase of such goods and services on credit, as
determined in accordance with GAAP.
"RECEIVABLES ENTITY" means (x) any Receivables Subsidiary or (y) any other
Person that is engaged in the business of acquiring, selling, collecting,
financing or refinancing Receivables, accounts (as defined in the Uniform
Commercial Code as in effect in any jurisdiction from time to time), other
accounts and/or other receivables, and/or related assets.
"RECEIVABLES FINANCING" means any financing of Receivables of the Company or
any Restricted Subsidiary that have been transferred to a Receivables Entity in
a Financing Disposition.
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"RECEIVABLES SUBSIDIARY" means a Subsidiary of the Company that (a) is
engaged solely in the business of acquiring, selling, collecting, financing or
refinancing Receivables, accounts (as defined in the Uniform Commercial Code as
in effect in any jurisdiction from time to time) and other accounts and
receivables (including any thereof constituting or evidenced by chattel paper,
instruments or general intangibles), all proceeds thereof and all rights
(contractual and other), collateral and other assets relating thereto, and any
business or activities incidental or related to such business, and (b) is
designated as a "Receivables Subsidiary" by the Board of Directors of the
Company.
"RELATED BUSINESS" means the business conducted (or proposed to be
conducted) by the Company and its Subsidiaries as of the Issue Date and any and
all businesses that in the good faith judgment of the Board of Directors of the
Company are related, ancillary or complementary to such business.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution declared
or paid on any Capital Stock of the Company or any of its Restricted
Subsidiaries (other than dividends or distributions payable solely in Capital
Stock (other than Disqualified Stock) of the Company or such Restricted
Subsidiary or dividends or distributions payable to the Company or any
Restricted Subsidiary (and, if the Restricted Subsidiary making such dividend or
distributions has any stockholder other than the Company or another Restricted
Subsidiary, to such stockholder on no more than a PRO RATA basis, measured by
value)); (ii) any payment to purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company or any Restricted Subsidiary (other than
any Capital Stock owned by the Company or any Restricted Subsidiary, except from
all holders of such Capital Stock of a Restricted Subsidiary on a pro rata
basis); (iii) any payment to purchase, redeem, defease or otherwise acquire or
retire for value any Indebtedness that is expressly subordinated in right of
payment to the Notes (other than a purchase, redemption, defeasance or other
acquisition or retirement for value (A) that is paid for with the proceeds of
Refinancing Indebtedness that is permitted under the covenant described under
"--Certain Covenants-- Limitation on Incurrence of Indebtedness," or (B) in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of such acquisition
or retirement, or (C) from Net Proceeds to the extent permitted by the covenant
described under "--Certain Covenants--Limitation on Asset Sales" or (D) upon a
Change of Control to the extent required by the agreement governing such
Indebtedness but only if the Company shall have complied with the covenant
described under "--Change of Control" and purchased all Notes tendered pursuant
to the offer to repurchase all of the Notes required thereby, prior to
purchasing or repaying such Indebtedness); or (iv) any Restricted Investment.
"RESTRICTED SUBSIDIARY" means each direct or indirect Subsidiary of the
Company other than an Unrestricted Subsidiary.
"REVOLVING CREDIT FACILITY" means the revolving credit facilities provided
under the Credit Facility (which may include any line or letter of credit
facility or subfacility thereunder).
"SALE/LEASEBACK TRANSACTION" means an arrangement relating to property now
owned or hereafter acquired by the Company or a Restricted Subsidiary whereby
the Company or such Restricted Subsidiary transfers such property to a Person
more than nine months after acquiring such property, and the Company or such
Restricted Subsidiary leases it from such Person, other than leases (x) between
the Company and a Restricted Subsidiary or between Restricted Subsidiaries, (y)
required to be classified and accounted for as capitalized leases for financial
reporting purposes in accordance with GAAP or (z) of any assets referred to in
clause (i)(E) of the definition of Asset Sale.
"SENIOR DEBT" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable state, federal
or foreign law) on and other amounts due on or in connection with (including any
fees, premiums, expenses,
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including costs of collection, and indemnities) any Indebtedness of the Company,
whether outstanding on the Issue Date or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Notes. Without limiting the generality of the foregoing, "Senior
Debt" shall also include the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable state, federal
or foreign law) on, and all other amounts owing in respect of, (i) Bank Debt of
the Company and any Receivables Financing and (ii) all Currency Agreement
Obligations and Interest Rate Agreement Obligations relating to Bank Debt of the
Company, in each case whether outstanding on the Issue Date or thereafter
created, incurred or assumed and including in respect of claims under
Guarantees, claims for indemnity, claims in relation to such Currency Agreement
Obligations and Interest Rate Agreement Obligations, expense reimbursement and
fees. Notwithstanding the foregoing, "Senior Debt" shall not include (a)
Indebtedness evidenced by the Notes, (b) Indebtedness that is PARI PASSU with or
expressly subordinated in right of payment to any Senior Debt of the Company,
(c) Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is by its terms without
recourse to the Company, (d) any repurchase, redemption or other obligation in
respect of Disqualified Stock of the Company, (e) to the extent it might
constitute Indebtedness, amounts owing for goods, materials or service purchased
in the ordinary course of business or consisting of trade payables or other
current liabilities (other than any current liabilities owing under Bank Debt or
the current portion of any long-term Indebtedness which would constitute Senior
Debt but for the operation of this clause (e)), (f) to the extent it might
constitute Indebtedness, amounts owed by the Company for services rendered to
the Company, (g) to the extent it might constitute Indebtedness, any liability
for federal, state, local, foreign or other taxes owed or owing by the Company,
(h) Indebtedness of the Company to a Subsidiary of the Company and (i) that
portion of any Indebtedness of the Company which at the time of incurrence is
incurred in violation of the Indenture; PROVIDED, however, that such
Indebtedness shall be deemed not to have been incurred in violation of the
Indenture for purposes of this clause (i) if (x) the holder(s) of such
Indebtedness or their representative or the Company shall have furnished to the
Trustee an opinion of recognized independent legal counsel, unqualified in all
material respects, addressed to the Trustee (which legal counsel may, as to
matters of fact, rely upon an Officers' Certificate of the Company) to the
effect that the incurrence of such Indebtedness does not violate the provisions
of the Indenture or (y) such Indebtedness consists of Bank Debt, and the
holder(s) of such Indebtedness of their agent or representative (1) had no
actual knowledge at the time of incurrence that the incurrence of such
Indebtedness violated the Indenture and (2) shall have received a certificate
from an Officer of the Company to the effect that the incurrence of such
Indebtedness does not violate the provisions of the Indenture.
"SENIOR SUBORDINATED NOTE OBLIGATIONS" means any principal of, premium, if
any, and interest on, and any other amounts owing in respect of, the Notes
payable pursuant to the terms of the Notes or the Indenture or upon acceleration
of the Notes, including, without limitation, amounts received upon the exercise
of rights of rescission or other rights of action (including claims for damages)
or otherwise, to the extent relating to the purchase price of the Notes or
amounts corresponding to such principal of, premium, if any, or interest on, or
other amounts owing with respect to, the Notes.
"SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary of the Company that
would be a "significant subsidiary" of the Company as defined in Rule 1-02 of
Regulation S-X under the Securities Act and the Exchange Act, as such Rule is in
effect on the Issue Date.
"STATED MATURITY" means, when used with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the purchase of
such
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security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"SUBSIDIARY" of a Person means (i) any corporation more than 50% of the
outstanding voting power of the Voting Stock of which is owned or controlled,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person, or by such Person and one or more other Subsidiaries thereof, or
(ii) any limited partnership of which such Person or any Subsidiary of such
Person is a general partner, or (iii) any other Person (other than a corporation
or limited partnership) in which such Person, or one or more other Subsidiaries
of such Person, or such Person and one or more other Subsidiaries thereof,
directly or indirectly, has more than 60% of the outstanding partnership or
similar interests or has the power, by contract or otherwise, to direct or cause
the direction of the policies, management and affairs thereof.
"SUBSIDIARY GUARANTEE" means any Guarantee of the Notes that may from time
to time be provided by a Restricted Subsidiary pursuant to the terms of the
Indenture.
"SUBSIDIARY GUARANTOR" means each of the Company's Restricted Subsidiaries
that issues a Subsidiary Guarantee.
"SURVIVING PERSON" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.
"TAX SHARING AGREEMENT" means the Tax Sharing Agreement dated as of the
Issue Date between Leiner Group, PLI and the Company, and as the same may be
amended from time to time in accordance with the terms of the indenture.
"TERM LOAN FACILITY" means the term loan facilities provided under the
Credit Facility.
"TREASURY RATE" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two Business Days prior to the Redemption
Date (or, if such Statistical Release is no longer published, any publicly
available source or similar market data)) most nearly equal to the period from
the Redemption Date to the Stated Maturity; PROVIDED, HOWEVER, that if the
period from the Redemption Date to the Stated Maturity is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the Redemption Date to the Stated Maturity
is less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company (other than a
Guarantor) designated as such pursuant to and in compliance with the covenant
described under "Limitation on Designation of Unrestricted Subsidiaries." Any
such designation may be revoked by a resolution of the Board of Directors of the
Company delivered to the Trustee, subject to the provisions of such covenant.
"U.S. RESTRICTED SUBSIDIARY" means any Restricted Subsidiary that is not a
Foreign Subsidiary.
"VOTING STOCK" of a Person means Capital Stock of such Person of the class
or classes pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not
at the time stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal,
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including payment at final maturity, in respect thereof, with (b) the number of
years (calculated to the nearest one-twelfth) that will elapse between such date
and the making of such payment, by (ii) the then outstanding aggregate principal
amount of such Indebtedness.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the New Notes will be issued in fully
registered form, without coupons. Except as described below, the New Notes will
be deposited with, or on behalf of, DTC, and registered in the name of Cede &
Co. ("Cede") as DTC's nominee in the form of a global Note certificate (the
"Global Certificate") or will remain in the custody of the Trustee pursuant to
the FAST Balance Certificate Agreement between DTC and the Trustee.
Existing Notes originally purchased by or transferred to (i) institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) who are not "qualified institutional buyers" (as defined in Rule
144A under the Securities Act) ("QIBs"), (ii) except as described below, persons
outside the United States pursuant to sales in accordance with Regulation S
under the Securities Act or (iii) any other persons who are not QIBs
(collectively, "Non-Global Purchasers") were issued in registered form without
coupons (the "Certificated Notes"). Upon the transfer to a QIB of Certificated
Existing Notes initially issued to a Non-Global Purchaser, such Certificated
Existing Notes will be exchanged for an interest in the Global Certificate
representing the Existing Notes in the custody of the Trustee representing the
principal amount of Notes being transferred. See "--Certificated Notes."
DTC has advised the Company that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a "banking organization"
within the meaning of the New York banking law, (iii) a member of the Federal
Reserve System, (iv) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and (v) a "Clearing Agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants (collectively, the "Participants") and facilitates the clearance
and settlement of securities transactions between Participants through
electronic book-entry changes to the accounts of its Participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Indirect access to DTC's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants") that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly.
The Company expects that pursuant to procedures established by DTC (i) upon
deposit of the Global Certificate representing New Notes, DTC will credit the
account of Participants tendering Existing Notes in exchange for New Notes with
an interest in the Global Certificate and (ii) ownership of beneficial interests
therein will be effected only through records maintained by DTC (with respect to
interests of Participants), Participants and Indirect Participants. The laws of
some states require that certain persons take physical delivery in definitive
form of securities that they own and that security interests in negotiable
instruments can only be perfected by delivery of certificates representing the
instruments. Consequently, the ability to transfer the Notes or to pledge the
Notes as collateral to persons in such states will be limited to such extent.
So long as DTC or its nominee is the registered owner of a Global
Certificate, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by the Global Certificate for all
purposes under the Indenture and the Notes. Except as provided below, owners of
beneficial interests in a Global Certificate will not be entitled to have Notes
represented by such Global Certificate registered in their names, will not
receive or be entitled to receive physical delivery of Certificated Notes, and
will not be considered the owners or holders thereof under the Indenture for any
purpose, including with respect to the giving of any direction, instruction or
approval to the Trustee thereunder. As a result, the ability of a person having
a beneficial interest in Notes represented by a Global
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Certificate to pledge or transfer such interest to persons or entities that do
not participate in DTC's system or otherwise to take action with respect to such
interest, may be affected by the lack of a physical certificate evidencing such
interest.
Accordingly, each holder of New Notes owning a beneficial interest in a
Global Certificate must rely on the procedures of DTC and, if such holder of New
Notes is not a Participant or an Indirect Participant, on the procedures of the
Participant through which such holder of New Notes owns its interest, to
exercise any rights of a holder of Notes under the Indenture. The Company
understands that under existing industry practice, in the event the Company
requests any action of a holder of New Notes or a holder of New Notes that is an
owner of a beneficial interest in a Global Certificate desires to take any
action that DTC, as the holder of such Global Certificate, is entitled to take,
DTC would authorize the Participant to take such action or would otherwise act
upon the instruction of such holder of New Notes. Neither the Company nor the
Trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of the New Notes by DTC, or for
maintaining, supervising or reviewing any records of DTC relating to such New
Notes or for any other matter relating to the actions or procedures of DTC.
Payments with respect to the principal of, premium, if any, and interest on,
any Notes represented by a Global Certificate registered in the name of DTC or
its nominee on the applicable record date will be payable by the Trustee to or
at the direction of DTC or its nominee in its capacity as the registered holder
of the Global Certificate representing such Notes under the Indenture. Under the
terms of the Indenture, the Company and the Trustee may treat the persons in
whose names the Notes, including the Global Certificate, are registered as the
owners thereof for the purpose of receiving such payment and for any and all
other purposes whatsoever. Consequently, neither the Company nor the Trustee has
or will have any responsibility or liability for the payment of such amounts to
beneficial owners of interests in the Global Certificate (including principal,
premium, if any, and interest), or to immediately credit the accounts of the
relevant Participants with such payment, in an amount proportionate to their
respective holdings in principal amount of the Global Certificate as shown on
the records of DTC. The Company expects that payments by the Participant and the
Indirect Participant to the beneficial owners of interests in the Global
Certificate will be governed by standing instructions and customary practice and
will be the responsibility of the Participant or the Indirect Participant and
DTC.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from the sources the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
CERTIFICATED NOTES
If (i) the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depository or DTC ceases to be registered as a
clearing agency under the Exchange Act and the Company is unable to locate a
qualified successor within 90 days, (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture or (iii) upon the occurrence of certain
other events, then, upon surrender by DTC of its Global Certificate, then
Certificated Notes will be issued to each person that DTC identifies as the
beneficial owner of the Notes represented by the Global Certificate. In
addition, subject to certain conditions, any person having a beneficial interest
in a Global Certificate may, upon request to the Trustee, exchange such
beneficial interest for Certificated Notes. Upon any such issuance, the Trustee
is required to register such Certificated Notes in the name of such person or
persons (or the nominee of any thereof), and cause the same to be delivered
thereto.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the material U.S. federal income tax
consequences to holders of the exchange of the Existing Notes for New Notes
pursuant to the Exchange Offer. The exchange of Existing Notes for New Notes
pursuant to the Exchange Offer should not constitute a taxable exchange for
United States federal income tax purposes. Accordingly, a holder who exchanges
such Notes in the Exchange Offer should not recognize gain or loss on the
exchange, such holder's tax basis in the New Notes received pursuant to the
Exchange Offer should be the same as such holder's tax basis in the Existing
Notes surrendered therefor and such holder's holding period for the New Notes
received pursuant to the Exchange Offer should include its holding period for
the Existing Notes surrendered therefor.
ALL HOLDERS OF EXISTING NOTES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE UNITED STATES FEDERAL, STATE AND LOCAL AND NON-UNITED STATES TAX
CONSEQUENCES OF THE EXCHANGE OF EXISTING NOTES FOR NEW NOTES AND OF THE
OWNERSHIP AND DISPOSITION OF NEW NOTES RECEIVED IN THE EXCHANGE OFFER IN LIGHT
OF THEIR OWN PARTICULAR CIRCUMSTANCES.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used for a period of 180 days
after the Expiration Date by a broker-dealer in connection with resales of New
Notes received in exchange for Existing Notes where such Existing Notes were
acquired as a result of market-making activities or other trading activities.
LHP has agreed that, for a period of 180 days after the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to any such
broker-dealer for use in connection with any such resale. In addition, until
, 1997, all dealers effecting transactions in the New Notes may be
required to deliver a prospectus. LHP may require any such sellers of New Notes
to supply information reasonably requested in connection with these activities.
LHP may also require such sellers to discontinue disposition of the New Notes if
certain events identified in the Registration Rights Agreement that require
updating of the Prospectus occur.
LHP will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit or any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
LHP has agreed to pay all expenses incident to its performance in connection
with the Exchange Offer under the Registration Rights Agreement, which, among
other things, do not include commissions or concessions of any brokers-dealers,
and will indemnify the Holders of the Existing Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
Certain of the Initial Purchasers have in the past, and may in the future,
provide investment banking and other related services to LHP and its affiliates
in the ordinary course of business. Merrill Lynch
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Capital Corporation, an affiliate of Merrill Lynch, is the documentation agent
and a lender under the New Credit Facility for which it received usual and
customary fees. Salomon Brothers Holding Company Inc, an affiliate of Salomon
Brothers Inc, is the syndication agent and a lender under the New Credit
Facility, for which it received usual and customary fees. Scotiabank, an
affiliate of Scotia Capital, is the Administrative Agent and a lender under the
New Credit Facility, for which it received usual and customary fees. In
addition, in connection with the Recapitalization, Merrill Lynch & Co. acquired
$15 million in limited liability company interests of North Castle, and The Bank
of Nova Scotia acquired $3 million of such interests.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the Company
by Debevoise & Plimpton, New York, New York.
EXPERTS
The Consolidated Financial Statements as of March 31, 1996 and March 31,
1997, and for each of the three years in the period ended March 31, 1997,
appearing in this Prospectus and the Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere in this Prospectus and in the Registration Statement, and
are included in reliance upon the reports of Ernst & Young LLP, independent
auditors, given upon the authority of such firm as experts in accounting and
auditing.
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LEINER HEALTH PRODUCTS INC.
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Audited Consolidated Financial Statements:
Report of Independent Auditors..................................................... F-2
Consolidated Balance Sheets as of March 31, 1996 and 1997.......................... F-3
Consolidated Statements of Income for the years ended March 31, 1995, 1996 and
1997............................................................................. F-4
Consolidated Statements of Shareholder's Equity for the years ended March 31, 1995,
1996 and 1997.................................................................... F-5
Consolidated Statements of Cash Flows for the years ended March 31, 1995, 1996 and
1997............................................................................. F-6
Notes to Consolidated Financial Statements......................................... F-7
Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheet (Unaudited) at June 30, 1997.................. F-18
Condensed Consolidated Statements of Operations (Unaudited) for the three months
ended June 30, 1996 and 1997..................................................... F-19
Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months
ended June 30, 1996 and 1997..................................................... F-20
Notes to Unaudited Condensed Consolidated Financial Statements..................... F-21
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholder
Leiner Health Products Inc.
We have audited the accompanying consolidated balance sheets of Leiner
Health Products Inc. as of March 31, 1996 and 1997, and the related consolidated
statements of income, shareholder's equity and cash flows for each of the three
years in the period ended March 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Leiner Health
Products Inc. at March 31, 1996 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
March 31, 1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Orange County, California
April 25, 1997
F-2
<PAGE>
LEINER HEALTH PRODUCTS INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
----------------------
<S> <C> <C>
1996 1997
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents............................................................... $ 1,411 $ 2,066
Accounts receivable, net of allowances of $2,539 and $3,840 at March 31, 1996 and 1997,
respectively.......................................................................... 67,459 77,436
Inventories............................................................................. 71,744 86,823
Deferred income taxes................................................................... 3,826 3,838
Prepaid expenses and other current assets............................................... 862 2,639
---------- ----------
Total current assets................................................................ 145,302 172,802
Property, plant and equipment, less accumulated depreciation and amortization............. 41,864 42,367
Goodwill, less accumulated amortization of $5,608 and $7,131 at March 31, 1996 and 1997,
respectively............................................................................ 52,386 58,035
Other noncurrent assets................................................................... 11,762 11,360
---------- ----------
Total assets........................................................................ $ 251,314 $ 284,564
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Bank checks outstanding, less cash on deposit........................................... $ 2,291 $ 10,410
Current portion of long-term debt....................................................... 2,023 3,148
Accounts payable........................................................................ 53,710 61,623
Customer allowances payable............................................................. 5,471 6,632
Accrued compensation and benefits....................................................... 4,749 6,233
Income taxes payable.................................................................... 461 1,818
Other accrued expenses.................................................................. 4,326 3,535
---------- ----------
Total current liabilities........................................................... 73,031 93,399
Long-term debt............................................................................ 102,151 102,290
Deferred income taxes..................................................................... 2,202 2,582
Other noncurrent liabilities.............................................................. 1,245 1,425
Commitments and contingent liabilities
Minority interest in subsidiary........................................................... -- 4,718
Shareholder's equity:
Common stock, $1 par value: 1,000 shares authorized, issued and outstanding at March 31,
1996 and 1997......................................................................... 1 1
Capital in excess of par value.......................................................... 62,966 62,966
Cumulative translation adjustment....................................................... -- (173)
Retained earnings....................................................................... 9,718 17,356
---------- ----------
Total shareholder's equity.......................................................... 72,685 80,150
---------- ----------
Total liabilities and shareholder's equity.......................................... $ 251,314 $ 284,564
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
LEINER HEALTH PRODUCTS INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------
<S> <C> <C> <C>
1995 1996 1997
---------- ---------- ----------
Net sales.................................................................... $ 314,730 $ 338,417 $ 392,786
Cost of sales................................................................ 236,613 253,272 288,579
---------- ---------- ----------
Gross profit................................................................. 78,117 85,145 104,207
Marketing, selling and distribution expenses................................. 42,400 44,228 51,477
General and administrative expenses.......................................... 17,302 18,344 21,219
Impairment and closure of OTC facility....................................... -- 4,730 1,416
Management reorganization.................................................... -- -- 1,000
Amortization of goodwill..................................................... 1,586 1,585 1,514
Other charges................................................................ 482 482 878
---------- ---------- ----------
Operating income............................................................. 16,347 15,776 26,703
Interest expense, net........................................................ 9,010 9,924 8,281
---------- ---------- ----------
Income before income taxes and extraordinary item............................ 7,337 5,852 18,422
Provision for income taxes before extraordinary item......................... 3,524 4,686 8,028
---------- ---------- ----------
Income before extraordinary item............................................. 3,813 1,166 10,394
Extraordinary loss on the early extinguishment of debt, net of income taxes
of $1,833.................................................................. -- -- 2,756
---------- ---------- ----------
Net income................................................................... $ 3,813 $ 1,166 $ 7,638
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
LEINER HEALTH PRODUCTS INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CAPITAL
COMMON STOCK IN EXCESS CUMULATIVE TOTAL
------------ OF PAR TRANSLATION RETAINED SHAREHOLDER'S
SHARES AMOUNT VALUE ADJUSTMENT EARNINGS EQUITY
------ --- --------- ------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1994.................... 1,000 $1 $62,966 $-- $ 4,739 $67,706
Net income................................... -- -- -- -- 3,813 3,813
------ --- --------- ------ -------- -----------
Balance at March 31, 1995.................... 1,000 1 62,966 -- 8,552 71,519
Net income................................... -- -- -- -- 1,166 1,166
------ --- --------- ------ -------- -----------
Balance at March 31, 1996.................... 1,000 1 62,966 -- 9,718 72,685
Net income................................... -- -- -- -- 7,638 7,638
Translation adjustment....................... -- -- -- (173) -- (173)
------ --- --------- ------ -------- -----------
Balance at March 31, 1997.................... 1,000 $1 $62,966 $(173) $ 17,356 $80,150
------ --- --------- ------ -------- -----------
------ --- --------- ------ -------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
LEINER HEALTH PRODUCTS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------------
<S> <C> <C> <C>
1995 1996 1997
--------- --------- ---------
OPERATING ACTIVITIES
Net income....................................................................... $ 3,813 $ 1,166 $ 7,638
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization.................................................. 10,698 12,496 12,600
Stock option compensation expense.............................................. 132 132 99
Deferred income taxes.......................................................... 2,779 3,364 270
Charge for long-lived asset impairment......................................... -- 4,730 --
Extraordinary loss on the early extinguishment of debt......................... -- -- 4,589
Translation adjustment......................................................... -- -- 173
Changes in operating assets and liabilities, net of effects of acquisition:
Accounts receivable.......................................................... (4,600) 4,742 (7,371)
Inventories.................................................................. (99) (7,818) (8,694)
Bank checks outstanding, less cash on deposit................................ 12,191 (9,900) 7,979
Accounts payable............................................................. 1,120 4,756 5,418
Customer allowances payable.................................................. (7,330) 260 1,161
Accrued compensation and benefits............................................ (1,339) (925) 1,484
Other accrued expenses....................................................... (4,323) (1,252) (1,956)
Income taxes payable......................................................... 101 691 1,246
Other........................................................................ (56) 261 (1,469)
--------- --------- ---------
Net cash provided by operating activities........................................ 13,087 12,703 23,167
--------- --------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment, net.................................. (16,722) (3,468) (3,540)
Acquisition of business, net of cash acquired.................................... -- -- (2,420)
Increase in other noncurrent assets.............................................. (5,128) (5,335) (4,263)
--------- --------- ---------
Net cash used in investing activities............................................ (21,850) (8,803) (10,223)
--------- --------- ---------
FINANCING ACTIVITIES
Net borrowings under bank line of credit......................................... 5,225 78 47,247
Repayment of senior notes, including prepayment penalty.......................... -- -- (49,097)
Increase in other long-term debt................................................. 5,662 1,305 2,270
Payments on other long-term debt................................................. (3,566) (3,872) (12,493)
--------- --------- ---------
Net cash provided by (used in) financing activities.............................. 7,321 (2,489) (12,073)
--------- --------- ---------
Effect of exchange rate changes.................................................. -- -- (216)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents............................. (1,442) 1,411 655
Cash and cash equivalents at beginning of period................................. 1,442 -- 1,411
--------- --------- ---------
Cash and cash equivalents at end of period....................................... $ -- $ 1,411 $ 2,066
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
1. FORMATION AND OPERATIONS
Leiner Health Products Inc. (the Company) is primarily involved in a single
business segment, the manufacture and distribution of vitamins, over-the-counter
drugs and other health and beauty aid products to mass market retailers and
through other channels, primarily in the United States and Canada. On May 4,
1992, with the support of the Company's Senior Management, the Company became a
wholly owned subsidiary of PLI Holdings Inc., which operates solely as a holding
company and which is itself a wholly owned subsidiary of Leiner Health Products
Group Inc. (the Parent), a corporation formed by AEA Investors Inc., a private
investment firm. These consolidated financial statements include the accounts of
the Company and its subsidiaries, including VH Holdings Inc., a holding company
which owns Vita Health Company (1985) Ltd. ("Vita Health"). See Note 3.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Leiner Health Products Inc. and its direct and indirect subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
USE OF ESTIMATES
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
reporting periods. Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of cash and cash equivalents, short-term borrowings and the
current portion of long-term debt approximate cost due to the short period of
time to maturity. Fair values of long-term debt, which have been determined
based on borrowing rates currently available to the Company for loans with
similar terms or maturity, approximate the carrying amounts in the consolidated
financial statements.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost being
determined by the first-in, first-out method.
F-7
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, net of accumulated
depreciation and amortization. Depreciation and amortization are provided using
the straight-line method, at rates designed to distribute the cost of assets
over their estimated service lives or, for leasehold improvements, the shorter
of their estimated service lives or their remaining lease terms.
OTHER ASSETS
Goodwill, representing the excess of the purchase price over the fair values
of the net assets of acquired entities, is being amortized over the period of
expected benefit ranging from 35 to 40 years. Deferred financing charges are
being amortized based on the principal balance outstanding using the effective
interest method. Other intangible assets are being amortized over the period of
expected benefit of 15 years. Incentives provided to customers to secure
long-term sales agreements (primarily cash advances and credit memos to be
applied against purchases under the contract) are amortized over the terms of
the agreements or as related sales are recognized. Amounts deferred under such
agreements totaled $9.5 million and $6.3 million as of March 31, 1996 and 1997,
respectively.
LONG-LIVED ASSETS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF (SFAS No. 121), in March 1995. SFAS
No. 121 requires long-lived assets and certain intangibles held and used by the
Company to be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The recoverability test is to be performed at the lowest level at
which undiscounted net cash flows can be directly attributable to long-lived
assets. Goodwill that is not associated with specific assets that are impaired
is assessed for impairment when impairment indicators are present and reduced to
its estimated fair value if less than its carrying value. The Company adopted
SFAS No. 121 during the fiscal year ended March 31, 1996 with no material effect
on the Company's consolidated financial statements.
FOREIGN CURRENCY TRANSLATION
The Company translates the foreign currency financial statements of its
Canadian subsidiary by translating balance sheet accounts at the year-end
exchange rate and income statement accounts at the weighted monthly average
exchange rate for the year. Translation gains and losses are recorded in common
shareholder's equity, and realized gains and losses are reflected in income.
Transaction gains and losses were immaterial.
REVENUE RECOGNITION
The Company recognizes revenue from product sales at the time of shipment.
Provisions are made currently for estimated returns.
F-8
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
The Company has elected to account for its stock-based compensation plans in
accordance with Accounting Principles Board Opinion No. 25 (APB 25), "Accounting
for Stock Issued to Employees" and related interpretations. Under the provisions
of APB 25, compensation expense is measured at the grant date for the difference
between the fair value of the stock, less the exercise price.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense for the
years ended March 31, 1995, 1996 and 1997 was $8.3 million, $8.7 million and
$11.3 million, respectively.
3. ACQUISITION
On January 30, 1997, the Company acquired all of the outstanding capital
stock of G. S. Investments Ltd. which owned, among other companies, Vita Health
Company (1985) Ltd. (Vita Health). Vita Health is headquartered in Winnipeg,
Manitoba, Canada and primarily manufactures and distributes vitamins and
over-the-counter drugs. The results of operations of Vita Health are included in
the accompanying consolidated statements of income since the date of
acquisition. The total cost of the acquisition, including direct acquisition
costs of $1.1 million, was approximately $16.0 million, represented by $2.4
million of cash, $4.7 million of preferred stock of a subsidiary and $8.9
million of liabilities assumed. The acquisition has been accounted for as a
purchase and, accordingly, the excess of cost over the fair value of net assets
acquired of $7.1 million has been included in goodwill, and is being amortized
over its expected benefit period of 35 years.
As part of the acquisition purchase price, the Company issued approximately
46,037 shares of class A preferred stock and approximately 17,511 shares of
class B preferred stock in VH Holdings Inc., a subsidiary of the Company. The
class A preferred stock has an aggregate redemption value of approximately $3.4
million and the class B preferred stock has an aggregate redemption value of
approximately $1.3 million. The preferred stock does not accrue dividends and
has no voting rights. It is redeemable at the option of the Company until
January 2003, or at the option of the holders beginning in January 1998 through
January 2003 at the redemption value. Redemption is mandatory in January 2004.
This stock has been classified as minority interest in subsidiary in the
accompanying consolidated balance sheet as of March 31, 1997.
The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisition of Vita Health had occurred at the beginning
of the period presented and does not purport to be indicative of the results
that would have occurred had the acquisition of Vita Health been made as of such
date or of results which may occur in the future.
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------
1996 1997
---------- ----------
<S> <C> <C>
Net sales............................................................. $ 366,430 $ 416,917
Net income before extraordinary item.................................. 3,089 10,455
Net income............................................................ 2,639 7,586
</TABLE>
F-9
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
3. ACQUISITION (CONTINUED)
Adjustments made in arriving at pro forma unaudited results of operations
include amortization of debt issuance fees related to the new Credit Agreement,
(see Note 7), increased interest expense on the new Credit Agreement,
amortization of goodwill and related tax adjustments.
4. MANAGEMENT REORGANIZATION, LONG-LIVED ASSET IMPAIRMENT AND FACILITY CLOSURE
During the year ended March 31, 1997, the Company reorganized the management
team. Expenses of $1.0 million include severance expense for the previous Chief
Financial Officer, Vice President of Product Development and Vice President of
Corporate Development and include the hiring and relocation expenses for the new
Chief Financial Officer and other corporate officers.
Because of declining sales and continued operating losses during the year
ended March 31, 1996, the Company decided to significantly reduce the size of
its over-the-counter (OTC) liquids pharmaceutical manufacturing business.
Accordingly, the Company evaluated, based on the criteria prescribed by SFAS No.
121, the ongoing value of the plant, equipment and related goodwill that arose
as part of the XCEL acquisition in May 1992. Goodwill of $7.8 million was
allocated based on the relative estimated fair value of the long-lived assets at
the date of acquisition. Based on its evaluation, the Company determined that
assets with a carrying amount of $8.3 million were impaired and wrote them down
by $4.7 million to their fair value. Fair value was based on independent
appraisals of the plant and equipment. This asset impairment charge is reflected
in the consolidated balance sheet as a reduction in the carrying amount of
goodwill.
During the year ended March 31, 1997, the Company closed its OTC liquids
pharmaceutical manufacturing facility and out sourced this production to a third
party. The costs incurred of $1.4 million included the write-off of fixed assets
($0.8 million) and closure costs ($0.6 million). In additon, an inventory
write-down of $0.5 was made and is included in cost of sales.
F-10
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. COMPOSITION OF CERTAIN BALANCE SHEET ITEMS
<TABLE>
<CAPTION>
MARCH 31,
--------------------
<S> <C> <C>
1996 1997
--------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Inventories:
Raw materials, bulk vitamins and packaging materials...................................... $ 40,950 $ 51,488
Work-in-process........................................................................... 3,573 5,849
Finished products......................................................................... 27,221 29,486
--------- ---------
$ 71,744 $ 86,823
--------- ---------
--------- ---------
</TABLE>
Property, plant and equipment:
<TABLE>
<CAPTION>
DEPRECIABLE LIVES
-----------------
<S> <C> <C> <C>
(YEARS)
Land.................................................................. -- $ 537 $ 734
Buildings and improvements............................................ 31-40 3,012 5,206
Leasehold improvements................................................ 7-40 9,761 10,549
Machinery and equipment............................................... 3-20 37,781 42,194
Furniture and fixtures................................................ 3-10 2,790 3,425
---------- ----------
53,881 62,108
Less accumulated depreciation and amortization........................ (12,017) (19,741)
---------- ----------
$ 41,864 $ 42,367
---------- ----------
---------- ----------
</TABLE>
6. SUPPLEMENTARY CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------------
<S> <C> <C> <C>
1995 1996 1997
--------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid during the period for:
Interest.......................................................................... $ 8,759 $ 9,532 $ 11,248
Income taxes, net of refunds received............................................. 555 616 5,603
</TABLE>
F-11
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
MARCH 31,
----------------------
<S> <C> <C>
1996 1997
---------- ----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Credit agreement, banks................................................................. $ 42,803 $ 100,378
Capital lease obligations............................................................... 6,077 5,060
Senior note agreements (Series A and B)................................................. 45,000 --
Revolving loan agreement, vendor........................................................ 8,271 --
Term loan, bank......................................................................... 1,898 --
Industrial revenue bonds................................................................ 125 --
---------- ----------
104,174 105,438
Less current portion.................................................................... (2,023) (3,148)
---------- ----------
Total long-term debt.................................................................. $ 102,151 $ 102,290
---------- ----------
---------- ----------
</TABLE>
CREDIT AGREEMENT, BANKS
On January 30, 1997, the Company entered into a Credit Agreement that
expires on April 1, 2003 and permits the Company to borrow up to $165 million
subject to borrowing limitations, as defined. Borrowings under this agreement
bear interest at either the bank's base rate (8.5% at March 31, 1997) or
Canadian prime rate (4.75% at March 31, 1997) plus up to 0.5% or LIBOR (5.72% at
March 31, 1997) plus up to 1.5% or banker's acceptance rate (3.2% at March 31,
1997) plus up to 1%, at the option of the Company. As of March 31, 1997, the
Company's interest rates were 6.4% for U.S. borrowings of $90.1 million and 4.1%
for Canadian borrowings of $10.3 million. In addition to certain agent and
up-front fees, as defined, this agreement requires a commitment fee of up to .5%
of the average daily unused portion of the revolving loan commitment amount, as
defined. Borrowings under this agreement are secured by a pledge of all the
common stock of the Company.
CAPITAL LEASE OBLIGATIONS
The capital lease obligations are payable in variable monthly installments
through January 2002, bear interest at effective rates ranging from 6.8% to 9.3%
and are secured by equipment with a net book value of approximately $5.1 million
at March 31, 1997.
COVENANTS AND MINIMUM PAYMENTS
Provisions of certain of the Company's debt agreements include terms, among
others, that require the Company to maintain certain financial ratios.
Furthermore, the agreements restrict indebtedness and expenditures for dividend
distributions, certain capital expenditures and investments. A change of
control, as defined, will constitute a default under the Credit Agreement. As of
March 31, 1997, the Company was in compliance with the covenants and conditions
of the new Credit Agreement. Due to restrictions in the Credit Agreement, none
of the retained earnings are available for dividends.
F-12
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM DEBT (CONTINUED)
Principal payments on long-term debt through fiscal 2002 and thereafter are:
<TABLE>
<CAPTION>
(IN
FISCAL YEAR THOUSANDS)
- ------------------------------------------------------------------------------- -------------
<S> <C>
1998......................................................................... $ 3,148
1999......................................................................... 3,417
2000......................................................................... 9,493
2001......................................................................... 13,625
2002......................................................................... 15,405
Thereafter................................................................... 60,350
-------------
Total $ 105,438
-------------
-------------
</TABLE>
RETIREMENT OF DEBT
As of March 31, 1996, Series A notes aggregated $35 million and bore
interest at 9.44% and Series B notes aggregated $10 million and bore interest at
9.60%. In connection with the new Credit Agreement, these senior notes were
prepaid in full on January 30, 1997, along with accrued interest and a
prepayment charge of $4.1 million which is included in the consolidated
statement of income as an extraordinary loss on the early extinguishment of debt
in the year ended March 31, 1997.
On December 10, 1993, the Company entered into a Credit Agreement that was
to expire on June 30, 1998 and had permitted the Company to borrow up to
$55,000,000, subject to borrowing base limitations, as defined. In connection
with the new credit agreement described above, borrowings under this agreement
were refinanced and the unamortized debt issuance costs of $492,000 were written
off and included in the consolidated statement of income as an extraordinary
loss on the early extinguishment of debt in the year ended March 31, 1997.
8. INCOME TAXES
The Company is included in the consolidated Federal income tax return of the
Parent. Under a tax sharing agreement, the Federal income tax provision is
computed on a consolidated return basis and provides that the Company by
participating in the consolidated filing shall be liable and make payment to the
Parent for its proportionate share of the total tax liability. The agreement
also provides that the Company shall receive benefit to the extent that its
losses and other credits result in a reduction of the consolidated tax
liability. In the event that a combined or consolidated state, local or foreign
tax return is filed, the tax sharing arrangement for the Federal provision shall
apply in a similar manner in computing the state, local and foreign tax
liability or benefit.
Deferred income taxes are computed using the liability method and reflect
the effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. Valuation allowances are established, when necessary, to reduce
deferred tax assets to estimated realizable amounts. The provision for income
taxes reflects the taxes to be paid for the period and the change during the
period in the deferred tax assets and liabilities.
F-13
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities are:
<TABLE>
<CAPTION>
MARCH 31,
--------------------
<S> <C> <C>
1996 1997
--------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Acquisition related accruals............................................................... $ 485 $ 81
Inventory capitalization................................................................... 759 634
Compensation accruals...................................................................... 442 405
Inventory obsolescence reserves............................................................ 1,033 863
Allowances for doubtful accounts and sales returns......................................... 1,031 1,392
Other...................................................................................... 76 463
--------- ---------
Total deferred tax assets.................................................................... 3,826 3,838
--------- ---------
Deferred tax liabilities:
Fixed assets book versus tax basis difference.............................................. (2,202) (2,582)
--------- ---------
Deferred tax assets, net of deferred tax liabilities......................................... $ 1,624 $ 1,256
--------- ---------
--------- ---------
</TABLE>
The following is a reconciliation of the statutory federal income tax rate
to the Company's effective income tax rate before extraordinary item:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------
<S> <C> <C> <C>
1995 1996 1997
---- ---- ----
Tax at U.S. statutory rates................................................... 35% 35% 35%
Charge for long-lived asset impairment........................................ -- 28 --
Goodwill amortization......................................................... 7 9 3
State income taxes, net of federal tax benefit................................ 6 8 6
---- ---- ----
48% 80% 44%
---- ---- ----
---- ---- ----
</TABLE>
Significant components of the provision for income taxes are:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal........................................................ $ 539 $ 1,176 $ 6,622
State.......................................................... 206 146 954
Foreign........................................................ -- -- 182
--------- --------- ---------
Total current.................................................... 745 1,322 7,758
--------- --------- ---------
Deferred:
Federal........................................................ 2,251 2,846 (131)
State.......................................................... 528 518 401
--------- --------- ---------
Total deferred................................................. 2,779 3,364 270
--------- --------- ---------
Provision for income taxes before extraordinary item........... 3,524 4,686 8,028
Tax benefit from extraordinary loss............................ -- -- (1,833)
--------- --------- ---------
Provision for income taxes, net................................ $ 3,524 $ 4,686 $ 6,195
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-14
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. EMPLOYEE BENEFITS
STOCK OPTION PLAN
The Parent's Stock Option Plan, as amended in 1996, provides for the
issuance of nonqualified stock options to certain key employees and directors to
purchase up to 175,000 shares of the Parent's Class A common stock. Options
granted are at exercise prices as determined by the Parent's Board of Directors,
but not less than $100 per share. Options generally vest on a pro rata basis at
a rate of 25% per year, with 25% immediate vesting on the date of grant, and
expire no later than ten years from the date of grant.
Pro forma information regarding net income is required by FASB Statement No.
123, "Accounting for Stock-Based Compensation," which also requires that the
information be determined as if the Parent has accounted for its employee stock
options granted subsequent to March 31, 1995 under the fair value method for
that Statement. The fair value for these options was estimated at the date of
grant using the Black-Scholes option pricing model. The Black-Scholes model was
developed for use in estimating the fair value of traded options which have no
vesting restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the expected
stock price volatility. Because the Parent's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.
In calculating pro forma information regarding net income, the fair value
was estimated at the date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions for the options on the Parent's
common stock: a risk-free interest rate of 6%; a dividend yield of 0%; a
volatility of the expected market price of the Parent's Class A common stock of
0; and a weighted-average expected life of the options of 6 years. The pro forma
net income for the years ended March 31, 1996 and 1997 was $1.1 million and $7.4
million, respectively.
There was no activity under the Stock Option Plan during the year ended
March 31, 1995. Activity under the Stock Option Plan for the years ended March
31, 1996 and 1997 is set forth below:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------------------
SHARES PRICE WEIGHTED
AVAILABLE FOR NUMBER OF PER AVERAGE
GRANT SHARES SHARE EXERCISE PRICE
------------- --------- -------- --------------
<S> <C> <C> <C> <C>
Balance at March 31, 1995................................... -- 81,552 $ 100 $100
Additional shares reserved.................................. 18,448 -- -- --
Options granted............................................. (18,448) 18,448 125-145 137
Options canceled............................................ -- -- -- --
------------- --------- -------- -----
Balance at March 31, 1996................................... -- 100,000 100-145 107
Additional shares reserved.................................. 75,000 -- -- --
Options granted............................................. (6,074) 6,074 175 175
Options canceled............................................ 6,074 (6,074) 100-145 107
------------- --------- -------- -----
Balance at March 31, 1997................................... 75,000 100,000 $100-175 $111
------------- --------- -------- -----
------------- --------- -------- -----
</TABLE>
F-15
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. EMPLOYEE BENEFITS (CONTINUED)
No options were exercised during the three year period ended March 31, 1997.
Options exercisable at March 31, 1995, 1996 and 1997 were 58,157, 83,147 and
86,721, respectively. The weighted-average fair value of options granted during
the years ended March 31, 1996 and 1997 were $40 and $52, respectively.
The weighted average remaining contractual life and weighted average
exercise price of options outstanding and of options exercisable as of March 31,
1997 were as follows:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
--------------------------------------------- --------------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
RANGE OF NUMBER OF CONTRACTUAL LIFE AVERAGE NUMBER OF AVERAGE
EXERCISE PRICES SHARES (YEARS) EXERCISE PRICE SHARES EXERCISE PRICE
- --------------- --------- ---------------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C>
$100-$175 100,000 6.9 $111 86,721 $105
</TABLE>
The Parent has reserved a total of 188,238 shares of its Class A common
stock for issuance under stock option plans as of March 31, 1997.
CONTRIBUTORY RETIREMENT PLANS
The Company has contributory retirement plans that cover substantially all
of the Company's employees who meet minimum service requirements. The Company's
contributions to the plans are discretionary and are determined and funded
annually by the Parent's Board of Directors. The Company's contributions totaled
$969,000, $1,011,000 and $1,109,000 for the plan years ended March 31, 1995,
1996 and 1997, respectively.
10. RELATED PARTY TRANSACTIONS
The Company leased certain facilities under an operating lease with a
partnership which included two officers of the Company's operating subsidiary.
The lease was terminated as of March 31, 1995. Rents paid to the partnership
totaled $477,000 during the year ended March 31, 1995.
Under a Management Agreement dated as of May 4, 1992 by and between the
Company and AEA Investors Inc., one of the Company's shareholders, the Company
paid AEA Investors Inc. management fees of $350,000 during each of the three
years ended March 31, 1997 in exchange for advisory and consulting services
rendered in connection with certain financial, management and other matters
relating to the business and operations of the Company. The annual management
fees of $350,000 were included in other charges in the accompanying consolidated
statements of income.
11. COMMITMENTS
The Company leases certain real estate for its manufacturing facilities,
warehouses, corporate and sales offices, as well as certain equipment under
operating leases (noncancelable) that expire at various dates through March 2004
and contain renewal options. Total rents charged to operations were $5,558,000,
$4,679,000 and $4,755,000 for the years ended March 31, 1995, 1996 and 1997,
respectively.
F-16
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMMITMENTS (CONTINUED)
Minimum future obligations on noncancelable operating leases in effect at
March 31, 1997 are:
<TABLE>
<CAPTION>
(IN
FISCAL YEAR THOUSANDS)
- ------------------------------------------------------------------------------- -------------
<S> <C>
1998........................................................................... $ 4,379
1999........................................................................... 3,512
2000........................................................................... 2,446
2001........................................................................... 2,093
2002........................................................................... 1,473
Thereafter..................................................................... 1,922
-------------
Total minimum lease payments................................................... $ 15,825
-------------
-------------
</TABLE>
12. CONTINGENT LIABILITIES
L-TRYPTOPHAN
The Company has been named in numerous actions brought in federal or state
courts seeking compensatory and, in some cases, punitive damages for alleged
personal injuries resulting from the ingestion of certain products containing
L-Tryptophan. As of August 14, 1997, the Company and/or certain of its
customers, many of whom have tendered their defense to the Company, had been
named in 660 lawsuits of which 658 have been settled.
The Company has entered into an agreement (the Agreement) with the Company's
supplier of bulk L-Tryptophan, under which the supplier has agreed to assume the
defense of all claims and to pay all settlements and judgments, other than for
certain punitive damages, against the Company arising out of the ingestion of
L-Tryptophan products. To date, the Supplier has funded all settlements and paid
all legal fees and expenses incurred by the Company related to these matters.
Of the remaining 13 cases, management does not expect that the Company will
be required to make any material payments in connection with their resolution by
virtue of the Agreement, or, in the event that the supplier ceases to honor the
Agreement, by virtue of the Company's product liability insurance, subject to
deductibles not to exceed $1.4 million in the aggregate. Accordingly, no
provision has been made in the Company's consolidated financial statements for
any loss that may result from these remaining actions.
OTHER
The Company is subject to other legal proceedings and claims which arise in
the normal course of business. While the outcome of these proceedings and claims
cannot be predicted with certainty, management does not believe the outcome of
any of these matters will have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.
13. CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables. The
Company sells its products to a geographically diverse customer base in the
drugstore, supermarket and discount chain industries. The Company performs
ongoing credit evaluations of its customers and maintains reserves for potential
losses. For the years ended March 31, 1995, 1996 and 1997, two customers
represented approximately 19% and 14%, 21% and 13%, and 27% and 12%,
respectively, of net sales.
F-17
<PAGE>
LEINER HEALTH PRODUCTS INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
JUNE 30,
1997
-----------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................................................... $ 3,117
Accounts receivable, net........................................................................... 56,012
Income taxes receivable............................................................................ 4,678
Inventories........................................................................................ 96,177
Deferred income taxes.............................................................................. 3,838
Prepaid expenses and other current assets.......................................................... 3,117
-----------
Total current assets............................................................................. 166,939
-----------
Property, plant and equipment, net................................................................... 42,034
Goodwill, net........................................................................................ 57,675
Deferred income taxes................................................................................ 3,321
Deferred financing charges........................................................................... 11,853
Other noncurrent assets.............................................................................. 11,544
-----------
Total assets..................................................................................... $ 293,366
-----------
-----------
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Bank checks outstanding, less cash on deposit...................................................... $ 10,222
Current portion of long-term debt.................................................................. 2,062
Accounts payable................................................................................... 53,525
Customer allowances payable........................................................................ 6,645
Accrued compensation and benefits.................................................................. 17,343
Income taxes payable............................................................................... --
Other accrued expenses............................................................................. 2,606
-----------
Total current liabilities........................................................................ 92,403
-----------
Long-term debt....................................................................................... 237,489
Deferred income taxes................................................................................ 2,582
Other noncurrent liabilities......................................................................... 1,196
Commitments and contingent liabilities
Minority interest in subsidiary...................................................................... 4,718
Shareholder's equity:
Common stock....................................................................................... 1
Capital in excess of par........................................................................... 62,966
Recapitalization of Parent......................................................................... (113,191)
Cumulative translation adjustment.................................................................. 33
Retained earnings.................................................................................. 5,169
-----------
Total shareholder's deficit...................................................................... (45,022)
-----------
Total liabilities and shareholder's equity (deficit)............................................. $ 293,366
-----------
-----------
</TABLE>
See accompanying notes to unaudited condensed financial statements.
F-18
<PAGE>
LEINER HEALTH PRODUCTS INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
---------------------
<S> <C> <C>
1996 1997
--------- ----------
Net sales.................................................................................. $ 70,634 $ 94,076
Cost of sales.............................................................................. 52,070 71,860
--------- ----------
Gross profit............................................................................. 18,564 22,216
Marketing, selling and distribution expenses............................................... 10,960 11,956
General and administrative expenses........................................................ 4,569 5,593
Management reorganization.................................................................. 187 --
Compensation related to stock options...................................................... -- 15,431
Management transaction bonuses............................................................. -- 5,125
Amortization of goodwill................................................................... 364 402
Other charges.............................................................................. 121 88
--------- ----------
Operating income (loss).................................................................. 2,363 (16,379)
Interest expense, net...................................................................... 2,152 1,800
--------- ----------
Income (loss) before income taxes and extraordinary item................................. 211 (18,179)
Provision (benefit) for income taxes before extraordinary item............................. 92 (7,105)
--------- ----------
Income (loss) before extraordinary item.................................................. 119 (11,074)
Extraordinary loss on the early extinguishment of debt, net of income taxes of $761........ -- 1,109
--------- ----------
Net income (loss)...................................................................... $ 119 ($ 12,183)
--------- ----------
--------- ----------
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-19
<PAGE>
LEINER HEALTH PRODUCTS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-----------------------
1996 1997
---------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........................................................................ $ 119 $ (12,183)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization.......................................................... 2,921 3,098
Stock option compensation expense...................................................... 33 8,300
Deferred income taxes.................................................................. -- (3,321)
Extraordinary loss on the early extinguishment of debt................................. -- 1,870
Translation adjustment................................................................. -- (206)
Changes in operating assets and liabilities:
Accounts receivable.................................................................. 16,320 21,430
Inventories.......................................................................... (8,445) (9,335)
Bank checks outstanding, less cash on deposit........................................ 3,953 (192)
Accounts payable..................................................................... (10,581) (8,103)
Customer allowances payable.......................................................... 242 13
Accrued compensation and benefits.................................................... (1,873) 11,110
Other accrued expenses............................................................... (1,418) (931)
Income taxes payable/receivable...................................................... (178) (6,496)
Other................................................................................ (635) (478)
---------- -----------
Net cash provided by operating activities........................................ 458 4,576
---------- -----------
INVESTING ACTIVITIES:
Additions to property, plant, and equipment, net......................................... (572) (1,301)
Increase in other noncurrent assets...................................................... (325) (3,069)
---------- -----------
Net cash used in investing activities................................................ (897) (4,370)
---------- -----------
FINANCING ACTIVITIES:
Net borrowings (payments) under former bank revolving credit facility.................... 937 (100,405)
Net borrowings (payments) under new bank revolving credit facility....................... -- 37,247
Borrowings under new bank term credit facility........................................... -- 85,000
Expenses paid on behalf of parent in connection with its recapitalization................ -- (11,783)
Increase in deferred financing charges................................................... -- (9,366)
Payments on other long-term debt......................................................... (449) (245)
---------- -----------
Net cash provided by financing activities............................................ 488 448
---------- -----------
Effect of exchange rate changes.......................................................... -- 397
---------- -----------
Net increase in cash and cash equivalents................................................ 49 1,051
Cash and cash equivalents at beginning of period......................................... 1,411 2,066
---------- -----------
Cash and cash equivalents at end of period............................................... $ 1,460 $ 3,117
---------- -----------
---------- -----------
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-20
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements for
the three months ended June 30, 1997 include the accounts of Leiner Health
Products Inc. (the "Company") and its subsidiaries, including Vita Health
Company (1985) Ltd. ("Vita Health") which was acquired January 30, 1997 in a
transaction accounted for as a purchase, and have been prepared by the Company
in accordance with generally accepted accounting principles for interim
financial information and in accordance with the rules of the Securities and
Exchange Commission ("SEC"). Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements.
In the opinion of management, all adjustments necessary for a fair
presentation of such financial statements have been included. Such adjustments
consisted only of normal recurring items except for adjustments recorded in
connection with the Recapitalization as discussed in Note 3. This report should
be read in conjunction with the Company's March 31, 1997 consolidated financial
statements and notes thereto in the registration statement. The results of
operations for the periods indicated should not be considered as indicative of
operations for the full year.
2. INVENTORIES
Inventories consist of the following as of June 30, 1997 (in thousands):
<TABLE>
<S> <C>
Raw materials, bulk vitamins and packaging materials.......... $ 57,139
Work-in-process............................................... 7,980
Finished products............................................. 31,058
-----------
$ 96,177
-----------
-----------
</TABLE>
3. THE RECAPITALIZATION
On June 30, 1997, the Company's ultimate parent, Leiner Health Products
Group, Inc. ("Leiner Group") completed a leveraged recapitalization transaction
("Recapitalization"). This transaction was effected through receipt of an equity
investment from North Castle Partners I, L.L.C. ("North Castle"), an investment
fund formed by Mr. Charles F. Baird, Jr. to effect the Recapitalization.
Pursuant to the Recapitalization, Leiner Group repurchased common stock from its
existing shareholders in an amount totaling (together with equity retained by
such shareholders) $205.0 million, issued $80.4 million of new shares of the
recapitalized Leiner Group to North Castle, issued $85 million of Senior
Subordinated Notes (the "Notes"), and established a $210 million senior secured
credit facility (the "New Credit Facility") that provides for both term and
revolving credit borrowings. Immediately upon consummation of the
Recapitalization, the obligations of Leiner Group under the Notes and the New
Credit Facility were assigned to and assumed by the Company. The
Recapitalization was accounted for as a recapitalization of Leiner Group which
had no impact on the historical basis of assets and liabilities as reflected in
the Company's consolidated financial statements.
In connection with the Recapitalization, the Company deducted $1.1 million
of deferred financing charges, net of income taxes of $0.8 million, from net
income (loss) as an extraordinary loss in the three months ended June 30, 1997.
Additionally in connection with the Recapitalization, the Company granted
F-21
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. THE RECAPITALIZATION (CONTINUED)
transaction bonuses to certain management personnel in the aggregate amount of
approximately $5.1 million and recorded compensation expense related to the
in-the-money value of stock options of approximately $15.4 million. The
compensation expense represented the excess of the fair market value of the
underlying common stock over the exercise price of the options canceled in
connection with the Recapitalization.
The assumption of the debt from Leiner Group and the payment of certain
other expenses related to the Recapitalization paid by the Company on behalf of
Leiner Group total $113.2 million and consist of the following (in thousands):
<TABLE>
<S> <C>
Funds contributed or transferred from Leiner Group............ $ 125,028
Assumption of debt from Leiner Group:
Senior Credit Facility...................................... (149,736)
Subordinated Debt........................................... (85,000)
Stock option compensation, net of cash paid of $7,131......... 8,300
Expenses paid by Company on behalf of Group................... (11,783)
---------
Recapitalization of Parent as of June 30, 1997.............. ($113,191)
---------
---------
</TABLE>
4. LONG-TERM DEBT
The New Credit Facility consists of two term loans ("Term Facility") due
December 30, 2004 and December 30, 2005 in the amounts of $45 million and $40
million, respectively, and a revolving credit facility in the amount of $125
million (the "Revolving Facility"), made available in U.S. dollars to the
Company (such portion, the "U.S. Revolving Facility") with a portion denominated
in Canadian dollars made available to Vita Health (such portion, the "Canadian
Revolving Facility"). The unpaid principal amount outstanding on the Revolving
Facility is due and payable on June 30, 2003. The Term Facility requires
quarterly amortization payments of approximately 1% per annum over the next six
years. Amortization payments scheduled during the period July 1, 1997 through
June 30, 1998 total $0.85 million. Borrowings under the New Credit Facility bear
interest at floating rates that are based on the lender's base rate (8.5% at
June 30, 1997), the lender's Canadian prime rate (4.75% at June 30, 1997), LIBOR
(5.9% at June 30, 1997) or the lender's banker's acceptance rate (3.44% at June
30, 1997), as the case may be, plus an "applicable margin" that is itself based
on the Company's leverage ratio. The leverage ratio is defined generally as the
ratio of total funded indebtedness to the consolidated EBITDA and varies as
follows: (a) for revolving credit borrowings, from 0.75% to 2.5% for LIBOR-
or banker's acceptance-based loans and from zero to 1.5% for alternate base
rate- or Canadian prime rate-based loans, and (b) for loans under the Term
Facility, from 2.375% to 2.875% or 2.5% to 3.0% for LIBOR-based loans and from
1.375% to 1.875% or 1.5% to 2.0% for alternate base rate-based loans. As of June
30, 1997, the Company's interest rates were 10.02% for U.S. borrowings and 5.69%
for Canadian borrowings under the New Credit Facility. In addition to certain
agent and up-front fees, the New Credit Facility requires a commitment fee of up
to 0.5% of the average daily unused portion of the revolving credit facility
based on the Company's leverage ratio.
The obligations of the Company under the U.S. Revolving Facility and the
Term Facilities are guaranteed by the direct parent of the Company, PLI Holdings
Inc. ("PLI Holdings") and by any direct or indirect U.S. subsidiaries of the
Company. The obligations of Vita Health under the Canadian Revolving
F-22
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT (CONTINUED)
Facility are guaranteed by the Company, PLI Holdings, the Company's direct or
indirect U.S. subsidiaries, Vita Health and its direct or indirect subsidiaries.
The New Credit Facility also is secured by substantially all the assets of the
Company and any of its direct or indirect U.S. subsidiaries, all of the capital
stock of the Company and any such direct or indirect U.S. subsidiaries, and 65%
of the capital stock of any direct non-U.S. subsidiaries of the Company and its
U.S. subsidiaries. The Canadian Revolving Facility is also secured by
substantially all assets of Vita Health, its direct and indirect Canadian
parents and any direct or indirect non-U.S. subsidiaries of LHP, and all of the
capital stock of any such direct or indirect non-U.S. subsidiaries. The New
Credit Facility contains financial covenants that require, among other things,
the Company to comply with certain financial ratios and tests, including those
that relate to the maintenance of specified levels of cash flow and
stockholder's equity. The Company was in compliance with all such covenants as
of June 30, 1997. As of September 30, 1997, the Company had $59.2 million
available under its New Revolving Facility.
Principal payments on long-term debt as of June 30, 1997 through fiscal 2002
and thereafter are (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
1998........................................................... $ 1,595
<S> <C>
1999........................................................... 1,674
2000........................................................... 2,402
2001........................................................... 2,321
2002........................................................... 861
Thereafter..................................................... 230,698
---------
Total.......................................................... $ 239,551
---------
---------
</TABLE>
5. RELATED PARTY TRANSACTION
Upon consummation of the recapitalization, Leiner Group's management
agreement with AEA was terminated, and Leiner Group and LHP entered into a
consulting agreement with North Castle Partners, L.L.C. (the "Sponsor"), an
affiliate of North Castle, to provide the Company with certain business,
financial and managerial advisory services. Mr. Baird acts as the managing
member of the Sponsor through Baird Investment Group, L.L.C. In exchange for
such services, Leiner Group and LHP have agreed to pay the Sponsor an annual fee
of $1.5 million, payable semi-annually in advance, plus the Sponsor's reasonable
out-of-pocket expenses. This fee may be reduced upon completion of an initial
public offering of Leiner's shares. The agreement also terminates on June 30,
2007, unless Baird Investment Group ceases to be the managing member of North
Castle, or upon the earliest of June 30, 2007 or the date that North Castle
terminates before that date. Leiner Group and LHP have also paid the Sponsor a
transaction fee of $3.5 million for services relating to arranging, structuring
and financing the Recapitalization, and reimbursed the Sponsor's related
out-of-pocket expenses.
6. CONTINGENT LIABILITIES
The Company has been named in numerous actions brought in federal or state
courts seeking compensatory and, in some cases, punitive damages for alleged
personal injuries resulting from the ingestion of certain products containing
L-Tryptophan. As of August 14, 1997, the Company and/or certain
F-23
<PAGE>
LEINER HEALTH PRODUCTS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. CONTINGENT LIABILITIES (CONTINUED)
of its customers, many of whom have tendered their defense to the Company, had
been named in 668 lawsuits of which 658 have been settled.
The Company has entered into an agreement (the "Agreement") with the
Company's supplier of bulk L-Tryptophan, under which the supplier has agreed to
assume the defense of all claims and to pay all settlements and judgments, other
than certain punitive damages, against the Company arising out of the ingestion
of L-Tryptophan products. To date, the supplier has funded all settlements and
paid all legal fees and expenses incurred by the Company related to these
matters.
Of the remaining 10 cases, management does not expect that the Company will
be required to make any material payments in connection with their resolution by
virtue of the Agreement, or, in the event that the supplier ceases to honor the
Agreement, by virtue of the Company's product liability insurance, subject to
deductibles not to exceed $1.6 million in the aggregate. Accordingly, no
provision has been made in the Company's consolidated financial statements for
any loss that may result from these remaining actions.
OTHER
The Company is subject to other legal proceedings and claims which arise in
the normal course of business. While the outcome of these proceedings and claims
cannot be predicted with certainty, management does not believe the outcome of
any of these matters will have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.
The Company learned in the first quarter of fiscal 1998 of an FDA proposal
to ban the use of phenolpthalein in laxatives. The FDA reportedly took this
action in response to certain studies which concluded that the administration of
very high doses of yellow phenolphthalein could cause cancer in laboratory
animals. The reports concerning these studies state that the dosages
administered substantially exceeded the dosages commonly used by human beings.
In response, the Company voluntarily discontinued production of its laxative
product containing yellow phenolphthalein and notified its customers that they
may return this product. The Company has reformulated this product and expects
to be shipping the reformulated version in November 1997.
7. SUBSEQUENT EVENT
On July 30, 1997, the Company entered into an interest protection
arrangement covering $29.5 million of its borrowings under the New Credit
Facility. Under this arrangement, the Company obtained a fixed interest rate of
6.17% on LIBOR, plus applicable margin (2.25%) instead of the fluctuating rate
as described in Note 4 and pays a fee of approximately $15,800 per annum. The
agreement expires July 30, 2000.
F-24
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE
ACCOMPANYING LETTER OF TRANSMITTAL IN CONNECTION WITH THE OFFER MADE BY THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL,
OR BOTH TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE NEW NOTES TO WHICH IT RELATES OR AN OFFER TO
SELL, OR THE SOLICITATION OF AN OFFER TO BUY THE NEW NOTES, IN ANY CIRCUMSTANCES
IN WHICH SUCH OFFER IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE
ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN A CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF
LEINER GROUP OR THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information................. iii
Prospectus Summary.................... 1
Risk Factors.......................... 15
The Company........................... 23
Use of Proceeds....................... 24
Capitalization........................ 25
Unaudited Pro Forma Financial
Information.......................... 26
Selected Historical and Pro Forma
Financial Information................ 33
Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................... 37
Industry.............................. 47
Business.............................. 50
Management............................ 69
Ownership of Capital Stock............ 74
The Recapitalization.................. 75
Certain Transactions.................. 77
Description of New Credit Facility.... 79
The Exchange Offer.................... 81
Registration Rights................... 88
Description of the New Notes.......... 90
Certain Federal Income Tax
Considerations....................... 128
Plan of Distribution.................. 128
Legal Matters......................... 129
Experts............................... 129
Index to Financial Statements......... F-1
</TABLE>
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
LEINER HEALTH PRODUCTS INC.
OFFER TO EXCHANGE
9 5/8% SENIOR SUBORDINATED NOTES,
DUE 2007, WHICH HAVE BEEN
REGISTERED UNDER THE
SECURITIES ACT OF 1933
AS AMENDED, FOR ANY AND ALL
OUTSTANDING 9 5/8% SENIOR
SUBORDINATED NOTES DUE 2007
---------------------
PROSPECTUS
---------------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Amended and Restated Certificate of Incorporation and Article V, Section
5 of the By-Laws of the Company authorize indemnification of officers and
directors to the full extent permitted under Delaware law, including a provision
eliminating (except under certain enumerated circumstances) the liability of
directors for duty of care violations.
The indemnification provided for in the Delaware General Corporation Law is
not exclusive of any other rights of indemnification, and a corporation may
maintain insurance against liabilities for which indemnification is not
expressly provided by the Delaware General Corporation Law.
Section 145 of the Delaware Corporation Law, as amended, provides in regards
to indemnification of directors and officers as follows:
"145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE.-- (a) A corporation shall have power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably
incurred by the person in connection with the defense or settlement of such
action or suit if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent that the Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified
II-1
<PAGE>
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there are no
such directors, or if such directors so direct, by independent legal counsel
in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect
to the resulting or surviving corporation as he would have with respect to
such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has
II-2
<PAGE>
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any by-law, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees)."
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
*** 2.1 -- Stock Purchase Agreement and Agreement and Plan of Merger, dated as of May 31, 1997, by and among
Leiner Group, North Castle Partners I, L.L.C. and LHP Acquisition Corp.
*** 2.2 -- Amendment No. 1 to Stock Purchase Agreement and Agreement and Plan of Merger, dated as of June 30,
1997, by and among Leiner Group, North Castle Partners I, L.L.C. and LHP Acquisition Corp.
*** 3.1 -- Amended and Restated Certificate of Incorporation of Leiner Health Products Inc. ("LHP").
*** 3.2 -- Amended and Restated By-Laws of LHP (formerly known as Amended and Restated By-Laws of LHP Holding
Corp.).
*** 4.1 -- Indenture, dated as of June 30, 1997, between Leiner Group and United States Trust Company of New
York (the "Trustee").
* 4.2 -- First Supplemental Indenture, dated as of June 30, 1997, among Leiner Group, LHP and the Trustee.
* 4.3 -- Purchase Agreement, dated as of June 19, 1997, among Leiner Group, LHP, Merrill Lynch & Co.,
Salomon Brothers Inc and Scotia Capital Markets (USA) Inc. (the "Initial Purchasers").
* 4.4 -- Registration Rights Agreement, dated as of June 30, 1997, among Leiner Group, LHP and the Initial
Purchasers.
*** 4.5 -- Credit Agreement, dated as of June 30, 1997 (the "Credit Agreement"), among Leiner Group, Vita
Health Company (1985) Ltd., a Canadian corporation ("Vita Health"), the banks and other financial
institutions party thereto, as lenders, The Bank of Nova Scotia, as U.S. Agent and Canadian Agent
(the "Agents"), Merrill Lynch Capital Corporation, as documentation agent, and Salomon Brothers
Holding Company Inc, as syndication agent.
*** 4.6 -- First Amendment to the Credit Agreement, dated as of September 29, 1997.
*** 4.7 -- Assumption Agreement, dated as of June 30, 1997, between Leiner Group and LHP and accepted and
acknowledged by the Agents on behalf of the lenders that are party to the Credit Agreement.
*** 4.8 -- U.S. Borrower Security Agreement, dated as of June 30, 1997, between LHP and The Bank of Nova
Scotia, as collateral agent.
*** 4.9 -- U.S. Borrower Pledge Agreement, dated as of June 30, 1997, made by LHP in favor of the Agents for
the secured parties, as defined therein.
*** 4.10 -- Parent Pledge Agreement, dated as of June 30, 1997, made by PLI Holdings Inc. in favor of the
Agents for the secured parties, as defined therein.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
*** 4.11 -- Canadian Holdings Pledge Agreement, dated as of June 30, 1997, made by VH Holdings Inc. in favor
of The Bank of Nova Scotia, as agent for each of the secured portions, as defined therein.
*** 4.12 -- Canadian Borrower Pledge Agreement, dated as of June 30, 1997, made by Vita Health in favor of The
Bank of Nova Scotia, as agent for each of the secured portions, as defined therein.
*** 4.13 -- U.S. Borrower Guaranty, dated as of June 30, 1997, made by LHP in favor of the Agents for the
secured portions, as defined therein.
*** 4.14 -- Parent Guaranty, dated as of June 30, 1997, made by PLI Holdings in favor of the Agents for the
secured portions, as defined therein.
*** 4.15 -- Canadian Holdings Guaranty, dated as of June 30, 1997, made by VH Holdings Inc. in favor of The
Bank of Nova Scotia as agent for the secured portions, as defined therein.
*** 4.16 -- Canadian Subsidiary Guaranties, each dated as of June 30, 1997, made by each of 64804 Manitoba
Ltd. and Westcan Pharmaceuticals Ltd. in favor of The Bank of Nova Scotia as agent for the secured
portions, as defined therein.
*** 4.17 -- Canadian Borrower Debenture, each dated as of June 30, 1997, made by Vita Health in favor of The
Bank of Nova Scotia on its own behalf and as agent for the Canadian secured portions as defined
therein in the amount of $75,000,000.
*** 4.18 -- Canadian Holdings Debenture, dated as of June 30, 1997, made by VH Holdings Inc. in favor of the
The Bank of Nova Scotia, on its own behalf and as agent for the Canadian secured portions, as
defined therein in the amount of $75,000,000.
*** 4.19 -- Canadian Subsidiary Debenture, dated as of June 30, 1997, made by 64804 Manitoba Ltd. in favor of
the The Bank of Nova Scotia, on its own behalf and as agent for the Canadian secured portions, as
defined therein in the amount of $75,000,000.
*** 4.20 -- Canadian Subsidiary Debenture, dated as of June 30, 1997, made by Westcan Pharmaceuticals Ltd. in
favor of the The Bank of Nova Scotia, on its own behalf and as agent for the Canadian secured
portions, as defined therein in the amount of $75,000,000.
*** 4.21 -- Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of June
30, 1997 from LHP, as Mortgagor, to The Bank of Nova Scotia, as agent, relating to the property
located at 3532 West 47th Place, Chicago, Illinois, as amended by the First Amendment to the
Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing dated as of July
31, 1997.
*** 4.22 -- Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of
August 20, 1997 from LHP, as Mortgagor, to The Bank of Nova Scotia, as agent, relating to the
property located at 3308 Covington, Kalamazoo, Michigan.
*** 4.23 -- Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of June
30, 1997 from LHP, as Mortgagor, to The Bank of Nova Scotia, as agent, relating to the property
located at 2300 Badger Lane, Madison, Wisconsin.
*** 4.24 -- Leasehold Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing,
dated June 30, 1997 from LHP, as Trustor, in favor of Lawyers Title Company of California as
Trustee, for the benefit of The Bank of Nova Scotia, as agent, relating to the property located at
7366 Orangewood Avenue, Garden Grove, California.
*** 4.25 -- Trademark Security Agreement, dated as of June 30, 1997, between LHP and The Bank of Nova Scotia
as collateral agent for the secured parties.
** 5 -- Opinion of Debevoise & Plimpton regarding the legality of the New Notes being registered.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
*** 10.1 -- Consulting Agreement, dated as of June 30, 1997, among Leiner Group, LHP and North Castle.
*** 10.2 -- Restated Standard Indemnity Agreement, dated September 1, 1992 between Showa Denko America Inc.
and LHP Holdings Corp. (now LHP).
*** 10.3 -- Guaranty Agreement, dated September 1, 1992, between Showa Denko K.K. and LHP Holdings Corp. (now
LHP).
*** 10.4 -- Leiner Group Stock Option Plan (formerly known as PLI Investors Inc. Stock Option Plan).
*** 10.5 -- First Amendment to the Leiner Group Stock Option Plan, effective as of June 30, 1997.
*** 10.6 -- Leiner Group Stock Incentive Plan, adopted and effective as of June 30, 1997.
*** 10.7 -- Lease, dated as of March 12, 1984, by and between R&R Properties ("R&R") and Trupak, Inc.
("Trupak"), as amended by the First Amendment, dated as of August 1, 1986 between R&R and Trupak,
the Second Amendment, dated as of June 19, 1989 between R&R and Trupak, the Third Amendment, dated
as of August 3, 1992 between R&R and P. Leiner Nutritional Products Inc. (successor to merger to
Trupak, Inc. ("P. Leiner"), the Fourth Amendment, dated as of August 2, 1994 between R&R and LHP
(successor to P. Leiner), and the Fifth Amendment, dated May 20, 1996 between R&R and LHP, related
to a premise located in West Unity, Ohio.
*** 10.8 -- Lease Agreement, dated August 2, 1994, between Square Feet Unlimited ("Square Feet Unlimited") and
LHP, relating to a premise in West Unity, Ohio, as amended by the First Amendment of Lease, dated
May 20, 1996, between Square Feet Unlimited and LHP.
*** 10.9 -- Lease, dated as of October 4, 1993, by and between Watson Land Company ("Watson") and LHP, related
to a premise located at 810 East 233rd Street, Carson, California.
*** 10.10 -- Lease, dated as of October 4, 1993, by and between Watson and LHP, related to a premise located at
901 East 233rd Street, Carson, California.
*** 10.11 -- Sublease, dated as of October 8, 1993 by and between Teledyne, Inc. and LHP, related to a premise
located at 901 East 233rd Street, Carson, California.
*** 10.12 -- Standard Industrial Lease, dated February 19, 1988 between Richard F. Burns, J. Grant Monahan and
Lawrence W. Doyle, as Trustees of AEW #113 Trust established under Declaration of Trust dated
January 19, 1988 and Vita-Fresh Vitamin Co. Inc. and Vital Industries, Inc., as amended by the
First Lease Amendment, dated as of June 12, 1997, between Sierra Pacific California--LP and LHP,
related to a premise located in Garden Grove, California.
*** 10.13 -- Lease, dated May 1, 1997 between Crescent Resources, Inc. and LHP, related to a premise located in
York County, South Carolina.
*** 10.14 -- Severance Benefit Agreement, dated as of November 21, 1991, by and between LHP and Robert M.
Kaminski.
*** 10.15 -- Severance Benefit Agreement, dated as of November 21, 1991, by and between LHP and Gale K.
Bensussen.
*** 10.16 -- Severance Benefit Agreement, dated as of May 30, 1997, by and between LHP and William B. Towne.
*** 10.17 -- Severance Benefit Agreement, dated as of November 21, 1991, by and between LHP and Kevin J.
Lanigan.
*** 10.18 -- Severance Benefit Agreement, dated as of November 21, 1991, by and between LHP and Stanley J.
Kahn.
*** 12.1 -- Computation of Ratio of Earnings to Fixed Charges.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
*** 12.2 -- Computation of EBITDA to Interest Expense.
*** 21 -- List of Subsidiaries of the Registrant.
*** 23.1 -- Consent of Ernst & Young LLP, Independent Auditors.
*** 23.2 -- Consent of Debevoise & Plimpton (included in Exhibit 5).
* 24 -- Powers of Attorney (included on signature pages to this Registration Statement on Form S-4).
*** 25 -- Statement of Eligibility and Qualification Under the Trust Indenture Act of 1939 (Form T-1) of
United States Trust Company of New York.
*** 99.1 -- Form of Letter of Transmittal.
*** 99.2 -- Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* Previously filed.
** To be filed by amendment.
*** Amended copy filed herewith.
(B) FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<S> <C>
Report of Independent Auditors on Financial Statement Schedule................. S-1
Schedule II--Valuation and Qualifying Accounts................................. S-2
</TABLE>
All supporting schedules other than the above have been omitted because they
are not required or the information required to be set forth therein is included
in the consolidated financial statements or in the notes thereto.
ITEM 22. UNDERTAKINGS.
The Registrant hereby undertakes
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement: (i) to include
any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; (iii) to include any material information
with respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
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<PAGE>
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement by any person or party who is deemed to be an underwriter within
the meaning of Rule 145 (c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(5) That every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415 will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offering
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(6) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling
persons of the Registrants pursuant to the foregoing provisions or
otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrants of expenses incurred or paid by a
director, officer or controlling person of the Registrants in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Leiner Health
Products Inc. has caused this Amendment No. 1 to the Company's Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Carson, State of California, on the 16th day of
October, 1997.
LEINER HEALTH PRODUCTS INC.
By: /s/ WILLIAM B. TOWNE
-----------------------------------------
Name: William B. Towne
Title: Executive Vice President,
Chief Financial Officer, Director,
Treasurer and Secretary
Pursuant to the requirements of this Securities Act of 1933, this Amendment
has been signed by the following persons in the capacities and on the dates
indicated.
PRINCIPAL EXECUTIVE OFFICER:
* Chief Executive Officer and
- ------------------------------ Director October 16, 1997
Robert M. Kaminski
DIRECTOR:
* President and Director
- ------------------------------ October 16, 1997
Gale K. Bensussen
PRINCIPAL ACCOUNTING OFFICER:
Executive Vice President,
/s/ WILLIAM B. TOWNE Chief Financial Officer,
- ------------------------------ Director, Treasurer and October 16, 1997
William B. Towne Secretary
PRINCIPAL FINANCIAL OFFICER:
Executive Vice President,
/s/ WILLIAM B. TOWNE Chief Financial Officer,
- ------------------------------ Director, Treasurer and October 16, 1997
William B. Towne Secretary
/s/ WILLIAM B. TOWNE
---------------------------
William B. Towne
*By: Attorney-in-Fact
II-8
<PAGE>
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE
Board of Directors and Shareholder
Leiner Health Products Inc.
We have audited the consolidated financial statements of Leiner Health
Products Inc. as of March 31, 1996 and 1997, and for each of the three years in
the period ended March 31, 1997, and have issued our report thereon dated April
25, 1997 (included elsewhere in this Registration Statement). Our audits also
included the financial statement schedule listed in Item 21(b) of this
Registration Statement. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Orange County, California
April 25, 1997
S-1
<PAGE>
SCHEDULE II
LEINER HEALTH PRODUCTS INC.
VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO COST BALANCE AT END
BEGINNING OF PERIOD AND EXPENSES DEDUCTIONS OF PERIOD
------------------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Year ended March 31, 1995:
Accounts receivable allowance................ $ 2,147 $ 4,903 $ 3,734 $ 3,316
Inventory valuation reserve.................. 5,306 2,640 3,537 4,409
Year ended March 31, 1996:
Accounts receivable allowance................ $ 3,316 $ 4,443 $ 5,220 $ 2,539
Inventory valuation reserve.................. 4,409 2,320 2,828 3,901
Year ended March 31, 1997:
Accounts receivable allowance................ $ 2,539 $ 6,761 $ 5,460 $ 3,840
Inventory valuation reserve.................. 3,901 4,687 3,837 4,751
Quarter ended June 30, 1997 (unaudited):
Accounts receivable allowance................ $ 3,840 $ 2,011 $ 1,827 $ 4,024
Inventory valuation reserve.................. 4,751 1,900 244 6,427
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE NO.
- ----------- ------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
*** 2.1 -- Stock Purchase Agreement and Agreement and Plan of Merger, dated as of May 31, 1997, by
and among Leiner Group, North Castle Partners I, L.L.C. and LHP Acquisition Corp.
*** 2.2 -- Amendment No. 1 to Stock Purchase Agreement and Agreement and Plan of Merger, dated as
of June 30, 1997, by and among Leiner Group, North Castle Partners I, L.L.C. and LHP
Acquisition Corp.
*** 3.1 -- Amended and Restated Certificate of Incorporation of Leiner Health Products Inc.
("LHP").
*** 3.2 -- Amended and Restated By-Laws of LHP (formerly known as Amended and Restated By-Laws of
LHP Holding Corp.).
*** 4.1 -- Indenture, dated as of June 30, 1997, between Leiner Group and United States Trust
Company of New York (the "Trustee").
* 4.2 -- First Supplemental Indenture, dated as of June 30, 1997, among Leiner Group, LHP and the
Trustee.
* 4.3 -- Purchase Agreement, dated as of June 19, 1997, among Leiner Group, LHP, Merrill Lynch &
Co., Salomon Brothers Inc and Scotia Capital Markets (USA) Inc. (the "Initial
Purchasers").
* 4.4 -- Registration Rights Agreement, dated as of June 30, 1997, among Leiner Group, LHP and
the Initial Purchasers.
*** 4.5 -- Credit Agreement, dated as of June 30, 1997 (the "Credit Agreement"), among Leiner
Group, Vita Health Company (1985) Ltd., a Canadian corporation ("Vita Health"), the banks
and other financial institutions party thereto, as lenders, The Bank of Nova Scotia, as
U.S. Agent and Canadian Agent (the "Agents"), Merrill Lynch Capital Corporation, as
documentation agent, and Salomon Brothers Holding Company Inc, as syndication agent.
*** 4.6 -- First Amendment to the Credit Agreement, dated as of September 29, 1997.
*** 4.7 -- Assumption Agreement, dated as of June 30, 1997, between Leiner Group and LHP and
accepted and acknowledged by the Agents on behalf of the lenders that are party to the
Credit Agreement.
*** 4.8 -- U.S. Borrower Security Agreement, dated as of June 30, 1997, between LHP and The Bank of
Nova Scotia, as collateral agent.
*** 4.9 -- U.S. Borrower Pledge Agreement, dated as of June 30, 1997, made by LHP in favor of the
Agents for the secured parties, as defined therein.
*** 4.10 -- Parent Pledge Agreement, dated as of June 30, 1997, made by PLI Holdings Inc. in favor
of the Agents for the secured parties, as defined therein.
*** 4.11 -- Canadian Holdings Pledge Agreement, dated as of June 30, 1997, made by VH Holdings Inc.
in favor of The Bank of Nova Scotia, as agent for each of the secured portions, as
defined therein.
*** 4.12 -- Canadian Borrower Pledge Agreement, dated as of June 30, 1997, made by Vita Health in
favor of The Bank of Nova Scotia, as agent for each of the secured portions, as defined
therein.
*** 4.13 -- U.S. Borrower Guaranty, dated as of June 30, 1997, made by LHP in favor of the Agents
for the secured portions, as defined therein.
*** 4.14 -- Parent Guaranty, dated as of June 30, 1997, made by PLI Holdings in favor of the Agents
for the secured portions, as defined therein.
*** 4.15 -- Canadian Holdings Guaranty, dated as of June 30, 1997, made by VH Holdings Inc. in favor
of The Bank of Nova Scotia as agent for the secured portions, as defined therein.
*** 4.16 -- Canadian Subsidiary Guaranties, each dated as of June 30, 1997, made by each of 64804
Manitoba Ltd. and Westcan Pharmaceuticals Ltd. in favor of The Bank of Nova Scotia as
agent for the secured portions, as defined therein.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE NO.
- ----------- ------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
*** 4.17 -- Canadian Borrower Debenture, each dated as of June 30, 1997, made by Vita Health in
favor of The Bank of Nova Scotia on its own behalf and as agent for the Canadian secured
portions as defined therein in the amount of $75,000,000.
*** 4.18 -- Canadian Holdings Debenture, dated as of June 30, 1997, made by VH Holdings Inc. in
favor of the The Bank of Nova Scotia, on its own behalf and as agent for the Canadian
secured portions, as defined therein in the amount of $75,000,000.
*** 4.19 -- Canadian Subsidiary Debenture, dated as of June 30, 1997, made by 64804 Manitoba Ltd. in
favor of the The Bank of Nova Scotia, on its own behalf and as agent for the Canadian
secured portions, as defined therein in the amount of $75,000,000.
*** 4.20 -- Canadian Subsidiary Debenture, dated as of June 30, 1997, made by Westcan
Pharmaceuticals Ltd. in favor of the The Bank of Nova Scotia, on its own behalf and as
agent for the Canadian secured portions, as defined therein in the amount of $75,000,000.
*** 4.21 -- Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated
as of June 30, 1997 from LHP, as Mortgagor, to The Bank of Nova Scotia, as agent,
relating to the property located at 3532 West 47th Place, Chicago, Illinois, as amended
by the First Amendment to the Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing dated as of July 31, 1997.
*** 4.22 -- Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated
as of August 20, 1997 from LHP, as Mortgagor, to The Bank of Nova Scotia, as agent,
relating to the property located at 3308 Covington, Kalamazoo, Michigan.
*** 4.23 -- Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated
as of June 30, 1997 from LHP, as Mortgagor, to The Bank of Nova Scotia, as agent,
relating to the property located at 2300 Badger Lane, Madison, Wisconsin.
*** 4.24 -- Leasehold Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, dated June 30, 1997 from LHP, as Trustor, in favor of Lawyers Title Company of
California as Trustee, for the benefit of The Bank of Nova Scotia, as agent, relating to
the property located at 7366 Orangewood Avenue, Garden Grove, California.
*** 4.25 -- Trademark Security Agreement, dated as of June 30, 1997, between LHP and The Bank of
Nova Scotia as collateral agent for the secured parties.
** 5 -- Opinion of Debevoise & Plimpton regarding the legality of the New Notes being
registered.
*** 10.1 -- Consulting Agreement, dated as of June 30, 1997, among Leiner Group, LHP and North
Castle.
*** 10.2 -- Restated Standard Indemnity Agreement, dated September 1, 1992 between Showa Denko
America Inc. and LHP Holdings Corp. (now LHP).
*** 10.3 -- Guaranty Agreement, dated September 1, 1992, between Showa Denko K.K. and LHP Holdings
Corp. (now LHP).
*** 10.4 -- Leiner Group Stock Option Plan (formerly known as PLI Investors Inc. Stock Option Plan).
*** 10.5 -- First Amendment to the Leiner Group Stock Option Plan, effective as of June 30, 1997.
*** 10.6 -- Leiner Group Stock Incentive Plan, adopted and effective as of June 30, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE NO.
- ----------- ------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
*** 10.7 -- Lease, dated as of March 12, 1984, by and between R&R Properties ("R&R") and Trupak,
Inc. ("Trupak"), as amended by the First Amendment, dated as of August 1, 1986 between
R&R and Trupak, the Second Amendment, dated as of June 19, 1989 between R&R and Trupak,
the Third Amendment, dated as of August 3, 1992 between R&R and P. Leiner Nutritional
Products Inc. (successor to merger to Trupak, Inc. ("P. Leiner"), the Fourth Amendment,
dated as of August 2, 1994 between R&R and LHP (successor to P. Leiner), and the Fifth
Amendment, dated May 20, 1996 between R&R and LHP, related to a premise located in West
Unity, Ohio.
*** 10.8 -- Lease Agreement, dated August 2, 1994, between Square Feet Unlimited ("Square Feet
Unlimited") and LHP, relating to a premise in West Unity, Ohio, as amended by the First
Amendment of Lease, dated May 20, 1996, between Square Feet Unlimited and LHP.
*** 10.9 -- Lease, dated as of October 4, 1993, by and between Watson Land Company ("Watson") and
LHP, related to a premise located at 810 East 233rd Street, Carson, California.
*** 10.10 -- Lease, dated as of October 4, 1993, by and between Watson and LHP, related to a premise
located at 901 East 233rd Street, Carson, California.
*** 10.11 -- Sublease, dated as of October 8, 1993 by and between Teledyne, Inc. and LHP, related to
a premise located at 901 East 233rd Street, Carson, California.
*** 10.12 -- Standard Industrial Lease, dated February 19, 1988 between Richard F. Burns, J. Grant
Monahan and Lawrence W. Doyle, as Trustees of AEW #113 Trust established under
Declaration of Trust dated January 19, 1988 and Vita-Fresh Vitamin Co. Inc. and Vital
Industries, Inc., as amended by the First Lease Amendment, dated as of June 12, 1997,
between Sierra Pacific California--LP and LHP, related to a premise located in Garden
Grove, California.
*** 10.13 -- Lease, dated May 1, 1997 between Crescent Resources, Inc. and LHP, related to a premise
located in York County, South Carolina.
*** 10.14 -- Severance Benefit Agreement, dated as of November 21, 1991, by and between LHP and
Robert M. Kaminski.
*** 10.15 -- Severance Benefit Agreement, dated as of November 21, 1991, by and between LHP and Gale
K. Bensussen.
*** 10.16 -- Severance Benefit Agreement, dated as of May 30, 1997, by and between LHP and William B.
Towne.
*** 10.17 -- Severance Benefit Agreement, dated as of November 21, 1991, by and between LHP and Kevin
J. Lanigan.
*** 10.18 -- Severance Benefit Agreement, dated as of November 21, 1991, by and between LHP and
Stanley J. Kahn.
*** 12.1 -- Computation of Ratio of Earnings to Fixed Charges.
*** 12.2 -- Computation of EBITDA to Interest Expense.
*** 21 -- List of Subsidiaries of the Registrant.
*** 23.1 -- Consent of Ernst & Young LLP, Independent Auditors.
*** 23.2 -- Consent of Debevoise & Plimpton (included Exhibit 5).
* 24 -- Powers of Attorney (included on signature pages to this Registration Statement on Form
S-4).
*** 25 -- Statement of Eligibility and Qualification Under the Trust Indenture Act of 1939 (Form
T-1) of United States Trust Company of New York.
*** 99.1 -- Form of Letter of Transmittal.
*** 99.2 -- Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* Previously filed.
** To be filed by amendment.
*** Amended copy filed herewith.
<PAGE>
EXHIBIT 2.1
CONFIDENTIAL
--------------------------------------------------------------
--------------------------------------------------------------
STOCK PURCHASE AGREEMENT
and
AGREEMENT AND PLAN OF MERGER
by and among
LEINER HEALTH PRODUCTS GROUP INC.
NORTH CASTLE PARTNERS I, L.L.C.
and
LHP ACQUISITION CORP.
Dated as of May 31, 1997
--------------------------------------------------------------
--------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 ISSUANCE AND SALE OF SHARES.....................................2
Section 1.1. Issuance of Shares..............................................2
Section 1.2. Consideration...................................................2
Section 1.3. Issuance of Purchased Shares and Cash Payment...................3
Section 1.4. Aggregate Purchased Share Value and Aggregate Management
Rollover Value..................................................3
ARTICLE 2 THE MERGER;
THE CLOSING; EFFECTIVE TIME.....................................3
Section 2.1. The Merger......................................................3
Section 2.2. The Closing.....................................................3
Section 2.3. Effective Time..................................................4
ARTICLE 3 CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION....................................4
Section 3.1. Certificate of Incorporation....................................4
Section 3.2. By-Laws.........................................................4
ARTICLE 4 DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION....................................4
Section 4.1. Directors.......................................................4
Section 4.2. Officers........................................................4
ARTICLE 5 CONVERSION OR CANCELLATION
OF SHARES IN THE MERGER.........................................5
Section 5.1. Conversion or Cancellation of Shares............................5
Section 5.2. Payment for Shares.............................................10
Section 5.3. Dissenters' Rights.............................................11
Section 5.4. Transfer of Shares After the Effective Time....................11
i
<PAGE>
ARTICLE 6 REPRESENTATIONS AND
WARRANTIES OF THE COMPANY......................................12
Section 6.1. Organization and Authority.....................................12
Section 6.2. The Company and the Subsidiaries...............................12
Section 6.3. Capitalization.................................................13
Section 6.4. The Purchased Shares...........................................13
Section 6.5. No Breach......................................................14
Section 6.6. Consents and Approvals.........................................14
Section 6.7. Absence of Certain Changes.....................................15
Section 6.8. Financial Statements...........................................15
Section 6.9. Liabilities....................................................15
Section 6.10. Compliance with Law............................................15
Section 6.11. Taxes..........................................................16
Section 6.12. Certain Employee Plans.........................................16
Section 6.13. Certain Agreements.............................................17
Section 6.14. Litigation.....................................................18
Section 6.15. Brokers and Finders............................................18
Section 6.16. [Intentionally omitted.].......................................18
Section 6.17. Environmental Compliance and Disclosure........................19
Section 6.18. Intellectual Property Rights...................................20
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB.....21
Section 7.1. Organization and Authority.....................................21
Section 7.2. No Breach......................................................21
Section 7.3. Consents and Approvals.........................................22
Section 7.4. Acquiring Persons..............................................22
Section 7.5. No Prior Business..............................................22
Section 7.6. Commitments....................................................22
Section 7.7. Available Funds................................................22
Section 7.8. Agreements with Officers, Directors or Shareholders............23
Section 7.9. Brokers and Finders............................................23
ARTICLE 8 COVENANTS......................................................23
Section 8.1. Conduct of Business............................................23
Section 8.2. Forbearances by the Company....................................23
Section 8.3. Access.........................................................25
Section 8.4. Best Efforts; Other Actions....................................25
Section 8.5. Books and Records..............................................26
Section 8.6. Expenses.......................................................26
ii
<PAGE>
Section 8.7. Information Statement..........................................26
Section 8.8. Announcements..................................................26
Section 8.9. Notification of Certain Matters................................27
Section 8.10. Officers' and Directors' Indemnification.......................27
Section 8.11. No Solicitation................................................28
Section 8.12. Transfer Taxes.................................................28
Section 8.13. Management Transaction Bonuses.................................28
Section 8.14. Repayment of Debt..............................................29
Section 8.15. Fairness Opinion...............................................29
ARTICLE 9 CONDITIONS.....................................................29
Section 9.1. Conditions to Each Party's Obligation to Effect the Merger.....29
Section 9.2. Conditions to Obligation of the Company to Effect the Merger...29
Section 9.3. Conditions to Obligation of Purchaser and Merger Sub
to Effect the Merger...........................................30
Section 9.4. Conditions to Obligation of the Company to Effect
the Stock Purchase.............................................31
Section 9.5. Conditions to Obligation of Purchaser to Effect
the Stock Purchase.............................................31
Section 9.6. Simultaneous Consummation of Stock Purchase and Merger.........31
ARTICLE 10 TERMINATION....................................................31
Section 10.1. Termination by Mutual Consent..................................31
Section 10.2. Termination by Either the Company or Purchaser.................32
Section 10.3. Termination by the Company.....................................32
Section 10.4. Termination by Purchaser.......................................33
Section 10.5. Effect of Termination and Abandonment..........................33
ARTICLE 11 GENERAL PROVISIONS.............................................33
Section 11.1. Nonsurvival of Representations, Warranties and Agreements......33
Section 11.2. Notices........................................................34
Section 11.3. Assignment; Binding Effect; Benefit............................34
Section 11.4. Entire Agreement...............................................35
Section 11.5. Amendment......................................................35
Section 11.6. Governing Law..................................................35
Section 11.7. Counterparts...................................................35
Section 11.8. Headings.......................................................36
iii
<PAGE>
Section 11.9. Interpretation.................................................36
Section 11.10. Incorporation of Exhibits and Schedules........................36
Section 11.11. Severability...................................................36
Section 11.12. Enforcement of Agreement.......................................36
Section 11.13. Performance by Merger Sub......................................36
iv
<PAGE>
EXHIBITS
Exhibit A Certificate of Incorporation of Surviving Corporation
Exhibit B Form of Warrant
Exhibit C [Intentionally Omitted]
Exhibit D [Intentionally Omitted]
Exhibit E Form of Opinion of Fried, Frank, Harris, Shriver & Jacobson
Exhibit F Form of Stockholders Agreement
Exhibit G Form of Opinion of Debevoise & Plimpton
SCHEDULES
Schedule 5.1 Management Stockholders and Optionholders
Schedule 6.2 Subsidiaries
Schedule 6.3 Agreements Relating to the Capital Stock
of the Company
Schedule 6.5 No Breach
Schedule 6.6 Consents and Approvals
Schedule 6.7 Absence of Certain Charges
Schedule 6.9 Liabilities
Schedule 6.10 Compliance with Law
Schedule 6.12(a) Section 401 Plans
Schedule 6.12(b) Employee Benefit Plans
Schedule 6.12(c) Employer Liability to Provide Benefits Upon
Retirement or Termination of Employment
Schedule 6.13(a) Employee Agreements
Schedule 6.13(b) Payment to Employee
Schedule 6.14 Litigation
Schedule 6.18 Intellectual Property
Schedule 7.8 Agreements with Officers, Directors
or Shareholders
Schedule 11.9 Knowledge of the Company
v
<PAGE>
DEFINED TERMS
TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION
AEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.1(a)
Aggregate Management Rollover Value . . . . . . . . . . . . . Section 1.1
Aggretate Option Value. . . . . . . . . . . . . . . . . . . . Section 5.1(a)
Aggregate Purchased Share Value . . . . . . . . . . . . . . . Section 1.1
Aggregate Share Equivalents . . . . . . . . . . . . . . . . . Section 5.1(a)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Applicable Cash Merger Consideration. . . . . . . . . . . . . Section 5.1(a)
Applicable Retained Share Amount. . . . . . . . . . . . . . . Section 5.1(a)
Applicable Retained Share Value . . . . . . . . . . . . . . . Section 5.1(a)
Balance Sheet Date. . . . . . . . . . . . . . . . . . . . . . Section 6.9
Certificate of Merger . . . . . . . . . . . . . . . . . . . . Section 2.3
Certificates. . . . . . . . . . . . . . . . . . . . . . . . . Section 5.2(b)
Class A Common Stock. . . . . . . . . . . . . . . . . . . . . Section 5.1(a)
Class B Common Stock. . . . . . . . . . . . . . . . . . . . . Section 5.1(a)
Class C Common Stock. . . . . . . . . . . . . . . . . . . . . Section 5.1(a)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.12(a)
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . Section 10.3
Company Common Stock. . . . . . . . . . . . . . . . . . . . . Section 5.1(a)
Credit Agreement. . . . . . . . . . . . . . . . . . . . . . . Section 6.3
Covered Expenses. . . . . . . . . . . . . . . . . . . . . . . Section 5.1(a)
D&O Binder. . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.2
Debt Commitments. . . . . . . . . . . . . . . . . . . . . . . Section 7.6
Delaware Courts . . . . . . . . . . . . . . . . . . . . . . . Section 11.6
Delayed Delivery Shares . . . . . . . . . . . . . . . . . . . Section 5.1(g)
DGCL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . Section 5.3(a)
Dissenting Stockholders . . . . . . . . . . . . . . . . . . . Section 5.1(a)
Effective Time. . . . . . . . . . . . . . . . . . . . . . . . Section 2.3
Effective Time Coverage . . . . . . . . . . . . . . . . . . . Section 8.10(b)
Employee. . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.12(c)
Employee Agreement. . . . . . . . . . . . . . . . . . . . . . Section 6.13(a)
Enforceability Exceptions . . . . . . . . . . . . . . . . . . Section 6.1(a)
Environmental Costs . . . . . . . . . . . . . . . . . . . . . Section 6.17(a)
Environmental Laws. . . . . . . . . . . . . . . . . . . . . . Section 6.17(a)
vi
<PAGE>
Environmental Matters . . . . . . . . . . . . . . . . . . . . Section 6.17(a)
Equity Commitments. . . . . . . . . . . . . . . . . . . . . . Section 10.3
Equity Memorandum . . . . . . . . . . . . . . . . . . . . . . Section 7.6
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.12(b)
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . Section 6.12(b)
Expense Letter. . . . . . . . . . . . . . . . . . . . . . . . Section 8.6
Financial Statements. . . . . . . . . . . . . . . . . . . . . Section 6.8
Fully Diluted Shares Outstanding. . . . . . . . . . . . . . . Section 5.1(a)
Hazardous Materials . . . . . . . . . . . . . . . . . . . . . Section 6.17(a)
Highly Confident Letter . . . . . . . . . . . . . . . . . . . Section 7.6
Information Statement . . . . . . . . . . . . . . . . . . . . Section 8.7
Intellectual Property . . . . . . . . . . . . . . . . . . . . Section 6.18
Lehman Brothers . . . . . . . . . . . . . . . . . . . . . . . Section 5.1(a)
Letter of Intent. . . . . . . . . . . . . . . . . . . . . . . Section 8.6
Loan Commitment . . . . . . . . . . . . . . . . . . . . . . . Section 7.6
Management Option . . . . . . . . . . . . . . . . . . . . . . Section 5.1(g)
Management Option Value . . . . . . . . . . . . . . . . . . . Section 5.1(g)
Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1
Merger Sub. . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
New Equity Commitments. . . . . . . . . . . . . . . . . . . . Section 10.3
Non-Current Management Option Consideration . . . . . . . . . Section 5.1(g)
Non-Management Applicable Retained Share Value. . . . . . . . Section 5.1(a)
Non-Management Cash Percentage. . . . . . . . . . . . . . . . Section 5.1(a)
Non-Management Option Value . . . . . . . . . . . . . . . . . Section 5.1(a)
Non-Management Retained Share Percentage. . . . . . . . . . . Section 5.1(a)
Non-Management Value. . . . . . . . . . . . . . . . . . . . . Section 5.1(a)
Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.1(g)
Option Spread . . . . . . . . . . . . . . . . . . . . . . . . Section 5.1(a)
Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . Section 5.2(a)
Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.10
Per Share Merger Consideration. . . . . . . . . . . . . . . . Section 5.1(a)
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . Section 5.1(b)
Preferred Stock Merger Consideration. . . . . . . . . . . . . Section 5.1(b)
Purchased Share Price . . . . . . . . . . . . . . . . . . . . Section 1.1
Purchased Shares. . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Retained Share Purchase Agreement . . . . . . . . . . . . . . Section 1.1
Rollover Equity Commitments . . . . . . . . . . . . . . . . . Section 10.3
Shareholders Agreement. . . . . . . . . . . . . . . . . . . . Section 6.4
Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.1(b)
vii
<PAGE>
Stock Purchase. . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2
Subsidiary Capital Stock. . . . . . . . . . . . . . . . . . . Section 6.3
Surviving Corporation . . . . . . . . . . . . . . . . . . . . Section 2.1
Surviving Corporation Common Stock. . . . . . . . . . . . . . Section 1.1
Surviving Corporation Non-Voting Common Stock . . . . . . . . Section 1.1
Surviving Corporation Voting Common Stock . . . . . . . . . . Section 1.1
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.11
Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . . Section 8.12
Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.1(a)
Warrant Fraction. . . . . . . . . . . . . . . . . . . . . . . Section 5.1(g)
viii
<PAGE>
STOCK PURCHASE AGREEMENT
AND
AGREEMENT AND PLAN OF MERGER
STOCK PURCHASE AGREEMENT and AGREEMENT AND PLAN OF MERGER
(collectively, this "AGREEMENT"), dated as of May 31, 1997, by and among Leiner
Health Products Group Inc., a Delaware corporation (the "COMPANY"), North Castle
Partners I, L.L.C., a Delaware limited liability company ("PURCHASER"), and LHP
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Purchaser ("MERGER SUB").
RECITALS
WHEREAS, the Boards of Directors of the Company and Merger Sub each
have determined that it is in the best interest of their respective stockholders
and the managing member of Purchaser has decided that it is in the best interest
of Purchaser's members to effect the transactions contemplated hereby upon the
terms and subject to the conditions set forth herein;
WHEREAS, in furtherance thereof, the boards of directors of the
Company and Merger Sub and the managing member of Purchaser have each approved
the merger of Merger Sub with and into the Company in accordance with applicable
law, upon the terms and subject to the conditions set forth herein;
WHEREAS, Purchaser desires to purchase and the Company desires to
issue and sell to Purchaser shares of Surviving Corporation Voting Common Stock
(as defined in SECTION 1.1) on the terms and conditions set forth in this
Agreement;
WHEREAS, the Company, Purchaser and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
<PAGE>
ARTICLE 1
ISSUANCE AND SALE OF SHARES
Section 1.1. ISSUANCE OF SHARES. On the terms and subject to the
conditions of this Agreement, at the Closing, the Company shall issue, transfer,
deliver and sell to Purchaser and Purchaser shall purchase and accept from the
Company (the "STOCK PURCHASE") that number of shares (the "PURCHASED SHARES")
of voting common stock, par value $0.01 per share, of the surviving corporation
("SURVIVING CORPORATION VOTING COMMON STOCK") equal to the quotient of the
Aggregate Purchased Share Value divided by $100 (the "PURCHASED SHARE PRICE")
for the consideration specified below in SECTION 1.2.
"AGGREGATE MANAGEMENT ROLLOVER VALUE" means the product of (i)(a) the
aggregate number of shares of class A (non-voting) common stock, par value $0.01
per share ("SURVIVING CORPORATION NON-VOTING COMMON STOCK"; Surviving
Corporation Voting Common Stock and Surviving Corporation Non-Voting Common
Stock being collectively referred to herein as "SURVIVING CORPORATION COMMON
STOCK") issuable to the stockholders set forth on SCHEDULE 5.1 pursuant to
SECTION 5.1(a), plus (b) the aggregate number of Delayed Delivery Shares and
shares of Surviving Corporation Common Stock which the optionholders set forth
on SCHEDULE 5.1 are entitled to receive at the Closing pursuant to SECTION
5.1(g), plus (c) the aggregate number of shares of Surviving Corporation Common
Stock to be issuable following consummation of the Merger pursuant to the
Retained Share Purchase Agreement, dated as of January 30, 1997 (as amended or
supplemented from time to time, the "RETAINED SHARE PURCHASE AGREEMENT") by and
between Leiner Health Products Inc., the Company, 3074951 Canada Ltd., 3074943
Canada Ltd., Lorne Seier, Mark Seier and VH Holdings Inc. in respect of the
preferred shares of Vita Health Company (1985) Ltd. issued and outstanding
immediately after the consummation of the Merger and the other transactions
contemplated herein, after giving effect to any repurchase of such shares in
connection with the Closing, multiplied by (ii) the Purchased Share Price.
"AGGREGATE PURCHASED SHARE VALUE" means the excess of (i) $99,000,000
over (ii) the Aggregate Management Rollover Value.
Section 1.2. CONSIDERATION. On the terms and subject to the conditions
of this Agreement, in consideration for the sale of the Purchased Shares, at the
Closing Purchaser will pay to the Company the Purchased Share Price for each
Purchased Share for an aggregate purchase price equal to the Aggregate Purchased
Share Value.
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Section 1.3. ISSUANCE OF PURCHASED SHARES AND CASH PAYMENT. At the
Closing (i) the Company shall deliver to Purchaser certificates representing the
Purchased Shares, duly authorized and issued in blank, free and clear of all
liens and restrictions of any kind (except for those imposed by the Shareholders
Agreement and applicable securities laws) and (ii) Purchaser shall deliver or
cause to be delivered to the Company the Purchased Share Price by wire transfer
of immediately available funds, to an account or accounts designated at least
two days prior to the Closing by the Company in a written notice to the
Purchaser.
Section 1.4. AGGREGATE PURCHASED SHARE VALUE AND AGGREGATE MANAGEMENT
ROLLOVER VALUE. It is agreed and understood that the aggregate proceeds to the
Company from the issuance and sale of the Purchased Shares, together with the
Aggregate Management Rollover Value, will equal $99,000,000.
ARTICLE 2
THE MERGER;
THE CLOSING; EFFECTIVE TIME
Section 2.1. THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in SECTION 2.3), Merger Sub shall
be merged with and into the Company in accordance with this Agreement and the
separate corporate existence of Merger Sub shall thereupon cease (the "MERGER").
The Company shall be the surviving corporation in the Merger (sometimes
hereinafter referred to as the "SURVIVING CORPORATION") and shall continue to be
governed by the laws of the State of Delaware, and the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. The Merger shall have the
effects specified in the Delaware General Corporation Law (the "DGCL").
Section 2.2. THE CLOSING. Subject to the terms and conditions of this
Agreement, the closing of the Merger and the Stock Purchase (the "CLOSING")
shall take place at the offices of Fried, Frank, Harris, Shriver & Jacobson, at
9:00 a.m., local time, on the first business day immediately following the day
on which the last to be fulfilled or waived of the conditions set forth in
ARTICLE 9 shall be fulfilled or waived in accordance herewith (or, if
contemplated to be satisfied simultaneously with the Closing, are capable of
being satisfied), or at such other time, date or place as is agreed to in
writing by the parties hereto. The date on which the Closing occurs is
hereinafter referred to as the "CLOSING DATE."
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Section 2.3. EFFECTIVE TIME. On the Closing Date, immediately following
the Closing, the parties hereto shall cause a certificate of merger meeting the
requirements of Section 251 of the DGCL (the "CERTIFICATE OF MERGER") to be
properly executed and filed in accordance with such section. The Merger shall
become effective upon the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware in accordance with the DGCL or at such later
time as the parties hereto shall have agreed upon and designated in such filing
as the effective time of the Merger (the "EFFECTIVE TIME").
ARTICLE 3
CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION
Section 3.1. CERTIFICATE OF INCORPORATION. Subject to SECTION 8.10(a),
the certificate of incorporation of the Company as in effect immediately prior
to the Effective Time shall, in accordance with the terms thereof and the DGCL,
be amended and restated as set forth on EXHIBIT A and, as so amended, shall be
the certificate of incorporation of the Surviving Corporation until duly amended
in accordance with the terms thereof and the DGCL.
Section 3.2. BY-LAWS. Subject to SECTION 8.10(a), the by-laws of the
Company in effect at the Effective Time shall be the by-laws of the Surviving
Corporation, until duly amended in accordance with the terms thereof and the
DGCL.
ARTICLE 4
DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION
Section 4.1. DIRECTORS. The directors of Merger Sub immediately prior to
the Effective Time shall, from and after the Effective Time, be the directors of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's certificate of incorporation and
by-laws.
Section 4.2. OFFICERS. The officers of the Company immediately prior to
the Effective Time shall, from and after the Effective Time, be the officers of
the Surviving Corporation until their successors have been duly elected or
appointed and
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qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's certificate of incorporation and by-laws.
ARTICLE 5
CONVERSION OR CANCELLATION
OF SHARES IN THE MERGER
Section 5.1. CONVERSION OR CANCELLATION OF SHARES. The manner of
converting or canceling shares of the Company and Merger Sub in the Merger shall
be as follows:
(a) At the Effective Time, each share of (i) Class A Common Stock of
the Company ("CLASS A COMMON STOCK"), (ii) Class B Common Stock of the Company
("CLASS B COMMON STOCK") and (iii) Class C Common Stock of the Company ("CLASS C
COMMON STOCK"; Class A Common Stock, Class B Common Stock and Class C Common
Stock being referred to collectively herein as "COMPANY COMMON STOCK"), each
with a par value $0.01 per share, issued and outstanding immediately prior to
the Effective Time (other than shares which are held by stockholders
("DISSENTING STOCKHOLDERS") exercising appraisal rights with respect to such
shares pursuant to Section 262 of the DGCL) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive, without interest, (i) the Applicable Cash Merger Consideration
(if any), (ii) the Applicable Retained Share Amount (if any) and (iii) warrants
in the form set forth on Exhibit B hereto (the "WARRANTS") to purchase a number
of shares of Surviving Corporation Non-Voting Common Stock equal to the Warrant
Fraction.
"AGGREGATE OPTION VALUE" means the dollar value equal to the sum, for
all Management Options, of the products obtained by multiplying for each
Management Option (i) the number of shares of Company Common Stock subject to
such option by (ii) the applicable Option Spread.
"AGGREGATE SHARE EQUIVALENTS" means sum of (i) the number of shares of
Company Common Stock outstanding immediately prior to the Effective Time plus
(ii) the quotient of (a) the Aggregate Option Value divided by (b) the Per Share
Merger Consideration.
"APPLICABLE CASH MERGER CONSIDERATION" means a dollar amount equal to
the excess of the Per Share Merger Consideration over the Applicable Retained
Share Value.
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"APPLICABLE RETAINED SHARE AMOUNT" means, with respect to (i) each
share of Company Common Stock held by a stockholder of the Company not listed on
SCHEDULE 5.1, a number of shares of Surviving Corporation Voting Common Stock
and (ii) each share of Common Stock held by a stockholder of the Company listed
on SCHEDULE 5.1, a number of shares of Surviving Corporation Common Stock (such
shares to be voting or non-voting as indicated on Schedule 5.1), in each case,
equal to the quotient of the Applicable Retained Share Value divided by the
Purchased Share Price.
"APPLICABLE RETAINED SHARE VALUE" means (i) with respect to each share
of Company Common Stock held by stockholders of the Company not listed on
SCHEDULE 5.1, an amount equal to the Non-Management Applicable Retained Share
Value per share and (ii) with respect to each share of Company Common Stock held
by stockholders of the Company listed on SCHEDULE 5.1, the dollar value per
share set forth next to such stockholder's name on SCHEDULE 5.1. The parties
acknowledge and agree that, subject to Section 5.1(g), Purchaser may deliver a
replacement SCHEDULE 5.1 at any time that is 5 days or more prior to the Closing
Date, which shall supersede SCHEDULE 5.1 attached hereto on the date of this
Agreement.
"COVERED EXPENSES" means the aggregate dollar amount of the fees and
expenses, to the extent paid by the Company, of (i) Lehman Brothers Inc.
("LEHMAN BROTHERS") for a fairness opinion delivered to the Company's board of
directors in connection with the Merger, (ii) Bain & Company, Inc. for its
analysis prepared regarding the business of the Company in connection with the
transactions contemplated hereby (but not to exceed $450,000) and excluding all
other analyses and projects performed by Bain & Company, Inc. for the Company,
(iii) Fried, Frank, Harris, Shriver & Jacobson for services provided in
connection with the Stock Purchase, the Merger and certain other transactions
(but excluding services provided in the ordinary course of business of the
Company) and (iv) AEA Investors Inc. ("AEA") for investment banking services in
connection with the Stock Purchase, the Merger and related transactions.
"FULLY DILUTED SHARES OUTSTANDING" means the number of shares of
Company Common Stock outstanding immediately prior to the Effective Time plus
the number of shares of the Company Common Stock issuable upon the exercise of
all outstanding Management Options (as hereinafter defined) immediately prior to
the Effective Time.
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"NON-MANAGEMENT APPLICABLE RETAINED SHARE VALUE" means a dollar amount
equal to $11 million multiplied by the Per Share Merger Consideration divided by
the Non-Management Value.
"NON-MANAGEMENT CASH PERCENTAGE" means the difference (expressed as a
percentage) of (a) one (1) minus (b) the Non-Management Retained Share
Percentage.
"NON-MANAGEMENT OPTION VALUE" means the dollar value equal to the
sum, for all Management Options held by individuals not listed on SCHEDULE 5.1,
of the products obtained by multiplying for each such Management Option (i) the
number of shares of Company Common Stock subject to such option by (ii) the
applicable Option Spread.
"NON-MANAGEMENT RETAINED SHARE PERCENTAGE" means the quotient
(expressed as a percentage) of (a) the Non-Management Applicable Retained Share
Value divided by (b) the Per Share Merger Consideration.
"NON-MANAGEMENT VALUE" means the sum of (i) the Per Share Merger
Consideration multiplied by the number of shares of Company Common Stock held by
persons not listed on Schedule 5.1 plus (ii) the Non-Management Option Value.
"OPTION SPREAD" means, with respect to each share of Company Common
Stock issuable upon exercise of a Management Option, the excess of the Per Share
Merger Consideration over the per share exercise price of such Management
Option.
"PER SHARE MERGER CONSIDERATION" means the quotient of
(i)(a) $222,200,710 minus (b) Covered Expenses divided by (ii) Fully Diluted
Shares Outstanding.
(b) At the Effective Time, each share of the Payment-In-Kind,
Exchangeable, Redeemable Series A Preferred Stock of the Company, each with a
par value of $0.01 per share (the "PREFERRED STOCK"; Company Common Stock and
Preferred Stock being referred to collectively herein as the "SHARES") issued
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive, without interest, $900 in cash plus a cash amount
equal to accrued and unpaid dividends thereon (whether or not declared) to the
Effective Time (the "PREFERRED STOCK MERGER CONSIDERATION"), which as of
March 31, 1997 was $13,505,505 in the aggregate.
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(c) (i) All issued and outstanding shares of Preferred Stock, by
virtue of the Merger and without any action on the part of the holders thereof,
shall no longer be outstanding and shall be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such Shares shall
thereafter cease to have any rights with respect to such Shares, except the
right to receive the Preferred Stock Merger Consideration for such Shares upon
the surrender of such certificate in accordance with SECTIONS 5.2(a) AND (b) or
the right, if any, to receive payment from the Surviving Corporation of the
"fair value" of such Shares as determined in accordance with Section 262 of the
DGCL.
(ii) The parties acknowledge and agree that (A) the shares of
Surviving Corporation Common Stock received pursuant to the Merger represent
stockholders' retained equity interest in the Company and (B) the Merger is
being consummated to effect the repurchase by the Company of a portion of the
Company Common Stock and to enable stockholders to receive the purchase price
for repurchased Company Common Stock and new Certificates reflecting
shareholders' retained equity interests in the Company. Therefore, upon the
Merger and without any action on the part of the holders thereof, each
certificate of Company Common Stock shall, subject to any applicable dissenters'
rights, entitle the holder thereof solely to the applicable number of Warrants
and the Per Share Merger Consideration, of which the Applicable Retained Share
Amount shall represent such holder's retained equity interest in the Company.
(d) Notwithstanding the foregoing, no fractions of a share of
Surviving Corporation Common Stock shall be issued in the Merger, but in lieu
thereof each holder of Shares otherwise entitled to a fraction of a share of
Surviving Corporation Common Stock shall, upon surrender of his or her
certificate or certificates, be entitled to receive an amount of cash (without
interest) determined by multiplying the Purchased Share Price by the fractional
share interest to which such holder would otherwise be entitled. The parties
acknowledge that payment of the cash consideration in lieu of issuing fractional
shares was not separately bargained for consideration but merely represents a
mechanical rounding off for purposes of simplifying the corporate and accounting
problems which would otherwise be caused by the issuance of fractional shares.
(e) At the Effective Time each share of (i) Company Common Stock and
(ii) Preferred Stock, in each case, issued and held in the Company's treasury
immediately prior to the Effective Time, shall, by virtue of the Merger and
without any action on the part of the holder thereof, cease to be outstanding,
shall be canceled and retired without payment of any consideration therefor and
shall cease to exist.
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(f) At the Effective Time, each share of common stock, par value
$0.01 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of Merger Sub or the holders thereof, cease to be outstanding, shall be canceled
and retired without payment of any consideration therefor and shall cease to
exist.
(g) At the Effective Time, each then outstanding stock option (a
"MANAGEMENT OPTION") granted by the Company pursuant to the Leiner Health
Products Group Inc. Nonqualified Stock Option Plan (the "OPTION PLAN"), whether
or not then exercisable, shall be canceled by the Company, and each holder of a
canceled Management Option shall receive, in cancellation and settlement of the
Management Option, consideration in the form of (i) as determined by the
Company, cash, rights to receive shares of Surviving Corporation Common Stock
upon the occurrence of certain circumstances ("DELAYED DELIVERY SHARES") or
Surviving Corporation Common Stock in an aggregate amount equal to the
Management Option Value and (ii) a Warrant to purchase the number of shares of
Surviving Corporation Common Stock equal to the product of (x) the Warrant
Fraction multiplied by (y) the quotient of (A) the Management Option Value
divided by (B) the Per Share Merger Consideration, PROVIDED that (a) with
respect to the consideration described in the foregoing clause (i), each
Management Option holder who is not listed on SCHEDULE 5.1 shall receive the
Non-Current Management Option Consideration and (b) each Management Option
holder listed on SCHEDULE 5.1 shall receive pursuant to Sections 5.1(a) and
5.1(g)(i), in the aggregate, cash on the one hand and a combination of Surviving
Corporation Common Stock and Delayed Delivery Shares on the other hand such that
the cash component of such aggregate consideration shall not exceed the
Non-Management Cash Percentage.
"MANAGEMENT OPTION VALUE" means, for each Management Option, the
product of (i) the number of shares of Company Common Stock subject to such
option multiplied by (ii) the applicable Option Spread.
"NON-CURRENT MANAGEMENT OPTION CONSIDERATION" means consideration
equal to the Management Option Value and composed of (a) a cash amount equal to
the Management Option Value multiplied by the Non-Management Cash Percentage and
(b) that number of shares of Surviving Corporation Voting Common Stock equal to
the quotient of (i) the Management Option Value multiplied by the Non-Management
Retained Share Percentage divided by (ii) the Purchased Share Price.
"WARRANT FRACTION" means the quotient of (a) 305,556 divided by (b)
Aggregate Share Equivalents.
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Section 5.2. PAYMENT FOR SHARES. (a) At or prior to the Effective Time,
Purchaser shall deposit in trust with such paying agent as may be appointed by
the Company with Purchaser's prior approval (the "PAYING AGENT") (i) amounts
sufficient in the aggregate to provide all funds necessary for the Paying Agent
to make payments in immediately available funds pursuant to SECTIONS 5.1(a), (b)
AND (d) hereof to holders of Shares issued and outstanding immediately prior to
the Effective Time. Prior to the Effective Time, the Company shall cause the
Paying Agent to deliver to each person (other than any of the Purchaser, Merger
Sub or their respective affiliates) who was or will be, immediately prior to the
Effective Time, a holder of record of issued and outstanding Shares a form
(mutually agreed to by the Company and Purchaser) of letter of transmittal and
instructions for use in effecting the surrender of the certificates which,
immediately prior to the Effective Time, represented any of such Shares in
exchange for payment therefor. It is agreed that letters of transmittal will be
made available to such holders prior to the Effective Time in final form, so
they may be delivered to the Paying Agent for payment at the Effective Time.
Upon surrender to the Paying Agent of such certificates, together with such
letter of transmittal, duly executed and completed in accordance with the
instructions thereto, the Purchaser shall cause to be paid by the Paying Agent
to the persons entitled thereto by wire transfer of immediately available funds
or check (as the Paying Agent shall be instructed by the person surrendering
such certificates) the amount of the Applicable Cash Merger Consideration or the
Preferred Stock Merger Consideration, as the case may be, payable in respect of
the Shares represented by such certificates net of any applicable withholding
tax. Such payment will be made at the Effective Time with respect to
certificates surrendered, and letters of transmittal duly executed and
completed, at the Effective Time, and as soon as practicable thereafter with
respect to certificates surrendered and letters of transmittal duly executed and
completed on a later date. No interest will be paid or will accrue on the
amount payable upon the surrender of any such certificate. If payment is to be
made to a person other than the registered holder of the certificate
surrendered, it shall be a condition of such payment that the certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the certificate surrendered or establish to the satisfaction of the
Surviving Corporation or the Paying Agent that such tax has been paid or is not
applicable. One hundred and eighty days following the Effective Time, the
Surviving Corporation shall be entitled to cause the Paying Agent to deliver to
it any funds (including any interest received with respect thereto) or
Certificates made available to the Paying Agent which have not been disbursed to
holders of certificates formerly representing Shares outstanding at the
Effective Time and thereafter such holders shall be entitled to look to the
Surviving Corporation only as general creditors thereof with respect to the cash
payable upon due
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surrender of their certificates. Notwithstanding the foregoing, neither the
Paying Agent nor any party hereto shall be liable to any holder of certificates
formerly representing Shares for any amount paid to a public official pursuant
to any applicable abandoned property, escheat or similar law. The Surviving
Corporation shall pay all charges and expenses, including those of the Paying
Agent, in connection with the exchange of Shares for cash.
(b) The Company will, prior to the Effective Time, provide to AEA,
which will (without charge) act on the Company's behalf, certificates
("Certificates") representing the Surviving Corporation Common Stock and
Warrants to be issued to holders of Company Common Stock and Management Options
pursuant to Sections 5.1(a) and (g). The Company and AEA will enter in an
agreement setting forth AEA's scope of responsibility and similar customary
matters.
Section 5.3. DISSENTERS' RIGHTS. (a) Notwithstanding any provision of
this Agreement to the contrary, if required by the DGCL but only to the extent
required thereby, Shares which are issued and outstanding immediately prior to
the Effective Time and which are held by holders of such Shares who have
properly exercised appraisal rights with respect thereto (the "DISSENTING
SHARES") in accordance with Section 262 of the DGCL will not be exchangeable for
the right to receive the Per Share Merger Consideration or Preferred Stock
Merger Consideration, as the case may be, and holders of such Dissenting Shares
will be entitled to receive payment of the appraised value of such Dissenting
Shares in accordance with the provisions of such Section 262 unless and until
such holders fail to perfect or effectively withdraw or lose their rights to
appraisal and payment under the DGCL.
(b) The Company shall give Purchaser notice of the delivery of any
demand from a Dissenting Stockholder pursuant to Section 262(d) of the DGCL. If
any Dissenting Stockholder shall fail to perfect or shall have effectively lost
the right to dissent, the shares held by such Dissenting Stockholder shall
thereupon be treated as though such shares have been converted into the right to
receive an amount equal to the Per Share Merger Consideration in the form
described in to SECTION 5.1 or Preferred Stock Merger Consideration, as the
case may be.
Section 5.4. TRANSFER OF SHARES AFTER THE EFFECTIVE TIME. No transfers
of Shares shall be made on the stock transfer books of the Surviving Corporation
at or after the Effective Time.
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ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company and its Subsidiaries (as defined in SECTION 6.2) hereby
represent and warrant to Purchaser as follows:
Section 6.1. ORGANIZATION AND AUTHORITY. (a) The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All necessary action, corporate or otherwise,
required to have been taken by or on behalf of the Company by applicable law,
its charter documents or otherwise to authorize (i) the approval, execution and
delivery on behalf of the Company of this Agreement and (ii) the performance by
the Company of its obligations under this Agreement and the consummation of the
transactions contemplated hereby has been taken. This Agreement constitutes a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except (x) as the same may be limited by applicable
bankruptcy, insolvency, moratorium or similar laws of general application
relating to or affecting creditors' rights, including without limitation, the
effect of statutory or other laws regarding fraudulent conveyances and
preferential transfers, and (y) for the limitations imposed by general
principles of equity. The foregoing exceptions are hereinafter referred to as
the "ENFORCEABILITY EXCEPTIONS".
(b) Without limitation to paragraph (a) of this SECTION 6.1, the
affirmative vote of the holders of the Class B Common Stock has been duly
obtained, and such vote is the only vote of the stockholders of the Company
necessary to adopt and approve this Agreement and to consummate the transactions
contemplated hereby.
Section 6.2. THE COMPANY AND THE SUBSIDIARIES. The Company has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Each Subsidiary is a
corporation duly organized and validly existing and in good standing under the
laws of its jurisdiction of incorporation and has the requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted and, except as set forth on SCHEDULE 6.2, is
wholly owned by the Company. The Company and each of the Subsidiaries is duly
qualified as a foreign corporation to do business, and is
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in good standing in each jurisdiction where the character of its properties
owned or leased or the nature of its activities makes such qualification
necessary, except for failures to be so qualified or in good standing which
would not, in the aggregate, have a material adverse effect on the Company and
the Subsidiaries taken as a whole. The Company has delivered to Purchaser true
and complete copies of its certificate of incorporation and by-laws, as amended
to the date hereof, which are in full force and effect. SCHEDULE 6.2 sets forth
a correct and complete list of the Subsidiaries of the Company, its jurisdiction
of incorporation, its authorized capital stock or share capital, and the
percentage ownership by each record holder thereof. For the purposes of this
Agreement, "SUBSIDIARY" shall mean any corporation or other legal entity of
which the Company (either above or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the stock or equity
interests the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity.
Section 6.3. CAPITALIZATION. The authorized capital stock of the Company
consists of (i) 749,592 shares of Class A Common Stock, (ii) 10,000 shares of
Class B Common Stock, (iii) 153,104 shares of Class C Common Stock, and
(iv) 30,000 shares of Preferred Stock. As of the date hereof (i) 551,392 shares
of Class A Common Stock are issued and outstanding, (ii) 10,000 shares of Class
B Common Stock are issued and outstanding, (iii) 153,104 shares of Class C
Common Stock are issued and outstanding and (iv) 14,383 shares of Preferred
Stock are issued and outstanding. As of the date hereof, 100,000 shares of
Class A Common Stock are issuable upon the exercise of outstanding Management
Options issued pursuant to the Option Plan. Except (i) for such Management
Options and (ii) as set forth in SCHEDULE 6.3 hereto, there are no existing
options, warrants, calls, subscriptions, or other rights or other agreements or
commitments obligating the Company or any of the Subsidiaries to issue,
transfer, redeem, acquire or sell any shares of capital stock of the Company or
any of the Subsidiaries. Other than the pledges of capital stock of
Subsidiaries ("SUBSIDIARY CAPITAL STOCK") in connection with the bank credit
facility of Leiner Health Products Inc. (the "CREDIT AGREEMENT"), there are no
liens, pledges, security interests, claims or other encumbrances on any shares
of the Subsidiary Capital Stock owned by the Company. Except as set forth in
SCHEDULE 6.3 hereto, there are no voting trusts or other agreements or
understandings to which the Company or any Subsidiary is a party with respect to
the voting of capital stock of the Company.
Section 6.4. THE PURCHASED SHARES. Upon delivery to Purchaser at the
Closing of certificates representing the Purchased Shares, and upon receipt by
the Company of the payment in full therefor, (i) good and valid title to the
Purchased Shares will pass to Purchaser, free and clear of all liens and
restrictions of any kind
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(except for those imposed by the stockholders agreement, to be entered into on
the Closing Date, by the Company, Purchaser, AEA and the other stockholders of
the Company (the "Shareholders Agreement") and applicable securities laws) and
(ii) the Purchased Shares will be validly issued, fully paid and nonassessable.
Other than as provided for in this Agreement or the Shareholders Agreement, the
Purchased Shares are not, and upon their issuance will not be, subject to any
voting trust agreement or other contract, agreement, commitment or understanding
restricting or otherwise relating to the voting, dividend rights or other
disposition of the Purchased Shares other than the Shareholders Agreement.
Section 6.5. NO BREACH. The execution and delivery of this Agreement by
the Company do not, and the consummation of the transactions contemplated hereby
will not, (i) violate or conflict with the certificate of incorporation or
by-laws of the Company or any of its Subsidiaries or (ii) except as set forth on
SCHEDULE 6.5 hereto, violate, conflict with, result in a breach of any provision
of, constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, result in the termination or in a right
of termination of, accelerate the performance required by or benefit obtainable
under, result in the triggering of any payment or other obligations pursuant to,
result in the creation of any encumbrance upon any of the properties of the
Company or its Subsidiaries under, or result in there being declared void,
voidable, subject to withdrawal, or without further binding effect, any of the
terms, conditions or provisions of any order, judgment, decree, note, bond,
mortgage, indenture, deed of trust or any license, franchise, permit, lease,
contract, agreement or other instrument, commitment or obligation to which the
Company or any of its Subsidiaries is a party, by which the Company or any of
its Subsidiaries or any of their respective properties is bound, or under which
the Company or any of its Subsidiaries, except for any of the foregoing matters
which individually or in the aggregate would not have a material adverse effect
on the Company and its Subsidiaries, taken as a whole, or prevent or delay the
consummation of the transactions contemplated hereby, or (iii) violate any laws
applicable to the Company, any of its Subsidiaries or any of their respective
assets.
Section 6.6. CONSENTS AND APPROVALS. Except as set forth on SCHEDULE 6.6
hereto, neither the execution and delivery of this Agreement by the Company nor
the consummation of the transactions contemplated hereby will require on the
part of the Company any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, except (i)
filings provided for in ARTICLE 2 and (ii) where the failures to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not (A) have a
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material adverse effect on the Company and the Subsidiaries taken as a whole or
(B) prevent the Company from performing its obligations under this Agreement.
Section 6.7. ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE
6.7, since March 31, 1997 neither the Company nor any of the Subsidiaries has
suffered any adverse change in its business, assets, results of operations or
financial condition which would be material to the Company and the Subsidiaries
taken as a whole, other than any changes resulting from general economic or
industry-wide conditions.
Section 6.8. FINANCIAL STATEMENTS. The Company has delivered to
Purchaser copies of the audited consolidated balance sheets of the Company as of
March 31, 1996 and 1997, and the audited consolidated statements of income, cash
flows and stockholders' equity for years ended March 31, 1996 and 1997 (the
"FINANCIAL STATEMENTS"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved and present fairly the consolidated
financial position of the Company and the Subsidiaries as at the dates thereof
and the consolidated statements of income, statements of cash flows and
statements of stockholders' equity of the Company for the periods indicated.
Section 6.9. LIABILITIES. Except as and to the extent reflected,
reserved against or otherwise disclosed in the Financial Statements (including
the notes thereto), and except as set forth on SCHEDULE 6.9, neither the Company
nor any of the Subsidiaries had as of the date of the latest balance sheet
contained in the Financial Statements (the "BALANCE SHEET DATE") any liabilities
or obligations of any kind, whether accrued, absolute, asserted or unasserted,
contingent or otherwise, whether or not such liabilities would have been
required to be disclosed on a balance sheet prepared in accordance with
generally accepted accounting principles consistently applied, which could
reasonably be expected to have a material adverse effect on the Company and the
Subsidiaries taken as a whole, and as of the date of this Agreement neither the
Company nor the Subsidiaries have incurred any such liabilities since the
Balance Sheet Date.
Section 6.10. COMPLIANCE WITH LAW. The businesses of the Company and the
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental agency or entity, and neither the Company nor any
of the Subsidiaries is in default, and no event has occurred which would
constitute a default, under any contract, lease or agreement to which the
Company or any of the Subsidiaries is a party or by which it is bound, except
for violations and defaults
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which, either singly or in the aggregate, do not and will not have a material
adverse effect on the Company and the Subsidiaries taken as a whole. None of
the Company or any of its Subsidiaries has received any written notice, or has
knowledge of any claim, alleging any such violation. The Company and its
Subsidiaries hold all licenses, permits, variances, consents, authorizations,
waivers, grants, franchises, concessions, exemptions, orders, registrations and
approvals of governmental entities or other persons (collectively, "PERMITS")
necessary for the ownership, leasing, operation, occupancy and use of their
respective real property and the conduct of their respective businesses as
currently conducted, except for such Permits, the failure of which to hold,
individually or in the aggregate, do not and will not have a material adverse
effect on the Company and the Subsidiaries taken as a whole.
Section 6.11. TAXES. The Company and each of the Subsidiaries have filed
all federal, state, local and foreign income and other tax returns required to
be filed by them, have paid all material taxes of any nature whatsoever, with
any related penalties, interest and liabilities (any of the foregoing being
referred to herein as a "TAX") that are shown on such tax returns as due and
payable on or before the date hereof. All such tax returns are true, correct
and complete, except for such failures to be true and correct which,
individually or in the aggregate, do not and will not have a material adverse
effect on the Company and the Subsidiaries taken as a whole. There are no
material liens for Taxes upon the assets of the Company or the Subsidiaries,
except for statutory liens for Taxes not yet due. There are no claims or
assessments pending against the Company or the Subsidiaries for any alleged
deficiency in Taxes (including by way of "30 day letter" or notice of deficiency
or similar notice under state, local or foreign law) which can reasonably be
expected to have a material adverse impact on the business or assets of the
Company and the Subsidiaries, taken as a whole. The Company and the
Subsidiaries have withheld and paid over to the relevant tax authority all taxes
required to be withheld in connection with payments to employees, independent
contractors, shareholders, lenders and others, except for such failures to
withhold or pay over which, individually or in the aggregate, do not and will
not have a material adverse effect on the Company and the Subsidiaries taken as
a whole.
Section 6.12. CERTAIN EMPLOYEE PLANS. (a) Except as set forth in SCHEDULE
6.12(a), each retirement plan of the Company and each Subsidiary intended to
qualify under Section 401 of the Internal Revenue Code of 1986, as amended (the
"CODE"), is, and since its inception has been, so qualified and a determination
letter has been issued by the Internal Revenue Service to the effect that each
such plan is so qualified, each trust forming a part of any such plan is exempt
from tax pursuant to Section 501(a) of the Code and no circumstances exist which
would adversely affect this qualification or exemption, except in each case as
would not, either individually or in the aggregate,
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have a material adverse effect on the Company and the Subsidiaries taken as a
whole. To the knowledge of the Company, no plan that is intended to be qualified
under Section 401(a) of the Code is the subject of an investigation or review by
the Internal Revenue Service, whether initiated by the Internal Revenue Service
or voluntarily by the Company, other than in connection with the Company's
request for a determination letter.
(b) To the knowledge of the Company, (i) neither the Company nor any
trade or business that, together with the Company, would be deemed a single
employer within the meaning of Section 4001 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), (an "ERISA AFFILIATE"), has violated
any applicable provision of law, including, without limitation, ERISA, and
(ii) neither the Company nor any ERISA Affiliate has, as of the date hereof,
incurred, nor do any circumstances exist that are likely to result in, a
liability under Title IV of ERISA with respect to any "employee benefit plan"
maintained by the Company or any ERISA Affiliate that has not been timely paid,
which violation or liability, either individually or in the aggregate, would
have a material adverse effect on the Company and the Subsidiaries taken as a
whole. All material "employee benefit plans" maintained by the Company and its
ERISA Affiliates and each material plan or material program that provides
perquisites, fringe benefits, incentive or other valuable compensation or equity
participation to any employee are set forth on SCHEDULE 6.12(b) hereto. Except
as does not and will not have a material adverse effect on the Company and its
Subsidiaries taken as a whole, (a) each employee benefit plan has been
administered in accordance with its terms (and the terms of any collective
bargaining agreement that relates to such plan) and (b) all contributions
required to be made in accordance with the terms of any such employee benefit
plan or collective bargaining agreement have been timely made.
(c) Except as set forth on SCHEDULE 6.12(c) hereto, neither the
Company nor any Subsidiary maintains or contributes to any plan which provides,
or has any liability to provide, life insurance, medical or other employee
welfare benefits to any current, former or retired employee, consultant or
director of the Company or any Subsidiary (an "EMPLOYEE") upon their retirement
or termination of employment, except as may be required by law, and neither the
Company nor any Subsidiary has ever represented, promised or contracted (whether
in oral or written form) to any Employee (either individually or to Employees as
a group) that such Employee(s) would be provided with life insurance, medical or
other employee welfare benefits upon their retirement or termination of
employment.
Section 6.13. CERTAIN AGREEMENTS. (a) Except as set forth on SCHEDULE
6.13(a), neither the Company nor any Subsidiary is a party to, or bound by, any
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employment, severance or consulting agreement, arrangement or understanding with
any officer, director, employee or former employee of the Company or any
Subsidiary (an "EMPLOYEE AGREEMENT").
(b) Except as set forth on SCHEDULE 6.13(b), the execution of, and
performance of the transactions contemplated in, this Agreement will not (either
alone or upon the occurrence of any additional or subsequent events) constitute
an event that will or may result in any payment (whether of severance pay or
otherwise) or forgiveness of indebtedness or acceleration, vesting, distribution
or increase in benefits or obligation to fund benefits or compensation with
respect to any Employee, under any Employee Agreement or any bonus, profit
sharing, compensation, severance, termination, stock, stock option, stock
appreciation right, pension or retirement plan, policy, trust, fund or other
arrangement.
(c) No payment or benefit which will or may be made by the Company or
any Subsidiary in connection with the transactions contemplated hereby pursuant
to any agreement in effect on the date hereof will be characterized as an
"excess parachute payment," within the meaning of Section 280G(b)(1) of the
Code.
Section 6.14. LITIGATION. Except as set forth on SCHEDULE 6.14, (i) there
is no claim, action, or proceeding pending or, to the best knowledge of the
executive officers of the Company, threatened against or relating to the Company
or any of the Subsidiaries before any court or governmental or regulatory
authority or body acting in an adjudicative capacity which, individually or in
the aggregate, if adversely determined, would have a material adverse effect on
the Company and the Subsidiaries taken as a whole and (ii) neither the Company
nor any Subsidiary is subject to any outstanding order, writ, injunction or
decree which, individually or in the aggregate, would have a material adverse
effect on the Company and the Subsidiaries as a whole.
Section 6.15. BROKERS AND FINDERS. Except for the fees and expenses to be
paid to AEA and Lehman Brothers (which fees and expenses constitute Covered
Expenses) and except for fees and expenses payable to financing sources and
investment banks pursuant to arrangements coordinated or arranged by Purchaser
(including, without limitation, arrangements with Salomon Brothers Inc, Merrill
Lynch & Co., North Castle Partners, L.L.C. and The Bank of Nova Scotia and its
affiliates), no broker, dealer or financial advisor is entitled to receive from
the Company or any of its Subsidiaries any broker's, finder's or investment
banking fee in connection with this Agreement or the transactions contemplated
hereby.
Section 6.16. [Intentionally omitted.]
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Section 6.17. ENVIRONMENTAL COMPLIANCE AND DISCLOSURE. (a) For the
purposes of this Agreement:
"ENVIRONMENTAL MATTERS" means any matter, relating to pollution,
protection of the environment and human health or safety, health or safety of
employees, sanitation, and any matter relating to emissions, discharges,
releases or threatened releases of Hazardous Materials or use, treatment,
storage, disposal, transport or handling of Hazardous Materials.
"ENVIRONMENTAL COSTS" means, without limitation, any remediation,
removal, or other response costs (which, without limitation, shall include costs
necessary to cause compliance with any and all Environmental Laws),
investigation costs (including, without limitation, fees of consultants,
counsel, and other experts in connection with any environmental investigation,
testing, audits or studies), losses, liabilities or obligations (including,
without limitation, liabilities or obligations under any lease or other
contract), payments, damages (including, without limitation, any actual or
punitive damages under any statutory law, common law cause of action or
contractual obligation, including, without limitation, damages (a) of third
parties for personal injury or property damage, or (b) to natural resources),
civil or criminal fines or penalties, judgments, and amounts paid in settlement
resulting from any Environmental Matter.
"ENVIRONMENTAL LAWS" means, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Sections
9601 ET SEQ., the Emergency Planning and Community Right-to-Know Act of 1986,
42 U.S.C. Sections 11001 ET SEQ., the Resource Conservation and Recovery Act,
42 U.S.C. Sections 6901 ET SEQ., the Toxic Substances Control Act, 15 U.S.C.
Sections 2601 ET SEQ., the Federal Insecticide, Fungicide, and Rodenticide Act,
7 U.S.C. Sections 136 ET SEQ., the Clean Air Act, 42 U.S.C. Sections 7401 ET
SEQ., the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C.
Sections 1251 ET SEQ., the Safe Drinking Water Act, 42 U.S.C. Sections 300f ET
SEQ., the Occupational Safety and Health Act, 29 U.S.C. Sections 651 ET SEQ.,
the Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 ET SEQ., as
any of the above statutes have been amended from time to time, all rules and
regulations promulgated pursuant to any of the above statutes, and any other
foreign, federal, state or local law, statute, ordinance, rule or regulation
governing Environmental Matters, as the same have been amended from time to
time, including any common law cause of action providing any right or remedy
with respect to Environmental Matters, and all applicable judicial and
administrative decisions, orders, and decrees relating to Environmental Matters.
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"HAZARDOUS MATERIALS" means any pollutants, contaminants, toxic,
hazardous or extremely hazardous substances, materials or wastes that are
regulated by, or may form the basis for liability under, any Environmental Laws.
(b) Except for any matters which individually or in the aggregate
would not have a material adverse effect on the Company and the Subsidiaries
taken as a whole,
(i) there are no Hazardous Materials in amounts required to
be remediated under applicable Environmental Laws at, on, under or within any
real property owned, leased or occupied by the Company or any of its
Subsidiaries;
(ii) there are no claims, notices, civil, criminal or
administrative actions, suits, hearings, investigations, inquiries or
proceedings pending that are based on or related to any Environmental Matters or
the failure to have any permits required to be obtained by the Company and each
of its Subsidiaries under applicable Environmental Laws for the use, storage,
treatment, transportation, release, emission and disposal of Hazardous Materials
used or produced by or otherwise relating to its business;
(iii) neither the Company nor any of its Subsidiaries has used
any waste disposal site, or otherwise disposed of, transported, or arranged for
the transportation of, any Hazardous Materials to any place or location in
violation of any Environmental Laws;
(iv) there are no underground storage tanks or surface
impoundments at, on, under or within any of real property owned, leased or
occupied by the Company or any of its Subsidiaries, or any portion thereof;
(v) none of the Company or its Subsidiaries has received any
notice asserting that it may be potentially responsible party at any waste
disposal site or other location used for the disposal of any Hazardous
Materials; and
(vi) none of the Company or its Subsidiaries has been
requested or required by any governmental entity to perform any investigatory or
remedial activity or other action in connection with any actual or alleged
release of Hazardous Materials or any other Environmental Matter.
Section 6.18. INTELLECTUAL PROPERTY RIGHTS. Except as set forth in
SCHEDULE 6.18, each of the Company and its Subsidiaries owns or has the right to
use pursuant to
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license, sublicense, agreement or permission all of the Intellectual Property
used by it in the conduct of its businesses as presently conducted, except where
the absence of any thereof, individually or in the aggregate, would not have a
material adverse effect on the Company and the Subsidiaries, taken as a whole,
and neither the Company nor any of its Subsidiaries has interfered with,
infringed upon or misappropriated any Intellectual Property rights of third
parties which interference, infringement or misappropriation individually or in
the aggregate would have a material adverse effect on the Company and the
Subsidiaries, taken as a whole. "INTELLECTUAL PROPERTY" means all patents,
patent applications, trademarks, know-how, trade secrets, service marks, logos,
trade names and corporate names, copyrights, computer software, management
information systems and other intellectual property and proprietary rights.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB
Purchaser and Merger Sub jointly and severally represent and warrant
to the Company as follows:
Section 7.1. ORGANIZATION AND AUTHORITY. Purchaser is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware. Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Each of Purchaser and Merger Sub has all requisite power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All necessary action, corporate or otherwise, required to
have been taken by or on behalf of each of Purchaser and Merger Sub by
applicable law, its charter documents or otherwise to authorize (i) the
approval, execution and delivery on behalf of it of this Agreement and (ii) the
performance by it of its obligations under this Agreement and the consummation
of the transactions contemplated hereby has been taken. This Agreement
constitutes a valid and binding agreement of each of Purchaser and Merger Sub,
enforceable against it in accordance with its terms, subject to the
Enforceability Exceptions.
Section 7.2. NO BREACH. The execution and delivery of this Agreement by
each of Purchaser and Merger Sub do not, and the consummation of the
transactions contemplated hereby will not, (i) violate or conflict with (x) the
certificate of formation of Purchaser or the limited liability agreement of the
Purchaser, dated May 9, 1997 or (y) the certificate of incorporation or the
by-laws of Merger Sub or (ii) constitute a breach or default (or an event which
with notice or lapse of time or both would become a breach or default) or give
rise to any lien, third party right of termination,
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cancellation, material modification or acceleration under any material
agreement, understanding or undertaking to which it is a party or by which it is
bound or any law, rule or regulation to which it is subject.
Section 7.3. CONSENTS AND APPROVALS. Neither the execution and delivery
of this Agreement by each of Purchaser and Merger Sub nor the consummation of
the transactions contemplated hereby will require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (i) filings provided for in ARTICLE 2 and (ii)
where the failures to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent Purchaser
or Merger Sub from performing its obligations under this Agreement.
Section 7.4. ACQUIRING PERSONS. No "acquiring persons" in the
transactions contemplated hereby have assets or sales of $10 million or more
within the meaning of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended and the implementing regulations thereunder.
Section 7.5. NO PRIOR BUSINESS. Neither Purchaser nor Merger Sub has
engaged in any business or activity of any kind, or entered into any agreement
or arrangement with any person or any entity or incurred, directly or
indirectly, any material liabilities or obligations, other than in connection
with the transactions contemplated hereby.
Section 7.6. COMMITMENTS. Purchaser has delivered to the Company true
and complete executed copies of (i) the commitment letter between the Company,
Vita Health Company (1985) Ltd. and The Bank of Nova Scotia, dated May 30, 1997
(the "LOAN COMMITMENT") and (ii) the letter of Merrill Lynch & Co. (the "HIGHLY
CONFIDENT LETTER") to the effect that Merrill Lynch & Co. is highly confident
that it will be able to sell or place the senior subordinated notes described in
the North Castle Partners I, L.L.C. private placement memorandum (the "EQUITY
MEMORANDUM"), collectively, the Loan Commitment and Highly Confident Letter
shall hereinafter be referred to as the "DEBT COMMITMENTS." Neither the Loan
Commitment nor the Highly Confident Letter has been withdrawn or modified in any
material adverse respect and no fact or facts exist which, individually or in
the aggregate, the Purchaser reasonably believes could result in the funding
contemplated by either of the Debt Commitments not being available.
Section 7.7. AVAILABLE FUNDS. Purchaser has, or expects to have,
available to it on the Closing Date (taking into account the Commitments), all
funds necessary to
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pay, without duplication, the aggregate (i) Purchased Share Price (ii) Per Share
Merger Consideration and (iii) Preferred Stock Merger Consideration payable
hereunder and to satisfy Purchaser's, Merger Sub's and the Company's other
obligations hereunder and under the Option Plan.
Section 7.8. AGREEMENTS WITH OFFICERS, DIRECTORS OR SHAREHOLDERS. Except
as disclosed on SCHEDULE 7.8 hereto, there are no contracts, agreements,
arrangements or understandings of any nature between Purchaser or its members
and any officer or director of the Company.
Section 7.9. BROKERS AND FINDERS. Neither Purchaser nor any of its
officers, members, employees or affiliates has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated herein, except that an affiliate
of Purchaser will charge the Company an investment banking fee of up to $3.5
million in connection with the Merger and the related transactions.
ARTICLE 8
COVENANTS
Section 8.1. CONDUCT OF BUSINESS. After the date hereof and prior to the
Closing, the Company shall, and shall cause each of its Subsidiaries to, (i)
conduct its operations only in the usual, regular and ordinary manner
substantially consistent with past practices (except as contemplated by this
Agreement) and (ii) use reasonable efforts to preserve intact the present
business organization of the Company and keep available the services of its
officers, employees, representatives, agents and consultants and preserve
relationships with those persons having business relationships with the Company
and its Subsidiaries.
Section 8.2. FORBEARANCES BY THE COMPANY. Except as contemplated by this
Agreement or pursuant to the terms of an agreement disclosed in a schedule
hereto, the Company will not, and will cause each of its Subsidiaries not to (a)
sell, lease, transfer or dispose of any of the material assets of the Company or
any of its Subsidiaries, except in each case in the ordinary course of business;
(b) mortgage, pledge or otherwise encumber any of the assets of the Company or
any of its Subsidiaries, except in each case in the ordinary course of business;
(c) amend, modify, transfer, assign or cancel any material contract or lease,
except in the ordinary course of business; (d) except for purchase orders or
sales orders arising in the ordinary and usual course of business, and except
for capital expenditures consistent with the applicable annual
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budget previously disclosed to Purchaser, enter into any contract which will
require an expenditure of more than $250,000 annually by the Company or any of
its Subsidiaries; (e) pay any dividend or make any distribution in respect of
the Shares, or issue any shares of capital stock of the Company; (f) amend its
certificate of incorporation or by-laws or comparable governing instruments;
(g) issue, sell, pledge or otherwise dispose of any shares of its capital stock
or other ownership interest or any securities convertible into or exchangeable
for any such shares or ownership interest, or any rights, warrants or options to
acquire or with respect to any such shares of capital stock, ownership interest,
or convertible or exchangeable securities; or accelerate any right to convert or
exchange or acquire any securities of the Company or any of its Subsidiaries for
any such shares or ownership interest; (h) effect any stock split, reverse stock
split, stock dividend, subdivision, reclassification or similar transaction, or
otherwise change its capitalization as it exists on the date hereof; (i) grant,
confer, award or amend any option, warrant, convertible securities or other
right to acquire any shares of its capital stock or take any action to cause to
be exercisable any otherwise unexercisable option under any stock option plan or
restricted stock plan; (j) directly or indirectly redeem, purchase or otherwise
acquire any shares of its capital stock or the capital stock of any of its
Subsidiaries; (k) make any material advance, loan, extension of credit or
capital contribution to, or purchase or acquire (by merger or otherwise) any
stock, bonds, notes, debentures or other securities of, or any assets
constituting a business unit of, or make any other investment in, any person,
firm or entity other than the Company or any Subsidiary; (l) incur, assume or
create any indebtedness for borrowed money, except indebtedness incurred in the
ordinary course of business consistent with past practice pursuant to the
Company's existing credit facilities; (m) assume, guarantee or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any person other than the Company or any Subsidiary; (n) make any
material tax election or settle or compromise any material tax liability except
with the consent of Purchaser; (o) make any material changes in the type or
amount of their insurance coverages, other than acquiring the D&O Binder (as
hereinafter defined) and completing the documentation of the policy contemplated
thereby; or (p) enter into any agreement to do any of the things described in
clauses (a) through (o) above. Notwithstanding the foregoing, nothing in this
SECTION 8.2 shall prevent the Company from (i) selling, leasing, transferring or
disposing of any of its real and/or personal property located in Chicago,
Illinois, (ii) issuing shares of capital stock pursuant to the exercise of
Management Options in accordance with their terms, (iii) amending the Retained
Share Purchase Agreement (or entering into a separate agreement) to provide for
the issuance of Surviving Corporation Common Stock in exchange for preferred
shares of Vita Health Company (1985) Ltd. (iv) repurchasing at or prior to the
Closing, any or all of the preferred shares covered by the Retained Share
Purchase Agreement (and the Company shall not be prohibited from incurring
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indebtedness in connection therewith), (v) entering into an operating lease to
occupy the Company's new facility in York County, South Carolina, or
(vi) modifying the Option Plan to permit the payment of the consideration
described in SECTION 5.1(g). "D&O" BINDER" means the insurance binder obtained
by the Company which provides directors' and officers' liability coverage for
directors and officers of the Company effective May 30, 1997.
Section 8.3. ACCESS. From the date of this Agreement until the Closing
Date, the Company will at reasonable times and upon reasonable notice (i) give
Purchaser reasonable access to the personnel, premises, properties, contracts
and books and records of the Company; and (ii) furnish Purchaser with such
financial and operating data and such other information relating to the Company
as Purchaser may from time to time reasonably request. Any disclosure
whatsoever during any investigation by or on behalf of Purchaser shall not
constitute an enlargement of or additional representations or warranties of the
Company beyond those specifically set forth in ARTICLE 6.
Section 8.4. BEST EFFORTS; OTHER ACTIONS. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to (i) use its
best efforts to take, or cause to be taken, all actions, and to do, or cause to
be done as promptly as practicable, all things necessary, proper or advisable
under applicable laws to consummate and make effective the transactions
contemplated by this Agreement, including obtaining any governmental or other
consents, transfers, orders, qualifications, waivers, authorizations, exemptions
and approvals, providing all notices and making all registrations, filings and
applications necessary or desirable for the consummation of the transactions
contemplated herein; (ii) use its best efforts to defend any lawsuits or other
legal proceedings (whether judicial or administrative) challenging this
Agreement or the consummation of the transactions contemplated herein, including
seeking to have any stay or temporary restraining order entered by any court or
other governmental authority vacated or reversed; and (iii) use its best efforts
to fulfill or obtain the fulfillment of all other conditions to Closing,
including, without limitation, the execution and delivery of all agreements or
other documents contemplated hereunder to be so executed and delivered.
Purchaser agrees to use its best efforts to negotiate and complete promptly all
necessary documentation and arrangements for obtaining the financing
contemplated by this Agreement and take all other actions reasonably required to
obtain such financing and the Company agrees to cooperate in all reasonable
respects with Purchaser in connection with obtaining such financing.
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Section 8.5. BOOKS AND RECORDS. At the Closing, the Company shall cause
to be delivered to Purchaser all the organizational documents, minute books,
stock ledgers, documents and related items of the Company and each of its
Subsidiaries.
Section 8.6. EXPENSES. Except as otherwise provided in this Agreement,
all fees, commissions and other expenses incurred by any of the parties hereto
in connection with the negotiation of this Agreement and in preparing to
consummate the transactions contemplated herein, including, without limitation,
any management transaction bonuses, accounting, legal and investment banking
fees, shall be borne by the party incurring such fee or expense; PROVIDED,
HOWEVER, that nothing in this Agreement shall supersede or be deemed to conflict
with (i) Section 5(a) of the letter agreement between AEA and North Castle
Partners I, L.L.C., dated May 2, 1997 (the "LETTER OF INTENT") or (ii) the
letter agreement between Charles F. Baird, Jr. and AEA, dated May 3, 1997 (the
"EXPENSE LETTER").
Section 8.7. INFORMATION STATEMENT. The Company will cause a notice (the
"INFORMATION STATEMENT") to be sent, prior to the Effective Time, to the
stockholders of the Company pursuant to Section 262(d)(2) of the DGCL. The
Information Statement, at the mailing date thereof, will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that the foregoing shall not apply to the extent that any such untrue statement
of a material fact or omission to state a material fact was made by the Company
in reliance upon and in conformity with written information concerning
Purchaser, Merger Sub or any of their respective affiliates furnished to the
Company by Purchaser specifically for use in the Information Statement. The
Information Statement, including any amendment or supplement thereto, shall be
prepared by the Company in consultation with Purchaser and its counsel, and
Purchaser promptly shall be provided with a true and correct copy of such
Information Statement and any such amendment or supplement.
Section 8.8. ANNOUNCEMENTS. Except as required by law, from the date of
this Agreement through the Closing Date and, in the event of any termination of
this Agreement pursuant to ARTICLE 10, thereafter, no statement or announcement
of any nature with respect to the existence of this Agreement or the
transactions contemplated herein and no press release shall be issued or made to
any other person by any of the parties hereto, without the express written
consents of both the Company and Purchaser, which consents shall not be
unreasonably withheld.
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Section 8.9. NOTIFICATION OF CERTAIN MATTERS. (a) Prior to the Closing
Purchaser shall keep the Company informed of (i) the status of the financings
contemplated in connection with the Stock Purchase, the Merger and the other
transactions contemplated hereby, including without limitation, the Commitments
and (ii) any facts with respect to such Commitments known to it which,
individually or in the aggregate, could reasonably be expected to result in any
of the Commitments being withdrawn or modified in any material adverse respect
or in the funding contemplated by any Commitment not being available.
Purchaser agrees to provide the Company with copies, promptly upon
Purchaser's receipt thereof, of Equity Commitments entered into by Purchaser and
of drafts of definitive financing arrangements contemplated by the Loan
Commitment and the Highly Confident Letter.
Section 8.10. OFFICERS' AND DIRECTORS' INDEMNIFICATION. (a) Purchaser
shall cause the Surviving Corporation to keep in effect in each of its
certificate of incorporation and by-laws and the certificates of incorporation
and by-laws (or other comparable documents) of each of its Subsidiaries,
provisions providing for exculpation and indemnification of the respective
officers and directors of the Company and its Subsidiaries to the fullest extent
permitted under applicable law.
(b) Purchaser shall cause to be maintained in effect, for not less
than six years from the Effective Time, for the benefit of the current or former
directors, officers, agents and employees of the Company, directors' and
officers' liability insurance policies that provide coverage for events
occurring at or prior to the Effective Time and contain terms and conditions
which are no less advantageous to the directors, officers, agents and employees
who are covered thereby, as those policies or binders maintained by the Company
at the Effective Time ("EFFECTIVE TIME COVERAGE"); PROVIDED, HOWEVER, that the
Purchaser shall not be required to cause Effective Time Coverage to be
maintained if the annual premium therefor would be in excess of 200% of the
annual premium rate of the D&O Binder; PROVIDED, FURTHER, that if Effective Time
Coverage cannot be obtained without paying an annual premium in excess of such
limit, Purchaser shall cause to be maintained as much coverage as can be
obtained by paying an annual premium equal to such limit; PROVIDED, FURTHER,
that the covered directors and officers shall have the right, but not the
obligation, to cause the Company to maintain Effective Time Coverage for the
benefit of such persons if such persons bear the cost of such insurance premium
in excess of the 200% limit.
(c) In the event Purchaser or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or
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surviving corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then, and in each such case, to the extent necessary to effectuate
the purposes of this SECTION 8.10, proper provision shall be made so that the
successors and assigns of Purchaser assume the obligations set forth in this
SECTION 8.10 and none of the actions described in clauses (i) or (ii) shall be
taken until such provision is made.
Section 8.11. NO SOLICITATION. Until the earlier of the Effective Time
and the termination of this Agreement, neither the Company nor any of its
Subsidiaries, nor any of their respective officers, directors, employees,
representatives, agents or affiliates, shall, directly or indirectly, encourage,
solicit, initiate or participate in any way in any discussions or negotiations
with, or provide any information to, or afford any access to the properties,
books or records of the Company or any of its Subsidiaries to, or otherwise
assist, facilitate or encourage, any corporation, partnership, person or other
entity or group (other than Purchaser or any affiliate or associate of
Purchaser), or enter into any agreement or understanding, concerning any merger,
consolidation, business combination, liquidation, reorganization, sale of all or
substantially all of its assets, a sale of shares of capital stock or similar
transactions involving the Company or any Subsidiary or any division of any
thereof, and shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing and take the necessary steps to inform such
parties of the obligations undertaken in this SECTION 8.11. The Company will
promptly notify Purchaser if the Company receives any request for such
information or any negotiations or discussions are sought to be initiated with
the Company and will promptly communicate to Purchaser the terms of any proposal
or inquiry which it may receive in respect of any such transaction, to the
extent that, in any such case, the request, proposal or inquiry relates to a
bona fide and credible proposal to effect such a transaction.
Section 8.12. TRANSFER TAXES. The Company shall be responsible for, and
shall indemnify the Purchaser from and against, any stamp tax, documentary tax,
transfer tax, real property gains tax or similar tax ("TRANSFER TAXES") arising
out of the Stock Purchase. The Company shall be responsible for, and shall
indemnify each holder of Shares from and against, any U.S. Transfer Taxes
arising out of the Merger.
Section 8.13. MANAGEMENT TRANSACTION BONUSES. The Company agrees that,
subject to receipt of stockholder approval, it will pay the management
transaction bonuses described on SCHEDULE 6.13(b) at the Effective Time.
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Section 8.14. REPAYMENT OF DEBT. Purchaser shall, in connection with the
Closing, cause to be repaid all amounts outstanding under the Credit Agreement,
including accrued and unpaid interest.
Section 8.15. FAIRNESS OPINION. The Company will use its reasonable best
efforts to obtain the fairness opinion of Lehman Brothers described in Section
10.3(e) as promptly as practicable. The Company hereby represents it is unaware
of any reason that Lehman Brothers would be unable to deliver the fairness
opinion described in Section 10.3(e).
ARTICLE 9
CONDITIONS
Section 9.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligation of the Company, Purchaser and Merger Sub to effect the
Merger shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions:
(a) None of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits the consummation
of the transactions contemplated by this agreement.
(b) Purchaser shall have purchased and the Company shall have issued
and sold the Purchased Shares pursuant to Article 1 of this Agreement.
(c) The Company and Purchaser shall have received the funds necessary
to consummate the Merger, the Stock Purchase and the related transactions
pursuant to the Commitments.
(d) The shareholder approval requirements of Section 280G(b)(5) of
the Code shall have been met with respect to the transaction bonuses described
on SCHEDULE 8.13, and the President or Vice President of the Company shall have
issued a certificate to such effect.
Section 9.2. CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the conditions that
(i) Purchaser and Merger Sub shall have performed their agreements contained in
this Agreement required to be performed at or prior to the Closing Date,
(ii) the representations and warranties of Purchaser and
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Merger Sub contained in this Agreement and in any document delivered in
connection herewith shall be true and correct in all material respects as of the
Closing Date and the Company shall have received a certificate of the President
or a Vice President of Purchaser and Merger Sub, dated the Closing Date,
certifying to such effect, (iii) the Company shall have received from Lehman
Brothers a fairness opinion, dated the Closing Date, reasonably acceptable to
the Company to the effect that, as of the Closing Date, the consideration to be
received by stockholders of the Company is fair from a financial point of view,
(iv) the Company shall have received from Houlihan Lokey Howard & Zukin a
solvency opinion, reasonably satisfactory to the Company, (v) the Company shall
have received an opinion, addressed to it and dated the Closing Date, of
Debevoise & Plimpton, counsel to Purchaser, to the effect set forth in Exhibit G
hereto, (vi) Purchaser shall have purchased the Purchased Shares in accordance
with the terms of this Agreement, and (vii) Purchaser shall have executed the
Stockholders Agreement, in the form of Exhibit F hereto.
Section 9.3. CONDITIONS TO OBLIGATION OF PURCHASER AND MERGER SUB TO EFFECT
THE MERGER. The obligations of Purchaser and Merger Sub to effect the Merger
shall be subject to the fulfillment at or prior to the Closing Date of the
conditions that (i) the Company shall have performed its agreements contained in
this Agreement required to be performed at or prior to the Closing Date;
(ii) the representations and warranties of the Company contained in this
Agreement and in any document delivered in connection herewith shall be true and
correct in all material respects as of the Closing Date and Purchaser shall have
received a certificate of the President or a Vice President of the Company,
dated the Closing Date, certifying to such effect; (iii) the Option Plan shall
have been modified as requested by Purchaser, to permit the payment of the
consideration described in SECTION 5.1(g), subject to receipt of any necessary
consents; (iv) Purchaser shall have received opinions, addressed to it and dated
the Closing Date, from each of (x) Fried, Frank, Harris, Shriver & Jacobson,
counsel to the Company, to the effect set forth in Exhibit E hereto, and (y)
special Delaware counsel to the Company as to certain matters referred to in
paragraphs 3 and 5 of Exhibit E, in form and substance reasonably satisfactory
to Purchaser; (v) the Shareholders Agreement, in the form of Exhibit F hereto
shall have been executed by holders of 90% or more of the outstanding Company
Common Stock (including holders on whose behalf AEA acts pursuant to a Covered
Shareholder's Agreement (as defined in the Shareholders Agreement)), after
giving effect to the Merger; (vi) the management agreement, dated May 4, 1992,
between AEA and P. Leiner Nutritional Products Corp. shall have been terminated;
and (vii) the Company shall not have received notice (that shall not have been
revoked or withdrawn) from the holders of more than 10% of the outstanding
Shares, determined on a fully diluted basis, that such holders have exercised or
intend to exercise their appraisal rights under Section 262 of the DGCL.
30
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Section 9.4. CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
STOCK PURCHASE. The obligation of the Company to effect the Stock Purchase
shall be subject to the fulfillment at or prior to the Closing Date of the
conditions that (i) Purchaser and Merger Sub shall have performed their
agreements contained in this Agreement required to be performed at or prior to
the Closing Date, (ii) the representations and warranties of Purchaser and
Merger Sub contained in this Agreement and in any document delivered in
connection herewith shall be true and correct in all material respects as of the
Closing Date and the Company shall have received a certificate of the President
or a Vice President of Purchaser and Merger Sub, dated the Closing Date,
certifying to such effect, (iii) the Company shall have received the aggregate
Purchased Share Price in respect of the Purchased Shares and (iv) the Merger
shall have been consummated on the terms and subject to the conditions of this
Agreement.
Section 9.5. CONDITIONS TO OBLIGATION OF PURCHASER TO EFFECT THE STOCK
PURCHASE. The obligation of Purchaser to effect the Stock Purchase shall be
subject to the fulfillment at or prior to the Closing Date of the conditions
that (i) the Company shall have performed its agreements contained in this
Agreement required to be performed at or prior to the Closing Date, and (ii) the
representations and warranties of the Company contained in this Agreement and in
any document delivered in connection herewith shall be true and correct in all
material respects as of the Closing Date and Purchaser shall have received a
certificate of the President or a Vice President of the Company, dated the
Closing Date, certifying to such effect, (iii) Purchaser shall have received the
Purchased Shares, and (iv) the Merger shall have been consummated on the terms
and subject to the conditions of this Agreement.
Section 9.6. SIMULTANEOUS CONSUMMATION OF STOCK PURCHASE AND MERGER. The
parties acknowledge and agree that the consummation of each of the Merger and
the Stock Purchase are conditional on the other and that the Merger and Stock
Purchase shall be consummated simultaneously at the Closing.
ARTICLE 10
TERMINATION
Section 10.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated and the Stock Purchase and Merger may be abandoned at any time prior
to the Effective Time, by the mutual written consent of Purchaser and the
Company.
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Section 10.2. TERMINATION BY EITHER THE COMPANY OR PURCHASER. This
Agreement may be terminated and the Stock Purchase and Merger may be abandoned
by either the Company or Purchaser if (a) the Closing shall not have occurred on
or before September 1, 1997 or (b) a United States federal or state court of
competent jurisdiction or United States federal or state governmental,
regulatory or administrative agency or commission shall have issued an order,
decree or ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable; and provided, in the case of a termination pursuant to clause
(a) above, that the terminating party shall not have breached its obligations
under this Agreement in any manner that shall have proximately contributed to
the occurrence of the failure referred to in said clause.
Section 10.3. TERMINATION BY THE COMPANY. This Agreement may be
terminated and the Stock Purchase and Merger may be abandoned at any time prior
to the Closing, by the Company, if (a) there has been a material breach of any
representation or warranty of Purchaser or Merger Sub contained in this
Agreement, (b) there has been a material breach of any of the covenants or
agreements contained in this Agreement on the part of Purchaser or Merger Sub,
which breach is not curable or, if curable, is not cured within 10 days after
written notice of such breach is given by the Company to Purchaser,
(c) Purchaser has not delivered, on or prior to June 10, 1997, (i) all equity
commitment agreements ("NEW EQUITY COMMITMENTS") pursuant to which Purchaser
shall sell limited liability company interests as contemplated by the Equity
Memorandum and (ii) a certificate from the managing member of the managing
member of Purchaser and the Chief Executive Officer and the President of the
Company, certifying that, based on their discussions with management of the
Company, they and other members of management confirm their intention to retain
equity in the Company (such intended retained equity, "ROLLOVER EQUITY
COMMITMENTS"; New Equity Commitments and Rollover Equity Commitments being
referred to collectively herein as "EQUITY COMMITMENTS"; Debt Commitments and
Equity Commitments being referred to collectively herein as "COMMITMENTS"), and
to convert their existing equity interests in the Company (in the form of
Company Common Stock and Management Options) into Surviving Corporation Common
Stock or Delayed Delivery Shares, as the case may be, or their preferred share
interest in a subsidiary of the Company into the right to receive, upon certain
circumstances, Surviving Corporation Common Stock, which Commitments must
specify and provide for (x) Rollover Equity Commitments equal to or greater than
$14 million and (y) proceeds to be realized by Purchaser pursuant to the
delivered New Equity Commitments, that, when added to the Aggregate Management
Rollover Value to be realized pursuant to the Rollover Equity Commitments, equal
$99,000,000, (d) at any
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time after June 10, 1997, any of the Commitments have been withdrawn or modified
in any material adverse respect, which the Company reasonably believes will
prevent the Closing from occurring, other than as a result of a failure by the
Company to fulfill its obligations under the final sentence of Section 8.4 or
(e) on or before June 5, 1997, Lehman Brothers has not delivered a fairness
opinion reasonably satisfactory to the Board of Directors of the Company to the
effect that, as of the date of such opinion, the consideration to be received by
the stockholders of the Company is fair from a financial point of view;
PROVIDED, HOWEVER, that any notice of termination pursuant to this clause (e)
must be delivered on or prior to June 9, 1997.
Section 10.4. TERMINATION BY PURCHASER. This Agreement may be terminated
and the Stock Purchase and Merger may be abandoned at any time prior to the
Closing by Purchaser, if (a) there has been a material breach of any
representation or warranty of the Company contained in this Agreement or (b)
there has been a material breach of any of the covenants or agreements contained
in this Agreement on the part of the Company, which breach is not curable or, if
curable, is not cured within 10 days after written notice of such breach is
given by Purchaser to the Company.
Section 10.5. EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement and the abandonment of the Stock Purchase and
Merger pursuant to this ARTICLE 10, all obligations of the parties hereto shall
terminate, except the obligations of the parties pursuant to this SECTION 10.5
and except for the provisions of SECTIONS 8.6, 8.8, 11.2, 11.3, 11.4, 11.5,
11.6, 11.8, 11.9, 11.10, 11.11 and 11.12. Moreover, in the event of termination
of this Agreement pursuant to SECTION 10.3 or 10.4, nothing herein shall
prejudice the ability of the non-breaching party to seek damages from any other
party for any willful breach of this Agreement, including without limitation,
attorneys' fees, or to pursue any remedy at law or in equity.
ARTICLE 11
GENERAL PROVISIONS
Section 11.1. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
The representations and warranties contained in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive beyond the
Closing, and none of the parties nor their respective officers, directors or
shareholders shall have any liability with respect thereto. Covenants or
agreements which by their terms contemplate performance by or at the Closing
Date shall not survive the Closing Date. This SECTION
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11.1 shall not limit, however, any covenant or agreement which by its terms
contemplates performance after the Closing Date.
Section 11.2. NOTICES. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
If to the Company: If to Purchaser or Merger Sub:
Mr. Robert M. Kaminski Mr. Charles F. Baird, Jr.
Leiner Health Products Group Inc. North Castle Partners I, L.L.C.
901 East 233rd Street 11 Meadowcroft Lane
Carson, California 90745-6204 Greenwich, Connecticut 08630
Facsimile: (310) 952-7766 Facsimile: (203) 869-4311
With a copy to: With a copy to:
Frederick H. Fogel, Esq. Franci J. Blassberg, Esq.
Fried, Frank, Harris, Debevoise & Plimpton
Shriver & Jacobson 875 Third Avenue
One New York Plaza New York, New York 10022
New York, New York 10004-1980 Facsimile: (212) 909-6836
Facsimile: (212) 859-4000
With a copy to:
Christine J. Smith, Esq.
AEA Investors Inc.
65 East 55th Street
New York, New York 10022
Facsimile: (212) 702-0518
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
Section 11.3. ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written
34
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consent of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. Notwithstanding anything contained in
this Agreement to the contrary, except for the provisions of ARTICLE 5 and
SECTION 8.10 (which are for the express benefit of the parties referred to
therein), nothing in this Agreement, express or implied, is intended to confer
on any person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
Section 11.4. ENTIRE AGREEMENT. This Agreement, the exhibits and
schedules hereto, Section 1 and Section 5(a) of the Letter of Intent, the
Expense Letter and any documents delivered by the parties in connection herewith
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings (oral and
written) among the parties with respect thereto.
Section 11.5. AMENDMENT. This Agreement may be amended by the parties
hereto at any time, but no amendment shall be made which by law requires the
further approval of stockholders without obtaining such further approval. This
Agreement may not be amended or modified except by an instrument in writing
signed by or on behalf of each of the parties hereto.
Section 11.6. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
its rules of conflict of laws. Each of the Company and Purchaser hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of Delaware and of the United States of America
located in the State of Delaware (the "DELAWARE COURTS") for any litigation
arising out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any litigation relating thereto except in
such courts), waives any objection to the laying of venue of any such litigation
in the Delaware Courts and agrees not to plead or claim that such litigation
brought in any Delaware Court has been brought in an inconvenient forum.
Notwithstanding the foregoing, each of the parties hereto agrees that each of
the other parties shall have the right to bring any action or proceeding for
enforcement of a judgment entered by the Delaware Courts in any other court or
jurisdiction.
Section 11.7. COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies of
this Agreement,
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each of which may be signed by less than all of the parties hereto, but together
all such copies are signed by all of the parties hereto.
Section 11.8. HEADINGS. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section 11.9. INTERPRETATION. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa. Whenever used in this Agreement, "to the knowledge of the
Company" (or words of similar import, whether expressed in the positive or
negative) shall mean only the actual knowledge of those persons who are listed
on SCHEDULE 11.9.
Section 11.10. INCORPORATION OF EXHIBITS AND SCHEDULES. All exhibits and
schedules hereto are hereby incorporated herein and made a part hereof for all
purposes as if fully set forth herein.
Section 11.11. SEVERABILITY. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or otherwise affecting the validity or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction. If any
provision of this Agreement is so broad as to be unenforceable, the provision
shall be interpreted to be only so broad as is enforceable.
Section 11.12. ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any Delaware Court, this
being in addition to any other remedy to which they may be entitled at law or in
equity.
Section 11.13. PERFORMANCE BY MERGER SUB. Purchaser hereby agrees to cause
Merger Sub to comply with its obligations hereunder and to cause Merger Sub to
consummate the Merger as contemplated herein.
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IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf as of the day and year
first written above.
LEINER HEALTH PRODUCTS GROUP INC.
By: /s/ Robert M. Kaminski
-------------------------------------
Name: Robert M. Kaminski
Title: Chief Executive Officer
NORTH CASTLE PARTNERS I, L.L.C.
By: Baird Investment Group, L.L.C.
Its Managing Member
By: /s/ Charles F. Baird
-------------------------------------
Name: Charles F. Baird
Title: Managing Member
LHP ACQUISITION CORP.
By: /s/ Charles F. Baird
-------------------------------------
Name: Charles F. Baird
Title: President
37
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EXHIBIT 2.2
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
AND AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 1, dated as of June 30, 1997, by and among Leiner Health
Products Group Inc., a Delaware corporation (the "COMPANY"), North Castle
Partners I, L.L.C., a Delaware limited liability company ("PURCHASER"), and LHP
Acquisition Corp., a Delaware corporation ("MERGER SUB").
RECITALS
WHEREAS, the parties hereto have previously entered into a Stock
Purchase Agreement and Agreement and Plan of Merger, dated as of May 31, 1997
(the "MERGER AGREEMENT"), by and among the Company, Purchaser and Merger Sub;
and
WHEREAS, the parties hereto desire to amend the Merger Agreement as
set forth herein.
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged and intending to be
legally bound hereby, the parties hereby agree as follows:
AGREEMENT
1. DEFINITIONS. Capitalized terms used but not defined herein shall
have the respective meanings ascribed to such terms in the Merger Agreement.
<PAGE>
2. AMENDMENTS. (a) Notwithstanding anything in Article 5 of the
Merger Agreement to the contrary, upon the consummation of the Merger each
Electing Non-U.S. Stockholder (as defined below) will be entitled to, and the
Company will cause to be issued to each Electing Non-U.S. Stockholder, Surviving
Corporation Non-Voting Common Stock in lieu of Surviving Corporation Voting
Common Stock that would otherwise be issued to such stockholder as a result of
the Merger. "Electing Non-U.S. Stockholder" means any non-United States
stockholder that delivers a letter of instruction to the Company directing the
Company to deliver Surviving Corporation Non-Voting Common Stock to such
stockholder in lieu of the Surviving Corporation Voting Common Stock that would
otherwise be delivered to such stockholder as a result of the Merger.
(b) Notwithstanding anything in Article 5 of the Merger Agreement to
the contrary, the parties acknowledge and agree that Purchaser may deliver a
replacement SCHEDULE 5.1 to the Merger Agreement at any time that is one day or
more prior to the Closing Date, which shall supersede SCHEDULE 5.1 attached
thereto.
3. FULL FORCE AND EFFECT. As amended hereby, the Merger Agreement
remains in full force and effect.
4. COUNTERPARTS. This Amendment No. 1 may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall be one and the
same instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf as of the day and year
first written above.
LEINER HEALTH PRODUCTS GROUP INC.
By: /s/ William B. Towne
------------------------------------------
Name: William B. Towne
Title: Executive Vice President - Finance
NORTH CASTLE PARTNERS I, L.L.C.
By: Baird Investment Group, L.L.C.
Its Managing Member
By: /s/ Charles F. Baird
-------------------------------------------
Name: Charles F. Baird
Title: Managing Member
LHP ACQUISITION CORP.
By: /s/ Charles F. Baird
-------------------------------------------
Name: Charles F. Baird
Title: President
3
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Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LEINER HEALTH PRODUCTS INC.
Leiner Health Products Inc., a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), hereby certifies as
follows:
1. The name of the Corporation is Leiner Health Products Inc. The
Corporation was originally incorporated under the name of P. Leiner Nutritional
Products Corp. on June 12, 1987.
2. The Corporation then filed a Certificate of Agreement of Merger,
merging with P. Leiner Nutritional Products Corp., a California corporation, the
Corporation being the surviving corporation, on August 27, 1987.
3. The Corporation then filed a Certificate of Merger, merging PLI
Merger Corp. with and into P. Leiner Nutritional Products Corp. on May 4, 1992.
4. The Corporation then filed a Certificate of Amendment, changing
its name to LHP Holdings Corp. on June 9, 1992.
5. The Corporation then filed a Certificate of Ownership, merging
LHP Holdings Corp. into Leiner Health Products Inc. on April 30, 1993.
6. This Amended and Restated Certificate of Incorporation was
proposed by the Board of Directors and adopted by the stockholders of the
Corporation in the manner and by the vote prescribed by Section 242 of the
General Corporation Law of the State of Delaware, the written consent of the
stockholders having been given in accordance with Section 228 of the General
Corporation Law of the State of Delaware, and is as follows:
FIRST: The name of the Corporation is Leiner Health Products Inc.
<PAGE>
SECOND: The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is One Thousand (1,000) shares of Common Stock,
and the par value of each such share is One Dollar ($1.00).
FIFTH: As permitted by Section 242(b) of the General Corporation
Law of the State of Delaware, the number of authorized shares of the
Corporation's Common Stock may be increased at any time and from time to time by
the affirmative vote of the holders of a majority of the shares of Common Stock.
SIXTH: The following provisions are inserted for the management of
the business and for the conduct of the affairs of the Corporation and for the
purpose of creating, defining, limiting and regulating the powers of the
Corporation and its directors and stockholders:
(a) The number of directors of the Corporation shall be fixed and may
be altered from time to time in the manner provided in the By-Laws, and
vacancies in the Board of Directors and newly created directorships
resulting from any increase in the authorized number of directors may be
filled, and directors may be removed, as provided in the By-Laws.
(b) The election of directors may be conducted in any manner approved
by the stockholders at the time when the election is held and need not be
by ballot.
(c) All corporate powers and authority of the Corporation (except as
at the time otherwise provided by law, by this Certificate of Incorporation
or by the By-Laws) shall be vested in and exercised by the Board of
Directors.
(d) No director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of his or her fiduciary
duty as a director, PROVIDED that nothing contained in this Certificate of
Incorporation shall eliminate or limit the liability of a director (i) for
any breach of the director's duty
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of loyalty to the Corporation or its stockholders, (II) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law, (III) under Section 174 of the General
Corporation Law of the State of Delaware or (IV) for any transaction from
which the director derived an improper personal benefit.
(d) The Board of Directors shall have the power without the assent or
vote of the stockholders to adopt, amend, alter or repeal the By-Laws of
the Corporation, except to the extent that the By-Laws or this Certificate
of Incorporation otherwise provide or to the extent that the provisions of
the By-Laws would conflict with the provisions of this Certificate of
Incorporation.
SEVENTH: The Corporation reserves the right to amend or repeal any
provision contained in this Amended and Restated Certificate of Incorporation in
the manner now or hereafter prescribed by the law of the State of Delaware, and
all rights herein conferred upon stockholders or directors are granted subject
to this reservation.
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IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by William B. Towne, its Secretary, and attested by Gale K. Bensussen,
its President, this 9th day of October, 1997.
LEINER HEALTH PRODUCTS INC.
By: /s/ William B. Towne
------------------------
Name: William B. Towne
Title: Executive V.P., Finance
and CFO, Secretary and Treasurer
ATTEST:
By:/s/ Gale K. Bensussen
------------------------------
Name: Gale K. Bensussen
Title: President
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Exhibit 3.2
BY-LAWS
OF
LEINER HEALTH PRODUCTS INC.
(FORMERLY LHP HOLDINGS CORP.)
AS AMENDED AND RESTATED ON OCTOBER 9, 1997
ARTICLE I
---------
STOCKHOLDERS
------------
SECTION 1. ANNUAL MEETING. The annual meeting of the stockholders
of the Corporation shall be held at such place, either within or without the
State of Delaware, and at 10:00 a.m. local time on the first Monday in June (or
if such day is a legal holiday, then on the next succeeding business day), or at
such other date and hour, as may be fixed from time to time by resolution of the
Board of Directors and set forth in the notice or waiver of notice of the
meeting.
SECTION 2. SPECIAL MEETINGS. Except as otherwise provided in the
Certificate of Incorporation, a special meeting of the stockholders of the
Corporation may be called at any time by the Board of Directors, the Chairman of
the Board, the Chief Executive Officer or the President and shall be called by
the Chairman of the Board, the Chief Executive Officer, the President or the
Secretary at the request in writing of stockholders holding together at least
twenty-five percent of the number of shares of stock outstanding and entitled to
vote at such meeting. Any special meeting of the stockholders shall be held on
such date, at such time and at such place within or without the State of
Delaware as the Board of Directors or the officer calling the meeting may
designate. At a special meeting of the stockholders, no business shall be
transacted and no corporate action shall be taken other than that stated in the
notice of the meeting unless all of the stockholders are present in person or by
proxy, in
<PAGE>
which case any and all business may be transacted at the meeting even though the
meeting is held without notice.
SECTION 3. NOTICE OF MEETINGS. Except as otherwise provided in these
By-Laws or by law, a written notice of each meeting of the stockholders shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder
of the Corporation entitled to vote at such meeting at his address as it appears
on the records of the Corporation. The notice shall state the place, date and
hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called.
SECTION 4. QUORUM. At any meeting of the stockholders, the holders
of a majority in number of the total outstanding shares of stock of the
Corporation entitled to vote at such meeting, present in person or represented
by proxy, shall constitute a quorum of the stockholders for all purposes, unless
the representation of a larger number of shares shall be required by law, by the
Certificate of Incorporation or by these By-Laws, in which case the
representation of the number of shares so required shall constitute a quorum;
provided that at any meeting of the stockholders at which the holders of any
class of stock of the Corporation shall be entitled to vote separately as a
class, the holders of a majority in number of the total outstanding shares of
such class, present in person or represented by proxy, shall constitute a quorum
for purposes of such class vote unless the representation of a larger number of
shares of such class shall be required by law, by the Certificate of
Incorporation or by these By-Laws.
SECTION 5. ADJOURNED MEETINGS. Whether or not a quorum shall be
present in person or represented at any meeting of the stockholders, the holders
of a majority in number of the shares of stock of the Corporation present in
person or represented by proxy and entitled to vote at such meeting may adjourn
from time to time; provided, however, that if the holders of any class of stock
of the Corporation are entitled to vote separately as a class upon any matter at
such meeting, any
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adjournment of the meeting in respect of action by such class upon such matter
shall be determined by the holders of a majority of the shares of such class
present in person or represented by proxy and entitled to vote at such meeting.
When a meeting is adjourned to another time or place, notice need not be given
of the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting the
stockholders, or the holders of any class of stock entitled to vote separately
as a class, as the case may be, may transact any business which might have been
transacted by them at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting.
SECTION 6. ORGANIZATION. The Chairman of the Board or, in his
absence, the Chief Executive Officer or, in his absence, the President shall
call all meetings of the stockholders to order, and shall act as Chairman of
such meetings. In the absence of the Chairman of the Board, the Chief Executive
Officer and the President, the holders of a majority in number of the shares of
stock of the Corporation present in person or represented by proxy and entitled
to vote at such meeting shall elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all
meetings of the stockholders; but in the absence of the Secretary, the Chairman
may appoint any person to act as Secretary of the meeting. It shall be the duty
of the Secretary to prepare and make, at least ten days before every meeting of
stockholders, a complete list of stockholders entitled to vote at such meeting,
arranged in alphabetical order and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list
shall be open, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting or, if not so
specified, at the place where the meeting is to be held, for the ten days next
preceding the meeting, to the examination of any stockholder, for any purpose
germane to the meeting, during
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ordinary business hours, and shall be produced and kept at the time and place of
the meeting during the whole time thereof and subject to the inspection of any
stockholder who may be present.
SECTION 7. VOTING. Except as otherwise provided in the Certificate
of Incorporation or by law, each stockholder shall be entitled to one vote for
each share of the capital stock of the Corporation registered in the name of
such stockholder upon the books of the Corporation. Each stockholder entitled
to vote at a meeting of stockholders or to express consent or dissent to
corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
When directed by the presiding officer or upon the demand of any stockholder,
the vote upon any matter before a meeting of stockholders shall be by ballot.
Except as otherwise provided by law or by the Certificate of Incorporation,
Directors shall be elected by a plurality of the votes cast at a meeting of
stockholders by the stockholders entitled to vote in the election and, whenever
any corporate action, other than the election of Directors is to be taken, it
shall be authorized by a majority of the votes cast at a meeting of stockholders
by the stockholders entitled to vote thereon.
Shares of the capital stock of the Corporation belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be counted
for quorum purposes.
SECTION 8. INSPECTORS. When required by law or directed by the
presiding officer or upon the demand of any stockholder entitled to vote, but
not otherwise, the polls shall be opened and closed, the proxies and ballots
shall be received and taken in charge, and all questions touching the
qualification of voters, the validity of proxies and the acceptance or rejection
of votes shall be decided at any meeting of the stockholders by two or more
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Inspectors who may be appointed by the Board of Directors before the meeting, or
if not so appointed, shall be appointed by the presiding officer at the meeting.
If any person so appointed fails to appear or act, the vacancy may be filled by
appointment in like manner.
SECTION 9. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless
otherwise provided in the Certificate of Incorporation, any action required to
be taken or which may be taken at any annual or special meeting of the
stockholders of the Corporation, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of any such corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE II
----------
BOARD OF DIRECTORS
------------------
SECTION 1. NUMBER AND TERM OF OFFICE. The property, business and
affairs of the Corporation shall be managed by or under the direction of four
(4) Directors, which number may be modified from time to time by resolution of
the Board of Directors, but in no event shall the number of Directors be less
than one. The Directors need not be stockholders of the Corporation. The
Directors shall, except as hereinafter otherwise provided for filling vacancies,
be elected at the annual meeting of stockholders, and shall hold office until
their respective successors are elected and qualified, or until their earlier
death, resignation or removal.
SECTION 2. REMOVAL, VACANCIES AND ADDITIONAL DIRECTORS. The
stockholders may, at any special meeting the notice of which shall state that it
is called for that purpose,
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remove, with or without cause, any Director and fill the vacancy; provided that
whenever any Director shall have been elected by the holders of any class of
stock of the Corporation voting separately as a class under the provisions of
the Certificate of Incorporation, such Director may be removed and the vacancy
filled only by the holders of that class of stock voting separately as a class.
Vacancies caused by any such removal and not filled by the stockholders at the
meeting at which such removal shall have been made, or any vacancy caused by the
death or resignation of any Director or for any other reason, and any newly
created directorship resulting from any increase in the authorized number of
Directors, may be filled by the affirmative vote of a majority of the Directors
then in office, although less than a quorum, and any Director so elected to fill
any such vacancy or newly created directorship shall hold office until his
successor is elected and qualified or until his earlier resignation or removal.
When one or more Directors shall resign effective at a future date, a
majority of the Directors then in office, including those who have so resigned,
shall have power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations shall become effective, and each
Director so chosen shall hold office as herein provided in connection with the
filling of other vacancies.
SECTION 3. PLACE OF MEETING. The Board of Directors may hold its
meetings in such place or places in the State of Delaware or outside the State
of Delaware as the Board from time to time shall determine.
SECTION 4. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such times and places as the Board from time to time
by resolution shall determine. No notice shall be required for any regular
meeting of the Board of Directors; but a copy of every resolution fixing or
changing the time or place of regular meetings shall be mailed to every Director
at least five days before the first meeting held in pursuance thereof.
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SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held whenever called by direction of the Chairman of the
Board, the Chief Executive Officer, the President or by any two of the Directors
then in office.
Notice of the day, hour and place of holding of each special meeting
shall be given by mailing the same at least two days before the meeting or by
causing the same to be delivered personally or transmitted by telegraph,
facsimile, telex or sent by certified, registered or overnight mail at least one
day before the meeting to each Director. Unless otherwise indicated in the
notice thereof, any and all business other than an amendment of these By-Laws
may be transacted at any special meeting, and an amendment of these By-Laws may
be acted upon if the notice of the meeting shall have stated that the amendment
of these By-Laws is one of the purposes of the meeting. At any meeting at which
every Director shall be present, even though without any notice, any business
may be transacted, including the amendment of these By-Laws.
SECTION 6. QUORUM. Subject to the provisions of Section 2 of this
Article II, a majority of the members of the Board of Directors in office (but
in no case less than one-third of the total number of Directors nor less than
two Directors) shall constitute a quorum for the transaction of business and the
vote of the majority of the Directors present at any meeting of the Board of
Directors at which a quorum is present shall be the act of the Board of
Directors. If at any meeting of the Board there is less than a quorum present,
a majority of those present may adjourn the meeting from time to time.
SECTION 7. ORGANIZATION. The Chairman of the Board or, in his
absence, the Chief Executive Officer or, in his absence, the President shall
preside at all meetings of the Board of Directors. In the absence of the
Chairman of the Board, the Chief Executive Officer and the President, a Chairman
shall be elected from the Directors present. The Secretary of the Corporation
shall act as Secretary of all meetings of the Directors; but in the absence of
the Secretary, the Chairman may appoint any person to act as Secretary of the
meeting.
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<PAGE>
SECTION 8. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the Corporation. The
Board may designate one or more Directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided by resolution passed by a majority of the whole Board, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and the affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority in reference to amending
the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending these By-Laws; and unless such resolution, these
By-Laws, or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
SECTION 9. CONFERENCE TELEPHONE MEETINGS. Unless otherwise
restricted by the Certificate of Incorporation or by these By-Laws, the members
of the Board of Directors or any committee designated by the Board, may
participate in a meeting of the Board or such committee, as the case may be, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting.
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SECTION 10. CONSENT OF DIRECTORS OR COMMITTEE IN LIEU OF MEETING.
Unless otherwise restricted by the Certificate of Incorporation or by these
By-Laws, any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a meeting
if all members of the Board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the Board or committee, as the case may be.
ARTICLE III
-----------
OFFICERS
--------
SECTION 1. OFFICERS. The officers of the Corporation shall be a
Chairman of the Board, a Chief Executive Officer, a President, one or more Vice
Presidents, a Secretary and a Treasurer, and such additional officers, if any,
as shall be elected by the Board of Directors pursuant to the provisions of
Section 7 of this Article III. The Chairman of the Board, the Chief Executive
Officer, the President, one or more Vice Presidents, the Secretary and the
Treasurer shall be elected by the Board of Directors at its first meeting after
each annual meeting of the stockholders. The failure to hold such election
shall not of itself terminate the term of office of any officer. All officers
shall hold office at the pleasure of the Board of Directors. Any officer may
resign at any time upon written notice to the Corporation. Officers may, but
need not, be Directors. Any number of offices may be held by the same person.
All officers, agents and employees shall be subject to removal, with
or without cause, at any time by the Board of Directors or by action of the
holders of a majority in number of the shares of stock of the Corporation. The
removal of an officer without cause shall be without prejudice to his contract
rights, if any. The election or appointment of an officer shall not of itself
create contract rights. All agents and employees other than officers elected by
the Board of Directors shall also
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be subject to removal, with or without cause, at any time by the officers
appointing them.
Any vacancy caused by the death of any officer, his resignation, his
removal, or otherwise, may be filled by the Board of Directors, and any officer
so elected shall hold office at the pleasure of the Board of Directors.
In addition to the powers and duties of the officers of the
Corporation as set forth in these By-Laws, the officers shall have such
authority and shall perform such duties as from time to time may be determined
by the Board of Directors.
SECTION 2. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD. The
Chairman of the Board shall preside at all meetings of the stockholders and at
all meetings of the Board of Directors and shall have such other powers and
perform such other duties as may from time to time be assigned to him by these
By-Laws or by the Board of Directors.
SECTION 3.A. POWERS AND DUTIES OF THE CHIEF EXECUTIVE OFFICER. The
Chief Executive Officer shall be the chief operating officer of the Corporation
and, subject to the control of the Board of Directors and the Chairman of the
Board, shall have general charge and control of all its operations and shall
perform all duties incident to the office of Chief Executive Officer. In the
absence of the Chairman of the Board, he shall preside at all meetings of the
stockholders and at all meetings of the Board of Directors and shall have such
other powers and perform such other duties as may from time to time be assigned
to him by these By-Laws or by the Board of Directors or the Chairman of the
Board.
SECTION 3.B. POWERS AND DUTIES OF THE PRESIDENT. The President shall,
subject to the control of the Board of Directors, the Chairman of the Board and
the Chief Executive Officer, have general charge and control of the corporate
development responsibilities of the Corporation and such other powers and
perform such other duties as may from time to time be
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assigned to him by these By-Laws or by the Board of Directors, the Chairman of
the Board or the Chief Executive Officer.
SECTION 4. POWERS AND DUTIES OF THE VICE PRESIDENTS. Each Vice
President shall perform all duties incident to the office of Vice President and
shall have such other powers and perform such other duties as may from time to
time be assigned to him by these By-Laws or by the Board of Directors, the
Chairman of the Board, the Chief Executive Officer or the President.
SECTION 5. POWERS AND DUTIES OF THE SECRETARY. The Secretary shall
keep the minutes of all meetings of the Board of Directors and the minutes of
all meetings of the stockholders in books provided for that purpose; he shall
attend to the giving or serving of all notices of the Corporation; he shall have
custody of the corporate seal of the Corporation and shall affix the same to
such documents and other papers as the Board of Directors, the Chairman of the
Board, the Chief Executive Officer or the President shall authorize and direct;
he shall have charge of the stock certificate books, transfer books and stock
ledgers and such other books and papers as the Board of Directors, the Chairman
of the Board, the Chief Executive Officer or the President shall direct, all of
which shall at all reasonable times be open to the examination of any Director,
upon application, at the office of the Corporation during business hours; and he
shall perform all duties incident to the office of Secretary and shall also have
such other powers and shall perform such other duties as may from time to time
be assigned to him by these By-Laws or the Board of Directors, the Chairman of
the Board, the Chief Executive Officer or the President.
SECTION 6. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall
have custody of, and when proper shall pay out, disburse or otherwise dispose
of, all funds and securities of the Corporation which may have come into his
hands; he may endorse on behalf of the Corporation for collection checks, notes
and other obligations and shall deposit the same to the credit of the
Corporation in such bank or banks or depositary or depositaries as the Board of
Directors may designate; he shall sign all receipts and vouchers for payments
made to the Corporation; he
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shall enter or cause to be entered regularly in the books of the Corporation
kept for the purpose full and accurate accounts of all moneys received or paid
or otherwise disposed of by him and whenever required by the Board of Directors
or the Chief Executive Officer shall render statements of such accounts; he
shall, at all reasonable times, exhibit his books and accounts to any Director
of the Corporation upon application at the office of the Corporation during
business hours; and he shall perform all duties incident to the office of
Treasurer and shall also have such other powers and shall perform such other
duties as may from time to time be assigned to him by these By-Laws or by the
Board of Directors, the Chairman of the Board, the Chief Executive Officer or
the President.
SECTION 7. ADDITIONAL OFFICERS. The Board of Directors may from time
to time elect such other officers (who may but need not be Directors), including
a Controller, Assistant Treasurers, Assistant Secretaries and Assistant
Controllers, as the Board may deem advisable and such officers shall have such
authority and shall perform such duties as may from time to time be assigned to
them by the Board of Directors, the Chairman of the Board, the Chief Executive
Officer or the President.
The Board of Directors may from time to time by resolution delegate to
any Assistant Treasurer or Assistant Treasurers any of the powers or duties
herein assigned to the Treasurer; and may similarly delegate to any Assistant
Secretary or Assistant Secretaries any of the powers or duties herein assigned
to the Secretary.
SECTION 8. GIVING OF BOND BY OFFICERS. All officers of the
Corporation, if required to do so by the Board of Directors, shall furnish bonds
to the Corporation for the faithful performance of their duties, in such
penalties and with such conditions and security as the Board shall require.
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SECTION 9. VOTING UPON STOCKS. Unless otherwise ordered by the Board
of Directors, the Chairman of the Board, the Chief Executive Officer, the
President or any Vice President shall have full power and authority on behalf of
the Corporation to attend and to act and to vote, or in the name of the
Corporation to execute proxies to vote, at any meetings of stockholders of any
corporation in which the Corporation may hold stock, and at any such meetings
shall possess and may exercise, in person or by proxy, any and all rights,
powers and privileges incident to the ownership of such stock. The Board of
Directors may from time to time, by resolution, confer like powers upon any
other person or persons.
SECTION 10. COMPENSATION OF OFFICERS. The officers of the
Corporation shall be entitled to receive such compensation for their services as
shall from time to time be determined by the Board of Directors.
ARTICLE IV
----------
STOCK-SEAL-FISCAL YEAR
----------------------
SECTION 1. CERTIFICATES FOR SHARES OF STOCK. The certificates for
shares of stock of the Corporation shall be in such form, not inconsistent with
the Certificate of Incorporation, as shall be approved by the Board of
Directors. All certificates shall be signed by the Chairman of the Board, the
Chief Executive Officer, the President or a Vice President and by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and shall
not be valid unless so signed.
In case any officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be issued and delivered as though
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the person or persons who signed such certificate or certificates had not ceased
to be such officer or officers of the Corporation.
All certificates for shares of stock shall be consecutively numbered
as the same are issued. The name of the person owning the shares represented
thereby with the number of such shares and the date of issue thereof shall be
entered on the books of the Corporation.
Except as hereinafter provided, all certificates surrendered to the
Corporation for transfer shall be cancelled, and no new certificates shall be
issued until former certificates for the same number of shares have been
surrendered and cancelled.
SECTION 2. LOST, STOLEN OR DESTROYED CERTIFICATES. Whenever a person
owning a certificate for shares of stock of the Corporation alleges that it has
been lost, stolen or destroyed, he shall file in the office of the Corporation
an affidavit setting forth, to the best of his knowledge and belief, the time,
place and circumstances of the loss, theft or destruction, and, if required by
the Board of Directors, a bond of indemnity or other indemnification sufficient
in the opinion of the Board of Directors to indemnify the Corporation and its
agents against any claim that may be made against it or them on account of the
alleged loss, theft or destruction of any such certificate or the issuance of a
new certificate in replacement therefor. Thereupon the Corporation may cause to
be issued to such person a new certificate in replacement for the certificate
alleged to have been lost, stolen or destroyed. Upon the stub of every new
certificate so issued shall be noted the fact of such issue and the number, date
and the name of the registered owner of the lost, stolen or destroyed
certificate in lieu of which the new certificate is issued.
SECTION 3. TRANSFER OF SHARES. Shares of stock of the Corporation
shall be transferred on the books of the Corporation by the holder thereof, in
person or by his attorney duly authorized in writing, upon surrender and
cancellation of
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certificates for the number of shares of stock to be transferred, except as
provided in the preceding section.
SECTION 4. REGULATIONS. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient concerning
the issue, transfer and registration of certificates for shares of stock of the
Corporation.
SECTION 5. RECORD DATE. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in writing
without a meeting or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, as the case may be, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held, the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board of Directors is necessary, shall be
the day on which the first written consent is expressed; and the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
15
<PAGE>
SECTION 6. DIVIDENDS. Subject to the provisions of the Certificate
of Incorporation, the Board of Directors shall have power to declare and pay
dividends upon shares of stock of the Corporation, but only out of funds
available for the payment of dividends as provided by law.
Subject to the provisions of the Certificate of Incorporation, any
dividends declared upon the stock of the Corporation shall be payable on such
date or dates as the Board of Directors shall determine. If the date fixed for
the payment of any dividend shall in any year fall upon a legal holiday, then
the dividend payable on such date shall be paid on the next day not a legal
holiday.
SECTION 7. CORPORATE SEAL. The Board of Directors shall provide a
suitable seal, containing the name of the Corporation, which seal shall be kept
in the custody of the Secretary. A duplicate of the seal may be kept and be
used by any officer of the Corporation designated by the Board of Directors, the
Chairman of the Board, the Chief Executive Officer or the President.
SECTION 8. FISCAL YEAR. The fiscal year of the Corporation shall be
such fiscal year as the Board of Directors from time to time by resolution shall
determine.
ARTICLE V
---------
MISCELLANEOUS PROVISIONS
------------------------
SECTION 1. CHECKS, NOTES, ETC. All checks, drafts, bills of
exchange, acceptances, notes or other obligations or orders for the payment of
money shall be signed and, if so required by the Board of Directors,
countersigned by such officers of the Corporation and/or other persons as the
Board of Directors from time to time shall designate.
Checks, drafts, bills of exchange, acceptances, notes, obligations and
orders for the payment of money made payable to
16
<PAGE>
the Corporation may be endorsed for deposit to the credit of the Corporation
with a duly authorized depositary by the Treasurer, or otherwise as the Board of
Directors may from time to time, by resolution, determine.
SECTION 2. LOANS. No loans and no renewals of any loans shall be
contracted on behalf of the Corporation except as authorized by the Board of
Directors. When authorized so to do, any officer or agent of the Corporation
may effect loans and advances for the Corporation from any bank, trust company
or other institution or from any firm, corporation or individual, and for such
loans and advances may make, execute and deliver promissory notes, bonds or
other evidences of indebtedness of the Corporation. When authorized so to do,
any officer or agent of the Corporation may pledge, hypothecate or transfer, as
security for the payment of any and all loans, advances, indebtedness and
liabilities of the Corporation, any and all stocks, securities and other
personal property at any time held by the Corporation, and to that end may
endorse, assign and deliver the same. Such authority may be general or confined
to specific instances.
SECTION 3. WAIVERS OF NOTICE. Whenever any notice whatever is
required to be given by law, by the Certificate of Incorporation or by these
By-Laws to any person or persons, a waiver thereof in writing, signed by the
person or persons entitled to the notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
SECTION 4. OFFICES OUTSIDE OF DELAWARE. Except as otherwise required
by the laws of the State of Delaware, the Corporation may have an office or
offices and keep its books, documents and papers outside of the State of
Delaware at such place or places as from time to time may be determined by the
Board of Directors, the Chairman of the Board, the Chief Executive Officer or
the President.
17
<PAGE>
ARTICLE VI
----------
AMENDMENTS
----------
These By-Laws may be amended, altered or repealed (A) by resolution
adopted by a majority of the Board of Directors at any special or regular
meeting of the Board if, in the case of such special meeting only, notice of
such amendment, alteration or repeal is contained in the notice or waiver of
notice of such meeting; or (B) at any regular or special meeting of the
stockholders if, in the case of such special meeting only, notice of such
amendment, alteration or repeal is contained in the notice or waiver of notice
of such meeting.
ARTICLE VII
-----------
INDEMNIFICATION
---------------
SECTION 1. NATURE OF INDEMNITY. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was or has agreed to become a director or officer of the Corporation, or
is or was serving or has agreed to serve at the request of the Corporation as a
director or officer, of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a party or
is threatened to be made a party to such an action, suit or proceeding by reason
of the fact that he or she is or was or has agreed to become an employee or
agent of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her or on his or her behalf in
connection with such action, suit or proceeding and any appeal
18
<PAGE>
therefrom, if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding had no reasonable cause to
believe his or her conduct was unlawful; except that in the case of an action or
suit by or in the right of the Corporation to procure a judgment in its favor
(A) such indemnification shall be limited to expenses (including attorneys'
fees) actually and reasonably incurred by such person in the defense or
settlement of such action or suit, and (B) no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.
The termination of any action, suit or proceeding by judgment, order
settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
Notwithstanding the foregoing, but subject to Article VII, Section 5
of these By-Laws, the Corporation shall not be obligated to indemnify a director
or officer of the Corporation in respect of any action, suit or proceeding (or
part thereof) instituted by such director or officer, unless such action, suit
or proceeding (or part thereof) has been authorized by the Board of Directors.
SECTION 2. SUCCESSFUL DEFENSE. To the extent that a director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any
19
<PAGE>
action, suit or proceeding referred to in Article VII, Section 1 of these
By-Laws or in defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith.
SECTION 3. DETERMINATION THAT INDEMNIFICATION IS PROPER. Any
indemnification of a director or officer of the Corporation under Article VII,
Section 1 of these By-Laws (unless ordered by a court) shall be made by the
Corporation unless a determination is made that indemnification of the director
or officer is not proper in the circumstances because he or she has not met the
applicable standard of conduct set forth in Article VII, Section 1 of these
By-Laws. Any indemnification of an employee or agent of the Corporation under
Article VII, Section 1 of these By-Laws (unless ordered by a court) may be made
by the Corporation upon a determination that indemnification of the employee or
agent is proper in the circumstances because he or she has met the applicable
standard of conduct set forth in Article VII, Section 1 of these By-Laws. Any
such determination shall be made (A) by a majority vote of the directors who are
not parties to such action, suit or proceeding, even though less than a quorum,
or (B) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (C) by the stockholders.
SECTION 4. ADVANCE PAYMENT OF EXPENSES. Expenses (including
attorneys' fees) incurred by a director or officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation as authorized in this
Article VII. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate. The Board of Directors may authorize
the Corporation's counsel to represent such director, officer, employee or agent
in any action, suit or
20
<PAGE>
proceeding, whether or not the Corporation is a party to such action, suit or
proceeding.
SECTION 5. PROCEDURE FOR INDEMNIFICATION OF DIRECTORS AND
OFFICERS. Any indemnification of a director or officer of the Corporation under
Article VII, Sections 1 and 2 of these By-Laws, or advance of costs, charges and
expenses to a director or officer under Article VII, Section 4 of these By-Laws,
shall be made promptly, and in any event within thirty (30) days, upon the
written request of the director or officer. If a determination by the
Corporation that the director or officer is entitled to indemnification pursuant
to this Article VII is required, and the Corporation fails to respond within
sixty (60) days to a written request for indemnity, the Corporation shall be
deemed to have approved such request. If the Corporation denies a written
request for indemnity or advancement of expenses, in whole or in part, or if
payment in full pursuant to such request is not made within thirty (30) days,
the right to indemnification or advances as granted by this Article VII shall be
enforceable by the director or officer in any court of competent jurisdiction.
Such person's costs and expenses incurred in connection with successfully
establishing his or her right to indemnification, in whole or in part, in any
such action shall also be indemnified by the Corporation. It shall be a defense
to any such action (other than an action brought to enforce a claim for the
advance of costs, charges and expenses under Article VII, Section 4 of these
By-Laws where the required undertaking, if any, has been received by the
Corporation) that the claimant has not met the standard of conduct set forth in
Article VII, Section 1 of these By-Laws, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the Corporation (including
its Board of Directors, its independent legal counsel, and its stockholders) to
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in Article VII, Section 1
of these By-Laws, nor the fact that there has been an actual determination by
the Corporation (including its Board of Directors, its independent legal
counsel, and its stockholders) that the claimant has not met such applicable
standard of
21
<PAGE>
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
SECTION 6. SURVIVAL; PRESERVATION OF OTHER RIGHTS. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the General Corporation Law of the State of Delaware are in effect
and any repeal or modification thereof shall not affect any right or obligation
then existing with respect to any state of facts then or previously existing or
any action, suit or proceeding previously or thereafter brought or threatened
based in whole or in part upon any such state of facts. Such a "contract right"
may not be modified retroactively without the consent of such director, officer,
employee or agent.
The indemnification provided by this Article VII shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
SECTION 7. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him or her and incurred by him or her or on his or her behalf in any such
capacity, or arising out of his or her status as such, whether or not the
Corporation would have the power to indemnify him or her against such liability
under the provisions of this Article VII, provided that such insurance is
available on acceptable terms, which determination shall be made by a vote of a
majority of the entire Board of Directors.
22
<PAGE>
SECTION 8. SEVERABILITY. If this Article or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the fullest
extent permitted by applicable law.
23
<PAGE>
Exhibit 4.1
================================================================================
LEINER HEALTH PRODUCTS GROUP INC., as Issuer,
and
UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee
_______________________
INDENTURE
Dated as of June 30, 1997
_______________________
$85,000,000
9 5/8% SENIOR SUBORDINATED NOTES DUE 2007
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
PARTIES........................................................................1
RECITALS.......................................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions.....................................................1
Section 1.02. Other Definitions..............................................42
Section 1.03. Rules of Construction..........................................43
Section 1.04. Form of Documents Delivered to Trustee.........................44
Section 1.05. Acts of Holders................................................46
Section 1.06. Notices, etc., to the Trustee and the Company..................47
Section 1.07. Notice to Holders; Waiver......................................48
Section 1.08. Conflict with Trust Indenture Act..............................49
Section 1.09. Effect of Headings and Table of Contents.......................49
Section 1.10. Successors and Assigns.........................................49
Section 1.11. Separability Clause............................................49
Section 1.12. Benefits of Indenture..........................................50
Section 1.13. GOVERNING LAW..................................................50
Section 1.14. No Recourse Against Others.....................................50
Section 1.15. Exhibits and Schedules.........................................50
Section 1.16. Counterparts...................................................51
Section 1.17. Duplicate Originals............................................51
Section 1.18. Incorporation by Reference of TIA..............................51
i
<PAGE>
ARTICLE TWO
SECURITY FORMS
Section 2.01. Form and Dating................................................51
Section 2.02. Execution and Authentication; Aggregate Principal Amount.......53
Section 2.03. Restrictive Legends............................................54
Section 2.04. Book-Entry Provisions for Global Note..........................56
Section 2.05. Special Transfer Provisions....................................59
ARTICLE THREE
THE NOTES
Section 3.01. Title and Terms................................................62
Section 3.02. Denominations..................................................63
Section 3.03. Temporary Notes................................................63
Section 3.04. Registration, Registration of Transfer and Exchange............63
Section 3.05. Mutilated, Destroyed, Lost and Stolen Notes....................66
Section 3.06. Payment of Interest; Interest Rights Preserved.................67
Section 3.07. Persons Deemed Owners..........................................69
Section 3.08. Cancellation...................................................69
Section 3.09. Computation of Interest........................................69
Section 3.10. Legal Holidays.................................................70
Section 3.11. CUSIP Number...................................................70
Section 3.12. Payment of Additional Interest Under Registration Rights
Agreement......................................................70
ARTICLE FOUR
DEFEASANCE OR COVENANT DEFEASANCE
Section 4.01. The Company's Option To Effect Defeasance or Covenant
Defeasance.....................................................71
ii
<PAGE>
Section 4.02. Defeasance and Discharge.......................................71
Section 4.03. Covenant Defeasance............................................72
Section 4.04. Conditions to Defeasance or Covenant Defeasance................73
Section 4.05. Deposited Money and U.S. Government Obligations To Be Held
in Trust; Other Miscellaneous Provisions.......................75
Section 4.06. Reinstatement..................................................76
Section 4.07. Repayment to Company...........................................77
ARTICLE FIVE
REMEDIES
Section 5.01. Events of Default..............................................77
Section 5.02. Acceleration of Maturity; Rescission and Annulment.............80
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Trustee; Other Remedies........................................83
Section 5.04. Trustee May File Proofs of Claims..............................84
Section 5.05. Trustee May Enforce Claims Without Possession of Notes.........85
Section 5.06. Application of Money Collected.................................86
Section 5.07. Limitation on Suits............................................86
Section 5.08. Unconditional Right of Holders To Receive Principal, Premium
and Interest...................................................87
Section 5.09. Restoration of Rights and Remedies.............................88
Section 5.10. Rights and Remedies Cumulative.................................88
Section 5.11. Delay or Omission Not Waiver...................................88
Section 5.12. Control by Majority............................................89
Section 5.13. Waiver of Past Defaults........................................89
Section 5.14. Undertaking for Costs..........................................90
Section 5.15. Waiver of Stay, Extension or Usury Laws........................91
iii
<PAGE>
ARTICLE SIX
THE TRUSTEE
Section 6.01. Certain Duties and Responsibilities............................91
Section 6.02. Notice of Defaults.............................................93
Section 6.03. Certain Rights of Trustee......................................93
Section 6.04. Trustee Not Responsible for Recitals, Dispositions of Notes
or Application of Proceeds Thereof.............................95
Section 6.05. Trustee and Agents May Hold Notes; Collections; etc............95
Section 6.06. Money Held in Trust............................................96
Section 6.07. Compensation and Indemnification of Trustee and Its Prior
Claim..........................................................96
Section 6.08. Conflicting Interests..........................................98
Section 6.09. Corporate Trustee Required; Eligibility........................98
Section 6.10. Resignation and Removal; Appointment of Successor Trustee......98
Section 6.11. Acceptance of Appointment by Successor........................101
Section 6.12. Successor Trustee by Merger, etc..............................102
Section 6.13. Preferential Collection of Claims Against Issuers.............102
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE
Section 7.01. Preservation of Information; Company To Furnish Trustee
Names and Addresses of Holders................................103
Section 7.02. Communications of Holders.....................................103
Section 7.03. Reports by Trustee............................................104
iv
<PAGE>
ARTICLE EIGHT
SUCCESSOR CORPORATION
Section 8.01. When Company May Merge, etc...................................104
Section 8.02. Successor Substituted.........................................105
Section 8.03. First Supplemental Indenture..................................106
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01. Without Consent of Holders....................................107
Section 9.02. With Consent of Holders.......................................108
Section 9.03. Compliance with Trust Indenture Act...........................110
Section 9.04. Revocation and Effect of Consents.............................110
Section 9.05. Notation on or Exchange of Notes..............................111
Section 9.06. Trustee May Sign Amendments, etc..............................112
ARTICLE TEN
COVENANTS
Section 10.01. Payment of Principal, Premium and Interest....................112
Section 10.02. Maintenance of Office or Agency...............................112
Section 10.03. Money for Note Payments To Be Held in Trust...................113
Section 10.04. Existence.....................................................115
Section 10.05. Payment of Taxes and Other Claims.............................116
Section 10.06. Maintenance of Properties.....................................116
Section 10.07. Insurance.....................................................117
Section 10.08. Compliance Certificate........................................117
Section 10.09. Provision of Financial Statements and Reports.................118
Section 10.10. Limitation on Issuances of Guarantees of Indebtedness by
Subsidiaries..................................................118
v
<PAGE>
Section 10.11. Limitation on Incurrence of
Indebtedness..................................................120
Section 10.12. Limitation on Restricted Payments.............................127
Section 10.13. Limitation on Transactions with Affiliates....................133
Section 10.14. Limitation on Asset Sales.....................................135
Section 10.15. Change of Control.............................................141
Section 10.16. Limitation on Liens...........................................145
Section 10.17. Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries........................................145
Section 10.18. Limitation on Incurrence of Other Senior Subordinated
Indebtedness..................................................148
Section 10.19. Designation of Unrestricted Subsidiaries......................148
Section 10.20. Limitation on the Sale or Issuance of Preferred Stock of
Restricted Subsidiaries.......................................150
ARTICLE ELEVEN
REDEMPTION OF NOTES
Section 11.01. Optional Redemption...........................................150
Section 11.02. Applicability of Article......................................151
Section 11.03. Election To Redeem; Notice to Trustee.........................151
Section 11.04. Selection of Notes To Be Redeemed.............................152
Section 11.05. Notice of Redemption..........................................152
Section 11.06. Deposit of Redemption Price...................................154
Section 11.07. Notes Payable on Redemption Date..............................154
Section 11.08. Notes Redeemed or Purchased in Part...........................155
ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 12.01. Satisfaction and Discharge of Indenture.......................155
vi
<PAGE>
Section 12.02. Application of Trust Money....................................157
ARTICLE THIRTEEN
GUARANTEE OF NOTES
Section 13.01. Subsidiary Guarantee..........................................157
Section 13.02. Execution and Delivery of Subsidiary Guarantee................160
Section 13.03. [Intentionally omitted.]......................................161
Section 13.04. Subsidiary Guarantee Obligations Subordinated to Guarantor
Senior Debt...................................................161
Section 13.05. Payment Over of Proceeds upon Dissolution, etc................162
Section 13.06. Suspension of Subsidiary Guarantee Obligations When
Guarantor Senior Debt in Default..............................164
Section 13.07. Release of Subsidiary Guarantee...............................165
Section 13.08. Waiver of Subrogation.........................................167
Section 13.09. Provisions Solely to Define Relative Rights...................168
Section 13.10. Trustee to Effectuate Subordination...........................169
Section 13.11. No Waiver of Subordination Provisions.........................169
Section 13.12. Notice to Trustee.............................................170
Section 13.13. Reliance on Judicial Order or Certificate of Liquidating
Agent Regarding Dissolution, etc..............................172
Section 13.14. Rights of Trustee as a Holder of Guarantor Senior Debt;
Preservation of Trustee's Rights..............................172
Section 13.15. Article Thirteen Applicable to Paying Agents..................173
Section 13.16. No Suspension of Remedies.....................................173
Section 13.17. Trustee's Relation to Guarantor Senior Debt...................173
Section 13.18. Subrogation...................................................174
vii
<PAGE>
ARTICLE FOURTEEN
SUBORDINATION OF NOTES
Section 14.01. Notes Subordinate to Senior Debt..............................175
Section 14.02. Payment Over of Proceeds upon Dissolution, etc................175
Section 14.03. Suspension of Payment When Senior Debt in Default.............177
Section 14.04. Trustee's Relation to Senior Debt.............................180
Section 14.05. Subrogation to Rights of Holders of Senior Debt...............180
Section 14.06. Provisions Solely to Define Relative Rights...................181
Section 14.07. Trustee to Effectuate Subordination...........................182
Section 14.08. No Waiver of Subordination Provisions.........................182
Section 14.09. Notice to Trustee.............................................183
Section 14.10. Reliance on Judicial Order or Certificate of Liquidating
Agent.........................................................185
Section 14.11. Rights of Trustee as a Holder of Senior Debt; Preservation
of Trustee's Rights...........................................185
Section 14.12. Article Applicable to Paying Agents...........................186
Section 14.13. No Suspension of Remedies.....................................186
Exhibit A - Form of Initial Note..........................................A-1
Exhibit B - Form of Exchange Note.........................................B-1
Exhibit C - Form of Certificate To Be Delivered
in Connection with Transfers to Non-
QIB Accredited Investors......................................C-1
Exhibit D - Form of Certificate To Be Delivered
in Connection with Transfers Pursuant
to Regulation S...............................................D-1
Exhibit E - Form of Supplemental Indenture in
Respect of Subsidiary Guarantee...............................E-1
Exhibit F - Form of First Supplemental Indenture..........................F-1
viii
<PAGE>
CROSS-REFERENCE TABLE
TIA INDENTURE
SECTION SECTION
310(a)(1)...................................................................6.09
310(a)(2)...................................................................6.09
310(a)(3)....................................................................N/A
310(a)(4)....................................................................N/A
310(a)(5)...................................................................6.09
310(b)......................................................................6.08
311(a)......................................................................6.13
311(b)......................................................................6.13
311(b)(2)...................................................................6.13
312(a)......................................................................7.01
312(b)......................................................................7.02
312(c)......................................................................7.02
313(a)......................................................................7.03
313(b)......................................................................7.03
313(c)......................................................................7.03
313(d)......................................................................7.03
314(a)...............................................................7.04, 10.09
314(b).......................................................................N/A
314(c)(1)...................................................................1.04
314(c)(2)...................................................................1.04
314(c)(3)...................................................................1.04
314(d).......................................................................N/A
314(e)......................................................................1.04
315(a)...................................................................6.01(a)
315(b)......................................................................6.02
315(c)...................................................................6.01(b)
315(d)...................................................................6.01(c)
315(d)(1).............................................................6.01(c)(i)
315(d)(2)............................................................6.01(c)(ii)
315(d)(3)...........................................................6.01(c)(iii)
ix
<PAGE>
TIA INDENTURE
SECTION SECTION
315(e)......................................................................5.14
316(a)......................................................................5.12
316(a)(1)(A)................................................................5.12
316(a)(1)(B)................................................................5.13
316(a)(2)....................................................................N/A
316(b)......................................................................5.08
317(a)(1)...................................................................5.03
317(a)(2)...................................................................5.04
317(b).....................................................................10.03
318(a)......................................................................1.08
N/A means Not Applicable.
Note: This Cross Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
x
<PAGE>
INDENTURE, dated as of June 30, 1997, between LEINER
HEALTH PRODUCTS GROUP INC., a corporation incorporated under the
laws of the State of Delaware ("LEINER GROUP"), as issuer, and
United States Trust Company of New York, a New York corporation,
as trustee (the "TRUSTEE").
Each party hereto agrees as follows for the benefit of
each other party and for the equal and ratable benefit of the
Holders of the Company's 9 5/8% Senior Subordinated Notes due 2007
(the "Initial Notes") and the Holders of the 9 5/8% Senior
Subordinated Notes due 2007 to be issued in exchange for the
Initial Notes pursuant to the Registration Rights Agreement (the
"Exchange Notes").
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. DEFINITIONS.
"ACQUIRED DEBT" means (x) Indebtedness of any Person
(the "Acquired Person") existing at the time the Acquired Person
merges or consolidates with or into, or becomes a Restricted
Subsidiary of, the Company or any Restricted Subsidiary, or (y)
Indebtedness of any Person assumed by the Company or any
Restricted Subsidiary in connection with its acquisition of
assets from such Person, in each case excluding Indebtedness
incurred in connection with, or in contemplation of, the Acquired
Person merging or consolidating with or into, or becoming a
Restricted Subsidiary of, the Company or any Restricted
Subsidiary, or such acquisition of assets.
"ACQUIRED PERSON" has the meaning set forth in the
definition of "Acquired Debt."
"ACQUISITION" means the purchase or other acquisition
of any Person or substantially all the assets of
<PAGE>
any person by any other Person, whether by purchase, stock
purchase, merger, consolidation, or other transfer, and whether
or not for consideration.
"AEA" means AEA Investors Inc., a Delaware corporation,
or any legal successor thereto as a result of a reorganization
thereof that does not involve any change in control thereof.
"AFFILIATE" means, with respect to any specified
Person, any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with
such specified Person. For purposes of this definition,
"CONTROL" (including, with correlative meanings, the terms
"CONTROLLING," "CONTROLLED BY" and "UNDER COMMON CONTROL WITH")
of any Person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise.
"APPLICABLE PREMIUM" means, with respect to a Note at
any Redemption Date, the greater of (i) 1.0% of the then
outstanding principal amount of such Note and (ii) the excess of
(A) the present value at such time of (1) the redemption price of
such Note at July 1, 2002 (such redemption price being described
in the first paragraph under Section 11.01), plus (2) all
required interest payments (excluding accrued but unpaid
interest) due on such Note through July 1, 2002, computed using a
discount rate equal to the Treasury Rate plus 75 basis points,
over (B) the then outstanding principal amount of such Note.
"ASSET SALE" means (i) any sale, lease, conveyance or
other disposition by the Company or any Restricted Subsidiary of
any assets (including by way of a sale-and-leaseback) other than
(A) in the ordinary course of business, (B) the sale, lease,
conveyance or other disposition of the Discontinued Facilities,
(C) any Financing Disposition, (D) the sale, lease, conveyance or
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other disposition of all or substantially all of the assets of
the Company, which shall not be an "Asset Sale" but instead shall
be governed by Article Eight of this Indenture) and (E) any "fee
in lieu" or other disposition of assets to any governmental
authority or agency that continue in use by the Company or any
Restricted Subsidiary, so long as the Company or any Restricted
Subsidiary may obtain title to such assets at any time upon
reasonable notice by paying a nominal fee, or (ii) the issuance
or sale of Capital Stock of any Restricted Subsidiary, in the
case of each of (i) and (ii), whether in a single transaction or
a series of related transactions, to any Person (other than to
the Company or a Restricted Subsidiary) for Net Proceeds in
excess of $1.0 million.
"ASSUMPTION" means the assignment by Leiner Group to
LHP of, and the assumption by LHP of, all of Leiner Group's
rights and obligations in respect of the Indenture and the Notes,
to be effected pursuant to the First Supplemental Indenture
between Leiner Group, LHP and the Trustee substantially in the
form of EXHIBIT F, to be entered into immediately after the
consummation of the issuance and sale of the Initial Notes.
"ATTRIBUTABLE DEBT" in respect of a Sale/Leaseback
Transaction means, as at the time of determination, the present
value (discounted at the interest rate assumed in making
calculations in accordance with FAS 13) of the total obligations
of the lessee for rental payments during the remaining term of
the lease included in such Sale/Leaseback Transaction (including
any period for which such lease has been extended).
"BANK AGENT" means The Bank of Nova Scotia or any
successor or replacement agent under the Credit Agreement.
"BANK DEBT" means any and all amounts, whether
outstanding on the Issue Date or thereafter incurred, payable
under or in respect of the Credit Facility, including without
limitation principal, premium (if any), interest
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(including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the
Company or any Restricted Subsidiary whether or not a claim for
post-filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations, guarantees, other
monetary obligations of any nature and all other amounts payable
thereunder or in respect thereof.
"BANKRUPTCY LAW" means Title 11, United States
Bankruptcy Code of 1978, as amended, or any similar United States
Federal or state law relating to bankruptcy, insolvency,
receivership, winding-up, liquidation, reorganization or relief
of debtors, or any amendment to, succession to or change in any
such law.
"BOARD OF DIRECTORS" means, with respect to any Person,
the board of directors, management committee or similar governing
body or any authorized committee thereof responsible for the
management of the business and affairs of such Person.
"BOARD RESOLUTION" means, with respect to any Person, a
copy of a resolution certified by the Secretary or an Assistant
Secretary of such Person to have been duly adopted by the Board
of Directors of such Person and to be in full force and effect on
the date of such certification, and delivered to the Trustee.
"BORROWING BASE" means, as of any date, an amount equal
to the sum of (i) 80% of the consolidated book value of the net
accounts receivable that (x) are owned by the Company or any of
its Restricted Subsidiaries as shown on the balance sheet of the
Company and its Restricted Subsidiaries for the most recently
ended fiscal quarter for which financial statements are available
or (y) are then outstanding as of such balance sheet date and
held pursuant to the terms of any Receivables Financing, and in
each case that are not more than 90 days past due, plus (ii) 60%
of the consolidated book value of the inventory owned by the
Company or any of its Restricted Subsidiaries as of such
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balance sheet date, all as calculated on a consolidated basis and
in accordance with GAAP.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking
institutions in New York, New York are authorized or obligated by
law or executive order to close.
"CAPITAL LEASE OBLIGATION" of any Person means, at the
time any determination thereof is to be made, the amount of the
liability in respect of a capital lease for property leased by
such Person that would at such time be required to be capitalized
on the balance sheet of such Person in accordance with GAAP.
"CAPITAL STOCK" of any Person means (i) in the case of
a corporation, corporate stock, (ii) in the case of an
association, limited liability company or business entity, any
and all Equity Interests, (iii) in the case of a partnership,
partnership interests (whether general or limited) and (iv) any
other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person, including any
Preferred Stock.
"CASH EQUIVALENTS" means (i) marketable direct
obligations issued by, or unconditionally guaranteed by, the
United States Government or issued by any instrumentality or
agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the
date of acquisition thereof; (ii) 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 or agency thereof maturing within one year from
the date of acquisition thereof and, at the time of acquisition,
having one of the two highest ratings obtainable from either
Standard & Poor's Rating Group (a division of McGraw Hill Inc.)
or any successor rating agency ("S&P") or Moody's Investors
Service, Inc. or any successor rating agency ("Moody's"); (iii)
commercial paper maturing
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no more than one year from the date of creation thereof and, at
the time of acquisition, having a rating of at least A-1 from S&P
or at least P-1 from Moody's; (iv) certificates of deposit, time
deposits or bankers' acceptances (or, with respect to foreign
banks, similar instruments) maturing within one year from the
date of acquisition thereof issued by (x) any lender under the
Credit Agreement or (y) a commercial banking institution that is
a member of the Federal Reserve System or a commercial banking
institution organized and located in a country recognized by the
United States of America, in each case under this clause (y),
having combined capital and surplus and undivided profits in
excess of $500,000,000 (or the foreign currency equivalent
thereof); (v) repurchase obligations with a term of not more
than seven days for underlying securities of the types described
in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; (vi) investments
in money market funds which invest substantially all their assets
in securities of the types described in clauses (i) through (v)
above; and (vii) other short-term investments utilized by Foreign
Subsidiaries in accordance with normal investment practices for
cash management not exceeding $1.0 million in aggregate principal
amount outstanding at any time.
"CHANGE OF CONTROL" means the occurrence of any of the
following events: (i) any "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), other than
Permitted Holders, is or becomes (including by merger,
consolidation or otherwise) the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a
Person shall be deemed to have beneficial ownership of all shares
that such Person has the right to acquire within one year,
whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 50% of the
voting power of the total outstanding Voting Stock of the
Company; PROVIDED that any "person" or "group" will be deemed to
"beneficially own" any Voting Stock of LHP held, directly or
indirectly, by Leiner Group or PLI so long as such person or
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group "beneficially owns," directly or indirectly, in the
aggregate more than 50% of the voting power of the total
outstanding Voting Stock of Leiner Group or PLI; (ii) during any
period of two consecutive years, individuals who at the beginning
of such period constituted the Board of Directors of any of LHP,
Leiner Group or PLI (together with any new directors whose
election to such Board of Directors, or whose nomination for
election by the stockholders of the Company, was approved by the
Permitted Holders or by a vote of 66 2/3% of the directors then
still in office who were either directors at the beginning of
such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of such Board of Directors of LHP, Leiner Group or PLI
then in office, as applicable; or (iii) the sale or other
disposition (including by merger, consolidation or otherwise) of
all or substantially all of the assets of any of LHP, Leiner
Group or PLI to any "person" or "group" (as defined in Rule 13d-5
of the Exchange Act) as an entirety or substantially as an
entirety in one transaction or a series of related transactions
unless immediately after giving effect to such transaction, no
"person" or "group," other than the Permitted Holders, is or
becomes (as a result of the acquisition, by merger or otherwise)
the beneficial owner, directly or indirectly, of more than 50% of
the voting power of the total outstanding Voting Stock of the
surviving or transferee corporation.
"COMMISSION" or "SEC" means the Securities and Exchange
Commission, as from time to time constituted, or if at any time
after the execution of this Indenture such Commission is not
existing and performing the applicable duties now assigned to it,
then the body or bodies performing such duties at such time.
"COMPANY" means Leiner Group until consummation of the
Assumption, and, upon consummation of the Assumption, means LHP
until a successor Person shall have become such pursuant to
Article Eight, and thereafter "Company" shall mean such successor
Person.
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"COMPANY REQUEST" or "COMPANY ORDER" means a written
request or order of the Company signed in the name of the Company
by an officer of the Company.
"CONSOLIDATED CASH FLOW" means, with respect to any
period, the Consolidated Net Income for such period, plus without
duplication (i) Consolidated Interest Expense for such period,
plus (ii) provision for taxes based on income, profits or
capital, to the extent such provision for taxes was included in
computing such Consolidated Net Income, plus (iii) depreciation,
amortization (including, without limitation, amortization of
goodwill and other intangibles) and all other non-cash charges
(excluding any non-cash charge which requires an accrual or
reserve for cash charges for any future period), to the extent
such depreciation, amortization and other non-cash charges were
deducted in computing such Consolidated Net Income.
"CONSOLIDATED COVERAGE RATIO" means, with respect to
any date of determination, the ratio of (i) the aggregate amount
of Consolidated Cash Flow for the period of the most recent four
consecutive fiscal quarters ended prior to such date for which
consolidated financial statements of the Company are available,
to (ii) Consolidated Interest Expense for such four fiscal
quarters, PROVIDED that:
(1) if since the beginning of such period the Company
or any Restricted Subsidiary has incurred any Indebtedness
that remains outstanding on such date of determination, or
if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio involves an incurrence of
Indebtedness (including without limitation any Acquired
Debt), Consolidated Cash Flow and Consolidated Interest
Expense for such period shall be calculated after giving
effect on a pro forma basis to such Indebtedness and the
application of the proceeds thereof (and, in the case of any
Acquired Debt, the related acquisition) as if such
Indebtedness had been incurred (and any such acquisition had
occurred) on the first day of such period;
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(2) if since the beginning of such period the Company
or any Restricted Subsidiary has repaid, repurchased,
defeased, retired or otherwise discharged (a "Discharge")
any Indebtedness that is no longer outstanding on such date
of determination, or if the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio involves a
Discharge of Indebtedness, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be
calculated after giving effect to such Discharge of such
Indebtedness, including with the proceeds of any such new
Indebtedness, as if such Discharge had occurred on the first
day of such period;
(3) if since the beginning of such period the Company
or any Restricted Subsidiary shall have disposed of any
company, any business, any group of assets constituting an
operating unit, or any other assets out of the ordinary
course of business (a "Sale"), (x) Consolidated Cash Flow
for such period shall be reduced by an amount equal to the
Consolidated Cash Flow (if positive) directly attributable
to the assets that are the subject of such Sale for such
period or increased by an amount equal to the Consolidated
Cash Flow (if negative) directly attributable thereto for
such period and (y) Consolidated Interest Expense for such
period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary
Discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Sale for
such period (and, if the Capital Stock of any Restricted
Subsidiary is sold, transferred or otherwise disposed of,
the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted
Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale, transfer or disposition);
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<PAGE>
(4) if since the beginning of such period the Company
or any Restricted Subsidiary shall have acquired (by merger
or otherwise) any company, any business, any group of assets
constituting an operating unit, or any other assets out of
the ordinary course of business (a "Purchase"), Consolidated
Cash Flow and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto
(including the incurrence of any related Indebtedness) as if
such Purchase had occurred on the first day of such period;
and
(5) if since the beginning of such period any Person
became a Restricted Subsidiary or was merged or consolidated
with or into the Company or any Restricted Subsidiary, in
each case in a Purchase, and since the beginning of such
period such Person shall have Discharged any Indebtedness or
made any Sale or Purchase that would have required an
adjustment pursuant to clause (2), (3) or (4) above if made
by the Company or a Restricted Subsidiary during such
period, Consolidated Cash Flow and Consolidated Interest
Expense for such period shall be calculated after giving pro
forma effect thereto as if such Discharge, Sale or Purchase
occurred on the first day of such period.
If any Indebtedness bears a floating rate of interest
and is being given pro forma effect, the interest expense on such
Indebtedness shall be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate Agreement
Obligation applicable to such Indebtedness if such Interest Rate
Agreement Obligation has a remaining term as at the date of
determination in excess of 12 months). If any Indebtedness
bears, at the option of the Company or a Restricted Subsidiary, a
fixed or floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be
computed by applying, at the option of the Company, either a
fixed or
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<PAGE>
floating rate. If any Indebtedness that is being given pro forma
effect was incurred under a revolving credit facility, the
interest expense on such Indebtedness shall be computed based
upon the average daily balance of such Indebtedness during the
applicable period. In making any calculation of the Consolidated
Coverage Ratio for any period prior to the date of the closing of
the Recapitalization, the Recapitalization shall be deemed to
have taken place on the first day of such period.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to
any period, the sum (without duplication) of (i) the interest
expense of the Company and its Restricted Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP
consistently applied, including without limitation (a)
amortization of debt discount, (b) net payments, if any, made or
received under Interest Rate Agreement Obligations (including
amortization of discounts), (c) the interest portion of any
deferred payment obligation, (d) accrued interest, (e) the
interest component of Capital Lease Obligations and rent expense
associated with Attributable Debt in respect of the relevant
lease giving rise thereto determined as if such lease were a
capitalized lease, accrued by the Company during such period, and
all capitalized interest of the Company and its Restricted
Subsidiaries, and (e) all commissions, discounts and other fees
and charges owed with respect to letters of credit, bankers'
acceptance financing or similar facilities, plus (ii) all cash
dividends paid during such period by the Company and its
Restricted Subsidiaries with respect to any Disqualified Stock
(other than to the Company or a Restricted Subsidiary), and minus
(iii) to the extent otherwise included in Consolidated Interest
Expense, amortization or write-off of financing costs, in each
case under clauses (i) through (iii) as determined on a
consolidated basis in accordance with GAAP consistently applied.
"CONSOLIDATED NET INCOME" means, with respect to any
period, the net income (or loss) of the Company and its
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Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP consistently applied,
adjusted by excluding, to the extent included in calculating such
net income (or loss), without duplication, (i) any extraordinary
gain or loss as recorded on the statement of operations in
accordance with GAAP, (ii) the portion of net income (or loss) of
the Company and its Restricted Subsidiaries allocable to the
Company's equity in the net income (or loss) of any
unconsolidated Person or Unrestricted Subsidiary, except (in the
case of such net income) to the extent of the amount of dividends
or distributions actually paid or made to the Company or any of
its Restricted Subsidiaries by such other Person during such
period, (iii) net income (or loss) of any Person combined with
the Company or any of its Restricted Subsidiaries on a "pooling
of interests" basis attributable to any period prior to the date
of combination, (iv) any gain or loss realized upon any Asset
Sale and any gain or loss realized upon the sale or other
disposition of any Capital Stock of any Person, (v) the net
income of any Restricted Subsidiary if the declaration of
dividends or similar distributions by that Restricted Subsidiary
of that net income to the Company is at the time restricted,
directly or indirectly, by operation of the terms of its charter
or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders (other than pursuant to the Notes
or the Indenture), except to the extent that any dividend or
distribution was or could have been made by the Restricted
Subsidiary to the Company or another Restricted Subsidiary during
such period in compliance with such restrictions, (vi) all
deferred financing costs written off and premiums paid in
connection with any early extinguishment of Indebtedness, (vii)
any unrealized gains or losses in respect of Currency Agreement
Obligations, (viii) any unrealized foreign currency transaction
gains or losses in respect of Indebtedness of any Person
denominated in a currency other than the functional currency of
such Person, (ix) any non-recurring charges related to the
Recapitalization or to any acquisition by the Company or any
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Restricted Subsidiary after the Issue Date, including without
limitation (a) any non-recurring compensation expense for the
in-the-money value of stock options that will be cashed out,
converted, exchanged or otherwise retired in connection with the
Recapitalization, and (b) any charge or expenses incurred for
management transaction bonuses in connection with the
Recapitalization, (x) any non-cash, non-recurring charges, (xi)
any charge relating to the closure of the Discontinued
Facilities, (xii) any non-recurring charges incurred in
connection with the Eastern Consolidation, (xiii) any charge or
expense incurred during the fiscal year ended March 31, 1997 (a)
for severance, hiring and relocation expenses in connection with
a management reorganization, (b) in connection with the
preparation and filing of a registration statement with the
Commission and (c) for bonuses paid to the former owners of the
Company's Canadian subsidiary and (xiv) any non-cash compensation
charge arising from any grant of stock options.
"CONSOLIDATED TANGIBLE ASSETS" means, as of any date of
determination, the total assets, less goodwill and other
intangibles (other than patents, trademarks, copyrights, licenses
and other intellectual property) shown on the balance sheet of
the Company and its Restricted Subsidiaries for the most recently
ended fiscal quarter for which financial statements are
available, determined on a consolidated basis in accordance with
GAAP.
"CORPORATE TRUST OFFICE" means the office of the
Trustee at which at any particular time its corporate trust
business shall be principally administered, which office at the
date of execution of this Indenture is located at 114 West 47th
Street, New York, New York 10036-1532; attention: Corporate
Trust Administration.
"CREDIT AGREEMENT" means the credit agreement dated as
of June 30, 1997, among Leiner Group, Vita Health Company (1985)
Ltd., a Canadian corporation, the banks and other financial
institutions party thereto from time to time, The Bank of Nova
Scotia, as administrative agent,
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Merrill Lynch Capital Corporation, as documentation agent, and
Salomon Brothers Holding Company Inc, as syndication agent, as
such agreement may be assumed by LHP or any other successor in
interest, and as such agreement may be amended, supplemented,
waived or otherwise modified from time to time, or refunded,
refinanced, restructured, replaced, renewed, repaid, increased or
extended from time to time (whether in whole or in part, whether
with the original agent and lenders or other agents and lenders
or otherwise, and whether provided under the original Credit
Agreement or otherwise).
"CREDIT FACILITY" means the collective reference to the
Credit Agreement, any Loan Documents (as defined therein), any
notes and letters of credit issued pursuant thereto and any
guarantee and collateral agreement, patent and trademark security
agreement, mortgages, letter of credit applications and other
guarantees, security agreements and collateral documents, and
other instruments and documents, executed and delivered pursuant
to or in connection with any of the foregoing, in each case as
the same may be amended, supplemented, waived or otherwise
modified from time to time, or refunded, refinanced,
restructured, replaced, renewed, repaid, increased or extended
from time to time (whether in whole or in part, whether with the
original agent and lenders or other agents and lenders or
otherwise, and whether provided under the original Credit
Agreement or otherwise). Without limiting the generality of the
foregoing, the term "Credit Facility" shall include any agreement
(i) changing the maturity of any Indebtedness incurred thereunder
or contemplated thereby, (ii) adding Subsidiaries of the Company
as additional borrowers or guarantors thereunder, (iii)
increasing the amount of Indebtedness incurred thereunder or
available to be borrowed thereunder or (iv) otherwise altering
the terms and conditions thereof.
"CURRENCY AGREEMENT OBLIGATIONS" means the Obligations
of any Person under a foreign exchange contract, currency swap
agreement or other similar agreement or
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arrangement to protect such Person against fluctuations in
currency values.
"DEBT ASSUMPTION" means (i) the Assumption and (ii) the
assignment by Leiner Group to LHP of, and the assumption by LHP
of, the rights and obligations of Leiner Group in respect of the
Credit Facility (and any guarantee thereof by LHP).
"DEFAULT" means any event that is, or after the giving
of notice or passage of time or both would be, an Event of
Default.
"DESIGNATED SENIOR DEBT" means (i) all Bank Debt, and
(ii) if no Senior Debt or Guarantor Senior Debt is outstanding
under the Credit Agreement, or if the lenders under the Credit
Agreement shall have consented thereto, any other Senior Debt (or
for certain purposes more fully described in Article Thirteen of
this Indenture, Guarantor Senior Debt) permitted to be incurred
under the Indenture the principal amount of which is $10.0
million or more at the time of the designation of such Senior
Debt (or Guarantor Senior Debt) as "Designated Senior Debt" by
the Company (or in the case of Guarantor Senior Debt, by the
relevant Subsidiary Guarantor) in a written instrument delivered
to the Trustee.
"DEPOSITORY" shall mean The Depository Trust Company,
New York, New York, or any successor thereto registered under the
Exchange Act or other applicable statute or regulation.
"DISCONTINUED FACILITIES" means the Company's Chicago,
Illinois OTC pharmaceutical facility and the Company's facilities
to be closed in connection with the Eastern Consolidation,
including the West Unity, Ohio and Sherburne, New York
facilities.
"DISPOSITION" means, with respect to any Person, any
merger, consolidation or other business combination
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involving such Person (whether or not such Person is the
Surviving Person) or the sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of
such Person's assets.
"DISQUALIFIED STOCK" means (i)any Preferred Stock of
any Restricted Subsidiary and (ii)any Capital Stock that, by its
terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof (other than upon
the occurrence of a change of control of the Company in
circumstances where the holders of the Notes would have similar
rights), in whole or in part on or prior to the final Stated
Maturity of the Notes.
"DOLLARS" or "$" means lawful money of the United
States of America.
"EASTERN CONSOLIDATION" means the consolidation of
LHP's eastern United States packaging and distribution operations
into a new facility in South Carolina, including the closure of
Discontinued Facilities, and the incurrence of moving and
relocation expenses for equipment and personnel, severance
expenses in connection with the closure of Discontinued
Facilities and training expenses in connection with the opening
of the new facility.
"EVENT OF DEFAULT" shall have the meaning specified in
Section 5.01 hereof.
"EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
"FAIR MARKET VALUE" means, with respect to any asset or
property, the sale value that would be obtained in an
arm's-length transaction between an informed and willing seller
under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.
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"FINANCING DISPOSITION" means any sale, transfer,
conveyance or other disposition of property or assets by the
Company or any Subsidiary thereof to any Receivables Entity, or
by any Receivables Subsidiary, in each case in connection with
the incurrence by a Receivables Entity of Indebtedness, or
obligations to make payments to the obligor on Indebtedness,
which may be secured by a Lien in respect of such property or
assets.
"FOREIGN SUBSIDIARY" means (a) any Restricted
Subsidiary of the Company that is (i) not organized under the
laws of the United States of America or any state thereof or the
District of Columbia and (ii) conducts its principal operations
outside the United States and (b) any Restricted Subsidiary of
the Company that has no material assets other than securities of
one or more Foreign Subsidiaries, and other assets relating to an
ownership interest in any such securities or Subsidiaries.
"GAAP" means generally accepted accounting principles
in the United States of America (i) as in effect on the Issue
Date (for purposes of the definitions of the terms "Borrowing
Base," "Consolidated Cash Flow," "Consolidated Coverage Ratio,"
"Consolidated Interest Expense," "Consolidated Net Income," and
"Consolidated Tangible Assets," all defined terms in this
Indenture as and to the extent used in or relating to any of the
foregoing definitions, and all ratios and computations based on
any of the foregoing definitions) and (ii) as in effect from time
to time (for all other purposes of this Indenture), including
those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other
statement by such other entity as approved by a significant
segment of the accounting profession.
"GUARANTEE" means a guarantee (other than by
endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any
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manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part
of any Indebtedness.
"GUARANTOR SENIOR DEBT" means, with respect to any
Subsidiary Guarantor, the principal of, premium, if any, and
interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable state, federal or
foreign law) on and other amounts due on or in connection with
(including any fees, premiums, expenses, including costs of
collection, and indemnities) any Indebtedness of such Subsidiary
Guarantor, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless in the case of any
particular Indebtedness, the instrument creating or evidencing
the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of
payment to the Subsidiary Guarantee of such Subsidiary Guarantor.
Without limiting the generality of the foregoing, "Guarantor
Senior Debt" shall also include the principal of, premium, if
any, and interest (including any interest accruing subsequent to
the filing of a petition of bankruptcy at the rate provided for
in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable state, federal or
foreign law) on, and all other amounts owing in respect of, (i)
Bank Debt of such Subsidiary Guarantor and any Receivables
Financing and (ii) all Currency Agreement Obligations and
Interest Rate Agreement Obligations relating to Bank Debt of such
Subsidiary Guarantor, in each case whether outstanding on the
Issue Date or thereafter created, incurred or assumed and
including in respect of claims under Guarantees, claims for
indemnity, claims in relation to Currency Agreement Obligations
and Interest Rate Agreement Obligations, expense reimbursement
and fees. Notwithstanding the foregoing, "Guarantor Senior Debt"
shall not include (a) Indebtedness evidenced by the Subsidiary
Guarantee of such Subsidiary Guarantor, (b) Indebtedness that is
PARI PASSU with or
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expressly subordinated in right of payment to any Guarantor
Senior Debt of such Subsidiary Guarantor, (c) Indebtedness which,
when incurred and without respect to any election under Section
1111(b) of Title 11, United States Code, is by its terms without
recourse to such Subsidiary Guarantor, (d) any repurchase,
redemption or other obligation in respect of Disqualified Stock
of such Subsidiary Guarantor, (e) to the extent it might
constitute Indebtedness, amounts owing for goods, materials or
services purchased in the ordinary course of business or
consisting of trade payables or other current liabilities (other
than any current liabilities owing under Bank Debt or the current
portion of any long-term Indebtedness which would constitute
Guarantor Senior Debt but for the operation of this clause (e)),
(f) to the extent it might constitute Indebtedness, amounts owed
by such Subsidiary Guarantor for services rendered to such
Subsidiary Guarantor, (g) to the extent it might constitute
Indebtedness, any liability for federal, state, local, foreign or
other taxes owed or owing by such Subsidiary Guarantor, (h)
Indebtedness of such Subsidiary Guarantor to a Subsidiary of the
Company and (i) that portion of any Indebtedness of such
Subsidiary Guarantor which at the time of incurrence is incurred
in violation of this Indenture; PROVIDED, HOWEVER, that such
Indebtedness shall be deemed not to have been incurred in
violation of this Indenture for purposes of this clause (i) if
(x) the holder(s) of such Indebtedness or their representative or
such Subsidiary Guarantor shall have furnished to the Trustee an
opinion of recognized independent legal counsel, unqualified in
all material respects, addressed to the Trustee (which legal
counsel may, as to matters of fact, rely upon an Officers'
Certificate of such Subsidiary Guarantor) to the effect that the
incurrence of such Indebtedness does not violate the provisions
of this Indenture or (y) such Indebtedness consists of Bank Debt,
and the holder(s) of such Indebtedness or their agent or
representative (1) had no actual knowledge at the time of
incurrence that the incurrence of such Indebtedness violated this
Indenture and (2) shall have received a certificate from an
officer of such Subsidiary Guarantor to the effect that the
incurrence
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of such Indebtedness does not violate the provisions of this
Indenture.
"HOLDER" or "NOTEHOLDER" means a Person in whose name a
Note is registered in the Note Register.
"INDEBTEDNESS" means, with respect to any Person,
without duplication, and whether or not contingent, (i)all
indebtedness of such Person for borrowed money or which is
evidenced by a note, bond, debenture or similar instrument, (ii)
all obligations of such Person to pay the deferred or unpaid
purchase price of property or services, which purchase price is
due more than six months after the date of placing such property
in service or taking delivery and title thereto or the completion
of such service, (iii) all Capital Lease Obligations and
Attributable Debt of such Person, (iv) all obligations of such
Person in respect of letters of credit or bankers' acceptances
issued or created for the account of such Person, (v) to the
extent not otherwise included in this definition, all net
obligations of such Person under all Interest Rate Agreement
Obligations or Currency Agreement Obligations of such Person,
(vi) all liabilities of others of the kind described in the
preceding clause (i), (ii) or (iii) secured by any Lien on any
property owned by such Person even if such Person has not assumed
or otherwise become liable for the payment thereof to the extent
of the value of the property subject to such Lien, (vii) all
Disqualified Stock issued by such Person, and (viii) to the
extent not otherwise included, any Guarantee by such Person of
any other Person's indebtedness or other obligations described in
clauses (i) through (vii) above. "Indebtedness" of the Company
and the Restricted Subsidiaries shall not include (i) current
trade payables incurred in the ordinary course of business and
payable in accordance with customary practices and (ii)
non-interest bearing installment obligations and accrued
liabilities incurred in the ordinary course of business which are
not more than 90 days past due.
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"INDENTURE" means this instrument as originally
executed (including all exhibits and schedules hereto) and as it
may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the
applicable provisions hereof.
"INDEPENDENT DIRECTOR" means a member of the Board of
Directors of the Company who does not have any material direct or
indirect financial interest in or with respect to any transaction
or series of related transactions.
"INITIAL PURCHASERS" means Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Salomon Brothers Inc
and Scotia Capital Markets (USA), Inc.
"INSTITUTIONAL ACCREDITED INVESTOR" means an
institution that is an "accredited investor" as that term is
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
"INTEREST PAYMENT DATE" means, when used with respect
to any Note and any installment of interest thereon, the date
specified in such Note as the fixed date on which such
installment of interest is due and payable, as set forth in such
Note.
"INTEREST RATE AGREEMENT OBLIGATIONS" means, with
respect to any Person, the Obligations of such Person under
(i)interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements, and (ii)other agreements or
arrangements designed to protect such Person against fluctuations
in interest rates.
"INVESTMENT" in any Person means any direct or indirect
advance, loan or other extension of credit (including, without
limitation, by way of Guarantee or similar arrangement, but
excluding advances, loans and other extension of credit to
customers, directors, officers and employees in the ordinary
course of business) to, capital contribution (by means of any
transfer of cash or other
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property to others or any payment for property or services for
the account or use of others) to, or any purchase or acquisition
of Capital Stock, bonds, notes, debentures or other similar
instruments issued by, such Person and shall include the
designation of a Restricted Subsidiary as an Unrestricted
Subsidiary. For purposes of the definition of "Unrestricted
Subsidiary" and Section 10.12 hereof, (i) "Investment" shall
include the portion (proportionate to the Company's equity
interest in such Subsidiary) of the Fair Market Value of the
assets (net of liabilities) of any Restricted Subsidiary at the
time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary and shall exclude the Fair Market Value
of the assets (net of liabilities) of any Unrestricted Subsidiary
at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) any property transferred to or
from an Unrestricted Subsidiary shall be valued at its Fair
Market Value at the time of such transfer, in each case as
determined by the Board of Directors in good faith.
"ISSUE DATE" means the date of first issuance of the
Notes under this Indenture, June 30, 1997.
"LEINER GROUP" means Leiner Health Products Group Inc.,
a Delaware corporation, or any successor thereto.
"LHP" means Leiner Health Products Inc., a Delaware
corporation, or any successor thereto.
"LIEN" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any
kind in respect of such asset, whether or not filed, recorded or
otherwise perfected under applicable law (including any
conditional sale or other title retention agreement, any lease in
the nature thereof, or any option or other agreement to sell or
give a security interest in any asset).
"MANAGEMENT AGREEMENT" means the Consulting Agreement
dated as of the Issue Date among LHP, Leiner Group
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and North Castle Partners, L.L.C., as in effect on the Issue
Date, and as the same may be amended from time to time in
accordance with the terms of the Indenture.
"MANAGEMENT INVESTORS" means the officers, directors,
employees and other members of the management of Leiner Group,
PLI, LHP or any of their respective Subsidiaries, or family
members or relatives thereof, or trusts for the benefit of any of
the foregoing, or any of their heirs, executors, successors and
legal representatives, who at any date beneficially own or have
the right to acquire, directly or indirectly, Capital Stock of
LHP, Leiner Group or PLI.
"MERGER" means the merger on the Issue Date of LHP
Acquisition Corp., a Delaware corporation, with and into Leiner
Group, with Leiner Group being the surviving corporation.
"NET PROCEEDS" from an Asset Sale means cash payments
received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable
or otherwise, but only as and when received, but excluding any
other consideration received in the form of assumption by the
acquiring Person of Indebtedness or other obligations relating to
the properties or assets that are the subject of such Asset Sale
or received in any other noncash form) therefrom, in each case
net of (i) all legal, title and recording tax expenses,
commissions and other fees and expenses incurred, and all
federal, state, provincial, foreign and local taxes required to
be paid or accrued as a liability under GAAP, as a consequence of
such Asset Sale, (ii) all payments made, and all installment
payments required to be made, on any Indebtedness that is secured
by any assets subject to such Asset Sale, in accordance with the
terms of any Lien upon such assets, (iii) all distributions and
other payments required to be made to minority interest holders
in Subsidiaries or joint ventures as a result of such Asset Sale,
or to any other Person (other than the Company or a
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Restricted Subsidiary) owning a beneficial interest in the assets
disposed of in such Asset Sale and (iv) appropriate amounts to be
provided as a reserve, in accordance with GAAP, against any
liabilities associated with the assets disposed of in such Asset
Sale and retained by the Company or any Restricted Subsidiary
after such Asset Sale.
"NON-PAYMENT DEFAULT" means, for purposes of Article
Fourteen hereof, any default (other than a Payment Default) with
respect to any Designated Senior Debt of the Company or any
Subsidiary Guarantor pursuant to which the maturity thereof may
be accelerated.
"NON-U.S. PERSON" means a person who is not a U.S.
person, as defined in Regulation S.
"NORTH CASTLE PARTNERS" means North Castle Partners I,
L.L.C., a Delaware limited liability company, or any legal
successor thereto as a result of a reorganization thereof that
does not involve any change in control thereof.
"NOTES" mean the Initial Notes and the Exchange Notes.
"OBLIGATIONS" means any principal, interest, penalties,
fees, indemnifications, reimbursement obligations, damages and
other liabilities payable under the documentation governing any
Indebtedness.
"OFFICER" means, with respect to any Person, the
Chairman, President, Chief Executive Officer, Chief Financial
Officer, Chief Operating Officer, any Vice President, Treasurer
or Secretary, or any other officer designated by the Board of
Directors of such Person as an Officer for purposes of this
Indenture.
"OFFICERS' CERTIFICATE" means, with respect to any
Person, a certificate signed by two Officers or by an Officer and
an Assistant Treasurer or Assistant Secretary of such Person.
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"OPINION OF COUNSEL" means a written opinion of
counsel, who may be an employee of or counsel to the Company, and
who shall be reasonably acceptable to the Trustee.
"OUTSTANDING" means, as of the date of determination,
all Notes theretofore authenticated and delivered under this
Indenture, except:
(i) Notes theretofore cancelled by the Trustee or duly
delivered to the Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or
redemption money in the necessary amount has been
theretofore deposited with the Trustee or any Paying Agent
(other than the Company or any Affiliate thereof) in trust
for the Holders of such Notes; PROVIDED, HOWEVER, that if
such Notes are to be redeemed, notice of such redemption has
been duly and irrevocably given pursuant to this Indenture
or provision therefor reasonably satisfactory to the Trustee
has been made;
(iii) Notes with respect to which the Company has
effected defeasance or covenant defeasance as provided in
Article Four, to the extent provided in Section4.02 or 4.03;
and
(iv) Notes in exchange for or in lieu of which other
Notes have been authenticated and delivered pursuant to this
Indenture, other than any such Notes in respect of which
there shall have been presented to the Trustee proof
satisfactory to it that such Notes are held by a BONA FIDE
purchaser in whose hands the Notes are valid obligations of
the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the
requisite principal amount of Outstanding Notes have given any
request, demand, authorization, direction, notice, consent or
waiver hereunder, Notes owned by the Company or any other obligor
under the Notes or any Affiliate of the
25
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Company or such other obligor shall be disregarded and deemed not
to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only
Notes which the Trustee knows to be so owned shall be so
disregarded. Notes so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Notes and that the pledgee is not the
Company or any other obligor under the Notes or any Affiliate of
the Company or such other obligor.
"PAYING AGENT" means any Person authorized by the
Company to pay the principal, or premium, if any, or interest on,
any Notes on behalf of the Company.
"PAYMENT BLOCKAGE PERIOD" shall have the meaning set
forth in Section 14.03.
"PAYMENT DEFAULT" means any default in the payment when
due (whether at Stated Maturity, by acceleration or otherwise) of
principal or interest on, or of unreimbursed amounts under drawn
letters of credit or fees relating to letters of credit
constituting, any Senior Debt or Guarantor Senior Debt, as
applicable, of the Company or any Subsidiary Guarantor.
"PERMITTED HOLDERS" means collectively or individually
(i) North Castle Partners and AEA and each of their respective
current, former and future employees, members, stockholders,
directors and officers, (ii) trusts for the benefit of such
Persons or the spouses, issue, parents or other relatives of such
Persons, (iii) Persons controlling or controlled by such Persons
and (iv) in the event of the death of any such individual Person,
heirs or testamentary legatees of such Person. For purposes of
this definition, "control," as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and
26
<PAGE>
policies of such Person, whether through ownership of voting
securities or by contract or otherwise.
"PERMITTED INVESTMENTS" means (i) any Investment in the
Company or any Restricted Subsidiary; (ii) any Investment in Cash
Equivalents; (iii) any Investment in a Person if, as a result of
such Investment, (a) such Person becomes a Restricted Subsidiary,
or (b) such Person either (1) is merged, consolidated or
amalgamated with or into the Company or one of its Restricted
Subsidiaries and the Company or such Restricted Subsidiary is the
Surviving Person, or (2) transfers or conveys substantially all
of its assets to, or is liquidated into, the Company or one of
its Restricted Subsidiaries; (iv) Investments in accounts and
notes receivable acquired in the ordinary course of business; (v)
any securities or other Investments received in connection with
any sale or other disposition of property or assets, including
any Asset Sale that complies with Section 10.14; (vi) Interest
Rate Agreement Obligations or Currency Agreement Obligations
permitted pursuant to Section 10.11; (vii) securities or other
Investments received in settlement of debts created in the
ordinary course of business and owing to the Company or any
Restricted Subsidiary, or as a result of foreclosure, perfection
or enforcement of any Lien, or in satisfaction of judgments,
including in connection with any bankruptcy proceeding or other
reorganization of another Person; (viii) Investments in existence
or made pursuant to legally binding written commitments in
existence on the Issue Date; (ix) pledges or deposits (a) with
respect to leases or utilities, provided to third parties in the
ordinary course of business or (b) otherwise described in the
definition of "Permitted Liens"; (x) bonds secured by assets
leased to and operated by the Company or any Restricted
Subsidiary that were issued in connection with the financing of
such assets so long as the Company or any Restricted Subsidiary
may obtain title to such assets at any time by paying a nominal
fee, cancelling such bonds and terminating the transaction; (xi)
(1) Investments in connection with a Financing Disposition by or
to any Receivables Entity, including Investments of funds held
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in accounts permitted or required by the arrangements governing
such Financing Disposition or any related Indebtedness, or (2)
any promissory note issued by Leiner Group or PLI, provided that
if Leiner Group or PLI, as applicable, receives cash from the
relevant Receivables Entity in exchange for such note, an equal
cash amount is contributed by Leiner Group or PLI to LHP; and
(xii) any promissory note of any Management Investor acquired in
connection with the issuance of Capital Stock of Leiner Group to
such Management Investor.
"PERMITTED JUNIOR SECURITIES" means, (i) for purposes
of Article Fourteen (so long as the effect of any exclusion
employing this definition is not to cause the Notes to be treated
in any case or proceeding or similar event described in clauses
(a), (b) or (c) of Section 14.02 as part of the same class of
claims as the Senior Debt or any class of claims PARI PASSU with,
or senior to, the Senior Debt for purposes of any payment or
distribution) debt or equity securities of the Company or any
successor corporation provided for by a plan of reorganization or
readjustment that are subordinated at least to the same extent
that the Notes are subordinated to the payment of all Senior
Debt; PROVIDED that (a) if a new corporation results from such
reorganization or readjustment, such corporation assumes any
Senior Debt not paid in full in cash or Cash Equivalents in
connection with such reorganization or readjustment and (b) the
rights of the holders of such Senior Debt are not, without the
consent of such holders, altered or impaired by such
reorganization or readjustment, and (ii) for purposes of Article
Thirteen, any Guarantee by a Subsidiary Guarantor of a Permitted
Junior Security of the Company described in clause (i) above;
PROVIDED that such Guarantee is subordinated to the payment of
all Guarantor Senior Debt at least to the same extent that the
Subsidiary Guarantees are subordinated to the payment of all
Guarantor Senior Debt, and such Guarantee is subject to
provisions substantially similar to those set forth in Article
Thirteen.
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"PERMITTED LIENS" means (i) Liens securing Indebtedness
of a Person existing at the time that such Person is merged into
or consolidated with or into, or becomes a Restricted Subsidiary
of, the Company or a Restricted Subsidiary; PROVIDED, HOWEVER,
that such Liens were not incurred in connection with, or in
contemplation of, such merger, consolidation or other
transaction, and do not extend to any property or assets other
than those of such Person; (ii) Liens on property or assets
acquired by the Company or a Restricted Subsidiary; PROVIDED,
HOWEVER, that such Liens were not incurred in connection with, or
in contemplation of such acquisition, and do not extend to any
other property or assets; (iii) Liens in respect of Interest Rate
Agreement Obligations, Currency Agreement Obligations, Purchase
Money Obligations, Capital Lease Obligations and Attributable
Debt permitted under this Indenture; (iv) Liens to secure
Indebtedness or other obligations of any Receivables Entity;
(v)Liens in favor of the Company or any Restricted Subsidiary;
and (vi) Liens incurred, or pledges and deposits in connection
with, (a) workers' compensation, unemployment insurance and other
social security benefits, and other similar legislation or other
insurance related obligations, (b) bids, tenders, trade,
government or other contracts (other than for borrowed money),
obligations for utilities, leases, licenses, statutory
obligations, and surety, judgment, performance and appeal bonds
and other obligations of like nature incurred by the Company or
any Restricted Subsidiary in the ordinary course of business, (c)
carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business, and (d) any extension, renewal, refinancing, refunding
or replacement of any Permitted Lien (or any arrangement to which
such Permitted Lien relates), PROVIDED that such new Lien, pledge
or deposit is limited to the property or assets that secured (or
under the arrangement under which the original Permitted Lien
arose, could secure) the obligations to which such Liens relate.
29
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"PERSON" means any individual, corporation,
partnership, joint venture, association, joint-stock company,
limited liability company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PLI" means PLI Holdings Inc., a Delaware corporation,
or any successor thereto.
"PREDECESSOR NOTE" means, with respect to any
particular Note, every previous Note evidencing all or a portion
of the same debt as that evidenced by such particular Note; and,
for the purposes of this definition, any Note authenticated and
delivered under Section 3.05 hereof in exchange for a mutilated
Note or in lieu of a lost, destroyed or stolen Note shall be
deemed to evidence the same debt as the mutilated, lost,
destroyed or stolen Note.
"PREFERRED STOCK," as applied to the Capital Stock of
any Person, means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends or
distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such
Person, over Capital Stock of any other class of such Person.
"PRIVATE PLACEMENT LEGEND" means the legend initially
set forth on the Notes in the form set forth in Section 2.03.
"PUBLIC DEBT" means any Indebtedness represented by
debt securities (including any Guarantee of such securities)
issued by the Company or any Restricted Subsidiary in connection
with a public offering (whether or not underwritten) or a private
placement (provided such private placement is underwritten for
resale pursuant to Rule 144A, Regulation S or otherwise under the
Securities Act or sold on an agency basis by a broker-dealer or
one of its affiliates); it being understood that the term "Public
Debt" shall not include any evidence of Indebtedness under
30
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the Credit Facility or any other commercial bank borrowings or
similar borrowings, any Receivables Financing, recourse transfers
of financial assets, capital leases, or other types of borrowings
incurred in a manner not customarily viewed as a "securities
offering."
"PUBLIC EQUITY OFFERING" means an underwritten primary
public offering of Common Stock (other than Disqualified Stock)
of LHP, Leiner Group or PLI pursuant to an effective registration
statement filed under the Securities Act, all of the net proceeds
of which, if issued by Leiner Group or PLI, are contributed as
common equity to LHP and which public equity offering, if such
public equity offering is the first pursuant to which LHP redeems
Notes pursuant to the second paragraph of Section 11.01, results
in gross proceeds to the issuer of not less than $50.0 million.
Any "Public Equity Offering" may be undertaken either
independently or in conjunction with any secondary offering of
securities by the issuer thereof.
"PURCHASE MONEY OBLIGATION" means any Indebtedness
secured by a Lien on assets related to the business of the
Company or the Restricted Subsidiaries, and any additions and
accessions thereto, which are purchased or constructed by the
Company or any Restricted Subsidiary at any time after the Issue
Date; PROVIDED that (i)any security agreement or conditional
sales or other title retention contract pursuant to which the
Lien on such assets is created (collectively a "SECURITY
AGREEMENT") shall be entered into within 180 days after the
purchase or substantial completion of the construction of such
assets and shall at all times be confined solely to the assets so
purchased or acquired, any additions and accessions thereto and
any proceeds therefrom, (ii)at no time shall the aggregate
principal amount of the outstanding Indebtedness secured thereby
be increased, except in connection with the purchase of additions
and accessions thereto and except in respect of fees and other
obligations in respect of such Indebtedness and (iii)(A)the
aggregate outstanding principal amount of Indebtedness secured
thereby (determined
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on a per asset basis in the case of any additions and accessions)
shall not at the time such Security Agreement is entered into
exceed 100% of the purchase price to the Company or any
Restricted Subsidiary of the assets subject thereto or (B)the
Indebtedness secured thereby shall be with recourse solely to the
assets so purchased or acquired, any additions and accessions
thereto and any proceeds therefrom.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" means a
"qualified institutional buyer," as that term is defined in Rule
144A under the Securities Act.
"RECAPITALIZATION" means the recapitalization of Leiner
Group pursuant to the Stock Purchase Agreement and Plan of
Merger, dated as of May 31, 1997, among Leiner Group, North
Castle and LHP Acquisition Corp., whereby LHP Acquisition Corp.
will be merged with and into Leiner Group, with Leiner Group
continuing as the surviving corporation.
"RECEIVABLE" means a right to receive payment arising
from a sale or lease of goods or services by a Person pursuant to
an arrangement with another Person pursuant to which such other
Person is obligated to pay for goods or services under terms that
permit the purchase of such goods and services on credit, as
determined in accordance with GAAP.
"RECEIVABLES FINANCING" means any financing of
Receivables of the Company or any Restricted Subsidiary that have
been transferred to a Receivables Entity in a Financing
Disposition.
"RECEIVABLES ENTITY" means (x) any Receivables
Subsidiary or (y) any other Person that is engaged in the
business of acquiring, selling, collecting, financing or
refinancing Receivables, accounts (as defined in the Uniform
Commercial Code as in effect in any jurisdiction from time to
time), other accounts and/or other receivables, and/or related
assets.
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"RECEIVABLES SUBSIDIARY" means a Subsidiary of the
Company that (a) is engaged solely in the business of acquiring,
selling, collecting, financing or refinancing Receivables,
accounts (as defined in the Uniform Commercial Code as in effect
in any jurisdiction from time to time) and other accounts and
receivables (including any thereof constituting or evidenced by
chattel paper, instruments or general intangibles), all proceeds
thereof and all rights (contractual and other), collateral and
other assets relating thereto, and any business or activities
incidental or related to such business, and (b) is designated as
a "Receivables Subsidiary" by the Board of Directors of the
Company.
"REDEMPTION DATE" means, with respect to any Note to be
redeemed, any date fixed for such redemption by or pursuant to
this Indenture and the terms of the Notes.
"REDEMPTION PRICE" means, with respect to any Note to
be redeemed, the price at which it is to be redeemed pursuant to
this Indenture and the terms of the Notes.
"REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights Agreement dated on or about the Issue Date among Leiner
Group, LHP and the Initial Purchasers for the benefit of
themselves and the Holders, as the same may be amended from time
to time in accordance with the terms thereof.
"REGULAR RECORD DATE" means the Regular Record Date
specified in the Notes.
"REGULATION S" means Regulation S under the Securities
Act.
"RELATED BUSINESS" means the business conducted (or
proposed to be conducted) by the Company and its Subsidiaries as
of the Issue Date and any and all businesses that in the good
faith judgment of the Board of Directors of the
33
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Company are related, ancillary or complementary to such business.
"RESPONSIBLE OFFICER" means, with respect to the
Trustee, the chairman or vice chairman of the board of directors,
the chairman or vice chairman of the executive committee of the
board of directors, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any assistant cashier, any trust officer
or assistant trust officer, the controller and any assistant
controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the
above designated officers and also means, with respect to a
particular corporate trust matter, any other officer of the
Trustee to whom any corporate trust matter is referred because of
his or her knowledge of and familiarity with the particular
subject.
"RESTRICTED INVESTMENT" means any Investment other than
a Permitted Investment.
"RESTRICTED PAYMENT" means (i) any dividend or other
distribution declared or paid on any Capital Stock of the Company
or any of its Restricted Subsidiaries (other than dividends or
distributions payable solely in Capital Stock (other than
Disqualified Stock) of the Company or such Restricted Subsidiary
or dividends or distributions payable to the Company or any
Restricted Subsidiary (and, if the Restricted Subsidiary making
such dividend or distributions has any stockholder other than the
Company or another Restricted Subsidiary, to such stockholder on
no more than a PRO RATA basis, measured by value)); (ii) any
payment to purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company or any Restricted
Subsidiary (other than any Capital Stock owned by the Company or
any Restricted Subsidiary), except from all holders of such
Capital Stock of a Restricted Subsidiary on a pro rata basis;
(iii) any payment to purchase, redeem, defease or otherwise
acquire or retire for value any Indebtedness that
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is expressly subordinated in right of payment to the Notes (other
than a purchase, redemption, defeasance or other acquisition or
retirement for value (A) that is paid for with the proceeds of
Refinancing Indebtedness that is permitted under Section 10.11,
or (B) in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within
one year of the date of such acquisition or retirement, or (C)
from Net Proceeds to the extent permitted by Section 10.14 or (D)
upon a Change of Control to the extent required by the agreement
governing such Indebtedness but only if the Company shall have
complied with Section 10.15 and purchased all Notes tendered
pursuant to the offer to repurchase all of the Notes required
thereby, prior to purchasing or repaying such Indebtedness); or
(iv) any Restricted Investment.
"RESTRICTED SECURITY" has the meaning assigned to such
term in Rule 144(a)(3) under the Securities Act; PROVIDED,
HOWEVER, that the Trustee shall be entitled to receive, at its
request, and conclusively rely on an Opinion of Counsel with
respect to whether any Note constitutes a Restricted Security.
"RESTRICTED SUBSIDIARY" means each direct or indirect
Subsidiary of the Company other than an Unrestricted Subsidiary.
"REVOLVING CREDIT FACILITY" means the revolving credit
facilities provided under the Credit Facility (which may include
any line or letter of credit facility or subfacility thereunder).
"RULE 144A" means Rule 144A under the Securities Act.
"SALE/LEASEBACK TRANSACTION" means an arrangement
relating to property now owned or hereafter acquired by the
Company or a Restricted Subsidiary whereby the Company or such
Restricted Subsidiary transfers such property to a
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Person more than nine months after acquiring such property, and
the Company or such Restricted Subsidiary leases it from such
Person, other than leases (x) between the Company and a
Restricted Subsidiary or between Restricted Subsidiaries, (y)
required to be classified and accounted for as capitalized leases
for financial reporting purposes in accordance with GAAP or (z)
of any assets referred to in clause (i)(E) of the definition of
Asset Sale.
"SECURITIES ACT" means the Securities Act of 1933, as
amended.
"SENIOR DEBT" means the principal of, premium, if any,
and interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable state, federal or
foreign law) on and other amounts due on or in connection with
(including any fees, premiums, expenses, including costs of
collection, and indemnities) any Indebtedness of the Company,
whether outstanding on the Issue Date or thereafter created,
incurred or assumed, unless in the case of any particular
Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that
such Indebtedness shall not be senior in right of payment to the
Notes. Without limiting the generality of the foregoing, "Senior
Debt" shall also include the principal of, premium, if any, and
interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable state, federal or
foreign law) on, and all other amounts owing in respect of, (i)
Bank Debt of the Company and any Receivables Financing and (ii)
all Currency Agreement Obligations and Interest Rate Agreement
Obligations relating to Bank Debt of the Company, in each case
whether outstanding on the Issue Date or thereafter created,
incurred or assumed and including in respect of claims under
Guarantees, claims for indemnity,
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claims in relation to such Currency Agreement Obligations and
Interest Rate Agreement Obligations, expense reimbursement and
fees. Notwithstanding the foregoing, "Senior Debt" shall not
include (a) Indebtedness evidenced by the Notes, (b) Indebtedness
that is PARI PASSU with or expressly subordinated in right of
payment to any Senior Debt of the Company, (c) Indebtedness
which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is by its terms
without recourse to the Company, (d) any repurchase, redemption
or other obligation in respect of Disqualified Stock of the
Company, (e) to the extent it might constitute Indebtedness,
amounts owing for goods, materials or services purchased in the
ordinary course of business or consisting of trade payables or
other current liabilities (other than any current liabilities
owing under Bank Debt or the current portion of any long-term
Indebtedness which would constitute Senior Debt but for the
operation of this clause (e)), (f) to the extent it might
constitute Indebtedness, amounts owed by the Company for services
rendered to the Company, (g) to the extent it might constitute
Indebtedness, any liability for federal, state, local, foreign or
other taxes owed or owing by the Company, (h) Indebtedness of the
Company to a Subsidiary of the Company and (i) that portion of
any Indebtedness of the Company which at the time of incurrence
is incurred in violation of this Indenture; PROVIDED, HOWEVER,
that such Indebtedness shall be deemed not to have been incurred
in violation of the Indenture for purposes of this clause (i) if
(x) the holder(s) of such Indebtedness or their representative or
the Company shall have furnished to the Trustee an opinion of
recognized independent legal counsel, unqualified in all material
respects, addressed to the Trustee (which legal counsel may, as
to matters of fact, rely upon an Officers' Certificate of the
Company) to the effect that the incurrence of such Indebtedness
does not violate the provisions of the Indenture or (y) such
Indebtedness consists of Bank Debt, and the holder(s) of such
Indebtedness or their agent or representative (1) had no actual
knowledge at the time of incurrence that the incurrence of such
Indebtedness violated this Indenture and
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(2) shall have received a certificate from an Officer of the
Company to the effect that the incurrence of such Indebtedness
does not violate the provisions of this Indenture.
"SENIOR REPRESENTATIVE" means the Bank Agent or any
other representatives designated in writing to the Trustee by the
holders of any class or issue of Designated Senior Debt; PROVIDED
that, in the absence of a representative of the type described
above, any holder or holders of a majority of the principal
amount outstanding of any class or issue of Designated Senior
Debt may collectively act as Senior Representative for such class
or issue.
"SENIOR SUBORDINATED NOTE OBLIGATIONS" means any
principal of, premium, if any, and interest on, and any other
amounts owing in respect of, the Notes payable pursuant to the
terms of the Notes or the Indenture or upon acceleration of the
Notes, including, without limitation, amounts received upon the
exercise of rights of rescission or other rights of action
(including claims for damages) or otherwise, to the extent
relating to the purchase price of the Notes or amounts
corresponding to such principal of, premium, if any, or interest
on, or other amounts owing with respect to, the Notes.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that
would be a "significant subsidiary" as defined in Rule 1-02 of
Regulation S-X under the Securities Act, as such Rule is in
effect on the Issue Date.
"SPECIAL RECORD DATE" means, with respect to the
payment of any Defaulted Interest, a date fixed by the Trustee
pursuant to Section 3.06 hereof.
"STATED MATURITY" means, when used with respect to any
security, the date specified in such security as the fixed date
on which the payment of principal of such security is due and
payable, including pursuant to any
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mandatory redemption provision (but excluding any provision
providing for the purchase of such security at the option of the
holder thereof upon the happening of any contingency beyond the
control of the issuer unless such contingency has occurred).
"SUBSIDIARY" of a Person means (i) any corporation more
than 50% of the outstanding voting power of the Voting Stock of
which is owned or controlled, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person, or by
such Person and one or more other Subsidiaries thereof, or (ii)
any limited partnership of which such Person or any Subsidiary of
such Person is a general partner, or (iii)any other Person (other
than a corporation or limited partnership) in which such Person,
or one or more other Subsidiaries of such Person, or such Person
and one or more other Subsidiaries thereof, directly or
indirectly, has more than 60% of the outstanding partnership or
similar interests or has the power, by contract or otherwise, to
direct or cause the direction of the policies, management and
affairs thereof.
"SUBSIDIARY GUARANTEE" means any Guarantee of the Notes
that may from time to time be provided by a Restricted Subsidiary
pursuant to the terms of this Indenture.
"SUBSIDIARY GUARANTOR" means each of the Company's
Restricted Subsidiaries that issues a Subsidiary Guarantee.
"SURVIVING PERSON" means, with respect to any Person
involved in or that makes any Disposition, the Person formed by
or surviving such Disposition or the Person to which such
Disposition is made.
"TAX SHARING AGREEMENT" means the Tax Sharing Agreement
dated as of the Issue Date among Leiner Group, PLI and LHP, and
as the same may be amended from time to time in accordance with
the terms of this Indenture.
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"TERM LOAN FACILITY" means the term loan facilities
provided under the Credit Facility.
"TREASURY RATE" means the yield to maturity at the time
of computation of United States Treasury securities with a
constant maturity (as compiled and published in the most recent
Federal Reserve Statistical Release H.15(519) which has become
publicly available at least two Business Days prior to the
relevant Redemption Date (or, if such Statistical Release is no
longer published, any publicly available source of similar market
data)) most nearly equal to the period from the relevant
Redemption Date to the Stated Maturity; PROVIDED, HOWEVER, that
if the period from the relevant Redemption Date to the Stated
Maturity is not equal to the constant maturity of a United States
Treasury security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which
such yields are given, except that if the period from the
relevant Redemption Date to the Stated Maturity is less than one
year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year
shall be used.
"TRUST INDENTURE ACT" or "TIA" means the Trust
Indenture Act of 1939, as amended, and as in effect from time to
time.
"TRUSTEE" means the Person named as the "Trustee" in
the first paragraph of this Indenture, until a successor Trustee
shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter "Trustee" shall mean such
successor Trustee.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the
Company (other than a Subsidiary Guarantor) designated as such
pursuant to and in compliance with Section 10.19 of this
Indenture. Any such designation may be revoked by a
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Board Resolution of the Company delivered to the Trustee, subject
to the provisions of such Section 10.19.
"U.S. GOVERNMENT OBLIGATIONS" means securities that are
(i) direct obligations of the United States of America for the
timely payment of which its full faith and credit is pledged or
(ii) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed
as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at
the option of the issuer thereof, and shall also include a
depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any
such U.S. Government Obligation or a specific payment of
principal of or interest on any such U.S. Government Obligation
held by such custodian for the account of the holder of such
depository receipt; PROVIDED, HOWEVER, that (except as required
by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository receipt
from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such
depository receipt.
"U.S. RESTRICTED SUBSIDIARY" means any Restricted
Subsidiary that is not a Foreign Subsidiary.
"VOTING STOCK" of a Person means Capital Stock of such
Person of the class or classes pursuant to which the holders
thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of
directors, managers or trustees of such Person (irrespective of
whether or not at the time the stock of any other class or
classes shall have or might have voting power by reason of the
happening of any contingency).
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied
to any Indebtedness at any date, the number of years
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obtained by dividing (i) the sum of the products obtained by
multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect
thereof, with (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of
such payment, by (ii) the then outstanding aggregate principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" means any
Restricted Subsidiary with respect to which all of the
outstanding voting securities (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the
Company or a Surviving Person of any Disposition involving the
Company, as the case may be.
Section 1.02. OTHER DEFINITIONS.
Defined in
Term Section
---- ----------
"Act" 1.05
"Agent Members" 2.04
"Asset Sale Offer" 10.14
"Asset Sale Offer Price" 10.14
"Asset Sale Offer Trigger Date" 10.14
"Authenticating Agent" 2.02
"Change of Control Date" 10.15
"Change of Control Offer" 10.15
"Change of Control Purchase Date" 10.15
"Change of Control Purchase Price" 10.15
"covenant defeasance" 4.03
"Defaulted Interest" 3.06
"defeasance" 4.02
"Defeased Guarantees" 4.01
"Defeased Notes" 4.01
"Designation" 10.19
"Designation Amount" 10.19
"Excess Proceeds" 10.14
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"Exchange Notes" Recitals
"Foreign Specified Indebtedness" 10.10
"Foreign Subsidiary Guarantee" 10.10
"Global Note" 2.01
"incur" 10.11(a)
"Initial Notes" Recitals
"Note Register" 3.04
"Note Registrar" 3.04
"Notice of Default" 5.01
"Offshore Physical Note" 2.01
"Optional Redemption Price" 11.01
"Other Obligations" 1.20
"Payment Blockage Notice" 14.03
"Permitted Indebtedness" 10.11
"Permitted Payments" 10.12
"Physical Notes" 2.01
"refinanced" 10.12
"refinancing" 10.12
"Refinancing Indebtedness" 10.11
"Required Filing Dates" 10.09
"Revocation" 10.19
"Taxes" 10.12
"U.S. Physical Notes" 2.01
"U.S. Specified Indebtedness" 10.10
"U.S. Subsidiary Guarantee" 10.10
Section 1.03. RULES OF CONSTRUCTION. For all purposes
of this Indenture, except as otherwise expressly provided or
unless the context otherwise requires:
(a) the terms defined in this Article have the
meanings assigned to them in this Article, and include the
plural as well as the singular;
(b) all other terms used herein which are defined in
the Trust Indenture Act, either directly or by reference
therein, have the meanings assigned to them therein;
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(c) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with GAAP;
(d) the words "HEREIN," "HEREOF" and "HEREUNDER" and
other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or other
subdivision;
(e) all references to "$" or "DOLLARS" shall refer to
the lawful currency of the United States of America;
(f) the words "INCLUDE," "INCLUDED" and "INCLUDING" as
used herein shall be deemed in each case to be followed by
the phrase "WITHOUT LIMITATION", if not expressly followed
by such phrase or the phrase "but not limited to";
(g) words in the singular include the plural, and
words in the plural include the singular; and
(h) any reference to a Section or Article refers to
such Section or Article of this Indenture unless otherwise
indicated.
Section 1.04. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish
to the Trustee (a)an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee to the effect that, in the
opinion of the signers, all conditions precedent (including any
covenants compliance with which constitutes a condition
precedent), if any, provided for in this Indenture relating to
the proposed action have been complied with, (b)an Opinion of
Counsel in form and substance reasonably satisfactory to the
Trustee to the effect that, in the opinion of counsel, all such
conditions (including any covenants compliance with which
constitutes a condition precedent), have been complied with
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and (c)where applicable, a certificate or opinion by an
accountant that complies with Section 314(c) of the Trust
Indenture Act. Notwithstanding the foregoing, in the case of any
such request or application as to which the furnishing of any
Officers' Certificate or Opinion of Counsel is specifically
required by any provision of this Indenture relating to such
particular request or application, no additional certificate or
opinion need be furnished.
Each certificate and Opinion of Counsel with respect to
compliance with a condition or covenant provided for in this
Indenture shall include:
(a) a statement to the effect that the Person making
such certificate or Opinion of Counsel has read such
covenant or condition;
(b) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
contained in such certificate or Opinion of Counsel are
based;
(c) a statement to the effect that, in the opinion of
such Person, he has made such examination or investigation
as is necessary to enable him to express an informed opinion
as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion
of such Person, such condition or covenant has been complied
with.
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be
so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such
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Persons as to other matters, and any such Person may certify or
give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Officer of the Company
may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless
such officer knows that the certificate or opinion or
representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such
certificate or opinion of counsel may be based, insofar as it
relates to factual matters, upon (x) a certificate or opinion of,
or representations by, an officer or officers of the Company
stating that the information with respect to such factual matters
is in the possession of the Company, unless such counsel knows
that the certificate or opinion or representations with respect
to such matters are erroneous or (y) one or more certificates of
public officials. Any Opinion of Counsel delivered in connection
with any transaction in accordance with Section 8.01 may rely on
any certificate or opinion of, or representations by, an officer
or officers of the Company with respect to compliance with
clauses (iii) and (iv) of Section 8.01.
Where any Person is required to make, give or execute
two or more applications, requests, consents, certificates,
statements, opinions or other instruments under this Indenture,
they may, but need not, be consolidated, with proper
identification of each matter covered therein, and form one
instrument.
Section 1.05. ACTS OF HOLDERS. Any request, demand,
authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Holders may be
embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in Person or
by an agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective
when such instrument or
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instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "ACT" of the
Holders signing such instrument or instruments. Proof of
execution (as provided below in subsection (b) of this Section
1.05) of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and
(subject to Section 6.01 hereof) conclusive in favor of the
Trustee and the Company, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Person
of any such instrument or writing may be proved in any reasonable
manner which the Trustee deems sufficient including, without
limitation, by verification by a notary public or signature
guarantee.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction,
notice, consent, waiver or other action by the Holder of any Note
shall bind every future Holder of the same Note or the Holder of
every Note issued upon the transfer thereof or in exchange
therefor or in lieu thereof to the same extent as the original
Holder, in respect of anything done, suffered or omitted to be
done by the Trustee, any Paying Agent or the Company in reliance
thereon, whether or not notation of such action is made upon such
Note.
Section 1.06. NOTICES, ETC., TO THE TRUSTEE AND THE
COMPANY. Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or
permitted by this Indenture to be made upon, given or furnished
to, or filed with:
(a) the Trustee by any Holder or by the Company shall
be sufficient for every purpose hereunder if
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made, given, furnished or filed, in writing, to or with the
Trustee at its Corporate Trust Office or at any other
address previously furnished in writing to the Holders and
the Company by the Trustee or at the office of any drop
agent specified by or on behalf of the Trustee to the
Holders and the Company from time to time; and
(b) the Company by the Trustee or by any Holder shall
be sufficient for every purpose (except as otherwise
expressly provided herein) hereunder if in writing and
mailed, first-class postage prepaid, to the Company,
addressed to it at 901 East 233rd Street, Carson, CA
90745-6204, Attention: Chief Financial Officer, with a copy
to Debevoise & Plimpton, 875 Third Avenue, New York, New
York 10022, Attention: David Brittenham, Esq., or at any
other address previously furnished in writing to the Trustee
by the Company.
Section 1.07. NOTICE TO HOLDERS; WAIVER. Where this
Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise expressly
provided herein) if in writing and mailed, first-class postage
prepaid, to each Holder affected by such event, AT THE ADDRESS OF
SUCH HOLDER AS IT APPEARS IN THE NOTE REGISTER, not later than
the latest date, and not earlier than the earliest date,
prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice
with respect to other Holders. Any notice when mailed to a
Holder in the aforesaid manner shall be conclusively deemed to
have been received by such Holder whether or not actually
received by such Holder. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition
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precedent to the validity of any action taken in reliance upon
such waiver.
In case by reason of the suspension of regular mail
service or by reason of any other cause, it shall be
impracticable to mail notice of any event as required by any
provision of this Indenture, then any method of giving such
notice as shall be reasonably satisfactory to the Trustee shall
be deemed to be a sufficient giving of such notice.
Section 1.08. CONFLICT WITH TRUST INDENTURE ACT. If
any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which
is required or deemed to be included in this Indenture by any of
the provisions of the Trust Indenture Act, such provision or
requirement of the Trust Indenture Act shall control.
If any provision of this Indenture modifies or excludes
any provision of the Trust Indenture Act that may be so modified
or excluded, such provision of the Trust Indenture Act shall be
deemed to apply to this Indenture as so modified or excluded, as
the case may be, if this Indenture shall then be qualified under
the TIA.
Section 1.09. EFFECT OF HEADINGS AND TABLE OF
CONTENTS. The Article and Section headings herein and the Table
of Contents are for convenience only and shall not affect the
construction hereof.
Section 1.10. SUCCESSORS AND ASSIGNS. All covenants
and agreements in this Indenture by the Company and Trustee shall
bind their respective successors and assigns, whether so
expressed or not.
Section 1.11. SEPARABILITY CLAUSE. In case any
provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
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Section 1.12. BENEFITS OF INDENTURE. Nothing in this
Indenture or in the Notes issued pursuant hereto, express or
implied, shall give to any Person (other than the parties hereto
and their successors hereunder, any Paying Agent and the Holders)
any benefit or any legal or equitable right, remedy or claim
under this Indenture, except as provided in Article Thirteen and
Article Fourteen.
SECTION 1.13. GOVERNING LAW. THIS INDENTURE AND THE
NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF, OTHER THAN ANY MANDATING THE
APPLICATION OF SUCH LAWS). THE TRUSTEE, THE COMPANY, EACH
SUBSIDIARY GUARANTOR, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES
AND (BY THEIR ACCEPTANCE OF THE NOTES) THE HOLDERS, AGREE TO
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN
THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS INDENTURE OR THE NOTES.
Section 1.14. NO RECOURSE AGAINST OTHERS. No recourse
for the payment of the principal of, or premium, if any, or
interest on, any of the Notes or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in this
Indenture or in any of the Notes, or of any Subsidiary Guarantor
in any Subsidiary Guarantee, or because of the creation of any
Indebtedness represented thereby, shall be had against any
incorporator, shareholder, officer, director, employee or
controlling person of the Company or of any successor Person
thereof. Each Holder of Notes by accepting a Note waives and
releases all such liability, and such waiver and release is part
of the consideration for the issuance of the Notes.
Section 1.15. EXHIBITS AND SCHEDULES. All exhibits
and schedules attached hereto are by this reference made a part
hereof with the same effect as if herein set forth in full.
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Section 1.16. COUNTERPARTS. This Indenture may be
executed in any number of counterparts, each of which shall be an
original; but such counterparts shall together constitute but one
and the same instrument.
Section 1.17. DUPLICATE ORIGINALS. The parties may
sign any number of copies of this Indenture. Each signed copy
shall be an original, but all of them together represent the same
agreement.
Section 1.18. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in, and made a part of,
this Indenture. Any terms incorporated by reference in this
Indenture that are defined by the TIA, defined by TIA reference
to another statute or defined by Commission rule under the TIA,
have the meanings so assigned to them therein.
ARTICLE TWO
SECURITY FORMS
Section 2.01. FORM AND DATING. The Initial Notes and
the Trustee's certificate of authentication relating thereto
shall be substantially in the form of EXHIBIT A. The Exchange
Notes and the Trustee's certificate of authentication relating
thereto shall be substantially in the form of EXHIBITB. The
Notes may have notations, legends or endorsements required by
law, governmental rule or regulation, stock or other securities
exchange rule or depository rule or usage, or other customary
usage. The Company shall approve the form of the Notes and any
notation, legend or endorsement on them. Each Note shall be
dated the date of its authentication and shall show the date of
its authentication.
The additional terms and provisions contained in the
forms of Notes and Subsidiary Guarantees, annexed hereto
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as EXHIBITS A AND E, respectively, shall constitute, and are
hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such
terms and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule144A shall be
issued initially in the form of one or more global Notes in
registered form, substantially in the form set forth in EXHIBIT A
(each, a "GLOBAL NOTE"), deposited with the Trustee, as custodian
for the Depository, duly executed by the Company and
authenticated by the Trustee as hereinafter provided, and shall
be Restricted Securities and shall bear the legend set forth in
Section 2.03 hereof. The aggregate principal amount of any such
Global Note may from time to time be increased or decreased by
adjustments made on the records of the Note Registrar, solely as
and to the extent provided in Section 2.05 hereof; PROVIDED that
in no event shall the aggregate principal amount of Notes
outstanding at any time exceed $85,000,000, except as provided in
Section 3.05 hereof.
Notes offered and sold in offshore transactions in
reliance on Regulation S shall be represented upon issuance by a
temporary Global Note, which will be exchangeable for
certificated Notes in registered form in substantially the form
set forth in EXHIBIT A (the "OFFSHORE PHYSICAL NOTES") only upon
the expiration of the "40-day restricted period" within the
meaning of Rule 903(c)(3) of Regulation S. Notes offered and
sold in reliance on any other exemption from registration under
the Securities Act other than as described in the preceding
paragraph shall be issued, and Notes offered and sold in reliance
on Rule 144A may be issued, in the form of certificated Notes in
registered form, in substantially the form set forth in EXHIBITA
(the "U.S. PHYSICAL NOTES"). The Offshore Physical Notes and the
U.S. Physical Notes, together with any other certificated Notes
in registered form, in substantially the form set forth in
EXHIBIT A, issued pursuant to the last sentence of paragraph (2)
of Section 2.04, are sometimes collectively
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herein referred to as the "PHYSICAL NOTES." Physical Notes may
initially be registered in the name of the Depository or a
nominee of such Depository and be delivered to the Trustee as
custodian for such Depository. Beneficial owners of Physical
Notes, however, may request registration of such Physical Notes
in their names or the names of their nominees.
Section 2.02. EXECUTION AND AUTHENTICATION; AGGREGATE
PRINCIPAL AMOUNT. The Notes shall be executed on behalf of the
Company by two Officers of the Company, or by an Officer of the
Company and an Assistant Treasurer or Assistant Secretary of the
Company. The signature of any Officer, Assistant Treasurer or
Assistant Secretary of the Company on the Notes may be manual or
facsimile.
If an Officer, Assistant Treasurer or Assistant
Secretary whose manual or facsimile signature is on a Note was an
Officer, Assistant Treasurer or Assistant Secretary at the time
of such execution but no longer holds that office or position at
the time the Trustee authenticates the Note, the Note shall
nevertheless be valid.
No Note shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose, unless there
appears on such Note a certificate of authentication
substantially in the form provided for herein executed by the
Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such
Note has been duly authenticated and delivered hereunder.
The Trustee shall authenticate (i)Initial Notes for
original issue in the aggregate principal amount not to exceed
$85,000,000 and (ii)Exchange Notes from time to time for issue
only in exchange for a like principal amount of Initial Notes, in
each case upon a written order of the Company in the form of an
Officers' Certificate. The Officers' Certificate shall specify
the amount of Notes to be authenticated and the date on which the
Notes are to be
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authenticated, whether the Notes are to be Initial Notes or
Exchange Notes and whether the Notes are to be issued as Physical
Notes or a Global Note or such other information as the Trustee
may reasonably request. The aggregate principal amount of Notes
outstanding at any time may not exceed $85,000,000, except as
provided in Section 3.05 hereof.
The Trustee may appoint an authenticating agent (the
"AUTHENTICATING AGENT") reasonably acceptable to the Company to
authenticate Notes. Unless otherwise provided in the
appointment, an Authenticating Agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture
to authentication by the Trustee includes authentication by such
Authenticating Agent. An Authenticating Agent has the same
rights as an agent to deal with the Company or with any Affiliate
of the Company.
Section 2.03. RESTRICTIVE LEGENDS. Each Global Note
and Physical Note that constitutes a Restricted Security shall
bear the following legend (the "PRIVATE PLACEMENT LEGEND") on the
face thereof until removed in accordance with the last sentence
of such legend, unless otherwise agreed by the Company and the
Holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, REGISTRATION AND SUBJECT TO
COMPLIANCE WITH OTHER APPLICABLE LAWS. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE
DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD THAT
MAY HEREAFTER BE PROVIDED UNDER RULE 144(K) (OR ANY
SUCCESSOR PROVISION THEREOF) AS PERMITTING THE RESALE
BY NON-
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AFFILIATES OF RESTRICTED SECURITIES WITHOUT RESTRICTION)
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION
DATE"), ONLY (A)TO THE COMPANY; (B)PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C)FOR SO LONG AS THE NOTES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D)PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS
THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E)TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH
A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR
(F)PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
OTHERWISE IN COMPLIANCE WITH OTHER APPLICABLE LAWS, SUBJECT
TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F)
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM. THE LEGEND WILL BE REMOVED UPON THE REQUEST OF A
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
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Each Global Note shall also bear a legend on the face
thereof in substantially the following form:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART
FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY
NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY
TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE
OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF
SUCH SUCCESSOR DEPOSITORY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE& CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT HEREON IS MADE TO CEDE& CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE& CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF
CEDE& CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTION2.05 OF THE
INDENTURE.
Section 2.04. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTE.
This Section 2.04 shall apply only to the Global Note deposited
with the Depository or its custodian.
(1) So long as the Notes are eligible for book-entry
settlement with the Depository, or unless
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otherwise required by law, the Global Note initially shall
(i) be registered in the name of the Depository or the
nominee of such Depository, (ii) be delivered to the Trustee
as custodian for such Depository and (iii) bear legends as
set forth in Section 2.03.
Members of, or participants in, the Depository ("AGENT
MEMBERS") shall have no rights under this Indenture with
respect to any Global Note held on their behalf by the
Depository, or the Trustee as its custodian, or under the
Global Note, and the Depository may be treated by the
Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of the Global Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any Agent
of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization
furnished by the Depository or impair, as between the
Depository and its Agent Members, the operation of customary
practices governing the exercise of the rights of a holder
of any Note.
(2) Transfers of the Global Note shall be limited to
transfers in whole, but, subject to the immediately
succeeding sentence, not in part, to the Depository, its
successors or their respective nominees. Interests of
beneficial owners in the Global Note may be transferred or
exchanged for Physical Notes in accordance with the rules
and procedures of the Depository and the provisions of
Section 2.05 hereof. In addition, Physical Notes shall be
transferred to the Persons identified by the Depositary as
the beneficial owners of the Notes represented by the Global
Note in exchange for their beneficial interests in the
Global Note upon the surrender by the Depositary of the
Global Note for cancellation, if (i)the Depository notifies
the Company, and the Company notifies the Trustee, that it
is unwilling or unable to continue as Depository for the
Global Note and a successor depositary is not
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appointed by the Company within 90 days of such notice, (ii)
the Company, at its option, notifies the Trustee in writing
that it elects to cause the issuance of Physical Notes under
the Indenture or (iii)an Event of Default has occurred and
is continuing and the Note Registrar has received a written
request from the Depository to issue Physical Notes.
(3) Any transfer or exchange of a portion of the
beneficial interest in the Global Note to beneficial owners
pursuant to paragraph (2) shall be made only in accordance
with the provisions of Section 2.05 hereof.
(4) In connection with the transfer of the beneficial
interests in the entire Global Note to beneficial owners
pursuant to paragraph (2), the Global Note shall be deemed
to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate
and deliver to each beneficial owner identified by the
Depository in exchange for its beneficial interest in the
Global Note, an equal aggregate principal amount of Physical
Notes of authorized denominations.
(5) Any Physical Note constituting a Restricted
Security delivered in exchange for a beneficial interest in
the Global Note pursuant to paragraph (2) or (3) shall,
except as otherwise provided by paragraphs (1)(a)(x) and (3)
of Section 2.05 hereof, bear the Private Placement Legend.
(6) The Company or the Trustee, in the discretion of
either of them, may treat as the Act of a Holder any
instrument or writing of any Person that is identified by
the Depositary as the owner of a beneficial interest in the
Global Note, provided that the fact and date of the
execution of such instrument or writing is proved in
accordance with Section 1.05(b).
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Section 2.05. SPECIAL TRANSFER PROVISIONS. (1)TRANSFERS
TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS AND NON-U.S.
PERSONS. The following provisions shall apply with respect to
the registration of any proposed transfer of a Note constituting
a Restricted Security to any Institutional Accredited Investor
which is not a QIB or to any Non-U.S. Person:
(a) the Note Registrar shall register the transfer of
any Note constituting a Restricted Security, whether or not
such Note bears the Private Placement Legend, if (x) the
requested transfer is after the later of the second
anniversary of the Issue Date and the relevant Resale
Restriction Termination Date or (y)(A)in the case of a
transfer to an Institutional Accredited Investor which is
not a QIB (excluding Non-U.S. Persons), the proposed
transferee has delivered to the Note Registrar a certificate
substantially in the form of EXHIBIT C or (B)in the case of a
transfer to a Non-U.S. Person, the proposed transferor has
delivered to the Note Registrar a certificate substantially
in the form of EXHIBIT D; and
(b) if the proposed transferor is an Agent Member
holding a beneficial interest in the Global Note, upon
receipt by the Note Registrar of (x) the certificate, if
any, required by paragraph (a) above and (y) written
instructions given in accordance with the Depository's and
the Note Registrar's procedures; and
(c) unless otherwise agreed by the Company and the
Trustee, in the case of any transfer pursuant to paragraph
(a)(y) above, an opinion of counsel, certifications and
other information satisfactory to the Company and the
Trustee,
whereupon (i) the Note Registrar shall reflect on its books and
records the date and (if the transfer does not involve a transfer
of outstanding Physical Notes) a decrease in the principal amount
of the Global Note in an amount equal to
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the principal amount of the beneficial interest in the Global
Note to be transferred, and (ii) the Company shall execute and
the Trustee shall authenticate and deliver one or more Physical
Notes of like tenor and amount.
(2) TRANSFERS TO QIBS. The following provisions shall
apply with respect to the registration of any proposed transfer
of a Note constituting a Restricted Security to a QIB (excluding
transfers to Non-U.S. Persons):
(a) the Note Registrar shall register the transfer if
such transfer is being made by a proposed transferor who has
checked the box provided for on the form of Note stating, or
has otherwise advised the Company and the Note Registrar in
writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Note stating, or
has otherwise advised the Company and the Note Registrar in
writing, that it is purchasing the Note for its own account
or an account with respect to which it exercises sole
investment discretion and that it and any such account is a
QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding
the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is
aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from
registration provided by Rule 144A; and
(b) if the proposed transferee is an Agent Member, and
the Notes to be transferred consist of Physical Notes which
after transfer are to be evidenced by an interest in the
Global Note, upon receipt by the Note Registrar of written
instructions given in accordance with the Depository's and
the Note Registrar's procedures, the Note Registrar shall
reflect on its books and records the date and an
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increase in the principal amount of the Global Note in an
amount equal to the principal amount of the Physical Notes
to be transferred, and the Trustee shall cancel the Physical
Notes so transferred.
(3) PRIVATE PLACEMENT LEGEND. Upon the transfer,
exchange or replacement of Notes not bearing the Private
Placement Legend, the Note Registrar shall deliver Notes that do
not bear the Private Placement Legend. Upon the transfer,
exchange or replacement of Notes bearing the Private Placement
Legend, the Note Registrar shall deliver only Notes that bear the
Private Placement Legend unless (i)the requested transfer is
after the later of the second anniversary of the Issue Date and
the relevant Resale Restriction Termination Date, or (ii) there
is delivered to the Note Registrar an opinion of counsel
reasonably satisfactory to the Company and the Trustee to the
effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the
provisions of the Securities Act.
(4) GENERAL. By its acceptance of any Note bearing
the Private Placement Legend, each Holder of such a Note
acknowledges the restrictions on transfer of such Note set forth
in this Indenture and in the Private Placement Legend and agrees
that it will transfer such Note only as provided in this
Indenture.
The Note Registrar shall retain copies of all letters,
notices and other written communications received pursuant to
Section 2.04 hereof or this Section 2.05. The Company shall have
the right to require the Note Registrar to deliver to the
Company, at the Company's expense, copies of all such letters,
notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Note
Registrar.
In connection with any transfer of the Notes, the
Trustee, the Note Registrar and the Company shall be entitled to
receive, shall be under no duty to inquire into,
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may conclusively presume the correctness of, and shall be fully protected in
relying upon the certificates, opinions and other information referred to herein
(or in the forms provided herein, attached hereto or to the Notes, or otherwise)
received from any Holder and any transferee of any Note regarding the validity,
legality and due authorization of any such transfer, the eligibility of the
transferee to receive such Note and any other facts and circumstances related to
such transfer.
ARTICLE THREE
THE NOTES
Section 3.01 TITLE AND TERMS. The aggregate principal amount of
Notes which may be authenticated and delivered under this Indenture is limited
to $85,000,000, except for Notes authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Notes pursuant to
Section 3.03, 3.04, 3.05, 9.05, 10.14, 10.15 or 11.08.
The Notes shall be known and designated as the "9 5/8% Senior
Subordinated Notes due 2007" of the Company. The final Stated Maturity of the
Notes shall be July 1, 2007. Interest on the Notes will accrue at the rate of
9 5/8% per annum and will be payable semi-annually in arrears on January 1 and
July 1 in each year, commencing on January 1, 1998, to holders of record on the
immediately preceding December 15 and June 15, respectively. Interest on the
Notes will accrue from the most recent date to which interest has been paid or
duly provided for or, if no interest has been paid, from the Issue Date.
The additional terms and provisions contained in the forms of Notes
and the Subsidiary Guarantees, annexed hereto as EXHIBITS A AND E, respectively,
shall constitute, and are hereby expressly made, a part of this Indenture and,
to the extent applicable, the Company and the Trustee, by
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their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Section 3.02. DENOMINATIONS. The Notes shall be issuable only in
fully registered form without coupons and in denominations of $1,000 and any
integral multiple thereof.
Section 3.03. TEMPORARY NOTES. Pending the preparation and delivery
of definitive Notes, the Company may execute, and upon Company Order the Trustee
shall authenticate and deliver, temporary Notes. Temporary Notes may be
printed, lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive Notes in
lieu of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the Officer or Officers executing such
Notes may consider appropriate, as conclusively evidenced by their execution of
such Notes.
If temporary Notes are issued, the Company will cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Company
designated for such purpose pursuant to Section 10.02, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.
Section 3.04. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office a register (the
register maintained in such office and in any other office or agency
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designated pursuant to Section 10.02 being herein sometimes referred to as the
"NOTE REGISTER") in which, subject to such reasonable regulations as the Person
appointed as being responsible for the keeping of the Note Register (the "NOTE
REGISTRAR") may prescribe, the Company shall provide for the registration of
Notes and of transfers of Notes. The Note Register shall be in written form or
in any form capable of being converted into written form within a reasonable
period of time. The Trustee is hereby initially appointed Note Registrar for
the purpose of registering Notes and transfers of Notes as herein provided. The
Company may appoint one or more co-registrars.
Upon surrender for registration of transfer of any Note at the office
or agency of the Company designated pursuant to Section 10.02, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Notes of any authorized
denomination or denominations, of a like aggregate principal amount and bearing
such restrictive legends as may be required by Section 2.03; PROVIDED that any
Note that is a Restricted Security may only be transferred pursuant to and in
accordance with Sections 2.04 and 2.05 hereof.
At the option of the Holder, Notes in certificated form may be
exchanged for other Notes of any authorized denomination or denominations, of a
like aggregate principal amount, upon surrender of the Notes to be exchanged at
such office or agency. Whenever any Notes are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the Notes
which the Holder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company, evidencing the same
indebtedness, and entitled to the same benefits under this Indenture, as the
Notes surrendered upon such registration of transfer or exchange and no such
transfer or exchange shall constitute a
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repayment of any obligation nor create any new obligations of the Company.
Every Note presented or surrendered for registration of transfer, or
for exchange or redemption, shall (if so required by the Company, the Trustee,
the Note Registrar or any co-registrar) be duly endorsed or be accompanied by a
written instrument of transfer in form satisfactory to the Company, the Trustee,
and the Note Registrar or any co-registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange or redemption of Notes, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Notes,
other than exchanges pursuant to Section3.03, 9.05, 10.14, 10.15 or 11.08 not
involving any transfer.
None of the Company, the Trustee, the Note Registrar or any
co-registrar shall be required (a) to issue, register the transfer of or
exchange any Note during a period beginning at the opening of business on the
day that the Trustee receives notice of any redemption from the Company and
ending at the close of business on the day notice of redemption is sent to
Holders, (b) to register the transfer of or exchange any Note so selected for
redemption in whole or in part, except the unredeemed portion of Notes being
redeemed in part or (c) to issue, register, transfer or exchange any Note during
a Change of Control Offer or an Asset Sale Offer, if such note is tendered
pursuant to such Change of Control Offer or Asset Sale Offer and not withdrawn.
When Notes are presented to the Note Registrar with a request to
register the transfer or to exchange them for an equal principal amount of Notes
of other authorized denominations, the Note Registrar shall register the
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transfer or make the exchange as requested if its requirements for such
transactions are met, and such transfer or exchange otherwise complies with the
provisions of this Indenture. To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall authenticate Notes at
the Note Registrar's request.
Section 3.05. MUTILATED, DESTROYED, LOST AND STOLEN NOTES. If (a) any
mutilated Note is surrendered to the Trustee, or (b) the Company and the Trustee
receive evidence to their satisfaction of the destruction, loss or theft of any
Note, and there is delivered to the Company and the Trustee, such security or
indemnity, in each case, as may be required by them to save each of them
harmless from any loss which either of them may suffer if a Note is replaced,
then, in the absence of notice to the Company or the Trustee that such Note has
been acquired by a BONA FIDE purchaser, the Company shall execute and the
Trustee shall authenticate and deliver, in exchange for any such mutilated Note
or in lieu of any such destroyed, lost or stolen Note, a replacement Note of
like tenor and principal amount, bearing a number not contemporaneously
outstanding.
Upon the issuance of any replacement Notes under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all benefits of this Indenture equally and proportionately with any and all
other Notes duly issued hereunder.
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The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
Section 3.06 PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Note which is payable, and is punctually paid or duly provided
for, on any Interest Payment Date shall be paid at the Corporate Trust Office or
agency of the Trustee maintained for that purpose in The City of New York, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts: PROVIDED, HOWEVER, that
payment of interest may be made at the option of the Company by check (which may
be a check of the Company) mailed to the address of the Person entitled thereto
as such address shall appear on the Note Register or by wire transfer to such
Person.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date and interest on such
defaulted interest at the then applicable interest rate borne by the Notes, to
the extent lawful (such defaulted interest and interest thereon herein
collectively called "DEFAULTED INTEREST"), shall forthwith cease to be payable
to the Holder on the Regular Record Date and such Defaulted Interest may be paid
by the Company, at its election in each case, as provided in subsection (a) or
(b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Note and the date
of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of
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money equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements reasonably satisfactory to
the Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this subsection (a)
provided. Thereupon the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest which shall be not more than 15 days and
not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company in writing
of such Special Record Date. In the name and at the expense of the
Company, the Trustee shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at its address as it appears in
the Note Register, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so mailed, such Defaulted Interest shall
be paid to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered on such Special Record Date and shall no
longer be payable pursuant to the following subsection (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, if, after written notice given by the
Company to the Trustee of the proposed payment pursuant to this subsection
(b), such payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of
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any other Note shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Note.
Section 3.07. PERSONS DEEMED OWNERS. Prior to and at the time of due
presentment for registration of transfer, the Company, the Trustee and any agent
of the Company or the Trustee may treat the Person in whose name any Note is
registered in the Note Register as the owner of such Note for the purpose of
receiving payment of principal of, and premium, if any, and (subject to Section
3.06) interest on, such Note and for all other purposes whatsoever, whether or
not such Note shall be overdue, and neither the Company, the Trustee nor any
agent of the Company or the Trustee shall be affected by notice to the contrary.
Section 3.08. CANCELLATION. All Notes surrendered for payment,
redemption, registration of transfer or exchange shall be delivered to the
Trustee and, if not already cancelled, shall be promptly cancelled by it. The
Company may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, as evidenced by a Company Order instructing
the Trustee that all Notes so delivered shall be promptly cancelled by the
Trustee. No Notes shall be authenticated in lieu of or in exchange for any
Notes cancelled as provided in this Section 3.08, except as expressly permitted
by this Indenture. Cancelled Notes held by the Trustee shall be disposed of as
directed by a Company Order; PROVIDED, HOWEVER, that the Trustee shall not be
required to destroy such cancelled Notes. The Trustee shall provide the Company
with a list of all Notes that have been cancelled from time to time as requested
by the Company.
Section 3.09. COMPUTATION OF INTEREST. Interest on the Notes shall
be computed on the basis of a 360-day year of twelve 30-day months.
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Section 3.10. LEGAL HOLIDAYS. In any case where any Interest Payment
Date, Redemption Date, date established for the payment of Defaulted Interest or
Stated Maturity of any Note shall not be a Business Day, then (notwithstanding
any other provision of this Indenture or of the Notes) payment of principal,
premium, if any, or interest need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date, Redemption Date, date established for the payment of
Defaulted Interest or at the Stated Maturity, as the case may be, and no
interest shall accrue with respect to such payment for the period from and after
such Interest Payment Date, Redemption Date, date established for the payment of
Defaulted Interest or Stated Maturity, as the case may be, to the next
succeeding Business Day.
Section 3.11. CUSIP NUMBER. The Company in issuing the Notes may use
"CUSIP" numbers (if then generally in use), and if so, the Trustee may use the
CUSIP numbers in notices of redemption or exchange as a convenience to Holders;
PROVIDED, HOWEVER, that any such notice may state that no representation is made
as to the correctness or accuracy of the CUSIP number printed in the notice or
on the Notes, and that reliance may be placed only on the other identification
numbers printed on the Notes. The Company shall promptly notify the Trustee in
writing of any change in the CUSIP number of the Notes.
Section 3.12. PAYMENT OF ADDITIONAL INTEREST UNDER REGISTRATION
RIGHTS AGREEMENT. Under certain circumstances the Company will be obligated to
pay certain additional amounts of interest to the Holders, as more particularly
set forth in Section 2(e) of the Registration Rights Agreement. The terms of
Section 2(e) of the Registration Rights Agreement are hereby incorporated herein
by reference and the Company shall be obligated to provide a copy of such
Registration Rights Agreement to the Trustee.
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ARTICLE FOUR
DEFEASANCE OR COVENANT DEFEASANCE
Section 4.01. THE COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT
DEFEASANCE. The Company may, at its option, at any time, elect to have
terminated the obligations of the Company with respect to Outstanding Notes and
to have terminated the obligations of any Subsidiary Guarantors, with respect to
the Subsidiary Guarantees, in each case, as set forth in this Article, and elect
to have either Section 4.02 or Section 4.03 be applied to all of the Outstanding
Notes (the "DEFEASED NOTES") and the Subsidiary Guarantees (the "DEFEASED
GUARANTEES"), upon compliance with the conditions set forth below in
Section 4.04. Either Section 4.02 or Section 4.03 may be applied to the
Defeased Notes and Defeased Guarantees to any Redemption Date or the Stated
Maturity of the Notes.
Section 4.02. DEFEASANCE AND DISCHARGE. Upon the Company's exercise
under Section 4.01 of the option applicable to this Section 4.02, the Company
shall be deemed to have been released and discharged from its obligations with
respect to the Defeased Notes and each of the Subsidiary Guarantors shall be
deemed to have been released from its obligations with respect to the Defeased
Guarantees on the date the relevant conditions set forth in Section 4.04 below
are satisfied (hereinafter, "DEFEASANCE"). For this purpose, such defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the Defeased Notes, which shall thereafter be deemed
to be "Outstanding" only for the purposes of Section 4.05 and the other Sections
of this Indenture referred to in (a) and (b) below, and the Company and each of
the Subsidiary Guarantors shall be deemed to have satisfied all other
obligations under such Notes and this Indenture insofar as such Notes are
concerned (and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following, which shall
survive until otherwise terminated or
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discharged hereunder: (a)the rights of Holders of Defeased Notes to receive,
solely from the trust fund described in Section 4.04 and as more fully set forth
in such Section, payments in respect of the principal of, premium, if any, and
interest on such Notes when such payments are due, (b)the Company's obligations
with respect to such Defeased Notes under Sections 3.03, 3.04, 3.05 and 10.02,
(c)the rights, powers, trusts, duties and immunities of the Trustee hereunder,
including, without limitation, the Trustee's rights under Section 6.07, and
(d)this Article Four. Subject to compliance with this Article Four, the Company
may, at its option and at any time, exercise its option under this Section 4.02
notwithstanding the prior exercise of its option under Section 4.03 with respect
to the Notes.
Section 4.03. COVENANT DEFEASANCE. Upon the Company's exercise under
Section 4.01 of the option applicable to this Section 4.03, the Company and the
Subsidiary Guarantors shall be released from their respective obligations under
any covenant or provision contained in Section 10.04 (other than with respect to
the Company) and Sections 10.05 through 10.20 and the provisions of Article
Eight shall not apply, with respect to the Defeased Notes on and after the date
the conditions set forth below are satisfied (hereinafter, "COVENANT
DEFEASANCE"), and the Notes shall thereafter be deemed not to be "Outstanding"
for the purposes of any direction, waiver, consent or declaration or Act of
Holders (and the consequences of any thereof) in connection with such covenants
or provisions, but shall continue to be deemed "Outstanding" for all other
purposes hereunder. For this purpose, such covenant defeasance means that, with
respect to the Outstanding Notes, the Company and the Subsidiary Guarantors may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant or provision, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or provision or by reason of any reference in any such covenant or
provision to any other provision herein or in any other document and such
omission
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to comply shall not constitute a Default or an Event of Default under Section
5.01, but, except as specified above, the remainder of this Indenture and such
Outstanding Notes shall be unaffected thereby.
Section 4.04. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE. The
following shall be the conditions to application of either Section 4.02 or
Section 4.03 to the Outstanding Notes:
(1) The Company shall have irrevocably deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 6.09 who shall agree to comply with the provisions of this
Article Four applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Notes, (a) cash, in
United States dollars, in an amount, or (b)U.S. Government Obligations
maturing as to principal, premium, if any, and interest in such amounts of
money and at such times as are sufficient without consideration of any
reinvestment of such interest, to pay principal of and interest on Defeased
Notes not later than one day before the due date of any payment, or (c)a
combination thereof, in amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants or a
nationally recognized investment banking firm expressed in a written
certification thereof delivered to the Trustee, to pay and discharge and
which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge, the principal of, premium, if any, and interest on the
Defeased Notes on the Stated Maturity or relevant Redemption Date in
accordance with the terms of this Indenture and the Notes; PROVIDED,
HOWEVER, that the Trustee (or other qualifying trustee) shall have received
an irrevocable written order from the Company instructing the Trustee (or
other qualifying trustee) to apply such money or the proceeds
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of such U.S. Government Obligations to said payments with respect to the
Notes;
(2) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as Section 5.01(g) or
(h) is concerned, at any time during the period ending on the ninety-first
day after the date of such deposit;
(3) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a Default or Event of Default under,
this Indenture or any other material agreement or instrument to which the
Company or any Subsidiary Guarantor is a party or by which it is bound;
(4) In the case of an election under Section 4.02, the Company shall
have delivered to the Trustee an Opinion of Counsel from Debevoise &
Plimpton or other counsel in the United States stating that (x)the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling or (y)since the date hereof, there has been a change in
the applicable Federal income tax law, in either case to the effect that,
and based thereon such opinion shall confirm to the effect that, the
Holders of the Outstanding Notes will not recognize income, gain or loss
for Federal income tax purposes as a result of such defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance had not
occurred;
(5) In the case of an election under Section 4.03, the Company shall
have delivered to the Trustee an Opinion of Counsel from Debevoise &
Plimpton or other counsel in the United States to the effect that the
Holders of the Outstanding Notes will not recognize income, gain or loss
for Federal income tax purposes as a result of such covenant defeasance and
will be
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subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such covenant defeasance
had not occurred; and
(6) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, (i) each to the effect that all
conditions precedent provided for in this Section 4.04 relating to either
the defeasance under Section 4.02 or the covenant defeasance under Section
4.03, as the case may be, have been complied with and (ii) in the case of
such Officers' Certificate, to the effect that if any other Indebtedness of
the Company shall then be outstanding or committed, such defeasance or
covenant defeasance will not violate the provisions of the material
agreements or instruments evidencing such Indebtedness. In rendering such
Opinion of Counsel, counsel may rely on such Officers' Certificate as to
any matters of fact (including as to compliance with the foregoing clauses
(1), (2) and (3)).
Opinions and certificates required to be delivered under this Section
shall be in compliance with the requirements set forth in the second paragraph
of Section1.04 and this Section4.04.
From and after the time of any deposit pursuant to clause (1) of the
first paragraph of this Section 4.04, the money or U.S. Government Obligations
so deposited shall not be subject to the rights of the holders of Senior Debt of
the Company pursuant to the subordination provisions of Article Fourteen.
Section 4.05. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to the provisions of the
last paragraph of Section 10.03, all money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or such other
Person that would qualify to act as successor
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trustee under Article Six, collectively for purposes of this Section 4.05, the
"Trustee") pursuant to Section 4.04 in respect of the Defeased Notes and
Defeased Guarantees shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (other than the Company or any
Affiliate of the Company) as the Trustee may determine, to the Holders of such
Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee and its agents and
hold them harmless against any tax, fee or other charge imposed on or assessed
against the U.S. Government Obligations deposited pursuant to Section 4.04 or
the principal, premium, if any, and interest received in respect thereof other
than any such tax, fee or other charge which by law is for the account of the
Holders of the Defeased Notes.
Anything in this Article Four to the contrary notwithstanding, the
Trustee shall deliver to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 4.04
hereof which, in the opinion of a nationally-recognized firm of independent
public accountants or a nationally recognized investment banking firm expressed
in a written certification thereof to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect an equivalent
defeasance or covenant defeasance. Subject to Article Six, the Trustee shall
not incur any liability to any Person by relying on such opinion.
Section 4.06. REINSTATEMENT. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with
Section 4.02 or 4.03, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining
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or otherwise prohibiting such application, then the obligations of the
Company and each of the Subsidiary Guarantors under this Indenture, the Notes
and the Subsidiary Guarantees shall be revived and reinstated as though no
deposit had occurred pursuant to Section 4.02 or 4.03, as the case may be,
until such time as the Trustee or Paying Agent is permitted to apply all such
money and U.S. Government Obligations in accordance with Section 4.02 or
4.03, as the case may be; PROVIDED, HOWEVER, that if the Company or the
Subsidiary Guarantors make any payment of principal, premium, if any, or
interest on any Note following the reinstatement of its obligations, the
Company or the Subsidiary Guarantors, as the case may be, shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money and U.S. Government Obligations held by the Trustee or Paying Agent.
Section 4.07 REPAYMENT TO COMPANY. The Trustee shall pay to the
Company (or, if appropriate, the Subsidiary Guarantors) upon Company Request any
money held by it for the payment of principal or interest that remains unclaimed
for two years. After payment to the Company or the Subsidiary Guarantors,
Noteholders entitled to money must look to the Company and the Subsidiary
Guarantors for payment as general creditors unless an applicable abandoned
property law designates another person and all liability of the Trustee or
Paying Agent with respect to such money shall thereupon cease.
ARTICLE FIVE
REMEDIES
Section 5.01. EVENTS OF DEFAULT. "EVENT OF DEFAULT," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment,
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decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the Company shall fail to pay interest on the Notes (including
any Additional Interest as defined in the Registration Rights Agreement)
when and as the same becomes due and payable (whether or not prohibited by
the subordination provisions of Article Fourteen) and such failure shall
continue for 30 days or more; or
(b) the Company shall fail to pay principal of the Notes (whether or
not prohibited by the subordination provisions of Article Fourteen) when
and as the same shall become due and payable, whether at maturity, upon
acceleration, optional or mandatory redemption, required repurchase, or
otherwise; or
(c) the failure to perform or comply with any provision of Article
Eight and the failure to offer to repurchase or to repurchase the Notes in
the event of a Change of Control in accordance with Section 10.15; or
(d) the Company or any Subsidiary Guarantor shall fail to perform or
comply with any of its other covenants or agreements in this Indenture or
(in the case of the Company) the Notes, or (in the case of such Subsidiary
Guarantor) its Subsidiary Guarantee (other than the defaults specified in
clauses (a), (b) or (c) above), which failure continues for a period of 30
days after written notice thereof has been given to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25.0%
in aggregate principal amount of the Notes then Outstanding; or
(e) the occurrence of one or more defaults under any agreements,
indentures or instruments under which the Company or any Significant
Subsidiary then has outstanding Indebtedness in excess of $7.5 million in
the aggregate and, if not already matured at its final
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maturity in accordance with its terms, such Indebtedness shall have been
accelerated; or
(f) one or more judgments, orders or decrees for the payment of money
in an amount (net of any insurance or indemnity payments actually received
in respect thereof prior to or within 60 days from the entry thereof, or to
be received in respect thereof in the event any appeal thereof shall be
unsuccessful) in excess of $7.5 million, either individually or in the
aggregate, shall be entered against the Company, any Subsidiary Guarantor
or any Significant Subsidiary or any of their respective properties and
which judgments, orders or decrees are not paid, discharged, bonded or
stayed or stayed pending appeal for a period of 60 days after their entry;
or
(g) there shall have been entered by a court of competent
jurisdiction (a)a decree or order for relief in respect of the Company, any
Subsidiary Guarantor or any Significant Subsidiary in an involuntary case
or proceeding under any applicable Bankruptcy Law or (b)a decree or order
adjudging the Company, any Subsidiary Guarantor or any Significant
Subsidiary bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company, any Subsidiary
Guarantor or any Significant Subsidiary under any applicable Federal or
state law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company, any
Subsidiary Guarantor or any Significant Subsidiary or of any substantial
part of their respective properties, or ordering the winding up or
liquidation of their affairs, and any such decree or order for relief shall
continue to be in effect, or any such other decree or order shall be
unstayed and in effect, for a period of 60 days; or
(h) (i)the Company, any Subsidiary Guarantor or any Significant
Subsidiary commences a voluntary case
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or proceeding under any applicable Bankruptcy Law or any other case or
proceeding to be adjudicated bankrupt or insolvent, (ii) the Company, any
Subsidiary Guarantor or any Significant Subsidiary consents to the entry of
a decree or order for relief in respect of the Company, such Subsidiary
Guarantor or such Significant Subsidiary, respectively, in an involuntary
case or proceeding under any applicable Bankruptcy Law or to the
commencement of any bankruptcy or insolvency case or proceeding against it,
(iii) the Company, any Subsidiary Guarantor or any Significant Subsidiary
files a petition or answer or consent seeking reorganization or relief
under any applicable Federal or state Bankruptcy Law, or (iv) the Company,
any Subsidiary Guarantor or any Significant Subsidiary (x) consents to the
filing of such petition or the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official, of the Company, such Subsidiary Guarantor or such
Significant Subsidiary, respectively, or of any substantial part of its
respective property, (y) makes a general assignment for the benefit of
creditors or (z) admits in writing its inability to pay its debts generally
as they become due; or
(i) other than as expressly provided for in this Indenture or such
Subsidiary Guarantee, any Subsidiary Guarantee of a Subsidiary Guarantor
ceases to be in full force and effect or is declared null and void, or any
Subsidiary Guarantor denies that it has any further liability under any
Subsidiary Guarantee, or gives notice to such effect (in each case, other
than by reason of the termination of this Indenture or the release of any
such Subsidiary Guarantee in accordance with such Subsidiary Guarantee or
this Indenture).
Section 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If
an Event of Default (other than an Event of Default specified in Section 5.01(g)
or (h)
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with respect to the Company) occurs and is continuing, the Trustee or the
Holders of not less than 25.0% in aggregate principal amount of the Notes
then Outstanding may, and the Trustee upon the request of the Holders of not
less than 25.0% in aggregate principal amount of the Notes then Outstanding
shall, declare all the Notes due and payable, in an amount equal to the
principal amount of the Notes together with accrued and unpaid interest to
the date the Notes become due and payable, immediately by notice in writing
to the Company, and to the Company and the Trustee, if by such Holders,
specifying the respective Event of Default and that such notice is a "notice
of acceleration," and such principal amount of the Notes and accrued and
unpaid interest thereon shall thereupon become immediately due and payable;
PROVIDED that so long as the Credit Agreement shall be in full force and
effect, if an Event of Default shall have occurred and be continuing (other
than an Event of Default specified in 5.01(g) or (h) with respect to the
Company), any such acceleration shall not be effective until the earlier to
occur of (x) five Business Days following delivery of a written notice of
such acceleration of the Notes to the Bank Agent under the Credit Agreement
and (y) the acceleration of any Indebtedness under the Credit Agreement. If
an Event of Default specified in Section 5.01(g) or (h) with respect to the
Company above occurs and is continuing, then the principal of, and premium,
if any, and any accrued interest on, all the Outstanding Notes shall IPSO
FACTO become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder of the Notes.
Notwithstanding the foregoing, in the event of a declaration of
acceleration in respect of the Notes because an Event of Default specified in
Section 5.01(e) shall have occurred and be continuing, such declaration of
acceleration of the Notes and such Event of Default shall be automatically
annulled and rescinded and be of no further effect if the Indebtedness that is
the subject of such Event of Default has been discharged or paid in full or such
Event of Default shall have been cured or waived by the holders of
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such Indebtedness and if such Indebtedness has been accelerated, then the
holders thereof have rescinded their declaration of acceleration in respect of
such Indebtedness, and written notice of such discharge, cure or waiver and
rescission, as the case may be, shall have been given to the Trustee within 60
days after such declaration of acceleration in respect of the Notes by the
Company or by the requisite holders of such Indebtedness or a trustee, fiduciary
or agent for such holders or other evidence satisfactory to the Trustee of such
events is provided to the Trustee and no other Event of Default shall have
occurred which has not been cured or waived during such 60-day period.
At any time after any declaration of acceleration has been made as
provided in the first paragraph of this Section 5.02 and before a judgment or
decree for payment of the money due has been obtained by the Trustee as
hereinafter provided in this Article Five, the Holders of not less than a
majority in aggregate principal amount of the Notes Outstanding, by written
notice to the Company and the Trustee, may rescind such declaration of
acceleration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(i) all amounts paid or advanced by the Trustee under Section
6.07, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel;
(ii) all overdue interest on all Outstanding Notes;
(iii) the principal of and premium, if any, on any Outstanding
Notes that have become due otherwise than by such declaration of
acceleration
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and interest thereon at the rate then borne by the Notes; and
(iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate then borne by the Notes;
and
(b) all Events of Default, other than the non-payment of principal of
the Notes, or any other amount, that has become due solely by such
declaration of acceleration, have been cured or waived.
Section 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE; OTHER REMEDIES. The Company covenants that if an Event of Default in
payment of principal, premium or interest specified in Section 5.01(a) or
5.01(b) hereof occurs and is continuing, the Company will, upon demand of the
Trustee, pay to the Trustee, for the benefit of the Holders of such Notes, the
whole amount then due and payable on such Notes for principal, premium, if any,
and interest, with interest upon the overdue principal, premium, if any, and, to
the extent that payment of such interest shall be legally enforceable, upon
overdue installments of interest, at the rate then borne by the Notes; and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may, but is not
obligated under this paragraph to, institute a judicial proceeding for the
collection of the sums so due and unpaid and may, but is not obligated under
this paragraph to, prosecute such proceeding to judgment or final decree, and
may, but is not obligated under this paragraph to, enforce the same against the
Company, any Subsidiary Guarantors or any other obligor upon the Notes and
collect any moneys adjudged or decreed to be
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payable in the manner provided by law out of the property of the Company or any
other obligor upon the Notes, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion, but is not obligated under this paragraph to, (i) proceed to
protect and enforce its rights and the rights of the Holders under this
Indenture and the Notes by such appropriate private or judicial proceedings as
the Trustee shall deem most effectual to protect and enforce such rights,
whether for the specific enforcement of any covenant or agreement contained in
this Indenture or the Notes or in aid of the exercise of any power granted
herein or therein, or (ii) proceed to protect and enforce any other proper
remedy. No recovery of any such judgment upon any property of the Company shall
impair any rights, powers or remedies of the Trustee or the Holders.
Section 5.04. TRUSTEE MAY FILE PROOFS OF CLAIMS. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other similar judicial
proceeding relative to the Company, any Subsidiary Guarantor or any other
obligor upon the Notes, or the property of the Company, such Subsidiary
Guarantor or of such other obligor or their creditors, the Trustee (irrespective
of whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand on the Company for the payment of overdue principal
or interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise, but is not obligated under this paragraph
(a) to file and prove a claim for the whole amount of principal,
premium, if any, and interest owing and unpaid in respect of the Notes and
to file such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee
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(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of
the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
Section 5.05. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES.
All rights of action and claims under this Indenture or the Notes may be
prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name and as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Notes in respect of which such judgment has been recovered.
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Section 5.06 APPLICATION OF MONEY COLLECTED. Any money collected by
the Trustee pursuant to this Article shall be applied in the following order, at
the date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal, premium, if any, or interest, upon presentation
of the Notes and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
First: to the Trustee for amounts due under Section 6.07;
Second: to Holders for interest accrued on the Notes, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Notes for interest;
Third: to Holders for principal amounts owing under the Notes,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal and premium; and
Fourth: to the Company or, to the extent the Trustee collects any
amount from any Subsidiary Guarantor, to such Subsidiary Guarantor.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Noteholders pursuant to this
Section 5.06.
Section 5.07. LIMITATION ON SUITS. No Holder of any Notes shall have
any right to institute any proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
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(b) the Holder or Holders of not less than 25.0% in principal amount
of the Outstanding Notes shall have made written request(s) to the Trustee
to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 30 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 30-day period by the Holders of a majority
in aggregate principal amount of the Outstanding Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture or any Note to affect, disturb or prejudice the rights of any
other Holders, or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture or any Note except in
the manner provided in this Indenture and for the equal and ratable benefit of
all the Holders.
Section 5.08. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST. Notwithstanding any other provision in this Indenture,
the Holder of any Note shall have the right, which is absolute and
unconditional, to receive cash payment, in United States dollars, of the
principal of, premium, if any, and (subject to Section 3.06 hereof) interest on
such Note on the respective Stated Maturity or Interest Payment Dates expressed
in such Note and to institute suit for the enforcement of any such payment on or
after such respective
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Stated Maturity or Interest Payment Dates and such rights shall not be impaired
without the express consent of such Holder.
Section 5.09. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture or any Note and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case the Company, the Trustee and the
Holders shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
Section 5.10. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy
herein conferred upon or reserved to the Trustee or to the Holders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 5.11. DELAY OR OMISSION NOT WAIVER. No delay or omission of
the Trustee or of any Holder of any Note to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article Five or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
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Section 5.12. CONTROL BY MAJORITY. The Holders of not less than a
majority in aggregate principal amount of the Outstanding Notes shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee; PROVIDED, HOWEVER, that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture or any Note or expose the Trustee to liability; and
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
In the event the Trustee takes any action or follows any direction
pursuant to this Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against any loss or expense caused
by taking such action or following such direction. This Section 5.12 shall
be in lieu of Section 316(a)(1)(A) of the TIA, and such Section 316(a)(1)(A)
of the TIA is hereby expressly excluded from this Indenture and the Notes, as
permitted by the TIA.
Section 5.13. WAIVER OF PAST DEFAULTS. The Holders of not less than
a majority in aggregate principal amount of the Outstanding Notes may on behalf
of the Holders of all the Notes waive any past Default hereunder and its
consequences, except a Default:
(a) in the payment of the principal of, premium, if any, or interest
on any Note (which may only be waived with the consent of each holder of
Notes affected); or
(b) in respect of a covenant or provision under this Indenture which,
pursuant to the second paragraph of Section 9.02, cannot be modified or
amended without
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the consent of the Holder of each Outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right
consequent thereon. In case of any such waiver, the Company, the Trustee and
the Holders shall be restored to their former positions and rights hereunder
and under the Notes, respectively. This paragraph of this Section 5.13 shall
be in lieu of Section 316(a)(1)(B) of the TIA and such 316(a)(1)(B) of the
TIA is hereby expressly excluded from this Indenture and the Notes, as
permitted by the TIA.
Section 5.14. UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture or the Notes, or
in any suit against the Trustee for any action taken, suffered or omitted by it
as Trustee, the filing by any party litigant in such suit of an undertaking to
pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the Outstanding Notes or to any suit instituted
by any Holder for the enforcement of the payment of the principal of, premium,
if any, or interest on any Note on or after the respective Stated Maturity or
Interest Payment Dates expressed in such Note.
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Section 5.15 WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury or other similar
law wherever enacted, now or at any time hereafter in force, which would
prohibit or forgive the Company from paying all or any portion of the principal
of, premium, if any, or interest on the Notes contemplated herein or in the
Notes or which may affect the covenants or the performance of this Indenture;
and the Company (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
Section 6.01 CERTAIN DUTIES AND RESPONSIBILITIES. Except during the
continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision
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hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that (i) this paragraph
does not limit the effect of paragraph (a) of this Section 6.01; (ii) the
Trustee shall not be liable for any error of judgment made in good faith by
an officer of the Trustee, unless it is proved that the Trustee was negligent
in ascertaining the pertinent facts; and (iii) the Trustee shall not be
liable with respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 5.12.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it or it does not receive an indemnity satisfactory to it in
its sole discretion against such risk, liability, loss, fee or expense which
might be incurred by it in compliance with such request or direction.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the
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Trustee shall be subject to the provisions of this Section 6.01.
Section 6.02. NOTICE OF DEFAULTS. Within 90 days after the
occurrence of any Default, the Trustee shall transmit by mail to all Holders, as
their names and addresses appear in the Note Register, notice of such Default
hereunder known to the Trustee; PROVIDED, HOWEVER, that, except in the case of a
Default in the payment of the principal of, premium, if any, or interest on any
Note, the Trustee shall be protected in withholding such notice if and so long
as the board of directors, the executive committee or a trust committee of
Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders.
Section 6.03. CERTAIN RIGHTS OF TRUSTEE. Subject to Section 6.01
hereof and the provisions of Section 315 of the TIA:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
approval, appraisal, bond, debenture, note, coupon, security, other
evidence of indebtedness or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors of the Company may be sufficiently
evidenced by a Board Resolution of the Company thereof;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking,
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suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate of the Company;
(d) the Trustee and its agents may consult, at the expense of the
Company, with counsel and any written advice of such counsel or any Opinion
of Counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon in accordance with such advice or Opinion of
Counsel;
(e) the Trustee and its agents shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, approval, appraisal, bond, debenture, note,
coupon, security, other evidence of indebtedness or other paper or document
but the Trustee in its discretion may make such further inquiry or
investigation into such facts or matters as it may deem fit;
(f) the Trustee and its agents may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent (other than an agent
who is an employee of the Trustee) or attorney appointed with due care by
it hereunder; or
(g) the Trustee shall not be charged with knowledge of any Default or
Event of Default, as the case may be, with respect to the Notes unless
either (1) a Responsible Officer of the Trustee shall have actual knowledge
of the Default or Event of Default, as the case may be, or (2) written
notice of such Default
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or Event of Default, as the case may be, shall have been given to the
Trustee by the Company, any other obligor on the Notes or by any Holder of
the Notes.
Section 6.04. TRUSTEE NOT RESPONSIBLE FOR RECITALS, DISPOSITIONS OF
NOTES OR APPLICATION OF PROCEEDS THEREOF. The recitals contained herein and in
the Notes, except the Trustee's certificates of authentication, shall be taken
as the statements of the Company and any Subsidiary Guarantors, and the Trustee
assumes no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or the
Notes, except that the Trustee represents that it is duly authorized to execute
and deliver this Indenture, authenticate the Notes and perform its obligations
hereunder and that the statements made by it in a Statement of Eligibility and
Qualification on Form T-1 supplied to the Company and any Subsidiary Guarantors
in connection with the registration of any Notes and any Subsidiary Guarantees
issued hereunder are and will be true and accurate subject to the qualifications
set forth therein. The Trustee shall not be accountable for the use or
application by the Company of Notes or the proceeds thereof.
Section 6.05. TRUSTEE AND AGENTS MAY HOLD NOTES; COLLECTIONS; ETC.
The Trustee, any Paying Agent, any Note Registrar or any other agent of the
Company or any Subsidiary Guarantors, in its individual or any other capacity,
may become the owner or pledgee of Notes, with the same rights it would have if
it were not the Trustee, Paying Agent, Note Registrar or such other agent and,
subject to Sections 6.08 and 6.13 hereof and Sections 310 and 311 of the Trust
Indenture Act, may otherwise deal with the Company or such Subsidiary Guarantors
and receive, collect, hold and retain collections from the Company or such
Subsidiary Guarantors with the same rights it would have if it were not the
Trustee, Paying Agent, Note Registrar or such other agent.
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Section 6.06. MONEY HELD IN TRUST. All moneys received by the
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be segregated from other
funds except to the extent required herein or by law. The Trustee shall not be
under any liability for interest on any moneys received by it hereunder, except
as it may otherwise agree in writing, in its discretion, with the Company.
Section 6.07. COMPENSATION AND INDEMNIFICATION OF TRUSTEE AND ITS
PRIOR CLAIM. The Company and any Subsidiary Guarantors covenant and agree:
(a) to pay to the Trustee from time to time, and the Trustee shall be entitled
to, reasonable compensation for all services rendered by it hereunder (which
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust); (b) to reimburse the Trustee and each predecessor
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by or on behalf of it in accordance with any of the provisions
of this Indenture (including the reasonable compensation, expenses and
disbursements of its counsel and of all agents and other Persons not regularly
in its employ), except any such reasonable expense, disbursement or advance as
may arise from its negligence or bad faith; and (c) to indemnify the Trustee and
each predecessor Trustee for, and to hold it harmless against, any loss,
liability or expense (including the reasonable expense of enforcing this
Indenture against the Company and any Subsidiary Guarantors and of defending
itself against any claim, whether asserted by any Holder, the Company or any
Subsidiary Guarantor), incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of this
Indenture or the trusts hereunder and the exercise or performance of any of its
powers or duties hereunder, including enforcement of this Section 6.07. The
Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. The obligations of the Company and any
Subsidiary Guarantors under this Section 6.07 to compensate and indemnify the
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Trustee and each predecessor Trustee and to pay or reimburse the Trustee and
each predecessor Trustee for expenses, disbursements and advances shall
constitute an additional obligation hereunder and shall survive the satisfaction
and discharge of this Indenture. To secure the obligations of the Company and
any Subsidiary Guarantors to the Trustee under this Section 6.07, the Trustee
shall have a Lien prior to the Notes upon all property and funds held or
collected by the Trustee as such, except funds and property paid by the Company
or such Subsidiary Guarantors and held in trust for the benefit of the Holders
of particular Notes under this Indenture. The Trustee's right to receive
payments of any amounts due under this Section 6.07 shall not be subordinate in
right of payment to any other liability or indebtedness of the Company or any
Subsidiary Guarantor (even though the Notes may be so subordinated). All such
payments and reimbursements shall be made with interest at a rate reasonably
acceptable to the Trustee, the Company and such Subsidiary Guarantors. The
Trustee shall be entitled to file a proof of claim in any bankruptcy proceeding
as a secured creditor for its reasonable compensation, fees and expenses under
this Section 6.07.
When the Trustee incurs expenses under Article Five hereof, the
expenses (including reasonable fees and expenses of its counsel) and the
compensation for the service in connection therewith are intended to constitute
expense of administration under any applicable bankruptcy law.
To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under this Section 6.07 out of the estate in any such
proceeding, shall be denied for any reason, other than solely because of the
misconduct of the Trustee or its agents, payment of the same shall be secured by
a Lien on, and shall be paid out of, any and all distributions, dividends,
money, securities and other properties that the Holders may be entitled to
receive in such proceeding
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whether in liquidation or under any plan of reorganization or arrangement or
otherwise.
Section 6.08. CONFLICTING INTERESTS. The Trustee shall be subject to
and comply with the provisions of Section 310(b) of the TIA.
Section 6.09. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall
at all times be a Trustee hereunder which shall be eligible to act as Trustee
under TIA Sections 310(a)(1) and 310(a)(5) and which shall have a combined
capital, surplus and undivided profits of at least $50,000,000, and have an
office or agency at which Notes may be presented for transfer and redemption
and at which demands may be made in The City of New York. If such
corporation publishes reports of condition at least annually, pursuant to law
or to the requirements of United States Federal, state, territorial or
District of Columbia supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Trustee shall resign immediately in the manner and with the
effect hereinafter specified in this Article.
Section 6.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR
TRUSTEE. No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article Six shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
The Trustee, or any trustee or trustees hereinafter appointed, may at
any time resign by giving written notice thereof to the Company and any
Subsidiary Guarantors at least 20 Business Days prior to the date of such
proposed resignation. Upon receiving such notice of resignation, the Company
and such Subsidiary Guarantors
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shall promptly appoint a successor trustee by written instrument, a copy of
which shall be delivered to the resigning Trustee and a copy to the successor
trustee. If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Trustee within 20 Business Days after the giving of such
notice of resignation, the resigning Trustee may, or any Holder who has been a
BONA FIDE Holder of a Note for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee. Such court may thereupon, after such
notice, if any, as it may deem proper, appoint a successor trustee.
The Trustee may be removed at any time by an Act of the Holders of a
majority in principal amount of the Outstanding Notes, delivered to the Trustee,
the Company and any Subsidiary Guarantors.
If at any time:
(1) the Trustee shall fail to comply with the provisions of Section
310(b) of the TIA in accordance with Section 6.08 hereof after written
request therefor by the Company, by any Subsidiary Guarantor or by any
Holder who has been a BONA FIDE Holder of a Note for at least six months,
or
(2) the Trustee shall cease to be eligible under Section 6.09 hereof
and shall fail to resign after written request therefor by the Company, by
any Subsidiary Guarantor or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent, or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose or
rehabilitation, conservation or liquidation,
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then, in any such case, (i) the Company or any Subsidiary Guarantor may
remove the Trustee, or (ii) subject to Section 5.14, the Holder of any Note
who has been a BONA FIDE Holder of a Note for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of
a successor Trustee. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause,
the Company and any Subsidiary Guarantors shall promptly appoint a successor
Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, the Company and any
Subsidiary Guarantors have not appointed a successor Trustee, a successor
Trustee may be appointed by Act of the Holders of a majority in principal
amount of the Outstanding Notes, delivered to the Company, any Subsidiary
Guarantors and the retiring Trustee, and the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become the
successor Trustee. If no successor Trustee shall have been so appointed by
the Company or the Holders of the Notes and accepted appointment in the
manner hereinafter provided, the Holder of any Note who has been a BONA FIDE
Holder for at least six months may, subject to Section 5.14, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company and any Subsidiary Guarantors shall give notice of
each resignation and each removal of the Trustee and each appointment of a
successor Trustee by mailing written notice of such event by first-class mail,
postage prepaid, to the Holders of Notes as their names and addresses appear in
the Note Register. Each notice shall include the name of the successor Trustee
and the address of its Corporate Trust Office.
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Section 6.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. Every
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Company, any Subsidiary Guarantors and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee as if originally named as
Trustee hereunder; but, nevertheless, on the written request of the Company, any
Subsidiary Guarantor or the successor Trustee, upon payment of amounts due it
pursuant to Section 6.07, such retiring Trustee shall duly assign, transfer and
deliver to the successor Trustee all moneys and property at the time held by it
hereunder and shall execute and deliver an instrument transferring to such
successor Trustee all the rights, powers, duties and obligations of the retiring
Trustee. Upon reasonable request of any such successor Trustee, the Company and
any Subsidiary Guarantors shall execute any and all instruments for more fully
and certainly vesting in and confirming to such successor Trustee all such
rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a
prior claim upon all property or funds held or collected by such Trustee to
secure any amounts then due it pursuant to the provisions of Section 6.07.
No successor Trustee with respect to the Notes shall accept
appointment as provided in this Section 6.11 unless at the time of such
acceptance such successor Trustee shall be eligible to act as Trustee under this
Article Six.
Upon acceptance of appointment by any successor Trustee as provided in
this Section 6.11, the Company and any Subsidiary Guarantors shall give notice
thereof to the Holders of the Notes, by mailing such notice to such Holders at
their addresses as they shall appear on the Note Register. If the acceptance of
appointment is substantially contemporaneous with the resignation or removal of
the predecessor Trustee, then the notice called for by the
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preceding sentence may be combined with the notice called for by Section
6.10(f). If the Company and any Subsidiary Guarantors fail to give such
notice within 10 days after acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be given at the
expense of the Company.
Section 6.12 SUCCESSOR TRUSTEE BY MERGER, ETC. Any corporation into
which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion, or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder without the execution
or filing of any paper or any further act on the part of any of the parties
hereto, provided such corporation shall be eligible under this Article Six to
serve as Trustee hereunder.
In case that, at the time such successor to the Trustee under this
Section 6.12 shall succeed to the trusts created by this Indenture, any of the
Notes shall have been authenticated but not delivered, any such successor to the
Trustee may adopt the certificate of authentication of any predecessor Trustee
and deliver such Notes so authenticated; and, in case at that time any of the
Notes shall not have been authenticated, any successor to the Trustee under this
Section 6.12 may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor Trustee; and in all such cases such
certificate shall have the full force that it is anywhere in the Notes or in
this Indenture provided that the certificate of the Trustee shall have.
Section 6.13 PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUERS.
The Trustee shall comply with Section 311(a) of the TIA, excluding any
creditor relationship listed in Section 311(b) of the TIA. If the present or
any future Trustee shall resign or be removed, it shall
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be subject to Section 311(a) of the TIA to the extent provided therein.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE
Section 7.01. PRESERVATION OF INFORMATION; COMPANY TO FURNISH TRUSTEE
NAMES AND ADDRESSES OF HOLDERS. The Trustee shall preserve in as current a form
as is reasonably practicable the most recent list available to it of the names
and addresses of all Holders; PROVIDED, HOWEVER, that if and for so long as the
Trustee shall be the Note Registrar, the Note Register shall satisfy the
requirements relating to such list. None of the Company, any Subsidiary
Guarantor or the Trustee shall be under any responsibility with regard to the
accuracy of such list.
(b) The Company will furnish or cause to be furnished to the Trustee
(i) semiannually, not more than 10 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date; and
(ii) at such other times as the Trustee may reasonably request in
writing, within 30 days after receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days prior
to the time such list is furnished;
PROVIDED, HOWEVER, that if and so long as the Trustee shall be the Note
Registrar, no such list need be furnished pursuant to this Section 7.01(b).
Section 7.02. COMMUNICATIONS OF HOLDERS. Holders may communicate
with other Holders with respect to their
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rights under this Indenture or under the Notes pursuant to Section 312(b) of
the TIA. The Trustee shall comply with Section 312(b) of the TIA. The
Company, any Subsidiary Guarantors and the Trustee and any and all other
Persons benefited by this Indenture shall have the protection afforded by
Section 312(c) of the TIA.
Section 7.03. REPORTS BY TRUSTEE. Within 60 days after May 15 of
each year commencing with the first May 15 following the date of this
Indenture, the Trustee shall mail to all Holders, as their names and
addresses appear in the Note Register, a brief report dated as of such May 15
that complies with Section 313(a) of the TIA; PROVIDED, HOWEVER, that if no
such event as described in Section 313(a) of the TIA has occurred within such
period then no such report need be transmitted. The Trustee shall also
comply with Sections 313(b), 313(c) and 313(d) of the TIA. At the time of
its mailing to Holders, a copy of each report shall be filed with the
Company, any Subsidiary Guarantors, the Commission and with each national
securities exchange on which the Notes are listed. The Company shall notify
the Trustee if and when the Notes are listed on any stock exchange and of any
delisting thereof.
ARTICLE EIGHT
SUCCESSOR CORPORATION
Section 8.01. WHEN COMPANY MAY MERGE, ETC. The Company shall not, in
any single transaction or series of related transactions, consolidate or merge
with or into (whether or not the Company is the Surviving Person (other than a
consolidation or merger with or into a Wholly-Owned Restricted Subsidiary;
PROVIDED that, in connection with any such merger or consolidation, no
consideration (other than Common Stock in the Surviving Person or the Company)
shall be issued or distributed to the shareholders of the Company)), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its
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properties or assets in one or more related transactions to, another Person,
and the Company will not permit any Restricted Subsidiary to enter into any
such transaction or series of related transactions if such transaction or
series of related transactions, in the aggregate, would result in a sale,
assignment, transfer, lease, conveyance or other disposition of all or
substantially all of the properties and assets of the Company and the
Restricted Subsidiaries, taken as a whole, to another Person, unless (i) the
Surviving Person is a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia; (ii) the
Surviving Person (if other than the Company) assumes all the obligations of
the Company under the Notes (and the Subsidiary Guarantees of the Subsidiary
Guarantors shall be confirmed as applying to such Surviving Person's
obligations under the Notes) and this Indenture and, if the Company has not
satisfied its obligations pursuant to Section 2 of the Registration Rights
Agreement, then the Registration Rights Agreement pursuant to a supplemental
indenture or other written agreement, as the case may be, in a form
reasonably satisfactory to the Trustee; (iii) at the time of and immediately
after such transaction, no Default or Event of Default shall have occurred
and be continuing; and (iv) the Surviving Person will have at the time of
such transaction and after giving pro forma effect thereto, would be
permitted to incur at least $1.00 of additional Indebtedness pursuant to
paragraph (a) of Section 10.11.
This Section 8.01 shall not apply to the Merger or the Debt
Assumption.
Section 8.02. SUCCESSOR SUBSTITUTED. Upon any transaction (other
than a lease) involving the Company in accordance with Section 8.01 hereof, in
which the Company is not the Surviving Person, (a) the Surviving Person or
Persons shall succeed to, and be substituted for, and may exercise every right
and power of, and shall assume all of the liabilities and obligations of, the
Company under this Indenture, the Notes and if the Company has not satisfied
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its obligations pursuant to Section 2 of the Registration Rights Agreement, the
Registration Rights Agreement, with the same effect as if such successor had
been named as the Company in this Indenture, the Notes and (if applicable) the
Registration Rights Agreement, and (b) the Company shall be released and
discharged from its obligations under this Indenture, the Notes and the
Registration Rights Agreement. In addition, each Subsidiary Guarantor, unless
it is the other party to the transaction or unless its Subsidiary Guarantee will
be released and discharged in accordance with its terms as a result of the
transaction, will be required to confirm, by supplemental indenture or other
written agreement with the same effect, that its Subsidiary Guarantee will apply
to the obligations of the Company or the Surviving Person under the Indenture.
Section 8.03. FIRST SUPPLEMENTAL INDENTURE. Leiner Group and LHP
hereby agree to cause the Assumption to be consummated and the First
Supplemental Indenture in the form of EXHIBIT F to be executed immediately
following the consummation of the Offering. Concurrently with the execution and
delivery of the First Supplemental Indenture, the Company shall deliver to the
Trustee an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee to the effect that such supplemental indenture has been duly
authorized, executed and delivered by LHP, and that, subject to applicable
bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance,
reorganization, moratorium and other laws now or hereafter in effect affecting
creditors' rights generally and the general principles of equity (including,
without limitation, standards of materiality, good faith, fair dealing and
reasonableness), such supplemental indenture is a valid and binding agreement of
LHP, enforceable against LHP in accordance with its terms.
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ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01. WITHOUT CONSENT OF HOLDERS. The Company, each
Subsidiary Guarantor (if any) and the Trustee may amend, waive or supplement
this Indenture or the Notes without notice to or consent of any Holder:
(a) to cure any ambiguity, omission, defect or inconsistency;
(b) to comply with Article Eight;
(c) to provide for uncertificated Notes in addition to certificated
Notes;
(d) to comply with any requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA;
(e) to provide for additional Subsidiary Guarantors or Subsidiary
Guarantees of the Notes or to secure the Notes;
(f) to evidence the release, discharge or termination of any
Subsidiary Guarantor or Subsidiary Guarantee in accordance with Article
Thirteen hereof or the terms of the applicable Subsidiary Guarantee;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(h) to make any change that would provide any additional benefit or
rights to the Holders or that does not adversely affect the rights of any
Holder.
Notwithstanding the foregoing and Section 9.02, on or after the date
hereof (but after execution and delivery
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of this Indenture and the issuance of the Notes), Leiner Group, LHP and the
Trustee may execute and deliver the First Supplemental Indenture, in each case
without notice to or consent of any Holder.
Section 9.02. WITH CONSENT OF HOLDERS. Subject to Section 5.08, the
Company, when authorized by its Board of Directors, each Subsidiary Guarantor
(if any), and the Trustee may amend or supplement this Indenture or the Notes
with the written consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for Notes), and the Holders of
not less than a majority in aggregate principal amount of the Outstanding Notes
by written notice to the Trustee (including consents obtained in connection with
a tender offer or exchange offer for Notes) may waive any existing Default or
Event of Default or compliance by the Company or any Subsidiary Guarantor with
any provision of this Indenture, the Notes or any Subsidiary Guarantee.
Notwithstanding the provisions of this Section 9.02, without the
consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 5.13, may not:
(i) reduce the principal amount of the Notes whose Holders must
consent to an amendment, supplement or waiver or make any other change to
the amendment, supplement or waiver provisions of the first two paragraphs
of this Section 9.02;
(ii) reduce the principal or change the fixed maturity of any Note,
or reduce the premium payable upon the redemption of any Note or change the
time at which any Note may be redeemed as described in Section 11.01 or,
following the occurrence of a Change of Control or an Asset Sale, amend,
change or modify the resulting obligation of the Company to offer to
repurchase and to repurchase the Notes in the event of
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a Change of Control or make and consummate the Asset Sale Offer with
respect to any Asset Sale, including by modifying any of the provisions or
definitions with respect thereto;
(iii) reduce the rate of or change the time for payment of interest
on any Notes;
(iv) waive a Default or Event of Default in the payment of principal
of, or premium, if any, or interest on, the Notes (except as provided in
Section 5.02, and except that Holders of at least a majority in aggregate
principal amount of the then outstanding Notes may (a) rescind an
acceleration of the Notes that resulted from a non-payment default, and
(b) waive the payment default that resulted from such acceleration);
(v) make any Note payable in money other than that stated in the
Notes;
(vi) modify any of the provisions of Section 5.08 or 5.13;
(vii) modify or change any of the provisions relating to
subordination of the Notes in Article Fourteen in a manner adverse to the
Holders of the Notes;
(viii) waive a redemption payment described in Section 11.01 with
respect to any Note; or
(ix) release any Subsidiary Guarantor that is a Significant Subsidiary
from any of its obligations under its Subsidiary Guarantee or this
Indenture other than in compliance with the terms of such Subsidiary
Guarantee or this Indenture.
Notwithstanding the foregoing, no amendment to Article Thirteen (other
than to Section 13.01, 13.02, 13.03 or 13.07) or Article Fourteen of this
Indenture or the
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definitions relating thereto that affects adversely the rights of any Senior
Debt or Guarantor Senior Debt at the time outstanding may be made unless the
holders of such Senior Debt or Guarantor Senior Debt (or any group or
representative thereof authorized to give a consent) consent in writing to such
amendment.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders of each Note affected
thereby, with a copy to the Trustee, a notice briefly describing the amendment,
supplement or waiver. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any supplemental indenture or effectiveness of any such amendment, supplement or
waiver.
Section 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment
of or supplement to this Indenture or the Notes shall comply with the TIA as
then in effect if this Indenture shall then be qualified under the TIA.
Section 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of that Note or
portion of that Note that evidences the same debt as the consenting Holder's
Note, even if notation of the consent is not made on any Note. Subject to the
following paragraph, any such Holder or subsequent Holder may revoke the consent
as to such Holder's Note or portion of such Note by notice to the Trustee or the
Company received by the Trustee or the Company, as the case may be, before the
date on which the Trustee receives an Officers' Certificate certifying that
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the Holders of the requisite principal amount of Notes have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
sentence of the immediately preceding paragraph, those Persons who were Holders
at such record date (or their duly designated proxies), and only those Persons,
shall be entitled to consent to such amendment, supplement or waiver or to
revoke any consent previously given, whether or not such Persons continue to be
Holders after such record date. No such consent shall be valid or effective for
more than 180 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder of Notes, unless it makes a change described in any of clauses
(i) through (ix) of the second paragraph of Section 9.02. In that case the
amendment, supplement or waiver shall bind each Holder of a Note who has
consented to it and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the consenting Holder's Note.
Section 9.05. NOTATION ON OR EXCHANGE OF NOTES. If an amendment,
supplement or waiver changes the terms of a Note, the Trustee shall (in
accordance with the specific direction of the Company) request the Holder of the
Note to deliver it to the Trustee. The Trustee shall (in accordance with the
specific direction of the Company) place an appropriate notation on the Note
about the changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Note shall
issue and the Trustee shall authenticate a new Note that reflects the changed
terms. Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
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Section 9.06. TRUSTEE MAY SIGN AMENDMENTS, ETC. The Trustee shall
sign any amendment, supplement or waiver authorized pursuant to this Article
Nine if the amendment, supplement or waiver does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment, supplement or waiver, the Trustee shall be entitled to receive, and
shall be fully protected in relying upon, an Officers' Certificate and an
Opinion of Counsel to the effect that the execution of any amendment, supplement
or waiver is authorized or permitted by this Indenture, that it is not
inconsistent herewith and that it will be valid and binding upon the Company in
accordance with its terms.
Notwithstanding the foregoing, the Trustee shall execute and deliver
the First Supplemental Indenture when executed and delivered by Leiner Group and
LHP in accordance with Section 8.03.
ARTICLE TEN
COVENANTS
Section 10.01. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The
Company will duly and punctually pay the principal of, and premium, if any, and
interest on, the Notes in accordance with the terms of the Notes and this
Indenture.
Section 10.02. MAINTENANCE OF OFFICE OR AGENCY. The Company will
maintain in The City of New York, an office or agency where Notes may be
presented or surrendered for payment, where Notes may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company or any Subsidiary Guarantor in respect of the Notes, the Subsidiary
Guarantees, if any, and this Indenture may be served. The office of the Trustee
shall be such office or agency of the Company, unless the Company
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shall designate and maintain some other office or agency for one or more of such
purposes. The Company will give prompt written notice to the Trustee of any
change in the location of any such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Notes may
be presented or surrendered for any or all such purposes, and may from time to
time rescind such designation; PROVIDED, HOWEVER, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in the Borough of Manhattan in The City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and any change in the location of any such other
office or agency.
Section 10.03. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST. If the
Company shall at any time act as its own Paying Agent, the Company will, on or
before each due date of the principal of, or premium, if any, or interest on,
any of the Notes, segregate and hold in trust for the benefit of the Holders
entitled thereto a sum sufficient to pay the principal, premium, if any, or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, and will promptly notify the Trustee
of its action or failure so to act.
If the Company is not acting as Paying Agent, the Company will, on or
before each due date of the principal of, or premium, if any, or interest on,
any Notes, deposit with a Paying Agent a sum in same day funds sufficient to pay
the principal, premium, if any, or interest so becoming
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due, such sum to be held in trust for the benefit of the Holders entitled to
such principal, premium or interest, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of such action or any
failure so to act.
If the Company is not acting as Paying Agent, the Company will cause
each Paying Agent other than the Trustee to execute and deliver to the Trustee
an instrument in which such Paying Agent shall agree with the Trustee, subject
to the provisions of this Section 10.03, that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of, or
premium, if any, or interest on, Notes in trust for the benefit of the
Holders entitled thereto until such sums shall be paid to such Holders or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any Default by the Company (or any
other obligor upon the Notes) in the making of any payment of principal of,
or premium, if any, or interest on, the Notes;
(c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all respects with the
provisions of this Indenture relating to the duties, rights and liabilities
of such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by
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the Company or such Paying Agent; and, upon such payment by any Paying Agent to
the Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, or premium, if
any, or interest on, any Note and remaining unclaimed for two years after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company upon receipt of a Company Request therefor, or (if then held by
the Company) shall be discharged from such trust; and the Holder of such Note
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease.
Section 10.04. EXISTENCE. Subject to Article Eight, the Company will
do or cause to be done all things necessary to, and will cause each of its
Restricted Subsidiaries to, preserve and keep in full force and effect its
corporate existence and the corporate existence of each of the Restricted
Subsidiaries, and the rights (charter and statutory), licenses and franchises of
the Company and each of the Restricted Subsidiaries, as applicable; PROVIDED,
HOWEVER, that the Company shall not be required to, or cause any such Restricted
Subsidiary to, preserve or keep in force or effect any such right, license or
franchise, or any such Restricted Subsidiary's corporate existence, if its Board
of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and their respective
Restricted Subsidiaries as a whole and that the loss thereof would not
materially adversely affect the Company's ability to perform its obligations
under the Indenture and the Notes; PROVIDED, FURTHER, HOWEVER, that the
foregoing shall not prohibit a liquidation, dissolution, merger, consolidation,
sale, transfer, conveyance or other disposition of a Restricted
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Subsidiary of the Company or any of its assets or Capital Stock in compliance
with the other terms of this Indenture.
Section 10.05. PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall
pay or discharge or cause to be paid or discharged, before the same shall become
delinquent and a penalty accrues from such delinquency, (a) all material taxes,
assessments and governmental charges levied or imposed (i) upon the Company or
any of its Subsidiaries or (ii) upon the income, profits or property of the
Company or any of its Subsidiaries and (b) all material lawful claims for labor,
materials and supplies, which, if unpaid, would by law become a Lien upon the
property of the Company or any of its Subsidiaries (other than any Permitted
Lien or other Lien permitted by this Indenture); PROVIDED, HOWEVER, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings properly
instituted and diligently conducted, or where the failure to effect such payment
or discharge would not materially adversely affect the Company's ability to
perform its obligations under the Indenture and the Notes.
Section 10.06. MAINTENANCE OF PROPERTIES. The Company shall, and
shall cause each of its Restricted Subsidiaries to, cause all material
properties owned by the Company or the Restricted Subsidiaries or used in the
conduct of its business or the businesses of the Restricted Subsidiaries to be
maintained and kept in good condition, repair and working order (reasonable wear
and tear excepted) and supplied with all necessary equipment, and cause to be
made all repairs, renewals, replacements, betterments and improvements thereof,
all as shall be reasonably necessary so that the business carried on in
connection therewith may be conducted at all times in the ordinary course;
PROVIDED, HOWEVER, that nothing in this Section 10.06 shall prevent the Company
or any of its Subsidiaries from discontinuing the operation and maintenance of
any of such properties if (x) such discontinuance is, in the judgment of the
Company
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or the Restricted Subsidiary, desirable in the conduct of its businesses or (y)
if such discontinuance or disposal is not materially adverse to the Company and
its Restricted Subsidiaries taken as a whole or the ability of the Company to
otherwise satisfy its obligations hereunder.
Section 10.07. INSURANCE. The Company will at all times keep all of
its and its Restricted Subsidiaries' properties which are of an insurable nature
insured with insurers, believed by the Company in good faith to be financially
sound and responsible, against loss or damage to the extent that property of
similar character is usually so insured by corporations similarly situated and
owning like properties (which may include self-insurance, if reasonable and in
comparable form to that maintained by companies similarly situated).
Section 10.08. COMPLIANCE CERTIFICATE. (a) The Company will deliver to
the Trustee within 120 days after the end of each of the Company's fiscal years
an Officers' Certificate stating whether or not the signers know of any Default
or Event of Default by the Company, any Subsidiary Guarantors, or any Restricted
Subsidiary that occurred during such fiscal period. If they do know of such a
Default or Event of Default, the certificate shall describe any such Default or
Event of Default and its status, including as to any steps being undertaken to
address or cure such Default or Event of Default. The Company shall also
deliver a certificate to the Trustee at least annually from the chief financial
officer (or if the Company does not have a chief financial officer, the
Company's principal executive, financial or accounting officer) of the Company
as to his or her knowledge of the compliance of the Company, any Subsidiary
Guarantors and the Restricted Subsidiaries with all conditions and covenants
under this Indenture and whether any Default or Event of Default has occurred,
such compliance to be determined without regard to any period of grace or
requirement of notice provided herein.
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(b) The Company will deliver to the Trustee as soon as possible, and
in any event within 10 days, after the Company becomes aware of the occurrence
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company or the applicable
Subsidiary Guarantor, as the case may be, is taking or proposes to take with
respect thereto.
Section 10.09. PROVISION OF FINANCIAL STATEMENTS AND REPORTS.
Whether or not the Company is then subject to Section 13(a) or 15(d) of the
Exchange Act, the Company will file with the Commission (unless such filing
is not permitted under the Exchange Act), so long as the Notes are
outstanding, the annual reports, quarterly reports and other periodic reports
which the Company would have been required to file with the Commission
pursuant to such Section 13(a) or 15(d) if the Company were so subject, and
such documents shall be filed with the Commission on or prior to the
respective dates (the "REQUIRED FILING DATES") by which the Company would
have been required so to file such documents if the Company were so subject.
The Company will also in any event (i) within 15 days of each Required Filing
Date, (a) transmit or cause to be transmitted by mail to all Holders of
Notes, as their names and addresses appear in the Note Register, without cost
to such Holders, and (b) file with the Trustee copies of the annual reports,
quarterly reports and other periodic reports which the Company would have
been required to file with the Commission pursuant to Section 13(a) or 15(d)
of the Exchange Act if the Company were subject to such Sections and (ii) if
filing such documents by the Company with the Commission is prohibited under
the Exchange Act, promptly upon written request and payment of the reasonable
cost of duplication and delivery, supply copies of such documents to any
prospective Holder at the Company's cost. The Company also shall comply with
the provisions of TIA Section 314(a).
Section 10.10. LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS
BY SUBSIDIARIES. (a) The Company will not permit any U.S. Restricted
Subsidiary,
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directly or indirectly, to Guarantee any other Indebtedness of the Company or
any Subsidiary Guarantor ("U.S. SPECIFIED INDEBTEDNESS") unless such U.S.
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to this Indenture providing for the Guarantee (a "U.S. SUBSIDIARY
GUARANTEE") of the payment of the Notes by such U.S. Restricted Subsidiary
thereby becoming a Subsidiary Guarantor, which U.S. Subsidiary Guarantee shall
be subordinated to such U.S. Restricted Subsidiary's Guarantee of such U.S.
Specified Indebtedness to the same extent as the Notes or the Subsidiary
Guarantees, as applicable, are subordinated to such U.S. Specified Indebtedness
under the Indenture; PROVIDED, HOWEVER, that a U.S. Restricted Subsidiary will
not be required to provide a U.S. Subsidiary Guarantee under this Section 10.10
unless and until such time as such U.S. Restricted Subsidiary, individually or
together with all other U.S. Restricted Subsidiaries that are otherwise
obligated to provide a U.S. Subsidiary Guarantee under this Section 10.10,
accounts for one percent or more of Consolidated Tangible Assets.
(b) The Company will not permit any Foreign Subsidiary, directly or
indirectly, to Guarantee any other Indebtedness of the Company or any Subsidiary
Guarantor (the "FOREIGN SPECIFIED INDEBTEDNESS" that (i) is PARI PASSU with or
expressly subordinated in right of payment to the Notes or the Subsidiary
Guarantees, as applicable, or (ii) represents Public Debt, in each case, unless
such Foreign Subsidiary simultaneously executes and delivers a supplemental
indenture to this Indenture providing for the Guarantee (a "FOREIGN SUBSIDIARY
GUARANTEE") of the payment of the Notes by such Foreign Subsidiary thereby
becoming a Subsidiary Guarantor, which Foreign Subsidiary Guarantee shall be
subordinated to such Foreign Subsidiary's Guarantee of such Foreign Specified
Indebtedness to the same extent as the Notes or the Subsidiary Guarantees, as
applicable, are subordinated to such Foreign Specified Indebtedness under the
Indenture.
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(c) The Company will have the right to cause any Restricted
Subsidiary to execute and deliver to the Trustee a supplemental indenture to
this Indenture pursuant to which such Subsidiary will Guarantee payment of the
Notes thereby becoming a Subsidiary Guarantor.
(d) Any Restricted Subsidiary that becomes a Subsidiary Guarantor
pursuant to this Section 10.10 shall enter into a Subsidiary Guarantee as
provided in Section 13.07 hereof.
Section 10.11. LIMITATION ON INCURRENCE OF INDEBTEDNESS. The Company
will not, and will not permit any Restricted Subsidiary to, create, incur,
assume or directly or indirectly enter into any Guarantee of or in any other
manner become directly or indirectly liable for (collectively, to "INCUR") any
Indebtedness (including any Acquired Debt), except that the Company and any
Subsidiary Guarantor may incur Indebtedness if, at the time of, and immediately
after giving PRO FORMA effect to, such incurrence of Indebtedness, the
Consolidated Coverage Ratio of the Company for the most recently ended four
fiscal quarters for which financial statements are available would be at least
(i) 2.0 to 1.0 until July 1, 1999 and (ii) 2.25 to 1.0 thereafter.
(b) The foregoing limitations will not apply to the incurrence of any
of the following (collectively, "PERMITTED INDEBTEDNESS"), each of which shall
be given independent effect:
(i) Indebtedness incurred by the Company or any Subsidiary Guarantor
pursuant to the Credit Facility in a maximum principal amount not to exceed
at any time,
(a) an aggregate principal amount of $85.0 million under the
Term Loan Facility, minus the aggregate amount of all scheduled
repayments of principal, and all mandatory prepayments of principal
with Net Proceeds from Asset Sales, whether
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or not such repayments or prepayments are actually made (unless the
relevant provision requiring any such repayment or prepayment is
waived or amended by the lenders thereunder in accordance therewith),
applied to permanently reduce the Indebtedness outstanding under the
Term Loan Facility, and plus (in the case of any refinancing thereof)
the aggregate amount of fees, underwriting discounts, premiums and
other costs and expenses incurred in connection with such refinancing,
and
(b) an aggregate principal amount outstanding at any time under
the Revolving Credit Facility not to exceed an amount equal to (A) an
amount (the "Total Amount") equal to the greater of (x) an amount
equal to $125.0 million, minus the amount of all mandatory prepayments
of principal with Net Proceeds from Asset Sales applied to permanently
reduce the commitments under the Revolving Credit Facility, and plus
(in the case of any refinancing thereof) the aggregate amount of fees,
underwriting discounts, premiums and other costs and expenses incurred
in connection with such refinancing, and (y) the Borrowing Base, minus
(B) without duplication, the amount then outstanding (i.e., advanced,
and received by, and available for use by, the Company) under any
Receivables Financing (as set forth in the books and records of the
Company and confirmed by the agent, trustee or other representative of
the institution or group providing such Receivables Financing) that
has been entered into by the Company, any Restricted Subsidiary or any
Receivables Subsidiary since the Issue Date and that, as of such date
of determination, has not expired or otherwise terminated, minus (C)
the aggregate principal amount of Indebtedness incurred under the
Revolving Credit Facility by Restricted Subsidiaries pursuant to
clause (ii) below;
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(ii) Indebtedness incurred by any Restricted Subsidiary under the
Revolving Credit Facility in an aggregate principal amount at any one time
outstanding not to exceed the greater of (A) $25.0 million and (B) 20.0% of
the Total Amount, and any Guarantees thereof;
(iii) Indebtedness of Foreign Subsidiaries and any Guarantees in
respect thereof; PROVIDED that the aggregate principal amount of such
Indebtedness outstanding at any time does not exceed, as to all such
Foreign Subsidiaries, the greater of (A) $20.0 million and (B) an amount
equal to 9.0% of Consolidated Tangible Assets (calculated on a PRO FORMA
basis giving effect to any Acquisition being financed with any such
Indebtedness);
(iv) Indebtedness represented by the Notes or the Exchange Notes, any
Guarantees in respect thereof, and any Indebtedness arising by reason of
any Lien granted to secure any of the foregoing Indebtedness;
(v) Indebtedness owed by any Restricted Subsidiary to the Company or
to another Restricted Subsidiary or owed by the Company to any Restricted
Subsidiary; PROVIDED, HOWEVER, that any such Indebtedness shall be at all
times held by a Person which is either the Company or a Restricted
Subsidiary of the Company; PROVIDED, FURTHER, HOWEVER, that upon either
(a)the transfer or other disposition of any such Indebtedness to a Person
other than the Company or another Restricted Subsidiary or (b)the sale,
lease, transfer or other disposition of shares of Capital Stock (including
by consolidation or merger) of any such Restricted Subsidiary to a Person
other than the Company or another Restricted Subsidiary, the incurrence of
such Indebtedness shall be deemed to be an incurrence that is not permitted
by this clause (v);
(vi) Indebtedness of the Company or any Restricted Subsidiary in the
form of Purchase Money Obligations,
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Capital Lease Obligations or Attributable Debt, in an aggregate amount at
any one time outstanding not to exceed the greater of (A) $5.0 million and
(B) an amount equal to 3.0% of Consolidated Tangible Assets;
(vii) Indebtedness of the Company or any Restricted Subsidiary
arising in the ordinary course of business with respect to Interest Rate
Agreement Obligations or Currency Agreement Obligations incurred for the
purpose of fixing or hedging interest rate risk or currency risk with
respect to any fixed or floating rate Indebtedness that is permitted by the
terms of this Indenture to be outstanding or any foreign currency exposure;
(viii) Indebtedness of the Company or any Restricted Subsidiary
arising from the honoring of a check, draft or similar instrument of such
Person drawn against insufficient funds, provided that such Indebtedness is
extinguished within five Business Days of its incurrence;
(ix) Indebtedness of the Company or any Restricted Subsidiary
consisting of Guarantees, indemnities, or Obligations in respect of
purchase price adjustments, in connection with the acquisition or
disposition of assets, including pursuant to the Recapitalization;
(x) Indebtedness of the Company or any Restricted Subsidiary in
respect of (A) letters of credit, bankers' acceptances or other similar
instruments or obligations, issued in connection with liabilities incurred
in the ordinary course of business (including those issued to governmental
entities in connection with self-insurance under applicable workers'
compensation statutes), or (B) surety, judgment, appeal, performance and
other similar bonds, instruments or obligations provided in the ordinary
course of business or (C) Guarantees of Senior Debt or incurred in
compliance with Section 10.10, or (D)
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Indebtedness arising by reason of any Lien securing Senior Debt or incurred
in compliance with Section 10.16;
(xi) Indebtedness (A) of the Company or any Subsidiary Guarantor
consisting of Guarantees of up to an aggregate principal amount of $2.0
million of borrowings by Management Investors in connection with the
purchase of Capital Stock of LHP, Leiner Group or PLI by such Management
Investors or (B) of the Company or any Restricted Subsidiary consisting of
Guarantees in respect of loans or advances made to officers or employees of
Leiner Group, LHP or any Restricted Subsidiary, or Guarantees otherwise
made on their behalf, (1) in respect of travel, entertainment and
moving-related expenses incurred in the ordinary course of business, or (2)
in the ordinary course of business not exceeding $500,000 in the aggregate
outstanding at any time;
(xii) Indebtedness of a Receivables Subsidiary secured by a Lien on
all or part of the assets disposed of in, or otherwise incurred in
connection with, a Financing Disposition;
(xiii) any Indebtedness incurred in connection with or given in
exchange for the renewal, extension, substitution, refunding, defeasance,
refinancing, repayment or replacement (a "REFINANCING") of any Indebtedness
described in clauses (i), (ii), (iii), (iv), (xiii), (xiv) or (xv) of this
clause (b) or of any Indebtedness permitted to be incurred pursuant to
clause (a) of this Section 10.11 ("REFINANCING INDEBTEDNESS"); PROVIDED,
HOWEVER, that (a) the principal amount of such Refinancing Indebtedness
shall not exceed the principal amount (or accrued amount, if less) of the
Indebtedness so renewed, extended, substituted, refunded, defeased,
refinanced, repaid or replaced ("REFINANCED"), plus the fees, underwriting
discounts, premium (not to exceed the stated amount of
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any premium required to be paid in connection with such a refinancing
pursuant to the terms of the Indebtedness being refinanced) and other costs
and expenses incurred in connection therewith; (b)with respect to
Refinancing Indebtedness of any Indebtedness other than Senior Debt, the
Refinancing Indebtedness shall have a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being refinanced; (c) with respect to Refinancing Indebtedness
other than Senior Debt, such Refinancing Indebtedness shall rank no more
senior than, and shall be at least as subordinated in right of payment to,
the Notes as the Indebtedness being refinanced; and (d)the obligor on such
Refinancing Indebtedness shall be the obligor on the Indebtedness being
refinanced, the Company or any Subsidiary Guarantor, or (in the case of
Indebtedness of a Foreign Subsidiary that is being refinanced) any Foreign
Subsidiary;
(xiv) Indebtedness of the Company or any Restricted Subsidiary which
is outstanding on the Issue Date;
(xv) Acquired Debt of any Restricted Subsidiary and any Guarantee
thereof, PROVIDED that at the time of such incurrence and after giving
effect thereto on a PRO FORMA basis, (x) no Default or Event of Default
will have occurred and be continuing or would result therefrom and (y) the
Company could incur at least $1.00 of additional Indebtedness pursuant to
clause (a) of this Section 10.11; and
(xvi) Indebtedness of the Company or any Subsidiary Guarantor in
addition to that described in clauses (i) through (xv) above, and any
renewals, extensions, substitutions, refinancings or replacements of such
Indebtedness, so long as the aggregate principal amount at any one time
outstanding of all such Indebtedness incurred pursuant to this clause (xvi)
does not exceed
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the greater of (a) $15.0 million and (b) an amount equal to 7.0% of
Consolidated Tangible Assets.
(c) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness incurred pursuant to and in
compliance with, this covenant, (i) any other obligation of the obligor on such
Indebtedness (or of any other Person that could have incurred such Indebtedness
as the obligor thereon) arising under any Guarantee, Lien or letter of credit
supporting such Indebtedness shall be disregarded to the extent that such
Guarantee, Lien or letter of credit secures the principal amount of such
Indebtedness; (ii) in the event that Indebtedness meets the criteria of more
than one of the types of Indebtedness described in the preceding paragraphs, the
Company, in its sole discretion, shall classify such item of Indebtedness and
only be required to include the amount and type of such Indebtedness in one of
such clauses; and (iii) the amount of Indebtedness issued at a price that is
less than the principal amount thereof shall be equal to the amount of the
liability in respect thereof determined in accordance with GAAP.
(d) For purposes of determining compliance with any
Dollar-denominated restriction on the incurrence of Indebtedness denominated in
a foreign currency, the Dollar-equivalent principal amount of such Indebtedness
incurred pursuant thereto shall be calculated based on the relevant currency
exchange rate in effect on the date that such Indebtedness was incurred, in the
case of term debt, or first committed, in the case of revolving credit debt,
PROVIDED that (x) the Dollar-equivalent principal amount of any such
Indebtedness outstanding on the Issue Date shall be calculated based on the
relevant currency exchange rate in effect on the Issue Date, (y) if such
Indebtedness is incurred to refinance other Indebtedness denominated in a
foreign currency, and such refinancing would cause the applicable
Dollar-denominated restriction to be exceeded if calculated at the relevant
currency exchange rate in effect on the date of such refinancing, such
Dollar-denominated
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restriction shall be deemed not to have been exceeded so long as the principal
amount of such refinancing Indebtedness does not exceed the principal amount of
such Indebtedness being refinanced and (z) the Dollar-equivalent principal
amount of Indebtedness denominated in a foreign currency and incurred pursuant
to the Credit Facility shall be calculated based on the relevant currency
exchange rate in effect on, at the Company's option, (i) the Issue Date, (ii)
any date on which any of the respective commitments under the Credit Facility
shall be reallocated between or among facilities or subfacilities thereunder, or
on which such rate is otherwise calculated for any purpose thereunder, or (iii)
the date of such incurrence. The principal amount of any Indebtedness incurred
to refinance other Indebtedness, if incurred in a different currency from the
Indebtedness being refinanced, shall be calculated based on the currency
exchange rate applicable to the currencies in which such respective Indebtedness
is denominated that is in effect on the date of such refinancing.
(e) Indebtedness of any Person that is not a Restricted Subsidiary,
which Indebtedness is outstanding at the time such Person becomes a Restricted
Subsidiary or is merged with or into or consolidated with the Company or a
Restricted Subsidiary, shall be deemed to have been incurred at the time such
Person becomes a Restricted Subsidiary or is merged with or into or consolidated
with the Company or a Restricted Subsidiary, and Indebtedness which is assumed
at the time of the acquisition of any asset shall be deemed to have been
incurred at the time of such acquisition.
(f) This Section 10.11 shall not apply to the Debt Assumption.
Section 10.12. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, make any Restricted Payment, unless at the time of and immediately
after giving effect to the proposed Restricted Payment (with the value of any
such Restricted Payment, if other than
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cash, to be as determined in good faith by the Board of Directors of the
Company, which determination shall be conclusive),
(i) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(ii) the Company could incur at least $1.00 of additional Indebtedness
pursuant to Section 10.11(a); and
(iii) the aggregate amount of all Restricted Payments made after the
Issue Date shall not exceed the sum of (a)an amount equal to 50% of the
Company's aggregate cumulative Consolidated Net Income accrued on a
cumulative basis from the Issue Date (or if such aggregate cumulative
Consolidated Net Income for such period shall be a deficit, minus 100% of
such deficit), PLUS (b)the aggregate amount of all net cash proceeds (other
than proceeds from the issuance of the common stock of Leiner Group to
North Castle Partners on the Issue Date) received since the Issue Date by
the Company (w) as capital contributions in the form of common equity to
the Company after the Issue Date, (x)from the issuance and sale (other than
to a Restricted Subsidiary) of Capital Stock (other than Disqualified
Stock), (y)from the issuance to a Person who is not a Subsidiary of the
Company of any options, warrants or other rights to acquire Capital Stock
of the Company (in each case, exclusive of any Disqualified Stock or any
options, warrants or other rights that are redeemable at the option of the
holder, or are required to be redeemed, prior to the Stated Maturity of the
Notes) and (z)from the issuance and sale by the Company or any Restricted
Subsidiary after the Issue Date of Disqualified Stock or debt securities
that have been converted into or exchanged for Capital Stock of the Company
(other than Disqualified Stock), plus the amount of cash received by the
Company or any
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Restricted Subsidiary upon such conversion or exchange, in each case to the
extent that such proceeds are not used to redeem, repurchase, retire or
otherwise acquire Capital Stock or any Indebtedness of the Company or any
Restricted Subsidiary, pursuant to clause (ii) of Section 10.12(b) below,
PLUS (c)the amount of the net reduction in Investments by the Company in
Unrestricted Subsidiaries resulting from (x) the payment of cash dividends
or the repayment in cash of the principal of loans or the cash return on
any Investment, in each case to the extent received by the Company or any
Restricted Subsidiary from Unrestricted Subsidiaries, (y) the release or
extinguishment of any Guarantee of Indebtedness of any Unrestricted
Subsidiary, and (z) the redesignation of Unrestricted Subsidiaries as
Restricted Subsidiaries of the Company (valued as provided in the
definition of "Investment"), such aggregate amount of the net reduction in
Investments not to exceed in the case of any Unrestricted Subsidiaries the
amount of Restricted Investments previously made by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary, which amount was
included in the calculation of the amount of Restricted Payments, PLUS
(d)to the extent that any Restricted Investment that was made after the
Issue Date is sold for cash or otherwise liquidated or repaid for cash, the
amount of cash proceeds received with respect to such Restricted
Investment, net of taxes and the cost of disposition, not to exceed the
amount of Restricted Investments made after the Issue Date.
(b) The provisions of Section 10.12(a) will not prohibit the
following actions (collectively, "PERMITTED PAYMENTS"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such declaration date such payment would have
been permitted under this Indenture and such payment shall be deemed
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to have been paid on such date of declaration for purposes of clause (iii)
of the preceding paragraph;
(ii) the redemption, repurchase, retirement or other acquisition of
any Capital Stock or any Indebtedness of the Company that is subordinated
in right of payment to the Notes in exchange for, or out of the proceeds
of, the substantially concurrent sale (other than to a Restricted
Subsidiary) of Capital Stock of the Company (other than any Disqualified
Stock);
(iii) Restricted Investments in an amount such that the sum of the
aggregate amount of Restricted Investments made pursuant to this clause
(iii) after the Issue Date and outstanding (net of any returns in cash
thereof or cash received in liquidation or on disposition thereof) does not
exceed at any time the greater of (A) $15.0 million and (B) 7.0% of
Consolidated Tangible Assets;
(iv) loans, advances, dividends or distributions to Leiner Group or
PLI to the extent necessary to permit Leiner Group to repurchase or
otherwise acquire, or payments by LHP to purchase or otherwise acquire,
Capital Stock of Leiner Group (including options, warrants or other rights
to acquire such Capital Stock) from departing or deceased directors,
officers or employees of Leiner Group, LHP or its Subsidiaries, or other
Management Investors (or payments in lieu of issuing and reacquiring any
such Capital Stock, made to or on behalf of any such Person), whether
pursuant to the terms of an employee benefit plan or employment agreement
or otherwise; PROVIDED that the aggregate amount of all such repurchases
shall not exceed $2.5 million during any fiscal year and $5.0 million
during any period of five consecutive fiscal years (plus the net cash
proceeds received by the Company after the Issue Date as a capital
contribution from the sale to Management Investors of Capital Stock of
Leiner Group
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or options, warrants or other rights in respect thereof);
(v) payments to Leiner Group or PLI to permit Leiner Group to pay, or
the payment by LHP directly of, the payments provided for by clause (viii)
of the second paragraph of Section 10.13;
(vi) loans, advances, dividends, or distributions by LHP or any
Restricted Subsidiary to Leiner Group or PLI not to exceed an amount
necessary to permit Leiner Group or PLI to (A) pay its costs (including all
professional fees and expenses) incurred to comply with its reporting
obligations under federal or state laws or under the Indenture, including
any reports filed with respect to the Securities Act, Exchange Act or the
respective rules and regulations promulgated thereunder, (B) make payments
in respect of its indemnification obligations owing to directors, officers,
employees or other Persons under its charter or by-laws or pursuant to
written agreements with any such Person, to the extent such payments relate
to the Company and its Subsidiaries, (C) pay all reasonable fees and
expenses payable by it in connection with the Recapitalization and related
transactions (including without limitation the financing thereof), or (D)
pay its other operational expenses (other than taxes) incurred in the
ordinary course of business and not exceeding $500,000 in the aggregate in
any fiscal year;
(vii) payments by LHP or any Restricted Subsidiary to Leiner Group or
PLI (A) pursuant to the Tax Sharing Agreement, (B) to pay or permit Leiner
Group to pay any taxes, charges or assessments, including but not limited
to sales, use, transfer, rental, ad valorem, value-added, stamp, property,
consumption, franchise, license, capital, net worth, gross receipts,
excise, occupancy, intangibles or similar taxes, charges or assessments
("TAXES") (other than federal, state or local taxes measured by income and
federal, state or
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local withholding imposed on payments made by Leiner Group), required to be
paid by Leiner Group or PLI by virtue of its being incorporated or having
capital stock outstanding (but not by virtue of owning stock of any
corporation other than PLI or LHP or any of its Subsidiaries), or being a
holding company parent of PLI or LHP or receiving dividends from or other
distributions in respect of the stock of PLI or LHP, or having guaranteed
any obligations of PLI or LHP or any of its Subsidiaries, or having made
any payment in respect of any of the items for which LHP is permitted to
make payments to Leiner Group or PLI pursuant to this covenant, (C) to pay
or permit Leiner Group or PLI to pay any other federal, state, foreign,
provincial or local taxes measured by income for which Leiner Group or PLI
is liable up to an amount not to exceed with respect to such federal taxes
the amount of any such taxes which LHP would have been required to pay on a
separate company basis or on a consolidated basis if LHP had filed a
consolidated return on behalf of an affiliated group (as defined in Section
1504 of the Internal Revenue Code of 1986, as amended, or an analogous
provision of state, local or foreign law) of which it was the common
parent, or with respect to state and local taxes, on a combined basis if
the Company had filed a combined return on behalf of an affiliated group
consisting only of the Company and its Subsidiaries, (D) to pay or permit
Leiner Group or PLI to pay any Taxes attributable to periods prior to the
issuance of the Notes, or (E) to pay or permit Leiner Group or PLI to pay
any Taxes attributable to the Assumption or any dividend or distribution in
respect of the stock of PLI or LHP;
(viii) the payment by LHP of, or loans, advances, dividends or
distributions by LHP to Leiner Group or PLI to pay, dividends on the common
stock of LHP, Leiner Group or PLI, as applicable, following an initial
public offering of such common stock, in an amount not to exceed in any
fiscal year 6% of the net
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proceeds received by LHP, in or from such public offering;
(ix) loans, advances, dividends or distributions by the Company or
any Restricted Subsidiary in an aggregate amount not to exceed $5.0
million; PROVIDED, HOWEVER, that the Company or any Restricted Subsidiary
shall not be permitted to make Restricted Payments under this clause (ix)
unless, after giving effect thereto (including the incurrence of any
Indebtedness to fund such Restricted Payment), the Consolidation Coverage
Ratio of the Company would be at least equal to 2.25:1.00; and
PROVIDED, FURTHER, that in the case of clauses (viii) and (ix) no Default
or Event of Default shall have occurred or be continuing at the time of
such payment after giving effect thereto.
For purposes of clause (iii) of Section 10.12(a) above, Permitted
Payments made pursuant to clauses (i), (iii), (iv), (viii) and (ix) of the
immediately preceding paragraph shall be included (with respect to clause (i),
as of the date of declaration) as Restricted Payments made since the Issue Date.
(c) The provisions of Section 10.12(a) shall not apply to any
purchase, redemption or other acquisition or retirement of Preferred Stock of
Vita Health Company (1985) Ltd., a Canadian corporation, made on or before the
date that is 20 days after the Issue Date.
Section 10.13. LIMITATION ON TRANSACTIONS WITH AFFILIATES. The
Company will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, enter into or suffer to exist any transaction or series of related
transactions (including, without limitation, the sale, purchase, exchange or
lease of assets, property or services) with any Affiliate of the Company (other
than the Company or a Restricted Subsidiary) unless (1)such transaction or
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series of related transactions is on terms that taken as a whole are no less
favorable to the Company or such Restricted Subsidiary, as the case may be, than
would be available in a comparable transaction in arm's-length dealings with a
Person that was not such an Affiliate, and (2) the Company delivers to the
Trustee (a) with respect to any transaction or series of related transactions
involving aggregate payments in excess of $1.0 million, an Officers' Certificate
certifying that such transaction or series of related transactions complies with
clause(1) above and (b)with respect to any transaction or series of related
transactions involving aggregate payments in excess of $5.0 million, an
Officers' Certificate certifying that such transaction or series of related
transactions has been approved by a majority of the members of the Board of
Directors of the Company and approved by a majority of the Independent Directors
or, in the event there is only one Independent Director, by such Independent
Director, and evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate, and (c) with respect to any transaction or series of
related transactions involving aggregate payments in excess of $15.0 million, an
opinion issued by an investment banking firm or appraiser or accounting firm of
national standing as to the fairness to the Company or such Restricted
Subsidiary from a financial point of view.
Notwithstanding the foregoing, this covenant will not apply to (i) any
transaction entered into by or among the Company or one of its Restricted
Subsidiaries with one or more Restricted Subsidiaries; (ii)any Restricted
Payment or Permitted Payment not prohibited by Section 10.12 hereof; (iii) the
payment of reasonable and customary regular fees to directors of the Company and
its Restricted Subsidiaries who are not employees of the Company or its
Subsidiaries; (iv) any transaction with an employee, officer or member of the
Board of Directors of the Company or any Restricted Subsidiary in the ordinary
course of business involving compensation, indemnity or employee benefit
arrangements; (v) loans or advances made to directors, officers or
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employees of Leiner Group, PLI, LHP or any Restricted Subsidiary, or Guarantees
in respect thereof or otherwise made on their behalf (including any payments
under such Guarantees), (A) in respect of travel, entertainment or
moving-related expenses incurred in the ordinary course of business, or (B) in
the ordinary course of business not exceeding $500,000 in the aggregate
outstanding at any time; (vi) payments pursuant to the Tax Sharing Agreement;
(vii) any agreement as in existence on the Issue Date, as the same may be
amended from time to time in any manner not adverse to the holders of Notes;
(viii) the payment of fees in an aggregate amount not to exceed $1.5 million in
any fiscal year and the reimbursement of reasonable out-of-pocket expenses
incurred by North Castle Partners, L.L.C., in each case in connection with its
performance of services pursuant to the Management Agreement; (ix) the
Recapitalization and all related transactions (including but not limited to the
financing thereof and the Debt Assumption), including without limitation the
incurrence and payment of all fees and expenses in connection therewith; (x) any
transaction in the ordinary course of business or approved by a majority of the
Independent Directors, between the Company or any Restricted Subsidiary and any
Affiliate of the Company controlled by the Company that is a joint venture or
similar entity primarily engaged in a Related Business; and (xii) Guarantees of
borrowings by Management Investors in connection with the purchase of Capital
Stock of LHP, Leiner Group or PLI by such Management Investors, which Guarantees
are permitted under Section 10.11, and payments thereunder.
Section 10.14. LIMITATION ON ASSET SALES. The Company will not, and
will not permit any Restricted Subsidiary to, make any Asset Sale unless (a)the
Company or such Restricted Subsidiary, as the case may be, receives
consideration (including by way of relief from, or by any other Person assuming
responsibility for, any liabilities, contingent or otherwise) at the time of
such Asset Sale at least equal to the Fair Market Value of the assets or other
property sold or disposed of in the Asset Sale, as such Fair Market Value may be
determined (and shall be determined, to
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the extent such Asset Sale or any series of related Asset Sales involves
aggregate consideration in excess of $1.0 million) in good faith by the Board of
Directors, whose determination shall be conclusive (including as to the value of
all noncash consideration), and (ii) at least 75% of such consideration
(excluding, in the case of an Asset Sale of assets, any consideration by way of
relief from, or by any other Person assuming responsibility for, any
liabilities, contingent or otherwise, which are not Indebtedness) consists of
either cash or Cash Equivalents. For purposes of this Section10.14, "cash"
shall include (1) the amount of any Indebtedness (other than any Indebtedness
that is by its terms expressly subordinated in right of payment to the Notes) of
the Company or such Restricted Subsidiary that is assumed by the transferee of
any such assets or other property in such Asset Sale or another Person (and
excluding any liabilities that are incurred in connection with or in
anticipation of such Asset Sale), but only to the extent that such assumption is
effected on a basis under which there is no further recourse to the Company or
any of the Restricted Subsidiaries with respect to such liabilities, (2)
Indebtedness of a Restricted Subsidiary that is no longer a Restricted
Subsidiary as a result of such Asset Sale, to the extent that the Company and
each other Restricted Subsidiary is unconditionally released from any Guarantee
of such Indebtedness in connection with such Asset Sale, (3) securities received
by the Company or any Restricted Subsidiary from the transferee that are
promptly converted into cash and (4) consideration consisting of Indebtedness of
the Company or any Restricted Subsidiary (other than Indebtedness that is by its
terms expressly subordinated in right of payment to the Notes), to the extent
such Indebtedness is cancelled and there is no further recourse to the Company
or any such Restricted Subsidiary, as the case may be, under such Indebtedness.
Within 365 days after any Asset Sale, the Company may elect to apply
an amount equal to the Net Proceeds from such Asset Sale to (a)permanently
reduce any Senior Debt of the Company or Indebtedness (other than Preferred
Stock) of
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a Restricted Subsidiary and/or (b)make an investment in, or acquire assets
related to, a Related Business. Pending the final application of any such
amount, the Company may temporarily reduce Senior Debt or Indebtedness of a
Restricted Subsidiary or temporarily invest such Net Proceeds in any manner
permitted by this Indenture. Any portion of such amount not applied or invested
as provided in the first sentence of this paragraph within 365 days of such
Asset Sale will be deemed to constitute "EXCESS PROCEEDS."
Each date on which the aggregate amount of Excess Proceeds in respect
of which an Asset Sale Offer has not been made exceeds $10.0 million shall be
deemed an "ASSET SALE OFFER TRIGGER DATE." As soon as practicable, but in no
event later than 20 Business Days after each Asset Sale Offer Trigger Date, the
Company shall commence an offer (an "ASSET SALE OFFER") to purchase the maximum
principal amount of Notes and other Indebtedness of the Company that ranks PARI
PASSU in right of payment with the Notes (to the extent required by the
instrument governing such other Indebtedness) that may be purchased out of the
Excess Proceeds. Any Notes to be purchased pursuant to an Asset Sale Offer
shall, and any other Indebtedness to be purchased pursuant to an Asset Sale
Offer may, be purchased PRO RATA based on the aggregate principal amount of
Notes and all such other Indebtedness outstanding, and all such Notes shall be
purchased at an offer price in cash in an amount equal to 100% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
purchase. To the extent that any Excess Proceeds remain after completion of an
Asset Sale Offer, the Company may use the remaining amount for general corporate
purposes otherwise permitted by this Indenture. In the event that the Company
is prohibited under the terms of any agreement governing outstanding Senior Debt
of the Company from repurchasing Notes with Excess Proceeds pursuant to an Asset
Sale Offer as set forth in this paragraph, the Company shall promptly use all
Excess Proceeds to permanently reduce such outstanding Senior Debt of the
Company. Upon the consummation of such permanent
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reduction, or of any Asset Sale Offer, the amount of Excess Proceeds shall be
deemed to be reset to zero.
Notice of an Asset Sale Offer shall be prepared and mailed by the
Company with a copy to the Trustee not later than the 20th business day after
the related Asset Sale Offer Trigger Date to each Holder of Notes at such
Holder's registered address, stating:
(i) that an Asset Sale Offer Trigger Date has occurred and that the
Company is offering to purchase the maximum principal amount of Notes that
may be purchased out of the Excess Proceeds to the extent to be applied to
an offer to purchase Notes (as provided in the immediately preceding
paragraph), at an offer price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
date of the purchase (the "ASSET SALE OFFER PURCHASE DATE"), which shall be
a Business Day, specified in such notice, that is not earlier than 30 days
or later than 60 days from the date such notice is mailed;
(ii) the amount of accrued and unpaid interest, if any, as of the
Asset Sale Offer Purchase Date;
(iii) that any Note not tendered will continue to accrue interest in
accordance with the terms thereof;
(iv) that, unless the Company defaults in the payment of the purchase
price for the Notes payable pursuant to the Asset Sale Offer, any Notes
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Asset Sale Offer Purchase Date;
(v) that Holders electing to have Notes purchased pursuant to an
Asset Sale Offer will be required to surrender their Notes to the Paying
Agent at the address specified in the notice prior to 5:00 p.m., New
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York City time, on the third Business Day prior to the Asset Sale Purchase
Date with the "Option of Holder to Elect Purchase" on the reverse thereof
completed and must complete any form letter of transmittal proposed by the
Company (which letter must be completed correctly by such Holder) and which
is reasonably acceptable to the Trustee and the Paying Agent;
(vi) that Holders of Notes will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New York
City time, on the third Business Day prior to the Asset Sale Offer Purchase
Date, a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Notes the Holder delivered for
purchase, the Note certificate number (if any) and a statement that such
Holder is withdrawing its election to have such Notes purchased;
(vii) that Holders whose Notes are purchased only in part will be
issued Notes equal in principal amount to the unpurchased portion of the
Notes surrendered;
(viii) the instructions that Holders must follow in order to tender
their Notes; and
(x)information concerning the business of the Company, the most recent
annual and quarterly reports of the Company filed with the SEC pursuant to
the Exchange Act (or, if the Company is not then required to file any such
reports with the SEC, the comparable reports prepared pursuant to Section
10.09), and such other information concerning the circumstances and
relevant facts regarding such Asset Sale and Asset Sale Offer as would be
material to a Holder of Notes in connection with the decision of such
Holder as to whether or not it should tender Notes pursuant to the Asset
Sale Offer.
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On the Asset Sale Offer Purchase Date, the Company will (i)accept for
payment the maximum principal amount of Notes or portions thereof tendered
pursuant to the Asset Sale Offer that can be purchased out of Excess Proceeds
from such Asset Sale that are to be applied to an Asset Sale Offer (to the
extent provided in the second preceding paragraph), (ii)deposit with the Paying
Agent an amount in cash equal to the aggregate purchase price of all Notes or
portions thereof accepted for payment and any accrued and unpaid interest on
such Notes as of the Asset Sale Offer Purchase Date, and (iii)deliver or cause
to be delivered to the Trustee all Notes tendered pursuant to the Asset Sale
Offer. If less than all Notes tendered pursuant to the Asset Sale Offer are
accepted for payment by the Company for any reason consistent with this
Indenture, selection of the Notes to be purchased by the Company shall be in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so listed, on a
PRO RATA basis or by lot; PROVIDED, HOWEVER, that Notes accepted for payment in
part shall only be purchased in integral multiples of $1,000. The Paying Agent
shall as promptly as practicable after the Asset Sale Offer Purchase Date mail
to each Holder of Notes or portions thereof accepted for payment an amount in
cash equal to the purchase price for such Notes plus any accrued and unpaid
interest thereon, and the Trustee shall promptly authenticate and mail to such
Holder of Notes accepted for payment in part a new Note equal in principal
amount to any unpurchased portion of the Notes, and any Note not accepted for
payment in whole or in part shall be promptly returned to the Holder of such
Note.
On and after an Asset Sale Offer Purchase Date, interest will cease to
accrue on the Notes or portions thereof accepted for payment, unless the Company
defaults in the payment of the purchase price therefor. The Company will
announce the results of the Asset Sale Offer on or as soon as practicable after
the Asset Sale Offer Purchase Date.
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The Company will comply with the applicable tender offer rules,
including the requirements of Section 14(e) and Rule 14e-1 under the Exchange
Act, and all other applicable securities laws and regulations in connection with
any Asset Sale Offer and will be deemed not to be in violation of any of its
covenants under this Indenture to the extent such compliance is in conflict with
such covenants.
Section 10.15. CHANGE OF CONTROL. Upon the occurrence of a Change of
Control (the date of such occurrence, the "CHANGE OF CONTROL DATE"), the Company
shall make an offer to purchase (a "CHANGE OF CONTROL OFFER"), and shall,
subject to the provisions described below, purchase, all or any portion (equal
to $1,000 or an integral multiple thereof) of the then outstanding Notes validly
tendered at a purchase price in cash (the "CHANGE OF CONTROL PURCHASE PRICE")
equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any, to the Change of Control Purchase Date; PROVIDED, HOWEVER, that
notwithstanding the occurrence of a Change of Control, the Company shall not be
obligated to purchase the Notes pursuant to this Section 10.15 in the event that
it has exercised its right to redeem all the Notes under Section 11.01. The
Company shall be required to purchase all Notes properly tendered in the Change
of Control Offer and not withdrawn.
Unless the Company has exercised its right to redeem all of the Notes
under Section 11.01, notice of a Change of Control Offer shall be prepared and
mailed by the Company not later than the 30th day after the Change of Control
Date (or at the Company's option, prior to such Change of Control but after the
public announcement thereof) to the Holders of Notes at their last registered
addresses appearing on the Note Register with a copy to the Trustee and the
Paying Agent. The Offer shall remain open from the time of mailing for at least
20 Business Days or such longer period as may be required by law. The notice,
which shall govern the terms of the Change of Control Offer, shall
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include such disclosures as are required by law and shall state:
(a) that the Change of Control has occurred or will occur and that
such Holder has (or upon such occurrence will have) the right to require
the Company to purchase all or a portion (equal to $1,000 or an integral
multiple thereof) of such Holder's Notes at a purchase price in cash equal
to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest, if any, to the date of purchase, which shall be a Business Day,
specified in such notice, that is not earlier than 30 days or later than
60 days from the date such notice is mailed (the "CHANGE OF CONTROL PURCHASE
DATE");
(b) the amount of accrued and unpaid interest, if any, as of the
Change Control Purchase Date;
(c) that any Note not tendered for payment will continue to accrue
interest in accordance with the terms thereof;
(d) that, unless the Company defaults in the payment of the purchase
price for the Notes payable pursuant to the Change of Control Offer, any
Notes accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Purchase Date;
(e) that Holders electing to have Notes purchased pursuant to a
Change of Control Offer will be required to surrender their Notes to the
Paying Agent at the address specified in the notice prior to 5:00 p.m., New
York City time, on the third Business Day prior to the Change of Control
Purchase Date with the "Option of Holder to Elect Purchase" on the reverse
thereof completed and must complete any form letter of transmittal proposed
by the Company (which letter must be completed correctly by such Holder)
and which is
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reasonably acceptable to the Trustee and the Paying Agent;
(f) that Holders of Notes will be entitled to withdraw their election
if the Paying Agent receives, not later than 5:00 p.m., New York City time,
on the third Business Day prior to the Change of Control Purchase Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
the Holder, the principal amount of Notes the Holder delivered for
purchase, the Note certificate number (if any) and a statement that such
Holder is withdrawing its election to have such Notes purchased;
(g) that Holders whose Notes are purchased only in part will be
issued Notes equal in principal amount to the unpurchased portion of the
Notes surrendered;
(h) the instructions that Holders must follow in order to tender
their Notes;
(i) that if such Change of Control Offer is made prior to the
occurrence of such Change of Control, payment is conditioned on the
occurrence of such Change of Control; and
(j) such other information as may be required by applicable laws and
regulations concerning the circumstances and relevant facts regarding such
Change of Control and Change of Control Offer as would be material to a
Holder of Notes in connection with the decision of such Holder as to
whether or not it should tender Notes pursuant to the Change of Control
Offer.
On the Change of Control Purchase Date, provided that such Change of
Control has occurred, the Company will (i)accept for payment all Notes or
portions thereof tendered pursuant to the Change of Control Offer, (ii)deposit
with the Paying Agent an amount in cash equal to the aggregate purchase price of
all Notes or portions
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thereof accepted for payment, plus any accrued and unpaid interest on such Notes
as of the Change of Control Purchase Date, and (iii)deliver or cause to be
delivered to the Trustee all Notes tendered pursuant to the Change of Control
Offer. The Paying Agent shall as promptly as practicable after the Change of
Control Purchase Date mail to each Holder of Notes or portions thereof accepted
for payment an amount in cash equal to the purchase price for such Notes, plus
any accrued and unpaid interest thereon, and the Trustee shall promptly
authenticate and mail to such Holders of Notes accepted for payment in part a
new Note equal in principal amount to any unpurchased portion of the Note
surrendered. Any Notes not so accepted in whole or in part shall be promptly
returned to the Holder thereof.
On and after a Change of Control Purchase Date, interest will cease to
accrue on the Notes or portions thereof accepted for payment unless the Company
defaults in the payment of the purchase price therefor. The Company will
publicly announce the results of the Change of Control Offer as soon as
practicable after the Change of Control Purchase Date.
The Company will comply with the applicable tender offer rules,
including the requirements of Section 14(e) and Rule 14e-1 under the Exchange
Act, and any other securities laws and regulations to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and the
Company is required to purchase Notes as described above and will be deemed not
to be in violation of any of its covenants under this Indenture to the extent
such compliance is in conflict with such covenants.
The Company will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in this Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly
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tendered and not withdrawn under such Change of Control Offer.
Section 10.16. LIMITATION ON LIENS. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, create, incur,
assume or suffer to exist any Lien on any asset now owned or hereafter acquired
by such Person, or any income or profits therefrom, or assign or convey any
right to receive income therefrom (any such Lien, including any such assignment
or conveyance, the "Initial Lien") securing Indebtedness of the Company or any
Subsidiary Guarantor that is PARI PASSU with or expressly subordinated in right
of payment to the Notes (other than Permitted Liens), unless the Notes are
equally and ratably secured thereby for so long as such Indebtedness is so
secured by the Initial Lien. Any such Lien thereby created in favor of the
Notes will be automatically and unconditionally released and discharged upon (i)
the release and discharge of the Initial Lien to which it relates, or (ii) any
sale, exchange or transfer to any Person not an Affiliate of the Company of the
property or assets secured by such Initial Lien, or of all the Capital Stock
held by the Company or any Restricted Subsidiary in, or all or substantially all
the assets of, any Restricted Subsidiary creating such Lien.
Section 10.17. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any Restricted Subsidiary to (a)pay dividends or make
any other distributions to the Company or any other Restricted Subsidiary on its
Capital Stock or with respect to any other interest or participation in, or
measured by, its profits, or pay any Indebtedness owed to the Company or any
other Restricted Subsidiary, (b)make loans or advances to the Company or any
other Restricted Subsidiary, or (c)transfer any of its properties or assets to
the Company or any other
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Restricted Subsidiary, except for such encumbrances or restrictions consisting
of or existing under or by reason of (i) the Credit Facility or any other
agreement or instrument as in effect on the Issue Date, and any amendments,
restatements, renewals, replacements or refinancings thereof; PROVIDED, HOWEVER,
that such amendments, restatements, renewals, replacements or refinancings are
no more restrictive with respect to such dividend and other payment restrictions
than those contained in the Credit Facility or such other agreement or
instrument (or, if more restrictive, than those contained in this Indenture)
immediately prior to any such amendment, restatement, renewal, replacement or
refinancing, (ii) any requirement of any regulatory authority having
jurisdiction over the Company or any Restricted Subsidiary or any of their
businesses, (iii)any agreement or instrument of a Person, or governing
Indebtedness or Capital Stock of a Person, acquired by or merged or consolidated
with or into the Company or any Restricted Subsidiary, or assumed by the Company
or any Restricted Subsidiary in connection with an acquisition of assets from
such Person, as in effect at the time of such acquisition, merger or
consolidation (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition, merger or consolidation); PROVIDED
that for purposes of this clause (iii), if another Person is the Surviving
Person, any Subsidiary or agreement thereof shall be deemed acquired or assumed,
as the case may be, by the Company when such Person becomes the Surviving
Person, (iv) any provision that restricts in a customary manner the subletting,
assignment or transfer of any property or asset that is subject to a lease,
license or similar contract, or the assignment or transfer of any lease, license
or other contract, (v) any transfer of, agreement to transfer, option or right
with respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by this Indenture, (vi)
mortgages, pledges or other security agreements securing Indebtedness of a
Restricted Subsidiary to the extent such encumbrance or restrictions restrict
the transfer of the property subject to such
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mortgages, pledges or other security agreements, (vii) customary provisions
restricting dispositions of real property interests set forth in any reciprocal
easement agreements of the Company or any Restricted Subsidiary, (viii)
encumbrances or restrictions arising or agreed to in the ordinary course of
business and that do not, individually or in the aggregate, detract from the
value of property or assets of the Company or any Restricted Subsidiary, (ix)
any agreement or instrument relating to any Indebtedness incurred by a Foreign
Subsidiary pursuant to Section 10.11(a), or clauses (ii), (iii), (vii), (x)(A)
and (x)(B) of Section 10.11(b), (x) subordination provisions applicable to any
note representing an obligation of the Company or any Restricted Subsidiary
owing to any Restricted Subsidiary, (xi) Purchase Money Obligations for property
acquired in the ordinary course of business that only impose restrictions on the
property so acquired, (xii) an agreement relating to Indebtedness of or a
Financing Disposition to or by any Receivables Entity, (xiii)an agreement for
the sale or disposition of the Capital Stock or assets of any Restricted
Subsidiary; PROVIDED, HOWEVER, that such restriction is only applicable to such
Restricted Subsidiary or assets, as applicable, and such sale or disposition
otherwise is permitted under Section 10.14, or (xiv)Refinancing Indebtedness
permitted under this Indenture; PROVIDED, HOWEVER, that the restrictions
contained in the agreements governing such Refinancing Indebtedness are no more
restrictive in the aggregate than those contained in the agreements governing
the Indebtedness being refinanced immediately prior to such refinancing.
Nothing contained in this Section 10.17 shall prevent the Company or
any Restricted Subsidiary from (1)creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in Section 10.16 or (2)restricting the sale
or other disposition of property or assets of the Company or any of its
Restricted Subsidiaries that secure Indebtedness of the Company or any of its
Restricted Subsidiaries.
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Section 10.18. LIMITATION ON INCURRENCE OF OTHER SENIOR SUBORDINATED
INDEBTEDNESS. The Company will not, and will not permit any Subsidiary
Guarantor to, directly or indirectly, incur, any Indebtedness that is expressly
subordinate in right of payment in any respect to any other Indebtedness, unless
such Indebtedness is expressly subordinate in right of payment to, or ranks PARI
PASSU with, the Notes, in the case of the Company, or the Subsidiary Guarantees,
in the case of a Subsidiary Guarantor; PROVIDED that the foregoing restriction
shall not apply to distinctions between categories of Senior Debt or Guarantor
Senior Debt that exist solely by reason of Liens or Guarantees arising or
created in respect of some but not all such Senior Debt or Guarantor Senior
Debt, as the case may be.
Section 10.19. DESIGNATION OF UNRESTRICTED SUBSIDIARIES. The Company
will not designate any Subsidiary of the Company (other than a newly created
Subsidiary in which no Investment has previously been made in excess of $1,000)
as an Unrestricted Subsidiary (a "Designation") unless:
(a) no Default shall have occurred and be continuing at the time of
or after giving effect to such Designation;
(b) immediately after giving effect to such Designation the Company
would be able to incur $1.00 of Indebtedness pursuant to Section 10.11(a);
and
(c) the Company would not be prohibited under Section 10.12 from
making an Investment at the time of Designation in an amount (the
"Designation Amount") equal to the Fair Market Value of such Restricted
Subsidiary on such date.
In the event of any such Designation, the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to Section
10.12 for all
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purposes of this Indenture in the Designation Amount. Neither the Company nor
any Restricted Subsidiary shall at any time (x) provide credit support for, or a
Guarantee of, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness); PROVIDED
that the Company may pledge Capital Stock or Indebtedness of any Unrestricted
Subsidiary on a nonrecourse basis such that the pledgee has no claim whatsoever
against the Company other than to obtain such pledged property, (y) be directly
or indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z)
be directly or indirectly liable for any Indebtedness which provides that the
holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to its
final scheduled maturity upon the occurrence of a default with respect to any
Indebtedness of any Unrestricted Subsidiary (including any right to take
enforcement action against such Unrestricted Subsidiary), except to the extent
permitted under Section 10.12.
The Company will not revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation"), unless:
(a) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation shall be deemed to have
been incurred at such time and shall have been permitted to be incurred
pursuant to this Indenture.
All Designations and Revocations must be evidenced by Board
Resolutions delivered to the Trustee certifying compliance with the foregoing
provisions.
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Section 10.20. LIMITATION ON THE SALE OR ISSUANCE OF PREFERRED STOCK
OF RESTRICTED SUBSIDIARIES. The Company will not sell, and will not permit any
Restricted Subsidiary to, directly or indirectly, issue or sell, any shares of
Preferred Stock of any Restricted Subsidiary, except (i) to the Company or a
Restricted Subsidiary, or to directors as director's qualifying shares to the
extent required by applicable law, or (in the case of a Foreign Subsidiary) to
the extent required by applicable law, or (ii) for any sale in compliance with
the terms of Section 10.14 or (iii) for any Preferred Stock incurred by any
Restricted Subsidiary in compliance with Section 10.11.
ARTICLE ELEVEN
REDEMPTION OF NOTES
Section 11.01. OPTIONAL REDEMPTION. Except as provided below, the
Notes are not redeemable at the option of the Company prior to July 1, 2002.
Subject to earlier redemption in the manner described in the next two succeeding
paragraphs, the Notes will be redeemable at the option of the Company, in whole
at any time or in part, at any time on or after July 1, 2002 at the Redemption
Prices (expressed as percentages of principal amount of the Notes) set forth
below, plus in each case accrued and unpaid interest, if any, to the Redemption
Date, if redeemed during the 12-month period beginning July 1 of the years
indicated below:
Redemption
Year Price
---- ----------
2002 104.813%
2003 103.208%
2004 101.604%
2005 and thereafter 100.000%
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In addition, at any time prior to July 1, 2000, the Company may, at
its option, redeem Notes, in an aggregate principal amount of up to 30% of the
aggregate principal amount of Notes originally issued, with the net cash
proceeds of one or more Public Equity Offerings, at 109 5/8% of the aggregate
principal amount thereof plus accrued and unpaid interest, if any, to the
Redemption Date; PROVIDED, HOWEVER, that not less than $60.0 million principal
amount of the Notes is outstanding immediately after giving effect to such
redemption (other than any Notes owned by the Company or any of its Affiliates)
and such redemption is effected within 60 days of the issuance in such Public
Equity Offering.
In addition, at any time prior to July 1, 2002, within 180 days after
the occurrence of a Change of Control, the Company may, at its option, redeem
all but not less than all of the Notes, at a Redemption Price equal to 100% of
the principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest, if any, to, the Redemption Date. Such Applicable Premium shall
be set forth in an Officers' Certificate of the Company furnished to the
Trustee, upon which the Trustee shall be entitled to conclusively rely and the
Trustee shall not be required to verify any calculations in respect thereof.
Section 11.02. APPLICABILITY OF ARTICLE. Redemption of Notes at the
election of the Company as permitted by any provision of Section 11.01, shall be
made in accordance with such provision and this Article Eleven.
Section 11.03. ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election
of the Company to redeem any Notes pursuant to Section11.01 shall be evidenced
by a Board Resolution of the Company and an Officers' Certificate. In case of
any redemption at the election of the Company, the Company shall, at least 60
days prior to the Redemption Date fixed by the Company (unless a shorter notice
period shall be satisfactory to the Trustee), notify the Trustee in
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writing of such Redemption Date and of the principal amount of Notes to be
redeemed.
Section 11.04. SELECTION OF NOTES TO BE REDEEMED. In the event that
less than all of the Notes are to be redeemed at any time, selection of such
Notes for redemption will be made by the Company in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not then listed on a national securities
exchange, on a PRO RATA basis or by lot or any other method as the Trustee shall
deem fair and appropriate; PROVIDED, HOWEVER, that Notes redeemed in part shall
only be redeemed in integral multiples of $1,000; PROVIDED, FURTHER, HOWEVER,
that any such redemption pursuant to the provisions relating to a Public Equity
Offering by the Company shall be made on a PRO RATA basis or on as nearly a PRO
RATA basis as practicable (subject to any procedures of The Depository Trust
Company or any other Depository). If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the portion of
the principal amount thereof to be redeemed and the Trustee shall authenticate
and mail to the holder of the original Note a new Note in principal amount equal
to the unredeemed portion of the original Note promptly after the original Note
has been canceled. On and after the Redemption Date, interest will cease to
accrue on Notes or portions thereof called for redemption.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Notes shall relate, in the
case of any Note redeemed or to be redeemed only in part, to the portion of the
principal amount of such Note which has been or is to be redeemed.
Section 11.05. NOTICE OF REDEMPTION. Notice of any optional or
mandatory redemption shall be mailed by first-class mail, postage prepaid,
mailed at least 30 but not more than 60 days before the Redemption Date, to each
Holder of Notes to be redeemed at its registered address.
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All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if fewer than all outstanding Notes are to be redeemed, the
identification of the particular Notes to be redeemed;
(d) in the case of a Note to be redeemed in part, the principal
amount of such Note to be redeemed and that after the Redemption Date upon
surrender of such Note, a new Note or Notes in the aggregate principal
amount equal to the unredeemed portion thereof will be issued;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(f) that on the Redemption Date the Redemption Price will become due
and payable upon each such Note or portion thereof, and that (unless the
Company shall default in payment of the Redemption Price) interest thereon
shall cease to accrue on and after said date;
(g) the place or places where such Notes are to be surrendered for
payment of the Redemption Price;
(h) the CUSIP number, if any, relating to such Notes; and
(i) the paragraph of the Notes or provision of the Indenture pursuant
to which the Notes are being redeemed.
Notice of redemption of Notes to be redeemed shall be given by the
Company or, at the Company's written
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request, by the Trustee in the name and at the expense of the Company.
The notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice to the Holder of any Note designated for redemption as a whole or in
part shall not affect the validity of the proceedings for the redemption of any
other Note.
Section 11.06. DEPOSIT OF REDEMPTION PRICE. On or prior to
10:00a.m., New York City time, on each Redemption Date, the Company shall
deposit with the Trustee or with a Paying Agent (or, if the Company is acting as
its own Paying Agent, segregate and hold in trust as provided in Section10.03)
an amount of money in same day funds sufficient to pay the Redemption Price of,
and any accrued and unpaid interest on, all the Notes or portions thereof which
are to be redeemed on that date.
Section 11.07. NOTES PAYABLE ON REDEMPTION DATE. Notice of
redemption having been given as aforesaid, the Notes so to be redeemed shall, on
the Redemption Date, become due and payable at the Redemption Price therein
specified and from and after such date (unless the Company shall default in the
payment of the Redemption Price) such Notes shall cease to bear interest. Upon
surrender of any such Note for redemption in accordance with said notice, such
Note shall be paid by the Company at the Redemption Price; PROVIDED, HOWEVER,
that installments of interest whose Stated Maturity is on or prior to the
Redemption Date shall be payable to the Holders of such Notes, or one or more
Predecessor Notes, registered as such on the relevant Regular Record Dates
according to the terms and the provisions of Section3.06.
On and after any Redemption Date, if money sufficient to pay the
Redemption Price of and any accrued and unpaid interest on Notes called for
redemption shall
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have been made available in accordance with Section 11.06, the Notes called for
redemption will cease to accrue interest and the only right of the Holders of
such Notes will be to receive payment of the Redemption Price of and subject to
the provision in the preceding paragraph, any accrued and unpaid interest on
such Notes to the Redemption Date. If any Note called for redemption shall not
be so paid upon surrender thereof for redemption, the principal and premium, if
any, shall, until paid, bear interest from the Redemption Date at the rate then
borne by such Note.
Section 11.08. NOTES REDEEMED OR PURCHASED IN PART. Any Note which
is to be redeemed or purchased only in part shall be surrendered to the Paying
Agent at the office or agency maintained for such purpose pursuant to
Section10.02 (with, if the Company, the Note Registrar or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to, the Company, the Note Registrar or the Trustee duly executed by
the Holder thereof or such Holder's attorney duly authorized in writing), and
the Company shall execute, and the Trustee shall authenticate and deliver to the
Holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such Holder in aggregate principal
amount equal to, and in exchange for, the portion of the principal of the Note
so surrendered that is not redeemed or purchased.
ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 12.01. SATISFACTION AND DISCHARGE OF INDENTURE. This
Indenture shall cease to be of further effect (except as to surviving rights of
registration of transfer or exchange of Notes expressly provided for in Section
2.05, the Company's obligations under Section 6.07 hereof, and the Trustee's and
Paying Agent's obligations under Section 4.06 hereof) and the Trustee, on
written
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demand of and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(a) either
(i) all Notes theretofore authenticated and delivered (other
than Notes which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section3.05 hereof) have been
delivered to the Trustee for cancellation; or
(ii) all such Notes not theretofore delivered to the Trustee for
cancellation (x) have become due and payable (y)will become due and
payable at their Stated Maturity within one year or (z) are to be
called for redemption within one year under arrangements reasonably
satisfactory to the Trustee for the giving of notice of redemption by
the Trustee in the name, and at the expense, of the Company, and, in
each case, the Company has irrevocably deposited or caused to be
deposited with the Trustee in trust for the purpose an amount in
United States dollars, U.S. Government Obligations, or a combination
thereof, sufficient to pay and discharge the entire Indebtedness on
such Notes not theretofore delivered to the Trustee for cancellation,
for the principal of, premium, if any, and interest to the date of
such deposit;
(b) the Company has paid or caused to be paid all other sums then
payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each to the effect that all conditions precedent
provided for in this Section 12.01 relating to the satisfaction and
discharge of this Indenture have been complied with.
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Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section6.07 and, if money shall
have been deposited with the Trustee pursuant to subclause (a)(ii) of this
Section 12.01, the obligations of the Trustee under Section12.02, shall survive.
Section 12.02. APPLICATION OF TRUST MONEY. Subject to the provisions
of the last paragraph of Section10.03, all money deposited with the Trustee
pursuant to Section12.01 shall be held in trust and applied by it, in accordance
with the provisions of the Notes and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of
the principal of, premium, if any, and interest on the Notes for whose payment
such money has been deposited with the Trustee.
ARTICLE THIRTEEN
GUARANTEE OF NOTES
Section 13.01. SUBSIDIARY GUARANTEE. (a) Subject to the provisions of
this Article Thirteen, each Restricted Subsidiary that hereafter becomes a
Subsidiary Guarantor pursuant to Section 10.10, by its execution and delivery of
its Subsidiary Guarantee in accordance with Sections 10.10 and 13.02, shall
thereby agree as follows:
(i) Each such Subsidiary Guarantor hereby jointly and severally and
fully and unconditionally guarantees to each Holder of a Note authenticated
and delivered by the Trustee and to the Trustee and its successors and
assigns, irrespective (to the fullest extent permitted by law) of (x) the
validity and enforceability of this Indenture, the Notes or the Obligations
of the Company or any other Subsidiary Guarantors to the Holders or the
Trustee hereunder or thereunder or (y) the absence
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of any action to enforce the same or any other circumstances which might
otherwise constitute a legal or equitable discharge or default of a
Subsidiary Guarantor, that: (1)the principal of, and premium, if any, and
interest on, the Notes will be duly and punctually paid in full when due,
whether at maturity, by acceleration or otherwise, and interest on the
overdue principal and (to the extent permitted by law) interest, if any, on
the Notes and all other Obligations of the Company or the Subsidiary
Guarantors to the Holders or the Trustee hereunder or thereunder (including
fees, expenses or other) will be promptly paid in full when due, all in
accordance with the terms hereof and thereof; and (2)in case of any
extension of time of payment or renewal of any Notes or any of such other
Obligations with respect to the Notes, the same will be promptly paid in
full when due in accordance with the terms of the extension or renewal,
whether at Stated Maturity, by acceleration or otherwise. Failing payment
when due of any amount so guaranteed, for whatever reason, each Subsidiary
Guarantor will be obligated to pay, or to cause the payment of, the same
immediately. An Event of Default under this Indenture or the Notes shall
constitute an event of default under each Subsidiary Guarantee, and shall
entitle the Holders of Notes to accelerate the obligations of the
Subsidiary Guarantors under their respective Subsidiary Guarantees in the
same manner and to the same extent as the obligations of the Company.
(ii) Each of such Subsidiary Guarantors hereby agrees (to the fullest
extent permitted by law) that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability
of the Notes or this Indenture, the absence of any action to enforce the
same, any waiver or consent by any holder of the Notes with respect to any
provisions hereof or thereof, any release of any other Subsidiary
Guarantor, the recovery of any judgment against the Company, any action to
enforce the
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same, whether or not a Subsidiary Guarantee is affixed to any particular
Note, or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor. Each of such Subsidiary
Guarantors hereby waives (to the fullest extent permitted by law) the
benefit of diligence, presentment, demand of payment, filing of claims with
a court in the event of insolvency or bankruptcy of the Company, any right
to require a proceeding first against the Company, protest, notice and all
demands whatsoever and covenants that (except as otherwise provided in
Section 13.07 or its Subsidiary Guarantee) its Subsidiary Guarantee will
not be discharged except by complete performance of the obligations
contained in the Notes, this Indenture and this Subsidiary Guarantee. Each
such Subsidiary Guarantor further agrees that, as between it, on the one
hand, and the Holders of Notes and the Trustee, on the other hand,
(1)subject to this Article Thirteen, the maturity of the obligations
guaranteed hereby may be accelerated as and to the extent provided in
Article Five hereof for the purposes of this Subsidiary Guarantee, and
(2)in the event of any acceleration of such obligations as provided in
Article Five hereof, such obligations (whether or not due and payable)
shall forthwith become due and payable by such Subsidiary Guarantor for the
purpose of its Subsidiary Guarantee.
(iii) Until terminated in accordance with Section 13.07 or its terms,
the Subsidiary Guarantee of such Subsidiary Guarantor shall remain in full
force and effect and continue to be effective should any petition be filed
by or against the Company for liquidation or reorganization, should the
Company become insolvent or make an assignment for the benefit of creditors
or should a receiver or trustee be appointed for all or any significant
part of the Company's assets, and shall, to the fullest extent permitted by
law, continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Notes
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are, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee on the Notes, whether as a
"voidable preference," "fraudulent transfer" or otherwise, all as though
such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned,
the Notes shall, to the fullest extent permitted by law, be reinstated and
deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
(b) No stockholder, officer, director, employer, incorporator or
controlling person, past, present or future, of any Subsidiary Guarantor, as
such, shall have any personal liability under any Subsidiary Guarantee by reason
of his, her or its status as such stockholder, officer, director, employer,
incorporator or controlling person.
(c) Each Subsidiary Guarantor shall have the right to seek
contribution from any non-paying Subsidiary Guarantor so long as the exercise of
such right does not impair the rights of the Holders under its Subsidiary
Guarantee.
(d) Notwithstanding any of the foregoing, each Subsidiary Guarantor's
liability under its Subsidiary Guarantee shall be limited to the maximum amount
that would not result in such Subsidiary Guarantee constituting a fraudulent
conveyance or fraudulent transfer under applicable law.
Section 13.02. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE. Each
Restricted Subsidiary that is required to become a Subsidiary Guarantor pursuant
to Section 10.10, and each Restricted Subsidiary that the Company causes to
become a Subsidiary Guarantor pursuant to Section 10.10, shall promptly execute
and deliver to the Trustee a supplemental indenture substantially in the form
set forth in EXHIBIT E to this Indenture, or otherwise in form and substance
reasonably satisfactory to the Trustee,
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evidencing its Subsidiary Guarantee on substantially the terms set forth in this
Article Thirteen. Concurrently therewith, the Company shall deliver to the
Trustee an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee to the effect that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and that,
subject to the applicable bankruptcy, insolvency, fraudulent transfer,
fraudulent conveyance, reorganization, moratorium and other laws now or
hereafter in effect affecting creditors' rights or remedies generally and the
general principles of equity (including, without limitation, standards of
materiality, good faith, fair dealing and reasonableness), such supplemental
indenture is a valid and binding agreement of such Restricted Subsidiary,
enforceable against such Restricted Subsidiary in accordance with its terms.
Section 13.03. [Intentionally omitted.]
Section 13.04. SUBSIDIARY GUARANTEE OBLIGATIONS SUBORDINATED TO
GUARANTOR SENIOR DEBT. Each Subsidiary Guarantor covenants and agrees, and each
Holder of a Note, by such Holder's acceptance thereof, likewise covenants and
agrees, that all payments pursuant to its Subsidiary Guarantee made by or on
behalf of such Subsidiary Guarantor are hereby expressly made subordinate and
subject in right of payment as provided in this Article Thirteen to the prior
payment in full in cash or cash equivalents of all amounts payable under all
existing and future Guarantor Senior Debt of such Subsidiary Guarantor.
This Section 13.04 and the following Sections 13.05, 13.06 and 13.08
through 13.17 of this Article Thirteen shall constitute a continuing offer to
all Persons who, in reliance upon such provisions, become holders of, or
continue to hold Guarantor Senior Debt of any Subsidiary Guarantor and, to the
extent set forth in Section 13.06(b), holders of Designated Senior Debt; and
such provisions are made for the benefit of the holders of Guarantor Senior Debt
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of each Subsidiary Guarantor and, to the extent set forth in Section 13.06(b),
holders of Designated Senior Debt; and such holders (to such extent) are made
obligees hereunder and they or each of them may enforce such provisions.
Section 13.05. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. In
the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relating to any Subsidiary Guarantor or its assets, or (b)
any liquidation, dissolution or other winding-up of any Subsidiary Guarantor,
whether voluntary or involuntary, or (c) any assignment for the benefit of
creditors or other marshalling of assets or liabilities of any Subsidiary
Guarantor, then and in any such event:
(i) the holders of all Guarantor Senior Debt of such Subsidiary
Guarantor shall be entitled to receive payment in full in cash or cash
equivalents, or provision acceptable to the requisite holders of Guarantor
Senior Debt of such Subsidiary Guarantor made for such payment, of all
amounts due on or in respect of all such Guarantor Senior Debt before the
Holders are entitled to receive any payment or distribution, whether in
cash, property or securities (excluding Permitted Junior Securities) on
account of the Senior Subordinated Note Obligations or for the acquisition
of any of the Notes; and
(ii) any payment or distribution of assets of such Subsidiary
Guarantor of any kind or character, whether in cash, property or securities
(excluding Permitted Junior Securities), by set-off or otherwise, to which
the Holders or the Trustee would be entitled but for the subordination
provisions of this Article Thirteen shall be paid by the liquidating
trustee or agent or other Person making such payment or distribution,
whether a trustee in bankruptcy, a receiver or liquidating trustee or
otherwise, directly to the
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holders of Guarantor Senior Debt of such Subsidiary Guarantor or their
representative or representatives or to the trustee or trustees under any
indenture under which any instruments evidencing any of such Guarantor
Senior Debt may have been issued, ratably according to the aggregate
amounts remaining unpaid on account of such Guarantor Senior Debt held or
represented by each, to the extent necessary to make payment in full in
cash or cash equivalents of all such Guarantor Senior Debt remaining
unpaid, after giving effect to any concurrent payment or distribution to
the holders of such Guarantor Senior Debt; and
(iii) in the event that, notwithstanding the foregoing provisions of
this Section 13.05, the Trustee or the Holder of any Note shall have
received any payment or distribution of assets of such Subsidiary Guarantor
of any kind or character, whether in cash, property or securities, in
respect of any Senior Subordinated Note Obligations under this Subsidiary
Guarantee before all Guarantor Senior Debt of such Subsidiary Guarantor is
paid in full in cash or cash equivalents or payment thereof provided for,
then and in such event such payment or distribution (excluding Permitted
Junior Securities) shall be paid over or delivered forthwith to the trustee
in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or
other Person making payment or distribution of assets of such Subsidiary
Guarantor for application to the payment of all such Guarantor Senior Debt
remaining unpaid, to the extent necessary to pay all of such Guarantor
Senior Debt in full in cash or cash equivalents, after giving effect to any
concurrent payment or distribution to or for the holders of such Guarantor
Senior Debt.
The consolidation of any Subsidiary Guarantor with, or the merger of
any Subsidiary Guarantor with or into, another Person or the liquidation or
dissolution of any Subsidiary Guarantor following the conveyance, transfer or
lease of its properties and assets substantially as an
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entirety to another Person shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshalling of assets and liabilities of such Subsidiary Guarantor for the
purposes of this Article Thirteen if (x) made in accordance with Section 13.07
or (y) the Person formed by such consolidation or the surviving entity of such
merger or the Person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, assume
the Subsidiary Guarantee of such Subsidiary Guarantor.
Section 13.06. SUSPENSION OF SUBSIDIARY GUARANTEE OBLIGATIONS WHEN
GUARANTOR SENIOR DEBT IN DEFAULT. (a) Unless Section 13.05 shall be applicable,
after the occurrence of a Payment Default no payment or distribution of any
assets of any Subsidiary Guarantor of any kind or character shall be made by or
on behalf of such Subsidiary Guarantor on account of the Senior Subordinated
Note Obligations or on account of the purchase, redemption, defeasance or other
acquisition of the Senior Subordinated Note Obligations or any of the
obligations of such Subsidiary Guarantor under its Subsidiary Guarantee unless
and until such Payment Default shall have been cured or waived or shall have
ceased to exist or the Senior Debt as to which such Payment Default relates
shall have been discharged or paid in full in cash or cash equivalents, after
which, subject to Section 13.05 (if applicable), such Subsidiary Guarantor shall
resume making any and all required payments in respect of its obligations under
its Subsidiary Guarantee.
(b) Unless Section 13.05 shall be applicable, during any Payment
Blockage Period in respect of the Notes, no payment or distribution of any
assets of any Subsidiary Guarantor of any kind or character shall be made by or
on behalf of such Subsidiary Guarantor on account of the Senior Subordinated
Note Obligations or on account of the purchase, redemption, defeasance or other
acquisition of the Senior
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Subordinated Note Obligations or on account of any of the other obligations of
such Subsidiary Guarantor under its Subsidiary Guarantee, PROVIDED that the
foregoing prohibition shall not apply unless such Payment Blockage Period has
been instituted under Section 14.03(b) by a Senior Representative acting for
holders of Designated Senior Debt which also constitutes Guarantor Senior Debt.
Upon the termination of any Payment Blockage Period, subject to Section 13.05
(if applicable), such Subsidiary Guarantor shall resume making any and all
required payments in respect of its obligations under its Subsidiary Guarantee.
(c) In the event that, notwithstanding the foregoing, the Trustee or
any Subsidiary Guarantor of any Note shall have received any payment from any
Subsidiary Guarantor prohibited by the foregoing provisions of this Section
13.06, then and in such event such payment shall be paid over and delivered
forthwith to the Senior Representative initiating the Payment Blockage Period,
in trust for distribution to the holders of Guarantor Senior Debt of such
Subsidiary Guarantor or, if no amounts are then due in respect of Guarantor
Senior Debt of such Subsidiary Guarantor, prompt return to such Subsidiary
Guarantor, or as a court of competent jurisdiction shall direct.
Section 13.07 RELEASE OF SUBSIDIARY GUARANTEE. (a) Any Restricted
Subsidiary that becomes a Subsidiary Guarantor pursuant to Section 10.10 shall
be automatically and unconditionally released and discharged from its
obligations under its Subsidiary Guarantee, and such Subsidiary Guarantee shall
terminate, concurrently with the payment in full of the aggregate principal
amount of all Notes then outstanding and all other Senior Subordinated Note
Obligations then due and owing. If any of such Senior Subordinated Note
Obligations so paid are revived and reinstated after such termination of such
Subsidiary Guarantee, then all of the obligations of such Subsidiary Guarantor
under such Subsidiary Guarantee shall be revived and reinstated as if such
Subsidiary Guarantee had not been terminated until such time as the aggregate
principal amount
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of all Notes then outstanding and all other Senior Subordinated Note Obligations
then due and owing are paid in full, and such Subsidiary Guarantor shall enter
into a supplemental indenture in form reasonably satisfactory to the Trustee,
evidencing such revival and reinstatement. Upon any such payment, the Trustee
shall execute any documents reasonably required in order to evidence such
release, discharge and termination in respect of such Subsidiary Guarantee.
(b) Any Subsidiary Guarantor shall be automatically and
unconditionally released and discharged from all of its obligations under its
U.S. Subsidiary Guarantee or Foreign Subsidiary Guarantee, as applicable, and
such Subsidiary Guarantee shall terminate, at any such time that such Subsidiary
Guarantor is released from all of its obligations under all of its Guarantees in
respect of U.S. Specified Indebtedness or Foreign Specified Indebtedness, as the
case may be, unless such release results from payment under such Guarantee of
U.S. Specified Indebtedness or Foreign Specified Indebtedness, as applicable.
Upon the delivery by the Company to the Trustee of an Officers' Certificate and,
if requested by the Trustee, an Opinion of Counsel to the effect that the
transaction giving rise to such release of such Subsidiary Guarantee was made by
the Company in accordance with the provisions of this Indenture and the Notes,
the Trustee shall execute any documents reasonably required in order to evidence
such release and discharge of such Subsidiary Guarantor from its obligations
under and termination of its Subsidiary Guarantee.
(c) Upon (i) the sale or disposition (whether by merger, stock
purchase, asset sale or otherwise) of a Subsidiary Guarantor (or all or
substantially all of the assets of any such Subsidiary Guarantor or all of the
Capital Stock of any such Subsidiary Guarantor) to a Person which is not an
Affiliate of the Company, or (ii) the merger or consolidation of any Subsidiary
Guarantor with and into the Company or another Subsidiary Guarantor that is the
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Surviving Person in such merger or consolidation, such Subsidiary Guarantor
shall be automatically and unconditionally released and discharged from all its
obligations under its Subsidiary Guarantee, and such Subsidiary Guarantee shall
terminate. Upon such occurrence, the Trustee shall execute any documents
reasonably required in order to evidence such release, discharge and termination
in respect of such Subsidiary Guarantee.
(d) Upon the release of any Subsidiary Guarantor from its Subsidiary
Guarantee pursuant to the provisions of the Indenture, each other Subsidiary
Guarantor not so released shall remain liable for the full amount of principal
of, and interest on, the Notes as and to the extent provided in this Article
Thirteen and its Subsidiary Guarantee.
(e) Each Subsidiary Guarantee shall terminate and cease to be of
further effect upon (i) defeasance of the Company's obligations in accordance
with Section 4.02 hereof and (ii) satisfaction and discharge of this Indenture
in accordance with Section 12.01.
Section 13.08. WAIVER OF SUBROGATION. Each Subsidiary Guarantor
hereby irrevocably waives any claim or other rights which it may now or
hereafter acquire against the Company that arise from the existence, payment,
performance or enforcement of such Subsidiary Guarantor's obligations under its
Subsidiary Guarantee and this Indenture, including, without limitation, any
right of subrogation, reimbursement, exoneration, indemnification, and any right
to participate in any claim or remedy of any Holder of Notes against the
Company, whether or not such claim, remedy or right arises in equity, or under
contract, statute or common law, until the Senior Subordinated Note Obligations
shall have been paid in full. If any amount shall be paid to any Subsidiary
Guarantor in violation of the preceding sentence and the Notes shall not have
been paid in full, such amount shall have been deemed to have been paid to such
Subsidiary Guarantor for the benefit of,
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and held in trust for the benefit of, the Holders of the Notes, and shall,
subject to the subordination provisions of this Article and to Article Fourteen,
forthwith be paid to the Trustee for the benefit of such Holders to be credited
and applied upon the Notes, whether matured or unmatured, in accordance with the
terms of this Indenture.
Section 13.09 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The
subordination provisions of this Article Thirteen are and are intended solely
for the purpose of defining the relative rights of the Holders of the Notes on
the one hand and the holders of Guarantor Senior Debt of any Subsidiary
Guarantor and, to the extent set forth in Section 13.06, holders of Designated
Senior Debt on the other hand. Nothing contained in this Article Thirteen or
elsewhere in this Indenture or in the Notes is intended to or shall (a) impair,
as among each Subsidiary Guarantor, its creditors other than holders of its
Guarantor Senior Debt and the Holders of the Notes, the obligation of such
Subsidiary Guarantor, which is absolute and unconditional, to make payments to
the Holders in respect of its obligations under its Subsidiary Guarantee as and
when the same shall become due and payable in accordance with their terms; or
(b) affect the relative rights against such Subsidiary Guarantor of the Holders
of the Notes and creditors of such Subsidiary Guarantor other than the holders
of the Guarantor Senior Debt of such Subsidiary Guarantor; or (c) prevent the
Trustee or the Holder of any Note from exercising all remedies otherwise
permitted by applicable law upon Default or an Event of Default under this
Indenture, subject to the rights, if any, under the subordination provisions of
this Article Thirteen of the holders of Guarantor Senior Debt of such Subsidiary
Guarantor hereunder and, to the extent set forth in Section 13.06, holders of
Designated Senior Debt (1) in any case, proceeding, dissolution, liquidation or
other winding-up, assignment for the benefit of creditors or other marshaling of
assets and liabilities of the Subsidiary Guarantor referred to in Section 13.05,
to receive, pursuant to and in accordance with such Section, cash, property and
securities
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otherwise payable or deliverable to the Trustee or such Holder, or (2) under the
conditions specified in Section 13.06, to prevent any payment prohibited by such
Section or enforce their rights pursuant to Section 13.06(c).
The failure by any Subsidiary Guarantor to make a payment in respect
of its obligations under its Subsidiary Guarantee by reason of any provision of
this Article Thirteen shall not be construed as preventing the occurrence of a
Default or an Event of Default hereunder.
Section 13.10. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Holder of a
Note by such Holder's acceptance thereof authorizes and directs the Trustee on
such Holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination provided in this Article Thirteen and appoints the
Trustee such Holder's attorney-in-fact for any and all such purposes, including,
in the event of any dissolution, winding-up, liquidation or reorganization of
any Subsidiary Guarantor whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the indebtedness of such Subsidiary Guarantor owing to such Holder in the
form required in such proceedings and the causing of such claim to be approved.
If the Trustee does not file such a claim prior to 30 days before the expiration
of the time to file such a claim, the holders of Guarantor Senior Debt, or any
Senior Representative, may file such a claim on behalf of Holders of the Notes.
Section 13.11. NO WAIVER OF SUBORDINATION PROVISIONS. (a) No right of
any present or future holder of any Guarantor Senior Debt or Designated Senior
Debt to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or any Subsidiary Guarantor or by any act or failure to act, in good faith, by
any such holder, or by any non-compliance by the Company or such Subsidiary
Guarantor with the terms, provisions and covenants of this Indenture, regardless
of any knowledge
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thereof any such holder may have or be otherwise charged with.
(b) Without limiting the generality of subsection (a) of this Section
13.11, the holders of Guarantor Senior Debt may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article Thirteen or
the obligations hereunder of the Holders of the Notes to the holders of such
Guarantor Senior Debt, do any one or more of the following: (1) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, such Guarantor Senior Debt or any Senior Debt as to which such Guarantor
Senior Debt relates or any instrument evidencing the same or any agreement under
which such Guarantor Senior Debt or such Senior Debt is outstanding; (2) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing such Guarantor Senior Debt or any Senior Debt as to which
such Guarantor Senior Debt relates; (3) release any Person liable in any manner
for the collection or payment of such Guarantor Senior Debt or any Senior Debt
as to which such Guarantor Senior Debt relates; and (4)exercise or refrain from
exercising any rights against such Subsidiary Guarantor and any other Person;
PROVIDED that in no event shall any such actions limit the right of the Holders
of the Notes to take any action to accelerate the maturity of the Notes pursuant
to Article Five hereof or to pursue any rights or remedies hereunder or under
applicable laws if the taking of such action does not otherwise violate the
terms of this Indenture.
Section 13.12. NOTICE TO TRUSTEE. (a) The Company and each Subsidiary
Guarantor shall give prompt written notice to the Trustee of any fact known to
such Subsidiary Guarantor which would prohibit the making of any payment to or
by the Trustee in respect of the Notes. Notwithstanding the subordination
provisions of this Article or any other provision of this Indenture, the Trustee
shall not
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be charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Notes, unless and
until the Trustee shall have received written notice thereof at its Corporate
Trust Office from the Company, such Subsidiary Guarantor or a holder of its
Guarantor Senior Debt or from any representative, trustee, fiduciary or agent
therefor; and, prior to the receipt of any such written notice, the Trustee,
subject to the provisions of this Section 13.12, shall be entitled in all
respects to assume that no such facts exist; PROVIDED that if the Trustee shall
not have received the notice provided for in this Section 13.12 at least two
Business Days prior to the date upon which by the terms hereof any money may
become payable for any purpose under this Indenture (including, without
limitation, the payment of the principal of or interest on any Note), then,
anything herein contained to the contrary notwithstanding but without limiting
the rights and remedies of the holders of such Guarantor Senior Debt or any
representative, trustee, fiduciary or agent thereof, the Trustee shall have full
power and authority to receive such money and to apply the same to the purpose
for which such money was received and shall not be affected by any notice to the
contrary which may be received by it within two Business Days prior to such
date; nor shall the Trustee be charged with knowledge of the curing of any such
default or the elimination of the act or condition preventing any such payment
unless and until the Trustee shall have received an Officers' Certificate to
such effect.
(b) Subject to the provisions of Section 6.01, the Trustee shall be
entitled to rely on the delivery to it of a written notice to the Trustee, by a
Person representing himself to be a holder of Guarantor Senior Debt (or a
representative, trustee, fiduciary or agent therefor). In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any Person as a holder of Guarantor Senior Debt to participate
in any payment or distribution pursuant to this Article Thirteen, the Trustee
may request such Person to
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furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Guarantor Senior Debt held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article Thirteen, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Section 13.13. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT REGARDING DISSOLUTION, ETC. Upon any payment or distribution
of assets of any Subsidiary Guarantor referred to in this Article Thirteen, the
Trustee, subject to the provisions of Section 6.01, and the Holders shall be
entitled to rely upon any order or decree entered by any court of competent
jurisdiction in which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding-up or similar case or proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders,
for the purpose of ascertaining the Persons entitled to participate in such
payment or distribution, the holders of Guarantor Senior Debt and other
Indebtedness of such Subsidiary Guarantor, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article Thirteen; PROVIDED that the foregoing shall
apply only if such court has been fully apprised of the provisions of this
Article Thirteen. The Trustee is not responsible for determining whether or not
the court has been fully apprised of the provisions of this Article Thirteen.
Section 13.14. RIGHTS OF TRUSTEE AS A HOLDER OF GUARANTOR SENIOR
DEBT; PRESERVATION OF TRUSTEE'S RIGHTS. The Trustee in its individual capacity
shall be entitled to all the rights set forth in this Article Thirteen with
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respect to any Guarantor Senior Debt which may at any time be held by the
Trustee, to the same extent as any other holder of such Guarantor Senior Debt,
and nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder. Nothing in this Article Thirteen shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 6.07, none of which is or
shall be subordinate in right of payment to Guarantor Senior Debt or Senior
Debt.
Section 13.15. ARTICLE THIRTEEN APPLICABLE TO PAYING AGENTS. In case
at any time any Paying Agent other than the Trustee shall have been appointed by
the Company and be then acting hereunder, the term "Trustee" as used in this
Article Thirteen shall in such case (unless the context otherwise requires) be
construed as extending to and including such Paying Agent within its meaning as
fully for all intents and purposes as if such Paying Agent were named in this
Article Thirteen in addition to or in place of the Trustee; PROVIDED that
Section 13.14 shall not apply to the Company or any Affiliate of the Company if
it or such Affiliate acts as Paying Agent.
Section 13.16. NO SUSPENSION OF REMEDIES. Nothing contained in this
Article Thirteen shall limit the right of the Trustee or the Holders of Notes to
take any action to accelerate the maturity of the Notes pursuant to Article Five
or to pursue any rights or remedies hereunder or under applicable law, subject
to the rights, if any, under this Article Thirteen of the holders, from time to
time, of Guarantor Senior Debt.
Section 13.17. TRUSTEE'S RELATION TO GUARANTOR SENIOR DEBT. With
respect to the holders of Guarantor Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Thirteen (and in Article Fourteen with
respect to Senior Debt), and no implied covenants or obligations with respect to
the holders of Guarantor Senior Debt shall be read into this Indenture against
the Trustee. The Trustee shall not be deemed to owe
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any fiduciary duty to the holders of Guarantor Senior Debt and the Trustee shall
not be liable to any holder of Guarantor Senior Debt if it shall mistakenly in
the absence of gross negligence or willful misconduct pay over or deliver to
Holders, any Subsidiary Guarantor or any other Person moneys or assets to which
any holder of Guarantor Senior Debt shall be entitled by virtue of this Article
Thirteen or otherwise.
Section 13.18. SUBROGATION. Upon the payment in full in cash or cash
equivalents of all amounts payable under or in respect of Guarantor Senior Debt,
the Holders shall be subrogated to the rights of the holders of such Guarantor
Senior Debt to receive payments or distributions of assets of any Subsidiary
Guarantor made on such Guarantor Senior Debt until all amounts due under the
Subsidiary Guarantee shall be paid in full; and for the purposes of such
subrogation, no payments or distributions to holders of such Guarantor Senior
Debt of any cash, property or securities to which Holders of the Notes would be
entitled except for the provisions of this Article Thirteen, and no payment
pursuant to the provisions of this Article Thirteen to holders of such Guarantor
Senior Debt by the Holders, shall, as among each Subsidiary Guarantor, its
creditors other than holders of such Guarantor Senior Debt and the Holders, be
deemed to be a payment by such Subsidiary Guarantor to or on account of such
Guarantor Senior Debt) it being understood that the provisions of this Article
Thirteen are solely for the purpose of defining the relative rights of the
holders of such Guarantor Senior Debt, on the one hand, and the Holders, on the
other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Thirteen shall have
been applied, pursuant to the provisions of this Article Thirteen, to the
payment of all amounts payable under Guarantor Senior Debt, then and in such
case, the Holders shall be entitled to receive from the holders of such
Guarantor Senior Debt at the time outstanding any payments or distributions
received
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by such holders of Guarantor Senior Debt in excess of the amount sufficient to
pay all amounts payable under or in respect of such Guarantor Senior Debt in
full.
ARTICLE FOURTEEN
SUBORDINATION OF NOTES
Section 14.01. NOTES SUBORDINATE TO SENIOR DEBT. The Company
covenants and agrees, and each Holder of a Note, by such Holder's acceptance
thereof, likewise covenants and agrees, that, to the extent and in the manner
hereinafter set forth in this Article Fourteen, the Indebtedness represented by
the Notes and the payment of the Senior Subordinated Note Obligations are hereby
expressly made subordinate and subject in right of payment as provided in this
Article to the prior payment in full in cash or cash equivalents of all amounts
payable under all existing and future Senior Debt.
This Article Fourteen shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of, or continue to
hold Senior Debt; and such provisions are made for the benefit of the holders of
Senior Debt; and such holders are made obligees hereunder and they or each of
them may enforce such provisions.
Section 14.02. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. In
the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relating to the Company or to its assets, or (b) any
liquidation, dissolution or other winding-up of the Company, whether voluntary
or involuntary, or (c) any assignment for the benefit of creditors or other
marshalling of assets or liabilities of the Company, then and in any such event:
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(i) the holders of Senior Debt shall be entitled to receive payment
in full in cash or cash equivalents or provision acceptable to the
requisite holders of Senior Debt made for such payments, of all amounts due
on or in respect of Senior Debt before the Holders are entitled to receive
any payment or distribution, whether in cash, property or securities
(excluding Permitted Junior Securities) on account of Senior Subordinated
Note Obligations or for the acquisition of any of the Notes; and
(ii) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (excluding Permitted
Junior Securities), by set-off or otherwise, to which the Holders or the
Trustee would be entitled but for the provisions of this Article shall be
paid by the liquidating trustee or agent or other Person making such
payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Senior Debt or
their representative or representatives or to the trustee or trustees under
any indenture under which any instruments evidencing any of such Senior
Debt may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Debt held or represented by each,
to the extent necessary to make payment in full in cash or cash equivalents
of all Senior Debt remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness; and
(iii) in the event that, notwithstanding the foregoing provisions of
this Section 14.02, the Trustee or the Holder of any Note shall have
received any payment or distribution of properties or assets of the Company
of any kind or character, whether in cash, property or securities, by set
off or otherwise in respect of any Senior Subordinated Note Obligations
before all Senior Debt is paid or provided for in full in cash or cash
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equivalents, then and in such event such payment or distribution (excluding
Permitted Junior Securities) shall be paid over or delivered forthwith to
the trustee in bankruptcy, receiver, liquidating trustee, custodian,
assignee, agent or other Person making payment or distribution of assets of
the Company for application to the payment of all Senior Debt remaining
unpaid, to the extent necessary to pay all Senior Debt in full in cash or
cash equivalents, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
The consolidation of the Company with, or the merger of the Company
with or into, another Person or the liquidation or dissolution of the Company
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another Person upon the terms and conditions set
forth in Article Eight hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshalling of assets and liabilities of the Company for the purposes of this
Article if the Person formed by such consolidation or the surviving entity of
such merger or the Person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, comply
with the conditions set forth in such Article Eight.
Section 14.03. SUSPENSION OF PAYMENT WHEN SENIOR DEBT IN DEFAULT. (a)
Unless Section 14.02 shall be applicable, upon the occurrence of a Payment
Default, no direct or indirect payment or distribution of any assets of the
Company of any kind or character shall be made by or on behalf of the Company on
account of the Senior Subordinated Note Obligations or on account of the
purchase or redemption or other acquisition of any Senior Subordinated Note
Obligations unless and until such Payment Default shall have been cured or
waived or shall have ceased to exist or such Senior Debt shall have been
discharged or paid in full in
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cash in cash equivalents, after which, subject to Section 14.02 (if applicable),
the Company shall resume making any and all required payments in respect of the
Notes and the other Senior Subordinated Note Obligations, including any missed
payments.
(b) Unless Section 14.02 shall be applicable, upon (1) the occurrence
of a Non-payment Default and (2) receipt by the Trustee and the Company from a
Senior Representative of written notice of such occurrence stating that such
notice is a Payment Blockage Notice pursuant to Section 14.03(b) of this
Indenture, no payment or distribution of any assets of the Company of any kind
or character shall be made by or on behalf of the Company on account of any
Senior Subordinated Note Obligations or on account of the purchase or redemption
or other acquisition of Senior Subordinated Note Obligations for a period
("PAYMENT BLOCKAGE PERIOD") commencing on the date of receipt by the Trustee of
such notice unless and until the earlier to occur of the following events
(subject to any blockage of payments that may then be in effect under Section
14.02 or subsection (a) of this Section 14.03): (i)179 days shall have elapsed
since receipt of such notice, (ii)the date on which such Non-payment Default is
cured or waived or ceases to exist (provided that no other Payment Default or
Non-payment Default has occurred or is then continuing after giving effect to
such cure or waiver), (iii) the date on which such Designated Senior Debt is
discharged or paid in full in cash or cash equivalents or (iv) the date on which
such Payment Blockage Period shall have been terminated by express written
notice to the Company or the Trustee from the Senior Representative initiating
such Payment Blockage Period, after which, subject to Section 14.02 (if
applicable) and subject to the existence of any Payment Default, the Company
shall promptly resume making any and all required payments in respect of the
Senior Subordinated Note Obligations, including any missed payments.
Notwithstanding any other provision of this Indenture, only one Payment Blockage
Period, whether with respect to the Notes, any Subsidiary Guarantee or the
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Notes and the Subsidiary Guarantees collectively, may be commenced within any
360 consecutive day period. No Non-payment Default with respect to Designated
Senior Debt that existed or was continuing on the date of the commencement of
any Payment Blockage Period with respect to the Designated Senior Debt
initiating such Payment Blockage Period (other than any such Non-payment Default
which was not and could not reasonably be expected to have been known by the
holders or the Senior Representative) will be, or can be, made the basis for the
commencement of a second Payment Blockage Period, whether or not within a period
of 360 consecutive days, unless such default has been cured or waived for a
period of not less than 90 consecutive days (it being acknowledged that any
subsequent action, or any breach of any financial covenant for a period
commencing after the date of commencement of such Payment Blockage Period, that,
in either case, would give rise to a Non-payment Default pursuant to any
provision under which a Non-payment Default previously existed or was continuing
shall constitute a new Non-payment Default for this purpose; PROVIDED that, in
the case of a breach of a particular financial covenant, the Company shall have
been in compliance for at least one full period commencing after the date of
commencement of such Payment Blockage Period). In no event shall a Payment
Blockage Period extend beyond 179 days from the date of the receipt by the
Trustee of the notice referred to in clause (2) hereof and there must be a 181
consecutive day period in any 360 day period during which no Payment Blockage
Period is in effect pursuant to this Section 14.03(b).
(c) In the event that, notwithstanding the foregoing, the Trustee
shall have received from the Company, or the Holder of any Note shall have
received from any source, any payment on account of the principal of, or
premium, if any, or interest on, the Notes, or any other Senior Subordinated
Note Obligations at a time when such payment is prohibited by the foregoing
provisions of this Section 14.03, the Trustee or such Holders shall hold such
payment in trust for the benefit of, and shall pay over and deliver to, the
holders of Senior Debt (PRO RATA as to each of such
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holders on the basis of the respective amounts of such Senior Debt held by
them), or their representative or the trustee under the indenture or other
agreement (if any) pursuant to which such Senior Debt may have been issued, as
their respective interests may appear, for application to the payment of all
outstanding Senior Debt until all such Senior Debt has been paid in full in
cash, after giving effect to all other payments or distributions to, or
provisions made for, the holders of Senior Debt.
Section 14.04 TRUSTEE'S RELATION TO SENIOR DEBT. With respect to the
holders of Senior Debt, the Trustee undertakes to perform or to observe only
such of its covenants and obligations as are specifically set forth in this
Article Fourteen (and in Article Thirteen with respect to any Guarantor Senior
Debt), and no implied covenants or obligations with respect to the holders of
Senior Debt shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and
the Trustee shall not be liable to any holder of Senior Debt if it shall
mistakenly pay over or deliver to Holders, the Company, any Subsidiary Guarantor
or any other Person moneys or assets to which any holder of Senior Debt shall be
entitled by virtue of this Article Fourteen or otherwise.
Section 14.05. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT. Upon
the payment in full in cash or cash equivalents of all Senior Debt, the Holders
of the Notes shall be subrogated to the rights of the holders of such Senior
Debt to receive payments and distributions of cash, property and securities
applicable to the Senior Debt until the principal of, premium, if any, and
interest on the Notes shall be paid in full in cash or cash equivalents. For
purposes of such subrogation, no payments or distributions to the holders of
Senior Debt of any cash, property or securities to which the Holders of the
Notes or the Trustee would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions of this Article to the
holders of Senior Debt by Holders of the
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Notes or the Trustee shall, as among the Company, its creditors other than
holders of Senior Debt, and the Holders of the Notes, be deemed to be a payment
or distribution by the Company to or on account of the Senior Debt.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Fourteen shall have
been applied, pursuant to the provisions of this Article Fourteen, to the
payment of all amounts payable under the Senior Debt of the Company, then and in
such case the Holders shall be entitled to receive from the holders of such
Senior Debt at the time outstanding any payments or distributions received by
such holders of such Senior Debt in excess of the amount sufficient to pay all
amounts payable under or in respect of such Senior Debt in full in cash or cash
equivalents.
Section 14.06. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The
provisions of this Article Fourteen are and are intended solely for the purpose
of defining the relative rights of the Holders of the Notes on the one hand and
the holders of Senior Debt on the other hand. Nothing contained in this Article
Fourteen or elsewhere in this Indenture or in the Notes is intended to or shall
(a) impair, as among the Company, its creditors other than holders of Senior
Debt and the Holders of the Notes, the obligation of the Company, which is
absolute and unconditional, to pay to the Holders of the Notes the principal of,
premium, if any, and interest on the Notes as and when the same shall become due
and payable in accordance with their terms; or (b) affect the relative rights
against the Company of the Holders of the Notes and creditors of the Company
other than the holders of Senior Debt; or (c) prevent the Trustee or the Holder
of any Note from exercising all remedies otherwise permitted by applicable law
upon a Default or an Event of Default under this Indenture, subject to the
rights, if any, under this Article Fourteen of the holders of Senior Debt (1) in
any case, proceeding, dissolution, liquidation or other winding up, assignment
for the benefit of creditors or other marshalling
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of assets and liabilities of the Company referred to in Section 14.02, to
receive, pursuant to and in accordance with such Section, cash, property and
securities otherwise payable or deliverable to the Trustee or such Holder, or
(2) under the conditions specified in Section 14.03, to prevent any payment
prohibited by such Section or enforce their rights pursuant to Section 14.03(c).
The failure to make a payment on account of any Senior Subordinated
Note Obligations by reason of any provision of this Article Fourteen shall not
be construed as preventing the occurrence of a Default or an Event of Default
hereunder.
Section 14.07. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Holder of a
Note by his acceptance thereof authorizes and directs the Trustee on his behalf
to take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article Fourteen and appoints the Trustee his
attorney-in-fact for any and all such purposes, including, in the event of any
dissolution, winding-up, liquidation or reorganization of the Company whether in
bankruptcy, insolvency, receivership proceedings, or otherwise, the timely
filing of a claim for the unpaid balance of the Indebtedness of the Company
owing to such Holder in the form required in such proceedings and the causing of
such claim to be approved. If the Trustee does not file such a claim prior to
30 days before the expiration of the time to file such a claim, the holders of
Senior Debt, or any Senior Representative, may file such a claim on behalf of
Holders of the Notes.
Section 14.08 NO WAIVER OF SUBORDINATION PROVISIONS. (a) No right of
any present or future holder of any Senior Debt to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any non-compliance by the Company
with the terms, provisions and covenants of this Indenture,
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regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
(b) Without limiting the generality of subsection (a) of this Section
14.08, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the Notes,
without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article Fourteen or
the obligations hereunder of the Holders of the Notes to the holders of Senior
Debt, do any one or more of the following: (1) change the manner, place or
terms of payment or extend the time of payment of, or renew or alter, Senior
Debt or any instrument evidencing the same or any agreement under which Senior
Debt is outstanding; (2)sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Debt; (3) release any
Person liable in any manner for the collection or payment of Senior Debt; and
(4) exercise or refrain from exercising any rights against the Company and any
other Person; PROVIDED that in no event shall any such actions limit the right
of the Holders of the Notes to take any action to accelerate the maturity of the
Notes pursuant to Article Five hereof or to pursue any rights or remedies
hereunder or under applicable laws if the taking of such action does not
otherwise violate the terms of this Indenture.
Section 14.09. NOTICE TO TRUSTEE. (a) The Company shall give prompt
written notice to the Trustee of any fact known to the Company which would
prohibit the making of any payment to or by the Trustee in respect of the Notes.
Notwithstanding the provisions of this Article Fourteen or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee in respect of the Notes, unless and until the Trustee shall have
received written notice thereof from the Company or a holder of Senior Debt or
from any trustee, fiduciary or agent therefor; and, prior to the
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receipt of any such written notice, the Trustee, subject to the provisions of
this Section 14.09, shall be entitled in all respects to assume that no such
facts exist; PROVIDED that if the Trustee shall not have received the notice
provided for in this Section 14.09 at least two Business Days prior to the date
upon which by the terms hereof any money may become payable for any purpose
under this Indenture (including, without limitation, the payment of the
principal of, premium, if any, or interest on any Note), then, anything herein
contained to the contrary notwithstanding but without limiting the rights and
remedies of the holders of Senior Debt or any trustee, fiduciary or agent
thereof, the Trustee shall have full power and authority to receive such money
and to apply the same to the purpose for which such money was received and shall
not be affected by any notice to the contrary which may be received by it within
two Business Days prior to such date; nor shall the Trustee be charged with
knowledge of the curing of any such default or the elimination of the act or
condition preventing any such payment unless and until the Trustee shall have
received an Officers' Certificate to such effect.
(b) Subject to the provisions of Section 6.01, the Trustee shall be
entitled to rely on the delivery to it of a written notice to the Trustee by a
Person representing himself to be a holder of Senior Debt (or a representative,
trustee, fiduciary or agent therefor) to establish that such notice has been
given by a holder of Senior Debt (or a representative, trustee, fiduciary or
agent therefor). In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a holder
of Senior Debt to participate in any payment or distribution pursuant to this
Article Fourteen, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article Fourteen, and if such evidence is not furnished, the
Trustee may defer any payment to such
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Person pending judicial determination as to the right of such Person to receive
such payment.
Section 14.10. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT. Upon any payment or distribution of assets of the Company
referred to in this Article Fourteen, the Trustee, subject to the provisions of
Section 6.01, and the Holders, shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders, for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
Senior Debt and other Indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article; PROVIDED that the foregoing shall apply
only if such court has been fully apprised of the provisions of this Article
Fourteen. The Trustee is not responsible for determining whether or not the
court has been fully apprised of the provisions of this Article Fourteen.
Section 14.11. RIGHTS OF TRUSTEE AS A HOLDER OF SENIOR DEBT;
PRESERVATION OF TRUSTEE'S RIGHTS. The Trustee in its individual capacity shall
be entitled to all the rights set forth in this Article Fourteen with respect to
any Senior Debt which may at any time be held by it, to the same extent as any
other holder of Senior Debt, and nothing in this Indenture shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article Fourteen
shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 6.07, none of which is or shall be subordinate in right of payment to
Senior Debt.
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Section 14.12. ARTICLE APPLICABLE TO PAYING AGENTS. In case at any
time any Paying Agent other than the Trustee shall have been appointed by the
Company and be then acting hereunder, the term "Trustee" as used in this Article
shall in such case (unless the context otherwise requires) be construed as
extending to and including such Paying Agent within its meaning as fully for all
intents and purposes as if such Paying Agent were named in this Article Fourteen
in addition to or in place of the Trustee; PROVIDED that Section 14.11 shall not
apply to the Company or any Affiliate of the Company if it or such Affiliate
acts as Paying Agent.
Section 14.13. NO SUSPENSION OF REMEDIES. Nothing contained in this
Article Fourteen shall limit the right of the Trustee or the Holders of Notes to
take any action to accelerate the maturity of the Notes pursuant to Article Five
or to pursue any rights or remedies hereunder or under applicable law, subject
to the rights, if any, under this Article Fourteen of the holders, from time to
time, of Senior Debt.
186
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
LEINER HEALTH PRODUCTS GROUP INC.
By:/s/ William B. Towne
-------------------------------------
Name: William B. Towne
Title: Executive Vice President,
Chief Financial Officer
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By:/s/ Gerard F. Ganey
-------------------------------------
Name: Gerard F. Ganey
Title: Senior Vice President
187
<PAGE>
EXHIBIT A
LEINER HEALTH PRODUCTS GROUP INC.
to be assumed by
LEINER HEALTH PRODUCTS INC.
9 5/8% SENIOR SUBORDINATED NOTE DUE 2007
CUSIP No. ______________
NO. _______________ $________________
LEINER HEALTH PRODUCTS GROUP INC., A DELAWARE CORPORATION (THE
"COMPANY," WHICH TERM INCLUDES ANY SUCCESSOR UNDER THE INDENTURE HEREINAFTER
REFERRED TO), FOR VALUE RECEIVED, PROMISES TO PAY TO ______________ OR
REGISTERED ASSIGNS, THE PRINCIPAL SUM OF _______________ UNITED STATES DOLLARS
[(OR SUCH LESSER OR GREATER PRINCIPAL AMOUNT, NOT EXCEEDING EIGHTY-FIVE MILLION
DOLLARS AND NO CENTS IN UNITED STATES DOLLARS ($85,000,000), AS SHALL BE
OUTSTANDING HEREUNDER FROM TIME TO TIME IN ACCORDANCE WITH SECTION 2.05 OF THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF)] ON JULY 1, 2007, AT THE OFFICE OR
AGENCY OF THE COMPANY REFERRED TO BELOW, AND TO PAY INTEREST THEREON ON JANUARY
1, AND JULY 1 IN EACH YEAR, COMMENCING ON JANUARY 1, 1998 (EACH AN "INTEREST
PAYMENT DATE"), ACCRUING FROM THE ISSUE DATE OR FROM THE MOST RECENT INTEREST
PAYMENT DATE TO WHICH INTEREST HAS BEEN PAID OR DULY PROVIDED FOR, AT THE RATE
OF 9 5/8% PER ANNUM, UNTIL THE PRINCIPAL HEREOF IS PAID OR DULY PROVIDED FOR.
INTEREST SHALL BE COMPUTED ON THE BASIS OF A 360-DAY YEAR OF TWELVE 30-DAY
MONTHS. THE COMPANY WILL ALSO PAY ADDITIONAL INTEREST (AS DEFINED IN THE
REGISTRATION RIGHTS AGREEMENT REFERRED TO ON THE REVERSE HEREOF), IF ANY, ON
THIS NOTE AS AND TO THE EXTENT PROVIDED THEREIN AND IN SUCH INDENTURE, UNTIL NO
LONGER SO REQUIRED OR UNTIL THE PRINCIPAL HEREOF IS PAID OR DULY PROVIDED FOR.
- -------------------------------
* To be included in any Global Note that is a Restricted Security.
A-1
<PAGE>
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture referred to on the
reverse hereof, be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on the December 15 or
June 15 (each a "Regular Record Date"), whether or not a Business Day, as the
case may be, next preceding such Interest Payment Date. Any such interest not
so punctually paid, or duly provided for, and interest on such defaulted
interest at the then applicable interest rate borne by the Notes, to the extent
lawful, shall forthwith cease to be payable to the Holder on such Regular Record
Date, and may be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on a Special Record
Date for the payment of such defaulted interest to be fixed by The Trustee,
Notice of which shall be given to holders of notes not less than 10 days prior
to such Special Record Date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in such Indenture.
Payment of the principal of, and premium, if any, and interest on,
this Note will be made at the Corporate Trust office or agency of the Trustee
maintained for that purpose in the City of New York, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; PROVIDED, HOWEVER, that payment of interest
may be made at the option of the Company by check (which may be a check of the
Company) mailed to the address of the Person entitled thereto as such address
shall appear on the Note Register.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof.
A-2
<PAGE>
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
A-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Notes referred to in the within-mentioned
Indenture.
Dated:
UNITED STATES TRUST COMPANY OF
NEW YORK,
as Trustee
By:
-------------------------------
Authorized Signatory
A-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
LEINER HEALTH PRODUCTS GROUP INC.
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
A-5
<PAGE>
(REVERSE OF NOTE)
9 5/8% Senior Subordinated Note due 2007
1. INDENTURE. This Note is one of a duly authorized issue of Notes
of the Company designated as its 9 5/8% Senior Subordinated Notes due 2007 (the
"Notes"), limited (except as otherwise provided in the Indenture referred to
below) in aggregate principal amount to $85,000,000, which may be issued under
an indenture (the "Indenture") dated as of June 30, 1997, by and among the
Company, as Issuer, and United States Trust Company of New York, as trustee (the
"Trustee," which term includes any successor Trustee under the Indenture).
Reference is hereby made to such Indenture and all indentures supplemental
thereto for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, any Subsidiary Guarantors,
the Trustee and the Holders of the Notes, and of the terms upon which the Notes
are, and are to be, authenticated and delivered. The terms of the Notes include
those stated in the Indenture and those made a part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended, and in effect from
time to time (the "TIA"). The Notes are subject to all such terms, and Holders
are referred to the Indenture and the TIA for a statement of such terms.
All capitalized terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
2. SUBSIDIARY GUARANTEES. This Note is entitled to certain future
senior subordinated Subsidiary Guarantees, if any, made for the benefit of the
Holders. Reference is hereby made to Article Thirteen of the Indenture for
terms relating to such Subsidiary Guarantees.
3. SUBORDINATION. The Indebtedness evidenced by the Notes is, to the
extent and in the manner provided in
A-6
<PAGE>
the Indenture, subordinate and subject in right of payment to the prior payment
in full in cash of all existing and future Senior Debt (including the
Indebtedness under the Credit Agreement). Each Holder of this Note, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee, on behalf of such Holder, to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such
Holder for such purpose; PROVIDED that upon any defeasance of this Note referred
to in Paragraph 7 below, the money or U.S. Government Obligations deposited
pursuant to the defeasance provisions of the Indenture for the payment of this
Note shall not be subject to the rights of the holders of Senior Debt of the
Company pursuant to the subordination provisions of the Indenture.
4. REDEMPTION.
(a) OPTIONAL REDEMPTION. Except as set forth below, the Notes are
not redeemable at the option of the Company prior to July 1, 2002. Subject to
earlier redemption in the manner described in the next two succeeding
paragraphs, the Notes will be redeemable at the option of the Company, in whole
or in part, at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest, if any, to the
redemption date, if redeemed during the 12-month period beginning July 1 of the
years indicated below:
Year Redemption Price
---- ----------------
2002 104.813%
2003 103.208%
2004 101.604%
2005 and thereafter 100.000%
In addition, at any time on or prior to July 1, 2000, the Company may,
at its option, redeem Notes, in an aggregate principal amount of up to 30% of
the aggregate
A-7
<PAGE>
principal amount of Notes originally issued, with the net cash proceeds of one
or more Public Equity Offerings, at 109 5/8% of the aggregate principal amount
thereof plus accrued and unpaid interest, if any, to the Redemption Date;
provided, however, that not less than $60.0 million principal amount of the
Notes is outstanding immediately after giving effect to such redemption (other
than any Notes owned by the Company or any of its Affiliates) and such
redemption is effected within 60 days of the issuance in such Public Equity
Offering.
In addition, at any time prior to July 1, 2002, within 180 days after
the occurrence of a Change of Control, the Company may, at its option, redeem
all but not less than all of the Notes, at a Redemption Price equal to 100% of
the principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest, if any, to, the Redemption Date.
Notice of redemption of the Notes pursuant to this Paragraph 4(a)
shall be mailed to holders of the Notes at least 30 but not more than 60 days
before the Redemption Date.
(b) NO SINKING FUND. The Company will not be required to make any
mandatory sinking fund payments in respect of the Notes.
(c) INTEREST PAYMENTS. In the case of any redemption of the Notes,
interest installments whose Stated Maturity is on or prior to the Redemption
Date will be payable to the Holders of such Notes, or one or more Predecessor
Notes, of record at the close of business on the relevant Record Date referred
to on the face hereof. Notes (or portions thereof) for whose redemption and
payment provision is made in accordance with the Indenture shall cease to bear
interest from and after the Redemption Date.
(d) PARTIAL REDEMPTION. In the event of redemption of this Note in
part only, a new Note or Notes
A-8
<PAGE>
for the unredeemed portion hereof shall be issued in the name of the Holder
hereof upon the cancellation hereof.
5. OFFERS TO PURCHASE. Sections 10.14 and 10.15 of the Indenture
provide that following certain Asset Sales (with respect to Section 10.14) and
upon the occurrence of a Change of Control (with respect to Section 10.15) and
subject to further limitations contained therein, the Company shall make an
offer to purchase certain amounts of the Notes in accordance with the procedures
set forth in the Indenture.
6. DEFAULTS AND REMEDIES. If an Event of Default shall occur and be
continuing, the principal of all of the outstanding Notes, plus all accrued and
unpaid interest, if any, to the date the Notes become due and payable, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
7. DEFEASANCE. The Indenture contains provisions (which provisions
apply to this Note) for defeasance at any time of (a) the entire indebtedness of
the Company on this Note and (b) certain restrictive covenants and related
Defaults and Events of Default, in each case upon compliance by the Company with
certain conditions set forth therein.
8. AMENDMENTS AND WAIVERS. The Company, each Subsidiary Guarantor
(if any) and the Trustee (if a party thereto) may, without the consent of the
Holders of any Outstanding Notes, amend, waive or supplement the Indenture or
the Notes for certain specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies, maintaining the qualification of the
Indenture under the Trust Indenture Act of 1939, as amended, and making any
change that does not adversely affect the rights of any Holder. Other
amendments and modifications of the Indenture or the Notes may be made by the
Company, each Subsidiary Guarantor (if any) and the Trustee with the consent of
the Holders of not less than a majority of the aggregate principal amount of the
Outstanding Notes, subject
A-9
<PAGE>
to certain exceptions requiring the consent of each Holder of the particular
Notes to be affected. Any such consent or waiver by or on behalf of the Holder
of this Note shall be conclusive and binding upon such Holder and upon all
future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note.
9. DENOMINATIONS, TRANSFER AND EXCHANGE. The Notes are issuable only
in registered form without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Notes are exchangeable for a like aggregate
principal amount of Notes of the authorized denomination, as requested by the
Holder surrendering the same.
The transfer of this Note is registrable on the Note Register of the
Company, upon surrender of this Note for registration of transfer at the office
or agency of the Company maintained for such purpose in the Borough of Manhattan
in The City of New York or at such other office or agency of the Company as may
be maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Note
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Notes, of authorized denominations and
for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
10. PERSONS DEEMED OWNERS. Prior to and at the time of due
presentment of this Note for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name
this Note is registered as the owner hereof for all purposes, whether or not
this Note shall be overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
A-10
<PAGE>
11. REGISTRATION RIGHTS; ADDITIONAL INTEREST. Pursuant to, and
subject to the terms and conditions of, the Registration Rights Agreement among
Leiner Group, LHP and the Initial Purchasers for themselves and on behalf of the
Holders of the Initial Notes, the Company will be obligated to use its best
efforts to consummate an exchange offer pursuant to which the Holder of this
Note shall have the right to exchange this Note for the Company's 9 5/8% Senior
Subordinated Notes due 2007 (the Exchange Notes referred to in the Indenture),
which will have been registered under the Securities Act, in like principal
amount and having terms identical in all material respects as the Initial Notes.
The Holders of the Initial Notes shall be entitled to receive certain additional
interest payments in the event such exchange offer is not consummated and upon
certain other conditions, all pursuant to and in accordance with the terms of
the Registration Rights Agreement and the Indenture.
12. NO RECOURSE AGAINST OTHERS. No recourse for the payment of the
principal of, or premium, if any, or interest on, any of the Notes or for any
claim based thereon or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Company in the Indenture or in
any of the Notes or of any Subsidiary Guarantor in any Subsidiary Guarantee, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, shareholder, officer, director, employee or
controlling person of the Company or of any successor Person thereof. Each
Holder of Notes by accepting a Note waives and releases all such liability, and
such waiver and release is part of the consideration for the issuance of the
Notes.
13. GOVERNING LAW. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, OTHER THAN
ANY MANDATING THE APPLICATION OF SUCH LAWS). THE TRUSTEE, THE COMPANY, EACH
SUBSIDIARY GUARANTOR, ANY OTHER
A-11
<PAGE>
OBLIGOR IN RESPECT OF THE NOTES AND (BY THEIR ACCEPTANCE OF THE NOTES) THE
HOLDERS, AGREE TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW
YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR
THIS NOTE.
A-12
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Note, fill in the form below and have your
signature guaranteed:
I or we assign and transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number) ---------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for such agent.
Date:_________________________ YOUR SIGNATURE:____________________
(Sign exactly as
your name appears on
the other side of
this Note)
By:_________________
NOTICE: To be
executed by an
executive
officer
NOTICE: Signature(s) must be guaranteed by an institution which is a
participant in the Securities Transfer Agent Medallion Program ("STAMP") or
similar program.
A-13
<PAGE>
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of
the effectiveness of a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) the later to occur of the second anniversary of the Issue
Date and the Resale Restriction Termination Date, the undersigned confirms
that it has not utilized any general solicitation or general advertising in
connection with and that such transfer is:
[CHECK ONE]
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that has furnished to the Company and the Trustee a signed
letter containing certain representations and agreements (the form of
which letter can be obtained from the Trustee); or
(4) __ outside the United States to a "foreign person" in compliance with
Rule 904 of Regulations under the Securities Act of 1933, as amended;
or
(5) __ pursuant to the exemption from registration provided by Rule 144 under
the Securities Act of 1933, as amended; or
(6) __ pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
A-14
<PAGE>
(7) __ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof, PROVIDED, that if box (3), (4), (5) or (7) is
checked, the Company or the Trustee may require, prior to registering any such
transfer of the Notes, in its sole discretion, such written legal opinions,
certifications (including an investment letter in the case of box (3) or (4)),
and other information as the Trustee, Note Registrar or the Company has
reasonably requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, as amended.
If none of the foregoing boxes are checked, the Trustee or Note
Registrar shall not be obligated to register this Note in the name of any person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section2.05 of the Indenture
shall have been satisfied.
Dated:____________________ Signed:_________________________
(Sign exactly as name
appears on the other
side of this Security)
Signature Guarantee:____________________________________________________________
A-15
<PAGE>
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Date:______________________________ ______________________________
NOTICE: To be executed by an
an executive officer
A-16
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 10.14 or 10.15 of the Indenture, check the Box: []
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 10.14 or 10.15 of the Indenture, state the amount:
$________________
DATE: __________________________ YOUR SIGNATURE: __________________________
(Sign exactly as your
name appears on the
other side of this Note)
By:_______________________
NOTICE: To be signed
by an executive
officer
NOTICE: Signature(s) must be guaranteed by an institution which is a
participant in the Securities Transfer Agent Medallion Program ("STAMP") or
similar program.
A-17
<PAGE>
EXHIBIT B
LEINER HEALTH PRODUCTS GROUP INC.
to be assumed by
LEINER HEALTH PRODUCTS INC.
9 5/8% SENIOR SUBORDINATED NOTE DUE 2007
CUSIP No. ________________
NO. _______________ $________________
LEINER HEALTH PRODUCTS GROUP INC., a Delaware corporation (the
"Company," which term includes any successor under the Indenture hereinafter
referred to), for value received, promises to pay to ___________________, or
registered assigns, the principal sum of ____________________ United States
Dollars on July 1, 2007, at the office or agency of the Company referred to
below, and to pay interest thereon on January 1 and July 1 in each year,
commencing on January 1, 1998 (each an "Interest Payment Date"), accruing from
the Issue Date or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, at the rate of 9 5/8% per annum, until the
principal hereof is paid or duly provided for. Interest shall be computed on
the basis of a 360-day year of twelve 30-day months. In addition, for any
period in which any Initial Note (as defined in such Indenture) exchanged for
this Note was outstanding, the Company will pay Additional Interest (as defined
in the Registration Rights Agreement referred to on the reverse hereof), if any,
on this Note as and to the extent provided therein and in such Indenture.
Notwithstanding the first sentence hereof, to the extent interest (including
Additional Interest, if any) has been paid or duly provided for with respect to
any Initial Note (as defined in such Indenture) exchanged for this Note,
interest on this Note shall accrue from the most recent Interest Payment Date to
which such interest (including Additional Interest, if any) on such Initial Note
had been paid or duly provided for.
B-1
<PAGE>
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture referred to on the
reverse hereof, be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on the December 15 or
June 15 (each a "Regular Record Date"), whether or not a Business Day, as the
case may be, next preceding such Interest Payment Date. Any such interest not
so punctually paid, or duly provided for, and interest on such defaulted
interest at the then applicable interest rate borne by the Notes, to the extent
lawful, shall forthwith cease to be payable to the Holder on such Regular Record
Date, and may be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on a Special Record
Date for the payment of such defaulted interest to be fixed by the Trustee,
notice of which shall be given to Holders of Notes not less than 10 days prior
to such Special Record Date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in such Indenture.
Payment of the principal of, and premium, if any, and interest on,
this Note will be made at the Corporate Trust office or agency of the Trustee
maintained for that purpose in The City of New York, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts: PROVIDED, HOWEVER, that payment of interest
may be made at the option of the Company by check (which may be a check of the
Company) mailed to the address of the Person entitled thereto as such address
shall appear on the Note Register.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the
B-2
<PAGE>
reverse hereof by manual signature, this Note shall not be entitled to any
benefit under the Indenture, or be valid or obligatory for any purpose.
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Notes referred to in the within-mentioned
Indenture.
Dated:
UNITED STATES TRUST COMPANY OF NEW
YORK
as Trustee
By:_________________________________
Authorized Signatory
B-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
LEINER HEALTH PRODUCTS GROUP INC.
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
B-4
<PAGE>
(REVERSE OF NOTE)
9 5/8% Senior Subordinated Note due 2007
1. INDENTURE. This Note is one of a duly authorized issue of Notes
of the Company designated as its 9 5/8% Senior Subordinated Notes due 2007 (the
"Notes"), limited (except as otherwise provided in the Indenture referred to
below) in aggregate principal amount to $85,000,000, which may be issued under
an indenture (the "Indenture") dated as of June 30, 1997, by and among the
Company, as Issuer, and United States Trust Company of New York, as trustee (the
"Trustee," which term includes any successor Trustee under the Indenture).
Reference is hereby made to such Indenture and all indentures supplemental
thereto for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, any Subsidiary Guarantors,
the Trustee and the Holders of the Notes, and of the terms upon which the Notes
are, and are to be, authenticated and delivered. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended, and in effect from time to time
(the "TIA"). The Notes are subject to all such terms, and Holders are referred
to the Indenture and the TIA for a statement of such terms.
All capitalized terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
2. SUBSIDIARY GUARANTEES. This Note is entitled to certain future
senior subordinated Subsidiary Guarantees, if any, made for the benefit of the
Holders. Reference is hereby made to Article Thirteen of the Indenture for
terms relating to such Subsidiary Guarantees.
3. SUBORDINATION. The Indebtedness evidenced by the Notes is, to the
extent and in the manner provided in
B-5
<PAGE>
the Indenture, subordinate and subject in right of payment to the prior payment
in full in cash of all existing and future Senior Debt (including the
Indebtedness under the Credit Agreement). Each Holder of this Note, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee, on behalf of such Holder, to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such
Holder for such purpose; PROVIDED that upon any defeasance of this Note
referred to in Paragraph 7 below, the money or U.S. Government Obligations
deposited pursuant to the defeasance provisions of the Indenture for the payment
of this Note shall not be subject to the rights of the holders of Senior Debt of
the Company pursuant to the subordination provisions of the Indenture.
4. REDEMPTION.
(a) OPTIONAL REDEMPTION. Except as set forth below, the Notes are
not redeemable at the option of the Company prior to July 1, 2002. Subject to
earlier redemption in the manner described in the next two succeeding
paragraphs, the Notes will be redeemable at the option of the Company, in whole
or in part, at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest, if any, to the
redemption date, if redeemed during the 12-month period beginning July 1 of the
years indicated below:
YEAR REDEMPTION PRICE
2002 104.813%
2003 103.208%
2004 101.604%
2005 and thereafter 100.000%
In addition, at any time on or prior to July 1, 2000, the Company may,
at its option, redeem Notes, in an aggregate principal amount of up to 30% of
the aggregate
B-6
<PAGE>
principal amount of Notes originally issued, with the net cash proceeds of one
or more Public Equity Offerings, at 109 5/8% of the aggregate principal amount
thereof plus accrued and unpaid interest, if any, to the Redemption Date;
provided, however, that not less than $60.0 million principal amount of the
Notes is outstanding immediately after giving effect to such redemption (other
than any Notes owned by the Company or any of its Affiliates) and such
redemption is effected within 60 days of the issuance in such Public Equity
Offering.
In addition, at any time prior to July 1, 2002, within 180 days after
the occurrence of a Change of Control, the Company may, at its option, redeem
all but not less than all of the Notes, at a Redemption Price equal to 100% of
the principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest, if any, to, the Redemption Date.
Notice of redemption of the Notes pursuant to this Paragraph 4(a)
shall be mailed to holders of the Notes at least 30 but not more than 60 days
before the Redemption Date.
(b) NO SINKING FUND. The Company will not be required to make any
mandatory sinking fund payments in respect of the Notes.
(c) INTEREST PAYMENTS. In the case of any redemption of the Notes,
interest installments whose Stated Maturity is on or prior to the Redemption
Date will be payable to the Holders of such Notes, or one or more Predecessor
Notes, of record at the close of business on the relevant Record Date referred
to on the face hereof. Notes (or portions thereof) for whose redemption and
payment provision is made in accordance with the Indenture shall cease to bear
interest from and after the Redemption Date.
(d) PARTIAL REDEMPTION. In the event of redemption of this Note in
part only, a new Note or Notes
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<PAGE>
for the unredeemed portion hereof shall be issued in the name of the Holder
hereof upon the cancellation hereof.
5. OFFERS TO PURCHASE. Sections 10.14 and 10.15 of the Indenture
provide that following certain Asset Sales (with respect to Section 10.14) and
upon the occurrence of a Change of Control (with respect to Section 10.15) and
subject to further limitations contained therein, the Company shall make an
offer to purchase certain amounts of the Notes in accordance with the procedures
set forth in the Indenture.
6. DEFAULTS AND REMEDIES. If an Event of Default shall occur and be
continuing, the principal of all of the outstanding Notes, plus all accrued and
unpaid interest, if any, to the date the Notes become due and payable, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
7. DEFEASANCE. The Indenture contains provisions (which provisions
apply to this Note) for defeasance at any time of (a) the entire indebtedness of
the Company on this Note and (b) certain restrictive covenants and related
Defaults and Events of Default, in each case upon compliance by the Company with
certain conditions set forth therein.
8. AMENDMENTS AND WAIVERS. The Company, each Subsidiary Guarantor
(if any) and the Trustee (if a party thereto) may, without the consent of the
Holders of any Outstanding Notes, amend, waive or supplement the Indenture or
the Notes for certain specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies, maintaining the qualification of the
Indenture under the Trust Indenture Act of 1939, as amended, and making any
change that does not adversely affect the rights of any Holder. Other
amendments and modifications of the Indenture or the Notes may be made by the
Company, each Subsidiary Guarantor (if any) and the Trustee with the consent of
the Holders of not less than a majority of the aggregate principal amount of the
Outstanding Notes, subject
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<PAGE>
to certain exceptions requiring the consent of each Holder of the particular
Notes to be affected. Any such consent or waiver by or on behalf of the Holder
of this Note shall be conclusive and binding upon such Holder and upon all
future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note.
9. DENOMINATIONS, TRANSFER AND EXCHANGE. The Notes are issuable only
in registered form without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Notes are exchangeable for a like aggregate
principal amount of Notes of the authorized denomination, as requested by the
Holder surrendering the same.
The transfer of this Note is registrable on the Note Register of the
Company, upon surrender of this Note for registration of transfer at the office
or agency of the Company maintained for such purpose in the Borough of Manhattan
in The City of New York or at such other office or agency of the Company as may
be maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Note
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Notes, of authorized denominations and
for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
10. PERSONS DEEMED OWNERS. Prior to and at the time of due
presentment of this Note for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name
this Note is registered as the owner hereof for all purposes, whether or not
this Note shall be overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
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<PAGE>
11. NO RECOURSE AGAINST OTHERS. No recourse for the payment of the
principal of, or premium, if any, or interest on, any of the Notes or for any
claim based thereon or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Company in the Indenture or in
any of the Notes or of any Subsidiary Guarantor in any Subsidiary Guarantee, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, shareholder, officer, director, employee or
controlling person of the Company or of any successor Person thereof. Each
Holder of Notes by accepting a Note waives and releases all such liability, and
such waiver and release is part of the consideration for the issuance of the
Notes.
12. GOVERNING LAW. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, OTHER THAN
ANY MANDATING THE APPLICATION OF SUCH LAWS). THE TRUSTEE, THE COMPANY, EACH
SUBSIDIARY GUARANTOR, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND (BY THEIR
ACCEPTANCE OF THE NOTES) THE HOLDERS AGREE TO SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH
OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THE INDENTURE OR THIS NOTE.
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<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Note, fill in the form below and have your
signature guaranteed:
I or we assign and transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number) ---------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for such agent.
Date:____________________ Your Signature:____________________
(Sign exactly as
your name appears on
the other side of
this Note)
By:_________________
NOTICE: To be
executed by an
executive
officer
NOTICE: Signature(s) must be guaranteed by an institution which is a
participant in the Securities Transfer Agent Medallion Program ("STAMP") or
similar program.
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 10.14 or 10.15 of the Indenture, check the Box: []
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 10.14 or 10.15 of the Indenture, state the amount:
$__________________
Date: _____________________________ Your Signature:_________________________
(Sign exactly as your
name appears on the
other side of this Note)
By: __________________________
NOTICE: To be signed
by an executive officer
NOTICE: Signature(s) must be guaranteed by an institution which is a
participant in the Securities Transfer Agent Medallion Program ("STAMP") or
similar program.
B-12
<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to NON-QIB Accredited Investors
______________, _____
[trustee]
New York, New York ______
Attention: Corporate Trust Department
Re: Leiner Health Products Inc.
(the "Company") 9 5/8% Senior Subordinated
Notes due 2007 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed purchase of $________ aggregate
principal amount of the notes, we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated June 30, 1997, relating to the Notes and such other
information as we deem necessary in order to make our investment decision.
We acknowledge that we have read and agreed to the matters stated in the
section entitled "Notice to Investors" of the Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is subject
to certain restrictions and conditions set forth in the Indenture dated as
of June 30, 1997 relating to the Notes (the "Indenture") and
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<PAGE>
the undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Notes except in compliance with, such restrictions
and conditions and the Securities Act of 1933, as amended (the "Securities
Act").
3. We understand that the Notes have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be
sold except as permitted in the following sentence. We agree on our own
behalf and on behalf of any investor account for which we are purchasing
Notes to offer, sell or otherwise transfer such Notes prior to the date
which is two years (or such shorter period that hereafter may be provided
under Rule 144(k) under the Securities Act (or any successor provision
thereof) as permitting the resale by non-affiliates of restricted
securities without restriction) after the later of the date of original
issuance of the Notes and the last date on which the Company or any
affiliate of the Company was the owner of such Notes (or any predecessor
thereto) (the "resale restriction termination date") only (a) to the
Company, (b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) for so long as the Notes are
eligible for resale pursuant to Rule 144a under the Securities Act, to a
person we reasonably believe is a qualified institutional buyer under Rule
144A (a "QIB") that purchases for its own account or for the account of a
QIB to whom notice is given that the transfer is being made in reliance on
Rule 144A, (d) pursuant to offers and sales to non-U.S. persons that occur
outside the United States within the meaning of Regulations S under the
Securities Act, (e) to an institutional "accredited investor" within the
meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act that is acquiring Notes for its own account or for the
account of such an institutional "accredited investor" for investment
purposes and not with a view to, or for offer or sale in connection with,
any distribution
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<PAGE>
thereof in violation of the Securities Act, or (f) pursuant to any other
available exemption from the registration requirements of the Securities
Act and otherwise in compliance with other applicable laws, subject in each
of the foregoing cases to any requirement of law that the disposition of
our property or the property of such investor account or accounts be at all
times within our or their control and to compliance with any applicable
state securities laws. The foregoing restrictions on resale will not apply
subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Notes is proposed to be made pursuant to clause (e)
above prior to the Resale Restriction Termination Date, the transferor
shall deliver a letter from the transferee substantially in the form of
this letter to the Trustee, which shall provide, among other things, that
the transferee is an institutional "accredited investor" within the meaning
of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities
Act and that it is acquiring such Notes for investment purposes and not for
distribution in violation of the Securities Act. We acknowledge on our own
behalf and on behalf of any investor account for which we are purchasing
Notes that the Issuer and the Trustee reserve the right prior to any offer,
sale or other transfer prior to the Resale Restriction Termination Date of
the Notes pursuant to clause (d), (e) or (f) above to require the delivery
of an opinion of counsel, certifications and/or other information
satisfactory to each of them.
4. We are an institutional "accredited investor" (within the meaning
of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) purchasing for our own account or for the account of such an
institutional "accredited investor," and we are acquiring the Notes for
investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities
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<PAGE>
Act and we have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are acting
are each able to bear the economic risk of our or its investment for an
indefinite period.
5. We are acquiring the Notes purchased by us for our own account or
for one or more accounts as to each of which we exercise sole investment
discretion.
6. You, the Company and counsel to the Company are entitled to rely
upon this letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours,
-----------------------------------
(Name of Purchaser)
By:___________________________
Date:_________________________
Upon transfer the Notes would be registered in the name of the new
beneficial owner as follows:
Name:_______________________________
Address:____________________________
Taxpayer ID Number:_________________
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<PAGE>
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
_______________, _____
[Trustee]
New York, New York _____
Attention: Corporate Trust Department
Re: Leiner Health Products Inc.
(the "Company") 9 5/8% Senior Subordinated
Notes Due 2007 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $ ____________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with regulation s under the u.s. securities act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore
D-1
<PAGE>
securities market and neither we nor any person acting on our behalf knows
that the transaction has been pre-arranged with a buyer in the United
States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You, the Company and counsel for the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[name of transferor]
BY: __________________________________
Authorized Signature
D-2
<PAGE>
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE IN RESPECT OF
SUBSIDIARY GUARANTEE
This Supplemental Indenture, dated as of [_________] (this
"Supplemental Indenture"), among [name of Subsidiary Guarantor] (the
"Guarantor"), [Company] (together with its successors and assigns, the
"Company"), [each other then existing Subsidiary Guarantor under the Indenture
referred to below,] and [Trustee], as Trustee under the Indenture referred to
below.
W I T N E S S E T H:
WHEREAS, the Company and the Trustee have heretofore become parties to
an Indenture, dated as of June 30, 1997, as amended (as amended, supplemented,
waived or otherwise modified, the "Indenture"), providing for the issuance of an
aggregate principal amount of $85,000,000 of 9 5/8% Senior Subordinated Notes
due 2007 of the Company (the "Notes");
WHEREAS, Sections 10.10 and 13.02 of the Indenture provide that under
certain circumstances the Company is required or permitted to cause the
Guarantor to execute and deliver to the Trustee a supplemental indenture
pursuant to which the Guarantor shall guarantee the Company's obligations under
the Notes pursuant to a Subsidiary Guarantee on the terms and conditions set
forth herein and in Article Thirteen of the Indenture; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the parties hereto
are authorized to execute and deliver this Supplemental Indenture to amend the
Indenture, without the consent of any Holder;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor, the
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<PAGE>
Company[, the other Subsidiary Guarantors] and the Trustee mutually covenant and
agree for the benefit of the Holders of the Notes as follows:
1. DEFINED TERMS. As used in this Supplemental Indenture, terms
defined in the Indenture or in the preamble or recital hereto are used herein as
therein defined. The words "herein," "hereof" and "hereby" and other words of
similar import used in this Supplemental Indenture refer to this Supplemental
Indenture as a whole and not to any particular section hereof.
2. AGREEMENT TO GUARANTEE. The Guarantor hereby agrees, jointly and
severally with all other Subsidiary Guarantors, to guarantee the Company's
Obligations under the Indenture and the Notes on the terms and subject to the
conditions set forth in Article Thirteen of the Indenture and to be bound by all
other applicable provisions of the Indenture as a Subsidiary Guarantor.
3. TERMINATION, RELEASE AND DISCHARGE. The Guarantor's Subsidiary
Guarantee shall terminate and be of no further force or effect, and the
Guarantor shall be released and discharged from all obligations in respect of
such Subsidiary Guarantee, as and when provided in Section 13.07 of the
Indenture.
4. NOTICES. All notices and other communications pertaining to the
Guarantor's Subsidiary Guarantee or any Note shall be in writing and shall be
deemed to have been duly given upon the receipt thereof. Such notices shall be
delivered by hand, or mailed, certified or registered mail with postage prepaid
(a) if to the Guarantor, at its address set forth below, with a copy to the
Company as provided in the Indenture for notices to the Company, and (b) if to
the Holders or the Trustee, as provided in the Indenture. The Guarantor by
notice to the Trustee may designate additional or different addresses for
subsequent notices to or communications with the Guarantor.
E-2
<PAGE>
5. PARTIES. Nothing in this Supplemental Indenture is intended or
shall be construed to give any Person, other than the Holders and the Trustee
and the holders of any Guarantor Senior Debt, any legal or equitable right,
remedy or claim under or in respect of the Guarantor's Subsidiary Guarantee or
any provision contained herein or in Article Thirteen of the Indenture.
6. GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, OTHER THAN ANY
MANDATING THE APPLICATION OF SUCH LAWS).
7. RATIFICATION OF INDENTURE; SUPPLEMENTAL INDENTURES PART OF
INDENTURE. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every Holder of Notes heretofore or
hereafter authenticated and delivered shall be bound hereby. The Trustee makes
no representation or warranty as to the validity or sufficiency of this
Supplemental Indenture.
8. COUNTERPARTS. The parties hereto may sign one or more copies of
this Supplemental Indenture in counterparts, all of which together shall
constitute one and the same agreement.
9. HEADINGS. The section headings herein are for convenience of
reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
E-3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NAME OF GUARANTOR],
By: _________________________________
Name:
Title:
Address:
[COMPANY]
By: _________________________________
Name:
Title:
Address:
[Add signature block for any other
existing Subsidiary Guarantor]
[TRUSTEE]
By: _________________________________
Name:
Title:
Address:
E-4
<PAGE>
EXHIBIT F
FIRST SUPPLEMENTAL INDENTURE (this "Supplemental
Indenture"), dated as of June 30, 1997 among LEINER HEALTH
PRODUCTS INC., a Delaware corporation ("LHP"), LEINER HEALTH
PRODUCTS GROUP INC., a Delaware corporation ("Leiner
Group"), and United States Trust Company of New York, a New
York corporation, as trustee under the indenture referred to
below (the "Trustee").
W I T N E S S E T H
WHEREAS Leiner Group, as issuer, heretofore executed and delivered to
the Trustee an indenture (the "Indenture"), dated as of June 30, 1997, providing
for the issuance of an aggregate principal amount of $85,000,000 of 9 5/8%
Senior Subordinated Notes due 2007 of Leiner Group (the "Notes");
WHEREAS, in connection with the Recapitalization and the financing
thereof, Leiner Group has issued the Notes pursuant to and in accordance with
the Indenture;
WHEREAS, in connection with the Recapitalization, Leiner Group wishes
to assign, transfer and convey to LHP, and LHP wishes to assume, all of Leiner
Group's rights and obligations in respect of the Indenture and the Notes, in
consideration of, among other things, the making available to LHP of the Credit
Facility for LHP's benefit and use, and the contribution to LHP by Leiner Group
(through its subsidiary PLI) of substantial funds for LHP's benefit and use,
among other things, to repay substantially all of LHP's previously existing
Indebtedness; and
WHEREAS, pursuant to Sections 8.03 and 9.01 of the Indenture, the
parties hereto are authorized to execute and
F-1
<PAGE>
deliver this Supplemental Indenture without the consent of any Holder;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, Leiner
Group, LHP, and the Trustee mutually covenant and agree for the equal and
ratable benefit of the Holders of the Notes as follows:
1. DEFINITIONS. (a) Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
(b) For all purposes of this Supplemental Indenture, except as
otherwise herein expressly provided or unless the context otherwise requires:
(i) the terms and expressions used herein shall have the same meanings as
corresponding terms and expressions used in the Indenture; and (ii) the words
"herein", "hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.
2. ASSIGNMENT. Effective immediately following the consummation of
the issuance and sale of the Notes to the Initial Purchasers on the date hereof,
Leiner Group hereby expressly and irrevocably assigns, transfers and conveys to
LHP all of Leiner Group's rights, obligations, covenants, agreements, duties and
liabilities under, with respect to, arising in connection with or resulting from
the Indenture and the Notes and any and all certificates and other documents
executed by Leiner Group in connection therewith.
3. ASSUMPTION. Effective immediately following the consummation of
the issuance and sale of the Notes to the Initial Purchasers on the date hereof,
LHP hereby expressly and irrevocably assumes, confirms and agrees to perform and
observe all of the Indebtedness, obligations, covenants, agreements, terms,
conditions, duties and
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<PAGE>
liabilities of Leiner Group under, with respect to, arising in connection with
or resulting from the Indenture and the Notes and any and all certificates and
other documents executed by Leiner Group in connection therewith, as fully as if
LHP were originally the obligor in respect thereof and the signatory thereto,
including, but not limited to, (i) the payment of principal, premium (if any)
and interest on the Notes when due, whether at maturity, by acceleration, by
optional redemption, by mandatory prepayment or otherwise, and all other
monetary obligations of Leiner Group under the Indenture and the Notes, and (ii)
the full and punctual performance of all other obligations of Leiner Group under
the Indenture and the Notes, including the compliance with the covenants
contained in Article Ten of the Indenture. Following the execution and delivery
of this Supplemental Indenture, the parties hereto agree that all references to
"the Company" in the Indenture and the Notes shall be deemed to be references to
LHP.
4. RELEASE. Effective as of 12:01 A.M. (New York City time) on the
day immediately following the date of the issuance and sale of the Notes to the
Initial Purchasers, Leiner Group is hereby fully and unconditionally released
and forever discharged from any and all obligations and liabilities Leiner Group
may have under, with respect to, arising in connection with or resulting from
the Indenture and the Notes and any and all certificates and other documents
executed by Leiner Group in connection therewith. From and after such time,
Leiner Group shall not be, and shall not be deemed to be, a party to or bound by
the Indenture or any of the Notes for any purpose.
5. RATIFICATION OF INDENTURE; SUPPLEMENTAL INDENTURE PART OF
INDENTURE. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed by the parties hereto and all the terms, conditions and
provisions thereof shall remain in full force and effect. This Supplemental
Indenture shall form a part of the Indenture for all purposes, and every holder
of Notes
F-3
<PAGE>
heretofore or hereafter authenticated and delivered shall be bound hereby.
6. GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, OTHER THAN ANY
MANDATING APPLICATION OF SUCH LAWS).
7. TRUSTEE MAKES NO REPRESENTATION. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.
8. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not effect the construction thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
LEINER HEALTH PRODUCTS GROUP INC.
by
----------------------------------
Name:
Title:
LEINER HEALTH PRODUCTS INC.
by
----------------------------------
Name:
Title:
UNITED STATES TRUST COMPANY OF
NEW YORK
by
----------------------------------
Name:
Title:
F-5
<PAGE>
Exhibit 4.5
[EXECUTION COPY]
CREDIT AGREEMENT,
dated as of June 30, 1997,
among
LEINER HEALTH PRODUCTS GROUP INC.,
as the U.S. Borrower (prior to the Assumption),
VITA HEALTH COMPANY (1985) LTD.,
as the Canadian Borrower,
VARIOUS FINANCIAL INSTITUTIONS,
as the U.S. Lenders
and the Canadian Lenders,
THE BANK OF NOVA SCOTIA,
as the U.S. Agent
for the U.S. Lenders,
THE BANK OF NOVA SCOTIA,
as the Canadian Agent
for the Canadian Lenders,
MERRILL LYNCH CAPITAL CORPORATION,
as Documentation Agent,
and
SALOMON BROTHERS HOLDING COMPANY INC,
as Syndication Agent.
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION PAGE
- ------- ----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms 5
1.2. Use of Defined Terms 57
1.3. Cross-References 57
1.4. Accounting and Financial Determinations 57
ARTICLE II
U.S. COMMITMENTS AND BORROWING
2.1. U.S. Commitments 58
2.1.1. U.S. Revolving Loan Commitment and U.S. Swing Line
Loan Commitment 58
2.1.2. U.S. Letter of Credit Commitment 59
2.1.3. Term Loan Commitment 59
2.1.4. U.S. Lenders Not Permitted or Required to Make Loans 60
2.1.5. U.S. Issuer Not Permitted or Required to Issue U.S.
Letters of Credit 61
2.2. Reduction of the U.S. Commitment Amounts; Reallocation 61
2.2.1. Optional 61
2.2.2. Mandatory 61
2.2.3. Reallocation 62
2.3. Borrowing Procedures 63
2.3.1. Borrowings of other than U.S. Swing Line Loans 63
2.3.2. U.S. Swing Line Loans 63
2.4. Continuation and Conversion Elections 65
2.5. Funding 65
2.6. U.S. Register; U.S. Notes 65
<PAGE>
ARTICLE III
CANADIAN COMMITMENTS, BORROWING AND CANADIAN BAS
3.1. Canadian Commitments 67
3.1.1. Canadian Revolving Loan Commitment and Canadian Swing
Line Loan Commitment 67
3.1.2. Canadian Letter of Credit Commitment 68
3.1.3. Canadian Lenders Not Permitted or Required to Make Loans 68
3.1.4. Canadian Issuer Not Permitted or Required to Issue
Canadian Letters of Credit 69
3.2. Reduction of the Canadian Commitment Amounts;
Reallocation 69
3.2.1. Optional 69
3.2.2. Reallocation 69
3.3. Borrowing Procedures 70
3.3.1. Borrowings of other than Canadian Swing Line Loans 70
3.3.2. Canadian Swing Line Loans 71
3.4. Continuation and Conversion Elections 72
3.4.1. Converting Canadian Prime Rate Loans to Canadian BAs 72
3.4.2. Converting Canadian BAs to Canadian Prime Rate Loans 73
3.5. Canadian BAs 73
3.5.1. Funding of Canadian BAs 73
3.5.2. Acceptance Fees 74
3.5.3. Presigned Draft Forms 74
3.5.4. Bill C-90. 74
3.6. Special Provisions Relating to Acceptance Notes 75
3.7. Canadian Register; Canadian Revolving Notes 75
ARTICLE IV
U.S. AND CANADIAN LETTER OF CREDIT SUBFACILITIES
4.1. Issuance Procedures 77
4.1.1. Other Lenders' Participation 77
4.1.2. Disbursements; Conversion to Loans 78
4.1.3. Reimbursement 79
(ii)
<PAGE>
4.1.4. Deemed Disbursements 79
4.1.5. Nature of Reimbursement Obligations 80
ARTICLE V
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
5.1. Repayments and Prepayments; Application 81
5.1.1. Repayments and Prepayments 81
5.1.2. Application 86
5.2. Interest Provisions 87
5.2.1. Rates 87
5.2.2. Post-Maturity Rates 87
5.2.3. Payment Dates 88
5.2.4. Interest Act Provision 88
5.3. Fees 89
5.3.1. Commitment Fee 89
5.3.2. Agents' Fees 89
5.3.3. Letter of Credit Fees 89
ARTICLE VI
CERTAIN LIBO RATE, CANADIAN BA AND OTHER PROVISIONS
6.1. LIBO Rate Lending Unlawful 90
6.2. Deposits Unavailable; Circumstances Making Canadian BAs
Unavailable 90
6.3. Increased Loan Costs, etc. 91
6.4. Funding Losses 92
6.5. Increased Capital Costs 92
6.6. Taxes 93
6.7. Payments, Computations, etc. 97
6.8. Sharing of Payments 97
6.9. Setoff 98
6.10. Lender's Duty to Mitigate 98
6.11. Replacement of Lenders 99
(iii)
<PAGE>
ARTICLE VII
CONDITIONS TO CREDIT EXTENSIONS
7.1. Initial Credit Extensions 100
7.1.1. Resolutions, etc. 100
7.1.2. Delivery of Documents 101
7.1.3. Transaction Closing Papers 101
7.1.4. Consummation of Transaction 101
7.1.5. Receipt of Capital Contribution, etc 101
7.1.6. Subordinated Debt 102
7.1.7. Delivery of Notes 102
7.1.8. Pledge Agreements 102
7.1.9. Management Services Agreement 104
7.1.10. Guaranties 104
7.1.11. Security Agreements 104
7.1.12. Trademark Security Agreement 105
7.1.13. Mortgages 105
7.1.14. Closing Date Certificates 106
7.1.15. Compliance Certificate 106
7.1.16. Solvency, etc. 106
7.1.17. Financial Information, etc. 106
7.1.18. Payment of Outstanding Indebtedness, etc. 106
7.1.19. Closing Fees, Expenses, etc. 107
7.1.20. Tax Sharing Agreement 107
7.1.21. Reliance Letters and Reports 107
7.1.22. Opinions of Counsel 107
7.2. All Credit Extensions 108
7.2.1. Compliance with Warranties, No Default, etc. 108
7.2.2. Credit Extension Request, etc. 109
7.2.3. Satisfactory Legal Form 109
(iv)
<PAGE>
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1. Organization, etc. 109
8.2. Due Authorization, Non-Contravention, etc. 109
8.3. Government Approval, Regulation, etc. 110
8.4. Validity, etc. 111
8.5. Financial Information 111
8.6. No Material Adverse Change 111
8.7. Litigation, Labor Controversies, etc. 111
8.8. Subsidiaries 112
8.9. Ownership of Properties 112
8.10. Taxes 112
8.11. Pension and Welfare Plans 112
8.12. Environmental Warranties 113
8.13. Intellectual Property 114
8.14. Regulations G, U and X 115
8.15. Accuracy of Information 115
8.16. Senior Indebtedness, etc. 115
ARTICLE IX
COVENANTS
9.1. Affirmative Covenants 116
9.1.1. Financial Information, Reports, Notices, etc. 116
9.1.2. Compliance with Laws, etc. 119
9.1.3. Maintenance of Properties 119
9.1.4. Insurance 119
9.1.5. Books and Records 120
9.1.6. Environmental Covenant 121
9.1.7. Future Subsidiaries 121
9.1.8. Process Agent 123
9.1.9. Use of Proceeds 123
9.1.10. Rate Protection Agreements 124
(v)
<PAGE>
9.1.11. Assumption Agreement 124
9.1.12. Appraisal 124
9.1.13. Kalamazoo, Michigan Property 124
9.2. Negative Covenants 125
9.2.1. Business Activities 125
9.2.2. Indebtedness 125
9.2.3. Liens 128
9.2.4. Financial Condition and Operations 130
9.2.5. Investments 132
9.2.6. Restricted Payments, etc. 134
9.2.7. Stock of Subsidiaries 136
9.2.8. Rental Obligations 136
9.2.9. Take or Pay Contracts 136
9.2.10. Consolidation, Merger, etc. 136
9.2.11. Permitted Dispositions. 137
9.2.12. Modification of Certain Agreements 138
9.2.13. Transactions with Affiliates 139
9.2.14. Negative Pledges, Restrictive Agreements, etc. 140
9.2.15. Sale and Leaseback 141
9.2.16. Capital Expenditures 141
ARTICLE X
EVENTS OF DEFAULT
10.1. Listing of Events of Default 143
10.1.1. Non-Payment of Obligations 143
10.1.2. Breach of Warranty 143
10.1.3. Non-Performance of Certain Covenants and
Obligations 143
10.1.4. Non-Performance of Other Covenants and
Obligations 143
10.1.5. Default on Other Indebtedness 143
10.1.6. Judgments 144
10.1.7. Pension Plans 144
10.1.8. Change in Control 144
10.1.9. Bankruptcy, Insolvency, etc. 144
10.1.10. Impairment of Security, etc. 145
(vi)
<PAGE>
10.1.11. Subordinated Notes 145
10.1.12. Redemption 146
10.1.13. Termination of Receivables Facility 146
10.2. Action if Bankruptcy 146
10.3. Action if Other Event of Default 146
ARTICLE XI
THE AGENTS
11.1. Actions 146
11.2. Funding Reliance, etc. 147
11.3. Exculpation 147
11.4. Successor 148
11.5. Loans by the Agents 149
11.6. Credit Decisions 149
11.7. Copies, etc. 149
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1. Waivers, Amendments, etc. 149
12.2. Notices 151
12.3. Payment of Costs and Expenses 151
12.4. Indemnification 152
12.5. Survival 153
12.6. Severability 153
12.7. Headings 153
12.8. Execution in Counterparts, Effectiveness, etc. 153
12.9. Governing Law; Entire Agreement 154
12.10. Successors and Assigns 154
12.11. Sale and Transfer of Loans and Notes; Participations
in Loans and Notes 154
12.11.1. Assignments 154
12.11.2. Participations 157
12.12. Other Transactions 158
(vii)
<PAGE>
12.13. Execution on Behalf of Corporation 158
12.14. Forum Selection and Consent to Jurisdiction 158
12.15. Waiver of Jury Trial 160
12.16. Acknowledgments and Representations by Lenders 160
12.17. Confidentiality 160
(viii)
<PAGE>
SCHEDULE I - Disclosure Schedule to Credit Agreement
SCHEDULE II - Percentages; Administrative Information
EXHIBIT A-1 - Form of U.S. Revolving Note
EXHIBIT A-2 - Form of Canadian Revolving Note
EXHIBIT A-3 - Form of Term B Note
EXHIBIT A-4 - Form of Term C Note
EXHIBIT A-5 - Form of U.S. Swing Line Note
EXHIBIT A-6 - Form of Canadian Swing Line Note
EXHIBIT A-7 - Form of Acceptance Note
EXHIBIT B-1 - Form of U.S. Borrowing Request
EXHIBIT B-2 - Form of Canadian Borrowing Request
EXHIBIT B-3 - Form of U.S. Issuance Request
EXHIBIT B-4 - Form of Canadian Issuance Request
EXHIBIT C-1 - Form of U.S. Continuation/ Conversion Notice
EXHIBIT C-2 - Form of Canadian Continuation/Conversion Notice
EXHIBIT D - Form of Lender Assignment Agreement
EXHIBIT E-1 - Form of U.S. Borrower Pledge Agreement
EXHIBIT E-2 - Form of Canadian Borrower Pledge Agreement
EXHIBIT E-3 - Form of Parent Pledge Agreement
EXHIBIT E-4 - Form of Canadian Holdings Pledge Agreement
EXHIBIT E-5 - Form of U.S. Subsidiary Pledge Agreement
EXHIBIT E-6 - Form of Canadian Subsidiary Pledge Agreement
EXHIBIT F-1 - Form of U.S. Borrower Guaranty
EXHIBIT F-2 - Form of Parent Guaranty
EXHIBIT F-3 - Form of Canadian Holdings Guaranty
EXHIBIT F-4 - Form of U.S. Subsidiary Guaranty
EXHIBIT F-5 - Form of Canadian Subsidiary Guaranty
EXHIBIT G-1 - Form of U.S. Borrower Security Agreement
EXHIBIT G-2 - Form of Canadian Borrower Debenture
EXHIBIT G-3 - Form of Canadian Holdings Debenture
EXHIBIT G-4 - Form of U.S. Subsidiary Security Agreement
EXHIBIT G-5 - Form of Canadian Subsidiary Debenture
EXHIBIT H - Form of Mortgage
EXHIBIT I - Form of Compliance Certificate
EXHIBIT J-1 - Form of U.S. Borrower Closing Date Certificate
EXHIBIT J-2 - Form of Canadian Borrower Closing Date Certificate
EXHIBIT J-3 - Form of Parent Closing Date Certificate
EXHIBIT K - Form of Master Subordination Agreement
EXHIBIT L-1 - Form of Opinion of New York Counsel to the Obligors
EXHIBIT L-2 - Form of Opinion of Canadian Counsel to the Obligors
EXHIBIT M - Form of Confidentiality Agreement
(ix)
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of June 30, 1997, is among LEINER
HEALTH PRODUCTS GROUP INC., a Delaware corporation ("LHPG" or, prior to the
Assumption (as defined below), the "U.S. BORROWER"), VITA HEALTH COMPANY (1985)
LTD., a Manitoba corporation (the "CANADIAN BORROWER", and together with the
U.S. Borrower, the "BORROWERS"), the various financial institutions as are or
may become parties hereto which extend a Commitment (such term and other
capitalized terms being used herein with the meanings provided in SECTION 1.1)
under the U.S. Facility (collectively, the "U.S. LENDERS"), the various
financial institutions as are or may become parties hereto which extend a
Commitment under the Canadian Facility (collectively, the "CANADIAN LENDERS",
and together with the U.S. Lenders, the "LENDERS"), THE BANK OF NOVA SCOTIA
("SCOTIABANK"), as agent for the U.S. Lenders under the U.S. Facility (in such
capacity, the "U.S. AGENT"), Scotiabank, currently acting through its executive
offices in Toronto, Ontario, as agent for the Canadian Lenders under the
Canadian Facility (in such capacity, the "CANADIAN AGENT", and together with the
U.S. Agent, collectively, the "AGENTS"), MERRILL LYNCH CAPITAL CORPORATION, as
Documentation Agent, and SALOMON BROTHERS HOLDING COMPANY INC, as Syndication
Agent.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Leiner and its various Subsidiaries are engaged in the
business of manufacturing and marketing, labeling, packaging and distributing at
wholesale and retail vitamins, minerals, nutritional supplements, health foods,
over-the-counter drugs and other pharmaceutical, health and beauty aid or
related items;
WHEREAS, (a) LHP Acquisition Corp., a Delaware corporation ("NEWCO"),
is controlled by North Castle Partners I, L.L.C., a Delaware limited liability
company ("NORTH CASTLE"), (b) Leiner is a direct, wholly-owned Subsidiary of PLI
Holdings Inc., a Delaware corporation ("PARENT"), (c) Parent is a direct,
wholly-owned Subsidiary of LHPG, (d) the Canadian Borrower is a direct,
wholly-owned (other than, on the Effective Date, for certain outstanding
preferred stock) Subsidiary of VH Holdings Inc., a Manitoba corporation
("CANADIAN HOLDINGS") and (e) Canadian Holdings is a direct, wholly-owned
Subsidiary of Leiner;
WHEREAS, AEA Investors Inc., a Delaware corporation ("AEA INVESTORS")
and certain of its co-investors (collectively, the "AEA GROUP") and Mr. Charles
F. Baird, Jr. ("C. BAIRD") are the holders of approximately 92% of the Existing
LHPG Common Stock, and Robert M. Kaminski, Gale Bensussen and other current and
former members of senior management and employees of LHPG and its Subsidiaries
(the "MANAGEMENT SHAREHOLDERS") collectively hold the remaining approximately 8%
of the Existing LHPG Common Stock;
<PAGE>
WHEREAS, certain of the Management Shareholders hold stock options
(the "EXISTING OPTIONS") that, if exercised, would increase their share of
ownership of the Existing LHPG Common Stock to approximately 20%;
WHEREAS, in accordance with and subject to the terms and conditions
contained in the Stock Purchase Agreement and Agreement and Plan of Merger,
dated as of May 31, 1997 (as amended, supplemented, amended and restated or
otherwise modified from time to time in accordance with SECTION 9.2.12, the
"MERGER AGREEMENT"), by and among LHPG, North Castle and Newco, Newco will merge
(the "MERGER", with the date of consummation of the Merger being referred to as
the "MERGER DATE", and the time that the Certificate of Merger becomes effective
being referred to as the "MERGER EFFECTIVE TIME") with and into LHPG, and
immediately upon such Merger, the separate corporate existence of Newco shall
cease and LHPG shall be the surviving corporation of the Merger and shall
continue as a corporation existing under the laws of Delaware;
WHEREAS, pursuant to the Merger Agreement, among other things,
(i) upon the effectiveness of the Merger, (x) the Existing LHPG
Common Stock (other than shares as to which statutory appraisal rights
shall have been exercised) will be converted into the right to receive
cash (if any), shares of LHPG Common Stock (if any) and warrants for LHPG
Common Stock, and (y) each share of Newco common stock will be canceled
and retired without payment therefor,
(ii) concurrently with the Merger, North Castle will purchase LHPG
Common Stock for a cash amount of not less than $75,000,000, and
(iii) as a result of the Merger, (x) certain current members of
management and employees of, and consultants to, LHPG and its Subsidiaries
and C. Baird will hold or have the right to receive shares of LHPG Common
Stock that, together with the shares thereof purchased by, or contributed
to, North Castle, will have a value of $99,000,000 based upon the per
share purchase price so paid by North Castle, and (y) members of the AEA
Group and certain former members of management and employees of LHPG and
its Subsidiaries will hold shares of LHPG Common Stock that will have a
value of approximately $11,000,000 based on such per share purchase price;
WHEREAS, in consideration of, among other things, the making
available to Leiner of the U.S. revolving credit facility under this Agreement,
the contribution to Leiner by LHPG of funds to repay substantially all of
Leiner's existing Indebtedness, and the grant by Parent of the Parent Guaranty,
Leiner will, immediately following the making of the initial Credit Extensions,
assume (the "ASSUMPTION") all of LHPG's rights and obligations under this
Agreement, the other Loan Documents and the Subordinated Debt Instruments
pursuant to SECTION 9.1.11, and LHPG will (on the succeeding day following the
effectiveness of such Assumption) be fully and unconditionally released and
discharged from all liabilities and
2
<PAGE>
obligations in respect of this Agreement, the other Loan Documents and the
Subordinated Debt Instruments;
WHEREAS, subject to the terms of this Agreement (including ARTICLE
VII), and in connection with the Transaction and in order to (i) finance in part
the Transaction (including related fees, taxes and expenses) and refinance in
part certain existing Indebtedness of Leiner and its Subsidiaries and (ii)
finance the working capital and other business needs of Leiner and its
Subsidiaries following the consummation of the Transaction, the Borrowers desire
to obtain
(a) from the U.S. Lenders, a Term B Loan Commitment and a Term C Loan
Commitment pursuant to which Borrowings of Term Loans, in a maximum
aggregate principal amount not to exceed $45,000,000 (in the case of Term
B Loans) and $40,000,000 (in the case of Term C Loans), will be made to
the U.S. Borrower in a single Borrowing to occur on the date of the
initial Credit Extensions;
(b) from the U.S. RL Lenders, a U.S. Revolving Loan Commitment (to
include availability for U.S. Revolving Loans, U.S. Swing Line Loans and
U.S. Letters of Credit) pursuant to which Borrowings of U.S. Revolving
Loans and U.S. Swing Line Loans, in a maximum aggregate principal amount
(together with all U.S. Letter of Credit Outstandings) not to exceed the
then existing U.S. Revolving Loan Commitment Amount, will be made to the
U.S. Borrower from time to time on and subsequent to the date of the
initial Credit Extensions but prior to the U.S. Revolving Loan Commitment
Termination Date;
(c) from the U.S. Issuers (and participated in by the U.S. RL
Lenders), a U.S. Letter of Credit Commitment pursuant to which the U.S.
Issuers will issue U.S. Letters of Credit for the account of the U.S.
Borrower and, subject to SECTION 2.1.2, its U.S. Subsidiaries from time
to time on and subsequent to the date of the initial Credit Extensions
but prior to the U.S. Revolving Loan Commitment Termination Date in a
maximum aggregate Stated Amount at any one time outstanding not to exceed
$35,000,000 (PROVIDED that the aggregate outstanding principal amount of
U.S. Revolving Loans, Swing Line Loans and U.S. Letter of Credit
Outstandings at any time shall not exceed the then existing U.S. Revolving
Loan Commitment Amount);
(d) from the U.S. Swing Line Lender (and participated in by the
U.S. RL Lenders), a U.S. Swing Line Loan Commitment pursuant to which
Borrowings of U.S. Swing Line Loans in an aggregate outstanding principal
amount not to exceed $15,000,000 will be made on and subsequent to the
date of the initial Credit Extensions but prior to the U.S. Revolving Loan
Commitment Termination Date (PROVIDED that the aggregate outstanding
principal amount of such U.S. Swing Line Loans, U.S. Revolving Loans and
U.S. Letter of Credit Outstandings at any time shall not exceed the then
existing U.S. Revolving Loan Commitment Amount);
3
<PAGE>
(e) from the Canadian Lenders, a Canadian Revolving Loan Commitment
(to include availability for Canadian Revolving Loans, Canadian Swing Line
Loans and Canadian Letters of Credit) pursuant to which Borrowings of
Canadian Revolving Loans and Canadian Swing Line Loans, in a maximum
aggregate principal amount (together with all Canadian Letter of Credit
Outstandings) not to exceed the then existing Canadian Revolving Loan
Commitment Amount, will be made to the Canadian Borrower from time to time
on and subsequent to the date of the initial Credit Extensions but prior
to the Canadian Revolving Loan Commitment Termination Date;
(f) from the Canadian Issuers (and participated in by the Canadian
Lenders), a Canadian Letter of Credit Commitment pursuant to which the
Canadian Issuers will issue Canadian Letters of Credit for the account of
the Canadian Borrower and, subject to SECTION 3.1.2, the Canadian
Borrower's Subsidiaries from time to time on and subsequent to the date
of the initial Credit Extensions but prior to the Canadian Revolving Loan
Commitment Termination Date in a maximum aggregate Stated Amount at any
one time outstanding not to exceed Cdn $13,000,000 (PROVIDED that the
aggregate outstanding principal amount of Canadian Revolving Loans and
Canadian Letter of Credit Outstandings at any time shall not exceed the
then existing Canadian Revolving Loan Commitment Amount); and
(g) from the Canadian Swing Line Lender (and participated in by the
Canadian Lenders), a Canadian Swing Line Loan Commitment pursuant to which
Borrowings of Canadian Swing Line Loans in an aggregate outstanding
principal amount not to exceed Cdn $1,400,000 will be made on and
subsequent to the date of the initial Credit Extensions but prior to the
Canadian Revolving Loan Commitment Termination Date (PROVIDED that the
aggregate outstanding principal amount of such Canadian Swing Line Loans,
Canadian Revolving Loans and Canadian Letter of Credit Outstandings at any
time shall not exceed the then existing Canadian Revolving Loan Commitment
Amount);
with all the proceeds of the Credit Extensions to be used for one or more of
the purposes specified in SECTION 9.1.9; and
WHEREAS, the Lenders and the Issuers are willing, on the terms and
subject to the conditions hereinafter set forth (including ARTICLE VII), to
extend such Commitments and make such Loans to the Borrowers and issue (or
participate in) Letters of Credit for the account of the Borrowers and their
Subsidiaries;
NOW, THEREFORE, the parties hereto agree as follows:
4
<PAGE>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. DEFINED TERMS. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and
recitals, shall, except where the context otherwise requires, have the
following meanings (such meanings to be equally applicable to the singular
and plural forms thereof):
"ACCEPTANCE NOTE" is defined in CLAUSE (b) of SECTION 3.6.
"ACCOUNT" means any account (as that term is defined in Section 9-106
of the UCC) of the U.S. Borrower or any of its Subsidiaries arising from the
sale or lease of goods or rendering of services.
"ADJUSTED NET WORTH" means, at any time, $110,000,000, PLUS an amount
equal to cumulative Net Income from July 1, 1997 to the end of the most recently
ended Fiscal Quarter for which financial statements have been delivered pursuant
to CLAUSE (a) or CLAUSE (b) of SECTION 9.1.1 , as shown in the consolidated
financial statements of the U.S. Borrower and its Subsidiaries that have been so
delivered; PROVIDED, that there shall be excluded from the determination of
Adjusted Net Worth
(a) the cumulative adjustments due to foreign currency translation
required by FASB 52 arising after the date of the initial Credit
Extensions; and
(b) the amount deducted, in determining Net Income, of all Specified
Adjustments (on an after-tax basis), to the extent incurred.
"AEA" means AEA Investors, and its current or future employees,
shareholders, directors and officers and (i) trusts for the benefit of such
Persons or the spouses, issue, parents or other relatives of such Persons, (ii)
entities controlling or controlled by such Persons and (iii) in the event of the
death of any such individual Person, heirs or testamentary legatees of such
Person.
"AEA GROUP" is defined in the THIRD RECITAL.
"AEA INVESTORS" is defined in the THIRD RECITAL.
"AFFILIATE" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). With respect to any Lender or Issuer, a Person shall
be deemed to be "controlled by" another Person if such other Person possesses,
directly or indirectly, power to vote 51% or more of the securities (on a fully
diluted basis) having ordinary voting power for the election of directors or
managing
5
<PAGE>
general partners or to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise. With respect to all
other Persons, a Person shall be deemed to be "controlled by" another Person
if such other Person possesses, directly or indirectly, power
(a) to vote 20% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing general partners; or
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"AGENT" and "AGENTS" are defined in the PREAMBLE.
"AGREEMENT" means, on any date, this Credit Agreement as originally
in effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"AGGREGATE LIMIT" is defined in SECTION 9.2.6.
"APPLICABLE CANADIAN BA STAMPING FEE" means at all times during the
applicable periods set forth below with respect to Canadian BAs, the applicable
percentage set forth below under the column entitled "Applicable Canadian BA
Stamping Fee":
APPLICABLE CANADIAN
LEVERAGE RATIO BA STAMPING FEE
-------------- -------------------
Less than 3.0:1 0.750%
Greater than or equal
to 3.0:1 and less than 3.5:1 0.875%
Greater than or equal
to 3.5:1 and less than 4.0:1 1.125%
Greater than or equal to 4.0:1 and less than 4.5:1 1.500%
Greater than or equal to 4.5:1 and less than 5.0:1 2.000%
Greater than or equal to 5.0:1 and less than 5.75:1 2.250%
Greater than or equal to 5.75:1 2.500%.
The Leverage Ratio used to compute the Applicable Canadian BA
Stamping Fee shall be the Leverage Ratio set forth in the Compliance Certificate
most recently delivered by the U.S. Borrower to the U.S. Agent pursuant to
CLAUSE (c) of SECTION 9.1.1 (PROVIDED, HOWEVER, for purposes of determining the
Applicable Canadian BA Stamping Fee for the period from the
6
<PAGE>
Effective Date through (and including) the date on which the U.S. Agent
receives the Compliance Certificate in respect of the Fiscal Quarter ended
September 30, 1997 delivered pursuant to CLAUSE (c) of SECTION 9.1.1, such
Leverage Ratio shall be the Leverage Ratio set forth in the Compliance
Certificate delivered by the U.S. Borrower pursuant to SECTION 7.1.15);
changes in the Applicable Canadian BA Stamping Fee resulting from a change in
the Leverage Ratio shall become effective upon delivery by the U.S. Borrower
to the U.S. Agent of a new Compliance Certificate pursuant to CLAUSE (c) of
SECTION 9.1.1 and notice therein of such change. If the U.S. Borrower shall
fail to deliver a Compliance Certificate within 45 days after the end of any
Fiscal Quarter (or within 90 days, in the case of the last Fiscal Quarter of
the Fiscal Year) as required pursuant to CLAUSE (c) of SECTION 9.1.1, the
Applicable Canadian BA Stamping Fee from and including the 46th (or 91st, as
the case may be) day after the end of such Fiscal Quarter to but not
including the date the U.S. Borrower delivers to the U.S. Agent a Compliance
Certificate shall conclusively equal the next higher Applicable Canadian BA
Stamping Fee from the Applicable Canadian BA Stamping Fee (or if there is
none higher, such Applicable Canadian BA Stamping Fee) that was in effect
when the last Compliance Certificate was so delivered by the U.S. Borrower to
the U.S. Agent.
"APPLICABLE COMMITMENT FEE MARGIN" means at all times during the
applicable periods set forth below with respect to the commitment fee payable to
the U.S. RL Lenders or the Canadian Lenders, as the case may be, pursuant to
SECTION 5.3.1, the applicable percentage set forth below under the column
entitled "Applicable Commitment Fee Margin":
APPLICABLE COMMITMENT
LEVERAGE RATIO FEE MARGIN
-------------- ---------------------
Less than 3.5:1 0.250%
Greater than or equal to 3.5:1 and less
than 4.5:1 0.375%
Greater than or equal to 4.5:1 0.500%.
The Leverage Ratio used to compute the Applicable Commitment Fee
Margin shall be the Leverage Ratio set forth in the Compliance Certificate most
recently delivered by the U.S. Borrower to the U.S. Agent pursuant to CLAUSE (C)
of SECTION 9.1.1 (PROVIDED, HOWEVER, for purposes of determining the Applicable
Commitment Fee Margin for the period from the Effective Date through (and
including) the date on which the U.S. Agent receives the Compliance Certificate
in respect of the Fiscal Quarter ended September 30, 1997 delivered pursuant to
CLAUSE (c) of SECTION 9.1.1, such Leverage Ratio shall be the Leverage Ratio set
forth in the Compliance Certificate delivered by the U.S. Borrower pursuant to
SECTION 7.1.15); changes in the Applicable Commitment Fee Margin resulting from
a change in the Leverage Ratio shall become effective upon delivery by the U.S.
Borrower to the U.S. Agent of a new Compliance Certificate pursuant to CLAUSE
(c) of SECTION 9.1.1 and notice therein of such change. If the U.S. Borrower
shall fail to deliver a Compliance Certificate within 45 days after the end of
any Fiscal Quarter (or within 90 days, in the case of the last Fiscal
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Quarter of the Fiscal Year) as required pursuant to CLAUSE (c) of SECTION
9.1.1, the Applicable Commitment Fee Margin from and including the 46th (or
91st, as the case may be) day after the end of such Fiscal Quarter to but not
including the date the U.S. Borrower delivers to the U.S. Agent a Compliance
Certificate shall conclusively equal the next higher Applicable Commitment
Fee Margin from the Applicable Commitment Fee Margin (or if there is none
higher, such Applicable Commitment Fee Margin) that was in effect when the
last Compliance Certificate was so delivered by U.S. Borrower to the U.S.
Agent.
"APPLICABLE MARGIN" means at all times during the applicable
periods set forth below,
(a) with respect to the unpaid principal amount of each (i) Revolving
Loan maintained as a U.S. Base Rate Loan or a Canadian Prime Rate Loan,
the applicable percentage set forth below under the column entitled
"Applicable Margin for U.S. Base Rate Loans and Canadian Prime Rate Loans"
and (ii) U.S. Revolving Loan maintained as a LIBO Rate Loan, the
applicable percentage set forth below under the column entitled
"Applicable Margin for LIBO Rate Loans":
APPLICABLE
MARGIN FOR
U.S. BASE RATE APPLICABLE
LOANS AND MARGIN FOR
CANADIAN PRIME LIBO
LEVERAGE RATIO RATE LOANS RATE LOANS
-------------- --------------- ----------
Less than 3.0:1 0.000% 0.750%
Greater than or equal to 3.0:1
and less than 3.5:1 0.000% 0.875%
Greater than or equal to 3.5:1
and less than 4.0:1 0.125% 1.125%
Greater than or equal to 4.0:1
and less than 4.5:1 0.500% 1.500%
Greater than or equal to 4.5:1
and less than 5.0:1 1.000% 2.000%
Greater than or equal to 5.0:1
and less than 5.75:1 1.250% 2.250%
Greater than or equal to 5.75:1 1.500% 2.500%.
(b) with respect to the unpaid principal amount of each Term B Loan
maintained as a (i) U.S. Base Rate Loan, the applicable percentage set
forth below under the column entitled "Applicable Margin for U.S. Base
Rate Loans" and (ii) LIBO Rate Loan, the
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applicable percentage set forth below under the column entitled
"Applicable Margin for LIBO Rate Loans":
APPLICABLE APPLICABLE
MARGIN FOR MARGIN FOR
U.S. BASE LIBO
LEVERAGE RATIO RATE LOANS RATE LOANS
-------------- ---------- ----------
Less than 5.0:1 1.375% 2.375%
Greater than or equal to 5.0:1
and less than 5.75:1 1.625% 2.625%
Greater than or equal to 5.75:1 1.875% 2.875%.
(c) with respect to the unpaid principal amount of each Term C Loan
maintained as a (i) U.S. Base Rate Loan, the applicable percentage set
forth below under the column entitled "Applicable Margin for U.S. Base
Rate Loans" and (ii) LIBO Rate Loan, the applicable percentage set forth
below under the column entitled "Applicable Margin for LIBO Rate Loans":
APPLICABLE APPLICABLE
MARGIN FOR MARGIN FOR
U.S. BASE LIBO
LEVERAGE RATIO RATE LOANS RATE LOANS
-------------- ---------- ----------
Less than 5.0:1 1.500% 2.500%
Greater than or equal to 5.0:1
and less than 5.75:1 1.750% 2.750%
Greater than or equal to 5.75:1 2.000% 3.000%.
The Leverage Ratio used to compute the Applicable Margin shall be
the Leverage Ratio set forth in the Compliance Certificate most recently
delivered by the U.S. Borrower to the U.S. Agent pursuant to CLAUSE (c) of
SECTION 9.1.1 (PROVIDED, HOWEVER, for purposes of determining the Applicable
Margin for the period from the Effective Date through (and including) the
date on which the U.S. Agent receives the Compliance Certificate in respect
of the Fiscal Quarter ended September 30, 1997 delivered pursuant to CLAUSE
(c) of SECTION 9.1.1, such Leverage Ratio shall be the Leverage Ratio set
forth in the Compliance Certificate delivered by the U.S. Borrower pursuant
to SECTION 7.1.15); changes in the Applicable Margin resulting from a change
in the Leverage Ratio shall become effective upon delivery by the U.S.
Borrower to the U.S. Agent of a new Compliance Certificate pursuant to CLAUSE
(c) of SECTION 9.1.1 and notice therein of such change. If the U.S. Borrower
shall fail to deliver a Compliance Certificate within 45 days after the end
of any Fiscal Quarter (or within 90 days, in the case of the last Fiscal
Quarter of the Fiscal Year) as required pursuant to CLAUSE (c) of
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SECTION 9.1.1, the Applicable Margin from and including the 46th (or 91st, as
the case may be) day after the end of such Fiscal Quarter to but not
including the date the U.S. Borrower delivers to the U.S. Agent a Compliance
Certificate shall conclusively equal the next higher Applicable Margin from
the Applicable Margin (or if there is none higher, such Applicable Margin)
that was in effect when the last Compliance Certificate was so delivered by
the U.S. Borrower to the U.S. Agent.
"ASSIGNEE LENDER" is defined in SECTION 12.11.1.
"ASSUMPTION" is defined in the SEVENTH RECITAL.
"ASSUMPTION AGREEMENT" means an assumption agreement in form and
substance satisfactory to the U.S. Agent to be executed and delivered by LHPG
and Leiner, pursuant to which Leiner shall assume all obligations of LHPG
under the Loan Documents and in respect of all Subordinated Debt.
"AUTHORIZED OFFICER" means, relative to any Borrower and any other
Obligor, those of its officers or managing members (in the case of a limited
liability company) whose signatures and incumbency shall have been certified
to the Agents and the Lenders pursuant to SECTION 7.1.1.
"BORROWERS" is defined in the PREAMBLE.
"BORROWING" means the Loans of the same type and, in the case of
LIBO Rate Loans or Canadian BAs, having the same Interest Period made by all
U.S. Lenders or Canadian Lenders, respectively, on the same Business Day and
pursuant to the same Borrowing Request in accordance with SECTION 2.3 or
SECTION 3.3, respectively.
"BORROWING REQUEST" means a U.S. Borrowing Request or a Canadian
Borrowing Request.
"BUSINESS DAY" means
(a) any day which is neither a Saturday or Sunday nor
(i) relative to matters under the U.S. Facility, a legal
holiday on which banks are authorized or required to be closed in New York,
New York, or
(ii) relative to matters under the Canadian Facility, a legal
holiday on which banks are authorized or required to be closed in Toronto,
Ontario; and
(b) relative to the making, continuing, prepaying or repaying of
any LIBO Rate Loans, any day which is a Business Day described in
CLAUSE (a) above and which is also a
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day on which dealings in U.S. Dollars are carried on in the interbank
eurodollar market of the U.S. Agent's LIBOR Office.
"C. BAIRD" is defined in the THIRD RECITAL.
"CALCULATION PERIOD" is defined in CLAUSE (a) of SECTION 5.2.4.
"CANADIAN AGENT" is defined in the PREAMBLE.
"CANADIAN BA" means a bill of exchange drawn by the Canadian Borrower
and accepted by a Canadian Lender that is denominated in Canadian Dollars with a
term of 30, 60, 90 or 180 days, issued and payable only in Canada and having a
face amount of an integral multiple of Cdn $100,000; PROVIDED, HOWEVER, that,
(a) to the extent the context shall require, each Acceptance Note
shall be deemed to be a Canadian BA; and
(b) references to outstanding principal amounts relating to
Canadian BAs shall refer to the stated amount of unmatured Canadian BAs
which have not been collateralized pursuant to, and in accordance with,
the terms of CLAUSE (g) or (h) of SECTION 5.1.1.
"CANADIAN BA RATE" means, for a particular term, the discount rate
per annum, calculated on the basis of a year of 365 days or 366 days, as the
case may be, equal to the average rate per annum for Canadian Dollar bankers'
acceptances having such term that appears on the Reuters Screen CDOR Page (or
any successor page) as of 10:00 a.m. (local time) on the first day of such
term as determined by the Canadian Agent.
"CANADIAN BORROWER" is defined in the PREAMBLE; PROVIDED, HOWEVER,
that if the Canadian Borrower is merged or amalgamated with or liquidated
into Canadian Holdings in accordance with SECTION 9.2.10, then the "Canadian
Borrower" shall mean the surviving or resulting corporation of such merger,
amalgamation or liquidation.
"CANADIAN BORROWER CLOSING DATE CERTIFICATE" means the closing
date certificate executed and delivered by the Canadian Borrower pursuant to
SECTION 7.1.14, substantially in the form of EXHIBIT J-2 hereto.
"CANADIAN BORROWER DEBENTURE" means the Security Agreement
executed and delivered by the Canadian Borrower pursuant to SECTION 7.1.11,
substantially in the form of EXHIBIT G-2, as amended, supplemented, amended
and restated or otherwise modified from time to time.
"CANADIAN BORROWER PLEDGE AGREEMENT" means the Pledge Agreement
executed and delivered by the Canadian Borrower pursuant to SECTION 7.1.8,
substantially in the form of
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EXHIBIT E-2 hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"CANADIAN BORROWING REQUEST" means a Loan request and certificate
duly executed by an Authorized Officer of the Canadian Borrower,
substantially in the form of EXHIBIT B-2 hereto.
"CANADIAN COMMITMENT" is defined in SECTION 3.1.
"CANADIAN CONTINUATION/CONVERSION NOTICE" means a notice of
continuation or conversion and certificate duly executed by an Authorized
Officer of the Canadian Borrower, substantially in the form of EXHIBIT C-2
hereto.
"CANADIAN CREDIT EXTENSION" means, as the context may require,
(a) the making of a Canadian Revolving Loan (including the
acceptance of a Canadian BA) by a Canadian Lender;
(b) the making of a Canadian Swing Line Loan by the Canadian
Swing Line Lender; or
(c) the issuance of a Canadian Letter of Credit, or the extension
of any Stated Expiry Date of any previously issued Canadian Letter of
Credit, by a Canadian Issuer.
"CANADIAN DOLLAR" and "CDN $" each mean the lawful money of Canada.
"CANADIAN FACILITY" is defined in SECTION 3.1.
"CANADIAN FACILITY GUARANTOR" means each of Parent, the U.S.
Borrower, any U.S. Subsidiary Guarantor, Canadian Holdings, each Canadian
Subsidiary Guarantor and, to the extent not prohibited by applicable law
(including the law of the jurisdiction under which such Subsidiary is
organized), each other Subsidiary of the U.S. Borrower, in each case in its
capacity as a Guarantor.
"CANADIAN HOLDINGS" is defined in the SECOND RECITAL.
"CANADIAN HOLDINGS DEBENTURE" means the Security Agreement
executed and delivered by Canadian Holdings in its capacity as a Canadian
Facility Guarantor pursuant to SECTION 7.1.11, substantially in the form of
EXHIBIT G-3, as amended, supplemented, amended and restated or otherwise
modified from time to time.
"CANADIAN HOLDINGS GUARANTY" means the Guaranty executed and
delivered by Canadian Holdings in its capacity as a Canadian Facility
Guarantor pursuant to SECTION 7.1.10,
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<PAGE>
substantially in the form of EXHIBIT F-3 hereto, as amended, supplemented,
amended and restated or otherwise modified from time to time.
"CANADIAN HOLDINGS PLEDGE AGREEMENT" means the Pledge Agreement
executed and delivered by Canadian Holdings in its capacity as a Canadian
Facility Guarantor pursuant to SECTION 7.1.8, substantially in the form of
EXHIBIT E-4 hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"CANADIAN ISSUANCE REQUEST" means a Letter of Credit request and
certificate duly executed by an Authorized Officer of the Canadian Borrower,
substantially in the form of EXHIBIT B-4 hereto.
"CANADIAN ISSUER" means, collectively, Scotiabank (or any
affiliate, unit or agency thereof) in its individual capacity hereunder as
issuer of any Canadian Letters of Credit and such other Canadian Lender as
may be designated by Scotiabank (and agreed to by the Canadian Borrower and
such Canadian Lender) in its individual capacity as the issuer of any
Canadian Letters of Credit.
"CANADIAN LENDERS" is defined in the PREAMBLE.
"CANADIAN LETTER OF CREDIT" is defined in CLAUSE (a) of SECTION
3.1.2.
"CANADIAN LETTER OF CREDIT COMMITMENT" means,
(a) relative to a Canadian Issuer, such Canadian Issuer's
obligation to issue Canadian Letters of Credit pursuant to SECTION 3.1.2;
and
(b) relative to each Canadian Lender, its obligation to
participate in such Canadian Letters of Credit pursuant to SECTION 4.1.1.
"CANADIAN LETTER OF CREDIT COMMITMENT AMOUNT" means, on any date,
a maximum amount of Cdn $13,000,000, as such amount may be reduced from time
to time pursuant to SECTION 3.2.
"CANADIAN LETTER OF CREDIT OUTSTANDINGS" means, on any date, an
amount equal to the sum of
(a) the then aggregate amount which is undrawn and available
under all issued and outstanding Canadian Letters of Credit,
PLUS
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations in respect of such Canadian Letters of Credit.
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<PAGE>
"CANADIAN LOAN" means, as the context may require, a Canadian
Revolving Loan or a Canadian Swing Line Loan.
"CANADIAN NOTE" means, as the context may require, a Canadian
Revolving Note or a Canadian Swing Line Note.
"CANADIAN PENSION PLAN" means a "registered pension plan", as such
term is defined in subsection 248(1) of the Income Tax Act (Canada), which is
subject to the Pension Benefits Act (Manitoba), or similar legislation in
another Province, and of which Canadian Holdings, the Canadian Borrower or
any Canadian Subsidiary is a participating employer.
"CANADIAN PERCENTAGE" means, relative to any Canadian Lender, the
applicable percentage relating to Canadian Revolving Loans as set forth
opposite its name on SCHEDULE II hereto or set forth in a Lender Assignment
Agreement, as such percentage may be adjusted from time to time (a) pursuant
to Lender Assignment Agreement(s) executed by such Lender and its Assignee
Lender(s) and delivered pursuant to SECTION 12.11.1 or (b) by a reallocation
pursuant to SECTION 3.2.2.
"CANADIAN PERSON" means a Person that is not a "non-resident" of
Canada within the meaning of the Income Tax Act (Canada).
"CANADIAN PRIME RATE" means, on any date and relative to all
Canadian Prime Rate Loans, a fluctuating rate of interest per annum equal to
the higher of
(a) the rate of interest most recently established by the
Canadian Agent at its Domestic Office as its prime rate for Canadian Dollar
loans in Canada; and
(b) the Canadian BA Rate most recently determined by the Canadian
Agent PLUS the lesser of (i) 1% and (ii) the Applicable Canadian BA Stamping
Fee.
The Canadian Prime Rate is not necessarily intended to be the lowest rate of
interest determined by the Canadian Agent in connection with extensions of
credit. Changes in the rate of interest on that portion of any Canadian
Revolving Loans maintained as Canadian Prime Rate Loans will take effect
simultaneously with each change in the Canadian Prime Rate. The Canadian
Agent will give notice promptly to the Canadian Borrower and the Canadian
Lenders of changes in the Canadian Prime Rate.
"CANADIAN PRIME RATE LOAN" means a Canadian Revolving Loan bearing
interest at a fluctuating rate determined by reference to the Canadian Prime
Rate.
"CANADIAN REGISTER" is defined in SECTION 3.7.
"CANADIAN REVOLVING LOAN" is defined in SECTION 3.1.1.
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"CANADIAN REVOLVING LOAN COMMITMENT" means, relative to any
Canadian Lender, such Canadian Lender's obligation (if any) to make Canadian
Revolving Loans pursuant to SECTION 3.1.1.
"CANADIAN REVOLVING LOAN COMMITMENT AMOUNT" means, on any date,
the Cdn $ Equivalent of $20,000,000, as such amount may be reduced or
reallocated from time to time pursuant to SECTION 3.2, and as determined by
the Canadian Agent in accordance with its customary banking practice for
determining currency exchange rates on each Quarterly Payment Date for such
date through (but excluding) the next Quarterly Payment Date.
"CANADIAN REVOLVING LOAN COMMITMENT TERMINATION DATE" means the
earliest of
(a) September 1, 1997 (if the initial Credit Extensions have not
occurred on or prior to such date);
(b) June 30, 2003;
(c) the date on which the Canadian Revolving Loan Commitment
Amount is terminated in full or reduced to zero pursuant to SECTION 3.2
(other than SECTION 3.2.2); and
(d) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in the preceding CLAUSE (c) or
(d), the Canadian Revolving Loan Commitments shall terminate automatically
and without any further action.
"CANADIAN REVOLVING NOTE" means a promissory note of the Canadian
Borrower payable to any Canadian Lender, substantially in the form of EXHIBIT
A-2 hereto (as such promissory note may be amended, endorsed or otherwise
modified from time to time), evidencing the aggregate Indebtedness of the
Canadian Borrower to such Canadian Lender resulting from outstanding Canadian
Revolving Loans, and also means all other promissory notes accepted from time
to time in substitution therefor or renewal thereof.
"CANADIAN SUBSIDIARY" means each Subsidiary of the Canadian
Borrower.
"CANADIAN SUBSIDIARY DEBENTURE" means any Security Agreement
executed and delivered by a Canadian Subsidiary in its capacity as a Canadian
Subsidiary Guarantor pursuant to the terms of this Agreement (including
CLAUSE (a) of SECTION 9.1.7), substantially in the form of EXHIBIT G-5
hereto, as amended, supplemented, amended and restated or otherwise modified
from time to time.
"CANADIAN SUBSIDIARY GUARANTOR" means each Canadian Subsidiary
which has executed and delivered a Canadian Subsidiary Guaranty.
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<PAGE>
"CANADIAN SUBSIDIARY GUARANTY" means a Subsidiary Guaranty
executed and delivered by a Canadian Subsidiary in its capacity as a Canadian
Subsidiary Guarantor pursuant to the terms of this Agreement (including
CLAUSE (a) of SECTION 9.1.7), substantially in the form of EXHIBIT F-5
hereto, as amended, supplemented, amended and restated or otherwise modified
from time to time.
"CANADIAN SUBSIDIARY PLEDGE AGREEMENT" means any Pledge Agreement
executed and delivered by a Canadian Subsidiary in its capacity as a Canadian
Subsidiary Guarantor pursuant to the terms of this Agreement (including
CLAUSE (a) of SECTION 9.1.7), substantially the form of EXHIBIT E-6 hereto,
as amended, supplemented, amended and restated or otherwise modified from
time to time.
"CANADIAN SWING LINE LENDER" means, on the Effective Date,
Scotiabank (or, at any time thereafter, another Canadian Lender designated by
Scotiabank with the consent of the Canadian Borrower, if such Canadian Lender
agrees to be the Canadian Swing Line Lender hereunder), in such Person's
capacity as the maker of Canadian Swing Line Loans.
"CANADIAN SWING LINE LOAN" is defined in CLAUSE (b) of SECTION
3.1.1.
"CANADIAN SWING LINE LOAN COMMITMENT" is defined in CLAUSE (b) of
SECTION 3.1.1.
"CANADIAN SWING LINE LOAN COMMITMENT AMOUNT" means, on any date,
Cdn $1,400,000, as such amount may be reduced from time to time pursuant to
SECTION 3.2.
"CANADIAN SWING LINE NOTE" means a promissory note of the Canadian
Borrower payable to the Canadian Swing Line Lender, in the form of EXHIBIT
A-6 hereto (as such promissory note may be amended, endorsed or otherwise
modified from time to time), evidencing the aggregate Indebtedness of the
Canadian Borrower to the Canadian Swing Line Lender resulting from
outstanding Canadian Swing Line Loans, and also means all other promissory
notes accepted from time to time in substitution therefor or renewal thereof.
"CANADIAN TRANSACTION" means the acquisition in January, 1997 of
all of the issued and outstanding shares of capital stock of G.S. Investments
Ltd. by the Canadian Borrower (as the successor to, among others, VH
Acquisition Inc., resulting from a series of short form amalgamations (in
January, 1997) involving the Canadian Borrower, Seier Holdings Ltd., G.S.
Investments Ltd. and VH Acquisition Inc.).
"CAPITAL EXPENDITURES" means, for any period, the aggregate amount
of all expenditures of the U.S. Borrower and its Subsidiaries for fixed or
capital assets made during such period which, in accordance with GAAP, would
be classified as capital expenditures (excluding (i) with respect to all
leasing or similar arrangements entered into during such period which, in
accordance with GAAP, would be classified as a capitalized lease, the
aggregate capitalized amount of all rental payments payable during the term
of such lease (including the portion of such payments allocable to interest
expense) and (ii) expenditures
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made in connection with the replacement or restoration of assets, to the
extent (A) of the sales price received for the assets being restored or
replaced at the time of such expenditure or the credit granted by the seller
of such assets for the assets being traded in at such time or (B) such
replacement or restoration is financed with (x) insurance proceeds paid on
account of the loss of or damage to the assets so replaced or restored or (y)
awards of compensation arising from the taking by condemnation or eminent
domain of the assets so replaced) and, for purposes of the definition of
"Excess Cash Flow" and SECTION 9.2.16 only (and not for purposes of the
calculation of any covenants contained in SECTION 9.2.4) shall also include
the aggregate amount of investments in intangible assets which, in accordance
with GAAP, would be included on the balance sheet of the U.S. Borrower and
its Subsidiaries, including deferred start-up costs and computer software.
"CAPITALIZED LEASE LIABILITIES" means all monetary obligations of
the Borrowers or any of their Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, would be classified as a
capitalized lease, and, for purposes of this Agreement and each other Loan
Document, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP, and the stated maturity thereof
shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be terminated by
the lessee without payment of a premium or a penalty.
"CAPITAL STOCK" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's capital, whether now
outstanding or issued after the Effective Date.
"CASH EQUIVALENT INVESTMENT" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one year
after such time, issued or guaranteed by the government of the United
States (or any agency or instrumentality thereof) or the government of
Canada or, if such evidence is rated at least R1(mid) by Dominion Bond
Rating Service Limited or CBRS Inc., by the government of any Province of
Canada;
(b) commercial paper, maturing not more than nine months from the
date of issue, which is issued by
(i) a corporation (other than an Affiliate of any Obligor)
organized under the laws of any state of the United States or of the
District of Columbia or under the laws of Canada or of any Province
of Canada and rated A-l by S&P, P-1 by Moody's, or R1(mid) by
Dominion Bond Rating Service Limited or CBRS Inc., or
(ii) any Lender (or its holding company);
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(c) any certificate of deposit or bankers acceptance, maturing not
more than one year after such time, which is issued or accepted by either
(i) a commercial banking institution that (x) is a member of the
Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than $250,000,000 (or the Cdn $
Equivalent thereof), (y) is listed on Schedule I of the Bank Act
(Canada) or (z) had a credit rating of Aa or better from Moody's or a
comparable rating from S&P, or
(ii) any Lender; or
(d) any repurchase agreement entered into with any Lender (or other
commercial banking institution of the stature referred to in CLAUSE (c)(i))
which
(i) is secured by a fully perfected security interest in any
obligation of the type described in CLAUSE (a); and
(ii) has a market value at the time such repurchase agreement is
entered into of not less than 100% of the repurchase obligation of
such Lender (or other commercial banking institution) thereunder.
"CASH FLOW COVERAGE RATIO" means, at the close of any Fiscal Quarter,
the ratio computed (except as set forth in CLAUSES (c), (d), (e) and (f)) for
the period consisting of such Fiscal Quarter and each of the three immediately
prior Fiscal Quarters of:
(a) EBITDA (for all such Fiscal Quarters) minus Capital
Expenditures made during such Fiscal Quarters
TO
(b) the sum (for all such Fiscal Quarters) of
(i) Interest Expense paid in cash;
PLUS
(ii) scheduled principal repayments of Debt (including scheduled
principal repayments of the Term Loans pursuant to the provisions of
CLAUSES (d) and (e) of SECTION 5.1.1, but excluding the amount of
Debt which is refinanced with other Debt pursuant to SECTION 9.2.2,
to the extent so refinanced (including the principal repayments of
Subordinated Debt to the extent made with the proceeds of other
Subordinated Debt issued to refinance or replace such original
Subordinated Debt in accordance with the terms of this Agreement));
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PLUS
(iii) all federal, state, provincial, local and foreign
income taxes actually paid in cash by the U.S. Borrower and its
Subsidiaries;
PROVIDED, HOWEVER, that in computing the Cash Flow Coverage Ratio for
(c) the second Fiscal Quarter of the 1998 Fiscal Year, the amount
set forth in CLAUSE (b) above shall equal the Second Quarter Adjusted
Amount, multiplied by four;
(d) the third Fiscal Quarter of the 1998 Fiscal Year, the amount
set forth in CLAUSE (b) above shall equal (i) the sum of (x) such amount
for such Fiscal Quarter PLUS (y) the Second Quarter Adjusted Amount,
multiplied by (ii) two;
(e) the fourth Fiscal Quarter of the 1998 Fiscal Year, the amount
set forth in CLAUSE (B) above shall equal (i) the sum of (x) such amount
for the third and fourth Fiscal Quarters of the 1998 Fiscal Year PLUS (y)
the Second Quarter Adjusted Amount, multiplied by (ii) 1.333; and
(f) the first Fiscal Quarter of the 1999 Fiscal Year, the amount set
forth in CLAUSE (B) above shall equal the sum of (x) such amount for the
third and fourth Fiscal Quarters of the 1998 Fiscal Year and for the first
Fiscal Quarter of the 1999 Fiscal Year PLUS (y) the Second Quarter
Adjusted Amount.
"CDN $ EQUIVALENT" means the Exchange Equivalent in Canadian
Dollars of any amount of U.S. Dollars.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response
Compensation Liability Information System List.
"CHANGE IN CONTROL" means
(a) at any time prior to the creation of a Public Market, the failure
of AEA, North Castle, C. Baird and Senior Management to directly or
indirectly own beneficially at least 51% of the outstanding Voting Stock
of LHPG on a fully diluted basis, such Voting Stock to be held free and
clear of all Liens (except (i) in the case of AEA and Senior Management
only, Persons described in the definition of "AEA" and such Senior
Management may grant or otherwise create or suffer to exist Liens on their
shares of LHPG so long as all such Liens of all such Persons are not in
favor of a single Person or group of Persons acting in concert and (ii) in
the case of North Castle and C. Baird, non-
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consensual Liens that arise by operation of law but which do not result
in a change in the ownership of such Capital Stock); or
(b) at any time after the creation of a Public Market (i) the failure
of AEA, North Castle, C. Baird and Senior Management to directly or
indirectly own beneficially at least 30% of the outstanding Voting Stock
of LHPG on a fully diluted basis, such Voting Stock to be held free and
clear of all Liens (except (i) in the case of AEA and Senior Management
only, Persons described in the definition of "AEA" and such Senior
Management may grant or otherwise create or suffer to exist Liens on their
shares of LHPG so long as all such Liens of all such Persons are not in
favor of a single Person or group of Persons acting in concert and (ii) in
the case of North Castle and C. Baird, non-consensual Liens that arise by
operation of law but which do not result in a change in the ownership of
such Capital Stock), or (iii) any person or group (within the meaning of
Sections 13(d) and 14(d) under the Exchange Act) (other than any of AEA,
North Castle, C. Baird and Senior Management) shall become the ultimate
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership"
of all securities that such person has the right to acquire, whether such
right is exercisable immediately, after the passage of time, upon the
happening of an event or otherwise) directly or indirectly, of shares
representing 20% or more of the Voting Stock of LHPG on a fully diluted
basis; or
(c) during any period of 24 consecutive months, individuals who at
the beginning of such period constituted the Board of Directors of LHPG
(together with any new directors whose election by such Board or whose
nomination for election by the stockholders of LHPG was approved by (i)
directors appointed by North Castle or (ii) a vote of 66 2/3% of the
directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously
so approved) cease for any reason to constitute a majority of the Board of
Directors of LHPG then in office; or
(d) the failure of LHPG to directly own beneficially and of
record all of the outstanding Voting Stock of Parent on a fully diluted
basis, such Voting Stock to be held free and clear of all Liens; or
(e) the failure of Parent to directly own beneficially and of
record all of the outstanding Voting Stock of Leiner on a fully diluted
basis, such Voting Stock to be held free and clear of all Liens, except in
favor of the Secured Parties; or
(f) so long as the Canadian Facility has not been terminated or there
are any Obligations owing by an Obligor with respect to the Canadian
Facility (other than in the case where the Canadian Facility is being
terminated and all Obligations in respect of the Canadian Facilities are
being repaid or cash collateralized on terms reasonably satisfactory to
the Canadian Agent contemporaneously with the diminution of Leiner's
ownership in the Canadian Borrower), the failure of Leiner to directly or
indirectly own beneficially and of record all of the outstanding Voting
Stock of the Canadian Borrower on a fully diluted
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basis (excluding non-voting preferred stock of the Canadian Borrower
existing on the Effective Date after giving effect to the Transaction),
such Voting Stock to be held free and clear of all Liens except in favor
of the Secured Parties; or
(g) at any time, the failure of C. Baird to be a managing member
of North Castle (other than a failure resulting from the death,
incompetency or disability of C. Baird); or
(h) a "Change of Control" (as defined in any Subordinated Debt
Instrument) shall occur.
"CODE" means the Internal Revenue Code of 1986, and the
regulations thereunder, in each case as amended, reformed or otherwise
modified from time to time.
"COMMITMENT" means, as the context may require, a U.S. Lender's
Term B Loan Commitment, Term C Loan Commitment, U.S. Revolving Loan
Commitment or U.S. Letter of Credit Commitment, a U.S. Issuer's U.S. Letter
of Credit Commitment, the U.S. Swing Line Lender's U.S. Swing Line Loan
Commitment, a Canadian Lender's Canadian Revolving Loan Commitment or
Canadian Letter of Credit Commitment, a Canadian Issuer's Canadian Letter of
Credit Commitment or the Canadian Swing Line Lender's Canadian Swing Line
Loan Commitment.
"COMMITMENT AMOUNT" means, as the context may require, the Term B
Loan Commitment Amount, the Term C Loan Commitment Amount, the U.S. Revolving
Loan Commitment Amount, the U.S. Letter of Credit Commitment Amount, the U.S.
Swing Line Loan Commitment Amount, the Canadian Revolving Loan Commitment
Amount, the Canadian Letter of Credit Commitment Amount or the Canadian Swing
Line Loan Commitment Amount.
"COMMITMENT TERMINATION DATE" means, as the context may require,
the U.S. Revolving Loan Commitment Termination Date, the Term B Loan
Commitment Termination Date, the Term C Loan Commitment Termination Date or
the Canadian Revolving Loan Commitment Termination Date.
"COMMITMENT TERMINATION EVENT" means
(a) the occurrence of any Event of Default described in CLAUSES
(a) through (d) of SECTION 10.1.9; or
(b) the occurrence and continuance of any other Event of Default
and either
(i) the declaration of all or any portion of the Loans to be
due and payable pursuant to SECTION 10.3, or
(ii) the giving of notice by the U.S. Agent, acting at the
direction of the Required Lenders, to the Borrowers that the
Commitments have been terminated.
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"COMPLIANCE CERTIFICATE" means a certificate duly completed and
executed by an Authorized Officer of the U.S. Borrower, substantially in the
form of EXHIBIT I hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time, together with such changes thereto as
the U.S. Agent may from time to time reasonably request for the purpose of
monitoring the U.S. Borrower's compliance with the financial covenants
contained herein.
"CONDUIT ENTITY" is defined in CLAUSE (d) of SECTION 6.6.
"CONFIDENTIAL INFORMATION" means information relating to LHPG or
any of its Subsidiaries obtained by either Agent or any Lender pursuant to or
in connection with this Agreement, or otherwise from or on behalf of LHPG or
any of its Subsidiaries or Affiliate (to the extent identified as an
Affiliate to the Lenders) (including any information obtained by either Agent
or any Lender in the course of any review of the books or records of either
Borrower or any Subsidiary thereof as contemplated herein), but excluding
information (i) that was previously known to such Agent or Lender (other than
through a previous lending or other business relationship with LHPG or any of
its Subsidiaries), or (ii) that is or subsequently becomes generally publicly
known through no act or omission by either Agent or any Lender or any Person
acting therefor.
"CONTINGENT LIABILITY" means any agreement, undertaking or
arrangement by which any Person guarantees, endorses or otherwise becomes or
is contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
Indebtedness of any other Person (other than by endorsements of instruments
in the course of collection), or guarantees the payment of dividends or other
distributions upon the shares of any other Person. The amount of any Person's
obligation under any Contingent Liability shall (subject to any limitation
set forth therein) be deemed to be the outstanding principal amount of the
debt, obligation or other liability guaranteed thereby.
"CONTINUATION/CONVERSION NOTICE" means, as the context may
require, a U.S. Continuation/Conversion Notice or a Canadian
Continuation/Conversion Notice.
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
U.S. Borrower, are treated as a single employer under Section 414(b) or
414(c) of the Code or Section 4001 of ERISA.
"COPYRIGHT SECURITY AGREEMENT" means any Copyright Security
Agreement (if and to the extent executed and delivered by any Obligor in
accordance with the terms of a Loan Document) in substantially the form of
Exhibit C to any Security Agreement, as amended, supplemented, amended and
restated or otherwise modified from time to time.
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"CREDIT EXTENSION" means, as the context may require, a Canadian
Credit Extension or a U.S. Credit Extension.
"CREDIT EXTENSION REQUEST" means, as the context may require, any
Borrowing Request or Issuance Request.
"CURRENT ASSETS" means, at any time, all amounts (other than cash
and Cash Equivalent Investments) which, in accordance with GAAP, would be
included as current assets on a consolidated balance sheet of the U.S.
Borrower and its Subsidiaries at such time.
"CURRENT LIABILITIES" means, at any time, all amounts which, in
accordance with GAAP, would be included as current liabilities on a
consolidated balance sheet of the U.S. Borrower and its Subsidiaries at such
time, excluding current maturities of Indebtedness.
"DEFAULT" means any Event of Default or any condition, occurrence
or event which, after notice or lapse of time or both, would constitute an
Event of Default.
"DISBURSEMENT" is defined in SECTION 4.1.2.
"DISBURSEMENT DATE" is defined in SECTION 4.1.2.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule attached
hereto as SCHEDULE I, as it may be amended, supplemented, amended and
restated or otherwise modified from time to time by the Borrowers with the
written consent of the U.S. Agent and the Required Lenders.
"DOLLAR", "U.S. DOLLAR" and "$" each mean the lawful money of the
United States.
"DOMESTIC OFFICE" means,
(a) relative to any U.S. Lender, the office of such Lender designated
as such Lender's "Domestic Office" below its signature hereto or in a
Lender Assignment Agreement, or such other office of a U.S. Lender (or any
successor or assign of such Lender) within the United States as may be
designated from time to time by notice from such Lender, as the case may
be, to each other Person party hereto, and
(b) relative to any Canadian Lender, the office of such Lender
designated as such Lender's "Domestic Office" below its signature hereto
or in a Lender Assignment Agreement, or such other office of a Canadian
Lender (or any successor or assign of such Lender) within Canada as may be
designated from time to time by notice from such Lender, as the case may
be, to each other Person party hereto.
"DUAL LENDERS" means, collectively, those U.S. RL Lenders that
also are Canadian Lenders.
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"EASTERN CONSOLIDATION" means the consolidation of the U.S.
Borrower's eastern United States packaging and distribution operations into a
new facility in South Carolina, including the closure of certain discontinued
facilities, and the incurrence of moving and relocation expenses for equipment
and personnel, severance expenses in connection with the closure of such
discontinued facilities and training expenses in connection with the opening of
the new facility.
"EBITDA" means, for any applicable period, the sum (without
duplication) of
(a) Net Income MINUS the aggregate amount of payments made in
accordance with CLAUSE (g)(i) and CLAUSE (g)(iv) of SECTION 9.2.13,
PLUS
(b) the amount deducted, in determining Net Income, representing
amortization of assets (including amortization with respect to goodwill,
deferred financing costs, other non-cash interest and all other intangible
assets),
PLUS
(c) the amount deducted, in determining Net Income, of all income
taxes (whether paid or deferred) of the U.S. Borrower and its
Subsidiaries,
PLUS
(d) the amount deducted, in determining Net Income, of Interest
Expense of the U.S. Borrower and its Subsidiaries (including, for
purposes of this definition only, the Canadian Borrower and its
Subsidiaries as if the Canadian Transaction had occurred at the beginning
of the applicable period), to the extent incurred, plus, without
duplication, any non-cash interest expense,
PLUS
(e) the amount deducted, in determining Net Income, representing
depreciation of assets,
PLUS
(f) the amount deducted, in determining Net Income, of all management
fees paid in cash in accordance with CLAUSE (b) of SECTION 9.2.13,
PLUS
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(g) the amount deducted, in determining Net Income, due to
foreign currency translation required by FASB 52 arising after the date of
the initial Credit Extensions,
PLUS
(h) the amount deducted, in determining Net Income, of all
Specified Adjustments.
"EFFECTIVE DATE" means the date this Agreement becomes effective
pursuant to SECTION 12.8.
"ENVIRONMENTAL LAWS" means all U.S. and Canadian federal, state,
provincial or local statutes, laws, ordinances, by-laws, codes, rules,
regulations, guidelines, decrees and orders relating to public health and
safety, the environment, pollution or waste management.
"EQUITY RIGHTS" means the right to receive, under certain
circumstances, LHPG Common Stock.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute thereto of similar import, together
with the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections thereto.
"ESCROW ACCOUNT" is defined in CLAUSE (c) of SECTION 5.1.1.
"EVENT OF DEFAULT" is defined in SECTION 10.1.
"EXCESS CASH FLOW" means, for any Fiscal Year, the excess (if any), of
(a) EBITDA for such Fiscal Year or (in the case of the 1998
Fiscal Year) for the period that begins from the date of the first Fiscal
Quarter beginning after the date of the initial Credit Extensions to March
31, 1998 (referred to as the "POST-CLOSING 1998 PERIOD")
OVER
(b) the sum (for such Fiscal Year or, in the case of the 1998
Fiscal Year, the Post-Closing 1998 Period) of
(i) Interest Expense;
PLUS
(ii) scheduled payments and optional prepayments, to the extent
actually made, of the principal amount of the Term Loans and any
other Indebtedness permitted
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pursuant to CLAUSES (d), (g) and (i) of SECTION 9.2.2 (other than
(i) Indebtedness of a revolving loan or similar type, except to the
extent that a corresponding amount of the commitment to lend is
permanently terminated or reduced and (ii) Indebtedness of a type
described in CLAUSES (c), (e) or (f) of SECTION 9.2.2), and optional
prepayments of the principal amount of the Revolving Loans in
connection with a reduction of the Revolving Loan Commitment Amount;
PLUS
(iii) all federal, state, provincial, local and foreign
income taxes actually paid in cash by the U.S. Borrower and its
Subsidiaries;
PLUS
(iv) Capital Expenditures actually made;
PLUS
(v) dividends (other than dividends paid pursuant to CLAUSES
(d), (e) and (g) of SECTION 9.2.6) paid in cash by the U.S. Borrower
to Parent;
PLUS
(vi) the amount of liabilities paid in cash to the extent
such liabilities were reserved for in accordance with GAAP on the
Opening Consolidated Balance Sheet;
PLUS
(vii) all management and consulting fees (including
reimbursement of expenses) paid or payable by the U.S. Borrower and
its Subsidiaries to North Castle or any Affiliate thereof, in
accordance with CLAUSE (b) of SECTION 9.2.13;
PLUS
(viii) the aggregate amount of Specified Adjustments paid in
cash;
PLUS
(ix) 75% (in the 1998 Fiscal Year) and 100% (in the case of each
subsequent Fiscal Year) of the amount of the net increase, if greater
than zero, of Current Assets over Current Liabilities of the U.S.
Borrower and its Subsidiaries from the last day of the immediately
preceding Fiscal Year to the end of the relevant Fiscal Year.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
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"EXCHANGE EQUIVALENT" means, on any date, relative to any amount
(the "ORIGINAL AMOUNT") expressed in either Canadian Dollars or U.S. Dollars
(the "ORIGINAL CURRENCY"), the amount expressed in the other currency which
would be required to buy the Original Amount of the Original Currency using
the noon spot rate exchange for Canadian interbank transactions applied in
converting the other currency into the Original Currency published by the
Bank of Canada for such date.
"EXISTING LHPG COMMON STOCK" means the common stock of LHPG prior
to the Recapitalization.
"EXISTING OPTIONS" is defined in the FOURTH RECITAL.
"FACILITY" means, as the context may require, the Canadian
Facility or the U.S. Facility.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the U.S. Agent from three federal funds
brokers of recognized standing selected by it.
"FEE LETTER" means that certain confidential letter, dated May 30,
1997, from Scotiabank to North Castle, LHPG and the Canadian Borrower,
relating to, among other things, certain fees to be paid in connection with
this Agreement.
"FISCAL QUARTER" means a quarter ending on the last day of March,
June, September or December.
"FISCAL YEAR" means any period of twelve consecutive calendar
months ending on March 31; references to a Fiscal Year with a number
corresponding to any calendar year (e.g., the "1997 Fiscal Year") refer to
the Fiscal Year ending on March 31 of such calendar year.
"FOREIGN PLEDGE AGREEMENT" means any supplemental pledge agreement
governed by the laws of a jurisdiction other than the United States or a
State thereof executed and delivered by a Borrower or any of its Subsidiaries
pursuant to the terms of this Agreement, in form and substance satisfactory
to the Agents, as may be necessary or desirable under the laws of
organization or incorporation of a Subsidiary to further protect or perfect
the Lien on and
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security interest in any Pledged Shares and/or Pledged Notes (as such terms
are defined in a Pledge Agreement).
"F.R.S. BOARD" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in SECTION 1.4.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state,
province, canton or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, the National Association of
Insurance Commissioners, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or capital
ownership or otherwise, by any of the foregoing.
"GUARANTOR" means, as the context may require, a Canadian Facility
Guarantor or a U.S. Facility Guarantor.
"GUARANTY" means, as the context may require, the U.S. Borrower
Guaranty, the Parent Guaranty, the Canadian Holdings Guaranty or a Subsidiary
Guaranty.
"HAZARDOUS MATERIAL" means:
(a) with respect to the U.S. Facility,
(i) any "hazardous substance", as defined by CERCLA;
(ii) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended; or
(iii) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material or substance (including any petroleum
product) within the meaning of any other applicable federal, state or
local law, regulation, ordinance or requirement (including consent
decrees and administrative orders) relating to or imposing liability
or standards of conduct concerning any hazardous, toxic or dangerous
waste, substance or material, all as amended; and
(b) with respect to the Canadian Facility,
(i) any substances that are defined or listed in, or otherwise
classified pursuant to, any applicable Environmental Laws as
"hazardous substances", "hazardous materials", "hazardous wastes",
"toxic substances", "contaminants", "pollutants" or any other
formulation intended to define, list or classify substances by reason
of adverse effects on the environment or deleterious properties such
as ignitability,
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corrosivity, reactivity, carcinogenicity, reproductive toxicity or
"TLCP" toxicity or "EP" toxicity;
(ii) any oil, petroleum or petroleum derived substances,
natural gas, natural gas liquids;
(iii) any flammable substances or explosives or any
radioactive materials; or
(iv) any asbestos in any form or electrical equipment which
contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of fifty parts per million.
"HEDGING OBLIGATIONS" means, with respect to any Person, all
liabilities of such Person under currency exchange agreements, interest rate
swap agreements, interest rate cap agreements and interest rate collar
agreements, and all other agreements or arrangements designed to protect such
Person against fluctuations in interest rates or currency exchange rates.
"HEREIN", "HEREOF", "HERETO", "HEREUNDER" and similar terms
contained in this Agreement or any other Loan Document refer to this
Agreement or such other Loan Document, as the case may be, as a whole and not
to any particular Section, paragraph or provision of this Agreement or such
other Loan Document.
"IMPERMISSIBLE QUALIFICATION" means, relative to the opinion or
certification of any independent public accountant as to any financial
statement of the U.S. Borrower, any qualification or exception to such
opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters
relevant to such financial statement; or
(c) which relates to the treatment or classification of any item
in such financial statement and which, as a condition to its removal,
would require an adjustment to such item the effect of which would be to
cause a Borrower to be in default of any of its obligations under
SECTION 9.2.4.
"INCLUDING" and "INCLUDE" means including without limiting the
generality of any description preceding such term, and, for purposes of this
Agreement and each other Loan Document, the parties hereto agree that the rule
of EJUSDEM GENERIS shall not be applicable to limit a general statement, which
is followed by or referable to an enumeration of specific matters, to matters
similar to the matters specifically mentioned.
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"INDEBTEDNESS" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and banker's
acceptances, in each case issued for the account of such Person;
(c) all obligations of such Person as lessee under leases which have
been or should be, in accordance with GAAP, recorded as Capitalized Lease
Liabilities;
(d) net liabilities (after giving effect to any gains) of such
Person under all Hedging Obligations;
(e) whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred purchase price of
property or services (PROVIDED that the term "deferred purchase price for
services" shall not include deferred payment for services incurred or
created by the Person relating to its employees and former employees) and
indebtedness (excluding prepaid interest thereon) secured by a Lien on
property owned or being purchased by such Person (including indebtedness
arising under conditional sales or other title retention agreements),
whether or not such indebtedness shall have been assumed by such Person or
is limited in recourse;
(f) all Receivables Facility Outstandings; and
(g) all Contingent Liabilities of such Person in respect of any of
the foregoing types of obligations of such Person or any other Persons.
For all purposes of this Agreement, (i) the term "Indebtedness" shall exclude
(y) customer deposits and interest payable thereon in the ordinary course of
business and (z) trade and other accounts and accrued expenses payable in the
ordinary course of business in accordance with customary trade terms
(including time drafts payable to foreign suppliers and, notwithstanding
CLAUSES (a) and (e) above, notes payable in respect of the deferred payment
of insurance policy premiums), and in the case of both (y) and (z) above,
which are not overdue for a period of more than 90 days or, if overdue for
more than 90 days, as to which a dispute exists and adequate reserves in
conformity with GAAP have been established on the books of such Person, and
(ii) the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or a
joint venturer (except to the extent that either by operation of law or by
the express terms of the relevant partnership or joint venture agreement any
such liabilities incurred in connection therewith are completely without
recourse to such Person).
"INDEMNIFIED LIABILITIES" is defined in SECTION 12.4.
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"INDEMNIFIED PARTIES" is defined in SECTION 12.4.
"INTEREST COVERAGE RATIO" means, at the close of any Fiscal Quarter,
the ratio computed (except as set forth in CLAUSES (c), (d), (e) and (f) below)
for the period consisting of such Fiscal Quarter and each of the three
immediately prior Fiscal Quarters of:
(a) EBITDA (for all such Fiscal Quarters)
TO
(b) the sum (for all such Fiscal Quarters) of Interest Expense
paid in cash;
PROVIDED, HOWEVER, that in computing the Interest Coverage Ratio for
(c) the second Fiscal Quarter of the 1998 Fiscal Year, the amount
set forth in CLAUSE (b) above shall equal the Second Quarter Adjusted
Amount, multiplied by four;
(d) the third Fiscal Quarter of the 1998 Fiscal Year, the amount
set forth in CLAUSE (b) above shall equal (i) the sum of (x) Interest
Expense for such Fiscal Quarter PLUS (y) the Second Quarter Adjusted
Amount, multiplied by (ii) two;
(e) the fourth Fiscal Quarter of the 1998 Fiscal Year, the amount
set forth in CLAUSE (b) above shall equal (i) the sum of (x) Interest
Expense for the third and fourth Fiscal Quarters of the 1998 Fiscal
Year PLUS (y) the Second Quarter Adjusted Amount, multiplied by (ii)
1.333; and
(f) the first Fiscal Quarter of the 1999 Fiscal Year, the amount set
forth in CLAUSE (b) above shall equal the sum of (x) Interest Expense for
the third and fourth Fiscal Quarters of the 1998 Fiscal Year and for the
first Fiscal Quarter of the 1999 Fiscal Year PLUS (y) the Second Quarter
Adjusted Amount.
"INTEREST EXPENSE" means, for any Fiscal Quarter, the aggregate
interest expense (net of interest income) of the U.S. Borrower and its
Subsidiaries for such Fiscal Quarter, as determined in accordance with GAAP,
including (i) the portion of any payments made in respect of Capitalized Lease
Liabilities allocable to interest expense and (ii) interest (or other fees in
the nature of interest or discount accrued and paid or payable in cash for such
Fiscal Quarter) in respect of the Permitted Receivables Transaction, but
excluding deferred financing costs and other non-cash interest expense.
"INTEREST PERIOD" means,
(a) relative to any LIBO Rate Loans, the period beginning on (and
including) the date on which such LIBO Rate Loan is made or continued as,
or converted into, a LIBO Rate Loan pursuant to SECTION 2.3 or 2.4 and
continuing to (but excluding) the day which,
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numerically corresponds to such date one, two, three or six months
thereafter (or, if such month has no numerically corresponding day, on
the last Business Day of such month) as the U.S. Borrower may select in
its relevant notice pursuant to SECTION 2.3 or 2.4; and
(b) relative to any Canadian BA or Acceptance Note, the period
beginning on (and including) the date on which such Canadian BA is
accepted or rolled over pursuant to SECTION 3.3 or 3.4 or such Acceptance
Note is issued pursuant to SECTION 3.6 and continuing to (but excluding)
the date which is 30, 60, 90 or 180 days thereafter as the Canadian
Borrower may select in its relevant notice pursuant to SECTION 3.3 or 3.4;
PROVIDED, HOWEVER, that
(c) the U.S. Borrower shall not be permitted to select Interest
Periods to be in effect at any one time which have expiration dates
occurring on more than four different dates with respect to Revolving
Loans and four different dates with respect to Term Loans;
(d) the Canadian Borrower shall not be permitted to select
Interest Periods to be in effect at any one time which have expiration
dates occurring on more than five different dates;
(e) if such Interest Period would otherwise end on a day which is not
a Business Day, such Interest Period shall end on the next following
Business Day (unless, if such Interest Period applies to a LIBO Rate Loan,
such next following Business Day is the first Business Day of a calendar
month, in which case such Interest Period shall end on the Business Day
next preceding such numerically corresponding day); and
(f) no Interest Period may end later than the Stated Maturity
Date for such Loan.
"INVESTMENT" means, relative to any Person,
(a) any loan or advance made by such Person to any other Person
(excluding commission, travel, petty cash and similar advances to
directors, officers and employees made in the ordinary course of
business);
(b) any Contingent Liability of such Person incurred in
connection with loans or advances described in CLAUSE (a); and
(c) any ownership or similar interest held by such Person in any
other Person.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and otherwise without
adjustment by reason of the financial condition of such other Person) and shall,
if made by the transfer or exchange of property other than cash, be deemed to
have been made in an original principal or capital amount equal to the fair
market value of such property at the time of such Investment.
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"ISSUANCE REQUEST" means, as the context may require, a U.S.
Issuance Request or a Canadian Issuance Request.
"ISSUER" means, as the context may require, a Canadian Issuer or a
U.S. Issuer.
"LAW CHANGE" is defined in CLAUSE (b) of SECTION 6.6.
"LEINER" means Leiner Health Products Inc., a Delaware corporation.
"LENDERS" is defined in the PREAMBLE and, in addition, shall
include any commercial bank or other financial institution that becomes a
Lender pursuant to SECTION 12.11.1.
"LENDER ASSIGNMENT AGREEMENT" means a lender assignment agreement
substantially in the form of EXHIBIT D hereto.
"LENDER'S ENVIRONMENTAL LIABILITY" means any and all losses,
liabilities, obligations, penalties, claims, litigation, demands, defenses,
costs, judgments, suits, proceedings, damages (including consequential
damages), disbursements or expenses of any kind or nature whatsoever
(including reasonable attorneys' fees at trial and appellate levels and
experts' fees and disbursements and expenses incurred in investigating,
defending against or prosecuting any litigation, claim or proceeding) which
may at any time be imposed upon, incurred by or asserted or awarded against
any Lender or any of such Lender's parent and subsidiary corporations, and
their Affiliates, shareholders, directors, officers, employees, and agents in
connection with or arising from:
(a) any Hazardous Material on, in, under or affecting all or any
portion of any property of a Borrower or any Subsidiary, the groundwater
thereunder, or any surrounding areas thereof to the extent caused by
Releases from a Borrower's or any of such Borrower's Subsidiaries' or any
of their respective predecessors' properties;
(b) any misrepresentation, inaccuracy or breach of any warranty,
contained or referred to in SECTION 8.12;
(c) any violation or claim of violation by a Borrower or any of
its Subsidiaries of any Environmental Laws; or
(d) the imposition of any lien for damages caused by or the recovery
of any costs for the cleanup, release or threatened release of Hazardous
Material by a Borrower or any of its Subsidiaries, or in connection with
any property owned or formerly owned by a Borrower or any of its
Subsidiaries.
"LETTER OF CREDIT" means, as the context may require, a Canadian
Letter of Credit or a U.S. Letter of Credit.
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"LETTER OF CREDIT COMMITMENT AMOUNT" means, as the context may
require, the Canadian Letter of Credit Commitment Amount or the U.S. Letter
of Credit Commitment Amount.
"LETTER OF CREDIT OUTSTANDING" means, as the context may require,
the Canadian Letter of Credit Outstandings or the U.S. Letter of Credit
Outstandings.
"LEVERAGE RATIO" means, as of the last day of any Fiscal Quarter,
the ratio of
(a) Total Debt outstanding on the last day of such Fiscal Quarter
TO
(b) EBITDA computed for the period consisting of such Fiscal
Quarter and each of the three immediately preceding Fiscal Quarters.
"LHPG" is defined in the PREAMBLE.
"LHPG COMMON STOCK" means the common stock of LHPG after giving
effect to the Recapitalization.
"LIBO RATE" means, relative to any Interest Period for LIBO Rate
Loans, the rate of interest equal to the average (rounded upwards, if necessary,
to the nearest 1/100 of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered to Scotiabank's LIBOR Office in the
London, England interbank market as at or about 11:00 a.m. London, England time
two Business Days prior to the beginning of such Interest Period for delivery on
the first day of such Interest Period, and in an amount approximately equal to
the amount of Scotiabank's LIBO Rate Loan and for a period approximately equal
to such Interest Period.
"LIBO RATE LOAN" means a U.S. Revolving Loan or a Term Loan bearing
interest, at all times during an Interest Period applicable to such Loan, at a
fixed rate of interest determined by reference to the LIBO Rate (Reserve
Adjusted).
"LIBO RATE (RESERVE ADJUSTED)" means, relative to any Loan to be
made, continued or maintained as, or converted into, a LIBO Rate Loan for any
Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined pursuant to the following formula:
LIBO Rate = LIBO RATE
(Reserve Adjusted) ------------------------------
1.00--LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO
Rate Loans will be determined by the U.S. Agent on the basis of the LIBOR
Reserve Percentage in effect on,
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and the applicable rates furnished to and received by the U.S. Agent from
Scotiabank, two Business Days before the first day of such Interest Period.
"LIBOR OFFICE" means, relative to any U.S. Lender, the office of such
U.S. Lender designated as such U.S. Lender's "LIBOR Office" below its signature
hereto or in a Lender Assignment Agreement, or such other office of a U.S.
Lender as designated from time to time by notice from such U.S. Lender to the
U.S. Borrower and the U.S. Agent, whether or not outside the United States,
which shall be making or maintaining LIBO Rate Loans of such Lender hereunder.
"LIBOR RESERVE PERCENTAGE" means, relative to any Interest Period for
LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the
maximum aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
specified under regulations issued from time to time by the F.R.S. Board and
then applicable to assets or liabilities consisting of or including
"Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S.
Board, having a term approximately equal or comparable to such Interest Period.
"LIEN" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property, or other priority or preferential
arrangement of any kind or nature whatsoever, to secure payment of a debt or
performance of an obligation, except for liens arising from the filing of
"precautionary" UCC or PPSA financing statements in connection with obligations
under leases that are not Capitalized Lease Liabilities to the extent that such
financing statements relate solely to the property subject to such lease
obligations and where the debtor named on such financing statements is not the
legal or beneficial owner of the described property.
"LOAN" means, as the context may require, a Canadian Revolving
Loan or a U.S. Loan.
"LOAN DOCUMENTS" collectively means this Agreement, the Notes, the
Letters of Credit, each Pledge Agreement, each Security Agreement, each
Mortgage, each Rate Protection Agreement relating to Hedging Obligations of a
Borrower or any of its Subsidiaries, each Borrowing Request, each Issuance
Request, each Foreign Pledge Agreement, the Fee Letter, the Master
Subordination Agreement, each Guaranty and each other agreement, certificate,
document or instrument delivered in connection with this Agreement and such
other agreements, whether or not specifically mentioned herein or therein.
"LOANS" means, as the context may require, a Revolving Loan, a
Term Loan or a Swing Line Loan, of any type.
"LOCAL TIME" means
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(a) relative to matters under the U.S. Facility, New York, New
York time, or
(b) relative to matters under the Canadian Facility, Toronto time.
"MANAGEMENT INVESTORS" means any of the officers, directors,
employees and other members of the management of LHPG or any of its
Subsidiaries, or family members or relatives thereof, or trusts for the
benefit of any of the foregoing, or their heirs, executors, successors and
legal representatives.
"MANAGEMENT SERVICES AGREEMENT" means the Consulting Agreement to
be entered into in connection with the Recapitalization and delivered
pursuant to SECTION 7.1.24 among North Castle Partners, L.L.C., LHPG and
Leiner, as amended, supplemented, amended and restated or otherwise modified
from time to time.
"MANAGEMENT SHAREHOLDERS" is defined in the THIRD RECITAL.
"MASTER SUBORDINATION AGREEMENT" means the Master Subordination
Agreement, substantially in the form of EXHIBIT K hereto.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a)
the financial condition, operations, assets, business or properties of the
U.S. Borrower or the U.S. Borrower and its Subsidiaries, taken as a whole,
(b) the rights and remedies of the Agents or any Secured Party under any Loan
Document or (c) the perfection or priority of the Secured Parties' Liens upon
the collateral described in any Loan Document.
"MERGER" is defined in the FIFTH RECITAL.
"MERGER AGREEMENT" is defined in the FIFTH RECITAL.
"MERGER EFFECTIVE TIME" is defined in the FIFTH RECITAL.
"MOODY'S" means Moody's Investors Service, Inc.
"MORTGAGE" means each mortgage, deed of trust or agreement
executed and delivered by the U.S. Borrower or any other Obligor in favor of
the U.S. Agent and shall also include any of the Canadian Borrower Debenture,
the Canadian Holdings Debenture and any Canadian Subsidiary Debenture which
creates a Lien on Mortgaged Real Property, pursuant to the terms of this
Agreement, substantially in the form of EXHIBIT H hereto (if the real
property which is to be encumbered is located in the U.S.), under which a
Lien is granted on the Mortgaged Real Property and fixtures described
therein, in each case as amended, supplemented, amended and restated or
otherwise modified from time to time.
"MORTGAGED REAL PROPERTY" means each fee or leasehold interest in
the Real Property owned (or leased) by the U.S. Borrower, the Canadian
Borrower or any other Obligor which
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has been mortgaged in favor of the U.S. Agent or the Canadian Agent, as such
Real Properties are described in Item 8.10 of the Disclosure Schedule on the
Effective Date, and all other Real Properties as may from time to time
following the Effective Date be required to be encumbered in favor of the
Secured Parties in accordance with the terms of this Agreement.
"NET DISPOSITION PROCEEDS" means the excess of
(a) the gross cash proceeds received by a Borrower or any of its
Subsidiaries from any Permitted Disposition of the type described in
CLAUSE (d) of SECTION 9.2.11 and any cash payments received in respect of
promissory notes or other non-cash consideration delivered to such
Borrower or such Subsidiary in respect of such Permitted Disposition,
OVER
(b) (i) all reasonable and customary fees and expenses with respect
to legal, investment banking, brokerage and accounting and other
professional fees, sales commissions and disbursements actually incurred
in connection with such Permitted Disposition which have not been paid to
Affiliates of such Borrower (except as permitted pursuant to SECTION
9.2.13),
(ii) all taxes and other governmental costs and expenses actually
paid or estimated by such Borrower (in good faith) to be payable in cash
in connection with such Permitted Disposition,
(iii) payments made by such Borrower or any of its Subsidiaries
to retire Indebtedness (other than the Loans) of such Borrower or any of
its Subsidiaries where payment of such Indebtedness is required in
connection with such Permitted Disposition, and
(iv) amounts, in the reasonable judgment of such Borrower, provided
by such Borrower or any of its Subsidiaries, as the case may be, as a
reserve, against any liabilities associated with such Permitted
Disposition to the extent, but only to the extent, that the amounts so
deducted, or for which such Borrower or any Subsidiary is liable, as the
case may be, are, at the time of receipt of such cash, paid or payable to
a Person that is not an Affiliate or, if payable to an Affiliate, are
permitted under SECTION 9.2.13, and are properly attributable to such
transaction or to the asset that is the subject thereof;
PROVIDED, HOWEVER, that if, after the payment of all taxes with respect to
such Permitted Disposition, (x) the amount of estimated taxes, if any,
pursuant to CLAUSE (b)(ii) above exceeded the tax amount actually paid in
cash in respect of such Permitted Disposition or (y) the amount reserved, if
any, pursuant to CLAUSE (b)(iv) above exceeded the actual associated
liabilities in respect of such Permitted Disposition, the aggregate amount of
such excess shall be immediately payable, pursuant to CLAUSE (C) of SECTION
5.1.1, as Net Disposition Proceeds. "Net Disposition Proceeds" shall exclude
(x) an aggregate amount equal to $15,000,000 of
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proceeds of Permitted Dispositions over the term of this Agreement and (y)
100% of proceeds from Permitted Dispositions of the type permitted pursuant
to CLAUSE (e) of SECTION 9.2.11, in a maximum aggregate amount over the term
of this Agreement not to exceed $5,000,000 (with such amount being referred
to as the "RETAINED AMOUNT") to the extent
(i) the Retained Amount is directly generated from the sale or
issuance after the date hereof of any newly issued stock, warrants or
options (I.E., other than stock, warrants or options outstanding on the
Effective Date) of any Subsidiary to any Person (other than such Borrower
or a wholly-owned Subsidiary),
(ii) such Borrower has, no less than 5 Business Days (or such shorter
period agreed to by the applicable Agent) prior to such sale or issuance,
notified the applicable Agent thereof and delivered to the applicable
Agent copies of all relevant registration statements, documents and other
instruments prepared in connection with such sale or issuance and such
other information relating thereto as the applicable Agent may otherwise
request), and
(iii) the applicable Agent shall have received a certificate from an
Authorized Officer of such Borrower certifying (A) as to the proposed
reinvestment of the Retained Amount in such Subsidiary, (B) as to the
value received by the Subsidiary for the sale or issuance of such newly
issued stock, warrants or options and (C) that the value of such
Borrower's ownership interest (whether held directly or indirectly) in
such Subsidiary has not been reduced as a result of such sale or issuance;
PROVIDED, HOWEVER, that to the extent any Retained Amount is not reinvested
in such Subsidiary in the method previously certified to the Agent within
twelve months from the date of receipt of the Retained Amount, then the
portion of the Retained Amount not so reinvested shall constitute Net
Disposition Proceeds and 100% of such unreinvested Retained Amount shall be
applied to the prepayment of Term Loans pursuant to CLAUSE (c) of SECTION
5.1.1.
"NET EQUITY PROCEEDS" means with respect to the sale or issuance
by Parent or LHPG to any Person of any stock, warrants or options or the
exercise of any such warrants or options, the EXCESS of:
(a) the gross cash proceeds received by such Person from such
sale, exercise or issuance,
OVER
(b) all reasonable and customary underwriting commissions and legal,
investment banking, brokerage and accounting and other professional fees,
sales commissions and disbursements actually incurred in connection with
such sale, exercise or issuance which have not been paid to Affiliates of
a Borrower in connection therewith.
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Net Equity Proceeds shall exclude the proceeds of any issuance or exercise of
stock options or warrants issued (i) in connection with the Recapitalization,
including pursuant to the Merger Agreement, (ii) to any Management Investor in
connection with a subscription agreement, incentive plan or similar arrangement,
or (iii) contributed in cash to the capital of Parent or LHPG by a replacement
officer or employee following the death, disability, retirement or termination
of employment of another officer or employee of LHPG or its Subsidiaries.
"NET INCOME" means, for any period, the aggregate of all amounts
(exclusive of (i) all amounts in respect of any extraordinary gains or
extraordinary losses, (ii) gains and losses arising from the sale of material
assets not in the ordinary course of business and (iii) earnings and losses
from discontinued operations) which, in accordance with GAAP, would be
included as net income on the consolidated financial statements of the U.S.
Borrower and its Subsidiaries for such period (including, for periods prior
to the Fiscal Quarter ended June 30, 1998, the Canadian Borrower and its
Subsidiaries as if the Canadian Transaction had occurred at the beginning of
such period).
"NET TANGIBLE ASSETS" means, at any time, the aggregate amount
which, in accordance with GAAP, would be included as total assets (less
intangible assets) on the balance sheet of the U.S. Borrower and its
Subsidiaries at such time MINUS the aggregate amount which, in accordance
with GAAP, would be included as Current Liabilities on the balance sheet of
the U.S. Borrower and its Subsidiaries at such time.
"NET UNREPATRIATED DISPOSITION PROCEEDS" means, at any time, the
total amount of Net Disposition Proceeds at such time that have not (i) been
applied to prepay Loans pursuant to CLAUSE (c) of SECTION 5.1.1 or resulted
in a reduction of the U.S. Revolving Loan Commitment pursuant to SECTION
2.2.2, or (ii) been deposited in an escrow account pursuant to the terms of
an escrow agreement in accordance with CLAUSE (c) of SECTION 5.1.1.
"NEWCO" is defined in the SECOND RECITAL.
"NORTH CASTLE" is defined in the SECOND RECITAL.
"NOTE" means, as the context may require, a U.S. Note or a
Canadian Note.
"NOTIONAL BA PROCEEDS" means, relative to a particular Canadian
Revolving Loan by way of Canadian BAs, the aggregate face amount of such
Canadian BAs less the aggregate of:
(a) a discount from the aggregate face amount of such Canadian
BAs calculated in accordance with normal market practice based on the
Canadian BA Rate for the term of such Canadian BAs; and
(b) the amount of the Applicable Canadian BA Stamping Fees in
respect of such Canadian BAs calculated in accordance with SECTION 3.5.2.
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"OBLIGATIONS" means all obligations (monetary or otherwise,
whether absolute or contingent, matured or unmatured, direct or indirect,
choate or inchoate, sole, joint, several or joint and several, due or to
become due, heretofore or hereafter contracted or acquired) of the Borrowers
and each other Obligor arising under or in connection with this Agreement,
the Notes, the Letters of Credit and each other Loan Document including (i)
all obligations for principal or interest under the Notes, whether incurred
on the date hereof or after the Effective Date, (ii) all other obligations
and liabilities of each Obligor, whether incurred on the date hereof or after
the Effective Date, whether for fees, costs, indemnification or otherwise,
arising hereunder or under any other Loan Document, (iii) all out-of-pocket
costs and expenses, including attorneys' fees and legal expenses, incurred by
the Agents or any Lender to the extent set forth in this Agreement in
connection with such Indebtedness, obligations and liabilities (iv) following
the occurrence and during the continuance of an Event of Default, all
advances made by the Agents or any Lender for the maintenance, protection,
preservation or enforcement of, or realization upon, the collateral in which
the Agents have been granted a security interest pursuant to a Loan Document
(or any portion thereof) including advances for storage, transportation
charges, taxes, insurance, repairs and the like, and (v) Hedging Obligations
owed to a Lender or an Affiliate thereof (or a Person that was a Lender or an
Affiliate of a Lender at the time the applicable Rate Protection Agreement
was entered into).
"OBLIGOR" means, as the context may require, each Borrower,
Parent, each Guarantor and any other Person (other than a Secured Party) to
the extent such Person is obligated under this Agreement or any other Loan
Document.
"OPENING CONSOLIDATED BALANCE SHEET" means the consolidated
balance sheet of Leiner and its Subsidiaries as of the date of the Merger,
giving effect to the Recapitalization and the Assumption, prepared in
accordance with GAAP.
"ORGANIC DOCUMENT" means, relative to any Obligor, as applicable,
its certificate of incorporation, by-laws, certificate of partnership,
partnership agreement, certificate of formation, limited liability company
agreement and all shareholder agreements, voting trusts and similar
arrangements applicable to any of such Obligor's partnership interests,
limited liability company interests or authorized shares of Capital Stock.
"PARENT" is defined in the SECOND RECITAL.
"PARENT CLOSING DATE CERTIFICATE" means the closing date
certificate executed and delivered by Parent pursuant to SECTION 7.1.14,
substantially in the form of EXHIBIT J-3 hereto.
"PARENT GUARANTY" means the Guaranty executed and delivered by
Parent pursuant to SECTION 7.1.10, substantially in the form of EXHIBIT F-2
hereto, as amended, supplemented, amended and restated or otherwise modified
from time to time.
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"PARENT PLEDGE AGREEMENT" means the Pledge Agreement executed and
delivered by Parent pursuant to SECTION 7.1.8, substantially in the form of
EXHIBIT E-3 hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"PARTICIPANT" is defined in SECTION 12.11.2.
"PATENT SECURITY AGREEMENT" means any Patent Security Agreement
(if and to the extent executed and delivered from time to time by any Obligor
in accordance with the terms of a Loan Document) in substantially the form of
Exhibit A to any Security Agreement, as amended, supplemented, amended and
restated or otherwise modified from time to time.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"PENSION PLAN" means, as the context may require, a U.S. Pension
Plan or a Canadian Pension Plan.
"PERCENTAGE" means, as the context may require, a U.S. Percentage
or a Canadian Percentage.
"PERMITTED ACQUISITION" means an acquisition (whether pursuant to
an acquisition of stock, assets or otherwise) by a Borrower or any Subsidiary
(other than a Restricted Subsidiary) from any Person of a business in which
all of the following is satisfied:
(a) such business is, taken as a whole, reasonably related or
reasonably similar to the business of such Borrower and its Subsidiaries
as described in the FIRST RECITAL;
(b) immediately before and after giving effect to such
acquisition no Default shall have occurred and be continuing; and
(c) such Borrower or Subsidiary shall have delivered to the U.S.
Agent consolidated financial statements for the period of four full Fiscal
Quarters immediately preceding such acquisition (prepared in good faith
and in a manner and using such methodology which is consistent with the
most recent financial statements delivered pursuant to SECTION 9.1.1)
giving effect to the consummation of such acquisition and evidencing
compliance with the covenants set forth in SECTION 9.2.4.
"PERMITTED DISPOSITION" means a disposition of assets by a
Borrower or any of its Subsidiaries permitted pursuant to SECTION 9.2.11.
"PERMITTED RECEIVABLES TRANSACTION" means any transaction
providing for the sale or financing of Accounts; PROVIDED, HOWEVER, that the
expiration date, term, conditions and structure (including the legal and
organizational structure of any Receivables Co. and the
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restrictions imposed on its activities) of, and the documentation relating
to, the Permitted Receivables Transaction must be on terms and conditions
satisfactory to the U.S. Agent.
"PERSON" means any natural person, corporation, limited liability
company, partnership, joint venture, joint stock company, firm, association,
trust or unincorporated organization, government, governmental agency, court
or any other legal entity, whether acting in an individual, fiduciary or
other capacity.
"PLAN" means any Pension Plan or Welfare Plan.
"PLEDGE AGREEMENT" means, as the context may require, the U.S.
Borrower Pledge Agreement, the Canadian Borrower Pledge Agreement, the Parent
Pledge Agreement, the Canadian Holdings Pledge Agreement, any Subsidiary
Pledge Agreement or any Foreign Pledge Agreement.
"PLEDGED SUBSIDIARY" means, at any time, each Subsidiary in
respect of which the applicable Agent has been granted, at such time, a
security interest in and to, or a pledge of, (i) any of the issued and
outstanding shares of Capital Stock of such Subsidiary, or (ii) any
intercompany notes of such Subsidiary owing to a Borrower or another
Subsidiary of a Borrower.
"POST-CLOSING 1998 PERIOD" is defined in CLAUSE (a) of the
definition of "Excess Cash Flow".
"PPSA" means The Personal Property Security Act (Manitoba), as in
effect from time to time.
"PROCESS AGENT" is defined in SECTION 12.14.
"PRO FORMA BALANCE SHEET" is defined in CLAUSE (b) of SECTION
7.1.17.
"PUBLIC EQUITY OFFERING" means a public offering of the Voting
Stock of Parent or LHPG pursuant to an effective registration statement under
the Securities Act of 1933, as amended.
"PUBLIC MARKET" shall exist if (i) a Public Equity Offering has
been consummated and (ii) any Voting Stock of Parent or LHPG has been
distributed by means of an effective registration statement under the
Securities Act of 1933, as amended.
"QUARTERLY PAYMENT DATE" means the fifteenth day of March, June,
September and December, or, if any such day is not a Business Day, the next
succeeding Business Day.
"RATE PROTECTION AGREEMENT" means, collectively, any currency or
interest rate swap, cap, collar or similar agreement entered into by an
Obligor under which the counterparty to
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such agreement is (or, at the time such Rate Protection Agreement was entered
into, was) a Lender or an Affiliate of a Lender.
"REAL PROPERTY" means, with respect to any Person, such Person's
present and future right, title and interest (including, without limitation, any
leasehold estate) in
(a) any plots, pieces or parcels of land;
(b) any improvements, buildings, structures and fixtures now or
hereafter located or erected thereon or attached thereto of every nature
whatsoever (the rights and interest described in CLAUSES (a) and (b) being
the "PREMISES");
(c) all easements, rights of way, gores of land or any lands occupied
by streets, ways, alleys, passages, sewer rights, water courses, water
rights and powers, and public places adjoining such land, and any other
interests in property constituting appurtenances to the Premises, or which
hereafter shall in any way belong, relate or be appurtenant thereto;
(d) all hereditaments, gas, oil, minerals (with the right to
extract, sever and remove such gas, oil and minerals), and easements, of
every nature whatsoever, located in or on the Premises; and
(e) all other rights and privileges thereunto belonging or
appertaining and all extensions, additions, improvements, betterments,
renewals, substitutions and replacements to or of any of the rights and
interests described in CLAUSES (c) and (d) above.
"RECAPITALIZATION" means the recapitalization of LHPG in
accordance with the terms of the Merger Agreement.
"RECEIVABLES CO." means any special purpose wholly-owned
Subsidiary of the U.S. Borrower organized after the date hereof (or such
other Person agreed to by the Agents) that purchases Accounts generated by
the U.S. Borrower or any of its Subsidiaries in connection with the Permitted
Receivables Transaction.
"RECEIVABLES FACILITY OUTSTANDINGS" means, at any date of
determination, with respect to the Permitted Receivables Transaction, the
aggregate cash proceeds received by the U.S. Borrower or any of its
Subsidiaries from the sale or financing of Accounts pursuant to the Permitted
Receivables Transaction which are outstanding on the date of determination.
"RECEIVABLES PROCEEDS" means, with respect to the Permitted
Receivables Transaction, the maximum amount of the commitment to purchase
Accounts under the Permitted Receivables Transaction.
"REFUNDED CANADIAN SWING LINE LOANS" is defined in CLAUSE (B) of
SECTION 3.3.2.
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"REFUNDED U.S. SWING LINE LOANS" is defined in CLAUSE (b) of
SECTION 2.3.2.
"REGISTER" means, as applicable, the Canadian Register or the U.S.
Register.
"REIMBURSEMENT OBLIGATION" is defined in SECTION 4.1.3.
"RELEASE" means a "RELEASE", as such term is defined in CERCLA.
"RENTALS" means, for any period and determined in accordance with
GAAP, all fixed payments made by the U.S. Borrower or any of its
Subsidiaries, as lessee or sublessee under any lease of real or personal
property (including as such all payments that the U.S. Borrower or any of its
Subsidiaries, as the case may be, is obligated to make to the lessor on
termination of the lease or surrender of the property), but shall be
exclusive of any amounts required to be paid by the U.S. Borrower or any such
Subsidiary (whether or not designated as rents or additional rents) on
account of maintenance, repairs, insurance, taxes, assessments and similar
charges. Fixed rents under any so called "percentage leases" shall be
computed solely on the basis of the minimum rents, if any, required to be
paid by the U.S. Borrower or any of its Subsidiaries, as the case may be,
regardless of sales or gross revenues.
"REPLACEMENT NOTICE" is defined in SECTION 6.11.
"REQUIRED LENDERS" means, at any time,
(a) prior to the date of the making of the initial Credit
Extensions hereunder, Lenders having at least 51% of the Commitments; and
(b) on and after the date of the initial Credit Extensions,
Lenders holding at least 51% of the Total Exposure Amount.
"RESOURCE CONSERVATION AND RECOVERY ACT" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, ET SEQ., as amended.
"RESTRICTED SUBSIDIARY" means, collectively, any direct or
indirect, non-wholly-owned Subsidiary (and Subsidiaries thereof) of the U.S.
Borrower (other than the Canadian Borrower) or any direct or indirect,
wholly-owned non-U.S. Subsidiary of the U.S. Borrower resulting from an
Investment by the U.S. Borrower permitted by CLAUSE (i) of SECTION 9.2.5.
"REVOLVING LOAN" means, as the context may require, a U.S.
Revolving Loan or a Canadian Revolving Loan.
"REVOLVING LOAN COMMITMENT" means, as the context may require, the
Canadian Revolving Loan Commitment or the U.S. Revolving Loan Commitment.
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"REVOLVING LOAN COMMITMENT AMOUNT" means, as the context may
require, the U.S. Revolving Loan Commitment Amount or the Canadian Revolving
Loan Commitment Amount.
"REVOLVING NOTE" means, as the context may require, a U.S.
Revolving Note or a Canadian Revolving Note.
"RL LENDER" means, as the context may require, a U.S. RL Lender or
a Canadian Lender.
"S&P" means Standard & Poor's Rating Services.
"SCOTIABANK" is defined in the PREAMBLE.
"SEC" means the Securities and Exchange Commission.
"SECOND QUARTER ADJUSTED AMOUNT" means the product of (x) the
actual amounts set forth in clause (b) of the definition of the applicable
ratio for the period from the date of the initial Credit Extensions through
September 30, 1997 (the "STUB PERIOD"), multiplied by (y) a fraction the
numerator of which is equal to the total number of days in the Fiscal Quarter
ended September 30, 1997 and the denominator of which is equal to the number
of days in the Stub Period.
"SECURED PARTIES" means, collectively, the Lenders, the Issuers,
the Agents, each counterparty to a Rate Protection Agreement that is (or, at
the time such Rate Protection Agreement was entered into, was) a Lender or an
Affiliate thereof and (in each case) each of their respective successors,
permitted transferees and permitted assigns.
"SECURITY AGREEMENT" means, as the context may require, the U.S.
Borrower Security Agreement, the Canadian Borrower Debenture, the Canadian
Holdings Debenture, each U.S. Subsidiary Security Agreement and each Canadian
Subsidiary Debenture, in each case as amended, supplemented, amended and
restated or otherwise modified from time to time.
"SENIOR MANAGEMENT" means, collectively, Robert M. Kaminski, Gale
K. Bensussen, William B. Towne, Kevin J. Lanigan, Stanley J. Kahn, Scott C.
Rexinger, Giffen H. Ott and Robert J. LaFerriere.
"SIGNIFICANT SUBSIDIARY" means, at any date of determination, any
Subsidiary that, together with its Subsidiaries, (i) for the most recent
Fiscal Year of the U.S. Borrower, accounted for (or, in the case of any
Subsidiary that is acquired following the Effective Date, would have
accounted for) more than 3% of the consolidated revenues of the U.S. Borrower
and its Subsidiaries during such Fiscal Year or (ii) as of the end of the
most recent Fiscal Year of the U.S. Borrower, was the owner of (or, in the
case of any Subsidiary that is acquired following the Effective Date, would
have been the owner of) more than 3% of the consolidated assets of the U.S.
Borrower and its Subsidiaries at the end of such Fiscal Year, all as set
forth
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on the most recently available consolidated financial statements of the U.S.
Borrower for such Fiscal Year.
"SPECIFIED ADJUSTMENTS" means an amount equal to the sum of
(1) documented, non-recurring
(a) charges incurred pursuant to the Eastern Consolidation after
the date of the initial Credit Extensions in an amount not to exceed
$3,800,000,
PLUS
(b) costs incurred during the 1997 Fiscal Year in connection with
the closure of the OTC liquid pharmaceuticals facility of Leiner in
Chicago, Illinois in an amount not to exceed $1,920,000,
PLUS
(c) costs incurred during the 1997 Fiscal Year in connection with
the management reorganization in an amount not to exceed $1,000,000,
PLUS
(d) costs incurred during the 1997 Fiscal Year in connection with
the preparation of the S-1 filing in an amount not to exceed $410,000,
PLUS
(e) costs incurred by the Canadian Borrower for discontinued
bonuses paid to its former owners in an amount not to exceed $2,400,000,
PLUS
(f) costs incurred as a management transaction bonus for the
Recapitalization in an amount not to exceed $5,200,000,
PLUS
(g) compensation charges incurred during the 1998 Fiscal Year for
the in-the-money value of stock options which will be, as part of the
Recapitalization, cashed out, exchanged for LHPG Common Stock or converted
into Equity Rights, in an amount not to exceed $15,500,000,
PLUS
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(2) documented non-cash compensation expenses arising from the
granting of stock options.
"STATED AMOUNT" of each Letter of Credit means the total amount
available to be drawn under such Letter of Credit upon the issuance thereof.
"STATED EXPIRY DATE" is defined in SECTION 4.1.
"STATED MATURITY DATE" means
(a) in the case of U.S. Revolving Loans, June 30, 2003;
(b) in the case of Canadian Revolving Loans, June 30, 2003;
(c) in the case of Term B Loans, December 30, 2004; and
(d) in the case of Term C Loans, December 30, 2005.
"SUBJECT LENDER" is defined in CLAUSE (a) of SECTION 6.11.
"SUBORDINATED DEBT" means the unsecured Indebtedness of the U.S.
Borrower evidenced by the Subordinated Notes and any other unsecured
Indebtedness of the U.S. Borrower subordinated to the Obligations on terms
and conditions, and pursuant to documentation, reasonably satisfactory to the
U.S. Agent and the Required Lenders.
"SUBORDINATED DEBT INSTRUMENTS" means the Subordinated Indenture,
the Subordinated Notes and all other agreements and instruments delivered in
connection therewith or pursuant to which the same shall have been issued or
are governed, as amended, supplemented, amended and restated or otherwise
modified in accordance with SECTION 9.2.12.
"SUBORDINATED INDENTURE" means the Indenture, dated as of June 30,
1997, between LHPG (prior to the Assumption) and Leiner (following the
Assumption) and United States Trust Company of New York, as trustee, as
amended, supplemented, amended and restated or otherwise modified from time
to time in accordance with SECTION 9.2.12.
"SUBORDINATED NOTE HOLDERS" means any and all holders of
Subordinated Notes.
"SUBORDINATED NOTES" means the 9.625% Senior Subordinated Notes
due 2007 issued by the U.S. Borrower pursuant to the Subordinated Indenture
in connection with the Transaction in accordance with SECTION 7.1.6, or in
exchange for any initially issued Subordinated Notes pursuant to an exchange
offer following the initial closing of the Transaction, in each case as
amended, supplemented, amended and restated or otherwise modified from time
to time in accordance with SECTION 9.2.12.
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"SUBORDINATION PROVISIONS" is defined in SECTION 10.1.11.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership or other business entity of which more than 50% of the outstanding
Capital Stock (or other ownership interest) having ordinary voting power to
elect a majority of the board of directors, managers or other voting members of
the governing body of such entity (irrespective of whether at the time Capital
Stock (or other ownership interest) of any other class or classes of such entity
shall or might have voting power upon the occurrence of any contingency) is at
the time directly or indirectly owned by such Person, by such Person and one or
more other Subsidiaries of such Person, or by one or more other Subsidiaries of
such Person. Unless the context otherwise specifically requires, the term
"Subsidiary" shall be a reference to a Subsidiary of a Borrower.
"SUBSIDIARY GUARANTOR" means each Subsidiary party to a Subsidiary
Guaranty (including each Subsidiary that is required, pursuant to CLAUSE (a) of
SECTION 9.1.7 to become a party to a Subsidiary Guaranty).
"SUBSIDIARY GUARANTY" means, as the context may require, a U.S.
Subsidiary Guaranty or a Canadian Subsidiary Guaranty.
"SUBSIDIARY PLEDGE AGREEMENT" means, as the context may require, a
U.S. Subsidiary Pledge Agreement or a Canadian Subsidiary Pledge Agreement.
"SUBSIDIARY SECURITY AGREEMENT" means, as the context may require,
a U.S. Subsidiary Security Agreement or a Canadian Subsidiary Debenture.
"SWING LINE LENDER" means, as the context may require, the U.S.
Swing Line Lender or the Canadian Swing Line Lender.
"SWING LINE LOAN" means, as the context may require, a U.S. Swing
Line Loan or a Canadian Swing Line Loan.
"SWING LINE LOAN COMMITMENT" means, as the context may require,
the U.S. Swing Line Loan Commitment or the Canadian Swing Line Loan
Commitment.
"SWING LINE LOAN COMMITMENT AMOUNT" means, as the context may
require, the U.S. Swing Line Loan Commitment Amount or the Canadian Swing
Line Loan Commitment Amount.
"SWING LINE NOTE" means, as the context may require, a U.S. Swing
Line Note or a Canadian Swing Line Note.
"TAXES" is defined in SECTION 6.6.
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"TAX SHARING AGREEMENT" means the tax sharing agreement between the
U.S. Borrower and LHPG delivered pursuant to SECTION 7.1.23, as amended,
supplemented, amended and restated or otherwise modified from time to time.
"TERM B LOAN" is defined in SECTION 2.1.3.
"TERM B LOAN COMMITMENT" means, relative to any U.S. Lender, such
Lender's obligation (if any) to make Term B Loans pursuant to CLAUSE (a) of
SECTION 2.1.3.
"TERM B LOAN COMMITMENT AMOUNT" means, on any date, $45,000,000.
"TERM B LOAN COMMITMENT TERMINATION DATE" means the earliest of
(a) September 1, 1997 (if the Term B Loans have not been made on
or prior to such date); and
(b) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in CLAUSE (b), the Term B Loan
Commitments shall terminate automatically and without any further action.
"TERM B NOTE" means a promissory note of the U.S. Borrower payable
to any U.S. Lender, in the form of EXHIBIT A-3 hereto (as such promissory
note may be amended, endorsed or otherwise modified from time to time),
evidencing the aggregate Indebtedness of the U.S. Borrower to such U.S.
Lender resulting from outstanding Term B Loans, and also means all other
promissory notes accepted from time to time in substitution therefor or
renewal thereof.
"TERM C LOAN" is defined in SECTION 2.1.3.
"TERM C LOAN COMMITMENT" means, relative to any U.S. Lender, such
Lender's obligation (if any) to make Term C Loans pursuant to CLAUSE (a) of
SECTION 2.1.3.
"TERM C LOAN COMMITMENT AMOUNT" means, on any date, $40,000,000.
"TERM C LOAN COMMITMENT TERMINATION DATE" means the earliest of
(a) September 1, 1997 (if the Term C Loans have not been made on
or prior to such date); and
(b) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in CLAUSE (b), the Term C Loan
Commitments shall terminate automatically and without any further action.
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"TERM C NOTE" means a promissory note of the U.S. Borrower payable
to any U.S. Lender, in the form of EXHIBIT A-4 hereto (as such promissory
note may be amended, endorsed or otherwise modified from time to time),
evidencing the aggregate Indebtedness of the U.S. Borrower to such U.S.
Lender resulting from outstanding Term C Loans, and also means all other
promissory notes accepted from time to time in substitution therefor or
renewal thereof.
"TERM LOAN" means, as the context may require, a Term B Loan or a
Term C Loan.
"TERM LOAN COMMITMENT" means, as the context may require, the Term
B Loan Commitment or the Term C Loan Commitment.
"TERM LOAN COMMITMENT AMOUNT" means, as the context may require,
the Term B Loan Commitment Amount or the Term C Loan Commitment Amount.
"TERM LOAN COMMITMENT TERMINATION DATE" means, as the context may
require, the Term B Loan Commitment Termination Date or the Term C Loan
Commitment Termination Date.
"TERM NOTE" means, as the context may require, a Term B Note or a
Term C Note.
"TOTAL ADJUSTED CAPITAL" means, on any date, an amount equal to
the sum (without duplication) of
(a) Total Debt on such date
PLUS
(b) Adjusted Net Worth on such date.
"TOTAL DEBT" means, on any date, the outstanding principal amount
of all Indebtedness of the U.S. Borrower and its Subsidiaries of the type
referred to in CLAUSE (a), CLAUSE (b) (including the U.S. $ Equivalent amount
(on such date of determination) of the Letter of Credit Outstandings), CLAUSE
(c) and CLAUSE (f), in each case of the definition of "Indebtedness"
(exclusive of intercompany Indebtedness between the U.S. Borrower and any of
its Subsidiaries or between any Subsidiaries of the U.S. Borrower) and
(without duplication) any Contingent Liability in respect of any of the
foregoing types of obligations of such Person or any other Person.
"TOTAL EXPOSURE AMOUNT" means, on any date of determination, the
outstanding principal amount of all U.S. Loans, U.S. Letter of Credit
Outstandings, the U.S. $ Equivalent (measured on the date immediately
preceding such date of determination) of all Canadian Revolving Loans, the
U.S. $ Equivalent (measured on the date immediately preceding such date of
determination) of all Canadian Letter of Credit Outstandings and, without
duplication, the unfunded amount of both Revolving Loan Commitment Amounts.
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"TRADEMARK SECURITY AGREEMENT" means any Trademark Security
Agreement executed and delivered by any Obligor substantially in the form of
Exhibit B to any Security Agreement, as amended, supplemented, amended and
restated or otherwise modified from time to time.
"TRANSACTION" means the consummation of the Merger, the
Recapitalization, the issuance of the Subordinated Notes and the making of
the initial Credit Extensions.
"TRANSACTION DOCUMENTS" means the Merger Agreement and all
certificates, filings, documents, instruments, consents, approvals, board of
directors resolutions and opinions furnished pursuant to or in connection
with the Merger Agreement and the Transaction.
"Type" means, relative to any Loan, the portion thereof, if any,
being maintained as a U.S. Base Rate Loan, a LIBO Rate Loan or a Canadian
Prime Rate Loan.
"UCC" means the Uniform Commercial Code as from time to time in
effect in the State of New York.
"UNITED STATES" or "U.S." means the United States of America, its
fifty states and the District of Columbia.
"U.S. AGENT" is defined in the PREAMBLE.
"U.S. ALTERNATE BASE RATE" means, on any date relative to all U.S.
Base Rate Loans, a fluctuating rate of interest per annum equal to the higher
of
(a) the rate of interest most recently established by the U.S.
Agent at its Domestic Office as its base rate for U.S. Dollar loans made
in the United States; and
(b) the U.S. Federal Funds Rate most recently determined by the
U.S. Agent PLUS 1/2 of 1%.
The U.S. Alternate Base Rate is not necessarily intended to be the lowest
rate of interest determined by the U.S. Agent in connection with extensions
of credit. Changes in the rate of interest on that portion of any U.S. Loans
maintained as U.S. Base Rate Loans will take effect simultaneously with each
change in the U.S. Alternate Base Rate. The U.S. Agent will give notice
promptly to the U.S. Borrower and the U.S. Lenders of changes in the U.S.
Alternate Base Rate.
"U.S. BASE RATE LOAN" means a U.S. Loan bearing interest at a
fluctuating rate determined by reference to the U.S. Alternate Base Rate.
"U.S. BORROWER" means LHPG (immediately prior to the Assumption)
and Leiner (following the Assumption).
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"U.S. BORROWER CLOSING DATE CERTIFICATE" means the closing date
certificate executed and delivered by the U.S. Borrower pursuant to SECTION
7.1.14, substantially in the form of EXHIBIT J-1 hereto.
"U.S. BORROWER GUARANTY" means the Guaranty executed and delivered
by the U.S. Borrower pursuant to SECTION 7.1.10, substantially in the form of
EXHIBIT F-1 hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"U.S. BORROWER PLEDGE AGREEMENT" means the Pledge Agreement
executed and delivered by the U.S. Borrower pursuant to SECTION 7.1.8,
substantially in the form of EXHIBIT E-1 hereto, as amended, supplemented,
amended and restated or otherwise modified from time to time.
"U.S. BORROWER SECURITY AGREEMENT" means the Security Agreement
executed and delivered by the U.S. Borrower pursuant to SECTION 7.1.11,
substantially in the form of EXHIBIT G-1 hereto, as amended, supplemented,
amended and restated or otherwise modified from time to time.
"U.S. BORROWING REQUEST" means a Loan request and certificate duly
executed by an Authorized Officer of the U.S. Borrower, substantially in the
form of EXHIBIT B-1 hereto.
"U.S. COMMITMENT" is defined in SECTION 2.1.
"U.S. CONTINUATION/CONVERSION NOTICE" means a notice of
continuation or conversion and certificate duly executed by an Authorized
Officer of the U.S. Borrower, substantially in the form of EXHIBIT C-1 hereto.
"U.S. CREDIT EXTENSION" means, as the context may require,
(a) the making of a Term Loan or a U.S. Revolving Loan by a U.S.
Lender;
(b) the making of a Swing Line Loan by the Swing Line Lender; or
(c) the issuance of a U.S. Letter of Credit, or the extension of
the Stated Expiry Date of a previously issued Letter of Credit, by a U.S.
Issuer.
"U.S. $ EQUIVALENT" means the Exchange Equivalent in U.S. Dollars
of any amount of Canadian Dollars.
"U.S. FACILITY" is defined in ARTICLE II.
"U.S. FACILITY GUARANTOR" means each of Parent and each U.S.
Subsidiary Guarantor, in each case in its capacity as a Guarantor.
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"U.S. FEDERAL FUNDS RATE" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the U.S. Agent from three federal funds brokers
of recognized standing selected by it.
"U.S. ISSUANCE REQUEST" means a Letter of Credit request and
certificate duly executed by an Authorized Officer of the U.S. Borrower,
substantially in the form of EXHIBIT B-3 hereto.
"U.S. ISSUER" means, collectively, Scotiabank (or any affiliate,
unit or agency thereof) in its individual capacity hereunder as issuer of any
U.S. Letters of Credit and such other U.S. Lender as may be designated by
Scotiabank (and agreed to by the U.S. Borrower and such U.S. Lender) in its
individual capacity as the issuer of any U.S. Letters of Credit.
"U.S. LENDER" is defined in the PREAMBLE.
"U.S. LETTER OF CREDIT" is defined in CLAUSE (a) OF SECTION 2.1.2.
"U.S. LETTER OF CREDIT COMMITMENT" means,
(a) relative to a U.S. Issuer, such U.S. Issuer's obligation to
issue U.S. Letters of Credit pursuant to SECTION 2.1.2; and
(b) relative to each U.S. RL Lender, its obligation to participate
in U.S. Letters of Credit pursuant to SECTION 4.1.1.
"U.S. LETTER OF CREDIT COMMITMENT AMOUNT" means, on any date, a
maximum amount of $35,000,000, as such amount may be reduced from time to time
pursuant to SECTION 2.2.
"U.S. LETTER OF CREDIT OUTSTANDINGS" means, on any date, an amount
equal to the sum of
(a) the then aggregate amount which is undrawn and available
under all issued and outstanding U.S. Letters of Credit,
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PLUS
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations in respect of such U.S. Letters of Credit.
"U.S. LOAN" means, as the context may require, a Term B Loan, a
Term C Loan, a U.S. Revolving Loan or a Swing Line Loan.
"U.S. NOTE" means, as the context may require, a U.S. Revolving
Note, a Term B Note, a Term C Note or a Swing Line Note.
"U.S. PENSION PLAN" means a "pension plan", as such term is
defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA
(other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA),
and to which the U.S. Borrower or any corporation, trade or business that is,
along with the U.S. Borrower, a member of a Controlled Group, may have
liability, including any liability by reason of having been a substantial
employer within the meaning of Section 4063 of ERISA at any time during the
preceding five years, or by reason of being deemed to be a contributing
sponsor under Section 4069 of ERISA.
"U.S. PERCENTAGE" means, relative to any U.S. Lender, the
applicable percentage relating to U.S. Revolving Loans, Term B Loans or Term
C Loans, as the case may be, as set forth opposite its name on SCHEDULE II
hereto or set forth in a Lender Assignment Agreement, as such percentage may
be adjusted from time to time (a) pursuant to Lender Assignment Agreement(s)
executed by such Lender and its Assignee Lender(s) and delivered pursuant to
SECTION 12.11.1 or (b) by a reallocation pursuant to SECTION 2.2.3.
"U.S. PERSON" means any Person who is a United States Person
within the meaning of Section 7701(a)(30) of the Code (or any applicable
successor provision).
"U.S. REGISTER" is defined in Section 2.6(b).
"U.S. REVOLVING LOAN" is defined in SECTION 2.1.1.
"U.S. REVOLVING LOAN COMMITMENT" means, relative to any U.S. RL
Lender, such U.S. RL Lender's obligation (if any) to make U.S. Revolving
Loans pursuant to CLAUSE (a) of SECTION 2.1.1.
"U.S. REVOLVING LOAN COMMITMENT AMOUNT" means, on any date,
$105,000,000, as such amount may be reduced or reallocated from time to time
pursuant to SECTION 2.2.
"U.S. REVOLVING LOAN COMMITMENT TERMINATION DATE" means the
earliest of
(a) September 1, 1997 (if the initial Credit Extensions have not
occurred on or prior to such date);
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(b) June 30, 2003;
(c) the date on which the U.S. Revolving Loan Commitment Amount is
terminated in full or reduced to zero pursuant to SECTION 2.2 (other than
SECTION 2.2.3); and
(d) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in the preceding CLAUSE (c) or
(d), the U.S. Revolving Loan Commitments shall terminate automatically and
without any further action.
"U.S. REVOLVING NOTE" means a promissory note of the U.S. Borrower
payable to any U.S. RL Lender, substantially in the form of EXHIBIT A-1
hereto (as such promissory note may be amended, endorsed or otherwise
modified from time to time), evidencing the aggregate Indebtedness of the
U.S. Borrower to such U.S. RL Lender resulting from outstanding U.S.
Revolving Loans, and also means all other promissory notes accepted from time
to time in substitution therefor or renewal thereof.
"U.S. RL LENDERS" means those U.S. Lenders with a Commitment to
make U.S. Revolving Loans.
"U.S. SUBSIDIARY" means any Subsidiary that is incorporated under
the laws of the United States or a state thereof.
"U.S. SUBSIDIARY GUARANTOR" means each U.S. Subsidiary which has
executed and delivered a U.S. Subsidiary Guaranty.
"U.S. SUBSIDIARY GUARANTY" means a Subsidiary Guaranty executed
and delivered by a U.S. Subsidiary Guarantor pursuant to the terms of this
Agreement (including CLAUSE (a) of SECTION 9.1.7), substantially in the form
of EXHIBIT F-4 hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"U.S. SUBSIDIARY PLEDGE AGREEMENT" means any Pledge Agreement
executed and delivered by a U.S. Subsidiary pursuant to the terms of this
Agreement (including CLAUSE (a) of SECTION 9.1.7), substantially in the form
of EXHIBIT E-5 hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"U.S. SUBSIDIARY SECURITY AGREEMENT" means any Security Agreement
executed and delivered by a U.S. Subsidiary pursuant to the terms of this
Agreement (including CLAUSE (a) of SECTION 9.1.7), substantially in the form
of EXHIBIT G-4 hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"U.S. SWING LINE LENDER" means, on the Effective Date, Scotiabank
(or, at any time thereafter, another U.S. RL Lender designated by Scotiabank
with the consent of the U.S.
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Borrower, if such U.S. RL Lender agrees to be
the U.S. Swing Line Lender hereunder), in such Person's capacity as the maker
of U.S. Swing Line Loans.
"U.S. SWING LINE LOAN" is defined in CLAUSE (b) of SECTION 2.1.1.
"U.S. SWING LINE LOAN COMMITMENT" is defined in CLAUSE (b) of
SECTION 2.1.1.
"U.S. SWING LINE LOAN COMMITMENT AMOUNT" means, on any date,
$15,000,000, as such amount may be reduced from time to time pursuant to
SECTION 2.2.
"U.S. SWING LINE NOTE" means a promissory note of the U.S.
Borrower payable to the U.S. Swing Line Lender, in the form of EXHIBIT A-5
hereto (as such promissory note may be amended, endorsed or otherwise
modified from time to time), evidencing the aggregate Indebtedness of the
U.S. Borrower to the U.S. Swing Line Lender resulting from outstanding U.S.
Swing Line Loans, and also means all other promissory notes accepted from
time to time in substitution therefor or renewal thereof.
"VOTING STOCK" means, with respect to any Person, Capital Stock of
any class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"WELFARE PLAN" means a "welfare plan", as such term is defined in
section 3(1) of ERISA.
"wholly-owned" means, with respect to any direct or indirect
Subsidiary, any Subsidiary all of the outstanding common stock (or similar
equity interest) of which (other than any director's qualifying shares or
investments by foreign nationals mandated by applicable laws) is owned
directly or indirectly by a Borrower.
SECTION 1.2. USE OF DEFINED TERMS. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in each other Loan Document, the
Disclosure Schedule, or any Borrowing Request, Issuance Request,
Continuation/Conversion Notice, Compliance Certificate, notice or other
communications delivered from time to time in connection with this Agreement
or any other Loan Document.
SECTION 1.3. CROSS-REFERENCES. Unless otherwise specified,
references in this Agreement and in each other Loan Document to any Article
or Section are references to such Article or Section of this Agreement or
such other Loan Document, as the case may be, and, unless otherwise
specified, references in any Article, Section or definition to any clause are
references to such clause of such Article, Section or definition.
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SECTION 1.4. ACCOUNTING AND FINANCIAL DETERMINATIONS. (a) Unless
otherwise specified, all accounting terms used herein or in any other Loan
Document shall be interpreted, and all accounting determinations and
computations hereunder or thereunder (including under SECTION 9.2.4) shall be
made, in accordance with those generally accepted accounting principles
("GAAP") applied in the preparation of the financial statements referred to
in CLAUSE (a) of SECTION 7.1.17; PROVIDED, HOWEVER, that all financial
statements required to be delivered hereunder or under any other Loan
Document shall be prepared in accordance with GAAP as in effect from time to
time. Unless otherwise expressly provided, all financial covenants and
defined financial terms shall be computed on a consolidated basis for the
U.S. Borrower and its Subsidiaries, in each case without duplication.
(b) If any changes in accounting principles from those used in the
preparation of the financial statements referred to in SECTION 8.5 hereafter
occur as a result of the promulgation of rules, regulations, pronouncements,
or opinions by the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants (or successors thereto or agencies
with similar functions) and such changes result in a change in the method of
calculation of financial covenants, standards or terms found in this
Agreement, the Borrowers and the Lenders agree to enter into negotiations in
order to amend such financial covenants, standards or terms so as to
equitably reflect such changes with the desired result that the evaluations
of the U.S. Borrower's financial condition shall be the same after such
changes as if such changes had not been made; PROVIDED, HOWEVER, that until
the parties hereto have reached a definitive agreement on such amendments,
the U.S. Borrower's financial condition shall continue to be evaluated on the
same principles as those used in the preparation of the financial statements
referred to in SECTION 8.5.
ARTICLE II
U.S. COMMITMENTS AND BORROWING
SECTION 2.1. U.S. COMMITMENTS. On the terms and subject to the
conditions of this Agreement (including SECTIONS 2.1.4, 2.1.5 and ARTICLE
VII),
(a) each U.S. Lender severally agrees to make U.S. Loans (other
than U.S. Swing Line Loans) pursuant to the U.S. Commitments and the U.S.
Swing Line Lender agrees to make U.S. Swing Line Loans pursuant to the
U.S. Swing Line Loan Commitment, in each case as described in this
SECTION 2.1;
and
(b) each U.S. Issuer severally agrees that it will issue U.S.
Letters of Credit pursuant to SECTION 2.1.2, and each U.S. RL Lender
severally agrees that it will purchase participation interests in such
U.S. Letters of Credit pursuant to SECTION 4.1.1.
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Such agreements of each U.S. Lender are referred to collectively as its "U.S.
COMMITMENT", and all U.S. Commitments of U.S. Lenders are referred to
collectively as the "U.S. FACILITY".
SECTION 2.1.1. U.S. REVOLVING LOAN COMMITMENT AND U.S. SWING LINE
LOAN COMMITMENT. (a) From time to time on any Business Day occurring prior
to the U.S. Revolving Loan Commitment Termination Date, each U.S. RL Lender
will make loans (relative to such Lender, its "U.S. REVOLVING LOANS") to the
U.S. Borrower equal to such U.S. RL Lender's U.S. Percentage of the aggregate
amount of each Borrowing of the U.S. Revolving Loans requested by the U.S.
Borrower to be made on such day. The Commitment of each such U.S. RL Lender
described in this SECTION 2.1.1 is herein referred to as its "U.S. REVOLVING
LOAN COMMITMENT". On the terms and subject to the conditions hereof, the
U.S. Borrower may from time to time borrow, prepay and reborrow the U.S.
Revolving Loans.
(b) From time to time on any Business Day occurring prior to the
U.S. Revolving Loan Commitment Termination Date, the U.S. Swing Line
Lender will make loans (relative to the U.S. Swing Line Lender, its
"U.S. SWING LINE LOANS") to the U.S. Borrower equal to the principal
amount of the U.S. Swing Line Loans requested by the U.S. Borrower to
be made on such day. The Commitment of the U.S. Swing Line Lender
described in this CLAUSE (b) is herein referred to as its "U.S. SWING
LINE LOAN COMMITMENT". On the terms and subject to the conditions
hereof, the U.S. Borrower may from time to time borrow, prepay and
reborrow U.S. Swing Line Loans.
SECTION 2.1.2. U.S. LETTER OF CREDIT COMMITMENT. From time to
time on any Business Day occurring prior to the U.S. Revolving Loan
Commitment Termination Date, the applicable U.S. Issuer will
(a) issue one or more standby or documentary letters of credit
(relative to such U.S. Issuer, its "U.S. LETTER OF CREDIT") for the
account of the U.S. Borrower (which may be for the benefit of a U.S.
Subsidiary that has delivered a Subsidiary Guaranty) in the Stated
Amount requested by the U.S. Borrower on such day; or
(b) extend the Stated Expiry Date of an existing standby U.S.
Letter of Credit previously issued hereunder to a date not later than
the earlier of (x) the then scheduled U.S. Revolving Loan Commitment
Termination Date and (y) one year from the date of such extension.
SECTION 2.1.3. TERM LOAN COMMITMENT. In a single Borrowing
(which shall be on a Business Day) occurring on or prior to the Term Loan
Commitment Termination Date, each U.S. Lender that has a Term B Loan
Commitment or a Term C Loan Commitment, as applicable,
(a) will make loans (relative to such U.S. Lender, its "TERM B
LOANS") to the U.S. Borrower equal to such U.S. Lender's U.S.
Percentage of the aggregate amount of the Borrowing of Term B Loans
requested by the U.S. Borrower to be made on such day
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(with the commitment of each such U.S. Lender described in this CLAUSE
(a) herein referred to as its "TERM B LOAN COMMITMENT"); and
(b) will make loans (relative to such U.S. Lender, its "TERM C
LOANS") to the U.S. Borrower equal to such U.S. Lender's U.S. Percentage
of the aggregate amount of the Borrowing of Term C Loans requested by the
U.S. Borrower to be made on such day (with the commitment of each such
U.S. Lender described in this CLAUSE (b) herein referred to as its "TERM C
LOAN COMMITMENT").
No amounts paid or prepaid with respect to Term B Loans or Term C Loans may be
reborrowed.
SECTION 2.1.4. U.S. LENDERS NOT PERMITTED OR REQUIRED TO MAKE LOANS.
No U.S. Lender shall be permitted or required to make any U.S. Loan if, after
giving effect thereto, the aggregate outstanding principal amount of
(a) all U.S. Revolving Loans
(i) of all U.S. RL Lenders and the outstanding principal amount
of all U.S. Swing Line Loans, together with the aggregate amount of
all U.S. Letter of Credit Outstandings, would exceed the then
existing U.S. Revolving Loan Commitment Amount; or
(ii) of such U.S. RL Lender, together with such U.S. RL
Lender's U.S. Percentage of the aggregate amount of all U.S. Letter
of Credit Outstandings and such U.S. RL Lender's U.S. Percentage of
the outstanding principal amount of all U.S. Swing Line Loans, would
exceed such U.S. RL Lender's U.S. Percentage of the then existing
U.S. Revolving Loan Commitment Amount;
(b) all Term B Loans or Term C Loans, as the case may be,
(i) of all U.S. Lenders would exceed the Term B Loan Commitment
Amount (in the case of Term B Loans) or the Term C Loan Commitment
Amount (in the case of Term C Loans); or
(ii) of such U.S. Lender with a Term B Loan Commitment or a Term
C Loan Commitment, as the case may be, would exceed such U.S.
Lender's U.S. Percentage of the Term B Loan Commitment Amount (in the
case of Term B Loans) or the Term C Loan Commitment Amount (in the
case of Term C Loans); or
(c) (i) all U.S. Swing Line Loans would exceed the then existing
U.S. Swing Line Loan Commitment Amount or (ii) unless otherwise agreed
to by the U.S. Swing Line Lender, in its sole discretion, the sum of
all U.S. Swing Line Loans and U.S. Revolving Loans made by the U.S.
Swing Line Lender plus the U.S. Swing Line Lender's U.S.
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Percentage multiplied by the aggregate amount of U.S. Letter of Credit
Outstandings would exceed the amount determined by multiplying the U.S.
Swing Line Lender's U.S. Percentage by the then existing U.S. Revolving
Loan Commitment Amount.
SECTION 2.1.5. U.S. ISSUER NOT PERMITTED OR REQUIRED TO ISSUE
U.S. LETTERS OF CREDIT. No U.S. Issuer shall be permitted or required to
issue any U.S. Letter of Credit if, after giving effect thereto, (a) the
aggregate amount of all U.S. Letter of Credit Outstandings would exceed the
U.S. Letter of Credit Commitment Amount or (b) the sum of the aggregate
amount of all U.S. Letter of Credit Outstandings plus the aggregate principal
amount of all U.S. Revolving Loans and U.S. Swing Line Loans then outstanding
would exceed the U.S. Revolving Loan Commitment Amount.
SECTION 2.2. REDUCTION OF THE U.S. COMMITMENT AMOUNTS;
REALLOCATION. The U.S. Commitment Amounts are subject to reduction from time
to time pursuant to SECTIONS 2.2.1 and 2.2.2, and to reallocation from time
to time pursuant to SECTION 2.2.3.
SECTION 2.2.1. OPTIONAL. The U.S. Borrower may, from time to time
on any Business Day occurring after the Effective Date, voluntarily reduce
the amount of the U.S. Revolving Loan Commitment Amount, the U.S. Swing Line
Loan Commitment Amount or the U.S. Letter of Credit Commitment Amount on the
Business Day so specified by the U.S. Borrower; PROVIDED, HOWEVER, that all
such reductions shall require at least one Business Day's prior notice to the
U.S. Agent and be permanent, and any partial reduction of any U.S. Commitment
Amount shall be in a minimum amount of $1,000,000 and in an integral multiple
of $500,000. Any reduction of the U.S. Revolving Loan Commitment Amount which
reduces the U.S. Revolving Loan Commitment Amount below the then current
amount of the U.S. Letter of Credit Commitment Amount or the U.S. Swing Line
Loan Commitment Amount, as the case may be, shall result in an automatic and
corresponding reduction of the U.S. Letter of Credit Commitment Amount or the
U.S. Swing Line Loan Commitment Amount, as the case may be, to the amount of
the U.S. Revolving Loan Commitment Amount, as so reduced, without any further
action on the part of any U.S. Lender, any U.S. Issuer or the U.S. Swing Line
Lender, as the case may be.
SECTION 2.2.2. MANDATORY. The U.S. Revolving Loan Commitment
Amount shall be reduced as set forth below.
(a) Following the prepayment of the Term Loans in full, the U.S.
Revolving Loan Commitment Amount shall, without any further action,
automatically and permanently be reduced concurrently with the receipt of
any Net Disposition Proceeds received by the U.S. Borrower or its U.S.
Subsidiaries, in an amount equal to 100% of such Net Disposition Proceeds;
PROVIDED, HOWEVER, that Net Disposition Proceeds attributable to
dispositions by non-U.S. Subsidiaries shall not be deemed "received" for
purposes of this clause until such time as such Net Disposition Proceeds
would have been required to be applied to repay Term Loans (determined as
if any Term Loans were still outstanding) pursuant to CLAUSE (c) of
SECTION 5.1.1; and PROVIDED, FURTHER, that the U.S. Borrower shall
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comply with its obligation to repatriate such Net Disposition Proceeds as
promptly as possible in accordance with CLAUSE (c) of SECTION 5.1.1.
(b) The U.S. Revolving Loan Commitment Amount shall be reduced on
each Business Day on which a Permitted Receivables Transaction is
consummated in an amount equal to the Receivables Proceeds.
Notwithstanding the foregoing, in no event shall the U.S. Revolving Loan
Commitment Amount be reduced as a result of CLAUSE (a) of this Section to less
than $50,000,000.
SECTION 2.2.3. REALLOCATION. At any time after the first anniversary
of the Effective Date and prior to the U.S. Revolving Loan Commitment
Termination Date, the Borrowers may, periodically after at least twelve months
have elapsed since the most recent reallocation made pursuant to this SECTION
2.2.3 or SECTION 3.2.2, upon five Business Days' prior irrevocable written
notice delivered to the Agents, elect to reallocate the U.S. $ Equivalent of the
then unused Canadian Revolving Loan Commitment Amount to the U.S. Revolving Loan
Commitment Amount; PROVIDED, HOWEVER, that the U.S. Revolving Loan Commitment
Amount shall not at any time exceed $125,000,000 (or such lesser amount if the
U.S. Revolving Loan Commitment Amount has been permanently reduced in accordance
with SECTIONS 2.2.1 or 2.2.2) as a result of such reallocation. Any such
reallocation will automatically reduce the Canadian Revolving Loan Commitment
Amount by a corresponding amount and, upon the effectiveness of such
reallocation, the U.S. Percentages relating to U.S. Revolving Loans of the Dual
Lenders shall be increased, and the U.S. Percentages of the U.S. RL Lenders that
are not Dual Lenders shall be decreased, as set forth in the next two sentences
to the extent necessary to reflect the Dual Lenders' commitment to make U.S.
Revolving Loans in the increased amount so reallocated to the U.S. Revolving
Loan Commitment Amount, it being the intent of the parties hereto that the U.S.
Revolving Loan Commitment of U.S. RL Lenders that are not Dual Lenders shall not
be increased above that which was in effect immediately prior to giving effect
to such reallocation. The U.S. Percentage of the U.S. Revolving Loan Commitment
Amount of a U.S. RL Lender that is not a Dual Lender shall equal the maximum
principal amount of U.S. Revolving Loans that such U.S. RL Lender would be
required to make immediately prior to giving effect to a reallocation pursuant
to this Section DIVIDED by the U.S. Revolving Loan Commitment Amount immediately
after giving effect to the increase in the U.S. Revolving Loan Commitment Amount
resulting from such reallocation. The U.S. Percentage of the U.S. Revolving Loan
Commitment Amount of a U.S. RL Lender that is a Dual Lender shall equal the
quotient of (a) the sum of (i) the maximum principal amount of U.S. Revolving
Loans that such Dual Lender would be required to make immediately prior to
giving effect to a reallocation pursuant to this Section PLUS (ii) the product
of (x) such Dual Lender's Canadian Percentage to make Canadian Revolving Loans
MULTIPLIED by (y) the U.S. $ Equivalent of the Canadian Revolving Loan
Commitment Amount reallocated pursuant to this Section, DIVIDED by (b) the U.S.
Revolving Loan Commitment Amount immediately after giving effect to the increase
in the U.S. Revolving Loan Commitment Amount resulting from such reallocation.
If the U.S. Revolving Loan Commitment Amount is reduced as a result of a
reallocation that increases the Canadian
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Revolving Loan Commitment Amount pursuant to SECTION 3.2.2, then the U.S.
Percentages of the U.S. RL Lenders that are not Dual Lenders shall be
increased and the U.S. Percentages of the Dual Lenders shall be decreased
based upon the foregoing principles (it being understood that the Commitment
Amounts of the U.S. RL Lenders that are not Dual Lenders shall not be changed
as a result of such reallocation). Upon (and as a condition to) a
reallocation pursuant to this Section which increases the U.S. Revolving Loan
Commitment Amount, the U.S. Borrower shall execute and deliver to each of the
Dual Lenders a new U.S. Revolving Note to reflect the increased U.S.
Revolving Loan Commitment of such Dual Lender. The U.S. Agent shall
distribute to the Borrowers and the Lenders the modified Percentages in
effect after giving effect to a reallocation pursuant to this Section.
SECTION 2.3. BORROWING PROCEDURES. U.S. Loans (other than U.S.
Swing Line Loans) shall be made by the U.S. Lenders in accordance with
SECTION 2.3.1, and U.S. Swing Line Loans shall be made by the U.S. Swing Line
Lender in accordance with SECTION 2.3.2.
SECTION 2.3.1. BORROWINGS OF OTHER THAN U.S. SWING LINE LOANS. In
the case of other than U.S. Swing Line Loans, by delivering a Borrowing
Request to the U.S. Agent on or before 1:00 p.m. (local time) on a Business
Day, the U.S. Borrower may from time to time irrevocably request, on not less
than one Business Day's notice in the case of U.S. Base Rate Loans, or three
Business Days' notice in the case of LIBO Rate Loans, and in either case not
more than five Business Days' notice, that a Borrowing be made, in the case
of LIBO Rate Loans, in a minimum amount of $1,000,000 and an integral
multiple of $1,000,000, in the case of U.S. Base Rate Loans, in a minimum
amount of $1,000,000 and an integral multiple of $250,000 or, in either case,
in the unused amount of the applicable U.S. Commitment; PROVIDED, HOWEVER,
that all initial U.S. Loans shall be made as U.S. Base Rate Loans. On the
terms and subject to the conditions of this Agreement, each Borrowing shall
be comprised of the type of U.S. Loans, and shall be made on the Business
Day, specified in such Borrowing Request. In the case of other than U.S.
Swing Line Loans, on or before 11:00 a.m. (local time) on such Business Day,
each U.S. Lender that has a U.S. Commitment to make the U.S. Loans being
requested shall deposit with the U.S. Agent same day funds in an amount equal
to such U.S. Lender's U.S. Percentage of the requested Borrowing. Such
deposit will be made to an account which the U.S. Agent shall specify from
time to time by notice to the U.S. Lenders. To the extent funds are received
from the U.S. Lenders, the U.S. Agent shall make such funds available to the
U.S. Borrower by wire transfer to the accounts the U.S. Borrower shall have
specified in its Borrowing Request. No U.S. Lender's obligation to make any
U.S. Loan shall be affected by any other U.S. Lender's failure to make any
U.S. Loan.
SECTION 2.3.2. U.S. SWING LINE LOANS. (a) By telephonic notice,
promptly followed (within one Business Day) by the delivery of a confirming
Borrowing Request, to the U.S. Swing Line Lender on or before 1:00 p.m. (local
time) on the Business Day the proposed U.S. Swing Line Loan is to be made, the
U.S. Borrower may from time to time irrevocably request that U.S. Swing Line
Loans be made by the U.S. Swing Line Lender in an aggregate minimum principal
amount of $200,000 and an integral multiple of $100,000. All U.S. Swing Line
Loans shall be made as U.S. Base Rate Loans and shall not be entitled to be
converted
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into LIBO Rate Loans. The proceeds of each U.S. Swing Line Loan shall be made
available by the U.S. Swing Line Lender, by its close of business on the
Business Day telephonic notice is received by it as provided in this CLAUSE
(a), to the U.S. Borrower by wire transfer to the account the U.S. Borrower
shall have specified in its notice therefor.
(b) If
(i) any U.S. Swing Line Loan shall be outstanding for more than
four Business Days;
(ii) any U.S. Swing Line Loan is or will be outstanding on a date
when the U.S. Borrower requests that a U.S. Revolving Loan be made; or
(iii) any Default shall occur and be continuing,
each U.S. RL Lender (other than the U.S. Swing Line Lender) irrevocably agrees
that it will, at the request of the U.S. Swing Line Lender, make a U.S.
Revolving Loan (which shall initially be funded as a U.S. Base Rate Loan) in an
amount equal to such U.S. RL Lender's U.S. Percentage of the aggregate principal
amount of all such U.S. Swing Line Loans then outstanding (such outstanding U.S.
Swing Line Loans hereinafter referred to as the "REFUNDED U.S. SWING LINE
LOANS"). On or before 11:00 a.m. (local time) on the first Business Day
following receipt by each U.S. RL Lender of a request to make U.S. Revolving
Loans as provided in the preceding sentence, each such U.S. RL Lender shall
deposit in an account specified by the U.S. Swing Line Lender the amount so
requested in same day funds and such funds shall be applied by the U.S. Swing
Line Lender to repay the Refunded U.S. Swing Line Loans. At the time the
aforementioned U.S. RL Lenders make the above referenced U.S. Revolving Loans,
the U.S. Swing Line Lender shall be deemed to have made, in consideration of the
making of the Refunded U.S. Swing Line Loans, U.S. Revolving Loans in an amount
equal to the U.S. Swing Line Lender's U.S. Percentage of the aggregate principal
amount of the Refunded U.S. Swing Line Loans. Upon the making (or deemed making,
in the case of the U.S. Swing Line Lender) of any U.S. Revolving Loans pursuant
to this CLAUSE (b), the amount so funded shall become outstanding under such
U.S. RL Lender's U.S. Revolving Note and shall no longer be owed under the U.S.
Swing Line Note. All interest payable with respect to any U.S. Revolving Loans
made (or deemed made, in the case of the U.S. Swing Line Lender) pursuant to
this CLAUSE (b) shall be appropriately adjusted to reflect the period of time
during which the U.S. Swing Line Lender had outstanding U.S. Swing Line Loans in
respect of which such U.S. Revolving Loans were made. Each U.S. RL Lender's
obligation to make the U.S. Revolving Loans referred to in this CLAUSE (b) shall
be absolute and unconditional and shall not be affected by any circumstance,
including (i) any set-off, counterclaim, recoupment, defense or other right
which such U.S. RL Lender may have against the U.S. Swing Line Lender, the U.S.
Borrower or any other Person for any reason whatsoever; (ii) the occurrence or
continuance of any Default; (iii) any adverse change in the condition (financial
or otherwise) of the U.S. Borrower; (iv) the acceleration or maturity of any
U.S. Loans or the termination of any U.S. Commitment after the making of any
U.S. Swing Line Loan; (v) any breach of this Agreement or any other Loan
Document by the U.S.
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Borrower or any U.S. RL Lender; or (vi) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.
SECTION 2.4. CONTINUATION AND CONVERSION ELECTIONS. By delivering
a Continuation/ Conversion Notice to the U.S. Agent on or before 1:00 p.m.
(local time) on a Business Day, the U.S. Borrower may from time to time
irrevocably elect, on not less than one Business Day's notice in the case of
U.S. Base Rate Loans, or three Business Days' notice in the case of LIBO Rate
Loans, and in either case not more than five Business Days' notice, that all,
or any portion in an aggregate minimum amount of $1,000,000 and an integral
multiple of $1,000,000, in the case of LIBO Rate Loans, or an aggregate
minimum amount of $1,000,000 and an integral multiple of $250,000, in the
case of U.S. Base Rate Loans, be, in the case of U.S. Base Rate Loans,
converted into LIBO Rate Loans or be, in the case of LIBO Rate Loans,
converted into U.S. Base Rate Loans or continued as LIBO Rate Loans (in the
absence of delivery of a Continuation/Conversion Notice with respect to any
LIBO Rate Loan at least three Business Days (but not more than five Business
Days) before the last day of the then current Interest Period with respect
thereto, such LIBO Rate Loan shall, on such last day, automatically convert
to a U.S. Base Rate Loan); PROVIDED, HOWEVER, that (x) each such conversion
or continuation shall be pro rated among the applicable outstanding U.S.
Loans of all U.S. Lenders that have made such U.S. Loans, and (y) no portion
of the outstanding principal amount of any U.S. Loans may be continued as, or
be converted into, LIBO Rate Loans when any Default has occurred and is
continuing.
SECTION 2.5. FUNDING. Each U.S. Lender may, if it so elects, fulfill
its obligation to make, continue or convert LIBO Rate Loans hereunder by causing
one of its foreign branches or Affiliates (or an international banking facility
created by such U.S. Lender) to make or maintain such LIBO Rate Loan; PROVIDED,
HOWEVER, that such LIBO Rate Loan shall nonetheless be deemed to have been made
and to be held by such U.S. Lender, and the obligation of the U.S. Borrower to
repay such LIBO Rate Loan shall nevertheless be to such U.S. Lender for the
account of such foreign branch, Affiliate or international banking facility; and
PROVIDED, FURTHER, HOWEVER, that such U.S. Lender shall cause such foreign
branch, Affiliate or international banking facility to comply with the
applicable provisions of CLAUSE (b) of SECTION 6.6 with respect to such LIBO
Rate Loan. In addition, the U.S. Borrower hereby consents and agrees that, for
purposes of any determination to be made for purposes of SECTION 6.1, 6.2, 6.3
or 6.4, it shall be conclusively assumed that each U.S. Lender elected to fund
all LIBO Rate Loans by purchasing Dollar deposits in its LIBOR Office's
interbank eurodollar market.
SECTION 2.6. U.S. REGISTER; U.S. NOTES.
(a) Each U.S. Lender may maintain in accordance with its usual
practice an account or accounts evidencing the Indebtedness of the U.S.
Borrower to such U.S. Lender resulting from each U.S. Loan made by such
U.S. Lender, including the amounts of principal and interest payable and
paid to such U.S. Lender from time to time hereunder. In the case of a
U.S. Lender that does not request, pursuant to PARAGRAPH (b)(ii) below,
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execution and delivery of a Note evidencing the U.S. Loans made by such
U.S. Lender to the U.S. Borrower, such account or accounts shall, to the
extent not inconsistent with the notations made by the U.S. Agent in the
U.S. Register, be conclusive and binding on the U.S. Borrower absent
manifest error; PROVIDED, HOWEVER, that the failure of any U.S. Lender to
maintain such account or accounts shall not limit or otherwise affect any
Obligations of the U.S. Borrower or any other Obligor.
(b)(i) The U.S. Borrower hereby designates the U.S. Agent to serve as
the U.S. Borrower's agent, solely for the purpose of this CLAUSE (b), to
maintain a register (the "U.S. REGISTER") on which the U.S. Agent will
record each U.S. Lender's U.S. Commitment, the U.S. Loans made by each
U.S. Lender and each repayment in respect of the principal amount of the
U.S. Loans of each U.S. Lender and annexed to which the U.S. Agent shall
retain a copy of each Lender Assignment Agreement delivered to the U.S.
Agent pursuant to SECTION 12.11.1. Failure to make any recordation, or any
error in such recordation, shall not affect the U.S. Borrower's obligation
in respect of such U.S. Loans. The entries in the U.S. Register shall be
conclusive, in the absence of manifest error, and the U.S. Borrower, the
U.S. Agent and the U.S. Lenders shall treat each Person in whose name a
U.S. Loan (and as provided in CLAUSE (ii) the Note evidencing such U.S.
Loan, if any) is registered as the owner thereof for all purposes of this
Agreement, notwithstanding notice or any provision herein to the contrary.
A U.S. Lender's U.S. Commitment and the U.S. Loans made pursuant thereto
may be assigned or otherwise transferred in whole or in part only by
registration of such assignment or transfer in the U.S. Register. Any
assignment or transfer of a U.S. Lender's U.S. Commitment or the U.S.
Loans made pursuant thereto shall be registered in the U.S. Register only
upon delivery to the U.S. Agent of a Lender Assignment Agreement duly
executed by the assignor thereof. No assignment or transfer of a U.S.
Lender's U.S. Commitment or the U.S. Loans made pursuant thereto shall be
effective unless such assignment or transfer shall have been recorded in
the U.S. Register by the U.S. Agent as provided in this Section.
(ii) The U.S. Borrower agrees that, upon the request to the U.S.
Agent by any U.S. Lender, the U.S. Borrower will execute and deliver to
such U.S. Lender, as applicable, a U.S. Revolving Note, a Term B Note and
a Term C Note evidencing the U.S. Loans made by such U.S. Lender. The U.S.
Borrower hereby irrevocably authorizes each U.S. Lender to make (or cause
to be made) appropriate notations on the grid attached to such U.S.
Lender's Note (or on any continuation of such grid), which notations, if
made, shall evidence, INTER ALIA, the date of, the outstanding principal
of, and the interest rate and Interest Period applicable to the U.S. Loans
evidenced thereby. Such notations shall, to the extent not inconsistent
with the notations made by the U.S. Agent in the U.S. Register, be
conclusive and binding on the U.S. Borrower absent manifest error;
PROVIDED, HOWEVER, that the failure of any U.S. Lender to make any such
notations shall not limit or otherwise affect any Obligations of the U.S.
Borrower or any other Obligor. The Loans evidenced by any such Note and
interest thereon shall at all times (including after assignment pursuant
to SECTION 12.11.1) be represented by one or more Notes payable to
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the order of the payee named therein and its registered assigns. A Note
and the obligation evidenced thereby may be assigned or otherwise
transferred in whole or in part only by registration of such assignment
or transfer of such Note and the obligation evidenced thereby in the U.S.
Register (and each Note shall expressly so provide). Any assignment or
transfer of all or part of an obligation evidenced by a Note shall be
registered in the U.S. Register only upon surrender for registration of
assignment or transfer of the Note evidencing such obligation, accompanied
by a Lender Assignment Agreement duly executed by the assignor thereof,
and thereupon, if requested by the assignee, one or more new Notes shall
be issued to the designated assignee and the old Note shall be returned by
the U.S. Agent to the Borrower marked "exchanged". No assignment of a Note
and the obligation evidenced thereby shall be effective unless it shall
have been recorded in the U.S. Register by the U.S. Agent as provided in
this Section.
ARTICLE III
CANADIAN COMMITMENTS, BORROWING AND CANADIAN BAS
SECTION 3.1. CANADIAN COMMITMENTS. On the terms and subject to
the conditions of this Agreement (including SECTIONS 3.1.3, 3.1.4 and ARTICLE
VII),
(a) each Canadian Lender severally agrees to make Canadian Revolving
Loans (other than Canadian Swing Line Loans) pursuant to the Canadian
Commitments and the Canadian Swing Line Lender agrees to make Canadian
Swing Line Loans pursuant to the Canadian Swing Line Loan Commitment, in
each case as described in this SECTION 3.1, and each Canadian Lender
agrees to accept Canadian BAs in accordance with SECTION 3.5; and
(b) each Canadian Issuer severally agrees that it will issue
Canadian Letters of Credit pursuant to SECTION 3.1.2, and each Canadian
Lender severally agrees that it will purchase participation interests
in such Canadian Letters of Credit pursuant to SECTION 4.1.1.
Such agreements of each Canadian Lender are referred to collectively as its
"CANADIAN COMMITMENT", and all Canadian Commitments of Canadian Lenders are
referred to collectively as the "CANADIAN FACILITY".
SECTION 3.1.1. CANADIAN REVOLVING LOAN COMMITMENT AND CANADIAN SWING
LINE LOAN COMMITMENT. (a) From time to time on any Business Day occurring prior
to the Canadian Revolving Loan Commitment Termination Date, each Canadian Lender
will make revolving loans to or accept Canadian BAs of (relative to such Lender,
its "CANADIAN REVOLVING LOANS") the Canadian Borrower equal to such Canadian
Lender's Canadian Percentage of the aggregate amount of each Borrowing of the
Canadian Revolving Loans requested by the Canadian Borrower to be made on such
day. The Commitment of each such Canadian Lender described in this SECTION 3.1.1
is herein referred to as its "CANADIAN
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REVOLVING LOAN COMMITMENT". On the terms and subject to the conditions
hereof, the Canadian Borrower may from time to time borrow, prepay and
reborrow the Canadian Revolving Loans.
(b) From time to time on any Business Day occurring prior to the
Canadian Revolving Loan Commitment Termination Date, the Canadian Swing
Line Lender will make loans (relative to the Canadian Swing Line Lender,
its "CANADIAN SWING LINE LOANS") to the Canadian Borrower equal to the
principal amount of the Canadian Swing Line Loans requested by the
Canadian Borrower to be made on such day. The Commitment of the Canadian
Swing Line Lender described in this CLAUSE (b) is herein referred to as
its "CANADIAN SWING LINE LOAN COMMITMENT". On the terms and subject to the
conditions hereof, the Canadian Borrower may from time to time borrow,
prepay and reborrow Canadian Swing Line Loans.
SECTION 3.1.2. CANADIAN LETTER OF CREDIT COMMITMENT. From time
to time on any Business Day occurring prior to the Canadian Revolving Loan
Commitment Termination Date, the applicable Canadian Issuer will
(a) issue one or more standby or documentary letters of credit
(relative to such Canadian Issuer, its "CANADIAN LETTER OF CREDIT") for
the account of the Canadian Borrower (which may be for the benefit of a
Canadian Subsidiary that has delivered a Subsidiary Guaranty) in the
Stated Amount requested by the Canadian Borrower on such day; or
(b) extend the Stated Expiry Date of an existing standby Canadian
Letter of Credit previously issued hereunder to a date not later than
the earlier of (x) the Canadian Revolving Loan Commitment Termination
Date and (y) one year from the date of such extension.
SECTION 3.1.3. CANADIAN LENDERS NOT PERMITTED OR REQUIRED TO MAKE
LOANS. No Canadian Lender shall be permitted or required to make any
Canadian Loan if, after giving effect thereto, the aggregate outstanding
principal amount of
(a) all Canadian Revolving Loans
(i) of all Canadian Lenders and the outstanding principal amount
of all Canadian Swing Line Loans, together with the aggregate amount of
all Canadian Letter of Credit Outstandings, would exceed the then
existing Canadian Revolving Loan Commitment Amount; or
(ii) of such Canadian Lender, together with such Canadian Lender's
Canadian Percentage of the aggregate amount of all Canadian Letter of
Credit Outstandings and such Canadian Lender's Canadian Percentage of the
outstanding principal amount of all
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Canadian Swing Line Loans, would exceed such Canadian Lender's Canadian
Percentage of the then existing Canadian Revolving Loan Commitment
Amount; or
(b) (i) all Canadian Swing Line Loans would exceed the then existing
Canadian Swing Line Loan Commitment Amount or (ii) unless otherwise agreed
to by the Canadian Swing Line Lender, in its sole discretion, the sum of
all Canadian Swing Line Loans and Canadian Revolving Loans made by the
Canadian Swing Line Lender plus the Canadian Swing Line Lender's Canadian
Percentage multiplied by the aggregate amount of Canadian Letter of Credit
Outstandings would exceed the amount determined by multiplying the
Canadian Swing Line Lender's Canadian Percentage by the then existing
Canadian Revolving Loan Commitment Amount.
SECTION 3.1.4. CANADIAN ISSUER NOT PERMITTED OR REQUIRED TO ISSUE
CANADIAN LETTERS OF CREDIT. No Canadian Issuer shall be permitted or required to
issue any Canadian Letter of Credit if, after giving effect thereto, (a) the
aggregate amount of all Canadian Letter of Credit Outstandings would exceed the
Canadian Letter of Credit Commitment Amount or (b) the sum of the aggregate
amount of all Canadian Letter of Credit Outstandings plus the aggregate
principal amount of all Canadian Revolving Loans and Canadian Swing Line Loans
then outstanding would exceed the Canadian Revolving Loan Commitment Amount.
SECTION 3.2. REDUCTION OF THE CANADIAN COMMITMENT AMOUNTS;
REALLOCATION. The Canadian Commitment Amounts are subject to reduction from
time to time pursuant to SECTION 3.2.1, and to reallocation from time to time
pursuant to SECTION 3.2.2.
SECTION 3.2.1. OPTIONAL. The Canadian Borrower may, from time to time
on any Business Day occurring after the Effective Date, voluntarily reduce the
amount of the Canadian Revolving Loan Commitment Amount, the Canadian Swing Line
Loan Commitment Amount or the Canadian Letter of Credit Commitment Amount on the
Business Day so specified by the Canadian Borrower; PROVIDED, HOWEVER, that all
such reductions shall require at least one Business Day's prior notice to the
Canadian Agent and be permanent, and any partial reduction of any Canadian
Commitment Amount shall be in a minimum amount of Cdn $1,000,000 and in an
integral multiple of Cdn $500,000. Any reduction of the Canadian Revolving Loan
Commitment Amount which reduces the Canadian Revolving Loan Commitment Amount
below the then current amount of the Canadian Letter of Credit Commitment Amount
or the Canadian Swing Line Loan Commitment Amount, as the case may be, shall
result in an automatic and corresponding reduction of the Canadian Letter of
Credit Commitment Amount or the Canadian Swing Line Loan Commitment Amount, as
the case may be, to the amount of the Canadian Revolving Loan Commitment Amount,
as so reduced, without any further action on the part of any Canadian Lender,
any Canadian Issuer or the Canadian Swing Line Lender, as the case may be.
SECTION 3.2.2. REALLOCATION. At any time after the first anniversary
of the Effective Date and prior to the Canadian Revolving Loan Commitment
Termination Date, the Borrowers may, periodically after at least twelve months
have elapsed since the most recent
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reallocation made pursuant to this SECTION 3.2.2 or SECTION 2.2.3, upon five
Business Days' prior irrevocable written notice delivered to the Agents,
elect to reallocate the Cdn $ Equivalent of the unused U.S. Revolving Loan
Commitment Amount to the Canadian Revolving Loan Commitment Amount of the
Dual Lenders; PROVIDED, HOWEVER, that the Canadian Revolving Loan Commitment
Amount shall not at any time exceed the Cdn $ Equivalent of $20,000,000 (or
such lesser amount if the Canadian Revolving Loan Commitment Amount has been
permanently reduced in accordance with SECTION 3.2.1) as a result of such
reallocation. Any such reallocation will automatically reduce the U.S.
Revolving Loan Commitment Amount by a corresponding amount. Upon a
reallocation pursuant to this Section, the Canadian Lenders shall have the
same Canadian Percentage to make Canadian RL Loans as that which was in
effect on the Effective Date (as such Canadian Percentage to make Canadian RL
Loans many have been modified by way of a Lender Assignment Agreement
subsequent to the Effective Date).
SECTION 3.3. BORROWING PROCEDURES. Canadian Loans (other than
Canadian Swing Line Loans) shall be made by the Canadian Lenders in
accordance with SECTION 3.3.1, and Canadian Swing Line Loans shall be made by
the Canadian Swing Line Lender in accordance with SECTION 3.3.2.
SECTION 3.3.1. BORROWINGS OF OTHER THAN CANADIAN SWING LINE LOANS. In
the Case of other than Canadian Swing Line Loans, by delivering a Borrowing
Request to the Canadian Agent at or before 1:00 p.m. (local time) on a Business
Day, the Canadian Borrower may from time to time irrevocably request, on the
Business Day the proposed Borrowing is to be made in the case of Canadian Prime
Rate Loans (to the extent the aggregate outstanding principal amount of Canadian
Prime Rate Loans, including as a result of such requested Borrowing, does not
exceed Cdn $2,000,000) or on not less than one Business Day's notice (to the
extent the aggregate outstanding principal amount of Canadian Prime Rate Loans,
including as a result of such requested Borrowing, exceeds Cdn $2,000,000), or
three Business Days' notice in the case of Canadian BAs, and in any case not
more than five Business Days' notice, that a Borrowing be made, in the case of
Canadian Prime Rate Loans, in a minimum amount of Cdn $100,000 and an integral
multiple of Cdn $100,000, in the case of Canadian BAs, in a minimum amount of
Cdn $1,000,000 and an integral multiple of Cdn $100,000 or, in either case, in
the unused amount of the applicable Canadian Commitment; PROVIDED, HOWEVER, that
all initial Canadian Revolving Loans shall be made as Canadian Prime Rate Loans.
On the terms and subject to the conditions of this Agreement, each Borrowing
shall be comprised of the type of Canadian Revolving Loans, and shall be made on
the Business Day, specified in such Borrowing Request. On or before 11:00 a.m.
(local time) on such Business Day, each Canadian Lender that has a Canadian
Commitment to make the Canadian Revolving Loans being requested shall deposit
with the Canadian Agent same day funds in an amount equal to such Canadian
Lender's Canadian Percentage of the requested Borrowing. Such deposit will be
made to an account which the Canadian Agent shall specify from time to time by
notice to the Canadian Lenders. To the extent funds are received from the
Canadian Lenders, the Canadian Agent shall make such funds available to the
Canadian Borrower by wire transfer to the accounts the Canadian Borrower shall
have specified in its Borrowing Request. No
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Canadian Lender's obligation to make any Canadian Revolving Loan shall be
affected by any other Canadian Lender's failure to make any Canadian
Revolving Loan.
SECTION 3.3.2. CANADIAN SWING LINE LOANS. By telephonic notice,
promptly followed (within one Business Day) by the delivery of a confirming
Borrowing Request, to the Canadian Swing Line Lender on or before 1:00 p.m.
(local time) on the Business Day the proposed Canadian Swing Line Loan is to be
made, the Canadian Borrower may from time to time irrevocably request that
Canadian Swing Line Loans be made by the Canadian Swing Line Lender in an
aggregate minimum principal amount of Cdn $100,000 and an integral multiple of
Cdn $100,000. All Canadian Swing Line Loans shall be made as Canadian Prime Rate
Loans and shall not be entitled to be converted into Canadian BAs. The proceeds
of each Canadian Swing Line Loan shall be made available by the Canadian Swing
Line Lender, by its close of business on the Business Day telephonic notice is
received by it as provided in this Section, to the Canadian Borrower by wire
transfer to the account the Canadian Borrower shall have specified in its notice
therefor.
(a) If
(i) any Canadian Swing Line Loan shall be outstanding for more
than four Business Days;
(ii) any Canadian Swing Line Loan is or will be outstanding on a
date when the Canadian Borrower requests that a Canadian Revolving Loan
be made; or
(iii) any Default shall occur and be continuing,
each Canadian Lender (other than the Canadian Swing Line Lender) irrevocably
agrees that it will, at the request of the Canadian Swing Line Lender, make a
Canadian Revolving Loan (which shall initially be funded as a Canadian Prime
Rate Loan) in an amount equal to such Canadian Lender's Canadian Percentage of
the aggregate principal amount of all such Canadian Swing Line Loans then
outstanding (such outstanding Canadian Swing Line Loans hereinafter referred to
as the "REFUNDED CANADIAN SWING LINE LOANS"). On or before 11:00 a.m. (local
time) on the first Business Day following receipt by each Canadian Lender of a
request to make Canadian Revolving Loans as provided in the preceding sentence,
each such Canadian Lender shall deposit in an account specified by the Canadian
Swing Line Lender the amount so requested in same day funds and such funds shall
be applied by the Canadian Swing Line Lender to repay the Refunded Canadian
Swing Line Loans. At the time the aforementioned Canadian Lenders make the above
referenced Canadian Revolving Loans, the Canadian Swing Line Lender shall be
deemed to have made, in consideration of the making of the Refunded Canadian
Swing Line Loans, Canadian Revolving Loans in an amount equal to the Canadian
Swing Line Lender's Canadian Percentage of the aggregate principal amount of the
Refunded Canadian Swing Line Loans. Upon the making (or deemed making, in the
case of the Canadian Swing Line Lender) of any Canadian Revolving Loans pursuant
to this CLAUSE (b), the amount so funded shall become outstanding under such
Canadian Lender's Canadian
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Revolving Note and shall no longer be owed under the Canadian Swing Line
Note. All interest payable with respect to any Canadian Revolving Loans made
(or deemed made, in the case of the Canadian Swing Line Lender) pursuant to
this CLAUSE (b) shall be appropriately adjusted to reflect the period of time
during which the Canadian Swing Line Lender had outstanding Canadian Swing
Line Loans in respect of which such Canadian Revolving Loans were made. Each
Canadian Lender's obligation to make the Canadian Revolving Loans referred to
in this CLAUSE (b) shall be absolute and unconditional and shall not be
affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Canadian Lender may have
against the Canadian Swing Line Lender, the Canadian Borrower or any other
Person for any reason whatsoever; (ii) the occurrence or continuance of any
Default; (iii) any adverse change in the condition (financial or otherwise)
of the Canadian Borrower; (iv) the acceleration or maturity of any Canadian
Loans or the termination of any Canadian Commitment after the making of any
Canadian Swing Line Loan; (v) any breach of this Agreement or any other Loan
Document by the Canadian Borrower or any Canadian Lender; or (vi) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
SECTION 3.4. CONTINUATION AND CONVERSION ELECTIONS. By delivering
a Continuation/ Conversion Notice to the Canadian Agent on or before 1:00
p.m. (local time) on a Business Day, the Canadian Borrower may from time to
time irrevocably elect, on not less than one Business Day's notice in the
case of Canadian Prime Rate Loans, or three Business Days' notice in the case
of Canadian BAs, and in either case not more than five Business Days' notice,
that all, or any portion in an aggregate minimum amount of Cdn $100,000 and
an integral multiple of Cdn $100,000, in the case of Canadian Prime Rate
Loans, or an aggregate minimum amount of Cdn $1,000,000 and an integral
multiple of Cdn $100,000, in the case of Canadian BAs, be, in the case of
Canadian Prime Rate Loans, converted into Canadian BAs or be, in the case of
Canadian BAs, converted into Canadian Prime Rate Loans or rolled over as
Canadian BAs (in the absence of delivery of a Continuation/Conversion Notice
with respect to any Canadian BA at least three Business Days (but not more
than five Business Days) before the last day of the then current Interest
Period with respect thereto, such Canadian BA shall, on such last day,
automatically convert to a Canadian Prime Rate Loan); PROVIDED, HOWEVER, that
(x) each such conversion or continuation shall be pro rated among the
applicable outstanding Canadian Revolving Loans of all Canadian Lenders that
have made such Canadian Revolving Loans, and (y) no portion of the
outstanding principal amount of any Canadian Revolving Loans may be continued
as, or be converted into, Canadian BAs when any Default has occurred and is
continuing.
SECTION 3.4.1. CONVERTING CANADIAN PRIME RATE LOANS TO CANADIAN
BAS. Provided that the Canadian Borrower has, by giving notice to the
Canadian Agent in accordance with SECTION 3.4, requested the Canadian Lenders
to accept its drafts to replace all or a portion of an outstanding Canadian
Revolving Loan, then each Canadian Lender shall, on the date of conversion
and concurrent with the payment by the Canadian Borrower to the Canadian
Agent on behalf of the Canadian Lenders of the principal amount of such
outstanding Canadian Revolving Loan or the portion thereof which is being
converted less the Notional BA
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Proceeds with respect to the drafts to be accepted, accept the Canadian
Borrower's draft or drafts having an aggregate face amount equal to its
Canadian Percentage of the aggregate principal amount of such Canadian
Revolving Loan or the portion thereof which is being converted, such
acceptance to be in accordance with SECTION 3.5.1.
SECTION 3.4.2. CONVERTING CANADIAN BAS TO CANADIAN PRIME RATE
LOANS. Each Canadian Lender shall, at the end of an Interest Period with
respect to Canadian BAs which such Canadian Lender has accepted, pay to the
holder thereof the face amount of such Canadian BA. Provided that the
Canadian Borrower has, by giving notice to the Canadian Agent in accordance
with SECTION 3.4, requested the Canadian Lenders to convert all or a portion
of outstanding maturing Canadian BAs into a particular type of Canadian
Revolving Loan, each Canadian Lender shall, upon the end of an Interest
Period with respect to such Canadian BAs and the payment by such Canadian
Lender to the holders of such Canadian BAs of the aggregate face amount
thereof, make available to the Canadian Borrower the Canadian Revolving Loan
into which the matured Canadian BAs or a portion thereof are converted in the
aggregate principal amount equal to its Canadian Percentage of the aggregate
face amount of the matured Canadian BAs or the portion thereof which are
being converted.
SECTION 3.5. CANADIAN BAS. Not in limitation of any other
provision of this Agreement, but in furtherance thereof, the provisions of
this SECTION 3.5 shall further apply to the acceptance, rolling over and
conversion of Canadian BAs:
SECTION 3.5.1. FUNDING OF CANADIAN BAS. If the Canadian Agent
receives a Borrowing Request or a Continuation/Conversion Notice from the
Canadian Borrower requesting a Borrowing or a rollover of or a conversion
into a Canadian Revolving Loan by way of Canadian BAs, the Canadian Agent
shall notify each of the Canadian Lenders, prior to 11:00 a.m. (local time)
on the second Business Day prior to the date of such Credit Extension, of
such request and of each Canadian Lender's Canadian Percentage of such
Canadian Revolving Loan. Each Canadian Lender shall, not later than 11:30
a.m. (local time) on the date of each Canadian Revolving Loan by way of
Canadian BAs (whether in respect of the Credit Extension or pursuant to a
rollover or conversion), accept drafts of the Canadian Borrower which are
presented to it for acceptance and which have an aggregate face amount equal
to such Canadian Lender's Canadian Percentage of the total Credit Extension
being made available by way of Canadian BAs on such date. With respect to
each drawdown of, rollover of or conversion into Canadian BAs, each Canadian
Lender shall not be required to accept any draft which has a face amount
which is not in an integral multiple of Cdn $100,000. Each Canadian Lender
shall purchase its Canadian Percentage of any Canadian BAs. Concurrent with
the acceptance of drafts of the Canadian Borrower as aforesaid, each Canadian
Lender shall make available to the Canadian Agent its Canadian Percentage of
the Notional BA Proceeds with respect to such Credit Extension. The Canadian
Agent shall, upon fulfillment by the Canadian Borrower of the terms and
conditions set forth in ARTICLE VII, make such Notional BA Proceeds available
to the Canadian Borrower on the date of such Credit Extension by crediting
the designated account of the Canadian Borrower.
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SECTION 3.5.2. ACCEPTANCE FEES. With respect to each draft the
Canadian Borrower accepted pursuant hereto, the Canadian Borrower shall pay
to the Canadian Lenders, in advance, an acceptance fee calculated at the rate
per annum, on the basis of a year of 365 days or 366 days, as the case may
be, equal to the Applicable Canadian BA Stamping Fee on the face amount of
such Canadian BA for its term, being the actual number of days in the period
commencing on the date of acceptance of the Canadian Borrower's draft and
continuing to (but excluding) the maturity date of such Canadian BA. Such
acceptance fee shall be non-refundable and shall be fully earned when due.
Such acceptance fee shall be paid to the Canadian Lenders by deducting the
amount thereof from what would otherwise be Notional BA Proceeds (excluding
such fee) funded pursuant to SECTION 3.5.1.
SECTION 3.5.3. PRESIGNED DRAFT FORMS. To enable the Canadian
Lenders to accept Canadian BAs, the Canadian Borrower shall supply each
Canadian Lender with such number of drafts as such Canadian Lender may
reasonably request, duly endorsed and executed on behalf of the Canadian
Borrower. Each Canadian Lender agrees that, in respect of the safekeeping of
executed drafts of the Canadian Borrower which are delivered to it for
acceptance hereunder, it will exercise the same degree of care which it gives
to its own negotiable instruments; PROVIDED that such Canadian Lender shall
not be deemed to be an insurer thereof. Such Canadian Lender will, upon
request by the Canadian Borrower, promptly advise the Canadian Borrower of
the number and designations, if any, of the uncompleted drafts then held by
it. The signature of any duly authorized officer of the Canadian Borrower on
a draft may be mechanically reproduced in facsimile and drafts and Canadian
BAs bearing such facsimile signature shall be binding upon the Canadian
Borrower as if they had been manually signed by such officer. Notwithstanding
that any of the individuals whose manual or facsimile signature appears on
any draft as one of such officers may no longer hold office at the date
thereof or at the date of its acceptance by such Canadian Lender hereunder or
at any time thereafter, any draft or Canadian BA so signed shall be valid and
binding upon the Canadian Borrower. The receipt by the Canadian Agent of a
request for a Borrowing by way of Canadian BAs shall be each Canadian
Lender's sufficient authority to complete, and each Canadian Lender shall,
subject to the terms and conditions of this Agreement, complete the
pre-signed forms of drafts in accordance with such request and the advice of
the Canadian Agent as to the amount of the Canadian BAs to be accepted by
such Canadian Lender, and the drafts so completed shall thereupon be deemed
to have been presented for acceptance.
SECTION 3.5.4. BILL C-90. It is the intention of the parties that,
if the proposed Depository Bills and Notes Act is enacted in substantially
the terms of Bill C-90 to which first reading was given in the House of
Commons of Canada on March 13, 1997, all Canadian BAs accepted by Canadian
Lenders under this Agreement after the effective date of that Act and after
clearing services acceptable to the Canadian Borrower, the Canadian Lenders
and the Canadian Agent are available, shall be issued in the form of a
"depository bill" and deposited with a "clearing house," as those terms are
defined in Bill C-90. At that time, the Canadian Agent shall, in consultation
with the Canadian Borrower and the Canadian Lenders, establish and notify the
Canadian Borrower and the Canadian Lenders of such procedures, consistent
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with the terms of this Agreement and the requirements of the Act, as are
reasonably necessary to accomplish the parties' intention.
SECTION 3.6. SPECIAL PROVISIONS RELATING TO ACCEPTANCE NOTES. (a) The
Canadian Borrower and each Canadian Lender hereby acknowledges and agrees that
from time to time certain Canadian Lenders which are not Canadian chartered
banks or which are Canadian chartered banks listed on Schedule II of the Bank
Act (Canada) may not be authorized to or may, as a matter of general corporate
policy, elect not to accept Canadian BA drafts, and the Canadian Borrower and
each Canadian Lender agrees that any such Canadian Lender may purchase
Acceptance Notes of the Canadian Borrower in accordance with the provisions of
SECTION 3.6(B) in lieu of accepting Canadian BAs for its account.
(b) In the event that any Canadian Lender described in SECTION 3.6(A)
above is unable to, or elects as a matter of general corporate policy not
to, accept Canadian BAs hereunder, such Canadian Lender shall not accept
Canadian BAs hereunder, but rather, if the Canadian Borrower requests the
acceptance of such Canadian BAs, the Canadian Borrower shall deliver to
such Canadian Lender non-interest bearing promissory notes (each, an
"ACCEPTANCE NOTE") of the Canadian Borrower, substantially in the form of
EXHIBIT A-7 hereto, having the same maturity as the Canadian BAs to be
accepted and in an aggregate principal amount equal to the undiscounted
face amount of such Canadian BAs. Each such Canadian Lender hereby agrees
to purchase Acceptance Notes from the Canadian Borrower at a purchase
price equal to the Notional BA Proceeds which would have been applicable
if a Canadian BA draft had been accepted by such Canadian Lender and such
Acceptance Notes shall be governed by the provisions of this ARTICLE III
as if they were Canadian BAs.
SECTION 3.7. CANADIAN REGISTER; CANADIAN REVOLVING NOTES.
(a) Each Canadian Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the Indebtedness of the
Canadian Borrower to such Canadian Lender resulting from each Canadian
Loan made by such Canadian Lender, including the amounts of principal and
interest payable and paid to such Canadian Lender from time to time
hereunder. In the case of a Canadian Lender that does not request,
pursuant to PARAGRAPH (b)(ii) below, execution and delivery of a Note
evidencing the Canadian Revolving Loans made by such Canadian Lender to
the Canadian Borrower, such account or accounts shall, to the extent not
inconsistent with the notations made by the Canadian Agent in the Canadian
Register, be conclusive and binding on the Canadian Borrower absent
manifest error; PROVIDED, HOWEVER, that the failure of any Canadian Lender
to maintain such account or accounts shall not limit or otherwise affect
any Obligations of the Canadian Borrower or any other Obligor.
(b)(i) The Canadian Borrower hereby designates the Canadian Agent to
serve as the Canadian Borrower's agent, solely for the purpose of this
CLAUSE (b), to maintain a register (the "CANADIAN REGISTER") on which the
Canadian Agent will record each Canadian
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Lender's Canadian Commitment, the Canadian Loans made by each Canadian
Lender and each repayment in respect of the principal amount of the
Canadian Loans of each Canadian Lender and annexed to which the
Canadian Agent shall retain a copy of each Lender Assignment Agreement
delivered to the Canadian Agent pursuant to SECTION 12.11.1. Failure to
make any recordation, or any error in such recordation, shall not
affect the Canadian Borrower's obligation in respect of such Canadian
Loans. The entries in the Canadian Register shall be conclusive, in the
absence of manifest error, and the Canadian Borrower, the Canadian
Agent and the Canadian Lenders shall treat each Person in whose name a
Canadian Loan (and as provided in CLAUSE (ii) the Note evidencing such
Canadian Loan, if any) is registered as the owner thereof for all
purposes of this Agreement, notwithstanding notice or any provision
herein to the contrary. A Canadian Lender's Canadian Commitment and the
Canadian Loans made pursuant thereto may be assigned or otherwise
transferred in whole or in part only by registration of such assignment
or transfer in the Canadian Register. Any assignment or transfer of a
Canadian Lender's Canadian Commitment or the Canadian Loans made
pursuant thereto shall be registered in the Canadian Register only upon
delivery to the Canadian Agent of a Lender Assignment Agreement duly
executed by the assignor thereof. No assignment or transfer of a
Canadian Lender's Canadian Commitment or the Canadian Loans made
pursuant thereto shall be effective unless such assignment or transfer
shall have been recorded in the Canadian Register by the Canadian Agent
as provided in this Section.
(ii) The Canadian Borrower agrees that, upon the request to the
Canadian Agent by any Canadian Lender, the Canadian Borrower will execute
and deliver to such Canadian Lender a Canadian Revolving Note evidencing
the Canadian Loans made by such Canadian Lender to the Canadian Borrower.
The Canadian Borrower hereby irrevocably authorizes each Canadian Lender
to make (or cause to be made) appropriate notations on the grid attached
to such Canadian Lender's Canadian Revolving Note (or on any continuation
of such grid), which notations, if made, shall evidence, INTER ALIA, the
date of, the outstanding principal of, and the interest rate and Interest
Period applicable to the Canadian Revolving Loans evidenced thereby. Such
notations shall, to the extent not inconsistent with the notations made by
the Canadian Agent in the Canadian Register, be conclusive and binding on
the Canadian Borrower that issued such note absent manifest error;
PROVIDED, HOWEVER, that the failure of any Canadian Lender to make any
such notations shall not limit or otherwise affect any Obligations of the
Canadian Borrower or any other Obligor. The Loans evidenced by any such
Note and interest thereon shall at all times (including after assignment
pursuant to SECTION 12.11.1) be represented by one or more Notes payable
to the order of the payee named therein and its registered assigns. A
Canadian Revolving Note and the obligation evidenced thereby may be
assigned or otherwise transferred in whole or in part only by registration
of such assignment or transfer of such Canadian Revolving Note and the
obligation evidenced thereby in the Canadian Register (and each Canadian
Revolving Note shall expressly so provide). Any assignment or transfer of
all or part of an obligation evidenced by a Canadian Revolving Note shall
be registered in the Canadian Register only upon surrender for
registration of assignment or transfer of the Canadian Revolving Note
evidencing such obligation,
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accompanied by a Lender Assignment Agreement duly executed by the
assignor thereof, and thereupon, if requested by the assignee, one or
more new Canadian Revolving Notes shall be issued to the designated
assignee and the old Note shall be returned by the Canadian Agent to
the Canadian Borrower marked "exchanged". No assignment of a Canadian
Revolving Note and the obligation evidenced thereby shall be effective
unless it shall have been recorded in the Canadian Register by the
Canadian Agent as provided in this Section.
ARTICLE IV
U.S. AND CANADIAN LETTER OF CREDIT SUBFACILITIES
On the terms and subject to the conditions of this Agreement
(including ARTICLE VII), each Borrower, each Issuer and each Lender severally
agrees as follows:
SECTION 4.1. ISSUANCE PROCEDURES. By delivering an Issuance Request
to the Agent under either Facility on a local Business Day, at or before 1:00
p.m. (local time), the Borrower under such Facility may, from time to time
irrevocably request, on not less than three nor more than ten Business Days'
notice (or such other notice as may be acceptable in the sole discretion of the
applicable Issuer under such Facility), in the case of an initial issuance of a
Letter of Credit, and not less than three nor more than ten Business Days'
notice prior to the then existing Stated Expiry Date of a Letter of Credit
(unless a shorter or longer notice period is acceptable in the sole discretion
of the applicable Issuer under such Facility), in the case of a request for the
extension of the Stated Expiry Date of a Letter of Credit, that the applicable
Issuer under such Facility issue, or extend the Stated Expiry Date of, as the
case may be, an irrevocable Letter of Credit for such Borrower's account.
Notwithstanding anything to the contrary contained herein or in any separate
application for any Letter of Credit, each Borrower under each Facility hereby
acknowledges and agrees that (v) it shall be obligated to reimburse the
applicable Issuer under such Facility upon each Disbursement under a Letter of
Credit issued under such Facility and (w) it shall be deemed to be the obligor
for purposes of each Letter of Credit issued at its request under such Facility.
Upon receipt of an Issuance Request pursuant to either Facility, the Agent under
such Facility shall promptly provide notice thereof to each Issuer and each
Lender under such Facility. Each Letter of Credit shall by its terms be stated
to expire on a date (its "STATED EXPIRY DATE") no later than the earlier of (x)
the applicable scheduled Revolving Loan Commitment Termination Date or (y) one
year from the date of its issuance. The Issuer of each Letter of Credit will
make available to the beneficiary thereof the original of such Letter of Credit.
SECTION 4.1.1. OTHER LENDERS' PARTICIPATION. Upon the issuance of
each Letter of Credit pursuant to a Facility by an Issuer under such
Facility, and without further action, each RL Lender (other than such Issuer)
under such Facility shall be deemed to have irrevocably purchased from such
Issuer, to the extent of such Lender's Percentage of the Revolving Loan
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Commitment Amount under such Facility, and such Issuer shall be deemed to
have irrevocably granted and sold to such Lender a participation interest in
such Letter of Credit (including the contingent liability and any
Reimbursement Obligation and all rights with respect thereto), and such
Lender shall, to the extent of its Percentage of the Revolving Loan
Commitment Amount under such Facility, as the case may be, be responsible for
reimbursing promptly (and in any event within one Business Day) such Issuer
for Reimbursement Obligations which have not been reimbursed in accordance
with SECTION 4.1.3 by the Borrower which requested the issuance of such
Letter of Credit. In addition, each RL Lender under each Facility shall, to
the extent of its Percentage of the Revolving Loan Commitment Amount under
such Facility, be entitled to receive a ratable portion of the Letter of
Credit fees payable pursuant to SECTION 5.3.2 with respect to each Letter of
Credit issued under such Facility and of interest payable pursuant to SECTION
5.2 with respect to any Reimbursement Obligation. To the extent that any
Lender under either Facility has reimbursed an Issuer for a Disbursement as
required by this Section, such Lender shall be entitled to receive a portion,
according to its Percentage of the Revolving Loan Commitment Amount under
such Facility, of any amounts subsequently received (from the Borrower which
requested the issuance of such Letter of Credit or otherwise) in respect of
such Disbursement.
SECTION 4.1.2. DISBURSEMENTS; CONVERSION TO LOANS. Each Issuer of
a Letter of Credit issued pursuant to either Facility will notify the
Borrower which requested the issuance of such Letter of Credit and the
applicable Agent promptly of the presentment for payment of such Letter of
Credit, together with notice of the date (the "DISBURSEMENT DATE") such
payment shall be made (each such payment, a "DISBURSEMENT"). Subject to the
terms and provisions of such Letter of Credit and this Agreement, such Issuer
shall make such payment to the beneficiary (or its designee) of such Letter
of Credit. On the first Business Day following the Disbursement Date (the
"REIMBURSEMENT DUE DATE") such Borrower will reimburse the applicable Agent
for the account of the Issuer of such Letter of Credit, for all amounts which
such Issuer has disbursed under such Letter of Credit, together with interest
thereon at the rate per annum otherwise applicable to Loans under such
Facility (which shall, in the case of the Canadian Facility, be Canadian
Prime Rate Loans and, in the case of the U.S. Facility, be U.S. Base Rate
Loans) from and including the Disbursement Date to but excluding the
Reimbursement Due Date and, thereafter (unless such Disbursement is converted
into Canadian Prime Rate Loans or U.S. Base Rate Loans, as appropriate, on
the Reimbursement Due Date), at a rate per annum equal to the rate per annum
then in effect with respect to such overdue Canadian Prime Rate Loans or U.S.
Base Rate Loans, as the case may be, pursuant to SECTION 5.2.2 for the period
from the Reimbursement Due Date through the date of such reimbursement;
PROVIDED, HOWEVER, that, if no Default shall have then occurred and be
continuing, unless such Borrower has notified the applicable Agent no later
than one Business Day prior to the Reimbursement Due Date that it will
reimburse such Issuer for such Disbursement, then the amount of the
Disbursement shall be deemed to be a Borrowing under such Facility (which
shall, in the case of the Canadian Facility, be Canadian Prime Rate Loans
and, in the case of the U.S. Facility, be U.S. Base Rate Loans) and following
the giving of notice thereof by the applicable Agent to the RL Lenders under
such Facility, each such RL Lender under such Facility (other than such
Issuer) will deliver to such Issuer on the
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Reimbursement Due Date immediately available funds in an amount equal to such
Lender's Percentage of such Borrowing. Each conversion of Disbursement
amounts into a Borrowing shall constitute a representation and warranty by
such Borrower that on the date of such Borrowing all of the statements set
forth in SECTION 7.2.1 and 7.2.2 are true and correct.
SECTION 4.1.3. REIMBURSEMENT. If a Borrower shall fail to honor
its obligation (a "REIMBURSEMENT OBLIGATION") under SECTION 4.1.2 to
reimburse an Issuer with respect to a Disbursement (including interest
thereon) in respect of a Letter of Credit issued pursuant to either Facility
upon the request of such Borrower and such Disbursement is not converted into
a Borrowing pursuant to SECTION 4.1.2, then, upon notice thereof by the
applicable Agent to the RL Lenders under such Facility, each such Lender's
obligation under SECTION 4.1.1 to reimburse, according to its Percentage of
the Revolving Loan Commitment Amount under such Facility, such Issuer for
such Disbursement shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to
payment which such Borrower or such Lender, as the case may be, may have or
have had against such Issuer or any such Lender, including any defense based
upon the failure of any Disbursement to conform to the terms of the
applicable Letter of Credit (if, in such Issuer's good faith opinion, such
Disbursement is determined to be appropriate) or any non-application or
misapplication by the beneficiary of the proceeds of such Letter of Credit;
PROVIDED, HOWEVER, that after paying in full its Reimbursement Obligation
hereunder, nothing herein shall adversely affect the right of such Borrower
or such Lender, as the case may be, to commence any proceeding against such
Issuer for any wrongful Disbursement made by such Issuer under a Letter of
Credit as a result of acts or omissions constituting gross negligence or
willful misconduct on the part of such Issuer.
SECTION 4.1.4. DEEMED DISBURSEMENTS. Upon the occurrence and
during the continuation of any Event of Default of the type described in
SECTION 10.1.9 or, with notice from the U.S. Agent acting at the direction of
the Required Lenders, upon the occurrence and during the continuation of any
other Event of Default,
(a) an amount equal to that portion of all Letter of Credit
Outstandings attributable to the then aggregate amount which is undrawn
and available under all Letters of Credit outstanding under each Facility
shall, without demand upon or notice to any Borrower or any other Person,
be deemed to have been paid or disbursed by the Issuer of such Letters of
Credit (notwithstanding that such amount may not in fact have been so paid
or disbursed); and
(b) upon notification by the applicable Agent to such Borrower of
its obligations under this Section, such Borrower shall be immediately
obligated to reimburse such Issuer for the amount deemed to have been
so paid or disbursed by such Issuer.
Any amounts so payable by such Borrower pursuant to this Section shall be
deposited in cash with the applicable Agent and held as collateral security for
the Obligations of such Borrower in connection with such Letters of Credit
issued by such Issuer. At such time when the Events
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of Default giving rise to the deemed disbursements hereunder shall have been
cured or waived, the applicable Agent shall return to such Borrower all
amounts then on deposit with the applicable Agent pursuant to this Section,
together with accrued interest at the U.S. Federal Funds Rate, which have not
been applied to the satisfaction of such Obligations.
SECTION 4.1.5. NATURE OF REIMBURSEMENT OBLIGATIONS. Each Borrower
requesting the issuance of a Letter of Credit and, to the extent set forth in
SECTION 4.1.1, each RL Lender under the Facility pursuant to which such Letter
of Credit is issued shall assume all risks of the acts, omissions or misuse of
such Letter of Credit by the beneficiary thereof. Each Issuer (except to the
extent of its own gross negligence or willful misconduct) shall not be
responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any Letter of Credit or any document submitted by any party in
connection with the application for and issuance of a Letter of Credit,
even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder
or the proceeds thereof in whole or in part, which may prove to be invalid
or ineffective for any reason;
(c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or
otherwise; or
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under a
Letter of Credit.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to any Issuer or any RL Lender. In furtherance and
extension and not in limitation or derogation of any of the foregoing, any
action taken or omitted to be taken by any Issuer of a Letter of Credit in good
faith (and not constituting gross negligence or willful misconduct) shall be
binding upon the Borrower requesting the issuance of such Letter of Credit, each
Obligor and each RL Lender under the Facility pursuant to which such Letter of
Credit is issued, and shall not put such Issuer under any resulting liability to
such Borrower, any Obligor or any such Lender, as the case may be.
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ARTICLE V
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 5.1. REPAYMENTS AND PREPAYMENTS; APPLICATION.
SECTION 5.1.1. REPAYMENTS AND PREPAYMENTS. Each Borrower shall
repay (in U.S. Dollars with respect to U.S. Loans and in Canadian Dollars
with respect to Canadian Revolving Loans) in full the unpaid principal amount
of each Loan outstanding to it upon the applicable Stated Maturity Date
therefor. Prior thereto, payments and prepayments of Loans shall or may be
made as set forth below.
(a) From time to time on any Business Day, a Borrower may make a
voluntary prepayment, in whole or in part, of the outstanding principal
amount of any
(i) Loans (other than Canadian BAs and Swing Line Loans)
outstanding to it under either Facility; PROVIDED, HOWEVER, that
(A) any such prepayment of the Term B Loans or Term C
Loans outstanding to it shall be made PRO RATA among Term B
Loans or Term C Loans, as applicable, outstanding to it under
such Facility of the same type and, if applicable, having the
same Interest Period of all Lenders under such Facility that
have made such Term B Loans or Term C Loans (with the amounts so
allocated to such Term B Loans or Term C Loans being applied to
the remaining amortization payments for such Term B Loans or
Term C Loans, as applicable, in such amounts as such Borrower
shall determine) and any such prepayment of Revolving Loans
outstanding to it shall be made PRO RATA among the Revolving
Loans outstanding to it under such Facility of the same type
and, if applicable, having the same Interest Period of all
Lenders under such Facility that have made such Revolving Loans;
(B) all such voluntary prepayments shall require at least
one but no more than five Business Days' prior written notice to
the Agent under such Facility; and
(C) all such voluntary partial prepayments shall be, in
the case of LIBO Rate Loans, in an aggregate minimum amount of
$1,000,000 and an integral multiple of $500,000, in the case of
U.S. Base Rate Loans, in an aggregate minimum amount of $200,000
and an integral multiple of $200,000, and, in the case of
Canadian Prime Rate Loans, in an aggregate minimum amount of Cdn
$500,000 and an integral multiple of Cdn $250,000; and
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(ii) Swing Line Loans; PROVIDED that
(A) all such voluntary prepayments shall require prior
telephonic notice to the applicable Swing Line Lender on or
before 1:00 p.m. (local time) on the day of such prepayment
(such notice to be confirmed in writing within 24 hours
thereafter); and
(B) all such voluntary partial prepayments shall be, in
the case of U.S. Swing Line Loans, in an aggregate minimum
amount of $500,000 and an integral multiple of $250,000, and, in
the case of Canadian Swing Line Loans, in an aggregate minimum
amount of Cdn $100,000 and an integral multiple of Cdn $100,000.
(b) (i) On each date when the sum of (x) the aggregate outstanding
principal amount of all U.S. Revolving Loans and U.S. Swing Line Loans and
(y) the aggregate amount of all U.S. Letter of Credit Outstandings exceeds
the U.S. Revolving Loan Commitment Amount (as it may be reduced or
reallocated from time to time, including pursuant to SECTIONS 2.2 and
3.2), the U.S. Borrower shall make a mandatory prepayment of all U.S.
Revolving Loans or all U.S. Swing Line Loans (or both) in an aggregate
amount equal to such excess; and (ii) on each date when the sum of (x) the
aggregate outstanding principal amount of all Canadian Revolving Loans and
Canadian Swing Line Loans and (y) the aggregate amount of all Canadian
Letter of Credit Outstandings exceeds the Canadian Revolving Loan
Commitment Amount (as it may be reduced or reallocated from time to time,
including pursuant to SECTIONS 2.2 and 3.2), the Canadian Borrower shall
make a mandatory prepayment of all Canadian Revolving Loans or all
Canadian Swing Line Loans (or both) in an aggregate amount equal to such
excess.
(c) Concurrently with the receipt by the U.S. Borrower or any
Subsidiary of any Net Disposition Proceeds, the U.S. Borrower shall make a
mandatory prepayment of the Term Loans in an amount equal to 100% of such
Net Disposition Proceeds, to be applied as set forth in SECTION 5.1.2;
PROVIDED, HOWEVER, that to the extent any or all of the Net Disposition
Proceeds attributable to dispositions by non-U.S. Subsidiaries are
prohibited or delayed by applicable local law from being repatriated to
the United States, the portion of such Net Disposition Proceeds so
affected shall, so long as no Event of Default has occurred and is
continuing, to the extent permitted by CLAUSE (d)(ii) of SECTION 9.2.11,
not be required to be applied at the time provided above, and may be (but
shall not be required to be), at the election of the U.S. Borrower,
deposited in an escrow account maintained with a U.S. Lender and under the
sole dominion and control of the U.S. Agent (such account being referred
to as an "ESCROW ACCOUNT") pursuant to the terms of an escrow agreement
satisfactory in form and substance to the U.S. Agent, until such time as
the applicable local law will permit repatriation to the United States
(and the U.S. Borrower hereby agrees that it will, and will cause the
applicable Subsidiary to, promptly take all action required by the
applicable local law to permit such repatriation). If and when
repatriation of any of such affected Net Disposition Proceeds is permitted
under
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the applicable local law, such repatriation shall be immediately
effected and such repatriated Net Disposition Proceeds will be applied in
the manner set forth in this Agreement; PROVIDED, FURTHER, HOWEVER, that,
to the extent the Board of Directors of the U.S. Borrower determines, in
good faith, that repatriation of any or all of the Net Disposition
Proceeds attributable to dispositions by non-U.S. Subsidiaries would have
a material adverse tax consequence, the Net Disposition Proceeds so
affected, to the extent permitted by CLAUSE (d)(ii) of SECTION 9.2.11,
shall not be required to be applied as so provided, and may be (but shall
not be required to be), at the election of the U.S. Borrower, deposited in
an Escrow Account and under the sole dominion and control of the U.S.
Agent pursuant to the terms of an escrow agreement satisfactory in form
and substance to the U.S. Agent for so long as such material adverse tax
consequence continues (and the U.S. Borrower hereby agrees to promptly
deliver to the U.S. Agent a certificate of an Authorized Officer as to
such determination, together with all documents and calculations
considered by the Board of Directors in reaching its conclusion as to the
presence of a material adverse tax consequence). Provided that the U.S.
Borrower shall have complied with its obligations under this Agreement (A)
in connection with any Permitted Disposition consisting of the sale of all
of the shares of stock of any Subsidiary that is a party to a Subsidiary
Guaranty, the obligations of such Subsidiary that is a party to a
Subsidiary Guaranty under its Subsidiary Guaranty shall automatically be
discharged and released without any further action by the Agents or any
Lender (and the Agents and the Lenders hereby agree, upon the request (and
at the expense) of the U.S. Borrower, to execute and deliver any
instrument or other document in a form acceptable to the Agents which may
reasonably be required to evidence such discharge and release) and (B) in
connection with the sale or other disposition of the Capital Stock of a
Subsidiary, the Agents shall release to the pledgor thereof, without
representation, warranty or recourse, express or implied, the Capital
Stock of such Subsidiary held by it as pledged stock, if any, under a
Pledge Agreement.
(d) On the Stated Maturity Date and on each Quarterly Payment Date
occurring during any period set forth below (or, if a Quarterly Payment
Date occurs on the next succeeding Business Day pursuant to the definition
of Quarterly Payment Date, then on such next succeeding Business Day), the
U.S. Borrower shall make a scheduled repayment of the outstanding
principal amount, if any, of all Term B Loans in an amount equal to the
amount set forth below opposite the Stated Maturity Date or such Quarterly
Payment Date, as applicable:
AMOUNT OF REQUIRED
PERIOD PRINCIPAL PAYMENT
------ ------------------
09/15/97 through (and
including) 06/15/03 $ 112,500
06/16/03 through (and
including) 06/15/04 $6,750,000
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06/16/04 through (and
including) 9/15/04 $7,650,000
Stated Maturity Date for
Term B Loans $7,650,000, or the then
outstanding principal amount
of all Term B Loans, if
different.
(e) On the Stated Maturity Date and on each Quarterly Payment Date
occurring during any period set forth below (or, if a Quarterly Payment
Date occurs on the next succeeding Business Day pursuant to the definition
of Quarterly Payment Date, then on such next succeeding Business Day), the
U.S. Borrower shall make a scheduled repayment of the outstanding
principal amount, if any, of all Term C Loans in an amount equal to the
amount set forth below opposite the Stated Maturity Date or such Quarterly
Payment Date, as applicable:
AMOUNT OF REQUIRED
PERIOD PRINCIPAL PAYMENT
------ ------------------
9/15/97 through (and
including) 06/15/04 $ 100,000
06/16/04 through (and
including) 06/15/05 $6,000,000
06/16/05 through (and
including) 9/15/05 $6,600,000
Stated Maturity Date for
Term C Loans $6,600,000, or the then
outstanding principal
amount of all Term C
Loans, if different.
(f) Concurrently with the receipt by Parent or LHPG of any Net
Equity Proceeds, the U.S. Borrower shall make, or cause to be made, a
mandatory prepayment of the Term Loans in an amount equal to 50% of such
Net Equity Proceeds, to be applied as set forth in SECTION 5.1.2.
(g) No later than 5 Business Days following the delivery of the U.S.
Borrower's annual audited consolidated financial statements required
pursuant to CLAUSE (b) of SECTION 9.1.1 (beginning with the annual audited
consolidated financial statements
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delivered in respect of the Fiscal Year ended March 31, 1998) if the
U.S. Borrower's Leverage Ratio was greater than or equal to 3.50:1 for
the Fiscal Year to which such financial statements relate, the U.S.
Borrower shall deliver to the U.S. Agent a calculation of the Excess
Cash Flow for such Fiscal Year and, no later than 5 Business Days
following the delivery of such calculation, make a mandatory prepayment
of the Term Loans in an amount equal to 50% of the Excess Cash Flow (if
any) for such Fiscal Year, to be applied as set forth in SECTION 5.1.2.
(h) (i) On each date when any reduction in the U.S. Revolving Loan
Commitment Amount shall become effective, including pursuant to SECTION
2.2 or SECTION 5.1.2, the U.S. Borrower shall make a mandatory prepayment
of all U.S. Revolving Loans and U.S. Swing Line Loans, and, if required,
deliver cash collateral for U.S. Letter of Credit Outstandings, equal to
the excess, if any, of the aggregate outstanding principal amount of all
U.S. Revolving Loans, U.S. Swing Line Loans and U.S. Letter of Credit
Outstandings over the U.S. Revolving Loan Commitment Amount, as so
reduced; and (ii) on each date when any reduction in the Canadian
Revolving Loan Commitment Amount shall become effective, including
pursuant to SECTION 3.2 or SECTION 5.1.2, the Canadian Borrower shall make
a mandatory prepayment of all Canadian Revolving Loans and Canadian Swing
Line Loans, and, if required, deliver cash collateral for Canadian Letter
of Credit Outstandings, equal to the excess, if any, of the aggregate
outstanding principal amount of all Canadian Revolving Loans, Canadian
Swing Line Loans and Canadian Letter of Credit Outstandings over the
Canadian Revolving Loan Commitment Amount, as so reduced.
(i) Within one Business Day following the receipt of a notice from
the Canadian Agent that the then outstanding principal amount of Canadian
Revolving Loans is in excess of 110% of the Cdn $ Equivalent of the then
existing Canadian Revolving Loan Commitment Amount (based on a
determination made by the Canadian Agent in accordance with its customary
banking practice for determining currency exchange rates, which shall be
conclusive and binding on the Borrowers absent manifest error), the
Canadian Borrower shall make a repayment of the principal amount of the
Canadian Revolving Loans to the Canadian Agent in the amount necessary to
cause the outstanding principal amount of Canadian Revolving Loans to not
exceed the Cdn $ Equivalent of the then existing Canadian Revolving Loan
Commitment Amount. If immediate repayment is not possible because Canadian
BAs have not matured, the Canadian Borrower shall immediately pledge cash
to the Canadian Agent in the amount that would otherwise be payable, to be
held as security until the amount of the excess is paid in full.
(j) Immediately upon any acceleration of the Stated Maturity Date of
any Loans pursuant to SECTION 10.2 or SECTION 10.3, each Borrower shall
repay all the Loans outstanding to it, unless, pursuant to SECTION 10.3,
only a portion of all the Loans outstanding to it is so accelerated (in
which case the portion so accelerated shall be so prepaid).
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Each prepayment of any Loans made pursuant to this Section shall be without
premium or penalty, except as may be required by SECTION 6.4. If any such
prepayment or repayments described above relate to Canadian BAs which have not
matured, the Canadian Borrower shall at such time deposit in a cash collateral
account opened and maintained by the Canadian Agent, an amount equal to the
aggregate undiscounted face amount (or the portion thereof relating to the
portion of all Canadian Revolving Loans so accelerated, in the case of CLAUSE
(h)) of all such unmatured Canadian BAs and such amounts held in such cash
collateral account shall be applied by the Canadian Agent to the payment of
maturing Canadian BAs. No prepayment of principal of any Revolving Loans or
Swing Line Loans pursuant to CLAUSE (a) or (b) shall cause a reduction in either
Revolving Loan Commitment Amount or Swing Line Loan Commitment Amount, as the
case may be.
SECTION 5.1.2. APPLICATION. Amounts prepaid shall be applied as
set forth in this Section.
(a) Subject to CLAUSE (b), each prepayment or repayment of the
principal of the Loans shall be applied, to the extent of such prepayment
or repayment, FIRST, in the case of U.S. Loans, to the principal amount
thereof being maintained as U.S. Base Rate Loans, and, in the case of
Canadian Revolving Loans, to the principal amount thereof being maintained
as Canadian Prime Rate Loans, and SECOND, in the case of U.S. Loans, to
the principal amount thereof being maintained as LIBO Rate Loans, and, in
the case of Canadian Revolving Loans, to the principal amount thereof
being maintained as Canadian BAs; PROVIDED that mandatory prepayments of
LIBO Rate Loans made pursuant to CLAUSES (c), (f) and (g) of SECTION
5.1.1, if not made on the last day of the Interest Period with respect
thereto, shall, at the U.S. Borrower's option, so long as no Default has
occurred and is continuing, be prepaid subject to the provisions of
SECTION 6.4, or the amount required to be applied to the prepayment of
LIBO Rate Loans (after application to any U.S. Base Rate Loans) shall be
deposited with the U.S. Agent as cash collateral for such Loans on terms
reasonably satisfactory to the U.S. Agent and thereafter shall be applied
in the order of the Interest Periods next ending most closely to the date
of receipt of the proceeds in respect of which such prepayment is required
to be made and on the last day of each such Interest Period (together with
a payment of all interest that is due on the last day of each such
Interest Period pursuant to CLAUSE (d) of SECTION 5.2.3). After such
application, unless an Event of Default shall have occurred and be
continuing, any remaining interest earned on such cash collateral shall be
paid to the U.S. Borrower.
(b) Each prepayment of Term Loans made pursuant to CLAUSES (c), (f)
and (g) of SECTION 5.1.1 shall be applied (i) FIRST, PRO RATA to a
mandatory prepayment of the outstanding principal amount of all applicable
Term Loans (with the amount of such prepayment of such applicable Term
Loans being applied to the remaining applicable Term Loan amortization
payments, unless otherwise consented to by the Required Lenders, PRO RATA
in accordance with the amount of each such remaining Term Loan
amortization payment), until all such applicable Term Loans have been paid
in full, and (ii) SECOND, once all applicable Term Loans have been repaid
in full, to the repayment of
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any outstanding U.S. Revolving Loans and a reduction of the U.S.
Revolving Loan Commitment Amount in accordance with and subject to the
limitations set forth in SECTION 2.2.2.
SECTION 5.2. INTEREST PROVISIONS. Interest on the outstanding
principal amount of all Loans shall accrue and be payable in accordance with
this SECTION 5.2.
SECTION 5.2.1. RATES. Subject to SECTION 5.2.2, pursuant to an
appropriately delivered Borrowing Request or Continuation/Conversion Notice,
each Borrower may elect that Loans comprising a Borrowing accrue interest at
a rate per annum:
(a) in the case of the U.S. Borrower,
(i) on that portion maintained from time to time as a U.S.
Base Rate Loan, equal to the sum of the U.S. Alternate Base Rate from
time to time in effect plus the Applicable Margin; PROVIDED that the
Applicable Margin for U.S. Swing Line Loans shall be the then effective
Applicable Margin for U.S. Revolving Loans maintained from time to time
as U.S. Base Rate Loans, and
(ii) on that portion maintained from time to time as a LIBO
Rate Loan, during each Interest Period applicable thereto, equal to the
sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus
the Applicable Margin; and
(b) in the case of the Canadian Borrower, on that portion maintained
from time to time as a Canadian Prime Rate Loan, equal to the sum of the
Canadian Prime Rate from time to time in effect plus the Applicable
Margin; PROVIDED that the Applicable Margin for Canadian Swing Line Loans
shall be the then effective Applicable Margin for Canadian Revolving Loans
maintained from time to time as Canadian Prime Rate Loans.
All LIBO Rate Loans shall bear interest from and including the first
day of the applicable Interest Period to (but not including) the last day of
such Interest Period at the interest rate determined as applicable to such LIBO
Rate Loan.
SECTION 5.2.2. POST-MATURITY RATES. After the date any principal
amount of any Loan or Reimbursement Obligation is due and payable (whether on
the Stated Maturity Date, upon acceleration or otherwise), or after any other
monetary Obligation of any Borrower shall have become due and payable, such
Borrower shall pay, but only to the extent permitted by law, interest (after as
well as before judgment) on such amounts at a rate per annum equal to, in the
case of overdue amounts relating to the U.S. Facility, the U.S. Alternate Base
Rate from time to time in effect plus a margin of 2-1/2% and, in the case of
overdue amounts relating to the Canadian Facility, the Canadian Prime Rate from
time to time in effect plus a margin of 2-1/2%.
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SECTION 5.2.3. PAYMENT DATES. Interest accrued on each Loan
shall be payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole or in
part, of principal outstanding on such Loan on the principal amount so
paid or prepaid;
(c) with respect to U.S. Base Rate Loans and Canadian Prime Rate
Loans, in arrears on each Quarterly Payment Date occurring after the
Effective Date;
(d) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period (and, if such Interest Period shall exceed 3
months, on the third month anniversary of such Interest Period);
(e) with respect to any U.S. Base Rate Loans converted into LIBO
Rate Loans or Canadian Prime Rate Loans converted into Canadian BAs on
a day when interest would not otherwise have been payable pursuant to
CLAUSE (c), on the date of such conversion; and
(f) on that portion of any Loans the Stated Maturity Date of
which is accelerated pursuant to SECTION 10.2 or SECTION 10.3,
immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
SECTION 5.2.4. INTEREST ACT PROVISION.
(a) For the purposes of the Interest Act (Canada), whenever interest
payable pursuant to this Agreement is calculated with respect to any
monetary Obligation relating to the Canadian Facility on the basis of a
period other than a calendar year (the "CALCULATION PERIOD"), each rate of
interest determined pursuant to such calculation expressed as an annual
rate is equivalent to such rate as so determined, MULTIPLIED by the actual
number of days in the calendar year in which the same is to be ascertained
and DIVIDED by the number of days in the Calculation Period.
(b) The principal of deemed reinvestment of interest with respect
to any monetary Obligation relating to the Canadian Facility shall not
apply to any interest calculation under this Agreement.
(c) The rates of interest with respect to any monetary Obligation
relating to the Canadian Facility stipulated in this Agreement are
intended to be nominal rates and not effective rates or yields.
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SECTION 5.3. FEES. Each Borrower agrees to pay the fees
applicable to it set forth in this SECTION 5.3. All such fees shall be
non-refundable.
SECTION 5.3.1. COMMITMENT FEE. Each of the U.S. Borrower and the
Canadian Borrower agrees to pay to the Agent under its respective Facility
for the account of each Lender under such Facility, for the period (including
any portion thereof when any of its Commitments under such Facility are
suspended by reason of such Borrower's inability to satisfy any condition of
ARTICLE VII) commencing on the Effective Date and continuing through the
applicable Revolving Loan Commitment Termination Date, a commitment fee in an
amount equal to the Applicable Commitment Fee Margin, in each case on such
Lender's Percentage under such Facility of the sum of the average daily
unused portion of the applicable Commitment Amount (net of Letter of Credit
Outstandings, in the case of each Revolving Loan Commitment Amount, and net
of the average daily outstanding principal amount of Swing Line Loans, when
determining the commitment fee payable to a Swing Line Lender on its
Revolving Loan Commitment); PROVIDED, that notwithstanding anything to the
contrary contained in this Agreement, the Canadian Borrower shall not be
obligated to pay any such commitment fee that has accrued in respect of the
U.S. Revolving Loan Facility. All commitment fees payable pursuant to this
Section shall be calculated on a year comprised of 360 days and payable by
the Borrowers in arrears on each Quarterly Payment Date, commencing with the
first Quarterly Payment Date following the Effective Date, and on the
applicable Revolving Loan Commitment Termination Date. The making of Swing
Line Loans shall not constitute usage of a Revolving Loan Commitment with
respect to the calculation of commitment fees to be paid by the Borrowers to
the Lenders.
SECTION 5.3.2. AGENTS' FEES. Each Borrower severally and not
jointly agrees to pay to the Agent under its respective Facility, for such
Agent's own account, the fees in the amounts and on the dates set forth in
the Fee Letter (to the extent such Borrower is obligated to pay such fee
thereunder).
SECTION 5.3.3. LETTER OF CREDIT FEES. Each Borrower agrees to
pay to the Agent under its respective Facility, for the PRO RATA account of
the Issuers under such Facility and each other Lender that has a Revolving
Loan Commitment under such Facility, a Letter of Credit fee in an amount
equal to
(a) with respect to each standby Letter of Credit requested by
such Borrower, the then Applicable Margin for Revolving Loans
maintained as LIBO Rate Loans, multiplied by the Stated Amount of each
such Letter of Credit; and
(b) with respect to each documentary Letter of Credit requested
by such Borrower, 1.25% per annum multiplied by the Stated Amount of
each such Letter of Credit,
such fees being payable on the date of issuance of each Letter of Credit (for
the period from the date of issuance to the earlier of the expiration date of
the applicable Letter of Credit and the immediately succeeding Quarterly Payment
Date) and after such Quarterly Payment Date
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quarterly in arrears on each subsequent Quarterly Payment Date; PROVIDED,
that notwithstanding anything to the contrary contained in this Agreement,
the Canadian Borrower shall not be obligated to pay any such fees that have
accrued in respect of Letters of Credit issued under the U.S. Facility. Each
Borrower severally and not jointly further agrees to pay to the applicable
Issuer under such Facility on the date of issuance of each Letter of Credit
(for the period from the date of issuance to the earlier of the expiration
date of the applicable Letter of Credit and the immediately succeeding
Quarterly Payment Date, and after such Quarterly Payment Date quarterly in
arrears on each subsequent Quarterly Payment Date) an issuance fee as
specified in the Fee Letter (to the extent such Borrower is obligated to pay
such fee thereunder).
ARTICLE VI
CERTAIN LIBO RATE, CANADIAN BA AND OTHER PROVISIONS
SECTION 6.1. LIBO RATE LENDING UNLAWFUL. If any U.S. Lender shall
determine (which determination shall, upon notice thereof to the U.S.
Borrower and the U.S. Lenders, be conclusive and binding on the U.S.
Borrower) that the introduction of or any change in or in the interpretation
of any law makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for such U.S. Lender to make, continue
or maintain any U.S. Loan as, or to convert any U.S. Loan into, a LIBO Rate
Loan, the obligations of such U.S. Lender to make, continue, maintain or
convert any such LIBO Rate Loan shall, upon such determination, forthwith be
suspended until such U.S. Lender shall notify the U.S. Agent that the
circumstances causing such suspension no longer exist, and all outstanding
LIBO Rate Loans shall automatically convert into U.S. Base Rate Loans at the
end of the then current Interest Periods with respect thereto or sooner, if
required by such law or assertion.
SECTION 6.2. DEPOSITS UNAVAILABLE; CIRCUMSTANCES MAKING CANADIAN
BAS UNAVAILABLE. (a) If the U.S. Agent shall have determined that
(i) Dollar deposits in the relevant amount and for the relevant
Interest Period are not available to the U.S. Agent in its relevant
market; or
(ii) by reason of circumstances affecting the U.S. Agent's relevant
market, adequate means do not exist for ascertaining the interest rate
applicable hereunder to LIBO Rate Loans,
then, upon notice from the U.S. Agent to the U.S. Borrower and the U.S.
Lenders, the obligations of all U.S. Lenders under SECTION 2.3 and SECTION
2.4 to make or continue any U.S. Loans as, or to convert any U.S. Loans into,
LIBO Rate Loans shall forthwith be suspended until the U.S. Agent shall
notify the U.S. Borrower and the U.S. Lenders that the circumstances causing
such suspension no longer exist.
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(b) If the Canadian Agent shall have determined that by reason of
circumstances affecting the money market, there is no market for Canadian
BAs, then the right of the Canadian Borrower to request the acceptance of
Canadian BAs and the acceptance thereof shall be suspended until the
Canadian Agent determines that the circumstances causing such suspension
no longer exist and the Canadian Agent so notifies the Canadian Borrower.
SECTION 6.3. INCREASED LOAN COSTS, ETC. (a) The U.S. Borrower
agrees to reimburse each U.S. Lender for any increase in the cost to such
U.S. Lender of, or any reduction in the amount of any sum receivable by such
U.S. Lender in respect of, making, continuing or maintaining (or of its
obligation to make, continue or maintain) any U.S. Loans as, or of converting
(or of its obligation to convert) any U.S. Loans into, LIBO Rate Loans that
arise in connection with any change in, or the introduction, adoption,
effectiveness, interpretation, reinterpretation or phase-in after the date
hereof of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank,
regulator or other governmental authority, except for such changes with
respect to increased capital costs and taxes which are governed by SECTIONS
6.5 and 6.6, respectively. Such U.S. Lender shall promptly notify the U.S.
Agent and the U.S. Borrower in writing of the occurrence of any such event,
such notice to state, in reasonable detail, the reasons therefor and the
additional amount required to compensate fully such U.S. Lender for such
increased cost or reduced amount. Such additional amounts shall be payable by
the U.S. Borrower directly to such U.S. Lender within five days of its
receipt of such notice, and such notice shall, in the absence of manifest
error, be conclusive and binding on the U.S. Borrower.
Without limiting the foregoing, in the event that, as a result of
any such change, introduction, adoption or the like described above, the
LIBOR Reserve Percentage decreases for any U.S. Lender's LIBO Rate Loans,
such U.S. Lender shall give prompt notice thereof in writing to the U.S.
Agent and the U.S. Borrower. On the fifth day following delivery of such
notice, the LIBO Rate (Reserve Adjusted) attributable to such U.S. Lender's
LIBO Rate Loans shall be adjusted to give the U.S. Borrower the benefit of
such decrease (for so long as such decrease shall remain in effect).
(b) The Canadian Borrower agrees to reimburse each Canadian Lender
for any increase in the cost to such Canadian Lender of, or any reduction
in the amount of any sum receivable by such Canadian Lender in respect of,
making, continuing or maintaining (or of its obligation to make, continue
or maintain) any Canadian Revolving Loans to the Canadian Borrower as, or
of converting (or of its obligation to convert) any Canadian Revolving
Loans into, Canadian BAs that arise in connection with any change in, or
the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in after the date hereof of, any law or
regulation, directive, guideline, decision or request (whether or not
having the force of law) of any court, central bank, regulator or other
governmental authority, except for such changes with respect to increased
capital costs and taxes which are governed by SECTIONS 6.5 and 6.6,
respectively. Such Canadian Lender shall promptly notify the Canadian
Agent and the Canadian Borrower in writing of the occurrence of any
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such event, such notice to state, in reasonable detail, the reasons
therefor and the additional amount required fully to compensate such
Canadian Lender for such increased cost or reduced amount. Such
additional amounts shall be payable by the Canadian Borrower directly
to such Canadian Lender within five days of its receipt of such notice,
and such notice shall, in the absence of manifest error, be conclusive
and binding on the Canadian Borrower.
SECTION 6.4. FUNDING LOSSES. In the event any Lender shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue or maintain any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan into, a LIBO
Rate Loan or a Canadian BA, as the case may be) as a result of
(a) any conversion or repayment or prepayment of the principal
amount of any LIBO Rate Loans on a date other than the scheduled last
day of the Interest Period applicable thereto, whether pursuant to
SECTION 5.1, SECTION 6.11 or otherwise;
(b) any conversion, repayment or cash collateralization of any
Canadian BA on a date other than the scheduled maturity date applicable
thereto, whether pursuant to SECTION 5.1 or otherwise;
(c) any U.S. Loans not being made as LIBO Rate Loans or any
Canadian Revolving Loans not being made as Canadian BAs, in each case
in accordance with the Borrowing Request therefor; or
(d) any U.S. Loans not being continued as, or converted into,
LIBO Rate Loans or any Canadian Revolving Loans not being continued as,
or converted into, Canadian BAs, in each case in accordance with the
Continuation/Conversion Notice therefor,
then, upon the written notice of such Lender to the applicable Borrower (with a
copy to the applicable Agent), such Borrower shall, within five days of its
receipt thereof, pay directly to such Lender such amount as will (in the
reasonable determination of such Lender) reimburse such Lender for such loss or
expense. Such written notice (which shall include calculations in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
such Borrower.
SECTION 6.5. INCREASED CAPITAL COSTS. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lender or any Person controlling
such Lender, and such Lender determines (in good faith but in its sole and
absolute discretion) that the rate of return on its or such controlling Person's
capital as a consequence of the Commitments, acceptance of or participation in
Canadian BAs or the Loans made, or the
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Letters of Credit participated in, by such Lender is reduced to a level below
that which such Lender or such controlling Person could have achieved but for
the occurrence of any such circumstance, then, in any such case upon notice
from time to time by such Lender to the applicable Borrower, such Borrower
shall immediately pay directly to such Lender additional amounts sufficient
to compensate such Lender or such controlling Person for such reduction in
rate of return. A statement of such Lender as to any such additional amount
or amounts (including calculations thereof in reasonable detail) shall, in
the absence of manifest error, be conclusive and binding on such Borrower. In
determining such amount, such Lender may use any method of averaging and
attribution that it (in its sole and absolute discretion) shall deem
applicable.
SECTION 6.6. TAXES. (a) Except as set forth in the next sentence,
all payments by each Borrower of principal of, and interest on, the Loans and
all other amounts payable hereunder (including in respect of fees and
Reimbursement Obligations) shall be made free and clear of and without
deduction for any present or future income, excise, sales, goods and
services, value added or stamp taxes and other taxes, fees, duties,
withholdings or other charges of any nature whatsoever levied or imposed with
respect to such payments, in the case of the U.S. Borrower, by the United
States (or any taxing authority or political subdivision thereof) and, in the
case of the Canadian Borrower, Canada (or any taxing authority or political
subdivision thereof), and, in the case of either Borrower, by any other
jurisdiction as a result of a connection between such Borrower and such
jurisdiction, but excluding franchise taxes and taxes imposed on or measured
by net income, net receipts or capital of the applicable Agent or any Lender
(such non-excluded items being "TAXES"). In the event that any withholding or
deduction from any payment to be made by such Borrower hereunder is required
in respect of any Taxes pursuant to any applicable law, rule or regulation,
then such Borrower shall, subject to CLAUSES (b) through (f) below, SECTION
6.10 and SECTION 6.11,
(i) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(ii) promptly forward to the applicable Agent an official receipt
or other documentation reasonably satisfactory to the applicable Agent
evidencing such payment to such authority; and
(iii) pay to the applicable Agent for its account or the account of
the applicable Lenders, as the case may be, such additional amount or
amounts as necessary to ensure that the net amount actually received by
the applicable Agent or any such Lender, as the case may be, will equal
the full amount such Person would have received had no such withholding or
deduction been required.
Moreover, subject to CLAUSES (b) through (f) below, SECTION 6.10
and SECTION 6.11, if any Taxes are directly asserted against the applicable
Agent or any Lender with respect to any payment received by the applicable
Agent or such Lender hereunder, and such Taxes are then due and payable in
accordance with applicable law, and the applicable Agent or such Lender,
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as the case may be, shall pay such Taxes (and for purposes of this SECTION
6.6 and the rights of the applicable Agent and the Lenders hereunder, a
distribution by the applicable Agent or any Lender to or for the account of
the applicable Agent or any Lender shall be deemed a payment by or on behalf
of the applicable Borrower), such Borrower will promptly pay such additional
amounts (including any penalties, interest or expenses with respect to such
Taxes, together with interest on such Taxes at a rate per annum equal to the
highest rate per annum then in effect pursuant to SECTION 5.2 for the period
from the date such applicable Agent or such Lender paid such Taxes through
the date of reimbursement by such Borrower) as is necessary in order that the
total net amount received by such Person after the payment of such Taxes (and
any Taxes imposed on such additional amount) shall equal the amount such
Person would have received had no such Taxes been asserted.
If any Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the applicable Agent, for its account or
the account of the respective Lenders, as the case may be, the required receipts
or other required documentary evidence, such Borrower shall indemnify the
applicable Agent or such Lenders, as the case may be, for any incremental Taxes,
interest or penalties that may become payable by the applicable Agent or any
such Lender, as the case may be, as a result of any such failure.
(b) Each U.S. Lender and the U.S. Agent hereby severally (but not jointly)
represents that, under applicable law and treaties in effect as of the
date of the initial Credit Extensions in the case of the original
signatories to this Agreement and in effect as of the date of the
assignment or other transfer to or the appointment of a Person that
subsequently thereby becomes a U.S. Lender or the U.S. Agent, no United
States federal taxes will be required to be withheld by the U.S. Agent or
the U.S. Borrower with respect to any payments to be made to such Person
in respect of this Agreement. Each U.S. Lender that is an original
signatory hereto and the U.S. Agent agrees severally (but not jointly)
that, prior to the date of the initial Credit Extensions, and each Person
which becomes a U.S. Lender by assignment or transfer pursuant to SECTION
12.11 hereof or becomes the U.S. Agent by appointment pursuant to SECTION
11.4 hereof agrees that, prior to such assignment, transfer or
appointment, it will in each case deliver to the U.S. Borrower and the
U.S. Agent the following:
(i) in the case of a U.S. Lender that is a U.S. Person, two copies of
a statement certifying that such Person is a U.S. Person, which statement
shall contain the address of such Person's office or place of business in
the United States, and shall be signed by an authorized officer of such
Person, together with two duly completed copies of United States Internal
Revenue Service Form W-9 (or applicable successor form) (unless it
establishes to the reasonable satisfaction of such Borrower that it is
otherwise eligible for an exemption from backup withholding tax or other
applicable withholding tax), or
(ii) in the case of a U.S. Lender that is not a U.S. Person, either
(x) two duly completed copies of United States Internal Revenue Service
Form 1001 or 4224 (or applicable successor form) certifying in each case
that such Person is entitled to receive
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payments under this Agreement and the Notes payable to it, without
deduction or withholding of any United States federal taxes or (y) in
the case of a U.S. Lender that is not a "bank" within the meaning of
section 881(c)(3)(A) of the Code that does not deliver Forms 1001 or
4224 pursuant to CLAUSE (i), two duly completed copies of United States
Internal Revenue Service Form W-8 and a certificate of a duly
authorized officer of such U.S. Lender to the effect that such U.S.
Lender (a) is not a "bank" within the meaning of section 881(c)(3)(A)
of the Code, (b) is a not a 10-percent shareholder of the U.S. Borrower
within the meaning of section 881(c)(3)(B) of the Code and (c) is not a
controlled foreign corporation receiving interest from a related person
within the meaning of Section 881(c)(3)(C) of the Code and in either
case, if reasonably requested by such Borrower, two duly completed
copies of United States Internal Revenue Service Form W-8 or Form W-9
(or applicable successor form) or such other forms or certificates as
are prescribed by law, regulation or administrative practice and that
are necessary to establish an exemption from U.S. federal withholding
tax or backup withholding tax.
Each Person who delivers to the U.S. Borrower and the U.S. Agent a Form W-8,
W-9, 1001 or 4224, or applicable successor form, pursuant to this CLAUSE (b),
further undertakes to deliver to the U.S. Borrower and the U.S. Agent two
further copies of said Form W-8, W-9, 1001, 4224, or applicable successor form,
or other manner of certification, as the case may be, on or before the date that
any such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by it to the
U.S. Borrower, and such extensions or renewals thereof as may reasonably be
requested by the U.S. Borrower, certifying that such Person is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal taxes, unless in any such case any change in law, rule,
regulation, treaty or directive, or in the interpretation or application thereof
(a "LAW CHANGE"), has occurred prior to the date on which any such delivery
would otherwise be required which renders all such forms inapplicable or which
would prevent such Person from duly completing and delivering any such form with
respect to it, in which event, promptly following such Law Change, but in any
event prior to the time the next payment under the Notes is due following such
Law Change, such Person shall advise the U.S. Borrower in writing that it is not
capable of receiving payments without any deduction or withholding of United
States federal tax.
(c) Each Canadian Lender and the Canadian Agent hereby severally (but not
jointly) represents that, under applicable law and treaties in effect as of the
date of the initial Credit Extensions in the case of the original signatories to
this Agreement and in effect as of the date of the assignment or other transfer
to or the appointment of a Person that subsequently thereby becomes a Canadian
Lender or the Canadian Agent, no Canadian federal taxes will be required to be
withheld by the Canadian Agent or the Canadian Borrower with respect to any
payments to be made to such Person in respect of this Agreement.
(d) If, as a result of a Law Change, the applicable Agent or any Lender
(i) is unable to furnish a Borrower with an Internal Revenue Service form (or
other similar form) otherwise required to be delivered by it pursuant to this
SECTION 6.6 or (ii) makes any payment of Taxes,
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or becomes liable to make any payment of Taxes, with respect to payments by a
Borrower hereunder, such Borrower's continuing obligation to make payments to
the applicable Agent or such Lender under the terms of CLAUSE (a) shall be
conditioned on the applicable Agent or such Lender, as the case may be, prior
to the time that the next payment under the Notes is due following such Law
Change (and thereafter as is required by applicable law), having furnished
such Borrower with any necessary certificate and having taken such other
steps as may be commercially reasonably available to it (but in no event
shall the applicable Agent or any such Lender be required to take any action
which is inconsistent with its internal policies or would be otherwise
adverse to the applicable Agent or such Lender or its Credit Extensions
hereunder) under applicable tax laws and any applicable tax treaty or
convention to obtain an exemption from, or reduction (to the lowest
applicable rate) of, such Taxes. Notwithstanding any provision of CLAUSE (a)
to the contrary, no Borrower shall have any obligation to pay any Taxes
(except to the extent reasonably believed by such Borrower to be required by
law in which event such Taxes may be paid by withholding from amounts
otherwise payable to a Lender or the applicable Agent) pursuant to CLAUSE
(a), or to pay any amount to the applicable Agent or any Lender pursuant to
CLAUSE (a), to the extent that such amount results from (i) the failure of
any Lender or the applicable Agent to comply with its obligations pursuant to
this SECTION 6.6, SECTION 2.5 or CLAUSE (iii) or (iv) of the second proviso
of the first sentence of SECTION 12.11.1, (ii) any representation or warranty
made or, pursuant to any certificate required to be delivered hereunder or
under any Lender Assignment Agreement, deemed to be made by any Lender or the
applicable Agent pursuant to this SECTION 6.6, SECTION 2.5 or CLAUSE (iii) or
(iv) of the second proviso of the first sentence of SECTION 12.11.1 proving
to have been incorrect when made or deemed to have been made in any material
respect or (iii) such Person being a "conduit entity" (a "CONDUIT ENTITY")
within the meaning of U.S. Treasury Regulation Section 1.881-3 or any
successor provision thereto. Each Lender agrees to indemnify and hold
harmless each Borrower and the applicable Agent from and against any taxes,
penalties, interest or other costs or losses (including reasonable attorneys'
fees and expenses) incurred or payable by such Borrower or the applicable
Agent as a result of the failure of such Borrower or the applicable Agent to
comply with its obligations to deduct or withhold any Taxes from any payments
made pursuant to this Agreement to such Lender or the applicable Agent which
failure resulted from (i) such Borrower's or the applicable Agent's reliance
on any form, statement, certificate or other information provided to it by,
or made by, such Lender pursuant to this SECTION 6.6 or SECTION 12.11.1 or
(ii) such Lender being a Conduit Entity.
(e) If any Agent or any Lender receives a refund in respect of Taxes paid
by a Borrower, such Agent or Lender shall promptly pay such refund, together
with any other amounts paid by such Borrower pursuant to CLAUSE (a) in
connection with such refunded Taxes, to such Borrower, PROVIDED, HOWEVER, that
such Borrower agrees to promptly return such refund to the applicable Agent or
the applicable Lender, as the case may be, after it receives notice from the
applicable Lender that such Lender is required to repay such refund.
(f) The agreements in this Section shall survive the termination of this
Agreement and the payment of the Notes and all other amounts payable hereunder.
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SECTION 6.7. PAYMENTS, COMPUTATIONS, ETC. Unless otherwise expressly
provided, all payments by any Borrower pursuant to this Agreement, the Notes,
each Letter of Credit or any other Loan Document shall be made by such Borrower
to the applicable Agent (or, in the case of amounts received as a result of the
exercise of remedies, by such Agent to the applicable Secured Parties), in each
case, for the PRO RATA account of the applicable Secured Parties entitled to
receive such payments. All such payments required to be made to the applicable
Agent shall be made, without setoff, deduction or counterclaim, not later than
2:00 p.m. (local time) on the date due, in same day or immediately available
funds, to such account as the applicable Agent shall specify from time to time
by notice to such Borrower. Funds received after that time shall be deemed to
have been received by the applicable Agent on the next succeeding Business Day.
The applicable Agent shall promptly remit in same day funds to each applicable
Secured Party its share, if any, of such payments received by the applicable
Agent for the account of such Secured Party. All interest (including interest on
LIBO Rate Loans) and fees shall be computed on the basis of the actual number of
days (including the first day but excluding the last day) occurring during the
period for which such interest or fee is payable over a year comprised of 360
days (or, in the case of interest on a U.S. Base Rate Loan (calculated at other
than the Federal Funds Rate) or a Canadian Prime Rate Loan, 365 days or, if
appropriate, 366 days). Whenever any payment to be made shall otherwise be due
on a day which is not a Business Day, such payment shall (except as otherwise
required by CLAUSE (e) of the definition of the term "INTEREST PERIOD") be made
on the next succeeding Business Day and such extension of time shall be included
in computing interest and fees, if any, in connection with such payment.
SECTION 6.8. SHARING OF PAYMENTS. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Loan or Reimbursement Obligation (other
than pursuant to the terms of SECTION 6.3, 6.4, 6.5 or 6.6) in excess of its PRO
RATA share of payments then or therewith obtained by all Lenders making Loans
under the same Facility, such Lender shall purchase from the other Lenders such
participations in Credit Extensions made by them as shall be necessary to cause
such purchasing Lender to share the excess payment or other recovery ratably
with each of them; PROVIDED, HOWEVER, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing Lender,
the purchase shall be rescinded and each Lender which has sold a participation
to the purchasing Lender shall repay to the purchasing Lender the purchase price
to the ratable extent of such recovery together with an amount equal to such
selling Lender's ratable share (according to the proportion of
(a) the amount of such selling Lender's required repayment to the
purchasing Lender
TO
(b) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. Each Borrower agrees that any Lender
so purchasing a participation
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from another Lender pursuant to this Section may, to the fullest extent
permitted by law, exercise all its rights of payment (including pursuant to
SECTION 6.9) with respect to such participation as fully as if such Lender
were the direct creditor of such Borrower in the amount of such
participation. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section applies, such Lender shall, to the extent practicable, exercise
its rights in respect of such secured claim in a manner consistent with the
rights of the Lenders entitled under this Section to share in the benefits of
any recovery on such secured claim.
SECTION 6.9. SETOFF. Each Lender shall, upon the occurrence and
during the continuance of any Default described in CLAUSES (a) through (d) of
SECTION 10.1.9 with respect to a Borrower or any Significant Subsidiary or,
with the consent of the Required Lenders, upon the occurrence and during the
continuance of any other Event of Default, have the right to appropriate and
apply to the payment of the Obligations owing to it (whether or not then
due), and (as security for such Obligations) each Borrower hereby grants to
each Lender a continuing security interest in, any and all balances, credits,
deposits, accounts or moneys of such Borrower then or thereafter maintained
with such Lender; PROVIDED, HOWEVER, that any such appropriation and
application shall be subject to the provisions of SECTION 6.8. Each Lender
agrees promptly to notify such Borrower and the applicable Agent after any
such setoff and application made by such Lender; PROVIDED, HOWEVER, that the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including other rights of setoff under applicable
law or otherwise) which such Lender may have.
SECTION 6.10. LENDER'S DUTY TO MITIGATE. Each Lender agrees that
as promptly as practicable after it becomes aware of the occurrence of an
event or the existence of a condition that would cause it to be affected
under SECTION 6.1, 6.2, 6.5 or 6.6 or that would entitle such Lender to
receive payments under SECTION 6.3, such Lender will give notice thereof to
the applicable Borrower and, to the extent not inconsistent with such
Lender's internal policies (or, even if inconsistent with such internal
policies, if at such time or at a time reasonably near to such time such
Lender has taken action similar to the action contemplated by this Section
for the benefit of substantially all of its other similarly situated
commercial borrowers), such Lender shall use all commercially reasonable
efforts to make, fund or maintain its affected LIBO Rate Loans through
another lending office of such Lender if, as a result thereof, the additional
moneys which would otherwise be required to be paid to such Lender pursuant
to SECTION 6.2, 6.3, 6.5 or 6.6, as the case may be, would be materially
reduced, or the illegality or other adverse circumstances which would
otherwise require a conversion of such Loans pursuant to SECTION 6.1 would
cease to exist, and if, as determined by such Lender in its reasonable
discretion, the making, funding or maintaining of such Loans through such
other lending office would not otherwise materially adversely affect such
Loans or such Lender.
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SECTION 6.11. REPLACEMENT OF LENDERS. Each Lender hereby
severally agrees as set forth in this Section.
(a) If any Lender (a "SUBJECT LENDER") makes demand upon a Borrower
for (or if a Borrower is otherwise required to pay) amounts pursuant to
SECTION 6.2, 6.3, 6.5 or 6.6, or gives notice pursuant to SECTION 6.1
requiring a conversion of such Subject Lender's LIBO Rate Loans to U.S.
Base Rate Loans or Canadian BAs to Canadian Prime Rate Loans, the
applicable Borrower may, within 90 days of receipt by such Borrower of
such demand or notice (or the occurrence of such other event causing such
Borrower to be required to pay such compensation), as the case may be,
give notice (a " REPLACEMENT NOTICE") in writing to the applicable Agent
and such Subject Lender of its intention to replace such Subject Lender
with a financial institution designated in such Replacement Notice. If the
applicable Agent shall, in the exercise of its reasonable discretion and
within 30 days of its receipt of such Replacement Notice, notify such
Borrower and such Subject Lender in writing that the designated financial
institution is satisfactory to the applicable Agent, then such Subject
Lender shall, so long as no Default or Event of Default shall have
occurred and be continuing (and subject to the payment of any amounts due
pursuant to SECTION 6.4), assign, in accordance with SECTION 12.11.1, all
of its Commitments, Loans, Notes and other rights and obligations under
this Agreement and all other Loan Documents (including Reimbursement
Obligations) to such designated financial institution; PROVIDED, HOWEVER,
that (i) such assignment shall be without recourse, representation or
warranty (other than that such Lender owns the Commitments, Loans and
Notes being assigned, free and clear of any Liens) and shall be on terms
and conditions reasonably satisfactory to such Subject Lender and such
designated financial institution and (ii) the purchase price paid by such
designated financial institution shall be in the amount of such Subject
Lender's Loans and its Percentage of outstanding Reimbursement
Obligations, together with all accrued and unpaid interest and fees in
respect thereof, plus all other amounts (including the amounts demanded
and unreimbursed under SECTIONS 6.2, 6.3, 6.5 and 6.6), owing to such
Subject Lender hereunder.
(b) In the event that S&P or Moody's shall, after the date that any
Person becomes a Lender, downgrade the long-term certificate of deposit
ratings of such Lender, and the resulting ratings shall be below BBB- or
Baa3, respectively, or the equivalent, then the applicable Borrower and
each applicable Issuer shall each have the right, but not the obligation,
upon notice to such Lender and the applicable Agent, to replace such
Lender with a financial institution (a "REPLACEMENT LENDER") acceptable to
such Borrower and the applicable Agent (such consents not to be
unreasonably withheld or delayed; PROVIDED that no such consent shall be
required if the Replacement Lender is an existing Lender), and upon any
such downgrading of any Lender's long-term certificate of deposit rating,
each such Lender hereby agrees to transfer and assign (in accordance with
and subject to the restrictions contained in SECTION 12.11.1) its
Commitments, Loans, Notes and other rights and obligations under this
Agreement and all other Loan Documents (including Reimbursement
Obligations) to such Replacement Lender; PROVIDED, HOWEVER, that (i) such
assignment shall be without recourse, representation or warranty (other
than that such
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Lender owns the Commitments, Loans and Notes being assigned, free and
clear of any Liens) and (ii) the purchase price paid by the Replacement
Lender shall be in the amount of such Lender's Loans and its Percentage
of outstanding Reimbursement Obligations, together with all accrued and
unpaid interest and fees in respect thereof, plus all other amounts
(other than the amounts (if any) demanded and unreimbursed under
SECTIONS 6.2, 6.3, 6.5 and 6.6, which shall be paid by such Borrower),
owing to such Lender hereunder. Upon any such termination or
assignment, such Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of any provisions of this
Agreement which by their terms survive the termination of this
Agreement.
(c) Upon the effective date of an assignment described in CLAUSE (a)
or (b), the applicable Borrower shall issue a replacement Note or Notes,
as the case may be, to such designated financial institution or
Replacement Lender, as applicable, and such institution shall become a
"Lender" for all purposes under this Agreement and the other Loan
Documents. In the case of CLAUSE (a), the applicable Agent agrees to use
all commercially reasonable efforts to assist such Borrower in locating a
replacement financial institution to replace any Subject Lender; PROVIDED,
HOWEVER, that such Agent shall have no obligation to become a Replacement
Lender; PROVIDED, FURTHER, HOWEVER, that such Borrower agrees to pay all
reasonable costs and expenses incurred by the applicable Agent in
providing such assistance.
ARTICLE VII
CONDITIONS TO CREDIT EXTENSIONS
SECTION 7.1. INITIAL CREDIT EXTENSIONS. The obligations of each
Lender and each Issuer to fund the initial Credit Extensions shall be subject
to the prior or concurrent satisfaction of each of the conditions precedent
set forth in this SECTION 7.1.
SECTION 7.1.1. RESOLUTIONS, ETC. The Agents shall have received from
(i) each U.S. Obligor, as applicable, a copy of a good standing certificate or
similar certificate issued by the relevant jurisdiction, dated a date reasonably
close to the Effective Date, for each such Person and (ii) from each Obligor, a
certificate, dated the date of the initial Credit Extensions and with
counterparts for each Lender, duly executed and delivered by such Person's
Secretary or Assistant Secretary as to
(a) resolutions of each such Person's Board of Directors then in full
force and effect authorizing, to the extent relevant, all aspects of the
Transaction applicable to such Person and the execution, delivery and
performance of such of the Merger Agreement, any other Transaction
Document, this Agreement, the Notes and each other Loan Document to be
executed by such Person and the transactions contemplated hereby and
thereby;
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(b) the incumbency and signatures of those of its officers
authorized to act, if applicable, with respect to the Merger Agreement,
any other Transaction Document, this Agreement, the Notes and each
other Loan Document to be executed by such Person; and
(c) the full force and validity of each Organic Document of such
Person together with copies thereof,
upon which certificates each Lender, each Issuer and each Agent may conclusively
rely until it shall have received a further certificate of the Secretary or
Assistant Secretary of any such Person canceling or amending the prior
certificate of such Person.
SECTION 7.1.2. DELIVERY OF DOCUMENTS. The Agents shall have
received (with copies for each Lender (but (unless otherwise requested by a
Lender) excluding from such copies the disclosure schedules, copies of which
will be on file with the Agents) a fully executed copy of the Merger
Agreement, and, to the extent required by SECTION 7.1.3, all other
Transaction Documents that are required to be delivered pursuant to the terms
of the Merger Agreement. The Agents shall be satisfied with all material
amendments, waivers or other modifications of, or other forbearance to
exercise any material rights with respect to, any of the terms or provisions
of the Merger Agreement and the exhibits and schedules thereto.
SECTION 7.1.3. TRANSACTION CLOSING PAPERS. To the extent not
received pursuant to SECTION 7.1.2, the Agents shall have received a
certificate (which may be the U.S. Borrower Closing Date Certificate), dated
the date of the initial Credit Extensions, of an Authorized Officer of the
U.S. Borrower certifying as to a true and complete copy of the Merger
Agreement and, to the extent requested by the Agents, all other Transaction
Documents.
SECTION 7.1.4. CONSUMMATION OF TRANSACTION. The U.S. Agent shall
have received evidence reasonably (in the case of CLAUSE (b)) satisfactory to
it that (a) the Merger has been (or contemporaneously with the making of the
initial Credit Extensions, will be) consummated in accordance with the Merger
Agreement and (b) all other aspects of the Transaction have been or,
contemporaneously with the making of the initial Credit Extensions, will be
consummated.
SECTION 7.1.5. RECEIPT OF CAPITAL CONTRIBUTION, ETC. The U.S.
Agent shall have received evidence reasonably satisfactory to it that
(a) contemporaneously with the making of the initial Credit
Extensions, (i) North Castle will purchase LHPG Common Stock for a cash
amount of not less than $75,000,000, and the U.S. Borrower shall have
received a cash equity contribution of not less than $75,000,000, (ii)
certain current members of management and employees of, and consultants
to, LHPG and its Subsidiaries and C. Baird will hold or have the right to
receive shares of LHPG Common Stock with a value of at least $14,000,000
and such LHPG Common Stock, together with the shares thereof purchased by,
or contributed to, North Castle, will have a value of $99,000,000 based
upon the per share price so paid by
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North Castle, and (iii) members of the AEA Group and certain former
members of management and employees of LHPG and its Subsidiaries will
hold shares of LHPG Common Stock that will have a value of
approximately $11,000,000 based on such per share purchase price, in
each case in accordance with the Merger Agreement or otherwise on terms
and conditions reasonably satisfactory to the U.S. Agent, and the
Transaction shall be consummated for aggregate consideration not to
exceed $360,000,000 (including the refinancing of Indebtedness of the
U.S. Borrower and its Subsidiaries and transaction fees and expenses
other than Covered Expenses as defined in the Merger Agreement); and
(b) the aggregate amount of fees and expenses incurred by the U.S.
Borrower, Parent and LHPG in connection with the Transaction (excluding
management bonuses and fees and expenses incurred by existing Leiner
stockholders that are not paid or payable by LHPG or its Subsidiaries and
excluding "Covered Expenses", as defined and used in the Merger Agreement)
have not exceeded $19,000,000.
SECTION 7.1.6. SUBORDINATED DEBT. The Agents shall have received
evidence reasonably satisfactory to them that the U.S. Borrower has received
(or, contemporaneously with the making of the initial Credit Extensions will
receive), at least $85,000,000 in gross proceeds from the issuance of the
Subordinated Notes to the Subordinated Note Holders, which Subordinated Notes
and all other Subordinated Note Instruments shall be in form and substance
reasonably satisfactory to the Agents.
SECTION 7.1.7. DELIVERY OF NOTES. The Agents shall have received, (i)
for the account of each U.S. Lender that has requested a Note on or prior to
5:00 p.m., New York time, on June 27, 1997, such U.S. Lender's U.S. Notes duly
executed and delivered by an Authorized Officer of the U.S. Borrower, and (ii)
for the account of each Canadian Lender that has requested a Note on or prior to
5:00 p.m., New York time, on June 27, 1997, such Canadian Lender's Canadian
Revolving Notes duly executed and delivered by an Authorized Officer of the
Canadian Borrower.
SECTION 7.1.8. PLEDGE AGREEMENTS. The Agents shall have received,
with counterparts for each Lender,
(a) the U.S. Borrower Pledge Agreement, dated as of the date
hereof, duly executed and delivered by an Authorized Officer of the
U.S. Borrower, together with
(i) certificates evidencing 65% of the Capital Stock of
Canadian Holdings, which certificates shall in each case be
accompanied by undated stock powers duly executed in blank,
(ii) all Pledged Notes (as defined in the U.S. Borrower
Pledge Agreement), if any, evidencing Indebtedness payable to
the U.S. Borrower, duly endorsed to the order of the Agents, and
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(iii) UCC financing statements (or similar instruments) in
respect of such Pledged Notes executed by each payee of a Pledged
Note to be filed in such jurisdictions as the Agents may reasonably
request;
(b) the Parent Pledge Agreement, dated as of the date hereof, duly
executed and delivered by an Authorized Officer of Parent, together with
certificates evidencing all of the issued and outstanding Capital Stock of
the U.S. Borrower, which certificates shall be accompanied by undated
stock powers duly executed in blank;
(c) the Canadian Holdings Pledge Agreement, dated as of the date
hereof, duly executed and delivered by an Authorized Officer of Canadian
Holdings, together with
(i) certificates evidencing all of the issued and
outstanding Capital Stock of the Canadian Borrower, which
certificates shall be accompanied by undated stock powers duly
executed in blank,
(ii) all Pledged Notes (as defined in the Canadian Holdings
Pledge Agreement), if any, evidencing Indebtedness payable to
Canadian Holdings, duly endorsed to the order of the Canadian
Agent, and
(iii) PPSA financing statements (or similar instruments) in
respect of the Canadian Holdings Pledge Agreement to be filed in
such jurisdictions as the Canadian Agent may reasonably request;
(d) the Canadian Borrower Pledge Agreement, dated as of the date
hereof, duly executed and delivered by an Authorized Officer of the
Canadian Borrower, together with
(i) certificates evidencing all of the issued and
outstanding Capital Stock of 64804 Manitoba Ltd. and Westcan
Pharmaceuticals Ltd., which certificates shall be accompanied by
undated stock powers duly executed in blank,
(ii) all Pledged Notes (as defined in the Canadian Holdings
Pledge Agreement), if any, evidencing Indebtedness payable to the
Canadian Borrower, duly endorsed to the order of the Canadian
Agent, and
(iii) PPSA financing statements (or similar instruments) in
respect of the Canadian Borrower Pledge Agreement to be filed in
such jurisdictions as the Canadian Agent may reasonably request;
and
(e) the Agents and their counsel shall be reasonably satisfied
that
(i) the Lien granted to the applicable Agent, for the
benefit of the Secured Parties, in the collateral described above
is a first priority (or local equivalent thereof) security
interest; and
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(ii) no Lien exists on any of the collateral described above
other than the Lien created in favor of the applicable Agent, for
the benefit of the Secured Parties, pursuant to a Pledge Agreement.
SECTION 7.1.9. MANAGEMENT SERVICES AGREEMENT. The U.S. Agent shall
have received a copy of the Management Services Agreement, dated as of the date
hereof, executed and delivered by the parties thereto, and the Management
Services Agreement shall be in form and substance satisfactory to the U.S.
Agent.
SECTION 7.1.10. GUARANTIES. The Agents shall have received, with
counterparts for each Lender, the Parent Guaranty, the U.S. Borrower
Guaranty, the Canadian Holdings Guaranty and each Canadian Subsidiary
Guaranty.
SECTION 7.1.11. SECURITY AGREEMENTS. The Agents shall have received,
with counterparts for each Lender, executed counterparts of the U.S. Borrower
Security Agreement, the Canadian Borrower Debenture, the Canadian Holdings
Debenture and each Canadian Subsidiary Debenture, each dated as of the date
hereof, duly executed by the applicable grantor party thereto, together with
(a) executed copies of Uniform Commercial Code financing statements
(Form UCC-1) or PPSA financing statements, naming the applicable grantor
as a debtor and the applicable Agent as the secured party, or other
similar instruments or documents, to be filed under the Uniform Commercial
Code or PPSA, as the case may be, of all jurisdictions as may be necessary
or, in the reasonable opinion of the applicable Agent, desirable to
perfect the security interests of the applicable Agent pursuant to the
applicable Security Agreement;
(b) executed copies of proper Uniform Commercial Code Form UCC-3
termination statements or similar PPSA instruments, if any, necessary
to release all Liens and other rights of any Person
(i) in any collateral described in such Security Agreement
previously granted by any Person, and
(ii) securing any of the Indebtedness identified in ITEM
9.2.2(B)(I) ("Indebtedness to be Paid") of the Disclosure Schedule,
together with such other Uniform Commercial Code Form UCC-3 termination
statements or similar PPSA instruments as the applicable Agent may reasonably
request; and
(c) certified copies of Uniform Commercial Code Requests for
Information or Copies (Form UCC-11) or similar PPSA instruments, or a
similar search report certified by a party acceptable to the applicable
Agent, dated a date reasonably near to the date of the initial Credit
Extension, listing all effective financing statements which name the
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applicable grantor (under its present name and any previous names used by
it within four months prior to the Closing Date) as the debtor and which
are filed in the jurisdictions in which filings were made pursuant to
CLAUSE (A) above, together with copies of such financing statements (none
of which shall cover any collateral described in such Security Agreement).
SECTION 7.1.12. TRADEMARK SECURITY AGREEMENT. The Agents shall
have received a Trademark Security Agreement, dated as of the date of the
initial Credit Extension, duly executed and delivered by the U.S. Borrower.
SECTION 7.1.13. MORTGAGES. The Agents shall have received
counterparts of each Mortgage, dated as of the date hereof, duly executed by
each of the U.S. Borrower, the Canadian Borrower and each other Obligor that
owns Mortgaged Real Property, as applicable, together with
(a) with respect to other than the Mortgaged Real Property in
Michigan, satisfactory arrangements for the completion of all recordings
and filings of each such Mortgage as may be necessary or, in the
reasonable opinion of the Agents, desirable effectively to create a valid,
perfected first priority Lien against the properties purported to be
covered thereby;
(b) in the case of Mortgages delivered by the U.S. Borrower (for
other than Mortgaged Real Property in Michigan), mortgagee's title
insurance policies in favor of the U.S. Agent and the Lenders in amounts
and in form and substance and issued by insurers, reasonably satisfactory
to the Agents, with respect to the property purported to be covered by
each Mortgage on such real property, insuring that title to such property
is marketable and that the interests created by such Mortgage constitute
valid first Liens thereon free and clear of all defects and encumbrances
other than those Liens permitted pursuant to SECTION 9.2.3 and those Liens
as approved by the Agents, and such policies shall also include, to the
extent then available, a survey reading, and, if required by the Mortgagee
and if available, a revolving credit endorsement, a comprehensive
endorsement, a variable rate endorsement, access and utilities
endorsements, a mechanic's lien endorsement and such other endorsements as
the Agents shall reasonably request and shall be accompanied by evidence
of the payment in full of all premiums thereon; PROVIDED, that, in the
case of zoning endorsements, if any, no additional premiums will be
required in excess of $2,000 for each Mortgaged Real Property; and
(c) such other approvals, opinions, or documents as the Agents may
reasonably request including consents and estoppel agreements from
landlords, to the extent then available, a current survey of each property
purported to be covered by a Mortgage in form and substance reasonably
satisfactory to the Agents and the title insurer.
SECTION 7.1.14. CLOSING DATE CERTIFICATES. The Agents shall have
received, with counterparts for each Lender, the U.S. Borrower Closing Date
Certificate, the Canadian
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Borrower Closing Date Certificate and the Parent Closing Date Certificate,
each dated the date of the initial Credit Extensions and duly executed and
delivered by an Authorized Officer of the U.S. Borrower, the Canadian
Borrower and Parent, as the case may be, in which certificates the U.S.
Borrower, the Canadian Borrower and Parent, as the case may be, shall agree
and acknowledge that the statements made therein shall be deemed to be true
and correct representations and warranties of the U.S. Borrower, the Canadian
Borrower and Parent, as the case may be, made as of such date (and in the
case of the U.S. Borrower and the Canadian Borrower, under this Agreement),
and, at the time each such certificate is delivered, such statements shall in
fact be true and correct. All documents and agreements required to be
appended to such Closing Date Certificates shall be in form and substance
reasonably satisfactory to the Agents.
SECTION 7.1.15. COMPLIANCE CERTIFICATE. The Agents shall have
received, with counterparts for each Lender, an initial Compliance
Certificate on a consolidated pro forma basis as if the Transaction had been
consummated and the Credit Extensions to be made on the date of the initial
Credit Extensions had been made as of March 31, 1997 evidencing PRO FORMA
compliance with the financial covenants set forth in SECTION 9.2.4 as of June
30, 1997, and as to such items therein as the Agents reasonably request,
dated the date of the initial Credit Extensions, duly executed (and with all
schedules thereto duly completed) and delivered by the chief executive,
financial or accounting Authorized Officer of the U.S. Borrower.
SECTION 7.1.16. SOLVENCY, ETC. The Agents shall have received,
with counterparts for each Lender, an opinion from Houlihan Lokey Howard &
Zukin, dated the date of the initial Credit Extensions, with respect to the
solvency of the U.S. Borrower, in form and substance reasonably satisfactory
to the Agents.
SECTION 7.1.17. FINANCIAL INFORMATION, ETC. The Agents shall
have received, with counterparts for each Lender,
(a) audited financial statements of the U.S. Borrower as at March
31, 1997; and
(b) a PRO FORMA consolidated balance sheet of the U.S. Borrower and
its Subsidiaries, as of the date of the initial Credit Extensions (the
"PRO FORMA BALANCE SHEET"), certified by the chief financial or accounting
Authorized Officer of the U.S. Borrower, giving effect to the consummation
of the Transaction and all the transactions contemplated by this Agreement
and reflecting the proposed capital structure of the U.S. Borrower
consistent with the bank memorandum furnished to the Lenders and otherwise
reasonably satisfactory to the Agent.
SECTION 7.1.18. PAYMENT OF OUTSTANDING INDEBTEDNESS, ETC. All
Indebtedness identified in ITEM 9.2.2(B)(I) ("Indebtedness to be Paid") of the
Disclosure Schedule, together with all interest, all prepayment premiums and
other amounts due and payable with respect thereto, shall have been (or,
contemporaneously with the making of the initial Credit Extensions, be) paid in
full from the proceeds of the initial Credit Extensions and the
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commitments in respect of such Indebtedness shall have been (or,
contemporaneously with the making of the initial Credit Extensions, be)
terminated, and all Liens securing payment of any such Indebtedness shall
have been (or, contemporaneously with the making of the initial Credit
Extensions, be) released and the Agents shall have received all UCC Form
UCC-3 termination statements (or comparable Canadian instruments) or other
instruments as may be suitable or appropriate in connection therewith. After
giving effect to the foregoing and to the Transaction, the U.S. Borrower and
its Subsidiaries shall have no more than $6,000,000 of funded Indebtedness in
respect of borrowed money other than pursuant to the Loan Documents and the
Subordinated Notes.
SECTION 7.1.19. CLOSING FEES, EXPENSES, ETC. The Agents shall
have received for their own account, or for the account of each Lender, as
the case may be, all fees, costs and expenses due and payable pursuant to
SECTIONS 5.3 and 12.3, if then invoiced.
SECTION 7.1.20. TAX SHARING AGREEMENT. The U.S. Agent shall have
received a copy of the Tax Sharing Agreement, dated as of the date hereof,
executed and delivered by the parties thereto, and the Tax Sharing Agreement
shall be in form and substance satisfactory to the U.S. Agent.
SECTION 7.1.21. RELIANCE LETTERS AND REPORTS. The Agents shall
have received, with copies for each Lender, copies of, unless the Agents
otherwise agree, reliance letters, dated the date of the making of the
initial Credit Extensions and addressed to each Lender and the Agents, in
respect of each of the legal opinions delivered in connection with the
Transaction from each of (i) Fried, Frank, Harris, Shriver & Jacobson and
(ii) Debevoise & Plimpton.
SECTION 7.1.22. OPINIONS OF COUNSEL. The Agents shall have
received opinions, dated the date of the initial Credit Extensions and
addressed to the Agents and all Lenders, from
(a) Debevoise & Plimpton, counsel to the Obligors, substantially
in the form of EXHIBIT L-1 hereto;
(b) Pitblado & Hoskin, Canadian counsel to the Obligors,
substantially in the form of EXHIBIT L-2 hereto; and
(c) Neal Gerber & Eisenberg, Illinois counsel to certain
Obligors, in form and substance satisfactory to the U.S. Agent;
(d) Jaffe, Raitt, Heyer, Weiss, Michigan counsel to certain
Obligors, in form and substance satisfactory to the U.S. Agent;
(e) Godfrey & Kahn, Wisconsin counsel to certain Obligors, in
form and substance satisfactory to the U.S. Agent;
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(f) Allen, Matkins, Leck, Gamble & Mallory LLP, California
counsel to certain Obligors, in form and substance satisfactory to the
U.S. Agent; and
(g) Benesch, Friedlander, Coplan & Aronoff, Ohio counsel to
certain Obligors, in form and substance satisfactory to the U.S. Agent.
SECTION 7.2. ALL CREDIT EXTENSIONS. The obligation of each Lender and
each Issuer to make any Credit Extension (including the initial Credit
Extensions) shall be subject to SECTIONS 2.1.4 and 2.1.5 or SECTIONS 3.1.3 and
3.1.4, as the case may be, and the satisfaction of each of the conditions
precedent set forth in this SECTION 7.2.
SECTION 7.2.1. COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. Both
before and after giving effect to any Credit Extension (but, if any Default of
the nature referred to in SECTION 10.1.5 shall have occurred with respect to any
other Indebtedness, without giving effect to the application, directly or
indirectly, of the proceeds thereof) the following statements shall be true and
correct:
(a) the representations and warranties set forth in ARTICLE VIII
(excluding, however, those contained in SECTION 8.7) and in each other
Loan Document shall, in each case, be true and correct in all material
respects with the same effect as if then made (unless stated to relate
solely to an earlier date, in which case such representations and
warranties shall be true and correct in all material respects as of such
earlier date);
(b) except as disclosed by the U.S. Borrower to the Agents and
the Lenders pursuant to SECTION 8.7,
(i) no labor controversy, litigation, arbitration or
governmental investigation or proceeding shall be pending or, to the
knowledge of the U.S. Borrower, threatened against Parent or the U.S.
Borrower or any of its Subsidiaries which could reasonably be
expected to have a Material Adverse Effect, or which would adversely
affect the legality, validity or enforceability of this Agreement,
the Notes or any other Loan Document; and
(ii) no development shall have occurred in any labor
controversy, litigation, arbitration or governmental investigation or
proceeding disclosed pursuant to SECTION 8.7 which could reasonably
be expected to have a Material Adverse Effect; and
(c) no Default shall have then occurred and be continuing, and
neither Parent nor the U.S. Borrower or any of its Subsidiaries shall be
in material violation of any law or governmental regulation or court order
or decree, which violation would, individually or in the aggregate, have a
Material Adverse Effect.
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SECTION 7.2.2. CREDIT EXTENSION REQUEST, ETC. Subject to SECTION
2.3 and 3.3, as the case may be, the applicable Agent shall have received a
Borrowing Request if Loans are being requested, or an Issuance Request if a
Letter of Credit is being requested or extended. Each of the delivery of a
Borrowing Request or Issuance Request and the acceptance by a Borrower of the
proceeds of such Credit Extension shall constitute a representation and
warranty by such Borrower that on the date of such Credit Extension (both
immediately before and after giving effect to such Credit Extension and the
application of the proceeds thereof) the statements made in SECTION 7.2.1 are
true and correct in all material respects.
SECTION 7.2.3. SATISFACTORY LEGAL FORM. All documents executed or
submitted pursuant hereto by or on behalf of the U.S. Borrower or any of its
Subsidiaries or any other Obligors shall be reasonably satisfactory in form
and substance to the Agents and its counsel; the Agents and their counsel
shall have received all information, approvals, opinions, documents or
instruments as the Agents or their counsel may reasonably request.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, each Issuer and the Agents to
enter into this Agreement and to make Credit Extensions hereunder, each
Borrower represents and warrants (as applicable) unto the Agents, each Issuer
and each Lender as set forth in this ARTICLE VIII.
SECTION 8.1. ORGANIZATION, ETC. Each Borrower and each of its
Subsidiaries is a corporation validly organized and existing and in good
standing under the laws of the state or jurisdiction of its incorporation, is
duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the nature of its business requires
such qualification (except where the failure to so qualify would not,
individually or in the aggregate, have a Material Adverse Effect), and has
full power and authority and holds all requisite governmental licenses,
permits and other approvals to enter into and perform the Transaction
Documents to which it is a party and its Obligations under this Agreement,
the Notes and each other Loan Document to which it is a party (except to the
extent the failure to have any such license, permit or other approval would
not have a Material Adverse Effect or adversely affect the ability of any
Borrower or any Obligor to own and hold under lease its property and to
conduct its business substantially as currently conducted by it).
SECTION 8.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The
execution, delivery and performance by each Borrower of this Agreement, the
Notes and each other Loan Document executed or to be executed by it, the
execution, delivery and performance by each other Obligor of each Loan
Document executed or to be executed by it, each Borrower's, each of their
Subsidiaries, Canadian Holding's, Parent's and each such other Obligor's
participation in the consummation of all aspects of the Transaction, the
execution, delivery and performance by LHPG of the Merger Agreement and the
other agreements executed and delivered in
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connection with the Transaction and the performance by the U.S. Borrower of
the Assumption are in each case within each such Person's corporate powers,
have been duly authorized by all necessary corporate action, and do not
(a) contravene any such Person's Organic Documents;
(b) contravene any contractual restriction (except for such
contraventions that (x) would not, singly or in the aggregate, have a
Material Adverse Effect, (y) would not result in the creation of any Lien
(except as expressly permitted by this Agreement) or (z) would not subject
either Agent, any Issuer or any Lender to any liability) binding on or
affecting any such Person;
(c) contravene (i) any court decree or order binding on or affecting
any such Person or (ii) any law or governmental regulation binding on or
affecting any such Person (other than, in the case of each Obligor's
participation in the consummation of the Transaction and the execution,
delivery and performance by LHPG of the Merger Agreement and the other
agreements executed and delivered in connection with the Transaction,
contravention of an immaterial nature); or
(d) result in, or require the creation or imposition of, any Lien
on any of such Person's properties (except as expressly permitted by
this Agreement).
SECTION 8.3. GOVERNMENT APPROVAL, REGULATION, ETC. No
authorization or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body or other Person (other
than (i) those that have been, or on the Effective Date will be, duly
obtained or made and which are, or on the Effective Date will be, in full
force and effect, (ii) following the date of the initial Credit Extensions,
routine filings with and notices to governmental authorities, regulatory
bodies or other Persons and (iii) those the failure of which to be obtained
could not reasonably be expected individually or in the aggregate to have a
Material Adverse Effect) is required for the consummation of the Transaction
and the due execution, delivery or performance by each Borrower of this
Agreement or the Notes or by any Borrower or any other Obligor of any other
Loan Document to which it is a party, or for the due execution, delivery
and/or performance of the Merger Agreement, in each case by the parties
thereto or the consummation of the Transaction. Neither Borrower nor any
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or 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.
SECTION 8.4. VALIDITY, ETC. This Agreement constitutes, and the
Notes and each other Loan Document executed by a Borrower will, on the due
execution and delivery thereof, constitute, the legal, valid and binding
obligations of such Borrower, enforceable against such Borrower in accordance
with their respective terms; and each other Loan Document executed pursuant
hereto by each other Obligor will, on the due execution and delivery thereof
by such
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Obligor, constitute the legal, valid and binding obligation of such Obligor
enforceable against such Obligor in accordance with its terms (except, in any
case above, as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally and by principles of equity).
SECTION 8.5. FINANCIAL INFORMATION. Subject to the last sentence
of SECTION 8.15, the financial statements of the U.S. Borrower and its
Subsidiaries furnished to the U.S. Agent and each Lender pursuant to SECTION
7.1.17 have been prepared in accordance with GAAP consistently applied, and
present fairly the consolidated financial condition of the corporations
covered thereby as at the dates thereof and the results of their operations
for the periods then ended. All balance sheets, all statements of operations,
shareholders' equity and cash flow and all other financial information of
each of the U.S. Borrower and its Subsidiaries furnished pursuant to SECTION
9.1.1 have been and will for periods following the Effective Date be prepared
in accordance with GAAP consistently applied, and do or will present fairly
the consolidated financial condition of the corporations covered thereby as
at the dates thereof and the results of their operations for the periods then
ended, except that quarterly financial statements need not include footnote
disclosure and may be subject to ordinary year-end adjustment.
SECTION 8.6. NO MATERIAL ADVERSE CHANGE. There has been no
material adverse change in the consolidated financial condition, results of
operations, assets, business or properties or, as of the date of the initial
Credit Extensions, prospects, of the U.S. Borrower and its Subsidiaries taken
as a whole since March 31, 1997, except to the extent that the incurrence of
Indebtedness pursuant to this Agreement and/or the Subordinated Debt, or the
repayment of any Indebtedness of Leiner and its Subsidiaries on the Effective
Date or payments to stockholders of the U.S. Borrower and the Canadian
Borrower, or of management bonuses and transaction costs and expenses, would
individually or in the aggregate be deemed such a material adverse change.
SECTION 8.7. LITIGATION, LABOR CONTROVERSIES, ETC. There is no
pending or, to the knowledge of the U.S. Borrower, threatened litigation,
action, proceeding, or labor controversy (i) affecting the U.S. Borrower or
any of its Subsidiaries, or any of their respective properties, businesses,
assets or revenues, which would reasonably be expected to have a Material
Adverse Effect, except as disclosed in ITEM 8.7 ("Litigation") of the
Disclosure Schedule or (ii) which would adversely affect the legality,
validity or enforceability of this Agreement, the Notes, any other Loan
Document, the Merger Agreement or the Transaction.
SECTION 8.8. SUBSIDIARIES. The U.S. Borrower has no
Subsidiaries, except those Subsidiaries
(a) which are identified in ITEM 8.8 ("Existing Subsidiaries") of
the Disclosure Schedule; or
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(b) which are permitted to have been organized or acquired in
accordance with SECTION 9.2.5 or 9.2.10.
SECTION 8.9. OWNERSHIP OF PROPERTIES. Except as disclosed in ITEM
8.9 ("Plant Sites and Property Matters") of the Disclosure Schedule, or as
permitted pursuant to SECTION 8.13 or SECTION 9.2.3, the U.S. Borrower and
each of its Subsidiaries owns (except where the failure to own such property
as provided in this SECTION 8.9 would not reasonably be expected to have a
Material Adverse Effect) (i) in the case of owned Real Property, good and
marketable fee title to, and (ii) in the case of owned personal property,
good and valid title to, or, in the case of leased real or personal property,
valid and enforceable leasehold interests (as the case may be) in, all of its
properties and assets, real and personal, tangible and intangible, of any
nature whatsoever, free and clear in each case of all Liens or claims.
SECTION 8.10. TAXES. The U.S. Borrower and each of its
Subsidiaries has filed all material tax returns and reports required by law
to have been filed by it and has paid all taxes and governmental charges
thereby shown to be due and owing, except any such taxes or charges which are
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on
its books.
SECTION 8.11. PENSION AND WELFARE PLANS. (a) During the
twelve-consecutive-month period prior to the date of the initial Credit
Extensions and prior to the date of any Credit Extension hereunder, no formal
steps have been taken to terminate any Pension Plan other than in a standard
termination under Section 4041(b) of ERISA, and no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under Section 302(f) of ERISA in either case which would reasonably be
expected to have a Material Adverse Effect. No condition exists or event or
transaction has occurred with respect to any Pension Plan which (i) could
reasonably be expected to result in the incurrence by the U.S. Borrower or
any Subsidiary of any liability, fine or penalty which would have a Material
Adverse Effect, or (ii) could reasonably be expected to result in the
incurrence by a member of the U.S. Borrower's Controlled Group (other than
the U.S. Borrower or the U.S. Borrower and its Subsidiaries) of any material
liability, fine or penalty which would have a Material Adverse Effect.
(b) Except for liabilities (if any) arising under the terms and
conditions, as in effect on the date of the initial Credit Extensions, of
the Plans disclosed in ITEM 8.11 ("Employee Benefit Plan") of the
Disclosure Schedule, neither the U.S. Borrower nor any Subsidiary has any
contingent liability with respect to any post-retirement benefit under a
Welfare Plan in either case which would reasonably be expected to have a
Material Adverse Effect, other than (i) liability for continuation
coverage described in Part 6 of Title I of ERISA and in Section 4980B of
the Code, (ii) liability for any Plan required by law to be extended to
employees outside of the U.S., or (iii) a modification of, or addition to,
the retiree benefit obligations disclosed in ITEM 8.11 ("Employee Benefit
Plan") of the Disclosure Schedule which when taken together with any other
addition or modification
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since the initial Credit Extensions do not materially increase the U.S.
Borrower's and its Subsidiaries' annual cost of providing such benefits.
SECTION 8.12. ENVIRONMENTAL WARRANTIES. Except as set forth in
ITEM 8.12 ("Environmental Matters") of the Disclosure Schedule:
(a) to the best knowledge of the U.S. Borrower, all facilities
and property owned or leased by the U.S. Borrower or any of its
Subsidiaries are in compliance with all Environmental Laws the
violation of which would reasonably be expected to have a Material
Adverse Effect;
(b) there are no pending or, to the best knowledge of the U.S.
Borrower, threatened
(i) claims, complaints, notices or requests for information
received by the U.S. Borrower or any of its Subsidiaries with
respect to any alleged violation of any Environmental Law, or
(ii) complaints, notices or inquiries to the U.S. Borrower
or any of its Subsidiaries regarding potential liability under any
Environmental Law
that, in the case of CLAUSES (b)(i) and (b)(ii), singly or in the
aggregate, would have a Material Adverse Effect;
(c) there have been no Releases of Hazardous Materials (other than
pursuant to permits, licenses, approvals or other governmental consents or
authorization for any such Releases) at, on or under any property now or
previously owned or leased by the U.S. Borrower or any of its Subsidiaries
that, singly or in the aggregate, have, or may reasonably be expected to
have, a Material Adverse Effect;
(d) to the best knowledge of the U.S. Borrower, the U.S. Borrower and
its Subsidiaries have been issued and are in material compliance with all
permits, certificates, approvals, licenses and other authorizations
relating to environmental matters and necessary for their businesses,
except for those permits, certificates, approvals, licenses and
authorizations the failure to obtain which or the failure to comply with
which would not reasonably be expected to have a Material Adverse Effect;
(e) no property now or, to the best knowledge of the U.S. Borrower,
previously owned or leased by the U.S. Borrower or any of its Subsidiaries
is listed or proposed for listing on the National Priorities List pursuant
to CERCLA, or, to the best knowledge of the U.S. Borrower, on the CERCLIS
or on any similar state list of sites requiring investigation or clean-up;
(f) to the best knowledge of the U.S. Borrower, there are no
underground storage tanks, active or abandoned, including petroleum
storage tanks, on or under any property
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now or previously owned or leased by the U.S. Borrower or any of its
Subsidiaries that, singly or in the aggregate, have, or may reasonably
be expected to have, a Material Adverse Effect;
(g) to the best knowledge of the U.S. Borrower, neither the U.S.
Borrower, nor any Subsidiary has directly transported or directly arranged
for the transportation of any Hazardous Material to any location which is
listed or proposed for listing on the National Priorities List pursuant to
CERCLA, on the CERCLIS or on any similar state list or which is the
subject of federal, state or local enforcement actions or other
investigations which may reasonably be expected to lead to claims against
the U.S. Borrower or such Subsidiary thereof for any remedial work, damage
to natural resources or personal injury, including claims under CERCLA,
which, singly or in the aggregate, have had, or may reasonably be expected
to have, a Material Adverse Effect;
(h) to the best knowledge of the U.S. Borrower, there are no
polychlorinated biphenyls or friable asbestos present at any property now
or previously owned or leased by the U.S. Borrower or any Subsidiary that,
singly or in the aggregate, have had, or may reasonably be expected to
have, a Material Adverse Effect; and
(i) to the best knowledge of the U.S. Borrower, no generation,
manufacture, storage, treatment, transportation or disposal of Hazardous
Material has occurred or is occurring on or from any property owned by the
U.S. Borrower or any of its Subsidiaries that, in either case above,
singly or in the aggregate, has had, or would reasonably be expected to
have, a Material Adverse Effect.
SECTION 8.13. INTELLECTUAL PROPERTY. Each of the U.S. Borrower and
its Subsidiaries owns and possesses or licenses (as the case may be) all such
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, service marks, service mark rights and copyrights as the U.S. Borrower
considers necessary for the conduct of the businesses of the U.S. Borrower and
its Subsidiaries as now conducted without, individually or in the aggregate, any
infringement upon rights of other Persons, in each case except as could not
reasonably be expected to result in a Material Adverse Effect, and there is no
individual patent, patent right, trademark, trademark right, trade name, trade
name right, service mark, service mark right or copyright the loss of which
would result in a Material Adverse Effect, except as may be disclosed in ITEM
8.13 ("Intellectual Property") of the Disclosure Schedule.
SECTION 8.14. REGULATIONS G, U AND X. Neither the U.S. Borrower nor
any of its Subsidiaries is engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock, and no proceeds of any Credit
Extensions will be used for a purpose which violates, or would be inconsistent
with, F.R.S. Board Regulation G, U or X. Terms for which meanings are provided
in F.R.S. Board Regulation G, U or X or any regulations substituted therefor, as
from time to time in effect, are used in this Section with such meanings.
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SECTION 8.15. ACCURACY OF INFORMATION. None of the factual
information heretofore or contemporaneously furnished by or on behalf of the
U.S. Borrower or any of its Subsidiaries in writing to the Agents, any Issuer or
any Lender for purposes of or in connection with this Agreement or any
transaction contemplated hereby or with respect to the Transaction, contains any
untrue statement of a material fact, and none of the other factual information
hereafter furnished in connection with this Agreement or any other Loan Document
by the U.S. Borrower or any other Obligor to the Agents, any Issuer or any
Lender will contain any untrue statement of a material fact on the date as of
which such information is dated or certified and, as of the date of the
execution and delivery of this Agreement by the Agents and each Lender, the
information delivered prior to the date of execution and delivery of this
Agreement (unless such information specifically relates to a prior date) does
not, and the factual information hereafter furnished shall not on the date as of
which such information is dated or certified, omit to state any material fact
necessary to make any information not misleading. Notwithstanding the foregoing,
all projections, including forecasts, budgets, pro formas and forward-looking
statements (the "PROJECTIONS"), prepared or to be prepared by or on behalf of
the U.S. Borrower or any other Obligor contained in any documents or materials
furnished by the U.S. Borrower or any other Obligor to the Agents, any Issuer or
any Lender (including the Projections included in (i) the bank memorandum
furnished to the Lenders with respect to the U.S. Borrower and the PRO FORMA
balance sheet furnished pursuant to CLAUSE (b) of SECTION 7.1.17, (ii) the PRO
FORMA Compliance Certificate furnished pursuant to SECTION 7.1.12 and (iii) the
budgets to be furnished pursuant to CLAUSE (i) of SECTION 9.1.1) have been or
will be prepared on the basis of assumptions believed by the U.S. Borrower to be
reasonable as of the date of preparation of such memorandum, PRO FORMA balance
sheet, PRO FORMA Compliance Certificate, or budgets (and the foregoing sentence
shall not apply to such Projections), it being acknowledged and agreed, however,
that such Projections as to future events should not be viewed as facts and that
the U.S. Borrower makes no representation or warranty that such Projections will
be realized.
SECTION 8.16. SENIOR INDEBTEDNESS, ETC. The U.S. Borrower has the
power and authority to incur the Indebtedness evidenced by the Subordinated
Notes as provided for under the Subordinated Indenture and has duly authorized,
executed and delivered the Subordinated Indenture. All Subordinated Notes have
been (and following the Effective Date, will be) issued by the U.S. Borrower
pursuant to due authorization. The Subordinated Indenture constitutes and (upon
issuance) the Subordinated Notes will constitute, the legal, valid and binding
obligation of the U.S. Borrower enforceable against the U.S. Borrower in
accordance with its terms, subject, as to enforcement, only to bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally and general equitable principles.
The subordination provisions of the Subordinated Notes and contained in the
Subordinated Indenture continue to be enforceable against the Subordinated Note
Holders by the holder of any Bank Debt (as defined in the Subordinated
Indenture) which has not effectively waived the benefits thereof. All
Obligations, including those to pay principal of and interest (including
post-petition interest) on the Loans and Reimbursement Obligations, and fees and
expenses in connection therewith, constitute Bank Debt (as defined in the
Subordinated Indenture) and all such Obligations are entitled to the benefits of
the
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subordination created by the Subordinated Indenture. The U.S. Borrower
acknowledges that the Agents, the Issuers and each Lender is entering into this
Agreement, and is extending its Commitments, in reliance upon the subordination
provisions of the Subordinated Indenture, the Subordinated Notes and this
Section.
ARTICLE IX
COVENANTS
SECTION 9.1. AFFIRMATIVE COVENANTS. Each Borrower agrees with each
Agent, each Issuer and each Lender that, until all Commitments have
terminated and all Obligations then due and owing have been paid and
performed in full, each Borrower will perform or cause to be performed the
obligations set forth in this SECTION 9.1 that are applicable to such
Borrower.
SECTION 9.1.1. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The
U.S. Borrower will furnish, or will cause to be furnished, to each Lender,
each Issuer and each Agent copies of the following financial statements,
reports, notices and information:
(a) as soon as available and in any event within 45 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year of the
U.S. Borrower, consolidated and, if requested by the U.S. Agent,
consolidating balance sheets of the U.S. Borrower and its Subsidiaries as
of the end of such Fiscal Quarter and consolidated and, if requested by
the U.S. Agent, consolidating statements of earnings and cash flow of the
U.S. Borrower and its consolidated Subsidiaries for such Fiscal Quarter
and for the period commencing at the end of the previous Fiscal Year and
ending with the end of such Fiscal Quarter and, in addition, commencing
with the consolidated and, if requested by the U.S. Agent, consolidating
balance sheets to be delivered hereunder for the Fiscal Quarter ending
December 31, 1998, the consolidated and, if requested by the U.S. Agent,
consolidating statement of earnings to be delivered hereunder for the
Fiscal Quarter ending December 31, 1998, and the consolidated and, if
requested by the U.S. Agent, consolidating statement of cash flow to be
delivered hereunder for the Fiscal Quarter ending December 31, 1998,
comparable information adjusted to reflect any changes at the close of and
for the corresponding Fiscal Quarter for the prior Fiscal Year and for the
corresponding portion of such Fiscal Year, in each case certified as
complete and correct by the chief financial Authorized Officer of the U.S.
Borrower; PROVIDED, HOWEVER, that for the period from the Effective Date
through the date of delivery of the financial information for the Fiscal
Quarter ending September 30, 1998, the U.S. Borrower will furnish
consolidating statements of operating income for the U.S. Borrower and its
Subsidiaries and for the Canadian Borrower, in each case for the
corresponding Fiscal Quarter for the prior Fiscal Year and for the
corresponding portion of such Fiscal Year;
(b) as soon as available and in any event within 90 days after the
end of each Fiscal Year of the U.S. Borrower, a copy of the annual audited
financial statements for such
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Fiscal Year for the U.S. Borrower and its consolidated Subsidiaries,
including therein consolidated and, if requested by the U.S. Agent,
consolidating, balance sheets of the U.S. Borrower and its consolidated
Subsidiaries as of the end of such Fiscal Year and consolidated and, if
requested by the U.S. Agent, consolidating, statements of earnings and
cash flow of the U.S. Borrower and its consolidated Subsidiaries for
such Fiscal Year, in the case of such consolidated (but not
consolidating) statements as audited (without any Impermissible
Qualification) by independent public accountants acceptable to the U.S.
Agent, together with a certificate from such accountants to the effect
that, in making the examination necessary for the signing of such
annual report by such accountants, they have not become aware of any
Default or Event of Default that has occurred and is continuing with
respect to the provisions of SECTIONS 9.2.4, 9.2.8, 9.2.10, 10.1.5 and
10.1.7 (limited, in the case of SECTIONS 10.1.5 and 10.1.7, to
reviewing the minutes of the board of directors of the U.S. Borrower
and its Subsidiaries), or, if they have become aware of such Default or
Event of Default, describing such Default or Event of Default;
(c) as soon as available and in any event within 45 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year of the
U.S. Borrower and within 90 days after the end of the Fiscal Year of the
U.S. Borrower, a Compliance Certificate, executed by the chief executive,
financial or accounting Authorized Officer of the U.S. Borrower, showing
(in reasonable detail and with appropriate calculations and computations
in all respects reasonably satisfactory to the U.S. Agent) compliance with
the financial covenants set forth in ARTICLE IX;
(d) as soon as possible and in any event within five Business Days
after the U.S. Borrower or any of its Subsidiaries obtains knowledge of
the occurrence of each Default, a statement of the chief executive,
financial or accounting Authorized Officer of the U.S. Borrower setting
forth details of such Default and the action which the U.S. Borrower has
taken and proposes to take with respect thereto;
(e) as soon as possible and in any event within five Business Days
after the U.S. Borrower or any of its Subsidiaries obtains knowledge of
(x) the occurrence of any material adverse development with respect to any
litigation, action, proceeding or labor controversy of the type and
materiality described in ITEM 8.7 ("Litigation") of the Disclosure
Schedule or (y) the commencement of any litigation, action, proceeding or
labor controversy of the type and materiality described in ITEM 8.7,
("Litigation") of the Disclosure Schedule, notice thereof and, to the
extent the U.S. Agent reasonably requests, copies of all documentation
relating thereto (to the extent that such disclosure would not violate
attorney-client privilege or the work product doctrine);
(f) promptly after the sending or filing thereof, copies of all
reports and registration statements which the U.S. Borrower or any of
its Subsidiaries files with the SEC or any national securities exchange;
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(g) immediately upon becoming aware of (i) the institution of any
steps by the U.S. Borrower, any of its Subsidiaries or any other Person to
terminate any Pension Plan, other than a standard termination, (ii) the
failure to make a required contribution to any U.S. Pension Plan if such
failure is sufficient to give rise to a Lien under Section 302(f) of ERISA
and if such failure continues for at least 30 days, (iii) the taking of
any action with respect to a U.S. Pension Plan which could result in the
requirement that the U.S. Borrower or any of its Subsidiaries furnish a
bond or other security to the PBGC or such U.S. Pension Plan, (iv) the
occurrence of any event with respect to any Pension Plan which could
result in the incurrence by the U.S. Borrower or any of its Subsidiaries
of any liability (other than a liability for the routine cost of
maintaining such Pension Plan), fine or penalty, or (v) any material
increase in the contingent liability of the U.S. Borrower or any of its
Subsidiaries (including the incurrence of any liability described in
CLAUSE (b)(ii) of SECTION 8.11) with respect to any post-retirement
Welfare Plan benefit, to the extent the effect of the action, occurrence
or event described in CLAUSE (g)(i), (g)(iv), or (g)(v) would reasonably
be expected to have a Material Adverse Effect, notice thereof and copies
of all documentation relating thereto;
(h) promptly upon receipt thereof, copies of all detailed
management letters submitted to the U.S. Borrower by the independent
public accountants referred to in CLAUSE (b) in connection with each
audit made by such accountants of the books of the U.S. Borrower or any
Subsidiary;
(i) promptly when available and in any event within 15 Business Days
after the last day of each Fiscal Year of the U.S. Borrower (commencing
after the Effective Date), a budget for the then current Fiscal Year of
the U.S. Borrower, which budget shall be prepared on a Fiscal Quarter
basis and shall contain a projected, consolidated balance sheet and
statement of earnings and cash flow of the U.S. Borrower and its
Subsidiaries for the then current Fiscal Year, prepared in reasonable
detail by the chief accounting, financial or executive Authorized Officer
of the U.S. Borrower;
(j) promptly following the delivery or receipt, as the case may
be, of any material written notice or communication pursuant to or in
connection with the Subordinated Indenture, a copy of such notice or
communication; and
(k) such other information respecting the condition or operations,
financial or otherwise, of Parent or the U.S. Borrower or any of its
Subsidiaries as any Lender or any Issuer through the U.S. Agent may from
time to time reasonably request (including information and reports from
the chief accounting, financial or executive Authorized Officer of the
U.S. Borrower, in such detail as the U.S. Agent or any Lender or Issuer
through the U.S. Agent may reasonably request, with respect to the terms
of and information provided pursuant to the Compliance Certificate).
SECTION 9.1.2. COMPLIANCE WITH LAWS, ETC. Each Borrower will,
and will cause each of its Subsidiaries to, comply in all material respects
with all applicable laws, rules,
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regulations and orders the noncompliance with which would be reasonably
expected to have a Material Adverse Effect, such compliance to include
(without limitation):
(a) the maintenance and preservation of each Borrower's and its
Subsidiaries' corporate existence and qualification as foreign
corporations in all jurisdictions in which the failure to be so qualified
would be reasonably expected to have a Material Adverse Effect; PROVIDED,
HOWEVER, that the Subsidiaries of the U.S. Borrower may be liquidated,
dissolved or merged as contemplated by SECTION 9.2.10 or disposed of if
permitted by SECTION 9.2.11; and, PROVIDED, FURTHER, HOWEVER, that nothing
in this SECTION 9.1.2 shall require the preservation of the corporate
existence of any Subsidiary (other than the Canadian Borrower for so long
as the Canadian Facility is outstanding) if the board of directors of the
U.S. Borrower determines in good faith that the failure to so preserve
such corporate existence would not reasonably be expected to have a
Material Adverse Effect; and
(b) the payment, before the same become delinquent, of all taxes,
assessments and governmental charges imposed upon it or upon its property
except to the extent being diligently contested in good faith by
appropriate proceedings and for which adequate reserves, if any, in
accordance with GAAP shall have been set aside on its books.
SECTION 9.1.3. MAINTENANCE OF PROPERTIES. Each Borrower will and
will cause each of its Subsidiaries to, maintain, preserve, protect and keep
its properties in good repair, working order and condition (ordinary wear and
tear excepted), and make necessary and proper repairs, renewals and
replacements so that its business carried on in connection therewith may be
properly conducted at all times unless such Borrower determines in good faith
that the continued maintenance of any of its properties is no longer
economically desirable, it being understood that any failure to comply with
the foregoing shall not result in a Default hereunder unless such failure to
comply would reasonably be expected to have a Material Adverse Effect.
SECTION 9.1.4. INSURANCE. The U.S. Borrower shall maintain, or
shall cause to be maintained, for the benefit of the U.S. Borrower and its
Subsidiaries:
(a) products liability insurance with respect to all the products
manufactured, produced, sold or otherwise distributed by the U.S.
Borrower or any of its Subsidiaries in an amount not less than
$40,000,000 per annum;
(b) physical damage insurance on all real and personal property on an
all-risk basis (including loss in transit insurance) and public liability
insurance against claims for personal injury, death or property damage
suffered by others upon, in or about any premises occupied by it or
occurring as a result of its ownership, maintenance or operation of any
airplanes, automobiles, trucks or other vehicles or other facilities
(including, but not limited to, any machinery used therein or thereupon)
or as the result of the use of products manufactured, constructed or sold
by it or services rendered by it in an amount
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as is usually carried by Persons of comparable size engaged in the same
or a similar business and similarly situated;
(c) such other types of insurance with respect to its business as
are usually carried by Persons of comparable size engaged in the same
or a similar business and similarly situated; and
(d) all worker's compensation or similar insurance as may be
required under the laws of any state or jurisdiction in which it may be
engaged in business.
All products liability insurance shall be provided (i) by insurers authorized
by Lloyds of London to underwrite such risks, (ii) by insurers having an A.M.
Best policyholders rating of not less than A- (except with respect to
insurers providing insurance of the type described in CLAUSE (d), in which
case such insurers shall have an A.M. Best policyholders rating of not less
than B+) or (iii) by such other insurers as the Agents may approve in
writing; PROVIDED that if the rating of any of the U.S. Borrower's products
liability insurers is downgraded, the U.S. Borrower and each of its
Subsidiaries, as the case may be, shall only be required to obtain
replacement insurance with an insurer satisfying the requirements of this
clause at the stated expiration of the insurance policy maintained with the
insurer whose rating was so downgraded.
SECTION 9.1.5. BOOKS AND RECORDS. Each Borrower will, and will
cause each of its Subsidiaries to, keep books and records which accurately
reflect all of its business affairs and transactions and permit the Agents
and each Lender or any of their respective representatives, at reasonable
times and intervals, during normal business hours and upon reasonable notice,
and at the Agents' or such Lender's expense, to visit all of such Borrower's
and such Subsidiaries' offices, to discuss such Borrower's and such
Subsidiaries' financial matters with such Borrower's and such Subsidiaries'
officers and independent public accountant (and each Borrower hereby
authorizes such independent public accountant to discuss such Borrower's or
such Subsidiaries' financial matters with the Agents and each Lender or any
of their respective representatives whether or not any representative of such
Borrower is present, but provided that an officer of such Borrower or such
Subsidiary shall be afforded a reasonable opportunity to be present at any
such discussion) and to examine (and, at the expense of such Borrower,
photocopy extracts from) any of such Borrower's and its Subsidiaries' books
or other corporate records. Each Borrower shall pay any fees of such
independent public accountant incurred in connection with the Agents' or any
Lender's exercise of its rights pursuant to this Section.
SECTION 9.1.6. ENVIRONMENTAL COVENANT. Each Borrower will, and
will cause each of its Subsidiaries to,
(a) use and operate all of its facilities and properties in material
compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in material compliance
therewith, and handle all Hazardous Materials in material compliance with
all
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applicable Environmental Laws, except for those permits, approvals,
certificates, licenses and authorizations the failure to keep in effect
would not, or the failure to comply with which would not, or for such
Environmental Laws the failure of which to comply with which would not,
singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect;
(b) promptly notify the Agents and provide copies upon receipt of all
written claims, complaints, notices or inquiries relating to the condition
of its facilities and properties in respect of, or as to compliance with,
Environmental Laws which individually or in the aggregate would have a
Material Adverse Effect, and shall promptly resolve any non-compliance
with Environmental Laws and keep its property free of any Lien imposed by
any Environmental Law which, in either case, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect;
and
(c) provide such information and certifications which the Agents
may reasonably request from time to time to evidence compliance with
this SECTION 9.1.6.
SECTION 9.1.7. FUTURE SUBSIDIARIES. Upon any Person becoming,
after the Effective Date, either a direct or indirect Subsidiary of a
Borrower, or upon an Obligor directly or indirectly acquiring additional
Capital Stock of any existing Subsidiary (other than any Receivables Co.)
having voting rights or contingent voting rights, the U.S. Borrower shall
notify the Agents of such acquisition and, unless otherwise agreed to among
the U.S. Borrower, the Agents and the Required Lenders,
(a) (i) such Person shall, unless it is a Restricted Subsidiary,
execute and deliver to the Agents a Subsidiary Guaranty, (ii) to the
extent such Person or such Obligor is required to pledge stock of a
Subsidiary pursuant to CLAUSE (b) of this SECTION 9.1.7, such Person or
such Obligor shall execute and deliver a Subsidiary Pledge Agreement
(or, if applicable, a supplement to an existing Pledge Agreement),
(iii) such Person shall, unless it is a Restricted Subsidiary, execute
and deliver to the Agents a Subsidiary Security Agreement and (iv) such
Person shall, unless it is a Restricted Subsidiary, execute and deliver
to the Agents a Mortgage on any Real Property the value of which
(together with improvements located thereon) exceeds $2,000,000 it
being agreed by the Lenders and the Agents that, subject to the last
sentence of this Section, non-U.S. Subsidiaries shall not be required
to deliver a guaranty of the Obligations of the U.S. Borrower or any
U.S. Subsidiary, or grant a Lien on any of their assets to secure the
Obligations of the U.S. Borrower or any U.S. Subsidiary;
(b) subject to the last sentence of this Section, (i) the U.S.
Borrower and each U.S. Subsidiary (other than a Restricted Subsidiary)
shall, pursuant to a Pledge Agreement (as supplemented, if necessary, by a
Foreign Pledge Agreement), pledge to the Agents, for their benefit and
that of the Secured Parties (as defined in such Pledge Agreement), (x) all
of the outstanding shares of Capital Stock of each Person that has become
a direct Subsidiary of the U.S. Borrower or such U.S. Subsidiary and (y)
all additional shares of
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Capital Stock of an existing Subsidiary owned directly by the U.S.
Borrower or such U.S. Subsidiary (PROVIDED that, for purposes of each
of the immediately preceding clauses (x) and (y), subject to the last
sentence of this Section, not more than 65% of the Capital Stock of any
non-U.S. Subsidiary shall be so pledged to the Agents to secure the
Obligations of the U.S. Borrower) and (ii) Canadian Holdings, the
Canadian Borrower and each Canadian Subsidiary and, to the extent not
prohibited by any applicable law, each other non-U.S. Subsidiary (other
than a Restricted Subsidiary) shall, pursuant to a Pledge Agreement (as
supplemented, if necessary, by a Foreign Pledge Agreement), pledge to
the Canadian Agent, for its benefit and that of the Secured Parties (as
defined in such Pledge Agreement), (x) all of the outstanding shares of
Capital Stock of each Person that has become a direct Subsidiary of
Canadian Holdings, the Canadian Borrower or such Canadian Subsidiary
or, in the case of any other non-U.S. Subsidiary that is not a
Restricted Subsidiary, all of the outstanding shares of Capital Stock
acquired by such non-U.S. Subsidiary and (y) all additional shares of
Capital Stock of an existing Subsidiary owned directly by Canadian
Holdings, the Canadian Borrower, any such Canadian Subsidiary or such
non-U.S. Subsidiary (other than a Restricted Subsidiary) (it being
understood and agreed that all of the Capital Stock pledged pursuant to
this CLAUSE (b)(ii) shall only secure the Obligations in respect of the
Canadian Facility), in the case of each of CLAUSES (i) and (ii),
together with undated stock powers for such certificates, executed in
blank (or, if any such shares of Capital Stock are uncertificated,
confirmation and evidence satisfactory to such Agent that the security
interest in such uncertificated securities has been transferred to and
perfected by such Agent, for the benefit of the Secured Parties, in
accordance with Section 8-313 and Section 8-321 of the UCC or any other
similar or local or foreign law which may be applicable); and
(c) subject to the last sentence of this Section, (i) the U.S.
Borrower and each U.S. Subsidiary shall, pursuant to a Pledge Agreement,
pledge to the Agents, for their benefit and that of the Secured Parties
(as defined in such Pledge Agreement), all intercompany notes (which
shall, unless the Agents shall otherwise agree, be in the form of Exhibit
A to such Pledge Agreement) issued to such Person pursuant to CLAUSE
(e)(i) of SECTION 9.2.2 and evidencing Indebtedness in favor of the U.S.
Borrower or such U.S. Subsidiary, as the case may be, to secure the
Obligations, (ii) Canadian Holdings, the Canadian Borrower and each
Canadian Subsidiary shall, pursuant to a Pledge Agreement, pledge to the
Canadian Agent, for its benefit and that of the Secured Parties (as
defined in such Pledge Agreement), all intercompany notes (which shall,
unless the Canadian Agent shall otherwise agree, be in the form of Exhibit
A to such Pledge Agreement) issued to such Person pursuant to CLAUSE
(e)(i) of SECTION 9.2.2 and evidencing Indebtedness in favor of Canadian
Holdings, the Canadian Borrower or such Canadian Subsidiary, as the case
may be, to secure the Obligations in respect of the Canadian Facility;
together, in each case, with such opinions of legal counsel for the Borrowers
(which may be in-house counsel to the U.S. Borrower and shall otherwise be from
counsel reasonably satisfactory to the Agents) relating thereto, which legal
opinions shall be in form and substance reasonably satisfactory to the Agents.
The U.S. Borrower agrees that if, as a result of a
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change in law after the date hereof, (i) a non-U.S. Subsidiary of the U.S.
Borrower is permitted to execute and deliver a U.S. Subsidiary Guaranty, a
U.S. Subsidiary Pledge Agreement or a U.S. Subsidiary Security Agreement or
(ii) the U.S. Borrower or any U.S. Subsidiary is permitted to pledge more
than 66 2/3% of the Capital Stock of any non-U.S. Subsidiary or any
intercompany Indebtedness owing to any direct or indirect non-U.S. Subsidiary
of the U.S. Borrower evidenced by a note or other instrument to secure the
Obligations of the U.S. Borrower, in any such case without material adverse
tax consequences to the U.S. Borrower or such Subsidiary, then the provisions
of CLAUSE (a) of this SECTION 9.1.7 shall thereafter apply to any non-U.S.
Subsidiary and/or (as the case may be) the provisions of CLAUSE (b) of this
SECTION 9.1.7 shall thereafter apply to 100% of the Capital Stock of such
non-U.S. Subsidiary (or such lesser amount that can be pledged without
material adverse tax consequences).
SECTION 9.1.8. PROCESS AGENT. Within 5 Business Days following the
Effective Date, the U.S. Agent shall have received letters from each Process
Agent accepting its appointment as agent for service of process for the Canadian
Borrower and certain other Obligors, as contemplated in SECTION 12.14 (and
similar provisions in the applicable Loan Documents).
SECTION 9.1.9. USE OF PROCEEDS. The Borrowers agree to apply the
proceeds of Credit Extensions as set forth below.
(a) The U.S. Borrower shall apply the proceeds of
(i) the U.S. Revolving Loans and the U.S. Letters of Credit to
(a) finance the Recapitalization and (b) provide for the general corporate
and working capital needs of the U.S. Borrower and its Subsidiaries; and
(ii) the Term Loans to (a) in part refinance certain existing
Indebtedness of the U.S. Borrower and (b) pay fees and expenses in
connection with the Recapitalization; and
(b) the Canadian Borrower shall apply the proceeds of the Canadian
Revolving Loans and the Canadian Letters of Credit to (i) refinance
certain existing Indebtedness and, to the extent required, redeem
Preferred Stock of the Canadian Borrower and (ii) provide for the general
corporate and working capital needs of the Canadian Borrower and its
Subsidiaries;
PROVIDED, that the aggregate amount of fees and expenses incurred by the U.S.
Borrower, Parent and LHPG in connection with the Transaction (excluding
management bonuses and fees and expenses incurred by existing Leiner
stockholders not paid or payable by LHPG or its Subsidiaries and excluding
"Covered Expenses" as defined in the Merger Agreement) shall not exceed
$19,000,000.
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SECTION 9.1.10. RATE PROTECTION AGREEMENTS. Within 180 days
following the Effective Date, the U.S. Borrower will enter into interest rate
protection agreements in such amounts and upon terms as the Agents and the
U.S. Borrower shall mutually agree.
SECTION 9.1.11. ASSUMPTION AGREEMENT. The U.S. Borrower agrees
that it shall deliver to the U.S. Agent, immediately following the making of
the initial Loans, the Assumption Agreement with copies for each Lender,
dated as of the date hereof, duly executed and delivered by an Authorized
Officer of LHPG and Leiner, in form and substance satisfactory to the U.S.
Agent.
SECTION 9.1.12. APPRAISAL. Within 30 days following the date of
the initial Credit Extension, the U.S. Borrower shall deliver to the U.S.
Agent
(a) a real estate appraisal for each Mortgaged Real Property
located in the U.S. prepared in accordance with the requirements of the
Financial Institutions Reform Recovery and Enforcement Act of 1989 and
the regulations promulgated thereunder, and otherwise in form and
substance reasonably satisfactory to the U.S. Agent; and
(b) to the extent not previously delivered pursuant to SECTION
7.1.13, current surveys of the Mortgaged Real Property located in
Illinois, Garden Grove, California and Wisconsin, in form and substance
reasonably satisfactory to the U.S. Agent and the title isurer.
SECTION 9.1.13. KALAMAZOO, MICHIGAN PROPERTY. To the extent not
previously delivered pursuant to Section to 7.1.13 hereof, the Borrower agrees
to use its reasonable best efforts to deliver (and in any event agrees to
deliver no later than 180 days following the Effective Date) to the U.S. Agent
with respect to the real property known as 3380 Covington, Kalamazoo, Michigan
("Kalamozoo Property"),
(a) evidence satisfactory to the U.S. Agent that title to the
Kalamazoo Property is in the U.S. Borrower and that arrangements for the
recording and filing of the Mortgage covering the Kalamazoo Property as
maybe necessary or, in the reasonable opinion of the U.S. Agent, desirable
effectively to create a valid, perfected first priority lien against the
Kalamazoo Property;
(b) a mortgagee title insurance policy in favor of the U.S. Agent and
the Lenders in amounts and in form and substance and issued by insurers,
reasonably satisfactory to the U.S. Agent with respect to the Kalamazoo
Property, insuring that title to such property is vested in the U.S.
Borrower and marketable and that the interests created by the Mortgage
constitutes a valid first lien thereon free and clear of all defects and
encumbrances other than those Liens permitted pursuant to SECTION 9.2.3
and those Liens as approved by the U.S. Agent, and such policy shall also
include a Current ALTA survey reading, and , if required by the mortgagee
and if available, a revolving credit endorsement, a comprehensive
endorsement, a variable rate endorsement, access and utility endorsements,
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a mechanics Lien endorsement and such other endorsements as the U.S. Agent
shall reasonably request and shall be accompanied by evidence of the
payment in full of all premiums thereon; provided, that, in the case of
zoning endorsements, if any, no additional premiums will be required in
excess of $2,000.00 for the Kalamazoo Property;
(c) a current ALTA survey of the Kalamazoo Property in form and
substance reasonably satisfactory to the U.S. Agent and the title
insurer.
SECTION 9.2. NEGATIVE COVENANTS. Each Borrower agrees with each
Agent, each Issuer and each Lender that, until all Commitments have terminated
and all Obligations then due and owing have been paid and performed in full,
each Borrower will perform the obligations set forth in this SECTION 9.2 that
are applicable to such Borrower.
SECTION 9.2.1. BUSINESS ACTIVITIES. The U.S. Borrower will not,
and will not permit any of its Subsidiaries to, engage in any business
activity, except those described in the FIRST RECITAL and such activities as
are reasonably incidental, reasonably similar or reasonably related thereto.
SECTION 9.2.2. INDEBTEDNESS. The U.S. Borrower will not, and
will not permit any of its Subsidiaries to, create, incur, assume or suffer
to exist or otherwise become or be liable in respect of any Indebtedness,
other than, without duplication, the following:
(a) Indebtedness in respect of (i) the Credit Extensions and other
Obligations and (ii) Hedging Obligations incurred in the ordinary course
of business of any Borrower and any Subsidiary (which shall exclude
Hedging Obligations incurred under agreements entered into for speculative
purposes or as an arbitrage of rates);
(b) (i) until the date of the initial Credit Extensions,
Indebtedness identified in ITEM 9.2.2(b)(i) ("Indebtedness to be Paid")
of the Disclosure Schedule and (ii) Indebtedness identified in ITEM
9.2.2(B)(II) ("Ongoing Indebtedness") of the Disclosure Schedule;
(c) Indebtedness incurred in the ordinary course of business of the
U.S. Borrower and its Subsidiaries (including open accounts extended by
suppliers on normal trade terms in connection with purchases of goods and
services, accrued liabilities and deferred income taxes, and including
Indebtedness in respect of performance, surety or appeal bonds provided in
the ordinary course of business, but excluding Indebtedness incurred
through the borrowing of money or Contingent Liabilities in respect
thereof);
(d) so long as such amounts are permitted under the terms of
Subordinated Debt, Indebtedness in respect of (i) Capitalized Lease
Liabilities, (ii) purchase money mortgages (iii) industrial revenue bond
issues and (iv) other Indebtedness that is unsecured or incurred by
non-U.S. Subsidiaries (other than Canadian Holdings and its Subsidiaries);
PROVIDED, that the aggregate amount of all Indebtedness outstanding
pursuant to this clause at the time any of the same is created, assumed or
incurred (together with the then
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outstanding principal amount of all other Indebtedness permitted under
this CLAUSE (d)) shall not at any time exceed 3.75% of Total Adjusted
Capital at such time after giving effect thereto and to any concurrent
repayment of other Indebtedness outstanding pursuant to this clause;
PROVIDED, FURTHER, that such non-U.S. Subsidiaries may not incur or be
liable for any such Indebtedness in an aggregate amount at any time
outstanding in excess of (x) $5,000,000 (for so long as the Leverage
Ratio is greater than or equal to 4:1, as indicated in the most
recently delivered Compliance Certificate) and (y) 1.875% of Total
Adjusted Capital (for the period subsequent to the Leverage Ratio being
less than 4:1, as indicated in the most recently delivered Compliance
Certificate) at such time; PROVIDED, FURTHER, that for purposes of the
calculation of the Leverage Ratio for this clause only, in the case
where a Borrower or a Subsidiary is incurring such Indebtedness to
consummate an acquisition of the capital stock of another Person that
will thereafter become a Subsidiary as a result, the Total Debt and
EBITDA of such Person shall be included on a PRO FORMA basis in the
calculation of the Leverage Ratio (as if the acquisition had occurred
on the first day of the applicable period during which the Leverage
Ratio is to be calculated);
(e) Indebtedness of any Subsidiary (other than a Restricted
Subsidiary and any Receivables Co.) owing to a Borrower or any other
Subsidiary, which Indebtedness
(i) shall (except in the case of Indebtedness owing by a
non-U.S. Subsidiary to the U.S. Borrower or any U.S. Subsidiary that
individually or in the aggregate does not exceed $1,000,000) be
evidenced by one or more promissory notes (such promissory note to
be, unless otherwise agreed to by the U.S. Agent, in substantially
the form of Exhibit A to the U.S. Borrower Pledge Agreement) duly
executed and, if the payee of such promissory note is a Borrower or a
U.S. Subsidiary, delivered in pledge pursuant to a Pledge Agreement
to the applicable Agent; and
(ii) shall not be forgiven or otherwise discharged for any
consideration other than payment in full or in part (PROVIDED, that
only the amount repaid in part shall be discharged) in cash unless
the U.S. Agent otherwise consents, such consent not to be
unreasonably withheld;
(f) intercompany Indebtedness (not evidenced by a note or other
instrument) of a Borrower owing to a Subsidiary that has previously
executed and delivered to the applicable Agent the Master Subordination
Agreement, in an aggregate outstanding principal amount not to exceed
$10,000,000 at any time;
(g) Indebtedness of a Person existing at the time such Person
became a Subsidiary of a Borrower to the extent such Indebtedness was
not incurred in connection with, or in contemplation of, such Person
becoming a Subsidiary, in an amount not to exceed $3,500,000;
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(h) Indebtedness of a Borrower incurred for the purpose of renewing,
extending or refinancing Indebtedness permitted by CLAUSE (b)(ii), (d),
(g), (j) or (k); PROVIDED, HOWEVER, that the principal amount of such
Indebtedness may not exceed the principal amount of the Indebtedness being
renewed or refinanced and, in the case of unsecured Subordinated Debt
permitted by CLAUSE (j), any such renewal or refinancing is upon terms and
provisions which are, in the reasonable judgment of the Required Lenders,
no less favorable to the U.S. Borrower in the aggregate than such
Indebtedness being so renewed or refinanced; PROVIDED, that in any event
in the case of any Indebtedness that renews, extends or refinances the
Subordinated Notes, such Indebtedness shall be subordinated to the Bank
Debt (as defined in the Subordinated Indenture) to the same extent and
degree as the Subordinated Notes;
(i) Indebtedness of any Receivables Co. incurred in connection with
the Permitted Receivables Transaction (i) Indebtedness in an aggregate
amount at any time not to exceed $125,000,000 and (ii) other Indebtedness
owing by a Receivables Co. to a Borrower or another Subsidiary on terms
satisfactory to the U.S. Agent; PROVIDED, that (as applicable), in the
case of CLAUSE (i)(i), the provisions of CLAUSE (b) of SECTION 2.2.2 are
complied with or, if no U.S. Revolving Loan Commitment is then in effect,
no Replacement Indebtedness is (or after giving effect to the consummation
of the Permitted Receivables Transaction, will be) outstanding in an
amount which, when added to the Indebtedness of such Receivables Co.,
would exceed $125,000,000;
(j) unsecured Subordinated Debt of the U.S. Borrower owing to the
Subordinated Note Holders under the Subordinated Indenture; PROVIDED,
HOWEVER, that the aggregate outstanding principal amount of such
Indebtedness shall not exceed $85,000,000;
(k) Indebtedness of the U.S. Borrower and the Canadian Borrower
(including by way of a reallocation of Indebtedness similar to the
reallocation contemplated by SECTION 3.2.2) in an aggregate principal
amount that does not, when aggregated with any Indebtedness incurred under
a Permitted Receivables Transaction, exceed $125,000,000 (the "REPLACEMENT
INDEBTEDNESS") (PROVIDED, that Indebtedness of the Canadian Borrower shall
not exceed the Candian $ Equivalent of $20,000,000) in the form of
revolving loans and/or letters of credit, and the guaranty of such
Indebtedness by Subsidiaries of the U.S. Borrower (but only to the extent
such Subsidiaries also guaranty the Obligations of the U.S. Borrower on a
PARI PASSU basis); provided, that the Replacement Indebtedness shall only
be incurred
(i) on terms and conditions reasonably satisfactory to the U.S.
Term Loan Lenders holding at least 51% of the then outstanding
principal amount of Term Loans;
(ii) if all Revolving Loans, Swing Line Loans and Letter of
Credit Outstandings shall have been repaid, or will simultaneously be
repaid, in cash in full and each of the Revolving Loan Commitment,
Swing Line Loan Commitment and Letter of Credit Commitment have been
permanently terminated (or have expired); and
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(iii) no Default would result from the incurrence of the
Replacement Indebtedness; and
(l) unsecured Indebtedness of the U.S. Borrower consisting of
Contingent Liabilities in respect of (i) up to an aggregate principal
amount of $2,000,000 of borrowings by Management Investors in connection
with the purchase of Capital Stock of LHPG by such Management Investors
and (ii) loans or advances of a type described in CLAUSE (h) of SECTION
9.2.5;
PROVIDED, HOWEVER, that no Indebtedness otherwise permitted by CLAUSE (d), (g),
(h), or (l) shall be permitted to be incurred if such incurrence would result in
a Default hereunder.
SECTION 9.2.3. LIENS. The U.S. Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist
any Lien upon any of its property, revenues or assets, whether now owned or
hereafter acquired, except:
(a) Liens securing payment of the Obligations, granted pursuant
to any Loan Document;
(b) until the date of the initial Credit Extensions, Liens
securing payment of Indebtedness of the type permitted and described in
CLAUSE (b)(i) of SECTION 9.2.2;
(c) Liens securing
(i) Indebtedness of the type permitted and described in any
of CLAUSES (d)(i) through (d)(iii) of SECTION 9.2.2; and
(ii) Indebtedness of non-U.S. Subsidiaries permitted and
described in CLAUSE (d)(iv) of SECTION 9.2.2 to the extent that
such Liens encumber assets of non-U.S. Subsidiaries (other than
Canadian Holdings and its Subsidiaries);
and renewals, extensions and refinancings of such Indebtedness; PROVIDED
that the Liens permitted by this clause with respect to CLAUSE (d)(i)
through (iii) of SECTION 9.2.2 shall only cover the same assets which
originally secured the Indebtedness renewed, extended or refinanced
pursuant to such clause;
(d) Liens existing as of the Effective Date and disclosed in ITEM
9.2.3(D) ("Ongoing Liens") of the Disclosure Schedule and Liens securing
any extension, renewal or replacement of any obligations secured by any
such Lien; PROVIDED, HOWEVER, that such Lien shall only cover the same
assets which originally secured the obligations being extended, renewed or
replaced;
(e) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable without penalty or
being diligently contested in good
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faith by appropriate proceedings and for which adequate reserves,
if any, in accordance with GAAP shall have been set aside on its books;
(f) Liens of carriers, warehousemen, mechanics, materialmen and
landlords and similar Liens incurred in the ordinary course of business
for sums not overdue or being diligently contested in good faith by
appropriate proceedings and for which adequate reserves, if any, in
accordance with GAAP shall have been set aside on its books;
(g) Liens incurred or deposits made in the ordinary course of
business in connection with workmen's compensation, unemployment insurance
or other forms of governmental insurance or benefits, or to secure
performance of tenders, statutory and regulatory obligations, bids, leases
and contracts or other similar obligations (other than for borrowed money)
entered into in the ordinary course of business or to secure obligations
on surety, appeal, judgment, performance, return-of-money or similar
bonds;
(h) judgment Liens in existence less than 45 days after the entry
thereof or with respect to which execution has been stayed or the payment
of which is covered in full (subject to a customary deductible) by
insurance maintained with responsible insurance companies or which do not
otherwise result in an Event of Default under SECTION 10.1.6;
(i) easements, rights-of-way, municipal and zoning ordinances or
similar 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 U.S. Borrower or its
Subsidiaries or the value or utility of the property to which such Lien is
attached;
(j) any interest or title of a lessor under any lease of property
to, or of any consignor of goods consigned to, or of any creditor of
any consignee in goods consigned to such consignee by, the U.S.
Borrower or any Subsidiary;
(k) Liens in favor of the U.S. Borrower or any Subsidiary (other
than, in the case of any Subsidiary (and notwithstanding any other
provision of this Agreement (including SECTION 9.2.2) to the contrary),
any Lien on any assets of the U.S. Borrower);
(l) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the U.S. Borrower and
its Subsidiaries, taken as a whole;
(m) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payments of customs duties in connection with
the importation of goods;
(n) Liens on the property of, or securing Indebtedness to the extent
permitted by CLAUSE (g) of SECTION 9.2.2 of, any Person which becomes a
Subsidiary after the date hereof; PROVIDED that such Liens exist at the
time such Person becomes a Subsidiary and
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are not created in anticipation thereof and such Liens attach only to a
specific tangible asset of such Person and not assets of such Person
generally;
(o) Liens on documents of title and the property covered thereby
securing Indebtedness in respect of letters of credit which are
commercial letters of credit;
(p) Liens on Accounts or other related assets of any Receivables
Co. created in connection with the Permitted Receivables Transaction;
and
(q) Liens on the assets of the U.S. Borrower and its Subsidiaries in
favor of the Lenders of the Replacement Indebtedness, but only to the
extent that such Liens (i) rank PARI PASSU (or are subordinate) to the
Liens granted in favor of the Secured Parties pursuant to the Loan
Documents and encumber only those assets in which the Secured Parties also
have been granted a Lien pursuant to the Loan Documents and (ii) are
spread between the Obligations and obligations in respect of the
Replacement Indebtedness on a PARI PASSU basis and are subject to an
intercreditor agreement reflecting the foregoing and reasonably
satisfactory to the U.S. Agent and the Lenders holding 51% or more of the
then outstanding principal amount of the Term Loans.
SECTION 9.2.4. FINANCIAL CONDITION AND OPERATIONS. The U.S.
Borrower will not permit to occur any of the events set forth below.
(a) ADJUSTED NET WORTH. The U.S. Borrower will not permit Adjusted
Net Worth at any time to be less than the sum of (i) $101,000,000 PLUS
(ii) 45% of cumulative Net Income (in excess of zero) from (and including)
July 1, 1997 to the date of determination of Adjusted Net Worth PLUS (iii)
45% of cumulative cash equity contributions received after the Effective
Date by the U.S. Borrower other than from Management Investors, as
contemplated by CLAUSE (iii) of SECTION 9.2.6.
(b) INTEREST COVERAGE RATIO. The U.S. Borrower will not permit
the Interest Coverage Ratio as of the end of any Fiscal Quarter during
any period set forth below, to be less than the ratio set forth
opposite such period:
INTEREST COVERAGE
PERIOD RATIO
------ -----------------
Closing Date
through 03/30/98 1.60:1
03/31/98--03/30/99 1.80:1
03/31/99--03/30/00 2.00:1
03/31/00--03/30/01 2.20:1
03/31/01--03/30/02 2.50:1
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INTEREST COVERAGE
PERIOD RATIO
------ -----------------
03/31/02--03/30/03 2.75:1
03/31/03--03/30/04 3.00:1
03/31/04--03/30/05 3.25:1
03/31/05--03/30/06 3.25:1
03/31/06--03/30/07 3.25:1
(c) LEVERAGE RATIO. The U.S. Borrower will not permit the
Leverage Ratio as of the end of any Fiscal Quarter occurring during any
period set forth below to be greater than the ratio set forth opposite
such period:
LEVERAGE
PERIOD RATIO
------ --------
Closing Date
through 03/30/98 6.50:1
03/31/98--03/30/99 6.00:1
03/31/99--03/30/00 5.50:1
03/31/00--03/30/01 4.75:1
03/31/01--03/30/02 4.25:1
03/31/02--03/30/03 3.75:1
03/31/03--03/30/04 3.50:1
03/31/04--03/30/05 3.25:1
03/31/05--03/30/06 3.25:1
03/31/06--03/30/07 3.25:1
(d) CASH FLOW COVERAGE RATIO. The U.S. Borrower will not permit
the Cash Flow Coverage Ratio as of the end of any Fiscal Quarter
occurring during any period set forth below to be less than the ratio
set forth opposite such period:
CASH FLOW
PERIOD COVERAGE RATIO
------ --------------
Closing Date
through 03/30/98 1.10:1
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CASH FLOW
PERIOD COVERAGE RATIO
------ --------------
03/31/98--03/30/99 1.10:1
03/31/99--03/30/00 1.15:1
03/31/00--03/30/01 1.15:1
03/31/01--03/30/02 1.20:1
03/31/02--03/30/03 1.20:1
03/31/03--03/30/04 1.20:1
03/31/04--03/30/05 1.05:1
03/31/05--03/30/06 1.00:1
03/31/06--03/30/07 1.00:1
SECTION 9.2.5. INVESTMENTS. The U.S. Borrower will not, and will
not permit any of its Subsidiaries to, make, incur, assume or suffer to exist
any Investment in any other Person, except:
(a) Investments existing on the Effective Date and identified in
ITEM 9.2.5(A) ("Ongoing Investments") of the Disclosure Schedule;
(b) Cash Equivalent Investments;
(c) without duplication, (i) Investments to the extent permitted
as Indebtedness pursuant to SECTION 9.2.2, (ii) to the extent that any
Receivables Co. is not a Subsidiary of the U.S. Borrower, Investments
in such Receivables Co. in connection with the Permitted Receivables
Transaction made by the U.S. Borrower and its Subsidiaries on terms
satisfactory to the Agents, and (iii) Investments permitted as Capital
Expenditures pursuant to SECTION 9.2.16;
(d) Investments by way of contributions to capital or purchases of
equity (i) by the U.S. Borrower in any of its Subsidiaries (other than a
Restricted Subsidiary) or by such Subsidiary in any of its Subsidiaries
(other than a Restricted Subsidiary), or (ii) by any such Subsidiary in
the U.S. Borrower; PROVIDED, that such Investments in any Receivables Co.
shall only be made in connection with the Permitted Receivables
Transaction on terms satisfactory to the Agents;
(e) Investments constituting (i) accounts receivable arising, (ii)
trade debt granted or (iii) deposits made in connection with the purchase
price of goods or services, in each case in the ordinary course of
business (PROVIDED, that nothing in this clause shall prevent the
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U.S. Borrower or any Subsidiary from offering such concessionary trade
terms, or from receiving such Investments in connection with the
bankruptcy or reorganization of their respective suppliers or customers or
the settlement of disputes with such customers or suppliers arising in the
ordinary course of business, as officers of the U.S. Borrower deem
reasonable in the circumstances);
(f) Investments constituting Permitted Acquisitions not in excess of
$35,000,000 in any single transaction; PROVIDED, that the aggregate amount
of Investments permitted under the terms of this Agreement shall not
exceed $85,000,000; PROVIDED, FURTHER, that (i) such Investments shall (if
Capital Stock is being acquired), result in the acquisition of a
"Subsidiary" of the U.S. Borrower (but not result in a Restricted
Subsidiary, which shall be exclusively governed by CLAUSE (i)) and (ii)
upon making such Investments, the provisions of SECTION 9.1.7 are complied
with;
(g) Investments made in connection with Permitted Dispositions
pursuant to CLAUSE (d) of SECTION 9.2.11; PROVIDED, that to the extent the
amount or value (as determined by the Board of Directors of the U.S.
Borrower in good faith) of any such Investment exceeds $1,000,000, the
U.S. Borrower shall use its best efforts to (x) cause such Investment to
be made in such a form that such Investment can be pledged to the
applicable Agent for the ratable benefit of each Secured Party, and (y) if
such Investment is in such form, to pledge such Investment to the
applicable Agent for the ratable benefit of each Secured Party, on terms
reasonably satisfactory to the applicable Agent;
(h) Investments constituting payroll advances and travel and
entertainment advances and relocation loans to officers and employees of
the U.S. Borrower or any of its Subsidiaries in the ordinary course of
business in an amount (in the case of relocation loans) not to exceed
$1,000,000 at any time outstanding;
(i) Investments made by the U.S. Borrower in an amount, when
aggregated with any Investments made pursuant to CLAUSE (j) below and the
fair market value of any assets sold, transferred, leased, contributed or
otherwise conveyed pursuant to CLAUSE (f) of SECTION 9.2.11, not to exceed
$5,000,000 in the aggregate over the term of this Agreement in a Person
that, after giving effect to such Investment, becomes a non-wholly-owned
Subsidiary or a wholly-owned non-U.S. Subsidiary (if such Subsidiary is
unable to execute a Subsidiary Guaranty in respect of the U.S. Borrower's
Obligations without material adverse tax consequences) and on or prior to
the date of such Investment is designated as a "Restricted Subsidiary" by
the U.S. Borrower to the U.S. Agent; and
(j) Investments made by the U.S. Borrower in joint ventures in an
amount, when aggregated with any Investments made pursuant to CLAUSE (i)
above and the fair market value of any assets sold, transferred, leased,
contributed or otherwise conveyed pursuant to CLAUSE (f) of SECTION
9.2.11, not to exceed $5,000,000 over the term of this Agreement;
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PROVIDED, HOWEVER, that
(k) any Investment which when made complies with the requirements
of CLAUSE (a), (b) or (c) of the definition of the term "Cash
Equivalent Investment" may continue to be held notwithstanding that
such Investment if made thereafter would not comply with such
requirements; and
(l) no Investment otherwise permitted by CLAUSE (f), (i) or (j)
shall be permitted to be made if, immediately before or after giving
effect thereto, any Default shall have occurred and be continuing.
SECTION 9.2.6. RESTRICTED PAYMENTS, ETC. Except as otherwise
permitted pursuant to SECTION 9.2.13, on and at all times after the Effective
Date:
(a) the U.S. Borrower will not declare, pay or make any dividend or
distribution (in cash, property or obligations) on any shares of any class
of Capital Stock (now or hereafter outstanding) of the U.S. Borrower or on
any warrants, options or other rights with respect to any shares of any
class of Capital Stock (now or hereafter outstanding) of the U.S. Borrower
(other than dividends or distributions payable solely in its common stock
or warrants to purchase its common stock or splitups or reclassifications
of its stock into additional or other shares of its common stock, but then
only to the extent such stock or warrants, if received in respect of stock
pledged under the Parent Pledge Agreement, are pledged to the U.S. Agent
for the benefit of the Lenders pursuant to the Parent Pledge Agreement in
a manner satisfactory to the U.S. Agent) or apply, or permit any of its
Subsidiaries to apply, any of its funds, property or assets to the
purchase, redemption, sinking fund or other retirement of, or agree or
permit any of its Subsidiaries to purchase or redeem, any shares of any
class of Capital Stock (now or hereafter outstanding) of the U.S. Borrower
or Parent, or warrants, options or other rights with respect to any shares
of any class of Capital Stock (now or hereafter outstanding) of the U.S.
Borrower or Parent;
(b) the U.S. Borrower will not, and will not permit any of its
Subsidiaries to, pay, prepay or repay any principal of, or redeem,
purchase or defease any principal in respect of, any Subordinated
Notes; and
(c) the U.S. Borrower will not, and will not permit any of its
Subsidiaries to, make any deposit for any of the foregoing purposes;
PROVIDED, HOWEVER, this SECTION 9.2.6 shall not prohibit:
(i) the U.S. Borrower from paying dividends to Parent in an
amount sufficient to enable Parent to pay reasonable and customary regular
fees to directors of Parent and LHPG;
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(ii) the U.S. Borrower from paying dividends or other payments to
Parent or LHPG to the extent (a) permitted or required under the Tax
Sharing Agreement or (b) in respect of payments permitted pursuant to
CLAUSE (g) of SECTION 9.2.13; and
(iii) the redemption or repurchase or other acquisition for value of
the preferred stock of the Canadian Borrower outstanding on the Effective
Date in an amount so expended not to exceed Cdn $6,400,000, or so long as
no Default has occurred and is continuing or would result therefrom, the
purchase, redemption, acquisition, cancellation or other retirement for
value of shares of Capital Stock of the U.S. Borrower, the Canadian
Borrower, Parent or LHPG, or any of their respective Subsidiaries, or
warrants or options on any such shares or related stock appreciation
rights or similar securities owned by officers or employees (or their
estates or beneficiaries under their estates), or other Management
Investors in all cases only upon death, disability, retirement,
termination of employment or pursuant to the terms of such stock option
plan or any other agreement under which such shares of Capital Stock,
options, related rights or similar securities were issued or under which
they may be put or called, or the payment of dividends to Parent in an
amount sufficient to enable Parent or LHPG to effect such purchase,
redemption, acquisition, cancellation or other retirement for value by
Parent or LHPG; PROVIDED that the aggregate cash consideration paid for
such purchase, redemption, acquisition, cancellation or other retirement
for value of such shares of Capital Stock, options, related rights or
similar securities shall not exceed (a) $4,000,000 over the term of this
Agreement (the "AGGREGATE LIMIT") and (b) $2,000,000 during any Fiscal
Year; PROVIDED, FURTHER, that the Aggregate Limit on the purchase,
redemption, acquisition, cancellation or other retirement for value set
forth in the immediately preceding proviso shall be increased by the cash
proceeds of any sale to any Management Investors of Capital Stock,
options, related rights or similar securities of the U.S. Borrower or LHPG
to the extent such cash proceeds are contributed to the capital of the
U.S. Borrower, as notified in a certificate delivered by an Authorized
Officer of the U.S. Borrower to the U.S. Agent.
SECTION 9.2.7. STOCK OF SUBSIDIARIES. The U.S. Borrower will not
permit any Subsidiary (other than a Restricted Subsidiary) to issue any
Capital Stock (whether for value or otherwise) to any Person other than the
U.S. Borrower or another wholly-owned Subsidiary.
SECTION 9.2.8. RENTAL OBLIGATIONS. The U.S. Borrower will not, and
will not permit any of its Subsidiaries to, enter into at any time any
arrangement which does not create a Capitalized Lease Liability and which
involves the leasing by the U.S. Borrower or any of its Subsidiaries from any
lessor of any real or personal property (or any interest therein), except
arrangements which, together with all other such arrangements which shall
then be in effect, will not require the payment of an aggregate amount in any
year of Rentals by the U.S. Borrower and its Subsidiaries in excess of 7.5%
of Total Adjusted Capital of the immediately preceding Fiscal Year.
SECTION 9.2.9. TAKE OR PAY CONTRACTS. The U.S. Borrower will not, and
will not permit any of its Subsidiaries to, enter into or be a party to any
arrangement for the purchase of materials, supplies, other property or services
if such arrangement by its express terms requires that payment be made by the
U.S. Borrower or such Subsidiary regardless of whether such materials, supplies,
other property or services are in fact or can be required to be delivered or
furnished to it.
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SECTION 9.2.10. CONSOLIDATION, MERGER, ETC. The U.S. Borrower
will not, and will not permit any of its Subsidiaries to, liquidate or
dissolve, consolidate with, or merge into or with, any other corporation, or
purchase or otherwise acquire all or substantially all of the assets of any
Person (or of any division thereof) except
(a) any such Subsidiary (other than any Receivables Co.) may
liquidate or dissolve voluntarily into, and may merge with and into, the
U.S. Borrower or any other Subsidiary (other than a Restricted Subsidiary
or any Receivables Co.), and the assets or stock of any Subsidiary may be
purchased or otherwise acquired by the U.S. Borrower or any other
Subsidiary (other than a Restricted Subsidiary or any Receivables Co.);
PROVIDED, HOWEVER, that in no event shall any Pledged Subsidiary merge
with and into any Subsidiary other than another Pledged Subsidiary unless
(i) the Required Lenders shall have given their prior written consent
thereto, or (ii) after giving effect thereto, the applicable Agent shall
have a perfected pledge of, and security interest in and to, all (or, in
the case of a direct, non-U.S. Subsidiary (and subject to the last
sentence of SECTION 9.1.7), 65%) of the issued and outstanding shares of
Capital Stock of the surviving Person in form and substance satisfactory
to such Agent and its counsel, pursuant to such documentation and opinions
as shall be necessary and appropriate in the opinion of such Agent and its
counsel to create, perfect or maintain the collateral position of such
Agent and the Lenders therein as contemplated by this Agreement; PROVIDED,
FURTHER, that neither Canadian Holdings or any of its Subsidiaries may
merge or consolidate with the U.S. Borrower or any non-Canadian Subsidiary
of the U.S. Borrower; PROVIDED, FURTHER, that notwithstanding any of the
foregoing, the Canadian Borrower may merge or amalgamate with or liquidate
into Canadian Holdings (provided that Canadian Holdings assumes the
Obligations of the Canadian Borrower);
(b) so long as no Default has occurred and is continuing or would
occur after giving effect thereto, the U.S. Borrower or any of its
Subsidiaries may (to the extent permitted by CLAUSE (f) of SECTION 9.2.5)
purchase all or substantially all of the assets or stock of any Person (or
any division thereof), or acquire such Person by merger;
(c) the U.S. Borrower may merge with another Person (x) in the Merger
or (y) so long as (i) the U.S. Borrower is the surviving corporation of
such merger, (ii) after giving effect to such merger, the U.S. Borrower is
organized under the laws of a State of the United States, (iii)
immediately prior to such merger the Investment (if not accomplished by
way of such merger) would have been permitted under this Agreement; and
(iv) no Default shall exist before and after giving effect to such merger;
and
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(d) any such Subsidiary may liquidate or dissolve voluntarily into,
and may merge with and into, any corporation which is not a Subsidiary of
the U.S. Borrower; PROVIDED that (i) such transaction is a Permitted
Disposition or (ii) the following conditions are satisfied: (a) the
surviving corporation shall be a Subsidiary of the U.S. Borrower, (b) the
U.S. Borrower shall own at least the same percentage of the outstanding
voting stock of the surviving corporation as the U.S. Borrower owned of
such Subsidiary prior to such merger, liquidation or consolidation, (c)
after giving effect thereto, no Default would occur or be continuing and
(d) the surviving corporation complies with the provisions of SECTION
9.1.7.
SECTION 9.2.11. PERMITTED DISPOSITIONS. The U.S. Borrower will not,
and will not permit any of its Subsidiaries to, sell, transfer, lease,
contribute or otherwise convey (including by way of merger), or grant options,
warrants or other rights with respect to, all or any part of the U.S. Borrower's
or such Subsidiaries' assets (including accounts receivable or Capital Stock of
Subsidiaries (by way of the sale or issuance in an initial public offering,
private placement or other conveyance of such Capital Stock)) to any Person
unless,
(a) such disposition is either (i) in the ordinary course of its
business or (ii) permitted by SECTION 9.2.10;
(b) such disposition is made by (i) a U.S. Subsidiary to either the
U.S. Borrower or another U.S. Subsidiary (other than any Receivables Co.,
which shall be governed by CLAUSE (g), or a Restricted Subsidiary) or (ii)
a Canadian Subsidiary to the Canadian Borrower or another Canadian
Subsidiary (other than any Receivables Co., which shall be governed by
CLAUSE (g) or a Restricted Subsidiary);
(c) such disposition is in respect of assets acquired within six
months of such disposition pursuant to or as a result of a Permitted
Acquisition;
(d) after giving effect to such disposition,
(i) the aggregate of all Disposition Percentages (as defined
below) in respect of all dispositions of Net Tangible Assets (and for
purposes of this clause, "Net Tangible Assets" shall include the fair
market value of Capital Stock of Subsidiaries that is issued, sold or
otherwise conveyed in an initial public offering, private placement
or otherwise), other than pursuant to CLAUSE (a), (b), (c), (e), (f)
or (g), (A) since the Effective Date would not exceed 15% and (B)
during any Fiscal Year would not exceed 10%; and
(ii) the aggregate amount of Net Unrepatriated Disposition
Proceeds (including any Net Unrepatriated Disposition Proceeds that
arise as a result of such disposition) does not exceed 6% of Net
Tangible Assets at the time of such disposition,
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and for purposes of dispositions pursuant to this clause, "Disposition
Percentage" shall mean for any disposition a fraction (expressed as a
percentage), the numerator of which shall be the amount of Net Tangible
Assets subject to such disposition (determined as of the date of such
disposition) and the denominator of which shall be Net Tangible Assets
(determined as of the date of such disposition);
(e) such disposition is in respect of the issuance or sale (by way of
an initial public offering, private placement or otherwise) of the Capital
Stock of one or more Subsidiaries in an aggregate amount not to exceed
$5,000,000 over the term of this Agreement; PROVIDED that after such
issuance or sale, the U.S. Borrower shall continue to own, directly or
indirectly, 50% or more (on a fully diluted basis) of each such non-U.S.
Subsidiary (and each of its Subsidiaries);
(f) such disposition (and any prior dispositions pursuant to this
clause) is in respect of a joint venture and the fair market value of the
assets being sold, transferred, leased, contributed or otherwise conveyed,
when aggregated with any Investments made pursuant to CLAUSES (i) and (j)
of SECTION 9.2.5, does not exceed $5,000,000 over the term of this
Agreement; or
(g) such disposition is in respect of Accounts or other related
assets and ancillary rights in property pursuant to the Permitted
Receivables Transaction.
SECTION 9.2.12. MODIFICATION OF CERTAIN AGREEMENTS. The U.S.
Borrower will not, and will not permit any of its Subsidiaries to,
(a) consent to any amendment, supplement, amendment and restatement,
waiver or other modification of any of, or enter into any forbearance from
exercising any rights with respect to, the terms or provisions contained
in, or applicable to, the Management Services Agreement, the Tax Sharing
Agreement, or the Merger Agreement or any schedules, exhibits or
agreements related thereto, in each case which amendment, supplement,
amendment and restatement, waiver, modification, or forbearance would
adversely affect any Borrower's ability to perform hereunder or which
would increase the purchase price with respect to the Transaction or which
would increase any Borrower's or any Subsidiary's obligations or
liabilities, contingent or otherwise (other than adjustments made pursuant
to the terms of the Merger Agreement), except for such amendments,
supplements, amendments and restatements, waivers, modifications or acts
of forbearance which would not cause any Borrower or any Subsidiary to
breach any of their obligations set forth herein or in any other Loan
Document or which, in the reasonable judgment of the Required Lenders,
would not be likely to detrimentally and materially affect Parent or any
Borrower and any Subsidiary, or the rights, benefits or interests of any
Secured Party;
(b) consent to any amendment, supplement, amendment and restatement,
waiver or other modification of, or forbearance from exercising rights
with respect to, any of the terms or provisions contained in or applicable
to the Subordinated Indenture or the
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Subordinated Notes, except for such amendments, supplements, amendments
and restatements, waivers, modifications or acts of forbearance (i) which,
in the reasonable judgment of the Required Lenders, would not be likely to
detrimentally and materially affect the rights, benefits or interests of
the Agents, any Issuer or the Lenders or (ii) to comply with the
requirements of the SEC in order to effect or maintain the qualification
of the Subordinated Indenture under the Trust Indenture Act of 1939; and
(c) without the prior written consent of the Agents, (i) optionally
terminate the Permitted Receivables Transaction, or (ii) consent to any
amendment, supplement, or other modification to any of the terms of the
documents, instruments and agreements delivered in connection with the
Permitted Receivables Transaction, other than any such amendment,
modification or change which (a) would extend the maturity thereof or (b)
does not in any way adversely affect the interests of the Agents, the
Lenders or the Issuers hereunder or under the Loan Documents or (c) is of
a technical or clarifying nature).
SECTION 9.2.13. TRANSACTIONS WITH AFFILIATES. The U.S. Borrower will
not, and will not permit any of its Subsidiaries to, enter into, or cause,
suffer or permit to exist any arrangement or contract with any of its other
Affiliates unless such arrangement or contract is on fair and reasonable terms
and is an arrangement or contract of the kind which would be entered into by a
prudent Person in the position of the U.S. Borrower or such Subsidiary with a
Person which is not one of its Affiliates; PROVIDED, HOWEVER, that the foregoing
shall not prohibit
(a) transactions between the U.S. Borrower and any of its
Subsidiaries, or between such Subsidiaries, otherwise not prohibited
herein;
(b) the U.S. Borrower or its Subsidiaries from entering into and
performing the Management Services Agreement, including, so long as no
Default of any payment Obligations shall have occurred and be continuing,
and no other Event of Default shall have occurred and be continuing or
shall result therefrom, paying to North Castle, North Castle Partners or
any Affiliate thereof management and consulting fees in an aggregate
amount not to exceed $1,500,000 per annum plus reasonable expenses in an
amount not to exceed $100,000 per year;
(c) the cash capitalization of, or transfer of assets to, a joint
venture to the extent permitted by CLAUSES (i) and (j) of SECTION 9.2.5
and CLAUSE (f) of SECTION 9.2.11;
(d) the U.S. Borrower or any of its Subsidiaries (including the
Canadian Borrower and its Subsidiaries) from entering into and performing
the Tax Sharing Agreement, including paying to LHPG or Parent, pursuant
to the Tax Sharing Agreement, amounts due and payable thereunder;
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(e) loans or advances made to Management Investors, or Contingent
Liabilities in respect thereof or otherwise made on their behalf
(including any payments thereunder), to the extent permitted under
CLAUSE (i) of SECTION 9.2.2 or CLAUSE (h) of SECTION 9.2.5;
(f) the Recapitalization and all related transactions (including
but not limited to the financing thereof), including the incurrence and
payment of all fees and expenses in connection therewith;
(g) dividends, distributions or payments to Parent or LHPG not to
exceed an amount necessary to permit Parent or LHPG to (i) pay costs
incurred to comply with reporting obligations under federal or state
securities or other laws, (ii) make payments in respect of indemnification
obligations under the Management Services Agreement or any of its Organic
Documents, (iii) pay all reasonable fees and expenses incurred by it in
connection with the Recapitalization and related transactions (including
the financing thereof) in amounts not to exceed those identified to the
U.S. Agent on or prior to the Effective Date, or (iv) pay its other
operational expenses (other than taxes) incurred in the ordinary course of
business and not exceeding $500,000 in the aggregate in any Fiscal Year;
and
(h) any transaction in the ordinary course of business or approved by
a majority of the independent directors of the U.S. Borrower between the
U.S. Borrower or any Subsidiary and any Affiliate of the U.S. Borrower
controlled by the U.S. Borrower that is a joint venture or similar entity
primarily engaged in a business related to any business of the U.S.
Borrower or any of its Subsidiaries, but only if such transaction is
otherwise permitted by the terms of this Agreement.
SECTION 9.2.14. NEGATIVE PLEDGES, RESTRICTIVE AGREEMENTS, ETC. The
U.S. Borrower will not, and will not permit any of its Subsidiaries to, enter
into any agreement (excluding (i) this Agreement and any other Loan Document,
(ii) any agreement governing any Indebtedness permitted by CLAUSE (b) of SECTION
9.2.2 as in effect on the Effective Date, (iii) in the case of CLAUSE (a) below,
any agreement governing any Indebtedness permitted by CLAUSE (d) of SECTION
9.2.2 as to the assets financed with the proceeds of such Indebtedness, or
governing the Indebtedness permitted by CLAUSE (d)(iv) of SECTION 9.2.2, or (iv)
in the case of CLAUSE (a) or (c) below, restrictions on any Receivables Co.
contained in documentation delivered for the Permitted Receivables Transaction)
prohibiting
(a) the creation or assumption of any Lien upon its properties,
revenues or assets, whether now owned or hereafter acquired, to the extent
that any such negative pledge would effectively prohibit the creation or
first priority perfection of any Liens of the type described in CLAUSE (a)
of SECTION 9.2.3;
(b) the ability of the U.S. Borrower or any other Obligor to
amend or otherwise modify this Agreement or any other Loan Document; or
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(c) the ability of any Subsidiary to make any payments, directly
or indirectly, to the U.S. Borrower by way of dividends, advances,
repayments of loans or advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns on
investments.
SECTION 9.2.15. SALE AND LEASEBACK. The U.S. Borrower will not, and
will not permit any of its Subsidiaries to, enter into any agreement or
arrangement with any other Person providing for the leasing by the U.S. Borrower
or any of its Subsidiaries of real or personal property of the U.S. Borrower or
any of its Subsidiaries owned as of the date of the initial Credit Extensions
which has been or is to be sold or transferred by the U.S. Borrower or any of
its Subsidiaries to such other Person or to any other Person to whom funds have
been or are to be advanced by such Person on the security of such property or
rental obligations of the U.S. Borrower or any of its Subsidiaries.
SECTION 9.2.16. CAPITAL EXPENDITURES. The U.S. Borrower will
not, and will not permit any of its Subsidiaries to, make or commit to make
Capital Expenditures in any Fiscal Year, except
(a) Capital Expenditures which do not aggregate in excess of the
greater of (i) 4.50% of the net sales of the U. S. Borrower and its
Subsidiaries for the previous Fiscal Year as certified to the Agent by
an Authorized Officer of the U.S. Borrower and (ii) the amount set
forth below opposite such Fiscal Year:
Maximum Capital
FISCAL YEAR EXPENDITURES
----------- ---------------
1998 $17,000,000
1999 $18,000,000
2000 $19,500,000
2001 $21,250,000
2002 $23,000,000
2003 $24,500,000
2004 $27,000,000
2005 $29,500,000
2006 $32,500,000
2007 $35,750,000
PROVIDED, that
(i) to the extent Capital Expenditures are made or committed to
be made in any Fiscal Year in an amount less than the maximum amount
permitted for such Fiscal Year as provided in this clause, the
Capital Expenditures that the U.S. Borrower or any of its
Subsidiaries may make or commit to make in the next following Fiscal
Year shall be increased by 50% of the amount of the permitted Capital
Expenditures not so
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made or committed to be made in the immediately preceding Fiscal year
(the "CARRY-FORWARD AMOUNT");
(ii) if all or a part of the Carry-Forward Amount is not used in
full in the immediately succeeding Fiscal Year, up to 25% of such
original Carry-Forward Amount may be carried forward to the second
immediately succeeding Fiscal Year, but no further carry forward of
such CarryForward Amount to any other succeeding Fiscal Year shall be
permitted; and
(iii) no portion of any Carry-Forward Amount shall be used
in any Fiscal Year until the entire amount of the Capital
Expenditures permitted to be made or committed to be made in such
Fiscal Year as provided in this CLAUSE (a) shall have been used; and
(b) Capitalized Lease Liabilities to the extent permitted as
Indebtedness pursuant to CLAUSE (d) of SECTION 9.2.2.
ARTICLE X
EVENTS OF DEFAULT
SECTION 10.1. LISTING OF EVENTS OF DEFAULT. Each of the
following events or occurrences described in this SECTION 10.1 shall
constitute an "EVENT OF DEFAULT".
SECTION 10.1.1. NON-PAYMENT OF OBLIGATIONS. Any Borrower shall
default in the payment or prepayment when due of
(a) any Reimbursement Obligation or any deposit of cash for
collateral purposes pursuant to SECTION 4.1.2 or SECTION 4.1.4, as the
case may be;
(b) any principal of or interest on any Loan, except that, with
respect to any Default in the payment of interest, such Default may
continue unremedied for a period of two Business Days before an Event
of Default shall exist hereunder as a result thereof; or
(c) of any fee described in ARTICLE V or of any other Obligation
and such default shall continue unremedied for a period of five days.
SECTION 10.1.2. BREACH OF WARRANTY. Any representation or warranty of
any Borrower, Parent, any Subsidiary Guarantor or any other Obligor made or
deemed to be made hereunder or in any other Loan Document executed by it or any
other writing or certificate furnished by or on behalf of a Borrower or any
other Obligor to either Agent, any Issuer or any Lender for the purposes of or
in connection with this Agreement or any such other Loan
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Document (including any certificates delivered pursuant to ARTICLE VII), is
or shall be incorrect when made or deemed to have been made in any material
respect.
SECTION 10.1.3. NON-PERFORMANCE OF CERTAIN COVENANTS AND
OBLIGATIONS. Any Borrower shall default in the due performance and observance
of any of its obligations under SECTION 9.2 other than (x) CLAUSE (a) or (c)
of SECTION 9.2.4 or (y) SECTION 9.2.5; or any Borrower shall default, and
such default shall continue unremedied for a period of 30 days or more, in
the due performance or observance of any of its obligations under CLAUSE (a)
or (c) of SECTION 9.2.4 or SECTION 9.2.5.
SECTION 10.1.4. NON-PERFORMANCE OF OTHER COVENANTS AND
OBLIGATIONS. Any Borrower or any other Obligor shall default in the due
performance and observance of any other agreement contained herein or in any
other Loan Document executed by it, and such default shall continue
unremedied for a period of 30 days after notice thereof shall have been given
to such Borrower by either Agent or any Lender.
SECTION 10.1.5. DEFAULT ON OTHER INDEBTEDNESS. A default shall
occur in the payment when due (subject to any applicable grace period),
whether by acceleration or otherwise, of any Indebtedness (other than
Indebtedness described in SECTION 10.1.1) of any Borrower or any Subsidiary
having a principal amount, individually or in the aggregate, in excess of
$1,000,000, or a default shall occur in the performance or observance of any
obligation or condition with respect to such Indebtedness (subject to any
applicable grace period) if the effect of such default is to accelerate the
maturity of any such Indebtedness or such default shall continue unremedied
for any applicable period of time sufficient to permit the holder or holders
of such Indebtedness, or any trustee or agent for such holders, to cause or
declare such Indebtedness to become due and payable or to require such
Indebtedness to be prepaid, redeemed, purchased or defeased, or to cause an
offer to purchase or defease such Indebtedness to be required to be made,
prior to its expressed maturity.
SECTION 10.1.6. JUDGMENTS. Any judgment or order for the payment
of money in excess of $1,000,000 (exclusive of any amounts fully covered by
insurance (less any applicable deductible) or indemnification and as to which
the insurer or the indemnifying party, as the case may be, has acknowledged
its responsibility to cover such judgment or order) shall be rendered against
any Borrower or any Subsidiary and such judgment shall not have been vacated
or discharged or stayed or bonded pending appeal within 45 days after the
entry thereof.
SECTION 10.1.7. PENSION PLANS. Any of the following events shall
occur with respect to any Pension Plan
(a) the institution of any steps by a Borrower, any member of its
Controlled Group or any other Person to terminate a Pension Plan if, as a
result of such termination, such Borrower or any such member could be
required to make a contribution to such Pension
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Plan, or could reasonably expect to incur a liability or obligation to
such Pension Plan, in excess of $1,000,000; or
(b) a contribution failure occurs with respect to any U.S.
Pension Plan sufficient to give rise to a Lien under section 302(f) of
ERISA.
SECTION 10.1.8. CHANGE IN CONTROL. Any Change in Control shall
occur.
SECTION 10.1.9. BANKRUPTCY, INSOLVENCY, ETC. Any Borrower, any
Subsidiary (which, either singly is or in the aggregate, would be a
Significant Subsidiary) or Parent shall
(a) become insolvent or generally fail to pay, or admit in writing
its inability or unwillingness generally to pay, debts as they become
due;
(b) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, sequestrator or other custodian for any substantial
part of the property of any thereof, or make a general assignment for
the benefit of creditors;
(c) in the absence of such application, consent or acquiescence,
permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for a substantial part of the property of
any thereof, and such trustee, receiver, sequestrator or other custodian
shall not be discharged within 60 days, provided that each Borrower, each
such Subsidiary and Parent hereby expressly authorizes each Agent and each
Lender to appear in any court conducting any relevant proceeding during
such 60-day period to preserve, protect and defend their rights under this
Agreement and the other Loan Documents;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or
liquidation proceeding, in respect thereof, and, if any such case or
proceeding is not commenced by any Borrower, any such Subsidiary or
Parent, such case or proceeding shall be consented to or acquiesced in by
such Borrower, such Subsidiary or Parent, as the case may be, or shall
result in the entry of an order for relief or shall remain for 60 days
undismissed, provided that each Borrower, each Subsidiary and Parent
hereby expressly authorizes each Agent and each Lender to appear in any
court conducting any such case or proceeding during such 60-day period to
preserve, protect and defend their rights under the Loan Documents; or
(e) take any corporate action authorizing, or in furtherance of,
any of the foregoing.
SECTION 10.1.10. IMPAIRMENT OF SECURITY, ETC. Any Loan Document,
or any Lien granted thereunder, shall (except in accordance with its terms),
in whole or in part, terminate, cease to be effective or cease to be the
legally valid, binding and enforceable obligation of any Obligor party
thereto; any Borrower, any other Obligor or any other party shall, directly
or
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indirectly, contest in any manner such effectiveness, validity, binding
nature or enforceability; or, except as permitted under any Loan Document,
any Lien securing any Obligation shall, in whole or in part, cease to be a
perfected first priority Lien.
SECTION 10.1.11. SUBORDINATED NOTES. The subordination provisions
relating to the Subordinated Indenture or any other Subordinated Debt
Instrument (the "SUBORDINATION PROVISIONS") shall fail to be enforceable by
the Lenders (to the extent they have not effectively waived in writing the
benefits thereof) in accordance with the terms thereof, or the principal or
interest on any Loan, Reimbursement Obligation or other Obligations shall
fail to constitute Bank Debt (as defined in the Subordinated Indenture (or
similar term in any other Subordinated Debt Instrument); or the U.S. Borrower
or any of its Subsidiaries shall, directly or indirectly, disavow or contest
in any manner (i) the effectiveness, validity or enforceability of any of the
Subordination Provisions, (ii) that any of such Subordination Provisions
exist for the benefit of the Agents, each Issuer and the Lenders or (iii)
that all payments of principal or interest with respect to any such
Subordinated Debt Instrument made by the U.S. Borrower or its Subsidiaries,
or realized from the liquidation of any property of the U.S. Borrower or its
Subsidiaries, shall be subject to any of such Subordination Provisions.
SECTION 10.1.12. REDEMPTION. Any event shall occur which, under
the terms of or any Subordinated Debt Instrument, shall require the U.S.
Borrower or any of its Subsidiaries to purchase, redeem or otherwise acquire
or offer to purchase, redeem or otherwise acquire all or any portion of the
principal amount of any such Subordinated Debt prior to its final stated
maturity date.
SECTION 10.1.13. TERMINATION OF RECEIVABLES FACILITY. Any event or
circumstance shall occur which permits or requires the Persons purchasing, or
financing the purchase of, Accounts under the Permitted Receivables
Transaction to stop so purchasing or financing such Accounts, other than by
reason of the occurrence of the stated expiry date of the Permitted
Receivables Transaction or the voluntary termination thereof by the U.S.
Borrower; PROVIDED, that any notices or cure periods that are conditions to
the rights of such Persons to stop purchasing, or financing the purchase of,
such Accounts have been given or have expired, as the case may be.
SECTION 10.2. ACTION IF BANKRUPTCY. If any Event of Default
described in CLAUSES (a) through (d) of SECTION 10.1.9 shall occur, the
Commitments (if not theretofore terminated) shall automatically terminate and
the outstanding principal amount of all outstanding Loans and all other
Obligations shall automatically be and become immediately due and payable,
without notice or demand.
SECTION 10.3. ACTION IF OTHER EVENT OF DEFAULT. If any Event of
Default (other than any Event of Default described in CLAUSES (a) through (d)
of SECTION 10.1.9) shall occur for any reason, whether voluntary or
involuntary, and be continuing, the U.S. Agent, upon the direction of the
Required Lenders, shall by notice to Borrowers declare all or any portion of
the outstanding principal amount of the Loans and other Obligations to be due
and payable
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and/or the Commitments (if not theretofore terminated) to be terminated,
whereupon the full unpaid amount of such Loans and other Obligations which
shall be so declared due and payable shall be and become immediately due and
payable, without further notice, demand or presentment, and/or, as the case
may be, the Commitments shall terminate; PROVIDED that (i) if less than the
total principal amount of all Loans and other Obligations are declared to be
due and payable, the amount so declared due and payable shall be PRO RATA
between the Facilities and (ii) the termination of a Commitment under a
Facility will automatically result in the corresponding termination of the
Commitment under the other Facility.
ARTICLE XI
THE AGENTS
SECTION 11.1. ACTIONS. Each Lender hereby appoints Scotiabank as
its U.S. Agent, as its Canadian Agent and/or (in each case) as its collateral
agent, as the case may be, under and for purposes of this Agreement, the
Notes and each other Loan Document. Each Lender authorizes the applicable
Agent to act on behalf of such Lender under this Agreement, the Notes and
each other Loan Document and, in the absence of other written instructions
from the Required Lenders received from time to time by such Agent (with
respect to which such Agent agrees that it will comply, except as otherwise
provided in this Section or as otherwise advised by counsel in order to avoid
contravention of applicable law), to exercise such powers hereunder and
thereunder as are specifically delegated to or required of such Agent by the
terms hereof and thereof, together with such powers as may be reasonably
incidental thereto. Each Lender hereby indemnifies (which indemnity shall
survive any termination of this Agreement) each Agent, PRO RATA according to
such Lender's percentage of the Total Exposure Amount, from and against any
and all liabilities, obligations, losses, damages, claims, costs or expenses
of any kind or nature whatsoever which may at any time be imposed on,
incurred by, or asserted against, either Agent in any way relating to or
arising out of this Agreement, the Notes and any other Loan Document,
including reasonable attorneys' fees, and as to which such Agent is not
reimbursed by a Borrower; PROVIDED, HOWEVER, that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, claims, costs or expenses which are determined by a court of
competent jurisdiction in a final proceeding to have resulted solely from
such Agent's gross negligence or wilful misconduct. Neither Agent shall be
required to take any action hereunder, under the Notes or under any other
Loan Document, or to prosecute or defend any suit in respect of this
Agreement, the Notes or any other Loan Document, unless it is indemnified
hereunder to its satisfaction. If any indemnity in favor of the Agents shall
be or become, in either Agent's determination, inadequate, such Agent may
call for additional indemnification from the Lenders and cease to do the acts
indemnified against hereunder until such additional indemnity is given.
SECTION 11.2. FUNDING RELIANCE, ETC. Unless the applicable Agent
shall have been notified by telephone, confirmed in writing, by any Lender by
5:00 p.m. (local time) on the Business Day prior to a Borrowing that such
Lender will not make available the amount which
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would constitute its Percentage of such Borrowing on the date specified
therefor, such Agent may assume that such Lender has made such amount
available to such Agent and, in reliance upon such assumption, make available
to the applicable Borrower a corresponding amount. If and to the extent that
such Lender shall not have made such amount available to such Agent, such
Lender and such Borrower severally agree to repay such Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such Agent made such amount available to such Borrower to the
date such amount is repaid to such Agent, at the interest rate applicable at
the time to Loans comprising such Borrowing (in the case of a Borrower) and
(in the case of a Lender), at the Federal Funds Rate (for the first two
Business Days after which such amount has not been repaid), and thereafter at
the interest rate applicable to Loans comprising such Borrowing.
SECTION 11.3. EXCULPATION. Neither Agent nor any of their
respective directors, officers, employees or agents shall be liable to any
Secured Party for any action taken or omitted to be taken by it under this
Agreement or any other Loan Document, or in connection herewith or therewith,
except for its own wilful misconduct or gross negligence, nor responsible for
any recitals or warranties herein or therein, nor for the effectiveness,
enforceability, validity or due execution of this Agreement or any other Loan
Document, nor for the creation, perfection or priority of any Liens purported
to be created by any of the Loan Documents, or the validity, genuineness,
enforceability, existence, value or sufficiency of any collateral security,
nor to make any inquiry respecting the performance by any Borrower of its
obligations hereunder or under any other Loan Document. Any such inquiry
which may be made by either Agent shall not obligate it to make any further
inquiry or to take any action. Each Agent shall be entitled to rely upon
advice of counsel concerning legal matters and upon any notice, consent,
certificate, statement or writing which such Agent believes to be genuine and
to have been presented by a proper Person.
SECTION 11.4. SUCCESSOR. Either Agent may resign as such at any
time upon at least 30 days' prior notice to the Borrowers and all Lenders. If
either Agent at any time shall resign, the Required Lenders may, with the
consent of the U.S. Borrower (such consent not to be unreasonably withheld
and, if the U.S. Borrower withholds its consent, stating the reasons therefor
in reasonable detail), appoint another Lender as a successor Agent which
shall thereupon become the applicable Agent in place of the retiring Agent
hereunder. If no successor Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Agent's giving notice of resignation, then the retiring Agent may,
with the consent of the U.S. Borrower (such consent not to be unreasonably
withheld and, if the U.S. Borrower withholds its consent, stating the reasons
therefor in reasonable detail) and on behalf of the Secured Parties, appoint
a successor Agent, which shall be one of the Lenders or a commercial banking
institution organized under the laws of (in the case of the U.S. Facility)
the U.S. (or any State thereof) or a U.S. branch or agency of a commercial
banking institution, and (in the case of the Canadian Facility) listed on
Schedule I of the Bank Act (Canada) and (in each case) having (x) a combined
capital and surplus of at least $250,000,000 and (y) (if such successor Agent
is so rated) a credit rating of AA or better by Moody's or a comparable
rating by S&P; PROVIDED, HOWEVER, that if, after
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expending all reasonable commercial efforts, such retiring Agent is unable to
find a commercial banking institution which is willing to accept such
appointment and which meets the qualifications set forth in CLAUSE (y) above,
such retiring Agent shall be permitted to appoint as its successor from all
available commercial banking institutions willing to accept such appointment
such institution having the highest credit rating of all such available and
willing institutions. Upon the acceptance of any appointment as an Agent
hereunder by a successor Agent, such successor Agent shall be entitled to
receive from the retiring Agent such documents of transfer and assignment as
such successor Agent may reasonably request, and shall thereupon succeed to
and become vested with all rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring Agent's resignation
hereunder as an Agent, the provisions of
(a) this ARTICLE XI shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Agent under this
Agreement; and
(b) SECTION 12.3 and SECTION 12.4 shall continue to inure to its
benefit.
SECTION 11.5. LOANS BY THE AGENTS. Each Agent shall have the same
rights and powers with respect to (x) the Credit Extensions made by it or any
of its Affiliates, and (y) the Notes held by it or any of its Affiliates as
any other Secured Party and may exercise the same as if it were not an Agent.
Each Agent and its Affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with any Borrower or any Subsidiary
or Affiliate of any Borrower as if such Agent were not an Agent hereunder.
SECTION 11.6. CREDIT DECISIONS. Each Secured Party acknowledges
that it has, independently of the Agents and each other Lender, and based on
such Lender's review of the financial information of the Borrowers, this
Agreement, the other Loan Documents (the terms and provisions of which being
satisfactory to such Secured Party) and such other documents, information and
investigations as such Secured Party has deemed appropriate, made its own
credit decision to extend its Commitments. Each Secured Party also
acknowledges that it will, independently of the Agents and each other Secured
Party, and based on such other documents, information and investigations as
it shall deem appropriate at any time, continue to make its own credit
decisions as to exercising or not exercising from time to time any rights and
privileges available to it under this Agreement or any other Loan Document.
SECTION 11.7. COPIES, ETC. The Agents shall give prompt notice to
each Secured Party of each notice or request required or permitted to be
given to the Agents by the Borrowers pursuant to the terms of this Agreement
(unless concurrently delivered to the Secured Parties by the Borrowers). The
Agents will distribute to each Secured Party each document or instrument
received for its account and copies of all other communications received by
the Agents from the Borrowers for distribution to the Secured Parties by the
Agents in accordance with the terms of this Agreement or any other Loan
Document.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1. WAIVERS, AMENDMENTS, ETC. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing
and consented to by the Borrowers and the Required Lenders; PROVIDED,
HOWEVER, that no such amendment, modification or waiver shall:
(a) extend any Commitment Termination Date or any interest
payment date or the date fees are payable under either Facility without
the consent of all adversely affected Lenders under that Facility or
modify this SECTION 12.1 without the consent of all Lenders;
(b) increase any Lender's Percentage of any Commitment Amount (in the
case of other than an increase in a Lender's applicable Percentage
resulting from a reallocation in accordance with SECTIONS 2.2.3 and
3.2.2), increase the aggregate amount of any Credit Extensions required to
be made by a Lender pursuant to its Commitments or reduce any fees
described in ARTICLE V payable to any Lender without the consent of such
Lender;
(c) extend the Stated Maturity Date for any Lender's Loan, or reduce
the principal amount of or rate of interest on any Lender's Loan, without
the consent of such Lender (it being understood and agreed, however, that
any vote to rescind any acceleration made pursuant to SECTION 10.2 and
SECTION 10.3 of amounts owing with respect to the Loans and other
Obligations shall only require the vote of the Required Lenders);
(d) change the definition of "Required Lenders" or any
requirement hereunder that any particular action be taken by all
Lenders without the consent of all Lenders;
(e) increase the Stated Amount of any Letter of Credit unless
consented to by each Issuer;
(f) release any of (i) the guarantees of any Guarantor or (ii) the
collateral (including any Pledged Notes (except as provided in CLAUSE
(e)(ii) of SECTION 9.2.2) or Pledged Shares, as such terms are defined in
the Pledge Agreements) (except the sale or transfer of Accounts and other
related assets in accordance with the Permitted Receivables Transaction),
in either case without the consent of all Lenders as expressly provided
herein or therein (it being understood that no consent of the Lenders is
required for a release in connection with a Permitted Disposition);
(g) change any of the terms of (i) CLAUSE (c) of SECTION 2.1.4 or
SECTION 2.3.2 without the consent of the U.S. Swing Line Lender or (ii)
CLAUSE (c) of SECTION 3.1.3 or SECTION 3.3.2 without the consent of the
Canadian Swing Line Lender;
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(h) affect adversely the interests, rights or obligations of
either Agent in its capacity as an Agent, or any Issuer, unless
consented to by such Agent or such Issuer, as the case may be; or
(i) modify CLAUSES (c), (d), (e) or (f) of SECTION 5.1.1 (other
than as to the Stated Maturity Date) without the consent of Lenders
holding at least 66 2/3% of the Total Exposure Amount.
No failure or delay on the part of either Agent, any Issuer or any Lender in
exercising any power or right under this Agreement or any other Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise
of any such power or right preclude any other or further exercise thereof or
the exercise of any other power or right. No notice to or demand on any
Borrower in any case shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by either Agent, any Issuer or any
Lender under this Agreement or any other Loan Document shall, except as may
be otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 12.2. NOTICES. All notices and other communications
provided to any party hereto under this Agreement or any other Loan Document
shall be in writing or by facsimile and addressed, delivered or transmitted
to such party at its address or facsimile number set forth below its
signature hereto (in the case of the Borrowers) and set forth in SCHEDULE II
(in the case of the Agents and the Lenders) or set forth in the Lender
Assignment Agreement or at such other address or facsimile number as may be
designated by such party in a notice to the other parties given in accordance
herewith. Any notice, if mailed and properly addressed with postage prepaid
or if properly addressed and sent by pre-paid courier service, shall be
deemed given when received; any notice, if transmitted by facsimile, shall be
deemed given when the confirmation of transmission thereof is received by the
transmitter.
SECTION 12.3. PAYMENT OF COSTS AND EXPENSES. Each Borrower
agrees to pay on demand all reasonable expenses of the Agents (including the
reasonable fees and out-of-pocket expenses of New York and Canadian counsel
to either Agent and of local counsel, if any, who may be retained by counsel
to either Agent) in connection with
(a) the negotiation, preparation, execution and delivery of this
Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from
time to time hereafter be required, whether or not the transactions
contemplated hereby are consummated; and
(b) the filing, recording, refiling or rerecording of any Loan
Document and/or any UCC financing statements relating thereto and all
amendments, supplements, amendments and restatements and other
modifications to any thereof and any and all other documents
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or instruments of further assurance required to be filed or recorded or
refiled or rerecorded by the terms hereof or the terms of any Loan
Document; and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
Each Borrower further agrees to pay, and to save each Agent, each Issuer and
the Lenders harmless from all liability for, any stamp, registration,
documentation, issuance or other similar taxes which may be payable in
connection with the execution or delivery of this Agreement, the Credit
Extensions hereunder, or the issuance of the Notes, Letters of Credit or any
other Loan Documents. Each Borrower also agrees to reimburse each Agent, each
Issuer and each Lender upon demand for all reasonable out-of-pocket expenses
(including reasonable attorneys' fees and legal expenses of counsel to either
Agent, any Issuer and the Lenders, and, based upon the written advice of
legal counsel, a copy of which shall be provided to the Borrowers, that in
such counsel's judgment having a common counsel for either Agent, any Issuer
and the Lenders would present such counsel with a conflict of interest, of
one other counsel selected by the Required Lenders (other than the Agents))
incurred by either Agent, any Issuer or such Lenders in connection with (x)
the negotiation of any restructuring or "work-out" with any Borrower, whether
or not consummated, of any Obligations and (y) the enforcement of any
Obligations.
SECTION 12.4. INDEMNIFICATION. In consideration of the execution
and delivery of this Agreement by each Lender, Issuer and Agent and the
extension of the Commitments, each Borrower hereby indemnifies, exonerates
and holds each Agent, each Issuer and each Lender and each of their
respective officers, directors, employees and agents (collectively, the
"INDEMNIFIED PARTIES") free and harmless from and against any and all
actions, causes of action, suits, losses, costs, liabilities and damages, and
expenses incurred in connection therewith (irrespective of whether any such
Indemnified Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys' fees and disbursements,
whether incurred in connection with actions between or among the parties
hereto or the parties hereto and third parties (collectively, the
"INDEMNIFIED LIABILITIES"), incurred by the Indemnified Parties or any of
them as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Credit
Extension, including all Indemnified Liabilities arising in connection
with (i) the Merger and (ii) the other aspects of the Transaction;
(b) the entering into and performance of this Agreement and any other
Loan Document by any of the Indemnified Parties (including any action
brought by or on behalf of any Borrower as the result of any determination
by the Required Lenders pursuant to ARTICLE VII not to fund any Credit
Extension), provided that any such action is resolved in favor of such
Indemnified Party;
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(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by any Borrower or any Subsidiary
of all or any portion of the stock or assets of any Person, whether or
not either Agent, any Issuer or any Lender is party thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to
the protection of the environment or the Release by any Borrower or any
Subsidiary of any Hazardous Material;
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by any Borrower or any Subsidiary thereof of
any Hazardous Material (including any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any
Environmental Law), regardless of whether caused by, or within the control
of, such Borrower or such Subsidiary; or
(f) each Lender's Environmental Liability (the indemnification herein
shall survive repayment of the Notes and any transfer of the property of
any Borrower or any Subsidiary by foreclosure or by a deed in lieu of
foreclosure for any Lender's Environmental Liability, regardless of
whether caused by, or within the control of, such Borrower or such
Subsidiary);
except for any such Indemnified Liabilities resulting from the gross
negligence or wilful misconduct of any such Indemnified Party, or arising out
of or in connection with any claims made or proceedings commenced against any
such Indemnified Party by any securityholder or creditor of such Indemnified
Party arising out of and based upon rights afforded any such securityholder
or creditor solely in its capacity as such. Each Borrower and its successors
and assigns hereby waive, release and agree not to make any claim or bring
any cost recovery action against, either Agent, any Issuer or any Lender
under CERCLA or any state equivalent, or any similar law now existing or
hereafter enacted. It is expressly understood and agreed that to the extent
that any Secured Party is strictly liable under any Environmental Laws, each
Borrower's obligation to such Secured Party under this indemnity shall
likewise be without regard to fault on the part of such Borrower with respect
to the violation or condition which results in liability of such Secured
Party. If and to the extent that the foregoing undertaking may be
unenforceable for any reason, each Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
SECTION 12.5. SURVIVAL. The obligations of each Borrower under
SECTIONS 6.3, 6.4, 6.5, 6.6, 12.3 and 12.4, and the obligations of the
Lenders under SECTION 11.1, shall in each case survive any assignment from
one Lender to another (in the case of SECTIONS 12.3 and 12.4) and any
termination of this Agreement, the payment in full of all the Obligations and
the termination of all the Commitments. The representations and warranties
made by each Borrower and each other Obligor in this Agreement and in each
other Loan Document shall survive the execution and delivery of this
Agreement and each such other Loan Document.
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SECTION 12.6. SEVERABILITY. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or such Loan Document or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 12.7. HEADINGS. The various headings of this Agreement
and of each other Loan Document are inserted for convenience only and shall
not affect the meaning or interpretation of this Agreement or such other Loan
Document or any provisions hereof or thereof.
SECTION 12.8. EXECUTION IN COUNTERPARTS, EFFECTIVENESS, ETC. This
Agreement may be executed by the parties hereto in several counterparts, each
of which shall be an original and all of which shall constitute together but
one and the same agreement. This Agreement shall become effective when
counterparts hereof executed on behalf of each Borrower, each Agent and each
Lender (or notice thereof satisfactory to each Agent) shall have been
received by each Agent and notice thereof shall have been given by each Agent
to each Borrower and each Lender.
SECTION 12.9. GOVERNING LAW; ENTIRE AGREEMENT. THIS AGREEMENT, THE
NOTES AND EACH OTHER LOAN DOCUMENT OTHER THAN THOSE THAT EXPRESSLY STATE
OTHERWISE (INCLUDING PROVISIONS WITH RESPECT TO INTEREST, LOAN CHARGES AND
COMMITMENT FEES) SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED
BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE
SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF A SECURITY
INTEREST UNDER A LOAN DOCUMENT, OR REMEDIES UNDER A LOAN DOCUMENT, IN RESPECT OF
ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN
THE STATE OF NEW YORK. This Agreement, the Notes and the other Loan Documents
constitute the entire understanding among the parties hereto with respect to the
subject matter hereof and thereof and supersede any prior agreements, written or
oral, with respect thereto.
SECTION 12.10. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that:
(a) no Borrower may assign or transfer its rights or delegate its
obligations hereunder, except (x) in connection with the Assumption with
respect to LHPG (and the Agents and the Lenders agree to the assignment by
LHPG to Leiner of, and the assumption by Leiner of, and the subsequent
release of LHPG from, all rights and obligations of LHPG under the Loan
Documents in accordance with Section 9.1.11) or (y)
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as permitted under CLAUSE (a) of SECTION 9.2.10 with respect to the
Canadian Borrower, without the prior written consent of the Agents and all
Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders
are subject to SECTION 12.11.
SECTION 12.11. SALE AND TRANSFER OF LOANS AND NOTES;
PARTICIPATIONS IN LOANS AND NOTES. Each Lender may assign, or sell
participations in, its Loans, Letters of Credit and Commitments to one or
more other Persons in accordance with this SECTION 12.11.
SECTION 12.11.1. ASSIGNMENTS. Upon prior notice to the
applicable Borrower and the applicable Agent, any Lender,
(a) with the consent of such Agent and, so long as no Event of
Default has occurred and is continuing, such Borrower (which consents
shall not be unreasonably delayed or withheld; PROVIDED, HOWEVER that in
the event of a proposed assignment to an Assignee Lender (as defined
below), the obligations of whom do not satisfy the credit ratings set
forth in CLAUSE (b) of SECTION 6.11, such Agent and such Borrower may
withhold such consent in their sole discretion) may at any time assign and
delegate to one or more commercial banks or other financial institutions;
and
(b) with notice to such Borrower and such Agent, but without the
consent of such Borrower or such Agent (or any other Person), may
assign and delegate to any of its Affiliates or to any other Lender
(each Person described in either of the foregoing clauses as being the Person
to whom such assignment and delegation is to be made, being hereinafter
referred to as an "ASSIGNEE LENDER"), all or any fraction of any of such
Lender's total Loans, Letter of Credit Outstandings and Commitments in a
minimum aggregate amount of $5,000,000, with respect to the U.S. Facility, or
Cdn $5,000,000, with respect to the Canadian Facility (or, if less, the
entire remaining amount of such Lender's Loans, Letter of Credit Outstandings
and Commitments); PROVIDED, HOWEVER, that
(i) with respect to assignments of Revolving Loans, the
assigning Lender must assign a PRO RATA portion of each of its Revolving Loan
Commitment, Revolving Loans and interest in Letters of Credit Outstanding;
(ii) each Assignee Lender will comply, if applicable, with the
provisions contained in SECTIONS 6.10 and 6.11;
(iii) with respect to the U.S. Facility, each Assignee Lender
that is a U.S. Lender that is a U.S. Person shall comply with the
provisions of CLAUSE (b)(i) of SECTION 6.6, and each Assignee Lender
that is a U.S. Lender that is not a U.S. Person
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shall comply with the provisions of CLAUSE (b)(ii) of SECTION 6.6
(and, in any case, with all of the other provisions of CLAUSE (b) of
SECTION 6.6);
(iv) with respect to the Canadian Facility, each Assignee Lender
shall represent that, under applicable law and treaties in effect as
of the date of the assignment, no federal taxes will be required to
be withheld by the Canadian Agent or the Canadian Borrower with
respect to any payments to be made to such Assignee Lender in respect
of this Agreement; and
(v) such assignment and obligation shall be made in compliance
with all applicable laws and shall require the prior consent of the
applicable Borrower if it would require any Borrower to make any
filing with any Governmental Authority or to qualify any Loan, Letter
of Credit or Note under the laws of any jurisdiction.
The applicable Borrower and each other Obligor and each Agent shall be
entitled to continue to deal solely and directly with such Lender in
connection with the interests so assigned and delegated to an Assignee Lender
until
(c) notice of such assignment and delegation, together with (i)
payment instructions, (ii) the Internal Revenue Service Forms or other
statements contemplated or required to be delivered pursuant to CLAUSE (b)
of SECTION 6.6, in each case if applicable, and (iii) addresses and
related information with respect to such Assignee Lender, shall have been
delivered to the applicable Borrower and the applicable Agent by such
Lender and such Assignee Lender;
(d) such Assignee Lender shall have executed and delivered to the
applicable Borrower and the applicable Agent a Lender Assignment Agreement
(which shall include, INTER ALIA, the Assignee Lender's representations
contemplated by CLAUSE (b) of SECTION 6.6, if applicable), accepted by
such Agent;
(e) the processing fees described below shall have been paid; and
(f) the applicable Agent shall have registered such assignment
and delegation in the applicable Register pursuant to SECTION 2.6(B) or
SECTION 3.7(b).
From and after the date that the applicable Agent accepts such Lender
Assignment Agreement, and such assignment and delegation is registered in the
applicable Register pursuant to SECTIONS 2.6(b) or 3.7(b), (x) the Assignee
Lender thereunder shall be deemed automatically to have become a party hereto
and to the extent that rights and obligations hereunder have been assigned
and delegated to such Assignee Lender in connection with such Lender
Assignment Agreement, shall have the rights and obligations of a Lender
hereunder and under the other Loan Documents, and (y) the assignor Lender, to
the extent that rights and obligations hereunder have been assigned and
delegated by it in connection with such Lender Assignment Agreement, shall be
released from its obligations hereunder and under the other Loan
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Documents. Within five Business Days after its receipt of notice that the
applicable Agent has received and accepted an executed Lender Assignment
Agreement, but subject to CLAUSE (d) above, the applicable Borrower shall
execute and deliver to such Agent (for delivery to the relevant Assignee
Lender) a new Note evidencing such Assignee Lender's assigned Loans and
Commitments and, if the assignor Lender has retained Loans and Commitments
hereunder, a replacement Note in the principal amount of the Loans and
Commitments retained by the assignor Lender hereunder (such Note to be in
exchange for, but not in payment of, the Note then held by such assignor
Lender). Each such Note shall be dated the date of the predecessor Note. The
assignor Lender shall mark each predecessor Note "exchanged" and deliver each
of them to the applicable Borrower. Accrued interest on that part of each
predecessor Note evidenced by a new Note, and accrued fees, shall be paid as
provided in the Lender Assignment Agreement. Accrued interest on that part of
each predecessor Note evidenced by a replacement Note shall be paid to the
assignor Lender. Accrued interest and accrued fees shall be paid at the same
time or times provided in the predecessor Note and in this Agreement. Such
assignor Lender or such Assignee Lender must also pay a processing fee in the
amount of $3,500 to the U.S. Agent or Cdn $4,500 to the Canadian Agent, as
applicable, upon delivery of any Lender Assignment Agreement. Any attempted
assignment and delegation not made in accordance with this SECTION 12.11.1
shall be null and void. Notwithstanding any other term of this SECTION
12.11.1, the agreement of each Swing Line Lender to provide its Swing Line
Loan Commitment shall not impair or otherwise restrict in any manner the
ability of such Swing Line Lender to make any assignment of its Loans or
Commitments, it being understood and agreed that such Swing Line Lender may
terminate its Swing Line Loan Commitment, either in whole or in part, in
connection with the making of any assignment; PROVIDED, HOWEVER, that if
Scotiabank's U.S. Revolving Loan Commitment is greater than or equal to
$10,000,000, Scotiabank agrees, unless another U.S. RL Lender has agreed to
become the U.S. Swing Line Lender, to continue to be the U.S. Swing Line
Lender. Notwithstanding anything to the contrary set forth above, any Lender
may (without requesting the consent of the applicable Borrower or the
applicable Agent) pledge its Loans to a Federal Reserve Bank in support of
borrowings made by such Lender from such Federal Reserve Bank.
SECTION 12.11.2. PARTICIPATIONS. Any Lender may at any time sell
to one or more commercial banks or other Persons (each of such commercial
banks and other Persons being herein called a "PARTICIPANT") participating
interests in any of the Loans, Commitments, or other interests of such Lender
hereunder; PROVIDED, HOWEVER, that
(a) no participation contemplated in this SECTION 12.11 shall
relieve such Lender from its Commitments or its other obligations
hereunder or under any other Loan Document;
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations;
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(c) the applicable Borrower and each other Obligor and each Agent
shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement and each of the other Loan Documents;
(d) no Participant, unless such Participant is an Affiliate of such
Lender or is itself a Lender, shall be entitled to require such Lender to
take or refrain from taking any action hereunder or under any other Loan
Document, except that such Lender may agree with any Participant that such
Lender will not, without such Participant's consent, take any actions of
the type described in CLAUSE (b), (f) or, to the extent requiring the
consent of each Lender, CLAUSE (c) of SECTION 12.1;
(e) no Borrower shall be required to pay any amount under this
Agreement that is greater than the amount which it would have been
required to pay had no participating interest been sold; and
(f) with respect to the Canadian Facility, under applicable law and
treaties in effect on the date of such sale, no Canadian federal taxes
shall be required to be withheld by the Canadian Agent or the Canadian
Borrower with respect to any payments to be made to such Participant in
respect of this Agreement.
Each Borrower acknowledges and agrees that each Participant, for purposes of
SECTIONS 6.3, 6.4, 6.5, 6.6, 6.8, 6.9, 9.1.1 (it being understood that it
shall be the obligation of each Lender (and not the Borrowers) to deliver to
their Participants the information and reports described in SECTION 9.1.1 to
Participants), 12.3 and 12.4, shall be considered a Lender. Each Participant
shall only be indemnified for increased costs pursuant to SECTION 6.3, 6.5 or
6.6 if and to the extent that the Lender which sold such participating
interest to such Participant concurrently is entitled to make, and does make,
a claim on the applicable Borrower for such increased costs. Any Lender that
sells a participating interest in any Loan, Commitment or other interest to a
Participant under this SECTION 12.11.2 shall indemnify and hold harmless the
applicable Borrower and the applicable Agent from and against any taxes,
penalties, interest or other costs or losses (including reasonable attorneys'
fees and expenses) incurred or payable by such Borrower or such Agent as a
result of the failure of such Borrower or such Agent to comply with its
obligations to deduct or withhold any Taxes from any payments made pursuant
to this Agreement to such Lender or such Agent, as the case may be, which
Taxes, with respect to the U.S. Facility, would not have been incurred or
payable if such Participant had been a U.S. Lender that was not a U.S. Person
and that was entitled to deliver to the U.S. Borrower, the U.S. Agent or such
Lender, and did in fact so deliver, a duly completed and valid Form 1001 or
4224 (or applicable successor form) entitling such Participant to receive
payments under this Agreement without deduction or withholding of any United
States federal taxes, and, with respect to the Canadian Facility, would not
have been incurred or payable if such Participant had been a Canadian Person.
SECTION 12.12. OTHER TRANSACTIONS. Nothing contained herein shall
preclude either Agent, any Issuer or any other Lender from engaging in any
transaction, in addition to those
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contemplated by this Agreement or any other Loan Document, with any Borrower
or any of their Affiliates in which such Borrower or such Affiliate is not
restricted hereby from engaging with any other Person.
SECTION 12.13. EXECUTION ON BEHALF OF CORPORATION. Any signature
by any Authorized Officer on this Agreement, any Loan Document and any other
instrument and certificate executed or to be executed pursuant to or in
connection with this Agreement or such other Loan Documents is provided only
in such Authorized Officer's capacity as a corporate officer, and not in any
way in such Authorized Officer's personal capacity.
SECTION 12.14. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENTS,
THE LENDERS, ANY ISSUER OR THE BORROWERS IN CONNECTION HEREWITH OR THEREWITH
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW
YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT EITHER AGENT'S OPTION, IN THE
COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. EACH BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE PERSONAL
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY
SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION, SUBJECT TO SUCH
BORROWER'S RIGHT TO CONTEST SUCH JUDGMENT BY MOTION OR APPEAL ON ANY GROUNDS
NOT EXPRESSLY WAIVED IN THIS SECTION 12.14. EACH BORROWER HEREBY IRREVOCABLY
APPOINTS CT CORPORATION SYSTEM (THE "PROCESS AGENT"), WITH AN OFFICE ON THE
DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, UNITED STATES, AS ITS
AGENT TO RECEIVE, ON SUCH BORROWER'S BEHALF AND ON BEHALF OF SUCH BORROWER'S
PROPERTY, SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER
PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE
MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO SUCH BORROWER
IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND SUCH
BORROWER HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO
ACCEPT SUCH SERVICE ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, EACH
BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED
MAIL, POSTAGE PREPAID, OR BY PERSONAL
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SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES
SPECIFIED IN SECTION 12.2. EACH BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY
HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY
BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE)
WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH BORROWER HEREBY IRREVOCABLY
WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 12.15. WAIVER OF JURY TRIAL. THE AGENTS, THE LENDERS, EACH
ISSUER AND EACH BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF THE AGENTS, THE LENDERS, THE ISSUERS OR THE BORROWERS
IN CONNECTION HEREWITH OR THEREWITH. EACH BORROWER ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION
(AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY)
AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS, THE LENDERS
AND EACH ISSUER ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN
DOCUMENT.
SECTION 12.16. ACKNOWLEDGMENTS AND REPRESENTATIONS BY LENDERS.
Each Lender represents to the Agents and each of the Obligors that,
independently and without reliance upon the Agents or any other Lender, and
based on such documents and information as it has deemed appropriate, it has
made and will make its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of
each of the Borrowers and the Obligors, it has made its own decision to make
its Loans and, in the case of an Issuer, such Issuers represents that it has
made its own decision to issue Letters of Credit, issue its Letters of Credit
hereunder and enter into this Agreement and it will make its own decisions in
taking or not taking action under this Agreement and the other Loan
Documents. Each Lender represents to each other party hereto that it is a
bank, savings and loan association or other similar savings institution,
insurance company, investment fund or company or other financial institution
which makes, invests in or acquires commercial loans in
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the ordinary course of its business, that it is participating hereunder as a
Lender for such commercial purposes, and that it has the knowledge and
experience to be and is capable of evaluating the merits and risks of being a
Lender hereunder.
SECTION 12.17. CONFIDENTIALITY. Each of the Lenders and the Agents
agrees (on behalf of itself and each of its affiliates, directors, officers,
employees, agents, advisors and representatives to (a) use any Confidential
Information only in connection with participating as a Lender or Agent
hereunder and not for any other purpose and (b) keep confidential any
Confidential Information, and in connection therewith comply with its
customary procedures for handling confidential information of this nature;
PROVIDED that nothing herein shall limit the disclosure of any such
information (i) to the extent required by statute, rule, regulation or
judicial process, (ii) as requested or required by any governmental agency or
representative thereof, (iii) to counsel and (if they have signed a
Confidentiality Agreement) other professional advisors for any of the Lenders
or the Agents, (iv) to any Lender's or any Agent's examiners, auditors or
accountants, or to the National Association of Insurance Commissioners, (v)
to the Agents or any other Lender, (vi) by the Agents or any Lender to an
Affiliate thereof, (vii) in connection with any litigation relating to
enforcement of the Loan Documents or (viii) to any Assignee Lender or
Participant (or prospective Assignee Lender or Participant) or to direct
contractual counterparties in Rate Protection Agreements entered into in
connection with a portion or all of a Lender's rights to receive payments
hereunder (or such contractual counterparties' professional advisors), so
long as (in each case) such Person first executes and delivers to the
respective Lender a Confidentiality Agreement, in substantially the form of
EXHIBIT M hereto, for the benefit of and enforceable by the Borrowers, which
Confidentiality Agreement shall be delivered to the U.S. Borrower promptly
after the execution thereof; PROVIDED that in the case of the preceding
CLAUSE (i), such Lender or Agent shall, to the extent legally permissible,
use reasonable efforts to notify the Borrowers of the proposed disclosure as
soon as is reasonably practicable under the circumstances.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of
the day and year first above written.
LEINER HEALTH PRODUCTS GROUP INC.
By: /s/ William B. Towne
-----------------------------------
Name: William B. Towne
Title: Executive Vice
President-Finance
Address: 901 East 233rd Street
Carson, California 90745
Facsimile No.: (310) 952-7768
Attention: William B. Towne
with a copy to:
North Castle Partners I, L .L.C.
11 Meadowcroft Lane
Greenwich, Connecticut 06830
Facsimile No.: (203) 869-4311
Attention: Charles Baird, Jr.
VITA HEALTH COMPANY (1985) LTD.
By: /s/ William B. Towne
-----------------------------------
Name: William B. Towne
Title: Treasurer
Address: 150 Beghin Avenue
Winnipeg, Manitoba
Facsimile No.: (204) 633-8386
Attention: Rachel Cahill
160
<PAGE>
with a copy to the U.S. Borrower and:
North Castle Partners I, L .L.C.
11 Meadowcroft Lane
Greenwich, Connecticut 06830
Facsimile No.: (203) 869-4311
Attention: Charles Baird, Jr.
THE BANK OF NOVA SCOTIA,
as the U.S. Agent
By: /s/ Gary McDonough
-----------------------------------
Title: Authorized Signatory
THE BANK OF NOVA SCOTIA,
as the Canadian Agent
By: /s/ Gary McDonough
-----------------------------------
Title: Authorized Signatory
161
<PAGE>
U.S. LENDERS:
THE BANK OF NOVA SCOTIA
By: /s/ Gary McDonough
-----------------------------------
Title: Authorized Signatory
162
<PAGE>
SALOMON BROTHERS HOLDING
COMPANY INC
By: /s/ Richard H. Ivers
-----------------------------------
Title: Managing Director
163
<PAGE>
MERRILL LYNCH CAPITAL CORPORATION
By: /s/
----------------------------------
Title:
164
<PAGE>
BANK OF MONTREAL
By: /s/ B. A. Blucher
----------------------------------
Title: Senior Vice President
165
<PAGE>
FLEET NATIONAL BANK
By: /s/
----------------------------------
Title: AVP.
166
<PAGE>
LASALLE NATIONAL BANK
By: /s/
----------------------------------
Title: Senior Vice President
167
<PAGE>
COMERICA BANK
By: /s/
----------------------------------
Title: Corporate Banking Officer
168
<PAGE>
THE LONG-TERM CREDIT BANK OF
JAPAN, LIMITED, NEW YORK BRANCH
By: /s/
----------------------------------
Title: Deputy General Manager
169
<PAGE>
SOCIETE GENERALE
By: /s/ J. Stanley Stewart
----------------------------------
Title: Vice President
170
<PAGE>
CREDITANSTALT BANKVEREIN
By: /s/ Clifford L. Wells
----------------------------------
Title: Vice President
By: /s/ Julie Bothamloy
----------------------------------
Title: Vice President
171
<PAGE>
IMPERIAL BANK, a California Banking
Corporation
By: /s/
----------------------------------
Title:
172
<PAGE>
DEEPROCK & COMPANY
By: Eaton Vance Management
as Investment Advisor
By: /s/ Barbara Campbell
----------------------------------
Title: Assistant Treasurer
173
<PAGE>
NORTHERN LIFE INSURANCE COMPANY
By: ING Capital Advisors, Inc.
as Investment Advisor
By: /s/ Kathleen A. Lenarcic
----------------------------------
Title: Vice President &
Portfolio Manager
174
<PAGE>
FLOATING RATE PORTFOLIO
By: Chancellor LGT Senior Secured
Management Inc., as attorney in fact
By: /s/
----------------------------------
Title: Vice President
175
<PAGE>
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/
----------------------------------
Title: Managing Director
176
<PAGE>
KZH-CRESCENT CORPORATION
By: /s/ Robert Goodwin
----------------------------------
Title: Authorized Agent
177
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY
By: /s/
----------------------------------
Title: Authorized Signatory
By: /s/
----------------------------------
Title: Authorized Signatory
178
<PAGE>
179
<PAGE>
CANADIAN LENDERS:
THE BANK OF NOVA SCOTIA
By: /s/ Gary McDonough
----------------------------------
Name: Gary McDonough
Title: Authorized Signatory
180
<PAGE>
BANK OF MONTREAL
By: /s/ B.A. Blucher
----------------------------------
Name: B.A. Blucher
Title: Senior Vice President
181
<PAGE>
SCHEDULE I
DISCLOSURE SCHEDULE TO CREDIT AGREEMENT
ITEM 8.7 LITIGATION
None
ITEM 8.8 EXISTING SUBSIDIARIES
1. Leiner Health Products Group Inc.:
PLI Holdings Inc., a Delaware corporation
Leiner Health Products Inc.
The companies listed in item (b) below
After the Assumption, Leiner Health Products Inc.'s Subsidiaries
are:
VH Holdings Inc., a Manitoba corporation
Vita Health Company (1985) Ltd., a Manitoba corporation
Westcan Pharmaceuticals Ltd., a Manitoba corporation
64804 Manitoba Ltd., a Manitoba corporation
ITEM 8.10 PLANT SITES AND PROPERTY MATTERS
MORTGAGED U.S. OWNED REAL PROPERTY
1. 3532 West 47th, Chicago, Illinois
2. 2300 Badger Lane, Madison, Wisconsin
MORTGAGED U.S. LEASED REAL PROPERTY
1. 7366 Orangewood Avenue, Garden Grove, California
MORTGAGED CANADIAN OWNED REAL PROPERTY
1. 150 Beghin Avenue, Winnipeg, Manitoba
2. 102/104 Osborne Street, Winnipeg, Manitoba
MORTGAGED CANADIAN LEASED REAL PROPERTY
None
ITEM 8.11 EMPLOYEE BENEFIT PLANS
PENSION PLAN
Leiner Health Products Inc. Retirement Plan
The Corporate Plan for Retirement Profit Sharing/401K Plan
Leiner Health Products 401K Restoration Plan Amendment and
Restatement
182
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WELFARE PLANS
Aetna Health Plans
(including Dental)
Prudential Health Care Vision Services Plan Blue Care
Network Dean Care HMO Aetna Health Plans Cigna Term Life
Occupational Health Service Corp.
ITEM 8.12 ENVIRONMENTAL MATTERS
None
ITEM 8.13 INTELLECTUAL PROPERTY
1. Your Life(R)
2. Pharmacist Formula(R)
3. Proven Release(R)
4. Daily Pak(R)
5. Central-Vite(R)
6. Bodycology(R)
ITEM 9.2.2.(B)(I) INDEBTEDNESS TO BE PAID
CREDITOR OUTSTANDING PRINCIPAL AMOUNT
Lenders under Credit Agreement US$90,204,000
dated as of January 30, 1997, Cdn$15,300,000
among Leiner, VH Holdings Inc.,
Vita Health Company (1985) Ltd.
and certain other parties named
therein.
ITEM 9.2.2.(B)(II) ONGOING INDEBTEDNESS
183
<PAGE>
CREDITOR DESCRIPTION OUTSTANDING PRINCIPAL AMOUNT
- -------- ----------- ----------------------------
Comdisco Tablet Presses (53,635.18)
Comdisco Disk drives (174,584.34)
Comdisco AS/400 upgrade (297,016.19)
G.E. Capital Swifpacks, twin-head (927,418.52)
cottoner, single-head
cottoner and bundling
system
G.E. Capital Cartoning machines (560,177.79)
G.E. Capital Swiftpack fillers, (2,064,837.53)
stretchwrapper, cartoner,
stretchpack and fette
presses
G.E. Capital Cottoner, swiftpack filler, (630,961.31)
and stretch packer
Crown Credit Corp. Accelerated Coater (22,357.27)
Crown Credit Corp. Reach Truck (27,734.47)
OTHER:
Various Miscellaneous forklifts, etc. (8,487.20)
TOTAL: (4,767,149.81)
ITEM 9.2.3(D) ONGOING LIENS
See Liens described in Appendix 1 hereto.
ITEM 9.2.5(A) ONGOING INVESTMENTS
1. Non-interest bearing note receivable, dated July 1, 1988, due from
Safeway Stores, Incorporated in the amount of $367,375. This note is
due upon the termination of the Leiner's agreement with Safeway.
2. OWNERSHIP IN OTHER PERSONS:
COMPANY NUMBER OF SHARES
184
<PAGE>
Hallwood Industries:
Steel city Prod. 19
Oakhurst Inc. 19
Natures Bounty 60
Perrigo 100
Phar-Mor Inc. 39
Phar-Mor Inc. 32
Roses 4118
Roses 9608
General Nutrition 59
Crown Group 21
Pharmaceuticals, Inc. 10
Iriquois Brands, Ltd. 5
Safeway Stores 10
5. CERTAIN NOTES:
Existing Notes in an aggregate principal amount not to exceed $325,000
representing amounts owed by certain current and former officers of
LHPG in connection with amounts advanced by LHPG to enable such
officers to pay income tax liability in respect of their purchase of
common stock issued by LHPG at a below-market price.
185
<PAGE>
Appendix I
to Disclosure Schedule
to Credit Agreement
Item 9.2.3(d)
SCHEDULE OF ONGOING LIENS
I. UCC FINANCING STATEMENTS
CALIFORNIA
1. UCC-1 Financing Statement, filed on Nov. 23, 1992
Debtor: Leiner Health Products Inc.
1845 West 205th Street
Torrance, CA 90501
Secured Party: The Bank of Nova Scotia,
as Intercreditor Agent
One Liberty Plaza
New York, NY 10006
Filed with Secretary of State, Sacramento, California
All pledged notes
All issued and outstanding shares of capital stock of any pledged share issuer
All other pledged property
All dividends, distributions, interest, and other payments with respect to
any pledged property
2. UCC-1 Financing Statement, filed on Dec. 24, 1992
Debtor: Leiner Health Products
1845 W. 205th Street
Torrance, CA 90501
Secured Party: Crown Credit Company
40 South Washington Street
New Bremen, OH 45869
Filed with Secretary of State, Sacramento, California
Crown lift truck, battery and charger
3. UCC-1 Financing Statement, filed on Jan. 12, 1993
Debtor: Leiner Health Products Inc.
186
<PAGE>
1845 W. 205th Street
Torrance, CA 90501
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, IL 60532
Filed with Secretary of State, Sacramento, California
Caterpillar lift truck, batteries and charger
4. UCC-1 Financing Statement, filed on Jan. 12, 1993
Debtor: Leiner Health Products Inc.
1845 W. 205th Street
Torrance, CA 90501
Secured Party: Crown Credit Company
40 South Washington Street
New Bremen, OH 45869
Filed with Secretary of State, Sacramento, California
Crown lift truck, battery and charger
5. UCC-1 Financing Statement, filed on Sept. 7, 1993
Debtor: Leiner Health Products Inc.
7366 Orangewood Avenue
Garden Grove, CA 92641
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, IL 60532
Filed with Secretary of State, Sacramento, California
Prime Mover reach truck, 2 Caterpillar lift trucks, batteries and chargers
6. UCC-1 Financing Statement, filed on Sept. 13, 1993
187
<PAGE>
Debtor: Leiner Health Products Inc.
7366 Orangewood Avenue
Garden Grove, CA 93641
Secured Party: The Bank of Nova Scotia,
as Intercreditor Agent
One Liberty Plaza
New York, NY 10006
Filed with Secretary of State, Sacramento, California
All pledged notes
All issued and outstanding shares of capital stock of any pledged share issuer
All other pledged property
All dividends, distributions, interest, and other payments with respect to
any pledged property
7. UCC-1 Financing Statement, filed on Sept. 23, 1993
Debtor: Leiner Health Products Inc.
7366 Orangewood Avenue
Garden Grove, CA 92641
Secured Party: Comdisco, Inc.
6111 North River Road
Rosemont, IL 60018
Filed with Secretary of State, Sacramento, California
Rotary Compacting Press
8. UCC-1 Financing Statement, filed on Oct. 8, 1993
Debtor: Leiner Health Products Inc.
1845 West 205th Street
Torrance, CA 90510
Secured Party: Xerox Corp.
2200 East McFadden Avenue
Santa Ana, CA 92705
Filed with Secretary of State, Sacramento, California
188
<PAGE>
Xerox copiers
9. UCC-1 Financing Statement, filed on Nov. 19, 1993
Debtor: Leiner Health Products Inc.
711 Walnut Street
Compton, CA 90220
Secured Party: Crown Credit Company
40 South Washington Street
New Bremen, Ohio 45869
Filed with Secretary of State, Sacramento, California
3 Crown lift trucks, batteries and chargers
10. UCC-1 Financing Statement, filed on Dec. 17, 1993
Debtor: Leiner Health Products Inc.
7366 Orangewood Avenue
Garden Grove, CA 92641
Secured Party: The Bank of Nova Scotia,
as Intercreditor Agent
One Liberty Plaza
New York, NY 10006
Filed with Secretary of State, Sacramento, California
All pledged notes
All issued and outstanding shares of capital stock of any
pledged share issuer
All other pledged property
All dividends, distributions, interest, and other payments with respect to
any pledged property
11. UCC-1 Financing Statement, filed on Jan. 31, 1994
Debtor: Leiner Health Products Inc.
711 Walnut Street
Compton, CA 90220
189
<PAGE>
Secured Party: Crown Credit Company
40 South Washington Street
New Bremen, OH 45869
Filed with Secretary of State, Sacramento, California
3 Crown lift trucks, batteries and chargers
12. UCC-1 Financing Statement, filed on Mar. 11, 1994
Debtor: Leiner Health Products Inc.
7366 Orangewood Avenue
Garden Grove, CA 92641
Secured Party: Toyota Motor Credit Corp.
2050 W. 190th Street #208
P.O. Box 3457
Torrance, CA 90510
Filed with Secretary of State, Sacramento, California
Transfer of lease from Xcel Laboratories, Inc. (original lease dated Jan. 25,
1991)
13. UCC-1 Financing Statement, filed on Mar. 11, 1994
Debtor: Leiner Health Products Inc.
7366 Orangewood Avenue
Garden Grove, CA 92641
Secured Party: Toyota Motor Credit Corp.
2050 W. 190th Street #208
P.O. Box 3457
Torrance, CA 90510
Filed with Secretary of State, Sacramento, California
Transfer of lease from Xcel Laboratories, Inc. (original lease dated Oct. 10,
1990)
14. UCC-1 Financing Statement, filed on July 8, 1994
Debtor: Leiner Health Products Inc.
190
<PAGE>
1845 West 205th Street
Torrance, CA 90510
Secured Party: Comdisco, Inc.
6111 North River Road
Rosemont, IL 60018
Filed with Secretary of State, Sacramento, California
Disk drives
15. UCC-1 Financing Statement, filed on Nov. 30, 1994
Debtor: Leiner Health Products
810 E. 233rd Street
Carson, CA 90745
Secured Party: Crown Credit Company
40 South Washington Street
New Bremen, OH 45869
Filed with Secretary of State, Sacramento, California
4 Crown lift trucks, batteries and chargers
16. UCC-1 Financing Statement, filed on Dec. 20, 1994
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: General Electric Capital Corp.
7700 Irving Center Drive #400
Irvine, CA 92718
Filed with Secretary of State, Sacramento, California
Tablet counters, cottoners and bundling systems
17. UCC-1 Financing Statement, filed on Jan. 4, 1995
191
<PAGE>
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: General Electric Capital Corp.
7700 Irvine Center Drive #400
Irvine, CA 92718
Filed with Secretary of State, Sacramento, California
Fillers, stretchwrapper, cartoner, stretch pack machine, tableting presses
18. UCC-1 Financing Statement, filed on Sept. 13, 1995
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: Ameritech Credit Corporation
2550 West Golf Road
Rolling Meadows, IL 60008
Filed with Secretary of State, Sacramento, California
Telecommunications and data equipment
19. UCC-1 Financing Statement, filed on Sept. 28, 1995
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: Xerox Corp.
2200 East McFadden Avenue
Santa Ana, CA 92705
Filed with Secretary of State, Sacramento, California
Xerox copiers
192
<PAGE>
20. UCC-1 Financing Statement, filed on Jan. 29, 1996
Debtor: Leiner Health Products Inc.
7366 Orangewood Avenue
Garden Grove, CA 92683
Secured Party: Comdisco, Inc.
6111 North River Road
Rosemont, IL 60018
Filed with Secretary of State, Sacramento, California
Coating machines, reverse osmosis system, compressor, refrigerated dryer
21. UCC-1 Financing Statement, filed on May 14, 1996
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, IL 60532
Filed with Secretary of State, Sacramento, California
Lift trucks, batteries and chargers
22. UCC-1 Financing Statement, filed on June 17, 1996
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: Crown Credit Company
40 South Washington Street
New Bremen, OH 45869
Filed with Secretary of State, Sacramento, California
Scale, lift trucks, batteries and chargers
193
<PAGE>
23. UCC-1 Financing Statement, filed on July 9, 1996
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: Xerox Corp.
2200 East McFadden Avenue
Santa Ana, CA 92705
Filed with Secretary of State, Sacramento, California
Xerox copiers
24. UCC-1 Financing Statement, filed on July 19, 1996
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: Ful Inc.
100 Corporate North
Bannockburn, IL 60015
Filed with Secretary of State, Sacramento, California
Forklift and battery
25. UCC-1 Financing Statement, filed on July 30, 1996
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: Secured Leasing, Inc.
222 N. Sepulveda Blvd., Suite 2000
El Segundo, CA 90245
Filed with Secretary of State, Sacramento, California
Computer equipment
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<PAGE>
26. UCC-1 Financing Statement, filed on Sept. 9, 1996
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: Crown Credit Company
40 South Washington Street
New Bremen, OH 45869
Filed with Secretary of State, Sacramento, California
Reach trucks, batteries and chargers
27. UCC-1 Financing Statement, filed on Sept. 9, 1996
Debtor: Leiner Health Products Inc.
7366 Orangewood Avenue
Garden Grove, CA 92641
Secured Party: Crown Credit Company
40 South Washington Street
New Bremen, OH 45869
Filed with Secretary of State, Sacramento, California
Reach trucks, batteries and chargers
28. UCC-1 Financing Statement, filed on Feb. 21, 1997
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: Crown Credit Company
40 South Washington Street
New Bremen, OH 45869
Filed with Secretary of State, Sacramento, California
Stockpicker, batteries and charger
195
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29. UCC-1 Financing Statement, filed on Feb. 21, 1997
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: Crown Credit Company
40 South Washington Street
New Bremen, OH 45869
Filed with Secretary of State, Sacramento, California
Reach truck, batteries and charger
30. UCC-1 Financing Statement, filed on Mar. 13, 1997
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: Associates Commercial Corporation
P.O. Box 168647
Irving, TX 75016
Filed with Secretary of State, Sacramento, California
Compactor
31. UCC-1 Financing Statement, filed on Jan. 17, 1992
Debtor: P. Leiner Nutritional Products Corp.
711 Walnut Street
Compton, CA 90220
Secured Party: W.T. Billard, Inc.
102671 Matern Place
Santa Fe Springs, CA 90670
Filed with Secretary of State, Sacramento, California
Continuation filed with Secretary of State, Sacramento, California on
Jan. 7, 1997
Trucks, batteries, chargers and watering cart
196
<PAGE>
LOS ANGELES COUNTY
32. UCC-1 Financing Statement, filed on Dec. 3, 1992
Debtor: Leiner Health Products Inc.
1845 West 205th Street
Torrance, CA 80501
Secured Party: The Bank of Nova Scotia,
as Intercreditor Agent
One Liberty Plaza
New York, NY 10006
Filed with Recorder, Los Angeles County, California
All pledged notes
All issued and outstanding shares of capital stock of any pledged share issuer
All other pledged property
All dividends, distributions, interest, and other payments with respect to any
pledged property
33. UCC-1 Financing Statement, filed on July 18, 1995
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: General Electric Capital Corp.
7700 Irvine Center Drive #400
Irvine, CA 92718
Filed with Recorder, Los Angeles County, California (fixture filing)
Fillers, stretchwrappers, cartoner, stretch pack machine, tableting presses
ILLINOIS
34. UCC-1 Financing Statement, filed on Feb. 16, 1994
Debtor: Leiner Health Products
3532 West 47th Place
Chicago, IL 60632
Secured Party: Atlas Lift Truck Rental & Sales
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5050 North River Road
Schiller Park, IL 60176
Filed with Secretary of State, Springfield, Illinois
Forklift trucks, batteries and chargers
35. UCC-1 Financing Statement, filed on Aug. 12, 1992
Debtor: XCEL Laboratories, Inc.
188 Industrial Drive
Elmhurst, IL 60126
Secured Party: Pitney Bowes Credit Corp.
201 Merritt Seven
Norwalk, CT 06856
Filed with Secretary of State, Springfield, Illinois
Miscellaneous equipment
36. UCC-1 Financing Statement, filed on Sept. 4, 1992
Debtor: XCEL Laboratories, Inc.
188 Industrial Drive
Elmhurst, IL 60126
Secured Party: Pitney Bowes Credit Corp.
201 Merritt Seven
Norwalk, CT 06856
Filed with Secretary of State, Springfield, Illinois
Miscellaneous equipment
37. UCC-1 Financing Statement, filed on Dec. 9, 1992
Debtor: XCEL Laboratories, Inc.
188 Industrial Drive
Elmhurst, IL 60126
198
<PAGE>
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, IL 60532
Filed with Secretary of State, Springfield, Illinois
Reach truck and lift trucks, batteries and chargers
MICHIGAN
38. UCC-1 Financing Statement, filed on Mar. 1, 1993
Debtor: Leiner Health Products Corp.
7047 Murthum Avenue
Warren, MI 48092
Secured Party: Crown Credit Company
40 South Washington Street
New Bremen, OH 45869
Filed with Secretary of State, Lansing, Michigan
Lift trucks, batteries and chargers
39. UCC-1 Financing Statement, filed on November 3, 1993
Debtor: Leiner Health Products Company
7047 Murthum Avenue
Warren, MI 48092
Secured Party: Crown Credit Company
40 South Washington Street
New Bremen, OH 45869
Filed with Secretary of State, Lansing, Michigan
Lift truck
OHIO
40. UCC-1 Financing Statement, filed on Jan. 21, 1993
Debtor: Leiner Health Products Inc.
199
<PAGE>
1845 West 205th Street
Torrance, CA 90501
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, IL 60532
Filed with Secretary of State, Columbus, Ohio
Lift truck, batteries and charger
41. UCC-1 Financing Statement, filed on May 28, 1993
Debtor: Leiner Health Products Inc.
1845 West 205th Street
Torrance, CA 90501
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, IL 60532
Filed with Secretary of State, Columbus, Ohio (amendment to filing dated
Jan. 21, 1993)
Lift truck, batteries and charger
42. UCC-1 Financing Statement, filed on Jan. 21, 1993
Debtor: Leiner Health Products Inc.
1845 West 205th Street
Torrance, CA 90501
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, IL 60532
Filed with Secretary of State, Columbus, Ohio
Lift truck, batteries and charger
43. UCC-1 Financing Statement, filed on May 28, 1993
200
<PAGE>
Debtor: Leiner Health Products Inc.
1845 West 205th Street
Torrance, CA 90501
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, IL 60532
Filed with Secretary of State, Columbus, Ohio (amendment to filing dated
Jan. 21, 1993)
Lift truck, batteries and charger
44. UCC-1 Financing Statement, filed on Dec. 20, 1994
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: General Electric Capital Corp.
7700 Irvine Center Drive #400
Irvine, CA 92718
Filed with Secretary of State, Columbus, Ohio
Cottoner, cartoning machines
45. UCC-1 Financing Statement, filed on Jan. 4, 1995
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: General Electric Capital Corp.
7700 Irvine Center Drive #400
Irvine, CA 92718
Filed with Secretary of State, Columbus, Ohio
Fillers, cottoners and stretch pack machine
201
<PAGE>
46. UCC-1 Financing Statement, filed on May 14, 1996
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, IL 60532
Filed with Secretary of State, Columbus, Ohio
Lift trucks, batteries and chargers
47. UCC-1 Financing Statement, filed on September 15, 1995
Debtor: Leiner Health Products Inc.
Secured Party: Ameritech Credit Corp.
[UCC-1 FORM ILLEGIBLE]
48. UCC-1 Financing Statement, filed on Jan. 21, 1993
Debtor: Leiner Health Products Inc.
1845 West 205th Street
Torrance, CA 90501
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, IL 60532
Filed with Secretary of State, Columbus, Ohio
Lift truck, batteries and charger
49. UCC-1 Financing Statement, filed on May 28, 1993
Debtor: Leiner Health Products Inc.
1845 West 205th Street
Torrance, CA 90501
202
<PAGE>
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, IL 60532
Filed with Secretary of State, Columbus, Ohio (amendment to filing dated
Jan. 21, 1993)
Lift truck, batteries and charger
WISCONSIN
50. UCC-1 Financing Statement, filed on Sept. 7, 1993
Debtor: XCEL Laboratories, Inc.
188 West Industrial Drive
Elmhurst, IL 60126
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, IL 60532
Filed with Secretary of State, Madison, Wisconsin
Reach truck and lift truck, batteries and chargers
51. UCC-1 Financing Statement, filed on Dec. 7, 1992
Debtor: XCEL Laboratories, Inc.
188 West Industrial Drive
Elmhurst, IL 60126
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, IL 60532
Filed with Secretary of State, Madison, Wisconsin
Reach truck and lift trucks, batteries and chargers
52. UCC-1 Financing Statement, filed on Dec. 20, 1994
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
203
<PAGE>
Secured Party: General Electric Capital Corp.
7700 Irvine Center Drive #400
Irvine, CA 92718
Filed with Secretary of State, Madison, Wisconsin
Cottoner and cartoning machines
53. UCC-1 Financing Statement, filed on Jan. 4, 1995
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: General Electric Capital Corp.
7700 Irvine Center Drive #400
Irvine, CA 92718
Filed with Secretary of State, Madison, Wisconsin
Fillers, cottoner and stretch pack machine
54. UCC-1 Financing Statement, filed on Jan. 29, 1997
Debtor: Leiner Health Products Inc.
2300 Badger Lane
Madison, WI 53700
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, Il 60532
Filed with Department of Financial Institutions, Madison, Wisconsin
Lift truck
55. UCC-1 Financing Statement, filed on Mar. 7, 1997
Debtor: Leiner Health Products Inc.
204
<PAGE>
2300 Badger Lane
Madison, WI 53700
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, Il 60532
Filed with Department of Financial Institutions, Madison, Wisconsin
Lift truck
WILLIAMS COUNTY, OHIO
56. UCC-1 Financing Statement, filed on June 15, 1993
Debtor: Leiner Health Products Inc.
1845 West 205th Street
Torrance, CA 90501
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, Il 60532
Filed with Recorder, Williams County, Ohio (amendment to filing dated
Jan. 12, 1993)
Lift truck, batteries and charger
57. UCC-1 Financing Statement, filed on Jan. 12, 1993
Debtor: Leiner Health Products Inc.
1845 West 205th Street
Torrance, CA 90501
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, Il 60532
Filed with Recorder, Williams County, Ohio
Lift truck, batteries and charger
205
<PAGE>
58. UCC-1 Financing Statement, filed on Jun. 15, 1993
Debtor: Leiner Health Products Inc.
1845 West 205th Street
Torrance, CA 90501
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, Il 60532
Filed with Recorder, Williams County, Ohio (amendment to filing dated
Jan. 12, 1993)
Lift truck, batteries and charger
59. UCC-1 Financing Statement, filed on Jan. 12, 1993
Debtor: Leiner Health Products Inc.
1845 West 205th Street
Torrance, CA 90501
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, Il 60532
Filed with Recorder, Williams County, Ohio
Lift truck, batteries and charger
60. UCC-1 Financing Statement, filed on May 14, 1996
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: Caterpillar Financial Services Corp.
901 Warrenville Rd. #304
Lisle, Il 60532
Filed with Recorder, Williams County, Ohio
Lift trucks, batteries and chargers
206
<PAGE>
DANE COUNTY, WISCONSIN
61. UCC-1 Financing Statement, filed on July 17, 1995
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: General Electric Capital Corp.
7700 Irvine Center Drive #400
Irvine, CA 92718
Filed with Register of Deeds, Dane County, Wisconsin
Fillers, cottoners, stretch pack machine
62. UCC-1 Financing Statement, filed on July 17, 1995
Debtor: Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Secured Party: General Electric Capital Corp.
7700 Irvine Center Drive #400
Irvine, CA 92718
Filed with Register of Deeds, Dane County, Wisconsin
Cottoner, cartoning machines
II. MANITOBA, CANADA FINANCING STATEMENTS
1. Financing Statement, registered on July 26, 1995
Debtor: Vita Health Company (1985) Ltd.
150 Beghin Avenue
Winnipeg, Manitoba R2J 2W2
Secured Party: RMK Leasing Ltd.
1300 Regent Avenue West
Winnipeg, Manitoba R2C 3A8
207
<PAGE>
Ford Cutaway
2. Financing Statement, registered on Sept. 22, 1994
Debtor: Vita Health Company (1985) Ltd.
150 Beghin Avenue
Winnipeg, Manitoba R2J 2W2
Secured Party: Tuckahoe Leasing Inc.
425 Bloor Street East, Suite 300
Toronto, ON M4W 3R4
Water distiller
3. Financing Statement, registered on Feb. 14, 1995
Debtor: Vita Health Company (1985) Ltd.
150 Beghin Avenue
Winnipeg, Manitoba R2J 2W2
Secured Party: EP Operations Ltd.
711 330 Graham Avenue
Winnipeg, Manitoba R3C 4A5
All property located at 24 Eaton Place, 234 Donald Street, Winnipeg, Manitoba,
including all inventory
III. TAX LIENS
LOS ANGELES COUNTY, CALIFORNIA
1. State tax lien, filed on July 28, 1994
Amount: $80.15
Debtor: Vital Industries, Inc.
26500 W. Agoura Rd S-555
Calabasas, CA 91302
Secured Party: State of California
Employment Development Department
208
<PAGE>
P.O. Box 826880
Sacramento, CA 94280
Filed with Recorder, Los Angeles County, California
2. State tax lien, filed on July 28, 1989
Amount: $1,903.79
Debtor: P. Leiner Nutritional Products Corp.
1845 West 205th Street
Torrance, CA 90501
Secured Party: State of California
Employment Development Department
P.O. Box 942880
Sacramento, CA 94280
Filed with Recorder, Los Angeles County, California
IV. JUDGMENT LIENS
DANE COUNTY, WISCONSIN
Judgment lien, filed on Nov. 29, 1993
Amount: $1873.74
Debtor: Leiner Health Products Inc.
2300 Badger Lane
Madison, WI 53713
Creditor: Ohmeda/Anaquest Employees Credit Union
Ohmeda Drive
P.O. Box 7850
Madison, WI 53707
Filed with Register of Deeds, Dane County, Wisconsin
Judgment Lien
209
<PAGE>
V. MISCELLANEOUS
1. Liens securing Canadian Bankers' Acceptances outstanding under the Credit
Agreement, dated as of January 30, 1997, among Leiner, VH Holdings Inc.,
Vita Health Company (1985) Ltd. and certain other parties named therein
2. Letters of Credit securing payment of certain preferred stock of the
Canadian Borrower
1. Expiration: Apr. 30, 1998
Aggregate
Face Amount: $ 3,177,418.50
2. Expiration: Apr. 30, 1998
Amount: $ 3,177,418.50
3. Letter of Guarantee
Expiration: June 30, 1997
Amount: $ 500,000.00
Beneficiary: Bank of Montreal
210
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II to
Credit Agreement
PERCENTAGES AND ADMINISTRATIVE INFORMATION
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
U.S. LENDERS: U.S. REVOLVING LOANS TERM B LOANS TERM C LOANS
--------------------- ------------- --------------
<S> <C> <C> <C>
THE BANK OF NOVA SCOTIA 13.60000000% 8.88888889% 31.25000000%
DOMESTIC OFFICE: LIBOR OFFICE:
One Liberty Plaza One Liberty Plaza
New York, NY 10006 New York, NY 10006
Facsimile No.: Facsimile No.:
(212) 225-5145 (212) 225-514-5145
Attention: Attention:
Daisy McDermott Daisy McDermott
SALOMON BROTHERS HOLDING COMPANY INC
10.40000000% 11.11111111% 0.000000000%
DOMESTIC OFFICE LIBOR OFFICE:
8800 Hidden River Parkway 8800 Hidden River Parkway
Tampa, FL 33637 Tampa, FL 33637
Facsimile No.: Facsimile No.:
(813) 558-4204/4142 (813) 558-4204/4142
Attention: Attention:
Elizabeth Eisenman Elizabeth Eisenman
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II to
Credit Agreement
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
U.S. LENDERS: U.S. REVOLVING LOANS TERM B LOANS TERM C LOANS
--------------------- ------------- --------------
<S> <C> <C> <C>
MERRILL LYNCH CAPITAL CORPORATION
10.40000000% 11.11111111% 0.00000000%
DOMESTIC OFFICE: LIBOR OFFICE:
225 Liberty Street 225 Liberty Street
New York, NY 10080-6114 New York, NY 10080-6114
Facsimile No.: Facsimile No.:
(212) 236-7584 (212) 236-7584
Attention: Attention:
Chris Reiley Chris Reiley
BANK OF MONTREAL 8.00000000% 13.33333333% 0.00000000%
DOMESTIC OFFICE: LIBOR OFFICE:
115 South LaSalle St. 115 South LaSalle St.
Chicago, IL 60304 Chicago, IL 60304
Facsimile No.: Facsimile No.:
(312) 750-3456 (312) 750-3456
Attention: Attention:
Caroline Bahardi Caroline Bahardi
Officer Officer
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II to
Credit Agreement
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
U.S. LENDERS: U.S. REVOLVING LOANS TERM B LOANS TERM C LOANS
--------------------- ------------- --------------
<S> <C> <C> <C>
COMERICA 8.00000000% 11.11111111% 0.00000000%
DOMESTIC OFFICE: LIBOR OFFICE:
500 Woodward Avenue 500 Woodward Avenue
Detroit, MI 48226 Detroit, MI 48226
Facsimile No.: Facsimile No.:
(313) 222-9516 (313) 222-9516
Attention: Attention:
Sherri L. Weiss Sherri L. Weiss
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II to
Credit Agreement
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
U.S. LENDERS: U.S. REVOLVING LOANS TERM B LOANS TERM C LOANS
--------------------- ------------- --------------
<S> <C> <C> <C>
CREDITANSTALT BANKVEREIN 8.00000000% 0.00000000% 0.00000000%
DOMESTIC OFFICE: LIBOR OFFICE:
Two Greenwich Plaza Two Greenwich Plaza
P.O. Box 1300 P.O. Box 1300
Greenwich, CT 06836-1300 Greenwich, CT 06836-1300
Facsimile No.:
(203) 861-1475 Facsimile No.:
(203) 861-1475
Attention:
Geoffrey C. Headington Attention:
Geoffrey C. Headington
FLEET NATIONAL BANK 8.80000000% 11.11111111% 0.00000000%
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II to
Credit Agreement
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
U.S. LENDERS: U.S. REVOLVING LOANS TERM B LOANS TERM C LOANS
--------------------- ------------- --------------
<S> <C> <C> <C>
DOMESTIC OFFICE: LIBOR OFFICE:
One Federal Street One Federal Street
Boston, MA 62211 Boston, MA 62211
Facsimile No.: Facsimile No.:
(617) 346-4806 (617) 346-4806
Attention: Attention:
Maria Vieira Maria Vieira
IMPERIAL BANK, A 8.00000000% 0.00000000% 0.00000000%
CALIFORNIA BANKING
CORPORATION
DOMESTIC OFFICE: LIBOR OFFICE:
9920 South Cienega Blvd., 14th Floor 9920 South Cienega Blvd., 14th Floor
Inglewood, Ca 90301 Inglewood, Ca 90301
Facsimile No.: Facsimile No.:
(310) 417-5997 (310) 417-5997
Attention: Attention:
Judy Varner Judy Varner
LASALLE NATIONAL BANK 8.80000000% 11.11111111% 0.00000000%
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II to
Credit Agreement
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
U.S. LENDERS: U.S. REVOLVING LOANS TERM B LOANS TERM C LOANS
--------------------- ------------- --------------
<S> <C> <C> <C>
DOMESTIC OFFICE: LIBOR OFFICE:
135 South LaSalle Street, Suite 301 135 South LaSalle Street, Suite 301
Chicago, IL 60603 Chicago, IL 60603
Facsimile No.: Facsimile No.:
(312) 904-6546 (312) 444-5055
Attention: Attention:
Rebecca Norton Rebecca Norton
THE LONG-TERM CREDIT
BANK OF JAPAN, LIMITED,
NEW YORK BRANCH 8.00000000% 11.11111111% 0.00000000%
DOMESTIC OFFICE: LIBOR OFFICE:
165 Broadway 165 Broadway
New York, NY 10006 New York, NY 10006
Facsimile No.: Facsimile No.:
(212) 608-2371 (212) 608-3452
Attention: Attention:
Koji Sasayama Robert Pacifici
SOCIETE GENERALE 8.00000000% 11.11111111% 0.00000000%
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II to
Credit Agreement
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
U.S. LENDERS: U.S. REVOLVING LOANS TERM B LOANS TERM C LOANS
--------------------- ------------- --------------
<S> <C> <C> <C>
DOMESTIC OFFICE: LIBOR OFFICE:
2029 Century Park East 2029 Century Park East
Suite 2900 Suite 2900
Los Angeles, CA 90067 Los Angeles, CA 90067
Facsimile No.: Facsimile No.:
(310) 203-0539 (310) 203-0539
Attention: Attention:
Doris Yun Doris Yun
DEEPROCK & COMPANY 0.00000000% 0.00000000% 3.75000000%
DOMESTIC OFFICE: LIBOR OFFICE:
24 Federal Street, 6th Floor 24 Federal Street, 6th Floor
Boston, MA 02110 Boston, MA 02110
Facsimile No: Facsimile No:
(617) 695-9594 (617) 695-9594
Attention: Attention:
Juliana Riley Juliana Riley
David Lochiano David Lochiano
MASSACHUSETTS MUTUAL
LIFE INSURANCE COMPANY 0.00000000% 0.00000000% 15.00000000%
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II to
Credit Agreement
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
U.S. LENDERS: U.S. REVOLVING LOANS TERM B LOANS TERM C LOANS
--------------------- ------------- --------------
<S> <C> <C> <C>
DOMESTIC OFFICE: LIBOR OFFICE:
1295 State Street 1295 State Street
Springfield, MA 01111 Springfield, MA 01111
Facsimile No.: Facsimile No.:
(413) 744-7922 (413) 744-7922
Attention: Attention:
Laura Hamal Laura Hamal
KZH-CRESCENT
CORPORATION 0.00000000% 0.00000000% 15.00000000%
DOMESTIC OFFICE: LIBOR OFFICE:
c/o The Chase Manhattan Bank c/o The Chase Manhattan Bank
450 West 33rd Street - 15th Floor 450 West 33rd Street - 15th Floor
New York, New York 10001 New York, New York 10001
Facsimile No.: Facsimile No.:
(212) 946-7776 (212) 946-7776
Attention: Attention:
Virginia Conway Virginia Conway
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II to
Credit Agreement
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
U.S. LENDERS: U.S. REVOLVING LOANS TERM B LOANS TERM C LOANS
--------------------- ------------- --------------
<S> <C> <C> <C>
NORTHERN LIFE INSURANCE
COMPANY 0.00000000% 0.00000000% 15.00000000%
DOMESTIC OFFICE: LIBOR OFFICE:
c/o ReliaStar Investment Research, Inc. c/o ReliaStar Investment Research, Inc.
100 Washington Square, Suite 800 100 Washington Square, Suite 800
Minneapolis, MN 55401-2147 Minneapolis, MN 55401-2147
Facsimile No.: Facsimile No.:
(213) 626-6552 (213) 626-6552
Attention: Attention:
Lenore Crummey-Benoit Lenore Crummey-Benoit
FLOATING RATE PORTFOLIO 0.00000000% 0.00000000% 5.00000000%
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II to
Credit Agreement
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
U.S. LENDERS: U.S. REVOLVING LOANS TERM B LOANS TERM C LOANS
--------------------- ------------- --------------
<S> <C> <C> <C>
DOMESTIC OFFICE: LIBOR OFFICE:
50 California Street, 27th Floor 50 California Street, 27th Floor
San Francisco, CA 94111-4624 San Francisco, CA 94111-4624
Facsimile No.: Facsimile No.:
(415) 296-0511 (415) 296-0511
Attention: Attention:
Linda DiNapoli Linda DiNapoli
ALLSTATE LIFE INSURANCE COMPANY 0.00000000% 0.00000000% 15.00000000%
DOMESTIC OFFICE: LIBOR OFFICE:
3075 Sanders Road 3075 Sanders Road
Suite 64A Suite 64A
Northbrook, IL 60062-7127 Northbrook, IL 60062-7127
Facsimile No.: Facsimile No.:
(847) 326-5042 (847) 326-5042
Attention: Attention:
Gini Diewald Gini Diewald
</TABLE>
II-10
<PAGE>
SCHEDULE II to
Credit Agreement
II-11
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II to
Credit Agreement
PERCENTAGE OF
CANADIAN LENDERS: CANADIAN REVOLVING LOANS
------------------------
<S> <C>
THE BANK OF NOVA SCOTIA 50.00000000%
DOMESTIC OFFICE: LIBOR OFFICE
44 King Street West 44 King Street West
Toronto, Ontario M5H 1H1 Toronto, Ontario
M5H 1H1
CANADA CANADA
Facsimile No.: Facsimile No.:
(416) 866-5991 (416) 866-5991
Attention: Attention:
Pat Kelly Pat Kelly
</TABLE>
II-12
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II to
Credit Agreement
PERCENTAGE OF
CANADIAN LENDERS: CANADIAN REVOLVING LOANS
------------------------
<S> <C>
BANK OF MONTREAL 50.00000000%
DOMESTIC OFFICE: LIBOR OFFICE:
First Canadian Place First Canadian Place
24th Floor 24th Floor
Toronto, Ontario M5X 1A1 Toronto, Ontario
M5X 1A1
CANADA CANADA
Facsimile No.: Facsimile No.:
(416) 867-5818 (416) 867-5818
Attention: Attention:
Cheryl Ten-Pow Cheryl Ten-Pow
</TABLE>
II-13
<PAGE>
Exhibit 4.6
[EXECUTION COPY]
FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT, dated as of September 29, 1997 (this "AMENDATORY
AGREEMENT"), to the Existing Credit Agreement (as defined below), is made among
LEINER HEALTH PRODUCTS INC., a Delaware corporation (as assignee of Leiner
Health Products Group Inc.'s rights and obligations under the Credit Agreement,
the "U.S. BORROWER"), VITA HEALTH COMPANY (1985) LTD., a Manitoba corporation
(the "CANADIAN BORROWER", and together with the U.S. Borrower, the "BORROWERS"),
the various financial institutions signatories hereto (the "LENDERS") and THE
BANK OF NOVA SCOTIA, as U.S. Agent and Canadian Agent for the Lenders, as
applicable.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrowers, the U.S. Lenders, the Canadian Lenders, the U.S.
Agent, the Canadian Agent, Merrill Lynch Capital Corporation, as Documentation
Agent, and Salomon Brothers Holding Company Inc., as Syndication Agent, are
parties to a Credit Agreement, dated as of June 30, 1997 (as amended,
supplemented, amended and restated or otherwise modified to the date hereof, the
"EXISTING CREDIT AGREEMENT");
WHEREAS, the Borrower has requested that the Lenders amend the Letter of
Credit expiration provision contained in the Existing Credit Agreement; and
WHEREAS, the Lenders have agreed, subject to the terms and conditions
hereinafter set forth, to amend the Existing Credit Agreement in certain
respects as provided below (the Existing Credit Agreement, as so amended by this
Amendatory Agreement, being referred to as the "CREDIT AGREEMENT");
NOW, THEREFORE, in consideration of the agreements herein contained, the
parties hereto agree as follows:
PART I
DEFINITIONS
<PAGE>
SUBPART 1.1. CERTAIN DEFINITIONS. The following terms (whether or not
underscored) when used in this Amendatory Agreement shall have the following
meanings (such meanings to be equally applicable to the singular and plural form
thereof):
"AMENDATORY AGREEMENT" is defined in the PREAMBLE.
"AMENDMENT NO. 1" is defined in SUBPART 3.1.
"BORROWERS" is defined in the PREAMBLE.
"CANADIAN BORROWER" is defined in the PREAMBLE.
"CREDIT AGREEMENT" is defined in the THIRD RECITAL.
"EXISTING CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"LENDERS" is defined in the PREAMBLE.
"FIRST AMENDMENT EFFECTIVE DATE" is defined in SUBPART 3.1.
"U.S. BORROWER" is defined in the PREAMBLE.
SUBPART 1.2. OTHER DEFINITIONS. Terms for which meanings are provided in
the Existing Credit Agreement are, unless otherwise defined herein or the
context otherwise requires, used in this Amendatory Agreement with such
meanings.
PART II
AMENDMENTS TO THE
EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the First Amendment
Effective Date, the Existing Credit Agreement is hereby amended in accordance
with SUBPART 2.1; except as so amended, the Existing Credit Agreement shall
continue in full force and effect in accordance with its terms.
SUBPART 2.1. AMENDMENT TO SECTION 4.1. Section 4.1 of the Existing Credit
Agreement is hereby amended by deleting the reference to "one year" in subclause
(y) contained therein and inserting "two years" in place thereof.
PART III
-2-
<PAGE>
CONDITIONS TO EFFECTIVENESS
SUBPART 3.1. FIRST AMENDMENT EFFECTIVE DATE. This Amendatory Agreement
(and the amendments and modifications contained herein) shall become effective,
and shall thereafter be referred to as "AMENDMENT NO. 1", on the date (the
"FIRST AMENDMENT EFFECTIVE DATE") when all of the conditions set forth in this
SUBPART 3.1 have been satisfied.
SUBPART 3.1.1. EXECUTION OF COUNTERPARTS. The Administrative Agent shall
have received counterparts of this Amendatory Agreement, duly executed and
delivered on behalf of each of the Borrowers, the Required Lenders and the
Issuer.
SUBPART 3.1.2. LEGAL DETAILS, ETC. All documents executed or submitted
pursuant hereto shall be satisfactory in form and substance to the Agents and
their counsel. The Agents and their counsel shall have received all information
and such counterpart originals or such certified or other copies or such
materials, as the Agents or their counsel may reasonably request, and all legal
matters incident to the transactions contemplated by this Amendatory Agreement
shall be satisfactory to the Agents and their counsel.
PART IV
MISCELLANEOUS
SUBPART 4.1. CROSS-REFERENCES. References in this Amendatory Agreement to
any Part or Subpart are, unless otherwise specified or otherwise required by the
context, to such Part or Subpart of this Amendatory Agreement.
SUBPART 4.2. LOAN DOCUMENT PURSUANT TO EXISTING CREDIT AGREEMENT. This
Amendatory Agreement is a Loan Document executed pursuant to the Existing Credit
Agreement and shall be construed, administered and applied in accordance with
all of the terms and provisions of the Existing Credit Agreement.
SUBPART 4.3. COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. Each of the
Borrowers represents and warrants on the First Amendment Effective Date for its
Subsidiaries and itself, both before and after giving effect to this Amendatory
Agreement, as follows:
(a) the representations and warranties set forth in Article VIII of
the Credit Agreement (excluding, however, those contained in Section 8.7)
and in each other Loan Document are, in each case, true and correct in all
material respects (unless stated to relate solely to an earlier date, in
which case such representations and warranties were true and correct in all
material respects as of such earlier date);
-3-
<PAGE>
(b) except as disclosed by the U.S. Borrower to the Agents and the
Lenders pursuant to Section 8.7 of the Credit Agreement,
(i) no labor controversy, litigation, arbitration or governmental
investigation or proceeding is pending or, to the knowledge of the
U.S. Borrower, threatened against Parent or the U.S. Borrower or any
of its Subsidiaries which could reasonably be expected to have a
Material Adverse Effect, or which would adversely affect the legality,
validity or enforceability of the Credit Agreement, the Notes or any
other Loan Document; and
(ii) no development has occurred in any labor controversy,
litigation, arbitration or governmental investigation or proceeding
disclosed pursuant to Section 8.7 of the Credit Agreement which could
reasonably be expected to have a Material Adverse Effect; and
(c) no Default has occurred and is continuing, and neither Parent nor
the U.S. Borrower or any of its Subsidiaries is in material violation of
any law or governmental regulation or court order or decree, which
violation would, individually or in the aggregate, have a Material Adverse
Effect.
SUBPART 4.4. SUCCESSORS AND ASSIGNS. This Amendatory Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
SUBPART 4.5. COUNTERPARTS. This Amendatory Agreement may be executed by
the parties hereto in several counterparts, each of which when executed and
delivered shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
SUBPART 4.6. GOVERNING LAW. THIS AMENDATORY AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendatory
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
LEINER HEALTH PRODUCTS INC.
By /s/
-----------------------------------
Title:
VITA HEALTH COMPANY (1985) LTD.
By /s/
-----------------------------------
Title:
THE BANK OF NOVA SCOTIA, as U.S. Agent,
Canadian Agent, U.S. Issuer, Canadian Issuer,
a U.S. Lender and a Canadian Lender
By /s/
-----------------------------------
Title: Senior Relationship Manager
-5-
<PAGE>
SALOMON BROTHERS HOLDING
COMPANY INC
By /s/
-----------------------------------
Title: Richard H. Ivers
Managing Director
<PAGE>
MERRILL LYNCH CAPITAL CORPORATION
By /s/
-----------------------------------
Title: VP
<PAGE>
BANK OF MONTREAL
By
-----------------------------------
Title:
<PAGE>
FLEET NATIONAL BANK
By /s/
-----------------------------------
Title: Senior Vice President
<PAGE>
LASALLE NATIONAL BANK
By /s/
-----------------------------------
Title: Senior Vice President
<PAGE>
COMERICA BANK
By /s/
-----------------------------------
Title: Corporate Banking Officer
<PAGE>
THE LONG-TERM CREDIT BANK OF
JAPAN, LIMITED, NEW YORK BRANCH
By /s/
-----------------------------------
Title: Deputy General Manager
Name: Shuichi Tajima
<PAGE>
SOCIETE GENERALE
By /s/
-----------------------------------
Title: J. Staley Steward
Vice President
<PAGE>
CREDITANSTALT BANKVEREIN
By /s/
-----------------------------------
Title: Geoffrey C. Headington
Associate
By /s/
-----------------------------------
Title: Gregory F. Mathis
Vice President
<PAGE>
IMPERIAL BANK, a California Banking
Corporation
By /s/
-----------------------------------
Title: Steven K. Johnson
Senior Vice President
<PAGE>
DEEPROCK & COMPANY
By: Eaton Vance Management,
as Investment Advisor
By /s/
-----------------------------------
Title: Scott H. Page
Vice President
<PAGE>
NORTHERN LIFE INSURANCE COMPANY
By: ING Capital Advisors, Inc.,
as Investment Advisor
By
-----------------------------------
Title:
<PAGE>
FLOATING RATE PORTFOLIO
By: Chancellor LGT Senior Secured
Management Inc., as attorney in fact
By /s/
-----------------------------------
Title: Assistant Vice President
<PAGE>
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By /s/
-----------------------------------
Title: Mary Ann McCarthy
Managing Director
<PAGE>
KZH-CRESCENT CORPORATION
By /s/
-----------------------------------
Title: Authorized Agent
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY
By /s/
-----------------------------------
Name:
By /s/
-----------------------------------
Name:
Its Authorized Signatories
<PAGE>
KZH-CRESCENT CORPORATION
By
-----------------------------------
Title:
<PAGE>
PAMCO CAYMAN LTD.
By: Protective Asset Management L. L.C.,
as Collateral Manager
By /s/
-----------------------------------
Title: Mark K. Okada CFA
Executive Vice President
Protective Asset Management Company
<PAGE>
CERES FINANCE LTD.
By /s/
-----------------------------------
Title: John H. Cullimane
Director
<PAGE>
Exhibit 4.7
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT, dated as of June 30, 1997 (this "AGREEMENT"),
between LEINER HEALTH PRODUCTS GROUP INC., a Delaware corporation ("LHPG"),
and LEINER HEALTH PRODUCTS INC., a Delaware corporation ("LEINER"), in favor
of THE BANK OF NOVA SCOTIA ("SCOTIABANK"), as agent for the U.S. Lenders
under the U.S. Facility (in such capacity, the "U.S. AGENT"), and Scotiabank,
currently acting through its executive offices in Toronto, Ontario, as agent
for the Canadian Lenders under the Canadian Facility (in such capacity, the
"CANADIAN AGENT" and, together with the U.S. Agent, collectively, the
"AGENTS"). Undefined capitalized terms in this Agreement are defined in the
Credit Agreement referred to below.
W I T N E S S E T H:
WHEREAS, in connection with the Recapitalization and financing
thereof, LHPG and the Agents are parties to the Credit Agreement, dated as of
June 30, 1997 (as amended, supplemented, waived or otherwise modified from
time to time, the "CREDIT AGREEMENT"), among LHPG, Vita Health Company (1985)
Ltd., the U.S. Lenders, the Canadian Lenders, the U.S. Agent, the Canadian
Agent, Merrill Lynch Capital Corporation, as Documentation Agent and Salomon
Brothers Holding Company Inc, as Syndication Agent, providing, inter alia,
for Borrowings of Term Loans in a maximum aggregate principal amount not to
exceed $45,000,000 (in the case of Term B Loans) and $40,000,000 (in the case
of Term C Loans) and U.S. Revolving Loans and Canadian Revolving Loans in a
maximum aggregate principal amount not to exceed $125,000,000; and
WHEREAS, in connection with the Recapitalization, LHPG wishes to
assign, transfer and convey to Leiner, and Leiner wishes to assume, all of
LHPG's rights and obligations in respect of the Credit Agreement and the
other Loan Documents in consideration of, among other things, (I) the making
available to Leiner of the U.S. Facility under the Credit Agreement and the
Commitments of the U.S. Lenders to make Credit Extension thereunder, (II) the
indirect contribution to Leiner by LHPG of funds to repay substantially all
of Leiner's existing Indebtedness, and (III) the delivery by the Parent of
the Parent Guaranty.
<PAGE>
NOW, THEREFORE, the parties hereto hereby agree as follows:
I.
ASSIGNMENT, ASSUMPTION AND RELEASE.
1. ASSIGNMENT OF RIGHTS AND OBLIGATIONS. Effective immediately
following the making of the initial Credit Extensions under the Credit
Agreement on the date hereof, LHPG hereby irrevocably assigns, transfers and
conveys to Leiner all of LHPG's rights, obligations, covenants, agreements,
duties and liabilities under or with respect to the Credit Agreement and each
other Loan Document and any and all certificates and other documents executed
by LHPG in connection therewith.
2. ASSUMPTION OF AGREEMENTS AND OBLIGATIONS. Effective immediately
following the making of the initial Credit Extensions under the Credit
Agreement on the date hereof, Leiner hereby expressly assumes, confirms and
agrees to perform and observe all of the Indebtedness, obligations,
covenants, agreements, terms, conditions, duties and liabilities of LHPG
under and with respect to the Credit Agreement and each other Loan Document
and any and all certificates and other documents executed by LHPG in
connection therewith as fully as if Leiner were originally the obligor in
respect thereof and the signatory thereto.
3. ASSUMPTION OF REPRESENTATIONS AND WARRANTIES. Effective
immediately following the making of the initial Credit Extensions under the
Credit Agreement on the date hereof, Leiner hereby expressly accepts and
assumes all liabilities of LHPG related to any representation or warranty
made by, and all rights and powers of LHPG under or in connection with, this
Agreement, the Credit Agreement and each other Loan Document.
4. RELEASE OF OBLIGATIONS. Effective as of 12:01 A.M. (New York City
time) on the day immediately following the date of the making of the initial
Credit Extensions under the Credit Agreement, (a) the Agents, acting on
behalf of the U.S. Lenders and the Canadian Lenders, respectively, hereby
release and forever discharge LHPG from any and all obligations LHPG may have
arising out of or resulting from
2
<PAGE>
the Credit Agreement and each other Loan Document and (b) Leiner hereby
releases and forever discharges LHPG from any and all obligations LHPG may
have arising out of or resulting from the Credit Agreement and each other
Loan Document. At all times after the effectiveness of the assumption
contemplated hereunder, with respect to all Credit Extensions made to or for
the account of LHPG prior to the effectiveness of such assumption, Leiner
shall be and have the obligations of, and LHPG shall no longer be or have the
obligations of, the "U.S. Borrower" within the meaning of and for all
purposes of the Credit Agreement.
5. CONFIRMATION OF STATUS AS "U.S. BORROWER". Leiner confirms and
acknowledges that it is the "U.S. Borrower" referred to in the Credit
Agreement, each other Loan Document and each other document and agreement
entered into in connection therewith that was executed and delivered by LHPG,
and hereby agrees to perform and observe all the covenants, agreements,
terms, conditions, obligations, appointments, duties and liabilities of LHPG
under the Credit Agreement, each other Loan Document and each other document
and agreement entered into in connection therewith that was executed and
delivered by LHPG, as if it had been the "U.S. Borrower" thereunder from the
original execution and delivery thereof.
6. RIGHTS REMAIN UNIMPAIRED. Leiner confirms and agrees that the
rights of the Agents, the Lenders and the Issuers under the Credit Agreement
and each other Loan Document shall be unimpaired and remain in full force and
effect and are hereby ratified and confirmed in all respects.
7. AMENDMENT TO THE CREDIT AGREEMENT. The Credit Agreement is hereby
deemed to be amended to the extent, but only to the extent, necessary to
effect the assignment, assumption and release provided for hereby.
II.
GENERAL.
1. NO OTHER AMENDMENTS; CONFIRMATION. Except as expressly amended,
modified and supplemented hereby, the provisions of the Credit Agreement and
the other Loan Documents are and shall remain in full force and effect.
3
<PAGE>
2. AFFIRMATION OF LOAN DOCUMENTS. Each of the parties hereby
consents to the execution and delivery of this Agreement and confirms,
reaffirms and restates its obligations under each of the Loan Documents to
which it is a party pursuant to the terms thereof.
3. GOVERNING LAW; COUNTERPARTS. (a) THIS AGREEMENT SHALL BE DEEMED A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING FOR SUCH PURPOSES SECTIONS 5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK) WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAWS THEREOF.
(b) This Agreement may be executed by one or more of the parties to
this Agreement on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
4. INTEGRATION. This Agreement and the other Loan Documents
represent the entire agreement of the parties hereto with respect to the
subject matter hereof and there are no promises or representations by the
parties hereto relative to the subject matter hereof not reflected or
referred to herein or therein.
5. SECTION HEADINGS. The section headings used in this Agreement are
for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
6. SUBMISSION TO JURISDICTION; WAIVERS. Each of the parties hereto
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any
4
<PAGE>
such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead
or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such party
at its address referred to in the other Loan Documents to which it is a
party or at such other address of which the other parties shall have been
notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this subsection any punitive damages.
7. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of LHPG and Leiner and their respective successors and
assigns, and the Agents, the U.S. Lenders and the Canadian Lenders and their
respective successors, endorsees, transferees and assigns.
8. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN. EACH PARTY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED
FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION
IS A MATERIAL INDUCEMENT FOR EACH PARTY ENTERING INTO THIS AGREEMENT.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.
LEINER HEALTH PRODUCTS GROUP INC.
By: /s/ William B. Towne
------------------------------------
Name: William B. Towne
Title: Executive Vice President-
Finance
LEINER HEALTH PRODUCTS INC.
By: /s/ William B. Towne
------------------------------------
Name: William B. Towne
Title: Executive Vice President-
Finance
Accepted and Acknowledged
as of the day and year
first above written.
THE BANK OF NOVA SCOTIA,
as U.S. Agent
By: /s/ Terry K. Fryett
-----------------------
Name: Terry K. Fryett
Title:
THE BANK OF NOVA SCOTIA,
as Canadian Agent
By: /s/ Terry K. Fryett
-----------------------
Name: Terry K. Fryett
Title:
6
<PAGE>
Exhibit 4.8
[EXECUTION COPY]
U.S. BORROWER SECURITY AGREEMENT
This U.S. BORROWER SECURITY AGREEMENT (as amended, supplemented,
amended and restated or otherwise modified from time to time, this "SECURITY
AGREEMENT"), dated as of June 30, 1997, is made by LEINER HEALTH PRODUCTS
INC., a Delaware corporation (the "GRANTOR"), in favor of THE BANK OF NOVA
SCOTIA, as collateral agent (the "AGENT") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented, amended and restated or otherwise modified from
time to time, the "CREDIT AGREEMENT"), among Leiner Health Products Group
Inc., a Delaware corporation ("LHPG" or the "U.S. BORROWER" (prior to the
Assumption)), Vita Health Company (1985) Ltd., a Manitoba corporation (the
"CANADIAN BORROWER", and together with the U.S. Borrower, the "BORROWERS"),
the various financial institutions as are or may become parties thereto which
extend a Commitment under the U.S. Facility (collectively, the "U.S.
LENDERS"), the various financial institutions as are or may become parties
thereto which extend a Commitment under the Canadian Facility (collectively,
the "CANADIAN LENDERS", and together with the U.S. Lenders, the "LENDERS"),
The Bank of Nova Scotia ("SCOTIABANK"), as agent for the U.S. Lenders under
the U.S. Facility (in such capacity, the "U.S. AGENT"), and Scotiabank, as
agent for the Canadian Lenders under the Canadian Facility (in such capacity,
the "CANADIAN AGENT"), the Lenders and the Issuers have extended Commitments
to make Credit Extensions to the Borrowers;
WHEREAS, as contemplated by the Credit Agreement, immediately
following the making of the initial Credit Extensions, the Grantor and LHPG
have delivered the Assumption Agreement, pursuant to which the Grantor has
assumed (the "ASSUMPTION") the rights and obligations of LHPG as (and has
become) the "U.S. Borrower" under the Credit Agreement;
<PAGE>
WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit Extensions) and the execution and
delivery of the Assumption Agreement under the Credit Agreement, the Grantor
is required to execute and deliver this Security Agreement; and
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the
Lenders and the Issuers to make Credit Extensions (including the initial
Credit Extensions) to the Borrowers pursuant to the Credit Agreement, and to
induce the Secured Parties to enter into Rate Protection Agreements, if any,
the Grantor agrees, for the benefit of each Secured Party, as follows.
ARTICLE 1.
DEFINITIONS
SECTION a. CERTAIN TERMS. The following terms (whether or not
underscored) when used in this Security Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"ABANDONED TRADEMARKS" means, collectively, the trademarks
identified in ITEM A of SCHEDULE III as abandoned.
"AGENT" is defined in the FIRST RECITAL.
"ASSUMPTION" is defined in the SECOND RECITAL.
"BORROWERS" is defined in the FIRST RECITAL.
"CANADIAN AGENT" is defined in the FIRST RECITAL.
"CANADIAN BORROWER" is defined in the FIRST RECITAL.
2
<PAGE>
"CANADIAN LENDERS" is defined in the FIRST RECITAL.
"COLLATERAL" is defined in SECTION 2.1.
"COLLATERAL ACCOUNT" is defined in SECTION 4.1.2(b).
"COPYRIGHT COLLATERAL" means (1) all copyrights (including all
copyrights for semi-conductor chip product mask works) owned by the Grantor
in the Grantor's name as such may be changed from time to time, whether
statutory or common law, registered or unregistered, now or hereafter in
force throughout the world including all of the Grantor's right, title and
interest in and to all copyrights registered in the United States Copyright
Office or anywhere else in the world and also including the copyrights
referred to in ITEM A of SCHEDULE IV attached hereto, and all applications
for registration thereof, whether pending or in preparation (all of the
foregoing items in this clause (a) being collectively called a "COPYRIGHT"),
the right to sue for past, present and future infringements of any thereof,
all rights of the Grantor thereto throughout the world, all extensions and
renewals of any thereof and all proceeds of the foregoing, including
licenses, royalties, income, payments, claims, damages and proceeds of suit;
(2) all copyright licenses of the Grantor, including each copyright
license referred to in ITEM B of SCHEDULE IV attached hereto subject, in
each case, to the terms of such license agreements, and the right to
prepare for sale, sell and advertise for sale, all Inventory now or
hereafter covered by such licenses; and
(3) all proceeds of, and rights of the Grantor associated with, the
foregoing (including license royalties and proceeds of infringement suits),
the right to sue for breach or enforcement of any copyright license
subject, in each case, to the terms of such license agreements, and all
rights of the Grantor thereto throughout the world.
"CREDIT AGREEMENT" is defined in the FIRST RECITAL.
3
<PAGE>
"EQUIPMENT" is defined in CLAUSE (A) of SECTION 2.1.
"EXCLUDED AGREEMENTS" is defined in SECTION 2.1.
"GRANTOR" is defined in the PREAMBLE.
"INTELLECTUAL PROPERTY COLLATERAL" means, collectively, the
Copyright Collateral, the Patent Collateral, the Trademark Collateral and the
Trade Secrets Collateral.
"INVENTORY" is defined in CLAUSE (B) of SECTION 2.1
"LENDERS" is defined in the FIRST RECITAL.
"PATENT COLLATERAL" means:
(a) all letters patent and applications for letters patent owned by
the Grantor in the Grantor's name as such may be changed from time to time,
throughout the world, including all patent applications in preparation for
filing anywhere in the world and including each patent and patent
application referred to in ITEM A of SCHEDULE II attached hereto (all of
the foregoing items in this CLAUSE (A) being collectively called a
"PATENT");
(b) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in
CLAUSE (A);
(c) all patent licenses of the Grantor, including each patent license
referred to in ITEM B of SCHEDULE II attached hereto subject, in each case,
to the terms of such license agreements, and the right to prepare for sale,
sell and advertise for sale, all Inventory now or hereafter covered by such
licenses; and
(d) all proceeds of, and rights of the Grantor associated with, the
foregoing (including license royalties and proceeds of infringement suits),
the right to sue third parties for past, present or future
4
<PAGE>
infringements of any patent or patent application (described in clause (a)),
including any patent or patent application referred to in ITEM A of
SCHEDULE II attached hereto, and for breach or enforcement of any patent
license, including any patent license referred to in ITEM B of SCHEDULE II
attached hereto subject, in each case, to the terms of such license
agreements, and all rights of the Grantor thereto throughout the world.
"RECEIVABLES" is defined in CLAUSE (C) of SECTION 2.1.
"RELATED CONTRACTS" is defined in CLAUSE (C) of SECTION 2.1.
"SCOTIABANK" is defined in the FIRST RECITAL.
"SECURITY AGREEMENT" is defined in the PREAMBLE.
"TRADEMARK COLLATERAL" means:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
certification marks, collective marks, logos, other source of business
identifiers, designs and general intangibles of a like nature owned by the
Grantor in the Grantor's name as such may be changed from time to time (all
of the foregoing items in this CLAUSE (A) being collectively called a
"TRADEMARK"), now existing anywhere in the world or hereafter adopted or
acquired, whether currently in use or not, all registrations and recordings
thereof and all applications in connection therewith, whether pending or in
preparation for filing, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any
office or agency of the United States of America or any State thereof or
any foreign country, including those referred to in ITEM A of SCHEDULE III
attached hereto; PROVIDED, HOWEVER, that Trademark Collateral shall not
include "intent to use" applications for trademark or service mark
registrations filed in the United States Patent and Trademark Office
pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. Section 1051, unless
and until an Amendment to
5
<PAGE>
Allege Use or a Statement of Use under Section 1(c) or 1(d) of said Act
has been filed;
(b) all Trademark licenses of the Grantor, including each Trademark
license referred to in ITEM B of SCHEDULE III attached hereto subject, in
each case, to the terms of such license agreements, and the right to
prepare for sale, sell and advertise for sale, all Inventory now or
hereafter covered by such licenses;
(c) all reissues, extensions or renewals of any of the items
described in CLAUSES (A) and (B);
(d) all of the goodwill of the business of the Grantor connected with
the use of, and symbolized by the items described in, CLAUSES (A) and (B);
and
(e) all proceeds of, and rights of the Grantor associated with, the
foregoing, including any claim by the Grantor against third parties for
past, present or future infringement or dilution of any Trademark or
Trademark registration, including any Trademark or Trademark registration
referred to in ITEM A of SCHEDULE III attached hereto, or for any injury to
the goodwill of the Grantor associated with the use of any such Trademark
or for breach or enforcement of any Trademark license subject, in each
case, to the terms of such license agreements.
"TRADE SECRETS COLLATERAL" means all of the Grantor's common law and
statutory trade secrets and all other confidential or proprietary or useful
information and all know-how owned by the Grantor in the Grantor's name as such
may be changed from time to time, or used in or held for use in the business of
the Grantor (all of the foregoing being collectively called a "TRADE SECRET"),
whether or not such Trade Secret has been reduced to a writing or other tangible
form, including all documents and things embodying, incorporating or referring
in any way to such Trade Secret, including the right to sue for and to enjoin
and to collect damages for the actual or threatened misappropriation of any
Trade Secret, all Trade Secret licenses of the Grantor, including each Trade
Secret license referred to in SCHEDULE V attached hereto subject, in each case,
to the terms of such license agreements and the right to prepare for sale,
6
<PAGE>
sell and advertise for sale, all Inventory now or hereafter covered by such
licenses, and including the right to sue for the breach or enforcement of any
such Trade Secret license subject, in each case, to the terms of such license
agreement.
"U.C.C." means the Uniform Commercial Code, as in effect from time to
time in the State of New York.
"U.S. AGENT" is defined in the FIRST RECITAL.
"U.S. LENDERS" is defined in the FIRST RECITAL.
"VEHICLES" means all cars, trucks, trailers, construction and
transportation equipment and other vehicles covered by a certificate of title
law of any state and all tires and other appurtenances to any of the foregoing.
SECTION b. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Security Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION c. U.C.C. DEFINITIONS. Unless otherwise defined herein or in
the Credit Agreement or the context otherwise requires, terms for which meanings
are provided in the U.C.C. are used in this Security Agreement, including its
preamble and recitals, with such meanings.
ARTICLE 2.
SECURITY INTEREST
SECTION a. GRANT OF SECURITY. The Grantor hereby assigns (for
collateral security purposes) and pledges to the Agent for its benefit and the
ratable benefit of each of the Secured Parties, and hereby grants to the Agent
for its benefit and the ratable benefit of each of the Secured Parties, a
security interest in all of the following, whether now or hereafter existing or
acquired by the Grantor (the "COLLATERAL"):
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(1) all equipment (other than Vehicles) of the Grantor, wherever
located, including all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and
therefor and all accessories related thereto (any and all of the foregoing
being the "EQUIPMENT");
(2) all inventory of the Grantor, wherever located, including
(a) all raw materials and work in process therefor, finished
goods thereof, and materials used or consumed in the manufacture or
production thereof,
(b) all goods in which the Grantor has an interest in mass or a
joint or other interest or right of any kind (including goods in which
the Grantor has an interest or right as consignee), and
(c) all goods which are returned to or repossessed by the
Grantor,
and all accessions thereto, products thereof and documents therefor (any
and all such inventory, materials, goods, accessions, products and
documents being the "INVENTORY");
(3) all accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (including tax refunds) of
the Grantor, whether or not arising out of or in connection with the sale
or lease of goods or the rendering of services, and all rights of the
Grantor now or hereafter existing in and to all security agreements,
guaranties, leases and other contracts securing or otherwise relating to
any such accounts, contracts, contract rights, chattel paper, documents,
instruments, and general intangibles (any and all such accounts, contracts,
contract rights, chattel paper, documents, instruments, and general
intangibles being the "RECEIVABLES", and any and all such security
agreements, guaranties, leases and other contracts being the "RELATED
CONTRACTS");
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(4) all Intellectual Property Collateral of the Grantor;
(5) all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing in this
SECTION 2.1;
(6) all of the Grantor's other property and rights of every kind and
description and interests therein; and
(7) all products, rents, issues, profits, returns, income and proceeds
of and from any and all of the foregoing Collateral (including proceeds
which constitute property of the types described in CLAUSES (A), (B), (C),
(D), (E) and (F), proceeds deposited from time to time in the Collateral
Account and in any lock boxes of the Grantor, and, to the extent not
otherwise included, all payments under insurance (whether or not the Agent
is the loss payee thereof), or any indemnity, warranty or guaranty, payable
by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral).
Notwithstanding the foregoing, "Collateral" shall not include (i) the
Collateral, as defined in the U.S. Borrower Pledge Agreement, (ii) any
Equipment that is subject to a Lien securing Indebtedness permitted by
clauses (d)(i) -(d)(iii) of Section 9.2.2 of the Credit Agreement (to the
extent a Lien in favor of the Agent is restricted or prohibited by the terms
of the agreements or other documents relating to the Indebtedness secured by
the applicable Equipment), and (iii) any chattel paper, general intangibles,
contracts, instruments, Intellectual Property Collateral, licenses or other
documents (collectively, "EXCLUDED AGREEMENTS") as to which the grant of a
security interest would result in a breach, default or termination of such
Excluded Agreements, unless and until any required consents shall have been
obtained. The Grantor agrees to use reasonable efforts to obtain any such
required consent.
SECTION b. SECURITY FOR OBLIGATIONS. This Security Agreement secures
the payment of all Obligations of
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the Grantor now or hereafter existing under the Credit Agreement, the Notes
and each other Loan Document to which the Grantor is or may become a party,
whether for principal, interest, costs, fees, expenses or otherwise.
SECTION c. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Security Agreement shall create a continuing security interest in the Collateral
and shall
(1) remain in full force and effect until payment in full in cash, or
cash collateralization, of all Obligations, the termination or expiration
of all Letters of Credit, the termination of all Rate Protection Agreements
entered into pursuant to the Credit Agreement and the termination of all
Commitments,
(2) be binding upon the Grantor, its successors, transferees and
assigns, and
(3) inure, together with the rights and remedies of the Agent
hereunder, to the benefit of the Agent and each other Secured Party.
Without limiting the generality of the foregoing CLAUSE (C), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit
Extensions held by it to any other Person or entity, and such other Person or
entity shall thereupon become vested with all the rights and benefits in
respect thereof granted to such Lender under any Loan Document (including
this Security Agreement) or otherwise, subject, however, to any contrary
provisions in such assignment or transfer, and to the provisions of Section
12.11 and Article XI of the Credit Agreement. Upon the payment in full in
cash, or cash collateralization, of all Obligations, the termination or
expiration of all Letters of Credit, the termination of all Rate Protection
Agreements entered into pursuant to the Credit Agreement and the termination
of all Commitments, the security interest granted herein and all related
Liens shall terminate and all rights to the Collateral shall revert to the
Grantor. Upon any such termination or release, the Agent will, at the
Grantor's sole expense, execute and deliver to the Grantor such documents as
the Grantor shall reasonably request to evidence such termination. Upon any
sale or other transfer
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of Collateral permitted by the Credit Agreement (including in connection
with, and at the time specified in documentation related to, any Permitted
Receivables Transaction), the security interest created hereunder in such
Collateral (but not in the proceeds thereof) shall be deemed to be
automatically released and all rights to such Collateral shall revert to the
Grantor and the Agent will, at the Grantor's sole expense, execute and
deliver to the Grantor such documents as the Grantor shall reasonably request
to evidence such release.
SECTION d. GRANTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding
(1) the Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein, and shall
perform in all material respects all of its duties and obligations under
such contracts and agreements to the same extent as if this Security
Agreement had not been executed, unless (i) such performance is fully
excused by breach of the other party or parties thereto or (ii) such
failure to perform would not be reasonably expected to have a material
adverse effect on the value of the Collateral,
(2) the exercise by the Agent of any of its rights hereunder shall not
release the Grantor from any of its duties or obligations under any such
contracts or agreements included in the Collateral, and
(3) neither the Agent nor any other Secured Party shall have any
obligation or liability under any such contracts or agreements included in
the Collateral by reason of this Security Agreement, nor shall the Agent or
any other Secured Party be obligated to perform any of the obligations or
duties of the Grantor thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
SECTION a. REPRESENTATIONS AND WARRANTIES. The Grantor represents
and warrants to each Secured Party as set forth in this Section.
SECTION (i) LOCATION OF COLLATERAL, ETC. All of the Equipment,
Inventory and lock boxes of the Grantor are located at the places specified
in ITEM A, ITEM B and ITEM C, respectively, of SCHEDULE I hereto, as such
Schedule shall be deemed to be modified from time to time to reflect any
notice given to the Agent pursuant to CLAUSE (A) of SECTION 4.1.1. Other
than Equipment or Inventory in transit, sold in the ordinary course of
business or the value of which, individually or in the aggregate, does not
exceed $1,500,000, none of the Equipment and Inventory has, within the four
months preceding the date of this Security Agreement, been located at any
place other than the places specified in ITEM A and ITEM B, respectively, of
SCHEDULE I hereto except as set forth in a footnote thereto. The chief
executive office of the Grantor and the office(s) where the Grantor keeps its
records concerning the Receivables, and all originals of all chattel paper
which evidence Receivables, are located at the address set forth in Item D of
SCHEDULE I hereto as such Schedule may be deemed to be modified from time to
time to reflect any notice given to the Agent pursuant to CLAUSE (C) of
SECTION 4.1.2. The Grantor has no trade names other than those set forth in
ITEM E of SCHEDULE I hereto. During the four months preceding the date
hereof, (i) the Grantor has not been known by any legal name different from
the one set forth on the signature page hereto, (ii) nor has the Grantor been
the subject of any merger or other corporate reorganization, except as set
forth in ITEM F of SCHEDULE I hereto. If the Collateral includes any
Inventory located in the State of California, the Grantor is not a "retail
merchant" within the meaning of Section 9102 of the Uniform Commercial Code
- -Secured Transactions of the State of California. All Receivables evidenced
by a promissory note or other instrument, negotiable document or chattel
paper which (individually or in the aggregate) exceed $1,500,000 have been
duly endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and
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substance reasonably satisfactory to the Agent and delivered and pledged to
the Agent pursuant to SECTION 4.1.7. The Grantor is not a party to any Federal,
state or local government contract except as set forth in ITEM G of SCHEDULE I
hereto.
SECTION (ii) OWNERSHIP, NO LIENS, ETC. The Grantor owns its
Collateral free and clear of any Lien, security interest, charge or
encumbrance except for the security interest created by this Security
Agreement and except as permitted by the Credit Agreement or any other Loan
Document. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of the Agent relating to
this Security Agreement or as have been filed in connection with Liens
permitted pursuant to the Loan Documents, including Section 9.2.3 of the
Credit Agreement.
SECTION (iii) POSSESSION AND CONTROL. The Grantor has exclusive
possession and control of its Equipment and Inventory, except as specified in
Item H of Schedule I hereto, as such Item shall be deemed to be modified from
time to time upon delivery of a written notice to the Agent given not less
than 30 days prior to the date on which the Grantor is to relinquish
exclusive possession and control of such Equipment and Inventory.
SECTION (iv) NEGOTIABLE DOCUMENTS, INSTRUMENTS AND CHATTEL PAPER.
The Grantor has delivered to the Agent possession of all originals of all
negotiable documents, instruments and chattel paper currently owned or held
by the Grantor (duly endorsed in blank, if requested by the Agent) which
(individually or in the aggregate) exceed $1,500,000.
SECTION (v) INTELLECTUAL PROPERTY COLLATERAL. With respect to any
Intellectual Property Collateral owned by the Grantor in the Grantor's name
as such may be changed from time to time the loss, impairment or infringement
of which might have a Material Adverse Effect:
(1) each such Copyright, Patent or Trademark is subsisting and has not
been adjudged invalid or unenforceable, in whole or in part and, to the
Grantor's knowledge, there is no basis or any grounds
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for any such Copyright, Patent or Trademark to be adjudged invalid or
unenforceable in whole or in part;
(2) the Grantor has made all reasonable and proper filings and
recordations to protect its interest in such Copyrights, Patents or
Trademarks, including recordations of its interests in the Patents and
Trademarks in the United States Patent and Trademark Office and in
corresponding offices throughout the world and its claims to the Copyrights
in the United States Copyright Office and in corresponding offices
throughout the world;
(3) to the Grantor's knowledge it is the exclusive owner of the entire
and unencumbered right, title and interest in and to such Copyrights,
Patents or Trademarks and no claim has been made that the use of such
Copyrights, Patents or Trademarks violates the asserted rights of any third
party;
(4) the Grantor has performed and will continue to perform all acts
and has paid and will continue to pay all required fees and taxes to
maintain each and every Copyright, Patent or Trademark in full force and
effect throughout the world, as applicable, except as permitted by the
Credit Agreement or this Agreement; and
(5) the Grantor has taken commercially reasonable steps to protect and
maintain the secrecy of its Trade Secrets.
The Grantor owns or is entitled to use by license or otherwise, all Trade
Secrets, licenses, technology, know-how, processes and rights not included in
the Copyrights, Patents or Trademarks used in, necessary for or of importance
to the conduct of the Grantor's business.
SECTION (vi) VALIDITY, ETC. (1) This Security Agreement is effective
to create, as collateral security for the Obligations of the Grantor, valid and
enforceable Liens on the Collateral in favor of the Agent, for the ratable
benefit of the Secured Parties, except as enforceability may be affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar
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laws relating to or affecting creditor's rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(2) Except with regard to Liens (if any) on Specified Assets, upon
the completion of the Filings (with respect to Collateral existing on the
Effective Date) and Subsequent Filings (with respect to Collateral acquired
following the Effective Date for which the Filings are not effective to
perfect the Lien on such after-acquired Collateral), and the delivery to
and continuing possession by the Agent of all instruments, chattel paper
and documents a security interest in which is perfected by possession
(which, in the case of such Subsequent Filings and such instruments,
chattel paper and documents, subject to SECTIONS 3.1.1 and 3.1.4, shall
have occurred prior to any Credit Extensions after the initial Credit
Extensions), the Liens created pursuant to this Agreement will constitute
valid Liens on and (to the extent provided herein) perfected security
interests in the Grantor's Collateral in favor of the Agent for the ratable
benefit of the Secured Parties, and will be prior to all other Liens of all
other Persons other than Permitted Liens, and enforceable as such as
against all other Persons other than (i) Ordinary Course Buyers, except to
the extent that the recording of an assignment or other transfer of title
to the Agent, in the United States Patent and Trademark Office may be
necessary for enforceability, and (ii) except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles (whether enforcement is sought by
proceedings in equity or at law) or by an implied covenant of good faith
and fair dealing. Notwithstanding the foregoing, the representation set
forth above shall be deemed true and correct for all purposes so long as
the Grantor has complied with its covenants set forth under CLAUSE (A) of
SECTION 4.1.1, CLAUSE (A) of SECTION 4.1.2, CLAUSE (E) of SECTION 4.1.4,
and SECTION 4.1.7 of this Security Agreement, including the delivery of
executed financing statements for Subsequent Filings to the
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Agent, whether or not the Agent has caused such financing statements to be
filed in the applicable filing offices. As used in this Section, the
following terms shall have the following meanings:
"FILINGS": the filing or recording of the Financing Statements
and the Trademark Security Agreement relating to the Collateral
existing on the Effective Date, in the places specified in ITEM I of
the SCHEDULE I hereto.
"FINANCING STATEMENTS": the financing statements delivered to the
Agent by such Grantor on the date hereof for filing in the
jurisdictions listed on ITEM I of SCHEDULE I hereto.
"ORDINARY COURSE BUYERS": with respect to goods only, buyers in
the ordinary course of business to the extent provided in Section
9-307(1) of the U.C.C. as in effect from time to time in the relevant
jurisdiction.
"PERMITTED LIENS": Liens permitted pursuant to the Loan
Documents, including those permitted to exist pursuant to Section
9.2.3 of the Credit Agreement.
"SPECIFIED ASSETS": the following property and assets of such
Grantor:
(1) equipment constituting fixtures;
(2) Patent Collateral and Trademark Collateral to the extent
that (a) Liens thereon cannot be perfected by the filing of financing
statements under the Uniform Commercial Code or by filing and
acceptance thereof in the United States Patent and Trademark Office or
(b) such Patent Collateral and Trademark Collateral that is not,
individually or in the aggregate, material to the business of the
Grantor and its Subsidiaries taken as a whole;
(3) Copyright Collateral and accounts arising therefrom to the
extent that the Uniform
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Commercial Code as in effect from time to time in the relevant
jurisdiction is not applicable to the creation or perfection of Liens
thereon;
(4) uncertificated securities;
(5) Collateral for which the perfection of Liens thereon
requires filings in or other actions under the laws of jurisdictions
outside the United States of America, any State, territory or
dependency thereof or the District of Columbia (except to the extent
that such filings or other actions have been made or taken);
(6) Receivables or Related Contracts on which the United States
of America or any department, agency or instrumentality thereof is the
obligor, and property or assets subject to any rights reserved in
favor of the United States government as required under law which do
not, individually or in the aggregate, exceed $1,500,000;
(7) goods included in Collateral received by any Person for
"sale or return" within the meaning of Section 2-326 of the Uniform
Commercial Code of the applicable jurisdiction, to the extent of
claims of creditors of such Person; and
(8) cash proceeds of Receivables or Inventory until transferred
to or deposited in the Collateral Account (if any).
"SUBSEQUENT FILINGS": any filings after the date hereof in any
other jurisdiction not set forth in ITEM I of SCHEDULE I as may be
necessary under any requirement of law to perfect a Lien on the
Collateral in favor of the Agent.
SECTION (vii) COMPLIANCE WITH LAWS. The Grantor is in compliance
with the requirements of all applicable laws (including the provisions of the
Fair Labor Standards Act), rules, regulations and orders of every
governmental authority, the non-compliance with which might have a Material
Adverse Effect or which might materially adversely
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affect the value of the Collateral or the worth of the Collateral as collateral
security in each case taken as a whole.
SECTION (viii) ABANDONED TRADEMARKS. The Abandoned Trademarks are
not, individually or in the aggregate, material to the continued operations
of the Grantor, and for purposes of this Security Agreement (including CLAUSE
(B) of SECTION 4.1.4), the Grantor hereby notifies the Agent that the
Abandoned Trademarks are of negligible economic value to the Grantor.
ARTICLE 4.
COVENANTS
SECTION a. CERTAIN COVENANTS. The Grantor covenants and agrees that,
so long as any portion of the Obligations shall remain unpaid, any Rate
Protection Agreements entered into pursuant to the Credit Agreement shall
remain in full force and effect, any Letters of Credit shall be outstanding
or any Lender shall have any outstanding Commitment, the Grantor will, unless
the Required Lenders shall otherwise consent in writing, perform, comply with
and be bound by the obligations set forth in this Section.
SECTION (i) AS TO EQUIPMENT AND INVENTORY. The Grantor hereby agrees
that it shall
(1) keep all the Equipment and Inventory (other than Inventory sold in
the ordinary course of business) at the places therefor specified in
SECTION 3.1.1 or, upon not less than 30 days' prior written notice to the
Agent, at such other places in a jurisdiction where all representations and
warranties set forth in the first sentence of SECTION 3.1.1, SECTION 3.1.3
and SECTION 3.1.6 shall be true and correct in all material respects, and
all action required pursuant to the first sentence of SECTION 4.1.7 shall
have been taken with respect to the Equipment and Inventory;
(2) cause each material item of Equipment to be maintained in good
operating condition, ordinary wear
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and tear and immaterial impairments of value and damage by the elements
excepted; and make or cause to be made all repairs, replacements, and other
improvements in connection therewith which are necessary or desirable to
such end, except to the extent that failure to do any of the foregoing would
not reasonably be expected to materially adversely affect the value of the
Collateral; and promptly furnish to the Agent a statement respecting any
material loss or damage to the Equipment; and
(3) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Equipment and
Inventory, except to the extent the validity thereof is being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP have been set aside; and
(4) not permit the aggregate value of the Equipment and Inventory not
within its exclusive possession and control to exceed in any fiscal year 2%
of net sales of the Grantor in the preceding fiscal year, PROVIDED that the
foregoing shall not include the value of Equipment or Inventory in
possession of a third party that has received a notice from the Grantor or
the Agent identifying the Lien on such Equipment or Inventory created under
this Security Agreement.
SECTION (ii) AS TO RECEIVABLES. Subject to the terms of any
documentation governing any Permitted Receivables Transaction:
(1) The Grantor shall (i) not change its chief executive office, the
office(s) where it keeps its records concerning the Receivables, and all
originals of all chattel paper which evidenced Receivables, located at the
address(es) set forth in ITEM D of SCHEDULE I hereto, or its name except
upon 30 days' prior written notice to the Agent and, prior to taking any
such action, delivering to the Agent all additional executed financing
statements and other documents reasonably requested by the Agent to
maintain the validity, perfection and priority of the security
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interests provided for herein; (ii) hold and preserve such records and
chattel paper; and (iii) permit representatives of the Agent at any time
during normal business hours upon reasonable advance written notice to
inspect and make abstracts from such records and chattel paper.
(2) Upon written notice by the Agent to the Grantor pursuant to this
clause, all proceeds of Collateral received by the Grantor shall be
forthwith (and, in any event, within two Business Days) delivered in kind
to the Agent for deposit to a deposit account (the "COLLATERAL ACCOUNT") of
the Grantor maintained with the Agent, and the Grantor shall not commingle
any such proceeds, and shall hold separate and apart from all other
property, all such proceeds in express trust for the benefit of the Agent
until delivery thereof is made to the Agent. The Agent will not give the
notice referred to in the preceding sentence unless there shall have
occurred and be continuing a Default of the nature set forth in
Section 10.1.9 of the Credit Agreement or an Event of Default.
(3) The Agent shall have the right to apply any amount in the
Collateral Account to the payment of any Obligations which are due and
payable or payable upon demand.
SECTION (iii) AS TO COLLATERAL.
(1) Until both (i) the occurrence and continuance of a Default of the
nature set forth in Section 10.1.9 of the Credit Agreement or an Event of
Default, and (ii) such time as the Agent shall notify the Grantor of the
revocation of such power and authority the Grantor (A) may in the ordinary
course of its business (except as otherwise permitted under the Credit
Agreement), at its own expense, sell, lease or furnish under contracts of
service or otherwise transfer any of the Inventory normally held by the
Grantor for such purpose, and use and consume, in the ordinary course of
its business (except as otherwise permitted under the Credit Agreement),
any raw materials, work in process or materials normally held by the
Grantor for such purpose, (B) subject to the terms of any documentation
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governing any Permitted Receivables Transaction, will, at its own expense,
endeavor to collect, as and when due, all amounts due with respect to any
of the Collateral, including the taking of such action with respect to such
collection as the Agent may reasonably request following the occurrence of
a Default of the nature set forth in Section 10.1.9 of the Credit Agreement
or an Event of Default or, in the absence of such request, as the Grantor
may deem advisable, and (c) subject to the terms of any documentation
governing any Permitted Receivables Transaction, may grant, in the ordinary
course of business (except as otherwise permitted under the Credit
Agreement), to any party obligated on any of the Collateral, any rebate,
refund or allowance to which such party may be lawfully entitled, and may
accept, in connection therewith, the return of goods, the sale or lease of
which shall have given rise to such Collateral. The Agent, however, may,
at any time following a Default of the nature set forth in Section 10.1.9
of the Credit Agreement or an Event of Default, whether before or after any
notice of revocation of such power and authority or the maturity of any of
the Obligations, notify any parties obligated on any of the Collateral to
make payment to the Agent of any amounts due or to become due thereunder
and enforce collection of any of the Collateral by suit or otherwise and
surrender, release, or exchange all or any part thereof, or compromise or
extend or renew for any period (whether or not longer than the original
period) any indebtedness thereunder or evidenced thereby. Upon request of
the Agent following a Default of the nature set forth in Section 10.1.9 of
the Credit Agreement or an Event of Default, the Grantor will, at its own
expense, notify any parties obligated on any of the Collateral to make
payment to the Agent of any amounts due or to become due thereunder.
(2) The Agent is authorized to endorse, in the name of the Grantor,
any item, howsoever received by the Agent, representing any payment on or
other proceeds of any of the Collateral for application pursuant to SECTION
6.1.
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SECTION (iv) AS TO INTELLECTUAL PROPERTY COLLATERAL. The Grantor
covenants and agrees to comply with the following provisions as such
provisions relate to any Intellectual Property Collateral owned by the
Grantor in the Grantor's name as such may be changed from time to time.
(1) As to any Patent Collateral that the Grantor may acquire following
the Effective Date the Grantor shall not, unless the Grantor shall either
(i) reasonably and in good faith determine (in which case, the Grantor
will, in conjunction with the notices provided under SECTION 4.1.4(E) give
notice of such determination to the Agent) that any of the Patent
Collateral is of negligible economic value to the Grantor, or (ii) have a
valid business purpose to do otherwise, do any act, or omit to do any act,
whereby any of the Patent Collateral may lapse or become abandoned or
dedicated to the public or unenforceable.
(2) The Grantor shall not, and the Grantor shall not permit any of its
licensees to, unless the Grantor shall either (i) reasonably and in good
faith determine (in which case, the Grantor will, in conjunction with the
notices provided under SECTION 4.1.4(E) give notice of such determination
to the Agent) that any of the Trademark Collateral is of negligible
economic value to the Grantor, or (ii) have a valid business purpose to do
otherwise,
(a) fail to continue to use any of the Trademarks in order to
maintain all of the Trademarks in full force free from any claim of
abandonment for non-use,
(b) fail to maintain as in the past the quality of its products
and services offered under all of the Trademark Collateral,
(c) fail to employ all of the Trademarks registered with any
Federal or state or foreign authority with an appropriate notice of
such registration,
(d) adopt or use any other Trademark which is confusingly similar
or a colorable imitation of any of
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the Trademark Collateral without notifying the Agent,
(e) use any Trademark registered with any Federal or state or
foreign authority except for the uses for which registration or
application for registration of such Trademark has been made except in
the ordinary course of business consistent with past practice, and
(f) do or permit any act or knowingly omit to do any act whereby
any of the Trademark Collateral may lapse or become invalid or
unenforceable.
(3) The Grantor shall not, unless the Grantor shall either (a)
reasonably and in good faith determine (in which case, the Grantor will, in
conjunction with the notices provided under SECTION 4.1.4(E) give notice of
such determination to the Agent) that any of the Copyright Collateral or
any of the Trade Secrets Collateral is of negligible economic value to the
Grantor, or (b) have a valid business purpose to do otherwise, do or permit
any act or knowingly omit to do any act whereby any of the Copyright
Collateral or any of the Trade Secrets Collateral may lapse or become
invalid or unenforceable or placed in the public domain except upon
expiration of the end of an unrenewable term thereof.
(4) The Grantor shall notify the Agent promptly if it knows, or has
reason to know, that any application or registration relating to any
material Copyright, Patent or Trademark may become abandoned or dedicated
to the public or placed in the public domain or invalid or unenforceable,
or of any adverse determination or development (including the institution
of, or any such determination or development in, any proceeding in the
United States Patent and Trademark Office, the United States Copyright
Office or any foreign counterpart thereof or any court) regarding the
Grantor's ownership of any such material Copyright, Patent or Trademark,
its right to register the same or to keep and maintain and enforce the
same.
23
<PAGE>
(5) In no event shall the Grantor or any of its agents, employees,
designees or licensees file an application for the registration of any
Patent, Copyright or Trademark with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency
in any other country or any political subdivision thereof, unless within 30
days after the end of each calendar quarter the Grantor informs the Agent,
and upon request of the Agent, executes and delivers any and all
agreements, instruments, documents and papers as the Agent may reasonably
request to evidence the Agent's security interest in such Patent, Copyright
or Trademark and the goodwill and general intangibles of the Grantor
relating thereto or represented thereby; PROVIDED, that the Grantor shall
not be required to deliver any such agreements, instruments, documents or
papers for filing or registration in any offices outside the United States
unless the economic value of such Patent, Copyright or Trademark in the
country in which such office is located is material to the business of the
Grantor and its Subsidiaries taken as a whole, and then shall only be
required to make such filings and registrations in the applicable offices
within such country.
(6) The Grantor shall take all necessary steps, including in any
proceeding before the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue any
application (and to obtain the relevant registration) filed by the Grantor
with respect to, and to maintain any registration of, any Patent, Copyright
or Trademark, including the filing of applications for renewal, affidavits
of use, affidavits of incontestability and opposition, interference and
cancellation proceedings and the payment of fees and taxes (except to the
extent that dedication, abandonment or invalidation is permitted under the
foregoing CLAUSES (A), (B) and (C)).
SECTION (v) INSURANCE. The Grantor will maintain or cause to be
maintained with responsible insurance companies insurance with respect to its
business and
24
<PAGE>
properties (including the Equipment and Inventory) against such casualties
and contingencies and of such types and in such amounts as is required
pursuant to the Credit Agreement and will, upon the request of the Agent,
furnish a certificate of a reputable insurance broker setting forth the
nature and extent of all insurance maintained by the Grantor in accordance
with this Section. Without limiting the foregoing, the Grantor further
agrees as follows:
(1) Each policy for property insurance shall show the Agent as loss
payee.
(2) Each policy for liability insurance shall show the Agent as
additional insured.
(3) With respect to each life insurance policy, the Grantor shall
execute and deliver to the Agent a collateral assignment, notice of which
has been acknowledged in writing by the insurer.
(4) Each insurance policy shall provide that at least 30 days' prior
written notice of cancellation or of lapse shall be given to the Agent by
the insured.
(5) The Grantor shall, if so requested by the Agent, deliver to the
Agent a copy of each insurance policy.
(6) All payments in respect of property insurance and life insurance
shall be deposited to the Collateral Account and if there shall be no
Collateral Account shall be paid to the Grantor.
SECTION (vi) TRANSFERS AND OTHER LIENS. The Grantor shall not:
(1) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except Inventory in the ordinary course
of business or as permitted by the Credit Agreement or this Security
Agreement; or
(2) create or suffer to exist any Lien or other charge or encumbrance
upon or with respect to any of the Collateral to secure Indebtedness of any
Person or
25
<PAGE>
entity, except for the security interest created by this Security
Agreement and except as permitted by the Credit Agreement or this Security
Agreement.
SECTION (vii) FURTHER ASSURANCES, ETC. The Grantor and the Agent
agree that, from time to time at the Grantor's expense, the Agent or the
Grantor, as the case may be, will, upon the written request of the other,
promptly execute and deliver all further instruments and documents, and take
all further action, that may be necessary or desirable, in order to preserve
the benefits of this Security Agreement or to perfect, preserve and protect
any security interest granted or purported to be granted hereby or to enable
the Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of the foregoing,
the Grantor will
(1) following the occurrence of an Event of Default and notice to the
Grantor by the Agent, mark conspicuously each document included in the
Inventory, each chattel paper included in the Receivables and each Related
Contract and, at the request of the Agent, each of its records pertaining
to the Collateral with a legend, in form and substance reasonably
satisfactory to the Agent, indicating that such document, chattel paper,
Related Contract or Collateral is subject to the security interest granted
hereby; and
(2) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices (including any
assignment of claim form under or pursuant to the federal assignment of
claims statute, 31 U.S.C. Section 3726, any successor or amended version
thereof or any regulation promulgated under or pursuant to any version
thereof, with respect to any Collateral the value of which (individually or
in the aggregate) exceeds $1,500,000), as may be necessary or desirable in
order to preserve the benefits of this Security Agreement or to perfect and
preserve the security interests and other rights granted or purported to be
granted to the Agent hereby; and
26
<PAGE>
(3) furnish to the Agent, from time to time at the Agent's request,
statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Agent may
reasonably request, all in reasonable detail.
With respect to the foregoing and the grant of the security interest
hereunder, the Grantor hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all
or any part of the Collateral without the signature of the Grantor where
permitted by law. A carbon, photographic or other reproduction of this
Security Agreement or any financing statement covering the Collateral or any
part thereof shall be sufficient as a financing statement where permitted by
law.
ARTICLE 5.
THE AGENT
SECTION a. AGENT APPOINTED ATTORNEY-IN-FACT. The Grantor hereby
irrevocably appoints the Agent the Grantor's attorneys-in-fact, with full
authority in the place and stead of the Grantor and in the name of the
Grantor or otherwise, from time to time in the Agent's discretion, following
the occurrence and continuation of a Default of the nature set forth in
Section 10.1.9 of the Credit Agreement or an Event of Default, to take any
action and to execute any instrument which the Agent may deem necessary or
advisable to accomplish the purposes of this Security Agreement, including:
(1) subject to the terms of any documentation governing any Permitted
Receivables Transaction, to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys due and to
become due under or in respect of any of the Collateral;
(2) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with CLAUSE (A) above;
27
<PAGE>
(3) subject to the terms of any documentation governing any Permitted
Receivables Transaction, to file any claims or take any action or institute
any proceedings which the Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Agent with respect to any of the Collateral; and
(4) to perform the affirmative obligations of the Grantor hereunder
(including all obligations of the Grantor pursuant to SECTION 4.1.7).
The Grantor hereby acknowledges, consents and agrees that the power of
attorney granted pursuant to this Section is irrevocable and coupled with an
interest; provided, that the power of attorney granted by the Grantor shall
terminate upon the payment in full in cash, or cash collateralization, of all
Obligations, the termination or expiration of all Letters of Credit, the
termination of all Rate Protection Agreements entered into pursuant to the
Credit Agreement and the termination of all Commitments.
SECTION b. AGENT MAY PERFORM. If the Grantor fails to perform any
agreement contained herein, the Agent may itself perform, or cause
performance of, such agreement, and the expenses of the Agent incurred in
connection therewith shall be payable by the Grantor pursuant to SECTION 6.2.
SECTION c. AGENT HAS NO DUTY. In addition to, and not in limitation
of, SECTION 2.4, the powers conferred on the Agent hereunder are solely to
protect its interest (on behalf of the Secured Parties) in the Collateral and
shall not impose any duty on it to exercise any such powers. Except for
reasonable care of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Agent shall have no duty as to
any Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral.
SECTION 5.4. REASONABLE CARE. The Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; PROVIDED, HOWEVER, the Agent shall be deemed to have
28
<PAGE>
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Grantor
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the Agent to
comply with any such request at any time shall not in itself be deemed a
failure to exercise reasonable care.
ARTICLE 6.
REMEDIES
SECTION a. CERTAIN REMEDIES. If any Event of Default shall have
occurred and be continuing and any Obligations shall be due and unpaid
(whether by acceleration or otherwise):
(1) The Agent may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the
U.C.C. (whether or not the U.C.C. applies to the affected Collateral) and
also may
(a) require the Grantor to, and the Grantor hereby agrees that it
will, at its expense and upon request of the Agent, subject to the
terms of any documentation governing any Permitted Receivables
Transaction, forthwith assemble all or part of the Collateral as
directed by the Agent and make it available to the Agent at a place to
be designated by the Agent which is reasonably convenient to both
parties, and
(b) subject to the terms of any documentation governing any
Permitted Receivables Transaction, without notice except as specified
below, and subject to any existing reserved rights or licenses, sell
the Collateral or any part thereof in one or more parcels at public or
private sale, at the Agent's offices or elsewhere, for cash, on credit
or for future delivery, and upon such other terms as the Agent may
deem commercially reasonable. The Grantor agrees that,
29
<PAGE>
to the extent notice of sale shall be required by law, at least ten
days' prior notice to the Grantor of the time and place of any public
sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Agent shall not be obligated
to make any sale of Collateral regardless of notice of sale having been
given. The Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to
which it was so adjourned.
(2) All cash proceeds received by the Agent in respect of any sale of,
collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Agent, be held by the Agent as
collateral for, and/or then or at any time thereafter applied (after
payment of any amounts payable to the Agent pursuant to SECTION 6.2) in
whole or in part by the Agent for the ratable benefit of the Secured
Parties against, all or any part of the Obligations in such order (as among
interest, fees, principal and other monetary Obligations) as the Agent
shall elect. Any surplus of such cash or cash proceeds held by the Agent
and remaining after payment in full in cash of all the Obligations shall be
paid over to the Grantor or to whomsoever may be lawfully entitled to
receive such surplus.
SECTION b. INDEMNITY AND EXPENSES.
(1) The Grantor agrees to indemnify the Agent from and against any and
all claims, losses and liabilities arising out of or resulting from this
Security Agreement (including enforcement of this Security Agreement),
except to the extent resulting from the Agent's gross negligence or wilful
misconduct.
(2) The Grantor will upon demand pay to the Agent the amount of any
and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Agent
may incur in connection with
30
<PAGE>
(a) the administration of this Security Agreement,
(b) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral,
and
(c) the exercise or enforcement of any of the rights of the Agent
or the Secured Parties hereunder, or (iv) the failure by the Grantor
to perform or observe any of the provisions hereof.
ARTICLE 7.
MISCELLANEOUS PROVISIONS
SECTION a. LOAN DOCUMENT. This Security Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION b. AMENDMENTS; ETC. No amendment to or waiver of
any provision of this Security Agreement nor consent to any departure by the
Grantor herefrom, shall in any event be effective unless the same shall be in
writing and signed by the Grantor and the Agent (on behalf of the Lenders or
the Required Lenders, as the case may be), and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION c. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic communication) and mailed or telecopied or delivered to either
party hereto, addressed to such party at the address of such party specified
in or pursuant to the Credit Agreement. All such notices and other
communications, when mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed
given when received; any such notice or communication, if transmitted by
telecopier, shall be deemed given when transmitted and electronically
confirmed.
31
<PAGE>
SECTION d. SECTION CAPTIONS. Section captions used in this Security
Agreement are for convenience of reference only, and shall not affect the
construction of this Security Agreement.
SECTION e. SEVERABILITY. Wherever possible each provision of this
Security Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Security Agreement.
SECTION f. COUNTERPARTS. This Security Agreement may be executed by
the parties hereto in several counterparts, each of which shall be deemed an
original and all of which shall constitute together but one and the same
agreement.
SECTION g. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS SECURITY
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS
5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK),
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE
UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER
HEREOF AND THEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH
RESPECT THERETO.
32
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Security Agreement to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
LEINER HEALTH PRODUCTS INC.
By /s/ William B. Towne
---------------------------
Name: William B. Towne
Title: Executive Vice
President Finances
THE BANK OF NOVA SCOTIA,
as Agent
By /s/ Gary McDonough
---------------------------
Name: Gary McDonough
Title: Authorized Signatory
33
<PAGE>
SCHEDULE I
to U.S. Borrower
Security Agreement
ITEM A. LOCATION OF EQUIPMENT
<TABLE>
<CAPTION>
Description Location
--------------------------------------- ----------------------------------
<S> <C> <C>
1. Land Kalamazoo, Michigan
Chicago, Illinois
Madison, Wisconsin
York County, South Carolina
Winnipeg, Manitoba, Canada
2. Buildings and Improvements Kalamazoo, Michigan
Classic--Sherburne, New York
Chicago, Illinois
Madison, Wisconsin
York County, South Carolina
Winnipeg, Manitoba, Canada
3. Leasehold Improvements Kalamazoo, Michigan
Classic--Sherburne, New York
Barstow, California
Trupak--West Unity, Ohio
Chicago, Illinois
Madison, Wisconsin
Garden Grove, California
Dallas, Texas
Carson, California
York County, South Carolina
Winnipeg, Manitoba, Canada
</TABLE>
<PAGE>
Item A. LOCATION OF EQUIPMENT (continued)
<TABLE>
<S> <C> <C>
4. Machinery and Equipment Kalamazoo, Michigan
Classic--Sherburne, New York
Barstow, California
Trupak--West Unity, Ohio
Chicago, Illinois
Madison, Wisconsin
Garden Grove, California
Dallas, Texas
Cleveland, Ohio
Clearwater, Florida
Seattle, Washington
Elmhurst, Illinois
Carson, California
York County, South Carolina
Winnipeg, Manitoba, Canada
5. Furniture and Fixtures (continued) Kalamazoo, Michigan
Classic--Sherburne, New York
Barstow, California
Trupak--West Unity, Ohio
Chicago, Illinois
Madison, Wisconsin
Garden Grove, California
Dallas, Texas
Cleveland, Ohio
Clearwater, Florida
Seattle, Washington
Elmhurst, Illinois
Carson, California
York County, South Carolina
Winnipeg, Manitoba, Canada
</TABLE>
2
<PAGE>
Item B. LOCATION OF INVENTORY
1. Baltimore, Maryland
2. Barstow, California
3. Brattleboro, Vermont
4. Carson, California
5. Chattsworth, California
6. Collinsville, Illinois
7. Colorado Springs, Colorado
8. Columbus, Georgia
9. El Paso, Texas
10. Forth Worth, Texas
11. Garden Grove, California
12. Honolulu, Hawaii
13. Junction City, Kansas
14. Kalamazoo, Michigan
15. Kent, Washington
16. Lawton, Oklahoma
17. Madison, Wisconsin
18. Mainland, Pennsylvania
19. Norfolk, Virginia
20. Oldsmar, Florida
21. Ontario, California
22. Pensacola, Florida
23. Portland, Oregon
24. San Antonio, Texas
25. Sanford, Florida
26. Sherburne, New York
27. Stockton, California
3
<PAGE>
Item B. LOCATION OF INVENTORY (continued)
28. West Unity, Ohio
29. Winnipeg, Manitoba, Canada
Item C. LOCATION OF LOCK BOXES
<TABLE>
<CAPTION>
Bank Name & Location Account Number Contact Person
------------------------- ------------------ ------------------------------
<S> <C> <C> <C>
1. LaSalle National Bank Acct. #2272755 Betty Latson
120 S. LaSalle Street First Vice President
Chicago, IL 60603 and Deputy Division Head
Commercial Banking
</TABLE>
Item D. PLACE(S) OF BUSINESS AND CHIEF EXECUTIVE OFFICE
<TABLE>
<CAPTION>
LOCATION TYPE OF FACILITY
- -------------------------------- -------------------------------------------
<S> <C>
Carson, California* Packaging and distribution
Garden Grove, California Manufacturing
Kalamazoo, Michigan Manufacturing
Kalamazoo, Michigan Auxiliary warehouse
York County, South Carolina Manufacturing
Winnipeg, Canada Manufacturing, packaging, distribution
West Unity, Ohio Packaging and distribution
Madison, Wisconsin Packaging and distribution
Sherburne, New York Packaging and distribution
Sherburne, New York Auxiliary warehouse
Chicago, Illionis Not in use; held for sale
</TABLE>
- ------------------------
* Chief Executive Offices
Item E. TRADE NAMES
None
4
<PAGE>
Item F. MERGER OR OTHER CORPORATE REORGANIZATION
None
Item G. GOVERNMENT CONTRACTS
None
Item H. NON EXCLUSIVE CONTROL OF COLLATERAL
1. Baltimore, Maryland
2. Brattleboro, Vermont
3. Collinsville, Illinois
4. Colorado Spring, Colorado
5. Columbus, Georgia
6. El Paso, Texas
7. Fort Worth, Texas
8. Honolulu, Hawaii
9. Junction City, Kansas
10. Kent, Washington
11. Lawton, Oklahoma
12. Mainland, Pennsylvania
13. Norfolk, Virginia
14. Oldsmar, Florida
15. Ontario, California
16. Pensacola, Florida
5
<PAGE>
Item H. NON EXCLUSIVE CONTROL OF COLLATERAL (continued)
17. Portland, Oregon
18. San Antonio, Texas
19. Sanford, Florida
20. Stockton, California
Item I. FILING OFFICES
1. California
a. Secretary of State
2. Colorado
a. Secretary of State
3. Florida
a. Secretary of State
4. Georgia
a. Muscogee County
5. Hawaii
a. Bureau of Conveyances
6. Illinois
a. Secretary of State
7. Kansas
a. Secretary of State
8. Maryland
a. Department of Assesments
9. Michigan
a. Secretary of State
10. New York
a. Secretary of State
b. Chenango County
11. Ohio
a. Secretary of State
b. Williams County
c. Cuyahoga County
6
<PAGE>
Item I. FILING OFFICES (continued)
12. Oklahoma
a. County Clerk of Comanche
13. Oregon
a. Secretary of State
14. Pennsylvania
a. Secretary of the Commonwealth
b. Prothonotary of Montgomery
15. South Carolina
a. Secretary of State
16. Texas
a. Secretary of State
17. Vermont
a. Secretary of State
18. Virginia
a. State Corporation Commission
b. City of Norfolk
19. Washington
a. Department of Licensing
20. Wisconsin
a. Secretary of State
7
<PAGE>
SCHEDULE II
to U.S. Borrower
Security Agreement
Item A. PATENTS
Issued Patents
- -------------------------------------------------------------------------
Country Patent No. Issue Date Inventor(s) Title
- ----------- ---------- ----------- ------------ -----------------------
USA D270379 08/30/83 Gale K. Ornamental design for
Bensussen a pharmaceutical tablet
USA D270099 08/09/83 Gale K. Ornamental design for
Bensussen a pharmaceutical tablet
USA D270010 08/02/83 Gale K. Ornamental design for
Bensussen a pharmaceutical tablet
USA D270009 08/02/83 Gale K. Ornamental design for
Bensussen a pharmaceutical tablet
Pending Patent Applications
- ----------------------------------------------------------------
Country Serial No. Filing Date Inventor(s) Title
- ----------- ---------- ----------- ------------ ------------
8
<PAGE>
SCHEDULE II
to U.S. Borrower
Security Agreement
NONE
Patent Applications in Preparation
- -----------------------------------------------------------------
Expected
Country Docket No. Filing Date Inventor(s) TITLE
- ----------- ----------- ----------- ------------ ------------
NONE
Item B. PATENT LICENSES
Country or Effective Expiration Subject
Territory Licensor Licensee Date Date Matter
- ------------- ---------- --------- --------- ------------ ------------
NONE
9
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Item A. Trademarks
Registered Trademarks
---------------------
Country Trademark Registration No. Registration
------- --------- ---------------- ------------
Date
----
USA DREMELON 672,108 1-6-59
USA JET-AWAKE 698,477 5-31-60
USA TELESTRES 707,739 11-29-60
USA STRIKES PAIN 733,291 6-26-62
USA GORDON'S ECONO-PAK 742,896 1-1-63
USA CHOOM EE'S 789,316 5-11-65
USA TRU-NATURE 964,561 7-24-73
USA COUNCILABS 973,800 11-27-73
USA SNIP E 1,005,174 2-25-75
USA YOUR LIFE 1,029,138 1-6-76
USA FORMULA RDA 1,034,189 2-24-76
USA TRU-NATURE 1,076,778 11-8-77 (*)
USA VITALIFE 1,094,936 7-4-78
USA YOUR LIFE & DESIGN 1,118,048 5-15-79
USA SUBSTANCE II 1,137,182 6-24-80
USA MY-A-MULTI 1,131,599 3-11-80
USA DIETIC 1,175,765 11-3-81
- -------------------------
*This mark has been abandoned and this registration will not be renewed.
10
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Registered Trademarks
---------------------
Country Trademark Registration No. Registration
------- --------- ---------------- ------------
Date
----
USA VITA-FRESH 1,152,085 4-28-81
USA FORMULA 36 1,172,810 10-13-81
USA DAILY VITAMIN PAK 1,178,785 11-24-81
USA L-FORMULA 1,189,083 2-9-82
USA FULVITA 1,190,422 2-23-82
USA SUPER VITA-HEALTH 36 1,232,483 3-29-83
USA VITA-HEALTH 1,239,943 5-31-83
USA NATURE'S HARMONY 1,257,332 11-15-83
USA EVERYDAY ATHLETE 1,259,763 12-6-83
USA YOUR LIFE 1,267,613 2-21-84
USA SENIOR'S CHOICE 1,308,596 12-11-84
USA HEALTHY LIFE 1,310,734 12-25-84
USA GRAND-SLAM 1,313,044 1-8-85
USA LIGHTWEIGHT 1,313,046 1-8-85
USA BURST 1,313,045 1-8-85
USA NBF NATIONAL BRAND FORMULA 1,320,310 2-19-85
USA MAXIMUM CHOICE 1,338,731 6-4-85
11
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Registered Trademarks
---------------------
Country Trademark Registration No. Registration
------- --------- ---------------- ------------
Date
----
USA MAXIMUM PAK 1,374,543 12-10-85
USA EXECUTIVE'S CHOICE 1,385,699 3-11-86
USA MAN'S CHOICE 1,387,982 4-1-86
USA WOMAN'S CHOICE 1,387,981 4-1-86
USA YOUR LIFE & DESIGN 1,402,829 7-29-86
USA CHUBBLES 1,418,458 11-25-86**
USA NATURES'S PREMIUM 1,433,522 3-24-87
USA BEARFOOT 1,435,638 4-7-87***
USA DAILY PAK 1,503,542 9-13-88
USA PHARMACIST FORMULA 1,509,847 10-25-88
USA PHARMACIST FORMULA & DESIGN 1,537,889 5-9-89
USA PHARMACIST FORMULA & DESIGN 1,591,651 4-17-90
- -------------------------
**This mark has been abandoned and this registration will not be renewed.
***This mark has been abandoned and this registration will not be renewed.
12
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Registered Trademarks
---------------------
Country Trademark Registration No. Registration
------- --------- ---------------- ------------
Date
----
USA PHARMACIST FORMULA 1,592,720 4-24-90
USA YOUR LIFE & DESIGN 1,596,015 5-15-90
USA PURITY & QUALITY GUARANTEED 1,604,326 7-3-90
USA THERA PLUS 1,608,014 7-31-90
USA CENTRAL-LIFE 1,630,503 1-1-91(****)
USA CENTRAL-VITE 1,630,504 1-1-91
USA NATURALIZED 1,663,752 11-5-91
USA PHARMACIST FORMULA & DESIGN 1,678,249 3-10-92
USA NRL GOLD BANNER & DESIGN 1,683,558 4-21-92
USA PROVEN RELEASE FORMULA
& DESIGN 1,698,545 6-30-92
USA RELEASE TESTED & DESIGN 1,706,198 8-11-92
- -------------------------
****This mark has been abandoned and this registration will not be renewed.
13
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Registered Trademarks
---------------------
Country Trademark Registration No. Registration
------- --------- ---------------- ------------
Date
----
USA SUPREME QUALITY 1,710,877 8-25-92
USA BODYCOLOGY 1,719,286 9-22-92
USA DISSOLUTION TESTED PROVEN
RELEASE & DESIGN 1,721,198 9-29-92
USA DISSOLUTION TESTED PROVEN
RELEASE & DESIGN 1,730,435 11-3-92
USA RELEASE ASSURED & DESIGN 1,742,102 12-22-92
USA TRU NATURE & DESIGN 1,745,052 1-5-93
USA PROVEN RELEASE & DESIGN 1,745,043 1-5-93
USA ALLERCOLD 1,746,289 1-12-93
USA SPACE KIDS 1,748,098 1-26-93
USA ABSTRACT DESIGN OF A FLOWER 1,749,184 1-26-93
USA BODYCOLOGY (Script) 1,749,731 2-2-93
14
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Registered Trademarks
---------------------
Country Trademark Registration No. Registration
------- --------- ---------------- ------------
Date
----
USA DISSOLUTION TESTED
RELEASE ASSURED & DESIGN 1,753,433 2-16-93
USA PHARMACIST FORMULA & DESIGN 1,765,207 4-13-93
USA PHARMACIST FORMULA 1,763,596 4-6-93
USA PHARMACIST FORMULA & DESIGN 1,763,597 4-6-93
USA HISTA TABS 1,768,400 5-4-93
USA RELEASE ASSURED & DESIGN 1,773,376 5-25-93
USA SELECT FORMULA 1,773,363 5-25-93
USA RELEASE ASSURED & DESIGN 1,782,015 7-13-93
USA DRYFEDRINE 1,783,199 7-20-93
USA PC PHARMACIST 1,788,756 8-17-93
USA SLUMBER TIME 1,789,833 8-24-93
USA PHARMACIST VALUE 1,789,839 8-24-93
15
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Registered Trademarks
---------------------
Country Trademark Registration No. Registration
------- --------- ---------------- ------------
Date
----
USA RELEASE ASSURED & DESIGN 1,794,087 9-21-93
USA ECOLOGIZED 1,802,519 11-2-93
USA LACTASE 3300 1,811,401 12-14-93
USA LABORATORY TESTED RELEASE
ASSURED & DESIGN 1,801,738 10-26-93
USA DISINTEGRATION TESTED
RELEASE ASSURED & DESIGN 1,801,737 10-26-93
USA LUBRICARE 1,831,007 4-19-94
USA CREATED FROM NATURE 1,867,904 12-20-94
USA DAILY PAK SELECT 1,877,375 2-7-95
USA PHARMACIST BEST 1,881,114 2-28-95
USA OPTIMUM BALANCE 1,881,149 2-28-95
USA PHARMACIST TRUST 1,884,193 3-14-95
USA PHARMACIST OWN 1,885,526 3-21-95
16
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Registered Trademarks
---------------------
Country Trademark Registration No. Registration
------- --------- ---------------- ------------
Date
----
USA PHARMACIST FIRST 1,885,527 3-21-95
USA PHARMACIST NUMBER 1 1,885,528 3-21-95
USA CENTRAL-VITE SUPREME 1,885,535 3-21-95
USA PHARMACIST FRIEND 1,885,529 3-21-95
USA PHARMACIST REFERRAL 1,884,188 3-14-95
USA PHARMACIST SOLUTION 1,884,189 3-14-95
USA PHARMACIST BLEND 1,884,190 3-14-95
USA PHARMACIST PICK 1,884,191 3-14-95
USA PHARMACIST ANSWER 1,884,192 3-14-95
USA PHARMACIST TRUSTED 1,884,194 3-14-95
USA ASSURED RELEASE & DESIGN 1,886,507 3-28-95
USA TODAY'S PHARMACIST 1,887,706 4-4-95
USA PHARMACIST SYSTEM 1,887,714 4-4-95
17
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Registered Trademarks
---------------------
Country Trademark Registration No. Registration
------- --------- ---------------- ------------
Date
----
USA BABYCOLOGY 1,906,239 7-18-95
USA LHP AND DESIGN 1,913,897 8-22-95
USA PHARMACIST CARE 1,912,171 8-15-95
USA PHARMACIST RELIEF 1,931,895 10-31-95
USA CENTRAL-VITE PLUS 1,915,779 8-29-95
USA REPLENISH 1,926,257 10-10-95
USA THE VITAMIN STORE 1,951,912 1-23-96
USA PHYTO-CONCENTRATES 1,969,648 4-23-96
USA BEYOND VITAMINS 1,971,903 4-30-96
USA LIQUI-COAT 1,986,734 7-16-96
USA BODYCOLOGY (Script) 1,989,228 7-23-96
USA KWIK-KAP 2,012,314 10-29-96
USA FORMULAE USP 2,033,157 1-21-97
USA LIQUID LIFT 2,035,351 2-4-97
USA BIO-BALANCE 2,041,108 2-25-97
18
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Registered Trademarks
---------------------
Country Trademark Registration No. Registration
------- --------- ---------------- ------------
Date
----
USA LEINER HEALTH PRODUCTS
& DESIGN 2,059,591 5-6-97
USA
California YOUR LIFE California 4-28-75
53094
California PHARMACIST FORMULA
ADJACENT THE REPRESENTATION
OF A MORTAR AND PESTLE California 6-14-91
94202
SCHEDULE III
to U.S. Borrower
Security Agreement
FOREIGN TRADEMARK REGISTRATIONS
Country Mark Reg. No. Reg. Date
------- ---- -------- ---------
Argentina BODYCOLOGY 1,549,896 01/31/95
Argentina BODYCOLOGY 1,549,895 01/31/95
Argentina PHYTO-NUTRIENTS 1,574,447 05/17/96
Argentina YOUR LIFE 1,488,512 11/30/93
Argentina PHARMACIST FORMULA 1,612,272 08/22/96
Australia VITA-FRESH B418,057 11/09/84
Australia YOUR LIFE A303,284 12/21/76
19
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
FOREIGN TRADEMARK REGISTRATIONS
Country Mark Reg. No. Reg. Date
------- ---- -------- ---------
Bulgaria PHARMACIST FORMULA 28,612 06/27/96
Bulgaria YOUR LIFE 26,679 11/13/95
Canada BODYCOLOGY 444,247 06/23/95
Canada NATURE'S HARMONY 304,672 07/12/85
Canada PHARMACIST FORMULA 463,731 09/27/96
Canada YOUR LIFE 228,785 02/21/79
Chile BODYCOLOGY 421,742 02/10/94
China BODYCOLOGY 888,341 10/27/96
China YOUR LIFE 685,624 09/01/95
Columbia BODYCOLOGY 192,452 12/23/96
Columbia NATURAL LIFE 148,953 08/24/93
Costa Rica VITA-FRESH 65,013 04/18/85
Ecuador BODYCOLOGY 252-97 03/12/97
Hong Kong BODYCOLOGY 3274/96 12/22/94
Italy NATURAL LIFE 439,451 03/17/81
Italy YOUR LIFE 439,450 03/17/81
Japan BODYCOLOGY 3,296,573 04/25/97
Japan NATURAL LIFE 2,508,775 02/26/93
Japan SUBSTANCE II 2,395,314 03/31/92
Japan YOUR LIFE 1,740,629 01/23/85
20
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
FOREIGN TRADEMARK REGISTRATIONS
Country Mark Reg. No. Reg. Date
------- ----- --------- ---------
Japan YOUR LIFE (Katakana) 2,616,893 01/31/94
Japan YOUR LIFE (Katakana) 2,691,018 5/27/96
Japan YOUR LIFE 3,296,575 04/25/97
Japan YOUR LIFE (Katakana) 3,296,576 04/25/97
Korea BODYCOLOGY 350,666 11/27/96
Korea BODYCOLOGY 350,667 11/27/96
Mexico BODYCOLOGY 450,043 01/12/94
Mexico FLOWER DESIGN 450,042 01/12/94
Mexico NEW ERA 480,932 11/29/94
Mexico PHARMACIST FORMULA 458,316 04/25/94
Mexico PHYTO-NUTRIENTS 498,447 07/25/95
Mexico YOUR LIFE 490,877 05/03/93
Moldova YOUR LIFE 4,390 06/23/95
New Zealand NATURAL LIFE 250,595 06/26/95
New Zealand NATURAL LIFE 266,085 08/20/96
New Zealand YOUR LIFE 250,594 06/26/95
Peru BODYCOLOGY 27,288 07/10/96
Peru YOUR LIFE 27,289 07/10/96
Romania YOUR LIFE 23,805 02/16/97
21
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
FOREIGN TRADEMARK REGISTRATIONS
Country Mark Reg. No. Reg. Date
------- ---- -------- ---------
Russia BODYCOLOGY 144,765 02/29/96
Saudi Arabia BODYCOLOGY 365/18 12/31/95
Saudi Arabia YOUR LIFE 377/77 08/09/95
Spain FLOWER DESIGN 1,759,189 04/30/93
Switzerland BODYCOLOGY 441,127 04/25/97
Switzerland YOUR LIFE 439,225 10/21/96
Taiwan FLOWER DESIGN 619,886 12/16/93
Taiwan FLOWER DESIGN 617,796 12/01/93
Taiwan BODYCOLOGY 617,795 12/01/93
Taiwan BODYCOLOGY 622,227 12/01/93
Taiwan NATURAL LIFE 716,049 06/16/96
Taiwan YOUR LIFE 685,624 09/01/95
Thailand YOUR LIFE kor36,721 10/26/95
UAE BODYCOLOGY 5,625 07/03/96
UAE NATURAL LIFE 6,406 08/12/95
UAE YOUR LIFE 5,705 07/07/96
UK BODYCOLOGY 1,250,928 09/25/85
UK BODYCOLOGY 2,006,693 12/28/94
UK BURST 1,458,246 03/14/91
UK NATURAL LIFE 1,175,140 05/18/82
UK VITA-FRESH 1,229,652 11/06/84
UK YOURLIF 1,072,487 12/29/76
22
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
FOREIGN TRADEMARK REGISTRATIONS
Country Mark Reg. No. Reg. Date
------- ---- -------- ---------
Vietnam BODYCOLOGY 19,201 12/01/95
Vietnam NATURAL LIFE 24,074 05/11/96
Vietnam YOUR LIFE 19,202 12/01/95
23
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
- ------- --------- ---------- -----------
USA ANTIOXIDANT PAK 74/359,579 2-16-93(*****)
USA NATURE'S CHOICE 74/484,440 1-27-94
USA RECTANGLE WITH OBLIQUE 74/486,615 2-4-94
OVAL DESIGN
USA PHYTO-NUTRIENTS & DESIGN 74/590,438 10-25-94
USA PHYTOPRINT 74/656,580 4-5-95
USA PHYTOGRAPH 74/717,312 8-18-95
USA BOOSTER PAK 74/732,911 9-22-95
USA OCEAN DEW 74/735,644 9-28-95
USA VITA-FRESH 75/024,396 11-27-95
USA YOUR LIFE 75/064,603 2-28-96
USA LEINER HEALTH PRODUCTS 75/064,602 2-28-96
USA APPLE 75/114,447 6-5-96
USA VITAMANIA 75/145,244 8-5-96
USA PHARMACEUTICAL GRADE 75/166,671 9-16-96
- -------------------------
(*****)Final refusal mailed.
24
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
- ------- --------- ---------- -----------
USA SPECIAL REFINING GUARANTEES 75/169,471 9-20-96
PURITY!
USA SPECIALLY PROCESSED AND 75/169,472 9-20-96
REFINED FOR EXTRA PURITY
USA MEMORY SUPPORT COMPLEX 75/204,606 11-26-96
USA CARDIO COMPLEX 75/204,607 11-26-96
USA SUPER E 75/204,608 11-26-96
USA E-MERGE 75/226,688 1-14-97
USA ENERGY COMPLEX 75/238,653 2-10-97
USA IMPERIAL GINSENG 75/252,865 3-6-97
USA ULTIMUM 75/271,340 4-8-97
USA GINSEVEN 75/285,684 5-2-97
Argentina NATURAL LIFE 2,026,121 3/11/96
Australia BODYCOLOGY 703,336 2/28/96
Australia NATURAL LIFE 703,337 2/28/96
Australia PHYTO-NUTRIENTS 703,335 2/28/96
Bahrain YOUR LIFE 850/95 6/28/95
Benelux YOUR LIFE 880823 10/18/96
25
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
- ------- --------- ---------- -----------
Brazil BODYCOLOGY 818,551,453 5/31/95
Brazil NATURAL LIFE (Stylized) 818,999,411 1/11/96
Brazil NATURAL LIFE (Stylized) 818,999,420 1/11/96
Brazil PHARMACIST FORMULA 819,165,530 3/29/96
Brazil PHYTO-NUTRIENTS & DESIGN 818,777,478 9/20/95
Brazil YOUR LIFE 818,601,132 6/16/95
Canada PHYTO-NUTRIENTS & DESIGN 770,309 12/7/94
Canada TRU-NATURE 812,380 5/10/96
Chile YOUR LIFE 334,929 2/20/96
China LEINER 970008281 1/27/97
China LEINER 970008282 1/27/97
China NATURAL LIFE 950,150,595 11/3/95
China NATURE'S GIFT 960,137,031 12/12/96
China YOUR LIFE 950,150,596 11/3/95
Colombia BODYCOLOGY 96/008,847 2/26/96
Colombia NATURAL LIFE 96/008,848 2/26/96
Colombia YOUR LIFE 96/019,027 4/19/96
Ecuador BODYCOLOGY 58764/95 7/23/95
26
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
- ------- --------- ---------- -----------
Ecuador NATURAL LIFE 58762/95 7/3/95
Ecuador PHARMACIST FORMULA 58761/95 7/3/95
Ecuador YOUR LIFE 58763/95 7/3/95
France YOUR LIFE 96/650,930 11/15/96
Germany YOUR LIFE 396 47 337.7 10/24/96
Greece PHYTO-NUTRIENTS & Design 126027 9/4/95
Greece YOUR LIFE 126058 9/7/95
Guatemala VITA-FRESH Unknown Unknown
Hong Kong VITA FRESH 94/15262 12/22/94
Hong Kong YOUR LIFE 94/15261 12/22/94
Indonesia BODYCOLOGY D95-4537 3/20/95
Indonesia NATURAL LIFE D95-9960 6/12/95
Indonesia PHARMACIST FORMULA D95-16477 9/13/95
Indonesia PHYTO-NUTRIENTS & DESIGN D95-16305 9/11/95
Indonesia YOUR LIFE D95-4538 3/20/95
Israel YOUR LIFE 104,556 4/12/96
Israel YOUR LIFE 105,670 6/7/96
Israel YOUR LIFE 105,671 6/7/96
27
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
- ------- --------- ---------- -----------
Italy BODYCOLOGY RM96C001755 4/15/96
Italy PHYTO-NUTRIENTS & DESIGN MI95C011680 11/22/95
Japan DISSOLUTION TESTED 7,133,709 12/22/95
Japan DISSOLUTION TESTED 7,133,710 12/22/95
Japan DISSOLUTION TESTED 7,133,711 12/22/95
in Katakana
Japan DISSOLUTION TESTED in 7,133,712 12/22/95
Katakana
Japan NATURAL LIFE 7,133,725 12/22/95
Japan NATURAL LIFE 7,133,726 12/22/95
Japan NATURAL LIFE in Katakana 7,133,727 12/22/95
Japan NATURAL LIFE in Katakana 7,133,728 12/22/95
Japan NATURALIZED 7,133,701 12/22/95
Japan NATURALIZED 7,133,702 12/22/95
Japan NATURALIZED in Katakana 7,133,703 12/22/95
Japan NATURALIZED in Katakana 7,133,704 12/22/95
28
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
- ------- --------- ---------- -----------
Japan NATURE'S HARMONY 7,133,705 12/22/95
Japan NATURE'S HARMONY 7,133,706 12/22/95
in Katakana
Japan NATURE'S HARMONY 7,133,707 12/22/95
in Katakana
Japan NATURE'S HARMONY 7,133,708 12/22/95
in Katakana
Japan NATURE'S PREMIUM 7,133,737 12/22/95
Japan NATURE'S PREMIUM 7,133,738 12/22/95
Japan NATURE'S PREMIUM 7,133,739 12/22/95
in Katakana
Japan NATURE'S PREMIUM 7,133,740 12/22/95
in Katakana
Japan PHARMACIST FORMULA 116191/1994 11/16/94
Japan PHYTO-NUTRIENTS & Design 123098/1994 12/06/94
Japan PROVEN RELEASE & Design 116564/1995 11/09/95
29
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
- ------- --------- ---------- -----------
Japan PROVEN RELEASE & Design 116565/1995 11/09/95
Japan PROVEN RELEASE & Design 116566/1995 11/09/95
Japan PURITY & QUALITY GUARANTEED 116567/1995 11/09/95
& Design
Japan PURITY & QUALITY GUARANTEED 116568/1995 11/09/95
& Design
Japan PURITY & GUARANTEED 116569/1995 11/09/95
& Design
Japan RELEASE ASSURED 7,133,713 12/22/95
Japan RELEASE ASSURED 7,133,714 12/22/95
Japan RELEASE ASSURED in Katakana 7,133,715 12/22/95
Japan RELEASE ASSURED in Katakana 7,133,716 12/22/95
Japan TRU-NATURE 7,133,717 12/22/95
Japan TRU-NATURE 7,133,718 12/22/95
Japan TRU-NATURE in Katakana 7,133,719 12/22/95
30
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
- ------- --------- ---------- -----------
Japan TRU-NATURE in Katakana 7,133,720 12/22/95
Japan VITA FRESH 7,133,733 12/22/95
Japan VITA FRESH 7,133,734 12/22/95
Japan VITA FRESH in Katakana 7,133,735 12/22/95
Japan VITA FRESH in Katakana 7,133,736 12/22/95
Japan VITA-HEALTH 7,133,721 12/22/95
Japan VITA-HEALTH 7,133,722 12/22/95
Japan VITA-HEALTH in Katakana 7,133,723 12/22/95
Japan VITA-HEALTH in Katakana 7,133,724 12/22/95
Japan VITAL LIFE 7,133,729 12/22/95
Japan VITAL LIFE 7,133,730 12/22/95
Japan VITAL LIFE in Katakana 7,133,731 12/22/95
Japan VITAL LIFE in Katakana 7,133,732 12/22/95
Japan YOUR LIFE 116561/1995 11/09/95
Japan YOUR LIFE 116562/1995 11/09/95
Japan YOUR LIFE (Katakana) 116563/1995 11/09/95
31
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
- ------- --------- ---------- -----------
KOREA (South) PHYTO-NUTRIENTS & Design 95/32910 8/25/95
KOREA (South) YOUR LIFE 96/15120 4/16/96
KOREA (South) YOUR LIFE 96/14632 4/12/96
Kuwait YOUR LIFE 32914 1/30/96
Latvia YOUR LIFE M-97-145 1/31/97
Lithuania YOUR LIFE 95/0455 2/15/95
Macao BODYCOLOGY 001849 4/15/97
Malaysia BODYCOLOGY 95/03342 4/13/95
Malaysia NATURAL LIFE 95/04123 5/2/95
Malaysia PHYTO-NUTRIENTS & Design 95/07899 8/7/95
Malaysia YOUR LIFE 95/03344 4/13/95
Malaysia YOUR LIFE 004648 6/23/95
Moldova NATURAL LIFE 250595 6/26/95
New Zealand PHYTO-NUTRIENTS 250596 6/26/95
Nicaragua BODYCOLOGY 96-03851 11/1/96
Nicaragua NATURAL LIFE 96-03852 11/1/96
Nicaragua PHARMACIST FORMULA & Design 96-03853 11/1/96
Nicaragua YOUR LIFE 96-03649 10/11/96
32
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
- ------- --------- ---------- -----------
Nigeria BODYCOLOGY Unknown Unknown
Nigeria NATURAL LIFE Unknown Unknown
Nigeria PHARMACIST FORMULA Unknown Unknown
Panama PHARMACIST FORMULA 077680 11/09/95
Panama YOUR LIFE 077681 10/9/95
Paraguay YOUR LIFE Unknown Unknown
Peru NATURAL LIFE 4271 2/26/96
Peru NATURAL LIFE 4270 2/26/96
Philippines BODYCOLOGY 108,167 5/16/96
Philippines NATURAL LIFE 108,052 5/10/96
Philippines PHARMACIST FORMULA & Design 115,194 10/30/96
Philippines PHYTO-NUTRIENTS & Design 102,652 9/12/95
Philippines YOUR LIFE 102,651 9/12/95
Poland BODYCOLOGY Z-159,569 5/10/96
Poland NATURAL LIFE Z-159,571 5/10/96
Poland PHARMACIST FORMULA & Design Z-154,913 1/3/96
Poland YOUR LIFE Z-159570 5/10/96
33
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
- ------- --------- ---------- -----------
Qatar YOUR LIFE 13390 5/6/95
Romania PHARMACIST FORMULA 36,131 8/16/95
Singapore BODYCOLOGY 1081/95 2/9/95
Singapore NATURAL LIFE 3216/95 4/11/95
Singapore PHYTO-NUTRIENTS & Design 4942/95 6/22/95
Singapore YOUR LIFE 1082/95 2/9/95
South Africa YOUR LIFE 96/13512 9/25/96
Spain BODYCOLOGY 1,759,188 4/30/93
Taiwan CENTRAL-VITE 86-018394 4/16/97
Taiwan PHARMACIST FORMULA & Design 85-31107 6/26/96
Taiwan PHYTO-NUTRIENTS & Design 84022242 5/9/95
Taiwan YOUR LIFE 85048280 9/24/96
Thailand BODYCOLOGY 282562 3/17/95
Turkey BODYCOLOGY 96/010115 7/8/96
Turkey PHARMACIST FORMULA & Design 96/010116 7/8/96
Turkey YOUR LIFE 96/010114 7/8/96
34
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
- ------- --------- ---------- -----------
Ukraine YOUR LIFE 95062125/T 6/28/95
United Kingdom LEINER 2,057,953 2/23/96
United Kingdom PHYTO-NUTRIENTS & Design 2,060,959 3/13/96
United Kingdom YOUR LIFE 2,108,771 8/29/96
Vietnam NATURAL LIFE N-1830/96 5/11/96
Zaire YOUR LIFE Unknown Unknown
35
<PAGE>
SCHEDULE III
to U.S. Borrower
Security Agreement
TRADEMARK APPLICATIONS IN PREPARATION
-------------------------------------
Expected Products/
Country Trademark Docket No. Filing Date Services
------- --------- ---------- ----------- ---------
NONE
Item B. TRADEMARK LICENSES
------------------
Country or Effective Expiration
Territory Trademark Licensor Licensee Date Date
- --------- --------- -------- -------- --------- ----------
NONE
36
<PAGE>
SCHEDULE IV
to U.S. Borrower
Security Agreement
Item A. COPYRIGHTS/MASK WORKS
---------------------
REGISTERED COPYRIGHTS/MASK WORKS (******)
--------------------------------
Country Registration No. Registration Date Author(s) Title
- ------ ---------------- ----------------- --------- -----
USA TX4-292-297 03/27/96 Leiner Natural
Health Life
Products
Inc.
COPYRIGHT/MASK WORK PENDING REGISTRATION APPLICATIONS
-----------------------------------------------------
Country Serial No. Filing Date Author(s) Title
- ------- ---------- ----------- --------- -----
NONE
COPYRIGHT/MASK WORK REGISTRATION APPLICATIONS IN PREPARATION
------------------------------------------------------------
Expected
Country Docket No. Filing Date Author(s) Title
- ------- ---------- ----------- --------- -----
NONE
- -------------------------
(******)The Grantor creates various copyrightable materials for use
in connection with the marketing of its products. The Grantor does not
generally register its copyrights in such works.
37
<PAGE>
SCHEDULE IV
to U.S. Borrower
Security Agreement
Item B. COPYRIGHT/MARK WORK LICENSES
----------------------------
Country or Effective Expiration Subject
Territory Licensor Licensee Date Date Matter
- -------- -------- -------- --------- ---------- -------
The Grantor licenses various off-the-shelf software programs from third party
vendors.
38
<PAGE>
SCHEDULE V
to U.S. Borrower
Security Agreement
TRADE SECRET OR KNOW-HOW LICENSES
---------------------------------
Country or Effective Expiration Subject
Territory Licensor Licensee Date Date Matter
- -------- -------- -------- --------- ---------- -------
NONE
<PAGE>
EXHIBIT A
to U.S. Borrower
Security Agreement
PATENT SECURITY AGREEMENT
-------------------------
This PATENT SECURITY AGREEMENT (this "AGREEMENT"), dated as of ________ __,
19__, is made between LEINER HEALTH PRODUCTS INC., a Delaware corporation
(the "GRANTOR"), and THE BANK OF NOVA SCOTIA, as collateral agent (the
"AGENT") for each of the Secured Parties;
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented, amended and restated or otherwise modified from
time to time, the "CREDIT AGREEMENT"), among Leiner Health Products Group
Inc., a Delaware corporation ("LHPG" or the "U.S. BORROWER" (prior to the
Assumption)), Vita Health Company (1985) Ltd., a Manitoba corporation (the
"CANADIAN BORROWER", and together with the U.S. Borrower, the "BORROWERS"),
the various financial institutions as are or may become parties thereto which
extend a Commitment under the U.S. Facility (collectively, the "U.S.
LENDERS"), the various financial institutions as are or may become parties
thereto which extend a Commitment under the Canadian Facility (collectively,
the "CANADIAN LENDERS", and together with the U.S. Lenders, the "LENDERS"),
The Bank of Nova Scotia ("SCOTIABANK"), as agent for the U.S. Lenders under
the U.S. Facility (in such capacity, the "U.S. AGENT"), and Scotiabank, as
agent for the Canadian Lenders under the Canadian Facility (in such capacity,
the "CANADIAN AGENT"), the Lenders and the Issuers have extended Commitments
to make Credit Extensions to the Borrowers;
WHEREAS, as contemplated by the Credit Agreement, immediately
following the making of the initial Credit Extensions, the Grantor and LHPG
have delivered the Assumption Agreement, pursuant to which the Grantor has
assumed (the "ASSUMPTION") the rights and obligations of LHPG as (and has
become) the "U.S. Borrower" under the Credit Agreement;
WHEREAS, in connection with the Credit Agreement, the Grantor has
executed and delivered a U.S. Borrower Security Agreement, dated as of June
30, 1997 (as amended, supplemented, amended and restated or otherwise
modified from time to time, the "SECURITY AGREEMENT");
<PAGE>
WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit Extensions) and the execution and
delivery of the Assumption Agreement under the Credit Agreement, the Grantor
is required to execute and deliver this Agreement; and
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in order to induce the
Lenders and the Issuers to make Credit Extensions (including the initial
Credit Extensions) to the Borrowers pursuant to the Credit Agreement, and to
induce the Secured Parties to enter into Rate Protection Agreements, if any,
the Grantor agrees, for the benefit of each Secured Party, as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined herein or the
context otherwise requires, terms used in this Agreement, including its
preamble and recitals, have the meanings provided (or incorporated by
reference) in the Security Agreement.
SECTION 2. GRANT OF SECURITY INTEREST. For good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to secure all of the Obligations, the Grantor does hereby grant
to the Agent a security interest in, for the ratable benefit of the Secured
Parties, all of the following property (the "PATENT COLLATERAL"), whether now
owned or hereafter acquired by it:
(a) all letters patent and applications for letters patent owned by
the Grantor in the Grantor's name as such may be changed from time to time,
throughout the world, including all patent applications in preparation for
filing anywhere in the world and including each patent and patent
application referred to in ITEM A of ATTACHMENT 1 attached hereto;
(b) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in
CLAUSE (A);
2
<PAGE>
(c) all patent licenses of the Grantor, including each patent license
referred to in ITEM B of ATTACHMENT 1 attached hereto subject, in each
case, to the terms of such license agreements, and the right to prepare for
sale, sell and advertise for sale, all Inventory now or hereafter covered
by such licenses; and
(d) all proceeds of, and rights of the Grantor associated with, the
foregoing (including license royalties and proceeds of infringement suits),
the right to sue third parties for past, present or future infringements of
any patent or patent application described in CLAUSE (A), including any
patent or patent application referred to in ITEM A of ATTACHMENT 1 attached
hereto, and for breach or enforcement of any patent license, including any
patent license referred to in ITEM B of ATTACHMENT 1 attached hereto
subject, in each case, to the terms of such license agreements, and all
rights thereto throughout the world of the Grantor.
SECTION 3. SECURITY AGREEMENT. This Agreement has been executed and
delivered by the Grantor for the purpose of registering the security interest
of the Agent in the Patent Collateral with the United States Patent and
Trademark Office and, to the extent required by the Security Agreement,
corresponding offices in other countries of the world. The security interest
granted hereby has been granted as a supplement to, and not in limitation of,
the security interest granted to the Agent for its benefit and the benefit of
each Secured Party under the Security Agreement. The Security Agreement (and
all rights and remedies of the Agent and each Secured Party thereunder) shall
remain in full force and effect in accordance with its terms.
SECTION 4. RELEASE OF SECURITY INTEREST. Upon the payment in full in
cash, or cash collateralization, of all Obligations, the termination or
expiration of all Letters of Credit, the termination of all Rate Protection
Agreements entered into pursuant to the Credit Agreement and the termination
of all Commitments, the security interest granted herein and all related
Liens shall terminate and all rights to the Patent Collateral shall revert to
the Grantor. Upon any such termination or release, the Agent will, at the
Grantor's sole expense, execute and deliver to the Grantor such documents as
the Grantor shall reasonably request to evidence such termination of the
security
3
<PAGE>
interest in the Patent Collateral granted herein and all related Liens.
SECTION 5. ACKNOWLEDGMENT. The Grantor does hereby
further acknowledge and affirm that the rights and remedies of the Agent with
respect to the security interest in the Patent Collateral granted hereby are
more fully set forth in the Security Agreement, the terms and provisions of
which (including the remedies provided for therein) are incorporated by
reference herein as if fully set forth herein.
SECTION 6. LOAN DOCUMENT, ETC. This Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions of the Credit Agreement.
SECTION 7. COUNTERPARTS. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute together but one and the same
agreement.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
LEINER HEALTH PRODUCTS INC.
By
--------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA,
as Agent
By
--------------------------
Name:
Title:
5
<PAGE>
ATTACHMENT 1
to U.S. Borrower
Patent Security Agreement
Item A. PATENTS
-------
Issued Patents
--------------
*Country Patent No. Issue Date Inventor(s) Title
------- ---------- ---------- ----------- -----
Pending Patent Applications
---------------------------
*Country Serial No. Filing Date Inventor(s) Title
------- ---------- ----------- ----------- -----
Patent Applications in Preparation
----------------------------------
Expected
*Country Docket No. Filing Date Inventor(s) Title
------- ---------- ----------- ----------- -----
Item B. PATENT LICENSES
---------------
*Country or Effective Expiration Subject
Territory Licensor Licensee Date Date Matter
--------- -------- -------- --------- ---------- -------
______________________
* List items related to the United States first for ease of
recordation. List items related to other countries next, grouped
by country and in alphabetical order by country name.
<PAGE>
EXHIBIT B
to U.S. Borrower
Security Agreement
TRADEMARK SECURITY AGREEMENT
This TRADEMARK SECURITY AGREEMENT (this "AGREEMENT"),
dated as of June 30, 1997, is made between LEINER HEALTH PRODUCTS INC., a
Delaware corporation (the "GRANTOR"), and THE BANK OF NOVA SCOTIA, as
collateral agent (the "AGENT") for each of the Secured Parties;
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to a Credit Agreement, dated as of the
date hereof (as amended, supplemented, amended and restated or otherwise
modified from time to time, the "CREDIT AGREEMENT"), among Leiner Health
Products Group Inc., a Delaware corporation ("LHPG or the "U.S. BORROWER"
(prior to the Assumption)), Vita Health Company (1985) Ltd., a Manitoba
corporation (the "CANADIAN BORROWER", and together with the U.S. Borrower,
the "BORROWERS"), the various financial institutions as are or may become
parties thereto which extend a Commitment under the U.S. Facility
(collectively, the "U.S. LENDERS"), the various financial institutions as are
or may become parties thereto which extend a Commitment under the Canadian
Facility (collectively, the "CANADIAN LENDERS", and together with the U.S.
Lenders, the "LENDERS"), The Bank of Nova Scotia ("SCOTIABANK"), as agent for
the U.S. Lenders under the U.S. Facility (in such capacity, the "U.S.
AGENT"), and Scotiabank, as agent for the Canadian Lenders under the Canadian
Facility (in such capacity, the "CANADIAN AGENT"), the Lenders and the
Issuers have extended Commitments to make Credit Extensions to the Borrowers;
WHEREAS, as contemplated by the Credit Agreement,
immediately following the making of the initial Credit Extensions, the
Grantor and LHPG have delivered the Assumption Agreement, pursuant to which
the Grantor has assumed (the "ASSUMPTION") the rights and obligations of LHPG
as (and has become) the "U.S. Borrower" under the Credit Agreement;
WHEREAS, in connection with the Credit Agreement, the
Grantor has executed and delivered a U.S. Borrower Security
Agreement, dated as of June 30, 1997 (as amended,
<PAGE>
supplemented, amended and restated or otherwise modified from time to time, the
"SECURITY AGREEMENT");
WHEREAS, as a condition precedent to the making of the
Credit Extensions (including the initial Credit Extensions) and the execution
and delivery of the Assumption Agreement under the Credit Agreement, the
Grantor is required to execute and deliver this Agreement; and
WHEREAS, the Grantor has duly authorized the execution,
delivery and performance of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and in order to
induce the Lenders and the Issuers to make Credit Extensions (including the
initial Credit Extensions) to the Borrowers pursuant to the Credit Agreement,
and to induce the Secured Parties to enter into Rate Protection Agreements,
if any, the Grantor agrees, for the benefit of each Secured Party, as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined herein
or the context otherwise requires, terms used in this Agreement, including
its preamble and recitals, have the meanings provided (or incorporated by
reference) in the Security Agreement.
SECTION 2. GRANT OF SECURITY INTEREST. For good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to secure all of the Obligations, the Grantor does hereby grant
to the Agent a security interest in, for the ratable benefit of the Secured
Parties, all of the following property (the "TRADEMARK COLLATERAL"), whether
now owned or hereafter acquired by it:
(a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names,
trade styles, service marks, certification marks, collective
marks, logos, other source of business identifiers, designs
and general intangibles of a like nature owned by the Grantor
in the Grantor's name as such may be changed from time to time
(all of the foregoing items in this CLAUSE (A) being
collectively called a "TRADEMARK"), now existing anywhere in
the world or hereafter adopted or acquired,
2
<PAGE>
whether currently in use or not, all registrations and recordings
thereof and all applications in connection therewith, whether pending
or in preparation for filing, including registrations, recordings
and applications in the United States Patent and Trademark Office or
in any office or agency of the United States of America or any State
thereof or any foreign country, including those referred to in ITEM A
of ATTACHMENT 1 attached hereto, PROVIDED, HOWEVER, that Trademark
Collateral shall not include "intent to use" applications for trademark
or service mark registrations filed in the United States Patent and
Trademark Office pursuant to Section 1(b) of the Lanham Act, 15 U.S.C.
Section 1051, unless and until an Amendment to Allege Use or a Statement
of Use under Section 1(c) or 1(d) of said Act has been filed;
(b) all Trademark licenses of the Grantor, including each Trademark
license referred to in ITEM B of ATTACHMENT 1 attached hereto subject, in
each case, to the terms of such license agreements, and the right to
prepare for sale, sell and advertise for sale, all Inventory now or
hereafter covered by such licenses;
(c) all reissues, extensions or renewals of any of the items
described in CLAUSES (A) and (B);
(d) all of the goodwill of the business of the Grantor connected with
the use of, and symbolized by the items described in, CLAUSES (A) and (B);
and
(e) all proceeds of, and rights of the Grantor associated with, the
foregoing, including any claim by the Grantor against third parties for
past, present or future infringement or dilution of any Trademark or
Trademark registration including any Trademark or Trademark registration
referred to in ITEM A of ATTACHMENT 1 attached hereto, or for any injury
to the goodwill of the Grantor associated with the use of any such
Trademark or for breach or enforcement of any Trademark license subject,
in each case, to the terms of such license agreements.
SECTION 3. SECURITY AGREEMENT. This Agreement has been executed and
delivered by the Grantor for the
3
<PAGE>
purpose of registering the security interest of the Agent in the Trademark
Collateral with the United States Patent and Trademark Office and, to the
extent required by the Security Agreement, corresponding offices in other
countries of the world. The security interest granted hereby has been
granted as a supplement to, and not in limitation of, the security interest
granted to the Agent for its benefit and the benefit of each Secured Party
under the Security Agreement. The Security Agreement (and all rights and
remedies of the Agent and each Secured Party thereunder) shall remain in full
force and effect in accordance with its terms.
SECTION 4. RELEASE OF SECURITY INTEREST. Upon the payment in full in
cash, or cash collateralization, of all Obligations, the termination or
expiration of all Letters of Credit, the termination of all Rate Protection
Agreements entered into pursuant to the Credit Agreement and the termination
of all Commitments, the security interest granted herein and all related
Liens shall terminate and all rights to the Trademark Collateral shall revert
to the Grantor. Upon any such termination or release, the Agent will, at the
Grantor's sole expense, execute and deliver to the Grantor such documents as
the Grantor shall reasonably request to evidence such termination of the
security interest in the Trademark Collateral granted herein and all related
Liens.
SECTION 5. ACKNOWLEDGMENT. The Grantor does hereby further
acknowledge and affirm that the rights and remedies of the Agent with respect
to the security interest in the Trademark Collateral granted hereby are more
fully set forth in the Security Agreement, the terms and provisions of which
(including the remedies provided for therein) are incorporated by reference
herein as if fully set forth herein.
SECTION 6. LOAN DOCUMENT, ETC. This Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions of the Credit Agreement.
SECTION 7. COUNTERPARTS. This Agreement may be executed by the
parties hereto in several counterparts, each
4
<PAGE>
of which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
LEINER HEALTH PRODUCTS INC.
By
--------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA,
as Agent
By
--------------------------
Name:
Title:
6
<PAGE>
ATTACHMENT 1
to U.S. Borrower
Trademark Security Agreement
Item A. TRADEMARKS
----------
Registered Trademarks
---------------------
*Country Trademark Registration No. Registration
------- --------- ---------------- ------------
Date
- ----
Pending Trademark Applications
------------------------------
*Country Trademark Serial No. Filing Date
------- --------- ---------- -----------
Trademark Applications in Preparation
-------------------------------------
Products/ Expected
*Country Trademark Docket No. Filing Date
------- --------- ---------- -----------
Services
- --------
Item B. TRADEMARK LICENSES
------------------
*Country or Effective Expiration
Territory Trademark Licensor Licensee Date Date
---------- --------- -------- -------- --------- ---------
_______________________
*List items related to the United States first for ease of recordation.
List items related to other countries next, grouped by country and in
alphabetical order by country name.
<PAGE>
EXHIBIT C
to U.S. Borrower
Security Agreement
COPYRIGHT SECURITY AGREEMENT
----------------------------
This COPYRIGHT SECURITY AGREEMENT (this "AGREEMENT"), dated as
of ________ __, 19__, is made between LEINER HEALTH PRODUCTS INC., a
Delaware corporation (the "GRANTOR"), and THE BANK OF NOVA SCOTIA, as
collateral agent (the "AGENT") for each of the Secured Parties;
W I T N E S S E T H :
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented, amended and restated or otherwise modified from
time to time, the "CREDIT AGREEMENT"), among Leiner Health Products Group
Inc., a Delaware corporation ("LHPG" or the "U.S. BORROWER" (prior to the
Assumption)), Vita Health Company (1985) Ltd., a Manitoba corporation (the
"CANADIAN BORROWER", and together with the U.S. Borrower, the "BORROWERS"),
the various financial institutions as are or may become parties thereto which
extend a Commitment under the U.S. Facility (collectively, the "U.S.
LENDERS"), the various financial institutions as are or may become parties
thereto which extend a Commitment under the Canadian Facility (collectively,
the "CANADIAN LENDERS", and together with the U.S. Lenders, the "LENDERS"),
The Bank of Nova Scotia ("SCOTIABANK"), as agent for the U.S. Lenders under
the U.S. Facility (in such capacity, the "U.S. AGENT"), and Scotiabank, as
agent for the Canadian Lenders under the Canadian Facility (in such capacity,
the "CANADIAN AGENT"), the Lenders and the Issuers have extended Commitments
to make Credit Extensions to the Borrowers;
WHEREAS, as contemplated by the Credit Agreement, immediately
following the making of the initial Credit Extensions, the Grantor and LHPG
have delivered the Assumption Agreement, pursuant to which the Grantor has
assumed (the "ASSUMPTION") the rights and obligations of LHPG as (and has
become) the "U.S. Borrower" under the Credit Agreement;
WHEREAS, in connection with the Credit Agreement, the Grantor has
executed and delivered a U.S. Borrower
<PAGE>
Security Agreement, dated as of June 30, 1997 (as amended, supplemented,
amended and restated or otherwise modified from time to time, the "SECURITY
AGREEMENT");
WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit Extensions) and the execution and
delivery of the Assumption Agreement under the Credit Agreement, the Grantor
is required to execute and deliver this Agreement; and
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in order to induce the
Lenders and the Issuers to make Credit Extensions (including the initial
Credit Extensions) to the Borrowers pursuant to the Credit Agreement, and to
induce the Secured Parties to enter into Rate Protection Agreements, if any,
the Grantor agrees, for the benefit of each Secured Party, as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined herein or the
context otherwise requires, terms used in this Agreement, including its
preamble and recitals, have the meanings provided (or incorporated by
reference) in the Security Agreement.
SECTION 2. GRANT OF SECURITY INTEREST. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
to secure all of the Obligations, the Grantor does hereby grant to the Agent
a security interest in, for the ratable benefit of each of the Secured
Parties, all of the following property (the "COPYRIGHT COLLATERAL"), whether
now owned or hereafter acquired by it, being (a) all copyrights (including
all copyrights for semi-conductor chip product mask works) owned by the
Grantor in the Grantor's name as such may be changed from time to time,
whether statutory or common law, registered or unregistered, now or hereafter
in force throughout the world including all of the Grantor's right, title and
interest in and to all copyrights registered in the United States Copyright
Office or anywhere else in the world and also including the copyrights
referred to in ITEM A of ATTACHMENT 1 attached hereto, and all applications
for
2
<PAGE>
registration thereof, whether pending or in preparation (all of the
foregoing items in this clause being collectively called a "COPYRIGHT"), the
right to sue for past, present and future infringements of any thereof, all
rights of the Grantor thereto throughout the world, all extensions and
renewals of any thereof and all proceeds of the foregoing, including
licenses, royalties, income, payments, claims, damages and proceeds of suit;
(b) all copyright licenses of the Grantor, including
each copyright license referred to in ITEM B of SCHEDULE IV
attached hereto subject, in each case, to the terms of such
license agreements, and the right to prepare for sale, sell
and advertise for sale, all Inventory now or hereafter covered
by such licenses; and
(c) all proceeds of, and rights of the Grantor
associated with, the foregoing (including license royalties
and proceeds of infringement suits), the right to sue for
breach or enforcement of any copyright license subject, in
each case, to the terms of such license agreements, and all
rights of the Grantor thereto throughout the world.
SECTION 3. SECURITY AGREEMENT. This Agreement has been executed and
delivered by the Grantor for the purpose of registering the security interest
of the Agent in the Copyright Collateral with the United States Copyright
Office and, to the extent required by the Security Agreement, corresponding
offices in other countries of the world. The security interest granted
hereby has been granted as a supplement to, and not in limitation of, the
security interest granted to the Agent for its benefit and the benefit of
each Secured Party under the Security Agreement. The Security Agreement (and
all rights and remedies of the Agent and each Secured Party thereunder) shall
remain in full force and effect in accordance with its terms.
SECTION 4. RELEASE OF SECURITY INTEREST. Upon the payment in full
in cash, or cash collateralization, of all Obligations, the termination or
expiration of all Letters of Credit, the termination of all Rate Protection
Agreements entered into pursuant to the Credit Agreement and
3
<PAGE>
the termination of all Commitments, the security interest granted herein and
all related Liens shall terminate and all rights to the Copyright Collateral
shall revert to the Grantor. Upon any such termination or release, the Agent
will, at the Grantor's sole expense, execute and deliver to the Grantor such
documents as the Grantor shall reasonably request to evidence such
termination of the security interest in the Copyright Collateral granted
herein and all related Liens.
SECTION 5. ACKNOWLEDGMENT. The Grantor does hereby further
acknowledge and affirm that the rights and remedies of the Agent with respect
to the security interest in the Copyright Collateral granted hereby are more
fully set forth in the Security Agreement, the terms and provisions of which
(including the remedies provided for therein) are incorporated by reference
herein as if fully set forth herein.
SECTION 6. LOAN DOCUMENT, ETC. This Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions of the Credit Agreement.
SECTION 7. COUNTERPARTS. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute together but one and the same
agreement.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first
above written.
LEINER HEALTH PRODUCTS INC.
By
--------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA,
as Agent
By
--------------------------
Name:
Title:
5
<PAGE>
ATTACHMENT 1
to U.S. Borrower
Copyright Security Agreement
Item A. COPYRIGHTS/MASK WORKS
---------------------
Registered Copyrights/Mask Works
--------------------------------
*Country Registration No. Registration Date Author(s) Title
------- ---------------- ----------------- --------- -----
Copyright/Mask Work Pending Registration Applications
-----------------------------------------------------
*Country Serial No. Filing Date Author(s) Title
------- ---------- ----------- --------- -----
Copyright/Mask Work Registration Applications in Preparation
------------------------------------------------------------
Expected
*Country Docket No. Filing Date Author(s) Title
------- ---------- ----------- --------- -----
Item B. COPYRIGHT/MASK WORK LICENSES
----------------------------
*Country or Effective Expiration Subject
Territory Licensor Licensee Date Date Matter
---------- -------- -------- --------- ---------- -------
______________________
* List items related to the United States first for ease of recordation.
List items related to other countries next, groupedby country and in
alphabetical order by country name.
<PAGE>
Exhibit 4.9
[EXECUTION COPY]
U.S. BORROWER PLEDGE AGREEMENT
This U.S. BORROWER PLEDGE AGREEMENT (as amended, supplemented,
amended and restated or otherwise modified from time to time, this "PLEDGE
AGREEMENT"), dated as of June 30, 1997, made by LEINER HEALTH PRODUCTS INC.,
a Delaware corporation (the "PLEDGOR"), in favor of the Agents (as defined
below) for each of the Secured Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented, amended and restated or otherwise modified from
time to time, the "CREDIT AGREEMENT"), among Leiner Health Products Group
Inc., a Delaware corporation ("LHPG" or the "U.S. BORROWER" (prior to the
Assumption)), Vita Health Company (1985) Ltd., a Manitoba corporation (the
"CANADIAN BORROWER", and together with the Pledgor, the "BORROWERS"), the
various financial institutions as are or may become parties thereto which
extend a Commitment under the U.S. Facility (collectively, the "U.S.
LENDERS"), the various financial institutions as are or may become parties
thereto which extend a Commitment under the Canadian Facility (collectively,
the "CANADIAN LENDERS", and together with the U.S. Lenders, the "LENDERS"),
The Bank of Nova Scotia ("SCOTIABANK"), as agent for the U.S. Lenders under
the U.S. Facility (in such capacity, the "U.S. AGENT"), and Scotiabank, as
agent for the Canadian Lenders under the Canadian Facility (in such capacity,
the "CANADIAN AGENT", and together with the U.S. Agent, collectively, the
"AGENTS"), the Lenders and the Issuers have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as contemplated by the Credit Agreement, immediately
following the making of the initial Credit Extensions, the Pledgor and LHPG
have delivered the Assumption Agreement, pursuant to which the Pledgor has
assumed (the "ASSUMPTION") the rights and obligations of LHPG as (and has
become) the "U.S. Borrower" under the Credit Agreement;
<PAGE>
WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit Extension) and the execution and
delivery of the Assumption Agreement under the Credit Agreement, the Pledgor
is required to execute and deliver this Pledge Agreement; and
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the
Lenders and the Issuers to make Credit Extensions (including the initial
Credit Extensions) to the Borrowers pursuant to the Credit Agreement, and to
induce Secured Parties to enter into Rate Protection Agreements, if any, the
Pledgor agrees, for the benefit of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"AGENTS" is defined in the FIRST RECITAL.
"BORROWERS" is defined in the FIRST RECITAL.
"CANADIAN AGENT" is defined in the FIRST RECITAL.
"CANADIAN BORROWER" is defined in the FIRST RECITAL.
"CANADIAN LENDERS" is defined in the FIRST RECITAL.
"COLLATERAL" is defined in SECTION 2.1.
2
<PAGE>
"CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"DISTRIBUTIONS" means all stock dividends, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
Capital Stock constituting Collateral, but shall not include Dividends.
"DIVIDENDS" means cash dividends and cash distributions with respect
to any Pledged Shares or other Pledged Property.
"LENDERS" are defined in the FIRST RECITAL.
"PLEDGE AGREEMENT" is defined in the PREAMBLE.
"PLEDGED NOTE ISSUER" means each Person identified in ITEM A of
ATTACHMENT 1 hereto (as supplemented) as the issuer of the Pledged Note
identified opposite the name of such Person.
"PLEDGED NOTES" means all promissory notes of any Pledged Note
Issuer in the form or substantially the form of EXHIBIT A hereto (unless
otherwise consented to by the Agents, which consent will not be unreasonably
withheld) which are delivered or required to be delivered from time to time
by the Pledgor to the Agents as Pledged Property hereunder, as such
promissory notes, in accordance with SECTION 4.5, are amended, modified or
supplemented from time to time, together with any promissory note of any
Pledged Note Issuer taken in extension or renewal thereof or substitution
therefor.
"PLEDGED PROPERTY" means all Pledged Shares, all Pledged Notes, and
all other pledged shares of Capital Stock or promissory notes, all other
securities, all assignments of any amounts due or to become due, all other
instruments which are now being delivered by the Pledgor to the Agents or may
from time to time hereafter be delivered by the Pledgor to the Agents for the
purpose of pledge under this
3
<PAGE>
Pledge Agreement or any other Loan Document, and all proceeds of any of the
foregoing.
"PLEDGED SHARE ISSUER" means each Person identified in ITEM B of
ATTACHMENT 1 hereto as the issuer of the Pledged Shares identified opposite
the name of such Person, and each Person whose Capital Stock is required to
be pledged hereunder and under the Credit Agreement from time to time.
"PLEDGED SHARES" means all shares of Capital Stock of any Pledged
Share Issuer which are delivered or required to be delivered from time to
time by the Pledgor to the Agents as Pledged Property hereunder.
"PLEDGOR" is defined in the PREAMBLE.
"SCOTIABANK" is defined in the FIRST RECITAL.
"SECURED PARTY" means, as the context may require, the Lenders, the
Issuers, the Agents, each counterparty to a Rate Protection Agreement that is
(or at the time such Rate Protection Agreement is entered into, was) a Lender
or an Affiliate thereof and (in each case), each of their respective
successors, permitted transferees and permitted assigns.
"SECURITIES ACT" is defined in CLAUSE (a) of SECTION 6.2.
"U.C.C." means the Uniform Commercial Code, as in effect in the
State of New York or, as the context may require, in any other jurisdiction
the laws of which may apply to all or a portion of the Collateral in which a
security interest is granted hereunder.
"U.S. AGENT" is defined in the FIRST RECITAL.
"U.S. LENDERS" is defined in the FIRST RECITAL.
SECTION 1.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise
defined herein or the context otherwise requires, terms used in this Pledge
Agreement, including its preamble and recitals, have the meanings provided in
the Credit Agreement.
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SECTION 1.3. U.C.C. DEFINITIONS. Unless otherwise defined herein
or the Credit Agreement or the context otherwise requires, terms for which
meanings are provided in the U.C.C. are used in this Pledge Agreement,
including its preamble and recitals, with such meanings.
ARTICLE II
PLEDGE
SECTION 2.1. GRANT OF SECURITY INTEREST. The Pledgor hereby
pledges, hypothecates, assigns, charges, mortgages, delivers, and transfers
to the Agents, for their benefit and the ratable benefit of each of the
Secured Parties, and hereby grants to the Agents, for their benefit and the
ratable benefit of the Secured Parties, a continuing security interest in,
all of the following property (the "COLLATERAL"):
(a) all promissory notes of each Pledged Note Issuer identified in
ITEM A of ATTACHMENT 1 hereto;
(b) all other Pledged Notes issued from time to time that are required
to be pledged pursuant to the terms of the Credit Agreement;
(c) all issued and outstanding shares of Capital Stock of each Pledged
Share Issuer identified in ITEM B of ATTACHMENT 1 hereto; PROVIDED, that,
subject to clause (a) of Section 7.1.8 of the Credit Agreement, not more
than 65% of the Capital Stock of each Pledged Share Issuer that is a
non-U.S. Subsidiary shall be so pledged;
(d) all other Pledged Shares issued from time to time that are
required to be pledged pursuant to the terms of the Credit Agreement;
(e) all other Pledged Property hereafter delivered to the Agents in
connection with this Pledge Agreement;
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(f) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing.
SECTION 2.2. SECURITY FOR OBLIGATIONS. This Pledge Agreement secures
the payment in full of all Obligations.
SECTION 2.3. DELIVERY OF PLEDGED PROPERTY. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Shares and all Pledged Notes, shall be delivered to and held by or on behalf
of (and, in the case of the Pledged Notes, endorsed to the order of) the
Agents pursuant hereto, shall be in suitable form for transfer by delivery,
and shall be accompanied by all necessary instruments of transfer or
assignment, duly executed in blank.
The Pledgor shall deliver or shall cause to be delivered promptly,
but in any event within five Business Days following issuance, in pledge
hereunder to the Agents, for their benefit and the ratable benefit of each of
the other Secured Parties, any and all additional shares of Capital Stock of
a Pledged Share Issuer issued to the Pledgor and all other Pledged Property
issued, distributed or otherwise delivered to or acquired by the Pledgor in
respect of such Pledged Share Issuer's Pledged Shares; PROVIDED, HOWEVER,
that in the case of a non-U.S. Subsidiary of the Pledgor, unless otherwise
required by the terms of the Credit Agreement, not more than 65% of the
Capital Stock of such non-U.S. Subsidiary shall be pledged by the Pledgor to
the Agent.
SECTION 2.4. DIVIDENDS ON PLEDGED SHARES AND PAYMENTS ON PLEDGED
NOTES. In the event that any Dividend or liquidating dividend is to be paid
on any Pledged Share or any payment of principal or interest is to be made on
any Pledged Note at a time when no Default of the nature set forth in Section
10.1.9 of the Credit Agreement or Event of Default has occurred and is
continuing or would result therefrom, such Dividend, liquidating dividend or
payment may be paid directly to the Pledgor. If any such Default or Event of
Default has occurred and is continuing, then any
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such Dividend, liquidating dividend or payment shall be paid directly to the
Agents.
SECTION 2.5. CONTINUING SECURITY INTEREST; TRANSFER OF NOTE. This
Pledge Agreement shall create a continuing security interest in the
Collateral and shall
(a) remain in full force and effect until payment in full in cash of
or cash collateralization in full of all Obligations, the termination or
expiration or cash collateralization of all Letters of Credit, the
termination of all Rate Protection Agreements and the termination of all
Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the Agents
hereunder, to the benefit of the Agents and each other Secured Party.
Without limiting the foregoing CLAUSE (c), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other
Person or entity, and such other Person or entity shall thereupon become
vested with all the rights and benefits in respect thereof granted to such
Lender under any Loan Document (including this Pledge Agreement) or
otherwise, subject, however, to any contrary provisions in such assignment or
transfer, and to the provisions of Section 12.11 and Article XI of the Credit
Agreement. Upon (i) the sale, transfer or other disposition of Collateral in
accordance with the Credit Agreement or (ii) the payment in full in cash of
all Obligations, the termination or expiration of all Letters of Credit, the
termination of all Rate Protection Agreements entered into pursuant to the
Credit Agreement and the termination of all Commitments, the security
interest granted herein shall automatically terminate with respect to (x)
such Collateral (in the case of CLAUSE (i)) and all rights to such Collateral
shall revert to the Pledgor or (y) all Collateral (in the case of CLAUSE
(ii)) and all rights to the Collateral shall revert to the Pledgor. Upon any
such termination, the Agents will, at the Pledgor's sole expense, deliver to
the Pledgor, without any representations, warranties or recourse of any kind
whatsoever, all
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certificates and instruments representing or evidencing all Pledged Shares
and all Pledged Notes, together with all other Collateral held by the Agents
hereunder, and execute and deliver to the Pledgor such documents as the
Pledgor shall reasonably request to evidence such termination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES, ETC. The Pledgor
represents and warrants for itself unto each Secured Party, as at the date of
each pledge and delivery hereunder (including each pledge and delivery of
Pledged Shares and each pledge and delivery of a Pledged Note) by the Pledgor
to the Agents of any Collateral, as set forth in this Article, and except as
set forth or may be otherwise provided in the applicable Foreign Pledge
Agreement with respect to a non-U.S. Pledged Share Issuer or Pledged Note
Issuer.
SECTION 3.1.1. OWNERSHIP, NO LIENS, ETC. The Pledgor is the legal
and beneficial owner of, and has good and marketable title to (and has full
right and authority to pledge and assign) such Collateral, free and clear of
all liens, security interests, options, or other charges or encumbrances,
except any lien or security interest granted pursuant hereto in favor of the
Agents and except as permitted under the Credit Agreement.
SECTION 3.1.2. VALID SECURITY INTEREST. The execution and delivery
of this Pledge Agreement, together with the delivery by the Pledgor of such
Collateral to the Agents, is effective to create a valid, perfected, first
priority security interest in such Collateral and all proceeds thereof,
securing the Obligations. No filing or other action will be necessary to
perfect or protect such security interest.
SECTION 3.1.3. AS TO PLEDGED SHARES. In the case of any Pledged
Shares constituting such Collateral, all of such Pledged Shares are duly
authorized and validly issued, fully paid, and non-assessable, and constitute
all of the issued and outstanding shares of Capital Stock of each
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Pledged Share Issuer set forth in ITEM B of ATTACHMENT I hereto (except in
the case of Pledged Shares of non-U.S. Subsidiaries in which case, unless
otherwise required pursuant to the terms of the Credit Agreement, 65% of the
Capital Stock has been so pledged. The Pledgor has no Subsidiaries other
than the Pledged Share Issuers, except as set forth in ITEM C of ATTACHMENT 1.
SECTION 3.1.4. AS TO PLEDGED NOTES. In the case of each Pledged
Note, all of such Pledged Notes have been duly authorized, executed,
endorsed, issued and delivered, and are the legal, valid and binding
obligation of the issuers thereof, and are not in default.
SECTION 3.1.5. AUTHORIZATION, APPROVAL, ETC. No authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority, regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this
Pledge Agreement by the Pledgor, or
(b) for the exercise by the Agents of the voting or other rights
provided for in this Pledge Agreement, or, except with respect to any
Pledged Shares, as may be required in connection with a disposition of such
Pledged Shares by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
SECTION 3.1.6. COMPLIANCE WITH LAWS. The Pledgor is in compliance
with the requirements of all applicable laws (including the provisions of the
Fair Labor Standards Act), rules, regulations and orders of every
governmental authority, the non-compliance with which would reasonably be
expected to have a Material Adverse Effect or which might materially
adversely affect the aggregate value of the Collateral under all Pledge
Agreements or the aggregate worth of the Collateral under all Pledge
Agreements as collateral security.
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ARTICLE IV
COVENANTS
SECTION 4.1. PROTECT COLLATERAL; FURTHER ASSURANCES, ETC. The
Pledgor will not sell, assign, transfer, pledge, or encumber in any other
manner the Collateral (except in favor of the Agents hereunder). The Pledgor
will warrant and defend the right and title herein granted unto the Agents in
and to the Collateral (and all right, title, and interest represented by the
Collateral) against the claims and demands of all Persons whomsoever. The
Pledgor agrees that at any time, and from time to time, at the expense of the
Pledgor, the Pledgor will promptly execute and deliver all further
instruments, and take all further action, that may be necessary or desirable,
or that the Agents may reasonably request, in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable
the Agents to exercise and enforce their rights and remedies hereunder with
respect to any Collateral.
SECTION 4.2. STOCK POWERS, ETC. The Pledgor agrees that all
Pledged Shares (and all other shares of Capital Stock constituting
Collateral) delivered by the Pledgor pursuant to this Pledge Agreement will
be accompanied by duly executed undated blank stock powers, or other
equivalent instruments of transfer acceptable to the Agents. The Pledgor
will, from time to time upon the request of the Agents, promptly deliver to
the Agents such stock powers, instruments, and similar documents,
satisfactory in form and substance to the Agents, with respect to the
Collateral as the Agents may reasonably request and will, from time to time
upon the request of the Agents after the occurrence of any Event of Default,
promptly transfer any Pledged Shares or other shares of common stock
constituting Collateral into the name of any nominee designated by the Agents.
SECTION 4.3. CONTINUOUS PLEDGE. Subject to SECTION 2.4, the Pledgor
will, at all times, keep pledged to the Agents pursuant hereto all Pledged
Shares and all other shares of Capital Stock constituting Collateral, all
Dividends and Distributions with respect thereto, all Pledged Notes, all
interest, principal and other proceeds
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received by the Agents with respect to the Pledged Notes, and all other
Collateral and other securities, instruments, proceeds, and rights from time
to time received by or distributable to the Pledgor in respect of any
Collateral; PROVIDED, HOWEVER, that, in the event of any sale of Collateral
permitted by Section 9.2.11 of the Credit Agreement, such Collateral shall be
deemed automatically released from the pledge and security interest hereunder
without any consent or other action of the Agents or any other Person and the
Agents will, at the request of the Pledgor and at the Pledgor's sole cost and
expense, execute and deliver such documents (without recourse and without
representation or warranty) as the Pledgor may reasonably request to evidence
such release. The Pledgor will not permit any Pledged Share Issuer to issue
any Capital Stock which shall not have been immediately duly pledged
hereunder on a first priority perfected basis except as permitted under the
Credit Agreement and PROVIDED that, subject to the last sentence of SECTION
9.1.7 of the Credit Agreement, not more than 65% of the Capital Stock of each
Pledged Share Issuer that is a non-U.S. Subsidiary shall be so pledged.
SECTION 4.4. VOTING RIGHTS; DIVIDENDS, ETC. The Pledgor agrees:
(a) after any Default of the nature referred to in Section 10.1.9 of
the Credit Agreement or any Event of Default shall have occurred and be
continuing, promptly upon receipt of notice thereof by the Pledgor and
without any request therefor by the Agents, to deliver (properly endorsed
where required hereby or requested by the Agents) to the Agents all
Dividends, Distributions, all interest, all principal, all other cash
payments, and all proceeds of the Collateral, all of which shall be held by
the Agents as additional Collateral for use in accordance with SECTION 6.4;
and
(b) after any Event of Default shall have occurred and be continuing
and the Agents have notified the Pledgor of the Agents' intention to
exercise their voting power under this CLAUSE (b) of this SECTION 4.4
(i) the Agents may exercise (to the exclusion of the Pledgor) the
voting power and all other incidental rights of ownership with respect
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to any Pledged Shares or other shares of Capital Stock constituting
Collateral and the Pledgor hereby grants the Agents an irrevocable
proxy, exercisable under such circumstances, to vote the Pledged
Shares and such other Collateral; and
(ii) promptly to deliver to the Agents such additional proxies
and other documents as may be necessary to allow the Agents to
exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and
proceeds which may at any time and from time to time be held by the Pledgor
but which the Pledgor is then obligated to deliver to the Agents, shall,
until delivery to the Agents, be held by the Pledgor separate and apart from
its other property in trust for the Agents. The Agents agree that unless an
Event of Default shall have occurred and be continuing and the Agents shall
have given the notice referred to in CLAUSE (b) of this SECTION 4.4, the
Pledgor shall have the exclusive voting power with respect to any shares of
Capital Stock (including any of the Pledged Shares) constituting Collateral
and the Agents shall, upon the written request of the Pledgor, promptly
deliver such proxies and other documents, if any, as shall be reasonably
requested by the Pledgor which are necessary to allow the Pledgor to exercise
voting power with respect to any such share of Capital Stock (including any
of the Pledged Shares) constituting Collateral; PROVIDED, HOWEVER, that no
vote shall be cast, or consent, waiver, or ratification given, or action
taken by the Pledgor that would impair any Collateral or be inconsistent with
or violate any provision of the Credit Agreement or any other Loan Document
(including this Pledge Agreement).
SECTION 4.5. ADDITIONAL UNDERTAKINGS. The Pledgor will not,
without the prior written consent of the Agents (such consent not to be
unreasonably withheld):
(a) enter into any agreement amending, supplementing, or waiving any
provision of any Pledged Note (including any underlying instrument pursuant
to which such Pledged Note is issued) or compromising or releasing or
extending the time for payment of any obligation of the maker thereof; or
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(b) take or omit to take any action the taking or the omission of
which would result in any impairment or alteration of any obligation of the
maker of any Pledged Note or other instrument constituting Collateral.
ARTICLE V
THE AGENTS
SECTION 5.1. AGENTS APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby
irrevocably appoints each Agent the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in such Agent's discretion, to take
any action and to execute any instrument which such Agent may deem necessary
or advisable to accomplish the purposes of this Pledge Agreement, including,
after the occurrence and during the continuance of a Default of the nature
set forth in Section 10.1.9 of the Credit Agreement or an Event of Default:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with CLAUSE (a) above; and
(c) to file any claims or take any action or institute any proceedings
which such Agent may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of such Agent with
respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of
attorney granted pursuant to this Section is irrevocable and coupled with an
interest.
SECTION 5.2. AGENTS MAY PERFORM. If the Pledgor fails to perform
any agreement contained herein, the Agents may themselves perform, or cause
performance of, such
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agreement, and the expenses of the Agents incurred in connection therewith
shall be payable by the Pledgor pursuant to SECTION 6.5.
SECTION 5.3. AGENTS HAVE NO DUTY. The powers conferred on the
Agents hereunder are solely to protect their interests (on behalf of the
Secured Parties) in the Collateral and shall not impose any duty on them to
exercise any such powers. Except for reasonable care of any Collateral in
their possession and the accounting for moneys actually received by it
hereunder, the Agents shall have no duty as to any Collateral or
responsibility for
(a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not the Agents have or are deemed to have knowledge of
such matters, or
(b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. REASONABLE CARE. The Agents are required to exercise
reasonable care in the custody and preservation of any of the Collateral in
their possession; PROVIDED, HOWEVER, the Agents shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if they take such action for that purpose as the Pledgor
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the Agents to
comply with any such request at any time shall not in itself be deemed a
failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. CERTAIN REMEDIES. If any Event of Default shall have
occurred and be continuing:
(a) The Agents may exercise in respect of the Collateral, in addition
to other rights and remedies
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provided for herein or otherwise available to them, all the rights and
remedies of a secured party on default under the U.C.C. (whether or not
the U.C.C. applies to the affected Collateral) and also may, without
notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the
Agents' offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Agents may deem commercially
reasonable. The Agents or any of the other Secured Parties may, to the
extent permitted by Section 9-504 of the U.C.C., be the purchaser of any
of the Collateral so sold and the obligations of the Pledgor of such
Collateral to such Secured Party may be applied as a credit against the
purchase price. The Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten days' prior notice to the Pledgor
of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification.
The Agents shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Agents may adjourn
any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. Upon any such
sale the Agents shall have the right to deliver, assign and transfer to
the purchaser thereof the Collateral so sold. Each purchaser (including
the Agents or any of the other Secured Parties) at any such sale shall
hold the Collateral so sold absolutely free from any claim or right of
whatsoever kind, including any equity or right of redemption of the
Pledgor, and the Pledgor hereby specifically waives, to the extent it
may lawfully do so, all rights of redemption, stay or appraisal which it
has or may have under any rule of law or statute now existing or
hereafter adopted.
(b) The Agents may
(i) transfer all or any part of the Collateral into the name of
the Agents or their nominee, with or without disclosing that such
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Collateral is subject to the lien and security interest hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Agents of any amount due or to become due
thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party
with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2. SECURITIES LAWS. If the Agents shall determine to
exercise their right to sell all or any of the Collateral pursuant to SECTION
6.1, the Pledgor agrees that, upon request of the Agents, the Pledgor will,
at its own expense:
(a) execute and deliver, and cause each issuer of the Collateral
contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be done
all such other acts and things, as may be necessary or, in the opinion of
the Agents, advisable to register such Collateral under the provisions of
the Securities Act of 1933, as from time to time amended (the "SECURITIES
ACT"), and to use its best efforts to cause the registration statement
relating thereto to become effective and to remain effective for such
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period as prospectuses are required by law to be furnished, and to make
all amendments and supplements thereto and to the related prospectus
which, in the opinion of the Agents, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto;
(b) use its best efforts to qualify the Collateral under the state
securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by the Agents;
(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act; and
(d) do or use its best efforts to cause to be done all such other acts
and things as may be necessary to make such sale of the Collateral or any
part thereof valid and binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount
of damages that would be suffered by the Agents or the Secured Parties by
reason of the failure by the Pledgor to perform any of the covenants
contained in this Section and, consequently, agrees that, if the Pledgor
shall fail to perform any of such covenants, it shall pay, as liquidated
damages and not as a penalty, an amount equal to the value (as determined by
the Agents) of the Collateral on the date the Agents shall demand compliance
with this Section and the full amount of any such payments shall be applied
in accordance with SECTION 6.4.
SECTION 6.3. COMPLIANCE WITH RESTRICTIONS. The Pledgor agrees that
in any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Agents are hereby authorized to comply with
any limitation or restriction in connection with such sale as they may be
advised by counsel is necessary in order to avoid any violation of applicable
law (including compliance with such procedures as may restrict the number of
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prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are
purchasing for their own account for investment and not with a view to the
distribution or resale of such Collateral), or in order to obtain any
required approval of the sale or of the purchaser by any governmental
regulatory authority or official, and the Pledgor further agrees that such
compliance shall not result in such sale being considered or deemed not to
have been made in a commercially reasonable manner, nor shall the Agents be
liable nor accountable to the Pledgor for any discount allowed by the reason
of the fact that such Collateral is sold in compliance with any such
limitation or restriction.
SECTION 6.4. APPLICATION OF PROCEEDS. If any Event of Default
shall have occurred and be continuing, all cash proceeds received by the
Agents in respect of any sale of, collection from, or other realization upon,
all or any part of the Collateral may, in the discretion of the Agents, be
held by the Agents as additional collateral security for, or at any time
thereafter be applied (after payment of any amounts payable to the Agents
pursuant to SECTION 6.5) in whole or in part by the Agents against, all or
any part of the Obligations.
Any surplus of such cash or cash proceeds held by the Agents and
remaining after payment in full in cash of or cash collateralization in full
of all the Obligations, the termination, expiration or cash collateralization
of all Letters of Credit, the termination of all Rate Protection Agreements
and the termination of all Commitments, shall be paid over to the Pledgor or
to whomsoever may be lawfully entitled to receive such surplus.
SECTION 6.5. INDEMNITY AND EXPENSES. The Pledgor hereby
indemnifies and holds harmless the Agents from and against any and all
claims, losses, and liabilities arising out of or resulting from this Pledge
Agreement (including enforcement of this Pledge Agreement), except claims,
losses, or liabilities resulting from the Agents' gross negligence or wilful
misconduct. Upon demand, the Pledgor will pay to the Agents the amount of
any and all reasonable expenses, including the reasonable fees and
disbursements of
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their counsel and of any experts and agents, which the Agents (in their
capacities as Agents and not as Lenders) may incur in connection with:
(a) the administration of this Pledge Agreement, the Credit Agreement
and each other Loan Document;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Agents
hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. LOAN DOCUMENT. This Pledge Agreement is a Loan
Document executed pursuant to the Credit Agreement and shall (unless
otherwise expressly indicated herein) be construed, administered and applied
in accordance with the terms and provisions thereof.
SECTION 7.2. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Pledge Agreement nor consent to any departure by the
Pledgor herefrom shall in any event be effective unless the same shall be in
writing and signed by the Pledgor and the Agents (on behalf of the Lenders or
the Required Lenders, as the case may be), and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it is given.
SECTION 7.3. PROTECTION OF COLLATERAL. The Agents may from time to
time, at their option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and
the Agents may from time to time take any other action which the Agents
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reasonably deem necessary for the maintenance, preservation or protection of
any of the Collateral or of their security interest therein, it being
understood and agreed that in each such case all costs and expenses incurred
by the Agents in connection therewith shall be payable by the Pledgor
pursuant to SECTION 6.5.
SECTION 7.4. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing or facsimile and,
if to the Pledgor, mailed or telecopied or delivered to it at the address or
facsimile number specified in the Credit Agreement and, if to the Agents,
mailed or telecopied or delivered to them at the addresses or facsimile
numbers specified in the Credit Agreement or, with respect to the Pledgor or
the Agents, at such other address or facsimile number as shall be designated
by such party in a written notice to each other party complying as to
delivery with the terms of this Section. All such notices and other
communications, when mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed
given when received; any such notice or communication, if transmitted by
telecopier, shall be deemed given when transmitted and electronically
confirmed.
SECTION 7.5. SECTION CAPTIONS. Section captions used in this
Pledge Agreement are for convenience of reference only, and shall not affect
the construction of this Pledge Agreement.
SECTION 7.6. SEVERABILITY. Wherever possible each provision of
this Pledge Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Pledge Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Pledge Agreement.
SECTION 7.7. COUNTERPARTS. This Pledge Agreement may be executed
by the parties hereto in several counterparts, each of which shall be deemed
to be an original and all of which shall constitute together but one and the
same agreement.
20
<PAGE>
SECTION 7.8. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS PLEDGE
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS
5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK),
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE
UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER
HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT
THERETO.
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
LEINER HEALTH PRODUCTS INC.
By /s/ William B. Towne
----------------------------
Name: William B. Towne
Title: Executive Vice
President-Finances
THE BANK OF NOVA SCOTIA,
as Agent
By /s/ Gary McDonough
----------------------------
Name: Gary McDonough
Title:
22
<PAGE>
EXHIBIT A
to U.S. Borrower
Pledge Agreement
PROMISSORY NOTE
$____________ _________, ____
FOR VALUE RECEIVED, the undersigned, ______________, a _______________
corporation (the "MAKER"), promises to pay to the order of LEINER HEALTH
PRODUCTS INC., a Delaware corporation (the "PAYEE"), on demand, the principal
sum of ______________ DOLLARS ($________) or, if less, the aggregate unpaid
principal amount, as reflected on the books and records of the Payee, of all
intercompany loans made from time to time by the Payee to the Maker.
The unpaid principal amount of this promissory note (this "NOTE")
from time to time outstanding shall bear interest at a rate of interest as
reflected in the books and records of the Payee, which the Maker represents
to be a lawful and commercially reasonable rate, payable from time to time on
demand of Payee, and all payments of principal of and interest on this Note
shall be payable in lawful currency of the United States of America. All
such payments shall be made by the Maker to an account established by the
Payee at _______________. Upon notice from the U.S. Agent that a Default (as
defined in the Credit Agreement, hereinafter defined) of the nature referred
to in Section 10.1.9 of the Credit Agreement or an Event of Default (as
defined in the Credit Agreement) has occurred and is continuing under the
Credit Agreement, the Maker shall make such payments, in same day funds, to
such other account as the U.S. Agent shall direct in such notice.
This Note is one of the Pledged Notes referred to in, and evidences
Indebtedness incurred pursuant to, clause (e) of Section 9.2.2 of the Credit
Agreement, dated as of June 30, 1997 (as amended, supplemented, amended and
restated or otherwise modified from time to time, the "CREDIT AGREEMENT"),
among the Payee, as the U.S. Borrower (following the Assumption), Vita Health
Company (1985) Ltd., as the Canadian Borrower, The Bank of Nova Scotia, as
the U.S. agent (the "U.S. AGENT") and the Canadian Agent, and various
financial institutions as are, or may from time to time become, parties
thereto. Upon the occurrence and continuance of an Event of Default under
the Credit Agreement, and notice thereof by the U.S. Agent to the Maker, the
U.S. Agent shall have all rights of the Payee to collect and accelerate, and
enforce all rights with respect
<PAGE>
to, the Indebtedness evidenced by this Note. Unless otherwise defined herein
or the context otherwise requires, terms used herein have the meanings
provided in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the
Pledge Agreement pursuant to which this Note has been pledged to the U.S.
Agent as security for the Obligations outstanding from time to time under the
Credit Agreement and each other Loan Document.
In addition to, but not in limitation of, the foregoing, the Maker
further agrees to pay all expenses, including reasonable attorneys' fees and
legal expenses, incurred by the holder (including the U.S. Agent as pledgee)
of this Note endeavoring to collect any amounts payable hereunder which are
not paid when due, whether by acceleration or otherwise.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS
5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).
THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON
THIS NOTE. THE MAKER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
2
<PAGE>
PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE TO ACCEPT THIS NOTE.
[NAME OF MAKER]
By
----------------------
Name:
Title:
Pay to the order of THE
BANK OF NOVA SCOTIA, as
U.S. Agent
By
----------------------
Name:
Title:
3
<PAGE>
ATTACHMENT 1
to U.S. Borrower
Pledge Agreement
Item A. PLEDGED NOTES
-------------
PLEDGED NOTE ISSUER DESCRIPTION
- ------------------- -----------
None.
Item B. PLEDGED SHARES
--------------
PLEDGED SHARE ISSUER COMMON STOCK
- -------------------- ---------------------------------------
AUTHORIZED OUTSTANDING % OF SHARES
SHARES SHARES PLEDGED
---------- ----------- -----------
VH HOLDINGS INC. Unlimited 100 65%
Item C. ADDITIONAL SUBSIDIARIES
-----------------------
None.
<PAGE>
EXHIBIT 4.10
PARENT PLEDGE AGREEMENT
This PARENT PLEDGE AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "PLEDGE AGREEMENT"),
dated as of June 30, 1997, is made by PLI HOLDINGS INC., a Delaware corporation
(the "PLEDGOR"), in favor of Agents (as defined below) for each of the Secured
Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented, amended and restated or otherwise modified from time
to time, the "CREDIT AGREEMENT"), among Leiner Health Products Group Inc., a
Delaware corporation ("LHPG" or the "U.S. BORROWER"(prior to the Assumption)),
Vita Health Company (1985) Ltd., a Manitoba corporation (the "CANADIAN
BORROWER", and together with the U.S. Borrower, the "BORROWERS"), the various
financial institutions as are or may become parties thereto which extend a
Commitment under the U.S. Facility (collectively, the "U.S. LENDERS"), the
various financial institutions as are or may become parties thereto which extend
a Commitment under the Canadian Facility (collectively, the "CANADIAN LENDERS",
and together with the U.S. Lenders, the "LENDERS"), The Bank of Nova Scotia
("SCOTIABANK"), as agent for the U.S. Lenders under the U.S. Facility (in such
capacity, the "U.S. AGENT"), and Scotiabank, as agent for the Canadian Lenders
under the Canadian Facility (in such capacity, the "CANADIAN AGENT", and
together with the U.S. Agent, collectively, the "AGENTS"), the Lenders and the
Issuers have extended Commitments to make Credit Extensions to the Borrowers;
WHEREAS, as contemplated by the Credit Agreement, immediately
following the making of the initial Credit Extensions, Leiner Health Products
Inc., a Delaware corporation ("LEINER") and LHPG have delivered the Assumption
Agreement, pursuant to which Leiner has assumed (the "ASSUMPTION") the rights
and obligations of LHPG as (and has become) the "U.S. Borrower" under the Credit
Agreement;
<PAGE>
WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit Extension) and the execution and
delivery of the Assumption Agreement under the Credit Agreement, the Pledgor is
required to execute and deliver this Pledge Agreement; and
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, it is in the best interests of the Pledgor to execute this
Pledge Agreement inasmuch as the Pledgor will derive substantial direct and
indirect benefits from the Credit Extensions made from time to time to the
Borrowers by the Lenders and the Issuer pursuant to the Credit Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuers to make Credit Extensions (including the initial Credit
Extensions) to the Borrowers pursuant to the Credit Agreement, and to induce
Secured Parties to enter into Rate Protection Agreements, if any, the Pledgor
agrees, for the benefit of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"AGENTS" is defined in the FIRST RECITAL.
"BORROWERS" is defined in the FIRST RECITAL.
"CANADIAN AGENT" is defined in the FIRST RECITAL.
"CANADIAN BORROWER" is defined in the FIRST RECITAL.
2
<PAGE>
"CANADIAN LENDERS" is defined in the FIRST RECITAL.
"COLLATERAL" is defined in SECTION 2.1.
"CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"DISTRIBUTIONS" means all stock dividends, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
Capital Stock constituting Collateral, but shall not include Dividends.
"DIVIDENDS" means cash dividends and cash distributions with respect
to any Pledged Shares or other Pledged Property.
"LENDERS" are defined in the FIRST RECITAL.
"PLEDGE AGREEMENT" is defined in the PREAMBLE.
"PLEDGED PROPERTY" means all Pledged Shares and all other pledged
shares of Capital Stock, all other securities, all assignments of any amounts
due or to become due, all other instruments which are now being delivered by the
Pledgor to the Agent or may from time to time hereafter be delivered by the
Pledgor to the Agent for the purpose of pledge under this Pledge Agreement or
any other Loan Document, and all proceeds of any of the foregoing.
"PLEDGED SHARE ISSUER" means each Person identified in ITEM A of
ATTACHMENT 1 hereto as the issuer of the Pledged Shares identified opposite the
name of such Person, and each Person whose Capital Stock is required to be
pledged hereunder and under the Credit Agreement from time to time.
"PLEDGED SHARES" means all shares of Capital Stock of any Pledged
Share Issuer which are delivered or required
3
<PAGE>
to be delivered from time to time by the Pledgor to the Agent as Pledged
Property hereunder.
"PLEDGOR" is defined in the PREAMBLE.
"SCOTIABANK" is defined in the FIRST RECITAL.
"SECURED PARTY" means, as the context may require, the Lenders, the
Issuers, the Agents, each counterparty to a Rate Protection Agreement that is
(or at the time such Rate Protection Agreement is entered into, was) a Lender or
an Affiliate thereof and (in each case), each of their respective successors,
permitted transferees and permitted assigns.
"SECURITIES ACT" is defined in SECTION 6.2.
"U.C.C." means the Uniform Commercial Code, as in effect in the State
of New York, or, as the context may require, in any other jurisdiction the laws
of which may apply to all or a portion of the Collateral in which a security
interest is granted hereunder.
"U.S. AGENT" is defined in the FIRST RECITAL.
"U.S. BORROWER" is defined in the FIRST RECITAL.
"U.S. LENDERS" is defined in the FIRST RECITAL.
SECTION 1.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. DEFINITIONS. Unless otherwise defined herein or
in the Credit Agreement or the context otherwise requires, terms for which
meanings are provided in the U.C.C. are used in this Pledge Agreement, including
its preamble and recitals, with such meanings.
4
<PAGE>
ARTICLE II
PLEDGE
SECTION 2.1. GRANT OF SECURITY INTEREST. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Agents, for their benefit and the ratable benefit of each of the Secured
Parties, and hereby grants to the Agents, for their benefit and the ratable
benefit of the Secured Parties, a continuing security interest in, all of the
following property (the "COLLATERAL"):
(a) all issued and outstanding shares of Capital Stock of each Pledged
Share Issuer identified in ITEM A of ATTACHMENT 1 hereto;
(b) all other Pledged Shares issued from time to time that are
required to be pledged pursuant to the terms of the Credit Agreement;
(c) all other Pledged Property hereafter delivered to the Agents in
connection with this Pledge Agreement;
(d) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property; and
(e) all proceeds of any of the foregoing.
SECTION 2.2. SECURITY FOR OBLIGATIONS. This Pledge Agreement secures
the payment in full in cash of all Obligations now or hereafter existing under
the Credit Agreement, the Notes and each other Loan Document.
SECTION 2.3. DELIVERY OF PLEDGED PROPERTY. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Shares, shall be delivered to and held by or on behalf of the Agents pursuant
hereto, shall be in suitable form for transfer by delivery, and shall be
accompanied by all necessary instruments of transfer or assignment, duly
executed in blank provided, however, that in the case of a non-U.S. Subsidiary
of the Pledgor, unless otherwise required by the terms of the
5
<PAGE>
Credit Agreement, not more than 65% of the Capital Stock of such non-U.S.
Subsidiary shall be pledged by the Pledgor to the Agents.
The Pledgor shall deliver or shall cause to be delivered promptly, but
in any event within five Business Days following issuance, in pledge hereunder
to the Agents, for their benefit and the ratable benefit of each of the other
Secured Parties, any and all additional shares of Capital Stock of a Pledged
Share Issuer issued to the Pledgor and all other Pledged Property issued,
distributed or otherwise delivered to or acquired by the Pledgor in respect of
such Pledged Share Issuer's Pledged Shares.
SECTION 2.4. DIVIDENDS ON PLEDGED SHARES. In the event that any
Dividend or liquidating dividend is to be paid on any Pledged Share at a time
when no Default of the nature set forth in Section 10.1.9 of the Credit
Agreement or Event of Default has occurred and is continuing or would result
therefrom, such Dividend, liquidating dividend or payment may be paid
directly to the Pledgor. If any such Default or Event of Default has
occurred and is continuing, then any such Dividend, liquidating dividend or
payment shall be paid directly to the Agents.
SECTION 2.5. CONTINUING SECURITY INTEREST; TRANSFER OF NOTE. This
Pledge Agreement shall create a continuing security interest in the Collateral
and shall
(a) remain in full force and effect until payment in full in cash of
all Obligations, the termination or expiration of all Letters of Credit,
the termination of all Rate Protection Agreements and the termination of
all Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the Agents
hereunder, to the benefit of the Agents and each other Secured Party.
Without limiting the foregoing CLAUSE (C), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other
Person or entity, and such
6
<PAGE>
other Person or entity shall thereupon become vested with all the rights and
benefits in respect thereof granted to such Lender under any Loan Document
(including this Pledge Agreement) or otherwise, subject, however, to any
contrary provisions in such assignment or transfer, and to the provisions of
Section 12.11 and Article XI of the Credit Agreement. Upon (i) the sale,
transfer or other disposition of Collateral in accordance with the Credit
Agreement or (ii) the payment in full in cash of or cash collateralization in
full of all Obligations, the termination, expiration or cash collateralization
of all Letters of Credit, the termination of all Rate Protection Agreements and
the termination of all Commitments, the security interests granted herein shall
automatically terminate with respect to (x) such Collateral (in the case of
clause (i)) and all rights to such Collateral shall revert to the Pledgor or (y)
all Collateral (in the case of clause (ii)) and all rights to the Collateral
shall revert to the Pledgor. Upon any such termination, the Agents will, at the
Pledgor's sole expense, deliver to the Pledgor, without any representations,
warranties or recourse of any kind whatsoever, all certificates and instruments
representing or evidencing all Pledged Shares, together with all other
Collateral held by the Agents hereunder, and execute and deliver to the Pledgor
such documents as the Pledgor shall reasonably request to evidence such
termination.
SECTION 2.6. SECURITY INTEREST ABSOLUTE. All rights of the Agents
and the security interests granted to the Agents hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional,
irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note, any other Loan Document or any instrument or document relating
thereto;
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against any Borrower, any other Obligor or any other Person
under the
7
<PAGE>
provisions of the Credit Agreement, any Note, any other Loan Document
or otherwise; or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Obligations;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations or any other extension,
compromise or renewal of any Obligation,
(d) any reduction, limitation, impairment or termination of any
Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Obligations or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note, any other Loan Document or any instrument or document relating
thereto;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver
or release of or addition to or consent to departure from any guaranty,
for any of the Obligations; or
(g) any other circumstances which might otherwise constitute a defense
(other than the defense of payment in full of the Obligations) available
to, or a legal or equitable discharge of, any Borrower, any other Obligor,
any surety or any guarantor.
SECTION 2.7. POSTPONEMENT OF SUBROGATION, ETC. The Pledgor will
not exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until
the
8
<PAGE>
prior payment, in full and in cash, of all Obligations, the termination or
expiration of all Letters of Credit, the termination of all Rate Protection
Agreements and the termination of all Commitments. Any amount paid to the
Pledgor on account of any payment made hereunder prior to the payment in full of
all Obligations shall be held in trust for the benefit of the Secured Parties
and each holder of a Note and shall immediately be paid to the Secured Parties
and each holder of a Note and credited and applied against the Obligations,
whether matured or unmatured, in accordance with the terms of the Credit
Agreement; PROVIDED, HOWEVER, that if
(a) the Pledgor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Obligations, and
(b) all Obligations have been paid in full, all Letters of Credit
have been terminated or expired, all Rate Protection Agreements have been
terminated and all Commitments have been permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Pledgor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Pledgor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation
to the Pledgor of an interest in the Obligations resulting from such payment
by the Pledgor. In furtherance of the foregoing, for so long as any
Obligations, Letters of Credit or Commitments remain outstanding or any Rate
Protection Agreement remains in full force and effect, the Pledgor shall
refrain from taking any action or commencing any proceeding against any
Borrower or any other Obligor (or its successors or assigns, whether in
connection with a bankruptcy proceeding or otherwise) to recover any amounts
in respect of payments made under this Pledge Agreement to any Secured Party
or any holder of a Note.
SECTION 2.8. JUDGMENT. The Pledgor hereby agrees that, with respect
to the Canadian Facility:
(a) if, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due in
9
<PAGE>
Canadian Dollars hereunder into another currency, then the rate of
exchange used shall be that at which the Agents, in accordance with
normal banking procedures could purchase Canadian Dollars with such
other currency on the Business Day preceding that on which final
judgment is given; and
(b) the obligation of the Pledgor in respect of any sum due from it to
any Secured Party or any holder of a Canadian Note hereunder or any other
Loan Document shall, notwithstanding any judgment in a currency other than
Canadian Dollars, be discharged only to the extent that on the Business
Day following receipt by the Secured Party or holder, as the case may be,
of any sum adjudged to be so due in a currency other than Canadian Dollars
such Secured Party or holder, as the case may be, may, in accordance with
normal banking procedures, purchase Canadian Dollars with such other
currency; in the event that the Canadian Dollars so purchased are less
than the amount originally due to any Secured Party or holder of a
Canadian Note in Canadian Dollars, the Pledgor, as a separate obligation
and notwithstanding any such judgment, hereby indemnifies and holds
harmless such Secured Party and holder against such loss, and if the
Canadian Dollars so purchased exceed the sum originally due to such
Secured Party or holder in Canadian Dollars, such Secured Party or holder,
as the case may be, shall remit to the Guarantor such excess.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES, ETC. The Pledgor
represents and warrants unto each Secured Party, as at the date of each pledge
and delivery hereunder (including each pledge and delivery of Pledged Shares) by
the Pledgor to the Agents of any Collateral, as set forth in this ARTICLE III.
SECTION 3.1.1. OWNERSHIP, NO LIENS, ETC. The Pledgor is the legal
and beneficial owner of, and has good and marketable title to (and has full
right and authority to
10
<PAGE>
pledge and assign) such Collateral, free and clear of all liens, security
interests, options, or other charges or encumbrances, except any lien or
security interest granted pursuant hereto in favor of the Agents.
SECTION 3.1.2. VALID SECURITY INTEREST. The execution and delivery
of this Pledge Agreement, together with the delivery by the Pledgor of such
Collateral to the Agents, is effective to create a valid, perfected, first
priority security interest in such Collateral and all proceeds thereof, securing
the Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
SECTION 3.1.3. AS TO PLEDGED SHARES. In the case of any Pledged
Shares constituting such Collateral, all of such Pledged Shares are duly
authorized and validly issued, fully paid, and non-assessable, and constitute
all of the issued and outstanding shares of Capital Stock of each Pledged Share
Issuer (except in the case of Pledged Shares of non-U.S. Subsidiaries, in which
case, unless otherwise required pursuant to the terms of the Credit Agreement,
65% of the stock has been so pledged). The Pledgor has no Subsidiaries other
than the Pledged Share Issuers, except as set forth in ITEM B of ATTACHMENT 1.
SECTION 3.1.4. AUTHORIZATION, APPROVAL, ETC. No authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority, regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this
Pledge Agreement by the Pledgor, or
(b) for the exercise by the Agents of the voting or other rights
provided for in this Pledge Agreement, or, except with respect to any
Pledged Shares, as may be required in connection with a disposition of
such Pledged Shares by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
11
<PAGE>
SECTION 3.1.5. COMPLIANCE WITH LAWS. The Pledgor is in compliance
with the requirements of all applicable laws (including the provisions of the
Fair Labor Standards Act), rules, regulations and orders of every governmental
authority, the non-compliance with which might would reasonably be expected to
have a Material Adverse Effect or which might materially adversely affect the
aggregate value of the Collateral under all Pledge Agreements or the aggregate
worth of the Collateral under all Pledge Agreements as collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. CERTAIN COVENANTS. The Pledgor covenants and agrees
that, so long as any portion of the Obligations shall remain unpaid, any Letters
of Credit shall be outstanding, any Rate Protection Agreement shall remain in
full force and effect or any Secured Party shall have any outstanding
Commitment, the Pledgor will, unless the Required Lenders shall otherwise
consent in writing, perform, comply with and be bound by the obligations set
forth in this ARTICLE IV.
SECTION 4.1.1. PROTECT COLLATERAL; FURTHER ASSURANCES, ETC. The
Pledgor will not sell, assign, transfer, pledge, or encumber in any other
manner the Collateral (except in favor of the Agents hereunder). The Pledgor
will warrant and defend the right and title herein granted unto the Agents in
and to the Collateral (and all right, title, and interest represented by the
Collateral) against the claims and demands of all Persons whomsoever. The
Pledgor agrees that at any time, and from time to time, at the expense of the
Pledgor, the Pledgor will promptly execute and deliver all further
instruments, and take all further action, that may be necessary or desirable,
or that the Agents may reasonably request, in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable
the Agents to exercise and enforce their rights and remedies hereunder with
respect to any Collateral.
12
<PAGE>
SECTION 4.1.2. STOCK POWERS, ETC. The Pledgor agrees that all
Pledged Shares (and all other shares of Capital Stock constituting
Collateral) delivered by the Pledgor pursuant to this Pledge Agreement will
be accompanied by duly executed, undated blank stock powers, or other
equivalent instruments of transfer acceptable to the Agents. The Pledgor
will, from time to time upon the request of the Agents, promptly deliver to
the Agents such stock powers, instruments, and similar documents,
satisfactory in form and substance to the Agents, with respect to the
Collateral as the Agents may reasonably request and will, from time to time
upon the request of the Agents after the occurrence of any Event of Default,
promptly transfer any Pledged Shares or other shares of common stock
constituting Collateral into the name of any nominee designated by the Agents.
SECTION 4.1.3. CONTINUOUS PLEDGE. Subject to SECTION 2.4, the
Pledgor will, at all times, keep pledged to the Agents pursuant hereto all
Pledged Shares and all other shares of Capital Stock constituting Collateral,
all Dividends and Distributions with respect thereto, and all other Collateral
and other securities, instruments, proceeds, and rights from time to time
received by or distributable to the Pledgor in respect of any Collateral;
PROVIDED, HOWEVER, that, in the event of any sale of Pledged Shares permitted by
Section 9.2.11 of the Credit Agreement, such Pledged Shares shall be deemed
automatically released from the pledge and security interest hereunder without
any consent or other action of the Agents or any other Person and the Agents
will, at the request of the Pledgor and at the Pledgor's sole cost and expense,
execute and deliver such documents (without recourse and without representation
or warranty) as the Pledgor may reasonably request to evidence such release.
The Pledgor will not permit any Pledged Share Issuer to issue any Capital Stock
which shall not have been immediately duly pledged hereunder on a first priority
perfected basis PROVIDED, that, subject to Section 9.1.7 of the Credit
Agreement, not more than 65% of the Capital Stock of each Pledged Share Issuer
that is a non-U.S. Subsidiary shall be so pledged.
SECTION 4.1.4. VOTING RIGHTS; DIVIDENDS, ETC. The Pledgor agrees:
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(a) after any Default of the nature referred to in Section 10.1.9 of
the Credit Agreement or any Event of Default shall have occurred and be
continuing, promptly upon receipt of notice thereof by the Pledgor and
without any request therefor by the Agents, to deliver (properly endorsed
where required hereby or requested by the Agents) to the Agents all
Dividends, Distributions, all interest, all principal, all other cash
payments, and all proceeds of the Collateral, all of which shall be held
by the Agents as additional Collateral for use in accordance with
SECTION 6.4; and
(b) after any Event of Default shall have occurred and be continuing
and the Agents have notified the Pledgor of the Agents' intention to
exercise their voting power under CLAUSE (B) of this SECTION 4.1.4
(i) the Agents may exercise (to the exclusion of the Pledgor) the
voting power and all other incidental rights of ownership with
respect to any Pledged Shares or other shares of Capital Stock
constituting Collateral and the Pledgor hereby grants the Agents an
irrevocable proxy, exercisable under such circumstances, to vote
the Pledged Shares and such other Collateral; and
(ii) promptly to deliver to the Agents such additional proxies
and other documents as may be necessary to allow the Agents to
exercise such voting power.
All Dividends, Distributions, cash payments, and proceeds at any time and from
time to time held by the Pledgor but which the Pledgor is then obligated to
deliver to the Agents, shall, until delivery to the Agents, be held by the
Pledgor separate and apart from its other property in trust for the Agents. The
Agents agrees that unless an Event of Default shall have occurred and be
continuing and the Agents shall have given the notice referred to in CLAUSE (B)
of this SECTION 4.1.4, the Pledgor shall have the exclusive voting power with
respect to any shares of Capital Stock (including any of the Pledged Shares)
constituting Collateral and the Agents shall, upon the written request of the
Pledgor, promptly deliver such proxies and other documents, if any, as shall be
reasonably requested by the Pledgor which are
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necessary to allow the Pledgor to exercise voting power with respect to any such
share of Capital Stock (including any of the Pledged Shares) constituting
Collateral; PROVIDED, HOWEVER, that no vote shall be cast, or consent, waiver,
or ratification given, or action taken by the Pledgor that would impair any
Collateral or be inconsistent with or violate any provision of the Credit
Agreement or any other Loan Document (including this Pledge Agreement).
ARTICLE V
THE AGENTS
SECTION 5.1. AGENTS APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby
irrevocably appoints each Agent the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time in the such Agent's discretion, to take any
action and to execute any instrument which such Agent may deem necessary or
advisable to accomplish the purposes of this Pledge Agreement, including after
the occurrence and during the continuance of a Default of the nature set forth
in Section 10.1.9 of the Credit Agreement or an Event of Default:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with CLAUSE (A) above; and
(c) to file any claims or take any action or institute any proceedings
which such Agent may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of such Agent with
respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
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SECTION 5.2. AGENTS MAY PERFORM. If the Pledgor fails to perform any
agreement contained herein, the Agents may themselves perform, or cause
performance of, such agreement, and the expenses of the Agents incurred in
connection therewith shall be payable by the Pledgor pursuant to SECTION 6.5.
SECTION 5.3. AGENTS HAVE NO DUTY. The powers conferred on the Agents
hereunder are solely to protect their interests (on behalf of the Secured
Parties) in the Collateral and shall not impose any duty on them to exercise any
such powers. Except for reasonable care of any Collateral in their possession
and the accounting for moneys actually received by them hereunder, the Agents
shall have no duty as to any Collateral or responsibility for
(a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not the Agents have or are deemed to have knowledge
of such matters, or
(b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. REASONABLE CARE. The Agents are required to exercise
reasonable care in the custody and preservation of any of the Collateral in
their possession; PROVIDED, HOWEVER, the Agents shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if they take such action for that purpose as the Pledgor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Agents to comply with
any such request at any time shall not in itself be deemed a failure to exercise
reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. CERTAIN REMEDIES. If any Event of Default shall have
occurred and be continuing:
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(a) The Agents may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to
them, all the rights and remedies of a secured party on default under the
U.C.C. (whether or not the U.C.C. applies to the affected Collateral) and
also may, without notice except as specified below, sell the Collateral or
any part thereof in one or more parcels at public or private sale, at any
of the Agents' offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Agents may deem commercially
reasonable. The Agents or any of the other Secured Parties may, to the
extent permitted by Section 9-504 of the U.C.C., be the purchaser of any
of the Collateral so sold and the obligations of the Pledgor of such
Collateral to such Secured Party may be applied as a credit against the
purchase price. The Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten days' prior notice to the Pledgor
of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The
Agents shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. The Agents may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. Upon any such sale the Agents
shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser (including the Agents or
any of the other Secured Parties) at any such sale shall hold the
Collateral so sold absolutely free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgor, and the
Pledgor hereby specifically waives, to the extent it may lawfully do so,
all rights of redemption, stay or appraisal which it has or may have under
any rule of law or statute now existing or hereafter adopted.
(b) The Agents may
(i) transfer all or any part of the Collateral into the name of
the Agents or their
17
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nominee, with or without disclosing that such Collateral is subject
to the lien and security interest hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Agents of any amount due or to become due
thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or
not longer than the original period) any obligations of any nature
of any party with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2. SECURITIES LAWS. If the Agents shall determine to
exercise their right to sell all or any of the Collateral pursuant to SECTION
6.1, the Pledgor agrees that, upon request of the Agents, the Pledgor will, at
its own expense:
(a) execute and deliver, and cause each issuer of the Collateral
contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be
done all such other acts and things, as may be necessary or, in the
opinion of the Agents, advisable to register such Collateral under the
provisions of the Securities Act of 1933, as from time to time amended
(the "SECURITIES ACT"), and to use its best efforts to cause the
registration statement relating thereto to
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become effective and to remain effective for such period as prospectuses
are required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectus which, in the opinion of
the Agents, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto;
(b) use its best efforts to qualify the Collateral under the state
securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by the Agents;
(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act; and
(d) do or use its best efforts to cause to be done all such other acts
and things as may be necessary to make such sale of the Collateral or any
part thereof valid and binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Agents or the Secured Parties by reason of
the failure by the Pledgor to perform any of the covenants contained in this
Section and, consequently, agrees that, if the Pledgor shall fail to perform any
of such covenants, it shall pay, as liquidated damages and not as a penalty, an
amount equal to the value (as determined by the Agents) of the Collateral on the
date the Agents shall demand compliance with this Section and the full amount of
any such payments shall be applied in accordance with SECTION 6.4.
SECTION 6.3. COMPLIANCE WITH RESTRICTIONS. The Pledgor agrees that
in any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Agents are hereby authorized to comply with any
limitation or restriction in connection with such sale as they may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance
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with such procedures as may restrict the number of prospective bidders and
purchasers, require that such prospective bidders and purchasers have certain
qualifications, and restrict such prospective bidders and purchasers to persons
who will represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or resale of such
Collateral), or in order to obtain any required approval of the sale or of the
purchaser by any governmental regulatory authority or official, and the Pledgor
further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall the Agents be liable nor accountable to the Pledgor for any discount
allowed by the reason of the fact that such Collateral is sold in compliance
with any such limitation or restriction.
SECTION 6.4. APPLICATION OF PROCEEDS. If any Event of Default shall
have occurred and be continuing, all cash proceeds received by the Agents in
respect of any sale of, collection from, or other realization upon, all or any
part of the Collateral may, in the discretion of the Agents, be held by the
Agents as additional collateral security for, or at any time thereafter be
applied (after payment of any amounts payable to the Agents pursuant to SECTION
6.5) in whole or in part by the Agents against, all or any part of the
Obligations.
Any surplus of such cash or cash proceeds held by the Agents and
remaining after payment in full in cash of or cash collateralization of all
the Obligations, the termination, expiration or cash collateralization of all
Letters of Credit, the termination of all Rate Protection Agreements and the
termination of all Commitments, shall be paid over to the Pledgor or to
whomsoever may be lawfully entitled to receive such surplus.
SECTION 6.5. INDEMNITY AND EXPENSES. The Pledgor hereby indemnifies
and holds harmless the Agents from and against any and all claims, losses, and
liabilities arising out of or resulting from this Pledge Agreement (including
enforcement of this Pledge Agreement), except claims, losses, or liabilities
resulting from the Agents' gross negligence or wilful misconduct. Upon demand,
the Pledgor will pay to the Agents the amount of any and all reasonable
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expenses, including the reasonable fees and disbursements of their counsel and
of any experts and agents, which the Agents (in their capacity as Agents and not
as Lenders) may incur in connection with:
(a) this Pledge Agreement, the Credit Agreement, each other Loan
Document or any instrument or document relating thereto;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Agents
hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. LOAN DOCUMENT. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Pledge Agreement nor consent to any departure by the Pledgor
herefrom shall in any event be effective unless the same shall be in writing and
signed by the Agents (on behalf of the Lenders or the Required Lenders, as the
case may be), and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it is given.
SECTION 7.3. PROTECTION OF COLLATERAL. The Agents may from time to
time, at their option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the
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continuance of an Event of Default) and the Agents may from time to time take
any other action which the Agents reasonably deem necessary for the maintenance,
preservation or protection of any of the Collateral or of their security
interest therein, it being understood and agreed that in each such case all
costs and expenses incurred by the Agents in connection therewith shall be
payable by the Pledgor pursuant to SECTION 6.5.
SECTION 7.4. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing or by facsimile
and, if to the Pledgor, mailed or telecopied or delivered to it in care of
the U.S. Borrower, and, if to the Agents, mailed or telecopied or delivered
to them, in each case at the addresses or facsimile numbers specified in the
Credit Agreement, or, with respect to the Pledgor or the Agents, at such
other address or facsimile number as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this Section. All such notices and other communications, when mailed and
properly addressed with postage prepaid or if properly addressed and sent by
pre-paid courier service, shall be deemed given when received; any such
notice or communication, if transmitted by telecopier, shall be deemed given
when transmitted and electronically confirmed.
SECTION 7.5. SECTION CAPTIONS. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.6. SEVERABILITY. Wherever possible each provision of
this Pledge Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Pledge Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Pledge Agreement.
SECTION 7.7. COUNTERPARTS. This Pledge Agreement may be executed
by the parties hereto in several counterparts, each of which shall be deemed
to be an
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original and all of which shall constitute together but one and the same
agreement.
SECTION 7.8. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS PLEDGE
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS
5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK),
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE
UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER
HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT
THERETO.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
PLI HOLDINGS INC.
By /s/ William B. Towne
----------------------------
Name: William B. Towne
Title: Vice President
THE BANK OF NOVA SCOTIA,
as Agent
By /s/ Gary McDonough
----------------------------
Name:
Title:
24
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ATTACHMENT 1
to Parent
Pledge Agreement
Item A. PLEDGED SHARES
--------------
None.
COMMON STOCK
---------------------------------------
Authorized Outstanding % of Shares
Pledged Share Issuer Shares Shares Pledged
---------- ----------- -----------
LEINER HEALTH PRODUCTS INC. 1,000 1,000 100%
Item B. ADDITIONAL SUBSIDIARIES
-----------------------
None.
25
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Exhibit 4.11
[EXECUTION COPY]
CANADIAN HOLDINGS PLEDGE AGREEMENT
This CANADIAN HOLDINGS PLEDGE AGREEMENT (as amended, supplemented,
amended and restated or otherwise modified from time to time, this "PLEDGE
AGREEMENT"), dated as of June 30, 1997, is made by VH HOLDINGS INC., a Manitoba
corporation (the "PLEDGOR"), in favor of THE BANK OF NOVA SCOTIA ("SCOTIABANK"),
as agent (in such capacity, the "CANADIAN AGENT") for each of the Secured
Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented, amended and restated or otherwise modified from time
to time, the "CREDIT AGREEMENT"), among Leiner Health Products Group Inc., a
Delaware corporation ("LHPG" or the "U.S. BORROWER" (prior to the Assumption)),
Vita Health Company (1985) Ltd., a Manitoba corporation (the "CANADIAN
BORROWER", and together with the U.S. Borrower, the "BORROWERS"), the various
financial institutions as are or may become parties thereto which extend a
Commitment under the U.S. Facility (collectively, the "U.S. LENDERS"), the
various financial institutions as are or may become parties thereto which extend
a Commitment under the Canadian Facility (collectively, the "CANADIAN LENDERS",
and together with the U.S. Lenders, the "LENDERS"), the Canadian Agent and
Scotiabank, as agent for the U.S. Lenders under the U.S. Facility (in such
capacity, the "U.S. AGENT", and together with the U.S. Agent, collectively, the
"AGENTS"), the Lenders and the Issuers have extended Commitments to make Credit
Extensions to the Borrowers;
WHEREAS, as contemplated by the Credit Agreement, immediately
following the making of the initial Credit Extensions, Leiner Health Products
Inc., a Delaware corporation ("LEINER") and LHPG have delivered the Assumption
Agreement, pursuant to which Leiner has assumed (the "ASSUMPTION") the rights
and obligations of LHPG as (and has become) the "U.S. Borrower" under the Credit
Agreement;
<PAGE>
WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit Extension) and the execution and
delivery of the Assumption Agreement under the Credit Agreement, the Pledgor is
required to execute and deliver this Pledge Agreement; and
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, it is in the best interests of the Pledgor to execute this
Pledge Agreement inasmuch as the Pledgor will derive substantial direct and
indirect benefits from the Credit Extensions made from time to time to the
Borrowers by the Lenders and the Issuer pursuant to the Credit Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuers to make Credit Extensions (including the initial Credit
Extensions) to the Borrowers pursuant to the Credit Agreement, and to induce
Secured Parties to enter into Rate Protection Agreements, if any, the Pledgor
agrees, for the benefit of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"AGENTS" is defined in the FIRST RECITAL.
"BORROWERS" is defined in the FIRST RECITAL.
"CANADIAN AGENT" is defined in the PREAMBLE.
"CANADIAN BORROWER" is defined in the FIRST RECITAL.
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"CANADIAN LENDERS" is defined in the FIRST RECITAL.
"COLLATERAL" is defined in SECTION 2.1.
"CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"DISTRIBUTIONS" means all stock dividends, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
Capital Stock constituting Collateral, but shall not include Dividends.
"DIVIDENDS" means cash dividends and cash distributions with respect
to any Pledged Shares or other Pledged Property.
"LENDERS" are defined in the FIRST RECITAL.
"PLEDGE AGREEMENT" is defined in the PREAMBLE.
"PLEDGED NOTE ISSUER" means each Person identified in ITEM A of
ATTACHMENT 1 hereto (as supplemented) as the issuer of the Pledged Note
identified opposite the name of such Person.
"PLEDGED NOTES" means all promissory notes of any Pledged Note Issuer
in the form or substantially the form of EXHIBIT A hereto (unless otherwise
consented to by the Canadian Agent, which consent will not be unreasonably
withheld) which are delivered or required to be delivered from time to time by
the Pledgor to the Canadian Agent as Pledged Property hereunder, as such
promissory notes, in accordance with SECTION 4.5, are amended, modified or
supplemented from time to time, together with any promissory note of any Pledged
Note Issuer taken in extension or renewal thereof or substitution therefor.
"PLEDGED PROPERTY" means all Pledged Shares, all Pledged Notes and all
other pledged shares of Capital Stock
3
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or promissory notes, all other securities, all assignments of any amounts due
or to become due, all other instruments which may from time to time hereafter
be delivered by the Pledgor to the Canadian Agent for the purpose of pledge
under this Pledge Agreement or any other Loan Document, and all proceeds of
any of the foregoing.
"PLEDGED SHARE ISSUER" means each Person identified in ITEM B of
ATTACHMENT 1 hereto as the issuer of the Pledged Shares identified opposite the
name of such Person, and each Person whose Capital Stock is required to be
pledged hereunder and under the Credit Agreement from time to time.
"PLEDGED SHARES" means all shares of Capital Stock of any Pledged
Share Issuer which are delivered or required to be delivered from time to time
by the Pledgor to the Canadian Agent as Pledged Property hereunder.
"PLEDGOR" is defined in the PREAMBLE.
"SCOTIABANK" is defined in the PREAMBLE.
"SECURED OBLIGATIONS" is defined in SECTION 2.2.
"SECURED PARTY" means, as the context may require, the Canadian
Lenders, the Canadian Issuers, the Canadian Agent, each counterparty to a Rate
Protection Agreement in respect of the Canadian Facility that is (or at the time
such Rate Protection Agreement is entered into, was) a Canadian Lender or an
Affiliate thereof and (in each case), each of their respective successors,
permitted transferees and permitted assigns.
"SECURITIES ACT" is defined in CLAUSE (A) of SECTION 6.2.
"U.C.C." means the Uniform Commercial Code, as in effect in the State
of New York, or, as the context may require, in any other jurisdiction the laws
of which may apply to all or a portion of the Collateral in which a security
interest is granted hereunder.
"U.S. AGENT" is defined in the FIRST RECITAL.
4
<PAGE>
"U.S. BORROWER" is defined in the FIRST RECITAL.
"U.S. LENDERS" is defined in the FIRST RECITAL.
SECTION 1.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. DEFINITIONS. Unless otherwise defined herein or
in the Credit Agreement or the context otherwise requires, terms for which
meanings are provided in the U.C.C. are used in this Pledge Agreement, including
its preamble and recitals, with such meanings.
ARTICLE II
PLEDGE
SECTION 2.1. GRANT OF SECURITY INTEREST. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Canadian Agent, for its benefit and the ratable benefit of each of the Secured
Parties, and hereby grants to the Canadian Agent, for its benefit and the
ratable benefit of the Secured Parties, a continuing security interest in, all
of the following property (the "COLLATERAL"):
(a) all promissory notes of each Pledged Note Issuer identified in
ITEM A of ATTACHMENT 1 hereto;
(b) all other Pledged Notes issued from time to time that are required
to be pledged pursuant to the terms of the Credit Agreement;
(c) all issued and outstanding shares of Capital Stock of each Pledged
Share Issuer identified in ITEM B of ATTACHMENT 1 hereto;
(d) all other Pledged Shares issued from time to time that are
required to be pledged pursuant to the terms of the Credit Agreement;
5
<PAGE>
(e) all other Pledged Property hereafter delivered to the Canadian
Agent in connection with this Pledge Agreement;
(f) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing.
SECTION 2.2. SECURITY FOR OBLIGATIONS. This Pledge Agreement secures
the payment in full in cash of all Obligations of the Pledgor now or hereafter
existing (all such Obligations being the "SECURED OBLIGATIONS").
SECTION 2.3. DELIVERY OF PLEDGED PROPERTY. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Shares and all Pledged Notes, shall be delivered to and held by or on behalf of
(and, in the case of the Pledged Notes, endorsed to the order of) the Canadian
Agent pursuant hereto, shall be in suitable form for transfer by delivery, and
shall be accompanied by all necessary instruments of transfer or assignment,
duly executed in blank.
The Pledgor shall deliver or shall cause to be delivered promptly, but
in any event within five Business Days following issuance, in pledge hereunder
to the Canadian Agent, for its benefit and the ratable benefit of each of the
other Secured Parties, any and all additional shares of Capital Stock of a
Pledged Share Issuer issued to the Pledgor and all other Pledged Property
issued, distributed or otherwise delivered to or acquired by the Pledgor in
respect of such Pledged Share Issuer's Pledged Shares.
SECTION 2.4. DIVIDENDS ON PLEDGED SHARES AND PAYMENTS ON PLEDGED
NOTES. In the event that any Dividend or liquidating dividend is to be paid on
any Pledged Share or any payment of principal or interest is to be made on any
Pledged Note at a time when no Default of the nature set forth in Section 10.1.9
of the Credit Agreement or Event of Default has occurred and is continuing or
would result therefrom, such Dividend, liquidating dividend or payment may be
paid directly to the Pledgor. If any such Default or Event of Default has
occurred and is continuing, then any
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such Dividend, liquidating dividend or payment shall be paid directly to the
Canadian Agent.
SECTION 2.5. CONTINUING SECURITY INTEREST; TRANSFER OF NOTE. This
Pledge Agreement shall create a continuing security interest in the Collateral
and shall
(a) remain in full force and effect until payment in full in cash of
or cash collateralization in full of all Secured Obligations, the
termination, expiration or cash collateralization of all Canadian Letters
of Credit, the termination of all Rate Protection Agreements in respect of
the Canadian Facility and the termination of all Canadian Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the Canadian Agent
hereunder, to the benefit of the Canadian Agent and each other Secured
Party.
Without limiting the foregoing clause (c), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Pledge Agreement) or otherwise, subject, however,
to any contrary provisions in such assignment or transfer, and to the provisions
of Section 12.11 and Article XI of the Credit Agreement. Upon (i) the sale,
transfer or other disposition of Collateral in accordance with the Credit
Agreement or (ii) the payment in full in cash of all Secured Obligations, the
termination or expiration of all Canadian Letters of Credit, the termination of
all Rate Protection Agreements in respect of the Canadian Facility and the
termination of all Canadian Commitments, the security interest granted herein
shall automatically terminate with respect to (x) such Collateral (in the case
of clause (i)) and all rights to such Collateral shall revert to the Pledgor or
(y) all Collateral (in the case of clause (ii)) and all rights to such
Collateral shall revert to the Pledgor. Upon any such termination, the Canadian
Agent will, at the Pledgor's sole expense, deliver to the Pledgor, without any
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representations, warranties or recourse of any kind whatsoever, all certificates
and instruments representing or evidencing all Pledged Shares and all Pledged
Notes, together with all other Collateral held by the Canadian Agent hereunder,
and execute and deliver to the Pledgor such documents as the Pledgor shall
reasonably request to evidence such termination.
SECTION 2.6. SECURITY INTEREST ABSOLUTE. All rights of the Canadian
Agent and the security interests granted to the Canadian Agent hereunder, and
all obligations of the Pledgor hereunder, shall be absolute and unconditional,
irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note, any other Loan Document or any instrument or document relating
thereto;
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against any Borrower, any other Obligor or any other Person
under the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise; or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligation;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation;
(d) any reduction, limitation, impairment or termination of any
Secured Obligation for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
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unenforceability of, or any other event or occurrence affecting, any
Secured Obligation or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note, any other Loan Document or any instrument or document relating
thereto;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Secured Obligations; or
(g) any other circumstances which might otherwise constitute a defense
(other than the defense of payment in full of the Secured Obligations)
available to, or a legal or equitable discharge of, either Borrower, any
other Obligor, any surety or any guarantor.
SECTION 2.7. POSTPONEMENT OF SUBROGATION, ETC. The Pledgor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Canadian Letters of Credit, the termination of all Rate
Protection Agreements in respect of the Canadian Facility and the termination of
all Canadian Commitments. Any amount paid to the Pledgor on account of any
payment made hereunder prior to the payment in full of all Secured Obligations
shall be held in trust for the benefit of the Secured Parties and each holder of
a Note and shall immediately be paid to the Secured Parties and each holder of a
Note and credited and applied against the Secured Obligations, whether matured
or unmatured, in accordance with the terms of the Credit Agreement; PROVIDED,
HOWEVER, that if
(a) the Pledgor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
(b) all Secured Obligations have been paid in full, all Canadian
Letters of Credit have been
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terminated or expired, all Rate Protection Agreements in respect of the
Canadian Facility have been terminated and all Canadian Commitments have
been permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Pledgor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Pledgor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Pledgor of an interest in the Secured Obligations resulting from such
payment by the Pledgor. In furtherance of the foregoing, for so long as any
Secured Obligations, Canadian Letters of Credit or Canadian Commitments remain
outstanding or any Rate Protection Agreement in respect of the Canadian Facility
remains in full force and effect, the Pledgor shall refrain from taking any
action or commencing any proceeding against the Canadian Borrower or any other
Obligor (or its successors or assigns, whether in connection with a bankruptcy
proceeding or otherwise) to recover any amounts in respect of payments made
under this Pledge Agreement to any Secured Party or any holder of a Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES, ETC. The Pledgor
represents and warrants unto each Secured Party, as at the date of each pledge
and delivery hereunder (including each pledge and delivery of Pledged Shares and
each pledge and delivery of a Pledged Note) by the Pledgor to the Canadian Agent
of any Collateral, as set forth in this Article III.
SECTION 3.1.1. OWNERSHIP, NO LIENS, ETC. The Pledgor is the legal
and beneficial owner of, and has good and marketable title to (and has full
right and authority to pledge and assign) such Collateral, free and clear of all
liens, security interests, options, or other charges or encumbrances, except any
lien or security interest granted pursuant hereto in favor of the Canadian
Agent.
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SECTION 3.1.2. VALID SECURITY INTEREST. The execution and delivery
of this Pledge Agreement, together with the delivery by the Pledgor of such
Collateral to the Canadian Agent is effective to create a valid, perfected,
first priority security interest in such Collateral and all proceeds thereof,
securing the Secured Obligations. No filing or other action will be necessary
to perfect or protect such security interest.
SECTION 3.1.3. AS TO PLEDGED SHARES. In the case of any Pledged
Shares constituting such Collateral, all of such Pledged Shares are duly
authorized and validly issued, fully paid, and non-assessable, and constitute
all of the issued and outstanding shares of Capital Stock of each Pledged Share
Issuer set forth in ITEM B of ATTACHMENT 1 hereto. The Pledgor has no
Subsidiaries other than the Pledged Share Issuers, except as set forth in ITEM C
of ATTACHMENT 1.
SECTION 3.1.4. AS TO PLEDGED NOTES. In the case of each Pledged
Note, all of such Pledged Notes have been duly authorized, executed, endorsed,
issued and delivered, and are the legal, valid and binding obligation of the
issuers thereof, and are not in default.
SECTION 3.1.5. AUTHORIZATION, APPROVAL, ETC. No authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority, regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this
Pledge Agreement by the Pledgor, or
(b) for the exercise by the Canadian Agent of the voting or other
rights provided for in this Pledge Agreement, or, except with respect to
any Pledged Shares, as may be required in connection with a disposition of
such Pledged Shares by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
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SECTION 3.1.6. COMPLIANCE WITH LAWS. The Pledgor is in compliance
with the requirements of all applicable laws (including the provisions of the
Fair Labor Standards Act), rules, regulations and orders of every governmental
authority, the non-compliance with which would reasonably be expected to have a
Material Adverse Effect or which might materially adversely affect the aggregate
value of the Collateral under all Pledge Agreements or the aggregate worth of
the Collateral under all Pledge Agreements as collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. CERTAIN COVENANTS. The Pledgor covenants and agrees
that, so long as any portion of the Secured Obligations shall remain unpaid, any
Letters of Credit shall be outstanding, any Rate Protection Agreement shall
remain in full force and effect or any Secured Party shall have any outstanding
Commitment, the Pledgor will, unless the Required Lenders shall otherwise
consent in writing, perform, comply with and be bound by the obligations set
forth in this Article.
SECTION 4.1.1. PROTECT COLLATERAL; FURTHER ASSURANCES, ETC. The
Pledgor will not sell, assign, transfer, pledge, or encumber in any other manner
the Collateral (except in favor of the Canadian Agent hereunder). The Pledgor
will warrant and defend the right and title herein granted unto the Canadian
Agent in and to the Collateral (and all right, title, and interest represented
by the Collateral) against the claims and demands of all Persons whomsoever.
The Pledgor agrees that at any time, and from time to time, at the expense of
the Pledgor, the Pledgor will promptly execute and deliver all further
instruments, and take all further action, that may be necessary or desirable, or
that the Canadian Agent may reasonably request, in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable the
Canadian Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.
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SECTION 4.1.2. STOCK POWERS, ETC. The Pledgor agrees that all
Pledged Shares (and all other shares of Capital Stock constituting Collateral)
delivered by the Pledgor pursuant to this Pledge Agreement will be accompanied
by duly executed, undated blank stock powers, or other equivalent instruments of
transfer acceptable to the Canadian Agent. The Pledgor will, from time to time
upon the request of the Canadian Agent, promptly deliver to the Canadian Agent
such stock powers, instruments, and similar documents, satisfactory in form and
substance to the Canadian Agent, with respect to the Collateral as the Canadian
Agent may reasonably request and will, from time to time upon the request of the
Canadian Agent after the occurrence of any Event of Default, promptly transfer
any Pledged Shares or other shares of common stock constituting Collateral into
the name of any nominee designated by the Canadian Agent.
SECTION 4.1.3. CONTINUOUS PLEDGE. Subject to SECTION 2.4, the
Pledgor will, at all times, keep pledged to the Canadian Agent pursuant hereto
all Pledged Shares and all other shares of Capital Stock constituting
Collateral, all Dividends and Distributions with respect thereto, all Pledged
Notes, all interest, principal and other proceeds received by the Canadian Agent
with respect to the Pledged Notes, and all other Collateral and other
securities, instruments, proceeds, and rights from time to time received by or
distributable to the Pledgor in respect of any Collateral; PROVIDED, HOWEVER,
that, in the event of any sale of Pledged Shares permitted by Section 9.2.11 of
the Credit Agreement, such Pledged Shares shall be deemed automatically released
from the pledge and security interest hereunder without any consent or other
action of the Canadian Agent or any other Person and the Canadian Agent will, at
the request of the Pledgor and at the Pledgor's sole cost and expense, execute
and deliver such documents (without recourse and without representation or
warranty) as the Pledgor may reasonably request to evidence such release. The
Pledgor will not permit any Pledged Share Issuer to issue any Capital Stock
which shall not have been immediately duly pledged hereunder on a first priority
perfected basis.
SECTION 4.1.4. VOTING RIGHTS; DIVIDENDS, ETC. The Pledgor agrees:
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(a) after any Default of the nature referred to in Section 10.1.9 of
the Credit Agreement or any Event of Default shall have occurred and be
continuing, promptly upon receipt of notice thereof by the Pledgor and
without any request therefor by the Canadian Agent, to deliver (properly
endorsed where required hereby or requested by the Canadian Agent) to the
Canadian Agent all Dividends, Distributions, all interest, all principal,
all other cash payments, and all proceeds of the Collateral, all of which
shall be held by the Canadian Agent as additional Collateral for use in
accordance with SECTION 6.4; and
(b) after any Event of Default shall have occurred and be continuing
and the Canadian Agent has notified the Pledgor of the Canadian Agent's
intention to exercise its voting power under this CLAUSE (B) of this
SECTION 4.1.4
(i) the Canadian Agent may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of ownership
with respect to any Pledged Shares or other shares of Capital Stock
constituting Collateral and the Pledgor hereby grants the Canadian
Agent an irrevocable proxy, exercisable under such circumstances, to
vote the Pledged Shares and such other Collateral; and
(ii) promptly to deliver to the Canadian Agent such additional
proxies and other documents as may be necessary to allow the Canadian
Agent to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time held by the Pledgor but which the
Pledgor is then obligated to deliver to the Canadian Agent, shall, until
delivery to the Canadian Agent, be held by the Pledgor separate and apart from
its other property in trust for the Canadian Agent. The Canadian Agent agrees
that unless an Event of Default shall have occurred and be continuing and the
Canadian Agent shall have given the notice referred to in CLAUSE (B) of this
SECTION 4.1.4, the Pledgor shall have the exclusive voting power with respect to
any shares of
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Capital Stock (including any of the Pledged Shares) constituting Collateral and
the Canadian Agent shall, upon the written request of the Pledgor, promptly
deliver such proxies and other documents, if any, as shall be reasonably
requested by the Pledgor which are necessary to allow the Pledgor to exercise
voting power with respect to any such share of Capital Stock (including any of
the Pledged Shares) constituting Collateral; PROVIDED, HOWEVER, that no vote
shall be cast, or consent, waiver, or ratification given, or action taken by the
Pledgor that would impair any Collateral or be inconsistent with or violate any
provision of the Credit Agreement or any other Loan Document (including this
Pledge Agreement).
SECTION 4.1.5. ADDITIONAL UNDERTAKINGS. The Pledgor will not,
without the prior written consent of the Canadian Agent (such consent not to be
unreasonably withheld):
(a) enter into any agreement amending, supplementing, or waiving any
provision of any Pledged Note (including any underlying instrument pursuant
to which such Pledged Note is issued) or compromising or releasing or
extending the time for payment of any obligation of the maker thereof; or
(b) take or omit to take any action the taking or the omission of
which would result in any impairment or alteration of any obligation of the
maker of any Pledged Note or other instrument constituting Collateral.
ARTICLE V
THE CANADIAN AGENT
SECTION 5.1. CANADIAN AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor
hereby irrevocably appoints the Canadian Agent the Pledgor's attorney-in-fact,
with full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in the Canadian Agent's discretion, to
take any action and to execute any instrument which the Canadian Agent may deem
necessary or advisable to accomplish the purposes of this
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Pledge Agreement, including, after the occurrence and during the continuance of
a Default of the nature set forth in Section 10.1.9 of the Credit Agreement or
an Event of Default:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with CLAUSE (A) above; and
(c) to file any claims or take any action or institute any proceedings
which the Canadian Agent may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce the rights of the Canadian
Agent with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. CANADIAN AGENT MAY PERFORM. If the Pledgor fails to
perform any agreement contained herein, the Canadian Agent may itself perform,
or cause performance of, such agreement, and the expenses of the Canadian Agent
incurred in connection therewith shall be payable by the Pledgor pursuant to
SECTION 6.5.
SECTION 5.3. CANADIAN AGENT HAS NO DUTY. The powers conferred on the
Canadian Agent hereunder are solely to protect its interest (on behalf of the
Secured Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Canadian Agent shall have no duty as to any Collateral or responsibility for
(a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether
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or not the Canadian Agent has or is deemed to have knowledge of such
matters, or
(b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. REASONABLE CARE. The Canadian Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; PROVIDED, HOWEVER, the Canadian Agent shall be
deemed to have exercised reasonable care in the custody and preservation of any
of the Collateral, if it takes such action for that purpose as the Pledgor
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the Canadian
Agent to comply with any such request at any time shall not in itself be deemed
a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. CERTAIN REMEDIES. If any Event of Default shall have
occurred and be continuing:
(a) The Canadian Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may, without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Canadian Agent's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Canadian Agent may deem commercially reasonable. The Canadian Agent or any
of the other Secured Parties may, to the extent permitted by Section 9-504
of the U.C.C., be the purchaser of any of the Collateral so sold and the
obligations of the Pledgor of such Collateral to such Secured Party may be
applied as a credit against
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the purchase price. The Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten days' prior notice to the Pledgor of
the time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification. The Canadian
Agent shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. The Canadian Agent may adjourn any
public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Upon any such sale the
Canadian Agent shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each purchaser (including the
Canadian Agent or any of the other Secured Parties) at any such sale shall
hold the Collateral so sold absolutely free from any claim or right of
whatsoever kind, including any equity or right of redemption of the
Pledgor, and the Pledgor hereby specifically waives, to the extent it may
lawfully do so, all rights of redemption, stay or appraisal which it has or
may have under any rule of law or statute now existing or hereafter
adopted.
(b) The Canadian Agent may
(i) transfer all or any part of the Collateral into the name of
the Canadian Agent or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Canadian Agent of any amount due or to become due
thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party
with respect thereto,
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(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2. SECURITIES LAWS. If the Canadian Agent shall determine
to exercise its right to sell all or any of the Collateral pursuant to SECTION
6.1, the Pledgor agrees that, upon request of the Canadian Agent, the Pledgor
will, at its own expense:
(a) execute and deliver, and cause each issuer of the Collateral
contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be done
all such other acts and things, as may be necessary or, in the opinion of
the Canadian Agent, advisable to register such Collateral under the
provisions of the Securities Act of 1933, as from time to time amended (the
"SECURITIES ACT"), and to use its best efforts to cause the registration
statement relating thereto to become effective and to remain effective for
such period as prospectuses are required by law to be furnished, and to
make all amendments and supplements thereto and to the related prospectus
which, in the opinion of the Canadian Agent, are necessary or advisable,
all in conformity with the requirements of the Securities Act and the rules
and regulations of the Securities and Exchange Commission applicable
thereto;
(b) use its best efforts to qualify the Collateral under the state
securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by the Canadian
Agent;
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(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act; and
(d) do or use its best efforts to cause to be done all such other acts
and things as may be necessary to make such sale of the Collateral or any
part thereof valid and binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Canadian Agent or the Secured Parties by
reason of the failure by the Pledgor to perform any of the covenants contained
in this Section and, consequently, agrees that, if the Pledgor shall fail to
perform any of such covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value (as determined by the Canadian Agent) of
the Collateral on the date the Canadian Agent shall demand compliance with this
Section and the full amount of any such payments shall be applied in accordance
with SECTION 6.4.
SECTION 6.3. COMPLIANCE WITH RESTRICTIONS. The Pledgor agrees that
in any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Canadian Agent is hereby authorized to comply
with any limitation or restriction in connection with such sale as it may be
advised by counsel is necessary in order to avoid any violation of applicable
law (including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and the Pledgor further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Canadian Agent be liable nor accountable to the
Pledgor for any discount allowed by
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the reason of the fact that such Collateral is sold in compliance with any such
limitation or restriction.
SECTION 6.4. APPLICATION OF PROCEEDS. If any Event of Default shall
have occurred and be continuing, all cash proceeds received by the Canadian
Agent in respect of any sale of, collection from, or other realization upon, all
or any part of the Collateral may, in the discretion of the Canadian Agent, be
held by the Canadian Agent as additional collateral security for, or at any time
thereafter be applied (after payment of any amounts payable to the Canadian
Agent pursuant to SECTION 6.5) in whole or in part by the Canadian Agent
against, all or any part of the Secured Obligations.
Any surplus of such cash or cash proceeds held by the Canadian Agent
and remaining after payment in full in cash of or cash collateralization in full
of all the Secured Obligations, the termination, expiration or cash
collateralization of all Canadian Letters of Credit, the termination of all Rate
Protection Agreements in respect of the Canadian Facility and the termination of
all Canadian Commitments, shall be paid over to the Pledgor or to whomsoever may
be lawfully entitled to receive such surplus.
SECTION 6.5. INDEMNITY AND EXPENSES. The Pledgor hereby indemnifies
and holds harmless the Canadian Agent from and against any and all claims,
losses, and liabilities arising out of or resulting from this Pledge Agreement
(including enforcement of this Pledge Agreement), except claims, losses, or
liabilities resulting from the Canadian Agent's gross negligence or wilful
misconduct. Upon demand, the Pledgor will pay to the Canadian Agent the amount
of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Canadian
Agent (in its capacity as Canadian Agent and not as a Lender) may incur in
connection with:
(a) the administration of this Pledge Agreement, the Credit Agreement,
each other Loan Document or any instrument or document relating thereto;
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(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Canadian
Agent hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. LOAN DOCUMENT. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Pledge Agreement nor consent to any departure by the Pledgor
herefrom shall in any event be effective unless the same shall be in writing and
signed by the Canadian Agent (on behalf of the Lenders or the Required Lenders,
as the case may be), and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it is given.
SECTION 7.3. PROTECTION OF COLLATERAL. The Canadian Agent may from
time to time, at its option, perform any act which the Pledgor agrees hereunder
to perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Canadian Agent may from time to time take any other action which the Canadian
Agent reasonably deems necessary for the maintenance, preservation or protection
of any of the Collateral or of its security interest therein, it being
understood and agreed that in each such case all costs and expenses incurred by
the Canadian Agent in connection therewith shall be payable by the Pledgor
pursuant to SECTION 6.5.
22
<PAGE>
SECTION 7.4. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing or by facsimile and,
if to the Pledgor, mailed or telecopied or delivered to it, in care of the
Canadian Borrower, at the address of the Canadian Borrower specified in the
Credit Agreement and, if to the Canadian Agent, mailed or telecopied or
delivered to it at the address or facsimile number specified in the Credit
Agreement, or, with respect to the Pledgor or the Canadian Agent, at such other
address or facsimile number as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this
Section. All such notices and other communications, when mailed and properly
addressed with postage prepaid or if properly addressed and sent by pre-paid
courier service, shall be deemed given when received; any such notice or
communication, if transmitted by telecopier, shall be deemed given when
transmitted and electronically confirmed.
SECTION 7.5. SECTION CAPTIONS. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.6. SEVERABILITY. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
SECTION 7.7. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS PLEDGE
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE PROVINCE OF MANITOBA AND THE LAWS OF CANADA APPLICABLE IN
THE PROVINCE, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE PROVINCE OF
MANITOBA. THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE
ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER
HEREOF AND
23
<PAGE>
SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.8. COUNTERPARTS. This Pledge Agreement may be executed by
the parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute together but one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
VH HOLDINGS INC.
By /s/ William B. Towne
----------------------------
Name: William B. Towne
Title: Treasurer
THE BANK OF NOVA SCOTIA,
as Canadian Agent
By /s/ Gary McDonough
----------------------------
Name:
Title: Authorized Signatory
24
<PAGE>
EXHIBIT A
to Canadian Holdings
Pledge Agreement
PROMISSORY NOTE
Cdn $____________ _________, ____
FOR VALUE RECEIVED, the undersigned, ______________, a _______________
corporation (the "MAKER"), promises to pay to the order of VH HOLDINGS INC., a
Manitoba corporation (the "PAYEE"), on demand, the principal sum of
______________ DOLLARS ($________) or, if less, the aggregate unpaid principal
amount, as reflected on the books and records of the Payee, of all intercompany
loans made from time to time by the Payee to the Maker.
The unpaid principal amount of this promissory note (this "NOTE") from
time to time outstanding shall bear interest at a rate of interest as reflected
in the books and records of the Payee, which the Maker represents to be a lawful
and commercially reasonable rate, payable from time to time on demand of Payee,
and all payments of principal of and interest on this Note shall be payable in
lawful currency of Canada. All such payments shall be made by the Maker to an
account established by the Payee at _______________. Upon notice from the
Canadian Agent that a Default (as defined in the Credit Agreement, hereinafter
defined) of the nature referred to in Section 10.1.9 of the Credit Agreement or
an Event of Default (as defined in the Credit Agreement) has occurred and is
continuing under the Credit Agreement, the Maker shall make such payments, in
same day funds, to such other account as the Canadian Agent shall direct in such
notice.
This Note is one of the Pledged Notes referred to in, and evidences
Indebtedness incurred pursuant to, clause (e) of Section 9.2.2 of the Credit
Agreement, dated as of June 30, 1997 (as amended, supplemented, amended and
restated or otherwise modified from time to time, the "CREDIT AGREEMENT"), among
Leiner Health Products Inc., as the U.S. Borrower (following the Assumption),
Vita Health Company (1985) Ltd., as the Canadian Borrower, The Bank of Nova
Scotia, as the Canadian agent (the "CANADIAN AGENT") and the U.S. Agent, and
various financial institutions as are, or may from time to time become, parties
thereto. Upon the occurrence and continuance of an Event of Default under the
Credit Agreement, and notice thereof by the Canadian Agent to the Maker, the
Canadian Agent shall have all rights of the Payee to collect and accelerate, and
enforce all rights with respect to, the Indebtedness evidenced by this
<PAGE>
Note. Unless otherwise defined herein or the context otherwise requires, terms
used herein have the meanings provided in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the
Pledge Agreement pursuant to which this Note has been pledged to the Canadian
Agent as security for the Secured Obligations in respect of the Canadian
Facility outstanding from time to time under the Credit Agreement and each other
Loan Document.
In addition to, but not in limitation of, the foregoing, the Maker
further agrees to pay all expenses, including reasonable attorneys' fees and
legal expenses, incurred by the holder (including the Canadian Agent as pledgee)
of this Note endeavoring to collect any amounts payable hereunder which are not
paid when due, whether by acceleration or otherwise.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE PROVINCE OF MANITOBA AND THE LAWS OF CANADA APPLICABLE IN
THE PROVINCE.
2
<PAGE>
THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS
NOTE. THE MAKER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE PAYEE TO ACCEPT THIS NOTE.
[NAME OF MAKER]
By
---------------------------------
Name:
Title:
Pay to the order of THE BANK OF
NOVA SCOTIA, as Canadian Agent
By
---------------------------------
Name:
Title:
3
<PAGE>
ATTACHMENT 1
to Canadian
Holdings
Pledge
Agreement
Item A. PLEDGED NOTES
Pledged Note Issuer Description
- ------------------- -----------
None.
Item B. PLEDGED SHARES
Pledged Share Issuer Common Stock
- -------------------- ---------------------------------------
Authorized Outstanding % of Shares
Shares Shares Pledged
---------- ----------- -----------
VH Acquisition Inc. (to be Unlimited 100 100%
known as Vita Health Company
(1985) Ltd.)
Item C. ADDITIONAL SUBSIDIARIES
None.
<PAGE>
EXHIBIT 4.12
CANADIAN BORROWER PLEDGE AGREEMENT
This CANADIAN BORROWER PLEDGE AGREEMENT (as amended, supplemented,
amended and restated or otherwise modified from time to time, this "PLEDGE
AGREEMENT"), dated as of June 30, 1997, made by VITA HEALTH COMPANY (1985) LTD.,
a Manitoba corporation (the "PLEDGOR"), in favor of THE BANK OF NOVA SCOTIA
("SCOTIABANK"), as agent (in such capacity, the "CANADIAN AGENT") for each of
the Secured Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented, amended and restated or otherwise modified from time
to time, the "CREDIT AGREEMENT"), among the Pledgor, as the Canadian Borrower,
Leiner Health Products Group Inc., a Delaware corporation ("LHPG" or the "U.S.
BORROWER" (prior to the Assumption), and together with the U.S. Borrower, the
"BORROWERS"), the various financial institutions as are or may become parties
thereto which extend a Commitment under the U.S. Facility (collectively, the
"U.S. LENDERS"), the various financial institutions as are or may become parties
thereto which extend a Commitment under the Canadian Facility (collectively, the
"CANADIAN LENDERS", and together with the U.S. Lenders, the "LENDERS"), the
Canadian Agent and Scotiabank, as agent for the U.S. Lenders under the U.S.
Facility (in such capacity, the "U.S. AGENT", and together with the Canadian
Agent, collectively, the "AGENTS"), the Lenders and the Issuers have extended
Commitments to make Credit Extensions to the Borrowers;
WHEREAS, as contemplated by the Credit Agreement, immediately
following the making of the initial Credit Extensions, Leiner Health Products,
Inc., a Delaware corporation ("LEINER") and LHPG have delivered the Assumption
Agreement, pursuant to which Leiner has assumed (the "ASSUMPTION") the rights
and obligations of LHPG as (and has become) the "U.S. Borrower" under the Credit
Agreement;
WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit
<PAGE>
Extension) and the execution and delivery of the Assumption Agreement under the
Credit Agreement, the Pledgor is required to execute and deliver this Pledge
Agreement; and
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuers to make Credit Extensions (including the initial Credit
Extensions) to the Borrowers pursuant to the Credit Agreement, and to induce
Secured Parties to enter into Rate Protection Agreements, if any, the Pledgor
agrees, for the benefit of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"AGENTS" is defined in the FIRST RECITAL.
"BORROWERS" is defined in the FIRST RECITAL.
"CANADIAN AGENT" is defined in the PREAMBLE.
"CANADIAN LENDERS" is defined in the FIRST RECITAL.
"COLLATERAL" is defined in SECTION 2.1.
"CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"DISTRIBUTIONS" means all stock dividends, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits,
2
<PAGE>
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
Capital Stock constituting Collateral, but shall not include Dividends.
"DIVIDENDS" means cash dividends and cash distributions with respect
to any Pledged Shares or other Pledged Property.
"LENDERS" are defined in the FIRST RECITAL.
"PLEDGE AGREEMENT" is defined in the PREAMBLE.
"PLEDGED NOTE ISSUER" means each Person identified in ITEM A of
ATTACHMENT 1 hereto (as supplemented) as the issuer of the Pledged Note
identified opposite the name of such Person.
"PLEDGED NOTES" means all promissory notes of any Pledged Note Issuer
in the form or substantially the form of EXHIBIT A hereto (unless otherwise
consented to by the Canadian Agent, which consent will not be unreasonably
withheld) which are delivered or required to be delivered from time to time by
the Pledgor to the Canadian Agent as Pledged Property hereunder, as such
promissory notes, in accordance with SECTION 4.5, are amended, modified or
supplemented from time to time, together with any promissory note of any Pledged
Note Issuer taken in extension or renewal thereof or substitution therefor.
"PLEDGED PROPERTY" means all Pledged Shares, all Pledged Notes, and
all other pledged shares of Capital Stock or promissory notes, all other
securities, all assignments of any amounts due or to become due, all other
instruments which may from time to time hereafter be delivered by the Pledgor to
the Canadian Agent for the purpose of pledge under this Pledge Agreement or any
other Loan Document, and all proceeds of any of the foregoing.
"PLEDGED SHARE ISSUER" means each Person identified in ITEM B of
ATTACHMENT 1 hereto as the issuer of the Pledged Shares identified opposite the
name of such Person, and each Person whose Capital Stock is required to
3
<PAGE>
be pledged hereunder and under the Credit Agreement from time to time.
"PLEDGED SHARES" means all shares of Capital Stock of any Pledged
Share Issuer which are delivered or required to be delivered from time to time
by the Pledgor to the Canadian Agent as Pledged Property hereunder.
"PLEDGOR" is defined in the PREAMBLE.
"SCOTIABANK" is defined in the PREAMBLE.
"SECURED OBLIGATIONS" is defined in SECTION 2.2.
"SECURED PARTY" means, as the context may require, the Canadian
Lenders, the Canadian Issuers, the Canadian Agent, each counterparty to a Rate
Protection Agreement in respect of the Canadian Facility that is (or at the time
such Rate Protection Agreement is entered into, was) a Canadian Lender or an
Affiliate thereof and (in each case), each of their respective successors,
permitted transferees and permitted assigns.
"SECURITIES ACT" is defined in CLAUSE (A) of SECTION 6.2.
"U.C.C." means the Uniform Commercial Code, as in effect in the State
of New York or, as the context may require, in any other jurisdiction the laws
of which may apply to all or a portion of the Collateral in which a security
interest is granted hereunder.
"U.S. AGENT" is defined in the FIRST RECITAL.
"U.S. BORROWER" is defined in the FIRST RECITAL.
"U.S. LENDERS" is defined in the FIRST RECITAL.
SECTION 1.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
4
<PAGE>
SECTION 1.3. U.C.C. DEFINITIONS. Unless otherwise defined herein or
the Credit Agreement or the context otherwise requires, terms for which meanings
are provided in the U.C.C. are used in this Pledge Agreement, including its
preamble and recitals, with such meanings.
ARTICLE II
PLEDGE
SECTION 2.1. GRANT OF SECURITY INTEREST. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Canadian Agent, for its benefit and the ratable benefit of each of the Secured
Parties, and hereby grants to the Canadian Agent, for its benefit and the
ratable benefit of the Secured Parties, a continuing security interest in, all
of the following property (the "COLLATERAL"):
(a) all promissory notes of each Pledged Note Issuer identified in
ITEM A of ATTACHMENT 1 hereto;
(b) all other Pledged Notes issued from time to time that are required
to be pledged pursuant to the terms of the Credit Agreement;
(c) all issued and outstanding shares of Capital Stock of each Pledged
Share Issuer identified in ITEM B of ATTACHMENT 1 hereto;
(d) all other Pledged Shares issued from time to time that are
required to be pledged pursuant to the terms of the Credit Agreement;
(e) all other Pledged Property hereafter delivered to the Canadian
Agent in connection with this Pledge Agreement;
(f) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing.
5
<PAGE>
SECTION 2.2. SECURITY FOR OBLIGATIONS. This Pledge Agreement secures
the payment in full in cash of all Obligations of the Pledgor now or hereafter
existing (all such Obligations being the "SECURED OBLIGATIONS").
SECTION 2.3. DELIVERY OF PLEDGED PROPERTY. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Shares and all Pledged Notes, shall be delivered to and held by or on behalf of
(and, in the case of the Pledged Notes, endorsed to the order of) the Canadian
Agent pursuant hereto, shall be in suitable form for transfer by delivery, and
shall be accompanied by all necessary instruments of transfer or assignment,
duly executed in blank.
The Pledgor shall deliver or shall cause to be delivered promptly, but
in any event within five Business Days following issuance, in pledge hereunder
to the Agents, for their benefit and the ratable benefit of each of the other
Secured Parties, any and all additional shares of Capital Stock of a Pledged
Share Issuer issued to the Pledgor and all other Pledged Property issued,
distributed or otherwise delivered to or acquired by the Pledgor in respect of
such Pledged Share Issuer's Pledged Shares.
SECTION 2.4. DIVIDENDS ON PLEDGED SHARES AND PAYMENTS ON PLEDGED
NOTES. In the event that any Dividend or liquidating dividend is to be paid on
any Pledged Share or any payment of principal or interest is to be made on any
Pledged Note at a time when no Default of the nature set forth in Section 10.1.9
of the Credit Agreement or Event of Default has occurred and is continuing or
would result therefrom, such Dividend, liquidating dividend or payment may be
paid directly to the Pledgor. If any such Default or Event of Default has
occurred and is continuing, then any such Dividend, liquidating dividend or
payment shall be paid directly to the Canadian Agent.
SECTION 2.5. CONTINUING SECURITY INTEREST; TRANSFER OF NOTE. This
Pledge Agreement shall create a continuing security interest in the Collateral
and shall
(a) remain in full force and effect until payment in full in cash of
or cash collateralization in full of all Secured Obligations, the
termination or expiration
6
<PAGE>
or cash collateralization of all Canadian Letters of Credit, the
termination of all Rate Protection Agreements in respect of the Canadian
Facility and the termination of all Canadian Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the Canadian Agent
hereunder, to the benefit of the Canadian Agent and each other Secured
Party.
Without limiting the foregoing CLAUSE (C), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Pledge Agreement) or otherwise, subject, however,
to any contrary provisions in such assignment or transfer, and to the provisions
of Section 12.11 and Article XI of the Credit Agreement. Upon (i) the sale,
transfer or other disposition of Collateral in accordance with the Credit
Agreement or (ii) the payment in full in cash of all Secured Obligations, the
termination or expiration of all Canadian Letters of Credit, the termination of
all Rate Protection Agreements in respect of the Canadian Facility and the
termination of all Canadian Commitments, the security interest granted herein
shall automatically terminate with respect to (x) such Collateral (in the case
of CLAUSE (I)) and all rights to such Collateral shall revert to the Pledgor or
(y) all Collateral (in the case of CLAUSE (II)) and all rights to the Collateral
shall revert to the Pledgor. Upon any such termination, the Canadian Agent
will, at the Pledgor's sole expense, deliver to the Pledgor, without any
representations, warranties or recourse of any kind whatsoever, all certificates
and instruments representing or evidencing all Pledged Shares and all Pledged
Notes, together with all other Collateral held by the Canadian Agent hereunder,
and execute and deliver to the Pledgor such documents as the Pledgor shall
reasonably request to evidence such termination.
7
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES, ETC. The Pledgor
represents and warrants for itself unto each Secured Party, as at the date of
each pledge and delivery hereunder (including each pledge and delivery of
Pledged Shares and each pledge and delivery of a Pledged Note) by the Pledgor to
the Canadian Agent of any Collateral, as set forth in this Article, and except
as set forth or may be otherwise provided in the applicable Foreign Pledge
Agreement with respect to a non-U.S. Pledged Share Issuer or Pledged Note
Issuer.
SECTION 3.1.1. OWNERSHIP, NO LIENS, ETC. The Pledgor is the legal
and beneficial owner of, and has good and marketable title to (and has full
right and authority to pledge and assign) such Collateral, free and clear of all
liens, security interests, options, or other charges or encumbrances, except any
lien or security interest granted pursuant hereto in favor of the Canadian
Agent.
SECTION 3.1.2. VALID SECURITY INTEREST. The execution and delivery
of this Pledge Agreement, together with the delivery by the Pledgor of such
Collateral to the Canadian Agent, is effective to create a valid, perfected,
first priority security interest in such Collateral and all proceeds thereof,
securing the Secured Obligations. No filing or other action will be necessary
to perfect or protect such security interest.
SECTION 3.1.3. AS TO PLEDGED SHARES. In the case of any Pledged
Shares constituting such Collateral, all of such Pledged Shares are duly
authorized and validly issued, fully paid, and non-assessable, and constitute
all of the issued and outstanding shares of Capital Stock of each Pledged Share
Issuer set forth in ITEM B of ATTACHMENT 1 hereto. The Pledgor has no
Subsidiaries other than the Pledged Share Issuers, except as set forth in ITEM C
of ATTACHMENT 1.
SECTION 3.1.4. AS TO PLEDGED NOTES. In the case of each Pledged
Note, all of such Pledged Notes have been duly authorized, executed, endorsed,
issued and delivered,
8
<PAGE>
and are the legal, valid and binding obligation of the issuers thereof, and are
not in default.
SECTION 3.1.5. AUTHORIZATION, APPROVAL, ETC. No authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority, regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this
Pledge Agreement by the Pledgor, or
(b) for the exercise by the Canadian Agent of the voting or other
rights provided for in this Pledge Agreement, or, except with respect to
any Pledged Shares, as may be required in connection with a disposition of
such Pledged Shares by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
SECTION 3.1.6. COMPLIANCE WITH LAWS. The Pledgor is in compliance
with the requirements of all applicable laws (including the provisions of the
Fair Labor Standards Act), rules, regulations and orders of every governmental
authority, the non-compliance with which could reasonably be expected to have a
Material Adverse Effect or which might materially adversely affect the aggregate
value of the Collateral (together with all Collateral under all Pledge
Agreements) or the aggregate worth of the Collateral (together with all
Collateral under all Pledge Agreements) as collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. PROTECT COLLATERAL; FURTHER ASSURANCES, ETC. The
Pledgor will not sell, assign, transfer, pledge, or encumber in any other manner
the Collateral (except in favor of the Canadian Agent hereunder). The Pledgor
will warrant and defend the right and title herein granted unto the Canadian
Agent in and to
9
<PAGE>
the Collateral (and all right, title, and interest represented by the
Collateral) against the claims and demands of all Persons whomsoever. The
Pledgor agrees that at any time, and from time to time, at the expense of the
Pledgor, the Pledgor will promptly execute and deliver all further instruments,
and take all further action, that may be necessary or desirable, or that the
Canadian Agent may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Canadian Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.
SECTION 4.2. STOCK POWERS, ETC. The Pledgor agrees that all Pledged
Shares (and all other shares of Capital Stock constituting Collateral) delivered
by the Pledgor pursuant to this Pledge Agreement will be accompanied by duly
executed undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Canadian Agent. The Pledgor will, from time to time upon the
request of the Canadian Agent, promptly deliver to the Canadian Agent such stock
powers, instruments, and similar documents, satisfactory in form and substance
to the Canadian Agent, with respect to the Collateral as the Canadian Agent may
reasonably request and will, from time to time upon the request of the Canadian
Agent after the occurrence of any Event of Default, promptly transfer any
Pledged Shares or other shares of common stock constituting Collateral into the
name of any nominee designated by the Canadian Agent.
SECTION 4.3. CONTINUOUS PLEDGE. Subject to SECTION 2.4, the Pledgor
will, at all times, keep pledged to the Canadian Agent pursuant hereto all
Pledged Shares and all other shares of Capital Stock constituting Collateral,
all Dividends and Distributions with respect thereto, all Pledged Notes, all
interest, principal and other proceeds received by the Canadian Agent with
respect to the Pledged Notes, and all other Collateral and other securities,
instruments, proceeds, and rights from time to time received by or distributable
to the Pledgor in respect of any Collateral; PROVIDED, HOWEVER, that, in the
event of any sale of Collateral permitted by Section 9.2.11 of the Credit
Agreement, such Collateral shall be deemed automatically released from the
pledge and security interest hereunder
10
<PAGE>
without any consent or other action of the Canadian Agent or any other Person
and the Canadian Agent will, at the request of the Pledgor and at the Pledgor's
sole cost and expense, execute and deliver such documents (without recourse and
without representation or warranty) as the Pledgor may reasonably request to
evidence such release. The Pledgor will not permit any Pledged Share Issuer to
issue any Capital Stock which shall not have been immediately duly pledged
hereunder on a first priority perfected basis except as permitted under the
Credit Agreement.
SECTION 4.4. VOTING RIGHTS; DIVIDENDS, ETC. The Pledgor agrees:
(a) after any Default of the nature referred to in Section 10.1.9 of
the Credit Agreement or any Event of Default shall have occurred and be
continuing, promptly upon receipt of notice thereof by the Pledgor and
without any request therefor by the Canadian Agent, to deliver (properly
endorsed where required hereby or requested by the Canadian Agent) to the
Canadian Agent all Dividends, Distributions, all interest, all principal,
all other cash payments, and all proceeds of the Collateral, all of which
shall be held by the Canadian Agent as additional Collateral for use in
accordance with SECTION 6.4; and
(b) after any Event of Default shall have occurred and be continuing
and the Canadian Agent has notified the Pledgor of the Canadian Agent's
intention to exercise its voting power under CLAUSE (B) of this SECTION 4.4
(i) the Canadian Agent may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of ownership
with respect to any Pledged Shares or other shares of Capital Stock
constituting Collateral and the Pledgor hereby grants the Canadian
Agent an irrevocable proxy, exercisable under such circumstances, to
vote the Pledged Shares and such other Collateral; and
(ii) promptly to deliver to the Canadian Agent such additional
proxies and other documents
11
<PAGE>
as may be necessary to allow the Canadian Agent to exercise such
voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Pledgor but which the
Pledgor is then obligated to deliver to the Canadian Agent, shall, until
delivery to the Canadian Agent, be held by the Pledgor separate and apart from
its other property in trust for the Canadian Agent. The Canadian Agent agrees
that unless an Event of Default shall have occurred and be continuing and the
Canadian Agent shall have given the notice referred to in CLAUSE (B) of this
SECTION 4.4, the Pledgor shall have the exclusive voting power with respect to
any shares of Capital Stock (including any of the Pledged Shares) constituting
Collateral and the Canadian Agent shall, upon the written request of the
Pledgor, promptly deliver such proxies and other documents, if any, as shall be
reasonably requested by the Pledgor which are necessary to allow the Pledgor to
exercise voting power with respect to any such share of Capital Stock (including
any of the Pledged Shares) constituting Collateral; PROVIDED, HOWEVER, that no
vote shall be cast, or consent, waiver, or ratification given, or action taken
by the Pledgor that would impair any Collateral or be inconsistent with or
violate any provision of the Credit Agreement or any other Loan Document
(including this Pledge Agreement).
SECTION 4.5. ADDITIONAL UNDERTAKINGS. The Pledgor will not, without
the prior written consent of the Canadian Agent (such consent not to be
unreasonably withheld):
(a) enter into any agreement amending, supplementing, or waiving any
provision of any Pledged Note (including any underlying instrument pursuant
to which such Pledged Note is issued) or compromising or releasing or
extending the time for payment of any obligation of the maker thereof; or
(b) take or omit to take any action the taking or the omission of
which would result in any impairment or alteration of any obligation of the
maker of any Pledged Note or other instrument constituting Collateral.
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ARTICLE V
THE CANADIAN AGENT
SECTION 5.1. CANADIAN AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor
hereby irrevocably appoints the Canadian Agent the Pledgor's attorney-in-fact,
with full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in the Canadian Agent's discretion, to
take any action and to execute any instrument which the Canadian Agent may deem
necessary or advisable to accomplish the purposes of this Pledge Agreement,
including, after the occurrence and during the continuance of a Default of the
nature set forth in Section 10.1.9 of the Credit Agreement or an Event of
Default:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with CLAUSE (A) above; and
(c) to file any claims or take any action or institute any proceedings
which the Canadian Agent may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce the rights of the Canadian
Agent with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. CANADIAN AGENT MAY PERFORM. If the Pledgor fails to
perform any agreement contained herein, the Canadian Agent may itself perform,
or cause performance of, such agreement, and the expenses of the Canadian Agent
incurred in connection therewith shall be payable by the Pledgor pursuant to
SECTION 6.5.
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SECTION 5.3. CANADIAN AGENT HAS NO DUTY. The powers conferred on the
Canadian Agent hereunder are solely to protect its interest (on behalf of the
Secured Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Canadian Agent shall have no duty as to any Collateral or responsibility for
(a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not the Canadian Agent has or is deemed to have
knowledge of such matters, or
(b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. REASONABLE CARE. The Canadian Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; PROVIDED, HOWEVER, the Canadian Agent shall be
deemed to have exercised reasonable care in the custody and preservation of any
of the Collateral, if it takes such action for that purpose as the Pledgor
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the Canadian
Agent to comply with any such request at any time shall not in itself be deemed
a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. CERTAIN REMEDIES. If any Event of Default shall have
occurred and be continuing:
(a) The Canadian Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C.
14
<PAGE>
applies to the affected Collateral) and also may, without notice except
as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Canadian Agent's
offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Canadian Agent may deem commercially
reasonable. The Agents or any of the other Secured Parties may, to the
extent permitted by Section 9-504 of the U.C.C., be the purchaser of any
of the Collateral so sold and the obligations of the Pledgor of such
Collateral to such Secured Party may be applied as a credit against the
purchase price. The Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten days' prior notice to the Pledgor
of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The
Canadian Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Canadian Agent may
adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned. Upon
any such sale the Agents shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser
(including the Agents or any of the other Secured Parties) at any such
sale shall hold the Collateral so sold absolutely free from any claim or
right of whatsoever kind, including any equity or right of redemption of
the Pledgor, and the Pledgor hereby specifically waives, to the extent it
may lawfully do so, all rights of redemption, stay or appraisal which it
has or may have under any rule of law or statute now existing or
hereafter adopted.
(b) The Canadian Agent may
(i) transfer all or any part of the Collateral into the name of
the Canadian Agent or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder,
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(ii) notify the parties obligated on any of the Collateral to
make payment to the Canadian Agent of any amount due or to become due
thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party
with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2. SECURITIES LAWS. If the Canadian Agent shall determine
to exercise its right to sell all or any of the Collateral pursuant to SECTION
6.1, the Pledgor agrees that, upon request of the Canadian Agent, the Pledgor
will, at its own expense:
(a) execute and deliver, and cause each issuer of the Collateral
contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be done
all such other acts and things, as may be necessary or, in the opinion of
the Canadian Agent, advisable to register such Collateral under the
provisions of the Securities Act of 1933, as from time to time amended (the
"SECURITIES ACT"), and to use its best efforts to cause the registration
statement relating thereto to become effective and to remain effective for
such period as prospectuses are required by law to be furnished, and to
make all amendments and
16
<PAGE>
supplements thereto and to the related prospectus which, in the opinion
of the Canadian Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and regulations of
the Securities and Exchange Commission applicable thereto;
(b) use its best efforts to qualify the Collateral under the state
securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by the Canadian
Agent;
(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act; and
(d) do or use its best efforts to cause to be done all such other acts
and things as may be necessary to make such sale of the Collateral or any
part thereof valid and binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Canadian Agent or the Secured Parties by
reason of the failure by the Pledgor to perform any of the covenants contained
in this Section and, consequently, agrees that, if the Pledgor shall fail to
perform any of such covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value (as determined by the Canadian Agent) of
the Collateral on the date the Canadian Agent shall demand compliance with this
Section and the full amount of any such payments shall be applied in accordance
with SECTION 6.4.
SECTION 6.3. COMPLIANCE WITH RESTRICTIONS. The Pledgor agrees that
in any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Canadian Agent is hereby authorized to comply
with any limitation or restriction in connection with such sale as it may be
advised by counsel is necessary in order to avoid any violation of applicable
law (including compliance with such procedures as may restrict the number
17
<PAGE>
of prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and the Pledgor further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Canadian Agent be liable nor accountable to the
Pledgor for any discount allowed by the reason of the fact that such Collateral
is sold in compliance with any such limitation or restriction.
SECTION 6.4. APPLICATION OF PROCEEDS. If any Event of Default shall
have occurred and be continuing, all cash proceeds received by the Canadian
Agent in respect of any sale of, collection from, or other realization upon, all
or any part of the Collateral may, in the discretion of the Canadian Agent, be
held by the Canadian Agent as additional collateral security for, or at any time
thereafter be applied (after payment of any amounts payable to the Canadian
Agent pursuant to SECTION 6.5) in whole or in part by the Canadian Agent
against, all or any part of the Secured Obligations.
Any surplus of such cash or cash proceeds held by the Canadian Agent
and remaining after payment in full in cash of or cash collateralization of all
the Secured Obligations, the termination, expiration or cash collateralization
of all Canadian Letters of Credit, the termination of all Rate Protection
Agreements in respect of the Canadian Facility and the termination of all
Canadian Commitments, shall be paid over to the Pledgor or to whomsoever may be
lawfully entitled to receive such surplus.
SECTION 6.5. INDEMNITY AND EXPENSES. The Pledgor hereby indemnifies
and holds harmless the Canadian Agent from and against any and all claims,
losses, and liabilities arising out of or resulting from this Pledge Agreement
(including enforcement of this Pledge Agreement), except claims, losses, or
liabilities resulting from the Canadian Agent's gross negligence or wilful
misconduct. Upon demand,
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<PAGE>
the Pledgor will pay to the Canadian Agent the amount of any and all reasonable
expenses, including the reasonable fees and disbursements of its counsel and of
any experts and agents, which the Canadian Agent (in its capacity as Canadian
Agent, not as Lender) may incur in connection with:
(a) the administration of this Pledge Agreement, the Credit Agreement
and each other Loan Document or any instrument or document relating
thereto;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Canadian
Agent hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. LOAN DOCUMENT. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Pledge Agreement nor consent to any departure by the Pledgor
herefrom shall in any event be effective unless the same shall be in writing and
signed by the Canadian Agent (on behalf of the Lenders or the Required Lenders,
as the case may be), and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it is given.
SECTION 7.3. PROTECTION OF COLLATERAL. The Canadian Agent may from
time to time, at its option, perform any act which the Pledgor agrees hereunder
to perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that
19
<PAGE>
no such request need be given after the occurrence and during the continuance of
an Event of Default) and the Canadian Agent may from time to time take any other
action which the Canadian Agent reasonably deems necessary for the maintenance,
preservation or protection of any of the Collateral or of its security interest
therein, it being understood and agreed that in each such case all costs and
expenses incurred by the Agents in connection therewith shall be payable by the
Pledgor pursuant to SECTION 6.5.
SECTION 7.4. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing or facsimile and
mailed or telecopied or delivered to either party hereto, addressed to such
party at such party's address specified in the Credit Agreement or, with respect
to the Pledgor or the Canadian Agent, at such other address or facsimile number
as shall be designated by such party in a written notice to each other party
complying as to delivery with the terms of this Section. All such notices and
other communications, when mailed and properly addressed with postage prepaid or
if properly addressed and sent by pre-paid courier service, shall be deemed
given when received; any such notice or communication, if transmitted by
telecopier, shall be deemed given when transmitted and electronically confirmed.
SECTION 7.5. SECTION CAPTIONS. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.6. SEVERABILITY. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
SECTION 7.7. COUNTERPARTS. This Pledge Agreement may be executed by
the parties hereto in several counterparts, each of which shall be deemed to be
an
20
<PAGE>
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.8. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS PLEDGE
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE PROVINCE OF MANITOBA AND THE LAWS OF CANADA APPLICABLE IN
THE PROVINCE, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE PROVINCE OF
MANITOBA. THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE
ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER
HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT
THERETO.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
VITA HEALTH COMPANY (1985) LTD.
By /s/ William B. Towne
----------------------------
Name: William B. Towne
Title: Treasurer
THE BANK OF NOVA SCOTIA,
as Canadian Agent
By /s/ Gary McDonough
----------------------------
Name:
Title: Authorized Signatory
22
<PAGE>
EXHIBIT A
to Canadian Borrower
Pledge Agreement
PROMISSORY NOTE
Cdn $_______________ _________, ____
FOR VALUE RECEIVED, the undersigned, ______________, a _______________
corporation (the "MAKER"), promises to pay to the order of VITA HEALTH COMPANY
(1985) LTD., a Manitoba corporation (the "PAYEE"), on demand, the principal sum
of ______________ DOLLARS ($________) or, if less, the aggregate unpaid
principal amount, as reflected on the books and records of the Payee, of all
intercompany loans made from time to time by the Payee to the Maker.
The unpaid principal amount of this promissory note (this "NOTE") from
time to time outstanding shall bear interest at a rate of interest as reflected
in the books and records of the Payee, which the Maker represents to be a lawful
and commercially reasonable rate, payable from time to time on demand of Payee,
and all payments of principal of and interest on this Note shall be payable in
lawful currency of Canada. All such payments shall be made by the Maker to an
account established by the Payee at _______________. Upon notice from the
Canadian Agent that a Default (as defined in the Credit Agreement, hereinafter
defined) of the nature referred to in Section 10.1.9 of the Credit Agreement or
an Event of Default (as defined in the Credit Agreement) has occurred and is
continuing under the Credit Agreement, the Maker shall make such payments, in
same day funds, to such other account as the Canadian Agent shall direct in such
notice.
This Note is one of the Pledged Notes referred to in, and evidences
Indebtedness incurred pursuant to, clause (e) of Section 9.2.2 of the Credit
Agreement, dated as of June 30, 1997 (as amended, supplemented, amended and
restated or otherwise modified from time to time, the "CREDIT AGREEMENT"), among
the Payee, as the Canadian Borrower, Leiner Health Products Inc., as the U.S.
Borrower (following the Assumption), The Bank of Nova Scotia, as the Canadian
agent (the "CANADIAN AGENT") and the U.S. Agent, and various financial
institutions as are, or may from time to time become, parties thereto. Upon the
occurrence and continuance of an Event of Default under the Credit Agreement,
and notice thereof by the Canadian Agent to the Maker, the Canadian Agent shall
have all rights of the Payee to collect and accelerate, and enforce all rights
with respect to, the Indebtedness evidenced by this Note. Unless
<PAGE>
otherwise defined herein or the context otherwise requires, terms used herein
have the meanings provided in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the
Pledge Agreement pursuant to which this Note has been pledged to the Canadian
Agent as security for the Obligations in respect of the Canadian Facility
outstanding from time to time under the Credit Agreement and each other Loan
Document.
In addition to, but not in limitation of, the foregoing, the Maker
further agrees to pay all expenses, including reasonable attorneys' fees and
legal expenses, incurred by the holder (including the Canadian Agent as pledgee)
of this Note endeavoring to collect any amounts payable hereunder which are not
paid when due, whether by acceleration or otherwise.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE PROVINCE OF MANITOBA AND THE LAWS OF CANADA APPLICABLE IN
THE PROVINCE.
THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS
NOTE. THE MAKER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
2
<PAGE>
PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE TO ACCEPT THIS NOTE.
[NAME OF MAKER]
By
------------------------------
Name:
Title:
Pay to the order of THE
BANK OF NOVA SCOTIA, as
Canadian Agent
By
------------------------------
Name:
Title:
3
<PAGE>
ATTACHMENT 1
to Canadian
Borrower
Pledge
Agreement
Item A. PLEDGED NOTES
Pledged Note Issuer Description
- ------------------- -----------
None.
Item B. PLEDGED SHARES
Pledged Share Issuer Common Stock
- -------------------- ----------------------------------------
Authorized Outstanding % of Shares
Shares Shares Pledged
---------- ----------- -----------
64804 Manitoba Ltd. unlimited 1 100%
Westcan Pharmaceuticals Ltd. unlimited 1 100%
Item C. ADDITIONAL SUBSIDIARIES
None.
<PAGE>
Exhibit 4.13
[EXECUTION COPY]
U.S. BORROWER GUARANTY
This U.S. BORROWER GUARANTY (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "GUARANTY"), dated as of
June 30, 1997, is made by LEINER HEALTH PRODUCTS INC., a Delaware corporation
(the "GUARANTOR"), in favor of the Agents (as defined below) for each of the
Secured Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented, amended and restated or otherwise modified from time
to time, the "CREDIT AGREEMENT"), among Leiner Health Products Group Inc., a
Delaware corporation ("LHPG" or the "U.S. BORROWER" (prior to the Assumption)),
Vita Health Company (1985) Ltd., a Manitoba corporation (the "CANADIAN
BORROWER", and together with the U.S. Borrower, the "BORROWERS"), the various
financial institutions as are or may become parties thereto which extend a
Commitment under the U.S. Facility (collectively, the "U.S. LENDERS"), the
various financial institutions as are or may become parties thereto which extend
a Commitment under the Canadian Facility (collectively, the "CANADIAN LENDERS",
and together with the U.S. Lenders, the "LENDERS"), The Bank of Nova Scotia
("SCOTIABANK"), as agent for the U.S. Lenders under the U.S. Facility (in such
capacity, the "U.S. AGENT"), and Scotiabank, as agent for the Canadian Lenders
under the Canadian Facility (in such capacity, the "CANADIAN AGENT", and
together with the U.S. Agent, collectively, the "AGENTS"), the Lenders and the
Issuers have extended Commitments to make Credit Extensions to the Borrowers;
WHEREAS, as contemplated by the Credit Agreement, immediately
following the making of the initial Credit Extensions, the Guarantor and LHPG
have delivered the Assumption Agreement, pursuant to which the Guarantor has
assumed (the "ASSUMPTION") the rights and obligations of LHPG as (and has
become) the "U.S. BORROWER" under the Credit Agreement;
<PAGE>
WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit Extension) and the execution and
delivery of the Assumption Agreement under the Credit Agreement, the Guarantor
is required to execute and deliver this Guaranty; and
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty;
NOW THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Lenders and the Issuers
to make Credit Extensions (including the initial Credit Extensions) to the
Borrowers pursuant to the Credit Agreement, and to induce Secured Parties to
enter into Rate Protection Agreements entered into pursuant to the Credit
Agreement, if any, the Guarantor agrees, for the benefit of each Secured Party,
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"AGENTS" is defined in the FIRST RECITAL.
"BORROWERS" is defined in the FIRST RECITAL.
"CANADIAN AGENT" is defined in the FIRST RECITAL.
"CANADIAN BORROWER" is defined in the FIRST RECITAL.
"CANADIAN FACILITY OBLIGOR" is defined in clause (a) of Section 2.1.
"CANADIAN LENDERS" is defined in the FIRST RECITAL.
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<PAGE>
"CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"GUARANTEED PARTY" is defined in CLAUSE (A) of SECTION 2.1.
"GUARANTOR" is defined in the PREAMBLE.
"GUARANTY" is defined in the PREAMBLE.
"LENDERS" is defined in the FIRST RECITAL.
"LHPG" is defined in the FIRST RECITAL.
"SCOTIABANK" is defined in the FIRST RECITAL.
"U.S. AGENT" is defined in the FIRST RECITAL.
"U.S. LENDERS" is defined in the FIRST RECITAL.
SECTION 1.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Guaranty, including
its preamble and recitals, have the meanings provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. GUARANTY. The Guarantor hereby absolutely,
unconditionally and irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or otherwise, of all Obligations of LHPG, the Canadian Borrower and each
other Obligor under the Canadian Facility (each a "CANADIAN FACILITY
OBLIGOR" and, together with LHPG, a "GUARANTEED PARTY") now or hereafter
existing, whether for principal, interest, fees, expenses or otherwise
(including all such amounts which would become due but for the operation of
the automatic stay under Section 362(a) of the United
3
<PAGE>
States Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
Section 502(b) and Section 506(b) or analogous provisions under Canadian
law); PROVIDED, HOWEVER, that (sujbect to SECTION 2.4), immediately
following the Assumption, the Guarantor's guarantee of LHPG's Obligations
pursuant to this Guaranty shall terminate and LHPG shall no longer be a
Guaranteed Party under this Guaranty; and
(b) indemnifies and holds harmless each Secured Party for any and all
costs and expenses (including reasonable attorney's fees and expenses and
disbursements) incurred by such Secured Party in enforcing any rights under
this Guaranty except for any such costs, expenses and disbursements arising
by reason of the relevant indemnified party's gross negligence or willful
misconduct.
This Guaranty constitutes a guaranty of payment when due and not of collection,
and the Guarantor specifically agrees that it shall not be necessary or required
that any Secured Party exercise any right, assert any claim or demand or enforce
any remedy whatsoever against any Guaranteed Party (or any other Person) before
or as a condition to the obligations of the Guarantor hereunder.
SECTION 2.2. ACCELERATION OF GUARANTY. The Guarantor agrees that,
unless repayment of the Canadian Facility shall have occurred as specified in
SECTION 2.3, in the event of the dissolution or insolvency of the Canadian
Borrower, any other Canadian Facility Obligor or the Guarantor, or the inability
or failure of the Canadian Borrower, any other Canadian Facility Obligor or the
Guarantor to pay debts as they become due, or an assignment by the Canadian
Borrower, any other Canadian Facility Obligor or the Guarantor for the benefit
of creditors, or the commencement of any case or proceeding in respect of the
Canadian Borrower, any other Canadian Facility Obligor or the Guarantor under
any bankruptcy, insolvency or similar laws, and if such event shall occur at a
time when any of the Obligations of the Canadian Borrower and each other
Canadian Facility Obligor may not then be due and payable, the Guarantor agrees
that it will pay to the Lenders forthwith the full amount which would be payable
hereunder
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<PAGE>
by the Guarantor if all such Obligations were then due and payable.
SECTION 2.3. GUARANTY ABSOLUTE, ETC. This Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment, and shall remain in full force and effect until all Obligations of the
Canadian Borrower and each other Canadian Facility Obligor have been paid in
full in cash or cash collateralized in full, all obligations of the Guarantor
hereunder shall have been paid in full in cash or cash collateralized in full,
all Canadian Letters of Credit have been terminated or expired, all Rate
Protection Agreements entered into pursuant to the Credit Agreement in respect
of the Canadian Facility have been terminated and all Canadian Commitments shall
have terminated. The Guarantor guarantees that the Obligations of each
Guaranteed Party will be paid strictly in accordance with the terms of the
Credit Agreement and each other Loan Document under which they arise, regardless
of any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Secured Party with respect
thereto. The liability of the Guarantor under this Guaranty shall be absolute,
unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note or any other Loan Document or any other instrument or
document relating to any thereof;
(b) the failure of any Secured Party
(i) to assert any claim or demand or to enforce any right or
remedy against any Guaranteed Party or any other Person (including any
other guarantor (including the Guarantor)) under the provisions of the
Credit Agreement, any Note, any other Loan Document, any other
instrument or document relating to any thereof or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
(including the Guarantor) of, or collateral securing, any Obligations
of the Canadian Borrower or any other Guaranteed Party;
5
<PAGE>
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of any Guaranteed Party, or
any other extension, compromise or renewal of any Obligation of any
Guaranteed Party;
(d) any reduction, limitation, impairment or termination of any
Obligations of any Guaranteed Party for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be
subject to (and the Guarantor hereby waives any right to or claim of) any
defense or setoff, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence
affecting, any Obligations of any Guaranteed Party or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note, or any other Loan Document or any other instrument or document
relating to any thereof;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party
securing any of the Obligations of any Guaranteed Party; or
(g) any other circumstance which might otherwise constitute a defense
(other than the defense of payment in full of the Obligations of any
Guaranteed Party) available to, or a legal or equitable discharge of, any
Guaranteed Party, any surety or any guarantor.
SECTION 2.4. REINSTATEMENT, ETC. The Guarantor agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment (in whole or in part) of any of the Obligations of any
Guaranteed Party is rescinded or must otherwise be restored by any Secured
Party, upon the insolvency, bankruptcy or reorganization of any Guaranteed Party
or otherwise, all as though such payment had not been made.
6
<PAGE>
SECTION 2.5. WAIVER, ETC. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of any Guaranteed Party and this Guaranty and any requirement that
the Agents or any other Secured Party protect, secure, perfect or insure any
security interest or Lien, or any property subject thereto, or exhaust any right
or take any action against any Guaranteed Party or any other Person (including
any other guarantor) or entity or any collateral securing the Obligations of any
Guaranteed Party, as the case may be.
SECTION 2.6. POSTPONEMENT OF SUBROGATION, ETC. The Guarantor agrees
that it will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in cash of or cash collateralization in full of
all Obligations of the Canadian Borrower and each other Canadian Facility
Obligor, the termination, expiration or cash collateralization of all Canadian
Letters of Credit, the termination of all Rate Protection Agreements in respect
of the Canadian Facility and the termination of all Canadian Commitments. Any
amount paid to the Guarantor on account of any such subrogation rights prior to
the payment in full in cash of all Obligations of the Canadian Borrower and each
other Canadian Facility Obligor shall be held in trust for the benefit of the
Secured Parties and shall immediately be paid to the Agents for the benefit of
the Secured Parties and credited and applied against the Obligations of the
Canadian Borrower and each other Canadian Facility Obligor, whether matured or
unmatured, in accordance with the terms of the Credit Agreement; PROVIDED,
HOWEVER, that if
(a) the Guarantor has made payment to the Secured Parties of all or
any part of the Obligations of the Canadian Borrower or any other Canadian
Facility Obligor, and
(b) all Obligations of the Canadian Borrower and each other Canadian
Facility Obligor have been paid in full in cash or cash collateralization,
all Canadian Letters of Credit have been terminated, expired or cash
collateralized, all Rate Protection Agreements entered into pursuant to the
Credit Agreement in respect of
7
<PAGE>
Canadian Commitments have been terminated and all Canadian Commitments have
been permanently terminated,
each Secured Party agrees that, at the Guarantor's request, the Agents, on
behalf of the Secured Parties, will execute and deliver to the Guarantor
appropriate documents (without recourse and without representation or warranty)
necessary to evidence the transfer by subrogation to the Guarantor of an
interest in the Obligations of the Canadian Borrower and each other Canadian
Facility Obligor resulting from such payment by the Guarantor. In furtherance
of the foregoing, for so long as any Obligations of the Canadian Borrower or any
other Canadian Facility Obligor or any Canadian Commitments remain outstanding,
the Guarantor shall refrain from taking any action or commencing any proceeding
against the Canadian Borrower or any other Canadian Facility Obligor (or its
successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in the respect of payments made under this
Guaranty to any Secured Party.
SECTION 2.7. SUCCESSORS, TRANSFEREES AND ASSIGNS; TRANSFERS
OF CANADIAN NOTES, ETC. This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Agents and each
other Secured Party.
Without limiting the generality of the foregoing, any Lender may assign or
otherwise transfer (in whole or in part) any Canadian Commitment, Canadian Note
or Canadian Credit Extension held by it to any other Person or entity, and such
other Person or entity shall thereupon become vested with all rights and
benefits in respect thereof granted to such Lender under any Loan Document
(including this Guaranty) or otherwise, subject, however to the provisions of
Section 12.11 and Article XI of the Credit Agreement.
SECTION 2.8. JUDGMENT. The Guarantor hereby agrees that, with
respect to the Canadian Facility:
(a) if, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due in
8
<PAGE>
Canadian Dollars hereunder into another currency, then the rate of exchange
used shall be that at which the Canadian Agent, in accordance with normal
banking procedures could purchase Canadian Dollars with such other currency
on the Business Day preceding that on which final judgment is given; and
(b) the obligation of the Guarantor in respect of any sum due from it
to any Secured Party hereunder or any other Loan Document shall,
notwithstanding any judgment in a currency other than Canadian Dollars, be
discharged only to the extent that on the Business Day following receipt by
the Secured Party of any sum adjudged to be so due in a currency other than
Canadian Dollars such Secured Party may, in accordance with normal banking
procedures, purchase Canadian Dollars with such other currency; in the
event that the Canadian Dollars so purchased are less than the amount
originally due to any Secured Party in Canadian Dollars, the Guarantor, as
a separate obligation and notwithstanding any such judgment, hereby
indemnifies and holds harmless such Secured Party against such loss, and if
the Canadian Dollars so purchased exceed the sum originally due to such
Secured Party or holder in Canadian Dollars, such Secured Party shall remit
to the Guarantor such excess.
ARTICLE III
MISCELLANEOUS PROVISIONS
SECTION 3.1. LOAN DOCUMENT. This Guaranty is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof, including Article XII thereof.
SECTION 3.2. BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS;
ASSIGNMENT. In addition to, and not in limitation of, SECTION 2.7, this
Guaranty shall be binding upon the Guarantor and its successors, transferees and
assigns and shall inure to the benefit of and be enforceable by each Secured
Party and its respective successors, transferees and assigns (to the full extent
provided
9
<PAGE>
pursuant to SECTION 2.7); PROVIDED, HOWEVER, that, except as permitted under the
Credit Agreement, the Guarantor may not assign any of its obligations hereunder
without the prior written consent of all Lenders.
SECTION 3.3. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Guaranty, nor consent to any departure by the Guarantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Guarantor and the Agents (on behalf of the Lenders or the
Required Lenders, as the case may be), and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 3.4. NOTICES. All notices and other communications provided
for hereunder shall be in writing or by facsimile and, mailed or telecopied or
delivered, with respect to the Guarantor, at the address of the Guarantor
specified in the Credit Agreement, and with respect to the Agents, to the
addresses of the Agents specified in the Credit Agreement, or, with respect to
the Guarantor or the Agents, at such other address or facsimile number as shall
be designated by such party in a written notice to each other party complying as
to delivery with the terms of this Section. All such notices and other
communications, when mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received; any such notice or communication, if transmitted by telecopier,
shall be deemed given when transmitted and electronically confirmed.
SECTION 3.5. NO WAIVER; REMEDIES. In addition to, and not in
limitation of, SECTION 2.3 and SECTION 2.5, no failure on the part of any
Secured Party to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 3.6. CAPTIONS. Section captions used in this Guaranty are
for convenience of reference only, and shall not affect the construction of this
Guaranty.
10
<PAGE>
SECTION 3.7. SEVERABILITY. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 3.8. COUNTERPARTS. This Guaranty may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SECTION 3.9. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS GUARANTY
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS GUARANTY AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
11
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
LEINER HEALTH PRODUCTS INC.
By /s/ William B. Towne
-----------------------------------------
Name: William B. Towne
Title: Executive Vice President-Finance
12
<PAGE>
Exhibit 4.14
[EXECUTION COPY]
PARENT GUARANTY
---------------
This PARENT GUARANTY (as amended, supplemented, amended and restated
or otherwise modified from time to time, this "GUARANTY"), dated as of June 30,
1997, is made by PLI HOLDINGS INC., a Delaware corporation (the "GUARANTOR"), in
favor of the Agents (as defined below) for each of the Secured Parties (as
defined below).
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented, amended and restated or otherwise modified from time
to time, the "CREDIT AGREEMENT"), among Leiner Health Products Group Inc., a
Delaware corporation ("LHPG" or the "U.S. BORROWER" (prior to the Assumption)),
Vita Health Company (1985) Ltd., a Manitoba corporation (the "CANADIAN
BORROWER", and together with the U.S. Borrower, the "BORROWERS"), the various
financial institutions as are or may become parties thereto which extend a
Commitment under the U.S. Facility (collectively, the "U.S. LENDERS"), the
various financial institutions as are or may become parties thereto which extend
a Commitment under the Canadian Facility (collectively, the "CANADIAN LENDERS",
and together with the U.S. Lenders, the "LENDERS"), The Bank of Nova Scotia
("SCOTIABANK"), as agent for the U.S. Lenders under the U.S. Facility (in such
capacity, the "U.S. AGENT"), and Scotiabank, as agent for the Canadian Lenders
under the Canadian Facility (in such capacity, the "CANADIAN AGENT", and
together with the U.S. Agent, collectively, the "AGENTS"), the Lenders and the
Issuers have extended Commitments to make Credit Extensions to the Borrowers;
WHEREAS, as contemplated by the Credit Agreement, immediately
following the making of the initial Credit Extensions, Leiner Health Products
Inc., a Delaware corporation ("LEINER") and LHPG have delivered the Assumption
Agreement, pursuant to which the Guarantor has assumed (the "ASSUMPTION") the
rights and obligations of
<PAGE>
Exhibit 4.13
LHPG as (and has become) the "U.S. Borrower" under the Credit Agreement;
WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit Extension) and the execution and
delivery of the Assumption Agreement under the Credit Agreement, the Guarantor
is required to execute and deliver this Guaranty; and
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty;
NOW THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Lenders and the Issuers
to make Credit Extensions (including the initial Credit Extensions) to the
Borrowers pursuant to the Credit Agreement, and to induce Secured Parties to
enter into Rate Protection Agreements, if any, the Guarantor agrees, for the
benefit of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"AGENTS" is defined in the FIRST RECITAL.
"BORROWERS" is defined in the FIRST RECITAL.
"CANADIAN AGENT" is defined in the FIRST RECITAL.
"CANADIAN BORROWER" is defined in the FIRST RECITAL.
"CANADIAN LENDERS" is defined in the FIRST RECITAL.
2
<PAGE>
Exhibit 4.13
"CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"GUARANTOR" is defined in the PREAMBLE.
"GUARANTY" is defined in the PREAMBLE.
"LENDERS" is defined in the FIRST RECITAL.
"SCOTIABANK" is defined in the FIRST RECITAL.
"SECURED PARTY" means, as the context may require, the Lenders, the
Issuers, the Agents, each counterparty to a Rate Protection Agreement that is
(or at the time such Rate Protection Agreement is entered into, was) a Lender or
an Affiliate thereof and (in each case), each of their respective successors,
permitted transferees and permitted assigns.
"U.S. AGENT" is defined in the FIRST RECITAL.
"U.S. BORROWER" is defined in the FIRST RECITAL.
"U.S. LENDERS" is defined in the FIRST RECITAL.
SECTION 1.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Guaranty, including
its preamble and recitals, have the meanings provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. GUARANTY. The Guarantor hereby absolutely,
unconditionally and irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or
3
<PAGE>
Exhibit 4.13
otherwise, of all Obligations of the Borrowers and each other Obligor now
or hereafter existing, whether for principal, interest, fees, expenses or
otherwise (including all such amounts which would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation of Sections
502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. Section
502(b) and Section 506(b)), and
(b) indemnifies and holds harmless each Secured Party and each holder
of a Note for any and all costs and expenses (including reasonable
attorney's fees and expenses and disbursements) incurred by such Secured
Party or such holder, as the case may be, in enforcing any rights under
this Guaranty except for any such costs, expenses and disbursements arising
by reason of the relevant indemnified party's gross negligence or willful
misconduct.
This Guaranty constitutes a guaranty of payment when due and not of collection,
and the Guarantor specifically agrees that it shall not be necessary or required
that any Secured Party or any holder of any Note exercise any right, assert any
claim or demand or enforce any remedy whatsoever against any Borrower or any
other Obligor (or any other Person) before or as a condition to the obligations
of the Guarantor hereunder.
SECTION 2.2. ACCELERATION OF GUARANTY. The Guarantor agrees that, in
the event of the dissolution or insolvency of any Borrower, any other Obligor or
the Guarantor (but excluding any liquidation, dissolution, merger or other
action permitted pursuant to Section 9.2.10 of the Credit Agreement), or the
inability or failure of any Borrower, any other Obligor or the Guarantor to pay
debts as they become due, or an assignment by any Borrower, any other Obligor or
the Guarantor for the benefit of creditors, or the commencement of any case or
proceeding in respect of any Borrower, any other Obligor or the Guarantor under
any bankruptcy, insolvency or similar laws, and if such event shall occur at a
time when any of the Obligations of the Borrowers and each other Obligor may not
then be due and
4
<PAGE>
Exhibit 4.13
payable, the Guarantor agrees that it will pay to the Lenders forthwith the full
amount which would be payable hereunder by the Guarantor if all such Obligations
were then due and payable.
SECTION 2.3. GUARANTY ABSOLUTE, ETC. This Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment, and shall remain in full force and effect until all Obligations of the
Borrowers and each other Obligor have been paid in full in cash or cash
collateralization, all obligations of the Guarantor hereunder shall have been
paid in full in cash or cash collateralization, all Letters of Credit have been
terminated or expired, all Rate Protection Agreements have been terminated and
all Commitments shall have terminated. The Guarantor guarantees that the
Obligations of the Borrowers and each other Obligor will be paid strictly in
accordance with the terms of the Credit Agreement and each other Loan Document
under which they arise, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of any Secured Party or any holder of any Note with respect thereto. The
liability of the Guarantor under this Guaranty shall be absolute, unconditional
and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note, any other Loan Document or any other instrument or
document relating to any thereof;
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against any Borrower, any other Obligor or any other Person
(including any other guarantor (including the Guarantor)) under the
provisions of the Credit Agreement, any Note, any other Loan Document,
any other instrument or document relating to any thereof or otherwise,
or
5
<PAGE>
Exhibit 4.13
(ii) to exercise any right or remedy against any other guarantor
(including the Guarantor) of, or collateral securing, any Obligations
of the Borrowers or any other Obligor;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Borrowers or any other
Obligor, or any other extension, compromise or renewal of any Obligation of
the Borrowers or any other Obligor;
(d) any reduction, limitation, impairment or termination of any
Obligations of the Borrowers or any other Obligor for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and the Guarantor hereby waives any right to or
claim of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Obligations of the Borrowers, any other Obligor
or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note, any other Loan Document or any other instrument or document
relating to any thereof;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party or
any holder of any Note securing any of the Obligations of the Borrowers or
any other Obligor; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, any Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.4. REINSTATEMENT, ETC. The Guarantor agrees that this
Guaranty shall continue to be effective or
6
<PAGE>
Exhibit 4.13
be reinstated, as the case may be, if at any time any payment (in whole or in
part) of any of the Obligations is rescinded or must otherwise be restored by
any Secured Party or any holder of any Note, upon the insolvency, bankruptcy or
reorganization of any Borrower, any other Obligor or otherwise, all as though
such payment had not been made.
SECTION 2.5. WAIVER, ETC. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of the Borrowers or any other Obligor and this Guaranty and any
requirement that the Agents, any other Secured Party or any holder of any Note
protect, secure, perfect or insure any security interest or Lien, or any
property subject thereto, or exhaust any right or take any action against any
Borrower, any other Obligor or any other Person (including any other guarantor)
or entity or any collateral securing the Obligations of the Borrowers or any
other Obligor, as the case may be.
SECTION 2.6. POSTPONEMENT OF SUBROGATION, ETC. The Guarantor agrees
that it will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in cash of or cash collateralization in full of
all Obligations of the Borrowers and each other Obligor, the termination,
expiration or cash collateralization of all Letters of Credit, the termination
of all Rate Protection Agreements and the termination of all Commitments. Any
amount paid to the Guarantor on account of any such subrogation rights prior to
the payment in full in cash of all Obligations of the Borrowers and each other
Obligor shall be held in trust for the benefit of the Secured Parties and each
holder of a Note and shall immediately be paid to the Agents for the benefit of
the Secured Parties and each holder of a Note and credited and applied against
the Obligations of the Borrowers and each other Obligor, whether matured or
unmatured, in accordance with the terms of the Credit Agreement; PROVIDED,
HOWEVER, that if
(a) the Guarantor has made payment to the Secured Parties and each
holder of a Note of all or any part of
7
<PAGE>
Exhibit 4.13
the Obligations of the Borrowers or any other Obligor, and
(b) all Obligations of the Borrowers and each other Obligor have been
paid in full in cash or cash collateralization in full, all Letters of
Credit have been terminated or expired, all Rate Protection Agreements have
been terminated and all Commitments have been permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Guarantor's
request, the Agents, on behalf of the Secured Parties and the holders of the
Notes, will execute and deliver to the Guarantor appropriate documents (without
recourse and without representation or warranty) necessary to evidence the
transfer by subrogation to the Guarantor of an interest in the Obligations of
the Borrowers and each other Obligor resulting from such payment by the
Guarantor. In furtherance of the foregoing, for so long as any Obligations or
Commitments remain outstanding, the Guarantor shall refrain from taking any
action or commencing any proceeding against any Borrower or any other Obligor
(or its successors or assigns, whether in connection with a bankruptcy
proceeding or otherwise) to recover any amounts in the respect of payments made
under this Guaranty to any Secured Party or any holder of a Note.
SECTION 2.7. SUCCESSORS, TRANSFEREES AND ASSIGNS; TRANSFERS OF NOTES,
ETC. This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Agents and each
other Secured Party.
Without limiting the generality of the foregoing, any Lender may assign or
otherwise transfer (in whole or in part) any Commitment, Note or Credit
Extension held by it to any other Person or entity, and such other Person or
entity shall thereupon become vested with all rights and benefits in respect
thereof granted to such Lender under any Loan Document (including this Guaranty)
or otherwise, subject,
8
<PAGE>
Exhibit 4.13
however, to the provisions of Section 12.11 and Article XI of the Credit
Agreement.
SECTION 2.8. JUDGMENT. The Guarantor hereby agrees that, with
respect to the Canadian Facility:
(a) if, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due in Canadian Dollars hereunder into another
currency, then the rate of exchange used shall be that at which the Agents,
in accordance with normal banking procedures could purchase Canadian
Dollars with such other currency on the Business Day preceding that on
which final judgment is given; and
(b) the obligation of the Guarantor in respect of any sum due from it
to any Secured Party or any holder of a Canadian Note hereunder or any
other Loan Document shall, notwithstanding any judgment in a currency other
than Canadian Dollars, be discharged only to the extent that on the
Business Day following receipt by the Secured Party or holder, as the case
may be, of any sum adjudged to be so due in a currency other than Canadian
Dollars such Secured Party or holder, as the case may be, may, in
accordance with normal banking procedures, purchase Canadian Dollars with
such other currency; in the event that the Canadian Dollars so purchased
are less than the amount originally due to any Secured Party or holder of a
Canadian Note in Canadian Dollars, the Guarantor, as a separate obligation
and notwithstanding any such judgment, hereby indemnifies and holds
harmless such Secured Party and holder against such loss, and if the
Canadian Dollars so purchased exceed the sum originally due to such Secured
Party or holder in Canadian Dollars, such Secured Party or holder, as the
case may be, shall remit to the Guarantor such excess.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
9
<PAGE>
Exhibit 4.13
In order to induce the Lenders, each Issuer and the Agents to enter
into the Credit Agreement and make the Credit Extensions thereunder, and the
applicable Lender (or its Affiliate) to enter into Rate Protection Agreements,
the Guarantor represents and warrants to each of the Secured Parties as set
forth in this ARTICLE III.
SECTION 3.1. ORGANIZATION, ETC. The Guarantor is a corporation
validly formed and existing and in good standing under the laws of the state or
jurisdiction of its formation, is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the nature of its
business requires such qualification (except where the failure to so qualify
would not, individually or in the aggregate, have a Material Adverse Effect),
and has full power and authority and holds all requisite governmental licenses,
permits and other approvals to enter into and perform its obligations under this
Guaranty and each other Loan Document to which it is a party and (except to the
extent the failure to have any such license, permit or other approval would not
have a Material Adverse Effect), to own and hold under lease its property and to
conduct its business substantially as currently conducted by it.
SECTION 3.2. GOVERNMENT APPROVAL, REGULATION, ETC. The Guarantor is
not an "investment company" within the meaning of the Investment Company Act of
1940, as amended, or 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.
SECTION 3.3. LITIGATION, LABOR CONTROVERSIES, ETC. There is no
pending or, to the knowledge of the Guarantor, threatened litigation, action,
proceeding, or labor controversy (i) affecting the Guarantor, or any of its
properties, businesses, assets or revenues, which would reasonably be expected
to have a Material Adverse Effect or (ii) which would adversely affect the
legality, validity or enforceability of this Guaranty, the Credit Agreement, the
Notes, any other Loan Document or the Purchase Agreement.
10
<PAGE>
Exhibit 4.13
SECTION 3.4. SUBSIDIARIES. On the Closing Date, the Guarantor has no
direct Subsidiaries, except the U.S. Borrower.
SECTION 3.5. SHELL STATUS. On and at all times prior to the
Effective Date, the Guarantor has not engaged in any business or activity, or
incurred any Indebtedness or other obligations of any type, except in connection
with the ownership of the outstanding Capital Stock of the U.S. Borrower.
SECTION 3.6. TAXES. The Guarantor has filed all material tax returns
and reports required by law to have been filed by it and has paid all taxes and
governmental charges thereby shown to be due and owing, except any such taxes or
charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books.
ARTICLE IV
COVENANTS, ETC.
The Guarantor covenants and agrees that, so long as any portion of the
Obligations shall remain unpaid, any Letters of Credit shall be outstanding, any
Rate Protection Agreement shall remain in full force and effect or any Lender
shall have any outstanding Commitment, the Guarantor will, unless the Required
Lenders shall otherwise consent in writing, perform the obligations set forth in
this ARTICLE IV.
SECTION 4.1. MAINTENANCE OF CORPORATE EXISTENCE. The Guarantor will
cause to be taken all actions necessary to maintain and preserve at all times
its corporate existence.
SECTION 4.2. COMPLIANCE WITH LAWS, ETC. The Guarantor will, and will
cause each of its Subsidiaries to, comply in all material respects with all
applicable laws,
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Exhibit 4.13
rules, regulations and orders, such compliance to include (without limitation):
(a) the maintenance and preservation of its corporate existence and
qualification as a foreign corporation, except where the failure to so
qualify could not reasonably be expected to have a Material Adverse Effect;
and
(b) the payment, before the same become delinquent, of all material
taxes, assessments and governmental charges imposed upon it or upon its
property except to the extent being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall
have been set aside on its books.
SECTION 4.3. NET EQUITY PROCEEDS. The Guarantor will, concurrently
with the receipt of any Net Equity Proceeds, cause to be made a mandatory
prepayment of the U.S. Term Loans to the extent required in accordance with
clause (f) of Section 5.1.1 of the Credit Agreement.
SECTION 4.4. BUSINESS ACTIVITIES. The Guarantor will not engage in
any business activity other than in connection with the Guarantor's continuing
ownership of the issued and outstanding shares of Capital Stock of the U.S.
Borrower.
SECTION 4.5. INDEBTEDNESS. The Guarantor will not create, incur,
assume or suffer to exist or otherwise become or be liable in respect of any
Indebtedness other than in respect of the Obligations.
SECTION 4.6. LIENS, ETC. The Guarantor will not create, incur,
assume, or enter into any agreement which by its terms creates, incurs or
assumes any Lien upon any of its assets (including any shares of Capital Stock
of the U.S. Borrower), whether now owned or hereafter acquired by the Guarantor
except as permitted pursuant to Section 9.2.3 (only clause (e) of Section 9.2.3
with respect to the Capital Stock of the U.S. Borrower) of the Credit Agreement;
nor will the Guarantor sell, transfer, contribute or
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Exhibit 4.13
otherwise dispose of or convey (or grant any options, warrants or other rights
with respect thereto) any shares of Capital Stock of the U.S. Borrower (except
pursuant to a transaction in which all Obligations will be simultaneously
discharged in full, all Letters of Credit have been terminated or cash
collateralized, all Rate Protection Agreements have been terminated and all
Commitments will be simultaneously terminated in full).
SECTION 4.7. INVESTMENTS. The Guarantor will not make, incur, assume
or suffer to exist any Investment in any other Person, except Investments in the
U.S Borrower.
SECTION 4.8. FIXED ASSETS. The Guarantor will not make or commit to
make any Capital Expenditure or enter into any arrangement which would give rise
to any Capitalized Lease Liability.
SECTION 4.9. RENTAL OBLIGATIONS. The Guarantor will not enter into
any arrangement which involves the leasing by the Guarantor from any lessor of
any real or personal property (or any interest therein) other than the lease of
office space incidental to its ordinary course of business.
SECTION 4.10. CONSOLIDATION, MERGER. The Guarantor will not wind-up,
liquidate or dissolve, consolidate or amalgamate with, or merge into or with any
other corporation or purchase or otherwise acquire all or any part of the assets
of any Person (or division thereof).
SECTION 4.11. ASSET DISPOSITIONS, ETC. The Guarantor will not sell,
transfer, lease or otherwise dispose of, or grant to any Person options,
warrants or other rights with respect to any of its assets, unless otherwise
permitted by the Credit Agreement.
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Exhibit 4.13
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. LOAN DOCUMENT. This Guaranty is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof, including Article XII thereof.
SECTION 5.2. BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS;
ASSIGNMENT. In addition to, and not in limitation of, SECTION 2.7, this
Guaranty shall be binding upon the Guarantor and its successors, transferees and
assigns and shall inure to the benefit of and be enforceable by each Secured
Party and each holder of a Note and their respective successors, transferees and
assigns (to the full extent provided pursuant to SECTION 2.7); PROVIDED,
HOWEVER, that the Guarantor may not assign any of its obligations hereunder
without the prior written consent of all Lenders.
SECTION 5.3. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Guaranty, nor consent to any departure by the Guarantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Guarantor and the Agents (on behalf of the Lenders or the
Required Lenders, as the case may be), and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 5.4. NOTICES. All notices and other communications provided
for hereunder shall be in writing or by facsimile and, mailed or telecopied or
delivered, with respect to the Guarantor, in care of the U.S. Borrower at the
address of the U.S. Borrower specified in the Credit Agreement, and with respect
to the Agents, to the addresses of the Agents specified in the Credit Agreement,
or, with respect to the Guarantor or the Agents, at such other address or
facsimile number as shall be designated by such party in a written notice to
each other party complying as to delivery with the terms of this Section. All
such notices and other communications, when mailed and properly addressed with
postage prepaid or if properly addressed and
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Exhibit 4.13
sent by pre-paid courier service, shall be deemed given when received; any such
notice or communication, if transmitted by telecopier, shall be deemed given
when transmitted and electronically confirmed.
SECTION 5.5. NO WAIVER; REMEDIES. In addition to, and not in
limitation of, SECTION 2.3 and SECTION 2.5, no failure on the part of any
Secured Party or any holder of a Note to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 5.6. CAPTIONS. Section captions used in this Guaranty are
for convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 5.7. SETOFF. In addition to, and not in limitation of, any
rights of any Secured Party or any holder of a Note under applicable law, each
Secured Party and each such holder shall, upon the occurrence of any Default
described in any of clauses (a) through (d) of Section 10.1.9 of the Credit
Agreement or with the consent of the Required Lenders, any Event of Default,
have the right to appropriate and apply to the payment of the obligations of the
Guarantor owing to it hereunder, whether or not then due, and the Guarantor
hereby grants to each Secured Party and each such holder a continuing security
interest in, any and all balances, credits, deposits, accounts or moneys of the
Guarantor then or thereafter maintained with such Secured Party, or such holder
or any agent or bailee for such Secured Party or such holder; PROVIDED, HOWEVER,
that any such appropriation and application shall be subject to the provisions
of Section 6.8 of the Credit Agreement.
SECTION 5.8. SEVERABILITY. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity,
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Exhibit 4.13
without invalidating the remainder of such provision or the remaining provisions
of this Guaranty.
SECTION 5.9. COUNTERPARTS. This Guaranty may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SECTION 5.10. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS GUARANTY
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS GUARANTY AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 5.11. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
GUARANTY OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE SECURED PARTIES
OR THE GUARANTOR SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF
THE STATE OF NEW YORK, NEW YORK COUNTY OR IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE AGENTS' OPTION, IN THE
COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY MAY BE FOUND. THE GUARANTOR
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK, NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS
SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH SUCH LITIGATION. THE GUARANTOR HEREBY IRREVOCABLY
APPOINTS CT CORPORATION SYSTEM (THE "PROCESS AGENT"), WITH AN OFFICE ON THE DATE
HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, UNITED STATES, AS ITS AGENT
TO RECEIVE, ON THE GUARANTOR'S BEHALF AND ON BEHALF OF THE GUARANTOR'S PROPERTY,
SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND
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Exhibit 4.13
ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH
SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO THE
GUARANTOR IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND
THE GUARANTOR HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO
ACCEPT SUCH SERVICE ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, THE
GUARANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED
MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW
YORK. THE GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED
TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE GUARANTOR HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN
AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE
GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS GUARANTY AND THE OTHER LOAN DOCUMENTS.
SECTION 5.12. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR THE GUARANTOR. THE GUARANTOR ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE
CREDIT AGREEMENT.
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Exhibit 4.13
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
PLI HOLDINGS INC.
By /s/ William B. Towne
------------------------------------------
Name: William B. Towne
Title: Vice President
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Exhibit 4.15
[EXECUTION COPY]
CANADIAN HOLDINGS GUARANTY
This CANADIAN HOLDINGS GUARANTY (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "GUARANTY"), dated as of
June 30, 1997, is made by VH HOLDINGS INC., a Manitoba corporation (the
"GUARANTOR"), in favor of THE BANK OF NOVA SCOTIA ("SCOTIABANK"), as agent (in
such capacity, the "CANADIAN AGENT") for each of the Secured Parties (as defined
below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented, amended and restated or otherwise modified from time
to time, the "CREDIT AGREEMENT"), among Leiner Health Products Group Inc., a
Delaware corporation ("LHPG" or the "U.S. BORROWER" (prior to the Assumption)),
Vita Health Company (1985) Ltd., a Manitoba corporation (the "CANADIAN
BORROWER", and together with the U.S. Borrower, the "BORROWERS"), the various
financial institutions as are or may become parties thereto which extend a
Commitment under the U.S. Facility (collectively, the "U.S. LENDERS"), the
various financial institutions as are or may become parties thereto which extend
a Commitment under the Canadian Facility (collectively, the "CANADIAN LENDERS",
and together with the U.S. Lenders, the "LENDERS"), the Canadian Agent and
Scotiabank, as agent for the U.S. Lenders under the U.S. Facility (in such
capacity, the "U.S. AGENT", and together with the Canadian Agent, collectively,
the "AGENTS"), the Lenders and the Issuers have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as contemplated by the Credit Agreement, immediately
following the making of the initial Credit Extensions, Leiner Health Products
Inc., a Delaware corporation ("LEINER") and LHPG have delivered the Assumption
Agreement, pursuant to which Leiner has assumed (the "ASSUMPTION") the rights
and obligations of LHPG as (and has become) the "U.S. Borrower" under the Credit
Agreement;
WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit
<PAGE>
Extension) and the execution and delivery of the Assumption Agreement under the
Credit Agreement, the Guarantor is required to execute and deliver this
Guaranty; and
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrowers by
the Lenders and the Issuers pursuant to the Credit Agreement;
NOW THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Lenders and the Issuers
to make Credit Extensions (including the initial Credit Extensions) to the
Borrowers pursuant to the Credit Agreement, and to induce Secured Parties to
enter into Rate Protection Agreements, if any, the Guarantor agrees, for the
benefit of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"AGENTS" is defined in the FIRST RECITAL.
"BORROWERS" is defined in the FIRST RECITAL.
"CANADIAN AGENT" is defined in the PREAMBLE.
"CANADIAN BORROWER" is defined in the FIRST RECITAL.
"CANADIAN LENDERS" is defined in the FIRST RECITAL.
2
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"CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"GUARANTOR" is defined in the PREAMBLE.
"GUARANTY" is defined in the PREAMBLE.
"LENDERS" is defined in the FIRST RECITAL.
"SCOTIABANK" is defined in the PREAMBLE.
"SECURED PARTY" means, as the context may require, the Canadian
Lenders, the Canadian Issuers, the Agents, each counterparty to a Rate
Protection Agreement that is (or at the time such Rate Protection Agreement is
entered into, was) a Canadian Lender or an Affiliate thereof and (in each case),
each of their respective successors, permitted transferees and permitted
assigns.
"U.S. AGENT" is defined in the FIRST RECITAL.
"U.S. BORROWER" is defined in the FIRST RECITAL.
"U.S. LENDERS" is defined in the FIRST RECITAL.
SECTION 1.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Guaranty, including
its preamble and recitals, have the meanings provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. GUARANTY. The Guarantor hereby absolutely,
unconditionally and irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or
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otherwise, of all Obligations of the Canadian Borrower now or hereafter
existing, whether for principal, interest, fees, expenses or otherwise
(including all such amounts which would become due but for the operation of
the automatic stay under Section 362(a) of the United States Bankruptcy
Code, 11 U.S.C. Section 362(a), and the operation of Sections 502(b) and
506(b) of the United States Bankruptcy Code, 11 U.S.C. Section 502(b) and
Section 506(b) or analogous provisions under Canadian law), and
(b) indemnifies and holds harmless each Secured Party and each holder
of a Canadian Note for any and all costs and expenses (including reasonable
attorney's fees and expenses and disbursements) incurred by such Secured
Party or such holder, as the case may be, in enforcing any rights under
this Guaranty except for any such costs, expenses and disbursements arising
by reason of the relevant indemnified party's gross negligence or willful
misconduct.
This Guaranty constitutes a guaranty of payment when due and not of collection,
and the Guarantor specifically agrees that it shall not be necessary or required
that any Secured Party or any holder of any Canadian Note exercise any right,
assert any claim or demand or enforce any remedy whatsoever against the Canadian
Borrower (or any other Person) before or as a condition to the obligations of
the Guarantor hereunder.
SECTION 2.2. ACCELERATION OF GUARANTY. The Guarantor agrees that, in
the event of the dissolution or insolvency of the Canadian Borrower or the
Guarantor (but excluding any liquidation, dissolution, merger or other action
permitted pursuant to Section 9.2.10 of the Credit Agreement), or the inability
or failure of the Canadian Borrower or the Guarantor to pay debts as they become
due, or an assignment by the Canadian Borrower or the Guarantor for the benefit
of creditors, or the commencement of any case or proceeding in respect of the
Canadian Borrower or the Guarantor under any bankruptcy, insolvency or similar
laws, and if such event shall occur at a time when any of the Obligations of the
Canadian Borrower may not then be due and payable, the Guarantor agrees that it
will pay to the Lenders forthwith the full amount which would be payable
4
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hereunder by the Guarantor if all such Obligations were then due and payable.
SECTION 2.3. GUARANTY ABSOLUTE, ETC. This Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment, and shall remain in full force and effect until all Obligations of the
Canadian Borrower have been paid in full in cash or cash collateralization in
full, all obligations of the Guarantor hereunder shall have been paid in full in
cash or cash collateralization in full, all Canadian Letters of Credit have been
terminated or expired, all Rate Protection Agreements in respect of Canadian
Commitments have been terminated and all Canadian Commitments shall have
terminated. The Guarantor guarantees that the Obligations of the Canadian
Borrower will be paid strictly in accordance with the terms of the Credit
Agreement and each other Loan Document under which they arise, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Secured Party or any holder of
any Canadian Note with respect thereto. The liability of the Guarantor under
this Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Canadian Note or any other Loan Document or any other
instrument or document relating to any thereof;
(b) the failure of any Secured Party or any holder of any Canadian
Note
(i) to assert any claim or demand or to enforce any right or
remedy against the Canadian Borrower or any other Person (including
any other guarantor (including the Guarantor)) under the provisions of
the Credit Agreement, any Canadian Note, any other Loan Document, any
other instrument or document relating to any thereof or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
(including the Guarantor) of,
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or collateral securing, any Obligations of the Canadian Borrower;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Canadian Borrower, or
any other extension, compromise or renewal of any Obligation of the
Canadian Borrower;
(d) any reduction, limitation, impairment or termination of any
Obligations of the Canadian Borrower for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be
subject to (and the Guarantor hereby waives any right to or claim of) any
defense or setoff, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence
affecting, any Obligations of the Canadian Borrower or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Canadian Note or any other Loan Document or any other instrument or
document relating to any thereof;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party or
any holder of any Canadian Note securing any of the Obligations of the
Canadian Borrower; or
(g) any other circumstance which might otherwise constitute a defense
(other than the defense of payment in full of the Obligations of the
Canadian Borrower) available to, or a legal or equitable discharge of, the
Canadian Borrower, any surety or any guarantor.
SECTION 2.4. REINSTATEMENT, ETC. The Guarantor agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment (in whole or in part) of any of the Obligations of the
Canadian Borrower is rescinded or must otherwise be
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<PAGE>
restored by any Secured Party or any holder of any Canadian Note, upon the
insolvency, bankruptcy or reorganization of the Canadian Borrower or otherwise,
all as though such payment had not been made.
SECTION 2.5. WAIVER, ETC. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of the Canadian Borrower and this Guaranty and any requirement that
the Canadian Agent, any other Secured Party or any holder of any Canadian Note
protect, secure, perfect or insure any security interest or Lien, or any
property subject thereto, or exhaust any right or take any action against the
Canadian Borrower or any other Person (including any other guarantor) or entity
or any collateral securing the Obligations of the Canadian Borrower.
SECTION 2.6. POSTPONEMENT OF SUBROGATION, ETC. The Guarantor agrees
that it will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in cash of or cash collateralization in full of
all Obligations of the Canadian Borrower, the termination, expiration or cash
collateralization of all Canadian Letters of Credit, the termination of all Rate
Protection Agreements in respect of Canadian Commitments and the termination of
all Canadian Commitments. Any amount paid to the Guarantor on account of any
such subrogation rights prior to the payment in full in cash of all Obligations
of the Canadian Borrower shall be held in trust for the benefit of the Secured
Parties and each holder of a Canadian Note and shall immediately be paid to the
Canadian Agent for the benefit of the Secured Parties and each holder of a
Canadian Note and credited and applied against the Obligations of the Canadian
Borrower, whether matured or unmatured, in accordance with the terms of the
Credit Agreement; PROVIDED, HOWEVER, that if
(a) the Guarantor has made payment to the Secured Parties and each
holder of a Canadian Note of all or any part of the Obligations of the
Canadian Borrower, and
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(b) all Obligations of the Canadian Borrower have been paid in full in
cash or cash collateralization in full, all Canadian Letters of Credit have
been terminated or expired, all Rate Protection Agreements in respect of
Canadian Commitments have been terminated and all Canadian Commitments have
been permanently terminated,
each Secured Party and each holder of a Canadian Note agrees that, at the
Guarantor's request, the Canadian Agent, on behalf of the Secured Parties and
the holders of the Canadian Notes, will execute and deliver to the Guarantor
appropriate documents (without recourse and without representation or warranty)
necessary to evidence the transfer by subrogation to the Guarantor of an
interest in the Obligations of the Canadian Borrower resulting from such payment
by the Guarantor. In furtherance of the foregoing, for so long as any
Obligations of the Canadian Borrower or any Canadian Commitments remain
outstanding, the Guarantor shall refrain from taking any action or commencing
any proceeding against the Canadian Borrower (or its successors or assigns,
whether in connection with a bankruptcy proceeding or otherwise) to recover any
amounts in the respect of payments made under this Guaranty to any Secured Party
or any holder of a Canadian Note.
SECTION 2.7. SUCCESSORS, TRANSFEREES AND ASSIGNS; TRANSFERS
OF CANADIAN NOTES, ETC. This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Canadian Agent
and each other Secured Party.
Without limiting the generality of the foregoing, any Lender may assign or
otherwise transfer (in whole or in part) any Canadian Commitment, Canadian Note
or Canadian Credit Extension held by it to any other Person or entity, and such
other Person or entity shall thereupon become vested with all rights and
benefits in respect thereof granted to such Lender under any Loan Document
(including this Guaranty) or otherwise, subject, however, to the provisions of
Section 12.11 and Article XI of the Credit Agreement.
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SECTION 2.8. JUDGMENT. The Guarantor hereby agrees that, with
respect to the Canadian Facility:
(a) if, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due in Canadian Dollars hereunder into another
currency, then the rate of exchange used shall be that at which the
Canadian Agent, in accordance with normal banking procedures could purchase
Canadian Dollars with such other currency on the Business Day preceding
that on which final judgment is given; and
(b) the obligation of the Guarantor in respect of any sum due from it
to any Secured Party hereunder or any other Loan Document shall,
notwithstanding any judgment in a currency other than Canadian Dollars, be
discharged only to the extent that on the Business Day following receipt by
the Secured Party of any sum adjudged to be so due in a currency other than
Canadian Dollars such Secured Party may, in accordance with normal banking
procedures, purchase Canadian Dollars with such other currency; in the
event that the Canadian Dollars so purchased are less than the amount
originally due to any Secured Party in Canadian Dollars, the Guarantor, as
a separate obligation and notwithstanding any such judgment, hereby
indemnifies and holds harmless such Secured Party against such loss, and if
the Canadian Dollars so purchased exceed the sum originally due to such
Secured Party or holder in Canadian Dollars, such Secured Party shall remit
to the Guarantor such excess.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby
represents and warrants to each Secured Party that the representations and
warranties contained in Article VIII of the Credit Agreement, insofar as the
representations and warranties contained therein are applicable to the Guarantor
and its properties, are true and correct in all material respects, each such
representation and warranty set forth in such Article (insofar as
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applicable as aforesaid) and all other terms of the Credit Agreement to which
reference is made therein, together with all related definitions and ancillary
provisions, being hereby incorporated into this Guaranty by reference as though
specifically set forth in this Article.
ARTICLE IV
COVENANTS, ETC.
SECTION 4.1. AFFIRMATIVE COVENANTS. The Guarantor covenants and
agrees that, so long as any portion of the Obligations of the Canadian Borrower
shall remain unpaid, any Canadian Letters of Credit shall be outstanding, any
Rate Protection Agreement in respect of the Canadian Commitments shall remain in
full force and effect or any Canadian Lender shall have any outstanding
Commitment, the Guarantor will, unless the Required Lenders shall otherwise
consent in writing, perform, comply with and be bound by all of the agreements,
covenants and obligations contained in Article IX of the Credit Agreement which
are applicable to the Guarantor or its properties, each such agreement, covenant
and obligation contained in such Article and all other terms of the Credit
Agreement to which reference is made herein, together with all related
definitions and ancillary provisions, being hereby incorporated into this
Guaranty by reference as though specifically set forth in this Article.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. LOAN DOCUMENT. This Guaranty is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof, including Article XII thereof.
SECTION 5.2. BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS;
ASSIGNMENT. In addition to, and not in limitation of, SECTION 2.7, this
Guaranty shall be binding upon the Guarantor and its successors, transferees and
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assigns and shall inure to the benefit of and be enforceable by each Secured
Party and each holder of a Canadian Note and their respective successors,
transferees and assigns (to the full extent provided pursuant to SECTION 2.7);
PROVIDED, HOWEVER, that, the Guarantor may not assign any of its obligations
hereunder without the prior written consent of all Lenders.
SECTION 5.3. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Guaranty, nor consent to any departure by the Guarantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Canadian Agent (on behalf of the Lenders or the Required
Lenders, as the case may be), and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 5.4. NOTICES. All notices and other communications provided
for hereunder shall be in writing or by facsimile and, mailed or telecopied or
delivered with respect to the Guarantor, in care of the Canadian Borrower at the
address of the Canadian Borrower specified in the Credit Agreement, and with
respect to the Canadian Agent, to the address of the Canadian Agent specified in
the Credit Agreement, or, with respect to the Guarantor or the Canadian Agent,
at such other address or facsimile number as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this Section. All such notices and other communications, when mailed and
properly addressed with postage prepaid or if properly addressed and sent by
pre-paid courier service, shall be deemed given when received; any such notice
or communication, if transmitted by telecopier, shall be deemed given when
transmitted and electronically confirmed.
SECTION 5.5. NO WAIVER; REMEDIES. In addition to, and not in
limitation of, SECTION 2.3 and SECTION 2.5, no failure on the part of any
Secured Party or any holder of a Canadian Note to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
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SECTION 5.6. CAPTIONS. Section captions used in this Guaranty are
for convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 5.7. SETOFF. In addition to, and not in limitation of, any
rights of any Secured Party or any holder of a Canadian Note under applicable
law, each Secured Party and each such holder shall, upon the occurrence of any
Default described in any of clauses (a) through (d) of Section 10.1.9 of the
Credit Agreement or with the consent of the Required Lenders, any Event of
Default, have the right to appropriate and apply to the payment of the
obligations of the Guarantor owing to it hereunder, whether or not then due, and
the Guarantor hereby grants to each Secured Party and each such holder a
continuing security interest in, any and all balances, credits, deposits,
accounts or moneys of the Guarantor then or thereafter maintained with such
Secured Party, or such holder or any agent or bailee for such Secured Party or
such holder; PROVIDED, HOWEVER, that any such appropriation and application
shall be subject to the provisions of Section 6.8 of the Credit Agreement.
SECTION 5.8. SEVERABILITY. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 5.9. COUNTERPARTS. This Guaranty may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SECTION 5.10. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS GUARANTY
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS GUARANTY AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO
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WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS,
WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 5.11. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
GUARANTY OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE SECURED PARTIES
OR THE GUARANTOR SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF
THE STATE OF NEW YORK, NEW YORK COUNTY OR IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE CANADIAN AGENT'S OPTION,
IN THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY MAY BE FOUND. THE
GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE GUARANTOR HEREBY
IRREVOCABLY APPOINTS CT CORPORATION SYSTEM (THE "PROCESS AGENT"), WITH AN OFFICE
ON THE DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, UNITED STATES, AS
ITS AGENT TO RECEIVE, ON THE GUARANTOR'S BEHALF AND ON BEHALF OF THE GUARANTOR'S
PROPERTY, SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS
WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE MADE
BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO THE GUARANTOR IN CARE OF THE
PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND THE GUARANTOR HEREBY
IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON
ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, THE GUARANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE
GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT THE GUARANTOR HAS
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OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, THE GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF
ITS OBLIGATIONS UNDER THIS GUARANTY AND THE OTHER LOAN DOCUMENTS.
SECTION 5.12. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR THE GUARANTOR. THE GUARANTOR ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE
CREDIT AGREEMENT.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
VH HOLDINGS INC.
By /s/ William B. Towne
---------------------------------
Name: William B. Towne
Title: Treasurer
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Exhibit 4.16
[EXECUTION COPY]
CANADIAN SUBSIDIARY GUARANTY
This CANADIAN SUBSIDIARY GUARANTY (as amended, supplemented, amended
and restated or otherwise modified from time to time, this "GUARANTY"), dated as
of June 30, 1997, is made by 64804 MANITOBA LTD., a Manitoba corporation (the
"GUARANTOR"), in favor of THE BANK OF NOVA SCOTIA ("SCOTIABANK"), as agent (in
such capacity, the "CANADIAN AGENT") for each of the Secured Parties (as defined
below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 30, 1997 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, the "CREDIT AGREEMENT"), among Leiner Health Products Group Inc., a
Delaware corporation ("LHPG" or the "U.S. BORROWER" (prior to the Assumption)),
Vita Health Company (1985) Ltd., a Manitoba corporation (the "CANADIAN
BORROWER", and together with the U.S. Borrower, the "BORROWERS"), the various
financial institutions as are or may become parties thereto which extend a
Commitment under the U.S. Facility (collectively, the "U.S. LENDERS"), the
various financial institutions as are or may become parties thereto which extend
a Commitment under the Canadian Facility (collectively, the "CANADIAN LENDERS",
and together with the U.S. Lenders, the "LENDERS"), the Canadian Agent and
Scotiabank, as agent for the U.S. Lenders under the U.S. Facility (in such
capacity, the "U.S. AGENT", and together with the Canadian Agent, collectively,
the "AGENTS"), the Lenders and the Issuers have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as contemplated by the Credit Agreement, immediately
following the making of the initial Credit Extensions, Leiner Health Products
Inc., a Delaware corporation ("LEINER") and LHPG have delivered the Assumption
Agreement, pursuant to which Leiner has assumed (the "ASSUMPTION") the rights
and obligations of LHPG as (and has become) the "U.S. Borrower" under the Credit
Agreement;
WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit
<PAGE>
Extension) and the execution and delivery of the Assumption Agreement under
the Credit Agreement, the Guarantor is required to execute and deliver this
Guaranty; and
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrowers by
the Lenders and the Issuers pursuant to the Credit Agreement;
NOW THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Lenders and the Issuers
to make Credit Extensions (including the initial Credit Extensions) to the
Borrowers pursuant to the Credit Agreement, and to induce Secured Parties to
enter into Rate Protection Agreements, if any, the Guarantor agrees, for the
benefit of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"AGENTS" is defined in the FIRST RECITAL.
"BORROWERS" is defined in the FIRST RECITAL.
"CANADIAN AGENT" is defined in the PREAMBLE.
"CANADIAN BORROWER" is defined in the FIRST RECITAL.
"CANADIAN LENDERS" is defined in the FIRST RECITAL.
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"CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"GUARANTOR" is defined in the PREAMBLE.
"GUARANTY" is defined in the PREAMBLE.
"LENDERS" is defined in the FIRST RECITAL.
"SCOTIABANK" is defined in the PREAMBLE.
"SECURED PARTY" means, as the context may require, the Canadian
Lenders, the Canadian Issuers, the Agents, each counterparty to a Rate
Protection Agreement that is (or at the time such Rate Protection Agreement is
entered into, was) a Canadian Lender or an Affiliate thereof and (in each case),
each of their respective successors, permitted transferees and permitted
assigns.
"U.S. AGENT" is defined in the FIRST RECITAL.
"U.S. BORROWER" is defined in the FIRST RECITAL.
"U.S. LENDERS" is defined in the FIRST RECITAL.
SECTION 1.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Guaranty, including
its preamble and recitals, have the meanings provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. GUARANTY. The Guarantor hereby absolutely,
unconditionally and irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or
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otherwise, of all Obligations of the Canadian Borrower now or hereafter
existing, whether for principal, interest, fees, expenses or otherwise
(including all such amounts which would become due but for the operation of
the automatic stay under Section 362(a) of the United States Bankruptcy
Code, 11 U.S.C. Section 362(a), and the operation of Sections 502(b) and
506(b) of the United States Bankruptcy Code, 11 U.S.C. Section 502(b) and
Section 506(b) or analogous provisions under Canadian law), and
(b) indemnifies and holds harmless each Secured Party and each holder
of a Canadian Note for any and all costs and expenses (including reasonable
attorney's fees and expenses and disbursements) incurred by such Secured
Party or such holder, as the case may be, in enforcing any rights under
this Guaranty except for any such costs, expenses and disbursements arising
by reason of the relevant indemnified party's gross negligence or willful
misconduct;
PROVIDED, HOWEVER, that the Guarantor shall be liable under this Guaranty for
the maximum amount of such liability that can be hereby incurred without
rendering this Guaranty, as it relates to the Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer, and not
for any greater amount. This Guaranty constitutes a guaranty of payment when
due and not of collection, and the Guarantor specifically agrees that it shall
not be necessary or required that any Secured Party or any holder of any
Canadian Note exercise any right, assert any claim or demand or enforce any
remedy whatsoever against the Canadian Borrower (or any other Person) before or
as a condition to the obligations of the Guarantor hereunder.
SECTION 2.2. ACCELERATION OF GUARANTY. The Guarantor agrees that, in
the event of the dissolution or insolvency of the Canadian Borrower or the
Guarantor (but excluding liquidation, dissolution, merger or other action
permitted pursuant to Section 9.2.10 of the Credit Agreement), or the inability
or failure of the Canadian Borrower or the Guarantor to pay debts as they become
due, or an assignment by the Canadian Borrower or the Guarantor for the benefit
of creditors, or the commencement of any case or proceeding in respect of the
Canadian Borrower or
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the Guarantor under any bankruptcy, insolvency or similar laws, and if such
event shall occur at a time when any of the Obligations of the Canadian
Borrower may not then be due and payable, the Guarantor agrees that it will
pay to the Lenders forthwith the full amount which would be payable hereunder
by the Guarantor if all such Obligations were then due and payable.
SECTION 2.3. GUARANTY ABSOLUTE, ETC. This Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment, and shall remain in full force and effect until all Obligations of the
Canadian Borrower have been paid in full in cash or cash collateralization in
full, all obligations of the Guarantor hereunder shall have been paid in full in
cash or cash collateralization in full, all Canadian Letters of Credit have been
terminated or expired, all Rate Protection Agreements in respect of the Canadian
Commitments have been terminated and all Canadian Commitments shall have
terminated. The Guarantor guarantees that the Obligations of the Canadian
Borrower will be paid strictly in accordance with the terms; PROVIDED, HOWEVER,
that in the event of any sale of the capital stock of the Guarantor to the
extent permitted by Section 9.2.11 of the Credit Agreement and to the extent
that, after giving effect to such sale, the Guarantor is no longer a Subsidiary
of the Canadian Borrower, the Guarantor and each Guarantor that is a Subsidiary
of the Guarantor shall be deemed automatically discharged and released from this
Guaranty without any consent or other action by the Canadian Borrower or any
Secured Party or any other Person and this Guaranty shall, as to each the
Guarantor, be automatically terminated and of no further force and effect, and
the Canadian Agent will, at the request of the Canadian Borrower or of the
Guarantor and at the Guarantor's sole cost and expense, execute and deliver such
documents (without recourse and without representation or warranty) as the
Guarantor may reasonably request to evidence such release. The Guarantor
guarantees that the Obligations of the Canadian Borrower will be paid strictly
in accordance with the terms of the Credit Agreement and each other Loan
Document, as the case may be, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of any Secured Party or any holder of any Note with respect thereto. The
liability of the Guarantor under
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this Guaranty shall be absolute, unconditional and irrevocable irrespective
of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Canadian Note or any other Loan Document or any other
instrument or document relating to any thereof;
(b) the failure of any Secured Party or any holder of any Canadian
Note
(i) to assert any claim or demand or to enforce any right or
remedy against the Canadian Borrower or any other Person (including
any other guarantor (including the Guarantor)) under the provisions of
the Credit Agreement, any Canadian Note, any other Loan Document, any
other instrument or document relating to any thereof or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
(including the Guarantor) of, or collateral securing, any Obligations
of the Canadian Borrower;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Canadian Borrower, or
any other extension, compromise or renewal of any Obligation of the
Canadian Borrower;
(d) any reduction, limitation, impairment or termination of any
Obligations of the Canadian Borrower for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be
subject to (and the Guarantor hereby waives any right to or claim of) any
defense or setoff, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence
affecting, any Obligations of the Canadian Borrower or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure
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from, any of the terms of the Credit Agreement, any Canadian Note or any
other Loan Document or any other instrument or document relating to any
thereof;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party or
any holder of any Canadian Note securing any of the Obligations of the
Canadian Borrower; or
(g) any other circumstance which might otherwise constitute a defense
(other than the defense of payment in full of the Obligations) available
to, or a legal or equitable discharge of, the Canadian Borrower, any surety
or any guarantor.
SECTION 2.4. REINSTATEMENT, ETC. The Guarantor agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment (in whole or in part) of any of the Obligations of the
Canadian Borrower is rescinded or must otherwise be restored by any Secured
Party or any holder of any Canadian Note, upon the insolvency, bankruptcy or
reorganization of the Canadian Borrower or otherwise, all as though such payment
had not been made.
SECTION 2.5. WAIVER, ETC. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of the Canadian Borrower and this Guaranty and any requirement that
the Canadian Agent, any other Secured Party or any holder of any Canadian Note
protect, secure, perfect or insure any security interest or Lien, or any
property subject thereto, or exhaust any right or take any action against the
Canadian Borrower or any other Person (including any other guarantor) or entity
or any collateral securing the Obligations of the Canadian Borrower.
SECTION 2.6. POSTPONEMENT OF SUBROGATION, ETC. The Guarantor agrees
that it will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in cash of or cash collateralization in full of
all Obligations of the Canadian
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Borrower, the termination, expiration or cash collateralization of all
Canadian Letters of Credit, the termination of all Rate Protection Agreements
in respect of the Canadian Commitments and the termination of all Canadian
Commitments. Any amount paid to the Guarantor on account of any such
subrogation rights prior to the payment in full in cash of all Obligations of
the Canadian Borrower shall be held in trust for the benefit of the Secured
Parties and each holder of a Canadian Note and shall immediately be paid to
the Canadian Agent for the benefit of the Secured Parties and each holder of
a Canadian Note and credited and applied against the Obligations of the
Canadian Borrower, whether matured or unmatured, in accordance with the terms
of the Credit Agreement; PROVIDED, HOWEVER, that if
(a) the Guarantor has made payment to the Secured Parties and each
holder of a Canadian Note of all or any part of the Obligations of the
Canadian Borrower, and
(b) all Obligations of the Canadian Borrower have been paid in full in
cash or cash collateralization in full, all Canadian Letters of Credit have
been terminated, expired or cash collateralized, all Rate Protection
Agreements in respect of the Canadian Commitments have been terminated and
all Canadian Commitments have been permanently terminated,
each Secured Party and each holder of a Canadian Note agrees that, at the
Guarantor's request, the Canadian Agent, on behalf of the Secured Parties and
the holders of the Canadian Notes, will execute and deliver to the Guarantor
appropriate documents (without recourse and without representation or warranty)
necessary to evidence the transfer by subrogation to the Guarantor of an
interest in the Obligations of the Canadian Borrower resulting from such payment
by the Guarantor. In furtherance of the foregoing, for so long as any
Obligations of the Canadian Borrower or any Canadian Commitments remain
outstanding, the Guarantor shall refrain from taking any action or commencing
any proceeding against the Canadian Borrower (or its successors or assigns,
whether in connection with a bankruptcy proceeding or otherwise) to recover any
amounts in the respect of payments made under this Guaranty to any Secured Party
or any holder of a Canadian Note.
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SECTION 2.7. SUCCESSORS, TRANSFEREES AND ASSIGNS; TRANSFERS
OF CANADIAN NOTES, ETC. This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Canadian Agent
and each other Secured Party.
Without limiting the generality of the foregoing, any Lender may assign or
otherwise transfer (in whole or in part) any Canadian Commitment, Canadian Note
or Canadian Credit Extension held by it to any other Person or entity, and such
other Person or entity shall thereupon become vested with all rights and
benefits in respect thereof granted to such Lender under any Loan Document
(including this Guaranty) or otherwise, subject, however to the provisions of
Section 12.11 and Article XI of the Credit Agreement.
SECTION 2.8. JUDGMENT. The Guarantor hereby agrees that, with
respect to the Canadian Facility:
(a) if, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due in Canadian Dollars hereunder into another
currency, then the rate of exchange used shall be that at which the
Canadian Agent, in accordance with normal banking procedures could purchase
Canadian Dollars with such other currency on the Business Day preceding
that on which final judgment is given; and
(b) the obligation of the Guarantor in respect of any sum due from it
to any Secured Party hereunder or any other Loan Document shall,
notwithstanding any judgment in a currency other than Canadian Dollars, be
discharged only to the extent that on the Business Day following receipt by
the Secured Party of any sum adjudged to be so due in a currency other than
Canadian Dollars such Secured Party may, in accordance with normal banking
procedures, purchase Canadian Dollars with such other currency; in the
event that the Canadian Dollars so purchased are less than the amount
originally due to any Secured Party in Canadian Dollars, the Guarantor, as
a separate obligation and notwithstanding any such judgment, hereby
indemnifies
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and holds harmless such Secured Party against such loss, and if the
Canadian Dollars so purchased exceed the sum originally due to such
Secured Party or holder in Canadian Dollars, such Secured Party shall remit
to the Guarantor such excess.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby
represents and warrants to each Secured Party that the representations and
warranties contained in Article VIII of the Credit Agreement, insofar as the
representations and warranties contained therein are applicable to the Guarantor
and its properties, are true and correct in all material respects, each such
representation and warranty set forth in such Article (insofar as applicable as
aforesaid) and all other terms of the Credit Agreement to which reference is
made therein, together with all related definitions and ancillary provisions,
being hereby incorporated into this Guaranty by reference as though specifically
set forth in this Article.
ARTICLE IV
COVENANTS, ETC.
SECTION 4.1. AFFIRMATIVE COVENANTS. The Guarantor covenants and
agrees that, so long as any portion of the Obligations of the Canadian Borrower
shall remain unpaid, any Canadian Letters of Credit shall be outstanding, any
Rate Protection Agreement in respect of the Canadian Commitments shall remain in
full force and effect or any Canadian Lender shall have any outstanding
Commitment, the Guarantor will, unless the Required Lenders shall otherwise
consent in writing, perform, comply with and be bound by all of the agreements,
covenants and obligations contained in Article IX of the Credit Agreement which
are applicable to the Guarantor or its properties, each such agreement, covenant
and obligation contained in such Article and all other terms of the Credit
Agreement to which reference is made herein, together with all related
definitions and
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ancillary provisions, being hereby incorporated into this Guaranty by
reference as though specifically set forth in this Article.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. LOAN DOCUMENT. This Guaranty is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof, including ARTICLE XII thereof.
SECTION 5.2. BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS;
ASSIGNMENT. In addition to, and not in limitation of, SECTION 2.7, this
Guaranty shall be binding upon the Guarantor and its successors, transferees and
assigns and shall inure to the benefit of and be enforceable by each Secured
Party and each holder of a Canadian Note and their respective successors,
transferees and assigns (to the full extent provided pursuant to SECTION 2.7);
PROVIDED, HOWEVER, that the Guarantor may not assign any of its obligations
hereunder without the prior written consent of all Lenders.
SECTION 5.3. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Guaranty, nor consent to any departure by the Guarantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Canadian Agent (on behalf of the Lenders or the Required
Lenders, as the case may be), and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 5.4. NOTICES. All notices and other communications provided
for hereunder shall be in writing or by facsimile and, mailed or telecopied or
delivered with respect to the Guarantor, in care of the Canadian Borrower at the
address of the Canadian Borrower specified in the Credit Agreement, and with
respect to the Canadian Agent, to the address of the Canadian Agent specified in
the Credit Agreement, or, with respect to the Guarantor or the Canadian Agent,
at such other address or facsimile number as shall be
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designated by such party in a written notice to each other party complying as
to delivery with the terms of this Section. All such notices and other
communications, when mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed
given when received; any such notice or communication, if transmitted by
telecopier, shall be deemed given when transmitted and electronically
confirmed.
SECTION 5.5. NO WAIVER; REMEDIES. In addition to, and not in
limitation of, SECTION 2.3 and SECTION 2.5, no failure on the part of any
Secured Party or any holder of a Canadian Note to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 5.6. CAPTIONS. Section captions used in this Guaranty are
for convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 5.7. SETOFF. In addition to, and not in limitation of, any
rights of any Secured Party or any holder of a Canadian Note under applicable
law, each Secured Party and each such holder shall, upon the occurrence of any
Default described in any of clauses (a) through (d) of Section 10.1.9 of the
Credit Agreement or with the consent of the Required Lenders, any Event of
Default, have the right to appropriate and apply to the payment of the
obligations of the Guarantor owing to it hereunder, whether or not then due, and
the Guarantor hereby grants to each Secured Party and each such holder a
continuing security interest in, any and all balances, credits, deposits,
accounts or moneys of the Guarantor then or thereafter maintained with such
Secured Party, or such holder or any agent or bailee for such Secured Party or
such holder; PROVIDED, HOWEVER, that any such appropriation and application
shall be subject to the provisions of SECTION 6.8 of the Credit Agreement.
SECTION 5.8. SEVERABILITY. Wherever possible each provision of this
Guaranty shall be interpreted in such
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manner as to be effective and valid under applicable law, but if any
provision of this Guaranty shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Guaranty.
SECTION 5.9. COUNTERPARTS. This Guaranty may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SECTION 5.10. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS GUARANTY
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE PROVINCE OF MANITOBA AND THE LAWS OF CANADA APPLICABLE IN THE PROVINCE.
THIS GUARANTY AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING
AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE
ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 5.11. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
GUARANTY OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE SECURED PARTIES
OR THE GUARANTOR SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF
THE STATE OF NEW YORK, NEW YORK COUNTY OR IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE CANADIAN AGENT'S OPTION,
IN THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY MAY BE FOUND. THE
GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE GUARANTOR HEREBY
IRREVOCABLY APPOINTS CT CORPORATION SYSTEM (THE "PROCESS AGENT"), WITH AN OFFICE
ON THE DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, UNITED STATES, AS
ITS AGENT TO RECEIVE, ON THE GUARANTOR'S BEHALF AND ON BEHALF OF THE
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GUARANTOR'S PROPERTY, SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY
OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH
SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO THE
GUARANTOR IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS,
AND THE GUARANTOR HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT
TO ACCEPT SUCH SERVICE ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE,
THE GUARANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT
THE STATE OF NEW YORK. THE GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY
HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE
GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE)
WITH RESPECT TO ITSELF OR ITS PROPERTY, THE GUARANTOR HEREBY IRREVOCABLY
WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS GUARANTY AND
THE OTHER LOAN DOCUMENTS.
SECTION 5.12. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR THE GUARANTOR. THE GUARANTOR ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE
CREDIT AGREEMENT.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
64804 MANITOBA LTD.
By /s/ William B. Towne
-------------------------------------------
Name: William B. Towne
Title: Treasurer
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[EXECUTION COPY]
CANADIAN SUBSIDIARY GUARANTY
----------------------------
This CANADIAN SUBSIDIARY GUARANTY (as amended, supplemented, amended
and restated or otherwise modified from time to time, this "GUARANTY"), dated as
of June 30, 1997, is made by WESTCAN PHARMACEUTICALS LTD., a Manitoba
corporation (the "GUARANTOR"), in favor of THE BANK OF NOVA SCOTIA
("SCOTIABANK"), as agent (in such capacity, the "CANADIAN AGENT") for each of
the Secured Parties (as defined below).
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to a Credit Agreement, dated as of June 30, 1997 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, the "CREDIT AGREEMENT"), among Leiner Health Products Group Inc., a
Delaware corporation ("LHPG" or the "U.S. BORROWER" (prior to the Assumption)),
Vita Health Company (1985) Ltd., a Manitoba corporation (the "CANADIAN
BORROWER", and together with the U.S. Borrower, the "BORROWERS"), the various
financial institutions as are or may become parties thereto which extend a
Commitment under the U.S. Facility (collectively, the "U.S. LENDERS"), the
various financial institutions as are or may become parties thereto which extend
a Commitment under the Canadian Facility (collectively, the "CANADIAN LENDERS",
and together with the U.S. Lenders, the "LENDERS"), the Canadian Agent and
Scotiabank, as agent for the U.S. Lenders under the U.S. Facility (in such
capacity, the "U.S. AGENT", and together with the Canadian Agent, collectively,
the "AGENTS"), the Lenders and the Issuers have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as contemplated by the Credit Agreement, immediately
following the making of the initial Credit Extensions, Leiner Health Products
Inc., a Delaware corporation ("LEINER") and LHPG have delivered the
<PAGE>
Assumption Agreement, pursuant to which Leiner has assumed (the "ASSUMPTION")
the rights and obligations of LHPG as (and has become) the "U.S. Borrower" under
the Credit Agreement;
WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit Extension) and the execution and
delivery of the Assumption Agreement under the Credit Agreement, the Guarantor
is required to execute and deliver this Guaranty; and
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrowers by
the Lenders and the Issuers pursuant to the Credit Agreement;
NOW THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Lenders and the Issuers
to make Credit Extensions (including the initial Credit Extensions) to the
Borrowers pursuant to the Credit Agreement, and to induce Secured Parties to
enter into Rate Protection Agreements, if any, the Guarantor agrees, for the
benefit of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
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"AGENTS" is defined in the FIRST RECITAL.
"BORROWERS" is defined in the FIRST RECITAL.
"CANADIAN AGENT" is defined in the PREAMBLE.
"CANADIAN BORROWER" is defined in the FIRST RECITAL.
"CANADIAN LENDERS" is defined in the FIRST RECITAL.
"CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"GUARANTOR" is defined in the PREAMBLE.
"GUARANTY" is defined in the PREAMBLE.
"LENDERS" is defined in the FIRST RECITAL.
"SCOTIABANK" is defined in the PREAMBLE.
"SECURED PARTY" means, as the context may require, the Canadian
Lenders, the Canadian Issuers, the Agents, each counterparty to a Rate
Protection Agreement that is (or at the time such Rate Protection Agreement is
entered into, was) a Canadian Lender or an Affiliate thereof and (in each case),
each of their respective successors, permitted transferees and permitted
assigns.
"U.S. AGENT" is defined in the FIRST RECITAL.
"U.S. BORROWER" is defined in the FIRST RECITAL.
"U.S. LENDERS" is defined in the FIRST RECITAL.
SECTION 1.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Guaranty, including
its
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preamble and recitals, have the meanings provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. GUARANTY. The Guarantor hereby absolutely,
unconditionally and irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or otherwise, of all Obligations of the Canadian Borrower now or hereafter
existing, whether for principal, interest, fees, expenses or otherwise
(including all such amounts which would become due but for the operation of
the automatic stay under Section 362(a) of the United States Bankruptcy
Code, 11 U.S.C. Section 362(a), and the operation of Sections 502(b) and
506(b) of the United States Bankruptcy Code, 11 U.S.C. Section 502(b) and
Section 506(b) or analogous provisions under Canadian law), and
(b) indemnifies and holds harmless each Secured Party and each holder
of a Canadian Note for any and all costs and expenses (including reasonable
attorney's fees and expenses and disbursements) incurred by such Secured
Party or such holder, as the case may be, in enforcing any rights under
this Guaranty except for any such costs, expenses and disbursements arising
by reason of the relevant indemnified party's gross negligence or willful
misconduct;
PROVIDED, HOWEVER, that the Guarantor shall be liable under this Guaranty for
the maximum amount of such liability that can be hereby incurred without
rendering this Guaranty, as it relates to the Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer,
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and not for any greater amount. This Guaranty constitutes a guaranty of payment
when due and not of collection, and the Guarantor specifically agrees that it
shall not be necessary or required that any Secured Party or any holder of any
Canadian Note exercise any right, assert any claim or demand or enforce any
remedy whatsoever against the Canadian Borrower (or any other Person) before or
as a condition to the obligations of the Guarantor hereunder.
SECTION 2.2. ACCELERATION OF GUARANTY. The Guarantor agrees that, in
the event of the dissolution or insolvency of the Canadian Borrower or the
Guarantor (but excluding liquidation, dissolution, merger or other action
permitted pursuant to Section 9.2.10 of the Credit Agreement), or the inability
or failure of the Canadian Borrower or the Guarantor to pay debts as they become
due, or an assignment by the Canadian Borrower or the Guarantor for the benefit
of creditors, or the commencement of any case or proceeding in respect of the
Canadian Borrower or the Guarantor under any bankruptcy, insolvency or similar
laws, and if such event shall occur at a time when any of the Obligations of the
Canadian Borrower may not then be due and payable, the Guarantor agrees that it
will pay to the Lenders forthwith the full amount which would be payable
hereunder by the Guarantor if all such Obligations were then due and payable.
SECTION 2.3. GUARANTY ABSOLUTE, ETC. This Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment, and shall remain in full force and effect until all Obligations of the
Canadian Borrower have been paid in full in cash or cash collateralization in
full, all obligations of the Guarantor hereunder shall have been paid in full in
cash or cash collateralization in full, all Canadian Letters of Credit have been
terminated or expired, all Rate Protection Agreements in respect of the Canadian
Commitments have been terminated and all Canadian Commitments shall have
terminated. The Guarantor guarantees that the Obligations of the Canadian
Borrower will be paid strictly in accordance
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with the terms; PROVIDED, HOWEVER, that in the event of any sale of the capital
stock of the Guarantor to the extent permitted by Section 9.2.11 of the Credit
Agreement and to the extent that, after giving effect to such sale, the
Guarantor is no longer a Subsidiary of the Canadian Borrower, the Guarantor and
each Guarantor that is a Subsidiary of the Guarantor shall be deemed
automatically discharged and released from this Guaranty without any consent or
other action by the Canadian Borrower or any Secured Party or any other Person
and this Guaranty shall, as to each the Guarantor, be automatically terminated
and of no further force and effect, and the Canadian Agent will, at the request
of the Canadian Borrower or of the Guarantor and at the Guarantor's sole cost
and expense, execute and deliver such documents (without recourse and without
representation or warranty) as the Guarantor may reasonably request to evidence
such release. The Guarantor guarantees that the Obligations of the Canadian
Borrower will be paid strictly in accordance with the terms of the Credit
Agreement and each other Loan Document, as the case may be, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Secured Party or any holder of
any Note with respect thereto. The liability of the Guarantor under this
Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Canadian Note or any other Loan Document or any other
instrument or document relating to any thereof;
(b) the failure of any Secured Party or any holder of any Canadian
Note
(i) to assert any claim or demand or to enforce any right or
remedy against the Canadian Borrower or any other Person (including
any other guarantor (including the Guarantor)) under the provisions of
the Credit Agreement, any Canadian
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<PAGE>
Note, any other Loan Document, any other instrument or document
relating to any thereof or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
(including the Guarantor) of, or collateral securing, any Obligations
of the Canadian Borrower;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Canadian Borrower, or
any other extension, compromise or renewal of any Obligation of the
Canadian Borrower;
(d) any reduction, limitation, impairment or termination of any
Obligations of the Canadian Borrower for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be
subject to (and the Guarantor hereby waives any right to or claim of) any
defense or setoff, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence
affecting, any Obligations of the Canadian Borrower or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Canadian Note or any other Loan Document or any other instrument or
document relating to any thereof;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party or
any holder of any Canadian Note securing any of the Obligations of the
Canadian Borrower; or
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<PAGE>
(g) any other circumstance which might otherwise constitute a defense
(other than the defense of payment in full of the Obligations) available
to, or a legal or equitable discharge of, the Canadian Borrower, any surety
or any guarantor.
SECTION 2.4. REINSTATEMENT, ETC. The Guarantor agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment (in whole or in part) of any of the Obligations of the
Canadian Borrower is rescinded or must otherwise be restored by any Secured
Party or any holder of any Canadian Note, upon the insolvency, bankruptcy or
reorganization of the Canadian Borrower or otherwise, all as though such payment
had not been made.
SECTION 2.5. WAIVER, ETC. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of the Canadian Borrower and this Guaranty and any requirement that
the Canadian Agent, any other Secured Party or any holder of any Canadian Note
protect, secure, perfect or insure any security interest or Lien, or any
property subject thereto, or exhaust any right or take any action against the
Canadian Borrower or any other Person (including any other guarantor) or entity
or any collateral securing the Obligations of the Canadian Borrower.
SECTION 2.6. POSTPONEMENT OF SUBROGATION, ETC. The Guarantor agrees
that it will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in cash of or cash collateralization in full of
all Obligations of the Canadian Borrower, the termination, expiration or cash
collateralization of all Canadian Letters of Credit, the termination of all Rate
Protection Agreements in respect of the Canadian Commitments and the termination
of all Canadian Commitments. Any amount paid to the Guarantor on account of any
such subrogation rights prior to the payment in full in
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cash of all Obligations of the Canadian Borrower shall be held in trust for the
benefit of the Secured Parties and each holder of a Canadian Note and shall
immediately be paid to the Canadian Agent for the benefit of the Secured Parties
and each holder of a Canadian Note and credited and applied against the
Obligations of the Canadian Borrower, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; PROVIDED, HOWEVER, that if
(a) the Guarantor has made payment to the Secured Parties and each
holder of a Canadian Note of all or any part of the Obligations of the
Canadian Borrower, and
(b) all Obligations of the Canadian Borrower have been paid in full in
cash or cash collateralization in full, all Canadian Letters of Credit have
been terminated, expired or cash collateralized, all Rate Protection
Agreements in respect of the Canadian Commitments have been terminated and
all Canadian Commitments have been permanently terminated,
each Secured Party and each holder of a Canadian Note agrees that, at the
Guarantor's request, the Canadian Agent, on behalf of the Secured Parties and
the holders of the Canadian Notes, will execute and deliver to the Guarantor
appropriate documents (without recourse and without representation or warranty)
necessary to evidence the transfer by subrogation to the Guarantor of an
interest in the Obligations of the Canadian Borrower resulting from such payment
by the Guarantor. In furtherance of the foregoing, for so long as any
Obligations of the Canadian Borrower or any Canadian Commitments remain
outstanding, the Guarantor shall refrain from taking any action or commencing
any proceeding against the Canadian Borrower (or its successors or assigns,
whether in connection with a bankruptcy proceeding or otherwise) to recover any
amounts in the respect of payments made under this Guaranty to any Secured Party
or any holder of a Canadian Note.
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SECTION 2.7. SUCCESSORS, TRANSFEREES AND ASSIGNS; TRANSFERS
OF CANADIAN NOTES, ETC. This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Canadian Agent
and each other Secured Party.
Without limiting the generality of the foregoing, any Lender may assign or
otherwise transfer (in whole or in part) any Canadian Commitment, Canadian Note
or Canadian Credit Extension held by it to any other Person or entity, and such
other Person or entity shall thereupon become vested with all rights and
benefits in respect thereof granted to such Lender under any Loan Document
(including this Guaranty) or otherwise, subject, however to the provisions of
Section 12.11 and Article XI of the Credit Agreement.
SECTION 2.8. JUDGMENT. The Guarantor hereby agrees that, with
respect to the Canadian Facility:
(a) if, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due in Canadian Dollars hereunder into another
currency, then the rate of exchange used shall be that at which the
Canadian Agent, in accordance with normal banking procedures could purchase
Canadian Dollars with such other currency on the Business Day preceding
that on which final judgment is given; and
(b) the obligation of the Guarantor in respect of any sum due from it
to any Secured Party hereunder or any other Loan Document shall,
notwithstanding any judgment in a currency other than Canadian Dollars, be
discharged only to the extent that on the Business Day following receipt by
the Secured Party of any sum adjudged to be so due in a currency other than
Canadian Dollars such Secured Party may, in accordance with normal banking
procedures, purchase Canadian Dollars
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<PAGE>
with such other currency; in the event that the Canadian Dollars so
purchased are less than the amount originally due to any Secured Party in
Canadian Dollars, the Guarantor, as a separate obligation and
notwithstanding any such judgment, hereby indemnifies and holds harmless
such Secured Party against such loss, and if the Canadian Dollars so
purchased exceed the sum originally due to such Secured Party or holder in
Canadian Dollars, such Secured Party shall remit to the Guarantor such
excess.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby
represents and warrants to each Secured Party that the representations and
warranties contained in Article VIII of the Credit Agreement, insofar as the
representations and warranties contained therein are applicable to the Guarantor
and its properties, are true and correct in all material respects, each such
representation and warranty set forth in such Article (insofar as applicable as
aforesaid) and all other terms of the Credit Agreement to which reference is
made therein, together with all related definitions and ancillary provisions,
being hereby incorporated into this Guaranty by reference as though specifically
set forth in this Article.
ARTICLE IV
COVENANTS, ETC.
SECTION 4.1. AFFIRMATIVE COVENANTS. The Guarantor covenants and
agrees that, so long as any portion of the Obligations of the Canadian Borrower
shall remain unpaid, any Canadian Letters of Credit shall be outstanding, any
Rate Protection Agreement in respect of the Canadian
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Commitments shall remain in full force and effect or any Canadian Lender shall
have any outstanding Commitment, the Guarantor will, unless the Required Lenders
shall otherwise consent in writing, perform, comply with and be bound by all of
the agreements, covenants and obligations contained in Article IX of the Credit
Agreement which are applicable to the Guarantor or its properties, each such
agreement, covenant and obligation contained in such Article and all other terms
of the Credit Agreement to which reference is made herein, together with all
related definitions and ancillary provisions, being hereby incorporated into
this Guaranty by reference as though specifically set forth in this Article.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. LOAN DOCUMENT. This Guaranty is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof, including ARTICLE XII thereof.
SECTION 5.2. BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS;
ASSIGNMENT. In addition to, and not in limitation of, SECTION 2.7, this
Guaranty shall be binding upon the Guarantor and its successors, transferees
and assigns and shall inure to the benefit of and be enforceable by each
Secured Party and each holder of a Canadian Note and their respective
successors, transferees and assigns (to the full extent provided pursuant to
SECTION 2.7); PROVIDED, HOWEVER, that the Guarantor may not assign any of its
obligations hereunder without the prior written consent of all Lenders.
SECTION 5.3. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Guaranty, nor consent to any departure by the Guarantor
herefrom, shall in any event be
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effective unless the same shall be in writing and signed by the Canadian Agent
(on behalf of the Lenders or the Required Lenders, as the case may be), and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
SECTION 5.4. NOTICES. All notices and other communications provided
for hereunder shall be in writing or by facsimile and, mailed or telecopied or
delivered with respect to the Guarantor, in care of the Canadian Borrower at the
address of the Canadian Borrower specified in the Credit Agreement, and with
respect to the Canadian Agent, to the address of the Canadian Agent specified in
the Credit Agreement, or, with respect to the Guarantor or the Canadian Agent,
at such other address or facsimile number as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this Section. All such notices and other communications, when mailed and
properly addressed with postage prepaid or if properly addressed and sent by
pre-paid courier service, shall be deemed given when received; any such notice
or communication, if transmitted by telecopier, shall be deemed given when
transmitted and electronically confirmed.
SECTION 5.5. NO WAIVER; REMEDIES. In addition to, and not in
limitation of, SECTION 2.3 and SECTION 2.5, no failure on the part of any
Secured Party or any holder of a Canadian Note to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 5.6. CAPTIONS. Section captions used in this Guaranty are
for convenience of reference only, and shall not affect the construction of this
Guaranty.
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SECTION 5.7. SETOFF. In addition to, and not in limitation of,any
rights of any Secured Party or any holder of a Canadian Note under applicable
law, each Secured Party and each such holder shall, upon the occurrence of any
Default described in any of clauses (a) through (d) of Section 10.1.9 of the
Credit Agreement or with the consent of the Required Lenders, any Event of
Default, have the right to appropriate and apply to the payment of the
obligations of the Guarantor owing to it hereunder, whether or not then due, and
the Guarantor hereby grants to each Secured Party and each such holder a
continuing security interest in, any and all balances, credits, deposits,
accounts or moneys of the Guarantor then or thereafter maintained with such
Secured Party, or such holder or any agent or bailee for such Secured Party or
such holder; PROVIDED, HOWEVER, that any such appropriation and application
shall be subject to the provisions of SECTION 6.8 of the Credit Agreement.
SECTION 5.8. SEVERABILITY. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 5.9. COUNTERPARTS. This Guaranty may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SECTION 5.10. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS GUARANTY
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE PROVINCE OF MANITOBA AND THE LAWS OF CANADA APPLICABLE IN THE PROVINCE.
THIS GUARANTY AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING
AMONG THE PARTIES HERETO WITH RESPECT
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TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR
ORAL, WITH RESPECT THERETO.
SECTION 5.11. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS GUARANTY OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE SECURED
PARTIES OR THE GUARANTOR SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE
CANADIAN AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
PROPERTY MAY BE FOUND. THE GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, NEW YORK
COUNTY AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH SUCH LITIGATION. THE GUARANTOR HEREBY IRREVOCABLY APPOINTS CT
CORPORATION SYSTEM (THE "PROCESS AGENT"), WITH AN OFFICE ON THE DATE HEREOF
AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, UNITED STATES, AS ITS AGENT TO
RECEIVE, ON THE GUARANTOR'S BEHALF AND ON BEHALF OF THE GUARANTOR'S PROPERTY,
SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH
MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE MADE BY
MAILING OR DELIVERING A COPY OF SUCH PROCESS TO THE GUARANTOR IN CARE OF THE
PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND THE GUARANTOR HEREBY
IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE
ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, THE GUARANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE
GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO
THE LAYING OF VENUE OF ANY
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SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT
THAT THE GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION
OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
RESPECT TO ITSELF OR ITS PROPERTY, THE GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS GUARANTY AND THE OTHER LOAN
DOCUMENTS.
SECTION 5.12. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR THE GUARANTOR. THE GUARANTOR ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE
CREDIT AGREEMENT.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
WESTCAN PHARMACEUTICALS LTD.
By: /s/ William B. Towne
------------------------------------
Name: William B. Towne
Title: Treasurer
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Exhibit 4.17
$75,000,000
DEMAND DEBENTURE
Vita Health Company (1985) Ltd.
150 Beghin Avenue
Winnipeg, Manitoba
R2J 3W2
1. PROMISE TO PAY
The above-named corporation (the "CORPORATION") for value received
promises to pay to The Bank of Nova Scotia (the "CANADIAN AGENT") at its offices
at 44 King Street West, Toronto, Ontario, M5H 1Hl on demand all amounts now or
hereafter owing by the Corporation to the Canadian Secured Parties (as defined
below) or any of them, up to the maximum principal amount of $75,000,000 in
lawful money of Canada, and interest at the rate of 25% per annum, calculated
daily and payable on demand, both before and after maturity and default, with
interest on overdue interest at the same rate.
This Debenture is granted to the Canadian Agent on its own behalf and
as agent for the following:
(a) the Canadian Lenders and the Canadian Issuers, each as defined in the
credit agreement dated as of 30 June 1997 (as amended, supplemented,
restated and replaced from time to time, the "CREDIT AGREEMENT")
between the Corporation, The Bank of Nova Scotia as Canadian Agent,
the Canadian Lenders and certain other parties;
(b) each counterparty to a Rate Protection Agreement (as defined in the
Credit Agreement) entered into by the Corporation or by a Canadian
Subsidiary (as defined in the Credit Agreement) that is (or at the
time the Rate Protection Agreement was entered into, was) a Canadian
Lender or an Affiliate (as defined in the Credit Agreement) of a
Canadian Lender; and
(c) their respective successors, permitted transferees and permitted
assigns.
The Canadian Agent and the persons listed above are collectively
referred to in this Debenture as the "CANADIAN SECURED PARTIES". The
Corporation and the Canadian Subsidiaries are collectively referred to in this
Debenture as the "CANADIAN OBLIGORS".
<PAGE>
2. OBLIGATIONS SECURED
This Debenture secures payment and performance by the Canadian
Obligors or any of them to the Canadian Secured Parties or any of them of all
debts, liabilities and obligations, present or future, direct or indirect,
absolute or contingent, matured or not, choate or inchoate, in any currency, at
any time owing by the Canadian Obligors or any of them to the Canadian Secured
Parties or any of them under or in connection with the Credit Documents (as
defined below) or remaining unpaid by the Canadian Obligors or any of them to
the Canadian Secured Parties or any of them under or in connection with the
Credit Documents, whether arising from dealings between the Canadian Secured
Parties or any of them and the Canadian Obligors or any of them or from any
other dealings or proceedings by which the Canadian Secured Parties or any of
them may be or become in any manner whatever a creditor of the Canadian Obligors
or any of them under or in connection with the Credit Documents, and wherever
incurred, and whether incurred by the Canadian Obligors or any of them alone or
with another or others and whether as principal or surety (including but not
limited to any guarantee by the Canadian Obligors or any of them of obligations
of other persons to the Canadian Secured Parties or any of them), and all
interest, commissions, legal and other costs, charges and expenses
(collectively, the "OBLIGATIONS SECURED"). The "CREDIT DOCUMENTS" include the
Credit Agreement, all promissory notes of the Corporation delivered under or in
connection with the Credit Agreement, as the promissory notes are amended,
endorsed or otherwise modified from time to time, standby or documentary letters
of credit issued for the account of the Corporation pursuant to the Credit
Agreement from time to time, any guarantee by the Corporation required by the
Credit Agreement, any Rate Protection Agreement to which the Canadian Obligors
or any of them is a party and any other Loan Document (as defined in the Credit
Agreement) to which the Canadian Obligors or any of them is a party.
3. GRANT OF SECURITY
As security for the payment of the obligations secured, the
Corporation:
(a) grants, assigns, mortgages and charges as and by way of a fixed and
specific mortgage and charge to and in favour of the Canadian Agent,
and grants to the Canadian Agent a security interest in, all freehold
real and immovable property now or hereafter owned or acquired by the
Corporation including but not limited to the lands and premises
described in Schedule A hereto, together with all buildings, erections
and fixtures now or hereafter constructed or placed thereon; and
(b) charges as and by way of a floating charge to and in favour of the
Canadian Agent, and grants to the Canadian Agent a security interest
in, all of the present and after-acquired property, undertaking and
assets of the Corporation for the time being, both real and personal,
movable and immovable, of whatsoever nature and kind now owned or
hereafter acquired (except such
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property and assets as are validly and effectively subject to any
fixed and specific mortgages and charges created by this Debenture),
including its goodwill and uncalled capital;
(all property, undertaking and assets subject to the said assignments,
mortgages, charges and security interests being collectively referred to as the
"MORTGAGED PROPERTY").
4. LEASES
The charge of the mortgaged property contained in section 3 shall not
extend or apply to the last day of the term of any lease or any agreement
therefor now held or hereafter acquired by the Corporation, but should the said
charge become enforceable the Corporation shall thereafter stand possessed of
such last day and shall hold it in trust to assign the same to any person
acquiring such term or the part thereof charged in the course of any enforcement
of the said charge or any realization of the subject matter thereof.
5. CONTRACTS, RIGHTS OR LICENCES
In this section 5, "RESTRICTED ASSET" shall mean any contract, right
or licence of the Corporation, including any right of the Corporation as a
security holder, shareholder or holder of a partnership interest, if pursuant to
the terms of such contract, right or licence, or pursuant to the terms of any
agreement affecting such contract, right or licence, the contract, right or
licence would automatically terminate if it was part of the mortgaged property,
or would be terminable at the option of the other party thereto or of the
grantor thereof, or would be subject to disposition, alteration or amendment at
the option of another party including another security holder, shareholder or
holder of a partnership interest. The charge of the mortgaged property contained
in section 3 shall not extend or apply to any Restricted Asset. Should the
charge become enforceable, the Corporation shall thereafter stand possessed of
each Restricted Asset and shall hold it in trust to assign the same or dispose
of the same to any person as requested by the Canadian Agent. In order that the
full value of all such Restricted Assets may be realized for the benefit of the
Canadian Secured Parties, the Corporation shall at its expense and at the
request of the Canadian Agent from time to time, take all such action and do or
cause to be done all such things as shall, in the opinion of the Canadian Agent
acting reasonably (with advice of counsel as the Canadian Agent considers
appropriate), be necessary or proper in order that all such Restricted Assets
shall enure to the benefit of the Canadian Agent.
6. NEGATIVE PLEDGE
The Corporation covenants that it shall not, without the consent in
writing of the Canadian Agent, create, assume, incur or permit the existence of
any mortgage, hypothec, charge, lien or other encumbrance upon the mortgaged
property or any part thereof, other than as may be permitted by the Credit
Agreement.
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<PAGE>
7. INSPECTION OF MORTGAGED PROPERTY
Until an event of default occurs, the Corporation may use the
mortgaged property in any lawful manner not inconsistent with this Debenture,
but the Canadian Agent shall have the right at reasonable times and intervals to
verify the existence and state of the mortgaged property in any manner the
Canadian Agent may consider appropriate and the Corporation agrees to furnish
all assistance and information and to perform all such acts as the Canadian
Agent may reasonably request in connection therewith, and for such purpose shall
permit the Canadian Agent or its agents access at reasonable times and intervals
to all places where any mortgaged property may be located and to all premises
occupied by the Corporation to examine and inspect the mortgaged property and
related records and documents.
8. EVENTS OF DEFAULT
The obligations secured shall immediately become payable and the
security constituted by this Debenture shall immediately become enforceable in
each of the following events:
(a) if any Canadian Obligor defaults in payment of any of the obligations
secured and the default continues beyond any applicable grace period;
(b) if the Corporation defaults in performance of any covenant or
condition of this Debenture and the default continues beyond any
applicable grace period; or
(c) if an event of default occurs and is continuing pursuant to the Credit
Agreement.
9. WAIVER OF DEFAULT
The Canadian Agent may by notice to the Corporation waive any default
of any Canadian Obligor on such terms and conditions as the Canadian Agent may
determine, but no such waiver shall be taken to affect any subsequent default or
the rights resulting therefrom.
10. REMEDIES
Whenever the security constituted by this Debenture becomes
enforceable and so long as it remains enforceable, the Canadian Agent may:
(a) immediately take possession of the mortgaged property and, whether or
not the Canadian Agent has done so, may sell, lease or otherwise
dispose thereof either as a whole or in separate parcels, at public
auction, by public tender or by private sale, with or without notice,
either for cash or upon credit, and
4
<PAGE>
upon such terms and conditions as the Canadian Agent may determine;
and the Canadian Agent may execute and deliver to any purchaser of
the mortgaged property or any part thereof good and sufficient deeds
and documents for the same, the Canadian Agent being irrevocably
constituted the attorney of the Corporation for the purpose of making
any such sale, lease or other disposition and executing such deeds
and documents;
(b) by instrument in writing appoint any person to be a receiver (which
term shall include a receiver and manager) of the mortgaged property
or of any part thereof and may remove any receiver so appointed and
appoint another in his stead; and any such receiver so appointed shall
have power: to take possession of the mortgaged property or any part
thereof, to carry on all or any part of the business of the
Corporation relating to the mortgaged property, to borrow money on
the security of the mortgaged property in priority to the Debenture
for the purpose of the maintenance, preservation or protection of the
mortgaged property or any part thereof or for carrying on all or any
part of the business of the Corporation relating to the mortgaged
property, and to sell, lease or otherwise dispose of the whole or any
part of the mortgaged property, at public auction, by public tender or
by private sale, with or without notice, either for cash or upon
credit, at such time and upon such terms and conditions as the
receiver may determine; provided that any such receiver shall be
deemed the agent of the Corporation and the Canadian Secured Parties
shall not be in any way responsible for any misconduct or negligence
of any such receiver; and
(c) exercise any of the other rights to which the Canadian Agent is
entitled as holder of this Debenture, including the right to take
proceedings in any court of competent jurisdiction for the appointment
of a receiver and manager, for the sale of the mortgaged property or
any part thereof or for foreclosure, and the right to take any other
action, suit, remedy or proceeding authorized or permitted under the
Debenture or by law or by equity in order to enforce the security
constituted by this Debenture.
In the exercise of their rights, powers and authorities under this
Debenture, the Canadian Agent and any receiver or receiver and manager appointed
by the Canadian Agent shall be the agent of the Corporation, and the Canadian
Agent shall not be in any way responsible for any misconduct or negligence of
any such receiver or receiver and manager. The Canadian Agent or any agent or
representative thereof, may become purchasers at any public sale of the
mortgaged property, whether made under a power of sale provided for in this Deed
or pursuant to judicial proceedings.
5
<PAGE>
11. TAXES AND OTHER CHARGES
The Corporation shall pay all rents, taxes, rates, levies, assessments
and government fees or dues levied, assessed or imposed in respect of the
mortgaged property or any part thereof (collectively "TAXES") as and when the
same shall become due and payable and shall pay all charges, liens and other
encumbrances on the mortgaged property (collectively "CHARGES") as and when the
same shall become due and payable. If the Corporation does not pay any Taxes or
Charges as and when the same shall become due and payable, the Canadian Agent
may, at its option, elect to pay any such amounts and charge to the Corporation
all amounts so paid as additional amounts secured under this Deed, together with
interest thereon from the date of payment by the Canadian Agent of any such
amounts at the highest rate applicable to Canadian dollar advances pursuant to
the Credit Agreement. The Corporation may contest in good faith the payment of
any Taxes or Charges provided that the Corporation is proceeding diligently and
in good faith and in the best possible manner to contest the claim, the
Corporation's interest in the mortgaged property cannot be forfeited, sold or
affected in any other way while contesting the claim, the Corporation keeps the
Canadian Agent fully informed of the proceedings, the Corporation has made
arrangements satisfactory to the Canadian Agent acting reasonably in respect of
the payment of the contested Taxes or Charges and the Corporation pays in
accordance with section 12 any expenses incurred by the Canadian Agent in
connection with the proceedings.
12. EXPENSES
The Corporation shall pay to the Canadian Agent upon demand the amount
of all reasonable expenses incurred in recovering any obligations secured or in
enforcing the security constituted by this Debenture, including but not limited
to, the expenses incurred in connection with the repossession, holding,
repairing, processing, preparing for disposition, and disposing of any of the
mortgaged property (including reasonable legal and other expenses), with
interest thereon from the date of the incurring of such expenses at the highest
rate applicable to Canadian dollar advances pursuant to the Credit Agreement.
13. DISCHARGE
If the Corporation pays to the Canadian Agent the obligations secured
by this Debenture or if the obligations secured by this Debenture are otherwise
paid in full and the Corporation otherwise observes and performs the terms and
conditions of this Debenture, then the Canadian Agent shall at the request and
at the expense of the Corporation cancel and discharge the mortgage and charge
of this Debenture and execute and deliver to the Corporation such deeds and
other instruments as shall be requisite therefor. For the purposes of this
section 13 only, "obligations secured" shall not include Rate Protection
Agreements that are not entered into pursuant to the Credit Agreement.
14. NOTICES
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<PAGE>
Unless otherwise provided in any agreement to which the Canadian Agent
and the Corporation are parties, any notice or demand required or permitted to
be given or made under this Debenture by the Canadian Agent to the Corporation
may be served personally on a director, officer or employee of the Corporation
or may be given or made by mailing the same by prepaid registered mail addressed
to the Corporation at its address as set out above and shall, unless a different
date of receipt is established by law, be conclusively deemed to have been
received by the Corporation if served personally on the day served and if given
or made by mailing by prepaid registered mail on the third business day
following the date of such mailing.
15. CONTINUING AND ADDITIONAL SECURITY
This Debenture shall not be considered as satisfied or discharged by
any intermediate payment (as distinct from a final payment) of the whole or part
of the obligations secured but shall constitute and be a continuing security for
a current or running account and shall be in addition to and not in substitution
for any other security now or hereafter held by or for the benefit of the
Canadian Agent. The remedies of the Canadian Agent under this Debenture may be
exercised from time to time separately or in combination and are in addition to
and not in substitution for any other rights of the Canadian Agent however
created.
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<PAGE>
16. AMALGAMATIONS
If the Corporation amalgamates with any corporation or corporations,
the obligations secured by this Debenture and the mortgage and charge created by
this Debenture shall continue and shall extend to the present and future
undertaking, property and assets of the amalgamated corporation, as if the
amalgamated corporation had executed this Debenture as the Corporation.
17. TRANSFERABLE
Subject to any restrictions on transfer contained in the Credit
Agreement or any other agreement to which the Corporation and the Canadian Agent
are parties, the obligations secured by this Debenture shall be paid and this
Debenture shall be transferable without regard to any set-off or counter-claim
between the Corporation and the Canadian Agent.
18. EFFECT OF HEADINGS
The headings and marginal notes of the sections in this Deed are
inserted for convenience of reference only and shall not affect the
interpretation of this Debenture.
19. LAW GOVERNING
This Debenture shall be governed in all respects by the law of the
Province of Manitoba and the federal laws of Canada applicable therein.
20. FURTHER COVENANTS
The Corporation shall not:
(a) change its name without providing the Canadian Agent with prior 30
days written notice thereof and promptly taking other steps, if any,
as the Canadian Secured Parties reasonably request to permit the
Canadian Agent to perfect the Security with respect to the change in
name;
(b) permit its chief executive office or chief place of business to be
located out of the Province of Manitoba without providing the Canadian
Agent with 30 days prior written notice thereof and promptly taking
other steps, if any, as the Canadian Secured Parties reasonably
request to permit the Canadian Agent to perfect the security with
respect to the change in location;
(c) permit any of its tangible personal property (other than (i) inventory
in transit (ii) goods of a type normally used in more than one
jurisdiction which are equipment or inventory leased or held for lease
by the Corporation to others or
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<PAGE>
(iii) tangible personal property of a value which is not material in
relation to the obligations secured which is temporarily located out
of Manitoba) to be located out of Manitoba without providing the
Canadian Agent with 30 days prior written notice thereof and promptly
taking other steps, if any, as the Canadian Secured Parties
reasonably request to permit the Canadian Agent to perfect the
security with respect to the change in location.
The Corporation shall, forthwith on demand, deliver to the Canadian
Agent possession of all "instruments," "securities," "letters of credit,"
"advices of credit" and "negotiable documents of title" as those terms are
defined or used in the Personal Property Security Act (Manitoba) as amended from
time to time. The Corporation shall also, forthwith on demand, deliver to the
Canadian Agent all such security agreements, mortgages and other documents as
may be reasonably required to provide the Canadian Agent with a fixed and
specific mortgage and charge and a security interest in all patents, trademarks
and other intellectual property in which the Corporation now or hereafter holds
an interest and to provide the Canadian Agent with a fixed and specific mortgage
and charge and a security interest in any or all real and immovable property
(including leaseholds), equipment, machinery, vehicles and other tangible
personal property hereafter acquired by the Corporation.
The Corporation represents and warrants that as of the date of this
Debenture, all of its tangible property, other than inventory in transit, is
located in the Province of Manitoba and all of its accounts receivable are
billed from, and payment is customarily received in, the same place.
IN WITNESS WHEREOF this Debenture has been signed by its duly
authorized officer as of 30 June 1997.
VITA HEALTH COMPANY (1985)
LTD.
By: /s/ William B. Towne c/s
------------------------------------
Name: William B. Towne
Title: Treasurer
9
<PAGE>
SCHEDULE A
to Debenture made by Vita Health Company (1985) Ltd.
Property Subject to Fixed And Specific Mortgage And Charge
Title No. 1499489
Legal Description: Lots 1 and 2 Plan 16587 WLTO
in Lots 197 and 200 Roman Catholic Mission Property
Encumbrances: Caveats Nos. 82-36037, 82-49451 and 1622504
Title No. 1499497
Legal Description: Parcels A and B Plan 29058 WLTO
in Lots 197 and 200 Roman Catholic Mission Property
Encumbrances: Caveats Nos. 247942, 1622503 and 1622504
Title No. 1499631
Legal Description: Lot 152 Plan 102 WLTO (W Div)
in RL 37 Parish of St Boniface
Encumbrances: Caveats Nos. 153141 and 226329
This Schedule forms part of a Debenture from Vita Health Company (1985) Ltd. to
The Bank of Nova Scotia, Dated this 30th day of June, 1997.
VITA HEALTH COMPANY (1985) LTD.
By: c/s
------------------------------------------------
Name:
Title:
10
<PAGE>
Exhibit 4.18
$75,000,000
DEMAND DEBENTURE
VH Holdings Inc.
150 Beghin Avenue
Winnipeg, Manitoba
R2J 3W2
1. PROMISE TO PAY
The above-named corporation (the "CORPORATION") for value received
promises to pay to The Bank of Nova Scotia (the "CANADIAN AGENT") at its offices
at 44 King Street West, Toronto, Ontario, M5H 1Hl on demand all amounts now or
hereafter owing by the Corporation to the Canadian Secured Parties (as defined
below) or any of them, up to the maximum principal amount of $75,000,000 in
lawful money of Canada, and interest at the rate of 25% per annum, calculated
daily and payable on demand, both before and after maturity and default, with
interest on overdue interest at the same rate.
This Debenture is granted to the Canadian Agent on its own behalf and
as agent for the following:
(a) the Canadian Lenders and the Canadian Issuers, each as defined in the
credit agreement dated as of 30 June 1997 (as amended, supplemented,
restated and replaced from time to time, the "CREDIT AGREEMENT")
between Vita Health Company (1985) Ltd. (the "Canadian Borrower"), The
Bank of Nova Scotia as Canadian Agent, the Canadian Lenders and
certain other parties;
(b) each counterparty to a Rate Protection Agreement (as defined in the
Credit Agreement) entered into by the Corporation, the Canadian
Borrower or a Canadian Subsidiary (as defined in the Credit Agreement)
that is (or at the time the Rate Protection Agreement was entered
into, was) a Canadian Lender or an Affiliate (as defined in the Credit
Agreement) of a Canadian Lender; and
(c) their respective successors, permitted transferees and permitted
assigns.
The Canadian Agent and the persons listed above are collectively referred to in
this Debenture as the "CANADIAN SECURED PARTIES". The Corporation, the Canadian
Borrower and the Canadian Subsidiaries are collectively referred to in this
Debenture as the "CANADIAN OBLIGORS".
<PAGE>
2. OBLIGATIONS SECURED
This Debenture secures payment and performance by the Canadian
Obligors or any of them to the Canadian Secured Parties or any of them of all
debts, liabilities and obligations, present or future, direct or indirect,
absolute or contingent, matured or not, choate or inchoate, in any currency, at
any time owing by the Canadian Obligors or any of them to the Canadian Secured
Parties or any of them under or in connection with the Credit Documents (as
defined below) or remaining unpaid by the Canadian Obligors or any of them to
the Canadian Secured Parties or any of them under or in connection with the
Credit Documents, whether arising from dealings between the Canadian Secured
Parties or any of them and the Canadian Obligors or any of them or from any
other dealings or proceedings by which the Canadian Secured Parties or any of
them may be or become in any manner whatever a creditor of the Canadian Obligors
or any of them under or in connection with the Credit Documents, and wherever
incurred, and whether incurred by the Canadian Obligors or any of them alone or
with another or others and whether as principal or surety (including but not
limited to any guarantee by the Canadian Obligors or any of them of obligations
of other persons to the Canadian Secured Parties or any of them), and all
interest, commissions, legal and other costs, charges and expenses
(collectively, the "OBLIGATIONS SECURED"). The "CREDIT DOCUMENTS" include the
Credit Agreement, all promissory notes of the Corporation delivered under or in
connection with the Credit Agreement, as the promissory notes are amended,
endorsed or otherwise modified from time to time, standby or documentary letters
of credit issued for the account of the Corporation pursuant to the Credit
Agreement from time to time, any guarantee by the Corporation required by the
Credit Agreement, any Rate Protection Agreement to which the Canadian Obligors
or any of them is a party and any other Loan Document (as defined in the Credit
Agreement) to which the Canadian Obligors or any of them is a party.
3. GRANT OF SECURITY
As security for the payment of the obligations secured, the
Corporation charges as and by way of a floating charge to and in favour of the
Canadian Agent, and grants to the Canadian Agent a security interest in, all of
the present and after-acquired property, undertaking and assets of the
Corporation for the time being, both real and personal, movable and immovable,
of whatsoever nature and kind now owned or hereafter acquired, including its
goodwill and uncalled capital, (all property, undertaking and assets subject to
the said mortgages, charges and security interests being collectively referred
to as the "MORTGAGED PROPERTY").
4. LEASES
The charge of the mortgaged property contained in section 3 shall not
extend or apply to the last day of the term of any lease or any agreement
therefor now held or hereafter acquired by the Corporation, but should the said
charge become enforceable the Corporation shall thereafter stand possessed of
such last day and shall hold it in trust to
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assign the same to any person acquiring such term or the part thereof charged
in the course of any enforcement of the said charge or any realization of the
subject matter thereof.
5. CONTRACTS, RIGHTS OR LICENCES
In this section 5, "RESTRICTED ASSET" shall mean any contract, right
or licence of the Corporation, including any right of the Corporation as a
security holder, shareholder or holder of a partnership interest, if pursuant to
the terms of such contract, right or licence, or pursuant to the terms of any
agreement affecting such contract, right or licence, the contract, right or
licence would automatically terminate if it was part of the mortgaged property,
or would be terminable at the option of the other party thereto or of the
grantor thereof, or would be subject to disposition, alteration or amendment at
the option of another party including another security holder, shareholder or
holder of a partnership interest. The charge of the mortgaged property contained
in section 3 shall not extend or apply to any Restricted Asset. Should the
charge become enforceable, the Corporation shall thereafter stand possessed of
each Restricted Asset and shall hold it in trust to assign the same or dispose
of the same to any person as requested by the Canadian Agent. In order that the
full value of all such Restricted Assets may be realized for the benefit of the
Canadian Secured Parties, the Corporation shall at its expense and at the
request of the Canadian Agent from time to time, take all such action and do or
cause to be done all such things as shall, in the opinion of the Canadian Agent
acting reasonably (with advice of counsel as the Canadian Agent considers
appropriate), be necessary or proper in order that all such Restricted Assets
shall enure to the benefit of the Canadian Agent.
6. NEGATIVE PLEDGE
The Corporation covenants that it shall not, without the consent in
writing of the Canadian Agent, create, assume, incur or permit the existence of
any mortgage, hypothec, charge, lien or other encumbrance upon the mortgaged
property or any part thereof, other than as may be permitted by the Credit
Agreement.
7. INSPECTION OF MORTGAGED PROPERTY
Until an event of default occurs, the Corporation may use the
mortgaged property in any lawful manner not inconsistent with this Debenture,
but the Canadian Agent shall have the right at reasonable times and intervals to
verify the existence and state of the mortgaged property in any manner the
Canadian Agent may consider appropriate and the Corporation agrees to furnish
all assistance and information and to perform all such acts as the Canadian
Agent may reasonably request in connection therewith, and for such purpose shall
permit the Canadian Agent or its agents access at reasonable times and intervals
to all places where any mortgaged property may be located and to all premises
occupied by the Corporation to examine and inspect the mortgaged property and
related records and documents.
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8. EVENTS OF DEFAULT
The obligations secured shall immediately become payable and the
security constituted by this Debenture shall immediately become enforceable in
each of the following events:
(a) if any Canadian Obligor defaults in payment of any of the obligations
secured and the default continues beyond any applicable grace period;
(b) if the Corporation defaults in performance of any covenant or
condition of this Debenture and the default continues beyond any
applicable grace period; or
(c) if an event of default occurs and is continuing pursuant to the Credit
Agreement.
9. WAIVER OF DEFAULT
The Canadian Agent may by notice to the Corporation waive any default
of any Canadian Obligor on such terms and conditions as the Canadian Agent may
determine, but no such waiver shall be taken to affect any subsequent default or
the rights resulting therefrom.
10. REMEDIES
Whenever the security constituted by this Debenture becomes
enforceable and so long as it remains enforceable, the Canadian Agent may:
(a) immediately take possession of the mortgaged property and, whether or
not the Canadian Agent has done so, may sell, lease or otherwise
dispose thereof either as a whole or in separate parcels, at public
auction, by public tender or by private sale, with or without notice,
either for cash or upon credit, and upon such terms and conditions as
the Canadian Agent may determine; and the Canadian Agent may execute
and deliver to any purchaser of the mortgaged property or any part
thereof good and sufficient deeds and documents for the same, the
Canadian Agent being irrevocably constituted the attorney of the
Corporation for the purpose of making any such sale, lease or other
disposition and executing such deeds and documents;
(b) by instrument in writing appoint any person to be a receiver (which
term shall include a receiver and manager) of the mortgaged property
or of any part thereof and may remove any receiver so appointed and
appoint another in his stead; and any such receiver so appointed shall
have power:(i) to take possession of the mortgaged property or any
part thereof,(ii) to carry on all or any part of the business of the
Corporation relating to the mortgaged property,
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<PAGE>
(iii) to borrow money on the security of the mortgaged property in
priority to the Debenture for the purpose of the maintenance,
preservation or protection of the mortgaged property or any part
thereof or for carrying on all or any part of the business of the
Corporation relating to the mortgaged property, and (iv) to sell,
lease or otherwise dispose of the whole or any part of the mortgaged
property, at public auction, by public tender or by private sale,
with or without notice, either for cash or upon credit, at such time
and upon such terms and conditions as the receiver may determine;
provided that any such receiver shall be deemed the agent of the
Corporation and the Canadian Secured Parties shall not be in any way
responsible for any misconduct or negligence of any such receiver;
and
(c) exercise any of the other rights to which the Canadian Agent is
entitled as holder of this Debenture, including the right to take
proceedings in any court of competent jurisdiction for the appointment
of a receiver and manager, for the sale of the mortgaged property or
any part thereof or for foreclosure, and the right to take any other
action, suit, remedy or proceeding authorized or permitted under the
Debenture or by law or by equity in order to enforce the security
constituted by this Debenture.
In the exercise of their rights, powers and authorities under this
Debenture, the Canadian Agent and any receiver or receiver and manager appointed
by the Canadian Agent shall be the agent of the Corporation, and the Canadian
Agent shall not be in any way responsible for any misconduct or negligence of
any such receiver or receiver and manager. The Canadian Agent or any agent or
representative thereof, may become purchasers at any public sale of the
mortgaged property, whether made under a power of sale provided for in this Deed
or pursuant to judicial proceedings.
11. TAXES AND OTHER CHARGES
The Corporation shall pay all rents, taxes, rates, levies, assessments
and government fees or dues levied, assessed or imposed in respect of the
mortgaged property or any part thereof (collectively "TAXES") as and when the
same shall become due and payable and shall pay all charges, liens and other
encumbrances on the mortgaged property (collectively "CHARGES") as and when the
same shall become due and payable. If the Corporation does not pay any Taxes or
Charges as and when the same shall become due and payable, the Canadian Agent
may, at its option, elect to pay any such amounts and charge to the Corporation
all amounts so paid as additional amounts secured under this Deed, together with
interest thereon from the date of payment by the Canadian Agent of any such
amounts at the highest rate applicable to Canadian dollar advances pursuant to
the Credit Agreement. The Corporation may contest in good faith the payment of
any Taxes or Charges provided that the Corporation is proceeding diligently and
in good faith and in the best possible manner to contest the claim, the
Corporation's interest in the mortgaged property cannot be forfeited, sold or
affected in any other way while contesting the claim, the Corporation keeps
5
<PAGE>
the Canadian Agent fully informed of the proceedings, the Corporation has
made arrangements satisfactory to the Canadian Agent acting reasonably in
respect of the payment of the contested Taxes or Charges and the Corporation
pays in accordance with section 12 any expenses incurred by the Canadian
Agent in connection with the proceedings.
12. EXPENSES
The Corporation shall pay to the Canadian Agent upon demand the amount
of all reasonable expenses incurred in recovering any obligations secured or in
enforcing the security constituted by this Debenture, including but not limited
to, the expenses incurred in connection with the repossession, holding,
repairing, processing, preparing for disposition, and disposing of any of the
mortgaged property (including reasonable legal and other expenses), with
interest thereon from the date of the incurring of such expenses at the highest
rate applicable to Canadian dollar advances pursuant to the Credit Agreement.
13. DISCHARGE
If the Corporation pays to the Canadian Agent the obligations secured
by this Debenture or if the obligations secured by this Debenture are otherwise
paid in full and the Corporation otherwise observes and performs the terms and
conditions of this Debenture, then the Canadian Agent shall at the request and
at the expense of the Corporation cancel and discharge the mortgage and charge
of this Debenture and execute and deliver to the Corporation such deeds and
other instruments as shall be requisite therefor. For the purposes of this
section 13 only, "obligations secured" shall not include Rate Protection
Agreements that are not entered into pursuant to the Credit Agreement.
14. NOTICES
Unless otherwise provided in any agreement to which the Canadian Agent
and the Corporation are parties, any notice or demand required or permitted to
be given or made under this Debenture by the Canadian Agent to the Corporation
may be served personally on a director, officer or employee of the Corporation
or may be given or made by mailing the same by prepaid registered mail addressed
to the Corporation at its address as set out above and shall, unless a different
date of receipt is established by law, be conclusively deemed to have been
received by the Corporation if served personally on the day served and if given
or made by mailing by prepaid registered mail on the third business day
following the date of such mailing.
15. CONTINUING AND ADDITIONAL SECURITY
This Debenture shall not be considered as satisfied or discharged by
any intermediate payment (as distinct from a final payment) of the whole or part
of the obligations secured but shall constitute and be a continuing security for
a current or running account and shall be in addition to and not in substitution
for any other security now or
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<PAGE>
hereafter held by or for the benefit of the Canadian Agent. The remedies of
the Canadian Agent under this Debenture may be exercised from time to time
separately or in combination and are in addition to and not in substitution
for any other rights of the Canadian Agent however created.
16. AMALGAMATIONS
If the Corporation amalgamates with any corporation or corporations,
the obligations secured by this Debenture and the mortgage and charge created by
this Debenture shall continue and shall extend to the present and future
undertaking, property and assets of the amalgamated corporation, as if the
amalgamated corporation had executed this Debenture as the Corporation.
17. TRANSFERABLE
Subject to any restrictions on transfer contained in the Credit
Agreement or any other agreement to which the Corporation and the Canadian Agent
are parties, the obligations secured by this Debenture shall be paid and this
Debenture shall be transferable without regard to any set-off or counter-claim
between the Corporation and the Canadian Agent.
7
<PAGE>
18. EFFECT OF HEADINGS
The headings and marginal notes of the sections in this Deed are
inserted for convenience of reference only and shall not affect the
interpretation of this Debenture.
19. LAW GOVERNING
This Debenture shall be governed in all respects by the law of the
Province of Manitoba and the federal laws of Canada applicable therein.
20. FURTHER COVENANTS
The Corporation shall not:
(a) change its name without providing the Canadian Agent with prior 30
days written notice thereof and promptly taking other steps, if any,
as the Canadian Secured Parties reasonably request to permit the
Canadian Agent to perfect the Security with respect to the change in
name;
(b) permit its chief executive office or chief place of business to be
located out of the Province of Manitoba without providing the Canadian
Agent with 30 days prior written notice thereof and promptly taking
other steps, if any, as the Canadian Secured Parties reasonably
request to permit the Canadian Agent to perfect the security with
respect to the change in location;
(c) permit any of its tangible personal property (other than (i) inventory
in transit (ii) goods of a type normally used in more than one
jurisdiction which are equipment or inventory leased or held for lease
by the Corporation to others or (iii) tangible personal property of a
value which is not material in relation to the obligations secured
which is temporarily located out of Manitoba) to be located out of
Manitoba without providing the Canadian Agent with 30 days prior
written notice thereof and promptly taking other steps, if any, as the
Canadian Secured Parties reasonably request to permit the Canadian
Agent to perfect the security with respect to the change in location.
The Corporation shall, forthwith on demand, deliver to the Canadian
Agent possession of all "instruments," "securities," "letters of credit,"
"advices of credit" and "negotiable documents of title" as those terms are
defined or used in the Personal Property Security Act (Manitoba) as amended from
time to time. The Corporation shall also, forthwith on demand, deliver to the
Canadian Agent all such security agreements, mortgages and other documents as
may be reasonably required to provide the Canadian Agent with a fixed and
specific mortgage and charge and a security interest in all patents, trademarks
and other intellectual property in which the Corporation now or hereafter holds
an interest and to provide the Canadian Agent with a fixed and specific mortgage
and charge and a security
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<PAGE>
interest in any or all real and immovable property (including leaseholds),
equipment, machinery, vehicles and other tangible personal property hereafter
acquired by the Corporation.
The Corporation represents and warrants that as of the date of this
Debenture, all of its tangible property, other than inventory in transit, is
located in the Province of Manitoba and all of its accounts receivable are
billed from, and payment is customarily received in, the same place.
IN WITNESS WHEREOF this Debenture has been signed by its duly
authorized officer as of 30 June 1997.
VH HOLDINGS INC.
By: /s/ William B. Towne c/s
--------------------------------------
Name: William B. Towne
Title: Treasurer
9
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Exhibit 4.19
$75,000,000
DEMAND DEBENTURE
64804 MANITOBA LTD.
150 Beghin Avenue
Winnipeg, Manitoba
R2J 3W2
1. PROMISE TO PAY
The above-named corporation (the "CORPORATION") for value received
promises to pay to The Bank of Nova Scotia (the "CANADIAN AGENT") at its offices
at 44 King Street West, Toronto, Ontario, M5H 1Hl on demand all amounts now or
hereafter owing by the Corporation to the Canadian Secured Parties (as defined
below) or any of them, up to the maximum principal amount of $75,000,000 in
lawful money of Canada, and interest at the rate of 25% per annum, calculated
daily and payable on demand, both before and after maturity and default, with
interest on overdue interest at the same rate.
This Debenture is granted to the Canadian Agent on its own behalf and
as agent for the following:
(a) the Canadian Lenders and the Canadian Issuers, each as defined in the
credit agreement dated as of 30 June 1997 (as amended, supplemented,
restated and replaced from time to time, the "CREDIT AGREEMENT")
between Vita Health Company (1985) Ltd. (the "Canadian Borrower"), The
Bank of Nova Scotia as Canadian Agent, the Canadian Lenders and
certain other parties;
(b) each counterparty to a Rate Protection Agreement (as defined in the
Credit Agreement) entered into by the Corporation or the Canadian
Borrower that is (or at the time the Rate Protection Agreement was
entered into, was) a Canadian Lender or an Affiliate (as defined in
the Credit Agreement) of a Canadian Lender; and
(c) their respective successors, permitted transferees and permitted
assigns.
The Canadian Agent and the persons listed above are collectively
referred to in this Debenture as the "CANADIAN SECURED PARTIES". The
Corporation and the Canadian Borrower are collectively referred to in this
Debenture as the "CANADIAN OBLIGORS".
2. OBLIGATIONS SECURED
This Debenture secures payment and performance by the Canadian
Obligors or any of them to the Canadian Secured Parties or any of them of all
debts, liabilities and obligations, present or future, direct or indirect,
absolute or contingent, matured or not, choate or inchoate, in any currency, at
any time owing by the Canadian Obligors or any of them to the Canadian Secured
Parties or any of them under or in connection with the Credit
<PAGE>
Documents (as defined below) or remaining unpaid by the Canadian Obligors or
any of them to the Canadian Secured Parties or any of them under or in
connection with the Credit Documents, whether arising from dealings between
the Canadian Secured Parties or any of them and the Canadian Obligors or any
of them or from any other dealings or proceedings by which the Canadian
Secured Parties or any of them may be or become in any manner whatever a
creditor of the Canadian Obligors or any of them under or in connection with
the Credit Documents, and wherever incurred, and whether incurred by the
Canadian Obligors or any of them alone or with another or others and whether
as principal or surety (including but not limited to any guarantee by the
Canadian Obligors or any of them of obligations of other persons to the
Canadian Secured Parties or any of them), and all interest, commissions,
legal and other costs, charges and expenses (collectively, the "OBLIGATIONS
SECURED"). The "CREDIT DOCUMENTS" include the Credit Agreement, all
promissory notes of the Corporation delivered under or in connection with the
Credit Agreement, as the promissory notes are amended, endorsed or otherwise
modified from time to time, standby or documentary letters of credit issued
for the account of the Corporation pursuant to the Credit Agreement from time
to time, any guarantee by the Corporation required by the Credit Agreement,
any Rate Protection Agreement to which the Canadian Obligors or any of them
is a party and any other Loan Document (as defined in the Credit Agreement)
to which the Canadian Obligors or any of them is a party.
3. GRANT OF SECURITY
As security for the payment of the obligations secured, the
Corporation charges as and by way of a floating charge to and in favour of the
Canadian Agent, and grants to the Canadian Agent a security interest in, all of
the present and after-acquired property, undertaking and assets of the
Corporation for the time being, both real and personal, movable and immovable,
of whatsoever nature and kind now owned or hereafter acquired, including its
goodwill and uncalled capital, (all property, undertaking and assets subject to
the said mortgages, charges and security interests being collectively referred
to as the "MORTGAGED PROPERTY").
4. LEASES
The charge of the mortgaged property contained in section 3 shall not
extend or apply to the last day of the term of any lease or any agreement
therefor now held or hereafter acquired by the Corporation, but should the said
charge become enforceable the Corporation shall thereafter stand possessed of
such last day and shall hold it in trust to assign the same to any person
acquiring such term or the part thereof charged in the course of any enforcement
of the said charge or any realization of the subject matter thereof.
5. CONTRACTS, RIGHTS OR LICENCES
In this section 5, "RESTRICTED ASSET" shall mean any contract, right
or licence of the Corporation, including any right of the Corporation as a
security holder, shareholder or holder of a partnership interest, if pursuant to
the terms of such contract, right or licence,
<PAGE>
or pursuant to the terms of any agreement affecting such contract, right or
licence, the contract, right or licence would automatically terminate if it
was part of the mortgaged property, or would be terminable at the option of
the other party thereto or of the grantor thereof, or would be subject to
disposition, alteration or amendment at the option of another party including
another security holder, shareholder or holder of a partnership interest. The
charge of the mortgaged property contained in section 3 shall not extend or
apply to any Restricted Asset. Should the charge become enforceable, the
Corporation shall thereafter stand possessed of each Restricted Asset and
shall hold it in trust to assign the same or dispose of the same to any
person as requested by the Canadian Agent. In order that the full value of
all such Restricted Assets may be realized for the benefit of the Canadian
Secured Parties, the Corporation shall at its expense and at the request of
the Canadian Agent from time to time, take all such action and do or cause to
be done all such things as shall, in the opinion of the Canadian Agent acting
reasonably (with advice of counsel as the Canadian Agent considers
appropriate), be necessary or proper in order that all such Restricted Assets
shall enure to the benefit of the Canadian Agent.
6. NEGATIVE PLEDGE
The Corporation covenants that it shall not, without the consent in
writing of the Canadian Agent, create, assume, incur or permit the existence of
any mortgage, hypothec, charge, lien or other encumbrance upon the mortgaged
property or any part thereof, other than as may be permitted by the Credit
Agreement.
7. INSPECTION OF MORTGAGED PROPERTY
Until an event of default occurs, the Corporation may use the
mortgaged property in any lawful manner not inconsistent with this Debenture,
but the Canadian Agent shall have the right at reasonable times and intervals to
verify the existence and state of the mortgaged property in any manner the
Canadian Agent may consider appropriate and the Corporation agrees to furnish
all assistance and information and to perform all such acts as the Canadian
Agent may reasonably request in connection therewith, and for such purpose shall
permit the Canadian Agent or its agents access at reasonable times and intervals
to all places where any mortgaged property may be located and to all premises
occupied by the Corporation to examine and inspect the mortgaged property and
related records and documents.
8. EVENTS OF DEFAULT
The obligations secured shall immediately become payable and the
security constituted by this Debenture shall immediately become enforceable in
each of the following events:
(a) if any Canadian Obligor defaults in payment of any of the obligations
secured and the default continues beyond any applicable grace period;
<PAGE>
(b) if the Corporation defaults in performance of any covenant or
condition of this Debenture and the default continues beyond any
applicable grace period; or
(c) if an event of default occurs and is continuing pursuant to the Credit
Agreement.
9. WAIVER OF DEFAULT
The Canadian Agent may by notice to the Corporation waive any default
of any Canadian Obligor on such terms and conditions as the Canadian Agent may
determine, but no such waiver shall be taken to affect any subsequent default or
the rights resulting therefrom.
10. REMEDIES
Whenever the security constituted by this Debenture becomes
enforceable and so long as it remains enforceable, the Canadian Agent may:
(a) immediately take possession of the mortgaged property and, whether or
not the Canadian Agent has done so, may sell, lease or otherwise
dispose thereof either as a whole or in separate parcels, at public
auction, by public tender or by private sale, with or without notice,
either for cash or upon credit, and upon such terms and conditions as
the Canadian Agent may determine; and the Canadian Agent may execute
and deliver to any purchaser of the mortgaged property or any part
thereof good and sufficient deeds and documents for the same, the
Canadian Agent being irrevocably constituted the attorney of the
Corporation for the purpose of making any such sale, lease or other
disposition and executing such deeds and documents;
(b) by instrument in writing appoint any person to be a receiver (which
term shall include a receiver and manager) of the mortgaged property
or of any part thereof and may remove any receiver so appointed and
appoint another in his stead; and any such receiver so appointed shall
have power:(i) to take possession of the mortgaged property or any
part thereof,(ii) to carry on all or any part of the business of the
Corporation relating to the mortgaged property,(iii) to borrow money
on the security of the mortgaged property in priority to the Debenture
for the purpose of the maintenance, preservation or protection of the
mortgaged property or any part thereof or for carrying on all or any
part of the business of the Corporation relating to the mortgaged
property, and (iv) to sell, lease or otherwise dispose of the whole or
any part of the mortgaged property, at public auction, by public
tender or by private sale, with or without notice, either for cash or
upon credit, at such time and upon such terms and conditions as the
receiver may determine; provided that any such receiver shall be
deemed the agent of the Corporation and the Canadian
<PAGE>
Secured Parties shall not be in any way responsible for any misconduct
or negligence of any such receiver; and
(c) exercise any of the other rights to which the Canadian Agent is
entitled as holder of this Debenture, including the right to take
proceedings in any court of competent jurisdiction for the appointment
of a receiver and manager, for the sale of the mortgaged property or
any part thereof or for foreclosure, and the right to take any other
action, suit, remedy or proceeding authorized or permitted under the
Debenture or by law or by equity in order to enforce the security
constituted by this Debenture.
In the exercise of their rights, powers and authorities under this
Debenture, the Canadian Agent and any receiver or receiver and manager appointed
by the Canadian Agent shall be the agent of the Corporation, and the Canadian
Agent shall not be in any way responsible for any misconduct or negligence of
any such receiver or receiver and manager. The Canadian Agent or any agent or
representative thereof, may become purchasers at any public sale of the
mortgaged property, whether made under a power of sale provided for in this Deed
or pursuant to judicial proceedings.
11. TAXES AND OTHER CHARGES
The Corporation shall pay all rents, taxes, rates, levies, assessments
and government fees or dues levied, assessed or imposed in respect of the
mortgaged property or any part thereof (collectively "TAXES") as and when the
same shall become due and payable and shall pay all charges, liens and other
encumbrances on the mortgaged property (collectively "CHARGES") as and when the
same shall become due and payable. If the Corporation does not pay any Taxes or
Charges as and when the same shall become due and payable, the Canadian Agent
may, at its option, elect to pay any such amounts and charge to the Corporation
all amounts so paid as additional amounts secured under this Deed, together with
interest thereon from the date of payment by the Canadian Agent of any such
amounts at the highest rate applicable to Canadian dollar advances pursuant to
the Credit Agreement. The Corporation may contest in good faith the payment of
any Taxes or Charges provided that the Corporation is proceeding diligently and
in good faith and in the best possible manner to contest the claim, the
Corporation's interest in the mortgaged property cannot be forfeited, sold or
affected in any other way while contesting the claim, the Corporation keeps the
Canadian Agent fully informed of the proceedings, the Corporation has made
arrangements satisfactory to the Canadian Agent acting reasonably in respect of
the payment of the contested Taxes or Charges and the Corporation pays in
accordance with section 12 any expenses incurred by the Canadian Agent in
connection with the proceedings.
12. EXPENSES
The Corporation shall pay to the Canadian Agent upon demand the amount
of all reasonable expenses incurred in recovering any obligations secured or in
enforcing the security constituted by this Debenture, including but not limited
to, the expenses incurred in
<PAGE>
connection with the repossession, holding, repairing, processing, preparing
for disposition, and disposing of any of the mortgaged property (including
reasonable legal and other expenses), with interest thereon from the date of
the incurring of such expenses at the highest rate applicable to Canadian
dollar advances pursuant to the Credit Agreement.
13. DISCHARGE
If the Corporation pays to the Canadian Agent the obligations secured
by this Debenture or if the obligations secured by this Debenture are otherwise
paid in full and the Corporation otherwise observes and performs the terms and
conditions of this Debenture, then the Canadian Agent shall at the request and
at the expense of the Corporation cancel and discharge the mortgage and charge
of this Debenture and execute and deliver to the Corporation such deeds and
other instruments as shall be requisite therefor. For the purposes of this
section 13 only, "obligations secured" shall not include Rate Protection
Agreements that are not entered into pursuant to the Credit Agreement.
14. NOTICES
Unless otherwise provided in any agreement to which the Canadian Agent
and the Corporation are parties, any notice or demand required or permitted to
be given or made under this Debenture by the Canadian Agent to the Corporation
may be served personally on a director, officer or employee of the Corporation
or may be given or made by mailing the same by prepaid registered mail addressed
to the Corporation at its address as set out above and shall, unless a different
date of receipt is established by law, be conclusively deemed to have been
received by the Corporation if served personally on the day served and if given
or made by mailing by prepaid registered mail on the third business day
following the date of such mailing.
15. CONTINUING AND ADDITIONAL SECURITY
This Debenture shall not be considered as satisfied or discharged by
any intermediate payment (as distinct from a final payment) of the whole or part
of the obligations secured but shall constitute and be a continuing security for
a current or running account and shall be in addition to and not in substitution
for any other security now or hereafter held by or for the benefit of the
Canadian Agent. The remedies of the Canadian Agent under this Debenture may be
exercised from time to time separately or in combination and are in addition to
and not in substitution for any other rights of the Canadian Agent however
created.
16. AMALGAMATIONS
If the Corporation amalgamates with any corporation or corporations,
the obligations secured by this Debenture and the mortgage and charge created by
this Debenture shall continue and shall extend to the present and future
undertaking, property and assets of
<PAGE>
the amalgamated corporation, as if the amalgamated corporation had executed
this Debenture as the Corporation.
17. TRANSFERABLE
Subject to any restrictions on transfer contained in the Credit
Agreement or any other agreement to which the Corporation and the Canadian Agent
are parties, the obligations secured by this Debenture shall be paid and this
Debenture shall be transferable without regard to any set-off or counter-claim
between the Corporation and the Canadian Agent.
18. EFFECT OF HEADINGS
The headings and marginal notes of the sections in this Deed are
inserted for convenience of reference only and shall not affect the
interpretation of this Debenture.
19. LAW GOVERNING
This Debenture shall be governed in all respects by the law of the
Province of Manitoba and the federal laws of Canada applicable therein.
20. FURTHER COVENANTS
The Corporation shall not:
(a) change its name without providing the Canadian Agent with prior 30
days written notice thereof and promptly taking other steps, if any,
as the Canadian Secured Parties reasonably request to permit the
Canadian Agent to perfect the Security with respect to the change in
name;
(b) permit its chief executive office or chief place of business to be
located out of the Province of Manitoba without providing the Canadian
Agent with 30 days prior written notice thereof and promptly taking
other steps, if any, as the Canadian Secured Parties reasonably
request to permit the Canadian Agent to perfect the security with
respect to the change in location;
(c) permit any of its tangible personal property (other than (i) inventory
in transit (ii) goods of a type normally used in more than one
jurisdiction which are equipment or inventory leased or held for lease
by the Corporation to others or (iii) tangible personal property of a
value which is not material in relation to the obligations secured
which is temporarily located out of Manitoba) to be located out of
Manitoba without providing the Canadian Agent with 30 days prior
written notice thereof and promptly taking other steps, if any, as the
Canadian Secured Parties reasonably request to permit the Canadian
Agent to perfect the security with respect to the change in location.
<PAGE>
The Corporation shall, forthwith on demand, deliver to the Canadian
Agent possession of all "instruments," "securities," "letters of credit,"
"advices of credit" and "negotiable documents of title" as those terms are
defined or used in the Personal Property Security Act (Manitoba) as amended from
time to time. The Corporation shall also, forthwith on demand, deliver to the
Canadian Agent all such security agreements, mortgages and other documents as
may be reasonably required to provide the Canadian Agent with a fixed and
specific mortgage and charge and a security interest in all patents, trademarks
and other intellectual property in which the Corporation now or hereafter holds
an interest and to provide the Canadian Agent with a fixed and specific mortgage
and charge and a security interest in any or all real and immovable property
(including leaseholds), equipment, machinery, vehicles and other tangible
personal property hereafter acquired by the Corporation.
The Corporation represents and warrants that as of the date of this
Debenture, all of its tangible property, other than inventory in transit, is
located in the Province of Manitoba and all of its accounts receivable are
billed from, and payment is customarily received in, the same place.
IN WITNESS WHEREOF this Debenture has been signed by its duly
authorized officer as of 30 June 1997.
64804 MANITOBA LTD.
By: /s/ William B. Towne c/s
--------------------------------------
Name: William B. Towne
Title: Treasurer
<PAGE>
Exhibit 4.20
$75,000,000
DEMAND DEBENTURE
WESTCAN PHARMACEUTICALS LTD.
150 Beghin Avenue
Winnipeg, Manitoba
R2J 3W2
1. PROMISE TO PAY
The above-named corporation (the "CORPORATION") for value received
promises to pay to The Bank of Nova Scotia (the "CANADIAN AGENT") at its offices
at 44 King Street West, Toronto, Ontario, M5H 1Hl on demand all amounts now or
hereafter owing by the Corporation to the Canadian Secured Parties (as defined
below) or any of them, up to the maximum principal amount of $75,000,000 in
lawful money of Canada, and interest at the rate of 25% per annum, calculated
daily and payable on demand, both before and after maturity and default, with
interest on overdue interest at the same rate.
This Debenture is granted to the Canadian Agent on its own behalf and
as agent for the following:
(a) the Canadian Lenders and the Canadian Issuers, each as defined in the
credit agreement dated as of 30 June 1997 (as amended, supplemented,
restated and replaced from time to time, the "CREDIT AGREEMENT")
between Vita Health Company (1985) Ltd. (the "Canadian Borrower"), The
Bank of Nova Scotia as Canadian Agent, the Canadian Lenders and
certain other parties;
(b) each counterparty to a Rate Protection Agreement (as defined in the
Credit Agreement) entered into by the Corporation or the Canadian
Borrower that is (or at the time the Rate Protection Agreement was
entered into, was) a Canadian Lender or an Affiliate (as defined in
the Credit Agreement) of a Canadian Lender; and
(c) their respective successors, permitted transferees and permitted
assigns.
The Canadian Agent and the persons listed above are collectively referred to in
this Debenture as the "CANADIAN SECURED PARTIES". The Corporation and the
Canadian Borrower are collectively referred to in this Debenture as the
"CANADIAN OBLIGORS".
2. OBLIGATIONS SECURED
This Debenture secures payment and performance by the Canadian
Obligors or any of them to the Canadian Secured Parties or any of them of all
debts, liabilities and obligations, present or future, direct or indirect,
absolute or contingent, matured or not,
<PAGE>
choate or inchoate, in any currency, at any time owing by the Canadian
Obligors or any of them to the Canadian Secured Parties or any of them under
or in connection with the Credit Documents (as defined below) or remaining
unpaid by the Canadian Obligors or any of them to the Canadian Secured
Parties or any of them under or in connection with the Credit Documents,
whether arising from dealings between the Canadian Secured Parties or any of
them and the Canadian Obligors or any of them or from any other dealings or
proceedings by which the Canadian Secured Parties or any of them may be or
become in any manner whatever a creditor of the Canadian Obligors or any of
them under or in connection with the Credit Documents, and wherever incurred,
and whether incurred by the Canadian Obligors or any of them alone or with
another or others and whether as principal or surety (including but not
limited to any guarantee by the Canadian Obligors or any of them of
obligations of other persons to the Canadian Secured Parties or any of them),
and all interest, commissions, legal and other costs, charges and expenses
(collectively, the "OBLIGATIONS SECURED"). The "CREDIT DOCUMENTS" include
the Credit Agreement, all promissory notes of the Corporation delivered under
or in connection with the Credit Agreement, as the promissory notes are
amended, endorsed or otherwise modified from time to time, standby or
documentary letters of credit issued for the account of the Corporation
pursuant to the Credit Agreement from time to time, any guarantee by the
Corporation required by the Credit Agreement, any Rate Protection Agreement
to which the Canadian Obligors or any of them is a party and any other Loan
Document (as defined in the Credit Agreement) to which the Canadian Obligors
or any of them is a party.
3. GRANT OF SECURITY
As security for the payment of the obligations secured, the
Corporation charges as and by way of a floating charge to and in favour of the
Canadian Agent, and grants to the Canadian Agent a security interest in, all of
the present and after-acquired property, undertaking and assets of the
Corporation for the time being, both real and personal, movable and immovable,
of whatsoever nature and kind now owned or hereafter acquired, including its
goodwill and uncalled capital, (all property, undertaking and assets subject to
the said mortgages, charges and security interests being collectively referred
to as the "MORTGAGED PROPERTY").
4. LEASES
The charge of the mortgaged property contained in section 3 shall not
extend or apply to the last day of the term of any lease or any agreement
therefor now held or hereafter acquired by the Corporation, but should the said
charge become enforceable the Corporation shall thereafter stand possessed of
such last day and shall hold it in trust to assign the same to any person
acquiring such term or the part thereof charged in the course of any enforcement
of the said charge or any realization of the subject matter thereof.
5. CONTRACTS, RIGHTS OR LICENCES
2
<PAGE>
In this section 5, "RESTRICTED ASSET" shall mean any contract, right
or licence of the Corporation, including any right of the Corporation as a
security holder, shareholder or holder of a partnership interest, if pursuant to
the terms of such contract, right or licence, or pursuant to the terms of any
agreement affecting such contract, right or licence, the contract, right or
licence would automatically terminate if it was part of the mortgaged property,
or would be terminable at the option of the other party thereto or of the
grantor thereof, or would be subject to disposition, alteration or amendment at
the option of another party including another security holder, shareholder or
holder of a partnership interest. The charge of the mortgaged property contained
in section 3 shall not extend or apply to any Restricted Asset. Should the
charge become enforceable, the Corporation shall thereafter stand possessed of
each Restricted Asset and shall hold it in trust to assign the same or dispose
of the same to any person as requested by the Canadian Agent. In order that the
full value of all such Restricted Assets may be realized for the benefit of the
Canadian Secured Parties, the Corporation shall at its expense and at the
request of the Canadian Agent from time to time, take all such action and do or
cause to be done all such things as shall, in the opinion of the Canadian Agent
acting reasonably (with advice of counsel as the Canadian Agent considers
appropriate), be necessary or proper in order that all such Restricted Assets
shall enure to the benefit of the Canadian Agent.
6. NEGATIVE PLEDGE
The Corporation covenants that it shall not, without the consent in
writing of the Canadian Agent, create, assume, incur or permit the existence of
any mortgage, hypothec, charge, lien or other encumbrance upon the mortgaged
property or any part thereof, other than as may be permitted by the Credit
Agreement.
7. INSPECTION OF MORTGAGED PROPERTY
Until an event of default occurs, the Corporation may use the
mortgaged property in any lawful manner not inconsistent with this Debenture,
but the Canadian Agent shall have the right at reasonable times and intervals to
verify the existence and state of the mortgaged property in any manner the
Canadian Agent may consider appropriate and the Corporation agrees to furnish
all assistance and information and to perform all such acts as the Canadian
Agent may reasonably request in connection therewith, and for such purpose shall
permit the Canadian Agent or its agents access at reasonable times and intervals
to all places where any mortgaged property may be located and to all premises
occupied by the Corporation to examine and inspect the mortgaged property and
related records and documents.
8. EVENTS OF DEFAULT
The obligations secured shall immediately become payable and the
security constituted by this Debenture shall immediately become enforceable in
each of the following events:
3
<PAGE>
(a) if any Canadian Obligor defaults in payment of any of the obligations
secured and the default continues beyond any applicable grace period;
(b) if the Corporation defaults in performance of any covenant or
condition of this Debenture and the default continues beyond any
applicable grace period; or
(c) if an event of default occurs and is continuing pursuant to the Credit
Agreement.
9. WAIVER OF DEFAULT
The Canadian Agent may by notice to the Corporation waive any default
of any Canadian Obligor on such terms and conditions as the Canadian Agent may
determine, but no such waiver shall be taken to affect any subsequent default or
the rights resulting therefrom.
10. REMEDIES
Whenever the security constituted by this Debenture becomes
enforceable and so long as it remains enforceable, the Canadian Agent may:
(a) immediately take possession of the mortgaged property and, whether or
not the Canadian Agent has done so, may sell, lease or otherwise
dispose thereof either as a whole or in separate parcels, at public
auction, by public tender or by private sale, with or without notice,
either for cash or upon credit, and upon such terms and conditions as
the Canadian Agent may determine; and the Canadian Agent may execute
and deliver to any purchaser of the mortgaged property or any part
thereof good and sufficient deeds and documents for the same, the
Canadian Agent being irrevocably constituted the attorney of the
Corporation for the purpose of making any such sale, lease or other
disposition and executing such deeds and documents;
(b) by instrument in writing appoint any person to be a receiver (which
term shall include a receiver and manager) of the mortgaged property
or of any part thereof and may remove any receiver so appointed and
appoint another in his stead; and any such receiver so appointed shall
have power:(i) to take possession of the mortgaged property or any
part thereof,(ii) to carry on all or any part of the business of the
Corporation relating to the mortgaged property,(iii) to borrow money
on the security of the mortgaged property in priority to the Debenture
for the purpose of the maintenance, preservation or protection of the
mortgaged property or any part thereof or for carrying on all or any
part of the business of the Corporation relating to the mortgaged
property, and (iv) to sell, lease or otherwise dispose of the whole or
any part of the mortgaged property, at public auction, by public
tender or by private sale,
4
<PAGE>
with or without notice, either for cash or upon credit, at such time
and upon such terms and conditions as the receiver may determine;
provided that any such receiver shall be deemed the agent of the
Corporation and the Canadian Secured Parties shall not be in any way
responsible for any misconduct or negligence of any such receiver;
and
(c) exercise any of the other rights to which the Canadian Agent is
entitled as holder of this Debenture, including the right to take
proceedings in any court of competent jurisdiction for the appointment
of a receiver and manager, for the sale of the mortgaged property or
any part thereof or for foreclosure, and the right to take any other
action, suit, remedy or proceeding authorized or permitted under the
Debenture or by law or by equity in order to enforce the security
constituted by this Debenture.
In the exercise of their rights, powers and authorities under this
Debenture, the Canadian Agent and any receiver or receiver and manager appointed
by the Canadian Agent shall be the agent of the Corporation, and the Canadian
Agent shall not be in any way responsible for any misconduct or negligence of
any such receiver or receiver and manager. The Canadian Agent or any agent or
representative thereof, may become purchasers at any public sale of the
mortgaged property, whether made under a power of sale provided for in this Deed
or pursuant to judicial proceedings.
11. TAXES AND OTHER CHARGES
The Corporation shall pay all rents, taxes, rates, levies, assessments
and government fees or dues levied, assessed or imposed in respect of the
mortgaged property or any part thereof (collectively "TAXES") as and when the
same shall become due and payable and shall pay all charges, liens and other
encumbrances on the mortgaged property (collectively "CHARGES") as and when the
same shall become due and payable. If the Corporation does not pay any Taxes or
Charges as and when the same shall become due and payable, the Canadian Agent
may, at its option, elect to pay any such amounts and charge to the Corporation
all amounts so paid as additional amounts secured under this Deed, together with
interest thereon from the date of payment by the Canadian Agent of any such
amounts at the highest rate applicable to Canadian dollar advances pursuant to
the Credit Agreement. The Corporation may contest in good faith the payment of
any Taxes or Charges provided that the Corporation is proceeding diligently and
in good faith and in the best possible manner to contest the claim, the
Corporation's interest in the mortgaged property cannot be forfeited, sold or
affected in any other way while contesting the claim, the Corporation keeps the
Canadian Agent fully informed of the proceedings, the Corporation has made
arrangements satisfactory to the Canadian Agent acting reasonably in respect of
the payment of the contested Taxes or Charges and the Corporation pays in
accordance with section 12 any expenses incurred by the Canadian Agent in
connection with the proceedings.
12. EXPENSES
5
<PAGE>
The Corporation shall pay to the Canadian Agent upon demand the amount
of all reasonable expenses incurred in recovering any obligations secured or in
enforcing the security constituted by this Debenture, including but not limited
to, the expenses incurred in connection with the repossession, holding,
repairing, processing, preparing for disposition, and disposing of any of the
mortgaged property (including reasonable legal and other expenses), with
interest thereon from the date of the incurring of such expenses at the highest
rate applicable to Canadian dollar advances pursuant to the Credit Agreement.
13. DISCHARGE
If the Corporation pays to the Canadian Agent the obligations secured
by this Debenture or if the obligations secured by this Debenture are otherwise
paid in full and the Corporation otherwise observes and performs the terms and
conditions of this Debenture, then the Canadian Agent shall at the request and
at the expense of the Corporation cancel and discharge the mortgage and charge
of this Debenture and execute and deliver to the Corporation such deeds and
other instruments as shall be requisite therefor. For the purposes of this
section 13 only, "obligations secured" shall not include Rate Protection
Agreements that are not entered into pursuant to the Credit Agreement.
14. NOTICES
Unless otherwise provided in any agreement to which the Canadian Agent
and the Corporation are parties, any notice or demand required or permitted to
be given or made under this Debenture by the Canadian Agent to the Corporation
may be served personally on a director, officer or employee of the Corporation
or may be given or made by mailing the same by prepaid registered mail addressed
to the Corporation at its address as set out above and shall, unless a different
date of receipt is established by law, be conclusively deemed to have been
received by the Corporation if served personally on the day served and if given
or made by mailing by prepaid registered mail on the third business day
following the date of such mailing.
15. CONTINUING AND ADDITIONAL SECURITY
This Debenture shall not be considered as satisfied or discharged by
any intermediate payment (as distinct from a final payment) of the whole or part
of the obligations secured but shall constitute and be a continuing security for
a current or running account and shall be in addition to and not in substitution
for any other security now or hereafter held by or for the benefit of the
Canadian Agent. The remedies of the Canadian Agent under this Debenture may be
exercised from time to time separately or in combination and are in addition to
and not in substitution for any other rights of the Canadian Agent however
created.
16. AMALGAMATIONS
6
<PAGE>
If the Corporation amalgamates with any corporation or corporations,
the obligations secured by this Debenture and the mortgage and charge created by
this Debenture shall continue and shall extend to the present and future
undertaking, property and assets of the amalgamated corporation, as if the
amalgamated corporation had executed this Debenture as the Corporation.
17. TRANSFERABLE
Subject to any restrictions on transfer contained in the Credit
Agreement or any other agreement to which the Corporation and the Canadian Agent
are parties, the obligations secured by this Debenture shall be paid and this
Debenture shall be transferable without regard to any set-off or counter-claim
between the Corporation and the Canadian Agent.
18. EFFECT OF HEADINGS
The headings and marginal notes of the sections in this Deed are
inserted for convenience of reference only and shall not affect the
interpretation of this Debenture.
19. LAW GOVERNING
This Debenture shall be governed in all respects by the law of the
Province of Manitoba and the federal laws of Canada applicable therein.
20. FURTHER COVENANTS
The Corporation shall not:
(a) change its name without providing the Canadian Agent with prior 30
days written notice thereof and promptly taking other steps, if any,
as the Canadian Secured Parties reasonably request to permit the
Canadian Agent to perfect the Security with respect to the change in
name;
(b) permit its chief executive office or chief place of business to be
located out of the Province of Manitoba without providing the Canadian
Agent with 30 days prior written notice thereof and promptly taking
other steps, if any, as the Canadian Secured Parties reasonably
request to permit the Canadian Agent to perfect the security with
respect to the change in location;
(c) permit any of its tangible personal property (other than (i) inventory
in transit (ii) goods of a type normally used in more than one
jurisdiction which are equipment or inventory leased or held for lease
by the Corporation to others or (iii) tangible personal property of a
value which is not material in relation to the obligations secured
which is temporarily located out of Manitoba) to be
7
<PAGE>
located out of Manitoba without providing the Canadian Agent with 30
days prior written notice thereof and promptly taking other steps, if
any, as the Canadian Secured Parties reasonably request to permit the
Canadian Agent to perfect the security with respect to the change in
location.
The Corporation shall, forthwith on demand, deliver to the Canadian
Agent possession of all "instruments," "securities," "letters of credit,"
"advices of credit" and "negotiable documents of title" as those terms are
defined or used in the Personal Property Security Act (Manitoba) as amended from
time to time. The Corporation shall also, forthwith on demand, deliver to the
Canadian Agent all such security agreements, mortgages and other documents as
may be reasonably required to provide the Canadian Agent with a fixed and
specific mortgage and charge and a security interest in all patents, trademarks
and other intellectual property in which the Corporation now or hereafter holds
an interest and to provide the Canadian Agent with a fixed and specific mortgage
and charge and a security interest in any or all real and immovable property
(including leaseholds), equipment, machinery, vehicles and other tangible
personal property hereafter acquired by the Corporation.
The Corporation represents and warrants that as of the date of this
Debenture, all of its tangible property, other than inventory in transit, is
located in the Province of Manitoba and all of its accounts receivable are
billed from, and payment is customarily received in, the same place.
IN WITNESS WHEREOF this Debenture has been signed by its duly
authorized officer as of 30 June 1997.
WESTCAN PHARMACEUTICALS LTD.
By: /s/ William B. Towne c/s
------------------------------------------
Name: William B. Towne
Title: Treasurer
8
<PAGE>
Exhibit 4.21
____________________________________________________________
LEINER HEALTH PRODUCTS INC.,
Mortgagor,
to
THE BANK OF NOVA SCOTIA,
as agent,
Mortgagee
___________________________________________________
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
___________________________________________________
Dated as of June 30, 1997
This instrument affects certain real and personal property
located in Cook County,
State of Illinois.
______________________________________________________________
Record and return to:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: Kenneth R. Kleiner, Esq.
This instrument was prepared by the above-named attorney.
Notice: This instrument contains INTER ALIA obligations which may provide for:
(a) a variable rate of interest and/or
(b) future and/or revolving credit advances or readvances, which when
made, shall have the same priority as advances or readvances made
on the date hereof whether or not (i) any advances or readvances
were made on the date hereof and (ii) any indebtedness is
outstanding at the time any advance or re-advance is made.
Notwithstanding anything to the contrary contained herein, the maximum
principal indebtedness secured under any contingency by this
instrument shall in no event exceed $210,000,000.00.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1.
COVENANTS AND AGREEMENTS OF THE MORTGAGOR
SECTION 1.1 Payment of Secured Obligations.............................11
SECTION 1.2 Title to Collateral, etc...................................11
SECTION 1.3 Title Insurance............................................12
SECTION 1.3.1 Title Insurance Policy.....................................12
SECTION 1.3.2 Title Insurance Proceeds...................................12
SECTION 1.4 Recordation................................................12
SECTION 1.5 Payment of Impositions, etc................................13
SECTION 1.6 Insurance and Legal Requirements...........................13
SECTION 1.7 Security Interests, etc....................................14
SECTION 1.8 Permitted Contests.........................................15
SECTION 1.9 Leases.....................................................16
SECTION 1.10 Compliance with Instruments................................16
SECTION 1.11 Maintenance and Repair, etc................................16
SECTION 1.12 Alterations, Additions, etc................................17
SECTION 1.13 Acquired Property Subject to Lien..........................17
SECTION 1.14 Assignment of Rents, Proceeds, etc.........................18
SECTION 1.15 No Claims Against the Mortgagee............................19
SECTION 1.16 Indemnification............................................19
SECTION 1.17 No Credit for Payment of Taxes.............................21
SECTION 1.18 Offering of the Notes; Application of
Proceeds of Loans..........................................21
SECTION 1.19 No Transfer of the Property................................21
SECTION 1.20 Security Agreement.........................................22
SECTION 1.21 Representations and Warranties.............................23
SECTION 1.22 Mortgagor's Covenants......................................23
ARTICLE 2.
INSURANCE; DAMAGE, DESTRUCTION OR TAKING, ETC.
SECTION 2.1 Insurance..................................................24
SECTION 2.1.1 Risks to be Insured........................................24
SECTION 2.1.2. Policy Provisions.....................................25
SECTION 2.1.3. Delivery of Policies, etc.............................26
SECTION 2.1.4. Separate Insurance....................................26
SECTION 2.1.5. Flood Insurance.......................................26
SECTION 2.2 Damage, Destruction or Taking; Mortgagor
to Give Notice; Assignment of Awards.......................27
SECTION 2.3 Application of Proceeds and Awards.........................27
SECTION 2.4 Total Taking and Total Destruction.........................30
ARTICLE 3.
EVENTS OF DEFAULT; REMEDIES, ETC.
SECTION 3.1 Events of Default; Acceleration............................31
SECTION 3.2 Legal Proceedings; Foreclosure.............................32
SECTION 3.3 Power of Sale..............................................32
SECTION 3.4 Uniform Commercial Code Remedies...........................33
SECTION 3.5 Mortgagee Authorized to Execute Deeds, etc.................34
i
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
SECTION 3.6 Purchase of Collateral by Mortgagee........................34
SECTION 3.7 Receipt a Sufficient Discharge to Purchaser................34
SECTION 3.8 Waiver of Appraisement, Valuation, etc.....................35
SECTION 3.9 Sale a Bar Against Mortgagor...............................35
SECTION 3.10 Secured Obligations to Become Due on Sale..................35
SECTION 3.11 Application of Proceeds of Sale and Other Moneys...........35
SECTION 3.12 Appointment of Receiver....................................36
SECTION 3.13 Possession, Management and Income..........................37
SECTION 3.14 Right of Mortgagee to Perform Mortgagor's
Covenants, etc.............................................37
SECTION 3.15 Subrogation................................................38
SECTION 3.16 Remedies, etc., Cumulative.................................38
SECTION 3.17 Provisions Subject to Applicable Law.......................38
SECTION 3.18 No Waiver, etc.............................................39
SECTION 3.19 Compromise of Actions, etc.................................39
ARTICLE 4.
DEFINITIONS
SECTION 4.1 Terms Defined in this Mortgage.............................39
SECTION 4.2 Use of Defined Terms.......................................47
SECTION 4.3 Credit Agreement Definitions...............................47
ARTICLE 5.
MISCELLANEOUS
SECTION 5.1 Further Assurances; Financing Statements...................47
SECTION 5.1.1 Further Assurances.........................................47
SECTION 5.1.2 Financing Statements.......................................48
SECTION 5.2 Additional Security........................................48
SECTION 5.3 Defeasance; Partial Release, etc...........................48
SECTION 5.3.1 Defeasance.................................................48
SECTION 5.3.2 Partial Release, etc......................................49
SECTION 5.4 Notices, etc...............................................49
SECTION 5.5 Waivers, Amendments, etc...................................49
SECTION 5.6 Cross-References...........................................49
SECTION 5.7 Headings...................................................49
SECTION 5.8 Currency...................................................49
SECTION 5.9 Governing Law..............................................49
SECTION 5.10 Successors and Assigns, etc................................50
SECTION 5.11 Waiver of Jury Trial; Submission to Jurisdiction...........50
SECTION 5.12 Severability...............................................51
SECTION 5.13 Loan Document..............................................51
SECTION 5.14 Usury Savings Clause.......................................51
SECTION 5.15 Future Advances............................................52
EXECUTION PAGE ..........................................................40
ii
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
ACKNOWLEDGMENT...........................................................41
Schedule 1 - Legal Description
Schedule 2 - Permitted Encumbrances
<PAGE>
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE
FILING, dated as of June 30, 1997 (this "MORTGAGE"), made by LEINER HEALTH
PRODUCTS INC. ( "LEINER" or the "MORTGAGOR"), a Delaware corporation having an
address of 901 East 233rd Street, Carson, California 90745, to THE BANK OF NOVA
SCOTIA, having an address at One Liberty Plaza, New York, New York 10006, for
itself as a Lender and as collateral agent (the "AGENT") under the Credit
Agreement referred to below (together with its successors and assigns from time
to time acting as agent under such Credit Agreement, the "MORTGAGEE").
W I T N E S S E T H T H A T:
WHEREAS, the Mortgagor is on the date of delivery hereof the owner of fee
title to the parcel of land described in SCHEDULE 1 hereto (the "LAND") and of
the Improvements (such term and other capitalized terms used in this Mortgage
having the respective meanings specified or referred to in ARTICLE IV);
WHEREAS, pursuant to the terms, conditions and provisions of the Credit
Agreement, dated as of June 30, 1997 (as amended, restated, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"), among Leiner
Health Products Group Inc. ("LHPG" or the "U.S. BORROWER" (prior to the
Assumption)), Vita Health Company (1985) Ltd. (the "CANADIAN BORROWER"), as
Canadian borrower (collectively, the "BORROWERS"), the institutions from time to
time a party thereto which extend a Commitment under the U.S. Facility
(collectively, the "U.S. LENDERS"), the various financial institutions from time
to time a party thereto which extend a Commitment under the Canadian Facility
(collectively, the "CANADIAN LENDERS", and together with the U.S. Lenders, the
"LENDERS"), The Bank of Nova Scotia ("SCOTIABANK"), as agent for the U.S.
Lenders under the U.S. Facility (in such capacity, the "U.S. AGENT"), and
Scotiabank, currently acting through its executive offices in Toronto, Ontario,
as agent for the Canadian Lenders under the Canadian Facility (in such capacity,
the "CANADIAN AGENT", and together with the U.S. Agent, collectively, the
"AGENTS"), the Lenders and the Issuer have agreed to make Loans to, and to issue
Letters of Credit for the account of, the Borrowers in the maximum original
principal amount of TWO HUNDRED TEN MILLION AND 00/100 DOLLARS ($210,000,000.00)
(such Loans and Letters of Credit are hereinafter referred to collectively as
the "CREDIT EXTENSIONS").
WHEREAS, the Credit Extensions consist of:
(i) from the U.S. Lenders, a Term B Loan Commitment and a Term C Loan
Commitment pursuant to
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which Borrowings of Term Loans, in a maximum aggregate principal amount not
to exceed $45,000,000 (in the case of Term B Loans) and $40,000,000 (in the
case of Term C Loans), will be made to the U.S. Borrower in a single
Borrowing to occur on the date of the initial Credit Extensions;
(ii) from the U.S. RL Lenders, a U.S. Revolving Loan Commitment (to
include availability for U.S. Revolving Loans, U.S. Swing Line Loans and
U.S. Letters of Credit) pursuant to which Borrowings of U.S. Revolving
Loans and U.S. Swing Line Loans, in a maximum aggregate principal amount
(together with all U.S. Letter of Credit Outstandings) not to exceed the
then existing U.S. Revolving Loan Commitment Amount, will be made to the
U.S. Borrower from time to time on and subsequent to the date of the
initial Credit Extensions but prior to the U.S. Revolving Loan Commitment
Termination Date;
(iii) from the U.S. Issuers (and participated in by the U.S. RL
Lenders), a U.S. Letter of Credit Commitment pursuant to which the U.S.
Issuers will issue U.S. Letters of Credit for the account of the U.S.
Borrower and, subject to Section 2.1.2 of the Credit Agreement, its U.S.
Subsidiaries from time to time on and subsequent to the date of the initial
Credit Extensions but prior to the U.S. Revolving Loan Commitment
Termination Date in a maximum aggregate Stated Amount at any one time
outstanding not to exceed $35,000,000 (PROVIDED that the aggregate
outstanding principal amount of U.S. Revolving Loans, Swing Line Loans and
U.S. Letter of Credit Outstandings at any time shall not exceed the then
existing U.S. Revolving Loan Commitment Amount);
(iv) from the U.S. Swing Line Lender (and participated in by the U.S.
RL Lenders), a U.S. Swing Line Loan Commitment pursuant to which Borrowings
of U.S. Swing Line Loans in an aggregate outstanding principal amount not
to exceed $15,000,000 will be made on and subsequent to the date of the
initial Credit Extensions but prior to the U.S. Revolving Loan Commitment
Termination Date (PROVIDED, that the aggregate outstanding principal amount
of such U.S. Swing Line Loans, U.S. Revolving Loans and U.S. Letter of
Credit Outstandings at any time shall not exceed the then existing U.S.
Revolving Loan Commitment Amount);
(v) from the Canadian Lenders, a Canadian Revolving Loan Commitment
(to include availability for Canadian Revolving Loans, Canadian Swing Line
Loans and Canadian Letters of Credit) pursuant to which Borrowings of
Canadian Revolving Loans and Canadian Swing Line Loans in a maximum
aggregate principal
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amount (together with all Canadian Letter of Credit Outstandings) not to
exceed the then existing Canadian Revolving Loan Commitment Amount, will be
made to the Canadian Borrower from time to time on and subsequent to the
date of the initial Credit Extensions but prior to the Canadian Revolving
Loan Commitment Termination Date;
(vi) from the Canadian Issuers (and participated in by the Canadian
Lenders), a Canadian Letter of Credit Commitment pursuant to which the
Canadian Issuers will issue Canadian Letters of Credit for the account of
the Canadian Borrower and, subject to Section 3.1.2 of the Credit
Agreement, the Canadian Borrower's Subsidiaries from time to time on and
subsequent to the date of the initial Credit Extensions but prior to the
Canadian Revolving Loan Commitment Termination Date in a maximum aggregate
Stated Amount at any one time outstanding not to exceed Cdn $13,000,000
(PROVIDED that the aggregate outstanding principal amount of Canadian
Revolving Loans and Canadian Letter of Credit Outstandings at any time
shall not exceed the then existing Canadian Revolving Loan Commitment
Amount); and
(vii) from the Canadian Swing Line Lender (and participated in by the
Canadian Lenders), a Canadian Swing Line Loan Commitment pursuant to which
Borrowings of Canadian Swing Line Loans in an aggregate outstanding
principal amount not to exceed the Cdn $1,400,000 will be made on and
subsequent to the date of the initial Credit Extensions but prior to the
Canadian Revolving Loan Commitment Termination Date (provided that the
aggregate outstanding principal amount of such Canadian Swing Line Loans,
Canadian Revolving Loans and Canadian Letter of Credit Outstandings at any
time shall not exceed the then existing Canadian Revolving Loan Commitment
Amount.
WHEREAS, as contemplated by the Credit Agreement, immediately following the
making of the initial Credit Extensions, the Mortgagor and LHPG have delivered
the Assumption Agreement, pursuant to which the Mortgagor has assumed (the
"ASSUMPTION") the rights and obligations of LHPG as (and has become ) the U.S.
Borrower under the Credit Agreement;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) and the execution and delivery of the
Assumption Agreement (as defined in the Credit Agreement) under the Credit
Agreement, the Mortgagor is required to execute and deliver this Mortgage;
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WHEREAS, (i) as a material inducement for the Lenders to enter into the Credit
Agreement and the other Loan Documents, (ii) to secure the payment and
performance of the Mortgagor's obligations under the Credit Agreement and the
other Loan Documents; and (iii) to secure the payment and performance of the
Secured Obligations, the Mortgagor is required to execute and deliver this
Mortgage to the Mortgagee; and
WHEREAS, the Mortgagor has duly authorized the execution, delivery and
performance of this Mortgage.
G R A N T:
NOW, THEREFORE, for and in consideration of the premises, and of the mutual
covenants herein contained, and in order to induce the Lenders to make the
Credit Extensions pursuant to the Credit Agreement, and in order to secure the
full, timely and proper payment and performance of and compliance with each and
every one of the Secured Obligations (as hereinafter defined), the Mortgagor
hereby irrevocably grants, bargains, sells, mortgages, warrants, aliens,
demises, releases, hypothecates, pledges, assigns, transfers and conveys to the
Mortgagee and its successors and assigns, forever, all of the following (the
"COLLATERAL"):
(a) REAL ESTATE. All of the Land and all additional lands and
estates therein now owned or hereafter acquired by the Mortgagor for use or
development with the Land or any portion thereof, together with all and
singular the tenements, rights, easements, hereditaments, rights of way,
privileges, liberties, appendages and appurtenances now or hereafter
belonging or in any way pertaining to the Land and such additional lands
and estates therein (including, without limitation, all rights relating to
storm and sanitary sewer, water, gas, electric, railway and telephone
services); all development rights, air rights, riparian rights, water,
water rights, water stock, all rights in, to and with respect to any and
all oil, gas, coal, minerals and other substances of any kind or character
underlying or relating to the Land and such additional lands and estates
therein and any interest therein; all estate, claim, demand, right, title
or interest of the Mortgagor in and to any street, road, highway or alley,
vacated or other, adjoining the Land or any part thereof and such
additional lands and estates therein; all strips and gores belonging,
adjacent or pertaining to the Land or such additional lands and estates;
and any after-acquired title to any of the foregoing (herein collectively
referred to as the "REAL ESTATE");
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(b) IMPROVEMENTS. All buildings, structures and other improvements
and any additions and alterations thereto or replacements thereof, now or
hereafter built, constructed or located upon the Real Estate; and, to the
extent that any of the following items of property constitutes fixtures
under applicable laws, all furnishings, fixtures, fittings, appliances,
apparatus, equipment, machinery, building and construction materials and
other articles of every kind and nature whatsoever and all replacements
thereof, now or hereafter affixed or attached to, placed upon or used in
any way in connection with the complete and comfortable use, enjoyment,
occupation, operation, development and/or maintenance of the Real Estate or
such buildings, structures and other improvements, including, but not
limited to, partitions, furnaces, boilers, oil burners, radiators and
piping, plumbing and bathroom fixtures, refrigeration, heating,
ventilating, air conditioning and sprinkler systems, other fire prevention
and extinguishing apparatus and materials, vacuum cleaning systems, gas and
electric fixtures, incinerators, compactors, elevators, engines, motors,
generators and all other articles of property which are considered fixtures
under applicable law (such buildings, structures and other improvements and
such other property are herein collectively referred to as the
"IMPROVEMENTS"; the Real Estate and the Improvements are herein
collectively referred to as the "PROPERTY");
(c) GOODS. All building materials, goods, construction materials,
appliances (including, without limitation, stoves, ranges, ovens,
disposals, refrigerators, water fountains and coolers, fans, heaters,
dishwashers, clothes washers and dryers, water heaters, hood and fan
combinations, kitchen equipment, laundry equipment, kitchen cabinets and
other similar equipment), stocks, beds, mattresses, bedding and linens,
supplies, blinds, window shades, drapes, carpets, floor coverings,
manufacturing equipment and machinery, office equipment, growing plants and
shrubberies, control devices, equipment (including window cleaning,
building cleaning, swimming pool, recreational, monitoring, garbage, pest
control and other equipment), motor vehicles, tools, furnishings,
furniture, lighting, non-structural additions to the Real Estate and
Improvements and all other tangible property of any kind or character,
together with all replacements thereof, now or hereafter located on or in
or used or useful in connection with the complete and comfortable use,
enjoyment, occupation, operation, development and/or maintenance of the
Property, regardless of whether or not located on or in the Property or
located elsewhere for purposes of storage,
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fabrication or otherwise (herein collectively referred to as the "GOODS");
(d) INTANGIBLES. All goodwill, trademarks, trade names, option
rights, purchase contracts, real and personal property tax refunds, books
and records and general intangibles of the Mortgagor relating to the
Property, and any other intangible property of the Mortgagor relating to
the Property (herein collectively referred to as the "INTANGIBLES");
(e) LEASES. All rights of the Mortgagor in, to and under all leases,
licenses, occupancy agreements, concessions and other arrangements, oral or
written, now existing or hereafter entered into, whereby any Person agrees
to pay money or any other consideration for the use, possession or
occupancy of, or any estate in, the Property or any portion thereof or
interest therein (herein collectively referred to as the "LEASES"), and the
right, subject to applicable law, upon the occurrence of any Event of
Default hereunder, to receive and collect the Rents (as hereinafter
defined) paid or payable thereunder;
(f) PLANS. All rights of the Mortgagor in and to all plans and
specifications, designs, drawings and other information, materials and
matters heretofore or hereafter prepared relating to the Improvements or
any construction on the Real Estate (herein collectively referred to as the
"PLANS");
(g) PERMITS. All rights of the Mortgagor, to the extent assignable,
in, to and under all permits, franchises, licenses, approvals and other
authorizations respecting the use, occupation and operation of the Property
and every part thereof and respecting any business or other activity
conducted on or from the Property, and any product or proceed thereof or
therefrom, including, without limitation, all building permits,
certificates of occupancy and other licenses, permits and approvals issued
by governmental authorities having jurisdiction (herein collectively
referred to as the "PERMITS");
(h) CONTRACTS. All right, title and interest of the Mortgagor in and
to all agreements, contracts, certificates, instruments, warranties,
appraisals, engineering, environmental, soils, insurance and other reports
and studies, books, records, correspondence, files and advertising
materials, and other documents, now or hereafter obtained or entered into,
as the case may be, pertaining to the construction, use, occupancy,
possession, operation, management, leasing, maintenance and/or ownership of
the Property and all right, title
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and interest of the Mortgagor therein (herein collectively referred to as
the "CONTRACTS");
(i) LEASES OF FURNITURE, FURNISHINGS AND EQUIPMENT. All right, title
and interest of the Mortgagor as lessee in, to and under any leases of
furniture, furnishings, equipment and any other Goods now or hereafter
installed in or at any time used in connection with the Property;
(j) RENTS. All rents, issues, profits, royalties, avails, income and
other benefits derived or owned, directly or indirectly, by the Mortgagor
from the Property, including, without limitation, all rents and other
consideration payable by tenants, claims against guarantors, and any cash
or other securities deposited to secure performance by tenants, under the
Leases (herein collectively referred to as "RENTS");
(k) PROCEEDS. All proceeds of the conversion, voluntary or
involuntary of any of the foregoing into cash or liquidated claims,
including, without limitation, proceeds of insurance and condemnation
awards (herein collectively referred to as "PROCEEDS"); and
(l) OTHER PROPERTY. All other property and rights of the Mortgagor
of every kind and character relating to the Property, and all proceeds and
products of any of the foregoing;
AND, without limiting any of the other provisions of this Mortgage, the
Mortgagor expressly grants to the Mortgagee, as secured party, a security
interest in all of those portions of the Collateral which are or may be subject
to the State Uniform Commercial Code provisions applicable to secured
transactions;
TO HAVE AND TO HOLD the Collateral unto the Mortgagee, its successors and
assigns, forever.
FURTHER to secure the full, timely and proper payment and performance of
the Secured Obligations, the Mortgagor hereby covenants and agrees with and
warrants to the Mortgagee as follows:
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ARTICLE 1.
COVENANTS AND AGREEMENTS OF THE MORTGAGOR
SECTION 1.1 PAYMENT OF SECURED OBLIGATIONS. (i) The Mortgagor agrees
that:
(a) it will duly and punctually pay and perform or cause to be paid
and performed each of the Obligations at the time and in accordance with
the terms of the Loan Documents, and
(b) when and as due and payable from time to time in accordance with
the terms hereof or of any other Loan Documents, pay and perform, or cause
to be paid and performed, all other Secured Obligations.
SECTION 1.2 TITLE TO COLLATERAL, ETC. The Mortgagor represents and
warrants to and covenants with the Mortgagee that:
(a) as of the date hereof and at all times hereafter while this
Mortgage is outstanding, the Mortgagor (1) is and shall be the absolute
owner of the legal and beneficial title to the Property and to all other
property included in the Collateral, and (2) has and shall have good and
marketable title in fee simple absolute to the Property, subject in each
case only to this Mortgage, the liens expressly permitted pursuant to the
terms of the Credit Agreement and the encumbrances set forth in SCHEDULE 2
hereto (collectively, the "PERMITTED ENCUMBRANCES");
(b) the Mortgagor has good and lawful right, power and authority to
execute this Mortgage and to convey, transfer, assign, mortgage and grant a
security interest in the Collateral, all as provided herein;
(c) this Mortgage has been duly executed, acknowledged and delivered
on behalf of the Mortgagor, all consents and other actions required to be
taken by the officers, directors, shareholders and partners, as the case
may be, of the Mortgagor have been duly and fully given and performed and
this Mortgage constitutes the legal, valid and binding obligation of the
Mortgagor, enforceable against the Mortgagor in accordance with its terms;
and
(d) the Mortgagor, at its expense, will warrant and defend to the
Mortgagee and any purchaser under the power of sale herein or at any
foreclosure sale such title to the Collateral and the first mortgage lien
and first priority perfected security interest of this Mortgage thereon and
therein against all claims and demands and will maintain, preserve and
protect such
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lien and security interest and will keep this Mortgage a valid, direct
first mortgage lien of record on and a first priority perfected security
interest in the Collateral, subject only to the Permitted Encumbrances.
SECTION 1.3 TITLE INSURANCE.
SECTION 1.3.1 TITLE INSURANCE POLICY. Concurrently with the execution and
delivery of this Mortgage, the Mortgagor, at its expense, has obtained and
delivered to the Mortgagee a loan policy or policies of title insurance in an
amount, and in form and substance, satisfactory to the Mortgagee naming the
Mortgagee as the insured, insuring the title to and the first mortgage lien of
this Mortgage on the Property, with endorsements requested by the Mortgagee.
The Mortgagor has duly paid in full all premiums and other charges due in
connection with the issuance of such policy or policies of title insurance.
SECTION 1.3.2 TITLE INSURANCE PROCEEDS. All proceeds received by and
payable to the Mortgagee for any loss under the loan policy or policies of title
insurance delivered to the Mortgagee pursuant to SECTION 1.3.1, or under any
policy or policies of title insurance delivered to the Mortgagee in substitution
therefor or replacement thereof, shall be the property of the Mortgagee and
shall be applied by the Mortgagee in accordance with the provisions of SECTION
2.3.
SECTION 1.4 RECORDATION. The Mortgagor, at its expense, will at all times
cause this Mortgage and any instruments amendatory hereof or supplemental hereto
and any instruments of assignment hereof or thereof (and any appropriate
financing statements or other instruments and continuations thereof), and each
other instrument delivered in connection with the Credit Agreement or any other
Loan Document and intended thereunder to be recorded, registered and filed, to
be kept recorded, registered and filed, in such manner and in such places, and
will pay all such recording, registration, filing fees, taxes and other charges,
and will comply with all such statutes and regulations as may be required by law
in order to establish, preserve, perfect and protect the lien and security
interest of this Mortgage as a valid, direct first mortgage lien and first
priority perfected security interest in the Collateral, subject only to the
Permitted Encumbrances. The Mortgagor will pay or cause to be paid, and will
indemnify the Mortgagee in respect of, all taxes (including interest and
penalties) at any time payable in connection with the filing and recording of
this Mortgage and any and all supplements and amendments hereto.
SECTION 1.5 PAYMENT OF IMPOSITIONS, ETC. Subject to Section 1.8 (relating
to permitted contests), the Mortgagor will pay or cause to be paid at least ten
(10) days before the same would become delinquent and before any fine,
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penalty, interest or cost may be added for non-payment, all taxes, assessments,
water and sewer rates, charges, license fees, inspection fees and other
governmental levies or payments, of every kind and nature whatsoever, general
and special, ordinary and extraordinary, unforeseen as well as foreseen, which
at any time may be assessed, levied, confirmed, imposed or which may become a
lien upon the Collateral, or any portion thereof, or which are payable with
respect thereto, or upon the rents, issues, income or profits thereof, or on the
occupancy, operation, use, possession or activities thereof, whether any or all
of the same be levied directly or indirectly or as excise taxes or as income
taxes, and all taxes, assessments or charges which may be levied on the Secured
Obligations, or the interest thereon (collectively, the "IMPOSITIONS"). The
Mortgagor will deliver to the Mortgagee, upon request, copies of official
receipts or other satisfactory proof evidencing such payments.
SECTION 1.6 INSURANCE AND LEGAL REQUIREMENTS. Subject to SECTION 1.8
(relating to permitted contests), the Mortgagor, at its expense, will comply in
all material respects, or cause compliance in all material respects with
(a) all provisions of any insurance policy covering or applicable to
the Collateral or any part thereof, all requirements of the issuer of any
such policy, and all orders, rules, regulations and other requirements of
the National Board of Fire Underwriters (or any other body exercising
similar functions) applicable to or affecting the Collateral or any part
thereof or any use or condition of the Collateral or any part thereof
(collectively, the "INSURANCE REQUIREMENTS"); and
(b) all laws, including Environmental, Health or Safety Requirements
of Law, statutes, codes, acts, ordinances, orders, judgments, decrees,
injunctions, rules, regulations, permits, licenses, authorizations,
directions and requirements of all governments, departments, commissions,
boards, courts, authorities, agencies, officials and officers, foreseen or
unforeseen, ordinary or extraordinary, which now or at any time hereafter
may be applicable to the Collateral or any part thereof, or any of the
adjoining sidewalks, curbs, vaults and vault space, if any, streets or
ways, or any use or condition of the Collateral or any part thereof
(collectively, the "LEGAL REQUIREMENTS");
whether or not compliance therewith shall require structural changes in or
interference with the use and enjoyment of the Collateral or any part thereof.
SECTION 1.7 SECURITY INTERESTS, ETC. The Mortgagor will not directly or
indirectly create or permit or suffer
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to be created or to remain, and will promptly discharge or cause to be
discharged, any deed of trust, mortgage, encumbrance or charge on, pledge of,
security interest in or conditional sale or other title retention agreement with
respect to or any other lien on or in the Collateral or any part thereof or the
interest of the Mortgagor or the Mortgagee therein, or any Proceeds thereof or
Rents or other sums arising therefrom, other than (a) Permitted Encumbrances,
and (b) liens of mechanics, materialmen, suppliers or vendors or rights thereto
incurred in the ordinary course of the business of the Mortgagor for sums not
yet due or any such liens or rights thereto which are at the time being
contested as permitted by SECTION 1.8. The Mortgagor will not postpone the
payment of any sums for which liens of mechanics, materialmen, suppliers or
vendors or rights thereto have been incurred (unless such liens or rights
thereto are at the time being contested as permitted by SECTION 1.8), or enter
into any contract under which payment of such sums is postponable (unless such
contract expressly provides for the legal, binding and effective waiver of any
such liens or rights thereto), in either case, for more than 60 days after the
completion of the action giving rise to such liens or rights thereto.
SECTION 1.8 PERMITTED CONTESTS. After prior written notice to the
Mortgagee, the Mortgagor at its expense may contest, or cause to be contested,
by appropriate legal proceedings conducted in good faith and with due diligence,
the amount or validity or application, in whole or in part, of any Imposition,
Legal Requirement or Insurance Requirement or lien of a mechanic, materialman,
supplier or vendor, PROVIDED THAT, (a) in the case of an unpaid Imposition,
lien, encumbrance or charge, such proceedings shall suspend the collection
thereof from the Mortgagor, the Mortgagee, and the Collateral (including any
rent or other income therefrom) and shall not interfere with the payment of any
such rent or income, (b) neither the Collateral nor any rent or other income
therefrom nor any part thereof or interest therein would be in any danger of
being sold, forfeited, lost, impaired or interfered with, (c) in the case of a
Legal Requirement, neither the Mortgagor nor the Mortgagee would be in danger of
any material civil or criminal liability for failure to comply therewith, (d)
the Mortgagor shall have furnished such security, if any, as may be required in
the proceedings or as may be reasonably requested by the Mortgagee, (e) the
non-payment of the whole or any part of any Imposition will not result in the
delivery of a tax deed to the Collateral or any part thereof because of such
non-payment, (f) the payment of any sums required to be paid with respect to any
of the Notes or under this Mortgage (other than any unpaid Imposition, lien,
encumbrance or charge at the time being contested in accordance with this
SECTION 1.8) shall not be interfered with or otherwise affected, (g) in the case
of any Insurance Requirement, the failure of the Mortgagor to comply
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therewith shall not affect the validity of any insurance required to be
maintained by the Mortgagor under SECTION 2.1, and (h) that adequate reserves,
determined in accordance with GAAP, shall have been set aside on the Mortgagor's
books.
SECTION 1.9 LEASES. The Mortgagor represents and warrants to the
Mortgagee that, as of the date hereof, there are no written or oral leases or
other agreements of any kind or nature relating to the occupancy of any portion
of the Property by any Person other than the Mortgagor. The Mortgagor will not
enter into any such written or oral lease or other agreement with respect to any
portion of the Property without first obtaining the written consent of the
Mortgagee.
SECTION 1.10 COMPLIANCE WITH INSTRUMENTS. The Mortgagor at its expense
will promptly comply with all rights of way or use, privileges, franchises,
servitudes, licenses, easements, tenements, hereditaments and appurtenances
forming a part of the Property and all instruments creating or evidencing the
same, in each case, to the extent compliance therewith is required of the
Mortgagor under the terms thereof. The Mortgagor will not take any action which
may result in a forfeiture or termination of the rights afforded to the
Mortgagor under any such instruments and will not, without the prior written
consent of the Mortgagee, amend any of such instruments.
SECTION 1.11 MAINTENANCE AND REPAIR, ETC. Subject to the provisions of
SECTION 1.12, the Mortgagor will keep or cause to be kept all presently and
subsequently erected or acquired Improvements and the sidewalks, curbs, vaults
and vault space, if any, located on or adjoining the same, and the streets and
the ways adjoining the same, in good and substantial order and repair and in
such a fashion that neither the value nor utility of the Collateral will not be
diminished, and, at its sole cost and expense, will promptly make or cause to be
made all necessary and appropriate repairs, replacements and renewals thereof,
whether interior or exterior, structural or nonstructural, ordinary or
extraordinary, foreseen or unforeseen, so that its business carried on in
connection therewith may be properly conducted at all times. All repairs,
replacements and renewals shall be at least equal in quality, use and value to
the original Improvements. The Mortgagor at its expense will do or cause to be
done all shoring of foundations and walls of any building or other Improvements
on the Property and (to the extent permitted by law) of the ground adjacent
thereto, and every other act necessary or appropriate for the preservation and
safety of the Property by reason of or in connection with any excavation or
other building operation upon the Property and upon any adjoining property,
whether or not the Mortgagor shall, by any Legal Requirement, be
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required to take such action or be liable for failure to do so.
SECTION 1.12 ALTERATIONS, ADDITIONS, ETC. So long as no Event of Default
shall have occurred and be continuing, the Mortgagor shall have the right at any
time and from time to time to make or cause to be made reasonable alterations of
and additions to the Property or any part thereof, PROVIDED THAT any alteration
or addition: (a) shall not change the general character or the use of the
Property or reduce the fair market value thereof below its value immediately
before such alteration or addition, or impair the usefulness of the Property;
(b) is effected with due diligence, in a good and workmanlike manner and in
compliance with all Legal Requirements and Insurance Requirements; (c) is
promptly and fully paid for, or caused to be paid for, by the Mortgagor; (d) is
made, in case the estimated cost of such alteration or addition exceeds U.S.
$250,000, (i) only after the Mortgagee shall have consented thereto and shall
have reviewed and approved in writing the plans and specifications therefor,
(ii) under the supervision of a qualified architect or engineer or another
professional approved by the Mortgagee and (iii) only after the Mortgagor shall
have furnished to the Mortgagee a performance bond or other security reasonably
satisfactory to the Mortgagee.
SECTION 1.13 ACQUIRED PROPERTY SUBJECT TO LIEN. All property at any time
acquired by the Mortgagor and provided or required by this Mortgage to be or
become subject to the lien and security interest hereof, whether such property
is acquired by exchange, purchase, construction or otherwise, shall forthwith
become subject to the lien and security interest of this Mortgage without
further action on the part of the Mortgagor or the Mortgagee. The Mortgagor, at
its expense, will execute and deliver to the Mortgagee (and will record and file
as provided in SECTION 1.4) an instrument supplemental to this Mortgage
satisfactory in substance and form to the Mortgagee, whenever such an instrument
is necessary under applicable law to subject to the lien and security interest
of this Mortgage all right, title and interest of the Mortgagor in and to all
property provided or required by this Mortgage to be subject to the lien and
security interest hereof.
SECTION 1.14 ASSIGNMENT OF RENTS, PROCEEDS, ETC. The assignment, grant
and conveyance of the Leases, Rents, Proceeds and other rents, income, proceeds
and benefits of the Collateral contained in the Granting Clause of this Mortgage
shall constitute an absolute, present and irrevocable assignment, grant and
conveyance, PROVIDED, HOWEVER, that permission is hereby given to the Mortgagor,
so long as no Event of Default has occurred hereunder, to collect, receive and
apply such Rents, Proceeds and other rents, income, proceeds and benefits as
they become due and
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payable, but not in advance thereof, and in accordance with all of the other
terms, conditions and provisions hereof, of the Loan Documents, and of the
Leases, contracts, agreements and other instruments with respect to which such
payments are made or such other benefits are conferred. Upon the occurrence of
an Event of Default, such permission shall terminate immediately and
automatically, without notice to the Mortgagor or any other Person except as
required by law, and shall not be reinstated upon a cure of such Event of
Default without the express written consent of the Mortgagee. Such assignment
shall be fully effective without any further action on the part of the Mortgagor
or the Mortgagee and the Mortgagee shall be entitled, at its option, upon the
occurrence of an Event of Default hereunder, to collect, receive and apply all
Rents, Proceeds and all other rents, income, proceeds and benefits from the
Collateral, including all right, title and interest of the Mortgagor in any
escrowed sums or deposits or any portion thereof or interest therein, whether or
not the Mortgagee takes possession of the Collateral or any part thereof. The
Mortgagor further grants to the Mortgagee the right, at the Mortgagee's option,
upon the occurrence of an Event of Default hereunder, to:
(a) enter upon and take possession of the Property for the purpose of
collecting Rents, Proceeds and said rents, income, proceeds and other
benefits;
(b) dispossess by the customary summary proceedings any tenant,
purchaser or other Person defaulting in the payment of any amount when and
as due and payable, or in the performance of any other obligation, under
any Lease, contract or other instrument to which said Rents, Proceeds or
other rents, income, proceeds or benefits relate;
(c) let or convey the Collateral or any portion thereof or any
interest therein; and
(d) apply Rents, Proceeds and such rents, income, proceeds and other
benefits, after the payment of all necessary fees, charges and expenses, on
account of the Secured Obligations in accordance with SECTION 3.11.
SECTION 1.15 NO CLAIMS AGAINST THE MORTGAGEE. Nothing contained in this
Mortgage shall constitute any consent or request by the Mortgagee, express or
implied, for the performance of any labor or the furnishing of any materials or
other property in respect of the Property or any part thereof, or be construed
to permit the making of any claim against the Mortgagee in respect of labor or
services or the furnishing of any materials or other property or any claim that
any lien based on the performance of such labor or the furnishing of any such
materials or other property is prior to the lien and security interest of this
Mortgage. ALL
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CONTRACTORS, SUBCONTRACTORS, VENDORS AND OTHER PERSONS DEALING WITH THE
PROPERTY, OR WITH ANY PERSONS INTERESTED THEREIN, ARE HEREBY REQUIRED TO TAKE
NOTICE OF THE PROVISIONS OF THIS SECTION.
SECTION 1.16 INDEMNIFICATION. The Mortgagor will protect, indemnify, save
harmless and defend the Mortgagee, the Lenders, and each of their respective
officers, directors, shareholders, employees, representatives and agents
(collectively, the "INDEMNIFIED PARTIES" and individually, an "INDEMNIFIED
PARTY"), from and against any and all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) imposed upon or incurred by or asserted
against any Indemnified Party by reason of (a) ownership of an interest in this
Mortgage, any other Loan Document or the Property, (b) any accident, injury to
or death of persons or loss of or damage to or loss of the use of property
occurring on or about the Property or any part thereof or the adjoining
sidewalks, curbs, vaults and vault spaces, if any, streets, alleys or ways, (c)
any use, non-use or condition of the Property or any part thereof or the
adjoining sidewalks, curbs, vaults and vault spaces, if any, streets, alleys or
ways, (d) any failure on the part of the Mortgagor to perform or comply with any
of the terms of this Mortgage, (e) performance of any labor or services or the
furnishing of any materials or other property in respect of the Collateral or
any part thereof made or suffered to be made by or on behalf of the Mortgagor,
(f) any negligence or tortious act on the part of the Mortgagor or any of its
agents, contractors, lessees, licensees or invitees, (g) any work in connection
with any alterations, changes, new construction or demolition of or additions to
the Property, or (h) (i) any Hazardous Material (as such term is defined in the
Credit Agreement) on, in, under or affecting all or any portion of the Property,
the groundwater, or any surrounding areas, (ii) any misrepresentation,
inaccuracy or breach of any warranty, covenant or agreement contained or
referred to in SECTIONS 1.20 and 1.21, (iii) any violation or claim of violation
by the Mortgagor of any Environmental, Health or Safety Requirements of Law, or
(iv) the imposition of any lien for damages caused by or the recovery of any
costs for the cleanup, release or threatened release of any Hazardous Material.
If any action or proceeding be commenced, to which action or proceeding any
Indemnified Party is made a party by reason of the execution of this Mortgage or
any other Loan Document, or in which it becomes necessary to defend or uphold
the lien of this Mortgage, all sums paid by the Indemnified Parties, for the
expense of any litigation to prosecute or defend the rights and lien created
hereby or otherwise, shall be paid by the Mortgagor to such Indemnified Parties,
as the case may be, as hereinafter provided. The Mortgagor will pay and save
the Indemnified Parties harmless against any and all liability
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with respect to any intangible personal property tax or similar imposition of
the State or any subdivision or authority thereof now or hereafter in effect,
to the extent that the same may be payable by the Indemnified Parties in
respect of this Mortgage, any Loan Document or any Secured Obligation. All
amounts payable to the Indemnified Parties under this SECTION 1.16. shall be
deemed indebtedness secured by this Mortgage and any such amounts which are
not paid within ten (10) days after written demand therefor by any
Indemnified Party shall bear interest at the rate provided for in Section
5.2.2. of the Credit Agreement from the date of such demand. In case any
action, suit or proceeding is brought against any Indemnified Party by reason
of any such occurrence, the Mortgagor, upon request of such Indemnified
Party, will, at the Mortgagor's expense, resist and defend such action, suit
or proceeding or cause the same to be resisted or defended by counsel
designated by the Mortgagor and approved by such Indemnified Party. The
obligations of the Mortgagor under this SECTION 1.16 shall survive any
discharge or reconveyance of this Mortgage and payment in full of the Secured
Obligations.
SECTION 1.17 NO CREDIT FOR PAYMENT OF TAXES. The Mortgagor shall not be
entitled to any credit against the Secured Obligations by reason of the payment
of any tax on the Property or any part thereof or by reason of the payment of
any other Imposition, and shall not apply for or claim any deduction from the
taxable value of the Property or any part thereof by reason of this Mortgage.
SECTION 1.18 OFFERING OF THE NOTES; APPLICATION OF PROCEEDS OF LOANS.
Neither the Mortgagor nor any Person acting on behalf of the Mortgagor has
directly or indirectly offered the Notes or any portion thereof or any similar
security to, or solicited any offer to buy any of the same from, any Person
other than the Mortgagee. Neither the Mortgagor nor any Person acting on behalf
of the Mortgagor has taken or will take any action which would subject the
issuance of the Notes to the provisions of section 5 of the Securities Act of
1933, as amended. The Mortgagor (a) will not use or permit to be used any
proceeds of the Loans, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of "purchasing" or "carrying" any "margin
stock" within the meaning of Regulation U of the Federal Reserve Board, as
amended from time to time, and (b) has or will apply all of the proceeds of the
Loans that are paid to it by the Mortgagee to the purposes permitted by the
Credit Agreement.
SECTION 1.19 NO TRANSFER OF THE PROPERTY. Except as set forth in the
Credit Agreement, the Mortgagor shall not, without the prior written consent of
the Mortgagee, which consent may be granted or withheld in the sole and absolute
discretion of the Mortgagee (i) sell, convey, assign or otherwise transfer the
Property or any portion of the
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Mortgagor's interest therein or (ii) further encumber the Property or permit the
Property to become encumbered by any lien, claim, security interest or other
indebtedness of any kind or nature other than the Permitted Encumbrances.
SECTION 1.20 SECURITY AGREEMENT. With respect to the items of personal
property and fixtures referred to and described in the Granting Clause of this
Mortgage and included as part of the Collateral, this Mortgage is hereby made
and declared to be a security agreement encumbering each and every item of
personal property and fixtures now or hereafter owned by Mortgagor and included
herein as a part of the Collateral, in compliance with the provisions of the
Uniform Commercial Code as enacted in the State. In this respect, Mortgagor, as
"Debtor", expressly grants to Mortgagee, as "Secured Party", a security interest
in and to all of the property now or hereafter owned by Mortgagor which
constitutes the personal property and fixtures hereinabove referred to and
described in this Mortgage, including all extensions, accessions, additions,
improvements, betterments, renewals, replacements and substitutions thereof or
thereto, and all proceeds from the sale or other disposition thereof. Mortgagor
agrees that Mortgagee may file this Mortgage, or a reproduction thereof, in the
real estate records or other appropriate index, as, and this Mortgage shall be
deemed to be, a financing statement filed as a fixture filing in accordance with
the Uniform Commercial Code as enacted in the State. Any reproduction of this
Mortgage or of any other security agreement or financing statement shall be
sufficient as a financing statement. In addition, Mortgagor agrees to execute
and deliver to Mortgagee, upon Mortgagee's request, any other security agreement
and financing statements, as well as extensions, renewals, and amendments
thereof, and reproductions of this Mortgage, in such form as Mortgagee may
require to perfect a security interest with respect to said items. Mortgagor
shall pay all costs of filing such financing statements and any extensions,
renewals, amendments and releases thereof, and shall pay all reasonable costs
and expenses of any record searches for financing statements Mortgagee may
reasonably require. Without the prior written consent of Mortgagee, Mortgagor
shall not create or suffer to be created pursuant to the Uniform Commercial Code
any other security interest in the above-described personal property and
fixtures, including any replacements and additions thereto. Upon the occurrence
of an Event of Default under this Mortgage, or any other violation of the
covenants, terms and conditions of the security agreement contained herein, the
Mortgagee shall have and shall be entitled to exercise any and all of the rights
and remedies (i) as prescribed in this Mortgage, or (ii) as prescribed by
general law, or (iii) as prescribed by the specific statutory provisions now or
hereafter enacted and specified in said Uniform Commercial Code, all at
Mortgagee's sole election. Mortgagor and Mortgagee agree
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that the filing of any financing statements in the records normally having to do
with personal property shall not in any way affect the agreement of Mortgagor
and Mortgagee that everything located in, on or about, or used or intended to be
used with or in connection with the use, operation or enjoyment of, the
Collateral, which is described or reflected as a fixture in this Mortgage, is,
and at all times and for all purposes and in all proceedings, both legal and
equitable, shall be, regarded as part of the Real Estate conveyed hereby.
Mortgagor warrants that Mortgagor's name, identity and address are as set forth
herein. The mailing address of the Mortgagee from which information may be
obtained concerning the security interest created herein is also set forth
herein. This information hereof is provided in order that this Mortgage shall
comply with the requirements of the Uniform Commercial Code as enacted in the
State for instruments to be filed as financing statements. In accordance with
the Uniform Commercial Code as enacted in the State, this Mortgage shall remain
effective as a fixture filing until this Mortgage is released or satisfied of
record or its effectiveness otherwise terminates as to the Collateral.
SECTION 1.21 REPRESENTATIONS AND WARRANTIES. In order to induce the
Mortgagee to enter into this Mortgage, the Credit Agreement and the other Loan
Documents, the Mortgagor agrees that all of the representations and warranties
set forth in the Credit Agreement are incorporated into this Mortgage by
reference as if fully set forth herein.
SECTION 1.22 MORTGAGOR'S COVENANTS. In order to induce the Mortgagee to
enter into this Mortgage, the Credit Agreement and the other Loan Documents, the
Mortgagor agrees that all of the covenants set forth in the Credit Agreement are
incorporated into this Mortgage by reference as if fully set forth herein.
ARTICLE 2.
INSURANCE; DAMAGE, DESTRUCTION OR TAKING, ETC.
SECTION 2.1 INSURANCE.
SECTION 2.1.1 RISKS TO BE INSURED. The Mortgagor will, at its expense,
maintain or cause to be maintained by insurance carriers that meet the standards
set forth below: (a) insurance with respect to the Improvements against loss or
damage by fire, lightning and such other risks as are included in standard
"all-risk" policies, in amounts sufficient to prevent the Mortgagor and the
Mortgagee from becoming a co-insurer of any partial loss under the applicable
policies, but in any event in amounts not less than the then full insurable
value (actual replacement value) of the Improvements, as determined by the
Mortgagor
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in accordance with generally accepted insurance practice and reasonably approved
by the Mortgagee or, at the request of the Mortgagee, as determined at the
Mortgagor's expense by the insurer or insurers or by an expert reasonably
approved by the Mortgagee, (b) comprehensive public liability, including bodily
injury and product liability and property damage insurance, with personal injury
endorsements, applicable to the Property in such amounts as are usually carried
by Persons of comparable size engaged in the same or a similar business and
similarly situated in the same general locality, but in any event with a
combined single limit of not less than Twenty Million Dollars ($20,000,000) per
occurrence, (c) explosion insurance in respect of any steam and pressure boilers
and similar apparatus located in the Property in such amounts as are usually
carried by Persons of comparable size engaged in the same or a similar business
and similarly situated in the same general locality, but in any event in an
amount not less than Twenty Million Dollars ($20,000,000), (d) business
interruption insurance (including added expense coverage) against all insurable
perils for a period of not fewer than twelve (12) months (subject to a
reasonable aggregate deductible not exceeding five (5) days per annum), and (e)
worker's compensation insurance to the full extent required by applicable law
for all employees of the Mortgagor engaged in any work on or about the Property
and employer's liability insurance with a limit of not less than Ten Million
Dollars ($10,000,000) for each occurrence.
All such insurance shall be provided (i) by insurers authorized by Lloyds
of London to underwrite such risks, (ii) by insurers having an A.M. Best
policyholders rating of not less than A-(except with respect to insurers
providing workers compensation insurance, in which case such insurers shall have
an A.M. Best policyholders rating of not less than B+), or (iii) by such other
insurers as the Mortgagee may approve in writing; PROVIDED that if the rating
of any of the insurers providing insurance hereunder is downgraded, the
Mortgagor shall only be required to obtain replacement insurance with an insurer
satisfying the requirements hereof at the stated expiration of the insurance
policy maintained with the insurer whose rating was so downgraded.
SECTION 2.1.2. POLICY PROVISIONS. All insurance maintained by the
Mortgagor pursuant to SECTION 2.1.1 shall (a) (except for worker's compensation
insurance) name the Mortgagor as the insured with the Mortgagee named as
mortgagee and loss payee, (b) (except for worker's compensation and public
liability insurance) provide that the proceeds for any losses shall be adjusted
by the Mortgagor subject to the reasonable approval of the Mortgagee in the
event the proceeds shall exceed Two Hundred Fifty Thousand Dollars ($250,000),
and shall be payable to the Mortgagee, to be held and applied as provided in
SECTION 2.3, (c) include effective waivers by the insurer of all
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rights of subrogation against any named insured, the indebtedness secured by
this Mortgage and the Property and all claims for insurance premiums against the
Mortgagee, (d) provide that any losses shall be payable notwithstanding (i) any
act, failure to act or negligence of or violation of warranties, declarations or
conditions contained in such policy by any named insured, (ii) the occupation or
use of the Property for purposes more hazardous than permitted by the terms
thereof, (iii) any foreclosure or other action or proceeding taken by the
Mortgagee pursuant to any provision of this Mortgage, or (iv) any change in
title or ownership of the Property, (e) provide that no cancellation, reduction
in amount or material change in coverage thereof or any portion thereof shall be
effective until at least ten (10) days after receipt by the Mortgagee of written
notice thereof, (f) provide that any notice under such policies shall be
simultaneously delivered to the Mortgagee, and (g) be reasonably satisfactory in
all other material respects to the Mortgagee. Any insurance maintained pursuant
to this SECTION 2.1 may be evidenced by blanket insurance policies covering the
Property and other properties or assets of the Mortgagor, and shall in all other
respects comply with the requirements of this SECTION 2.1.
SECTION 2.1.3. DELIVERY OF POLICIES, ETC. The Mortgagor will deliver to
the Mortgagee, promptly upon request, (a) certified copies of all policies
evidencing all insurance required to be maintained under SECTION 2.1.1 (or, in
the case of blanket policies, certificates thereof by the insurers together with
a copy of each blanket policy), and (b) evidence, in the form of receipted
bills, as to the payment of all premiums due thereon (with respect to public
liability insurance policies, all installments for the current year due thereon
to such date), PROVIDED THAT the Mortgagee shall not be deemed by reason of its
custody of such policies to have knowledge of the contents thereof. The
Mortgagor will also deliver to the Mortgagee not later than thirty (30) days
prior to the expiration of any policy a binder or certificate of the insurer
evidencing the replacement thereof. In the event the Mortgagor shall fail to
effect or maintain any insurance required to be effected or maintained pursuant
to the provisions of this SECTION 2.1, the Mortgagor will indemnify the
Mortgagee against damage, loss or liability resulting from all risks for which
such insurance should have been effected or maintained.
SECTION 2.1.4. SEPARATE INSURANCE. The Mortgagor will not take out
separate insurance concurrent in form or contributing in the event of loss with
that required to be maintained pursuant to this SECTION 2.1.
SECTION 2.1.5. FLOOD INSURANCE. The Mortgagor represent and warrants that
the Improvements are not located in an area designated as "flood prone" (as
defined under the National Flood Insurance Regulations) or, to the extent the
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Improvements or any portion thereof are located in an area designated as "flood
prone", the Mortgagor maintains in full force and effect flood insurance under
the National Flood Insurance Program to the extent and in the amount required by
applicable laws.
SECTION 2.2 DAMAGE, DESTRUCTION OR TAKING; MORTGAGOR TO GIVE NOTICE;
ASSIGNMENT OF AWARDS. In case of
(a)any damage to or destruction of the Collateral or any part thereof,
or
(b)any taking, whether for permanent or temporary use, of all or any
part of the Collateral or any interest therein or right accruing thereto,
as the result of or in anticipation of the exercise of the right of
condemnation or eminent domain, or a change of grade affecting the
Collateral or any portion thereof (a "TAKING"), or the commencement of any
proceedings or negotiations which may result in a Taking,
the Mortgagor will promptly give written notice thereof to the Mortgagee,
generally describing the nature and extent of such damage or destruction and the
Mortgagor's best estimate of the cost of restoring the Collateral, or the nature
of such proceedings or negotiations and the nature and extent of the Taking
which might result therefrom, as the case may be. Subject to SECTION 2.3, the
Mortgagee shall be entitled to all insurance proceeds payable on account of such
damage or destruction and to all awards or payments allocable to the Collateral
on account of such Taking, and the Mortgagor hereby irrevocably assigns,
transfers and sets over to the Mortgagee all rights of the Mortgagor to any such
proceeds, awards or payments and irrevocably authorizes and empowers the
Mortgagee, at its option, in the name of the Mortgagor or otherwise, to file and
prosecute what would otherwise be the Mortgagor's claim for any such proceeds,
award or payment and to collect, receipt for and retain the same for disposition
in accordance with SECTION 2.3. The Mortgagor will pay all reasonable costs and
expenses incurred by the Mortgagee in connection with any such damage,
destruction or Taking and seeking and obtaining any insurance proceeds, awards
or payments in respect thereof.
SECTION 2.3 APPLICATION OF PROCEEDS AND AWARDS. The Mortgagee may, at its
option, apply all amounts recovered under any insurance policy required to be
maintained by the Mortgagor hereunder and all awards received by it on account
of any Taking in any one or more of the following ways:
(a) to the payment of the reasonable costs and expenses incurred by
the Mortgagee in obtaining any such insurance proceeds or awards, including
the fees and expenses of attorneys and insurance and other experts and
consultants, the costs of litigation,
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arbitration, mediation, investigations and other judicial, administrative
or other proceedings and all other out-of-pocket expenses;
(b) to the payment of the principal of the Credit Extensions and any
interest (including post-petition interest payable in any proceedings for
bankruptcy under applicable law ("POST-PETITION INTEREST") to the extent
such interest is a Secured Obligation) accrued and unpaid thereon, without
regard to whether any portion or all of such amounts shall be matured or
unmatured, together with interest at the rate provided for in the Credit
Agreement on any overdue principal and (to the extent permitted by
applicable law) interest; and, in case such amount shall be insufficient to
pay in full all such amounts, then such amount shall be applied, FIRST, to
the payment of all amounts of interest (including Post-Petition Interest to
the extent such interest is a Secured Obligation) accrued on the Credit
Extensions and unpaid, SECOND, to the payment of all amounts of principal
at the time outstanding;
(c) to the payment of, or the application to, any Secured Obligation
(other than as provided in CLAUSE (B) above);
(d) to fulfill any of the other covenants contained herein, in the
Credit Agreement, or in any other Loan Document, as the Mortgagee may
determine in its sole discretion;
(e) to the Mortgagor for application to the cost of restoring the
Collateral and the replacement of Goods destroyed, damaged or taken; or
(f) to the Mortgagor.
Notwithstanding the foregoing provisions of this SECTION 2.3 to the
contrary (but subject to the provisions of SECTION 2.4), and if each of the
following conditions is satisfied, the Mortgagee, upon request of the Mortgagor,
shall apply insurance proceeds or condemnation awards received by it to the
restoration or replacement of the Collateral, to the extent necessary for the
restoration or replacement thereof:
(i) there shall then exist no uncured Default of which Mortgagor
has received notice thereof;
(ii) the Mortgagor shall furnish to the Mortgagee a certificate
of an architect or engineer reasonably acceptable to the Mortgagee
stating (x) that the Collateral is capable of
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being restored, prior to the maturity of the Credit Agreement, to
substantially the same condition as existed prior to the casualty or
Taking, (y) the aggregate estimated direct and indirect costs of such
restoration and (z) as to any Taking, that the property taken in such
Taking, or sold under threat thereof, is not necessary to the
Mortgagor's customary use or occupancy of the Property; and
(iii) in the event that the estimated cost of restoration set
forth in the certificate of such architect or engineer (and such
revisions to such estimate as are from time to time made) exceeds the
net insurance proceeds or condemnation awards actually received from
time to time, the Mortgagor shall deposit the amount of such excess
with the Mortgagee.
In the event that such insurance proceeds or condemnation awards are to be
utilized in the restoration of the Collateral, the Mortgagee shall disburse such
Proceeds and the additional amounts deposited by the Mortgagor for such
restoration after receipt of a written request for disbursement, on not fewer
than five (5) nor more than twelve (12) Business Days notice and, to the extent
applicable, in accordance with the Mortgagee's customary construction loan
procedures and conditions. In the event that such insurance or condemnation
awards are to be utilized to replace the Collateral so destroyed or taken, the
Mortgagee shall disburse such Proceeds after receipt of a written request for
disbursement, on not fewer than five (5) Business Days nor more than twelve (12)
Business Days notice simultaneously with the acquisition of such replacement
property by the Mortgagor. In the event that, after the restoration or
replacement of the Collateral, any insurance or condemnation awards shall
remain, such amount shall be paid to the Mortgagor. Insurance proceeds and
condemnation awards shall be invested in the manner reasonably requested by the
Mortgagor and approved by the Mortgagee, and all interest earned thereon shall
be applied as provided in this SECTION 2.3. If, prior to the receipt by the
Mortgagee of such insurance proceeds or condemnation awards, the Collateral
shall have been sold on foreclosure, the Mortgagee shall have the right to
receive said insurance proceeds or condemnation awards to the extent of any
deficiency found to be due upon such sale, with legal interest thereon, whether
or not a deficiency judgment shall have been sought or recovered or denied, and
the reasonable attorneys' fees, costs and disbursements incurred by the
Mortgagee in connection with the collection of such award or payment.
SECTION 2.4 TOTAL TAKING AND TOTAL DESTRUCTION. In the event of a Total
Destruction or a Total Taking, the
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Mortgagee shall apply all amounts recovered under any insurance policy referred
to in SECTION 2.1.1 and all awards received by it on account of any such Taking
as follows:
(a) first, to the payment of the reasonable costs and expenses
incurred by the Mortgagee in obtaining any such insurance proceeds or
awards, including the fees and expenses of attorneys and insurance and
other experts and consultants, the costs of litigation, arbitration,
mediation, investigations and other judicial, administrative or other
proceedings and all other out-of-pocket expenses;
(b) second, to the payment of the principal of the Credit Extensions
and any interest (including Post-Petition Interest to the extent such
interest is a Secured Obligation) accrued and unpaid thereon, without
regard to whether any portion or all of such amounts shall be matured or
unmatured, together with interest at the rate provided for in the Credit
Agreement on any overdue principal and (to the extent permitted by
applicable law) interest; and, in case such amount shall be insufficient to
pay in full all such amounts, then such amount shall be applied, FIRST, to
the payment of all amounts of interest (including Post-Petition Interest to
the extent such interest is a Secured Obligation) accrued on the Credit
Extensions and unpaid, and SECOND, to the payment of all amounts of
principal at the time outstanding;
(c) third, to the payment of, or the application to, any Secured
Obligation (other than as provided in CLAUSE (B) above);
(d) fourth, to fulfill any of the other covenants contained herein as
the Mortgagee may determine; and
(e) fifth, the balance, if any, to the Mortgagor.
ARTICLE 3.
EVENTS OF DEFAULT; REMEDIES, ETC.
SECTION 3.1 EVENTS OF DEFAULT; ACCELERATION. If an "Event of Default"
(pursuant to and as defined in the Credit Agreement) shall have occurred, then
and in any such event the Mortgagee may at any time thereafter (unless all
Events of Default shall theretofore have been remedied and all costs and
expenses, including, without limitation, attorneys' fees and expenses incurred
by or on behalf of the Mortgagee, shall have been paid in full by the Mortgagor)
declare, by written notice to the Mortgagor, the Loans and all other Secured
Obligations to be due and payable immediately or on a date specified in such
notice (PROVIDED
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that, upon the occurrence of any Event of Default described in Section 10.1.9.
of the Credit Agreement, the Loans and all other Secured Obligations shall
automatically become due and payable), and on such date the same shall be and
become due and payable, together with interest accrued thereon, without
presentment, demand, protest or notice, all of which the Mortgagor hereby
waives. The Mortgagor will pay on demand all costs and expenses, including,
without limitation, attorneys' fees and expenses, incurred by or on behalf of
the Mortgagee in enforcing this Mortgage, or any other Loan Document, or
occasioned by any default hereunder or thereunder.
SECTION 3.2 LEGAL PROCEEDINGS; FORECLOSURE. If an Event of Default
shall have occurred, the Mortgagee at any time may, at its election, proceed
at law or in equity or otherwise to enforce the payment and performance of
the Secured Obligations in accordance with the terms hereof and thereof and
to foreclose the lien of this Mortgage as against all or any part of the
Collateral and to have the same sold under the judgment or decree of a court
of competent jurisdiction. The Mortgagee shall be entitled to recover in such
proceedings all costs incident thereto, including attorneys' fees and
expenses in such amounts as may be fixed by the court.
SECTION 3.3 POWER OF SALE. If an Event of Default shall have occurred,
the Mortgagee may grant, bargain, sell, assign, transfer, convey and deliver the
whole or, from time to time, any part of the Collateral, or any interest in any
part thereof, at any private sale or at public auction, with or without demand,
advertisement or notice, for cash, on credit or for other property, for
immediate or future delivery, and for such price or prices and on such terms as
the Mortgagee in its uncontrolled discretion may determine, or as may be
required by law, and upon such sale the Mortgagee may execute and deliver to the
purchaser(s) instruments of conveyance pursuant to the terms hereof and to
applicable laws. Without limiting the authority granted in this SECTION 3.3,
the Mortgagee shall, without demand on the Mortgagor, after the lapse of such
time as may then be required by law, and notice of default and notice of sale
having been given as then required by law, sell the Collateral on the date and
at the time and place designated in the notice of sale, either as a whole or in
separate parcels and in such order as the Mortgagee may determine, but subject
to any statutory right of the Mortgagor to direct the order in which such
property, if consisting of several known lots, parcels or interests, shall be
sold, at public auction to the highest bidder, the purchase price payable in
lawful money of the United States at the time of sale. The Person conducting
the sale may, for any cause deemed expedient, postpone the sale from time to
time until it shall be completed and, in every such case, notice of postponement
shall be given by public declaration thereof by
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such Person at the time and place last appointed for the sale; PROVIDED THAT, if
the sale is postponed for longer than one (1) day beyond the day designated in
the notice of sale, notice of sale and notice of the time, date and place of
sale shall be given in the same manner as the original notice of sale. The
Mortgagee shall execute and deliver to the purchaser at any such sale a
mortgagee's deed conveying the property so sold, but without any covenant or
warranty, express or implied. The recitals in such mortgagee's deed of any
matters or facts shall be conclusive proof of the truthfulness thereof. Any
Person, including the Mortgagee, may bid at the sale. The Mortgagee shall apply
the proceeds of the sale, to the extent consistent with this Mortgage, to the
payment of (a) the costs and expenses of exercising the power of sale and of the
sale, including the payment of attorneys' fees and costs, (b) the cost of any
evidence of title procured in connection with such sale, (c) all sums expended
under the terms hereof in conjunction with any default provision hereof, not
then repaid, with accrued interest at the rate provided for in the Credit
Agreement from the date of incurrence, (d) outstanding principal and interest
under the Credit Agreement, (e) all Secured Obligations (other than as provided
in CLAUSE (D) above). The Mortgagee shall give the remainder, if any, of the
proceeds of the sale to the Person or Persons legally entitled thereto, or the
Mortgagee, in the Mortgagee's discretion, may deposit the balance of such
proceeds with any court or public official authorized to receive such proceeds.
SECTION 3.4 UNIFORM COMMERCIAL CODE REMEDIES. If an Event of Default
shall have occurred, the Mortgagee may exercise from time to time and at any
time any rights and remedies available to it under applicable law upon default
in the payment of indebtedness, including, without limitation, any right or
remedy available to it as a secured party under the Uniform Commercial Code of
the State. The Mortgagor shall, promptly upon request by the Mortgagee,
assemble the Collateral, or any portion thereof generally described in such
request, and make it available to the Mortgagee at such place or places
designated by the Mortgagee and reasonably convenient to the Mortgagee or the
Mortgagor. If the Mortgagee elects to proceed under the Uniform Commercial Code
of the State to dispose of portions of the Collateral, the Mortgagee, at its
option, may give the Mortgagor notice of the time and place of any public sale
of any such property, or of the date after which any private sale or other
disposition thereof is to be made, by sending notice by registered or certified
first class mail, postage prepaid, to the Mortgagor at least ten (10) days
before the time of the sale or other disposition. If any notice of any proposed
sale, assignment or transfer by the Mortgagee of any portion of the Collateral
or any interest therein is required by law, the Mortgagor conclusively agrees
that ten (10) days notice to the Mortgagor of the
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date, time and place (and, in the case of a private sale, the terms) thereof is
reasonable.
SECTION 3.5 MORTGAGEE AUTHORIZED TO EXECUTE DEEDS, ETC. The Mortgagor
irrevocably appoints the Mortgagee (which appointment is coupled with an
interest) the true and lawful attorney of the Mortgagor, in its name and stead
and on its behalf, for the purpose of effectuating any sale, assignment,
transfer or delivery for the enforcement hereof, whether pursuant to power of
sale, foreclosure or otherwise, to execute and deliver all such deeds, bills of
sale, assignments, releases and other instruments as may be designated in any
such request.
SECTION 3.6 PURCHASE OF COLLATERAL BY MORTGAGEE. The Mortgagee may be a
purchaser of the Collateral or of any part thereof or of any interest therein at
any sale thereof, whether pursuant to power of sale, foreclosure or otherwise,
and the Mortgagee may apply upon the purchase price thereof the indebtedness
secured hereby owing to the Mortgagee. Such purchaser shall, upon any such
purchase, acquire good title to the properties so purchased, free of the
security interest and lien of this Mortgage and free of all rights of redemption
in the Mortgagor.
SECTION 3.7 RECEIPT A SUFFICIENT DISCHARGE TO PURCHASER. Upon any sale of
the Collateral or any part thereof or any interest therein, whether pursuant to
power of sale, foreclosure or otherwise, the receipt of the Mortgagee or the
officer making the sale under judicial proceedings shall be a sufficient
discharge to the purchaser for the purchase money, and such purchaser shall not
be obliged to see to the application thereof.
SECTION 3.8 WAIVER OF APPRAISEMENT, VALUATION, ETC. The Mortgagor hereby
waives, to the fullest extent it may lawfully do so, the benefit of all
appraisement, valuation, stay, extension and redemption laws now or hereafter in
force and all rights of marshaling in the event of any sale of the Collateral or
any part thereof or any interest therein.
SECTION 3.9 SALE A BAR AGAINST MORTGAGOR. Any sale of the Collateral or
any part thereof or any interest therein under or by virtue of this Mortgage,
whether pursuant to power of sale, foreclosure or otherwise, shall forever be a
bar against the Mortgagor.
SECTION 3.10 SECURED OBLIGATIONS TO BECOME DUE ON SALE. Upon any sale of
the Collateral or any portion thereof or interest therein by virtue of the
exercise of any remedy by the Mortgagee under or by virtue of this Mortgage,
whether pursuant to power of sale, foreclosure or otherwise in accordance with
this Mortgage or by virtue of any other remedy available at law or in equity or
by statute or
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otherwise, at the option of the Mortgagee, any sums or monies due and payable
pursuant to the Credit Agreement, the Loan Documents and in connection with the
Loans and/or the Secured Obligations shall, if not previously declared due and
payable, immediately become due and payable, together with interest accrued
thereon, and all other indebtedness which this Mortgage by its terms secures.
SECTION 3.11 APPLICATION OF PROCEEDS OF SALE AND OTHER MONEYS. The
proceeds of any sale of the Collateral or any part thereof or any interest
therein under or by virtue of this Mortgage, whether pursuant to power of sale,
foreclosure or otherwise, and all other moneys at any time held by the Mortgagee
as part of the Collateral, shall be applied in such order of priority as the
Mortgagee shall determine in its sole and absolute discretion including, without
limitation, as follows:
(a) first, to the payment of the reasonable costs and expenses of such
sale (including, without limitation, the cost of evidence of title and the
costs and expenses, if any, of taking possession of, retaining custody
over, repairing, managing, operating, maintaining and preserving the
Collateral or any part thereof prior to such sale), all reasonable costs
and expenses incurred by the Mortgagee or any other Person in obtaining or
collecting any insurance proceeds, condemnation awards or other amounts
received by the Mortgagee, all reasonable costs and expenses of any
receiver of the Collateral or any part thereof, and any Impositions or
other charges or expenses prior to the security interest or lien of this
Mortgage, which the Mortgagee may consider it necessary or desirable to
pay;
(b) second, to the payment of any Secured Obligation (other than those
set forth in SECTION 3.11(c) below);
(c) third, to the payment of all amounts of principal of and interest
(including Post-Petition Interest to the extent such interest is a Secured
Obligation) at the time due and payable under the Credit Agreement at the
time outstanding (whether due by reason of maturity or by reason of any
prepayment requirement or by declaration or acceleration or otherwise),
including interest at the rate provided for in the Credit Agreement on any
overdue principal and (to the extent permitted under applicable law) on any
overdue interest; and, in case such moneys shall be insufficient to pay in
full such principal and interest, then, FIRST, to the payment of all
amounts of interest (including Post-Petition Interest to the extent such
interest is a Secured Obligation) at the time due and payable and, SECOND,
to the payment of all
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amounts of principal at the time due and payable under the Credit
Agreement; and
(d) fourth, the balance, if any, held by the Mortgagee after payment
in full of all amounts referred to in subdivisions SECTIONS 3.11(a), (b)
and (c) above, shall, unless a court of competent jurisdiction may
otherwise direct by final order not subject to appeal, be paid to or upon
the direction of the Mortgagor.
SECTION 3.12 APPOINTMENT OF RECEIVER. If an Event of Default shall have
occurred, the Mortgagee shall, as a matter of right, without notice, and without
regard to the adequacy of any security for the indebtedness secured hereby or
the solvency of the Mortgagor, be entitled to the appointment of a receiver for
all or any part of the Collateral, whether such receivership be incidental to a
proposed sale of the Collateral or otherwise, and the Mortgagor hereby consents
to the appointment of such a receiver and will not oppose any such appointment.
SECTION 3.13 POSSESSION, MANAGEMENT AND INCOME. If an Event of Default
shall have occurred, in addition to, and not in limitation of, the rights and
remedies provided in SECTION 1.14, the Mortgagee, upon five (5) days notice to
the Mortgagor, may enter upon and take possession of the Collateral or any part
thereof by force, summary proceeding, ejectment or otherwise and may remove the
Mortgagor and all other Persons and any and all property therefrom and may hold,
operate, maintain, repair, preserve and manage the same and receive all
earnings, income, Rents, issues and Proceeds accruing with respect thereto or
any part thereof. The Mortgagee shall be under no liability for or by reason of
any such taking of possession, entry, removal or holding, operation or
management, except that any amounts so received by the Mortgagee shall be
applied to pay all costs and expenses of so entering upon, taking possession of,
holding, operating, maintaining, repairing, preserving and managing the
Collateral or any part thereof, and any Impositions or other charges prior to
the lien and security interest of this Mortgage which the Mortgagee may consider
it necessary or desirable to pay, and any balance of such amounts shall be
applied as provided in SECTION 3.11.
SECTION 3.14 RIGHT OF MORTGAGEE TO PERFORM MORTGAGOR'S COVENANTS, ETC. If
the Mortgagor shall fail to make any payment or perform any act required to be
made or performed hereunder or under the Credit Agreement or any other Loan
Document, the Mortgagee, subject to twenty (20) days' prior written notice to
the Mortgagor (except that no prior notice shall be required in the case of an
emergency or where the failure to make such payment or perform such obligation
could affect the priority of the lien of this Mortgage) without waiving or
releasing any obligation or Default, may (but shall be under no obligation to)
at any time thereafter
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make such payment or perform such act for the account and at the expense of the
Mortgagor, and may enter upon the Collateral for such purpose and take all such
action thereon as, in the Mortgagee's opinion, may be necessary or appropriate
therefor. No such entry and no such action shall be deemed an eviction of any
lessee of the Property or any part thereof. All sums so paid by the Mortgagee
and all costs and expenses (including, without limitation, attorneys' fees and
expenses) so incurred, together with interest thereon at the rate provided for
in Section 5.2.2. of the Credit Agreement from the date of payment or incurring,
shall constitute additional indebtedness under the Credit Agreement secured by
this Mortgage and shall be paid by the Mortgagor to the Mortgagee on demand.
SECTION 3.15 SUBROGATION. To the extent that the Mortgagee, on or after
the date hereof, pays any sum due under any provision of any Legal Requirement
or any instrument creating any lien prior or superior to the lien of this
Mortgage, or the Mortgagor or any other Person pays any such sum with the
proceeds of the loan evidenced by the Credit Agreement, the Mortgagee shall have
and be entitled to a lien on the Collateral equal in priority to the lien
discharged, and the Mortgagee shall be subrogated to, and receive and enjoy all
rights and liens possessed, held or enjoyed by, the holder of such lien, which
shall remain in existence and benefit the Mortgagee in securing the Secured
Obligations.
SECTION 3.16 REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of
the Mortgagee provided for in this Mortgage, the Credit Agreement or any other
Loan Document, or now or hereafter existing at law or in equity or by statute or
otherwise shall be cumulative and concurrent and shall be in addition to every
other right, power or remedy provided for in this Mortgage, the Credit Agreement
or any other Loan Document, or now or hereafter existing at law or in equity or
by statute or otherwise, and the exercise or beginning of the exercise by the
Mortgagee of any one or more of the rights, powers or remedies provided for in
this Mortgage, the Credit Agreement, or any other Loan Document, or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Mortgagee of any or all such
other rights, powers or remedies.
SECTION 3.17 PROVISIONS SUBJECT TO APPLICABLE LAW. All rights, powers and
remedies provided in this Mortgage may be exercised only to the extent that the
exercise thereof does not violate any applicable provisions of law and are
intended to be limited to the extent necessary so that they will not render this
Mortgage invalid, unenforceable or not entitled to be recorded, registered or
filed under the provisions of any applicable law. If any term of this Mortgage
or any application thereof shall be
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invalid or unenforceable, the remainder of this Mortgage and any other
application of such term shall not be affected thereby.
SECTION 3.18 NO WAIVER, ETC. No failure by the Mortgagee to insist upon
the strict performance of any term hereof or of the Credit Agreement, or of any
other Loan Document, or to exercise any right, power or remedy consequent upon a
breach hereof or thereof, shall constitute a waiver of any such term or of any
such breach. No waiver of any breach shall affect or alter this Mortgage, which
shall continue in full force and effect with respect to any other then existing
or subsequent breach. By accepting payment or performance of any amount or
other Secured Obligations secured hereby before or after its due date, the
Mortgagee shall not be deemed to have waived its right either to require prompt
payment or performance when due of all other amounts and Secured Obligations
payable hereunder or to declare a default for failure to effect such prompt
payment.
SECTION 3.19 COMPROMISE OF ACTIONS, ETC. Any action, suit or proceeding
brought by the Mortgagee pursuant to any of the terms of this Mortgage, the
Credit Agreement, any other Loan Document, or otherwise, and any claim made by
the Mortgagee hereunder or thereunder, may be compromised, withdrawn or
otherwise dealt with by the Mortgagee without any notice to or approval of the
Mortgagor.
ARTICLE 4.
DEFINITIONS
SECTION 4.1 TERMS DEFINED IN THIS MORTGAGE. When used herein the
following terms have the following meanings:
"AGENT" shall have the meaning set forth in the PREAMBLE.
"ASSUMPTION" shall have the meaning set forth in the FOURTH RECITAL.
"BORROWERS" shall have the meaning set forth in the SECOND RECITAL.
"BORROWING" shall have the meaning set forth in the Credit Agreement.
"CANADIAN AGENT" shall have the meaning set forth in the Credit Agreement.
"CANADIAN BORROWER" shall have the meaning set forth in the SECOND RECITAL.
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"CANADIAN FACILITY" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN ISSUERS" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN LENDERS" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN LETTER OF CREDIT" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN LETTER OF CREDIT OUTSTANDINGS" shall have the meaning set forth
in the Credit Agreement.
"CANADIAN REVOLVING LOAN" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN REVOLVING LOAN COMMITMENT" shall have the meaning set forth in
the Credit Agreement.
"CANADIAN REVOLVING LOAN COMMITMENT AMOUNT" shall have the meaning set
forth in the Credit Agreement.
"CANADIAN REVOLVING LOAN COMMITMENT TERMINATION DATE" shall have the
meaning set forth in the Credit Agreement.
"CANADIAN SUBSIDIARY" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN SWING LINE LENDER" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN SWING LINE LOAN" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN SWING LINE LOAN COMMITMENT" shall have the meaning set forth in
the Credit Agreement.
"CDN $" shall have the meaning set forth in the Credit Agreement.
"COLLATERAL" shall have the meaning set forth in the GRANTING CLAUSE.
"COMMITMENT" shall have the meaning set forth in the Credit Agreement.
"CONTRACTS" shall have the meaning set forth in CLAUSE (h) of the GRANTING
CLAUSE.
"CREDIT AGREEMENT" shall have the meaning set forth in the SECOND RECITAL.
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"CREDIT EXTENSIONS" shall have the meaning set forth in the the SECOND
RECITAL.
"DEFAULT" means any Event of Default or any condition or event which, after
notice or lapse of time, or both, would constitute an Event of Default.
"ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means all valid and
enforceable Requirements of Law derived from or relating to federal, state
and local laws or regulations relating to or addressing the environment,
health or safety, including but not limited to any law, regulation, or order
relating to the use, handling, or disposal of any Hazardous Material, any
law, regulation, or order relating to Remedial Action, and any law,
regulation, or order relating to workplace or worker safety and health, as
such Requirements of Law are promulgated by the specifically authorized
agency responsible for administering such Requirements of Law.
"EVENT OF DEFAULT" shall have the meaning set forth in the Credit
Agreement.
"GOODS" shall have the meaning set forth in CLAUSE (c) of the GRANTING
CLAUSE.
"HAZARDOUS MATERIAL" shall have the meaning set forth in the Credit
Agreement.
"HEREIN", "HEREOF", "HERETO", and "HEREUNDER" and similar terms refer to
this Mortgage and not to any particular Section, paragraph or provision of this
Mortgage.
"IMPOSITIONS" shall have the meaning set forth in SECTION 1.5.
"IMPROVEMENTS" shall have the meaning set forth in CLAUSE (b) of the
GRANTING CLAUSE.
"INDEMNIFIED PARTIES" shall have the meaning set forth in SECTION 1.16.
"INSURANCE REQUIREMENTS" shall have the meaning set forth in PARAGRAPH (a)
of SECTION 1.6.
"INTANGIBLES" shall have the meaning set forth in CLAUSE (d) of the
GRANTING CLAUSE.
"ISSUER" shall have the meaning set forth in the Credit Agreement.
"LAND" shall have the meaning set forth in the FIRST RECITAL.
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"LEASES" shall have the meaning set forth in CLAUSE (e) of the GRANTING
CLAUSE.
"LEINER" shall have the meaning set forth in the PREAMBLE.
"LEGAL REQUIREMENTS" shall have the meaning set forth in PARAGRAPH (b) of
SECTION 1.6.
"LENDERS" shall have the meaning set forth in the Credit Agreement.
"LETTER OF CREDIT" shall have the meaning set forth in the Credit
Agreement.
"LHPG" shall have the meaning set forth in the PREAMBLE.
"LOAN DOCUMENTS" shall have the meaning set forth in the Credit Agreement.
"LOANS" shall have the meaning set forth in the Credit Agreement.
"MORTGAGE" shall have the meaning set forth in the PREAMBLE.
"MORTGAGEE" shall have the meaning set forth in the PREAMBLE.
"MORTGAGOR" shall have the meaning set forth in the PREAMBLE.
"NOTES" shall have the meaning set forth in the Credit Agreement.
"OBLIGATIONS" shall have the meaning set forth in the Credit Agreement.
"OBLIGOR" shall mean each Person having any liabilities, obligations,
duties or responsibilities under the Credit Agreement or any Loan Document.
"PERMITS" shall have the meaning set forth in CLAUSE (g) of the GRANTING
CLAUSE.
"PERMITTED ENCUMBRANCES" shall have the meaning set forth in SECTION 1.2.
"PERSON" means a corporation, an association, a partnership, an
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency or officer.
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"PLANS" shall have the meaning set forth in CLAUSE (f) of the GRANTING
CLAUSE.
"POST-PETITION INTEREST" shall have the meaning set forth in SECTION 2.3.
"PROCEEDS" shall have the meaning set forth in CLAUSE (k) of the GRANTING
CLAUSE.
"PROPERTY" shall have the meaning set forth in CLAUSE (b) of the GRANTING
CLAUSE.
"REAL ESTATE" shall have the meaning set forth in CLAUSE (a) of the
GRANTING CLAUSE.
"RELEASE" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
indoor or outdoor environment or into or out of any Property, including the
movement of Hazardous Material through or in the air, soil, surface water,
groundwater or Property.
"REMEDIAL ACTION" means actions required to (i) clean up, remove, treat
or in any other way address Hazardous Material in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Hazardous Material; or (iii) investigate and determine if
a remedial response is needed and to design such a response and post-remedial
investigation, monitoring, operation and maintenance and care.
"RENTS" shall have the meaning set forth in CLAUSE (j) of the GRANTING
CLAUSE.
"REVOLVING LOAN" shall have the meaning set forth in the Credit Agreement.
"SCOTIABANK" shall have the meaning set forth in the SECOND RECITAL.
"SECURED OBLIGATIONS" means all Obligations now or hereafter existing
under the Credit Agreement, and all obligations (monetary or otherwise)
arising under or in connection with the Notes and each other Loan Document,
whether for principal, interest, costs, fees, expenses or otherwise, and all
other obligations of the Mortgagor and each Obligor under any Loan Document,
including, without limitation, any Subsidiary Guaranty, howsoever created,
arising or now or hereafter existing or due or to become due.
"STATE" means the State of Illinois.
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"STATED AMOUNT" shall have the meaning set forth in the Credit Agreement.
"SUBSIDIARY GUARANTY" shall have the meaning set forth in the Credit
Agreement.
"TAKING" shall have the meaning set forth in CLAUSE (b) of SECTION 2.2.
"TERM LOAN" shall have the meaning set forth in the Credit Agreement.
"TERM B LOAN" shall have the meaning set forth in the Credit Agreement.
"TERM B LOAN COMMITMENT" shall have the meaning set forth in the Credit
Agreement.
"TERM C LOAN" shall have the meaning set forth in the Credit Agreement.
"TERM C LOAN COMMITMENT" shall have the meaning set forth in the Credit
Agreement.
"TOTAL DESTRUCTION" means any damage to or destruction of the
Improvements or any part thereof which, in the reasonable estimation of the
Mortgagee shall require the expenditure of an amount in excess of fifty
percent (50%) of the replacement value of the Property to restore the
Improvements to substantially the same condition of the Improvements
immediately prior to such damage or destruction.
"TOTAL TAKING" means a Taking, whether permanent or for temporary use,
which, in the good faith judgment of the Mortgagee, shall substantially
interfere with the normal operation of the Property by the Mortgagor.
"U.S. AGENT" shall have the meaning set forth in the Credit Agreement.
"U.S. BORROWER" shall have the meaning set forth in the SECOND RECITAL.
"U.S. FACILITY" shall have the meaning set forth in the Credit Agreement.
"U.S. ISSUERS" shall have the meaning set forth in the Credit Agreement.
"U.S. LENDERS" shall have the meaning set forth in the Credit Agreement.
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"U.S. LETTER OF CREDIT" shall have the meaning set forth in the Credit
Agreement.
"U.S. LETTER OF CREDIT OUTSTANDINGS" shall have the meaning set forth in
the Credit Agreement.
"U.S. REVOLVING LOAN" shall have the meaning set forth in the Credit
Agreement.
"U.S. REVOLVING LOAN COMMITMENT" shall have the meaning set forth in the
Credit Agreement.
"U.S. REVOLVING LOAN COMMITMENT AMOUNT" shall have the meaning set forth in
the Credit Agreement.
"U.S. REVOLVING LOAN COMMITMENT TERMINATION DATE" shall have the meaning
set forth in the Credit Agreement.
"U.S. RL LENDERS" shall have the meaning set forth in the Credit Agreement.
"U.S. SUBSIDIARY" shall have the meaning set forth in the Credit Agreement.
"U.S. SWING LINE LENDER" shall have the meaning set forth in the Credit
Agreement.
"U.S. SWING LINE LOAN" shall have the meaning set forth in the Credit
Agreement.
SECTION 4.2 USE OF DEFINED TERMS. Terms for which meanings are provided
in this Mortgage shall, unless otherwise defined or the context otherwise
requires, have such meanings when used in any certificate and any opinion,
notice or other communication delivered from time to time in connection with
this Mortgage or pursuant hereto.
SECTION 4.3 CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Mortgage,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
ARTICLE 5.
MISCELLANEOUS
-------------
SECTION 5.1 FURTHER ASSURANCES; FINANCING STATEMENTS.
SECTION 5.1.1 FURTHER ASSURANCES. The Mortgagor, at its expense, will
execute, acknowledge and deliver all such instruments and take all such other
action as the Mortgagee from time to time may reasonably request:
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(a) to better subject to the lien and security interest of this
Mortgage all or any portion of the Collateral,
(b) to perfect, publish notice or protect the validity of the lien and
security interest of this Mortgage,
(c) to preserve and defend the title to the Collateral and the rights
of the Mortgagee therein against the claims of all Persons as long as this
Mortgage shall remain undischarged,
(d) to better subject to the lien and security interest of this
Mortgage or to maintain or preserve the lien and security interest of this
Mortgage with respect to any replacement or substitution for any Collateral
or any other after-acquired property, or
(e) in order to further effectuate the purposes of this Mortgage and
to carry out the terms hereof and to better assure and confirm to the
Mortgagee its rights, powers and remedies hereunder.
SECTION 5.1.2 FINANCING STATEMENTS. Notwithstanding any other provision
of this Mortgage, the Mortgagor hereby agrees that, without notice to or the
consent of the Mortgagor, the Mortgagee may file with the appropriate public
officials such financing statements, continuation statements, amendments and
similar documents as are or may become necessary to perfect, preserve or
protect the security interest granted by this Mortgage.
SECTION 5.2 ADDITIONAL SECURITY. Without notice to or consent of the
Mortgagor, and without impairment of the security interest and lien and
rights created by this Mortgage, the Mortgagee and the Lenders may accept
from the Mortgagor or any other Person additional security for the Secured
Obligations. Neither the giving of this Mortgage nor the acceptance of any
such additional security shall prevent the Mortgagee from resorting, first,
to such additional security, or, first, to the security created by this
Mortgage, or concurrently to both, in any case without affecting the
Mortgagee's lien and rights under this Mortgage.
SECTION 5.3 DEFEASANCE; PARTIAL RELEASE, ETC.
SECTION 5.3.1 DEFEASANCE. If the Loans and all other amounts owing
pursuant to the Credit Agreement and the other Loan Documents shall be repaid
in full in accordance with the terms thereof, and if the Mortgagor shall pay,
in full, the principal of and premium, if any, and interest on the Secured
Obligations in accordance with the terms thereof and hereof and all other
sums payable hereunder by the Mortgagor
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and shall comply with all the terms, conditions and requirements hereof and
of the Secured Obligations which by their nature are capable of being
complied with during the term hereof, then on such date, the Mortgagee shall,
upon the request of the Mortgagor and at the Mortgagor's sole cost and
expense, execute and deliver such instruments, in form and substance
reasonably satisfactory to the Mortgagee, as may be necessary to reconvey,
release and discharge this Mortgage.
SECTION 5.3.2 PARTIAL RELEASE, ETC. The Mortgagee may, at any time and
from time to time, without liability therefor, and without prior notice to
the Mortgagor, release or reconvey any part of the Collateral, consent to the
making of any map or plat of the Property, join in granting any easement
thereon or join in any extension agreement or agreement subordinating the
lien of this Mortgage, or enter into any other agreement in connection with
the Collateral.
SECTION 5.4 NOTICES, ETC. All notices and other communications provided
to any of the parties hereto shall be in writing and addressed, delivered or
transmitted to such party as set forth in the Credit Agreement.
SECTION 5.5 WAIVERS, AMENDMENTS, ETC. The provisions of this Mortgage
may be amended, discharged or terminated and the observance or performance of
any provision of this Mortgage may be waived, either generally or in a
particular instance and either retroactively or prospectively, only by an
instrument in writing executed by the Mortgagor and the Mortgagee.
SECTION 5.6 CROSS-REFERENCES. References in this Mortgage and in each
instrument executed pursuant hereto to any Section or Article are, unless
otherwise specified, to such Section or Article of this Mortgage or such
instrument, as the case may be, and references in any Section, Article or
definition to any clause are, unless otherwise specified, to such clause of
such Section, Article or definition.
SECTION 5.7 HEADINGS. The various headings of this Mortgage and of each
instrument executed pursuant hereto are inserted for convenience only and
shall not affect the meaning or interpretation of this Mortgage or such
instrument or any provisions hereof or thereof.
SECTION 5.8 CURRENCY. Unless otherwise expressly stated, all references
to any currency or money, or any dollar amount, or amounts denominated in
"Dollars" herein will be deemed to refer to the lawful currency of the United
States.
SECTION 5.9 GOVERNING LAW. THIS MORTGAGE SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE.
40
<PAGE>
SECTION 5.10 SUCCESSORS AND ASSIGNS, ETC. This Mortgage shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
SECTION 5.11 WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION.
(a) EACH OF THE MORTGAGOR AND THE MORTGAGEE HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS MORTGAGE, THE CREDIT AGREEMENT, ANY LOAN DOCUMENT
OR ANY OTHER RELATED INSTRUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF THE MORTGAGOR
OR THE MORTGAGEE. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
MORTGAGEE AND THE LENDERS TO ENTER INTO THE TRANSACTIONS PROVIDED FOR IN
THE CREDIT AGREEMENT AND TO MAKE THE CREDIT EXTENSIONS.
(b) FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INVOLVING THIS
MORTGAGE, THE CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT, THE MORTGAGOR
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION
OF ALL FEDERAL AND STATE COURTS LOCATED IN THE STATE AND CONSENTS THAT IT
MAY BE SERVED WITH ANY PROCESS OR PAPER BY REGISTERED MAIL OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE IN ACCORDANCE WITH APPLICABLE LAW,
PROVIDED A REASONABLE TIME FOR APPEARANCE IS ALLOWED. THE MORTGAGOR
EXPRESSLY WAIVES, TO THE EXTENT IT MAY LAWFULLY DO SO, ANY OBJECTION, CLAIM
OR DEFENSE WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY
ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS MORTGAGE, THE CREDIT
AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY SUCH COURT, IRREVOCABLY WAIVES
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER IRREVOCABLY
WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO ANY SUCH CLAIM, SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE
JURISDICTION OVER THE PERSON OF THE MORTGAGOR. NOTHING CONTAINED HEREIN
WILL BE DEEMED TO PRECLUDE THE MORTGAGEE FROM BRINGING AN ACTION AGAINST
THE MORTGAGOR IN ANY OTHER JURISDICTION.
SECTION 5.12 SEVERABILITY. Any provision of this Mortgage, the Credit
Agreement or any other Loan Document which is prohibited or unenforceable in
any jurisdiction shall as to such provision and such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Mortgage, the Credit Agreement
or such Loan Document or affecting the validity or enforceability of such
provision in any other jurisdiction.
41
<PAGE>
SECTION 5.13 LOAN DOCUMENT. This Mortgage is a Loan Document executed
pursuant to the Credit Agreement and, unless otherwise expressly indicated
herein, shall be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 5.14 USURY SAVINGS CLAUSE. It is the intention of the Mortgagor
and the Mortgagee to conform strictly to the usury laws governing the Loan
Documents, and any interest payable under the Loan Documents shall be subject
to reduction to the amount not in excess of the maximum non-usurious amount
allowed under such laws, as construed by the courts having jurisdiction over
such matters. In the event the maturity of the Secured Obligations is
accelerated by reason of any provision of the Loan Documents, or by reason of
an election by the Mortgagee resulting from an Event of Default, then earned
interest may never include more than the maximum amount permitted by law,
computed from the dates of each advance of loan proceeds under the Credit
Agreement until payment, and any interest in excess of the maximum amount
permitted by law shall be canceled automatically or, if theretofore paid, at
the option of the Mortgagee, shall be rebated to the Mortgagor, or shall be
credited on the principal amount of the Secured Obligations or, if all
principal has been repaid, then the excess shall be rebated to the Mortgagor.
If any interest is canceled, credited against principal or rebated to the
Mortgagor in accordance with the foregoing sentence and, if thereafter the
interest payable hereunder is less than the maximum amount permitted by
applicable law, the rate hereunder shall automatically be increased to the
maximum extent possible to permit repayment to the Mortgagee and the Lenders
as soon as possible of any interest in excess of the maximum amount permitted
by law which was earlier canceled, credited against principal or rebated to
the Mortgagor pursuant to the provisions of the foregoing sentence.
SECTION 5.15 FUTURE ADVANCES. Any and all future advances under this
Mortgage and the Loan Documents shall have the same priority as if the future
advance was made on the date that this Mortgage was recorded. This Mortgage
shall secure the Secured Obligations, whenever incurred, such Secured
Obligations to be due at the times provided in the Loan Documents. Notice is
hereby given that the Secured Obligations may INCREASE as a result of any
defaults hereunder by Mortgagor due to, for example, and without limitation,
unpaid interest or late charges, unpaid taxes or insurance premiums which the
Mortgagee elects to advance, defaults under leases that the Mortgagee elects
to cure, attorney fees or costs incurred in enforcing the Loan Documents or
other expenses incurred by the Mortgagee in protecting the Collateral, the
security of this Mortgage or the Mortgagee's rights and interests.
42
<PAGE>
IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be duly
executed as of the day and year first above written.
MORTGAGOR:
LEINER HEALTH PRODUCTS INC.,
a Delaware corporation
By: /s/ William B. Towne
-----------------------------
Name: William B. Towne
Title: Executive Vice President - Finance
DRAFTED BY:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: Kenneth R. Kleiner, Esq.
43
<PAGE>
ACKNOWLEDGMENT OF MORTGAGOR
STATE OF New York )
)ss
COUNTY OF New York)
On this 27thday of June, 1997, before me, the undersigned
officer, personally appeared William Towne personally known and acknowledged
himself/herself (or proved to me on the basis of satisfactory evidence) to be
the Exec VP of Leiner Health Products Inc. (hereinafter, the "Corporation"),
and that as such officer, being duly authorized to do so pursuant to its
bylaws or a resolution of its board of directors, executed, subscribed and
acknowledged the foregoing instrument for the purposes therein contained, by
signing the name of the Corporation by himself/herself in his/her authorized
capacity as such officer as his/her free and voluntary act and deed and the
free and voluntary act and deed of said corporation.
In Witness Whereof, I hereunto set my hand and official seal.
/s/ Caron F. Gelineau
--------------------------------
Notary Public
Notarial Seal My Commission Expires
Caron F. Gelineau
Notary Public, State of New York
No. 31-5009056
Qualified in New York County
Commission Expires March 8, 1999
44
<PAGE>
SCHEDULE 1
LEGAL DESCRIPTION OF THE LAND
(attached hereto)
P.I.N. : 1. 19-11-200-007
2. 19-11-200-034
3. 19-11-200-036
Street Address : 3532 West 47th Place
Chicago, Illinois 60632
Parcel 1: The North 410 feet of that part lying South of the South line of West
47th Street (a 66 foot public street) and West of the West line of South St.
Louis Avenue (a 66 foot street now vacated) of Block 7 of James H. Rees'
Subdivision of the Northeast 1/4 of Section 11, Township 38 North, Range 13,
East of the Third Principal Meridian, in Cook County, Illinois.
Parcel 2:
Easement for the construction, maintenance, operation and renewal beneath the
surface of the ground of high and low water pressure water mains for supplying
water for sprinkler service hydrants, and domestic purposes, with the rights to
construct, maintain, operate, and renew underneath the surface of the ground,
concrete or brick vaults (with covered manhole openings at the surface) to house
gate valves, meters, controls, and other water devices; and with the right to
construct, maintain, renew and operate above the surface of the ground fire
hydrants for the benefit of Parcel 1 above, as granted and created by instrument
from W. Wood Prince and James F. Donovan, not as individuals but as Trustees of
the Central Manufacturing District under an Indenture and Declaration of Trust
dated February 1, 1916, and recorded in the office of the Recorder of Deeds of
Cook County, Illinois in Book 13717 of Records at Page 253, as Document Number
5814222 to Benefit Realty Company, an Illinois corporation, dated June 30, 1977
and recorded July 25, 1977 as Document 24025706 and filed in the office of the
Registrar of Titles on December 30, 1977 as Document LR2990769 over, under, on
and upon the following described parcels of land:
Easement 2: The West 18 feet of the South 10 feet of the North 149 feet of that
part of South St. Louis Avenue (a 66 foot private street) lying South of the
South line of West 47th Street (a 66 foot public street) in Block 7 of James H.
Rees' Subdivision of the Northeast 1/4 of Section 11, Township 38 North, Range
13 East of the Third Principal Meridian, in Cook County, Illinois.
Easement 4: The South 10 feet of the North 24.67 feet of the West 242 feet of
the East 396 feet of that part of West 47th Place (a 60 foot private street)
lying West of the West line of South St. Louis Avenue (a 66 foot private
street); also the North 14.67 feet of the West 10 feet of the East 164 feet of
part of West 47th Place lying West of the West line of South St. Louis Avenue;
also the North 14.67 feet of the West 10 feet of the East 361 West 47th Place
lying West of the West line of said South St. Louis Avenue also the North 14.67
feet of the West 10 feet of the East 396 feet of said part of West 47th Place
lying West of the West line of said South St. Louis Avenue; being in Block 7 and
in the EastBlock 8 of James H. Rees' Subdivision of the Northeast 1/4 of Section
11, Township 38 North, Range 13, East of the Third Principal Meridian, in Cook
County, Illinois.
Parcel 1 also known as:
Lots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, and that part of Lot
17 falling in the North 410 feet South of the South line of 47th Street of Block
7, in the Subdivision of the WestBlock 7 of James H. Rees' Subdivision of the
Northeast 1/4 of Section 11, Township 38 North, Range 13 East of the Third
Principal Meridian, in Cook County, Illinois.
45
<PAGE>
SCHEDULE 2
PERMITTED ENCUMBRANCES
----------------------
Those exceptions to title listed
in Lawyers Title Insurance Corporation
marked-up commitment # 97-04952 dated June 30, 1997.
46
<PAGE>
LEINER HEALTH PRODUCTS INC.,
Mortgagor,
to
THE BANK OF NOVA SCOTIA,
as agent,
Mortgagee
--------------------------------------------
FIRST AMENDMENT TO
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
--------------------------------------------
Dated as of July 31, 1997
This instrument affects certain real and personal property
located in Cook County, State of Illinois
--------------------------------------------
Record and return to:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: Kenneth R. Kleiner, Esq.
This instrument was prepared by the above-named attorney
<PAGE>
FIRST AMENDMENT TO
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
FIRST AMENDMENT TO MORTGAGE, ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT AND FIXTURE FILING, dated as of July 31, 1997 (this
"FIRST AMENDMENT TO MORTGAGE"), made by LEINER HEALTH PRODUCTS INC., a
Delaware corporation (the "MORTGAGOR"), having an address at 901 East 233rd
Street, Carson, California 90745 to THE BANK OF NOVA SCOTIA, having an
address at One Liberty Plaza, New York, New York 10006, for itself as a
Lender and as collateral agent for the various commercial lending
institutions (collectively, the "LENDERS") which are, or may from time to
time hereafter become, parties to the Credit Agreement, as hereinafter
defined (herein together with its successors and assigns from time to time
acting as collateral agent under such Credit Agreement, the "MORTGAGEE").
W I T N E S S E T H T H A T:
- - - - - - - - - - - - - -
WHEREAS, the Mortgagor is on the date of delivery hereof
the owner of fee title to the parcel of land described in SCHEDULE 1 hereto
(the "LAND") and of the improvements thereon;
WHEREAS, the Mortgagor, the Lenders and the collateral
agent named therein were parties to that certain credit agreement (the
"CREDIT AGREEMENT") dated as of June 30, 1997;
WHEREAS, to partially secure the Mortgagor's obligations
under the Credit Agreement, the Mortgagor executed and delivered to
Mortgagee, as collateral agent for the Lenders, that certain Mortgage,
Assignment of Leases and Rents, Security Agreement and Fixture Filing dated
as of June 30, 1997, pursuant to which the Mortgagor granted, mortgaged, and
conveyed unto Mortgagee, as collateral agent for the Lenders, and its
successors and assigns a first mortgage lien and first priority security
interest in and to the Collateral (as defined therein), all as set forth and
subject to the terms of the Mortgage;
WHEREAS, the Mortgage was recorded in the Office of the
Recorder of Deeds of Cook County, State of Illinois, as Document Number
97492971 and recorded on July 9, 1997;
<PAGE>
WHEREAS, the Mortgagor and Mortgagee entered into an
Undertaking Agreement dated as of June 30, 1997, pursuant to which the
Mortgagor undertook to deliver to the Mortgagee an amendment to the Mortgage
which would modify the legal description of the Land, together with the
improvements thereon, that secures the Mortgage; and
WHEREAS, the Mortgagor has duly authorized the execution,
delivery and performance of this First Amendment to Mortgage.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained and other good and valuable consideration
given by the Mortgagee to the Mortgagor, the receipt and sufficiency of which
are hereby acknowledged, the Mortgagor and the Mortgagee agree that, from and
after the date hereof, the Mortgage (including the recitals therein) be and
the same hereby is, amended as follows:
1. SCHEDULES I AND 2 to the Mortgage (copies of which are
attached hereto and made a part hereof) are hereby deleted in their entirety
and are replaced by SCHEDULES 3 AND 4 hereto (copies of which are annexed
hereto and made a part hereof).
2. This First Amendment to Mortgage shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
3. Except as amended pursuant to the terms of this First
Amendment to Mortgage, all of the terms, provisions and conditions of the
Mortgage shall remain in full force and effect and are hereby ratified and
confirmed.
IN WITNESS WHEREOF, the Mortgagor has caused this First
Amendment to Mortgage to be duly executed as of the day and year first above
written.
MORTGAGOR:
LEINER HEALTH PRODUCTS INC.,
a Delaware corporation
[Corporate Seal] By /s/ William B. Towne
-------------------------------------
Name: William B. Towne
Title:
2
<PAGE>
Accepted and agreed:
MORTGAGEE:
THE BANK OF NOVA SCOTIA, as agent
By /s/ Terry Fryett
-------------------------------------
Name: Terry Fryett
Title:
20446280.01
3
<PAGE>
ACKNOWLEDGMENT
State of California
County of Los Angeles
On July 25, 1997 before Sharen Page Notary Public personally
appeared William B. Towne, personally known to me to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
/s/ Sharen Page
--------------------------------
Signature of Notary Public
4
<PAGE>
ACKNOWLEDGMENT OF MORTGAGEE
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 30th day of July, 1997, before me, the undersigned
officer, personally appeared Terry Fryett, personally known and acknowledged
himself to me to be a Unit Head of The Bank of Nova Scotia, and that as such
officer, being duly authorized to do so pursuant to its bylaws or a resolution
of its board of directors, executed and acknowledged the foregoing instrument
for the purposes therein contained, by signing the name of the Canadian
chartered bank by himself/herself as such officer as his/her free and voluntary
act and deed and the free and voluntary act and deed of said Canadian chartered
bank.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Joan D'addario
------------------------------------
Notary Public
Dec. 31, 1998
------------------------------------
My Commission Expires:
Notary Seal:
JOAN D'ADDARIO
Notary Public, State of New York
No. 4758211, Qualified in Suffolk
County Ceritificate Filed in New
York County Commission Expires Dec.
31, 1998
5
<PAGE>
SCHEDULE 1
OLD DESCRIPTION OF THE LAND
---------------------------
(see attached)
P.I.N.: 1. 19-11-200-007
2. 19-11-200-034
3. 19-11-200-036
Street Address: 3532 West 47th Place
Chicago, IL 60632
<PAGE>
Parcel 1: The North 410 feet of that part lying South of the South line of West
47th Street (a 66 foot public street) and West of the West line of South St.
Louis Avenue (a 66 foot street now vacated) of Block 7 of James H. Rees'
Subdivision of the Northeast 1/4 of Section 11, Township 38 North, Range 13,
East of the Third Principal
Meridian, in Cook County, Illinois.
Parcel 2:
Easement for the construction, maintenance, operation and renewal beneath the
surface of the ground of high and low water pressure water mains for supplying
water for sprinkler service hydrants, and domestic purposes, with the rights to
construct, maintain, operate, and renew underneath the surface of the ground,
concrete or brick vaults (with covered manhole openings at the surface) to house
gate valves, meters, controls, and other water devices; and with the right to
construct, maintain, renew and operate above the surface of the ground fire
hydrants for the benefit of Parcel 1 above, as granted and created by instrument
from W. Wood Prince and James F. Donovan, not as individuals but as Trustees of
the Central Manufacturing District under an Indenture and Declaration of Trust
dated February 1, 1916, and recorded in the office of the Recorder of Deeds of
Cook County, Illinois in Book 13717 of Records at Page 253, as Document Number
5814222 to Benefit Realty Company, an Illinois corporation, dated June 30, 1977
and recorded July 25, 1977 as Document 24025706 and filed in the office of the
Registrar of Titles on December 30, 1977 as Document LR2990769 over, under, on
and upon the following described parcels of land:
Easement 2: The West 18 feet of the South 10 feet of the North 149 feet of that
part of South St. Louis Avenue (a 66 foot private street) lying South of the
South line of West 47th Street (a 66 foot public street) in Block 7 of James H.
Rees' Subdivision of the Northeast 1/4 of Section 11, Township 38 North, Range
13 East of the Third Principal
Meridian, in Cook County, Illinois.
Easement 4: The South 10 feet of the North 24.67 feet of the West 242 feet of
the East 396 feet of that part of West 47th Place (a 60 foot private street)
lying West of the West line of South St. Louis Avenue (a 66 foot private
street); also the North 14.67 feet of the West 10 feet of the East 164 feet of
part of West 47th Place lying West of the West line of South St. Louis Avenue;
also the North 14.67 feet of the West 10 feet of the East 361 West 47th Place
lying West of the West line of said South St. Louis Avenue also the North 14.67
feet of the West 10 feet of the East 396 feet of said part of West 47th Place
lying West of the West line of said South St. Louis Avenue; being in Block 7 and
in the East 1/2 of Block 8 of James H. Rees' Subdivision of the
(Continued)
<PAGE>
Northeast 1/4 of Section 11, Township 38 North, Range 13, East of the Third
Principal Meridian, in Cook County, Illinois.
Parcel 1 also known as:
Lots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, and that part of Lot
17 falling in the North 410 feet South of the South line of 47th Street of Block
7, in the Subdivision of the West 1/2 of Block 7 of James H. Rees' Subdivision
of the Northeast 1/4 of Section 11, Township 38 North, Range 13 East of the
Third Principal Meridian, in Cook County, Illinois.
<PAGE>
SCHEDULE 2
OLD PERMITTED ENCUMBRANCES
--------------------------
Those exceptions to title listed
in Lawyers Title Insurance Corporation
marked-up commitment #97-04952 dated June 30, 1997.
<PAGE>
SCHEDULE 3
NEW DESCRIPTION OF THE LAND
---------------------------
(see attached)
P.I.N.: 1. 19-11-200-007
2. 19-11-200-034
3. 19-11-200-036
4. 19-11-200-003
Street Address: 3532 West 47th Place
Chicago, IL 60632
<PAGE>
LEGAL DESCRIPTION:
Parcel 1: The North 410 feet of that part lying South of the South line of
West 47th Street (a 66 foot public street) and West of the West line of South
St. Louis Avenue (a 66 foot street now vacated) of Block 7 of James H. Rees'
Subdivision of the Northeast 1/4 of Section 11, Township 38 North, Range 13,
East of the Third Principal Meridian, in Cook County, Illinois.
Parcel 2: Easement for the construction, maintenance, operation and renewal
beneath the surface of the ground of high and low water pressure water mains
for supplying water for sprinkler service hydrants, and domestic purposes,
with the rights to construct, maintain, operate, and renew underneath the
surface of the ground, concrete or brick vaults (with covered manhole
openings at the surface) to house gate valves, meters, controls, and other
water devices; and with the right to construct, maintain, renew and operate
above the surface of the ground fire hydrants for the benefit of Parcel 1
above, as granted and created by instrument from W. Wood Prince and James F.
Donovan, not as individuals but as Trustees of the Central Manufacturing
District under an Indenture and Declaration of Trust dated February 1, 1916,
and recorded in the office of the Recorder of Deeds of Cook County, Illinois
in Book 13717 of Records at Page 253, as Document Number 5814222 to Benefit
Realty Company, an Illinois corporation, dated June 30, 1977 and recorded
July 25, 1977 as Document 24025706 and filed in the office of the Registrar
of Titles on December 30, 1977 as Document LR2990769 over, under, on and upon
the following described parcels of land:
Parcel 4: The South 205 feet of the North 410 feet of that part lying South
of the South line of West 47th Street (a 66 foot public street) of the East
1/2 of Block 8 of James H. Rees' Subdivision of the Northeast 1/4 of Section
11, Township 38 North, Range 13, East of the Third Principal Meridian, in
Cook County, Illinois.
Easement 2: The West 18 feet of the South 10 feet of the North 149 feet of
that part of South St. Louis Avenue (a 66 foot private street) lying South of
the South line of West 47th Street (a 66 foot public street) in Block 7 of
James H. Rees' Subdivision of the Northeast 1/4 of Section 11, Township 38
North, Range 13 East of the Third Principal Meridian, in Cook County,
Illinois.
Easement 4: The South 10 feet of the North 24.67 feet of the West 242 feet of
the East 396 feet of that part of West 47th Place (a 60 foot private street)
lying West of the West line of South St. Louis Avenue (a 66 foot private
street); also the North 14.67 feet of the West 10 feet of the East 164 feet
of part of West 47th Place lying West of the West line of South St. Louis
Avenue; also the North 14.67 feet of the West 10 feet of the East 361 feet of
part of West 47th Place lying West of the West line of said
(Continued)
<PAGE>
South St. Louis Avenue; also the North 14.67 feet of the West 10 feet of the
East 396 feet of said part of West 47th Place lying West of the West line of
said South St. Louis Avenue; being in Block 7 and in the East 1/2 of Block 8
of James H. Rees' Subdivision of the Northeast 1/4 of Section 11, Township 38
North, Range 13, East of the Third Principal Meridian, in Cook County,
Illinois.
Parcel 1 also known as:
Lots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, and that part of
Lot 17 falling in the North 410 feet South of the South line of 47th Street
of Block 7, in the Subdivision of the West 1/2 of Block 7 of James H. Rees'
Subdivision of the Northeast 1/4 of Section 11, Township 38 North, Range 13
East of the Third Principal Meridian, in Cook County, Illinois.
<PAGE>
SCHEDULE 4
NEW PERMITTED ENCUMBRANCES
--------------------------
Those exceptions to title listed in
Lawyers Title Insurance Corporation
marked-up commitment #97-04952 (Revised)
dated ________ __, 1997.
<PAGE>
Exhibit 4.22
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LEINER HEALTH PRODUCTS INC.,
Mortgagor,
to
THE BANK OF NOVA SCOTIA,
as agent,
Mortgagee
___________________________________________________
MORTGAGE
___________________________________________________
Dated as of , 1997
This instrument affects certain real and personal property
located in Kalamazoo County,
State of Michigan.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Record and return to:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: Kenneth R. Kleiner, Esq.
This instrument was prepared by the above-named attorney.
Notice: This instrument contains INTER ALIA obligations which may
provide for:
(a) a variable rate of interest and/or
(b) future and/or revolving credit advances or readvances, which when
made, shall have the same priority as advances or readvances made
on the date hereof whether or not (i) any advances or readvances
were made on the date hereof and (ii) any indebtedness is
outstanding at the time any advance or re-advance is made.
Notwithstanding anything to the contrary contained herein, the maximum
principal indebtedness secured under any contingency by this
instrument shall in no event exceed $210,000,000.00.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1.
COVENANTS AND AGREEMENTS OF THE MORTGAGOR
SECTION 1.1. Payment of Secured Obligations...........................11
SECTION 1.2. Title to Collateral, etc.................................11
SECTION 1.3. Title Insurance..........................................12
SECTION 1.3.1. Title Insurance Policy...................................12
SECTION 1.3.2. Title Insurance Proceeds.................................13
SECTION 1.4. Recordation..............................................13
SECTION 1.5. Payment of Impositions, etc..............................14
SECTION 1.6. Insurance and Legal Requirements.........................14
SECTION 1.7. Security Interests, etc..................................15
SECTION 1.8. Permitted Contests.......................................16
SECTION 1.9. Leases...................................................17
SECTION 1.10. Compliance with Instruments..............................17
SECTION 1.11. Maintenance and Repair, etc..............................17
SECTION 1.12. Alterations, Additions, etc..............................18
SECTION 1.13. Acquired Property Subject to Lien........................19
SECTION 1.14. Assignment of Rents, Proceeds, etc.......................19
SECTION 1.15. No Claims Against the Mortgagee..........................20
SECTION 1.16. Indemnification..........................................21
SECTION 1.17. No Credit for Payment of Taxes...........................23
SECTION 1.18. Offering of the Notes; Application of Proceeds of Loans..23
SECTION 1.19. No Transfer of the Property..............................23
SECTION 1.20. Security Agreement.......................................24
SECTION 1.21. Representations and Warranties...........................25
SECTION 1.22. Mortgagor's Covenants....................................26
ARTICLE 2.
INSURANCE; DAMAGE, DESTRUCTION OR TAKING, ETC.
SECTION 2.1. Insurance................................................26
SECTION 2.1.1. Risks to be Insured......................................26
SECTION 2.1.2. Policy Provisions........................................27
SECTION 2.1.3. Delivery of Policies, etc................................28
SECTION 2.1.4. Separate Insurance.......................................29
SECTION 2.1.5. Flood Insurance..........................................29
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TABLE OF CONTENTS
(continued)
Page
SECTION 2.2. Damage, Destruction or Taking; Mortgagor to Give Notice;
Assignment of Awards.........................................29
SECTION 2.3. Application of Proceeds and Awards.............................30
SECTION 2.4. Total Taking and Total Destruction.............................33
ARTICLE 3.
EVENTS OF DEFAULT; REMEDIES, ETC.
SECTION 3.1. Events of Default; Acceleration................................34
SECTION 3.2. Legal Proceedings; Foreclosure.................................35
SECTION 3.3. Power of Sale..................................................35
SECTION 3.4. Uniform Commercial Code Remedies...............................37
SECTION 3.5. Mortgagee Authorized to Execute Deeds, etc.....................38
SECTION 3.6. Purchase of Collateral by Mortgagee............................38
SECTION 3.7. Receipt a Sufficient Discharge to Purchaser....................38
SECTION 3.8. Waiver of Appraisement, Valuation, etc.........................39
SECTION 3.9. Sale a Bar Against Mortgagor...................................39
SECTION 3.10. Secured Obligations to Become Due on Sale......................39
SECTION 3.11. Application of Proceeds of Sale and Other Moneys...............39
SECTION 3.12. Appointment of Receiver........................................41
SECTION 3.13. Possession, Management and Income..............................41
SECTION 3.14. Right of Mortgagee to Perform Mortgagor's Covenants, etc.......42
SECTION 3.15. Subrogation....................................................42
SECTION 3.16. Remedies, etc., Cumulative.....................................43
SECTION 3.17. Provisions Subject to Applicable Law...........................43
SECTION 3.18. No Waiver, etc.................................................43
SECTION 3.19. Compromise of Actions, etc.....................................44
ARTICLE 4.
DEFINITIONS
SECTION 4.1. Terms Defined in this Mortgage..................................44
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TABLE OF CONTENTS
(continued)
Page
SECTION 4.2. Use of Defined Terms........................................52
SECTION 4.3. Credit Agreement Definitions................................52
ARTICLE 5.
MISCELLANEOUS
SECTION 5.1. Further Assurances; Financing Statements
............................................................53
SECTION 5.1.1. Further Assurances........................................53
SECTION 5.1.2. Financing Statements......................................53
SECTION 5.2. Additional Security.........................................54
SECTION 5.3. Defeasance; Partial Release, etc............................54
SECTION 5.3.1. Defeasance................................................54
SECTION 5.3.2. Partial Release, etc......................................54
SECTION 5.4. Notices, etc................................................55
SECTION 5.5. Waivers, Amendments, etc....................................55
SECTION 5.6. Cross-References............................................55
SECTION 5.7. Headings....................................................55
SECTION 5.8. Currency....................................................55
SECTION 5.9. Governing Law...............................................56
SECTION 5.10. Successors and Assigns, etc.................................56
SECTION 5.11. Waiver of Jury Trial; Submission to Jurisdiction............56
SECTION 5.12. Severability................................................57
SECTION 5.13. Loan Document...............................................57
SECTION 5.14. Usury Savings Clause........................................57
SECTION 5.15. Future Advances.............................................58
EXECUTION PAGE...............................................................59
ACKNOWLEDGMENT...............................................................60
Schedule 1 - Legal Description
Schedule 2 - Permitted Encumbrances
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MORTGAGE
MORTGAGE, dated as of ___________ __, 1997 (this "MORTGAGE"), made by
LEINER HEALTH PRODUCTS INC. ("LEINER" or the "MORTGAGOR"), a Delaware
corporation having an address of 901 East 233rd Street, Carson, California
90745, to THE BANK OF NOVA SCOTIA, having an address at One Liberty Plaza, New
York, New York 10006, for itself as a Lender and as collateral agent (the
"AGENT") under the Credit Agreement referred to below (together with its
successors and assigns from time to time acting as agent under such Credit
Agreement, the "MORTGAGEE").
W I T N E S S E T H T H A T:
WHEREAS, the Mortgagor is on the date of delivery hereof the owner of fee
title to the parcel of land described in SCHEDULE 1 hereto (the "LAND") and of
the Improvements (such term and other capitalized terms used in this Mortgage
having the respective meanings specified or referred to in ARTICLE IV);
WHEREAS, pursuant to the terms, conditions and provisions of the Credit
Agreement, dated as of June 30, 1997 (as amended, restated, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"), among Leiner
Health Products Group Inc. ("LHPG" or the "U.S. BORROWER" (prior to the
Assumption)), Vita Health Company (1985) Ltd. (the "CANADIAN BORROWER"), as
Canadian borrower (collectively, the "BORROWERS"), the institutions from time to
time a party thereto which extend a Commitment under the U.S. Facility
(collectively, the "U.S. LENDERS"), the various financial institutions from time
to time a party thereto which extend a Commitment under the Canadian Facility
(collectively, the "CANADIAN LENDERS", and together with the U.S. Lenders, the
"LENDERS"), The Bank of Nova Scotia ("SCOTIABANK"), as agent for the U.S.
Lenders under the U.S. Facility (in such capacity, the "U.S. AGENT"), and
Scotiabank, currently acting through its executive offices in Toronto, Ontario,
as agent for the Canadian Lenders under the Canadian Facility (in such capacity,
the "CANADIAN AGENT", and together with the U.S. Agent, collectively, the
"AGENTS"), the Lenders and the Issuer have agreed to make Loans to, and to issue
Letters of Credit for the account of, the Borrowers in the maximum original
principal amount of
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TWO HUNDRED TEN MILLION AND 00/100 DOLLARS ($210,000,000.00) (such Loans and
Letters of Credit are hereinafter referred to collectively as the "CREDIT
EXTENSIONS").
WHEREAS, the Credit Extensions consist of:
(i) from the U.S. Lenders, a Term B Loan Commitment and a Term C Loan
Commitment pursuant to which Borrowings of Term Loans, in a maximum
aggregate principal amount not to exceed $45,000,000 (in the case of Term B
Loans) and $40,000,000 (in the case of Term C Loans), will be made to the
U.S. Borrower in a single Borrowing to occur on the date of the initial
Credit Extensions;
(ii) from the U.S. RL Lenders, a U.S. Revolving Loan Commitment (to
include availability for U.S. Revolving Loans, U.S. Swing Line Loans and
U.S. Letters of Credit) pursuant to which Borrowings of U.S. Revolving
Loans and U.S. Swing Line Loans, in a maximum aggregate principal amount
(together with all U.S. Letter of Credit Outstandings) not to exceed the
then existing U.S. Revolving Loan Commitment Amount, will be made to the
U.S. Borrower from time to time on and subsequent to the date of the
initial Credit Extensions but prior to the U.S. Revolving Loan Commitment
Termination Date;
(iii) from the U.S. Issuers (and participated in by the U.S. RL
Lenders), a U.S. Letter of Credit Commitment pursuant to which the U.S.
Issuers will issue U.S. Letters of Credit for the account of the U.S.
Borrower and, subject to Section 2.1.2 of the Credit Agreement, its U.S.
Subsidiaries from time to time on and subsequent to the date of the initial
Credit Extensions but prior to the U.S. Revolving Loan Commitment
Termination Date in a maximum aggregate Stated Amount at any one time
outstanding not to exceed $35,000,000 (PROVIDED that the aggregate
outstanding principal amount of U.S. Revolving Loans, Swing Line Loans and
U.S. Letter of Credit Outstandings at any time shall not exceed the then
existing U.S. Revolving Loan Commitment Amount);
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(iv) from the U.S. Swing Line Lender (and participated in by the U.S.
RL Lenders), a U.S. Swing Line Loan Commitment pursuant to which Borrowings
of U.S. Swing Line Loans in an aggregate outstanding principal amount not
to exceed $15,000,000 will be made on and subsequent to the date of the
initial Credit Extensions but prior to the U.S. Revolving Loan Commitment
Termination Date (PROVIDED, that the aggregate outstanding principal amount
of such U.S. Swing Line Loans, U.S. Revolving Loans and U.S. Letter of
Credit Outstandings at any time shall not exceed the then existing U.S.
Revolving Loan Commitment Amount);
(v) from the Canadian Lenders, a Canadian Revolving Loan Commitment
(to include availability for Canadian Revolving Loans, Canadian Swing Line
Loans and Canadian Letters of Credit) pursuant to which Borrowings of
Canadian Revolving Loans and Canadian Swing Line Loans in a maximum
aggregate principal amount (together with all Canadian Letter of Credit
Outstandings) not to exceed the then existing Canadian Revolving Loan
Commitment Amount, will be made to the Canadian Borrower from time to time
on and subsequent to the date of the initial Credit Extensions but prior to
the Canadian Revolving Loan Commitment Termination Date;
(vi) from the Canadian Issuers (and participated in by the Canadian
Lenders), a Canadian Letter of Credit Commitment pursuant to which the
Canadian Issuers will issue Canadian Letters of Credit for the account of
the Canadian Borrower and, subject to Section 3.1.2 of the Credit
Agreement, the Canadian Borrower's Subsidiaries from time to time on and
subsequent to the date of the initial Credit Extensions but prior to the
Canadian Revolving Loan Commitment Termination Date in a maximum aggregate
Stated Amount at any one time outstanding not to exceed Cdn $13,000,000
(PROVIDED that the aggregate outstanding principal amount of Canadian
Revolving Loans and Canadian Letter of Credit Outstandings at any time
shall not exceed the then existing Canadian Revolving Loan Commitment
Amount); and
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(vii) from the Canadian Swing Line Lender (and participated in by the
Canadian Lenders), a Canadian Swing Line Loan Commitment pursuant to which
Borrowings of Canadian Swing Line Loans in an aggregate outstanding
principal amount not to exceed the Cdn $1,400,000 will be made on and
subsequent to the date of the initial Credit Extensions but prior to the
Canadian Revolving Loan Commitment Termination Date (PROVIDED that the
aggregate outstanding principal amount of such Canadian Swing Line Loans,
Canadian Revolving Loans and Canadian Letter of Credit Outstandings at any
time shall not exceed the then existing Canadian Revolving Loan Commitment
Amount.
WHEREAS, as contemplated by the Credit Agreement, immediately following the
making of the initial Credit Extensions, the Mortgagor and LHPG have delivered
the Assumption Agreement, pursuant to which the Mortgagor has assumed (the
"ASSUMPTION") the rights and obligations of LHPG as (and has become) the U.S.
Borrower under the Credit Agreement;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) and the execution and delivery of the
Assumption Agreement (as defined in the Credit Agreement) under the Credit
Agreement, the Mortgagor is required to execute and deliver this Mortgage;
WHEREAS, (i) as a material inducement for the Lenders to enter into the
Credit Agreement and the other Loan Documents, (ii) to secure the payment and
performance of the Mortgagor's obligations under the Credit Agreement and the
other Loan Documents; and (iii) to secure the payment and performance of the
Secured Obligations, the Mortgagor is required to execute and deliver this
Mortgage to the Mortgagee; and
WHEREAS, the Mortgagor has duly authorized the execution, delivery and
performance of this Mortgage.
G R A N T:
NOW, THEREFORE, for and in consideration of the premises, and of the mutual
covenants herein contained, and
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in order to induce the Lenders to make the Credit Extensions pursuant to the
Credit Agreement, and in order to secure the full, timely and proper payment and
performance of and compliance with each and every one of the Secured Obligations
(as hereinafter defined), the Mortgagor hereby irrevocably grants, bargains,
sells, mortgages, warrants, aliens, demises, releases, hypothecates, pledges,
assigns, transfers and conveys to the Mortgagee and its successors and assigns,
forever, all of the following (the "COLLATERAL"):
(a) REAL ESTATE. All of the Land and all additional lands and
estates therein now owned or hereafter acquired by the Mortgagor for use or
development with the Land or any portion thereof, together with all and
singular the tenements, rights, easements, hereditaments, rights of way,
privileges, liberties, appendages and appurtenances now or hereafter
belonging or in any way pertaining to the Land and such additional lands
and estates therein (including, without limitation, all rights relating to
storm and sanitary sewer, water, gas, electric, railway and telephone
services); all development rights, air rights, riparian rights, water,
water rights, water stock, all rights in, to and with respect to any and
all oil, gas, coal, minerals and other substances of any kind or character
underlying or relating to the Land and such additional lands and estates
therein and any interest therein; all estate, claim, demand, right, title
or interest of the Mortgagor in and to any street, road, highway or alley,
vacated or other, adjoining the Land or any part thereof and such
additional lands and estates therein; all strips and gores belonging,
adjacent or pertaining to the Land or such additional lands and estates;
and any after-acquired title to any of the foregoing (herein collectively
referred to as the "REAL ESTATE");
(b) IMPROVEMENTS. All buildings, structures and other improvements
and any additions and alterations thereto or replacements thereof, now or
hereafter built, constructed or located upon the Real Estate; and, to the
extent that any of the following items of property constitutes fixtures
under applicable laws, all furnishings, fixtures, fittings, appliances,
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apparatus, equipment, machinery, building and construction materials and
other articles of every kind and nature whatsoever and all replacements
thereof, now or hereafter affixed or attached to, placed upon or used in
any way in connection with the complete and comfortable use, enjoyment,
occupation, operation, development and/or maintenance of the Real Estate or
such buildings, structures and other improvements, including, but not
limited to, partitions, furnaces, boilers, oil burners, radiators and
piping, plumbing and bathroom fixtures, refrigeration, heating,
ventilating, air conditioning and sprinkler systems, other fire prevention
and extinguishing apparatus and materials, vacuum cleaning systems, gas and
electric fixtures, incinerators, compactors, elevators, engines, motors,
generators and all other articles of property which are considered fixtures
under applicable law (such buildings, structures and other improvements and
such other property are herein collectively referred to as the
"IMPROVEMENTS"; the Real Estate and the Improvements are herein
collectively referred to as the "PROPERTY");
(c) GOODS. All building materials, goods, construction materials,
appliances (including, without limitation, stoves, ranges, ovens,
disposals, refrigerators, water fountains and coolers, fans, heaters,
dishwashers, clothes washers and dryers, water heaters, hood and fan
combinations, kitchen equipment, laundry equipment, kitchen cabinets and
other similar equipment), stocks, beds, mattresses, bedding and linens,
supplies, blinds, window shades, drapes, carpets, floor coverings,
manufacturing equipment and machinery, office equipment, growing plants and
shrubberies, control devices, equipment (including window cleaning,
building cleaning, swimming pool, recreational, monitoring, garbage, pest
control and other equipment), motor vehicles, tools, furnishings,
furniture, lighting, non-structural additions to the Real Estate and
Improvements and all other tangible property of any kind or character,
together with all replacements thereof, now or hereafter located on or in
or used or useful in connection with the complete and comfortable use,
enjoyment, occupation, operation, development and/or maintenance of the
Property,
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regardless of whether or not located on or in the Property or located
elsewhere for purposes of storage, fabrication or otherwise (herein
collectively referred to as the "GOODS");
(d) INTANGIBLES. All goodwill, trademarks, trade names, option
rights, purchase contracts, real and personal property tax refunds, books
and records and general intangibles of the Mortgagor relating to the
Property, and any other intangible property of the Mortgagor relating to
the Property (herein collectively referred to as the "INTANGIBLES");
(e) LEASES. All rights of the Mortgagor in, to and under all leases,
licenses, occupancy agreements, concessions and other arrangements, oral or
written, now existing or hereafter entered into, whereby any Person agrees
to pay money or any other consideration for the use, possession or
occupancy of, or any estate in, the Property or any portion thereof or
interest therein (herein collectively referred to as the "LEASES"), and the
right, subject to applicable law, upon the occurrence of any Event of
Default hereunder, to receive and collect the Rents (as hereinafter
defined) paid or payable thereunder;
(f) PLANS. All rights of the Mortgagor in and to all plans and
specifications, designs, drawings and other information, materials and
matters heretofore or hereafter prepared relating to the Improvements or
any construction on the Real Estate (herein collectively referred to as the
"PLANS");
(g) PERMITS. All rights of the Mortgagor, to the extent assignable,
in, to and under all permits, franchises, licenses, approvals and other
authorizations respecting the use, occupation and operation of the Property
and every part thereof and respecting any business or other activity
conducted on or from the Property, and any product or proceed thereof or
therefrom, including, without limitation, all building permits,
certificates of occupancy and other licenses, permits and approvals issued
by governmental authorities having jurisdiction (herein collectively
referred to as the "PERMITS");
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(h) CONTRACTS. All right, title and interest of the Mortgagor in and
to all agreements, contracts, certificates, instruments, warranties,
appraisals, engineering, environmental, soils, insurance and other reports
and studies, books, records, correspondence, files and advertising
materials, and other documents, now or hereafter obtained or entered into,
as the case may be, pertaining to the construction, use, occupancy,
possession, operation, management, leasing, maintenance and/or ownership of
the Property and all right, title and interest of the Mortgagor therein
(herein collectively referred to as the "CONTRACTS");
(i) LEASES OF FURNITURE, FURNISHINGS AND EQUIPMENT. All right, title
and interest of the Mortgagor as lessee in, to and under any leases of
furniture, furnishings, equipment and any other Goods now or hereafter
installed in or at any time used in connection with the Property;
(j) RENTS. All rents, issues, profits, royalties, avails, income and
other benefits derived or owned, directly or indirectly, by the Mortgagor
from the Property, including, without limitation, all rents and other
consideration payable by tenants, claims against guarantors, and any cash
or other securities deposited to secure performance by tenants, under the
Leases (herein collectively referred to as "RENTS");
(k) PROCEEDS. All proceeds of the conversion, voluntary or
involuntary of any of the foregoing into cash or liquidated claims,
including, without limitation, proceeds of insurance and condemnation
awards (herein collectively referred to as "PROCEEDS"); and
(l) OTHER PROPERTY. All other property and rights of the Mortgagor
of every kind and character relating to the Property, and all proceeds and
products of any of the foregoing;
AND, without limiting any of the other provisions of this Mortgage, the
Mortgagor expressly grants to the Mortgagee, as secured party, a security
interest in all of those portions of the Collateral which are or may be subject
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<PAGE>
to the State Uniform Commercial Code provisions applicable to secured
transactions;
TO HAVE AND TO HOLD the Collateral unto the Mortgagee, its successors and
assigns, forever.
FURTHER to secure the full, timely and proper payment and performance of
the Secured Obligations, the Mortgagor hereby covenants and agrees with and
warrants to the Mortgagee as follows:
ARTICLE 1.
COVENANTS AND AGREEMENTS OF THE MORTGAGOR
SECTION 1.1. PAYMENT OF SECURED OBLIGATIONS. (i) The Mortgagor agrees
that:
(a) it will duly and punctually pay and perform or cause to be paid
and performed each of the Obligations at the time and in accordance with
the terms of the Loan Documents, and
(b) when and as due and payable from time to time in accordance with
the terms hereof or of any other Loan Documents, pay and perform, or cause
to be paid and performed, all other Secured Obligations.
SECTION 1.2. TITLE TO COLLATERAL, ETC. The Mortgagor represents and
warrants to and covenants with the Mortgagee that:
(a) as of the date hereof and at all times hereafter while this
Mortgage is outstanding, the Mortgagor (1) is and shall be the absolute
owner of the legal and beneficial title to the Property and to all other
property included in the Collateral, and (2) has and shall have good and
marketable title in fee simple absolute to the Property, subject in each
case only to this Mortgage, the liens expressly permitted pursuant to the
terms of the Credit Agreement and the encumbrances set forth in SCHEDULE 2
hereto (collectively, the "PERMITTED ENCUMBRANCES");
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(b) the Mortgagor has good and lawful right, power and authority to
execute this Mortgage and to convey, transfer, assign, mortgage and grant a
security interest in the Collateral, all as provided herein;
(c) this Mortgage has been duly executed, acknowledged and delivered
on behalf of the Mortgagor, all consents and other actions required to be
taken by the officers, directors, shareholders and partners, as the case
may be, of the Mortgagor have been duly and fully given and performed and
this Mortgage constitutes the legal, valid and binding obligation of the
Mortgagor, enforceable against the Mortgagor in accordance with its terms;
and
(d) the Mortgagor, at its expense, will warrant and defend to the
Mortgagee and any purchaser under the power of sale herein or at any
foreclosure sale such title to the Collateral and the first mortgage lien
and first priority perfected security interest of this Mortgage thereon and
therein against all claims and demands and will maintain, preserve and
protect such lien and security interest and will keep this Mortgage a
valid, direct first mortgage lien of record on and a first priority
perfected security interest in the Collateral, subject only to the
Permitted Encumbrances.
SECTION 1.3. TITLE INSURANCE.
SECTION 1.3.1. TITLE INSURANCE POLICY. Concurrently with the execution
and delivery of this Mortgage, the Mortgagor, at its expense, has obtained and
delivered to the Mortgagee a loan policy or policies of title insurance in an
amount, and in form and substance, satisfactory to the Mortgagee naming the
Mortgagee as the insured, insuring the title to and the first mortgage lien of
this Mortgage on the Property, with endorsements requested by the Mortgagee.
The Mortgagor has duly paid in full all premiums and other charges due in
connection with the issuance of such policy or policies of title insurance.
SECTION 1.3.2. TITLE INSURANCE PROCEEDS. All proceeds received by and
payable to the Mortgagee for any loss under the loan policy or policies of title
insurance delivered to the Mortgagee pursuant to SECTION 1.3.1, or under any
policy
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or policies of title insurance delivered to the Mortgagee in substitution
therefor or replacement thereof, shall be the property of the Mortgagee and
shall be applied by the Mortgagee in accordance with the provisions of SECTION
2.3.
SECTION 1.4. RECORDATION. The Mortgagor, at its expense, will at all
times cause this Mortgage and any instruments amendatory hereof or supplemental
hereto and any instruments of assignment hereof or thereof (and any appropriate
financing statements or other instruments and continuations thereof), and each
other instrument delivered in connection with the Credit Agreement or any other
Loan Document and intended thereunder to be recorded, registered and filed, to
be kept recorded, registered and filed, in such manner and in such places, and
will pay all such recording, registration, filing fees, taxes and other charges,
and will comply with all such statutes and regulations as may be required by law
in order to establish, preserve, perfect and protect the lien and security
interest of this Mortgage as a valid, direct first mortgage lien and first
priority perfected security interest in the Collateral, subject only to the
Permitted Encumbrances. The Mortgagor will pay or cause to be paid, and will
indemnify the Mortgagee in respect of, all taxes (including interest and
penalties) at any time payable in connection with the filing and recording of
this Mortgage and any and all supplements and amendments hereto.
SECTION 1.5. PAYMENT OF IMPOSITIONS, ETC. Subject to SECTION 1.8
(relating to permitted contests), the Mortgagor will pay or cause to be paid at
least ten (10) days before the same would become delinquent and before any fine,
penalty, interest or cost may be added for non-payment, all taxes, assessments,
water and sewer rates, charges, license fees, inspection fees and other
governmental levies or payments, of every kind and nature whatsoever, general
and special, ordinary and extraordinary, unforeseen as well as foreseen, which
at any time may be assessed, levied, confirmed, imposed or which may become a
lien upon the Collateral, or any portion thereof, or which are payable with
respect thereto, or upon the rents, issues, income or profits thereof, or on the
occupancy, operation, use, possession or activities thereof, whether any or all
of the same be levied directly or indirectly or as excise taxes or as income
taxes, and all taxes, assessments or charges which
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may be levied on the Secured Obligations, or the interest thereon (collectively,
the "IMPOSITIONS"). The Mortgagor will deliver to the Mortgagee, upon request,
copies of official receipts or other satisfactory proof evidencing such
payments.
SECTION 1.6. INSURANCE AND LEGAL REQUIREMENTS. Subject to SECTION 1.8
(relating to permitted contests), the Mortgagor, at its expense, will comply in
all material respects, or cause compliance in all material respects with
(a) all provisions of any insurance policy covering or applicable to
the Collateral or any part thereof, all requirements of the issuer of any
such policy, and all orders, rules, regulations and other requirements of
the National Board of Fire Underwriters (or any other body exercising
similar functions) applicable to or affecting the Collateral or any part
thereof or any use or condition of the Collateral or any part thereof
(collectively, the "INSURANCE REQUIREMENTS"); and
(b) all laws, including Environmental, Health or Safety Requirements
of Law, statutes, codes, acts, ordinances, orders, judgments, decrees,
injunctions, rules, regulations, permits, licenses, authorizations,
directions and requirements of all governments, departments, commissions,
boards, courts, authorities, agencies, officials and officers, foreseen or
unforeseen, ordinary or extraordinary, which now or at any time hereafter
may be applicable to the Collateral or any part thereof, or any of the
adjoining sidewalks, curbs, vaults and vault space, if any, streets or
ways, or any use or condition of the Collateral or any part thereof
(collectively, the "LEGAL REQUIREMENTS");
whether or not compliance therewith shall require structural changes in or
interference with the use and enjoyment of the Collateral or any part thereof.
The failure by Mortgagor to pay Impositions and the failure by Mortgagor to pay
any insurance premium upon any insurance policy relating to the Collateral, or
any part thereof, shall constitute waste, and shall entitle Mortgagee to
exercise the remedies afforded by Section 600.2927 of the Michigan Revised
Judicature Act of 1961, as now or hereafter amended, and by any other statute
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or law now or hereafter in effect, including the appointment of a receiver, to
which appointment Mortgagor consents.
SECTION 1.7. SECURITY INTERESTS, ETC. The Mortgagor will not directly or
indirectly create or permit or suffer to be created or to remain, and will
promptly discharge or cause to be discharged, any deed of trust, mortgage,
encumbrance or charge on, pledge of, security interest in or conditional sale or
other title retention agreement with respect to or any other lien on or in the
Collateral or any part thereof or the interest of the Mortgagor or the Mortgagee
therein, or any Proceeds thereof or Rents or other sums arising therefrom, other
than (a) Permitted Encumbrances, and (b) liens of mechanics, materialmen,
suppliers or vendors or rights thereto incurred in the ordinary course of the
business of the Mortgagor for sums not yet due or any such liens or rights
thereto which are at the time being contested as permitted by SECTION 1.8. The
Mortgagor will not postpone the payment of any sums for which liens of
mechanics, materialmen, suppliers or vendors or rights thereto have been
incurred (unless such liens or rights thereto are at the time being contested as
permitted by SECTION 1.8), or enter into any contract under which payment of
such sums is postponable (unless such contract expressly provides for the legal,
binding and effective waiver of any such liens or rights thereto), in either
case, for more than 60 days after the completion of the action giving rise to
such liens or rights thereto.
SECTION 1.8. PERMITTED CONTESTS. After prior written notice to the
Mortgagee, the Mortgagor at its expense may contest, or cause to be contested,
by appropriate legal proceedings conducted in good faith and with due diligence,
the amount or validity or application, in whole or in part, of any Imposition,
Legal Requirement or Insurance Requirement or lien of a mechanic, materialman,
supplier or vendor, PROVIDED THAT, (a) in the case of an unpaid Imposition,
lien, encumbrance or charge, such proceedings shall suspend the collection
thereof from the Mortgagor, the Mortgagee, and the Collateral (including any
rent or other income therefrom) and shall not interfere with the payment of any
such rent or income, (b) neither the Collateral nor any rent or other income
therefrom nor any part thereof or interest therein would be in any danger of
being sold, forfeited, lost, impaired or interfered with, (c) in the
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case of a Legal Requirement, neither the Mortgagor nor the Mortgagee would be in
danger of any material civil or criminal liability for failure to comply
therewith, (d) the Mortgagor shall have furnished such security, if any, as may
be required in the proceedings or as may be reasonably requested by the
Mortgagee, (e) the non-payment of the whole or any part of any Imposition will
not result in the delivery of a tax deed to the Collateral or any part thereof
because of such non-payment, (f) the payment of any sums required to be paid
with respect to any of the Notes or under this Mortgage (other than any unpaid
Imposition, lien, encumbrance or charge at the time being contested in
accordance with this SECTION 1.8) shall not be interfered with or otherwise
affected, (g) in the case of any Insurance Requirement, the failure of the
Mortgagor to comply therewith shall not affect the validity of any insurance
required to be maintained by the Mortgagor under SECTION 2.1, and (h) that
adequate reserves, determined in accordance with GAAP, shall have been set aside
on the Mortgagor's books.
SECTION 1.9. LEASES. The Mortgagor represents and warrants to the
Mortgagee that, as of the date hereof, there are no written or oral leases or
other agreements of any kind or nature relating to the occupancy of any portion
of the Property by any Person other than the Mortgagor. The Mortgagor will not
enter into any such written or oral lease or other agreement with respect to any
portion of the Property without first obtaining the written consent of the
Mortgagee.
SECTION 1.10. COMPLIANCE WITH INSTRUMENTS. The Mortgagor at its expense
will promptly comply with all rights of way or use, privileges, franchises,
servitudes, licenses, easements, tenements, hereditaments and appurtenances
forming a part of the Property and all instruments creating or evidencing the
same, in each case, to the extent compliance therewith is required of the
Mortgagor under the terms thereof. The Mortgagor will not take any action which
may result in a forfeiture or termination of the rights afforded to the
Mortgagor under any such instruments and will not, without the prior written
consent of the Mortgagee, amend any of such instruments.
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SECTION 1.11. MAINTENANCE AND REPAIR, ETC. Subject to the provisions of
SECTION 1.12, the Mortgagor will keep or cause to be kept all presently and
subsequently erected or acquired Improvements and the sidewalks, curbs, vaults
and vault space, if any, located on or adjoining the same, and the streets and
the ways adjoining the same, in good and substantial order and repair and in
such a fashion that neither the value nor utility of the Collateral will not be
diminished, and, at its sole cost and expense, will promptly make or cause to be
made all necessary and appropriate repairs, replacements and renewals thereof,
whether interior or exterior, structural or nonstructural, ordinary or
extraordinary, foreseen or unforeseen, so that its business carried on in
connection therewith may be properly conducted at all times. All repairs,
replacements and renewals shall be at least equal in quality, use and value to
the original Improvements. The Mortgagor at its expense will do or cause to be
done all shoring of foundations and walls of any building or other Improvements
on the Property and (to the extent permitted by law) of the ground adjacent
thereto, and every other act necessary or appropriate for the preservation and
safety of the Property by reason of or in connection with any excavation or
other building operation upon the Property and upon any adjoining property,
whether or not the Mortgagor shall, by any Legal Requirement, be required to
take such action or be liable for failure to do so.
SECTION 1.12. ALTERATIONS, ADDITIONS, ETC. So long as no Event of Default
shall have occurred and be continuing, the Mortgagor shall have the right at any
time and from time to time to make or cause to be made reasonable alterations of
and additions to the Property or any part thereof, PROVIDED THAT any alteration
or addition: (a) shall not change the general character or the use of the
Property or reduce the fair market value thereof below its value immediately
before such alteration or addition, or impair the usefulness of the Property;
(b) is effected with due diligence, in a good and workmanlike manner and in
compliance with all Legal Requirements and Insurance Requirements; (c) is
promptly and fully paid for, or caused to be paid for, by the Mortgagor; (d) is
made, in case the estimated cost of such alteration or addition exceeds U.S.
$250,000, (i) only after the Mortgagee shall have consented thereto and shall
have reviewed and approved in writing the
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plans and specifications therefor, (ii) under the supervision of a qualified
architect or engineer or another professional approved by the Mortgagee and
(iii) only after the Mortgagor shall have furnished to the Mortgagee a
performance bond or other security reasonably satisfactory to the Mortgagee.
SECTION 1.13. ACQUIRED PROPERTY SUBJECT TO LIEN. All property at any time
acquired by the Mortgagor and provided or required by this Mortgage to be or
become subject to the lien and security interest hereof, whether such property
is acquired by exchange, purchase, construction or otherwise, shall forthwith
become subject to the lien and security interest of this Mortgage without
further action on the part of the Mortgagor or the Mortgagee. The Mortgagor, at
its expense, will execute and deliver to the Mortgagee (and will record and file
as provided in SECTION 1.4) an instrument supplemental to this Mortgage
satisfactory in substance and form to the Mortgagee, whenever such an instrument
is necessary under applicable law to subject to the lien and security interest
of this Mortgage all right, title and interest of the Mortgagor in and to all
property provided or required by this Mortgage to be subject to the lien and
security interest hereof.
SECTION 1.14. ASSIGNMENT OF RENTS, PROCEEDS, ETC. The assignment, grant
and conveyance of the Leases, Rents, Proceeds and other rents, income, proceeds
and benefits of the Collateral contained in the Granting Clause of this Mortgage
shall constitute an absolute, present and irrevocable assignment, grant and
conveyance, PROVIDED, HOWEVER, that permission is hereby given to the Mortgagor,
so long as no Event of Default has occurred hereunder, to collect, receive and
apply such Rents, Proceeds and other rents, income, proceeds and benefits as
they become due and payable, but not in advance thereof, and in accordance with
all of the other terms, conditions and provisions hereof, of the Loan Documents,
and of the Leases, contracts, agreements and other instruments with respect to
which such payments are made or such other benefits are conferred. Upon the
occurrence of an Event of Default, such permission shall terminate immediately
and automatically, without notice to the Mortgagor or any other Person except as
required by law, and shall not be reinstated upon a cure of such Event of
Default without the express written consent of the
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Mortgagee. Such assignment shall be fully effective without any further action
on the part of the Mortgagor or the Mortgagee and the Mortgagee shall be
entitled, at its option, upon the occurrence of an Event of Default hereunder,
to collect, receive and apply all Rents, Proceeds and all other rents, income,
proceeds and benefits from the Collateral, including all right, title and
interest of the Mortgagor in any escrowed sums or deposits or any portion
thereof or interest therein, whether or not the Mortgagee takes possession of
the Collateral or any part thereof. The Mortgagor further grants to the
Mortgagee the right, at the Mortgagee's option, upon the occurrence of an Event
of Default hereunder, to:
(a) enter upon and take possession of the Property for the purpose of
collecting Rents, Proceeds and said rents, income, proceeds and other
benefits;
(b) dispossess by the customary summary proceedings any tenant,
purchaser or other Person defaulting in the payment of any amount when and
as due and payable, or in the performance of any other obligation, under
any Lease, contract or other instrument to which said Rents, Proceeds or
other rents, income, proceeds or benefits relate;
(c) let or convey the Collateral or any portion thereof or any
interest therein; and
(d) apply Rents, Proceeds and such rents, income, proceeds and other
benefits, after the payment of all necessary fees, charges and expenses, on
account of the Secured Obligations in accordance with SECTION 3.11.
SECTION 1.15. NO CLAIMS AGAINST THE MORTGAGEE. Nothing contained in this
Mortgage shall constitute any consent or request by the Mortgagee, express or
implied, for the performance of any labor or the furnishing of any materials or
other property in respect of the Property or any part thereof, or be construed
to permit the making of any claim against the Mortgagee in respect of labor or
services or the furnishing of any materials or other property or any claim that
any lien based on the performance of such labor or the furnishing of any such
materials or other property is prior to the lien and security interest of
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this Mortgage. ALL CONTRACTORS, SUBCONTRACTORS, VENDORS AND OTHER PERSONS
DEALING WITH THE PROPERTY, OR WITH ANY PERSONS INTERESTED THEREIN, ARE HEREBY
REQUIRED TO TAKE NOTICE OF THE PROVISIONS OF THIS SECTION.
SECTION 1.16. INDEMNIFICATION. The Mortgagor will protect, indemnify,
save harmless and defend the Mortgagee, the Lenders, and each of their
respective officers, directors, shareholders, employees, representatives and
agents (collectively, the "INDEMNIFIED PARTIES" and individually, an
"INDEMNIFIED PARTY"), from and against any and all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) imposed upon or
incurred by or asserted against any Indemnified Party by reason of (a) ownership
of an interest in this Mortgage, any other Loan Document or the Property, (b)
any accident, injury to or death of persons or loss of or damage to or loss of
the use of property occurring on or about the Property or any part thereof or
the adjoining sidewalks, curbs, vaults and vault spaces, if any, streets, alleys
or ways, (c) any use, non-use or condition of the Property or any part thereof
or the adjoining sidewalks, curbs, vaults and vault spaces, if any, streets,
alleys or ways, (d) any failure on the part of the Mortgagor to perform or
comply with any of the terms of this Mortgage, (e) performance of any labor or
services or the furnishing of any materials or other property in respect of the
Collateral or any part thereof made or suffered to be made by or on behalf of
the Mortgagor, (f) any negligence or tortious act on the part of the Mortgagor
or any of its agents, contractors, lessees, licensees or invitees, (g) any work
in connection with any alterations, changes, new construction or demolition of
or additions to the Property, or (h) (i) any Hazardous Material (as such term is
defined in the Credit Agreement) on, in, under or affecting all or any portion
of the Property, the groundwater, or any surrounding areas, (ii) any
misrepresentation, inaccuracy or breach of any warranty, covenant or agreement
contained or referred to in SECTIONS 1.20 and 1.21, (iii) any violation or claim
of violation by the Mortgagor of any Environmental, Health or Safety
Requirements of Law, or (iv) the imposition of any lien for damages caused by or
the recovery of any costs for the cleanup, release or threatened release of any
Hazardous Material. If any action or proceeding be
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commenced, to which action or proceeding any Indemnified Party is made a party
by reason of the execution of this Mortgage or any other Loan Document, or in
which it becomes necessary to defend or uphold the lien of this Mortgage, all
sums paid by the Indemnified Parties, for the expense of any litigation to
prosecute or defend the rights and lien created hereby or otherwise, shall be
paid by the Mortgagor to such Indemnified Parties, as the case may be, as
hereinafter provided. The Mortgagor will pay and save the Indemnified Parties
harmless against any and all liability with respect to any intangible personal
property tax or similar imposition of the State or any subdivision or authority
thereof now or hereafter in effect, to the extent that the same may be payable
by the Indemnified Parties in respect of this Mortgage, any Loan Document or any
Secured Obligation. All amounts payable to the Indemnified Parties under this
SECTION 1.16. shall be deemed indebtedness secured by this Mortgage and any such
amounts which are not paid within ten (10) days after written demand therefor by
any Indemnified Party shall bear interest at the rate provided for in Section
5.2.2. of the Credit Agreement from the date of such demand. In case any
action, suit or proceeding is brought against any Indemnified Party by reason of
any such occurrence, the Mortgagor, upon request of such Indemnified Party,
will, at the Mortgagor's expense, resist and defend such action, suit or
proceeding or cause the same to be resisted or defended by counsel designated by
the Mortgagor and approved by such Indemnified Party. The obligations of the
Mortgagor under this SECTION 1.16 shall survive any discharge or reconveyance of
this Mortgage and payment in full of the Secured Obligations.
SECTION 1.17. NO CREDIT FOR PAYMENT OF TAXES. The Mortgagor shall not be
entitled to any credit against the Secured Obligations by reason of the payment
of any tax on the Property or any part thereof or by reason of the payment of
any other Imposition, and shall not apply for or claim any deduction from the
taxable value of the Property or any part thereof by reason of this Mortgage.
SECTION 1.18. OFFERING OF THE NOTES; APPLICATION OF PROCEEDS OF LOANS.
Neither the Mortgagor nor any Person acting on behalf of the Mortgagor has
directly or indirectly offered the Notes or any portion thereof or any similar
security to, or solicited any offer to buy any of the same
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from, any Person other than the Mortgagee. Neither the Mortgagor nor any Person
acting on behalf of the Mortgagor has taken or will take any action which would
subject the issuance of the Notes to the provisions of section 5 of the
Securities Act of 1933, as amended. The Mortgagor (a) will not use or permit to
be used any proceeds of the Loans, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of "purchasing" or "carrying" any
"margin stock" within the meaning of Regulation U of the Federal Reserve Board,
as amended from time to time, and (b) has or will apply all of the proceeds of
the Loans that are paid to it by the Mortgagee to the purposes permitted by the
Credit Agreement.
SECTION 1.19. NO TRANSFER OF THE PROPERTY. Except as set forth in the
Credit Agreement, the Mortgagor shall not, without the prior written consent of
the Mortgagee, which consent may be granted or withheld in the sole and absolute
discretion of the Mortgagee (i) sell, convey, assign or otherwise transfer the
Property or any portion of the Mortgagor's interest therein or (ii) further
encumber the Property or permit the Property to become encumbered by any lien,
claim, security interest or other indebtedness of any kind or nature other than
the Permitted Encumbrances.
SECTION 1.20. SECURITY AGREEMENT. With respect to the items of personal
property and fixtures referred to and described in the Granting Clause of this
Mortgage and included as part of the Collateral, this Mortgage is hereby made
and declared to be a security agreement encumbering each and every item of
personal property and fixtures now or hereafter owned by Mortgagor and included
herein as a part of the Collateral, in compliance with the provisions of the
Uniform Commercial Code as enacted in the State. In this respect, Mortgagor, as
"Debtor", expressly grants to Mortgagee, as "Secured Party", a security interest
in and to all of the property now or hereafter owned by Mortgagor which
constitutes the personal property and fixtures hereinabove referred to and
described in this Mortgage, including all extensions, accessions, additions,
improvements, betterments, renewals, replacements and substitutions thereof or
thereto, and all proceeds from the sale or other disposition thereof. Mortgagor
agrees that Mortgagee may file this Mortgage, or a reproduction thereof, in the
real estate records or other appropriate index, as,
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and this Mortgage shall be deemed to be, a financing statement filed as a
fixture filing. Any reproduction of this Mortgage or of any other security
agreement or financing statement shall be sufficient as a financing statement.
In addition, Mortgagor agrees to execute and deliver to Mortgagee, upon
Mortgagee's request, any other security agreement and financing statements, as
well as extensions, renewals, and amendments thereof, and reproductions of this
Mortgage, in such form as Mortgagee may require to perfect a security interest
with respect to said items. Mortgagor shall pay all costs of filing such
financing statements and any extensions, renewals, amendments and releases
thereof, and shall pay all reasonable costs and expenses of any record searches
for financing statements Mortgagee may reasonably require. Without the prior
written consent of Mortgagee, Mortgagor shall not create or suffer to be created
pursuant to the Uniform Commercial Code any other security interest in the
above-described personal property and fixtures, including any replacements and
additions thereto. Upon the occurrence of an Event of Default under this
Mortgage, or any other violation of the covenants, terms and conditions of the
security agreement contained herein, the Mortgagee shall have and shall be
entitled to exercise any and all of the rights and remedies (i) as prescribed in
this Mortgage, or (ii) as prescribed by general law, or (iii) as prescribed by
the specific statutory provisions now or hereafter enacted and specified in said
Uniform Commercial Code, all at Mortgagee's sole election. Mortgagor and
Mortgagee agree that the filing of any financing statements in the records
normally having to do with personal property shall not in any way affect the
agreement of Mortgagor and Mortgagee that everything located in, on or about, or
used or intended to be used with or in connection with the use, operation or
enjoyment of, the Collateral, which is described or reflected as a fixture in
this Mortgage, is, and at all times and for all purposes and in all proceedings,
both legal and equitable, shall be, regarded as part of the Real Estate conveyed
hereby. Mortgagor warrants that Mortgagor's name, identity and address are as
set forth herein. The mailing address of the Mortgagee from which information
may be obtained concerning the security interest created herein is also set
forth herein. This information hereof is provided in order that this Mortgage
shall comply with the requirements of the Uniform Commercial Code as enacted in
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the State for instruments to be filed as financing statements. This Mortgage
shall remain effective as a fixture filing until this Mortgage is released or
satisfied of record or its effectiveness otherwise terminates as to the
Collateral.
SECTION 1.21. REPRESENTATIONS AND WARRANTIES. In order to induce the
Mortgagee to enter into this Mortgage, the Credit Agreement and the other Loan
Documents, the Mortgagor agrees that all of the representations and warranties
set forth in the Credit Agreement are incorporated into this Mortgage by
reference as if fully set forth herein.
SECTION 1.22. MORTGAGOR'S COVENANTS. In order to induce the Mortgagee to
enter into this Mortgage, the Credit Agreement and the other Loan Documents, the
Mortgagor agrees that all of the covenants set forth in the Credit Agreement are
incorporated into this Mortgage by reference as if fully set forth herein.
ARTICLE 2.
INSURANCE; DAMAGE, DESTRUCTION OR TAKING, ETC.
SECTION 2.1. INSURANCE.
SECTION 2.1.1. RISKS TO BE INSURED. The Mortgagor will, at its expense,
maintain or cause to be maintained by insurance carriers that meet the standards
set forth below: (a) insurance with respect to the Improvements against loss or
damage by fire, lightning and such other risks as are included in standard
"all-risk" policies, in amounts sufficient to prevent the Mortgagor and the
Mortgagee from becoming a co-insurer of any partial loss under the applicable
policies, but in any event in amounts not less than the then full insurable
value (actual replacement value) of the Improvements, as determined by the
Mortgagor in accordance with generally accepted insurance practice and
reasonably approved by the Mortgagee or, at the request of the Mortgagee, as
determined at the Mortgagor's expense by the insurer or insurers or by an expert
reasonably approved by the Mortgagee, (b) comprehensive public liability,
including bodily injury and product liability and property
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damage insurance, with personal injury endorsements, applicable to the Property
in such amounts as are usually carried by Persons of comparable size engaged in
the same or a similar business and similarly situated in the same general
locality, but in any event with a combined single limit of not less than Twenty
Million Dollars ($20,000,000) per occurrence, (c) explosion insurance in respect
of any steam and pressure boilers and similar apparatus located in the Property
in such amounts as are usually carried by Persons of comparable size engaged in
the same or a similar business and similarly situated in the same general
locality, but in any event in an amount not less than Twenty Million Dollars
($20,000,000), (d) business interruption insurance (including added expense
coverage) against all insurable perils for a period of not fewer than twelve
(12) months (subject to a reasonable aggregate deductible not exceeding five (5)
days per annum), and (e) worker's compensation insurance to the full extent
required by applicable law for all employees of the Mortgagor engaged in any
work on or about the Property and employer's liability insurance with a limit of
not less than Ten Million Dollars ($10,000,000) for each occurrence.
All such insurance shall be provided (i) by insurers authorized by Lloyds
of London to underwrite such risks, (ii) by insurers having an A.M. Best
policyholders rating of not less than A-(except with respect to insurers
providing workers compensation insurance, in which case such insurers shall have
an A.M. Best policyholders rating of not less than B+) or (iii) by such other
insurers as the Mortgagee may approve in writing; PROVIDED, that if the rating
of any of the insurers providing insurance hereunder is downgraded, the
Mortgagor shall only be required to obtain replacement insurance with an insurer
satisfying the requirements hereof at the stated expiration of the insurance
policy maintained with the insurer whose rating was so downgraded.
SECTION 2.1.2. POLICY PROVISIONS. All insurance maintained by the
Mortgagor pursuant to SECTION 2.1.1 shall (a) (except for worker's compensation
insurance) name the Mortgagor as the insured with the mortgagee named as
mortgagee and loss payee, (b) (except for worker's compensation and public
liability insurance) provide that the proceeds for any losses shall be adjusted
by the Mortgagor subject to the reasonable approval of the
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Mortgagee in the event the proceeds shall exceed Two Hundred Fifty Thousand
Dollars ($250,000), and shall be payable to the Mortgagee, to be held and
applied as provided in SECTION 2.3, (c) include effective waivers by the insurer
of all rights of subrogation against any named insured, the indebtedness secured
by this Mortgage and the Property and all claims for insurance premiums against
the Mortgagee, (d) provide that any losses shall be payable notwithstanding
(i) any act, failure to act or negligence of or violation of warranties,
declarations or conditions contained in such policy by any named insured,
(ii) the occupation or use of the Property for purposes more hazardous than
permitted by the terms thereof, (iii) any foreclosure or other action or
proceeding taken by the Mortgagee pursuant to any provision of this Mortgage, or
(iv) any change in title or ownership of the Property, (e) provide that no
cancellation, reduction in amount or material change in coverage thereof or any
portion thereof shall be effective until at least ten (10) days after receipt by
the Mortgagee of written notice thereof, (f) provide that any notice under such
policies shall be simultaneously delivered to the Mortgagee, and (g) be
reasonably satisfactory in all other material respects to the Mortgagee. Any
insurance maintained pursuant to this SECTION 2.1 may be evidenced by blanket
insurance policies covering the Property and other properties or assets of the
Mortgagor, and shall in all other respects comply with the requirements of this
SECTION 2.1.
SECTION 2.1.3. DELIVERY OF POLICIES, ETC. The Mortgagor will deliver to
the Mortgagee, promptly upon request, (a) certified copies of all policies
evidencing all insurance required to be maintained under SECTION 2.1.1 (or, in
the case of blanket policies, certificates thereof by the insurers together with
a copy of each blanket policy), and (b) evidence, in the form of receipted
bills, as to the payment of all premiums due thereon (with respect to public
liability insurance policies, all installments for the current year due thereon
to such date), PROVIDED THAT the Mortgagee shall not be deemed by reason of its
custody of such policies to have knowledge of the contents thereof. The
Mortgagor will also deliver to the Mortgagee not later than thirty (30) days
prior to the expiration of any policy a binder or certificate of the insurer
evidencing the replacement thereof. In the event the Mortgagor shall fail
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to effect or maintain any insurance required to be effected or maintained
pursuant to the provisions of this SECTION 2.1, the Mortgagor will indemnify the
Mortgagee against damage, loss or liability resulting from all risks for which
such insurance should have been effected or maintained.
SECTION 2.1.4. SEPARATE INSURANCE. The Mortgagor will not take out
separate insurance concurrent in form or contributing in the event of loss with
that required to be maintained pursuant to this SECTION 2.1.
SECTION 2.1.5. FLOOD INSURANCE. The Mortgagor represents and warrants
that the Improvements are not located in an area designated as "flood prone" (as
defined under the National Flood Insurance Regulations) or, to the extent the
Improvements or any portion thereof are located in an area designated as "flood
prone", the Mortgagor maintains in full force and effect flood insurance under
the National Flood Insurance Program to the extent and in the amount required by
applicable laws.
SECTION 2.2. DAMAGE, DESTRUCTION OR TAKING; MORTGAGOR TO GIVE NOTICE;
ASSIGNMENT OF AWARDS. In case of
(a) any damage to or destruction of the Collateral or any part
thereof, or
(b) any taking, whether for permanent or temporary use, of all or any
part of the Collateral or any interest therein or right accruing thereto,
as the result of or in anticipation of the exercise of the right of
condemnation or eminent domain, or a change of grade affecting the
Collateral or any portion thereof (a "TAKING"), or the commencement of any
proceedings or negotiations which may result in a Taking,
the Mortgagor will promptly give written notice thereof to the Mortgagee,
generally describing the nature and extent of such damage or destruction and the
Mortgagor's best estimate of the cost of restoring the Collateral, or the nature
of such proceedings or negotiations and the nature and extent of the Taking
which might result therefrom, as the case may be. Subject to SECTION 2.3, the
Mortgagee shall be entitled to all insurance proceeds payable on account of such
damage or destruction and to all awards or payments allocable to
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the Collateral on account of such Taking, and the Mortgagor hereby irrevocably
assigns, transfers and sets over to the Mortgagee all rights of the Mortgagor to
any such proceeds, awards or payments and irrevocably authorizes and empowers
the Mortgagee, at its option, in the name of the Mortgagor or otherwise, to file
and prosecute what would otherwise be the Mortgagor's claim for any such
proceeds, award or payment and to collect, receipt for and retain the same for
disposition in accordance with SECTION 2.3. The Mortgagor will pay all
reasonable costs and expenses incurred by the Mortgagee in connection with any
such damage, destruction or Taking and seeking and obtaining any insurance
proceeds, awards or payments in respect thereof.
SECTION 2.3. APPLICATION OF PROCEEDS AND AWARDS. The Mortgagee may, at
its option, apply all amounts recovered under any insurance policy required to
be maintained by the Mortgagor hereunder and all awards received by it on
account of any Taking in any one or more of the following ways:
(a) to the payment of the reasonable costs and expenses incurred by
the Mortgagee in obtaining any such insurance proceeds or awards, including
the fees and expenses of attorneys and insurance and other experts and
consultants, the costs of litigation, arbitration, mediation,
investigations and other judicial, administrative or other proceedings and
all other out-of-pocket expenses;
(b) to the payment of the principal of the Credit Extensions and any
interest (including post-petition interest payable in any proceedings for
bankruptcy under applicable law ("POST-PETITION INTEREST") to the extent
such interest is a Secured Obligation) accrued and unpaid thereon, without
regard to whether any portion or all of such amounts shall be matured or
unmatured, together with interest at the rate provided for in the Credit
Agreement on any overdue principal and (to the extent permitted by
applicable law) interest; and, in case such amount shall be insufficient to
pay in full all such amounts, then such amount shall be applied, FIRST, to
the payment of all amounts of interest (including Post-Petition Interest to
the extent such interest is a Secured Obligation) accrued on the Credit
Extensions and unpaid, SECOND, to
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the payment of all amounts of principal at the time outstanding;
(c) to the payment of, or the application to, any Secured Obligation
(other than as provided in CLAUSE (B) above);
(d) to fulfill any of the other covenants contained herein, in the
Credit Agreement, or in any other Loan Document, as the Mortgagee may
determine in its sole discretion;
(e) to the Mortgagor for application to the cost of restoring the
Collateral and the replacement of Goods destroyed, damaged or taken; or
(f) to the Mortgagor.
Notwithstanding the foregoing provisions of this SECTION 2.3 to the
contrary (but subject to the provisions of SECTION 2.4), and if each of the
following conditions is satisfied, the Mortgagee, upon request of the Mortgagor,
shall apply insurance proceeds or condemnation awards received by it to the
restoration or replacement of the Collateral, to the extent necessary for the
restoration or replacement thereof:
(i) there shall then exist no uncured Default of which Mortgagor has
received notice thereof;
(ii) the Mortgagor shall furnish to the Mortgagee a certificate of an
architect or engineer reasonably acceptable to the Mortgagee stating (x)
that the Collateral is capable of being restored, prior to the maturity of
the Credit Agreement, to substantially the same condition as existed prior
to the casualty or Taking, (y) the aggregate estimated direct and indirect
costs of such restoration and (z) as to any Taking, that the property taken
in such Taking, or sold under threat thereof, is not necessary to the
Mortgagor's customary use or occupancy of the Property; and
(iii) in the event that the estimated cost of restoration set forth in
the certificate of such architect or engineer (and such revisions to such
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estimate as are from time to time made) exceeds the net insurance proceeds
or condemnation awards actually received from time to time, the Mortgagor
shall deposit the amount of such excess with the Mortgagee.
In the event that such insurance proceeds or condemnation awards are to be
utilized in the restoration of the Collateral, the Mortgagee shall disburse such
Proceeds and the additional amounts deposited by the Mortgagor for such
restoration after receipt of a written request for disbursement, on not fewer
than five (5) nor more than twelve (12) Business Days notice and, to the extent
applicable, in accordance with the Mortgagee's customary construction loan
procedures and conditions. In the event that such insurance or condemnation
awards are to be utilized to replace the Collateral so destroyed or taken, the
Mortgagee shall disburse such Proceeds after receipt of a written request for
disbursement, on not fewer than five (5) Business Days nor more than twelve (12)
Business Days notice simultaneously with the acquisition of such replacement
property by the Mortgagor. In the event that, after the restoration or
replacement of the Collateral, any insurance or condemnation awards shall
remain, such amount shall be paid to the Mortgagor. Insurance proceeds and
condemnation awards shall be invested in the manner reasonably requested by the
Mortgagor and approved by the Mortgagee, and all interest earned thereon shall
be applied as provided in this SECTION 2.3. If, prior to the receipt by the
Mortgagee of such insurance proceeds or condemnation awards, the Collateral
shall have been sold on foreclosure, the Mortgagee shall have the right to
receive said insurance proceeds or condemnation awards to the extent of any
deficiency found to be due upon such sale, with legal interest thereon, whether
or not a deficiency judgment shall have been sought or recovered or denied, and
the reasonable attorneys' fees, costs and disbursements incurred by the
Mortgagee in connection with the collection of such award or payment.
SECTION 2.4. TOTAL TAKING AND TOTAL DESTRUCTION. In the event of a Total
Destruction or a Total Taking, the Mortgagee shall apply all amounts recovered
under any insurance policy referred to in SECTION 2.1.1 and all awards received
by it on account of any such Taking as follows:
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(a) first, to the payment of the reasonable costs and expenses
incurred by the Mortgagee in obtaining any such insurance proceeds or
awards, including the fees and expenses of attorneys and insurance and
other experts and consultants, the costs of litigation, arbitration,
mediation, investigations and other judicial, administrative or other
proceedings and all other out-of-pocket expenses;
(b) second, to the payment of the principal of the Credit Extensions
and any interest (including Post-Petition Interest to the extent such
interest is a Secured Obligation) accrued and unpaid thereon, without
regard to whether any portion or all of such amounts shall be matured or
unmatured, together with interest at the rate provided for in the Credit
Agreement on any overdue principal and (to the extent permitted by
applicable law) interest; and, in case such amount shall be insufficient to
pay in full all such amounts, then such amount shall be applied, FIRST, to
the payment of all amounts of interest (including Post-Petition Interest to
the extent such interest is a Secured Obligation) accrued on the Credit
Extensions and unpaid, and SECOND, to the payment of all amounts of
principal at the time outstanding;
(c) third, to the payment of, or the application to, any Secured
Obligation (other than as provided in CLAUSE (B) above);
(d) fourth, to fulfill any of the other covenants contained herein as
the Mortgagee may determine; and
(e) fifth, the balance, if any, to the Mortgagor.
ARTICLE 3.
EVENTS OF DEFAULT; REMEDIES, ETC.
SECTION 3.1. EVENTS OF DEFAULT; ACCELERATION. If an "Event of Default"
(pursuant to and as defined in the Credit Agreement) shall have occurred, then
and in any such event the Mortgagee may at any time thereafter (unless all
Events of Default shall theretofore have been remedied and all
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costs and expenses, including, without limitation, attorneys' fees and expenses
incurred by or on behalf of the Mortgagee, shall have been paid in full by the
Mortgagor) declare, by written notice to the Mortgagor, the Loans and all other
Secured Obligations to be due and payable immediately or on a date specified in
such notice (PROVIDED that, upon the occurrence of any Event of Default
described in Section 10.1.9. of the Credit Agreement, the Loans and all other
Secured Obligations shall automatically become due and payable), and on such
date the same shall be and become due and payable, together with interest
accrued thereon, without presentment, demand, protest or notice, all of which
the Mortgagor hereby waives. The Mortgagor will pay on demand all costs and
expenses, including, without limitation, attorneys' fees and expenses, incurred
by or on behalf of the Mortgagee in enforcing this Mortgage, or any other Loan
Document, or occasioned by any default hereunder or thereunder.
SECTION 3.2. LEGAL PROCEEDINGS; FORECLOSURE. If an Event of Default shall
have occurred, the Mortgagee at any time may, at its election, proceed at law
or in equity or otherwise to enforce the payment and performance of the
Secured Obligations in accordance with the terms hereof and thereof and to
foreclose the lien of this Mortgage as against all or any part of the
Collateral and to have the same sold under the judgment or decree of a court
of competent jurisdiction. The Mortgagee shall be entitled to recover in such
proceedings all costs incident thereto, including attorneys' fees and
expenses in such amounts as may be fixed by the court.
SECTION 3.3. POWER OF SALE. If an Event of Default shall have occurred,
the Mortgagee may grant, bargain, sell, assign, transfer, convey and deliver the
whole or, from time to time, any part of the Collateral, or any interest in any
part thereof, at any private sale or at public auction, with or without demand,
advertisement or notice, for cash, on credit or for other property, for
immediate or future delivery, and for such price or prices and on such terms as
the Mortgagee in its uncontrolled discretion may determine, or as may be
required by law, and upon such sale the Mortgagee may execute and deliver to the
purchaser(s) instruments of conveyance pursuant to the terms hereof and to
applicable laws. Without limiting the authority granted
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in this SECTION 3.3, the Mortgagee shall, without demand on the Mortgagor, after
the lapse of such time as may then be required by law, and notice of default and
notice of sale having been given as then required by law, sell the Collateral on
the date and at the time and place designated in the notice of sale, either as a
whole or in separate parcels and in such order as the Mortgagee may determine,
but subject to any statutory right of the Mortgagor to direct the order in which
such property, if consisting of several known lots, parcels or interests, shall
be sold, at public auction to the highest bidder, the purchase price payable in
lawful money of the United States at the time of sale. The Person conducting
the sale may, for any cause deemed expedient, postpone the sale from time to
time until it shall be completed and, in every such case, notice of postponement
shall be given by public declaration thereof by such Person at the time and
place last appointed for the sale; PROVIDED THAT, if the sale is postponed for
longer than one (1) day beyond the day designated in the notice of sale, notice
of sale and notice of the time, date and place of sale shall be given in the
same manner as the original notice of sale. The Mortgagee shall execute and
deliver to the purchaser at any such sale a mortgagee's deed conveying the
property so sold, but without any covenant or warranty, express or implied. The
recitals in such mortgagee's deed of any matters or facts shall be conclusive
proof of the truthfulness thereof. Any Person, including the Mortgagee, may bid
at the sale. The Mortgagee shall apply the proceeds of the sale, to the extent
consistent with this Mortgage, to the payment of (a) the costs and expenses of
exercising the power of sale and of the sale, including the payment of
attorneys' fees and costs, (b) the cost of any evidence of title procured in
connection with such sale, (c) all sums expended under the terms hereof in
conjunction with any default provision hereof, not then repaid, with accrued
interest at the rate provided for in the Credit Agreement from the date of
incurrence, (d) outstanding principal and interest under the Credit Agreement,
(e) all Secured Obligations (other than as provided in CLAUSE (D) above). The
Mortgagee shall give the remainder, if any, of the proceeds of the sale to the
Person or Persons legally entitled thereto, or the Mortgagee, in the Mortgagee's
discretion, may deposit the balance of such proceeds with any court or public
official authorized to receive such proceeds.
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The Mortgagor acknowledges that the power is hereby granted to Mortgagee to
sell the Collateral or any part thereof at public auction, and to convey same to
the purchaser after notice as required by the statutes of the State for
foreclosure of mortgages by advertisement being Sections 600.3201 ET SEQ.,
Michigan Compiled Laws, as amended.
CAUTION: THIS PARAGRAPH CONTAINS A WAIVER OF IMPORTANT LEGAL RIGHTS. This
Mortgage contains a power of sale which permits the Mortgagee to cause the
Collateral to be sold upon the occurrence of an Event of Default. The Mortgagee
may elect to cause the Collateral to be sold by advertisement rather than
pursuant to court action, and Mortgagor hereby voluntarily and knowingly waives
any right Mortgagor may have by virtue of any applicable constitutional
provision or statute to any notice or court hearing prior to the exercise of the
power of sale, except as may be expressly required by the Michigan statute
governing foreclosures by advertisement. By execution of this Mortgage, the
Mortgagor represents and acknowledges that the meaning and consequences of this
paragraph have been discussed as fully as desired by the Mortgagor with the
Mortgagor's legal counsel.
SECTION 3.4. UNIFORM COMMERCIAL CODE REMEDIES. If an Event of Default
shall have occurred, the Mortgagee may exercise from time to time and at any
time any rights and remedies available to it under applicable law upon default
in the payment of indebtedness, including, without limitation, any right or
remedy available to it as a secured party under the Uniform Commercial Code of
the State. The Mortgagor shall, promptly upon request by the Mortgagee,
assemble the Collateral, or any portion thereof generally described in such
request, and make it available to the Mortgagee at such place or places
designated by the Mortgagee and reasonably convenient to the Mortgagee or the
Mortgagor. If the Mortgagee elects to proceed under the Uniform Commercial Code
of the State to dispose of portions of the Collateral, the Mortgagee, at its
option, may give the Mortgagor notice of the time and place of any public sale
of any such property, or of the date after which any private sale or other
disposition thereof is to be made, by sending notice by registered or certified
first class mail, postage prepaid, to the Mortgagor at least ten (10) days
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before the time of the sale or other disposition. If any notice of any proposed
sale, assignment or transfer by the Mortgagee of any portion of the Collateral
or any interest therein is required by law, the Mortgagor conclusively agrees
that ten (10) days notice to the Mortgagor of the date, time and place (and, in
the case of a private sale, the terms) thereof is reasonable.
SECTION 3.5. MORTGAGEE AUTHORIZED TO EXECUTE DEEDS, ETC. The Mortgagor
irrevocably appoints the Mortgagee (which appointment is coupled with an
interest) the true and lawful attorney of the Mortgagor, in its name and stead
and on its behalf, for the purpose of effectuating any sale, assignment,
transfer or delivery for the enforcement hereof, whether pursuant to power of
sale, foreclosure or otherwise, to execute and deliver all such deeds, bills of
sale, assignments, releases and other instruments as may be designated in any
such request.
SECTION 3.6. PURCHASE OF COLLATERAL BY MORTGAGEE. The Mortgagee may be a
purchaser of the Collateral or of any part thereof or of any interest therein at
any sale thereof, whether pursuant to power of sale, foreclosure or otherwise,
and the Mortgagee may apply upon the purchase price thereof the indebtedness
secured hereby owing to the Mortgagee. Such purchaser shall, upon any such
purchase, acquire good title to the properties so purchased, free of the
security interest and lien of this Mortgage and free of all rights of redemption
in the Mortgagor.
SECTION 3.7. RECEIPT A SUFFICIENT DISCHARGE TO PURCHASER. Upon any sale
of the Collateral or any part thereof or any interest therein, whether pursuant
to power of sale, foreclosure or otherwise, the receipt of the Mortgagee or the
officer making the sale under judicial proceedings shall be a sufficient
discharge to the purchaser for the purchase money, and such purchaser shall not
be obliged to see to the application thereof.
SECTION 3.8. WAIVER OF APPRAISEMENT, VALUATION, ETC. The Mortgagor hereby
waives, to the fullest extent it may lawfully do so, the benefit of all
appraisement, valuation, stay, extension and redemption laws now or hereafter in
force and all rights of marshaling in the event of any sale
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of the Collateral or any part thereof or any interest therein.
SECTION 3.9. SALE A BAR AGAINST MORTGAGOR. Any sale of the Collateral or
any part thereof or any interest therein under or by virtue of this Mortgage,
whether pursuant to power of sale, foreclosure or otherwise, shall forever be a
bar against the Mortgagor.
SECTION 3.10. SECURED OBLIGATIONS TO BECOME DUE ON SALE. Upon any sale of
the Collateral or any portion thereof or interest therein by virtue of the
exercise of any remedy by the Mortgagee under or by virtue of this Mortgage,
whether pursuant to power of sale, foreclosure or otherwise in accordance with
this Mortgage or by virtue of any other remedy available at law or in equity or
by statute or otherwise, at the option of the Mortgagee, any sums or monies due
and payable pursuant to the Credit Agreement, the Loan Documents and in
connection with the Loans and/or the Secured Obligations shall, if not
previously declared due and payable, immediately become due and payable,
together with interest accrued thereon, and all other indebtedness which this
Mortgage by its terms secures.
SECTION 3.11. APPLICATION OF PROCEEDS OF SALE AND OTHER MONEYS. The
proceeds of any sale of the Collateral or any part thereof or any interest
therein under or by virtue of this Mortgage, whether pursuant to power of sale,
foreclosure or otherwise, and all other moneys at any time held by the Mortgagee
as part of the Collateral, shall be applied in such order of priority as the
Mortgagee shall determine in its sole and absolute discretion including, without
limitation, as follows:
(a) first, to the payment of the reasonable costs and expenses of such
sale (including, without limitation, the cost of evidence of title and the
costs and expenses, if any, of taking possession of, retaining custody
over, repairing, managing, operating, maintaining and preserving the
Collateral or any part thereof prior to such sale), all reasonable costs
and expenses incurred by the Mortgagee or any other Person in obtaining or
collecting any insurance proceeds, condemnation awards or other amounts
received by the Mortgagee, all reasonable costs and expenses of any
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receiver of the Collateral or any part thereof, and any Impositions or
other charges or expenses prior to the security interest or lien of this
Mortgage, which the Mortgagee may consider it necessary or desirable to
pay;
(b) second, to the payment of any Secured Obligation (other than those
set forth in SECTION 3.11(C) below);
(c) third, to the payment of all amounts of principal of and interest
(including Post-Petition Interest to the extent such interest is a Secured
Obligation) at the time due and payable under the Credit Agreement at the
time outstanding (whether due by reason of maturity or by reason of any
prepayment requirement or by declaration or acceleration or otherwise),
including interest at the rate provided for in the Credit Agreement on any
overdue principal and (to the extent permitted under applicable law) on any
overdue interest; and, in case such moneys shall be insufficient to pay in
full such principal and interest, then, FIRST, to the payment of all
amounts of interest (including Post-Petition Interest to the extent such
interest is a Secured Obligation) at the time due and payable and, SECOND,
to the payment of all amounts of principal at the time due and payable
under the Credit Agreement; and
(d) fourth, the balance, if any, held by the Mortgagee after payment
in full of all amounts referred to in subdivisions SECTIONS 3.11(A), (B)
and (C) above, shall, unless a court of competent jurisdiction may
otherwise direct by final order not subject to appeal, be paid to or upon
the direction of the Mortgagor.
SECTION 3.12. APPOINTMENT OF RECEIVER. If an Event of Default shall have
occurred, the Mortgagee shall, as a matter of right, without notice, and without
regard to the adequacy of any security for the indebtedness secured hereby or
the solvency of the Mortgagor, be entitled to the appointment of a receiver for
all or any part of the Collateral, whether such receivership be incidental to a
proposed sale of the Collateral or otherwise, and the
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Mortgagor hereby consents to the appointment of such a receiver and will not
oppose any such appointment.
SECTION 3.13. POSSESSION, MANAGEMENT AND INCOME. If an Event of Default
shall have occurred, in addition to, and not in limitation of, the rights and
remedies provided in SECTION 1.14, the Mortgagee, upon five (5) days notice to
the Mortgagor, may enter upon and take possession of the Collateral or any part
thereof by force, summary proceeding, ejectment or otherwise and may remove the
Mortgagor and all other Persons and any and all property therefrom and may hold,
operate, maintain, repair, preserve and manage the same and receive all
earnings, income, Rents, issues and Proceeds accruing with respect thereto or
any part thereof. The Mortgagee shall be under no liability for or by reason of
any such taking of possession, entry, removal or holding, operation or
management, except that any amounts so received by the Mortgagee shall be
applied to pay all costs and expenses of so entering upon, taking possession of,
holding, operating, maintaining, repairing, preserving and managing the
Collateral or any part thereof, and any Impositions or other charges prior to
the lien and security interest of this Mortgage which the Mortgagee may consider
it necessary or desirable to pay, and any balance of such amounts shall be
applied as provided in SECTION 3.11.
SECTION 3.14. RIGHT OF MORTGAGEE TO PERFORM MORTGAGOR'S COVENANTS, ETC.
If the Mortgagor shall fail to make any payment or perform any act required to
be made or performed hereunder or under the Credit Agreement or any other Loan
Document, the Mortgagee, subject to twenty (20) days' prior written notice to
the Mortgagor (except that no prior notice shall be required in the case of an
emergency or where the failure to make such payment or perform such obligation
could affect the priority of the lien of this Mortgage) without waiving or
releasing any obligation or Default, may (but shall be under no obligation to)
at any time thereafter make such payment or perform such act for the account and
at the expense of the Mortgagor, and may enter upon the Collateral for such
purpose and take all such action thereon as, in the Mortgagee's opinion, may be
necessary or appropriate therefor. No such entry and no such action shall be
deemed an eviction of any lessee of the Property or any part thereof. All sums
so paid by the Mortgagee and all costs and expenses (including, without
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limitation, attorneys' fees and expenses) so incurred, together with interest
thereon at the rate provided for in Section 5.2.2. of the Credit Agreement from
the date of payment or incurring, shall constitute additional indebtedness under
the Credit Agreement secured by this Mortgage and shall be paid by the Mortgagor
to the Mortgagee on demand.
SECTION 3.15. SUBROGATION. To the extent that the Mortgagee, on or after
the date hereof, pays any sum due under any provision of any Legal Requirement
or any instrument creating any lien prior or superior to the lien of this
Mortgage, or the Mortgagor or any other Person pays any such sum with the
proceeds of the loan evidenced by the Credit Agreement, the Mortgagee shall have
and be entitled to a lien on the Collateral equal in priority to the lien
discharged, and the Mortgagee shall be subrogated to, and receive and enjoy all
rights and liens possessed, held or enjoyed by, the holder of such lien, which
shall remain in existence and benefit the Mortgagee in securing the Secured
Obligations.
SECTION 3.16. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of
the Mortgagee provided for in this Mortgage, the Credit Agreement or any other
Loan Document, or now or hereafter existing at law or in equity or by statute or
otherwise shall be cumulative and concurrent and shall be in addition to every
other right, power or remedy provided for in this Mortgage, the Credit Agreement
or any other Loan Document, or now or hereafter existing at law or in equity or
by statute or otherwise, and the exercise or beginning of the exercise by the
Mortgagee of any one or more of the rights, powers or remedies provided for in
this Mortgage, the Credit Agreement, or any other Loan Document, or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Mortgagee of any or all such
other rights, powers or remedies.
SECTION 3.17. PROVISIONS SUBJECT TO APPLICABLE LAW. All rights, powers
and remedies provided in this Mortgage may be exercised only to the extent that
the exercise thereof does not violate any applicable provisions of law and are
intended to be limited to the extent necessary so that they will not render this
Mortgage invalid,
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unenforceable or not entitled to be recorded, registered or filed under the
provisions of any applicable law. If any term of this Mortgage or any
application thereof shall be invalid or unenforceable, the remainder of this
Mortgage and any other application of such term shall not be affected thereby.
SECTION 3.18. NO WAIVER, ETC. No failure by the Mortgagee to insist upon
the strict performance of any term hereof or of the Credit Agreement, or of any
other Loan Document, or to exercise any right, power or remedy consequent upon a
breach hereof or thereof, shall constitute a waiver of any such term or of any
such breach. No waiver of any breach shall affect or alter this Mortgage, which
shall continue in full force and effect with respect to any other then existing
or subsequent breach. By accepting payment or performance of any amount or
other Secured Obligations secured hereby before or after its due date, the
Mortgagee shall not be deemed to have waived its right either to require prompt
payment or performance when due of all other amounts and Secured Obligations
payable hereunder or to declare a default for failure to effect such prompt
payment.
SECTION 3.19. COMPROMISE OF ACTIONS, ETC. Any action, suit or proceeding
brought by the Mortgagee pursuant to any of the terms of this Mortgage, the
Credit Agreement, any other Loan Document, or otherwise, and any claim made by
the Mortgagee hereunder or thereunder, may be compromised, withdrawn or
otherwise dealt with by the Mortgagee without any notice to or approval of the
Mortgagor.
ARTICLE 4.
DEFINITIONS
SECTION 4.1. TERMS DEFINED IN THIS MORTGAGE. When used herein the
following terms have the following meanings:
"AGENT" shall have the meaning set forth in the PREAMBLE.
"ASSUMPTION" shall have the meaning set forth in the FORTH RECITAL.
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"BORROWERS" shall have the meaning set forth in the SECOND RECITAL.
"BORROWING" shall have the meaning set forth in the Credit Agreement.
"CANADIAN AGENT" shall have the meaning set forth in the Credit Agreement.
"CANADIAN BORROWER" shall have the meaning set forth in the SECOND RECITAL.
"CANADIAN FACILITY" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN ISSUERS" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN LENDERS" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN LETTER OF CREDIT" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN LETTER OF CREDIT OUTSTANDINGS" shall have the meaning set forth
in the Credit Agreement.
"CANADIAN REVOLVING LOAN" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN REVOLVING LOAN COMMITMENT" shall have the meaning set forth in
the Credit Agreement.
"CANADIAN REVOLVING LOAN COMMITMENT AMOUNT" shall have the meaning set
forth in the Credit Agreement.
"CANADIAN REVOLVING LOAN COMMITMENT TERMINATION DATE" shall have the
meaning set forth in the Credit Agreement.
"CANADIAN SUBSIDIARY" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN SWING LINE LENDER" shall have the meaning set forth in the Credit
Agreement.
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"CANADIAN SWING LINE LOAN" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN SWING LINE LOAN COMMITMENT" shall have the meaning set forth in
the Credit Agreement.
"CDN$" shall have the meaning set forth in the Credit Agreement.
"COLLATERAL" shall have the meaning set forth in the GRANTING CLAUSE.
"COMMITMENT" shall have the meaning set forth in the Credit Agreement.
"CONTRACTS" shall have the meaning set forth in clause (h) of the GRANTING
CLAUSE.
"CREDIT AGREEMENT" shall have the meaning set forth in the SECOND RECITAL.
"CREDIT EXTENSIONS" shall have the meaning set forth in the the SECOND
RECITAL.
"DEFAULT" means any Event of Default or any condition or event which, after
notice or lapse of time, or both, would constitute an Event of Default.
"ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means all valid and
enforceable Requirements of Law derived from or relating to federal, state and
local laws or regulations relating to or addressing the environment, health or
safety, including but not limited to any law, regulation, or order relating to
the use, handling, or disposal of any Hazardous Material, any law, regulation,
or order relating to Remedial Action, and any law, regulation, or order relating
to workplace or worker safety and health, as such Requirements of Law are
promulgated by the specifically authorized agency responsible for administering
such Requirements of Law.
"EVENT OF DEFAULT" shall have the meaning set forth in the Credit
Agreement.
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"GOODS" shall have the meaning set forth in CLAUSE (C) of the GRANTING
CLAUSE.
"HAZARDOUS MATERIAL" shall have the meaning set forth in the Credit
Agreement.
"HEREIN", "HEREOF", "HERETO", and "HEREUNDER" and similar terms refer to
this Mortgage and not to any particular Section, paragraph or provision of this
Mortgage.
"IMPOSITIONS" shall have the meaning set forth in SECTION 1.5.
"IMPROVEMENTS" shall have the meaning set forth in CLAUSE (B) of the
GRANTING CLAUSE.
"INDEMNIFIED PARTIES" shall have the meaning set forth in SECTION 1.16.
"INSURANCE REQUIREMENTS" shall have the meaning set forth in PARAGRAPH (A)
of SECTION 1.6.
"INTANGIBLES" shall have the meaning set forth in CLAUSE (D) of the
GRANTING CLAUSE.
"ISSUER" shall have the meaning set forth in the Credit Agreement.
"LAND" shall have the meaning set forth in the FIRST RECITAL.
"LEASES" shall have the meaning set forth in CLAUSE (E) of the GRANTING
CLAUSE.
"LEINER" shall have the meaning set forth in the PREAMBLE.
"LEGAL REQUIREMENTS" shall have the meaning set forth in PARAGRAPH (B) of
SECTION 1.6.
"LENDERS" shall have the meaning set forth in the Credit Agreement.
"LETTER OF CREDIT" shall have the meaning set forth in the Credit
Agreement.
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"LHPG" shall have the meaning set forth in the PREAMBLE.
"LOAN DOCUMENTS" shall have the meaning set forth in the Credit Agreement.
"LOANS" shall have the meaning set forth in the Credit Agreement.
"MORTGAGE" shall have the meaning set forth in the PREAMBLE.
"MORTGAGEE" shall have the meaning set forth in the PREAMBLE.
"MORTGAGOR" shall have the meaning set forth in the PREAMBLE.
"NOTES" shall have the meaning set forth in the Credit Agreement.
"OBLIGATIONS" shall have the meaning set forth in the Credit Agreement.
"OBLIGOR" shall mean each Person having any liabilities, obligations,
duties or responsibilities under the Credit Agreement or any Loan Document.
"PERMITS" shall have the meaning set forth in CLAUSE (G) of the GRANTING
CLAUSE.
"PERMITTED ENCUMBRANCES" shall have the meaning set forth in SECTION 1.2.
"PERSON" means a corporation, an association, a partnership, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency or officer.
"PLANS" shall have the meaning set forth in CLAUSE (F) of the GRANTING
CLAUSE.
"POST-PETITION INTEREST" shall have the meaning set forth in SECTION 2.3.
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"PROCEEDS" shall have the meaning set forth in CLAUSE (K) of the GRANTING
CLAUSE.
"PROPERTY" shall have the meaning set forth in CLAUSE (B) of the GRANTING
CLAUSE.
"REAL ESTATE" shall have the meaning set forth in CLAUSE (A) of the
GRANTING CLAUSE.
"RELEASE" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any Property, including the movement of
Hazardous Material through or in the air, soil, surface water, groundwater or
Property.
"REMEDIAL ACTION" means actions required to (i) clean up, remove, treat or
in any other way address Hazardous Material in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Hazardous Material; or (iii) investigate and determine if a
remedial response is needed and to design such a response and post-remedial
investigation, monitoring, operation and maintenance and care.
"RENTS" shall have the meaning set forth in CLAUSE (J) of the GRANTING
CLAUSE.
"REVOLVING LOAN" shall have the meaning set forth in the Credit Agreement.
"SCOTIABANK" shall have the meaning set forth in the SECOND RECITAL.
"SECURED OBLIGATIONS" means all Obligations now or hereafter existing under
the Credit Agreement, and all obligations (monetary or otherwise) arising under
or in connection with the Notes and each other Loan Document, whether for
principal, interest, costs, fees, expenses or otherwise, and all other
obligations of the Mortgagor and each Obligor under any Loan Document,
including, without limitation, any Subsidiary Guaranty, howsoever created,
arising or now or hereafter existing or due or to become due.
44
<PAGE>
"STATE" means the State of Michigan.
"STATED AMOUNT" shall have the meaning set forth in the Credit Agreement.
"SUBSIDIARY GUARANTY" shall have the meaning set forth in the Credit
Agreement.
"TAKING" shall have the meaning set forth in CLAUSE (B) of SECTION 2.2.
"TERM LOAN" shall have the meaning set forth in the Credit Agreement.
"TERM B LOAN" shall have the meaning set forth in the Credit Agreement.
"TERM B LOAN COMMITMENT" shall have the meaning set forth in the Credit
Agreement.
"TERM C LOAN" shall have the meaning set forth in the Credit Agreement.
"TERM C LOAN COMMITMENT" shall have the meaning set forth in the Credit
Agreement.
"TOTAL DESTRUCTION" means any damage to or destruction of the Improvements
or any part thereof which, in the reasonable estimation of the Mortgagee shall
require the expenditure of an amount in excess of fifty percent (50%) of the
replacement value of the Property to restore the Improvements to substantially
the same condition of the Improvements immediately prior to such damage or
destruction.
"TOTAL TAKING" means a Taking, whether permanent or for temporary use,
which, in the good faith judgment of the Mortgagee, shall substantially
interfere with the normal operation of the Property by the Mortgagor.
"U.S. AGENT" shall have the meaning set forth in the Credit Agreement.
"U.S. BORROWER" shall have the meaning set forth in the SECOND RECITAL.
45
<PAGE>
"U.S. FACILITY" shall have the meaning set forth in the Credit Agreement.
"U.S. ISSUERS" shall have the meaning set forth in the Credit Agreement.
"U.S. LENDERS" shall have the meaning set forth in the Credit Agreement.
"U.S. LETTER OF CREDIT" shall have the meaning set forth in the Credit
Agreement.
"U.S. LETTER OF CREDIT OUTSTANDINGS" shall have the meaning set forth in
the Credit Agreement.
"U.S. REVOLVING LOAN" shall have the meaning set forth in the Credit
Agreement.
"U.S. REVOLVING LOAN COMMITMENT" shall have the meaning set forth in the
Credit Agreement.
"U.S. REVOLVING LOAN COMMITMENT AMOUNT" shall have the meaning set forth in
the Credit Agreement.
"U.S. REVOLVING LOAN COMMITMENT TERMINATION DATE" shall have the meaning
set forth in the Credit Agreement.
"U.S. RL LENDERS" shall have the meaning set forth in the Credit Agreement.
"U.S. SUBSIDIARY" shall have the meaning set forth in the Credit Agreement.
"U.S. SWING LINE LENDER" shall have the meaning set forth in the Credit
Agreement.
"U.S. SWING LINE LOAN" shall have the meaning set forth in the Credit
Agreement.
SECTION 4.2. USE OF DEFINED TERMS. Terms for which meanings are provided
in this Mortgage shall, unless otherwise defined or the context otherwise
requires, have such meanings when used in any certificate and any opinion,
notice or other communication delivered from time to time in connection with
this Mortgage or pursuant hereto.
46
<PAGE>
SECTION 4.3. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Mortgage, including
its preamble and recitals, have the meanings provided in the Credit Agreement.
ARTICLE 5.
MISCELLANEOUS
SECTION 5.1. FURTHER ASSURANCES; FINANCING STATEMENTS.
SECTION 5.1.1. FURTHER ASSURANCES. The Mortgagor, at its expense, will
execute, acknowledge and deliver all such instruments and take all such other
action as the Mortgagee from time to time may reasonably request:
(a) to better subject to the lien and security interest of this
Mortgage all or any portion of the Collateral,
(b) to perfect, publish notice or protect the validity of the lien and
security interest of this Mortgage,
(c) to preserve and defend the title to the Collateral and the rights
of the Mortgagee therein against the claims of all Persons as long as this
Mortgage shall remain undischarged,
(d) to better subject to the lien and security interest of this
Mortgage or to maintain or preserve the lien and security interest of this
Mortgage with respect to any replacement or substitution for any Collateral
or any other after-acquired property, or
(e) in order to further effectuate the purposes of this Mortgage and
to carry out the terms hereof and to better assure and confirm to the
Mortgagee its rights, powers and remedies hereunder.
SECTION 5.1.2. FINANCING STATEMENTS. Notwithstanding any other provision
of this Mortgage, the Mortgagor hereby agrees that, without notice to or the
consent of the
47
<PAGE>
Mortgagor, the Mortgagee may file with the appropriate public officials such
financing statements, continuation statements, amendments and similar documents
as are or may become necessary to perfect, preserve or protect the security
interest granted by this Mortgage.
SECTION 5.2. ADDITIONAL SECURITY. Without notice to or consent of the
Mortgagor, and without impairment of the security interest and lien and rights
created by this Mortgage, the Mortgagee and the Lenders may accept from the
Mortgagor or any other Person additional security for the Secured Obligations.
Neither the giving of this Mortgage nor the acceptance of any such additional
security shall prevent the Mortgagee from resorting, first, to such additional
security, or, first, to the security created by this Mortgage, or concurrently
to both, in any case without affecting the Mortgagee's lien and rights under
this Mortgage.
SECTION 5.3. DEFEASANCE; PARTIAL RELEASE, ETC.
SECTION 5.3.1. DEFEASANCE. If the Loans and all other amounts owing
pursuant to the Credit Agreement and the other Loan Documents shall be repaid in
full in accordance with the terms thereof, and if the Mortgagor shall pay, in
full, the principal of and premium, if any, and interest on the Secured
Obligations in accordance with the terms thereof and hereof and all other sums
payable hereunder by the Mortgagor and shall comply with all the terms,
conditions and requirements hereof and of the Secured Obligations which by their
nature are capable of being complied with during the term hereof, then on such
date, the Mortgagee shall, upon the request of the Mortgagor and at the
Mortgagor's sole cost and expense, execute and deliver such instruments, in form
and substance reasonably satisfactory to the Mortgagee, as may be necessary to
reconvey, release and discharge this Mortgage.
SECTION 5.3.2. PARTIAL RELEASE, ETC. The Mortgagee may, at any time and
from time to time, without liability therefor, and without prior notice to the
Mortgagor, release or reconvey any part of the Collateral, consent to the making
of any map or plat of the Property, join in granting any easement thereon or
join in any extension agreement or
48
<PAGE>
agreement subordinating the lien of this Mortgage, or enter into any other
agreement in connection with the Collateral.
SECTION 5.4. NOTICES, ETC. All notices and other communications provided
to any of the parties hereto shall be in writing and addressed, delivered or
transmitted to such party as set forth in the Credit Agreement.
SECTION 5.5. WAIVERS, AMENDMENTS, ETC. The provisions of this Mortgage
may be amended, discharged or terminated and the observance or performance of
any provision of this Mortgage may be waived, either generally or in a
particular instance and either retroactively or prospectively, only by an
instrument in writing executed by the Mortgagor and the Mortgagee.
SECTION 5.6. CROSS-REFERENCES. References in this Mortgage and in each
instrument executed pursuant hereto to any Section or Article are, unless
otherwise specified, to such Section or Article of this Mortgage or such
instrument, as the case may be, and references in any Section, Article or
definition to any clause are, unless otherwise specified, to such clause of such
Section, Article or definition.
SECTION 5.7. HEADINGS. The various headings of this Mortgage and of each
instrument executed pursuant hereto are inserted for convenience only and shall
not affect the meaning or interpretation of this Mortgage or such instrument or
any provisions hereof or thereof.
SECTION 5.8. CURRENCY. Unless otherwise expressly stated, all references
to any currency or money, or any dollar amount, or amounts denominated in
"Dollars" herein will be deemed to refer to the lawful currency of the United
States.
SECTION 5.9. GOVERNING LAW. THIS MORTGAGE SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE.
SECTION 5.10. SUCCESSORS AND ASSIGNS, ETC. This Mortgage shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
49
<PAGE>
SECTION 5.11. WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION. (a) EACH
OF THE MORTGAGOR AND THE MORTGAGEE HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
MORTGAGE, THE CREDIT AGREEMENT, ANY LOAN DOCUMENT OR ANY OTHER RELATED
INSTRUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN), OR ACTIONS OF THE MORTGAGOR OR THE MORTGAGEE. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE MORTGAGEE AND THE LENDERS TO ENTER INTO THE
TRANSACTIONS PROVIDED FOR IN THE CREDIT AGREEMENT AND TO MAKE THE CREDIT
EXTENSIONS.
(b) FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INVOLVING THIS
MORTGAGE, THE CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT, THE MORTGAGOR HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ALL
FEDERAL AND STATE COURTS LOCATED IN THE STATE AND CONSENTS THAT IT MAY BE SERVED
WITH ANY PROCESS OR PAPER BY REGISTERED MAIL OR BY PERSONAL SERVICE WITHIN OR
WITHOUT THE STATE IN ACCORDANCE WITH APPLICABLE LAW, PROVIDED A REASONABLE TIME
FOR APPEARANCE IS ALLOWED. THE MORTGAGOR EXPRESSLY WAIVES, TO THE EXTENT IT MAY
LAWFULLY DO SO, ANY OBJECTION, CLAIM OR DEFENSE WHICH IT MAY HAVE AT ANY TIME TO
THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS
MORTGAGE, THE CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY SUCH COURT,
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER IRREVOCABLY
WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO ANY SUCH CLAIM, SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION
OVER THE PERSON OF THE MORTGAGOR. NOTHING CONTAINED HEREIN WILL BE DEEMED TO
PRECLUDE THE MORTGAGEE FROM BRINGING AN ACTION AGAINST THE MORTGAGOR IN ANY
OTHER JURISDICTION.
SECTION 5.12. SEVERABILITY. Any provision of this Mortgage, the Credit
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall as to such provision and such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Mortgage, the Credit Agreement or such
50
<PAGE>
Loan Document or affecting the validity or enforceability of such provision in
any other jurisdiction.
SECTION 5.13. LOAN DOCUMENT. This Mortgage is a Loan Document executed
pursuant to the Credit Agreement and, unless otherwise expressly indicated
herein, shall be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 5.14. USURY SAVINGS CLAUSE. It is the intention of the Mortgagor
and the Mortgagee to conform strictly to the usury laws governing the Loan
Documents, and any interest payable under the Loan Documents shall be subject to
reduction to the amount not in excess of the maximum non-usurious amount allowed
under such laws, as construed by the courts having jurisdiction over such
matters. In the event the maturity of the Secured Obligations is accelerated by
reason of any provision of the Loan Documents, or by reason of an election by
the Mortgagee resulting from an Event of Default, then earned interest may never
include more than the maximum amount permitted by law, computed from the dates
of each advance of loan proceeds under the Credit Agreement until payment, and
any interest in excess of the maximum amount permitted by law shall be canceled
automatically or, if theretofore paid, at the option of the Mortgagee, shall be
rebated to the Mortgagor, or shall be credited on the principal amount of the
Secured Obligations or, if all principal has been repaid, then the excess shall
be rebated to the Mortgagor. If any interest is canceled, credited against
principal or rebated to the Mortgagor in accordance with the foregoing sentence
and, if thereafter the interest payable hereunder is less than the maximum
amount permitted by applicable law, the rate hereunder shall automatically be
increased to the maximum extent possible to permit repayment to the Mortgagee
and the Lenders as soon as possible of any interest in excess of the maximum
amount permitted by law which was earlier canceled, credited against principal
or rebated to the Mortgagor pursuant to the provisions of the foregoing
sentence.
SECTION 5.15. FUTURE ADVANCES. This Mortgage is a "Future Advance
Mortgage" under Act No. 348 of Public Acts of Michigan of 1990. Any and all
future advances under this Mortgage and the Loan Documents shall have the same
priority as if the future advance was made on the date that this
51
<PAGE>
Mortgage was recorded. This Mortgage shall secure the Secured Obligations,
whenever incurred, such Secured Obligations to be due at the times provided in
the Loan Documents. Notice is hereby given that the Secured Obligations may
INCREASE as a result of any defaults hereunder by Mortgagor due to, for example,
and without limitation, unpaid interest or late charges, unpaid taxes or
insurance premiums which the Mortgagee elects to advance, defaults under leases
that the Mortgagee elects to cure, attorney fees or costs incurred in enforcing
the Loan Documents or other expenses incurred by the Mortgagee in protecting the
Collateral, the security of this Mortgage or the Mortgagee's rights and
interests.
52
<PAGE>
IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be duly
executed as of the day and year first above written.
WITNESSES: MORTGAGOR:
/s/ LEINER HEALTH PRODUCTS INC.,
------------------------ a Delaware corporation
Name
/s/ By: /s/ William B. Towne
------------------------ -------------------------
Name Name: William B. Towne
Title: Executive V.P. -
Finance
DRAFTED BY:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: Kenneth R. Kleiner, Esq.
53
<PAGE>
ACKNOWLEDGMENT OF MORTGAGOR
STATE OF New York )
)ss
COUNTY OF New York)
On this 27th day of June, 1997, before me, the undersigned officer,
personally appeared William B. Towne personally known and acknowledged
himself/herself (or proved to me on the basis of satisfactory evidence) to be
the Exec. V.P. of Leiner Health Products Inc. (hereinafter, the
"Corporation"), and that as such officer, being duly authorized to do so
pursuant to its bylaws or a resolution of its board of directors, executed,
subscribed and acknowledged the foregoing instrument for the purposes therein
contained, by signing the name of the Corporation by himself/herself in
his/her authorized capacity as such officer as his/her free and voluntary act
and deed and the free and voluntary act and deed of said corporation.
In Witness Whereof, I hereunto set my hand and official seal.
/s/ Caron F. Gelineau
---------------------------------
Notary Public
Notarial Seal My Commission Expires
Caron F. Gelineau
Notary Public, State of New York
No. 31-5009056
Qualified in New York County
Commission Expires March 8, 1999
54
<PAGE>
SCHEDULE 1
LEGAL DESCRIPTION OF THE LAND
(attached hereto)
Commencing at the South 1/4 post of Section 36, Town 2 South, Range
11 West; thence North .DEG 08' West along the North and South 1/4 line 446.76
feet for the place of beginning of the land hereinafter described; thence
North .DEG 08' West along the said 1/4 line 300.20 feet; thence North 89
.DEG 53' 38" East parallel to the South line of said Section, 35.0 feet;
thence North .DEG 08' West parallel to said 1/4 line 660.03 feet to the
Southerly line of Covington Road; thence North 55 51' 34" East along said
Southerly line 415.85 feet; thence on a curve to the right (with a central
angle of 3 .DEG 22' 05", a radius of 1112.92 feet, chord bearing North 57
.DEG 32' 34" East 65.41 feet) a distance of 65.42 feet; thence South .DEG 08'
East parallel to said North and South 1/4 line 1229.01 feet; thence South 89
.DEG 53' 38" West 435.0 feet to the place of beginning.
<PAGE>
SCHEDULE 2
PERMITTED ENCUMBRANCES
Those exceptions to title listed in
Lawyers Title Insurance Corporation
marked up commitment # LT-48745, dated June 30, 1997.
<PAGE>
Exhibit 4.23
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LEINER HEALTH PRODUCTS INC.,
Mortgagor,
to
THE BANK OF NOVA SCOTIA,
as agent,
Mortgagee
___________________________________________________
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
___________________________________________________
Dated as of June 30, 1997
This instrument affects certain real and personal property
located in Dane County, State of Wisconsin.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Record and return to:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: Kenneth R. Kleiner, Esq.
This instrument was prepared by the above-named attorney.
Notice: This instrument contains INTER ALIA obligations which may provide for:
(a) a variable rate of interest and/or
(b) future and/or revolving credit advances or readvances, which when
made, shall have the same priority as advances or readvances made
on the date hereof whether or not (i) any advances or readvances
were made on the date hereof and (ii) any indebtedness is
outstanding at the time any advance or re-advance is made.
Notwithstanding anything to the contrary contained herein, the maximum
principal indebtedness secured under any contingency by this
instrument shall in no event exceed $210,000,000.00.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1.
COVENANTS AND AGREEMENTS OF THE MORTGAGOR
SECTION 1.1 Payment of Secured Obligations.................................12
SECTION 1.2 Title to Collateral, etc.......................................12
SECTION 1.3 Title Insurance................................................13
SECTION 1.3.1 Title Insurance Policy.........................................13
SECTION 1.3.2 Title Insurance Proceeds.......................................13
SECTION 1.4 Recordation....................................................14
SECTION 1.5 Payment of Impositions, etc....................................14
SECTION 1.6 Insurance and Legal Requirements...............................15
SECTION 1.7 Security Interests, etc........................................15
SECTION 1.8 Permitted Contests.............................................16
SECTION 1.9 Leases.........................................................17
SECTION 1.10 Compliance with Instruments....................................17
SECTION 1.11 Maintenance and Repair, etc....................................18
SECTION 1.12 Alterations, Additions, etc....................................18
SECTION 1.13 Acquired Property Subject to Lien..............................19
SECTION 1.14 Assignment of Rents, Proceeds, etc.............................19
SECTION 1.15 No Claims Against the Mortgagee................................21
SECTION 1.16 Indemnification................................................21
SECTION 1.17 No Credit for Payment of Taxes.................................23
SECTION 1.18 Offering of the Notes; Application of
Proceeds of Loans.............................................23
SECTION 1.19 No Transfer of the Property....................................23
SECTION 1.20 Security Agreement.............................................24
SECTION 1.21 Representations and Warranties.................................26
SECTION 1.22 Mortgagor's Covenants..........................................26
ARTICLE 2.
INSURANCE; DAMAGE, DESTRUCTION OR TAKING, ETC.
SECTION 2.1 Insurance......................................................26
SECTION 2.1.1. Risks to be Insured............................................26
SECTION 2.1.2. Policy Provisions..............................................27
SECTION 2.1.3. Delivery of Policies, etc......................................28
SECTION 2.1.4. Separate Insurance.............................................29
SECTION 2.1.5. Flood Insurance................................................29
SECTION 2.2 Damage, Destruction or Taking; Mortgagor to
Give Notice; Assignment of Awards..............................29
SECTION 2.3 Application of Proceeds and Awards.............................30
SECTION 2.4 Total Taking and Total Destruction.............................33
i
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
ARTICLE 3.
EVENTS OF DEFAULT; REMEDIES, ETC.
SECTION 3.1 Events of Default; Acceleration................................34
SECTION 3.2 Legal Proceedings; Foreclosure.................................35
SECTION 3.3 Power of Sale..................................................35
SECTION 3.4 Uniform Commercial Code Remedies...............................36
SECTION 3.5 Mortgagee Authorized to Execute Deeds, etc.....................37
SECTION 3.6 Purchase of Collateral by Mortgagee............................37
SECTION 3.7 Receipt a Sufficient Discharge to Purchaser....................38
SECTION 3.8 Waiver of Appraisement, Valuation, etc.........................38
SECTION 3.9 Sale a Bar Against Mortgagor...................................38
SECTION 3.10 Secured Obligations to Become Due on Sale......................38
SECTION 3.11 Application of Proceeds of Sale and Other Moneys...............39
SECTION 3.12 Appointment of Receiver........................................40
SECTION 3.13 Possession, Management and Income..............................40
SECTION 3.14 Right of Mortgagee to Perform Mortgagor's
Covenants, etc................................................41
SECTION 3.15 Subrogation....................................................41
SECTION 3.16 Remedies, etc., Cumulative.....................................42
SECTION 3.17 Provisions Subject to Applicable Law...........................42
SECTION 3.18 No Waiver, etc.................................................43
SECTION 3.19 Compromise of Actions, etc.....................................43
ARTICLE 4.
DEFINITIONS
SECTION 4.1 Terms Defined in this Mortgage.................................44
SECTION 4.2 Use of Defined Terms...........................................51
SECTION 4.3 Credit Agreement Definitions...................................52
ARTICLE 5.
MISCELLANEOUS
SECTION 5.1 Further Assurances; Financing Statements.......................52
SECTION 5.1.1 Further Assurances.............................................52
SECTION 5.1.2 Financing Statements...........................................53
SECTION 5.2 Additional Security............................................53
ii
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
SECTION 5.3 Defeasance; Partial Release, etc...............................53
SECTION 5.3.1 Defeasance.....................................................53
SECTION 5.3.2 Partial Release, etc...........................................54
SECTION 5.4 Notices, etc...................................................54
SECTION 5.5 Waivers, Amendments, etc.......................................54
SECTION 5.6 Cross-References...............................................54
SECTION 5.7 Headings.......................................................54
SECTION 5.8 Currency.......................................................54
SECTION 5.9 Governing Law..................................................55
SECTION 5.10 Successors and Assigns, etc....................................55
SECTION 5.11 Waiver of Jury Trial; Submission to Jurisdiction...............55
SECTION 5.12 Severability...................................................56
SECTION 5.13 Loan Document..................................................56
SECTION 5.14 Usury Savings Clause...........................................56
SECTION 5.15 Future Advances................................................57
EXECUTION PAGE ...............................................................58
ACKNOWLEDGMENT................................................................59
Schedule 1 - Legal Description
Schedule 2 - Permitted Encumbrances
iii
<PAGE>
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE
FILING, dated as of June 30, 1997 (this "MORTGAGE"), made by LEINER HEALTH
PRODUCTS INC. ( "LEINER" or the "MORTGAGOR"), a Delaware corporation having an
address of 901 East 233rd Street, Carson, California 90745, to THE BANK OF NOVA
SCOTIA, having an address at One Liberty Plaza, New York, New York 10006, for
itself as a Lender and as collateral agent (the "AGENT") under the Credit
Agreement referred to below (together with its successors and assigns from time
to time acting as agent under such Credit Agreement, the "MORTGAGEE").
W I T N E S S E T H T H A T:
WHEREAS, the Mortgagor is on the date of delivery hereof the owner of fee
title to the parcel of land described in SCHEDULE 1 hereto (the "LAND") and of
the Improvements (such term and other capitalized terms used in this Mortgage
having the respective meanings specified or referred to in ARTICLE IV);
WHEREAS, pursuant to the terms, conditions and provisions of the Credit
Agreement, dated as of June 30, 1997 (as amended, restated, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"), among Leiner
Health Products Group Inc. ("LHPG" or the "U.S. BORROWER" (prior to the
Assumption)),Vita Health Company (1985) Ltd. (the "CANADIAN BORROWER"), as
Canadian borrower (collectively, the "BORROWERS"), the institutions from time to
time a party thereto which extend a Commitment under the U.S. Facility
(collectively, the "U.S. LENDERS"), the various financial institutions from time
to time a party thereto which extend a Commitment under the Canadian Facility
(collectively, the "CANADIAN LENDERS", and together with the U.S. Lenders, the
"LENDERS"), The Bank of Nova Scotia ("SCOTIABANK"), as agent for the U.S.
Lenders under the U.S. Facility (in such capacity, the "U.S. AGENT"), and
Scotiabank, currently acting through its executive offices in Toronto, Ontario,
as agent for the Canadian Lenders under the Canadian Facility (in such capacity,
the "CANADIAN AGENT", and together with the U.S. Agent, collectively, the
"AGENTS"), the Lenders and the Issuer have agreed to make Loans to, and to issue
Letters of Credit for the account of, the Borrowers in the maximum original
principal amount of
2
<PAGE>
TWO HUNDRED TEN MILLION AND 00/100 DOLLARS ($210,000,000.00) (such Loans and
Letters of Credit are hereinafter referred to collectively as the "CREDIT
EXTENSIONS").
WHEREAS, the Credit Extensions consist of:
(i) from the U.S. Lenders, a Term B Loan Commitment and a Term C Loan
Commitment pursuant to which Borrowings of Term Loans, in a maximum
aggregate principal amount not to exceed $45,000,000 (in the case of Term B
Loans) and $40,000,000 (in the case of Term C Loans), will be made to the
U.S. Borrower in a single Borrowing to occur on the date of the initial
Credit Extensions;
(ii) from the U.S. RL Lenders, a U.S. Revolving Loan Commitment (to
include availability for U.S. Revolving Loans, U.S. Swing Line Loans and
U.S. Letters of Credit) pursuant to which Borrowings of U.S. Revolving
Loans and U.S. Swing Line Loans, in a maximum aggregate principal amount
(together with all U.S. Letter of Credit Outstandings) not to exceed the
then existing U.S. Revolving Loan Commitment Amount, will be made to the
U.S. Borrower from time to time on and subsequent to the date of the
initial Credit Extensions but prior to the U.S. Revolving Loan Commitment
Termination Date;
(iii) from the U.S. Issuers (and participated in by the U.S. RL
Lenders), a U.S. Letter of Credit Commitment pursuant to which the U.S.
Issuers will issue U.S. Letters of Credit for the account of the U.S.
Borrower and, subject to Section 2.1.2 of the Credit Agreement, its U.S.
Subsidiaries from time to time on and subsequent to the date of the initial
Credit Extensions but prior to the U.S. Revolving Loan Commitment
Termination Date in a maximum aggregate Stated Amount at any one time
outstanding not to exceed $35,000,000 (PROVIDED that the aggregate
outstanding principal amount of U.S. Revolving Loans, Swing Line Loans and
U.S. Letter of Credit Outstandings at any time shall not exceed the then
existing U.S. Revolving Loan Commitment Amount);
(iv) from the U.S. Swing Line Lender (and participated in by the U.S.
RL Lenders), a U.S. Swing Line Loan Commitment pursuant to which Borrowings
of U.S. Swing Line Loans in an aggregate outstanding principal amount not
to exceed $15,000,000 will be made on and subsequent to the date of the
initial Credit
3
<PAGE>
Extensions but prior to the U.S. Revolving Loan Commitment Termination Date
(PROVIDED, that the aggregate outstanding principal amount of such U.S.
Swing Line Loans, U.S. Revolving Loans and U.S. Letter of Credit
Outstandings at any time shall not exceed the then existing U.S. Revolving
Loan Commitment Amount);
(v) from the Canadian Lenders, a Canadian Revolving Loan Commitment
(to include availability for Canadian Revolving Loans, Canadian Swing Line
Loans and Canadian Letters of Credit) pursuant to which Borrowings of
Canadian Revolving Loans and Canadian Swing Line Loans in a maximum
aggregate principal amount (together with all Canadian Letter of Credit
Outstandings) not to exceed the then existing Canadian Revolving Loan
Commitment Amount, will be made to the Canadian Borrower from time to time
on and subsequent to the date of the initial Credit Extensions but prior to
the Canadian Revolving Loan Commitment Termination Date;
(vi) from the Canadian Issuers (and participated in by the Canadian
Lenders), a Canadian Letter of Credit Commitment pursuant to which the
Canadian Issuers will issue Canadian Letters of Credit for the account of
the Canadian Borrower and, subject to Section 3.1.2 of the Credit
Agreement, the Canadian Borrower's Subsidiaries from time to time on and
subsequent to the date of the initial Credit Extensions but prior to the
Canadian Revolving Loan Commitment Termination Date in a maximum aggregate
Stated Amount at any one time outstanding not to exceed Cdn $13,000,000
(PROVIDED that the aggregate outstanding principal amount of Canadian
Revolving Loans and Canadian Letter of Credit Outstandings at any time
shall not exceed the then existing Canadian Revolving Loan Commitment
Amount); and
(vii) from the Canadian Swing Line Lender (and participated in by the
Canadian Lenders), a Canadian Swing Line Loan Commitment pursuant to which
Borrowings of Canadian Swing Line Loans in an aggregate outstanding
principal amount not to exceed Cdn $1,400,000 will be made on and
subsequent to the date of the initial Credit Extensions but prior to the
Canadian Revolving Loan Commitment Termination Date (PROVIDED that the
aggregate outstanding principal amount of such Canadian Swing Line Loans,
Canadian Revolving Loans and Canadian Letter of Credit Outstandings at any
time shall not exceed the then existing Canadian Revolving Loan Commitment
Amount.
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WHEREAS, as contemplated by the Credit Agreement, immediately following the
making of the initial Credit Extensions, the Mortgagor and LHPG have delivered
the Assumption Agreement, pursuant to which the Mortgagor has assumed (the
"ASSUMPTION") the rights and obligations of LHPG as (and has become) the U.S.
Borrower under the Credit Agreement;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) and the execution and delivery of the
Assumption Agreement (as defined in the Credit Agreement) under the Credit
Agreement, the Mortgagor is required to execute and deliver this Mortgage;
WHEREAS, (i) as a material inducement for the Lenders to enter into the Credit
Agreement and the other Loan Documents, (ii) to secure the payment and
performance of the Mortgagor's obligations under the Credit Agreement and the
other Loan Documents; and (iii) to secure the payment and performance of the
Secured Obligations, the Mortgagor is required to execute and deliver this
Mortgage to the Mortgagee; and
WHEREAS, the Mortgagor has duly authorized the execution, delivery and
performance of this Mortgage.
G R A N T:
NOW, THEREFORE, for and in consideration of the premises, and of the mutual
covenants herein contained, and in order to induce the Lenders to make the
Credit Extensions pursuant to the Credit Agreement, and in order to secure the
full, timely and proper payment and performance of and compliance with each and
every one of the Secured Obligations (as hereinafter defined), the Mortgagor
hereby irrevocably grants, bargains, sells, mortgages, warrants, aliens,
demises, releases, hypothecates, pledges, assigns, transfers and conveys to the
Mortgagee and its successors and assigns, forever, all of the following (the
"COLLATERAL"):
(a) REAL ESTATE. All of the Land and all additional lands and
estates therein now owned or hereafter acquired by the Mortgagor for use or
development with the Land or any portion thereof, together with all and
singular the tenements, rights, easements, hereditaments, rights of way,
privileges, liberties, appendages and appurtenances now or hereafter
belonging or in any way pertaining to the
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Land and such additional lands and estates therein (including, without
limitation, all rights relating to storm and sanitary sewer, water, gas,
electric, railway and telephone services); all development rights, air
rights, riparian rights, water, water rights, water stock, all rights in,
to and with respect to any and all oil, gas, coal, minerals and other
substances of any kind or character underlying or relating to the Land and
such additional lands and estates therein and any interest therein; all
estate, claim, demand, right, title or interest of the Mortgagor in and to
any street, road, highway or alley, vacated or other, adjoining the Land or
any part thereof and such additional lands and estates therein; all strips
and gores belonging, adjacent or pertaining to the Land or such additional
lands and estates; and any after-acquired title to any of the foregoing
(herein collectively referred to as the "REAL ESTATE");
(b) IMPROVEMENTS. All buildings, structures and other improvements
and any additions and alterations thereto or replacements thereof, now or
hereafter built, constructed or located upon the Real Estate; and, to the
extent that any of the following items of property constitutes fixtures
under applicable laws, all furnishings, fixtures, fittings, appliances,
apparatus, equipment, machinery, building and construction materials and
other articles of every kind and nature whatsoever and all replacements
thereof, now or hereafter affixed or attached to, placed upon or used in
any way in connection with the complete and comfortable use, enjoyment,
occupation, operation, development and/or maintenance of the Real Estate or
such buildings, structures and other improvements, including, but not
limited to, partitions, furnaces, boilers, oil burners, radiators and
piping, plumbing and bathroom fixtures, refrigeration, heating,
ventilating, air conditioning and sprinkler systems, other fire prevention
and extinguishing apparatus and materials, vacuum cleaning systems, gas and
electric fixtures, incinerators, compactors, elevators, engines, motors,
generators and all other articles of property which are considered fixtures
under applicable law (such buildings, structures and other improvements and
such other property are herein collectively referred to as the
"IMPROVEMENTS"; the Real Estate and the Improvements are herein
collectively referred to as the "PROPERTY");
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(c) GOODS. All building materials, goods, construction materials,
appliances (including, without limitation, stoves, ranges, ovens,
disposals, refrigerators, water fountains and coolers, fans, heaters,
dishwashers, clothes washers and dryers, water heaters, hood and fan
combinations, kitchen equipment, laundry equipment, kitchen cabinets and
other similar equipment), stocks, beds, mattresses, bedding and linens,
supplies, blinds, window shades, drapes, carpets, floor coverings,
manufacturing equipment and machinery, office equipment, growing plants and
shrubberies, control devices, equipment (including window cleaning,
building cleaning, swimming pool, recreational, monitoring, garbage, pest
control and other equipment), motor vehicles, tools, furnishings,
furniture, lighting, non-structural additions to the Real Estate and
Improvements and all other tangible property of any kind or character,
together with all replacements thereof, now or hereafter located on or in
or used or useful in connection with the complete and comfortable use,
enjoyment, occupation, operation, development and/or maintenance of the
Property, regardless of whether or not located on or in the Property or
located elsewhere for purposes of storage, fabrication or otherwise (herein
collectively referred to as the "GOODS");
(d) INTANGIBLES. All goodwill, trademarks, trade names, option
rights, purchase contracts, real and personal property tax refunds, books
and records and general intangibles of the Mortgagor relating to the
Property, and any other intangible property of the Mortgagor relating to
the Property (herein collectively referred to as the "INTANGIBLES");
(e) LEASES. All rights of the Mortgagor in, to and under all leases,
licenses, occupancy agreements, concessions and other arrangements, oral or
written, now existing or hereafter entered into, whereby any Person agrees
to pay money or any other consideration for the use, possession or
occupancy of, or any estate in, the Property or any portion thereof or
interest therein (herein collectively referred to as the "LEASES"), and the
right, subject to applicable law, upon the occurrence of any Event of
Default hereunder, to receive and collect the Rents (as hereinafter
defined) paid or payable thereunder;
(f) PLANS. All rights of the Mortgagor in and to all plans and
specifications, designs, drawings and
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other information, materials and matters heretofore or hereafter prepared
relating to the Improvements or any construction on the Real Estate (herein
collectively referred to as the "PLANS");
(g) PERMITS. All rights of the Mortgagor, to the extent assignable,
in, to and under all permits, franchises, licenses, approvals and other
authorizations respecting the use, occupation and operation of the Property
and every part thereof and respecting any business or other activity
conducted on or from the Property, and any product or proceed thereof or
therefrom, including, without limitation, all building permits,
certificates of occupancy and other licenses, permits and approvals issued
by governmental authorities having jurisdiction (herein collectively
referred to as the "PERMITS");
(h) CONTRACTS. All right, title and interest of the Mortgagor in and
to all agreements, contracts, certificates, instruments, warranties,
appraisals, engineering, environmental, soils, insurance and other reports
and studies, books, records, correspondence, files and advertising
materials, and other documents, now or hereafter obtained or entered into,
as the case may be, pertaining to the construction, use, occupancy,
possession, operation, management, leasing, maintenance and/or ownership of
the Property and all right, title and interest of the Mortgagor therein
(herein collectively referred to as the "CONTRACTS");
(i) LEASES OF FURNITURE, FURNISHINGS AND EQUIPMENT. All right, title
and interest of the Mortgagor as lessee in, to and under any leases of
furniture, furnishings, equipment and any other Goods now or hereafter
installed in or at any time used in connection with the Property;
(j) RENTS. All rents, issues, profits, royalties, avails, income and
other benefits derived or owned, directly or indirectly, by the Mortgagor
from the Property, including, without limitation, all rents and other
consideration payable by tenants, claims against guarantors, and any cash
or other securities deposited to secure performance by tenants, under the
Leases (herein collectively referred to as "RENTS");
(k) PROCEEDS. All proceeds of the conversion, voluntary or
involuntary of any of the foregoing into cash or liquidated claims,
including, without
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limitation, proceeds of insurance and condemnation awards (herein
collectively referred to as "PROCEEDS"); and
(l) OTHER PROPERTY. All other property and rights of the Mortgagor
of every kind and character relating to the Property, and all proceeds and
products of any of the foregoing;
AND, without limiting any of the other provisions of this Mortgage, the
Mortgagor expressly grants to the Mortgagee, as secured party, a security
interest in all of those portions of the Collateral which are or may be subject
to the State Uniform Commercial Code provisions applicable to secured
transactions;
TO HAVE AND TO HOLD the Collateral unto the Mortgagee, its successors and
assigns, forever.
FURTHER to secure the full, timely and proper payment and performance of
the Secured Obligations, the Mortgagor hereby covenants and agrees with and
warrants to the Mortgagee as follows:
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xx ARTICLE 1.
COVENANTS AND AGREEMENTS OF THE MORTGAGOR
SECTION 1.1 PAYMENT OF SECURED OBLIGATIONS. (i) The Mortgagor agrees
that:
(a) it will duly and punctually pay and perform or cause to be paid
and performed each of the Obligations at the time and in accordance with
the terms of the Loan Documents, and
(b) when and as due and payable from time to time in accordance with
the terms hereof or of any other Loan Documents, pay and perform, or cause
to be paid and performed, all other Secured Obligations.
SECTION 1.2 TITLE TO COLLATERAL, ETC. The Mortgagor represents and
warrants to and covenants with the Mortgagee that:
(a) as of the date hereof and at all times hereafter while this
Mortgage is outstanding, the Mortgagor (1) is and shall be the absolute
owner of the legal and beneficial title to the Property and to all other
property included in the Collateral, and (2) has and shall have good and
marketable title in fee simple absolute to the Property, subject in each
case only to this Mortgage, the liens expressly permitted pursuant to the
terms of the Credit Agreement and the encumbrances set forth in SCHEDULE 2
hereto (collectively, the "PERMITTED ENCUMBRANCES");
(b) the Mortgagor has good and lawful right, power and authority to
execute this Mortgage and to convey, transfer, assign, mortgage and grant a
security interest in the Collateral, all as provided herein;
(c) this Mortgage has been duly executed, acknowledged and delivered
on behalf of the Mortgagor, all consents and other actions required to be
taken by the officers, directors, shareholders and partners, as the case
may be, of the Mortgagor have been duly and fully given and performed and
this Mortgage constitutes the legal, valid and binding obligation of the
Mortgagor, enforceable against the Mortgagor in accordance with its terms;
and
(d) the Mortgagor, at its expense, will warrant and defend to the
Mortgagee and any purchaser under the
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power of sale herein or at any foreclosure sale such title to the
Collateral and the first mortgage lien and first priority perfected
security interest of this Mortgage thereon and therein against all claims
and demands and will maintain, preserve and protect such lien and security
interest and will keep this Mortgage a valid, direct first mortgage lien of
record on and a first priority perfected security interest in the
Collateral, subject only to the Permitted Encumbrances.
SECTION 1.3 TITLE INSURANCE.
SECTION 1.3.1 TITLE INSURANCE POLICY. Concurrently with the execution and
delivery of this Mortgage, the Mortgagor, at its expense, has obtained and
delivered to the Mortgagee a loan policy or policies of title insurance in an
amount, and in form and substance, satisfactory to the Mortgagee naming the
Mortgagee as the insured, insuring the title to and the first mortgage lien of
this Mortgage on the Property, with endorsements requested by the Mortgagee.
The Mortgagor has duly paid in full all premiums and other charges due in
connection with the issuance of such policy or policies of title insurance.
SECTION 1.3.2 TITLE INSURANCE PROCEEDS. All proceeds received by and
payable to the Mortgagee for any loss under the loan policy or policies of title
insurance delivered to the Mortgagee pursuant to SECTION 1.3.1, or under any
policy or policies of title insurance delivered to the Mortgagee in substitution
therefor or replacement thereof, shall be the property of the Mortgagee and
shall be applied by the Mortgagee in accordance with the provisions of SECTION
2.3.
SECTION 1.4 RECORDATION. The Mortgagor, at its expense, will at all times
cause this Mortgage and any instruments amendatory hereof or supplemental hereto
and any instruments of assignment hereof or thereof (and any appropriate
financing statements or other instruments and continuations thereof), and each
other instrument delivered in connection with the Credit Agreement or any other
Loan Document and intended thereunder to be recorded, registered and filed, to
be kept recorded, registered and filed, in such manner and in such places, and
will pay all such recording, registration, filing fees, taxes and other charges,
and will comply with all such statutes and regulations as may be required by law
in order to establish, preserve, perfect and protect the lien and security
interest of this Mortgage as a valid, direct first mortgage lien and first
priority perfected security interest in the Collateral, subject only to the
Permitted Encumbrances. The
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Mortgagor will pay or cause to be paid, and will indemnify the Mortgagee in
respect of, all taxes (including interest and penalties) at any time payable in
connection with the filing and recording of this Mortgage and any and all
supplements and amendments hereto.
SECTION 1.5 PAYMENT OF IMPOSITIONS, ETC. Subject to SECTION 1.8 (relating
to permitted contests), the Mortgagor will pay or cause to be paid at least ten
(10) days before the same would become delinquent and before any fine, penalty,
interest or cost may be added for non-payment, all taxes, assessments, water and
sewer rates, charges, license fees, inspection fees and other governmental
levies or payments, of every kind and nature whatsoever, general and special,
ordinary and extraordinary, unforeseen as well as foreseen, which at any time
may be assessed, levied, confirmed, imposed or which may become a lien upon the
Collateral, or any portion thereof, or which are payable with respect thereto,
or upon the rents, issues, income or profits thereof, or on the occupancy,
operation, use, possession or activities thereof, whether any or all of the same
be levied directly or indirectly or as excise taxes or as income taxes, and all
taxes, assessments or charges which may be levied on the Secured Obligations, or
the interest thereon (collectively, the "IMPOSITIONS"). The Mortgagor will
deliver to the Mortgagee, upon request, copies of official receipts or other
satisfactory proof evidencing such payments.
SECTION 1.6 INSURANCE AND LEGAL REQUIREMENTS. Subject to SECTION 1.8
(relating to permitted contests), the Mortgagor, at its expense, will comply in
all material respects, or cause compliance in all material respects with
(a) all provisions of any insurance policy covering or applicable to
the Collateral or any part thereof, all requirements of the issuer of any
such policy, and all orders, rules, regulations and other requirements of
the National Board of Fire Underwriters (or any other body exercising
similar functions) applicable to or affecting the Collateral or any part
thereof or any use or condition of the Collateral or any part thereof
(collectively, the "INSURANCE REQUIREMENTS"); and
(b) all laws, including Environmental, Health or Safety Requirements
of Law, statutes, codes, acts, ordinances, orders, judgments, decrees,
injunctions, rules, regulations, permits, licenses, authorizations,
directions and requirements of all governments,
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departments, commissions, boards, courts, authorities, agencies, officials
and officers, foreseen or unforeseen, ordinary or extraordinary, which now
or at any time hereafter may be applicable to the Collateral or any part
thereof, or any of the adjoining sidewalks, curbs, vaults and vault space,
if any, streets or ways, or any use or condition of the Collateral or any
part thereof (collectively, the "LEGAL REQUIREMENTS");
whether or not compliance therewith shall require structural changes in or
interference with the use and enjoyment of the Collateral or any part thereof.
SECTION 1.7 SECURITY INTERESTS, ETC. The Mortgagor will not directly or
indirectly create or permit or suffer to be created or to remain, and will
promptly discharge or cause to be discharged, any deed of trust, mortgage,
encumbrance or charge on, pledge of, security interest in or conditional sale or
other title retention agreement with respect to or any other lien on or in the
Collateral or any part thereof or the interest of the Mortgagor or the Mortgagee
therein, or any Proceeds thereof or Rents or other sums arising therefrom, other
than (a) Permitted Encumbrances, and (b) liens of mechanics, materialmen,
suppliers or vendors or rights thereto incurred in the ordinary course of the
business of the Mortgagor for sums not yet due or any such liens or rights
thereto which are at the time being contested as permitted by SECTION 1.8. The
Mortgagor will not postpone the payment of any sums for which liens of
mechanics, materialmen, suppliers or vendors or rights thereto have been
incurred (unless such liens or rights thereto are at the time being contested as
permitted by SECTION 1.8), or enter into any contract under which payment of
such sums is postponable (unless such contract expressly provides for the legal,
binding and effective waiver of any such liens or rights thereto), in either
case, for more than 60 days after the completion of the action giving rise to
such liens or rights thereto.
SECTION 1.8 PERMITTED CONTESTS. After prior written notice to the
Mortgagee, the Mortgagor at its expense may contest, or cause to be contested,
by appropriate legal proceedings conducted in good faith and with due diligence,
the amount or validity or application, in whole or in part, of any Imposition,
Legal Requirement or Insurance Requirement or lien of a mechanic, materialman,
supplier or vendor, PROVIDED THAT, (a) in the case of an unpaid Imposition,
lien, encumbrance or charge, such proceedings shall suspend the collection
thereof from the Mortgagor, the Mortgagee, and the Collateral (including any
rent or other
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income therefrom) and shall not interfere with the payment of any such rent or
income, (b) neither the Collateral nor any rent or other income therefrom nor
any part thereof or interest therein would be in any danger of being sold,
forfeited, lost, impaired or interfered with, (c) in the case of a Legal
Requirement, neither the Mortgagor nor the Mortgagee would be in danger of any
material civil or criminal liability for failure to comply therewith, (d) the
Mortgagor shall have furnished such security, if any, as may be required in the
proceedings or as may be reasonably requested by the Mortgagee, (e) the
non-payment of the whole or any part of any Imposition will not result in the
delivery of a tax deed to the Collateral or any part thereof because of such
non-payment, (f) the payment of any sums required to be paid with respect to any
of the Notes or under this Mortgage (other than any unpaid Imposition, lien,
encumbrance or charge at the time being contested in accordance with this
SECTION 1.8) shall not be interfered with or otherwise affected, (g) in the case
of any Insurance Requirement, the failure of the Mortgagor to comply therewith
shall not affect the validity of any insurance required to be maintained by the
Mortgagor under SECTION 2.1, and (h) that adequate reserves, determined in
accordance with GAAP, shall have been set aside on the Mortgagor's books.
SECTION 1.9 LEASES. The Mortgagor represents and warrants to the
Mortgagee that, as of the date hereof, there are no written or oral leases or
other agreements of any kind or nature relating to the occupancy of any portion
of the Property by any Person other than the Mortgagor. The Mortgagor will not
enter into any such written or oral lease or other agreement with respect to any
portion of the Property without first obtaining the written consent of the
Mortgagee.
SECTION 1.10 COMPLIANCE WITH INSTRUMENTS. The Mortgagor at its expense
will promptly comply with all rights of way or use, privileges, franchises,
servitudes, licenses, easements, tenements, hereditaments and appurtenances
forming a part of the Property and all instruments creating or evidencing the
same, in each case, to the extent compliance therewith is required of the
Mortgagor under the terms thereof. The Mortgagor will not take any action which
may result in a forfeiture or termination of the rights afforded to the
Mortgagor under any such instruments and will not, without the prior written
consent of the Mortgagee, amend any of such instruments.
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SECTION 1.11 MAINTENANCE AND REPAIR, ETC. Subject to the provisions of
SECTION 1.12, the Mortgagor will keep or cause to be kept all presently and
subsequently erected or acquired Improvements and the sidewalks, curbs, vaults
and vault space, if any, located on or adjoining the same, and the streets and
the ways adjoining the same, in good and substantial order and repair and in
such a fashion that neither the value nor utility of the Collateral will not be
diminished, and, at its sole cost and expense, will promptly make or cause to be
made all necessary and appropriate repairs, replacements and renewals thereof,
whether interior or exterior, structural or nonstructural, ordinary or
extraordinary, foreseen or unforeseen, so that its business carried on in
connection therewith may be properly conducted at all times. All repairs,
replacements and renewals shall be at least equal in quality, use and value to
the original Improvements. The Mortgagor at its expense will do or cause to be
done all shoring of foundations and walls of any building or other Improvements
on the Property and (to the extent permitted by law) of the ground adjacent
thereto, and every other act necessary or appropriate for the preservation and
safety of the Property by reason of or in connection with any excavation or
other building operation upon the Property and upon any adjoining property,
whether or not the Mortgagor shall, by any Legal Requirement, be required to
take such action or be liable for failure to do so.
SECTION 1.12 ALTERATIONS, ADDITIONS, ETC. So long as no Event of Default
shall have occurred and be continuing, the Mortgagor shall have the right at any
time and from time to time to make or cause to be made reasonable alterations of
and additions to the Property or any part thereof, PROVIDED THAT any alteration
or addition: (a) shall not change the general character or the use of the
Property or reduce the fair market value thereof below its value immediately
before such alteration or addition, or impair the usefulness of the Property;
(b) is effected with due diligence, in a good and workmanlike manner and in
compliance with all Legal Requirements and Insurance Requirements; (c) is
promptly and fully paid for, or caused to be paid for, by the Mortgagor; (d) is
made, in case the estimated cost of such alteration or addition exceeds U.S.
$250,000, (i) only after the Mortgagee shall have consented thereto and shall
have reviewed and approved in writing the plans and specifications therefor,
(ii) under the supervision of a qualified architect or engineer or another
professional approved by the Mortgagee and (iii) only after the Mortgagor shall
have furnished to the Mortgagee a
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performance bond or other security reasonably satisfactory to the Mortgagee.
SECTION 1.13 ACQUIRED PROPERTY SUBJECT TO LIEN. All property at any time
acquired by the Mortgagor and provided or required by this Mortgage to be or
become subject to the lien and security interest hereof, whether such property
is acquired by exchange, purchase, construction or otherwise, shall forthwith
become subject to the lien and security interest of this Mortgage without
further action on the part of the Mortgagor or the Mortgagee. The Mortgagor, at
its expense, will execute and deliver to the Mortgagee (and will record and file
as provided in SECTION 1.4) an instrument supplemental to this Mortgage
satisfactory in substance and form to the Mortgagee, whenever such an instrument
is necessary under applicable law to subject to the lien and security interest
of this Mortgage all right, title and interest of the Mortgagor in and to all
property provided or required by this Mortgage to be subject to the lien and
security interest hereof.
SECTION 1.14 ASSIGNMENT OF RENTS, PROCEEDS, ETC. The assignment, grant
and conveyance of the Leases, Rents, Proceeds and other rents, income, proceeds
and benefits of the Collateral contained in the Granting Clause of this Mortgage
shall constitute an absolute, present and irrevocable assignment, grant and
conveyance, PROVIDED, HOWEVER, that permission is hereby given to the Mortgagor,
so long as no Event of Default has occurred hereunder, to collect, receive and
apply such Rents, Proceeds and other rents, income, proceeds and benefits as
they become due and payable, but not in advance thereof, and in accordance with
all of the other terms, conditions and provisions hereof, of the Loan Documents,
and of the Leases, contracts, agreements and other instruments with respect to
which such payments are made or such other benefits are conferred. Upon the
occurrence of an Event of Default, such permission shall terminate immediately
and automatically, without notice to the Mortgagor or any other Person except as
required by law, and shall not be reinstated upon a cure of such Event of
Default without the express written consent of the Mortgagee. Such assignment
shall be fully effective without any further action on the part of the Mortgagor
or the Mortgagee and the Mortgagee shall be entitled, at its option, upon the
occurrence of an Event of Default hereunder, to collect, receive and apply all
Rents, Proceeds and all other rents, income, proceeds and benefits from the
Collateral, including all right, title and interest of the Mortgagor in any
escrowed sums or deposits or any portion thereof or interest therein, whether or
not the Mortgagee
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takes possession of the Collateral or any part thereof. The Mortgagor further
grants to the Mortgagee the right, at the Mortgagee's option, upon the
occurrence of an Event of Default hereunder, to:
(a) enter upon and take possession of the Property for the purpose of
collecting Rents, Proceeds and said rents, income, proceeds and other
benefits;
(b) dispossess by the customary summary proceedings any tenant,
purchaser or other Person defaulting in the payment of any amount when and
as due and payable, or in the performance of any other obligation, under
any Lease, contract or other instrument to which said Rents, Proceeds or
other rents, income, proceeds or benefits relate;
(c) let or convey the Collateral or any portion thereof or any interest
therein; and
(d) apply Rents, Proceeds and such rents, income, proceeds and other
benefits, after the payment of all necessary fees, charges and expenses, on
account of the Secured Obligations in accordance with Section 3.11.
SECTION 1.15 NO CLAIMS AGAINST THE MORTGAGEE. Nothing contained in this
Mortgage shall constitute any consent or request by the Mortgagee, express or
implied, for the performance of any labor or the furnishing of any materials or
other property in respect of the Property or any part thereof, or be construed
to permit the making of any claim against the Mortgagee in respect of labor or
services or the furnishing of any materials or other property or any claim that
any lien based on the performance of such labor or the furnishing of any such
materials or other property is prior to the lien and security interest of this
Mortgage. ALL CONTRACTORS, SUBCONTRACTORS, VENDORS AND OTHER PERSONS DEALING
WITH THE PROPERTY, OR WITH ANY PERSONS INTERESTED THEREIN, ARE HEREBY REQUIRED
TO TAKE NOTICE OF THE PROVISIONS OF THIS SECTION.
SECTION 1.16 INDEMNIFICATION. The Mortgagor will protect, indemnify, save
harmless and defend the Mortgagee, the Lenders, and each of their respective
officers, directors, shareholders, employees, representatives and agents
(collectively, the "INDEMNIFIED PARTIES" and individually, an "INDEMNIFIED
PARTY"), from and against any and all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses)
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imposed upon or incurred by or asserted against any Indemnified Party by
reason of (a) ownership of an interest in this Mortgage, any other Loan
Document or the Property, (b) any accident, injury to or death of persons or
loss of or damage to or loss of the use of property occurring on or about the
Property or any part thereof or the adjoining sidewalks, curbs, vaults and
vault spaces, if any, streets, alleys or ways, (c) any use, non-use or
condition of the Property or any part thereof or the adjoining sidewalks,
curbs, vaults and vault spaces, if any, streets, alleys or ways, (d) any
failure on the part of the Mortgagor to perform or comply with any of the
terms of this Mortgage, (e) performance of any labor or services or the
furnishing of any materials or other property in respect of the Collateral or
any part thereof made or suffered to be made by or on behalf of the
Mortgagor, (f) any negligence or tortious act on the part of the Mortgagor or
any of its agents, contractors, lessees, licensees or invitees, (g) any work
in connection with any alterations, changes, new construction or demolition
of or additions to the Property, or (h) (i) any Hazardous Material (as such
term is defined in the Credit Agreement) on, in, under or affecting all or
any portion of the Property, the groundwater, or any surrounding areas, (ii)
any misrepresentation, inaccuracy or breach of any warranty, covenant or
agreement contained or referred to in SECTIONS 1.20 and 1.21, (iii) any
violation or claim of violation by the Mortgagor of any Environmental, Health
or Safety Requirements of Law, or (iv) the imposition of any lien for damages
caused by or the recovery of any costs for the cleanup, release or threatened
release of any Hazardous Material. If any action or proceeding be commenced,
to which action or proceeding any Indemnified Party is made a party by reason
of the execution of this Mortgage or any other Loan Document, or in which it
becomes necessary to defend or uphold the lien of this Mortgage, all sums
paid by the Indemnified Parties, for the expense of any litigation to
prosecute or defend the rights and lien created hereby or otherwise, shall be
paid by the Mortgagor to such Indemnified Parties, as the case may be, as
hereinafter provided. The Mortgagor will pay and save the Indemnified
Parties harmless against any and all liability with respect to any intangible
personal property tax or similar imposition of the State or any subdivision
or authority thereof now or hereafter in effect, to the extent that the same
may be payable by the Indemnified Parties in respect of this Mortgage, any
Loan Document or any Secured Obligation. All amounts payable to the
Indemnified Parties under this SECTION 1.16. shall be deemed indebtedness
secured by this Mortgage and any such amounts which are not paid within ten
(10) days after written demand therefor by
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any Indemnified Party shall bear interest at the rate provided for in Section
5.2.2. of the Credit Agreement from the date of such demand. In case any
action, suit or proceeding is brought against any Indemnified Party by reason of
any such occurrence, the Mortgagor, upon request of such Indemnified Party,
will, at the Mortgagor's expense, resist and defend such action, suit or
proceeding or cause the same to be resisted or defended by counsel designated by
the Mortgagor and approved by such Indemnified Party. The obligations of the
Mortgagor under this SECTION 1.16 shall survive any discharge or reconveyance of
this Mortgage and payment in full of the Secured Obligations.
SECTION 1.17 NO CREDIT FOR PAYMENT OF TAXES. The Mortgagor shall not be
entitled to any credit against the Secured Obligations by reason of the payment
of any tax on the Property or any part thereof or by reason of the payment of
any other Imposition, and shall not apply for or claim any deduction from the
taxable value of the Property or any part thereof by reason of this Mortgage.
SECTION 1.18 OFFERING OF THE NOTES; APPLICATION OF PROCEEDS OF LOANS.
Neither the Mortgagor nor any Person acting on behalf of the Mortgagor has
directly or indirectly offered the Notes or any portion thereof or any similar
security to, or solicited any offer to buy any of the same from, any Person
other than the Mortgagee. Neither the Mortgagor nor any Person acting on behalf
of the Mortgagor has taken or will take any action which would subject the
issuance of the Notes to the provisions of section 5 of the Securities Act of
1933, as amended. The Mortgagor (a) will not use or permit to be used any
proceeds of the Loans, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of "purchasing" or "carrying" any "margin
stock" within the meaning of Regulation U of the Federal Reserve Board, as
amended from time to time, and (b) has or will apply all of the proceeds of the
Loans that are paid to it by the Mortgagee to the purposes permitted by the
Credit Agreement.
SECTION 1.19 NO TRANSFER OF THE PROPERTY. Except as set forth in the
Credit Agreement, the Mortgagor shall not, without the prior written consent of
the Mortgagee, which consent may be granted or withheld in the sole and absolute
discretion of the Mortgagee (i) sell, convey, assign or otherwise transfer the
Property or any portion of the Mortgagor's interest therein or (ii) further
encumber the Property or permit the Property to become encumbered by any lien,
claim, security interest or other indebtedness of any kind or nature other than
the Permitted Encumbrances.
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SECTION 1.20 SECURITY AGREEMENT. With respect to the items of personal
property and fixtures referred to and described in the Granting Clause of this
Mortgage and included as part of the Collateral, this Mortgage is hereby made
and declared to be a security agreement encumbering each and every item of
personal property and fixtures now or hereafter owned by Mortgagor and included
herein as a part of the Collateral, in compliance with the provisions of the
Uniform Commercial Code as enacted in the State. In this respect, Mortgagor, as
"Debtor", expressly grants to Mortgagee, as "Secured Party", a security interest
in and to all of the property now or hereafter owned by Mortgagor which
constitutes the personal property and fixtures hereinabove referred to and
described in this Mortgage, including all extensions, accessions, additions,
improvements, betterments, renewals, replacements and substitutions thereof or
thereto, and all proceeds from the sale or other disposition thereof. Mortgagor
agrees that Mortgagee may file this Mortgage, or a reproduction thereof, in the
real estate records or other appropriate index, as, and this Mortgage shall be
deemed to be, a financing statement filed as a fixture filing in accordance with
the Uniform Commercial Code as enacted in the State. Any reproduction of this
Mortgage or of any other security agreement or financing statement shall be
sufficient as a financing statement. In addition, Mortgagor agrees to execute
and deliver to Mortgagee, upon Mortgagee's request, any other security agreement
and financing statements, as well as extensions, renewals, and amendments
thereof, and reproductions of this Mortgage, in such form as Mortgagee may
require to perfect a security interest with respect to said items. Mortgagor
shall pay all costs of filing such financing statements and any extensions,
renewals, amendments and releases thereof, and shall pay all reasonable costs
and expenses of any record searches for financing statements Mortgagee may
reasonably require. Without the prior written consent of Mortgagee, Mortgagor
shall not create or suffer to be created pursuant to the Uniform Commercial Code
any other security interest in the above-described personal property and
fixtures, including any replacements and additions thereto. Upon the occurrence
of an Event of Default under this Mortgage, or any other violation of the
covenants, terms and conditions of the security agreement contained herein, the
Mortgagee shall have and shall be entitled to exercise any and all of the rights
and remedies (i) as prescribed in this Mortgage, or (ii) as prescribed by
general law, or (iii) as prescribed by the specific statutory provisions now or
hereafter enacted and specified in said Uniform Commercial Code, all at
Mortgagee's sole election. Mortgagor and Mortgagee agree
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that the filing of any financing statements in the records normally having to do
with personal property shall not in any way affect the agreement of Mortgagor
and Mortgagee that everything located in, on or about, or used or intended to be
used with or in connection with the use, operation or enjoyment of, the
Collateral, which is described or reflected as a fixture in this Mortgage, is,
and at all times and for all purposes and in all proceedings, both legal and
equitable, shall be, regarded as part of the Real Estate conveyed hereby.
Mortgagor warrants that Mortgagor's name, identity and address are as set forth
herein. The mailing address of the Mortgagee from which information may be
obtained concerning the security interest created herein is also set forth
herein. This information hereof is provided in order that this Mortgage shall
comply with the requirements of the Uniform Commercial Code as enacted in the
State for instruments to be filed as financing statements. In accordance with
the Uniform Commercial Code as enacted in the State, this Mortgage shall remain
effective as a fixture filing until this Mortgage is released or satisfied of
record or its effectiveness otherwise terminates as to the Collateral.
SECTION 1.21 REPRESENTATIONS AND WARRANTIES. In order to induce the
Mortgagee to enter into this Mortgage, the Credit Agreement and the other Loan
Documents, the Mortgagor agrees that all of the representations and warranties
set forth in the Credit Agreement are incorporated into this Mortgage by
reference as if fully set forth herein.
SECTION 1.22 MORTGAGOR'S COVENANTS. In order to induce the Mortgagee to
enter into this Mortgage, the Credit Agreement and the other Loan Documents, the
Mortgagor agrees that all of the covenants set forth in the Credit Agreement are
incorporated into this Mortgage by reference as if fully set forth herein.
ARTICLE 2.
INSURANCE; DAMAGE, DESTRUCTION OR TAKING, ETC.
SECTION 2.1 INSURANCE.
SECTION 2.1.1. RISKS TO BE INSURED. The Mortgagor will, at its expense,
maintain or cause to be maintained by insurance carriers that meet the standards
set forth below: (a) insurance with respect to the Improvements against loss or
damage by fire, lightning and such other risks as are included in standard
"all-risk" policies, in amounts
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sufficient to prevent the Mortgagor and the Mortgagee from becoming a co-insurer
of any partial loss under the applicable policies, but in any event in amounts
not less than the then full insurable value (actual replacement value) of the
Improvements, as determined by the Mortgagor in accordance with generally
accepted insurance practice and reasonably approved by the Mortgagee or, at the
request of the Mortgagee, as determined at the Mortgagor's expense by the
insurer or insurers or by an expert reasonably approved by the Mortgagee, (b)
comprehensive public liability, including bodily injury and product liability
and property damage insurance, with personal injury endorsements, applicable to
the Property in such amounts as are usually carried by Persons of comparable
size engaged in the same or a similar business and similarly situated in the
same general locality, but in any event with a combined single limit of not less
than Twenty Million Dollars ($20,000,000) per occurrence, (c) explosion
insurance in respect of any steam and pressure boilers and similar apparatus
located in the Property in such amounts as are usually carried by Persons of
comparable size engaged in the same or a similar business and similarly situated
in the same general locality, but in any event in an amount not less than Twenty
Million Dollars ($20,000,000), (d) business interruption insurance (including
added expense coverage) against all insurable perils for a period of not fewer
than twelve (12) months (subject to a reasonable aggregate deductible not
exceeding five (5) days per annum), and (e) worker's compensation insurance to
the full extent required by applicable law for all employees of the Mortgagor
engaged in any work on or about the Property and employer's liability insurance
with a limit of not less than Ten Million Dollars ($10,000,000) for each
occurrence.
All such insurance shall be provided (i) by insurers authorized by Lloyds
of London to underwrite such risks, (ii) by insurers having an A.M. Best
policyholders rating of not less than A-(except with respect to insurers
providing workers compensation insurance, in which case such insurers shall have
an A.M. Best policyholders rating of not less than B+) or (iii) by such other
insurers as the Mortgagee may approve in writing; PROVIDED, HOWEVER, that if the
rating of any of the insurers providing insurance hereunder is downgraded, the
Mortgagor shall only be required to obtain replacement insurance with an insurer
satisfying the requirements hereof at the stated expiration of the insurance
policy maintained with the insurer whose rating was so downgraded.
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SECTION 2.1.2. POLICY PROVISIONS. All insurance maintained by the
Mortgagor pursuant to SECTION 2.1.1 shall (a) (except for worker's compensation
insurance) name the Mortgagor as the insured with the Mortgagee named as
mortgagee and loss payee, (b) (except for worker's compensation and public
liability insurance) provide that the proceeds for any losses shall be adjusted
by the Mortgagor subject to the reasonable approval of the Mortgagee in the
event the proceeds shall exceed Two Hundred Fifty Thousand Dollars ($250,000),
and shall be payable to the Mortgagee, to be held and applied as provided in
SECTION 2.3, (c) include effective waivers by the insurer of all rights of
subrogation against any named insured, the indebtedness secured by this Mortgage
and the Property and all claims for insurance premiums against the Mortgagee,
(d) provide that any losses shall be payable notwithstanding (i) any act,
failure to act or negligence of or violation of warranties, declarations or
conditions contained in such policy by any named insured, (ii) the occupation or
use of the Property for purposes more hazardous than permitted by the terms
thereof, (iii) any foreclosure or other action or proceeding taken by the
Mortgagee pursuant to any provision of this Mortgage, or (iv) any change in
title or ownership of the Property, (e) provide that no cancellation, reduction
in amount or material change in coverage thereof or any portion thereof shall be
effective until at least ten (10) days after receipt by the Mortgagee of written
notice thereof, (f) provide that any notice under such policies shall be
simultaneously delivered to the Mortgagee, and (g) be reasonably satisfactory in
all other material respects to the Mortgagee. Any insurance maintained pursuant
to this SECTION 2.1 may be evidenced by blanket insurance policies covering the
Property and other properties or assets of the Mortgagor, and shall in all other
respects comply with the requirements of this SECTION 2.1.
SECTION 2.1.3. DELIVERY OF POLICIES, ETC. The Mortgagor will deliver to
the Mortgagee, promptly upon request, (a) certified copies of all policies
evidencing all insurance required to be maintained under SECTION 2.1.1 (or, in
the case of blanket policies, certificates thereof by the insurers together with
a copy of each blanket policy), and (b) evidence, in the form of receipted
bills, as to the payment of all premiums due thereon (with respect to public
liability insurance policies, all installments for the current year due thereon
to such date), PROVIDED THAT the Mortgagee shall not be deemed by reason of its
custody of such policies to have knowledge of the contents thereof. The
Mortgagor will also deliver to the Mortgagee not later than thirty (30) days
prior to the expiration of any policy
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a binder or certificate of the insurer evidencing the replacement thereof. In
the event the Mortgagor shall fail to effect or maintain any insurance required
to be effected or maintained pursuant to the provisions of this SECTION 2.1, the
Mortgagor will indemnify the Mortgagee against damage, loss or liability
resulting from all risks for which such insurance should have been effected or
maintained.
SECTION 2.1.4. SEPARATE INSURANCE. The Mortgagor will not take out
separate insurance concurrent in form or contributing in the event of loss with
that required to be maintained pursuant to this SECTION 2.1.
SECTION 2.1.5. FLOOD INSURANCE. The Mortgagor represents and warrants
that the Improvements are not located in an area designated as "flood prone" (as
defined under the National Flood Insurance Regulations) or, to the extent the
Improvements or any portion thereof are located in an area designated as "flood
prone", the Mortgagor maintains in full force and effect flood insurance under
the National Flood Insurance Program to the extent and in the amount required by
applicable laws.
SECTION 2.2 DAMAGE, DESTRUCTION OR TAKING; MORTGAGOR TO GIVE NOTICE;
ASSIGNMENT OF AWARDS. In case of
(a) any damage to or destruction of the Collateral or any part thereof,
or
(b) any taking, whether for permanent or temporary use, of all or any
part of the Collateral or any interest therein or right accruing thereto,
as the result of or in anticipation of the exercise of the right of
condemnation or eminent domain, or a change of grade affecting the
Collateral or any portion thereof (a "TAKING"), or the commencement of any
proceedings or negotiations which may result in a Taking,
the Mortgagor will promptly give written notice thereof to the Mortgagee,
generally describing the nature and extent of such damage or destruction and the
Mortgagor's best estimate of the cost of restoring the Collateral, or the nature
of such proceedings or negotiations and the nature and extent of the Taking
which might result therefrom, as the case may be. Subject to SECTION 2.3, the
Mortgagee shall be entitled to all insurance proceeds payable on account of such
damage or destruction and to all awards or payments allocable to the Collateral
on account of such Taking, and the Mortgagor hereby irrevocably assigns,
transfers and sets over to the Mortgagee all rights of the Mortgagor to any
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such proceeds, awards or payments and irrevocably authorizes and empowers the
Mortgagee, at its option, in the name of the Mortgagor or otherwise, to file and
prosecute what would otherwise be the Mortgagor's claim for any such proceeds,
award or payment and to collect, receipt for and retain the same for disposition
in accordance with SECTION 2.3. The Mortgagor will pay all reasonable costs and
expenses incurred by the Mortgagee in connection with any such damage,
destruction or Taking and seeking and obtaining any insurance proceeds, awards
or payments in respect thereof.
SECTION 2.3 APPLICATION OF PROCEEDS AND AWARDS. The Mortgagee may, at its
option, apply all amounts recovered under any insurance policy required to be
maintained by the Mortgagor hereunder and all awards received by it on account
of any Taking in any one or more of the following ways:
(a) to the payment of the reasonable costs and expenses incurred by
the Mortgagee in obtaining any such insurance proceeds or awards, including
the fees and expenses of attorneys and insurance and other experts and
consultants, the costs of litigation, arbitration, mediation,
investigations and other judicial, administrative or other proceedings
and all other out-of-pocket expenses;
(b) to the payment of the principal of the Credit Extensions and any
interest (including post-petition interest payable in any proceedings for
bankruptcy under applicable law ("POST-PETITION INTEREST") to the extent
such interest is a Secured Obligation) accrued and unpaid thereon, without
regard to whether any portion or all of such amounts shall be matured or
unmatured, together with interest at the rate provided for in the Credit
Agreement on any overdue principal and (to the extent permitted by
applicable law) interest; and, in case such amount shall be insufficient to
pay in full all such amounts, then such amount shall be applied, FIRST, to
the payment of all amounts of interest (including Post-Petition Interest to
the extent such interest is a Secured Obligation) accrued on the Credit
Extensions and unpaid, SECOND, to the payment of all amounts of principal
at the time outstanding;
(c) to the payment of, or the application to, any Secured Obligation
(other than as provided in CLAUSE (B) above);
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(d) to fulfill any of the other covenants contained herein, in the
Credit Agreement, or in any other Loan Document, as the Mortgagee may
determine in its sole discretion;
(e) to the Mortgagor for application to the cost of restoring the
Collateral and the replacement of Goods destroyed, damaged or taken; or
(f) to the Mortgagor.
Notwithstanding the foregoing provisions of this SECTION 2.3 to the
contrary (but subject to the provisions of SECTION 2.4), and if each of the
following conditions is satisfied, the Mortgagee, upon request of the Mortgagor,
shall apply insurance proceeds or condemnation awards received by it to the
restoration or replacement of the Collateral, to the extent necessary for the
restoration or replacement thereof:
(i) there shall then exist no uncured Default of which Mortgagor
has received notice thereof;
(ii) the Mortgagor shall furnish to the Mortgagee a certificate
of an architect or engineer reasonably acceptable to the Mortgagee
stating (x) that the Collateral is capable of being restored, prior to
the maturity of the Credit Agreement, to substantially the same
condition as existed prior to the casualty or Taking, (y) the
aggregate estimated direct and indirect costs of such restoration and
(z) as to any Taking, that the property taken in such Taking, or sold
under threat thereof, is not necessary to the Mortgagor's customary
use or occupancy of the Property; and
(iii) in the event that the estimated cost of restoration set
forth in the certificate of such architect or engineer (and such
revisions to such estimate as are from time to time made) exceeds the
net insurance proceeds or condemnation awards actually received from
time to time, the Mortgagor shall deposit the amount of such excess
with the Mortgagee.
In the event that such insurance proceeds or condemnation awards are to be
utilized in the restoration of the Collateral, the Mortgagee shall disburse such
Proceeds and the additional amounts deposited by the Mortgagor for
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such restoration after receipt of a written request for disbursement, on not
fewer than five (5) nor more than twelve (12) Business Days notice and, to the
extent applicable, in accordance with the Mortgagee's customary construction
loan procedures and conditions. In the event that such insurance or
condemnation awards are to be utilized to replace the Collateral so destroyed or
taken, the Mortgagee shall disburse such Proceeds after receipt of a written
request for disbursement, on not fewer than five (5) Business Days nor more than
twelve (12) Business Days notice simultaneously with the acquisition of such
replacement property by the Mortgagor. In the event that, after the restoration
or replacement of the Collateral, any insurance or condemnation awards shall
remain, such amount shall be paid to the Mortgagor. Insurance proceeds and
condemnation awards shall be invested in the manner reasonably requested by the
Mortgagor and approved by the Mortgagee, and all interest earned thereon shall
be applied as provided in this SECTION 2.3. If, prior to the receipt by the
Mortgagee of such insurance proceeds or condemnation awards, the Collateral
shall have been sold on foreclosure, the Mortgagee shall have the right to
receive said insurance proceeds or condemnation awards to the extent of any
deficiency found to be due upon such sale, with legal interest thereon, whether
or not a deficiency judgment shall have been sought or recovered or denied, and
the reasonable attorneys' fees, costs and disbursements incurred by the
Mortgagee in connection with the collection of such award or payment.
SECTION 2.4 TOTAL TAKING AND TOTAL DESTRUCTION. In the event of a Total
Destruction or a Total Taking, the Mortgagee shall apply all amounts recovered
under any insurance policy referred to in SECTION 2.1.1 and all awards received
by it on account of any such Taking as follows:
(a) first, to the payment of the reasonable costs and expenses
incurred by the Mortgagee in obtaining any such insurance proceeds or
awards, including the fees and expenses of attorneys and insurance and
other experts and consultants, the costs of litigation, arbitration,
mediation, investigations and other judicial, administrative or other
proceedings and all other out-of-pocket expenses;
(b) second, to the payment of the principal of the Credit Extensions
and any interest (including Post-Petition Interest to the extent such
interest is a Secured Obligation) accrued and unpaid thereon, without
regard to whether any portion or all of such amounts
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shall be matured or unmatured, together with interest at the rate provided
for in the Credit Agreement on any overdue principal and (to the extent
permitted by applicable law) interest; and, in case such amount shall be
insufficient to pay in full all such amounts, then such amount shall be
applied, FIRST, to the payment of all amounts of interest (including
Post-Petition Interest to the extent such interest is a Secured Obligation)
accrued on the Credit Extensions and unpaid, and SECOND, to the payment of
all amounts of principal at the time outstanding;
(c) third, to the payment of, or the application to, any Secured
Obligation (other than as provided in CLAUSE (B) above);
(d) fourth, to fulfill any of the other covenants contained herein as
the Mortgagee may determine; and
(e) fifth, the balance, if any, to the Mortgagor.
ARTICLE 3.
EVENTS OF DEFAULT; REMEDIES, ETC.
SECTION 3.1 EVENTS OF DEFAULT; ACCELERATION. If an "Event of Default"
(pursuant to and as defined in the Credit Agreement) shall have occurred, then
and in any such event the Mortgagee may at any time thereafter (unless all
Events of Default shall theretofore have been remedied and all costs and
expenses, including, without limitation, attorneys' fees and expenses incurred
by or on behalf of the Mortgagee, shall have been paid in full by the Mortgagor)
declare, by written notice to the Mortgagor, the Loans and all other Secured
Obligations to be due and payable immediately or on a date specified in such
notice (PROVIDED that, upon the occurrence of any Event of Default described in
Section 10.1.9. of the Credit Agreement, the Loans and all other Secured
Obligations shall automatically become due and payable), and on such date the
same shall be and become due and payable, together with interest accrued
thereon, without presentment, demand, protest or notice, all of which the
Mortgagor hereby waives. The Mortgagor will pay on demand all costs and
expenses, including, without limitation, attorneys' fees and expenses, incurred
by or on behalf of the Mortgagee in enforcing this Mortgage, or any other Loan
Document, or occasioned by any default hereunder or thereunder.
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SECTION 3.2 LEGAL PROCEEDINGS; FORECLOSURE. If an Event of Default
shall have occurred, the Mortgagee at any time may, at its election, proceed
at law or in equity or otherwise to enforce the payment and performance of
the Secured Obligations in accordance with the terms hereof and thereof and
to foreclose the lien of this Mortgage as against all or any part of the
Collateral and to have the same sold under the judgment or decree of a court
of competent jurisdiction. The Mortgagee shall be entitled to recover in such
proceedings all costs incident thereto, including attorneys' fees and
expenses in such amounts as may be fixed by the court.
SECTION 3.3 POWER OF SALE. If an Event of Default shall have occurred,
the Mortgagee may grant, bargain, sell, assign, transfer, convey and deliver the
whole or, from time to time, any part of the Collateral, or any interest in any
part thereof, at any private sale or at public auction, with or without demand,
advertisement or notice, for cash, on credit or for other property, for
immediate or future delivery, and for such price or prices and on such terms as
the Mortgagee in its uncontrolled discretion may determine, or as may be
required by law, and upon such sale the Mortgagee may execute and deliver to the
purchaser(s) instruments of conveyance pursuant to the terms hereof and to
applicable laws. Without limiting the authority granted in this SECTION 3.3,
the Mortgagee shall, without demand on the Mortgagor, after the lapse of such
time as may then be required by law, and notice of default and notice of sale
having been given as then required by law, sell the Collateral on the date and
at the time and place designated in the notice of sale, either as a whole or in
separate parcels and in such order as the Mortgagee may determine, but subject
to any statutory right of the Mortgagor to direct the order in which such
property, if consisting of several known lots, parcels or interests, shall be
sold, at public auction to the highest bidder, the purchase price payable in
lawful money of the United States at the time of sale. The Person conducting
the sale may, for any cause deemed expedient, postpone the sale from time to
time until it shall be completed and, in every such case, notice of postponement
shall be given by public declaration thereof by such Person at the time and
place last appointed for the sale; PROVIDED THAT, if the sale is postponed for
longer than one (1) day beyond the day designated in the notice of sale, notice
of sale and notice of the time, date and place of sale shall be given in the
same manner as the original notice of sale. The Mortgagee shall execute and
deliver to the purchaser at any such sale a mortgagee's deed conveying the
property so sold, but without any covenant or warranty,
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express or implied. The recitals in such mortgagee's deed of any matters or
facts shall be conclusive proof of the truthfulness thereof. Any Person,
including the Mortgagee, may bid at the sale. The Mortgagee shall apply the
proceeds of the sale, to the extent consistent with this Mortgage, to the
payment of (a) the costs and expenses of exercising the power of sale and of the
sale, including the payment of attorneys' fees and costs, (b) the cost of any
evidence of title procured in connection with such sale, (c) all sums expended
under the terms hereof in conjunction with any default provision hereof, not
then repaid, with accrued interest at the rate provided for in the Credit
Agreement from the date of incurrence, (d) outstanding principal and interest
under the Credit Agreement, (e) all Secured Obligations (other than as provided
in CLAUSE (D) above). The Mortgagee shall give the remainder, if any, of the
proceeds of the sale to the Person or Persons legally entitled thereto, or the
Mortgagee, in the Mortgagee's discretion, may deposit the balance of such
proceeds with any court or public official authorized to receive such proceeds.
SECTION 3.4 UNIFORM COMMERCIAL CODE REMEDIES. If an Event of Default
shall have occurred, the Mortgagee may exercise from time to time and at any
time any rights and remedies available to it under applicable law upon default
in the payment of indebtedness, including, without limitation, any right or
remedy available to it as a secured party under the Uniform Commercial Code of
the State. The Mortgagor shall, promptly upon request by the Mortgagee,
assemble the Collateral, or any portion thereof generally described in such
request, and make it available to the Mortgagee at such place or places
designated by the Mortgagee and reasonably convenient to the Mortgagee or the
Mortgagor. If the Mortgagee elects to proceed under the Uniform Commercial Code
of the State to dispose of portions of the Collateral, the Mortgagee, at its
option, may give the Mortgagor notice of the time and place of any public sale
of any such property, or of the date after which any private sale or other
disposition thereof is to be made, by sending notice by registered or certified
first class mail, postage prepaid, to the Mortgagor at least ten (10) days
before the time of the sale or other disposition. If any notice of any proposed
sale, assignment or transfer by the Mortgagee of any portion of the Collateral
or any interest therein is required by law, the Mortgagor conclusively agrees
that ten (10) days notice to the Mortgagor of the date, time and place (and, in
the case of a private sale, the terms) thereof is reasonable.
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SECTION 3.5 MORTGAGEE AUTHORIZED TO EXECUTE DEEDS, ETC. The Mortgagor
irrevocably appoints the Mortgagee (which appointment is coupled with an
interest) the true and lawful attorney of the Mortgagor, in its name and stead
and on its behalf, for the purpose of effectuating any sale, assignment,
transfer or delivery for the enforcement hereof, whether pursuant to power of
sale, foreclosure or otherwise, to execute and deliver all such deeds, bills of
sale, assignments, releases and other instruments as may be designated in any
such request.
SECTION 3.6 PURCHASE OF COLLATERAL BY MORTGAGEE. The Mortgagee may be a
purchaser of the Collateral or of any part thereof or of any interest therein at
any sale thereof, whether pursuant to power of sale, foreclosure or otherwise,
and the Mortgagee may apply upon the purchase price thereof the indebtedness
secured hereby owing to the Mortgagee. Such purchaser shall, upon any such
purchase, acquire good title to the properties so purchased, free of the
security interest and lien of this Mortgage and free of all rights of redemption
in the Mortgagor.
SECTION 3.7 RECEIPT A SUFFICIENT DISCHARGE TO PURCHASER. Upon any sale of
the Collateral or any part thereof or any interest therein, whether pursuant to
power of sale, foreclosure or otherwise, the receipt of the Mortgagee or the
officer making the sale under judicial proceedings shall be a sufficient
discharge to the purchaser for the purchase money, and such purchaser shall not
be obliged to see to the application thereof.
SECTION 3.8 WAIVER OF APPRAISEMENT, VALUATION, ETC. The Mortgagor hereby
waives, to the fullest extent it may lawfully do so, the benefit of all
appraisement, valuation, stay, extension and redemption laws now or hereafter in
force and all rights of marshaling in the event of any sale of the Collateral or
any part thereof or any interest therein.
SECTION 3.9 SALE A BAR AGAINST MORTGAGOR. Any sale of the Collateral or
any part thereof or any interest therein under or by virtue of this Mortgage,
whether pursuant to power of sale, foreclosure or otherwise, shall forever be a
bar against the Mortgagor.
SECTION 3.10 SECURED OBLIGATIONS TO BECOME DUE ON SALE. Upon any sale of
the Collateral or any portion thereof or interest therein by virtue of the
exercise of any remedy by the Mortgagee under or by virtue of this Mortgage,
whether pursuant to power of sale, foreclosure or otherwise
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in accordance with this Mortgage or by virtue of any other remedy available at
law or in equity or by statute or otherwise, at the option of the Mortgagee, any
sums or monies due and payable pursuant to the Credit Agreement, the Loan
Documents and in connection with the Loans and/or the Secured Obligations shall,
if not previously declared due and payable, immediately become due and payable,
together with interest accrued thereon, and all other indebtedness which this
Mortgage by its terms secures.
SECTION 3.11 APPLICATION OF PROCEEDS OF SALE AND OTHER MONEYS. The
proceeds of any sale of the Collateral or any part thereof or any interest
therein under or by virtue of this Mortgage, whether pursuant to power of sale,
foreclosure or otherwise, and all other moneys at any time held by the Mortgagee
as part of the Collateral, shall be applied in such order of priority as the
Mortgagee shall determine in its sole and absolute discretion including, without
limitation, as follows:
(a) first, to the payment of the reasonable costs and expenses of such
sale (including, without limitation, the cost of evidence of title and the
costs and expenses, if any, of taking possession of, retaining custody
over, repairing, managing, operating, maintaining and preserving the
Collateral or any part thereof prior to such sale), all reasonable costs
and expenses incurred by the Mortgagee or any other Person in obtaining or
collecting any insurance proceeds, condemnation awards or other amounts
received by the Mortgagee, all reasonable costs and expenses of any
receiver of the Collateral or any part thereof, and any Impositions or
other charges or expenses prior to the security interest or lien of this
Mortgage, which the Mortgagee may consider it necessary or desirable to
pay;
(b) second, to the payment of any Secured Obligation (other than those
set forth in SECTION 3.11(C) below);
(c) third, to the payment of all amounts of principal of and interest
(including Post-Petition Interest to the extent such interest is a Secured
Obligation) at the time due and payable under the Credit Agreement at the
time outstanding (whether due by reason of maturity or by reason of any
prepayment requirement or by declaration or acceleration or otherwise),
including interest at the rate provided for in the Credit Agreement on any
overdue principal and
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(to the extent permitted under applicable law) on any overdue interest;
and, in case such moneys shall be insufficient to pay in full such
principal and interest, then, FIRST, to the payment of all amounts of
interest (including Post-Petition Interest to the extent such interest is a
Secured Obligation) at the time due and payable and, SECOND, to the payment
of all amounts of principal at the time due and payable under the Credit
Agreement; and
(d) fourth, the balance, if any, held by the Mortgagee after payment
in full of all amounts referred to in subdivisions SECTIONS 3.11(A), (B)
and (C) above, shall, unless a court of competent jurisdiction may
otherwise direct by final order not subject to appeal, be paid to or upon
the direction of the Mortgagor.
SECTION 3.12 APPOINTMENT OF RECEIVER. If an Event of Default shall have
occurred, the Mortgagee shall, as a matter of right, without notice, and without
regard to the adequacy of any security for the indebtedness secured hereby or
the solvency of the Mortgagor, be entitled to the appointment of a receiver for
all or any part of the Collateral, whether such receivership be incidental to a
proposed sale of the Collateral or otherwise, and the Mortgagor hereby consents
to the appointment of such a receiver and will not oppose any such appointment.
SECTION 3.13 POSSESSION, MANAGEMENT AND INCOME. If an Event of Default
shall have occurred, in addition to, and not in limitation of, the rights and
remedies provided in SECTION 1.14, the Mortgagee, upon five (5) days notice to
the Mortgagor, may enter upon and take possession of the Collateral or any part
thereof by force, summary proceeding, ejectment or otherwise and may remove the
Mortgagor and all other Persons and any and all property therefrom and may hold,
operate, maintain, repair, preserve and manage the same and receive all
earnings, income, Rents, issues and Proceeds accruing with respect thereto or
any part thereof. The Mortgagee shall be under no liability for or by reason of
any such taking of possession, entry, removal or holding, operation or
management, except that any amounts so received by the Mortgagee shall be
applied to pay all costs and expenses of so entering upon, taking possession of,
holding, operating, maintaining, repairing, preserving and managing the
Collateral or any part thereof, and any Impositions or other charges prior to
the lien and security interest of this Mortgage which the Mortgagee may consider
it necessary or desirable to pay, and any balance of such amounts shall be
applied as provided in SECTION 3.11.
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SECTION 3.14 RIGHT OF MORTGAGEE TO PERFORM MORTGAGOR'S COVENANTS, ETC. If
the Mortgagor shall fail to make any payment or perform any act required to be
made or performed hereunder or under the Credit Agreement or any other Loan
Document, the Mortgagee, subject to twenty (20) days' prior written notice to
the Mortgagor (except that no prior notice shall be required in the case of an
emergency or where the failure to make such payment or perform such obligation
could affect the priority of the lien of this Mortgage) without waiving or
releasing any obligation or Default, may (but shall be under no obligation to)
at any time thereafter make such payment or perform such act for the account and
at the expense of the Mortgagor, and may enter upon the Collateral for such
purpose and take all such action thereon as, in the Mortgagee's opinion, may be
necessary or appropriate therefor. No such entry and no such action shall be
deemed an eviction of any lessee of the Property or any part thereof. All sums
so paid by the Mortgagee and all costs and expenses (including, without
limitation, attorneys' fees and expenses) so incurred, together with interest
thereon at the rate provided for in Section 5.2.2. of the Credit Agreement from
the date of payment or incurring, shall constitute additional indebtedness under
the Credit Agreement secured by this Mortgage and shall be paid by the Mortgagor
to the Mortgagee on demand.
SECTION 3.15 SUBROGATION. To the extent that the Mortgagee, on or after
the date hereof, pays any sum due under any provision of any Legal Requirement
or any instrument creating any lien prior or superior to the lien of this
Mortgage, or the Mortgagor or any other Person pays any such sum with the
proceeds of the loan evidenced by the Credit Agreement, the Mortgagee shall have
and be entitled to a lien on the Collateral equal in priority to the lien
discharged, and the Mortgagee shall be subrogated to, and receive and enjoy all
rights and liens possessed, held or enjoyed by, the holder of such lien, which
shall remain in existence and benefit the Mortgagee in securing the Secured
Obligations.
SECTION 3.16 REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of
the Mortgagee provided for in this Mortgage, the Credit Agreement or any other
Loan Document, or now or hereafter existing at law or in equity or by statute or
otherwise shall be cumulative and concurrent and shall be in addition to every
other right, power or remedy provided for in this Mortgage, the Credit Agreement
or any other Loan Document, or now or hereafter existing at law or in equity or
by statute or otherwise, and the exercise or beginning of the exercise by the
Mortgagee of any one or
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more of the rights, powers or remedies provided for in this Mortgage, the Credit
Agreement, or any other Loan Document, or now or hereafter existing at law or in
equity or by statute or otherwise shall not preclude the simultaneous or later
exercise by the Mortgagee of any or all such other rights, powers or remedies.
SECTION 3.17 PROVISIONS SUBJECT TO APPLICABLE LAW. All rights, powers and
remedies provided in this Mortgage may be exercised only to the extent that the
exercise thereof does not violate any applicable provisions of law and are
intended to be limited to the extent necessary so that they will not render this
Mortgage invalid, unenforceable or not entitled to be recorded, registered or
filed under the provisions of any applicable law. If any term of this Mortgage
or any application thereof shall be invalid or unenforceable, the remainder of
this Mortgage and any other application of such term shall not be affected
thereby.
SECTION 3.18 NO WAIVER, ETC. No failure by the Mortgagee to insist upon
the strict performance of any term hereof or of the Credit Agreement, or of any
other Loan Document, or to exercise any right, power or remedy consequent upon a
breach hereof or thereof, shall constitute a waiver of any such term or of any
such breach. No waiver of any breach shall affect or alter this Mortgage, which
shall continue in full force and effect with respect to any other then existing
or subsequent breach. By accepting payment or performance of any amount or
other Secured Obligations secured hereby before or after its due date, the
Mortgagee shall not be deemed to have waived its right either to require prompt
payment or performance when due of all other amounts and Secured Obligations
payable hereunder or to declare a default for failure to effect such prompt
payment.
SECTION 3.19 COMPROMISE OF ACTIONS, ETC. Any action, suit or proceeding
brought by the Mortgagee pursuant to any of the terms of this Mortgage, the
Credit Agreement, any other Loan Document, or otherwise, and any claim made by
the Mortgagee hereunder or thereunder, may be compromised, withdrawn or
otherwise dealt with by the Mortgagee without any notice to or approval of the
Mortgagor.
SECTION 3.20 WAIVER OF MARSHALLING AND STRICT FORECLOSURE. Mortgagor, for
Mortgagor and all who may claim through or under Mortgagor, waives any and all
right to have the Property marshaled upon any foreclosure of the lien hereof and
agrees that any court having jurisdiction to
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foreclose such lien may order the Property sold as an entirety. Mortgagor
agrees that to the extent permitted by law this Mortgage may be foreclosed by
Mortgagee, at Mortgagee's option pursuant to the provisions of Sections 846.101,
846.102 and/or Section 846.103 of the Wisconsin Statutes or any successor
thereof.
ARTICLE 4.
DEFINITIONS
SECTION 4.1 TERMS DEFINED IN THIS MORTGAGE. When used herein the
following terms have the following meanings:
"AGENT" shall have the meaning set forth in the PREAMBLE.
"ASSUMPTION" shall have the meaning set forth in the FORTH RECITAL.
"BORROWERS" shall have the meaning set forth in the SECOND RECITAL.
"BORROWING" shall have the meaning set forth in the Credit Agreement.
"CANADIAN AGENT" shall have the meaning set forth in the Credit Agreement.
"CANADIAN BORROWER" shall have the meaning set forth in the SECOND RECITAL.
"CANADIAN FACILITY" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN ISSUERS" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN LENDERS" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN LETTER OF CREDIT" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN LETTER OF CREDIT OUTSTANDINGS" shall have the meaning set forth
in the Credit Agreement.
"CANADIAN REVOLVING LOAN" shall have the meaning set forth in the Credit
Agreement.
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"CANADIAN REVOLVING LOAN COMMITMENT" shall have the meaning set forth in
the Credit Agreement.
"CANADIAN REVOLVING LOAN COMMITMENT AMOUNT" shall have the meaning set
forth in the Credit Agreement.
"CANADIAN REVOLVING LOAN COMMITMENT TERMINATION DATE" shall have the
meaning set forth in the Credit Agreement.
"CANADIAN SUBSIDIARY" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN SWING LINE LENDER" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN SWING LINE LOAN" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN SWING LINE LOAN COMMITMENT" shall have the meaning set forth in
the Credit Agreement.
"CDN $" shall have the meaning set forth in the Credit Agreement.
"COLLATERAL" shall have the meaning set forth in the GRANTING CLAUSE.
"COMMITMENT" shall have the meaning set forth in the Credit Agreement.
"CONTRACTS" shall have the meaning set forth in CLAUSE (H) of the GRANTING
CLAUSE.
"CREDIT AGREEMENT" shall have the meaning set forth in the SECOND RECITAL.
"CREDIT EXTENSIONS" shall have the meaning set forth in the the SECOND
RECITAL.
"DEFAULT" means any Event of Default or any condition or event which, after
notice or lapse of time, or both, would constitute an Event of Default.
"ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means all valid and
enforceable Requirements of Law derived from or relating to federal, state and
local laws or regulations relating to or addressing the environment, health or
safety, including but not limited to any law, regulation, or order relating to
the use, handling, or disposal of any Hazardous Material, any law, regulation,
or
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order relating to Remedial Action, and any law, regulation, or order relating to
workplace or worker safety and health, as such Requirements of Law are
promulgated by the specifically authorized agency responsible for administering
such Requirements of Law.
"EVENT OF DEFAULT" shall have the meaning set forth in the Credit
Agreement.
"GOODS" shall have the meaning set forth in CLAUSE (C) of the GRANTING
CLAUSE.
"HAZARDOUS MATERIAL" shall have the meaning set forth in the Credit
Agreement.
"HEREIN", "HEREOF", "HERETO", and "HEREUNDER" and similar terms refer to
this Mortgage and not to any particular Section, paragraph or provision of this
Mortgage.
"IMPOSITIONS" shall have the meaning set forth in SECTION 1.5.
"IMPROVEMENTS" shall have the meaning set forth in CLAUSE (B) of the
GRANTING CLAUSE.
"INDEMNIFIED PARTIES" shall have the meaning set forth in SECTION 1.16.
"INSURANCE REQUIREMENTS" shall have the meaning set forth in PARAGRAPH (A)
of SECTION 1.6.
"INTANGIBLES" shall have the meaning set forth in CLAUSE (D) of the
GRANTING CLAUSE.
"ISSUER" shall have the meaning set forth in the Credit Agreement.
"LAND" shall have the meaning set forth in the FIRST RECITAL.
"LEASES" shall have the meaning set forth in CLAUSE (E) of the GRANTING
CLAUSE.
"LEINER" shall have the meaning set forth in the PREAMBLE.
"LEGAL REQUIREMENTS" shall have the meaning set forth in PARAGRAPH (B) of
SECTION 1.6.
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"LENDERS" shall have the meaning set forth in the Credit Agreement.
"LETTER OF CREDIT" shall have the meaning set forth in the Credit
Agreement.
"LHPG" shall have the meaning set forth in the PREAMBLE.
"LOAN DOCUMENTS" shall have the meaning set forth in the Credit Agreement.
"LOANS" shall have the meaning set forth in the Credit Agreement.
"MORTGAGE" shall have the meaning set forth in the PREAMBLE.
"MORTGAGEE" shall have the meaning set forth in the PREAMBLE.
"MORTGAGOR" shall have the meaning set forth in the PREAMBLE.
"NOTES" shall have the meaning set forth in the Credit Agreement.
"OBLIGATIONS" shall have the meaning set forth in the Credit Agreement.
"OBLIGOR" shall mean each Person having any liabilities, obligations,
duties or responsibilities under the Credit Agreement or any Loan Document.
"PERMITS" shall have the meaning set forth in CLAUSE (G) of the GRANTING
CLAUSE.
"PERMITTED ENCUMBRANCES" shall have the meaning set forth in SECTION 1.2.
"PERSON" means a corporation, an association, a partnership, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency or officer.
"PLANS" shall have the meaning set forth in CLAUSE (F) of the GRANTING
CLAUSE.
"POST-PETITION INTEREST" shall have the meaning set forth in SECTION 2.3.
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"PROCEEDS" shall have the meaning set forth in CLAUSE (K) of the GRANTING
CLAUSE.
"PROPERTY" shall have the meaning set forth in CLAUSE (B) of the GRANTING
CLAUSE.
"REAL ESTATE" shall have the meaning set forth in CLAUSE (A) of the
GRANTING CLAUSE.
"RELEASE" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any Property, including the movement of
Hazardous Material through or in the air, soil, surface water, groundwater or
Property.
"REMEDIAL ACTION" means actions required to (i) clean up, remove, treat or
in any other way address Hazardous Material in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Hazardous Material; or (iii) investigate and determine if a
remedial response is needed and to design such a response and post-remedial
investigation, monitoring, operation and maintenance and care.
"RENTS" shall have the meaning set forth in CLAUSE (J) of the GRANTING
CLAUSE.
"REVOLVING LOAN" shall have the meaning set forth in the Credit Agreement.
"SCOTIABANK" shall have the meaning set forth in the SECOND RECITAL.
"SECURED OBLIGATIONS" means all Obligations now or hereafter existing under
the Credit Agreement, and all obligations (monetary or otherwise) arising under
or in connection with the Notes and each other Loan Document, whether for
principal, interest, costs, fees, expenses or otherwise, and all other
obligations of the Mortgagor and each Obligor under any Loan Document,
including, without limitation, any Subsidiary Guaranty, howsoever created,
arising or now or hereafter existing or due or to become due.
"STATE" means the State of Wisconsin.
"STATED AMOUNT" shall have the meaning set forth in the Credit Agreement.
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"SUBSIDIARY GUARANTY" shall have the meaning set forth in the Credit
Agreement.
"TAKING" shall have the meaning set forth in CLAUSE (B) of SECTION 2.2.
"TERM LOAN" shall have the meaning set forth in the Credit Agreement.
"TERM B LOAN" shall have the meaning set forth in the Credit Agreement.
"TERM B LOAN COMMITMENT" shall have the meaning set forth in the Credit
Agreement.
"TERM C LOAN" shall have the meaning set forth in the Credit Agreement.
"TERM C LOAN COMMITMENT" shall have the meaning set forth in the Credit
Agreement.
"TOTAL DESTRUCTION" means any damage to or destruction of the Improvements
or any part thereof which, in the reasonable estimation of the Mortgagee shall
require the expenditure of an amount in excess of fifty percent (50%) of the
replacement value of the Property to restore the Improvements to substantially
the same condition of the Improvements immediately prior to such damage or
destruction.
"TOTAL TAKING" means a Taking, whether permanent or for temporary use,
which, in the good faith judgment of the Mortgagee, shall substantially
interfere with the normal operation of the Property by the Mortgagor.
"U.S. AGENT" shall have the meaning set forth in the Credit Agreement.
"U.S. BORROWER" shall have the meaning set forth in the SECOND RECITAL.
"U.S. FACILITY" shall have the meaning set forth in the Credit Agreement.
"U.S. ISSUERS" shall have the meaning set forth in the Credit Agreement.
"U.S. LENDERS" shall have the meaning set forth in the Credit Agreement.
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"U.S. LETTER OF CREDIT" shall have the meaning set forth in the Credit
Agreement.
"U.S. LETTER OF CREDIT OUTSTANDINGS" shall have the meaning set forth in
the Credit Agreement.
"U.S. REVOLVING LOAN" shall have the meaning set forth in the Credit
Agreement.
"U.S. REVOLVING LOAN COMMITMENT" shall have the meaning set forth in the
Credit Agreement.
"U.S. REVOLVING LOAN COMMITMENT AMOUNT" shall have the meaning set forth in
the Credit Agreement.
"U.S. REVOLVING LOAN COMMITMENT TERMINATION DATE" shall have the meaning
set forth in the Credit Agreement.
"U.S. RL LENDERS" shall have the meaning set forth in the Credit Agreement.
"U.S. SUBSIDIARY" shall have the meaning set forth in the Credit Agreement.
"U.S. SWING LINE LENDER" shall have the meaning set forth in the Credit
Agreement.
"U.S. SWING LINE LOAN" shall have the meaning set forth in the Credit
Agreement.
SECTION 4.2 USE OF DEFINED TERMS. Terms for which meanings are provided
in this Mortgage shall, unless otherwise defined or the context otherwise
requires, have such meanings when used in any certificate and any opinion,
notice or other communication delivered from time to time in connection with
this Mortgage or pursuant hereto.
SECTION 4.3 CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined herein
or the context otherwise requires, terms used in this Mortgage, including its
preamble and recitals, have the meanings provided in the Credit Agreement.
ARTICLE 5.
MISCELLANEOUS
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SECTION 5.1 FURTHER ASSURANCES; FINANCING STATEMENTS.
SECTION 5.1.1 FURTHER ASSURANCES. The Mortgagor, at its expense, will
execute, acknowledge and deliver all such instruments and take all such other
action as the Mortgagee from time to time may reasonably request:
(a) to better subject to the lien and security interest of this
Mortgage all or any portion of the Collateral,
(b) to perfect, publish notice or protect the validity of the lien and
security interest of this Mortgage,
(c) to preserve and defend the title to the Collateral and the rights
of the Mortgagee therein against the claims of all Persons as long as this
Mortgage shall remain undischarged,
(d) to better subject to the lien and security interest of this
Mortgage or to maintain or preserve the lien and security interest of this
Mortgage with respect to any replacement or substitution for any Collateral
or any other after-acquired property, or
(e) in order to further effectuate the purposes of this Mortgage and
to carry out the terms hereof and to better assure and confirm to the
Mortgagee its rights, powers and remedies hereunder.
SECTION 5.1.2 FINANCING STATEMENTS. Notwithstanding any other provision
of this Mortgage, the Mortgagor hereby agrees that, without notice to or the
consent of the Mortgagor, the Mortgagee may file with the appropriate public
officials such financing statements, continuation statements, amendments and
similar documents as are or may become necessary to perfect, preserve or protect
the security interest granted by this Mortgage.
SECTION 5.2 ADDITIONAL SECURITY. Without notice to or consent of the
Mortgagor, and without impairment of the security interest and lien and rights
created by this Mortgage, the Mortgagee and the Lenders may accept from the
Mortgagor or any other Person additional security for the Secured Obligations.
Neither the giving of this Mortgage nor the acceptance of any such additional
security shall prevent the Mortgagee from resorting, first, to such additional
security, or, first, to the security created by this Mortgage, or concurrently
to both, in any case without
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affecting the Mortgagee's lien and rights under this Mortgage.
SECTION 5.3 DEFEASANCE; PARTIAL RELEASE, ETC.
SECTION 5.3.1 DEFEASANCE. If the Loans and all other amounts owing
pursuant to the Credit Agreement and the other Loan Documents shall be repaid in
full in accordance with the terms thereof, and if the Mortgagor shall pay, in
full, the principal of and premium, if any, and interest on the Secured
Obligations in accordance with the terms thereof and hereof and all other sums
payable hereunder by the Mortgagor and shall comply with all the terms,
conditions and requirements hereof and of the Secured Obligations which by their
nature are capable of being complied with during the term hereof, then on such
date, the Mortgagee shall, upon the request of the Mortgagor and at the
Mortgagor's sole cost and expense, execute and deliver such instruments, in form
and substance reasonably satisfactory to the Mortgagee, as may be necessary to
reconvey, release and discharge this Mortgage.
SECTION 5.3.2 PARTIAL RELEASE, ETC. The Mortgagee may, at any time and
from time to time, without liability therefor, and without prior notice to the
Mortgagor, release or reconvey any part of the Collateral, consent to the making
of any map or plat of the Property, join in granting any easement thereon or
join in any extension agreement or agreement subordinating the lien of this
Mortgage, or enter into any other agreement in connection with the Collateral.
SECTION 5.4 NOTICES, ETC. All notices and other communications provided
to any of the parties hereto shall be in writing and addressed, delivered or
transmitted to such party as set forth in the Credit Agreement.
SECTION 5.5 WAIVERS, AMENDMENTS, ETC. The provisions of this Mortgage may
be amended, discharged or terminated and the observance or performance of any
provision of this Mortgage may be waived, either generally or in a particular
instance and either retroactively or prospectively, only by an instrument in
writing executed by the Mortgagor and the Mortgagee.
SECTION 5.6 CROSS-REFERENCES. References in this Mortgage and in each
instrument executed pursuant hereto to any Section or Article are, unless
otherwise specified, to such Section or Article of this Mortgage or such
instrument, as the case may be, and references in any Section, Article or
definition to any clause are, unless otherwise specified,
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to such clause of such Section, Article or definition.
SECTION 5.7 HEADINGS. The various headings of this Mortgage and of each
instrument executed pursuant hereto are inserted for convenience only and shall
not affect the meaning or interpretation of this Mortgage or such instrument or
any provisions hereof or thereof.
SECTION 5.8 CURRENCY. Unless otherwise expressly stated, all references
to any currency or money, or any dollar amount, or amounts denominated in
"Dollars" herein will be deemed to refer to the lawful currency of the United
States.
SECTION 5.9 GOVERNING LAW. THIS MORTGAGE SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE.
SECTION 5.10 SUCCESSORS AND ASSIGNS, ETC. This Mortgage shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
SECTION 5.11 WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION.
(a) EACH OF THE MORTGAGOR AND THE MORTGAGEE HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS MORTGAGE, THE CREDIT AGREEMENT, ANY LOAN DOCUMENT
OR ANY OTHER RELATED INSTRUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF THE MORTGAGOR
OR THE MORTGAGEE. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
MORTGAGEE AND THE LENDERS TO ENTER INTO THE TRANSACTIONS PROVIDED FOR IN
THE CREDIT AGREEMENT AND TO MAKE THE CREDIT EXTENSIONS.
(b) FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INVOLVING THIS
MORTGAGE, THE CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT, THE MORTGAGOR
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION
OF ALL FEDERAL AND STATE COURTS LOCATED IN THE STATE AND CONSENTS THAT IT
MAY BE SERVED WITH ANY PROCESS OR PAPER BY REGISTERED MAIL OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE IN ACCORDANCE WITH APPLICABLE LAW,
PROVIDED A REASONABLE TIME FOR APPEARANCE IS ALLOWED. THE MORTGAGOR
EXPRESSLY WAIVES, TO THE EXTENT IT MAY LAWFULLY DO SO, ANY OBJECTION, CLAIM
OR DEFENSE WHICH
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IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR
PROCEEDING ARISING OUT OF THIS MORTGAGE, THE CREDIT AGREEMENT OR ANY OTHER
LOAN DOCUMENT IN ANY SUCH COURT, IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM AND FURTHER IRREVOCABLY WAIVES THE RIGHT TO OBJECT, WITH
RESPECT TO ANY SUCH CLAIM, SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER THE PERSON OF THE
MORTGAGOR. NOTHING CONTAINED HEREIN WILL BE DEEMED TO PRECLUDE THE
MORTGAGEE FROM BRINGING AN ACTION AGAINST THE MORTGAGOR IN ANY OTHER
JURISDICTION.
SECTION 5.12 SEVERABILITY. Any provision of this Mortgage, the Credit
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall as to such provision and such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Mortgage, the Credit Agreement or such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 5.13 LOAN DOCUMENT. This Mortgage is a Loan Document executed
pursuant to the Credit Agreement and, unless otherwise expressly indicated
herein, shall be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 5.14 USURY SAVINGS CLAUSE. It is the intention of the Mortgagor
and the Mortgagee to conform strictly to the usury laws governing the Loan
Documents, and any interest payable under the Loan Documents shall be subject to
reduction to the amount not in excess of the maximum non-usurious amount allowed
under such laws, as construed by the courts having jurisdiction over such
matters. In the event the maturity of the Secured Obligations is accelerated by
reason of any provision of the Loan Documents, or by reason of an election by
the Mortgagee resulting from an Event of Default, then earned interest may never
include more than the maximum amount permitted by law, computed from the dates
of each advance of loan proceeds under the Credit Agreement until payment, and
any interest in excess of the maximum amount permitted by law shall be canceled
automatically or, if theretofore paid, at the option of the Mortgagee, shall be
rebated to the Mortgagor, or shall be credited on the principal amount of the
Secured Obligations or, if all principal has been repaid, then the excess shall
be rebated to the Mortgagor. If any interest
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is canceled, credited against principal or rebated to the Mortgagor in
accordance with the foregoing sentence and, if thereafter the interest payable
hereunder is less than the maximum amount permitted by applicable law, the rate
hereunder shall automatically be increased to the maximum extent possible to
permit repayment to the Mortgagee and the Lenders as soon as possible of any
interest in excess of the maximum amount permitted by law which was earlier
canceled, credited against principal or rebated to the Mortgagor pursuant to the
provisions of the foregoing sentence.
SECTION 5.15 FUTURE ADVANCES. Any and all future advances under this
Mortgage and the Loan Documents shall have the same priority as if the future
advance was made on the date that this Mortgage was recorded. This Mortgage
shall secure the Secured Obligations, whenever incurred, such Secured
Obligations to be due at the times provided in the Loan Documents. Notice is
hereby given that the Secured Obligations may INCREASE as a result of any
defaults hereunder by Mortgagor due to, for example, and without limitation,
unpaid interest or late charges, unpaid taxes or insurance premiums which the
Mortgagee elects to advance, defaults under leases that the Mortgagee elects to
cure, attorney fees or costs incurred in enforcing the Loan Documents or other
expenses incurred by the Mortgagee in protecting the Collateral, the security of
this Mortgage or the Mortgagee's rights and interests.
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IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be duly
executed as of the day and year first above written.
MORTGAGOR:
LEINER HEALTH PRODUCTS INC.,
a Delaware corporation
By: /s/ William B. Towne
---------------------------
Name: William B. Towne
Title: Executive V.P. - Finance
DRAFTED BY:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: Kenneth R. Kleiner, Esq.
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ACKNOWLEDGMENT OF MORTGAGOR
STATE OF New York )
)SS.:
COUNTY OF New York )
On June 27, 1997, before me, Caron Gelineau, a Notary Public in and for said
State, personally appeared William Towne and _________________________,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument
and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her/ signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Caron Gelineau (Seal)
---------------------------------
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SCHEDULE 1
LEGAL DESCRIPTION OF THE LAND
(see attached)
Part of Lot Three (3), Block One (1), W. H. Jacobs and E. S. Barker's
Subdivision, in the City of Madison, Dane County, Wisconsin, more particularly
described as follows: Commencing at the Southwest corner of said lot; thence
Easterly along South line of said lot 400.8 feet more or less to an iron stake
192.5 feet Westerly of an iron stake at the intersection of said South line with
West right-of-way line of Badger Road; thence Northerly parallel with said
right-of-way line 200.5 feet to an iron stake; thence Easterly parallel with
South line of said lot 192.5 feet to an iron stake on West right-of-way line of
Badger Road; thence Northerly along said right-of-way line 216.75 feet to North
line of said Lot 3; thence Westerly along said North line 593.3 feet to
Northwest corner of said Lot 3; thence Southerly along West line of said Lot 3,
417.3 feet to the point of beginning. EXCEPT that part conveyed to State of
Wisconsin in Deed recorded on May 12, 1988 as Document Number 2080811.
Parcel No. 60-0709-362-0096-7
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SCHEDULE 2
PERMITTED ENCUMBRANCES
Those exceptions to title listed in
Lawyers Title Insurance Corporation
marked-up commitment number 40394x1,
dated June 30, 1997.
51
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Exhibit 4.24
Recording Requested By and
When Recorded, Mail To:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: Kenneth R. Kleiner, Esq.
- -------------------------------------------------------------------------------
(Space above this line for recorder's use)
Notice: This instrument contains inter alia obligations which may provide for:
(a) a variable rate of interest and/or
(b) future and/or revolving credit advances or readvances, which when made,
shall have the same priority as advances or readvances made on the date hereof
whether or not (i) any advances or readvances were made on the date hereof and
(ii) any indebtedness is outstanding at the time any advance or readvance is
made.
Notwithstanding anything to the contrary contained herein, the maximum principal
indebtedness secured under any contingency by this instrument shall in no event
exceed $210,000,000.00
LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES
AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING
This Leasehold Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing dated as of June 30, 1997(this "DEED OF TRUST") has
been executed by LEINER HEALTH PRODUCTS INC., a Delaware corporation, as trustor
("LEINER" or the "TRUSTOR"), having an address of 901 East 233rd Street, Carson,
California, in favor of Lawyers Title Company of California, having an address
of 18551 Von Karman Avenue, Irvine, California 92715 as trustee (the "TRUSTEE"),
for the benefit of THE BANK OF NOVA SCOTIA, having an address of One Liberty
Plaza, New York, New York 10006, for itself as a Lender under the Credit
Agreement referred to below and as the collateral agent as beneficiary
<PAGE>
(together with its successors and assigns from time to time acting as agent
under such Credit Agreement, the "BENEFICIARY").
W I T N E S S E T H T H A T:
WHEREAS, pursuant to the Encumbered Leases (as hereinafter defined), the
Trustor is on the date of delivery hereof the holder of the leasehold estate in
the parcel of land described in SCHEDULE 1 hereto (collectively, the "LAND") and
of the Improvements (such term and other capitalized terms used in this Deed of
Trust having the respective meanings specified or referred to in ARTICLE IV);
WHEREAS, pursuant to the terms, conditions and provisions of the Credit
Agreement, dated as of June 30, 1997 (as amended, restated, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"), among Leiner
Health Products Group Inc. ("LHPG" or the "U.S. BORROWER" (prior to the
Assumption)), Vita Health Company (1985) Ltd. (the "CANADIAN BORROWER"), as
Canadian borrower (collectively, the "BORROWERS"), the institutions from time to
time a party thereto which extend a Commitment under the U.S. Facility
(collectively, the "U.S. LENDERS"), the various financial institutions from time
to time a party thereto which extend a Commitment under the Canadian Facility
(collectively, the "CANADIAN LENDERS", and together with the U.S. Lenders, the
"LENDERS"), The Bank of Nova Scotia ("SCOTIABANK"), as agent for the U.S.
Lenders under the U.S. Facility (in such capacity, the "U.S. AGENT"), and
Scotiabank, currently acting through its executive offices in Toronto, Ontario,
as agent for the Canadian Lenders under the Canadian Facility (in such capacity,
the "CANADIAN AGENT", and together with the U.S. Agent, collectively, the
"AGENTS"), the Lenders and the Issuer have agreed to make Loans to, and to issue
Letters of Credit for the account of, the Borrowers in the maximum original
principal amount of TWO HUNDRED TEN MILLION AND 00/100 DOLLARS ($210,000,000.00)
(such Loans and Letters of Credit are hereinafter referred to collectively as
the "CREDIT EXTENSIONS").
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<PAGE>
WHEREAS, the Credit Extensions consist of:
(i) from the U.S. Lenders, a Term B Loan Commitment and a Term C Loan
Commitment pursuant to which Borrowings of Term Loans, in a maximum
aggregate principal amount not to exceed $45,000,000 (in the case of Term B
Loans) and $40,000,000 (in the case of Term C Loans), will be made to the
U.S. Borrower in a single Borrowing to occur on the date of the initial
Credit Extensions;
(ii) from the U.S. RL Lenders, a U.S. Revolving Loan Commitment (to
include availability for U.S. Revolving Loans, U.S. Swing Line Loans and
U.S. Letters of Credit) pursuant to which Borrowings of U.S. Revolving
Loans and U.S. Swing Line Loans, in a maximum aggregate principal amount
(together with all U.S. Letter of Credit Outstandings) not to exceed the
then existing U.S. Revolving Loan Commitment Amount, will be made to the
U.S. Borrower from time to time on and subsequent to the date of the
initial Credit Extensions but prior to the U.S. Revolving Loan Commitment
Termination Date;
(iii) from the U.S. Issuers (and participated in by the U.S. RL
Lenders), a U.S. Letter of Credit Commitment pursuant to which the U.S.
Issuers will issue U.S. Letters of Credit for the account of the U.S.
Borrower and, subject to Section 2.1.2 of the Credit Agreement, its U.S.
Subsidiaries from time to time on and subsequent to the date of the initial
Credit Extensions but prior to the U.S. Revolving Loan Commitment
Termination Date in a maximum aggregate Stated Amount at any one time
outstanding not to exceed $35,000,000 (PROVIDED that the aggregate
outstanding principal amount of U.S. Revolving Loans, Swing Line Loans and
U.S. Letter of Credit Outstandings at any time shall not exceed the then
existing U.S. Revolving Loan Commitment Amount);
(iv) from the U.S. Swing Line Lender (and participated in by the U.S.
RL Lenders), a U.S. Swing Line Loan Commitment pursuant to which Borrowings
of U.S. Swing Line Loans in an aggregate outstanding principal amount not
to exceed $15,000,000 will be made on and subsequent to the date of the
initial Credit Extensions but prior to the U.S. Revolving Loan
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<PAGE>
Commitment Termination Date (PROVIDED, that the aggregate outstanding
principal amount of such U.S. Swing Line Loans, U.S. Revolving Loans
and U.S. Letter of Credit Outstandings at any time shall not exceed
the then existing U.S. Revolving Loan Commitment Amount);
(v) from the Canadian Lenders, a Canadian Revolving Loan Commitment
(to include availability for Canadian Revolving Loans, Canadian Swing Line
Loans and Canadian Letters of Credit) pursuant to which Borrowings of
Canadian Revolving Loans and Canadian Swing Line Loans, in a maximum
aggregate principal amount (together with all Canadian Letter of Credit
Outstandings) not to exceed the then existing Canadian Revolving Loan
Commitment Amount, will be made to the Canadian Borrower from time to time
on and subsequent to the date of the initial Credit Extensions but prior to
the Canadian Revolving Loan Commitment Termination Date;
(vi) from the Canadian Issuers (and participated in by the Canadian
Lenders), a Canadian Letter of Credit Commitment pursuant to which the
Canadian Issuers will issue Canadian Letters of Credit for the account of
the Canadian Borrower and, subject to Section 3.1.2 of the Credit
Agreement, the Canadian Borrower's Subsidiaries from time to time on and
subsequent to the date of the initial Credit Extensions but prior to the
Canadian Revolving Loan Commitment Termination Date in a maximum aggregate
Stated Amount at any one time outstanding not to exceed Cdn $13,000,000
(PROVIDED that the aggregate outstanding principal amount of Canadian
Revolving Loans and Canadian Letter of Credit Outstandings at any time
shall not exceed the then existing Canadian Revolving Loan Commitment
Amount); and
(vii) from the Canadian Swing Line Lender (and participated in by the
Canadian Lenders), a Canadian Swing Line Loan Commitment pursuant to which
Borrowings of Canadian Swing Line Loans in an aggregate outstanding
principal amount not to exceed the Cdn $1,400,000 will be made on and
subsequent to the date of the initial Credit Extensions but prior to the
Canadian Revolving Loan Commitment Termination Date (PROVIDED that the
aggregate outstanding principal amount of such Canadian Swing Line Loans,
Canadian Revolving Loans and Canadian Letter of Credit
4
<PAGE>
Outstandings at any time shall not exceed the then existing Canadian
Revolving Loan Commitment Amount.
WHEREAS, as contemplated by the Credit Agreement, immediately following the
making of the initial Credit Extensions, the Trustor and LHPG have delivered the
Assumption Agreement, pursuant to which Trustor has assumed (the "ASSUMPTION")
the rights and obligations of LHPG as (and has become) the U.S. Borrower under
the Credit Agreement;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) and the execution and delivery of the
Assumption Agreement (as defined in the Credit Agreement) under the Credit
Agreement, the Trustor is required to execute and deliver this Deed of Trust;
WHEREAS, (i) as a material inducement for the Lenders to enter into the Credit
Agreement and the other Loan Documents, (ii) to secure the payment and
performance of the Trustor's obligations under the Credit Agreement and the
other Loan Documents; and (iii) to secure the payment and performance of the
Secured Obligations, the Trustor is required to execute and deliver this Deed of
Trust to the Beneficiary; and
WHEREAS, the Trustor has duly authorized the execution, delivery and performance
of this Deed of Trust.
G R A N T:
NOW, THEREFORE, for and in consideration of the premises, and of the mutual
covenants herein contained, and in order to induce the Lenders to make the
Credit Extensions pursuant to the Credit Agreement, and in order to secure the
full, timely and proper payment and performance of and compliance with each and
every one of the Secured Obligations (as hereinafter defined), the Trustor
hereby irrevocably grants, bargains, sells, mortgages, warrants, aliens,
demises, releases, hypothecates, pledges, assigns, transfers and conveys to the
Trustee, the successors, successors in trust and assigns of Trustee, IN TRUST,
WITH POWER OF SALE, for the benefit of the Beneficiary and its successors and
assigns, forever, all of the following (the "TRUST PREMISES"):
5
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(a) REAL ESTATE. The leasehold estate in the Land created by the
Encumbered Lease and all rights, options and other benefits inuring to
Trustor under the Encumbered Lease, together with all and singular the
tenements, rights, easements, hereditaments, rights of way, privileges,
liberties, appendages and appurtenances now or hereafter belonging or in
any way pertaining to the Land and such additional lands and estates
therein (including, without limitation, all rights relating to storm and
sanitary sewer, water, gas, electric, railway and telephone services); all
development rights, air rights, riparian rights, water, water rights, water
stock, all rights in, to and with respect to any and all oil, gas, coal,
minerals and other substances of any kind or character underlying or
relating to the Land and such additional lands and estates therein and any
interest therein; all estate, claim, demand, right, title or interest of
the Trustor in and to any street, road, highway or alley, vacated or other,
adjoining the Land or any part thereof and such additional lands and
estates therein; all strips and gores belonging, adjacent or pertaining to
the Land or such additional lands and estates; and any after-acquired title
to any of the foregoing (herein collectively referred to as the "REAL
ESTATE");
(b) IMPROVEMENTS. All buildings, structures and other improvements
and any additions and alterations thereto or replacements thereof, now or
hereafter built, constructed or located upon the Real Estate; and, to the
extent that any of the following items of property constitutes fixtures
under applicable laws, all furnishings, fixtures, fittings, appliances,
apparatus, equipment, machinery, building and construction materials and
other articles of every kind and nature whatsoever and all replacements
thereof, now or hereafter affixed or attached to, placed upon or used in
any way in connection with the complete and comfortable use, enjoyment,
occupation, operation, development and/or maintenance of the Real Estate or
such buildings, structures and other improvements, including, but not
limited to, partitions, furnaces, boilers, oil burners, radiators and
piping, plumbing and bathroom fixtures, refrigeration, heating,
ventilating, air conditioning and sprinkler systems, other fire prevention
and extinguishing apparatus and materials, vacuum cleaning systems, gas and
electric fixtures, incinerators, compactors, elevators, engines, motors,
generators and all other articles of property
6
<PAGE>
which are considered fixtures under applicable law (such buildings,
structures and other improvements and such other property are herein
collectively referred to as the "IMPROVEMENTS"; the Real Estate and the
Improvements are herein collectively referred to as the "Property");
(c) GOODS. All building materials, goods, construction materials,
appliances (including, without limitation, stoves, ranges, ovens,
disposals, refrigerators, water fountains and coolers, fans, heaters,
dishwashers, clothes washers and dryers, water heaters, hood and fan
combinations, kitchen equipment, laundry equipment, kitchen cabinets and
other similar equipment), stocks, beds, mattresses, bedding and linens,
supplies, blinds, window shades, drapes, carpets, floor coverings,
manufacturing equipment and machinery, office equipment, growing plants and
shrubberies, control devices, equipment (including window cleaning,
building cleaning, swimming pool, recreational, monitoring, garbage, pest
control and other equipment), motor vehicles, tools, furnishings,
furniture, lighting, non-structural additions to the Real Estate and
Improvements and all other tangible property of any kind or character,
together with all replacements thereof, now or hereafter located on or in
or used or useful in connection with the complete and comfortable use,
enjoyment, occupation, operation, development and/or maintenance of the
Property, regardless of whether or not located on or in the Property or
located elsewhere for purposes of storage, fabrication or otherwise (herein
collectively referred to as the "GOODS");
(d) INTANGIBLES. All goodwill, trademarks, trade names, option
rights, purchase contracts, real and personal property tax refunds, books
and records and general intangibles of the Trustor relating to the
Property, and any other intangible property of the Trustor relating to the
Property (herein collectively referred to as the "INTANGIBLES");
(e) LEASES. All rights of the Trustor in, to and under all leases,
licenses, occupancy agreements, concessions and other arrangements, oral or
written, now existing or hereafter entered into, whereby any Person agrees
to pay money or any other consideration for the use, possession or
occupancy of, or any estate in, the Property or any portion thereof or
interest
7
<PAGE>
therein (herein collectively referred to as the "LEASES"), and the
right, subject to applicable law, upon the occurrence of any Event of
Default hereunder, to receive and collect the Rents (as hereinafter
defined) paid or payable thereunder;
(f) PLANS. All rights of the Trustor in and to all plans and
specifications, designs, drawings and other information, materials and
matters heretofore or hereafter prepared relating to the Improvements or
any construction on the Real Estate (herein collectively referred to as the
"PLANS");
(g) PERMITS. All rights of the Trustor, to the extent assignable,
in, to and under all permits, franchises, licenses, approvals and other
authorizations respecting the use, occupation and operation of the Property
and every part thereof and respecting any business or other activity
conducted on or from the Property, and any product or proceed thereof or
therefrom, including, without limitation, all building permits,
certificates of occupancy and other licenses, permits and approvals issued
by governmental authorities having jurisdiction (herein collectively
referred to as the "PERMITS");
(h) CONTRACTS. All right, title and interest of the Trustor in and to
all agreements, contracts, certificates, instruments, warranties,
appraisals, engineering, environmental, soils, insurance and other reports
and studies, books, records, correspondence, files and advertising
materials, and other documents, now or hereafter obtained or entered into,
as the case may be, pertaining to the construction, use, occupancy,
possession, operation, management, leasing, maintenance and/or ownership of
the Property and all right, title and interest of the Trustor therein
(herein collectively referred to as the "CONTRACTS");
(i) LEASES OF FURNITURE, FURNISHINGS AND EQUIPMENT. All right, title
and interest of the Trustor as lessee in, to and under any leases of
furniture, furnishings, equipment and any other Goods now or hereafter
installed in or at any time used in connection with the Property;
(j) RENTS. All rents, issues, profits, royalties, avails, income and
other benefits derived or owned, directly or indirectly, by the Trustor
from the
8
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Property, including, without limitation, all rents and other consideration
payable by tenants, claims against guarantors, and any cash or other
securities deposited to secure performance by tenants under the Leases
(herein collectively referred to as "Rents");
(k) CERTAIN RIGHTS UNDER THE ENCUMBERED LEASES. All rights of the
Trustor as lessee under each Encumbered Lease to exercise (i) any right to
renew the term of any Encumbered Lease, (ii) any right to purchase the
premises demised thereunder, (iii) any right to terminate any Encumbered
Lease as a result of a casualty or the condemnation of all or a portion of
the Land (the foregoing rights are referred to, collectively, as the
"SPECIAL ENCUMBERED LEASE RIGHTS");
(l) PROCEEDS. All proceeds of the conversion, voluntary or
involuntary of any of the foregoing into cash or liquidated claims,
including, without limitation, proceeds of insurance and condemnation
awards (herein collectively referred to as "PROCEEDS"); and
(m) OTHER PROPERTY. All other property and rights of the Trustor of
every kind and character relating to the Property, and all proceeds and
products of any of the foregoing;
AND, without limiting any of the other provisions of this Deed of Trust the
Trustor expressly grants to the Beneficiary, as secured party, a security
interest in all of those portions of the Trust Premises which are or may be
subject to the State Uniform Commercial Code provisions applicable to secured
transactions;
TO HAVE AND TO HOLD the Trust Premises and all parts thereof unto the
Trustee and the successors, successors-in-trust and assigns of the Trustee for
the benefit of the Beneficiary, its successors and assigns, forever.
FURTHER to secure the full, timely and proper payment and performance of
the Secured Obligations, the Trustor hereby covenants and agrees with and
warrants to the Trustee and the Beneficiary as follows:
9
<PAGE>
ARTICLE I
COVENANTS AND AGREEMENTS OF THE TRUSTOR
SECTION 1.1. PAYMENT OF SECURED OBLIGATIONS. (i) The Trustor agrees that:
(a) it will duly and punctually pay and perform or cause to be paid
and performed each of the Obligations at the time and in accordance with
the terms of the Loan Documents, and
(b) when and as due and payable from time to time in accordance with
the terms hereof or of any other Loan Documents, pay and perform, or cause
to be paid and performed, all other Secured Obligations.
SECTION 1.2. TITLE TO TRUST PREMISES, ETC. The Trustor represents and
warrants to and covenants with the Trustee and the Beneficiary that:
(a) as of the date hereof and at all times hereafter while this Deed
of Trust is outstanding, the Trustor is and shall be the absolute owner and
holder of the leasehold interest in the Property created by each Encumbered
Lease so long as such leasehold estate exists, and the absolute owner of
the legal and beneficial title to all other property included in the Trust
Premises, subject in each case only to this Deed of Trust, the encumbrances
set forth in SCHEDULE 2 hereto (collectively, the "PERMITTED ENCUMBRANCES")
and the terms and conditions of the Encumbered Lease;
(b) the Trustor has good and lawful right, power and authority to
execute this Deed of Trust and to convey, transfer, assign, mortgage and
grant a security interest in the Trust Premises, all as provided herein;
(c) this Deed of Trust has been duly executed, acknowledged and
delivered on behalf of the Trustor, all consents and other actions required
to be taken by the officers, directors, shareholders and partners, as the
case may be, of the Trustor have been duly and fully given and performed
and this Deed of Trust constitutes the legal, valid and binding obligation
of the Trustor, enforceable against the Trustor in accordance with its
terms; and
10
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(d) the Trustor, at its expense, will warrant and defend the Trustee
and the Beneficiary and any purchaser under the power of sale herein or at
any foreclosure sale Trustor's title to the Trust Premises and the first
deed of trust lien and first priority perfected security interest of this
Deed of Trust thereon and therein against all claims and demands and will
maintain, preserve and protect such lien and security interest and will
keep this Deed of Trust a valid, direct first deed of trust lien of record
on and a first priority perfected security interest in the Trust Premises
so long as the leasehold estate in the Property created by such Encumbered
Lease exists, subject only to the Permitted Encumbrances.
SECTION 1.3. TITLE INSURANCE.
SECTION 1.3.1. TITLE INSURANCE POLICY. Concurrently with the execution
and delivery of this Deed of Trust, the Trustor, at its expense, has obtained
and delivered to the Beneficiary a loan policy or policies of title insurance in
an amount, and in form and substance, satisfactory to the Beneficiary naming the
Beneficiary as the insured, insuring the title to and the first deed of trust
lien of this Deed of Trust on the leasehold interest created by each Encumbered
Lease in the Property with endorsements requested by the Beneficiary. The
Trustor has duly paid in full all premiums and other charges due in connection
with the issuance of such policy or policies of title insurance.
SECTION 1.3.2. TITLE INSURANCE PROCEEDS. All proceeds received by and
payable to the Beneficiary for any loss under the loan policy or policies of
title insurance delivered to the Beneficiary pursuant to SECTION 1.3.1, or under
any policy or policies of title insurance delivered to the Beneficiary in
substitution therefor or replacement thereof, shall be the property of the
Beneficiary and shall be applied by the Beneficiary in accordance with the
provisions of SECTION 2.3.
SECTION 1.4. RECORDATION. The Trustor, at its expense, will at all times
cause this Deed of Trust and any instruments amendatory hereof or supplemental
hereto and any instruments of assignment hereof or thereof (and any appropriate
financing statements or other instruments and
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continuations thereof), and each other instrument delivered in connection
with the Credit Agreement or any other Loan Document and intended thereunder
to be recorded, registered and filed, to be kept recorded, registered and
filed, in such manner and in such places, and will pay all such recording,
registration, filing fees, taxes and other charges, and will comply with all
such statutes and regulations as may be required by law in order to
establish, preserve, perfect and protect the lien and security interest of
this Deed of Trust as a valid, direct first deed of trust lien and first
priority perfected security interest in the Trust Premises, subject only to
the Permitted Encumbrances. The Trustor will pay or cause to be paid, and
will indemnify the Trustee and the Beneficiary in respect of, all taxes
(including interest and penalties) at any time payable in connection with the
filing and recording of this Deed of Trust and any and all supplements and
amendments hereto.
SECTION 1.5. PAYMENT OF IMPOSITIONS, ETC. Subject to SECTION 1.8
(relating to permitted contests), the Trustor will pay or cause to be paid at
least ten (10) days before the same would become delinquent and before any fine,
penalty, interest or cost may be added for non-payment, all taxes, assessments,
water and sewer rates, charges, license fees, inspection fees and other
governmental levies or payments, of every kind and nature whatsoever, general
and special, ordinary and extraordinary, unforeseen as well as foreseen, which
at any time may be assessed, levied, confirmed, imposed or which may become a
lien upon the Trust Premises, or any portion thereof, or which are payable with
respect thereto, or upon the rents, issues, income or profits thereof, or on the
occupancy, operation, use, possession or activities thereof, whether any or all
of the same be levied directly or indirectly or as excise taxes or as income
taxes, and all taxes, assessments or charges which may be levied on the Secured
Obligations, or the interest thereon (collectively, the "IMPOSITIONS"). The
Trustor will deliver to the Trustee and the Beneficiary, upon request, copies of
official receipts or other satisfactory proof evidencing such payments.
SECTION 1.6. INSURANCE AND LEGAL REQUIREMENTS. Subject to SECTION 1.8
(relating to permitted contests), the Trustor, at its expense, will comply in
all material respects, or cause compliance in all material respects with
(a) all provisions of any insurance policy covering or applicable
to the Trust Premises or any part thereof, all requirements of the issuer
of any
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such policy, and all orders, rules, regulations and other requirements
of the National Board of Fire Underwriters (or any other body exercising
similar functions) applicable to or affecting the Trust Premises or any
part thereof or any use or condition of the Trust Premises or any part
thereof (collectively, the "INSURANCE REQUIREMENTS"); and
(b) all laws, including Environmental, Health or Safety Requirements
of Law, statutes, codes, acts, ordinances, orders, judgments, decrees,
injunctions, rules, regulations, permits, licenses, authorizations,
directions and requirements of all governments, departments, commissions,
boards, courts, authorities, agencies, officials and officers, foreseen or
unforeseen, ordinary or extraordinary, which now or at any time hereafter
may be applicable to the Trust Premises or any part thereof, or any of the
adjoining sidewalks, curbs, vaults and vault space, if any, streets or
ways, or any use or condition of the Trust Premises or any part thereof
(collectively, the "LEGAL REQUIREMENTS");
whether or not compliance therewith shall require structural changes in or
interference with the use and enjoyment of the Trust Premises or any part
thereof.
SECTION 1.7. SECURITY INTERESTS, ETC. The Trustor will not directly or
indirectly create or permit or suffer to be created or to remain, and will
promptly discharge or cause to be discharged, any deed of trust, mortgage,
encumbrance or charge on, pledge of, security interest in or conditional sale or
other title retention agreement with respect to or any other lien on or in the
Trust Premises or any part thereof or the interest of the Trustor, the Trustee,
or the Beneficiary therein, or any Proceeds thereof or Rents or other sums
arising therefrom, other than: (a) Permitted Encumbrances; and (b) liens of
mechanics, materialmen, suppliers or vendors or rights thereto incurred in the
ordinary course of the business of the Trustor for sums not yet due or any such
liens or rights thereto which are at the time being contested as permitted by
SECTION 1.8. The Trustor will not postpone the payment of any sums for which
liens of mechanics, materialmen, suppliers or vendors or rights thereto have
been incurred (unless such liens or rights thereto are at the time being
contested as permitted by SECTION 1.8), or enter into any contract under which
payment of such sums is postponable (unless such contract expressly provides for
the legal, binding and effective
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waiver of any such liens or rights thereto), in either case, for more than
sixty (60) days after the completion of the action giving rise to such liens
or rights thereto.
SECTION 1.8. PERMITTED CONTESTS. After prior written notice to the
Beneficiary, the Trustor at its expense may contest, or cause to be contested,
by appropriate legal proceedings conducted in good faith and with due diligence,
the amount or validity or application, in whole or in part, of any Imposition,
Legal Requirement or Insurance Requirement or lien of a mechanic, materialman,
supplier or vendor, PROVIDED THAT, (a) in the case of an unpaid Imposition,
lien, encumbrance or charge, such proceedings shall suspend the collection
thereof from the Trustor, the Trustee, the Beneficiary, and the Trust Premises
(including any rent or other income therefrom) and shall not interfere with the
payment of any such rent or income, (b) neither the Trust Premises nor any rent
or other income therefrom nor any part thereof or interest therein would be in
any danger of being sold, forfeited, lost, impaired or interfered with, (c) in
the case of a Legal Requirement, neither the Trustor, the Trustee nor the
Beneficiary would be in danger of any material civil or criminal liability for
failure to comply therewith, (d) the Trustor shall have furnished such security,
if any, as may be required in the proceedings or as may be reasonably requested
by the Beneficiary, (e) the non-payment of the whole or any part of any
Imposition will not result in the delivery of a tax deed to the Trust Premises
or any part thereof because of such non-payment, (f) the payment of any sums
required to be paid with respect to any of the Notes or under this Deed of Trust
(other than any unpaid Imposition, lien, encumbrance or charge at the time being
contested in accordance with this SECTION 1.8) shall not be interfered with or
otherwise affected, (g) in the case of any Insurance Requirement, the failure of
the Trustor to comply therewith shall not affect the validity of any insurance
required to be maintained by the Trustor under SECTION 2.1, and (h) that
adequate reserves, determined in accordance with GAAP, shall have been set aside
on the Trustor's books.
SECTION 1.9. LEASES. The Trustor represents and warrants to the Trustee
and the Beneficiary that, as of the date hereof, there are no written or oral
leases or other agreements of any kind or nature relating to the occupancy of
any portion of the Property by any Person other than the Trustor. The
Trustor will not enter into any such written or oral lease or other agreement
with respect to any portion
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of the Property without first obtaining the written consent of the Beneficiary.
SECTION 1.10. COMPLIANCE WITH INSTRUMENTS. The Trustor at its expense
will promptly comply with all rights of way or use, privileges, franchises,
servitudes, licenses, easements, tenements, hereditaments and appurtenances
forming a part of the Property and all instruments creating or evidencing the
same, in each case, to the extent compliance therewith is required of the
Trustor under the terms thereof. The Trustor will not take any action which may
result in a forfeiture or termination of the rights afforded to the Trustor
under any such instruments and will not, without the prior written consent of
the Beneficiary, amend any of such instruments.
SECTION 1.11. MAINTENANCE AND REPAIR, ETC. Subject to the provisions of
SECTION 1.12, the Trustor will keep or cause to be kept all presently and
subsequently erected or acquired Improvements and the sidewalks, curbs, vaults
and vault space, if any, located on or adjoining the same, and the streets and
the ways adjoining the same, in good and substantial order and repair and in
such a fashion that neither the value nor utility of the Trust Premises will not
be diminished, and, at its sole cost and expense, will promptly make or cause to
be made all necessary and appropriate repairs, replacements and renewals
thereof, whether interior or exterior, structural or nonstructural, ordinary or
extraordinary, foreseen or unforeseen, so that its business carried on in
connection therewith may be properly conducted at all times. All repairs,
replacements and renewals shall be at least equal in quality, use and value to
the original Improvements. The Trustor at its expense will do or cause to be
done all shoring of foundations and walls of any building or other Improvements
on the Property and (to the extent permitted by law) of the ground adjacent
thereto, and every other act necessary or appropriate for the preservation and
safety of the Property by reason of or in connection with any excavation or
other building operation upon the Property and upon any adjoining property,
whether or not the Trustor shall, by any Legal Requirement, be required to take
such action or be liable for failure to do so.
SECTION 1.12. ALTERATIONS, ADDITIONS, ETC. So long as no Event of Default
shall have occurred and be continuing, the Trustor shall have the right at any
time and from time to time to make or cause to be made reasonable alterations of
and additions to the Property or any part thereof,
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PROVIDED THAT any alteration or addition: (a) shall not change the general
character or the use of the Property or reduce the fair market value thereof
below its value immediately before such alteration or addition, or impair the
usefulness of the Property; (b) is effected with due diligence, in a good and
workmanlike manner and in compliance with all Legal Requirements and
Insurance Requirements; (c) is promptly and fully paid for, or caused to be
paid for, by the Trustor; (d) is made, in case the estimated cost of such
alteration or addition exceeds U.S. $250,000, (i) only after the Beneficiary
shall have consented thereto and shall have reviewed and approved in writing
the plans and specifications therefor, (ii) under the supervision of a
qualified architect or engineer or another professional approved by the
Beneficiary and (iii) only after the Trustor shall have furnished to the
Beneficiary a performance bond or other security reasonably satisfactory to
the Beneficiary.
SECTION 1.13. ACQUIRED PROPERTY SUBJECT TO LIEN. All property at any time
acquired by the Trustor and provided or required by this Deed of Trust to be or
become subject to the lien and security interest hereof, whether such property
is acquired by exchange, purchase, construction or otherwise, shall forthwith
become subject to the lien and security interest of this Deed of Trust without
further action on the part of the Trustor, the Trustee or the Beneficiary. The
Trustor, at its expense, will execute and deliver to the Trustee and Beneficiary
(and will record and file as provided in SECTION 1.4) an instrument supplemental
to this Deed of Trust satisfactory in substance and form to the Beneficiary,
whenever such an instrument is necessary under applicable law to subject to the
lien and security interest of this Deed of Trust all right, title and interest
of the Trustor in and to all property provided or required by this Deed of Trust
to be subject to the lien and security interest hereof.
SECTION 1.14. ASSIGNMENT OF LEASES, RENTS, PROCEEDS, ETC. The assignment,
grant and conveyance of the Leases, Rents, Proceeds and other rents, income,
proceeds and benefits of the Trust Premises contained in the Granting Clause of
this Deed of Trust shall constitute an absolute, present and irrevocable
assignment, grant and conveyance, PROVIDED, HOWEVER, that permission is hereby
given to the Trustor, so long as no Event of Default has occurred hereunder, to
collect, receive and apply such Rents, Proceeds and other rents, income,
proceeds and benefits as they become due and payable, but not in advance
thereof, and
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in accordance with all of the other terms, conditions and provisions hereof,
of the Loan Documents, and of the Leases, contracts, agreements and other
instruments with respect to which such payments are made or such other
benefits are conferred. Upon the occurrence of an Event of Default, such
permission shall terminate immediately and automatically, without notice to
the Trustor or any other Person except as required by law, and shall not be
reinstated upon a cure of such Event of Default without the express written
consent of the Beneficiary. Such assignment shall be fully effective without
any further action on the part of the Trustor, the Trustee, or the
Beneficiary, and the Beneficiary shall be entitled, at its option, upon the
occurrence of an Event of Default hereunder, to collect, receive and apply
all Rents, Proceeds and all other rents, income, proceeds and benefits from
the Trust Premises, including all right, title and interest of the Trustor in
any escrowed sums or deposits or any portion thereof or interest therein,
whether or not the Trustee or the Beneficiary takes possession of the Trust
Premises or any part thereof. To the extent not prohibited by the relevant
Encumbered Lease, the Trustor further grants to the Beneficiary the right, at
the Beneficiary's option, upon the occurrence of an Event of Default
hereunder, to:
(a) enter upon and take possession of the Property for the purpose of
collecting Rents, Proceeds and said rents, income, proceeds and other
benefits;
(b) dispossess by the customary summary proceedings any tenant,
purchaser or other Person defaulting in the payment of any amount when and
as due and payable, or in the performance of any other obligation, under
any Lease, contract or other instrument to which said Rents, Proceeds or
other rents, income, proceeds or benefits relate;
(c) let or convey the Trust Premises or any portion thereof or any
interest therein; and
(d) apply Rents, Proceeds and such rents, income, proceeds and other
benefits, after the payment of all necessary fees, charges and expenses, on
account of the Secured Obligations in accordance with SECTION 3.11.
Trustor acknowledges and agrees that the acceptance by Beneficiary of the
assignments of the Leases, Rents and Proceeds with all of the rights, powers,
privileges and authority so created, shall not, prior to entry upon and taking
of possession of the Property by Beneficiary, be
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deemed or construed to constitute Beneficiary a mortgagee in possession nor
thereafter or at any time or in any event obligate Beneficiary to appear in
or defend any action or proceeding relating to the Leases or to the Property,
or to take any action hereunder, or to expend any money or incur any expenses
or perform or discharge any obligation, duty or liability under the Leases or
other agreements relating to the Trust Premises, or to assume any obligation
or responsibility for any security deposits or other deposits delivered to
Trustor by lessees thereunder and not assigned and delivered to Beneficiary,
nor shall Beneficiary be liable in any way for any injury or damage to person
or property sustained by any person or persons, firm or corporation, in or
about the Property.
Trustor hereby agrees to indemnify and hold Beneficiary harmless of and
from any and all liability, loss, damage or expense that it may or might incur
under or by reason of the assignments contained herein, or for any action taken
by Beneficiary hereunder, or by reason or in defense of any and all claims and
demands whatsoever that may be asserted against Beneficiary arising out of the
Leases, including without limitation any claim by any lessees of credit for
rental paid to and received by Trustor, but not delivered to Beneficiary, for
any period under the Leases more than one (1) month in advance of the due date
thereof. Should Beneficiary incur any such liability, loss, damage or expense,
the amount thereof (including reasonable attorneys' fees) with interest thereon
at the U.S. Alternate Base Rate from time to time in effect plus a margin of 2
1/2% shall be payable by Trustor immediately without demand, shall be secured by
this Deed of Trust, and shall be part of the Secured Obligations.
SECTION 1.15. NO CLAIMS AGAINST THE TRUSTEE OR THE BENEFICIARY. Nothing
contained in this Deed of Trust shall constitute any consent or request by the
Trustee or the Beneficiary, express or implied, for the performance of any labor
or the furnishing of any materials or other property in respect of the Property
or any part thereof, or be construed to permit the making of any claim against
the Trustee or the Beneficiary in respect of labor or services or the furnishing
of any materials or other property or any claim that any lien based on the
performance of such labor or the furnishing of any such materials or other
property is prior to the lien and security interest of this Deed of Trust. ALL
CONTRACTORS, SUBCONTRACTORS, VENDORS AND OTHER PERSONS DEALING WITH THE
PROPERTY, OR WITH ANY PERSONS
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INTERESTED THEREIN, ARE HEREBY REQUIRED TO TAKE NOTICE OF THE PROVISIONS OF
THIS SECTION.
SECTION 1.16. INDEMNIFICATION. The Trustor will protect, indemnify, save
harmless and defend the Trustee, the Beneficiary, the Lenders, and each of their
respective officers, directors, shareholders, employees, representatives and
agents (collectively, the "INDEMNIFIED PARTIES" and individually, an
"INDEMNIFIED PARTY"), from and against any and all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) imposed upon or
incurred by or asserted against any Indemnified Party by reason of (a) ownership
of an interest in this Deed of Trust, any other Loan Document or the Property,
(b) any accident, injury to or death of persons or loss of or damage to or loss
of the use of property occurring on or about the Property or any part thereof or
the adjoining sidewalks, curbs, vaults and vault spaces, if any, streets, alleys
or ways, (c) any use, non-use or condition of the Property or any part thereof
or the adjoining sidewalks, curbs, vaults and vault spaces, if any, streets,
alleys or ways, (d) any failure on the part of the Trustor to perform or comply
with any of the terms of this Deed of Trust, (e) performance of any labor or
services or the furnishing of any materials or other property in respect of the
Trust Premises or any part thereof made or suffered to be made by or on behalf
of the Trustor, (f) any negligence or tortious act on the part of the Trustor or
any of its agents, contractors, lessees, licensees or invitees, (g) any work in
connection with any alterations, changes, new construction or demolition of or
additions to the Property, or (h) (i) any Hazardous Material (as such term is
defined in the Credit Agreement) on, in, under or affecting all or any portion
of the Property, the groundwater, or any surrounding areas, (ii) any
misrepresentation, inaccuracy or breach of any warranty, covenant or agreement
contained or referred to in SECTIONS 1.20 and 1.21, (iii) any violation or claim
of violation by the Trustor of any Environmental, Health, or Safety Requirements
of Law, or (iv) the imposition of any lien for damages caused by or the recovery
of any costs for the cleanup, release or threatened release of any Hazardous
Material. If any action or proceeding be commenced, to which action or
proceeding any Indemnified Party is made a party by reason of the execution of
this Deed of Trust or any other Loan Document, or in which it becomes necessary
to defend or uphold the lien of this Deed of Trust, all sums paid by the
Indemnified Parties, for the expense of any litigation to prosecute or defend
the rights
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and lien created hereby or otherwise, shall be paid by the Trustor to such
Indemnified Parties, as the case may be, as hereinafter provided. The
Trustor will pay and save the Indemnified Parties harmless against any and
all liability with respect to any intangible personal property tax or similar
imposition of the State or any subdivision or authority thereof now or
hereafter in effect, to the extent that the same may be payable by the
Indemnified Parties in respect of this Deed of Trust, any Loan Document or
any Secured Obligation. All amounts payable to the Indemnified Parties under
this SECTION 1.16 shall be deemed indebtedness secured by this Deed of Trust
and any such amounts which are not paid within ten (10) days after written
demand therefor by any Indemnified Party shall bear interest at the rate
provided for in Section 5.2.2. of the Credit Agreement from the date of such
demand. In case any action, suit or proceeding is brought against any
Indemnified Party by reason of any such occurrence, the Trustor, upon request
of such Indemnified Party, will, at the Trustor's expense, resist and defend
such action, suit or proceeding or cause the same to be resisted or defended
by counsel designated by the Trustor and approved by such Indemnified Party.
The obligations of the Trustor under this SECTION 1.16 shall survive any
discharge or reconveyance of this Deed of Trust and payment in full of the
Secured Obligations.
SECTION 1.17. NO CREDIT FOR PAYMENT OF TAXES. The Trustor shall not be
entitled to any credit against the Secured Obligations by reason of the payment
of any tax on the Property or any part thereof or by reason of the payment of
any other Imposition, and shall not apply for or claim any deduction from the
taxable value of the Property or any part thereof by reason of this Deed of
Trust.
SECTION 1.18. OFFERING OF THE NOTES; APPLICATION OF PROCEEDS OF LOANS.
Neither the Trustor nor any Person acting on behalf of the Trustor has directly
or indirectly offered the Notes or any portion thereof or any similar security
to, or solicited any offer to buy any of the same from, any Person other than
the Beneficiary. Neither the Trustor nor any Person acting on behalf of the
Trustor has taken or will take any action which would subject the issuance of
the Notes to the provisions of section 5 of the Securities Act of 1933, as
amended. The Trustor (a) will not use or permit to be used any proceeds of the
Loans, directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of "purchasing" or "carrying" any "margin stock" within the meaning of
Regulation U of the Federal Reserve Board, as amended from time to time, and (b)
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has or will apply all of the proceeds of the Loans that are paid to it by the
Beneficiary to the purposes permitted by the Credit Agreement.
SECTION 1.19. ENCUMBERED LEASE. (a) The Trustor covenants and agrees that
it will promptly perform or cause to be performed all things necessary to
preserve and maintain the rights of the Trustor as lessee under the Encumbered
Lease, and use best efforts to prevent any termination, surrender, cancellation,
forfeiture or impairment thereof. The Trustor shall at all times fully perform
and comply with all agreements, covenants, terms and conditions imposed upon or
assumed by it as lessee under the Encumbered Lease prior to the expiration of
any notice and/or cure period provided in such Encumbered Lease. Upon receipt
by the Beneficiary from the lessor under the Encumbered Lease of any written
notice of default by the lessee thereunder, the Beneficiary may rely thereon and
take any action the Beneficiary deems necessary to prevent or to cure any
default by the Trustor in the performance of or compliance with any of the
agreements, covenants, terms or conditions imposed upon or assumed by the
Trustor as lessee under the Encumbered Lease, even though the existence of such
default or the nature thereof be questioned or denied by the Trustor or by any
party on behalf of the Trustor. Without limiting the generality of any other
provisions hereof, the Trustor hereby expressly grants to the Beneficiary, and
agrees that the Beneficiary shall have, the right to enter in and upon the
Property or any part thereof to such extent and as often as the Beneficiary
deems necessary or desirable for the purposes permitted by the immediately
preceding sentence. Subject to the foregoing, and without limiting
Beneficiary's other remedies under this Deed of Trust, the Beneficiary may pay
and expend such sums of money as the Beneficiary deems necessary for any such
purpose, and, in such event the amount so paid shall be immediately due and
payable, upon demand, together with interest thereon at the interest rate
provided for in the Credit Agreement for overdue payments, from the date of any
such payment by the Beneficiary to the date of repayment to the Beneficiary in
good and immediately available funds. If the Beneficiary takes any such action
to cure any such default by the Trustor, the Beneficiary shall notify the
Trustor thereof, provided however, that any failure by the Beneficiary so to
notify the Trustor shall not entitle the Trustor to challenge or otherwise
affect the validity of the Beneficiary's action or entitle the Trustor to any
claim for damages or any other claims, offsets or setoffs against the
Beneficiary.
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(b) The Trustor further covenants and agrees that:
(i) It shall not surrender any leasehold estate and interest
hereinabove described, nor terminate or cancel the Encumbered Lease prior
to the expiration of its term, and that it shall not without the express
written consent of the Beneficiary, which shall not be unreasonably
withheld, modify, change, supplement, alter or amend the Encumbered Lease
either orally or in writing, except if such modification, change,
supplement, alteration or amendment reduces the term, increases the rent,
materially increases Trustor's obligations under the Encumbered Lease,
materially decreases the Trustor's rights under the Encumbered Lease or
shall materially impair the Trustee's security interest in the Property or
the rights and remedies of the Trustee under this Deed of Trust, in which
cases the Beneficiary's consent may be withheld in its sole and absolute
discretion. As further security for the repayment of the indebtedness
secured hereby and for the performance of the covenants herein and in the
Encumbered Lease contained, the Trustor hereby assigns to the Beneficiary
all of its rights, privileges and prerogatives as lessee under the
Encumbered Lease to terminate, cancel, modify, change, supplement, alter or
amend the Encumbered Lease, and any termination, cancellation,
modification, change, supplement, alteration or amendment of the Encumbered
Lease without the prior written consent thereto by the Beneficiary, as set
forth above and pursuant to the conditions set forth herein, shall be void
and of no force and effect.
(ii) No release or forbearance of any of the Trustor's obligations
under the Encumbered Lease, pursuant to the Encumbered Lease or otherwise,
shall release the Trustor from any of its obligations under this Deed of
Trust, including, without limitation, its obligations with respect to the
payment of rent as provided for in the Encumbered Lease and the performance
of all of the terms, provisions, covenants, conditions and agreements
contained in the Encumbered Lease, to be kept, performed and complied with
by the lessee therein.
(iii) Unless the Beneficiary shall otherwise expressly consent in
writing, the fee title to the Land, the Trustor's interest in the
improvements on the Land and the leasehold estate created by the Encumbered
Lease shall not merge and shall always remain separate
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and distinct, notwithstanding the union of said estates either in the
lessor or in the lessee, or in a third party by purchase or otherwise. If
notwithstanding the foregoing a merger of such fee and leasehold estate
is deemed to have occurred, then this Deed of Trust shall nonetheless
remain in full force and effect in accordance with the terms hereof and
shall encumber the entire merged fee and leasehold estate.
(iv) The Trustor will not appoint or consent to the appointment of an
arbitrator pursuant to any provision of the Encumbered Lease so providing
without the prior written consent of the Beneficiary, except to the extent
the Encumbered Lease shall provide for such appointment. The Trustor shall
promptly notify the Beneficiary in writing of any request made by the
Trustor, as lessee under the Encumbered Lease, or the lessor thereunder,
for arbitration proceedings pursuant to the Encumbered Lease and of the
institution of any arbitration proceedings, as well as all proceedings
thereunder. In addition, the Trustor shall promptly deliver to the
Beneficiary a copy of the determination of the arbitrators in each such
arbitration proceeding. The Beneficiary shall have the right to
participate with the Trustor or on its own behalf as an interested party in
accordance with the terms of the Encumbered Lease.
(v) The Trustor shall not consent to the subordination of the
Encumbered Lease to any mortgage, deed of trust or other lien on the fee
interest of the lessor under the Encumbered Lease.
(vi) If the Trustor acquires fee simple title or any other estate,
title or interest in the Land, the Trustor shall promptly notify the
Beneficiary of such acquisition and, upon receipt of a written request by
the Beneficiary, shall cause to be executed and recorded all such other and
further assurances or other instruments in writing as may in the opinion of
the Beneficiary be required or desirable to carry out the intent and
meaning of CLAUSE (III) above.
(vii) Within ten (10) days after the Trustor's receipt of any notice
of any motion, application or effort to reject the Encumbered Lease by the
lessor thereunder or any trustee arising from or in connection with any
case, proceeding or other action commenced or pending by or against such
lessor under the Bankruptcy
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Code or any comparable provisions contained in any present or future
Federal, state, local, foreign or other statute, law, rule or regulation
("COMPARABLE PROVISIONS"), the Trustor shall give notice thereof to the
Beneficiary. The Trustor hereby (A) assigns to the Beneficiary any and
all of the Trustor's rights as lessee under Section 365(h) of the
Bankruptcy Code or any Comparable Provisions, and (B) covenants that it
shall not elect to treat the Encumbered Lease as terminated pursuant to
Section 365(h) of the Bankruptcy Code without first obtaining the prior
written consent of the Beneficiary, and (C) agrees that any such election
by the Trustor without such consent shall be null and void.
(viii) Without limiting the generality of the foregoing, the Trustor
hereby assigns, transfers and sets over to the Beneficiary all of the
Trustor's claims and rights to the payment of damages arising from any
rejection by the lessor under the Encumbered Lease under the Bankruptcy
Code or any Comparable Provision. The Beneficiary shall have the right to
proceed in its own name or in the name of the Trustor in respect of any
claim, suit, action or proceeding relating to the rejection of the
Encumbered Lease, including, without limitation, the right to file and
prosecute, to the exclusion of the Trustor, any proofs of claim,
complaints, motions, applications, notices and other documents, in any case
in respect of the lessor thereunder under the Bankruptcy Code or any
Comparable Provision. This assignment constitutes a present and
irrevocable assignment of the foregoing claims, rights and remedies, and
shall continue in effect until all of the indebtedness shall have been
satisfied and discharged in full. Any amounts received by the Beneficiary
in damages arising out of the rejection of the Encumbered Lease as
aforesaid shall be applied first to all reasonable costs and expenses of
the Beneficiary (including, without limitation, reasonable attorneys' fees
and disbursements), incurred in connection with the exercise of any of its
rights or remedies under this SECTION 1.19.
(ix) If there shall be filed by or against the Trustor a petition
under the Bankruptcy Code or any Comparable Provision and the Trustor, as
lessee under the Encumbered Lease, shall determine to reject the Encumbered
Lease, the Trustor shall give the Beneficiary not less than thirty (30)
days prior notice
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of the date on which the Trustor shall apply to the United States
Bankruptcy Court or other judicial body with appropriate jurisdiction for
authority to reject the Encumbered Lease; the Beneficiary shall have the
right, but not the obligation, to serve upon the Trustor within such thirty
(30) day period a notice stating that (a) the Beneficiary demands that the
Trustor assume and assign the Encumbered Lease to the Beneficiary pursuant
to Section 365 of the Bankruptcy Code or any Comparable Provision and
(b) the Beneficiary covenants to cure or provide adequate assurance of
prompt cure of all defaults and provide adequate assurance of future
performance under the Encumbered Lease. If the Beneficiary serves upon the
Trustor the notice described in the preceding sentence, the Trustor shall
not seek to reject the Encumbered Lease and shall comply with the demand
provided for in subclause (a) of the preceding clause within thirty (30)
days after the notice shall have been given subject to the performance by
the Beneficiary of the covenant provided for in subclause (b) of the
preceding clause. Effective upon the entry of an order for relief in
respect of the Trustor under Chapter 7 of the Bankruptcy Code or any
Comparable Provision, the Trustor hereby assigns and transfers to the
Beneficiary a non-exclusive right to apply to the Bankruptcy Court or
other judicial body with appropriate jurisdiction for an order extending
the period during which the Encumbered Lease may be rejected or assumed.
(x) The Trustor shall promptly give to the Beneficiary copies of (A)
all notices of default or (B) any other communications or notices with
respect to events which relate to the likely impairment of the security of
this Deed of Trust which it shall give or receive under the Encumbered
Lease and shall promptly notify the Beneficiary of any default under the
Encumbered Lease on the part of the lessor or the Trustor thereunder.
(xi) The Trustor shall notify the Beneficiary within ten (10) business
days after the Trustor becomes aware of the transfer of the fee interest in
the Land or any portion thereof.
(c) The Trustor hereby represents and warrants that (i) to the best of its
knowledge, the Encumbered Lease is in full force and effect, (ii) all rent and
additional rent payable under the Encumbered Lease has been paid to the
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extent they were due and payable to the date hereof, and (iii) it has not
received any written notices that any event of default has occurred under the
Encumbered Lease and has no knowledge that any event has occurred which, with
the giving of notice, the passage of time, or both, would constitute an event
of default under the Encumbered Lease.
(d) The Trustor hereby acknowledges that if the Encumbered Lease shall be
terminated prior to the expiration of its term due to default by the lessee
thereunder, and if the Beneficiary or its designee shall acquire from the lessor
thereunder a new lease of the Real Estate or any portion thereof, the Trustor
shall have no right, title or interest in or to such lease or the leasehold
estate created thereby, or the options therein contained, if any.
(e) None of the rights and privileges granted to the Trustor hereunder or
under any other Loan Document is in any way intended to diminish or lessen the
Trustor's obligations under subparagraph (a) of this SECTION 1.19.
(f) Without the prior written consent of the Beneficiary, except as
hereafter provided, the Trustor will not exercise or waive any of the Special
Encumbered Lease Rights. Upon receipt of a reasonable and written request made
by the Beneficiary, the Trustor will exercise any or all of the Special
Encumbered Lease Rights. The Trustor hereby grants and assigns to the
Beneficiary the right to exercise at any time any or all of the Special
Encumbered Lease Rights by and on behalf of the Trustor and, upon request made
by the Beneficiary, the Trustor will promptly (and in any event within ten (10)
days after request) take such actions and execute such instruments as are
requested by the Beneficiary to evidence to any third party the Beneficiary's
rights to so exercise the Special Encumbered Lease Rights. Notwithstanding the
assignment of the Special Encumbered Lease Rights to the Beneficiary, the
Trustor shall retain the nonexclusive right to exercise, without the concurrence
of the Beneficiary, any of the Special Encumbered Lease Rights other than the
right to terminate the Encumbered Lease as a result of condemnation of the Land.
SECTION 1.20. SECURITY AGREEMENT. With respect to the items of personal
property and fixtures referred to and described in the Granting Clause of this
Deed of Trust and included as part of the Trust Premises, this Deed of Trust is
hereby made and declared to be a security agreement encumbering each and every
item of personal property and
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fixtures now or hereafter owned by Trustor and included herein as a part of
the Trust Premises, in compliance with the provisions of the Uniform
Commercial Code as enacted in the State. In this respect (and
notwithstanding the conveyance to the Trustee rather than directly to the
Beneficiary as provided in this Deed of Trust), Trustor, as "Debtor",
expressly grants to Beneficiary, as "Secured Party", a security interest in
and to all of the property now or hereafter owned by Trustor which
constitutes the personal property and fixtures hereinabove referred to and
described in this Deed of Trust, including all extensions, accessions,
additions, improvements, betterments, renewals, replacements and
substitutions thereof or thereto, and all proceeds from the sale or other
disposition thereof. Trustor agrees that Beneficiary may file this Deed of
Trust, or a reproduction thereof, in the real estate records or other
appropriate index, as, and this Deed of Trust shall be deemed to be, a
financing statement filed as a fixture filing in accordance with California
Uniform Commercial Code Section 9402. Any reproduction of this Deed of
Trust or of any other security agreement or financing statement shall be
sufficient as a financing statement. In addition, Trustor agrees to execute
and deliver to Beneficiary, upon Beneficiary's request, any other security
agreement and financing statements, as well as extensions, renewals, and
amendments thereof, and reproductions of this Deed of Trust, in such form as
Beneficiary may require to perfect a security interest with respect to said
items. Trustor shall pay all costs of filing such financing statements and
any extensions, renewals, amendments and releases thereof, and shall pay all
reasonable costs and expenses of any record searches for financing statements
Beneficiary may reasonably require. Without the prior written consent of
Beneficiary, Trustor shall not create or suffer to be created pursuant to the
Uniform Commercial Code any other security interest in the above-described
personal property and fixtures, including any replacements and additions
thereto. Upon the occurrence of an Event of Default under this Deed of
Trust, or any other violation of the covenants, terms and conditions of the
security agreement contained herein, the Beneficiary shall have and shall be
entitled to exercise any and all of the rights and remedies (i) as prescribed
in this Deed of Trust, or (ii) as prescribed by general law, or (iii) as
prescribed by the specific statutory provisions now or hereafter enacted and
specified in said Uniform Commercial Code, all at Beneficiary's sole
election. Trustor and Beneficiary agree that the filing of any financing
statements in the records normally having to do with personal property shall
not in any way affect the
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agreement of Trustor and Beneficiary that everything located in, on or about,
or used or intended to be used with or in connection with the use, operation
or enjoyment of, the Trust Premises, which is described or reflected as a
fixture in this Deed of Trust, is, and at all times and for all purposes and
in all proceedings, both legal and equitable, shall be, regarded as part of
the Real Estate conveyed hereby. Trustor warrants that Trustor's name,
identity and address are as set forth herein. The mailing address of the
Beneficiary from which information may be obtained concerning the security
interest created herein is also set forth herein. This information hereof is
provided in order that this Deed of Trust shall comply with the requirements
of the Uniform Commercial Code as enacted in the State for instruments to be
filed as financing statements. In accordance with California Uniform
Commercial Code Section 9402, this Deed of Trust shall remain effective as a
fixture filing until this Deed of Trust is released or satisfied of record or
its effectiveness otherwise terminates as to the Trust Premises.
SECTION 1.21. REPRESENTATIONS AND WARRANTIES. In order to induce the
Beneficiary to enter into this Deed of Trust, the Credit Agreement and the other
Loan Documents, the Trustor agrees that all of the representations and
warranties set forth in the Credit Agreement are incorporated into this Deed of
Trust by reference as if fully set forth herein.
SECTION 1.22. TRUSTOR'S COVENANTS. In order to induce the Beneficiary to
enter into this Deed of Trust, the Credit Agreement and the other Loan
Documents, the Trustor agrees that all of the covenants set forth in the Credit
Agreement are incorporated into this Deed of Trust by reference as if fully set
forth.
ARTICLE II
INSURANCE; DAMAGE, DESTRUCTION OR TAKING, ETC.
SECTION 2.1. INSURANCE.
SECTION 2.1.1. RISKS TO BE INSURED. The Trustor will, at its expense,
maintain or cause to be maintained by insurance carriers that meet the standards
set forth below: (a) insurance with respect to the Improvements against loss or
damage by fire, lightning and such other risks as are included in standard
"all-risk" policies, in amounts
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sufficient to prevent the Trustor, the Trustee and the Beneficiary from
becoming a co-insurer of any partial loss under the applicable policies, but
in any event in amounts not less than the then full insurable value (actual
replacement value) of the Improvements, as determined by the Trustor in
accordance with generally accepted insurance practice and reasonably approved
by the Beneficiary or, at the request of the Beneficiary, as determined at
the Trustor's expense by the insurer or insurers or by an expert reasonably
approved by the Beneficiary, (b) comprehensive public liability, including
bodily injury and product liability and property damage insurance, with
personal injury endorsements, applicable to the Property in such amounts as
are usually carried by Persons of comparable size engaged in the same or
similar business and similarly situated in the same general locality, but in
any event with a combined single limit of not less than Twenty Million
Dollars ($20,000,000) per occurrence, (c) explosion insurance in respect of
any steam and pressure boilers and similar apparatus located in the Property
in such amounts as are usually carried by Persons of comparable size engaged
in the same or a similar business and similarly situated the same general
locality, but in any event in an amount not less than Twenty Million Dollars
($20,000,000), (d) business interruption insurance (including added expense
coverage) against all insurable perils for a period of not fewer than twelve
(12) months (subject to a reasonable aggregate deductible not exceeding five
(5) days per annum), and (e) worker's compensation insurance to the full
extent required by applicable law for all employees of the Trustor engaged in
any work on or about the Property and employer's liability insurance with a
limit of not less than Ten Million Dollars ($10,000,000) for each occurrence.
All such insurance shall be provided (i) by insurers authorized by Lloyds
of London to underwrite such risks, (ii) by insurers having an A.M. Best
policyholders rating of not less than A- (except with respect to insurers
providing workers compensation insurance, in which case such insurers shall have
an A.M. Best policyholders rating of not less than B+) or (iii) by such other
insurers as the Beneficiary may approve in writing; PROVIDED, HOWEVER, that if
the rating of any of the insurers providing insurance hereunder is downgraded,
the Trustor shall only be required to obtain replacement insurance with an
insurer satisfying the requirements hereof at the stated expiration of the
insurance policy maintained with the insurer whose rating was so downgraded.
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SECTION 2.1.2. POLICY PROVISIONS. All insurance maintained by the Trustor
pursuant to SECTION 2.1.1 shall (a) (except for worker's compensation insurance)
name the Trustor as the insured with the Beneficiary named as mortgagee and loss
payee, (b) (except for worker's compensation and public liability insurance)
provide that the proceeds for any losses shall be adjusted by the Trustor
subject to the reasonable approval of the Beneficiary in the event the proceeds
shall exceed Two Hundred Fifty Thousand Dollars ($250,000), and shall be
payable to the Beneficiary, to be held and applied as provided in SECTION 2.3,
(c) include effective waivers by the insurer of all rights of subrogation
against any named insured, the indebtedness secured by this Deed of Trust and
the Property and all claims for insurance premiums against the Trustee and the
Beneficiary, (d) provide that any losses shall be payable notwithstanding
(i) any act, failure to act or negligence of or violation of warranties,
declarations or conditions contained in such policy by any named insured,
(ii) the occupation or use of the Property for purposes more hazardous than
permitted by the terms thereof, (iii) any foreclosure or other action or
proceeding taken by the Beneficiary pursuant to any provision of this Deed of
Trust, or (iv) any change in title or ownership of the Property, (e) provide
that no cancellation, reduction in amount or material change in coverage thereof
or any portion thereof shall be effective until at least ten (10) days after
receipt by the Beneficiary of written notice thereof, (f) provide that any
notice under such policies shall be simultaneously delivered to the Beneficiary,
and (g) be reasonably satisfactory in all other material respects to the
Beneficiary. Any insurance maintained pursuant to this SECTION 2.1 may be
evidenced by blanket insurance policies covering the Property and other
properties or assets of the Trustor, and shall in all other respects comply with
the requirements of this SECTION 2.1.
SECTION 2.1.3. DELIVERY OF POLICIES, ETC. The Trustor will deliver to the
Beneficiary, promptly upon request: (a) certified copies of all policies
evidencing all insurance required to be maintained under SECTION 2.1.1 (or, in
the case of blanket policies, certificates thereof by the insurers together with
a copy of each blanket policy), and (b) evidence, in the form of receipted
bills, as to the payment of all premiums due thereon (with respect to public
liability insurance policies, all installments for the current year due thereon
to such date), PROVIDED THAT the Beneficiary shall not be deemed by reason of
its custody of such policies to have knowledge of the contents thereof.
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The Trustor will also deliver to the Beneficiary not later than thirty (30)
days prior to the expiration of any policy a binder or certificate of the
insurer evidencing the replacement thereof. In the event the Trustor shall
fail to effect or maintain any insurance required to be effected or
maintained pursuant to the provisions of this SECTION 2.1, the Trustor will
indemnify the Trustee and the Beneficiary against damage, loss or liability
resulting from all risks for which such insurance should have been effected
or maintained.
SECTION 2.1.4. SEPARATE INSURANCE. The Trustor will not take out separate
insurance concurrent in form or contributing in the event of loss with that
required to be maintained pursuant to this SECTION 2.1.
SECTION 2.2. DAMAGE, DESTRUCTION OR TAKING; TRUSTOR TO GIVE NOTICE;
ASSIGNMENT OF AWARDS. In case of
(a) any damage to or destruction of the Trust Premises or any part
thereof, or
(b) any taking, whether for permanent or temporary use, of all or any
part of the Trust Premises or any interest therein or right accruing
thereto, as the result of or in anticipation of the exercise of the right
of condemnation or eminent domain, or a change of grade affecting the Trust
Premises or any portion thereof (a "TAKING"), or the commencement of any
proceedings or negotiations which may result in a Taking,
the Trustor will promptly give written notice thereof to the Trustee and the
Beneficiary, generally describing the nature and extent of such damage or
destruction and the Trustor's best estimate of the cost of restoring the Trust
Premises, or the nature of such proceedings or negotiations and the nature and
extent of the Taking which might result therefrom, as the case may be. Subject
to Section 2.3, the Beneficiary shall be entitled to all insurance proceeds
payable on account of such damage or destruction and to all awards or payments
allocable to the Trust Premises on account of such Taking and the Trustor hereby
irrevocably assigns, transfers and sets over to the Beneficiary all rights of
the Trustor to any such proceeds, awards or payments and irrevocably authorizes
and empowers the Beneficiary, at its option, in the name of the Trustor or
otherwise, to file and prosecute what would otherwise be the Trustor's claim for
any such proceeds, award or payment and
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to collect, receipt for and retain the same for disposition in accordance
with SECTION 2.3. The Trustor will pay all reasonable costs and expenses
incurred by the Trustee or the Beneficiary in connection with any such
damage, destruction or Taking and seeking and obtaining any insurance
proceeds, awards or payments in respect thereof.
SECTION 2.3. APPLICATION OF PROCEEDS AND AWARDS. The Beneficiary may, at
its option, apply all amounts recovered under any insurance policy required to
be maintained by the Trustor hereunder and all awards received by it on account
of any Taking in any one or more of the following ways:
(a) to the payment of the reasonable costs and expenses incurred by
the Trustee, or the Beneficiary, in obtaining any such insurance proceeds
or awards, including the fees and expenses of attorneys and insurance and
other experts and consultants, the costs of litigation, arbitration,
mediation, investigations and other judicial, administrative or other
proceedings and all other out-of-pocket expenses;
(b) to the payment of the principal of the Credit Extensions and any
interest (including post-petition interest payable in any proceedings for
bankruptcy under applicable law ("POST PETITION INTEREST") to the extent
such interest is a Secured Obligation) accrued and unpaid thereon, without
regard to whether any portion or all of such amounts shall be matured or
unmatured, together with interest at the rate provided for in the Credit
Agreement on any overdue principal and (to the extent permitted by
applicable law) interest; and, in case such amount shall be insufficient to
pay in full all such amounts, then such amount shall be applied, FIRST, to
the payment of all amounts of interest (including Post-Petition Interest to
the extent such interest is a Secured Obligation) accrued on the Credit
Extensions and unpaid, SECOND, to the payment of all amounts of principal
at the time outstanding;
(c) to the payment of, or the application to, any Secured Obligation
(other than as provided in clause (b) above);
(d) to fulfill any of the other covenants contained herein, in the
Credit Agreement, or in any other Loan Document, as the Beneficiary may
determine in its sole discretion;
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(e) to the Trustor for application to the cost of restoring the Trust
Premises and the replacement of Goods destroyed, damaged or taken; or
(f) to the Trustor.
Notwithstanding the foregoing provisions of this SECTION 2.3 to the
contrary (but subject to the provisions of SECTION 2.4), and if each of the
following conditions is satisfied, the Beneficiary, upon request of the Trustor,
shall apply insurance proceeds or condemnation awards received by it to the
restoration or replacement of the Trust Premises, to the extent necessary for
the restoration or replacement thereof:
(i) there shall then exist no uncured Default of which Trustor
has received notice thereof;
(ii) the Trustor shall furnish to the Beneficiary a certificate
of an architect or engineer reasonably acceptable to the Beneficiary
stating (x) that the Trust Premises is capable of being restored,
prior to the maturity of the Credit Agreement, to substantially the
same condition as existed prior to the casualty or Taking, (y) the
aggregate estimated direct and indirect costs of such restoration and
(z) as to any Taking, that the property taken in such Taking, or sold
under threat thereof, is not necessary to the Trustor's customary use
or occupancy of the Property; and
(iii) in the event that the estimated cost of restoration set
forth in the certificate of such architect or engineer (and such
revisions to such estimate as are from time to time made) exceeds the
net insurance proceeds or condemnation awards actually received from
time to time, the Trustor shall deposit the amount of such excess with
the Beneficiary.
In the event that such insurance proceeds or condemnation awards are to be
utilized in the restoration of the Trust Premises, the Beneficiary shall
disburse such Proceeds and the additional amounts deposited by the Trustor for
such restoration after receipt of a written request for disbursement, on not
fewer than five (5) nor more than twelve (12) Business Days notice and, to the
extent
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applicable, in accordance with customary construction loan procedures and
conditions. In the event that such insurance or condemnation awards are to
be utilized to replace the Trust Premises so destroyed or taken, the
Beneficiary shall disburse such Proceeds after receipt of a written request
for disbursement, on not fewer than five (5) Business Days nor more than
twelve (12) Business Days notice simultaneously with the acquisition of such
replacement property by the Trustor. In the event that, after the
restoration or replacement of the Trust Premises, any insurance or
condemnation awards shall remain, such amount shall be paid to the Trustor.
Insurance proceeds and condemnation awards shall be invested in the manner
reasonably requested by the Trustor and approved by the Beneficiary, and all
interest earned thereon shall be applied as provided in this SECTION 2.3.
If, prior to the receipt by the Beneficiary of such insurance proceeds or
condemnation awards, the Trust Premises shall have been sold on foreclosure,
the Beneficiary shall have the right to receive said insurance proceeds or
condemnation awards to the extent of any deficiency found to be due upon such
sale, with legal interest thereon, whether or not a deficiency judgment shall
have been sought or recovered or denied, and the reasonable attorneys' fees,
costs and disbursements incurred by the Beneficiary in connection with the
collection of such award or payment.
SECTION 2.4 TOTAL TAKING AND TOTAL DESTRUCTION. In the event of a Total
Destruction or a Total Taking, the Beneficiary shall apply all amounts recovered
under any insurance policy referred to in SECTION 2.1.1 and all awards received
by it on account of any such Taking as follows:
(a) first, to the payment of the reasonable costs and expenses
incurred by the Beneficiary in obtaining any such insurance proceeds or
awards, including the fees and expenses of attorneys and insurance and
other experts and consultants, the costs of litigation, arbitration,
mediation, investigations and other judicial, administrative or other
proceedings and all other out-of-pocket expenses;
(b) second, to the payment of the principal of the Credit Extensions
and any interest (including Post-Petition Interest to the extent such
interest is a Secured Obligation) accrued and unpaid thereon, without
regard to whether any portion or all of such amounts shall be matured or
unmatured, together with interest at the rate provided for in the Credit
Agreement on any
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overdue principal and (to the extent permitted by applicable law) interest;
and, in case such amount shall be insufficient to pay in full all such
amounts, then such amount shall be applied, FIRST, to the payment of all
amounts of interest (including Post-Petition Interest to the extent such
interest is a Secured Obligation) accrued on the Credit Extensions and
unpaid, and SECOND, to the payment of all amounts of principal at the
time outstanding;
(c) third, to the payment of, or the application to, any Secured
Obligation (other than as provided in CLAUSE (B) above);
(d) fourth, to fulfill any of the other covenants contained herein as
the Beneficiary may determine; and
(e) fifth, the balance, if any, to the Trustor.
ARTICLE III
EVENTS OF DEFAULT; REMEDIES, ETC.
SECTION 3.1. EVENTS OF DEFAULT; ACCELERATION. If an "Event of Default"
(pursuant to and as defined in the Credit Agreement) shall have occurred, then
and in any such event the Beneficiary may at any time thereafter (unless all
Events of Default shall theretofore have been remedied and all costs and
expenses, including, without limitation, attorneys' fees and expenses incurred
by or on behalf of the Beneficiary, shall have been paid in full by the Trustor)
declare, by written notice to the Trustor, the Loans and all other Secured
Obligations to be due and payable immediately or on a date specified in such
notice, (provided that, upon the occurrence of any Event of Default described in
Section 10.1.9. of the Credit Agreement, the Loans and all other Secured
Obligations shall automatically become due and payable), and on such date the
same shall be and become due and payable, together with interest accrued
thereon, without presentment, demand, protest or notice, all of which the
Trustor hereby waives. The Trustor will pay on demand all costs and expenses,
including without limitation, attorneys' fees and expenses, incurred by or on
behalf of the Beneficiary in enforcing this Deed of Trust, or any other Loan
Document, or occasioned by any default hereunder or thereunder.
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SECTION 3.2. LEGAL PROCEEDINGS; FORECLOSURE. If an Event of Default shall
have occurred, the Trustee at any time may, at its election, proceed at law or
in equity or otherwise to enforce the payment and performance of the Secured
Obligations in accordance with the terms hereof and thereof and to foreclose the
lien of this Deed of Trust as against all or any part of the Trust Premises and
to have the same sold under the judgment or decree of a court of competent
jurisdiction. The Beneficiary shall be entitled to recover in such proceedings
all costs incident thereto, including the Trustee's fees and attorneys' fees and
expenses in such amounts as may be fixed by the court.
SECTION 3.3. POWER OF SALE. If an Event of Default shall have occurred,
the Trustee may grant, bargain, sell, assign, transfer, convey and deliver the
whole or, from time to time, any part of the Trust Premises, or any interest in
any part thereof, at any private sale or at public auction, with or without
demand, advertisement or notice, for cash, on credit or for other property, for
immediate or future delivery, and for such price or prices and on such terms as
the Trustee in its uncontrolled discretion may determine, or as may be required
by law, and upon such sale the Trustee may execute and deliver to the
purchaser(s) instruments of conveyance pursuant to the terms hereof and to
applicable laws. Without limiting the authority granted in this SECTION 3.3,
the Trustee shall, without demand on the Trustor, after the lapse of such time
as may then be required by law, and notice of default and notice of sale having
been given as then required by law, sell the Trust Premises on the date and at
the time and place designated in the notice of sale, either as a whole or in
separate parcels and in such order as the Trustee may determine, but subject to
any statutory right of the Trustor to direct the order in which such property,
if consisting of several known lots, parcels or interests, shall be sold, at
public auction to the highest bidder, the purchase price payable in lawful money
of the United States at the time of sale. The Person conducting the sale may,
for any cause deemed expedient, postpone the sale from time to time until it
shall be completed and, in every such case, notice of postponement shall be
given by public declaration thereof by such Person at the time and place last
appointed for the sale. The Trustee shall execute and deliver to the purchaser
at any such sale a trustee's deed conveying the property so sold, but without
any covenant or warranty, express or implied. The recitals in such trustee's
deed of any matters or facts shall be conclusive proof of the truthfulness
thereof. Any Person, including the Trustee or Beneficiary, may bid at the
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sale. The Trustee shall apply the proceeds of the sale, to the extent
consistent with this Deed of Trust, to the payment of (a) the costs and
expenses of exercising the power of sale and of the sale, including the
payment of attorneys' fees and costs, (b) the cost of any evidence of title
procured in connection with such sale, (c) all sums expended under the terms
hereof in conjunction with any default provision hereof, not then repaid,
with accrued interest at the rate provided for in the Credit Agreement from
the date of incurrence, (d) outstanding principal and interest under the
Credit Agreement, (e) all Secured Obligations (other than as provided in
clause (d) above). The Trustee shall give the remainder, if any, of the
proceeds of the sale to the Person or Persons legally entitled thereto, or
the Trustee, in the Trustee's discretion, may deposit the balance of such
proceeds with any court or public official authorized to receive such
proceeds.
SECTION 3.4. UNIFORM COMMERCIAL CODE REMEDIES. If an Event of Default
shall have occurred, the Beneficiary may exercise from time to time and at any
time any rights and remedies available to it under applicable law upon default
in the payment of indebtedness, including, without limitation, any right or
remedy available to it as a secured party under the Uniform Commercial Code of
the State. The Trustor shall, promptly upon request by the Trustee or the
Beneficiary, assemble the Trust Premises, or any portion thereof generally
described in such request, and make it available to the Trustee or the
Beneficiary, at such place or places designated by the Trustee or the
Beneficiary, and reasonably convenient to the Trustee or the Beneficiary. If
the Beneficiary elects to proceed under the Uniform Commercial Code of the State
to dispose of portions of the Trust Premises, the Trustee or the Beneficiary, at
their respective option, may give the Trustor notice of the time and place of
any public sale of any such property, or of the date after which any private
sale or other disposition thereof is to be made, by sending notice by registered
or certified first class mail, postage prepaid, to the Trustor at least ten (10)
days before the time of the sale or other disposition. If any notice of any
proposed sale, assignment or transfer by the Beneficiary of any portion of the
Trust Premises or any interest therein is required by law, the Trustor
conclusively agrees that ten (10) days notice to the Trustor of the date, time
and place (and, in the case of a private sale, the terms) thereof is reasonable.
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SECTION 3.5. TRUSTEE AND BENEFICIARY AUTHORIZED TO EXECUTE DEEDS, ETC.
The Trustor irrevocably appoints the Trustee and the Beneficiary (which
appointment is coupled with an interest) the true and lawful attorney of the
Trustor, in its name and stead and on its behalf, for the purpose of
effectuating any sale, assignment, transfer or delivery for the enforcement
hereof, whether pursuant to power of sale, foreclosure or otherwise, to execute
and deliver all such deeds, bills of sale, assignments, assignments of
Encumbered Lease, releases and other instruments as may designated in any such
request.
SECTION 3.6. PURCHASE OF TRUST PREMISES BY BENEFICIARY. The Beneficiary
may be a purchaser of the Trust Premises or of any part thereof or of any
interest therein at any sale thereof, whether pursuant to power of sale,
foreclosure or otherwise, and the Beneficiary may apply upon the purchase price
thereof the indebtedness secured hereby owing to the Beneficiary. Such
purchaser shall, upon any such purchase, acquire good title to the properties so
purchased, free of the security interest and lien of this Deed of Trust and free
of all rights of redemption in the Trustor.
SECTION 3.7. RECEIPT A SUFFICIENT DISCHARGE TO PURCHASER. Upon any sale
of the Trust Premises or any part thereof or any interest therein, whether
pursuant to power of sale, foreclosure or otherwise, the receipt of the Trustee
or the officer making the sale under judicial proceedings shall be a sufficient
discharge to the purchaser for the purchase money, and such purchaser shall not
be obliged to see to the application thereof.
SECTION 3.8. WAIVER OF APPRAISEMENT, VALUATION, ETC. The Trustor hereby
waives, to the fullest extent it may lawfully do so, the benefit of all
appraisement, valuation, stay, extension and redemption laws now or hereafter in
force and all rights of marshaling in the event of any sale of the Trust
Premises or any part thereof or any interest therein.
SECTION 3.9. SALE A BAR AGAINST TRUSTOR. Any sale of the Trust Premises
or any part thereof or any interest therein under or by virtue of this Deed of
Trust, whether pursuant to power of sale, foreclosure or otherwise, shall
forever be a bar, against the Trustor.
SECTION 3.10. SECURED OBLIGATIONS TO BECOME DUE ON SALE. Upon any sale of
the Trust Premises or any portion
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thereof or interest therein by virtue of the exercise of any remedy by the
Trustee or the Beneficiary under or by virtue of this Deed of Trust, whether
pursuant to power of sale, foreclosure or otherwise in accordance with this
Deed of Trust or by virtue of any other remedy available at law or in equity
or by statute or otherwise, at the option of the Trustee or the Beneficiary
any sums or monies due and payable pursuant to the Credit Agreement, the Loan
Documents and in connection with the Loans and/or the Secured Obligations,
shall, if not previously declared due and payable, immediately become due and
payable, together with interest accrued thereon, and all other indebtedness
which this Deed of Trust by its terms secures.
SECTION 3.11. APPLICATION OF PROCEEDS OF SALE AND OTHER MONEYS. The
proceeds of any sale of the Trust Premises or any part thereof or any interest
therein under or by virtue of this Deed of Trust, whether pursuant to power of
sale, foreclosure or otherwise, and all other moneys at any time held by the
Trustee or the Beneficiary as part of the Trust Premises, shall be applied in
such order of priority as the Beneficiary shall determine in its sole and
absolute discretion including, without limitation, as follows:
(a) first, to the payment of the reasonable costs and expenses of such
sale (including, without limitation, the cost of evidence of title and the
costs and expenses, if any, of taking possession of, retaining custody
over, repairing, managing, operating, maintaining and preserving the Trust
Premises or any part thereof prior to such sale), all reasonable costs and
expenses incurred by the Trustee, the Beneficiary, or any other Person in
obtaining or collecting any insurance proceeds, condemnation awards or
other amounts received by the Beneficiary, all reasonable costs and
expenses of any receiver of the Trust Premises or any part thereof, and any
Impositions or other charges or expenses prior to the security interest or
lien of this Deed of Trust, which the Trustee or the Beneficiary may
consider it necessary or desirable to pay;
(b) second, to the payment of any Secured Obligation (other than those
set forth in Section 3.11(c) below);
(c) third, to the payment of all amounts of principal of and interest
(including Post-Petition
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Interest to the extent such interest is a Secured Obligation) at the time
due and payable under the Credit Agreement at the time outstanding
(whether due by reason of maturity or by reason of any prepayment
requirement or by declaration or acceleration or otherwise), including
interest at the rate provided for in the Credit Agreement on any overdue
principal and (to the extent permitted under applicable law) on any
overdue interest; and, in case such moneys shall be insufficient to pay in
full such principal and interest, then, FIRST, to the payment of all
amounts of interest (including Post-Petition Interest to the extent such
interest is a Secured Obligation) at the time due and payable and, SECOND,
to the payment of all amounts of principal at the time due and payable
under the Credit Agreement; and
(d) fourth, the balance, if any, held by the Trustee or the
Beneficiary after payment in full of all amounts referred to in
subdivisions SECTIONS 3.11 (A), (B) and (C) above, shall, unless a court of
competent jurisdiction may otherwise direct by final order not subject to
appeal, be paid to or upon the direction of the Trustor.
SECTION 3.12. APPOINTMENT OF RECEIVER. If an Event of Default shall have
occurred, the Beneficiary shall, as a matter of right, without notice, and
without regard to the adequacy of any security for the indebtedness secured
hereby or the solvency of the Trustor, be entitled to the appointment of a
receiver for all or any part of the Trust Premises, whether such receivership be
incidental to a proposed sale of the Trust Premises or otherwise, and the
Trustor hereby consents to the appointment of such a receiver and will not
oppose any such appointment.
SECTION 3.13. POSSESSION, MANAGEMENT AND INCOME. If an Event of Default
shall have occurred, in addition to, and not in limitation of, the rights and
remedies provided in SECTION 1.14, the Trustee or the Beneficiary upon five (5)
days notice to the Trustor, may enter upon and take possession of the Trust
Premises or any part thereof by force, summary proceeding, ejectment or
otherwise and may remove the Trustor and all other Persons and any and all
property therefrom and may hold, operate, maintain, repair, preserve and manage
the same and receive all earnings, income, Rents, issues and Proceeds accruing
with respect thereto or any part thereof. The Trustee and the Beneficiary shall
be under no liability for or by reason of
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any such taking of possession, entry, removal or holding, operation or
management, except that any amounts so received by the Trustee or the
Beneficiary shall be applied to pay all costs and expenses of so entering
upon, taking possession of, holding, operating, maintaining, repairing,
preserving and managing the Trust Premises or any part thereof, and any
Impositions or other charges prior to the lien and security interest of this
Deed of Trust which the Trustee or the Beneficiary may consider it necessary
or desirable to pay, and any balance of such amounts shall be applied as
provided in Section 3.11.
SECTION 3.14. RIGHT OF TRUSTEE AND THE BENEFICIARY TO PERFORM TRUSTOR'S
COVENANTS, ETC. If the Trustor shall fail to make any payment or perform any
act required to be made or performed hereunder or under the Credit Agreement or
any other Loan Document, the Beneficiary, subject to twenty (20) days' prior
written notice to the Trustor (except that no prior notice shall be required in
the case of an emergency or where the failure to make such payment or perform
such obligation could affect the priority of the lien of this Deed of Trust)
without waiving or releasing any obligation or Default, may (but shall be under
no obligation to) at any time thereafter make such payment or perform such act
for the account and at the expense of the Trustor, and may enter upon the Trust
Premises for such purpose and take all such action thereon as, in either the
Trustee's or the Beneficiary's opinion, may be necessary or appropriate
therefor. No such entry and no such action shall be deemed an eviction of any
lessee of the Property or any part thereof. All sums so paid by the Trustee or
the Beneficiary, and all costs and expenses (including, without limitation,
attorneys' fees and expenses) so incurred, together with interest thereon at the
rate provided for in Section 5.2.2. of the Credit Agreement from the date of
payment or incurring, shall constitute additional indebtedness under the Credit
Agreement secured by this Deed of Trust and shall be paid by the Trustor to the
Trustee or the Beneficiary, as the case may be, on demand.
SECTION 3.15. SUBROGATION. To the extent that either of the Trustee or
the Beneficiary, on or after the date hereof, pays any sum due under any
provision of any Legal Requirement or any instrument creating any lien prior or
superior to the lien of this Deed of Trust, or the Trustor or any other Person
pays any such sum with the proceeds of the loan evidenced by the Credit
Agreement, the Trustee and/or the Beneficiary shall have and be entitled to a
lien on the Trust Premises equal in priority to the lien
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discharged, and the Trustee and/or the Beneficiary shall be subrogated to,
and receive and enjoy all rights and liens possessed, held or enjoyed by, the
holder of such lien, which shall remain in existence and benefit the
Beneficiary in securing the Secured Obligations.
SECTION 3.16. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of
the Trustee and/or the Beneficiary provided for in this Deed of Trust, the
Credit Agreement, or any other Loan Document, or now or hereafter existing at
law or in equity or by statute or otherwise shall be cumulative and concurrent
and shall be in addition to every other right, power or remedy provided for in
this Deed of Trust, the Credit Agreement or any other Loan Document, or now or
hereafter existing at law or in equity or by statute or otherwise, and the
exercise or beginning of the exercise by the Trustee or the Beneficiary of any
one or more of the rights, powers or remedies provided for in this Deed of
Trust, the Credit Agreement, or any other Loan Document, or now or hereafter
existing at law or in equity or by statute or otherwise shall not preclude the
simultaneous or later exercise by the Trustee or the Beneficiary of any or all
such other rights, powers or remedies.
SECTION 3.17. PROVISIONS SUBJECT TO APPLICABLE LAW. All rights, powers
and remedies provided in this Deed of Trust may be exercised only to the extent
that the exercise thereof does not violate any applicable provisions of law and
are intended to be limited to the extent necessary so that they will not render
this Deed of Trust invalid, unenforceable or not entitled to be recorded,
registered or filed under the provisions of any applicable law. If any term of
this Deed of Trust or any application thereof shall be invalid or unenforceable,
the remainder of this Deed of Trust and any other application of such term shall
not be affected thereby.
SECTION 3.18. NO WAIVER, ETC. No failure by the Trustee or the
Beneficiary to insist upon the strict performance of any term hereof or of the
Credit Agreement, or of any other Loan Document, or to exercise any right, power
or remedy consequent upon a breach hereof or thereof, shall constitute a waiver
of any such term or of any such breach. No waiver of any breach shall affect or
alter this Deed of Trust, which shall continue in full force and effect with
respect to any other then existing or subsequent breach. By accepting payment
or performance of any amount or other Secured Obligations secured hereby before
or after its due date, neither the Trustee nor the Beneficiary shall
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be deemed to have waived its right either to require prompt payment or
performance when due of all other amounts and Secured Obligations payable
hereunder or to declare a default for failure to effect such prompt payment.
SECTION 3.19. COMPROMISE OF ACTIONS, ETC. Any action, suit or proceeding
brought by the Trustee or the Beneficiary pursuant to any of the terms of this
Deed of Trust, the Credit Agreement, any other Loan Document, or otherwise, and
any claim made by the Trustee or the Beneficiary hereunder or thereunder, may be
compromised, withdrawn or otherwise dealt with by the Trustee or the Beneficiary
without any notice to or approval of the Trustor.
ARTICLE IV
DEFINITIONS
SECTION 4.1. TERMS DEFINED IN THIS DEED OF TRUST. When used herein the
following terms have the following meanings:
"AGENT" shall have the meaning set forth in the Credit Agreement.
"BANKRUPTCY CODE" means Title 11 of the United States Code (11 U.S.C.
Sections 101 ET SEQ.), as amended from time to time, and any successor statute.
"BENEFICIARY" shall have the meaning set forth in the PREAMBLE.
"BORROWERS" shall have the meaning set forth in the second recital.
"BORROWING" shall have the meaning set forth in the Credit Agreement.
"CANADIAN AGENT" shall have the meaning set forth in the Credit Agreement.
"CANADIAN BORROWER" shall have the meaning set forth in the second recital.
"CANADIAN FACILITY" shall have the meaning set forth in the Credit
Agreement.
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"CANADIAN ISSUERS" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN LENDERS" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN LETTER OF CREDIT" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN LETTER OF CREDIT OUTSTANDINGS" shall have the meaning set forth
in the Credit Agreement.
"CANADIAN REVOLVING LOAN" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN REVOLVING LOAN COMMITMENT" shall have the meaning set forth in
the Credit Agreement.
"CANADIAN REVOLVING LOAN COMMITMENT AMOUNT" shall have the meaning set
forth in the Credit Agreement.
"CANADIAN REVOLVING LOAN COMMITMENT TERMINATION DATE" shall have the
meaning set forth in the Credit Agreement.
"CANADIAN SUBSIDIARY" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN SWING LINE LENDER" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN SWING LINE LOAN" shall have the meaning set forth in the Credit
Agreement.
"CANADIAN SWING LINE LOAN COMMITMENT" shall have the meaning set forth in
the Credit Agreement.
"CDN $" shall have the meaning set forth in the Credit Agreement.
"COMMITMENT" shall have the meaning set forth in the Credit Agreement.
"COMPARABLE PROVISIONS" shall have the meaning set forth in SECTION
1.19(B).
"CONTRACTS" shall have the meaning set forth in CLAUSE (H) of the GRANTING
CLAUSE.
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"CREDIT AGREEMENT" shall have the meaning set forth in the SECOND RECITAL.
"CREDIT EXTENSIONS" shall have the meaning set forth in the the SECOND
RECITAL.
"DEED OF TRUST" shall have the meaning set forth in the PREAMBLE.
"DEFAULT" means any Event of Default or any condition or event which, after
notice or lapse of time, or both, would constitute an Event of Default.
"ENCUMBERED LEASE" means, individually, the lease described on Schedule 3
annexed hereto and made a part hereof, as each such lease may be amended,
restated or otherwise modified from time to time.
"ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means all valid and
enforceable Requirements of Law derived from or relating to federal, state and
local laws or regulations relating to or addressing the environment, health or
safety, including but not limited to any law, regulation, or order relating to
the use, handling, or disposal of any Hazardous Material, any law, regulation,
or order relating to Remedial Action, and any law, regulation, or order relating
to workplace or worker safety and health, as such Requirements of Law are
promulgated by the specifically authorized agency responsible for administrating
such Requirements of Law.
"EVENT OF DEFAULT" shall mean (i) an "Event of Default" as defined in the
Credit Agreement or (ii) a termination, cancellation or surrender of any
Encumbered Lease prior to its stated expiration date.
"GOODS" shall have the meaning set forth in CLAUSE (C) of the GRANTING
CLAUSE.
"HAZARDOUS MATERIAL" shall have the meaning set forth in the Credit
Agreement.
"HEREIN", "HEREOF", "HERETO", and "HEREUNDER" and similar terms refer to
this Deed of Trust and not to any particular Section, paragraph or provision of
this Deed of Trust.
"IMPOSITIONS" shall have the meaning set forth in SECTION 1.5.
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"IMPROVEMENTS" shall have the meaning set forth in CLAUSE (B) of the
GRANTING CLAUSE.
"INDEMNIFIED PARTIES" shall have the meaning set forth in SECTION 1.16.
"INSURANCE REQUIREMENTS" shall have the meaning set forth in PARAGRAPH (A)
of SECTION 1.6.
"INTANGIBLES" shall have the meaning set forth in CLAUSE (D) of the
GRANTING CLAUSE.
"ISSUER" shall have the meaning set forth in the Credit Agreement.
"LAND" shall have the meaning set forth in the FIRST RECITAL.
"LEASES" shall have the meaning set forth in CLAUSE (E) of the GRANTING
CLAUSE.
"LEGAL REQUIREMENTS" shall have the meaning set forth in PARAGRAPH (B) of
SECTION 1.6.
"LEINER" shall have the meaning set forth in the PREAMBLE.
"LENDERS" shall have the meaning set forth in the Credit Agreement.
"LETTER OF CREDIT" shall have the meaning set forth in the Credit
Agreement.
"LHPG" shall have the meaning set forth in the SECOND RECITAL.
"LOAN DOCUMENTS" shall have the meaning set forth in the Credit Agreement.
"LOANS" shall have the meaning set forth in the Credit Agreement.
"NOTES" shall have the meaning set forth in the Credit Agreement.
"OBLIGATIONS" shall have the meaning set forth in the Credit Agreement.
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"OBLIGOR" shall mean each Person having any liabilities, obligations,
duties or responsibilities under the Credit Agreement or any Loan Document.
"OTHER OBLIGATIONS" shall have the meaning set forth in clause (k) of
Section 5.17.
"OTHER PARTIES" shall have the meaning set forth in clause (k) of Section
5.17.
"PERMITS" shall have the meaning set forth in CLAUSE (G) of the GRANTING
CLAUSE.
"PERMITTED ENCUMBRANCES" shall have the meaning set forth in SECTION 1.2.
"PERSON" means a corporation, an association, a partnership, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency or officer.
"PLANS" shall have the meaning set forth in CLAUSE (F) of the GRANTING
CLAUSE.
"POST-PETITION INTEREST" shall have the meaning set forth in SECTION 2.3.
"PROCEEDS" shall have the meaning set forth in CLAUSE (K) of the GRANTING
CLAUSE.
"PROPERTY" shall have the meaning set forth in CLAUSE (B) of the GRANTING
CLAUSE.
"REAL ESTATE" shall have the meaning set forth in CLAUSE (A) of the
GRANTING CLAUSE.
"RELEASE" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any Property, including the movement of
Hazardous Material through or in the air, soil, surface water, groundwater or
Property.
"REMEDIAL ACTION" means actions required to (i) clean up, remove, treat or
in any other way address Hazardous Material in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Hazardous Material; or (iii) investigate and determine if a
remedial response is needed and to design
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such a response and post-remedial investigation, monitoring, operation and
maintenance and care.
"RENTS" shall have the meaning set forth in CLAUSE (J) of the GRANTING
CLAUSE.
"RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR TRUSTEE"
"SCOTIABANK" shall have the meaning set forth in the SECOND RECITAL.
"SECURED OBLIGATIONS" means all Obligations now or hereafter existing under
the Credit Agreement, and all obligations (monetary or otherwise) arising under
or in connection with the Notes and each other Loan Document, whether for
principal, interest, costs, fees, expenses or otherwise, and all other
obligations of the Trustor and each Obligor under any Loan Document, including,
without limitation, any Subsidiary Guaranty, howsoever created, arising or now
or hereafter existing or due or to become due.
"SPECIAL ENCUMBERED LEASE RIGHTS" shall have the meaning set forth in
CLAUSE (K) of the GRANTING CLAUSE.
"STATE" means the State of California.
"STATED AMOUNT" shall have the meaning set forth in the Credit Agreement.
"SUBSIDIARY GUARANTY" shall have the meaning set forth in the Credit
Agreement.
"SWING BANKS" shall have the meaning set forth in the Credit Agreement
"TAKING" shall have the meaning set forth in CLAUSE (B) of SECTION 2.2.
"TERM LOAN" shall have the meaning set forth in the Credit Agreement.
"TERM B LOAN" shall have the meaning set forth in the Credit Agreement.
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"TERM B LOAN COMMITMENT" shall have the meaning set forth in the Credit
Agreement.
"TERM C LOAN" shall have the meaning set forth in the Credit Agreement.
"TERM C LOAN COMMITMENT" shall have the meaning set forth in the Credit
Agreement.
"TOTAL DESTRUCTION" means any damage to or destruction of the Improvements
or any part thereof which, in the reasonable estimation of the Beneficiary shall
require the expenditure of an amount in excess of fifty percent (50%) of the
replacement value of the Property to restore the Improvements to substantially
the same condition of the Improvements immediately prior to such damage or
destruction.
"TOTAL TAKING" means a Taking, whether permanent or for temporary use,
which, in the good faith judgment of the Beneficiary, shall substantially
interfere with the normal operation of the Property by the Trustor.
"TRUSTEE" shall have the meaning set forth in the preamble.
"TRUSTOR" shall have the meaning set forth in the PREAMBLE.
"TRUST PREMISES" shall have the meaning set forth in the GRANTING CLAUSE.
"U.S. AGENT" shall have the meaning set forth in the Credit Agreement.
"U.S. ALTERNATE BASE RATE" shall have the meaning set forth in the Credit
Agreement.
"U.S. BORROWER" shall have the meaning set forth in the SECOND RECITAL.
"U.S. FACILITY" shall have the meaning set forth in the Credit Agreement.
"U.S. ISSUERS" shall have the meaning set forth in the Credit Agreement.
"U.S. LENDERS" shall have the meaning set forth in the Credit Agreement.
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"U.S. LETTER OF CREDIT" shall have the meaning set forth in the Credit
Agreement.
"U.S. LETTER OF CREDIT OUTSTANDINGS" shall have the meaning set forth in
the Credit Agreement.
"U.S. REVOLVING LOAN" shall have the meaning set forth in the Credit
Agreement.
"U.S. REVOLVING LOAN COMMITMENT" shall have the meaning set forth in the
Credit Agreement.
"U.S. REVOLVING LOAN COMMITMENT AMOUNT" shall have the meaning set forth in
the Credit Agreement.
"U.S. REVOLVING LOAN COMMITMENT TERMINATION DATE" shall have the meaning
set forth in the Credit Agreement.
"U.S. RL LENDERS" shall have the meaning set forth in the Credit Agreement.
"U.S. SUBSIDIARY" shall have the meaning set forth in the Credit Agreement.
"U.S. SWING LINE LENDER" shall have the meaning set forth in the Credit
Agreement.
"U.S. SWING LINE LOAN" shall have the meaning set forth in the Credit
Agreement.
"U.S. SWING LINE LOAN COMMITMENT" shall have the meaning set forth in the
Credit Agreement.
SECTION 4.2. USE OF DEFINED TERMS. Terms for which meanings are provided
in this Deed of Trust shall, unless otherwise defined or the context otherwise
requires, have such meanings when used in any certificate and any opinion,
notice or other communication delivered from time to time in connection with
this Deed of Trust or pursuant hereto.
SECTION 4.3. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Deed of Trust,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
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ARTICLE I
MISCELLANEOUS
SECTION 5.1. FURTHER ASSURANCES; Financing Statements.
SECTION 5.1.1. FURTHER ASSURANCES. The Trustor, at its expense, will
execute, acknowledge and deliver all such instruments and take all such other
action as the Trustee or the Beneficiary from time to time may reasonably
request:
(a) better to subject to the lien and security interest of this Deed
of Trust all or any portion of the Trust Premises,
(b) to perfect, publish notice or protect the validity of the lien
and security interest of this Deed of Trust,
(c) to preserve and defend the title to the Trust Premises and the
rights of the Trustee or the Beneficiary therein against the claims of all
Persons as long as this Deed of Trust shall remain undischarged,
(d) to better subject to the lien and security interest of this Deed
of Trust or to maintain or preserve the lien and security interest of this
Deed of Trust with respect to any replacement or substitution for any Trust
Premises or any other after-acquired property, or
(e) in order to further effectuate the purposes of this Deed of Trust
and to carry out the terms hereof and to better assure and confirm to the
Trustee and the Beneficiary their rights, powers and remedies hereunder.
SECTION 5.1.2. FINANCING STATEMENTS. Notwithstanding any other provision
of this Deed of Trust, the Trustor hereby agrees that, without notice to or the
consent of the Trustor, the Beneficiary may file with the appropriate public
officials such financing statements, continuation statements, amendments and
similar documents as are or may become necessary to perfect, preserve or protect
the security interest granted by this Deed of Trust.
SECTION 5.2. ADDITIONAL SECURITY. Without notice to or consent of the
Trustor, and without impairment of the
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security interest and lien of and rights created by this Deed of Trust, the
Trustee or the Beneficiary and the Lenders may accept from the Trustor or any
other Person additional security for the Secured Obligations. Neither the
giving of this Deed of Trust nor the acceptance of any such additional
security shall prevent the Trustee or the Beneficiary from resorting first to
such additional security, or first to the security created by this Deed of
Trust, or concurrently to both, in any case without affecting the Trustee's
or the Beneficiary's lien and rights under this Deed of Trust.
SECTION 5.3. DEFEASANCE, PARTIAL RELEASE, ETC.
SECTION 5.3.1. DEFEASANCE. If the Loans and all other amounts owing
pursuant to the Credit Agreement and the other Loan Documents shall be repaid in
full in accordance with the terms thereof, and if the Trustor shall pay, in
full, the principal of and premium, if any, and interest on the Secured
Obligations in accordance with the terms thereof and hereof and all other sums
payable hereunder by the Trustor and shall comply with all the terms, conditions
and requirements hereof and of the Secured Obligations, which by their nature
are capable of being complied with during the term hereof, then on such date,
Beneficiary shall release the lien of this Deed of Trust and the Beneficiary
shall, upon the request of the Trustor and at the Trustor's sole cost and
expense, execute and deliver such instruments, in form and substance reasonably
satisfactory to the Beneficiary, as may be necessary to reconvey, release and
discharge this Deed of Trust without further action on the part of the Trustor,
the Trustee, or the Beneficiary.
SECTION 5.3.2. PARTIAL RELEASE, ETC. The Trustee may, at the direction of
the Beneficiary, at any time and from time to time, without liability therefor,
and without prior notice to the Trustor, release or reconvey any part of the
Trust Premises, consent to the making of any map or plat of the Property, join
in granting any easement thereon or join in any extension agreement or agreement
subordinating the lien of this Deed of Trust or enter into any other agreement
in connection with the Trust Premises.
SECTION 5.4. NOTICES, ETC. All notices and other communications provided
to any of the parties hereto shall be in writing and addressed, delivered or
transmitted to such party as set forth in the Credit Agreement.
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SECTION 5.5. WAIVERS, AMENDMENTS, ETC. The provisions of this Deed of
Trust may be amended, discharged or terminated and the observance or performance
of any provision of this Deed of Trust may be waived, either generally or in a
particular instance and either retroactively or prospectively, only by an
instrument in writing executed by the Trustor and the Beneficiary.
SECTION 5.6. CROSS-REFERENCES. References in this Deed of Trust and in
each instrument executed pursuant hereto to any Section or Article are, unless
otherwise specified, to such Section or Article of this Deed of Trust or such
instrument, as the case may be, and references in any Section, Article or
definition to any clause are, unless otherwise specified, to such clause of such
Section, Article or definition.
SECTION 5.7. HEADINGS. The various headings of this Deed of Trust and of
each instrument executed pursuant hereto are inserted for convenience only and
shall not affect the meaning or interpretation of this Deed of Trust or such
instrument or any provisions hereof or thereof.
SECTION 5.8. CURRENCY. Unless otherwise expressly stated, all references
to any currency or money, or any dollar amount, or amounts denominated in
"Dollars" herein will be deemed to refer to the lawful currency of the United
States.
SECTION 5.9. GOVERNING LAW. THIS DEED OF TRUST SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE.
SECTION 5.10. SUCCESSORS AND ASSIGNS, ETC. This Deed of Trust shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors, successors-in-time and assigns.
SECTION 5.11. CONCERNING THE TRUSTEE.
SECTION 5.11.1. ACCEPTANCE OF TRUSTS; CERTAIN TERMS OF THE TRUSTS. The
Trustee, for itself and its successors, hereby accepts the trusts of this Deed
of Trust, but only upon the terms herein set forth, including the following:
(a) The recitals in this Deed of Trust and in any supplement hereto
which may hereafter be executed by the Trustor and the Trustee shall be
taken as the statements of the Trustor and shall not be considered
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as made by, or imposing any obligation or liability upon, the Trustee.
(b) The Trustee may execute any of the trusts or powers hereof and
perform any duty hereunder either directly or through its agents or
attorneys, and the Trustee shall not be responsible for the acts of any
agent or attorney appointed by it in good faith and without negligence.
(c) The Trustee may, at the expense of the Trustor, consult with
legal counsel to be selected by it, and the Trustee shall not be liable for
any action taken, suffered or omitted to be taken by it in good faith in
accordance with the advice of counsel.
(d) The Trustor will pay to the Trustee from time to time, on demand,
compensation for all services rendered hereunder (which shall not be
limited to the compensation of trustees of any express trust as provided by
law) and also all reasonable expenses, charges, counsel fees and other
disbursements and those of its agents and attorneys, made or incurred in
the administration of the trusts hereby created and any other duties hereby
imposed. The Trustor agrees to indemnify and save harmless the Trustee
against and from any liability or damages which it may incur or sustain, in
good faith, in the exercise and performance of any of its powers and duties
hereunder.
(e) The Trustee shall not be liable, in case of taking possession of
the Trust Premises, for debts contracted or liability or damages incurred
in the management or operation of the Trust Premises, for the salaries of
employees of the Trustor or for nonfulfillment of contracts by the Trustor.
(f) The Trustee shall be protected in acting upon any notice,
resolution, request, consent, order, certificate, report, opinion,
statement, obligation, appraisal or other document believed by it to be
genuine and to have been signed by the proper party or parties or by a
person or persons authorized to act on his or their behalf.
(g) The Trustee shall not be responsible for the validity or
genuineness of any securities, personal property, notes or deeds of trust
at any time pledged and deposited hereunder.
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SECTION 5.11.2. DUTIES AND RESPONSIBILITY OF TRUSTEE; IN CASE OF DEFAULT;
PRIOR TO DEFAULT; WHEN ACTING UNDER DIRECTION OF BENEFICIARY. If an Event of
Default shall have occurred and shall be continuing to the actual knowledge of
the Trustee, or if the Trustee shall have received notice thereof from the
Beneficiary, the Trustee, only if so directed by the Beneficiary, shall exercise
such of the rights and powers vested in it by this Deed of Trust, and in so
doing shall use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs. None of the provisions of this Deed of Trust shall be construed as
relieving the Trustee from liability for its own negligent action, own negligent
failure to act, or own willful misconduct, except that,
(a) so long as no Event of Default shall have occurred and be
continuing,
(1) the Trustee shall not be liable except for the performance
of such duties as are specifically set forth in this Deed of Trust,
and no implied covenants or obligations shall be read into this Deed
of Trust against the Trustee, whose duties and obligations shall be
determined solely by the express provisions of this Deed of Trust, and
(2) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of opinions expressed therein, upon certificates or
opinions conforming to the requirements of this Deed of Trust;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by an officer or officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts;
(c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with provisions of
applicable law and the direction of the Beneficiary, relating to the time,
method, and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred upon the Trustee
under this Deed of Trust;
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(d) the Trustee shall not be liable for any action taken or omitted by
it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Deed of Trust;
(e) if an Event of Default shall have occurred and shall be
continuing, the Trustee shall not exercise any of the powers granted to it
hereunder unless and until specifically requested to do so by the
Beneficiary; and
(f) none of the provisions contained in this Deed of Trust shall
require the Trustee to advance or use its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in
the exercise of any of its rights or powers.
SECTION 5.11.3. NOTICE OF DEFAULT. The Trustee shall, within ten days
after it has actual knowledge thereof, give to the Beneficiary notice of any
Default.
SECTION 5.11.4. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR TRUSTEE.
(a) The Trustee may resign and be discharged from the trusts hereby
created by giving written notice thereof to the Trustor and to the
Beneficiary. Such resignation shall become effective upon the appointment
of its successor and such successor's acceptance of such appointment,
PROVIDED THAT, if a successor Trustee has not been so appointed, or, if so
appointed, has not accepted the appointment within thirty (30) days after
the date of such written notice of resignation, the Trustee may apply to
any court of competent jurisdiction for the appointment of a successor
Trustee.
(b) The Trustee may be removed at any time by an instrument or
instruments signed by the Beneficiary and filed with the Trustor and the
Trustee.
(c) The Beneficiary may appoint a successor Trustee at any time by
filing for record in the office of the County Recorder of the County in
which the Property is located a substitution of Trustee. From the time the
substitution is filed for record, the successor Trustee shall succeed to
all of the powers, duties, authority and title of the Trustee without the
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necessity of any conveyance from the Trustee originally herein named or any
successor. Each such substitution shall be executed and acknowledged, and
notice thereof shall be given and proof thereof made in accordance with
applicable law. The Trustor agrees to accept and confirm any such
successor Trustee hereunder by executing and delivering a supplemental Deed
of Trust and security agreement or any other appropriate agreement.
SECTION 5.12. WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION. (A) EACH
OF THE TRUSTOR, THE TRUSTEE AND THE BENEFICIARY HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
DEED OF TRUST, THE CREDIT AGREEMENT, ANY LOAN DOCUMENT OR ANY OTHER RELATED
INSTRUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN), OR ACTIONS OF THE TRUSTOR, THE TRUSTEE, OR THE BENEFICIARY.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE TRUSTEE AND THE BENEFICIARY AND
THE LENDERS TO ENTER INTO THE TRANSACTIONS PROVIDED FOR IN THE CREDIT AGREEMENT
AND TO MAKE THE CREDIT EXTENSIONS.
(b) FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INVOLVING THIS DEED OF
TRUST, THE CREDIT AGREEMENT, OR ANY OTHER LOAN DOCUMENT, THE TRUSTOR HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ALL
FEDERAL AND STATE COURTS LOCATED IN THE STATE AND CONSENTS THAT IT MAY BE SERVED
WITH ANY PROCESS OR PAPER BY REGISTERED MAIL OR BY PERSONAL SERVICE WITHIN OR
WITHOUT THE STATE IN ACCORDANCE WITH APPLICABLE LAW, PROVIDED A REASONABLE TIME
FOR APPEARANCE IS ALLOWED. THE TRUSTOR EXPRESSLY WAIVES, TO THE EXTENT IT MAY
LAWFULLY DO SO, ANY OBJECTION, CLAIM OR DEFENSE WHICH IT MAY HAVE AT ANY TIME TO
THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS DEED
OF TRUST, THE CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY SUCH COURT,
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER IRREVOCABLY
WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO ANY SUCH CLAIM, SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION
OVER THE PERSON OF THE TRUSTOR. NOTHING CONTAINED HEREIN WILL BE DEEMED TO
PRECLUDE EITHER OF THE TRUSTEE OR THE BENEFICIARY FROM BRINGING AN ACTION
AGAINST THE TRUSTOR IN ANY OTHER JURISDICTION.
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SECTION 5.13. SEVERABILITY. Any provision of this Deed of Trust, the
Credit Agreement, or any other Loan Document, which is prohibited or
unenforceable in any jurisdiction shall as to such provision and such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Deed of
Trust, the Credit Agreement, or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 5.14. LOAN DOCUMENT. This Deed of Trust is a Loan Document
executed pursuant to the Credit Agreement and, unless otherwise expressly
indicated herein, shall be construed, administered and applied in accordance
with the terms and provisions thereof.
SECTION 5.15. USURY SAVINGS CLAUSE. It is the intention of the Trustor,
the Trustee and the Beneficiary to conform strictly to the usury laws governing
the Loan Documents, and any interest payable under the Loan Documents shall be
subject to reduction to the amount not in excess of the maximum non-usurious
amount allowed under such laws, as construed by the courts having jurisdiction
over such matters. In the event the maturity of the Secured Obligations is
accelerated by reason of any provision of the Loan Documents, or by reason of an
election by the Beneficiary resulting from an Event of Default, then interest
may never include more than the maximum amount permitted by law, computed from
the dates of each advance of loan proceeds under the Credit Agreement until
payment, and any interest in excess of the maximum amount permitted by law shall
be canceled automatically or, if theretofore paid, at the option of the
Beneficiary, shall be rebated to the Trustor, or shall be credited on the
principal amount of the Secured Obligations or, if all principal has been
repaid, then the excess shall be rebated to the Trustor. If any interest is
canceled, credited against principal or rebated to the Trustor in accordance
with the foregoing sentence and, if thereafter the interest payable hereunder is
less than the maximum amount permitted by applicable law, the rate hereunder
shall automatically be increased to the maximum extent possible to permit
repayment to the Beneficiary and the Lenders as soon as possible of any interest
in excess of the maximum amount permitted by law which was earlier canceled,
credited against principal or rebated to the Trustor or the Beneficiary pursuant
to the provisions of the foregoing sentence.
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SECTION 5.16. FUTURE ADVANCES. This Deed of Trust secures "future
advances" under California law. Any and all future advances under this Deed of
Trust and the Loan Documents shall have the same priority as if the future
advance was made on the date that this Deed of Trust was recorded. This Deed of
Trust shall secure the Secured Obligations, whenever incurred, such Secured
Obligations to be due at the times provided in the Loan Documents. Notice is
hereby given that the Secured Obligations may INCREASE as a result of any
defaults hereunder by Trustor due to, for example, and without limitation,
unpaid interest or late charges, unpaid taxes or insurance premiums which the
Beneficiary elects to advance, defaults under leases that the Beneficiary elects
to cure, attorney fees or costs incurred in enforcing the Loan Documents or
other expenses incurred by the Beneficiary in protecting the Trust Premises, the
security of this Deed of Trust or the Beneficiary's rights and interests.
SECTION 5.17. SPECIAL PROVISIONS MODIFYING OR AFFECTING THIS DEED OF TRUST
BY REASON OF THE STATE IN WHICH THE LAND IS LOCATED. By virtue of the fact that
the said real estate is located in the State of California, the provisions set
forth below shall be applicable to this Deed of Trust, and to the extent
applicable, shall modify, affect and supplement the other provisions hereof.
(a) Foreclosure by Power of Sale. Should Beneficiary elect to foreclose
by exercise of the power of sale herein contained, Beneficiary shall notify
Trustee and shall deposit with Trustee this Deed of Trust and such receipts and
evidence of expenditures made and secured hereby as Trustee may require.
(i) Upon receipt of such notice from Beneficiary, Trustee shall cause
to be recorded, mailed or delivered to Trustor such notice of default and
election to sell as is then required by law and by this Deed of Trust. Trustee
shall, without demand on Trustor, after lapse of such time as may then be
required by law and after recordation of such notice of default and after notice
of sale has been given as required by law, sell the Property at time and place
of sale fixed by it in said notice of sale, either as a whole, or in separate
lots or parcels or items as Trustee shall deem expedient, and in such order as
it may determine, at public auction, to the highest bidder for cash in lawful
money of the United States payable at the time of sale. Trustee shall deliver
to such purchaser or purchasers thereof its
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good and sufficient deed or deeds conveying the property so sold, but without
any covenant or warranty, express or implied. The recitals in such deed of
any matters or facts shall be conclusive proof of the truthfulness thereof.
Any person, including without limitation Trustor, Trustee or Beneficiary, may
purchase at such sale and Trustor hereby covenants to warrant and defend the
title of such purchaser or purchasers. If allowed by law, Beneficiary, if it
is the purchaser, may credit bid the outstanding amount of the indebtedness
secured hereby toward payment of the purchase price. Trustor hereby
expressly waives any right of redemption after sale that Trustor may have at
the time of sale or that may apply to the sale.
(ii) After deducting all costs, fees and expenses of Trustee and of
this Deed of Trust, including costs of evidence of title in connection with sale
and reasonable Trustee's and attorneys' fees for conducting the sale, Trustee
shall apply the proceeds of sale to payment of all sums expended under the terms
hereof and not then repaid (with accrued interest at the U.S. Alternate Base
Rate from time to time in effect plus 2 1/2%), and to all other sums then
secured hereby in accordance with the Loan Documents, and the remainder, if any,
to the person or persons legally entitled thereto.
(iii) Trustee may postpone sale of all or any portion of the Property
by public announcement at such time and place of sale, and from time to time
thereafter may postpone such sale by public announcement at the time fixed by
the preceding postponement or by subsequently noticed sale, and without further
notice make such sale at the time fixed by the last postponement; or Trustee
may, in its discretion, give a new notice of sale. Beneficiary may rescind any
such notice of default at any time before Trustee's sale by executing a notice
of rescission and recording the same. The recordation of such notice shall
constitute a cancellation of any prior declaration of default and demand for
sale and of any acceleration of maturity of the indebtedness secured hereby
effected by any prior declaration or notice of default. The exercise by
Beneficiary of the right of rescission shall not constitute a waiver of any
default and demand for sale, or notices of default and of election to cause the
said real estate to be sold, nor otherwise affect any of the Loan Documents or
this Deed of Trust, or any of the rights, obligations or remedies of Beneficiary
or Trustee hereunder.
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(b) Full Reconveyance. Upon written request of Beneficiary stating that
all sums secured hereby have been paid, and upon surrender of this Deed of Trust
to Trustee for cancellation and retention and upon payment by Trustor of
Trustee's fees, Trustee shall reconvey to Trustor, or the person or persons
legally entitled thereto, without warranty, any portion of the Property then
held hereunder. The recitals in such reconveyance of any matters or facts shall
be conclusive proof of the truthfulness thereof. The grantee in any
reconveyance may be described as "the person or persons legally entitled
thereto."
(c) Trustee. The following provisions apply to Trustee:
(i) Trustee accepts this trust when this Deed of Trust, duly executed
and acknowledged, is made a public record as provided by law, and by its
acceptance hereof, Trustee covenants faithfully to perform and fulfill the
trusts herein created, being liable, however, only for willful negligence or
misconduct, and Trustee hereby waives any statutory fee and agrees to accept
reasonable compensation, in lieu thereof, for any services rendered by it in
accordance with the terms hereof.
(ii) At any time and from time to time, without liability therefor and
without notice, upon written request of Beneficiary, Trustee shall (1) consent
in writing to the making of any map or plat of the said real estate, (2) join in
granting any easement thereon, (3) join in any extension agreement or any
agreement subordinating the lien or charge hereof.
(iii) Trustee may resign at any time upon giving thirty (30) days'
notice in writing to Trustor and to Beneficiary.
(iv) Beneficiary may, from time to time, by written instrument
executed and acknowledged by Beneficiary, mailed to Trustor and recorded in the
county in which the said real estate is located, and by otherwise complying with
the provisions of the applicable law of the State of California, substitute a
successor or successors to the person or persons then named herein or acting
hereunder as Trustee.
(d) Beneficiary Statements. Trustor agrees to pay Beneficiary for each
statement of Beneficiary as to the Secured Obligations secured hereby, furnished
at Trustor's
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request, the maximum fee allowed by law, or if there be no maximum
fee, then such reasonable fee as is charged by Beneficiary as of the time said
statement is furnished. Trustor further agrees to pay the charges of
Beneficiary for any other service rendered Trustor, or on its behalf, in
connection with this Deed of Trust or the Secured Obligations secured hereby,
including without limitation the delivery to an escrow holder of a request for
full or partial reconveyance of this Deed of Trust, transmitting records
pertaining to this Deed of Trust and the Secured Obligations secured hereby to
show a new owner of the said real estate, and replacing an existing policy of
insurance held hereunder with another such policy.
(e) Actions Affecting the Trust Premises. Trustor, at Trustor's expense,
shall appear in and contest any action or proceeding purporting to affect the
Trust Premises or the security hereof or the rights or powers of Beneficiary or
Trustee. Trustor shall pay all costs and expenses incurred by Beneficiary or
Trustee, including the cost of evidence of title and attorneys' fees, in any
such action or proceeding in which Beneficiary or Trustee may appear.
(f) Insurance Losses and Proceeds. In the event of loss, Trustor shall
give immediate written notice to the insurance carrier and Beneficiary. Trustor
hereby authorizes and empowers Beneficiary, at Beneficiary's option and in
Beneficiary's sole discretion as attorney-in-fact for Trustor, to pay premiums,
to make proof of loss, to adjust and compromise any claim under insurance
policies, to appear in and prosecute any action arising from such insurance
policies, to collect and receive insurance proceeds, and to deduct therefrom
Beneficiary's expenses in the collection of such proceeds. Trustor further
authorizes Beneficiary, at Beneficiary's option (1) to hold the balance of such
proceeds to be used for the cost of reconstruction, restoration or repair
(hereinafter in this subsection referred to as "reconstruction") of the said
real estate, or (2) to apply the balance of such proceeds to the payment of the
sums secured by this Deed of Trust, whether or not then due; provided, however,
that Beneficiary shall hold the balance of any proceeds actually received by
Beneficiary and make such proceeds available to Trustor for the costs of
reconstruction of the said real estate if all of the following conditions are
satisfied within sixty (60) days from the date of the damage or destruction:
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(i) Trustor is not in default hereunder and no event has occurred and
no fact exists which with notice and/or lapse of time would constitute an Event
of Default.
(ii) Trustor satisfies Beneficiary that after the reconstruction is
completed, the value of the Trust Premises, as determined by Beneficiary in its
reasonable discretion, will be not less than the value of the Property
(including land and improvements) determined by Beneficiary at the time of the
recording of this Deed of Trust.
(iii) Beneficiary has been given satisfactory proof that expenditure
of such proceeds (and, where applicable, the additional funds referred to in
clause (iv) below) will fully restore the Improvements free and clear of all
liens other than this Deed of Trust and any other liens or encumbrances
permitted by Beneficiary under this Deed of Trust.
(iv) If such proceeds shall be insufficient to restore or rebuild the
Improvements, Trustor shall have deposited with Beneficiary funds which,
together with such insurance proceeds, shall be sufficient to complete the
reconstruction of the Improvements.
(v) Trustor has delivered to Beneficiary the plans and specifications
and a construction contract for the work of reconstruction in form and content
acceptable to Beneficiary with an architect and a contractor acceptable to
Beneficiary.
(vi) If Trustor shall fail within a reasonable time, subject to delays
beyond its control, to complete reconstruction of the Improvements, then
Beneficiary, at its option, may complete such reconstruction for or on behalf of
Trustor, and for such purpose Beneficiary may do all necessary acts.
(vii) Such damage or destruction has not resulted in an impairment of
the security interest created by this Deed of Trust that will continue after the
completion of reconstruction or, if there is such an impairment of the security
interest created hereunder, said insurance proceeds shall be applied towards the
Secured Obligations and any other sums secured hereby to the extent of the
impairment of the security interest created hereunder.
(viii) If the insurance proceeds are held by Beneficiary to be used to
reimburse Trustor for the cost of
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reconstruction of the said real estate, then (1) the said real estate shall
be promptly and diligently restored by Trustor to the equivalent of its
condition immediately prior to the casualty in accordance with the original
plans and specifications or to such other condition as Beneficiary may
approve in writing, (2) disbursements of such insurance proceeds shall be in
accordance with disbursement procedures acceptable to Beneficiary, and (3)
any proceeds actually received by Beneficiary and not required to reconstruct
the said real estate or satisfy the conditions set forth in subparagraphs (i)
through (viii) of this subsection shall be applied towards the Secured
Obligations secured hereby. Beneficiary may commingle any such award or
settlement held by it with its other general funds. Beneficiary shall not be
obligated to pay interest in respect of any such award or settlement held by
it nor shall Trustor be entitled to a credit against any of the Secured
Obligations, except and to the extent the award or settlement are applied
thereto pursuant to this subsection. Without limitation of the foregoing,
Beneficiary shall have the right at all times to apply such insurance
proceeds to the cure of any Event of Default or the performance of any
obligations of Trustor under the Loan Documents.
(ix) If the insurance proceeds are applied to the payment of the
Secured Obligations secured by this Deed of Trust, any such application shall be
in such order as set forth in SECTION 3.11 of this Deed of Trust and shall
constitute a voluntary prepayment subject to any prepayment premiums or fees
provided in any of the other Loan Documents. Beneficiary may apply such
insurance proceeds to such prepayment premiums or fees. Nothing herein
contained shall be deemed to excuse Trustor from repairing or maintaining the
said real estate as provided herein or restoring all damage or destruction to
the said real estate, regardless of whether or not there are insurance proceeds
available to Trustor or whether any such proceeds are sufficient in amount, and
the application or release by Beneficiary of any insurance proceeds shall not
cure or waive any default or notice of default under this Deed of Trust or
invalidate any act done pursuant to such notice.
(g) Copies of Notices. Trustor hereby requests that a copy of any notice
of default and any notice of sale hereunder be mailed to it at the address set
forth on the first page of this Deed of Trust.
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(h) CCP Section 736. Beneficiary shall have all of the rights, privileges
and remedies of a secured lender under California Code of Civil Procedure
Section 736.
(i) Attorneys' Fees. If any Event of Default occurs, Trustor shall pay
all costs of enforcement and collection, including but not limited to,
reasonable attorneys' fees, whether or not such enforcement and collection
includes the filing of a lawsuit. As used in this Deed of Trust and in the
other Loan Documents, the term "attorneys' fees" or "attorneys' fees and costs"
shall mean the fees and expenses of counsel to the parties hereto, which may
include printing, photostating, duplicating and other expenses, air freight
charges, and fees billed for law clerks, paralegals, librarians and others not
admitted to the bar but performing services under the supervision of an
attorney. The terms "attorneys' fees" or "attorneys' fees and costs" shall also
include, without limitation, all such fees and expenses incurred with respect to
appeals, arbitrations, bankruptcy proceedings and any post-judgment proceedings
to collect any judgment, and whether or not any action or proceeding is brought
with respect to the matter for which said fees and expenses were incurred. The
provisions allowing for the recovery of post-judgment fees, costs and expenses
are separate and several and shall survive the merger of the applicable Loan
Document into any judgment.
(j) This Deed of Trust is both a real property lien and also a "security
agreement" and a "financing statement" within the meaning of the State Uniform
Commercial Code. The Trust Premises includes both real and personal property
and all of Trustor's other right, title and interest, whether tangible or
intangible, in the Trust Premises. By executing and delivering this Deed of
Trust, Trustor grants to Trustee for the benefit of Beneficiary, as security for
the Secured Obligations secured hereby, a security interest in the Trust
Premises to the full extent that any of the Trust Premises may be subject to the
State Uniform Commercial Code. Notwithstanding the grant of such security
interest to Trustee, the beneficial owner and holder of such security interest
is Beneficiary, Beneficiary will be deemed the "secured party" with respect to
such security interest for all purposes of the Uniform Commercial Code and will
be so identified on all financing statements filed in connection therewith, and
Beneficiary shall be entitled upon the occurrence of an Event of Default to
exercise all the remedies of a secured party under the Uniform Commercial Code
as well as all other rights and remedies available at law or in equity.
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(k) Accommodation Provisions. Insofar as this Deed of Trust secures
obligations (the "OTHER OBLIGATIONS") of other Obligors other than Trustor (the
"OTHER PARTIES") in favor of Beneficiary, Trustor has executed and delivered
this Deed of Trust as an accommodation instrument with the intent of subjecting
its interests in the Property to the lien of this Deed of Trust as security for
the Other Obligations and in order to induce Beneficiary to enter into the Loan
Documents. Trustor hereby agrees, to the fullest extent permitted by law, not
to assert or take advantage of:
(i) Any right to require Beneficiary to proceed against the Other Parties
or any other person or to proceed against or exhaust any other security held by
Beneficiary at any time or to pursue any other remedy in Beneficiary's power
before exercising any right or remedy under this Deed of Trust.
(ii) Any defense that may arise by reason of:
(a) Beneficiary's failure to proceed against the Other Parties'
property, or any other party against whom Beneficiary might assert a claim,
before proceeding against Trustor under this Deed of Trust; or
(b) The release, suspension, discharge or impairment of any of
Beneficiary's rights against the Other Parties or any other party against
whom Beneficiary might assert a claim, whether such release, suspension,
discharge or impairment is explicit, tacit or inadvertent; or
(c) Beneficiary's failure to pursue any other remedies available
to Beneficiary that would reduce the burden of the indebtedness secured
hereby on Trustor's interests in the Property; or
(d) Any extension of the time for the payment or performance of
any of the Other Obligations or this Deed of Trust; or
(e) Any amendment of this Deed of Trust or the Other
Obligations, whether or not such amendment materially affects the risk that
Trustor has assumed by executing this Deed of Trust; or
(f) The incapacity, lack of authority, death or disability of
the Other Parties or any other person or persons; or
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(g) The failure of Beneficiary to file or enforce a claim
against the estate (in either administration, bankruptcy or any other
proceedings) of the Other Parties or any other person or persons.
(iii) Demand, protest and notice of any kind, including, without
limitation, the following notices:
(a) Notice of the evidence, creation or incurring of any new or
additional indebtedness or obligation (provided that such indebtedness or
obligation is not secured by this Deed of Trust); or
(b) Notice of any action or non-action on the part of the Other
Parties or Beneficiary in connection with any obligation or evidence of
indebtedness held by Beneficiary as collateral; or
(c) Notice of payment or non-payment by the Other Parties of the
indebtedness secured by this Deed of Trust.
(iv) Any right to assert against the Beneficiary any defense arising by
reason of any claim or defense based upon an election of remedies by the
Beneficiary to foreclose, either by judicial foreclosure or by exercise of the
power of sale, under any other deed of trust securing the Other Obligations,
which in any manner impairs, reduces, releases, destroys or extinguishes
Trustor's subrogation rights, rights to proceed against the Other Parties for
reimbursement, or any other rights of Trustor to proceed against any other
person or security. Trustor waives all rights and defenses to enforcement of
all or any part of the indebtedness secured hereby which defenses are based on
an election of remedies by Beneficiary, even though the election of remedies,
such as nonjudicial foreclosure with respect to any
such other deed of trust, will destroy Trustor's rights of subrogation and
reimbursement against the Other Parties by operation of Section 580d of the
California Code of Civil Procedure. This means, among other things:
(a) The Beneficiary may collect from the Trustor without first
foreclosing on any real or personal property collateral pledged by the
Other Parties.
(b) If the Beneficiary forecloses on any real property
collateral pledged by the Other Parties:
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(c) The amount of the debt may be reduced only by the price for
which that collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price.
(ii) The Beneficiary may collect from the Trustor even if the
Beneficiary, by foreclosing on the other real property collateral, has
destroyed any right the Trustor may have to collect from the Other
Parties.
This is an unconditional and irrevocable waiver of any rights and defenses the
Trustor may have because the debtor's debt is secured by real property. These
rights and defenses include, but are not limited to, any rights or defenses
based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil
Procedure.
(v) Any rights arising because of Trustor's payment or satisfaction
of the indebtedness secured hereby (i) against the Other Parties, by way of
subrogation to the rights of Beneficiary or otherwise, or (ii) against any other
guarantor or any Other Party obligated to pay any of the indebtedness secured
hereby, by way of contribution or reimbursement or otherwise.
(vi) Any duty on the part of Beneficiary to disclose to Trustor any
default under the Other Obligations.
(vii) Any duty on the part of Beneficiary to disclose to Trustor any
facts Beneficiary may now know or may hereafter know about the Other Parties or
any successors in interest (if any) regardless of whether Beneficiary (i) has
reason to believe that any such facts materially increase the risk beyond the
risk which Trustor intends to assume by executing this Deed of Trust, (ii) has
reason to believe that these facts are unknown to Trustor, or (iii) has a
reasonable opportunity to communicate such facts to Trustor, it being understood
and agreed that Trustor is fully responsible for being and keeping informed of
the financial condition of the Other Parties or any successor in interest of the
Other Parties and of all circumstances bearing on the risk of non-payment of any
indebtedness of the Other Parties to Beneficiary that is secured hereby.
(viii) Any right to object to the release of any portions of the
Property from the lien of this Deed of Trust notwithstanding the fact that such
releases may be made
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without Beneficiary's having received any or adequate consideration therefor.
Trustor further agrees that with respect to any Secured Obligation secured
hereby Beneficiary may, in such manner and upon such terms and at such times as
Beneficiary deems best and without demand or notice to or consent of Trustor (i)
release any party now or hereafter liable for the performance of any such
Secured Obligation, (ii) extend the time for the performance of any such Secured
Obligation, (iii) accept additional security therefor, and (iv) alter,
substitute or release any property securing such performance.
Before executing this Deed of Trust, Trustor has made such independent
legal and factual inquiries and investigations as Trustor deemed necessary or
desirable with respect to the ability of the Other Parties to honor all of the
Other Parties' covenants and agreements with Beneficiary, and Trustor has relied
solely on said independent inquiries and investigations preparatory to entering
into this Deed of Trust.
(l) Controlling Provisions. In the event of any conflict between
Section 5.17 and any other provisions of this Deed of Trust, the provisions of
this Section 5.17 shall control.
69
<PAGE>
IN WITNESS WHEREOF, the Trustor has caused this Deed of Trust to be duly
executed as of the day and year first above written.
TRUSTOR:
LEINER HEALTH PRODUCTS INC., a
Delaware corporation
By: /s/ William B. Towne
------------------------------------
Name: William B. Towne
Title: Executive Vice President-Finance
70
<PAGE>
ACKNOWLEDGMENT OF TRUSTOR
STATE OF New York )
)SS.:
COUNTY OF New York )
On June 27, 1997, before me,Caron Gelineau, a Notary Public in and for said
State, personally appeared William Towne and _________________________,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument
and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her/ signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Caron F. Gelineau (Seal)
---------------------------------------
Caron F. Gelineau
Notary Public, State of New York
No. 31-5009056
Qualified in New York County
Commission Expires March 8, 1999
1
<PAGE>
SCHEDULE 1
LEGAL DESCRIPTION OF THE LAND
(attached hereto)
That portion of Lot 11 in Section 26, Township 4 South, Range 11 West of the J.
W. Bixby and Company's Subdivision, in the City of Garden Grove, County of
Orange, State of California, as shown on a map recorded in Book 7, Page 51 of
Miscellaneous Records of Los Angeles County, described as follows:
Parcel 1 on Lot Line Adjustment filed in Book 12691, Page 1992 of Official
Records of said Orange County.
Except any rights to oil, gas or other hydrocarbon products without the right of
surface entry as set forth in an instrument recorded February 24, 1943 in Book
1177, Page 540 Official Records.
Also except all oil, oil rights, minerals, mineral rights, natural gas, natural
gas rights, and other hydrocarbons by whatsoever name known, geothermal steam
and all products derived from any of the foregoing, that may be within or under
the parcel of land hereinabove described, together with the perpetual right of
drilling, mining, exploring and operating therefor and storing in and removing
the same from said land or any other land, including the right to whipstock or
directionally drill and mine from lands other than those hereinabove described,
oil or gas wells, tunnels and shafts into, through or across the subsurface of
the land hereinabove described and to bottom such whipstocked or directionally
drilled wells, tunnels, and shafts under and beneath or beyond the exterior
limits thereof, and to redrill, retunnel, equip, maintain, repair, deepen and
operate any such wells or mines, without however, the right to drill, mine,
store, explore and operate through the surface or the upper five hundred (500)
feet of the subsurface of the land hereinabove described, as reserved in the
deed from The Irvine Company, a Michigan corporation, successors by merger with
Irvine Industrial Complex, a corporation, recorded June 30, 1978 in Book 12739,
Page 1281, Official Records.
1
<PAGE>
SCHEDULE 2
PERMITTED ENCUMBRANCES
Those exceptions to title listed
in Lawyers Title Insurance
Corporation marked-up commitment
#9707008-44 dated June 30, 1997.
1
<PAGE>
SCHEDULE 3
ENCUMBERED LEASE
Standard Industrial Lease dated February 19, 1988 by and between Richard F.
Burns, J. Grant Monahon, and Lawrence W. Doyle, as Trustees of AEW #113 Trust
established by Declaration of Trust dated January 19, 1988, predecessor in
interest to Fujita Corporation USA, as landlord, and Vita-Fresh Vitamin Co.,
predecessor Inc., in interest to Leiner Health Products Inc., as tenant, and as
such Lease has been amended, restated or otherwise modified from time to time.
2
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
ARTICLE I
COVENANTS AND AGREEMENTS OF THE TRUSTOR
SECTION 1.1. Payment of Secured Obligations...............................10
SECTION 1.2. Title to Trust Premises, etc.................................11
SECTION 1.3. Title Insurance..............................................12
SECTION 1.3.1. Title Insurance Policy.............................12
SECTION 1.3.2. Title Insurance Proceeds...........................12
SECTION 1.4. Recordation..................................................12
SECTION 1.5. Payment of Impositions, etc..................................13
SECTION 1.6. Insurance and Legal Requirements.............................13
SECTION 1.7. Security Interests, etc......................................14
SECTION 1.8. Permitted Contests...........................................15
SECTION 1.9. Leases.......................................................15
SECTION 1.10. Compliance with Instruments.................................16
SECTION 1.11. Maintenance and Repair, etc.................................16
SECTION 1.12. Alterations, Additions, etc.................................16
SECTION 1.13. Acquired Property Subject to Lien...........................17
SECTION 1.14. Assignment of Leases, Rents, Proceeds, etc..................17
SECTION 1.15. No Claims Against the Trustee or the Beneficiary............20
SECTION 1.16. Indemnification.............................................20
SECTION 1.17. No Credit for Payment of Taxes..............................22
SECTION 1.18. Offering of the Notes; Application of Proceeds of Loans.....22
SECTION 1.19. Encumbered Lease............................................22
SECTION 1.20. Security Agreement..........................................28
SECTION 1.21. Representations and Warranties..............................30
SECTION 1.22. Trustor's Covenants.........................................30
ARTICLE II
INSURANCE; DAMAGE, DESTRUCTION OR TAKING, ETC..
SECTION 2.1. Insurance....................................................30
SECTION 2.1.1. Risks to be Insured.....................................31
SECTION 2.1.2. Policy Provisions.......................................32
SECTION 2.1.3. Delivery of Policies, etc...............................33
SECTION 2.1.4. Separate Insurance......................................33
SECTION 2.2. Damage, Destruction or Taking; Trustor to Give
Notice; Assignment of Awards................................33
SECTION 2.3. Application of Proceeds and Awards...........................34
i
<PAGE>
Section Page
- ------- ----
SECTION 2.4 Total Taking and Total Destruction............................37
ARTICLE III
EVENTS OF DEFAULT; REMEDIES, ETC.
SECTION 3.1. Events of Default; Acceleration..............................38
SECTION 3.2. Legal Proceedings; Foreclosure...............................38
SECTION 3.3. Power of Sale................................................39
SECTION 3.4. Uniform Commercial Code Remedies.............................40
SECTION 3.5. Trustee and Beneficiary Authorized to Execute Deeds, etc.....40
SECTION 3.6. Purchase of Trust Premises by Beneficiary....................41
SECTION 3.7. Receipt a Sufficient Discharge to Purchaser..................41
SECTION 3.8. Waiver of Appraisement, Valuation, etc.......................41
SECTION 3.9. Sale a Bar Against Trustor...................................41
SECTION 3.10. Secured Obligations to Become Due on Sale...................41
SECTION 3.11. Application of Proceeds of Sale and Other Moneys............42
SECTION 3.12. Appointment of Receiver.....................................43
SECTION 3.13. Possession, Management and Income...........................43
SECTION 3.14. Right of Trustee and the Beneficiary to Perform
Trustor's Covenants, etc ..................................44
SECTION 3.15. Subrogation.................................................44
SECTION 3.16. Remedies, etc., Cumulative..................................45
SECTION 3.17. Provisions Subject to Applicable Law........................45
SECTION 3.18. No Waiver, etc..............................................45
SECTION 3.19. Compromise of Actions, etc..................................46
ii
<PAGE>
Section Page
- ------- ----
ARTICLE IV
DEFINITIONS
SECTION 4.1. Terms Defined in this Deed of Trust..........................46
SECTION 4.2. Use of Defined Terms.........................................54
SECTION 4.3. Credit Agreement Definitions.................................55
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Further Assurances; Financing Statements.....................55
SECTION 5.1.1. Further Assurances......................................55
SECTION 5.1.2. Financing Statements....................................55
SECTION 5.2. Additional Security..........................................56
SECTION 5.3. Defeasance, Partial Release, etc.............................56
SECTION 5.3.1. Defeasance..............................................56
SECTION 5.3.2. Partial Release, etc....................................56
SECTION 5.4. Notices, etc.................................................57
SECTION 5.5. Waivers, Amendments, etc.....................................57
SECTION 5.6. Cross-References.............................................57
SECTION 5.7. Headings.....................................................57
SECTION 5.8. Currency.....................................................57
SECTION 5.9. Governing Law................................................57
SECTION 5.10. Successors and Assigns, etc.................................58
SECTION 5.11. Concerning the Trustee......................................58
SECTION 5.11.1. Acceptance of Trusts; Certain Terms of the Trusts......58
SECTION 5.12. Waiver of Jury Trial; Submission to Jurisdiction............61
SECTION 5.13. Severability................................................62
SECTION 5.14. Loan Document...............................................62
SECTION 5.15. Usury Savings Clause........................................63
SECTION 5.16. Future Advances.............................................63
SECTION 5.17. SPECIAL PROVISIONS MODIFYING OR AFFECTING THIS
DEED OF TRUST BY REASON OF THE STATE IN WHICH THE
LAND IS LOCATED...................................................64
Execution Page..............................................................63
Acknowledgments.............................................................64
Schedule 1--Legal Description of the Land
Schedule 2--Permitted Encumbrances
iii
<PAGE>
Section Page
- ------- ----
Schedule 3--Encumbered Lease
iv
<PAGE>
Exhibit 4.25
[EXECUTION COPY]
TRADEMARK SECURITY AGREEMENT
----------------------------
This TRADEMARK SECURITY AGREEMENT (this "AGREEMENT"), dated as of
June 30, 1997, is made between LEINER HEALTH PRODUCTS INC., a Delaware
corporation (the "GRANTOR"), and THE BANK OF NOVA SCOTIA, as collateral agent
(the "AGENT") for each of the Secured Parties;
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented, amended and restated or otherwise modified from
time to time, the ("CREDIT AGREEMENT"), among Leiner Health Products Group
Inc., a Delaware corporation ("LHPG" or the "U.S. BORROWER" (prior to the
Assumption)), Vita Health Company (1985) Ltd., a Manitoba corporation (the
"CANADIAN BORROWER", and together with the U.S. Borrower, the "BORROWERS"),
the various financial institutions as are or may become parties thereto which
extend a Commitment under the U.S. Facility (collectively, the "U.S.
LENDERS"), the various financial institutions as are or may become parties
thereto which extend a Commitment under the Canadian Facility (collectively,
the "CANADIAN LENDERS", and together with the U.S. Lenders, the "LENDERS"),
The Bank of Nova Scotia ("SCOTIABANK"), as agent for the U.S. Lenders under
the U.S. Facility (in such capacity, the "U.S. AGENT"), and Scotiabank, as
agent for the Canadian Lenders under the Canadian Facility (in such capacity,
the "CANADIAN AGENT"), the Lenders and the Issuers have extended Commitments
to make Credit Extensions to the Borrowers;
WHEREAS, as contemplated by the Credit Agreement, immediately
following the making of the initial Credit Extensions, the Grantor and LHPG
have delivered the Assumption Agreement, pursuant to which the Grantor has
assumed (the "ASSUMPTION") the rights and obligations of LHPG as (and has
become) the "U.S. Borrower" under the Credit Agreement;
<PAGE>
WHEREAS, in connection with the Credit Agreement, the Grantor has
executed and delivered a U.S. Borrower Security Agreement, dated as of June
30, 1997 (as amended, supplemented, amended and restated or otherwise
modified from time to time, the "SECURITY AGREEMENT");
WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit Extensions) and the execution and
delivery of the Assumption Agreement under the Credit Agreement, the Grantor
is required to execute and deliver this Agreement; and
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in order to induce the
Lenders and the Issuers to make Credit Extensions (including the initial
Credit Extensions) to the Borrowers pursuant to the Credit Agreement, and to
induce the Secured Parties to enter into Rate Protection Agreements, if any,
the Grantor agrees, for the benefit of each Secured Party, as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined herein or the
context otherwise requires, terms used in this Agreement, including its
preamble and recitals, have the meanings provided (or incorporated by
reference) in the Security Agreement.
SECTION 2. GRANT OF SECURITY INTEREST. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
to secure all Obligations, the Grantor does hereby grant to the Agent a
security interest in, for the ratable benefit of the Secured Parties, all of
the following property (the "TRADEMARK COLLATERAL"), whether now owned or
hereafter acquired by it:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
certification marks, collective marks, logos, other source of business
identifiers, designs and general intangibles of a like nature owned by the
Grantor in the Grantor's name as such may be changed from time to
2
<PAGE>
time (all of the foregoing items in this CLAUSE (A) being collectively
called a "TRADEMARK"), now existing anywhere in the world or hereafter
adopted or acquired, whether currently in use or not, all registrations and
recordings thereof and all applications in connection therewith, whether
pending or in preparation for filing, including registrations, recordings
and applications in the United States Patent and Trademark Office or in any
office or agency of the United States of America or any State thereof or
any foreign country, including those referred to in ITEM A of ATTACHMENT 1
attached hereto, PROVIDED, HOWEVER, that Trademark Collateral shall not
include "intent to use" applications for trademark or service mark
registrations filed in the United States Patent and Trademark Office
pursuant to Section l(b) of the Lanham Act, 15 U.S.C. Section 1051, unless
and until an Amendment to Allege Use or a Statement of Use under Section
l(c) or l(d) of said Act has been filed;
(b) all Trademark licenses of the Grantor, including each Trademark
license referred to in ITEM B of ATTACHMENT 1 attached hereto subject, in
each case, to the terms of such license agreements, and the right to
prepare for sale, sell and advertise for sale, all Inventory now or
hereafter covered by such licenses;
(c) all reissues, extensions or renewals of any of the items
described in CLAUSES (A) and (B);
(d) all of the goodwill of the business of the Grantor connected
with the use of, and symbolized by the items described in, CLAUSES (A) and
(B); and
(e) all proceeds of, and rights of the Grantor associated with, the
foregoing, including any claim by the Grantor against third parties for
past, present or future infringement or dilution of any Trademark or
Trademark registration including any Trademark or Trademark registration
referred to in ITEM A of ATTACHMENT 1 attached hereto, or for any injury to
the goodwill of the Grantor associated with the use of any such Trademark
or for breach or enforcement of any Trademark license subject, in each
case, to the terms of such license agreements.
3
<PAGE>
SECTION 3. SECURITY AGREEMENT. This Agreement has been executed
and delivered by the Grantor for the purpose of registering the security
interest of the Agent in the Trademark Collateral with the United States
Patent and Trademark Office and, to the extent required by the Security
Agreement, corresponding offices in other countries of the world. The
security interest granted hereby has been granted as a supplement to, and not
in limitation of, the security interest granted to the Agent for its benefit
and the benefit of each Secured Party under the Security Agreement. The
Security Agreement (and all rights and remedies of the Agent and each Secured
Party thereunder) shall remain in full force and effect in accordance with
its terms.
SECTION 4. RELEASE OF SECURITY INTEREST. Upon the payment in full
in cash, or cash collateralization, of all Obligations, the termination or
expiration of all Letters of Credit, the termination of all Rate Protection
Agreements entered into pursuant to the Credit Agreement and the termination
of all Commitments, the security interest granted herein and all related
Liens shall terminate and all rights to the Trademark Collateral shall revert
to the Grantor. Upon any such termination or release, the Agent will, at the
Grantor's sole expense, execute and deliver to the Grantor such documents as
the Grantor shall reasonably request to evidence such termination of the
security interest in the Trademark Collateral granted herein and all related
Liens.
SECTION 5. ACKNOWLEDGMENT. The Grantor does hereby further
acknowledge and affirm that the rights and remedies of the Agent with respect
to the security interest in the Trademark Collateral granted hereby are more
fully set forth in the Security Agreement, the terms and provisions of which
(including the remedies provided for therein) are incorporated by reference
herein as if fully set forth herein.
SECTION 6. LOAN DOCUMENT, ETC. This Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions of the Credit Agreement.
4
<PAGE>
SECTION 7. COUNTERPARTS. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute together but one and the same
agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
LEINER HEALTH PRODUCTS INC.
By /s/ William B. Towne
---------------------------------
Name: William B. Towne
Title: Executive Vice President-
Finance
THE BANK OF NOVA SCOTIA,
as Agent
By /s/ Gary McDonough
---------------------------------
Name: Gary McDonough
Title:
6
<PAGE>
Attachment 1
to Trademark
Security Agreement
Item A. TRADEMARKS
Registered Trademarks
Country Trademark Registration No. Registration Date
------- ------------------ ---------------- -----------------
USA DREMELON 672,108 1-6-59
USA JET-AWAKE 698,477 5-31-60
USA TELESTRES 707,739 11-29-60
USA STRIKES PAIN 733,291 6-26-62
USA GORDON'S ECONO-PAK 742,896 1-1-63
USA CHOOM EE'S 789,316 5-11-65
USA TRU-NATURE 964,561 7-24-73
USA COUNCILABS 973,800 11-27-73
USA SNIP E 1,005,174 2-25-75
USA YOUR LIFE 1,029,138 1-6-76
USA FORMULA RDA 1,034,189 2-24-76
USA TRU-NATURE 1,076,778 11-8-77*
USA VITALIFE 1,094,936 7-4-78
USA YOUR LIFE & DESIGN 1,118,048 5-15-79
USA SUBSTANCE II 1,137,182 6-24-80
USA MY-A-MULTI 1,131,599 3-11-80
USA DIETIC 1,175,765 11-3-81
USA VITA-FRESH 1,152,085 4-28-81
USA FORMULA 36 1,172,810 10-13-81
USA DAILY VITAMIN PAK 1,178,785 11-24-81
- -------------------------
* This mark has been abandoned and this registration will not be renewed.
<PAGE>
Attachment 1
to Trademark
Security Agreement
Registered Trademarks
Country Trademark Registration No. Registration Date
------- ------------------ ---------------- -----------------
USA L-FORMULA 1,189,083 2-9-82
USA FULVITA 1,190,422 2-23-82
USA SUPER VITA-HEALTH 36 1,232,483 3-29-83
USA VITA-HEALTH 1,239,943 5-31-83
USA NATURE'S HARMONY 1,257,332 11-15-83
USA EVERYDAY ATHLETE 1,259,763 12-6-83
USA YOUR LIFE 1,267,613 2-21-84
USA SENIOR'S CHOICE 1,308,596 12-11-84
USA HEALTHY LIFE 1,310,734 12-25-84
USA GRAND-SLAM 1,313,044 1-8-85
USA LIGHTWEIGHT 1,313,046 1-8-85
USA BURST 1,313,045 1-8-85
USA NBF NATIONAL
BRAND FORMULA 1,320,310 2-19-85
USA MAXIMUM CHOICE 1,338,731 6-4-85
USA MAXIMUM PAK 1,374,543 12-10-85
USA EXECUTIVE'S CHOICE 1,385,699 3-11-86
USA MAN'S CHOICE 1,387,982 4-1-86
USA WOMAN'S CHOICE 1,387,981 4-1-86
USA YOUR LIFE & DESIGN 1,402,829 7-29-86
2
<PAGE>
Attachment 1
to Trademark
Security Agreement
Registered Trademarks
Country Trademark Registration No. Registration Date
------- ------------------ ---------------- -----------------
USA CHUBBLES 1,418,458 11-25-86**
USA NATURES'S PREMIUM 1,433,522 3-24-87
USA BEARFOOT 1,435,638 4-7-87***
USA DAILY PAK 1,503,542 9-13-88
USA PHARMACIST FORMULA 1,509,847 10-25-88
USA PHARMACIST FORMULA
& DESIGN 1,537,889 5-9-89
USA PHARMACIST FORMULA
& DESIGN 1,591,651 4-17-90
USA PHARMACIST FORMULA 1,592,720 4-24-90
USA YOUR LIFE & DESIGN 1,596,015 5-15-90
USA PURITY & QUALITY
GUARANTEED 1,604,326 7-3-90
USA THERA PLUS 1,608,014 7-31-90
USA CENTRAL-LIFE 1,630,503 1-1-91****
USA CENTRAL-VITE 1,630,504 1-1-91
USA NATURALIZED 1,663,752 11-5-91
- -------------------------
** This mark has been abandoned and this registration will not be renewed.
*** This mark has been abandoned and this registration will not be renewed.
**** This mark has been abandoned and this registration will not be renewed.
3
<PAGE>
Attachment 1
to Trademark
Security Agreement
Registered Trademarks
Country Trademark Registration No. Registration Date
------- ----------------------- ---------------- -----------------
USA PHARMACIST FORMULA
& DESIGN 1,678,249 3-10-92
USA NRL GOLD BANNER
& DESIGN 1,683,558 4-21-92
USA PROVEN RELEASE FORMULA
& DESIGN 1,698,545 6-30-92
USA RELEASE TESTED & DESIGN 1,706,198 8-11-92
USA SUPREME QUALITY 1,710,877 8-25-92
USA BODYCOLOGY 1,719,286 9-22-92
USA DISSOLUTION TESTED
PROVEN RELEASE & DESIGN 1,721,198 9-29-92
USA DISSOLUTION TESTED
PROVEN RELEASE & DESIGN 1,730,435 11-3-92
USA RELEASE ASSURED
& DESIGN 1,742,102 12-22-92
USA TRU NATURE & DESIGN 1,745,052 1-5-93
USA PROVEN RELEASE & DESIGN 1,745,043 1-5-93
USA ALLERCOLD 1,746,289 1-12-93
USA SPACE KIDS 1,748,098 1-26-93
4
<PAGE>
Attachment 1
to Trademark
Security Agreement
Registered Trademarks
Country Trademark Registration No. Registration Date
------- ----------------------- ---------------- -----------------
USA ABSTRACT DESIGN
OF A FLOWER 1,749,184 1-26-93
USA BODYCOLOGY (Script) 1,749,731 2-2-93
USA DISSOLUTION TESTED
RELEASE ASSURED & DESIGN 1,753,433 2-16-93
USA PHARMACIST FORMULA
& DESIGN 1,765,207 4-13-93
USA PHARMACIST FORMULA 1,763,596 4-6-93
USA PHARMACIST FORMULA
& DESIGN 1,763,597 4-6-93
USA HISTA TABS 1,768,400 5-4-93
USA RELEASE ASSURED
& DESIGN 1,773,376 5-25-93
USA SELECT FORMULA 1,773,363 5-25-93
USA RELEASE ASSURED
& DESIGN 1,782,015 7-13-93
USA DRYFEDRINE 1,783,199 7-20-93
USA PC PHARMACIST 1,788,756 8-17-93
USA SLUMBER TIME 1,789,833 8-24-93
USA PHARMACIST VALUE 1,789,839 8-24-93
5
<PAGE>
Attachment 1
to Trademark
Security Agreement
Registered Trademarks
Country Trademark Registration No. Registration Date
------- ------------------------- ---------------- -----------------
USA RELEASE ASSURED & DESIGN 1,794,087 9-21-93
USA ECOLOGIZED 1,802,519 11-2-93
USA LACTASE 3300 1,811,401 12-14-93
USA LABORATORY TESTED RELEASE
ASSURED & DESIGN 1,801,738 10-26-93
USA DISINTEGRATION TESTED
RELEASE ASSURED & DESIGN 1,801,737 10-26-93
USA LUBRICARE 1,831,007 4-19-94
USA CREATED FROM NATURE 1,867,904 12-20-94
USA DAILY PAK SELECT 1,877,375 2-7-95
USA PHARMACIST BEST 1,881,114 2-28-95
USA OPTIMUM BALANCE 1,881,149 2-28-95
USA PHARMACIST TRUST 1,884,193 3-14-95
USA PHARMACIST OWN 1,885,526 3-21-95
USA PHARMACIST FIRST 1,885,527 3-21-95
USA PHARMACIST NUMBER 1 1,885,528 3-21-95
USA CENTRAL-VITE SUPREME 1,885,535 3-21-95
6
<PAGE>
Attachment 1
to Trademark
Security Agreement
Registered Trademarks
Country Trademark Registration No. Registration Date
------- ------------------------- ---------------- -----------------
USA PHARMACIST FRIEND 1,885,529 3-21-95
USA PHARMACIST REFERRAL 1,884,188 3-14-95
USA PHARMACIST SOLUTION 1,884,189 3-14-95
USA PHARMACIST BLEND 1,884,190 3-14-95
USA PHARMACIST PICK 1,884,191 3-14-95
USA PHARMACIST ANSWER 1,884,192 3-14-95
USA PHARMACIST TRUSTED 1,884,194 3-14-95
USA ASSURED RELEASE & DESIGN 1,886,507 3-28-95
USA TODAY'S PHARMACIST 1,887,706 4-4-95
USA PHARMACIST SYSTEM 1,887,714 4-4-95
USA BABYCOLOGY 1,906,239 7-18-95
USA LHP AND DESIGN 1,913,897 8-22-95
USA PHARMACIST CARE 1,912,171 8-15-95
USA PHARMACIST RELIEF 1,931,895 10-31-95
USA CENTRAL-VITE PLUS 1,915,779 8-29-95
USA REPLENISH 1,926,257 10-10-95
7
<PAGE>
Attachment 1
to Trademark
Security Agreement
Registered Trademarks
Country Trademark Registration No. Registration Date
---------- ------------------------ ---------------- -----------------
USA THE VITAMIN STORE 1,951,912 1-23-96
USA PHYTO-CONCENTRATES 1,969,648 4-23-96
USA BEYOND VITAMINS 1,971,903 4-30-96
USA LIQUI-COAT 1,986,734 7-16-96
USA BODYCOLOGY (Script) 1,989,228 7-23-96
USA KWIK-KAP 2,012,314 10-29-96
USA FORMULAE USP 2,033,157 1-21-97
USA LIQUID LIFT 2,035,351 2-4-97
USA BIO-BALANCE 2,041,108 2-25-97
USA LEINER HEALTH PRODUCTS
& DESIGN 2,059,591 5-6-97
California YOUR LIFE California 53094 4-28-75
California PHARMACIST FORMULA California 94202 6-14-91
ADJACENT THE
REPRESENTATION OF A
MORTAR AND PESTLE
FOREIGN TRADEMARK REGISTRATIONS
Country Mark Reg. No. Reg. Date
--------- ---------- --------- ---------
Argentina BODYCOLOGY 1,549,896 01/31/95
Argentina BODYCOLOGY 1,549,895 01/31/95
8
<PAGE>
Attachment 1
to Trademark
Security Agreement
FOREIGN TRADEMARK REGISTRATIONS
Country Mark Reg. No. Reg. Date
------- ---- -------- ---------
Argentina PHYTO-NUTRIENTS 1,574,447 05/17/96
Argentina YOUR LIFE 1,488,512 11/30/93
Argentina PHARMACIST FORMULA 1,612,272 08/22/96
Australia VITA-FRESH B418,057 11/09/84
Australia YOUR LIFE A303,284 12/21/76
Bulgaria PHARMACIST FORMULA 28,612 06/27/96
Bulgaria YOUR LIFE 26,679 11/13/95
Canada BODYCOLOGY 444,247 06/23/95
Canada NATURE'S HARMONY 304,672 07/12/85
Canada PHARMACIST FORMULA 463,731 09/27/96
Canada YOUR LIFE 228,785 02/21/79
Chile BODYCOLOGY 421,742 02/10/94
China BODYCOLOGY 888,341 10/27/96
China YOUR LIFE 685,624 09/01/95
Columbia BODYCOLOGY 192,452 12/23/96
Columbia NATURAL LIFE 148,953 08/24/93
Costa Rica VITA-FRESH 65,013 04/18/85
Ecuador BODYCOLOGY 252-97 03/12/97
Hong Kong BODYCOLOGY 3274/96 12/22/94
Italy NATURAL LIFE 439,451 03/17/81
Italy YOUR LIFE 439,450 03/17/81
Japan BODYCOLOGY 3,296,573 04/25/97
Japan NATURAL LIFE 2,508,775 02/26/93
9
<PAGE>
Attachment 1
to Trademark
Security Agreement
FOREIGN TRADEMARK REGISTRATIONS
Country Mark Reg. No. Reg. Date
------- ---- --------
Japan SUBSTANCE II 2,395,314 03/31/92
Japan YOUR LIFE 1,740,629 01/23/85
Japan YOUR LIFE (Katakana) 2,616,893 01/31/94
Japan YOUR LIFE (Katakana) 2,691,018 5/27/96
Japan YOUR LIFE 3,296,575 04/25/97
Japan YOUR LIFE (Katakana) 3,296,576 04/25/97
Korea BODYCOLOGY 350,666 11/27/96
Korea BODYCOLOGY 350,667 11/27/96
Mexico BODYCOLOGY 450,043 01/12/94
Mexico FLOWER DESIGN 450,042 01/12/94
Mexico NEW ERA 480,932 11/29/94
Mexico PHARMACIST FORMULA 458,316 04/25/94
Mexico PHYTO-NUTRIENTS 498,447 07/25/95
Mexico YOUR LIFE 490,877 05/03/93
Moldova YOUR LIFE 4,390 06/23/95
New Zealand NATURAL LIFE 250,595 06/26/95
New Zealand NATURAL LIFE 266,085 08/20/96
New Zealand YOUR LIFE 250,594 06/26/95
Peru BODYCOLOGY 27,288 07/10/96
Peru YOUR LIFE 27,289 07/10/96
Romania YOUR LIFE 23,805 02/16/97
Russia BODYCOLOGY 144,765 02/29/96
Saudi Arabia BODYCOLOGY 365/18 12/31/95
10
<PAGE>
Attachment 1
to Trademark
Security Agreement
FOREIGN TRADEMARK REGISTRATIONS
Country Mark Reg. No. Reg. Date
------- ---- -------- ----------
Saudi Arabia YOUR LIFE 377/77 08/09/95
Spain FLOWER DESIGN 1,759,189 04/30/93
Switzerland BODYCOLOGY 441,127 04/25/97
Switzerland YOUR LIFE 439,225 10/21/96
Taiwan FLOWER DESIGN 619,886 12/16/93
Taiwan FLOWER DESIGN 617,796 12/01/93
Taiwan BODYCOLOGY 617,795 12/01/93
Taiwan BODYCOLOGY 622,227 12/01/93
Taiwan NATURAL LIFE 716,049 06/16/96
Taiwan YOUR LIFE 685,624 09/01/95
Thailand YOUR LIFE kor36,721 10/26/95
UAE BODYCOLOGY 5,625 07/03/96
UAE NATURAL LIFE 6,406 08/12/95
UAE YOUR LIFE 5,705 07/07/96
UK BODYCOLOGY 1,250,928 09/25/85
UK BODYCOLOGY 2,006,693 12/28/94
UK BURST 1,458,246 03/14/91
UK NATURAL LIFE 1,175,140 05/18/82
UK VITA-FRESH 1,229,652 11/06/84
UK YOURLIF 1,072,487 12/29/76
Vietnam BODYCOLOGY 19,201 12/01/95
Vietnam NATURAL LIFE 24,074 05/11/96
Vietnam YOUR LIFE 19,202 12/01/95
11
<PAGE>
Attachment 1
to Trademark
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
------- --------- ---------- -----------
USA ANTIOXIDANT PAK 74/359,579 2-16-93(*****)
USA NATURE'S CHOICE 74/484,440 1-27-94
USA RECTANGLE WITH OBLIQUE 74/486,615 2-4-94
OVAL DESIGN
USA PHYTO-NUTRIENTS & DESIGN 74/590,438 10-25-94
USA PHYTOPRINT 74/656,580 4-5-95
USA PHYTOGRAPH 74/717,312 8-18-95
USA BOOSTER PAK 74/732,911 9-22-95
USA OCEAN DEW 74/735,644 9-28-95
USA VITA-FRESH 75/024,396 11-27-95
USA YOUR LIFE 75/064,603 2-28-96
USA LEINER HEALTH PRODUCTS 75/064,602 2-28-96
USA APPLE 75/114,447 6-5-96
USA VITAMANIA 75/145,244 8-5-96
USA PHARMACEUTICAL GRADE 75/166,671 9-16-96
USA SPECIAL REFINING 75/169,471 9-20-96
GUARANTEES PURITY!
USA SPECIALLY PROCESSED AND 75/169,472 9-20-96
REFINED FOR EXTRA PURITY
- -------------------------
(*****)Final refusal mailed.
12
<PAGE>
Attachment 1
to Trademark
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
------- --------- ---------- -----------
USA MEMORY SUPPORT COMPLEX 75/204,606 11-26-96
USA CARDIO COMPLEX 75/204,607 11-26-96
USA SUPER E 75/204,608 11-26-96
USA E-MERGE 75/226,688 1-14-97
USA ENERGY COMPLEX 75/238,653 2-10-97
USA IMPERIAL GINSENG 75/252,865 3-6-97
USA ULTIMUM 75/271,340 4-8-97
USA GINSEVEN 75/285,684 5-2-97
Argentina NATURAL LIFE 2,026,121 3/11/96
Australia BODYCOLOGY 703,336 2/28/96
Australia NATURAL LIFE 703,337 2/28/96
Australia PHYTO-NUTRIENTS 703,335 2/28/96
Bahrain YOUR LIFE 850/95 6/28/95
Benelux YOUR LIFE 880823 10/18/96
Brazil BODYCOLOGY 818,551,453 5/31/95
Brazil NATURAL LIFE (Stylized) 818,999,411 1/11/96
Brazil NATURAL LIFE (Stylized) 818,999,420 1/11/96
Brazil PHARMACIST FORMULA 819,165,530 3/29/96
Brazil PHYTO-NUTRIENTS & DESIGN 818,777,478 9/20/95
Brazil YOUR LIFE 818,601,132 6/16/95
13
<PAGE>
Attachment 1
to Trademark
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
------- --------- ---------- -----------
Canada PHYTO-NUTRIENTS & DESIGN 770,309 12/7/94
Canada TRU-NATURE 812,380 5/10/96
Chile YOUR LIFE 334,929 2/20/96
China LEINER 970008281 1/27/97
China LEINER 970008282 1/27/97
China NATURAL LIFE 950,150,595 11/3/95
China NATURE'S GIFT 960,137,031 12/12/96
China YOUR LIFE 950,150,596 11/3/95
Colombia BODYCOLOGY 96/008,847 2/26/96
Colombia NATURAL LIFE 96/008,848 2/26/96
Colombia YOUR LIFE 96/019,027 4/19/96
Ecuador BODYCOLOGY 58764/95 7/23/95
Ecuador NATURAL LIFE 58762/95 7/3/95
Ecuador PHARMACIST FORMULA 58761/95 7/3/95
Ecuador YOUR LIFE 58763/95 7/3/95
France YOUR LIFE 96/650,930 11/15/96
Germany YOUR LIFE 396 47 337.7 10/24/96
Greece PHYTO-NUTRIENTS & Design 126027 9/4/95
Greece YOUR LIFE 126058 9/7/95
Guatemala VITA-FRESH Unknown Unknown
Hong Kong VITA FRESH 94/15262 12/22/94
Hong Kong YOUR LIFE 94/15261 12/22/94
Indonesia BODYCOLOGY D95-4537 3/20/95
14
<PAGE>
Attachment 1
to Trademark
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
------- --------- ---------- -----------
Indonesia NATURAL LIFE D95-9960 6/12/95
Indonesia PHARMACIST FORMULA D95-16477 9/13/95
Indonesia PHYTO-NUTRIENTS & DESIGN D95-16305 9/11/95
Indonesia YOUR LIFE D95-4538 3/20/95
Israel YOUR LIFE 104,556 4/12/96
Israel YOUR LIFE 105,670 6/7/96
Israel YOUR LIFE 105,671 6/7/96
Italy BODYCOLOGY RM96C001755 4/15/96
Italy PHYTO-NUTRIENTS & DESIGN MI95C011680 11/22/95
Japan DISSOLUTION TESTED 7,133,709 12/22/95
Japan DISSOLUTION TESTED 7,133,710 12/22/95
Japan DISSOLUTION TESTED 7,133,711 12/22/95
in Katakana
Japan DISSOLUTION TESTED 7,133,712 12/22/95
in Katakana
Japan NATURAL LIFE 7,133,725 12/22/95
Japan NATURAL LIFE 7,133,726 12/22/95
Japan NATURAL LIFE in Katakana 7,133,727 12/22/95
Japan NATURAL LIFE in Katakana 7,133,728 12/22/95
Japan NATURALIZED 7,133,701 12/22/95
15
<PAGE>
Attachment 1
to Trademark
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
------- --------- ---------- -----------
Japan NATURALIZED 7,133,702 12/22/95
Japan NATURALIZED in Katakana 7,133,703 12/22/95
Japan NATURALIZED in Katakana 7,133,704 12/22/95
Japan NATURE'S HARMONY 7,133,705 12/22/95
Japan NATURE'S HARMONY 7,133,706 12/22/95
in Katakana
Japan NATURE'S HARMONY 7,133,707 12/22/95
in Katakana
Japan NATURE'S HARMONY
in Katakana 7,133,708 12/22/95
Japan NATURE'S PREMIUM 7,133,737 12/22/95
Japan NATURE'S PREMIUM 7,133,738 12/22/95
Japan NATURE'S PREMIUM 7,133,739 12/22/95
in Katakana
Japan NATURE'S PREMIUM 7,133,740 12/22/95
in Katakana
Japan PHARMACIST FORMULA 116191/1994 11/16/94
Japan PHYTO-NUTRIENTS & Design 123098/1994 12/06/94
Japan PROVEN RELEASE & Design 116564/1995 11/09/95
16
<PAGE>
Attachment 1
to Trademark
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
------- --------- ---------- -----------
Japan PROVEN RELEASE & Design 116565/1995 11/09/95
Japan PROVEN RELEASE & Design 116566/1995 11/09/95
Japan PURITY & QUALITY 116567/1995 11/09/95
GUARANTEED & Design
Japan PURITY & QUALITY 116568/1995 11/09/95
GUARANTEED & Design
Japan PURITY & GUARANTEED 116569/1995 11/09/95
& Design
Japan RELEASE ASSURED 7,133,713 12/22/95
Japan RELEASE ASSURED 7,133,714 12/22/95
Japan RELEASE ASSURED 7,133,715 12/22/95
in Katakana
Japan RELEASE ASSURED
in Katakana 7,133,716 12/22/95
Japan TRU-NATURE 7,133,717 12/22/95
Japan TRU-NATURE 7,133,718 12/22/95
Japan TRU-NATURE in Katakana 7,133,719 12/22/95
Japan TRU-NATURE in Katakana 7,133,720 12/22/95
Japan VITA FRESH 7,133,733 12/22/95
Japan VITA FRESH 7,133,734 12/22/95
17
<PAGE>
Attachment 1
to Trademark
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
------- --------- ---------- -----------
Japan VITA FRESH in Katakana 7,133,735 12/22/95
Japan VITA FRESH in Katakana 7,133,736 12/22/95
Japan VITA-HEALTH 7,133,721 12/22/95
Japan VITA-HEALTH 7,133,722 12/22/95
Japan VITA-HEALTH in Katakana 7,133,723 12/22/95
Japan VITA-HEALTH in Katakana 7,133,724 12/22/95
Japan VITAL LIFE 7,133,729 12/22/95
Japan VITAL LIFE 7,133,730 12/22/95
Japan VITAL LIFE in Katakana 7,133,731 12/22/95
Japan VITAL LIFE in Katakana 7,133,732 12/22/95
Japan YOUR LIFE 116561/1995 11/09/95
Japan YOUR LIFE 116562/1995 11/09/95
Japan YOUR LIFE (Katakana) 116563/1995 11/09/95
KOREA (South) PHYTO-NUTRIENTS & Design 95/32910 8/25/95
KOREA (South) YOUR LIFE 96/15120 4/16/96
KOREA (South) YOUR LIFE 96/14632 4/12/96
Kuwait YOUR LIFE 32914 1/30/96
Latvia YOUR LIFE M-97-145 1/31/97
Lithuania YOUR LIFE 95/0455 2/15/95
Macao BODYCOLOGY 001849 4/15/97
Malaysia BODYCOLOGY 95/03342 4/13/95
18
<PAGE>
Attachment 1
to Trademark
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
------- --------- ---------- -----------
Malaysia NATURAL LIFE 95/04123 5/2/95
Malaysia PHYTO-NUTRIENTS & Design 95/07899 8/7/95
Malaysia YOUR LIFE 95/03344 4/13/95
Malaysia YOUR LIFE 004648 6/23/95
Moldova NATURAL LIFE 250595 6/26/95
New Zealand PHYTO-NUTRIENTS 250596 6/26/95
Nicaragua BODYCOLOGY 96-03851 11/1/96
Nicaragua NATURAL LIFE 96-03852 11/1/96
Nicaragua PHARMACIST FORMULA 96-03853 11/1/96
& Design
Nicaragua YOUR LIFE 96-03649 10/11/96
Nigeria BODYCOLOGY Unknown Unknown
Nigeria NATURAL LIFE Unknown Unknown
Nigeria PHARMACIST FORMULA Unknown Unknown
Panama PHARMACIST FORMULA 077680 11/09/95
Panama YOUR LIFE 077681 10/9/95
Paraguay YOUR LIFE Unknown Unknown
Peru NATURAL LIFE 4271 2/26/96
Peru NATURAL LIFE 4270 2/26/96
Philippines BODYCOLOGY 108,167 5/16/96
Philippines NATURAL LIFE 108,052 5/10/96
Philippines PHARMACIST FORMULA 115,194 10/30/96
& Design
19
<PAGE>
Attachment 1
to Trademark
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
------- --------- ---------- -----------
Philippines PHYTO-NUTRIENTS & Design 102,652 9/12/95
Philippines YOUR LIFE 102,651 9/12/95
Poland BODYCOLOGY Z-159,569 5/10/96
Poland NATURAL LIFE Z-159,571 5/10/96
Poland PHARMACIST FORMULA Z-154,913 1/3/96
& Design
Poland YOUR LIFE Z-159570 5/10/96
Qatar YOUR LIFE 13390 5/6/95
Romania PHARMACIST FORMULA 36,131 8/16/95
Singapore BODYCOLOGY 1081/95 2/9/95
Singapore NATURAL LIFE 3216/95 4/11/95
Singapore PHYTO-NUTRIENTS & Design 4942/95 6/22/95
Singapore YOUR LIFE 1082/95 2/9/95
South Africa YOUR LIFE 96/13512 9/25/96
Spain BODYCOLOGY 1,759,188 4/30/93
Taiwan CENTRAL-VITE 86-018394 4/16/97
Taiwan PHARMACIST FORMULA 85-31107 6/26/96
& Design
Taiwan PHYTO-NUTRIENTS & Design 84022242 5/9/95
Taiwan YOUR LIFE 85048280 9/24/96
Thailand BODYCOLOGY 282562 3/17/95
Turkey BODYCOLOGY 96/010115 7/8/96
20
<PAGE>
Attachment 1
to Trademark
Security Agreement
Pending Trademark Applications
------------------------------
Country Trademark Serial No. Filing Date
------- --------- ---------- -----------
Turkey PHARMACIST FORMULA 96/010116 7/8/96
& Design
Turkey YOUR LIFE 96/010114 7/8/96
Ukraine YOUR LIFE 95062125/T 6/28/95
United Kingdom LEINER 2,057,953 2/23/96
United Kingdom PHYTO-NUTRIENTS & Design 2,060,959 3/13/96
United Kingdom YOUR LIFE 2,108,771 8/29/96
Vietnam NATURAL LIFE N-1830/96 5/11/96
Zaire YOUR LIFE Unknown Unknown
21
<PAGE>
Attachment 1
to Trademark
Security Agreement
Trademark Applications in Preparation
-------------------------------------
Expected Products/
Country Trademark Docket No. Filing Date Services
-------- --------- --------- ----------- --------
NONE
Item B. Trademark Licenses
------------------
Country or Effective Expiration
Territory Trademark Licensor Licensee Date Date
--------- --------- -------- -------- --------- ----------
NONE
22
<PAGE>
Exhibit 10.1
CONSULTING AGREEMENT
This CONSULTING AGREEMENT, dated as of June 30, 1997 (the
"AGREEMENT"), among Leiner Health Products Inc., a Delaware corporation (the
"COMPANY"), Leiner Health Products Group Inc., a Delaware corporation (the
"PARENT"), and North Castle Partners, L.L.C., a Delaware limited liability
company ("NCP").
W I T N E S S E T H:
WHEREAS, pursuant to a Stock Purchase Agreement and Plan of Merger,
dated as of May 31, 1997 (the "MERGER AGREEMENT"), by and among the Parent,
North Castle Partners I, L.L.C. (the "FUND") and LHP Acquisition Corp. ("MERGER
SUB"), the parties thereto effected a recapitalization of the Parent and certain
related transactions including, without limitation, the transactions described
in the Offering Memorandum, dated June 20, 1997 (the "Offering Memorandum"),
relating to the offering by the Parent of $85 million aggregate principal amount
of Senior Subordinated Notes, due 2007 (collectively, the "TRANSACTIONS").
Capitalized terms used herein without definition herein have the meaning
specified in the Merger Agreement or, if not defined in the Merger Agreement,
the meaning specified in the Amended and Restated Limited Liability Operating
Agreement of the Fund (the "Operating Agreement").
WHEREAS, NCP has performed financial, investment banking, management
advisory and other services (the "TRANSACTION SERVICES") for the Parent and the
Company in connection with the Transactions, including but not limited to in
connection with the preparation, negotiation, execution and delivery of the
commitment, fee and engagement letters, underwriting agreements, credit
agreements, indentures and indenture supplements, guarantees, mortgages, pledge
agreements and other security agreements, subscription and stockholder
agreements, and other agreements, instruments and documents, relating to the
financing of the Transactions;
WHEREAS, the Company and the Parent desire to receive financial and
managerial consulting services from NCP from and after the Closing, and NCP
desires to provide such services to the Company and the Parent;
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth and the
<PAGE>
mutual benefits to be derived herefrom, the parties hereto hereby agree as
follows:
1. ENGAGEMENT. The Company and the Parent hereby engage NCP as a
consultant, and NCP hereby agrees to provide financial and managerial consulting
services to the Company and the Parent, all on the terms and subject to the
conditions set forth below.
2. SERVICES, ETC. NCP hereby agrees during the term of this
Agreement to assist, advise and consult with the Boards of Directors and
management of the Company, the Parent and their respective Subsidiaries in such
manner and on such business, management and financial matters, and provide such
other financial and managerial advisory services (collectively, the "CONTINUING
SERVICES"), as may be reasonably requested from time to time by the Boards of
Directors or management of the Company, the Parent and their respective
Subsidiaries, including but not limited to assistance in:
(i) establishing and maintaining banking, legal and other business
relationships for the Company, the Parent and their respective
Subsidiaries;
(ii) developing and implementing corporate and business strategy and
planning for the Company, the Parent and their respective
Subsidiaries, including plans and programs for improving
operating, marketing and financial performance, budgeting of
future corporate investments, acquisition and divestiture
strategies, and reorganizational programs; and
(iii) providing professional employees to serve as directors or
officers of the Company, the Parent and their respective
Subsidiaries.
3. COMPENSATION; PAYMENT OF EXPENSES. (a) The Company agrees to pay
to NCP, concurrent with the execution of this Agreement, as compensation for the
Transaction Services, a fee of $3,500,000.
(b) (i) The Company agrees to pay to NCP, as compensation for the
Continuing Services to be rendered by NCP hereunder, an annual fee (the
"Continuing Services Fee") of $1,500,000 (subject to adjustment as set forth
below),
2
<PAGE>
payable semi-annually in advance on each July 1 and February 1 during the term
of this Agreement.
(ii) The Continuing Service Fee shall be adjusted to reflect the
Public Float (as defined below) of the Parent as follows: (A) if the Public
Float is less than 25%, the Continuing Service Fee shall be $1,500,000, (B) if
the Public Float is at least 25% but less than 50%, the Continuing Services Fee
shall be $1,000,000, (C) if the Public Float is at least 50% but less than 75%,
the Continuing Services Fee shall be $500,000, (D) if the Public Float is at
least 75% but less than 90%, the Continuing Services Fee shall be $250,000 and
(E) if the Public Float is 90% or more, no Continuing Services Fee shall be
payable. "Public Float" means the percentage of the common stock of the Parent
(on a fully-diluted basis) that shall have been sold to the public in an
underwritten public offering pursuant to an effective registration statement
under the Securities Act.
(iii) During any period when a Material Financing Default (as
defined below) shall have occurred and be continuing, 50% of all Continuing
Services Fees then payable shall be deferred until such Material Financing
Default is no longer continuing, whereupon all Continuing Services Fees that
shall have been deferred shall be promptly paid. A "Material Financing Default"
shall mean any non-payment or prepayment when due of principal or interest under
the Parent or Company's principal financing documents or any event of default
thereunder resulting from a default with respect to any covenant requiring
maintenance of an interest coverage ratio, debt to capitalization ratio, cash
flow coverage ratio or earnings to debt ratio contained therein.
(c) The Company shall reimburse NCP for such reasonable travel and
other out-of-pocket expenses as may be incurred by NCP and its employees, agents
and advisors in the course or on account of rendering of the Transaction
Expenses or any Continuing Services, including but not limited to any fees and
expenses of any legal, accounting or other professional advisors to NCP engaged
in connection with the Continuing Services being provided hereunder. NCP may
submit monthly expense statements, which shall be payable within thirty days.
4. TERM, ETC. (a) The provisions of Sections 1 through 4 of this
Agreement shall terminate (i) if the Managing Member of the Fund is removed
pursuant to Section
3
<PAGE>
4.1 of the Operating Agreement or (ii) upon the earlier to occur of (x) the
tenth anniversary of the date hereof, (Y) the date on which the Fund terminates
in accordance with the terms of its Limited Liability Company Operating
Agreement (z) the date on which the Ordinary Members of the Fund have the right
to terminate the Fund pursuant to the terms of the Operating Agreement.
(b) Upon any consolidation or merger, or any conveyance, transfer or
lease of all or substantially all of the assets of the Company or the Parent,
the successor corporation formed by such consolidation or into the Company or
the Parent is merged or to which such conveyance, transfer or lease is made
shall, if the Fund shall own at least one third of the outstanding capital stock
of such successor entity, succeed to, and be substituted for, the Company or the
Parent under this Agreement with the same effect as if such successor
corporation had been a party thereto. Any other such consolidation, merger or
conveyance, transfer or lease of all or substantially all of the assets of the
Company or the Parent shall have the effect of terminating this Agreement or of
releasing of the Company or the Parent or any such successor corporation from
its obligations hereunder.
5. INDEMNIFICATION. (a) DEFINITIONS.
(i) "CLAIM" means, with respect to any Indemnitee, any claim against
such Indemnitee involving any Obligation with respect to which such Indemnitee
may be entitled to be defended and indemnified by the Company and the Parent
under this Agreement.
(ii) "INDEMNITEE" means each of NCP, the Fund, Baird Investment
Group, L.L.C., their respective successors and assigns, and their respective
directors, officers, partners, ordinary members, managing members, employees,
agents, advisors, representatives and controlling persons (within the meaning of
the Securities Act of 1933, as amended (the "SECURITIES ACT").
(iii) "OBLIGATIONS" means, collectively, any and all claims,
obligations, liabilities, causes of actions, actions, suits, proceedings,
investigations, judgments, decrees, losses, damages, fees, costs and expenses
(including without limitation interest, penalties and fees and disbursements of
attorneys, accountants, investment bankers and other professional advisors), in
each case whether
4
<PAGE>
incurred, arising or existing with respect to third parties or otherwise at any
time or from time to time.
(b) The Company and the Parent hereby agree to jointly and severally
indemnify, defend and hold harmless each Indemnitee:
(i) from and against any and all Obligations, whether incurred with
respect to third parties or otherwise, in any way resulting from, arising
out of or in connection with, based upon or relating to (A) the Securities
Act, the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"),
or any other applicable securities or other laws, in connection with any of
the Transactions, (B) any other action or failure to act of the Parent, the
Company or any other direct or indirect Subsidiary of the Parent or any of
their predecessors, whether such action or failure has occurred or is yet
to occur or (C) except to the extent that any such Obligation is found in a
final judgment by a court of competent jurisdiction to have resulted from
the gross negligence or intentional misconduct of NCP or its Affiliates,
the performance by NCP of the Transaction Services, the Continuing Services
or any other consulting, monitoring, financial advisory or other services
for the Parent, the Company or any other direct or indirect Subsidiary of
the Parent (whether performed prior to the date hereof, hereafter, pursuant
to this Agreement or otherwise); and
(ii) to the fullest extent permitted by Delaware law, from and against
any and all Obligations in any way resulting from, arising out of or in
connection with, based upon or relating to (A) the fact that such
Indemnitee is or was a director or an officer of the Parent, the Company or
any other direct or indirect Subsidiary of the Parent, as the case may be,
or is or was serving at the request of such corporation as a director,
officer, employee or agent of or advisor or consultant to another
corporation, partnership, joint venture, trust or other enterprise or (B)
any breach or alleged breach by such Indemnitee of his or her fiduciary
duty as a director or an officer of the Parent, the Company or any other
direct or indirect Subsidiary, as the case may be;
in each case including but not limited to any and all fees, costs and expenses
(including without limitation fees and disbursements of attorneys) incurred by
or on behalf of any
5
<PAGE>
Indemnitee in asserting, exercising or enforcing any of its rights, powers,
privileges or remedies in respect of this Agreement.
(c) Without in any way limiting the foregoing Section 6(b), the
Company and the Parent agree to jointly and severally indemnify, defend and hold
harmless each Indemnitee from and against any and all Obligations resulting
from, arising out of or in connection with, based upon or relating to
liabilities under the Securities Act, the Exchange Act or any other applicable
securities or other laws, rules or regulations in connection with (i) the
inaccuracy or breach of or default under any representation, warranty, covenant
or agreement in any document prepared, executed or delivered in connection with
the Transactions, including, without limitation, in the Offering Memorandum, the
Exchange Offer Registration Statement (as defined in the Offering Memorandum),
the Confidential Private Placement Memorandum with respect to the offering of
interests in the Fund or the Confidential Managers Information Memorandum and
Confidential Employees Information Memorandum, with respect to the opportunity
offered managers and employees of the Parent to retain equity in the Parent
(each, a "TRANSACTION DOCUMENT"), (ii) any untrue statement or alleged untrue
statement of a material fact contained in any Transaction Document or (iii) any
omission or alleged omission to state in any Transaction Document a material
fact required to be stated therein or necessary to make the statements therein
not misleading unless, in the case of each of clauses (i), (ii), and (iii), it
is finally judicially determined by a court of competent jurisdiction that such
Obligations resulted from the fraudulent conduct of such Indemnitee.
6. INDEMNIFICATION PROCEDURES.
(a) Whenever any Indemnitee shall have actual knowledge of the
reasonable likelihood of the assertion of a Claim, NCP (acting on its own behalf
or, if requested by any such Indemnitee other than itself, on behalf of such
Indemnitee) or such Indemnitee shall notify the Company and the Parent in
writing of the Claim (the "NOTICE OF CLAIM") with reasonable promptness after
such Indemnitee has such knowledge relating to such Claim and has notified NCP
thereof. The Notice of Claim shall specify all material facts known to NCP (or
if given by such Indemnitee, such Indemnitee) that may give rise to such Claim
and the monetary amount or an estimate of the monetary amount of the Obligation
involved if NCP (or if given by such Indemnitee, such Indemnitee) has knowledge
of such amount or a
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reasonable basis for making such an estimate. The failure of NCP to give such
Notice of Claim shall not relieve either the Company or the Parent of its
indemnification obligations under this Agreement except to the extent that such
omission results in a failure of actual notice to it and it is materially
injured as a result of the failure to give such Notice of Claim. The Company
and the Parent shall, at their expense, undertake the defense of such Claim with
attorneys, of their own choosing satisfactory in all respects to NCP. NCP may
participate in such defense with counsel of NCP's choosing at the expense of the
Company and the Parent. In the event that the Company or the Parent do not
undertake the defense of the Claim within a reasonable time after NCP has given
the Notice of Claim, NCP may, at the expense of the Company and the Parent and
after giving notice to the Company and the Parent of such action, undertake the
defense of the Claim and compromise or settle the Claim, all for the account of
and at the risk of the Company and the Parent. In the defense of any Claim, the
Company and the Parent shall not, except with the consent of NCP, consent to
entry of any judgment or enter into any settlement that includes any injunctive
or other non-monetary relief, or that does not include as an unconditional term
thereof the giving by the person or persons asserting such Claim to such
Indemnitee of a release from all liability with respect to such Claim. In each
case, NCP and each other Indemnitee seeking indemnification hereunder will
cooperate with the Company and the Parent, so long as the Company and the Parent
are conducting the defense of the Claim, in the preparation for and the
prosecution of the defense of such Claim, including making available evidence
within the control of NCP or such Indemnitee, as the case may be, and persons
needed as witnesses who are employed by NCP or such Indemnitee, as the case may
be, in each case as reasonably needed for such defense and at cost, which cost,
to the extent reasonably incurred, shall be paid by the Company and the Parent.
(b) The Company and the Parent hereby agree to advance costs and
expenses, including attorney's fees, incurred by NCP (acting on its own behalf
or, if requested by any such Indemnitee other than itself, on behalf of such
Indemnitee) or any Indemnitee in defending any Claim in advance of the final
disposition of such Claim upon receipt of an undertaking by or on behalf of NCP
or such Indemnitee to repay amounts so advanced if it shall ultimately be
determined that NCP or such Indemnitee is not entitled to be indemnified by the
Company and the Parent as authorized by this Agreement.
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(c) NCP shall notify the Company and the Parent in writing of the
amount of any Claim actually paid by NCP (the "NOTICE OF PAYMENT"). The amount
of any Claim actually paid by NCP shall bear simple interest at the rate equal
to the Bank of Nova Scotia's prime rate as of the date of such payment plus 2%
per annum, from the date the Company and the Parent receive the Notice of
Payment to the date on which the Company or the Parent shall repay the amount of
such Claim plus interest thereon to NCP.
7. CERTAIN COVENANTS. The rights of each Indemnitee to be
indemnified under any other agreement, document, certificate or instrument or
applicable law are independent of and in addition to any rights of such
Indemnitee to be indemnified under this Agreement. The rights of each
Indemnitee and the obligations of the Company and the Parent hereunder shall
remain in full force and effect regardless of any investigation made by or on
behalf of such Indemnitee. The Company and the Parent shall maintain the State
of Delaware as their state of incorporation and shall implement and maintain in
full force and effect any and all corporate charter and by-law provisions that
may be necessary or appropriate to enable it to carry out their obligations
hereunder to the fullest extent permitted by Delaware corporate law, including
without limitation a provision of their certificates of incorporation
eliminating liability of a director for breach of fiduciary duty to the fullest
extent permitted by Section 102(b)(7) (or any successor section thereto) of the
General Corporation Law of the State of Delaware, as it may be amended from time
to time.
8. GOVERNING LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the law of the State of New
York, regardless of the law that might be applied under principles of conflict
of laws, except to the extent that the corporate law of the State of Delaware
specifically and mandatorily applies, in which case such law shall apply.
9. SEVERABILITY. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
10. INDEPENDENT CONTRACTOR STATUS. The parties agree that NCP shall
perform services hereunder as an independent contractor, retaining control
over and
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responsibility for its own operations and personnel. Neither NCP nor any of
its employees or agents shall, solely by virtue of this Agreement or the
arrangements hereunder, be considered employees or agents of the Company or the
Parent nor shall any of them have authority to contract in the name of a member
of or bind the Company or the Parent, except to the extent that any member or
professional employee of NCP may be serving as a director or an officer of the
Company or the Parent.
11. NOTICES. All notices and other communications made in connection
with this Agreement shall be in writing. Any notice or other communication in
connection herewith shall be deemed duly given to any party (a) two Business
Days after it is sent by express, registered or certified mail, return receipt
requested, postage prepaid or (b) one Business Day after it is sent by overnight
courier guaranteeing next day delivery, in each case, addressed as follows or,
to such other address as may be specified in writing to the other parties
hereto:
(i) if to the Company or the Parent:
Leiner Health Products Inc.
901 E. 233rd Street
Carson, CA 90745
Facsimile: (310) 952-7766
Telephone: (310) 835-8400
Attention: Robert M. Kaminski
(ii) if to NCP:
North Castle Partners, L.L.C.
11 Meadowcroft Lane
Greenwich, CT 06830
Attention: Charles F. Baird, Jr.
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Facsimile: (212) 909-6836
Telephone: (212) 909-6000
Attention: Franci J. Blassberg, Esq.
9
<PAGE>
Either party may give any notice or other communication in connection herewith
using any other means (including, but not limited to, personal delivery,
messenger service, facsimile, telex or ordinary mail), but no such notice or
other communication shall be deemed to have been duly given unless and until it
is actually received by the individual for whom it is intended.
12. ENTIRE AGREEMENT. This Agreement, (A) contains the complete and
entire understanding and agreement of NCP and the Company with respect to the
subject matter hereof and (B) supersedes all prior and contemporaneous
understandings, conditions and agreements, oral or written, express or implied,
in respect of the subject matter hereof. There are no representations or
warranties of NCP in connection with this Agreement or the services to be
provided hereunder, except as expressly made and contained in this Agreement.
13. HEADINGS. The headings contained in this Agreement are for
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
14. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
15. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties to this Agreement and their respective
successors and assigns and to each Indemnitee, PROVIDED that none of NCP, the
Parent or the Company may assign any of its rights or obligations under this
Agreement without the express written consent of the other party hereto. This
Agreement is not intended to confer any right or remedy hereunder upon any
person other than the parties to this Agreement and their respective successors
and permitted assigns and each Indemnitee.
16. WAIVER OF JURY TRIAL. Each party hereto acknowledges and agrees
that any controversy that may arise under this Agreement is likely to involve
complicated and difficult issues, and therefore it hereby irrevocably and
unconditionally waives any right it may have to a trial by jury in respect of
any litigation directly or indirectly arising out of or relating to this
Agreement, or the breach, termination or validity of this Agreement, or the
transac-
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<PAGE>
tions contemplated by this Agreement. Each party certifies and
acknowledges that (A) no representative, agent or attorney of any other party
has represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce the foregoing waiver, (B) it understands
and has considered the implications of this waiver, (C) it makes this waiver
voluntarily, and (D) it has been induced to enter into this Agreement by, among
other things, the mutual waivers and certifications contained in this Section
17.
17. SUBMISSION TO JURISDICTION. The Company, the Parent and NCP
hereby irrevocably submit to the jurisdiction of the courts of the State of New
York and the Federal courts of the United States of America, in each case
located in the State, City and County of New York, solely in respect of the
interpretation and enforcement of the provisions of this Agreement, and hereby
waive, and agree not to assert, as a defense in any action, suit or proceeding
for the interpretation or enforcement hereof, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in such courts or that the venue thereof may not be appropriate or that this
Agreement may not enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding may
be heard and determined in such a New York State or Federal court. The Company,
the Parent and NCP hereby consent to and grant any such court jurisdiction over
the person of such parties and over the subject matter of any such dispute and
agree that mailing of process or other papers in connection with any such action
or proceeding in the manner provided in Section 12, or in such other manner as
may be permitted by law, shall be valid and sufficient service thereof.
18. AMENDMENT; WAIVERS. No amendment, modification, supplement or
discharge of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party or Indemnitee against
whom enforcement of the amendment, modification, supplement, discharge or waiver
is sought. Any such waiver shall constitute a waiver only with respect to the
specific matter described in such writing and shall in no way impair the rights
of the party or Indemnitee granting such waiver in any other respect or at any
other time. Neither the waiver by any of the parties hereto or any Indemnitee
of a breach of or a default under any of the provisions of this Agreement, nor
the failure by any party hereto or any Indemnitee on one or more occasions, to
enforce any of the
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provisions of this Agreement or to exercise any right, powers or privilege
hereunder, shall be construed as a waiver of any other breach or default of a
similar nature, or as a waiver of any of such provisions, rights, power or
privileges hereunder. The rights and remedies herein provided are cumulative
and are not exclusive of any rights or remedies that any party or Indemnitee may
otherwise have at law or in equity or otherwise.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
NORTH CASTLE PARTNERS, L.L.C.
By: /s/ Charles F. Baird, Jr.
------------------------------
Name: Charles F. Baird, Jr.
Title: Sole Member
LEINER HEALTH PRODUCTS INC.
By: /s/ William B. Towne
------------------------------
Name: William B. Towne
Title: Executive Vice President, Treasurer
LEINER HEALTH PRODUCTS GROUP INC.
By: /s/ William B. Towne
------------------------------
Name: William B. Towne
Title: Executive Vice President, Treasurer
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<PAGE>
Exhibit 10.2
RESTATED STANDARD INDEMNITY AGREEMENT CONFIDENTIAL
AGREEMENT
THIS AGREEMENT, dated September 1, 1992, by and between Showa Denko
America, Inc. ("SDA"), and LHP Holdings Corp., (which, together with the
subsidiaries listed on Attachment 1 hereto, are referred to collectively as the
"Company").
W I T N E S S E T H
WHEREAS, the Company has manufactured, sold, and/or distributed products
containing L-tryptophan ("LTCPs"), some or all of which may have contained L-
tryptophan ("LT") sold by SDA; and
WHEREAS, claims have been asserted and lawsuits have been instituted
against SDA, the Company, and/or direct or indirect customers of the Company for
whom the Company is or may become responsible to provide a defense (individually
a "Secured Customer" and collectively the "Secured Customers"), alleging that
one or more of them is liable for personal injuries arising from ingestion of
LTCPs manufactured, sold, or distributed by the Company; and
WHEREAS, in partial settlement of the Company's claim for indemnification
against SDA arising from SDA's sale of LT to the Company, or to an entity from
which the Company may have purchased, without any admission of liability by SDA
or by the Company with respect to the claims between them or against them, SDA
and the Company wish to provide for their respective responsibilities for the
defense of such claims and for the payment of judgments and settlements in
respect of such claims as provided in this Agreement; and
<PAGE>
WHEREAS, the Company is unwilling to enter into this Agreement unless
Showa Denko K.K., a Japanese company ("SDK"), enters into a Guaranty Agreement
with the Company substantially in the form annexed to this Agreement as
Attachment 2;
NOW, THEREFORE:
1. This Agreement shall apply to all claims, whether in litigation or
not, alleging liability for personal injuries arising from the ingestion of
LTCPs manufactured, sold, or distributed by the Company asserted against SDA,
the Company, and/or Secured Customers, or against any one or more of them,
whether on, before, or after the date hereof (except as specifically provided
herein). Each such claim is hereinafter referred to individually as a "Claim,"
and all such claims are hereinafter referred to collectively as the "Claims."
Each person asserting a Claim is hereinafter referred to individually as a
"Claimant" and all such persons are hereinafter referred to collectively as the
"Claimants."
2. SDA agrees to indemnify and to hold harmless the Company from and
against any obligation (whether direct or by virtue of any obligation to a
Secured Customer or any cross-claim, third-party claim, claim for contribution
or indemnification, or otherwise) to make payment of any settlement or judgment
for damages in favor of any person in respect of a Claim where the LTCPs
allegedly ingested by the Claimant or Claimants making such Claim contained LT
sold by SDA, as follows:
(a) If a proximate cause of the personal injuries giving rise to
liability, as determined on the basis of a preponderance of the evidence,
including but not limited to epidemiological, chemical, and medical
evidence, was a constituent of the LT product sold by SDA or was a factor
for which SDK, SDA or any other company or other entity controlling,
controlled by or under common control with SDA (SDK and each such other
company or other entity, an "SDA Affiliate") was responsible, then, subject
to subparagraph (b) below, SDA shall be solely responsible for the
Company's payment
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<PAGE>
obligations, whether direct or indirect as noted above, in respect of such
settlement or judgment;
(b) If a proximate cause of the personal injuries giving rise to
liability, as determined on the basis of a preponderance of the evidence,
including but not limited to epidemiological, chemical, and medical
evidence, was (i) the sale of LT, or of an LTCP for which the recommended
daily dosage contained more than 100 mg. of LT, by the Company or by any
Secured Customer subsequent to March 17, 1990, or (ii) the sale of an LTCP
for which the recommended daily dosage contained 100 mg. or less of LT by
the Company or by any Secured Customer subsequent to May 23, 1990, or (iii)
the addition of any substance to, or tampering with, any LT or an LTCP
while that LT or LTCP was in the possession, custody or control of the
Company or any Secured Customer (each such sale, addition or tampering, an
"Exclusion Event"), then SDA and the Company shall seek to reach agreement
regarding the Company's responsibility, if any, for payment in respect of
said settlement or such judgment as is fair under all the circumstances;
(c) If SDA and the Company are unable to agree on the matters which are
the subject of the provisions of subparagraphs (a) or (b) above, then SDA
and the Company shall submit the matter to binding arbitration as specified
in paragraph 15 hereof;
(d) Either SDA or the Company may make any payment contemplated under this
paragraph 2 without prejudice to its right to seek reimbursement from the
other under the procedures set forth in paragraph 15;
(e) Each of the Company-and SDA agrees that it will provide prompt notice
to the other if it learns of the existence of any Exclusion Event (each
such notice, a "Notice of Exclusion"), it being agreed, however, that a
failure by SDA or the Company to provide such notice shall not (i) be
deemed to constitute a material breach of this Agreement or (ii) result in
any change in the rights or obligations of SDA or the Company pursuant to
this Agreement, including without limitation their respective rights and
obligations under
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<PAGE>
or arising by virtue of subparagraph (b) above. A Notice of Exclusion of
any Claim shall be null and void and of no effect unless provided prior to
the earlier to occur of (i) sixty (60) days prior to the date of the
commencement of the earliest to occur of the trial, arbitration or
mediation of such Claim and (ii) thirty (30) days prior to any settlement
of such Claim.
(f) Any Notice of Exclusion pursuant to this paragraph shall be made in
the manner provided in paragraph 19 (which paragraph specifies the party to
whom and the place notice is to be delivered).
3. SDA agrees (i) to designate Citibank, N.A., or another bank mutually
acceptable to the parties as the disbursement agent (the "Disbursement Agent")
pursuant to a Disbursement Agent Agreement substantially in the form annexed to
this Agreement as Attachment 3 (such agreement, or any replacement thereof
substantially in such form, the "Disbursement Agent Agreement") and (ii) to
maintain the Disbursement Agent Agreement in effect during the term of this
Agreement. In support of its payment obligations hereunder and under similar
agreements with other customers of SDA, SDA has delivered to the Disbursement
Agent an irrevocable standby letter of credit in favor of the Disbursement Agent
pursuant to the terms of the Disbursement Agent Agreement in the amount of
Twenty Million US Dollars ($20,000,000) substantially in the form of the letter
of credit annexed as Exhibit B to the Disbursement Agent Agreement. If amounts
are drawn on the letter of credit, SDA during the term of this Agreement will
cause an amendment or supplement to the letter of credit or a new letter of
credit to be delivered to the Disbursement Agent providing for a restored limit
of Twenty Million US Dollars ($20,000,000) within thirty (30) days after such
drawing. During the term of this Agreement, no later than thirty (30) days
prior to the expiration date of any letter of credit (as it may have been
extended from time to time), SDA will deliver to the Disbursement Agent a
renewal of the letter of credit for a term of at least two years or a substitute
letter of credit for such term.
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<PAGE>
The Company shall be a Beneficiary within the meaning of the Disbursement
Agent Agreement, but only so long as (i) this Agreement remains in effect and to
the extent provided in this Agreement or (ii) the Company otherwise remains
entitled to the benefits of the Disbursement Agent Agreement under paragraph 16
of this Agreement. The Company acknowledges that other direct and indirect
customers of SDA will have equal rights as Beneficiaries under the Disbursement
Agent Agreement.
The Company acknowledges (i) that any claim by it to the benefits of the
Disbursement Agent Agreement must be submitted and administered in strict
compliance with the following procedures, (ii) that the Company has no right to
receive, and the Disbursement Agent has no authority to make, payments by the
Disbursement Agent or draws under the letter of credit unless the claim has been
certified for payment to the Disbursement Agent by the Verification Agent
hereafter referred to, and (iii) that it may claim payment hereunder only as
long as this Agreement remains in effect or the Company otherwise remains
entitled to benefits under paragraph 16 hereof.
The procedures for submission and review of any claim by the Company shall
be the following:
(a) The Verification Agent shall be a mutually acceptable lawyer
independent of the parties. If such Verification Agent or any successor
shall die or resign or otherwise become unable or cease to continue to act
as such, SDA, after consultation with the Company and the parties to any
other similar agreements with SDA, shall appoint a successor Verification
Agent, who shall be a lawyer independent of the parties. The Verification
Agent will act independently and impartially on behalf of both parties in
reviewing claims for payment and certifying amounts to the Disbursement
Agent for payment and shall use professional care in the performance of his
function. The Verification Agent shall not be liable to either party for
determinations made by him in good faith and with due care even though such
determinations subsequently are held to be
5
<PAGE>
erroneous. The Verification Agent shall have no duties except to SDA, the
Company, and the parties other than SDA to agreements similar to this
Agreement (such parties being referred to in the Disbursement Agent
Agreement as Beneficiaries). Persons asserting Claims, plaintiffs with
judgments against any of SDA, the Company, or Secured Customers, and
Secured Customers shall have no right to assert any third-party beneficiary
relationship against the Verification Agent or any claim to payment from
the Disbursement Agent under this Agreement, except that any Secured
Customer that has entered into a separate indemnification agreement between
itself and SDA entitling it to do so may directly exercise its rights as a
Beneficiary under the Disbursement Agent Agreement pursuant to such
separate indemnification agreement. The Company shall have no
responsibility for any part of the fees and expenses of the Verification
Agent or the Disbursement Agent.
(b) If a judgment for money damages is entered against the Company or its
Secured Customer, or a settlement amount is reduced to a judgment
enforceable against the Company or its Secured Customer, as to which the
Company contends that SDA is required to make payment pursuant to paragraph
2 hereof, the Company may give written notice thereof (the "Payment Request
Notice") to SDA and to the Verification Agent setting forth a brief
statement of the basis for its contention, accompanied by a certified copy
of the judgment, together with evidence that the judgment has become
enforceable against the judgment debtor under applicable law. If SDA does
not respond in the terms permitted by subparagraph (c) hereof within ten
(10) business days of the receipt by it of the Payment Request Notice, the
Verification Agent, subject only to his review of relevant documents and
his verification of any pertinent additional circumstances, shall certify
the amount claimed to the Disbursement Agent for payment pursuant to the
provisions of the Disbursement Agent Agreement.
(c) In response to a Payment Request Notice, SDA may
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<PAGE>
(1)acknowledge to the Company and the Verification Agent its obligation
hereunder to pay part or all of the amount claimed, in which event the
Verification Agent shall forthwith certify the amount or such part thereof,
as the case may be, to the Disbursement Agent for payment pursuant to the
provisions of the Disbursement Agent Agreement, and any portion of such
claim as to which SDA does not acknowledge its obligation hereunder to pay
shall be governed by clause (3) of this subparagraph (c);
(2) state that it proposes to take effective steps to stay or suspend
the enforcement of such judgment pending post-trial applications or appeal,
including the posting of any bond or other security required for that
purpose, in which event, provided that the Verification Agent is satisfied
that such stay or suspension has been effected within five (5) business
days after notice to SDA and the Verification Agent from the Company of an
attempted enforcement of such judgment against the Company, further action
by the Verification Agent in respect of such judgment shall be deferred
until such stay or suspension expires; or
(3) object to payment of part or all of the amount requested, stating
briefly its grounds of objection and that it intends to submit its
contentions in arbitration pursuant to paragraph 15 hereof and SDA agrees
to use its best efforts to expedite any such arbitration, to select its
arbitrator promptly pursuant to the applicable procedures and to cause such
person to select the neutral arbitrator expeditiously, and to have the
arbitration held no later than 180 days after submission of the matter to
arbitration. If SDA submits the matter to arbitration within thirty (30)
days of its response, the liability of SDA, if any, shall be determined by
the decision of the arbitrators. If the arbitrators award an amount to the
Company, then the Verification Agent shall certify the sum so awarded by
the arbitrators to the Disbursement Agent for payment pursuant to the
provisions of the Disbursement Agent Agreement. If in subsequent
proceedings in conformity with the CPR Rules (as defined in paragraph 15)
and the U.S. Arbitration Act the award of the arbitrators is overturned and
it is determined that the amount awarded by the arbitrators
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<PAGE>
and paid by the Disbursement Agent to or on behalf of the Company exceeds
the amount that was properly owed by SDA, then the Company agrees to pay
promptly such excess amount plus interest at the legal rate. If the
Company shall commence judicial proceedings to review a decision of the
arbitrators, the Verification Agent shall certify to the Disbursement Agent
for payment the amount determined in such judicial proceedings to be due
from SDA. If SDA shall object to payment of less than all the amount
claimed by the Company, then the Verification Agent shall proceed, as to
the balance claimed, pursuant to clause (1) of this subparagraph (c).
(d) If SDA in response to a Payment Request Notice objects to payment of
part or all of the amount requested by the Company, so that the
Verification Agent cannot certify to the Disbursement Agent a payment to be
made in full satisfaction of the judgment, then the Company may elect to
require such a full payment by SDA notwithstanding its objection by (i)
giving notice to the Verification Agent of such election not later than ten
(10) business days after receipt of SDA's objection, including therewith
evidence acceptable to the Verification Agent demonstrating the Company's
compliance with the Escrow Requirement, and (ii) satisfying the Escrow
Requirement, as hereinafter defined, with respect to all that part of the
judgment as to which SDA made objection. Promptly upon receipt of such
timely notice with such evidence, the Verification Agent shall certify the
amount to which SDA objected to the Disbursement Agent for payment pursuant
to the provisions of the Disbursement Agent Agreement. To exercise this
election, the Company must deposit a sum of money in an amount equal to all
that part of the judgment to which SDA made objection in an interest-bearing
escrow account with a substantial mutually acceptable bank and execute an
escrow agreement in standard form (the "Escrow Agreement") with said bank
for the benefit of SDA (the "Escrow Requirement"). If the Company exercises
this election, then SDA will submit the dispute to arbitration within thirty
(30) days as provided in subparagraph 3(c)(3) above. The Escrow Agreement-
shall provide that the deposited escrow funds, with interest earnings
8
<PAGE>
net after escrow fees thereon, will be released by the escrow agent to the
parties as their interests may appear pursuant to and in accordance with
the award of the arbitrators on the dispute as to such amount to which SDA
made objection, or as otherwise directed in a writing signed by both SDA
and the Company. If the award is overturned in any subsequent proceedings
(as above provided), and it is determined that either SDA or the Company
received an amount from the escrow larger than that to which it was
entitled, then the party receiving such excess agrees to pay promptly such
excess amount, plus the attributable share of the net interest earnings on
the amount that it received, plus interest at the legal rate accruing after
the escrow distribution, to the party determined to be entitled thereto.
(e) In any case in which the Verification Agent is required to verify the
appropriateness of payment of an amount claimed by the Company, the
Verification Agent shall promptly review the documents submitted and
conduct such further investigation, if any, of additional facts and
circumstances as he determines to be appropriate. SDA and the Company
shall cooperate fully in any such investigation and shall respond to
inquiries from the Verification Agent and provide explanations within two
(2) business days of any such inquiry. The Company shall use its best
efforts to cause any Secured Customer to cooperate in like manner.
Whenever he deems it appropriate, the Verification Agent may seek
information by conference telephone calls with counsel for the parties, and
the parties agree to cause their respective counsel to cooperate fully with
the Verification Agent for that purpose, subject to the maintenance of any
privilege.
(f) At the request of either party, the Verification Agent may require
that procedures be followed to assure that a payment from the Disbursement
Agent will be applied solely to payment of the judgment or arbitral award
as to which claim has been made, and for no other purpose. These
procedures may include a direction to the Disbursement Agent to issue a
check directly to the order of a judgment plaintiff against delivery of a
satisfaction
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of the judgment and release of the defendant or defendants against which
the judgment or portion thereof being paid was entered, satisfactory to
counsel for the parties.
4. SDA shall have no obligation to indemnify for or to make any payments
in respect of any judgment or part of a judgment (i) for damages caused by the
intentional tort of the Company or any Secured Customer, (ii) for punitive
damages attributable to conduct of the Company or any Secured Customer, (iii)
for civil or criminal penalties, or (iv) for any award of multiple damages
caused by the intentional misconduct or violations of law by the Company or by
any Secured Customer; but SDA's obligation to indemnify shall apply to the
extent that the Company's or any Secured Customer's liability for such damages
or penalties is attributable solely to the acts or the failure to act of SDA or
of any SDA Affiliate. However, nothing in the preceding sentence shall
constitute a waiver of any rights that the Company or a Secured Customer may
have under common law or statute to seek indemnification or contribution from
SDA or any affiliate thereof in respect of damages or penalties of a type
specifically described in the preceding sentence that are imposed upon the
Company or the Secured Customer, subject to the provisions of paragraphs 14 and
15. SDA shall not be obligated to make any payments in respect of a default
judgment on a Claim against the Company or any Secured Customer unless SDA or
counsel retained by SDA was responsible for defense of the Claim in litigation
at the time of default. SDA shall have no obligation under this Agreement to
pay for any settlement of any Claim entered into by the Company or any Secured
Customer prior to the date of this Agreement, but SDA may agree to accept such
obligation in a separate agreement in writing.
5. The parties hereto agree that the Company shall use best efforts to
secure the compliance of its Secured Customers with the provisions of this
Agreement that pertain to them. Failure of such compliance on the part of a
Secured Customer that adversely affects the ability of SDA to conduct a defense
against any Claim shall be a basis for SDA to withhold the benefits of this
Agreement from such Secured Customer with respect to such Claim, but shall not
be a basis for SDA to withhold the benefits of this Agreement from the Company
except as expressly
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provided in the last sentence of paragraph 6(b), paragraph 9(d), or the third
sentence of paragraph 14 of the Agreement.
6. (a) SDA shall pay the legal fees and expenses as incurred in, and
shall be entitled to supervise and direct, the defense of any Claims
which fall within the provisions of this Agreement made against SDA,
the Company, or any Secured Customer including, without limitation,
any Claim presented to any court, administrative body, other tribunal,
or otherwise and including the negotiation of settlement of any Claim
before or after such presentation.
(b) The Company hereby consents to be jointly represented with SDA by
common counsel selected by SDA (such common counsel, so selected,
"Common Counsel") in respect of any Claim where SDA, in its sole
discretion, deems it advisable to retain such Common Counsel. The
Company will use best efforts to obtain the consent of each Secured
Customer involved in the Claim to such joint representation. SDA
shall be responsible for all fees and disbursements of such Common
Counsel as they are incurred. SDA and the Company agree promptly to
enter into a common representation agreement or agreements
substantially in the form annexed to this Agreement as Attachment 4
(and the Company will use best efforts to cause any involved Secured
Customers to become parties thereto) providing for the retention of
Common Counsel on a Claim-by-Claim basis, which agreements shall
provide for the waiver of any conflicts of interest that may exist.
SDA shall have no obligation to defend any Secured Customer who shall
refuse to agree to a request for such common representation, and SDA
shall have no obligation to make payment hereunder to the extent that
such payment obligation is in respect of a Claim against a Secured
Customer who refused to participate in the common defense against such
Claim.
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(c) If the Company or SDA shall terminate this Agreement, and SDA is
not then in default of its obligations under the provisions of
paragraph 3 above, then the terminating party shall withdraw from
representation by Common Counsel; PROVIDED, HOWEVER, that in the event
SDA terminates this Agreement pursuant to the second sentence of
paragraph 16 of this Agreement, the Company will be deemed to have
withdrawn from all applicable common representation agreements and to
have consented to the continued representation by Common Counsel of
SDA and all other parties to any common representation agreement in
respect of any Claims. Except as set forth in the immediately
preceding proviso, the Company and SDA each hereby expressly agrees
that the non-terminating party may continue to be represented by
Common Counsel. The Company and SDA each waives any conflicts of
interest that continued representation of the other party by Common
Counsel in accordance with this Agreement might otherwise entail. If
SDA is in default of its obligations under the provisions of paragraph
3 above, and if the Company or SDA shall terminate this Agreement,
then at the Company's request SDA shall withdraw from representation
by Common Counsel, and each party hereby expressly agrees that the
Company and the Secured Customers may continue to be represented by
Common Counsel and waives any conflicts of interest that such
representation might otherwise entail. If the Company terminates this
Agreement or if SDA terminates this Agreement pursuant to the
provisions of the second sentence of paragraph 16, SDA shall have no
further obligation to defend Secured Customers under this Agreement.
(d) Nothing herein shall preclude SDA, the Company, or any Secured
Customer from retaining separate counsel in respect of any Claim, but
the party retaining separate counsel shall instruct such separate
counsel to cooperate with SDA's counsel unless it is prejudicial to do
so, and a party retaining separate
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<PAGE>
counsel shall be responsible for payment of the fees and disbursements
of its separate counsel unless otherwise agreed by SDA.
(e) At the request of the Company, SDA will pay the reasonable fees,
costs and disbursements of one national coordinating counsel for the
Company, who shall also be responsible for contact with each of the
Company's Secured Customers. If the Company shall have retained
national coordinating counsel, then SDA will use best efforts to
consult with such counsel regarding the selection of counsel for
particular cases and regarding important decisions in the litigation.
SDA will instruct Common Counsel (i) to provide such national
coordinating counsel, on a timely basis, copies of all pleadings,
discovery, and status reports and material correspondence so that such
national coordinating counsel will be kept fairly apprised of the
progression of the litigation; (ii) to consult with such national
coordinating counsel regarding material Court filings made on behalf
of the Company or a Secured Customer on a timely basis in advance of
making such filings; and (iii) to keep such national coordinating
counsel advised of settlement negotiations at least bimonthly. SDA
and Common Counsel shall endeavor to contact the Company and the
Secured Customers through the Company's national coordinating counsel.
National coordinating counsel will be provided reasonable access to
the files of Common Counsel for the review and copying of such files
on all matters related to the joint defense.
7. The Company will cooperate fully with SDA, and will use best efforts
to obtain the Secured Customers' cooperation with SDA, in the investigation and
defense of claims, including but not limited to making its or their records and
personnel available to SDA and its attorneys and providing witnesses to present
testimony at any trial, arbitration, or proceeding, if requested to do so, and
consulting with SDA's attorneys prior to providing any documents or information
to any claimant or any person acting on behalf of a claimant. SDA will also
13
<PAGE>
cooperate in the defense of Claims in cases in which it is not a party. The
Company agrees promptly to instruct all counsel which, prior to the date of this
Agreement, have represented the Company in connection with any Claim (i) to
provide counsel for SDA with copies of all written communications, and to
disclose to counsel for SDA the substance of all oral communications, made prior
to the date of this Agreement to counsel for any plaintiff in any Claim (other
than documents or oral statements either previously provided to counsel for SDA
or exclusively in respect of procedural issues); and (ii) except with respect to
a Withdrawn Claim (as defined in paragraph 13 below) to refrain from oral or
written communications with any such plaintiff's counsel (x) without providing
Common Counsel prior notice of the opportunity to attend, or (y) as authorized
by counsel for SDA, or (z) as required by law.
8. The Company represents and agrees that (a) no default judgment on any
Claim has been entered against it or to its knowledge any of its Secured
Customers as of the date of this Agreement, and it will not, and will use best
efforts to cause its Secured Customers not to, knowingly permit a default
judgment to be taken against it or them hereafter without SDA's express written
consent; (b) neither it nor, to its knowledge, any of its Secured Customers has
knowingly made, and it will not, and will use best efforts to cause its Secured
Customers not to, knowingly make, any admission of liability for any Claim; and
(c) neither it nor, to its knowledge, any of its Secured Customers has entered
into any agreement for the compromise or settlement of any Claim (except for any
such agreements as have been identified in writing to SDA prior to execution of
this Agreement) or will hereafter enter into any agreements for the compromise
or settlement of any Claim without SDA's consent (which consent shall not be
unreasonably withheld), and any such settlement payment made shall be subject to
paragraph 2(d) above.
9. (a) In the event of any material breach by the Company or by SDA of
this Agreement, then the other party ("the non-breaching party") may,
at its sole option, waive the breach or, in addition to any other
remedies provided herein
14
<PAGE>
(including without limitation arbitration pursuant to paragraph 15),
(i) terminate this Agreement or (ii) terminate this Agreement with
respect to any Claim the defense of which has been materially
adversely affected by such breach. If the party alleged to be in
material breach disputes the grounds for termination of the Agreement,
then such party must submit the matter to arbitration within 30 days
after the notice of termination or be deemed to have accepted it.
(b) The failure of a Secured Customer to comply with the provisions
of this Agreement shall not be deemed a breach of this Agreement by
the Company entitling SDA to invoke the termination rights in
subparagraph (a) above if and so long as the Company has exercised,
and continues to exercise, its best efforts to persuade the Secured
Customer to comply.
(c) In the event of a material breach by the Company, and in addition
to the remedy in subparagraph (a) above, SDA may seek to reduce (in
whole or in part) the portion of any settlement or judgment it must
pay under this Agreement to the extent such amount was adversely
affected by such breach. If the Company disputes any such reduction
in payment, then SDA must submit the matter to arbitration pursuant to
paragraph 15 hereof. Should SDA reduce its portion of any settlement
or judgment as provided herein, the Company shall not be required to
pay any part or all of said settlement or judgment by virtue of this
provision except by order of the arbitrators.
(d) SDA may also invoke the provisions of paragraph 9(c) above to
seek to reduce its obligation as to amounts attributable to a Secured
Customer in a situation described in paragraph 9(b) above.
(e) Nothing contained in this paragraph 9 shall limit the right of a
party to terminate this Agreement pursuant to paragraph 16 of this
Agreement.
15
<PAGE>
10. SDA shall be solely responsible for retaining and supervising claims
adjusters for Claims, except for any claims asserted before the date hereof for
which the Company has engaged an adjuster who has already contacted the claimant
or the claimant's lawyer or representative (the "Contacted Claimants"), and the
Company agrees not to retain claims adjusters for any other Claims. The Company
has, concurrently with the execution of this Agreement, provided SDA with a list
of all such Contacted Claimants, specifying the responsible adjuster and the
status of the Claims. SDA will pay all costs of the adjusters retained by it
and, beginning with the date of this Agreement, all reasonable costs of
adjusters previously retained by the Company for purposes of adjusting Claims of
Contacted Claimants. Notwithstanding the foregoing, if SDA shall fail to retain
and supervise such claims adjusters in a timely manner, as a result of which the
Company or the Secured Customers may be adversely prejudiced, the Company shall
have the right to retain and supervise such adjusters at SDA's expense.
11. Adjusters retained by SDA will keep the Company's national
coordinating counsel (if any) and/or its insurer fully apprised of the status of
all Claims not in litigation on at least a bimonthly basis. Adjusters retained
by the Company in respect of Contacted Claimants shall keep SDA apprised of the
status of such Claims as reasonably requested by SDA, and such adjusters shall
be available to pursue settlement as requested by SDA.
12. (a) SDA may settle any Claim without prior approval of or prior
notice to the Company or any Secured Customer if such settlement makes
no admissions, acknowledges no liabilities, includes an unconditional
release of the Company and any involved Secured Customers and either
(i) the amount of the settlement is $5,000 or less, or (ii) the
Company or any Secured Customer will have no responsibility for
payment of such settlement pursuant to paragraph 2 hereof. If SDA
shall settle a Claim without prior notice to the Company or any
Secured Customer, SDA shall provide prompt notice of the settlement
thereafter.
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<PAGE>
(b) SDA may settle any claim with prior notice to the Company or any
Secured Customer for an amount in excess of $5,000 if the Company or
any of its Secured Customers may have some responsibility for payment
of such settlement pursuant to paragraph 2, but only if SDA has given
the Company a timely Notice of Exclusion with respect to such claim as
required by paragraph 2(e) hereof. Any such settlement shall make no
admissions, acknowledge no liabilities, and include an unconditional
release of the Company and any involved Secured Customers. If SDA
intends to assert any claim against the Company for contribution
pursuant to paragraph 2(b) relating to the settlement, such prior
notice of the settlement will also contain notice of such intent,
stating the portion of the settlement amount expected to be so claimed
by SDA and an explanation in reasonable detail of SDA's basis for such
claim. SDA shall have no obligation to delay settlement to await a
response from the Company or any Secured Customer, but SDA will
endeavor to give the Company or any Secured Customer such reasonable
period to respond as will not jeopardize the opportunity to settle.
It is agreed that neither party is the agent or the attorney in fact
of the other party and cannot bind the other party to any settlement
agreement in any Claim or suit.
(c) Whether the provisions of paragraphs 2(a) or 2(b) of this
Agreement apply to the settlement of any Claim, unless the parties
hereto have agreed otherwise all amounts payable to the plaintiff or
claimant in such settlement shall be advanced by SDA, without
prejudice to SDA's rights to seek reimbursement pursuant to the
provisions of paragraph 2(b) and, in the event of disagreement, to
arbitrate the dispute pursuant to the provisions of paragraph 15, and
in any such arbitration the Company may raise any disagreement it may
have had regarding the amount of settlement. If SDA settles any Claim
against itself in an action in which a Claim is also asserted against
the Company, such settlement will also extend to and cover the
Company. SDA shall expressly extend releases achieved by such
17
<PAGE>
settlement to cover the Company's Secured Customer(s); PROVIDED,
HOWEVER, that the Company's Secured Customer(s) have participated with
SDA in the common defense and have executed a waiver of conflicts
satisfactory to SDA.
13. Notwithstanding any other provision of this Agreement to the contrary,
the Company may elect not to be represented by Common Counsel, or to terminate
its representation by Common Counsel, in respect of any particular Claim (each
such election by the Company, an "Election") in the event that the Company
determines in its sole discretion that representation of the Company by Common
Counsel in respect of such Claim is not or may not be in the best interest of
the Company (each Claim in respect of which the Company makes an Election, a
"Withdrawn Claim"). Any Election (i) shall be made in writing and shall
expressly refer to this paragraph 13, and (ii) shall be effective when delivered
to SDA and, in the event that Common Counsel has represented the Company in
defending the Claim to which such Election relates, to Common Counsel. It is
agreed that SDA's obligations under paragraphs 1, 2, 3 and 6 of this Agreement
shall be inapplicable with respect to any Withdrawn Claim, and, without limiting
the generality of the foregoing, that SDA shall have no obligation (i) to make
any indemnification or other payment to the Company pursuant to this Agreement
in respect of any Withdrawn Claim, or (ii) to provide or pay for any national
coordinating counsel for the Company in respect of any Withdrawn Claim;
provided, HOWEVER, that nothing in the foregoing sentence shall affect the
obligation of SDA to pay any fees or disbursements of Common Counsel incurred in
defending the Company in a Claim prior to the date of an Election by the Company
with respect to that Claim. In addition, the Company irrevocably waives any
right it may have (whether under this Agreement, at common law or otherwise) to
recover from SDA or any SDA Affiliate any fees or disbursements of any counsel
(other than Common Counsel) incurred by the Company in connection with any
Withdrawn Claim or the defense thereof.
14. Each of SDA and the Company hereby covenant during the term of this
Agreement not to sue or to assert any cross-claim, third-party claim, or other
claim against the
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other or against any SDA Affiliate or against any parent, subsidiary, or
affiliate of the Company in respect of any Claim, but the foregoing shall not
preclude a judicial action to compel arbitration or to enforce an award
resulting from an arbitration pursuant to the provisions of paragraph 15. The
Company covenants to use its best efforts to cause its Secured Customers to
covenant during the term of this Agreement not to sue or to assert any cross
claim, third-party claim, or other claim against SDA or any SDA Affiliate, in
which event SDA will agree not to assert any such claims against such Secured
Customers or their parents, subsidiaries, or affiliates in respect of any Claim.
If the Company or any Secured Customer (whether or not such Secured Customer
shall have agreed not to do so) shall bring any claim against SDA or any SDA
Affiliate in respect of a Claim, SDA shall have available the remedies provided
in the last sentence of paragraph 6(b)and paragraph 9(d) hereof. The
provisions of this paragraph only apply for so long as this Agreement is in
effect. After termination by any party, cross-claims, third-party claims or
other claims may be brought without restriction. Each party hereto waives any
statute of limitations, any defense of laches, and any procedural rules of court
which apply to the assertion of cross-claims, third-party claims, or other
claims against each other relating to any Claim for the period from the date
hereof through the date that is one year from and after the latest of (i) the
date a settlement is entered into with the claimant/plaintiff relating to such
Claim, (ii) the date a non-appealable, final judgment relating to such Claim is
entered as to any party hereto; and (iii) the date of termination of this
Agreement. Each party also agrees that no pleading, discovery response, order,
verdict, judgment, or court decision in any lawsuit asserting a Claim shall have
collateral-estoppel or similarly preclusive effect with respect to any
litigation or other proceedings between the parties.
15. Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be settled by arbitration in accordance with the
Center for Public Resources Rules for Non-Administered Arbitration of Business
Disputes (the "CPR Rules"), by three arbitrators, of whom each party shall
appoint one and the third shall be the Chairman. The
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<PAGE>
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. ch.
1, and judgment upon the award rendered by the arbitrators may be entered by any
court having jurisdiction thereof. Arbitration shall take place in a city to be
agreed upon by the parties or, in the absence of agreement, in New York City,
Chicago, Atlanta, Los Angeles, or San Francisco (whichever city is
geographically closest to the venue of the Claim out of which the matter is to
be arbitrated), subject to the power of the arbitrators to hold hearings or
meetings wherever they deem it appropriate. The arbitrators shall apply the
substantive law of the State of New York. Arbitration of disputes concerning
the parties' payment obligations in respect of a judgment rendered on a Claim
shall be based on the trial record with respect to such Claim and such further
evidence as either party may present to the arbitrators. Arbitration of
disputes concerning the parties' payment obligations in respect of a settlement
of a Claim shall be based on the pretrial record developed with respect to such
Claim and such further evidence as either party may present to the arbitrators.
No pleading, discovery response, order, verdict, judgment or court decision in
any lawsuit asserting a Claim shall have a collateral-estoppel or similarly
preclusive effect with respect to an arbitration to determine the proximate
cause of the personal injuries or the cause of damages giving rise to the
liability (the responsibility for which is being disputed in the arbitration).
The parties agree that discovery authorized by the arbitrators can be pursued
anywhere in the world and that each will cooperate to accomplish same. Any
party obstructing orderly discovery can be sanctioned at the discretion of the
Chairman. As provided in the CPR Rules, attorneys fees and costs may be awarded
to a prevailing party as part of the arbitral award.
16. Either party may terminate this Agreement at any time in the event the
terminating party is entitled to do so under Paragraph 9(a). In addition, SDA
may terminate this Agreement in the event that (i) the Company has made an
Election in respect of one or more Claims and (ii) SDA determines in its sole
discretion that the exercise of the right by the Company to make such Election
is or may be prejudicial to SDA. Paragraphs 2, 4, 13 and 15 (with respect only
to all settlements and judgments entered into or awarded prior to termination),
20
<PAGE>
paragraph 6(c) (except in respect of any Withdrawn Claim), this paragraph 16 and
paragraph 17 shall survive termination of this Agreement. In addition, SDA will
have the right to terminate this Agreement with respect to a Claim, and promptly
retender the defense of a Claim back to the Company, in the event it is
determined (and SDA shall have the burden of proof to establish) that such Claim
arises solely out of LTCPs and is based upon LT contained therein acquired from
some person or entity other than SDA (directly or indirectly), or that the LTCPs
sold by the Company to the claimant contained no LT sold by SDA; PROVIDED,
HOWEVER, that the right of termination granted to SDA in this sentence may be
exercised no later than sixty (60) days prior to the date of commencement of the
trial, arbitration or mediation of such Claim.
Notwithstanding termination, SDA shall be responsible for adjustment costs
for services rendered pursuant to paragraph 10 and the Company's national
coordinating counsels' fees and costs pursuant to paragraph 6 (except as
otherwise provided in paragraph 13), incurred prior to termination. Once
terminated, this Agreement will not survive or affect the rights of the parties
except as specifically set forth in this paragraph.
17. Communications concerning and/or the exchange of information or
materials of any kind between or among the parties hereto or their counsel,
Secured Customers, insurers, or adjusters concerning the Claims are and shall be
made in furtherance of the common defense of such Claims (whether pursued
through common or separate counsel) and are intended to be, and shall remain,
confidential and privileged to the full extent permitted under the attorney
client privilege, work-product doctrine, trade secret privilege, and any other
applicable privilege or protective doctrine. Neither participation in this
Agreement nor the sharing of information pursuant to it is intended to reduce or
diminish the confidentiality of such information or to waive any privilege or
protection which may apply in the absence of such participation or sharing of
information. The obligations under this paragraph shall survive termination of
this Agreement.
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This Agreement in no way restricts the rights of any party hereto to use
evidence against each other in any arbitration under this Agreement or
litigation between the parties hereto following termination of this Agreement.
18. This Agreement contains the entire agreement between the parties, and
replaces all prior agreements, if any, between or among the parties, with
respect to the settlement of Claims and to the allocation of responsibility
between the parties for the payment of settlements of or judgments on Claims.
No modifications of this Agreement shall be effective unless in a written
agreement properly executed by authorized representatives of each of the parties
hereto. Nothing in this Agreement shall amend or modify any agreement or
understanding between the parties hereto, or preclude any action, relating to
reimbursement of costs and expenses of the Company, and any other damages
associated therewith, incurred in connection with the product recall of LTCPS,
nor shall this paragraph preclude any party to argue the pertinence to
proceedings between the parties of purchase orders, invoices or other agreements
between the parties relating to the purchase and sale of LT.
19. Notices by either party to the other with respect to the subject
matter of this Agreement shall be provided by facsimile with confirming copy by
mail, addressed as follows:
If to SDA:
Showa Denko America, Inc.
280 Park Avenue
27th Floor, West Building
New York, New York 10017
tel: (212) 687-0773
fax: (212) 573-9007
Attention: President
22
<PAGE>
with a copy to:
Christopher H. Lunding, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
tel: (212) 225-2000
fax: (212) 225-3999
If to the Company:
LHP Holdings Corp.
1845 W. 205 Street
Torrance, CA 90501
Attention: President
With a copy to:
Daniel J. Lanahan, Esq.
Ropers, Majeski, Kohn, Bentley, Wagner & Kane
3558 Round Barn Boulevard, Suite 300
Santa Rosa, California 95403
tel: (707) 524-4200
fax: (707) 523-4610
The Company and SDA each reserves the right to change its address and/or
facsimile number for the purposes set forth above by giving fifteen (15) days'
prior written notice of such change to the other party either at its address for
the giving of notices set forth above in this paragraph or to such other address
as the party giving such notice shall have specified to the other party in the
manner set forth above.
20. The signatures of the representatives of SDA and the Company at the
end of this Agreement constitute the representation by each that it is the duly
authorized representative of SDA and the Company, respectively, and that they
are authorized to enter into this Agreement.
21. This Agreement shall be governed by the law of the State of New York;
provided, however, that if applying Federal law would result in upholding a
claim of the attorney-client privilege, the work product-doctrine, the trade
secret privilege, or any other applicable privilege
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<PAGE>
or protective doctrine which otherwise would be lost or waived if New York law
were to be applied, then Federal law shall govern this Agreement insofar as such
privilege or doctrine is concerned.
22. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original.
23. The Company represents, covenants, and agrees that (i) it will cause
its subsidiaries listed on Attachment 1 to fulfill each of the obligations,
representations, and warranties required of or made by the Company in this
Agreement; (ii) each of the obligations, representations, and warranties
required of or made by the Company will be deemed to have been made by or
required of the Company and each of its subsidiaries listed on Attachment 1;
(iii) a breach of such obligations, representations, or warranties by any one or
more of the subsidiaries listed on Attachment I that is not timely performed by
the Company deemed to be a breach by the Company; and (iv) the Company has full
authority to act for and bind its said subsidiaries, and can act for them, in
all matters covered by this Agreement. It is further agreed that each
subsidiary listed on Attachment 1 shall be considered to be part of the Company
and shall be entitled to benefits under this Agreement only so long as it
remains a wholly-owned subsidiary (direct or indirect) of the Company, and the
Company shall no longer be responsible under this paragraph 23 for conduct of
any such subsidiary after the date the subsidiary ceases to be a wholly-owned
subsidiary of the Company.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives.
SHOWA DENKO AMERICA, INC.
By /s/ Norio Masubuchi
-------------------------
Norio Masubuchi
President
LHP HOLDINGS CORP.
By /s/ Gale K. Bensussen
-------------------------
Gale K. Bensussen
President
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<PAGE>
Attachment 1
to Agreement Dated as of September 1, 1992
By and Between Showa Denko America, Inc.
and LHP Holdings Corp.
LIST OF SUBSIDIARIES
Leiner Health Products Inc.
Xcel Laboratories, Inc.
26
<PAGE>
Exhibit 10.3
SDK GUARANTY AGREEMENT CONFIDENTIAL
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, dated as of September 1, 1992, by and between SHOWA
DENKO K.K. (the "Guarantor"), a corporation organized and existing under the
laws of Japan, and LHP Holdings Corp. (the "Beneficiary"), a corporation
organized and existing under the laws of California.
WITNESSETH
WHEREAS the Beneficiary and SHOWA DENKO AMERICA, INC. ("SDA") have entered into
a written agreement dated as of the date of this Guaranty Agreement providing
(among other things) that SDA agrees to indemnify the Beneficiary from and
against certain obligations in respect of Claims relating to L-tryptophan
manufactured by the Guarantor, all to the extent specified and pursuant to the
terms and conditions contained in that agreement (that agreement, as the same
may be amended, modified or supplemented from time to time, referred to herein
as the "Agreement"), and
WHEREAS it is a requirement of the Agreement that SDA deliver the guaranty of
SDA's obligations under the Agreement to the Beneficiary contained in this
Guaranty Agreement;
NOW, THEREFORE, the Guarantor and the Beneficiary agree as follows:
1. GUARANTY. (a) The Guarantor unconditionally and irrevocably guarantees (as
primary obligor and not merely as surety) payment in full as provided in the
Agreement of all amounts payable by SDA under the Agreement, as and when those
amounts become payable by SDA pursuant to the terms and conditions contained in
the Agreement. The Guarantor further unconditionally and irrevocably guarantees
the performance by SDA, as and when required pursuant to the terms and
conditions of the Agreement, of all obligations of SDA under the Agreement. The
Guaranty contained herein is made subject to all of the terms and conditions
contained in the Agreement evidencing the obligations of SDA guaranteed hereby,
and nothing contained herein shall be deemed to amend or modify any of such
terms or conditions in any way.
(b) This is a continuing Guaranty and a guaranty of payment (not merely of
collection) and performance, and it shall remain in full force and effect until
the later to occur of (i) termination of the Agreement in accordance with its
terms and (ii) such time as all amounts payable by SDA under the Agreement have
been validly, finally and irrevocably
<PAGE>
paid in full. This Guaranty shall not be affected in any way by the absence of
any action to obtain those amounts from SDA. With respect to this Guaranty, the
Guarantor waives all requirements as to presentment, demand for payment, demand
for performance, notice of default, protest or notice of any kind regarding SDA
or the breach by SDA of its obligations under the Agreement.
(c) This Guaranty shall not be affected by the occurrence of any circumstance
(other than complete, irrevocable payment) that might otherwise constitute a
legal or equitable discharge or defense of a surety or guarantor. If SDA merges
or consolidates with or into another entity, loses its separate legal identity
or ceases to exist, or files any petition for bankruptcy or any other insolvency
proceeding, the Guarantor shall nonetheless continue to be liable for the
payment of all amounts payable by SDA under the Agreement and for the
performance of all obligations of SDA under the Agreement.
(d) This Guaranty shall remain in full force and effect or shall be reinstated
(as the case may be) if at any time any payment by SDA made pursuant to the
Agreement, in whole or in part, is rescinded or must otherwise be returned by
the Beneficiary upon the insolvency, bankruptcy or reorganization of SDA or
otherwise, all to the same extent as if that payment had not been made.
(e) So long as any amount payable by SDA under the Agreement is overdue and
unpaid, the Guarantor shall not (i) exercise any right of subrogation or
indemnity, or similar right or remedy, against SDA or any of its assets or
property in respect of any amount paid by the Guarantor under this Guaranty or
(ii) file a proof of claim in competition with the Beneficiary for any amount
owing to the Guarantor by SDA on any account whatsoever in the event of the
bankruptcy, insolvency or liquidation of SDA.
2. CONTRACTUAL CURRENCY. All payments by the Guarantor under this Guaranty
shall be made in United States currency.
3. NO CONFLICT WITH LAW; REMEDIES NOT EXCLUSIVE. (a) Neither the execution or
delivery of this Guaranty Agreement by the Guarantor, nor the performance by the
Guarantor of its obligations hereunder, conflicts with or will result in the
breach of any applicable Japanese law, regulation or statute.
(b) The rights and remedies set forth in the Agreement are in addition to and
not exclusive of any rights and remedies available to the Beneficiary by law in
respect of this Guaranty.
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4. AMENDMENTS, WAIVERS. All amendments, waivers and modifications of or to
any provision of this Guaranty and any consent to departure by the Guarantor
from the terms hereof shall be in writing and signed and delivered by the
Beneficiary and, in the case of any such amendment or modification, by the
Guarantor, and shall not otherwise be effective. Any such waiver or consent
shall be effective only in the specific instance and for the purpose for which
it is given.
5. BINDING EFFECT. This Guaranty shall be binding on the Guarantor and its
successors and assigns. However, the Guarantor shall not transfer any of its
obligations hereunder without the prior written consent of the Beneficiary, and
any purported transfer without that consent shall be void. This Guaranty shall
inure to the benefit of the Beneficiary and its successors and assigns.
6. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. (a) This Guaranty shall
be governed by and construed and interpreted in accordance with the law of the
State of New York.
(b) The Guarantor irrevocably submits to the non-exclusive jurisdiction of the
courts of the State of New York and of the United States sitting in the Borough
of Manhattan in connection with any action or proceeding by the Beneficiary to
enforce the Guarantor's obligations under this Guaranty (each, a "Proceeding")
and irrevocably appoints CT CORPORATION SYSTEM, 1633 Broadway, New York, New
York 10019 as its agent for the sole purpose of receiving service of process or
other legal summons in connection with any Proceeding brought in any such court.
So long as the Guarantor has any obligation under this Guaranty, it will
maintain a duly appointed agent in New York City for the service of such process
or summons and, if it fails to maintain such an agent, any such process or
summons may be served on it by mailing a copy thereof to the Guarantor at its
address set forth, and in the manner provided, in Paragraph 7 hereof, with such
service deemed effective on the fifteenth day after the date of such mailing.
(c) The Guarantor irrevocably waives, to the fullest extent permitted by
applicable law, any defense or objection it may now or hereafter have to the
laying of venue of any Proceeding brought in the courts of the State of New York
or of the United States sitting in the Borough of Manhattan (a Proceeding
brought in any such court, a "New York Proceeding") and any claim that any
Proceeding brought in any such court has been brought in an inconvenient forum.
Nothing herein contained shall preclude the Beneficiary from bringing an action
or proceeding to enforce the Guarantor's
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obligations under this Guaranty in any other place where jurisdiction over the
Guarantor properly may be obtained.
(d) The Guarantor irrevocably agrees that it will not raise as a defense or
set-off in any New York Proceeding an allegation that the Beneficiary is
indebted to the Guarantor or SDA, or interpose a counter-claim in a New York
Proceeding seeking recovery of any such alleged indebtedness, unless that
indebtedness allegedly arose out of the same operative facts as form the basis
of the Beneficiary's claims in that New York Proceeding.
(e) The Guarantor and the Beneficiary each irrevocably waives trial by jury in
any New York Proceeding.
(f) The Guarantor and the Beneficiary each irrevocably agree that the party
prevailing in any New York Proceeding shall be entitled to be awarded therein an
amount equal to the reasonable fees and expenses of its attorneys incurred in
connection with that Proceeding.
7. ENFORCEMENT IN JAPAN. The Guarantor solemnly covenants that in the event
that a final, non-appealable judgment is rendered against it in a New York
Proceeding (any such final, non-appealable judgment, a "Judgment"), the
Guarantor (i) will not raise any defense to the enforcement of such Judgment in
Japan which would, or seeks to, require relitigation of that New York
Proceeding; and (ii) will do everything within its power to assure that such
Judgment becomes enforceable in Japan as soon as is possible under Japanese law
after the time enforcement of such Judgment is sought in that country.
8. NOTICES. All notices, requests, demands and other communications to the
Guarantor or the Beneficiary which are required or permitted hereunder shall be
made in writing and shall be deemed properly given hereunder when provided by
confirmed facsimile transmission, with a separate confirming copy sent by United
States registered mail, return receipt requested, with sufficient postage
prepaid thereon to carry it to its addressed destination, as follows:
SHOWA DENKO K.K.
13-9, Shiba Daimon 1-chome
Minato-ku, Tokyo 105
Japan
Attention: President
--------------------
Facsimile: 011-81-3-5470-3709
with a copy to:
CLEARY, GOTTLIEB, STEEN & HAMILTON
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One Liberty Plaza
New York, New York 10006
Attention: Christopher H. Lunding, Esq.
----------------------------------------
Facsimile: 212-225-3999
If to the Beneficiary:
LHP Holdings Corp.
1845 W. 205 Street
Torrance, CA 90501
Attention: Gale K. Bensussen
-----------------------------
Facsimile: (310) 212-7048
with a copy to:
Ropers, Majeski, Kohn, Bentley, Wagner & Kane
3558 Round Barn Boulevard, Suite 300
Santa Rosa, California 95403
Attention: Daniel J. Lanahan, Esq.
-----------------------------------
Facsimile: (707) 523-4610
The Guarantor and the Beneficiary each reserves the right to change its address
and/or facsimile number for the purposes set forth above by giving fifteen days'
prior written notice of such change to the other either at its address for the
giving of notices set forth in the Agreement or to such other address as the
party giving such notice shall have specified to the other party in the manner
set forth above.
9. HEADINGS. The section headings in this Guaranty are for convenience of
reference only and shall not affect the meaning or construction of any provision
hereof.
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IN WITNESS WHEREOF the Guarantor and the Beneficiary each has duly executed this
Guaranty Agreement as of the date first written above.
SHOWA DENKO K.K.
By: /s/ Daiya Miyoshi
----------------------
Daiya Miyoshi
Representative Director
and Executive Vice President
LHP HOLDINGS CORP.
By: /s/ Gale K. Bensussen
----------------------
Gale K. Bensussen
President
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Exhibit 10.4
PLI INVESTORS INC.
STOCK OPTION PLAN
ARTICLE 1
GENERAL
1.1 PURPOSE. The purpose of this PLI Investors Inc. Stock Option
Plan (the "Plan") is to provide for certain key employees and/or directors of P.
Leiner Nutritional Products Corp., a Delaware corporation and its subsidiaries
and affiliates (collectively, the "Company"), each an indirect wholly-owned
subsidiary of PLI Investors Inc., a Delaware corporation ("PLI"), an incentive
(I) to join and/or remain in the service of the Company and its subsidiaries,
(II) to maintain and enhance the long-term performance and profitability of PLI,
the Company and their subsidiaries and affiliates and (III) to acquire a
proprietary interest in the success of PLI, the Company and their subsidiaries.
1.2 DEFINITION OF CERTAIN TERMS.
(a) "Agreement" means an agreement issued pursuant to Section 2.1.
(b) "Board" means the Board of Directors of PLI.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed to administer the Plan
in accordance with Section 13.
(e) "Company" means P. Leiner Nutritional Products Corp., a Delaware
corporation and its subsidiaries and affiliates.
<PAGE>
(f) "Common Stock" means the shares of Class A common stock, par value
$.01 per share, of PLI and any other shares into which such common stock shall
thereafter be exchanged by reason of a recapitalization, merger, consolidation,
split-up, combination, exchange of shares or the like.
(g) "Optionee" means an employee of the Company who has been awarded
any Option under this Plan.
(h) "Option" means a "nonqualified" stock option, as described in
Section 1.5, granted under the Plan.
(i) The terms "parent corporation" and "subsidiary corporation" as
used herein shall have the meaning given those terms in Code section 425(e) and
(f), respectively. A corporation shall be deemed a parent or a subsidiary only
for such periods during which the requisite ownership relationship is
maintained.
(j) "Plan" means this PLI Investors Inc. Stock Option Plan.
(k) "Termination With Cause," with respect to any Optionee, means
termination by the Company of such Optionee's employment for: (I)
misappropriation of corporate funds, (II) conviction of a felony or a crime
involving moral turpitude, (III) willful violation of directions of the Chief
Executive Officer or the Board of Directors of the Company, or (IV) gross
negligence and wilful misconduct.
1.3 ADMINISTRATION. (a) (i) Subject to Section 1.3(e), the Plan
shall be administered by a committee of the Board which shall consist of at
least two directors and which shall have the power of the Board to authorize
awards under the Plan. The members
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of the Committee shall be appointed by, and may be changed from time to time in
the discretion of, the Board.
(ii) No person shall serve as a member of the Committee if such person
is then. or was at any time within one year prior thereto, eligible for
selection as a person to whom awards may be granted under the Plan, or under any
other plan of PLI or any of its affiliates entitling the participants therein to
acquire stock, stock options of PLI or any of its affiliates. The term
"affiliate" as used in the preceding sentence means any person or entity which,
at the time of reference, directly, or indirectly through one or more
intermediaries, (I) controls PLI or (II) is controlled by, or is under common
control with, PLI.
(b) The Committee shall have the authority (I) to exercise all of the
powers granted to it under the Plan, (II) to construe, interpret and implement
the Plan and any Agreement executed pursuant to Section 2.1, (III) to prescribe,
amend and rescind rules and regulations relating to the Plan, (IV) to make all
determinations necessary or advisable in administering the Plan, and (V) to
correct any defect, supply any omission and reconcile any inconsistency in the
Plan.
(c) The determination of the Committee on all matters relating to the
Plan or any Agreement shall be conclusive.
(d) No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award
thereunder.
(e) Notwithstanding anything to the contrary contained herein: (I)
until the Board shall appoint the members of the Committee, the Plan shall be
administered by the
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Board; and (II) the Board may, in its sole discretion, at any time and from time
to time, resolve to administer the Plan, with any members of the Board who are
eligible to receive awards hereunder not participating in decisions relating to
the Plan. In either of the foregoing events, the term "Committee" as used
herein shall be deemed to mean the Board.
1.4 PERSONS ELIGIBLE FOR AWARDS. Awards under the Plan may be made
from time to time to such key employees of the Company as the Committee shall in
its sole discretion select.
1.5 TYPES OF AWARDS UNDER THE PLAN. Awards may be made under the Plan
in the form of stock options which shall be "nonqualified" stock options subject
to the provisions of section 83 of the Code, all as more fully set forth in
Article 2.
1.6 SHARES AVAILABLE FOR AWARDS. (a) Subject to Section 3.4 (relating
to adjustments upon changes in capitalization), as of any date the total number
of shares of Common Stock with respect to which Options may be awarded under the
Plan shall be equal to the excess (if any) of (I) 100,000 shares over (II) the
sum of (A) the number of shares subject to outstanding Options granted under the
Plan, and (B) the number of shares previously issued pursuant to the exercise of
Options granted under the Plan. In accordance with (and without limitation
upon) the preceding sentence, shares of Common Stock covered by Options granted
under the Plan which expire or terminate for any reason shall again become
available for award under the Plan.
(b) Shares that are issued upon the exercise of Options awarded under
the Plan shall be authorized and unissued or treasury shares of Common Stock.
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(c) Without limiting the generality of the preceding provisions of
this Section 1.6, the Committee may, but solely with the Optionee's consent,
agree to cancel any award of Options under the Plan and issue new Options in
substitution therefor, provided that the Options as so substituted shall satisfy
all of the requirements of the Plan as of the date such new Options are awarded.
ARTICLE 2
STOCK OPTIONS
2.1 AGREEMENTS EVIDENCING STOCK OPTIONS. (a) Options awarded under
the Plan shall be evidenced by Agreements which shall not be inconsistent with
the terms and provisions of the Plan, and which shall contain such provisions as
the Committee may in its sole discretion deem necessary or desirable. Without
limiting the generality of the foregoing, the Committee may in any Agreement
impose such restrictions or conditions upon the exercise of such Option or upon
the sale or other disposition of the shares of Common Stock issuable upon
exercise of such Option as the Committee may in its sole discretion determine.
By accepting an award pursuant to the Plan each Optionee shall thereby agree
that each such award shall be subject to all of the terms and provisions of the
Plan, including, but not limited to, the provisions of Section 1.3(d).
(b) Each Agreement shall set forth the number of shares of Common
Stock subject to the Option granted thereby.
(c) Each Agreement relating to Options shall set forth the amount
payable by the Optionee to PLI upon exercise of the Option evidenced thereby.
The Option exercise
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<PAGE>
price per share of Common Stock of a "nonqualified" stock option shall be not
less than $100 per share, adjusted as determined by the Committee to reflect
changes in capitalization as contemplated by Section 3.4.
2.2 TERM OF OPTIONS. Each Agreement shall set forth the period during
which the Option evidenced thereby shall be exercisable, whether in whole or in
part, such periods to be determined by the Committee in its discretion.
2.3 EXERCISE OF OPTIONS. Subject to the provisions of this Article 2,
each Option granted under the Plan shall be exercisable as follows:
(a) An Option shall become exercisable at such times and subject to
such conditions as the applicable Agreement may provide.
(b) Unless the applicable Agreement otherwise provides, an Option
granted under the Plan may be exercised from time to time as to all or part
of the shares as to which such Option shall then be exercisable.
(c) An Option shall be exercisable by the filing of a written notice
of exercise with PLI, on such form and in such manner as the Committee
shall in its sole discretion prescribe.
(d) Any written notice of exercise of an Option shall be accompanied
by payment of the exercise price for the shares being purchased. Such
payment shall be made by certified or official bank check payable to PLI
(or the equivalent thereof acceptable to the Committee). As soon as
practicable after receipt of such payment,
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<PAGE>
PLI shall deliver to the Optionee a certificate or certificates for the
shares of Common Stock so purchased.
2.4 TERMINATION OF OPTIONS. (a) Notwithstanding anything to the
contrary in this Plan, except as the Agreement may otherwise provide and as set
forth in Section 2.4(b) and Section 2.4(d), Options granted to an Optionee (and
already vested but not yet exercised) shall terminate on the earliest to occur
of (I) the date which is 45 days after termination of his employment with the
Company for any reason (other than death or disability in which case the Options
shall terminate on the date which is 180 days after the date of such
termination), (II) a sale or other disposition of 80% or more of the outstanding
capital stock or substantially ail the assets of PLI ("Sale"), and (III) the
merger or consolidation of the Company with or into any other corporation
("Merger") other than (X) a merger or consolidation in which the Company is the
surviving corporation and the shares of its outstanding common stock are not
changed into any other securities or property pursuant to such merger or
consolidation, or (Y) a merger or consolidation with an affiliate of the Company
following which those persons who owned directly or indirectly a majority of the
outstanding shares of common stock of the Company immediately prior to such
merger or consolidation will own a majority of the outstanding shares of common
stock of the surviving corporation.
(b) Notwithstanding anything to the contrary in this Plan, all Options
granted to an Optionee shall immediately expire and cease to be exercisable and
all rights granted to
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an Optionee under this Plan and such Optionee's Agreement shall immediately
expire in the event of a Termination With Cause of the Optionee by the Company
at any time.
(c) Unless the applicable Agreement expressly provides otherwise,
Options awarded to Optionees under the terms of the Plan will be exercisable
only in accordance with the following vesting schedule:
Cumulative
Percentage of
Applicable Date Total Shares
--------------- ------------
On the date of the applicable Agreement 25%
On the first anniversary of the date of the Agreement 50%
On the second anniversary of the date of the Agreement 75%
On the third anniversary of the date of the Agreement 100%
provided, however that in the event of a Sale or Merger any unexercised Options
will be fully vested on the Closing Date of any such Sale or Merger. The
Committee may modify this vesting schedule in any manner that it deems
appropriate in any Agreement, and may provide different vesting schedules in
different Agreements in its sole discretion. Except as otherwise provided
herein, in the event that Optionee's employment with the Company is terminated
for any reason prior to the date on which the Optionee's right to exercise the
Options has fully vested pursuant to this Section 2.4(c), the Options will
immediately cease to be exercisable with respect to any and all shares which
have not vested as of the date of such termination.
8
<PAGE>
(d) If at the time in question the Common Stock is not publicly traded
on a national securities exchange or over-the-counter market, in the event that
an Optionee's employment with the Company is terminated for any reason, the
Company at its election, on giving ten days' written notice to Optionee, may (I)
repurchase any and all shares of Common, Stock then owned by Optionee which were
previously acquired by Optionee through exercise of Options granted under this
Plan and (II) cancel any Options which have vested under the terms of the Plan
but have not been exercised subject to payment of the purchase price described
below. The purchase price payable by the Company to the Optionee on exercise of
its right to repurchase under (d)(i) above will be the fair market value of the
Common Stock held by the Optionee which is being repurchased, determined as of
the date of the repurchase. The purchase price payable by the Company to
Optionee on exercise of the right to cancel vested but unexercised Options under
(d)(ii) above will be the fair market value of the Options in question
determined as of the date of the cancellations. In either of the above cases,
the fair market value will be determined by the Board in its absolute
discretion.
ARTICLE 3
MISCELLANEOUS
3.1 AMENDMENT OF THE PLAN; MODIFICATION OF AWARDS. (a) The Board may,
without stockholder approval, from time to time suspend or discontinue the Plan
or revise or amend it in any respect whatsoever, except that no such amendment
shall alter or impair any rights or obligations under any award theretofore made
under the Plan without the consent of
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<PAGE>
the person to whom such award was made. Furthermore, except as and to the
extent otherwise permitted by Section 3.4, no such amendment shall, without
stockholder approval:
(i) increase, beyond the amounts set forth in Section 1.6, the number
of shares of Common Stock in respect of which awards may be granted;
(ii) change the designation in Section 1.4 of the class of persons
eligible to receive awards under the Plan; or
(iii) extend the term of the Plan beyond the period set forth in
Section 3.12.
(b) With the consent of the Optionee and subject to the terms and
conditions of the Plan (including Section 3.1(a)), the Committee may amend
outstanding Agreements with such Optionee, for example, to (I) accelerate the
time or times at which an Option may be exercised or (II) extend the scheduled
expiration date of the Option.
3.2 NONASSIGNABILITY. No right granted to any Optionee under the Plan
or under any Agreement shall be assignable or transferable other than by will or
by the laws of descent and distribution. During the life of the Optionee, all
rights granted to the Optionee under the Plan or under any Agreement shall be
exercisable only by him.
3.3 WITHHOLDING OF TAXES. PLI or the Company shall be entitled to
withhold an amount sufficient to satisfy any federal, state and other
governmental tax requirements related thereto. Whenever, under the Plan, shares
of Common Stock are to be delivered upon exercise of an Option, PLI shall be
entitled to require as a condition of delivery that the Optionee remit an amount
sufficient to satisfy all federal, state and other governmental tax withholding
requirements related thereto.
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3.4 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If and to the extent
specified by the Committee, the number of shares of Common Stock which may be
issued pursuant to the exercise of Options granted under the Plan may be
appropriately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from the subdivision or combination of shares
of Common Stock or other capital adjustments, or the payment of a stock dividend
after the effective date of this Plan, or other increase or decrease in the
number of such shares of Common Stock effected without receipt of consideration
by PLI; provided, however, that any Options to purchase fractional shares of
Common Stock resulting from any such adjustment shall be eliminated.
Adjustments under this Section 3.4 shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
3.5 RIGHT OF DISCHARGE RESERVED. Nothing in this Plan or in any
Agreement shall confer upon any employee or other person the right to continue
in the employment or service of the Company or affect any right which the
Company may have to terminate the employment or service of such employee or
other person.
3.6 NO RIGHTS AS A STOCKHOLDER. No Optionee or other person holding
an Option shall have any of the rights of a stockholder of PLI with respect to
shares subject to an Option until the issuance of a stock certificate to him for
such shares. Except as otherwise provided in Section 3.4, no adjustment shall
be made for dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, securities or other property) for which the
record date is prior to the date such stock certificate is issued.
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3.7 NATURE OF PAYMENTS. (a) Any and all payments of shares of Common
Stock or cash hereunder shall be granted, transferred or paid in consideration
of services performed by the Optionee for the Company.
(b) All such grants, issuances and payments shall constitute a special
incentive payment to the Optionee and shall not, unless otherwise determined by
the Committee, be taken into account in computing the amount of salary or
compensation of the Optionee for the purposes of determining any pension,
retirement, death or other benefits under (I) any pension, retirement, life
insurance or other benefit plan of the Company or (II) any agreement between the
Company and the Optionee.
3.8 NON-UNIFORM DETERMINATIONS. The Committee's determinations under
the Plan need not be uniform and may be made by it selectively among persons who
receive, or are eligible to receive, awards under the Plan (whether or not such
persons are similarly situated). Without limiting the generality of the
foregoing, the Committee shall be entitled, among other things, to make
non-uniform and selective determinations, and to enter into non-uniform and
selective Agreements, as to (I) the persons to receive awards under the Plan.
and (II) the terms and provisions of awards under the Plan.
3.9 OTHER PAYMENTS OR AWARDS. Nothing contained in the Plan shall be
deemed in any way to limit or restrict PLI, the Company, any subsidiary or the
Committee from making any award or payment to any person under any other plan,
arrangement or understanding, whether now existing or hereafter in effect.
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3.10 RESTRICTIONS. (a) If the Committee shall at any time determine
that any Consent (as hereinafter defined) is necessary or desirable as a
condition of, or in connection with, the granting of any award under the
Plan, the issuance or purchase of shares or other rights thereunder or the
taking of any other action thereunder (each such action being hereinafter
referred to as a "Plan Action"), then such Plan Action shall not be taken,
in whole or in part, unless and until such Consent shall have been effected
or obtained to the full satisfaction of the Committee. Without limiting
the generality of the foregoing, if (I) the Committee is entitled under the
Plan to make any payment in cash, Common Stock or both, and (II) the
Committee determines that a Consent is necessary or desirable as a
condition of, or in connection with, payment in any one or more of such
forms, the Committee shall be entitled to determine not to make any payment
whatsoever until such Consent shall have been obtained in the manner
aforesaid.
(b) The term "Consent" as used herein with respect to any Plan Action
means (I) any and all listings, registrations or qualifications in respect
thereof upon any securities exchange or under any federal, state or local law,
rule or regulation, (II) any and all written agreements and representations by
the grantee with respect to the disposition of shares, or with respect to any
other matter, which the Committee shall deem necessary or desirable to comply
with the terms of any such listing, registration or qualification or to obtain
an exemption from the requirement that any such listing, qualification or
registration be made
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and (III) any and all consents, clearances and approvals in respect of a Plan
Action by any governmental or other regulatory bodies.
3.11 SECTION HEADINGS. The section headings contained herein are for
the purposes of convenience only and are not intended to define or limit the
contents of said sections.
3.12 EFFECTIVE DATE AND TERM OF PLAN. (a) This Plan shall be deemed
adopted and become effective upon the approval thereof by the Board; provided
that, notwithstanding any other provision of this Plan, no Option awarded under
the Plan shall be exercisable unless the Plan is approved, within 12 months
before or after the date the Plan is adopted, by (I) the express consent of
stockholders holding at least a majority of PLI's voting stock voting in person
or by proxy at a duly held stockholders' meeting, or (II) the written consent of
stockholders holding at least a majority of PLI's voting stock.
(b) The Plan shall terminate 10 years after the earlier of the date on
which it becomes effective or the date on which it is approved by the
stockholders of PLI, and no awards shall thereafter be made under the Plan.
Notwithstanding the foregoing, all awards made under the Plan prior to the date
on which the Plan terminates shall remain in effect until such awards have been
satisfied or terminated in accordance with the terms and provisions of the Plan.
3.13 NOTICES. PLI has agreed to provide reasonable notice, designed
to permit an Optionee the opportunities to exercise his Options, of the
occurrence of (A) a Sale or (B) a Merger.
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15
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Exhibit 10.5
FIRST AMENDMENT TO THE LEINER HEALTH PRODUCTS
GROUP INC. STOCK OPTION PLAN (formerly known as the PLI
Investors Inc. Stock Option Plan) (the "Plan")
Acting pursuant to Section 3.1(a) of the Plan, Leiner Health Products
Group Inc. (the "Company") hereby amends the Plan, effective as of June 30,
1997, unless otherwise indicated.
1. The Plan is amended by adding a new Section 1.6(d) at the end of
Section 1.6 thereof, reading in its entirety as follows:
(d) Effective as of June 30, 1997, no further Options may be awarded
under this Plan.
2. The Plan is amended by deleting the proviso at the end of the
first sentence of Section 2.4(c) thereof.
3. The Plan is amended by adding a new Section 2.5 to the end of
Article 2 thereof, reading in its entirety as follows:
2.5 RECAPITALIZATION TRANSACTION. Notwithstanding anything to the
contrary in this Plan, as of the effective time of the consummation of the
transactions contemplated by the Stock Purchase Agreement and Agreement and
Plan of Merger, dated as of May 31, 1997 (the "Merger Agreement"; such
time, the "Effective Time"; the consummation of such transactions, the
"Recapitalization"), by and among the Company, North Castle Partners I,
L.L.C. and LHP Acquisition Corp., each then outstanding Option shall be
canceled. In full and complete satisfaction thereof, the Company shall
deliver to each Optionee in respect of each share of Common Stock subject
to a canceled Option, an amount equal to the excess (the "Option Value")
of (I) $265.318 over (II) the exercise price of the Option. Such amount
for any Optionee shall be paid in the form, determined by the Company in
its sole and absolute discretion to be in the Company's best interest and
set forth opposite such Optionee's name on Schedule I hereto, of (W) cash,
(X) shares of voting common stock, par value $0.01 per share, of the
surviving company in the Recapitalization (such stock, "Surviving Company
Voting Common Stock"; such company, the "Surviving Company"), (Y) the right
to receive shares of class A (non-voting) common stock, par value $0.01 per
share, of the Surviving Company ("Surviving Company Non-Voting Common
Stock") at a future date, and on terms and conditions, determined by the
Company ("Delayed Delivery Stock"), or (Z) a combination thereof; PROVIDED
that, each Optionee who is not employed by the Company as of the Effective
Time shall receive, in respect of each share of Common Stock subject to a
canceled Option,
<PAGE>
6.0812% of the Option Value in the form of shares of Surviving Company
Voting Common Stock and the remainder of the Option Value in the form of
cash, as set forth on Schedule I hereto. The Company shall also deliver to
each Optionee holding an Option at the Effective Time a warrant to purchase
the number of shares of Surviving Company Non-Voting Common Stock set forth
on Schedule I hereto and determined in accordance with the following
formula: the product of (A) a fraction, the numerator of which is the
Optionee's aggregate Option Value and the denominator of which is
205,000,000, multiplied by (B) 305,556.
4. The Plan is amended by deleting Section 3.13 thereof in its
entirety.
2
<PAGE>
<TABLE>
<CAPTION>
Attachment A
CANCELLATION OF OPTIONS
IN CONNECTION WITH THE RECAPITALIZATION
- -----------------------------------------------------------------------------------------------------------------------------------
OPTIONEE OPTIONS BEING CASH SHARES OF SURVING SHARES OF DELAYED WARRANT TO PURCHASE NUMBER OF
CANCELLED IN THE COMPANY VOTING DELIVERY STOCK SHARES OF SURVIVING COMPANY
RECAPITALIZATION COMMON STOCK NON-VOTING COMMON STOCK
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Robert M. Kaminski 16,860 $ 16.87 0 24,067 3,587
- -----------------------------------------------------------------------------------------------------------------------------------
Gale K. Bensussen 11,786 $ 41.71 0 18,484 2,755
- -----------------------------------------------------------------------------------------------------------------------------------
Kevin J. Lanigan 7,524 $ 750,055.04 0 4,938 1,854
- -----------------------------------------------------------------------------------------------------------------------------------
William B. Towne 4,000 $ 73.28 0 4,812 717
- -----------------------------------------------------------------------------------------------------------------------------------
Stanley J. Kahn 9,524 $ 991,891.68 0 5,576 2,310
- -----------------------------------------------------------------------------------------------------------------------------------
Giffen H. Ott 4,262 $ 385,986.68 0 3,186 1,050
- -----------------------------------------------------------------------------------------------------------------------------------
Scott C. Rexinger 2,000 $ 36.64 0 2,406 359
- -----------------------------------------------------------------------------------------------------------------------------------
Robert O. Cavenah 3,262 $ 68.36 0 5,392 804
- -----------------------------------------------------------------------------------------------------------------------------------
Norbert F. Guziewicz 6,524 $ 475,636.72 0 6,029 1,608
- -----------------------------------------------------------------------------------------------------------------------------------
Eric P. Schick 1,000 $ 18.32 0 903 135
- -----------------------------------------------------------------------------------------------------------------------------------
Ronald R. Gentry 3,000 $ 54.96 0 3,609 538
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
OPTIONEE OPTIONS BEING CASH SHARES OF SURVING SHARES OF DELAYED WARRANT TO PURCHASE NUMBER OF
CANCELLED IN THE COMPANY VOTING DELIVERY STOCK SHARES OF SURVIVING COMPANY
RECAPITALIZATION COMMON STOCK NON-VOTING COMMON STOCK
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
William M. Jenkins 2,000 $ 310,536.64 0 201 493
- -----------------------------------------------------------------------------------------------------------------------------------
John R. Altenberg 1,000 $ 63,018.32 0 573 179
- -----------------------------------------------------------------------------------------------------------------------------------
Gregory Zebrowski 448 $ 2.61 0 539 80
- -----------------------------------------------------------------------------------------------------------------------------------
Michael W. Hader 3,750 $ 619,943.70 0 0 924
- -----------------------------------------------------------------------------------------------------------------------------------
Brubaker Trust 8,524 $1,276,573.36 826 0 2,026
- -----------------------------------------------------------------------------------------------------------------------------------
Diane Beardsley 7,524 $1,168,255.04 756 0 1,854
- -----------------------------------------------------------------------------------------------------------------------------------
Leo Schultz 3,262 $ 506,568.36 327 0 804
- -----------------------------------------------------------------------------------------------------------------------------------
Richard Fisher 3,750 $ 582,343.70 376 0 924
- -----------------------------------------------------------------------------------------------------------------------------------
Total 80,715
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
Exhibit 10.6
Adopted and Effective
as of June 30, 1997
LEINER HEALTH PRODUCTS GROUP INC.
STOCK INCENTIVE PLAN
SECTION 1.
PURPOSE
The purpose of the Plan is to foster and promote the long-term
financial success of the Company and materially increase shareholder value by
(a) motivating superior performance by means of performance-related incentives,
(b) encouraging and providing for the acquisition of an ownership interest in
the Company by Employees and (c) enabling the Company to attract and retain the
services of an outstanding management team upon whose judgment, interest and
special effort the successful conduct of its operations is largely dependent.
SECTION 2.
DEFINITIONS
2.1. Definitions. Whenever used herein, the following terms shall
have the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Award Agreement" means the agreement, certificate or other
instrument evidencing the grant of any Incentive Award under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Business Day" shall mean any day on which banks located in
New York City are not required or authorized by law to remain closed.
(e) "Cause", with respect to any Incentive Award, shall have the
meaning assigned thereto in the Award Agreement evidencing such
Incentive Award or, if there is no such meaning assigned, shall mean (i)
the willful failure by the Participant to perform substantially his
duties as an employee of the Company or any Subsidiary (other than due
to physical or mental illness) after reasonable notice to the
Participant of such failure, (ii) the Participant's engaging in serious
misconduct that is injurious to the Company or any Subsidiary, (iii) the
Participant's having been convicted of, or entered a plea of nolo
contendere to, a crime that constitutes a felony or (iv) the breach by
the
<PAGE>
Participant of any written covenant or agreement with the Company or any
Subsidiary not to disclose information pertaining to the Company or any
Subsidiary or not to compete or interfere with the Company or any
Subsidiary.
(f) "Change in Control" shall mean the first to occur of the
following events:
(i) a majority of the members of the Board at any time cease
for any reason other than due to death or disability to be persons
who were members of the Board twenty-four months prior to such time
(or, if at the relevant time less than twenty-four months has
elapsed since the Effective Date hereof, since such Effective Date)
(the "Incumbent Directors"); provided that any director whose
election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the members of the
Board then still in office who are Incumbent Directors shall be
treated as an Incumbent Director; or
(ii) any "person," including a "group" (as such terms are used
in Sections 13(d) and 14(d)(2) of the Act, but excluding North
Castle Partners, the Company, its Subsidiaries, any employee
benefit plan of the Company or any Subsidiary, employees of the
Company or any Subsidiary or any group of which any of the
foregoing is a member) is or becomes the "beneficial owner" (as
defined in Rule 13(d)(3) under the Act), directly or indirectly,
including without limitation, by means of a tender or exchange
offer, of securities of the Company representing (x) prior to the
occurrence of a Public Offering, 50% or more or (y) otherwise, 30%
or more, of the combined voting power of the Company's then
outstanding securities; or
(iii) the stockholders of the Company shall approve a
definitive agreement (x) for the merger or other business
combination of the Company with or into another corporation
immediately following which merger or combination (A) the stock of
the surviving entity is not readily tradeable on an established
securities market, (B) a majority of the directors of the surviving
entity are persons who (1) were not directors of the Company
immediately prior to the merger and (2) are not nominees or
representatives of the Company or (C) any "person," including a
"group" (as such terms are used in Sections 13(d) and 14(d)(2) of
the Act, but excluding North Castle Partners, the Company, its
Subsidiaries, any employee benefit plan of the Company or any
2
<PAGE>
Subsidiary, employees of the Company or any Subsidiary or any group
of which any of the foregoing is a member) is or becomes the
"beneficial owner" (as defined in Rule 13(d)(3) under the Act),
directly or indirectly, of (1) prior to the occurrence of a Public
Offering, 50% or more, or (2) otherwise, 30% or more, of the
securities of the surviving entity or (y) for the direct or
indirect sale or other disposition of all or substantially all of
the assets of the Company; or
(iv) any other event or transaction that is declared by
resolution of the Board to constitute a Change in Control for
purposes of the Plan.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed
to occur in the event the Company files for bankruptcy, liquidation or
reorganization under the United States Bankruptcy Code.
(g) "Change in Control Price", with respect to a class of Common
Stock, shall mean the price per share of such class of Common Stock paid in
conjunction with any transaction resulting in a Change in Control (as
determined in good faith by the Board if any part of such price is payable
other than in cash).
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Committee" means the Compensation Committee of the Board (or
such other committee of the Board as the Board shall designate), which
shall consist of three or more members serving at the pleasure of the
Board.
(j) "Common Stock" means the Non-Voting Common Stock and the Voting
Common Stock.
(k) "Company" means Leiner Health Products Group Inc., a Delaware
corporation, and any successor thereto.
(l) "Deferred Stock Unit" means a Participant's right to receive
pursuant to the Plan one share of a particular class of Common Stock, or,
if provided by the Board at the date of grant, cash equal to the Fair
Market Value of such share of Common Stock, at the end of a specified
period of time. The term "Deferred Stock Unit" shall include both Elective
Deferred Stock Units and Freestanding Deferred Stock Units within the
meaning of Section 7.1.
3
<PAGE>
(m) "Disability", with respect to any Incentive Award, shall have the
meaning assigned thereto in the Award Agreement evidencing such Incentive
Award or, if there is no such meaning assigned, shall mean long-term
disability as defined under the terms of the long-term disability plans or
policies sponsored by the Company or any Subsidiary which employs such
Participant.
(n) "Effective Date" means the later of (i) the date of the Plan's
adoption by the Board or (ii) the effective time (the "Effective Time") of
the consummation of the transactions contemplated by the Stock Purchase
Agreement and Agreement and Plan of Merger, dated as of May 31, 1997, by
and among the Company, North Castle Partners and LHP Acquisition Corp.
(o) "Employee" means any employee of the Company or any of its
Subsidiaries.
(p) "Fair Market Value" means, as of any date, and with respect to a
particular class of Common Stock, the fair market value on such date per
share of such class of Common Stock as determined in good faith by the
Board. In making a determination of Fair Market Value, the Board shall
give due consideration to such factors as it deems appropriate, including,
without limitation, the earnings and certain other financial and operating
information of the Company and the Subsidiaries in recent periods, the
potential value of the Company and the Subsidiaries as a whole, the future
prospects of the Company and the Subsidiaries and the industries in which
they compete, the history and management of the Company and the
Subsidiaries, the general condition of the securities markets and the fair
market value of securities of companies engaged in businesses similar to
those of the Company and the Subsidiaries. Notwithstanding the foregoing,
following a Public Offering, Fair Market Value with respect to a class of
Common Stock shall mean the average of the high and low trading prices for
a share of such class of Common Stock on the primary national exchange
(including NASDAQ) on which such class of Common Stock is then traded on
the trading day immediately preceding the date as of which such Fair Market
Value is determined. The determination of Fair Market Value will not give
effect to any restrictions on transfer of the shares of such class of
Common Stock or the fact that such shares would represent a minority
interest in the Company.
(q) "Incentive Award" means any award under the Plan of an Option,
Stock Appreciation Right or Deferred Stock Unit. Each of these
4
<PAGE>
awards may be granted alone or together with other awards under the Plan
and/or cash awards outside the Plan.
(r) "Non-Voting Common Stock" means the Class A (non-voting) common
stock of the Company, par value $0.01 per share.
(s) "North Castle Partners" means North Castle Partners I, L.L.C., a
Delaware limited liability company, and any successor investment entity
managed by Baird Investment Group, L.L.C.
(t) "Option" means the right granted to a Participant under the Plan
to purchase a stated number of shares of a specified class of Common Stock
at a stated price for a specified period of time. For purposes of the
Plan, an Option may be either (i) an "Incentive Stock Option" within the
meaning of section 422 of the Code or (ii) an Option which is not an
Incentive Stock Option (a "Non-Qualified Stock Option").
(u) "Participant" means any Employee designated by the Board to
receive an Incentive Award under the Plan.
(v) "Plan" means the Leiner Health Products Group Inc. Stock
Incentive Plan, as set forth herein and as the same may be amended from
time to time.
(w) "Public Offering" means any offering of the Common Stock to the
general public pursuant to an underwritten public offering led by one or
more underwriters at least one of which is of nationally recognized
standing.
(x) "Retirement", with respect to any Incentive Award, shall have the
meaning assigned thereto in the Award Agreement evidencing such Incentive
Award, or, if there is no such meaning assigned, shall mean a Participant's
retirement at or after normal retirement age under the terms of the
retirement plan sponsored by the Company or any Subsidiary which employs
such Participant.
(y) "Stock Appreciation Right" means, with respect to a class of
Common Stock, the right to receive a payment from the Company in cash equal
to the excess of the Fair Market Value of a share of such class of Common
Stock at the date of exercise over a specified price fixed by the Board at
the time of grant.
5
<PAGE>
(z) "Subsidiary" means any corporation or partnership in which the
Company owns, directly or indirectly, 50% or more of the total combined
voting power of all classes of stock of such corporation or of the capital
interest or profits interest of such partnership.
(aa) "Voting Common Stock" means the common stock (voting) of the
Company, par value $0.01 per share.
2.2. Gender and Number. Except when otherwise indicated by the
context, words in the masculine gender used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.
SECTION 3.
ELIGIBILITY AND PARTICIPATION
Participants in the Plan shall be those Employees selected by the
Board to participate in the Plan.
SECTION 4.
POWERS OF THE BOARD
4.1. Power to Grant and Establish Terms of Awards. The Board shall,
subject to the terms of the Plan, determine the Employees to whom Incentive
Awards shall be granted and the terms and conditions of such Incentive
Awards, provided that nothing in the Plan shall limit the right of members of
the Board who are Employees to receive Incentive Awards hereunder.
The proper officers of the Company may suggest to the Board the
Participants who should receive Incentive Awards under the Plan. In accordance
with the terms of the Plan, the terms and conditions of each Incentive Award
shall be determined by the Board at the time of grant, and such terms and
conditions may be subsequently changed by the Board, in its discretion, provided
that no such change may be effected which would adversely affect a Participant's
rights with respect to an Incentive Award then outstanding, without the consent
of such Participant. The Board may establish different terms and conditions for
different Participants receiving Incentive Awards and for the same Participant
for each Incentive Award such Participant
6
<PAGE>
may receive, whether or not granted at different times. The grant of any
Incentive Award to any Employee shall not entitle such Employee to the grant
of any other Incentive Awards.
4.2. Substitute Options. The Board shall have the right, subject to
the consent of the Participant to whom Options and/or Stock Appreciation Rights
have been granted, to grant in substitution for and in cancellation of such
outstanding Options or Stock Appreciation Rights, replacement Options or Stock
Appreciation Rights which may contain terms more favorable to the Participant
than the Options or Stock Appreciation Rights they replace, including, without
limitation, a lower exercise price (subject to Section 6.2) or base price.
4.3. Administration. The Board shall be responsible for the
administration of the Plan. Any authority exercised by the Board under the
Plan shall be exercised by the Board, in its sole discretion. Incentive
Awards granted by the Board may be subject to such conditions, not
inconsistent with the terms of the Plan, as the Board shall determine, in its
discretion. The Board, by majority action thereof, is authorized to
prescribe, amend and rescind rules and regulations relating to the
administration of the Plan, to provide for conditions and assurances deemed
necessary or advisable to protect the interests of the Company and the
Subsidiaries and to make all other determinations necessary or advisable for
the administration and interpretation of the Plan and to carry out its
provisions and purposes. Determinations, interpretations or other actions
made or taken by the Board pursuant to the provisions of the Plan shall be
final, binding and conclusive for all purposes and upon all persons.
4.4. Delegation by the Board. All of the powers, duties and
responsibilities of the Board specified in the Plan may, to the full extent
permitted by applicable law, be exercised and performed by the Committee or
any other duly constituted committee of the Board, in any such case, to the
extent authorized by the Board to exercise and perform such powers, duties
and responsibilities.
SECTION 5.
STOCK SUBJECT TO PLAN
5.1. Number. Subject to the provisions of Section 5.3, the number of
shares of Common Stock subject to Incentive Awards under the Plan may not
exceed 122,222 shares in the aggregate. The shares to be delivered under the
Plan may consist, in whole or in part, of Common Stock held in treasury or
authorized but
7
<PAGE>
unissued shares of Common Stock, not reserved for any other purpose, or from
Common Stock reacquired by the Company.
5.2. Cancelled, Terminated, or Forfeited Awards. Any shares of
Common Stock subject to any portion of an Incentive Award which, in any such
case and for any reason, expires, or is cancelled, terminated or otherwise
settled without the issuance of such shares of Common Stock shall again be
available for award under the Plan.
5.3. Adjustment in Capitalization. The number and class of Incentive
Awards (and the number of shares of a class of Common Stock available for
issuance upon exercise or settlement of such Incentive Awards) granted under
the Plan, and the number, class and exercise price of any outstanding
Options, may be adjusted by the Board, in its sole discretion, if it shall
deem such an adjustment to be necessary or appropriate to reflect any Common
Stock dividend, stock split or share combination or any recapitalization,
merger, consolidation, exchange of shares, liquidation or dissolution of the
Company.
5.4. Stockholders Agreement. The holder of any shares of Common
Stock received in respect of an Award hereunder, and anyone whose rights
derive therefrom, shall be entitled to the benefits of and shall be bound by
the obligations set forth in the Stockholders Agreement, dated as of June 30,
1997, among the Company, North Castle Partners I, L.L.C., LHP Acquisition
Corp. and each other person who is a party thereto, as the same may be
amended from time to time (the "Stockholders Agreement"), and shall be deemed
to be a Management Stockholder thereunder. For purposes of Sections 3(a) and
11 of the Stockholders Agreement, the phrase "the fifth anniversary of this
Agreement" shall mean the fifth anniversary of the date of grant of the
applicable Award hereunder.
SECTION 6.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
6.1. Grant of Options. Options may be granted to Participants at such
time or times as shall be determined by the Board. Options granted under the
Plan may be of two types: (i) Incentive Stock Options and (ii) Non-Qualified
Stock Options, except that no Incentive Stock Option may be granted to any
Employee of a Subsidiary which is not a corporation. The date of grant of an
Option under the Plan will be the date on which the Option is awarded by the
Board or, if so determined by the Board,
8
<PAGE>
the date on which occurs any event the occurrence of which is an express
condition precedent to the grant of the Option. Each Option shall be
evidenced by an Award Agreement that shall specify the class of Common Stock
to which the Option relates, the exercise price at which a share of such
class of Common Stock may be purchased pursuant to such Option, the duration
of the Option, the number of shares of Common Stock to which the Option
pertains and such other terms and conditions not inconsistent with the Plan
as the Board shall determine, including customary representations, warranties
and covenants with respect to securities law matters.
6.2. Option Price. The exercise price per share of a class of Common
Stock to be purchased upon exercise of an Option shall be determined by the
Board but shall not be less than the greater of (i) the Fair Market Value on
the date the Option is granted or (ii) $100.00.
6.3. Exercise of Options. Options awarded to a Participant under the
Plan shall be exercisable at such time or times and subject to such
restrictions or other conditions, including the performance of a minimum
period of service or the satisfaction of performance goals, as the Board
shall determine either at or after the date of grant of such Options, subject
to the Board's right to accelerate or waive any conditions to the
exercisability of any Option granted under the Plan. Unless otherwise
determined by the Board, subject to the continuous employment of the
Participant with the Company or one of the Subsidiaries, Options granted to a
Participant will become exercisable in four equal installments on each of the
date of grant and each of the first three anniversaries of the date of
grant, PROVIDED that 100% of the Options shall become exercisable at the time
and under the circumstances as described in Sections 8.1 and 8.2 or in the
event of the Participant's termination of employment with the Company and the
Subsidiaries by reason of Retirement, Disability or death, as described in
Section 6.7. Once exercisable, an Option may be exercised from time to time,
in whole or in part, up to the total number of shares of the class of Common
Stock with respect to which it is then exercisable. Notwithstanding the
foregoing, no Option shall be exercisable for more than 10 years after the
date on which it is granted.
6.4. Payment. The Board shall establish procedures governing the
exercise of Options, which procedures shall generally require that written
notice of exercise thereof be given and that the exercise price thereof be
paid in full at the time of exercise (i) in cash or cash equivalents,
including by personal check, or (ii) in accordance with such other procedures
or in such other form as the Board shall from time to time determine. The
exercise price of any Options exercised at any time following a Public
Offering may be paid in full or in part in the form of shares of
9
<PAGE>
Common Stock, based on the Fair Market Value of such shares of Common Stock
on the date of exercise, subject to such rules and procedures as may be
adopted by the Board. As soon as practicable after receipt of a written
exercise notice and payment of the exercise price in accordance with this
Section 6.4, the Company shall make (or cause to be made) an appropriate book
entry reflecting the Participant's ownership of the shares of Common Stock so
acquired and shall deliver to the Participant a certificate or certificates
representing the shares of Common Stock acquired upon the exercise thereof,
bearing appropriate legends if applicable.
6.5. Incentive Stock Options. Notwithstanding anything in the Plan
to the contrary, no term of the Plan relating to Incentive Stock Options
shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be so exercised, so as to disqualify the
Plan under section 422 of the Code, or, without the consent of any
Participant affected thereby, to cause any Incentive Stock Option previously
granted to fail to qualify for the Federal income tax treatment afforded
Incentive Stock Options under section 421 of the Code.
6.6. Stock Appreciation Rights.
(a) Grant. Stock Appreciation Rights may be granted to
Participants at such time or times and with respect to such number of shares
of any class of Common Stock as shall be determined by the Board and shall be
subject to such terms and conditions as the Board may impose. Each grant of
an Incentive Award of Stock Appreciation Rights shall be evidenced by an
Award Agreement.
(b) Exercise. Stock Appreciation Rights may be exercised at
such time or times and subject to such conditions, including the performance
of a minimum period of service, the satisfaction of performance goals or the
occurrence of any event or events, including a Change in Control, as the
Board shall determine, either at or after the date of grant. Stock
Appreciation Rights which are granted in tandem with an Option may only be
exercised upon the surrender of the right to exercise such Option for an
equivalent number of shares and may be exercised only with respect to the
shares of Common Stock for which the related Option is then exercisable.
(c) Settlement. Subject to the provisions of Section 10.4 of
the Plan, upon exercise of a Stock Appreciation Right, the Participant shall
be entitled to receive payment in the form, determined by the Board, of cash,
shares of Common Stock having a Fair Market Value equal to such cash amount,
or a combination of
10
<PAGE>
shares of Common Stock and cash having an aggregate value equal to such
amount, determined by multiplying:
(i) any increase in the Fair Market Value of a share of the
applicable class of Common Stock at the date of exercise over the
price fixed by the Board at the date of grant of such Stock
Appreciation Right, by
(ii) the number of shares of Common Stock with respect to which the
Stock Appreciation Right is exercised;
PROVIDED, HOWEVER, that at the time of grant, the Board may establish, in its
sole discretion, a maximum amount per share which will be payable upon exercise
of a Stock Appreciation Right.
6.7. Exercisability Following Termination of Employment. Unless
otherwise determined by the Board at or after the date of grant, in the event
a Participant's employment with the Company and the Subsidiaries terminates
by reason of Retirement, Disability or death, all Options and Stock
Appreciation Rights then held by such Participant, whether or not exercisable
at the date of such termination of employment, shall thereafter remain
exercisable by the Participant or, if applicable, the Participant's
beneficiary, for a period of one year from the date of termination, but in no
event later than the expiration of the stated term of the Option or Stock
Appreciation Right. Unless otherwise determined by the Board at or after the
date of grant, in the event a Participant's employment with the Company and
the Subsidiaries terminates for any reason other than Retirement, Disability,
death or termination by the Company for Cause, all Options and Stock
Appreciation Rights then held by such Participant that are then exercisable
shall remain exercisable for the 90 day period immediately following such
termination of employment or until the expiration of the term of such Option
or Stock Appreciation Right, whichever period is shorter. Unless otherwise
determined by the Board at or after the date of grant, in the event of a
Participant's termination of employment with the Company and the Subsidiaries
by the Company for Cause, all Options and Stock Appreciation Rights then held
by such Participant shall immediately terminate and be cancelled, in full, on
the date of such termination of employment. All Options that are not
exercisable following a Participant's termination of employment shall
immediately terminate and be cancelled on the date of such termination of
employment and all other Options not exercised prior to such date shall
terminate and be cancelled on the date the period for exercise has expired.
11
<PAGE>
6.8. Board Discretion. Notwithstanding anything else contained in
this Section 6 to the contrary, the Board may, at or after the date of grant,
accelerate or waive any conditions to the exercisability of any Option or
Stock Appreciation Right granted under the Plan and may permit all or any
portion of any such Option or Stock Appreciation Right to be exercised
following a Participant's termination of employment for any reason on such
terms and subject to such conditions as the Board shall determine for a
period up to and including, but not beyond, the expiration of the term of
such Options.
SECTION 7.
DEFERRED STOCK UNITS
7.1. Deferred Stock Unit Awards. On fixed dates established by the
Board and subject to such terms and conditions as the Board shall determine,
the Board may permit a Participant to elect to defer receipt of all or a
portion of his annual compensation and/or annual incentive bonus ("Deferred
Annual Amount") payable by the Company or a Subsidiary and receive in lieu
thereof an Incentive Award of a number of Deferred Stock Units (the "Elective
Deferred Stock Units") equal to the greatest whole number which may be
obtained by dividing (x) the amount of the Deferred Annual Amount, by (y) the
Fair Market Value of a share of a particular class of Common Stock on the
date of grant. No shares of Common Stock will be issued at the time an award
of Deferred Stock Units is made and the Company shall not be required to set
aside a fund for the payment of any such award. The Company will establish a
separate account for the Participant and will record in such account the
number of Deferred Stock Units awarded to the Participant. The Board may
also grant a Participant an Incentive Award of Deferred Stock Units
("Freestanding Deferred Stock Units") without regard to any election by the
Participant to defer receipt of any compensation or bonus amount payable to
him. Upon the grant of Deferred Stock Units hereunder, the Company shall
establish a notational account for the Participant and will record in such
account the number of Deferred Stock Units awarded to the Participant. No
shares of Common Stock will be issued to the Participant at the time an award
of Deferred Stock Units is granted.
The terms and conditions of Deferred Stock Unit awards shall be
determined by the Board and shall be set forth in an Award Agreement entered
into by the Participant and the Company evidencing such Deferred Stock Unit
award, including customary representations, warranties and covenants with
respect to securities law matters. Unless otherwise determined by the Board,
each such Award Agreement shall
12
<PAGE>
also state that prior to the earlier to occur of (x) a Public Offering or
(y) the fifth anniversary of the date of grant, the Deferred Stock Unit
shall be subject to certain cash settlement rights of the Company upon a
termination of employment.
7.2. Dividends with respect to Deferred Stock Units. The Board
will determine whether and to what extent to credit to the account of, or to
pay currently to, each recipient of a Deferred Stock Unit award, an amount
equal to any dividends paid by the Company during the period of deferral with
respect to the corresponding number of shares of the applicable class of
Common Stock ("Dividend Equivalents"). Unless otherwise provided by the
Board, any Dividend Equivalents in respect of cash dividends payable or
dividends payable in property other than Common Stock on the shares of Common
Stock corresponding to the Participant's Deferred Stock Units shall be deemed
invested in a book entry account bearing interest, for each calendar quarter
during which such amount is credited to such account, at the prime rate as
reported in The Wall Street Journal (Eastern Edition) on the first Business
Day of such calendar quarter. Unless otherwise provided by the Board, any
Dividend Equivalents with respect to dividends payable in shares of Common
Stock on the shares of Common Stock corresponding to the Participant's
Deferred Stock Units shall be deemed invested in additional Deferred Stock
Units.
7.3. Vesting of Deferred Stock Unit Awards. The portion of each
Deferred Stock Unit award that consists of Elective Deferred Stock Units,
together with any Dividend Equivalents credited with respect thereto, shall
be fully vested at all times. Unless the Board provides otherwise at or
after the date of grant, the portion of each Deferred Stock Unit award that
consists of Freestanding Deferred Stock Units, together with any Dividend
Equivalents credited with respect thereto, will become vested in full on the
fifth anniversary of the date of grant of such Units, provided the
Participant remains in the continuous employ of the Company or a Subsidiary
through such applicable date. Notwithstanding the foregoing, the Board may
accelerate the vesting of any Freestanding Deferred Stock Unit award at or
after the date of grant.
7.4. Rights as a Stockholder. A Participant shall not have any
rights as a stockholder in respect of Deferred Stock Units awarded pursuant
to the Plan (including, without limitation, the right to vote on any matter
submitted to the Company's stockholders) until such time as the shares of
Common Stock attributable to such Deferred Stock Units have been issued to
such Participant or his beneficiary.
7.5. Settlement of Deferred Stock Units. Subject to Sections 8.3 and
9 and the last sentence of Section 7.1, unless the Board determines otherwise
at or after the date of grant, a Participant shall receive one share of the
applicable class of
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<PAGE>
Common Stock in settlement of each Elective Deferred Stock Unit (and related
Dividend Equivalents) credited to such Participant's account under the Plan
as soon as administratively practicable, but not later than 90 days,
following the earlier to occur of (x) the fifth anniversary of the date of
grant or (y) the date of such Participant's termination of employment due to
Retirement, death or Disability (or such later date as may be elected by the
Participant in accordance with the rules and procedures of the Board).
Subject to Sections 8.3 and 9 and the last sentence of Section 7.1, unless
the Board determines otherwise at or after the date of grant, a Participant
shall receive one share of the applicable class of Common Stock in settlement
of each Freestanding Deferred Stock Unit (and related Dividend Equivalents)
that shall have become vested on or prior to the date of such Participant's
termination of employment with the Company and the Subsidiaries, other than a
termination for Cause, as soon as administratively practicable, but not later
than 90 days, following the date of such termination of employment (or on
such earlier date as the Board shall permit or such later date as may be
elected by the Participant in accordance with the rules and procedures of the
Board). In the event of the termination of a Participant's employment with
the Company and the Subsidiaries for Cause, the Participant shall immediately
forfeit all rights with respect to any Freestanding Deferred Stock Units (and
related Dividend Equivalents) credited to his account, whether or not then
vested. The Board may provide in the Award Agreement applicable to any
Incentive Award of Deferred Stock Units that, in lieu of issuing shares of a
particular class of Common Stock in settlement of the vested portion of such
Deferred Stock Unit, the Board may direct the Company to pay to the
Participant the value of the shares of Common Stock corresponding to such
Deferred Stock Units in cash. Notwithstanding the foregoing, prior to the
earlier to occur of (i) a Public Offering or (ii) the fifth anniversary of
the date of grant, a Deferred Stock Unit shall be subject to certain cash
settlement rights of the Company as are specified in the Award Agreement.
For each share of Common Stock received in settlement of Deferred Stock
Units, the Company shall deliver to the Participant a certificate
representing such share of Common Stock, bearing appropriate legends if
applicable.
SECTION 8.
CHANGE IN CONTROL; REPURCHASE RIGHTS
8.1. Accelerated Vesting and Payment. Subject to the provisions of
Section 8.2 below, in the event of a Change in Control, (i) each outstanding
Option and Stock Appreciation Right, in each case whether or not then
exercisable, shall promptly be cancelled in exchange for a payment in cash of
an amount equal to the excess of the
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<PAGE>
Change in Control Price over the exercise price for such Option or the base
price for such Stock Appreciation Right, whichever is applicable (except
that, with respect to Stock Appreciation Rights granted in tandem with
Incentive Stock Options, the Fair Market Value shall be used in the
calculation rather than the Change in Control Price), and (ii) each
outstanding Deferred Stock Unit, whether or not then vested, shall be
cancelled in exchange for a cash payment of an amount equal to the Change in
Control Price. Any amount payable under this Section 8.1 shall be payable in
full as soon as administratively practicable, but no later than 30 days,
following the Change in Control.
8.2. Alternative Awards. Notwithstanding Section 8.1, no
cancellation, acceleration of exercisability, vesting, cash settlement or
other payment shall occur with respect to any Incentive Award or any class of
Incentive Awards if the Board reasonably determines in good faith prior to
the occurrence of a Change in Control that such Incentive Award or class of
Incentive Awards shall be honored or assumed, or new rights substituted
therefor (such honored, assumed or substituted award hereinafter called an
"Alternative Award") by a Participant's employer (or the parent or a
subsidiary of such employer) immediately following the Change in Control,
provided that any such Alternative Award must:
(i) provide such Participant (or each Participant in a class of
Participants) with rights and entitlements substantially equivalent to or
better than the rights and entitlements applicable under such Incentive
Award, including, but not limited to, an identical or better exercise or
vesting schedule and identical or better timing and methods of payment;
(ii) have substantially equivalent economic value to such Incentive
Award (determined at the time of the Change in Control); and
(iii) have terms and conditions which provide that in the event that
the Participant's employment is involuntarily terminated or constructively
terminated (other than for Cause) upon or following such Change in Control,
any conditions on a Participant's rights under, or any restrictions on
exercisability applicable to, each such Alternative Award shall be waived
or shall lapse, as the case may be.
For this purpose, a constructive termination shall mean a termination by a
Participant following a material reduction in the Participant's compensation,
a material reduction in the Participant's responsibilities or the relocation
of the Participant's principal place
15
<PAGE>
of employment to another location a material distance farther away from the
Participant's home, in each case, without the Participant's prior written
consent.
8.3. Certain Rights upon Termination of Employment Prior to Public
Offering. Unless otherwise determined by the Board at the time of grant, the
Board shall provide in each Award Agreement evidencing an Incentive Award
granted hereunder that, upon a termination of a Participant's employment with
the Company and the Subsidiaries for any reason prior to the earlier to occur
of (i) a Public Offering or (ii) the fifth anniversary of the date of grant
of such Incentive Award, the Company shall have the right to repurchase for
cash any vested Options or shares of Common Stock then held by the
Participant relating to such Incentive Award. Unless otherwise determined by
the Board at the time of grant, the Board shall provide in each stock
subscription agreement relating to an Incentive Award that, upon a
termination of a Participant's employment with the Company and the
Subsidiaries due to death, Disability or Retirement prior to the earlier to
occur of (i) a Public Offering or (ii) the fifth anniversary of the date of
grant of an Incentive Award, the Participant shall have the right to require
the Company to repurchase shares of Common Stock then owned by him for a
repurchase price equal to the Fair Market Value, and upon such additional
terms and conditions as are set forth in such Award Agreement.
SECTION 9.
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
The Board at any time may terminate or suspend the Plan, and from
time to time may amend or modify the Plan. No amendment, modification,
termination or suspension of the Plan shall in any manner adversely affect
any Incentive Award theretofore granted under the Plan, without the consent
of the Participant holding such Incentive Award. Shareholder approval of any
such termination, suspension, amendment or modification shall be obtained to
the extent mandated by applicable law, or if otherwise deemed appropriate by
the Board; PROVIDED that, the Board will not consider any amendment or
modification of the Plan unless the Company has provided at least 30 Business
Days prior written notice of such proposed amendment or modification to North
Castle Partners.
16
<PAGE>
SECTION 10.
MISCELLANEOUS PROVISIONS
10.1. Nontransferability of Awards. No Incentive Award granted under
the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution.
All rights with respect to any Incentive Award granted to a Participant under
the Plan shall be exercisable during his lifetime only by such Participant.
Restrictions, if any, on the transfer of Common Stock received upon exercise or
settlement of any Incentive Award shall be set forth in the applicable Award
Agreement evidencing such Incentive Award, including without limitation,
restrictions described in Section 8.3 herein.
10.2. Beneficiary Designation. Each Participant under the Plan may
from time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
or by whom any right under the Plan is to be exercised in case of his death.
Each designation will revoke all prior designations by the same Participant,
shall be in a form prescribed by the Board and will be effective only when filed
by the Participant in writing with the Board during his lifetime. In the
absence of any such designation, benefits remaining unpaid or Incentive Awards
outstanding at the Participant's death shall be paid to or exercised by the
Participant's surviving spouse, if any, or otherwise to or by his estate.
10.3. No Guarantee of Employment or Participation. Nothing in the
Plan shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment at any time and for any
reason, nor confer upon any Participant any right to continue in the employ of
the Company or any Subsidiary. No Employee shall have a right to be selected as
a Participant, or, having been so selected, to receive any Incentive Awards
under the Plan.
10.4. Tax Withholding. The Company and the Subsidiaries shall have
the power to withhold, or require a Participant to remit to the Company or a
Subsidiary promptly upon notification of the amount due, an amount determined by
the Company or such Subsidiary, in its discretion, to be sufficient to satisfy
all Federal, state, local and foreign withholding tax requirements in respect of
any Incentive Award and the Company may (or may cause a Subsidiary to) defer
payment of cash or issuance or delivery of Common Stock until such requirements
are satisfied. The Board may permit or require a Participant to satisfy his tax
withholding obligation hereunder in such other manner, subject to such
conditions, as the Board shall determine.
17
<PAGE>
10.5. Indemnification. Each person who is or shall have been a
member of the Committee or the Board shall be indemnified and held harmless
by the Company to the fullest extent permitted by law against and from any
loss, cost, liability or expense (including any related attorneys' fees and
advances thereof) that may be imposed upon or reasonably incurred by him in
connection with, based upon or arising or resulting from any claim, action,
suit or proceeding to which he may be made a party or in which he may be
involved by reason of any action taken or failure to act under or in
connection with the Plan or any Award Agreement and against and from any and
all amounts paid by him in settlement thereof, with the Company's approval,
or paid by him in satisfaction of any judgment in any such action, suit or
proceeding against him, provided he shall give the Company an opportunity, at
its own expense, to handle and defend the same before he undertakes to handle
and defend it on his own behalf. The foregoing right of indemnification
shall not be exclusive and shall be independent of any other rights of
indemnification to which such persons may be entitled under the Company's
Articles of Incorporation or By-laws, by contract, as a matter of law or
otherwise.
10.6. No Limitation on Compensation. Nothing in the Plan shall be
construed to limit the right of the Company to establish other plans or to
pay compensation to its employees in cash or property, in a manner which is
not expressly authorized under the Plan.
10.7. Requirements of Law. The granting of Incentive Awards and the
issuance of shares of Common Stock shall be subject to all applicable laws,
rules and regulations, and to such approvals by any governmental agencies or
national or foreign securities exchanges as may be appropriate or required,
as determined by the Board. Notwithstanding any other provision of the Plan
or any Award Agreement, no Incentive Awards shall be granted under the Plan,
and no shares of Common Stock shall be issued upon exercise of, or otherwise
in connection with, any Incentive Award granted under the Plan, if such grant
or issuance would result in a violation of applicable law, including the
federal securities laws and any applicable state or foreign securities laws.
10.8. Governing Law. The Plan, and all agreements hereunder, shall
be construed in accordance with and governed by the laws of the State of
Delaware without regard to principles of conflicts of laws.
10.9. No Impact On Benefits. Incentive Awards granted under the Plan
are not compensation for purposes of calculating an Employee's rights under
any employee benefit plan, except to the extent provided in any such plan.
18
<PAGE>
10.10. Securities Law Compliance. Instruments evidencing Incentive
Awards may contain such other provisions, not inconsistent with the Plan, as
the Board deems advisable, including a requirement that the Participant
represent to the Company in writing, when an Incentive Award is granted or
when he receives shares with respect to such Award (or at such other times as
the Committee deems appropriate) that he is accepting such Incentive Award,
or receiving or acquiring such shares (unless they are then covered by a
Securities Act of 1933 registration statement), for his own account for
investment only and with no present intention to transfer, sell or otherwise
dispose of such shares except such disposition by a legal representative as
shall be required by will or the laws of any jurisdiction in winding up the
estate of the Participant. Such shares shall be transferable only if the
proposed transfer shall be permissible pursuant to the Plan and if, in the
opinion of counsel satisfactory to the Company, such transfer at such time
will be in compliance with applicable securities laws.
10.11. Freedom of Action. Subject to Section 9, nothing in the Plan
or any Award Agreement shall be construed as limiting or preventing the
Company or any Subsidiary from taking any action with respect to the
operation or conduct of its business that it deems appropriate or in its best
interest.
10.12. Term of Plan. The Plan shall be effective as of the Effective
Date; provided that in no event shall the Plan become effective unless and
until the Effective Time. The Plan shall expire on the tenth anniversary of
the Effective Date, (except as to Incentive Awards outstanding on that date),
unless sooner terminated pursuant to Section 9.
10.13. No Right to Particular Assets. Nothing contained in this Plan
and no action taken pursuant to this Plan shall create or be construed to
create a trust of any kind or any fiduciary relationship between the Company
and the Subsidiaries, on the one hand, and any Participant or executor,
administrator or other personal representative or designated beneficiary of
such Participant, on the other hand, or any other persons. Any reserves that
may be established by the Company or any Subsidiary in connection with this
Plan shall continue to be held as part of the general funds of the Company,
and no individual or entity other than the Company shall have any interest in
such funds until paid to a Participant. To the extent that any Participant
or his executor, administrator or other personal representative, as the case
may be, acquires a right to receive any payment from the Company or a
Subsidiary pursuant to this Plan, such right shall be no greater than the
right of an unsecured general creditor of the Company or such Subsidiary.
19
<PAGE>
10.14. Notices. Each Participant shall be responsible for furnishing
the Board with the current and proper address for the mailing of notices and
delivery of agreements and shares of Common Stock. Any notices required or
permitted to be given shall be deemed given if directed to the person to whom
addressed at such address and mailed by regular United States mail,
first-class and prepaid. If any item mailed to such address is returned as
undeliverable to the addressee, mailing will be suspended until the
Participant furnishes the proper address.
10.15. Severability of Provisions. If any provision of this Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof, and this Plan shall be
construed and enforced as if such provision had not been included.
10.16. Incapacity. Any benefit payable to or for the benefit of a
minor, an incompetent person or other person incapable of receiving such
benefit shall be deemed paid when paid to such person's guardian or to the
party providing or reasonably appearing to provide for the care of such
person, and such payment shall fully discharge the Board, the Committee, the
Company and other parties with respect thereto.
10.17. No Rights as Stockholder. No Participant shall have any
voting or other rights as a stockholder of the Company with respect to any
Common Stock covered by any Incentive Award until the issuance of a
certificate or certificates to the Participant for such Common Stock.
Subject to Section 7.2, no adjustment shall be made for dividends or other
rights for which the record date is prior to the issuance of such certificate
or certificates.
10.18. Headings and Captions. The headings and captions herein are
provided for reference and convenience only, shall not be considered part of
this Plan and shall not be employed in the construction of this Plan.
20
<PAGE>
Exhibit 10.7
INDEX TO LEASE BETWEEN
R & R PROPERTIES (LANDLORD)
AND
TRUPAK, INC. (TENANT)
WEST UNITY, OHIO
ARTICLE HEADING PAGE NO.
- ------- ------- -------
1 Premises. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Term and Option to Renew. . . . . . . . . . . . . . . . . . . 1
3 Minimum Rent. . . . . . . . . . . . . . . . . . . . . . . . . 2
4 Tenant's Tax Obligations. . . . . . . . . . . . . . . . . . . 3
5 Construction of Improvements and Possession.. . . . . . . . . 4
6 Use of Premises.. . . . . . . . . . . . . . . . . . . . . . . 5
7 Assignment and Subletting.. . . . . . . . . . . . . . . . . . 5
8 Tenant's Right to Make Improvements.. . . . . . . . . . . . . 6
9 Tenant's Right to Mortgage. . . . . . . . . . . . . . . . . . 7
10 Care and Maintenance of Exterior Premises.. . . . . . . . . . 7
11 Landlord's Obligations to Repair and Maintain.. . . . . . . . 8
12 Tenant's Obligations to Repair and Maintain . . . . . . . . . 8
13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14 Restoration; Damage by Fire or Other Casualty. . . . . . . . 10
15 Waiver of Subrogation.. . . . . . . . . . . . . . . . . . . . 11
16 Gas, Water, Heat, Electricity.. . . . . . . . . . . . . . . . 11
17 Eminent Domain. . . . . . . . . . . . . . . . . . . . . . . . 11
18 Bankruptcy and Insolvency . . . . . . . . . . . . . . . . . . 12
19 Default by Tenant and Right to Cure by Tenant.. . . . . . . . 13
20 Default by Landlord and Right to Cure by Tenant.. . . . . . . 13
21 Right to Re-Entry . . . . . . . . . . . . . . . . . . . . . . 14
22 Subordination - Attornment. . . . . . . . . . . . . . . . . . 14
23 Quiet Enjoyment.. . . . . . . . . . . . . . . . . . . . . . . 15
24 Ownership of Improvements.. . . . . . . . . . . . . . . . . . 16
25 Investment Tax Credit.. . . . . . . . . . . . . . . . . . . . 16
26 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 17
27 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . 17
28 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
29 Holding Over. . . . . . . . . . . . . . . . . . . . . . . . . 18
30 Consent Not Unreasonably Withheld.. . . . . . . . . . . . . . 18
31 Estoppel Certificate. . . . . . . . . . . . . . . . . . . . . 18
32 Cumulative Rights.. . . . . . . . . . . . . . . . . . . . . . 18
33 Partial Invalidity. . . . . . . . . . . . . . . . . . . . . . 18
34 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
35 Short Form Lease. . . . . . . . . . . . . . . . . . . . . . . 19
36 Captions and Section Numbers. . . . . . . . . . . . . . . . . 19
37 Successors. . . . . . . . . . . . . . . . . . . . . . . . . . 19
Exhibit "A" - Legal Description
Exhibit "B" - Site Plan
Exhibit "C" - Landlord's Work
<PAGE>
LEASE
THIS LEASE, made and entered into as of the 12th day of March, 1984,
by and between R & R Properties, an Ohio Partnership, ("Landlord"), whose
address is 1140 South McCord Road, Holland, Ohio 43528, and TRUPAK, INC., an
Ohio corporation, ("Tenant"), whose address is 7047 Murthum Avenue, Warren,
Michigan 48092.
WITNESSETH:
The parties hereto do hereby agree as follows:
1. PREMISES.
Landlord, for and in consideration of the rents to be paid and the
covenants and agreements to be kept and performed by Tenant, does hereby lease
to Tenant premises situated in the Village of West Unity, Williams County, Ohio,
containing approximately 44,866 square feet of building area located on the
property more particularly described on Exhibit "A" attached hereto and made a
part hereof, together with the exclusive right to use the parking area and the
non-exclusive right to use certain common facilities, all of which are more
particularly identified on the site plan marked Exhibit "B" attached hereto and
made a part hereof (which premises are collectively hereinafter referred to as
the "Demised Premises" or "Leased Premises").
2. TERM AND OPTION TO RENEW.
A. The term of this Lease shall commence upon the date on which
Landlord notifies Tenant in writing that the Leased Premises have been completed
in accordance with Exhibit "C" ("Landlord's Work") and are available for
Tenant's occupancy ("Commencement Date") and shall end on the tenth (10th) lease
year of the lease term, as the term "Lease Year" is hereinafter defined, unless
extended or sooner terminated as hereinafter provided. For the purposes of this
Lease, the first lease year shall be a period commencing on the
<PAGE>
first day of the month following the Commencement Date, if such date is other
than the first day of the month, and the term "lease year" shall mean a fiscal
year of twelve (12) consecutive calendar months thereafter. The phrase "lease
term" as used in this Lease shall be the term of this Lease and any extensions
thereof.
In the event the term of this Lease shall not have commenced by July
1, 1984, Tenant shall have the right to cancel this Lease upon notice to
Landlord.
B. Tenant shall have and is hereby granted an option to extend the
term of this Lease for one (1) successive period of five (5) years on the same
terms and conditions as stated herein, except that the annual rental shall be
One Hundred Eleven Thousand Six Hundred Dollars ($111,600.00), payable monthly
at the rate of Nine Thousand Three Hundred Dollars ($9,300.00). Such option
shall be exercised by notice in writing to Landlord given not later than six (6)
months prior to the expiration of the initial term. Upon the mailing of such
notice, the term of this Lease shall be extended as above provided. If the
option shall be exercised, any reference in this Lease to the term hereof shall
be deemed to apply to the extended term.
3. MINIMUM RENT.
Tenant hereby hires said Demised Premises for the term herein
mentioned, and, in consideration of the peaceful use and enjoyment of the
Demised Premises and the performance of all of the terms and provisions thereof
to be performed by Landlord, does hereby covenant and agree to pay Landlord, as
the minimum rent for said premises, the sum of Ninety Three Thousand Dollars
($93,000.00) per year, payable in equal monthly installments of Seven Thousand
Seven Hundred Fifty Dollars ($7,750.00) each, in advance, on or before the first
day of each month. In the event the minimum
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<PAGE>
rent commences or terminates on a day other than the first day of a calendar
month, then such rent shall be prorated on a daily basis based upon a thirty
(30) day calendar month.
All rental payments due hereunder shall be sent to Landlord's address
first above given, or such other place as Landlord may designate.
In the event Tenant fails to mail the rent on or before the 8th day of
the month, Tenant shall pay the required rent, plus Ten Percent (10%) of the
monthly rent as a "late payment fee". Provided, however, there shall be no late
payment fee unless and until the Tenant has failed to pay the monthly rent on a
timely basis (i.e., mailed on or before the 8th day of the month) for more than
once during any twelve (12) month period.
4. TENANT'S TAX OBLIGATIONS.
A. Tenant agrees to pay any increased real estate taxes and
assessments over and above the real estate taxes and assessments established on
the full valuation of the facilities to be completed for the Tenant after the
second full lease year. The Tenant's proportionate part shall be a fraction,
the numerator of which is the number of square feet of floor area in the Demised
Premises (44,866 square feet) and the denominator of which is the total number
of rentable square feet of floor area in the building (initially, 107,936 square
feet). Said amount shall be deemed to be additional rent and shall be due and
payable on the first of the month following delivery to Tenant of a receipt for
Landlord's payment of said taxes. It is expressly understood and agreed that
such annual tax increase, if any, shall not exceed Ten Percent (10%) per year.
Landlord's request for payment of such taxes shall be accompanied with copies of
the receipted tax bills for the current year and for the base tax year, together
with the
-3-
<PAGE>
appropriate computations. Payment of special assessments is to be made, if
permitted, on an installment basis, extending over the maximum period of time
available. Tenant shall have no obligation to pay any installment of special
assessment extended beyond the term of this Lease. All such taxes for the last
year of the term hereof shall be equitably prorated between the parties.
B. Tenant shall have the right to request Landlord to contest the
validity of the amount of taxes assessed or other public charges paid or to be
paid by Tenant, so long as Tenant is exercising good faith in making such
request.
5. CONSTRUCTION OF IMPROVEMENTS AND POSSESSION.
On or before May 1, 1984, Landlord, at its sole cost and expense,
shall make such improvements to the interior of the Leased Premises as is set
forth on Exhibit "C" ("Landlord's Work") attached hereto and made a part hereof.
Landlord shall use only new, first-class materials in the construction of its
work and Landlord agrees that all work to be performed by it shall be done in a
workmanlike manner in accordance with all applicable building and related codes
having jurisdiction.
Notwithstanding anything contained herein to the contrary, during the
period that Landlord's Work is being performed, Tenant shall have the right, on
a rent-free basis, to store inventory and supplies and/or move in machinery and
equipment at the Leased Premises, provided Tenant does not interfere with
Landlord's Work. Tenant may also use unleased portions of the building
contiguous to the Leased Premises rent free during the period of Landlord's
Work. Landlord shall not be responsible for any such items stored or installed
by Tenant prior to delivery of the Leased Premises to Tenant, other than
Landlord using reasonable and normal security.
-4-
<PAGE>
In the event Landlord fails to deliver the Leased Premises to Tenant,
ready for Tenant's occupancy, on or before the above referred to date, from and
after the Commencement Date Tenant shall have free rent for an equal period of
time as is caused by the Landlord's delay in delivering the Leased Premises to
Tenant.
Landlord hereby represents to Tenant and agrees to install, on or
before November 15, 1984, on the exterior of the building occupied by Tenant a
minimum of One (1) Inch of styrofoam insulation and a steel exterior facade from
grade level to roof level on all sides of the building, except the office area.
All exterior windows, except for the office area, will be covered by the steel
exterior facade. Failure of Landlord to install the exterior facade or to
complete same by November 15, 1984, shall result in a reduction in rent at the
rate of $100.00 per day for each day that such exterior facade has not been
installed after November 15, 1984.
6. USE OF PREMISES.
The Leased Premises may be used and occupied by Tenant for
manufacturing, warehousing and related operations, and for any other lawful
purpose, with the written consent of Landlord.
7. ASSIGNMENT AND SUBLETTING.
Tenant shall have the right at all times to assign or sublet all or
any part of the Demised Premises with Landlord's written consent, provided,
however, that any such assignment or subletting shall not release Tenant from
liability hereunder.
Notwithstanding anything contained herein to the contrary, Tenant
shall have the right, without Landlord's consent, to transfer or assign this
Lease or sublet the whole or any portion thereof to Tenant's Guarantor or wholly
owned subsidiary corpora-
-5-
<PAGE>
tion of Tenant or Tenant's Guarantor, or to any corporation succeeding to
substantially all the assets of Tenant as a result of the consolidation or
merger or to a corporation to which all or substantially all of the assets of
Tenant have been sold; provided, however, that in each of the foregoing
instances such other corporation shall assume in writing all of the Tenant's
obligations hereunder.
8. TENANT'S RIGHT TO MAKE IMPROVEMENTS.
Landlord agrees that Tenant may, from time to time and at any time
during the term hereof, in its sole discretion and at its own cost and expense,
remove, remodel, alter, add to or modify the interior of the Leased Premises, so
long as same does not affect the structural integrity of the building of which
the Leased Premises are a part and provided Tenant complies with the provisions
set forth in this Paragraph.
All such improvements shall be of a good and substantial character and
such as will not tend to decrease the value of the Leased Premises.
Tenant shall pay for all labor performed and materials furnished in
making such improvements and will keep the Demised Premises and improvements
thereon at all times free and clear of all liens for labor or materials
furnished in and about such construction, and will defend, at its own cost and
expense, each and every lien asserted or claim filed against said premises
and/or the buildings or improvements thereon, or any part thereof, for labor
claimed to have been so performed or material claimed to have been so furnished,
and promptly pay each and every judgment made or given against said premises, or
any part thereof, or the buildings and/or improvements thereon, and/or against
Landlord or Tenant, on account of any such lien and indemnify and save harmless
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<PAGE>
Landlord, their successors and assigns from all and every claim and action on
account of such claim, lien or judgment or any of Landlord's agents, employees
or contractors, in or about such erection, construction or employment.
All such construction and improvements shall comply with all laws and
ordinances relating thereto.
9. TENANT'S RIGHT TO MORTGAGE.
Tenant, in its sole discretion, shall have the right, from time to
time, to borrow money and grant as security therefor a mortgage (or deed of
trust) on Tenant's leasehold interest covering the Demised Premises upon such
terms and conditions as are satisfactory to Tenant.
10. CARE AND MAINTENANCE OF EXTERIOR PREMISES.
During the term of this Lease, Landlord at its sole expense agrees to
maintain, replace and repair, as required, the exterior portions of the building
and the common areas as hereinafter defined. The term "common area" as used in
this Lease shall mean parking areas, lights and light standards, roadways,
sidewalks, truckways, landscaped areas, utilities, drainage and all other areas
or improvements located outside of any building situated on the property
described on Exhibit "A".
Landlord at its sole expense agrees to adequately light, (for the
purposes hereof the present lighting is deemed to be "adequate"), clean, remove
snow, stripe the parking areas, repair (or replace if necessary), police to
provide adequate security, if required, and maintain all of the common areas.
Tenant at its sole expense will keep and maintain the interior of the
Leased Premises in a clean, sanitary and safe condition.**The Leased Premises
will be kept free from rubbish and
**Also, Tenant shall pay for the electricity for the exterior lights attached to
Tenant's portion of the Leased Premises.
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<PAGE>
dirt at all times, and Tenant shall store all trash and garbage within a
confined area on the Leased Premises, and will arrange for the regular pick up
of garbage at Tenant's expense. Tenant shall not perform any acts or carry on
any practice which may be a nuisance or menace to other occupants of contiguous
properties. Tenant shall have the right, at its sole expense, to install and
maintain additional lighting in the parking areas.
11. LANDLORD'S OBLIGATIONS TO REPAIR AND MAINTAIN.
With respect to the building occupied by Tenant, Landlord shall keep
the foundation, exterior walls and roof in good condition and repair. Landlord
shall also provide the initial original equipment warranties on all equipment
furnished by Landlord to the Tenant. In addition, Landlord hereby grants to
Tenant a warranty for a period of one (1) year after the commencement of the
term hereof on all labor and materials furnished by Landlord with respect to
Landlord's Work as set forth on Exhibit "C".
Landlord hereby warrants and represents that the heating, electrical,
air conditioning, if any, plumbing and all mechanical systems will be in good
working order and repair at the time of commencement of the term of this Lease.
12. TENANT'S OBLIGATIONS TO REPAIR AND MAINTAIN.
Except as provided in Paragraph 11 hereof, with respect to the Leased
Premises, Tenant covenants and agrees that it will, at its own expense, during
the continuance of this Lease, keep the interior of such premises in good
condition and repair, and at the expiration of the term or any renewal or
extension thereof, to yield and give up the premises in good condition, damage
by usual wear and tear, fire, the elements or other casualties excepted.
In the event that there is a breakdown of the heating,
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<PAGE>
air conditioning, electrical, plumbing or any mechanical systems within the last
three (3) years of the term of this Lease, and such breakdown results in the
necessity of replacing same, the Tenant's obligation with respect thereto shall
not exceed (i) Seventy-Five Percent (75%) of the cost, if such breakdown occurs
during the third from the last Lease Year; (ii) Fifty Percent (50%) of the cost,
if such breakdown occurs during the second from the last Lease Year; (iii)
Twenty Five Percent (25%) of the cost if such breakdown occurs during the last
Lease Year. Provided, however, if Tenant elects to exercise its Option to
extend the term of the Lease for an additional five (5) years, the Tenant will
retroactively reimburse the Landlord for any such costs, up to and including
One Hundred Percent (100%) thereof, and then the above formula shall apply to
the last three (3) years of the extended option term of this Lease.
13. INSURANCE.
A. Tenant agrees to procure and keep in full force and effect during
the term hereof public liability and property damage insurance with respect to
the Demised Premises in the sum of Five Hundred Thousand Dollars ($500,000.00)
for damage resulting to one person, and One Million Dollars ($1,000,000.00) for
damage resulting from one casualty, and One Hundred Thousand Dollars
($100,000.00) property damage. Tenant shall deliver said policies, or in lieu
thereof, certificates evidencing said policies, to Landlord, and upon Tenant's
failure to do so, Landlord may, at its option, obtain such insurance, and the
cost thereof shall be paid as additional rent due and payable upon the next
ensuing rent day. Notwithstanding anything herein to the contrary, Landlord and
Tenant shall be named as joint insured on all policies.
B. At all times during the term of this Lease, Land-
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<PAGE>
lord agrees, at its expense, to maintain fire and extended coverage insurance
("all risk") on all buildings and improvements erected and constructed upon
the property described on Exhibit "A" attached hereto in insurance companies
of generally recognized responsibility and credit and authorized to do
business in the State of Ohio, in an amount determined by Landlord.
14. RESTORATION; DAMAGE BY FIRE OR OTHER CASUALTY.
In the event the Leased Premises shall be damaged or destroyed in
whole or in part by fire or other casualty during the term hereof, Landlord will
immediately repair and restore the same to good, tenantable condition within
sixty (60) days from the date of such damage or destruction, and the rental
herein provided for shall abate entirely in case the entire premises are
untenantable and pro-rata for the portion rendered untenantable, in case a part
only is untenantable, until the same shall be restored to a tenantable
condition. Tenant, in its sole discretion, shall have the right as to determine
whether or not the Premises are tenantable for its use. If such damage or
destruction cannot reasonably be repaired within the aforementioned period,
Landlord shall notify Tenant within ten (10) days after the happening of such
damage or destruction whether or not Landlord will repair or rebuild. If
Landlord elects not to repair or rebuild, this Lease shall be terminated. If
Landlord shall elect to repair or rebuild, Landlord shall specify the time
period within such repairs or restoration shall be completed, and Tenant shall
have the option, within ten (10) days after receipt of such notice, to elect
whether to terminate this Lease without any further liability hereunder, or to
extend the period of the term of this Lease equivalent to the time from the
happening of such damage or destruction until the Leased Premises are restored
to their former condition. Tenant shall not have any
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<PAGE>
right to terminate with respect to the foregoing if Landlord repairs or rebuilds
the damaged premises within said sixty (60) day period. In the event Tenant
elects to extend the term of this Lease, Landlord shall restore the Leased
Premises to its former condition within the time specified in the notice, and
Tenant shall not be liable to pay rent for the period from the time of such
damage or destruction until the premises are so restored to their former
condition.
15. WAIVER OF SUBROGATION.
Each party hereto does hereby remise, release and discharge the other
party hereto and any officer, agent, employee or representative of such party of
and from any liability whatsoever hereafter arising from loss, damage or injury
caused by fire or other casualty for which insurance (permitting waiver of
liability and containing a waiver of subrogation) is carried by the injured
party at the time of such loss, damage or injury to the extent of any recovery
by the injured party under such insurance.
16. GAS, WATER, HEAT, ELECTRICITY.
Tenant will pay all charges, if any, made against said Leased Premises
for gas, water, heat and electricity during the continuance of this Lease as the
same shall become due. Tenant shall maintain a minimum temperature in the
Leased Premises of 60DEG. Fahrenheit, provided all other tenants are equally
obligated.
17. EMINENT DOMAIN.
If the whole or any part of the floor area of the Leased Premises
hereby leased shall be taken by public authority under the power of Eminent
Domain, then the term of this Lease shall cease as of the date possession shall
be taken by such public authority, and the rent shall be paid up to that date
with a proportionate refund by Landlord of such rent as shall have been paid in
advance.
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<PAGE>
In the event that as a result of any taking under the power of eminent
domain the common areas and the parking area shall be reduced to less than
Eighty Percent (80%) of its former area, Tenant may, at Tenant's sole election,
terminate the term of this Lease by giving Landlord notice of the exercise of
its election within sixty (60) days after the taking, and the termination shall
be effective as of the time that possession of the part so taken shall be
required for public use. Thereafter, the parties shall be relieved of all
subsequent obligations under the terms of this Lease.
Landlord reserves to itself, and Tenant assigns to Landlord, all
rights to damages accruing on account of any taking under the power of eminent
domain or by reason of any act of any public or quasi-public authority for which
damages are payable. Tenant agrees to execute instruments of assignment as may
be reasonably required by Landlord in any proceedings for the recovery of the
damages if requested by Landlord, and to turn over to Landlord any damages that
may be recovered in any proceedings. It is agreed and understood, however, that
Landlord does not reserve to itself, and Tenant does not assign to Landlord, any
damages payable for loss of business or goodwill, depreciation to and costs of
removal of stock and trade fixtures of Tenant and relocation of Tenant's signs,
if any.
18. BANKRUPTCY AND INSOLVENCY.
Subject to the Federal Bankruptcy Act, if a petition in bankruptcy
shall be filed by Tenant, or if Tenant shall be adjudicated bankrupt, or if
Tenant shall make a general assignment for the benefit of creditors, or if in
any proceeding based upon the insolvency of Tenant a receiver of all the
property of Tenant shall be appointed and shall not be discharged within ninety
(90) days after
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<PAGE>
such appointment, then Landlord may terminate this Lease by giving notice to
Tenant of its intention so to do; provided, however, neither bankruptcy,
insolvency, an assignment for the benefit of creditors nor the appointment of a
receiver shall affect this Lease or permit its termination so long as the
covenants on the part of Tenant to be performed shall be performed by Tenant or
someone claiming under it.
19. DEFAULT BY TENANT AND RIGHT TO CURE BY TENANT.
In the event default shall be made by Tenant in the payment of rent
upon the day it becomes due and payable and such default continues for a period
of ten (10) days after receipt by Tenant of written notice thereof, or if
default shall be made or suffered by Tenant in any of the other covenants and
conditions of the Lease required to be kept or performed by Tenant (other than
payment of rent), and Tenant fails to cure any such default(s) or commences to
cure such default(s) within thirty (30) days after receipt by Tenant of written
notice from Landlord specifying the default or defaults complained of, then and
in any such event or events and whenever and as often as such failure or default
shall occur, it shall and may be lawful for Landlord, at Landlord's election, at
any time thereafter, to re-enter into and repossess the premises and the
building(s) and improvements situated thereon, and every part thereof, and
Tenant and each and every other occupant to remove and put out. In the event
that Tenant's default (other than nonpayment of rent) is not cured within said
thirty (30) day period by reason of labor troubles, war, governmental
regulations, unavailability of materials or any condition beyond Tenant's
reasonable control, the time for curing such default shall be extended
accordingly.
20. DEFAULT BY LANDLORD AND RIGHT TO CURE BY TENANT.
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<PAGE>
In the event default shall be made by Landlord in any of the covenants
and conditions in this Lease required to be kept or performed by Landlord and
Landlord fails to cure any such default(s) or commences to cure such default(s)
within thirty (30) days after receipt by Landlord of written notice from Tenant
specifying the default or defaults complained of, then and in any such event or
events and whenever and as often as such failure or default shall occur, it
shall and may be lawful for Tenant, at Tenant's election, and at any time
thereafter, to cure such default for the account of Landlord and Landlord shall,
within fifteen (15) days after notice, reimburse Tenant for any amount paid by
Tenant, plus interest on said amount based on the then existing prime rate of
the National Bank of Detroit and Tenant shall have the further right to set off
and deduct from the payment of rent due hereunder any and all amounts due to
Tenant. Provided, however, if Landlord's failure to perform would result in an
emergency which affects personal life or damage to property, then Tenant may
proceed to remedy the situation and give Landlord notice thereof as soon as
reasonably possible. In the event that Landlord's default is not cured within
said thirty (30) day period by reason of labor troubles, war, governmental
regulations, unavailability of materials or any condition beyond Landlord's
reasonable control, the time for curing such default shall be extended
accordingly.
21. RIGHT TO RE-ENTRY.
In the event that Landlord shall, during the period covered by this
Lease, obtain possession of said premises by re-entry, summary proceedings or
otherwise, Tenant hereby agrees to pay Landlord the expense (including
attorneys' fees) incurred in obtaining possession of said premises.
22. SUBORDINATION - ATTORNMENT.
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<PAGE>
A. This Lease shall, at the request of Landlord, be subordinate to
any first mortgage or deed of trust that may now or hereafter be placed upon
the Leased Premises and to any and all advances to be made thereunder and to the
interest thereon and all renewals, replacements and extensions thereof, provided
the mortgagee or trustee named in the mortgages or trust deeds shall agree to
recognize the Lease of Tenant in the event of foreclosure, if Tenant is not then
in default. Landlord agrees to keep Tenant advised as to the existence of all
mortgages on the property, including the names and addresses of all mortgagees.
Landlord agrees to request all mortgagees to notify Tenant in writing of any
default in any mortgage payments. Tenant shall have the right, at its option,
to make payments of rentals directly to the mortgagees involved until such
default is cured or removed.
B. Landlord covenants, warrants and represents that any mortgagee or
trustee under a deed of trust of the Leased Premises shall agree in writing to
recognize the Lease of Tenant in the event of foreclosure if Tenant is not in
default hereunder. Tenant shall, in the event any proceedings are brought for
the foreclosure or in the event of the exercise of the power of sale under
any mortgage or deed of trust made by Landlord covering the Leased Premises, to
attorn to the purchaser upon such foreclosure or sale and recognize any such
purchaser as Landlord under this Lease.
23. QUIET ENJOYMENT.
Landlord represents, covenants and warrants that it is or will be the
record title holder of the Leased Premises at the time of commencement of the
term of this Lease, free and unencumbered, and has full right and lawful
authority to enter into this Lease for the full term hereof and that upon
Tenant's
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<PAGE>
paying the rent and observing and performing all the terms, covenants and
conditions on Tenant's part to be observed and performed, Tenant may peaceable
and quietly have, hold, occupy and enjoy the Leased Premises without hindrance
or molestation for the full Lease term hereof.
Landlord acknowledges that Tenant's use of the Leased Premises and its
products are regulated and controlled by the Federal Drug Administration and
other governmental agencies and, as such, the Tenant's facilities are strictly
controlled and are held to a high degree of cleanliness, and purity of the
atmosphere. Accordingly, Landlord further represents, covenants and warrants
that the other occupants of the building of which the Leased Premises are a part
shall have separate space that is sealed off from Tenant's Leased Premises and
that such occupants shall be required to refrain from causing any fumes, odors
or noise level problems which exceed the Federal and State OSHA standards,
without the use of protective apparatus or devices, or which cause Tenant to be
in violation of any governmental controls. Any violation of this provision by
Landlord shall be deemed to be a material breach of this Lease, for which
Landlord shall be liable for damages, together with any other legal remedies
available to Tenant.
24. OWNERSHIP OF IMPROVEMENTS.
Upon the termination of this Lease, whether by lapse of time or
otherwise, all buildings and improvements then and at such time upon said Leased
Premises shall belong to Landlord, other than Tenant's furniture, trade fixtures
and signs, which shall be the sole property of Tenant.
25. INVESTMENT TAX CREDIT.
Landlord hereby agrees to elect under the applicable provisions of the
Internal Revenue Code of 1954, as amended (here-
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<PAGE>
inafter referred to as the "Code"), to pass through to Tenant all investment
tax credit which may be available to the facility covered by this Lease under
Section 38 of said Code which is not available to Landlord pursuant to the
Code with respect to qualified property installed by Landlord on the Leased
Premises. Landlord agrees to promptly execute all documents submitted by
Tenant and required by said Code, and regulations issued thereunder, to
enable Tenant to obtain such credit and to cooperate with Tenant with respect
to the maintenance of records in connection therewith.
26. COMPLIANCE WITH LAWS.
Tenant shall, at its own expense, promptly comply with all lawful
laws, orders, regulations or ordinances of all municipal, county and state
authorities affecting the premises hereby leased which are directly
attributable to Tenant's use of the Leased Premises, and the cleanliness,
safety, occupation and use of the same. Landlord hereby warrants and represents
to Tenant that at the commencement of the term hereof, the Leased Premises will
comply with all laws, orders, regulations and ordinances of all governmental
authorities having jurisdiction, and that Landlord will obtain and deliver to
Tenant a Certificate of Occupancy if available for the Leased Premises.
27. INTERPRETATION.
This Lease shall be interpreted in accordance with the laws of the
state in which the Leased Premises are situated.
28. NOTICES.
All notices provided for in this Lease shall be in writing and sent to
the respective parties at their addresses set forth at the beginning of this
Lease or at such other place or places as hereafter shall be designated in
writing by the respective parties. Such notice shall be served personally or
mailed by U.S. registered
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or certified mail, return receipt requested, postage prepaid. Each party may,
from time to time, designate other parties and their addresses to whom copies of
notices are to be sent on their behalf.
29. HOLDING OVER.
It is hereby agreed that in the event Tenant herein holds over after
the termination of this Lease, thereafter, the tenancy shall be from month-to-
month in the absence of a written agreement to the contrary, which month to
month lease may be terminated by either party upon thirty (30) days prior
written notice.
30. CONSENT NOT UNREASONABLY WITHHELD.
Landlord agrees that whenever under this Lease provision is made for
Tenant securing the written consent of Landlord, such written consent shall not
be unreasonably withheld or delayed.
31. ESTOPPEL CERTIFICATE.
At any time and from time to time, Landlord and Tenant agree, upon the
request in writing from the other, to execute, acknowledge and deliver to the
requesting party a statement in writing certifying that this Lease is unmodified
and in full force and effect (or if there have been modifications, then the same
are in full force and effect) and the dates to which minimum rent and other
charges have been paid.
32. CUMULATIVE RIGHTS.
It is agreed that each and every of the rights, remedies and benefits
provided by this Lease shall be cumulative and shall not be exclusive of any
other of said rights, remedies and benefits, or of any other rights, remedies
and benefits allowed by law.
33. PARTIAL INVALIDITY.
If any term, covenant or condition of this Lease or the application
thereof to any person or circumstance shall, to any
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extent, be invalid or unenforceable, the remainder of this Lease, or the
application of the term, covenant, or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition of this Lease shall be
valid and be enforced to the fullest extent permitted by law.
34. WAIVERS.
One or more waivers of any covenant or condition by either Landlord or
Tenant shall not be construed as a waiver of a further breach of the same
covenant or condition.
35. SHORT FORM LEASE.
Upon the request of either party hereto, the other party shall join in
the execution of a memorandum or so-called "short form" of lease for the purpose
of recordation. Said memorandum or short form of this Lease shall describe the
parties, the Leased Premises, the term of this Lease, options to renew and any
other special provisions except rentals payable hereunder and shall incorporate
this Lease by reference.
36. CAPTIONS AND SECTION NUMBERS.
The captions, section numbers and index appearing in this Lease are
inserted only as a matter of convenience and in no way define, limit, construe
or describe the scope or intent of the sections of this Lease or in any way
affect this Lease.
37. SUCCESSORS.
The covenants, conditions and agreements of this Lease shall be
binding upon and shall inure to the benefit of the heirs, representatives,
successors and permitted assigns of the parties hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused these presents to
be executed all as of the day and year first above written.
WITNESSES: R & R PROPERTIES, an Ohio
partnership
/s/ W. Bradford Snow By: /s/ Frank J. Roach
- -------------------------------- ---------------------------------
Frank J. Roach
AND /s/ James A. Rupp
- -------------------------------- ---------------------------------
James A. Rupp
"Landlord"
/s/ Jerome C. Hirsch TRUPAK, INC., an Ohio corporation
- ---------------------------------
By: /s/ Merle Harris
- -------------------------------- ---------------------------------
"Tenant"
GUARANTY
FOR VALUE RECEIVED, and in consideration for, and as an inducement to
Landlord making the within Lease with Tenant, the undersigned hereby
unconditionally guarantees to Landlord, and Landlord's successors and assigns,
the full performance and observance of all the covenants, conditions and
agreements therein provided to be performed and observed by Tenant.
FRESHLABS, INC., a Michigan
corporation
By: /s/ Merle Harris
------------------------------
Dated: March 12, 1984
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<PAGE>
LEGAL DESCRIPTION
The property is in the Village of West Unity, Williams County, Ohio.
Legal description to be attached prior to the commencement of the
term, upon Landlord furnishing to Tenant a certified survey and legal
description in a form satisfactory to Tenant.
EXHIBIT "A"
<PAGE>
MEMORANDUM OF LEASE
MEMORANDUM OF LEASE made this 12th day of March, 1984, between
R & R PROPERTIES, an Ohio Partnership, whose address is 1140 South McCord Road,
Holland, Ohio 43528 ("Landlord"), and TRUPAK, INC., an Ohio corporation,
whose address is 7047 Murthum Avenue, Warren, Michigan 48092 ("Tenant").
WITNESSETH:
WHEREAS, the parties hereto have entered into a Lease dated March 12,
1984, covering certain premises located in the Village of West Unity, Williams
County, Ohio; and
WHEREAS, it is the desire of the parties hereto to enter into a
Memorandum of Lease for the purpose of recording the same and giving notice of
the existence of said Lease;
NOW, THEREFORE, in consideration of the rents reserved and the
covenants and conditions more particularly set forth in that certain Lease
entered into between the parties hereto, Landlord and Tenant do hereby covenant,
promise and agree as follows:
1. Landlord does demise and lease unto Tenant and Tenant hereby
rents from Landlord, for the term hereinafter provided, and any extension
thereof, those certain premises consisting of 44,866 square feet of building
area located on the property more particularly described on Exhibit "A" attached
hereto and made a part hereof, together with the exclusive right to use the
parking area and the non-exclusive right to use certain common facilities which
are contiguous to the building area and are described on Exhibit "A" attached
hereto and made a part hereof.
2. The lease term shall commence upon the date on which Landlord
notifies Tenant in writing that the Leased Premises have been completed in
accordance with Exhibit "C" (Landlord's Work) attached to and made a part of the
Lease, and are available for Tenant's occupancy ("Commencement Date") and shall
end on the tenth lease year of the lease term.
<PAGE>
3. Tenant shall have the right to renew and extend the Lease for one
(1) additional five (5) year period.
4. This instrument is executed for the purpose of giving public
record notice of the fact of the execution of the above described Lease, and all
of the terms and conditions of said Lease and amendments thereto, if any, are
incorporated by reference herein, and where in conflict, the terms of the Lease
shall prevail.
5. This agreement shall extend to and be binding upon the parties
hereto and their respective heirs, representatives, successors and permitted
assigns.
IN WITNESS WHEREOF, the parties hereto have executed these presents
and set their hands the day and year first above written.
WITNESSES:
R & R PROPERTIES, an Ohio partnership
/s/ W. Bradford Snow
- ------------------------------- By: /s/ Frank J. Roach
W. Bradford Snow ----------------------------------
Frank J. Roach
/s/ Lenore S. Litivin
- -------------------------------
Lenore S. Litivin AND
By: /s/ James A. Rupp
-----------------------------------
James A. Rupp
"Landlord"
/s/ Jerome C. Hirsch TRUPAK, INC., an Ohio corporation
- --------------------------------
Jerome C. Hirsch
/s/ Lenore S. Litivin By: /s/ Merle Harris
- -------------------------------- -----------------------------------
Lenore S. Litivin Merle Harris
"Tenant"
ACKNOWLEDGEMENT OF LANDLORD
STATE OF MICHIGAN )
) ss.
COUNTY OF WAYNE )
On this 12th day of March, 1984, before me personally appeared
FRANK J. ROACH and JAMES A. RUPP, to me personally known to be the persons
who executed the foregoing Lease and acknowledged
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<PAGE>
FIRST AMENDMENT TO LEASE
THIS First Amendment to Lease made as of this first day of August, 1986, by
and between R & R PROPERTIES, an Ohio Partnership ("Landlord"), whose address is
1140 South McCord Road, Holland, Ohio 43528, and TRUPAK, INC., an Ohio
Corporation ("Tenant"), whose address is 7047 Murthum Avenue, Warren, Michigan
48092.
W I T N E S S E T H
WHEREAS, Landlord and Tenant entered into a certain Lease dated as of the
12th day of March, 1984 ( a Memorandum of such Lease was recorded in Volume 21
of Leases, Page 289, Williams County Records, Ohio) (hereinafter referred to as
"Lease") covering certain premises located in the Village of West Unity,
Williams County, Ohio, containing approximately 44,866 square feet of building
area, more particularly described in said Lease; and
WHEREAS, Tenant is desirous of leasing an additional 35,404 square feet of
building area located contiguous to the existing space such additional space
being more particularly identified on Exhibit A-1 attached hereto and made a
part hereof.
NOW THEREFORE, in consideration of the foregoing, the parties hereto hereby
agree to amend the terms of the Lease as hereinafter set forth:
1. Landlord does hereby lease to Tenant an additional 35,404 square feet
of building area ("New Space") contiguous to the existing Leased Premises which
additional space is more particularly identified on Exhibit A-1 and shall
hereafter be included as part of the Leased Premises.
2. Commencing August 1, 1986, Tenant shall pay to Landlord for the New
Space minimum rent in the sum of Four Thousand and 00/100 ($4,000.00) Dollars
for the month of August.
Provided Landlord has completed Landlord's Work in the New Space (as
hereinafter set forth) commencing September 1, 1986, Tenant hereby agrees to pay
to Landlord as minimum rent for the New Space the sum of Six Thousand One
Hundred Fifteen and 35/100 ($6,115.35) Dollars in advance on or before the first
day of each month throughout the balance of the lease term in addition to the
minimum rent set forth in Article 3 of the Lease.
3. With respect to the New Space, Landlord hereby represents and
warrants:
(A) A portion of the New Space, namely 10,000 square feet, is presently
leased to Elder Pharmaceuticals, Inc., on a month-to-month basis at a
rental of One Thousand Seven Hundred and 00/100 ($1,700.00) Dollars
per month. Such Lease was entered into as of July 1, 1985, as
amended, and expires on June 30, 1986. Said Lease is in full force
and effect and no default by either Landlord or Tenant exists
thereunder. No rent has been paid in advance other than the current
month's rent. Landlord hereby assigns and transfers over to Tenant
herein all of Landlord's right, title and interest as Landlord in and
to said Lease entered into with Elder Pharmaceuticals, Inc., as
aforedescribed. Landlord hereby agrees to execute a separate
-1-
<PAGE>
assignment of said Lease to Tenant herein upon request of Tenant.
Landlord shall advise Elder Pharmaceuticals, Inc., commencing August
1, 1986, its lease has been assigned to Tenant herein and all rent
shall be payable directly to Tenant herein.
(B) All existing heating, electrical, plumbing and mechanical systems in
the New Space shall be in good condition and in working order. In
addition, the roof shall be sealed, air-tight and leak free.
(C) The Landlord shall complete by no later than September 1, 1986, the
following "Landlord's Work":
(1) Repair or replace all fixtures in the two restrooms located in
the New Space and such fixtures shall be in good operating
condition.
(2) Repair and seal all holes in the exterior walls in the New Space.
(3) In the 13,000 square feet of the New Space which currently is
unoccupied, Landlord will immediately paint the ceilings white
and remove all unused fixtures, plumbing, etc. from the ceiling
areas. The posts will also be painted white and all existing
sodium lighting will be placed in working order. Landlord will
supply all the necessary lighting fixtures to continue the
existing lighting pattern, except the Tenant will furnish 20
sodium lighting fixtures from their existing space which Landlord
will install in areas that the lights are missing. With respect
to the balance of the New Space, Landlord will complete
Landlord's Work (i.e., being the same improvements as set forth
above) as rapidly as possible immediately upon such space being
cleared and ready for "Landlord's Work".
4. Tenant agrees to pay any increase in Landlord's insurance premiums
over and above the sum of Fourteen Thousand Forty and 00/100 ($14,040.00)
Dollars with respect to the insurance carried by Landlord on the New Space.
Landlord shall submit to Tenant evidence of such increase in insurance and
within 30 days thereafter, Tenant shall pay said amount to Landlord.
5. Landlord and Tenant hereby agree that the commencement date of the
Lease was May 21, 1984, and the initial Lease term will end on May 31, 1994.
6. Accept as expressly amended herein, all other terms and conditions of
said Lease shall remain in full force and effect, are applicable to the New
Premises which shall hereafter be included in the Leased Premises and are hereby
ratified and confirmed by the parties hereto.
-2-
<PAGE>
IN WITNESS WHEREOF, the respective parties hereto have executed this First
Amendment to Lease effective as of the date of this Agreement.
IN THE PRESENCE OF: R & R PROPERTIES, an Ohio
Partnership
/s/ Josi L. Galford By: /s/ Frank J. Roach
- ----------------------------------- ------------------------------------
Frank J. Roach
/s/ Tina G. Weing AND /s/ James A. Rupp
- ----------------------------------- ------------------------------------
James A. Rupp
"Landlord"
/s/ Jerome C. Hirsch TRUPAK, INC., an Ohio Corporation
- -----------------------------------
By: /s/ Merle Harris
- ----------------------------------- ------------------------------------
Merle Harris
"Tenant"
-3-
<PAGE>
EXHIBIT A-1
[FLOOR PLAN]
<PAGE>
SECOND AMENDMENT TO LEASE
THIS second Amendment to lease made as of this 19th day of June, 1989, by
and between R & R PROPERTIES, an Ohio Partnership, ("Landlord"), whose address
is 1160 South McCord Road, Holland, Ohio 43528, and TRUPAK, INC., an Ohio
Corporation, ("Tenant"), whose address is 7047 Murthum Avenue, Warren, Michigan
48092.
W I T N E S S E T H
WHEREAS, Landlord and Tenant entered into a certain Lease dated as of the
12th day of March, 1984 (a Memorandum of such Lease was recorded in Volume 21 of
Leases, Page 289, Williams County Records, Ohio) (hereinafter referred to as
"Lease") covering certain premises located in the Village of West Unity,
Williams County, Ohio, containing approximately 44,866 square feet of building
area, more particularly described in said Lease; and
WHEREAS, Landlord and Tenant entered into a first amendment to lease on
August 1, 1986 and additional 35,404 square feet of building area located
contiguous to the existing space.
WHEREAS, Tenant is desirous of leasing an additional 25,450 square feet
being more particularly identified on exhibit B-1 as area 5 beginning September
1, 1989.
WHEREAS, Tenant is desirous of leasing an additional 21,840 square feet
being now particularly identified on exhibit B-1 as area 6 beginning January 1,
1990.
NOW THEREFORE, in consideration of the foregoing, the parties hereto hereby
agree to amend the terms of the Leases as hereinafter set forth:
1. Landlord does hereby lease to Tenant an additional 25,450 square
feet of building area ("New Space") contiguous to the existing Leased Premises
which additional space is more particularly identified on Exhibit B-1 as area 5
and shall hereafter be included as part of the Leased Premises.
2. Provided Landlord has completed Landlord's Work in the New Space
(as hereinafter set forth) commencing September 1, 1989, Tenant hereby agrees to
pay to Landlord as minimum rent for the New Space, (area 5,) the sum of Four
Thousand Nine Hundred Thirty (4,930) Dollars in advance on or before the first
day of each month throughout the balance of the lease term in addition to the
minimum rent set forth in Article 3 of Lease.
3. Landlord does hereby lease to Tenant an additional 21,840 square
feet of building area ("New Space") contiguous to the existing Leased Premises
which additional space is more particularly identified on Exhibit B-1 as area 6
and shall hereafter be included as part of the Leased Premises, effective
January 1, 1990.
4. Commencing January 1, 1990, Tenant hereby agrees to pay to
Landlord as minimum rent for the New Space, area 6, the sum of Four Thousand
Ninety Five (4,095) Dollars in advance on or before the first day of each month
throughout the balance of the lease term in addition to the minimum rent set
forth in Article 3 of Lease.
(A) The Landlord shall complete by no later than September 1, 1989,
the following "Landlord's Work": or as described on exhibit B-2
hereto attached.
1
<PAGE>
(B) Tenant agrees to pay any prorata increase in landlord's insurance
premiums over and above the sum of Fourteen Thousand Forty and 00/100
($14,040.00) Dollars with respect to the insurance carried by
Landlord. Landlord shall submit to Tenant evidence of such increase
in insurance and within 30 days thereafter, Tenant shall pay said
amount to Landlord.
(C) Except as expressly amended herein, all other terms and
conditions of said Lease shall remain in full force and effect, are
applicable to the New Premises which shall hereafter be included in
the Leased Premises and are hereby ratified and confirmed by the
parties hereto.
IN WITNESS WHEREOF the respective parties hereto have executed this Second
Amendment to Lease effective as of the date of this Agreement.
IN THE PRESENCE OF: R & R PROPERTIES, an Ohio
Partnership
/s/ Joanne Van Camp /s/ Frank J. Roach
- ----------------------------- -------------------------------
Frank J. Roach
/s/ AND /s/ James A. Rupp
- ---------------------------- --------------------------------
James A. Rupp
"Landlord"
TRUPAK, INC., an Ohio
Corporation
/s/ BY: /s/ 6/19/89
- ---------------------------- -------------------------------
"Tenant"
2
<PAGE>
THIRD AMENDMENT TO LEASE
THIS third Amendment to lease made as of the ______ day of ___________,
1992 by and between R & R PROPERTIES, an Ohio Partnership ("Landlord"), whose
address is 1160 S. McCord Road, Holland, Ohio 43528, P. Leiner Nutritional
Products, Inc., a California Corporation, successor by merger to Trupak, Inc.,
formerly an Ohio Corporation ("Tenant"), whose address is 7047 Murthum Avenue,
Warren, Michigan 48092.
W I T N E S S E T H
WHEREAS, Landlord and Tenant entered into a certain Lease dated as of the
12th day of March, 1984 (a Memorandum of such Lease was recorded in Volume 21 of
Leases, Page 289, Williams County Records, Ohio) (hereinafter referred to as
"Lease") covering certain premises located in the Village of West Unity,
Williams County, Ohio, containing approximately 44,866 square feet of building
area, more particularly described in said Lease; and
WHEREAS, Landlord and Tenant entered into a first amendment to lease on
August 1, 1986 and additional 35,404 square feet of building area located
contiguous to the existing space.
WHEREAS, Landlord and Tenant entered into a second amendment to lease
effective September 1, 1989 an additional 25,450 square feet being more
particularly identified as area 5.
WHEREAS, Landlord and Tenant entered into a second amendment to lease
effective January 1, 1990 for an additional 21,840 square feet being now
particularly identified as area 6.
WHEREAS, Tenant is desirous of leasing an additional 4,960 square feet
being now particularly identified on exhibit B-1 as Area 5A beginning February
1, 1992.
NOW THEREFORE, in consideration of the foregoing, the parties hereto hereby
agree to amend the terms of the Leases as hereinafter set forth:
1. Landlord does hereby lease to Tenant an additional 4,960 square feet
of building area ("New Space") contiguous to the existing Leased
Premises which additional space is more particularly identified on
Exhibit B-1 as Area 5A and shall hereafter be included as part of the
Leased Premises.
2. Commencing February 1, 1992, Tenant hereby agrees to pay to Landlord
as minimum rent for the New Space (Area 5A), the sum of Nine Hundred
Sixty Three Dollars ($963.00) in advance on or before the first day of
each month throughout the balance of the lease term in addition to the
minimum rent set forth in Article 3 of Lease, and the
<PAGE>
first and second amendment to the lease.
B. Tenant agrees to pay any prorata increase in landlord's
insurance premiums over and above the sum of Fourteen
Thousand Forty and 00/100 Dollars ($14,040.00) with respect
to the insurance carried by Landlord. Landlord shall submit
to Tenant evidence of such increase in insurance and within
30 days thereafter, Tenant shall pay said amount to
Landlord.
C. Except as expressly amended herein, all other terms and
conditions of said Lease shall remain in full force and
effect, are applicable to the New Premises which shall
hereafter be included in the Leased Premises and are hereby
ratified and confirmed by the parties hereto.
IN WITNESS WHEREOF the respective parties hereto have executed this Third
Amendment to Lease effective as of the date of this Agreement.
IN THE PRESENCE OF: R & R PROPERTIES, an Ohio
Partnership
- -------------------------- ------------------------------
Frank J. Roach
AND
- -------------------------- ------------------------------
James A. Rupp
"Landlord"
P. Leiner Nutritional
Products Inc.
A California Corporation
BY
- -------------------------- ------------------------------
"Tenant"
<PAGE>
[FLOORPLAN]
<PAGE>
FOURTH AMENDMENT OF LEASE
This Fourth Amendment to Lease dated this 2nd day of August, 1994, by and
between R&R PROPERTIES, an Ohio Partnership ("Landlord"), whose address is 1160
S. McCord Road, Holland, Ohio, 43528 and LEINER HEALTH PRODUCTS INC. ("Tenant"),
a Delaware Corporation, whose address is 1845 West 205th Street, Torrence,
California 90501.
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a Lease dated March 12, 1984, as
amended by the First Amendment to Lease dated August 1, 1986, the Second
Amendment to Lease dated June 19, 1989 and the Third Amendment to Lease dated
August 3rd, 1992 (collectively the "Lease"); and
WHEREAS, the Lease is still in full force and effect (though currently
functioning on a month to month basis pursuant to Section 9 of the Lease);
NOW THEREFORE, Landlord and Tenant agree to amend the Lease as follows:
1. Effective the lst day of June, 1994, the Lease term shall be the
period commencing the 1st day of June, 1994 and ending the 31st day of May,
1995.
2. Effective as of the 1st day of June, 1994, and except with respect to
June, 1994 as provided below, Tenant covenants and agrees to pay Landlord,
without demand, at Landlord's office or such other place as Landlord may from
time to time designate, as rent for the Leased Premises, Twenty six thousand
four hundred and thirty dollars and forty eight cents ($26,430.48) per month
until the Leased Premises increase in size as provided in paragraph 4.
Tenant has paid to Landlord Twenty three thousand three hundred and sixty
dollars and fifty three cents ($23,360.53) constituting the full payment for
June.
3. Upon the expiration of the term of the Lease, and provided that the
Tenant is not in default under the terms of the Lease, Tenant may, at its
option, continue Lease for another 1 year period. Tenant shall give Landlord
written notice no less than (3) months prior to the 31st day of May, 1995 of its
intention to renew. If no written notice is received, the Lease will be
extended on a month to month basis as provided for Section 29 of the Lease.
<PAGE>
4. Landlord will attempt to make available area 4 (5,676 sq. ft. more or
less) as soon as possible and upon giving Tenant notice the area is available,
rent will begin on the first of the month following such notice of availability
at the rent rate of One thousand one hundred and fifty four dollars and twelve
cents ($1,154.12). This area will then become part of the Leased Premises
described in the Lease and the First, Second and Third Amendments. Tenant will
also give up forty parking spaces along Oak Street to be used by Schlegel
Corporation. Parking area given up by Leiner will be immediately replaced as
required in the area directly to the west of Tenant's main lot.
5. In all other respects the Lease shall remain in full force and effect.
IN WITNESS WHEREOF, the Landlord and Tenant have hereunto set their hands
to duplicates hereof as of the day and year first written above.
WITNESSED BY: R & R PROPERTIES, LANDLORD
/s/ Kristen By:
- -------------------------------- ----------------------------
- --------------------------------
LEINER HEALTH PRODUCTS INC., TENANT
By: /s/ Diane J. Beardsley
- -------------------------------- -----------------------------
<PAGE>
FIFTH AMENDMENT OF LEASE
This fifth Amendment to Lease dated this 20th day of May, 1996, by
and between R&R PROPERTIES, an Ohio Partnership ("Landlord"), whose address
is 1160 S. McCord Road, Holland, Ohio, 43528 and LEINER HEALTH PRODUCTS INC.,
("Tenant"), a Delaware Corporation, whose address is 901 E. 223rd Street,
Carson, California 90745.
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a Lease dated March 12,
1984, as amended by the First Amendment to Lease dated August 1, 1986, the
Second Amendment to Lease dated June 19, 1989, the Third Amendment to Lease
dated August 3rd, 1992, and the Fourth Amendment to Lease dated August 2nd,
1994, (collectively the "LEASE"); and
WHEREAS, the Lease is still in full force and effect,
NOW THEREFORE, Landlord and Tenant agree to amend the Lease as
follows:
1. Effective the 1st day of June, 1996, the Lease term shall be the
period commencing the first day of June, 1996 and ending the 31st day of May,
1999.
2. Effective as of the 1st day of June, 1996, Tenant covenants and
agrees to pay to Landlord, without demand, at Landlord's office or such other
place as Landlord may from time to time designate, as rent for the premises,
Twenty seven thousand five hundred and eighty four dollars and sixty cents
($27,584.60) per month.
3. Upon the expiration of the term of the Lease, and provided that
the Tenant is not both in default and past the expiration of any applicable cure
periods under the terms of this Lease, Tenant may, at its option, continue Lease
for another 3 year period. If Tenant continues to occupy the Premises as of
January 1st, 1999, and no notice of intent to vacate has been received by
Landlord, the Lease shall be extended automatically for another 3 year term.
4. During the original term as stated above, either Tenant or
Landlord may terminate the Lease by giving the other one years written notice of
its intention to do so. If such notice is given, there will be no "holding
over" except as agreed and at whatever rate the participants hereto agree upon
at the time. If Landlord receives such notice of intent to vacate, Landlord
shall not disclose such information to the employees of Tenant or the community
for a period of 90 days or until Tenant has advised employees of its intent,
whichever happens first.
<PAGE>
5. In all other respects the Lease shall remain in full force and
effect.
IN WITNESS WHEREOF, the Landlord and Tenant have hereunto set their
hands to duplicate originals hereof as of the day and year first written above.
WITNESSED BY: R & R PROPERTIES, LANDLORD
By:
- ----------------------------------- --------------------------------
- -----------------------------------
LEINER HEALTH PRODUCTS INC. TENANT,
/s/ Sharen Page, Notary Public By: /s/ GIFFEN H. OTT
- ----------------------------------- --------------------------------
Giffen H. Ott
- ----------------------------------- V.P.-Operations
<PAGE>
Exhibit 10.8
LEASE
BY AND BETWEEN
LEINER HEALTH PRODUCTS INC.
AND
SQUARE FEET UNLIMITED
WEST UNITY INDUSTRIAL PARK
REF 66,000 SQ. FT. BUILDING
SEAN RUPP JIM RUPP
14 723 WMS. CO. RD. "M" 4320 OAK GLEN
MONTPELIER, OHIO 43543 CAMDEN, MI 49232
419-485-8441 517-567-8000
HELPING INDUSTRY FIND A HOME
<PAGE>
INDEX TO LEASE BETWEEN
SQUARE FEET UNLIMITED (LANDLORD)
LEINER HEALTH PRODUCTS, INC. (TENANT)
WEST UNITY (WEST) INDUSTRIAL PARK
ARTICLE HEADING PAGE NO.
1 Premises . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Term and Option to Renew . . . . . . . . . . . . . . . . . . 1
3 Minimum Rent . . . . . . . . . . . . . . . . . . . . . . . . 2
4 Real Estate Tax Obligations. . . . . . . . . . . . . . . . . 2
5 Use of Premises. . . . . . . . . . . . . . . . . . . . . . . 2
6 Assignment and Subletting. . . . . . . . . . . . . . . . . . 3
7 Tenant's Right to Make Improvements. . . . . . . . . . . . . 3
8 Tenant's Right to Mortgage . . . . . . . . . . . . . . . . . 3
9 Care and Maintenance of Exterior Premises. . . . . . . . . . 3
10 Landlord's Obligation to Repair and Maintain . . . . . . . . 4
11 Tenant's Obligations to Repair and Maintain. . . . . . . . . 4
12 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 4
13 Restoration; Damage by Fire or Other Casualty. . . . . . . . 5
14 Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . 6
15 Gas, Water, Heat, Electricity. . . . . . . . . . . . . . . . 6
16 Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . 6
17 Bankruptcy and Insolvency. . . . . . . . . . . . . . . . . . 7
18 Default by Tenant and Right to Cure by Landlord. . . . . . . 7
19 Default by Landlord and Right to Cure by Tenant. . . . . . . 7
20 Right to Re-Entry. . . . . . . . . . . . . . . . . . . . . . 8
21 Subordination - Attornment . . . . . . . . . . . . . . . . . 8
22 Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . 8
23 Ownership of Improvements. . . . . . . . . . . . . . . . . . 9
24 Investment Tax Credit. . . . . . . . . . . . . . . . . . . . 9
25 Compliance with Laws . . . . . . . . . . . . . . . . . . . . 9
26 Environmental Matters. . . . . . . . . . . . . . . . . . . . 9
27 Interpretation . . . . . . . . . . . . . . . . . . . . . . . 12
28 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
29 Holding Over . . . . . . . . . . . . . . . . . . . . . . . . 12
30 Consent Not Unreasonably Withheld. . . . . . . . . . . . . . 13
31 Estoppel Certificate . . . . . . . . . . . . . . . . . . . . 13
32 Cumulative Rights. . . . . . . . . . . . . . . . . . . . . . 13
33 Partial Invalidity . . . . . . . . . . . . . . . . . . . . . 13
34 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
35 Short Form Lease . . . . . . . . . . . . . . . . . . . . . . 13
36 Landlord's Work. . . . . . . . . . . . . . . . . . . . . . . 14
37 Captions and Section Numbers . . . . . . . . . . . . . . . . 14
38 Successors . . . . . . . . . . . . . . . . . . . . . . . . . 14
39 Real Estate License Disclosure . . . . . . . . . . . . . . . 14
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 15
Notary for Landlord. . . . . . . . . . . . . . . . . . . . . 15
Notary for Tenant. . . . . . . . . . . . . . . . . . . . . . 16
Exhibit "A"
Exhibit "B"
<PAGE>
LEASE
This Lease, made and entered into as of the ___ day of July 1994, is by and
between SQUARE FEET UNLIMITED, a Michigan Partnership ("Landlord"), or Lessor,
whose address is 4320 Oak Glen at Merry Lake, Camden, Michigan 49232, and LEINER
HEALTH PRODUCTS INC. ("Tenant"), or Lessee, a Delaware Corporation, whose
address is 1845 West 205th Street, Torrence, California 90501.
WITNESSED: THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS:
1. PREMISES.
Landlord, for and in consideration of the rents to be paid and the
covenants and agreements to be kept and performed by Tenant, does hereby lease
to Tenant premises situated in the Village of West Unity, Williams Co., Ohio,
containing 66,000 square feet of building area located on the property more
particularly described on Exhibit "A" attached hereto and made a part hereof,
together with the exclusive right to use the parking area and the grounds which
are a part thereof (which premises are collectively hereinafter referred to as
the "Demised Premises" or "Leased Premises").
2. TERM AND OPTION TO RENEW.
A. The term of this lease shall commence upon August 1st, 1994 and shall end
on May 31st, 1995, unless extended or sooner terminated as hereinafter provided.
B. Upon expiration of the 10 month term of this Lease, and provided that
Lessee is not then in default under the terms of this Lease beyond any grace
period herein provided, Tenant may, at its option, continue the term for an
additional one year period (the "Renewal Term"). Lessee shall give Lessor no
less than three months notice in writing of its intention to renew. Any such
renewal term shall be upon the same terms and conditions as this Lease. If the
renewal option is not exercised, the Lease shall continue beyond May 31st, 1995
on a month to month basis until terminated by 30 days written notice given by
either Landlord or Tenant.
If during the Renewal Term additional improvements such as offices or more
building area are required, Landlord and Tenant may negotiate for Landlord or
Tenant to provide them and make provision for an adjustment in the rents to
cover the costs involved by adding an addendum hereto.
All rental payments due hereunder shall be sent to Landlord's address, the first
above given, or such other place as Landlord may designate to Tenant in writing.
1
<PAGE>
3. FIXED RENT.
A. Tenant hereby hires said Demised Premises for the term herein mentioned,
and, in consideration of the peaceful use and enjoyment of the Demised Premises
and the performance of all of the terms and provisions thereof to be performed
by Landlord, does hereby covenant and agree to pay Landlord, as the fixed rent
for said premises, the sum of Thirteen thousand four hundred and twenty dollars
($13,420) per month to be paid in advance, on or before the first day of each
month, commencing on the First day of August, 1994.
B. It is noted that an existing customer occupies 8,000 sq. ft. of this
building on a month to month lease. Immediately upon the signing of this Lease,
Landlord will give this customer notice to move out within 30 days, and Landlord
will use its best efforts to cause this customer to vacate the building as soon
as possible. If the customer has not moved out by August 1st, 1994, Tenant
(Leiner) may deduct One thousand six hundred and twenty six dollars and sixty
seven cents ($1,626.67) from the August rent and from each monthly installment
thereafter until such customer vacates such space.
IN THE EVENT TENANT FAILS TO MAIL THE RENT ON OR BEFORE THE 8TH DAY OF THE
MONTH, TENANT SHALL PAY THE REQUIRED RENT, PLUS FIVE PERCENT (5%) OF THE MONTHLY
RENT AS A "LATE PAYMENT FEE". This late payment fee will continue to accumulate
and compound as long as the lease is in default.
Notwithstanding any provision of this Lease to the contrary, Tenant will have no
liability whatsoever in connection with (i) any action or omission of, or any
claim asserted by, such customer or any employee, agent, contractor, licensee,
or invitee of such customer (in each case an "existing user"), or (ii) any claim
brought by any person in connection with any space in the building occupied or
used by existing user which claim arises out of any event occurring or any
circumstance existing at any time during which any such space is so occupied or
used, except and only to the extent of the negligence or willful misconduct of
Tenant or of any of Tenant's employees or agents.
4. REAL ESTATE TAX OBLIGATIONS.
The Real estate taxes on all improvements on this property have been abated
by the village of West Unity for a period of 10 years (six years remaining).
Landlord agrees to pay the real estate taxes for the land and all improvements
and assessments for the term of this Lease.
5. USE OF PREMISES.
The Leased Premises may be used and occupied by Tenant for offices,
manufacturing, warehousing and related operations, and for any other lawful
purpose with the written consent of Landlord. Landlord warrants that the above
uses are permissible under the existing zoning.
2
<PAGE>
6. ASSIGNMENT AND SUBLETTING.
Tenant shall have the right at all times to assign or sublet all or any part of
the Demised Premises with Landlord's written consent, provided, however, that
any such assignment or subletting shall not release Tenant from liability
hereunder.
7. TENANT'S RIGHT TO MAKE IMPROVEMENTS.
Landlord agrees that Tenant may, from time to time and at any time during the
term hereof, in its sole discretion and at its own cost and expense, remove,
remodel, alter, add to or modify the interior of the Leased Premises, so long as
same does not affect the structural integrity of the building provided Tenant
complies with the provisions set forth in this Paragraph.
All such improvements shall be of a good substantial character and such as will
not tend to decrease the value of the Leased Premises.
Tenant shall pay for all labor performed and materials furnished in making such
improvements thereon keeping it at all times free and clear of all liens for
labor or materials furnished in and about such construction, and will defend, at
it's own cost and expense, each and every lien asserted or claim filed against
said premises and/or the buildings or improvements thereon, or any part thereof,
for labor claimed to have been so performed or material claimed to have been so
furnished, and promptly pay each and every judgment made or given against said
premises, or any part thereof or the buildings and/or improvements thereon,
and/or against Landlord or Tenant, on account of any such lien and indemnify and
save harmless Landlord, their successors and assigns from all and every claim
and action on account of such claim, lien or judgment.
All such construction and improvements shall comply with all laws and ordinances
relating thereto.
8. TENANT'S RIGHT TO MORTGAGE.
Tenant, in its sole discretion, shall have the right, from time to time, to
borrow money and grant as security therefore a mortgage (or deed of trust) on
Tenant's leasehold interest covering the Demised Premises upon such terms and
conditions as are satisfactory to Tenant.
9. CARE AND MAINTENANCE OF EXTERIOR PREMISES.
During the term of this Lease, Landlord, at its sole expense agrees to maintain
the exterior of the building, take care of the lawns and remove snow from
drives, parking and dock areas.
Tenant will clean snow from sidewalks.
Tenant at its sole expense will keep and maintain the interior of the Leased
Premises in a clean, sanitary and safe condition.
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The Leased Premises will be kept free from rubbish and dirt at all times, and
Tenant shall store all trash and garbage within an area east of and adjacent to
Leased Premises, and will arrange for the regular pick up of garbage at Tenant's
expense. Tenant shall not perform any acts or carry on any practices which may
be a nuisance or menace to other occupants of contiguous properties.
10. LANDLORD'S OBLIGATIONS TO REPAIR AND MAINTAIN.
With respect to the building occupied by Tenant, Landlord shall, during the term
of the Lease, at Landlord's expense, keep the foundation, exterior walls and
roof in good condition and repair and at Landlord's expense will make all
capital replacements and major repairs to heating, sprinklers on premises and
major electrical and plumbing to or in the building. Tenant shall, at Tenants
expense, make all repairs to building system necessary in the normal course of
Tenants operation.
Landlord warrants that the heating equipment will be sufficient to heat the
manufacturing and warehouse space to 65 Degrees when the outside temperature is
0 Degrees.
11. TENANT'S OBLIGATIONS TO REPAIR AND MAINTAIN.
Except as provided in Paragraph 10 hereof, with respect to the Leased Premises,
Tenant covenants and agrees that it will, at its own expense, during the
continuance of this Lease, keep the interior of such premises in good condition
and repair, and at the expiration of the term or any renewal or extension
thereof, to yield and give up the premises in good condition, damage by usual
wear and tear, fire, the elements or other casualties excepted.
Tenant will specifically be responsible for fork truck damage to doors, the
building liner and exterior siding.
12. INSURANCE.
A. Tenant shall indemnify and hold harmless Landlord from all costs and
liabilities arising out of or connected with the activities of Tenant, its
employees, agents or business invitees upon the Demised Premises or the property
of which the Demised Premises are a part. Landlord shall indemnify and hold
harmless Tenant from all costs and liabilities arising out of or connected with
the activities of Landlord, its employees, agents, business invitees or other
Tenants upon the Demised Premises or the property of which the Demised Premises
are a part.
B. Tenant and Landlord each agree to procure and keep in full force and effect
during the term hereof its own policy of public liability and property damage
insurance with respect to its respective risks described above in the sum of One
Million Dollars ($1,000,000.00) per occurrence and, and One Million Dollars
($1,000,000.00) annual aggregate. Tenant and Landlord shall deliver
certificates evidencing said policies, to each other, and upon either party's
failure to do so, each may, at its option,
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obtain such insurance, and the cost thereof shall be paid as additional rent due
and payable upon the next ensuing rent day, or deducted from such rent as
appropriate.
Each party shall be indicated as an additional insured on the other party's
coverage.
C. At all times during the term of this Lease, Landlord agrees, at is expense,
to maintain fire and extended coverage insurance ("all risk") on all buildings
and improvements erected and constructed upon the property described on Exhibit
"A" attached hereto, with insurance companies of generally recognized
responsibility and credit and authorized to do business in the State of Ohio, in
an amount not less than the full replacement cost thereof.
13. RESTORATION: DAMAGE BY FIRE OR OTHER CASUALTY.
In the event the Leased Premises shall be damaged or destroyed in whole or in
part by fire or other casualty during the term hereof, Landlord will immediately
repair and restore the same to good, tenantable condition within sixty (60) days
from the date of such damage or destruction, and the rental herein provided for
shall abate entirely in case the entire premises are untenantable and pro-rata
for the portion rendered untenantable, or in case a part only is untenantable,
until the same shall be restored to a tenantable condition. Tenant, in its sole
discretion, shall have the right to determine whether or not the Premises are
tenantable for its use. If such damage or destruction cannot reasonably be
repaired within the aforementioned period, Landlord shall notify Tenant within
ten (10) days after the happening of such damage or destruction whether or not
Landlord will repair or rebuild. If Landlord elects not to repair or rebuild,
this Lease shall be terminated. If Landlord shall elect to repair or rebuild,
Landlord shall specify the time period within such repairs or restoration shall
be completed, and Tenant shall have the option, within ten (10) days after
receipt of such notice, to elect whether to terminate this Lease without any
further liability hereunder, or to extend the period of the term of this Lease
equivalent to the time from the happening of such damage or destruction until
the Leased Premises are restored to their former condition. Tenant shall not
have any right to terminate with respect to the foregoing if Landlord repairs or
rebuilds the damaged premises within the sixty (60) day period, and Landlord may
not elect not to repair if property can be repaired in 60 days. In the event
Tenant elects to extend this 60 day rebuilding period, Landlord shall restore
the leased Premises to its former condition within the time agreed, and Tenant
shall not be liable to pay rent for the period from the time of such damage or
destruction until the Premises are so restored to their former condition.
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14. WAIVER OF SUBROGATION.
Each party hereto does hereby remise, release and discharge the other party
hereto and any officer, agent, employee or representative of such party of and
from any liability whatsoever hereafter arising from loss, damage or injury
caused by fire or other casualty for which insurance (permitting waiver of
liability and containing a waiver of subrogation) is carried by the injured
party at the time of such loss, damage or injury to the extent of any recovery
by the injured party under such insurance.
15. GAS, WATER, HEAT, ELECTRICITY.
Tenant will pay all charges, if any, made against said Leased Premises for gas,
water, heat and electricity during the continuance of this Lease as the same
shall become due. Tenant shall maintain a minimum temperature in the Leased
Premises of 45 Degrees Fahrenheit to prevent damage to the sprinkler system.
16. EMINENT DOMAIN.
If the whole or any part of the floor area of the Leased Premises hereby leased
or access thereto shall be taken by public authority under the power of eminent
domain, then the term of this Lease shall cease at the option of the Tenant as
of the date possession thereof or title thereto shall be taken by such public
authority, and the rent shall be paid up to that date with a proportionate
refund by Landlord of such rent as shall have been paid in advance.
In the event that as a result of any taking under the power of eminent domain
the common areas and the parking area shall be reduced to less than Eighty
Percent (80%) of its former area, or access thereto shall be materially reduced
Tenant may, at Tenant's sole election, terminate the term of this Lease by
giving Landlord notice of the exercise of its election within sixty (60) days
after taking, and the termination shall be effective as of the time that
possession of the part so taken shall be required for public use. Thereafter
the parties shall be relieved of all subsequent obligations under the terms of
this Lease.
Landlord reserves to itself, and Tenant assigns to Landlord, all rights to
damages accruing on account of any taking under the power of eminent domain or
by reason of any act of any public or quasi-public authority for which damages
are payable. Tenant agrees to execute instruments of assignment as may be
reasonably required by Landlord, and to turn over to Landlord any damages that
may be recovered in any proceedings. It is agreed and understood, however, that
Landlord does not reserve to itself, and Tenant does not assign to Landlord, any
damages payable for loss of business or goodwill, and loss of favorable
leasehold, depreciation to and costs of removal of stock and trade fixtures of
Tenant and relocation of Tenant's signs, if any.
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17. BANKRUPTCY AND INSOLVENCY.
Subject to the Federal Bankruptcy Act, if a petition in bankruptcy shall be
filed by Tenant, or if Tenant shall be adjudicated bankrupt, or if Tenant
shall make a general assignment for the benefit of creditors, or if in any
proceeding based upon the insolvency of Tenant a receiver of all the property of
Tenant shall be appointed and shall not be discharged within ninety (90) days
after such appointment, then Landlord may terminate this Lease by giving notice
to Tenant of its intention so to do; provided, however, neither bankruptcy,
insolvency, an assignment for the benefit or creditors nor the appointment of a
receiver shall affect this Lease or permit its termination so long as the
covenants on the part of Tenant to be performed shall be performed by Tenant or
someone claiming under it.
18. DEFAULT BY TENANT AND RIGHT TO CURE BY LANDLORD.
In the event default shall be made by Tenant in the payment of rent upon the day
it becomes due and payable and such default continues for a period of (10) days
after receipt by Tenant of written notice thereof, or if default shall be made
or suffered by Tenant in any of the other covenants and conditions of this Lease
required to be kept or performed by Tenant (other than payment of rent), and
Tenant fails to cure any such default(s) or fails to commence to cure such
default(s) within thirty (30) days after receipt by Tenant of written notice
from Landlord specifying the default or defaults complained of, then and in any
such event or events and whenever and as often as such failure default shall
occur, it shall and may be lawful for Landlord, at Landlord's election, at any
time thereafter, to re-enter into and repossess the premises and the building(s)
and improvements situated thereon, and every part thereof, and Tenant, subleases
or assignee of tenant, to remove and vacate. In the event that Tenant's default
(other than nonpayment of rent) is not cured within said thirty (30) day period
by reason of labor troubles, war, governmental regulations, unavailability of
materials or any condition beyond Tenant's reasonable control, the time for
curing such default shall be extended accordingly. Not withstanding the
foregoing, if the Tenant commences to remedy a non-monetary default within the
thirty day cure period, and proceeds to complete such remedy with due diligence,
the Tenant will not be deemed to be in default.
19. DEFAULT BY LANDLORD AND RIGHT TO CURE BY TENANT.
In the event default shall be made by Landlord in any of the covenants and
conditions in this Lease required to be kept or performed by Landlord and
Landlord fails to cure any such default(s) or fails to commence to cure such
default(s) within thirty (30) days after receipt by Landlord of written notice
from Tenant specifying the default or defaults complained of, then and in any
such event or events and whenever and as often as such failure or default shall
occur, it shall and may be lawful for Tenant, at Tenant's election, and at any
time thereafter, to cure such default for the account of Landlord and Landlord
shall,
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within fifteen (15) days after notice, reimburse Tenant for any amount paid by
Tenant, provided, however, if Landlord's failure to perform would result in an
emergency which affects personal life or damage to property, then Tenant may
proceed immediately to remedy the situation and give Landlord notice thereof as
soon as reasonably possible. In the event that Landlord's default is not cured
within said thirty (30) day period by reason of labor troubles, war,
governmental regulations, unavailability of materials or any condition beyond
Landlord's reasonable control, the time for curing such default shall be
extended accordingly.
20. RIGHT TO RE-ENTRY.
In the event that Landlord shall, during the period covered by this Lease,
obtain possession of said premises by re-entry, summary proceedings or
otherwise, Tenant hereby agrees to pay Landlord the expense (including
attorneys' fees) incurred in obtaining possession of said premises.
21. SUBORDINATION - ATTORNMENT.
A. This Lease shall, at the request of Landlord, be subordinate to any first
mortgage or deed of trust that may now or hereafter be placed upon the Leased
Premises and to any and all advances to be made thereunder and to the interest
thereon and all renewals, replacements and extensions thereof, provided the
mortgagee or trustee named in the mortgages or trust deeds shall agree to
recognize the Lease of Tenant in the event of foreclosure, if Tenant is not
then in default. Landlord agrees to keep Tenant advised as to the existence of
all mortgages on the property, including the names and addresses of all
mortgagees. Landlord agrees to request all mortgagees to notify Tenant in
writing of any default in any mortgage payments. Tenant shall have the right,
at its option, to make payments of rentals directly to the mortgagees involved
until such default is cured or removed.
B. Landlord covenants, warrants and represents that any mortgagee or trustee
under a deed of trust of the Leased Premises shall agree in writing to recognize
the Lease of Tenant in the event of foreclosure if Tenant is not in default
hereunder. Tenant shall, in the event any proceedings are brought for the
foreclosure or in the event of the exercise of the power of sale under any
mortgage or deed of trust made by Landlord covering the Leased Premises, attorn
to the purchaser upon such foreclosure or sale and recognize any such purchaser
as Landlord under this Lease.
22. QUIET ENJOYMENT.
Landlord represents, covenants and warrants that it is the record title holder
of the Leased Premises at the time of commencement of the term of this Lease
free and unencumbered, and has full right and lawful authority to enter into
this Lease for the full term hereof and that upon Tenant's paying the rent and
observing and performing all the terms, covenants and conditions on Tenant's
part to be observed and performed, Tenant may
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peaceably and quietly have, hold, occupy and enjoy the Leased Premises without
hindrance or molestation for the full Lease term hereof.
23. OWNERSHIP OF IMPROVEMENTS.
Upon the termination of this Lease, whether by lapse of time or otherwise, all
buildings and improvements then and at such time upon said Leased Premises shall
belong to Landlord, other than manufacturing or materials handling equipment,
furniture, trade fixtures and signs, that are at any time or from time to time
installed or placed by Tenant in or at the Leased Premises. Landlord shall have
no right or interest in such equipment, furniture, trade fixtures or signs and
Tenant may remove them at any time.
24. INVESTMENT TAX CREDIT.
Landlord hereby agrees to elect under the applicable provision of the INTERNAL
REVENUE CODE of 1954, as amended (hereinafter referred to as the "code"), to
pass through to Tenant all investment tax credit which may be available to the
facility covered by this Lease under Section 38 of said Code which is not
available to Landlord pursuant to the Code with respect to qualified property
installed by Landlord on the Leased Premises. Landlord agrees to promptly
execute all documents submitted by Tenant and required by said Code, and
regulations issued thereunder, to enable Tenant to obtain such credit and to
cooperate with Tenant with respect to the maintenance of records in connection
therewith.
25. COMPLIANCE WITH LAWS.
Tenant shall, at its own expense, promptly comply with all lawful laws, orders,
regulations or ordinances of all municipal, county and state authorities
affecting the premises hereby leased which are directly attributable to Tenant's
use of the Leased Premises, and the cleanliness, safety, occupation and use of
the same. Landlord hereby warrants and represents to Tenant that at the
commencement of the term hereof, the Leased Premises will comply with all laws,
orders, regulations and ordinances of all governmental authorities having
jurisdiction.
Landlord further warrants that the space to be occupied by Tenant, associated
parking areas and common facilities are free from and otherwise not encumbered
by any environmental impairments currently regulated under the Resource
Conservation and Recovery Act ("RCRA"), Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and any other Federal, state, and/or
local environmental regulations.
26. ENVIRONMENTAL MATTERS
(a) DEFINITIONS. For purposes of these environmental provisions, the
following terms shall have the meanings set forth below.
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"Hazardous Material" means any substance:
(i) the presence of which requires investigation or remediation
under any federal, state or local environmental statute, regulation, rule,
ordinance or order; or
(ii) which is or becomes defined as a "hazardous waste", "hazardous
substance", pollutant, or contaminant under any federal, state, or local
environmental statute, regulations, rule, or ordinance, or amendments
thereto, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section 9601, (ET
SEQ.) and/or the Resource Conservation and Recovery Act (42 U.S.C. Section
6901, ET SEQ.); or
(iii) the presence of which on the Leased Premises causes or
threatens to cause under any common law in connection with any Hazardous
Material, as defined under clause (ii) above a nuisance upon the Leased
Premises or to the adjacent properties, or poses or threatens to pose a
hazard to the health or safety of persons on or about the Leased Premises;
or
(iv) without limitation, which contains petroleum, including crude oil
or any fraction thereof; or
(v) without limitation, which contains polychlorinated bipheynols
(PCBs), asbestos, or urea formaldehyde foam insulation.
"Off-Site Location" shall mean any site or facility to which Hazardous
Material generated on the Leased Premises has been transported for recycling,
reuse, treatment, storage, or disposal.
"Environmental Requirements" means all applicable present and future
statutes, regulations, rules, ordinances, codes, licenses, permits, orders,
approvals, plans, authorizations, concessions, franchises, and similar items, of
all governmental agencies, departments, commissions, boards, bureaus, or
instrumentalities of the United States, states, and political subdivisions
thereof, and all applicable judicial, administrative, and regulatory decrees,
judgments, and orders relating to the protection of human health or the
environment.
"Environmental Damages" means all claims, judgments, damages, losses,
penalties, fines, liabilities (including strict liability), encumbrances, liens,
costs and expenses of investigation and defense of any claim (whether or not
such claim is ultimately defeated), and of any good faith settlement or
judgment, of whatever kind or nature, contingent or otherwise, matured or
unmatured, foreseeable or unforeseeable, including, without limitation,
reasonable attorneys' fees and disbursements and consultants' fees, any of which
are incurred at any time as a result of:
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(i) the existence of Hazardous Material upon, about, or beneath
the Leased Premises or migrating or threatening to migrate to or from
the Leased Premises, or the existence of a violation of Environmental
Requirements pertaining to the Leased Premises arising out of or in
connection with the use and occupancy of the Leased Premises; or
(ii) the release or threatened release of Hazardous Material
upon, about, or beneath Off-Site Locations or the existence of a
violation of Environmental Requirements pertaining to the Off-Site
Locations but in either case only to the extent arising out of or in
connection with any event or circumstance specified in clause (i) of
this definition.
(b) COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS. Neither party hereto
shall cause, permit, or suffer the existence or the commission by such party,
its agents, employees, contractors, or any invitees, of a violation of any
Environmental Requirements upon, about, or beneath the Leased Premises or any
portion thereof.
(c) HAZARDOUS MATERIAL. Neither party hereto shall cause or permit
any Hazardous Material to be used, stored, generated, or disposed of on or in
the Leased Premises in violation of any Environmental Requirement without first
obtaining the other party's written consent.
(d) INDEMNITY. Tenant will indemnify and save harmless Landlord from
and against any and all Environmental Damages which may be imposed upon,
incurred by, or asserted against Landlord or the Leased Premises, except those
which are a result of Hazardous Materials which were: (i) present at the Leased
Premises prior to the Commencement Date; (ii) placed or released at the Leased
Premises by the Landlord or Landlord's predecessor in title or any agent,
employee, contractor or invitee of either of them; or, (iii) in the case of an
Off-Site Location, were present at the Leased Premises or released or were
generated prior to the Commencement Date.
(e) OBLIGATION TO REMEDIATE. Notwithstanding any of the obligations
of Tenant to indemnify Landlord as provided above, Tenant shall, upon demand of
Landlord, and at Tenant's sole cost and expense, promptly take all actions to
remediate any Hazardous Material located upon, about or beneath the Leased
Premises which are (i) required by any federal, state, or local governmental
agency or political subdivision, as a result of Lessee's violation of
Environmental Requirements, or (ii) reasonably required to restore the Leased
Premises to the condition (in terms of environmental quality) in which they were
at the Commencement Date as a result of Tenant's violation of Environmental
Requirements.
(f) NOTICE. If either party hereto shall become aware of or receive
notice of any actual or alleged violation of Environmental Requirements, or
should either party hereto become aware of the release of Hazardous Material,
upon, beneath, or from the Leased Premises, then such party shall deliver to the
other party
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within ten (10) days of the receipt of any such notice or release of Hazardous
Material, a written description thereof, together with copies of any documents
in such party's possession which refer or relate to such violation or release.
(g) PRE-EXISTING CONDITIONS. Tenant shall have no liability under
the terms of this Lease for and Landlord will indemnify and save harmless Tenant
from and against any Environmental Damages resulting from (i) Hazardous
Materials which were present at the Leased Premises prior to the Commencement
date, (ii) any Hazardous Materials which are or have been generated, stored or
released by Landlord on or from the Leased Premises, or (iii) any breach by
Landlord of any of its obligations under this Section 26.
(h) TITLE III REPORTS/SITE INVESTIGATION OR ASSESSMENT REPORTS. Each
Party hereto shall provide the other party with copies of all SARA S312 and S313
reports (and/or any analogous reports required under similar state or local
"Community Right to Know" statutes, ordinances or regulations) within ten (10)
days of their filing. Each Party hereto shall also promptly provide the other
party with copies of any and all reports or other documents prepared in
connection with any investigation, assessment or review of any nature which
relates to the environmental quality of the Leased Premises.
(i) UNDERGROUND STORAGE TANKS (UST'S). Landlord warrants there are
no UST'S on the Premises at the beginning of the Lease and each Party hereto
agrees that none shall be installed.
27. INTERPRETATION.
This Lease shall be interpreted in accordance with the laws of the state in
which the Leased Premises are situated.
28. NOTICES.
All notices provided for in this Lease shall be in writing and sent to the
respective parties at their addresses set forth at the beginning of this Lease
or at such other place or places as hereafter shall be designated in writing, by
the respective parties. Such notice shall be served personally or mailed by
U.S. registered or certified mail, return receipt requested, postage prepaid,
and shall be deemed to have been delivered upon such personal service or deposit
in such mails. Each party may, from time to time, designate other parties and
their addresses to whom copies of notices are to be sent on their behalf.
29. HOLDING OVER.
It is hereby agreed that in the event Tenant herein holds over after the
termination of this Lease, thereafter, the tenancy shall be from month-to-month
in the absence of a written agreement to the contrary, which month to month
lease may be terminated by either party upon thirty (30) days prior written
notice.
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30. CONSENT NOT UNREASONABLY WITHHELD.
Landlord agrees that whenever under this Lease, provision is made for Tenant
securing the consent of Landlord, such consent and the writing evidencing such
consent shall not be unreasonably withheld, conditioned or delayed.
31. ESTOPPEL CERTIFICATE.
At any time and from time to time, Landlord and Tenant agree, upon the request
in writing from the other, to execute, acknowledge and deliver to the requesting
party a statement in writing certifying that this Lease is unmodified and in
full force and effect (or if there have been modifications, then the same are in
full force and effect) and the dates to which minimum rent and other charges
have been paid.
32. CUMULATIVE RIGHTS.
It is agreed that each and every of the rights, remedies and benefits provided
by this Lease shall be cumulative and shall not be exclusive of any other of
said rights, remedies and benefits, or of any other rights, remedies and
benefits allowed by law.
33. PARTIAL INVALIDITY.
If any term, covenant or condition of this Lease or the application thereof to
any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of the term, covenant, or
condition to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each term, covenant
or condition of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
34. WAIVERS.
One or more waivers of any covenant or condition by either Landlord or Tenant
shall not be construed as a waiver of a further breach of the same covenant or
condition.
35. SHORT FORM LEASE.
Upon the request of either party hereto, the other party shall join in the
execution of a memorandum or so-called "short form" of lease for the purpose of
recordation. Said memorandum or short form of this Lease shall describe the
parties, the Leased Premises, the term of this Lease, options to renew and any
other special provisions except rentals payable hereunder and shall incorporate
this Lease by reference.
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36. LANDLORD'S WORK.
The Landlord, at its sole cost and expense, shall complete the work described in
Exhibit "B", attached hereto and made a part hereof ("Landlord's Work") by the
dates indicated therein. In the even the Landlord shall fail to complete all
items of Landlord's Work by the completion dates, the Tenant shall have the
right, but not the obligation, to complete any incomplete items of Landlord's
Work and deduct from the rent payable by the Tenant to the Landlord, a sum equal
to the cost of such completion.
37. CAPTIONS AND SECTION NUMBERS.
The captions, section numbers and index appearing in this Lease are inserted
only as a matter of convenience and in no way define, limit, construe or
describe the scope or intent of the sections of this Lease or in any way affect
this Lease.
38. SUCCESSORS.
The covenants, conditions and agreements of this Lease shall be binding upon and
shall inure to the benefit of the heirs, representatives, successors and
permitted assigns of the parties hereto.
39. REAL ESTATE LICENSE DISCLOSURE.
Tenant is advised that Sean G. Rupp, a partner in Square Feet Unlimited, is a
licensed Real Estate Salesman in the State of Ohio.
Landlord and Tenant hereby represent and warrant to each other that it has not
dealt with any broker or finder in connection with the negotiation or execution
of this Lease and each of them hereby indemnifies and will defend the other
against all claims, losses, damages, liabilities and expenses (including
without limitation reasonable attorney's fees and expenses) arising out of or
in connection with a breach of the foregoing representation and warranty by the
indemnifying party.
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IN WITNESS WHEREOF, the parties hereto have caused these presents to be executed
all as of the day and year first above written.
WITNESSES; SQUARE FEET UNLIMITED,
a Michigan Partnership
By:
- --------------------------- --------------------------
Sean G. Rupp
AND
- --------------------------- --------------------------
James A. Rupp
- --------------------------- LEINER HEALTH PRODUCTS INC.
/s/ Sharen Page By: /s/ Diane J. Beardsley
- --------------------------- --------------------------
Dated: 8/2/96
---------------------
STATE OF : OHIO
ss.
COUNTY OF : Williams
BE IT REMEMBERED that on this ____th day of July, 1994 before me the
subscriber, a notary public in and for said county, personally came SQUARE FEET
UNLIMITED, a partnership by Sean G. Rupp and James A. Rupp, it's partners, the
Lessor in the foregoing Agreement of Lease, and acknowledged the signing thereof
to be its voluntary act and deed.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed
my official seal on the day and year last aforesaid.
__________________________
Notary Public
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STATE OF: CALIFORNIA
ss.
COUNTY OF: ORANGE
Before me, a notary public in and for said county, personally appeared the above
name Diane J. Beardsley by __________________, who acknowledged that she did
sign the foregoing instrument and that the same is the free act and deed of said
Corporation, and the free act and deed of him personally as such officer.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my
official seal on this 2nd day of August, 1994.
/s/ Sharen Page
------------------------------
Notary Public
[Notary Seal]
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FIRST AMENDMENT OF LEASE
This first Amendment to Lease dated this 20th day of May, 1996, by and
between SQUARE FEET UNLIMITED, a Michigan Partnership, ("Landlord"), whose
address is 4320 Oak Glen, Camden, Michigan 49232 and LEINER HEALTH PRODUCTS
INC., ("Tenant"), a Delaware Corporation, whose address is 901 E. 233rd Street,
Carson, California 90745.
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a Lease dated August 2nd, 1994,
(the "LEASE"); and
WHEREAS, the Lease is still in full force and effect,
NOW THEREFORE, Landlord and Tenant agree to amend the Lease as follows:
1. Effective the 1st day of June, 1996, the Lease term shall be the
period commencing the first day of June, 1996 and ending the 31st day of May,
1999.
2. Effective as of the 1st day of June, 1996, Tenant covenants and agrees
to pay to Landlord, without demand, at Landlord's office or such other place as
Landlord may from time to time designate, as rent for the premises, Thirteen
thousand four hundred and twenty dollars and no cents ($13,420.00) per month.
3. Upon the expiration of the term of the Lease, and provided that the
Tenant is not both in default and past the expiration of any applicable cure
periods under the terms of this Lease, Tenant may, at its option, continue Lease
for another 3 year period. If Tenant continues to occupy the Premises as of
January 1st, 1999, and no notice of intent to vacate has been received by
Landlord, the Lease shall be extended automatically for another 3 year term.
4. During the original term as stated above, either Tenant or Landlord
may terminate the Lease by giving the other one years written notice of its
intention to do so. If such notice is given, there will be no "holding over"
except as agreed and at whatever rate the participants hereto agree upon at the
time. If Landlord receives such notice of intent to vacate, Landlord shall not
disclose such information to the employees of Tenant or the community for a
period of 90 days or until Tenant has advised employees of its intent, whichever
happens first.
5. In all other respects the Lease shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the Landlord and Tenant have hereunto set their hands
to duplicate originals hereof as of the day and year first written above.
WITNESSED BY:
R & R PROPERTIES, LANDLORD
By:
- ----------------------------------- --------------------------------
- -----------------------------------
LEINER HEALTH PRODUCTS INC. TENANT,
/s/ Sharen Page, Notary Public By: /s/ GIFFEN H. OTT
- ----------------------------------- -------------------------------
Giffen H. Ott
Vice President, Operations
- -----------------------------------
<PAGE>
EXHIBIT 10.9
LEASE
LANDLORD: WATSON LAND COMPANY,
a California corporation
TENANT: LEINER HEALTH PRODUCTS INC.
a Delaware corporation
DATED: October 4, 1993
THE SUBMISSION OF THIS DOCUMENT FOR EXAMINATION AND NEGOTIATION DOES NOT
CONSTITUTE AN OFFER TO LEASE, OR A RESERVATION OF, OR OPTION FOR, THE
PREMISES; THIS DOCUMENT BECOMES EFFECTIVE AND BINDING ONLY UPON EXECUTION AND
DELIVERY HEREOF BY LANDLORD. NO ACT OR OMISSION OF ANY EMPLOYEE OR AGENT OF
LANDLORD OR OF LANDLORD'S BROKER SHALL ALTER, CHANGE OR MODIFY ANY OF THE
PROVISIONS HEREOF.
[BUILDING 160]
<PAGE>
INDEX
ARTICLE ----- PAGE
------- ----
ARTICLE I - Basic Lease Provisions . . . . . . . . . . . . . . . . . . 1
ARTICLE II - Condition of Premises . . . . . . . . . . . . . . . . . . 2
ARTICLE III - Term of Lease . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV - Rent . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE V - Taxes and Assessments . . . . . . . . . . . . . . . . . . 5
ARTICLE VI - Utility Charges . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE VII - Hold Harmless . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VIII - Insurance . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IX - Repairs and Maintenance . . . . . . . . . . . . . . . . . 10
ARTICLE X - Inspection of Premises by Landlord . . . . . . . . . . . . 19
ARTICLE XI - Mechanics' Liens . . . . . . . . . . . . . . . . . . . . 20
ARTICLE XII - Damage or Destruction of Premises . . . . . . . . . . . 20
ARTICLE XIII - Condemnation . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE XIV - Use of Premises - Assignments . . . . . . . . . . . . . 22
ARTICLE XV - Event of Default . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XVI - Surrender of Premises . . . . . . . . . . . . . . . . . 28
ARTICLE XVII - Delays - Extensions of Time . . . . . . . . . . . . . . 29
ARTICLE XVIII - Attorneys' Fees. . . . . . . . . . . . . . . . . . . . 29
ARTICLE XIX - Tenant's Estoppel Certificate . . . . . . . . . . . . . 31
ARTICLE XX - Rights Reserved by Landlord . . . . . . . . . . . . . . . 32
ARTICLE XXI - Covenant of Quiet Enjoyment . . . . . . . . . . . . . . 32
ARTICLE XXII - Recordation . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XXIII - Subordination . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XXIV - Security Deposit . . . . . . . . . . . . . . . . . . . 33
ARTICLE XXV - Holding Over . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XXVI - General . . . . . . . . . . . . . . . . . . . . . . . . 35
26.1 Remedies Cumulative . . . . . . . . . . . . . . . . 35
26.2 Successors and Assigns . . . . . . . . . . . . . . 35
26.3 Payments and Interest . . . . . . . . . . . . . . . 35
26.4 Late Charge . . . . . . . . . . . . . . . . . . . . 35
26.5 Late Payments . . . . . . . . . . . . . . . . . . . 35
26.6 Notices . . . . . . . . . . . . . . . . . . . . . . 35
26.7 Captions . . . . . . . . . . . . . . . . . . . . . 36
26.8 Pronouns and Singular/Plural . . . . . . . . . . . 36
26.9 Time of Essence . . . . . . . . . . . . . . . . . . 36
26.10 Reasonable Consent . . . . . . . . . . . . . . . 36
26.11 Fair Meaning . . . . . . . . . . . . . . . . . . 36
26.12 Entire Agreement . . . . . . . . . . . . . . . . 36
26.13 No Accord and Satisfaction . . . . . . . . . . . 36
26.14 Choice of Law . . . . . . . . . . . . . . . . . . 37
26.15 Non-Discrimination . . . . . . . . . . . . . . . 37
26.16 Counterparts . . . . . . . . . . . . . . . . . . 37
26.17 Corporate Resolution . . . . . . . . . . . . . . 37
26.18 Reimbursements to Landlord . . . . . . . . . . . 37
26.19 No Guard Service . . . . . . . . . . . . . . . . 38
26.20 Brokers . . . . . . . . . . . . . . . . . . . . . 38
26.21 Brokerage Commission . . . . . . . . . . . . . . 38
26.22 Limitation of Liability . . . . . . . . . . . . . 38
26.23 Parking . . . . . . . . . . . . . . . . . . . . . 39
26.24 Lease Reviewed . . . . . . . . . . . . . . . . . 39
26.25 Financial Statements . . . . . . . . . . . . . . 39
26.26 Lease Interest Rate . . . . . . . . . . . . . . . 39
26.27 Tenant's Self-Insurance . . . . . . . . . . . . . 39
26.28 Landlord Bankruptcy Proceeding . . . . . . . . . 40
26.29 Waiver of Redemption by Tenant; Holding Over . . 40
EXHIBITS
- --------
Exhibit A - Performance Standards of Watson Industrial Center
Exhibit B - Legal Description
Exhibit C - Form of Lease Addendum
Exhibit D - Hazardous Material Certificate
Exhibit E - Form of Estoppel Certificate
Exhibit F - Initial Improvement Work
Exhibit G - Uses Under Existing Zoning
Exhibit H - Form of Confidentiality Agreement
Exhibit I - Insurance Summary
Lease Rider Number 1
<PAGE>
SINGLE TENANT INDUSTRIAL LEASE
THIS SINGLE TENANT INDUSTRIAL LEASE ("Lease") is made and entered
into as of this fourth day of October 1993, by and between WATSON LAND
COMPANY, a California corporation ("Landlord") and LEINER HEALTH PRODUCTS
INC., a Delaware corporation ("Tenant").
Landlord and Tenant mutually covenant and agree that Landlord, in
consideration of the rent payable by Tenant and the covenants and agreements
to be kept, observed and performed by Tenant, hereby rents and leases to
Tenant, and Tenant hereby takes and hires from Landlord, the "Premises" (as
defined herein), pursuant to the provisions of this Lease, subject to (i) all
applicable zoning, municipal, county, state and federal laws; (ii) covenants,
conditions, restrictions, reservations, easements, rights and rights-of-way
of record; and (iii) Performance Standards of Watson Industrial Center
attached hereto as Exhibit A and incorporated herein by reference. In the
event of any conflict between the provisions of this Lease and the provisions
of the Performance Standards, the provisions of this Lease shall govern.
ARTICLE I
BASIC LEASE PROVISIONS
1.1 DESCRIPTION OF PREMISES The Premises, as referred to herein,
shall consist of the parcel of land located in the County of Los Angeles,
State of California, as more particularly described in the attached Exhibit B
(the "Land"); the multi-purpose office, warehouse and industrial building
located on the Land (the "Building") together with the appurtenant
improvements located on the Land; and any other improvements or additions made
by either Landlord or Tenant which become a part of the Premises in accordance
with the provisions of this Lease.
1.2 STREET ADDRESS OF PREMISES: 810 East 233rd Street, Carson,
California 90745.
1.3 APPROXIMATE BUILDING SQUARE FOOTAGE: 204,000.
1.4 LEASE TERM: Ten (10) years beginning on April 1, 1994 or such
other date as is determined pursuant to the provisions of this Lease (the
"Commencement Date") and ending on March 31, 2004 (the "Termination Date").
1.5 EXTENSION OPTION: Two (2) periods of five (5) years each.
(See Paragraphs 1 and 2 of the attached Lease Rider.)
1.6 INITIAL MINIMUM RENT: Sixty-Five Thousand Two Hundred Eighty
Dollars ($65,280).
1.7 PERIODIC RENT ADJUSTMENTS: See Paragraph 3 of the attached
Lease Rider.
1.8 ANNUAL TAX BASE AMOUNT: Fifty-One Thousand Two Hundred
Sixty-Two Dollars ($51,262).
1.9 ANNUAL INSURANCE BASE AMOUNT: Eighteen Thousand Two Hundred
Dollars ($18,200).
1.10 INITIAL SECURITY DEPOSIT: Sixty-Five Thousand Two Hundred
Eighty Dollars ($65,280).
<PAGE>
1.11 BROKERS: CB Commercial Real Estate Group (Jeffrey S. Morgan
and Goodall W. McCullough, Jr.).
1.12 INITIAL IMPROVEMENT WORK: See Paragraph 4 of the attached
Lease Rider.
1.13 EXHIBITS AND RIDERS: The following Exhibits and Riders are
attached to this Lease and made a part hereof:
Exhibit A - Performance Standards of Watson
Industrial Center
Exhibit B - Legal Description
Exhibit C - Form of Lease Addendum
Exhibit D - Hazardous Material Certificate
Exhibit E - Form of Estoppel Certificate
Exhibit F - Initial Improvement Work
Exhibit G - Uses Under Existing Zoning
Exhibit H - Form of Confidentiality Agreement
Exhibit I - Insurance Summary
Lease Rider Number 1
1.14 MAILING ADDRESSES:
Landlord: Watson Land Company
22010 Wilmington Avenue, Suite 400
Carson, California 90745
Tenant: Leiner Health Products
1845 West 205th Street
P.O. Box 2010
Torrance, California 90510-2010
(after the Leiner Health Products
Commencement Date) 901 East 233rd Street
Carson, California 90745
ARTICLE II
CONDITION OF PREMISES
2.1 Tenant acknowledges that prior to the execution of this
Lease, Tenant has been furnished full access to, and has inspected the
Premises. Landlord shall deliver the Premises to Tenant clean and free of
debris on the Commencement Date. Landlord warrants that the Initial
Improvement Work described in the attached Lease Rider No. 1 shall be
completed and shall be in good operating condition on the Commencement Date of
the Lease Term. If a non-compliance with said warranty exists as of the
Commencement Date, Landlord shall, except as otherwise provided in this Lease,
promptly after receipt of written notice from Tenant setting forth with
specificity the nature and extent of such non-compliance, rectify the same at
Landlord's expense. If Tenant does not give Landlord written notice of any
non-compliance with this warranty within one year after the Commencement Date,
correction of that non-compliance shall be the obligation of Tenant at
Tenant's sole cost and expense. Landlord hereby agrees to execute any
documentation reasonably requested by Tenant in order to evidence the fact
that effective after the first year of the Lease Term, Landlord shall assign
all of its right, title and interest in and to any warranties regarding
workmanship and material with respect to the Initial Improvement Work
including, by way of illustration and not limitation, the warranties regarding
the operation of systems such as air-conditioning or heating. Landlord shall
cooperate with Tenant relative to the enforcement of any such warranties upon
written request by Tenant. Any such warranties which remain in effect upon
the expiration or sooner termination of this Lease shall be re-assigned to
Landlord. Tenant acknowledges that neither Landlord nor any real estate agent
or broker representing Landlord or Tenant has made any representation or
warranty as to
2
<PAGE>
the present or future suitability of the Premises for the conduct of Tenant's
business. Landlord warrants to Tenant that, to Landlord's actual knowledge,
the improvements on the Premises comply with all applicable laws, codes,
ordinances, rules or regulations affecting the Premises including, without
limitation, laws, codes ordinances, rules or regulations relating to fire or
life safety, or access by disabled persons (collectively "Codes") affecting
the Premises as of the date the Building was initially constructed, and
Landlord has not received any notice or citation for any violation of any
Codes in effect as of the date of this Lease with respect to the Building (or
with respect to any other building in Watson Industrial Center South which is
reasonably similar to the Building and which would lead a reasonable and
prudent Landlord to conclude that the violation identified in such notice or
citation applied to the Building as well as to such other building). Landlord
shall be responsible for bringing the Premises into compliance with "ADA"
requirements as provided in Paragraph 2.2, below. Such warranty does not
apply to any Codes relating to Tenant's proposed use of the Premises, and
Tenant shall be responsible for determining the suitability and conformity of
the Premises with respect to such Codes, and Tenant shall be responsible for
making any necessary modifications to the Premises in order to comply with
such Codes. Landlord hereby represents to Tenant that the Premises is zoned as
set forth in the attached Exhibit G, and such zoning classification permits
the uses listed on the attached Exhibit G. Landlord agrees to cooperate with
and assist Tenant in connection with Tenant's application for approval of its
proposed specific uses of the Premises to the extent such approvals are
required by any governmental entity with jurisdiction over the Premises,
including assisting Tenant in making any appearances determined to be
reasonably necessary by Tenant before any such governmental entity.
Landlord's agreement in the immediately preceding sentence shall include
cooperation in the same regard with respect to the construction of the
proposed overhead bridge conveyor system described in Paragraph 7 of Lease
Rider No. 1.
2.2 Landlord agrees that it shall cause the Premises to be
brought into compliance with the requirements of Title III of the Americans
with Disabilities Act ("ADA") which are applicable to the Premises as of the
Commencement Date of the Lease Term with respect to use of the Premises as a
warehousing and distribution facility. If Tenant uses or permits the Premises
to be used for any use or purpose constituting a "public accommodation"
pursuant to the ADA, Tenant shall be responsible for bringing the Premises and
related access areas and entrances into compliance with any provisions of the
ADA applicable to, or triggered by, such use.
ARTICLE III
TERM OF LEASE
3.1 The term of this Lease (the "Lease Term") shall be the period set
forth in Item 1.4 of the Basic Lease Provisions. Subject to the terms and
conditions of this Lease, the Lease Term shall commence on the Commencement
Date and shall terminate on the Termination Date, which dates are specified in
Item 1.4 of the Basic Lease Provisions. All of the terms and conditions of
this Lease shall apply as of the date this Lease is signed by both Landlord
and Tenant (the "Execution Date"); provided, however, that Tenant shall have
no obligation to pay Minimum Rent until the Commencement Date. Effective upon
the execution of this Lease, Landlord shall cooperate with Tenant in
scheduling inspections of the Building by Tenant and its design consultants
from time to time as may be reasonably necessary for Tenant to perform its
space planning and design work for the Premises. In addition, commencing on
March 1, 1993, and continuing until the Commencement Date (the "Early
Occupancy"), Tenant and its agents, contractors, vendors, and security
contractors shall be permitted
3
<PAGE>
to enter the Premises for the purposes of plan layout, facilities planning,
security activities, construction and installation of Tenant's furniture,
fixtures, utilities, telecommunication systems, security systems and the
overhead bridge conveyor system described in the attached Lease Rider.
3.2 If Landlord is unable to deliver possession of the Premises
to Tenant by the Commencement Date specified in Item 1.4 of the Basic Lease
Provisions, for any reason (other than a delay which is attributable to any
act or omission of Tenant, in which event the Lease Term shall be deemed to
have commenced on the date specified in Item 1.4 of the Basic Lease
Provisions), the Lease Term shall not commence until possession of the
Premises is delivered to Tenant. For the purposes of this Paragraph 3.2,
delivery of possession of the Premises to Tenant shall be deemed to occur on
the earlier of: (a) the date on which Initial Improvement Work (if any) is
substantially completed (provided, however, that if the Initial Improvement
Work is substantially completed prior to April 1, 1994, such work shall be
deemed to have been substantially completed on April 1, 1994); or (b) the date
on which Tenant uses or occupies all or any portion of the Premises with any
of Tenant's personnel or property for the purpose of conducting business
therein. If Landlord so desires, Landlord and Tenant shall execute a Lease
Addendum in the form attached to this Lease as Exhibit C, confirming the
actual Commencement Date and Termination Date. Landlord shall not be liable
for any damage caused by any delay in delivery of the Premises to Tenant, and
this Lease shall not be void or voidable as a result of any such delay.
Tenant shall not be liable for rent until Landlord delivers possession of the
Premises to Tenant, and the Lease Term shall be extended for a period of time
equal to the period of such delay. If the Lease Term commences on a day other
than the first day of a calendar month, the Lease Term shall end on the last
day of the calendar month in which said Lease Term would otherwise end. If
Landlord does not deliver possession of the Premises to Tenant within ninety
(90) days of the date specified in Item 1.4 of the Basic Lease Provisions (the
"Outside Date"), Tenant may either (i) terminate this Lease by giving written
notice to Landlord at any time after the Outside Date, provided Landlord has
not delivered possession of the Premises to Tenant before Tenant gives such
notice to Landlord; or (ii) allow this Lease to continue, in which event
Landlord shall credit against the Minimum Rent first coming due under this
Lease an amount equal to one day's Minimum Rent for each day after the Outside
Date that the Commencement Date has not occurred.
3.3 If Tenant occupies all or any portion of the Premises with
Tenant's personnel or property for the purposes permitted during the Early
Occupancy prior to the date specified in Item 1.4 of the Basic Lease
Provisions, such occupancy shall be subject to all terms and provisions of
this Lease, and such occupancy shall not advance the Termination Date.
3.4 If, prior to the Commencement Date set forth in Item 1.4 of
the Basic Lease Provisions, the Building is damaged or destroyed by an event
or cause which is not attributable to any act or omission of Tenant or
"Tenant's Agents" (as defined herein), but such damage or destruction does not
result in the termination of this Lease pursuant to the terms of Article XII,
then this Lease shall continue in full force and effect, but for each month
that the Commencement Date is delayed as a result of such damage or
destruction, Tenant shall be entitled to a credit against Minimum Rent
subsequently coming due under this Lease in the amount of Twelve Thousand Five
Hundred Dollars ($12,500), but in no event more than One Hundred Fifty
Thousand Dollars in the aggregate. No more than Twelve Thousand Five Hundred
Dollars ($12,500) shall be applied as a credit during any one month of the
Lease Term.
4
<PAGE>
ARTICLE IV
RENT
4.1 Tenant agrees to pay to Landlord at the office of Landlord or
at such other place as may be designated by Landlord from time to time,
without any prior demand therefor and without any deduction or setoff
whatsoever, except as may be specifically provided by the provisions of this
Lease, as minimum monthly rent ("Minimum Rent"), the sum specified as the
Initial Minimum Rent in Item 1.6 of the Basic Lease Provisions. Minimum Rent
shall be payable in advance on the first day of each calendar month of the
Lease Term. If the Lease Term shall commence upon a day other than the first
day of a calendar month, then Tenant shall pay, upon the Commencement Date, a
pro rata portion of the Minimum Rent for the first fractional calendar month.
Minimum Rent payable by Tenant under this Lease is subject to adjustment in
accordance with the provisions of Item 1.7 of the Basic Lease Provisions.
Unless specifically designated otherwise in this Lease, all fees, charges,
costs, expenses or other payments to be paid by Tenant to Landlord pursuant to
this Lease shall be deemed to be additional rent.
ARTICLE V
TAXES AND ASSESSMENTS
5.1 Tenant covenants and agrees to pay to Landlord, as additional
rent hereunder, the amount by which all real estate taxes and assessments, and
installments thereof which may be taxed, charged, levied, assessed or imposed
during any fiscal tax year occurring during the Lease Term (and any extensions
or renewals thereof) upon all or any portion of or in relation to the Premises
and the improvements at any time erected thereon and the appurtenances
thereof, exceed the Annual Tax Base Amount specified in Item 1.8 of the Basic
Lease Provisions. In the partial fiscal tax year in which the Lease Term
shall commence, and in the partial fiscal tax year in which the Lease Term
shall terminate, such taxes and assessments and the Annual Tax Base Amount
shall be prorated on a daily basis (using a 365-day year), and Tenant's
payment obligations shall be computed accordingly. If any assessments or
taxes are levied or assessed against the Premises which are payable or may be
paid in monthly or more frequent installments, Tenant shall be required to pay
only such installments as shall become due and payable during the Lease Term;
provided however, if an assessment or tax is imposed upon the Premises because
of the acts or upon the request of Tenant, then Tenant shall pay the total
amount thereof in equal annual installments during the Lease Term, on a date
established by Landlord.
5.2 Tenant shall pay the amount of any taxes and assessments
which it is obligated to pay hereunder directly to Landlord within fourteen
(14) days after receipt of Landlord's invoice therefor, Landlord agrees, in
turn, to promptly pay such taxes and assessments to the appropriate taxing
authority.
5.3 In the event of any "Tax Reassessment" (as defined herein),
Tenant shall have the right, in Tenant's or Landlord's name, but at Tenant's
sole cost and expense, to contest the validity of any tax or assessment or
assessed valuation of the Premises by appropriate proceedings timely
instituted; provided that: (a) Tenant gives Landlord written notice of
Tenant's intention to do so prior to the date on which Tenant is obligated to
pay such taxes pursuant to Paragraph 5.2, above; (b) Tenant makes timely
payment to Landlord of all taxes payable pursuant to this Article V; (c) at
the time of Tenant's payment of such taxes to Landlord, Tenant requests
Landlord, in writing, to pay such taxes under protest; and (d) Tenant
diligently prosecutes any such contest. As used herein, the term "Tax
Reassessment" means any change in the assessed full cash value of the
Premises as a
5
<PAGE>
result of a sale transfer or conveyance of all or any portion of the
Premises, or a "change in ownership" (as the phrase is defined in Section 60
of the California Revenue and Taxation Code) of all or any portion of the
Premises. Landlord shall, if requested by Tenant, cooperate with Tenant in
any such proceedings, provided, however, that Landlord shall not be liable
for any expenses whatsoever in connection therewith, and Tenant shall
protect, indemnify, and reimburse Landlord for all claims loss, cost,
liability, expense, attorneys' fees or damages resulting therefrom. If
Tenant prevails in such tax contest, Landlord shall, within thirty (30) days
following Landlord's receipt of the refund of any overpaid taxes, pay to
Tenant any such overpaid taxes which were paid by Tenant during the Lease
Term.
5.4 As used herein, the term "real estate taxes" shall include
any form of real estate tax or assessment, general, special, ordinary or
extraordinary, and any license fee, commercial rental tax, rental excise tax,
improvement bond or bonds, levy or tax (other than income taxes) imposed on
the Premises by any authority having the direct or indirect power to tax,
including any city, state or the federal government, or any school,
agricultural, sanitary, fire, street, drainage, water or other improvement
district thereof, as against any legal or equitable interest of Landlord in
the Premises or in the real property of which the Premises are a part, as
against Landlord's right to rent or other income therefrom, and as against
Landlord's business of leasing the Premises. With respect to any assessment
for capital improvements benefitting the Premises which is included within
the definition of real estate taxes and which is imposed over a period which
is substantially less than the estimated useful life of such capital
improvements, such assessment shall be amortized over the useful life of the
improvement in question, at a commercially reasonable rate of interest, and,
notwithstanding any governmental requirement concerning payment, Tenant
shall only be obligated to pay installment payments of such assessment based
upon the semi-annual amortization payments which would be required during the
Lease Term had the cost of such improvements been amortized over the
estimated useful life such improvements in equal semi-annual installments and
at a commercially reasonable rate of interest. Where any such capital
improvement is funded by a bonded indebtedness, the term of the bond maturity
shall be deemed to be the useful life of the capital improvement. The term
"real estate taxes" shall also include any tax, fee, levy, assessment or
charge (i) in substitution of, partially or totally, any tax, fee, levy,
assessment or charge hereinabove included within the definition of "real
property tax"; or (ii) the nature of which was hereinbefore included within
the definition of "real property tax"; or (iii) which is imposed for a
service or right not charged prior to June 1, 1978, or, if previously
charged, has been increased since June 1, 1978; or (iv) which is imposed by
reasons of this transaction, any modifications or changes hereto, or any
transfers hereof. Notwithstanding anything to the contrary set forth in the
Lease, real estate taxes shall not include: (a) any excess profits taxes,
franchise taxes, gift taxes, capital stock taxes, inheritance and succession
taxes, estate taxes, federal and state income taxes, and other taxes to the
extent applicable to Landlord's general or net income (as opposed to rents or
receipts), (b) penalties incurred as a result of Landlord's negligence,
inability or unwillingness to make payments of, and/or to file any tax or
information returns with respect to, any real estate taxes, when due, or (c)
any other taxes or assessments charged or levied against Landlord which are
not directly incurred as a result of the operation of the Premises.
5.5 In the event of a sale by Landlord of its fee simple
interest in the Premises to a third party, Tenant shall have no obligation to
pay any increase in real estate taxes which result from such sale. However,
nothing contained in this Paragraph 5.5 shall limit Tenant's obligation to
pay any other
6
<PAGE>
increases in real estate taxes, including, without limitation, inflation
factor adjustments as provided in Section 51 of the California Revenue and
Taxation Code and changes in the manner or method of computing or imposing
taxes pursuant to applicable law. No transfer of stock of Landlord, and no
transfer of the property to a lender pursuant to foreclosure or acceptance of
a deed in lieu of foreclosure (or to any purchaser of the Premises or the
Building Complex from such a lender) shall constitute a "sale by Landlord of
its fee simple interest in the Premises to a third party" for the purposes of
this Paragraph 5.5.
ARTICLE VI
UTILITY CHARGES
6.1 Tenant shall contract for, in Tenant's name, and shall pay
or cause to be paid, all charges for gas, electricity, light, heat,
air-conditioning, power, telephone, sewer, trash collection and waste removal
and/or disposal, security or guard service, alarm systems, or other service,
and any taxes, levies or excises thereon, used, rendered or supplied to
Tenant in connection with the Premises; and for all connection and closing
charges, and any tax or excise thereon; and for any governmental service or
service subject to governmental regulation, however described, furnished to
the Premises during the Lease Term and during any other period in which
Tenant uses or occupies the Premises. Landlord and Tenant (or Landlord only,
in Landlord's name, if Landlord so elects) shall contract for water service
for the Premises, but Tenant shall be solely responsible for any fees,
charges or costs of any nature imposed or incurred in connection with such
water service. Landlord may elect to have bills for such water service
delivered directly to Tenant, or Landlord may have such bills delivered to
Landlord and separately invoice Tenant for the actual cost of such water
service. Tenant shall pay any such bill or invoice within ten (10) days
following Tenant's receipt thereof. Landlord shall not be liable to Tenant
for any loss, injury, damage, disruption of business or any other harm
resulting from any interruption of utility services to the Premises, unless
such interruption results solely from the gross negligence or willful
misconduct of Landlord. In the event of any interruption or disruption in
utility services to the Premises, Landlord agrees to reasonably cooperate
with Tenant to minimize the length and impact of any such interruption or
disruption.
ARTICLE VII
HOLD HARMLESS
7.1 Tenant covenants and agrees that Landlord shall not at any
time or to any extent whatsoever be liable, responsible, or in any way be
accountable for any loss, injury, death or damage to persons or property
which at any time may be suffered or sustained by Tenant or by any person
whomsoever who may at any time be using, occupying or visiting the Premises,
or be in, on, or about the same, whether such loss, injury, death or damage
shall be caused by or in any way result from or arise out of any act,
omission or negligence of Tenant or of any occupant, subtenant, visitor or
user of any portion of the Premises or from fire, steam, electricity, water,
rain, act of God, or from breakage or leakage or any defect in any pipes,
sprinklers, or plumbing, electrical or heating and air conditioning systems
or fixtures, or from any other cause. Tenant does hereby release Landlord
and agrees to indemnify, defend, hold and save Landlord free and harmless of,
from, and against any and all claims, losses, costs, liabilities, expenses or
damages whatsoever arising out of or related to any use or occupancy of the
Premises by Tenant or any of Tenant's agents, employees, invitees or
contractors (collectively "Losses"), including attorneys' fees and costs on
account of any such Losses, except for any Losses resulting
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solely from the gross negligence or willful misconduct of Landlord.
7.2 Landlord covenants and agrees that Tenant shall not at any
time or to any extent whatsoever be liable, responsible, or in any way
accountable to Landlord for any injury to or death of persons which at any
time may be suffered or sustained by Landlord or by any person whomsoever who
may at any time be using, occupying or visiting the Premises, or be in, on,
or about the same, to the extent such injury or death shall be caused by or
in any way result from or arise out of any act, omission or negligence of
Landlord, or any of Landlord's agents or employees. To the extent of any loss
which is covered by Landlord's property insurance policies and for which a
waiver of subrogation under such policies exists, Tenant shall not be liable
to Landlord for damage from fire, steam, electricity, water, rain, act of
God, or from breakage or leakage, or any defect in any pipes, sprinklers, or
plumbing, electrical or heating and air conditioning systems or fixtures, or
from any other cause. Landlord agrees to indemnify, defend, hold and save
Tenant free and harmless of, from, and against any and all claims, losses,
costs, liabilities, expenses or damages, including attorneys' fees and costs
on account of any such losses, resulting solely from the gross negligence or
willful misconduct of Landlord.
ARTICLE VIII
INSURANCE
8.1 Unless Tenant elects to become the "Insuring Party" (as
defined herein) Landlord shall, throughout the Lease Term, keep the "Building
Shell" (as defined in Paragraph 12.1, below) (but not Tenant's trade
fixtures, furnishings or equipment) insured against all risks (as the term
"all risk" is used in the insurance industry), and for earthquake and flood
risks, in such form and with such policy limits as Landlord may determine
from time to time, so as to provide reasonable protection of Landlord's
ownership interests in the Premises at a reasonable cost. Notwithstanding the
foregoing, Landlord shall not be required to maintain any insurance which
becomes unavailable or commercially unreasonable to carry in the Southern
California insurance marketplace. Landlord agrees that prior to changing the
insurance limits or deductible amounts of such insurance in a manner which
would materially decrease the insurance limits or materially increase the
deductible amounts from the limits and deductibles shown in the Insurance
Summary attached hereto as Exhibit I, Landlord will notify Tenant and
provide Tenant with an opportunity to obtain its own insurance against any
increased risk resulting from any such decrease in insurance limits or
increase in deductibles or to become the Insuring Party under this Lease. If
Landlord fails to so notify Tenant, then in the event of a loss for which
insurance is required under this Paragraph 8.1, Tenant shall not be
responsible for any additional increment or portion of such loss to the
extent such loss would have been covered pursuant to the insurance program
described in the attached Exhibit I, but is not covered under the revised
insurance program. In the event that Tenant desires to provide insurance on
the Building Shell (which insurance shall include policy coverages, limits
and deductibles in the same amounts as would be provided by Landlord, and
which shall otherwise satisfy the requirements set forth in this Paragraph
8.1 for coverage which would be carried by Landlord, and which shall satisfy
the applicable requirements of Paragraph 8.4, below), Tenant may, at any time
other than the period from sixty (60) days prior to the expiration of the
then-current Policy Year through thirty (30) days following the commencement
of the immediately following Policy Year, upon written notice to Landlord and
at Tenant's sole cost, elect to obtain, in lieu of
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Landlord's insurance pursuant to this Paragraph 8.1, Tenant's own insurance
on the Building Shell. For purposes of this Lease, the term "Policy Year"
shall mean the one-year period following the commencement date for coverage
under Landlord's then-effective insurance policy. As of the date of this
Lease, the Policy Year for Landlord's existing coverage commenced on July 15,
1993. However, the date of commencement of subsequent Policy Years may
change from time to time over the Lease Term. Landlord agrees to provide
Tenant with written notice of any change in the commencement date of any
Policy Year. In the event of any insured loss, regardless of whether
Landlord or Tenant is the Insuring Party, Tenant shall be responsible
for paying to Landlord any deductible amounts under any insurance policies
insuring the Premises, whether carried by Landlord or Tenant, and, in the
event Tenant elects to become the Insuring Party under this Paragraph 8.1,
Tenant shall be responsible for any coinsurance amounts. Notwithstanding the
foregoing, if Landlord is the party carrying the policy of earthquake
insurance for the Building Shell, the deductible amount payable by Tenant for
any loss resulting from an earthquake shall not exceed five percent (5%) of
the full replacement cost of the Building Shell. Such limitation on the
deductible amount payable by Tenant for any loss resulting from an earthquake
shall not apply if Tenant is the party carrying such earthquake insurance.
The party providing the "all risk" property insurance required under this
Paragraph 8.1 shall also obtain and maintain "rental value insurance"
covering two year's rent (Minimum Rent, real estate taxes, insurance premiums
and landscape maintenance charges) payable under this Lease. If, taking into
account Landlord's overall insurance program for its properties, it is
possible and reasonably practical for Tenant to obtain and maintain in effect
one or more of the components of the insurance required pursuant to this
Paragraph 8.1, Tenant may do so as provided in this Paragraph 8.1, and in
such event Tenant shall be the "Insuring Party" with respect to the risks
covered by the insurance so carried by Tenant, and Landlord shall be the
"Insuring Party" with respect to the risks covered by the insurance so
carried by Landlord.
8.2 Should Tenant elect to become the Insuring Party as to all
or any portion of the insurance described in Paragraph 8.1, above, any
insurance so carried by Tenant shall have attached thereto such form of
lender's loss payable endorsement as Landlord's Lender may require. Tenant
shall, within ten (10) days following Landlord's request therefor, provide
Landlord with a copy of the insurance policy or policies obtained by Tenant
pursuant to Paragraph 8.1, together with a certificate of insurance for such
policy or policies which shall confirm, among other things, that such policy
shall not be modified, cancelled or non-renewed without at least thirty (30)
days prior written notice to Landlord. If Tenant elects to become the
Insuring Party as to all of the insurance described in Paragraph 8.1, Minimum
Rent for each month during which Tenant is the Insuring Party shall be
reduced by one-twelfth (1/12th) of the Annual Insurance Base Amount set forth
in Item 1.9 of the Basic Lease Provisions. If Tenant elects to become the
Insuring Party as to only a portion of the insurance described in Paragraph
8.1, then the Minimum Rent for each month during which Tenant is the Insuring
Party for such insurance shall be reduced by the portion of one-twelfth of
the Annual Insurance Base Amount which is attributable to the insurance
originally carried by Landlord (at the rate included in the Annual Insurance
Base Amount) so carried by Tenant, and the Annual Insurance Base Amount shall
be reduced accordingly. Tenant covenants and agrees to pay to Landlord, as
additional rent hereunder, the amount by which the annual premiums and
related fees for the insurance specified in Paragraph 8.1 which is carried
by Landlord exceeds the Annual Insurance Base Amount specified in Item 1.9 of
the Basic Lease Provisions. Such amount shall be paid by Tenant to Landlord
within ten (10) days after receipt by Tenant of Landlord's
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statement of the cost thereof. If at any time during the Lease Term during
which Landlord is the Insuring Party, the annual premiums and related fees
for the insurance carried by Landlord pursuant to Paragraph 8.1, above,
exceeds the "Insurance Cap Amount" (as defined herein), Tenant shall not be
required to pay any portion of such premiums and related fees exceeding the
Insurance Cap Amount. For the purposes of this Lease, the Insurance Cap
Amount for any Policy Year shall be an amount equal to two and one-half
(2-1/2) times the Annual Insurance Base Amount, as adjusted by any increases
in the "CPI" (as defined in Lease Rider No. 1) from the date of this Lease to
the date of the Policy Year in question. In the Policy Year in which the
Lease Term shall commence and in the Policy Year in which it shall terminate,
such insurance premiums and the Annual Insurance Base Amount shall be
prorated on a daily basis (using a 365-day year), and Tenant's payment
obligations shall be computed accordingly. With respect to any insurance for
which Tenant is the Insuring Party, Tenant shall pay the premiums for such
insurance directly to the insurance carrier at Tenant's sole cost and expense.
8.3 Landlord and Tenant agree that if the Building Shell shall
be damaged or destroyed by risks insured against under Paragraph 8.1, or if
any of Tenant's machinery, fixtures, furniture, merchandise or other
property, real or personal, are damaged or destroyed from any cause covered
by a property policy obtained by Tenant, then and to the extent allowable and
without invalidating such insurance, and whether or not such damage or
destruction was caused by the negligence of the other party, neither party
shall have any liability to the other nor to any insurer of the other for or
in respect of such damage or destruction. If obtainable, each party shall
require all policies of fire or other insurance carried by such party during
the Lease Term upon the Premises or contents therein to include a provision
whereby the insurer designated therein shall waive its right of subrogation
against the other party.
8.4 During the entire Lease Term, Tenant, at Tenant's sole cost
and expense, shall procure and maintain in full force and effect personal
injury and property damage liability insurance with a combined single limit
of not less than Five Million Dollars ($5,000,000). Such insurance may be
evidenced by a Primary Policy or a combination of a Primary Policy and an
Excess Policy. Tenant's liability insurance shall be primary and any
liability insurance maintained by Landlord shall not be contributory.
Landlord shall be named as an additional insured in such policies, and a
policy endorsement so naming Landlord shall be furnished to Landlord. All
such insurance shall insure the performance by Tenant of the indemnity
provisions of Article VII of this Lease. In the event that either party
hereto shall at any time deem the limits of such liability insurance then
carried to be insufficient, the parties shall endeavor to agree upon the
proper and reasonable limits for such insurance then to be carried. If the
parties shall be unable to agree thereon, the proper and reasonable limits
for such insurance then to be carried shall be determined by an impartial
third person knowledgeable of insurance risk matters selected by the parties,
or should they be unable to agree upon a selection by an impartial third
person such third person shall be chosen by the Presiding Judge of the
Superior Court of Los Angeles County upon application by either party made
after five (5) days written notice to the other party of the time and place
of application. The decision of such impartial third person as to such
limits then to be carried shall be binding upon the parties. Such insurance
shall be carried with the limits as agreed upon or determined pursuant to
this Paragraph until such limits shall again be changed pursuant to the
provisions of this Paragraph. The expenses of such determination shall be
borne equally between Landlord and Tenant.
8.5 All of the insurance provided by Tenant under this Article
VIII and all renewals thereof shall be issued by such
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good, responsible and standard companies rated at least A-: Class VII (or the
weighted average rating of all insurers in the group of companies providing
the insurance carried by Landlord under Paragraph 8.1, if such weighted
average rating is lower than A-: Class VII) in the current edition of Best's
Insurance Guide, and authorized to do business in California. Any insurance
carrier providing Tenant's liability insurance must be an "admitted" carrier
in the State of California. The policy or policies of insurance provided for
in Paragraph 8.1 hereof shall be payable to Landlord, or to Tenant or jointly
to Landlord and Landlord's Lender, and Tenant agrees to endorse any check to
the order of Landlord which might be made payable directly to Tenant, or
jointly to Landlord and Tenant, by the insurance company. Tenant agrees to
immediately comply with any request of the insurance carrier providing
insurance described in Paragraph 8.1 if the failure to comply therewith will
cause cancellation of such insurance. All policies provided by Tenant shall
expressly provide that the policy shall not be cancelled or non-renewed
without thirty (30) days' prior written notice to Landlord. Neither Landlord
nor Tenant shall do or permit to be done anything which will invalidate the
insurance policies provided for in this Article VIII. Upon the issuance or
renewal of the liability insurance policy described in this Article VIII, or
upon commencement of the Lease Term if such policy is then in force or
effect, Tenant shall have its insurance carrier furnish Landlord with a
Certificate of said insurance. If requested in writing by Landlord following
a claim or occurrence for which coverage may be available under any policy of
insurance carried by Tenant under this Lease, Tenant shall reproduce and
forward to Landlord a true copy of any such insurance policy. Tenant shall
obtain such fire insurance and other insurance on Tenant's machinery,
fixtures, furniture and other property, real or personal (or shall
self-insure such property), as Tenant deems appropriate, and with which
Landlord shall not otherwise be concerned.
ARTICLE IX
REPAIRS AND MAINTENANCE
9.1 Landlord shall maintain and repair the foundation, floor
slab, exterior walls, exterior paint, roof, asphalt paving, concrete paving
and fire sprinkler system of the Premises at its own cost and expense
(subject to Tenant and insurance contributions relating to damage or
destruction affecting the Premises), provided, however, that if any
maintenance or repair work for the foundation, floor slab, exterior walls,
exterior paint, roof, asphalt paving, concrete paving or fire sprinkler
system of the Premises is required as a result of any negligence or willful
misconduct of Tenant or any of Tenant's agents, employees, shippers,
customers, invitees or contractors, such work shall be at Tenant's sole cost
and expense except to the extent such matter is covered by the insurance
required to be carried by Landlord under the terms of this Lease. Tenant
shall keep all other portions and components of the Premises, and including
all plumbing, HVAC systems, electrical and lighting systems, ceilings, plate
glass and skylights in good order, condition and repair during the Lease Term
and any Extended Term. Without limiting the generality of the foregoing,
Tenant shall perform all maintenance detailed in Paragraph K (mechanical
service controls) of the Performance Standards of the Watson Industrial
Center attached hereto as Exhibit A. Tenant shall also maintain any of
Tenant's property visible from outside the Building in the same condition,
with the surfaces thereof painted at such intervals and such colors as
Landlord shall approve. Except as provided below, Tenant shall promptly
replace any portion of the Premises or system or equipment in the Premises
which cannot be fully repaired. In the event it becomes necessary to replace
a component of the HVAC system or lighting for the Premises and such
replacement would constitute a capital
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improvement, Tenant shall pay a portion of the cost of such capital
improvement computed by multiplying such cost by a fraction, the numerator of
which shall be the total number of years of the Lease Term (including any
Extended Term for which Tenant has or ultimately exercises its extension
option) and the denominator of which shall be the number of years of the
projected useful life of such capital improvement. With respect to any
capital improvement to major plumbing lines within the Building which have an
aggregate replacement cost in excess of Twenty-Five Thousand Dollars
($25,000.00), Tenant shall pay a portion of such cost of such capital
improvement computed by multiplying the total cost of such improvements by a
fraction, the numerator of which shall be the number of years remaining in
the Lease Term (including any Extended Term for which Tenant has or
ultimately exercises its extension option) and the denominator of which shall
be fifteen (15). If the replacement of any such capital improvement item
occurs prior to the end of the Lease Term, and Tenant subsequently exercises
one or both of its extension options, the amount previously computed as being
payable by Tenant hereunder shall be adjusted to reflect the change in the
numerator of such fraction resulting from Tenant's exercise of such extension
option. Tenant's portion of such cost shall be paid in equal monthly
payments, amortized at a commercially reasonably interest rate, over the
portion of the Lease Term remaining as of the date such capital improvement
is commenced. Any payment adjustment resulting from the exercise of an
extension option shall be paid by Tenant in equal monthly payments amortized
over the Extended Term at a commercially reasonable interest rate. Tenant
shall maintain the Premises in an orderly, first-class and fully operative
condition. Landlord shall maintain the exterior landscaping for the Premises
in accordance with Landlord's then-prevailing landscape maintenance
standards, and the amount by which the cost of such landscape maintenance
work exceeds the Landscape Base Amount of One Thousand One Hundred
Forty-Eight Dollars ($1,148) shall be paid by Tenant to Landlord as
additional rent. Such payments shall be made by Tenant within thirty (30)
days following Tenant's receipt of an invoice from Landlord. Except for
Landlord's obligations for maintenance and repair of the foundations,
exterior walls, exterior paint and roof of the Premises, Landlord shall have
no obligation to repair or maintain the improvements or any areas adjacent
thereto. Tenant waives the provisions of any law permitting Tenant to make
repairs at Landlord's expense.
9.1.1 If Tenant provides notice (the "Repair Notice") to Landlord
of an event or circumstance which Landlord is required to repair, alter or
maintain pursuant to the terms of this Lease (a "Required Action"), and
Landlord fails to provide the Required Action within the time period required
by this Lease, or a reasonable period of time, if no specific time period is
specified in this Lease, after a reasonable period of time following the
receipt of the Repair Notice (the "Notice Date"), or, in any event, does not
commence the Required Action within ten (10) days after the Notice Date and
complete the Required Action within thirty (30) days after the Notice Date
(provided that if the nature of the Required Action is such that the same
cannot reasonably be completed within a thirty (30) day period, Landlord's
time period for completion shall not be deemed to have expired if Landlord
diligently commences such cure within such period and thereafter diligently
proceeds to rectify and complete the Required Action, as soon as possible),
then Tenant may proceed to take the Required Action, pursuant to the terms of
this Lease, and after delivering a second notice to Landlord specifying that
Tenant is taking the Required Action (the "Second Notice").
9.1.2 Notwithstanding the foregoing, if there exists an emergency
such that the Premises or a portion thereof are rendered untenantable and
Tenant's personnel are forced to vacate the Premises or such portion thereof
and if Tenant gives
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Landlord notice (the "Emergency Notice") of Tenant's intention to take action
with respect thereto (the "Necessary Action") and the Necessary Action is
also a Required Action, Tenant may take the Necessary Action if Landlord does
not commence the Necessary Action within one (1) business day after the
Emergency Notice (the "Emergency Cure Period") and thereafter use its best
efforts and due diligence to complete the Necessary Action as soon as
possible.
9.1.3 If any Necessary Action will affect the structural integrity
of the Building, or the exterior appearance of the Building, Tenant shall use
only those contractors used by Landlord in the Building for work on the
Building Systems, or its structure, and Landlord shall provide Tenant (when
available and upon Tenant's request) with notice identifying such contractors
and any changes to the list of such contractors, unless such contractors are
unwilling or unable to perform such work or the cost of such work is not
competitive, in which event Tenant may utilize the services of any other
qualified contractors which normally and regularly perform similar work in
the vicinity of the Building except for any contractors who Landlord
specifically notifies Tenant in writing within five (5) business days of
Landlord's receipt of a Repair Notice or within one (1) business day of
Landlord's receipt of an Emergency Notice that Tenant may not use for such
work (which notice shall specify the commercially reasonable reasons for
Landlord's not allowing Tenant to use such contractor.)
9.1.4 If any Requested Action or Necessary Action is taken by
Tenant pursuant to the terms of this Paragraph 9.1, and such Required Action
or Necessary Action relates to an item for which Landlord is allocated
payment responsibility under this Lease, then Landlord shall reimburse Tenant
for Tenant's reasonable and documented costs and expenses in taking the
Required Action or Necessary Action within thirty (30) days after receipt by
Landlord of an invoice from Tenant which sets forth a reasonably
particularized breakdown of its costs and expenses in connection with taking
the Required Action or Necessary Action on behalf of Landlord (the "Repair
Invoice). In the event Landlord does not pay Tenant the amount of the repair
invoice within the time required pursuant to this Paragraph 9.1.4, Tenant
shall have the right to seek recovery of such amount pursuant to a judicial
reference proceeding conducted in accordance with the provisions of Paragraph
18.2, below. If ownership of the Premises has been conveyed to a person
other than: (a) a lender pursuant to foreclosure of acceptance of a deed in
lieu of foreclosure; (b) an institutional owner, such as a pension trust
fund, life insurance company or commercial bank with a property management
presence in California; or (c) a non-institutional owner headquartered in the
state of California, then if Tenant obtains a final judgment against such
Landlord in such judicial reference proceeding, and such Landlord fails to
make the payment to Tenant in the amount of such judgment within ten (10)
days following Tenant's demand for such payment, then Tenant shall have the
right to deduct up to twenty percent (20%) of the amount of Tenant's monthly
Minimum Rent payments under this Lease until such time as Tenant has deducted
an amount equal to the amount of such judgment, together with interest on any
unpaid outstanding balance of such judgment that may exist from time to time
at the Lease Interest Rate.
9.2 All of Tenant's obligations to maintain and repair shall be
accomplished at Tenant's sole expense. If Tenant fails to maintain and
repair the Premises, Landlord may, at its election, notify Tenant of Tenant's
obligation to undertake such repair and maintenance work. If Tenant fails to
commence such work within a reasonable period of time following receipt of
such notice (determined in light of then-prevailing facts and circumstances)
Landlord may enter the Premises and perform any such work on behalf of
Tenant. Notwithstanding the foregoing, no
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notice to Tenant shall be required in case of emergency, and in the event of
an emergency Landlord may enter the Premises and perform such repair and
maintenance on behalf of Tenant. In any such case, Tenant shall reimburse
Landlord for all costs so incurred immediately upon demand, together with
interest thereon at the "Lease Interest Rate" (as defined in Paragraph 26.26,
below). Landlord's right to perform maintenance and repair work pursuant to
this Paragraph 9.2 shall not be deemed to create any obligation on the part
of Landlord to do so, and shall not in any way limit Landlord's remedies
under this Lease.
9.3 Upon the expiration or sooner termination of this Lease,
Tenant shall surrender the Premises to Landlord, broom clean and in the same
condition as received, except for ordinary wear and tear which Tenant is not
otherwise obligated to remedy under any provision of this Lease, and except
for repair and maintenance items which are the obligation of Landlord
pursuant to Paragraph 9.1, above. Any damage to, or deterioration of, the
Premises shall be deemed not to be ordinary wear and tear if the same was the
responsibility of Tenant under this Lease, and could have been prevented by
good maintenance practices. In addition, Landlord may require Tenant to
remove any alterations, additions or improvements prior to the termination of
the Lease and to restore the Premises to its prior condition, or Landlord may
perform such removals and restorations itself, all at Tenant's expense.
Notwithstanding the foregoing, Landlord and Tenant hereby agree that Tenant
shall not be required to remove from the Premises the overhead bridge
conveyor system described in Paragraph 7 of the attached Lease Rider. All
alterations, additions and improvements which Landlord has not required
Tenant to remove or which Tenant has not elected to remove, as provided
herein, shall become Landlord's property and shall be surrendered to Landlord
upon the expiration or sooner termination of the Lease, except that Tenant
may remove any of Tenant's machinery or equipment which can be removed
without damage to the Premises. Tenant may, at its election, finance the
purchase of, grant security interests in, and otherwise encumber any trade
fixtures, furnishings, trade equipment, inventory or other personal property
owned by Tenant (collectively, the "Personal Property") (but not any
equipment which is a replacement of or an enhancement to any building systems
existing on the Premises as of the date of this Lease, or any building
equipment which is necessary for the operation or integrity of the Building)
and Landlord agrees to execute a commercially reasonable form of "Landlord
Lien Waiver Agreement" should Tenant request Landlord to do so. As used
herein, the term "Landlord Lien Waiver Agreement" shall mean an agreement
granting the holder of a security interest in the Personal Property the
right, upon reasonable notice to Landlord, to enter the Premises for the
purposes of taking possession of and removing Tenant's Personal Property.
Any such Landlord Lien Waiver Agreement shall include requirements that: (a)
such lender repair all damage caused by or arising out of any entry of the
Premises, including any damage caused by the removal of Tenant's Personal
Property; (b) the Personal Property be removed no later than thirty (30) days
following delivery of a written demand from Landlord to Tenant or such
Lender, which demand may be made only following the termination of the Lease;
(c) the lender is prohibited from conducting any public sale or auction sale
of any of the Personal Property on the Premises; and (d) the lender indemnify
Landlord from and against and all liabilities, losses, damages and expenses
arising out of or related to the lender's entry on to or use of the Premises,
or the removal of the Personal Property from the Premises. Tenant agrees to
indemnify and hold Landlord harmless from and against any liability, loss,
cost, damage or expense relating to the installation, placement, removal or
financing of any such Personal Property, except to the extent any damages
result solely from the negligence or willful misconduct of Landlord, and
except for any damages covered by property insurance carried by Landlord
pursuant to the terms of this Lease
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and for which a waiver of subrogation has been obtained. If, whether in
violation of this Lease or pursuant to Landlord's permission (which may be
granted or withheld in Landlord's sole and absolute discretion), Tenant
installs any "Underground Storage Tanks" (as defined herein) on the Premises,
Tenant shall, at its sole cost and expense, remove any such Underground
Storage Tanks immediately upon the request of Landlord, the expiration or
sooner termination of this Lease, or the order of any governmental authority,
whichever occurs first. Notwithstanding any provisions of this Lease to the
contrary, such Underground Storage Tanks shall at all times be and remain the
property of Tenant. As used herein, the term "Underground Storage Tank"
means any one or combination of tanks, including all pipes, sumps, valves and
other equipment connected thereto, which are used for the storage of
petroleum products, hydrocarbon substances or fractions thereof, or other
Hazardous Materials, and which are located wholly or partially beneath the
surface of the ground. Tenant shall repair, at Tenant's expense, any damage
to the Premises caused by the removal of any such machinery or equipment.
9.4 Tenant shall not, without the prior written approval of
Landlord, make any additions, alterations, changes or improvements to the
Premises or any portion thereof. Any request for approval of additions,
alterations, changes or improvements shall be presented to Landlord in
writing, accompanied by detailed drawings and specifications. If Tenant so
requests, Landlord shall notify Tenant in writing, at the time of Landlord's
approval of such additions, alterations, changes or improvements, whether
Landlord will require the removal of such additions, alterations, changes or
improvements, upon the expiration or sooner termination of the Lease Term.
Any item for which Landlord so notifies Tenant that Landlord will not require
to be removed is referred to herein as an "Exempt Alteration". If Landlord
has indicated that Landlord will require the removal of any addition,
alteration, change or improvement, Landlord may subsequently notify Tenant
that Landlord will not require the removal of such item, in which event
Tenant shall not (unless it has previously done so) remove such alteration,
addition, change or improvement. Tenant shall not be required to obtain
Landlord's consent for any non-structural additions, alterations, changes or
improvements to the Premises which do not affect any building service
equipment, and which, as to any particular integrated group of additions,
alterations, changes or improvements, have an aggregate cost of less than
Twenty Thousand Dollars ($20,000.00). No addition, alteration, change or
improvement shall be made which will weaken the structural strength, lessen
the value of, interfere with, or make inoperable any portion of the Premises
or the "building service equipment", or change the architectural appearance
of the Premises, unless such alteration, change or improvement was
constructed pursuant to plans and specifications specifically approved by
Landlord in writing. All approved additions, alterations, changes and
improvements shall be made in workmanlike manner, in full compliance with all
laws and ordinances applicable thereto. Except for any Underground Storage
Tanks, which shall, at all times be and remain the property of Tenant, all
such additions, alterations, changes and improvements shall become a part of
the Premises, and become the property of Landlord upon the expiration or
sooner termination of the Lease Term; and, unless Landlord shall require
removal thereof as required pursuant to Paragraph 16.2, all such
improvements, including all building service equipment improvements (but
specifically excluding any Underground Storage Tanks), shall remain in and be
surrendered as a part of the Premises upon the expiration or sooner
termination of this Lease. Tenant shall furnish Landlord with a copy of
Tenant's final drawings which accurately set forth with field-grade notations
the nature and extent of improvements made by Tenant to the Premises. Tenant
and any assignee or sublessee of Tenant shall obtain Landlord's prior written
consent before any signs are
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installed on the Premises. Such signs shall remain the property of Tenant or
any assignee or sublessee who installs the same and they shall be removed
from the Premises at the expiration or sooner termination of the Lease Term.
Any damage arising out of or resulting from the installation, placement or
removal of such signs shall be repaired by Tenant at Tenant's sole cost and
expense. Landlord agrees that it shall not unreasonably withhold its consent
to the installation of Tenant's business identity signs for the Premises.
The term "building service equipment" shall include, without limitation,
equipment and property ordinarily necessary or convenient for the operation
and utilization of a building, such as heaters, air conditioners, solar
panels, power panels, transformers, light fixtures, sprinklers, suspended
ceilings, plumbing fixtures, walls, cabinets, shelving affixed to walls in
office areas, doors, floor coverings, fixtures, fencing, paging systems,
emission or pollution control facilities, security and alarm systems, dock
levelers, and utility services such as gas, electricity, water, steam,
telephone, sewer and other similar services used in connection with the
foregoing items. Building service equipment shall also include any related
power installations, plumbing installations, pollution control installations,
sprinkler installations, energy conservation installations, and security
installations, including wiring, conduits, ducts, lines, pipes and meters for
the transportation, distribution, measuring and/or disposal thereof.
Building service equipment shall also include installations affixed to the
Building which serve machinery and equipment, including, without limitation,
air lines, conveyors, crane ways, dust collectors, paint booths, buss
ducting, power panels and related power installations.
9.5 Tenant shall have the right, without Landlord's prior
approval, to install within the Premises Tenant's equipment, trade fixtures,
furniture and furnishings (hereinafter collectively called "Tenant's
Equipment"). Under no circumstances, however, shall Underground Storage
Tanks be installed on the Premises. However, Tenant shall notify Landlord in
writing and Tenant shall obtain Landlord's prior written approval before the
installation of heavy equipment, or heavy trade fixtures in the Premises, and
prior to placing any load on the roof or attaching any load to the walls or
the underside of the roof of any building. Tenant shall not install any of
Tenant's Equipment in such a manner as to weaken the structural strength of
the improvements on the Premises, interfere with, or make inoperable any
portion of the Premises or the building service equipment. If Tenant makes
any addition, alteration, change, or improvement to the Premises described in
Paragraph 9.4 without Landlord's consent, or if Tenant installs any of
Tenant's Equipment in violation of this Paragraph 9.5, then Tenant shall,
upon receipt of written notice from Landlord, promptly remove, replace, or
otherwise correct such installations in such manner as Landlord shall
reasonably require and direct, and Tenant shall reimburse Landlord, on demand
and as additional rent, for all architect's, engineer's and legal fees
incurred by Landlord in connection with such installations. If Tenant or any
person with whom Tenant is engaged in business causes any damage to the
Premises or the improvements, structural or otherwise, Tenant assumes all
risk of such damage to any improvements and Tenant shall, upon demand,
promptly repair all such damage to the reasonable satisfaction of Landlord.
Tenant shall promptly repair any damage to the Premises arising from the
installation, use, and removal of Tenant's Equipment; and Tenant shall
restore the Premises to a clean and orderly condition and appearance, state
of repair and operating order with all remaining improvements thereon in a
good, safe, fully operable condition and in full compliance with all federal,
state and local laws, rules, regulations and ordinances. If Tenant fails to
perform any act or obligation required of Tenant under this Paragraph 9.5,
Landlord shall have the right, but not the obligation, after ten (10) days'
written notice to Tenant specifying the action required by Tenant, to enter
upon the
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Premises and perform such act or obligation; unless within such ten (10) day
period, Tenant commences to take the specific action and continues to
diligently pursue the completion of such action. In the event Tenant fails
to so commence and pursue such action and Landlord takes such action on
behalf of Tenant, Tenant agrees to pay Landlord, as additional rent within
ten (10) days of receipt of Landlord's invoice, for all costs incurred by
Landlord in performing Tenant's act or obligation, plus an overhead allowance
of fifteen percent (15%) of such cost.
9.6 Landlord shall not be obligated to maintain or to make any
repairs, replacements, or renewals of any kind, nature or description
whatsoever to the Premises or any buildings or improvements thereon, except
as specifically provided in Paragraphs 9.1, 12.1, 13.3 and Exhibit A of this
Lease.
9.7 Tenant shall comply with and abide by all federal, state,
county, municipal and other governmental statutes, ordinances, laws, and
regulations affecting the Premises, the improvements thereon, the business to
be conducted therein and thereon by Tenant, or any activity or condition on
or in the Premises; provided, however, that if such compliance requires
structural or other capital improvements to the Premises which are not
required as a result of the specific use of the Premises by Tenant, but
rather are generally required at law for similar types of buildings, then
Tenant shall only be obligated to pay a pro rata portion of the costs of such
improvements. Such pro rata portion shall be determined by multiplying the
cost of such improvements by a fraction, the numerator of which shall be the
number of years remaining in the Lease Term as of the date such capital
improvement is commenced (including any years of any Extended Term for which
Tenant has exercised or ultimately exercises its extension option) and the
denominator of which shall be fifteen (15). If such improvements are
performed prior to the end of the Lease Term, and Tenant subsequently
exercises one or both of its extension options, the amount previously
computed as being payable by Tenant thereunder shall be adjusted to reflect
the change in the numerator of such fraction resulting from Tenant's exercise
of any such extension option. Tenant's portion of such cost shall be paid in
equal monthly payments, amortized at a commercially reasonably interest rate,
over the portion of the Lease Term remaining as of the date such capital
improvement is commenced. Any payment adjustment resulting from the exercise
of an extension option shall be paid by Tenant in equal monthly payments
amortized over the Extended Term at a commercially reasonable interest rate.
Without limiting the generality of the foregoing, Tenant shall comply with
all environmental laws and laws relating to "Hazardous Materials" (as defined
herein) affecting the Premises, the improvements therein, the business
conducted thereon by Tenant, or any activity or condition on or in the
Premises, to the extent that the necessity of such compliance was caused by
the act of Tenant or Tenant's agents, employees, invitees, customers,
contractors, subcontractors or licensees (collectively "Tenant's Agents").
Tenant shall not be responsible for any costs or expenses of remediating the
presence of any "Hazardous Materials" (as defined herein) which were located
on the Premises prior to the Commencement Date (the "Pre-Existing
Conditions") or which were not caused by the acts of Tenant or Tenant's
Agents, and Landlord shall indemnify and hold Tenant harmless from and
against any fines, removal costs or remediation expenses incurred as a result
of any such Pre-Existing Conditions or incurred as a result of causes other
than the acts of Tenant or Tenant's Agents. This indemnity shall not,
however, bind any lender who succeeds to Landlord's interest in the Premises
through foreclosure or acceptance of a deed in lieu of foreclosure, nor any
purchaser of the Premises from such a lender. Tenant shall not install,
place, construct or maintain any Underground Storage Tanks on the Premises.
Any and all Hazardous Materials and their containers which are brought upon
the Premises by, at the direction of, or
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with the consent or approval of Tenant shall, at all times, remain the
property of Tenant. Tenant warrants that Tenant's business and all activities
to be performed by Tenant in, on or about the Premises shall comply with such
statutes, ordinances, laws and regulations; and Tenant agrees to change any
such activity or install necessary equipment, safety devices, pollution
control systems, or other installations at any time during the Lease Term to
so comply therewith. If the Premises are, or become subject to, the Los
Angeles County Congestion Management Program (mandated by Sections 65088 et
seq of the California Government Code) or the City of Carson Trip Reduction
and Travel Demand Measures Ordinance, Tenant shall be responsible, at its
sole cost and expense, for complying with all requirements of such programs
and ordinances, including, without limitation, any provisions of such
programs and ordinances requiring improvements or modifications to the
Premises. However, to the extent such compliance requires structural or
other capital improvements to the Premises which are not required as a result
of the specific use of the Premises by Tenant, but rather are generally
required by law for similar types of buildings, such costs shall be allocated
between Landlord and Tenant provided above for capital improvements. If,
during the Lease Term, Landlord or Tenant is required to convert or replace
the HVAC system serving the Premises in order to comply with federal, state
or local statutes, laws, ordinances, rules or regulations concerning the use
of chlorofluorocarbons (including, without limitation, Freon), then the
responsibility for paying the costs of any such conversion or replacement,
including, without limitation, the purchase and installation of new
equipment, and the alteration of existing HVAC equipment in the Premises to
accommodate any new equipment shall be allocated between Landlord and Tenant
as provided above. Tenant agrees not to commit or permit waste upon the
Premises.
9.8 Tenant shall (i) not cause or permit any "Hazardous
Material" (as hereinafter defined) to be brought upon, kept, used, stored,
discharged or released (collectively "used") in or about the Premises during
the Lease Term, without the prior written consent of Landlord.
Notwithstanding the foregoing, so long as Tenant consistently complies with
all applicable legal and regulatory requirements relating to the use,
storage, handling and disposal of Hazardous Materials, Tenant shall be
permitted to use and store on the Premises reasonable quantities of consumer
cleaning products, office supplies and similar over-the-counter cleaning and
maintenance supplies. Landlord agrees that it will not unreasonably withhold
its consent to the use of any Hazardous Materials of a type and in quantities
similar to those used with by other tenants of Landlord at Watson Industrial
Center South or any other master planned industrial park owned by Landlord.
If Tenant breaches the obligations stated in the preceding sentence, or if
any Hazardous Material used on the Premises during the Lease Term results in
contamination of the Premises or any adjacent property, then Tenant shall
indemnify, defend and hold Landlord harmless from any and all claims,
judgments, damages, penalties, fines, costs, liabilities or losses
(including, without limitation, sums paid in settlement of claims, attorneys'
fees, consultant fees and expert fees) which arise or result, during or after
the Lease Term or any Extended Term, as a result of Hazardous Material so
used. This indemnification of Landlord by Tenant includes, without
limitation, costs incurred in connection with any investigation of site
conditions or any cleanup, remedial, removal or restoration work required by
any federal, state or local governmental agency or political subdivision
because of Hazardous Material present in the soil or ground water on or under
the Premises and/or adjacent property. Without limiting the foregoing, if
any Hazardous Material is used on the Premises during the Lease Term and
results in any contamination of the Premises and/or adjacent property, Tenant
shall promptly take all actions at its sole expense as are necessary to
return the Premises
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and/or adjacent property to the condition existing prior to the use of any
such Hazardous Material on the Premises and/or adjacent property; provided
that Landlord's approval of such actions shall first be obtained, which
approval shall not be unreasonably withheld so long as such actions would not
potentially have any material adverse long-term or short-term effect on the
Premises or adjacent property. As used herein, the term "Hazardous Material"
means any petroleum products or other hydrocarbon substances (and fractions
thereof) and any hazardous or toxic substance, material or waste which is or
becomes regulated by any local governmental authority, the State of
California or the United States Government. Upon expiration or earlier
termination of this Lease, Tenant shall duly execute and deliver to Landlord
a certificate (the "Hazardous Material Certificate") in the form of Exhibit D
attached hereto. In the event Tenant shall fail to so deliver the Hazardous
Material Certificate, such failure shall, without further notice or the
passage of time constitute a default under the Lease and, without in any way
limiting or impairing Landlord's remedies against Tenant, shall entitle
Landlord to retain the entire security deposit held by Landlord to be applied
toward payment of the cost of assessing the presence of Hazardous Material on
the Premises and/or adjacent property, and toward payment of all loss, cost,
liability, damage and expense of Landlord arising as a result of any such
contamination and toward such other costs and expenses of Landlord as
Landlord may designate in its sole discretion. Landlord may, if it so
desires, cause a properly licensed and qualified environmental consultant to
conduct an environmental audit of the Premises. The scope and detail of such
environmental audit shall be reasonably determined by Landlord based on all
relevant facts and circumstances then existing. If any environmental audit
recommends or suggests that additional testing be conducted, Landlord may
require that such additional testing be conducted. If such environmental
audit determines that the Premises or any adjacent property has been
contaminated with Hazardous Materials resulting from the acts or omissions of
Tenant or Tenant's Agents, and if the corrective action recommendations
contained in such environmental audit were not previously made known to
Landlord by Tenant as a part of Tenant's own remediation plan for the
Premises, then Tenant shall pay the costs of such environmental audit,
together with the costs of remediating the effects of such contamination to a
standard which complies with all applicable laws and to a standard which will
not cause the market value of such property to be diminished. A copy of any
environmental audit performed by either Landlord or Tenant shall be promptly
delivered to the other party. If, at any time during the Lease Term or upon
the termination or earlier expiration of the Lease, Landlord reasonably
believes that the Premises or any adjacent property has been contaminated as
a result of Hazardous Materials which were used on or about the Premises
during the Lease Term, Landlord may require Tenant to conduct an
environmental audit (in accordance with the above described criteria) to
evaluate the presence of any Hazardous Materials on the Premises (and the
cost of such audit shall be paid by Tenant if such audit indicates that the
Premises or any adjacent property has been contaminated as a result of
Hazardous Materials which were used on or about the Premises by Tenant or
Tenant's Agents during the Lease Term), and to cleanup, remediate, and
otherwise mitigate the effects of the presence of any such Hazardous
Materials on the Premises consistent with the remediation standards described
above, or Landlord may, if it so elects, undertake such an environmental
audit and any such cleanup, remediation or mitigation work on behalf of
Tenant, at Tenant's sole cost and expense. In any event, any such
environmental audit or cleanup, remediation or mitigation work shall be
performed by qualified environmental professionals acceptable to Landlord.
Nothing contained herein shall be deemed or construed to limit the liability
of Tenant to Landlord hereunder for the breach of any covenant of Tenant
under this Paragraph 9.8. The provisions of this Paragraph 9.8 shall
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survive the expiration or earlier termination of this Lease and Tenant's
surrender of the Premises to Landlord.
9.9 On the fifteenth (15th) day of each January each year of the
Lease Term following the year in which the Commencement Date occurs, (the
"Disclosure Dates"), Tenant shall disclose to Landlord in writing the common
and chemical names and the quantities of all Hazardous Materials which were
stored, used or disposed of on the Premises during the preceding calendar
year. Tenant shall immediately notify Landlord of Tenant's receipt of any
notice, citation or other communication received by Tenant relating to the
presence, storage, use or release of any Hazardous Materials in, on or about
the Premises.
9.10 Landlord shall have the right, but not the duty, to inspect
the Premises at any time to determine whether Tenant is complying with the
requirements of this Lease. If Tenant is not in compliance with the
requirements of the provisions of this Lease relating to Hazardous Materials,
Landlord shall have the right, but not the obligation, to notify Tenant that
Landlord intends to enter upon the Premises to remedy such condition and, if
Tenant fails to remedy such condition within ten (10) days after receipt of
such notice and to diligently pursue the complete correction of such
condition, then Landlord may, but shall not be obligated to immediately enter
upon the Premises to remedy any condition caused by Tenant's failure to
comply with the requirements of this Lease. Landlord shall use reasonable
efforts to minimize interference with Tenant's business as a result of any
such entry by Landlord but shall not be liable for any interference caused
thereby.
9.11 Any failure of Tenant to comply with the provisions of
Paragraphs 9.7, 9.8 and 9.9 of this Lease shall be a material default under
this Lease, enabling Landlord to exercise any of the remedies set forth in
this Lease.
9.12 Tenant acknowledges its understanding and awareness that the
Building was constructed prior to 1979, and that some asbestos-containing
materials may have been used in the construction of the Building. Tenant
acknowledges its receipt of an "Asbestos Disclosure Letter" from Landlord, a
copy of which is incorporated herein by reference. Tenant acknowledges its
awareness that the release of asbestos fibers can present a serious health
risk, and Tenant agrees that it shall not undertake any activities on the
Premises which might disturb or release asbestos-containing materials without
implementing appropriate safety procedures.
9.13 Pursuant to the requirements of California Health and Safety
Code Section 25359.7, Landlord hereby notifies Tenant that Landlord does not
know, and does not have reasonable cause to believe, that any release of any
Hazardous Materials has come to be located on or beneath the Premises. Prior
to the Commencement Date, Landlord shall provide to Tenant, for informational
purposes only, copies of any Phase I environmental reports and other
environmental reports, surveys or studies in Landlord's possession which
relate to the Premises.
ARTICLE X
INSPECTION OF PREMISES BY LANDLORD
10.1 Tenant agrees that Landlord and the authorized
representatives of Landlord shall have the right to enter the Premises upon
reasonable notice to Tenant (determined in light of then-prevailing facts and
circumstances) at all reasonable times during usual business hours, or at any
time in the case of an emergency, for the purpose of (a) inspecting same; and
(b) making such repairs or reconstruction to the Premises required by or
permitted to be made by Landlord, and (c) performing any work
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therein that may be necessary by reason of Tenant's default under the
provisions of this Lease. Nothing herein shall imply any duty of Landlord to
do any work which, under the provisions of this Lease, Tenant is required to
perform and the performance thereof by Landlord shall not constitute a waiver
of Tenant's default in failing to perform the same. Landlord may, during the
progress of any work on the Premises, keep and store upon the parking area of
or within the Premises, all necessary materials, tools and equipment.
Landlord shall not in any event be liable for any inconvenience, annoyance,
disturbance, loss of business, or other damage sustained by Tenant while
making such repairs or the performance of any such work on the Premises, or
on account of bringing materials, supplies and equipment into or through the
Premises during the course thereof. In the event Landlord makes any repairs
or maintenance which Tenant has failed to do or perform, after reasonable
notice and time to so perform, the cost thereof plus an overhead allowance of
fifteen percent (15%) of such cost shall constitute additional rent and shall
be paid to Landlord within ten (10) days of receipt of Landlord's invoice.
10.2 Landlord is hereby given the right during usual business
hours to enter the Premises and to exhibit the same for purposes of sale or
mortgage, and during the last six (6) months of the Lease Term to exhibit the
same to any prospective tenant.
ARTICLE XI
MECHANICS' LIENS
11.1 Tenant covenants and agrees to keep all of the Premises and
every part thereof and all buildings and other improvements thereon free and
clear of and from any and all mechanics', materialmen's and other liens for
work or labor done, services performed, materials, appliances, transportation
or power contributed, used or furnished or to be used in or about the
Premises for or in connection with any operations of Tenant, any alterations,
improvements, repairs or additions, which Tenant may make or permit or cause
to be made, or any work or construction by, for or permitted by Tenant on or
about the Premises; and at all times Tenant shall promptly and fully pay and
discharge any and all claims upon which any such lien may or could be based;
and Tenant shall save and hold Landlord and all of the Premises free and
harmless of and from any and all such liens and claims of liens and suits or
other proceedings pertaining thereto. Tenant, or any subtenant, assignee or
other occupant of the Premises covenants and agrees to give Landlord written
notice not less than ten (10) days in advance of the commencement of any
construction, alteration, addition, improvements or repair to the Premises in
order that Landlord may post an appropriate notice of Landlord's
non-responsibility.
11.2 No mechanics' or materialmen's liens or mortgages, deeds of
trust, or other liens of any character whatsoever created or suffered by
Tenant shall in any way or to any extent affect the interest or rights of
Landlord in any buildings or other improvements on the Premises, or attach to
or affect Landlord's title to or rights in the Premises.
11.3 Tenant shall have the right to contest any mechanic's lien
or other lien claim filed against the Premises provided that Tenant gives
Landlord written notice of such contest, Tenant diligently prosecutes such
contest, at all times effectually stays or prevents any official or judicial
sale of the Premises under execution or otherwise, and pays or otherwise
satisfies any final judgment adjudging or enforcing such contested lien and
thereafter procures record satisfaction or release thereof. If requested in
writing by Landlord, Tenant shall furnish to Landlord a surety bond issued by
a surety company acceptable to Landlord in an amount not less than one and
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one-half times the amount of any such mechanic's lien or other lien claim
filed against the Premises.
ARTICLE XII
DAMAGE OR DESTRUCTION OF PREMISES
12.1 In the event the "Building Shell" (as defined herein) is
damaged or destroyed, then so long as the cost of repairing such damage or
destruction is covered by insurance policies carried by the appropriate
Insuring Party (except for deductible amounts, which shall in all cases be
paid by Tenant), Landlord shall repair and restore the Building Shell (but
not any of Tenant's trade fixtures, furnishings or equipment) to its
condition existing prior to said damage or destruction, and this Lease shall
continue in full force and effect. Any damage or destruction of the type
described above is referred to herein as an "Insured Loss." As used herein,
the term "Building Shell" shall mean the core and shell of the Building as it
exists as of the date of this Lease, together with any alterations and
improvements thereto which are generally recognized and accepted as being
real property in nature, and which, by the terms of this Lease become the
property of Landlord upon the expiration or sooner termination of this Lease.
The proceeds of insurance maintained pursuant to Paragraph 8.1 shall be
delivered to Landlord and shall be used to pay the cost and expense of
repairing and rebuilding the Building Shell. If Landlord is the Insuring
Party, and if the cost of repairing any damage or destruction to the Building
Shell is not covered by insurance due solely to Landlord's failure to obtain
and maintain in effect the policies of insurance which Landlord is required
to maintain pursuant to Paragraph 8.1, above, then such damage and
destruction shall be treated in the same manner as an Insured Loss pursuant
to this Paragraph 12.1. If Tenant is the Insuring Party, and if the cost of
repairing any damage or destruction to the Building Shell is not covered by
insurance due solely to Tenant's failure to obtain and maintain in effect the
policies of insurance which Tenant is required to maintain pursuant to
Paragraph 8.1, above, then such damage and destruction shall be treated in
the same manner as an Insured Loss pursuant to this Paragraph 12.1, but
Tenant shall be required to pay to Landlord the full amount of any costs of
repairing such damage or destruction which would have been covered by
insurance had Tenant maintained the required insurance, and Tenant shall be
required to pay to Landlord the full amount of any deductible amounts which
Tenant would have been required to pay pursuant to the terms of this Lease
had Tenant maintained the required insurance.
12.2 In the event the Building Shell is damaged or destroyed,
and, for reasons other than the Insuring Party's failure to maintain in
effect the insurance which the Insuring Party is required to maintain
pursuant to Paragraph 8.1, above, the cost of repairing such damage or
destruction is not covered by insurance policies carried by the Insuring
Party (an "Uninsured Loss"), then so long as the cost of repairing such
damage or destruction does not exceed the "Cap Amount" (as defined herein),
Landlord shall repair and restore the Building Shell (but not any of Tenant's
trade fixtures, furnishings or equipment) to its condition existing prior to
said damage or destruction, and this Lease shall continue in full force and
effect. As used herein, the term "Cap Amount" shall mean the amount of Five
Hundred Thousand Dollars ($500,000). In the event of an Uninsured Loss
having a repair cost which is equal to or less than the Cap Amount, Landlord
and Tenant shall each contribute one-half of the repair cost of such
Uninsured Loss (up to a maximum contribution amount of Two Hundred Fifty
Thousand Dollars ($250,000) each for Landlord and Tenant). If Landlord is
the Insuring Party as to all or any part of the insurance required pursuant
to Paragraph 8.1, and the repair cost of such
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Uninsured Loss exceeds the Cap Amount, Landlord and Tenant shall each have
the right to terminate this Lease upon thirty (30) days written notice to the
other. However, if a party has elected to terminate this Lease pursuant to
this Paragraph 12.2, the other party may prevent termination of the Lease
pursuant to this Paragraph 12.2 by paying (in addition to any other amounts
to be paid by such party pursuant to this Paragraph 12.2) the amount by which
the cost of repairing such Uninsured Loss exceeds the Cap Amount. If Tenant
is the Insuring Party as to all of the insurance required pursuant to
Paragraph 8.1, and the repair cost of such Uninsured Loss exceeds the Cap
Amount, Landlord shall have the right, within thirty (30) days following the
date of such Uninsured Loss, to elect to either: (a) terminate this Lease;
or (b) repair such damage or destruction, in which event Tenant shall pay to
Landlord Tenant's portion of the Cap Amount, plus any repair costs in excess
of the Cap Amount, and this Lease shall continue in full force and effect.
12.3 In the event Landlord is the Insuring Party as to a
particular risk and the Building Shell is damaged or destroyed, and the cost
of repairing such damage or destruction (exclusive of deductible amounts,
which in all cases shall be paid by Tenant) is not fully covered by insurance
policies carried by Landlord, then Landlord may, at its election, either:
(a) terminate this Lease upon thirty (30) days written notice to Tenant; or
(b) repair such damage or destruction, in which event this Lease shall remain
in full force and effect. However, if Landlord has elected to terminate this
Lease pursuant to this Paragraph 12.3, Tenant may prevent termination of the
Lease pursuant to this Paragraph 12.3 by paying to Landlord, in addition to
the deductible amounts otherwise payable by Tenant, the portion of the cost
of repairing such damaged improvements which is not fully covered by
insurance policies carried by Landlord. If Landlord is the Insuring Party as
to earthquake coverage, the deductible amount payable by Tenant for any loss
resulting from an earthquake shall not exceed five percent (5%) of the full
replacement cost of the Building Shell. Such limitation on the deductible
amount payable by Tenant for any loss resulting from an earthquake shall not
apply if Tenant is the Insuring Party as to earthquake coverage. In the
event Tenant is the Insuring Party as to a particular risk, then if the
Building Shell is damaged or destroyed, and the cost of repairing such damage
or destruction is partially or fully covered by insurance policies required
to be carried by Tenant pursuant to the terms of this Lease, then Tenant
shall pay to Landlord, in addition to the deductible amounts otherwise
payable by Tenant, the full amount of cost of repairing such damaged
improvements, and this Lease shall continue in full force and effect.
12.4 Upon the occurrence of any damage or destruction to the
Building Shell, Landlord shall, within thirty (30) days following the date of
occurrence of such damage or destruction, provide to Tenant a written notice
of Landlord's reasonable and good faith estimate of the time required to
complete the repair and restoration of the Building Shell ("Landlord's Time
Estimate"). Landlord's Time Estimate shall be supported by a certification
letter addressed to both Landlord and Tenant from a properly licensed and
qualified general contractor selected by Landlord, stating the opinion of
such contractor as to the number of days following the issuance of the
necessary building permits necessary to complete the repair and restoration
of the Building Shell. If Landlord reasonably estimates that such repair and
restoration will take more than two hundred seventy (270) days to complete
(measured from the date of issuance of necessary building permits for the
repair and restoration work) either Landlord or Tenant may elect to terminate
this Lease upon written notice to the other, which notice shall be given, if
at all, within twenty (20) days following Tenant's receipt of Landlord's Time
Estimate. Once such notice has been delivered, the twenty (20) day response
period has expired and the repair and
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restoration work has commenced, neither party shall have the right to
terminate this Lease as a result of the occurrence of such damage or
destruction, regardless of the actual time necessary to complete such repair
and restoration work, but Landlord agrees that it shall use diligent efforts
to complete the restoration work in a timely manner. Upon termination of
this Lease pursuant to this Paragraph 12.4, Tenant shall pay to Landlord one
(but not more than one) of the following amounts: (a) the deductible amount
payable by Tenant in the event of an Insured Loss, if the damage and
destruction results from an Insured Loss; or (b) Tenant's portion of the Cap
Amount, if the damage and destruction results from an Uninsured Loss. If the
reconstruction of the Building Shell is delayed beyond the date established
for completion of repair and restoration work as provided in the general
contract between Landlord and the general contractor selected by Landlord to
perform such repair and restoration work (the "General Contractor"), and if
Tenant actually suffers damages as a result of such delay, then so long as
Landlord continues to receive the proceeds of rent abatement insurance during
the period of such delay, Landlord shall assign to Tenant (to the extent of
any damages actually suffered by Tenant as a result of such delay) any
liquidated damages or other damages payable by the general contractor
pursuant to the terms of its general contract as a result of such delay. To
the extent Landlord does not receive sufficient rent abatement insurance
proceeds to fully compensate Landlord for any abatement of rent under this
Lease, Landlord shall have a first priority claim to any such liquidated
damages or other damages payable by the general contractor.
12.5 The Minimum Rent payable by Tenant pursuant to the
provisions of Paragraph 4.1 shall abate, in the proportion that the part of
the Premises rendered unusable to Tenant bears to the whole thereof, from the
date of the damage or destruction through the time required by Landlord to
repair and rebuild the Building Shell, but only to the extent to which
Landlord receives, or is ultimately entitled to receive, reimbursement for
such abatement pursuant to the rental value insurance maintained under
Paragraph 8.1 of this Lease. If, as of the date any payment of Minimum Rent
is due under this Lease, Landlord is the party responsible for obtaining rent
abatement insurance pursuant to Paragraph 8.1, and Landlord has not received
reimbursement from its insurance carrier for the Minimum Rent then due under
this Lease, then the Minimum Rent then due under this Lease shall nonetheless
be abated, so long as Landlord is ultimately entitled to receive
reimbursement for such rent abatement from Landlord's insurance carrier.
Except for abatement of such Minimum Rent, if any, Tenant shall have no claim
against Landlord by reason of any damage, destruction, repair or rebuilding
of the Premises.
12.6 Subject to the provisions of this Paragraph 12.6, if the
Building Shell is damaged or destroyed, either partially or totally, during
the last year of the Lease Term, Landlord or Tenant may, at such party's
option, cancel and terminate this Lease as of the date of occurrence of such
damage by giving written notice to the other party of the electing party's
election to do so within thirty (30) days after the date of occurrence of
such damage. Notwithstanding the foregoing, if Tenant possesses an option to
extend the Lease Term, and the time within which Tenant may exercise such
option has not expired, then if Tenant validly exercises such option within
twenty (20) days after the occurrence of such damage or destruction, Landlord
shall not have the right to terminate this Lease pursuant to this Paragraph
12.6, and the other applicable provisions of this Article XII shall govern
the repair and restoration of the Building Shell or the termination of this
Lease (as the case may be). If there is only partial damage to the Premises,
and either Landlord or Tenant desire for this Lease to continue in effect
notwithstanding such partial damage, then this Lease shall not terminate as a
result of such partial damage, so long as all of
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the following terms and conditions are satisfied (or are waived by Landlord):
(a) Landlord shall only be obligated to repair or restore such partial
damage to the extent that the full costs of repairing such partial damage are
covered by insurance proceeds and Tenant payments relating to such damage;
(b) Tenant shall provide Landlord with evidence reasonably satisfactory to
Landlord that Tenant's continued use and occupancy of the Premises is in
compliance with all applicable Codes and will not violate the terms of any
insurance policies affecting the Premises: (c) Landlord shall have received
the consent of any lender holding a mortgage or deed of trust encumbering the
Premises to such continued use and occupancy of the Premises and such
non-restoration of the Premises; (d) Minimum Rent for the portion of the
Building which is rendered unusable as a result of such partial damage (and
which is not actually used by Tenant) shall be reduced on pro rata basis, but
in no event shall the amount of such reduction exceed twenty percent (20%) of
the total Minimum Rent otherwise payable under this Lease and Landlord shall
be fully compensated for any such rent abatement by the rent abatement
insurance required pursuant to the terms of Article VIII of this Lease; (e)
Tenant shall indemnify and hold Landlord harmless from and against any loss,
cost, damage, liability or expense arising out of or related to any such use
or occupancy of the partially damaged Building; and (f) at least eighty
percent (80%) of the floor area of the Building can continue to be used and
occupied by Tenant notwithstanding such partial damage.
12.7 Tenant waives the provisions of any statutes which relate to
termination of leases when the leased premises are destroyed; and Tenant
agrees that such event shall be governed by the terms of this Lease and not
by any such statute.
ARTICLE XIII
CONDEMNATION
13.1 If title to all or any portion of the Premises shall be
taken by any public or quasi-public use or authority under any statute or by
right of eminent domain, or by private purchase in lieu thereof, then the
rights of the parties to share in the condemnation award or purchase price
thereby resulting shall be governed by the provisions of this Article XIII.
13.2 Should all or such portion of the Premises be taken in such
a manner as to materially interfere with Tenant's use and occupancy thereof,
then this Lease shall terminate as of the date that possession of said
Premises or part thereof shall be taken. Landlord shall be entitled to (a)
any amount paid for the taking of Landlord's fee interest in the Premises,
(b) any severance damages included in the award, (c) any amount paid for the
taking of the Premises except that paid for any improvements made to the
Premises by Tenant which remain the property of Tenant, and (d) any amount
which represents the present worth of rent payments to be made in the future
under the provisions of this Lease; and none of Landlord's interests in the
above shall be subject to any diminution or apportionment whatsoever. Tenant
shall be entitled to compensation paid under condemnation for the taking of
any improvements made to the Premises by Tenant which remain the property of
Tenant, for Tenant's relocation expenses, loss of good will and/or loss of
Tenant's trade fixtures.
13.3 In the event of a partial taking of the Premises which does
not materially interfere with Tenant's continued use and occupancy of the
Premises and there remains sufficient of the Premises for the continued use
of Tenant, then this Lease shall terminate only as to the part so taken, as
of the date that possession of such part of the Premises is taken, and the
Minimum Rent herein provided for shall be reduced in proportion as the square
footage of building floor area taken bears to the total
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building floor area existing before such taking. In the event of a partial
taking, Landlord agrees to replace or repair the building facility
constituting a portion of the Premises to its condition as existed when the
Lease Term commenced, and without regard to improvements made by Tenant, by
reinstalling plumbing, electrical, wiring, walls and paving, if necessary, so
that said building facility shall be completely operable and an integral
whole. In the event of such partial taking, Landlord shall be entitled to
receive all amounts described in the second sentence of Paragraph 13.2; and
none of Landlord's interest in the above shall be subject to any diminution
or apportionment whatsoever. Tenant shall be entitled to compensation paid
under condemnation for the taking of any improvements made to the Premises by
Tenant which remain the property of Tenant, for Tenant's relocation expenses,
loss of good will and/or loss of Tenant's trade fixtures.
13.4 Landlord and Tenant agree to execute all documents and
assignments necessary to carry out this Article XIII in the event of
condemnation or purchase in lieu thereof.
ARTICLE XIV
USE OF PREMISES - ASSIGNMENTS
14.1 Tenant shall have the right to use the Premises for
manufacturing, packaging and distributing vitamins, over-the-counter or
prescription drugs and related products in compliance with all applicable
laws and regulations, including, without limitation, environmental laws and
laws relating to Hazardous Materials; and Tenant agrees such use shall comply
with all applicable laws and regulations in effect when this Lease Term
commences and as may be amended or newly enacted during the Lease Term.
Tenant shall not use the Premises for the retail sale of property. Tenant
shall not conduct nor permit to be conducted any auction or auction sale at
the Premises. Tenant's use of the Premises is subject to limitations imposed
by the Watson Industrial Center Performance Standards and the limitations
contained in this Lease. Tenant covenants and agrees that it shall not
permit any of its employees, agents, contractors, vendors or shippers to park
trucks, automobiles, trailers or other vehicles on any of the public streets
in the general vicinity of the Premises or the industrial or business park in
which the Premises are located. Tenant's use of the Premises is subject to
limitations imposed by the Watson Industrial Center Performance Standards and
the limitations contained in this Lease.
14.2 Tenant shall not, assign, sublet or otherwise transfer this
Lease, or Tenant's interest in and to the Premises, nor enter into any
license or concession agreements with respect thereto, without first
procuring the written consent of Landlord. Any such attempted or purported,
assignment, subletting, transfer or license or concession agreement
(collectively "Transfer") without Landlord's prior written consent shall be
void and of no force and effect, and shall not confer any interest or estate
in the purported transferee (the "Transferee") and shall, at Landlord's
option, constitute an incurable default under this Lease. Tenant shall have
no right to mortgage, hypothecate or otherwise encumber its leasehold estate
in the Premises or its rights under this Lease, and Landlord and Tenant
specifically agree that any such mortgage, hypothecation or encumbrance by
Tenant is strictly and absolutely prohibited. Landlord hereby agrees to
consent to Tenant's subleasing, in the aggregate, up to twenty thousand
square feet (20,000) of floor area of the Premises to vendees, suppliers and
consultants to Tenant, and any such sublease shall be treated in the same
manner as a Transfer to an Affiliate as provided herein. Landlord agrees
that, in the event of a proposed Transfer to an "Affiliate" (as defined
herein), Landlord
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will not withhold its consent to such Transfer so long as: (i) such
Affiliate's use of the Premises is in conformance with Paragraph 14.1; (ii)
such Affiliate's use of the Premises will not result in any material increase
in the potential risk to Landlord arising out of or relating to Hazardous
Materials; and (iii) such Transfer will not cause any portion of the amounts
received by Landlord pursuant to this Lease or any sublease to fail to
qualify as "rents from real property" within the meaning of Section 856(d) of
the Internal Revenue Code, or which could cause any other income received by
Landlord to fail to qualify as income described in Section 856(c)(2) of the
Internal Revenue Code; and (iv) Landlord, acting reasonably and in good
faith, determines that such Transfer does not present an unreasonable risk
relating to the use, storage or disposal of Hazardous Materials. As used
herein, the term "Affiliate" shall mean any corporation for which fifty
percent (50%) or more of the voting stock (i) is owned by Tenant; or (ii) is
owned, directly or indirectly, by a corporation owning more than fifty
percent of the voting stock of Tenant. Any transfer of stock or other
ownership interest of Tenant which is made with the purpose or which has the
practical effect of circumventing the Transfer restrictions imposed under
this Article XIV shall be deemed to be a Transfer requiring Landlord's
consent. The consent of Landlord required hereunder shall not be
unreasonably withheld; however, a condition precedent to any consent to a
Transfer shall be Tenant's agreement to pay to Landlord as rent any costs and
expenses incurred by Landlord for review and consultation by Landlord's legal
counsel, securing credit reports, administrative overhead and the like.
Notwithstanding the foregoing, Landlord and Tenant agree that, in determining
whether to reasonably consent to a proposed transfer, Landlord may consider,
among other things, any or all of the following factors:
14.2.1 The reputation of the Transferee (including any principals,
partners or shareholders of such assignee, subtenant to Transferee),
including, without limitation, the Transferee's reputation for dishonesty,
criminal conduct or unethical business practices;
14.2.2 The financial capacity of the proposed Transferee to perform
its obligations under this Lease (or in the event of a Transfer of less than
all of the Premises, the financial capacity of the proposed Transferee to
perform its obligations as to the portion of the Premises Transferred to such
Transferee);
14.2.3 Whether the business experience and quality of business
operations of the proposed Transferee is comparable to that of Tenant;
14.2.4 The credit history of the proposed Transferee;
14.2.5 The intended use of the Premises by the proposed Transferee,
and Landlord's assessment of the impact of such use upon the Premises and
neighboring properties;
14.2.6 Whether the proposed Transferee's use of the Premises will
involve the generation, storage, use, treatment or disposal of any Hazardous
Materials, or will in any way increase any potential risk or liability to
Landlord arising out of or relating to Hazardous Materials; and
14.2.7 Whether the proposed Transferee is acceptable to the holder
of any mortgage or deed of trust encumbering the Premises (but provided,
however, that the time for approving or disapproving any Transfer as provided
herein shall not be extended by the need to obtain the consent of any such
mortgage holder or deed of trust beneficiary).
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14.3 Notwithstanding any permitted Transfer, Tenant shall at all
times remain directly, primarily and fully responsible and liable for the
payment of rent and for compliance with all obligations under the terms,
provisions and covenants of this Lease. All Transfer agreements shall
expressly provide that, in the event of a default by Tenant under this Lease,
the Transferee covenants and agrees with Landlord, contemporaneously with
receipt of written notice from Landlord that Tenant is in default of this
Lease, and for so long as such default continues, but not for a period of
time in excess of the term of the Transfer, to accept Landlord as Landlord of
Transferee, to attorn to Landlord as Landlord, to thereafter perform all
duties and responsibilities under the Transfer agreement directly to Landlord
for Landlord's sole benefit, and to cure any default of Tenant under this
Lease. Upon the occurrence of any default by Tenant, if the Premises or any
part thereof are then sublet, Landlord, in addition to any other remedies
herein provided or provided by law, may at its option collect directly from
such subtenant all rents becoming due to Tenant under such sublease and apply
such rent against any sums due to Landlord from Tenant hereunder, and no such
collection shall be construed to constitute a novation or release of Tenant
from the further performance of Tenant's obligations under this Lease. Any
sale, assignment, transfer or hypothecation of Tenant's interest under this
Lease, and any proposed subletting or occupancy of the Premises not in
compliance with this Article XIV shall be void.
14.4 Should Tenant desire to make a Transfer of the Premises,
Tenant shall give not less than thirty (30) days' prior written notice
thereof to Landlord setting forth the name of the proposed Transferee, the
term, use, rental rate and other relevant particulars of the proposed
Transfer, including, without limitation, evidence satisfactory to Landlord
that the proposed Transferee will not use, store or dispose of any Hazardous
Materials in or on the Premises, and that the proposed Transferee will
immediately occupy and thereafter use the Premises for the entire term of the
Lease or the sublease (as the case may be). Such notice shall be
accompanied, in the case of a sublease, by a copy of the proposed sublease,
and in the case of any Transfer, any documents or financial information
Landlord may require in order to make a determination as to the suitability
of the Transferee.
14.5 Landlord shall have the right to condition its consent to
any subletting or assignment upon payment by Tenant to Landlord of fifty
percent (50%) of all "Transfer Consideration" (as defined herein) received or
to be received, directly or indirectly, by Tenant on account of such
subletting or assignment to a party other than an Affiliate. In no event
shall Tenant's monetary obligations to Landlord, as set forth in this Lease,
be reduced. Such Transfer Consideration shall be paid to Landlord at the
same time or times as the same is paid to or used by Tenant. "Transfer
Consideration" shall mean (i) in the case of a sublease, any consideration
paid or given, directly or indirectly, by the sublessee to Tenant pursuant to
the sublease for the use of the Premises, or any portion thereof, over and
above the rent, however denominated, in this Lease, payable by Tenant to
Landlord for the use of the Premises, or portion thereof (after subtracting
therefrom actual and reasonable attorneys' fees and brokerage commissions,
costs of tenant improvements, costs of environmental studies and other
economic concessions made by the sublessee or incurred by Tenant in
connection with such sublease), prorating as appropriate the amount payable
by Tenant to Landlord under this Lease if less than all of the Premises is
sublet, and (ii) in the case of an assignment, the gross amount of any
consideration paid or given, directly or indirectly, by the assignee to
Tenant in exchange for entering into the assignment. Notwithstanding
anything contained in this Lease to the contrary, Tenant shall not (i) sublet
or assign the Premises or this Lease on any basis such that the rent or other
amounts to be paid by the sublessee or assignee there-
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under would be based, in the whole or in part, on the income or profits
derived by the business activities of the sublessee or assignee; (ii) furnish
or render any services to the sublessee or assignee or operate the Premises
so subleased or assigned; (iii) sublet or assign the Premises or this Lease
to any person that Tenant or Landlord owns, directly or indirectly (by
applying the constructive ownership rules set forth in Section 856(d)(5) of
the Internal Revenue Code [the "Code"]), provided, however, that the
restriction contained in this item (iii) shall not apply to an assignment of
this Lease to an Affiliate of Tenant if no Transfer Consideration arises and
if Landlord does not own, directly or indirectly (as described above), an
interest in such assignee; (iv) sublet or assign less than substantially all
of the Premises or this Lease pursuant to a sublease or assignment under
which Transfer Consideration is paid; or (v) sublet or assign the Premises or
this Lease in any other manner which could cause any portion of the amounts
received by Landlord pursuant to this Lease or any sublease to fail to
qualify as "rents from real property" within the meaning of Section 856(d) of
the Code, or which could cause any other income received by Landlord to fail
to qualify as income described in Section 856(c)(2) of the Code.
14.6 In addition to Landlord's right of approval pursuant to
Paragraph 14.2, above, and Landlord's right to share in Transfer
Consideration pursuant to Paragraph 14.5, above, in the event Tenant
contemplates a proposed Transfer of all or substantially all of the Premises
for all or substantially all of the remaining Lease Term (except for a
proposed Transfer to an Affiliate), Tenant shall notify Landlord, in writing,
of Tenant's desire to commence to locate a proposed Transferee. Landlord
shall then have the option to cancel this Lease effective on a date which is
no later than sixty (60) days following the date of Landlord's notice to
Tenant of Landlord's exercise of such option. The option shall be exercised,
if at all, by Landlord giving Tenant written notice thereof within thirty
(30) days following Landlord's receipt of Tenant's written notice of Tenant's
intention to locate a proposed Transferee. Upon any such cancellation,
Tenant shall pay to Landlord all amounts, as estimated by Landlord, payable
by Tenant to such termination date with respect to any obligations, costs or
charges which are the responsibility of Tenant under this Lease as of the
termination date. Further, upon any such cancellation Landlord and Tenant
shall have no further obligations or liabilities to each other with respect
to the affected portion of the Premises, except with respect to obligations
or liabilities which have accrued as of such cancellation date (in the same
manner as if such cancellation date were the date originally fixed for the
expiration of the Lease Term, or Extended Term, as the case may be).
14.7 Tenant shall in no event assign less than its entire
interest in this Lease. This Lease shall not be assignable by operation of
law, except that if Tenant is a natural person, this Lease shall be binding
upon and inure to the benefit of the estate of Tenant.
14.8 If this Lease is assigned to any person or entity pursuant
to the provisions of the "Revised Bankruptcy Act" (Title 11 of the United
States Code; 11 U.S.C. Section 101 et seq.), any and all monies or other
consideration payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord, and shall not constitute property of Tenant
or of the estate of Tenant within the meaning of the Revised Bankruptcy Act.
Any and all monies or other considerations constituting Landlord's property
under this Article XIV not paid or delivered to Landlord shall be held in
trust for the benefit of Landlord and shall be promptly paid or delivered to
Landlord. Any person or entity to which this Lease is assigned pursuant to
the provisions of the Revised Bankruptcy Act shall be deemed without fur-
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ther act or deed to have assumed all of the obligations arising under this
Lease on and after the date of such assignment.
14.9 Landlord shall have the right to sell, transfer, delegate or
assign any of its rights or obligations under this Lease but Landlord shall
not assign its obligations to Tenant under this Lease unless Landlord
simultaneously assigns its ownership interest in the Premises to the same
party.
ARTICLE XV
EVENT OF DEFAULT
15.1 Tenant shall be in default under this Lease if:
15.1.1 Tenant shall fail to make any payment of Minimum
Rent, any additional rent payable hereunder, or any other monetary obligation
required of Tenant under this Lease (including, without limitation,
restoration of any security deposit as required under this Lease) and such
failure shall continue for ten (10) days after Tenant's receipt of written
notice from Landlord that said rent or monetary obligation is due and payable
as provided in this Lease; or
15.1.2 Tenant shall neglect or fail to perform or observe
any of the covenants herein contained on Tenant's part to be performed or
observed, and Tenant shall fail to remedy the same within thirty (30) days
after Landlord shall have given to Tenant written notice specifying such
neglect or failure (provided, however, that if the performance or observance
of any such covenant reasonably requires more than thirty (30) days to
perform, Tenant shall not be in default under this Lease as a result of
Tenant's failure to perform or observe any such covenant within such thirty
(30) day period, so long as Tenant has commenced the actions necessary to
perform or observe such covenant within such thirty (30) day period, and is
diligently pursuing such cure to completion); or
15.1.3 Tenant shall abandon the Premises and such
abandonment shall continue for a period of fourteen (14) consecutive days
during which Minimum Rent for the Premises has remained unpaid.
15.2 In the event of any default by Tenant, and without any
further notice or demand, Landlord shall have the right at Landlord's
election, then or at any time thereafter, to:
15.2.1 Terminate this Lease, which shall terminate
Tenant's right to the use, occupancy and possession of the Premises, and
Tenant shall immediately surrender possession of the Premises to Landlord; or
15.2.2 Re-enter and take possession of the Premises or any
part thereof as provided by law, in which event this Lease shall terminate
effective when Landlord takes possession; or
15.2.3 Continue this Lease in effect and enforce any or
all rights and remedies of Landlord under this Lease, including the right to
recover Minimum Rent, additional rent and charges equivalent to rent
(sometimes collectively referred to herein as "rent") as they become due
under this Lease, for so long as Landlord does not terminate Tenant's right
to possession of the Premises; or
15.2.4 Seek any legal or equitable relief permitted by law.
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15.3 If Landlord terminates this Lease as provided in
subparagraphs 15.2.1 or 15.2.2 hereof, Landlord shall have the right to
recover from Tenant:
15.3.1 The worth, at the time of the award, of the unpaid
rent that had been earned at the time of termination of this Lease; and
15.3.2 The worth, at the time of the award, of the amount
by which the unpaid rent that would have been earned after the date of
termination of this Lease until the time of award exceeds the amount of the
loss of rent that Tenant proves could have been reasonably avoided; and
15.3.3 The worth, at the time of the award, of the amount
by which the unpaid rent for the balance of the term after the time of award
exceeds the amount of the loss of rent that Tenant proves could have been
reasonably avoided; and
15.3.4 Any other amount necessary to compensate Landlord
for all detriment proximately caused by Tenant's breach or which in the
ordinary course of things would be likely to result therefrom; such as, the
reasonable cost of recovering possession of the Premises, expenses of
reletting including reasonable attorney's fees and any real estate
commissions paid or payable, necessary repair, restoration, renovation, or
alteration of the Premises, and care and safekeeping of the Premises.
"The worth, at the time of the award," as used in
subparagraphs 15.3.1 and 15.3.2 of this Paragraph, is to be computed by
allowing interest at the Lease Interest Rate in effect when each installment
of rent referred to in said subparagraphs became payable. "The worth, at the
time of the award," as referred to in subparagraph 15.3.3 of this Paragraph,
is to be computed by discounting the amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award, plus one
percent (1%).
15.4 If Tenant shall breach this Lease and abandon the Premises,
this Lease shall continue in full force and effect for so long as Landlord
does not terminate Tenant's right to possession of the Premises, and Landlord
may enforce all of its rights and remedies under this Lease, including but
not limited to the right to recover rent and charges equivalent to rent as
they become due under this Lease. For the purposes of this Paragraph 15.4
and Paragraph 15.2, the following acts by Landlord shall not constitute a
termination of Tenant's right to possession of the Premises: (i) maintenance
or preservation of the Premises, (ii) efforts to relet the Premises, or (iii)
the appointment of a receiver upon initiative of Landlord to protect
Landlord's interest under the Lease.
15.5 In the event Landlord re-enters and takes possession of the
Premises, Landlord may at Landlord's option require Tenant to remove from the
Premises any of Tenant's property located therein. If Tenant fails to do so,
Landlord shall not be responsible for the care or safekeeping thereof and may
remove any of the same from the Premises and place the same in storage in a
public warehouse at the cost, expense and risk of Tenant with authority to
the warehouseman to sell the same in the event that Tenant shall fail to pay
the costs of transportation and storage, all in accordance with the rules and
regulations applicable to the operation of a public warehouseman's business.
Any refusal by a public warehouseman to accept personal property located in
the Premises upon such condition shall be conclusive evidence that the same
is of no substantial value, and shall be an unconditional warrant to Landlord
for disposing of the same in any manner Landlord may see fit, and without
accountability for any alleged value thereof. In addition, Landlord may, at
Land-
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lord's election, dispose of said property pursuant to the provisions of
Sections 1980 through 1991 of the California Civil Code. In any and all such
cases of re-entry, Landlord may make any repairs in, to or upon the Premises
which may be necessary, desirable or convenient, and Tenant hereby waives any
and all claims for damages which may be caused or occasioned by such reentry
or any of the aforesaid acts of Landlord or by reason of any loss or
destruction or damage to any property in or about the Premises or any part
thereof.
15.6 Tenant further covenants and agrees that if Landlord fails
or neglects for any reason to take advantage of any of the terms hereof
provided for the termination of this Lease or for the termination or
forfeiture of the estate hereby leased, or if Landlord, having the right to
declare this Lease terminated or the estate hereby leased terminated or
forfeited, shall fail so to do, any such failure or neglect of Landlord shall
not be or be deemed or be construed to be a waiver of any provisions for the
termination of this Lease continuing to exist or for the termination or
forfeiture of the estate hereby leased subsequently arising, or as a waiver
of any of the covenants, terms or conditions of this Lease or of the prompt
performance thereof by Tenant. None of the covenants, terms or conditions of
this Lease can be waived by conduct of the parties or by estoppel; any claim
or waiver must be in writing and signed by the party entitled to the benefit
thereof.
ARTICLE XVI
SURRENDER OF PREMISES
16.1 Upon any termination of this Lease, whether by lapse of
time, cancellation pursuant to an election provided for herein, forfeiture,
or otherwise, Tenant shall immediately surrender possession of the Premises
and all buildings and improvements on the same (excepting those improvements
which Landlord shall have required Tenant to remove therefrom pursuant to
Paragraph 9.3 hereof) to Landlord in a clean and orderly condition and
appearance, state of repair and operating order, and with all such
improvements thereon in a good, safe, fully operable condition, and in full
compliance with all Federal, State and local laws, rules, regulations and
ordinances (including, without limitation, any laws, rules, regulations and
ordinances relating to Hazardous Materials) and each provision of this Lease,
including without limitation the provisions of Article IX hereof. If
possession is not immediately surrendered, Landlord may, with process of law,
enter the Premises and repossess the same and expel Tenant or any subtenant
or occupant therefrom. Landlord shall hold the Premises after any such
re-entry free of any right, privilege or estate of Tenant and without any
duty or obligation to Tenant in respect of any subsequent reletting or
disposition of the Premises. If Tenant's business operations on the Premises
or uses of the Premises involve any generation, storage, use, treatment or
disposal of any Hazardous Material, Tenant shall be responsible for removing
any such Hazardous Materials from the Premises and for decontaminating the
Premises and any neighboring properties affected by such Hazardous Materials.
16.2 Upon the termination of this Lease, Tenant, if not in
default hereunder at the time, shall have the right to remove, and if
directed so to do by Landlord shall remove, from the Premises, all of
Tenant's machinery, equipment (excluding building service equipment), trade
fixtures, signs, furniture, furnishings, supplies and inventory then
installed or in place in, on or about the Premises. Except as hereinafter
expressly set forth, such removal shall be completed prior to the expiration
or earlier termination of this Lease. Tenant shall make all repairs to the
Premises required because of such removal and Tenant shall surrender the
Premises to Landlord in good condition, reasonable
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wear and tear which Tenant is not otherwise obligated to repair under this
Lease excepted. If this Lease shall terminate at any time other than the
time herein fixed as the expiration of the Lease Term, and occurring not due
to a default by Tenant, then Tenant, if not in default hereunder at the time,
shall have a reasonable time thereafter to effect the removal of the
foregoing items, not to exceed sixty (60) days.
16.3 If any of Tenant's machinery, equipment, trade fixtures,
signs, furniture, furnishings, supplies and inventory remain on the Premises
after the end of the term hereof or time allowed to remove the same, such
property shall be deemed abandoned by Tenant and it shall become the property
of Landlord without any claim therein of Tenant should Landlord so elect,
subject to the terms on any Landlord Lien Waiver Agreement executed by
Landlord.
16.4 Upon termination of this Lease, Tenant shall surrender the
Premises in a "broom-clean" condition, with all refuse and debris removed
therefrom, and with all electrical, plumbing, heating and air conditioning
installations in a good, safe and fully operable condition, and prior to such
termination, Tenant shall fill or repair any holes or openings made by Tenant
in the walls, roof or floor of the building, remove any protuberance, and
perform any maintenance or repairs required of Tenant by this Lease. Nothing
contained in this Paragraph 16.4 shall be deemed to limit Tenant's repair and
maintenance obligations pursuant to Article IX of this Lease. If directed so
to do by Landlord, Tenant shall also remove any improvements, additions or
alterations made to the Premises by Tenant (except for any Exempt Alterations
as described in Paragraph 9.1, above) and thereafter restore the Premises to
their original condition, even though such improvements by the terms of this
Lease become a part of the Premises and the property of Landlord.
ARTICLE XVII
DELAYS -- EXTENSIONS OF TIME
17.1 The time within which Landlord or Tenant is obligated herein
to construct, repair or rebuild any building, improvement or other structure
shall be extended and the performance excused when the delay is occasioned by
the other party (such as failure to promptly give required approvals, or
installation of machinery and equipment during construction which interferes
with or delays the contractor); or by strikes, threats of strikes or
lockouts; blackouts, war, threats of war, bombing, insurrection, riot or
invasion; acts of God, calamities, civil commotions, violent action of the
elements or fire; action, inaction or delayed action of any governmental
agency; regulations or laws of any national, state or local governmental
authority; unavailability of materials at reasonable prices, delays in
delivery of materials by suppliers or weather conditions which impair or
delay construction; or other matters or things, whether similar or dissimilar
to the foregoing, beyond the reasonable control of the obligated party.
Delayed action by a governmental agency shall be deemed to occur if a
building permit is not issued within forty-five (45) days after drawings,
specifications, and engineering calculations for such permit are filed for
plan check with such governmental agency.
ARTICLE XVIII
ATTORNEYS' FEES
18.1 In the event that either Landlord or Tenant brings any
action or proceeding against the other for possession of the Premises or for
the recovery of any sum due hereunder, or to interpret or enforce any
provision of this Lease or any rights of either party hereto, or because of
the breach of any covenant,
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condition or provision hereof, or for any other relief against the other,
declaratory or otherwise, including appeals therefrom and whether being an
action based upon a tort or contract, then the prevailing party to this Lease
in any such proceeding shall be paid reasonable attorneys' fees and costs of
such action or proceeding including an allowance for reasonable attorneys'
fees for appeals and rehearings. Notwithstanding the provisions of
California Civil Code Section 1717, the term "prevailing party" as used
herein shall include, without limitation, both a party as to whom a lawsuit
is dismissed (with or without prejudice) without the written consent of that
party and, if the lawsuit is one for declaratory relief, that party whose
contentions are substantially upheld as to the interpretations of this Lease.
Any attorneys' fees payable pursuant to this Article may be claimed either
as court costs or in a separate suit. In addition to the foregoing award of
attorneys' fees to the prevailing party, the prevailing party in any such
lawsuit shall be entitled to its reasonable attorneys' fees incurred in any
post-judgment proceedings to collect or enforce the judgment. This provision
is separate and several and shall survive the merger of this Lease into any
judgment on this Lease. Should Landlord be made a party to any suit or
proceeding brought by a third party, arising by reason of Tenant's use or
occupancy of the Premises and not being a dispute essentially between
Landlord and Tenant, then Tenant shall defend Tenant and Landlord therein, at
Tenant's sole cost and expense, and shall hold Landlord free and harmless
from any claim loss, liability, duty or obligation therein, including any
reasonable attorneys' fees of Landlord.
18.2 At the election of either Landlord or Tenant, either party
shall have the right to have any dispute arising under this Lease heard by a
reference procedure pursuant to the provisions of California Code of Civil
Procedure Section 638 et seq., for a determination to be made which shall be
binding upon the parties as if tried before a court or jury. Notwithstanding
the foregoing, any action to recover possession of the Premises as a result
of a default by Tenant shall be brought and maintained pursuant to the
provisions of California Code of Civil Procedure Sections 1159 et seq., and
the provisions of this Paragraph 18.2 shall not apply to any such actions.
The parties agree specifically as to the following:
(a) Within seven (7) days after service of a demand by a party
hereto, the parties shall agree upon a single referee who shall then try
all issues, whether of fact or law, and then report a finding and judgment
thereon. If the parties are unable to agree upon a referee, either party
may seek to have one appointed, pursuant to California Code of Civil
Procedure Section 640, by the presiding judge of the Los Angeles County
Superior Court. The venue for any judicial reference heard pursuant to this
Paragraph 18.2 shall be Los Angeles County.
(b) The compensation of the referee shall be such charge as is
customarily charged by the referee for like services. The cost of such
proceeding shall initially be borne equally by the parties. However, the
prevailing party in such proceeding shall be entitled, in addition to all
other costs, to recover its contribution for the cost of the reference as
an item of damages and/or recoverable costs.
(c) If a reporter is requested by either party, then a reporter
shall be present at all proceedings, and the fees of such reporter shall
be borne by the party requesting such reporter. Such fees shall be an
item of recoverable costs. Only a party shall be authorized to request a
reporter.
(d) The referee shall apply all California Rules of Procedure and
Evidence and shall apply the substantive law of California in deciding
the issues to be heard. Notice of
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any motions before the referee shall be given, and all matters shall be set
at the convenience of the referee.
(e) The referee's decision under California Code of Civil
Procedure Section 644, shall stand as the judgment of the Court, subject to
appellate review as provided by the laws of the State of California.
(f) The parties agree that any such dispute shall be decided as
soon as practicably possible. The date of hearing for any proceeding
shall be determined by agreement of the parties and the referee, or if
the parties cannot agree, then by the referee, but in no event shall the
date of the hearing be later than one hundred twenty (120) days after the
date of the service or demand.
(g) The referee shall have the power to award damages and all other
relief in the event of a violation of any of the provisions of this Lease
which are to be resolved pursuant to this Paragraph 18.2.
ARTICLE XIX
TENANT'S ESTOPPEL CERTIFICATE
19.1 Tenant shall, at any time and from time to time during the
Lease Term (or any Extended Term), upon not less than fourteen (14) days'
prior written notice from Landlord, execute, acknowledge and deliver to
Landlord a written certificate substantially in the form attached hereto as
Exhibit E, certifying: (i) that this Lease represents the entire agreement
between Landlord and Tenant, and is unmodified and in full force and effect
(or, if modified, stating the nature of such modification and certifying that
this Lease, as so modified, is in full force and effect); (ii) the dates to
which Minimum Rent and other charges or additional rent have been paid in
advance, if any; (iii) the Commencement Date and Termination Date of the
Lease Term; (iv) whether Tenant has assigned, subleased or otherwise
transferred the Premises, this Lease or any interest of Tenant therein; (v)
the then-current amount of Minimum Rent and any Security Deposit paid by
Tenant to Landlord under this Lease; (vi) the date upon which, and the amount
or method by which, Minimum Rent, additional rent or other charges payable
under this Lease will next be adjusted or increased (if at all); (vii) that
there are no options to extend the term of this Lease, or if any such options
exist, describing any such options and stating the terms and conditions upon
which any such options may be exercised; (viii) that there are no rights of
first refusal to purchase the Premises or lease additional space contiguous
to the Premises, or if any such rights of first refusal exist, stating the
terms and conditions upon which the same may be exercised; (ix) that to the
best knowledge of Tenant there are not any uncured defaults on the part of
Landlord under this Lease, and that Tenant has no right of offset,
counterclaim or deduction against Minimum Rent or other payment obligations
of Tenant under this Lease, or specifying such defaults if any are claimed
together with the amount of any offset, counterclaim or deduction alleged by
Tenant; and (x) that Landlord has fully performed each and all of its
construction, repair and maintenance obligations (if any), as required under
this Lease, except as may be specifically set forth in said statement (if
applicable), and that Tenant, subject to any such stated exception(s),
accepts the Premises in their present condition.
19.2 In addition to the certificate required pursuant to
Paragraph 19.1, above, Landlord shall have the right to require Tenant to
execute a statement or certificate in a form requested by an existing or
potential purchaser, lender or other party which may acquire the Premises or
hold a security interest in the Premises (or the real property or Building of
which the
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Premises are a part), so long as such receiving entity is in serious
negotiations with Landlord, or any other certificate or form as may be
requested by Landlord.
19.3 Any such certificate or statement referred to in this
Article XIX may be relied upon by any such existing or potential purchaser,
lender, other secured party, and Tenant's failure or refusal to execute and
deliver such statement within such time shall, at the option of Landlord,
constitute a default under this Lease.
19.4 If Landlord desires to finance, refinance, or sell all or
any portion of the real property of which the Building or the Premises are a
part, Tenant hereby agrees to deliver to any lender or purchaser identified
by Landlord as being in serious negotiations with Landlord, such financial
statements and other documents and instruments of Tenant as may be reasonably
required by any such lender or purchaser. If at the time Landlord requests
such financial statements, Tenant's stock is not traded on a public stock
exchange, Tenant may require that the recipients of such financial statements
execute a confidentiality agreement in substantially the same form as is
attached hereto as Exhibit H. Such statements shall include the last three
(3) years' financial statements of Tenant. All such financial statements and
other information shall be received by Landlord and any such lender or
purchaser in confidence, in accordance with the terms of such confidentiality
agreement.
19.5 Tenant acknowledges and agrees that Tenant's obligation to
provide such certificates or statements constitutes a material inducement to
Landlord to execute this Lease, and Tenant shall provide Landlord with such
certificates and statements within five (5) days following Tenant's receipt
of Landlord's written request therefor, but not more than once per year,
except for any year in which a sale or refinancing of the Premises is being
negotiated.
ARTICLE XX
RIGHTS RESERVED BY LANDLORD
20.1 Landlord expressly reserves all rights in and with respect
to the land hereby leased not inconsistent with Tenant's use of the Premises
as provided in this Lease, including (without in any way limiting the
generality of the foregoing) all rights to the subsurface of the land more
than five (5) feet below ground level, except where building improvements
extend more than five (5) feet below ground level; and all rights to the
airspace more than ten (10) feet above the roof of any building; and the
rights to enter upon the Premises upon prior written notice reasonably in
advance of such entry for itself for the purpose of installing, using,
maintaining, renewing and replacing such overhead or underground water, oil,
gas, sewer drainage, and other pipe lines, and telephone, electric, power,
television and other lines, cables and conduits as Landlord may deem
desirable in connection with the development or use of any other property in
the neighborhood of the Premises, whether owned by Landlord or not, all of
which pipelines, lines and conduits shall be buried to a sufficient depth or
raised to a sufficient height so as not to interfere with the use or
stability of the Premises. Landlord shall coordinate the time of such entry
and the conduct of any such activities on the Premises with Tenant so as to
minimize disruption to Tenant's ongoing business activities on the Premises.
ARTICLE XXI
COVENANT OF QUIET ENJOYMENT
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21.1 Landlord does hereby covenant, promise and agree to and with
Tenant that Tenant, for so long as it is not in default hereof and is in
compliance with all of the terms and conditions of this Lease, shall and may
at all times peaceable and quietly have, hold, use, occupy and possess the
Premises throughout the term of this Lease, subject to all of the terms and
conditions of this Lease, without any molestation or eviction by Landlord or
any persons claiming by or through Landlord.
ARTICLE XXII
RECORDATION
22.1 Neither this Lease nor a short form of memorandum of this
Lease shall be recorded in the office of any county recorder without
Landlord's express written consent. In the event of any such recordation by
Tenant, Tenant shall be solely responsible for any documentary transfer taxes
or other taxes relating to or arising out of such recordation.
ARTICLE XXIII
SUBORDINATION
23.1 Subject to Landlord's obtaining and providing to Tenant a
"non-disturbance agreement" as provided in Paragraph 23.2, below, this Lease
and Tenant's rights hereunder are and will remain subject and subordinate to
any ground lease, mortgage, deed of trust or any other hypothecation for
security now or hereafter placed upon the real property of which the Premises
are a part (the "Property"), and, again, subject to such non-disturbance
protection, to all increases, renewals, modifications, consolidations,
replacements, and extensions thereof (collectively referred to as the
"Mortgage"). If the holder of a Mortgage becomes the owner of the Property
by reason of foreclosure or acceptance of a deed in lieu of foreclosure, at
such holder's election Tenant will be bound to such holder or its
successor-in-interest under all terms and conditions of this Lease, and
Tenant will be deemed to have attorned to and recognized such holder or
successor as Landlord's successor-in-interest for the remainder of the Lease
Term or any extension thereof. The foregoing is self-operative and no further
instrument of subordination and/or attornment will be necessary unless
required by Landlord or the holder of a Mortgage, in which case Tenant will,
within ten (10) days after written request, execute and deliver without
charge any documents reasonably required by Landlord or such holder in order
to confirm the subordination and attornment set forth above. Should the
holder of a Mortgage request that this Lease and Tenant's rights hereunder be
made superior, rather than subordinate, to the Mortgage, then Tenant will,
within ten (10) days after written request, execute and deliver without
charge such agreement as may be reasonably required by such holder in order
to effectuate and evidence such superiority of the Lease to the Mortgage.
23.2 If Tenant fails to execute and deliver any documents as and
when required above, such failure will constitute a default under this Lease,
entitling Landlord to the same rights and remedies as if such default were
with respect to non-payment of Minimum Rent. With respect to each Mortgage
that may encumber the Property at or after the commencement of the Lease
Term, Landlord agrees that promptly following its receipt of written request
by Tenant, Landlord will request the holder of the Mortgage, at Landlord's
expense, to grant Tenant a "non-disturbance agreement," in the usual form
used by such holder. The term "non-disturbance agreement" as used herein
means, in general, an agreement that as long as Tenant is not in default
under this Lease, this Lease will not be terminated if such holder acquires
title to the Property by reason of foreclosure proceedings or acceptance of a
deed in lieu of foreclosure, provided that Tenant
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attorns to such holder in accordance with such holder's requirements.
ARTICLE XXIV
SECURITY DEPOSIT
24.1 As security for the faithful performance of the terms,
covenants, conditions and provisions of this Lease, as well as to indemnify
Landlord from any damages, costs, expenses, real estate brokerage commissions
or attorneys' fees which Landlord may incur or suffer by reason of any
default by Tenant, Tenant hereby agrees to deposit with Landlord, upon
execution of this Lease, the sum set forth in Item 1.10 of the Basic Lease
Provisions. Landlord shall not be required to keep said deposit separate
from its general accounts. No interest shall be paid by Landlord to Tenant
on said deposit, and no trust relationship is created between Landlord and
Tenant with respect to the security deposit.
24.2 In the event Tenant shall be in default hereof at any time
prior to the end of the term hereof, then Landlord may apply all or any
portion of the security deposit in payment of Landlord's costs, expenses,
damages, real estate broker's commissions, and attorneys' fees in enforcing
the terms, covenants, conditions and provisions hereof. Nothing herein
contained shall be construed to mean that the recovery of damages by Landlord
against Tenant shall be limited to the sum of the security deposit. In the
event any portion or all of the security deposit is applied by Landlord in
accordance with the foregoing, then Tenant shall immediately deposit with
Landlord additional sums so that the security deposit in the hands of
Landlord shall be at all times not less than the sum of the deposit herein
provided for.
24.3 Should the Lease Term and the occupancy of the Premises by
Tenant fail to commence through no fault of Tenant, then Landlord shall
return the security deposit and any prepaid rent then possessed by Landlord
to Tenant within thirty (30) days after such event occurs. If this Lease
should terminate for any reason other than the default of Tenant, Landlord
shall return the security deposit to Tenant promptly after Landlord's
inspection of the Premises and confirmation that the Premises are surrendered
in the condition as required under the terms of this Lease.
ARTICLE XXV
HOLDING OVER
25.1 If Tenant remains in possession of the Premises after the
expiration of the Lease Term or any extension or renewal hereof, such holding
over shall not operate to extend or renew this Lease but shall be construed
as a tenancy from month-to-month which may be terminated by Landlord upon
three (3) days' prior written notice if Tenant is then in default of this
Lease, or by either party upon at least thirty (30) days' prior written
notice directed to the end of a calendar month. Such month-to-month tenancy
by Tenant shall be subject to all the terms and provisions of this Lease,
except that the Minimum Rent payable during the period of holding over shall
be one hundred twenty-five percent (125%) of the average monthly Minimum Rent
payable by Tenant during the last twelve (12) months of the Lease Term or any
extension or renewal thereof. Notwithstanding the foregoing, if Landlord
notifies Tenant, in writing, that Landlord is in serious negotiations with
another tenant for the Premises, then commencing the first day of the month
following the month in which such notice is delivered to Landlord, Minimum
Rent for such holdover period shall be one hundred fifty percent (150%) of
the average monthly Minimum Rent payable by Tenant during the last twelve
(12) months of the Lease Term or any extension or renewal
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thereof. Any options, rights, or privileges granted to Tenant, if any, to
extend the Lease Term, to acquire the Premises, or re-lease the same, shall
not be applicable during said period of holding over.
ARTICLE XXVI
GENERAL
26.1 REMEDIES CUMULATIVE. The specific remedies to which
Landlord may resort under the terms of this Lease are cumulative and are not
intended to be exclusive of any other remedies or means of redress to which
Landlord may be lawfully entitled in case of any breach or threatened breach
by Tenant of any provision of this Lease.
26.2 SUCCESSORS AND ASSIGNS. The covenants and agreements herein
contained shall bind and inure to the benefit of Landlord, its successors and
assigns, and Tenant, its successors and assigns, subject to the provisions of
this Lease.
26.3 PAYMENTS AND INTEREST. Except as otherwise specifically
provided in this Lease, each covenant, agreement or stipulation by a party
hereto shall be performed at such party's own cost and expense, and without
cost or expense to the other party. Any monetary obligations due from Tenant
to Landlord which are not paid when due shall bear interest from the due date
until paid to Landlord at the Lease Interest Rate. Such interest shall be
paid at the time of payment of the principal obligation as a condition of
remedy of such principal obligation. Any check tendered by Tenant which is
dishonored by the drawee bank shall not constitute payment of any obligation
under this Lease.
26.4 LATE CHARGE. Tenant acknowledges that late payment of
Minimum Rent and items designated in this Lease as additional rent will cause
Landlord to incur costs and suffer damages not contemplated by this Lease,
the exact amount of which will be impracticable to ascertain. Such costs and
damages include, but are not limited to, late charges which may be imposed on
Landlord by the terms of any trust deed covering the Premises; additional
administrative duties of Landlord's personnel in determining delinquent rents
and attempts to collect such rents by reasonable means other than litigation;
additional accounting and budgetary duties of Landlord's personnel; possible
adverse effects on Landlord's credit rating resulting from impairment of
Landlord's cash flow; and attorneys' fees resulting from consultations with
counsel. Accordingly, if any installment of Minimum Rent or items designated
as additional rent are not received by Landlord within ten (10) days after
receipt of written notice that the same are due, Tenant shall pay Landlord,
as additional rent, a late charge equal to five percent (5%) of such overdue
amount. Landlord and Tenant agree that such late charge represents a fair,
equitable, and reasonable estimate of the costs and damages Landlord will
incur because of Tenant's late payment.
26.5 LATE PAYMENTS. In the event that a late charge is payable
pursuant to Paragraph 26.4, whether or not collected, for two (2) consecutive
installments of rent, then rent shall automatically become due and payable
quarterly in advance for the next twelve (12) months, rather than monthly,
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary. All monies paid to Landlord under this Paragraph may be
intermingled with other monies of Landlord and shall not bear interest. All
advance payments provided for in this Paragraph shall be deemed rent under
this Lease.
26.6 NOTICES. Any notice or demand required or permitted by law
or by any of the provisions of this Lease shall be in writing. All notices
or demands by either party shall be
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deemed to have been properly given upon delivery when served personally; two
(2) business days after being deposited with the U.S. Postal Service when
sent by registered or certified mail, postage prepaid; or by noon on the
business day following the day of deposit with an overnight express-carrier
when sent by overnight express service, such as Federal Express. Notices
from Landlord to Tenant shall be given to Tenant at the address of the
Premises. Notices or demands to Landlord shall be given to Landlord at 22010
Wilmington Avenue, Suite 400, Carson, California 90745. Either party hereto
may change the place to which notices are to be given by advising the other
party in writing.
26.7 CAPTIONS. The headings or captions of Articles in this
Lease are for convenience and reference only, and they in no way define,
limit or describe the scope or intent of this Lease or the provisions of such
Articles.
26.8 PRONOUNS AND SINGULAR/PLURAL. Feminine or neuter pronouns
shall be substituted for those masculine form or vice versa, and the plural
shall be substituted for the singular number of vice versa, in the place or
places herein where the context may require such substitution or
substitutions.
26.9 TIME OF ESSENCE. Time is hereby declared to be of the
essence of this Lease and of each and every scheduled monetary or material
non-monetary covenant, term, condition or provision hereof.
26.10 REASONABLE CONSENT. Except for determinations expressly
described as being in the "absolute discretion" of the applicable party, or
for which this Lease otherwise establishes express standards, neither
Landlord nor Tenant shall unreasonably withhold or delay any consent,
approval or other determination provided for hereunder, and determinations
subject to absolute discretion shall not be unreasonably delayed. In the
event that either Landlord or Tenant disagrees with any determination made by
the other hereunder (other than a determination in the absolute discretion of
the determining party) and reasonably requests the reasons for such
determination, the determining party shall furnish its reasons in writing and
in reasonable detail within three (3) business days following such request.
Furthermore, in addition to the foregoing, whenever the Lease grants Landlord
or Tenant the right to take action, exercise discretion, establish rules and
regulations, make allocations or other determinations, or otherwise exercise
rights or fulfill obligations, Landlord and Tenant shall act reasonably and
in good faith and take no action which might result in the frustration of the
reasonable expectations of a sophisticated landlord and sophisticated tenant
concerning the benefits to be enjoyed under this Lease. Landlord shall
exercise its rights and perform its obligations hereunder, in such a way as
to reasonably minimize any resulting interference with Tenant's use of the
Premises, and Tenant shall exercise its rights and perform its obligations
hereunder, and otherwise operate the Premises, except as provided under this
Lease, in such a way as to reasonably minimize any resulting interference
with Landlord's obligations.
26.11 FAIR MEANING. The language in all parts of this Lease shall
be in all cases construed as a whole according to its fair meaning, and not
strictly for nor against either Landlord or Tenant.
26.12 ENTIRE AGREEMENT. This Lease contains all of the agreements
of the parties hereto with respect to any matter covered or mentioned in this
Lease, and no prior agreement or understanding pertaining to any such matter
shall be effective for any purpose. No provision of this Lease may be
amended or added to except by an agreement in writing signed by the parties
hereto or their respective successors in interest.
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26.13 NO ACCORD AND SATISFACTION. No payment by Tenant or receipt
by Landlord of a lesser amount than that stipulated herein for Minimum Rent,
additional rent or any other charge shall be deemed to be other than on
account of the earliest stipulated Minimum Rent, additional rent or other
charge then due, nor shall any endorsement or statement on a check or letter
accompanying any check or payment be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to rights to
recover the balance of such Minimum Rent, additional rent, or other charges
or pursue any other remedy in this Lease, at law or in equity.
26.14 CHOICE OF LAW. This Lease shall be governed by and
construed pursuant to the laws of the State of California.
26.15 NON-DISCRIMINATION. Tenant herein covenants by and for
itself, its heirs, executors, administrators and assigns, and all persons
claiming under or through it; and this Lease is made and accepted upon and
subject to the following conditions: That there shall be no discrimination
against or segregation of any person or group of persons, on account of race,
color, creed, national origin, or ancestry in the leasing, subleasing,
transferring, use, occupancy, tenure or enjoyment of the Premises, nor shall
the Tenant itself, or any person claiming under or through it, establish or
permit any such practice or practices of discrimination or segregation with
reference to the selection, location, number, use or occupancy of Tenant's
lessees, sublessees or vendees on the Premises.
26.16 COUNTERPARTS. This Lease may be executed in several
counterparts, each of which shall constitute an original.
26.17 CORPORATE RESOLUTION. Tenant shall deliver to Landlord,
contemporaneously with delivery of this Lease executed by Tenant, a certified
copy of a resolution of Tenant's Board of Directors authorizing the execution
of this Lease and naming the representatives authorized to execute this Lease
on behalf of Tenant.
26.18 REIMBURSEMENTS TO LANDLORD. If Tenant, or any third party
on behalf of Tenant or with whom Tenant is engaged or contemplates engaging
in business, requests that Landlord review or approve any drawings,
specifications or engineering calculations respecting any improvements Tenant
intends to install in the Premises or execute any agreement or written
instrument; and if Landlord refers such matter to any architect, engineer,
surveyor or other professional or administrative personnel of Landlord or to
legal counsel for review and advice to Landlord, then Tenant agrees to
reimburse Landlord as additional rent for all professional fees and costs
incurred by Landlord at the actual cost thereof for persons not in the direct
employ of Landlord, and at the rate of Fifty Dollars ($50.00) per hour for
all time spent by professional and administrative persons in the direct
employ of Landlord. Notwithstanding the foregoing, Tenant shall not be
responsible for reimbursing Landlord for any such fees or costs relating to
the installation of any of Tenant's improvements which occurs prior to the
expiration of the sixth (6th) month of the Lease Term. If Tenant requests
that Landlord consent to an assumption and/or assignment of this Lease or a
subletting of the Premises to a third party for which Landlord's written
consent is required, Tenant agrees to reimburse Landlord, as additional rent,
for all time spent by Landlord's administrative and professional personnel,
in reviewing the proposed form of all legal documents submitted by Tenant and
preparing necessary additional legal documents, in evaluating the
investigating the credit worthiness of the proposed assignee or subtenant, in
inspecting the Premises to determine if the same is in the condition and
state of repair as required by this Lease, in reviewing drawings and
specifications for any additional improvements to be made to the Premises,
and for any other action
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required in the reasonable judgment of Landlord. Landlord shall be
reimbursed at the rate of Fifty Dollars ($50.00) per hour for the time spent
by its administrative and professional personnel, and at the actual and
reasonable cost of professional fees and costs incurred by Landlord for
persons not in the direct employ of Landlord, for each such request made by
Tenant. The hourly fee payable to Landlord's administrative and professional
personnel under this Paragraph shall be increased by the percentage increase
in the Consumer Price Index ("all items" index for urban wage earners and
clerical workers, Los Angeles/Anaheim/Riverside area, 1982-84=100) on each
anniversary date of the commencement of the term of this Lease.
26.19 NO GUARD SERVICE. Tenant hereby acknowledges that the rent
payable to Landlord hereunder does not include the cost of guard service or
other security measures, and that Landlord shall have no obligation
whatsoever to provide any such service or measures. Tenant assumes all
responsibility for the protection of Tenant, its agents and invitees from
acts of third parties.
26.20 BROKERS. Tenant acknowledges its understanding that
Landlord shall pay all brokerage commissions owing to CB Commercial Realty
Group, Inc. ("Broker") in connection with the transaction contemplated by
this Lease pursuant to a separate agreement. Landlord and Tenant each
represent and warrant to the other that other than the Broker, no broker,
agent, or finder negotiated or was instrumental in negotiating or
consummating this Lease on its behalf and that it knows of no broker, agent,
or finder, other than the Broker, who is, or might be, entitled to a
commission or compensation in connection with this Lease. In the event of
any such claims for additional brokers' or finders' fees or commissions in
connection with the negotiation, execution or consummation of this Lease,
then Landlord shall indemnify, save harmless and defend Tenant from and
against such claims if they shall be based upon any statement, representation
or agreement by Landlord, and Tenant shall indemnify, save harmless and
defend Landlord if such claims shall be based upon any statement,
representation or agreement made by Tenant.
26.21 BROKERAGE COMMISSION. Tenant acknowledges its understanding
that Landlord has paid a real estate brokerage commission for securing
Tenant's tenancy at the Premises for the term of this Lease. If Tenant
defaults under this Lease and discontinues paying the rent specified herein,
Tenant shall, within thirty (30) days of such event, reimburse Landlord for
the unamortized portion of such brokerage commission pursuant to the
following formula:
Total amount of Number of months of
brokerage commission x unexpired lease term.
- ------------------------------------------------------------
Number of months of lease term
Notwithstanding the foregoing, Landlord shall not be entitled to recover such
unamortized portions of the brokerage commission as provided in this
Paragraph 26.21 if, following an uncured default under this Lease by Tenant,
either (a) Landlord elects to pursue its remedy against Tenant pursuant to
California Civil Code Section 1951.4, or (b) Landlord recovers the discounted
present value of all rent payable for the entire term of the Lease pursuant
to California Civil Code Section 1951.2. To the extent Landlord recovers the
discounted present value of some, but not all, of the rent payable following
the termination of this Lease resulting from Tenant's default, the number of
months of such rent so recovered by Landlord shall be subtracted from the
"number of months of unexpired lease term" in the formula set forth above.
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26.22 LIMITATION OF LIABILITY. Tenant hereby agrees that, in the
event of any actual or alleged failure, breach or default hereunder by
Landlord, Tenant's sole and exclusive remedy shall be against and shall be
satisfied from the Landlord's equity interest in the Premises. This
limitation shall not apply to any tort liability of Landlord to Tenant.
Tenant agrees that the obligations of Landlord under this Lease do not
constitute personal obligations of the individual directors, officers or
shareholders of Landlord, and Tenant shall not seek recourse against the
individual directors, officers or shareholders of Landlord or any of their
personal assets for satisfaction of any liability with respect to this Lease.
Notwithstanding the foregoing, in the event Landlord places any mortgages or
deeds of trust (collectively, "encumbrances") against the Premises in an
aggregate amount of greater than eighty percent (80%) of the fair market
value of the Premises, Tenant shall be entitled to proceed against the
general assets of Landlord (but not any director, officer or shareholder of
Landlord) to the extent of the amount by which the encumbrances exceed eighty
percent (80%) of the fair market value of the Premises.
26.23 PARKING. Tenant shall instruct and require that Tenant's
employees, agents, visitors and business invitees park motor vehicles within
the parking areas included on the Premises; and such employees, agents,
visitors and invitees shall not park on the streets within the Watson
Industrial Center. If there is insufficient parking area included on the
Premises for parking of such motor vehicles, Tenant shall use its best
efforts to obtain off-street parking privileges on other properties in the
vicinity of the Premises.
26.24 LEASE REVIEWED. Landlord and Tenant have carefully read and
reviewed this Lease and each term and provision contained herein, and each of
them has referred this Lease to its own legal counsel for review and advice
as to the legal consequences of this Lease. Landlord and Tenant acknowledge
their informed and voluntary consent thereto. Landlord and Tenant further
agree that, at the time this Lease is executed, the terms of this Lease are
commercially reasonable and effectuate the intent and purpose of Landlord and
Tenant with respect to the Premises.
26.25 FINANCIAL STATEMENTS. As a material inducement to
Landlord's execution of this Lease, Tenant hereby represents and warrants
that Tenant has furnished to Landlord the most current audited financial
statements of Tenant prepared in accordance with generally accepted
accounting principles in a manner consistently applied in each case.
Throughout the Lease Term, Tenant shall, within ten (10) days following
Landlord's request, provide Landlord with Tenant's then-current financial
statements. Landlord shall maintain such financial statements in confidence,
except for disclosure to prospective purchasers of the Premises and
prospective lenders who are in serious negotiations with Landlord and whose
loans would be secured in whole or in part by this Lease or the Premises. If
at the time Landlord requests such financial statements, Tenant's stock is
not traded on a public stock exchange, Tenant may require that the recipients
of such financial statements execute a confidentiality agreement in
substantially the same form as is attached hereto as Exhibit H.
26.26 LEASE INTEREST RATE. As used in this Lease, the "Lease
Interest Rate" shall be a rate equal to two percent (2%) per year in excess
of the "Reference Rate" most recently announced by Bank of America, Los
Angeles from time to time, provided however that if Bank of America ceases to
announce such Reference Rate, then such rate shall be a rate comparable to
such Reference Rate; and provided further, however, that in no event shall
the Lease Interest Rate exceed the highest lawful rate of interest
permissible by law.
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26.27 TENANT'S SELF-INSURANCE. So long as the tenant under this
Lease is Leiner Health Products Inc., Tenant shall be entitled to self-insure
for business interruption losses and losses to Tenant's personal property,
but in no event shall Tenant be permitted to self-insure for general
liability risks for property insurance for the Premises. Any self-insurance
shall be deemed to contain all of the terms and conditions applicable to such
insurance as required in Article VIII including, without limitation, a full
waiver of subrogation. If Tenant elects to so self-insure, then with respect
to any claims which may result from incidents occurring during the Term, such
self-insurance obligations shall survive the expiration or earlier
termination of this Lease to the same extent as the insurance required would
survive.
26.28 LANDLORD BANKRUPTCY PROCEEDING. If ownership of the
Premises has been conveyed to a person other than: (a) a lender pursuant to
foreclosure of acceptance of a deed in lieu of foreclosure; (b) an
institutional owner, such as a pension trust fund, life insurance company or
commercial bank; or (c) a non-institutional owner headquartered in the state
of California, then in the event that the obligations of Landlord under this
Lease are not performed during the pendency of a bankruptcy or insolvency
proceeding involving the Landlord as the debtor, or following the rejection
of this Lease in accordance with Section 365 of the United States Bankruptcy
Code and the election of the Tenant to remain the possession of the Premises
in a bankruptcy or insolvency proceeding involving the Landlord as the
debtor, then notwithstanding any provision of this Lease to the contrary,
Tenant shall have the right to set off against Rents next due and owing under
this Lease (i) any and all damages that it demonstrates to the Bankruptcy
Court were caused by such nonperformance of the Landlord's obligation under
this Lease by Landlord, debtor-in-possession, or the bankruptcy trustee, and
(ii) any and all damages caused by the nonperformance of Landlord's
obligations under this Lease following any rejection of this Lease in
accordance with Section 365 of the United States Bankruptcy Code.
26.29 WAIVER OF REDEMPTION BY TENANT; HOLDING OVER. Tenant hereby
waives for Tenant and all those claiming under Tenant any right now or
hereafter existing to redeem the Premises after termination of Tenant's right
of occupancy by order or judgment of any court or by any legal process or
writ pursuant to the California Code of Civil Procedure Section 729.010
through 729.090, but nothing in this Lease shall be deemed to constitute
Tenant's waiver of its right to petition for relief from a forfeiture
pursuant to California Code of Civil Procedure Section 1179 or California
Civil Code Section 3275.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as
of the day and year first above written.
"LANDLORD" "TENANT"
WATSON LAND COMPANY, LEINER HEALTH PRODUCTS INC.,
a California corporation a Delaware corporation
By: By: /s/ Giffen H. Ott
----------------------- --------------------------
Its: Its: Vice President
------------------
By: /s/ Kevin J. Lanigan
--------------------------
Its: Executive V.P./C.O.O.
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Exhibit 10.10
L E A S E
LANDLORD: WATSON LAND COMPANY,
a California corporation
TENANT: LEINER HEALTH PRODUCTS INC.,
a Delaware corporation
DATED: October 4, 1993
THE SUBMISSION OF THIS DOCUMENT FOR EXAMINATION AND NEGOTIATION DOES NOT
CONSTITUTE AN OFFER TO LEASE, OR A RESERVATION OF, OR OPTION FOR, THE
PREMISES; THIS DOCUMENT BECOMES EFFECTIVE AND BINDING ONLY UPON EXECUTION AND
DELIVERY HEREOF BY LANDLORD. NO ACT OR OMISSION OF ANY EMPLOYEE OR AGENT OF
LANDLORD OR OF LANDLORD'S BROKER SHALL ALTER, CHANGE OR MODIFY ANY OF THE
PROVISIONS HEREOF.
[Portion of Building 156]
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INDEX
ARTICLE PAGE
ARTICLE I - Basic Lease Provisions . . . . . . . . . . . . . . . . 1
ARTICLE II - Common Area, Parking and Condition of Premises. . . . 2
ARTICLE III - Term of Lease. . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV - Rent. . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE V - Taxes and Assessments. . . . . . . . . . . . . . . . . 5
ARTICLE VI - Utility Charges . . . . . . . . . . . . . . . . . . . 7
ARTICLE VII - Hold Harmless. . . . . . . . . . . . . . . . . . . . 7
ARTICLE VIII - Insurance . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IX - Repairs, Maintenance, Alterations
and Removal of Equipment. . . . . . . . . . . . . . . . . . 10
ARTICLE X - Inspection of Premises by Landlord . . . . . . . . . . 19
ARTICLE XI - Mechanics' Liens. . . . . . . . . . . . . . . . . . . 19
ARTICLE XII - Damage or Destruction of Premises. . . . . . . . . . 20
ARTICLE XIII - Condemnation. . . . . . . . . . . . . . . . . . . . 21
ARTICLE XIV - Use Of Premises - Assignments. . . . . . . . . . . . 22
ARTICLE XV - Event of Default. . . . . . . . . . . . . . . . . . . 26
ARTICLE XVI - Surrender of Premises. . . . . . . . . . . . . . . . 28
ARTICLE XVII - Delays - Extensions of Time . . . . . . . . . . . . 29
ARTICLE XVIII - Attorneys' Fees. . . . . . . . . . . . . . . . . . 29
ARTICLE XIX - Statement of Lease . . . . . . . . . . . . . . . . . 31
ARTICLE XX - Rights Reserved by Landlord . . . . . . . . . . . . . 32
ARTICLE XXI - Covenant of Quiet Enjoyment. . . . . . . . . . . . . 33
ARTICLE XXII - Recordation . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XXIII - Subordination. . . . . . . . . . . . . . . . . . . 33
ARTICLE XXIV - Security Deposit. . . . . . . . . . . . . . . . . . 34
ARTICLE XXV - Holding Over . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XXVI - General . . . . . . . . . . . . . . . . . . . . . . 35
26.1 Remedies Cumulative. . . . . . . . . . . . . . . . . 35
26.2 Successors and Assigns . . . . . . . . . . . . . . . 35
26.3 Payments and Interest. . . . . . . . . . . . . . . . 35
26.4 Late Charge. . . . . . . . . . . . . . . . . . . . . 35
26.5 Late Payments and Impounds . . . . . . . . . . . . . 35
26.6 Notices. . . . . . . . . . . . . . . . . . . . . . . 36
26.7 Captions . . . . . . . . . . . . . . . . . . . . . . 36
26.8 Pronouns and Singular/Plural . . . . . . . . . . . . 36
26.9 Time of Essence. . . . . . . . . . . . . . . . . . . 36
26.10 Reasonable Consent . . . . . . . . . . . . . . . . . 36
26.11 Fair Meaning . . . . . . . . . . . . . . . . . . . . 36
26.12 Entire Agreement . . . . . . . . . . . . . . . . . . 37
26.13 No Accord and Satisfaction . . . . . . . . . . . . . 37
26.14 Choice of Law. . . . . . . . . . . . . . . . . . . . 37
26.15 Non-Discrimination . . . . . . . . . . . . . . . . . 37
26.16 Counterparts . . . . . . . . . . . . . . . . . . . . 37
26.17 Corporate Resolution . . . . . . . . . . . . . . . . 37
26.18 Reimbursements to Landlord . . . . . . . . . . . . . 37
26.19 No Guard Service . . . . . . . . . . . . . . . . . 38
26.20 Brokers. . . . . . . . . . . . . . . . . . . . . . . 38
26.21 Brokerage Commission . . . . . . . . . . . . . . . . 38
26.22 Limitation of Liability. . . . . . . . . . . . . . . 39
26.23 Parking. . . . . . . . . . . . . . . . . . . . . . . 39
26.24 Lease Reviewed . . . . . . . . . . . . . . . . . . . 39
26.25 Financial Statements . . . . . . . . . . . . . . . . 39
26.26 Lease Interest Rate. . . . . . . . . . . . . . . . . 39
26.27 Tenant's Self-Insurance. . . . . . . . . . . . . . . 40
26.28 Landlord Bankruptcy Proceeding.. . . . . . . . . . . 40
26.29 Waiver of Redemption by Tenant; Holding Over.. . . . 40
EXHIBITS
Exhibit A - Performance Standards of Watson Industrial Center
Exhibit B - Outline of Premises
Exhibit C - Form of Lease Addendum
Exhibit D - Operating Expenses
Exhibit E - Hazardous Material Certificate
Exhibit F - Form of Estoppel Certificate
Exhibit G - Initial Improvement Work
Exhibit H - Uses Under Existing Zoning
Exhibit I - Form of Confidentiality Agreement
Exhibit J - Insurance Summary
Lease Rider Number 1
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MULTI-TENANT INDUSTRIAL LEASE
This lease ("Lease") is made and entered into as of this fourth day
of October, 1993, by and between WATSON LAND COMPANY, a California
corporation ("Landlord") and LEINER HEALTH PRODUCTS INC., a Delaware
corporation, ("Tenant").
Landlord and Tenant mutually covenant and agree that Landlord, in
consideration of the rent payable by Tenant and the covenants and agreements
to be kept, observed and performed by Tenant, hereby rents and leases to
Tenant, and Tenant hereby takes and hires from Landlord, the "Premises" (as
defined herein), pursuant to the provisions of this Lease, subject to (i) all
applicable zoning, municipal, county, state and federal laws; (ii) covenants,
conditions, restrictions, reservations, easements, rights and rights-of-way
of record; and (iii) Performance Standards of Watson Industrial Center
attached hereto as Exhibit A and incorporated herein by reference. In the
event of any conflict between the provisions of this Lease and the provisions
of the Performance Standards, the provisions of this Lease shall govern.
ARTICLE I
BASIC LEASE PROVISIONS
1.1 DESCRIPTION OF PREMISES: "Premises," as used herein shall
mean and refer to that certain space located within the building (the
"Building") situated on the real property located in the County of Los
Angeles, State of California, commonly known as 901 East 233rd Street,
Carson, California, as outlined on the attached Exhibit B, which Premises
consists of approximately 45,000 square feet. The Premises, the Building and
the parcel of land (the "Land") on which the Building is located are
collectively referred to herein as the "Building Complex."
1.2 STREET ADDRESS OF PREMISES: 901 East 233rd Street, Carson,
California.
1.3 APPROXIMATE PREMISES SQUARE FOOTAGE: 45,000.
1.4 LEASE TERM: Ten (10) years and five (5) months beginning on
November 1, 1993 or such other date as is determined pursuant to the
provisions of this Lease (the "Commencement Date") and ending on March 31,
2004 (the "Termination Date").
1.5 EXTENSION OPTION: Two (2) periods of five (5) years each (See
Paragraphs 1 and 2 of the attached Lease Rider).
1.6 INITIAL MINIMUM RENT: Fourteen Thousand Four Hundred Dollars
(14,400).
1.7 PERIODIC RENT ADJUSTMENTS: See Paragraph 3 of the attached
Lease Rider.
1.8 TENANT'S PRORATA SHARE: Seventeen percent (17%).
1.9 ANNUAL TAX BASE AMOUNT: Seventy-Four Thousand Two Hundred
Eighty-Seven Dollars ($74,287).
1.10 ANNUAL INSURANCE BASE AMOUNT: Nineteen Thousand Five Hundred
and Eighty-Three Dollars ($19,583).
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1.11 INITIAL SECURITY DEPOSIT: Fourteen Thousand Four Hundred Dollars
($14,400).
1.12 BROKERS: CB Commercial Real Estate Group (Jeffrey S. Morgan
and Goodall W. McCullough, Jr.).
1.13 INITIAL IMPROVEMENT WORK: See Paragraph 4 of the attached
Lease Rider.
1.14 EXHIBITS AND RIDERS: The following Exhibits and Riders are
attached to this Lease and made a part hereof:
Exhibit A - Performance Standards of Watson
Industrial Center
Exhibit B - Outline of Premises
Exhibit C - Form of Lease Addendum
Exhibit D - Operating Expenses
Exhibit E - Hazardous Material Certificate
Exhibit F - Form of Estoppel Certificate
Exhibit G - Initial Improvement Work
Exhibit H - Uses Under Existing Zoning
Exhibit I - Form of Confidentiality Agreement
Exhibit J - Insurance Summary
Lease Rider Number 1
1.15 MAILING ADDRESSES:
Landlord: Watson Land Company
22010 South Wilmington Avenue
Suite 400
Carson, California 90745
Tenant: Leiner Health Products, Inc.
1845 West 205th Street
P.O. Box 2010
Torrance, California 90510-2010
(after the Leiner Health Products
Commencement Date) 901 East 233rd Street
Carson, California 90745
ARTICLE II
COMMON AREA, PARKING AND CONDITION OF PREMISES
2.1 The term "Common Area", as used herein, is defined as all
areas and facilities outside the Premises and within the exterior boundary
line of the Land that are provided and designated by Landlord from time to
time for the general non-exclusive use of Landlord, Tenant and other tenants
of the Building Complex, and their respective employees, suppliers, shippers,
customers and invitees, and may include, among other things, parking areas,
loading and unloading areas, trash receptacle areas, roadways, sidewalks,
walkways, parkways, driveways, landscape areas, and other areas commonly
found in comparable industrial buildings.
2.2 Landlord hereby grants to Tenant for the benefit of Tenant and
its employees, suppliers, shippers, customers, and invitees, during the
"Lease Term" (as defined herein), the non-exclusive right to use the Common
Areas, in common with others entitled to such use, as the Common Areas exist
from time to time, subject to any rights, powers, and privileges reserved by
Landlord under the terms hereof or under the terms of any rules, regulations
or restrictions now or hereafter governing the use of the Building Complex.
Under no circumstances shall the right herein granted to use the Common Areas
be deemed to include the right to store any property, temporarily or
permanently, in the Common Areas. Any such storage shall be permitted only
by the prior written consent of Landlord, in Landlord's sole and
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absolute discretion, which consent may be revoked at any time. In the event
that any unauthorized storage shall occur, and is not cured within
twenty-four (24) hours following notice from Landlord, then Landlord shall
have the right, in addition to such other rights and remedies that it may
have, to remove the stored items and charge the cost to Tenant, which cost
shall be immediately payable upon Landlord's demand and which shall be deemed
to be additional rent under this Lease.
2.3 Landlord or such other person(s) as Landlord may appoint from
time to time shall have the right, from time to time, to establish, modify,
amend and enforce reasonable rules and regulations with respect to the Common
Areas and the use and maintenance thereof. Tenant agrees to abide by and
conform to such rules and regulations, and to cause its employees, suppliers,
shippers, customers, and invitees to so abide and conform. Landlord shall
not be responsible to Tenant for any non-compliance by other tenants in the
Building Complex with such rules and regulations.
2.4 Landlord shall have the right, in Landlord's sole discretion,
from time to time: (a) to make reasonable changes to the Common Areas,
including, without limitation, changes in the location, size, shape and
number of driveways, entrances, parking spaces, parking areas, loading and
unloading areas, ingress, egress, direction of traffic, landscaped areas and
walkways; (b) to close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available; (c)
to use the Common Area while engaged in making additional improvements,
repairs or alterations to the Building Complex or any portion thereof; (d) to
create controlled access or gated parking areas within the Common Areas; and
(e) to do and perform such other acts and make such changes in, to or with
respect to the Common Areas and Building Complex as Landlord may, in its
reasonable judgment, deem to be appropriate. The Common Areas shall be
repaired and maintained by Landlord subject to reimbursement for items
included as "Operating Expenses" (as defined herein).
2.5 Tenant acknowledges that prior to the execution of this Lease,
Tenant has been furnished full access to, and has inspected the Premises.
Landlord shall deliver the Premises to Tenant clean and free of debris on the
Commencement Date. Landlord warrants that the Initial Improvement Work
described in the attached Lease Rider No. 1 shall be completed and shall be
in good operating condition on the Commencement Date of the Lease Term. If a
non-compliance with said warranty exists as of the Commencement Date,
Landlord shall, except as otherwise provided in this Lease, promptly after
receipt of written notice from Tenant setting forth with specificity the
nature and extent of such non-compliance, rectify the same at Landlord's
expense. If Tenant does not give Landlord written notice of any
non-compliance with this warranty within one year after the Commencement
Date, correction of that non-compliance shall be the obligation of Tenant at
Tenant's sole cost and expense. Landlord hereby agrees to execute any
documentation reasonably requested by Tenant in order to evidence the fact
that effective after the first year of the Lease Term, Landlord shall assign
all of its right, title and interest in and to any warranties regarding
workmanship and material with respect to the Initial Improvement Work
including, by way of illustration and not limitation, the warranties
regarding the operation of systems such as air-conditioning or heating.
Landlord shall cooperate with Tenant relative to the enforcement of any such
warranties upon written request by Tenant. Any such warranties which remain
in effect upon the expiration or sooner termination of this Lease shall be
re-assigned to Landlord. Tenant acknowledges that neither Landlord nor any
real estate agent or broker representing Landlord or Tenant has made any
representation or warranty as to the present or future suitability of the
Premises for the conduct
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of Tenant's business. Landlord warrants to Tenant that, to Landlord's actual
knowledge, the improvements on the Premises comply with all applicable laws,
codes, ordinances, rules or regulations affecting the Premises including,
without limitation, laws, codes ordinances, rules or regulations relating to
fire or life safety, or access by disabled persons (collectively "Codes")
affecting the Premises as of the date the Building was initially constructed,
and Landlord has not received any notice or citation for any violation of any
Codes in effect as of the date of this Lease with respect to the Building (or
with respect to any other building in Watson Industrial Center South which is
reasonably similar to the Building and which would lead a reasonable and
prudent Landlord to conclude that the violation identified in such notice or
citation applied to the Building as well as to such other building).
Landlord shall be responsible for bringing the Premises into compliance with
"ADA" requirements as provided in Paragraph 2.2, below. Such warranty does
not apply to any Codes relating to Tenant's proposed use of the Premises, and
Tenant shall be responsible for determining the suitability and conformity of
the Premises with respect to such Codes, and Tenant shall be responsible for
making any necessary modifications to the Premises in order to comply with
such Codes. Landlord hereby represents to Tenant that the Premises is zoned
as set forth in the attached Exhibit H, and such zoning classification
permits the uses listed on the attached Exhibit H. Landlord agrees to
cooperate with and assist Tenant in connection with Tenant's application for
approval of its proposed specific uses of the Premises to the extent such
approvals are required by any governmental entity with jurisdiction over the
Premises, including assisting Tenant in making any appearances determined to
be reasonably necessary by Tenant before any such governmental entity.
Landlord's agreement in the immediately preceding sentence shall include
cooperation in the same regard with respect to the construction of the
proposed overhead bridge conveyor system described in Paragraph 7 of Lease
Rider No. 1
2.6 Landlord agrees that it shall cause the Premises to be brought
into compliance with the requirements of Title III of the Americans with
Disabilities Act ("ADA") which are applicable to the Premises as of the
Commencement Date of the Lease Term with respect to use of the Premises as a
warehousing and distribution facility. If Tenant uses or permits the
Premises to be used for any use or purpose constituting a "public
accommodation" pursuant to the ADA, Tenant shall be responsible for bringing
the Premises and related access areas and entrances into compliance with any
provisions of the ADA applicable to, or triggered by, such use.
ARTICLE III
TERM OF LEASE
3.1 The term of this Lease (the "Lease Term") shall be the period
set forth in Item 1.4 of the Basic Lease Provisions. Subject to the terms
and conditions of this Lease, the Lease Term shall commence on the
Commencement Date and shall terminate on the Termination Date, which dates
are specified in Item 1.4 of the Basic Lease Provisions. All of the terms
and conditions of this Lease shall apply as of the date this Lease is signed
by both Landlord and Tenant (the "Execution Date"); provided, however, that
Tenant shall have no obligation to pay Minimum Rent until the Commencement
Date. Effective upon the execution of this Lease, Landlord shall cooperate
with Tenant in scheduling inspections of the Building by Tenant and its
design consultants from time to time as may be reasonably necessary for
Tenant to perform its space planning and design work for the Premises. In
addition, effective upon the Execution Date, Tenant and its agents,
contractors, vendors, and security contractors shall be permitted to enter
the Premises for the purposes of plan layout, facilities planning, security
activities, construction and
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installation of Tenant's furniture, fixtures, utilities, telecommunication
systems and security systems.
3.2 If Tenant occupies all or any portion of the Premises with
Tenant's personnel or property prior to the date specified in Item 1.4 of the
Basic Lease Provisions, such occupancy shall be subject to all terms and
provisions of this Lease, and such occupancy shall not advance the
Termination Date.
3.3 Landlord agrees to use diligent efforts to complete the
"Initial Improvement Work" (as described in the attached Exhibit G) prior to
the Commencement Date. However, Landlord's failure to have completed all of
the Initial Improvement Work prior to the Commencement Date shall not delay
or extend the Commencement Date, and shall not cause this Lease to be void or
voidable.
ARTICLE IV
RENT
4.1 Tenant agrees to pay to Landlord at the office of Landlord or
at such other place as may be designated by Landlord from time to time,
without any prior demand therefor and without any deduction or setoff
whatsoever, except as may be specifically provided by the provisions of this
Lease, as minimum monthly rent ("Minimum Rent"), the sum specified as the
Initial Minimum Rent in Item 1.6 of the Basic Lease Provisions. Minimum Rent
shall be payable in advance on the first day of each calendar month of the
Lease Term. If the Lease Term shall commence upon a day other than the first
day of a calendar month, then Tenant shall pay, upon the Commencement Date, a
pro rata portion of the Minimum Rent for the first fractional calendar month.
Minimum Rent payable by Tenant under this Lease is subject to adjustment in
accordance with the provisions of Item 1.7 of the Basic Lease Provisions.
Unless specifically designated otherwise in this Lease, all fees, charges,
costs, expenses or other payments to be paid by Tenant to Landlord pursuant
to this Lease shall be deemed to be additional rent.
4.2 As additional rent hereunder, Tenant shall pay to Landlord
monthly, on the first day of each month, as additional rent, Tenant's
"Prorata Share" of all expenses described in the attached Exhibit D (the
"Operating Expenses"). As used herein, Tenant's "Prorata Share" shall be the
percentage amount set forth in Item 1.8 of the Basic Lease Provisions;
however, in the event the square footage of the Building is increased or
decreased, Tenant's Prorata Share shall be adjusted and shall equal a
fraction, the numerator of which is the square footage of the floor area of
the Premises and the denominator of which is the total square footage of the
floor area of the Building. Operating Expenses shall be estimated by
Landlord from time to time, and Tenant's payments of such Operating Expenses
shall be based upon such estimates. At the conclusion of each calendar year,
Landlord shall compute the actual Operating Expenses of the Building Complex,
and Tenant's Prorata Share of such Operating Expenses. If the monthly
payments of Operating Expenses made by Tenant during such calendar year are
less that the actual amount of the Operating Expenses for such calendar year,
Tenant shall, within thirty (30) days after receipt of a statement from
Landlord, pay such amounts to Landlord. In the event Tenant has overpaid
Landlord, Tenant shall be entitled to credit any such overpayment against
Operating Expenses next coming due. Tenant shall have the right, at its sole
cost and expense, to cause an audit of Operating Expenses. Any such audit
shall be made upon thirty (30) days prior written notice to Landlord, and
shall be made, if at all, within ninety (90) days following Tenant's receipt
of Landlord's annual computation of Operating Expenses. Any adjustment to
Operating Expenses resulting from any such
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audit shall be made in the same manner as provided above for annual
adjustments to Operating Expenses.
ARTICLE V
TAXES AND ASSESSMENTS
5.1 Landlord shall pay the "real estate taxes" (as defined herein)
applicable to the Building Complex, subject to reimbursement by Tenant of
Tenant's Prorata Share of the amount by which all real estate taxes and
assessments, and installments thereof which may be taxed, charged, levied,
assessed or imposed during any fiscal tax year occurring during the Lease
Term (and any extensions or renewals thereof) upon all or any portion of, or
in relation to, the Building Complex, exceed the Annual Tax Base Amount
specified in Item 1.9 of the Basic Lease Provisions (the "Excess Tax
Amount"). The Excess Tax Amount shall be paid by Tenant to Landlord within
fourteen (14) days following the date of Landlord's invoice therefor. In the
partial fiscal tax year in which the Lease Term shall commence, and in the
partial fiscal tax year in which the Lease Term shall terminate, such taxes
and assessments and the Annual Tax Base Amount shall be prorated on a daily
basis (using a 365-day year), and Tenant's payment obligations shall be
computed accordingly. Tenant shall pay to Landlord, upon demand, the
entirety of any increase in real estate taxes assessed by reason of any
improvements placed upon the Premises by Tenant.
5.2 Tenant shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Tenant contained in the Premises or elsewhere. Whenever
possible, Tenant shall cause said trade fixtures, furnishings, equipment and
all other personal property to be assessed and billed separately from the
real property of Landlord. If any of Tenant's said personal property shall
be assessed with Landlord's real property, Tenant shall pay to Landlord the
taxes attributable to Tenant within ten (10) days after receipt of a written
statement from Landlord setting forth the taxes applicable to Tenant's
property.
5.3 As used herein, the term "real estate taxes" shall include any
form of real estate tax or assessment, general, special, ordinary or
extraordinary, and any license fee, commercial rental tax, rental excise tax,
improvement bond or bonds, levy or tax (other than income taxes) imposed on
the Building Complex by any authority having the direct or indirect power to
tax, including any city, state or the federal government, or any school,
agricultural, sanitary, fire, street, drainage, water or other improvement
district thereof, as against any legal or equitable interest of Landlord in
the Building Complex, as against Landlord's right to rent or other income
therefrom, and as against Landlord's business of leasing the Building
Complex. With respect to any assessment for capital improvements
benefitting the Premises which is included within the definition of real
estate taxes and which is imposed over a period which is substantially less
than the estimated useful life of such capital improvements, such assessment
shall be amortized over the useful life of the improvement in question, at a
commercially reasonable rate of interest, and, notwithstanding any
governmental requirement concerning payment, Tenant shall only be obligated
to pay installment payments of such assessment based upon the semi-annual
amortization payments which would be required during the Lease Term had the
cost of such improvements been amortized over the estimated useful life such
improvements in equal semi-annual installments and at a commercially
reasonable rate of interest. Where any such capital improvement is funded by
a bonded indebtedness, the term of the bond maturity shall be deemed to be
the useful life of the capital improvement. The term "real estate taxes"
shall also include any tax, fee, levy, assessment or charge (i) in
substitution of, partially or totally, any tax,
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fee, levy, assessment or charge hereinabove included within the definition of
"real property tax"; or (ii) the nature of which was hereinbefore included
within the definition of "real property tax"; or (iii) which is imposed for a
service or right not charged prior to June 1, 1978, or, if previously
charged, has been increased since June 1, 1978; or (iv) which is imposed by
reasons of this transaction, any modifications or changes hereto, or any
transfers hereof. Notwithstanding anything to the contrary set forth in the
Lease, real estate taxes shall not include: (a) any excess profits taxes,
franchise taxes, gift taxes, capital stock taxes, inheritance and succession
taxes, estate taxes, federal and state income taxes, and other taxes to the
extent applicable to Landlord's general or net income (as opposed to rents or
receipts), (b) penalties incurred as a result of Landlord's negligence,
inability or unwillingness to make payments of, and/or to file any tax or
information returns with respect to, any real estate taxes, when due, or (c)
any other taxes or assessments charged or levied against Landlord which are
not directly incurred as a result of the operation of the Premises.
5.4 If the Building Complex is not separately assessed, Tenant's
Prorata Share of the real estate tax liability shall be an equitable
proportion of the real estate taxes for all of the land and improvements
included within the tax parcel assessed, such proportion to be determined by
Landlord from the respective valuations assigned in the assessor's work
sheets or such other information as may be reasonably available. Landlord's
reasonable determination thereof, made in good faith, shall be conclusive.
5.5 In the event of a sale by Landlord of its fee simple interest
in the Premises to a third party, Tenant shall have no obligation to pay any
increase in real estate taxes which result from such sale. However, nothing
contained in this Paragraph 5.5 shall limit Tenant's obligation to pay any
other increases in real estate taxes, including, without limitation,
inflation factor adjustments as provided in Section 51 of the California
Revenue and Taxation Code and changes in the manner or method of computing or
imposing taxes pursuant to applicable law. No transfer of stock of Landlord,
and no transfer of the property to a lender pursuant to foreclosure or
acceptance of a deed in lieu of foreclosure (or to any purchaser of the
Premises or the Building Complex from such a lender) shall constitute a "sale
by Landlord of its fee simple interest in the Premises to a third party" for
the purposes of this Paragraph 5.5.
ARTICLE VI
UTILITY CHARGES
6.1 Gas, electricity, power, telephone, sewer, trash collection
and waste removal and/or disposal, alarm systems, or other services serving
the Premises and the Building Complex (collectively the "Utilities") shall,
whenever possible, be separately billed and/or metered, as applicable, to
the Premises in Tenant's name, and the cost of operation of such Utilities
shall be paid directly by Tenant. The installation costs for any necessary
water, gas and electrical meters shall be paid by Tenant. Any and all
inspections, taxes, levies or excises in connection with the Utilities and
all connection, metering and closing charges, and any tax or excise thereon
shall be paid or caused to be paid directly by Tenant. Any utility charges
for services benefitting the Building Complex which are not separately
metered shall be included in Operating Expenses. Landlord and Tenant (or
Landlord only, in Landlord's name, if Landlord so elects) shall contract for
water service for the Premises, but Tenant shall be solely responsible for
any fees, charges or costs of any nature imposed or incurred in connection
with such water service. Landlord may elect to have bills for
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such water service delivered directly to Tenant, or Landlord may have such
bills delivered to Landlord and separately invoice Tenant for the actual cost
of such water service. Tenant shall pay any such bill or invoice within ten
(10) days following Tenant's receipt thereof. Landlord shall not be liable to
Tenant for any loss, injury, damage, disruption of business or any other harm
resulting from any interruption of utility services to the Premises. In the
event of any interruption or disruption in utility services to the Premises,
Landlord agrees to reasonably cooperate with Tenant to minimize the length
and impact of any such interruption or disruption.
ARTICLE VII
HOLD HARMLESS
7.1 Tenant covenants and agrees that Landlord shall not at any
time or to any extent whatsoever be liable, responsible, or in any way
accountable for any loss, injury, death or damage to persons or property
which at any time may be suffered or sustained by Tenant or by any person
whomsoever who may at any time be using, occupying or visiting the Building
Complex or the Premises, or be in, on, or about the same, whether such loss,
injury, death or damage shall be caused by or in any way result from or arise
out of any act, omission or negligence of Tenant or of any occupant,
subtenant, visitor or user of any portion of the Premises or the Building
Complex or from fire, steam, electricity, water, rain, act of God, or from
the breakage or leakage, or any defect in any pipes, sprinklers, or plumbing,
electrical or heating and air conditioning systems or fixtures, or from any
other cause. Tenant does hereby release Landlord and agrees to indemnify,
defend, hold and save Landlord harmless of, from and against any and all
claims, losses, costs, liabilities, expenses or damages whatsoever arising
out of or related to any use or occupancy of the Premises by Tenant or any of
Tenant's agents, employees, shippers, customers, invitees or contractors
(collectively "Losses"), including attorneys' fees and costs on account of
any such Losses, except any Losses resulting solely from the willful
misconduct or gross negligence of Landlord. Landlord shall not be liable for
any damages arising from any act or neglect of any other tenant, occupant or
user of the Building Complex, nor from the failure of Landlord to enforce the
provisions of any other lease affecting the Building Complex.
7.2 Landlord covenants and agrees that Tenant shall not at any
time or to any extent whatsoever be liable, responsible, or in any way
accountable to Landlord for any injury to or death of persons which at any
time may be suffered or sustained by Landlord or by any person whomsoever who
may at any time be using, occupying or visiting the Building Complex or the
Premises, or be in, on, or about the same, to the extent such injury or death
shall be caused by or in any way result from or arise out of any act,
omission or negligence of Landlord, or any of Landlord's agents or employees.
To the extent of any loss which is covered by Landlord's property insurance
policies and for which a waiver of subrogation under such policies exists,
Tenant shall not be liable to Landlord for damage from fire, steam,
electricity, water, rain, act of God, or from breakage or leakage, or any
defect in any pipes, sprinklers, or plumbing, electrical or heating and air
conditioning systems or fixtures, or from any other cause. Landlord agrees
to indemnify, defend, hold and save Tenant free and harmless of, from, and
against any and all claims, losses, costs, liabilities, expenses or damages,
including attorneys' fees and costs on account of any such losses, resulting
solely from the gross negligence or willful misconduct of Landlord.
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ARTICLE VIII
INSURANCE
8.1 Unless Tenant elects to become the "Insuring Party" (as
defined herein) Landlord shall, throughout the Lease Term, keep the "Building
Shell" (as defined in Paragraph 12.1, below) (but not Tenant's trade
fixtures, furnishings or equipment) insured against all risks (as the term
"all risk" is used in the insurance industry), and for earthquake and flood
risks, in such form and with such policy limits as Landlord may determine
from time to time, so as to provide reasonable protection of Landlord's
ownership interests in the Building Complex at a reasonable cost.
Notwithstanding the foregoing, Landlord shall not be required to maintain any
insurance which becomes unavailable or commercially unreasonable to carry in
the Southern California insurance marketplace. Landlord agrees that prior to
changing the insurance limits or deductible amounts of such insurance in a
manner which would materially decrease the insurance limits or materially
increase the deductible amounts from the limits and deductibles shown in the
Insurance Summary attached hereto as Exhibit J, Landlord will notify Tenant
and provide Tenant with an opportunity to obtain its own insurance against
any increased risk resulting from any such decrease in insurance limits or
increase in deductibles or to become the Insuring Party under this Lease. If
Landlord fails to so notify Tenant, then in the event of a loss for which
insurance is required under this Paragraph 8.1, Tenant shall not be
responsible for any additional increment or portion of such loss to the
extent such loss would have been covered pursuant to the insurance program
described in the attached Exhibit J, but is not covered under the revised
insurance program. In the event that Tenant desires to provide insurance on
the Building Shell (which insurance shall include policy coverages, limits
and deductibles in the same amounts as would be provided by Landlord, and
which shall otherwise satisfy the requirements set forth in this Paragraph
8.1 for coverage which would be carried by Landlord, and which shall satisfy
the applicable requirements of Paragraph 8.4, below), Tenant may, at any time
other than the period from sixty (60) days prior to the expiration of the
then-current Policy Year through thirty (30) days following the commencement
of the immediately following Policy Year, upon written notice to Landlord and
at Tenant's sole cost, elect to obtain, in lieu of Landlord's insurance
pursuant to this Paragraph 8.1, Tenant's own insurance on the Building Shell.
For purposes of this Lease, the term "Policy Year" shall mean the one-year
period following the commencement date for coverage under Landlord's
then-effective insurance policy. As of the date of this Lease, the Policy
Year for Landlord's existing coverage commenced on July 15, 1993. However,
the date of commencement of subsequent Policy Years may change from time to
time over the Lease Term. Landlord agrees to provide Tenant with written
notice of any change in the commencement date of any Policy Year. In the
event of any Insured Loss, regardless of whether Landlord or Tenant is the
Insuring Party, Tenant shall be responsible for paying to Landlord any
deductible amounts under any insurance policies insuring the Premises,
whether carried by Landlord or Tenant, and, in the event Tenant elects to
become the Insuring Party under this Paragraph 8.1, Tenant shall be
responsible for any coinsurance amounts. Notwithstanding the foregoing, if
Landlord is the party carrying the policy of earthquake insurance for the
Building Shell, the deductible amount payable by Tenant for any loss
resulting from an earthquake shall not exceed five percent (5%) of the full
replacement cost of the Building Shell. Such limitation on the deductible
amount payable by Tenant for any loss resulting from an earthquake shall not
apply if Tenant is the party carrying such earthquake insurance. The party
providing the "all risk" property insurance required under this Paragraph 8.1
shall also obtain and maintain "rental value insurance" covering two year's
rent (Minimum Rent, real estate taxes, insurance premiums and landscape
maintenance charges)
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payable under this Lease. If, taking into account Landlord's overall
insurance program for its properties, it is possible and reasonably practical
for Tenant to obtain and maintain in effect one or more of the components of
the insurance required pursuant to this Paragraph 8.1, Tenant may do so as
provided in this Paragraph 8.1, and in such event Tenant shall be the
"Insuring Party" with respect to the risks covered by the insurance so
carried by Tenant, and Landlord shall be the "Insuring Party" with respect to
the risks covered by the insurance so carried by Landlord.
8.2 Should Tenant elect to become the Insuring Party as to all or
any portion of the insurance described in Paragraph 8.1, above, any insurance
so carried by Tenant shall have attached thereto such form of lender's loss
payable endorsement as Landlord's Lender may require. Tenant shall, within
ten (10) days following Landlord's request therefor, provide Landlord with a
copy of the insurance policy or policies obtained by Tenant pursuant to
Paragraph 8.1, together with a certificate of insurance for such policy or
policies which shall confirm, among other things, that such policy shall not
be modified, cancelled or non-renewed without at least thirty (30) days prior
written notice to Landlord. If Tenant elects to become the Insuring Party as
to all of the insurance described in Paragraph 8.1, Minimum Rent for each
month during which Tenant is the Insuring Party shall be reduced by
one-twelfth (1/12th) of the Annual Insurance Base Amount set forth in Item
1.9 of the Basic Lease Provisions. If Tenant elects to become the Insuring
Party as to only a portion of the insurance described in Paragraph 8.1, then
the Minimum Rent for each month during which Tenant is the Insuring Party for
such insurance shall be reduced by the portion of one-twelfth of the Annual
Insurance Base Amount which is attributable to the insurance originally
carried by Landlord (at the rate included in the Annual Insurance Base
Amount) so carried by Tenant, and the Annual Insurance Base Amount shall be
reduced accordingly. Tenant covenants and agrees to pay to Landlord, as
additional rent hereunder, the amount by which the annual premiums and
related fees for the insurance specified in Paragraph 8.1 which is carried by
Landlord exceeds the Annual Insurance Base Amount specified in Item 1.9 of
the Basic Lease Provisions. Such amount shall be paid by Tenant to Landlord
within ten (10) days after receipt by Tenant of Landlord's statement of the
cost thereof. If at any time during the Lease Term during which Landlord is
the Insuring Party, the annual premiums and related fees for the insurance
carried by Landlord pursuant to Paragraph 8.1, above, exceeds the "Insurance
Cap Amount" (as defined herein), Tenant shall not be required to pay any
portion of such premiums and related fees exceeding the Insurance Cap Amount.
For the purposes of this Lease, the Insurance Cap Amount for any Policy Year
shall be an amount equal to two and one-half (2-1/2) times the Annual
Insurance Base Amount, as adjusted by any increases in the "CPI" (as defined
in Lease Rider No. 1) from the date of this Lease to the date of the Policy
Year in question. In the Policy Year in which the Lease Term shall commence
and in the Policy Year in which it shall terminate, such insurance premiums
and the Annual Insurance Base Amount shall be prorated on a daily basis
(using a 365-day year), and Tenant's payment obligations shall be computed
accordingly. With respect to any insurance for which Tenant is the Insuring
Party, Tenant shall pay the premiums for such insurance directly to the
insurance carrier at Tenant's sole cost and expense.
8.3 Landlord and Tenant agree that if the Building Shell shall be
damaged or destroyed by risks insured against under Paragraph 8.1, or if any
of Tenant's machinery, fixtures, furniture, merchandise or other property,
real or personal, are damaged or destroyed from any cause covered by a
property policy obtained by Tenant, then and to the extent allowable and
without invalidating such insurance, and whether or not such damage or
destruction was caused by the negligence of the other party,
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neither party shall have any liability to the other nor to any insurer of the
other for or in respect of such damage or destruction. If obtainable, each
party shall require all policies of fire or other insurance carried by such
party during the Lease Term upon the Building Complex or contents therein to
include a provision whereby the insurer designated therein shall waive its
right of subrogation against the other party.
8.4 During the entire Lease Term, Tenant, at Tenant's sole cost
and expense, shall procure and maintain in full force and effect personal
injury and property damage liability insurance with a combined single limit
of not less than Five Million Dollars ($5,000,000). Such insurance may be
evidenced by a Primary Policy or a combination of a Primary Policy and an
Excess Policy. Tenant's liability insurance shall be primary and any
liability insurance maintained by Landlord shall not be contributory.
Landlord shall be named as an additional insured in such policies, and a
policy endorsement so naming Landlord shall be furnished to Landlord. All
such insurance shall insure the performance by Tenant of the indemnity
provisions of Article VII of this Lease. In the event that either party
hereto shall at any time deem the limits of such liability insurance then
carried to be insufficient, the parties shall endeavor to agree upon the
proper and reasonable limits for such insurance then to be carried. If the
parties shall be unable to agree thereon, the proper and reasonable limits
for such insurance then to be carried shall be determined by an impartial
third person knowledgeable of insurance risk matters selected by the parties,
or should they be unable to agree upon a selection by an impartial third
person such third person shall be chosen by the Presiding Judge of the
Superior Court of Los Angeles County upon application by either party made
after five (5) days written notice to the other party of the time and place
of application. The decision of such impartial third person as to such
limits then to be carried shall be binding upon the parties. Such insurance
shall be carried with the limits as agreed upon or determined pursuant to
this Paragraph until such limits shall again be changed pursuant to the
provisions of this Paragraph. The expenses of such determination shall be
borne equally between Landlord and Tenant.
8.5 All of the insurance provided by Tenant under this Article
VIII and all renewals thereof shall be issued by such good, responsible and
standard companies rated at least A-: Class VII (or the weighted average
rating of all insurers in the group of companies providing the insurance
carried by Landlord under Paragraph 8.1, if such weighted average rating is
lower than A-: Class VII) in the current edition of Best's Insurance Guide,
and authorized to do business in California. Any insurance carrier providing
Tenant's liability insurance must be an "admitted" carrier in the State of
California. The policy or policies of insurance provided for in Paragraph
8.1 hereof shall be payable to Landlord, or to Tenant or jointly to Landlord
and Landlord's Lender, and Tenant agrees to endorse any check to the order
of Landlord which might be made payable directly to Tenant, or jointly to
Landlord and Tenant, by the insurance company. Tenant agrees to immediately
comply with any request of the insurance carrier providing insurance
described in Paragraph 8.1 if the failure to comply therewith will cause
cancellation of such insurance. All policies provided by Tenant shall
expressly provide that the policy shall not be cancelled or non-renewed
without thirty (30) days' prior written notice to Landlord. Neither Landlord
nor Tenant shall do or permit to be done anything which will invalidate the
insurance policies provided for in this Article VIII. Upon the issuance or
renewal of the liability insurance policy described in this Article VIII, or
upon commencement of the Lease Term if such policy is then in force or
effect, Tenant shall have its insurance carrier furnish Landlord with a
Certificate of said insurance. If requested in writing by Landlord following
a claim or occurrence for which coverage may be available under any policy of
insurance carried
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by Tenant under this Lease, Tenant shall reproduce and forward to Landlord a
true copy of any such insurance policy. Tenant shall obtain such fire
insurance and other insurance on Tenant's machinery, fixtures, furniture and
other property, real or personal (or shall self-insure such property), as
Tenant deems appropriate, and with which Landlord shall not otherwise be
concerned.
ARTICLE IX
REPAIRS, MAINTENANCE, ALTERATIONS
AND REMOVAL OF EQUIPMENT
9.1 Landlord shall maintain and repair the foundation, floor slab,
exterior walls, roof, asphalt paving, concrete paving and fire sprinkler
system of the Premises and the Building Complex at its own cost and expense,
(subject to Tenant and insurance contributions relating to damage or
destruction affecting the Premises), provided, however, that if any
maintenance or repair work for the foundation, floor slab, exterior walls,
roof, asphalt paving, concrete paving and fire sprinkler system of the
Premises or the Building Complex is required as a result of any negligence or
willful misconduct of Tenant or any of Tenant's agents, employees, shippers,
customers, invitees or contractors, such work shall be at Tenant's sole cost
and expense except to the extent such matter is covered by the insurance
required to be carried by Landlord under the terms of this Lease. Tenant
shall keep in good order, condition and repair all other portions and
components of the Premises (and portions or components of the Building
Complex serving the Premises), and including all plumbing, HVAC systems
serving the Premises, electrical and lighting systems, ceilings, plate glass
and skylights in good order, condition and repair during the Lease Term and
any Extended Term. Without limiting the generality of the foregoing, Tenant
shall perform all maintenance detailed in Paragraph K (mechanical service
controls) of the Performance Standards of the Watson Industrial Center
attached hereto as Exhibit A. Tenant shall also maintain any of Tenant's
property visible from outside the Building in the same condition, with the
surfaces thereof painted at such intervals and such colors as Landlord shall
approve. Except as provided below, Tenant shall promptly replace any portion
of the Premises or system or equipment in or serving the Premises which
cannot be fully repaired. In the event it becomes necessary to replace a
component of the HVAC system or lighting for the Premises and such
replacement would constitute a capital improvement, Tenant shall pay a
portion of the cost of such capital improvement computed by multiplying such
cost by a fraction, the numerator of which shall be the total number of years
of the Lease Term (including any Extended Term for which Tenant has or
ultimately exercises its extension option) and the denominator of which shall
be the number of years of the projected useful life of such capital
improvement. With respect to any capital improvement to major plumbing lines
within the Building which have an aggregate replacement cost in excess of
Twenty-Five Thousand Dollars ($25,000.00), Tenant shall pay a portion of such
cost of such capital improvement computed by multiplying the total cost of
such improvements by a fraction, the numerator of which shall be the number
of years remaining in the Lease Term (including any Extended Term for which
Tenant has or ultimately exercises its extension option) and the denominator
of which shall be fifteen (15). If the replacement of any such capital
improvement item occurs prior to the end of the Lease Term, and Tenant
subsequently exercises one or both of its extension options, the amount
previously computed as being payable by Tenant hereunder shall be adjusted to
reflect the change in the numerator of such fraction resulting from Tenant's
exercise of such extension option. Tenant's portion of such cost shall be
paid in equal monthly payments, amortized at a commercially reasonably
interest rate, over the portion of the Lease Term remaining as of the date
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such capital improvement is commenced. Any payment adjustment resulting from
the exercise of an extension option shall be paid by Tenant in equal monthly
payments amortized over the Extended Term at a commercially reasonable
interest rate. Tenant shall maintain the Premises in an orderly, first-class
and fully operative condition. Landlord shall maintain the exterior
landscaping for the Building Complex in accordance with Landlord's
then-prevailing landscape maintenance standards, and Tenant shall pay to
Landlord Tenant's Prorata Share of the amount by which the cost of such
landscape maintenance work exceeds the "Landscape Base Amount" of One
Thousand Sixty-Five Dollars ($1,065). Such payments shall be made by Tenant
within thirty (30) days following Tenant's receipt of an invoice from
Landlord. Except for Landlord's obligations for maintenance and repair of
the foundation, floor slab, exterior walls, exterior paint, roof, asphalt
paving, concrete paving and fire sprinkler system of the Premises and the
Building Complex, Landlord shall have no obligation to repair or maintain the
improvements or any areas adjacent thereto. Tenant waives the provisions of
any law permitting Tenant to make repairs at Landlord's expense.
9.1.1 If Tenant provides notice (the "Repair Notice") to
Landlord of an event or circumstance which Landlord is required to repair,
alter or maintain pursuant to the terms of this Lease (a "Required Action"),
and Landlord fails to provide the Required Action within the time period
required by this Lease, or a reasonable period of time, if no specific time
period is specified in this Lease, after a reasonable period of time
following the receipt of the Repair Notice (the "Notice Date"), or, in any
event, does not commence the Required Action within ten (10) days after the
Notice Date and complete the Required Action within thirty (30) days after
the Notice Date (provided that if the nature of the Required Action is such
that the same cannot reasonably be completed within a thirty (30) day period,
Landlord's time period for completion shall not be deemed to have expired if
Landlord diligently commences such cure within such period and thereafter
diligently proceeds to rectify and complete the Required Action, as soon as
possible), then Tenant may proceed to take the Required Action, pursuant to
the terms of this Lease, and after delivering a second notice to Landlord
specifying that Tenant is taking the Required Action (the "Second Notice").
9.1.2 Notwithstanding the foregoing, if there exists an
emergency such that the Premises or a portion thereof are rendered
untenantable and Tenant's personnel are forced to vacate the Premises or such
portion thereof and if Tenant gives Landlord notice (the "Emergency Notice")
of Tenant's intention to take action with respect thereto (the "Necessary
Action") and the Necessary Action is also a Required Action, Tenant may take
the Necessary Action if Landlord does not commence the Necessary Action
within one (1) business day after the Emergency Notice (the "Emergency Cure
Period") and thereafter use its best efforts and due diligence to complete
the Necessary Action as soon as possible.
9.1.3 If any Necessary Action will affect the structural
integrity of the Building, or the exterior appearance of the Building, Tenant
shall use only those contractors used by Landlord in the Building for work on
the Building Systems, or its structure, and Landlord shall provide Tenant
(when available and upon Tenant's request) with notice identifying such
contractors and any changes to the list of such contractors, unless such
contractors are unwilling or unable to perform such work or the cost of such
work is not competitive, in which event Tenant may utilize the services of
any other qualified contractors which normally and regularly perform similar
work in the vicinity of the Building except for any contractors who Landlord
specifically notifies Tenant in writing within five (5) business days of
Landlord's receipt of a Repair Notice or within one (1) business
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day of Landlord's receipt of an Emergency Notice that Tenant may not use for
such work (which notice shall specify the commercially reasonable reasons for
Landlord's not allowing Tenant to use such contractor.)
9.1.4 If any Requested Action or Necessary Action is taken
by Tenant pursuant to the terms of this Paragraph 9.1, and such Required
Action or Necessary Action relates to an item for which Landlord is allocated
payment responsibility under this Lease, then Landlord shall reimburse Tenant
for Tenant's reasonable and documented costs and expenses in taking the
Required Action or Necessary Action within thirty (30) days after receipt by
Landlord of an invoice from Tenant which sets forth a reasonably
particularized breakdown of its costs and expenses in connection with taking
the Required Action or Necessary Action on behalf of Landlord (the "Repair
Invoice). In the event Landlord does not pay Tenant the amount of the repair
invoice within the time required pursuant to this Paragraph 9.1.4, Tenant
shall have the right to seek recovery of such amount pursuant to a judicial
reference proceeding conducted in accordance with the provisions of Paragraph
18.2, below. If ownership of the Premises or the Building Complex has been
conveyed to a person other than: (a) a lender pursuant to foreclosure of
acceptance of a deed in lieu of foreclosure; (b) an institutional owner, such
as a pension trust fund, life insurance company or commercial bank with a
property management presence in California; or (c) a non-institutional owner
headquartered in the state of California, then if Tenant obtains a final
judgment against such Landlord in such judicial reference proceeding, and
such Landlord fails to make the payment to Tenant in the amount of such
judgment within ten (10) days following Tenant's demand for such payment,
then Tenant shall have the right to deduct up to twenty percent (20%) of the
amount of Tenant's monthly Minimum Rent payments under this Lease until such
time as Tenant has deducted an amount equal to the amount of such judgment,
together with interest on any unpaid outstanding balance of such judgment
that may exist from time to time at the Lease Interest Rate.
9.2 If Tenant fails to maintain and repair the Premises as
required pursuant to this Lease, Landlord may, at its election, notify Tenant
of Tenant's obligation to undertake such repair and maintenance work. If
Tenant fails to commence such work within a reasonable period of time
following receipt of such notice (determined in light of then-prevailing
facts and circumstances) Landlord may enter the Premises and perform any such
work on behalf of Tenant. Notwithstanding the foregoing, no notice to Tenant
shall be required in case of emergency, and in the event of an emergency
Landlord may enter the Premises and perform such repair and maintenance on
behalf of Tenant. In any such case, Tenant shall reimburse Landlord for all
costs so incurred immediately upon demand, together with interest thereon at
the "Lease Interest Rate" (as defined in Paragraph 26.26, below). Landlord's
right to perform maintenance and repair work pursuant to this Paragraph 9.2
shall not be deemed to create any obligation on the part of Landlord to do
so, and shall not in any way limit Landlord's remedies under this Lease.
9.3 Upon the expiration or sooner termination of this Lease,
Tenant shall surrender the Premises to Landlord, broom clean and in the same
condition as received, except for ordinary wear and tear which Tenant is not
otherwise obligated to remedy under any provision of this Lease, and except
for repair and maintenance items which are the obligation of Landlord
pursuant to Paragraph 9.1, above. Any damage to, or deterioration of, the
Premises shall be deemed not to be ordinary wear and tear if the same was the
responsibility of Tenant under this Lease, and could have been prevented by
good maintenance practices. In addition, Landlord may require Tenant to
remove any alterations, additions or improvements prior to the termination of
the Lease and to restore the Premises to its prior condition, or Landlord may
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perform such removals and restorations itself, all at Tenant's expense.
Notwithstanding the foregoing, Landlord and Tenant hereby agree that Tenant
shall not be required to remove from the Premises the Overhead Bridge
Conveyor System described in Paragraph 5 of the attached Lease Rider. All
alterations, additions and improvements which Landlord has not required
Tenant to remove or which Tenant has not elected to remove, as provided
herein, shall become Landlord's property and shall be surrendered to Landlord
upon the expiration or sooner termination of the Lease, except that Tenant
may remove any of Tenant's machinery or equipment which can be removed
without damage to the Premises. Tenant may, at its election, finance the
purchase of, grant security interests in, and otherwise encumber any trade
fixtures, furnishings, trade equipment, inventory or other personal property
owned by Tenant (collectively, the "Personal Property") (but not any
equipment which is a replacement of or an enhancement to any building systems
existing on the Premises as of the date of this Lease, or any building
equipment which is necessary for the operation or integrity of the Building
or the Building Complex) and Landlord agrees to execute a commercially
reasonable form of "Landlord Lien Waiver Agreement" should Tenant request
Landlord to do so. As used herein, the term "Landlord Lien Waiver Agreement"
shall mean an agreement granting the holder of a security interest in the
Personal Property the right, upon reasonable notice to Landlord, to enter the
Premises for the purposes of taking possession of and removing Tenant's
Personal Property. Any such Landlord Lien Waiver Agreement shall include
requirements that: (a) such lender repair all damage caused by or arising
out of any entry of the Premises or the Building Complex, including any
damage caused by the removal of Tenant's Personal Property; (b) the Personal
Property be removed no later than thirty (30) days following delivery of a
written demand from Landlord to Tenant or such Lender, which demand may be
made only following the termination of the Lease; (c) the lender is
prohibited from conducting any public sale or auction sale of any of the
Personal Property on the Premises or the Building Complex; and (d) the lender
indemnify Landlord from and against and all liabilities, losses, damages and
expenses arising out of or related to the lender's entry onto or use of the
Premises or the Building Complex, or the removal of the Personal Property
from the Premises. Tenant agrees to indemnify and hold Landlord harmless
from and against any liability, loss, cost, damage or expense relating to the
installation, placement, removal or financing of any such Personal Property,
except to the extent any damages result solely from the negligence or willful
misconduct of Landlord, and except for any damages covered by property
insurance carried by Landlord pursuant to the terms of this Lease and for
which a waiver of subrogation has been obtained. If, whether in violation of
this Lease or pursuant to Landlord's permission (which may be granted or
withheld in Landlord's sole and absolute discretion), Tenant installs any
"Underground Storage Tanks" (as defined herein) on the Premises or the
Building Complex, Tenant shall, at its sole cost and expense, remove any such
Underground Storage Tanks immediately upon the request of Landlord, the
expiration or sooner termination of this Lease, or the order of any
governmental authority, whichever occurs first. Notwithstanding any
provisions of this Lease to the contrary, such Underground Storage Tanks
shall at all times be and remain the property of Tenant. As used herein, the
term "Underground Storage Tank" means any one or combination of tanks,
including all pipes, sumps, valves and other equipment connected thereto,
which are used for the storage of petroleum products, hydrocarbon substances
or fractions thereof, or other Hazardous Materials, and which are located
wholly or partially beneath the surface of the ground. Tenant shall repair,
at Tenant's expense, any damage to the Premises or the Building Complex
caused by the removal of any such machinery or equipment.
9.4 Tenant shall not, without the prior written approval of
Landlord, make any additions, alterations, changes or
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improvements to the Premises, or the Building Complex or any portion thereof.
Any request for approval of additions, alterations, changes or improvements
shall be presented to Landlord in writing, accompanied by detailed drawings
and specifications. If Tenant so requests, Landlord shall notify Tenant in
writing, at the time of Landlord's approval of such additions, alterations,
changes or improvements, whether Landlord will require the removal of such
additions, alterations, changes or improvements, upon the expiration or
sooner termination of the Lease Term. Any item for which Landlord so
notifies Tenant that Landlord will not require to be removed is referred to
herein as an "Exempt Alteration". If Landlord has indicated that Landlord
will require the removal of any addition, alteration, change or improvement,
Landlord may subsequently notify Tenant that Landlord will not require the
removal of such item, in which event Tenant shall not (unless it has
previously done so) remove such alteration, addition, change or improvement.
Tenant shall not be required to obtain Landlord's consent for any
non-structural additions, alterations, changes or improvements to the
Premises which do not affect any building service equipment, and which, as to
any particular integrated group of additions, alterations, changes or
improvements, have an aggregate cost of less than Twenty Thousand Dollars
($20,000.00). No addition, alteration, change or improvement shall be made
which will weaken the structural strength, lessen the value of, interfere
with, or make inoperable any portion of the Premises, the Building Complex or
the "building service equipment", or change the architectural appearance of
the Building Complex, unless such alteration, change or improvement was
constructed pursuant to plans and specifications specifically approved by
Landlord in writing. All approved additions, alterations, changes and
improvements shall be made in workmanlike manner, in full compliance with all
laws and ordinances applicable thereto. Except for any Underground Storage
Tanks, which shall, at all times be and remain the property of Tenant, all
such additions, alterations, changes and improvements shall become a part of
the Premises, and become the property of Landlord upon the expiration or
sooner termination of the Lease Term; and, unless Landlord shall require
removal thereof as required pursuant to Paragraph 16.2, all such
improvements, including all building service equipment improvements (but
specifically excluding any Underground Storage Tanks), shall remain in and be
surrendered as a part of the Premises upon the expiration or sooner
termination of this Lease. Tenant shall furnish Landlord with a copy of
Tenant's final drawings which accurately set forth with field-grade notations
the nature and extent of improvements made by Tenant to the Premises or the
Building Complex. Tenant and any assignee or sublessee of Tenant shall
obtain Landlord's prior written consent before any signs are installed on or
about the Premises or the Building Complex. Such signs shall remain the
property of Tenant or any assignee or sublessee who installs the same and
they shall be removed from the Premises and the Building Complex at the
expiration or sooner termination of the Lease Term. Any damage arising out
of or resulting from the installation, placement or removal of such signs
shall be repaired by Tenant at Tenant's sole cost and expense. Landlord
agrees that it shall not unreasonably withhold its consent to the
installation of Tenant's business identity signs for the Premises and the
Building Complex. The term "building service equipment" shall include,
without limitation, equipment and property ordinarily necessary or convenient
for the operation and utilization of a building, such as heaters, air
conditioners, solar panels, power panels, transformers, light fixtures,
sprinklers, suspended ceilings, plumbing fixtures, walls, cabinets, shelving
affixed to walls in office areas, doors, floor coverings, fixtures, fencing,
paging systems, emission or pollution control facilities, security and alarm
systems, dock levelers, and utility services such as gas, electricity, water,
steam, telephone, sewer and other similar services used in connection with
the foregoing items. Building service equipment shall also include any
related power instal-
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lations, plumbing installations, pollution control installations, sprinkler
installations, energy conservation installations, and security installations,
including wiring, conduits, ducts, lines, pipes and meters for the
transportation, distribution, measuring and/or disposal thereof. Building
service equipment shall also include installations affixed to the Building
which serve machinery and equipment, including, without limitation, air
lines, conveyors, crane ways, dust collectors, paint booths, buss ducting,
power panels and related power installations.
9.5 Tenant shall have the right, without Landlord's prior
approval, to install within the Premises Tenant's equipment, trade fixtures,
furniture and furnishings (hereinafter collectively called "Tenant's
Equipment"). Under no circumstances, however, shall Underground Storage
Tanks be installed on the Premises or the Building Complex. However, Tenant
shall notify Landlord in writing and Tenant shall obtain Landlord's prior
written approval before the installation of heavy equipment, or heavy trade
fixtures in the Premises, and prior to placing any load on the roof or
attaching any load to the walls or the underside of the roof of the Building.
Tenant shall not install any of Tenant's Equipment in such a manner as to
weaken the structural strength of the improvements within the Building
Complex, interfere with, or make inoperable any portion of the Premises, the
Building Complex or the building service equipment. If Tenant makes any
addition, alteration, change, or improvement to the Premises or the Building
Complex described in Paragraph 9.4 without Landlord's consent, or if Tenant
installs any of Tenant's Equipment in violation of this Paragraph 9.5, then
Tenant shall, upon receipt of written notice from Landlord, promptly remove,
replace, or otherwise correct such installations in such manner as Landlord
shall reasonably require and direct, and Tenant shall reimburse Landlord, on
demand and as additional rent, for all architect's, engineer's and legal fees
incurred by Landlord in connection with such installations. If Tenant or any
person with whom Tenant is engaged in business causes any damage to the
Premises, the Building Complex or the improvements, structural or otherwise,
Tenant assumes all risk of such damage to any improvements and Tenant shall,
upon demand, promptly repair all such damage to the reasonable satisfaction
of Landlord. Tenant shall promptly repair any damage to the Premises or the
Building Complex arising from the installation, use, and removal of Tenant's
Equipment; and Tenant shall restore the Premises to a clean and orderly
condition and appearance, state of repair and operating order with all
remaining improvements thereon in a good, safe, fully operable condition and
in full compliance with all federal, state and local laws, rules, regulations
and ordinances. If Tenant fails to perform any act or obligation required of
Tenant under this Paragraph 9.5, Landlord shall have the right, but not the
obligation, after ten (10) days' written notice to Tenant specifying the
action required by Tenant, to enter upon the Premises and perform such act or
obligation; unless within such ten (10) day period, Tenant commences to take
the specific action and continues to diligently pursue the completion of such
action. In the event Tenant fails to so commence and pursue such action and
Landlord takes such action on behalf of Tenant, Tenant agrees to pay
Landlord, as additional rent within ten (10) days of receipt of Landlord's
invoice, for all costs incurred by Landlord in performing Tenant's act or
obligation, plus an overhead allowance of fifteen percent (15%) of such cost.
9.6 Landlord shall not be obligated to maintain or to make any
repairs, replacements, or renewals of any kind, nature or description
whatsoever to the Premises or the Building Complex, except as specifically
provided in this Lease.
9.7 Tenant shall comply with and abide by all federal, state,
county, municipal and other governmental statutes, ordinances, laws, and
regulations affecting the Premises, the
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Building Complex, the improvements thereon, the business to be conducted
therein and thereon by Tenant, or any activity or condition on or in the
Premises; provided, however, that if such compliance requires structural or
other capital improvements to the Premises or the Building Complex which are
not required as a result of the specific use of the Premises or the Building
Complex by Tenant, but rather are generally required at law for similar types
of buildings, then Tenant shall only be obligated to pay a pro rata portion
of the costs of such improvements. Such pro rata portion shall be determined
by multiplying the cost of such improvements by a fraction, the numerator of
which shall be the number of years remaining in the Lease Term as of the date
such capital improvement is commenced (including any years of any Extended
Term for which Tenant has exercised or ultimately exercises its extension
option) and the denominator of which shall be fifteen (15). If such
improvements are performed prior to the end of the Lease Term, and Tenant
subsequently exercises one or both of its extension options, the amount
previously computed as being payable by Tenant thereunder shall be adjusted
to reflect the change in the numerator of such fraction resulting from
Tenant's exercise of any such extension option. Tenant's portion of such cost
shall be paid in equal monthly payments, amortized at a commercially
reasonably interest rate, over the portion of the Lease Term remaining as of
the date such capital improvement is commenced. Any payment adjustment
resulting from the exercise of an extension option shall be paid by Tenant
in equal monthly payments amortized over the Extended Term at a commercially
reasonable interest rate. Without limiting the generality of the foregoing,
Tenant shall comply with all environmental laws and laws relating to
"Hazardous Materials" (as defined herein) affecting the Premises, the
improvements therein, the business conducted thereon by Tenant, or any
activity or condition on or in the Premises, to the extent that the necessity
of such compliance was caused by the act of Tenant or Tenant's agents,
employees, invitees, customers, contractors, subcontractors or licensees
(collectively "Tenant's Agents"). Tenant shall not be responsible for any
costs or expenses of remediating the presence of any "Hazardous Materials"
(as defined herein) which were located on the Premises or the Building
Complex prior to the Commencement Date (the "Pre-Existing Conditions") or
which were not caused by the acts of Tenant or Tenant's Agents, and Landlord
shall indemnify and hold Tenant harmless from and against any fines, removal
costs or remediation expenses incurred as a result of any such Pre-Existing
Conditions or incurred as a result of causes other than the acts of Tenant or
Tenant's Agents. This indemnity shall not, however, bind any lender who
succeeds to Landlord's interest in the Premises or the Building Complex
through foreclosure or acceptance of a deed in lieu of foreclosure, nor any
purchaser of the Premises or the Building Complex from such a lender. Tenant
shall not install, place, construct or maintain any Underground Storage Tanks
on the Premises. Any and all Hazardous Materials and their containers which
are brought upon the Premises or the Building Complex by, at the direction
of, or with the consent or approval of Tenant shall, at all times, remain the
property of Tenant. Tenant warrants that Tenant's business and all
activities to be performed by Tenant in, on or about the Premises or the
Building Complex shall comply with such statutes, ordinances, laws and
regulations; and Tenant agrees to change any such activity or install
necessary equipment, safety devices, pollution control systems, or other
installations at any time during the Lease Term to so comply therewith. If
the Premises are, or become subject to, the Los Angeles County Congestion
Management Program (mandated by Sections 65088 et seq of the California
Government Code) or the City of Carson Trip Reduction and Travel Demand
Measures Ordinance, Tenant shall be responsible, at its sole cost and
expense, for complying with all requirements of such programs and ordinances,
including, without limitation, any provisions of such programs and ordinances
requiring improvements or modifications to the Premises. However, to the
extent such
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compliance requires structural or other capital improvements to
the Premises which are not required as a result of the specific use of the
Premises by Tenant, but rather are generally required by law for similar
types of buildings, such costs shall be allocated between Landlord and Tenant
provided above for capital improvements. If, during the Lease Term, Landlord
or Tenant is required to convert or replace the HVAC system serving the
Premises in order to comply with federal, state or local statutes, laws,
ordinances, rules or regulations concerning the use of chlorofluorocarbons
(including, without limitation, Freon), then the responsibility for paying
the costs of any such conversion or replacement, including, without
limitation, the purchase and installation of new equipment, and the
alteration of existing HVAC equipment in the Premises to accommodate any new
equipment shall be allocated between Landlord and Tenant as provided above.
Tenant agrees not to commit or permit waste upon the Premises.
9.8 Tenant shall (i) not cause or permit any "Hazardous Material"
(as hereinafter defined) to be brought upon, kept, used, stored, discharged
or released (collectively "used") in or about the Premises or the Building
Complex during the Lease Term, without the prior written consent of Landlord.
Notwithstanding the foregoing, so long as Tenant consistently complies with
all applicable legal and regulatory requirements relating to the use,
storage, handling and disposal of Hazardous Materials, Tenant shall be
permitted to use and store on the Premises reasonable quantities of consumer
cleaning products, office supplies and similar over-the-counter cleaning and
maintenance supplies. Landlord agrees that it will not unreasonably withhold
its consent to the use of any Hazardous Materials of a type and in quantities
similar to those used with by other tenants of Landlord at Watson Industrial
Center South or any other master planned industrial park owned by Landlord.
If Tenant breaches the obligations stated in the preceding sentence, or if
any Hazardous Material used on the Premises during the Lease Term results in
contamination of the Premises or any adjacent property, then Tenant shall
indemnify, defend and hold Landlord harmless from any and all claims,
judgments, damages, penalties, fines, costs, liabilities or losses
(including, without limitation, sums paid in settlement of claims, attorneys'
fees, consultant fees and expert fees) which arise or result, during or after
the Lease Term or any Extended Term, as a result of Hazardous Material so
used. This indemnification of Landlord by Tenant includes, without
limitation, costs incurred in connection with any investigation of site
conditions or any cleanup, remedial, removal or restoration work required by
any federal, state or local governmental agency or political subdivision
because of Hazardous Material present in the soil or ground water on or
under the Premises, the Building Complex and/or adjacent property. Without
limiting the foregoing, if any Hazardous Material is used on the Premises or
the Building Complex during the Lease Term and results in any contamination
of the Premises, the Building Complex and/or adjacent property, Tenant shall
promptly take all actions at its sole expense as are necessary to return the
Premises, the Building Complex and/or adjacent property to the condition
existing prior to the use of any such Hazardous Material on the Premises, the
Building Complex and/or adjacent property; provided that Landlord's approval
of such actions shall first be obtained, which approval shall not be
unreasonably withheld so long as such actions would not potentially have any
material adverse long-term or short-term effect on the Premises or adjacent
property. As used herein, the term "Hazardous Material" means any petroleum
products or other hydrocarbon substances (and fractions thereof) and any
hazardous or toxic substance, material or waste which is or becomes regulated
by any local governmental authority, the State of California or the United
States Government. Upon expiration or earlier termination of this Lease,
Tenant shall duly execute and deliver to Landlord a certificate (the
"Hazardous Material Certi-
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ficate") in the form of Exhibit E attached hereto. In the event Tenant shall
fail to so deliver the Hazardous Material Certificate, such failure shall,
without further notice or the passage of time constitute a default under the
Lease and, without in any way limiting or impairing Landlord's remedies
against Tenant, shall entitle Landlord to retain the entire security deposit
held by Landlord to be applied toward payment of the cost of assessing the
presence of Hazardous Material on the Premises, the Building Complex and/or
adjacent property, and toward payment of all loss, cost, liability, damage
and expense of Landlord arising as a result of any such contamination and
toward such other costs and expenses of Landlord as Landlord may designate in
its sole discretion. Landlord may, if it so desires, cause a properly
licensed and qualified environmental consultant to conduct an environmental
audit of the Premises and the Building Complex. The scope and detail of such
environmental audit shall be reasonably determined by Landlord based on all
relevant facts and circumstances then existing. If any environmental audit
recommends or suggests that additional testing be conducted, Landlord may
require that such additional testing be conducted. If such environmental
audit determines that the Premises, the Building Complex or any adjacent
property has been contaminated with Hazardous Materials resulting from the
acts or omissions of Tenant or Tenant's Agents, and if the corrective action
recommendations contained in such environmental audit were not previously
made known to Landlord by Tenant as a part of Tenant's own remediation plan
for the Premises, then Tenant shall pay the costs of such environmental
audit, together with the costs of remediating the effects of such
contamination to a standard which complies with all applicable laws and to a
standard which will not cause the market value of such property to be
diminished. A copy of any environmental audit performed by either Landlord
or Tenant shall be promptly delivered to the other party. If, at any time
during the Lease Term or upon the termination or earlier expiration of the
Lease, Landlord reasonably believes that the Premises or any adjacent
property has been contaminated as a result of Hazardous Materials which were
used on or about the Premises during the Lease Term, Landlord may require
Tenant to conduct an environmental audit (in accordance with the above
described criteria) to evaluate the presence of any Hazardous Materials on
the Premises and the Building Complex (and the cost of such audit shall be
paid by Tenant if such audit indicates that the Premises, the Building
Complex or any adjacent property has been contaminated as a result of
Hazardous Materials which were used on or about the Premises or the Building
Complex by Tenant or Tenant's Agents during the Lease Term), and to cleanup,
remediate, and otherwise mitigate the effects of the presence of any such
Hazardous Materials on the Premises and the Building Complex consistent with
the remediation standards described above, or Landlord may, if it so elects,
undertake such an environmental audit and any such cleanup, remediation or
mitigation work on behalf of Tenant, at Tenant's sole cost and expense. In
any event, any such environmental audit or cleanup, remediation or mitigation
work shall be performed by qualified environmental professionals acceptable
to Landlord. Nothing contained herein shall be deemed or construed to limit
the liability of Tenant to Landlord hereunder for the breach of any covenant
of Tenant under this Paragraph 9.8. The provisions of this Paragraph 9.8
shall survive the expiration or earlier termination of this Lease and
Tenant's surrender of the Premises to Landlord.
9.9 On the fifteenth (15th) day of January each year of Lease Term
following the year in which the Commencement Date occurs (the "Disclosure
Dates"), Tenant shall disclose to Landlord in writing the common and chemical
names and the quantities of all Hazardous Materials which were stored, used
or disposed of on the Premises and/or the Building Complex during the
preceding calendar year. Tenant shall immediately notify Landlord of
Tenant's receipt of any notice, citation or other
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communication received by Tenant relating to the presence, storage, use or
release of any Hazardous Materials in, on or about the Premises.
9.10 Landlord shall have the right, but not the duty, to inspect
the Premises at any time to determine whether Tenant is complying with the
requirements of this Lease. If Tenant is not in compliance with the
requirements of the provisions of this Lease relating to Hazardous Materials,
Landlord shall have the right, but not the obligation, to notify Tenant that
Landlord intends to enter upon the Premises to remedy such condition and, if
Tenant fails to remedy such condition within ten (10) days after receipt of
such notice and to diligently pursue the complete correction of such
condition, then Landlord may, but shall not be obligated to immediately enter
upon the Premises to remedy any condition caused by Tenant's failure to
comply with the requirements of this Lease. Landlord shall use reasonable
efforts to minimize interference with Tenant's business as a result of any
such entry by Landlord but shall not be liable for any interference caused
thereby.
9.11 Any failure of Tenant to comply with the provisions of
Paragraphs 9.7, 9.8 and 9.9 of this Lease shall be a material default under
this Lease, enabling Landlord to exercise any of the remedies set forth in
this Lease.
9.12 Tenant acknowledges its understanding and awareness that the
Building was constructed prior to 1979, and that some asbestos-containing
materials may have been used in the construction of the Building. Tenant
acknowledges its receipt of an "Asbestos Disclosure Letter" from Landlord, a
copy of which is incorporated herein by reference. Tenant acknowledges its
awareness that the release of asbestos fibers can present a serious health
risk, and Tenant agrees that it shall not undertake any activities on the
Building Complex or the Premises which might disturb or release
asbestos-containing materials without implementing appropriate safety
procedures.
9.13 Pursuant to the requirements of California Health and Safety
Code Section 25359.7, Landlord hereby notifies Tenant that Landlord does not
know, and does not have reasonable cause to believe, that any release of any
Hazardous Materials has come to be located on or beneath the Building
Complex. Prior to the Commencement Date, Landlord shall provide to Tenant,
for informational purposes only, copies of any Phase I environmental reports
and other environmental reports, surveys or studies in Landlord's possession
which relate to the Building Complex.
ARTICLE X
INSPECTION OF PREMISES BY LANDLORD
10.1 Tenant agrees that Landlord and the authorized representatives
of Landlord shall have the right to enter the Premises upon reasonable notice
to Tenant (determined in light of then-prevailing facts and circumstances) at
all reasonable times during usual business hours, or at any time in the case
of an emergency, for the purpose of (a) inspecting same; and (b) making such
repairs or reconstruction to the Premises required by or permitted to be made
by Landlord, and (c) performing any work therein that may be necessary by
reason of Tenant's default under the provisions of this Lease. Nothing
herein shall imply any duty of Landlord to do any work which, under the
provisions of this Lease, Tenant is required to perform and the performance
thereof by Landlord shall not constitute a waiver of Tenant's default in
failing to perform the same. Landlord may, during the progress of any work on
the Premises, keep and store upon the parking area of or within the Premises,
all necessary materials, tools and equipment. Landlord shall not in any event
be liable for any inconvenience, annoyance, disturbance, loss of business,
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or other damage sustained by Tenant while making such repairs or the
performance of any such work on the Premises or the Building Complex, or on
account of bringing materials, supplies and equipment into or through the
Premises or the Building Complex during the course thereof. In the event
Landlord makes any repairs or maintenance which Tenant has failed to do or
perform, after reasonable notice and time to so perform, the cost thereof
plus an overhead allowance of fifteen percent (15%) of such cost shall
constitute additional rent and shall be paid to Landlord within ten (10) days
of receipt of Landlord's invoice.
10.2 Landlord is hereby given the right during usual business hours
to enter the Premises and to exhibit the same for purposes of sale or
mortgage, and during the last six (6) months of the Lease Term to exhibit the
same to any prospective tenant.
ARTICLE XI
MECHANICS' LIENS
11.1 Tenant covenants and agrees to keep all of the Premises and
the Building Complex free and clear of and from any and all mechanics',
materialmen's and other liens for work or labor done, services performed,
materials, appliances, transportation or power contributed, used or furnished
or to be used in or about the Premises or the Building Complex for or in
connection with any operations of Tenant, any alterations, improvements,
repairs or additions, which Tenant may make or permit or cause to be made, or
any work or construction by, for or permitted by Tenant on or about the
Premises or the Building Complex; and at all times Tenant shall promptly and
fully pay and discharge any and all claims upon which any such lien may or
could be based; and Tenant shall save and hold Landlord, the Premises and the
Building Complex free and harmless of and from any and all such liens and
claims of liens and suits or other proceedings pertaining thereto. Tenant,
or any subtenant, assignee or other occupant of the Premises covenants and
agrees to give Landlord written notice not less than ten (10) days in advance
of the commencement of any construction, alteration, addition, improvements
or repair to the Premises in order that Landlord may post an appropriate
notice of Landlord's non-responsibility.
11.2 No mechanics' or materialmen's liens or mortgages, deeds of
trust, or other liens of any character whatsoever created or suffered by
Tenant shall in any way or to any extent affect the interest or rights of
Landlord in any buildings or other improvements in the Building Complex, or
attach to or affect Landlord's title to or rights in the Premises or the
Building Complex.
11.3 Tenant shall have the right to contest any mechanic's lien or
other lien claim filed against the Premises or the Building Complex provided
that Tenant gives Landlord written notice of such contest, Tenant diligently
prosecutes such contest, at all times effectually stays or prevents any
official or judicial sale of the Premises and the Building Complex under
execution or otherwise, and pays or otherwise satisfies any final judgment
adjudging or enforcing such contested lien and thereafter procures record
satisfaction or release thereof. If requested in writing by Landlord, Tenant
shall furnish to Landlord a surety bond issued by a surety company acceptable
to Landlord in an amount not less than one and one-half times the amount of
any such mechanic's lien or other lien claim filed against the Premises or
the Building Complex.
ARTICLE XII
DAMAGE OR DESTRUCTION OF PREMISES
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12.1 In the event the "Building Shell" (as defined herein) is
damaged or destroyed, then so long as the cost of repairing such damage or
destruction is covered by insurance policies carried by the appropriate
Insuring Party (except for deductible amounts, which shall in all cases be
paid by Tenant), Landlord shall repair and restore the Building Shell (but
not any of Tenant's trade fixtures, furnishings or equipment) to its
condition existing prior to said damage or destruction, and this Lease shall
continue in full force and effect. Any damage or destruction of the type
described above is referred to herein as an "Insured Loss." As used herein,
the term "Building Shell" shall mean the core and shell of the Building as it
exists as of the date of this Lease, together with any alterations and
improvements thereto which are generally recognized and accepted as being
real property in nature, and which, by the terms of this Lease become the
property of Landlord upon the expiration or sooner termination of this Lease.
The proceeds of insurance maintained pursuant to Paragraph 8.1 shall be
delivered to Landlord and shall be used to pay the cost and expense of
repairing and rebuilding the Building Shell. If Landlord is the Insuring
Party, and if the cost of repairing any damage or destruction to the Building
Shell is not covered by insurance due solely to Landlord's failure to obtain
and maintain in effect the policies of insurance which Landlord is required
to maintain pursuant to Paragraph 8.1, above, then such damage and
destruction shall be treated in the same manner as an Insured Loss pursuant
to this Paragraph 12.1. If Tenant is the Insuring Party, and if the cost of
repairing any damage or destruction to the Building Shell is not covered by
insurance due solely to Tenant's failure to obtain and maintain in effect the
policies of insurance which Tenant is required to maintain pursuant to
Paragraph 8.1, above, then such damage and destruction shall be treated in
the same manner as an Insured Loss pursuant to this Paragraph 12.1, but
Tenant shall be required to pay to Landlord the full amount of any costs of
repairing such damage or destruction which would have been covered by
insurance had Tenant maintained the required insurance, and Tenant shall be
required to pay to Landlord the full amount of any deductible amounts which
Tenant would have been required to pay pursuant to the terms of this Lease
had Tenant maintained the required insurance.
12.2 In the event the Building Shell is damaged or destroyed, and,
for reasons other than the Insuring Party's failure to maintain in effect the
insurance which the Insuring Party is required to maintain pursuant to
Paragraph 8.1, above, the cost of repairing such damage or destruction is not
covered by insurance policies carried by the Insuring Party (an "Uninsured
Loss"), then so long as the cost of repairing such damage or destruction does
not exceed the "Cap Amount" (as defined herein), Landlord shall repair and
restore the Building Shell (but not any of Tenant's trade fixtures,
furnishings or equipment) to its condition existing prior to said damage or
destruction, and this Lease shall continue in full force and effect. As used
herein, the term "Cap Amount" shall mean the amount of Five Hundred Thousand
Dollars ($500,000). In the event of an Uninsured Loss having a repair cost
which is equal to or less than the Cap Amount, Landlord and Tenant shall each
contribute one-half of the repair cost of such Uninsured Loss (up to a
maximum contribution amount of Two Hundred Fifty Thousand Dollars ($250,000)
each for Landlord and Tenant). If Landlord is the Insuring Party as to all
or any part of insurance required pursuant to Paragraph 8.1, and the repair
cost of such Uninsured Loss exceeds the Cap Amount, Landlord and Tenant shall
each have the right to terminate this Lease upon thirty (30) days written
notice to the other. However, if a party has elected to terminate this Lease
pursuant to this Paragraph 12.2, the other party may prevent termination of
the Lease pursuant to this Paragraph 12.2 by paying (in addition to any other
amounts to be paid by such party pursuant to this Paragraph 12.2) the amount
by which the cost of repairing such Uninsured Loss exceeds the Cap
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Amount. If Tenant is the Insuring Party as to all of the insurance required
pursuant to Paragraph 8.1, and the repair cost of such Uninsured Loss exceeds
the Cap Amount, Landlord shall have the right, within thirty (30) days
following the date of such Uninsured Loss, to elect to either: (a) terminate
this Lease; or (b) repair such damage or destruction, in which event Tenant
shall pay to Landlord Tenant's portion of the Cap Amount, plus any repair
costs in excess of the Cap Amount, and this Lease shall continue in full
force and effect.
12.3 In the event Landlord is the Insuring Party as to a particular
risk and the Building Shell is damaged or destroyed, and the cost of
repairing such damage or destruction (exclusive of deductible amounts, which
in all cases shall be paid by Tenant) is not fully covered by insurance
policies carried by Landlord, then Landlord may, at its election, either:
(a) terminate this Lease upon thirty (30) days written notice to Tenant; or
(b) repair such damage or destruction, in which event this Lease shall remain
in full force and effect. However, if Landlord has elected to terminate this
Lease pursuant to this Paragraph 12.3, Tenant may prevent termination of the
Lease pursuant to this Paragraph 12.3 by paying to Landlord, in addition to
the deductible amounts otherwise payable by Tenant, the portion of the cost
of repairing such damaged improvements which is not fully covered by
insurance policies carried by Landlord. If Landlord is the Insuring Party as
to earthquake coverage, the deductible amount payable by Tenant for any loss
resulting from an earthquake shall not exceed five percent (5%) of the full
replacement cost of the Building Shell. Such limitation on the deductible
amount payable by Tenant for any loss resulting from an earthquake shall not
apply if Tenant is the Insuring Party as to earthquake coverage. In the
event Tenant is the Insuring Party as to a particular risk, then if the
Building Shell is damaged or destroyed, and the cost of repairing such damage
or destruction is partially or fully covered by insurance policies required
to be carried by Tenant pursuant to the terms of this Lease, then Tenant
shall pay to Landlord, in addition to the deductible amounts otherwise
payable by Tenant, the full amount of cost of repairing such damaged
improvements, and this Lease shall continue in full force and effect.
12.4 Upon the occurrence of any damage or destruction to the
Building Shell, Landlord shall, within thirty (30) days following the date of
occurrence of such damage or destruction, provide to Tenant a written notice
of Landlord's reasonable and good faith estimate of the time required to
complete the repair and restoration of the Building Shell ("Landlord's Time
Estimate"). Landlord's Time Estimate shall be supported by a certification
letter addressed to both Landlord and Tenant from a properly licensed and
qualified general contractor selected by Landlord, stating the opinion of
such contractor as to the number of days following the issuance of the
necessary building permits necessary to complete the repair and restoration
of the Building Shell. If Landlord reasonably estimates that such repair and
restoration will take more than two hundred seventy (270) days to complete
(measured from the date of issuance of necessary building permits for the
repair and restoration work) either Landlord or Tenant may elect to terminate
this Lease upon written notice to the other, which notice shall be given, if
at all, within twenty (20) days following Tenant's receipt of Landlord's Time
Estimate. Once such notice has been delivered, the twenty (20) day response
period has expired and the repair and restoration work has commenced, neither
party shall have the right to terminate this Lease as a result of the
occurrence of such damage or destruction, regardless of the actual time
necessary to complete such repair and restoration work, but Landlord agrees
that it shall use diligent efforts to complete the restoration work in a
timely manner. Upon termination of this Lease pursuant to this Paragraph
12.4, Tenant shall pay to Landlord one (but not more than one) of the
following amounts:
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(a) the deductible amount payable by Tenant in the event of an Insured Loss,
if the damage and destruction results from an Insured Loss; or (b) Tenant's
portion of the Cap Amount, if the damage and destruction results from an
Uninsured Loss. If the reconstruction of the Building Shell is delayed
beyond the date established for completion of repair and restoration work as
provided in the general contract between Landlord and the general contractor
selected by Landlord to perform such repair and restoration work (the
"General Contractor"), and if Tenant actually suffers damages as a result of
such delay, then so long as Landlord continues to receive the proceeds of
rent abatement insurance during the period of such delay, Landlord shall
assign to Tenant (to the extent of any damages actually suffered by Tenant as
a result of such delay) any liquidated damages or other damages payable by
the general contractor pursuant to the terms of its general contract as a
result of such delay. To the extent Landlord does not receive sufficient
rent abatement insurance proceeds to fully compensate Landlord for any
abatement of rent under this Lease, Landlord shall have a first priority
claim to any such liquidated damages or other damages payable by the general
contractor.
12.5 The Minimum Rent payable by Tenant pursuant to the provisions
of Paragraph 4.1 shall abate, in the proportion that the part of the Premises
rendered unusable to Tenant bears to the whole thereof, from the date of the
damage or destruction through the time required by Landlord to repair and
rebuild the Building Shell, but only to the extent to which Landlord
receives, or is ultimately entitled to receive, reimbursement for such
abatement pursuant to the rental value insurance maintained under Paragraph
8.1 of this Lease. If, as of the date any payment of Minimum Rent is due
under this Lease, Landlord is the party responsible for obtaining rent
abatement insurance pursuant to Paragraph 8.1, and Landlord has not received
reimbursement from its insurance carrier for the Minimum Rent then due under
this Lease, then the Minimum Rent then due under this Lease shall nonetheless
be abated, so long as Landlord is ultimately entitled to receive
reimbursement for such rent abatement from Landlord's insurance carrier.
Except for abatement of such Minimum Rent, if any, Tenant shall have no claim
against Landlord by reason of any damage, destruction, repair or rebuilding
of the Premises.
12.6 Subject to the provisions of this Paragraph 12.6, if the
Building Shell is damaged or destroyed, either partially or totally, during
the last year of the Lease Term, Landlord or Tenant may, at such party's
option, cancel and terminate this Lease as of the date of occurrence of such
damage by giving written notice to the other party of the electing party's
election to do so within thirty (30) days after the date of occurrence of
such damage. Notwithstanding the foregoing, if Tenant possesses an option to
extend the Lease Term, and the time within which Tenant may exercise such
option has not expired, then if Tenant validly exercises such option within
twenty (20) days after the occurrence of such damage or destruction, Landlord
shall not have the right to terminate this Lease pursuant to this Paragraph
12.6, and the other applicable provisions of this Article XII shall govern
the repair and restoration of the Building Shell or the termination of this
Lease (as the case may be). If there is only partial damage to the Premises,
and either Landlord or Tenant desire for this Lease to continue in effect
notwithstanding such partial damage, then this Lease shall not terminate as a
result of such partial damage, so long as all of the following terms and
conditions are satisfied (or are waived by Landlord): (a) Landlord shall
only be obligated to repair or restore such partial damage to the extent that
the full costs of repairing such partial damage are covered by insurance
proceeds and Tenant payments relating to such damage; (b) Tenant shall
provide Landlord with evidence reasonably satisfactory to Landlord that
Tenant's continued use and occupancy of the Premises is in compliance with
all applicable Codes and will not
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violate the terms of any insurance policies affecting the Premises: (c)
Landlord shall have received the consent of any lender holding a mortgage or
deed of trust encumbering the Premises to such continued use and occupancy of
the Premises and such non-restoration of the Premises; (d) Minimum Rent for
the portion of the Building which is rendered unusable as a result of such
partial damage (and which is not actually used by Tenant) shall be reduced on
pro rata basis, but in no event shall the amount of such reduction exceed
twenty percent (20%) of the total Minimum Rent otherwise payable under this
Lease and Landlord shall be fully compensated for any such rent abatement by
the rent abatement insurance required pursuant to the terms of Article VIII
of this Lease; (e) Tenant shall indemnify and hold Landlord harmless from and
against any loss, cost, damage, liability or expense arising out of or
related to any such use or occupancy of the partially damaged Building; and
(f) at least eighty percent (80%) of the floor area of the Building can
continue to be used and occupied by Tenant notwithstanding such partial
damage.
12.7 Tenant waives the provisions of any statutes which relate to
termination of leases when the leased premises are destroyed; and Tenant
agrees that such event shall be governed by the terms of this Lease and not
by any such statute.
ARTICLE XIII
CONDEMNATION
13.1 If title to all or any portion of the Premises or the Building
Complex shall be taken by any public or quasi-public use or authority under
any statute or by right of eminent domain, or by private purchase in lieu
thereof, then the rights of the parties to share in the condemnation award or
purchase price thereby resulting shall be governed by the provisions of this
Article XIII.
13.2 Should all or such portion of the Premises or the Building
Complex be taken in such a manner as to materially interfere with Tenant's
use and occupancy thereof, then this Lease shall terminate as of the date
that possession of said Premises or part thereof shall be taken. Landlord
shall be entitled to (a) any amount paid for the taking of Landlord's fee
interest in the Building Complex, (b) any severance damages included in the
award, (c) any amount paid for the taking of the Premises except that paid
for any improvements made to the Premises by Tenant which remain the property
of Tenant, and (d) any amount which represents the present worth of rent
payments to be made in the future under the provisions of this Lease; and
none of Landlord's interests in the above shall be subject to any diminution
or apportionment whatsoever. Tenant shall be entitled to compensation paid
under condemnation for the taking of any improvements made to the Premises by
Tenant which remain the property of Tenant, for Tenant's relocation expenses,
loss of good will and/or loss of Tenant's trade fixtures.
13.3 In the event of a partial taking of the Premises or the
Building Complex which does not materially interfere with Tenant's continued
use and occupancy of the Premises and there remains sufficient of the
Premises for the continued use of Tenant, then this Lease shall terminate
only as to the part so taken, as of the date that possession of such part of
the Premises is taken, and the Minimum Rent and Tenant's Prorata Share herein
provided for shall be reduced in proportion as the square footage of building
floor area taken bears to the total building floor area existing before such
taking. In the event of a partial taking, Landlord agrees to replace or
repair the Building Complex to its condition as existed when the Lease Term
commenced, and without regard to improvements made by Tenant, by reinstalling
plumbing, electrical, wiring, walls and paving, if
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necessary, so that said Building Complex shall be completely operable and an
integral whole. In the event of such partial taking, Landlord shall be
entitled to receive all amounts described in the second sentence of Paragraph
13.2; and none of Landlord's interest in the above shall be subject to any
diminution or apportionment whatsoever. Tenant shall be entitled to
compensation paid under condemnation for the taking of any improvements made
to the Premises by Tenant which remain the property of Tenant, for Tenant's
relocation expenses, loss of good will and/or loss of Tenant's trade fixtures.
13.4 Landlord and Tenant agree to execute all documents and
assignments necessary to carry out this Article XIII in the event of
condemnation or purchase in lieu thereof.
ARTICLE XIV
USE OF PREMISES - ASSIGNMENTS
14.1 Tenant shall have the right to use the Premises for
manufacturing, packaging and distributing vitamins, over-the-counter or
prescription drugs and related products in compliance with all applicable
laws and regulations, including, without limitation, environmental laws and
laws relating to Hazardous Materials; and Tenant agrees such use shall comply
with all applicable laws and regulations in effect when this Lease Term
commences and as may be amended or newly enacted during the Lease Term.
Tenant shall not use the Premises for the retail sale of property. Tenant
shall not conduct nor permit to be conducted any auction or auction sale at
the Premises. Tenant covenants and agrees that it shall not permit any of its
employees, agents, contractors, vendors or shippers to park trucks,
automobiles, trailers or other vehicles on any of the public streets in the
general vicinity of the Premises or the industrial or business park in which
the Premises are located. Tenant's use of the Premises is subject to
limitations imposed by the Watson Industrial Center Performance Standards and
the limitations contained in this Lease.
14.2 Tenant shall not assign, sublet or otherwise transfer this
Lease, or Tenant's interest in and to the Premises, nor enter into any
license or concession agreements with respect thereto, without first
procuring the written consent of Landlord. Any such attempted or purported
assignment, subletting, transfer, or license or concession agreement
(collectively "Transfer") without Landlord's prior written consent shall be
void and of no force and effect, and shall not confer any interest or estate
in the purported transferee (the "Transferee") and shall, at Landlord's
option, constitute an incurable default under this Lease. Tenant shall have
no right to mortgage, hypothecate or otherwise encumber its leasehold estate
in the Premises or its rights under this Lease, and Landlord and Tenant
specifically agree that any such mortgage, hypothecation or encumbrance by
Tenant is strictly and absolutely prohibited. Landlord hereby agrees to
consent to Tenant's subleasing, in the aggregate, up to five thousand square
feet (5,000) of floor area of the Premises to vendees, suppliers and
consultants to Tenant, and any such sublease shall be treated in the same
manner as a Transfer to an Affiliate as provided herein. Landlord agrees
that, in the event of a proposed Transfer to an "Affiliate" (as defined
herein), Landlord will not withhold its consent to such Transfer so long as:
(i) such Affiliate's use of the Premises is in conformance with Paragraph
14.1; (ii) such Affiliate's use of the Premises will not result in any
material increase in the potential risk to Landlord arising out of or
relating to Hazardous Materials; and (iii) such Transfer will not cause any
portion of the amounts received by Landlord pursuant to this Lease or any
sublease to fail to qualify as "rents from real property" within the meaning
of Section 856(d) of the Internal Revenue Code, or which could
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cause any other income received by Landlord to fail to qualify as income
described in Section 856(c)(2) of the Internal Revenue Code; and (iv)
Landlord, acting reasonably and in good faith, determines that such Transfer
does not present an unreasonable risk relating to the use, storage or
disposal of Hazardous Materials. . As used herein, the term "Affiliate"
shall mean any corporation for which fifty percent (50%) or more of the
voting stock (i) is owned by Tenant; or (ii) is owned, directly or
indirectly, by a corporation owning more than fifty percent of the voting
stock of Tenant. Any transfer of stock or other ownership interest of
Tenant which is made with the purpose or which has the practical effect of
circumventing the Transfer restrictions imposed under this Article XIV shall
be deemed to be a Transfer requiring Landlord's consent. The consent of
Landlord required hereunder shall not be unreasonably withheld; however, a
condition precedent to any consent to a Transfer shall be Tenant's agreement
to pay to Landlord as rent any costs and expenses incurred by Landlord for
review and consultation by Landlord's legal counsel, securing credit reports,
administrative overhead and the like. Notwithstanding the foregoing,
Landlord and Tenant agree that, in determining whether to reasonably consent
to a proposed transfer, Landlord may consider, among other things, any or all
of the following factors:
14.2.1 The reputation of the Transferee (including any
principals, partners or shareholders of such assignee, subtenant to
Transferee), including, without limitation, the Transferee's reputation for
dishonesty, criminal conduct or unethical business practices;
14.2.2 The financial capacity of the proposed Transferee to
perform its obligations under this Lease (or in the event of a Transfer of
less than all of the Premises, the financial capacity of the proposed
Transferee to perform its obligations as to the portion of the Premises
Transferred to such Transferee);
14.2.3 Whether the business experience and quality of
business operations of the proposed Transferee is comparable to that of
Tenant;
14.2.4 The credit history of the proposed Transferee;
14.2.5 The intended use of the Premises by the proposed
Transferee, and Landlord's assessment of the impact of such use upon the
Premises and neighboring properties;
14.2.6 Whether the proposed Transferee's use of the
Premises will involve the generation, storage, use, treatment or disposal of
any Hazardous Materials, or will in any way increase any potential risk or
liability to Landlord arising out of or relating to Hazardous Materials; and
14.2.7 Whether the proposed Transferee is acceptable to the
holder of any mortgage or deed of trust encumbering the Building Complex (but
provided, however, that the time for approving or disapproving any Transfer
as provided herein shall not be extended by the need to obtain the consent of
any such mortgage holder or deed of trust beneficiary).
14.3 Notwithstanding any permitted Transfer, Tenant shall at all
times remain directly, primarily and fully responsible and liable for the
payment of rent and for compliance with all obligations under the terms,
provisions and covenants of this Lease. All Transfer agreements shall
expressly provide that, in the event of a default by Tenant under this Lease,
the Transferee covenants and agrees with Landlord, contemporaneously with
receipt of written notice from Landlord that Tenant is in default of this
Lease, and for so long as such default continues, but not
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for a period of time in excess of the term of the Transfer, to accept
Landlord as Landlord of Transferee, to attorn to Landlord as Landlord, to
thereafter perform all duties and responsibilities under the Transfer
agreement directly to Landlord for Landlord's sole benefit, and to cure any
default of Tenant under this Lease. Upon the occurrence of any default by
Tenant, if the Premises or any part thereof are then sublet, Landlord, in
addition to any other remedies herein provided or provided by law, may at its
option collect directly from such subtenant all rents becoming due to Tenant
under such sublease and apply such rent against any sums due to Landlord from
Tenant hereunder, and no such collection shall be construed to constitute a
novation or release of Tenant from the further performance of Tenant's
obligations under this Lease. Any sale, assignment, transfer or
hypothecation of Tenant's interest under this Lease, and any proposed
subletting or occupancy of the Premises not in compliance with this Article
XIV shall be void.
14.4 Should Tenant desire to make a Transfer of the Premises,
Tenant shall give not less than thirty (30) days' prior written notice
thereof to Landlord setting forth the name of the proposed Transferee, the
term, use, rental rate and other relevant particulars of the proposed
Transfer, including, without limitation, evidence satisfactory to Landlord
that the proposed Transferee will not use, store or dispose of any Hazardous
Materials in or on the Premises or the Building Complex, and that the
proposed Transferee will immediately occupy and thereafter use the Premises
for the entire term of the Lease or the sublease (as the case may be). Such
notice shall be accompanied, in the case of a sublease, by a copy of the
proposed sublease, and in the case of any Transfer, any documents or
financial information Landlord may require in order to make a determination
as to the suitability of the Transferee.
14.5 Landlord shall have the right to condition its consent to any
subletting or assignment upon payment by Tenant to Landlord of fifty percent
(50%) of all "Transfer Consideration" (as defined herein) received or to be
received, directly or indirectly, by Tenant on account of such subletting or
assignment to a party other than an Affiliate. Notwithstanding the foregoing,
in the event of a termination of the "Teledyne Lease" prior to its scheduled
termination date, and the amendment of this Lease to become a "Direct Lease"
of the "Sublease Space" (as the quoted terms are defined in Paragraph 9 of
the attached Lease Rider) pursuant to Paragraph 9 of the attached Lease
Rider, one hundred percent (100%) of all Transfer Consideration relating to
the Sublease Space for the period of time up to the scheduled termination
date of the Teledyne Lease shall be paid to Landlord. In no event shall
Tenant's monetary obligations to Landlord, as set forth in this Lease, be
reduced. Such Transfer Consideration shall be paid to Landlord at the same
time or times as the same is paid to or used by Tenant. "Transfer
Consideration" shall mean (i) in the case of a sublease, any consideration
paid or given, directly or indirectly, by the sublessee to Tenant pursuant to
the sublease for the use of the Premises, or any portion thereof, over and
above the rent, however denominated, in this Lease, payable by Tenant to
Landlord for the use of the Premises, or portion thereof (after subtracting
therefrom actual and reasonable attorneys' fees and brokerage commissions,
costs of tenant improvements, costs of environmental studies and other
economic concessions made by the sublessee or incurred by Tenant in
connection with such sublease), prorating as appropriate the amount payable
by Tenant to Landlord under this Lease if less than all of the Premises is
sublet, and (ii) in the case of an assignment, the gross amount of any
consideration paid or given, directly or indirectly, by the assignee to
Tenant in exchange for entering into the assignment. Notwithstanding
anything contained in this Lease to the contrary, Tenant shall not (i) sublet
or assign the Premises or this Lease on any basis such that the rent or other
amounts to be paid by the sublessee or assignee
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thereunder would be based, in the whole or in part, on the income or profits
derived by the business activities of the sublessee or assignee; (ii) furnish
or render any services to the sublessee or assignee or operate the Premises
so subleased or assigned; (iii) sublet or assign the Premises or this Lease
to any person that Tenant or Landlord owns, directly or indirectly (by
applying the constructive ownership rules set forth in Section 856(d)(5) of
the Internal Revenue Code [the "Code"]), provided, however, that the
restriction contained in this item (iii) shall not apply to an assignment of
this Lease to an Affiliate of Tenant if no Transfer Consideration arises and
if Landlord does not own, directly or indirectly (as described above), an
interest in such assignee; (iv) sublet or assign less than substantially all
of the Premises or this Lease pursuant to a sublease or assignment under
which Transfer Consideration is paid; or (v) sublet or assign the Premises or
this Lease in any other manner which could cause any portion of the amounts
received by Landlord pursuant to this Lease or any sublease to fail to
qualify as "rents from real property" within the meaning of Section 856(d) of
the Code, or which could cause any other income received by Landlord to fail
to qualify as income described in Section 856(c)(2) of the Code.
14.6 In addition to Landlord's right of approval pursuant to
Paragraph 14.2, above, and Landlord's right to share in Excess Rents pursuant
to Paragraph 14.5, above, in the event Tenant contemplates a proposed
Transfer of all or substantially all of the Premises for all or substantially
all of the remaining Lease Term (except for a proposed Transfer to an
Affiliate), Tenant shall notify Landlord, in writing, of Tenant's desire to
commence to locate a proposed Transferee. Landlord shall then have the
option to cancel this Lease effective on a date which is no later than sixty
(60) days following the date of Landlord's notice to Tenant of Landlord's
exercise of such option. The option shall be exercised, if at all, by
Landlord giving Tenant written notice thereof within thirty (30) days
following Landlord's receipt of Tenant's written notice of Tenant's intention
to locate a proposed Transferee. Upon any such cancellation, Tenant shall
pay to Landlord all amounts, as estimated by Landlord, payable by Tenant to
such termination date with respect to any obligations, costs or charges which
are the responsibility of Tenant under this Lease as of the termination date.
Further, upon any such cancellation Landlord and Tenant shall have no
further obligations or liabilities to each other with respect to the affected
portion of the Premises, except with respect to obligations or liabilities
which have accrued as of such cancellation date (in the same manner as if
such cancellation date were the date originally fixed for the expiration of
the Lease Term, or Extended Term, as the case may be).
14.7 Tenant shall in no event assign less than its entire interest
in this Lease. This Lease shall not be assignable by operation of law, except
that if Tenant is a natural person, this Lease shall be binding upon and
inure to the benefit of the estate of Tenant.
14.8 If this Lease is assigned to any person or entity pursuant to
the provisions of the "Revised Bankruptcy Act" (Title 11 of the United States
Code; 11 U.S.C. Section101 et seq.), any and all monies or other
consideration payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord, and shall not constitute property of Tenant
or of the estate of Tenant within the meaning of the Revised Bankruptcy Act.
Any and all monies or other considerations constituting Landlord's property
under this Article XIV not paid or delivered to Landlord shall be held in
trust for the benefit of Landlord and shall be promptly paid or delivered to
Landlord. Any person or entity to which this Lease is assigned pursuant to
the provisions of the Revised Bankruptcy Act shall be deemed without fur-
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ther act or deed to have assumed all of the obligations arising under this
Lease on and after the date of such assignment.
14.9 Landlord shall have the right to sell, transfer, delegate or
assign any of its rights or obligations under this Lease but Landlord shall
not assign its obligations to Tenant under this Lease unless Landlord
simultaneously assigns its ownership interest in the Premises to the same
party.
ARTICLE XV
EVENT OF DEFAULT
15.1 Tenant shall be in default under this Lease if:
15.1.1 Tenant shall fail to make any payment of Minimum
Rent, Operating Expenses, any additional rent payable hereunder, or any other
monetary obligation required of Tenant under this Lease (including, without
limitation, restoration of any security deposit as required under this Lease)
and such failure shall continue for ten (10) days after Tenant's receipt of
written notice from Landlord that said rent or monetary obligation is due and
payable as provided in this Lease; or
15.1.2 Tenant shall neglect or fail to perform or observe
any of the covenants herein contained on Tenant's part to be performed or
observed, and Tenant shall fail to remedy the same within thirty (30) days
after Landlord shall have given to Tenant written notice specifying such
neglect or failure (provided, however, that if the performance or observance
of any such covenant reasonably requires more than thirty (30) days to
perform, Tenant shall not be in default under this Lease as a result of
Tenant's failure to perform or observe any such covenant within such thirty
(30) day period, so long as Tenant has commenced the actions necessary to
perform or observe such covenant within such thirty (30) day period, and is
diligently pursuing such cure to completion); or
15.1.3 Tenant shall abandon the Premises and such
abandonment shall continue for a period of fourteen (14) consecutive days
during which Minimum Rent for the Premises has remained unpaid.
15.2 In the event of any default by Tenant, and without any further
notice or demand, Landlord shall have the right at Landlord's election, then
or at any time thereafter, to:
15.2.1 Terminate this Lease, which shall terminate Tenant's
right to the use, occupancy and possession of the Premises, and Tenant shall
immediately surrender possession of the Premises to Landlord; or
15.2.2 Re-enter and take possession of the Premises or any
part thereof as provided by law, in which event this Lease shall terminate
effective when Landlord takes possession; or
15.2.3 Continue this Lease in effect and enforce any or all
rights and remedies of Landlord under this Lease, including the right to
recover Minimum Rent, additional rent and charges equivalent to rent
(sometimes collectively referred to herein as "rent") as they become due
under this Lease, for so long as Landlord does not terminate Tenant's right
to possession of the Premises; or
15.2.4 Seek any legal or equitable relief permitted by law.
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15.3 If Landlord terminates this Lease as provided in subparagraphs
15.2.1 or 15.2.2 hereof, Landlord shall have the right to recover from Tenant:
15.3.1 The worth, at the time of the award, of the unpaid
rent that had been earned at the time of termination of this Lease; and
15.3.2 The worth, at the time of the award, of the amount
by which the unpaid rent that would have been earned after the date of
termination of this Lease until the time of award exceeds the amount of the
loss of rent that Tenant proves could have been reasonably avoided; and
15.3.3 The worth, at the time of the award, of the amount
by which the unpaid rent for the balance of the term after the time of award
exceeds the amount of the loss of rent that Tenant proves could have been
reasonably avoided; and
15.3.4 Any other amount necessary to compensate Landlord
for all detriment proximately caused by Tenant's breach or which in the
ordinary course of things would be likely to result therefrom; such as, the
reasonable cost of recovering possession of the Premises, expenses of
reletting including reasonable attorney's fees and any real estate
commissions paid or payable, necessary repair, restoration, renovation, or
alteration of the Premises, and care and safekeeping of the Premises.
"The worth, at the time of the award," as used in
subparagraphs 15.3.1 and 15.3.2 of this Paragraph, is to be computed by
allowing interest at the Lease Interest Rate in effect when each installment
of rent referred to in said subparagraphs became payable. "The worth, at the
time of the award," as referred to in subparagraph 15.3.3 of this Paragraph,
is to be computed by discounting the amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award, plus one
percent (1%).
15.4 If Tenant shall breach this Lease and abandon the Premises,
this Lease shall continue in full force and effect for so long as Landlord
does not terminate Tenant's right to possession of the Premises, and Landlord
may enforce all of its rights and remedies under this Lease, including but
not limited to the right to recover rent and charges equivalent to rent as
they become due under this Lease. For the purposes of this Paragraph 15.4
and Paragraph 15.2, the following acts by Landlord shall not constitute a
termination of Tenant's right to possession of the Premises: (i) maintenance
or preservation of the Premises, (ii) efforts to relet the Premises, or (iii)
the appointment of a receiver upon initiative of Landlord to protect
Landlord's interest under the Lease.
15.5 In the event Landlord re-enters and takes possession of the
Premises, Landlord may at Landlord's option require Tenant to remove from the
Premises any of Tenant's property located therein. If Tenant fails to do so,
Landlord shall not be responsible for the care or safekeeping thereof and may
remove any of the same from the Premises and place the same in storage in a
public warehouse at the cost, expense and risk of Tenant with authority to
the warehouseman to sell the same in the event that Tenant shall fail to pay
the costs of transportation and storage, all in accordance with the rules and
regulations applicable to the operation of a public warehouseman's business.
Any refusal by a public warehouseman to accept personal property located in
the Premises upon such condition shall be conclusive evidence that the same
is of no substantial value, and shall be an unconditional warrant to Landlord
for disposing of the same in any manner Landlord may see fit, and without
accountability for any alleged value thereof. In addition, Landlord may, at
Land-
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lord's election, dispose of said property pursuant to the provisions of
Sections 1980 through 1991 of the California Civil Code. In any and all such
cases of re-entry, Landlord may make any repairs in, to or upon the Premises
which may be necessary, desirable or convenient, and Tenant hereby waives any
and all claims for damages which may be caused or occasioned by such reentry
or any of the aforesaid acts of Landlord or by reason of any loss or
destruction or damage to any property in or about the Premises or any part
thereof.
15.6 Tenant further covenants and agrees that if Landlord fails or
neglects for any reason to take advantage of any of the terms hereof provided
for the termination of this Lease or for the termination or forfeiture of the
estate hereby leased, or if Landlord, having the right to declare this Lease
terminated or the estate hereby leased terminated or forfeited, shall fail so
to do, any such failure or neglect of Landlord shall not be or be deemed or
be construed to be a waiver of any provisions for the termination of this
Lease continuing to exist or for the termination or forfeiture of the estate
hereby leased subsequently arising, or as a waiver of any of the covenants,
terms or conditions of this Lease or of the prompt performance thereof by
Tenant. None of the covenants, terms or conditions of this Lease can be
waived by conduct of the parties or by estoppel; any claim or waiver must be
in writing and signed by the party entitled to the benefit thereof.
ARTICLE XVI
SURRENDER OF PREMISES
16.1 Upon any termination of this Lease, whether by lapse of time,
cancellation pursuant to an election provided for herein, forfeiture, or
otherwise, Tenant shall immediately surrender possession of the Premises
(excepting those improvements which Landlord shall have required Tenant to
remove therefrom pursuant to Paragraph 9.3 hereof) to Landlord in a clean and
orderly condition and appearance, state of repair and operating order, and
with all such improvements thereon in a good, safe, fully operable condition,
and in full compliance with all Federal, State and local laws, rules,
regulations and ordinances (including, without limitation, any laws, rules,
regulations and ordinances relating to Hazardous Materials) and each
provision of this Lease, including without limitation the provisions of
Article IX hereof. If possession is not immediately surrendered, Landlord
may, with process of law, enter the Premises and repossess the same and expel
Tenant or any subtenant or occupant therefrom. Landlord shall hold the
Premises after any such re-entry free of any right, privilege or estate of
Tenant and without any duty or obligation to Tenant in respect of any
subsequent reletting or disposition of the Premises. If Tenant's business
operations on the Premises or uses of the Premises involve any generation,
storage, use, treatment or disposal of any Hazardous Material, Tenant shall
be responsible for removing any such Hazardous Materials from the Premises
and the Building Complex and for decontaminating the Premises and the
Building Complex and any neighboring properties affected by such Hazardous
Materials.
16.2 Upon the termination of this Lease, Tenant, if not in default
hereunder at the time, shall have the right to remove, and if directed so to
do by Landlord shall remove, from the Premises, all of Tenant's machinery,
equipment (excluding building service equipment), trade fixtures, signs,
furniture, furnishings, supplies and inventory then installed or in place in,
on or about the Premises or the Building Complex. Except as hereinafter
expressly set forth, such removal shall be completed prior to the expiration
or earlier termination of this Lease. Tenant shall make all repairs to the
Premises or the Building Complex required because of such removal and Tenant
shall
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surrender the Premises to Landlord in good condition, reasonable wear and
tear which Tenant is not otherwise obligated to repair under this Lease
excepted. If this Lease shall terminate at any time other than the time
herein fixed as the expiration of the Lease Term, and occurring not due to a
default by Tenant, then Tenant, if not in default hereunder at the time,
shall have a reasonable time thereafter to effect the removal of the
foregoing items, not to exceed sixty (60) days.
16.3 If any of Tenant's machinery, equipment, trade fixtures,
signs, furniture, furnishings, supplies and inventory remain on the Premises
after the end of the term hereof or time allowed to remove the same, such
property shall be deemed abandoned by Tenant and it shall become the property
of Landlord without any claim therein of Tenant should Landlord so elect,
subject to the terms on any Landlord Lien Waiver Agreement executed by
Landlord.
16.4 Upon termination of this Lease, Tenant shall surrender the
Premises and the relevant portion of the Building Complex in a "broom-clean"
condition, with all refuse and debris removed therefrom, and with all
electrical, plumbing, heating and air conditioning installations in a good,
safe and fully operable condition, and prior to such termination, Tenant
shall fill or repair any holes or openings made by Tenant in the walls, roof
or floor of the building, remove any protuberance, and perform any
maintenance or repairs required of Tenant by this Lease. Nothing contained
in this Paragraph 16.4 shall be deemed to limit Tenant's repair and
maintenance obligations pursuant to Article IX of this Lease. If directed so
to do by Landlord, Tenant shall also remove any improvements, additions or
alterations made to the Premises or the Building Complex by Tenant (except
for any Exempt Alterations as described in Paragraph 9.1, above) and
thereafter restore the Premises and the Building Complex to their original
condition, even though such improvements by the terms of this Lease become a
part of the Premises and the property of Landlord.
ARTICLE XVII
DELAYS - EXTENSIONS OF TIME
17.1 The time within which Landlord or Tenant is obligated herein
to construct, repair or rebuild any building, improvement or other structure
shall be extended and the performance excused when the delay is occasioned by
the other party (such as failure to promptly give required approvals, or
installation of machinery and equipment during construction which interferes
with or delays the contractor); or by strikes, threats of strikes or
lockouts; blackouts, war, threats of war, bombing, insurrection, riot or
invasion; acts of God, calamities, civil commotions, violent action of the
elements or fire; action, inaction or delayed action of any governmental
agency; regulations or laws of any national, state or local governmental
authority; unavailability of materials at reasonable prices, delays in
delivery of materials by suppliers or weather conditions which impair or
delay construction; or other matters or things, whether similar or dissimilar
to the foregoing, beyond the reasonable control of the obligated party.
Delayed action by a governmental agency shall be deemed to occur if a
building permit is not issued within forty-five (45) days after drawings,
specifications, and engineering calculations for such permit are filed for
plan check with such governmental agency.
ARTICLE XVIII
ATTORNEYS' FEES
18.1 In the event that either Landlord or Tenant brings any action
or proceeding against the other for possession of the
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Premises or for the recovery of any sum due hereunder, or to interpret or
enforce any provision of this Lease or any rights of either party hereto, or
because of the breach of any covenant, condition or provision hereof, or for
any other relief against the other, declaratory or otherwise, including
appeals therefrom and whether being an action based upon a tort or contract,
then the prevailing party to this Lease in any such proceeding shall be paid
reasonable attorneys' fees and costs of such action or proceeding including
an allowance for reasonable attorneys' fees for appeals and rehearings.
Notwithstanding the provisions of California Civil Code Section 1717, the
term "prevailing party" as used herein shall include, without limitation,
both a party as to whom a lawsuit is dismissed (with or without prejudice)
without the written consent of that party and, if the lawsuit is one for
declaratory relief, that party whose contentions are substantially upheld as
to the interpretations of this Lease. Any attorneys' fees payable pursuant
to this Article may be claimed either as court costs or in a separate suit.
In addition to the foregoing award of attorneys' fees to the prevailing
party, the prevailing party in any such lawsuit shall be entitled to its
reasonable attorneys' fees incurred in any post-judgment proceedings to
collect or enforce the judgment. This provision is separate and several and
shall survive the merger of this Lease into any judgment on this Lease.
Should Landlord be made a party to any suit or proceeding brought by a third
party, arising by reason of Tenant's use or occupancy of the Premises and not
being a dispute essentially between Landlord and Tenant, then Tenant shall
defend Tenant and Landlord therein, at Tenant's sole cost and expense, and
shall hold Landlord free and harmless from any claim loss, liability, duty or
obligation therein, including any reasonable attorneys' fees of Landlord.
18.2 At the election of either Landlord or Tenant, either party shall
have the right to have any dispute arising under this Lease heard by a
reference procedure pursuant to the provisions of California Code of Civil
Procedure Section 638 et seq., for a determination to be made which shall be
binding upon the parties as if tried before a court or jury. Notwithstanding
the foregoing, any action to recover possession of the Premises as a result
of a default by Tenant shall be brought and maintained pursuant to the
provisions of California Code of Civil Procedure Sections 1159 et seq., and
the provisions of this Paragraph 18.2 shall not apply to any such actions.
The parties agree specifically as to the following:
(a) Within seven (7) days after service of a demand by a party
hereto, the parties shall agree upon a single referee who shall then
try all issues, whether of fact or law, and then report a finding and
judgment thereon. If the parties are unable to agree upon a referee,
either party may seek to have one appointed, pursuant to California
Code of Civil Procedure Section 640, by the presiding judge of the Los
Angeles County Superior Court. The venue for any judicial reference
heard pursuant to this Paragraph 18.2 shall be Los Angeles County.
(b) The compensation of the referee shall be such charge as is
customarily charged by the referee for like services. The cost of such
proceeding shall initially be borne equally by the parties. However,
the prevailing party in such proceeding shall be entitled, in addition
to all other costs, to recover its contribution for the cost of the
reference as an item of damages and/or recoverable costs.
(c) If a reporter is requested by either party, then a reporter
shall be present at all proceedings, and the fees of such reporter
shall be borne by the party requesting such reporter. Such fees shall
be an item of recoverable costs. Only a party shall be authorized to
request a reporter.
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(d) The referee shall apply all California Rules of Procedure and
Evidence and shall apply the substantive law of California in deciding
the issues to be heard. Notice of any motions before the referee shall
be given, and all matters shall be set at the convenience of the
referee.
(e) The referee's decision under California Code of Civil
Procedure Section 644, shall stand as the judgment of the Court,
subject to appellate review as provided by the laws of the State of
California.
(f) The parties agree that any such dispute shall be decided as
soon as practicably possible. The date of hearing for any proceeding
shall be determined by agreement of the parties and the referee, or if
the parties cannot agree, then by the referee, but in no event shall
the date of the hearing be later than one hundred twenty (120) days
after the date of the service or demand.
(g) The referee shall have the power to award damages and all
other relief in the event of a violation of any of the provisions of
this Lease which are to be resolved pursuant to this Paragraph 18.2.
ARTICLE XIX
STATEMENT OF LEASE
19.1 Tenant shall, at any time and from time to time during the
Lease Term (or any Extended Term), upon not less than fourteen (14)
days' prior written notice from Landlord, execute, acknowledge and
deliver to Landlord a written certificate substantially in the form
attached hereto as Exhibit F, certifying: (i) that this Lease represents
the entire agreement between Landlord and Tenant, and is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full
force and effect); (ii) the dates to which Minimum Rent and other
charges or additional rent have been paid in advance, if any; (iii) the
Commencement Date and Termination Date of the Lease Term; (iv) whether
Tenant has assigned, subleased or otherwise transferred the Premises,
this Lease or any interest of Tenant therein; (v) the then-current
amount of Minimum Rent and any Security Deposit paid by Tenant to
Landlord under this Lease; (vi) the date upon which, and the amount or
method by which, Minimum Rent, additional rent or other charges payable
under this Lease will next be adjusted or increased (if at all); (vii)
that there are no options to extend the term of this Lease, or if any
such options exist, describing any such options and stating the terms
and conditions upon which any such options may be exercised; (viii) that
there are no rights of first refusal to purchase the Premises or lease
additional space contiguous to the Premises, or if any such rights of
first refusal exist, stating the terms and conditions upon which the
same may be exercised; (ix) that to the best knowledge of Tenant there
are not any uncured defaults on the part of Landlord under this Lease,
and that Tenant has no right of offset, counterclaim or deduction
against Minimum Rent or other payment obligations of Tenant under this
Lease, or specifying such defaults if any are claimed together with the
amount of any offset, counterclaim or deduction alleged by Tenant; and
(x) that Landlord has fully performed each and all of its construction,
repair and maintenance obligations (if any), as required under this
Lease, except as may be specifically set forth in said statement (if
applicable), and that Tenant, subject to any such stated exception(s),
accepts the Premises in their present condition.
19.2 In addition to the certificate required pursuant to Paragraph
19.1, above, Landlord shall have the right to require Tenant to execute a
statement or certificate in a form
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requested by an existing or potential purchaser, lender or other party which
may acquire the Premises or the Building Complex or hold a security interest
in the Premises or the Building Complex, so long as such receiving entity is
in serious negotiations with Landlord, or any other certificate or form as
may be requested by Landlord.
19.3 Any such certificate or statement referred to in this Article
XIX may be relied upon by any such existing or potential purchaser, lender,
other secured party, and Tenant's failure or refusal to execute and deliver
such statement within such time shall, at the option of Landlord, constitute
a default under this Lease.
19.4 If Landlord desires to finance, refinance, or sell all or any
portion of the real property of which the Building or the Premises are a
part, Tenant hereby agrees to deliver to any lender or purchaser identified
by Landlord as being in serious negotiations with Landlord, such financial
statements and other documents and instruments of Tenant as may be reasonably
required by any such lender or purchaser. If at the time Landlord requests
such financial statements, Tenant's stock is not traded on a public stock
exchange, Tenant may require that the recipients of such financial statements
execute a confidentiality agreement in substantially the same form as is
attached hereto as Exhibit I. Such statements shall include the last three
(3) years' financial statements of Tenant. All such financial statements and
other information shall be received by Landlord and any such lender or
purchaser in confidence, in accordance with the terms of such confidentiality
agreement.
19.5 Tenant acknowledges and agrees that Tenant's obligation to
provide such certificates or statements constitutes a material inducement to
Landlord to execute this Lease, and Tenant shall provide Landlord with such
certificates and statements within five (5) days following Tenant's receipt
of Landlord's written request therefor, but not more than once per year,
except for any year in which a sale or refinancing of the Premises is being
negotiated.
ARTICLE XX
RIGHTS RESERVED BY LANDLORD
20.1 Landlord expressly reserves all rights in and with respect to
the Premises and the Building Complex not inconsistent with Tenant's use of
the Premises as provided in this Lease, including (without in any way
limiting the generality of the foregoing) all rights to the subsurface of the
land more than five (5) feet below ground level, except where building
improvements extend more than five (5) feet below ground level; and all
rights to the airspace more than ten (10) feet above the roof of any
building; and the rights to enter upon the Premises and the Building Complex
upon prior written notice reasonably in advance of such entry for itself for
the purpose of installing, using, maintaining, renewing and replacing such
overhead or underground water, oil, gas, sewer drainage, and other pipe
lines, and telephone, electric, power, television and other lines, cables and
conduits as Landlord may deem desirable in connection with the development or
use of any other property in the neighborhood of the Premises and the
Building Complex, whether owned by Landlord or not, all of which pipelines,
lines and conduits shall be buried to a sufficient depth or raised to a
sufficient height so as not to interfere with the use or stability of the
Premises. Landlord shall coordinate the time of such entry and the conduct
of any such activities on the Premises with Tenant so as to minimize
disruption to Tenant's ongoing business activities on the Premises.
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ARTICLE XXI
COVENANT OF QUIET ENJOYMENT
21.1 Landlord does hereby covenant, promise and agree to and with
Tenant that Tenant, for so long as it is not in default hereof and is in
compliance with all of the terms and conditions of this Lease, shall and may
at all times peaceable and quietly have, hold, use, occupy and possess the
Premises throughout the term of this Lease, subject to all of the terms and
conditions of this Lease, without any molestation or eviction by Landlord or
any persons claiming by or through Landlord.
ARTICLE XXII
RECORDATION
22.1 Neither this Lease nor a short form of memorandum of this
Lease shall be recorded in the office of any county recorder without
Landlord's express written consent. In the event of any such recordation by
Tenant, Tenant shall be solely responsible for any documentary transfer taxes
or other taxes relating to or arising out of such recordation.
ARTICLE XXIII
SUBORDINATION
23.1 Subject to Landlord's obtaining and providing to Tenant a
"non-disturbance agreement" as provided in Paragraph 23.2, below, this Lease
and Tenant's rights hereunder are and will remain subject and subordinate to
any ground lease, mortgage, deed of trust or any other hypothecation for
security now or hereafter placed upon the real property of which the Premises
are a part (the "Property"), and, again, subject to such non-disturbance
protection, to all increases, renewals, modifications, consolidations,
replacements, and extensions thereof (collectively referred to as the
"Mortgage"). If the holder of a Mortgage becomes the owner of the Property
by reason of foreclosure or acceptance of a deed in lieu of foreclosure, at
such holder's election Tenant will be bound to such holder or its
successor-in-interest under all terms and conditions of this Lease, and
Tenant will be deemed to have attorned to and recognized such holder or
successor as Landlord's successor-in-interest for the remainder of the Lease
Term or any extension thereof. The foregoing is self-operative and no
further instrument of subordination and/or attornment will be necessary
unless required by Landlord or the holder of a Mortgage, in which case Tenant
will, within ten (10) days after written request, execute and deliver without
charge any documents reasonably required by Landlord or such holder in order
to confirm the subordination and attornment set forth above. Should the
holder of a Mortgage request that this Lease and Tenant's rights hereunder be
made superior, rather than subordinate, to the Mortgage, then Tenant will,
within ten (10) days after written request, execute and deliver without
charge such agreement as may be reasonably required by such holder in order
to effectuate and evidence such superiority of the Lease to the Mortgage.
23.2 If Tenant fails to execute and deliver any documents as and
when required above, such failure will constitute a default under this Lease,
entitling Landlord to the same rights and remedies as if such default were
with respect to non-payment of Minimum Rent. With respect to each Mortgage
that may encumber the Property at or after the commencement of the Lease
Term, Landlord agrees that promptly following its receipt of written request
by Tenant, Landlord will request the holder of the Mortgage, at Landlord's
expense, to grant Tenant a "non-disturbance agreement," in the usual form
used by such holder. The term "non-disturbance agreement" as used herein
means, in general, an agreement that as long as Tenant is not in default
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under this Lease, this Lease will not be terminated if such holder acquires
title to the Property by reason of foreclosure proceedings or acceptance of a
deed in lieu of foreclosure, provided that Tenant attorns to such holder in
accordance with such holder's requirements.
ARTICLE XXIV
SECURITY DEPOSIT
24.1 As security for the faithful performance of the terms,
covenants, conditions and provisions of this Lease, as well as to indemnify
Landlord from any damages, costs, expenses, real estate brokerage commissions
or attorneys' fees which Landlord may incur or suffer by reason of any
default by Tenant, Tenant hereby agrees to deposit with Landlord, upon
execution of this Lease, the sum set forth in Item 1.11 of the Basic Lease
Provisions. Landlord shall not be required to keep said deposit separate
from its general accounts. No interest shall be paid by Landlord to Tenant
on said deposit, and no trust relationship is created between Landlord and
Tenant with respect to the security deposit.
24.2 In the event Tenant shall be in default hereof at any time
prior to the end of the term hereof, then Landlord may apply all or any
portion of the security deposit in payment of Landlord's costs, expenses,
damages, real estate broker's commissions, and attorneys' fees in enforcing
the terms, covenants, conditions and provisions hereof. Nothing herein
contained shall be construed to mean that the recovery of damages by Landlord
against Tenant shall be limited to the sum of the security deposit. In the
event any portion or all of the security deposit is applied by Landlord in
accordance with the foregoing, then Tenant shall immediately deposit with
Landlord additional sums so that the security deposit in the hands of
Landlord shall be at all times not less than the sum of the deposit herein
provided for.
24.3 Should the Lease Term and the occupancy of the Premises by
Tenant fail to commence through no fault of Tenant, then Landlord shall
return the security deposit and any prepaid rent then possessed by Landlord
to Tenant within thirty (30) days after such event occurs. If this Lease
should terminate for any reason other than the default of Tenant, Landlord
shall return the security deposit to Tenant promptly after Landlord's
inspection of the Premises and confirmation that the Premises are surrendered
in the condition as required under the terms of this Lease.
ARTICLE XXV
HOLDING OVER
25.1 If Tenant remains in possession of the Premises after the
expiration of the Lease Term or any extension or renewal hereof, such holding
over shall not operate to extend or renew this Lease but shall be construed
as a tenancy from month-to-month which may be terminated by Landlord upon
three (3) days' prior written notice if Tenant is then in default of this
Lease, or by either party upon at least thirty (30) days' prior written
notice directed to the end of a calendar month. Such month-to-month tenancy
by Tenant shall be subject to all the terms and provisions of this Lease,
except that the Minimum Rent payable during the period of holding over shall
be one hundred twenty-five percent (125%) of the average monthly Minimum Rent
payable by Tenant during the last twelve (12) months of the Lease Term or any
extension or renewal thereof. Notwithstanding the foregoing, if Landlord
notifies Tenant, in writing, that Landlord is in serious negotiations with
another tenant for the Premises, then commencing the first day of the month
following the month in
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which such notice is delivered to Landlord, Minimum Rent for such holdover
period shall be one hundred fifty percent (150%) of the average monthly
Minimum Rent payable by Tenant during the last twelve (12) months of the
Lease Term or any extension or renewal thereof. Any options, rights, or
privileges granted to Tenant, if any, to extend the Lease Term, to acquire
the Premises, or re-lease the same, shall not be applicable during said
period of holding over.
ARTICLE XXVI
GENERAL
26.1 REMEDIES CUMULATIVE. The specific remedies to which Landlord
may resort under the terms of this Lease are cumulative and are not intended
to be exclusive of any other remedies or means of redress to which Landlord
may be lawfully entitled in case of any breach or threatened breach by Tenant
of any provision of this Lease.
26.2 SUCCESSORS AND ASSIGNS. The covenants and agreements herein
contained shall bind and inure to the benefit of Landlord, its successors and
assigns, and Tenant, its successors and assigns, subject to the provisions of
this Lease.
26.3 PAYMENTS AND INTEREST. Except as otherwise specifically
provided in this Lease, each covenant, agreement or stipulation by a party
hereto shall be performed at such party's own cost and expense, and without
cost or expense to the other party. Any monetary obligations due from Tenant
to Landlord which are not paid when due shall bear interest from the due date
until paid to Landlord at the Lease Interest Rate. Such interest shall be
paid at the time of payment of the principal obligation as a condition of
remedy of such principal obligation. Any check tendered by Tenant which is
dishonored by the drawee bank shall not constitute payment of any obligation
under this Lease.
26.4 LATE CHARGE. Tenant acknowledges that late payment of
Minimum Rent and items designated in this Lease as additional rent will cause
Landlord to incur costs and suffer damages not contemplated by this Lease,
the exact amount of which will be impracticable to ascertain. Such costs and
damages include, but are not limited to, late charges which may be imposed on
Landlord by the terms of any trust deed covering the Premises; additional
administrative duties of Landlord's personnel in determining delinquent rents
and attempts to collect such rents by reasonable means other than litigation;
additional accounting and budgetary duties of Landlord's personnel; possible
adverse effects on Landlord's credit rating resulting from impairment of
Landlord's cash flow; and attorneys' fees resulting from consultations with
counsel. Accordingly, if any installment of Minimum Rent or items designated
as additional rent are not received by Landlord within ten (10) days after
receipt of written notice that the same are due, Tenant shall pay Landlord,
as additional rent, a late charge equal to five percent (5%) of such overdue
amount. Landlord and Tenant agree that such late charge represents a fair,
equitable, and reasonable estimate of the costs and damages Landlord will
incur because of Tenant's late payment.
26.5 LATE PAYMENTS AND IMPOUNDS. In the event that a late charge
is payable pursuant to Paragraph 26.4, whether or not collected, for two (2)
consecutive installments of rent, then rent shall automatically become due
and payable quarterly in advance for the next twelve (12) months, rather than
monthly, notwithstanding Paragraph 4.1 or any other provision of this Lease
to the contrary. All monies paid to Landlord under this Paragraph may be
intermingled with other monies of Landlord and shall not bear interest. All
advance payments provided for in this Paragraph shall be deemed rent under
this Lease.
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26.6 NOTICES. Any notice or demand required or permitted by law
or by any of the provisions of this Lease shall be in writing. All notices
or demands by either party shall be deemed to have been properly given upon
delivery when served personally; two (2) business days after being deposited
with the U.S. Postal Service when sent by registered or certified mail,
postage prepaid; or by noon on the business day following the day of deposit
with an overnight express-carrier when sent by overnight express service,
such as Federal Express. Notices from Landlord to Tenant shall be given to
Tenant at the address of the Premises. Notices or demands to Landlord shall
be given to Landlord at 22010 Wilmington Avenue, Suite 400, Carson,
California 90745. Either party hereto may change the place to which notices
are to be given by advising the other party in writing.
26.7 CAPTIONS. The headings or captions of Articles in this
Lease are for convenience and reference only, and they in no way define,
limit or describe the scope or intent of this Lease or the provisions of such
Articles.
26.8 PRONOUNS AND SINGULAR/PLURAL. Feminine or neuter pronouns
shall be substituted for those masculine form or vice versa, and the plural
shall be substituted for the singular number of vice versa, in the place or
places herein where the context may require such substitution or
substitutions.
26.9 TIME OF ESSENCE. Time is hereby declared to be of the
essence of this Lease and of each and every scheduled monetary or material
non-monetary covenant, term, condition or provision hereof.
26.10 REASONABLE CONSENT. Except for determinations expressly
described as being in the "absolute discretion" of the applicable party, or
for which this Lease otherwise establishes express standards, neither
Landlord nor Tenant shall unreasonably withhold or delay any consent,
approval or other determination provided for hereunder, and determinations
subject to absolute discretion shall not be unreasonably delayed. In the
event that either Landlord or Tenant disagrees with any determination made by
the other hereunder (other than a determination in the absolute discretion of
the determining party) and reasonably requests the reasons for such
determination, the determining party shall furnish its reasons in writing and
in reasonable detail within three (3) business days following such request.
Furthermore, in addition to the foregoing, whenever the Lease grants Landlord
or Tenant the right to take action, exercise discretion, establish rules and
regulations, make allocations or other determinations, or otherwise exercise
rights or fulfill obligations, Landlord and Tenant shall act reasonably and
in good faith and take no action which might result in the frustration of the
reasonable expectations of a sophisticated landlord and sophisticated tenant
concerning the benefits to be enjoyed under this Lease. Landlord shall
exercise its rights and perform its obligations hereunder, in such a way as
to reasonably minimize any resulting interference with Tenant's use of the
Premises, and Tenant shall exercise its rights and perform its obligations
hereunder, and otherwise operate the Premises, except as provided under this
Lease, in such a way as to reasonably minimize any resulting interference
with Landlord's obligations.
26.11 FAIR MEANING. The language in all parts of this Lease
shall be in all cases construed as a whole according to its fair meaning, and
not strictly for nor against either Landlord or Tenant.
26.12 ENTIRE AGREEMENT. This Lease contains all of the
agreements of the parties hereto with respect to any matter covered or
mentioned in this Lease, and no prior agreement or understanding pertaining
to any such matter shall be effective
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for any purpose. No provision of this Lease may be amended or added to
except by an agreement in writing signed by the parties hereto or their
respective successors in interest.
26.13 NO ACCORD AND SATISFACTION. No payment by Tenant or
receipt by Landlord of a lesser amount than that stipulated herein for
Minimum Rent, additional rent or any other charge shall be deemed to be other
than on account of the earliest stipulated Minimum Rent, additional rent or
other charge then due, nor shall any endorsement or statement on a check or
letter accompanying any check or payment be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice
to rights to recover the balance of such Minimum Rent, additional rent, or
other charges or pursue any other remedy in this Lease, at law or in equity.
26.14 CHOICE OF LAW. This Lease shall be governed by and
construed pursuant to the laws of the State of California.
26.15 NON-DISCRIMINATION. Tenant herein covenants by and for
itself, its heirs, executors, administrators and assigns, and all persons
claiming under or through it; and this Lease is made and accepted upon and
subject to the following conditions: That there shall be no discrimination
against or segregation of any person or group of persons, on account of race,
color, creed, national origin, or ancestry in the leasing, subleasing,
transferring, use, occupancy, tenure or enjoyment of the Premises, nor shall
the Tenant itself, or any person claiming under or through it, establish or
permit any such practice or practices of discrimination or segregation with
reference to the selection, location, number, use or occupancy of Tenant's
lessees, sublessees or vendees on the Premises.
26.16 COUNTERPARTS. This Lease may be executed in several
counterparts, each of which shall constitute an original.
26.17 CORPORATE RESOLUTION. Tenant shall deliver to Landlord,
contemporaneously with delivery of this Lease executed by Tenant, a certified
copy of a resolution of Tenant's Board of Directors authorizing the execution
of this Lease and naming the representatives authorized to execute this Lease
on behalf of Tenant.
26.18 REIMBURSEMENTS TO LANDLORD. If Tenant, or any third party
on behalf of Tenant or with whom Tenant is engaged or contemplates engaging
in business, requests that Landlord review or approve any drawings,
specifications or engineering calculations respecting any improvements Tenant
intends to install in the Premises or execute any agreement or written
instrument; and if Landlord refers such matter to any architect, engineer,
surveyor or other professional or administrative personnel of Landlord or to
legal counsel for review and advice to Landlord, then Tenant agrees to
reimburse Landlord as additional rent for all professional fees and costs
incurred by Landlord at the actual cost thereof for persons not in the direct
employ of Landlord, and at the rate of Fifty Dollars ($50.00) per hour for
all time spent by professional and administrative persons in the direct
employ of Landlord. Notwithstanding the foregoing, Tenant shall not be
responsible for reimbursing Landlord for any such fees or costs relating to
the installation of any of Tenant's improvements which occurs prior to the
expiration of the sixth (6th) month of the Lease Term. If Tenant requests
that Landlord consent to an assumption and/or assignment of this Lease or a
subletting of the Premises to a third party for which Landlord's written
consent is required, Tenant agrees to reimburse Landlord, as additional rent,
for all time spent by Landlord's administrative and professional personnel,
in reviewing the proposed form of all legal documents submitted by Tenant and
preparing necessary additional legal documents, in evaluating the
investigating the credit worthiness of the proposed assignee or
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subtenant, in inspecting the Premises to determine if the same is in the
condition and state of repair as required by this Lease, in reviewing
drawings and specifications for any additional improvements to be made to the
Premises, and for any other action required in the reasonable judgment of
Landlord. Landlord shall be reimbursed at the rate of Fifty Dollars ($50.00)
per hour for the time spent by its administrative and professional personnel,
and at the actual and reasonable cost of professional fees and costs incurred
by Landlord for persons not in the direct employ of Landlord, for each such
request made by Tenant. The hourly fee payable to Landlord's administrative
and professional personnel under this Paragraph shall be increased by the
percentage increase in the Consumer Price Index ("all items" index for urban
wage earners and clerical workers, Los Angeles/Anaheim/Riverside area,
1982-84=100) on each anniversary date of the commencement of the term of this
Lease.
26.19 NO GUARD SERVICE. Tenant hereby acknowledges that the rent
payable to Landlord hereunder does not include the cost of guard service or
other security measures, and that Landlord shall have no obligation
whatsoever to provide any such service or measures. Tenant assumes all
responsibility for the protection of Tenant, its agents and invitees from
acts of third parties.
26.20 BROKERS. Tenant acknowledges its understanding that
Landlord shall pay all brokerage commissions owing to CB Commercial Realty
Group, Inc. ("Broker") in connection with the transaction contemplated by
this Lease pursuant to a separate agreement. Landlord and Tenant each
represent and warrant to the other that other than the Broker, no broker,
agent, or finder negotiated or was instrumental in negotiating or
consummating this Lease on its behalf and that it knows of no broker, agent,
or finder, other than the Broker, who is, or might be, entitled to a
commission or compensation in connection with this Lease. In the event of
any such claims for additional brokers' or finders' fees or commissions in
connection with the negotiation, execution or consummation of this Lease,
then Landlord shall indemnify, save harmless and defend Tenant from and
against such claims if they shall be based upon any statement, representation
or agreement by Landlord, and Tenant shall indemnify, save harmless and
defend Landlord if such claims shall be based upon any statement,
representation or agreement made by Tenant.
26.21 BROKERAGE COMMISSION. Tenant acknowledges its
understanding that Landlord has paid a real estate brokerage commission for
securing Tenant's tenancy at the Premises for the term of this Lease. If
Tenant defaults under this Lease and discontinues paying the rent specified
herein, Tenant shall, within thirty (30) days of such event, reimburse
Landlord for the unamortized portion of such brokerage commission pursuant to
the following formula:
Total amount of Number of months of
brokerage commission x unexpired lease term.
- -----------------------------------------------------------------------
Number of months of lease term
Notwithstanding the foregoing, Landlord shall not be entitled to recover such
unamortized portions of the brokerage commission as provided in this
Paragraph 26.21 if, following an uncured default under this Lease by Tenant,
either (a) Landlord elects to pursue its remedy against Tenant pursuant to
California Civil Code Section 1951.4, or (b) Landlord recovers the discounted
present value of all rent payable for the entire term of the Lease pursuant
to California Civil Code Section 1951.2. To the extent Landlord recovers the
discounted present value of some, but not all, of the rent payable following
the termination of this Lease resulting from Tenant's default, the number of
months of such rent so recovered by Landlord shall be subtracted from the
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"number of months of unexpired lease term" in the formula set forth above.
26.22 LIMITATION OF LIABILITY. Tenant hereby agrees that, in the
event of any actual or alleged failure, breach or default hereunder by
Landlord, Tenant's sole and exclusive remedy shall be against and shall be
satisfied from the Landlord's equity interest in the Premises. This
limitation shall not apply to any tort liability of Landlord to Tenant.
Tenant agrees that the obligations of Landlord under this Lease do not
constitute personal obligations of the individual directors, officers or
shareholders of Landlord, and Tenant shall not seek recourse against the
individual directors, officers or shareholders of Landlord or any of their
personal assets for satisfaction of any liability with respect to this Lease.
Notwithstanding the foregoing, in the event Landlord places any mortgages or
deeds of trust (collectively, "encumbrances") against the Premises in an
aggregate amount of greater than eighty percent (80%) of the fair market
value of the Premises, Tenant shall be entitled to proceed against the
general assets of Landlord (but not any director, officer or shareholder of
Landlord) to the extent of the amount by which the encumbrances exceed eighty
percent (80%) of the fair market value of the Premises.
26.23 PARKING. Tenant shall instruct and require that Tenant's
employees, agents, visitors and business invitees park motor vehicles within
the parking areas included in the Building Complex; and such employees,
agents, visitors and invitees shall not park on the streets within the Watson
Industrial Center. If there is insufficient parking area included on the
Premises for parking of such motor vehicles, Tenant shall use its best
efforts to obtain off-street parking privileges on other properties in the
vicinity of the Premises.
26.24 LEASE REVIEWED. Landlord and Tenant have carefully read
and reviewed this Lease and each term and provision contained herein, and
each of them has referred this Lease to its own legal counsel for review and
advice as to the legal consequences of this Lease. Landlord and Tenant
acknowledge their informed and voluntary consent thereto. Landlord and Tenant
further agree that, at the time this Lease is executed, the terms of this
Lease are commercially reasonable and effectuate the intent and purpose of
Landlord and Tenant with respect to the Premises.
26.25 FINANCIAL STATEMENTS. As a material inducement to
Landlord's execution of this Lease, Tenant hereby represents and warrants
that Tenant has furnished to Landlord the most current audited financial
statements of Tenant prepared in accordance with generally accepted
accounting principles in a manner consistently applied in each case.
Throughout the Lease Term, Tenant shall, within ten (10) days following
Landlord's request, provide Landlord with Tenant's then-current financial
statements. Landlord shall maintain such financial statements in confidence,
except for disclosure to prospective purchasers of the Premises and
prospective lenders who are in serious negotiations with Landlord and whose
loans would be secured in whole or in part by this Lease or the Premises. If
at the time Landlord requests such financial statements, Tenant's stock is
not traded on a public stock exchange, Tenant may require that the recipients
of such financial statements execute a confidentiality agreement in
substantially the same form as is attached hereto as Exhibit I.
26.26 LEASE INTEREST RATE. As used in this Lease, the "Lease
Interest Rate" shall be a rate equal to two percent (2%) per year in excess
of the "Reference Rate" most recently announced by Bank of America, Los
Angeles from time to time, provided however that if Bank of America ceases to
announce such Reference Rate, then such rate shall be a rate comparable to
such Reference
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Rate; and provided further, however, that in no event shall
the Lease Interest Rate exceed the highest lawful rate of interest
permissible by law.
26.27 TENANT'S SELF-INSURANCE. So long as the tenant under this
Lease is Leiner Health Products Inc., Tenant shall be entitled to self-insure
for business interruption losses and losses to Tenant's personal property,
but in no event shall Tenant be permitted to self-insure for general
liability risks for property insurance for the Premises. Any self-insurance
shall be deemed to contain all of the terms and conditions applicable to such
insurance as required in Article VIII including, without limitation, a full
waiver of subrogation. If Tenant elects to so self-insure, then with respect
to any claims which may result from incidents occurring during the Term, such
self-insurance obligations shall survive the expiration or earlier
termination of this Lease to the same extent as the insurance required would
survive.
26.28 LANDLORD BANKRUPTCY PROCEEDING. If ownership of the
Premises or the Building Complex has been conveyed to a person other than:
(a) a lender pursuant to foreclosure of acceptance of a deed in lieu of
foreclosure; (b) an institutional owner, such as a pension trust fund, life
insurance company or commercial bank; or (c) a non-institutional owner
headquartered in the state of California, then in the event that the
obligations of Landlord under this Lease are not performed during the
pendency of a bankruptcy or insolvency proceeding involving the Landlord as
the debtor, or following the rejection of this Lease in accordance with
Section 365 of the United States Bankruptcy Code and the election of the
Tenant to remain the possession of the Premises in a bankruptcy or insolvency
proceeding involving the Landlord as the debtor, then notwithstanding any
provision of this Lease to the contrary, Tenant shall have the right to set
off against rents next due and owing under this Lease (i) any and all damages
that it demonstrates to the Bankruptcy Court were caused by such
nonperformance of the Landlord's obligation under this Lease by Landlord,
debtor-in-possession, or the bankruptcy trustee, and (ii) any and all damages
caused by the nonperformance of Landlord's obligations under this Lease
following any rejection of this Lease in accordance with Section 365 of the
United States Bankruptcy Code.
26.29 WAIVER OF REDEMPTION BY TENANT; HOLDING OVER. Tenant hereby
waives for Tenant and all those claiming under Tenant any right now or
hereafter existing to redeem the Premises after termination of Tenant's right
of occupancy by order or judgment of any court or by any legal process or
writ pursuant to the California Code of Civil Procedure Section 729.010
through 729.090, but nothing in this Lease shall be deemed to constitute
Tenant's waiver of its right to petition for relief from a forfeiture
pursuant to California Code of Civil Procedure Section 1179 or California
Civil Code Section 3275.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as
of the day and year first above written.
"LANDLORD" "TENANT"
WATSON LAND COMPANY, LEINER HEALTH PRODUCTS INC.,
a California corporation a Delaware corporation
By: /s/ By: /s/ Giffen H. Ott
---------------------------- ------------------------------
Its: Its: Vice President, Manufacturing
------------------------- & Development
---------------------------
By: /s/ Kevin J. Lanigan
------------------------------
Its: Executive VP/C.O.O.
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Exhibit 10.11
SUBLEASE
THIS SUBLEASE ("Sublease") dated as of October 8, 1993, is entered into by
and between TELEDYNE, INC., a Delaware corporation ("Sublandlord") and LEINER
HEALTH PRODUCTS INC., a Delaware corporation ("Subtenant").
W I T N E S S E T H
WHEREAS by that certain lease dated as of July 17, 1991 (the "Lease"), by
and between Watson Land Company, as Landlord, and Sublandlord, as Tenant,
Landlord leased to Sublandlord a portion of that certain building located at 901
East 233rd Street, Carson, California 90745 ("Building"), which portion is
referred to herein as the "Subleased Premises"; and
WHEREAS, a copy of the Lease is attached hereto as EXHIBIT "A" and
incorporated herein by this reference; and
WHEREAS, by that certain Lease of even date herewith (the "Direct Lease")
Subtenant is directly leasing from Landlord the balance of the Building (the
"Direct Premises") for a term which will commence on January 1, 1994 (or such
earlier date as the term of this Sublease commences as set forth in Paragraph 1
below) and shall end on March 31, 2004; and
WHEREAS, a copy of Article VIII, Article XIV, Paragraph 26.10 and
Paragraphs 5, 6 and 7 of Rider No. 1 of the Direct Lease, and a copy of
Paragraph 7 of the "810 Lease" described in Paragraph 2(b) below, are attached
hereto as EXHIBIT "B" and incorporated herein by reference; and
WHEREAS, Subtenant desires to sublease from Sublandlord and Sublandlord
desires to sublease to Subtenant the Subleased Premises for a term, at a rent,
and upon and subject to the covenants, agreements, terms, conditions,
limitations, exceptions and reservations herein contained;
NOW THEREFORE, in consideration of the premises subleased herein, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto covenant and agree as follows:
1. SUBLEASE. Sublandlord hereby subleases to Subtenant, and
Subtenant hereby subleases from Sublandlord, the Subleased Premises, upon and
subject to the covenants, agreements, limitations, reservations, exceptions,
terms and conditions herein contained, and for a term commencing on January 1,
1994 or such earlier date as Subtenant commences the packaging of product of
Subtenant within the Subleased Premises for resale, (the "Sublease Commencement
Date") and ending at midnight on September 30, 2001 (the "Sublease Expiration
Date") or on such earlier date upon which said term may expire or be canceled or
terminated pursuant to any of the provisions of this Sublease. The Subleased
Premises are subleased together with the appurtenances thereto, including,
without limitation, the right to use in common with others the common areas of
the Building to the extent permitted under the Lease. However, inasmuch as
Subtenant is directly leasing the Direct Premises from Landlord, there shall be
no "common area" during such time as Subtenant concurrently leases from Landlord
the Direct Premises and leases from Sublandlord the Subleased Premises, it being
the intent of Subtenant to occupy the entire Building during the term of this
Sublease. As a result of Subtenant's leasing of the entire Building, as
aforesaid, several provisions of this Sublease shall be controlled by the
provisions of the Direct Lease during the "Concurrent Terms", which in this
Sublease shall mean and refer to the time period during which Subtenant is
concurrently subleasing from Sublandlord the Subleased Premises and directly
leasing from Landlord the Direct Premises.
2. CONDITIONS.
(a) The parties' obligations hereunder are expressly conditioned upon
Landlord's execution of the written consent attached to this Sublease, and,
as a matter of information between Sublandlord and Subtenant, and not as a
condition to this Agreement, it is noted herein that such consent shall
provide, among other things, for Landlord's agreement that in the event of
and upon the termination or cancellation of the
<PAGE>
Lease pursuant to the terms and provisions thereof, this Sublease shall
automatically terminate and Landlord and Subtenant will concurrently enter
into an amendment to the Direct Lease which shall include the Subleased
Premises into the Premises demised under the Direct Lease, but at the
rental payable under this Sublease for the remaining scheduled term of this
Sublease, and thereafter at the Minimum Rent in the same amount per square
foot of the Subleased Premises which is payable per square foot for the
Premises under the Direct Lease. If Landlord does not execute such consent
by close of business on October 14, 1993, and such date is not extended
by written agreement of the parties, then this Sublease shall automatically
terminate and neither Sublandlord nor Subtenant shall have any further
obligations hereunder after the date of termination.
(b) The parties' obligations hereunder are expressly conditioned upon
(i) Subtenant entering into the Direct Lease with Landlord for the balance
of the Building until March 31, 2004 and for the Subleased Premises for a
term commencing as of the expiration of the term of the Sublease until
March 31, 2004 on terms and conditions satisfactory to Subtenant in its
sole discretion and (ii) Subtenant entering into a lease with Landlord for
a 204,000 square foot building located directly to the south of the
Building at 810 East 233rd Street, Carson, California (the "810 Lease"). If
Landlord and Subtenant have not entered into the Direct Lease and the 810
Lease by close of business on October 14, 1993, then Subtenant may, upon
notice to Sublandlord delivered not later than October 21, 1993, terminate
this Sublease whereupon neither Sublandlord nor Subtenant shall have any
further obligations hereunder after the date of termination.
3. SUBLEASE FIXED RENT. The fixed monthly rent for the
Subleased Premises shall be as set forth in the following table:
Monthly Annual
Year Rate Months Rate
---- ------- ------ ------
Year 1 (Months 1 $41,861.30* x 10 = $418,613.00
through 10):
Year 1 (Months 11 $57,848.96 x 2 = $115,697.92
and 12
Year 2: $57,848.96 x 12 = $694,187.52
Year 3: $57,848.96 x 12 = $694,187.52
Year 4: $57,848.96 x 12 = $694,187.52
Year 5: $65,636.32 x 12 = $787,635.84
Year 6: $65,636.32 x 12 = $787,635.84
Year 7: $65,636.32 x 12 = $787,635.84
Year 8: $65,636.32 x 9** = $590,726.88
-------------
Total $5,570,507.88
*Rent for the office space portion of the Subleased Premises is abated for
the first ten (10) months of the term.
** Year 8 is only 9 months since the expiration date is September 30, 2001.
Subtenant covenants and agrees to pay such monthly rent, in advance, on the
first day of each and every calendar month during the term of this Sublease
commencing on the Sublease Commencement Date, provided, however, that such date
shall be extended on a day-for-day basis for each day that Subtenant is delayed
in the completion of its initial tenant improvement work in the Subleased
Premises due to any unreasonable act or omission on the part of Sublandlord. The
fixed monthly rent for the third (3rd) month of the term of this Sublease shall
be paid by
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Subtenant to Sublandlord upon the full execution and delivery of this Sublease.
If the term shall end on a day other than the first or last day of a calendar
month, all amounts hereunder shall be apportioned based on a thirty (30) day
month during the applicable month during which the term of this Sublease shall
be in effect.
4. ADDITIONAL RENT.
(a) In addition to the fixed monthly rent provided for in
Paragraph 3 hereof, Subtenant shall pay to Sublandlord, as additional
rent hereunder, within a period that is three (3) business days less
than the date such payment is due under the Lease, in each case after
written notice and demand, any other payments for which Sublandlord
shall become responsible to Landlord under Paragraph 4.2 of the Lease,
including payments arising (A) by reason of any act or omission of
Subtenant, including without limitation, payments accruing as a result
of any preparation of, or alterations to, the Subleased Premises
undertaken by Subtenant, or (B) as a result of Subtenant's default
hereunder or by such default causing Sublandlord to be in default
under the Lease. Subtenant covenants to pay the additional rent when
due, and in lawful money of the United States. Any delay by
Sublandlord in billing any sum set forth in this Paragraph 4 or in
Paragraph 3 hereinabove shall not constitute a waiver of or in any way
impair Subtenant's obligation to pay the same in accordance with the
terms of this Sublease.
(b) The fixed monthly rent, additional rent and other payments
herein reserved or payable shall be paid to Sublandlord at:
Teledyne, Inc.
1901 Avenue of the Stars, 18th Floor
Los Angeles, California 90067
Attention: Real Estate Department
and/or at such other place as Sublandlord may designate from time to
time in writing, in lawful money of the United States of America, as
and when the same becomes due and payable, without demand therefor and
without any deduction, set-off or abatement whatsoever, except as
expressly permitted herein or permitted of Sublandlord under the
Lease, and applicable on a pro-rated basis under this Sublease, as
referenced in the last sentence of Subparagraph 12(b) below.
(c) All adjustments of rent, costs, charges and expenses which
Subtenant assumes, agrees or is obligated to pay to Sublandlord
pursuant to this Sublease shall be deemed additional rent, and in the
event of nonpayment, Sublandlord shall have the rights and remedies
with respect thereto as are herein provided for in case of nonpayment
of the fixed monthly rent reserved hereunder.
5. CONDITION OF SUBLEASED PREMISES. Subtenant represents that
it has made a thorough inspection of the Subleased Premises and is familiar with
the condition of every part thereof. Subtenant further represents that it has
made a thorough examination of the Lease and that it is familiar with all the
terms, conditions and covenants, contained therein. Sublandlord shall improve
the Subleased Premises to the condition described in Paragraph 6 below.
Sublandlord represents and warrants that the copy of the Lease attached hereto
as EXHIBIT "A" is a true and complete copy of the Lease and, except as set forth
therein, and except for that certain Estoppel Certificate entered into by and
between Subtenant, Landlord and The Prudential Insurance Company of America,
there are no additional agreements between Sublandlord and Landlord with respect
to the Subleased Premises.
6. TENANT IMPROVEMENTS.
(a) Prior to the Commencement Date, and, as to certain portions
of the Subleased Premises, at such earlier date as Subtenant and
Sublandlord reasonably agree upon in order to accommodate Subtenant's
commencement of its work of improvements in the Subleased Premises
which work shall begin in the Subleased Premises immediately following
the full execution and delivery of this Sublease, Sublandlord shall
perform the following works of improvement, and only the following
works of improvement, within the Subleased Premises, it being
understood and agreed between the parties that, except as
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expressly set forth in this Sublease, Subtenant is leasing the
Subleased Premises on an "as is" basis, subject to Sublandlord's
assignment to Subtenant of all of Sublandlord's rights to require
Landlord to comply with the provisions of the Lease regarding the
condition of the Subleased Premises on delivery thereof to
Sublandlord:
(i) Sublandlord shall cause the inspection of the roof and
underlying membrane to be undertaken by a licensed roofing
contractor and shall cause those repairs which may be necessary
for the safe occupancy of the Subleased Premises. In connection
with such inspection, Sublandlord shall provide a roofing report
to verify the water tight condition of the existing roof of the
Building, including specific assurance that the cause of certain
leaks which the parties have reviewed and which are occurring
over portions of the office area of the Subleased Premises have
been repaired.
(ii) Sublandlord shall cause to be placed in good working
order, condition and state of repair, all mechanical systems in
the Subleased Premises, including, but not limited to, the
heating ventilating and air conditioning systems, all electrical,
lighting, plumbing, office intercom system and security systems.
With respect to the heating, ventilating and air conditioning
systems serving the office portion of the Subleased Premises,
Sublandlord shall provide a one year warranty for service, repair
and replacement to the extent such systems are not modified by
Subtenant. Further, Sublandlord specifically assigns and
transfers to Subtenant all of the benefits set forth in EXHIBIT
"G" to the Lease, and in particular Subparagraph B of said
EXHIBIT "G" which sets forth certain major components which will
be paid for by Landlord if such heating, ventilating and air
conditioning component replacements are required due to wear and
tear.
(iii) Sublandlord shall cause the repair of all broken
exterior glass at the Subleased Premises, and shall reseal to a
weather tight condition all exterior windows in the office
portion of the Building.
(iv) Sublandlord shall have prepared and shall provide a
current termite and pest control inspection report for the
Subleased Premises and shall provide evidence that the termite
and pest abatement work specified in such report has been
completed. Sublandlord shall also provide evidence that repairs
of any termite damage to the overhead gluelam beams within the
Subleased Premises has been completed as specified by such
report.
(b) Subtenant shall contract with Landlord in order to cause the
remediation by removal of all of the asbestos in the Subleased
Premises identified in the attachments to that certain cover letter
dated September 29, 1993 from Mr. Burr Baldwin, Jr. to Mr. Giffen
Ott, a copy of which letter is attached hereto as Exhibit "C" and
incorporated herein, and the return of the affected area, following
such work of removal, to a condition ready to receive surface
materials, such as floor covering or wall covering. The cost of such
work of remediation, removal and restoration shall be divided equally
between Sublandlord and Subtenant up to a total cost of $4,000, and
with any excess cost over $4,000 to be paid for by Sublandlord, so
that the maximum cost to Subtenant for such work shall be $2,000.
Sublandlord shall reimburse Subtenant for Sublandlord's share of the
cost of such work within ten (10) business days following receipt by
Sublandlord of an invoice, together with any back-up information as
may be reasonably requested by Sublandlord. Prior to the commencement
of the work of remediation, removal and restoration by Landlord, a
description of the work and the estimated cost thereof shall be set
forth in a contract between Landlord and Subtenant, which contract
shall be reasonably approved by Sublandlord prior to the commencement
of such work within the Subleased Premises.
(c) Subtenant shall be responsible for causing the Subleased
Premises to be in compliance with the requirements of Title III of the
Americans With Disabilities Act which are applicable to the Subleased
Premises as of the Commencement Date.
(d) In no event shall Sublandlord be required to repair any
cosmetic damage to any furniture, furnishings, partitioning,
carpeting, wallpaper or other decorative
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finishing resulting from Sublandlord's work set forth in Subparagraph
6(a) above unless such damage is due to the willful misconduct or
gross negligence of Sublandlord.
(e) By the execution of the Consent and Agreement Concerning
Sublease by Landlord, Sublandlord and Subtenant, it is agreed and
understood by and among Sublandlord, Subtenant and Landlord that the
provisions of Paragraph A of Exhibit "G" to the Lease are hereby
amended to provide that Subtenant shall contract for a preventative
maintenance program with respect to the roof surface of the Subleased
Premises with either Landlord or with an entity approved in writing by
Landlord, which contract, in Landlord's reasonable judgment, will
require the performance by the contractor of a preventative
maintenance program which is in accordance with good property
management and roofing maintenance practice. So long as such program
is followed, Landlord will waive any requirement of roof replacement
which is otherwise required by the provisions of said Paragraph A of
Exhibit "G" or by any surrender provisions of the Lease. During the
term of this Sublease, Subtenant shall be responsible for assuring
that such preventative maintenance program is in full force and
effect. If, as a result of subtenant's failure to cause such
preventative maintenance program to be in effect during the term of
this Sublease, Landlord requires the replacement of the roof at the
end of the term of the Lease, such replacement responsibility shall
be that of Subtenant.
7. SUBTENANT'S ALTERATIONS.
(a) Sublandlord hereby consents to the installation in the
Subleased Premises of the following proposed modifications:
(i) the addition of a sound attenuation corridor between
the existing offices and the Subleased Premises and the proposed
production line to be installed in the Subleased Premises by
Sublandlord;
(ii) a 30,000 square foot ground level area to house ten
(10) production machines with a 30,000 square foot mezzanine,
including the installation of approximately 25 roof-mounted HVAC
units;
(iii) approximately 5,000 square feet of various office
pods;
(iv) the modification of the existing restrooms and the
addition of one employee locker area (men and women);
(v) exterior dust controller and air compressor pads and
enclosures;
(vi) wash areas for disassembly and cleaning and
pharmaceutical bottle filling and packaging devices;
(vii) two (2) structural openings at the second floor
office area for fork lift access;
(viii) structural openings for several new man-door exits
and one 14 wide access way in the existing concrete demising wall
in the Subleased Premises;
(ix) the relocation of the existing second floor office
stairs to accommodate Subtenant's new sound attenuation corridor
described in clause (i) hereinabove;
(x) maintenance areas and related office areas;
(xi) construction of the bridge between the Subleased
Premises and the 810 Premises as described in Paragraph 7 of
Lease Rider No. 1 to the 810 Lease, which Paragraph 7 is part of
EXHIBIT "B" to this Sublease; and
(xii) the refurbishment of the existing offices in the
Subleased Premises.
During the term of the Lease, Subtenant may not make any alterations
or installations unless Subtenant first agrees to remove the same and
repair any damage caused by such
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removal, or Sublandlord and Landlord have agreed in writing that such
alterations or installations shall not be required to be removed upon
expiration or termination of this Sublease, it being agreed and
understood that, so long as Landlord does not require the removal
thereof, Sublandlord shall not require any such removal. Sublandlord
agrees not to unreasonably withhold its consent to any proposed
alterations or additions, provided, however, that Sublandlord's
failure to consent shall be deemed reasonable if Landlord's consent
has been requested and Landlord fails, within a reasonable time, to
give such consent. It shall be unreasonable for Sublandlord to
withhold its consent to an alteration if Landlord has provided its
unconditioned written approval of such alteration or, if Landlord
provides conditional written approval of such alteration, then it
shall be unreasonable for Sublandlord to condition its consent to such
alteration other than to the same conditions as set forth by Landlord.
Subtenant, in making any alterations or installations in or to the
Subleased Premises, shall comply with all of the terms, covenants and
conditions of the Lease and with all requirements of governmental
bodies having jurisdiction thereover. Prior to making such alterations
or installations, Subtenant shall first obtain Sublandlord's and
Landlord's written approval to the plans and specifications therefor
and shall furnish to Sublandlord and Landlord any permits,
authorizations, evidence of insurance and, if requested, insurance
provided for under the provisions of the Lease.
(b) Sublandlord shall (i) promptly submit to Landlord any extra
copy or copies of plans, specifications and other items submitted by
Subtenant for consent and approval, and (ii) promptly submit to
Subtenant, all responses or inquiries from Landlord with respect to
the foregoing.
(c) If this Sublease terminates prior to the Sublease Expiration
Date by virtue of any default by Subtenant under the terms of this
Sublease, then and in such event all alterations or installations made
by Subtenant, and all personal property left by Subtenant shall,
unless Sublandlord elects otherwise, become the property of
Sublandlord and shall remain upon and be surrendered under the
Subleased Premises as a part thereof. Further, in the event of such
early termination as a result of Subtenant's default, by Landlord's
consent to this Sublease, Landlord agrees that Sublandlord will be in
compliance with its surrender provisions under the Lease if
Sublandlord allows any alterations made by Subtenant which were
approved by Landlord. If this Sublease terminates on the Sublease
Expiration Date, then to the extent that Landlord does not require
that alterations or personal property become the property of Landlord
under the Lease, or if Subtenant has reached a direct agreement with
Landlord with respect thereto, Subtenant shall retain ownership
thereof. In the event of an early termination or cancellation of the
term of this Sublease, and if Sublandlord has the right hereunder to
elect to require the removal of alterations and/or personal property
and does in fact so elect, then Sublandlord shall give Subtenant
prompt notice of such election, and Subtenant shall restore that
portion of the Subleased Premises affected by such removal to
substantially their condition immediately prior to the installation of
the alteration or personal property being removed, reasonable wear and
tear excepted (i.e., substantially the condition existing immediately
prior to the date of installation), at Subtenant's own cost and
expense, prior to the expiration of the term of this Sublease.
Subtenant shall also pay the cost of repairing all damage to the
Subleased Premises, the Building and the land occasioned by any such
removal. If Subtenant shall not have removed any alterations and/or
personal property which it is required hereby to remove in the event
of an early expiration of this Sublease, then Sublandlord shall have
the right to remove the same at the sole cost and expense of
Subtenant. The provisions of this Paragraph 7(c) shall survive an
early termination of this Sublease. If this Sublease expires on the
Sublease Expiration Date, then the provisions of this Paragraph 7(c)
shall be of no force and effect and Subtenant's obligations shall be
as provided under the terms of the direct lease relative to the
removal of alterations at the end of the Lease Term.
8. PERMITTED USES. Subtenant shall use and occupy the
Subleased Premises for the manufacturing, packaging and distributing of
vitamins, over the counter and prescription drugs, and other related products,
including related office functions, and for any other legal purposes in
connection with the conduct of its business, subject to the physical limitations
of the specifications of the Building. Subtenant's use shall be subject to the
provisions of the Lease. If any governmental license or permit shall be required
for the proper and lawful conduct of Subtenant's business in the Subleased
Premises or any part thereof, and if failure to secure such
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license or permit would in any way affect Landlord, Sublandlord or the Building
or any part thereof or create a default under the Lease, then Subtenant shall,
at Subtenant's expense, procure and thereafter maintain such license or permit.
Subtenant shall at all times during the term of this Sublease comply with the
terms and conditions of each such license or permit.
9. ASSIGNMENT AND SUBLEASE. So long as Subtenant is a direct
tenant of Landlord under the Direct Lease, the provisions of Article XIV of the
Direct Lease shall contain all of the rights and obligations of Subtenant with
respect to the issue of assignment and subletting pursuant to the terms of this
Sublease. In the event that the Direct Lease is terminated prior to the
termination of this Sublease, then, as between Sublandlord and Subtenant, the
provisions of Article XIV of the Lease shall contain all of the rights and
obligations of Subtenant with respect to the issue of assignment and subletting
pursuant to the terms of this Sublease.
10. APPROVALS UNDER THE LEASE AND SUBLEASE.
(a) Whenever in this Sublease (whether by the express terms
hereof, by incorporation by reference of the terms of the Lease or
otherwise) Sublandlord is granted the right to prescribe, approve or
require certain acts, standards or performances by Subtenant, Landlord
shall also be deemed to have such right. Whenever under the Lease,
Sublandlord must comply with particular requirements (such as
obtaining insurance) or act or perform (to indemnify, hold harmless or
reimburse) for the benefit of Landlord, Subtenant shall also comply or
act for the benefit of Sublandlord and Landlord to the extent that
obligation is attributable to the Subleased Premises. Wherever in this
Sublease (whether by the express terms of this Sublease, by
incorporation by reference of the terms of the Lease or otherwise) the
consent or approval by Sublandlord is required for any act or thing,
which consent or approval Sublandlord has agreed not to unreasonably
withhold or delay, and the consent or approval Sublandlord has agreed
not to unreasonably withhold or delay, and the consent or approval of
Landlord either is required under the Lease for the same act or thing
or would be required under the Lease for the same act or thing if
performed or desired by Sublandlord (as Tenant under the Lease), then:
(i) Sublandlord's refusal to give such approval or consent shall be
deemed reasonable if inter alia, Landlord shall have refused to give
such approval or consent, whether or not Landlord shall be obligated
to act reasonably and whether or not Landlord shall be acting
reasonably, it being understood and agreed that Sublandlord shall have
no obligation or liability during the term of this Sublease for
Landlord's failure to act reasonably; (ii) if Subtenant requests such
consent or approval from Sublandlord, Sublandlord shall promptly
forward to Landlord a copy of any request of Subtenant for consent or
approval from Landlord; and (iii) if Landlord grants, denies or
conditions its consent or approval, Sublandlord shall promptly notify
Subtenant of such fact and forward to Subtenant a copy of any such
grant, denial or condition if the same shall be in writing. Nothing
contained in the preceding sentence shall be deemed to require
Sublandlord to give any consent or approval because Landlord has given
such consent or approval.
(b) All references in this Paragraph 10 (whether in the text
itself or by incorporation from the Lease) to the consent or approval
of Landlord or Sublandlord shall be deemed to mean the written consent
or approval of Landlord or Sublandlord, as the case may be, and no
consent or approval of Landlord or Sublandlord, as the case may be,
shall be effective for any purpose unless such consent or approval is
set forth in a written instrument executed by Landlord or Sublandlord,
as the case may be. If any request or demand is made by Landlord
(whether requiring and act, restraint or payment) directly to
Subtenant pursuant to the Lease in respect of a corresponding
obligation under the Lease, then such request or demand shall be
honored and performed or adhered to as if the request or demand was
made directly by Sublandlord. In all provisions of this Sublease
requiring the satisfactory approval or consent of Sublandlord,
Subtenant first shall be required, if Sublandlord under similar
circumstances would be required under the terms of the Lease, to
obtain the approval or consent of Landlord and then to obtain the like
approval or consent of Sublandlord. Sublandlord shall forward to
Landlord such requests as Subtenant may submit for approval or consent
from Landlord. Whenever, pursuant to this Sublease, Landlord or
Sublandlord's consent or approval, or the review or consideration by
Landlord or Sublandlord of any matter, is permitted, solicited or
required prior to or in connection with any activity planned or
undertaken on behalf of Subtenant, Subtenant shall reimburse Landlord
and Sublandlord for all actual reasonable and
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documented out-of-pocket expenses (including, without limitation, the
reasonable fees and disbursements of attorneys and other professional
consultants), incurred by Landlord and Sublandlord, as the case may
be, in connection with such consideration, review, consent or
approval. Such reimbursement shall be made by Subtenant on demand.
Expenses incurred by Sublandlord shall be deemed to include any
expenses payable to Landlord under the Lease.
11. SUBORDINATION; SUBTENANT'S COVENANTS AND INDEMNITY.
(a) This Sublease is subject and subordinate to all of the
terms, covenants, provisions, conditions and agreements contained in
the Lease and in any amendments or supplements thereto and to the
matters to which the Lease is subject and subordinate; provided,
however, that Sublandlord shall not enter into any amendment or
supplement to the Lease which increases Subtenant's obligations
hereunder or decreases its rights hereunder without the prior written
consent of Subtenant which Subtenant may withhold in its sole and
absolute discretion. Subtenant covenants and agrees (i) to perform and
to observe all of the terms, covenants, provisions, conditions and
agreements of the Lease on Sublandlord's part to be performed and
observed to the extent the same are attributable to the Subleased
Premises; (ii) that Subtenant will not do or cause to be done or
suffer or permit any act or thing to be done which would or might
cause the Lease or the rights of Sublandlord as Tenant thereunder to
be canceled, terminated or forfeited or which would make Sublandlord
liable for any damages, claims or penalties; and (iii) except for any
liabilities arising from Sublandlord's willful misconduct or gross
negligence or that of its agents, employees or contractors, to
indemnify and hold harmless Sublandlord from and against any and all
liability, loss, damages, suits, penalties, claims and demands of
every kind or nature (including, without limitation, reasonable
attorneys' fees and expenses of defense) by reason of Subtenant's
failure to comply with the forgoing or arising from the use, occupancy
or manner of use and/or occupancy of the Subleased Premises or of any
business conducted therein, or from any work or thing whatsoever done
or any condition created by or any other act or omission of Subtenant,
its assignees or subtenants, or their respective employees, agents,
servants, contractors, invitees, visitors or licensees, in or about
the Subleased Premises or any other part of the Building.
(b) In the event of any default on the part of Subtenant under
any of the terms, covenants, conditions, provisions or agreements of
the Lease or of this Sublease, Sublandlord shall have the same rights
and remedies against Subtenant under this Sublease as are available to
the Landlord against Sublandlord under the provisions of the Lease.
(c) The provisions of this Paragraph 11 shall survive the
expiration or sooner termination of the Sublease.
12. RIGHTS AND OBLIGATIONS UNDER SUBLEASE.
(a) Except as otherwise provided herein, including Paragraphs
12(b) and (d) below, the provisions of the Lease are hereby
incorporated by reference with the same force and effect as if set
forth in length herein and shall apply to the Subleased Premises and
to the Building to the extent that the same are applicable, except as
modified and amended by this Sublease. References in the Lease to
"Landlord", "Tenant", "Premises", "Lease", "Minimum Rent" and
"additional rent" shall be deemed to refer to Sublandlord, Subtenant,
Subleased Premises, this Sublease, fixed monthly rent hereunder, and
additional rent hereunder, respectively. To the extent that any
provisions of the Lease may conflict or be inconsistent with the
provisions of this Sublease, whether or not such inconsistency is
expressly noted herein, the provisions of this Sublease shall govern.
(b) Notwithstanding the foregoing provisions of this Sublease to
the contrary, it is understood and agreed that all services, repairs,
restorations, consents, equipment and access which, and the manner in
which the same are required or authorized to be provided and made by
Sublandlord or its agents hereunder or in accordance with the
provisions of the Lease, will, in fact, be provided by Landlord to the
extent required by the Lease, and Sublandlord shall have no obligation
or liability during the term of this Sublease (i) to provide any such
services, or make any such repairs or restorations, or (ii) for the
manner in which the same are provided. If Landlord shall be entitled
to any payment or
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remuneration by reason of additional services provided at the request
of Subtenant with respect to the Subleased Premises, Subtenant shall
pay the same promptly on demand as additional rent hereunder.
Subtenant agrees to look solely to Landlord for the furnishing of such
services, in accordance with the terms of the Lease and for any
indemnity for any losses or claims arising by reason of any failure,
breach or delay in performing or furnishing the same which may be
available. Sublandlord shall in no event be liable to Subtenant nor
shall the obligations of Subtenant hereunder be impaired or the
performance thereof excused because of any failure or delay on
Landlord's part in furnishing such services, or making such
restorations or repairs, except that to the extent that Sublandlord
shall be entitled to any abatement of any rent that Sublandlord is
obligated to pay under the Lease in respect of any particular portion
of the Subleased Premises, Subtenant shall have a corresponding
abatement.
(c) If Landlord shall default in any of its obligations to
Sublandlord with respect to the Subleased Premises, Subtenant shall be
entitled to enforce Sublandlord's rights against Landlord under the
Lease with respect to the Subleased Premises, at no cost or expense to
Sublandlord, and Subtenant shall protect and hold Sublandlord harmless
from and against any and all claims, costs and expenses related to any
such enforcement. If, after written request from Subtenant,
Sublandlord shall fail or refuse to take appropriate action of the
enforcement of Sublandlord's rights against Landlord with respect to
the Subleased Premises within a reasonable period of time considering
the nature of Landlord's default, Subtenant shall, if the same right
would be permissible by Sublandlord under the Lease, have the right to
pursue a claim, action, proceeding or arbitration, for injunction,
damages or other remedy in its own name, and for that purpose and only
to such extent all of the rights of Sublandlord under the Lease hereby
are conferred upon and assigned to Subtenant and Subtenant hereby is
subrogated to such rights to the extent that the same shall apply to
the Subleased Premises; provided, further, that notwithstanding
anything herein to the contrary, in no event shall Subtenant have the
right to take any action which may result in a default under the Lease
or in a surrender of all or any portion of the Subleased Premises
except as a result of Landlord's recapture termination rights under
Paragraph 14.6 of the Lease. If any such action against Landlord in
Subtenant's name shall be barred by reason of lack of privity,
nonassignability or otherwise, Subtenant may take such action in
Sublandlord's name, provided that (i) Subtenant has given Sublandlord
at least five (5) business days prior written notice of Subtenant's
intention to take such action (except in the case of an emergency, in
which event only that notice which is reasonable under the
circumstances will be required), (ii) Sublandlord shall, to the extent
reasonably practicable, and at Subtenant's sole cost and expense,
cooperate with Subtenant in taking such action, and (iii) Subtenant
shall indemnify, defend, protect and hold Sublandlord harmless from
and against all liability, loss or damage which Sublandlord shall
suffer by reason of such action. Notwithstanding the foregoing,
Sublandlord agrees and covenants to use its reasonable efforts to
obtain performance by Landlord of its obligations under the Lease with
respect to the Subleased Premises.
(d) Except as otherwise expressly provided in this Sublease, the
terms, covenants and conditions of Article III, Paragraph 4.1, and
Sublandlord's reimbursement obligations under Section 12.4 of the
Lease, are expressly excluded from Sublease. Further, Subtenant hereby
agrees that with respect to Paragraph 12.4 of the Lease, Subtenant
shall not request Sublandlord to exercise any right of termination
unless Landlord reasonably estimates that the repair and restoration
contemplated by said Paragraph 12.4 will take more than 270 days to
complete (measured from the date of issuance if necessary building
permits for the repair and restoration work). Further, during the
terms of this Sublease, the provisions of Paragraph 26.10 of the
Direct Lease shall supersede the provisions of Paragraph 25.10 of the
Lease.
(e) Sublandlord covenants and agrees with Subtenant that
Sublandlord will pay all fixed rent and additional rent payable by
Sublandlord pursuant to the Lease to the extent that failure to
perform same would adversely affect Subtenant's use or occupancy of
the Subleased Premises. Sublandlord agrees to indemnify Subtenant and
hold it harmless from and against any and all claims, damages, losses,
expenses and liabilities, including reasonable attorneys' fees
incurred as a result of the non-performance or non-observance
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of any obligation of Sublandlord under the Lease which has not become
an obligation of Subtenant pursuant to this Sublease.
13. DAMAGE OR DESTRUCTION. If the Subleased Premises shall be
partially or totally damaged by fire or other cause, the consequences thereof
shall be governed by Article XII of the Lease. Subtenant's right to an
apportionment or abatement of rent and to repairs shall be dependent upon
whether or not Sublandlord has a right to apportionment or abatement of rents
and/or repairs under said Article XII in respect of the Subleased Premises.
Except as such rights are provided to Sublandlord by Landlord in the Lease, no
damage, compensation or claims shall be payable by Sublandlord for
inconvenience, loss of business or annoyance arising from any repair or
restoration of any portion of the Subleased Premises or of the Building.
Subtenant shall not have any right to terminate this Sublease pursuant to
Article XII, except to the extent that such right to terminate the lease
pursuant to paragraph 12.4; provided, however, that such right to terminate
shall mature after two hundred seventy (270) days rather than one hundred
eighty (180) days in this Sublease, based upon Subtenant's rights as set
forth in Paragraph 12.4 of the Direct Lease.
14. QUIET ENJOYMENT. If and so long as Subtenant pays the fixed
monthly rent, additional rent and other charges due and payable hereunder and
performs all of the other obligations of Subtenant to be performed hereunder,
Subtenant may peaceably and quietly have, hold and enjoy the Subleased Premises
subject, nevertheless, to the terms, covenants, conditions and provisions of
this Sublease and to the Lease and to the matters to which the Lease is subject
and subordinate.
15. NOTICES. Any notice, demand, request or other communication
which under the terms of this Sublease or under any provision of law or
governmental regulation must or may be given either by Sublandlord or Subtenant
to either Sublandlord or Subtenant shall be in writing and hand delivered or
mailed by United States certified mail, return receipt requested, postage
prepaid, or by a nationally recognized overnight courier service addressed as
follows to the person entitled to receive the same:
(a) If to Sublandlord:
Teledyne, Inc.
1901 Avenue of the Stars, 18th Floor
Los Angeles, California 90067
Attention: General Counsel
with a copy to:
Teledyne, Inc.
1901 Avenue of the Stars, 18th Floor
Los Angeles, California 90067
Attention: Real Estate Department
(b) If to Subtenant prior to April 1, 1994:
Leiner Health Products Inc.
1845 West 205th Street
P.O. Box 2010
Torrance, California 90501
(c) If to Subtenant after April 1, 1994:
Leiner Health Products Inc.
901 East 233rd Street
Carson, California 90745
Attention: Chief Financial Officer
Any notice shall be deemed to have been validly given four (4) business days
after being deposited in the mail, postage prepaid. Either party by notice as
aforesaid may change the addresses set forth above for notices, requests,
demands or communications to it.
16. BROKERS. Each party warrants and represents to the other
that such party has dealt with no broker or other person in connection with this
sublease transaction other than
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<PAGE>
The Klabin Company and CB Commercial Real Estate Group, Inc. Subtenant and
Sublandlord agree to indemnify and save harmless each other from any costs,
expenses, attorneys' fees or liability for compensation or charges which may be
claimed by any other broker or agent as a result of any conversations,
correspondence, other dealings or actions of the indemnifying party in
connection with this Sublease transaction.
17. ESTOPPEL CERTIFICATES. Subtenant shall, at any time and
from time to time, on not less than fourteen (14) days' prior written demand by
Sublandlord or Landlord, execute, acknowledge, and deliver to Sublandlord or
Landlord, as the case may be, a written statement certifying (a) that this
Sublease is unmodified and in full force and effect, or, in the alternative,
that this Sublease is in full force and effect as modified (the instruments of
modification being set forth in a schedule attached to and made a part of said
statement), (b) the dates to which the fixed monthly rent, additional rent and
other charges due under the Sublease have been paid, and (c) whether or not to
the best of Subtenant's knowledge, Sublandlord is in default hereunder, and, if
so, specifying the nature of the default. It is intended and Subtenant
understands that any such statement delivered pursuant to this Paragraph 17 may
be relied upon by others with whom Landlord and Sublandlord, as the case may be,
may be dealing. Sublandlord agrees to provide to Subtenant an estoppel
certificate signed by Sublandlord, containing the same types of information and
within the same periods of time, as are set forth above, except such changes as
are reasonably necessary to reflect that the estoppel certificate is being
granted and signed by Sublandlord to Subtenant or Subtenant's lender, assignee
or subsublessee, rather than from Subtenant to Sublandlord.
18. INSURANCE. So long as Subtenant is a direct tenant of
Landlord under the Direct Lease, the provisions of Article VIII of the Direct
Lease shall contain all of the rights and obligations of Subtenant with respect
to the issue of insurance pursuant to the terms of this Sublease. In the event
that the Direct Lease is terminated prior to the termination of this Sublease,
then, as between Sublandlord and Subtenant, the provisions of Article VIII of
the Lease shall contain all of the rights and obligations of Subtenant with
respect to the issue of insurance pursuant to the terms of this Sublease.
19. EARLY OCCUPANCY. Subtenant, at Subtenant's option, shall be
permitted to enter the Subleased Premises upon the execution and delivery of
this Sublease by Sublandlord and Subtenant for the purpose of remodeling the
Subleased Premises and installing Subtenant's furniture and fixtures. From the
date of such occupancy until the Sublease Commencement Date, Subtenant shall
have no obligation to pay any fixed monthly rent or any other charge whatsoever
other than utilities and security costs. If legally permissible, Subtenant may
commence the operation of its business within the Subleased Premises during such
period of access, without causing any early commencement of the term of this
Sublease. If Subtenant elects to exercise the within right of early entry in
accordance with the provisions of this Paragraph, Subtenant further agrees to
(a) comply with the terms and conditions of the Sublease except with regard to
Subtenant's obligation to pay fixed monthly rent, rent adjustments and any other
charges whatsoever, (b) pay for and provide certificates evidencing the
existence and amounts of liability insurance carried by Subtenant, which
coverage shall be in compliance with Article VIII of the Lease, and (c) comply
with all applicable laws, regulations, permits and other approvals applicable to
such early entry work on the Subleased Premises. Subtenant understands that it
is undertaking a business risk by such early entry, which is that Landlord may
not provide its consent to this Sublease. If by the expiration of the period of
time provided under the Sublease for Sublandlord to deliver such consent,
Landlord has failed to give such consent, Subtenant shall be subject to a
potential notice of immediate vacation of the Premises by Landlord and/or
Sublandlord, in which event this Sublease shall terminate and Subtenant's sole
remedy shall be the right to remove all of its personal property from the
Subleased Premises, and to promptly repair any resulting damage, so long as such
removal occurs within fifteen (15) days of receipt of notice of the disapproval
of this Sublease, with the failure to so timely remove such personality creating
the rights in Landlord and Sublandlord to dispose of Subtenant's personal
property pursuant to the provisions of California Civil Code Sections 1980
through 1991.
20. DEFAULT.
(a) In the event that Subtenant shall default in the payment of
fixed monthly or additional rent hereunder, or default in the
performance or observance of any of the terms,
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conditions and covenants of this Sublease, which default shall not be
cured within the grace periods set forth in the Lease, as modified by
Paragraph 12(d) of this Sublease, Sublandlord, in addition to and not
in limitation of any rights otherwise available to it, shall have the
same rights and remedies with respect to such default as are provided
to Landlord under the Lease with respect to defaults by tenant
thereunder, with the same force and effect as though all such
provisions relating to any such default or defaults were herein set
forth in full, and Subtenant shall have all of the obligations of the
tenant under the Lease with respect to such default.
(b) In the event of a default by Subtenant in the performance of
any of its obligations hereunder, Sublandlord may, at its option, and
without waiving any other remedies for such default herein or by law
or by incorporation by reference of the Lease provided, at any time
thereafter, give written notice to Subtenant that if such default is
not cured, or the cure not commenced within seven (7) days after such
notice is deemed given pursuant to the terms of this Sublease, and
thereafter pursued diligently to conclusion, Sublandlord may cure such
default for the account of Subtenant, coordinating with Subtenant to
the extent reasonably possible, and any amount paid or incurred by
Sublandlord in so doing shall be deemed paid or incurred for the
account of Subtenant, and Subtenant agrees to reimburse Sublandlord
therefor and save Sublandlord harmless therefrom; provided that
Sublandlord may cure any such default as aforesaid prior to the
expiration of any waiting period if reasonably necessary to protect
Sublandlord's interests under the Lease or to prevent injury or damage
to persons or property. If Subtenant shall fail to reimburse
Sublandlord upon demand for any amount paid for the account of
Subtenant hereunder, said amount shall be added to, and become due as
a part of, the next payment of fixed monthly rent due hereunder.
21. MISCELLANEOUS.
(a) This Sublease shall be binding upon and insure to the
benefit of the parties hereto and, subject to the limitations set
forth in Paragraph 9 hereof, their respective successors and assigns
(it being acknowledged by Sublandlord and Subtenant that for the
purposes of the Consent attached hereto, Landlord shall not be
considered to be such a successor or assign).
(b) This Sublease may be executed in counterpart originals and
delivered by facsimile and all such counterparts and facsimiles shall
constitute one original Sublease. If this Sublease is delivered by
facsimile, the party delivering the Sublease by facsimile shall
deliver to the other party the executed original by mail in accordance
with Paragraph 16 of this Sublease.
(c) Subtenant hereby warrants and represents to Sublandlord and
Landlord, as of the date of execution hereof, as follows:
(i) Subtenant is a Delaware corporation duly and validly
organized, existing and in good standing under the laws of
California;
(ii) Subtenant is duly authorized and fully qualified to
conduct is business in the State of California and is in good
standing in said state; and
((iii) The undersigned officer of Subtenant has been
authorized to sign this Sublease on behalf of Subtenant, and this
Sublease constitutes the valid and binding obligation of
Subtenant.
(d) EXTENSION OF TERM UNDER LEASE. Sublandlord acknowledges
that Subtenant is concurrently entering into the Direct Lease with the
Landlord for the Subleased Premises for a term commencing upon the
expiration of the term of this Sublease. Therefore, Sublandlord hereby
waives any right to extend the term of the Lease with respect to the
Subleased Premises.
22. TENANT IMPROVEMENTS. Sublandlord shall provide Subtenant
with a Tenant Improvement Allowance of Five Hundred Thousand Dollars
($500,000.00) to be used for Subtenant's refurbishment and/or installation of
the administrative offices, security and protective
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<PAGE>
devices selected by Subtenant for the Premises, including fencing, fire safety
devices such as draft curtains, sprinklers and the like. Sublandlord shall make
payments on a progress payment basis as set forth herein. Subtenant shall submit
to Sublandlord, from time to time, but not more frequently than once a month, a
written request, in a form to be approved by Sublandlord, for disbursement of
portions of the allowance set forth above (the "Allowance"). Each such request
shall include (i) a copy of the bill or invoice, approved by Subtenant, which
Subtenant is required to pay, and a certification from Subtenant's construction
representative that the amount set forth in such request is due and owing, (ii)
executed mechanic's lien releases from all of the contractors working on such
improvements, which shall comply with the appropriate provisions, as reasonably
determined by Sublandlord, of California Civil Code Section 3262(d), and (iii)
such additional information and evidence as Sublandlord may reasonably require.
Sublandlord shall pay to Subtenant within thirty (30) days after receipt of each
such request the amounts so requested by Subtenant in a check made jointly
payable to Subtenant's general contractor and to Subtenant, less a ten percent
(10%) retention (the aggregate amount of such retention is referred to herein as
the "Final Retention"), until such time as the Five Hundred Thousand Dollars
($500,000.00) Allowance has been depleted in its entirety. Sublandlord shall pay
to Subtenant by check jointly payable to Subtenant and its general contractor,
the Final Retention following the completion of construction of Subtenant's work
of improvement in the Premises, provided that Subtenant delivers to Sublandlord
properly executed mechanic lien releases in compliance with both California
Civil Code Section 3262(d)(2), and either Section 3262(d)(3) or Section
3262(d)(4).
23. BUILDING SIGN, SECURITY, AND ANTENNA. The provisions of
Paragraphs 5, 6 and 7 of Lease Rider No. 1 of the Direct Lease, pertaining to
building sign, security and antennas, respectively, are hereby incorporated in
this Sublease by reference.
24. CONFIDENTIALITY. Sublandlord and Subtenant, and by
executing the attached Consent and Agreement Concerning Sublease, Landlord, each
hereby agree not to disclose to any third party the fact that this Sublease, and
the Consent and Agreement Concerning Sublease attached hereto, have been fully
executed and delivered by the parties hereto and thereto until the later to
occur of October 31, 1993 or such date as Subtenant delivers written notice to
Landlord and Sublandlord that the level of confidentiality has been reduced to
the following level, i.e., that Landlord, Sublandlord and Subtenant each hereby
agree to use their respective commercially reasonable efforts to keep the terms
of this Sublease confidential and shall not disclose same to any other person
not a party hereto without the prior written consent of the other party;
however, Subtenant may disclose the terms hereof to Subtenant's real estate
broker, proposed assignees or sublessees, Affiliates (as defined in Paragraph
14.2 of the Direct Lease) and their real estate brokers, or Subtenant's
accountants, attorneys, managing employees, and others in privity with
Subtenant, to the extent reasonably necessary for Subtenant's business purpose.
Notwithstanding the foregoing, Sublandlord and Landlord shall be permitted to
disclose the terms of this Sublease to their respective attorneys, auditors,
accountants, employees, lenders and other persons having a legitimate need to
know the terms hereof for bona fide business purposes.
IN WITNESS WHEREOF, Sublandlord and Subtenant have duly executed
this Sublease as of the day and year first above written.
SUBLANDLORD: SUBTENANT:
TELEDYNE, INC, LEINER HEALTH PRODUCTS INC.,
a Delaware corporation a Delaware corporation
By: /s/ By: /s/ Giffen H. Ott
------------------------------- -----------------------
Its: Treasurer Giffen H. Ott
Its: Vice President,
Manufacturing
Development
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<PAGE>
EXHIBIT "A"
L E A S E
LANDLORD: WATSON LAND COMPANY,
a California corporation
TENANT: TELEDYNE, INC.,
a Delaware corporation
DATED: July 17, 1991
THE SUBMISSION OF THIS DOCUMENT FOR EXAMINATION AND NEGOTIATION DOES NOT
CONSTITUTE AN OFFER TO LEASE, OR A RESERVATION OF, OR OPTION FOR, THE PREMISES;
THIS DOCUMENT BECOMES EFFECTIVE AND BINDING ONLY UPON EXECUTION AND DELIVERY
HEREOF BY LANDLORD. NO ACT OR OMISSION OF ANY EMPLOYEE OR AGENT OF LANDLORD OR
OF LANDLORD'S BROKER SHALL ALTER, CHANGE OR MODIFY ANY OF THE PROVISIONS HEREOF.
<PAGE>
INDEX
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ARTICLE PAGE
- ------- ----
ARTICLE I - Basic Lease Provisions . . . . . . . . . . . . . .1
ARTICLE II - Common Area, Parking and Condition of Premises. .2
ARTICLE III - Term of Lease. . . . . . . . . . . . . . . . . .4
ARTICLE IV - Rent. . . . . . . . . . . . . . . . . . . . . . .5
ARTICLE V - Taxes and Assessment . . . . . . . . . . . . . . .6
ARTICLE VI - Utility Charges . . . . . . . . . . . . . . . . .7
ARTICLE VII - Hold Harmless. . . . . . . . . . . . . . . . . .8
ARTICLE VIII - Insurance . . . . . . . . . . . . . . . . . . .9
ARTICLE IX - Repairs, Maintenance, Alterations and Removal
of Equipment . . . . . . . . . . . . . . . . . 10
ARTICLE X - Inspection of Premises by Landlord . . . . . . . 16
ARTICLE XI - Mechanics' Liens. . . . . . . . . . . . . . . . 17
ARTICLE XII - Damage or Destruction of Premises. . . . . . . 18
ARTICLE XIII - Condemnation. . . . . . . . . . . . . . . . . 19
ARTICLE XIV - Use Of Premises - Assignments. . . . . . . . . 20
ARTICLE XV - Event of Default. . . . . . . . . . . . . . . . 24
ARTICLE XVI - Surrender of Premises. . . . . . . . . . . . . 26
ARTICLE XVII - Delays - Extensions of Time . . . . . . . . . 27
ARTICLE XVIII - Attorneys' Fees and Dispute Resolution . . . 27
ARTICLE XIX - Statement of Lease . . . . . . . . . . . . . . 29
ARTICLE XX - Rights Reserved by Landlord . . . . . . . . . . 29
ARTICLE XXI - Covenant of Quiet Enjoyment. . . . . . . . . . 29
ARTICLE XXII - Recordation . . . . . . . . . . . . . . . . . 30
ARTICLE XXIII - Subordination. . . . . . . . . . . . . . . . 30
ARTICLE XXIV - Holding Over. . . . . . . . . . . . . . . . . 31
ARTICLE XXV - General. . . . . . . . . . . . . . . . . . . . 31
25.1 Remedies Cumulative . . . . . . . . . . . . . . . 31
25.2 Successors and Assigns. . . . . . . . . . . . . . 32
25.3 Payments and Interest . . . . . . . . . . . . . . 32
25.4 Late Charge . . . . . . . . . . . . . . . . . . . 32
25.5 Late Payments and Impounds. . . . . . . . . . . . 32
25.6 Notices . . . . . . . . . . . . . . . . . . . . . 32
25.7 Captions. . . . . . . . . . . . . . . . . . . . . 32
25.8 Pronouns and Singular/Plural. . . . . . . . . . . 32
25.9 Time of Essence . . . . . . . . . . . . . . . . . 32
25.10 Reasonable Consent. . . . . . . . . . . . . . . . 33
25.11 Fair Meaning. . . . . . . . . . . . . . . . . . . 33
25.12 Entire Agreement. . . . . . . . . . . . . . . . . 33
25.13 No Accord and Satisfaction. . . . . . . . . . . . 33
25.14 Choice of Law . . . . . . . . . . . . . . . . . . 33
15.15 Non-Discrimination. . . . . . . . . . . . . . . . 33
25.16 Counterparts. . . . . . . . . . . . . . . . . . . 33
25.17 Corporate Resolution. . . . . . . . . . . . . . . 33
25.18 Reimbursements to Landlord. . . . . . . . . . . . 33
25.19 No Guard Service. . . . . . . . . . . . . . . . . 33
25.20 Brokers . . . . . . . . . . . . . . . . . . . . . 34
25.21 Brokerage Commission. . . . . . . . . . . . . . . 34
25.22 Parking . . . . . . . . . . . . . . . . . . . . . 34
25.23 Lease Reviewed. . . . . . . . . . . . . . . . . . 35
25.24 Financial Statements. . . . . . . . . . . . . . . 35
25.25 Lease Interest Rate . . . . . . . . . . . . . . . 35
EXHIBITS
- --------
Exhibit A - Performance Standards of Watson Industrial Center
Exhibit B - Outline of Premises
Exhibit B-1 - Description of Common Areas
Exhibit C - Legal Description
Exhibit D - Operating Expenses
Exhibit E - Insurance Summary
Exhibit F - Landlord's Initial Improvement Work
Exhibit F-1 - Work Performance Schedule
Exhibit G - Maintenance and Repair of Roof and
HVAC System
Exhibit H - Tenant's Special Manufacturing Improvements
Exhibit I - Items Purchased from Previous Tenant
LEASE RIDER
- -----------
Lease Rider Number 1
<PAGE>
MULTI-TENANT INDUSTRIAL LEASE
This lease ("Lease") is made and entered into as of this 17th day of July,
1991 by and between WATSON LAND COMPANY, a California corporation ("Landlord")
and TELEDYNE, INC., a Delaware corporation ("Tenant").
Landlord and Tenant mutually covenant and agree that Landlord, in
consideration of the rent payable by Tenant and the covenants and agreements to
be kept, observed and performed by Tenant, hereby rents and leases to Tenant,
and Tenant hereby takes and hires from Landlord, the "Premises" (as defined
herein), pursuant to the provisions of this Lease, subject to (i) all applicable
zoning, municipal, county, state and federal laws; (ii) covenants, conditions,
restrictions, reservations, easements, rights and rights-of-way of record; and
(iii) Performance Standards of Watson Industrial Center dated July 1, 1991,
attached hereto as Exhibit "A" and incorporated herein by reference. In the
event of any conflict between the provisions of this Lease and the provisions of
the Performance Standards, the provisions of this Lease shall govern.
ARTICLE I
BASIC LEASE PROVISIONS
1.1 DESCRIPTION OF PREMISES: "Premises," as used herein shall mean and
refer to that certain space located within the building (the "Building")
situated on the real property located in the County of Los Angeles, State of
California, commonly known as 901 East 233rd Street, Carson, California, as
outlined on the attached Exhibit "B", which Premises consists of
approximately 222,496 square feet. The Building consists of approximately
267,496 square feet. Landlord shall retain possession of the remaining 45,000
square feet of the Building (the "Additional Premises"), which may be leased
or used by third parties as determined by Landlord from time to time, in
Landlord's sole and absolute discretion, subject only to Tenant's "Right of
First Offer" to lease the Additional Premises pursuant to Paragraph 6 of the
attached Lease Rider. The Premises and the Building are located on a parcel
of land (the "Land") described in the attached Exhibit "C". The Building and
the Land are collectively referred to herein as the "Building Complex."
1.2 STREET ADDRESS OF PREMISES: 901 East 233rd Street, Carson, California.
1.3 APPROXIMATE PREMISES SQUARE FOOTAGE: 222,496.
1.4 LEASE TERM: Ten (10) years beginning on October 1, 1991 (the
"Commencement Date") and ending on September 30, 2001 (the "Termination
Date").
1.5 EXTENSION OPTIONS: Three (3) periods of Five (5) years each. See
Paragraph 1 of the attached Lease Rider.
1.6 INITIAL MINIMUM RENT: Seventy-Three Thousand Four Hundred
Twenty-Three Dollars ($73,423.00).
1.7 PERIODIC RENT ADJUSTMENTS: See Paragraph 2 of the attached Lease
Rider.
1.8 TENANT's PRORATA SHARE: Eighty-three percent (83%) based on a total
building area of 267,496 square feet.
1.9 [Intentionally Deleted.]
1.10 [Intentionally Deleted.]
<PAGE>
1.11 SECURITY DEPOSIT: None.
1.12 BROKERS: The Klabin Company (David A. Prior and Arnold Ng).
1.13 INITIAL IMPROVEMENT WORK: See Paragraph 4 of the attached Lease
Rider.
1.14 EXHIBITS AND RIDERS: The following Exhibits and Riders are
attached to this Lease and made a part hereof:
Exhibit A - Performance Standards of Watson Industrial
Center
Exhibit B - Outline of Premises
Exhibit B-1 - Description of Common Areas
Exhibit C - Legal Description
Exhibit D - Operating Expenses
Exhibit E - Insurance Summary
Exhibit F - Landlord's Initial Improvement Work
Exhibit F-1 - Work Performance Schedule
Exhibit G - Maintenance and Repair of Roof and HVAC System
Exhibit H - Tenant's Special Manufacturing Improvements
Exhibit I - Items Purchased from Previous Tenant
Lease Rider Number 1
1.15 MAILING ADDRESSES:
Landlord: Watson Land Company
22010 South Wilmington Avenue
Suite 400
Carson, California 90745
Tenant: Teledyne, Inc.
1901 Avenue of the Stars, 18th Floor
Los Angeles, California 90067
Attention: Legal Department
With a
Copy to: Teledyne Inet
a Division of Teledyne Industries, Inc.
901 East 233rd Street
Carson, California 90745
ARTICLE II
COMMON AREA, PARKING AND CONDITION OF PREMISES
2.1 The term "Common Area", as used herein, is defined as all
areas and facilities outside the Premises and within the exterior boundary
line of the Land, as shown in the attached Exhibit B-1.
2.2 Landlord hereby grants to Tenant for the benefit of Tenant and
its employees, suppliers, shippers, customers, and invitees, during the
"Early Occupancy Period" and the "Lease Term" (as those terms are defined
herein), the non-exclusive right to use the Common Areas, in common with
others entitled to such use, subject to any rights, powers, and privileges
reserved by Landlord under the terms hereof or under the terms of any rules,
regulations or restrictions now or hereafter governing the use of the
Building Complex. Tenant shall have a priority right to use the portion of
the Common Areas shown as the "Priority Area" in the cross-hatched area in
the attached Exhibit "B-1" for parking, loading and unloading, and Tenant
shall have the non-exclusive right, in common with others entitled to such
use, to use the balance of the Common Areas. However, Tenant agrees to use
its reasonable and diligent efforts to restrict its
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<PAGE>
use of the Common Areas to the Priority Area and the "Shipping Access Area"
shown in the attached Exhibit "B-1". Under no circumstances shall the right
herein granted to use the Common Areas be deemed to include the right to
store any property, temporarily or permanently, in any portion of the Common
Areas other than the portions of Tenant's "Priority Area" designated as
"Storage Area" on the attached Exhibit B-1. Tenant may store materials in the
Storage Area for a period of no more than thirty (30) days for any particular
item, but such storage must be in compliance with the requirements of the
Performance Standards. In the event that any unauthorized storage shall
occur, and is not cured within twenty-four (24) hours following notice from
Landlord, then Landlord shall have the right, in addition to such other
rights and remedies that it may have, to remove the stored items and charge
the cost to Tenant, which cost shall be immediately payable upon Landlord's
demand and which shall be deemed to be additional rent under this Lease.
2.3 Tenant shall be allocated three hundred seventy (370) vehicle
parking spaces, which spaces shall be located in the "Priority Area" shown on
the attached Exhibit "B-1". To the extent that any additional parking spaces
are required to be allocated to Tenant pursuant to applicable law, such
spaces may be located on any portion of the Building Complex or at any
location outside of the boundaries of the Building Complex which is within a
reasonable proximity to the Premises. Such parking spaces shall be used only
for parking vehicles no larger than full-size passenger automobiles or pickup
trucks. Tenant agrees that the parking spaces allocated to Tenant may include
"compact" parking spaces, in such number as may be required or permitted by
applicable governmental requirements. Tenant shall use reasonable and
diligent efforts to ensure that trucks and other service vehicles providing
supplies, materials or services to Tenant shall use only the Priority Area or
the Shipping Access Area. Tenant shall use its best efforts to prohibit any
vehicles that belong to or are controlled by Tenant or Tenant's employees,
suppliers, shippers, customers or invitees from being loaded, unloaded, or
parked in areas other than the Priority Area or the Shipping Access Area, and
Tenant shall fully cooperate with landlord in implementing necessary
corrective measures. If Tenant fails to prohibit any use by its employees,
suppliers, shippers, customers or invitees of areas other than the Priority
Area and the Shipping Access Area, then Landlord shall have the right, upon
reasonable notice (except in the event of any emergency, in which event no
notice shall be required), to remove or tow away any vehicle involved. Should
Tenant fail to prohibit any such prohibited use, then Landlord may charge the
removal or towing cost to Tenant, which cost shall be immediately payable to
Landlord upon demand by Landlord.
2.4 Landlord or such other person(s) as Landlord may appoint from
time to time shall have the right, from time to time, to establish, modify,
amend and enforce reasonable rules and regulations with respect to the Common
Areas and the use and maintenance thereof. Tenant agrees to abide by and
conform to such rules and regulations, and to cause its employees, suppliers,
shippers, customers, and invitees to so abide and conform. Landlord agrees to
use reasonable and diligent efforts to cause any other tenant of the Building
Complex to comply with all rules and regulations relating to the use of the
Common Areas and to cause such other tenant to use reasonable and diligent
efforts to avoid using Tenant's Priority Area and will include in its lease
with such other tenant, the right of Landlord to tow away any vehicle used by
any employee, supplier, shipper, customer or invitee of such other tenant
which is parked in Tenant's Priority Area; however, Landlord shall not be
responsible to Tenant for any non-compliance by other tenants in the Building
Complex (if any) with such rules and regulations.
-3-
<PAGE>
2.5 Landlord shall have the right, in Landlord's reasonable
discretion, from time to time: (a) to make reasonable changes to the Common
Areas, including, without limitation, changes in the location, size, shape
and number of driveways, entrances, parking spaces, parking areas, loading
and unloading areas, ingress, egress, direction of traffic, landscaped areas
and walkways; (b) to close temporarily any of the Common Areas for
maintenance purposes so long as reasonable access to the Premises remains
available; (c) to use the Common Area while engaged in making additional
improvements, repairs or alterations to the Building Complex or any portion
thereof; and (d) to do and perform such other acts and make such changes in,
to or with respect to the Common Areas and Building Complex as Landlord may,
in its reasonable judgment, deems to be appropriate. Notwithstanding the
foregoing, Landlord shall not make any changes to the Common Areas in a
manner which would adversely affect Tenant's use of the Priority Area without
first obtaining Tenant's consent, which consent shall not be unreasonably
withheld or delayed. Responsibility for the repair and maintenance of various
components of the Common Areas shall be allocated Landlord and Tenant as
provided in this Lease.
2.6 Except as otherwise specifically provided in this Lease, Tenant
accepts the Premises and the relevant portion of the Building Complex in their
present condition, state of repair and operating order and present "AS IS"
condition. Tenant acknowledges that prior to the execution of this Lease,
Tenant has been furnished full access to the Premises and has independently
undertaken such studies and inspections of the Premises and the Building
Complex as Tenant has deemed appropriate. Notwithstanding the foregoing, the
Premises shall be in good operating condition as of the Commencement Date,
subject only to Landlord's completion of items described in the attached
Exhibit "F" (Landlord's "Initial Improvement Work") which do not materially
interfere with Tenant's use or occupancy of the Premises. Subject to "Tenant
Delays" (as defined in Paragraph 4 of the attached Lease Rider) and
"Excusable Delays" (as defined herein), Landlord shall complete the work
described in Paragraph 4 of the attached Lease Rider substantially in
accordance with the Work Performance Schedule attached hereto as Exhibit
"F-1". Tenant further acknowledges that neither Landlord nor any real estate
agent or broker representing Landlord or Tenant has made any representation
or warranty as to the present or future suitability of the Premises for the
conduct of Tenant's business.
ARTICLE III
TERM OF LEASE
3.1 The term of this Lease (the "Lease Term") shall be the period
set forth in Item 1.4 of the Basic Lease Provisions. Subject to the terms and
conditions of this Lease, the Lease Term shall commence on the Commencement
Date and shall terminate on the Termination Date, which dates are specified
in Item 1.4 of the Basic Lease Provisions. All of the terms and conditions of
this Lease shall apply as of the date this Lease is signed by both Landlord
and Tenant (the "Execution Date"); provided, however, that Tenant shall have
no obligation to pay Minimum Rent or Operating Expenses until the
Commencement Date. Notwithstanding the foregoing, in the event Tenant
commences manufacturing operations from the Premises more than thirty (30)
days prior to the Commencement Date, Tenant shall pay to Landlord a
proportionate amount of Minimum Rent and a proportionate amount of Tenant's
Prorata Share of "Operating Expenses" (as defined herein) for each such day
that Tenant so utilizes the Premises before the Commencement Date.
3.2 Commencing on the Execution Date and continuing until the
Commencement Date (the "Early Occupancy Period"),
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Tenant and its agents, contractors, vendors, and security contractors shall
be permitted to enter the Premises for the purposes of plant layout,
facilities planning, security activities, construction of Tenant's Special
Manufacturing Improvements (as described in Paragraph 5 of the attached Lease
Rider) and installation of Tenant's furniture, fixtures, utilities,
telecommunication systems and security systems. Tenant agrees that throughout
the Early Occupancy Period, Tenant shall conduct its activities on the
Premises in such a way so as not to interfere with, disrupt or delay
Landlord's work or activities relating to Landlord's Initial Improvement Work.
Landlord shall have no responsibility for any damage, theft, destruction or
injury to Tenant or any of Tenant's property as a result of Tenant's
presence or activities on, or use of, the Premises during the Early Occupancy
Period. Tenant may, at its election, obtain and maintain security services
for the Premises during the Early Occupancy Period. Except as otherwise
provided in Paragraph 3.1 regarding Tenant's obligation to pay Minimum Rent
and Operating Expenses, any use or occupancy of the Premises or the Building
Complex by Tenant pursuant to this Paragraph 3.2 shall be subject to and in
accordance with the terms and conditions of this Lease.
ARTICLE IV
RENT
4.1 Tenant agrees to pay to Landlord at the office of Landlord or at
such other place as may be designated by Landlord from time to time, without
any prior demand therefor and without any deduction or setoff whatsoever, as
minimum monthly rent ("Minimum Rent"), the sum specified as the Initial
Minimum Rent in Item 1.6 of the Basic Lease Provisions. Minimum Rent shall be
payable in advance on the first day of each calendar month of the Lease Term.
If the Lease Term shall commence upon a day other than the first day of a
calendar month, then Tenant shall pay, upon the Commencement Date, a prorata
portion of the Minimum Rent for the first fractional calendar month. Upon the
execution of this Lease by Tenant, Tenant shall pay to Landlord Minimum Rent
for the first month of the Lease Term for which Minimum Rent is payable.
During first five (5) months of the Lease Term, Minimum Rent shall be
abated. Landlord and Tenant acknowledge that the rent abatement for the first
five (5) months of the Lease Term pursuant to this Paragraph 4.1 has been
granted to Tenant as additional consideration for entering into this Lease,
and for agreeing to pay the Minimum Rent and performing the terms and
conditions otherwise required under this Lease. Accordingly, if Tenant shall
default under this Lease and fail to cure such default within the time
permitted for cure pursuant to this Lease, if any, Tenant shall become
obligated to pay to Landlord all Minimum Rent otherwise abated hereunder
during the rent abatement period; provided, however, for each month from the
Commencement Date to the date of the uncured default, the amount of Minimum
Rent payable to Landlord pursuant to this Paragraph 4.1 shall be reduced by
an amount equal to the total amount of the Minimum Rent abated as of the date
of such default divided by one hundred twenty (120); and if at the expiration
of the one hundred twentieth (120th) month of the Lease Term no uncured
default has occurred, Tenant shall have no obligation to pay Landlord the
Minimum Rent abated in accordance with the provisions of this Paragraph 4.1.
Notwithstanding the foregoing, Landlord shall not be entitled to recover such
abated Minimum Rent as provided in this Paragraph 4.1 if, following an
uncured default under this Lease by Tenant, Landlord elects to pursue its
remedy against Tenant pursuant to California Civil Code Section 1951.4.
Minimum Rent payable by Tenant under this Lease is subject to adjustment in
accordance with the provisions of Item 1.7 of the Basic Lease Provisions
and Paragraphs 2 and 3 of the attached Lease Rider.
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4.2 As additional rent hereunder, Tenant shall pay to Landlord
Tenant's Prorata Share of all expenses described in the attached Exhibit "D"
(the "Operating Expenses"). Such Operating Expenses shall be paid to Landlord
within ten (10) days following Tenant's receipt of Landlord's invoice therefor.
Notwithstanding the foregoing, Tenant shall pay its Prorata Share of "real
estate taxes" (as defined in Paragraph 5.1, below) and premiums for the
insurance described in Paragraph 8.1, below, at the times specified in
Paragraphs 5.2 and 8.1, respectively, for the payment of such items. As used
herein, Tenant's "Prorata Share" shall be the percentage amount set forth in
Item 1.8 of the Basic Lease Provisions; however, in the event the square footage
of the Building or the Premises is increased or decreased, Tenant's Prorata
Share shall be adjusted and shall equal a fraction, the numerator of which is
the square footage of the floor area of the Premises and the denominator of
which is the total square footage of the floor area of the Building.
ARTICLE V
TAXES AND ASSESSMENTS
5.1 Landlord shall pay the "real estate taxes" (as defined herein)
applicable to the Building Complex (subject to reimbursement by Tenant of
Tenant's Prorata Share of such real estate taxes), which may be taxed, charged,
levied, assessed or imposed during any fiscal tax year occurring during the
Lease Term (and any extensions or renewals thereof) upon all or any portion of,
or in relation to, the Building Complex. In the partial fiscal tax year in
which the Lease Term shall commence, and in the partial fiscal tax year in which
the Lease Term shall terminate, such taxes and assessments and the Annual Tax
Base Amount shall be prorated on a daily basis (using a 365-day year), and
Tenant's payment obligations shall be computed accordingly. Tenant shall pay to
Landlord, upon demand, the entirety of any increase in real estate taxes
assessed by reason of any improvements placed upon the Premises by Tenant.
5.2 Tenant shall pay to Landlord, within ten (10) days following
Tenant's receipt of Landlord's invoice therefor, Tenant's Prorata Share of all
real estate taxes, together with the full amount of any additional real estate
taxes assessed by reason of any improvements placed upon the Premises by Tenant.
Whenever possible, Tenant shall cause its trade fixtures, furnishings, equipment
and all other personal property to be assessed and billed separately from the
real property of Landlord. If any of Tenant's said personal property shall be
assessed with Landlord's real property, Tenant shall pay to Landlord the taxes
attributable to such personal property within ten (10) days after receipt of a
written statement from Landlord setting forth the taxes applicable to such
personal property. Landlord's invoice to Tenant for Tenant's Prorata Share of
any such real estate taxes shall be submitted to Tenant within a reasonable time
following Landlord's receipt of the tax bill or assessment notice for such real
estate taxes, and the amount of such invoice shall be paid by Tenant to Landlord
no later than fourteen (14) days prior to the due date for the payment of such
taxes to the taxing authority.
5.3 As used herein, the term "real estate taxes" shall include any
form of real estate tax or assessment, general, special, ordinary or
extraordinary, and any license fee, commercial rental tax, rental excise tax,
improvement bond or bonds, levy or tax (other than income taxes) imposed on the
Building Complex by any authority having the direct or indirect power to tax,
including any city, state or the federal government, or any school,
agricultural, sanitary, fire, street, drainage, water or other improvement
district thereof, as against any legal or equitable interest of Landlord in the
Building Complex, as
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against Landlord's right to rent or other income therefrom, and as against
Landlord's business of leasing the Building Complex. If an assessment is levied
against the Premises for a capital improvement (determined in accordance with
generally accepted accounting principles) and such assessment is imposed over a
period which is substantially less than the estimated useful life of such
capital improvement, Tenant shall only be obligated to pay a pro rata portion of
such assessment based on the number of years remaining in the Lease Term as of
the date of the imposition of such assessment, and the estimated useful life of
such capital improvement. The term "real estate taxes" shall also include any
tax, fee, levy, assessment or charge (i) in substitution of, partially or
totally, any tax, fee, levy, assessment or charge hereinabove included within
the definition of "real property tax"; or (ii) the nature of which was
hereinbefore included within the definition of "real property tax"; or (iii)
which is imposed for a service or right not charged prior to June 1, 1978, or,
if previously charged, has been increased since June 1, 1978; or (iv) which is
imposed by reasons of this transaction, any modifications or changes hereto, or
any transfers hereof.
5.4 In the event of a sale, transfer or conveyance of all or any
portion of the Premises by Landlord occurring after the date of this Lease, or a
"change in ownership" (as the phrase is defined in Section 60 of the California
Revenue and Taxation Code) effected by Landlord of all or any portion of the
Premises occurring after the date of this Lease, or occurring before the date of
this Lease but not reflected in the tax bill for fiscal tax year 1990-1991
(collectively referred to herein as a "Reassessment Event"), it is understood
that Tenant shall have no obligation to pay any increase in real estate taxes
which result solely from such a Reassessment Event. However, nothing contained
in this Paragraph 5.4 shall limit Tenant's obligation to pay any increase in
real property taxes resulting from inflation factor adjustments as provided in
Section 51 of the California Revenue and Taxation Code, or resulting from any
change in taxes or impositions of special taxes as provided in Article 13A of
the California Constitution, unless such increase or change results from a
Reassessment Event, in which case Tenant shall have no obligation to pay such
increase or net increase resulting from any such Reassessment Event.
ARTICLE VI
UTILITY CHARGES
6.1 Gas, electricity, power, telephone, sewer, trash collection and
waste removal and/or disposal, alarm systems, or other services serving the
Premises and the Building Complex (collectively the "Utilities") shall, whenever
possible, be separately billed and/or metered, as applicable, to the Premises in
Tenant's name, and the cost of operation of such Utilities shall be paid
directly by Tenant. The installation costs for separate electrical service and
a separate electrical meter for the Premises shall be paid by Tenant. The
installation costs for a separate electrical meter for any portion of the
Building which is not leased to Tenant shall be paid by Landlord. If all or any
portion of the Building which is not leased to Tenant is used for purposes other
than warehouse and incidental office purposes, then Landlord shall, at its
expense, install separate water and gas meters for the Premises. Any and all
inspections, taxes, levies or excises in connection with the Utilities and all
connection, metering and closing charges, and any tax or excise thereon shall be
paid or caused to be paid directly by Tenant. Any utility charges for services
benefitting the Building Complex which are not separately metered shall be
included in Operating Expenses. Periodic fire sprinkler tests for the Building,
as required by applicable law, shall be conducted by Tenant and any
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costs or fees related to such tests shall be paid by Tenant. Landlord shall
reimburse Tenant for "Landlord's Share" (as defined in Paragraph 9.1, below) of
the costs or fees related to such tests, in the same manner as reimbursements
are made to Tenant pursuant to Paragraph 9.1, below. Landlord and Tenant (or
Landlord only, in Landlord's name, if Landlord so elects) shall contract for
water service for the Premises, but Tenant shall be solely responsible for any
fees, charges or costs of any nature imposed or incurred in connection with
such water service. Landlord may elect to have bills for such water service
delivered directly to Tenant, or Landlord may have such bills delivered to
Landlord and separately invoice Tenant for the actual cost of such water
service. Tenant shall pay any such bill or invoice within ten (10) days
following Tenant's receipt thereof. Except to the extent caused by Landlord's
gross negligence, Landlord shall not be liable to Tenant for any loss, injury,
damage, disruption of business or any other harm resulting from any interruption
of utility services to the Premises.
ARTICLE VII
HOLD HARMLESS
7.1 Tenant covenants and agrees that Landlord shall not at any time
or to any extent whatsoever be liable, responsible, or in any way accountable to
Tenant for any loss, injury, death or damage to persons or property which at any
time may be suffered or sustained by Tenant or by any person whomsoever who may
at any time be using, occupying or visiting the Building Complex, or be in, on,
or about the same, whether such loss, injury, death or damage shall be caused by
or in any way result from or arise out of any act, omission or negligence of
Tenant or of any occupant, subtenant, visitor or user of any portion of the
Premises or the Building Complex or from fire, steam, electricity, water, rain,
act of God, or from the breakage or leakage, or any defect in any pipes,
sprinklers, or plumbing, electrical or heating and air conditioning systems or
fixtures, or from any other cause whether said damage or injury results from
conditions arising upon the Premises or upon other portions of the Building
Complex or from other sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Tenant, unless, and to the extent that such damage results from the willful
misconduct or negligence of Landlord. Landlord shall not be liable for any
damages arising from any act or neglect of any other tenant, occupant or user of
the Building Complex, nor from the failure of Landlord to enforce the provisions
of any other lease affecting the Building Complex.
7.2 Landlord covenants and agrees that Tenant shall not at any time
or to any extent whatsoever be liable, responsible, or in any way accountable to
Landlord for any injury to or, death of persons which at any time may be
suffered or sustained by Landlord or by any person whomsoever who may at any
time be using, occupying or visiting the Building Complex, or be in, on, or
about the same, whether such injury or death shall be caused by or in any way
result from or arise out of any act, omission or negligence of Landlord, any
other tenant, visitor or user of the Building Complex or from fire, steam,
electricity, water, rain, act of God, or from breakage or leakage, or any defect
in any pipes, sprinklers, or plumbing, electrical or heating and air
conditioning systems or fixtures, or from any other cause whether said injury or
death results from conditions arising upon other portions of the Building
Complex or from other sources or places and regardless of whether the cause of
such injury or death or the means of repairing the same is inaccessible to
Landlord, unless, and to the extent that such injury or death results from the
willful misconduct or negligence of Tenant.
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ARTICLE VIII
INSURANCE
8.1 Landlord shall, subject to reimbursement as an Operating Expense
pursuant to Paragraph 4.2, above, keep all buildings and improvements which may
from time to time be upon or a part of the Building Complex (but not Tenant's
personal property, fixtures or equipment) insured against all risks (as the term
"all risk" is used in the insurance industry), including earthquake and flood,
in such form and with such policy limits as Landlord may determine from time to
time, so as to provide reasonable insurance coverage for the Building Complex at
a reasonable cost. Landlord agrees that, prior to changing the insurance limits
or deductible amounts of such insurance in a manner which would decrease the
insurance limits or increase the deductible amounts from the limits and
deductibles shown in the insurance summary attached hereto as Exhibit "E",
Landlord will notify Tenant and provide Tenant with an opportunity to obtain its
own insurance against any increased risk resulting from any such decrease in
insurance limits or increase in deductibles. Notwithstanding the foregoing,
Landlord shall not be required to maintain any insurance which becomes
unavailable in the Southern California insurance marketplace. In the event of
any insured loss, Tenant shall be liable to Landlord for Tenant's Prorata Share
of any deductible or coinsurance amount claimed by the insurance carrier.
Landlord shall also obtain and maintain "rental value insurance" covering one
year's rent (Minimum Rent, real estate taxes, and Operating Expenses) payable
under this Lease. The premiums for all insurance specified in this Paragraph
8.1 shall be included as Operating Expenses. Such premiums shall be paid by
Tenant to Landlord within ten (10) days following Tenant's receipt of Landlord's
invoice therefor, but in no event shall Tenant's payment of such invoice be due
more than fourteen (14) days prior to the due date for Landlord's payment of
such premiums to the insurance carrier or insurance agent. In the insurance
policy year in which the Lease Term shall commence and in the insurance policy
year in which it shall terminate, such insurance premiums and the Annual
Insurance Base Amount shall be prorated on a daily basis (using a 365-day year),
and Tenant's Operating Expense payment obligations with respect to insurance
premiums shall be computed accordingly. Such insurance shall have attached
thereto such form of lender's loss payable endorsement as any lender whose loan
is secured in whole or in part by the Building Complex ("Landlord's Lender") may
require.
8.2 Landlord and Tenant agree that if the building and improvements
at any time forming a part of the Building Complex shall be damaged or destroyed
by risks insured against under Paragraph 8.1, or if any of Tenant's machinery,
fixtures, furniture, merchandise or other property, real or personal, are
damaged or destroyed from any cause covered by a property policy obtained by
Tenant, then and to the extent allowable and without invalidating such
insurance, and whether or not such damage or destruction was caused by the
negligence of the other party, neither party shall have any liability to the
other nor to any insurer of the other for or in respect of such damage or
destruction. If obtainable, each party shall require all policies of fire or
other insurance carried by such party during the Lease Term upon the Building
Complex or contents therein to include a provision whereby the insurer
designated therein shall waive its right of subrogation against the other party.
8.3 During the entire Lease Term, Tenant, at Tenant's sole cost and
expense, shall procure and maintain in full force and effect personal injury and
property damage liability insurance with a combined single limit of not less
than Five Million Dollars ($5,000,000). Such insurance may be evidenced by a
Primary Policy or a combination of a Primary Policy and an
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Umbrella Excess Policy. Tenant's liability insurance shall be primary and
any liability insurance maintained by Landlord shall be excess coverage over
the coverage provide by Tenant. Landlord shall be named as an additional
insured in such policies, and a policy endorsement so naming Landlord shall
be furnished to Landlord. The limits of said policies shall not limit the
liability of Tenant under this Lease. In the event that either party hereto
shall at any time deem the limits of such liability insurance then carried to
be insufficient, the parties shall endeavor to agree upon the proper and
reasonable limits for such insurance then to be carried. If the parties
shall be unable to agree thereon, the proper and reasonable limits for such
insurance then to be carried shall be determined by an impartial third person
knowledgeable of insurance risk matters selected by the parties, or should
they be unable to agree upon a selection by an impartial third person such
determination shall be made pursuant to the judicial reference procedure
described in Paragraph 18.2, below. The decision of such impartial third
person or referee as to such limits then to be carried shall be binding upon
the parties. Such insurance shall be carried with the limits as agreed upon
or determined pursuant to this Paragraph until such limits shall again be
changed pursuant to the provisions of this Paragraph. The expenses of such
determination shall be borne equally between Landlord and Tenant.
8.4 All of the insurance provided by Tenant under this Article VIII
and all renewals thereof shall be issued by such good, responsible and
standard companies rated at least A:Class XII in the current edition of
Best's Insurance Guide, and authorized to do business in California. The
policy or policies of insurance provided for in Paragraph 8.1 hereof shall be
payable to Landlord, or jointly to Landlord and Landlord's Lender, and Tenant
agrees to endorse any check to the order of Landlord which might be made
payable jointly to Landlord and Tenant by the insurance company. Tenant
agrees to immediately comply with any request of the insurance carrier
providing insurance described in Paragraph 8.1 if the failure to comply
therewith will cause cancellation of such insurance. All policies provided
by Tenant shall expressly provide that the policy shall not be canceled or
altered without thirty (30) days' prior written notice to Landlord. Neither
Landlord nor Tenant shall do or permit to be done anything which will
invalidate the insurance policies provided for in this Article VIII. Upon
the issuance or renewal of the liability insurance policy described in this
Article VIII, or upon commencement of the Lease Term if such policy is then
in force or effect, Tenant shall have its insurance carrier furnish Landlord
with a Certificate of said insurance. If requested in writing by Landlord,
Tenant shall reproduce and forward to Landlord a true copy of any insurance
policy described in this Lease and obtained by Tenant. Tenant shall obtain
such fire insurance and other insurance on Tenant's machinery, fixtures,
furniture and other property, real or personal, as Tenant deems appropriate,
and with which Landlord shall not otherwise be concerned.
ARTICLE IX
REPAIRS, MAINTENANCE, ALTERATIONS
AND REMOVAL OF EQUIPMENT
9.1 Landlord shall be responsible for the cost of any maintenance or
repairs of the structural aspects of the foundation and exterior walls of the
Building, and for the repair and maintenance of all water, sewer and gas
lines located outside of the perimeter of the Building (unless and to the
extent the maintenance or repair of any such items is necessitated by any
negligent or intentional act or omission of Tenant, Tenant's employees,
shippers, customers or invitees, in which case Tenant shall be responsible
for all such costs). Except as otherwise
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specifically provided in this Lease, and subject to the provisions of
Exhibits "D" and "G" to this Lease, Tenant shall, at its sole cost and
expense, maintain, keep in good condition and repair the parking lots,
walkways, driveways (including sweeping and cleaning), landscaping, fences,
roof decking, roof membrane and non-structural roof components of the entire
Building Complex and all heating, ventilating and air conditioning equipment
serving the Premises, and all other portions of the Premises and all portions
and components of the Building Complex which serve the Premises or are used
by Tenant. Except for the initial repainting of the exterior of the Building
to be performed by Landlord as part of Landlord's Initial Improvement Work,
Tenant shall be responsible for repainting the Building in accordance with
the requirements of the Performance Standards, and Landlord shall reimburse
Tenant for Landlord's Share of the cost of such repainting. Landlord shall
be responsible for contributing Landlord's Share of the maintenance and
repair costs for the parking lots, walkways, driveways, landscaping, fences,
roof decking, roof membrane and non-structural roof components of the
Building Complex. Landlord's Share of any such maintenance and repair costs
shall be reimbursed to Tenant within ten (10) days following Landlord's
receipt of a detailed invoice for such items, together with such supporting
documentation (such as vendor's invoices) as Landlord may reasonably
request. The difference between: (a) one hundred percent (100%); and (b)
Tenant's Prorata Share, (as Tenant's Prorata Share may exist from time to
time as provided in this Lease), shall constitute the "Landlord's Share".
All maintenance and repair work performed by Tenant shall be consistent with
the then prevailing standards for buildings owned by Landlord in Watson
Industrial Center South, and shall comply with the requirements of the
Performance Standards. Tenant shall consult with Landlord and obtain
Landlord's approval (which approval shall not be unreasonably withheld or
delayed) prior to performing any major repair or maintenance work (such as
parking lot repaving of roof replacement). Tenant acknowledges its
understanding and awareness that Tenant's failure to promptly and properly
perform its maintenance obligations under this Lease could adversely affect
other tenants in the Building. Without limiting the generality of the
foregoing, Tenant's maintenance and repair obligations shall include all
plumbing, electrical and lighting facilities and equipment within the
Premises, all fixtures, interior walls and interior surfaces of exterior
walls, and all ceilings, windows, doors, plate glass, and skylights located
within the Premises. Tenant's and Landlord's respective obligations relating
to the maintenance and repair of the roof of the Building and the Building's
heating, ventilating and air conditioning systems are set forth in the
attached Exhibit "G". Landlord may undertake any of the repair or
maintenance work provided in this Paragraph 9.1 from time to time as Landlord
deems necessary, but Landlord shall have no obligation to make repairs under
this Paragraph 9.1 until a reasonable time after receipt of written notice
from Tenant of the need for such repairs. Tenant expressly waives the
benefits of any statute now or hereafter in effect which would otherwise
afford Tenant the right to make repairs at Landlord's expense or to terminate
this Lease because of Landlord's failure to keep the Premises in good order,
condition and repair. Landlord shall not be liable for damages or losses of
any kind or nature by reason of Landlord's damages or losses of any kind or
nature by reason of Landlord's failure to furnish any Common Area services
when such failure is caused by accident, breakage, repairs, strikes,
lockouts, "Excusable Delays" (as defined herein) or other disturbances or
disputes of any character or by any other cause unless and to the extent due
to Landlord's gross negligence or willful misconduct.
9.2 If Tenant fails to maintain and repair the Premises and the
Building Complex as required pursuant to this Lease, Landlord may, at its
election, notify Tenant of Tenant's obligation to undertake such repair and
maintenance work. If
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Tenant fails to commence such work within a reasonable period of time
following Tenant's receipt of such notice (determined in light of
then-prevailing facts and circumstances) Landlord may enter the Premises and
perform any such work on behalf of Tenant. Notwithstanding the foregoing, no
notice to Tenant shall be required in case of emergency, and in the event of
an emergency Landlord may enter the Premises and perform such repair and
maintenance on behalf of Tenant. In any such case, Tenant shall reimburse
Landlord for all reasonable costs so incurred immediately upon demand,
together with interest thereon at the "Lease Interest Rate" (as defined in
Paragraph 25.25, below). Landlord's right to perform maintenance and repair
work pursuant to this Paragraph 9.2 shall not be deemed to create any
obligation on the part of Landlord to do so, and shall not in any way limit
Landlord's remedies under this Lease.
9.3 Upon the expiration or sooner termination of this Lease, Tenant
shall surrender the Premises to Landlord, broom clean and in the same
condition as received, except for: (i) ordinary wear and tear which Tenant
is not otherwise obligated to remedy under any provision of this Lease; (ii)
repair and maintenance items which are the obligation of Landlord pursuant to
Paragraph 9.1, above; (iii) damage from casualty which Tenant is not
otherwise required to repair under the terms of this Lease; (iv) the effect
of any taking of all or any portion of the Premises by right of eminent
domain; and (v) removal of any "Exempt Alterations" (as defined in Paragraph
9.4, below). Any damage to, or deterioration of, the Premises shall be
deemed not to be ordinary wear and tear if the same could have been prevented
by good maintenance practices. In addition, Landlord may require Tenant to
remove all alterations, additions or improvements prior to the termination of
the Lease and to restore the Premises to its prior condition, or Landlord may
perform such removals and restorations itself, all at Tenant's expense. All
alterations, additions and improvements which Landlord has not required
Tenant to remove or which Tenant has not elected to remove, as provided
herein, shall become Landlord's property and shall be surrendered to Landlord
upon the expiration or sooner termination of the Lease, except that Tenant
may remove any of Tenant's machinery and equipment from the Premises so long
as Tenant repairs any damage to the Premises resulting from the installation
and/or removal of such machinery or equipment. If, whether in violation of
this Lease or pursuant to Landlord's permission (which may be granted or
withheld in Landlord's sole and absolute discretion), Tenant installs any
"Underground Storage Tanks" (as defined herein) in the Premises of the
Building Complex, Tenant shall, at its sole cost and expense, remove any such
Underground Storage Tanks immediately upon the request of Landlord, the
expiration or sooner termination of this Lease, or the order of any
governmental authority, whichever occurs first. Notwithstanding any
provisions of this Lease to the contrary, such Underground Storage Tanks
shall at all times be and remain the property of Tenant. As used herein, the
term "Underground Storage Tank" means any one or combination of tanks,
including all pipes, sumps, valves and other equipment connected thereto,
which are used for the storage of petroleum products, hydrocarbon substances
or fractions thereof, or other Hazardous Materials, and which are located
wholly or partially beneath the surface of the ground. Tenant shall repair,
at Tenant's expense, any damage to the Premises caused by the removal of any
such machinery or equipment.
9.4 Except for "Tenant's Special Manufacturing Improvements" listed in
the attached Exhibit "H", Tenant shall not, without the prior written
approval of Landlord, make any additions, alterations, changes or
improvements to the Premises or any portion thereof. Any request for approval
of additions, alterations, changes or improvements (including Tenant's
Special Manufacturing Improvements) shall be presented to Landlord in
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writing, accompanied by detailed drawings and specifications. If Tenant so
requests, Landlord shall notify Tenant, in writing, at the time of Landlord's
approval of such additions, alterations, changes or improvements, whether
Landlord will require the removal of any such additions, alterations, changes
or improvements upon the expiration or sooner termination of the Lease Term.
Any such item for which Landlord so notifies Tenant that Landlord will not
require to be removed are referred to herein as "Exempt Alterations." If
Landlord has indicated that Landlord will require the removal of any
additional alteration, change or improvement, Landlord may subsequently
notify Tenant that Landlord will not require the removal of such item, in
which event Tenant shall not (unless it has previously done so) remove such
alteration, addition, change or improvement. Notwithstanding the foregoing,
Tenant shall not be required to obtain Landlord's consent for any
non-structural additions, alterations, changes or improvements to the
Premises which do not affect any building service equipment, and which, as to
any particular integrated group of additions, alterations, changes or
improvements, have a cost of less than Ten Thousand Dollars ($10,000). No
addition, alteration, change or improvement shall be made which will weaken
the structural strength, lessen the value of, interfere with, or make
inoperable any portion of the Premises or the "building service equipment",
or change the architectural appearance of the Premises. All approved
additions, alterations, changes and improvements shall be made in workmanlike
manner, in full compliance with all laws and ordinances applicable thereto.
Except for any Underground Storage Tanks, which shall, at all times be and
remain the property of Tenant, all such additions, alterations, changes and
improvements shall become a part of the Premises, and become the property of
Landlord when installed; and, unless Landlord shall require removal thereof
as required pursuant to this Paragraph 9.4 or Paragraph 16.2, below, all such
improvements, including all building service equipment improvements (but
specifically excluding any Underground Storage Tanks), shall remain in and be
surrendered as a part of the Premises upon the expiration or sooner
termination of this Lease. Tenant shall furnish Landlord with a set of "as
built" drawings which accurately set forth the nature and extent of
improvements made by Tenant to the Premises. Tenant and any assignee or
sublessee of Tenant shall obtain Landlord's prior written consent before any
signs are installed on the Premises. Such signs shall remain the property of
Tenant or any assignee or sublessee who installs the same and they shall be
removed from the Premises at the expiration or sooner termination of the
Lease Term. Any damage arising out of or resulting from the installation,
placement or removal of such signs shall be repaired by Tenant as Tenant's
sole cost and expense. The term "building service equipment" shall include,
without limitation, equipment and property ordinarily necessary or convenient
for the operation and utilization of a building, which are present in the
Building Complex as of the Execution Date (other than the items purchased by
Tenant from the previous tenant of the Building Complex, as described in the
attached Exhibit I), or are installed in the Building Complex by Landlord as
part of Landlord's Initial Improvement Work, together with any replacements
of such items, such as heaters, air conditioners, solar panels, power panels,
transformers, light fixtures, sprinklers, suspended ceilings, plumbing
fixtures, walls, cabinets, shelving affixed to walls in office areas, doors,
floor coverings, fixtures, fencing, paging systems, emission or pollution
control facilities, security and alarm systems, dock levelers, and utility
services such as gas, electricity, water, steam, telephone, sewer and
other similar services used in connection with the foregoing items.
Building service equipment shall also include any related power
installations, plumbing installations, pollution control installations,
sprinkler installations, energy conservation installations, and security
installations, including wiring, conduits, ducts, lines, pipes
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and meters for the transportation, distribution, measuring and/or disposal
thereof. Building service equipment shall also include installations affixed
to the Building which serve machinery and equipment, including, without
limitation, air lines, conveyors, crane ways, dust collectors, paint booths,
buss ducting, power panels and related power installations, but building
service equipment shall not include any of Tenant's Special Manufacturing
Improvements.
9.5 Tenant shall have the right, without Landlord's prior
approval, to install within the Premises Tenant's equipment, trade fixtures,
furniture and furnishings (hereinafter collectively called "Tenant's
Equipment"). Under no circumstances, however, shall Underground Storage Tanks
be installed on the Premises. Tenant shall notify Landlord in writing and
Tenant shall obtain Landlord's prior written approval before the installation
of any heavy equipment, or heavy trade fixtures in the Premises, and prior to
placing any load on the roof or attaching any load to the walls or the
underside of the roof of any building. Tenant shall not place any load on the
floor of any building in excess of the design load. Tenant shall not install
any of Tenant's Equipment in such manner as to weaken the structural strength
of the improvements on the Premises, interfere with, or make inoperable any
portion of the Premises or the building service equipment. If Tenant makes
any addition, alteration, change, or improvement to the Premises described in
Paragraph 9.4 without Landlord's consent, or if Tenant installs any of
Tenant's Equipment in violation of this Paragraph 9.5, then Tenant shall, upon
receipt of written notice from Landlord, promptly correct such installations
in such manner as Landlord shall reasonably require and direct, and Tenant
shall reimburse Landlord, on demand and as additional rent, for all
architect's, engineer's and legal fees incurred by Landlord in connection with
such installations. If Tenant or any person with whom Tenant is engaged in
business causes any damage to the Premises or the improvements, structural or
otherwise, Tenant assumes all risk of such damage to any improvements and
Tenant shall, upon demand, promptly repair all such damage to the reasonable
satisfaction of Landlord. Tenant shall promptly repair any damage to the
Premises arising from the installation, use, and removal of Tenant's
Equipment; and Tenant shall restore the Premises to a clean and orderly
condition and appearance, state of repair and operating order with all
remaining improvements thereon in a good, safe, fully operable condition and
in full compliance with all federal, state and local laws, rules, regulations
and ordinances. If Tenant fails to perform any act or obligation required of
Tenant under this Paragraph 9.5, Landlord shall have the right, but not the
obligation, after ten (10) days' written notice to Tenant specifying the
action required by Tenant, to enter upon the Premises and perform such act or
obligation. In that event, Tenant agrees to pay Landlord, as additional rent
within ten (10) days of receipt of Landlord's invoice, for all costs incurred
by Landlord in performing Tenant's act or obligation, plus a single additional
rent payment of fifteen percent (15%) of such cost.
9.6 Landlord shall not be obligated to maintain or to make any
repairs or replacements of any kind, nature or description whatsoever to the
Premises or the Building Complex, except as specifically provided in this
Lease.
9.7 Tenant shall comply with and abide by all federal, state,
county, municipal and other governmental statutes, ordinances, laws, and
regulations affecting the Premises, the improvements thereon, the business to
be conducted therein and thereon by Tenant, or any activity or condition on or
in the Premises. Any and all "Hazardous Materials" (as defined herein) and
their containers which are brought upon the Premises by, at the direction of,
or with the consent or approval of Tenant shall, at all times, as between
Landlord and Tenant, remain the
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property of Tenant. Tenant warrants that Tenant's business and all activities
to be performed by Tenant in, on or about the Premises shall comply with such
statutes, ordinances, laws and regulations; and Tenant agrees to change any
such activity or install necessary equipment, safety devices, pollution
control systems, or other installations at any time during the Lease Term to
so comply therewith. Tenant acknowledges its understanding and awareness that
the Building was constructed prior to 1979, and that some asbestos-containing
materials may have been used in the construction of the Building. Tenant
acknowledges its receipt of an "Asbestos Disclosure Letter" from Landlord, a
copy of which is incorporated herein by reference. Tenant acknowledges its
awareness that the release of asbestos fibers can present a serious health
risk, and Tenant agrees that it shall not undertake any activities on the
Premises which might disturb or release asbestos-containing materials without
implementing appropriate safety procedures.
9.8 Landlord has not, to its actual knowledge, received any
request (written or otherwise) from any governmental agency or other entity
for information or provided any notification to any such agency or entity,
concerning releases of Hazardous Materials to or from, affecting or related to
the Premises or the Building Complex and none of such property is the subject
of any testing or other investigation which would require some remediation
action to be taken pursuant to any applicable "Environmental Laws" (as
hereinafter defined).
9.9 Landlord has no actual knowledge of any prior or current use
by any owner, tenant, or occupant of the Premises or the Building Complex, for
the purpose of generating, treating, producing, storing, handling,
transferring, processing, transporting, disposing or otherwise releasing
Hazardous Materials, either on, in, from or about the Premises which (a)
threatens to create, creates or causes a contamination or release of Hazardous
Materials on or about the Premises, (b) creates any form of liability, civil
or criminal, direct or indirect, due to such actual or threatened
contamination or release, or (c) is in contravention of any Environmental
Laws. Tenant represents that it does not have actual knowledge of any of the
foregoing.
9.10 To the actual knowledge of Landlord, no underground storage
tanks are currently located on the Premises and Landlord has no actual
knowledge that Underground Storage Tanks have ever been located on the
Premises or the Building Complex.
9.11 The term "Hazardous Materials" as used throughout the Lease
shall mean any flammable, explosives, radioactive materials, hazardous wastes,
petroleum products and their fractions friable asbestos or any material
containing asbestos, toxic substances or related materials, including, without
limitation, substances now or hereafter defined as "Hazardous Substances",
"Hazardous Materials" or "Toxic Substances" in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C.
Section 6901, et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901, et seq.), the Hazardous Materials Transportation Act (49 U.S.C.
Section 1801, et seq.), any so-called "Superfund" or "Superlien" law or any
other applicable federal, state or local law, common law, code, rule,
regulation, ordinance, presently in effect or hereafter enacted (the
aforedescribed laws, codes, rules, regulations or ordinances being referred to
as "Environmental Laws"). As used in this Article IX, the term "actual
knowledge" shall with respect to Landlord mean that none of the senior
executive officers of Landlord with responsibility for marketing or property
management, have actual personal knowledge of the facts in question.
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9.12 The Tenant agrees that it alone shall be responsible for
complying with any and all Environmental Laws relating to, or applicable by
reason of, the Tenant's use and occupancy of the Premises, including any and
all costs and expenditures related to or necessitated by such compliance.
9.13 Landlord agrees to indemnify and hold harmless the Tenant
from any and all claims, damages, fines, judgments, penalties, costs,
liabilities, or losses (including, without limitation, any and all sums paid
for defense or settlement of claims, attorneys' fees, consultant, and expert
fees, but specifically excluding consequential damages) arising during or
after the Lease Term from or in connection with the migrations, presence, or
discharge of Hazardous Materials in, on or affecting the Premises prior to the
Execution Date of this Lease (or released or discharged by Landlord after the
date of this Lease), unless the Hazardous Materials are present as a result of
negligence, willful misconduct, or other acts of Tenant, Tenant's agents,
employees or contractors (the "Preexisting Environmental Conditions").
Without limitation of the foregoing, this indemnification shall include any
and all costs incurred due to any investigation of the site or any cleanup,
removal or restoration mandated by a federal, state, or local agency or
political subdivision, unless the Hazardous Materials are present as a result
of the negligence, willful misconduct, or other acts of Tenant, Tenant's
agent, employees or contractors.
9.14 Tenant agrees to indemnify, defend and hold harmless the Landlord
from any and all claims, damages, fines, judgments, penalties, costs,
liabilities or losses (including, without limitation, any and all sums paid
for defense or settlement of claims, attorneys' fees, consultant, and expert
fees) arising during or after the Lease Term from or in connection with the
migration, presence, suspected presence or discharge of Hazardous Materials
in, on or affecting the Premises, as a result of Tenant's activities on the
Premises. Without limitation of the foregoing this indemnification shall
include any and all costs incurred due to any investigation less of the site
or any cleanup, remediation removal, or restoration mandated by a federal,
state, or local agency or political subdivision, as a result of Tenant's
activities on the Premises. The provisions of this Paragraph 9.14, above and
Paragraphs 9.7, 9.12 and 9.13 above shall survive the expiration or sooner
termination of this Lease.
9.15 Tenant shall immediately notify Landlord of Tenant's receipt
of any notice, citation or other communication received by Tenant relating to
the presence, storage, use or release of any Hazardous Materials in, on or
about the Premises which could reasonably be expected to materially and
adversely affect the Premises or the Building Complex. Tenant shall, each
year during the Lease Term, deliver to Landlord a copy of the "business plan"
prepared by Tenant for the Premises pursuant to the requirements of California
Health and Safety Code Section 25500 ET. SEQ. Prior to the Execution Date of
this Lease, Tenant shall provide Landlord with a copy of Tenant's business
plan for its facility located at 2750 West Lomita Boulevard, Torrance,
California 90509-2883, together with such other information as Landlord may
reasonably request in order for Landlord to assess the risks to Landlord
relating to Tenant's proposed use of Hazardous Materials on the Premises.
ARTICLE X
INSPECTION OF PREMISES BY LANDLORD
10.1 Tenant agrees that Landlord and the authorized
representatives of Landlord shall have the right, upon reasonable notice to
Tenant (determined in light of then-prevailing facts
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and circumstances) to enter the Premises at all reasonable times during usual
business hours, or at any time in the case of an emergency, for the purpose of
(a) inspecting same; and (b) making such repairs or reconstruction to the
Premises or the Building Complex required by or permitted to be made by
Landlord, and (c) determining whether Tenant is in compliance with the
provisions of this Lease relating to Hazardous Materials. Nothing herein
shall imply any duty of Landlord to do any work which, under the provisions of
this Lease, Tenant is required to perform and the performance thereof by
Landlord shall not constitute a waiver of Tenant's default in failing to
perform the same. Landlord may, during the progress of any work on the
Premises, keep and store upon the parking area of or within the Premises, all
necessary materials, tools and equipment. Landlord shall not in any event be
liable for any inconvenience, annoyance, disturbance, loss of business, or
other damage sustained by Tenant while making such repairs or the performance
of any such work on the Premises or the Building Complex, or on account of
bringing materials, supplies and equipment into or through the Premises or the
Building Complex during the course thereof, but Landlord agrees to use
reasonable efforts to avoid causing any unnecessary inconvenience, annoyance
or disturbance. In the event Landlord makes any repairs or maintenance which
Tenant has failed to do or perform, the cost thereof plus an overhead
allowance of fifteen percent (15%) of such cost shall constitute additional
rent and shall be paid to Landlord within ten (10) days of receipt of
Landlord's invoice.
10.2 Landlord is hereby given the right upon reasonable prior notice
to Tenant to enter the Premises during usual business hours to exhibit the
Premises for purposes of sale or mortgage, and during the last six (6) months
of the Lease Term to exhibit the same to any prospective tenant.
ARTICLE XI
MECHANICS' LIENS
11.1 Tenant covenants and agrees to keep all of the Premises and
the Building Complex free and clear of and from any and all mechanics',
materialmen's and other liens for work or labor done, services performed,
materials, appliances, transportation or power contributed, used or furnished
or to be used in or about the Premises or the Building Complex for or in
connection with any operations of Tenant, any alterations, improvements,
repairs or additions, which Tenant may make or permit or cause to be made, or
any work or construction by, for or permitted by Tenant on or about the
Premises or the Building Complex; and at all times Tenant shall promptly and
fully pay and discharge any and all claims upon which any such lien may or
could be based; and Tenant shall save and hold Landlord, the Premises and the
Building Complex free and harmless of and from any and all such liens and
claims of liens and suits or other proceedings pertaining thereto. Tenant, or
any subtenant, assignee or other occupant of the Premises covenants and agrees
to give Landlord written notice not less than ten (10) days in advance of the
commencement of any construction, alteration, addition, improvements or repair
to the Premises in order that Landlord may post an appropriate notice of
Landlord's non-responsibility.
11.2 No mechanics' or materialmen's liens or mortgages, deeds of
trust, or other liens of any character whatsoever created or suffered by
Tenant shall in any way or to any extent affect the interest or rights of
Landlord in any buildings or other improvements in the Building Complex, or
attach to or affect Landlord's title to or rights in the Premises or the
Building Complex.
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11.3 Tenant shall have the right to contest any mechanic's lien or other
lien claim filed against the Premises or the Building Complex provided that
Tenant gives Landlord written notice of such contest, Tenant diligently
prosecutes such contest, at all times effectually stays or prevents any
official or judicial sale of the Premises and the Building Complex under
execution or otherwise, and pays or otherwise satisfies any final judgment
adjudging or enforcing such contested lien and thereafter procures record
satisfaction or release thereof. If requested in writing by Landlord, Tenant
shall furnish to Landlord a surety bond issued by a surety company acceptable
to Landlord in an amount not less than one and one-half times the amount of
any such mechanic's lien or other lien claim filed against the Premises or
the Building Complex.
ARTICLE XII
DAMAGE OR DESTRUCTION OF PREMISES
12.1 In the event the Building Complex or the Premises are damaged or
destroyed, then so long as the cost of repairing such damage or destruction
is covered by insurance policies carried by Landlord (except for deductible
amounts), Landlord shall repair and restore such improvements then owned by
Landlord to their condition prior to said damage or destruction, and this
Lease shall continue in full force and effect. The proceeds of insurance
maintained pursuant to Paragraph 8.1 which are paid to Landlord shall be
utilized by Landlord to defray the cost and expense of repairing and
rebuilding the Premises and the Building Complex.
12.2 In the event the buildings or other structures within the Building
Complex or the Premises are damaged or destroyed, and the cost of repairing
such damage or destruction is not covered by insurance policies carried by
Landlord, Landlord will be responsible for rebuilding the Premises so long as
the uninsured cost of repairing such damage or destruction does not exceed
Five Hundred Thousand Dollars ($500,000.00). If the uninsured cost of
repairing such damage or destruction exceeds Five Hundred Thousand Dollars
($500,000.00), Landlord shall have the right, at its election, to either
rebuild the Premises, or to terminate this Lease. However, if Tenant so
desires, Tenant may prevent termination of the Lease pursuant to this
Paragraph 12.2 by agreeing to pay the amount by which the uninsured cost of
repairing such damage or destruction exceeds Five Hundred Thousand Dollars
($500,000.00). Notwithstanding any other provisions of this Lease, in the
event of any damage or destruction occurring in the last two (2) years of the
Lease Term which is not covered by insurance policies carried by Landlord,
Landlord shall have the right to terminate this Lease upon thirty (30) days
notice to Tenant, which notice shall be given within thirty (30) days of the
date of occurrence of such damage or destruction.
12.3 In the event of damage or destruction of the Premises, or any
portion thereof, the Minimum Rent and Operating Expenses payable by Tenant
pursuant to the provisions of Paragraph 4.1 shall abate, in the proportion
that the part of the Premises rendered unusable to Tenant bears to the whole
thereof, from the date of the damage or destruction through the time
required by Landlord to repair and rebuild the Premises, but only to the
extent to which Landlord receives reimbursement for such abatement pursuant
to the rental value insurance maintained under Paragraph 8.1 of this Lease.
Except for abatement of such Minimum Rent and Operating Expenses, if any,
Tenant shall have no claim against Landlord by reason of any damage,
destruction, repair or rebuilding of the Premises.
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12.4 Upon the occurrence of any damage or destruction to the Building
Complex or the Premises, Landlord shall, within thirty (30) days following
the date of occurrence of such damage or destruction, provide to Tenant a
written notice of Landlord's reasonable and good faith estimate of the time
required to complete the repair and restoration of the Premises ("Landlord's
Time Estimate"). If Landlord reasonably estimates that such repair and
restoration will take more than one hundred eighty (180) days to complete
(measured from the date of issuance of necessary building permits for the
repair and restoration work) either Landlord or Tenant may elect to terminate
this Lease upon written notice to the other, which notice shall be given, if
at all, within fifteen (15) days following Tenant's receipt of Landlord's
Time Estimate. Once notice has been delivered, the fifteen (15) day response
period has expired and repair and restoration work has commenced, neither
party shall have the right to terminate this Lease as a result of the
occurrence of such damage or destruction. If Tenant elects to terminate this
Lease as a result of such damage or destruction, Tenant will be required to
reimburse Landlord for Landlord's unamortized brokerage commissions and
Tenant Improvement Expenditures in the initial aggregate amount of Seven
Hundred Fifty Thousand Dollars ($750,000.00). This amount shall decrease by
Six Thousand Two Hundred Fifty Dollars ($6,250.00) per month for each full
month of the Lease Term for which Tenant has paid Minimum Rent and other
charges to be paid by Tenant pursuant to the terms of the Lease.
12.5 If the Building Complex or the Premises is damaged or destroyed,
either partially or totally, during the last year of the Lease Term, Landlord
or Tenant may, at such party's option, cancel and terminate the Lease as of
the date of the occurrence of such damage by giving written notice to the
other party of the electing party's election to terminate, within thirty (30)
days after the date of occurrence of such damage. Provided, however, that if
Tenant possesses an option to extend the Lease Term in the time within which
Tenant may exercise such option has not expired, and if Tenant validly
exercises such option within twenty (20) days after the occurrence of such
damage or destruction, then Landlord shall not have the right to terminate
this Lease pursuant to this Paragraph 12.5. In such event, the repair and
restoration of the Premises shall be governed by the other applicable
provisions of this Article XII.
12.6 Tenant waives the provisions of any statutes which relate to
termination of leases when the Premises are destroyed; and Tenant agrees that
such event shall be governed by the terms of this Lease and not by any such
statute.
ARTICLE XIII
CONDEMNATION
13.1 If title to all or any portion of the Premises or the Building
Complex shall be taken by any public of quasi-public use or authority under
any statute or by right of eminent domain, or by private purchase in lieu
thereof, then the rights of the parties to share in the condemnation award or
purchase price thereby resulting shall be governed by the provisions of this
Article XIII.
13.2 Should all or such portion of the Premises or the Building Complex
be taken in such a manner as to materially interfere with Tenant's use and
occupancy thereof, then this Lease shall terminate as of the date that
possession of said Premises or part thereof shall be taken. Landlord shall be
entitled to (a) any amount paid for the taking of Landlord's fee interest in
the Building Complex, (b) any severance damages included in the award, (c)
any amount paid for the taking of the
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Premises except that paid for any improvements made to the Premises by Tenant
which remain the property of Tenant, and (d) any amount which represents the
present worth of rent payments to be made in the future under the provisions
of this Lease; and none of Landlord's interests in the above shall be subject
to any diminution or appointment whatsoever. Tenant shall be entitled to
compensation paid under condemnation for the taking of any improvements made
to the Premises by Tenant which remain the property of Tenant.
13.3 In the event of a partial taking of the Premises or the Building
Complex which does not materially interfere with Tenant's continued use and
occupancy of the Premises and there remains sufficient of the Premises for the
continued use of Tenant, then this Lease shall terminate only as to the part
so taken, as of the date that possession of such part of the Premises is
taken, and the Minimum Rent and Operating Expenses herein provided for shall
be reduced in proportion as the square footage of building floor area taken
bears to the total building floor area existing before such taking. In the
event of a partial taking, Landlord agrees to replace or repair the Building
Complex to its condition as existed when the Lease Term commenced, and
without regard to improvements made by Tenant, by reinstalling, plumbing,
electrical, wiring, walls and paving, if necessary, so that said Building
Complex shall be completely operable and an integral whole, but at a cost to
Landlord not to exceed the condemnation award received by Landlord. In the
event of such partial taking, Landlord shall be entitled to receive all
amounts described in the second sentence of Paragraph 13.2; and none of
Landlord's interest in the above shall be subject to any diminution or
apportionment whatsoever. Tenant shall be entitled to compensation paid under
condemnation for the taking of any improvements made to the Premises by
Tenant which remain the property of Tenant.
13.4 Landlord and Tenant agree to execute all documents and assignments
necessary to carry out this Article XIII in the event of condemnation or
purchase in lieu thereof.
ARTICLE XIV
USE OF PREMISES - ASSIGNMENTS
14.1 Tenant shall have the right to use the Premises for manufacturing,
warehousing and general office purposes in compliance with all applicable
laws and regulations, including, without limitation, environmental laws and
laws relating to Hazardous Materials; and Tenant agrees such use shall comply
with all applicable laws and regulations in effect when this Lease Term
commences and as may be amended or newly enacted during the Lease Term.
Tenant shall not use the Premises for the retail sale of property.
Tenant shall not conduct nor permit to be conducted any auction or auction
sale at the Premises. Tenant's use of the Premises is subject to limitations
imposed by the Watson Industrial Center Performance Standards attached hereto
as Exhibit "A" and the limitations contained in this Lease.
14.2 Tenant shall not transfer, assign, sublet, mortgage or otherwise
hypothecate this Lease, or Tenant's interest in and to the Premises, nor
enter into any license or concession agreements with respect thereto, without
first procuring the written consent of Landlord. Any such attempted or
purported transfer, assignment, subletting, mortgage or hypothecation, or
license or concession agreement (collectively "Transfer") without Landlord's
prior written consent shall be void and of no force and effect, and shall not
confer any interest or estate in the purported transferee (the "Transferee")
and shall, at Landlord's option, constitute an incurable default under this
Lease. Landlord agrees that, in the event of a proposed Transfer to an
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"Affiliate" (as defined herein), Landlord will not withhold its consent to
such Transfer so long as (i) such Affiliate's use of the Premises is in
conformance with Paragraph 14.1; (ii) such Affiliate's use of the Premises
will not result in any material increase in the potential risk to Landlord
arising out of or relating to Hazardous Materials; and (iii) such Transfer
will not cause any portion of the amounts received by Landlord pursuant to
this Lease or any sublease to fail to qualify as "rents from real property"
within the meaning of Section 856(d) of the Internal Revenue Code, or which
could cause any other income received by Landlord to fail to qualify as
income described in Section 856(c)(2) of the Internal Revenue Code. As used
herein, the term "Affiliate" shall mean any corporation for which fifty
percent (50%) or more of the voting stock (i) is owned by Tenant; or (ii) is
owned, directly or indirectly, by a corporation owning more than fifty
percent of the voting stock of Tenant. Any transfer of stock or other
ownership interest of Tenant which is made with the purpose or principal
intent of circumventing the Transfer restrictions imposed under this Article
XIV shall be deemed to be a Transfer requiring Landlord's consent. The
consent of Landlord required hereunder shall not be unreasonably withheld;
however, a condition precedent to any consent to a Transfer shall be Tenant's
agreement to pay to Landlord as rent any costs and expenses incurred by
Landlord for review and consultation by Landlord's legal counsel, securing
credit reports, administrative overhead and the like. Notwithstanding the
foregoing, Landlord and Tenant agree that, in determining whether to
reasonably consent to a proposed transfer, Landlord may consider, among other
things, any or all of the following factors:
14.2.1 The reputation of the Transferee (including any principals,
partners or shareholders of such assignee, subtenant to Transferee),
including, without limitation, the Transferee's reputation for dishonesty,
criminal conduct or unethical business practices;
14.2.2 The financial capacity of the proposed Transferee to perform
its obligations under this Lease;
14.2.3 Whether the business experience and quality of business
operations of the proposed Transferee is comparable to that of Tenant;
14.2.4 The credit history of the proposed Transferee;
14.2.5 The intended use of the Premises by the proposed Transferee,
and Landlord's assessment of the impact of such use upon the Premises and
neighboring properties;
14.2.6 Whether the proposed Transferee's use of the Premises will
involve the generation, storage, use, treatment or disposal of any Hazardous
Materials, or will in any way increase any potential risk or liability to
Landlord arising out of or relating to Hazardous Materials.
14.3 Notwithstanding any permitted Transfer, Tenant shall at all times
remain directly, primarily or fully responsible and liable for the payment of
rent and for compliance with all obligations under the terms, provisions and
covenants of this Lease. All Transfer agreements shall expressly provide
that, in the event of a default by Tenant under this Lease, the Transferee
covenants and agrees with Landlord, contemporaneously with receipt of written
notice from Landlord that Tenant is in default of this Lease, and for so long
as such default continues, but not for a period of time in excess of the term
of the Transfer, to accept Landlord as Landlord of Transferee, to attorn to
Landlord as Landlord, to thereafter perform all duties and responsibilities
under the Transfer agreement directly to Landlord for Land-
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lord's sole benefit, and to cure any default of Tenant under this Lease. Upon
the occurrence of any default by Tenant, if the Premises or any part thereof are
then sublet, Landlord, in addition to any other remedies herein provided or
provided by law, may at its option collect directly from such subtenant all
rents becoming due to Tenant under such sublease and apply such rent against any
sums due to Landlord from Tenant hereunder, and no such collection shall be
construed to constitute a novation or release of Tenant from the further
performance of Tenant's obligations under this Lease. Any sale, assignment,
transfer or hypothecation of Tenant's interest under this Lease, and any
proposed subletting or occupancy of the Premises not in compliance with this
Article XIV shall be void and shall, at the option of Landlord exercisable by
notice to Tenant, terminate this Lease.
14.4 Should Tenant desire to make a Transfer of the Premises, Tenant
shall give not less than thirty (30) days' prior written notice thereof to
Landlord setting forth the name of the proposed Transferee, the term, use,
rental rate and other relevant particulars of the proposed Transfer, including,
without limitation, evidence satisfactory to Landlord that the proposed
Transferee will not use, store or dispose of any Hazardous Materials in or on
the Premises or the Building Complex, and that the proposed Transferee will
immediately occupy and thereafter use the Premises for the entire term of the
Lease or the sublease (as the case may be). Such notice shall be accompanied,
in the case of a sublease, by a copy of the proposed sublease, and in the case
of any Transfer, any documents or financial information Landlord may require in
order to make a determination as to the suitability of the Transferee.
14.5 Landlord shall have the right to condition its consent to any
subletting or assignment upon payment by Tenant to Landlord of fifty percent
(50%) of all "Transfer Consideration" (as defined herein) received or to be
received, directly or indirectly, by Tenant on account of such subletting or
assignment. Notwithstanding the foregoing, no Transfer Consideration shall
be payable to Landlord in connection with a Transfer by Tenant to an
Affiliate. In no event shall Tenant's monetary obligations to Landlord, as
set forth in this Lease, be reduced as a result of any subletting or
assignment. Such Transfer Consideration shall be paid to Landlord at the
same time or times as the same is paid to or used by Tenant. "Transfer
Consideration" shall mean (i) in the case of a sublease, any consideration
paid or given, directly or indirectly, by the sublessee to Tenant pursuant to
the sublease for the use of the Premises, or any portion thereof (after
subtracting therefrom actual and reasonable attorneys' fees and brokerage
commissions, costs of tenant improvements, costs of environmental studies and
other economic concessions made to the sublessee or incurred by Tenant in
connection with such sublease), over and above the rent, however denominated,
in this Lease, payable by Tenant to Landlord for the use of the Premises (or
portion thereof), prorating as appropriate the amount payable by Tenant to
Landlord under this Lease if less than all of the Premises is sublet, and
(ii) in the case of an assignment, the gross amount of any consideration paid
or given, directly or indirectly, by the assignee to Tenant in exchange for
entering into the assignment. Notwithstanding anything contained in this
Lease to the contrary, Landlord may withhold its consent to any of the
following (i) any subletting or assignment of the Premises or this Lease on
any basis such that the rent or other amounts to be paid by the sublessee or
assignee thereunder would be based, in the whole or in part, on the income or
profits derived by the business activities of the sublessee or assignee; (ii)
any sublease or assignment under circumstances in which Tenant would furnish
or render any services to the sublessee or assignee or operate the Premises
so subleased or assigned; (iii) any sublease or assignment of the Premises
or this Lease to any person that
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Tenant or Landlord owns, directly or indirectly (by applying the constructive
ownership rules set forth in Section 856(d)(5) of the Internal Revenue Code
[the "Code"]), provided, however, that the restriction contained in this item
(iii) shall not apply to an assignment of this Lease to an Affiliate of Tenant
if no Transfer Consideration arises and if Landlord does not own, directly or
indirectly (as described above), an interest in such assignee; or (iv) any
sublease or assignment of the Premises or this Lease in any other manner (other
than a sublease of substantially all or less than substantially all of the
Premises, regardless of whether Landlord will receive any Transfer Consideration
as a result of such sublease) which could cause any portion of the amounts
received by Landlord pursuant to this Lease or any sublease to fail to qualify
as "rents from real property" within the meaning of Section 856(d) of the Code,
or which could cause any other income received by Landlord to fail to qualify as
income described in Section 856(c)(2) of the Code.
14.6 In addition to Landlord's right of approval pursuant to
Paragraph 14.2, above, and Landlord's right to share in Transfer Consideration
pursuant to Paragraph 14.5, above, Landlord shall have the option, in the event
of any proposed Transfer (other than a transfer to an Affiliate), to cancel this
Lease as to the affected portion of the Premises as of the effective date of the
Transfer set forth in Tenant's notice. The option shall be exercised, if at
all, by Landlord giving Tenant written notice thereof within thirty (30) days
following Landlord's receipt of Tenant's written request. Upon any such
cancellation, Tenant shall pay to Landlord all amounts, as estimated by
Landlord, payable by Tenant to such termination date with respect to that
portion of any obligations, costs or charges which are the responsibility of
Tenant under this Lease and allocable to the affected portion of the Premises.
Further, upon any such cancellation Landlord and Tenant shall have no further
obligations or liabilities to each other with respect to the affected portion of
the Premises, except with respect to obligations or liabilities which have
accrued as of such cancellation date (in the same manner as if such cancellation
date were the date originally fixed for the expiration of the Lease Term, or
Extended Term, as the case may be). Without limitation, Landlord may lease the
affected portion of the Premises to the prospective Transferee, without
liability to the Tenant. Landlord's failure to exercise said cancellation right
as herein provided shall not be construed as Landlord's consent to the proposed
Transfer.
14.7 If the Lease is assigned to any person or entity pursuant to
the provisions of the "Revised Bankruptcy Act" (Title 11 of the United States
Code; 11 U.S.C. Section 101 et seq.), any and all monies or other
consideration payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord, and shall not constitute property of Tenant
or of the estate of Tenant within the meaning of the Revised Bankruptcy Act.
Any and all monies or other considerations constituting Landlord's property
under this Article XIV not paid or delivered to Landlord shall be held in
trust for the benefit of Landlord and shall be promptly paid or delivered to
Landlord. Any person or entity to which this Lease is assigned pursuant to
the provisions of the Revised Bankruptcy Act shall be deemed without further
act or deed to have assumed all of the obligations arising under this Lease
on and after the date of such assignment.
14.8 Landlord shall have the right to sell, transfer, delegate or
assign any of its rights or obligations under this Lease, but Landlord shall not
assign its obligations to Tenant under this Lease unless Landlord simultaneously
assigns its ownership interest in the Building Complex to the same party.
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ARTICLE XV
EVENT OF DEFAULT
15.1 Tenant shall be in default under this Lease if:
15.1.1 Tenant shall fail to make any payment of Minimum Rent,
Operating Expenses, any additional rent payable hereunder, or any other monetary
obligation required of Tenant under this Lease (including, without limitation,
restoration of any security deposit as required under this Lease) and such
failure shall continue for three (3) days after Tenant's receipt of written
notice from Landlord that said rent or monetary obligation is due and payable as
provided in this Lease; or
15.1.2 Tenant shall neglect or fail to perform or observe
any of the covenants herein contained on Tenant's part to be performed or
observed, and Tenant shall fail to remedy the same within thirty (30) days
after Landlord shall have given to Tenant written notice specifying such
neglect or failure (provided, however, that if the performance or observance
of any such covenant reasonably requires more than thirty (30) days to
perform, Tenant shall not be in default under this Lease as a result of its
failure to perform or observe any such covenant within such (30) day period
so long as Tenant has commenced the actions necessary to perform or observe
such covenant within such thirty (30) day period, and is diligently pursuing
such cure to completion); or
15.1.3 Tenant shall abandon the Premises and such
abandonment shall continue for a period of fourteen (14) consecutive days
during which Minimum Rent for the Premises has remained unpaid.
15.2 In the event of any default by Tenant, and without any further
notice or demand, Landlord shall have the right at Landlord's election, then or
at any time thereafter, to:
15.2.1 Terminate this Lease, which shall terminate Tenant's
right to the use, occupancy and possession of the Premises, and Tenant shall
immediately surrender possession of the Premises to Landlord; or
15.2.2 Re-enter and take possession of the Premises or any
part thereof as provided by law, in which event this Lease shall terminate
effective when Landlord takes possession; or
15.2.3 Continue this Lease in effect and enforce any or all
rights and remedies of Landlord under this Lease, including the right to recover
Minimum Rent, additional rent and charges equivalent to rent (sometimes
collectively referred to herein as "rent") as they become due under this Lease,
for so long as Landlord does not terminate Tenant's right to possession of the
Premises; or
15.2.4 Seek any legal or equitable relief permitted by law.
15.3 If Landlord terminates this Lease as provided in subparagraphs
15.2.1 or 15.2.2 hereof, Landlord shall have the right to recover from Tenant:
15.3.1 The worth, at the time of the award, of the unpaid
rent that had been earned at the time of termination of this Lease; and
15.3.2 The worth, at the time of the award, of the amount by
which the unpaid rent that would have been earned after the date of termination
of this Lease until the time of
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award exceeds the amount of the loss of rent that Tenant proves could have been
reasonably avoided; and
15.3.3 The worth, at the time of the award, of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of the loss of rent that Tenant proves could have been
reasonably avoided; and
15.3.4 Any other amount necessary to compensate Landlord for
all detriment proximately caused by Tenant's breach or which in the ordinary
course of things would be likely to result therefrom; such as, the cost of
recovering possession of the Premises, expenses of reletting including
attorney's fees and any real estate commissions paid or payable, necessary
repair, restoration, renovation, or alteration of the Premises, and care and
safekeeping of the Premises.
"The worth, at the time of the award," as used in
subparagraphs 15.3.1 and 15.3.2 of this paragraph, is to be computed by allowing
interest at the Lease Interest Rate in effect when each installment of rent
referred to in said subparagraphs became payable. "The worth, at the time of
the award," as referred to in subparagraph 15.3.3 of this paragraph, is to be
computed by discounting the amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of the award, plus one percent (1%).
15.4 If Tenant shall breach this Lease and abandon the Premises, this
Lease shall continue in full force and effect for so long as Landlord does
not terminate Tenant's right to possession of the Premises, and Landlord may
enforce all of its rights and remedies under this Lease, including but not
limited to the right to recover rent and charges equivalent to rent as they
become due under this Lease. For the purposes of this Paragraph 15.4 and
Paragraph 15.2, the following acts by Landlord shall not constitute a
termination of Tenant's right to possession of the Premises: (i) maintenance
or preservation of the Premises, (ii) efforts to relet the Premises, or (iii)
the appointment of a receiver upon initiative of Landlord to protect
Landlord's interest under the Lease.
15.5 In the event Landlord re-enters and takes possession of the
Premises, Landlord may at Landlord's option require Tenant to remove from the
Premises any of Tenant's property located therein. If Tenant fails to do so,
Landlord shall not be responsible for the care or safekeeping thereof and may
remove any of the same from the Premises and place the same in storage in a
public warehouse at the cost, expense and risk of Tenant with authority to
the warehouseman to sell the same in the event that Tenant shall fail to pay
the costs of transportation and storage, all in accordance with the rules and
regulations applicable to the operation of a public warehouseman's business.
Any refusal by a public warehouseman to accept personal property located in
the Premises upon such condition shall be conclusive evidence that the same
is of no substantial value, and shall be an unconditional warrant to Landlord
for disposing of the same in any manner Landlord may see fit, and without
accountability for any alleged value thereof. In addition, Landlord may, at
Landlord's election, dispose of said property pursuant to the provisions of
Sections 1980 through 1991 of the California Civil Code. In any and all such
cases of re-entry, Landlord may make any repairs in, to or upon the Premises
which may be necessary, desirable or convenient, and Tenant hereby waives any
and all claims for damages which may be caused or occasioned by such reentry
or any of the aforesaid acts of Landlord or by reason of any loss or
destruction or damage to any property in or about the Premises or any part
thereof.
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15.6 Tenant further covenants and agrees that if Landlord fails or
neglects for any reason to take advantage of any of the terms hereof provided
for the termination of this Lease or for the termination or forfeiture of the
estate hereby leased, or if Landlord, having the right to declare this Lease
terminated or the estate hereby leased terminated or forfeited, shall fail to
do so, any such failure or neglect of Landlord shall not be or be deemed or
be construed to be a waiver of any provisions for the termination of this
Lease continuing to exist or for the termination or forfeiture of the estate
hereby leased subsequently arising, or as a waiver of any of the covenants,
terms and conditions of this Lease or of the prompt performance thereof by
Tenant. None of the covenants, terms or conditions of this Lease can be
waived by conduct of the parties or by estoppel; any claim or waiver must be
in writing and signed by the party entitled to the benefit thereof.
ARTICLE XVI
SURRENDER OF PREMISES
16.1 Upon the termination of this Lease, whether by lapse of time,
cancellation pursuant to an election provided for herein, forfeiture, or
otherwise, Tenant shall immediately surrender possession of the Premises
(excepting those improvements which Landlord shall have required Tenant to
remove therefrom pursuant to Paragraph 9.3 hereof) to Landlord in a clean and
orderly condition and appearance, state of repair and operating order, and
with all such improvements thereon in a good, safe, fully operable condition,
and in full compliance with all Federal, State and local laws, rules,
regulations and ordinances (including, without limitation, any laws, rules,
regulations and ordinances relating to Hazardous Materials, except to the
extent relating to Pre-existing Environmental Conditions) and each provision
of this Lease, including without limitation the provisions of Article IX
hereof. If possession is not immediately surrendered, Landlord may, with
process of law, enter the Premises and repossess the same and expel Tenant or
any subtenant or occupant therefrom. Landlord shall hold the Premises after
any such re-entry free of any right, privilege or estate of Tenant and
without any duty or obligation to Tenant in respect of any subsequent
reletting or disposition of the Premises. If Tenant's business operations on
the Premises or uses of the Premises involve any generation, storage, use,
treatment or disposal of any Hazardous Material, Tenant shall be responsible
for removing any such Hazardous Materials from the Premises and the Building
Complex and for decontaminating the Premises and the Building Complex and any
neighboring properties affected by such Hazardous Materials.
16.2 Upon the termination of this Lease, Tenant, if not in default
hereunder at the time, shall have the right to remove, and if directed so to
do by Landlord shall remove, from the Premises, all of Tenant's machinery,
equipment (excluding building service equipment), trade fixtures, signs,
furniture, furnishings, supplies and inventory then installed or in place in,
on or about the Premises or the Building Complex (except that Tenant shall
not be required to remove any Exempt Alterations). Except as hereinafter
expressly set forth, such removal shall be completed prior to the expiration
or earlier terminations of this Lease. Tenant shall make all repairs to the
Premises or the Building Complex required because of such removal and Tenant
shall restore the Premises and the relevant portion of the Building Complex
to their condition as existed when the Lease Term commenced. If this Lease
shall terminate at any time other than the time herein fixed as the
expiration of the Lease Term, and occurring not due to a default by Tenant,
then Tenant, if not in default hereunder at the time, shall have a reasonable
time thereafter to effect the removal of the foregoing items, not to
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exceed sixty (60) days. Tenant shall pay Minimum Rent and items designated in
this Lease as additional rent to Landlord on a per diem basis during the time
such removal is taking place.
16.3 If any of Tenant's machinery, equipment, trade fixtures, signs,
furniture, furnishings, supplies and inventory remain on the Premises after
the end of the term hereof or time allowed to remove the same, such property
of Landlord without any claim therein of Tenant should Landlord so elect.
16.4 Upon termination of this Lease, Tenant shall surrender the
Premises and the relevant portion of the Building Complex in a "broom-clean"
condition, with all refuse and debris removed therefrom, and with all
electrical, plumbing, heating and air conditioning installations in a good,
safe and fully operable condition, and prior to such termination, Tenant
shall fill or repair any holes or openings made by Tenant in the walls, roof
or floor of the building, remove any protuberance, and perform any
maintenance or repairs required of Tenant by this Lease. Nothing contained in
this Paragraph 16.4 shall be deemed to limit Tenant's repair and maintenance
obligations pursuant to Article IX of this Lease. If directed so to do by
Landlord, Tenant shall also remove any improvements, additions or alterations
made to the Premises or the Building Complex by Tenant (other than Exempt
Alterations) and thereafter restore the Premises and the Building Complex to
their original condition, even though such improvements by the terms of this
Lease become a part of the Premises and the property of Landlord.
ARTICLE XVII
DELAYS -- EXTENSIONS OF TIME
17.1 The time within which Landlord or Tenant is obligated herein to
construct, repair or rebuild any building, improvement or other structure
shall be extended and the performance excused when the delay is occasioned by
the other party (such as failure to promptly give required approvals, or
installation of machinery and equipment during construction which interferes
with or delays the contractor); or by strikes, threats of strikes or
lockouts; blackouts, war, threats of war, bombing, insurrection, riot or
invasion; acts of God, calamities, civil commotions, violent action of the
elements or fire; action, inaction or delayed action of any governmental
agency; regulations or laws of any national, state or local governmental
authority; unavailability of materials at reasonable prices, delays in
delivery of materials by suppliers to weather conditions which impair or
delay construction; or other matters or things, whether similar or dissimilar
to the foregoing, beyond the reasonable control of the obligated party.
Delayed action by a governmental agency shall be deemed to occur if a
building permit is not issued within forty-five (45) days after drawings,
specifications, and engineering calculations for such permit are filed for
plan check with such governmental agency.
ARTICLE XVIII
ATTORNEYS' FEES AND DISPUTE RESOLUTION
18.1 In the event that either Landlord or Tenant brings any action or
proceeding against the other for possession of the Premises or for the
recovery of any sum due hereunder, or because of the breach of any covenant,
condition or provisions hereof, or for any other relief against the other,
declaratory or otherwise, including appeals therefrom, and whether being an
action based upon a tort or contract, then the prevailing party to this Lease
in any such proceeding shall be paid reasonable attorneys' fees and costs of
such action or proceeding which shall be enforceable
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whether or not such action or proceeding, is prosecuted to final judgment,
and including an allowance for reasonable attorneys' fees for appeals and
rehearings. In addition to the foregoing award of attorneys' fees to the
prevailing party, the prevailing party in any such lawsuit shall be entitled
to its attorneys' fees incurred in any post-judgment proceedings to collect
or enforce the judgment. This provision is separate and several and shall
survive the merger of this Lease into any judgment on this Lease. Should
Landlord be made a party to any suit or proceeding brought by a third party,
arising by reason of Tenant's use or occupancy of the Premises and not being
a dispute essentially between Landlord and Tenant, then Tenant shall defend
Tenant and Landlord therein, at Tenant's sole cost and expense, and shall
hold Landlord free and harmless from any claim, loss, liability, duty or
obligation therein, including any reasonable attorneys' fees of Landlord.
18.2 At the election of either Landlord or Tenant, either party shall
have the right to have any dispute arising under this Lease heard by a
reference procedure pursuant to the provisions of California Code of Civil
Procedure Section 638 ET. SEQ., for a determination to be made which shall be
binding upon the parties as if tried before a court or jury. Notwithstanding
the foregoing, any action to recover possession of the Premises as a result
of a default by Tenant shall be brought and maintained pursuant to the
provisions of California Code of Civil Procedure Sections 1159 ET. SEQ., and
the provisions of this Paragraph 18.2 shall not apply to any such actions.
The parties agree specifically as to the following:
(a) Within five (5) business days after service of a demand by a
party hereto, the parties shall agree upon a single referee who shall then
try all issues, whether of fact or law, and then report a finding and
judgment thereon. If the parties are unable to agree upon a referee, either
party may seek to have one appointed, pursuant to California Code of Civil
Procedures, Section 640, by the presiding judge of the Los Angeles County
Superior Court. The venue for any judicial reference heard pursuant to this
Paragraph 18.2 shall be Los Angeles County.
(b) The compensation of the referee shall be such charge as is
customarily charged by the referee for like services. The cost of such
proceeding shall initially be borne equally by the parties. However, the
prevailing party in such proceeding shall be entitled, in addition to all
other costs, to recover its contribution for the cost of the reference as an
item of damages an/or recoverable costs.
(c) If a reporter is requested by either party, then a reporter
shall be present at all proceedings, and the fees of such reporter shall be
borne by the party requesting such reporter. Such fees shall be an item of
recoverable costs. Only a party shall be authorized to request a reporter.
(d) The referee shall apply all California Rules of Procedure and
Evidence and shall apply the substantive law of California in deciding the
issues to be heard. Notice of any motions before the referee shall be given,
and all matters shall be set at the convenience of the referee.
(e) The referee's decision under California Code of Civil
Procedure, Section 644, shall stand as the judgment of the court, subject to
appellate review as provided by the laws of the State of California.
(f) The parties agree that any such dispute shall be decided as
soon as practicably possible. The date of hearing for any proceeding shall be
determined by agreement of the
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parties and the referee, or if the parties cannot agree, then by the referee,
but in no event shall the date of the hearing be later than one hundred
twenty (120) days after the date of the service or demand.
(g) The referee shall have the power to award damages and all other
relief in the event of a violation of any of the provisions of this Lease
which are to be resolved pursuant to this Paragraph 18.2.
ARTICLE XIX
STATEMENT OF LEASE
19.1 Tenant agrees at any reasonable time and upon not less than ten
(10) days' prior written request by Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect (or if modified, in full force and
effect as modified and stating modifications), and the dates to which rent or
other sums have been paid in advance, it being intended that any such
statement delivered pursuant to this paragraph may be relied upon by any
prospective purchaser, mortgagee, assignee, or beneficiary. Tenant shall also
deliver to Landlord, upon Landlord's written request, the latest annual or
quarterly report for Teledyne, Inc. (or the current audited financial
statements of any assignee of Tenant, if this Lease is assigned to any party
other than an Affiliate).
ARTICLE XX
RIGHTS RESERVED BY LANDLORD
20.1 Landlord expressly reserves all rights in and with respect to the
Premises and the Building Complex which are not inconsistent with Tenant's
use of the Premises as provided in this Lease, and which do not unreasonably
interfere with Tenant's use or occupancy of the Premises, including (without
in any way limiting the generality of the foregoing) all rights to the
subsurface of the land more than five (5) feet below ground level, except
where building improvements extend more than five (5) feet below ground
level; and all rights to the airspace more than ten (10) feet above the roof
of any building; and the rights to enter upon the Premises and the Building
Complex for itself or to give easements to others for the purpose of
installing, using, maintaining, renewing and replacing such overhead or
underground water, oil, gas, sewer drainage, and other pipe lines, and
telephone, electric, power, television and other lines, cables and conduits
as Landlord may deem desirable in connection with the development or use of
any other property in the neighborhood of the Premises and the Building
Complex, whether owned by Landlord or not, all of which pipelines, lines and
conduits shall be buried to a sufficient depth or raised to a sufficient
height to as not to interfere with the use or stability of the Premises.
ARTICLE XXI
COVENANT OF QUIET ENJOYMENT
21.1 Landlord does hereby covenant, promise and agree to and with
Tenant with Tenant, for so long as it is not in default hereof and is in
compliance with all of the terms and conditions of this lease, shall and may
at all times peaceable and quietly have, hold, use, occupy and possess the
Premises throughout the term of this Lease, subject to all of the terms and
conditions of this Lease, without any molestation or eviction by Landlord or
any persons claiming by or through Landlord.
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ARTICLE XXII
RECORDATION
22.1 Neither this Lease nor a short form of memorandum of this Lease
shall be recorded in the office of any county recorder without Landlord's
express written consent which may be granted or withheld by Landlord in its sole
and absolute discretion. In the event of any such recordation (unless such
recordation is requested or required by Landlord), Tenant shall be solely
responsible for any documentary transfer taxes or other taxes relating to or
arising out of any such recordation.
ARTICLE XXIII
SUBORDINATION
23.1 Subject to Landlord's obtaining and providing to Tenant a "non-
disturbance agreement" as provided in Paragraph 23.2, below, this Lease and
Tenant's rights hereunder are and will remain subject and subordinate to any
ground lease, mortgage, deed of trust or any other hypothecation for security
now or hereafter placed upon the real property of which the Premises are a part
(the "Property"), and to all increases, renewals, modifications, consolidations,
replacements, and extensions thereof (collectively referred to as the
"Mortgage"). If the holder of a mortgage becomes the owner of the Property by
reason of foreclosure or acceptance of a deed in lieu of foreclosure, at such
holder's election tenant will be bound to such holder or its successor-in-
interest under all terms and conditions of this Lease, and Tenant will be deemed
to have attorned to and recognized such holder or successor as Landlord's
successor-in-interest for the remainder of the Lease Term or any extension
thereof. The foregoing is self-operative and no further instrument of
subordination and/or attornment will be necessary unless required by Landlord or
the holder of a Mortgage, in which case Tenant will, within ten (10) days after
written request, execute and deliver without charge any documents reasonably
required by Landlord or such holder in order to confirm the subordination and
attornment set forth above. Should the holder of a Mortgage request that this
Lease and Tenant's rights hereunder be made superior, rather than subordinate,
to the Mortgage, then Tenant will, within ten (10) days after written request,
execute and deliver without charge such agreement as may be reasonably required
by such holder in order to effectuate and evidence such superiority of the Lease
to the Mortgage.
23.2 If Tenant fails to execute and deliver any documents as and when
required above, such failure will constitute a default under this Lease,
entitling the Landlord to the same rights and remedies as if such default were
with respect to non-payment of Minimum Rent. With respect to each Mortgage that
may encumber the Property at or after the commencement of the Lease term,
Landlord agrees that promptly following its receipt of written request by
Tenant, Landlord will obtain from the holder of the Mortgage, at Landlord's
expense, a "non-disturbance agreement," in a commercially reasonable form. The
term "non-disturbance agreement" as used herein means, in general, an agreement
that as long as Tenant is not in default under this Lease, this Lease will not
be terminated if such holder acquires title to the Property by reason of
foreclosure proceedings or acceptance of a deed in lieu of foreclosure, provided
that Tenant attorns to such holder in accordance with such holder's
requirements.
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ARTICLE XXIV
HOLDING OVER
24.1 If Tenant remains in possession of the Premises after the
expiration of the Lease Term or any extension or renewal hereof, such holding
over shall not operate to extend or renew this Lease but shall be construed as a
tenancy from month-to-month which may be terminated by Landlord upon three (3)
days' prior written notice if Tenant is then in default of this Lease, or by
either party upon at least thirty (3) days' prior written notice directed to the
end of the calendar month. Such month-to-month tenancy by Tenant shall be
subject to all the terms and provisions of this Lease, except that the Minimum
Rent payable during the period of holding over shall be the greater of: (a)
Minimum Rent set forth in Item 1.6 of the Basic Lease Provisions, plus a
percentage of such rent equal to the percentage change in the CPI between the
Commencement Date of this Lease and the period of holding over; or (b) one
hundred fifty percent (150%) of the average monthly Minimum Rent payable by
Tenant during the last twelve (12) months of the Lease Term or any extension or
renewal thereof. Any option, rights, or privileges granted to Tenant, if any,
to extend the Lease Term, to acquire the Premises, or re-lease the same, shall
not be applicable during said period of holding over.
ARTICLE XXV
GENERAL
25.1 REMEDIES CUMULATIVE. The specific remedies to which Landlord
may resort under the terms of this lease are cumulative and are not intended to
be exclusive of any other remedies or means of redress to which Landlord may be
lawfully entitled in case of any breach or threatened breach by Tenant of any
provision of this Lease.
25.2 SUCCESSORS AND ASSIGNS. The covenants and agreements herein
contained shall bind and inure to the benefit of Landlord, its successors and
assigns, and Tenant, its successors and assigns, subject to the provisions of
this Lease.
25.3 PAYMENTS AND INTEREST. Except as otherwise specifically
provided in this Lease, each covenant, agreement or stipulation by a party
hereto shall be performed at such party's own cost and expense, and without cost
or expense to the other party. Any monetary obligations due from Tenant to
Landlord which are not paid when due shall bear interest from the due date until
paid to Landlord at the Lease Interest Rate. Such interest shall be paid at the
time of payment of the principal obligation as a condition of remedy of such
principal obligation. Any check tendered by Tenant which is dishonored by the
drawee bank shall not constitute payment of any obligation under this Lease.
25.4 LATE CHARGE. Tenant acknowledges that late payment of Minimum
Rent and items designated in this Lease as additional rent will cause Landlord
to incur costs and suffer damages not contemplated by this Lease, the exact
amount of which will be impracticable to ascertain. Such costs and damages
include, but are not limited to, late charges which may be imposed on Landlord
by the terms of any trust deed covering the Premises; additional administrative
duties of Landlord's personnel; possible adverse effects on Landlord's credit
rating resulting from impairment of Landlord's cash flow; and attorneys' fees
resulting from consultations with counsel. Accordingly, if any installment of
Minimum Rent or items designated as additional rent are not received by Landlord
within ten (10) days after the same are due,
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Tenant shall pay Landlord, as additional rent, a late charge equal to five
percent (5%) of such overdue amount. Landlord and Tenant agree that such late
charge represents a fair, equitable, and reasonable estimate of the costs and
damages Landlord will incur because of Tenant's late payment.
25.5 LATE PAYMENTS AND IMPOUNDS. In the event that a late charge is
payable pursuant to Paragraph 25.4, whether or not collected, for two (2)
consecutive installments of rent, then rent shall automatically become due and
payable quarterly in advance, rather than monthly, notwithstanding Paragraph 4.1
or any other Provision of this Lease to the contrary. All monies paid to
Landlord under this paragraph may be intermingled with other monies of Landlord
and shall not bear interest. All advance payments provided for in this
Paragraph shall be deemed rent under this Lease.
25.6 NOTICES. Any notice or demand required or permitted by law or
by any of the provisions of this Lease shall be in writing. All notices or
demands by either party shall be deemed to have been properly given upon
delivery when served personally; two (2) business days after being deposited
with the U.S. Postal Service when sent by registered or certified mail, postage
prepaid; or by noon on the business day following the day of deposit with an
overnight express service, such as Federal Express. Notices from Landlord to
Tenant shall be given to Tenant at the address of the Premises, with a copy to
Teledyne, Inc., 1901 Avenue of the Stars, 18th Floor, Los Angeles, California
90067, Attention: Legal Department. Notices or demands to Landlord shall be
given to Landlord at 22010 Wilmington Avenue, Suite 400, Carson, California
90745. Either party hereto may change the place to which notices are to be
given by advising the other party in writing.
25.7 CAPTIONS. The headings or captions of Articles in this Lease
are for convenience and reference only, and they in no way define, limit or
describe the scope or intent of this Lease or the Provisions of such Articles.
25.8 PRONOUNS AND SINGULAR/PLURAL. Feminine or neuter pronouns shall
be substituted for those masculine form or vice versa, and the plural shall be
substituted for the singular number of vice versa, in the place or places herein
where the context may require such substitution or substitutions.
25.9 TIME OF ESSENCE. Time is hereby declared to be of the essence
of this Lease and of each and every covenant, term, condition or provision
hereof.
25.10 REASONABLE CONSENT. Unless otherwise provided in this Lease,
whenever the consent or approval of Landlord or Tenant is required by the
provisions of this Lease, such consent or approval shall not be unreasonably
withheld or delayed.
25.11 FAIR MEANING. The language in all parts of this Lease shall be
in all cases construed as a whole according to its fair meaning, and not
strictly for nor against either Landlord or Tenant.
25.12 ENTIRE AGREEMENT. This Lease contains all of the agreements of
the parties hereto with respect to any matter covered or mentioned in this
Lease, and no prior agreement or understanding pertaining to any such matter
shall be effective for any purpose. No provision of this Lease may be amended
or added to except by an agreement in writing signed by the parties hereto or
their respective successors in interest.
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25.13 NO ACCORD AND SATISFACTION. No payment by Tenant or receipt by
Landlord of a lesser amount than that stipulated herein for Minimum rent,
additional rent or any other charge shall be deemed to be other than on
account of the earliest stipulated Minimum Rent, additional rent or other
charge than due, nor shall any endorsement or statement on a check or letter
accompanying any check or payment be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to rights to
recover the balance of such Minimum Rent, additional rent, or other charges
or pursue any other remedy in this Lease, at law or in equity.
25.14 CHOICE OF LAW. This Lease shall be governed by and construed
pursuant to the laws of the State of California.
25.15 NON-DISCRIMINATION. Tenant herein covenants by and for
itself, its heirs, executors, administrators and assigns, and all persons
claiming under or through it; and this Lease is made and accepted upon and
subject to the following conditions: That there shall be no discrimination
against or segregation of any person or group of persons, on account of race,
color, creed, national origin, or ancestry in the leasing, subleasing,
transferring, use, occupancy, tenure or enjoyment of the Premises, nor shall
the Tenant itself, or any person claiming under or through it, establish or
permit any such practice or practices of discrimination or segregation with
reference to the selection, location, number, use or occupancy of Tenant's
lessees, sublessees or vendees on the Premises.
25.16 COUNTERPARTS. This Lease may be executed in several
counterparts, each of which shall constitute an original.
25.17 CORPORATE RESOLUTION. Tenant shall deliver to Landlord,
contemporaneously with delivery of this Lease executed by Tenant, a corporate
resolution or a letter from Tenant's legal department confirming that Tenant
has the corporate power and authority to enter into this Lease, and that the
persons executing this Lease are authorized to execute this Lease on behalf
of Tenant.
25.18 REIMBURSEMENTS TO LANDLORD. If Tenant, or any third party on
behalf of Tenant or with whom Tenant is engaged or contemplates engaging in
business, requests that Landlord review or approve any drawings,
specifications or engineering calculations respecting any improvements Tenant
intends to install in the Premises or execute any agreement or written
instrument; and if Landlord refers such matter to any architect, engineer,
surveyor or other professional or administrative personnel of Landlord or to
legal counsel for review and advice to Landlord, then Tenant agrees to
reimburse Landlord as additional rent for all professional fees and costs
incurred by Landlord at the actual cost thereof for persons not in the direct
employ of Landlord, and at the rate of Fifty Dollars ($50.00) per hour for
all time spent by professional and administrative persons in the direct
employ of Landlord. Notwithstanding the foregoing, Tenant shall not be
responsible for reimbursing Landlord for any such fees or costs relating to
the installation of any of Tenant's Special Manufacturing Improvements which
occurs prior to the expiration of the sixth (6th) month of the Lease Term. If
Tenant requests that Landlord consent to an assumption and/or assignment of
this Lease or a subletting of the Premises to a third party for which
Landlord's written consent is required, Tenant agrees to reimburse Landlord,
as additional rent, for all time spent by Landlord's administrative and
professional personnel, in reviewing the proposed form of all legal documents
submitted by Tenant and preparing necessary additional legal documents, in
evaluating the investigating the credit worthiness of the proposed assignee
or subtenant, in inspecting the Premises to determine if the same is in the
condition and state of repair as
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required by this Lease, in reviewing drawings and specifications for any
additional improvements to be made to the Premises; and for any other action
required in the reasonable judgment of Landlord. Landlord shall be reimbursed
at the rate of Fifty Dollars ($50.00) per hour for the time spent by its
administrative and professional personnel, and at the actual cost of
professional fees and costs incurred by Landlord for persons not in the direct
employ of Landlord, for each such request made by Tenant. The hourly fee
payable to Landlord's administrative and professional personnel under this
Paragraph shall be increased by the percentage increase in the Consumer Price
Index ("all items" index for urban wage earners and clerical workers, Los
Angeles/Anaheim/Riverside area, 1982-84 = 100) on each anniversary date of the
commencement of the term of this Lease.
25.19 NO GUARD SERVICE. Tenant hereby acknowledges that the rent
payable to Landlord hereunder does not include the cost of guard service or
other security measures, and that Landlord shall have no obligation whatsoever
to provide any such service or measures. Tenant assumes all responsibility for
the protection of Tenant, its agents and invitees from acts of third parties.
25.20 BROKERS. Tenant represents and warrants to Landlord that
Tenant has had no dealings with any real estate broker, finder or other person
with respect to this Lease in any manner, excepting only the brokers
specifically named in Item 1.12 of the Basic Lease Provisions. Tenant hereby
indemnifies and holds Landlord harmless from any liability or claim that may be
asserted against Landlord by any broker, finder or person with whom Tenant has
purportedly dealt whose name is not inserted in this paragraph.
25.21 BROKERAGE COMMISSION. Tenant acknowledges its understanding
that Landlord has paid a real estate brokerage commission for securing Tenant's
tenancy at the Premises for the term of this Lease. If Tenant defaults under
this Lease and discontinues paying the rent specified herein, Tenant shall,
within thirty (30) days of such event, reimburse Landlord for the unamortized
portion of such brokerage commission pursuant to the following formula:
Total amount of Number of months of
brokerage commission x unexpired lease term.
- -------------------------------------------------------------
Number of months of least term
Notwithstanding the foregoing, Landlord shall not be entitled to recover such
unamortized portions of the brokerage commission as provided in this Paragraph
25.21 if, following an uncured default under this Lease by Tenant, Landlord
elects to pursue its remedy against Tenant pursuant to California Civil Code
Section 1951.4.
25.22 PARKING. Tenant shall instruct and require that Tenant's
employees, agents, visitors and business invitees park motor vehicles within the
parking areas included in the Building Complex; and such employees, agent,
visitors and invitees shall not park on the streets within the Watson Industrial
Center. If there is insufficient parking area included on the Premises for
parking of such motor vehicles, Tenant shall use its best efforts to obtain off-
street parking privileges on other properties in the vicinity of the Premises.
25.23 LEASE REVIEWED. Landlord and Tenant have carefully read and
reviewed this Lease and each term and provision contained herein, and each of
them has referred this Lease to its own legal counsel for review and advice as
to the legal consequences of this Lease. Landlord and Tenant acknowledge their
informed and voluntary consent thereto. Landlord and Tenant
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further agree that, at the time this Lease is executed, the terms of this Lease
are commercially reasonable and effectuate the intent and purpose of Landlord
and Tenant with respect to the Premises.
25.24 FINANCIAL STATEMENTS. As a material inducement to Landlord's
execution of this Lease, Tenant hereby represents and warrants that Tenant has
furnished to Landlord the most current annual report for Teledyne, Inc.
Throughout the Lease Term, Tenant shall, within ten (10) days following
Landlord's request, provide Landlord with the most current annual report for
Teledyne, Inc. If Tenant assigns this Lease to any party other than an
Affiliate, such assignee shall deliver to Landlord, within ten (10) days
following Landlord's request, such assignee's then-current financial statements.
25.25 LEASE INTEREST RATE. As used in this Lease, the "Lease
Interest Rate" shall be a rate equal to two percent (2%) per year in excess of
the "Reference Rate" most recently announced by Bank of America, Los Angeles
from time to time, provided however that if Bank of America ceases to announce
such Reference Rate; and provided further, however, that in no event shall the
Lease Interest Rate exceed the highest lawful rate of interest permissible by
law.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first above written.
"LANDLORD" "TENANT"
WATSON LAND COMPANY, TELEDYNE, INC.,
a California corporation a Delaware corporation
By: /s/ By: /s/ Douglas I. Grant
-------------------------------- ------------------------------------
Its: President Its: Treasurer
---------------------------- --------------------------------
Date executed: 7-22-91 By: /s/ J. W. Dougherty
--------------------- ------------------------------------
Its: Manager, Real Estate
--------------------------------
Date executed: 7/17/91
-------------------------
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Exhibit 10.12
STANDARD INDUSTRIAL LEASE - SPECIAL NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Parties. This Lease, dated February 19, 1988, is made by and
between Richard F. Burns, J. Grant Monahon, and Lawrence W. Doyle, as
Trustees of AEW #113 Trust established under Declaration of Trust dated
January 19, 1988 (herein called "Lessor") and Vita-Fresh Vitamin Co., Inc., a
California corporation and Vital Industries, Inc. a California Corporation
(herein called "Lessee").
2. Premises. Lessor hereby leases to Lessee and Lessee leases from
Lessor for the term, at the rental, and upon all of the conditions set forth
herein, that certain real property situated in the County of Orange State of
California, commonly known as 7366 Orangewood Avenue, Garden Grove and
described as a manufacturing and distribution facility. Said real property
including the land and all improvements therein, is herein called "the
Premises".
3. Term.
3.1 Term. The term of this Lease shall be for the period
commencing on the date hereof and ending on January 31, 1988 unless sooner
terminated pursuant to any provision hereof.
3.2 Delay in Possession. Notwithstanding said commencement date,
if for any reason Lessor cannot deliver possession of the Premises to Lessee
on said date, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease or the obligations of
Lessee hereunder or extend the term hereof, but in such case, Lessee shall
not be obligated to pay rent until possession of the Premises is tendered to
Lessee; provided, however, that if Lessor shall not have delivered possession
of the Premises within sixty (60) days from said commencement date, Lessee
may, at Lessee's option, by notice in writing to Lessor within ten (10) days
thereafter, cancel this Lease, in which event the parties shall be discharged
from all obligations hereunder: provided further, however, that if such
written notice of Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease hereunder shall terminate and be
of no further force or effect.
4. Rent: Special Net Lease.
4.1 Rent. Lessee shall pay to Lessor as rent for the Premises,
monthly payments of $53,200, in advance, on the 1st day of each month of the
term hereof. Lessee shall pay Lessor upon the execution hereof
$________________ as rent for (Fixed
<PAGE>
monthly rental due hereunder shall be increased periodically pursuant to the
terms of the Addendum attached hereto.) Rent for any period during the term
hereof which is for less than one month shall be a pro rata portion of the
monthly installment. Rent shall be payable in lawful money of the United
States to Lessor at the address stated herein or to such other persons or at
such other places as Lessor may designate in writing.
4.2 Special Net Lease. This Lease is what is commonly called a
"Net, Net, Net Lease", it being understood that the Lessor shall receive the
rent set forth in Paragraph 4.1 free and clear of any and all other
impositions, taxes, liens, charges or expenses of any nature whatsoever in
connection with the ownership and operation of the Premises. In addition to
the rent reserved by Paragraph 4.1, Lessee shall pay to the parties
respectively entitled thereto all impositions, insurance premiums, operating
charges, maintenance charges, construction costs, and any other charges,
costs and expenses which arise or may be contemplated under any provisions
of this Lease during the term hereof. All of such charges, costs and
expenses shall constitute additional rent, and upon the failure of Lessee to
pay any of such costs, charges or expenses, Lessor shall have the same rights
and remedies as otherwise provided in this Lease for the failure of Lessee to
pay rent. It is the intention of the parties hereto that this Lease shall
not be terminable for any reason by the Lessee, and the Lessee shall in no
event be entitled to any abatement of or reduction in rent payable under this
Lease, except as herein expressly provided. Any present or future law to the
contrary shall not alter this agreement of the parties.
5. Security Deposit. Lessee shall deposit with Lessor upon
execution hereof $106,400 as security for Lessee's faithful performance of
Lessee's obligations hereunder. If Lessee fails to pay rent or other charges
due hereunder, or otherwise defaults with respect to any provision of this
Lease, Lessor may use, apply or retain all or any portion of said deposit for
the payment of any rent or other charge in default or for the payment of any
other sum to which Lessor may become obligated by reason of Lessee's default,
or to compensate Lessor for any loss or damage which Lessor may suffer
thereby. If Lessor so uses or applies all or any portion of said deposit,
Lessee shall within ten (10) days after written demand therefor deposit cash
with Lessor in an amount sufficient to restore said deposit to the full
amount hereinabove stated and Lessee's failure to do so shall be a material
breach of this Lease. If the monthly rent shall, from time to time, increase
during the term of this Lease, Lessee shall thereupon deposit with Lessor
additional security deposit so that the amount of security deposit held by
Lessor shall at all times bear the same proportion to current rent as the
original security deposit bears to the original monthly rent set forth in
paragraph 4 hereof. Lessor shall not be required to keep said deposit
separate from its general accounts. If Lessee performs all of Lessee's
obligations hereunder, said deposit, or so much thereof as has not
theretofore been applied by Lessor, shall be returned to Lessee (or, at
Lessor's
2
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option, to the last assignee, if any, of Lessee's interest hereunder) at the
expiration of the term hereof, and after Lessee has vacated the Premises. No
trust relationship is created herein between Lessor and Lessee with respect
to said Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only for (See
Addendum) and for no other purpose.
6.2 Compliance with Law. Lessee shall, at Lessee's expense, comply
promptly with all applicable statutes, ordinances, rules, regulations,
orders, covenants and restrictions of record, and requirements in effect
during the term or any part of the term hereof, regulating the use by Lessee
of the Premises. Lessee shall not use nor permit the use of the Premises in
any manner that will tend to create waste or a nuisance or, if there shall be
more than one tenant in the building containing the Premises, shall tend to
disturb such other tenants.
6.3 Condition of Premises. Lessee hereby accepts the Premises in
their condition existing as of the Lease commencement date or the date that
Lessee takes possession of the Premises, whichever is earlier, subject to all
applicable zoning, municipal, county and state laws, ordinances and
regulations governing and regulating the use of the Premises, and any
covenants or restrictions of record, and accepts this Lease subject thereto
and to all matters disclosed thereby and by any exhibits attached hereto.
Lessee acknowledges that neither Lessor nor Lessor's agent has made any
representation or warranty as to the present or future suitability of the
Premises for the conduct of Lessee's business.
SPECIAL NET
(This is a special form containing unique provisions and should only
be used in special situations where the LESSEE will pay rent under
all circumstances and in the event of destruction the LESSEE will
rebuild under all circumstances.)
7. Maintenance, Repairs and Alterations.
7.1 Lessee's Obligations. Lessee shall keep in good order,
condition and repair the Premises and every part thereof, structural and non
structural, (whether or not such portion of the Premises requiring repair, or
the means of repairing the same are reasonably or readily accessible to
Lessee, and whether or not the need for such repairs occurs as a result of
Lessee's use, any prior use, the elements or the age of such portion
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of the Premises) including, without limiting the generality of the foregoing,
all plumbing, heating, air conditioning. (Lessee shall procure and maintain,
at Lessee's expense, an air conditioning system maintenance contract)
ventilating, electrical, lighting facilities and equipment within the
Premises, fixtures, walls (interior and exterior), foundations, ceilings,
roofs (interior and exterior), floors, windows, doors, plate glass and
skylights located within the Premises, and all landscaping, driveways,
parking lots, fences and signs located on the Premises and sidewalks and
parkways adjacent to the Premises.
7.2 Surrender. On the last day of the term hereof, or on any
sooner termination, Lessee shall surrender the Premises to Lessor in the same
condition as when received, ordinary wear and tear excepted, clean and free
of debris. Lessee shall repair any damage to the Premises occasioned by the
installation or removal of Lessee's trade fixtures, furnishings and
equipment. Notwithstanding anything to the contrary otherwise stated in
this Lease, Lessee shall leave the air lines, power panels, electrical
distribution systems, lighting fixtures, space heaters, air conditioning,
plumbing and fencing on the premises in good operating condition.
7.3 Lessor's Rights. If Lessee fails to perform Lessee's
obligations under this Paragraph 7, or under any other paragraph of this
Lease, Lessor may at its option (but shall not be required to) enter upon the
Premises after ten (10) days' prior written notice to Lessee (except in the
case of an emergency, in which case no notice shall be required), perform
such obligations on Lessee's behalf and put the same in good order, condition
and repair and the cost thereof together with interest thereon at the
maximum rate than allowable by law shall become due and payable as additional
rental to Lessor together with Lessee's next rental installment.
7.4 Lessor's Obligations. Except for the obligations of Lessor
under Paragraph 14 (relating to condemnation of the Premises), it is intended
by the parties hereto that Lessor have no obligation, in any manner
whatsoever, to repair and maintain the Premises nor the building located
thereon nor the equipment therein, whether structural or non structural, all
of which obligations are intended to be that of the Lessee under Paragraph
7.1 hereof. Lessee expressly waives the benefit of any statute now or
hereinafter in effect which would otherwise afford Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the premises in good order, condition and repair.
7.5 Alterations and Additions.
(a) In any event, Lessee shall make no change or alteration to the
exterior of the Premises nor the exterior of the building(s) on the Premises
without Lessor's prior written consent. As used in this Paragraph 7.5 the
term "Utility
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Installation" shall mean carpeting, window coverings, air lines, power
panels, electrical distribution systems, lighting fixtures, space heaters,
air conditioning, plumbing, and fencing. Lessor may require that Lessee
remove any or all of said alterations, improvements, additions or Utility
Installations at the expiration of the term, and restore the Premises to
their prior condition. Lessor may require Lessee to provide Lessor, at
Lessee's sole cost and expense, a lien and completion bond in an amount equal
to one and one-half times the estimated cost of such improvements, to insure
Lessor against any liability for mechanic's and materialmen's liens and to
insure completion of the work. Should Lessee make any alterations,
improvements, additions or Utility Installations without the prior approval
of Lessor, Lessor may require that Lessee remove any or all of the same.
(b) Any alterations, improvements, additions or Utility
Installations in, or about the Premises that Lessee shall desire to make and
which requires the consent of the Lessor shall be presented to Lessor in
written form, with proposed detailed plans. If Lessor shall give its
consent, the consent shall be deemed conditioned upon Lessee acquiring a
permit to do so from appropriate governmental agencies, the furnishing of a
copy thereof to Lessor prior to the commencement of the work and the
compliance by Lessee of all conditions of said permit in a prompt and
expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Lessee
shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in the Premises, and Lessor shall have the right to
post notices of non-responsibility in or on the Premises as provided by law.
If Lessee shall, in good faith, contest the validity of any such lien, claim
or demand, then Lessee shall, at its sole expense defend itself and Lessor
against the same and shall pay and satisfy any such adverse judgment that may
be rendered thereon before the enforcement thereof against the Lessor or the
Premises, upon the condition that if Lessor shall require, Lessee shall
furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to
such contested lien claim or demand indemnifying Lessor against liability for
the same and holding the Premises free from the effect of such lien or claim.
In addition, Lessor may require Lessee to pay Lessor's attorneys fees and
costs in participating in such action if Lessor shall decide it is to its
best interest to do so.
(d) Unless Lessor requires their removal, as set forth in Paragraph
7.5(a), all alterations, improvements, additions and Utility Installations
(whether or not such Utility Installations constitute trade fixtures of
Lessee), which may be made on the Premises, shall become the property of
Lessor and remain upon and be surrendered with the Premises at the expiration
of the term. Notwithstanding the provisions of this
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Paragraph 7.5(d), Lessee's machinery and equipment, other than that which is
affixed to the Premises so that it cannot be removed without material damage
to the Premises, shall remain the property of Lessee and may be removed by
Lessee subject to the provisions of Paragraph 7.2.
8. Insurance Indemnity.
8.1 Insuring Party. As used in this Paragraph 8, the term
"insuring party" shall mean the party who has the obligation to obtain the
Property Insurance required hereunder. The insuring party shall be
designated in Paragraph 46 hereof. Whether the insuring party is the Lessor
or the Lessee, Lessee shall, as additional rent for the Premises, pay the
cost of all insurance required hereunder. If Lessor is the insuring party
Lessee shall, within ten (10) days following demand by Lessor, reimburse
Lessor for the cost of the insurance so obtained.
8.2 Liability Insurance. Lessee shall, at Lessee's expense obtain
and keep in force during the term of this Lease a policy of Combined Single
Limit, Bodily Injury and Property Damage insurance insuring Lessor and Lessee
against any liability arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such
insurance shall be a combined single limit policy in an amount not less than
$500,000 per occurrence. The policy shall insure performance by Lessee of
the indemnity provisions of this Paragraph 8. The limits of said insurance
shall not, however, limit the liability of Lessee hereunder.
8.3 Property Insurance.
(a) The insuring party shall obtain and keep in force during the
term of this Lease a policy or policies of insurance covering loss or damage
to the Premises, in the amount of the full replacement value thereof, as the
same may exist from time to time, which replacement value is now $_________,
but in no event less than the total amount required by lenders having liens
on the Premises, against all perils included within the classification of
fire, extended coverage, vandalism, malicious mischief, flood (in the event
same is required by a lender having a lien on the Premises), and special
extended perils ("all risk" as such term is used in the insurance industry).
Said insurance shall provide for payment of loss thereunder to Lessor or to
the holders of mortgages or deeds of trust on the Premises. The insuring
party shall, in addition, obtain and keep in force during the term of this
Lease a policy of rental value insurance covering a period of one year, with
loss payable to Lessee, which insurance shall also cover all real estate
taxes and insurance costs for said period. A stipulated value or agreed
amount endorsement deleting the coinsurance provision of the policy shall be
procured with said insurance as well as an automatic increase in insurance
endorsement
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causing the increase in annual property insurance coverage by 2% per quarter.
If the insuring party shall fail to procure and maintain said insurance the
other party may, but shall not be required to, procure and maintain the same,
but at the expense of Lessee. If such insurance coverage has a deductible
clause, the deductible amount shall not exceed $1,000 per occurrence, and
Lessee shall be labile for such deductible amount.
(b) If the Premises are part of a larger building, or if the
Premises are part of a group of buildings owned by Lessor which are adjacent
to the Premises, then Lessee shall pay for any increase in the property
insurance of such other building or buildings if said increase is caused by
Lessee's acts, omissions, use or occupancy of the Premises.
(c) If the Lessor is the insuring party the Lessor will not insure
Lessee's fixtures, equipment or tenant improvements unless the tenant
improvements have become a part of the Premises under paragraph 7, hereof.
But if Lessee is the insuring party the Lessee shall insure its fixtures,
equipment and tenant improvements.
8.4 Insurance Policies. Insurance required hereunder shall be in
companies holding a "General Policyholders Rating" of at least B plus, or
such other rating as may be required by a lender having a lien on the
Premises, as set forth in the most current issues of "Best's Insurance
Guide". The insuring party shall deliver to the other party copies of
policies of such insurance or certificates evidencing the existence and
amounts of such insurance with loss payable clauses as required by this
paragraph 8. No such policy shall be cancellable or subject to reduction of
coverage or other modification except after thirty (30) days' prior written
notice to Lessor. If Lessee is the insuring party Lessee shall, at least
thirty (30) days prior to the expiration of such policies, furnish Lessor
with renewals or "binders" thereof, or Lessor may order such insurance and
charge the cost thereof to Lessee, which amount shall be payable by Lessee
upon demand. Lessee shall not do or permit to be done anything which shall
invalidate the insurance policies referred to in Paragraph 8.3. If Lessee
does or permits to be done anything which shall increase the cost of the
insurance policies referred to in Paragraph 8.3, then Lessee shall forthwith
upon Lessor's demand reimburse Lessor for any additional premiums
attributable to any act or omission or operation of Lessee causing such
increase in the cost of insurance. If Lessor is the insuring party, and if
the insurance policies maintained hereunder cover other improvements in
addition to the Premises, Lessor shall deliver to lessee a written statement
setting forth the amount of any such insurance cost increase and showing in
reasonable detail the manner in which it has been computed.
8.5 Waiver of Subrogation. Lessee and Lessor each hereby release
the other, and waive their entire right of recovery against the other for
loss or damage
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arising out of or incident to the perils insured against under paragraph 8.3,
which perils occur in, on or about the Premises, whether due to the
negligence of Lessor or Lessee or their agents, employees, contractors and/or
invitees. Lessee and Lessor shall, upon obtaining the policies of insurance
required hereunder, give notice to the insurance carrier or carriers that the
foregoing mutual waiver of subrogation is contained in this Lease.
8.6 Indemnity. Lessee shall indemnify and hold harmless Lessor
from and against any and all claims arising from Lessee's use of the
Premises, or from the conduct of Lessee's business or from any activity, work
or things done, permitted or suffered by Lessee in or about the Premises or
elsewhere and shall further indemnify and hold harmless Lessor from and
against any and all claims arising from any breach or default in the
performance of any obligation on Lessee's part to be performed under the
terms of this Lease, or arising from any negligence of the Lessee, or any of
Lessee's agents, contractors, or employees, and from and against all costs,
attorney's fees, expenses and liabilities incurred in the defense of any such
claim or any action or proceeding brought thereon except to the extent that
any such claim arises out of the gross negligence or wilful misconduct of
Lessor or its agents; and in case any action or proceeding be brought against
Lessor by reason of any such claim, Lessee upon notice from Lessor shall
defend the same at Lessee's expense by counsel satisfactory to Lessor.
Lessee, as a material part of the consideration to Lessor, hereby assumes all
risk of damage to property or injury to persons, in, upon or about the
Premises arising from any cause and Lessee hereby waives all claims in
respect thereof against Lessor.
8.7 Exemption of Lessor from Liability. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of
income therefrom or for damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other
person in or about the Premises, nor shall Lessor be liable for injury to the
person of Lessee, Lessee's employees, agents or contractors, whether such
damage or injury is caused by or results from fire, steam, electricity, gas,
water or rain, or from the breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether the said damage or injury results
from conditions arising upon the Premises or upon other portions of the
building of which the Premises are a part, or from other sources or places
and regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Lessee. Lessor shall not be liable for
any damages arising from any act or neglect of any other tenant, if any, of
the building in which the Premises are located.
9. Damage, Destruction, Obligation to Rebuild, Rent Abatement.
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9.1 Obligation to Rebuild. In the event that some or all of the
improvements constituting a part of the Premises or the Premises itself are
damaged or destroyed, partially or totally from any cause whatsoever, whether
or not such damage or destruction is covered by any insurance required to be
maintained under Paragraph 8.3 hereof then Lessee shall repair, restore and
rebuild the Premises to its condition existing immediately prior to such
damage or destruction and this Lease shall remain in full force and effect.
Such repair, restoration and rebuilding (all of which are herein called
"repair") shall be commenced within a reasonable time after such damage or
destruction has occurred and shall be diligently pursued to completion.
9.2 Insurance Proceeds. The proceeds of any insurance maintained
under Paragraph 8.3 hereof shall be made available to Lessee for payment of
costs and expense of repair, provided however, that such proceeds may be made
available to Lessee subject to reasonable conditions, including, but not
limited to architect's certification of cost, retention of percentage of such
proceeds pending recordation of a notice of completion and a lien and
completion bond to insure against mechanic's or materialmen's liens arising
out of the repair and to insure completion of the repair, all at the expense
of Lessee. In the event the insurance proceeds are insufficient to cover the
cost of repair, then any amounts required over the amount of the insurance
proceeds received that are required to complete said repair shall be paid by
Lessee. In the event the insurance proceeds are not made available to Lessee
within 120 days after such damage or destruction, unless the amount of
insurance coverage is in dispute with the insurance carrier, Lessee shall
have the option for 30 days commencing on the expiration of such 120 day
period, of cancelling this Lease. If Lessee shall exercise such option,
Lessee shall have no further obligation hereunder and shall have no claim
against Lessor. Lessee, in order to exercise said option, shall exercise
said option by giving written notice to Lessor within said 30 day period,
time being of the essence.
9.3 Damage Near End of Term.
(a) If the Premises are damaged or destroyed, either partially or
totally, during the last six months of the term of this Lease, Lessor may at
Lessor's option cancel and terminate this Lease as of the date of occurrence
of such damage by giving written notice to Lessee of Lessor's election to do
so within 30 days after the date of occurrence of such damage.
(b) Notwithstanding paragraph 9.3(a) to the contrary, in the event
that Lessee has an option to extent or renew this Lease, and the time within
which said option may be exercised has not yet expired, Lessee shall exercise
such option, if it is to be exercised at all, no later than 20 days after
damage or destruction to the Premises, either total or partial occurring
during the last six months of the term of this Lease, which
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damage or destruction is covered by insurance required to be maintained under
paragraph 8. If Lessee duly exercises such option during said 20 day period,
Lessee shall, in accordance with paragraph 9.2 at Lessee's expense, repair
such damage as soon as reasonably possible and this Lease shall continue in
full force and effect. If Lessee fails to exercise such option during said 20
day period, the Lessor may at Lessor's option terminate and cancel this Lease
as of the expiration of said 20 day period by giving written notice to Lessee
of Lessor's election to do so within 10 days after the expiration of said 20
day period, notwithstanding any term or provision in the grant of option to
the contrary.
9.4 Abatement of Rent. Notwithstanding the partial or total
destruction of the Premises and any part thereof, and notwithstanding whether
the casualty is insured or not, there shall be no abatement of rent or of any
other obligation of Lessee hereunder by reason of such damage or destruction
unless the Lease is terminated by virtue of any other provision of this Lease.
9.5 Termination -- Advance Payments. Upon termination of this
Lease pursuant to this Paragraph 9, an equitable adjustment shall be made
concerning advance rent and any advance payments made by Lessee or Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's security
deposit as has not theretofore been applied by Lessor.
9.6 Waiver. Lessee waives the provisions of any statutes which
relate to termination of leases when the thing leased is destroyed and agrees
that such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessee shall pay the real property tax, as
defined in paragraph 10.2, applicable to the Premises during the term of this
Lease. All such payments shall be made at lease ten (10) days prior to the
delinquency date of such payment. Lessee shall promptly furnish Lessor with
satisfactory evidence that such taxes have been paid. If any such taxes paid
by Lessee shall cover any period of time prior to or after the expiration of
the term hereof, Lessee's share of such taxes shall be equitably prorated to
cover only the period of time within the tax fiscal year during which this
Lease shall be in effect, and Lessor shall reimburse Lessee to the extent
required. If Lessee shall fail to pay any such taxes, Lessor shall have the
right to pay the same, in which case Lessee shall repay such amount to Lessor
with Lessee's next rent installment together with interest at the maximum
rate then allowable by law.
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10.2 Definition of "Real Property Tax." As used herein, the term
"real property tax" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed on the Premises by any authority
having the direct or indirect power to tax, including any city, state or
federal government, or any school, agricultural, sanitary, fire, street,
drainage or other improvement district thereof, as against any legal or
equitable interest of Lessor in the Premises or in the real property of which
the Premises are a part, as against Lessor's right to rent or other income
therefrom, and as against Lessor's business of leasing the Premises. The
term "real property tax" shall also include any tax, fee, levy, assessment or
charge (i) in substitution of, partially or totally, any tax, fee, levy,
assessment or charge hereinabove included within the definition of "real
property tax," or (ii) the nature of which was hereinbefore included within
the definition of "real property tax," or (iii) which is imposed for a
service or right not charged prior to June 1, 1978, or, if previously
charged, has been increased since June 1, 1978, or (iv) which is imposed as a
result of a transfer, either partial or total, of Lessor's interest in the
Premises or which is added to a tax or charge hereinbefore included within
the definition of real property tax by reason of such transfer, or (v) which
is imposed by reason of this transaction, any modifications or changes
hereto, or any transfers hereof.
10.3 Joint Assessment. If the Premises are not separately
assessed, Lessee's liability shall be an equitable proportion of the real
property taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the
respective valuations assigned in the assessor's work sheets or such other
information as may be reasonably available. Lessor's reasonable determination
thereof, in good faith, shall be conclusive.
10.4 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Lessee contained in the Premises or elsewhere. When
possible, Lessee shall cause said trade fixtures, furnishings, equipment and
all other personal property to be assessed and billed separately from the
real property of Lessor.
(b) If any of the Lessee's said personal property shall be assessed
with Lessor's real property, Lessee shall pay Lessor the taxes attributable
to Lessee within 10 days after receipt of a written statement setting forth
the taxes applicable to Lessee's property.
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11. Utilities. Lessee shall pay for all water, gas, heat, light,
power, telephone and other utilities and services supplied to the Premises,
together with any taxes thereon. If any such services are not separately
metered to Lessee, Lessee shall pay a reasonable proportion to be determined
by Lessor of all charges jointly metered with other premises.
12. Assignment and Subletting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in this Lease or in the
Premises, without Lessor's prior written consent, which Lessor shall not
unreasonably withhold. Lessor shall respond to Lessee's request for consent
hereunder in a timely manner and any attempted assignment, transfer,
mortgage, encumbrance or subletting without such consent shall be void, and
shall constitute a breach of this Lease.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph
12.1 hereof, Lessee may assign or sublet the Premises, or any portion
thereof, without Lessor's consent, to any corporation which controls, is
controlled by or is under common control with Lessee, or to any corporation
resulting from the merger or consolidation with Lessee, or to any person or
entity which acquires all the assets of Lessee as a going concern of the
business that is being conducted on the Premises, provided that said assignee
assumes, in full, the obligations of Lessee under this Lease. Any such
assignment shall not, in any way, affect or limit the liability of Lessee
under the terms of this Lease even if after such assignment or subletting the
terms of this Lease are materially changed or altered without the consent of
Lessee, the consent of whom shall not be necessary.
12.3 No Release of Lessee. Regardless of Lessor's consent, no
subletting or assignment shall release Lessee or Lessee's obligation or alter
the primary liability of Lessee to pay the rent and to perform all other
obligations to be performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed to be a waiver by Lessor of
any provision hereof. Consent to one assignment ro subletting shall not be
deemed consent to any subsequent assignment or subletting. In the event of
default by any assignee of Lessee or any successor or Lessee, in the
performance of any of the terms hereof. Lessor may proceed directly against
Lessee without the necessity of exhausting remedies against said assignee.
Lessor may consent to subsequent assignments or subletting of this Lease or
amendments or modifications to this Lease with assignees of Lessee, without
notifying Lessee, or any successor of Lessee, and without obtaining its or
their consent thereto and such action shall not relieve Lessee of liability
under this Lease.
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12.4 Attorney's Fees. In the event Lessee shall assign or sublet
the Premises or request the consent of Lessor to any assignment or subletting
or if Lessee shall request the consent of Lessor for any act Lessee proposes
to do then Lessee shall pay Lessor's reasonable attorneys fees incurred in
connection therewith, such attorneys fees not to exceed $350,000 for each
such request.
13. Default; Remedies.
13.1 Defaults. The occurrence of any one or more of the following
events shall constitute a material default and breach of this Lease by Lessee:
(a) The abandonment of the Premises by Lessee.
(b) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of five business days after written
notice thereof from Lessor to Lessee. In the event that Lessor serves Lessee
with a Notice to Pay Rent or Quit within five business days pursuant to
applicable Unlawful Detainer statutes such 5-business-day Notice to Pay Rent
or Quit shall also constitute the notice required by the subparagraph.
(c) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed
by Lessee, other than described in paragraph (b) above, where such failure
shall continue for a period of 30 days after written notice thereof from
Lessor to Lessee; provided, however, that if the nature of Lessee's default
is such that more than 30 days are reasonably required for its cure, then
Lessee shall not be deemed to be in default if Lessee commenced such cure
within said 30-day period and thereafter diligently prosecutes such cure to
completion.
(d) (i) The making by Lessee of any general arrangement or
assignment for the benefit of creditors; (ii) Lessee becomes a "debtor" as
defined in 11 U.S.C. Section 101 or any successor statute thereto (unless, in
the case of a petition filed against Lessee, the same is dismissed within 60
days); (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within 30
days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises of Lessee's
interest in this Lease, where such seizure is not discharged within 30 days.
Provided, however, in the event that any provision of this paragraph
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13.1(d) is contrary to any applicable law, such provision shall be of no
force or effect.
(e) The discovery by Lessor that any financial statement given to
Lessor by Lessee, any assignee of Lessee, any successor in interest of Lessee
or any guarantor of Lessee's obligation hereunder, and any of them, was
materially false.
13.2 Remedies. In the event of any such material default or breach
by Lessee, Lessor may at any time thereafter, with or without notice or
demand and without limiting Lessor in the exercise of any right or remedy
which Lessor may have by reason of such default or breach:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. In such event
Lessor shall be entitled to recover from Lessee all damages incurred by
Lessor by reason of Lessee's default including, but not limited to, the cost
of recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorney's
fees, and any real estate commission actually paid; the worth at the time of
award by the court having jurisdiction thereof of the amount by which the
unpaid rent for the balance of the term after the time of such award exceeds
the amount of such rental loss for the same period that Lessee proves could
be reasonably avoided; that portion of the leasing commission paid by Lessor
pursuant to Paragraph 15 applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have abandoned the
Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent
as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located. Unpaid installments of rent and other unpaid monetary obligations
of Lessee under the terms of this Lease shall bear interest from the date due
at the maximum rate then allowable by law.
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13.3 Default by Lessor. Lessor shall not be in default unless
Lessor fails to perform obligations required of Lessor within a reasonable
time, but in no event later than thirty (30) days after written notice by
Lessee to Lessor and to the holder of any first mortgage or deed of trust
covering the Premises whose name and address shall have theretofore been
furnished to Lessee in writing, specifying wherein Lessor has failed to
perform such obligation; provided, however, that if the nature of Lessor's
obligation is such that more than thirty (30) days are required for
performance then Lessor shall not be in default if Lessor commences
performance within such 30-day period and thereafter diligently prosecutes
the same to completion.
13.4 Late Charges. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited
to, processing and accounting charges, and late charges which may be imposed
on Lessor by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee
shall not be received by Lessor or Lessor's designee within ten (10) days
after such amount shall be due, then, without any requirement for notice to
Lessee, Lessee shall pay to Lessor a late charge equal to 6% of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment
by Lessee. Acceptance of such late charge by lessor shall in no event
constitute a waiver of Lessee's default with respect to such overdue amount,
nor prevent Lessor from exercising any of the other rights and remedies
granted hereunder. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) consecutive installments of rent,
then rent shall automatically become due and payable quarterly in advance,
rather than monthly, notwithstanding paragraph 4 or any other provision of
this Lease to the contrary.
13.5 Impounds. In the event that a late charge is payable
hereunder, whether or not collected, for three (3) installments of
rent,(1) Lessee shall pay to Lessor, if Lessor shall so request, in addition
to any other payments required under this Lease, a monthly advance
installment, payable at the same time as the monthly rent, as estimated by
Lessor, for real property tax and insurance expenses on the Premises which
are payable by Lessee under the terms of this Lease. Such fund shall be
established to insure payment when due, before delinquency, of any or all
such real property taxes and insurance premiums. If the amounts paid to
Lessor by Lessee under the provisions of this paragraph are insufficient to
discharge the obligations of Lessee to pay such real property taxes and
insurance premiums as the same become due, Lessee shall pay to Lessor, upon
Lessor's demand, such additional sums necessary to pay such obligations.
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1 or other sums due Lessor under the Lease, or for late payments of insurance
premiums or real property taxes
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All moneys paid to Lessor under this paragraph may be intermingled with other
moneys of Lessor and shall not bear interest. In the event of a default in
the obligations of Lessee to perform under this Lease, then any balance
remaining from paid to Lessor under the provisions of this paragraph may, at
the option of Lessor, be applied to the payment of any monetary default of
Lessee in lieu of being applied to the payment of real property tax and
insurance premiums.
14. Condemnation. If the Premises or any portion thereof are taken
under the power of eminent domain, or sold under the threat of the exercise
of said power (all of which are herein called "condemnation") this Lease
shall terminate as to the part so taken as of the date the condemning
authority takes title or possession, whichever first occurs. If more than
10% of the floor area of the building on the Premises, or more than 25% of
the land area of the Premises which is not occupied by any building, is taken
by condemnation, Lessee may, at Lessee's option, to be exercised in writing
only within ten (10) days after Lessor shall have given Lessee written notice
of such taking (or in the absence of such notice, within ten (10) days after
the condemning authority shall have taken possession) terminate this Lease as
of the date the condemning authority takes such possession. If Lessee does
not terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Premises remaining,
except that the rent shall be reduced in the proportion that the floor area
of the building taken bears to the total floor area of the building situated
on the Premises. No reduction of rent shall occur if the only area taken is
that which does not have building located thereon. Any award for the taking
of all or any part of the Premises under the power of eminent domain or any
payment made under threat of the exercise of such power shall be the property
of Lessor, whether such award shall be made as compensation for dimunition in
value of the leasehold or for the taking of the fee, or as severance damages;
provided, however, that Lessee shall be entitled to any award for loss of or
damage to Lessee's trade fixtures and removable personal property. In the
event that this Lease is not terminated by reason of such condemnation,
Lessor shall to the extent of severance damages received by Lessor in
connection with such condemnation, repair any damage to the Premises caused
by such condemnation except to the extent that Lessee has been reimbursed
therefor by the condemning authority. Lessee shall pay any amount in excess
of such severance damages required to complete such repair.
16. Estoppel Certificate.
(a) Lessee shall at any time upon not less than ten (10) days'
prior written notice from Lessor execute, acknowledge and deliver to Lessor
a statement in writing (i) certifying that this Lease is unmodified and in
full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is
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in full force and effect) and the date to which the rent and other charges
are paid in advance, if any, and (ii) acknowledging that there are not, to
Lessee's knowledge, any uncured defaults on the part of Lessor hereunder, or
specifying such defaults if any are claimed. Any such statement may be
conclusively relied upon by any prospective purchaser of encumbrancer of the
Premises.
(b) At Lessor's option, Lessee's failure to deliver such statement
within such time shall be a material breach of this Lease or shall be
conclusive upon Lessee (i) that this Lease is in full force and effect,
without modification except as may be represented by Lessor, (ii) that there
are no uncured defaults in Lessor's performance, and (iii) that not more than
one month's rent has been paid in advance or such failure may be considered
by Lessor as a default by Lessee under this Lease.
(c) If Lessor desires to finance, refinance, or sell the Premises,
or any part thereof, Lessee hereby agrees to deliver to any lender or
purchaser designated by Lessor such financial statements of Lessee as may be
reasonably required by such lender or purchaser. Such statements shall
include the past three years' financial statements of Lessee. All such
financial statements shall be received by Lessor and such lender or purchaser
in confidence and shall be used only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall
mean only the owner or owners at the time in question of the fee title and,
in the event of any transfer of such title or interest, Lessor herein named
(and in case of any subsequent transfers then the grantor) shall be relieved
from and after the date of such transfer of all liability as respects
Lessor's obligations thereafter to be performed, provided that any funds in
the hands of the Lessor or the then grantor at the time of such transfer, in
which Lessee has an interest, shall be delivered to the grantee. The
obligations contained in this Lease to be performed by Lessor shall, subject
as aforesaid, be binding on Lessor's successors and assigns, only during
their respective periods of ownership.
18. Severability. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. Interest on Past-due Obligations. Except as expressly herein
provided, any amount due to Lessor not paid when due shall bear interest at
the maximum rate then allowable by law from the date due. Payment of such
interest shall not excuse or cure any default by Lessee under this Lease,
provided, however, that interest shall not be payable on late charges
incurred by Lessee nor on any amounts upon which late charges are paid by
Lessee.
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20. Time of Essence. Time is of the essence.
21. Additional Rent. Any monetary obligations of Lessee to Lessor
under the terms of this Lease shall be deemed to be rent.
22. Incorporation of Prior Agreements; Amendments. This Lease
contains all agreements of the parties with respect to any matter mentioned
herein. No prior agreement or understanding pertaining to any such matter
shall be effective. This Lease may be modified in writing only, signed by
the parties in interest at the time of the modification. Except as otherwise
stated in this Lease, Lessee hereby acknowledges that neither the real estate
broker listed in Paragraph 15 hereof nor any cooperating broker on this
transaction nor the Lessor or any employees or agents of a . . . . said
persons has made any oral or written warranties or representations to Lessee
relative to the condition or use by Lessee of said Premises and Lessee
acknowledges that Lessee assumes all responsibility regarding the
Occupational Safety Health Act, the legal use and adaptability of the
Premises and the compliance thereof with all applicable laws and regulations
in effect during the term of this Lease except as otherwise specifically
stated in this Lease.
23. Notices. Any notice required or permitted to be given
hereunder shall be in writing and may be given by personal delivery or by
certified mail, and if given personally or by mail, shall be deemed
sufficiently given if addressed to Lessee or to Lessor at the address noted
below the signature of the respective parties, as the case may be. Either
party may by notice to the other specify a different address for notice
purposes except that upon Lessee's taking possession of the Premises, the
Premises shall constitute Lessee's address for notice purposes. A copy of
all notices required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by notice to Lessee.
24. Waivers. No waiver by Lessor or any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent breach by
Lessee of the same or any other provision. Lessor's consent to, or approval
of, any acts shall not be deemed to render unnecessary the obtaining of
Lessor's consent to or approval of any subsequent act by Lessee. The
acceptance of rent hereunder by Lessor shall not be a waiver of any preceding
breach by Lessee of any provision hereof, other than the failure of Lessee to
pay the particular rent so accepted, regardless of Lessor's knowledge of such
preceding breach at the time of acceptance of such rent.
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26. Holding Over. If Lessee, with Lessor's consent, remains in
possession of the Premises or any part thereof after the expiration of the
term hereof, such occupancy shall be a tenancy from month to month upon all
the provisions of the Lease pertaining to the obligations of Lessee, but all
options and rights of first refusal, if any, granted under the terms of this
Lease shall be deemed terminated and be of no further effect during said
month to month tenancy.
27. Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
28. Covenants and Conditions. Each provision of this Lease
performable by Lessee shall be deemed both a covenant and a condition.
29. Binding Effect; Choice of Law. Subject to any provisions
hereof restricting assignment or subletting by Lessee and subject to the
provisions of Paragraph 17, this Lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State wherein the Premises are located.
30. Subordination.
(a) This Lease, at Lessor's option, shall be subordinate to any
ground lease, mortgage, deed of trust, or any other hypothecation or security
not or hereafter placed upon the real property of which the Premises are a
part and to any and all advances made on the security thereof and to all
renewals, modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of
the Premises shall not be disturbed if Lessee is not in default and so long
as Lessee shall pay the rent and observe and perform all of the provisions of
this Lease, unless this Lease is otherwise terminated pursuant to its terms.
If any mortgagee, trustee or ground lessor shall elect to have this Lease
prior to the lien of its mortgage, deed of trust or ground lease, and shall
give written notice thereof to Lessee, this Lease shall be deemed prior to
such mortgage, deed of trust, or ground lease, whether this Lease is dated
prior or subsequent to the date of said mortgage, deed of trust or ground
lease or the date of recording thereof.
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(b) Lessee agrees to execute any documents reasonably required to
effectuate an attornment, a subordination or to make this Lease prior to the
lien of any mortgage, deed of trust or ground lease, as the case may be.
Lessee's failure to execute such documents within 10 days after written
demand shall constitute a material default by Lessee hereunder.
31. Attorney's Fees. If either party or the broker named herein
brings an action to enforce the terms hereof or declare rights hereunder, the
prevailing party in any such action, on trial or appeal, shall be entitled to
his reasonable attorney's fees to be paid by the losing party as fixed by the
court.
32. Lessor's Access. Lessor and Lessor's agents shall have the
right to enter the Premises at reasonable times during normal business hours
for the purpose of inspecting the same, showing the same to prospective
purchasers, lenders, or lessees, and making such alterations, repairs,
improvements or additions to the Premises or to the building of which they
are a part as Lessor may deem necessary or desirable. Lessor may at any time
place on or about the Premises any ordinary "For Sale" signs and Lessor may
at any time during the last 120 days of the term hereof place on or about the
Premises any ordinary "For Lease" signs, all without rebate of rent or
liability to Lessee.
33. Auctions. Lessee shall not conduct, not permit to be
conducted, either voluntarily or involuntarily, any auction upon the Premises
without first having obtained Lessor's prior written consent.
Notwithstanding anything to the contrary in this Lease, Lessor shall not be
obligated to exercise any standard of reasonableness in determining whether
to grant such consent.
34. Signs. Lessee shall not place any sign upon the Premises
without Lessor's prior written consent.
35. Merger. The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, or a termination by Lessor, shall
not work a merger, and shall, at the option of Lessor, terminate all or any
existing subtenancies or may, at the option of Lessor, operate as an
assignment to Lessor of any or all of such subtenancies.
36. Consents.
37. Guarantor. In the event that there is a guarantor of this
Lease, said guarantor shall have the same obligations as Lessee under this
Lease.
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38. Quiet Possession. Upon Lessee paying the rent for the
Premises and observing and performing all of the covenants, conditions and
provisions on Lessee's part to be observed and performed hereunder, Lessee
shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease. The individuals executing
this Lease on behalf of Lessor represent and warrant to Lessee that they are
fully authorized and legally capable of executing this Lease on behalf of
Lessor and that such execution is binding upon all parties holding an
ownership interest in the Premises.
39. Options.
39.1 Definition. As used in this paragraph the word "Options" has
the following meaning: the right or option to extend the term of this Lease
or to renew this Lease or to extend or renew any lease that Lessee has on
other property of Lessor.
39.2 Options Personal. Each Option granted to Lessee in this Lease
are personal to Lessee and may not be exercised or be assigned, voluntarily
or involuntarily, by or to any person or entity other than Lessee, provided,
however, the Option may be exercised by or assigned to any Lessee Affiliate a
defined in paragraph 12.2 of this Lease. The Options herein granted to
Lessee are not assignable separate and apart from this Lease.
39.3 Multiple Options. In the event that Lessee has any multiple
options to extend or renew this Lease a later option cannot be exercised
unless the prior option to extend or renew this Lease has been so exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, (i)
during the time commencing from the date Lessor gives to Lessee a notice of
default pursuant to paragraph 13.1(b) or 13.1(c) and continuing until the
default alleged in said notice of default is cured, or (ii) during the period
of time commencing on the day after a monetary obligation to Lessor is due
from Lessee and unpaid without any necessity for notice thereof to Lessee)
continuing until the obligation is paid, or (iii) at any time after an event
of default described in paragraphs 13.1(a), 13.1(d), or 13.1(e) (without any
necessity of Lessor to give notice of such default to Lessee), or (iv) in the
event that Lessor has given to Lessee three or more notices of default under
paragraph 13.1(b), where a late charge has become payable under paragraph
13.4 for each of such defaults, or paragraph 13.1(c), whether or not the
defaults are cured, during the 12 month period prior to the time that Lessee
intends to exercise the subject Option.
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(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise
an Option because of the provisions of paragraph 37.4(a).
(c) All rights of Lessee under the provision of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due
and timely exercise of the Option, if, after such exercise and prior to
commencement of the Option period, (i) Lessee fails to pay to Lessor a
monetary obligation of Lessee for a period of 30 days after such obligation
becomes due (without any necessity of Lessor to give notice thereof to
Lessee), or (ii) Lessee fails to commence to cure a default specified in
paragraph 13.1(c) within 30 days after the date that Lessor gives notice to
Lessee of such default and/or Lessee fails thereafter to diligently prosecute
said cure to completion, or (iii) Lessee commits a default described in
paragraph 13.1(a), 13.1(d) or 13.1(e) (without any necessity of Lessor to
give notice of such default to Lessee), or (iv) Lessor gives to Lessee three
or more notices of default under paragraph 13.1(b), where a late charge
becomes payable under paragraph 13.4 for each such default, or paragraph
13.1(c), whether or not the defaults are cured.
40. Multiple Tenant Building. In the event that the Premises are
part of a larger building or group of buildings than Lessee agrees that it
will abide by keep and observe all reasonable rules...[ ] from time to time
for the management, , care and cleanliness of the building and grounds,
the parking of vehicles and the preservation of good order therein as well as
for the convenience of other occupants and tenants of the building. The
violations of any such rules and regulations shall be deemed a material
breach of this Lease by Lessee.
41. Security Measures. Lessee hereby acknowledges that the rental
payable to Lessor hereunder does not include the cost of guard service or
other security measures, and that Lessor shall have no obligation whatsoever
to provide same. Lessee assumes all responsibility for the protection of
Lessee, its agents and invitees from acts of third parties.
42. Easements. Lessor reserves to itself the right, from time to
time, to grant such easements, rights and dedications that Lessor deems
necessary or desirable and to cause the recordation of Parcel Maps and
restrictions, so long as such easements, rights, dedications, Maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee shall sign any of the aforementioned documents upon request
of Lessor and failure to do so shall constitute a material breach of this
Lease.
43. Performing Under Protest. If at any time a dispute shall
arise as to any amount or sum of money to be paid by one party to the other
under the provisions hereof, the party against whom the obligation to pay the
money is asserted shall have the
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right to make payment "under protest" and such payment shall not be regarded
as a voluntary payment, and there shall survive the right on the part of said
party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said party to pay such sum
or any part thereof, said party shall be entitled to recover such sum or so
much thereof as it was not legally required to pay under the provisions of
this Lease.
44. Authority. If Lessee is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute
and deliver this Lease on behalf of said entity. If Lessee is a corporation,
trust of partnership, Lessee shall, within thirty (30) days after execution
of this Lease, deliver to Lessor evidence to such authority satisfactory to
Lessor.
45. Conflict. Any conflict between the printed provisions of the
Lease and the typewritten or handwritten provisions shall be controlled by
the typewritten or handwritten provisions.
46. Insuring Party. The insuring party under this lease shall be
Lessee.
47. Addendum. Attached hereto is an addendum or addenda containing
paragraphs 1 through 13 which constitutes a part of this Lease.
47.1 In the event there is more than one Lessee hereunder, each
such Lessee shall be jointly and severally liable for performance of Lessee's
obligations hereunder.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT
THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX
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CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING THERETO: THE PARTIES
SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE LEGAL
AND TAX CONSEQUENCES OF THIS LEASE.
The parties hereto have executed this Lease at the place on the dates specified
immediately adjacent to their respective signatures.
<TABLE>
<S> <C>
Richard F. Burns, J. Grant Monahon, and Lawrence
Executed at LESSOR: W. Doyle, as Trustees of AFW
----------------- ----------------------------------------------------
#113 Trust, established under Declaration of Trust on
on dated January 19, 1988
-------------------------- ----------------------------------------------------
Address By: /s/
---------------------- ------------------------------------------------
- -----------------------------
as Trustee as aforesaid and not individually
"LESSOR" (Corporate seal)
Executed at LESSEE: Vita-Fresh Vitamin Co., Inc. a California corporation
-----------------
By: /s/
------------------------------------------------
on
---------------------------
Jim H. Martin, President
Address Vital Industries, Inc. a California Corporation
---------------------- ------------------------------------------------
- -----------------------------
By: /s/
------------------------------------------------
Jim H. Martin, President
</TABLE>
For these forms write or call the American Real Estate Association, 350 South
Figueroa St., Suite 275, Los Angeles, CA 90071 (213) 687-8777.
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ADDENDUM TO STANDARD INDUSTRIAL LEASE -- SPECIAL NET
VITA-FRESH VITAMIN CO., INC.
THIS ADDENDUM TO STANDARD INDUSTRIAL LEASE shall constitute a part
of that certain Standard Industrial Lease -- Special Net dated February 19,
1988 (the "Lease"), between Richard F. Burns, J. Grant Monahon, and Lawrence
W. Doyle, as Trustees of AEW #113 Trust established by Declaration of Trust
dated January 19, 1988 ("Lessor"), and Vita-Fresh Vitamin Co., Inc., a
California corporation ("Lessee"), and the terms hereof shall for all
purposes be deemed incorporated into the Lease.
1. Amendment of Paragraph 4.1. Paragraph 4.1 of the Lease is hereby
amended to add the following sentences at the end thereof:
Effective as of the commencement of each Rent Period (other than
the first Rent Period) during the term of this Lease, the fixed
monthly rental payable hereunder shall be increased to the sum of
(a) the fixed monthly rental during the immediately preceding
Rent Period (the "Base Period"), plus (b) the sum obtained by
multiplying such amount by the percentage increase (expressed as
a fraction) in the Consumer Price Index, measured from the month
immediately preceding the commencement of the Base Period to the
final month of the Base Period. "Rent Period" shall refer to
each consecutive period of 30 calendar months, provided that the
first Rent Period shall commence with the commencement of the
Lease term and end at the end of the 30th month thereafter, and
the final Rent Period shall terminate upon termination of
- -------------------------
* and Vital Industries, Inc., a California Corporation
<PAGE>
the Lease. As used herein, the term "Consumer Price Index" shall
mean the United States Department of Labor's Bureau of Labor
Statistics Consumer Price Index, All Urban Consumers, All Items, Los
Angeles, Long Beach, Anaheim Area, California (1967 = 100), or the
successor of such Index. Notwithstanding the foregoing, however,
the fixed monthly rental for any Rent Period (other than the first
Rent Period) shall be not less than 1.1166 times, nor more than
1.213 times, the fixed monthly rental during the Base Period.
2. Amendment of Paragraph 5. Paragraph 5 of the Lease is hereby
amended to add the following sentence at the end thereof:
Lessor agrees to invest the Security Deposit in a money market
account at a financial institution reasonably acceptable to both
Lessor and Lessee, with interest to accrue to Lessee's benefit,
provided that: (i) Lessor shall have no liability for any loss of
principal, interest, or alternative investment opportunity, and
(ii) Lessor shall have the right to terminate any such investment
at any time when Lessor would have the right to apply such
deposit or a portion thereof as provided for herein, without any
liability for loss of principal or interest, or both.
3. Amendment of Paragraph 6.1. Paragraph 6.1 of the Lease is hereby
amended to read as follows:
6.1 Use. The Premises shall be used and occupied only for the
manufacture and distribution of vitamins and pharmaceuticals, or
for any other lawful purpose that does not: (a) materially
increase wear and tear on the Premises or the building in which
the Premises are located (the "Building"), (b) violate any
conditions, covenants, and restrictions applicable to the
Premises or the Building, (c) involve in any material fashion the
manufacture, storage, or release on or from the Premises of
hazardous or toxic substances or materials, (d) render
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unobtainable any insurance required hereunder, or (e) in Lessor's
reasonable judgment, decrease the marketability of the Premises or
the Building with respect to sale or leasing or both. Lessee
acknowledges that it has reviewed and is familiar with the content
of the restrictions with respect to use of the Premises set forth in
that certain Corporation Grant Deed recorded June 30, 1978 in the
Official Records of Orange County in Book 12739, Page 1281.
4. Amendment of Paragraph 7.2. Paragraph 7.2 of the Lease is hereby
amended to read as follows:
7.2 Surrender. Upon expiration or termination of the Lease, Lessee
shall surrender to Lessor the Premises and all Lessee's improvements
(including HVAC, air filtration and other building systems) and
alterations in good condition, and shall remove all of its personal
property, including without limitation any manufacturing equipment
and other trade fixtures (other than trade fixtures constituting
HVAC, air filtration or other building systems). Lessee shall
perform all restoration made necessary by the removal of any
improvements, alterations, or personal property prior to expiration
of the Lease term. If any such removal would damage the building in
which the Premises are situated, Lessee shall give Lessor prior
written notice thereof and Lessor may elect to make such removal at
Lessee's expense or otherwise to require Lessee to post a bond or
other security for such restoration. Lessor may retain or dispose
of in any manner any such improvements, alterations or personal
property of Lessee that Lessee does not remove from the premises
upon expiration or termination of the Lease term, in which case
title thereto shall vest in Lessor. Lessee hereby waives all claims
against Lessor for any damage or loss to Lessee arising out of
Lessor's retention or disposition of, and agrees to be liable to
Lessor for Lessor's costs of storing, removing, and disposing of,
any such improvements, alterations, or personal property of Lessee.
If Lessee
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fails to surrender the Premises to Lessor upon expiration or
termination of the Lease as required by this Paragraph, Lessee shall
indemnify, defend, and hold Lessor harmless from all damages, loss,
cost, and expense (including attorneys' fees) arising out of or in
connection with Lessee's failure to do so, including without
limitation any claims made by a succeeding tenant.
5. Amendment of Paragraph 7.5. Paragraph 7.5 of the Lease is hereby
amended to add the following sentences to the beginning of subparagraph (a):
Lessee may make non-structural, interior alterations,
improvements, and additions (other than Utility Installations
involving major building systems) to the Premises without
Lessor's prior written consent, provided (i) that Lessee present
any such proposed alterations to Lessor in written form, together
with detailed plans, prior to commencement of any work, (ii) that
Lessee obtain a permit for the proposed work from the appropriate
governmental agencies, furnish a copy thereof to Lessor prior to
commencement of the work, and comply with all conditions of such
permit promptly and expeditiously, (iii) that such alterations do
not diminish the general level of tenant improvements within the
Premises, the overall value of the Premises or the building in
which the Premises are situated, or the ability of Lessor to
relet the Premises, (iv) that such alterations are installed in
accordance with all applicable laws, ordinances, regulations, and
covenants, conditions, and restrictions, and (v) that such
alterations do not increase materially the cost of obtaining any
insurance required hereunder. Notwithstanding the foregoing
sentence, Lessee shall not make any alterations, improvements, or
additions of any sort to the Premises during the last twelve
months of the Lease term, whether non-structural or otherwise,
without Lessor's prior written consent. Lessee shall be entitled
to make structural alterations and Utility Installations
involving major building systems provided that all of the
requirements of (a)(i) through
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(a)(v), above, are met, and that Lessee obtain Lessor's
prior written consent.
6. Amendment of Paragraphs 8.2, 8.3, and 8.4. Paragraphs 8.2, 8.3,
and 8.4 of the Lease are hereby amended to read as follows:
8.2 Liability Insurance. The insuring party shall carry public
liability insurance, insuring Lessor and Lessee against claims
for personal injury or death and property damage, in an amount
not less than $1,000,000 per occurrence for personal injury or
death and $1,000,000 per occurrence for property damage, and with
umbrella or excess coverage of no less than $10,000,000. Lessee
shall provide Lessor with satisfactory evidence of compliance
with California requirements for Workers' Compensation coverage
and of employee automobile coverage.
8.3 Property Insurance. The insuring party shall obtain and
keep in force constantly during the term of this Lease a policy
or policies of insurance in an amount not less than 100% of the
full replacement cost (less deductibles) of the Premises,
including all tenant improvements and fixtures (other than trade
fixtures) insuring Lessor (as the named insured and loss payee)
against loss or damage by fire or other risks included from time
to time in what is commonly called "all-risk" or extended
coverage insurance, including, but not limited to endorsements
covering losses sustained by reason of fire and lightning, flood,
earthquake, riot and civil commotion, and vandalism and malicious
mischief. Such full replacement cost shall be subject to
adjustment no less than annually, which adjustments shall in any
event be subject to Lessor's reasonable approval. The insuring
party shall, in addition, obtain and keep in force during the
term of this Lease a policy of rental value insurance covering a
period of one (1) year, with loss payable to Lessee, which
insurance shall also cover all real estate taxes and insurance
costs for said period. If such insurance coverage has a
deductible clause, the
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<PAGE>
deductible amount shall not exceed $50,000 per
occurrence for property insurance (other than flood and
earthquake coverage), 10% for flood and earthquake
insurance and $10,000 for rental value insurance, and
Lessee shall be liable for such deductible amount.
8.4 Policies. All policies of insurance required by this Lease
shall be maintained with insurers licensed to conduct business in
California with a Best's rating classification of not less than
"A" (except with respect to worker's compensation ) and otherwise
reasonably satisfactory to Lessor and shall contain a replacement
cost endorsement and a waiver of subrogation rights by the
insurer. All policies of insurance shall include an endorsement
providing that any proceeds of the policy shall be payable to
Lessor, or, with respect to liability insurance, to a third
party, in accordance with the policy terms and notwithstanding
any act or negligence of Lessee, and, if Lessee is the insuring
party, shall contain an agreement by the insurer that such policy
shall not be amended or cancelled without at least 30 days' prior
written notice to Lessor (provided that Lessee shall exercise its
best efforts to secure a 60 day notice period from each insurer
and that a 10 day notice period of cancellation following
nonpayment of premium shall be satisfactory). Any policies
containing a coinsurance clause shall include a replacement cost
endorsement adequate to ensure that the coinsurance clause is
rendered inoperative. At Lessor's option, any insurance obtained
by Lessor may be part of a "blanket" policy maintained by Lessor.
The insuring party shall deliver to the other party copies of
policies of such insurance or certificates evidencing the
existence and amounts of such insurance with loss payable clauses
as required by this Paragraph 8. If Lessee is the insuring party
Lessee shall, at least 30 days prior to the expiration of such
policies, furnish Lessor with renewals or "binders" thereof, or
Lessor may order such insurance and charge the cost thereof to
Lessee, which amount shall be payable by Lessee upon demand.
Lessee shall not do or permit to be done
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<PAGE>
anything that would invalidate the insurance policies
referred to in Paragraph 8.3.
7. Amendment of Paragraph 10. Paragraph 10 of the Lease is hereby
amended to add a new paragraph 10.5, as follows:
Notwithstanding the foregoing provisions of paragraph 10.1,
Lessor may, at Lessor's option, elect to pay such real property
taxes directly, in which event Lessee agrees to reimburse Lessor
therefor in full with Lessee's next rent installment, provided,
however, that Lessor shall have notified Lessee in writing at
least 30 days prior to delinquency of (i) Lessor's intention to
pay such taxes, and (ii) the length of time for which Lessor
intends to pay such taxes directly.
8. Amendment of Paragraph 12. Paragraph 12 of the Lease is hereby
amended to read as follows:
12. Assignment and Subletting.
(a) Lessee shall not, without the prior written consent
of Lessor, assign this Lease or any interest herein, sublet
the Premises or any part thereof, permit the use or
occupancy of the Premises by any person other than
Lessee, or hypothecate this Lease or any interest herein.
Any of the foregoing acts without such consent shall be
void and shall, at the option of Lessor, constitute a
default that shall entitle Lessor to terminate this Lease.
Regardless of Lessor's consent, no hypothecation,
assignment, subletting, occupation, or use by any other
person shall (i) release Lessee from Lessee's obligations
or alter the primary liability of Lessee to pay the rental
and to perform all other obligations hereunder, or (ii) be
deemed to be a consent to any subsequent hypothecation,
assignment, subletting, occupation, or use by another
person. The acceptance of rental by Lessor from any
other person shall not be deemed to be a waiver by
Lessor of any provision hereof. This Lease shall not,
nor shall any interest herein, be assignable as to the
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<PAGE>
interest of Lessee involuntarily or by operation of law
without the prior written consent of Lessor. Lessee
agrees that the instrument by which any assignment or
subletting consented to by Lessor is accomplished shall
expressly provide that the assignee or subtenant will
perform and observe all the agreements, covenants,
conditions, and provisions to be performed and observed
by Lessee under this Lease as and when performance and
observance is due, that no assignee or subtenant shall
have the further right to assign or sublet, and that Lessor
shall have the right to enforce such agreements,
covenants, conditions, and provisions directly against
such assignee or subtenant. Lessee shall in all cases
remain responsible for the performance by any subtenant
or assignee as indicated thereon of all such agreements,
covenants, conditions, and provisions. Any assignment
or subletting without an instrument containing the
foregoing provision shall be void and shall, at the option
of Lessor, constitute a default that entitles Lessor to
terminate this Lease.
(b) If the Lessee is a privately held corporation, or is
an unincorporated association or partnership, the
transfer, assignment, or hypothecation of any stock or
interest in such corporation, association, or partnership in
excess of fifty percent (50%) in the aggregate shall be
deemed an assignment or transfer within the meaning and
provisions of this paragraph 12. Notwithstanding the
foregoing sentence, neither the transfer of all of the stock
of Vita-Fresh Vitamin Co., Inc., a California
corporation, nor the transfer of all of the stock of Vital
Industries, Inc., a California corporation, to P. Leiner
Nutritional Products Corp., a Delaware corporation,
shall be deemed such an assignment or transfer. If
Lessee is a publicly held corporation, the public trading
of stock in Lessee shall not be deemed an assignment or
transfer within the meaning of this paragraph.
(c) Notwithstanding the provisions of subparagraph
12(a) above, Lessee may assign this Lease, without
Lessor's consent, to P. Leiner Nutritional Products
8
<PAGE>
Corp., a Delaware corporation ("P. Leiner"), or to any
wholly owned subsidiary thereof, upon P. Leiner's
acquisition of all of the stock of Lessee or Lessee's
parent corporation, or to any corporation resulting from
the merger or consolidation with Lessee, provided that
said assignee assumes, in full, the obligations of Lessee
under this Lease.
(d) Notwithstanding the provisions of subparagraph
12(a), before entering into any assignment of this Lease
or into a sublease of all or part of the Premises, Lessee
shall give written notice to Lessor identifying the
intended assignee or subtenant by name and address, the
terms of the intended assignment or sublease, and the
nature of the business of the proposed assignee or
sublessee, and providing current financial statements for
the proposed assignee or sublessee (which financials, in
the case of an assignee, shall have been audited) and,
thereafter, any other information that Lessor may
reasonably request. For a period of 30 days after such
notice is given, Lessor shall have the right by written
notice to Lessee (i) in the case of a proposed sublease,
either to (A) sublet from Lessee any portion of the
Premises proposed to be sublet for the term for which
such portion is proposed to be sublet but at the same rent
as Lessee is required to pay to Lessor under this Lease
for the same space, computed on a pro rata square
footage basis, or (B) if the proposed subletting is for
substantially the remaining period of the term of this
Lease, terminate this Lease entirely or as it pertains to
the portion of the Premises so proposed by Lessee to be
sublet, or (ii) in the case of a proposed assignment, to
terminate this Lease. If Lessor so terminates this Lease,
such termination shall be as of the date specified in
Lessor's notice. If Lessor so terminates this Lease,
Lessor may, if it elects, enter into a new lease covering
the Premises or a portion thereof with the intended
assignee or subtenant on such terms as Lessor and such
person may agree, or enter into a new lease covering
the Premises or a portion thereof with any other person;
in such event, Lessee shall not be entitled to any portion of
9
<PAGE>
the profit, if any, that Lessor may realize on account of
such termination and reletting. Lessor's exercise of its
aforesaid option shall not be construed to impose any
liability upon Lessor with respect to any real estate
brokerage commission(s) or any other costs or expenses
incurred by Lessee in connection with its proposed
subletting or assignment.
(e) If Lessee complies with the provisions of
paragraph 12(a) and 12(d) above, and Lessor does not
exercise any of the options provided to Lessor under
paragraph 12(d), Lessor's consent to a proposed
assignment or sublet shall not be withheld unreasonably,
and shall be granted or refused within 30 days after
Lessor's receipt of all the information to which it is
entitled pursuant to subparagraph 12(d). If Lessor
refuses such consent, Lessor shall state the basis for such
refusal. Without limiting the other instances in which it
may be reasonable for Lessor to withhold its consent to
an assignment or subletting, Lessor and Lessee
acknowledge that it shall be reasonable for Lessor to
withhold its consent in the following instances:
(1) the proposed assignee or sublessee is a governmental
agency;
(2) the use of the Premises by the proposed
assignee or sublessee would involve occupancy in
violation of Paragraph 6 of this Lease;
(3) in Lessor's reasonable judgment, the
financial worth of the proposed assignee or
sublessee does not meet the credit standards
applied by Lessor or its investment advisors for
other tenants under leases with comparable terms;
(4) in Lessor's reasonable judgment, the
proposed assignee or sublessee does not have a
good reputation as a tenant of property;
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<PAGE>
(5) Lessor has received from any prior lessor
of the proposed assignee or subtenant a negative
report concerning such prior lessor's experience
with the proposed assignee or subtenant;
(6) Lessor has experienced previous defaults
by or is in litigation with the proposed assignee or
subtenant;
(7) the use of the Premises by the proposed
assignee or subtenant would violate any applicable
law, ordinance, regulation, or covenants,
conditions, and restrictions;
(8) the proposed assignment or sublease fails
to include all of the terms and provisions required
to be included therein pursuant to this Paragraph
12; or
(9) Lessee is in default of any obligation of
Lessee under this lease, or Lessee has defaulted
under this Lease on three or more occasions
during the 12 months last preceding the date that
Lessee shall request consent.
(f) In the case of an assignment, any sums or other
economic consideration received by Lessee as a result of
such assignment shall be paid to Lessor after first
deducting the cost of any real estate commissions
incurred in connection with such assignment. In the case
of a subletting, any sum or economic consideration
received by Lessee as a result of such subletting in
excess of the monthly rental due hereunder (such
monthly rental prorated if necessary to reflect only rental
allocable to the sublet portion of the Premises) shall be
paid to Lessor after first deducting (1) the cost of
leasehold improvements made to the sublet portion of the
Premises at Lessee's cost for the specific benefit of the
sublessee, amortized over the term of the sublease, and
(2) the cost of any real estate commissions incurred in
connection with such subletting, amortized over the term
11
<PAGE>
of the sublease. Upon Lessor's request, Lessee shall
assign to Lessor all amounts to be paid to Lessee by any
such subtenant or assignee and shall direct such subtenant
or assignee to pay the same directly to Lessor.
(g) If Lessee shall assign or sublet the Premises, or
request the consent of Lessor to any assignment or
subletting, or if Lessee shall request the consent of
Lessor for any act that Lessee proposes to do, then
Lessee shall pay Lessor's reasonable attorneys' fees
incurred in connection therewith.
9. Amendment of Paragraph 13.1. The Lease is hereby amended to
add a new subparagraph (f) to Paragraph 13.1, as follows:
(f) The vacating of the Premises by Lessee for a period of two
consecutive months or more, provided that, notwithstanding the
provisions of paragraph 13.2 hereof, and only if Lessee is not
otherwise in default hereunder, Lessor's sole remedy with respect
to this subparagraph 13.1(f) shall be to terminate the Lease and
retake possession of the Premises.
10. Options to Extend Term. The Lease is hereby amended to add a new
Paragraph 48, as follows:
48. Options to Extend Term. Lessor hereby grants to Lessee the
following options (the "Options") to extend the term of this
Lease for two successive five-year periods (each an "Option
Period"), each commencing upon expiration of the then current
term, upon each and all of the following terms and conditions:
(a) Each Option shall be exercised by written notice
of exercise given to and actually received by Lessor on a
date that precedes the expiration of the then current term
by at least 9, and not more than 12 months.
(b) The provisions of Paragraph 39 of the Lease,
including the provision relating to defaults of Lessee set
12
<PAGE>
forth in Paragraph 39.4, shall govern the exercise of
each Option.
(c) Except where specifically modified by this
Paragraph 48, all of the terms and conditions of this
Lease (including without limitation the Consumer Price
Index rent adjustments provided for in Paragraph 4.1
of the Lease) shall apply during the term of an Option.
(d) The initial fixed monthly rental payable pursuant
to Paragraph 4.1 of the Lease during each Option period
shall be the "Fair Rental Value" of the Premises,
meaning the monthly rental rate per square foot of
rentable area prevailing at the time the term of each
Option period commences for comparable manufacturing
and distribution space similarly situated in Orange
County that is thenbeing leased, multiplied by the
greater of 140,000 square feet or the net rentable area of
the Premises,with appropriate adjustments for
comparison rentals that are not on a triple-net basis.
Lessor shall notify Lessee in writing on or before the
date that is three months prior to commencement of each
Option period of Lessor's statement of Fair Rental
Value. If Lessee in good faith disputes Lessor's
determination of Fair Rental Value as so indicated,
Lessee shall so notify Lessor in writing within 10 days
following receipt of Lessor's statement. If such dispute
is not resolved by negotiation between the parties within
15 days after such notice of dispute is given, Lessee may
elect to submit Fair Rental Value to determination by
appraisal pursuant to subparagraph 48(e) below. If
Lessee fails to make such election in writing within 10
days following the close of such 15-day negotiation
period, Lessee shall be deemed to have accepted Lessor's
determination of Fair Rental Value. If an Option period
commences prior to such determination by appraisal,
Lessee shall pay rental when due based upon Lessor's
determination of Fair Rental Value, subject to retroactive
adjustment between the parties in the event a
determination by appraisal is different from Lessor's
determination.
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<PAGE>
(e) If Fair Rental Value is to be determined by
appraisal, within 10 days after expiration of the 15-day
negotiation period, Lessor and Lessee shall each appoint
as an appraiser an independent real estate broker with at
least 10 years experience in the leasing of manufacturing
and distribution space in the Orange County area, or a
similarly qualified real estate appraiser, and give notice
of such appointment to the other. If either Lessor or
Lessee shall fail to appoint an appraiser in timely
fashion, the appointed appraiser shall select the second
appraiser within 10 days after the failure of Lessor or
Lessee, as the case may be, to appoint. Such appraisers
shall, within 30 days after the appointment of the last of
them to be appointed, complete their determination of
Fair Rental Value and submit their appraisal reports to
Lessor and Lessee. If the valuations vary by 5% or less
of the higher value, the Fair Rental Value shall be the
average of the two valuations. If the valuations vary by
more than 5% of the higher value, the two appraisers
shall, within 10 days after submission of the last
appraisal report, appoint a third appraiser who shall be
similarly qualified. If the two appraisers are unable to
agree timely on the selection of a third appraiser, then
either appraiser, on behalf of both, may request such
appointment by the presiding Judge of the United States
District Court for the Central District of California.
Such appraiser shall, within 30 days after appointment,
make a determination of Fair Rental Value and submit
the appraisal report to Lessor and Lessee. The Fair
Rental Value shall be as determined by the third
appraiser, unless it is less than the valuations set forth in
the lower appraisal previously obtained, in which case
the valuation set forth in the lower appraisal shall be
controlling, or unless it is greater than the valuation set
forth in the higher appraisal previously obtained, in
which case the valuation set forth in the higher appraisal
shall be controlling. Lessor and Lessee shall each pay
the fees of their respective appraisers, and the fees of the
third appraisal shall be paid one-half by Lessor and one-
half by Lessee.
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<PAGE>
(f) Notwithstanding the foregoing, Fair Rental Value,
whether determined pursuant to Lessor's statement or by
appraisal, shall in no event be less than the fixed monthly
rental applicable to the Rent Period immediately
preceding the commencement of the Option period,
increased by the percentage increase in the Consumer
Price Index as provided in Paragraph 4.1 of this Lease.
The provisions of Paragraph 4.1 regarding Consumer
Price Index adjustments shall continue to apply
throughout each Option period.
11. Environmental Obligations. The Lease is hereby amended to
add a new Paragraph 49, as follows:
49. Hazardous Materials. Lessee hereby covenants and
agrees not to cause or permit the presence, use,
generation, release, discharge, storage, disposal, or
transportation of any Hazardous Materials (as defined
below) on, under, in, above, to, or from the Premises
other than in strict compliance with all applicable
federal, state, and local laws, regulations, and orders.
For the purposes of this Lease the term "Hazardous
Materials" shall refer to any substances, materials, and
wastes that are or become regulated as hazardous or
toxic substances under any applicable local, state, or
federal law, regulation, or order. Lessee shall
indemnify, defend, and hold Lessor harmless from and
against (a) any loss, cost, expense, claim, or liability
arising out of any investigation, monitoring, clean-up,
containment, removal, storage, or restoration work
("Remedial Work") required by, or incurred by Lessor
or any non-governmental entity or person in a reasonable
belief that such work is required by, any applicable
federal, state, or local law, governmental agency, or
political subdivision, and (b) any claims of third parties
for loss, injury, expense, or damage arising out of the
presence, release, or discharge of any Hazardous
Material on, under, in, above, to, or from the Premises
during the term of this Lease. In the event any Remedial
Work is so required under any applicable federal, state,
15
<PAGE>
or local law during the term of this Lease, Lessee shall
perform or cause to be performed the Remedial Work in
compliance with such law, regulation, or order. All
Remedial Work shall be performed by one or more
contractors under the supervision of a consulting
engineer, each selected by Lessee and approved in
advance in writing by Lessor. In the event Lessee shall
fail to commence the Remedial Work in timely fashion
or fail to prosecute diligently the Remedial Work to
completion, Lessor may, but shall not be required to,
cause the Remedial Work to be performed, subject fully
to the indemnification provisions of this paragraph.
12. Right of First Negotiation. The Lease is hereby amended to add
a new Paragraph 50, as follows:
50. Right of First Negotiation. During the term of
this Lease, Lessor agrees that, prior to accepting any
offer from an unaffiliated third party to purchase the
Premises, Lessor shall notify Lessee (a "Notice of Desire
to Sell") of Lessor's desire to sell the Premises. If,
within five business days of Lessee's receipt of a Notice
of Desire to Sell, Lessee notifies Lessor in writing of
Lessee's desire to purchase the Premises, Lessor agrees
to negotiate in good faith with Lessee for a period of 20
business days following Lessor's Notice of Desire to Sell
prior to accepting the offer of any other party for the
purchase and sale of the Premises. If, notwithstanding
such good faith negotiations, the parties fail to execute a
binding, written agreement within such 20-business-day
period with respect to Lessee's purchase of the Premises
from Lessor, Lessor shall be entitled to market and sell
the Premises on any terms whatsoever and free of any
further obligation to notify or negotiate with Lessee.
13. Assignment of Contracts. The Lease is hereby amended to add
a new Paragraph 51, as follows:
16
<PAGE>
51. Assignment of Contracts. Lessee agrees that,
effective upon termination of this Lease, Lessee shall
assign to Lessor any and all service contracts relating to
the Property of which Lessor desires to take an
assignment, including without limitation any alarm repair
or maintenance or landscaping contracts.
14. Exculpation. The Lease is hereby amended to add a new
Paragraph 52, as follows:
52. Exculpation. Neither the shareholders, nor the
trustees, nor the officers of Vanguard Real Estate Fund
I, created pursuant to that certain Amended and Restated
Declaration of Trust of Vanguard Real Estate Fund I
dated as of December 9, 1986, nor the trustees of AEW
#113 Trust shall bear any liability whatsoever under this
Lease or for the performance of any obligations
hereunder. To the extent that the beneficiary of AEW
#113 Trust shall have any liability under law for the acts
or omissions of Lessor under this Lease (without
admission or acknowledgment of such liability), Lessee
shall look solely to the trust estate of Vanguard Real
Estate Fund I for the payment of any claim arising under
or relating to this Lease or for the performance of any
term hereof.
17
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have executed this Addendum to
Standard Industrial Lease as of the date of the Lease.
LESSOR: LESSEE:
Richard F. Burns, J. Grant Monahon, Vita-Fresh Vitamin Co., Inc., a
and Lawrence W. Doyle, as Trustees of California corporation
AEW #113 Trust, established by
Declaration of Trust dated January 19,
1988
By:/s/
---------------------------------
Name: Jim H. Martin
Its: President
By:/s/
--------------------------------- Vital Industries, Inc., a California
as Trustee as aforesaid and not Corporation
individually
By:/s/
---------------------------------
Name: Jim H. Martin
Its: President
18
<PAGE>
FIRST LEASE AMENDMENT FOR THE LEASE BETWEEN RICHARD F. BURNS, J. GRANT
MONAHON, AND LAWRENCE W. DOYLE, AS TRUSTEES OF AEW #113 TRUST ESTABLISHED
UNDER DECLARATION OF TRUST DATED JANUARY 19, 1988, (LESSOR) AND VITA-FRESH
VITAMIN CO. INC., A CALIFORNIA CORPORATION AND VITAL INDUSTRIES, INC. A
CALIFORNIA CORPORATION (LESSEE) DATED FEBRUARY 19,1988 FOR THE PREMISES KNOWN
AS 7366 ORANGEWOOD AVE, GARDEN GROVE, CALIFORNIA
Effective upon full execution of this document by both parties, the
above referenced lease and its addendum shall be modified to reflect the
following changes:
Paragraph I Parties: Delete "Richard F. Burns, J. Grant
Monahon, and Lawrence W. Doyle, as
Trustees of AEW #113 Trust established
under Declaration of Trust dated January
19, 1988" and substitute "Sierra Pacific
California - LP."
Delete "Vita-Fresh Vitamin Co., Inc. A
California Corporation and Vital Industries,
Inc. A California Corporation" and
substitute "Leiner Health Products Inc. a
Delaware Corporation."
Paragraph 3 Term: Delete "January 31, 1998" and substitute
"October 31, 2002."
Paragraph 4 Base Rent: Delete entire paragraph and substitute the
following:
"Beginning on August 1, 1997, and
thereafter, but subject to further adjustment
as herein provided, the base monthly rent
for the premises shall be $67,200.00 per
month payable without offset in advance on
the first day of each and every month."
Rent Delete "Amendment of Paragraph 4.1 " of the
Adjustment: Addendum and substitute the following:
<PAGE>
"The base rental shall be adjusted on
August 1, 1998 and on each August 1st
thereafter based upon the same percentage
increase in the CPI as published by The
Bureau of Labor Statistics for All Urban
Wage Earners and Clerical for La-Long
Beach-Riverside (1967=100) or any
successor index between the base month of
August 1997 and the month of August
preceding each rental adjustment date with a
maximum of 5% annually during this lease
term and any extension thereof."
Rent The rent payable to Lessor for August -
Abatement: November 15, 1997 shall be base rent free.
Improvements Lessor to paint the exterior of the building
at his sole cost and expense. Color to be
similar to that of Lessees' Carson Facility.
Cancellation Lessee shall have the right to accelerate the
expiration date of the Lease by providing
Lessor with a written notice no less than 12
months prior to the new proposed expiration
date. Such notice shall be delivered in
accordance with Section 23 of the Lease.
The earliest date that the Lessee may
accelerate the expiration date of the Lease is
to January 31, 2001. Upon Lessee
providing Lessor with the referenced notice,
Lessee shall provide Lessor with a check in
accordance with the following schedule:
Early expiration date January 31, 2001 - the
fee will be equal to 3 times the January
2001 baserent.
Early expiration date February 1, 2001 to
December 31, 2001 - the fee will be equal
to 2 times the base rent of the new ending
date.
2
<PAGE>
Early expiration date January 1, 2002 to
September 30, 2002 - the fee will be equal
to the base rent of the new ending date.
Except where modified above, all terms, covenants and conditions of the
Lease and its Amendment shall remain unchanged and in full force and effect.
AGREED AND ACCEPTED
By: Sierra Pacific California-LP By: Leiner Health Products (Lessee)
(Lessor)
By: /s/ /s/
---------------------------- -------------------------------
John L. Pagliassotti Giffen H. Ott
Managing Director - FPM Senior Vice President - Operations
Date: 6/12/97 Date: June 11, 1997
-------------------------- -----------------------------
3
<PAGE>
Exhibit 10.13
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made and entered into as of
the 1st day of May, 1997 by and between CRESCENT RESOURCES, INC., a South
Carolina corporation ("Landlord"), and LEINER HEALTH PRODUCTS INC., a
Delaware Corporation ("Tenant").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements contained
herein, the parties agree for themselves, their successors and assigns, as
follows:
1. Defined Terms. In addition to any other defined terms set
forth in this Lease, the following terms used in this lease shall have the
meaning set forth in this Paragraph 1 unless otherwise noted.
(a) Land. That certain tract of land within the Park located
at 15150 Stateline Drive, Charlotte, North Carolina (28273) and 587
Greenway Industrial Drive, Fort Mill, South Carolina (29715), more
particularly described on Exhibit A hereto.
(b) Building. That certain building located on the Land
consisting of approximately 121,767 gross rentable square feet of space,
and all fixtures, furnishings and equipment made a part thereof and used
in connection therewith.
(c) Park. That certain complex of land and buildings,
including the Land and the Building, and designated by Landlord as
"Lakemont Industrial Park."
(d) Premises. The Land, together with the Building and all
other improvements located thereon, including, without limitation, all
parking areas, driveways, and sidewalks thereon, together with a
non-exclusive right to use all other driveways, roads, parking areas and
other common facilities furnished by the Landlord for the common use of
all other tenants located within the Park. The Premises are designated
on the plat attached hereto as Exhibit B.
(e) Tenant Operations. Pharmaceutical manufacturing,
packaging, storage, distribution and related office and warehousing
facilities.
(f) Commencement Date. May 1, 1997.
<PAGE>
Exhibit 10.13
(g) Expiration Date. May 31, 1998, subject, however, to
adjustment pursuant to Paragraphs 3(a) and 3(b) of this Lease.
(h) Advance Rental Payment. $27,803.47 pursuant and subject
to Paragraph 31(j) of this Lease.
Additional Defined Terms:
Additional Rental Paragraph 5(b)
Annual Rental Paragraph 5
Applicable Laws Paragraph 4(a)
Event(s) of Default Paragraph 20
Event of Tenant Misconduct Paragraph 17(a)
Event of Landlord Misconduct Paragraph 17(b)
Force Majeure Matter(s) Paragraph 26
Hazardous Substances Paragraph 17(d)
Landlord's Work Paragraph 4(a)
Lease Extension Term Paragraph 3(b)
Lease Term Paragraph 3
Lease Year Paragraph 3
Minimum Rental Paragraph 5(a)
New Facility Paragraph 3(a)
Ready for Occupancy Paragraph 4(b)
Tenant Delay Factors Paragraph 4(b)
Tenant Upfit Allowance Paragraph 4(c)
2. Description of Premises. Landlord hereby leases to Tenant,
and Tenant hereby accepts and rents from Landlord, the Premises. Tenant
shall have the exclusive right to the use of the Premises on the terms and
conditions set forth herein.
3. Lease Term. The term of this Lease (the "Lease Term") shall
commence on the Commencement Date and shall end at midnight on the Expiration
Date. As used herein, the term "Lease Year" shall mean each year of the
Lease Term commencing on the Commencement Date, or any anniversary thereof,
and ending at the expiration of twelve (12) months thereafter. In the event
the Commencement Date is any day other than the first day of a calendar
month, there will be a partial Lease Year at the end of the Lease Term (which
partial Lease Year shall consist of a partial calendar month).
(a) Landlord and Tenant both agree that the ultimate term of
this Lease is tied to the completion of Tenant's new facility consisting
of approximately 544,950 s.f. (the
2
<PAGE>
Exhibit 10.13
"New Facility") which is being constructed in the Park and a complete move
of all Tenant's contents from the Premises to the New Facility.
Notwithstanding the foregoing, Tenant agrees that the Lease Expiration Date
will be the earlier of (i) May 31, 1998 or (ii) the date the New Facility
has been completed and Landlord has received a permanent Certificate of
Occupancy for the New Facility; provided, however, Landlord and Tenant
agree that in no event is the Lease Expiration Date to be earlier than
December 31, 1997.
(b) Although the Lease Term expires upon completion of the New
Facility, Landlord agrees that Tenant may continue to occupy the Premises
on the same terms and conditions for an additional sixty (60) days from
the later of the completion of the New Facility or May 31, 1998 in order
to complete Tenant's move to the New Facility. Should Tenant desire to
extend the Lease Term beyond the sixty (60) day period previously
described, Tenant is to inform Landlord in writing within five (5)
business days from the date the New Facility has been completed and a
permanent Certificate of Occupancy has been received. The "Lease Extension
Term" would be for a minimum of three (3) years at the prevailing fair
market rate for comparable facilities in the Park on terms and conditions
substantially as set forth herein, but subject to adjustments in certain
time periods commensurate for a longer term lease.
4. Construction and Acceptance of Premises.
(a) Landlord shall proceed to construct improvements upon the
Premises, at its expense (subject, however, to the provisions of
Paragraph 4(c), in compliance with the plans and specifications approved
in writing by Tenant, with such minor variations as Landlord may deem
advisable ("Landlord's Work"). Landlord shall tender the Premises to
Tenant promptly as provided in Paragraph 4(b). Landlord's Work shall be
constructed in a good and workmanlike manner, using new materials, in
accordance with the plans and specifications approved by Tenant and all
Applicable Laws. As used herein, "Applicable Laws" shall mean all laws,
ordinances (including Fire and Building Codes), regulations, orders,
interpretations and zoning requirements of any governmental authority,
agency or other public or private regulatory authority (including
insurance underwriters or rating bureaus) and including the requirements
of the Americans With Disabilities Act, as amended (the "ADA"), which may
be in effect from time to time and relating to the Premises or Tenant's
business conducted therein.
(b) The Premises shall be deemed to be "Ready for Occupancy"
when Landlord has substantially completed all of Landlord's Work. If the
Premises are not Ready for Occupancy within three (3) months following the
Commencement Date, unless such delays are caused by Tenant and Tenant's
agents or employees (collectively, "Tenant Delay Factors"), including,
without limitation, change orders requested by
3
<PAGE>
Exhibit 10.13
Tenant relative to the Landlord's Work, Tenant may, at its option,
terminate this Lease by written notice to Landlord delivered within thirty
(30) days following the expiration of such three (3) month period, in which
event neither party shall have any further liabilities or obligations
hereunder, except Landlord shall repay to Tenant any prepaid rent
(including the Advance Rental Payment) and all indemnification obligations
herein shall survive such termination. When the Premises are Ready for
Occupancy, Tenant agrees to accept possession thereof. Tenant further
agrees that, if requested by Landlord, Tenant will sh Landlord with a
written statement that Tenant has accepted the Premises after the Premises
are deemed Ready for Occupancy and that Landlord has fully complied with
Landlord's covenants and obligations hereunder or Tenant shall otherwise
state what, if any, Landlord defaults exist and shall give Landlord time
to cure any such defaults as provided in Paragraph 20(c). Notwithstanding
the requirements for occupancy of the entire Premises set forth above,
Landlord agrees that Tenant may take possession of portions of the Premises
as such portions are completed to the satisfaction of Tenant, provided
Tenant does not unreasonably interfere with the completion of Landlord's
Work with respect to the remainder of the Premises.
(c) Landlord shall be solely responsible for the completion of
the improvements to the Premises as stated above. Landlord shall enter
into a contract for the construction of such improvements with a
guaranteed maximum price of Four Hundred Eighty-one Thousand Four Hundred
Ninety-six ($481,496.00) and shall be responsible for the payment of all
work performed thereunder. Tenant agrees to pay to Landlord, within
fifteen (15) days of the date hereof, a refundable security deposit in the
amount of Three Hundred Thirty-one Thousand Four Hundred Ninety-six
Dollars ($331,496.00) as security for the completion of the improvements
and payment of Landlord's development fee as set forth herein, subject to
adjustment as set forth herein (the "Construction Security Deposit"). Upon
completion of the Landlord's Work, the Construction Security Deposit will
be adjusted based on the actual cost of the items designated on Exhibit C
as Leiner Improvements, less the sum of One Hundred Fifty Thousand Dollars
($150,000.00). Landlord will hold the Construction Security Deposit
subject to this Paragraph 4(c) during the Lease Term. At the end of the
initial Lease Tenn, provided Tenant moves into the New Facility, Landlord
will return the Construction Security Deposit to Tenant. Provided,
however, if the New Facility is not completed and the Lease is terminated,
Landlord may retain the Construction Security Deposit as liquidated
damages. In the event Tenant exercises its option to extend the Lease
Term, Landlord will refund the Construction Security Deposit to Tenant,
and the Annual Rental for the Lease Extension Term shall be increased
by an amount equal to the Construction Security Deposit amortized over
the entire Lease Extension Term. The cost of certain improvements and
work included in Landlord's Work are more particularly set forth in
Exhibit C.
4
<PAGE>
Exhibit 10.13
(d) Prior to beginning Landlord's Work and during the
construction, Landlord shall provide Tenant with copies of all construction
documents and certificates of insurance from the general contractor,
satisfactory to Tenant. Such insurance shall include General Liability
and Automobile with limits in an amount not less than $1,000,000 combined
single limit including completion operations and shall name Tenant as an
additional insured. Certificates of insurance for workers' compensation
shall also be provided.
5. Annual Rental. During the full Lease Term, Tenant shall pay
to Landlord, without notice, demand, reduction, set-off or any defense, a
total annual rental (the "Annual Rental") consisting of the sum total of the
Minimum Rental and Additional Rental. If the Commencement Date is a date
other than the first day of a calendar month and/or the Expiration Date is a
date other than the last day of a calendar month, the Annual Rental shall be
prorated daily and paid in advance on the Commencement Date and/or the first
day of the calendar month in which the Expiration Date occurs.
(a) Minimum Rental. Tenant shall pay annually a minimum rental
(the "Minimum Rental") of Three Hundred Thirty-three Thousand Six Hundred
Forty-one and 58/100 Dollars ($333,641.58) payable in twelve (12) equal
monthly installments of Twenty-seven Thousand Eight Hundred Three and
47/100 Dollars ($27,803.47) each in advance on or before the Commencement
Date and on or before the first day of each succeeding calendar month
during the Lease Term.
(b) Additional Rental. In addition to the Minimum Rental,
Tenant shall pay to Landlord Tenant's share of Landlord's (i) real estate
taxes related to the Premises, (ii) insurance premiums related to the
Premises, and (iii) common area maintenance costs associated with the
Premises and the Park, as more particularly set forth below.
(1) Tenant's Share of Taxes. Tenant shall pay any ad
valorem taxes (or any tax hereafter imposed in lieu thereof) payable
for the Building relative to the Lease Term in excess of $35,216.00.
Such cost is estimated to be $44,000.00.
(2) Tenant's Share of Insurance Premiums. Tenant shall
pay any amount of premiums charged for fire and extended coverage
and liability insurance, together with all endorsements thereto,
carried by Landlord on the Building relative to the Lease Term in
excess of $3,815.00 (which is estimated to be $0.00).
(3) Tenant's Share of Common Area Maintenance Costs.
Tenant shall pay to the property owners association established for
the maintenance of the common areas of the Park its proportionate
share of the property owners association
5
<PAGE>
Exhibit 10.13
charges allocated to the Premises. Landlord shall use good faith
efforts to keep the operating and maintenance costs in line with
costs for other similarly situated first-class industrial parks. Such
cost shall not exceed $8,400.00 annually during the initial Lease
Term. Tenant, at its expense, shall provide its own garbage
collection, recycling and disposal.
(c) Payment of Additional Rental. The estimated amounts of
Tenant's Additional Rental for taxes, insurance premiums and common area
maintenance costs for the partial Lease Year ending December 31 of the
calendar year in which the Commencement Date falls are set forth above.
For each succeeding calendar year during the Lease Term, Landlord shall
submit an estimate of Tenant's share for taxes, insurance premiums and
common area maintenance costs on or before April 1 of each such succeeding
calendar year. If an estimate of Tenant's share of expenses for any
calendar year during the Lease Term has not been submitted on or before
the first day of April in such calendar year, Tenant shall pay Tenant's
share for such month(s) at the estimated rate for the previous calendar
year, and such payment(s) shall be adjusted effective as of January 1
of such calendar year at such time as the estimate for such calendar
year is submitted, at which time the deficiency or overage (as the case
may be) in the estimated payments for the preceding months in such
calendar year also shall be collected or credited (as the case may be).
Landlord shall charge, and Tenant shall pay, the estimated Tenant's share
of expenses on a monthly basis or on some other periodic basis
established by Landlord, payable in advance and subject to adjustment after
the end of the respective calendar year on the basis of the actual costs
incurred for such calendar year. Tenant's share of estimated taxes,
insurance premiums and common area maintenance costs shall be paid in a
like manner, with the monthly rental installments being adjusted
accordingly. In the event such costs actually decrease for any such
calendar year, Landlord shall reimburse Tenant for any overage paid and
the monthly rental installments for the next period shall be reduced
accordingly.
(d) Late Charge. If Tenant fails to pay to Landlord when due
any installment of Annual Rental or other sum to be paid hereunder,
Tenant shall pay Landlord on demand a late charge of three percent (3 %)
of the amount due. Failure to pay such late charge upon demand therefor
shall be an Event of Default hereunder. Provision for such late charge
shall be in addition to all other rights and remedies available to
Landlord hereunder or at law or in equity and shall not be construed as
liquidated damages or as limiting Landlord's remedies in any manner.
6. Alterations and Improvements by Tenant. Any structural
changes or other material alterations, additions, or improvements made to the
Premises by Tenant shall be subject to the prior written consent of Landlord
(which consent shall not be unreasonably
6
<PAGE>
Exhibit 10.13
withheld or delayed) and shall be at the sole cost and expense of Tenant.
All such alterations, additions or improvements shall be constructed in a
good and workmanlike manner, using new materials, in accordance with plans
and specifications approved by Landlord and all Applicable Laws.
Additionally, Tenant covenants and agrees that no improvements, changes,
alterations, additions, maintenance or repairs shall be made by Tenant to the
Premises which might impair the structural soundness of the Building, which
might result in an overload of the weight capacity of floors in the Building,
which might result in an overload of capacity of electric lines serving the
Building, or which might interfere with electric or electronic equipment in
the Building or on any adjacent or nearby property. Upon the expiration or
earlier termination of this Lease, all alterations, additions or
improvements, including, without limitation, all walls, railings, carpeting,
floor and wall coverings and other permanent real estate fixtures (excluding,
however, Tenant's trade fixtures and equipment, as described in Paragraph 12
herein) made by, for, or at the direction of Tenant, and upon the election of
Tenant, shall either: (i) become the property of Landlord and remain upon the
Premises or (ii) be removed from the Premises by Tenant, at Tenant's sole
cost and expense.
7. Use of Premises. Tenant shall use the Premises only for the
Tenant Operations and for no other purpose and shall comply with all
Applicable Laws in connection with the use of the Premises. Additionally,
Tenant covenants and agrees that nothing shall be done or kept in the
Premises which might result in an overload of the weight capacity of floors
in the Building, which might result in an overload of capacity of electric
lines serving the Building, or which might interfere with electric or
electronic equipment in the Building or on any adjacent or nearby property.
Tenant shall not do any act or follow any practice relating to the Premises
which shall constitute a nuisance or detract in any way from the reputation
of the Park as a first-class industrial park. Tenant's duties in this regard
shall include allowing no noxious or offensive odors, fumes, gases, smoke,
dust, steam or vapors, or any loud or disturbing noise or vibrations to
originate in or emit from the Premises.
8. Taxes. Tenant shall pay in a timely manner and prior to
delinquency any taxes or assessments of any nature imposed or assessed upon
its trade fixtures, equipment, machinery, inventory, merchandise or other
personal property located on the Premises and owned by or in the custody of
Tenant. Landlord shall pay in a timely manner and prior to delinquency all
ad valorem property taxes which are now or hereafter assessed upon the Park
and the Premises, except as otherwise expressly provided in this Lease.
9. Hazard and Casualty Insurance. Landlord shall maintain and
pay for general hazard and casualty insurance special form, with extended
coverage, covering the Building equal to ninety percent (90%) of the
insurable value thereof (i.e., the replacement cost, less depreciation),
satisfactory to Tenant. Provided, however, if Tenant uses the Premises for
any
7
<PAGE>
Exhibit 10.13
purpose or in any manner which causes an increase in Landlord's insurance
rates, Tenant shall pay such additional insurance premium (in addition to all
other payments due under this Lease) to Landlord as additional rent within
(30) days after demand from Landlord. Landlord shall provide to Tenant a
certificate of insurance satisfactory to Tenant evidencing the requirements
of this Paragraph. Tenant shall maintain and pay for all fire and extended
coverage insurance on its contents in the Premises, including trade fixtures,
equipment, machinery, merchandise or other personal property belonging to or
in the custody of Tenant.
10. Landlord's Limited Covenant to Repair and Replace. During the
Lease Term, Landlord shall be responsible for repairs or replacements to the
roof, exterior walls and structural members, including foundation and
sub-flooring of the Premises (except office fronts, plate glass windows,
doors, door closure devices, window and door frames, nailing, locks and
hardware and painting or other treatment of interior walls).
(a) Landlord's efforts to repair and replace pursuant to this
paragraph shall be made within a reasonable time after written notice from
Tenant of the need for such repair or replacement to be made (exclusive of
repairs and replacements necessitated by an Event of Tenant Misconduct).
With respect to latent or patent defects in the Premises or in the
Building, Landlord's liability shall not extend beyond one year from the
date of substantial completion of the construction of the improvements
specified in the Landlord's Work, whether or not such defects are
discovered within such one-year period.
(b) If Landlord cannot, using due diligence, complete its
repairs and replacements within sixty (60) days after written notice from
Tenant and if the resulting condition renders a material portion of the
Premises untenantable for the Tenant Operations, then, following the
expiration of such sixty (60) day period and continuing until such time
as the repair or replacement is completed (or is completed sufficiently
so as to not render a material portion of the Premises untenantable for
the Tenant Operations), either party may terminate this Lease effective
upon (30) days prior written notice, without prejudice to Landlord's
rights to receive payment from Tenant for uninsured damages caused
directly or indirectly by Tenant as stated below. If the cause of such
repairs or replacements is the result of an Event of Tenant Misconduct,
then Tenant shall not be entitled to terminate this Lease pursuant to
this paragraph, and Tenant shall pay Landlord the full amount of such
cost, damage, and expense (except as otherwise provided in Paragraph 15
herein). Furthermore, in the event Landlord diligently pursues the
completion of the required repairs and replacements during the sixty (60)
day period provided above but is unable to complete such repairs and
replacements prior to the expiration of such period, such sixty (60) day
period shall be extended for all purposes under this paragraph (including
Tenant's termination right) for
8
<PAGE>
Exhibit 10.13
such additional, reasonable period of time as is necessary to allow
Landlord to complete such repair or replacement (provided Landlord must
continue to pursue the completion of such repair or replacement in a
diligent manner), provided Tenant consents and does not elect to
terminate this Lease.
(c) Landlord's duty to repair or replace as prescribed in this
paragraph shall be Tenant's sole remedy and shall be in lieu of all other
warranties or guaranties of Landlord, express or implied; provided,
however, Landlord has an obligation and duly to faithfully perform its
obligations hereunder in a reasonable and diligent manner in an effort to
mitigate any damages suffered by Tenant as a result thereof. Furthermore,
the terms of this paragraph shall have no application to casualty events
and exercises of the power of eminent domain that affect the Premises,
which shall be governed by the terms and provisions in Paragraph 14
herein and Paragraph 19 herein, respectively.
(d) If any repairs required to be made by Landlord hereunder
are not made within sixty (60) days after written notice delivered to
Landlord by Tenant (provided no advance written notice shall be required
in cases of emergency), Tenant may, at its option, make such repairs, and
Landlord shall pay to Tenant immediately upon demand, the cost of such
repairs plus five percent (5%) of the amount thereof, and failure to do
so shall constitute a Landlord default hereunder.
11. Tenant's Covenant to Repair. Tenant shall be responsible for
the repair, replacement and maintenance in good order and condition of all
parts and components of the Premises, other than those specified for
maintenance by Landlord herein, including, without limitation, the plumbing,
wiring, electrical system, heating system, air conditioning system, glass and
plate glass, equipment and machinery constituting fixtures located within the
Premises and shall keep all plumbing units, pipes and connections free from
obstruction and protected against ice and freeing.
(a) Landlord represents and warrants to Tenant that all such
plumbing, wiring, electrical system, heating system, air conditioning
system, glass, equipment and machinery constituting fixtures located
within the Premises shall be in good working order and repair upon
delivery of the Premises to Tenant. At the end of the Lease Term, Tenant
shall return the Premises to Landlord in as good of a condition as
existed at the time all of the Landlord's Work was completed pursuant
to Paragraph 4 herein, excepting only normal wear and tear, acts of God
and repairs required to be made by Landlord hereunder.
(b) Tenant's duty to maintain the heating and air conditioning
system serving the Premises shall specifically include the duty to
inspect the system, to replace filters
9
<PAGE>
Exhibit 10.13
as recommended and to perform other recommended periodic servicing.
During the Lease Term, Tenant shall obtain and maintain a service contract
with an independent maintenance contractor reasonably satisfactory to
Landlord to provide such service for the heating and air conditioning
system. The service contract must include all services suggested by the
applicable equipment manufacturer(s) in the operation and maintenance
manual(s) and must become effective on the Commencement Date.
(c) If any repairs required to be made by Tenant hereunder are
not made within sixty (60) days after written notice delivered to Tenant
by Landlord (provided no advance written notice shall be required in cases
of emergency), Landlord may, at its option, make such repairs without
liability to Tenant for any loss or damage which may result to Tenant's
stock or business by reason of such repairs, and Tenant shall pay to
Landlord immediately upon demand, as additional rent hereunder, the cost
of such repairs plus five percent (5%) of the amount thereof, and failure
to do so shall constitute an Event of Default of Tenant hereunder.
(d) If Tenant makes any repair required hereunder the cost of
which is $5,000 or more to any system, equipment or machinery which
existed on the Premises as of the Commencement Date (i.e., not installed
as part of Landlord's Work) and such repair is not required due to an
Event of Tenant Misconduct, Tenant may amortize such expense over the
useful life of such equipment (estimated to be 7 years) and pay only
the portion of such expense allocated to the remainder of the Lease Term,
and Landlord shall reimburse Tenant for the remainder of the cost of such
repair at the end of the Lease Term.
12. Trade Fixtures and Equipment; Non-Liability for Certain Damages.
(a) So long as Tenant is not in default under this Lease, any
trade fixtures and equipment installed in the Premises at Tenant's
expense shall remain Tenant's personal Property, and Tenant shall have
the right at any time during the Lease Term to remove such fixtures and
equipment. Upon removal of any fixtures or equipment, Tenant shall
immediately restore the Premises to substantially the same condition
as existed at the time all of the Landlord's Work was completed pursuant
to Paragraph 4 herein, ordinary wear and tear and acts of God alone
excepted. Any trade fixtures and equipment not removed by Tenant at
the expiration or an earlier termination of this Lease shall either
(i) become the property of Landlord or (ii) be removed by Tenant, at
Tenant's expense.
(b) Landlord and Landlord's agents and employees shall not be
liable to Tenant or any other person or entity whomsoever for any injury
to person or damage to Property caused by the Premises becoming out of
repair or by defect in or failure of equipment,
10
<PAGE>
Exhibit 10.13
pipes or wiring, or broken glass, or by the backing up of drains, or by
gas, water, steam, electricity or oil leaking, escaping or flowing into
the Premises unless caused by or arising out of an Event of Landlord
Misconduct. Landlord shall not be liable to Tenant for any compensation,
damages or reduction of rent by reason of inconvenience or annoyance or
loss of business arising from power losses or shortages or from the
necessity of Landlord's entering the Premises for any of the purposes
authorized in this Lease or for repairing the Premises. Landlord's
liability with respect to any defects, repairs or maintenance for which
Landlord is responsible under any provision of this Lease shall be limited
to the cost of such repairs or maintenance or the curing of such defect,
unless due to an Event of Landlord Misconduct. Tenant shall indemnify and
hold Landlord harmless from and against any loss, cost, expense or claims
arising out of such injury or damage referred to in this paragraph.
13. Utilities. Tenant shall pay in a timely manner and prior to
delinquency for all utilities or services related to its use of the Premises,
including electricity, gas, heat, sewer, water, telephone and janitorial
services. Landlord shall not be responsible for the stoppage or interruption
of utilities services, other than as required by its limited covenant to
repair and replace set forth herein.
14. Damage or Destruction of Premises. If the Building is so
damaged by fire or other casualty that (i) substantial alteration or
reconstruction of the Building shall be required or (ii) any mortgagee of
Landlord requires that all or any portion of the insurance proceeds payable
as a result of such casualty be applied to the payment of the underlying
mortgage debt, then Landlord may, at its option, terminate this by notifying
Tenant in writing of such termination within sixty (60) days after the date
the casualty event occurs. If the Premises are damaged by fire or other
casualty but are not rendered untenantable for Tenant's business, either in
whole or in part, and if Landlord does not terminate this Lease pursuant to
the immediately preceding sentence, Landlord shall cause such damage to be
repaired without unreasonable delay. In such event, all insurance proceeds
shall be made payable to Landlord and shall be used to repair or rebuild the
Premises in accordance with the standards set forth herein and not for any
other purposes, without Tenant's prior written consent. Landlord shall be
responsible for the payment in full of any deductible. If by reason of such
casualty, the Premises are rendered untenantable for Tenant's business,
either in whole or in part, and Landlord does not terminate this Lease as
provided in the first sentence above in this Paragraph 14, Landlord shall
cause the damage to be repaired or replaced without unreasonable delay, and
in the interim, the Annual Rental shall be equitably reduced as to such
portion of the Premises as is rendered untenantable. Any such abatement of
rent shall not, however, create an extension of the Lease Term. Provided,
however, if by reason of such casualty, the Premises are rendered
substantially untenantable, and Landlord fails to give Tenant reasonable
assurances that the amount of time required to repair the
11
<PAGE>
Exhibit 10.13
damage, using due diligence, shall not exceed the earlier of (i) the expected
completion date of the New Facility or (ii) sixty (60) days from the date the
casualty event occurs, then either party shall have the right to terminate
this Lease by giving written notice of termination within sixty (60) days
after the date the casualty event occurs. Notwithstanding the other
provisions of this Paragraph 14, in the event there is a casualty loss to the
Premises to the extent of fifty percent (50%) or more of the replacement
value during the last Lease Year of the Lease Term, including any Lease
Extension Term that has then been exercised by Tenant, either party may, at
its option, terminate this Lease by giving written notice within sixty (60)
days after the date the casualty event occurs; and, in such case, Annual
Rental shall abate as of the date of such notice. Except as provided herein,
there shall be no obligation of Landlord to rebuild or repair in case of fire
or other casualty, and no termination under this Paragraph 14 shall affect
any rights of Landlord or Tenant hereunder because of prior defaults of the
other party. Tenant shall give Landlord prompt notice of any fire or other
casualty in the Premises.
15. Mutual Waiver; Waiver of Subrogation. The parties mutually
release and waive unto the other, all rights to claim damages, costs or
expenses for any injury to persons (including death) or property caused by a
casualty of any type whatsoever in, on or about the Premises, the Building or
the Park if the amount of such damages, costs or expenses has been paid to
such damaged party under the terms of any policy of insurance. All insurance
policies carried with respect to this Lease, if permitted under applicable
law, shall contain a provision whereby the insurer waives prior to loss all
rights of subrogation against either Landlord or Tenant (as the case may be).
16. Signs and Advertising. In order to provide architectural
control for the Park, Tenant may install, at Tenant's expense, only such
exterior signs, marquees, billboards, outside lighting fixtures and/or other
decorations on the Premises as shall have been approved in advance and in
writing by Landlord. Notwithstanding the foregoing, given that the Premises
are being used by Tenant only as a temporary facility, Landlord agrees that
Tenant may install signage of the quality and style typical for construction
sites. The care and maintenance of all such approved signs shall be the sole
responsibility of Tenant. Landlord shall have the right to remove any such
sign or other decoration and fully restore the exterior of the Premises at
the cost and expense of Tenant if any such exterior work is done without
Landlord's prior written approval. Upon the expiration or earlier
termination of this Lease, Tenant shall remove any such sign or decoration
and fully restore the exterior of the Premises, at Tenant's sole cost and
expense. Tenant shall not permit, allow or cause to be used in, on or about
the Premises any sound production devices, mechanical or moving display
devices or bright lights for the purposes of advertisement, the effect of
which would be visible or audible from the exterior of the Premises.
12
<PAGE>
Exhibit 10.13
17. Indemnification, Liability Insurance and Hazardous Substances.
(a) Indemnification by Tenant. Tenant shall indemnify and save
Landlord harmless against any and all claims, suits, demands, actions,
fines, damages and liabilities and all costs and expenses thereof
(including, without limitation, reasonable attorneys' fees) arising out
of injury to persons (including death) or property occurring in, on or
about, or arising out of, the Premises or other areas in the Park if
caused by or occasioned wholly or in part by any willful or negligent act
or omission of Tenant, its agents, subtenants, licensees, invitees,
contractors, subcontractors or employees (collectively, an 'Event of
Tenant Misconduct"). Tenant shall give Landlord prompt written notice
of any such happening causing injury to persons or property.
(b) Indemnification by Landlord. Landlord shall indemnify and
save Tenant harmless against any and all claims, suits, demands, actions,
fines, damages and liabilities and all costs and expenses thereof
(including, without limitation, reasonable attorneys' fees) arising out of
injury to persons (including death) or property occurring in, on or
about, or arising out of, the Premises or other areas in the Park if such
damage or injury is caused by or occasioned wholly or in part by any
willful or negligent act or omission of Landlord, its agents, licensees,
invitees, contractors, subcontractors, employees or other tenants within
the Park (to the extent that Landlord is indemnified by such other tenant)
(an "Event of Landlord Misconduct"). Landlord shall give Tenant prompt
written notice of any such happening causing injury to persons or
property.
(c) Liability Insurance. At all times during the Lease Term,
Tenant shall, at its own expense, keep in force comprehensive public
liability insurance, on a claims made basis, with such companies holding
an A. M. Best's Rating of A- VIII or better, as shall, from time to time,
be acceptable to Landlord (and to any mortgagee having a mortgage interest
in the Premises) and naming Landlord as an additional insured. The
amounts of such coverage, until changed at Landlord's request, shall be
$1,000,000.00 with respect to bodily injury or death of one person as a
result of any one accident and $500,000.00 with respect to damage to
property. Tenant shall first furnish to Landlord a copy of the required
policy or certificate of insurance, evidencing the required coverage and
naming Landlord as an additional insured under such policy, prior to the
Commencement Date and thereafter prior to each policy renewal date. Such
policy also shall include contractual liability coverage for the
performance by Tenant of the indemnity obligations of Tenant under this
Lease, and such policy shall contain a provision whereby the insurer will
provide sixty (60) days notice of cancellation or nonrenewal, except for
twenty (20) days for non-payment.
13
<PAGE>
Exhibit 10.13
At all times during the Lease Term, Landlord shall, at its own
expense, keep in force comprehensive public liability insurance, on a
claims made basis, with such companies rated A. M. Best's Rating
of A- VIII or better, as shall, from time to time, be acceptable to Tenant
(and to any mortgagee having a mortgage interest in the Park) and naming
Tenant as an additional insured. The amounts of such coverage, until
changed at Tenant's request, shall be $1,000,000.00 with respect to
bodily injury or death of one person as a result of any one accident
and $500,000.00 with respect to damage to property. Landlord shall first
furnish to Tenant a copy of the required policy or certificate of
insurance, evidencing the required coverage and naming Tenant as an
additional insured under such policy, prior to the Commencement Date and
thereafter prior to each policy renewal date. Such policy also shall
include contractual liability coverage for the performance by Landlord
of the indemnity obligations of Landlord under this Lease, and such
policy shall contain a provision whereby the insurer will provide
sixty (60) days notice of cancellation or non-renewal, except for
twenty (20) days for non-payment.
(d) Presence and Use of Hazardous Substances. Tenant shall not,
without Landlord's prior written consent, keep on or around the Premises,
the common areas or facilities in or relating to the Premises for use,
disposal, treatment, generation, storage or sale, any substances
designated as, or containing components designated as, hazardous,
dangerous, toxic or harmful, and/or any substance that is subject to
regulation by any then-current federal, state or local law, statute or
ordinance and the rules and regulations implementing them, including, but
not limited to, the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.); the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.); the
Clean Water Act (33 U.S.C. Section 1251 et seq.); the Clean Air Act
(42 U.S.C. Section 7401 et seq.); and the Toxic Substances Control Act
(15 U.S.C. Section 2601 et seq.) (such substances being herein
collectively referred to as "Hazardous Substances"). With respect
to any such Hazardous Substance, Tenant shall:
(1) Allow Landlord or Landlord's agent or representative,
upon prior notice to Tenant, to enter the Premises during reasonable
business hours to check Tenant's compliance with all applicable
governmental laws, statutes, ordinances, rules, regulations and
requirements regarding Hazardous Substances;
(2) Comply with minimum levels, standards or other
performance standards or requirements which may be set forth or
established for certain Hazardous Substances; and if minimum
standards or levels are applicable to Hazardous Substances present
on the Premises, such standards or levels shall be
14
<PAGE>
Exhibit 10.13
established and documented by an on-site inspection by the
appropriate governmental authorities and shall be set forth in an
addendum to this Lease;
(3) Comply with all applicable governmental laws, statutes,
ordinances, rules, regulations and requirements regarding the proper
and lawful use, sale, transportation, generation, treatment and
disposal of such Hazardous Substances; and
(4) Pay to Landlord upon demand as additional rent any and
all costs incurred by Landlord as a result of any violation or breach
of the provisions of this Paragraph 17(d), including Landlord's
reasonable attorneys' fees and costs.
The terms and provisions in this Paragraph 17(d) shall survive the expiration
of the Lease Term or the earlier termination of this Lease.
(e) Unauthorized Releases of Hazardous Substances; Cleanup
Costs; Default and Indemnification.
(1) Tenant shall give immediate written notice to Landlord
of any release, spill, discharge or threatened discharge of any
Hazardous Substance on or at the Premises, the common areas or
facilities in or relating to the Building, the Land, the Park, or
the surrounding environment, which release, spill, discharge or
threatened discharge was not made pursuant to or in conformance with
the terms of any permit or license issued to Tenant by the
appropriate governmental authority. Such notice shall include a
description of measures taken or proposed to be taken by Tenant to
contain and/or remedy the release, spill, discharge or threatened
discharge and any resultant damage to property, persons, the
Premises, the common areas or facilities in or relating to the
Building, the Land, the Park, and/or the surrounding environment.
Tenant or Landlord, as the case may be, shall give prompt written
notice to the other party of any private or governmental
investigation relating to Hazardous Substances on or about the
Premises or the Park.
(2) At Tenant's own expense, Tenant shall promptly take
all steps necessary to contain and remedy any release, spill,
discharge or threatened discharge of Hazardous Substances on or at
the Premises, facilities in or relating to the Building and the Land,
and all resultant damage or injury to property, persons, and the
environment. Landlord shall have the right, but not the obligation,
to participate in and approve any environmental assessment or
remedial cleanup plan for the Premises or facilities in or relating
to the Building and the Land. Tenant, its employees, agents and
contractors shall fully cooperate with any and all federal,
15
<PAGE>
Exhibit 10.13
state and local governmental officials having jurisdiction over the
Premises in resolving or addressing any situation involving the
presence of Hazardous Substances on or about the Premises.
(3) At Landlord's own expense, Landlord shall
promptly take all steps necessary to contain and remedy any
release, spill, discharge or threatened discharge of Hazardous
Substances on or at the Park and all resultant damage or injury
to property, persons, and the environment. Landlord, its
employees, agents and contractors shall fully cooperate with any
and all federal, state and local governmental officials having
jurisdiction over the Park in resolving or addressing any
situation involving the presence of Hazardous Substances on or
about the Park.
(4) Tenant shall be fully and completely liable to
Landlord for any and all cleanup costs and any and all other
charges, fees, and penalties (civil and criminal) imposed by
any governmental authority with respect to Tenant's use,
generation, handling, storage, containment, disposal,
transportation, and/or sale of Hazardous Substances.
(5) Landlord shall be fully and completely liable to
Tenant for any and all cleanup costs and any and all other charges,
fees, and penalties (civil and criminal) imposed by any governmental
authority with respect to Landlord's or any other tenant's use (to
the extent Landlord is indemnified by such tenant), generation,
handling, storage, containment, disposal, transportation, and/or
sale of Hazardous Substances.
(6) Tenant shall indemnify, defend and save Landlord
harmless from any and all costs, fees, penalties and charges
assessed against or imposed upon Landlord (as well as Landlord's
reasonable attorneys' fees and costs) as a result of Tenant's use,
generation, handling, storage, containment, disposal, transportation,
and/or sale of Hazardous Substances.
(7) Landlord shall indemnify, defend and save Tenant
harmless from any and all costs, fees, penalties and charges assessed
against or imposed upon Tenant (as well as Tenant's reasonable
attorneys' fees and costs) as a result of Landlord's or any other
tenant's use, generation, handling, storage, containment, disposal,
transportation, and/or sale of Hazardous Substances or incurred by
reason of any other tenant's activities within the Park (to the
extent Landlord is indemnified by such tenant). Notwithstanding
anything to the contrary, Landlord shall be fully responsible for
all pre-existing environmental conditions with respect to the
16
<PAGE>
Exhibit 10.13
Premises and shall indemnify, defend and save Tenant harmless from
and against any claim, loss, cost or expense (including reasonable
attorneys' fees) arising out of any injury or damage as a result of
any environmental contamination or the presence of any Hazardous
Substances on the Premises which existed on the Premises prior to the
Commencement Date of this Lease.
(8) Upon a default under Paragraph 17(d) herein or
this Paragraph 17(e) and in addition to the rights and remedies
set forth elsewhere in this Lease, Landlord or Tenant, as the
case may be, shall be entitled to the following rights and
remedies:
(i) To terminate this Lease immediately; and
(ii) To recover any and all damages associated with the
default, including, but not limited to, cleanup
costs and charges, civil and criminal penalties and
fees, any and all damages and claims asserted by
third parties, and reasonable attorneys' fees and
costs.
The terms and provisions in this Paragraph 17(e) shall survive the expiration
of the Lease Term or the earlier termination of this Lease.
18. Landlord's Right of Entry. Landlord and those persons
authorized by Landlord shall have the right to enter the Premises during
reasonable business hours and upon reasonable notice for the purposes of
making repairs, making connections, installing utilities, providing services
to the Premises or for any other tenant, making inspections or showing the
Premises to prospective purchasers and/or lenders. Further, during the last
six (6) months of the Lease Term, including any extended Lease Term that has
then been exercised by Tenant, Landlord and those persons authorized by it
shall have the right during reasonable business hours and upon reasonable
notice to Tenant, to show the Premises to prospective tenants; provided,
however, Landlord agrees that it will not show the Premises to any
prospective tenant which is deemed by Tenant, in its sole discretion, to be a
competitor of Tenant. In addition, any and all visitors to the Premises,
including Landlord and any prospective tenant, shall comply with all rules
and regulations of Tenant applicable to the Premises. Notwithstanding any
term or provision in this Lease to the contrary, including those included in
this Paragraph 18, Landlord shall be entitled to enter the Premises at all
times and without any advance notice to Tenant if Landlord reasonably
determines or believes that an emergency circumstance or situation exists
that requires such entry.
17
<PAGE>
Exhibit 10.13
19. Eminent Domain. If any substantial portion of the Premises is
taken under the power of eminent domain (including any conveyance made in
lieu thereof) or if any such taking shall materially impair the normal
operation of Tenant's business, then either party shall have the right to
terminate this Lease by giving written notice of such termination within (30)
days after such taking. If neither party elects to terminate this Lease
pursuant to the immediately preceding sentence, Landlord shall repair and
restore the Premises to a tenantable condition and the Annual Rental shall be
equitably reduced as to the portion of the Premises that is taken. All
compensation awarded for any taking (or the proceeds of a private sale in
lieu thereof) shall be the property of Landlord, whether such award is for
compensation for damages to Landlord's or Tenant's interest in the Premises,
and Tenant hereby assigns all of its interest in any such award to Landlord;
provided, however, Landlord shall not have any interest in any separate award
made to Tenant for loss of business, moving expenses or the taking of
Tenant's trade fixtures or equipment if a separate award for such items is
made to Tenant.
20. Events of Default and Remedies.
(a) Upon the occurrence of any one or more of the following
events (each, an "Event of Default"; collectively, "Events of Default"),
Landlord shall be entitled to exercise any rights or remedies available
in this Lease, at law or in equity. Events of Default shall be:
(1) Tenant's failure to pay when due any rental or other
sum of money payable hereunder if not remedied within five (5)
business days after written notice thereof is given to Tenant
(provided, however, and notwithstanding the foregoing to the
contrary, Tenant shall not be entitled to such notice and cure
period more than two (2) times during any given Lease Year).
(2) Failure by Tenant to perform any of the other terms,
covenants or conditions contained in this Lease if such failure is not
remedied within thirty (30) days after written notice thereof is
given to Tenant (or within a reasonable period of time for any
default which cannot reasonably be cured within such thirty (30)
day period).
(3) Tenant, or any guarantor of Tenant's obligations
under this Lease (if any), becomes bankrupt or insolvent, files any
debtor proceedings, files pursuant to any statute a petition in
bankruptcy or insolvency or for reorganization, or files a petition
for the appointment of a receiver or trustee for all or substantially
all of such party's assets and such petition or appointment is not
set aside within sixty (60) days
18
<PAGE>
Exhibit 10.13
from the date of such petition or appointment or if such party makes
an assignment for the benefit of creditors or petitions for or
enters into such an arrangement.
(4) Tenant vacates, abandons, or fails to operate in the
Premises (or any substantial part thereof) or allows its leasehold
estate under this Lease to be taken under any writ of execution and
such writ is not vacated or set aside within thirty (30) days.
(b) In addition to its other remedies at law or in equity,
Landlord, upon an Event of Default by Tenant, shall have the immediate
right to re-enter and remove all persons and property from the Premises
and dispose of such property as it deems fit provided such actions are
done without a breach of the peace and in accordance with all applicable
laws pertaining to repossession by Landlord of leasehold property. If
Landlord re-enters the Premises, either with or without legal process, it
may either terminate this Lease or, from time to time without terminating
this Lease, make such alterations and repairs as may be necessary or
appropriate to relet the Premises, and relet the Premises upon such terms
and conditions as Landlord deems advisable. Tenant also shall be liable
for and shall pay to Landlord, in addition to any other sum provided to
be paid herein, reasonable brokers' fees incurred by Landlord in
connection with reletting the whole or any part of the Premises; the costs
of removing from the Premises and storing Tenant's property; the costs of
repairing, altering, remodeling or otherwise putting the Premises into
condition acceptable to a new tenant or tenants, and all reasonable
expenses incurred by Landlord in enforcing or defending Landlord's
rights and/or remedies under this Lease, including reasonable attorneys'
fees. No retaking of possession of the Premises by Landlord shall be
deemed as an election to terminate this Lease unless a written notice
of such intention is given by Landlord to Tenant at the time of re-entry;
but, notwithstanding any such re-entry or reletting without termination,
Landlord may at any time thereafter elect to terminate this Lease for such
previous default. In the event of an elected termination of this Lease by
Landlord, whether before or after re-entry, Landlord may recover from
Tenant damages, including the costs of recovering the Premises, and Tenant
shall remain liable to pay Annual Rental (which may, at Landlord's
election, be accelerated to be due and payable in full as of the Event
of Default or at any time thereafter and recoverable as damages in a
lump sum) that would have been payable by Tenant hereunder for the
remainder of the Lease Term, less the rentals actually received by
Landlord from any reletting. (In the event of any such acceleration, in
determining the Annual Rental which would be payable by Tenant
subsequent to default, the Annual Rental for each Lease Year of the
unexpired Lease Term shall be equal to the Annual Rental payable by
Tenant for the last Lease Year prior to the default). If any rent owing
under this Lease is collected by or through an attorney, Tenant agrees
to pay Landlord's reasonable attorneys' fees to the extent allowed by
19
<PAGE>
Exhibit 10.13
applicable law. Notwithstanding anything to the contrary contained
herein, Landlord shall have an obligation to mitigate its damages by
promptly and diligently attempting to relet the Premises at
market rental.
(c) Upon the occurrence of any breach or default by Landlord of
any of covenants, agreements or obligations of Landlord herein which are
not cured within the time provided herein (or, if no time is provided,
within (30) days after written notice to Landlord), Tenant shall be
entitled to exercise any rights and remedies available in this Lease,
at law or in equity.
(d) Notwithstanding anything to the contrary contained herein,
in the event any dispute arising under this Lease involves a claim or
controversy in an amount less than Thirty Thousand Dollars ($30,000.00),
the parties agree to submit such dispute to third-party mediation. The
determination of the mediator shall be conclusive and binding on the
parties. For any dispute involving a claim or controversy in the amount
of Thirty Thousand Dollars ($30,000.00) or more, the parties agree to
submit such dispute to binding arbitration. Such dispute shall be
submitted to binding arbitration before three (3) arbitrators (unless the
parties consent in writing to a single arbitrator) in accordance with the
arbitration rules of the American Arbitration Association ("AAA") in
existence at the time such arbitration is commenced. The prevailing party
shall be responsible for the costs of such mediation or arbitration, as
the case may be.
21. Subordination. This Lease is subject and subordinate to any
and all mortgages or deeds of trust now or hereafter placed upon the property
of which the Premises are a part, and this clause shall be self-operative,
without any further instrument necessary to effect such subordination,
provided any such lender may, at its option and without seeking or obtaining
Tenant's consent, subordinate the lien of its mortgage or deed of trust to
this Lease. At the request from time to time of Landlord or any lender that
holds a mortgage or deed of trust on the property of which the Premises are a
part, Tenant shall promptly execute and deliver to Landlord any such
instrument or instruments as Landlord or such lender may reasonably request
evidencing the subordination of this Lease to such mortgage or deed of trust.
Provided, however, as a condition to Tenant's obligation to execute and
deliver any such instrument(s), the applicable lender must agree that
Tenant's rights to quiet enjoyment and possession of the Premises under this
Lease shall not be divested by foreclosure or other default proceedings under
the applicable mortgage or deed of trust so long as Tenant shall not be in
default under this Lease. Tenant shall continue its obligations under
this Lease in full force and effect, notwithstanding any foreclosure or
default proceedings by any such lender.
20
<PAGE>
Exhibit 10.13
22. Assigning and Subletting. Tenant shall not assign, sublet,
mortgage, pledge or encumber this Lease, the Premises, or any interest in the
whole or in any portion thereof, without the prior written consent of
Landlord (which consent shall not be unreasonably withheld). If Tenant makes
any such assignment, mortgage, sublease or pledge (whether with or without
Landlord's written consent), Tenant named herein and any guarantor of
Tenant's obligations under this Lease shall nonetheless remain primarily
liable for the performance and observation of all of the terms of this Lease
required to be observed or performed by Tenant hereunder. Any rental or any
fee or charge received by Tenant in connection with any such assignment or
sublease which is in excess of the Annual Rental payable to Landlord
hereunder shall be paid immediately by Tenant to Landlord as additional rent
under this Lease. In addition, Landlord shall have the option, in its sole
discretion, to terminate this Lease effective as of the proposed effective
date of any assignment or sublease, by giving Tenant written notice thereof
within thirty (30) days after Landlord's receipt of said notice from Tenant;
and in the event Tenant shall propose to sublet only a portion of the
Premises, Landlord shall have the additional option to terminate this Lease
as to that portion of the Premises proposed to be sublet. Should Landlord
not elect to so terminate this Lease in connection with any proposed
subletting or assignment, Landlord shall continue to have the right to
disapprove same (subject to the terms above). Upon any subletting or
assignment by Tenant in accordance with the terms hereof, any renewal
options, expansion options, and/or rights of first refusal granted herein
shall become null and void. Consent by Landlord to one or more assignments
or sublettings shall not operate as a waiver of Landlord's rights as to any
subsequent assignments or sublettings.
23. Covenant of Quiet Enjoyment. Landlord represents that it has
full right and authority to lease the Premises and that Tenant shall
peacefully and quietly hold and enjoy the Premises for the full Lease Term so
long as Tenant does not default in the performance of any of the terms hereof.
24. Estoppel Certificates. Within (10) days after receipt of any
written request by Landlord, Tenant shall deliver a written estoppel
certificate addressed to Landlord and/or any other party designated by
Landlord, certifying any facts that are then true with respect to this Lease,
including, without limitation, that this Lease is in full force and effect,
that no default exists on the part of Landlord or Tenant hereunder, that
Tenant is in possession of the Premises, that Tenant has commenced the
payment of rent hereunder, and that there are no defenses or offsets claimed
by Tenant with respect to payment of rentals under this Lease.
25. Protection Against Liens. Tenant shall do all things
necessary to prevent the filing of any mechanic's, materialmen's or other
types of liens whatsoever, against all or any part of the Premises, the
Building,
21
<PAGE>
Exhibit 10.13
the Land or the Park by reason of any claims made by, against, through or
under Tenant. If any such lien is filed against the Premises, the Building,
the Land or the Park (or any portion thereof), Tenant shall either cause the
same to be discharged of record within twenty (20) days after filing or, if
Tenant, in its discretion and in good faith, determines that such lien should
be contested, Tenant shall furnish such security as may be necessary to
prevent any foreclosure proceedings against the Premises, the Building, the
Land or the Park (or any portion thereof) during the pendency of such
contest. If Tenant shall fail to discharge such lien within said time period
or fail to furnish such security, then Landlord may, at its election and in
addition to any other right or remedy available to it, discharge the lien by
paying the amount claimed to be due or by procuring the discharge by giving
security or in such other manner as may be allowed by law. If Landlord acts
to discharge or secure any such lien as permitted herein, then Tenant shall
immediately reimburse Landlord (as additional rent) for all sums paid and all
costs and expenses (including reasonable attorneys' fees) incurred by
Landlord relative to such lien, together with interest on the total expenses
and costs at the maximum lawful rate.
26. Force Majeure. Whenever a period of time is herein prescribed
for the taking of any action by Landlord, Landlord shall not be liable or
responsible for, and there shall be excluded from the computation of such
period of time, any delays due to any condition, matter or circumstance
beyond the reasonable control of Landlord (collectively, "Force Majeure
Matters"; each, a "Force Majeure Matter"), including, without limitation, the
following: strikes; lockouts; acts of God; governmental restrictions, war or
enemy action or invasion; civil commotion; insurrection; riot; mob violence;
malicious mischief or sabotage; fire or any other casualty; adverse weather
conditions or unusual inclement weather; condemnation; unavailability of
materials; failure of a governmental instrumentality to act in a timely
fashion; any litigation or other legal proceeding which delays the approval
of plans or the issuance of any grading or building permit for construction,
including, without limitation, the issuance of an injunction enjoining such
approval and/or issuance, as the case may be; any law, order or regulation of
any governmental, quasi-governmental, judicial or military authority; or
other similar cause. Without limiting the generality of the foregoing, in
the event a Force Majeure Matter affects Landlord's construction and delivery
obligation(s) relative to the Premises under this Lease, the period of time
during which Landlord may complete such construction and delivery
obligation(s) shall be extended by the same number of days as the number of
days of delay caused by such Force Majeure Matter on the critical path of
completing such construction and delivery obligation(s).
27. Non-waiver. No course of dealing between Landlord and Tenant
and no delay or omission of Landlord or Tenant in exercising any right
arising from Tenant's or Landlord's default shall impair such right or be
construed to be a waiver of a default.
28. Landlord Liability. All obligations of Landlord hereunder
will be construed as covenants, not conditions, and all such obligations will
be binding upon Landlord only
22
<PAGE>
Exhibit 10.13
during the period of its ownership and possession of the Building and not
thereafter. The term "Landlord," under this Lease, shall mean only the owner,
for the time being, of the Building. If Landlord shall sell, assign or
transfer all or any part of its interest in the Premises or in this Lease to
a successor in interest which expressly assumes the obligations of Landlord
hereunder, then the selling, assigning or transferring Landlord shall
thereupon be released and discharged from all covenants and obligations
hereunder, and Tenant shall look solely to such successor in interest for the
performance of all of Landlord's obligations hereunder. Tenant's obligations
under this Lease shall in no manner be affected by Landlord's assignment or
transfer hereunder, and Tenant shall thereafter attorn and look solely to
such successor in interest as the landlord hereunder, provided Landlord gives
Tenant prompt written notice of any change in ownership by assignment,
transfer or otherwise during the Lease Term. Notwithstanding any other
provision hereof, Landlord shall not have any personal liability hereunder.
In the event of any breach or default by Landlord in any term or provision of
this Lease, Tenant agrees to look solely to Landlord's interest in the Land
and the Building; however, in no event shall any deficiency judgment or any
money judgment of any kind be sought or obtained against Landlord.
29. Holding Over. Except as provided in Paragraph 3, if Tenant
remains in possession of the Premises or any part thereof after the
expiration of the Lease Term without Landlord's acquiescence, Tenant shall be
deemed only a tenant at will and there shall be no renewal of this Lease
without a written agreement signed by both parties specifying such renewal;
in addition, the monthly Minimum Rental required to be paid under this Lease
relative to any holdover period shall automatically become one hundred fifty
percent (150%) of the monthly Minimum Rental payable immediately prior to the
expiration of the Lease Term. Tenant also shall be liable for any and all
damages, direct and consequential, suffered by Landlord as a result of any
holdover without Landlord's unequivocal written acquiescence.
30. Notices. Any notice allowed or required by this Lease shall
be deemed to have been sufficiently served if the same shall be in writing
and placed in the United States Mail, via certified mail or registered mail,
return receipt requested, with proper postage prepaid and addressed:
AS TO LANDLORD: Crescent Resources, Inc.
400 South Tryon Street, Suite 1300 (28202)
P.O. Box 1003 (28201-1003)
Charlotte, North Carolina
Attention: Director of Property Management
23
<PAGE>
Exhibit 10.13
AS TO TENANT: Leiner Health Products Inc.
587 Greenway Industrial Drive
Fort Mill, South Carolina 29715
Attention: Bob Chichester
with a copy to:
Leiner Health Products Inc.
901 East 233rd Street
Carson, California 90745-6204
Attention: Senior Vice President of
Operations
The addresses of Landlord and Tenant to which notices shall be directed may
be changed or added from time to time by either party giving notice to the
other in the prescribed manner.
31. Miscellaneous.
(a) Rules and Regulations. Attached hereto as Exhibit D are the rules
and regulations currently in effect with respect to the Building. Landlord
shall have the right from time to time to reasonably amend these rules and
regulations for Tenant's use of the Premises. Tenant shall abide by and
actively enforce such rules and regulations, including, without limitation,
rules and regulations governing parking of vehicles on designated portions of
the Land as to its employees, agents, invitees and licensees.
(b) Evidence of Authority. If requested by Landlord, Tenant shall
furnish appropriate legal documentation evidencing the valid existence and good
standing of Tenant and the authority of any parties signing this Lease on
behalf of Tenant to act for Tenant.
(c) Nature and Extent of Agreement. This Lease, together with all
exhibits hereto, contains the complete agreement of the parties concerning the
subject matter hereof, and there are no oral or written understandings,
representations, or agreements pertaining thereto which have not been
incorporated herein. This Lease creates only the relationship of landlord and
tenant between the parties, and nothing herein shall impose upon
either party any powers, obligations or restrictions not expressed herein.
This Lease shall be construed and governed by the laws of the state in which
the Premises are located.
24
<PAGE>
Exhibit 10.13
(d) Severability. If any term or provision of this Lease, or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other those as to which it
is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Lease shall be valid and enforced to the fullest
extent permitted by law, notwithstanding the invalidity of any other term or
provision hereof.
(e) Binding Effect. This Lease shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
successors and assigns. This Lease shall not be binding on Landlord until
executed by an officer of Landlord having a title of Vice President or higher
and delivered to Tenant. No amendment or modification of this Lease shall be
binding upon Landlord unless same is in writing and executed by an officer of
Landlord having a title of Vice President or higher.
(f) Captions and Headings. The captions and headings in this Lease
are for convenience and reference only, and they shall in no way be held to
explain, modify, or construe the meaning of the terms of this Lease.
(g) Lease Review. The submission of this Lease to Tenant for review
does not constitute a reservation for or option for the Premises, and this
Lease shall become effective as a contract only upon execution and delivery
by Landlord and Tenant.
(h) Brokerage. Each party warrants and represents to the other no
brokerage fees or commissions are due as a result of this transaction. Tenant
and Landlord shall each be responsible for the payment of their respective
consulting fees, finder's fee, commission, or like compensation (if any),
including reasonable attorneys' fees incurred in connection with entering
into this Lease.
(i) Memorandum of Lease. Upon the request of either party, the
other party shall join in the execution of a memorandum of this Lease (a
""Memorandum'') in recordable form. Either party may record the Memorandum in
the appropriate land record office, at its own expense. However, neither
party shall record this Lease (or any portion thereof) without the written
consent of the other party.
(j) Advance Rental Payment. Tenant either has paid to Landlord on
or prior to the date of this Lease or will pay to Landlord within fifteen
(15) days after the date of this Lease a sum equal to one full month's
installment of Annual Rental (the ""Advance Rental Payment'') as security for
Tenant's performance of its obligations under this Lease. If Tenant is not
then in default under this Lease, Landlord shall apply the
25
<PAGE>
Exhibit 10.13
Advance Rental Payment to the payment of the monthly installment of Annual
Rental due relative to the first full calendar month during the Lease Term.
If Tenant is then in default under this Lease, Landlord may, at its option,
apply all or any part of the Advance Rental Payment to cure the default. With
regard to any partial calendar month (if any) preceding the first full
calendar month during the Lease Term, Tenant shall pay the pro rata portion
of the monthly installment of Annual Rental in a timely manner pursuant to
Paragraph 5 herein.
(k) Landlord's Consent. Whenever this Lease requires Landlord's
consent to or approval of any item or matter, Landlord may condition such
consent or approval on payment or reimbursement by Tenant of all costs and
expenses incurred by Landlord in connection with reviewing and responding to
such item or matter.
(l) Survival of Obligations. Notwithstanding any term or provision
in this Lease to the contrary, any liability or obligation of Landlord or
Tenant arising during or accruing with respect to the Lease Term shall
survive the expiration or earlier termination of this Lease, including,
without limitation, obligations and liabilities relating to (i) rental
payments, (ii) the condition of the Premises and the removal of Tenant's
property, and (iii) indemnity and hold harmless provisions in this Lease.
(m) Confidentiality. Neither Landlord nor Tenant shall disclose the
terms of this Lease to any third party except (i) legal counsel or other
consultants to Landlord and Tenant, (ii) any assignee of Landlord's or
Tenant's interest in this Lease or any sublessee of Tenant relative to the
Premises (or any portion thereof), (iii) as required by applicable law or
by subpoena or other similar legal process, or (iv) for financial
reporting purposes.
(n) Attorneys' Fees. In the event either party defaults in the
performance of any of the terms of this Lease and the other party employs
attorney(s) in connection therewith, the defaulting party agrees to pay the
prevailing party's reasonable attorneys' fees (calculated at such attorneys'
reasonable and customary hourly rates and without regard to the amount in
controversy) and costs of litigation.
(o) Time of Performance. Except as expressly otherwise herein
provided, with respect to all required acts of Tenant, TIME IS OF THE ESSENCE
of this Lease.
(p) Real Estate Investment Trust. During the Lease Term, should a
real estate investment trust become Landlord hereunder, all provisions of
this Lease shall remain in full force and effect except as modified by this
Paragraph 31(p). If Landlord in good faith determines that its status as a
real estate investment trust under the provisions of the
26
<PAGE>
Exhibit 10.13
Internal Revenue Code of 1986, as heretofore or hereafter amended, will be
jeopardized because of any provision of this Lease, Landlord may request
reasonable amendments to this Lease and Tenant will not unreasonably
withhold, delay or defer its consent thereto, provided that such amendments
do not (i) increase the monetary obligations of Tenant pursuant to this Lease
or (ii) in any other manner adversely affect Tenant's interest in the
Premises.
27
<PAGE>
Exhibit 10.13
IN WITNESS WHEREOF, the parties have caused this Lease to be duly executed
under seal as of the date first set forth above pursuant to authority duly
given.
WITNESSES: LANDLORD:
CRESCENT RESOURCES, INC.
- ----------------------------- By:---------------------------
- ----------------------------- Its:-----------------------
TENANT:
LEINER HEALTH PRODUCTS INC.
- ----------------------------- By:---------------------------
- ----------------------------- Its:-----------------------
28
<PAGE>
Exhibit 10.13
EXHIBIT A
to
Lease Agreement
Legal Description
TRACT 1
LYING AND BEING in Pineville Township, Mecklenburg County, North Carolina and
being those certain 2.248 acre, 1.195 acre, 2.020 acre tracts and that
certain 1.373 acre tract of Common Property shown on that certain plat
entitled ""Plat of Survey for Crescent Resources, Inc. Lakemont Industrial
Park Property, Phase 1, Map 1'' prepared by Cardan Systems Corp. dated May 3,
1991 and recorded in Map Book 24, Page 366, Mecklenburg County, North
Carolina, Public Registry.
TRACT 2
LYING AND BEING in Fort Mill Township, York County, South Carolina and being
that certain 28.649 acre tract shown as ""Tap Map 722, Parcel 4 and 6'' on
that certain plat entitled ""Plat of Survey for Crescent Resources, Inc.
Lakemont Industrial Park Property'' prepared by Cardan Systems Corp. dated
March 7, 1991 and recorded in Plat Book 107, Page 118 in the Office of the
Clerk of Court for York County, South Carolina.
A-1
<PAGE>
Exhibit 10.13
EXHIBIT B
to
Lease Agreement
Designation of Premises
[map]
B-1
<PAGE>
Exhibit 10.13
EXHIBIT C
Sheets
Cost Breakdown
4/23/97
<TABLE>
<CAPTION>
TOTAL RELOCATE CRESCENT
ITEM COST SAVINGS COST
- ------------------------------------------------------------------------------ ---------- ---------- ---------
<C> <S> <C> <C> <C>
PRO RATA..................... General Conditions $ 16,433 2,500
L........................ Engineering & Architectural drawings $ 9,000
L........................ Building permit $ 2,731
L........................ Demolition $ 9,399
L........................ Exterminator $ 5,500 5,500
L........................ Fence for Quarantine Area $ 5,857 5,857
L........................ Fence for Maintenance Area $ 2,086 2,058
L........................ Concrete $ 534
L........................ Masonry $ 200
L........................ Steel frames at roll up doors $ 1,000
L........................ Relocate X Bracing Allowance $ 1,500
L........................ Shed for air compressor $ 1,000
L........................ Relocated break room cabinet $ 406
L........................ Roof work for new HVAC units $ 1,600
L........................ Overhead doors $ 2,100 2,100
L........................ Regular doors and hardware $ 8,227
L........................ Drywall for new offices and low walls $ 9,673
L........................ New ceiling for Production area $ 18,501
L........................ Rubber base & VCT $ 675 675
L........................ Carpet at designated areas $ 6,324 6,324
L........................ Repaint of existing space on drywall $ 3,738 3,733
L........................ Painting at production area $ 3,875
L........................ Seal production room floor (sim. to Tenant) $ 2,017
L........................ Rescreen louvers $ 700 700
L........................ Lifting platform Allowance $ 11,150 11,150
L........................ Air Compressor (2 stage unit) $ 64,063 64,003
L........................ Distribution piping and known drops $ 9,390
L........................ Refrigerator and two microwaves
L........................ 140 gal electric water heaters with
recirc feature $ 3,000 3,000
L........................ Washdown stations $ 1,100 1,100
L........................ Double bowl kitchen sink $ 2,250 1,560
L........................ Replumb for break sink $ 1,500
L........................ Fire suppression system at production $ 12,750
L........................ HVAC system less maintenance shop $ 42,280 10,500
L........................ New 1200 AMP service $ 33,788 8,000
L........................ Electrical connections for HVAC $ 2,138
L........................ Warehouse equipment connections $ 24,687 5,000
L........................ Electrical upper office $ 2,870
L........................ Electrical connections production Allowance $ 62,500
</TABLE>
C-1
<PAGE>
Exhibit 10.13
<TABLE>
<CAPTION>
TOTAL RELOCATE CRESCENT
ITEM COST SAVINGS COST
- ------------------------------------------------------------------------------ ---------- ---------- ---------
<C> <S> <C> <C> <C>
L........................ Light fixtures for Production Area $ 17,300
L........................ Rework warehouse lighting for new rack
location $ 11,273
L........................ Contingency $ 16,207
PRO RATA..................... General contractors OH/P $ 66,592 $ 1,842
Total estimated cost...................................................... $882,871 $114,366 $27,375
Adjustment Total after roll forward....................................... $367,140
</TABLE>
* RETROFIT COSTS WILL BE FINALIZED AT A LATER DATE.
Not Included Items
Sealer in warehouse
Bug Zappers
Appliances
Card Access system
Exterior work on building
Dock door work
Security system
C-2
<PAGE>
Exhibit 10.13
Above price based on drawings listed below as approved by Mike Hader
Appendix B................................... A1 3/13/97
Enlarged floor plan.......................... A2 3/13/97
Enlarged floor plan.......................... A3 3/13/97
Reflected ceiling plan....................... A4 3/13/97
Ducati Temporary Facility.................... M1 3/13/97
Ducati Temporary Facility.................... M2 2/18/97
Ducati Temporary Facility.................... M3 2/18/97
Floor plan electrical........................ E1 3/13/97
Enlarged lighting plan....................... E2 3/13/97
Enlarged power plan.......................... E3 3/13/97
Enlarged mezzanine plan...................... E4 3/13/97
Riser schedules.............................. E5 3/13/97
Panel Schedules.............................. E6 3/13/97
Panel Schedules.............................. E7 3/13/97
L=Leiner Improvement
C=Crescent Improvement
C-3
<PAGE>
Exhibit 10.13
EXHIBIT D
to
Lease Agreement
Rules and Regulations
1. RESTRICTED USES. The Premises shall not be used by Tenant for any
one or more of the following uses:
(a) Agriculture or any related use, including any roadside stand for
the display and sale of agricultural products and any use which
involves the raising, breeding, or keeping of any animals or
poultry;
(b) Processing or slaughter of livestock, swine, poultry or other
animals;
(c) Manufacture of leather goods;
(d) Manufacture of explosives or explosive agents;
(e) Manufacture, sale, rental, repair or storage of heavy equipment,
buses, trucks, trailers, automobiles, recreational vehicles and
mobile or trailer homes;
(f) Unscreened outdoor storage, outdoor fabrication or outdoor
handling of any machinery, parts, material, supplies or
products;
(g) Residential uses;
(h) Overnight parking of campers, mobile homes, boats, trailers or
motor homes;
(i) Erecting and maintaining structures of a temporary nature,
except that during the period of construction of improvements to
the Premises, Tenant's contractors or subcontractors may be
permitted to erect or maintain such temporary structures upon
Landlord's prior written approval;
(j) Jails, prisons, labor camps, penal, detention or correction
facilities or farms;
(k) Cemeteries or mausoleums;
(l) Mining, including the extraction, processing and removal of sand,
gravel, stone, minerals or clay;
(m) Any land fills, any hazardous waste disposal or storage
facilities and any incinerators;
(n) Racetracks, raceways and drag strips; and
(o) Massage parlors, topless night clubs or similar business
operations.
2. NUISANCES. Tenant shall not cause any unclean, unhealthy, unsightly
or unkempt condition to exist in the Premises or in the Park. Tenant
shall not use the Premises or any portion of the Park, in whole or in
part, for the deposit, storage or burial of any property or thing that
will cause the above-mentioned areas to appear to be in an unclean or
untidy condition or that will be obnoxious to the eye; nor shall
Tenant allow any substance, thing, or material to be kept, utilized
or carried out in the Premises or the Park that will emit foul or
obnoxious odors, fumes, smoke or dust or that will cause any
vibration or noise or other condition that will or might disturb
the peace, quiet, safety, comfort, or serenity of the occupants
of the Park. No noxious, offensive or illegal trade or activity
shall be carried out in the Premises or in the Park, nor shall
anything be done tending to cause embarrassment, discomfort,
annoyance, or nuisance to any person using any portion of the Park.
3. RESTRICTED ACTIONS IN THE PARK. Tenant shall not cause or allow
any cutting of vegetation, dumping, digging, filling, destruction
or other waste to be committed on the common areas of the Premises
or the Park. Tenant shall not cause any obstruction of, or allow
or cause anything to be kept or stored on, altered, constructed or
planted in, or removed from the common areas of the Park without
Landlord's prior written consent.
4. SIGN DISPLAY. Except as permitted in Paragraph 16 of the Lease,
all signage will be coordinated by Landlord throughout the Park
for uniformity and attractiveness. The size, shape, design,
lighting, materials and location of all signs shall conform to the
uniform signage plan for the Park. Tenant shall not cause any
sign, tag, label, picture, advertisement or notice to be
displayed, distributed, inscribed, painted or affixed by Tenant on
any part of the Park or the Premises without the prior written
consent of Landlord. Landlord shall have the right, at Tenant's
sole cost and expense, to remove all unapproved signs installed by
or on behalf of Tenant, without notice to Tenant.
5. DRIVES AND PARKING AREAS. All parking shall be within the
boundaries of the Land and within marked parking spaces. There
shall be no on-street parking. Tenant, its employees, agents and
invitees shall comply with reasonable parking rules and
regulations as they may be posed and distributed from time to
time. Tenant is responsible for controlling all of its truck
traffic in accordance with the
C-4
<PAGE>
Exhibit 10.13
restrictions and regulations imposed by Landlord.
6. STORAGE AND TRASH DISPOSAL. No materials, supplies or equipment
belonging to Tenant shall be stored except inside the Premises.
Trash disposal is confined to the receptacles provided by Tenant
in a location approved by Landlord and no trash receptacles may be
placed in any other location in the Park.
7. LOCKS. Landlord acknowledges that Tenant may use card readers for
locks. No additional locks shall be placed on the doors of the
Premises by Tenant. If Tenant changes any existing locks, Tenant
shall immediately furnish Landlord with two keys/cards to such new
locks. Landlord will, without charge, furnish Tenant with two
keys/cards for each lock existing upon the entrance door when
Tenant assumes possession of the Premises, with the understanding
that, at the termination of the Lease, the keys/cards shall be
returned.
8. IMPROVEMENTS, CONTRACTORS AND SERVICE MAINTENANCE. Tenant shall
not make any improvements to the exterior of the Building or the
Park and Tenant shall not make any structural changes or other
material alterations, additions or improvements to the Premises
without the prior written consent of Landlord. Tenant will refer
all of Tenant's contractors, contractors' representatives and
installation technicians rendering any service on or to the
Premises to Landlord for Landlord's approval and supervision
before performance of any service. This provision shall apply to
all work performed in the Premises, including installation of
electrical devices and attachments and installations of any nature
affecting floors, walls, woodwork, trim,
C-5
<PAGE>
Exhibit 10.13
windows, ceilings, equipment or any other physical portion of the
Premises.
9. REGULATIONS FOR OPERATION AND USE. Tenant shall not place or use
in or about the Premises any explosives, gasoline, kerosene, oil,
acids, caustics or any other flammable, explosive or hazardous
material, without the prior written consent of Landlord.
10. WINDOW COVERINGS. Windows facing the Building exterior shall at
all times be wholly clear and uncovered (except for such blinds or
curtains or other window coverings as Landlord may provide or
approve).
11. NO VIOLATIONS OF FIRE LAWS OR HEALTH CODE. Tenant shall not do or
permit anything to be done in the Premises, or bring or keep
anything therein, which will obstruct or interfere with the rights
of other tenants in the Park or in any other way injure or annoy
them or conflict with any laws relating to fires, or with any
regulations of the Fire Department or with any insurance policy
upon the Building or the Park, or any part thereof, or conflict
with any of the rules and ordinances of the Board of Health.
12. NO VIOLATIONS OF LAWS. Tenant shall promptly and at its expense
execute and comply with all laws, rules, orders, ordinances,
including all applicable zoning ordinances, and regulations of the
City, County, State or Federal Government and of any department or
bureau of any of them and of any other governmental authority
having jurisdiction over the Premises, affecting Tenant's
occupancy of the Premises or Tenant's business conducted therein.
13. NO USE OF ROOF. Neither Tenant, nor Tenant's servants, employees
or agents shall go upon the roof of the Building
C-6
<PAGE>
Exhibit 10.13
without the written consent of Landlord, except as may be necessary
to comply with Tenant's repair and maintenance obligations set forth
in this Lease.
14. NO CANVASSING. Canvassing, soliciting and peddling in and about the
Park is prohibited.
15. NO LOUD MUSICAL DEVICES. Tenant shall not operate or permit to be
operated any musical or sound producing instrument or device
inside or outside the Premises which may be heard outside the
Premises or by other tenants in the Park.
16. USE OF WASHROOMS. Tenant shall not use the washrooms, restrooms,
and plumbing fixtures of the Premises and appurtenances thereto,
for any purposes other than the purposes for which they were
constructed, and Tenant shall not deposit any sweepings, rubbish,
rags, or other improper substances therein. If Tenant or Tenant's
servants, employees, agents, contractors, jobbers, licensees,
invitees, guests or visitors cause any damage to such washrooms,
restrooms, plumbing fixtures or appurtenances, such damage shall
be repaired, at Tenant's expense, and Landlord shall not be
responsible therefor.
17. NO UNPLEASANT ODORS. Tenant shall not cause or permit any
unpleasant odors to emanate from the Premises, or otherwise
interfere, injure or annoy in any way other tenants in the Park or
persons conducting business with them.
18. DISPOSAL OF CRATES. When conditions are such that Tenant must
dispose of crates, boxes, etc. on the sidewalk or parking areas on
the Land, it will be the responsibility of Tenant to dispose of
same in an orderly manner.
C-7
<PAGE>
Exhibit 10.13
19. NO FOOD DISTRIBUTION. No prepared food and/or beverages shall be
distributed from the Premises, but, notwithstanding the provisions
of this Paragraph 19, Tenant may prepare coffee and similar
beverages and warm typical luncheon items for the consumption of
Tenant's employees and invitees.
20. LOCATION OF IMPROVEMENTS. Tenant will not locate furnishings or
cabinets adjacent to mechanical or electrical access panels or
over air conditioning outlets in the Premises so as to prevent
operating personnel from servicing such units as routine or
emergency access may require. Tenant shall be responsible for any
cost associated with moving such furnishings for Landlord's access
to such mechanical or electrical access panels or air conditioning
outlets.
21. MODIFICATIONS. Landlord shall have the right from time to time to
make any and all such reasonable modifications and additions to
these Rules and Regulations as may be necessary for the safety,
care, quiet enjoyment and cleanliness of the Park. Tenant agrees
to abide by these Rules and Regulations and any reasonable
modifications and additions as are hereafter adopted by Landlord,
including, but not limited to, modifications made by Landlord as a
result of any changes in the city zoning ordinance.
C-8
<PAGE>
Exhibit 10.13
THIS AGREEMENT MAY BE SUBJECT TO ARBITRATION PURSUANT TO THE UNIFORM
ARBITRATION ACT, SECTION 15-48-10, ET SEQ., CODE OF LAWS OF SOUTH CAROLINA,
1976, AS AMENDED, AS SET FORTH IN PARAGRAPH 20(D) OF THIS LEASE.
LEASE AGREEMENT
BETWEEN
CRESCENT RESOURCES, INC.,
AS LANDLORD
AND
LEINER HEALTH PRODUCTS INC.,
AS TENANT
MAY 1, 1997
<PAGE>
Exhibit 10.13
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<C> <S> <C>
1. Defined Terms................................................................. 1
(a) Land...................................................................... 1
(b) Building.................................................................. 1
(c) Park...................................................................... 1
(d) Premises.................................................................. 1
(e) Tenant Operations......................................................... 1
(f) Commencement Date......................................................... 1
(g) Expiration Date........................................................... 2
(h) Advance Rental Payment.................................................... 2
2. Description of Premises....................................................... 2
3. Lease Term.................................................................... 2
4. Construction and Acceptance of Premises....................................... 3
5. Annual Rental................................................................. 5
(a) Minimum Rental............................................................ 5
(b) Additional Rental......................................................... 5
(1) Tenant's Share of Taxes............................................... 5
(2) Tenant's Share of Insurance Premiums.................................. 5
(3) Tenant's Share of Common Area Maintenance Costs....................... 5
(c) Payment of Additional Rental.............................................. 6
(d) Late Charge............................................................... 6
6. Alterations and Improvements by Tenant........................................ 6
7. Use of Premises............................................................... 7
8. Taxes......................................................................... 7
9. Hazard and Casualty Insurance................................................. 7
10. Landlord's Limited Covenant to Repair and Replace............................. 8
11. Tenant's Covenant to Repair................................................... 9
12. Trade Fixtures and Equipment; Non-Liability for Certain Damages............... 10
</TABLE>
i
<PAGE>
Exhibit 10.13
<TABLE>
<CAPTION>
<C> <S> <C>
13. Utilities..................................................................... 11
14. Damage or Destruction of Premises............................................. 11
15. Mutual Waiver; Waiver of Subrogation.......................................... 12
16. Signs and Advertising......................................................... 12
17. Indemnification, Liability Insurance and Hazardous Substances................. 12
(a) Indemnification by Tenant................................................. 12
(b) Indemnification by Landlord............................................... 13
(c) Liability Insurance....................................................... 13
(d) Presence and Use of Hazardous Substances.................................. 14
(e) Unauthorized Releases of Hazardous Substances; Cleanup Costs;
Default and Indemnification............................................. 15
18. Landlord's Right of Entry..................................................... 17
19. Eminent Domain................................................................ 17
20. Events of Default and Remedies................................................ 18
21. Subordination................................................................. 20
22. Assigning and Subletting...................................................... 20
23. Covenant of Quiet Enjoyment................................................... 21
24. Estoppel Certificates......................................................... 21
25. Protection Against Liens...................................................... 21
26. Force Majeure................................................................. 21
27. Non-waiver.................................................................... 22
28. Landlord Liability............................................................ 22
29. Holding Over.................................................................. 22
30. Notices....................................................................... 23
</TABLE>
ii
<PAGE>
Exhibit 10.13
<TABLE>
<CAPTION>
<C> <S> <C>
31. Miscellaneous................................................................. 23
(a) Rules and Regulations..................................................... 23
(b) Evidence of Authority..................................................... 24
(c) Nature and Extent of Agreement............................................ 24
(d) Severability.............................................................. 24
(e) Binding Effect............................................................ 24
(f) Captions and Headings..................................................... 24
(g) Lease Review.............................................................. 24
(h) Brokerage................................................................. 25
(i) Memorandum of Lease....................................................... 25
(j) Advance Rental Payment.................................................... 25
(k) Landlord's Consent........................................................ 25
(o) Time of Performance....................................................... 26
(p) Real Estate Investment Trust.............................................. 26
</TABLE>
iii
<PAGE>
Exhibit 10-14
SEVERANCE BENEFIT AGREEMENT
THIS AGREEMENT is made and entered into as of the 21st day of
November, 1991, by and between P. LEINER NUTRITIONAL PRODUCTS, INC. OF
DELAWARE, a Delaware corporation (the "Company"), and ROBERT KAMINSKI
("Executive").
R E C I T A L S
A. Executive is the Chief Operating Officer of the Company; and
B. The Company desires to assure the retention of the services of
Executive, whose experience, knowledge and abilities with respect to the
business and affairs of the Company are valuable to the Company and would be
difficult to replace;
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto hereby agree as follows:
1. Severance Benefit. In consideration of Executive's past service
to the Company, his current value to the Company, and his continued service to
the Company, the Company agrees that if Executive's employment is terminated by
the Company other than for Cause (as defined below), or if Executive resigns
his employment with the Company for Good Reason (as defined below), the Company
shall provide to Executive upon such termination or resignation the following
severance benefits:
(a) A lump-sum severance payment equal to the sum of (i) one year's
base salary, plus (ii) any annual individual performance bonus or targeted
commission, both as in effect at the time of the termination or
resignation;
(b) Outplacement assistance at the Company's expense, up to a maximum
cost to the Company of $20,000; and
(c) Executive shall have such rights under applicable Company plans
or programs, including but not limited to stock option and incentive plans,
as may be determined pursuant to the terms of such plans or programs.
2. Discharge for Cause. For purposes of this Agreement, "Cause"
shall mean one of the following, as determined by the affirmative vote of a
majority of the Board of Directors acting at a meeting at which a quorum is
present:
<PAGE>
(a) Executive's willful malfeasance, gross negligence or dishonesty
in the performance of Executive's duties to the Company, but excluding such
duties as would constitute a basis for Executive to resign for "Good
Reason" hereunder;
(b) Executive's willful breach of any employment agreement between
Executive and the Company;
(c) Executive's substantial and continuing refusal to perform
Executive's duties to the Company, but excluding such duties as would
constitute a basis for Executive to resign for "Good Reason" hereunder; or
(d) The conviction of Executive on charges of (i) a felony under the
laws of the United States or any state involving moral turpitude or (ii) a
crime under the laws of any other country or political subdivision thereof
that would constitute a felony involving moral turpitude under the laws of
the United States or any state had they applied.
3. Resignation for Good Reason. For purposes of this Agreement,
resignation for "Good Reason" shall mean the termination of Executive's
employment for any of the following reasons (without Executive's express prior
written consent):
(a) The assignment to Executive by the Company of duties materially
inconsistent with Executive's positions, duties, responsibilities, titles
or offices as of the date hereof or as such appropriately may change from
time to time during the term of this Agreement;
(b) Any material reduction by the Company of Executive's duties or
responsibilities;
(c) Any loss by Executive of the principal position held on the date
hereof or appropriately assigned to Executive hereafter (except in
connection with the termination of Executive's employment for Cause) as a
result of Executive's death or "permanent disability" (defined for purposes
of this Agreement as the inability of Executive to render services to the
Company on a full-time basis due to physical or mental illness or
disability for six months or more in the aggregate in any 12-month period);
(d) A reduction by the Company in Executive's base salary or
individual performance bonus, as in effect on the date hereof or as the
same may be increased from time to time during the term of this Agreement;
(e) A material adverse change in Executive's benefits or perquisites,
as in effect on the date hereof or as the same may be increased or improved
from time to time during the term of this Agreement;
2
<PAGE>
(f) The requirement by the Company that Executive relocate to an
office or location more than thirty (30) miles from Executive's
then-current principal office location; or
(g) The failure by the Company to obtain the specific assumption of
this Agreement by any successor or assign of the Company or any person
acquiring substantially all of the Company's assets.
4. Employment at Will. The Company may terminate Executive's
employment at any time for any reason, and Executive may terminate his
employment with the Company at any time for any reason, and nothing in this
Agreement shall be construed as giving either the Company or Executive any
right or obligation to continue their employment relationship.
5. Discharge For Cause or Resignation without Good Reason. If
Executive is discharged for Cause, or if Executive voluntarily resigns
without Good Reason, all payments of base salary and performance bonus, as
well as all of Executive's benefits, shall immediately cease and Executive
shall be entitled to no further compensation or benefits of any kind.
6. Waiver or Modification. Any waiver, alteration or modification
of any of the provisions of this Agreement or cancellation or replacement of
this Agreement shall not be valid unless made in writing and signed by the
parties hereto. Waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
7. Construction. Except as to matters of internal corporate
policy and regulation, which shall be governed by the laws of the State of
Delaware (the State of incorporation of the Company), this Agreement shall be
governed by the laws of the State of California.
8. Binding Effect. The rights and obligations of the Company
under this Agreement shall be binding upon and shall inure to the benefit of
any successors or assigns of the Company. In the event of any consolidation
or merger of the Company into or with another corporation, such other
corporation shall assume this Agreement and shall become obligated to perform
all of the terms and conditions hereof, and Executive's obligations hereunder
shall continue in favor of such other corporation or the subsidiary of such
corporation carrying on the major part of the business of the Company.
9. Entire Agreement. This Agreement constitutes the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements, amendments, memoranda or understandings
between the Company and Executive.
3
<PAGE>
10. Counterparts. This Agreement may be executed in a number of
identical counterparts, each of which shall be construed as an original for
all purposes, but all of which taken together shall constitute one and the
same Agreement.
11. Notices. Any notice required or permitted to be given under
this Agreement shall be in writing and delivered in person or sent by
registered or certified United States mail, postage and fees prepaid, to the
addresses of the parties set forth below, or such other address as shall be
furnished by notice hereunder by any such party:
The Company: 1845 West 205th Street
Torrance, California 90510
Attention: Chief Executive Officer
Executive: 6762 Los Verdes Drive, #3
Rancho Palos Verdes, CA 90274
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
"THE COMPANY": P. LEINER NUTRITIONAL PRODUCTS, INC. OF
DELAWARE
By: /s/
------------------------------------
Michael Leiner
Chief Executive Officer
"EXECUTIVE": /s/
-----------------------------------
Robert Kaminski
4
<PAGE>
Exhibit 10.15
SEVERANCE BENEFIT AGREEMENT
THIS AGREEMENT is made and entered into as of the 21st day of
November, 1991, by and between P. LEINER NUTRITIONAL PRODUCTS, INC. OF
DELAWARE, a Delaware corporation (the "Company"), and GALE BENSUSSEN
("Executive").
R E C I T A L S
A. Executive is the Senior Vice President-Corporate Development of
the Company; and
B. The Company desires to assure the retention of the services of
Executive, whose experience, knowledge and abilities with respect to the
business and affairs of the Company are valuable to the Company and would be
difficult to replace;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
1. Severance Benefit. In consideration of Executive's past
service to the Company, his current value to the Company, and his continued
service to the Company, the Company agrees that if Executive's employment is
terminated by the Company other than for Cause (as defined below), or if
Executive resigns his employment with the Company for Good Reason (as defined
below), the Company shall provide to Executive upon such termination or
resignation the following severance benefits:
(a) A lump-sum severance payment equal to the sum of (i) one year's
base salary, plus (ii) any annual individual performance bonus or targeted
commission, both as in effect at the time of the termination or
resignation;
(b) Outplacement assistance at the Company's expense, up to a maximum
cost to the Company of $20,000; and
(c) Executive shall have such rights under applicable Company plans
or programs, including but not limited to stock option and incentive plans,
as may be determined pursuant to the terms of such plans or programs.
<PAGE>
2. Discharge for Cause. For purposes of this Agreement, "Cause"
shall mean one of the following, as determined by the affirmative vote of a
majority of the Board of Directors acting at a meeting at which a quorum is
present:
(a) Executive's willful malfeasance, gross negligence or dishonesty
in the performance of Executive's duties to the Company, but excluding such
duties as would constitute a basis for Executive to resign for "Good
Reason" hereunder;
(b) Executive's willful breach of any employment agreement between
Executive and the Company;
(c) Executive's substantial and continuing refusal to perform
Executive's duties to the Company, but excluding such duties as would
constitute a basis for Executive to resign for "Good Reason" hereunder; or
(d) The conviction of Executive on charges of (i) a felony under the
laws of the United States or any state involving moral turpitude or (ii) a
crime under the laws of any other country or political subdivision thereof
that would constitute a felony involving moral turpitude under the laws of
the United States or any state had they applied.
3. Resignation for Good Reason. For purposes of this Agreement,
resignation for "Good Reason" shall mean the termination of Executive's
employment for any of the following reasons (without Executive's express
prior written consent):
(a) The assignment to Executive by the Company of duties materially
inconsistent with Executive's positions, duties, responsibilities, titles
or offices as of the date hereof or as such appropriately may change from
time to time during the term of this Agreement;
(b) Any material reduction by the Company of Executive's duties or
responsibilities;
(c) Any loss by Executive of the principal position held on the date
hereof or appropriately assigned to Executive hereafter (except in
connection with the termination of Executive's employment for Cause) as a
result of Executive's death or "permanent disability" (defined for purposes
of this Agreement as the inability of Executive to render services to the
Company on a full-time basis due to physical or mental illness or
disability for six months or more in the aggregate in any 12-month period);
(d) A reduction by the Company in Executive's base salary or
individual performance bonus, as in effect on the date hereof or as the
same may be increased from time to time during the term of this Agreement;
2
<PAGE>
(e) A material adverse change in Executive's benefits or perquisites,
as in effect on the date hereof or as the same may be increased or improved
from time to time during the term of this Agreement;
(f) The requirement by the Company that Executive relocate to an
office or location more than thirty (30) miles from Executive's
then-current, principal office location; or
(g) The failure by the Company to obtain the specific assumption of
this Agreement by any successor or assign of the Company or any person
acquiring substantially all of the Company's assets.
4. Employment at Will. The Company may terminate Executive's
employment at any time for any reason, and Executive may terminate his
employment with the Company at any time for any reason, and nothing in this
Agreement shall be construed as giving either the Company or Executive any
right or obligation to continue their employment relationship.
5. Discharge For Cause or Resignation without Good Reason. If
Executive is discharged for Cause, or if Executive voluntarily resigns
without Good Reason, all payments of base salary and performance bonus, as
well as all of Executive's benefits, shall immediately cease and Executive
shall be entitled to no further compensation or benefits of any kind.
6. Waiver or Modification. Any waiver, alteration or modification
of any of the provisions of this Agreement or cancellation or replacement of
this Agreement shall not be valid unless made in writing and signed by the
parties hereto. Waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
7. Construction. Except as to matters of internal corporate
policy and regulation, which shall be governed by the laws of the State of
Delaware (the State of incorporation of the Company), this Agreement shall be
governed by the laws of the State of California.
8. Binding Effect. The rights and obligations of the Company
under this Agreement shall be binding upon and shall inure to the benefit of
any successors or assigns of the Company. In the event of any consolidation
or merger of the Company into or with another corporation, such other
corporation shall assume this Agreement and shall become obligated to perform
all of the terms and conditions hereof, and Executive's obligations hereunder
shall continue in favor of such other corporation or the subsidiary of such
corporation carrying on the major part of the business of the Company.
3
<PAGE>
9. Entire Agreement. This Agreement constitutes the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements, amendments, memoranda or understandings
between the Company and Executive.
10. Counterparts. This Agreement may be executed in a number of
identical counterparts, each of which shall be construed as an original for
all purposes, but all of which taken together shall constitute one and the
same Agreement.
11. Notices. Any notice required or permitted to be given under
this Agreement shall be in writing and delivered in person or sent by
registered or certified United States mail, postage and fees prepaid, to the
addresses of the parties set forth below, or such other address as shall be
furnished by notice hereunder by any such party:
The Company: 1845 West 205th Street
Torrance, California 90510
Attention: Chief Executive Officer
Executive: 365 25th Street
Santa Monica, CA 90402
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
"THE COMPANY": P. LEINER NUTRITIONAL PRODUCTS, INC. OF
DELAWARE
By: /s/
------------------------------------
Michael Leiner
Chief Executive Officer
"EXECUTIVE": /s/
------------------------------------
Gale Bensussen
4
<PAGE>
Exhibit 10.15
SEVERANCE BENEFIT AGREEMENT
THIS AGREEMENT is made and entered into as of the 30th day of May,
1997, by and between LEINER HEALTH PRODUCTS, INC. OF CALIFORNIA, a
California corporation (the "Company"), and William B. Towne ("Executive").
RECITALS
A. Executive is the Executive Vice President and Chief Financial
Officer of the Company; and
B. The Company desires to assure the retention of the services of
Executive, whose experience, knowledge and abilities with respect to the
business and affairs of the Company are valuable to the Company and would be
difficult to replace;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
1. Severance Benefit. In consideration of Executive's past service
to the Company, his current value to the Company, and his continued service
to the Company, the Company agrees that if Executive's employment is
terminated by the Company other than for Cause (as defined below), or if
Executive resigns his employment with the Company for Good Reason (as defined
below), the Company shall provide to Executive upon such termination or
resignation the following severance benefits:
(a) A lump-sum severance payment equal to the sum of (i) one year's
base salary, plus (ii) any annual individual performance bonus or targeted
commission, both as in effect at the time of the termination or resignation;
(b) Out placement assistance at the Company's expense, up to a
maximum cost to the Company of $20,000; and
(c) Executive shall have such rights under applicable Company plans
or programs, including but not limited to stock option and incentive plans,
as may be determined pursuant to the terms of such plans or programs.
2. Discharge for Cause. For purposes of this Agreement, "Cause"
shall mean one of the following, as determined by the affirmative vote of a
majority of the Board of Directors acting at a meeting at which a quorum is
present:
<PAGE>
(a) Executive's willful malfeasance, gross negligence or dishonesty
in the performance of Executive's duties to the Company, but excluding such
duties as would constitute a basis for Executive to resign for "Good Reason"
hereunder;
(b) Executive's willful breach of any employment agreement between
Executive and the Company;
(c) Executive's substantial and continuing refusal to perform
Executive's duties to the Company, but excluding such duties as would
constitute a basis for Executive to resign for "Good Reason" hereunder; or
(d) The conviction of Executive on charges of (i) a felony under
the laws of the United States or any state involving moral turpitude or (ii)
a crime under the laws of any other country or political subdivision thereof
that would constitute a felony involving moral turpitude under the laws of
the United States or any state had they applied.
3. Resignation for Good Reason. For purposes of this Agreement,
resignation for "Good Reason" shall mean the termination of Executive's
employment for any of the following reasons (without Executive's express
prior written consent):
(a) The assignment to Executive by the Company of duties materially
inconsistent with Executive's positions, duties, responsibilities, titles or
offices as of the date hereof or as such appropriately may change from time
to time during the term of this Agreement;
(b) Any material reduction by the Company of Executive's duties or
responsibilities;
(c) Any loss by Executive of the principal position held on the
date hereof or appropriately assigned to Executive hereafter (except in
connection with the termination of Executive's employment for Cause) as a
result of Executive's death or "permanent disability" (defined for purposes
of this Agreement as the inability of Executive to render services to the
Company on a full-time basis due to physical or mental illness or disability
for six months or more in the aggregate in any 12-month period);
(d) A reduction by the Company in Executive's base salary or
individual performance bonus, as in effect on the date hereof or as the same
may be increased from time to time during the term of this Agreement;
2
<PAGE>
(e) A material adverse change in Executive's benefits or
perquisites, as in effect on the date hereof or as the same may be increased
or improved from time to time during the term of this Agreement;
(f) The requirement by the Company that Executive relocate to an
office or location more than thirty (30) miles from Executive's then-current
principal office location; or
(g) The failure by the Company to obtain the specific assumption of
this Agreement by any successor or assign of the Company or any person
acquiring substantially all of the Company's assets.
4. Employment at Will. The company may terminate Executive's
employment at any time for any reason, and Executive may terminate his
employment with the Company at any time for any reason, and nothing in this
Agreement shall be construed as giving either the Company or Executive any
right or obligation to continue their employment relationship.
5. Discharge For Cause or Resignation without Good Reason. If
Executive is discharged for Cause, or if Executive voluntarily resigns
without Good Reason, all payments of base salary and performance bonus, as
well as all of Executive's benefits, shall immediately cease and Executive
shall be entitled to no further compensation or benefits or any kind.
6. Waiver or Modification. Any waiver, alternation or modification
of any of the provisions of this Agreement or cancellation or replacement of
this Agreement shall not be valid unless made in writing and signed by the
parities hereto. Waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
7. Constructions. Except as to matters of internal corporate
policy and regulation, which shall be governed by the laws of the State of
California (the State of incorporation of the company), this Agreement shall
be governed by the laws of the State of California.
8. Binding Effect. The rights and obligations of the company under
this Agreement shall be binding upon and shall inure to the benefit of any
successors or assigns of the Company. In the event of any consolidation or
merger of the Company into or with another corporation, such other
corporation shall assume this Agreement and shall become obligated to perform
all of the terms and conditions hereof, and Executive's obligations
3
<PAGE>
hereunder shall continue in favor of such other corporation or the subsidiary
of such corporation carrying on the major part of the business of the Company.
9. Entire Agreement. This Agreement constitutes the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements, amendments, memoranda or understandings
between the Company and Executive.
10. Counterparts. This Agreement may be executed in a number of
identical counterparts, each of which shall be construed as an original for
all purposes, but all of which taken together shall constitute one and the
same Agreement.
11. Notices. Any notice required or permitted to be given under
this Agreement shall be in writing and delivered in person or sent by
registered or certified United States mail, postage and fees prepaid, to the
addresses of the parties set forth below, or such other address as shall be
furnished by notice hereunder by any such party:
The Company: 901 E. 233rd Street
Carson, California 90745
Attention: Chief Executive Officer
Executive: 300 Via Navajo
Palos Verdes Estates, CA 90274
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
"THE COMPANY": LEINER HEALTH PRODUCTS, INC. OF CALIFORNIA
By: /s/ Robert M. Kaminski
-------------------------------
Robert M. Kaminski
Chief Executive Officer
"EXECUTIVE": /s/ William B. Towne
-------------------------------
<PAGE>
Exhibit 10.17
SEVERANCE BENEFIT AGREEMENT
THIS AGREEMENT is made and entered into as of the 21st day of
November, 1991, by and between P. LEINER NUTRITIONAL PRODUCTS, INC. OF
DELAWARE, a Delaware corporation (the "Company"), and KEVIN J. LANIGAN
("Executive").
R E C I T A L S
A. Executive is the Senior Vice President-Operations Planning of
the Company; and
B. The Company desires to assure the retention of the services of
Executive, whose experience, knowledge and abilities with respect to the
business and affairs of the Company are valuable to the Company and would be
difficult to replace;
NOW THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
1. Severance Benefit. In consideration of Executive's past
service to the Company, his current value to the Company, and his continued
service to the Company, the Company agrees that if Executive's employment is
terminated by the Company other than for Cause (as defined below), or if
Executive resigns his employment with the Company for Good Reason (as defined
below), the Company shall provide to Executive upon such termination or
resignation, subject to the limitations set forth below, the total of the
following severance benefits:
(a) A lump-sum severance payment equal to three times the sum of
(i) one year's base salary, plus (ii) any annual individual performance
bonus or targeted commission, both as in effect at the time of the
termination or resignation;
(b) Outplacement assistance at the Company's expense, up to a maximum
cost to the Company of $20,000; and
(c) Such rights under applicable Company plans or programs, including
but not limited to stock option and incentive plans, as Executive may have
pursuant to the terms of such plans or programs;
provided, however, that if the Company determines that the foregoing
benefits, either alone or together with other payments and benefits that
Executive has a right to receive from the Company, would not be deductible
(in whole or in part) by the Company or any parent entity thereof
<PAGE>
because such payments constitute a "parachute payment" (as defined in Section
280G of the Internal Revenue Code, as amended (the "Code")), the amount of
the foregoing benefits shall be reduced to the largest amount that the
Company can pay or provide without incurring a restriction on the
deductibility of such payments under Section 280G of the Code. Subject to
the foregoing, Executive shall be entitled to designate the order in which
various benefits shall be reduced in order to satisfy the reduction
contemplated by the preceding sentence.
2. Discharge for Cause. For purposes of this Agreement, "Cause"
shall mean one of the following, as determined by the affirmative vote of a
majority of the Board of Directors acting at a meeting at which a quorum is
present:
(a) Executive's willful malfeasance, gross negligence or dishonesty
in the performance of Executive's duties to the Company, but excluding such
duties as would constitute a basis for Executive to resign for "Good
Reason" hereunder;
(b) Executive's willful breach of any employment agreement between
Executive and the Company;
(c) Executive's substantial and continuing refusal to perform
Executive's duties to the Company, but excluding such duties as would
constitute a basis for Executive to resign for "Good Reason" hereunder; or
(d) The conviction of Executive on charges of (i) a felony under the
laws of the United States or any state involving moral turpitude or (ii) a
crime under the laws of any other country or political subdivision thereof
that would constitute a felony involving moral turpitude under the laws of
the United States or any state had they applied.
3. Resignation for Good Reason. For purposes of this Agreement,
resignation for "Good Reason" shall mean the termination of Executive's
employment for any of the following reasons (without Executive's express
prior written consent):
(a) The assignment to Executive by the Company of duties materially
inconsistent with Executive's positions, duties, responsibilities, titles
or offices as of the date hereof or as such appropriately may change from
time to time during the term of this Agreement;
(b) Any material reduction by the Company of Executive's duties or
responsibilities;
(c) Any loss by Executive of the position held on the date hereof or
appropriately assigned to Executive hereafter (except in connection with
the termination of Executive's employment for Cause) as a result of
Executive's death or "permanent disability" (defined for purposes of this
Agreement as the inability of Executive to render services to the Company
2
<PAGE>
on a full-time basis due to physical or mental illness or disability for
six months or more in the aggregate in any 12-month period);
(d) A reduction by the Company in Executive's base salary or
individual performance bonus, as in effect on the date hereof or as the
same may be increased from time to time during the term of this Agreement;
(e) A material adverse change in Executive's benefits or perquisites,
as in effect on the date hereof or as the same may be increased or improved
from time to time during the term of this Agreement;
(f) The requirement by the Company that Executive relocate to an
office or location more than thirty (30) miles from Executive's
then-current principal office location; or
(g) The failure by the Company to obtain the specific assumption of
this Agreement by any successor or assign of the Company or any person
acquiring substantially all of the Company's assets.
4. Employment at Will. The Company may terminate Executive's
employment at any time for any reason, and Executive may terminate his
employment with the Company at any time for any reason, and nothing in this
Agreement shall be construed as giving either the Company or Executive any
right or obligation to continue their employment relationship.
5. Discharge For Cause or Resignation without Good Reason. If
Executive is discharged for Cause, or if Executive voluntarily resigns
without Good Reason, all payments of base salary and performance bonus, as
well as all of Executive's benefits, shall immediately cease and Executive
shall be entitled to no further compensation or benefits of any kind.
6. Waiver or Modification. Any waiver, alteration or modification
of any of the provisions of this Agreement or cancellation or replacement of
this Agreement shall not be valid unless made in writing and signed by the
parties hereto. Waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
7. Construction. Except as to matters of internal corporate
policy and regulation, which shall be governed by the laws of the State of
Delaware (the State of incorporation of the Company), this Agreement shall be
governed by the laws of the State of California.
8. Binding Effect. The rights and obligations of the Company
under this Agreement shall be binding upon and shall inure to the benefit of
any successors or assigns of the Company. In the event of any consolidation
or merger of the Company into or with another corporation,
3
<PAGE>
such other corporation shall assume this Agreement and shall become obligated
to perform all of the terms and conditions hereof, and Executive's
obligations hereunder shall continue in favor of such other corporation or
the subsidiary of such corporation carrying on the major part of the business
of the Company.
9. Entire Agreement. This Agreement constitutes the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements, amendments, memoranda or understandings
between the Company and Executive.
10. Counterparts. This Agreement may be executed in a number of
identical counterparts, each of which shall be construed as an original for
all purposes, but all of which taken together shall constitute one and the
same Agreement.
11. Notices. Any notice required or permitted to be given under
this Agreement shall be in writing and delivered in person or sent by
registered or certified United States mail, postage and fees prepaid, to the
addresses of the parties set forth below, or such other address as shall be
furnished by notice hereunder by any such party:
The Company: 1845 West 205th Street
Torrance, California 90510
Attention: Chief Executive Officer
Executive: 2904 Via Anacapa
Palos Verdes Estates, California 90274
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
"THE COMPANY": P. LEINER NUTRITIONAL PRODUCTS, INC. OF
DELAWARE
By: /s/
-------------------------------------
Michael Leiner
Chief Executive Officer
"EXECUTIVE": /s/
-------------------------------------
Kevin J. Lanigan
4
<PAGE>
Exhibit 10.18
SEVERANCE BENEFIT AGREEMENT
THIS AGREEMENT is made and entered into as of the 21st day of
November, 1991, by and between P. LEINER NUTRITIONAL PRODUCTS, INC. OF
DELAWARE, a Delaware corporation (the "Company"), and STANLEY J. KAHN
("Executive").
R E C I T A L S
A. Executive is the Vice President-Sales of the Company; and
B. The Company desires to assure the retention of the services of
Executive, whose experience, knowledge and abilities with respect to the
business and affairs of the Company are valuable to the Company and would be
difficult to replace;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
1. Severance Benefit. In consideration of Executive's past
service to the Company, his current value to the Company, and his continued
service to the Company, the Company agrees that if Executive's employment is
terminated by the Company other than for Cause (as defined below), or if
Executive resigns his employment with the Company for Good Reason (as defined
below), the Company shall provide to Executive upon such termination or
resignation the following severance benefits:
(a) A lump-sum severance payment equal to the sum of (i) one year's
base salary, plus (ii) any annual individual performance bonus or targeted
commission, both as in effect at the time of the termination or
resignation;
(b) Outplacement assistance at the Company's expense, up to a maximum
cost to the Company of $20,000; and
(c) Executive shall have such rights under applicable Company plans
or programs, including but not limited to stock option and incentive plans,
as may be determined pursuant to the terms of such plans or programs.
2. Discharge for Cause. For purposes of this Agreement, "Cause"
shall mean one of the following, as determined by the affirmative vote of a
majority of the Board of Directors acting at a meeting at which a quorum is
present:
<PAGE>
(a) Executive's willful malfeasance, gross negligence or dishonesty
in the performance of Executive's duties to the Company, but excluding such
duties as would constitute a basis for Executive to resign for "Good
Reason" hereunder;
(b) Executive's willful breach of any employment agreement between
Executive and the Company;
(c) Executive's substantial and continuing refusal to perform
Executive's duties to the Company, but excluding such duties as would
constitute a basis for Executive to resign for "Good Reason" hereunder; or
(d) The conviction of Executive on charges of (i) a felony under the
laws of the United States or any state involving moral turpitude or (ii) a
crime under the laws of any other country or political subdivision thereof
that would constitute a felony involving moral turpitude under the laws of
the United States or any state had they applied.
3. Resignation for Good Reason. For purposes of this Agreement,
resignation for "Good Reason" shall mean the termination of Executive's
employment for any of the following reasons (without Executive's express
prior written consent):
(a) The assignment to Executive by the Company of duties materially
inconsistent with Executive's positions, duties, responsibilities, titles
or offices as of the date hereof or as such appropriately may change from
time to time during the term of this Agreement;
(b) Any material reduction by the Company of Executive's duties or
responsibilities;
(c) Any loss by Executive of the principal position held on the date
hereof or appropriately assigned to Executive hereafter (except in
connection with the termination of Executive's employment for Cause) as a
result of Executive's death or "permanent disability" (defined for purposes
of this Agreement as the inability of Executive to render services to the
Company on a full-time basis due to physical or mental illness or
disability for six months or more in the aggregate in any 12-month period);
(d) A reduction by the Company in Executive's base salary or
individual performance bonus, as in effect on the date hereof or as the
same may be increased from time to time during the term of this Agreement;
(e) A material adverse change in Executive's benefits or perquisites,
as in effect on the date hereof or as the same may be increased or improved
from time to time during the term of this Agreement;
2
<PAGE>
(f) The requirement by the Company that Executive relocate to an
office or location more than thirty (30) miles from Executive's
then-current, principal office location; or
(g) The failure by the Company to obtain the specific assumption of
this Agreement by any successor or assign of the Company or any person
acquiring substantially all of the Company's assets.
4. Employment at Will. The Company may terminate Executive's
employment at any time for any reason, and Executive may terminate his
employment with the Company at any time for any reason, and nothing in this
Agreement shall be construed as giving either the Company or Executive any
right or obligation to continue their employment relationship.
5. Discharge For Cause or Resignation without Good Reason. If
Executive is discharged for Cause, or if Executive voluntarily resigns
without Good Reason, all payments of base salary and performance bonus, as
well as all of Executive's benefits, shall immediately cease and Executive
shall be entitled to no further compensation or benefits of any kind.
6. Waiver or Modification. Any waiver, alteration or modification
of any of the provisions of this Agreement or cancellation or replacement of
this Agreement shall not be valid unless made in writing and signed by the
parties hereto. Waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
7. Construction. Except as to matters of internal corporate
policy and regulation, which shall be governed by the laws of the State of
Delaware (the State of incorporation of the Company), this Agreement shall be
governed by the laws of the State of California.
8. Binding Effect. The rights and obligations of the Company
under this Agreement shall be binding upon and shall inure to the benefit of
any successors or assigns of the Company. In the event of any consolidation
or merger of the Company into or with another corporation, such other
corporation shall assume this Agreement and shall become obligated to perform
all of the terms and conditions hereof, and Executive's obligations hereunder
shall continue in favor of such other corporation or the subsidiary of such
corporation carrying on the major part of the business of the Company.
9. Entire Agreement. This Agreement constitutes the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements, amendments, memoranda or understandings
between the Company and Executive.
3
<PAGE>
10. Counterparts. This Agreement may be executed in a number of
identical counterparts, each of which shall be construed as an original for
all purposes, but all of which taken together shall constitute one and the
same Agreement.
11. Notices. Any notice required or permitted to be given under
this Agreement shall be in writing and delivered in person or sent by
registered or certified United States mail, postage and fees prepaid, to the
addresses of the parties set forth below, or such other address as shall be
furnished by notice hereunder by any such party:
The Company: 1845 West 205th Street
Torrance, California 90510
Attention: Chief Executive Officer
Executive: 36337 Blue Grass Oval
Solon, OH 44139
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
"THE COMPANY": P. LEINER NUTRITIONAL PRODUCTS, INC. OF
DELAWARE
By: /s/
------------------------------------
Michael Leiner
Chief Executive Officer
"EXECUTIVE": /s/
------------------------------------
Stanley J. Kahn
4
<PAGE>
Exhibit 12.1
LEINER HEALTH PRODUCTS INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE
30,
FISCAL YEARS ENDED MARCH 31, ----------------------------------
------------------------------------------------------------------
UNAUDITED UNAUDITED
PRO FORMA 1997
1993(1) 1994 1995 1996 1997 1997(2) 1996 1997 PRO FORMA
--------- --------- --------- --------- --------- ----------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss)......... $ (1,033) $ 3,417 $ 3,813 $ 1,166 $ 7,638 $ (2,626) $ 119 $ (12,183) $ (2,431)
Extraordinary item........ -- -- -- -- 2,756 2,756 -- 1,109 1,109
Income taxes.............. 999 3,573 3,524 4,686 8,028 1,669 92 (7,105) (604)
Fixed charges............. 7,054 8,627 10,863 11,484 9,866 24,980 2,544 2,222 6,238
--------- --------- --------- --------- --------- ----------- --------- ---------- -----------
Earnings................ $ 7,020 $ 15,617 $ 18,200 $ 17,336 $ 28,288 $ 26,779 $ 2,755 $ (15,957) $ 4,312
--------- --------- --------- --------- --------- ----------- --------- ---------- -----------
--------- --------- --------- --------- --------- ----------- --------- ---------- -----------
Fixed charges:
Interest expense.......... $ 5,791 $ 7,144 $ 9,010 $ 9,924 $ 8,281 $ 23,368 $ 2,152 $ 1,800 $ 5,816
Interest portion of rent
expense................. 1,263 1,483 1,853 1,560 1,585 1,612 392 422 422
--------- --------- --------- --------- --------- ----------- --------- ---------- -----------
Total fixed charges..... $ 7,054 $ 8,627 $ 10,863 $ 11,484 $ 9,866 $ 24,980 $ 2,544 $ 2,222 $ 6,238
--------- --------- --------- --------- --------- ----------- --------- ---------- -----------
--------- --------- --------- --------- --------- ----------- --------- ---------- -----------
Ratio of earnings to fixed
charges(3).............. 1.0 1.8 1.7 1.5 2.9 1.1 1.1 (7.2) 0.7
--------- --------- --------- --------- --------- ----------- --------- ---------- -----------
--------- --------- --------- --------- --------- ----------- --------- ---------- -----------
</TABLE>
- ------------------------
(1) The computation of ratio of earnings to fixed charges for the fiscal year
ended March 31, 1993 represents the results of operations of LHP, the
results of operations for XCEL from the date of its acquisition, and
purchase accounting for the acquisitions of LHP and XCEL during that fiscal
year. See "The Company."
(2) On January 30, 1997, the Company purchased Vita Health. This column gives
effect to the acquisition of Vita Health, as well as the Recapitalization
and related transactions. See "Unaudited Pro Forma Financial Information."
The Vita Health acquisition was accounted for under the purchase method of
accounting. Consequently, the results of operations of Vita Health were
included in the consolidated financial results of the Company for the two
months ended March 31, 1997. The pro forma column includes the operating
results of Vita Health for the additional ten months ended January 30, 1997.
(3) In calculating the ratio of earnings to fixed charges, earnings consist of
income before taxes plus fixed charges. Fixed charges consist of interest
expense and amortization of deferred financing fees, whether capitalized or
expensed, plus one-third of rental expense under operating leases (the
portion that has been deemed by the Company to be representative of an
interest factor).
<PAGE>
EXHIBIT 12.2
LEINER HEALTH PRODUCTS INC.
COMPUTATION OF EBITDA TO INTEREST EXPENSE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FISCAL YEARS ENDED MARCH 31, ENDED JUNE 30,
-------------------------------------------------------------------- --------------------
UNAUDITED (UNAUDITED)
PRO FORMA
1993(1) 1994 1995 1996 1997 1997(2) 1996 1997
----------- --------- --------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss).................... $ (1,033) $ 3,417 $ 3,813 $ 1,166 $ 7,638 $ (2,626) $ 119 $ (12,183)
Add Back:
Interest expense, net.............. 5,791 7,144 9,010 9,924 8,281 23,368 2,152 1,800
Income taxes....................... 999 3,573 3,524 4,686 8,028 1,669 92 (7,105)
Depreciation and amortization...... 4,586 7,247 10,514 12,288 12,309 12,862 2,867 3,066
Extraordinary item................. -- -- -- -- 2,756 2,756 -- 1,109
Non-recurring charges:
Impairment and closure of
facility....................... -- -- -- 4,730 1,416 1,416 -- --
Management reorganization........ -- -- -- -- 1,000 1,000 187 --
Compensation related to stock
options........................ -- -- -- -- -- -- -- 15,431
Management transaction bonuses... -- -- -- -- -- -- -- 5,125
Other charges.................... 3,631 2,017 132 132 528 528 33 --
----------- --------- --------- --------- --------- ----------- --------- ---------
Subtotal....................... 15,007 19,981 23,180 31,760 34,318 43,599 5,331 19,426
----------- --------- --------- --------- --------- ----------- --------- ---------
EBITDA(3)............................ $ 13,974 $ 23,398 $ 26,993 $ 32,926 $ 41,956 $ 40,973 $ 5,450 $ 7,243
----------- --------- --------- --------- --------- ----------- --------- ---------
----------- --------- --------- --------- --------- ----------- --------- ---------
Interest expense, net(3)............. $ 5,791 $ 7,144 $ 9,010 $ 9,924 $ 8,281 $ 23,368 $ 2,152 $ 1,800
Less amortization of deferred
financing charges.................. -- -- 184 212 239 1,573 59 66
----------- --------- --------- --------- --------- ----------- --------- ---------
Adjusted interest expense, net....... $ 5,791 $ 7,144 $ 8,826 $ 9,712 $ 8,042 $ 21,795 $ 2,093 $ 1,734
----------- --------- --------- --------- --------- ----------- --------- ---------
----------- --------- --------- --------- --------- ----------- --------- ---------
Ratio of EBITDA to interest
expense............................ 2.4 3.3 3.1 3.4 5.2 1.9 2.6 4.2
----------- --------- --------- --------- --------- ----------- --------- ---------
----------- --------- --------- --------- --------- ----------- --------- ---------
<CAPTION>
1997
PRO FORMA
-----------
<S> <C>
Net income (loss).................... $ (2,431)
Add Back:
Interest expense, net.............. 5,816
Income taxes....................... (604)
Depreciation and amortization...... 3,066
Extraordinary item................. 1,109
Non-recurring charges:
Impairment and closure of
facility....................... --
Management reorganization........ --
Compensation related to stock
options........................ --
Management transaction bonuses... --
Other charges.................... --
-----------
Subtotal....................... 9,387
-----------
EBITDA(3)............................ $ 6,956
-----------
-----------
Interest expense, net(3)............. $ 5,816
Less amortization of deferred
financing charges.................. 393
-----------
Adjusted interest expense, net....... $ 5,423
-----------
-----------
Ratio of EBITDA to interest
expense............................ 1.3
-----------
-----------
</TABLE>
- ------------------------
(1) The computation of EBITDA to interest expense for the fiscal year ended
March 31, 1993 represents the results of operations of LHP, the results of
operations for XCEL from the date of its acquisition, and purchase
accounting for the acquisitions of LHP and XCEL during that fiscal year. See
"The Company."
(2) On January 30, 1997, the Company purchased Vita Health. This column gives
effect to the acquisition of Vita Health, as well as the Recapitalization
and related transactions. See "Unaudited Pro Forma Financial Information."
The Vita Health acquisition was accounted for under the purchase method of
accounting. Consequently, the results of operations of Vita Health were
included in the consolidated financial results of the Company for the two
months ended March 31, 1997. The pro forma column includes the operating
results of Vita Health for the additional ten months ended January 30, 1997.
(3) For purposes of calculating the ratio of EBITDA to interest expense,
interest expense excludes the amortization of deferred financing fees, which
is included in interest expense in the income statement in the audited
consolidated financial statements.
"EBITDA," as presented, represents earnings before interest expense, income
taxes, depreciation and amortization and extraordinary item, and also
excludes certain expenses that are not expected to be continued. (See Notes
5 and 6 to the "Selected Historical and Pro Forma Financial Data"). EBITDA
is included because management understands that such information is
considered by certain investors to be an additional basis for evaluating the
Company's ability to pay interest, repay debt and make capital expenditures.
EBITDA should not be considered an alternative to measures of operating
performance as determined in accordance with generally accepted accounting
principles, including net income as a measure of the Company's operating
results and cash flows as a measure of the Company's liquidity. Because
EBITDA is not calculated identically by all companies, the presentation
herein may not be comparable to other similarly titled measures of other
companies.
EBITDA for Pro Forma Fiscal 1997 was $43.4 million, excluding the
discontinued profit distribution at Vita Health of $2.4 million.
<PAGE>
EXHIBIT 21
List of Subsidiaries
The subsidiaries of the Registrant and their respective jurisdictions are as
follows:
SUBSIDIARY JURISDICTION
---------- -------------
VH Holdings Inc. Manitoba (Canada)
Vita Health Company (1985) Ltd. Manitoba (Canada)
64804 Manitoba Ltd. Manitoba (Canada)
Westcan Pharmaceuticals Ltd. Manitoba (Canada)
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Summary
Historical and Pro Forma Financial Data," "Selected Historical and Pro Forma
Financial Information" and "Experts" and to the use of our reports dated April
25, 1997 in Amendment No. 1 to the Registration Statement (Form S-4 No.
333-33121) and related Prospectus of Leiner Health Products Inc. for the
registration of $85,000,000 of its Senior Subordinated Notes due 2007.
ERNST & YOUNG LLP
Orange County, California
October 9, 1997
<PAGE>
Exhibit 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
Section 305(b)(2) _______
--------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
--------------------------
Leiner Health Products Inc.
(Exact name of OBLIGOR as specified in its charter)
Delaware 95-3431709
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
901 East 233rd Street 90745
Carson, California (Zip code)
(Address of principal executive offices)
--------------------------
9 5/8% Senior Subordinated Notes due 2007
(Title of the indenture securities)
================================================================================
<PAGE>
- 2 -
GENERAL
1. GENERAL INFORMATION
-------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
-----------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
The obligor currently is not in default under any of its outstanding
securities for which United States Trust Company of New York is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and
15 of Form T-1 are not required under General Instruction B.
16. LIST OF EXHIBITS
----------------
T-1.1 -- Organization Certificate, as amended, issued by the
State of New York Banking Department to transact
business as a Trust Company, is incorporated by
reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to the
Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE>
- 3 -
16. LIST OF EXHIBITS
(CONT'D)
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to
Form T-1 filed on September 15, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
- ----
As of September 4, 1997, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
----------------------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 5th day
of September 1997.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ James E. Logan
----------------------------------
James E. Logan
Vice President
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
--------------------------------------
By: /s/Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
JUNE 30, 1997
-------------
(IN THOUSANDS)
ASSETS
Cash and Due from Banks $ 83,529
Short-Term Investments 259,746
Securities, Available for Sale 924,165
Loans 1,437,342
Less: Allowance for Credit Losses 13,779
------------
Net Loans 1,423,563
Premises and Equipment 61,515
Other Assets 122,696
------------
TOTAL ASSETS $ 2,875,214
------------
------------
LIABILITIES
Deposits:
Non-Interest Bearing $ 763,075
Interest Bearing 1,409,017
Total Deposits 2,172,092
Short-Term Credit Facilities 404,212
Accounts Payable and Accrued Liabilities 132,213
------------
TOTAL LIABILITIES $ 2,708,517
------------
------------
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 49,541
Retained Earnings 100,930
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes (1,231)
------------
TOTAL STOCKHOLDER'S EQUITY 166,697
------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 2,875,214
------------
------------
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
August 7, 1997
<PAGE>
Exhibit 99.1
[FORM OF LETTER OF TRANSMITTAL]
LEINER HEALTH PRODUCTS INC.
OFFER TO EXCHANGE ITS 9 5/8 % SENIOR SUBORDINATED NOTES
DUE 2007 ("NEW NOTES"), WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT, FOR ANY AND ALL OUTSTANDING 9 5/8% SENIOR
SUBORDINATED NOTES DUE 2007 ("EXISTING NOTES"), PURSUANT TO THE PROSPECTUS
DATED ____________, 1997
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________,
1997 OR SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFER MAY BE EXTENDED
(THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO THE EXPIRATION DATE.
To: United States Trust Company of New York, EXCHANGE AGENT
<TABLE>
<S> <C>
BY MAIL: BY FACSIMILE:
United States Trust Company of New York (212) 780-0592
P.O. Box 843 Cooper Station (For Eligible Institutions Only)
New York, New York 10276 Attention: Customer Service
Attention: Corporate Trust Services Confirm by Telephone to:
(800) 548-6565
BY HAND BEFORE 4:30 P.M.: BY OVERNIGHT COURIER AND BY HAND AFTER 4:30 P.M.:
United States Trust Company of New York United States Trust Company of New York
111 Broadway 770 Broadway, 13th Floor
New York, New York 10006 New York, New York 10003
Attention: Lower Level Corporate Trust Window
</TABLE>
FOR INFORMATION CALL:
(800) 548-6565
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER
THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX BELOW
------------------
List below the Existing Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the certificate number(s)
and principal amount of Existing Notes should be listed on a separate signed
schedule affixed hereto.
<TABLE>
<CAPTION>
======================================================================================================================
<S> <C> <C> <C> <C>
Description of Existing Notes (1) (2) (3) (4)
Tendered
- ----------------------------------------------------------------------------------------------------------------------
Principal Amount of
Aggregate Existing Notes Tendered
Principal Aggregate Principal in Exchange for
Name(s) and Address(es) of Certificate Amount of Amount of Existing certificated New
Registered Holder(s) Numbers(s)* Existing Notes Notes Tendered** Notes***
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated in this column, the holder will be deemed to
have tendered the full aggregate principal amount represented by such
Existing Notes.
*** Unless otherwise indicated, the holder will be deemed to have tendered
Existing Notes in exchange for a beneficial interest in one or more fully
registered global notes, which will be deposited with, or on behalf of,
The Depository Trust Company ("DTC") and registered in the name of Cede &
Co., its nominee.
================================================================================
2
<PAGE>
The undersigned acknowledges that he, she or it has received and
reviewed the Prospectus, dated ____________, 1997 (the "Prospectus"), of
Leiner Health Products Inc., a Delaware corporation ("LHP"), and this Letter
of Transmittal (the "Letter of Transmittal"), which together constitute LHP's
offer (the "Exchange Offer") to exchange up to $85,000,000 aggregate
principal amount of its New Notes, which will have been registered under the
Securities Act of 1933, as amended (the "Securities Act") for a like
principal amount of its outstanding Existing Notes. The New Notes and the
Existing Notes are collectively referred to as the "Notes." Capitalized terms
used but not defined herein have the meanings ascribed to them in the
Prospectus.
This Letter of Transmittal is to be used if (i) certificates of
Existing Notes are to be forwarded herewith (ii) delivery of Existing Notes
is to be made by book-entry transfer to an account maintained by the Exchange
Agent at DTC, pursuant to the procedures set forth in "The Exchange
Offer--Procedures for Tendering" in the Prospectus or (iii) the Existing
Notes are tendered according to the guaranteed delivery procedures set forth
in "The Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus.
Delivery of this Letter of Transmittal and any other required documents
should be made to the Exchange Agent. Delivery of documents to a book-entry
transfer facility does not constitute delivery to the Exchange Agent.
Holders whose Existing Notes are not immediately available or who
cannot deliver their Existing Notes and all other documents required hereby
to the Exchange Agent on or prior to the Expiration Date must tender their
Existing Notes according to the guaranteed delivery procedure set forth in
the Prospectus under the caption "The Exchange Offer--Procedures for
Tendering." See Instruction 1. Holders of Existing Notes that are tendering
by book-entry transfer to the Exchange Agent's account at DTC can execute the
tender through the DTC Automated Tender Offer Program ("ATOP") for which the
transaction will be eligible. DTC participants should transmit their
acceptance to DTC, which will verify the acceptance and execute a book-entry
delivery to the Exchange Agent's account at DTC. DTC will then send an
Agent's Message (as defined in the Prospectus) to the Exchange Agent for its
acceptance. DTC participants may also accept the Exchange Offer by submitting
a notice of guaranteed delivery through ATOP.
|_| CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED HEREWITH TO THE
EXCHANGE AGENT IN EXCHANGE FOR CERTIFICATED NEW NOTES.
Unless the undersigned (i) has completed item (4) in the box entitled
"Description of Existing Notes Tendered" and (ii) has checked the box above,
the undersigned will be deemed to have tendered Existing Notes in exchange
for a beneficial interest in one or more fully registered global
certificates, which will be deposited with, or on behalf of, DTC and
registered in the name of Cede & Co., its nominee. Beneficial interests in
such registered global certificates will be shown on, and transfers thereof
will be effected only through, records maintained by DTC and its
participants. See "Description of the New Notes --Book-Entry, Delivery and
Form" as set forth in the Prospectus.
|_| CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED BY BOOK- ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution__________________ |_| The Depository Trust Company
Account Number__________________________________________________________________
Transaction Code Number_________________________________________________________
|_| CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT
AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)____________________________________________________
Window Ticket Number (if any)___________________________________________________
Date of Execution of Notice of Guaranteed Delivery______________________________
Name of Eligible Institution that Guaranteed Delivery___________________________
If delivered by book-entry transfer:
Account Number_______________________ Transaction Code Number__________________
|_| CHECK HERE IF YOU (I) ARE A BROKER-DEALER (II) WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS MADE THERETO, (III) WILL RECEIVE NEW NOTES FOR YOUR OWN
ACCOUNT IN EXCHANGE FOR EXISTING NOTES THAT WERE ACQUIRED AS A RESULT OF
MARKET MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND
<PAGE>
(IV) ACKNOWLEDGE THAT YOU WILL DELIVER THE PROSPECTUS IN CONNECTION WITH
ANY RESALE OF SUCH NEW NOTES (BY SO ACKNOWLEDGING AND DELIVERING THE
PROSPECTUS, YOU WILL NOT, HOWEVER, BE DEEMED TO ADMIT THAT YOU ARE AN
"UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT).
Name
Address________________________________________________________________________
4
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to conditions of the Exchange Offer
described herein and in the Prospectus, the undersigned hereby tenders to LHP
the aggregate principal amount of Existing Notes indicated above. Subject to,
and effective upon, the acceptance for exchange of Existing Notes tendered
hereby, the undersigned hereby sells, assigns and transfers to, or upon the
order of, the Exchange Agent, as agent of LHP, all right, title and interest
in and to such Existing Notes as are being tendered hereby, and irrevocably
constitutes and appoints the Exchange Agent as the true and lawful agent and
attorney-in-fact of the undersigned to cause the Existing Notes tendered
hereby to be transferred and exchanged.
The undersigned hereby represents and warrants that the
undersigned has full power and authority to tender, exchange, sell, assign
and transfer the Existing Notes tendered hereby and to acquire the New Notes
issuable upon the exchange of such tendered Existing Notes, and that the Ex
change Agent, as agent of LHP, will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim when the same are accepted by the
Exchange Agent, as agent of LHP. The undersigned will, upon request, execute
and deliver any additional documents deemed by LHP or the Exchange Agent to
be necessary or desirable to complete the exchange, sale, assignment and
transfer of the Existing Notes tendered hereby.
The undersigned also acknowledges that this Exchange Offer is
being made in reliance on the interpretations of the staff of the Securities
and Exchange Commission (the "SEC"), as set forth in no-action letters issued
to third parties (including EXXON CAPITAL HOLDINGS CORPORATION (available May
13, 1988), MORGAN STANLEY & CO. INCORPORATED (available June 5, 1991), K-III
COMMUNICATIONS CORPORATION (available May 14, 1993) and SHEARMAN & STERLING
(available July 2, 1993)). Based on such interpretations of the staff of the
SEC set forth in such no-action letters, LHP believes that the New Notes
issued in exchange for the Existing Notes pursuant to the Exchange Offer may
be offered for resale, resold and otherwise transferred by a holder thereof
(other than any such holder that is an "affiliate" of LHP within the meaning
of Rule 405 under the Securities Act without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that (i)
such New Notes are acquired in the ordinary course of such holder's business,
(ii) at the time of the commencement of the Exchange Offer such holder has no
arrangement with any person to participate in a distribution of the New Notes
and (iii) such holder is not engaged in, and does not intend to engage in and
does not have an understanding or arrangement with any person to engage in a
distribution of the New Notes. LHP has not sought, and does not intend to
seek, a no-action letter from the SEC with respect to the effects of the
Exchange Offer, and there can be no assurance that the staff of the SEC would
make a similar determination with respect to the New Notes as it has in such
no-action letters.
By tendering Existing Notes in exchange for New Notes or executing
this Letter of Transmittal, each holder will represent to LHP that: (i) it is
not such an affiliate of LHP, (ii) any New Notes to be received by it will be
acquired in the ordinary course of business and (iii) at the time of the
commencement of the Exchange Offer it had no arrangement with any person to
participate in a distribution of the New Notes. If the undersigned is not a
broker-dealer or is a broker-dealer but will not receive New Notes for its own
account in exchange for Existing Notes, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution
5
<PAGE>
of New Notes. If the undersigned is not a broker-dealer or is a broker-dealer
but will not receive New Notes for its own account in exchange for Existing
Notes, the undersigned represents that it is not engaged in, and does not
intend to engage in, a distribution of New Notes. If a holder of Existing
Notes is unable to make the foregoing representations, such holder may not
rely on the applicable interpretations of the staff of the SEC and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction unless
such sale is made pursuant to an exemption from such requirements.
If the undersigned is a broker-dealer that will receive New Notes
for its own account in exchange for Existing Notes, where such Existing Notes
were acquired as a result of market-making activities or other trading
activities, by tendering Existing Notes in exchange for New Notes or
executing this Letter of Transmittal the undersigned acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act and
that it has not entered into any arrangement or understanding with LHP or an
affiliate of LHP in connection with any resale of such New Notes; however, by
so acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. The SEC has taken the position that such broker-dealers may
fulfill their prospectus delivery requirements with respect to the New Notes
(other than a resale of New Notes received in exchange for an unsold
allotment from the original sale of the Existing Notes) with the Prospectus.
The Prospectus, as it may be amended or supplemented from time to time, may
be used by such broker-dealers for a period of time, starting on the
Expiration Date and ending on the close of business 180 days after the
Expiration date in connection with the sale or transfer of such New Notes.
LHP has agreed that, for such period of time, it will make the Prospectus (as
it may be amended or supplemented) available to a broker-dealer which, with
LHP's prior written consent, makes a market in the Existing Notes and
receives New Notes pursuant to the Exchange Offer (each a "Participating
Broker-Dealer") for use in connection with any resale of such New Notes. By
accepting the Exchange Offer, each broker-dealer that receives New Notes
pursuant to the Exchange Offer acknowledges and agrees to notify LHP prior to
using the Prospectus in connection with the sale or transfer of New Notes and
that, upon receipt of notice from LHP of the happening of any event which
makes any statement in the Prospectus untrue in any material respect or which
requires the making of any changes in the Prospectus in order to make the
statements therein not misleading, such broker-dealer will suspend use of the
Prospectus until (i) LHP has amended or supplemented the Prospectus to
correct such misstatement or omission and (ii) either LHP has furnished
copies of the amended or supplemented Prospectus to such broker-dealer or, if
LHP has not otherwise agreed to furnish such copies and declines to do so
after such broker-dealer so requests, such broker-dealer has obtained a copy
of such amended or supplemented Prospectus as filed with the SEC. LHP agrees
to deliver such notice and such amended or supplemented Prospectus promptly
to any Participating Broker-Dealer that has so notified LHP. Except as
described above, the Prospectus may not be used for or in connection with an
offer to resell, a resale or any other retransfer of New Notes. A
broker-dealer that acquired Existing Notes in a transaction other than as
part of its market-making activities or other trading activities will not be
able to participate in the Exchange Offer.
If the undersigned is not a broker dealer, by accepting the Exchange
Offer, the undersigned represents to LHP that (i) the New Notes acquired
pursuant to the Exchange Offer are being obtained in the ordinary course of such
holder's business, (ii) such holder is not participating in, does not intend to
participate in and has no arrangement or understanding with any person to
participate in the distribution of such New Notes and (iii) such holder is not
an "affiliate," as defined in Rule 405 under the Securities Act, of Riverwood or
if such holder is such an affiliate,
6
<PAGE>
such holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
All authority conferred or agreed to be conferred in this Letter
of Transmittal and every obligation of the undersigned hereunder shall be
binding upon the successors, assigns, heirs, executors, administrators,
trustees in bankruptcy and legal representatives of the undersigned and shall
not be affected by, and shall survive, the death or incapacity of the
undersigned. This tender may be withdrawn only in accordance with the
procedures set forth in the instructions contained in this Letter of
Transmittal.
The undersigned understands that tenders of the Existing Notes
pursuant to any one of the procedures described under "The Exchange
Offer--Procedures for Tendering" in the Prospectus and in the instructions
hereto will constitute a binding agreement between the undersigned and LHP in
accordance with the terms and subject to the conditions of the Exchange Offer.
The undersigned understands that if its Existing Notes are
accepted for exchange, interest on the New Notes will accrue from the last
interest payment date on which interest was paid on the Existing Notes
surrendered in exchange thereof, or if no interest has been paid, from the
original date of issuance of the Existing Notes.
The undersigned recognizes that unless the holder of Existing
Notes (i) completes item (4) of the Box entitled "Description of Existing
Notes Tendered" above and (ii) checks the box entitled "Check here if
tendered shares of Existing Notes are being delivered to the Exchange Agent
in exchange for certificated New Notes" above, such holder, when tendering
such Existing Notes, will be deemed to have tendered such Existing Notes in
exchange for a beneficial interest in one or more fully registered global
certificates, which will be deposited with, or on behalf of, DTC and
registered in the name of Cede & Co., its nominee. Beneficial interests in
such registered global certificates will be shown on, and transfers thereof
will be effected only through, records maintained by DTC and its
participants. See "Book-Entry, Delivery and Form" in the Prospectus.
The undersigned recognizes that, under certain circumstances set
forth in the Prospectus under "The Exchange Offer--Conditions," LHP may not
be required to accept for exchange any of the Existing Notes tendered.
Existing Notes not accepted for exchange or withdrawn will be returned to the
undersigned at the address set forth below unless otherwise indicated under
"Special Delivery Instructions" below.
7
<PAGE>
[The undersigned acknowledges that by tendering the Existing Notes
pursuant to any one of the procedures described under "The Exchange
Offer--Procedures for Tendering" in the Prospectus and in the instructions
hereto, the undersigned agrees that once the Exchange Offer is consummated,
LHP shall not be obligated to file or prepare a Shelf Registration Statement
(as defined in the Registration Rights Agreement, dated as of June 30, 1997,
as amended (the "Registration Rights Agreement"), among Leiner Health
Products Group Inc., LHP and the Initial Purchasers, or take any other action
provided in Sections 2 or 3 of the Registration Rights Agreement with respect
to a Shelf Registration Statement, and the undersigned hereby waives any
requirement of the Registration Rights Agreement that LHP files, prepares or
takes any other action relating to a Shelf Registration Statement once the
Exchange Offer is consummated.]
All questions as to the validity, form, eligibility (including
time of receipt) and withdrawal or acceptability of any tender will be
determined by LHP, in its sole discretion, which determination will be final
and binding. LHP reserves the absolute right to reject any and all Existing
Notes not properly tendered or any Existing Notes which, if accepted, would,
in the opinion of counsel for LHP, be unlawful. LHP also reserves the
absolute right to waive any irregularities or conditions of tender as to
particular Existing Notes. LHP'S interpretation of the terms and conditions
of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Existing Notes must
be cured within such time as LHP shall determine. Neither LHP, the Exchange
Agent nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of Existing Notes, nor
shall any of them incur any liability for failure to give such notification.
Tenders of Existing Notes will not be deemed to have been made until such
irregularities have been cured or waived. Any Existing Notes received by the
Exchange Agent that is not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost to
such holder by the Exchange Agent, unless otherwise provided in this Letter
of Transmittal, as soon as practicable following the Expiration Date.
Unless otherwise indicated herein in the box entitled "Special
Issuance Instructions" below, the undersigned hereby requests that the New
Notes (and, if applicable, substitute certificates representing Existing
Notes for any Existing Notes not exchanged) be issued in the name of the
undersigned. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, the undersigned hereby requests that
the New Notes (and, if applicable, substitute certificates representing
Existing Notes for any Existing Notes not exchanged) be sent to the
undersigned at the address shown above in the box entitled "Description of
Existing Notes Tendered."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF
EXISTING NOTES TENDERED" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO
HAVE TENDERED THE EXISTING NOTES AS SET FORTH IN SUCH BOX(ES) ABOVE.
8
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
X ________________________________ __________________________________
X ________________________________ __________________________________
Signature(s) of Owner(s) Date
Area Code and Telephone Number___________________________________________
If a holder is tendering any Existing Notes, this Letter of Transmittal must
be signed by the registered holders(s) as the name(s) appear(s) on the
certificate(s) for the Existing Notes or by any person(s) authorized to
become registered holders(s) by endorsements and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
officer or other person acting in a fiduciary or representative capacity,
please set forth full title below. See Instruction 3.
Name(s):__________________________________________________________________
__________________________________________________________________________
(Please Type or Print)
Capacity:_________________________________________________________________
Address:__________________________________________________________________
__________________________________________________________________________
(Include Zip Code)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution:__________________________________________________
(Authorized Signature)
__________________________________________________________________________
(Title)
__________________________________________________________________________
(Name of Firm)
Dated:____________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------- -------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4 AND 6) (SEE INSTRUCTIONS 3, 4 AND 6)
To be completed ONLY if New Notes (and, if To be completed ONLY if certificates for
applicable, substitute certificates representing Existing New Notes (and, if applicable, substitute certificates
Notes for any Existing Notes not exchanged) are to be representing Existing Notes for any Existing Notes
issued in the name of and sent to someone other than not exchanged) are to be sent to someone other than the
the person or persons whose signature(s) appear(s) on person or persons whose signature(s) appear(s) on this
this Letter of Transmittal above. Letter of Transmittal above or to such person or
persons at an address other than shown in the box
Issue New Notes to: entitled "Description of Existing Notes Tendered" on
this Letter of Transmittal above.
Name(s): ..............................................
Mail New Notes to:
...................................................
(Please Type or Print) Name(s) ..................................................
................................................... ..................................................
(Please Type or Print) (Please Type or Print)
Address: .............................................. ..................................................
(Please Type or Print)
...................................................
(Zip Code) Address: ..................................................
.....................................................
(Complete Substitute Form W-9) (Zip Code)
- -------------------------------------------------------------- -------------------------------------------------------------
IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH, THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF
(TOGETHER WITH THE CERTIFICATE(S) FOR EXISTING NOTES OR A CONFIRMATION OF BOOK-ENTRY TRANSFER OF SUCH EXISTING NOTES AND ALL
OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
</TABLE>
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: LEINER HEALTH PRODUCTS INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE Part I--Taxpayer Identification Number
FORM W-9 Enter your taxpayer identification number in the
DEPARTMENT OF THE TREASURY appropriate box. For most individuals, this is your
INTERNAL REVENUE SERVICE social security number. If you do not have a num- -------------------------------------------
ber, see how to obtain a "TIN" in the enclosed Social Security Number
Social Security Number Guidelines.
OR
NOTE: If the account is in more than one name, see
the chart on page 2 of the enclosed Guidelines to
determine what number to give. -------------------------------------------
Employer Identification Number
- ----------------------------- -----------------------------------------------------------------------------------------------------
Part II--For Payees Exempt from Backup Withholding (See enclosed Guidelines)
-----------------------------------------------------------------------------------------------------
PAYOR'S REQUEST FOR TAXPAYER CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT:
IDENTIFICATION NUMBER (TIN)
AND CERTIFICATION (1) the number shown on this form is my correct Taxpayer Identification Number (or I am waiting for
a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure
to report all interest or dividends or the IRS has notified me that I am no longer subject to
backup withholding.
-----------------------------------------------------------------------------------------------------
SIGNATURE______________________ DATE__________________________
- -----------------------------------------------------------------------------------------------------------------------------------
Certification Guidelines--You must cross out item (2) of the above certification if you have been notified by the IRS that you
are subject to backup withholding because of underreporting of interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no
longer subject to backup withholding, do not cross out item (2).
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer
Identification Number has not been issued to me, and that I mailed or
delivered an application to receive a Taxpayer Identification Number to the
appropriate Internal Revenue Service Center or Social Security Administration
Office (or I intend to mail or deliver an application in the near future). I
understand that if I do not provide a Taxpayer Identification Number to the
payer, 31 percent of all payments made to me on account of the New Preferred
Stock shall be retained until I provide a Taxpayer Identification Number to
the payer and that, if I do not provide my Taxpayer Identification Number
within sixty (60) days, such retained amounts shall be remitted to the
Internal Revenue Service as backup withholding and 31 percent of all
reportable payments made to me thereafter will be withheld and remitted to
the Internal Revenue Service until I provide a Taxpayer Identification Number.
SIGNATURE _________________________ DATE ______________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE NEW NOTES. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND EXISTING NOTES; GUARANTEED
DELIVERY PROCEDURE
The Letter of Transmittal is to be used to forward, and must accompany,
all certificates representing Existing Notes tendered pursuant to the
Exchange Offer. Certificates representing the Existing Notes in proper form
for transfer (or a confirmation of book-entry transfer of such Existing Notes
into the Exchange Agent's account at the book-entry transfer facility) as
well as a properly completed and duly executed copy of this Letter of
Transmittal and all other documents required by this Letter of Transmittal,
must be received by the Exchange Agent at its address set forth herein prior
to 5:00 p.m., New York City time, on the Expiration Date. Existing Notes
tendered must be in integral multiples of $1,000.
The method of delivery of this Letter of Transmittal, the Existing
Notes and all other required documents, including delivery through DTC and
any acceptance of an Agent's Message delivered through ATOP, is at the
election and risk of the tendering holders, but the delivery will be deemed
made only when actually received or confirmed by the Exchange Agent. If such
delivery is by mail, it is recommended that registered or certified mail
properly insured, with return receipt requested, be used. In all cases,
sufficient time should be allowed to permit timely delivery.
If a holder desires to tender Existing Notes and such holder's Existing
Notes are not immediately available or time will not permit such holder's
Letter of Transmittal, Existing Notes (or a confirmation of book-entry
transfer of Existing Notes into the Exchange Agent's account at the
book-entry transfer facility) or other required documents to reach the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date, or such holder cannot complete the procedure of book-entry transfer on
a timely basis, such holder may nevertheless tender Existing Notes if:
(a) such tender is made by or through an Eligible Institution
(as defined below);
(b) the Exchange Agent has received from such Eligible Institution
prior to 5:00 p.m., New York City time, on the Expiration Date, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof)
and Notice of Guaranteed Delivery, substantially in the form provided by
LHP (by facsimile transmission, mail or hand delivery), or an Agent's
Message with respect to guaranteed delivery that is accepted by Riverwood,
setting forth the name and address of the holder of such Existing Notes
and the principal amount of Existing Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within three New York
Stock Exchange ("NYSE") trading days after the execution of the Notice of
Guaranteed Delivery, a Book-Entry Confirmation and any other documents
required by this Letter of Transmittal and the instructions hereto, will
be deposited by such Eligible Institution with the Exchange Agent; and
<PAGE>
(c) a Book-Entry Confirmation and all other required documents
required by the Letter of Transmittal are received by the Exchange Agent
within three NYSE trading days after the Notice of Guaranteed Delivery.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Existing
Notes (or a timely confirmation of a book-entry transfer of Existing Notes
into the Exchange Agent's account at the book-entry transfer facility) or a
Notice of Guaranteed Delivery from an Eligible Institution is received by the
Exchange Agent.
See "The Exchange Offer" in the Prospectus.
2. WITHDRAWALS
Any holder may withdraw a tender of Existing Notes prior to 5:00 p.m.,
New York City time on the Expiration Date. For a withdrawal to be effective,
a written notice of withdrawal must be received by the Exchange Agent prior
to 5:00 p.m., New York City time on the Expiration Date at one of its
addresses set forth herein. Any such notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility from which
the Existing Notes was tendered, identify the principal amount of the
Existing Notes to be withdrawn, and specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Existing Notes and otherwise comply with the procedures of such facility. All
questions as to the validity, form and eligibility (including time of
receipt) of such notice will be determined by LHP, determination shall be
final and binding on all parties. See "The Exchange Offer--Withdrawal of
Tenders" in the Prospectus. If Existing Notes have been tendered pursuant to
the procedures for book-entry transfer, any notice of withdrawal must specify
the name and number of the participant's account at DTC to be credited with
the withdrawn Existing Notes or otherwise comply with DTC's procedures. See
"The Exchange Offer-Withdrawal of Tenders" in the Prospectus.
3. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES
If this Letter of Transmittal or a notice of withdrawal, as the case
may be, is signed by the registered holder of the Existing Notes tendered
hereby, the signature must correspond exactly with the name as written on the
face of the certificates without any change whatsoever.
If any tendered Existing Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any tendered Existing Notes are registered in different names, it
will be necessary to complete, sign and submit as many separate copies of
this Letter of Transmittal as there are different names in which tendered
Existing Notes are held.
If this Letter of Transmittal or any Existing Notes or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary
or representative capacity, such persons should indicate when signing, and
unless waived by LHP, proper evidence satisfactory to LHP of their authority
so to act must be submitted.
2
<PAGE>
The signatures on this Letter of Transmittal or a notice of withdrawal,
as the case may be, must be guaranteed unless the Existing Notes surrendered
for exchange pursuant thereto are tendered (i) by a registered holder of the
Existing Notes who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in this Letter of
Transmittal or (ii) for the account of an Eligible Institution. In the event
that the signatures in this Letter of Transmittal or a notice of withdrawal,
as the case may be, are required to be guaranteed, such guarantees must be by
a firm which is a member of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc., or by a
commercial bank or trust company having an office or correspondent in the
United States, or an "eligible institution" within the meaning of Rule
17Ad-15 of the Securities Exchange Act of 1934, as amended (each an "Eligible
Institution"). If Existing Notes are registered in the name of a person other
than the signer of this Letter of Transmittal, the Existing Notes surrendered
for exchange must be endorsed by, or be accompanied by a written instrument
or instruments of transfer or exchange, in satisfactory form as determined by
LHP in its sole discretion, duly executed by the registered holder with the
signature thereon guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS
Tendering holders of Existing Notes should indicate in the applicable
box the name and address to which New Notes issued pursuant to the Exchange
Offer are to be issued or sent, if different from the name or address of the
person signing this Letter of Transmittal. In the case of issuance in a
different name, the employer identification or social security number of the
person named must also be indicated. If no such instructions are given, any
New Notes will be issued in the name of, and delivered to, the name or
address of the person signing this Letter of Transmittal and any Existing
Notes not accepted for exchange will be returned to the name or address of
the person signing this Letter of Transmittal.
5. BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9
Under the federal income tax laws, payments that may be made by LHP on
account of New Notes issued pursuant to the Exchange Offer may be subject to
backup withholding at the rate of 31%. In order to avoid such backup
withholding, each tendering holder should complete and sign the Substitute
Form W-9 included in this Letter of Transmittal and either (a) provide the
correct taxpayer identification number ("TIN") and certify, under penalties
of perjury, that the TIN provided is correct and that (i) the holder has not
been notified by the Internal Revenue Service (the "IRS") that the holder is
subject to backup withholding as a result of failure to report all interest
or dividends or (ii) the IRS has notified the holder that the holder is no
longer subject to backup withholding; or (b) provide an adequate basis for
exemption. If the tendering holder has not been issued a TIN and has applied
for one, or intends to apply for one in the near future, such holder should
write "Applied For" in the space provided for the TIN in Part I of the
Substitute Form W-9, sign and date the Substitute Form W-9 and sign the
Certificate of Payee Awaiting Taxpayer Identification Number. If "Applied
For" is written in Part I, LHP (or the Exchange Agent with respect to the New
Notes or a broker or custodian) may still withhold 31% of the amount of any
payments made on account of the New Notes until the holder furnishes LHP (or
the Exchange Agent with respect to the New Notes or a broker or custodian)
with its TIN. In general, if a holder is an individual, the taxpayer
identification number is the Social Security number of such individual. If
the Exchange Agent or LHP is not provided with the correct TIN, the holder
may be subject to a $50 penalty imposed by the IRS. Certain holders
(including, among others, all corporations and certain foreign individuals)
are not subject to these backup withholding and
3
<PAGE>
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, such holder must submit a statement (generally, IRS Form
W-8), signed under penalties of perjury, attesting to that individual's
exempt status. Such statements can be obtained from the Exchange Agent. For
further information concerning backup withholding and instructions for
completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the
Substitute Form W-9 if Existing Notes are registered in more than one name),
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Existing Notes to be deemed invalidly tendered, but may require LHP (or the
Exchange Agent with respect to the New Notes or a broker or custodian) to
withhold 31% of the amount of any payments made on account of the New Notes.
Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained from the IRS.
6. TRANSFER TAXES
LHP will pay all transfer taxes, if any, applicable to the transfer of
Existing Notes to it or its order pursuant to the Exchange Offer. If,
however, New Notes and/or substitute Existing Notes not exchanged are to be
delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Existing Notes tendered hereby, or if
tendered Existing Notes are registered in the name of any person other than
the person signing this Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the transfer of Existing Notes to LHP or
its order pursuant to the Exchange Offer, the amount of any such transfer
taxes (whether imposed on the registered holder or any other person) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Existing Notes specified in this
Letter of Transmittal.
7. WAIVER OF CONDITIONS
LHP reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Existing Notes, by execution of this
Letter of Transmittal, shall waive any right to receive notice of the
acceptance of their Existing Notes for exchange.
Neither LHP nor any other person is obligated to give notice of defects or
irregularities in any tender, nor shall any of them incur any liability for
failure to give any such notice.
9. INADEQUATE SPACE
4
<PAGE>
If the space provided herein is inadequate, the aggregate principal
amount of Existing Notes being tendered and the certificate number or numbers
(if available) should be listed on a separate schedule attached hereto and
separately signed by all parties required to sign this Letter of Transmittal.
10. MUTILATED, LOST, STOLEN OR DESTROYED EXISTING NOTES
Any holder whose Existing Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above
for further instructions.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter of Transmittal, may
be directed to the Exchange Agent at the address and telephone number
indicated above.
12. VALIDITY OF TENDERS
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal or acceptability of any tender will be determined by
Riverwood in its sole discretion, which determination will be final and
binding. Riverwood reserves the absolute right to reject any and all Existing
Notes not properly tendered or any Existing Notes which, if accepted, would,
in the opinion of counsel for Riverwood, be unlawful. Riverwood also reserves
the absolute right to waive any irregularities or conditions of tender as to
particular Existing Notes. Riverwood's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Existing Notes must
be cured within such time as Riverwood shall determine. Neither Riverwood,
the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Existing
Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Existing Notes will not be deemed to have been made
until such irregularities have been cured or waived. Any Existing Notes
received by the Exchange Agent that is not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
without cost to such holder by the Exchange Agent, unless otherwise provided
in this Letter of Transmittal, as soon as practicable following the
Expiration Date.
5
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
LEINER HEALTH PRODUCTS INC.
95/8% SENIOR SUBORDINATED NOTES DUE 2007
This form must be used by a holder of the 95/8% Senior subordinated
Notes due 2007 (the "Existing Notes") of Leiner Health Products Inc., a Delaware
corporation ("LHP"), that wishes to tender Existing Notes to the Exchange Agent
pursuant to the guaranteed delivery procedures described in "The Exchange
Offer--Procedures for Tendering" of the Prospectus dated _______________, 1997
(the "Prospectus") and in Instruction 1 to the accompanying Letter of
Transmittal. Any holder that wishes to tender Existing Notes pursuant to such
guaranteed delivery procedures must ensure that the Exchange Agent receives this
Notice of Guaranteed Delivery prior to 5:00 p.m., New York City time, on the
Expiration Date of the Exchange Offer. Capitalized terms not defined herein
have the meaning ascribed to them in the Prospectus or the Letter of
Transmittal.
To: United States Trust Company of New York, Exchange Agent
<TABLE>
<S> <C>
BY MAIL: BY FACSIMILE:
United States Trust Company of New York (212) 780-0592
P.O. Box 843 Cooper Station (For Eligible Institutions Only)
New York, New York 10276 Attention: Customer Service
Attention: Corporate Trust Services Confirm by Telephone to:
(800) 548-6565
BY HAND BEFORE 4:30 P.M.: BY OVERNIGHT COURIER AND BY HAND AFTER 4:30 P.M.:
United States Trust Company of New York United States Trust Company of New York
111 Broadway 770 Broadway, 13th Floor
New York, New York 10006 New York, New York 10003
Attention: Lower Level Corporate Trust Window
</TABLE>
FOR INFORMATION CALL:
(800) 548-6565
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to LHP, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal
<PAGE>
amount of Existing Notes specified below pursuant to the guaranteed delivery
procedures set forth in the Prospectus and in Instruction 1 of the Letter of
Transmittal. The undersigned hereby tenders the Existing Notes listed below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Certificate Number(s) (if known) of
Existing Notes or Account Number at Aggregate Principal Amount Aggregate Principal
the Book-Entry Facility Represented Amount Tendered
- ----------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
All authority herein conferred or agreed to be conferred shall survive the death
or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
SIGN HERE
Name of Registered or Acting Holder: ___________________________________________
Signature(s): __________________________________________________________________
Name(s) (PLEASE PRINT): ________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
Telephone Number: ______________________________________________________________
Date: __________________________________________________________________________
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Associates of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal
(or facsimile thereof), together with the Existing Notes tendered hereby in
proper form for transfer (or confirmation of the book-entry transfers of such
Existing Notes into the Exchange Agent's account at the book-entry transfer
facility described in the Prospectus under the caption "The Exchange
Offer--Procedures for Tendering" and in the Letter of Transmittal) and any other
required documents, all by 5:00 p.m., New York City time, within three New York
Stock Exchange ("NYSE") trading days after the date of execution of this Notice
of Guaranteed Delivery.
2
<PAGE>
SIGN HERE
Name of firm: __________________________________________________________________
Authorized Signature: __________________________________________________________
Name (PLEASE PRINT): ___________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
Telephone Number: ______________________________________________________________
Date: __________________________________________________________________________
DO NOT SEND EXISTING NOTES WITH THIS FORM. ACTUAL SURRENDER OF EXISTING NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF
TRANSMITTAL.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly
completed and duly executed copy of this Notice of Guaranteed Delivery and any
other documents required by this Notice of Guaranteed Delivery must be received
by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New
York City time, on the Expiration Date. The method of delivery of this Notice
of Guaranteed Delivery and any other required documents to the Exchange Agent is
at the election and risk of the holder and the delivery will be deemed made only
when actually received by the Exchange Agent. If delivery is by mail,
registered or certified mail properly insured, with return receipt requested, is
recommended. In all cases sufficient time should be allowed to assure timely
delivery. For a description of the guaranteed delivery procedure, see
Instruction 1 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice
of Guaranteed Delivery is signed by the registered holder(s) of the Existing
Notes referred to herein, the signature must correspond with the name(s) written
on the face of the Existing Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the book-entry transfer facility whose name appears on a security position
listing as the owner of Existing Notes, the signature must correspond with the
name shown on the security position listing as the owner of the Existing Notes.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Existing Notes listed or a participant of the
book-entry transfer facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the registered
holder(s) appears on the
3
<PAGE>
Existing Notes or signed as the name of the participant shown on the book-entry
transfer facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation,
or other person acting in a fiduciary or representative capacity, such person
should so indicate when signing.
3. Requests for Assistance or Additional Copies. Questions and
requests for assistance and requests for additional copies of the Prospectus may
be directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
4
