<PAGE> 1
10Q-QTR3C
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 23, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________
TO _______________
COMMISSION FILE NUMBER: 000-24385
SCHOOL SPECIALTY, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 39-0971239
(State or Other Jurisdiction of Incorporation) (IRS Employer
Identification No.)
1000 NORTH BLUEMOUND DRIVE
APPLETON, WISCONSIN
(Address of Principal Executive Offices)
54914
(Zip Code)
(920) 734-2756
(Registrant's Telephone Number, including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS FEBRUARY 23, 1999
----- -----------------
Common Stock, $0.001 par value 14,578,925
<PAGE> 2
SCHOOL SPECIALTY, INC.
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JANUARY 23, 1999
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Page
Number
------
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
Consolidated Balance Sheets at January 23, 1999
(Unaudited) and April 25, 1998........................................................... 1
Unaudited Consolidated Statements of Income for the Three
Months Ended January 23, 1999 and January 24, 1998 and
For the Nine Months Ended January 23, 1999 and January 24, 1998.......................... 2
Unaudited Consolidated Statements of Cash Flows for the Nine
Months Ended January 23, 1999 and January 24, 1998....................................... 3
Notes to Unaudited Consolidated Financial Statements ............................................. 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............................................................. 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK...................................................................................... 14
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION ................................................................................ 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................................................. 15
</TABLE>
-Index-
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SCHOOL SPECIALTY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
January 23, April 25,
1999 1998
---- ----
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................... $ - $ -
Accounts receivable, less allowance for doubtful accounts
of $1,778 and $716, respectively ....................... 84,843 38,719
Inventories ................................................. 46,799 49,307
Prepaid expenses and other current assets ................... 16,219 13,503
-------- --------
Total current assets ...................................... 147,861 101,529
Property and equipment, net ................................. 39,781 22,553
Intangible assets, net ...................................... 183,693 99,613
Deferred income tax asset ................................... 6,191 -
Other assets ................................................ 987 34
-------- --------
Total assets .............................................. $378,513 $223,729
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt ........................... $ 10,314 $ 11
Short-term payable to U.S. Office Products .................. - 20,277
Accounts payable ............................................ 15,485 23,788
Accrued compensation ........................................ 11,945 4,458
Accrued income taxes ........................................ 5,596 -
Accrued restructuring ....................................... 3,638 472
Other accrued liabilities ................................... 10,057 4,732
-------- --------
Total current liabilities ................................. 57,035 53,738
Long-term payable to U.S. Office Products....................... - 62,699
Long-term debt ................................................. 162,199 315
Other .......................................................... 212 511
-------- --------
Total liabilities ......................................... 219,446 117,263
Stockholders' equity:
Preferred stock, $0.001 par value per share, 1,000,000 shares
authorized; none outstanding ............................... - -
Common stock, $0.001 par value per share, 150,000,000 shares
authorized and 14,578,925 shares issued and outstanding .... 15 -
Capital paid in excess of par value.......................... 146,768 -
Divisional equity ........................................... - 104,883
Accumulated other comprehensive income ...................... 6 -
Retained earnings ........................................... 12,278 1,583
-------- --------
Total stockholders' equity ................................ 159,067 106,466
-------- --------
Total liabilities and stockholders' equity .............. $378,513 $223,729
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
SCHOOL SPECIALTY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
January 23, January 24, January 23, January 24,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues ................................... $ 85,359 $ 49,391 $ 424,332 $ 247,880
Cost of revenues ........................... 57,266 33,178 281,436 164,105
--------- --------- --------- ---------
Gross profit .......................... 28,093 16,213 142,896 83,775
Selling, general and administrative expenses 30,476 19,860 108,005 63,395
Non-recurring charges:
Strategic restructuring plan cost ..... - - 1,074 -
Restructuring costs ................... - - 4,200 -
--------- --------- --------- ---------
Operating income ........................... (2,383) (3,647) 29,617 20,380
Other income (expense):
Interest expense ........................ (3,879) (1,411) (8,942) (4,100)
Interest income ......................... 37 - 114 109
Other ................................... - (441) - (441)
--------- --------- --------- ---------
Income before provision for income taxes ... (6,225) (5,499) 20,789 15,948
Provision for income taxes ................. (2,927) (2,565) 10,094 7,113
--------- --------- --------- ---------
Net income ................................. $ (3,298) $ (2,934) $ 10,695 $ 8,835
========= ========= ========= =========
Weighted average shares:
Basic ...................................... 14,579 14,181 14,625 12,751
Diluted .................................... 14,579 14,181 14,665 13,020
Net income per share:
Basic ...................................... $ (0.23) $ (0.21) $ 0.73 $ 0.69
Diluted .................................... $ (0.23) $ (0.21) $ 0.73 $ 0.68
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
SCHOOL SPECIALTY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
For the Nine months Ended
January 23, January 24,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income .......................................................... $ 10,695 $ 8,835
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization expense ............................. 6,607 3,382
Non-recurring charges ............................................. 5,274 -
Amortization of loan fees ......................................... 420 -
Other ............................................................. - 43
Change in current assets and liabilities (net of assets acquired and
liabilities assumed in business combinations accounted for under the
purchase method):
Accounts receivable ............................................... (1,971) (6,450)
Inventory ......................................................... 27,208 9,590
Prepaid expenses and other current assets ......................... 1,722 3,844
Accounts payable .................................................. (31,924) (6,593)
Accrued liabilities ............................................... 11,069 2,741
--------- ---------
Net cash provided by operating activities ..................... 29,100 15,392
Cash flows from investing activities:
Cash paid in acquisitions, net of cash received ..................... (95,030) (92,076)
Additions to property and equipment ................................. (3,978) (4,095)
Other ............................................................... 171 (366)
--------- ---------
Net cash used in investing activities ......................... (98,837) (96,537)
--------- ---------
Cash flows from financing activities:
Payments of short-term debt, net .................................... (20,277) (1,841)
Advances from (payments to) U.S. Office Products .................... (62,699) 19,424
Capital contribution by U.S. Office Products ........................ 8,095 69,762
Proceeds from issuance of common stock .............................. 32,735 -
Payments of long term debt .......................................... (187,857) (6,200)
Proceeds from issuance of long-term debt ............................ 302,700 -
Capitalized loan fees ............................................... (2,960) -
--------- ---------
Net cash provided by financing activities ..................... 69,737 81,145
Net increase (decrease) in cash and cash equivalents ................... - -
Cash and cash equivalents, beginning of period ......................... - -
--------- ---------
Cash and cash equivalents, end of period ............................... $ - $ -
========= =========
Supplemental disclosures of cash flow information:
Interest paid ....................................................... $ 7,153 $ 27
Income taxes paid ................................................... $ 3,429 $ -
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
SCHOOL SPECIALTY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
(UNAUDITED)
(IN THOUSANDS)
The Company issued common stock and cash in connection with certain business
combinations accounted for under the purchase method in the nine months ended
January 23, 1999 and January 24, 1998. The fair values of the assets and
liabilities of the acquired companies at the dates of the acquisitions are
presented as follows:
<TABLE>
<CAPTION>
For the Nine months Ended
January 23, January 24,
1999 1998
<S> <C> <C>
Accounts receivable .......................... $ 44,153 $ 17,848
Inventories .................................. 24,701 18,075
Prepaid expenses and other current assets .... 3,251 2,431
Property and equipment ....................... 17,312 6,667
Intangible assets ............................ 85,312 74,741
Other assets ................................. 7,223 210
Short-term debt .............................. - (1,850)
Accounts payable ............................. (23,621) (9,410)
Accrued liabilities .......................... (6,303) (7,050)
Long-term debt ............................... (56,998) (6,020)
-------- --------
Net assets acquired .................. $ 95,030 $ 95,642
======== ========
Acquisitions were funded as follows:
U. S. Office Products common stock ........... $ - $ 3,566
Cash ......................................... 95,030 92,076
-------- --------
Total ............................... $ 95,030 $ 95,642
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
SCHOOL SPECIALTY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The Balance Sheet at April 25, 1998 has been derived from the
audited financial statements of School Specialty, Inc. (the "Company") for the
fiscal year ended April 25, 1998. For further information, refer to the
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended April 25, 1998.
NOTE 2--STOCKHOLDERS' EQUITY
Changes in stockholders' equity during the nine months ended January 23, 1999
were as follows:
<TABLE>
<S> <C>
Stockholders' equity balance at April 25, 1998 $106,466
Shares issued in June 1998 32,735
Contribution by U.S. Office Products 8,095
Compensation Expense from Officer Stock Purchase 1,074
Cumulative translation adjustment 2
Net income 10,695
-------
Stockholders' equity balance at January 23, 1999 $159,067
========
</TABLE>
On June 10, 1998, U.S. Office Products distributed to its shareholders one share
of School Specialty common stock for every 9 shares of U.S. Office Products
common stock held by each respective shareholder (the "spin-off"). The share
data reflected in the accompanying financial statements represents the
historical share data for U.S. Office Products for the period or as of the date
indicated, and retroactively adjusted to give effect to the one for nine
distribution ratio. The current year share data also includes shares that the
Company issued during the first quarter of the fiscal year.
NOTE 3--EARNINGS PER SHARE
In fiscal 1998, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share." SFAS No. 128 simplifies the standards
required under current accounting rules for computing earnings per share and
replaces the presentation of primary earnings per share and fully diluted
earnings per share with a presentation of basic earnings per share ("basic EPS")
and diluted earnings per share ("diluted EPS").
The following information presents the Company's computations of basic and
diluted EPS for the periods presented in the consolidated statement of income:
<TABLE>
<CAPTION>
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Three months ended January 23, 1999:
Basic EPS $ (3,298) 14,579 $ (0.23)
Effect of dilutive employee stock options -- -- --
Diluted EPS $ (3,298) 14,579 $ (0.23)
Three months ended January 24, 1998:
Basic EPS $ (2,934) 14,181 $ (0.21)
</TABLE>
5
<PAGE> 8
<TABLE>
<S> <C> <C> <C>
Effect of dilutive employee stock options -- -- --
Diluted EPS $ (2,934) 14,181 $ (0.21)
Nine months ended January 23, 1999:
Basic EPS $ 10,695 14,625 $ 0.73
Effect of dilutive employee stock options -- 40
Diluted EPS $ 10,695 14,665 $ 0.73
Nine months ended January 24, 1998:
Basic EPS $ 8,835 12,751 $ 0.69
Effect of dilutive employee stock options -- 269
Diluted EPS$ $ 8,835 13,020 $ 0.68
</TABLE>
The Company had additional employee stock options outstanding during the periods
presented that were not included in the computation of diluted EPS because they
were anti-dilutive.
NOTE 4--ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
the reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general purpose financial
statements. SFAS No. 130 is effective for fiscal years beginning after December
15, 1997. The Company's other comprehensive income for the period ended January
23, 1999 is $1 and $5, on a cumulative basis. The Company's comprehensive income
is comprised solely of translation adjustments. The adoption of SFAS No. 130
will have no impact on consolidated results of operations, financial position or
cash flow.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about segments of an
enterprise and related information. " SFAS No. 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. SFAS No. 131
is effective for financial statements for fiscal years beginning after December
15, 1997 and will be presented in the Company's Annual Report on Form 10-K for
the year ending April 24, 1999. Financial statement disclosures for prior
periods are required to be restated. The Company is in the process of evaluating
the disclosure requirements. The adoption of SFAS No. 131 will have no impact on
consolidated results of operations, financial position or cash flow.
In March 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position 98-1, "Accounting for the costs of computer
software developed or obtained for internal use" ("SOP 98-1"). SOP 98-1 requires
computer software costs associated with internal use software to be expensed as
incurred until certain capitalization criteria are met. The Company will adopt
SOP 98-1 during fiscal year 1999. Adoption of this Statement is not expected to
have a material impact on the Company's consolidated financial position or
results of operations.
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." This statement, which is required to be
adopted for annual periods beginning after June 15, 1999, establishes standards
for recognition and measurement of derivatives and hedging activities. The
Company will implement this statement in fiscal year 2001 as required. The
adoption of SFAS No. 133 is not expected to have a material effect on the
Company's financial position or results of operations.
NOTE 5--CREDIT FACILITY
On September 30, 1998, the Company entered into a five year secured $350,000
senior credit facility consisting of a $250,000 revolving loan and $100,000 term
loan. Under the senior credit facility, interest on borrowings accrued through
the third fiscal quarter at a rate of, at the Company's option, either (i) LIBOR
plus 2.375% or (ii) the lender's base rate plus a margin of .75%, plus an unused
fee of .475 on the unborrowed amount under the revolving credit facility.
Thereafter, interest will accrue at a rate of (i) LIBOR plus a range of 1.000%
to 2.000%, or (ii) the lender's base rate plus a range of .000% to .750%, plus
an unused fee ranging from .275 to .475 on the unborrowed amount under the
revolving credit facility (depending on the Company's leverage ratio of funded
debt to EBITDA). Indebtedness is secured by substantially all of
6
<PAGE> 9
the assets of the Company. The senior credit facility is subject to terms and
conditions typical of facilities of such size and includes certain financial
covenants. The Company borrowed under the senior credit facility to repay the
U.S. Office Products' debt outstanding on June 10, 1998 in accordance with the
terms of the spin-off, to fund the two companies acquired in the first three
quarters of fiscal 1999 and for seasonal working capital. The balance of the
senior credit facility will be available for working capital, capital
expenditures and acquisitions, subject to compliance with financial covenants.
The amount outstanding as of January 23, 1999 under the senior credit facility
was approximately $172,000.
On October 28, 1998 the Company entered into an interest rate swap agreement
with the Bank of New York covering $50,000 of the outstanding senior credit
facility. The agreement fixes the 30 day LIBOR interest rate at 4.37% per annum
on the $50,000 notional amount and has a three year term that may be canceled by
the Bank of New York on the second anniversary. The floating LIBOR interest rate
at January 23, 1999 was 4.94%.
The term loan will amortize quarterly over five years under the following
amortization schedule with the first principal payment due January 30, 1999:
<TABLE>
<C> <C>
Year 1 $ 10,000
Year 2 15,000
Year 3 15,000
Year 4 30,000
Year 5 30,000
---------
$ 100,000
=========
</TABLE>
NOTE 6--BUSINESS COMBINATIONS
During the fiscal period ended April 25, 1998, the Company completed eight
business combinations which were accounted for under the purchase method.
In the first nine months of fiscal 1999, the Company made two significant
acquisitions which were accounted for under the purchase method of accounting
for an aggregate cash purchase price of approximately $95,000, resulting in
goodwill of approximately $85,000 which will be amortized over 40 years. The
results of these acquisitions have been included in the Company's results from
their respective dates of acquisition.
The following presents the unaudited pro forma results of operations of the
Company for the three and nine month periods ended January 23, 1999 and January
24, 1998, and includes the Company's consolidated financial statements, which
give retroactive effect to the acquisitions as if all such purchase acquisitions
had been made at the beginning of fiscal 1998. The results presented below
include certain pro forma adjustments to reflect the amortization of intangible
assets, adjustments to interest expense, adjustments to depreciation, and the
inclusion of a federal income tax provision on all earnings for the periods
ended January 23, 1999 and January 24, 1998 respectively:
<TABLE>
<CAPTION>
Three Months Ended Nine months Ended
January 23, January 24, January 23, January 24,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues .................. $ 85,359 $ 81,257 $ 480,402 $ 472,975
Net income ................ (3,298) (6,045) 11,399 7,253
Net income per share:......
Basic ..................... $ (0.23) $ (0.43) $ .78 $ .57
Diluted ................... $ (0.23) $ (0.43) $ .78 $ .56
</TABLE>
7
<PAGE> 10
On March 30, 1998, the Company acquired certain assets of Education Access out
of a Federal bankruptcy proceeding. Accordingly, revenues and net loss for
Education Access included in the above pro forma results were $600 and ($24),
respectively, for the quarter ended January 23, 1999, compared with revenues and
net loss of $3,300 and $(350), respectively, for the quarter ended January 24,
1998. Revenues and net loss were $4,700 and ($150), respectively, for the nine
months ended January 23, 1999, compared with revenues and net income of $18,100
and $120, respectively, for the nine months ended January 24, 1998.
In addition, the Company incurred non-recurring charges in the quarters ended
July 25, 1998 and October 24, 1999. The first quarter non-cash strategic
restructuring plan cost of $1,074 consisted of compensation expense attributed
to the U.S. Office Products stock option tender offer and the sale of shares of
stock to certain executive management personnel of the Company, net of
underwriting discounts. The second quarter restructuring costs of $4,200 is
related to the consolidation of School Specialty Inc's existing warehousing,
customer service and sales operations resulting from the acquisition of
Beckley-Cardy, Inc. The $4,200 charge includes $2,100 for employee severance and
termination benefits, $1,300 for lease termination and facility shut-down costs
and $800 for write down of fixed assets and inventories.
The after-tax charge included in net income for the nine months ended January
23, 1999 is $3,158.
The unaudited pro forma results of operations are prepared for comparative
purposes only and do not necessarily reflect the results that would have
occurred had the acquisitions occurred at the beginning of fiscal 1998 or the
results which may occur in the future.
NOTE 7- SUBSEQUENT EVENTS
On February 9, 1999 the Company purchased Sportime, LLC, the physical education,
athletic and recreation products business of Genesis Direct Inc. for
approximately $23 million in cash. Sportime had 1998 revenues of $32.6 million.
8
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
The following table sets forth various items as a percentage of revenues on a
historical basis.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JANUARY 23, JANUARY 24, JANUARY 23, JANUARY 24,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues ................................... 100.0% 100.0% 100.0% 100.0%
Cost of revenues ........................... 67.1% 67.2% 66.3% 66.2%
------ ------ ------ ------
Gross profit ............................... 32.9% 32.8% 33.7% 33.8%
Selling, general and administrative expenses 35.7% 40.2% 25.5% 25.6%
Non-recurring charges:
Strategic restructuring plan cost ........ -- -- 0.2% --
Restructuring costs ...................... -- -- 1.0% --
------ ------ ------ ------
Operating Income ......................... (2.8)% (7.4)% 7.0% 8.2%
Interest expense, net .................... 4.5% 2.9% 2.1% 1.6%
Other .................................... -- .9% -- --
------ ------ ------ ------
Income before provision for income taxes ... (7.3)% (11.2)% 4.9% 6.4%
Provision for income taxes ................. (3.4)% (5.2)% 2.4% 2.9%
------ ------ ------ ------
Net income ................................. (3.9)% (6.0)% 2.5% 3.5%
====== ====== ====== ======
</TABLE>
THREE MONTHS ENDED JANUARY 23, 1999 COMPARED TO THREE MONTHS ENDED JANUARY 24,
1998
Revenues
Revenues increased 72.8%, from $49.4 million for the three months ended January
24, 1998 to $85.4 million for the three months ended January 23, 1999. This
increase was due primarily to the inclusion in the three months ended January
23, 1999 of (1) the revenues of the two businesses acquired during fiscal 1999
and (2) all of the revenues of two businesses acquired in the last two quarters
of fiscal 1998 (whose revenues were included in the three months ended January
23, 1998 only from the date of acquisition). Revenues also increased due to
sales to new accounts and increased sales to existing customers.
Gross Profit
Gross profit increased 73.3%, from $16.2 million for the three months ended
January 24, 1998 to $28.1 million for the three months ended January 23, 1999.
Gross margins (gross profit as a percentage of revenues) were essentially flat
at 32.8% for the three months ended January 24, 1998 and 32.9% for the three
months ended January 23, 1999. Gross margins were increased primarily by the
positive impact of increased sales of higher margin specialty products partially
offset by the acquisition of Beckley-Cardy in the second quarter of fiscal 1999
(which had a lower gross margin than our existing businesses).
Selling, General and Administrative Expenses
Selling, general and administrative expenses include selling expenses (the most
significant component of which is sales wages and commissions), operations
expenses (which includes customer service, warehouse and outbound
9
<PAGE> 12
transportation costs), catalog costs and general administrative overhead (which
includes information systems, accounting, legal, human resources and purchasing
expense).
Selling, general and administrative expenses (which include depreciation and
amortization) increased 53.4%, from $19.9 million for the three months ended
January 24, 1998 to $30.5 million for the three months ended January 23, 1999.
As a percentage of revenues, these expenses decreased from 40.2% for the three
months ended January 24, 1998 to 35.7% for the three months ended January 23,
1999. The decrease in selling, general and administrative expenses as a
percentage of revenues was due primarily to the elimination of redundant
selling, general and administrative expenses and the consolidation of
warehousing under the restructuring plan discussed below.
Interest Expense
Interest expense, net of interest income, increased 36%, from $1.4 million, or
2.9% of revenues, for the three months ended January 24, 1998 to $3.9 million,
or 4.5% of revenues, for the three months January 23, 1999 primarily due to the
increase in debt attributable to the acquisition of the three businesses
acquired since January 24, 1998, offset by the reduction in debt from applying
the net proceeds from our initial public offering and private placement of
Common Stock in June 1998 and the forgiveness of debt from U.S. Office Products
in connection with the spin-off.
Provision for Income Taxes
Provision (benefit) for income taxes decreased 14.1 % from $(2.6 million) for
the three months ended January 24, 1998 to $(2.9 million) for the three months
ended January 23, 1999, due to slightly higher pre-tax losses attributed to the
increased size of the business and reflecting the same effective income tax rate
of 47% for each of the three month periods ended January 24, 1998 and January
23, 1999. The higher effective tax rate, compared to the federal statutory rate
of 35%, is primarily due to state income taxes and nondeductible goodwill
amortization.
NINE MONTHS ENDED JANUARY 23, 1999 COMPARED TO NINE MONTHS ENDED JANUARY 24,
1998
Revenues
Revenues increased 71.2%, from $247.9 million for the nine months ended
January 24, 1998 ("Interim 1998") to $424.3 million for the nine months ended
January 23, 1999 ("Interim 1999"). This increase was due primarily to the
inclusion in Interim 1999 of (1) the revenues of two businesses acquired during
Interim 1999 from their respective dates of acquisition and (2) all of the
Interim 1999 revenues of seven businesses acquired in Interim 1998 (whose
revenues were included in Interim 1998 only from the date of acquisition).
Revenues also increased due to sales to new accounts, increased sales to
existing customers and higher pricing on certain products in response to
increased product costs.
Gross Profit
Gross profit increased 70.6%, from $83.8 million in Interim 1998 to $142.9
million in Interim 1999 primarily due to the acquisitions referred to above.
Gross margins (gross profit as a percentage of revenues) were essentially flat
at 33.8% for Interim 1998 and 33.7% for Interim 1999. Gross margins were reduced
by the acquisition of Beckley-Cardy in the second quarter of Interim 1999 (which
had a lower gross margin than our existing businesses) and an increase in lower
margin bid revenues in our traditional businesses. These reductions in gross
margins were almost entirely offset by the positive impact of increased sales of
higher margin specialty products and lower product costs due to higher vendor
purchase rebates, which reflected our increased buying power.
Selling, General and Administrative
Selling, general and administrative expenses (including depreciation and
amortization) increased 70.4%, from $63.4 million in Interim 1998 to $108.0
million in Interim 1999 due primarily to the acquisitions referred to above. As
a percentage of revenues, these expenses were essentially flat at 25.6% for
Interim 1998 and 25.5% for Interim 1999. The decrease in selling, general and
administrative expenses as a percentage of revenues resulting from cost savings
attributable to the integration of companies acquired during fiscal 1998 and the
consolidation of the Company's warehousing under the restructuring plan
discussed below were almost offset by increases attributable to the acquisition
of Beckley-Cardy in the second quarter of Interim 1999 (which had higher
selling, general and administrative expenses as a percentage of revenues than
the Company's existing businesses) and higher depreciation and amortization
expenses due to the acquisitions referred to above.
Restructuring Charges
Restructuring charges during Interim 1999 included (1) a non-cash
restructuring charge of $1.1 million in the first quarter of Interim 1999,
consisting of compensation expense attributed to the U.S. Office Products stock
option tender offer and the sale of shares of Common Stock to some of the
Company's executive management personnel, net of underwriting discounts and (2)
a $4.2 million restructuring charge in the second quarter of Interim 1999
relating to the Company's plan to consolidate its existing warehousing, customer
service and sales operations following the acquisition of Beckley-Cardy. Under
this restructuring plan, the Company intends to reduce its distribution centers
from 13 to eight and its customer service centers from seven to two during the
period from October 1998 through December 1999. The $4.2 million charge consists
of $2.1 million for employee severance and termination benefits, $1.3 million
for lease termination and facility shut-down costs and $0.8 million for write
down of fixed assets and inventories. On an after-tax basis these restructuring
charges reduced net income for Interim 1999 by $3.2 million.
Interest Expense
Interest expense, net of interest income, increased 121%, from $4.0
million, or 1.6% of revenues, for Interim 1998 to $8.8 million, or 2.1% of
revenues, for Interim 1999 primarily due to the increase in debt attributable to
the acquisition of the three businesses since January 24, 1998 offset by the
reduction in debt from applying the net proceeds from the Company's initial
public offering of Common Stock and private placement in June 1998 and the
forgiveness of debt from U.S. Office Products in connection with the spin-off.
Provision for Income Taxes
Provision for income taxes increased 41.9% from $7.1 million for Interim
1998 to $10.1 million for Interim 1999, reflecting effective income tax rates of
49% for Interim 1999 and 45% for Interim 1998. The higher effective tax rate,
compared to the federal statutory rate of 35%, is primarily due to state income
taxes and nondeductible goodwill amortization.
10
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
At January 23, 1999, the Company had working capital of $90.8 million. The
Company's capitalization at January 23, 1999 was $331.6 million and consisted of
debt of $172.5 million and stockholders' equity of $159.1 million.
The Company currently has a five year secured $350 million revolving Senior
Credit Facility with NationsBank, N.A. The Senior Credit Facility has a $100
million term loan payable quarterly over five years commencing in January 1999
and revolving loans which mature on September 30, 2003. The amount outstanding
as of January 23, 1999 under the Senior Credit Facility was approximately $172
million. Borrowings under the Senior Credit Facility are usually significantly
higher during the Company's first and second quarters to meet the working
capital needs of the Company's peak selling season. On October 28, 1998, the
Company entered into an interest rate swap agreement with the Bank of New York
covering $50 million of the outstanding Senior Credit Facility. The agreement
fixes the 30 day LIBOR interest rate at 4.37% per annum (floating LIBOR on
January 23, 1999 was 4.94%) on the $50 million notional amount and has a three
year term that may be canceled by the Bank of New York on the second
anniversary. As of January 23, 1999, the effective interest rate on borrowings
under the Company's Senior Credit Facility was approximately 8%. Since the
beginning of fiscal 1999, the Company borrowed under the Senior Credit Facility
to fund three acquisitions and for seasonal working capital and capital
expenditures.
On June 9, 1998, the Company sold 2,125,000 shares of Common Stock in a
public offering for $30,631,875 in net proceeds. In addition, the Company sold
250,000 shares of Common Stock in a private placement directly to Daniel P.
Spalding, its Chairman of the Board and Chief Executive Officer, David J. Vander
Zanden, its President and Chief Operating Officer, and Donald Ray Pate, Jr., its
Executive Vice President for ClassroomDirect.com (formerly named Re-Print), at a
price of $14.415 per share for aggregate consideration of $3,603,750. In
connection with the offerings, the Company incurred approximately $1,500,000 of
expenses. The total net proceeds to the Company from the offerings were
approximately $32,735,625. The net proceeds were used to reduce indebtedness
outstanding under the Company's Senior Credit Facility.
During the nine months ended January 23, 1999, net cash provided by
operating activities was $29.1 million. This net cash provided by operating
activities during the period is indicative of the high seasonal nature of the
business, with sales occurring in the first and second quarter of the fiscal
year and cash receipts in the second and third quarters. Net cash used in
investing activities was $98.8 million, including $95 million for acquisitions
and $3.9 million for additions to property and equipment and other. Net cash
provided by financing activities was $69.7 million. Borrowing under the Senior
Credit Facility included (1) $16.9 million used to fund the cash portion of the
purchase price of the Hammond & Stephens acquisition, (2) $134.7 million used to
fund the Beckley-Cardy acquisition consisting of $78.1 million for the cash
portion of the purchase price and $56.6 million for debt repayment, (3) $83.3
million used to repay the U.S. Office Products debt in connection with the
spin-off and (4) $67.8 million used for short-term funding of seasonal working
capital and the purchase of property and equipment. The $32.7 million net
proceeds from the Company's initial public offering and the sale of 250,000
shares of Common Stock to certain employees was used to repay a portion of the
$302.7 million borrowed under the Senior Credit Facility. U.S. Office Products
contributed capital of $8.1 million as required under the distribution agreement
entered into with the Company in connection with the spin-off.
During the nine months ended January 24, 1998, net cash used in operating
activities was $15.4 million. Net cash used in investing activities was $96.5
million, including $92.1 million for acquisitions and $4.1 million for additions
to property and equipment and other. Net cash provided by financing activities
was $81.1 million, including $89.2 million provided by U.S. Office Products to
fund the cash portion of the purchase price and the repayment of debt associated
with the eight companies acquired in business combinations accounted for under
the purchase method during fiscal 1998 and to fund working capital and the
purchase of property and equipment, partially offset by $8 million used to repay
indebtedness.
The Company's anticipated capital expenditures for the next twelve months
is approximately $10 million. The largest items include software development for
the Company's Internet initiative, computer hardware and software and warehouse
equipment.
The Company is currently considering, and has hired a nationally known
commercial real estate agent to market, a sale and leaseback transaction
involving six distribution facilities in Ohio, Massachusetts, Kansas, Texas,
Nevada and Illinois. The Company is currently seeking bids on these properties
for such a transaction. The Company may sell all or any number of these
facilities or could substitute other properties it owns in this transaction. The
Company believes that the current fair market value for these distribution
facilities is approximately $26 million with net proceeds to the Company of
approximately $25 million which would be used to repay outstanding indebtedness
under the Company's Senior Credit Facility or for general corporate purposes,
including working capital and for acquisitions. If the Company determines to
proceed with this transaction, the Company expects that it would close in the
fourth quarter of fiscal 1999 or the first quarter of fiscal 2000.
11
<PAGE> 14
FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
The Company's business is subject to seasonal influences. The Company's
historical revenues and profitability have been dramatically higher in the first
two quarters of its fiscal year (May-October) primarily due to increased
shipments to customers coinciding with the start of each school year.
12
<PAGE> 15
Quarterly results also may be materially affected by the timing of acquisitions,
the timing and magnitude of costs related to such acquisitions, variations in
costs to the Company for the products it sells, the mix of products sold and
general economic conditions. Moreover, the operating margins of companies
acquired by the Company may differ substantially from those of the Company,
which could contribute to the further fluctuation in its quarterly operating
results. Therefore, results for any quarter are not indicative of the results
that the Company may achieve for any subsequent fiscal quarter or for a full
fiscal year.
INFLATION
The Company does not believe that inflation has had a material impact on its
results of operations during the three or nine months ended January 23, 1999 and
January 24, 1998, respectively.
YEAR 2000
The Year 2000 issue exists because many computer systems and applications,
including those embedded in equipment and facilities, use two digit rather than
four digit date fields to designate an applicable year. As a result, the
systems and applications may not properly recognize the Year 2000 or process
data which include it, potentially causing data miscalculations or inaccuracies
or operational malfunctions or failures. Because any disruption to the
Company's computerized order processing and inventory systems could materially
and adversely affect the Company's operations, the Company has established a
centrally managed, company wide plan to identify, evaluate and address Year 2000
issues. Although the Company expects that most of its mission critical systems,
network elements and products will be verified for Year 2000 compliance by May
1999, its ability to meet this target is dependent upon a variety of factors. In
addition, if the Company's suppliers, service providers and/or customers fail to
resolve their Year 2000 issues in an effective and timely manner, the Company's
business could be significantly and adversely affected. The Company believes
that many of its school customers have not yet addressed or resolved their Year
2000 issues.
The Company currently estimates that it will incur expenses of approximately
$100,000 through 1999 in connection with its anticipated Year 2000 efforts. In
addition to approximately $50,000 in expenses incurred through January 23, 1999
for matters historically identified as Year 2000-related. The timing of
expenses may vary and is not necessarily indicative of readiness efforts or
progress to date. The Company also expects to incur certain capital improvement
costs (totaling approximately $300,000) to support this project. Such capital
costs are being incurred sooner than originally planned, but, for the most part,
would have been required in the normal course of business. The Company expects
to fund its Year 2000 efforts through operating cash flows. The Company will
use its Senior Credit Facility for capital improvements related to the effort.
As part of its Year 2000 initiative, the Company is evaluating scenarios that
may occur as a result of the century change and is in the process of developing
contingency and business continuity plans tailored for Year 2000-related
occurrences. The Company is highly reliant on its computer order processing and
inventory systems to fill orders, bill the customer and collect payments. A
loss of either of the Company's systems would cause long delays in filling and
shipping products, billing the customer and collecting accounts receivable. The
highly seasonal nature of the Company's business does not allow for any delay in
shipping products to customers. Although the seasonal nature of the Company's
business would heighten any problems encountered, the timing of the majority of
the Company's sales, shipping, billing and collection efforts for fiscal 1999
will be complete prior to the Year 2000. The Company expects that any
unforeseen problems related to Year 2000 issues would be identified within the
months of January and February 2000, which is its slowest period. The Company
has identified that it may experience certain inconveniences or inefficiencies
as a result of a supplier's failure to remediate its Year 2000 issue. The
Company believes, however, that most of its business will proceed without any
significant interruption.
13
<PAGE> 16
FORWARD-LOOKING STATEMENTS
In accordance with the Private Securities Litigation Reform Act of 1995, the
Company can obtain a "safe-harbor" for forward-looking statements by identifying
those statements and by accompanying those statements with cautionary statements
which identify factors that could cause actual results to differ materially from
those in the forward-looking statements. Accordingly, the foregoing
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contains certain forward-looking statements relating to growth and
other plans, projected revenues, earnings and costs. The Company's actual
results may differ materially from those contained in the forward-looking
statements herein. Factors which may cause such a difference to occur include
those factors identified in Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operation--Factors Affecting the Company's
Business," contained in the Company's Form 10-K for the year ended April 25,
1998, which factors are incorporated herein by reference to such Form 10-K.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Part II - OTHER INFORMATION
Item 5. Other Information
14
<PAGE> 17
Under the terms of the agreement entered into on June 9, 1998 between the
Company and U.S. Office Products in connection with the spin-off (the
"Distribution Agreement"), the Company agreed with the other three spin-off
companies to indemnify U.S. Office Products for certain liabilities incurred by
U.S. Office Products prior to the spin-off, including liabilities under federal
securities laws (the "Indemnification Obligation"). The portion of the shared
liabilities payable by each spin-off company is determined by the relative
aggregate market values of the common stock of the spin-off companies
immediately after the spin-off. The maximum aggregate amount the Company can be
required to pay for all indemnification obligations is limited by the
Distribution Agreement to $1.75 million.
U.S. Office Products has been named a defendant in various class action
lawsuits. These lawsuits generally allege violations of federal securities laws
by U.S. Office Products and other named defendants during the months preceding
the spin-off. The Company has not received any notice or claim from U.S. Office
Products alleging that these lawsuits are within the scope of the
Indemnification Obligation. Also, the Company has not yet determined the extent
to which certain insurance coverage of U.S. Office Products may be available to
the Company in connection with any Indemnification Obligation triggered by these
lawsuits. As discussed above, to the extent there would be any liability subject
to the Company's Indemnification Obligation, including any deductible under
insurance coverage, such liability is limited to the Company's pro rata share
(based on the aggregate market value of the spin-off companies following the
spin-off) under the Distribution Agreement, limited to a maximum of $1.75
million.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit No. Description
----------- -----------
10.1 Amended and Restated 1998
Stock Incentive Plan
10.2 Amended and Restated Credit
Agreement dated as of
September 30, 1998 among
School Specialty, Inc.,
certain subsidiaries and
affiliates of School
Specialty, Inc., the
lenders named therein,
Nationsbank, N.A., Bank
One, Wisconsin and U.S.
Bank National Association
27.1 Financial Data Schedule
15
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SCHOOL SPECIALTY, INC.
(Registrant)
March 1, 1999 /s/ Daniel P. Spalding
- ---------------------- ----------------------------------------------------
Date Daniel P. Spalding
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
March 1, 1999 /s/ Donald J. Noskowiak
- ---------------------- ----------------------------------------------------
Date Donald J. Noskowiak
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE> 19
INDEX TO EXHIBITS
Exhibit No. Description
- ------------ -----------
10.1 Amended and Restated 1998
Stock Incentive Plan
10.2 Amended and Restated Credit
Agreement dated as of
September 30, 1998 among
School Specialty, Inc.,
certain subsidiaries and
affiliates of School
Specialty, Inc., the
lenders named therein,
Nationsbank, N.A., Bank
One, Wisconsin and U.S.
Bank National Association
27.1 Financial Data Schedule
<PAGE> 1
AMENDED AND RESTATED
SCHOOL SPECIALTY, INC.
1998 STOCK INCENTIVE PLAN
PURPOSE SCHOOL SPECIALTY, INC., a Delaware corporation (the "Company"),
wishes to recruit, reward, and retain employees, officers and
outside directors. To further these objectives, the Company
hereby sets forth the School Specialty, Inc. 1998 Stock
Incentive Plan (the "Plan") to provide options ("Options") or
direct grants ("Stock Grants" and, together with the Options,
"Awards") to employees, officers and outside directors with
respect to shares of the Company's common stock (the "Common
Stock"). The Plan was originally effective as of the effective
date (the "Effective Date") of the Company's registration under
Section 12 of the Securities Exchange Act of 1934 (the "Exchange
Act") with respect to its initial public offering ("IPO"), and
this amendment and restatement is effective as of November 30,
1998.
PARTICIPANTS All Employees of the Company and any Eligible Subsidiaries are
eligible for Options and Stock Grants under this Plan, as are
the officers and the directors of the Company and the Eligible
Subsidiaries who are not employees ("Eligible Officers and
Eligible Directors"). Eligible employees, officers and directors
become "optionees" when the Administrator grants them an option
under this Plan or "recipients" when they receive a direct grant
of Common Stock. (Optionees and recipients are referred to
collectively as "participants." The term participant also
includes, where appropriate, a person authorized to exercise an
Award in place of the original optionee.) The Administrator may
also grant Options or make Stock Grants to consultants and other
service providers.
Employee means any person employed as a common law employee of
the Company or an Eligible Subsidiary.
ADMINISTRATOR The Administrator will be the Compensation Committee of the
Board of Directors of the Company (the "Compensation
Committee"), unless the Board specifies another committee. The
Board may also act under the Plan as though it were the
Compensation Committee. The Board of Directors of U.S. Office
Products Company ("U.S. Office Products"), directly or through a
committee of directors, had the authority to act as
Administrator before U.S. Office Products distributed the Common
Stock to U.S. Office Products' stockholders (the
"Distribution").
The Administrator is responsible for the general operation and
administration of the Plan and for carrying out its provisions
and has full discretion in interpreting administering the
provisions of the Plan. Subject to the express provisions of the
Plan, the Administrator may exercise such
<PAGE> 2
powers and authority of the Board as the Administrator may find
necessary or appropriate to carry out its functions. The
Administrator may delegate its functions (other than those
described in the GRANTING OF AWARDS section) to officers or
other employees of the Company.
The Administrator's powers will include, but not be limited to,
the power to amend, waive, or extend any provision or limitation
of any Award. The Administrator may act through meetings of a
majority of its members or by unanimous consent.
GRANTING OF Subject to the terms of the Plan, the Administrator will, in its
AWARDS sole discretion, determine:
the participants who receive Awards,
the terms of such Awards,
the schedule for exercisability or nonforfeitability
(including any requirements that the participant or the
Company satisfy performance criteria),
the time and conditions for expiation of the Award, and
the form of payment due upon exercise, if any.
The Administrator's determinations under the Plan need not be
uniform and need not consider whether possible participants are
similarly situated.
Options granted to employees may be nonqualified stock options
("NQSOs") or "incentive stock options" ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code"), or the corresponding
provision of any subsequently enacted tax statute. Options
granted to Eligible Officers and Eligible Directors, including
Formula Options, must be NQSOs. The Administrator will not grant
ISOs unless the stockholders either have already approved the
granting of ISOs or give such approval within 12 months after
the grant.
The Administrator may impose such conditions on or charge such
price for the Stock Grants as it deems appropriate.
SUBSTITUTIONS The Administrator may also grant Awards in substitution for
options or other equity interests held by individuals (i) as a
result of their employment by or services to U.S. Office
Products before the Distribution or (ii) who become Employees of
the Company or of an Eligible
2
<PAGE> 3
Subsidiary as a result of the Company's acquiring or merging
with the individual's employer or acquiring its assets. If
necessary to conform the Awards to the interests for which they
are substitutes, the Administrator may grant substitute Awards
under terms and conditions that vary from those the Plan
otherwise requires. Awards in substitution for U.S. Office
Products' options in connection with the Distribution will
retain their pre-Distribution exercise schedule and terms
(including Change of Control provisions) and expiration date.
DIRECTOR Each Eligible Director will receive a formula stock option
FORMULA ("Formula Option") as of the Effective Date with respect to
OPTIONS 15,000 shares of Common Stock, as will each Eligible Director
later appointed or elected to the Board (with the grant made as
of the date of his first election or appointment). Each Eligible
Director serving on the Board at each annual meeting of the
Company's shareholders (beginning with the meeting at least six
months after the Effective Date of the IPO) will receive a
Formula Option as of that meeting with respect to 5,000 shares
of Common Stock. The Exercise Price for Formula Options will be
the Fair Market Value on the Date of Grant.
EXERCISE Unless the Administrator specifies otherwise, each Formula
SCHEDULE Option will become exercisable as to 20% of the covered shares
on the first anniversary of its Date of Grant, an additional 30%
on the second anniversary, and the remaining 50% on or after the
third anniversary. A Formula Option will become exercisable in
its entirety upon the director's death, disability, or
attainment of age 70. Options will be forfeited to the extent
they are not then exercisable if a director resigns or fails to
be reelected as a director.
DATE OF GRANT The Date of Grant will be the date as of which this Plan or the
Administrator grants an Award to a participant, as specified in
the Plan or in the Administrator's minutes.
EXERCISE PRICE The Exercise Price is the value of the consideration that a
participant must provide in exchange for one share of Common
Stock. The Administrator will determine the Exercise Price under
each Award and may set the Exercise Price without regard to the
Exercise Price of any other Awards granted at the same or any
other time. The Company may use the consideration it receives
from the participant for general corporate purposes.
The Exercise Price per share for NQSOs may not be less than 100%
of the Fair Market Value of a share on the Date of Grant. If an
Option is intended to be an ISO, the Exercise Price per share
may not be less than 100% of the Fair Market Value (on the Date
of Grant) of a share of
3
<PAGE> 4
Common Stock covered by the Option; provided, however, that if
the Administrator decides to grant an ISO to someone covered by
Sections 422(b)(6) and 424(d) (as a more-than-10%-stock-owner),
the Exercise Price of the Option must be at least 110% of the
Fair Market Value (on the Date of Grant).
The Administrator may satisfy any state law requirements
regarding adequate consideration for Stock Grants by (i) issuing
Common Stock held as treasury stock or (ii) charging the
recipients at least the par value for the shares covered by the
Stock Grant. The Administrator may designate that a recipient
may satisfy (ii) either by direct payments or by the
Administrator's withholding from other payments due to the
recipient.
FAIR MARKET Fair Market Value of a share of Common Stock for purposes of the
VALUE Plan will be determined as follows:
If the Common Stock trades on a national securities
exchange, the closing sale price on that date;
If the Common Stock does not trade on any such exchange,
the closing sale price as reported by the National
Association of Securities Dealers, Inc. Automated
Quotation System ("Nasdaq") for such date;
If no such closing sale price information is available,
the average of the closing bid and asked prices that
Nasdaq reports for such date; or
If there are no such closing bid and asked prices, the
average of the closing bid and asked prices as reported
by any other commercial service for such date.
For any date that is not a trading day, the Fair Market Value of
a share of Common Stock for such date shall be determined by
using the closing sale price or the average of the closing bid
and asked prices, as appropriate, for the immediately preceding
trading day.
The Fair Market Value will be deemed equal to the IPO price for
any Options granted as of the date on which the IPO's
underwriters price the IPO or granted on the following day
before trading opens in the Common Stock.
EXERCISABILITY The Administrator will determine the times and conditions for
exercise of or purchase under each Award but may not extend the
period for exercise
4
<PAGE> 5
beyond the tenth anniversary of its Date of Grant (or five years
for ISOs granted to 10% owners covered by Code Sections
422(b)(6) and 424(d)).
Awards will become exercisable at such times and in such manner
as the Administrator determines and the Award Agreement, if any,
indicates; provided, however, that the Administrator may, on
such terms and conditions as it determines appropriate,
accelerate the time at which the participant may exercise any
portion of an Award or at which restrictions on Stock Grants
lapse. For Stock Grants, "exercise" refers to acceptance of the
Award or lapse of restrictions, as appropriate in context.
If the Administrator does not specify otherwise, Options will
become exercisable and restrictions on Stock Grants will lapse
as to one-fourth of the covered shares on each of the first four
anniversaries of the Date of Grant.
No portion of an Award that is unexercisable at a participant's
termination of employment will thereafter become exercisable,
unless the Award Agreement provides otherwise, either initially
or by amendment.
CHANGE OF Upon a Change of Control (as defined below), all Options held by
CONTROL current Employees and directors will become fully exercisable
and all restrictions on Stock Grants will lapse. A Change of
Control for this purpose means the occurrence, after the
Company's IPO, of any one or more of the following events:
a person, entity, or group (other than the Company, any
Company subsidiary, any Company benefit plan, or any
underwriter temporarily holding securities for an
offering of such securities) acquires ownership of more
than 50% of the undiluted total voting power of the
Company's then-outstanding securities eligible to vote
to elect members of the Board ("Company Voting
Securities");
consummation of a merger or consolidation of the Company
into any other entity--unless the holders of the Company
Voting Securities outstanding immediately before such
consummation, together with any trustee or other
fiduciary holding securities under a Company benefit
plan, hold securities that represent immediately after
such merger or consolidation at least 50% of the
combined voting power of the then outstanding voting
securities of either the Company or the other surviving
entity or its parent; or
the stockholders of the Company approve (i) a plan of
complete liquidation or dissolution of the Company or
(ii) an agreement for
5
<PAGE> 6
the Company's sale or disposition of all or
substantially all the Company's assets, and such
liquidation, dissolution, sale, or disposition is
consummated.
Even if other tests are met, a Change of Control has not
occurred under any circumstance in which the Company
files for bankruptcy protection or is reorganized
following a bankruptcy filing.
The ADJUSTMENT UPON CHANGES IN CAPITAL STOCK provisions will
also apply if the Change of Control is a SUBSTANTIAL CORPORATE
CHANGE (as defined in those provisions).
LIMITATION An Option granted to an employee will be an ISO only to the
ON ISOs extent that the aggregate Fair Market Value (determined at the
Date of Grant) of the stock with respect to which ISOs are
exercisable for the first time by the optionee during any
calendar year (under the Plan and all other plans of the Company
and its subsidiary corporations, within the meaning of Code
Section 422(d)), does not exceed $100,000. This limitation
applies to Options in the order in which such Options were
granted. If, by design or operation, the Option exceeds this
limit, the excess will be treated as an NQSO.
METHOD OF To exercise any exercisable portion of an Award, the participant
EXERCISE must:
Deliver a written notice of exercise to the Assistant
Secretary of the Company (or to whomever the
Administrator designates), in a form complying with any
rules the Administrator may issue, signed by the
participant, and specifying the number of shares of
Common Stock underlying the portion of the Award the
participant is exercising;
Pay the full Exercise Price, if any, by cashier's or
certified check for the shares of Common Stock with
respect to which the Award is being exercised, unless
the Administrator consents to another form of payment
(which could include the use of Common Stock); and
Deliver to the Administrator such representations and
documents as the Administrator, in its sole discretion,
may consider necessary or advisable.
Payment in full of the Exercise Price need not accompany the
written notice of exercise provided the notice directs that the
stock certificates for the shares issued upon the exercise be
delivered to a licensed broker acceptable to the Company as the
agent for the individual exercising the
6
<PAGE> 7
option and at the time the stock certificates are delivered to
the broker, the broker will tender to the Company cash or cash
equivalents acceptable to the Company and equal to the Exercise
Price.
If the Administrator agrees to allow an optionee to pay through
tendering Common Stock to the Company, the individual can only
tender stock he has held for at least six months at the time of
surrender. Shares of stock offered as payment will be valued,
for purposes of determining the extent to which the participant
has paid the Exercise Price, at their Fair Market Value on the
date of exercise. The Administrator may also, in its discretion,
accept attestation of ownership of Common Stock and issue a net
number of shares upon Option exercise.
AWARD No one may exercise an Award more than ten years after its Date
EXPIRATION of Grant (or five years, for an ISO granted to a more-than-10%
shareholder). Unless the Award Agreement provides otherwise,
either initially or by amendment, no one may exercise an Award
after the first to occur of:
EMPLOYMENT The 90th day after the date of termination of employment (other
TERMINATION than for death or Disability), where termination of employment
means the time when the employer-employee or other service
providing relationship between the employee and the Company ends
for any reason, including retirement. Unless the Award Agreement
provides otherwise, termination of employment does not include
instances in which the Company immediately rehires a common law
employee as an independent contractor. The Administrator, in its
sole discretion, will determine all questions of whether
particular terminations or leaves of absence are terminations of
employment;
DlSABILITY For disability, the earlier of (i) the first anniversary of the
participant's termination of employment for disability and (ii)
30 days after the participant no longer has a disability, where
"disability" means the inability to engage in any substantial
gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in
death or that has lasted or can be expected to last for a
continuous period of not less than twelve months; or
DEATH The date 24 months after the participant's death.
If exercise is permitted after termination of employment, the
Award will nevertheless expire as of the date that the former
service provider violates any covenant not to compete in effect
between the Company and the former employee. In addition, an
optionee who exercises an Option more than 90 days after
termination of employment with the Company and/or the Eligible
Subsidiaries will only receive ISO treatment to the extent
7
<PAGE> 8
permitted by law, and becoming or remaining an employee of
another related company (that is not an Eligible Subsidiary) or
an independent contractor to the Company will not prevent loss
of ISO status because of the formal termination of employment.
Nothing in this Plan extends the term of an Award beyond the
tenth anniversary of its Date of Grant, nor does anything in
this AWARD EXPIRATION section make an Award exercisable that has
not otherwise become exercisable.
AWARD Award Agreements will set forth the terms of each Award and will
AGREEMENT include such terms and conditions, consistent with the Plan, as
the Administrator may determine are necessary or advisable. To
the extent the agreement is inconsistent with the Plan, the Plan
will govern. The Award Agreements may contain special rules. The
Administrator may, but is not required to, issue agreements for
Stock Grants.
STOCK SUBJECT Except as adjusted below under CORPORATE CHANGES, the aggregate
TO PLAN number of shares of Common Stock that may be issued under the
Awards (whether ISOs, NQSOs, or Stock Grants) may not exceed 20%
percent of the total number of shares of Common Stock
outstanding, determined immediately after the grant of the
Award;
the maximum number of shares that may be subject to ISOs
may not exceed 600,000; and
the maximum number of shares that may be granted under
Awards for a single individual in a calendar year may
not exceed 1,200,000. (The individual maximum applies
only to Awards first made under this Plan and not to
Awards made in substitution of a prior employer's
options or other incentives, except as Code Section
162(m) otherwise requires.)
The Common Stock will come from either authorized but unissued
shares or from previously issued shares that the Company
reacquires, including shares it purchases on the open market. If
any Award expires, is canceled, or terminates for any other
reason, the shares of Common Stock available under that Award
will again be available for the granting of new Awards (but will
be counted against that calendar year's limit for a given
individual).
No adjustment will be made for a dividend or other right (except
a stock dividend) for which the record date precedes the date of
exercise.
8
<PAGE> 9
The participant will have no rights of a stockholder with
respect to the shares of stock subject to an Award except to the
extent that the Company has issued certificates for, or
otherwise confirmed ownership of, such shares upon the exercise
of the Award.
The Company will not issue fractional shares pursuant to the
exercise of an Award, but the Administrator may, in its
discretion, direct the Company to make a cash payment in lieu of
fractional shares.
PERSON WHO During the participant's lifetime, only the participant or his
MAY EXERCISE duly appointed guardian or personal representative may exercise
the Awards. After his death, his personal representative or any
other person authorized under a will or under the laws of
descent and distribution may exercise any then exercisable
portion of an Award. If someone other than the original
recipient seeks to exercise any portion of an Award, the
Administrator may request such proof as it may consider
necessary or appropriate of the person's right to exercise the
Award.
ADJUSTMENTS Subject to any required action by the Company (which it shall
UPON CHANGES IN promptly take) or its stockholders, and subject to the
CAPITAL STOCK provisions of applicable corporate law, if, after the Date of
Grant of an Award, the outstanding shares of Common Stock
increase or decrease or change into or are exchanged for a
different number or kind of security because of any
recapitalization, reclassification, stock split, reverse stock
split, combination of shares, exchange of shares, stock
dividend, or other distribution payable in capital stock, or
some other increase or decrease in such Common Stock
occurs without the Company's receiving consideration.
The Administrator may make a proportionate and appropriate
adjustment in the number of shares of Common Stock underlying
each Award, so that the proportionate interest of the
participant immediately following such event will, to the extent
practicable, be the same as immediately before such event. (This
adjustment does not apply to Common Stock that the optionee has
already purchased nor to Stock Grants that are already
nonforfeitable, except to the extent of similar treatment for
most stockholders.) Unless the Administrator determines another
method would be appropriate, any such adjustment to an Award
will not change the total price with respect to shares of Common
Stock underlying the unexercised portion of the Award but will
include a corresponding proportionate adjustment in the Award's
Exercise Price. The Administrator will make a
9
<PAGE> 10
commensurate change to the maximum number and kind of shares
provided in the STOCK SUBJECT TO PLAN section.
Any issue by the Company of any class of preferred stock, or
securities convertible into shares of common or preferred stock
of any class, will not affect, and no adjustment by reason
thereof will be made with respect to, the number of shares of
Common Stock subject to any Award or the Exercise Price except
as this ADJUSTMENTS section specifically provides. The grant of
an Award under the Plan will not affect in any way the right or
power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure,
or to merge or to consolidate, or to dissolve, liquidate, sell,
or transfer all or any part of its business or assets.
SUBSTANTIAL Upon a Substantial Corporate Change, the Plan and any
CORPORATE unexercised CORPORATE Awards will terminate unless provision is
CHANGE made in writing in connection with such transaction for the
assumption or continuation of outstanding Awards, or the
substitution for such options or grants of any options or grants
covering the stock or securities of a successor employer
corporation, or a parent or subsidiary of such successor, with
appropriate adjustments as to the number and kind of shares of
stock and prices, in which event the Awards will continue in the
manner and under the terms so provided.
Unless the Board determines otherwise, if an Award would
otherwise terminate under the preceding sentence, participants
who are then employees, officers or directors of the Company
will have the right, at such time before the consummation of the
transaction causing such termination as the Board reasonably
designates, upon such reasonable notice as determined by the
Board, to exercise any unexercised portions of the Award,
whether or not they had previously become exercisable. However,
unless the Board determines otherwise, the acceleration will not
occur if it would render unavailable "pooling of interest"
accounting for any reorganization, merger, or consolidation of
the Company.
A Substantial Corporate Change means:
the dissolution or liquidation of the Company,
merger, consolidation, or reorganization of the Company
with one or more corporations in which the Company is
not the surviving corporation,
the sale of substantially all of the assets of the
Company to another corporation, or
10
<PAGE> 11
any transaction (including a merger or reorganization in
which the Company survives) approved by the Board that
results in any person or entity (other than any
affiliate of the Company as defined in Rule 144(a)(1)
under the Securities Act, any Company Subsidiary, any
Company benefit plan, or any underwriter temporarily
holding securities for an offering of such securities)
owning 100% of the combined voting power of all classes
of stock of the Company.
SUBSIDIARY Employees of Company Subsidiaries will be entitled to
EMPLOYEES participate in the Plan, except as otherwise designated by the
Board of Directors or the Committee.
Eligible Subsidiary means each of the Company's Subsidiaries,
except as the Board otherwise specifies. For ISO grants,
Subsidiary means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at
the time an ISO is granted to a Participant under the Plan, each
corporation (other than the last corporation in the unbroken
chain) owns stock possessing 50% or more of the total combined
voting power of all classes of stock in another corporation in
such chain. For ISO purposes, Subsidiary also includes a
single-member limited liability company included within the
chain described in the preceding sentence. For NQSOs, the Board
or the Administrator can use a different definition of
Subsidiary in its discretion.
LEGAL The Company will not issue any shares of Common Stock under an
COMPLIANCE Award until all applicable requirements imposed by Federal and
state securities and other laws, rules, and regulations, and by
any applicable regulatory agencies or stock exchanges, have been
fully met. To that end, the Company may require the participant
to take any reasonable action to comply with such requirements
before issuing such shares. No provision in the Plan or action
taken under it authorizes any action that is otherwise
prohibited by Federal or state laws.
The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act of 1933 ("Securities act") and
the Securities Exchange Act of 1934 and all regulations and
rules the Securities and Exchange Commission issues under those
laws. Notwithstanding anything in the Plan to the contrary, the
Administrator must administer the Plan, and Awards may be
granted and exercised, only in a way that conforms to such laws,
rules, and regulations. To the extent permitted by applicable
law, the Plan and any Awards will be deemed amended to the
extent necessary to conform to such laws, rules, and
regulations.
11
<PAGE> 12
PURCHASE FOR Unless a registration statement under the Securities Act covers
INVESTMENT the shares of Common Stock a participant receives upon exercise
AND OTHER of his Award, the Administrator may require, at the time of such
RESTRICTIONS excercise of receipt of a grant, that the participant agree in
writing to acquire such shares for investment and not for public
resale or distribution, unless and until the shares subject to
the Award are registered under the Securities Act. Unless the
shares are registered under the Securities Act, the participant
must acknowledge:
that the shares purchased on exercise of the Award are
not so registered,
that the participant may not sell or otherwise transfer
the shares unless:
the shares have been registered under the
Securities Act in connection with the sale or
transfer thereof, or
counsel satisfactory to the Company has issued an
opinion satisfactory to the Company that the sale
or other transfer of such shares is exempt from
registration under the Securities Act, and
such sale or transfer complies with all other
applicable laws, rules, and regulations, including
all applicable Federal and state securities laws,
rules, and regulations.
Additionally, the Common Stock, when issued upon the exercise of
an Award, will be subject to any other transfer restrictions,
rights of first refusal, and rights of repurchase set forth in
or incorporated by reference into other applicable documents,
including the Company's articles or certificate of
incorporation, by-laws, or generally applicable stockholders'
agreements.
The Administrator may, in its sole discretion, take whatever
additional actions it deems appropriate to comply with such
restrictions and applicable laws, including placing legends on
certificates and issuing stop-transfer orders to transfer agents
and registrars.
TAX The participant must satisfy all applicable Federal, state, and
WITHHOLDING local income and employment tax withholding requirements before
the Company will deliver stock certificates upon the exercise of
an Award. The Company may decide to satisfy the withholding
obligations through additional withholding on salary or wages.
If the Company does not or cannot withhold from other
compensation, the participant must pay the Company,
12
<PAGE> 13
with a cashier's check or certified check, the full amounts
required by withholding. Payment of withholding obligations is
due before the Company issues shares with respect to the Award.
If the Administrator so determines, the participant may instead
satisfy the withholding obligations by directing the Company to
retain shares from the Award exercise, by tendering previously
owned shares, or by attesting to his ownership of shares (with
the distribution of net shares).
TRANSFERS, Unless the Administrator otherwise approves in advance in
ASSIGNMENTS, writing for estate planning or other purposes, an Award may not
AND PLEDGES be assigned, pledged, or otherwise transferred in any way,
whether by operation of law or otherwise or through any legal or
equitable proceedings (including bankruptcy), by the participant
to any person, except by will or by operation of applicable laws
of descent and distribution. If Rule 16b-3 then applies to an
Award, the participant may not transfer or pledge shares of
Common Stock acquired under a Stock Grant or upon exercise of an
Option until at least six months have elapsed from (but
excluding) the Date of Grant, unless the Administrator approves
otherwise in advance in writing. The Administrator may, in its
discretion, expressly provide that a participant may transfer
his Award without receiving consideration to (i) members of his
immediate family (children, grandchildren, or spouse); (ii)
trusts for the benefit of such family members; or (iii)
partnerships where the only partners are such family members.
AMENDMENT OR The Board may amend, suspend, or terminate the Plan at any time,
TERMINATION without the consent of the participants or their beneficiaries;
OF PLAN AND provided however, that no amendment will deprive any participant
OPTIONS or beneficiary of any previously declared Award. Except as
required by law or by the CORPORATE CHANGES section, the
Administrator may not, without the participant's or
beneficiary's consent, modify the terms and conditions of an
Award so as to adversely affect the participant. No amendment,
suspension, or termination of the Plan will, without the
participant's or beneficiary's consent, terminate or adversely
affect any right or obligations under any outstanding Awards.
PRIVILEGES No participant and no beneficiary or other person claiming under
OF STOCK or through such participant will have any right, title, or
OWNERSHIP interest in or to any shares of Common Stock allocated or
reserved under the Plan or subject to any Award except as to
such shares of Common Stock if any, already issued to such
participant.
EFFECT ON Whether exercising or receiving an Award causes the participant
OTHER PLANS to accrue or receive additional benefits under any pension or
other plan is governed solely by the terms of such other plan.
13
<PAGE> 14
LIMITATIONS Notwithstanding any other provisions of the Plan, no individual
ON LIABILITY acting as a director, employee, or agent of the Company shall be
liable to any participant, former participant, spouse,
beneficiary, or any other person for any claim, loss, liability,
or expense incurred in connection with the Plan, nor shall such
individual be personally liable because of any contract or other
instrument he executes in such other capacity. The Company will
indemnify and hold harmless each director, employee, or agent of
the Company to whom any duty or power relating to the
administration or interpretation of the Plan has been or will be
delegated, against any cost or expense (including attorneys'
fees) or liability (including any sum paid in settlement of a
claim with the Board's approval) arising out of any act or
omission to act concerning this Plan unless arising out of such
person's own fraud or bad faith.
NO EMPLOYMENT Nothing contained in this Plan constitutes an employment
CONTRACT contract between the Company and the participants. The Plan does
not give any participant any right to be retained in the
Company's employ, nor does it enlarge or diminish the Company's
right to end the participant's employment.
APPLICABLE The laws of the State of Delaware (other than its choice of law
LAW provisions) govern this Plan and its interpretation.
DURATION Unless the Board extends the Plan's term, the Administrator may
OF PLAN not grant Awards after June 8, 2008. The Plan will then
terminate but will continue to govern unexercised and unexpired
Awards.
14
<PAGE> 1
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of September 30, 1998
among
SCHOOL SPECIALTY, INC.
as Borrower,
Certain Subsidiaries and Affiliates,
as Guarantors,
THE LENDERS NAMED HEREIN,
AND
NATIONSBANK, N.A.,
as Administrative Agent and Lead Arranger,
BANK ONE, WISCONSIN
and
U.S. BANK NATIONAL ASSOCIATION
as Documentation Agents
<PAGE> 2
TABLE OF CONTENTS
SECTION 1 DEFINITIONS..........................................................1
1.1 Definitions.......................................................1
1.2 Computation of Time Periods......................................25
1.3 Accounting Terms.................................................25
SECTION 2 CREDIT FACILITIES...................................................26
2.1 Revolving Loans..................................................26
2.2 Letter of Credit Subfacility.....................................28
2.3 Swingline Loan Subfacility.......................................33
2.4 Term Loan........................................................35
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES......................36
3.1 Default Rate.....................................................36
3.2 Extension and Conversion.........................................36
3.3 Prepayments......................................................37
3.4 Termination and Reduction of Commitments.........................38
3.5 Fees.............................................................38
3.6 Capital Adequacy.................................................39
3.7 Inability To Determine Interest Rate.............................39
3.8 Illegality.......................................................40
3.9 Requirements of Law..............................................40
3.10 Taxes...........................................................41
3.11 Indemnity.......................................................43
3.12 Pro Rata Treatment..............................................44
3.13 Sharing of Payments.............................................45
3.14 Payments, Computations, Etc.....................................45
3.15 Evidence of Debt................................................47
3.16 Certain Rules Relating to the Payment of Additional Amounts.....48
SECTION 4 GUARANTY............................................................49
4.1 The Guarantee....................................................49
4.2 Obligations Unconditional........................................49
4.3 Reinstatement....................................................50
4.4 Certain Additional Waivers.......................................51
4.5 Remedies.........................................................51
4.6 Rights of Contribution...........................................51
4.7 Continuing Guarantee.............................................52
SECTION 5 CONDITIONS..........................................................52
5.1 Conditions to Closing............................................52
5.2 Conditions to All Extensions of Credit...........................54
5.3 Conditions Subsequent to Closing.................................55
i
<PAGE> 3
SECTION 6 REPRESENTATIONS AND WARRANTIES......................................56
6.1 Financial Condition..............................................56
6.2 No Changes or Restricted Payments................................56
6.3 Organization; Existence; Compliance with Law.....................56
6.4 Power; Authorization; Enforceable Obligations....................57
6.5 No Legal Bar.....................................................57
6.6 No Material Litigation...........................................57
6.7 No Default.......................................................58
6.8 Ownership of Property; Liens.....................................58
6.9 Intellectual Property............................................58
6.10 No Burdensome Restrictions......................................58
6.11 Taxes...........................................................58
6.12 ERISA...........................................................59
6.13 Governmental Regulations, Etc...................................60
6.14 Subsidiaries....................................................61
6.15 Purpose of Extensions of Credit.................................61
6.16 Environmental Matters...........................................61
SECTION 7 AFFIRMATIVE COVENANTS...............................................62
7.1 Financial Statements.............................................62
7.2 Certificates; Other Information..................................63
7.3 Notices..........................................................64
7.4 Payment of Obligations...........................................66
7.5 Conduct of Business and Maintenance of Existence.................66
7.6 Maintenance of Property; Insurance...............................66
7.7 Inspection of Property; Books and Records; Discussions...........66
7.8 Environmental Laws...............................................67
7.9 Financial Covenants..............................................67
7.10 Agency Fees.....................................................68
7.11 Additional Guaranties and Stock Pledges.........................68
7.12 Ownership of Subsidiaries.......................................69
7.13 Use of Proceeds.................................................69
SECTION 8 NEGATIVE COVENANTS..................................................70
8.1 Indebtedness.....................................................70
8.2 Liens............................................................71
8.3 Nature of Business...............................................72
8.4 Consolidation, Merger, Sale or Purchase of Assets, etc...........72
8.5 Advances, Investments and Loans..................................73
8.6 Transactions with Affiliates.....................................74
8.7 Ownership of Equity Interests....................................74
8.8 Fiscal Year......................................................74
8.9 Prepayments of Indebtedness, etc.................................74
8.10 Restricted Payments.............................................74
8.11 No Further Negative Pledges.....................................75
ii
<PAGE> 4
SECTION 9 EVENTS OF DEFAULT...................................................75
9.1 Events of Default................................................75
9.2 Acceleration; Remedies...........................................77
SECTION 10 AGENCY PROVISIONS..................................................78
10.1 Appointment.....................................................78
10.2 Delegation of Duties............................................79
10.3 Exculpatory Provisions..........................................79
10.4 Reliance on Communications......................................80
10.5 Notice of Default...............................................80
10.6 Non-Reliance on Administrative Agent and Other Lenders..........80
10.7 Indemnification.................................................81
10.8 Administrative Agent in its Individual Capacity.................81
10.9 Successor Administrative Agent..................................82
SECTION 11 MISCELLANEOUS......................................................82
11.1 Notices.........................................................82
11.2 Right of Set-Off................................................84
11.3 Benefit of Agreement............................................84
11.4 No Waiver; Remedies Cumulative..................................87
11.5 Payment of Expenses, etc........................................87
11.6 Amendments, Waivers and Consents................................88
11.7 Counterparts....................................................89
11.8 Headings........................................................89
11.9 Survival........................................................89
11.10 Governing Law; Submission to Jurisdiction; Venue...............90
11.11 Severability...................................................90
11.12 Entirety.......................................................90
11.13 Binding Effect; Termination....................................91
11.14 Confidentiality................................................91
11.15 Source of Funds................................................92
11.16 Conflict.......................................................92
iii
<PAGE> 5
SCHEDULES
Schedule 2.1(a) Lenders and Commitments
Schedule 2.1(b)(i) Form of Notice of Borrowing
Schedule 2.1(e) Form of Revolving Note
Schedule 2.2(b)-1 Existing Letters of Credit
Schedule 2.2(b)-2 Form of Notice of Request for Letter of Credit
Schedule 2.4(d) Form of Term Note
Schedule 3.2 Form of Notice of Extension/Conversion
Schedule 5.1(i)(v) Form of Secretary's Certificate
Schedule 6.6 Description of Legal Proceedings
Schedule 6.8 Existing Liens
Schedule 6.11 Tax Matters
Schedule 6.12 ERISA
Schedule 6.14 Subsidiaries
Schedule 6.16 Environmental
Schedule 7.2(b) Form of Officer's Compliance Certificate
Schedule 7.11 Form of Joinder Agreement
Schedule 8.1 Existing Indebtedness
Schedule 8.4(b) Excluded Asset Dispositions
Schedule 8.5 Existing Investments
Schedule 8.6 Existing Agreements with Affiliates
Schedule 11.1 Lenders and Addresses
Schedule 11.3(b) Form of Assignment and Acceptance
iv
<PAGE> 6
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 30,
1998 (the "Credit Agreement"), is by and among SCHOOL SPECIALTY, INC., a
Delaware corporation (the "Borrower"), the subsidiaries and affiliates
identified on the signature pages hereto and such other subsidiaries and
affiliates as may from time to time become Guarantors hereunder in accordance
with the provisions hereof (the "Guarantors"), the lenders named herein and such
other lenders as may become a party hereto (the "Lenders"), NATIONSBANK, N.A.,
as Administrative Agent and Lead Arranger (in such capacity, the "Administrative
Agent") and BANK ONE, WISCONSIN and U.S. BANK NATIONAL ASSOCIATION, as
Documentation Agents.
W I T N E S S E T H
WHEREAS, a $250 million revolving credit facility has been established
in favor of the Borrower pursuant to that Credit Agreement dated as of June 9,
1998 (as amended and modified, the "Original Credit Agreement") among the
Borrower, the guarantors and lenders identified therein and NationsBank, N.A.,
as Administrative Agent;
WHEREAS, the Borrower has requested that the credit facility be
increased and otherwise modified;
WHEREAS, the Lenders have agreed to the requested modifications on the
terms and conditions set forth in this Amended and Restated Credit Agreement
which is given in amendment to, restatement of and substitution for the Original
Credit Agreement;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 Definitions.
As used in this Credit Agreement, the following terms shall
have the meanings specified below unless the context otherwise requires:
"Additional Credit Party" means each Person that becomes a
Guarantor after the Closing Date by execution of a Joinder Agreement.
"Administrative Agent" shall have the meaning assigned to such
term in the heading hereof, together with any successors or assigns.
<PAGE> 7
"Administrative Agent Fees" shall have the meaning assigned to
such term in Section 3.5(c).
"Administrative Agent's Fee Letter" means that certain letter
agreement, dated as of August 12, 1998, between the Agent and the
Borrower, as amended, modified, supplemented or replaced from time to
time.
"Affiliate" means, with respect to any Person, any other
Person (i) directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person or (ii) directly or
indirectly owning or holding five percent (5%) or more of the equity
interest in such Person. For purposes of this definition, "control"
when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative
to the foregoing. Notwithstanding anything to the contrary in this
Agreement, no Affiliate of Jonathan J. Ledecky shall be deemed to be an
Affiliate of any member of the Consolidated Group solely because of Mr.
Ledecky's status as an officer, director or employee of a member of the
Consolidated Group.
"Agency Services Address" means NationsBank, N.A.,
NC1-001-15-04, 101 North Tryon Street, Charlotte, North Carolina 28255,
Attn: Agency Services, or such other address as may be identified by
written notice from the Administrative Agent to the Borrower.
"Aggregate Revolving Committed Amount" means the aggregate
amount of Revolving Commitments in effect from time to time, being
initially TWO HUNDRED FIFTY MILLION DOLLARS ($250,000,000).
"Applicable Percentage" means for any day, the rate per annum
set forth below opposite the applicable Consolidated Leverage Ratio
then in effect, it being understood that the Applicable Percentage for
(i) Base Rate Loans shall be the percentage set forth under the column
"Base Rate Margin", (ii) Eurodollar Loans shall be the percentage set
forth under the column "Eurodollar Margin and Letter of Credit Fee",
(iii) the Letter of Credit Fee shall be the percentage set forth under
the column "Eurodollar Margin and Letter of Credit Fee" and (iv) the
Commitment Fee shall be the percentage set forth under the column
"Commitment Fee":
2
<PAGE> 8
<TABLE>
<CAPTION>
Eurodollar
Margin
Consolidated and
Pricing Leverage Base Rate Letter of Commitment
Level Ratio Margin Credit Fee Fee
----- ----- ------ ---------- ---
<S> <C> <C> <C> <C>
I < 2.25 0% 1.00% 0.275%
-
II > 2.25 but < 2.75 0% 1.25% 0.325%
-
III > 2.75 but < 3.25 0.25% 1.50% 0.375%
-
IV > 3.25 but < 3.75 0.50% 1.75% 0.425%
-
V > 3.75 0.75% 2.00% 0.475%
</TABLE>
The Applicable Percentage shall be determined and adjusted periodically
on the date (each a "Rate Determination Date") five (5) Business Days
after the date by which the annual and quarterly compliance
certificates and related financial statements and information are
required in accordance with the provisions of Sections 7.1(a) and (b)
and Section 7.2(b), as appropriate; provided that:
(i) the initial Applicable Percentages shall be
2.375% in the case of the Eurodollar Margin and Letter of
Credit Fee, 0.75% in the case of the Base Rate Margin, and
0.475% in the case of the Commitment Fee and shall remain in
effect until the Rate Determination Date to occur in
connection with the delivery of the quarterly compliance
certificate and related financial statements for the fiscal
quarter ending January 30, 1999; and
(ii) in the event an annual or quarterly compliance
certificate and related financial statements and information
are not delivered timely to the Agency Services Address by the
date required by Sections 7.1(a) and (b) and Section 7.2(b),
as appropriate, the Applicable Percentages shall be based on
Pricing Level V until such time as an appropriate compliance
certificate and related financial statements and information
are delivered, whereupon the applicable Pricing Level shall be
adjusted based on the information contained in such compliance
certificate and related financial statements and information.
Each Applicable Percentage shall be effective from a Rate Determination
Date until the next such Rate Determination Date. The Administrative
Agent shall determine the appropriate Applicable Percentages in the
pricing matrix promptly upon receipt of the quarterly or annual
compliance certificate and related financial information and shall
promptly notify the Borrower and the Lenders of any change thereof.
Such determinations by the Administrative Agent shall be conclusive
absent manifest error. Adjustments in the Applicable Percentages shall
be effective as to existing Extensions of Credit as well as new
Extensions of Credit made thereafter.
3
<PAGE> 9
"Asset Disposition" means, other than a Securitization
Transaction and the Excluded Asset Dispositions, (i) the sale, lease or
other disposition of any property or asset by any member of the
Consolidated Group, other than any such sale permitted by Sections
8.4(b) and other than to the extent permitted by Section 8.5, and (ii)
receipt by any member of the Consolidated Group of any cash insurance
proceeds or condemnation award payable by reason of theft, loss,
physical destruction or damage, taking or similar event with respect to
any of their property or assets.
"Attributed Principal Amount" means, on any day, with respect
to any Securitization Transaction entered into by any member of the
Consolidated Group, the aggregate amount (with respect to any such
transaction, the "Invested Amount") paid to, or borrowed by, such
Person as of such date under such Securitization Transaction, minus the
aggregate amount received by the applicable Receivables Financier and
applied to the reduction of the Invested Amount under such
Securitization Transaction.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from
time to time.
"Bankruptcy Event" means, with respect to any Person, the
occurrence of any of the following with respect to such Person: (i) a
court or governmental agency having jurisdiction in the premises shall
enter a decree or order for relief in respect of such Person in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or
ordering the winding up or liquidation of its affairs; or (ii) there
shall be commenced against such Person an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or any case, proceeding or other action for the appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its
Property or for the winding up or liquidation of its affairs, and such
involuntary case or other case, proceeding or other action shall remain
undismissed, undischarged or unbonded for a period of sixty (60)
consecutive days; or (iii) such Person shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in
an involuntary case under any such law, or consent to the appointment
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its Property or make any general assignment for the
benefit of creditors; or (iv) such Person shall be unable to, or shall
admit in writing its inability to, pay its debts generally as they
become due.
"Base Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest whole multiple
of 1/100 of 1%) equal to the greater of (a) the Federal Funds
Rate in effect on such day plus 1/2 of 1% or (b) the Prime
Rate in effect on such day. If for any reason the
Administrative Agent shall have determined (which
determination shall be conclusive absent manifest error) that
it is unable after due inquiry to ascertain the Federal Funds
Rate for any reason,
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<PAGE> 10
including the inability or failure of the Administrative Agent
to obtain sufficient quotations in accordance with the terms
hereof, the Base Rate shall be determined without regard to
clause (a) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist.
Any change in the Base Rate due to a change in the Prime Rate
or the Federal Funds Rate shall be effective on the effective
date of such change in the Prime Rate or the Federal Funds
Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Borrower" means School Specialty, Inc., a Delaware
corporation, as referenced in the opening paragraph, its successors and
permitted assigns.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in Charlotte, North Carolina or New
York, New York are authorized or required by law to close, except that,
when used in connection with a Eurodollar Loan, such day shall also be
a day on which dealings between banks are carried on in U.S. dollar
deposits in London, England.
"Capital Expenditures" means, for any period, without
duplication, all expenditures (whether paid in cash or other
consideration) during such period that, in accordance with GAAP, are or
should be included in additions to property, plant and equipment or
similar items reflected in the consolidated statement of cash flows for
such period; provided, that Capital Expenditures shall not include, for
purposes hereof, (i) expenditures of proceeds of insurance settlements,
condemnation awards and other settlements in respect of lost,
destroyed, damaged or condemned assets, equipment or other property to
the extent such expenditures are made to replace or repair such lost,
destroyed, damaged or condemned assets, equipment or other property or
otherwise to acquire assets or properties useful in the business of the
members of the Consolidated Group within 12 months of receipt of such
proceeds.
"Capital Lease" means, as applied to any Person, any lease of
any Property (whether real, personal or mixed) by that Person as lessee
which, in accordance with GAAP, is or should be accounted for as a
capital lease on the balance sheet of that Person.
"Capital Lease Obligation" means the capital lease obligations
relating to a Capital Lease determined in accordance with GAAP.
"Cash Equivalents" means (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than twelve months from the date of
acquisition, (b) U.S. dollar denominated time deposits and certificates
of deposit of (i) any Lender, or (ii) any domestic commercial bank of
recognized standing (y) having capital and surplus in excess
5
<PAGE> 11
of $500,000,000 and (z) whose short-term commercial paper rating from
S&P is at least A-1 or the equivalent thereof or from Moody's is at
least P-1 or the equivalent thereof (any such bank being an "Approved
Bank"), in each case with maturities of not more than 270 days from the
date of acquisition, (c) commercial paper and variable or fixed rate
notes issued by any Approved Bank (or by the parent company thereof) or
any variable rate notes issued by, or guaranteed by, any domestic
corporation rated A-1 (or the equivalent thereof) or better by S&P or
P-1 (or the equivalent thereof) or better by Moody's and maturing
within six months of the date of acquisition, (d) repurchase agreements
entered into by a Person with a bank or trust company (including any of
the Lenders) or recognized securities dealer having capital and surplus
in excess of $500,000,000 for direct obligations issued by or fully
guaranteed by the United States of America in which such Person shall
have a perfected first priority security interest (subject to no other
Liens) and having, on the date of purchase thereof, a fair market value
of at least 100% of the amount of the repurchase obligations, (e)
obligations of any State of the United States or any political
subdivision thereof, the interest with respect to which is exempt from
federal income taxation under Section 103 of the Code, having a long
term rating of at least AA- or Aa-3 by S&P or Moody's, respectively,
and maturing within three years from the date of acquisition thereof,
(f) Investments in municipal auction preferred stock (i) rated AAA (or
the equivalent thereof) or better by S&P or Aaa (or the equivalent
thereof) or better by Moody's and (ii) with dividends that reset at
least once every 365 days and (g) Investments, classified in accordance
with GAAP as current assets, in money market investment programs
registered under the Investment Company Act of 1940, as amended, which
are administered by reputable financial institutions having capital of
at least $100,000,000 and the portfolios of which are limited to
Investments of the character described in the foregoing subdivisions
(a) through (f).
"Change of Control" means the occurrence of any of the
following events: (i) any Person or two or more Persons acting in
concert shall have acquired beneficial ownership, directly or
indirectly, of, or shall have acquired by contract or otherwise, or
shall have entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of or control
over, Voting Stock of the Borrower (or other securities convertible
into such Voting Stock) representing 35% or more of the combined voting
power of all Voting Stock of the Borrower, or (ii) during any period of
up to 24 consecutive months, commencing after the Closing Date,
individuals who at the beginning of such 24 month period were directors
of the Borrower (together with any new director whose election by the
Borrower's Board of Directors or whose nomination for election by the
Borrower's shareholders was approved by a vote of at least a majority
of the directors then still in office who either were 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 directors of the Borrower then in office. As used
herein, "beneficial ownership" shall have the meaning provided in Rule
13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
"Closing Date" means the date hereof.
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<PAGE> 12
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute thereto, as interpreted by the rules and
regulations issued thereunder, in each case as in effect from time to
time. References to sections of the Code shall be construed also to
refer to any successor sections.
"Commitment" means the Revolving Commitment, the LOC
Commitment, the Swingline Commitment and the Term Loan Commitment.
"Commitment Fee" shall have the meaning given such term in
Section 3.5(a).
"Commitment Percentage" means the Revolving Commitment
Percentage or the Term Loan Commitment Percentage, as appropriate.
"Commitment Period" means the period from and including the
Closing Date to but not including the earlier of (i) the Termination
Date, or (ii) the date on which the Commitments terminate in accordance
with the provisions of this Credit Agreement.
"Consolidated EBITDA" means for any period for the
Consolidated Group, the sum of Consolidated Net Income plus
Consolidated Interest Expense plus all provisions for any Federal,
state or other domestic and foreign income taxes plus depreciation and
amortization plus (minus) one-time non-recurring and/or restructuring
charges deducted (added) in calculating Consolidated Net Income, in
each case on a consolidated basis determined in accordance with GAAP
applied on a consistent basis, but excluding for purposes hereof
extraordinary gains and losses and related tax effects thereon (to the
extent such items are not taken into consideration for purposes of
determining Consolidated Net Income). Except as otherwise expressly
provided, the applicable period shall be for the four consecutive
fiscal quarters ending as of the date of determination.
"Consolidated Fixed Charge Coverage Ratio" means for any
period, the ratio of Consolidated EBITDA to Consolidated Fixed Charges.
"Consolidated Fixed Charges" means for any period for the
Consolidated Group, the sum of the cash portion of Consolidated
Interest Expense plus scheduled maturities of Funded Debt paid (and
sinking fund payments and the like relating thereto) plus Restricted
Payments, in each case on a consolidated basis determined in accordance
with GAAP applied on an consistent basis. Except as otherwise expressly
provided, the applicable period shall be for the four consecutive
fiscal quarters ending as of the date of determination.
"Consolidated Funded Debt" means Funded Debt of the
Consolidated Group determined on a consolidated basis in accordance
with GAAP applied on a consistent basis.
"Consolidated Group" means the Borrower and its consolidated
subsidiaries, as determined in accordance with GAAP.
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<PAGE> 13
"Consolidated Interest Expense" means for any period for the
Consolidated Group, all interest expense, including the amortization of
debt discount and premium, the interest component under Capital Leases
and the implied interest component under Securitization Transactions,
in each case on a consolidated basis determined in accordance with GAAP
applied on a consolidated basis. Except as expressly provided
otherwise, the applicable period shall be for the four consecutive
quarters ending as of the date of determination.
"Consolidated Leverage Ratio" means, as of the last day of any
fiscal quarter, the ratio of Consolidated Funded Debt on such day to
Consolidated EBITDA for the period of four consecutive fiscal quarters
ending as of such day.
"Consolidated Net Income" means for any period for the
Consolidated Group, net income on a consolidated basis determined in
accordance with GAAP applied on a consistent basis, but excluding for
purposes of determining the Consolidated Leverage Ratio and
Consolidated Fixed Charge Coverage Ratio, any extraordinary gains or
losses and related tax effects thereon. Except as expressly provided
otherwise, the applicable period shall be for the four consecutive
quarters ending as of the date of determination.
"Consolidated Net Worth" means, as for any date for the
Consolidated Group, shareholders' equity or net worth as determined in
accordance with GAAP.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any material
agreement, instrument or undertaking to which such Person is a party or
by which it or any of its property is bound.
"Credit Documents" means a collective reference to this Credit
Agreement, the Notes, the LOC Documents, Security Agreement, Pledge
Agreement, Mortgages, each Joinder Agreement, the Administrative
Agent's Fee Letter, and all other related agreements and documents
issued or delivered hereunder or thereunder or pursuant hereto or
thereto.
"Credit Party" means any of the Borrower and the Guarantors.
"Debt Transaction" means, with respect to any member of the
Consolidated Group, any sale, issuance or placement of Funded Debt,
whether or not evidenced by promissory note or other written evidence
of indebtedness, other than under the Credit Documents.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that, at
such time, (i) has failed to make an Extension of Credit required
pursuant to the terms of this Credit Agreement, (ii) has failed to pay
to the Administrative Agent or any Lender an amount
8
<PAGE> 14
owed by such Lender pursuant to the terms of the Credit Agreement or
any other of the Credit Documents, or (iii) has been deemed insolvent
or has become subject to a bankruptcy or insolvency proceeding or to a
receiver, trustee or similar proceeding.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"Domestic Credit Party" means any Credit Party which is
incorporated or organized under the laws of any State of the United
States or the District of Columbia.
"Domestic Subsidiary" means any Subsidiary which is
incorporated or organized under the laws of any State of the United
States or the District of Columbia.
"Environmental Laws" means any and all lawful and applicable
Federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions,
grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals,
or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes.
"Equity Transaction" means, with respect to any member of the
Consolidated Group, any issuance of shares of its capital stock or
other equity interest, other than an issuance (i) to a member of the
Consolidated Group, (ii) in connection with a conversion of debt
securities to equity, (iii) in connection with exercise by a present or
former employee, officer or director under a stock incentive plan,
stock option plan or other equity-based compensation plan or
arrangement or (iv) in connection with the Spin-Off Transactions.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by
the rules and regulations thereunder, all as the same may be in effect
from time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
"ERISA Affiliate" means an entity which is under common
control with any Credit Party within the meaning of Section 4001(a)(14)
of ERISA, or is a member of a group which includes the Borrower and
which is treated as a single employer under Sections 414(b) or (c) of
the Code.
"ERISA Event" means (i) with respect to any Plan, the
occurrence of a Reportable Event or the substantial cessation of
operations (within the meaning of Section 4062(e) of ERISA); (ii) the
withdrawal by the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate from a Multiple Employer Plan during a plan year in which it
was a substantial employer (as such term is defined in Section 4001 of
ERISA), or the termination
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<PAGE> 15
of a Multiple Employer Plan; (iii) the distribution of a notice of
intent to terminate or the actual termination of a Plan pursuant to
Section 4041(a)(2) or 4041A of ERISA; (iv) the institution of
proceedings to terminate or the actual termination of a Plan by the
PBGC under Section 4042 of ERISA; (v) any event or condition which
could reasonably be expected to constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; (vi) the complete or partial withdrawal of the
Borrower, any Subsidiary of the Borrower or any ERISA Affiliate from a
Multiemployer Plan; (vii) the conditions for imposition of a lien under
Section 302(f) of ERISA exist with respect to any Plan; or (vii) the
adoption of an amendment to any Plan requiring the provision of
security to such Plan pursuant to Section 307 of ERISA.
"Eurodollar Loan" means any Loan bearing interest at a rate
determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
determined pursuant to the following formula:
Eurodollar Rate = Interbank Offered Rate
---------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that
percentage (expressed as a decimal) which is in effect from time to
time under Regulation D of the Board of Governors of the Federal
Reserve System (or any successor), as such regulation may be amended
from time to time or any successor regulation, as the maximum reserve
requirement (including, without limitation, any basic, supplemental,
emergency, special, or marginal reserves) applicable with respect to
Eurocurrency liabilities as that term is defined in Regulation D (or
against any other category of liabilities that includes deposits by
reference to which the interest rate of Eurodollar Loans is
determined), whether or not Lender has any Eurocurrency liabilities
subject to such reserve requirement at that time. Eurodollar Loans
shall be deemed to constitute Eurocurrency liabilities and as such
shall be deemed subject to reserve requirements without benefits of
credits for proration, exceptions or offsets that may be available from
time to time to a Lender. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage. As of the date hereof, the Eurodollar
Reserve Percentage is zero.
"Event of Default" means such term as defined in Section 9.1.
"Excluded Asset Disposition" means the sale and leaseback of
certain real property owned by the Borrower as set forth on Schedule
8.4(b).
"Existing Letters of Credit" means those Letters of Credit
outstanding on the Closing Date and identified on Schedule 2.2(b)-1.
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<PAGE> 16
"Extension of Credit" means, as to any Lender, the making of,
or participation in, a Loan by such Lender or the issuance or extension
of, or participation in, a Letter of Credit.
"Fees" means all fees payable pursuant to Section 3.5.
"Federal Funds Rate" means, for any day, the rate of interest
per annum (rounded upwards, if necessary, to the nearest whole multiple
of 1/100 of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding
such day, provided that (A) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Business Day and (B) if no such rate is so
published on such next preceding Business Day, the Federal Funds Rate
for such day shall be the average rate quoted to the Administrative
Agent on such day on such transactions as determined by the
Administrative Agent.
"Foreign Credit Party" means a Credit Party which is not a
Domestic Credit Party.
"Foreign Subsidiary" means a Subsidiary which is not a
Domestic Subsidiary.
"Funded Debt" means, with respect to any Person, without
duplication, (i) all Indebtedness of such Person for borrowed money,
(ii) all obligations of such Person evidenced by bonds, debentures,
notes or similar instruments, or upon which interest payments are
customarily made, (iii) all purchase money Indebtedness (including for
purposes hereof, indebtedness and obligations described in clauses
(iii) and (iv) of the definition of "Indebtedness") of such Person,
including without limitation the principal portion of all obligations
of such Person under Capital Leases, (iv) all Support Obligations of
such Person with respect to Funded Indebtedness of another Person, (v)
the maximum available amount of all standby letters of credit or
acceptances issued or created for the account of such Person, (vi) all
Funded Debt of another Person secured by a Lien on any Property of such
Person, whether or not such Funded Indebtedness has been assumed,
provided that for purposes hereof the amount of such Funded Debt shall
be limited to the greater of (A) the amount of such Funded Debt as to
which there is recourse to such Person and (B) the fair market value of
the property which is subject to the Lien (but not greater than the
amount of Funded Debt secured thereby), (vii) the outstanding
Attributed Principal Amount under any Securitization Transaction, and
(viii) the principal balance outstanding under any synthetic lease, tax
retention operating lease, off-balance sheet loan or similar
off-balance sheet financing product to which such Person is a party,
where such transaction is considered borrowed money indebtedness for
tax purposes but is classified as an operating lease in accordance with
GAAP (but specifically excluding, for purposes of this subsection
(viii), leases which are treated as operating leases both for purposes
of GAAP and for tax purposes). The Funded Debt of any Person shall
include the Funded Debt of any partnership or joint venture in which
such Person is a general partner or joint venturer,
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<PAGE> 17
but only to the extent to which there is recourse to such Person for
the payment of such Funded Debt.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to the terms of
Section 1.3 hereof.
"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Guarantor" means each of those other Persons identified as a
"Guarantor" on the signature pages hereto, and each other Person which
may hereafter become a Guarantor by execution of a Joinder Agreement,
together with their successors and permitted assigns.
"Guaranteed Obligations" means, as to each Guarantor, without
duplication, (i) all obligations of the Borrower (including interest
accruing after a Bankruptcy Event, regardless of whether such interest
is allowed as a claim under the Bankruptcy Code) to the Lenders and the
Administrative Agent, whenever arising, under this Credit Agreement,
the Notes or the Credit Documents, and (ii) all liabilities and
obligations, whenever arising, owing from the Borrower to any Lender,
or any Affiliate of a Lender, arising under any Hedging Agreement
relating to Obligations hereunder.
"Hedging Agreements" means any interest rate protection
agreement or foreign currency exchange agreement between the Borrower
and any Lender, or any Affiliate of a Lender.
"Indebtedness" of any Person means, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations
of such Person evidenced by bonds, debentures, notes or similar
instruments, or upon which interest payments are customarily made,
(iii) all obligations of such Person under conditional sale or other
title retention agreements relating to Property purchased by such
Person (other than customary reservations or retentions of title under
agreements with suppliers entered into in the ordinary course of
business), (iv) all obligations of such Person issued or assumed as the
deferred purchase price of Property or services purchased by such
Person (other than trade debt incurred in the ordinary course of
business and due within twelve months of the incurrence thereof) which
would appear as liabilities on a balance sheet of such Person, (v) all
obligations of such Person under take-or-pay or similar arrangements or
under commodities agreements, (vi) all Indebtedness of others secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on, or payable out
of the proceeds of production from, Property owned or acquired by such
Person, whether or not the obligations secured thereby have been
assumed, provided that for purposes hereof the amount of such
Indebtedness shall be limited to the greater of (A) the amount of such
Indebtedness as to which there is recourse to such Person and (B) the
fair market value of the property which is subject to the Lien (but not
greater than the amount of Indebtedness secured thereby), (vii) all
Support Obligations of such Person, (viii) the principal portion of all
obligations of such Person under Capital Leases, (ix) all
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<PAGE> 18
obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements, commodity purchase or
option agreements or other interest or exchange rate or commodity price
hedging agreements (including, but not limited to, the Hedging
Agreements), (x) the maximum amount of all standby letters of credit
issued or bankers' acceptances facilities created for the account of
such Person and, without duplication, all drafts drawn thereunder (to
the extent unreimbursed), (xi) all preferred stock issued by such
Person and required by the terms thereof to be redeemed, or for which
mandatory sinking fund payments are due, by a fixed date, (xii) the
outstanding Attributed Principal Amount under any Securitization
Transaction and (xiii) the principal balance outstanding under any
synthetic lease, tax retention operating lease, off-balance sheet loan
or similar off-balance sheet financing product to which such Person is
a party, where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an operating lease
in accordance with GAAP (but specifically excluding, for purposes of
this subsection (xiii), leases which are treated as operating leases
both for purposes of GAAP and for tax purposes). 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,
but only to the extent to which there is recourse to such Person for
payment of such Indebtedness.
"Interbank Offered Rate" means, for the Interest Period for
each Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
(rounded upwards, if necessary, to the nearest whole multiple of 1/100
of 1%) equal to the rate of interest, determined by the Administrative
Agent on the basis of the offered rates for deposits in dollars for a
period of time corresponding to such Interest Period (and commencing on
the first day of such Interest Period), appearing on Telerate Page 3750
(or, if, for any reason, Telerate Page 3750 is not available, the
Reuters Screen LIBO Page) as of approximately 11:00 A.M. (London time)
two (2) Business Days before the first day of such Interest Period. As
used herein, "Telerate Page 3750" means the display designated as page
3750 by Dow Jones Markets, Inc. (or such other page as may replace such
page on that service for the purpose of displaying the British Bankers
Association London interbank offered rates) and "Reuters Screen LIBO
Page" means the display designated as page "LIBO" on the Reuters
Monitor Money Rates Service (or such other page as may replace the LIBO
page on that service for the purpose of displaying London interbank
offered rates of major banks).
"Interest Payment Date" means (i) as to any Base Rate Loan,
the last day of each March, June, September and December, the date of
repayment of principal of such Loan and the Termination Date and (ii)
as to any Eurodollar Loan and Swingline Loan, the last day of each
Interest Period for such Loan, the date of repayment of principal of
such Loan and on the Termination Date, and in addition where the
applicable Interest Period is more than three months, then also on the
date three months from the beginning of the Interest Period, and each
three months thereafter. If an Interest Payment Date falls on a date
which is not a Business Day, such Interest Payment Date shall be deemed
to be the next succeeding Business Day.
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"Interest Period" means (i) as to any Eurodollar Loan, a
period of one, two, three or six month's duration, as the Borrower may
elect, commencing in each case, on the date of the borrowing (including
conversions, extensions and renewals), and (ii) as to any Swingline
Loan, a period of such duration, not to exceed 30 days, as the Borrower
may request and the Swingline Lender may agree in accordance with the
provisions of Section 2.3(b)(i), commencing in each case, on the date
of borrowing; provided, however, (A) if any Interest Period would end
on a day which is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day (except that in the case
of Eurodollar Loans where the next succeeding Business Day falls in the
next succeeding calendar month, then on the next preceding Business
Day), (B) in the case of Loans other than those comprising the Term
Loan, no Interest Period shall extend beyond the Termination Date, and,
in the case of Loans comprising the Term Loan, no Interest Period shall
extend beyond any principal amortization payment date unless, and to
the extent that, the portion of the Term Loan comprised of Eurodollar
Loans expiring prior to the applicable principal amortization payment
date plus the portion of the Term Loan comprised of Base Rate Loans
equals or exceeds the principal amortization payment then due; and (C)
in the case of Eurodollar Loans, where an Interest Period begins on a
day for which there is no numerically corresponding day in the calendar
month in which the Interest Period is to end, such Interest Period
shall end on the last day of such calendar month.
"Invested Amount" shall have the meaning given such term in
the definition of Attributed Principal Amount.
"Investment", in any Person, means any loan or advance to such
Person, any purchase or other acquisition of any capital stock,
warrants, rights, options, obligations or other securities of, or
equity interest in, such Person, any capital contribution to such
Person or any other investment in such Person, including, without
limitation, any Support Obligation incurred for the benefit of such
Person.
"IPO" means the completion of the initial public offering of
common stock, par value $.001 per share, of the Borrower.
"Issuing Lender" means, initially, NationsBank and, hereafter,
any Revolving Lender which the Borrower may request and such Revolving
Lender may agree.
"Issuing Lender Fees" shall have the meaning assigned to such
term in Section 3.5(b)(ii).
"Joinder Agreement" means a Joinder Agreement substantially in
the form of Schedule 7.11 hereto, executed and delivered by an
Additional Credit Party in accordance with the provisions of Section
7.11.
"Knowledge" of any Person means the actual knowledge of the
Responsible Officers of such Person and the knowledge they would
acquire through the exercise of reasonable diligence in the ordinary
course of duties.
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"Lenders" means each of the Persons identified as a "Lender"
on the signature pages hereto, and their successors and assigns.
"Letter of Credit" means the Existing Letters of Credit and
any letter of credit issued by the Issuing Lender for the account of
the Borrower in accordance with the terms of Section 2.2.
"Letter of Credit Fee" shall have the meaning given such term
in Section 3.5(b)(i).
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other
title retention agreement, any financing or similar statement or notice
filed under the Uniform Commercial Code as adopted and in effect in the
relevant jurisdiction or other similar recording or notice statute, and
any lease in the nature thereof).
"Loan" or "Loans" means the Revolving Loans, Swingline Loans
and/or the Term Loan.
"LOC Commitment" means the commitment of the Issuing Lender to
issue, and to honor payment obligations under, Letters of Credit
hereunder and with respect to each Revolving Lender, the commitment of
each Revolving Lender to purchase participation interests in the
Letters of Credit up to such Revolving Lender's LOC Committed Amount as
specified in Schedule 2.1(a), as such amount may be reduced from time
to time in accordance with the provisions hereof.
"LOC Committed Amount" means, collectively, the aggregate
amount of all of the LOC Commitments of the Revolving Lenders to issue
and participate in Letters of Credit as referenced in Section 2.2(a)
and, individually, the amount of each Revolving Lender's LOC Commitment
as specified in Schedule 2.1(a).
"LOC Documents" means, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or
providing for (i) the rights and obligations of the parties concerned
or at risk or (ii) any collateral security for such obligations.
"LOC Obligations" means, at any time, the sum of (i) the
maximum amount which is, or at any time thereafter may become,
available to be drawn under Letters of Credit then outstanding,
assuming compliance with all requirements for drawings referred to in
such Letters of Credit plus (ii) the aggregate amount of all drawings
under Letters of Credit honored by the Issuing Lender but not
theretofore reimbursed.
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"Material Adverse Effect" means a material adverse effect on
(i) the condition (financial or otherwise), operations, business,
assets, liabilities or prospects of the Consolidated Group taken as a
whole, (ii) the ability of the Credit Parties taken as a whole to
perform any material obligation under the Credit Documents to which it
is a party or (iii) the rights and remedies of the Lenders under the
Credit Documents.
"Materials of Environmental Concern" means any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Laws,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such company in the business
of rating securities.
"Mortgages" means those mortgages, deeds of trust, security
deeds or like instruments given to the Administrative Agent for the
benefit of the Lenders to secure the Obligations hereunder, as amended
and modified.
"Mortgaged Property" means the property which is the subject
of a Mortgage as referenced therein.
"Multiemployer Plan" means a Plan which is a multiemployer
plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan of which the Borrower,
any Subsidiary of the Borrower or any ERISA Affiliate and at least one
employer other than the Borrower, any Subsidiary of the Borrower or any
ERISA Affiliate are contributing sponsors.
"NationsBank" means NationsBank, N.A. and its successors.
"Net Proceeds" means gross cash proceeds (including any cash
received by way of deferred payment pursuant to a promissory note,
receivable or otherwise, but only as and when received) received in
connection with an Asset Disposition, Equity Transaction, Debt
Transaction or Securitization Transaction (relating, in the case of a
Securitization Transaction, to the Attributed Principal Amount
thereof), net of (i) reasonable transaction costs, including in the
case of an Equity Transaction or a Debt Transaction, underwriting
discounts and commissions and in the case of an Asset Disposition
occurring in connection with a claim under an insurance policy, costs
incurred in connection with adjustment and settlement of the claim,
(ii) estimated taxes payable in connection therewith, and (iii) in the
case of an Asset Disposition, Debt Transaction or Securitization
Transaction, any amounts payable in respect of Funded Debt, including
without limitation principal, interest, premiums and penalties, which
is secured by, or otherwise related to, any property or asset which is
the subject thereof to
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<PAGE> 22
the extent that such Funded Debt and any payments in respect thereof
are paid with a portion of the proceeds therefrom.
"Non-Excluded Taxes" means such term as is defined in Section
3.10.
"Note" or "Notes" means any Revolving Note or any Term Note.
"Notice of Borrowing" means a written notice of borrowing in
substantially the form of Schedule 2.1(b)(i), as required by Section
2.1(b)(i).
"Notice of Extension/Conversion" means the written notice of
extension or conversion in substantially the form of Schedule 3.2, as
required by Section 3.2.
"Obligations" means, collectively, the Revolving Loans,
Swingline Loans, the LOC Obligations and the Term Loan.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed)
which is not a Capital Lease other than any such lease in which that
Person is the lessor.
"Participation Interest" means the purchase by a Lender of a
participation in LOC Obligations as provided in Section 2.2(c), in
Swingline Loans as provided in Section 2.3(b)(iii) and in Loans as
provided in Section 3.13.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any
successor thereof.
"Permitted Investments" means Investments which are either (i)
cash and Cash Equivalents; (ii) accounts receivable created, acquired
or made in the ordinary course of business and payable or dischargeable
in accordance with customary trade terms; (iii) Investments consisting
of stock, obligations, securities or other property received in
settlement of accounts receivable (created in the ordinary course of
business) from bankrupt obligors; (iv) Investments existing as of the
Closing Date and set forth in Schedule 8.5, (v) Support Obligations
permitted by Section 8.1; (vi) acquisitions permitted by Section
8.4(c)(ii); (vii) transactions permitted by Section 8.6, (viii) loans
to employees, directors or officers in connection with the award of
convertible bonds or stock under a stock incentive plan, stock option
plan or other equity-based compensation plan or arrangement in the
aggregate not to exceed $5,000,000 (calculated on the exercise price
for any such shares) in the aggregate at any time outstanding; (ix)
other advances or loans to employees, directors, officers or agents not
to exceed $2,000,000 in the aggregate at any time outstanding; (x)
advances or loans to customers or suppliers that do not exceed
$5,000,000 in the aggregate at any one time outstanding, (xi)
Investments by a member of the Consolidated Group or an Affiliate of a
member of the Consolidated Group in connection with a Permitted
Securitization Transaction, (xii) Investments by members of the
Consolidated Group in
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their Subsidiaries and Affiliates existing on the Closing Date, (xiii)
Investments by one Credit Party in and to another Credit Party which
is, at the time such Investment is made, not subject to a Bankruptcy
Event, and (xiv) other loans, advances and investments of a nature not
contemplated in the foregoing subsections in an amount not to exceed
$5,000,000 in the aggregate at any time outstanding.
"Permitted Liens" means:
(i) Liens in favor of the Administrative
Agent on behalf of the Lenders;
(ii) Liens in favor of a Lender or an
Affiliate of a Lender pursuant to a Hedging Agreement
permitted hereunder, but only (A) to the extent such Liens
secure obligations under such agreements permitted under
Section 8.1, (B) to the extent such Liens are on the same
collateral as to which the Lenders also have a Lien and (C) if
such provider and the Lender shall share pari passu in the
collateral subject to such Liens;
(iii) Liens (other than Liens created or
imposed under ERISA) for taxes, assessments or governmental
charges or levies not yet due or Liens for taxes being
contested in good faith by appropriate proceedings for which
adequate reserves determined in accordance with GAAP have been
established (and as to which the Property subject to any such
Lien is not yet subject to foreclosure, sale or loss on
account thereof);
(iv) Liens of landlords or of mortgagees of
landlords arising by operation of law or pursuant to the terms
of real property laws and Liens of carriers, warehousemen,
mechanics, materialmen and suppliers and other Liens imposed
by law or pursuant to customary reservations or retentions of
title arising in the ordinary course of business, provided
that such Liens secure only amounts not yet due and payable
or, if due and payable, are unfiled and no other action has
been taken to enforce the same, or are being contested in good
faith by appropriate proceedings for which adequate reserves
determined in accordance with GAAP have been established (and
as to which the Property subject to any such Lien is not yet
subject to foreclosure, sale or loss on account thereof);
(v) Liens (other than Liens created or
imposed under ERISA) incurred or deposits made by the Borrower
and its Subsidiaries in the ordinary course of business in
connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the
performance of tenders, statutory obligations, bids, leases,
government contracts, performance and return-of-money bonds
and other similar obligations (exclusive of obligations for
the payment of borrowed money);
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<PAGE> 24
(vi) Liens in connection with attachments or
judgments (including judgment or appeal bonds) provided that
the judgments secured shall, within 30 days after the entry
thereof, have been bonded, discharged or execution thereof
stayed pending appeal, or shall have been discharged within 30
days after the expiration of any such stay;
(vii) easements, rights-of-way, restrictions
(including zoning restrictions), minor defects or
irregularities in title and other similar charges or
encumbrances not, in any material respect, impairing the use
of the encumbered Property for its intended purposes;
(viii) Liens securing purchase money and
sale/leaseback Indebtedness (including Capital Leases) to the
extent permitted under Section 8.1(c), provided that any such
Lien attaches only to the Property financed or leased and such
Lien attaches thereto concurrently with or within 90 days
after the acquisition thereof in connection with the purchase
money transactions and within 30 days after the closing of any
sale/leaseback transaction;
(ix) leases or subleases granted to others
not interfering in any material respect with the business of
any member of the Consolidated Group;
(x) any interest of title of a lessor under,
and Liens arising from UCC financing statements (or equivalent
filings, registrations or agreements in foreign jurisdictions)
relating to, leases permitted by this Credit Agreement;
(xi) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods;
(xii) Liens created or deemed to exist in
connection with a Permitted Securitization Transaction
(including any related filings of any financing statements),
but only to the extent that any such Lien relates to the
applicable receivables and related property actually sold,
contributed or otherwise conveyed pursuant to such
transaction;
(xiii) Liens deemed to exist in connection
with Investments in repurchase agreements permitted under
Section 8.5;
(xiv) normal and customary rights of setoff
upon deposits of cash in favor of banks or other depository
institutions;
(xv) Liens existing as of the Closing Date
and set forth on Schedule 6.8; provided that (a) no such Lien
shall at any time be extended to or cover any Property other
than the Property subject thereto on the Closing Date or
replacement
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<PAGE> 25
property and (b) the principal amount of the Indebtedness
secured by such Liens shall not be increased;
(xvi) mortgage liens on real property of a
Person that becomes a Subsidiary or is merged into the
Borrower or a Subsidiary after the Closing Date securing
Indebtedness permitted by subsection 8.1(h); provided that (A)
such mortgage Liens existed at the time such Person became a
Subsidiary or was merged into the Borrower or a Subsidiary and
were not created in anticipation thereof, (B) no such mortgage
Lien is spread to cover any other property or asses after the
time such Person becomes a Subsidiary or is merged into the
Borrower or a Subsidiary and (C) such mortgage Liens are
released or otherwise satisfied by the end of the Acquired
Mortgaged Property Disposition Period provided in Section
7.15; and
(xvii) additional Liens not otherwise
permitted by the preceding clauses that secure obligations not
to exceed $5,000,000 in the aggregate at any time outstanding.
"Permitted Securitization Transaction" means any
Securitization Transaction; provided that (i) the Administrative Agent
and the Required Lenders shall be reasonably satisfied with the
structure and documentation for any such transaction and that the terms
of such transaction entered into after the Closing Date, including the
discount applicable to the Receivables which are subject of such
financing and any termination events, shall be (in the good faith
understanding of the Administrative Agent and the Required Lenders)
consistent with those prevailing in the market at the time of
commitment thereto for similar transactions involving a receivables
originator/servicer of similar credit quality and a receivables pool or
other similar characteristics and (ii) the documentation for such
transaction shall not be amended or modified in a way which is
materially detrimental to the Lenders without the prior written
approval of the Administrative Agent and the Required Lenders.
"Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or
other enterprise (whether or not incorporated) or any Governmental
Authority.
"Plan" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which the
Borrower, any Subsidiary of the Borrower or any ERISA Affiliate is (or,
if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" within the meaning of Section 3(5)
of ERISA.
"Pledge Agreement" means the Amended and Restated Pledge
Agreement dated as of the Closing Date given by the Borrower and the
other pledgors identified therein to NationsBank, N.A., as
Administrative Agent, to secure the obligations hereunder, as amended
and modified.
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"Prime Rate" means the rate of interest per annum publicly
announced from time to time by NationsBank as its prime rate in effect
at its principal office in Charlotte, North Carolina, with each change
in the Prime Rate being effective on the date such change is publicly
announced as effective (it being understood and agreed that the Prime
Rate is a reference rate used by NationsBank in determining interest
rates on certain loans and is not intended to be the lowest rate of
interest charged on any extension of credit by NationsBank to any
debtor).
"Pro Forma Basis" means, with respect to any transaction, that
such transaction shall be deemed to have occurred as of the first day
of the four fiscal-quarter period ending as of the most recent fiscal
quarter end preceding the date of such transaction with respect to
which the Administrative Agent and the Lenders have received the
officer's certificate in accordance with the provisions of Section
7.2(b). As used herein, "transaction" means (i) any corporate merger or
consolidation as referred to in Section 8.4(a), (ii) any sale or other
disposition of assets as referred to in Section 8.4(b), (iii) any
acquisition of capital stock or securities or any purchase, lease or
other acquisition of property as referred to in Section 8.4(c) or (iv)
the making of any Restricted Payment as referred to in Section 8.10.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Receivables" means any right of payment from or on behalf of
any obligor, whether constituting an account, chattel paper,
instrument, general intangible or otherwise, arising from the sale or
financing by a member of the Consolidated Group of merchandise or
services, and monies due thereunder, security in the merchandise and
services financed thereby, records related thereto, and the right to
payment of any interest or finance charges and other obligations with
respect thereto, proceeds from claims on insurance policies related
thereto, any other proceeds related thereto, and any other related
rights.
"Receivables Financier" means, in connection with a
Securitization Transaction, the Person which provides financing for
such transaction whether by purchase, loan or otherwise in respect of
Receivables.
"Register" shall have the meaning given such term in Section
11.3(c).
"Regulation T, U, or X" means Regulation T, U or X,
respectively, of the Board of Governors of the Federal Reserve System
as from time to time in effect and any successor to all or a portion
thereof.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing into the environment (including the abandonment or
discarding of barrels, containers and other closed receptacles
containing any Materials of Environmental Concern).
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"Reportable Event" means any of the events set forth in
Section 4043(c) of ERISA, other than those events as to which the
notice requirement has been waived by regulation.
"Required Lenders" means, at any time, Lenders having more
than fifty percent (50%) of the Commitments, or if the Commitments have
been terminated, Lenders having more than fifty percent (50%) of the
aggregate principal amount of the Obligations outstanding (taking into
account in each case Participation Interests or obligation to
participate therein); provided that the Commitments of, and outstanding
principal amount of Obligations (taking into account Participation
Interests therein) owing to, a Defaulting Lender shall be excluded for
purposes hereof in making a determination of Required Lenders.
"Requirement of Law" means, as to any Person, the certificate
of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its material property is subject.
"Responsible Officer" means the President, Chief Executive
Officer, the Chief Financial Officer and the Controller.
"Restricted Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of stock now or hereafter outstanding, except (A) a dividend payable
solely in shares of that class to the holders of that class and (B)
dividends and other distributions payable to a Credit Party, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any
class of stock now or hereafter outstanding and (iii) any payment made
to retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire shares of any class of stock now or
hereafter outstanding.
"Revolving Commitment" means, with respect to each Revolving
Lender, the commitment of such Revolving Lender to make Revolving Loans
in an aggregate principal amount at any time outstanding of up to such
Revolving Lender's Revolving Committed Amount.
"Revolving Commitment Percentage" means, for each Revolving
Lender, a fraction (expressed as a decimal) the numerator of which is
the Revolving Committed Amount of such Revolving Lender at such time
and the denominator of which is the Aggregate Revolving Committed
Amount at such time. The initial Revolving Commitment Percentages are
set out on Schedule 2.1(a).
"Revolving Committed Amount" means, collectively, the
aggregate amount of all of the Revolving Commitments and, individually,
the amount of each Revolving
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Lender's Revolving Commitment as specified in Schedule 2.1(a), as such
amounts may be reduced from time to time in accordance with the
provisions hereof.
"Revolving Lenders" means Lenders holding Revolving
Commitments, as identified on Schedule 2.1 and their successors and
assigns.
"Revolving Loans" shall have the meaning assigned to such term
in Section 2.1(a).
"Revolving Note" or "Revolving Notes" means the promissory
notes of the Borrower in favor of each of the Revolving Lenders
evidencing the Revolving Loans and Swingline Loans in substantially the
form attached as Schedule 2.1(e), individually or collectively, as
appropriate, as such promissory notes may be amended, modified,
supplemented, extended, renewed or replaced from time to time.
"Revolving Obligations" means, collectively, the Revolving
Loans, Swingline Loans and LOC Obligations.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of such
division in the business of rating securities.
"Securitization Transaction" means any financing transaction
or series of financing transactions that have been or may be entered
into by a member of the Consolidated Group pursuant to which such
member of the Consolidated Group may sell, convey or otherwise transfer
to (i) a Subsidiary or affiliate (a "Securitization Subsidiary"), or
(ii) any other Person, or may grant a security interest in, any
Receivables or interests therein secured by merchandise or services
financed thereby (whether such Receivables are then existing or arising
in the future) of such member of the Consolidated Group, and any assets
related thereto, including without limitation, all security interests
in merchandise or services financed thereby, the proceeds of such
Receivables, and other assets which are customarily sold or in respect
of which security interests are customarily granted in connection with
securitization transactions involving such assets.
"Security Agreement" means the Amended and Restated Security
Agreement dated as of the Closing Date given by the Borrower and the
other grantors identified therein to NationsBank, N.A., as
Administrative Agent, to secure the obligations hereunder, as amended
and modified.
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple
Employer Plan.
"Spin-Off Transactions" shall have the meaning given to such
term in Section 5.1(b).
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<PAGE> 29
"Subordinated Debt" means any Indebtedness of a member of the
Consolidated Group which by its terms is expressly subordinated in
right of payment to the prior payment of the obligations under the
Credit Agreement and the other Credit Documents on terms and conditions
satisfactory to the Required Lenders.
"Subsidiary" means, as to any Person, (a) any corporation more
than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time, any class
or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by
such Person directly or indirectly through Subsidiaries, and (b) any
partnership, association, joint venture or other entity in which such
Person directly or indirectly through Subsidiaries has more than 50% of
the voting interests at any time. Unless otherwise identified,
"Subsidiary" or "Subsidiaries" shall mean Subsidiaries of the Borrower.
"Support Obligations" means, with respect to any Person,
without duplication, any obligations of such Person (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) guaranteeing or intended to
guarantee any Indebtedness of any other Person in any manner, whether
direct or indirect, and including without limitation any obligation,
whether or not contingent, (i) to purchase any such Indebtedness or any
Property constituting security therefor, (ii) to advance or provide
funds or other support for the payment or purchase of any such
Indebtedness or to maintain working capital, solvency or other balance
sheet condition of such other Person (including without limitation keep
well agreements, maintenance agreements, comfort letters or similar
agreements or arrangements) for the benefit of any holder of
Indebtedness of such other Person, (iii) to lease or purchase Property,
securities or services primarily for the purpose of assuring the holder
of such Indebtedness, or (iv) to otherwise assure or hold harmless the
holder of such Indebtedness against loss in respect thereof. Subject to
any limits set forth in the agreements evidencing such Support
Obligations, the amount of any Support Obligation shall be deemed to be
an amount equal to the outstanding principal amount (or maximum
principal amount, if larger) of the Indebtedness in respect of which
such Support Obligation is made.
"Swingline Commitment" means the commitment of the Swingline
Lender to make Swingline Loans in an aggregate principal amount at any
time outstanding up to the Swingline Committed Amount and the
commitment of the Revolving Lenders to purchase participation interests
in the Swingline Loans up to their respective Revolving Commitment
Percentage as provided in Section 2.3(b)(iii), as such amounts may be
reduced from time to time in accordance with the provisions hereof.
"Swingline Committed Amount" means the amount of the Swingline
Lender's Commitment as specified in Section 2.3(a).
"Swingline Lender" means NationsBank and its successors.
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<PAGE> 30
"Swingline Loan" means a swingline revolving loan made by the
Swingline Lender pursuant to the provisions of Section 2.3.
"Term Lenders" means Lenders holding Term Loan Commitments, as
identified on Schedule 2.1 and their successors and assigns.
"Term Loan" shall have the meaning assigned to such term in
Section 2.4(a).
"Term Loan Commitment" means, with respect to each Term
Lender, the commitment of such Term Lender to make its portion of the
Term Loan as specified in Schedule 2.1 (and for purposes of making
determinations of Required Lenders hereunder after the Closing Date and
for purposes of calculations referred to in Section 11.6(b), the
principal amount outstanding on the Term Loan).
"Term Loan Commitment Percentage" means, for each Term Lender,
a fraction (expressed as a percentage) the numerator of which is the
amount of the Term Loan Commitment (and after the Closing Date, the
outstanding principal amount of such Term Lender's Term Loan) of such
Term Lender at such time and the denominator of which is the aggregate
amount of the Term Loan Commitment (and after the Closing Date, the
aggregate principal amount of the Term Loan) at such time. The initial
Term Loan Commitment Percentages are set out on Schedule 2.1.
"Term Loan Committed Amount" means, collectively, the
aggregate amount of all of the Term Loan Commitments and, individually,
the amount of each Term Lender's Term Loan Commitment as specified in
Schedule 2.1(a), as such amounts may be reduced from time to time in
accordance with the provisions hereof.
"Term Note" or "Term Notes" means the promissory notes of the
Borrower in favor of each of the Term Lenders evidencing the Term Loan
in substantially the form attached as Schedule 2.4(d), individually or
collectively, as appropriate, as such promissory notes may be amended,
modified, supplemented, extended or renewed from time to time.
"Termination Date" means September 30, 2003 (being five years
from the Closing Date), or if extended with the written consent of each
of the Lenders, such later date as to which the Termination Date may be
extended.
"USOP" means U.S. Office Products Company.
"Voting Stock" means, with respect to any Person, capital
stock or other equity or ownership interest issued by such Person the
holders of which are ordinarily, in the absence of contingencies,
entitled to vote for the election of directors (or persons performing
similar functions) of such Person, even though the right so to vote has
been suspended by the happening of such a contingency.
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<PAGE> 31
1.2 Computation of Time Periods.
For purposes of computation of periods of time hereunder, the
word "from" means "from and including" and the words "to" and "until" each mean
"to but excluding."
1.3 Accounting Terms.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Lenders hereunder shall be prepared, in accordance with GAAP applied on a
consistent basis. All calculations made for the purposes of determining
compliance with this Credit Agreement shall (except as otherwise expressly
provided herein) be made by application of GAAP applied on a basis consistent
with the most recent annual or quarterly financial statements delivered pursuant
to Section 7.1 hereof (or, prior to the delivery of the first financial
statements pursuant to Section 7.1 hereof, consistent with the annual unaudited
financial statements referenced in Section 6.1(i) hereof); provided, however, if
(a) the Borrower shall object to determining such compliance on such basis at
the time of delivery of such financial statements due to any change in GAAP or
the rules promulgated with respect thereto or (b) the Administrative Agent or
the Required Lenders shall so object in writing within 30 days after delivery of
such financial statements, then such calculations shall be made on a basis
consistent with the most recent financial statements delivered by the Borrower
to the Lenders as to which no such objection shall have been made.
(b) It is further acknowledged and agreed that, except as
expressly provided otherwise, for purposes of determining the Applicable
Percentage and compliance with the financial covenants in Section 7.9 (and
compliance therewith on a Pro Forma Basis), in the case of acquisitions and
dispositions which have occurred during the applicable period to the extent
permitted hereunder, adjustments shall be made to take into account historical
performance relating thereto during such applicable period prior to the date of
such acquisition or disposition, and the effect of any Indebtedness paid with
proceeds from a disposition whether or not such adjustments are consistent with
GAAP.
SECTION 2
CREDIT FACILITIES
2.1 Revolving Loans.
(a) Revolving Commitment. During the Commitment Period, subject to
the terms and conditions hereof, each Revolving Lender severally agrees to make
revolving credit loans (the "Revolving Loans") to the Borrower from time to time
in the amount of such Revolving Lender's Revolving Commitment Percentage of such
Revolving Loans for the purposes hereinafter set forth; provided that (i) with
regard to the Revolving Lenders collectively, the aggregate principal amount of
Revolving Obligations outstanding at any time shall not exceed the Aggregate
Revolving Committed Amount and (ii) with regard to each Revolving Lender
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individually, such Revolving Lender's Revolving Commitment Percentage of
Revolving Obligations outstanding at any time shall not exceed such Revolving
Lender's Revolving Committed Amount. Revolving Loans may consist of Base Rate
Loans or Eurodollar Loans, or a combination thereof, as the Borrower may
request, and may be repaid and reborrowed in accordance with the provisions
hereof.
(b) Revolving Loan Borrowings.
(i) Notice of Borrowing. The Borrower shall request a
Revolving Loan borrowing by written notice (or telephone notice
promptly confirmed in writing) to the Administrative Agent not later
than 11:00 A.M. (Charlotte, North Carolina time) on the Business Day
prior to the date of the requested borrowing in the case of Base Rate
Loans, and on the third Business Day prior to the date of the requested
borrowing in the case of Eurodollar Loans. Each such request for
borrowing shall be irrevocable and shall specify (A) that a Revolving
Loan is requested, (B) the date of the requested borrowing (which shall
be a Business Day), (C) the aggregate principal amount to be borrowed,
and (D) whether the borrowing shall be comprised of Base Rate Loans,
Eurodollar Loans or a combination thereof, and if Eurodollar Loans are
requested, the Interest Period(s) therefor. If the Borrower shall fail
to specify in any such Notice of Borrowing (I) an applicable Interest
Period in the case of a Eurodollar Loan, then such notice shall be
deemed to be a request for an Interest Period of one month, or (II) the
type of Revolving Loan requested, then such notice shall be deemed to
be a request for a Base Rate Loan hereunder. The Administrative Agent
shall give notice to each Revolving Lender promptly upon receipt of
each Notice of Borrowing pursuant to this Section 2.1(b)(i), the
contents thereof and each such Revolving Lender's share of any
borrowing to be made pursuant thereto.
(ii) Minimum Amounts. Each Revolving Loan shall be in a
minimum aggregate principal amount of $5,000,000, in the case of
Eurodollar Loans, or $500,000 (or the remaining Revolving Committed
Amount, if less), in the case of Base Rate Loans, and integral
multiples of $500,000 in excess thereof.
(iii) Advances. Each Revolving Lender will make its Revolving
Commitment Percentage of each Revolving Loan borrowing available to the
Administrative Agent for the account of the Borrower, or in such other
manner as the Administrative Agent may specify in writing, by 1:00 P.M.
(Charlotte, North Carolina time) on the date specified in the
applicable Notice of Borrowing in Dollars and in funds immediately
available to the Administrative Agent. Such borrowing will then be made
available to the Borrower by the Administrative Agent by crediting the
account of the Borrower on the books of such office with the aggregate
of the amounts made available to the Administrative Agent by the
Revolving Lenders and in like funds as received by the Administrative
Agent.
(c) Repayment. The principal amount of all Revolving Loans shall be due
and payable in full on the Termination Date.
(d) Interest. Subject to the provisions of Section 3.1,
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(i) Base Rate Loans. During such periods as Revolving Loans
shall be comprised in whole or in part of Base Rate Loans, such Base
Rate Loans shall bear interest at a per annum rate equal to the Base
Rate plus the Applicable Percentage;
(ii) Eurodollar Loans. During such periods as Revolving Loans
shall be comprised in whole or in part of Eurodollar Loans, such
Eurodollar Loans shall bear interest at a per annum rate equal to the
Eurodollar Rate plus the Applicable Percentage.
Interest on Revolving Loans shall be payable in arrears on each applicable
Interest Payment Date (or at such other times as may be specified herein).
(e) Revolving Notes. The Revolving Loans shall be evidenced by a duly
executed Revolving Note in favor of each Revolving Lender.
(f) Maximum Number of Eurodollar Loans. The Borrower will be limited to
a maximum number of ten (10) Eurodollar Loans outstanding at any time which are
Revolving Loans. For purposes hereof, Eurodollar Loans with separate or
different Interest Periods will be considered as separate Eurodollar Loans even
if their Interest Periods expire on the same date.
2.2 Letter of Credit Subfacility.
(a) Issuance. During the Commitment Period, subject to the terms
and conditions hereof and of the LOC Documents, if any, and such other terms and
conditions which the Issuing Lender may reasonably require, the Issuing Lender
shall issue, and the Revolving Lenders shall participate in, such Letters of
Credit as the Borrower may request for its own account or for the account of any
Subsidiary as provided herein, in a form acceptable to the Issuing Lender, for
the purposes hereinafter set forth; provided that (i) the aggregate amount of
LOC Obligations shall not exceed TEN MILLION DOLLARS ($10,000,000) at any time
(the "LOC Committed Amount"), (ii) with regard to the Revolving Lenders
collectively, the aggregate principal amount of Revolving Obligations
outstanding at any time shall not exceed the Aggregate Revolving Committed
Amount and (iii) with regard to each Revolving Lender individually, such
Revolving Lender's Revolving Commitment Percentage of Revolving Obligations
outstanding at any time shall not exceed such Revolving Lender's Revolving
Committed Amount. Letters of Credit issued hereunder shall not have an original
expiry date more than one year from the date of issuance or extension, nor an
expiry date, whether as originally issued or by extension, extending beyond the
Termination Date. Each Letter of Credit shall comply with the related LOC
Documents. The issuance date of each Letter of Credit shall be a Business Day.
(b) Notice and Reports. Except for those Letters of Credit
described on Schedule 2.2(b)-1 which shall be issued on the Closing Date, the
request for the issuance of a Letter of Credit shall be submitted by the
Borrower to the Issuing Lender at least three (3) Business Days prior to the
requested date of issuance (or such shorter period as may be agreed by the
Issuing Lender). A form of Notice of Request for Letter of Credit is attached as
Schedule 2.2(b)-2. The Issuing Lender will provide to the Administrative Agent
at least monthly, and more frequently upon
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request, a detailed summary report on its Letters of Credit and the activity
thereon, in form and substance acceptable to the Administrative Agent. In
addition, the Issuing Lender will provide to the Administrative Agent for
dissemination to the Revolving Lenders at least quarterly, and more frequently
upon request, a detailed summary report on its Letters of Credit and the
activity thereon, including, among other things, the Credit Party for whose
account the Letter of Credit is issued, the beneficiary, the face amount, and
the expiry date. The Issuing Lender will provide copies of the Letters of Credit
to the Administrative Agent and the Revolving Lenders promptly upon request.
(c) Participation. Each Revolving Lender, with respect to the
Existing Letters of Credit, hereby purchases a participation interest in such
Existing Letters of Credit, and with respect to Letters of Credit issued after
the Closing Date, upon issuance of a Letter of Credit, shall be deemed to have
purchased without recourse a risk participation from the applicable Issuing
Lender in such Letter of Credit and the obligations arising thereunder, in each
case in an amount equal to its pro rata share of the obligations under such
Letter of Credit (based on the respective Revolving Commitment Percentages of
the Revolving Lenders) and shall absolutely, unconditionally and irrevocably
assume, as primary obligor and not as surety, and be obligated to pay to the
Issuing Lender therefor and discharge when due, its pro rata share of the
obligations arising under such Letter of Credit. Without limiting the scope and
nature of each Revolving Lender's participation in any Letter of Credit, to the
extent that the Issuing Lender has not been reimbursed as required hereunder or
under any such Letter of Credit, each such Revolving Lender shall pay to the
Issuing Lender its pro rata share of such unreimbursed drawing in same day funds
on the day of notification by the Issuing Lender of an unreimbursed drawing
pursuant to the provisions of subsection (d) hereof. The obligation of each
Revolving Lender to so reimburse the Issuing Lender shall be absolute and
unconditional and shall not be affected by the occurrence of a Default, an Event
of Default or any other occurrence or event. Any such reimbursement shall not
relieve or otherwise impair the obligation of the Borrower to reimburse the
Issuing Lender under any Letter of Credit, together with interest as hereinafter
provided.
(d) Reimbursement. In the event of any drawing under any Letter of
Credit, the Issuing Lender will promptly notify the Borrower. Unless the
Borrower shall immediately notify the Issuing Lender that the Borrower intends
to otherwise reimburse the Issuing Lender for such drawing, the Borrower shall
be deemed to have requested that the Revolving Lenders make a Revolving Loan in
the amount of the drawing as provided in subsection (e) hereof on the related
Letter of Credit, the proceeds of which will be used to satisfy the related
reimbursement obligations. The Borrower promises to reimburse the Issuing Lender
on the day of drawing under any Letter of Credit (either with the proceeds of a
Revolving Loan obtained hereunder or otherwise) in same day funds. If the
Borrower shall fail to reimburse the Issuing Lender as provided hereinabove, the
unreimbursed amount of such drawing shall bear interest at a per annum rate
equal to the Base Rate plus the sum of (i) the Applicable Percentage and (ii)
two percent (2%). The Borrower's reimbursement obligations hereunder shall be
absolute and unconditional under all circumstances irrespective of any rights of
setoff, counterclaim or defense to payment the Borrower may claim or have
against the Issuing Lender, the Administrative Agent, the Lenders, the
beneficiary of the Letter of Credit drawn upon or any other Person, including
without limitation any
<PAGE> 35
defense based on any failure of the Borrower or any other Credit Party to
receive consideration or the legality, validity, regularity or unenforceability
of the Letter of Credit. The Issuing Lender will promptly notify the other
Revolving Lenders of the amount of any unreimbursed drawing and each Revolving
Lender shall promptly pay to the Administrative Agent for the account of the
Issuing Lender in Dollars and in immediately available funds, the amount of such
Revolving Lender's pro rata share of such unreimbursed drawing. Such payment
shall be made on the day such notice is received by such Revolving Lender from
the Issuing Lender if such notice is received at or before 2:00 P.M. (Charlotte,
North Carolina time) otherwise such payment shall be made at or before 12:00
Noon (Charlotte, North Carolina time) on the Business Day next succeeding the
day such notice is received. If such Revolving Lender does not pay such amount
to the Issuing Lender in full upon such request, such Revolving Lender shall, on
demand, pay to the Administrative Agent for the account of the Issuing Lender
interest on the unpaid amount during the period from the date of such drawing
until such Revolving Lender pays such amount to the Issuing Lender in full at a
rate per annum equal to, if paid within two (2) Business Days of the date that
such Revolving Lender is required to make payments of such amount pursuant to
the preceding sentence, the Federal Funds Rate and thereafter at a rate equal to
the Base Rate. Each Revolving Lender's obligation to make such payment to the
Issuing Lender, and the right of the Issuing Lender to receive the same, shall
be absolute and unconditional, shall not be affected by any circumstance
whatsoever and without regard to the termination of this Credit Agreement or the
Commitments hereunder, the existence of a Default or Event of Default or the
acceleration of the obligations of the Borrower hereunder and shall be made
without any offset, abatement, withholding or reduction whatsoever.
Simultaneously with the making of each such payment by a Revolving Lender to the
Issuing Lender, such Revolving Lender shall, automatically and without any
further action on the part of the Issuing Lender or such Revolving Lender,
acquire a participation in an amount equal to such payment (excluding the
portion of such payment constituting interest owing to the Issuing Lender) in
the related unreimbursed drawing portion of the LOC Obligation and in the
interest thereon and in the related LOC Documents, and shall have a claim
against the Borrower with respect thereto.
(e) Repayment with Revolving Loans. On any day on which the Borrower
shall have requested, or been deemed to have requested, a Revolving Loan advance
to reimburse a drawing under a Letter of Credit, the Administrative Agent shall
give notice to the Revolving Lenders that a Revolving Loan has been requested or
deemed requested by the Borrower to be made in connection with a drawing under a
Letter of Credit, in which case a Revolving Loan advance comprised of Base Rate
Loans (or Eurodollar Loans to the extent the Borrower has complied with the
procedures of Section 2.1(b)(i) with respect thereto) shall be immediately made
to the Borrower by all Revolving Lenders (notwithstanding any termination of the
Commitments pursuant to Section 9.2) pro rata based on the respective Revolving
Commitment Percentages of the Revolving Lenders (determined before giving effect
to any termination of the Commitments pursuant to Section 9.2) and the proceeds
thereof shall be paid directly to the Issuing Lender for application to the
respective LOC Obligations. Each such Revolving Lender hereby irrevocably agrees
to make its pro rata share of each such Revolving Loan immediately upon any such
request or deemed request in the amount, in the manner and on the date specified
in the preceding sentence notwithstanding (i) the amount of such borrowing may
not comply with the minimum amount for advances of Revolving Loans otherwise
required hereunder, (ii) whether any conditions specified in Section 5.2 are
then satisfied, (iii) whether a Default or an Event of Default then exists, (iv)
failure for any such request
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or deemed request for Revolving Loan to be made by the time otherwise required
hereunder, (v) whether the date of such borrowing is a date on which Revolving
Loans are otherwise permitted to be made hereunder or (vi) any termination of
the Commitments relating thereto immediately prior to or contemporaneously with
such borrowing. In the event that any Revolving Loan cannot for any reason be
made on the date otherwise required above (including, without limitation, as a
result of the commencement of a proceeding under the Bankruptcy Code with
respect to the Borrower or any Credit Party), then each such Revolving Lender
hereby agrees that it shall forthwith purchase (as of the date such borrowing
would otherwise have occurred, but adjusted for any payments received from the
Borrower on or after such date and prior to such purchase) from the Issuing
Lender such participation in the outstanding LOC Obligations as shall be
necessary to cause each such Revolving Lender to share in such LOC Obligations
ratably (based upon the respective Revolving Commitment Percentages of the
Revolving Lenders (determined before giving effect to any termination of the
Commitments pursuant to Section 9.2)), provided that in the event such payment
is not made on the day of drawing, such Revolving Lender shall pay in addition
to the Issuing Lender interest on the amount of its unfunded Participation
Interest at a rate equal to, if paid within two (2) Business Days of the date of
drawing, the Federal Funds Rate, and thereafter at the Base Rate.
(f) Designation of Subsidiaries as Account Parties. Notwithstanding
anything to the contrary set forth in this Credit Agreement, including without
limitation Section 2.2(a) hereof, a Letter of Credit issued hereunder may
contain a statement to the effect that such Letter of Credit is issued for the
account of a Subsidiary, provided that notwithstanding such statement, the
Borrower shall be the actual account party for all purposes of this Credit
Agreement for such Letter of Credit and such statement shall not affect the
Borrower's reimbursement obligations hereunder with respect to such Letter of
Credit.
(g) Renewal, Extension. The renewal or extension of any Letter of
Credit shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Letter of Credit hereunder.
(h) Uniform Customs and Practices. The Issuing Lender may have the
Letters of Credit be subject to The Uniform Customs and Practice for Documentary
Credits, as published as of the date of issue by the International Chamber of
Commerce (the "UCP"), in which case the UCP may be incorporated therein and
deemed in all respects to be a part thereof.
(i) Indemnification; Nature of Issuing Lender's Duties.
(i) In addition to its other obligations under this Section
2.2, the Borrower hereby agrees to protect, indemnify, pay and save the
Issuing Lender harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including
reasonable attorneys' fees) that the Issuing Lender may incur or be
subject to as a consequence, direct or indirect, of (A) the issuance of
any Letter of Credit or (B) the failure of the Issuing Lender to honor
a drawing under a Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de
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facto government or governmental authority (all such acts or omissions,
herein called "Government Acts").
(ii) As between the Borrower and the Issuing Lender, the
Borrower shall assume all risks of the acts, omissions or misuse of any
Letter of Credit by the beneficiary thereof. The Issuing Lender shall
not be responsible: (A) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of any Letter of
Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged; (B) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, that may
prove to be invalid or ineffective for any reason; (C) for errors,
omissions, interruptions or delays (other than by the Issuing Lender)
in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (D) for any loss
or delay (other than by the Issuing Lender) in the transmission or
otherwise of any document required in order to make a drawing under a
Letter of Credit or of the proceeds thereof; and (E) for any
consequences arising from causes beyond the control of the Issuing
Lender, including, without limitation, any Government Acts. None of the
above shall affect, impair, or prevent the vesting of the Issuing
Lender's rights or powers hereunder.
(iii) In furtherance and extension and not in limitation of
the specific provisions hereinabove set forth, any action taken or
omitted by the Issuing Lender, under or in connection with any Letter
of Credit or the related certificates, if taken or omitted in good
faith and not constituting gross negligence, shall not put such Issuing
Lender under any resulting liability to the Borrower or any other
Credit Party. It is the intention of the parties that this Credit
Agreement shall be construed and applied to protect and indemnify the
Issuing Lender against any and all risks involved in the issuance of
the Letters of Credit, all of which risks are hereby assumed by the
Borrower (on behalf of itself and each of the other Credit Parties),
including, without limitation, any and all Government Acts. The Issuing
Lender shall not, in any way, be liable for any failure by the Issuing
Lender or anyone else to pay any drawing under any Letter of Credit as
a result of any Government Acts or any other cause beyond the control
of the Issuing Lender.
(iv) Nothing in this subsection (i) is intended to limit the
reimbursement obligations of the Borrower contained in subsection (d)
above. The obligations of the Borrower under this subsection (i) shall
survive the termination of this Credit Agreement. No act or omissions
of any current or prior beneficiary of a Letter of Credit shall in any
way affect or impair the rights of the Issuing Lender to enforce any
right, power or benefit under this Credit Agreement.
(v) Notwithstanding anything to the contrary contained in this
subsection (i), the Borrower shall have no obligation to indemnify the
Issuing Lender in respect of any liability incurred by the Issuing
Lender (A) arising out of the negligence or willful misconduct of the
Issuing Lender, as determined by a court of competent jurisdiction, or
(B)
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caused by the Issuing Lender's failure to pay under any Letter of
Credit after presentation to it of a request strictly complying with
the terms and conditions of such Letter of Credit, as determined by a
court of competent jurisdiction, unless such payment is prohibited by
any law, regulation, court order or decree.
(j) Responsibility of Issuing Lender. It is expressly understood and
agreed that the obligations of the Issuing Lender hereunder to the Lenders are
only those expressly set forth in this Credit Agreement and that the Issuing
Lender shall be entitled to assume that the conditions precedent set forth in
Section 5.2 have been satisfied unless it shall have acquired actual knowledge
that any such condition precedent has not been satisfied; provided, however,
that nothing set forth in this Section 2.2 shall be deemed to prejudice the
right of any Lender to recover from the Issuing Lender any amounts made
available by such Lender to the Issuing Lender pursuant to this Section 2.2 in
the event that it is determined by a court of competent jurisdiction that the
payment with respect to a Letter of Credit constituted gross negligence or
willful misconduct on the part of the Issuing Lender.
(k) Conflict with LOC Documents. In the event of any conflict between
this Credit Agreement and any LOC Document (including any letter of credit
application), this Credit Agreement shall control.
2.3 Swingline Loan Subfacility.
(a) Swingline Commitment. Subject to the terms and conditions hereof
and in reliance upon the representations and warranties set forth herein, the
Swingline Lender, in its individual capacity, agrees to make certain revolving
credit loans requested by the Borrower in Dollars to the Borrower (each a
"Swingline Loan" and, collectively, the "Swingline Loans") from time to time
from the Closing Date until the Termination Date for the purposes hereinafter
set forth; provided, however, (i) the aggregate principal amount of Swingline
Loans outstanding at any time shall not exceed TWENTY MILLION DOLLARS
($20,000,000) (the "Swingline Committed Amount") and (ii) with regard to the
Revolving Lenders collectively, the aggregate principal amount of Revolving
Obligations outstanding at any time shall not exceed the Aggregate Revolving
Committed Amount. Swingline Loans hereunder shall be made as Base Rate Loans,
and may be repaid and reborrowed in accordance with the provisions hereof.
(b) Swingline Loan Advances.
(i) Notices; Disbursement. Whenever the Borrower
desires a Swingline Loan advance hereunder it shall give written notice
(or telephonic notice promptly confirmed in writing) to the Swingline
Lender not later than 11:00 A.M. (Charlotte, North Carolina time) on
the Business Day of the requested Swingline Loan advance. Each such
notice shall be irrevocable and shall specify (A) that a Swingline Loan
advance is requested, (B) the date of the requested Swingline Loan
advance (which shall be a Business Day) and (C) the principal amount of
and Interest Period for the Swingline Loan advance requested. Each
Swingline Loan shall have such maturity date as the Swingline Lender
and the Borrower shall agree upon receipt by the Swingline Lender of
any such notice from the
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Borrower. The Swingline Lender shall initiate the transfer of funds
representing the Swingline Loan advance to the Borrower by 3:00 P.M.
(Charlotte, North Carolina time) on the Business Day of the requested
borrowing.
(ii) Minimum Amounts. Each Swingline Loan advance shall be in
a minimum principal amount of $500,000 and in integral multiples of
$100,000 in excess thereof (or the remaining amount of the Swingline
Committed Amount, if less).
(iii) Repayment of Swingline Loans. Swingline Loans shall not
be outstanding more than 30 days from the date of advance and may not
extend beyond the Termination Date, on which date the Swingline Loans
shall be due and payable in full. The Swingline Lender may, at any
time, in its sole discretion, by written notice to the Borrower and the
Revolving Lenders, demand repayment of its Swingline Loans by way of a
Revolving Loan advance, in which case the Borrower shall be deemed to
have requested a Revolving Loan advance comprised solely of Base Rate
Loans in the amount of such Swingline Loans; provided, however, that
any such demand shall be deemed to have been given one Business Day
prior to the Termination Date and on the date of the occurrence of any
Event of Default described in Section 9.1 and upon acceleration of the
indebtedness hereunder and the exercise of remedies in accordance with
the provisions of Section 9.2. Each Revolving Lender hereby irrevocably
agrees to make its pro rata share of each such Revolving Loan in the
amount, in the manner and on the date specified in the preceding
sentence notwithstanding (I) the amount of such borrowing may not
comply with the minimum amount for advances of Revolving Loans
otherwise required hereunder, (II) whether any conditions specified in
Section 5.2 are then satisfied, (III) whether a Default or an Event of
Default then exists, (IV) failure of any such request or deemed request
for Revolving Loan to be made by the time otherwise required hereunder,
(V) whether the date of such borrowing is a date on which Revolving
Loans are otherwise permitted to be made hereunder or (VI) any
termination of the Commitments relating thereto immediately prior to or
contemporaneously with such borrowing. In the event that any Revolving
Loan cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to the Borrower or
any other Credit Party), then each Revolving Lender hereby agrees that
it shall forthwith purchase (as of the date such borrowing would
otherwise have occurred, but adjusted for any payments received from
the Borrower on or after such date and prior to such purchase) from the
Swingline Lender such Participations Interest in the outstanding
Swingline Loans as shall be necessary to cause each such Revolving
Lender to share in such Swingline Loans ratably based upon its
Revolving Commitment Percentage of the Revolving Committed Amount
(determined before giving effect to any termination of the Commitments
pursuant to Section 3.4), provided that (A) all interest payable on the
Swingline Loans shall be for the account of the Swingline Lender until
the date as of which the respective Participation Interest is purchased
and (B) at the time any purchase of Participation Interests pursuant to
this sentence is actually made, the purchasing Revolving Lender shall
be required to pay to the Swingline Lender, to the extent not paid to
the Swingline Lender by the Borrower in accordance with the terms of
subsection (c) below, interest on the principal amount of Participation
Interests purchased for each day from and
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including the day upon which such borrowing would otherwise have
occurred to but excluding the date of payment for such Participation
Interests, at the rate equal to the
Federal Funds Rate.
(c) Interest on Swingline Loans.
Subject to the provisions of Section 3.1, each Swingline Loan shall
bear interest at a per annum rate (computed on the basis of the actual number of
days elapsed over a year of 365 days) equal to the Base Rate. Interest on
Swingline Loans shall be payable in arrears on each applicable Interest Payment
Date (or at such other times as may be specified herein), unless accelerated
sooner pursuant to Section 9.2.
(d) Swingline Note. The Swingline Loans shall be evidenced by the
Revolving Note.
2.4 Term Loan.
(a) Term Loan Commitment. Subject to the terms and conditions hereof,
each Term Lender severally agrees to make its Term Loan Commitment Percentage of
a term loan (the "Term Loan") in the aggregate principal amount of ONE HUNDRED
MILLION DOLLARS ($100,000,000) to the Company on the Closing Date for the
purposes hereinafter set forth. The Term Loan may consist of Base Rate Loans or
Eurodollar Loans, or a combination thereof, as the Borrower may request. Amounts
repaid on the Term Loan may not be reborrowed.
(b) Term Loan Borrowing. The Borrower shall submit an appropriate
Notice of Borrowing relating to the Term Loan not later than 11:00 A.M.
(Charlotte, North Carolina time) on the Closing Date, with respect to the
portion of the Term Loan initially consisting of a Base Rate Loan, or on the
third Business Day prior to the Closing Date, with respect to the portion of the
Term Loan initially consisting of one or more Eurodollar Loans, which Notice of
Borrowing shall be irrevocable and shall specify (i) that the funding of the
Term Loan is requested, and (ii) whether the funding of the Term Loan shall be
comprised of Base Rate Loans, Eurodollar Loans or combination thereof, and if
Eurodollar Loans are requested, the Interest Period(s) therefor. If the Borrower
shall fail to deliver such Notice of Borrowing to the Administrative Agent by
11:00 A.M. (Charlotte, North Carolina time) on the third Business Day prior to
the Closing Date, then the full amount of the Term Loan shall be initially
comprised of Base Rate Loans. Each Term Lender shall make its Term Loan
Commitment Percentage of the Term Loan available to the Administrative Agent for
the account of the Borrower, or in such other manner as the Administrative Agent
may specify in writing, by 1:00 P.M. (Charlotte, North Carolina time) on the
Closing Date in Dollars and in funds immediately available to the Administrative
Agent.
(c) Minimum Amounts. The Term Loan may be comprised of minimum
aggregate principal amounts of $5,000,000 in the case of Eurodollar Loans, and
$2,500,000 (or the remaining portion of the Term Loan, if less) in the case of
Base Rate Loans, and integral multiples of $1,250,000 (or the remaining portion
of the Term Loan, if less) in excess thereof.
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(d) Repayment. The aggregate principal amount of the Term Loan shall be
repaid in sixteen (16) consecutive quarterly installments as follows:
January 30, 1999 $2,500,000 July 30, 2001 $3,750,000
April 30, 1999 $2,500,000 October 30, 2001 $3,750,000
July 30, 1999 $2,500,000 January 30, 2002 $7,500,000
October 30, 1999 $2,500,000 April 30, 2002 $7,500,000
January 30, 2000 $3,750,000 July 30, 2002 $7,500,000
April 30, 2000 $3,750,000 October 30, 2002 $7,500,000
July 30, 2000 $3,750,000 January 30, 2003 $7,500,000
October 30, 2000 $3,750,000 April 30, 2003 $7,500,000
January 30, 2001 $3,750,000 July 30, 2003 $7,500,000
April 30, 2001 $3,750,000 September 30, 2003 $7,500,000
------------
$100,000,000
The foregoing amortization payments are subject to reduction as provided in
Section 3.3(b).
(e) Interest. Subject to the provisions of Section 3.1,
(i) Base Rate Loans. During such periods as the Term Loan
shall be comprised in whole or in part of Base Rate Loans, such Base
Rate Loans shall bear interest at a per annum rate equal to the sum of
the Base Rate plus the Applicable Percentage; and
(ii) Eurocurrency Loans. During such periods as the Term
Loan shall be comprised in whole or in part of Eurocurrency Loans, such
Eurocurrency Loans shall bear interest at a per annum rate equal to the
sum of the Eurocurrency Rate plus the Applicable Percentage.
Interest on the Term Loan shall be payable in arrears on each applicable
Interest Payment Date (or at such other time as may be specified herein).
(f) Term Notes. The Term Loan shall be evidenced by a duly executed
Term Note in favor of each Term Lender.
(g) Maximum Number of Eurodollar Loans. The Borrower will be limited to
a maximum number of five (5) Eurodollar Loans outstanding at any time which are
part of the Term Loan. For purposes hereof, Eurodollar Loans with separate or
different Interest Periods will be considered as separate Eurodollar Loans even
if their Interest Periods expire on the same date.
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SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 Default Rate.
Upon the occurrence, and during the continuance, of an Event
of Default, the principal of and, to the extent permitted by law, interest on
the Loans and any other amounts owing hereunder or under the other Credit
Documents shall bear interest, payable on demand, at a per annum rate 2% greater
than the rate which would otherwise be applicable (or if no rate is applicable,
whether in respect of interest, fees or other amounts, then 2% greater than the
Base Rate).
3.2 Extension and Conversion.
Subject to the terms of Section 5.2, the Borrower shall have
the option, on any Business Day, to extend existing Loans into a subsequent
permissible Interest Period or to convert Loans into Loans of another interest
rate type; provided, however, that (i) except as provided in Section 3.8,
Eurodollar Loans may be converted into Base Rate Loans only on the last day of
the Interest Period applicable thereto, (ii) Eurodollar Loans may be extended,
and Base Rate Loans may be converted into Eurodollar Loans, only if no Default
or Event of Default is in existence on the date of extension or conversion,
(iii) Loans extended as, or converted into, Eurodollar Loans shall be subject to
the terms of the definition of "Interest Period" set forth in Section 1.1 and
shall be in such minimum amounts as provided in, with respect to Revolving
Loans, Section 2.1(b)(ii) and, with respect to the Term Loan, Section 2.4(c),
and (iv) any request for extension or conversion of a Eurodollar Loan which
shall fail to specify an Interest Period shall be deemed to be a request for an
Interest Period of one month. Each such extension or conversion shall be
effected by the Borrower by giving a Notice of Extension/Conversion (or
telephone notice promptly confirmed in writing) to the Administrative Agent
prior to 11:00 A.M. (Charlotte, North Carolina time) on the Business Day of, in
the case of the conversion of a Eurodollar Loan into a Base Rate Loan, and on
the third Business Day prior to, in the case of the extension of a Eurodollar
Loan as, or conversion of a Base Rate Loan into, a Eurodollar Loan, the date of
the proposed extension or conversion, specifying the date of the proposed
extension or conversion, the Loans to be so extended or converted, the types of
Loans into which such Loans are to be converted and, if appropriate, the
applicable Interest Periods with respect thereto. Each request for extension or
conversion shall be irrevocable and shall constitute a representation and
warranty by the Borrower of the matters specified in subsections (a) through (e)
of Section 5.2. In the event the Borrower fails to request extension or
conversion of any Eurodollar Loan in accordance with this Section, or any such
conversion or extension is not permitted or required by this Section, then such
Eurodollar Loan shall be automatically converted into a Base Rate Loan at the
end of the Interest Period applicable thereto. The Administrative Agent shall
give each Lender notice as promptly as practicable of any such proposed
extension or conversion affecting any Loan.
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3.3 Prepayments.
(a) Voluntary Prepayments. Loans hereunder may be repaid in
whole or in part without premium or penalty; provided that (i) Eurodollar Loans
may be prepaid only upon three (3) Business Days' prior written notice to the
Administrative Agent and must be accompanied by payment of any amounts owing
under Section 3.11, and (ii) partial prepayments shall be minimum principal
amounts of $5,000,000, in the case of Eurodollar Loans, and $500,000, in the
case of Base Rate Loans, and in integral multiples of $500,000 in excess
thereof. Voluntary prepayments on the Revolving Loans may be reborrowed in
accordance with the provisions hereof. Voluntary prepayments on the Term Loan
shall be made to, and serve to reduce, the principal amortization installments
ratably.
(b) Mandatory Prepayments. If at any time, (A) the aggregate
principal amount of Revolving Obligations shall exceed the Aggregate Revolving
Committed Amount, (B) the aggregate amount of LOC Obligations shall exceed the
LOC Committed Amount, or (C) the aggregate amount of Swingline Loans shall
exceed the Swingline Committed Amount, the Borrower shall immediately make
payment on the Revolving Loans and/or to a cash collateral account in respect of
the LOC Obligations, in an amount sufficient to eliminate the deficiency.
(c) Application. Unless otherwise specified by the Borrower,
prepayments made hereunder shall be applied first to Swingline Loans, then to
Revolving Loans which are Base Rate Loans, then to Revolving Loans which are
Eurodollar Loans in direct order of Interest Period maturities, then to a cash
collateral account to secure LOC Obligations, then to Term Loans which are Base
Rate Loans and finally to Term Loans which are Eurodollar Loans in direct order
of Interest Period maturities. Amounts prepaid on Revolving Obligations may be
reborrowed in accordance with the provisions hereof. Amounts prepaid on the Term
Loan may not be reborrowed. Voluntary prepayments on the Term Loan shall be
applied to, and serve to reduce, the principal amortization installments
ratably.
3.4 Termination and Reduction of Commitments
(a) Voluntary Reductions. The Revolving Commitments may be
terminated or permanently reduced by the Borrower in whole or in part upon three
(3) Business Days' prior written notice to the Administrative Agent, provided
that (i) after giving effect to any voluntary reduction the aggregate amount of
Revolving Obligations shall not exceed the Aggregate Revolving Committed Amount,
as reduced, and (ii) partial reductions by the Borrower shall be minimum
principal amount of $5,000,000, and in integral multiples of $1,000,000 in
excess thereof.
(b) Mandatory Reductions. The Commitments hereunder shall be
permanently reduced as hereafter provided in an amount equal to one hundred
percent (100%) of the Net Proceeds received from Asset Dispositions in any
fiscal year; but only to the extent that (i) such Net Proceeds are not
reinvested (or committed to be reinvested) in the same or similar property or
assets within six (6) months of the date of sale, lease, disposition, casualty,
theft or loss giving rise thereto, and (ii) the aggregate amount of such Net
Proceeds not reinvested in
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accordance with the foregoing subsection (i) in any fiscal year shall exceed
five percent (5%) of total assets for the Consolidated Group as of the end of
the immediately preceding fiscal year. Reductions in Commitments pursuant to
this subsection (b) shall be applied to, and serve to reduce, the Revolving
Commitments and the Term Loan Commitments pro rata. Reductions in the Term Loan
Commitment will result in payment thereon by the amount of reduction thereof,
and shall be applied to, and serve to reduce, the principal amortization
installments ratably.
(c) Termination. The Commitments hereunder shall terminate on
the Termination Date.
3.5 Fees.
(a) Commitment Fee. In consideration of the Revolving
Commitments hereunder, the Borrower agrees to pay to the Administrative Agent
for the ratable benefit of the Revolving Lenders a commitment fee (the
"Commitment Fee") equal to the Applicable Percentage per annum on the average
daily unused amount of the Revolving Committed Amount for the applicable period.
The Commitment Fee shall be payable quarterly in arrears on the 15th day
following the last day of each calendar quarter for the immediately preceding
quarter (or portion thereof) beginning with the first such date to occur after
the Closing Date. For purposes of computation of the Commitment Fee, Swingline
Loans shall not be counted toward or considered usage under the Revolving Loan
facility.
(b) Letter of Credit Fees.
(i) Letter of Credit Fee. In consideration of the LOC
Commitment hereunder, the Borrower agrees to pay to the Administrative
Agent for the ratable benefit of the Revolving Lenders a fee (the
"Letter of Credit Fee") equal to the Applicable Percentage per annum on
the average daily maximum amount available to be drawn under Letters of
Credit from the date of issuance to the date of expiration. The Letter
of Credit Fee shall be payable quarterly in arrears on the 15th day
following the last day of each calendar quarter for the immediately
preceding quarter (or portion thereof) beginning with the first such
date to occur after the Closing Date.
(ii) Issuing Lender Fee. In addition to the Letter of
Credit Fee, the Borrower agrees to pay to the Issuing Lender for its
own account without sharing by the other Lenders (A) a fronting and
negotiation fee of .125% per annum on the average daily maximum amount
available to be drawn under Letters of Credit issued by it from the
date of issuance to the date of expiration, and (B) customary charges
of the Issuing Lender with respect to the issuance, amendment,
transfer, administration, cancellation and conversion of, and drawings
under, such Letters of Credit (collectively, the "Issuing Lender
Fees").
(c) Administrative Fees. The Borrower agrees to pay to the
Administrative Agent, for its own account, an annual administrative fee and such
other fees, if any, referred to in the Administrative Agent's Fee Letter
(collectively, the "Administrative Agent Fees").
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3.6 Capital Adequacy.
If any Lender has determined, after the date hereof, that the
adoption or the becoming effective of, or any change in, or any change by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or administration
of, any applicable law, rule or regulation regarding capital adequacy, or
compliance by such Lender with any request or directive of general applicability
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Lender's capital or assets as a consequence
of its commitments or obligations hereunder to a level below that which such
Lender could have achieved but for such adoption, effectiveness, change or
compliance (taking into consideration such Lender's policies with respect to
capital adequacy applied on a consistent basis), then, upon notice from such
Lender to the Borrower, the Borrower shall be obligated to pay to such Lender
such additional amount or amounts as will compensate such Lender for such
reduction. Each determination by any such Lender of amounts owing under this
Section shall, absent manifest error, be conclusive and binding on the parties
hereto.
3.7 Inability To Determine Interest Rate.
If prior to the first day of any Interest Period, the Administrative
Agent shall have determined (which determination shall be conclusive and binding
upon the Borrower) that, by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, the Administrative Agent shall give
telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as
practicable thereafter. If such notice is given (a) any Eurodollar Loans
requested to be made on the first day of such Interest Period shall be made as
Base Rate Loans and (b) any Loans that were to have been converted on the first
day of such Interest Period to or continued as Eurodollar Loans shall be
converted to or continued as Base Rate Loans. The Administrative Agent shall
withdraw such notice promptly after such circumstances cease to exist. Until
such notice has been withdrawn by the Administrative Agent, no further
Eurodollar Loans shall be made or continued as such, nor shall the Borrower have
the right to convert Base Rate Loans to Eurodollar Loans.
3.8 Illegality.
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for any Lender to make
or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such
Lender shall promptly give written notice of such circumstances to the Borrower
and the Administrative Agent (which notice shall be withdrawn whenever such
circumstances no longer exist), (b) the commitment of such Lender hereunder to
make Eurodollar Loans, continue Eurodollar Loans as such and convert a Base Rate
Loan to Eurodollar Loans shall forthwith be canceled and, until such time as it
shall no longer be unlawful for such Lender to make or maintain Eurodollar
Loans, such Lender shall then have a commitment only to make a Base Rate Loan
when a Eurodollar Loan is requested and (c) such Lender's Loans then outstanding
as
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Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans
on the respective last days of the then current Interest Periods with respect to
such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrower shall pay to
such Lender such amounts, if any, as may be required pursuant to Section 3.11.
3.9 Requirements of Law.
Subject to Section 3.16, if, after the date hereof, the adoption of or
any change in any Requirement of Law or in the interpretation or application
thereof applicable to any Lender, or compliance by any Lender with any request
or directive of general applicability (whether or not having the force of law)
from any central bank or other Governmental Authority, in each case made
subsequent to the Closing Date (or, if later, the date on which such Lender
becomes a Lender):
(a) shall subject such Lender to any tax of any kind
whatsoever with respect to any Letter of Credit, any Eurodollar Loans
made by it or its obligation to make Eurodollar Loans, or change the
basis of taxation of payments to such Lender in respect thereof (except
for (i) Non-Excluded Taxes covered by Section 3.10 (including
Non-Excluded Taxes imposed solely by reason of any failure of such
Lender to comply with its obligations under Section 3.10(b)) and (ii)
changes in taxes measured by or imposed upon the overall net income, or
franchise tax (imposed in lieu of such net income tax), of such Lender
or its applicable lending office, branch, or any affiliate thereof));
(b) shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for the
account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(c) shall impose on such Lender any other condition
(excluding any tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrower from such Lender,
through the Administrative Agent, in accordance herewith, the Borrower shall be
obligated to promptly pay such Lender, upon its demand, any additional amounts
(net of any amounts paid pursuant to Section 3.6) necessary to compensate such
Lender for such increased cost or reduced amount receivable, provided that, in
any such case, the Borrower may elect to convert the Eurodollar Loans made by
such Lender hereunder to Base Rate Loans by giving the Administrative Agent at
least one Business Day's notice of such election, in which case the Borrower
shall promptly pay to such Lender, upon demand, without duplication, such
amounts, if any, as may be required pursuant to Section 3.11. If any Lender
becomes entitled to claim any additional amounts pursuant to this subsection, it
shall provide prompt notice thereof to the Borrower, through the
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Administrative Agent, certifying (x) that one of the events described in this
paragraph (a) has occurred and describing in reasonable detail the nature of
such event, (y) as to the increased cost or reduced amount resulting from such
event and (z) as to the additional amount demanded by such Lender and a
reasonably detailed explanation of the calculation thereof. Such a certificate
as to any additional amounts payable pursuant to this subsection submitted by
such Lender, through the Administrative Agent, to the Borrower shall be
conclusive and binding on the parties hereto in the absence of manifest error.
This covenant shall survive the termination of this Credit Agreement and the
payment of the Loans and all other amounts payable hereunder.
3.10 Taxes.
(a) Except as provided below in this subsection, all payments made by
the Borrower under this Credit Agreement and any Notes shall be made free and
clear of, and without deduction or withholding for or on account of, any present
or future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any court, or governmental body, agency or other
official, excluding taxes (the "Excluded Taxes") that are measured by or imposed
upon the overall net income of the Administrative Agent or any Lender or its
applicable lending office, or any branch or affiliate thereof, and all franchise
taxes, branch taxes, taxes on doing business or taxes on the overall capital or
net worth of the Administrative Agent or any Lender or its applicable lending
office, or any branch or affiliate thereof, in each case imposed in lieu of net
income taxes, imposed: (i) by the jurisdiction under the laws of which the
Administrative Agent or such Lender, applicable lending office, branch or
affiliate is organized or is located, or in which its principal executive office
is located, or any nation within which such jurisdiction is located or any
political subdivision thereof; or (ii) by reason of any connection between the
jurisdiction imposing such tax and the Administrative Agent or such Lender,
applicable lending office, branch or affiliate other than a connection arising
solely from such Lender having executed, delivered or performed its obligations,
or received payment under or enforced, this Credit Agreement or any Notes. If
any such taxes, levies, imposts, duties, charges, fees, deductions or
withholdings other than the Excluded Taxes ("Non-Excluded Taxes") are required
to be withheld from any amounts payable to the Administrative Agent or any
Lender hereunder or under any Notes, (A) the amounts so payable to the
Administrative Agent or such Lender shall be increased to the extent necessary
to yield to the Administrative Agent or such Lender (after payment of all
Non-Excluded Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Credit Agreement and any Notes,
provided, however, that the Borrower shall be entitled to deduct and withhold
any Non-Excluded Taxes and shall not be required to increase any such amounts
payable to any Lender that is not organized under the laws of the United States
of America or a state thereof if such Lender fails to comply with the
requirements of paragraph (b) of this subsection whenever any Non-Excluded Taxes
are payable by the Borrower, and (B) as promptly as possible thereafter the
Borrower shall send to the Administrative Agent for its own account or for the
account of such Lender, as the case may be, a certified copy of an original
official receipt received by the Borrower showing payment thereof. If the
Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the required receipts or
other required documentary evidence, the Borrower shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the
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Administrative Agent or any Lender as a result of any such failure. If the
Administrative Agent or any Lender receives a refund or tax benefit in respect
of Non-Excluded Taxes for which the Borrower had made additional payments
pursuant to this Section 3.10(a), the Administrative Agent or such Lender, as
the case may be, shall promptly pay such refund (together with any interest with
respect thereto received from the relevant taxing authority) to the Borrower;
provided, however, that the Borrower agrees promptly to return such refund
(together with any interest with respect thereto due to the relevant taxing
authority) to the Administrative Agent or the applicable Lender, as the case may
be, upon receipt of a notice that such refund is required to be repaid to the
relevant taxing authority. The agreements in this subsection shall survive the
termination of this Credit Agreement and the payment of the Loans and all other
amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(X)(i) on or before the date of any payment by the Borrower
under this Credit Agreement or Notes to such Lender, deliver to the
Borrower and the Administrative Agent (A) two (2) duly completed copies
of United States Internal Revenue Service Form 1001 or 4224, or
successor applicable form, as the case may be, certifying that it is
entitled to receive payments under this Credit Agreement and any Notes
without deduction or withholding of any United States federal income
taxes and (B) an Internal Revenue Service Form W-8 or W-9, or successor
applicable form, as the case may be, certifying that it is entitled to
an exemption from United States backup withholding tax;
(ii) deliver to the Borrower and the Administrative Agent two
(2) further copies of any such form or certification on or before the
date that any such form or certification expires or becomes obsolete
and after the occurrence of any event requiring a change in the most
recent form previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the
Borrower or the Administrative Agent; or
(Y) in the case of any such Lender that is not a "bank" within
the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (i)
represent to the Borrower (for the benefit of the Borrower and the
Administrative Agent) that it is not a bank within the meaning of
Section 881(c)(3)(A) of the Internal Revenue Code, (ii) agree to
furnish to the Borrower on or before the date of any payment by the
Borrower, with a copy to the Administrative Agent two (2) accurate and
complete original signed copies of Internal Revenue Service Form W-8,
or successor applicable form certifying to such Lender's legal
entitlement at the date of such certificate to an exemption from U.S.
withholding tax under the provisions of Section 881(c) of the Internal
Revenue Code with respect to payments to be made under this Credit
Agreement and any Notes (and to deliver to the Borrower and the
Administrative Agent two (2) further copies of such form on or before
the date it expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recently provided form and, if
necessary, obtain any extensions of time reasonably
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requested by the Borrower or the Administrative Agent for filing and
completing such forms), and (iii) agree, to the extent legally entitled
to do so, upon reasonable request by the Borrower, to provide to the
Borrower (for the benefit of the Borrower and the Administrative Agent)
such other forms as may be reasonably required in order to establish
the legal entitlement of such Lender to an exemption from withholding
with respect to payments under this Credit Agreement and any Notes;
unless in any such case any change in treaty, law or regulation has occurred
after the date such Person becomes a Lender hereunder which renders all such
forms inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrower and the Administrative Agent. Each Person that shall become a Lender
pursuant to subsection 11.3 shall, upon the effectiveness of the related
transfer, be required to provide all of the forms, certifications and statements
required pursuant to this subsection.
3.11 Indemnity.
The Borrower promises to indemnify each Lender and to hold each Lender
harmless from any loss or expense which such Lender may sustain or incur (other
than through such Lender's gross negligence or willful misconduct) as a
consequence of (a) default by the Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans after the Borrower has given a notice
requesting the same in accordance with the provisions of this Credit Agreement,
(b) default by the Borrower in making any prepayment of a Eurodollar Loan after
the Borrower has given a notice thereof in accordance with the provisions of
this Credit Agreement or (c) the making of a prepayment of Eurodollar Loans on a
day which is not the last day of an Interest Period with respect thereto. With
respect to Eurodollar Loans, such indemnification may include an amount equal to
the excess, if any, of (i) the amount of interest which would have accrued on
the amount so prepaid, or not so borrowed, converted or continued, for the
period from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of the applicable Interest Period (or, in the case of a
failure to borrow, convert or continue, the Interest Period that would have
commenced on the date of such failure) in each case at the applicable rate of
interest for such Loans provided for herein (excluding, however, the Applicable
Percentage included therein, if any) over (ii) the amount of interest (as
reasonably determined by such Lender) which would have accrued to such Lender on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank Eurodollar market. The covenants of the Borrower
set forth in this Section 3.11 shall survive the termination of this Credit
Agreement and the payment of the Loans and all other amounts payable hereunder.
3.12 Pro Rata Treatment.
Except to the extent otherwise provided herein:
(a) Loans. Each Revolving Loan, each payment or prepayment of principal
of any Revolving Loan (other than Swingline Loans) or reimbursement obligations
arising from drawings under Letters of Credit, each payment of interest on the
Revolving Loans or reimbursement obligations arising from drawings under Letters
of Credit, each payment of Commitment Fees, each
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payment of the Letter of Credit Fee, each reduction of the Revolving Committed
Amount and each conversion or extension of any Revolving Loan (other than
Swingline Loans), shall be allocated pro rata among the Revolving Lenders in
accordance with the respective principal amounts of their outstanding Revolving
Loans and Participation Interests. With respect to the Term Loan, each payment
or prepayment of principal on the Term Loan, each payment of interest thereon,
and each conversion or extension of any Loan comprising the Term Loan, shall be
allocated pro rata among the Term Lenders in accordance with the respective
principal amounts of their Term Loan and Participation Interests therein.
(b) Advances. No Lender shall be responsible for the failure or delay
by any other Lender in its obligation to make its ratable share of a borrowing
hereunder; provided, however, that the failure of any Lender to fulfill its
obligations hereunder shall not relieve any other Lender of its obligations
hereunder. Unless the Administrative Agent shall have been notified in writing
by any Lender prior to a borrowing that such Lender will not make the amount
that would constitute its ratable share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by such Lender within the time period specified therefor hereunder, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the Federal Funds Rate for a period of two
(2) Business Days (or, in the case of a deemed demand of repayment of a
Swingline Loan by way of a Revolving Loan pursuant to Section 2.3(b)(iii), for a
period of two (2) Business Days after receipt by such Lender of notice thereof),
and thereafter at the Base Rate, for the period until such Lender makes such
amount immediately available to the Administrative Agent. If such Lender does
not pay such amounts to the Administrative Agent forthwith upon demand, the
Administrative Agent may notify the Borrower and request the Borrower to
immediately pay such amount to the Administrative Agent with interest at the
Base Rate. A certificate of the Administrative Agent submitted to any Lender
with respect to any amounts owing under this subsection shall be conclusive in
the absence of manifest error.
3.13 Sharing of Payments.
The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan, LOC Obligations or any other
obligation owing to such Lender under this Credit Agreement through the exercise
of a right of setoff, banker's lien or counterclaim, or pursuant to a secured
claim under Section 506 of Title 11 of the United States Code or other security
or interest arising from, or in lieu of, such secured claim, received by such
Lender under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, in excess of its pro rata share of such
payment as provided for in this Credit Agreement, such Lender shall promptly
purchase from the other Lenders a participation in such Loans, LOC Obligations
and other obligations in such amounts, and make such other adjustments from time
to time, as shall be equitable to the end that all Lenders share such payment in
accordance with their respective ratable shares as provided for in this Credit
Agreement. The Lenders further agree among themselves that if payment to a
Lender obtained by such Lender through the exercise of a right of setoff,
banker's lien, counterclaim or other event as aforesaid shall be rescinded or
must otherwise be restored, each
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Lender which shall have shared the benefit of such payment shall, by purchase of
a participation, return its share of that benefit (together with its share of
any accrued interest payable with respect thereto) to each Lender whose payment
shall have been rescinded or otherwise restored. The Borrower agrees that any
Lender so purchasing such a participation may, to the fullest extent permitted
by law, exercise all rights of payment, including setoff, banker's lien or
counterclaim, with respect to such participation as fully as if such Lender were
a holder of such Loan, LOC Obligations or other obligation in the amount of such
participation. Except as otherwise expressly provided in this Credit Agreement,
if any Lender or the Administrative Agent shall fail to remit to the
Administrative Agent or any other Lender an amount payable by such Lender or the
Administrative Agent to the Administrative Agent or such other Lender pursuant
to this Credit Agreement on the date when such amount is due, such payments
shall be made together with interest thereon for each date from the date such
amount is due until the date such amount is paid to the Administrative Agent or
such other Lender at a rate per annum equal to the Federal Funds Rate. 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 3.13 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 under this
Section 3.13 to share in the benefits of any recovery on such secured claim.
3.14 Payments, Computations, Etc.
(a) Except as otherwise specifically provided herein, all payments
hereunder shall be made to the Administrative Agent in dollars in immediately
available funds, without setoff, deduction, counterclaim or withholding of any
kind, at the Administrative Agent's office specified in Section 11.1 not later
than 2:00 P.M. (Charlotte, North Carolina time) on the date when due. Payments
received after such time shall be deemed to have been received on the next
succeeding Business Day. The Administrative Agent may (but shall not be
obligated to) debit the amount of any such payment which is not made by such
time to any ordinary deposit account of the Borrower maintained with the
Administrative Agent (with notice to the Borrower). The Borrower shall, at the
time it makes any payment under this Credit Agreement, specify to the
Administrative Agent the Loans, LOC Obligations, Fees, interest or other amounts
payable by the Borrower hereunder to which such payment is to be applied (and in
the event that it fails so to specify, or if such application would be
inconsistent with the terms hereof, the Administrative Agent shall distribute
such payment to the Lenders in such manner as the Administrative Agent may
determine to be appropriate in respect of obligations owing by the Borrower
hereunder, subject to the terms of Section 3.12(a)). The Administrative Agent
will distribute such payments to such Lenders, if any such payment is received
prior to 2:00 P.M. (Charlotte, North Carolina time) on a Business Day, in like
funds as received prior to the end of such Business Day and otherwise the
Administrative Agent will distribute such payment to such Lenders on the next
succeeding Business Day. Whenever any payment hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day (subject to accrual of interest and Fees for
the period of such extension), except that in the case of Eurodollar Loans, if
the extension would cause the payment to be made in the next following calendar
month, then such payment shall instead be made on the next preceding Business
Day. Except as expressly provided otherwise herein, all computations of interest
and fees shall be made on the basis of actual number
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of days elapsed over a year of 360 days, except with respect to computation of
interest on Base Rate Loans which (unless the Base Rate is determined by
reference to the Federal Funds Rate) shall be calculated based on a year of 365
or 366 days, as appropriate. Interest shall accrue from and include the date of
borrowing, but exclude the date of payment.
(b) Allocation of Payments After Event of Default. Notwithstanding any
other provisions of this Credit Agreement to the contrary, after the occurrence
and during the continuance of an Event of Default, all amounts collected or
received by the Administrative Agent or any Lender on account of the Obligations
or any other amounts outstanding under any of the Credit Documents shall be paid
over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation reasonable attorneys' fees)
of the Administrative Agent in connection with enforcing the rights of
the Lenders under the Credit Documents;
SECOND, to payment of any fees owed to the Administrative
Agent;
THIRD, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation, reasonable attorneys' fees)
of each of the Lenders in connection with enforcing its rights under
the Credit Documents or otherwise with respect to the Obligations owing
to such Lender;
FOURTH, to the payment of all accrued interest and fees on or
in respect of the Obligations;
FIFTH, to the payment of the outstanding principal amount of
the Obligations (including the payment or cash collateralization of the
outstanding LOC Obligations);
SIXTH, to all other Obligations and other obligations which
shall have become due and payable under the Credit Documents or
otherwise and not repaid pursuant to clauses "FIRST" through "FIFTH"
above; and
SEVENTH, to the payment of the surplus, if any, to whoever may
be lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; and (ii) each of the Lenders shall receive an amount equal
to its pro rata share (based on the proportion that the then outstanding
Obligations held by such Lender bears to the aggregate then outstanding
Obligations) of amounts available to be applied pursuant to clauses "FOURTH",
"FIFTH" and "SIXTH" above; and (iii) to the extent that any amounts available
for distribution pursuant to clause "FIFTH" above are attributable to the issued
but undrawn amount of outstanding Letters of Credit, such amounts shall be held
by the Administrative Agent in a cash collateral account and applied (A) first,
to reimburse the Issuing Lender for any drawings under such Letters of Credit
and (B) then,
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following the expiration of all Letters of Credit, to all other
obligations of the types described in clauses "FIFTH" and "SIXTH" above in the
manner provided in this Section 3.14(b).
3.15 Evidence of Debt.
(a) Each Lender shall maintain an account or accounts evidencing each
Loan made by such Lender to the Borrower from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Credit Agreement. Each Lender will make reasonable efforts to
maintain the accuracy of its account or accounts and to promptly update its
account or accounts from time to time, as necessary.
(b) The Administrative Agent shall maintain the Register pursuant to
Section 11.3(c) hereof, and a subaccount for each Lender, in which Register and
subaccounts (taken together) shall be recorded (i) the amount, type and Interest
Period of each such Loan hereunder, (ii) the amount of any principal or interest
due and payable or to become due and payable to each Lender hereunder and (iii)
the amount of any sum received by the Administrative Agent hereunder from or for
the account of the Borrower and each Lender's share thereof. The Administrative
Agent will make reasonable efforts to maintain the accuracy of the subaccounts
referred to in the preceding sentence and to promptly update such subaccounts
from time to time, as necessary.
(c) The entries made in the accounts, Register and subaccounts
maintained pursuant to subsection (b) of this Section 3.15 (and, if consistent
with the entries of the Administrative Agent, subsection (a)) shall be prima
facie evidence of the existence and amounts of the obligations of the Borrower
therein recorded; provided, however, that the failure of any Lender or the
Administrative Agent to maintain any such account, such Register or such
subaccount, as applicable, or any error therein, shall not in any manner affect
the obligation of the Borrower to repay the Loans made by such Lender in
accordance with the terms hereof.
3.16 Certain Rules Relating to the Payment of Additional Amounts.
(a) Upon the request and at the expense of the Borrower, each Lender to
which the Borrower is required to pay any additional amount pursuant to Section
3.9 or 3.10 shall reasonably afford the Borrower the opportunity to contest, and
shall reasonably cooperate with the Borrower in contesting, the imposition of
any Non-Excluded Tax giving rise to such payment; provided that (i) such Lender
shall not be required to afford the Borrower the opportunity to so contest
unless the Borrower shall have confirmed in writing to such Lender its
obligation to pay such amounts pursuant to this Agreement and (ii) the Borrower
shall reimburse such Lender for its reasonable attorney's and accountant's fees
and disbursements incurred in so cooperating with the Borrower in contesting the
imposition of such Non-Excluded Tax.
(b) If a Lender changes its applicable lending office (other than
pursuant to paragraph (c) below) or engages in a combination with another
financial institution and the effect of the change or combination, as of the
date of the change or combination, would be to cause the Borrower to become
obligated to pay any additional amount under subsection 3.9 or 3.10, the
Borrower shall not be obligated to pay such additional amount.
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(c) If a condition or an event occurs that would, or would upon the
passage of time or giving of notice, result in the payment of any additional
amount to any Lender by the Borrower pursuant to Section 3.9 or 3.10, such
Lender shall promptly notify the Borrower and the Administrative Agent and shall
take such steps as may reasonably be available to it and acceptable to the
Borrower to mitigate the effects of such condition or event (which shall include
efforts to rebook the Revolving Loans held by such Lender at another lending
office, or through another branch or an affiliate, of such Lender); provided
that such Lender shall not be required to take any step that, in its reasonable
judgment, would be disadvantageous to its business or operations in any material
respect or would require it to incur additional costs (unless the Borrower
agrees to reimburse such Lender for the reasonable incremental out-of-pocket
costs thereof).
(d) If the Borrower shall become obligated to pay additional amounts
pursuant to Section 3.9 or 3.10 and any affected Lender shall not have promptly
taken steps necessary to avoid the need for payments under Section 3.9 or 3.10,
the Borrower shall have the right, for so long as such obligation remains, with
the assistance of the Administrative Agent, to seek one or more substitute
Lenders reasonably satisfactory to the Administrative Agent and the Borrower to
purchase the affected Revolving Loans, in whole or in part, at an aggregate
price no less than such Revolving Loans' principal amount plus accrued interest,
and assume the affected obligations under this Agreement. In such case, the
Borrower, the Administrative Agent, the affected Lender, and any substitute
Lender shall execute and deliver an appropriately completed Assignment pursuant
to Section 11.3(b) to effect the assignment of rights to, and the assumption of
obligations by, the substitute Lender; provided that any fees required to be
paid pursuant to Section 11.3(b) in connection with such assignment shall be
paid by the Borrower.
SECTION 4
GUARANTY
4.1 The Guarantee.
Each of the Guarantors hereby jointly and severally guarantees to each
Lender, to each Affiliate of a Lender that enters into a Hedging Agreement and
to the Administrative Agent as hereinafter provided the prompt payment of the
Guaranteed Obligations in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration, as mandatory cash collateralization or
otherwise) strictly in accordance with the terms thereof. The Guarantors hereby
further agree that if any of the Guaranteed Obligations are not paid in full
when due (whether at stated maturity, as a mandatory prepayment, by
acceleration, as mandatory cash collateralization or otherwise), the Guarantors
will, jointly and severally, promptly pay the same, without any demand or notice
whatsoever, and that in the case of any extension of time of payment or renewal
of any of the Guaranteed Obligations, the same will be promptly paid in full
when due (whether at extended maturity, as a mandatory prepayment, by
acceleration or otherwise) in accordance with the terms of such extension or
renewal.
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Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents or Hedging Agreements, to the extent the
obligations of a Guarantor shall be adjudicated to be invalid or unenforceable
for any reason (including, without limitation, because of any applicable state
or federal law relating to fraudulent conveyances or transfers) then the
obligations of each Guarantor hereunder shall be limited to the maximum amount
that is permissible under applicable law (whether federal or state and
including, without limitation, the Bankruptcy Code).
4.2 Obligations Unconditional.
The obligations of the Guarantors under Section 4.1 hereof are joint
and several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Credit Documents or Hedging
Agreements, or any other agreement or instrument referred to therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever which might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 4.2 that the obligations of the
Guarantors hereunder shall be absolute and unconditional under any and all
circumstances. Each Guarantor agrees that such Guarantor shall have no right of
subrogation, indemnity, reimbursement or contribution against the Borrower or
any other Guarantor of the Guaranteed Obligations for amounts paid under this
Guaranty until such time as the Lenders (and any Affiliates of Lenders entering
into Hedging Agreements) have been paid in full, all Commitments under the
Credit Agreement have been terminated and no Person or Governmental Authority
shall have any right to request any return or reimbursement of funds from the
Lenders in connection with monies received under the Credit Documents or Hedging
Agreements. Without limiting the generality of the foregoing, it is agreed that,
to the fullest extent permitted by law, the occurrence of any one or more of the
following shall not alter or impair the liability of any Guarantor hereunder
which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to any
Guarantor, the time for any performance of or compliance with any of
the Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of any
of the Credit Documents, any Hedging Agreement or any other agreement
or instrument referred to in the Credit Documents or Hedging Agreements
shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall
be accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the
Credit Documents, any Hedging Agreement or any other agreement or
instrument referred to in the Credit Documents or Hedging Agreements
shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with;
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(iv) any Lien granted to, or in favor of, the Administrative
Agent or any Lender or Lenders as security for any of the Guaranteed
Obligations shall fail to attach or be perfected; or
(v) any of the Guaranteed Obligations shall be determined to
be void or voidable (including, without limitation, for the benefit of
any creditor of any Guarantor) or shall be subordinated to the claims
of any Person (including, without limitation, any creditor of any
Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Administrative Agent or any Lender
exhaust any right, power or remedy or proceed against any Person under any of
the Credit Documents, any Hedging Agreement or any other agreement or instrument
referred to in the Credit Documents or Hedging Agreements, or against any other
Person under any other guarantee of, or security for, any of the Guaranteed
Obligations.
4.3 Reinstatement.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Guaranteed Obligations is rescinded
or must be otherwise restored by any holder of any of the Guaranteed
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Administrative Agent and each Lender on demand for all reasonable costs and
expenses (including, without limitation, fees and expenses of counsel) incurred
by the Administrative Agent or such Lender in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
4.4 Certain Additional Waivers.
Each Guarantor agrees that such Guarantor shall have no right of
recourse to security for the Guaranteed Obligations, except through the exercise
of the rights of subrogation pursuant to Section 4.2.
4.5 Remedies.
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Administrative Agent and the
Lenders, on the other hand, the Guaranteed Obligations may be declared to be
forthwith due and payable as provided in Section 9.2 hereof (and shall be deemed
to have become automatically due and payable in the circumstances provided in
said Section 9.2) for purposes of Section 4.1 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration (or preventing the
Guaranteed Obligations from becoming automatically due and payable) as against
any other Person and that, in the event of such declaration (or the Guaranteed
Obligations being deemed to have become automatically due and
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payable), the Guaranteed Obligations (whether or not due and payable by any
other Person) shall forthwith become due and payable by the Guarantors for
purposes of said Section 4.1.
4.6 Rights of Contribution.
The Guarantors hereby agree, as among themselves, that if any Guarantor
shall become an Excess Funding Guarantor (as defined below), each other
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
succeeding provisions of this Section 4.6), pay to such Excess Funding Guarantor
an amount equal to such Guarantor's Pro Rata Share (as defined below and
determined, for this purpose, without reference to the properties, assets,
liabilities and debts of such Excess Funding Guarantor) of such Excess Payment
(as defined below). The payment obligation of any Guarantor to any Excess
Funding Guarantor under this Section 4.6 shall be subordinate and subject in
right of payment to the prior payment in full of the obligations of such
Guarantor under the other provisions of this Section 4, and such Excess Funding
Guarantor shall not exercise any right or remedy with respect to such excess
until payment and satisfaction in full of all of such obligations. For purposes
hereof, (i) "Excess Funding Guarantor" shall mean, in respect of any obligations
arising under the other provisions of this Section 4 (hereafter, the "Guarantied
Obligations"), a Guarantor that has paid an amount in excess of its Pro Rata
Share of the Guarantied Obligations; (ii) "Excess Payment" shall mean, in
respect of any Guarantied Obligations, the amount paid by an Excess Funding
Guarantor in excess of its Pro Rata Share of such Guarantied Obligations; and
(iii) "Pro Rata Share", for the purposes of this Section 4.6, shall mean, for
any Guarantor, the ratio (expressed as a percentage) of (a) the amount by which
the aggregate present fair saleable value of all of its assets and properties
exceeds the amount of all debts and liabilities of such Guarantor (including
contingent, subordinated, unmatured, and unliquidated liabilities, but excluding
the obligations of such Guarantor hereunder) to (b) the amount by which the
aggregate present fair saleable value of all assets and other properties of the
Borrower and all of the Guarantors exceeds the amount of all of the debts and
liabilities (including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of the Borrower and the Guarantors
hereunder) of the Borrower and all of the Guarantors, all as of the Closing Date
(if any Guarantor becomes a party hereto subsequent to the Closing Date, then
for the purposes of this Section 4.6 such subsequent Guarantor shall be deemed
to have been a Guarantor as of the Closing Date and the information pertaining
to, and only pertaining to, such Guarantor as of the date such Guarantor became
a Guarantor shall be deemed true as of the Closing Date).
4.7 Continuing Guarantee.
The guarantee in this Section 4 is a continuing guarantee, and shall
apply to all Guaranteed Obligations whenever arising.
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SECTION 5
CONDITIONS
5.1 Conditions to Closing.
This Credit Agreement shall become effective, and the initial
Extensions of Credit may be made, upon the satisfaction of the following
conditions precedent:
(a) Execution of Credit Agreement and Credit Documents.
Receipt of (i) multiple counterparts of this Credit Agreement, (ii) a Revolving
Note for each Revolving Lender, and (iii) a Term Note for each Term Lender and
(iv) multiple counterparts of the Pledge Agreement, the Security Agreement and
the UCC financing statements relating thereto, if any, in each case executed by
a duly authorized officer of each party thereto and in each case conforming to
the requirements of this Credit Agreement.
(b) Consummation of Spin-off. Evidence of consummation of the
spin-off of the Borrower from USOP (the "Spin-Off Transactions") as described in
the Distribution Agreement among Workflow Graphics, Inc., Aztec Technology
Partners, Navigant International, Inc. and the Borrower (collectively, the
"Spin-Off Companies") and USOP, the Tax Allocation Agreement among the Spin-Off
Companies and USOP, the Employee Benefits Agreement among the Spin-Off Companies
and USOP and the Tax Indemnity Agreement among the Spin-Off Companies
(collectively, the "Spin-Off Documents"), substantially final forms of which are
attached as exhibits to the Borrower's Registration Statements on Form S-1 under
the Securities Act of 1933, and the transactions contemplated in connection
therewith, including receipt of all shareholder, governmental and other
necessary consents, approvals and authorizations (including the passage of all
waiting periods).
(c) Pro Forma Balance Sheet. Receipt of a pro forma balance
sheet for the Borrower and its Subsidiaries upon consummation of the spin-off
and the transactions contemplated in connection therewith after giving effect to
the initial Extensions of Credit hereunder.
(d) Legal Opinions. Receipt of multiple counterparts of
opinions of counsel for the Credit Parties relating to the Credit Documents and
the transactions contemplated herein, in form and substance satisfactory to the
Administrative Agent and the Required Lenders.
(e) Stock Certificates. Receipt of original stock certificates
evidencing the ownership interests of the Credit Parties pledged pursuant to the
Pledge Agreement, together in each case with original undated stock powers
executed in blank.
(f) Financial Information. Receipt of financial information
regarding the Borrower and its subsidiaries, as may be requested by, and in each
case in form and substance satisfactory to the Administrative Agent and the
Lenders.
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(g) Evidence of Insurance. Receipt of insurance certificates
or policies evidencing flood hazard insurance (for improvements located in areas
having "special flood hazards"), casualty insurance (including builders' risk
and all-risk permanent policies) and liability insurance conforming to the
requirements of this Credit Agreement and the other Credit Documents, showing
the Administrative Agent as loss payee with respect to the flood hazard and
casualty insurance, together with evidence of payment of premiums thereon.
(h) Absence of Legal Proceedings. The absence of any action,
suit, investigation or proceeding pending in any court or before any arbitrator
or governmental instrumentality which could reasonably be expected to have a
Material Adverse Effect on the Consolidated Group taken as a whole.
(i) Corporate Documents. Receipt of the following (or their
equivalent) for each of the Credit Parties:
(i) Articles of Incorporation. Copies of the articles
of incorporation or charter documents certified to be true and complete
as of a recent date by the appropriate governmental authority of the
state of its incorporation.
(ii) Resolutions. Copies of resolutions of the Board
of Directors approving and adopting the respective Credit Documents,
the transactions contemplated therein and authorizing execution and
delivery thereof, certified by a secretary or assistant secretary as of
the Closing Date to be true and correct and in force and effect as of
such date.
(iii) Bylaws. Copies of the bylaws certified by a
secretary or assistant secretary as of the Closing Date to be true and
correct and in force and effect as of such date.
(iv) Good Standing. Copies, where applicable, of (A)
certificates of good standing, existence or its equivalent certified as
of a recent date by the appropriate governmental authorities of the
state of incorporation and each other state in which the failure to so
qualify and be in good standing would in the aggregate have a Material
Adverse Effect and (B) a certificate indicating payment of all
corporate franchise taxes certified as of a recent date by the
appropriate governmental taxing authorities.
(v) Officer's Certificate. An officer's certificate
for each of the Credit Parties dated as of the Closing Date
substantially in the form of Schedule 5.1(i)(v) with appropriate
insertions and attachments.
(j) Fees. Receipt of all fees, if any, owing pursuant to the
Administrative Agent's Fee Letter, Section 3.5 or otherwise.
(k) Subsection 5.2 Conditions. The conditions specified in
Section 5.2 shall be satisfied
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(l) Additional Matters. All other documents and legal matters
in connection with the transactions contemplated by this Credit Agreement shall
be reasonably satisfactory in form and substance to the Agents and the Required
Lenders.
5.2 Conditions to All Extensions of Credit.
The obligation of each Lender to make any Extension of Credit hereunder
(including the initial Extension of Credit to be made hereunder) is subject to
the satisfaction of the following conditions precedent on the date of making
such Extension of Credit:
(a) Representations and Warranties. The representations and
warranties made by the Credit Parties herein or in any other Credit Documents or
which are contained in any certificate furnished at any time under or in
connection herewith shall be true and correct in all material respects on and as
of the date of such Extension of Credit as if made on and as of such date
(except for those which expressly relate to an earlier date).
(b) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing on such date or after giving
effect to the Extension of Credit to be made on such date unless such Default or
Event of Default shall have been waived in accordance with this Credit
Agreement.
(c) No Bankruptcy Event. No Bankruptcy Event shall have
occurred and be continuing with respect to any of the Credit Parties.
(d) No Material Adverse Effect. No circumstances, events or
conditions shall have occurred since the date of the audited financial
statements referenced in Section 6.1 which could reasonably be expected to have
a Material Adverse Effect.
(e) Additional Conditions to Revolving Loans. If a Revolving
Loan is made pursuant to Section 2.1, all conditions set forth therein shall
have been satisfied.
(f) Additional Conditions to Letters of Credit. If such
Extension of Credit is made pursuant to Section 2.2, all conditions set forth
therein shall have been satisfied.
(g) Additional Conditions to Swingline Loans. If a Swingline
Loan is made pursuant to Section 2.3, all conditions set forth therein shall
have been satisfied.
(h) Additional Conditions to the Term Loan. If the Term Loan
is made pursuant to Section 2.4, all conditions set forth therein shall have
been satisfied.
Each request for Extension of Credit (including extensions and
conversions) and each acceptance by the Borrower of an Extension of Credit
(including extensions and conversions) shall be deemed to constitute a
representation and warranty by the Borrower as of the date of
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such Extension of Credit that the applicable conditions in paragraphs (a), (b),
(c) and (d), and in (e), (f) or (g) of this subsection have been satisfied.
5.3 Conditions Subsequent to Closing.
As of the Closing Date, it is the present intention of the Borrower, as
a general matter, to lease, rather than own, real property in its business. To
that end, the Borrower plans to market real property owned by it with an intent
to lease back the real property necessary and useful in its operations and to
dispose of real property which is not needed in the operation of its business.
The Borrower agrees that to the extent domestic members of the Consolidated
Group shall continue to own real property owned as of the Closing Date twelve
(12) months after the Closing Date, the following conditions subsequent shall be
satisfied:
(a) Execution of Mortgages. Receipt of multiple counterparts
of the Mortgages in each case executed by a duly authorized officer of each
party thereto and in each case conforming to the requirements of the Credit
Agreement.
(b) Surveys. Receipt of copies of recent ALTA surveys of each
of the Mortgaged Properties by registered engineers or land surveyors, in form
and detail (including the location of special flood hazard areas) acceptable to
the Administrative Agent.
(c) Title Policies. Receipt of standard ALTA mortgagee
policies insuring the priority of the Mortgages in amounts and from companies
acceptable to the Administrative Agent and the Required Lenders. The title
policies shall include only such exceptions as are acceptable to the
Administrative Agent. Copies of recorded documentation relating to all such
exceptions will be provided to the Administrative Agent.
(d) Appraisals. Receipt of appraisals of certain of the
Mortgaged Property, in form and content satisfactory to the Administrative
Agent.
(e) Environmental Reports. Receipt of copies of environmental
assessment reports and other environmental documentation, if any, relating to
the Mortgaged Properties, which reports shall be in form and detail and which
results and conclusions shall be satisfactory to the Administrative Agent and
the Required Lenders.
SECTION 6
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Credit Agreement and to make
Extensions of Credit herein provided for, each of the members of the
Consolidated Group parties hereto hereby represents and warrants to the
Administrative Agent and to each Lender that:
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6.1 Financial Condition.
Each of the financial statements described below (copies of which have
heretofore been provided to the Administrative Agent for distribution to the
Lenders), have been prepared in accordance with GAAP consistently applied
throughout the periods covered thereby, are complete and correct in all material
respects and present fairly the financial condition and results from operations
of the entities and for the periods specified, subject in the case of interim
company-prepared statements to normal year-end adjustments:
(i) the annual audited consolidated financial statements of
the Borrower and its consolidated subsidiaries contained in the
Borrower's Form 10K for the fiscal year ending April 25, 1998,
including a consolidated balance sheet of the Borrower and its
consolidated subsidiaries dated as of April 25, 1998, together with
related statements of income and cash flows certified by Price
Waterhouse LLP, certified public accountants; and
(ii) the company-prepared consolidated financial statements of
the Borrower and its consolidated subsidiaries contained in the
Borrower's Form 10Q for the fiscal period ending July 25, 1998,
including a consolidated balance sheet of the Borrower and its
consolidated subsidiaries dated as of July 25, 1998, together with
related statements of income and cash flows.
6.2 No Changes or Restricted Payments.
Since the date of the financial statements referenced in Section
6.1(ii), there has been no circumstance, development or event relating to or
affecting the members of the Consolidated Group which has had or would be
reasonably expected to have a Material Adverse Effect.
6.3 Organization; Existence; Compliance with Law.
Each of the members of the Consolidated Group (a) is duly organized,
validly existing in good standing under the laws of the jurisdiction of its
incorporation or organization, (b) has the corporate or other necessary power
and authority, and the legal right to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified as a foreign entity and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, other than in such jurisdictions where the failure to be so
qualified and in good standing would not, in the aggregate, have a Material
Adverse Effect, and (d) is in compliance with all Requirements of Law, except to
the extent that the failure to comply therewith would not, in the aggregate, be
reasonably expected to have a Material Adverse Effect.
6.4 Power; Authorization; Enforceable Obligations.
Each of the Credit Parties has the corporate or other necessary power
and authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party and has taken
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all necessary corporate or other action to authorize the execution, delivery and
performance by it of the Credit Documents to which it is a party. No consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with
acceptance of extensions of credit or the making of the guaranties hereunder or
with the execution, delivery or performance of any Credit Documents by the
Credit Parties (other than those which have been obtained, such filings as are
required by the Securities and Exchange Commission and to fulfill other
reporting requirements with Governmental Authorities) or with the validity or
enforceability of any Credit Document against the Credit parties (except such
filings as are necessary in connection with the perfection of the Liens created
by such Credit Documents). Each Credit Document to which it is a party
constitutes a legal, valid and binding obligation of such Credit Party
enforceable against such Credit Party in accordance with their respective terms,
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.
6.5 No Legal Bar.
The execution, delivery and performance of the Credit Documents, the
borrowings hereunder and the use of the Extensions of Credit will not violate
any Requirement of Law or any Contractual Obligation of any member of the
Consolidated Group (except those as to which waivers or consents have been
obtained), and will not result in, or require, the creation or imposition of any
Lien on any of their respective properties or revenues pursuant to any
Requirement of Law or Contractual Obligation other than the Liens arising under
or contemplated in connection with the Credit Documents. No member of the
Consolidated Group is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a Material
Adverse Effect.
6.6 No Material Litigation.
No claim, litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the best knowledge of the
Credit Parties, threatened by or against, any members of the Consolidated Group
or against any of their respective properties or revenues which (a) relate to
the Credit Documents or any of the transactions contemplated hereby or thereby,
(b) if adversely determined, could reasonably be expected to have a Material
Adverse Effect. Set forth on Schedule 6.6 is a summary of all claims,
litigation, investigations and proceedings pending or, to the best knowledge of
the Credit Parties, threatened by or against the members of the Consolidated
Group or against any of their respective properties or revenues seeking damages
in excess of $100,000 in each case, and none of such actions, individually or in
the aggregate, is reasonably expected to have a Material Adverse Effect.
6.7 No Default.
No Default or Event of Default has occurred and is continuing.
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6.8 Ownership of Property; Liens.
Each of members of the Consolidated Group has good record and
marketable title in fee simple to, or a valid leasehold interest in, all its
material real property, and good title to, or a valid leasehold interest in, all
its other material property, and none of such property is subject to any Lien,
except for Permitted Liens.
6.9 Intellectual Property.
Each of the members of the Consolidated Group owns, or has the legal
right to use, all United States trademarks, tradenames, copyrights, technology,
know-how and processes, if any, necessary for each of them to conduct its
business as currently conducted (the "Intellectual Property") except for those
the failure to own or have such legal right to use could not be reasonably
expected to have a Material Adverse Effect. No claim has been asserted and is
pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor does any Credit Party know of any such claim, and the use of such
Intellectual Property by the members of the Consolidated Group does not infringe
on the rights of any Person, except for such claims and infringements that in
the aggregate, could not be reasonably expected to have a Material Adverse
Effect.
6.10 No Burdensome Restrictions.
No Requirement of Law or Contractual Obligation of the members of the
Consolidated Group could be reasonably expected to have a Material Adverse
Effect.
6.11 Taxes.
Except as set forth on Schedule 6.11, each of the members of the
Consolidated Group has filed or caused to be filed all United States federal
income tax returns and all other material tax returns which, to the best
knowledge of the Credit Parties, are required to be filed and has paid (a) all
taxes shown to be due and payable on said returns or (b) all taxes shown to be
due and payable on any assessments of which it has received notice made against
it or any of its property and all other taxes, fees or other charges imposed on
it or any of its property by any Governmental Authority (other than any (i)
taxes, fees or other charges with respect to which the failure to pay, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect or
(ii) taxes, fees or other charges the amount or validity of which are currently
being contested and with respect to which reserves in conformity with GAAP have
been provided on the books of such Person), and no tax Lien has been filed, and,
to the best knowledge of the Credit Parties, no claim is being asserted, with
respect to any such tax, fee or other charge.
6.12 ERISA
Except as set forth on Schedule 6.12 and except as could not reasonably
be expected to have a Material Adverse Effect:
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(a) To the knowledge of the Credit Parties, during the five-year period
prior to the date on which this representation is made or deemed made: (i) no
ERISA Event has occurred and no event or condition has occurred or exists as a
result of which any ERISA Event could reasonably be expected to occur, with
respect to any Plan; (ii) no "accumulated funding deficiency," as such term is
defined in Section 302 of ERISA and Section 412 of the Code, whether or not
waived, has occurred with respect to any Plan; (iii) each Plan has been
maintained, operated, and funded in compliance with its own terms and in
material compliance with the provisions of ERISA, the Code, and any other
applicable federal or state laws; and (iv) no lien in favor of the PBGC or a
Plan has arisen or is reasonably likely to arise on account of any Plan.
(b) The actuarial present value of all "benefit liabilities" (as
defined in Section 4001(a)(16) of ERISA), whether or not vested, under each
Single Employer Plan, as of the last annual valuation date prior to the date on
which this representation is made or deemed made (determined, in each case, in
accordance with Financial Accounting Standards Board Statement 87, utilizing the
actuarial assumptions used in such Plan's most recent actuarial valuation
report), did not exceed as of such valuation date the fair market value of the
assets of such Plan.
(c) No member of the Consolidated Group nor any ERISA Affiliate has
incurred, or, to the best knowledge of the Credit Parties, could be reasonably
expected to incur, any withdrawal liability under ERISA to any Multiemployer
Plan or Multiple Employer Plan. No member of the Consolidated Group nor any
ERISA Affiliate would become subject to any withdrawal liability under ERISA if
any member of the Consolidated Group or any ERISA Affiliate were to withdraw
completely from all Multiemployer Plans and Multiple Employer Plans as of the
valuation date most closely preceding the date on which this representation is
made or deemed made. No member of the Consolidated Group nor any ERISA Affiliate
has received any notification that any Multiemployer Plan is in reorganization
(within the meaning of Section 4241 of ERISA), is insolvent (within the meaning
of Section 4245 of ERISA), or has been terminated (within the meaning of Title
IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the Credit
Parties, reasonably expected to be in reorganization, insolvent, or terminated.
(d) No prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has
occurred with respect to a Plan which has subjected or may subject any member of
the Consolidated Group or any ERISA Affiliate to any liability under Sections
406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any
agreement or other instrument pursuant to which any member of the Consolidated
Group or any ERISA Affiliate has agreed or is required to indemnify any person
against any such liability.
(e) No member of the Consolidated Group nor any ERISA Affiliates has
any material liability with respect to "expected post-retirement benefit
obligations" within the meaning of the Financial Accounting Standards Board
Statement 106. Each Plan which is a welfare plan (as defined in Section 3(1) of
ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Code apply
has been administered in compliance in all material respects of such sections.
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6.13 Governmental Regulations, Etc.
(a) No part of the proceeds of the Extensions of Credit hereunder will
be used, directly or indirectly, for the purpose of purchasing or carrying any
"margin stock" within the meaning of Regulation U, or for the purpose of
purchasing or carrying or trading in any securities. If requested by any Lender
or the Administrative Agent, the Borrower will furnish to the Administrative
Agent and each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form U-1 referred to in said Regulation U. No indebtedness
being reduced or retired out of the proceeds of the Extensions of Credit
hereunder was or will be incurred for the purpose of purchasing or carrying any
margin stock within the meaning of Regulation U or any "margin security" within
the meaning of Regulation T. "Margin stock" within the meanings of Regulation U
does not constitute more than 25% of the value of the consolidated assets of the
Borrower and its Subsidiaries. None of the transactions contemplated by this
Credit Agreement (including, without limitation, the direct or indirect use of
the proceeds of the Loans) will violate or result in a violation of the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, or regulations issued pursuant thereto, or Regulation T, U or X.
(b) None of the members of the Consolidated Group is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company Act of 1940, each as amended. In addition,
none of the members of the Consolidated Group is (i) an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, and is not controlled by such a company, or (ii) a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(c) No director, executive officer or principal shareholder of any
member of the Consolidated Group is a director, executive officer or principal
shareholder of any Lender. For the purposes hereof the terms "director",
"executive officer" and "principal shareholder" (when used with reference to any
Lender) have the respective meanings assigned thereto in Regulation O issued by
the Board of Governors of the Federal Reserve System.
(d) Each of the members of the Consolidated Group has obtained all
material licenses, permits, franchises or other governmental authorizations
necessary to the ownership of its respective Property and to the conduct of its
business.
(e) None of the members of the Consolidated Group is in violation of
any applicable statute, regulation or ordinance of the United States of America,
or of any state, city, town, municipality, county or any other jurisdiction, or
of any agency thereof (including without limitation, environmental laws and
regulations), which violation could reasonably be expected to have a Material
Adverse Effect.
(f) Each of the members of the Consolidated Group is current with all
material reports and documents, if any, required to be filed with any state or
federal securities commission or
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similar agency and is in full compliance in all material respects with all
applicable rules and regulations of such commissions.
6.14 Subsidiaries.
Set forth on Schedule 6.14 are all the Subsidiaries of the Borrower at
the Closing Date, the jurisdiction of their incorporation and the direct or
indirect ownership interest of the Borrower therein.
6.15 Purpose of Extensions of Credit.
Extensions of Credit hereunder may be used to refinance existing
indebtedness (including intercompany indebtedness owing to USOP), to finance
working capital, capital expenditures and other lawful corporate purposes,
including acquisitions permitted hereunder.
6.16 Environmental Matters.
Except as set forth on Schedule 6.16 and except as could not reasonably
be expected to have a Material Adverse Effect:
(a) Each of the facilities and properties owned, leased or operated by
the members of the Consolidated Group (the "Properties") and, to the knowledge
of the Credit Parties, all operations at the Properties are in compliance with
all applicable Environmental Laws, and there is no violation of any
Environmental Law with respect to the Properties or the businesses operated by
the members of the Consolidated Group (the "Businesses"), and, to the knowledge
of the Credit Parties, there are no conditions relating to the Businesses or
Properties that could reasonably be expected to give rise to liability under any
applicable Environmental Laws.
(b) None of the Properties contains, or, to the knowledge of the Credit
Parties, has previously contained, any Materials of Environmental Concern at, on
or under the Properties in amounts or concentrations that constitute or
constituted a violation of, or could reasonably be expected to give rise to
liability under, Environmental Laws.
(c) None of the Credit Parties has received any written or verbal
notice of, or inquiry from any Governmental Authority regarding, any violation,
alleged violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with regard to any
of the Properties or the Businesses, nor does any Credit Party have knowledge or
reason to believe that any such notice will be received or is being threatened.
(d) To the knowledge of the Credit Parties, Materials of Environmental
Concern have not been transported or disposed of from the Properties, or
generated, treated, stored or disposed of at, on or under any of the Properties
or any other location, in each case by or on behalf any members of the
Consolidated Group in violation of, or in a manner that would be reasonably
likely to give rise to liability under, any applicable Environmental Law.
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(e) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of any Credit Party, threatened, under any
Environmental Law to which any member of the Consolidated Group is or is
reasonably likely to be named as a party, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental Law
with respect to any member of the Consolidated Group, the Properties or the
Businesses.
(f) To the knowledge of the Credit Parties, there has been no release
or, threat of release of Materials of Environmental Concern at or from the
Properties, or arising from or related to the operations (including, without
limitation, disposal) of any member of the Consolidated Group in connection with
the Properties or otherwise in connection with the Businesses, in violation of
or in amounts or in a manner that could reasonably be expected to give rise to
liability under Environmental Laws.
6.17 Year 2000 Problem.
The Borrower and its Subsidiaries are reviewing the areas within their
businesses and operations which could be adversely affected by, and have
developed or are developing a program to address on a timely basis, the "Year
2000 Problem" (i.e. the risk that computer applications used by the Borrower or
any of its Subsidiaries may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999). Based upon the review done to date, the Borrower reasonably
believes that the "Year 2000 Problem" will not have any materially adverse
effect on the business or financial condition of the Borrower or any of its
Subsidiaries.
SECTION 7
AFFIRMATIVE COVENANTS
Each of the Credit Parties covenants and agrees that on the Closing
Date, and so long as this Credit Agreement is in effect and until the
Commitments have been terminated, no Obligations remain outstanding and all
amounts owing hereunder or in connection herewith have been paid in full, each
of the members of the Consolidated Group party hereto shall:
7.1 Financial Statements.
Furnish, or cause to be furnished, to the Administrative Agent for
distribution to the Lenders:
(a) Audited Financial Statements. As soon as available, but in
any event within 120 days after the end of each fiscal year, an audited
consolidated balance sheet of the Borrower and its subsidiaries as of
the end of the fiscal year and the related consolidated statements of
income, retained earnings, shareholders' equity and cash flows for the
year, audited by Price Waterhouse LLP, or other firm of independent
certified public accountants of nationally recognized standing
reasonably acceptable to the
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Required Lenders, setting forth in each case in comparative form the
figures for the previous year, reported without a "going concern" or
like qualification or exception, or qualification indicating that the
scope of the audit was inadequate to permit such independent certified
public accountants to certify such financial statements without such
qualification.
(b) Company-Prepared Financial Statements. As soon as
available, but in any event
(i) within 50 days after the end of each of the first
three fiscal quarters, a company-prepared consolidated balance
sheet of the Borrower and its subsidiaries as of the end of
the quarter and related company-prepared consolidated
statements of income, retained earnings, shareholders' equity
and cash flows for such quarterly period and for the fiscal
year to date;
(ii) within 90 days after the end of the fourth
fiscal quarter, a company-prepared consolidated balance sheet
of the Borrower and its subsidiaries as of the end of the
quarter and related company-prepared consolidated statements
of income, retained earnings, shareholders' equity and cash
flows for such quarterly period and for the fiscal year to
date;
(iii) Prior to the end of each fiscal year, an annual
business plan and budget for the members of the Consolidated
Group, containing, among other things, pro forma financial
statements for the next fiscal year,
in each case setting forth in comparative form the consolidated figures
for the corresponding period or periods of the preceding fiscal year or
the portion of the fiscal year ending with such period, as applicable,
in each case subject to normal recurring year-end audit adjustments.
All such financial statements shall be complete and correct in all material
respects (subject, in the case of interim statements, to normal recurring
year-end audit adjustments) and shall be prepared in reasonable detail and, in
the case of the annual and quarterly financial statements provided in accordance
with subsections (a) and (b) above, in accordance with GAAP (subject to the
adjustments specified in Section 1.3(a)) applied consistently throughout the
periods reflected therein and further accompanied by a description of, and an
estimation of the effect on the financial statements on account of, a change in
the application of accounting principles as provided in Section 1.3(a).
7.2 Certificates; Other Information.
Furnish, or cause to be furnished, to the Administrative Agent for
distribution to the Lenders:
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(a) Accountant's Certificate and Reports. Concurrently with
the delivery of the financial statements referred to in subsection
7.1(a) above, a certificate of the independent certified public
accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of
any Default or Event of Default with respect to the financial covenants
contained in Section 7.9, except as specified in such certificate.
(b) Officer's Certificate. Concurrently with the delivery of
the financial statements referred to in Sections 7.1(a) and 7.1(b)
above, a certificate of a Responsible Officer stating that, to the best
of such Responsible Officer's knowledge and belief, (i) the financial
statements fairly present in all material respects the financial
condition of the parties covered by such financial statements, (ii)
during such period the members of the Consolidated Group have observed
or performed in all material respects the covenants and other
agreements hereunder and under the other Credit Documents relating to
them, and satisfied in all material respects the conditions, contained
in this Credit Agreement to be observed, performed or satisfied by
them, and (iii) such Responsible Officer has obtained no knowledge of
any Default or Event of Default except as specified in such
certificate. Such certificate shall include the calculations required
to indicate compliance with Section 7.9. A form of Officer's
Certificate is attached as Schedule 7.2(b).
(c) Accountants' Reports. Promptly upon receipt, a copy of any
final (as distinguished from a preliminary or discussion draft)
"management letter" or other similar report submitted by independent
accountants or financial consultants to the members of the Consolidated
Group in connection with any annual, interim or special audit.
(d) Capital Budget Reports. Annually, within 30 days after the
end of each fiscal year, a capital expenditures budget for the
Consolidated Group, and quarterly within 45 days after the end of each
fiscal quarter, a report of capital expenditures, asset sales and
dispositions (including sale-leasebacks and the terms thereof) and
reinvestment of net proceeds thereof for the fiscal quarter and
including information for the fiscal year-to-date and a comparison
against both the prior fiscal year and the capital budget, in form
reasonably acceptable to the Administrative Agent, demonstrating, among
other things, compliance with the provisions of Sections 3.4(b), 7.9(d)
and 8.4(b).
(e) Public Information. Within thirty days after the same are
sent, copies of all reports (other than those otherwise provided
pursuant to subsection 7.1) and other financial information which any
member of the Consolidated Group sends to its public stockholders, and
within thirty days after the same are filed, copies of all financial
statements and non-confidential reports which any member of the
Consolidated Group may make to, or file with, the Securities and
Exchange Commission or any successor or analogous Governmental
Authority.
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(f) Other Information. Promptly, such additional financial and
other information as the Administrative Agent, at the request of any
Lender, may from time to time reasonably request.
7.3 Notices.
Give notice to the Administrative Agent (which shall promptly transmit
such notice to each Lender) of:
(a) Defaults. Immediately (and in any event within two (2)
Business Days) after a Responsible Officer of any Credit Party acquires
actual knowledge of the occurrence of any Default or Event of Default.
(b) Contractual Obligations. Promptly, the occurrence of any
default or event of default by any member of the Consolidated Group
under any Contractual Obligation to which it is a party which could
reasonably be expected to have a Material Adverse Effect.
(c) Legal Proceedings. Promptly, any litigation, or any
investigation or proceeding (including without limitation, any
environmental proceeding) of which any member of the Consolidated Group
has knowledge, or any material development in respect thereof of which
any member of the Consolidated Group has knowledge, affecting any
member of the Consolidated Group which has a reasonable possibility of
an adverse determination, is not covered by insurance and could
reasonably be expected to have a Material Adverse Effect.
(d) ERISA. Promptly, after any Responsible Officer of the
Borrower knows or has reason to know of the likely occurrence of a
Material Adverse Effect as a result of (i) any event or condition,
including, but not limited to, any Reportable Event, that constitutes,
or can reasonably be expected to lead to, an ERISA Event; (ii) with
respect to any Multiemployer Plan, the receipt of notice as prescribed
in ERISA or otherwise of any withdrawal liability assessed against any
of their ERISA Affiliates, or of a determination that any Multiemployer
Plan is in reorganization or insolvent (both within the meaning of
Title IV of ERISA); (iii) the failure to make full payment on or before
the due date (including extensions) thereof of all amounts which the
members of the Consolidated Group or any ERISA Affiliate are required
to contribute to each Plan pursuant to its terms and as required to
meet the minimum funding standard set forth in ERISA and the Code with
respect; or (iv) any change in the funding status of any Plan that
reasonably could be expected to have a Material Adverse Effect;
together with a description of any such event or condition or a copy of
any such notice and a statement by the chief financial officer of the
Borrower briefly setting forth the details regarding such event,
condition, or notice, and the action, if any, which has been or is
being taken or is proposed to be taken by the Credit Parties with
respect thereto. Promptly upon request, the members of the Consolidated
Group shall furnish the Administrative Agent and the Lenders with such
additional information concerning any Plan as may be reasonably
requested, including, but not limited to, copies of each annual
report/return (Form 5500 series), as well as all
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schedules and attachments thereto required to be filed with the
Department of Labor and/or the Internal Revenue Service pursuant to
ERISA and the Code, respectively, for each "plan year" (within the
meaning of Section 3(39) of ERISA).
(e) Other. Promptly, any other development or event which a
Responsible Officer of the Borrower determines could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer of the Borrower setting forth details of the occurrence
referred to therein and stating what action the relevant Credit Parties propose
to take with respect thereto.
7.4 Payment of Obligations.
Pay, discharge or otherwise satisfy at or before maturity or before
they become delinquent, as the case may be, in accordance with prudent business
practice (subject, where applicable, to specified grace periods) all material
obligations of each member of the Consolidated Group of whatever nature and any
additional costs that are imposed as a result of any failure to so pay,
discharge or otherwise satisfy such obligations, except when the amount or
validity of such obligations and costs is currently being contested in good
faith by appropriate proceedings and reserves, if applicable, in conformity with
GAAP with respect thereto have been provided on the books of the Consolidated
Group, as the case may be.
7.5 Conduct of Business and Maintenance of Existence.
Continue to engage in business of the same general type as now
conducted by it on the date hereof and similar or related businesses with, and
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges, licenses and
franchises necessary or desirable in the normal conduct of its business; comply
with all Contractual Obligations and Requirements of Law applicable to it except
to the extent that failure to comply therewith would not, in the aggregate, have
a Material Adverse Effect.
7.6 Maintenance of Property; Insurance.
Keep all material property used in its business in reasonably good
working order and condition (ordinary wear and tear excepted); maintain with
financially sound and reputable insurance companies casualty, liability and such
other insurance (which may include plans of self-insurance) with such coverage
and deductibles, and in such amounts as are consistent with prudent business
practice and in any event consistent with normal industry practice (except to
any greater extent as may be required by the terms of any of the other Credit
Documents); and furnish to the Administrative Agent, upon written request, full
information as to the insurance carried.
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7.7 Inspection of Property; Books and Records; Discussions.
Keep proper books of records and account in which full, true and
correct entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to its businesses and
activities; and permit, during regular business hours and upon reasonable notice
by the Administrative Agent, the Administrative Agent to visit and inspect any
of its properties and examine and make abstracts (including photocopies) from
any of its books and records (other than materials protected by the
attorney-client privilege or materials which the Credit Parties may not disclose
without violation of a confidentiality obligation binding upon them) at any
reasonable time, and to discuss the business, operations, properties and
financial and other condition of the members of the Consolidated Group with
officers and employees of the members of the Consolidated Group and with their
independent certified public accountants. The cost of the inspection referred to
in the preceding sentence shall be for the account of the Lenders unless an
Event of Default has occurred and is continuing, in which case the cost of such
inspection shall be for the account of the Credit Parties.
7.8 Environmental Laws.
(a) Comply in all material respects with, and take reasonable
actions to ensure compliance in all material respects by all tenants and
subtenants, if any, with, all applicable Environmental Laws and obtain and
comply in all material respects with and maintain, and take reasonable actions
to ensure that all tenants and subtenants obtain and comply in all material
respects with and maintain, any and all licenses, approvals, notifications,
registrations or permits required by applicable Environmental Laws except to the
extent that failure to do so could not reasonably be expected to have a Material
Adverse Effect;
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws except to the extent that the same are being contested in good faith by
appropriate proceedings and the failure to do or the pendency of such
proceedings could not reasonably be expected to have a Material Adverse Effect;
and
(c) Defend, indemnify and hold harmless the Administrative Agent
and the Lenders, and their respective employees, agents, officers and directors,
from and against any and all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or
unknown, contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under, any Environmental Law
applicable to the operations of the members of the Consolidated Group or the
Properties, or any orders, requirements or demands of Governmental Authorities
related thereto, including, without limitation, reasonable attorney's and
consultant's fees, investigation and laboratory fees, response costs, court
costs and litigation expenses, except to the extent that any of the foregoing
arise out of the gross negligence or willful misconduct of the party seeking
indemnification therefor. The agreements in this paragraph shall survive
repayment of the Loans and all other amounts payable hereunder, and termination
of the Commitments.
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7.9 Financial Covenants.
(a) Consolidated Leverage Ratio. As of the end of each fiscal
quarter set forth below, the Consolidated Leverage Ratio shall be not greater
than:
Fiscal Quarter Ending (on or about)
<TABLE>
<S> <C>
October 30, 1998 4.50:1.0
January 30, 1999, April 30, 1999 and October 30, 1999 4.00:1.0
July 30, 1999 4.75:1.0
January 30, 2000, April 30, 2000 and October 30, 2000 3.75:1.0
July 30, 2000 4.50:1.0
Each fiscal quarter ending after the fiscal quarter ending
October 30, 2000 other than the fiscal quarter
ending July 30 of each year 3.50:1.0
July 30, 2001 and the fiscal quarter ending July 30 of
each year thereafter 4.25:1.0
</TABLE>
(b) Consolidated Fixed Charge Coverage Ratio. As of the end of each
fiscal quarter, the Consolidated Fixed Charge Coverage Ratio shall be not less
than 2.0:1.0.
(c) Consolidated Net Worth. As of the end of each fiscal quarter,
Consolidated Net Worth shall be not less than $125,000,000 plus on the last day
of each fiscal quarter to occur after the Closing Date, 50% of Consolidated Net
Income (but not less than zero) for the fiscal quarter then ended, such
increases to be cumulative, plus 100% of the net proceeds from Equity
Transactions occurring after the Closing Date.
(d) Capital Expenditures. Members of the Consolidated Group will not
make Capital Expenditures in any fiscal year in excess of:
Fiscal year 1998 $ 7,000,000
Fiscal year 1999 $ 8,000,000
Fiscal year 2000 $ 9,000,000
Fiscal year 2001 $ 10,000,000
Fiscal year 2002 $ 11,000,000
Fiscal year 2003 $ 12,000,000
The unused portion of Capital Expenditures permitted but not used in any fiscal
year may be carried over and used in the next fiscal year (one-year carry-over).
7.10 Agency Fees.
Pay to the Administrative Agent the annual agency fee and comply with
the other agreements provided for in the Administrative Agent's Fee Letter.
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7.11 Additional Guaranties and Stock Pledges.
(a) Domestic Subsidiaries. Where Domestic Subsidiaries of the
Borrower which are not Credit Parties hereunder (the "Non-Guarantor
Subsidiaries") shall at any time constitute more than (the "Threshold
Requirement"):
(i) in any instance for any such Non-Guarantor Subsidiary,
five percent (5%) of consolidated assets for the Consolidated Group or
five percent (5%) of consolidated revenues for the Consolidated Group,
or
(ii) in the aggregate for all such Non-Guarantor Subsidiaries,
ten percent (10%) of consolidated assets for the Consolidated Group or
ten percent (10%) of consolidated revenues for the Consolidated Group,
then the Borrower shall (i) promptly notify the Administrative Agent thereof,
and promptly cause such Domestic Subsidiary or Subsidiaries to become a
Guarantor by execution of a Joinder Agreement, such that immediately after
joinder as a Guarantor, the remaining Non-Guarantor Subsidiaries shall not in
any instance, or collectively, exceed the Threshold Requirement, (ii) deliver
with the Joinder Agreement, supporting resolutions, incumbency certificates,
corporate formation and organizational documentation and opinions of counsel as
the Administrative Agent may reasonably request, and (iii) deliver stock
certificates and related pledge agreements or pledge joinder agreements
evidencing the pledge of 100% of the Voting Stock of all Domestic Subsidiaries
(whether or not they are Guarantors) and 65% of the Voting Stock of all Foreign
Subsidiaries, together with undated stock transfer powers executed in blank.
(b) Foreign Subsidiaries. At any time any Person becomes a Foreign
Subsidiary, the Borrower will promptly notify the Administrative Agent thereof
and cause (i) delivery of supporting resolutions, incumbency certificates,
corporation formation and organizational documentation and opinions of counsel
as the Administrative Agent may reasonably request, and (ii) delivery of stock
certificates (where required for perfection under local law) and a related
pledge agreement or pledge joinder agreement evidencing the pledge of 65% of the
Voting Stock of such Foreign Subsidiary and of 65% of the Voting Stock of each
of its Domestic Subsidiaries and 65% of the Voting Stock of each of its Foreign
Subsidiaries, together in each case with undated stock transfer powers executed
in blank.
7.12 Ownership of Subsidiaries.
Except to the extent otherwise permitted in Section 8.4(b) and Section
8.7 and to the extent as would not cause a Change of Control and except as set
forth on Schedule 6.14, the Borrower shall, directly or indirectly, own at all
times 100% of the Voting Stock of each of its Subsidiaries.
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7.13 Use of Proceeds.
Extensions of Credit will be used solely for the purposes provided in
Section 6.15.
7.14 Year 2000 Compatibility.
Take all action necessary to assure that its computer based systems are
able to operate and effectively process data including dates on and after
January 1, 2000, and, at the reasonable request of the Administrative Agent or
the Required Lenders, provide evidence to the Lenders of such year 2000
compatibility.
7.15 Further Assurances in respect of Assumed Mortgage
Indebtedness.
As of the Closing Date, it is the present intention of the Borrower, as
a general matter, to lease, rather than own, real property in its business. To
that end, the Borrower plans to market real property owned by it with an intent
to lease back the real property necessary and useful in its operations and to
dispose of real property which is not needed in the operation of its business.
Consistent with this approach, the Borrower agrees that in respect of real
property constituting an acquisition permitted under Section 8.4, including such
real property which is subject to a mortgage lien permitted hereunder ("Acquired
Real Property"), it will, and will cause its Domestic Subsidiaries to, sell and
lease-back or sell and dispose of such Acquired Real Property, within 18 months
from the date of acquisition, in the case of Acquired Real Property with a fair
market value of less than $5 million for any individual property, and within 12
months from the date of acquisition in the case of Acquired Real Property with a
fair market value of $5 million or more for any individual property (the
"Acquired Real Property Disposition Period"). In the event that any Acquired
Real Property remains at the end of the applicable Acquired Real Property
Disposition Period, (i) in the case of properties with a fair market value of $5
million or more for any individual property, the Borrower will cause such
properties to be released from the mortgage Liens in favor of other lenders, if
any, and grant mortgage Liens in favor of the Administrative Agent to secure the
Obligations hereunder, together with the items referenced in Section 5.3; and
(ii) in the case of properties with a fair market value of less than $5 million
for any individual property, then if and to the extent the fair market value of
all such properties shall exceed $15 million in the aggregate, the Borrower will
cause a sufficient number of such properties to be released from the mortgage
Liens in favor of other lenders, if any, and grant mortgage Liens in favor of
the Administrative Agent to secure the Obligations hereunder, together with the
items referenced in Section 5.3, such that after giving effect thereto the fair
market value of such properties not subject to the mortgage Liens in favor of
the Administrative Agent to secure the Obligations hereunder shall not exceed
$15 million in the aggregate. Failure to release Acquired Real Property from the
mortgage Liens and to provide mortgage Liens in favor of the Administrative
Agent to secure the Obligations as required hereunder (together with the other
items referenced in Section 5.3) by the end of the Acquired Real Property
Disposition Period will constitute a default under Section 8.2, in the absence
of a consent by the Required Lenders.
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SECTION 8
NEGATIVE COVENANTS
Each of the Credit Parties covenants and agrees that on the Closing
Date, and so long as this Credit Agreement is in effect and until the
Commitments have been terminated, no Obligations remain outstanding and all
amounts owing hereunder or in connection herewith, have been paid in full, no
member of the Consolidated Group shall:
8.1 Indebtedness.
Contract, create, incur, assume or permit to exist any Indebtedness,
except:
(a) Indebtedness arising or existing under this Credit
Agreement and the other Credit Documents;
(b) Indebtedness set forth in Schedule 8.1, and renewals,
refinancings and extensions thereof on terms and conditions no less
favorable than for such existing Indebtedness;
(c) Capital Lease Obligations and Indebtedness incurred, in
each case, to provide all or a portion of the purchase price or costs
of construction of an asset or, in the case of a sale/leaseback
transaction as described in Section 8.11, to finance the value of such
asset owned by a member of the Consolidated Group, provided that (i)
such Indebtedness when incurred shall not exceed the purchase price or
cost of construction of such asset or, in the case of a sale/leaseback
transaction, the fair market value of such asset, (ii) no such
Indebtedness shall be refinanced for a principal amount in excess of
the principal balance outstanding thereon at the time of such
refinancing plus the reasonable expenses of such refinancing, and (iii)
the total amount of all such Indebtedness shall not exceed $15,000,000
at any time outstanding;
(d) Indebtedness and obligations in connection with
Permitted Securitization Transactions; provided that the total
Attributed Principal Amount for all such financings shall not exceed
$50,000,000 at any time;
(e) Indebtedness and obligations owing under interest rate
protection agreements relating to the Obligations hereunder and under
interest rate, commodities and foreign currency exchange protection
agreements entered into in the ordinary course of business to manage
existing or anticipated risks and not for speculative purposes;
(f) unsecured intercompany Indebtedness owing by a member of
the Consolidated Group to another member of the Consolidated Group;
(g) Subordinated Debt of the Borrower;
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(h) mortgage Indebtedness assumed in connection with an
acquisition permitted under Section 8.4, and any refinancing,
refunding, renewal or extension thereof, provided that (i) such
Indebtedness was in existence as of the date of the acquisition and was
not incurred or assumed in contemplation thereof, (ii) the amount of
any such mortgage Indebtedness shall not be increased in connection
with any refinancing, refunding, renewal or extension (exclusive of
reasonable premiums, fees and expenses in connection therewith), and
(iii) the Borrower shall be compliance with the requirements of Section
7.15;
(i) other unsecured Indebtedness of the Borrower of up to
$5,000,000 in the aggregate at any time outstanding; and
(j) Support Obligations with respect to Indebtedness
permitted under this Section 8.1.
8.2 Liens.
Contract, create, incur, assume or permit to exist any Lien with
respect to any of their respective property or assets of any kind (whether real
or personal, tangible or intangible), whether now owned or hereafter acquired,
except for Permitted Liens.
8.3 Nature of Business.
Alter the character of their business in any material respect from that
conducted as of the Closing Date and similar or related businesses.
8.4 Consolidation, Merger, Sale or Purchase of Assets, etc.
Other than those transactions contemplated in the Borrower's Form S-1
Registration Statement under the Securities Act of 1933 with respect to the IPO,
(a) Enter into a transaction of merger or consolidation,
except
(i) a member of the Consolidated Group may be a party to
a transaction of merger or consolidation with another member of the
Consolidated Group, provided that (A) if the Borrower is a party
thereto, it shall be the surviving corporation, (B) if a Guarantor is a
party thereto and the Borrower is not a party thereto, a Guarantor
shall be the surviving corporation or the surviving corporation shall
be a Domestic Subsidiary and shall become a Guarantor hereunder as an
Additional Credit Party pursuant to Section 7.11 concurrently
therewith, and (C) no Default or Event of Default shall exist either
immediately prior to or immediately after giving effect thereto; and
(ii) a member of the Consolidated Group (other than
the Borrower) may be a party to a transaction of merger or
consolidation with any other Person, provided that (A) the provisions
of Section 7.11 regarding joinder of certain Subsidiaries
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as Additional Credit Parties hereunder shall be complied with, (B) no
Default or Event of Default shall exist either immediately prior to or
immediately after giving effect thereto, and (C) the provisions of
subsection (c) of this Section shall be complied with.
(b) Sell, lease, transfer or otherwise dispose of assets,
property and/or operations (including any sale-leaseback transaction, but
excluding (i) the sale of inventory in the ordinary course of business, (ii) the
sale or disposition of plant, property and equipment which is no longer useful
in the business or as to which the proceeds therefrom are reinvested in plant,
property and equipment within six months thereof, and (iii) the Excluded Asset
Dispositions), other than to another Credit Party, which
(i) in the aggregate in any fiscal year shall constitute
more than ten percent (10%) of total assets for the Consolidated Group
as of the immediately preceding fiscal year, or in the aggregate in any
fiscal year shall account for more than ten percent (10%) of
Consolidated Net Income for the immediately preceding fiscal year; or
(ii) would cause a Default or Event of Default to exist
after giving effect thereto on a Pro Forma Basis,
without the prior written consent of the Required Lenders (which consent shall
not be unreasonably withheld or delayed).
(c) Acquire all or any portion of the capital stock or other
ownership interest in any Person which is not a Subsidiary or all or any
substantial portion of the assets, property and/or operations of a Person which
is not a Subsidiary, without the prior written consent of the Required Lenders
(which consent shall not be unreasonably withheld or delayed), unless
(i) in the case of an acquisition of capital stock or
other ownership interest, if after giving effect thereto such Person
will not be a Subsidiary, then such acquisition will not cause a
violation of Section 8.5;
(ii) in the case of an acquisition of capital stock or
other ownership interest, if after giving effect thereto such Person
will be a Subsidiary, or in the case of an acquisition of assets,
property and/or operations, then
(A) the cost (including, without limitation,
Indebtedness assumed and the fair market value of non-cash
consideration) of any such acquisition (or series of related
acquisitions) shall not exceed $50 million in any instance;
(B) the cash consideration of all such
acquisitions shall not exceed $100 million in any fiscal year;
(C) the acquisition is in the same or a similar or
related line of business as that of the Credit Parties;
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(D) the Board of Directors of the Person which is
the subject of the acquisition shall have approved the
acquisition;
(E) no Default or Event of Default would exist
after giving effect thereto on a Pro Forma Basis; and
(F) the provisions of Section 7.11 regarding
joinder of certain Subsidiaries as Additional Credit Parties
hereunder shall be complied with.
(d) In the case of the Borrower and any Subsidiary which is
not wholly-owned, liquidate, wind-up or dissolve, whether voluntarily or
involuntarily (or suffer to permit any such liquidation or dissolution).
8.5 Advances, Investments and Loans.
Lend money or extend credit or make advances to any Person, or purchase
or acquire any stock, obligations or securities of, or any other interest in, or
make any capital contribution to, or otherwise make an Investment in, any Person
except for Permitted Investments.
8.6 Transactions with Affiliates.
Enter into or permit to exist any transaction or series of
transactions, whether or not in the ordinary course of business, with any
officer, director, shareholder or Affiliate other than (i) transactions
permitted by Section 8.1, Section 8.4(b), Section 8.5 or Section 8.10, (ii)
customary fees and expenses paid to directors, (iii) transactions between the
Borrower and a wholly owned Domestic Guarantor, (iv) transactions pursuant to
agreements existing as of the Closing Date and set forth on Schedule 8.6 hereto,
and (v) any other transaction that is on terms and conditions substantially as
favorable as would be obtainable in a comparable arm's-length transaction with a
Person other than an officer, director, shareholder or Affiliate.
8.7 Ownership of Equity Interests.
Issue, sell, transfer, pledge or otherwise dispose of any partnership
interests, shares of capital stock or other equity or ownership interests
("Equity Interests") in any member of the Consolidated Group, except (i)
issuance, sale or transfer of Equity Interests to a Credit Party by a Subsidiary
of such Credit Party, (ii) in connection with a transaction permitted by Section
8.4, or (iii) as needed to qualify directors under applicable law.
8.8 Fiscal Year.
Change its fiscal year end from the last Saturday in April of each
year.
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8.9 Prepayments of Indebtedness, etc.
(a) After the issuance thereof, amend or modify (or permit the
amendment or modification of), the terms of any other Indebtedness in a manner
adverse to the interests of the Lenders (including specifically shortening any
maturity or average life to maturity or requiring any payment sooner than
previously scheduled or increasing the interest rate or fees applicable
thereto);
(b) Make any prepayment, redemption, defeasance or acquisition for
value of (including without limitation, by way of depositing money or securities
with the trustee with respect thereto before due for the purpose of paying when
due), or refund, refinance or exchange of any Funded Debt (other than the
Obligations or intercompany Indebtedness permitted hereunder) other than (a)
regularly scheduled payments of principal and interest, (b) Funded Debt having
an interest rate in excess of the Base Rate, and (c) provided no Default or
Event of Default shall exist immediately prior or after giving effect thereto on
a Pro Forma Basis, other Funded Debt not exceeding $250,000 in any instance and
$500,000 in the aggregate in any calendar year.
8.10 Restricted Payments.
Make or permit any Restricted Payments, unless and to the extent that
no Default or Event of Default shall exist immediately prior or after giving
effect thereto on a Pro Forma Basis.
8.11 No Further Negative Pledges.
Except with respect to prohibitions against other encumbrances on
specific Property encumbered to secure payment of particular Indebtedness (which
Indebtedness relates solely to such specific Property, and improvements and
accretions thereto, and is otherwise permitted hereby), no member of the
Consolidated Group will enter into, assume or become subject to any agreement
prohibiting or otherwise restricting the creation or assumption of any Lien upon
its material properties or assets, whether now owned or hereafter acquired, or
requiring the grant of any material security for such obligation if security is
given for some other obligation.
SECTION 9
EVENTS OF DEFAULT
9.1 Events of Default.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
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(a) Payment. Any Credit Party shall
(i) default in the payment when due of any principal of any of
the Loans or of any reimbursement obligations arising from drawings
under Letters of Credit and such default shall continue for the lesser
of three (3) Business Days or until the Termination Date; or
(ii) default, and such defaults shall continue for three (3)
or more Business Days, in the payment when due of any interest on the
Loans or on any reimbursement obligations arising from drawings under
Letters of Credit, or of any Fees or other amounts owing hereunder,
under any of the other Credit Documents or in connection herewith or
therewith; or
(b) Representations. Any representation, warranty or statement
made or deemed to be made herein, in any of the other Credit Documents, or in
any statement or certificate delivered or required to be delivered pursuant
hereto or thereto shall prove untrue in any material respect on the date as of
which it was deemed to have been made; or
(c) Covenants.
(i) Default in the due performance or observance of any term,
covenant or agreement contained in Section 7.3(a), 7.9, 7.11, 7.13 or
8.1 through 8.11, inclusive, or any condition contained in Section 5.3;
(ii) Default in the due performance or observance by it of any
term, covenant or agreement (other than those referred to in
subsections (a), (b) or (c)(i) of this Section 9.1) contained in this
Credit Agreement and such default shall continue unremedied for a
period of at least 30 days after the earlier of a responsible officer
of a Credit Party becoming aware of such default or notice thereof by
the Administrative Agent; or
(d) Other Credit Documents. (i) Any Credit Party shall default in
the due performance or observance of any material term, covenant or agreement in
any of the other Credit Documents (subject to applicable grace or cure periods,
if any), or (ii) except as to the Credit Party which is dissolved, released or
merged or consolidated out of existence as the result of or in connection with a
dissolution, merger or disposition permitted by Section 8.4(a), Section 8.4(b)
or Section 8.4(c), any Credit Document shall fail to be in full force and effect
or to give the Administrative Agent and/or the Lenders any material part of the
Liens, rights, powers and privileges purported to be created thereby; or
(e) Guaranties. Except as to the Credit Party which is dissolved,
released or merged or consolidated out of existence as the result of or in
connection with a dissolution, merger or disposition permitted by Section
8.4(a), Section 8.4(b) or Section 8.4(c), the guaranty given by any Guarantor
hereunder or any material provision thereof shall cease to be in full force and
effect, or any Guarantor hereunder or any Person acting by or on behalf of such
Guarantor shall deny or disaffirm such Guarantor's obligations under such
guaranty, or any Guarantor shall
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default (subject to applicable grace or cure period, if any) in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to any guaranty; or
(f) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect
to any Credit Party; or
(g) Defaults under Other Agreements. With respect to any
Indebtedness (other than Indebtedness outstanding under this Credit Agreement)
in excess of $5,000,000 in the aggregate for the Consolidated Group taken as a
whole, (A) (1) any member of the Consolidated Group shall default in any payment
(beyond the applicable grace period with respect thereto, if any) with respect
to any such Indebtedness, or (2) the occurrence and continuance of a default in
the observance or performance relating to such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event or condition shall occur or condition exist, the effect of which default
or other event or condition is to cause, or permit, the holder or holders of
such Indebtedness (or trustee or agent on behalf of such holders) to cause
(determined without regard to whether any notice or lapse of time is required),
any such Indebtedness to become due prior to its stated maturity; or (B) any
such Indebtedness shall be declared due and payable, or required to be prepaid
other than by a regularly scheduled required prepayment, prior to the stated
maturity thereof; or
(h) Judgments. Any member of the Consolidated Group shall fail
within 60 days of the date due and payable to pay, bond or otherwise discharge
any judgment, settlement or order for the payment of money which judgment,
settlement or order, when aggregated with all other such judgments, settlements
or orders due and unpaid at such time, exceeds $1,000,000, and which is not
covered by insurance, stayed on appeal (or for which no motion for stay is
pending) or is not otherwise being executed; or
(i) ERISA. Any of the following events or conditions, if such
event or condition could reasonably be expected to have a Material Adverse
Effect: (1) any "accumulated funding deficiency," as such term is defined in
Section 302 of ERISA and Section 412 of the Code, whether or not waived, shall
exist with respect to any Plan, or any lien shall arise on the assets of a
member of the Consolidated Group or any ERISA Affiliate in favor of the PBGC or
a Plan; (2) an ERISA Event shall occur with respect to a Single Employer Plan,
which is, in the reasonable opinion of the Administrative Agent, likely to
result in the termination of such Plan for purposes of Title IV of ERISA; (3) an
ERISA Event shall occur with respect to a Multiemployer Plan or Multiple
Employer Plan, which is, in the reasonable opinion of the Administrative Agent,
likely to result in (i) the termination of such Plan for purposes of Title IV of
ERISA, or (ii) a member of the Consolidated Group or any ERISA Affiliate
incurring any liability in connection with a withdrawal from, reorganization of
(within the meaning of Section 4241 of ERISA), or insolvency of (within the
meaning of Section 4245 of ERISA) such Plan; or (4) any prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the Code) or
breach of fiduciary responsibility shall occur which may subject a member of the
Consolidated Group or any ERISA Affiliate to any liability under Sections 406,
409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any
agreement or other instrument pursuant to which a member of the
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Consolidated Group or any ERISA Affiliate has agreed or is required to indemnify
any person against any such liability; or
(j) Ownership. There shall occur a Change of Control.
9.2 Acceleration; Remedies.
Upon the occurrence and during the continuance of an Event of Default,
and at any time thereafter, the Administrative Agent shall, upon the request and
direction of the Required Lenders, by written notice to the Credit Parties take
any of the following actions:
(i) Termination of Commitments. Declare the Commitments
terminated whereupon the Commitments shall be immediately terminated.
(ii) Acceleration. Declare the unpaid principal of and any
accrued interest in respect of all Loans, any reimbursement obligations
arising from drawings under Letters of Credit and any and all other
indebtedness or obligations of any and every kind owing by the Credit
Parties to the Administrative Agent and/or any of the Lenders hereunder
to be due whereupon the same shall be immediately due and payable
without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by each of the Credit Parties.
(iii) Cash Collateral. Direct the Borrower to pay (and the
Borrower agrees that upon receipt of such notice, or upon the occurrence
of an Event of Default under Section 9.1(f), it will immediately pay) to
the Administrative Agent additional cash, to be held by the
Administrative Agent, for the benefit of the Revolving Lenders, in a
cash collateral account as additional security for the LOC Obligations
in respect of subsequent drawings under all then outstanding Letters of
Credit in an amount equal to the maximum aggregate amount which may be
drawn under all Letters of Credits then outstanding.
(iv) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents and all rights
of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then (a) if such Event of Default occurs with respect to the
Borrower, (i) with respect to the Borrower, the Commitments shall automatically
terminate and all Loans, all reimbursement obligations arising from drawings
under Letters of Credit, all accrued interest in respect thereof, all accrued
and unpaid Fees and other indebtedness or obligations owing to the
Administrative Agent and/or any of the Lenders hereunder automatically shall
immediately become due and payable without presentment, demand, protest or the
giving of any notice or other action by the Administrative Agent or the Lenders,
all of which are hereby waived by the Credit Parties, and (ii) with respect to
any other Credit Party, all obligations of such Credit Party hereunder
automatically shall immediately become due and payable without presentment,
demand, protest or the giving of any notice or other action by the
Administrative Agent or the Lenders, all of which are hereby waived
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by such Credit Party; (b) if such Event of Default occurs with respect to any
other Credit Party, all obligations of such Credit Party hereunder automatically
shall immediately become due and payable without presentment, demand, protest or
the giving of any notice or other action by the Administrative Agent or the
Lenders, all of which are hereby waived by such Credit Party; and (c) nothing in
this sentence shall be construed to prevent the Administrative Agent or the
Lenders from exercising any other remedies it or they may have under this
Section 9.2.
SECTION 10
AGENCY PROVISIONS
10.1 Appointment.
Each Lender hereby designates and appoints NationsBank, N.A. as
administrative agent (in such capacity, the "Administrative Agent") of such
Lender to act as specified herein and the other Credit Documents, and each such
Lender hereby authorizes the Administrative Agent as the Administrative Agent
for such Lender, to take such action on its behalf under the provisions of this
Credit Agreement and the other Credit Documents and to exercise such powers and
perform such duties as are expressly delegated by the terms hereof and of the
other Credit Documents, together with such other powers as are reasonably
incidental thereto. Each Lender further directs and authorizes the
Administrative Agent to execute releases (or similar agreements) to give effect
to the provisions of this Credit Agreement and the other Credit Documents,
including specifically without limitation the provisions of Section 8.4 hereof.
Notwithstanding any provision to the contrary elsewhere herein and in the other
Credit Documents, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Credit Agreement or any of the other Credit Documents, or shall otherwise exist
against the Administrative Agent. The provisions of this Section are solely for
the benefit of the Administrative Agent and the Lenders and none of the Credit
Parties shall have any rights as a third party beneficiary of the provisions
hereof. In performing its functions and duties under this Credit Agreement and
the other Credit Documents, the Administrative Agent shall act solely as
Administrative Agent of the Lenders and does not assume and shall not be deemed
to have assumed any obligation or relationship of agency or trust with or for
any Credit Party or any of their respective Affiliates.
10.2 Delegation of Duties.
The Administrative Agent may execute any of its duties hereunder or
under the other Credit Documents by or through agents or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. The Administrative Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.
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10.3 Exculpatory Provisions.
The Administrative Agent and its officers, directors, employees,
agents, attorneys-in-fact or affiliates shall not be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection herewith or in connection with any of the other Credit Documents
(except for its or such Person's own gross negligence or willful misconduct), or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any of the Credit Parties
contained herein or in any of the other Credit Documents or in any certificate,
report, document, financial statement or other written or oral statement
referred to or provided for in, or received by the Administrative Agent under or
in connection herewith or in connection with the other Credit Documents, or
enforceability or sufficiency therefor of any of the other Credit Documents, or
for any failure of any Credit Party to perform its obligations hereunder or
thereunder. The Administrative Agent shall not be responsible to any Lender for
the effectiveness, genuineness, validity, enforceability, collectability or
sufficiency of this Credit Agreement, or any of the other Credit Documents or
for any representations, warranties, recitals or statements made herein or
therein or made by the Borrower or any Credit Party in any written or oral
statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by the Administrative Agent to the Lenders or by or on behalf
of the Credit Parties to the Administrative Agent or any Lender or be required
to ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained herein or therein or
as to the use of the proceeds of the Loans or the use of the Letters of Credit
or of the existence or possible existence of any Default or Event of Default or
to inspect the properties, books or records of the Credit Parties or any of
their respective Affiliates.
10.4 Reliance on Communications.
The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to any of the Credit Parties, independent accountants and
other experts selected by the Administrative Agent with reasonable care). The
Administrative Agent may deem and treat the Lenders as the owners of their
respective interests hereunder for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent in accordance with Section 11.3(b) hereof. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Credit Agreement or under any of the other Credit Documents
unless it shall first receive such advice or concurrence of the Required Lenders
as it deems appropriate or it shall first be indemnified to its satisfaction by
the Lenders against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action. The Administrative
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder or under any of the other Credit Documents in accordance with
a request of the Required Lenders (or to the extent specifically provided in
Section 11.6, all the Lenders) and such request
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and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders (including their successors and assigns).
10.5 Notice of Default.
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless the
Administrative Agent has received notice from a Lender or a Credit Party
referring to the Credit Document, describing such Default or Event of Default
and stating that such notice is a "notice of default." In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall give
prompt notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders.
10.6 Non-Reliance on Administrative Agent and Other Lenders.
Each Lender expressly acknowledges that each of the Administrative
Agent and its officers, directors, employees, Administrative Agents,
attorneys-in-fact or affiliates has not made any representations or warranties
to it and that no act by the Administrative Agent or any affiliate thereof
hereinafter taken, including any review of the affairs of any Credit Party or
any of their respective Affiliates, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that it has, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations, property,
financial and other conditions, prospects and creditworthiness of the Borrower,
the other Credit Parties or their respective Affiliates and made its own
decision to make its Loans hereunder and enter into this Credit Agreement. Each
Lender also represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Credit Agreement, and to make such investigation as it deems necessary to
inform itself as to the business, assets, operations, property, financial and
other conditions, prospects and creditworthiness of the Borrower, the other
Credit Parties and their respective Affiliates. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, assets, property, financial or other
conditions, prospects or creditworthiness of the Borrower, the other Credit
Parties or any of their respective Affiliates which may come into the possession
of the Administrative Agent or any of its officers, directors, employees,
Administrative Agents, attorneys-in-fact or affiliates.
10.7 Indemnification.
The Lenders agree to indemnify the Administrative Agent in its capacity
as such (to the extent not reimbursed by the Borrower and without limiting the
obligation of the Borrower to do so), ratably according to their respective
Commitments (or if the Commitments have expired or
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been terminated, in accordance with the respective principal amounts of
outstanding Loans and Participation Interests of the Lenders), from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including without limitation at any time following the final
payment of all of the obligations of the Borrower hereunder and under the other
Credit Documents) be imposed on, incurred by or asserted against the
Administrative Agent in its capacity as such in any way relating to or arising
out of this Credit Agreement or the other Credit Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the gross negligence or willful
misconduct of the Administrative Agent. If any indemnity furnished to the
Administrative Agent for any purpose shall, in the opinion of the Administrative
Agent, be insufficient or become impaired, the Administrative Agent may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished. The agreements in this
Section shall survive the repayment of the Loans, LOC Obligations and other
obligations under the Credit Documents and the termination of the Commitments
hereunder.
10.8 Administrative Agent in its Individual Capacity.
The Administrative Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrower,
its Subsidiaries or their respective Affiliates as though the Administrative
Agent were not the Administrative Agent hereunder. With respect to the Loans
made by and all obligations of the Borrower hereunder and under the other Credit
Documents, the Administrative Agent shall have the same rights and powers under
this Credit Agreement as any Lender and may exercise the same as though it were
not the Administrative Agent, and the terms "Lender" and "Lenders" shall include
the Administrative Agent in its individual capacity.
10.9 Successor Administrative Agent.
The Administrative Agent may, at any time, resign upon 20 days' written
notice to the Lenders, and may be removed, upon show of cause, by the Required
Lenders upon 30 days' written notice to the Administrative Agent. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the notice of resignation or notice of
removal, as appropriate, then the retiring Administrative Agent shall select a
successor Administrative Agent provided such successor is a Lender hereunder or
a commercial bank organized under the laws of the United States of America or of
any State thereof and has a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations as Administrative Agent,
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as appropriate, under this Credit Agreement and the other Credit Documents and
the provisions of this Section 10.9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Credit Agreement.
SECTION 11
MISCELLANEOUS
11.1 Notices.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (i) when
delivered, (ii) when transmitted via telecopy (or other facsimile device) to the
number set out below with receipt confirmed by machine or voice, (iii) the day
following the day on which the same has been delivered prepaid to a reputable
national overnight air courier service, or (iv) the third Business Day following
the day on which the same is sent by certified or registered mail, postage
prepaid, in each case to the respective parties at the address, in the case of
the Borrower, Guarantors and the Administrative Agent, set forth below, and, in
the case of the Lenders, set forth on Schedule 11.1, or at such other address as
such party may specify by written notice to the other parties hereto:
if to the Borrower or the Guarantors:
School Specialty, Inc.
100 N. Bluemound Drive
Appleton, Wisconsin 54913-1579
Attn: Donald J. Noskowiak
Telephone: 920-734-2756, Ext. 258
Telecopy: 920-734-6276
with a copy to:
Joseph F. Franzoi, IV
Franzoi & Franzoi, S.C.
514 Racine Street
Menasha, Wisconsin 54952-2398
Telephone: 920-725-3916
Telecopy: 920-725-0998
and a copy to:
Russell J. Bruemmer
Wilmer, Cutler & Pickering
2445 M Street, NW
Washington, DC 20037-1420
Telephone: 202-663-6804
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Telecopy: 202-663-6363
if to the Administrative Agent:
NationsBank, N.A.
101 N. Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attn: Agency Services
Telephone: (704) 388-1108
Telecopy: (704) 388-9436
with a copy to:
NationsBank, N.A.
Corporate Finance Group
6610 Rockledge Drive, 6th Floor
MD2-600-06-13
Bethesda, Maryland 20817-1876
Attn: Michael R. Heredia
Telephone: (301) 571-0724
Telecopy: (301) 571-0719
11.2 Right of Set-Off.
In addition to any rights now or hereafter granted under applicable law
or otherwise, and not by way of limitation of any such rights, upon the
occurrence and during the continuance of an Event of Default, each Lender is
authorized at any time and from time to time, without presentment, demand,
protest or other notice of any kind (all of which rights being hereby expressly
waived), to set-off and to appropriate and apply any and all deposits (general
or special) and any other indebtedness at any time held or owing by such Lender
(including, without limitation branches, agencies or Affiliates of such Lender
wherever located) to or for the credit or the account of any Credit Party
against obligations and liabilities of such Person to such Lender hereunder,
under the Notes, the other Credit Documents or otherwise, irrespective of
whether such Lender shall have made any demand hereunder and although such
obligations, liabilities or claims, or any of them, may be contingent or
unmatured, and any such set-off shall be deemed to have been made immediately
upon the occurrence of an Event of Default even though such charge is made or
entered on the books of such Lender subsequent thereto. Any Person purchasing a
participation in the Loans and Commitments hereunder pursuant to Section 3.13 or
Section 11.3(d) may exercise all rights of set-off with respect to its
participation interest as fully as if such Person were a Lender hereunder.
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11.3 Benefit of Agreement.
(a) Generally. This Credit Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided that none of the Credit Parties may
assign or transfer any of its interests without prior written consent of the
Lenders; provided further that the rights of each Lender to transfer, assign or
grant participations in its rights and/or obligations hereunder shall be limited
as set forth in this Section 11.3, provided however that nothing herein shall
prevent or prohibit any Lender from (i) pledging its Loans hereunder to a
Federal Reserve Bank in support of borrowings made by such Lender from such
Federal Reserve Bank, or (ii) granting assignments or selling participations in
such Lender's Loans and/or Commitments hereunder to its parent company and/or to
any Affiliate or Subsidiary of such Lender.
(b) Assignments. Subject to subsection (c) of this Section 11.3,
each Lender may assign all or a portion of its rights and obligations hereunder,
pursuant to an assignment agreement substantially in the form of Schedule
11.3(b), to (i) any Lender or any Affiliate or Subsidiary of a Lender, or (ii)
any other commercial bank, financial institution or "accredited investor" (as
defined in Regulation D of the Securities and Exchange Commission) reasonably
acceptable to the Administrative Agent and, so long as no Default or Event of
Default has occurred and is continuing, the Borrower; provided that (i) any such
assignment (other than any assignment to an existing Lender and other than any
assignment during the Initial Sell-Down period (as defined in subsection (c) of
this Section 11.3)) shall be in a minimum aggregate amount of $5,000,000 (or, if
less, the remaining amount of the Commitment being assigned by such Lender) of
the Commitments and in integral multiples of $1,000,000 above such amount and
(ii) each such assignment shall be of a constant, not varying, percentage of all
such Lender's rights and obligations under this Credit Agreement. Any assignment
hereunder shall be effective upon delivery to the Administrative Agent of
written notice of the assignment together with a transfer fee of $3,500 payable
by the assigning Lender to the Administrative Agent for its own account from and
after the later of (i) the effective date specified in the applicable assignment
agreement and (ii) the date of recording of such assignment in the Register
pursuant to the terms of subsection (c) below. The assigning Lender will give
prompt notice to the Administrative Agent and the Borrower of any such
assignment. Upon the effectiveness of any such assignment (and after notice to,
and (to the extent required pursuant to the terms hereof), with the consent of,
the Borrower as provided herein), the assignee shall become a "Lender" for all
purposes of this Credit Agreement and the other Credit Documents and, to the
extent of such assignment, the assigning Lender shall be relieved of its
obligations hereunder to the extent of the Loans and Commitment components being
assigned. Along such lines the Borrower agrees that upon notice of any such
assignment and surrender of the appropriate Note or Notes, it will promptly
provide to the assigning Lender and to the assignee separate promissory notes in
the amount of their respective interests substantially in the form of the
original Note (but with notation thereon that it is given in substitution for
and replacement of the original Note or any replacement notes thereof). By
executing and delivering an assignment agreement in accordance with this Section
11.3(b), the assigning Lender thereunder and the assignee thereunder shall be
deemed to confirm to and agree with each other and the other parties hereto as
follows: (i) such assigning Lender warrants that it is the legal and beneficial
owner of the interest being assigned thereby free and clear of any adverse
claim; (ii) except as set forth in
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clause (i) above, such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Credit Agreement, any of the
other Credit Documents or any other instrument or document furnished pursuant
hereto or thereto, or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, any of the other
Credit Documents or any other instrument or document furnished pursuant hereto
or thereto or the financial condition of any Credit Party or any of their
respective Affiliates or the performance or observance by any Credit Party of
any of its obligations under this Credit Agreement, any of the other Credit
Documents or any other instrument or document furnished pursuant hereto or
thereto; (iii) such assignee represents and warrants that it is legally
authorized to enter into such assignment agreement; (iv) such assignee confirms
that it has received a copy of this Credit Agreement, the other Credit Documents
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such assignment agreement;
(v) such assignee will independently and without reliance upon the
Administrative Agent, such assigning Lender or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Credit Agreement and the other Credit Documents; (vi) such assignee
appoints and authorizes the Administrative Agent to take such action on its
behalf and to exercise such powers under this Credit Agreement or any other
Credit Document as are delegated to the Administrative Agent by the terms hereof
or thereof, together with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their terms
all the obligations which by the terms of this Credit Agreement and the other
Credit Documents are required to be performed by it as a Lender.
(c) Initial Syndication Period. During an initial period from the
Closing Date until the earlier of (i) the date four months from the Closing Date
or (ii) the date by which the aggregate Commitments of Bank One, Wisconsin and
U.S. Bank National Association, in each instance, shall have been reduced to $50
million or less (the "Initial Sell-Down Period"), the Lenders hereby agree that
during such period, other than in the case of assignments by a Lender to one of
its Affiliates or Subsidiaries or to a Federal Reserve Bank as permitted
hereunder, (A) no assignment of Commitments shall be made hereunder except by
and through NationsBank, N.A., as Administrative Agent, (B) all such assignments
during such period shall first serve to reduce the aggregate Commitments of
NationsBank, N.A., Bank One, Wisconsin and U.S. Bank National Association
(collectively, the "Co-Agents") as they may agree among themselves, before
reduction of the Commitments of any other Lenders, and (C) each Lender shall
notify NationsBank, N.A., as Administrative Agent, of prospective assignees.
(d) Maintenance of Register. The Administrative Agent shall
maintain at one of its offices in Charlotte, North Carolina a copy of each
Lender assignment agreement delivered to it in accordance with the terms of
subsection (b) above and a register for the recordation of the identity of the
principal amount, type and Interest Period of each Loan outstanding hereunder,
the names, addresses and the Commitments of the Lenders pursuant to the terms
hereof from time to time (the "Register"). The Administrative Agent will make
reasonable efforts to maintain the accuracy of the Register and to promptly
update the Register from time to time, as necessary. The entries in the Register
shall be conclusive in the absence of manifest error and the Borrower, the
Administrative
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Agent and the Lenders may treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all purposes of
this Credit Agreement. The Register shall be available for inspection by the
Borrower and each Lender, at any reasonable time and from time to time upon
reasonable prior notice.
(e) Participations. Each Lender may sell, transfer, grant or assign
participations in all or any part of such Lender's rights, obligations, or
rights and obligations hereunder (including all or a portion of its Commitments
or its Loans); provided that (i) such selling Lender shall remain a "Lender" for
all purposes under this Credit Agreement (such selling Lender's obligations
under the Credit Documents remaining unchanged) and the participant shall not
constitute a Lender hereunder, (ii) no such participant shall have, or be
granted, rights to approve any amendment or waiver relating to this Credit
Agreement or the other Credit Documents except to the extent any such amendment
or waiver would (A) reduce the principal of or rate of interest on or Fees in
respect of any Loans in which the participant is participating, (B) postpone the
date fixed for any payment of principal (including extension of the Termination
Date or the date of any mandatory prepayment), interest or Fees in which the
participant is participating, (C) except as expressly provided in the Credit
Documents, release all or substantially all of the Guarantors from their
guaranty obligations hereunder, or (D) except as permitted under Section 8.4(b),
release all or substantially all of the collateral, and (iii) sub-participations
by the participant (except to an affiliate, parent company or affiliate of a
parent company of the participant) shall be prohibited. In the case of any such
participation, the participant shall not have any rights under this Credit
Agreement or the other Credit Documents (the participant's rights against the
selling Lender in respect of such participation to be those set forth in the
participation agreement with such Lender creating such participation) and all
amounts payable by and other obligations of the Borrower hereunder shall be
determined as if such Lender had not sold such participation, provided, however,
that such participant shall be entitled to receive additional amounts under
Sections 3.6, 3.9, 3.10 and 3.11 on the same basis as if it were a Lender (but
not in excess of amounts available to the Lender from which the participant took
its interest).
11.4 No Waiver; Remedies Cumulative.
No failure or delay on the part of the Administrative Agent or any
Lender in exercising any right, power or privilege hereunder or under any other
Credit Document and no course of dealing between the Administrative Agent or any
Lender and any of the Credit Parties shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
or under any other Credit Document preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder or
thereunder. The rights and remedies provided herein are cumulative and not
exclusive of any rights or remedies which the Administrative Agent or any Lender
would otherwise have. No notice to or demand on any Credit Party in any case
shall entitle the Borrower or any other Credit Party to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of the Administrative Agent or the Lenders to any other or further action
in any circumstances without notice or demand.
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11.5 Payment of Expenses, etc.
The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and
expenses (A) of the Administrative Agent in connection with the negotiation,
preparation, execution and delivery and administration of this Credit Agreement
and the other Credit Documents and the documents and instruments referred to
therein (including, without limitation, the reasonable fees and expenses of
Moore & Van Allen, PLLC, special counsel to the Administrative Agent) and any
amendment, waiver or consent relating hereto and thereto including, but not
limited to, any such amendments, waivers or consents resulting from or related
to any work-out, renegotiation or restructure relating to the performance by the
Credit Parties under this Credit Agreement and (B) of the Administrative Agent
and the Lenders in connection with enforcement of the Credit Documents and the
documents and instruments referred to therein (including, without limitation, in
connection with any such enforcement, the reasonable fees and disbursements of
counsel for the Administrative Agent and each of the Lenders); (ii) pay and hold
each of the Lenders harmless from and against any and all present and future
stamp and other similar taxes with respect to the foregoing matters and save
each of the Lenders harmless from and against any and all liabilities with
respect to or resulting from any delay or omission (other than to the extent
attributable to such Lender) to pay such taxes; and (iii) indemnify each Lender,
its officers, directors, employees, representatives and Administrative Agents
from and hold each of them harmless against any and all losses, liabilities,
claims, damages or expenses incurred by any of them as a result of, or arising
out of, or in any way related to, or by reason of (A) any investigation,
litigation or other proceeding (whether or not any Lender is a party thereto)
related to the entering into and/or performance of any Credit Document or the
use of proceeds of any Loans (including other extensions of credit) hereunder or
the consummation of any other transactions contemplated in any Credit Document,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding or (B) the presence or Release of any Materials of Environmental
Concern at, under or from any Property owned, operated or leased by the Borrower
or any of its Subsidiaries, or the failure by the Borrower or any of its
Subsidiaries to comply with any Environmental Law (but excluding, in the case of
either of clause (A) or (B) above, any such losses, liabilities, claims, damages
or expenses to the extent incurred by reason of gross negligence or willful
misconduct on the part of the Person to be indemnified).
11.6 Amendments, Waivers and Consents.
Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Required Lenders and the
Borrower, provided, however, that:
(a) without the consent of each Lender affected thereby, neither this
Credit Agreement nor any of the other Credit Documents may be amended
to
(i) extend the final maturity of any Loan or the time of
payment of any reimbursement obligation, or any portion
thereof, arising from drawings under Letters of Credit, or
extend or waive any principal amortization payment of any
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Loan, or any portion thereof (other than a waiver or modification of a
mandatory prepayment or commitment reduction hereunder which shall be
subject to the consent of the Required Lenders except as expressly
provided otherwise),
(ii) reduce the rate or extend the time of payment of interest
(other than as a result of waiving the applicability of any
increase in interest rates after the occurrence of an Event of Default
or on account of a failure to deliver financial statements on a timely
basis) thereon or Fees hereunder,
(iii) reduce or waive the principal amount of any Loan or
of any reimbursement obligation, or any portion thereof, arising from
drawings under Letters of Credit,
(iv) increase the Commitment of a Lender over the amount
thereof in effect (it being understood and agreed that a waiver of any
Default or Event of Default or mandatory reduction in the Commitments
shall not constitute a change in the terms of any Commitment of any
Lender),
(v) except as permitted under Section 8.4(b), release all or
substantially all of the collateral,
(vi) except as the result of or in connection with a
dissolution, merger or disposition of a Subsidiary permitted under
Section 8.4, release the Borrower or all or substantially all of the
Guarantors from its or their obligations under the Credit Documents,
(vii) amend, modify or waive any provision of this Section 11.6
or Section 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 9.1(a),
11.2, 11.3, 11.5 or 11.9,
(viii) reduce any percentage specified in, or otherwise modify,
the definition of Required Lenders, or
(ix) consent to the assignment or transfer by the Borrower (or
another Credit Party) of any of its rights and obligations under (or
in respect of) the Credit Documents except as permitted thereby;
(b) without the consent of the Agent, no provision of Section 10 may
be amended;
(c) without the consent of the Issuing Lender, no provision of Section
2.2 may be amended.
Notwithstanding the fact that the consent of all the Lenders is
required in certain circumstances as set forth above, (x) each Lender is
entitled to vote as such Lender sees fit on any
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bankruptcy reorganization plan that affects the Loans, and each Lender
acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code
supersedes the unanimous consent provisions set forth herein and (y) the
Required Lenders may consent to allow a Credit Party to use cash collateral in
the context of a bankruptcy or insolvency proceeding.
11.7 Counterparts.
This Credit Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.
11.8 Headings.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 Survival.
All indemnities set forth herein, including, without limitation, in
Section 2.2(i), 3.9, 3.11, 10.7 or 11.5 shall survive the execution and delivery
of this Credit Agreement, the making of the Loans, the issuance of the Letters
of Credit, the repayment of the Loans, LOC Obligations and other obligations
under the Credit Documents and the termination of the Commitments hereunder, and
all representations and warranties made by the Credit Parties herein shall
survive delivery of the Notes and the making of the Loans hereunder.
11.10 Governing Law; Submission to Jurisdiction; Venue.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Any legal action or proceeding with respect to this Credit Agreement or any
other Credit Document may be brought in the courts of the State of New York in
New York County, or of the United States for the Southern District of New York,
and, by execution and delivery of this Credit Agreement, each of the Credit
Parties hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the nonexclusive jurisdiction of such courts.
Each of the Credit Parties further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to it at the address set out for notices pursuant to Section 11.1, such
service to become effective three (3) days after such mailing. Nothing herein
shall affect the right of the Administrative Agent to serve process in any other
manner permitted by law or to commence legal proceedings or to otherwise proceed
against any Credit Party in any other jurisdiction.
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<PAGE> 97
(b) Each of the Credit Parties hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Credit Agreement or any other Credit Document brought in the courts referred to
in subsection (a) hereof and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum.
(c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE ADMINISTRATIVE AGENT,
THE LENDERS, THE BORROWER AND THE CREDIT PARTIES HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
11.11 Severability.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.12 Entirety.
This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
11.13 Binding Effect; Termination.
(a) This Credit Agreement shall become effective at such time on or
after the Closing Date when it shall have been executed by the Borrower, the
Guarantors and the Administrative Agent, and the Administrative Agent shall have
received copies hereof (telefaxed or otherwise) which, when taken together, bear
the signatures of each Lender, and thereafter this Credit Agreement shall be
binding upon and inure to the benefit of the Borrower, the Guarantors, the
Administrative Agent and each Lender and their respective successors and
assigns.
(b) The term of this Credit Agreement shall be until no Loans, LOC
Obligations or any other amounts payable hereunder or under any of the other
Credit Documents shall remain outstanding and until all of the Commitments
hereunder shall have expired or been terminated.
11.14 Confidentiality.
The Administrative Agent and the Lenders agree to keep confidential
(and to cause their respective affiliates, officers, directors, employees,
Administrative Agents and representatives to
92
<PAGE> 98
keep confidential) all information, materials and documents furnished to the
Administrative Agent or any such Lender by or on behalf of any Credit Party
(whether before or after the Closing Date) which relates to the Borrower or any
of its Subsidiaries (the "Information"). Notwithstanding the foregoing, the
Administrative Agent and each Lender shall be permitted to disclose Information
(i) to its affiliates, officers, directors, employees, agents and
representatives (provided they have been informed of the confidential nature of
such Information and have agreed to abide by the provisions of this Section
11.14) in connection with its participation in any of the transactions evidenced
by this Credit Agreement or any other Credit Documents or the administration of
this Credit Agreement or any other Credit Documents; (ii) to the extent required
by applicable laws and regulations or by any subpoena or similar legal process,
or requested by any Governmental Authority, and, where permissable in connection
therewith, after notice to the Borrower reasonably calculated to afford the
Borrower an opportunity to contest the disclosure; (iii) to the extent such
Information (A) becomes publicly available other than as a result of a breach of
this Credit Agreement or any agreement entered into pursuant to clause (iv)
below, (B) becomes available to the Administrative Agent or such Lender on a
non-confidential basis from a source other than a Credit Party or (C) was
available to the Administrative Agent or such Lender on a non-confidential basis
prior to its disclosure to the Administrative Agent or such Lender by a Credit
Party; (iv) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee or
participant) first specifically agrees in a writing furnished to and for the
benefit of the Credit Parties to be bound by the terms of this Section 11.14; or
(v) to the extent that the Borrower shall have consented in writing to such
disclosure. Nothing set forth in this Section 11.14 shall obligate the
Administrative Agent or any Lender to return any materials furnished by the
Credit Parties.
11.15 Source of Funds.
Each of the Lenders hereby represents and warrants to the Borrower that
at least one of the following statements is an accurate representation as to the
source of funds to be used by such Lender in connection with the financing
hereunder:
(a) no part of such funds constitutes assets allocated to any
separate account maintained by such Lender in which any employee
benefit plan (or its related trust) has any interest;
(b) to the extent that any part of such funds constitutes
assets allocated to any separate account maintained by such Lender,
such Lender has disclosed to the Borrower the name of each employee
benefit plan whose assets in such account exceed 10% of the total
assets of such account as of the date of such purchase (and, for
purposes of this subsection (b), all employee benefit plans maintained
by the same employer or employee organization are deemed to be a single
plan);
(c) to the extent that any part of such funds constitutes
assets of an insurance company's general account, such insurance
company has complied with all of the requirements of the regulations
issued under Section 401(c)(1)(A) of ERISA; or
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<PAGE> 99
(d) such funds constitute assets of one or more specific
benefit plans which such Lender has identified in writing to the
Borrower.
As used in this Section 11.15, the terms "employee benefit plan" and "separate
account" shall have the respective meanings assigned to such terms in Section 3
of ERISA.
11.16 Conflict.
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.
[Signature Page to Follow]
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<PAGE> 100
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: SCHOOL SPECIALTY, INC.,
a Delaware corporation
By: /s/ Donald J. Noskowiak
-------------------------
Name: Donald J. Noskowiak
Title: Executive Vice President & Chief Financial Officer
GUARANTORS: CHILDCRAFT EDUCATION CORP.,
a New York corporation
By: /s/ Donald J. Noskowiak
-------------------------
Name: Donald J. Noskowiak
Title: Vice President
RE-PRINT LLC,
a Delaware limited liability company
By: /s/ Donald J. Noskowiak
-------------------------
Name: Donald J. Noskowiak
Title: Vice President School Specialty Inc., Member
BIRD-IN-HAND WOODWORKS, INC.,
a New Jersey corporation
By: /s/ Donald J. Noskowiak
-------------------------
Name: Donald J. Noskowiak
Title: Vice President
SAX ARTS & CRAFTS, INC.,
a Delaware corporation
By: /s/ Donald J. Noskowiak
-------------------------
Name: Donald J. Noskowiak
Title: Vice President
<PAGE> 101
THE NATIONAL SCHOOL SUPPLY COMPANY,
a Delaware corporation
By: /s/ Donald J. Noskowiak
-------------------------
Name: Donald J. Noskowiak
Title: Vice President
BECKLEY-CARDY, INC.,
a Delaware corporation
By: /s/ Donald J. Noskowiak
-------------------------
Name: Donald J. Noskowiak
Title: Vice President
LENDERS: NATIONSBANK, N.A.,
individually in its capacity as a
Lender and in its capacity as Administrative Agent
By: /s/ Michelle R. Heredia
-------------------------
Name: Michelle R. Heredia
Title: Senior Vice President
BANK ONE, WISCONSIN
By: /s/ Anthony F. Maggiore
-------------------------
Name: Anthony F. Maggiore
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Greg Wilson
-------------------------
Name: Greg Wilson
Title: Commercial Banking Officer
<PAGE> 102
THE BANK OF NEW YORK
By: /s/ Mark T. Family
-------------------------
Name: Mark T. Family
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
By: /s/ Andrew K. Peterson
-------------------------
Name: Andrew K. Peterson
Title: Vice President
FIRSTAR BANK MILWAUKEE, N.A.
By: /s/ Caroline V. Krider
-------------------------
Name: Caroline V. Krider
Title: Vice President
US TRUST
By: /s/ Thomas F. Macina
-------------------------
Name: Thomas F. Macina
Title: Vice President
LASALLE NATIONAL BANK
By: /s/ Russell P. McMinn
-------------------------
Name: Russell P. McMinn
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated financial statements of the Company included in the
Report on Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-24-1999
<PERIOD-END> JAN-23-1999
<PERIOD-START> APR-27-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 86,621
<ALLOWANCES> 1,778
<INVENTORY> 46,799
<CURRENT-ASSETS> 147,861
<PP&E> 50,331
<DEPRECIATION> (10,550)
<TOTAL-ASSETS> 378,513
<CURRENT-LIABILITIES> 57,035
<BONDS> 0
0
0
<COMMON> 15
<OTHER-SE> 159,052
<TOTAL-LIABILITY-AND-EQUITY> 378,513
<SALES> 424,332
<TOTAL-REVENUES> 424,332
<CGS> 281,436
<TOTAL-COSTS> 281,436
<OTHER-EXPENSES> 113,165
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,942
<INCOME-PRETAX> 20,789
<INCOME-TAX> 10,094
<INCOME-CONTINUING> 10,695
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,695
<EPS-PRIMARY> .73
<EPS-DILUTED> .73
</TABLE>
