<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
------ EXCHANGE ACT OF 1934. For the Quarterly Period ended June 30, 1996.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
------ EXCHANGE ACT OF 1934. For the transition Period from N/A to .
----- -----
Commission File No. 1-8467
BMC INDUSTRIES, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Minnesota 41-0169210
------------------------ ---------------------------------
(State of Incorporation) (IRS Employer Identification No.)
Two Appletree Square, Minneapolis, Minnesota 55425
--------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(612) 851-6000
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether 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 at least the past 90 days.
X Yes No
--------- --------
BMC Industries, Inc. has outstanding 27,313,089 shares of common stock as of
August 12, 1996. There is no other class of stock outstanding.
Page 1 of 73
Exhibit Index Begins at Page 9.
<PAGE>
PART I: FINANCIAL INFORMATION
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
Item 1: Financial Statements
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
ASSETS
- --------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 5,540 $ 15,874
Trade accounts and notes receivable,
net of allowances 25,276 23,003
Inventories 47,098 34,772
Deferred income taxes 4,831 3,753
Other current assets 7,659 5,964
- --------------------------------------------------------------------------------------
Total Current Assets 90,404 83,366
- --------------------------------------------------------------------------------------
Property, Plant and Equipment 188,920 171,711
Less Accumulated Depreciation 92,551 90,302
----------- ----------
Property, Plant and Equipment, Net 96,369 81,409
----------- ----------
Deferred Income Taxes 5,607 5,362
Other Assets, Net 11,899 12,195
- --------------------------------------------------------------------------------------
Total Assets $ 204,279 $ 182,332
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------
Current Liabilities
Short-term borrowings $ 6,020
Accounts payable 18,444 $ 20,408
Income taxes payable 10,094 9,308
Accrued expenses and other current liabilities 24,533 20,920
- --------------------------------------------------------------------------------------
Total Current Liabilities 59,091 50,636
- --------------------------------------------------------------------------------------
Other Liabilities 19,261 21,654
Deferred Income Taxes 1,532 1,576
Stockholders' Equity
Common stock 55,302 52,974
Retained earnings 66,305 50,962
Cumulative translation adjustment 4,070 5,749
Other (1,282) (1,219)
- --------------------------------------------------------------------------------------
Total Stockholders' Equity 124,395 108,466
- --------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 204,279 $ 182,332
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
Page 2
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------------------------------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Net sales of primary products $ 67,513 $ 64,026 $ 135,622 $ 121,779
Equipment and technology sales 661 5,621 853 9,202
- ------------------------------------------------------------------------------------------------------------------------
Total Revenues 68,174 69,647 136,475 130,981
- ------------------------------------------------------------------------------------------------------------------------
Operating Costs and Expenses
Cost of sales of primary products 49,487 50,764 104,582 99,110
Cost of equipment and technology sales 204 3,757 370 5,668
Selling 2,559 2,205 5,117 4,480
Administrative 1,288 1,330 2,515 2,584
- ------------------------------------------------------------------------------------------------------------------------
Total Operating Costs and Expenses 53,538 58,056 112,584 111,842
- ------------------------------------------------------------------------------------------------------------------------
Income from Operations 14,636 11,591 23,891 19,139
- ------------------------------------------------------------------------------------------------------------------------
Other Income and (Expense)
Interest expense (60) (28) (190) (105)
Interest income 31 213 150 398
Other income (expense) 81 (92) 31 (159)
- ------------------------------------------------------------------------------------------------------------------------
Earnings before Income Taxes 14,688 11,684 23,882 19,273
Income Tax Provision 4,846 4,207 7,857 7,102
- ------------------------------------------------------------------------------------------------------------------------
Net Earnings $ 9,842 $ 7,477 $ 16,025 $ 12,171
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Net Earnings Per Share $ 0.35 $ 0.26 $ 0.57 $ 0.43
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Number of Shares Included in Per Share Computation 28,369 28,233 28,324 28,131
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Dividends Declared Per Share $ 0.0125 $ 0.01 $ 0.025 $ 0.02
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
Page 3
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30
----------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Cash Provided by Operating Activities
Net earnings $ 16,025 $ 12,171
Depreciation and amortization 5,127 4,363
Changes in operating assets and liabilities (16,896) 146
- ------------------------------------------------------------------------------------------------------
Total 4,256 16,680
- ------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Investing Activities
Additions to property, plant and equipment (22,079) (11,590)
Other -- 22
- ------------------------------------------------------------------------------------------------------
Total (22,079) (11,568)
- ------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities
Short-term borrowings 6,020 --
Common stock issued 2,356 388
Cash dividends paid (679) (536)
Other (37) (157)
- ------------------------------------------------------------------------------------------------------
Total 7,660 (305)
- ------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (171) 303
- ------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (10,334) 5,110
Cash and Cash Equivalents at Beginning of Period 15,874 14,327
- ------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 5,540 $ 19,437
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
Page 4
<PAGE>
BMC INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
1. Financial Statements
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the financial position of the Company as of June 30,
1996, and the results of operations and the cash flows for the periods
ended June 30, 1996 and 1995. Such adjustments are of a normal
recurring nature. Certain items in the financial statements for the
periods ended June 30, 1995 have been reclassified to conform to the
presentation for the periods ended June 30, 1996. Per share amounts for
the periods ended June 30, 1995 have been restated to reflect a
two-for-one stock split in the third quarter of 1995. The results of
operations for the three-month and six-month periods ended June 30, 1996
are not necessarily indicative of the results to be expected for the
full year. The balance sheet as of December 31, 1995 is derived from
the audited balance sheet as of that date. 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 December 31,
1995.
2. Inventories
June 30, 1996 December 31, 1995
------------- -----------------
Raw materials $ 15,150 $ 12,556
Work in process 8,173 5,772
Finished goods 23,775 16,444
----------- -----------
Total Inventories $ 47,098 $ 34,772
----------- -----------
----------- -----------
3. Credit Agreement
During the second quarter of 1996, the Company signed a new credit
agreement (the Agreement) with three domestic banks for unsecured
borrowings totaling $150,000. This Agreement consists of a $70,000
four-year revolving credit facility for general corporate purposes and
an $80,000 one-year acquisition credit facility. Borrowings under the
Agreement bear interest at the Eurodollar Rate plus 0.30% to 0.70%. The
rate spread is dependent upon the Company's ratio of debt to total
capitalization. In addition, the Company pays a facility fee on
unborrowed funds at rates ranging from 0.08% to 0.175%, depending on the
Company's debt to total capitalization ratio. Under terms of the
Agreement, the Company must meet certain affirmative covenants,
including maintaining a specified total capitalization ratio, interest
coverage ratio, cash flow leverage ratio and tangible net worth. The
Company was in compliance with all covenants and no borrowings were
outstanding under the Agreement at June 30, 1996.
Page 5
<PAGE>
4. Long-term Contract
Work is continuing on a long-term contract for the construction of
aperture mask production equipment for a customer in China. At June 30,
1996, the contract was approximately 90% complete. At June 30, 1996, no
material change had been made in the estimate of costs to complete the
contract.
5. Earnings Per Share
Primary earnings per share is computed using the weighted average number
of common and common equivalent shares outstanding during the periods.
Common stock equivalents include dilutive stock options using the
treasury stock method. Fully diluted earnings per share did not differ
significantly from primary earnings per share in all periods presented.
As indicated in Note 1, per share amounts for the periods ended June 30,
1995 have been restated to reflect a two-for-one stock split in the
third quarter of 1995.
6. Legal Matters
There are no material changes in the status of the Barth Industries
legal proceeding or any other legal proceeding or environmental matter
described in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
Page 6
<PAGE>
BMC INDUSTRIES, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1996 AND 1995
Second quarter revenues from primary products (excluding equipment and
technology sales) increased $3.5 million or 5.4% from the second quarter of
1995. Due to the impact of the decline in value of the Deutsche Mark (DM)
relative to the U.S. Dollar on the German mask operation, primary product
revenues of the Precision Imaged Products group increased only slightly from
the strong second quarter of 1995. In the second quarter, sales of jumbo (30"
and larger) aperture masks, which have higher gross margin percentages than
smaller mask sizes, increased 41.9% over second quarter 1995 sales. The
Company made its first sales of computer monitor high-resolution masks
manufactured from the new aperture mask line at its manufacturing facility in
Germany during the second quarter. While the sales impact of this line was
nominal in the second quarter, the Company believes that the new
high-resolution line will contribute significant sales in future quarters.
Net sales of the Optical Products group increased 17.5% due to higher sales in
all product lines. In particular, sales of high end products (polycarbonate,
progressive, high index and polarizing sunglass lenses) increased 21.2% over
the same quarter in the prior year.
Cost of sales of primary products was 73.3% of net sales for the second
quarter of 1996, compared to 79.3% in the same period of 1995. The
improvement occurred in both groups and was due primarily to improved sales
mix of higher-margin products and improved yields and manufacturing
efficiencies. The Optical Products group also benefited from the acquisition
of plastic lenses from a lower cost, off-shore manufacturer.
The provision for income taxes was 33.0% of pre-tax income in the second
quarter of 1996 compared to 36.0% for the same period in 1995. The lower
effective rate in the second quarter of 1996 was primarily due to utilization
of excess foreign tax credits upon the repatriation of earnings from the
Company's German subsidiary and additionally, foreign earnings, which incur
taxes at rates higher than in the U.S., represented a lower proportion of
earnings in the second quarter of 1996 compared to the same period in 1995.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Total revenues from primary products (excluding equipment and technology
sales) for the first six months of 1996 increased $13.8 million or 11.4% over
the first six months of 1995. Primary product revenues from the Precision
Imaged Products group for the first six months of 1996 increased 11.4% due
primarily to continued improvement in sales mix toward higher-margin jumbo
masks (30" and larger) and invar color television aperture masks. For the
first six months of 1996, sales of jumbo masks and masks made from invar
increased 64.1% and 24.0%, respectively, over the comparable 1995 period. Net
sales of the Optical Products group increased 11.4% due to higher sales in all
product lines. In particular, sales of high end products (polycarbonate,
progressive, high index and polarizing sunglass lenses) increased more than
15.2% over the prior year.
Page 7
<PAGE>
Cost of sales of primary products was 77.1% of net sales for the first six
months of 1996, compared to 81.4% in the same period of 1995. The improvement
occurred throughout the Company and was due primarily to improved sales mix of
higher-margin products and improved yields and manufacturing efficiencies.
The provision for income taxes was 32.9% of pre-tax income in the first six
months of 1996 compared to 36.8% for the same period in 1995. The lower
effective rate in the first six months of 1996 was primarily due to
utilization of excess foreign tax credits upon the repatriation of earnings
from the Company's German subsidiary and additionally, foreign earnings, which
incur taxes at higher rates than in the U.S., represented a lower proportion
of earnings in the first six months of 1996 compared to the same period in
1995. The Company anticipates that its effective tax rate for the total year
of 1996 will be lower than the 37.0% effective rate for the total year of 1995
for the reasons described above.
FINANCIAL POSITION AND LIQUIDITY
Cash and cash equivalent balances decreased $10.3 million and short-term
borrowings increased $6.0 million during the first six months of 1996, due
primarily to $22.1 million of capital expenditures relating primarily to the
expansion of the Company's aperture mask manufacturing facilities and
increased inventory levels, offset partially by cash generated from earnings.
The increased inventory levels were due primarily to building inventories
related to the new computer monitor high-resolution mask line and increasing
inventories in the Optical Products group to support new product
introductions. Working capital was $31.3 million at June 30, 1996 compared to
$32.7 million at December 31, 1995. The current ratio was 1.53 at June 30,
1996, compared to 1.65 at December 31, 1995. The ratio of total liabilities
to equity declined to .64 at June 30, 1996 compared to .68 at December 31,
1995.
During the second quarter, the Company signed a $150 million unsecured credit
facility consisting of a $70 million revolving credit facility for general
purposes and an $80 million acquisition credit facility. The Company expects
a significant increase in its capital spending in 1996 due to approximately
$55 million of capital spending relating to the two-line expansion of the
Company's aperture mask manufacturing facility at Cortland, New York. The
revolving credit facility will provide the funds needed for capital spending
related to the Cortland expansion. The acquisition credit facility will
provide immediately available funds in the event the Company encounters a
strategic acquisition opportunity. As of June 30, 1996, the Company had
commitments of approximately $13.8 million related to capital projects, a
majority of which was related to the Cortland expansion.
ENVIRONMENTAL
In April 1996, the Company was named as a potentially responsible party (PRP)
at a site in Zionsville, Indiana. This is the third site at this location for
which the Company has been named a PRP. The Company entered into a de minimus
settlement agreement for the prior two sites and also believes that it will be
a de minimus party at this site. The Company does not believe the eventual
outcome at this site will have a material adverse effect on the financial
condition of the Company.
There are no material changes in the status of the legal proceedings and
environmental matters described in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.
Page 8
<PAGE>
Part II: OTHER INFORMATION
ITEM 1. With regard to legal proceedings and certain environmental matters,
see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on page 8 and Note 6 of the "Notes to Condensed
Consolidated Financial Statements" on page 6.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
The Company's 1996 Annual Meeting of Stockholders was held on
April 25, 1996. One matter was submitted to a vote of stockholders:
Election of certain members of the Company's Board of Directors.
(1) The nominees for election to the Company's Board of Directors,
as listed in the Company's Proxy Statement dated March 22, 1996,
were elected for two year terms at that meeting. Voting for the
individual nominees was as follows:
Votes Withheld
Nominee Votes For or Against
------- -------- --------------
Mr. Lyle D. Altman 19,522,226 60,801
Mr. Paul B. Burke 19,526,465 56,562
Mr. Harry A. Hammerly 19,524,826 58,201
The following directors did not stand for election this year
because their terms of office continued after the meeting:
Mr. John W. Castro, Mr. Joe E. Davis and Dr. Richard A. Swalin.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits Page
-------- ----
10.1 Credit Agreement among BMC Industries, Inc., Norwest
Bank Minnesota, National Association, and various
banks .................................................. 11
10.2 First Declaration of Amendment, dated as of March 29,
1996, to the BMC Industries, Inc. Savings Plan, 1994
Revision ............................................... 65
10.3 Amendment No. 1 to the 1994 Stock Incentive Plan ....... 67
27. Financial Data Schedule (filed only in electronic format)
99.1 News Release, dated July 18, 1996, announcing the
second quarter 1996 operating results .................. 68
99.2 News Release, dated June 10, 1996, announcing $150
million credit facility ................................ 72
99.3 News Release, dated June 7, 1996, announcing quarterly
dividend ............................................. 73
Page 9
<PAGE>
(b) REPORTS ON FORM 8-K.
The Company did not file any reports on Form 8-K during the quarter
ended June 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BMC INDUSTRIES, INC.
-----------------------------
Jeffrey L. Wright
Corporate Controller
(Principal Accounting Officer)
Dated: August 13, 1996
Page 10
<PAGE>
CREDIT AGREEMENT
AMONG
BMC INDUSTRIES, INC.
VARIOUS BANKS
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
=============================================
$70,000,000 REVOLVING CREDIT FACILITY
$80,000,000 ACQUISITION CREDIT FACILITY
=============================================
CLOSING DATE: JUNE 5, 1996
[LOGO]
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS ................................................... 1
Section 1.1 Definitions ............................................... 1
ARTICLE II AMOUNT AND TERMS OF THE LOANS AND LETTERS OF CREDIT .......... 11
Section 2.1 Facility A ................................................ 11
Section 2.2 Facility B ................................................ 11
Section 2.3 Procedure for Making Advances ............................. 11
Section 2.4 Interest .................................................. 13
Section 2.5 Pricing Adjustments ....................................... 14
Section 2.6 Letters of Credit ......................................... 15
Section 2.7 Commitment Fees ........................................... 16
Section 2.8 Syndication Fee ........................................... 17
Section 2.9 Voluntary Reduction of the Commitment Amounts ............. 17
Section 2.10 Mandatory Reduction of the Commitment
Amounts: Excess Foreign Debt ............................ 17
Section 2.11 Voluntary Prepayments ..................................... 18
Section 2.12 Computation of Interest and Fees .......................... 18
Section 2.13 Payment ................................................... 18
Section 2.14 Payment on Nonbusiness Days ............................... 18
Section 2.15 Fees on Fixed Rate Advances and Indemnity ................. 18
Section 2.16 Capital Adequacy .......................................... 20
ARTICLE III CONDITIONS OF LENDING AND LETTERS OF CREDIT ................. 21
Section 3.1 Initial Conditions Precedent .............................. 21
Section 3.2 Conditions Precedent to All advances and
Letters of Credit ....................................... 22
ARTICLE IV REPRESENTATIONS AND WARRANTIES ............................... 22
Section 4.1 Corporate Existence and Power ............................. 22
Section 4.2 Authorization of Borrowing; No Conflict as to
Law or Agreements ....................................... 22
Section 4.3 Legal Agreements .......................................... 23
Section 4.4 Subsidiaries .............................................. 23
Section 4.5 Financial Condition ....................................... 23
Section 4.6 Adverse Change ............................................ 23
Section 4.7 Litigation ................................................ 23
Section 4.8 Hazardous Substances ...................................... 23
Section 4.9 Regulation U .............................................. 23
Section 4.10 Taxes ..................................................... 24
Section 4.11 Titles and Liens .......................................... 24
Section 4.12 ERISA ..................................................... 24
ARTICLE V AFFIRMATIVE COVENANTS OF THE BORROWER ......................... 24
Section 5.1 Financial Statements ...................................... 24
Section 5.2 Books and Records; Inspection and Examination ............. 26
<PAGE>
Section 5.3 Compliance with Laws ...................................... 26
Section 5.4 Payment of Taxes and Other Claims ......................... 27
Section 5.5 Maintenance of Properties ................................. 27
Section 5.6 Insurance ................................................. 27
Section 5.7 Preservation of Corporate Existence ....................... 27
Section 5.8 Total Capitalization Ratio ................................ 27
Section 5.9 Interest Coverage Ratio ................................... 28
Section 5.10 Cash Flow Leverage Ratio ................................. 28
Section 5.11 Tangible Net Worth ....................................... 28
ARTICLE VI NEGATIVE COVENANTS ........................................... 28
Section 6.1 Liens ..................................................... 28
Section 6.2 Indebtedness .............................................. 30
Section 6.3 Guaranties ................................................ 31
Section 6.4 Investments ............................................... 32
Section 6.5 Sale of Assets ............................................ 33
Section 6.6 Restrictions on Issuance and Sale of Subsidiary Stock ..... 34
Section 6.7 Consolidation and Merger .................................. 34
Section 6.8 Sale and Leaseback ........................................ 35
Section 6.9 Subordinated Debt ......................................... 35
Section 6.10 Hazardous Substances ...................................... 35
Section 6.11 Restrictions on Nature of Business ........................ 35
Section 6.12 Restrictions on Subsidiary Agreements ..................... 35
ARTICLE VII EVENTS OF DEFAULT, RIGHTS AND REMEDIES ...................... 35
Section 7.1 Events of Default ......................................... 36
Section 7.2 Rights and Remedies ....................................... 38
Section 7.3 Pledge of Cash Collateral Account ......................... 39
ARTICLE VIII THE AGENT .................................................. 39
Section 8.1 Authorization ............................................. 39
Section 8.2 Distribution of Payments and Proceeds ..................... 39
Section 8.3 Expenses .................................................. 40
Section 8.4 Payments Received Directly by Banks ....................... 41
Section 8.5 Indemnification ........................................... 41
Section 8.6 Limitations on Agent's Power .............................. 41
Section 8.7 Exculpation ............................................... 41
Section 8.8 Agent and Affiliates ...................................... 42
Section 8.9 Credit Investigation ...................................... 42
Section 8.10 Resignation ............................................... 42
Section 8.11 Assignments ............................................... 42
Section 8.12 Participations ............................................ 42
Section 8.13 Disclosure of Information ................................ 43
-ii-
<PAGE>
ARTICLE IX MISCELLANEOUS ................................................ 44
Section 9.1 No Waiver; Cumulative Remedies ............................ 44
Section 9.2 Amendments, Etc. .......................................... 44
Section 9.3 Notice .................................................... 44
Section 9.4 Costs and Expenses ........................................ 45
Section 9.5 Indemnification by Borrower ............................... 45
Section 9.6 Execution in Counterparts ................................. 45
Section 9.7 Binding Effect, Assignment ................................ 46
Section 9.8 Governing Law ............................................. 46
Section 9.9 Severability of Provisions ................................ 46
Section 9.10 Waiver of Jury Trial ...................................... 46
Section 9.11 Prior Agreements .......................................... 46
Section 9.12 Most Favored Nation ....................................... 47
Section 9.13 Headings .................................................. 47
-iii-
<PAGE>
CREDIT AGREEMENT
Dated as of June 5, 1996
BMC Industries, Inc., a Minnesota corporation; the Banks, as
defined below; and Norwest Bank Minnesota, National Association, a national
banking association, as Agent for the Banks, agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise
requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as
the singular; and
(b) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted
accounting principles.
"Advance" means an Advance by a Bank to the Borrower pursuant to
Article II.
"Agent" means Norwest acting in its capacity as agent for itself
and the other Banks hereunder.
"Agreement" means this Credit Agreement.
"Bank Business Day" means a day other than a Saturday, Sunday or day
on which any Bank is not open for the transaction of commercial business
at its main office in Minnesota or Michigan, as the case may be.
"Banks" means Norwest, acting on its own behalf and not as Agent, and
each of the other undersigned banks, collectively.
"Borrower" means BMC Industries, Inc., a Minnesota corporation and a
party to this Agreement.
"Borrowing" means a borrowing under Article II consisting of equal
Advances made to the Borrower at the same time by each of the Banks
severally.
<PAGE>
"Capitalized Lease" of a Person means any lease of property by such
Person as lessee which would be capitalized on a balance sheet of such
Person prepared in accordance with generally accepted accounting
principles consistently applied.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown
as a liability on a balance sheet of such Person prepared in accordance
with generally accepted accounting principles consistently applied.
"Cash Collateral Account" means an account maintained with the Agent
in which funds are deposited pursuant to Section 2.6(h), Section 2.10 or
Section 7.2(c).
"Cash Flow Leverage Ratio" means, at the end of any fiscal quarter of
the Borrower, the ratio of (A) the aggregate Funded Debt of the Borrower
and its Subsidiaries as at the end of that fiscal quarter, to (B) EBITDA
of the Borrower and its Subsidiaries during the four fiscal quarters
ending on that quarter-end, all determined on a consolidated basis in
accordance with generally accepted accounting principles consistently
applied.
"Commitment" means, with respect to each Bank, that Bank's commitment
to make Advances and issue or participate in Letters of Credit pursuant to
Article II.
"Compliance Certificate" means a certificate in substantially the
form of Exhibit D, or such other form as the Borrower and the Banks may
from time to time agree upon in writing, executed by a Designated
Financial Officer of the Borrower, (i) setting forth relevant facts in
reasonable detail the computations as to whether or not the Borrower is in
compliance with the requirements set forth in Sections 5.8, 5.9, 5.10 and
5.11, (ii) stating that the financial statements delivered therewith have
been prepared in accordance with generally accepted accounting principles
applied on a basis that is consistent in all material respects with the
accounting practices reflected in the annual financial statements referred
to in Section 4.5, subject to any Required GAAP Change and, in the case of
interim financial statements, year-end audit adjustments, and
(iii) stating whether or not such officer or any other member of the
Borrower's senior management has knowledge of the occurrence of any
Default or Event of Default hereunder not theretofore reported and
remedied and, if so, stating in reasonable detail the facts with respect
thereto.
"Consolidated Net Income" means the net earnings of the Borrower and
its Subsidiaries on a consolidated basis after excluding the sum of (i)
any net losses or any undistributed net income of any minority interest
held by the Borrower, (ii) the gain or loss resulting from the sale of any
capital assets other than in the ordinary course of business, (iii)
extraordinary or non-recurring gains or losses, provided they are
identified as such in the Borrower's audited financial statements and (iv)
any gain
-2-
<PAGE>
resulting from any write-up of assets, all determined in accordance with
generally accepted accounting principles consistently applied.
"Contingent Obligation" of a Person means any agreement, undertaking
or arrangement by which such Person assumes, guarantees, endorses,
contingently agrees to purchase or provide funds for the payment of, or
otherwise becomes or is contingently liable upon, the obligation or
liability of any other Person, or agrees to maintain the net worth or
working capital or other financial condition of any other Person, or
otherwise assures any creditor of such other Person against loss,
including, without limitation, any comfort letter, operating agreement,
take-or-pay contract or application for a letter of credit; provided that,
(a) with respect to the Borrower, its obligations under that certain
Pledge Declaration made to Deutsche Bank AG dated September 23, 1994, and
any extension, increase, substitution or replacement therefor, (b)
obligations of the Borrower or any Subsidiary to reimburse the issuer of
any undrawn letter of credit issued in connection with any obligation of
the Borrower or any Subsidiary, and (c) any transaction described in
Section 6.1(k), shall in each case not be a Contingent Obligation
hereunder.
"Default" means an event that, with the giving of notice, the passage
of time or both, would constitute an Event of Default.
"Designated Financial Officer" means the chief financial officer,
treasurer, assistant treasurer or controller of the Borrower.
"Domestic Subsidiary" means a Subsidiary that conducts no material
business outside the United States and has no material property outside
the United States.
"EBIT" means, for any period, the sum of (a) Consolidated Net Income
for the Borrower and its Subsidiaries for such period, (b) Interest
Expense for such period to the extent deducted in determining such
Consolidated Net Income, and (c) all taxes accrued for such period on or
measured by income to the extent deducted in determining such Consolidated
Net Income, all determined in accordance with generally accepted
accounting principles consistently applied.
"EBITDA" means, for any period, the sum of (a) EBIT for the Borrower
and its Subsidiaries for such period, and (b) depreciation, depletion,
amortization and other non-cash items for such period to the extent
deducted in determining the Consolidated Net Income component used in the
calculation of EBIT, all determined in accordance with generally accepted
accounting principles consistently applied.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is, along with the Borrower, a member of a controlled
group of corporations or a
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<PAGE>
controlled group of trades or businesses, as described in sections
414(b) and 414(c), respectively, of the Internal Revenue Code of 1986,
as amended.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 ET SEQ., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 ET SEQ.,
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1802 ET
SEQ., the Toxic Substances Control Act, 15 U.S.C. Section 2601 ET SEQ.,
the Federal Water Pollution Control Act, 33 U.S.C. Section 1252 ET SEQ.,
the Clean Water Act, 33 U.S.C. Section 1321 ET SEQ., the Clean Air Act, 42
U.S.C. Section 7401 ET SEQ., and any other federal, state, county,
municipal, local or other statute, law, ordinance or regulation which may
relate to or deal with human health or the environment, all as may be from
time to time amended.
"Eurodollar Business Day" means a Bank Business Day on which dealings
in U.S. dollar deposits are carried on in the London interbank market.
"Eurodollar Rate" means the annual rate equal to the sum of (i) the
rate obtained by dividing (a) the rate (rounded up to the nearest 1/16 of
1%) determined by the Agent to be the average rate at which U.S. dollar
deposits are offered to the Agent by major banks in the London interbank
market for funds to be made available on the first day of any Interest
Period in an amount approximately equal to the amount for which a
Eurodollar Rate quotation has been requested and maturing at the end of
such Interest Period, by (b) a percentage equal to 100% minus the Federal
Reserve System requirement (expressed as a percentage) applicable to such
deposits, and (ii) the applicable Eurodollar Rate Spread.
"Eurodollar Rate Spread" means a percentage, determined as set forth
in Section 2.5.
"Event of Default" has the meaning specified in Section 7.1.
"Excess Foreign Debt" means, as of any date, the greater of (i) $0,
or (ii) (A) the highest aggregate indebtedness of Foreign Subsidiaries
outstanding at any one time after the date hereof and on or before the
date of determination, less (B) $35,000,000.
"Facility A Advance" means an Advance by a Bank to the Borrower
pursuant to Section 2.1.
"Facility A Commitment Amount" means, with respect to each Bank, the
amount so designated opposite that Bank's name on the signature page,
unless said amount is reduced pursuant to Section 2.9 or 2.10, in which
event it means the amount to which said amount is reduced.
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<PAGE>
"Facility A Commitment Fee Rate" means a percentage, determined as
set forth in Section 2.5.
"Facility A Commitment Termination Date" means the earliest of
(i) June 15, 2000, (ii) the date on which the Facility A Commitment
Amounts have been reduced to $0 pursuant to Section 2.9, or (iii) the date
on which the Commitments have been terminated pursuant to Section 7.2.
"Facility A Note" has the meaning set forth in Section 2.1.
"Facility B Advance" means an Advance by a Bank to the Borrower
pursuant to Section 2.2.
"Facility B Commitment Amount" means, with respect to each Bank, the
amount so designated opposite that Bank's name on the signature page,
unless said amount is reduced pursuant to Section 2.9 or 2.10, in which
event it means the amount to which said amount is reduced.
"Facility B Commitment Fee Rate" means a percentage, determined as
set forth in Section 2.5.
"Facility B Commitment Termination Date" means the earliest of
(i) June 4, 1997, (ii) the date on which the fourth Borrowing under
Section 2.2 is made, (iii) the date on which the Facility B Commitment
Amounts have been reduced to $0 pursuant to Section 2.9, or (iv) the date
on which the Commitments have been terminated pursuant to Section 7.2.
"Facility B Note" has the meaning set forth in Section 2.2.
"Federal Funds Rate" means at any time an interest rate per annum
equal to the weighted average of the rates for overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which
is a Bank Business Day, the average of the quotations for such day for
such transactions received by the Agent from three federal funds brokers
of recognized standing selected by it, it being understood that the
Federal Funds Rate for any day which is not a Bank Business Day shall be
the Federal Funds Rate for the next preceding Bank Business Day.
"Floating Rate" means an annual rate equal to the Federal Funds Rate
plus 150 basis points (1.50%), which rate shall change when and as the
Federal Funds Rate changes.
"Foreign Subsidiary" means a Subsidiary that is not a Domestic
Subsidiary.
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<PAGE>
"Funded Debt" of a Person means such Person's (i) obligations for
borrowed money; (ii) obligations representing the purchase price of
property or services deferred beyond 12 months (other than accounts
payable and accrued expenses arising in the ordinary course of such
Person's business payable on terms customary in the trade or to then
current or former employees of the Borrower or any Subsidiary); (iii)
obligations, whether or not assumed, secured by liens or payable out of
the proceeds or production from property now or hereafter owned or
acquired by such Person; (iv) obligations which are evidenced by notes,
acceptances, and other such instruments, except for any such instruments
representing obligations (a) to then current or former employees of the
Borrower or any Subsidiary, and (b) any such instrument representing any
reimbursement obligation under a letter of credit excluded from the
definition of Contingent Obligations; (v) Capitalized Lease Obligations;
and (vi) Contingent Obligations. For the purpose of computing the "Funded
Debt" of any Person, there shall be excluded any particular Funded Debt to
the extent that, upon or prior to the maturity thereof, there shall have
been deposited with the proper depository in trust the necessary funds (or
evidences of such indebtedness, if permitted by the instrument creating
such indebtedness) for the payment, redemption or satisfaction of such
indebtedness; and thereafter such funds and evidences of indebtedness so
deposited shall not be included in any computation of the assets of such
Person. Any determination of "Funded Debt" provided to be for the
Borrower and its Subsidiaries on a consolidated basis in accordance with
generally accepted accounting principles consistently applied shall
require the elimination of all intercompany items.
"Guaranty" means a Guaranty of a Subsidiary of the Borrower, each in
the form of Exhibit C.
"Guarantying Subsidiary" means (i) Vision-Ease, and (ii) any other
present or future Domestic Subsidiary of the Borrower as to which the
Agent has received each of the following, each in form and substance
satisfactory to the Agent and the Banks:
(i) a Guaranty, duly executed by that Subsidiary,
(ii) an opinion of independent counsel to such Subsidiary, opining
that such Guaranty has been duly executed by that Subsidiary
and is enforceable in accordance with its terms, and opining
as to such other matters as the Agent or any Bank may
reasonably request, and
(iii) a certificate of the secretary of that Subsidiary (A)
certifying that the execution, delivery and performance of
that Subsidiary's Guaranty have been duly approved by all
necessary action of the Board of Directors of that
Subsidiary, and attaching true and correct copies of the
applicable resolutions granting such approval, (B) certifying
that attached to such certificate are true and correct copies
of the articles of
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<PAGE>
incorporation and bylaws of that Subsidiary, together with
such copies, and (C) certifying the names of the officers of
that Subsidiary that are authorized to sign that Subsidiary's
Guaranty, together with the true signatures of such officers.
"Hazardous Substance" means any asbestos, urea-formaldehyde,
polychlorinated biphenyls ("PCBs"), nuclear fuel or material, chemical
waste, radioactive material, explosives, known carcinogens, petroleum
products and by-products and other dangerous, toxic or hazardous
pollutants, contaminants, chemicals, materials or substances listed or
identified in, or regulated by, any Environmental Law.
"Interest Coverage Ratio" means, as of the end of any fiscal quarter
of the Borrower, the ratio of (i) EBIT of the Borrower and its
Subsidiaries during the four-quarter period ending on that quarter-end, to
(ii) Interest Expense of the Borrower and its Subsidiaries during the
four-quarter period ending on that quarter-end, all determined on a
consolidated basis in accordance with generally accepted accounting
principles consistently applied.
"Interest Expense" means, for any period of calculation and without
duplication, all interest, whether paid in cash, accrued as a liability or
capitalized, on indebtedness during such period, all calculated for such
period for the Borrower and its Subsidiaries on a consolidated basis in
accordance with generally accepted accounting principles consistently
applied.
"Interest Period" means, with respect to any Advance bearing interest
at a Eurodollar Rate, a period of one, two, three, or six months beginning
on a Eurodollar Business Day, as elected by the Borrower.
"Issuing Bank" means Norwest, acting as the Bank issuing Letters of
Credit.
"L/C Amount" means the sum of (i) the aggregate face amount of any
issued and outstanding Letters of Credit, plus (ii) amounts drawn under
Letters of Credit for which the Banks have neither been reimbursed nor
made any Advance.
"Letter of Credit" has the meaning set forth in Section 2.6.
"Loan Documents" means this Agreement and the Notes.
"Material Adverse Change" means a material adverse change in the
financial condition, properties, or operations of (i) the Borrower itself,
(ii) the Borrower and its Guarantying Subsidiaries, taken as a whole, or
(iii) the Borrower and all of its Subsidiaries, taken as a whole.
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<PAGE>
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA.
"Net Worth" means stockholders' equity, determined for the Borrower
and its Subsidiaries on a consolidated basis in accordance with generally
accepted accounting principles consistently applied.
"Non-Guarantying Subsidiary" means any Subsidiary that is not a
Guarantying Subsidiary.
"Norwest" means Norwest Bank Minnesota, National Association, a
national banking association and a party to this Agreement.
"Note" means a Facility A Note or a Facility B Note.
"Percentage" means, with respect to each Bank, the ratio of (i) the
sum of that Bank's Facility A Commitment Amount and Facility B Commitment
Amount, to (ii) the aggregate Facility A Commitment Amounts and Facility B
Commitment Amounts of all of the Banks. For purposes of the foregoing
calculation only, following the Facility A Commitment Termination Date,
each Bank's Facility A Commitment Amount shall be deemed to be the
principal balance of that Bank's Facility A Note; and following the
Facility B Commitment Termination Date, each Bank's Facility B Commitment
Amount shall be deemed to be the principal balance of that Bank's Facility
B Note
"Permitted Acquisition" means the acquisition of at least 51% of the
stock of any other Person (or, if such Person constitutes a Foreign
Subsidiary, at least 50% of the stock of such Person) by the Borrower or
any Subsidiary, the consolidation or merger of any other Person into the
Borrower or any Subsidiary, or the transfer of any assets of any other
Person to the Borrower or any Subsidiary outside the ordinary course of
business, in each case so long as (i) such other Person is engaged
principally in, or the assets so acquired relate solely to, Permitted
Lines of Business, (ii) no Default or Event of Default is continuing at
the time of such acquisition, consolidation, merger or transfer, or would
be caused by such acquisition, consolidation, merger or transfer, (iii) in
the case of any consolidation or merger, the Borrower or an existing
Subsidiary of the Borrower shall be the continuing or surviving
corporation, and (iv) in the case of an acquisition of stock of another
Person who would, upon the consummation of such acquisition, be a Domestic
Subsidiary, such Person provides, concurrent with such acquisition, such
documents as are necessary to render that Person a Guarantying Subsidiary,
as defined herein.
"Permitted Line of Business" means any line of business consisting
principally of the employment, adoption or utilization of certain
manufacturing processes, or any
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<PAGE>
line of business constituting an expansion or vertical integration of
the Borrower's lines of business existing as of the date hereof.
"Permitted Stock Option Debt" means indebtedness of any officer or
employee of the Borrower or any Subsidiary to the Borrower arising from
the exercise by such officer or employee of options to purchase stock of
the Borrower directly from the Borrower, provided that, except to the
extent reasonably necessary to enable such officer or employee to pay
income taxes attributable to the exercise of such options, neither the
Borrower nor any Subsidiary shall have made any cash advance in connection
with such indebtedness.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained for
employees of the Borrower or any Subsidiary or ERISA Affiliate and covered
by Title IV of ERISA.
"Reportable Event" means (i) a "reportable event" described in
Section 4043 of ERISA and the regulations issued thereunder, other than
any such event for which the 30-day notice requirement under ERISA has
been waived in such regulations, (ii) a withdrawal from any Plan, as
described in Section 4063 of ERISA, (iii) an action to terminate a Plan
for which a notice is required to be filed under Section 4041 of ERISA,
(iv) any other event or condition that might constitute grounds for
termination of, or the appointment of a trustee to administer, any Plan,
or (v) a complete or partial withdrawal from a Multiemployer Plan as
described in Sections 4203 and 4205 of ERISA.
"Required Banks" means one or more Banks having an aggregate
Percentage equal to or greater than 66-2/3%.
"Required GAAP Change" means any change in the Borrower's accounting
practices to the extent that, due to a promulgation of the Financial
Accounting Standards Board changing or implementing any new accounting
standard or to any recommendation of a Big Six accounting firm acting as
the Borrower's independent auditors, such change has been recommended to
or imposed upon the Borrower for its financial statements to be in
conformity with generally accepted accounting principles, so long as
(x) the Borrower has fully disclosed to the Banks any such Required GAAP
Change and the effects of the Required GAAP Change on the Borrower's
financial statements, and (y) the Borrower and the Banks have agreed in
writing to any adjustments to Sections 5.8, 5.9, 5.10 and 5.11 necessary
to reflect the effects of such Required GAAP Change. Promptly following
notice by the Borrower to the Agent of any proposed Required GAAP Change,
the Borrower and the Banks
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<PAGE>
shall negotiate in good faith in order to effect any such adjustments to
Sections 5.8, 5.9, 5.10 and 5.11 on or before the effective date of such
proposed change.
"Subordinated Debt" means indebtedness of the Borrower or any
Subsidiary which is subordinated in right of payment to all indebtedness
of the Borrower to any Bank, on terms that have been approved in writing
by each of the Banks and that have been noted by appropriate legend on all
instruments evidencing the Subordinated Debt.
"Subsidiary" means (i) any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of
such corporation, irrespective of whether or not at the time stock of any
other class or classes shall have or might have voting power by reason of
the happening of any contingency, is at the time directly or indirectly
owned by the Borrower, by the Borrower and one or more other Subsidiaries,
or by one or more other Subsidiaries, (ii) any partnership of which 50% or
more of the partnership interest therein are directly or indirectly owned
by the Borrower, by the Borrower and one or more other Subsidiaries, or by
one or more other Subsidiaries, and (iii) any limited liability company or
other form of business organization the effective control of which is held
by the Borrower, the Borrower and one or more other Subsidiaries, or by
one or more other Subsidiaries.
"Tangible Net Worth" means the excess of:
(a) the tangible assets of the Borrower and its Subsidiaries
(excluding intercompany items) which, in accordance with generally
accepted accounting principles, are tangible assets, after deducting
adequate reserves in each case where, in accordance with generally
accepted accounting principles, a reserve is proper, over
(b) all debt and liabilities of the Borrower and its
Subsidiaries (excluding intercompany items).
In calculating Tangible Net Worth, (i) inventory shall be taken into
account on the basis of the cost or current market value, whichever is
lower, (ii) in no event shall there be included as such tangible assets
patents, trademarks, trade names, copyrights, licenses, good will, prepaid
expenses, deferred charges or treasury stock or any securities or
indebtedness of the Borrower or a Subsidiary or any other securities
unless the same are readily marketable in the United States of America or
entitled to be used as a credit against federal income tax liabilities,
(iii) securities included as such tangible assets shall be taken into
account at their current market price or cost, whichever is lower, and
(iv) any write-up in the book value of any assets shall not be taken into
account.
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<PAGE>
"Total Capitalization" means the sum of Net Worth plus Funded Debt
determined for the Borrower and its Subsidiaries on a consolidated basis
in accordance with generally accepted accounting principles consistently
applied.
"Total Capitalization Ratio" means, as at the end of any fiscal
quarter of the Borrower, the ratio of the Funded Debt of the Borrower and
its Subsidiaries as at the end of that quarter to Total Capitalization at
the end of that quarter, all determined on a consolidated basis in
accordance with generally accepted accounting principles consistently
applied.
"Vision-Ease" means Vision-Ease Lens, Inc.
"Welfare Plan" means a "welfare plan" as defined in Section 3(1) of
ERISA.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS AND LETTERS OF CREDIT
Section 2.1 FACILITY A. Each Bank agrees, severally but not jointly,
on the terms and subject to the conditions hereinafter set forth, to make
Advances to the Borrower from time to time during the period from the date
hereof to and including the Facility A Commitment Termination Date in an
aggregate amount not to exceed at any time outstanding that Bank's Facility A
Commitment Amount, less that Bank's Percentage of the then-outstanding L/C
Amount. Within the limits of each Bank's Facility A Commitment Amount, the
Borrower may borrow, prepay pursuant to Section 2.11 and reborrow under this
Section 2.1. The Facility A Advances made by each Bank shall be evidenced by
and repayable with interest in accordance with a single promissory note of the
Borrower (each, a "Facility A Note") payable to the order of that Bank,
substantially in the form of Exhibit A hereto, dated the date hereof. The
proceeds of each Facility A Advance shall be used by the Borrower for its
general corporate purposes.
Section 2.2 FACILITY B. Each Bank agrees, severally but not jointly,
on the terms and subject to the conditions hereinafter set forth, to make
Advances to the Borrower from time to time during the period from the date
hereof to and including the Facility B Commitment Termination Date in an
aggregate amount not to exceed at any time outstanding that Bank's Facility B
Commitment Amount. Within the limits of each Bank's Facility B Commitment
Amount, the Borrower may borrow, prepay pursuant to Section 2.11 and reborrow
under this Section 2.2. The Facility B Advances made by each Bank shall be
evidenced by and repayable in accordance with a single promissory note of the
Borrower (each, a "Facility B Note") payable to the order of that Bank,
substantially in the form of Exhibit B hereto, dated the date hereof. The
proceeds of each Facility B Advance shall be used by the Borrower to facilitate
one or more Permitted Acquisitions.
Section 2.3 PROCEDURE FOR MAKING ADVANCES. Each Borrowing shall occur
following written notice from the Borrower to the Agent or telephonic request
from any
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person purporting to be authorized to request Advances on behalf of the
Borrower. Each such notice or request shall specify (i) the date of the
requested Borrowing, (ii) the amount thereof, and (iii) if any portion of
such Borrowing will bear interest at a Eurodollar Rate, the Interest Period
selected by the Borrower with respect thereto. If such Borrowing is to be
made under Section 2.2, the Borrower shall, concurrent with or prior to the
delivery of such notice or request, inform the Agent of the name of the
target and nature of the Permitted Acquisition for which the proceeds of such
Borrowing will be used, and will deliver to the Agent (i) a statement of the
sources and uses of all funds with respect to such Permitted Acquisition,
(ii) copies of all agreements and other documents entered into or held by the
Borrower relating to such Permitted Acquisition, other than Non-Disclosable
Documents, and (iii) such supporting documentation as the Agent or any Bank
may reasonably require to establish the continuing accuracy (both at the time
of the requested Borrowing and after applying the proceeds of such Borrowing)
of the representation set forth in Section 4.9. As used herein,
"Non-Disclosable Documents" means agreements and documents that the Borrower
is prohibited from disclosing to the Banks pursuant to a bona fide
non-disclosure agreement not entered into primarily for the purpose of
evading the requirements of this Section and for the disclosure of which the
Borrower has been unable to obtain permission despite its best efforts to do
so. Such notice or request must be received by the Agent not later than 12:30
p.m. (Minneapolis time) on the day on which such Borrowing is to occur or, if
all or any portion of the Borrowing will bear interest at a Eurodollar Rate,
not later than three Bank Business Days' prior to the date on which such
Borrowing is to occur. Upon receiving a request for a Borrowing, and in any
event not later than 1:30 p.m. (Minneapolis time) on the date that the
requested Borrowing is to occur, or, if the requested Borrowing is to bear
interest at a Eurodollar Rate, the close of business on the day that the
request is received, the Agent will notify the Banks of the amount of the
requested Borrowing, the amount of each Bank's Advance with respect thereto,
and, if applicable, the Eurodollar Rate and the Interest Period selected by
the Borrower. Upon fulfillment of the applicable conditions set forth in
Article III, each Bank shall remit its Percentage of the requested Borrowing
to the Agent in immediately available funds. So long as a Bank receives
notice of the requested Borrowing by the applicable time specified above,
that Bank will make its Advance with respect to that Borrowing available to
the Agent by wire transfer of immediately available funds to the Agent not
later than 4:00 p.m. (Minneapolis time) on the date called for in such
notice. Prior to the close of business on the day of the requested
Borrowing, the Agent shall disburse such funds by crediting the same to the
Borrower's demand deposit account maintained with the Agent or in such other
manner as the Agent and the Borrower may from time to time agree. The Agent
shall have no obligation to disburse the requested Borrowing if any condition
set forth in Article III has not been satisfied on the day of the requested
Borrowing. Each Borrowing shall be in the amount of $750,000 or more;
provided, however, that any portion of such Borrowing bearing interest at a
Eurodollar Rate must be in the amount of $1,500,000 or more. The Borrower
shall be obligated to repay all Advances made to it notwithstanding the fact
that the person requesting the same was not in fact authorized so to do. Any
request for an Advance shall be deemed to be a representation that the
statements set forth in Section 3.2 are correct.
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<PAGE>
Section 2.4 INTEREST. The Notes shall bear interest on the unpaid
principal amount thereof from the date thereof until paid as set forth in this
Section 2.4. Unless the Borrower elects a Eurodollar Rate pursuant to this
Section, the principal balance of each Note shall bear interest at the Floating
Rate. At the election of the Borrower, which may be exercised from time to
time, the Borrower may request in writing or by telephone that the Agent quote
the Eurodollar Rate that would be applicable for the portion of the outstanding
principal balance of the Notes (including any Advance requested or to be
requested) and for the Interest Period indicated by the Borrower in its
quotation request. The portion of the outstanding balance of the Notes for
which a Eurodollar Rate quotation is requested (i) must be in the minimum
amount (as to all Notes combined) of $1,500,000, (ii) if such request relates
to Advances already outstanding, must, on the first day of the applicable
Interest Period, either (A) bear interest at the Floating Rate, or (B) bear
interest at a Eurodollar Rate with respect to which the Interest Period expires
on such first day, and (iii) must not be subject to being repaid during the
proposed Interest Period by any regularly scheduled principal payment. A
request for a Eurodollar Rate quotation must be received by the Agent before
12:30 p.m. on the day three Eurodollar Business Days before the first day of
the proposed Interest Period. The Borrower shall immediately either accept or
reject the quotation by telephone. If the Borrower does not affirmatively
accept a Eurodollar Rate quotation, the quotation shall be deemed to have been
rejected. Upon acceptance of a quotation, the quoted Eurodollar Rate shall
(subject to fluctuations in the applicable Eurodollar Rate Spread) be the
interest rate applicable for the proposed Interest Period to the portion of the
outstanding principal balance of the Notes to which the quotation related (and
the remaining part of the principal balance of the Notes, if any, shall
continue to bear interest at the rate or rates previously applicable to such
amounts). At the termination of such Interest Period, the interest rate
applicable to the portion of the principal balance of the Notes to which the
Eurodollar Rate quotation was applicable shall revert to the Floating Rate
unless a new Eurodollar Rate quotation is requested and accepted by the
Borrower. Notwithstanding anything to the contrary in this Section, the Agent
shall have no obligation to quote a Eurodollar Rate for any Interest Period if
any Bank, in its sole discretion, determines that deposits in amounts equal to
the amount for which the quotation has been requested and maturing at the end
of the proposed Interest Period are not readily available to any Bank from
major banks in the London interbank market. Notwithstanding any other
provision of this Agreement or the Notes, interest accruing at a Eurodollar
Rate shall be due and payable on the last day of the applicable Interest Period
or, if an Interest Period is in excess of three months, on the last day of each
calendar quarter and on the last day of the Interest Period. Absent manifest
error, the records of the Agent shall be conclusive evidence as to the amount
of the Notes bearing interest at Eurodollar Rates, the applicable Eurodollar
Rates and the dates on which the Interest Periods applicable to such Eurodollar
Rates expire.
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<PAGE>
Section 2.5 PRICING ADJUSTMENTS.
(a) Until adjusted as set forth below, the Eurodollar Rate Spread,
Facility A Commitment Fee Rate and Facility B Commitment Fee Rate shall be
0.30%, 0.12% and 0.08%, respectively.
(b) The Eurodollar Rate Spread, Facility A Commitment Fee Rate and
Facility B Commitment Fee Rate shall be adjusted quarterly on the basis of
the Total Capitalization Ratio of the Borrower as at the end of the
previous fiscal quarter in accordance with the following table:
<TABLE>
<CAPTION>
Facility A Facility B
Total Eurodollar Rate Commitment Fee Commitment Fee
Capitalization Ratio Spread Rate Rate
-------------------- ------ ---- ----
<S> <C> <C> <C>
0.35 to 1 or less 0.30% 0.12% 0.08%
Greater than 0.35 to 1, 0.50% 0.15% 0.10%
but not greater than 0.50
to 1
Greater than 0.50 to 1 0.70% 0.175% 0.125%
</TABLE>
Notwithstanding the foregoing, (i) no reduction in the Eurodollar Rate
Spread, Facility A Commitment Fee Rate or Facility B Commitment Fee Rate
will be made if a Default or an Event of Default has occurred and is
continuing at the time that such reduction would otherwise be made, and
(ii) if the Borrower fails to deliver any financial statements or
Compliance Certificates when required under Section 5.1, the Agent may,
and upon the request of the Required Banks, shall, by notice to the
Borrower, increase the Eurodollar Rate Spread, Facility A Commitment Fee
Rate and Facility B Commitment Fee Rate to the highest rates set forth
above from the beginning of the fiscal quarter in which such items were
required to be delivered until such time as the Agent has received all
such financial statements and Compliance Certificates.
(c) Reductions and increases in the Eurodollar Rate Spread (and the
letter of credit fees based thereon), Facility A Commitment Fee Rate and
Facility B Commitment Fee Rate will be determined quarterly following
receipt of the Borrower's financial statements and quarterly Compliance
Certificates required under Section 5.1. Any such reduction or increase
shall be applicable (i) to Eurodollar Rate requests made on or after the
third Bank Business Day following such receipt, and (ii) to commitment
fees and letter of credit fees accruing on or after the third Bank
Business Day following such receipt. The Agent shall notify each Bank of
any change pursuant to this Section 2.5 promptly following the
determination thereof.
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Section 2.6 LETTERS OF CREDIT.
(a) The Borrower may from time to time request that the Issuing Bank
issue one or more irrevocable standby or documentary letters of credit
(each, a "Letter of Credit") for the account of the Borrower. No Letter
of Credit shall be issued if (i) the face amount of that Letter of Credit,
together with the then-applicable L/C Amount and the aggregate principal
balance of the Facility A Notes then outstanding, would exceed the
aggregate Facility A Commitment Amounts, or (ii) the face amount of that
Letter of Credit, together with the then-applicable L/C Amount, would
exceed $5,000,000. Each Letter of Credit shall be used for the Borrower's
general corporate purposes.
(b) At least five days prior to the issuance of each Letter of
Credit, the Borrower shall execute a letter of credit application and
reimbursement agreement in such form as the Issuing Bank may require.
(c) Each Letter of Credit shall be issued in a form acceptable to
the Issuing Bank. Unless otherwise approved by the Required Banks, no
Letter of Credit shall have an initial or any renewal term of more than
one year or a term (including renewals thereof) extending beyond the
Facility A Commitment Termination Date.
(d) A fee shall be due and payable to the Agent for the benefit of
the Banks upon issuance of each Letter of Credit, computed at an annual
rate equal to the Eurodollar Rate Spread applied to the face amount of
that Letter of Credit outstanding from time to time, from and including
the date of issuance of that Letter of Credit until the expiration
thereof, payable in advance on the date of issuance and on the first day
of each calendar quarter thereafter. The Banks shall promptly refund the
unearned portion of any such issuance fee with respect to any Letter of
Credit for any calendar quarter upon request of the Borrower following the
end of such quarter or upon termination or cancellation of that Letter of
Credit.
(e) An examination fee shall be due and payable to the Issuing Bank
for its own account upon any draw under any Letter of Credit. The
examination fee shall be equal to the sum of (i) one-eighth of one percent
(.125%) of the amount so drawn, and (ii) $100; provided, however, that the
amount of that examination fee is subject to review and adjustment by the
Issuing Bank in its sole discretion at any time and from time to time. The
Issuing Bank shall give written notice to the Borrower of any increase in
such examination fee prior to its imposition.
(f) The Borrower shall pay the amount of each draft drawn under any
Letter of Credit to the Issuing Bank on demand, together with interest at
the Floating Rate from the date that such draft is paid by the Issuing
Bank until payment of such amount in full. The Issuing Bank may (at its
option) charge any deposit account
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maintained by the Borrower with the Issuing Bank for the amount of any
draft drawn under a Letter of Credit.
(g) Each Bank shall be deemed to hold a participation interest in
each Letter of Credit equal to that Bank's Percentage of the face amount
of that Letter of Credit. If the Issuing Bank makes any payment pursuant
to the terms of any Letter of Credit and is not promptly reimbursed, the
Issuing Bank may request that each other Bank pay such Bank's Percentage
of the unreimbursed amount. Upon receipt of any such request prior to
11:00 a.m. (Minneapolis time) on a Bank Business Day, the recipient shall
be unconditionally and irrevocably obligated to pay its Percentage of the
unreimbursed amount to the Issuing Bank in immediately available funds
prior to 3:00 p.m. (Minneapolis time) on such date. Notices received
after 11:00 a.m. (Minneapolis time) shall be deemed to have been received
on the following Bank Business Day. If payment is not made by a Bank when
due hereunder, interest on the unpaid amount shall accrue from the date of
the Issuing Bank's request through the date of payment at the Federal
Funds Rate. After making any payment to the Issuing Bank under this
subsection in connection with a particular Letter of Credit, a Bank shall
be entitled to participate to the extent of its Percentage in the related
reimbursements received by the Issuing Bank from the Borrower or
otherwise. Upon receiving any such reimbursement, the Issuing Bank will
distribute to each Bank its Percentage of such reimbursement. At the
option of the Issuing Bank, any payment by a Bank hereunder may be deemed
an Advance in accordance with Section 2.1 and payable under the Facility A
Notes.
(h) Unless otherwise agreed by each Bank in writing, the Borrower
shall deposit in the Cash Collateral Account, on the Facility A Commitment
Termination Date, an amount equal to the then-applicable L/C Amount, less
the balance (if any) then outstanding in the Cash Collateral Account.
Section 2.7 COMMITMENT FEES.
(a) The Borrower agrees to pay to each Bank a commitment fee at an
annual rate equal to the then-applicable Facility A Commitment Fee Rate on
the average daily unused amount of that Bank's Facility A Commitment
Amount from the date hereof to and including the Facility A Commitment
Termination Date, payable quarterly on the last day of each March, June,
September and December through the Facility A Commitment Termination Date,
commencing June 30, 1996. Any commitment fee remaining unpaid on the
Facility A Commitment Termination Date shall be due and payable on that
date. As used herein, the "unused amount" of any Bank's Facility A
Commitment Amount shall, at any time, mean that Bank's Facility A
Commitment Amount, less the sum of (i) the principal balance of that
Bank's Facility A Note then outstanding, and (ii) that Bank's Percentage
of the L/C Amount then outstanding.
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(b) The Borrower agrees to pay to each Bank a commitment fee at an
annual rate equal to the then-applicable Facility B Commitment Fee Rate on
the average daily unused amount of that Bank's Facility B Commitment
Amount from the date hereof to and including the Facility B Commitment
Termination Date, payable quarterly on the last day of each March, June,
September and December through the Facility B Commitment Termination Date,
commencing June 30, 1996. Any commitment fee remaining unpaid on the
Facility B Commitment Termination Date shall be due and payable on that
date.
Section 2.8 SYNDICATION FEE. The Borrower shall pay to the Agent,
for the Agent's own account and not for the benefit of the Banks, a syndication
fee in an amount set forth in a separate agreement between the Agent and the
Borrower.
Section 2.9 VOLUNTARY REDUCTION OF THE COMMITMENT AMOUNTS. The
Borrower shall have the right at any time and from time to time upon 30
calendar days' prior notice to the Agent permanently to reduce the Facility A
Commitment Amounts or Facility B Commitment Amounts, without penalty or
premium, provided that (i) no reduction of the Facility A Commitment Amounts
shall reduce the Facility A Commitment Amounts to an amount less than the
aggregate principal balance of the Facility A Notes and the L/C Amount then
outstanding, (ii) no reduction of the Facility B Commitment Amounts shall
reduce the Facility B Commitment Amounts to an amount less than the aggregate
principal balance of the Facility B Notes then outstanding, (iii) each partial
reduction of the Facility A Commitment Amounts or Facility B Commitment Amounts
shall be in an amount not less than $5,000,000 in aggregate, and (iv) any
partial reduction of the Facility A Commitment Amounts or Facility B Commitment
Amounts shall be pro rata as to each Bank in accordance with that Bank's
Percentage.
Section 2.10 MANDATORY REDUCTION OF THE COMMITMENT AMOUNTS: EXCESS
FOREIGN DEBT. Upon any increase in Excess Foreign Debt, each Bank's Facility B
Commitment Amount shall be automatically reduced by an amount equal to that
Bank's Percentage of such increase. To the extent that such increase exceeds
the then-outstanding aggregate Facility B Commitment Amounts, each Bank's
Facility A Commitment Amount shall be automatically reduced by an amount equal
to that Bank's Percentage of such excess. Any reduction of the Facility A
Commitment Amounts or Facility B Commitment Amounts in accordance with this
Section shall be permanent. If, following any reduction in accordance with this
paragraph, the aggregate principal balance of the Facility A Notes or the
Facility B Notes exceeds the aggregate Facility A Commitment Amounts or
Facility B Commitment Amounts, as the case may be, the Borrower shall
immediately deliver to the Agent immediately available funds (the "Funds")
equal to such excess. The Funds shall be applied to the prepayment of the
Notes in accordance with Section 2.11. If any Funds remain after the prepayment
of the Notes in full (that is, if the remaining Funds are attributable to the
then-outstanding L/C Amount), the remaining Funds shall be deposited in the
Cash Collateral Account and shall secure the Borrower's obligations and
otherwise be treated as set forth in Section 7.3.
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Section 2.11 VOLUNTARY PREPAYMENTS. The Borrower may prepay the
Notes in whole or in part, without penalty or premium, at any time and from
time to time; provided that (i) prepayment of any Bank's Facility A Note or
Facility B Note must be accompanied by pro rata prepayment of each other Bank's
Facility A Note or Facility B Note, as the case may be; (ii) any prepayment of
the full amount of any Note shall include accrued interest thereon, (iii) any
prepayment of any portion of the principal balance of any Note which, at the
time of such prepayment, bears interest at a Eurodollar Rate shall be
accompanied by compensation as specified in Section 2.15(b), (iv) each
prepayment of the Notes (other than prepayment of the Facility A Notes or
Facility B Notes in full) shall be in the principal amount of $1,500,000 or
more, (v) any prepayment of the Facility B Notes after the Facility B
Commitment Termination Date shall be made only upon three Bank Business Days'
notice to the Agent, and (vi) any partial prepayment of any Facility B Note
after the Facility B Commitment Termination Date shall be applied to the
principal installments of said Note in inverse order of their maturities. Each
partial prepayment of principal on the Facility A Notes or the Facility B Notes
shall be applied, first, to that portion of such Notes bearing interest at the
Floating Rate, and, second, to that portion of such Notes bearing interest at a
Eurodollar Rate.
Section 2.12 COMPUTATION OF INTEREST AND FEES. Interest under the
Notes and the fees hereunder shall be computed on the basis of actual number of
days elapsed in a year of 360 days.
Section 2.13 PAYMENT. All payments of principal and interest under
the Notes and of the fees hereunder shall be made to the Agent in immediately
available funds. Payments received after noon (Minneapolis time) on any day
shall be deemed received on the next succeeding Bank Business Day. The
Borrower agrees that the amount shown on the books and records of each Bank as
being the principal balance of that Bank's Note shall be prima facie evidence
of such principal amount. The Borrower hereby authorizes the Agent to charge
against the Borrower's account with the Agent an amount equal to the accrued
interest and fees from time to time due and payable to the Agent and the Banks
under the Notes or hereunder, or (at the Banks' option) to effect a Borrowing
under Section 2.1 in such amount, all without receipt of any request for such
charge or Borrowing.
Section 2.14 PAYMENT ON NONBUSINESS DAYS. Whenever any payment to
be made hereunder or under the Notes shall be stated to be due on a day other
than a Bank Business Day, such payment may be made on the next succeeding Bank
Business Day, and such extension of time shall in each case be included in the
computation of payment of interest on such Note or the fees hereunder, as the
case may be.
Section 2.15 FEES ON FIXED RATE ADVANCES AND INDEMNITY. In addition
to any interest payable on Advances made hereunder and any fees or other
amounts payable hereunder, the Borrower agrees:
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(a) If at any time any applicable law, rule or regulation or the
interpretation or administration thereof by any governmental authority
(including, without limitation, Regulation D of the Federal Reserve
Board):
(i) shall subject any Bank to any tax, duty or other charges
(including but not limited to any tax designed to discourage the
purchase or acquisition of foreign securities or debt instruments by
United States nationals) with respect to this Agreement, or shall
materially change the basis of taxation of payments to any Bank of
the principal of or interest on any portion of the principal balance
of that Bank's Notes bearing interest at a Eurodollar Rate (except
for the imposition of or changes in respect of the rate of tax on the
overall net income of that Bank); or
(ii) shall impose or deem applicable or increase any reserve,
special deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by any Bank because of
any portion of the principal balance of that Bank's Notes bearing
interest at a Eurodollar Rate and the result of any of the foregoing
would be to increase the cost to that Bank of making or maintaining
any such portion or to reduce any sum received or receivable by that
Bank with respect to such portion;
then, within 30 days after demand by any Bank the Borrower shall pay that
Bank such additional amount or amounts as will compensate that Bank for
such increased cost or reduction (after giving effect to any tax credit or
diminishment arising from such increased cost or reduction). A
certificate in reasonable detail of that Bank setting forth the basis for
the determination of such additional amount or amounts shall be conclusive
evidence of such amount or amounts.
(b) The Borrower shall also compensate any Bank, upon written
request by that Bank (which request shall set forth the basis for
requesting such amounts), for all losses and expenses in respect of any
interest or other consideration paid by that Bank to lenders of funds
borrowed by it or deposited with it to maintain any portion of the
principal balance of that Bank's Notes at a Eurodollar Rate which that
Bank may sustain to the extent not otherwise compensated for hereunder and
not mitigated by the reemployment of such funds if any prepayment of any
such portion occurs on a date that is not the expiration date of the
relevant Interest Period. A certificate as to any such loss or expense
(including calculations, in reasonable detail, showing how that Bank
computed such loss or expense) shall be promptly submitted by that Bank to
the Borrower and shall, in the absence of manifest error, be conclusive
and binding as to the amount thereof. Such loss or expense may be
computed as though that Bank acquired deposits in the London interbank
market to fund that portion of the principal balance whether or not that
Bank actually did so.
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In determining amounts payable under this Section 2.15, the Banks may use any
reasonable averaging, attribution and allocation methods.
Section 2.16 CAPITAL ADEQUACY. If any Bank determines at any time
that its Return has been reduced as a result of any Capital Adequacy Rule
Change, that Bank may require the Borrower to pay it the amount necessary to
restore its Return to what it would have been had there been no Capital
Adequacy Rule Change. For purposes of this Section:
(a) "Return", for any period, means the percentage determined by
dividing (i) the sum of interest and ongoing fees earned by a Bank under
this Agreement during such period, by (ii) the average capital that Bank
is required to maintain during such period as a result of its being a
party to this Agreement, as determined by that Bank based upon its total
capital requirements and a reasonable attribution formula that takes
account of the Capital Adequacy Rules then in effect. Return may be
calculated for each calendar quarter and for the shorter period between
the end of a calendar quarter and the date of termination in whole of this
Agreement.
(b) "Capital Adequacy Rule" means any law, rule, regulation or
guideline regarding capital adequacy that applies to any Bank, or the
interpretation thereof by any governmental or regulatory authority.
Capital Adequacy Rules include rules requiring financial institutions to
maintain total capital in amounts based upon percentages of outstanding
loans, binding loan commitments and letters of credit.
(c) "Capital Adequacy Rule Change" means any change in any Capital
Adequacy Rule occurring after the date of this Agreement, but the term
does not include any changes in applicable requirements that at the date
hereof are scheduled to take place under the existing Capital Adequacy
Rules or any increases in the capital that any Bank is required to
maintain to the extent that the increases are required due to a regulatory
authority's assessment of the financial condition of that Bank.
(d) "Bank" includes (but is not limited to) the Agent, the Banks, as
defined elsewhere in this Agreement, and any participant in the loans made
hereunder.
The initial notice sent by a Bank shall be sent as promptly as practicable
after that Bank learns that its Return has been reduced, shall include a demand
for payment of the amount necessary to restore that Bank's Return for the
quarter in which the notice is sent and, if applicable, the preceding quarter,
and shall state in reasonable detail the cause for the reduction in its Return
and its calculation of the amount of such reduction. Thereafter, that Bank may
send a new notice during each calendar quarter setting forth the calculation of
the reduced Return for that quarter and/or the preceding quarter and including
a demand for payment of the amount necessary to restore its Return for that
period. In determining amounts payable under this Section 2.16, the Banks may
use any reasonable averaging, attribution and allocation methods. A Bank's
calculation in any such notice shall be conclusive and binding absent
demonstrable error.
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ARTICLE III
CONDITIONS OF LENDING AND LETTERS OF CREDIT
Section 3.1 INITIAL CONDITIONS PRECEDENT. The obligation of the
Banks to make any Advance or to issue any Letter of Credit is subject to the
condition precedent that each Bank shall have received on or before the day of
the first Advance all of the following, each dated (unless otherwise indicated)
as of the date hereof, in form and substance satisfactory to each Bank:
(a) The Notes, properly executed on behalf of the Borrower.
(b) A Guaranty, properly executed on behalf of Vision-Ease.
(c) Current searches of appropriate filing offices showing that
(i) no state or federal tax liens have been filed and remain in effect
against the Borrower, and (ii) no financing statements have been filed and
remain in effect against the Borrower except financing statements
perfecting only security interests permitted under Section 6.1.
(d) A certificate of the secretary of the Borrower (i) certifying
that the execution, delivery and performance of the Loan Documents have
been duly approved by all necessary action of the Board of Directors of
the Borrower, and attaching true and correct copies of the applicable
resolutions granting such approval, (ii) certifying that attached to such
certificate are true and correct copies of the articles of incorporation
and bylaws of the Borrower, together with such copies, and
(iii) certifying the names of the officers of the Borrower that are
authorized to sign the Loan Documents and other documents contemplated
hereunder, together with the true signatures of such officers.
(e) A certificate of the secretary of Vision-Ease (i) certifying
that the execution, delivery and performance of the Guaranty of Vision-
Ease have been duly approved by all necessary action of the Board of
Directors of Vision-Ease, and attaching true and correct copies of the
applicable resolutions granting such approval, (ii) certifying that
attached to such certificate are true and correct copies of the articles
of incorporation and bylaws of Vision-Ease, together with such copies, and
(iii) certifying the names of the officers of Vision-Ease that are
authorized to sign the Guaranty of Vision-Ease and other documents
contemplated hereunder, together with the true signatures of such
officers.
(f) Certificates of good standing of the Borrower and its
Subsidiaries, dated not more than ten days before such date.
(g) A signed copy of an opinion of counsel for the Borrower,
addressed to the Banks in substantially the form of Exhibit E hereto.
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Section 3.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF
CREDIT. The obligation of the Banks to make any Advance or to issue any Letter
of Credit shall be subject to the further conditions precedent that on the date
of such Advance or Letter of Credit:
(a) the representations and warranties contained in Article IV are
correct on and as of the date of such Advance or Letter of Credit as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result from
such Advance or Letter of Credit, which constitutes a Default or an Event
of Default.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Banks as follows:
Section 4.1 CORPORATE EXISTENCE AND POWER. The Borrower and its
Subsidiaries are each corporations duly incorporated, validly existing and in
good standing under the laws of their respective jurisdictions of
incorporation, and are each duly licensed or qualified to transact business in
all jurisdictions where the character of the property owned or leased or the
nature of the business transacted by them makes such licensing or qualification
necessary, except where the failure to be so licensed or qualified (i) will not
permanently preclude the Borrower or any Subsidiary from maintaining any action
in such jurisdiction even though such action arose in whole or in part during
the period of such failure, and (ii) will not effect any other Material Adverse
Change. The Borrower has all requisite power and authority, corporate or
otherwise, to conduct its business, to own its properties and to execute and
deliver, and to perform all of its obligations under, the Loan Documents.
Section 4.2 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR
AGREEMENTS. The execution, delivery and performance by the Borrower of the
Loan Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not
(i) require any consent or approval of the stockholders of the Borrower, or any
authorization, consent or approval by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (ii) violate any
provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of any
order, writ, injunction or decree presently in effect having applicability to
the Borrower or of the Articles of Incorporation or Bylaws of the Borrower,
(iii) result in a breach of or constitute a default under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which the
Borrower is a party or by which it or its properties may be bound or affected,
or (iv) result in, or require, the creation or imposition of any mortgage, deed
of trust, pledge, lien, security interest or other charge or encumbrance of any
nature upon or with respect to any of the properties now owned or hereafter
acquired by the Borrower.
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Section 4.3 LEGAL AGREEMENTS. This Agreement and the other Loan
Documents constitute, the legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms.
Section 4.4 SUBSIDIARIES. Schedule 4.4 hereto is a complete and
correct list of all present Subsidiaries and of the percentage of the ownership
of the Borrower or any other Subsidiary in each as of the date of this
Agreement. Except as otherwise indicated in that Schedule, all shares of each
Subsidiary owned by the Borrower or by any such other Subsidiary are validly
issued and fully paid and nonassessable.
Section 4.5 FINANCIAL CONDITION. The Borrower has heretofore
furnished to the Banks its audited financial statement as of December 31, 1995,
and its unaudited interim financial statement as of March 31, 1996. Those
financial statements fairly present the financial condition of the Borrower and
its Subsidiaries on the dates thereof and the results of their operations and
cash flows for the periods then ended, and were prepared in accordance with
generally accepted accounting principles (except for the omission of footnotes
and similar details in the case of the March 31, 1996 unaudited interim
financial statement).
Section 4.6 ADVERSE CHANGE. There has been no Material Adverse
Change since the date of the latest financial statement referred to in Section
4.5 or delivered pursuant to Section 5.1.
Section 4.7 LITIGATION. Except as set forth in Schedule 4.7, there
are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any Subsidiary or the
properties of the Borrower or any Subsidiary before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which, if determined adversely to the Borrower or that Subsidiary,
could reasonably be expected (either separately or in conjunction with other
pending or threatened litigation) to effect a Material Adverse Change.
Section 4.8 HAZARDOUS SUBSTANCES. Except as set forth in Schedule
4.8, to the best of the Borrower's knowledge after reasonable inquiry, neither
the Borrower nor any Subsidiary or other Person has ever caused or permitted
any Hazardous Substance to be disposed of in any manner which might result in
any material liability to the Borrower or any Subsidiary on, under or at any
real property which is operated by the Borrower or any Subsidiary or in which
the Borrower or any Subsidiary has any interest; and, to the best of the
Borrower's knowledge after reasonable inquiry, no such real property has ever
been used (either by the Borrower, by any Subsidiary or by any other Person) as
a dump site or permanent or temporary storage site for any Hazardous Substance.
Section 4.9 REGULATION U. Margin stock (as defined in Regulation U
of the Board of Governors of the Federal Reserve System) constitutes and at all
times will constitute less than 25% of those assets of the Borrower and its
Subsidiaries which are subject to any limitation on sale, pledge, or other
restriction hereunder.
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Section 4.10 TAXES. The Borrower and its Subsidiaries have each
(i) paid or caused to be paid to the proper authorities when due all federal,
state and local taxes required to be withheld by them, (ii) filed all federal,
state and local tax returns which to the knowledge of the officers of the
Borrower are required to be filed, and (iii) paid or caused to be paid to the
respective taxing authorities all taxes as shown on said returns or on any
assessment received by them to the extent such taxes have become due, excluding
(with respect to clauses (i) and (ii)) taxes whose amount, applicability or
validity is being contested in good faith by appropriate proceedings disclosed
to the Agent and the Banks and for which the Borrower or the applicable
Subsidiary has provided adequate reserves in accordance with generally accepted
accounting principles.
Section 4.11 TITLES AND LIENS. The Borrower or one of its
Subsidiaries has good title to each of the properties and assets reflected in
the latest balance sheet referred to in Section 4.5 (other than any sold, as
permitted by Section 6.5), free and clear of all mortgages, security interests,
liens and encumbrances, except for mortgages, security interests and liens
permitted by Section 6.1 and covenants, restrictions, rights, easements and
minor irregularities in title which do not materially interfere with the
business or operations of the Borrower or such Subsidiary as presently
conducted. No financing statement naming the Borrower or any Subsidiary as
debtor is on file in any office except to perfect only security interests
permitted by Section 6.1.
Section 4.12 ERISA. No Plan established or maintained by the
Borrower, any Subsidiary or any ERISA Affiliate that is subject to Part 3 of
Subtitle B of Title I of ERISA had an accumulated funding deficiency (as such
term is defined in Section 302 of ERISA) in excess of $1,000,000 as of the last
day of the most recent fiscal year of such Plan ended prior to the date hereof,
and no liability to the Pension Benefit Guaranty Corporation (other than for
premiums pursuant to Section 4007 of ERISA) or the Internal Revenue Service in
excess of such amount has been, or is expected by the Borrower, any Subsidiary
or any ERISA Affiliate to be, incurred with respect to any Plan of the
Borrower, any Subsidiary or any ERISA Affiliate. Neither the Borrower nor any
Subsidiary has any material contingent liability with respect to any
post-retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
ARTICLE V
AFFIRMATIVE COVENANTS OF THE BORROWER
So long as any Note shall remain unpaid or any Letter of Credit or
Commitment shall be outstanding, the Borrower will comply with the following
requirements, unless the Required Banks shall otherwise consent in writing:
Section 5.1 FINANCIAL STATEMENTS. The Borrower will deliver to each
Bank:
(a) As soon as available, and in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the annual audit report
of the Borrower
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prepared on a consolidated basis with the unqualified opinion of
independent certified public accountants selected by the Borrower and
acceptable to the Banks, which annual report shall include the balance
sheets of the Borrower and its Subsidiaries as at the end of such fiscal
year and the related statements of income, shareholders' equity and cash
flows of the Borrower and its Subsidiaries for the fiscal year then
ended, all (i) in reasonable detail, (ii) prepared on a consolidated
basis in accordance with generally accepted accounting principles
applied on a basis consistent with the accounting practices applied in
the annual financial statements referred to in Section 4.5, subject to
Required GAAP Changes, and (iii) accompanied by the related unaudited
consolidating statements, prepared in accordance with generally accepted
accounting principles consistently applied; together with a report
signed by such accountants stating that in making the investigations
necessary for said opinion they obtained no knowledge, except as
specifically stated, of any Default or Event of Default hereunder and
all relevant facts in reasonable detail to evidence, and the
computations as to, whether or not the Borrower is in compliance with
the requirements set forth in Sections 5.8, 5.9, 5.10 and 5.11.
(b) As soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of the
Borrower, consolidated and consolidating balance sheets of the Borrower
and its Subsidiaries as at the end of such quarter and related
consolidated and consolidating statements of earnings and cash flows of
the Borrower and its Subsidiaries for the year to date and (in the case of
the statement of earnings only) for such quarter, all (i) in reasonable
detail, (ii) stating (with respect to the consolidated statements but not
any consolidating statements) in comparative form the figures for the
corresponding date and period in the previous year, and (iii) prepared in
accordance with generally accepted accounting principles applied on a
basis consistent with the accounting practices reflected in the annual
financial statements referred to in Section 4.5, subject to Required GAAP
Changes.
(c) Concurrent with the delivery of any financial statements under
paragraph (a) or (b), a Compliance Certificate, duly executed by a
Designated Financial Officer of the Borrower.
(d) Promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower or any
Subsidiary shall have sent to its stockholders.
(e) Promptly after the sending or filing thereof, copies of all
regular and periodic financial reports which the Borrower or any
Subsidiary shall file with the Securities and Exchange Commission or any
national securities exchange.
(f) Immediately after the commencement thereof, notice in writing of
all litigation and of all proceedings before any governmental or
regulatory agency affecting the Borrower or any Subsidiary of the type
described in Section 4.7 or which
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seek a monetary recovery against the Borrower and/or its Subsidiaries
combined (after deduction of any portion thereof covered by insurance
proceeds) in excess of $3,000,000.
(g) As promptly as practicable (but in any event not later than five
business days) after an officer of the Borrower or any Subsidiary obtains
knowledge of the occurrence of any Default or Event of Default, notice of
such occurrence, together with a detailed statement by a responsible
officer of the Borrower or the appropriate Subsidiary of the steps being
taken by the Borrower or the appropriate Subsidiary to cure the effect of
such event.
(h) Promptly upon becoming aware of any Reportable Event or any
prohibited transaction (as defined in Section 4975 of the Internal Revenue
Code or Section 406 of ERISA) in connection with any Plan or any trust
created thereunder, a written notice specifying the nature thereof, what
action the Borrower has taken, is taking or proposes to take with respect
thereto, and, as soon as known, any action taken or threatened by the
Internal Revenue Service, the Pension Benefit Guaranty Corporation or the
Department of Labor with respect thereto.
(i) Promptly upon their receipt, copies of (a) all notices received
by the Borrower, any Subsidiary or any ERISA Affiliate of the Pension
Benefit Guaranty Corporation's intent to terminate any Plan or to have a
trustee appointed to administer any Plan, and (b) all notices received by
the Borrower, any Subsidiary or any ERISA Affiliate from a Multiemployer
Plan concerning the imposition or amount of withdrawal liability pursuant
to Section 4202 of ERISA.
(j) Such other information respecting the financial condition and
results of operations of the Borrower or any Subsidiary as any Bank may
from time to time reasonably request.
Section 5.2 BOOKS AND RECORDS; INSPECTION AND EXAMINATION. The
Borrower will keep, and will cause each Subsidiary to keep, accurate books of
record and account for itself in which true and complete entries will be made
in accordance with generally accepted accounting principles consistently
applied and, upon request of any Bank, will give any representative of that
Bank access to, and permit such representative to examine, copy or make
extracts from, any and all books, records and documents in possession of the
Borrower or that Subsidiary, to inspect any properties of the Borrower or that
Subsidiary and to discuss the affairs, finances and accounts of the Borrower or
that Subsidiary with any of the principal officers of the Borrower or that
Subsidiary, all at such times during normal business hours and as often as any
Bank may reasonably request.
Section 5.3 COMPLIANCE WITH LAWS. The Borrower will, and will cause
each Subsidiary to, comply with the requirements of applicable laws and
regulations, the
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noncompliance with which would materially and adversely affect its business
or the consolidated financial condition of the Borrower and its Subsidiaries.
Section 5.4 PAYMENT OF TAXES AND OTHER CLAIMS. The Borrower will
pay or discharge, and will cause each Subsidiary to pay or discharge, when due,
(a) all taxes, assessments and governmental charges levied or imposed upon it
or upon its income or profits, or upon any properties belonging to it, prior to
the date on which penalties attach thereto, (b) all federal, state and local
taxes required to be withheld by it, and (c) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien or charge
upon any properties of the Borrower or any Subsidiary; provided, that neither
the Borrower nor any Subsidiary shall be required to pay any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which the Borrower
or such Subsidiary has provided adequate reserves in accordance with generally
accepted accounting principles.
Section 5.5 MAINTENANCE OF PROPERTIES. The Borrower will keep and
maintain, and will cause each Subsidiary to keep and maintain, all of its
properties necessary or useful in its business in good condition, repair and
working order; provided, however, that nothing in this Section shall prevent
the Borrower or any Subsidiary from discontinuing the operation and maintenance
of any of its properties if such discontinuance is, in the reasonable judgment
of the Borrower or the appropriate Subsidiary, desirable in the conduct of its
business and not disadvantageous in any material respect to any Bank as holder
of the Notes.
Section 5.6 INSURANCE. The Borrower will, and will cause each
Subsidiary to, obtain and maintain insurance with insurers reasonably believed
by the Borrower to be responsible and reputable, in such amounts and against
such risks as is usually carried by companies engaged in similar business and
owning similar properties in the same general areas in which the Borrower or
such Subsidiary operates.
Section 5.7 PRESERVATION OF CORPORATE EXISTENCE. The Borrower will,
and will cause each Subsidiary to, preserve and maintain its corporate
existence and all of its rights, privileges and franchises; provided, however,
that neither the Borrower nor any Subsidiary shall be required to preserve any
of its rights, privileges and franchises if its Board of Directors shall
reasonably determine that the preservation thereof is no longer desirable in
the conduct of the business of the Borrower or the appropriate Subsidiary and
that the loss thereof is not disadvantageous in any material respect to any
Bank as a holder of the Notes.
Section 5.8 TOTAL CAPITALIZATION RATIO. The Borrower will at all
times maintain its Total Capitalization Ratio, determined as at the end of each
fiscal quarter of the Borrower designated below, at not more than the amount
set forth below opposite such quarter-end:
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Quarters Ending Ratio
--------------- -----
On or before June 30, 1997 0.60 to 1
July 1, 1997 through September 30, 1997 0.57 to 1
October 1, 1997 through December 31, 1997 0.55 to 1
January 1, 1998 through March 31, 1998 0.53 to 1
April 1, 1998 and thereafter 0.50 to 1
Section 5.9 INTEREST COVERAGE RATIO. The Borrower will at all times
maintain its Interest Coverage Ratio, determined at the end of each fiscal
quarter of the Borrower, at not less than 2.50 to 1.
Section 5.10 CASH FLOW LEVERAGE RATIO. The Borrower will at all
times maintain its Cash Flow Leverage Ratio, determined at the end of each
fiscal quarter of the Borrower, at not more than 3.75 to 1.
Section 5.11 TANGIBLE NET WORTH. The Borrower will maintain
Consolidated Tangible Net Worth at all times in an amount not less than
$103,000,000, plus 50% of the Borrower's Consolidated Net Income (unless such
Consolidated Net Income is negative, in which case it shall be ignored for
purposes of this Section) for each fiscal quarter of the Borrower ending after
April 1, 1996 and 75% of the net proceeds of any equity offering conducted by
the Borrower after April 1, 1996.
ARTICLE VI
NEGATIVE COVENANTS
So long as any Note shall remain unpaid or any Letter of Credit or
Commitment shall be outstanding, the Borrower agrees that, without the prior
written consent of the Required Banks:
Section 6.1 LIENS. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any mortgage, deed of
trust, pledge, lien, security interest, or other charge or encumbrance of any
nature on any of its assets, now owned or hereafter acquired, or assign or
otherwise convey any right to receive income or give its consent to the
subordination of any right or claim of the Borrower or any Subsidiary to any
right or claim of any other Person; excluding, however, from the operation of
the foregoing:
(a) Liens for taxes or assessments or other governmental charges to
the extent not required to be paid by Section 5.4.
(b) Materialmen's, merchants', carriers' worker's, repairer's, or
other like liens arising in the ordinary course of business to the extent
not required to be paid by Section 5.4.
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(c) Pledges or deposits to secure obligations under worker's
compensation laws, unemployment insurance and social security laws, or to
secure the performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases or to secure statutory obligations
or surety or appeal bonds, or to secure indemnity, performance or other
similar bonds, in all cases only to the extent such pledges or deposits
are made in the ordinary course of business.
(d) Rights of setoff or similar "bankers' liens" covering deposit
accounts of the Borrower and its Subsidiaries and deemed to exist in favor
of the applicable depository institutions.
(e) Zoning restrictions, easements, licenses, restrictions on the
use of real property or minor irregularities in title thereto, which do
not materially impair the use of such property in the operation of the
business of the Borrower or any Subsidiary or the value of such property
for the purpose of such business.
(f) Purchase money mortgages, liens, or security interests (which
term for purposes of this subsection shall include conditional sale
agreements or other title retention agreements and leases in the nature of
title retention agreements) upon or in property acquired after the date
hereof, or mortgages, liens or security interests existing in such
property at the time of acquisition thereof, or, in the case of any
corporation which thereafter becomes a Subsidiary, mortgages, liens or
security interests upon or in its property, existing at the time such
corporation becomes a Subsidiary, provided that:
(i) no such mortgage, lien or security interest extends or shall
extend to or cover any property of the Borrower or such
Subsidiary, as the case may be, other than the property then
being acquired and fixed improvements then or thereafter
erected thereon;
(ii) the aggregate principal amount of all indebtedness of the
Borrower and all Subsidiaries secured by all mortgages, liens
or security interests described in this subsection shall not
exceed $3,000,000 at any one time outstanding; and
(iii) the aggregate principal amount of indebtedness secured by
mortgages, liens and security interests described in this
subsection (f) at the time of acquisition of the property
subject thereto shall not exceed 100% of the cost of such
property or of the then fair market value of such property as
reasonably determined by the Board of Directors of the
Borrower, whichever shall be less.
(g) Mortgages, liens, pledges and security interests created by any
Subsidiary as security for indebtedness owing to the Borrower or to
another
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Subsidiary, other than mortgages, liens, pledges and security interests
created by a Guarantying Subsidiary as security for indebtedness owing
to a Non-Guarantying Subsidiary.
(h) Mortgages, liens, pledges and security interests on any property
of the Borrower or any Subsidiary (other than those described in
subsection (f) and (g)) securing any indebtedness for borrowed money in
existence on the date hereof and listed in Schedule 6.1 hereto.
(i) Real estate mortgages upon manufacturing and office facilities
of Vision-Ease and the Borrower's Buckbee-Mears St. Paul division incurred
for the acquisition, construction or expansion of such facilities,
provided that:
(i) no such mortgage extends or shall extend to or cover any
property other than the real property affected by such
acquisition, construction or expansion;
(ii) the aggregate principal amount of all indebtedness secured by
all mortgages described in this subsection shall not exceed
$20,000,000, less the aggregate liability of the Borrower and
its Subsidiaries with respect to all arrangements described in
clause (ii) of Section 6.8 to the extent that such liability
exceeds $10,000,000; and
(iii) the aggregate principal amount of indebtedness secured by
mortgages described in this subsection (i) at the time of such
acquisition, construction or expansion shall not exceed 100%
of the cost of such acquisition, construction or expansion or
of the then fair market value of such property as reasonably
determined by the Board of Directors of the Borrower,
whichever shall be less.
(j) Liens arising out of a judgment against the Borrower or any
Subsidiary for the payment of money with respect to which an appeal is
being prosecuted and a stay of execution pending such appeal has been
secured, so long as the aggregate amount of all such liens outstanding
against the Borrower and its Subsidiaries does not exceed $3,000,000.
(k) Liens which may be deemed to exist on notes, drafts or
instruments received in payment of trade receivables owing to any Foreign
Subsidiary which are sold or otherwise negotiated by such Foreign
Subsidiary with recourse.
(l) Liens on property of any Foreign Subsidiary securing
indebtedness permitted under Section 6.2(e).
Section 6.2 INDEBTEDNESS. The Borrower will not, and will not
permit any Subsidiary to, incur, create, assume or permit to exist any
indebtedness on account of, or
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liability on account of, deposits or advances or any indebtedness for
borrowed money, or any other indebtedness or liability evidenced by notes,
bonds, debentures or similar obligations, except:
(a) Indebtedness to the Banks arising under this Agreement.
(b) Indebtedness of the Borrower or any Subsidiary in existence on
the date hereof and listed in Schedule 6.2 hereto, but not including any
extensions or renewals thereof.
(c) Indebtedness of a Subsidiary to the Borrower or another
Subsidiary on account of borrowings, or indebtedness of the Borrower to a
Subsidiary on account of borrowings from that Subsidiary (but only to the
extent that the borrowing giving rise to such indebtedness is not
prohibited by Section 6.4).
(d) Purchase money indebtedness of the Borrower or any Subsidiary
secured by liens permitted by paragraphs (f) or (i) of Section 6.1.
(e) Indebtedness of Foreign Subsidiaries, so long as, prior to the
incurrence of such indebtedness, the Borrower has made any prepayment or
other remittance required under Section 2.10 on account of such
indebtedness.
(f) Indebtedness not otherwise permitted under this Section 6.2, so
long as the aggregate amount of all such indebtedness permitted only under
this paragraph (f) outstanding at any one time does not exceed $3,000,000.
(g) Obligations arising from deposits and prepayments by customers
of the Borrower and its Subsidiaries with respect to goods ordered but not
yet delivered, so long as the aggregate amount of all such obligations
outstanding at any one time does not exceed $25,000,000.
Section 6.3 GUARANTIES. The Borrower will not, and will not permit
any Subsidiary to, assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligations of any other Person,
except:
(a) The endorsement of negotiable instruments by the Borrower or any
Subsidiary for deposit or collection or similar transactions in the
ordinary course of business.
(b) Guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons in
existence on the date hereof and listed in Schedule 6.3 hereto.
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(c) Guaranties by the Borrower of the indebtedness or other
obligations of any Guarantying Subsidiary, so long as the indebtedness to
which such guaranties relate is not prohibited by Section 6.2.
Section 6.4 INVESTMENTS. The Borrower will not, and will not permit
any Subsidiary to, purchase or hold beneficially any stock or other securities
or evidence of indebtedness of, make or permit to exist any loans or advances
to, or make any investment or acquire any interest whatsoever in, any other
Person, except:
(a) Investments in direct obligations of the United States of
America or any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of
America having a maturity of one year or less, commercial paper issued by
U.S. corporations rated "A-1" or "A-2" by Standard & Poors Corporation or
"P-1" or "P-2" by Moody's Investors Service or certificates of deposit,
bankers' acceptances, repurchase agreements or other money market
instruments having a maturity of one year or less issued by members of the
Federal Reserve System having deposits in excess of $100,000,000.
(b) Investments in the stock of another corporation for the purpose
of effecting a tender offer to purchase all of the stock of such
corporation, so long as (i) no Default or Event of Default (including but
not limited to any Default or Event of Default arising because of a breach
of Section 4.9) exists when such investment is made or results from such
investment, (ii) the acquisition of all of the stock of such corporation
would constitute a Permitted Acquisition, (iii) the Borrower does not hold
stock in more than one corporation at any one time pursuant to this
paragraph (b), (iv) the amount of stock held pursuant to this paragraph
(b) does not exceed 5% of the outstanding stock of such corporation, and
(v) within 6 months following the initial investment pursuant to this
paragraph (b), the Borrower and its Subsidiaries either (A) have divested
themselves of all of the stock so acquired, or (B) have completed the
proposed acquisition, and such corporation has become a Guarantying
Subsidiary.
(c) Any existing investment by the Borrower or any other Subsidiary
in the stock of any Subsidiary.
(d) Any loan, advance, or other investment in any Guarantying
Subsidiary.
(e) Loans and advances by a Subsidiary to the Borrower or another
Subsidiary, other than loans and advances by a Guarantying Subsidiary to a
Non-Guarantying Subsidiary.
(f) Loans and advances by the Borrower or any Guarantying Subsidiary
to any Non-Guarantying Subsidiary not exceeding at any one time an
aggregate of $5,000,000 as to all Non-Guarantying Subsidiaries combined.
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(g) Loans to officers and employees of the Borrower or any
Subsidiary (other than those described in subsection (i) below) not
exceeding at any one time an aggregate of $1,000,000 as to the Borrower
and all Subsidiaries combined.
(h) Travel advances to officers, employees, sales representatives
and consultants of the Borrower or any Subsidiary in the ordinary course
of business.
(i) Loans or advances constituting Permitted Stock Option Debt.
(j) Investments constituting Permitted Acquisitions.
(k) Short-term loans and advances between the Borrower and any
Subsidiary for the sole purpose of managing foreign exchange exposure, so
long as the aggregate amount of all such loans and advances outstanding at
any one time does not exceed $6,000,000.
(l) Investments not otherwise permitted by this Section 6.4, so long
as the aggregate amount of all such investments of the Borrower and its
Subsidiaries combined does not at any time exceed $50,000.
(m) Investments by the Borrower in non-qualified retirement and
deferred compensation plans, and investments by related trusts in
securities of any type, so long as the aggregate amount of all such
investments does not exceed $5,000,000.
Section 6.5 SALE OF ASSETS. The Borrower will not, and will not
permit any Subsidiary to, sell, lease, assign, transfer or otherwise dispose
(whether in one transaction or in a series of transactions) of all or a
substantial part of its assets (including but not limited to stock of any
Subsidiary or other corporation held by the Borrower) to any other Person other
than in the ordinary course of business, except that the foregoing shall not
apply to or prevent:
(a) The sale, lease or transfer of assets by the Borrower or a
wholly-owned Subsidiary of the Borrower to the Borrower or another
wholly-owned Subsidiary of the Borrower, but only so long as (i) no
Default or Event of Default has occurred and is continuing at the time of,
or would result from, such sale, lease or transfer, and (ii) such sale,
lease or transfer is not made by the Borrower or a Guarantying Subsidiary
to a Non-Guarantying Subsidiary. The Borrower or the applicable
Subsidiary, as the case may be, may acquire any assets permitted to be
sold, leased or transferred to it pursuant to the preceding sentence.
Without limiting the generality of the foregoing, the Banks acknowledge
that the Borrower has discussed the possibility of transferring all or
substantially all of its operating assets into one or more wholly-owned
Subsidiaries. The Borrower acknowledges that such a transfer is permitted
hereunder only if, prior to such transfer, each Subsidiary to which such a
transfer may be made has executed a Guaranty and taken such other action
as is necessary to cause such Subsidiaries to be a "Guarantying
Subsidiary" as defined herein.
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(b) Sales of assets (other than those qualifying under any other
subsection of this Section) of the Borrower or any Subsidiary to a Person
other than the Borrower or a Guarantying Subsidiary if, after giving
effect to such sale, the aggregate fair market value of all such assets
sold by the Borrower and all of its Subsidiaries for any period of 12
consecutive months will not exceed the lesser of (i) 20% of the aggregate
fair market value of all assets of the Borrower and its Guarantying
Subsidiaries as of the date hereof, or (ii) the sum of (A) $5,000,000, and
(B) any decrease in the aggregate Commitment Amounts effected during that
12-month period pursuant to Section 2.9.
Section 6.6 RESTRICTIONS ON ISSUANCE AND SALE OF SUBSIDIARY STOCK.
The Borrower will not:
(a) permit any Subsidiary to issue or sell any shares of stock of
any class of such Subsidiary to any other Person, except for the issuance
or sale of shares (i) for the purpose of qualifying directors, satisfying
pre-emptive rights or paying a common stock dividend on, or splitting,
common stock of such Subsidiary, (ii) by any Non-Guarantying Subsidiary to
any other Subsidiary, or (iii) by any Guarantying Subsidiary to the
Borrower or any other Guarantying Subsidiary; or
(b) sell, transfer or otherwise dispose of any shares of stock of
any class of any Subsidiary or permit any Subsidiary to sell, transfer or
otherwise dispose of any shares of stock of any class of any other
Subsidiary, except for the sale, transfer or other disposition of shares
(i) for the purpose of qualifying directors, (ii) by any Non-Guarantying
Subsidiary to any other Subsidiary, or (iii) by any Guarantying Subsidiary
to the Borrower or any other Guarantying Subsidiary.
Section 6.7 CONSOLIDATION AND MERGER. The Borrower will not, and
will not permit any Subsidiary to, consolidate with or merge into any Person,
or permit any other Person to merge into it, or acquire (in a transaction
analogous in purpose or effect to a consolidation or merger) all or
substantially all of the assets of any other Person; provided, however, that
the restrictions contained in this Section shall not apply to or prevent any of
the following:
(a) The consolidation or merger of any Guarantying Subsidiary with,
or a conveyance or transfer of its assets to, the Borrower (if the
Borrower shall be the continuing or surviving corporation) or another
Guarantying Subsidiary.
(b) The consolidation or merger of any Non-Guarantying Subsidiary
with, or a conveyance or transfer of its assets to, another then-existing
wholly-owned Non-Guarantying Subsidiary (other than a consolidation or
merger of a Foreign Subsidiary with a Domestic Subsidiary).
(c) Permitted Acquisitions.
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Section 6.8 SALE AND LEASEBACK. The Borrower will not, and will not
permit any Subsidiary to, enter into any arrangement, directly or indirectly,
with any other Person whereby the Borrower or such Subsidiary shall sell or
transfer any real or personal property, whether now owned or hereafter
acquired, and then or thereafter rent or lease as lessee such property or any
part thereof or any other property which the Borrower or such Subsidiary, as
the case may be, intends to use for substantially the same purpose or purposes
as the property being sold or transferred, except that the foregoing shall not
prohibit (i) the arrangement described in Schedule 6.8, or (ii) any other such
arrangement so long as (A) such arrangement relates to property of the Borrower
and its Subsidiaries acquired after the date hereof, (B) such arrangement is
entered into within six months following the initial acquisition or
construction of such property by the Borrower or the applicable Subsidiary,
(C) no Default or Event of Default has occurred and is continuing at the time
of, or would result from, such arrangement, and (D) the aggregate liability of
the Borrower and its Subsidiaries with respect to all such arrangements does
not at any one time exceed $30,000,000, less the aggregate principal amount of
the indebtedness secured by Liens described in Section 6.1(i).
Section 6.9 SUBORDINATED DEBT. The Borrower will not, and will not
permit any Subsidiary to, (i) make any payment of, or acquire, any Subordinated
Debt except as expressly permitted by the subordination provision thereof;
(ii) give security for all or any part of such Subordinated Debt; (iii) amend
or cancel the subordination provisions of such Subordinated Debt; (iv) take or
omit to take any action whereby the subordination of such Subordinated Debt or
any part thereof to the Notes might be terminated, impaired or adversely
affected; or (v) omit to give the Banks prompt written notice of any default
under any agreement or instrument relating to such Subordinated Debt by reason
whereof such Subordinated Debt might become or be declared to be immediately
due and payable.
Section 6.10 HAZARDOUS SUBSTANCES. The Borrower will not, and will
not permit any Subsidiary to, cause or permit any Hazardous Substance to be
disposed of, in any manner which might result in any material liability to the
Borrower or any Subsidiary, on, under or at any real property which is operated
by the Borrower or any Subsidiary or in which the Borrower or any Subsidiary
has any interest.
Section 6.11 RESTRICTIONS ON NATURE OF BUSINESS. The Borrower will
not, and will not permit any Subsidiary to, engage in any line of business
other than Permitted Lines of Business.
Section 6.12 RESTRICTIONS ON SUBSIDIARY AGREEMENTS. Neither the
Borrower nor any Subsidiary shall enter into any agreement restricting,
limiting or imposing conditions upon the payment of dividends by that
Subsidiary to the Borrower or any other Subsidiary.
ARTICLE VII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
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Section 7.1 EVENTS OF DEFAULT. "Event of Default", wherever used
herein, means any one of the following events:
(a) Default in the payment of any principal of or interest on any
Note, or with respect to any reimbursement obligation under Section
2.6(f), when the same becomes due and payable, and the continuance of such
default for a period of five Bank Business Days.
(b) Default in the payment of any fees required under Section 2.6 or
2.7 when the same become due and payable and the continuance of such
default for a period of five Bank Business Days.
(c) Default in the performance, or breach, of any covenant or
agreement on the part of the Borrower contained in Section 5.8, 5.9, 5.10,
5.11, 6.5 or 6.6 hereof.
(d) Default in the performance, or breach, of any covenant or
agreement of the Borrower in this Agreement (other than a covenant or
agreement a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with), and the continuance of such default
or breach for a period of 30 days after the Agent has given notice to the
Borrower specifying such default or breach and requiring it to be
remedied.
(e) Any representation or warranty made by the Borrower in this
Agreement or by the Borrower (or any of its officers) in any certificate,
instrument, or statement contemplated by or made or delivered pursuant to
or in connection with this Agreement, shall prove to have been incorrect
in any material respect when made.
(f) Any Subsidiary shall repudiate, purport to revoke, or fail to
perform any of that Subsidiary's obligations under its Guaranty; or any
Guarantying Subsidiary shall for any reason (other than by reason of its
merger or consolidation with the Borrower or another Guarantying
Subsidiary) cease to be a Guarantying Subsidiary.
(g) A default under any bond, debenture, note or other evidence of
indebtedness of the Borrower or any Subsidiary (other than to the Banks)
or under any indenture or other instrument under which any such evidence
of indebtedness has been issued or by which it is governed and either
(i) the acceleration of payment of such indebtedness, or (ii) the
continuation of such default for the greater of (A) five Bank Business
Days, or (B) the applicable period of grace, if any, specified in such
evidence of indebtedness, indenture or other instrument; provided,
however, that no Event of Default shall be deemed to have occurred under
this paragraph if the aggregate amount owing as to all such indebtedness
as to which such defaults have occurred and are continuing is less than
$3,000,000; provided further that if such default shall be cured by the
Borrower or the applicable Subsidiary, or waived by the
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holders of such indebtedness, in each case prior to the commencement of
any action under Section 7.2 and only as may be permitted by such
evidence of indebtedness, indenture or other instrument, then the Event
of Default hereunder by reason of such default shall be deemed likewise
to have been thereupon cured or waived.
(h) An event of default shall occur under any security agreement,
mortgage, deed of trust, assignment or other instrument or agreement
directly or indirectly securing any obligations of the Borrower hereunder
or under any Note or any guaranty of such obligations.
(i) Default in the payment of any amount owed by the Borrower to any
Bank other than hereunder or under the Notes.
(j) The Borrower or any Subsidiary shall be adjudicated a bankrupt
or insolvent, or admit in writing its inability to pay its debts as they
mature, or make an assignment for the benefit of creditors; or the
Borrower or any Subsidiary shall apply for or consent to the appointment
of any receiver, trustee, or similar officer for it or for all or any
substantial part of its property; or such receiver, trustee or similar
officer shall be appointed without the application or consent of the
Borrower or such Subsidiary, as the case may be, and such appointment
shall continue undischarged for a period of 30 days; or the Borrower or
any Subsidiary shall institute (by petition, application, answer, consent
or otherwise) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding
relating to it under the laws of any jurisdiction; or any such proceeding
shall be instituted (by petition, application or otherwise) against the
Borrower or any Subsidiary; or any judgment, writ, warrant of attachment
or execution or similar process shall be issued or levied against a
substantial part of the property of the Borrower or any Subsidiary and
such judgment, writ, or similar process shall not be released, vacated or
fully bonded within 30 days after its issue or levy.
(k) A petition shall be filed by or against the Borrower or any
Subsidiary under the United States Bankruptcy Code naming the Borrower or
that Subsidiary as debtor.
(l) The rendering against the Borrower or any Subsidiary of a final
judgment, decree or order for the payment of money if the amount of such
judgment, decree or order, together with the amount of all other such
judgments, decrees and orders then outstanding, less (in each case) the
portion thereof covered by insurance proceeds, is greater than $3,000,000
and if such judgment, decree or order remains unsatisfied and in effect
for any period of 30 consecutive days without a stay of execution.
(m) Any Plan shall have been terminated, or a trustee shall have
been appointed by an appropriate United States District Court to
administer any Plan, or the
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Pension Benefit Guaranty Corporation shall have instituted proceedings
to terminate any Plan or to appoint a trustee to administer any Plan, or
withdrawal liability shall have been asserted against the Borrower, any
Subsidiary or any ERISA Affiliate by a Multiemployer Plan; or the
Borrower, any Subsidiary or any ERISA Affiliate shall have incurred
liability to the Pension Benefit Guaranty Corporation, the Internal
Revenue Service, the Department of Labor or Plan participants in excess
of $1,000,000 with respect to any Plan; or any Reportable Event that the
Required Banks may determine in good faith might constitute grounds for
the termination of any Plan, for the appointment by the appropriate
United States District Court of a trustee to administer any Plan or for
the imposition of withdrawal liability with respect to a Multiemployer
Plan, shall have occurred and be continuing 30 days after written notice
to such effect shall have been given to the Borrower by the Banks;
provided, however, that no Event of Default shall be deemed to have
occurred under this paragraph on account of the Borrower's termination
of its Plan relating solely to its operations in Ft. Lauderdale,
Florida, so long as the aggregate liability of the Borrower and its
Subsidiaries on account of such termination does not exceed $1,500,000.
Section 7.2 RIGHTS AND REMEDIES. Upon the occurrence of an Event of
Default or at any time thereafter until such Event of Default is cured to the
written satisfaction of the Required Banks, the Agent may, and upon request of
the Required Banks shall, exercise any or all of the following rights and
remedies:
(a) The Agent may, by notice to the Borrower, declare the
Commitments to be terminated, whereupon the same shall forthwith
terminate.
(b) The Agent may, by notice to the Borrower, declare the entire
unpaid principal amount of the Notes then outstanding, all interest
accrued and unpaid thereon, and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon such Notes, all such
accrued interest and all such amounts shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower.
(c) If any Letter of Credit remains outstanding, the Agent may, by
notice to the Borrower, require the Borrower to deposit in the Cash
Collateral Account immediately available funds equal to the aggregate face
amount of all such outstanding Letters of Credit.
(d) The Banks may, without notice to the Borrower and without
further action, apply any and all money owing by any Bank or any affiliate
of any Bank to the Borrower to the payment of the Notes then outstanding,
including interest accrued thereon, and of all other sums then owing by
the Borrower hereunder. For purposes of the foregoing, the Borrower hereby
pledges, and grants the Agent, as agent for the Banks, a security interest
in, all such moneys and all proceeds thereof as security for
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the payment of all amounts due and to become due from the Borrower to
the Agent and the Banks pursuant to this Agreement
(e) The Agent and the Banks may exercise any other rights and
remedies available to them by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in Section 7.1(k) hereof, the entire unpaid principal amount of the
Notes then outstanding, all interest accrued and unpaid thereon, and all other
amounts payable under this Agreement shall be immediately due and payable
without presentment, demand, protest or notice of any kind.
Section 7.3 PLEDGE OF CASH COLLATERAL ACCOUNT. The Borrower hereby
pledges, and grants the Agent, as agent for the Banks, including the Issuing
Bank, a security interest in, all sums held in the Cash Collateral Account from
time to time and all proceeds thereof as security for the payment of all
amounts due and to become due from the Borrower to the Issuing Bank, the Agent
and/or the Banks pursuant to this Agreement, including but not limited to both
principal of and interest on the Notes and all renewals, extensions and
modifications thereof and any notes issued in substitution therefor, and
specifically including the Borrower's obligation to reimburse the Banks for any
amount drawn under any Letter of Credit, whether such reimbursement obligation
arises directly under this Agreement or under a separate reimbursement
agreement. Upon request of the Borrower, the Agent shall permit the Borrower
to withdraw from the Cash Collateral Account the lesser of (i) the Excess
Balance (as defined below), or (ii) the balance of the Cash Collateral Account.
As used herein, "Excess Balance" means (i) at any time during the continuance
of a Default or Event of Default (unless each such Default or Event of Default
has been waived by the Agent in writing), the amount by which the balance of
the Cash Collateral Account exceeds the aggregate amount secured by the sums
held in the Cash Collateral Account, and (ii) at all other times, the amount by
which the balance of the Cash Collateral Account exceeds the sum of the
aggregate principal balance of the Facility A Notes and the L/C Amount. The
Agent shall have full ownership and control of the Cash Collateral Account,
and, except as set forth above, the Borrower shall have no right to withdraw
the funds maintained in the Cash Collateral Account.
ARTICLE VIII
THE AGENT
Section 8.1 AUTHORIZATION. Each Bank and the holder of each Note
irrevocably appoints and authorizes the Agent to act on behalf of such Bank or
holder to the extent provided herein or in any document or instrument delivered
hereunder or in connection herewith, and to take such other action as may be
reasonably incidental thereto.
Section 8.2 DISTRIBUTION OF PAYMENTS AND PROCEEDS.
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(a) After deduction of any costs of collection as hereinafter
provided and any servicing fee provided in any agreement between the Agent
and the applicable Bank, the Agent shall remit to each Bank that Bank's
Percentage of all payments of principal, interest, Letter of Credit fees
payable under Section 2.6(d) and commitment fees payable under Section 2.7
that are received by the Agent under the Loan Documents. Each Bank's
interest in the Loan Documents shall be payable solely from payments,
collections and proceeds actually received by the Agent under the Loan
Documents; and the Agent's only liability to the Banks hereunder shall be
to account for each Bank's Percentage of such payments, collections and
proceeds in accordance with this Agreement. If the Agent is ever required
for any reason to refund any such payments, collections or proceeds, each
Bank will refund to the Agent, upon demand, its Percentage of such
payments, collections or proceeds, together with its Percentage of
interest or penalties, if any, payable by the Agent in connection with
such refund. The Agent may, in its sole discretion, make payment to the
Banks in anticipation of receipt of payment from the Borrower. If the
Agent fails to receive any such anticipated payment from the Borrower,
each Bank shall promptly refund to the Agent, upon demand, any such
payment made to it in anticipation of payment from the Borrower, together
with interest for each day on such amount until so refunded at a rate
equal to the Federal Funds Rate for each such date.
(b) Notwithstanding the foregoing, if any Bank has wrongfully
refused to fund its Percentage of any Borrowing or other Advance as
required hereunder, or if the principal balance of any Bank's Note is for
any other reason less than its Percentage of the aggregate principal
balances of the Notes then outstanding, the Agent may remit all payments
received by it to the other Banks until such payments have reduced the
aggregate amounts owed by the Borrower to the extent that the aggregate
amount owing to such Bank hereunder is equal to its Percentage of the
aggregate amount owing to all of the Banks hereunder. The provisions of
this paragraph are intended only to set forth certain rules for the
application of payments, proceeds and collections in the event that a Bank
has breached its obligations hereunder and shall not be deemed to excuse
any Bank from such obligations.
Section 8.3 EXPENSES. All payments, collections and proceeds
received or effected by the Agent may be applied, first, to pay or reimburse
the Agent for all costs, expenses, damages and liabilities at any time incurred
by or imposed upon the Agent in connection with this Agreement or any other
Loan Document (including but not limited to all reasonable attorney's fees,
foreclosure expenses and advances made to protect the security of any
collateral). If the Agent does not receive payments, collections or proceeds
sufficient to cover any such costs, expenses, damages or liabilities within 30
days after their incurrence or imposition, each Bank shall, upon demand, remit
to the Agent its Percentage of the difference between (i) such costs, expenses,
damages and liabilities, and (ii) such payments, collections and proceeds.
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Section 8.4 PAYMENTS RECEIVED DIRECTLY BY BANKS. If any Bank or
other holder of a Note shall obtain any payment or other recovery (whether
voluntary, involuntary, by application of offset or otherwise) on account of
principal of or interest on any Note other than through distributions made in
accordance with Section 8.2, such Bank or holder shall promptly give notice of
such fact to the Agent and shall purchase from the other Banks or holders such
participations in the Notes held by them as shall be necessary to cause the
purchasing Bank or holder to share the excess payment or other recovery ratably
with each of them; provided, however, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing Bank or
holder, the purchase shall be rescinded and the purchasing Bank restored to the
extent of such recovery (but without interest thereon).
Section 8.5 INDEMNIFICATION. The Agent shall not be required to do
any act hereunder or under any other document or instrument delivered hereunder
or in connection herewith or take any action toward the execution or
enforcement of the agency hereby created, or to prosecute or defend any suit in
respect of this Agreement or the Notes or any documents or instrument delivered
hereunder or in connection herewith unless indemnified to its satisfaction by
the holders of the Notes against loss, cost, liability and expense. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent, be insufficient or become impaired, the Agent may call for additional
indemnity and not commence or cease to do the acts indemnified against until
such additional indemnity is furnished.
Section 8.6 LIMITATIONS ON AGENT'S POWER. Notwithstanding any other
provision of this Agreement, the Agent shall not have the power, without the
consent of all of the Banks, to (i) forgive any indebtedness of the Borrower
arising under this Agreement or the Notes, (ii) agree to reduce the rate of
interest charged under this Agreement, (iii) agree to extend the maturity of
any amounts due under this Agreement or the Notes, or (iv) agree to any waiver
of strict compliance with the provisions of Section 6.1.
Section 8.7 EXCULPATION. The Agent shall be entitled to rely upon
advice of its counsel concerning legal matters, and upon this Agreement, any
Loan Document and any schedule, certificate, statement, report, notice or other
writing which it believes to be genuine or to have been presented by a proper
person. Neither the Agent nor any of its directors, officers, employees or
agents shall (a) be responsible for any recitals, representations or warranties
contained in, or for the execution, validity, genuineness, effectiveness or
enforceability of this Agreement, any Loan Document, or any other instrument or
document delivered hereunder or in connection herewith, (b) be responsible for
the validity, genuineness, perfection, effectiveness, enforceability,
existence, value or enforcement of any collateral security, (c) be under any
duty to inquire into or pass upon any of the foregoing matters, or to make any
inquiry concerning the performance by the Borrower or any other obligor of its
obligations, or (d) in any event, be liable as such for any action taken or
omitted by it or them, except for its or their own gross negligence or willful
misconduct. The agency
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hereby created shall in no way impair or affect any of the rights and powers
of, or impose any duties or obligations upon, the Agent in its individual
capacity.
Section 8.8 AGENT AND AFFILIATES. The Agent shall have the same
rights and powers hereunder in its individual capacity as any other Bank, and
may exercise or refrain from exercising the same as though it were not the
Agent, and the Agent and its affiliates may accept deposits from and generally
engage in any kind of business with the Borrower as fully as if the Agent were
not the Agent hereunder.
Section 8.9 CREDIT INVESTIGATION. Each Bank acknowledges that it
has made such inquiries and taken such care on its own behalf as would have
been the case had its Commitment been granted and the Advances made directly by
such Bank to the Borrower without the intervention of the Agent or any other
Bank. Each Bank agrees and acknowledges that the Agent makes no
representations or warranties about the creditworthiness of the Borrower or any
other party to this Agreement or with respect to the legality, validity,
sufficiency or enforceability of this Agreement, any Loan Document, or any
other instrument or document delivered hereunder or in connection herewith.
Section 8.10 RESIGNATION. The Agent may, and at the request of the
Required Banks (which request shall, so long as no Default or Event of Default
is continuing, be made only with the consent of the Borrower) shall, resign as
such at any time upon at least 30 days' prior notice to the Borrower and the
Banks. In the event of any resignation of the Agent, the Required Banks shall
as promptly as practicable appoint a successor Agent; provided, however, that
so long as no Default or Event of Default is continuing, such appointment may
be made only with the consent of the Borrower. If no such successor Agent
shall have been so appointed and shall have accepted such appointment within 30
days after the resigning Agent's giving of notice of resignation, then the
resigning Agent may, on behalf of the Banks, appoint a successor Agent, which
shall be a commercial bank organized under the laws of the United States of
America or of any State thereof. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon be
entitled to receive from the prior Agent such documents of transfer and
assignment as such successor Agent may reasonably request and the resigning
Agent shall be discharged from its duties and obligations under this Agreement.
After any resignation pursuant to this Section, the provisions of this Section
shall inure to the benefit of the retiring Agent as to any actions taken or
omitted to be taken by it while it was an Agent hereunder.
Section 8.11 ASSIGNMENTS. No Bank may assign any of its rights or
obligations under any Loan Document without the prior written consent of the
Borrower, the Agent and the other Banks; provided, however, that the consent of
the Borrower shall not be required in connection with any such assignment made
at any time when the Borrower is the subject of a proceeding under the United
States Bankruptcy Code or any successor thereto.
Section 8.12 PARTICIPATIONS Each Bank may grant participations in a
portion of its Notes and Commitments to any institutional investor, with the
consent of the Agent
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(which consent shall not be unreasonably withheld) but without the consent of
the Borrower, but only so long as:
(a) within five Bank Business Days after granting any participation,
such Bank gives the Agent notice of such participation, including the
name, address and telecopier number of the participant and the amount of
the Notes and Commitments covered by the participation; and
(b) the principal amount of the participation so granted is no less
than $8,000,000.
No holder of any such participation, other than an affiliate of such Bank,
shall be entitled to require such Bank to take or omit to take any action
hereunder, except that such Bank may agree with such participant that such Bank
will not, without such participant's consent, (i) forgive any indebtedness of
the Borrower under this Agreement or the Notes, (ii) agree to reduce the rate
of interest charged under this Agreement, except as expressly provided by the
terms of the Loan Documents, (iii) agree to extend the final maturity of any
indebtedness evidenced by the Notes, (iv) agree to any waiver of strict
compliance with the provisions of Section 6.1, or (v) increase the amount of
such participant's participation. No Bank shall, as between the Borrower and
such Bank, be relieved of any of its obligations hereunder as a result of any
such granting of a participation. The Borrower hereby acknowledges and agrees
that any participant described in this Section will, for purposes of Section
2.16, be considered to be a Bank hereunder (provided that such participant
shall not be entitled to receive any more than the Bank selling such
participation would have received had such sale not taken place) and may rely
on, and possess all rights under, any opinions, certificates, or other
instruments or documents delivered under or in connection with any Loan
Document. Except as set forth in this Section 8.12, no Bank may grant any
participation in any Loan Document or Commitment.
Section 8.13 DISCLOSURE OF INFORMATION. The Agent and the Banks
shall keep confidential (and cause their respective officers, directors,
employees, agents and representatives to keep confidential) all information,
materials and documents furnished by the Borrower and its Subsidiaries to the
Agent or the Banks (the "Disclosed Information"). Notwithstanding the
foregoing, the Agent and each Bank may disclose Disclosed Information (i) to
the Agent, any other Bank or any affiliate of any Bank; (ii) to legal counsel,
accountants and other professional advisors to the Agent or such Bank; (iii) to
any regulatory body having jurisdiction over any Bank or the Agent; (iv) to the
extent required by applicable laws and regulations or by any subpoena or
similar legal process, or requested by any governmental agency or authority;
(v) to the extent such Disclosed Information (A) becomes publicly available
other than as a result of a breach of this Agreement, (B) becomes available to
the Agent or such Bank on a non-confidential basis from a source other than the
Borrower or a Subsidiary, or (C) was available to the Agent or such Bank on a
non-confidential basis prior to its disclosure to the Agent or such Bank by the
Borrower or a Subsidiary; (vi) to the extent the Borrower or such Subsidiary
shall have consented to such disclosure in writing;
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(vii) to the extent reasonably deemed necessary by the Agent or any Bank in
the enforcement of the remedies of the Agent and the Banks provided under the
Loan Documents; or (viii) in connection with any potential assignment or
participation in the interest granted hereunder, provided that any such
potential assignee or participant shall have executed a confidentiality
agreement imposing on such potential assignee or participant substantially
the same obligations as are imposed on the Agent and the Banks under this
Section same containing the confidentiality provisions set forth in this
Section 8.13.
ARTICLE IX
MISCELLANEOUS
Section 9.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on
the part of the Banks in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any Bank's acceptance of
payments while any Default or Event of Default is outstanding operate as a
waiver of such Default or Event of Default, or any right, power or remedy under
the Loan Documents; nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy under the Loan Documents. The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law.
Section 9.2 AMENDMENTS, ETC. No amendment, modification,
termination or waiver of any provision of any Loan Document or consent to any
departure by the Borrower therefrom shall be effective unless the same shall be
in writing and signed by the Required Banks (or, in the case of any action
described in Section 8.6, each Bank), and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances. In no event shall any increase in any Bank's Facility A
Commitment Amount, Facility B Commitment Amount or other obligations hereunder
be effective unless agreed to in writing by that Bank.
Section 9.3 NOTICE. Except as otherwise expressly provided herein,
all notices and other communications hereunder shall be in writing and shall be
(i) personally delivered, (ii) transmitted by registered mail, postage
prepaid, (iii) sent by Federal Express or similar expedited delivery service,
or (iv) transmitted by telecopy, in each case addressed to the party to whom
notice is being given at its address as set forth by its signature below, or,
if telecopied, transmitted to that party at its telecopier number set forth by
its signature below; or, as to each party, at such other address or telecopier
number as may hereafter be designated in a notice by that party to the other
party complying with the terms of this Section. All such notices or other
communications shall be deemed to have been given on (i) the date received if
delivered personally, (ii) five business days after the date of posting, if
delivered by mail, (ii) the date of receipt, if delivered by Federal Express or
similar expedited
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delivery service, or (iii) the date of transmission if delivered by telecopy,
except that notices or requests to the Banks pursuant to any of the
provisions of Article II shall not be effective until received by that Banks.
Section 9.4 COSTS AND EXPENSES. The Borrower agrees to pay on demand
all costs and expenses incurred by the Agent in connection with the
negotiation, preparation, execution, administration, amendment or enforcement
of the Loan Documents and the other instruments and documents to be delivered
hereunder and thereunder, including the reasonable fees and out-of-pocket
expenses of counsel for the Agent with respect thereto, whether paid to outside
counsel or allocated to the Agent by in-house counsel. The Borrower also
agrees to pay and reimburse the Agent for all of its out-of-pocket and
allocated costs incurred in connection with each audit or examination conducted
by the Agent, its employees or agents, which audits and examinations shall be
for the sole benefit of the Agent and the Banks; provided, however, that the
Borrower shall have no obligation to pay or reimburse the Agent for more than
one such audit or examination in any single fiscal year of the Borrower so long
as no Default or Event of Default has occurred and is continuing at the time of
such audit or examination. In addition, the Borrower agrees to pay on demand
all costs and expenses incurred by any Bank (other than the Agent) in
connection with the enforcement of the Loan Documents following the occurrence
of an Event of Default specified under Section 7.1(k), including the reasonable
fees and out-of-pocket expenses of counsel for such Bank with respect thereto;
provided, however, that no such costs and expenses shall be paid prior to
payment in full of all principal and interest on the Notes and all costs and
expenses incurred by the Agent and reimbursable hereunder.
Section 9.5 INDEMNIFICATION BY BORROWER. The Borrower hereby agrees
to indemnify the Banks and each officer, director, employee and agent thereof
(herein individually each called an "Indemnitee" and collectively called the
"Indemnitees") from and against any and all losses, claims, damages, reasonable
expenses (including, without limitation, reasonable attorneys' fees) and
liabilities (all of the foregoing being herein called the "Indemnified
Liabilities") incurred by an Indemnitee in connection with any litigation in
which it is alleged that any Environmental Law has been breached with respect
to any activity or property of the Borrower, except for any portion of such
losses, claims, damages, expenses or liabilities incurred solely as a result of
the gross negligence or willful misconduct of the applicable Indemnitee. If
and to the extent that the foregoing indemnity may be unenforceable for any
reason, the Borrower hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. All obligations provided for in this
Section shall survive any termination of this Agreement.
Section 9.6 EXECUTION IN COUNTERPARTS. This Agreement and the other
Loan Documents may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed to be an original and all of
which counterparts of this
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Agreement or such other Loan Document, as the case may be, taken together,
shall constitute but one and the same instrument.
Section 9.7 BINDING EFFECT, ASSIGNMENT. The Loan Documents shall be
binding upon and inure to the benefit of the Borrower and the Banks and their
respective successors and assigns, except that (i) the Borrower shall not have
the right to assign its rights thereunder or any interest therein without the
prior written consent of each Bank, and (ii) the foregoing shall not limit the
provisions of Sections 8.11 and 8.12.
Section 9.8 GOVERNING LAW. The Loan Documents shall be governed by,
and construed in accordance with, the laws of the State of Minnesota.
Section 9.9 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
SECTION 9.10 WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND THE
BANKS HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT AND THE
NOTE OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
Section 9.11 PRIOR AGREEMENTS. This Agreement and the other Loan
Documents and related documents described herein restate and supersede in their
entirety any and all prior agreements and understandings, oral or written,
between the Banks and the Borrower. Without limiting the generality of the
foregoing, this Agreement shall be deemed to replace in its entirety the Credit
Agreement, dated September 30, 1994, between the Borrower and Norwest (the "Old
Agreement"). Upon execution of this Agreement by the Agent, the
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Banks and the Borrower, neither Norwest nor the Borrower shall have any
obligation to the other under the Old Agreement, except that the Borrower
shall continue to have the obligation to pay any fees remaining unpaid under
the Old Agreement that had accrued through the effective date of this
Agreement and to pay principal of and interest on the promissory notes issued
pursuant to the Old Agreement until such notes have been paid in full by the
proceeds of the initial Facility A Advances hereunder.
Section 9.12 MOST FAVORED NATION. If at any time from and after the
effective date of this Agreement, the Borrower or any Domestic Subsidiary shall
enter into any trust indenture or other agreement for, relating to, or amending
any terms or conditions applicable to any Funded Debt with any initial term of
not less than 180 days incurred in connection with the domestic operations of
the Borrower or such Domestic Subsidiary, in an amount equal to or in excess of
$1,000,000, which includes covenants or defaults reasonably determined by the
Required Banks to be more restrictive than those provided for in Articles
Section V and VI, the Borrower shall promptly so advise the Agent and the
Banks. Thereupon, if the Required Banks shall request by notice to the
Borrower, the Borrower shall enter into an amendment to this Agreement
providing for substantially the same such covenants and defaults as those
provided for in such trust indenture or other agreement, MUTATIS MUTANDIS, to
the extent required and as may be selected by the Required Banks, such
amendment to remain in effect for the entire duration of the term to maturity
of such Funded Debt (to and including the date to which the same may be
extended at the Borrower's or Subsidiary's option); provided, however, that if
any such trust indenture or other agreement shall be modified, supplemented,
amended or terminated so as to modify, amend or eliminate such trust indenture
or other agreement or any such covenant, term, condition or default so made a
part of this Agreement, then, the Borrower shall give the Agent and the Banks
prompt notice thereof and such modification, supplement or amendment shall
operate to modify, amend or eliminate such covenants, term, condition or
default as so made a part of this Agreement. Nothing in this Section 9.12 shall
create or imply any consent by the Agent or the Banks to any indebtedness of
the Borrower or any Subsidiary except as set forth in Section 6.2.
Section 9.13 HEADINGS. Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
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Address: BMC INDUSTRIES, INC.
Two Appletree Square, Suite 400
Minneapolis, Minnesota 55425
Attention: John N. McCormick By /s/ Michael P. Hawks
Telecopier: 612-851-6050 -----------------------------------------
Its V.P. Finance & Admin. CFO and Secretary
----------------------------------------
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Address: NORWEST BANK MINNESOTA, NATIONAL
Sixth Street and Marquette Avenue ASSOCIATION, as Agent
Minneapolis, Minnesota 55479-0085
Attention: Scott Bjelde
Telecopier: 612-667-4145 By /s/ Lennie M. Kaufman
-------------------------------------
Its V. P. Loan Syndications
-------------------------------------
Address: NORWEST BANK MINNESOTA, NATIONAL
Sixth Street and Marquette Avenue ASSOCIATION, as a Bank
Minneapolis, Minnesota 55479-0085
Attention: Scott Bjelde
Telecopier: 612-667-4145 By /s/ Scott Bjelde
-------------------------------------
Its Assistant Vice President
Facility A Commitment Amount: -------------------------------------
$23,333,333.34
Facility B Commitment Amount:
$26,666,666.67
Address: FIRST BANK NATIONAL ASSOCIATION
First Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Kurt Egertson By /s/ Kurt Egertson
Telecopier: 612-973-0822 -------------------------------------
Its Vice President
-------------------------------------
Facility A Commitment Amount:
$23,333,333.33
Facility B Commitment Amount:
$26,666,666.66
Address: NBD BANK
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Marguerite Mullins
Telecopier: 313-225-1212 By /s/ Marguerite Mullins
-------------------------------------
Its Second Vice President
-------------------------------------
Facility A Commitment Amount:
$23,333,333.33
Facility B Commitment Amount:
$26,666,666.66
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<PAGE>
EXHIBITS AND SCHEDULES
Exhibit A Facility A Note
Exhibit B Facility B Note
Exhibit C Guaranty
Exhibit D Compliance Certificate
Exhibit E Opinion of Borrower's Counsel
___________________________________________
Schedule 4.4 Subsidiaries
Schedule 4.7 Litigation
Schedule 4.8 Hazardous Substances
Schedule 6.1 Permitted Liens
Schedule 6.2 Permitted Indebtedness
Schedule 6.3 Permitted Guaranties
Schedule 6.8 Sale and Leaseback
<PAGE>
BMC INDUSTRIES, INC. SAVINGS PLAN
1994 REVISION
FIRST DECLARATION OF AMENDMENT
Pursuant to the retained power of amendment contained in Section 11.2 of the
instrument entitled "BMC Industries, Inc. Savings Plan -- 1994 Revision", the
undersigned does hereby amend Section 5.2(C) of such instrument in the
following manner:
"(C) Notwithstanding Subsection (A)-
(1) Any Participant who has attained age 55 may irrevocably
direct the transfer of all or any portion of his or her Matching
Contribution Account from the BMC Common Stock Fund to one or more of
the investment funds maintained pursuant to Section 5.1 other than the
BMC Common Stock Fund in accordance with the Participant's direction
then in effect pursuant to Subsection (D) or (E), as the case may be.
Each direction must be made in accordance with and is subject to Plan
Rules and will be effective as of the first day of the calendar quarter
that next follows by at least 30 days (or such shorter period as the
Administrator may by uniform rule allow) the date on which the
Administrator receives a complete and accurate direction from the
Participant in a form prescribed by Plan Rules. The amount transferred
will be based on the value of the shares of Company Stock as of the
Valuation Date immediately preceding the effective date of the transfer.
All Matching Contributions credited to the Participant's Matching
Contribution Account after the effective date of such direction will
continue to be invested pursuant to Subsection (A)."
(2) Any Participant who is an Employee and is not eligible to
make directions pursuant to Subsection (C)(1) may irrevocably direct the
transfer, in five percent increments of up to 25 percent of his or her
Matching Contribution Account from the BMC Common Stock Fund to one or
more of the investment funds maintained pursuant to Section 5.1 other
than the BMC Common Stock Fund in accordance with the Participant's
direction then in effect pursuant to Subsection (D) or (E), as the case
may be. A Participant may only make an election pursuant to this
Subsection (C)(2) if, as of the Valuation Date last preceding the
calendar quarter immediately preceding the effective date of such
election, the portion of the Participant's Matching Contribution Account
invested in the BMC Common Stock Fund equals or exceeds 20 percent of
the balance of the Participant's Account. Each direction must be made in
accordance with and is subject to Plan Rules and will be effective as of
the first day of the calendar quarter that next follows by at least 30
days (or such shorter period as the Administrator may by uniform rule
allow) the date on which the Administrator receives a complete and
accurate direction from the Participant in a form prescribed by Plan
Rules. The amount
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<PAGE>
transferred will be based on the value of the shares of Company Stock as
of the Valuation Date immediately preceding the effective date of the
transfer. All Matching Contributions credited to the Participant's
Matching Contribution Account after the effective date of such direction
will continue to be invested pursuant to Subsection (A)."
The foregoing amendment is effective as of April 1, 1996.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed
by its duly authorized officers this 29th day of March, 1996.
BMC INDUSTRIES, INC.
Attest: /s/ Michael P. Hawks By: /s/ Christine A. Wolff
---------------------------- --------------------------
Secretary Director of Compensation
of Benefits
Page 66
<PAGE>
AMENDMENT NO. 1
1994 STOCK INCENTIVE PLAN
7 AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS.
(a) GRANTS OF OPTIONS. At such time as, following the effective date of
the Plan, new Non-Employee Directors are first elected or appointed to the
Board of Directors to fill new directorships or to fill vacancies, such
Non-Employee Directors will be granted automatically, on a one-time basis on
the date of their election or appointment, a Non-Statutory Stock Option to
purchase 10,000 shares of Common Stock (subject to adjustment as provided in
Section 4.3 of the Plan). In addition, on the date of each Annual Meeting of
Shareholders of the Company following the date a Non-Employee Director is
first elected or appointed to the Board of Directors, each person who is a
Non-Employee Director as of such date will be granted automatically a
Non-Statutory Stock Option to purchase 4,000 shares of Common Stock (subject
to adjustment as provided in Section 4.3 of the Plan).
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,814
<SECURITIES> 1,726
<RECEIVABLES> 28,578
<ALLOWANCES> 3,302
<INVENTORY> 47,098
<CURRENT-ASSETS> 90,404
<PP&E> 188,920
<DEPRECIATION> 92,551
<TOTAL-ASSETS> 204,279
<CURRENT-LIABILITIES> 59,091
<BONDS> 0
0
0
<COMMON> 54,020
<OTHER-SE> 70,375
<TOTAL-LIABILITY-AND-EQUITY> 204,279
<SALES> 135,815
<TOTAL-REVENUES> 136,475
<CGS> 104,952
<TOTAL-COSTS> 112,584
<OTHER-EXPENSES> (31)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40
<INCOME-PRETAX> 23,882
<INCOME-TAX> 7,857
<INCOME-CONTINUING> 16,025
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,025
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.57
</TABLE>
<PAGE>
CONTACT: Michael P. Hawks (NYSE -- BMC)
(612) 851-6030 FOR IMMEDIATE RELEASE
BMC REPORTS RECORD SECOND QUARTER EARNINGS
July 18, 1996 -- Minneapolis, MN -- BMC Industries, Inc. today reported second
quarter net earnings of $9,842,000 or $.35 per share, up 32% from earnings of
$7,477,000 or $.26 per share in the year-earlier period. Second quarter
revenues for primary products (excluding equipment and technology sales)
increased 5% over the prior year quarter.
Net earnings for the first six months of 1996 totaled $16,025,000 or $.57 per
share. This represented an improvement of $3,854,000 or 32% over the
$12,171,000 or $.43 per share recorded for the first six months of the prior
year. Revenues from primary products for the first six months of 1996 were
11% higher than the same period in the prior year.
Paul B. Burke, BMC's chairman and chief executive officer stated "The second
quarter represents a new second quarter earnings record for BMC and is the
twenty-first consecutive quarter of increased net earnings over the
year-earlier period, excluding income from the sale of equipment and
technology and other non-recurring items. Very importantly, all three of our
divisions contributed to our record results."
The Company's Precision Imaged Products operation (including both the Mask
Operation and Buckbee-Mears St. Paul) produced record second quarter results.
Due to the impact of the decline in the value of the Deutsche Mark (DM)
relative to the dollar on the German Mask operation, primary product revenues
for the Precision Imaged Products operation increased only slightly from the
exceptionally strong second quarter of 1995. However, year-to-date revenues
were up over 11%, notwithstanding the weakening of the DM. More importantly,
second quarter profitability for the Precision Imaged Products operation
increased 40% when compared to the year earlier quarter. This increase in
profitability was due to the continued sales mix shift to higher-margin
products and improved operating performance. In the second quarter, sales of
jumbo (30" and larger) aperture masks increased 42% over second quarter 1995
sales. BMC's new computer monitor high-resolution mask line at the Company's
manufacturing facility in Germany (BME) continued to move up the yield curve
and ran at better than planned yields in the month of June. The Company made
its first sales of computer monitor high-resolution masks from the new line at
the end of the second quarter. While the sales impact of this
-more-
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<PAGE>
line was nominal, substantial initial inventories have been built and the
Company believes that the BME high-resolution line will contribute significant
sales in future quarters. Finally, Buckbee-Mears St. Paul's profitability in
the second quarter increased 32% over the second quarter of 1995, due
primarily to increased sales, sales mix changes and production efficiencies.
BMC's Optical Products operation also produced record second quarter results.
Second quarter sales of Optical Products increased 17% over the second quarter
of 1995, while profitability increased 39%. The increase in sales was
attributable to higher sales in all product lines. In particular, sales of
high end products (polycarbonate, progressive, high index and polarizing
sunglass lenses) increased more than 21% over the same quarter in the prior
year. The increase in Optical Products' profitability in the second quarter
was driven by the increased sales and strong gross margin contributions from
all product lines.
BMC is one of the world's largest manufacturers of aperture masks for color
television tubes and computer monitors. The Company is also a leading
producer of polycarbonate, glass and plastic eyewear lenses. The common stock
of the Company is traded on the New York Stock Exchange under the symbol "BMC".
-more-
Page 69
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------------- --------------------------
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Net sales of primary products $ 67,513 $ 64,026 $ 135,622 $ 121,779
Equipment and technology sales 661 5,621 853 9,202
- -------------------------------------------------------------------------------------------------------
Total Revenues 68,174 69,647 136,475 130,981
- -------------------------------------------------------------------------------------------------------
Operating Costs and Expenses
Cost of sales of primary products 49,487 50,764 104,582 99,110
Cost of equipment and technology sales 204 3,757 370 5,668
Selling 2,559 2,205 5,117 4,480
Administrative 1,288 1,330 2,515 2,584
- -------------------------------------------------------------------------------------------------------
Total Operating Costs and Expenses 53,538 58,056 112,584 111,842
- -------------------------------------------------------------------------------------------------------
Income from Operations 14,636 11,591 23,891 19,139
- -------------------------------------------------------------------------------------------------------
Other Income and (Expense)
Interest expense (60) (28) (190) (105)
Interest income 31 213 150 398
Other income (expense) 81 (92) 31 (159)
- -------------------------------------------------------------------------------------------------------
Earnings before Income Taxes 14,688 11,684 23,882 19,273
Income Taxes 4,846 4,207 7,857 7,102
- -------------------------------------------------------------------------------------------------------
Net Earnings $ 9,842 $ 7,477 $ 16,025 $ 12,171
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Earnings Per Share $ 0.35 $ 0.26 $ 0.57 $ 0.43
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Number of Shares Included in Per Share
Computation 28,369 28,233 28,324 28,131
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
-more-
Page 70
<PAGE>
BMC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
JUNE 30 December 31
------- -----------
ASSETS 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 5,540 $ 15,874
Trade accounts and notes receivable, net of allowances 25,276 23,003
Inventories 47,098 34,772
Deferred income taxes 4,831 3,753
Other current assets 7,659 5,964
- -----------------------------------------------------------------------------------------
Total Current Assets 90,404 83,366
- -----------------------------------------------------------------------------------------
Property, Plant and Equipment 188,920 171,711
Less Accumulated Depreciation 92,551 90,302
--------- ---------
Property, Plant and Equipment, Net 96,369 81,409
--------- ---------
Deferred Income Taxes 5,607 5,362
Other Assets, Net 11,899 12,195
- -----------------------------------------------------------------------------------------
Total Assets $ 204,279 $ 182,332
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------
Current Liabilities
Short-term borrowings $ 6,020
Accounts payable 18,444 $ 20,408
Income taxes payable 10,094 9,308
Accrued expenses and other current liabilities 24,533 20,920
- -----------------------------------------------------------------------------------------
Total Current Liabilities 59,091 50,636
- -----------------------------------------------------------------------------------------
Other Liabilities 19,261 21,654
Deferred Income Taxes 1,532 1,576
Stockholders' Equity
Common stock 55,302 52,974
Retained earnings 66,305 50,962
Cumulative translation adjustment 4,070 5,749
Other (1,282) (1,219)
- -----------------------------------------------------------------------------------------
Total Stockholders' Equity 124,395 108,466
- -----------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 204,279 $ 182,332
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>
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Page 71
<PAGE>
Contact: Michael P. Hawks (NYSE -- BMC)
(612) 851-6030 FOR IMMEDIATE RELEASE
BMC OBTAINS A $150 MILLION CREDIT FACILITY
June 10, 1996 -- Minneapolis, Minnesota -- BMC Industries, Inc. announced
today it has entered into a credit agreement with Norwest Bank Minnesota,
N.A., as agent and a lending bank, First Bank National Association and NBD
Bank for a $150 million unsecured credit facility. This credit facility
consists of a $70 million revolving credit facility for general corporate
purposes and an $80 million acquisition credit facility.
Paul B. Burke, BMC's Chairman, President and Chief Executive Officer, stated,
"The Company has undertaken its most aggressive capital expenditure and
expansion programs in its history. This credit facility provides BMC with the
availability of funds to successfully complete these programs, as well as
provides immediately available funds in the event the Company encounters a
strategic acquisition opportunity."
BMC is one of the world's largest manufacturers of aperture masks for color
picture tubes used in televisions and computer monitors. Through Vision-Ease
Lens, Inc., a wholly-owned subsidiary of the Company, the Company is also a
leading producer of polycarbonate, glass and plastic eyewear lenses. The
common stock of the Company is traded on the New York Stock Exchange under the
symbol "BMC".
Page 72
<PAGE>
Contact: Michael P. Hawks (NYSE-BMC)
(612)851-6030 FOR IMMEDIATE RELEASE
BMC ANNOUNCES QUARTERLY DIVIDEND
June 7, 1996--Minneapolis, Minnesota--BMC Industries, Inc. today announced
that its Board of Directors has approved a continuation of its quarterly cash
dividend of $.0125 cents per share.
Shareholders of record as of June 19, 1996 will receive a dividend of $.0125
for each share owned on that date, to be paid on July 3, 1996.
BMC Industries, Inc. is one of the world's largest manufacturers of aperture
masks for color picture tubes used in televisions and computer monitors. The
Company is also a leading producer of polycarbonate, glass and plastic eyewear
lenses. BMC's common stock is traded on the New York Stock Exchange under the
symbol BMC.
-30-
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